Digital & Diversity in Banking: ft. Luvleen Sidhu of BM Technologies, Pt I

In this special episode, Sean and Gina welcome Luvleen Sidhu, Founder and CEO of BM Technologies, one of the largest digital banking platforms in the U.S. Luvleen talks about digital-first banking and how BankMobile was founded with the premise that banking could be substantially better for consumers, especially regarding affordability and consumer-friendly products that are delivered to not only solve consumer pain points but also address inefficiencies in banking at the same time. Sean and Gina ask Luvleen about accelerating digital banking strategies for community banks and credit unions to enhance their technology quotient and partnerships with banking-as-a-service (BaaS) providers to extend their reach.

For more information about their Banking-as-a-Service model, contact BM Technologies.

Text Transcript

Intro: This is Believe in Banking, a podcast series for decision makers, influencers, and leaders, featuring experts taking on the financial industry’s most pressing issues with insight and empathy. The podcast features information and conversations designed to enlighten and empower. Here are your Believe in Banking hosts, Sean Keathley and Gina Bleedorn.

Sean Keathley: Welcome. This is our Believe in Banking Podcast. I am Sean Keathley, President and CEO of Adrenaline.

Gina Bleedorn: And I’m Gina Bleedorn, Chief Experience Officer at Adrenaline

Sean Keathley: Well Gina, we’ve got a very exciting guest today, I cannot wait to have this conversation. Do you want to do the honors of welcoming our podcast guests for our 22nd episode?

Gina Bleedorn: Would love to. It is my pleasure to welcome Luvleen Sidhu, Founder and CEO of BM Technologies.

Sean Keathley: Welcome Luvleen.

Luvleen Sidhu: Thank you, Gina and Sean. I’m really happy to be here.

Gina Bleedorn: Luvleen, you have, even in the last month, then on Bloomberg, Yahoo Finance, and all over all kinds of news outlets. We’re thrilled to have you here on Believe in Banking and we have so many questions to ask you, we may never let you go. But we should actually get started.

Luvleen Sidhu: I’m thrilled to be here. Thank you so much guys for having me.

Sean Keathley: Well Luvleen, thank you, this is going to be an exciting conversation. We’re going to jump in, our listeners are dying to hear what you have to say. Why don’t we start? I mean, your story is so unique, both personally, but also for BM Technologies and BankMobile. How do you want to set this up? Tell the listeners about the story, how did the company come about? And talk about just the dramatic growth and all the success that you’ve been experiencing since then.

Luvleen Sidhu: Sure, I’d be happy to. So we started BankMobile, which BM Technologies was formerly known as BankMobile until we went public earlier this year. And BankMobile really started with the premise that banking could be better, it could be substantially better, especially around a few things. Number one, affordability, transparency, more consumer friendly products. And was there a way to really deliver banking where we were solving for these consumer pain points and also solving for the inefficiencies of the actual business model of banking? Which is really much branch-based banking. And so taking all of this into consideration, we wanted to be able to utilize technology to create a better banking experience for millions of Americans, and that’s what we set out to do a little over six years ago. And since then, we have become one of the largest digital banking platforms in the country. We have over two million account holders today. We are, we believe, the first Neobanking FinTech to go public. And we are, we believe again, the first Neobanking FinTech to actually be EBITDA positive and to have a path towards profitability.

Sean Keathley: That’s such a neat thing to think about because so many technology companies have lot of cash but they don’t make any money. So that’s the point last point you were making.

Luvleen Sidhu: Exactly. And that is important because we believed, when we set out, that we’ve not only create a product that was more affordable, that was easier to use, but also had a growth model and a net income model that was at least equal to, if not better than, traditional banks. And profitability was key in making sure that we fulfilled that mandate. And what has really allowed us to be profitable is the model that we pursue, which is a B2B2C strategy and banking as a service, which has really allowed us fundamentally to be able to acquire bank customers at very high volumes and at very low costs.

