Business banking

The race to satisfy small and midsize businesses' demands for digital payments and other financial services is driving up acquisition activity across the payments ecosystem.

While some payments players are building up services for the small and midsize business (SMB) segment, others are paring those operations. A company's chosen strategy may depend on whether it's prepared to take on mounting competition in the arena.

Western Union in August sold its cross-border money transfer unit that catered to SMBs for about $910 million to a U.S. private equity group. Meanwhile, U.S. Bank has been buying up businesses, including Bento Technologies in August, to target SMBs' payments needs.

The acquisitive interest from some corners of the payments sphere comes as small and midsize businesses become increasingly aware of the need to digitally upgrade their payment systems to remain competitive, and richly funded fintechs, like Square, step up their attempts to court them. 

“Cashflow management is a major challenge for many businesses, particularly for [small and midsize businesses],” a recent Juniper Research white paper said. “An emerging range of products allows businesses to more effectively manage their cashflow via automation.”

U.S. Bank is determined to meet those small and midsize businesses' new digital demands. To that end, the Minneapolis-based bank bought Bento, which sells payment and expense management services to small and midsize businesses and, in 2019, acquired Talech, a software provider that buttresses SMBs' point-of-sale systems. The Talech deal also onboarded Irv Henderson, now the bank’s chief digital officer for small businesses.

Those business customers may initially have come to the bank for checking account services, but now they’re seeking software services that integrate other functions such as invoicing, credit card management, payroll processing and supplier expense management, Henderson said in a recent interview.   

U.S. Bank counts some 1 million businesses that make less than $20 million annually among its clients, Henderson said. “These customers are asking us to deliver more services,” he said. “We see that as a critical evolution of the services we must offer to continue to be meaningful.”

Indeed, if they don’t offer such services, a pack of upstart fintechs are lining up to take away clients. San Francisco-based Square is moving well beyond the small plastic reader to develop more financial and banking services, and a slew of other startups have followed. 

Legacy payments players are also snapping up the businesses that court SMBs, too, as they look to compete. Payments processor Fiserv, in recent years, has swallowed businesses, including Clover and Pineapple Payments, in its quest to court SMBs.

Meanwhile, Western Union sold off its cross-border money transfer services unit focused on small and midsize businesses in August in an effort to concentrate on its consumer business and digital white-label services, said Shelly Swanback, the company’s president of product and platform. This will allow Western Union to focus not just on consumer-to-consumer money transfers such as remittances but on providing other financial services for the company’s millions of users worldwide, she said.

The Denver-based company may also have understood that the growing appetite for payments companies that cater to small and midsize businesses made it an opportune time to sell a unit that offers cross-border payment services to SMBs. Western Union’s stock got an initial pop after it announced the Aug. 4 divestiture of the unit, though shares drifted down after. Representatives of the investment firms that bought the unit, Baupost Group and Goldfinch Partners, didn’t respond to requests for comment on their intentions.

“Right now, innovation is at a high with cross-border payments, and the reason for that is we have seen how efficient we can be with domestic payments,” said Erika Baumann, a research director at the financial services consulting firm Aite Novarica. 

Generally speaking, the mid-tier banks realize they must up the ante to compete for middle-market business clients, especially with respect to cross-border and card services, she said. Banks are also engaging in partnerships to meet some of those client needs, she said.

“At this point, financial institutions are recognizing there is a market opportunity there, and there may be an opportunity cost,” Baumann said.

For its part, U.S. Bank remains on the hunt to buy more businesses that focus on small and midsize clients, Henderson said. The bank will continue to “aggressively” acquire, partner and build new operations that cater to that segment of business owners, he said.

An early decision to pivot from a direct-to-consumer model to a business-to-business one was a critical step in the evolution of BankMobile, now BM Technologies, said the banking-as-a-service (BaaS) provider’s CEO, Luvleen Sidhu, during a fireside chat in September at the Finovate Fall conference in New York City.

