Of course, mobile money is no longer new. India is home to prominent mobile money entrepreneurs, such as Beam and Money On Mobile who have made it easier to do peer-to-peer digital transactions. Late last year, the Reserve Bank of India even challenged the definition of a bank, letting mobile money operators become “payment banks,” which can’t lend but can fulfill most services of a traditional bank. Meanwhile, bKash, in Bangladesh, has been growing rapidly and innovating in how it delivers cash to the underbanked. It launched in July 2011 and already had 11 million accounts by the end of 2013.
The mobile money phenomenon began in Kenya and has spread globally with local entrepreneurs adopting similar models, and trying to breakdown regulatory roadblocks.
However, in the US, banking has struggled to deviate from the older brick-and-mortar model, defined by the Goliaths of banking. Bank of America BAC -2.73%, Chase, Wells Fargo — all have apps but the systems are largely the same: complex log in passwords, overdraft charges, maintenance fees. Paypal allows for peer-to-peer lending without hefty fees but it’s not a bank.
That’s what caught Luvleen Sidhu’s attention: an industry that needed to become more Millennial-friendly, and more importantly, lose all the fees, she says.
Sidhu is Chief Strategy Officer at BankMobile, a new app that launched in January with a grand vision: revolutionizing banking in the US. With no physical branches, and no fees, BankMobile wants to streamline retail banking into a simple mobile experience.
The app’s interface is sleek, modern, and stylish as is the website, which solicits videos and input from customers to BYOB – Build Your Own Bank. But beyond design, they do offer a long list of products: checking, savings, loans, lines of credit to $5,000, personal bankers, financial literacy programs, and more.
Since its launch at the beginning of 2015, they’ve opened close to 3,000 bank accounts, Sidhu reports.
Sidhu is the daughter of Jay Sidhu, CEO and Chairman of the parent company, Customers Bank, and was the founder, chairman, and CEO of Sovereign Bancorp, which turned into Santander Bank in the Boston area. Much of the managing team of BankMobile comes from Sovereign Bancorp, including the president, Warren Taylor. Ms. Sidhu herself hails from the financial world with a previous stint at Lehman Brother and in consulting at Booz & Co.
BankMobile stems from the frustrations of an antiquated and increasingly unjust world of banking, Ms. Sidhu says.
“We noticed that the world was moving ahead but here in the US, we weren’t. Banks especially were lagging behind.”
She throws out some stats to prove her point. For instance, underbanked or unbanked families spend nearly 10 percent of their income on alternative banking fees — the same as on their groceries. The Consumer Financial Protection Bureau asked, in 2012, how a growing assortment of fees, imposed by banks, is affecting consumers. According to a report by Moebs Services, Americans spent over $32 billion in overdraft fees in 2013. But that’s where banks can rake in revenue.
BankMobile is opting out of fees altogether, Sidhu iterates.
Without fees, BankMobile relies on interchange charges (fees divided between a bank and a credit card company every time a merchant swipes a card) and margins on loans.
BankMobile, however, is not the only mobile bank app on the market. GoBank, Moven and Simple also offer similar products; however, all three do have fees.
Sidhu says that they have a fuller range of services. Plus, BankMobile users can qualify to have a personal financial advisor (for free) who is well-versed in Millennial financial dilemmas.
Mobile banking has really taken off in recent years. Last year, Reuters reported that a branch-based transaction costs 50 times as much as the same transaction being conducted on a mobile phone. So it makes economical sense as well to shed some of the overhead costs.
The Aite Group estimates that mobile banking is going to see a 30% annual growth rate, going from 33 million in 2012 to a projected 96 million by 2016.
The brick-and-mortar bank serves a limited role nowadays, argues Sidhu. With a network of 55,000 ATMs offered through BankMobile, she says, her customers can get cash anywhere for free. Sign-up for BankMobile is also done digitally: a photo of your driver’s license provides the necessary identification. Later this year, the company will be rolling out a biometric feature as well.
BankMobile is heavy on technology: crowdsourcing ideas, remote financial advisors, digital signups, and even a foundation dedicated to funding future tech entrepreneurs.
“We really see ourselves less as a bank. But more as a tech company with a bank charter,” she says.
Forbes
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