Experts: Banks must embrace uncertainty to go digital

Cuy Mauck, president and CEO of Stryv Bank in Park City, Kan., gave an audience at the Bank Holding Company Association Spring Seminar an insider’s view of his bank’s new digital branch, branded as BADASS BANK. He spoke during a panel discussion led by Sarah Fankhauser, president and CEO of DCI, the Hutchinson, Kan-based core processing company. The meeting took place in Edina, Minn., on May 5-6. .Mauck gave a detailed description of the digital subsidiary of Stryv Bank, BADASS BANK, which seeks to differentiate itself through its stylized all-caps brand name and card design. The digital subsidiary is marketed for customers who are confident enough to bank at a nontraditional institution.The bank was also launched to survive large-scale industry consolidation and compete with Capital One and JPMorgan. “We need deposits, and this was the one name that we felt when we got in front of people would drive success,” Mauck said of why the BADASS BANK name was chosen.There was also precedence behind the idea: Old Glory Bank, which positions itself as opposing government overreach, had 600 accounts as of the first quarter of 2023, before exploding to 44,600 the following quarter. That number has since risen even more, to 71,000 accounts for a total of $190 million in deposits. Another example is razor company Jeremy’s Razors, which markets itself as a conservative alternative to brands perceived as too politically liberal, added 45,000 subscriptions in just its first week. “We knew that market was out there, so we decided we were going to build our own brand on a national scale,” Mauck said. Mauck adopted a direct approach throughout his presentation, telling owners that half of their banks wouldn’t exist in 20 years. The number of FDIC-insured institutions has already fallen to 4,400 from 14,000 in 1980.Fankhauser said banks launching a digital branch will want to choose a different name and seek a different type of customer than their original business models. Though a digital branch will likely cost less than a brick-and-mortar office, banks will still need to spend on marketing to attract customers, she added. She suggested they stay informed of current trends and challenge their cores and digital providers to help them bank differently. Fankhauser called on banks to meet their customers where they are and connect to their target market by offering the financial tools they already use as part of a brand that personally resonates while delivering added value. She said banks need to partner with an established solution that specializes in areas they don’t. Doing so also allows for a high speed-to-market while allowing banks to focus on their most important tasks, she added. In banking-as-a-service arrangements, fintechs are responsible for finding customers and marketing, but the accounts are still in the bank’s system, Fankhauser said. Banks facing legal trouble from their fintech processors neither sufficiently know the data nor the fintech to ensure compliance, Fankhauser added. Partnering with a fintech company can feel like a major undertaking, but banks shouldn’t overcomplicate the process, she said. “Start small, it can be as simple as a card program,” she added.