The company, which was incubated by Customers Bancorp for five years before its spinoff in August 2020, was up against mounting competition in the consumer digital banking space from challengers like Chime and Varo, whose advertising budgets were difficult to match. 

"We found out pretty early on that our pillar of being able to have a profitable, sustainable model — and as fast as possible — wasn’t happening. The cap was really high. We weren't getting the sort of engagement and direct deposit customers, which are critical in banking," said Sidhu, who co-founded BankMobile in 2014. "It's challenging when you have other challenger banks spending half a billion dollars on marketing, and that's why we pivoted."

After turning its focus to B2B, the company soon realized it could carve out its own space in the market by offering banking services to large nonbank entities. 

"In 2016, we took a B2B approach and started implementing [BaaS], our strategy today, which I think over the last 18 months has become a buzzword in this industry," she said. 

BM Technologies, as it was called after it was acquired for $140 million by special-purpose acquisition company Megalith Financial Acquisition Corp. in 2020, secured its largest partnership with T-Mobile in 2019 — a deal that allows the wireless carrier to offer its more than 100 million customers a checking account.

The pivot to B2B quickly paid off, Sidhu said. In less than two years, T-Mobile Money became a $1 billion bank, she said.

Key to BM Technologies’ growth has been its ability to recognize early on the additional ways to monetize the company’s services and reach customers, Sidhu said.

"There are other ways we can monetize the strategy and still remain dedicated to our vision and our mission, which is to create a better banking experience for millions of Americans by utilizing technology," she said.

BM Technologies’ partnerships with more than 735 colleges and universities has also proved an efficient method of acquiring customers at a low cost.

"[Colleges and universities] disperse billions of dollars a year in financial agreements and other payments to their students. It's a pain in the butt and operationally and financially expensive for them to do," Sidhu said. "We take that over for them and in return, we've created an extraordinary customer acquisition model where we touch one in every three college students."

The company is able to acquire customers at less than $10, Sidhu said. Average balances are $8,000, and direct deposit accounts for at least 20% of the company’s portfolio, she added. 

"It’s all about continuing to be innovative and finding new distribution channels … while still getting to that end product that the consumers love," Sidhu said. 

BM Technologies is betting on the ability to enter into more partnerships like its T-Mobile tie-up as it looks to grow. 

"There are nonbanks out there, especially larger brands, that have entrenched customer bases, and they are looking for ways to continue to attract and retain those customers, create more loyalty, differentiation, and they're looking for new revenue streams," Sidhu said. "T-Mobile was one of the first players to use financial services as a way to check the box in terms of those strategic opportunities."

Jiko, the fintech startup that made headlines last year when it gained a national charter after purchasing a small Minnesota-based community bank, said it is pivoting from its consumer-focused model and accelerating its business-to-business strategy.

"We always had this idea that at some point we would open up the [application programming interfaces]. We knew from the beginning that it wouldn't just be for the app," said Jiko co-founder and CEO Stephane Lintner, adding banking-as-a-service (BaaS) was a vision the startup had "early in its DNA."

Shortly after Jiko’s acquisition of Mid-Central Federal Savings Bank, which is based in Wadena, Minnesota, Lintner said the startup began receiving numerous inquiries from other fintechs who were interested in leveraging its technology. 

What makes Jiko’s services unique is that the platform replaces bank deposits with government-backed Treasury bills, which can be spent in real time by customers via debit transactions. The company says its debit card cash-back rewards program passes the interchange income back to the customer in the form of 1% cash back on qualifying purchases. 

"So many people were excited about what we were doing and we got an immediate demand," said Lintner, a former Goldman Sachs trader. "So we started thinking strategically, 'Can we accelerate this?' And we all came to the conclusion that it was the right thing to do."

Lintner said the company poured all of its energy into opening up the platform as soon as it could, a project it spent the bulk of the past year on.