Luvleen Sidhu: So today we’re acquiring a bank customer at less than $10 through our partnership or B2B2C model. And we’re also providing substantial value to the partners in this ecosystem of banking as a service. And what that is is that we enable them to utilize our technology, to be able to roll out a full suite of completely branded digital banking products to their customers, to their employees, to better attract, engage, and retain them to create more differentiation for themselves to create an emotional connection. And we help them do this at really a fraction of the time, the fraction of the costs that it would take them to do it themselves. And of course, if they’re a non-bank to be able to do this without having to become a bank. So that’s, at a very high level, a little bit about our genesis and where we are today.

Sean Keathley: Amazing.

Gina Bleedorn: Luvleen, we met you back six years ago or more on that journey. It was shortly after the Higher One’s partnership and in the initial stages of Customer’s Bank. And even at the time, we were working on some strategies to reach younger demographics, college bound students, post-college. Talk to us about digital first banking. You have certainly seen and are filling the gap between low and middle-income Americans and giving them affordable financial services. What do you think about that gap, how it developed, and what the future of digital first banking looks like?

Luvleen Sidhu: Sure. Well, you definitely took me back, sort of a blast in the past. But when we first launched BankMobile, we were so excited to have you as a very close partner to help us with our launch. And I want to thank you and Sean for that, it’s definitely great memories that we had working with your team. And I’m so glad to hear that you guys are still doing well and spreading your knowledge and expertise to so many partners that you work with.

Luvleen Sidhu: So digital first, so traditional banks have typically been branch based and it’s really focused on geographics sort of physical location. And what’s really important in a digital world is to really create digital communities where there’s communities based on shared values, shared interests, shared needs, and that’s what technology really enables us to do. So for us, we look at a student demographic, for example, these are young individuals coming in, maybe it’s their first bank account. Many of them don’t have credit, don’t understand the components of building credit and we’re able to insert ourselves in that trajectory of getting to touch those students at a very early age through our relationships with about 725 campuses across the country. Today, we touch one in every three college bound students and that gives us an opportunity to potentially open a bank account with them. And we are opening several hundred thousand accounts through this channel today.

Luvleen Sidhu: But the important thing Gina is understanding that that is a digital community, it’s the student community. We know that their pain points are, we want to learn money management, we want to get better at savings. We want to get better at setting goals, we want to be rewarded for good financial behavior, we want rewards and discounts at retailers and at bookstores and things that are relevant to us. And so we focus on the specific community that we’re serving and make sure that the product and the service that we’re offering really tailors to them. So in our student banking experience, we have money management tools, we have the ability to set money aside and save for specific goals.

Luvleen Sidhu: We have the ability, through our passport program, to make sure that students are rewarded for good financial behavior, meaning they are logging into their banking app, they are setting up direct deposit, they are setting up a goal for savings, et cetera, and all of these you could say in quotes, “good financial behaviors”, earn them stamps. And the more stamps that they have, the more sort of rewards are unlocked for them in terms of retailer discounts, in terms of entering into a sweepstakes where we pay off four lucky student’ a debt each year. Four times a year, we pick four students.

Luvleen Sidhu: And so that’s an example of being able to create digital communities, identifying their pain points, and then creating the right product and services to really serve and solve those pain points. And we’re doing the same in the wireless product that we’ve created with T-Mobile and making sure that the product that we’re offering there is a standalone very strong bank account, but that we’re also creating synergies between the T-Mobile experience and the bank account so that it makes sense for T-Mobile customers to want to use that account and we’re solving pain points there too.

Gina Bleedorn: It’s wonderful to hear and refreshing in banking, in general, to hear about truly customer first focused strategies and love the idea of the communities that you are serving. What is interesting is that those same communities of let’s say younger students, college bound, post-college, are actually sharing in many needs as other communities too. And all of the things that you were saying in financial wellness and good financial habits, they might be at a slightly different stage in life in older segments but all of that is what people need now more, more than ever. How do you feel that banking as a service and partnership with community banks and credit unions could help bring the same type of customer focused strategies to community institutions so they can compete in a way like a Fintech while still being a traditional banking provider?

