Digital-Only Bank Partnerships Reap Benefits for Retailers

By David Mitchell, President of NYMBUS

Challenger banks are on the rise for attracting modern consumers who seek banking alternatives that are convenient and more affordable. In order for traditional banks and credit unions to compete, launching a digital-only bank has quickly become a survival strategy.

Speed of launch is a critical factor when considering a digital-only experience, which has encouraged more financial institutions to embrace fintech partnerships that can help them to rapidly innovate. A recent study from Juniper Research supports this trend by predicting fintech revenue will grow 59 percent over the next five years. According to a March 2019 poll taken by Bank Innovation, 30 percent of bank respondents found fintech partnerships provide the greatest value in creating a better customer experience. Eighty-nine percent of bankers surveyed by Manatt, Phelps & Phillips, LLP also say partnerships between banks and fintechs will captivate the industry over the next decade.

As more financial institutions continue partnering with fintech companies to launch standalone digital banks that attract new customers and deposits, non-financial organizations such as retailers have begun to realize the value of participating in these partnerships to deepen their own relationships with consumers while offering potential new profit streams.

FINTECH SERVICES HELP RETAILERS RETAIN CUSTOMERS

T-Mobile is a recent and high-profile example of just how seriously retailers are taking the financial services market. By partnering with digital-only bank BankMobile, the cellular provider has been able to introduce an instant digital banking offering to its loyal customer base with limited risk.

Using the charter of Customers Bank, BankMobile was created to test and leverage digital-first financial technology with the goal of disrupting the current banking experience—all while under the established institution’s years of trust and financial security. Today, BankMobile has 1.8 million account holders and claims to serve one in every three college students in the United States.

With over 80 million U.S. customers of its own, T-Mobile understands that smartphones are dramatically influencing daily life. According to the Mobile Ecosystem Forum, 61 percent of people around the world use their mobile phone to carry out banking activity, with 48 percent using a dedicated banking app. In the United States, the number of digital banking users has risen 21 percent in the past five years alone. A Federal Reserve survey revealed roughly half of banked Americans accessed their accounts through a smartphone last year.

These statistics support the opportunity for T-Mobile to be a valuable partner in the banking market. As more people use their smartphones to manage money, together with BankMobile, T-Mobile now has a mobile-first banking product available to quickly deepen its connection with its wireless customers.

Tiffany Minor, director of marketing for financial services business at T-Mobile, recently explained to American Banker: “The more products you have, if your customers are happy with them and have a great experience, they will stay longer, and having customers stay longer is good for business.”

RETAIL BRANDS CAN HELP DIGITAL BANKS GROW FASTER

The benefits are mutual when retailers and digital banks partner up. For BankMobile, the T-Mobile brand has given them a national distribution channel with access to tens of millions of potential new customers.

Amazon is another retail giant rumored to one day launch its own bank or checking account. Whether they accomplish this by partnering with a megabank’s digital-first product(s) remains to be seen. One thing is for certain, the Amazon brand will help skyrocket sales and growth opportunities for the established institution involved in that partnership scenario.

Building a new digital bank’s brand identity involves an investment in time and money. Partnering with an established retailer can be a faster alternative to building a loyal and lucrative consumer audience.

FOUNDATIONS FOR DIGITAL-ONLY BANK SUCCESS

Digital-only bank success largely depends on brand differentiation and partnerships.

By investing in the right fintech partner, today’s financial institutions can quickly and affordably launch customized and competitive digital banking experiences without undergoing a technology conversion or hiring new staff. Implementing a Banking-as-a-Service (BaaS) business model like SmartLaunch has made fully-outsourced digital banks possible. NYMBUS provides all of the necessary technology, resources and digital marketing support to attract new customers and revenue growth in as few as 90 days.

Non-financial organizations such as retailers are now able to participate in financial services by partnering with these tech-forward digital banks. The mutually beneficial relationship combines an established institution’s years of trust and financial security with a retailer’s brand and customer loyalty. And for the digital banks launched through SmartLaunch, are provided immediate access to world-class banking technology, shared services and marketing support.

With both sides standing to gain tremendous value, more retailers may follow T-Mobile’s lead. Contact us today to learn more about how NYMBUS can help you get started.