Several partners are already lined up, Lintner said, which are expected to go live in the coming weeks. The company is in active conversations with around 40 other potential partners, Lintner added.

Jiko’s banking app is still available for consumers to download, and the company plans to keep enhancing its features, but its main use will serve as a "showroom" for Jiko’s technology, Lintner said. 

As an example of Jiko’s capabilities, Lintner pointed to a large transaction the platform facilitated in February 2021. 

The company announced it processed a $4.7 million debit card transaction as part of its 1% cash-back rewards program. The company claims the single transaction, a tax payment to the IRS made with Jiko’s debit card, resulted in $47,000 cash back to the customer, deposited directly into the customer’s account.

"It shows that we can do large things — process large, million-dollar payments — and have a lot of money leave the bank because we have T-bills behind it," said Lintner, who claims the debit card transaction was the largest of its kind in history. 

Lintner said he is confident Jiko’s B2B focus — or "B2B2C focus," as he calls it — opens up the startup to a large market. 

"We have a massive opportunity to deliver our product and our vision at scale by embedding our digital product in your favorite brands. Because of who we are and how we built this, we basically have infinite scale," he said. "We really are one big infrastructure play that can power everyone up but still protect the consumer. ... We're not going to be spending large campaigns on the consumer, trying to get people to download the app or referrals — we’ll continue to do some of that — but the real focus is on our partners."

Similar pivot

Jiko isn’t the first fintech to shift its focus from a direct-to-consumer model to a business-to-business one. 

When faced with mounting competition in the consumer digital banking space from challengers like Chime and Varo Bank, BM Technologies — back when it was known as BankMobile — made a similar pivot.

BM Technologies, which was spun off from Customers Bank last year, turned its focus to B2B in 2016 after realizing it could carve out its own space in the market by offering banking services to large nonbank entities, CEO Luvleen Sidhu said at a conference in September.

The pivot paid off, Sidhu said, adding its partnership with T-Mobile helped the company grow T-Mobile Money into a $1 billion bank in less than two years.

Lintner said Jiko is seeing interest from lifestyle apps, new and established fintechs, as well as banks. 

"We're having interesting conversations with banks — banks that have too many deposits and want to compete with the fintechs but are not sure how to do it," he said. "It's an interesting landscape. We're launching a few [in 2021]. There'll be a lot more [in 2022]."

Valley Bank's new payment platform will provide a solution to an industrywide cash issue plaguing the cannabis-related businesses it serves by allowing their customers access to a mobile wallet payment system, the bank's chief digital product officer, Stuart Cook, told Banking Dive at October's Money20/20 conference in Las Vegas.

The $41 billion-asset nationally chartered bank, which has branches across New Jersey, New York, Florida and Alabama, serves five of the top 10 multistate cannabis-related business operators, Cook said. 

The platform, called Valley Pay, is expected to launch with a pilot program in the coming months. 

The mobile app operates similar to a reloadable Starbucks wallet gift card, Cook said.

"It's merchant branded, and that provides a lot of economic benefit to the merchant, in terms of the costs of those transactions," he said. "It also builds a whole bunch of other benefits in terms of building loyalty and a marketing solution as well."

Customers can fund the card from their existing bank account and present a QR code at the point of sale, he added. 

"The beauty of it is it's real-time loading, and it's real-time funds for the merchant. So we're solving a number of problems in the payment process that exist," Cook said.

Valley Bank is launching the platform in partnership with a "large processor" who wants to remain anonymous, Cook said.

Valley Bank has been serving the cannabis space for a year and has built a service and compliance system that involves transporting and depositing the large amounts of cash the dispensaries collect on a daily basis. 

Despite a growing number of states that have legalized cannabis, its federal status as a Schedule 1 drug means most banks and major credit card issuers won’t open accounts or process transactions in the space. 