Luvleen Sidhu: Sure. So in our banking as a service strategy, it really first started out with non-banks. What non-banks exist out there where they would benefit from offering a fully branded banking experience to their customers, to their employees, to better attract, engage and retain them. And this was especially very evident in commoditized industries, such as wireless. And that’s why T-Mobile is such a great use case for being able to roll out T-Mobile money where T-Mobile was a disruptor in the wireless space, but they’re a disruptor in general. And so they felt that, “Hey, people hate banking. Can we disrupt banking and create a better banking experience for millions of T-Mobile customers?” And that’s what we set out to do, to really differentiate their ecosystem of value beyond wireless. But as we saw the success there, as we saw the success in the higher ed space through the relationships that we have with those campuses and our ability to touch those students and create a better banking experience for them, we realized that financial institutions could also benefit from our banking as a service strategy.

Luvleen Sidhu: And so community banks around the country, I think many of them are so successful in the sense that they’re respected, there’s credibility in the communities in which they serve. It’s a high touch experience that many in those communities value, but I think where they need help is to be able to accelerate their digital strategies and really enhance their technology quotient you could say. And for the ability to provide them new ways, to be able to access customers beyond the boundaries of their physical communities. And that’s where we feel that we can come in and so we’re on a mission to really extend our banking as a service, which has historically been for non-banks into the community banking space to help community banks accelerate their digital banking strategies. And for us to be able to come in and not only provide the technology support, but if there’s also a need to support from the back end of running a bank as well, that we’re equipped to serve them there.

Luvleen Sidhu: And what I mean by that is we’re a very unique bass provider or banking as a service provider where we not only provide the technology to our partners, but we have the end to end sort of turnkey solution of running a bank as well. So the amount of support that’s needed to service these deposits and these accounts. So we have our own core system that we run checking accounts on, if that is what our non-bank partner or a bank partner chooses to use us and so we help them save sort of those core costs as well.

Luvleen Sidhu: As well as we have our own banking operations team, we have our own fraud team, our own compliance and risk management teams. We do debit card issuance, we do customer service. It’s really a turnkey solution for you to turn on or turn off whatever you are looking for. In this space today, you have the FI service of the world, the FISs of the world, you have Q2 coming in and helping with just the technology piece, the digital banking piece. And I think that our ability to really create a more flexible, more innovative solution to roll out these digital banking strategies, we feel very well equipped to do so, and also support them beyond technology if that is what they’re looking for.

Gina Bleedorn: Well, I was interested in knowing when and how is an ideal time for a community institution to engage with you. So as they’re evaluating their tech stack and what you were just explaining about how all of the other providers come into play, is there an ideal time or an ideal way, or what you’ve had success with before to help advise the right time to consider a partnership? I think you made the benefits very clear.

Sean Keathley: We’re on the same wavelength. The other two aspects of that I was going to ask you is a three-part. That’s one. Two is, how do you want to go about doing that? I think your biggest problem Luvleen may be that we’ve got hundreds of listeners that immediately want to do this. I mean, this is what everybody is stuck on. And then third, I don’t know if you boil the ocean in FI, if there’s a sweet spot, there’s 10,000 organizations, 54% of assets are in four organizations. The rest are banks and credit unions, but they range from the average size 300 million up to super regionals. So Gina and I are both kind of focused in here, because this is our audience, this range of community, a big bank, and what you just said is going to be gold for them.

Luvleen Sidhu: For us, the right time is really when a community bank sort of looks inwards and says, “Hey, we’re ready for sort of implementing a strategy that’s going to take us sort of leap years ahead in terms of where we want to go and that we want to partner with you to get you there.” And I think the first step, we’re working with a financial institution right now, and for them, they are a commercially focused institution and wanted to really enhance and implement a retail digital banking solution. And they felt that that was enough of a leap for them, that they wanted help sort of investigating and exploring the rollout of a retail digital bank.

Luvleen Sidhu: And so that’s where we came in because they were re-evaluating their strategy, they were thinking about, “Does it make sense to do this in-house versus what will it cost us? Will it help speed us up by partnering with someone like BankMobile?” And then internally they can make the decision whether it makes sense to do this with a partner like ourselves or to do it internally and I think it’s just a question that each individual organization needs to look at themselves and sort of decide for themselves.

Outro: You’ve been listening to Believe in Banking, a podcast series created to empower decision makers, influencers, and industry leaders in financial services. Be sure to also join us on our flagship site,