5 market niches banks are reaching with technology

Banks of all sizes are turning to the booming health care profession, often through fintech acquisitions.

“It’s a large, lucrative and stable market,” said Kilmer. “The players can buy almost everything that banks have,” including wealth management and private banking.

For example, the $186.3 billion-asset KeyBank acquired Laurel Road, which has roots in student loan refinancing, in 2019. It launched Laurel Road as a digital bank for medical professionals in March 2021.

“Doctors feel like banks pay attention to them when they have ‘arrived,’” said Alyssa Schaefer, chief experience officer at Laurel Road, during American Banker’s Digital Banking conference in 2021. “When they are in the thick of training they don’t have a lot of options for credit or mortgage. We are trying to engage them much earlier than other banks.”

Panacea Financial is another digital bank for physicians; it debuted in November 2020. It is a division of Primis Bank, a $3.5 billion-asset institution in Glen Allen, Virginia. Originally the digital bank offered checking and savings accounts and fixed-rate personal loans, but it has since introduced student loan refinancing, practice loans for those starting or acquiring a practice and insurance.

“I think everyone wants doctors as customers, but they haven’t been willing to make unique products for them,” said Michael Jerkins, president and co-founder of Panacea, in a November story.

On the lending side, Fifth Third Bancorp in Cincinnati acquired health care lender Provide in July 2021. In September, Fifth Third noted that new loan volumes were better than expected.

Meanwhile, Zions Bancorp in Salt Lake City is developing a digital mortgage product for dentists, veterinarians, optometrists, physicians and pharmacists who have already taken out business loans.

A number of banks have acquired or partnered with home improvement-focused lenders to capitalize on consumers’ enthusiasm for renovating their homes. Sometimes these deals were motivated by the fintech lenders’ point-of-sale loan technology.

For example, Goldman Sachs announced it would purchase point-of-sale loan provider GreenSky in September 2021. The deal was expected to give Goldman access to a million customers every year, typically people who own their home and have a high income. The bank chose GreenSky because of its cloud-native technology as well as its merchant network, which include home-improvement companies.

“They've gotten their technology stack to a place where it's more modular than monolithic,” said Stephanie Cohen, global co-head of consumer and wealth management at Goldman in a September interview. “They have spent time making the interaction that happens at the customer's house really seamless.”

Portage Bank, a $40.6 million-asset institution headquartered in Ceylon, Minnesota, underwrote home renovation loans in partnership with the app Plunk as part of a test that ended in September 2021. Plunk helps homeowners figure out the valuation of their home in real time, discern which remodeling projects will deliver the greatest returns and connect with local contractors. In July 2021, it announced its home renovation loan, which lets homeowners borrow up to 75% of their home’s future remodeled value in an all-digital environment. Portage funded the loans while Plunk walked users through remodeling.

“Portage agreed to work with Plunk based on our ability to bring them new customers — and, importantly, be on the front wave of what we both believe is a very big opportunity for home renovation loans,” said David Bluhm, co-founder of Plunk. He said Portage gained both new loans and new customer leads.

A growing number of banks are banking cannabis businesses. Technology is helping them scale up their efforts and ensure they remain compliant in a regulatory and legal gray area. It also gives them a head start over banks that are waiting for legislation on the federal level.

West Town Bank & Trust, a subsidiary of Integrated Financial Holdings in Raleigh, North Carolina, uses software from RiskScout, a provider of an onboarding and due diligence platform that focuses on high-risk markets. This helps the $411.4 million-asset bank filter prospective customers and conduct intensive know-your-business checks that take negative news and more into account. Lead Bank, in Kansas City, Missouri, turned to Dama Financial, a company that helps banks handle cannabis businesses, for help sourcing customers, initial due diligence and ongoing monitoring.

“There is a very high resource requirement to bank the cannabis industry and we would not be able to do it to this level without partnering with a fintech like Dama,” said Danny Schneider, the Bank Secrecy Act officer at the $738.4 million-asset Lead Bank, in a February interview.

Needham Bank, in Needham, Massachusetts, announced that it would acquire Eastern Bankshares’ cannabis banking operation in early 2022. “As we prepared to enter the cannabis banking business, we took a holistic look at our infrastructure to ensure we were capturing the right information in each channel at account opening,” said Paul Evangelista, director of specialized banking at the $2.9 billion-asset bank.

That meant collaborating with its core data service provider COCC to ensure it was capturing the right data for compliance and monitoring purposes, and bringing on two new technology providers: Shield Compliance to automate customer onboarding and monitoring, and Verafin to monitor transactions and to create currency transaction reports and suspicious activity reports.