"With the explosion of legalization across states, there are some big businesses that have unique banking needs. They’re underbanked, underserved and it's over -ashed. There's just cash everywhere," Cook said, adding one of Valley Bank’s cannabis clients deposits more than $1 million in cash a day. "Unsurprisingly, there's a huge pent-up demand across these businesses to digitize the payments to get cash out of the businesses."

Eliminating the industry’s reliance on cash is not just a safety issue for cannabis dispensary operators, Cook said. 

"It’s also about consumer desire.They don't really want to be carrying large amounts of cash or making these transactions in cash," he said. 

The right size

Valley Bank’s size is key to its ability to innovate quickly and create products that serve niche spaces like cannabis, Cook said.

"We’re big enough to do something meaningful and small enough to get s*** done," he said. "The wallet that we built — we're going into pilot with one merchant next month. And that, from concept to launch, is under six months. We've been able to move pretty quickly here to understand the kind of demand the merchants and consumers have for this."

Valley Bank’s goal is to see Valley Pay adopted by each of the major multistate cannabis operators it serves.

"I think it's a huge opportunity for us to grow our bank, deposits and our assets in this space," Cook said. "I think what it also does is, it shows that with the right banking partner, you can solve some of these long-standing problems in this space."

The bank hopes to eventually solve scaling issues that would allow the Valley to serve smaller, mom-and-pop-type merchants in the future, Cook said.

"We're starting with the big guys first and then we'll look to kind of scale it out from there," he said.

Cook said he thinks Valley Pay will also provide the bank with unique visibility into the cannabis supply chain. 

"So we know a lot at the transaction level, and we have a view from seed to sale, and I just think that that's going to unlock a lot of really interesting financial products for those businesses. We've made some early forays into helping businesses finance their growth," Cook said. "I expect we’ll do more of that as we understand the sector and the business more."

Niche banking

The bank’s decision to start serving the cannabis sector over a year ago stems from its existing mission to target niche markets. The bank also serves businesses in the healthcare sector, commercial real estate and homeowner associations.

"There's a lot of consolidation in the banking market today — you're either gonna be bought or sold, or acquire and grow," Cook said. "And so the interesting proposition that we discussed was, how could we help businesses in particular niches grow? We could never really be a bank that provided services for everyone, we really needed to be thinking about where those niches were where we could really serve those markets. We've been exploring various niches, and cannabis was an interesting one for us."

As major banks and card companies begin offering an array of cryptocurrency products and services, whether consumers will adopt crypto as payment vehicles remains an open question.

Companies are making it easier than ever for consumers to pay with crypto at the point of sale. Until recently, paying with crypto was a complicated endeavor that involved enduring delays waiting for transactions to clear on a blockchain, if retailers were even willing to accept it. And the volatility of digital assets was difficult to manage for retailers and consumers alike.

But over the past year, a growing number of mainstream payment providers and card networks are making it easier for retailers to accept crypto. As a result, businesses are increasingly adding cryptocurrencies as payment options and making a bet that consumer uptake will grow. The persistent rise in crypto value — more than $2 trillion worldwide, or about equal to the value of greenbacks in circulation — makes it worth their while to encourage consumers to spend from their increasingly bulging digital wallets. 

Two key factors underpin companies’ bets on crypto payments: a growing number of consumers holding crypto — unlike five years ago — and technology that’s made it easier than ever to transact with crypto. With an increasing number of customers holding crypto assets, easy crypto payments are a natural next step, companies said.

“There was sort of a mismatch between the crypto world, which is a real-time world, and the traditional kind of bank transfer world,” said Randy Kern, chief technology officer at card issuing and processing firm Marqeta. “[Now] we are able to provide an experience that’s much more seamless.”

Growing acceptance

In recent months, major payments companies have broadened the ability for merchants to accept cryptocurrencies.

Purchase, New York-based Mastercard launched a partnership with digital asset exchange Bakkt to allow partner merchants, banks and fintech firms to accept payments in crypto. The tie-up also allows for the delivery of crypto rewards to consumers.  Mastercard’s partnership with Bakkt lets merchants and other partners accept crypto while Bakkt carries out custodial services. In addition, Mastercard this month tapped other partners to create crypto-linked credit, debit and prepaid cards in the Asia-Pacific region that can be used for converting crypto to fiat currency for spending.

