One banker's advice for product development: Let customers pitch in

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Judith Erwin thought she was done with banking after 35 years in the industry, until she was approached two years ago with the idea for a New York bank that would cater to startups.

“I asked myself, if you could start a bank from scratch, what would that look like and what problems could you solve,” she said. “It turned out to be quite a long list.”


Erwin decided to go for it provided the company — which ultimately was dubbed Grasshopper Bank — made itself “a digital-first commercial bank for the digital entrepreneur.”

Erwin sat down with American Banker to discuss account opening, wire transfers, cash-flow management and other services that she thinks traditional banks could improve on. She also discussed the origin of the bank’s unusual name. The transcript below has been edited for length and clarity.

What's driving this idea of a digital-only commercial bank? Does it have to do with servicing innovators that expect innovation from their bank?

JUDITH ERWIN: That is a part of it, but from a go-to-market strategy, we’re talking to digital entrepreneurs that grew up in a digital world, and they expect their business banking to feel like their consumer experience. But also from a business perspective, it's the right thing to do.

I do worry about banks’ ability to stay relevant in this world. In order to do that, you need to drive costs down so that small banks don't have to be sold every five minutes. Those innovators are going to be a part of co-designing our products. We want to collaborate with our clients so that we’re in a constant feedback loop to drive change.

What does that look like?

It took us more than two years to build this. During that time frame, we were working constantly with user groups that consisted of entrepreneurs. We had them giving us feedback the whole time. Then, we have a strategy of a very deliberate rollout.

We’re in an alpha rollout right now. Our beta phase starts later [in July] with 100 clients. During the beta phase, we’ll be interacting with these clients on an ongoing basis about what they think about certain things.

This group of beta clients is going to be a very special part of our legacy, actually, in terms of building the product. But because we are using an agile development methodology, we're going to be creating new features and functionality every two to four weeks instead of the waterfall approach to development that most banks do.

When you talk about a two- to four-week time frame, is that a result of using the cloud and working with a software company?

It’s all of the above. Our technology architecture has been built with that completely in mind. We have Temenos as a real-time data feed of the software license on the bottom, and then our proprietary platform sitting on top.

But that platform is built on an open application programming interface architecture so that we can partner with other fintechs that have maybe already built something beautiful that we can use. I only want to build those things that are our special sauce, and that is going to be around data tools for our entrepreneurs to run a better business.

It's quite a long road map, but our minimum-level product is focused on a few pain points. One is opening an account, which can be a god-awful process. We’ve set out to have a completely online interface, and it's basically a seven-minute chat that you could do on your phone or your browser, no matter how big or small you are. You can have the account ready the next day or sooner.

The second pain point we addressed was wire transfers. Ask businesses what's the worst service a bank offers, and 90% of them will say wire transfers. We have a highly intuitive interface, highly secure, but you can send wires from wherever you are in the world in a safe, secure environment that'll be done in three minutes; and I won’t charge you $25.

And the third pain point we addressed for entrepreneurs, which is something I’m sure they lose sleep over every day: what is going on with their cash burn? How much money do I have? What are my expenses? How many months of cash do I have left? How can I manage that real time? As part of our initial product offering, we have a cash-burn calculator which allows entrepreneurs to calculate and manage and project their cash burn to help them make the right decisions.

What's behind the bank's unusual name?

We started out with a placeholder name. When we first did our application, we called it New York Venture Bank.

That's very boring and very generic. So, since we're in New York City, we chose Grasshopper in homage to [U.S. Navy] Rear Adm. Grace Hopper. If you're not familiar with her story, she was part of a team in the '60s and '70s that started development on the computer programming language that led to COBOL. She was a really amazing woman who is just now starting to get some notoriety.

The other thing about the name that's really cool is that grasshoppers are physically only able to move forward, and not backwards and sideways. And forward is the way we want to take the banking industry.

You mentioned previously how you’ll work with your customers on new features. From that perspective, what’s next?

The most important product a client can have is a checking account, as simple as that sounds. And maybe also a money market account. But the question then becomes, what do you do with the data gathered from those accounts?

What if we can capture information for an audit in advance so they’re audit-ready when their accountant comes around asking for that information in late December, then can push it over to them on Jan. 1 with the push of a button.

We’ll also be working on various reconciliation tools. We’re talking with Ripple already for cross-border payments, and that will be an early product for us. We’re also working on same-day ACH and will be an early adopter there, too.

As a new bank, how do you go about getting customers? You mentioned how you’re already working with close to 100 customers. How does that happen?

We have a large investor group. A number of our investors are strategic. We have both investors who invest in technology companies, but also partners of venture firms that were part of our round.

We actually have a very long waitlist of clients that come from both our investors but also the general ecosystem. Once people know you are coming, they want to join. We're really very fortunate that we have a long waitlist of companies, and we’re going to take the first 100 and bring them into our beta launch, and that includes borrowers. It’s not just the checking account. We’re lending into this space as well.

I’m pleased to say we have a lot of good momentum though we’ve been in launch for so long. We’ll do a full launch sometime later in the year. And because of our online account opening capability, that’ll be open to the world.

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