Also in October, payments software firm ACI Worldwide announced a tie-up with RocketFuel Blockchain to allow more than 50 cryptocurrencies to be accepted through one click at client e-commerce checkouts, with no fees.  

Marqeta in October began powering Visa crypto debit cards from Bakkt, Coinbase and Fold. Marqeta’s technology enables crypto transactions to take place at speeds similar to those for fiat transactions.

Visa, which said it partners with 50 crypto platforms on card programs, announced in July that more than $1 billion was spent on crypto-linked Visa cards in the first half of 2021.

"A Visa credential — whether physical or virtual" — is becoming the preferred mechanism for the increasing number of consumers who have crypto when they want to actually access that value in spending,” said Cuy Sheffield, head of crypto at Visa.

Payments firms and merchants that spoke with Payments Dive said the addition of crypto as a payments vehicle is a response to consumer demand, and an opportunity to grow basket sizes. Crypto payments software from third-party firms allow for quick conversion of crypto payments to fiat currency, letting merchants make or receive payments without holding the digital assets. 

Merrick Theobald, vice president of marketing at crypto payment processor BitPay, said the availability of crypto transactions drives up average order value and can help merchants tap into new customer bases. BitPay charges a flat fee of 1% of transactions for fiat conversions in the background and completes crypto payment transactions.

“Sometimes a concern with Bitcoin is with the volatility, but that's also why a merchant would want to partner with BitPay, because we manage the volatility — they have nothing to do with the volatility — if they charge $100, they're going to get $100 minus our 1% fee,” he said.

For Atlanta-based BitPay, which said it supports a dozen cryptocurrencies globally, its 1% fee is lower than those charged by major card networks, which can charge more than 2% per transaction. In addition, Theobald said adding crypto payments is a way merchants can attract buyers who typically make larger purchases. 

According to a Forrester Research study commissioned by BitPay in 2020, crypto adopters have an average order value of $450, compared to $200 for non-crypto users. In addition, of customers paying through BitPay, 40% were new customers, demonstrating a major opportunity to broaden customer reach, Forrester reported.

Alongside growing acceptance of crypto transactions at checkout, payments firms say the technology is allowing the transactions to settle faster, on a time frame similar to regular card transactions. Compared to settlement times for crypto payments processed on a blockchain without an intermediary, working through Marqeta cuts processing time from days to minutes.

“Instead of a multiday process, now from your wallet and the associated card that Marqeta has issued, you're able to — in real time — collapse that whole three-day, multistep process into something that's done entirely behind the scenes. And with your cards, you can effectively go make a purchase in the real world which, from the merchant’s perspective, looks like a traditional fiat currency purchase,” Kern said.

Visa, the biggest card company, and No. 2 Mastercard are pitching crypto payments that offer no more friction than a traditional card transaction. 

“There are very few merchants who are enabled to directly accept Bitcoin over the Bitcoin blockchain because it's difficult for them to do so — it requires new infrastructure, and they have to upgrade their point-of-sale terminals,” Sheffield said. “It can take 10 minutes for a transaction to confirm, and then there's the volatility that merchants have to figure out.” 

By contrast, Visa allows for crypto acceptance at 70 million merchants, where the balance of crypto is automatically converted to fiat currencies on the back end, Sheffield said.

Will consumers opt in?

Despite a growing number of options for consumers to pay with crypto, it’s too early to assess the level of crypto use at checkouts, though practitioners agree adoption isn’t huge at this point.

Sheffield acknowledged that Visa’s $1 billion in payment volume from crypto-linked cards represents a small percentage of the trillions of dollars in payment volume Visa processes. (Visa’s total payments and cash volume was $11.3 trillion in 2020.)

Online retailer Overstock made a splash in 2014, when it became one of the first major retailers to accept Bitcoin for purchases. Still, CEO Jonathan Johnson told Payments Dive that Bitcoin sales amount to less than one-quarter of 1% of sales.

Analysts say simply turning on crypto payments isn’t likely to convince large swaths of consumers to use it as a default payment method.

While crypto payment solutions are more readily available, it’s unclear what payment problem they’re solving, said Daniela Hawkins, a payments analyst with research firm Capco. To ensure the flow of crypto payments from the consumer to merchant, the retailer will need to enable them through some sort of established payment rail, she noted. 

Crypto payments for everyday purchases also include an additional tax burden, a factor that may deter some consumers from using it. Making a purchase with cryptocurrency — however small — is considered a taxable event because it involves an exchange of value when the buyer sells crypto to initiate the payment. So, in addition to sales tax, the transaction triggers other tax reporting requirements because buying goods with crypto involves a sale of the underlying digital asset.

“The IRS treats cryptocurrency as property, so any time you buy, sell or exchange cryptocurrency, it’s treated as a taxable event,” said Shivani Jain, a certified public accountant and partner at accounting, tax and advisory firm Sax LLP.  

Tools to track the tax implications of crypto transactions are evolving. While technology may eventually solve this problem, it takes some leg work for the average consumer to meet tax reporting requirements, she said.

Some argue that companies are adding crypto payment vehicles as a marketing strategy, or as a gesture of support for the crypto ecosystem. But for most consumers, adoption isn’t likely to grow without an additional benefit from paying with crypto, said David True, a partner at payments consultancy PayGility Advisors.

“It’s for the true believers, or people who are really into using crypto and believe in the future of crypto,” said True, referencing those who already use it for everyday payments.

Other people will need different reasons.

“They’ll pay with it if there’s simplicity and they'll pay with it if there's a reward or some sort of benefit attached,” True said. 

Indeed, for some consumers, cryptocurrencies as rewards for credit card spending — including offerings from BlockFi, Upgrade and Gemini — seem to be accelerating use of crypto as a payment vehicle. BlockFi’s crypto reward credit card, for example, is reportedly approaching $2 billion in annualized transaction volume since its launch in July. 

Still, the ability to garner crypto reward points that grow through card activity is of greater value to the customer than using the card for transactions in crypto, said Kalpesh Kapadia, CEO of Deserve, the card technology company that partnered with Visa and BlockFi on the recent crypto reward credit card.

“People want to hoard Bitcoin [and] people want it to grow,” he said. “It’s like gold. You convert gold into dollars when you want to sell.”

The volatility of cryptocurrencies, he said, may inhibit their use as payment vehicles, but stablecoins — digital currencies tied to the value of a reserve asset such as the U.S. dollar — have potential, he said. Stablecoins, for example, are part of Facebook’s Novi digital currency pilot in the U.S. and Guatemala, which is tapping the stablecoin USDP.

A bet on the future

Companies enabling crypto payments say they want to get in front of the new payment habits of a younger generation that is more open to transacting with crypto, and that they may want more interoperability between their crypto and non-crypto assets.

ACI Worldwide said clients — which include banks, merchants and billers — are asking for crypto payment options because of consumer demand. 

“We've been asked, ‘When can my consumers pay for a pizza with it? When can my consumers go to see a movie and pay with cryptocurrency?’” said Debbie Guerra, head of the merchant segment at ACI Worldwide. “I think there is a demographic play with a more mobile-adept, younger buyer.”

People who are buying into crypto, quite literally, want crypto payment capabilities that allow them to be able to more seamlessly transact between their crypto and non-crypto assets. 

“Particularly for more millennial and Gen Z consumers, [crypto] is starting to become a mainstream investment, and these consumers want to have access to that liquidity,” Sheffield said. “They're buying Bitcoin so that they can hold it, and they believe that it will appreciate over time — but they still want to be able to have access to that money. They don’t want to have to wait.”

Citi in August launched a service called Bridge built by Citi to connect small and midsize businesses with a host of banks, primarily made up of minority depository institutions. 

The platform will link banking institutions across the country with businesses based in Alabama, Colorado, Georgia, Louisiana, North Carolina, South Carolina and Tennessee that are searching for loans.

Harte Thompson, a Citi senior vice president, said the platform will combat racial inequality in the world of banking by allowing minority deposit institutions "to provide a digital experience without having to build it out internally," and enabling borrowers "that are looking to bank with minority depository institutions" to find such backers.

Bridge connects small- to medium-sized businesses with 18 different banking institutions, most of which are nonwhite-owned banks or community development financial institutions. Businesses being targeted by the new program, mainly based in southern states, can use the service to solicit loans under $10 million.

Citi describes the platform as a "digital meeting place," and highlights liquidity creation, the digitization of loan processes and racial justice initiatives as some of the platform’s guiding aspirations. 

To use the service, businesses first complete a request for proposal, which includes financial data and the value of the loan they hope to obtain. Banking institutions respond with nonbinding offers, and businesses are free to select their best option before pursuing the relationship outside of the platform. 

"We wanted to make sure that we give borrowers choice, and so we picked a few banks of different sizes," said Rohit Mathur, another senior vice president at Citi.

The new platform squares with Citi’s broader efforts to diminish the racial wealth gap. The bank launched the Action for Racial Equity in September 2020, and spent $1 billion on racial justice initiatives, including "over $50 million in new capital and revenue-generating opportunities allocated for Minority Depository Institutions."

According to American Banker, the utility of the platform is threefold: to bring capital to small companies, to build up Citi’s ties with minority-owned banks and to promote innovation in general.

One of the institutions taking part in the pilot is Columbia, South Carolina-based Optus Bank, a minority depository institution. 

"Bridge built by Citi will enable us to deploy the capital we’ve raised from Citi and others back to more entrepreneurs — jumpstarting the desperately needed revitalization after this pandemic ravaged many neighborhoods, particularly those in underbanked communities," Optus Bank CEO Dominik Mjartan said in a statement.

Bridge built by Citi is a product of the bank’s D10X incubation program. D10X has given rise to other platforms like Ensemble, which aims to help divorced and separated parents manage their finances.

For now, there are no fees associated with the new Bridge product for either lenders or borrowers. And according to Mathur, there is no predetermined model for fees. Citigroup is collecting data about the interactions between lenders and borrowers on the platform, and has no specific date for the pilot's conclusion.

Pennsylvania-based Customers Bank in December unveiled new branding, a design the $19 billion-asset lender said is a reflection of its evolution as a technology-focused financial institution.

The rebrand, which includes visual changes to the company’s logo, website, mobile app and offices, follows the bank’s growth over the past two years, which includes new products and geographic expansion, Customers said. 

Amid the pandemic, the bank has become a prolific Paycheck Protection Program (PPP) lender, facilitating roughly 347,000 of the government-backed loans totaling $10 billion. 

The bank has found success allowing other financial institutions to white-label the PPP platform it built in-house, giving other lenders access to its technology for PPP loan origination, funding and forgiveness. 

The bank has also taken a major step into the cryptocurrency space, joining trailblazers Signature Bank and Silvergate Bank in offering banking services to digital-asset institutions.

The company announced in November it had partnered with around 20 cryptocurrency clients, including Genesis, Blockfills, GSR and San Francisco Open Exchange. The business has helped the firm net $1.5 billion of zero-cost deposits since the beginning of October.

Customers said the recent growth has helped it expand beyond its Northeast geographic footprint to include new markets such as Texas, Florida and the Carolinas.

"As a result, the executive leadership undertook a complete rebranding to reposition the bank as a fintech-forward-focused banking institution that provides commercial and consumer clients the stability, regulatory and trust inherent in working with an established bank," the bank said in a statement.

The bank’s new logo does away with the red, white and blue theme and the American flag, a feature Customers Bank Executive Chairman Jay Sidhu said served the bank well in the past.

"It clearly represented the American Dream and our emphasis on assisting the challengers, small business owners and entrepreneurs to punch above their weight class to achieve their financial and growth objectives," he said in a statement. "We will always hold American values, democracy, and heritage closely in our hearts. But as an emblem of a fintech-forward financial institution with a national reach, we need to signal markets, investors, and clients that we have a modern look, feel and discipline."

New clients attracted to the bank are "younger, more diverse, more tech savvy, and looking for a different customer experience," Customers said, adding the new branding is "designed to capture this vibe."

The new logo features two overlapping blue rings, which the bank said represents its goal to connect to customers and provide highly personalized service. 

"Even if the image is rotated, the connection remains, which perfectly embodies Customers Bank's new brand," the bank said.

Customers, which declined to share how much it is investing in the rebranding effort, said a revamp to its mobile app is underway.

The bank plans to convert its branches to the new signage in the coming months, adding the timing is dependent on supply-chain issues. 

KeyBank bought payments startup XUP, a deal the $187 billion-asset bank said advances its embedded banking strategy by streamlining its merchant payments business, the firm announced in November.

XUP, which is short for transactions "up," claims its technology allows financial institutions to "take back the merchant experience" by connecting merchants, financial service providers and acquirers across all channels.

"We've long embraced the software innovation that's sweeping through the financial services industry, and the acquisition of XUP allows us to continue to be a leader in this space," Ken Gavrity, head of enterprise payments and analytics for KeyBank, said in a statement. Financial terms of the deal were not disclosed.

KeyBank was an early investor in XUP, and led the startup’s $3 million seed round with Naples Fintech Ventures in 2021, according to the Charlotte Business Journal. 

"We've been very active in the fintech space for the better part of eight years, leveraging the fintech partnership model to be able to bring best-in-class services to our clients," said Jon Briggs, KeyBank’s head of commercial product and innovation. "And as part of that strategy, it oftentimes goes beyond just bringing their capability through a bank channel to our clients, but it also includes an equity investment."

Briggs said the bank's strategy of investment in a fintech followed by an acquisition, allows it to see the inner operations of the company and influence its roadmap.

"We were looking for a partner to help transform our merchant services and card processing business, and it made sense, not only culturally, but also strategically, for us to acquire them and accelerate our roadmap," he said. 

The acquisition will help the bank address challenges regarding its legacy infrastructure, an issue many traditional financial institutions deal with, Briggs said. 

"Typically, core systems are very old and very siloed. Everything that a commercial client needs, in terms of technology infrastructure, has been built around those siloed products," he said. "In banking, because legacy technology and infrastructure are oftentimes built around product silos, it can feel like you're walking into McDonald's, getting in line to get your fries and then going into another line to get your hamburger."

XUP’s technology helps the bank create a singular experience for its merchant clients, Briggs said. 

"We're only asking them for their information once, and we're delivering our products and services to them in a very seamless and streamlined way," he said.

KeyBank has made several other strategic acquisitions over the past few years.

The Cleveland-based bank acquired student lender Laurel Road in 2019 and relaunched the platform as a national digital bank for healthcare professionals in March. The bank also purchased McLean, Virginia-based analytics and data science firm AQN Strategies in March. 

"We're taking that same approach, building on the success we've had with Laurel Road to bring the XUP team in, maintain them as a fintech company operating with the size and scale of KeyBank to really advance their capabilities," he said. 

All of XUP’s employees will be retained, and the fintech’s operations will continue out of their offices in Atlanta and Charlotte, North Carolina, Briggs added. 

"Those locations, in the banking and payments space, are two beachheads of talent in the industry," he said. "You can expect to see continued investment in those geographic locations to be able to grow the team further."