This fintech is taking anti-bank marketing to extremes. It may pay for it

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Good Money, a fintech that is nearly a year away from launching its first product, is already cranking out controversy.

It is in many ways the disruptor from central casting, complete with trash-talking of established players. Consumers are hungry for a coup against traditional banking, CEO Gunnar Lovelace says. Many banks, the startup's website says, lack good values, pollute the earth and hurt the economy.

“We give 50% of our profits to charity,” a tag line from reads. “Suck it, banks.”

Enough investors have bought into the brash message and ambitious (but still unrealized) business plan for the startup to raise $30 million in Series A funding.

But Good Money still has to team up with banks to provide some of its services, and industry observers say the aggressive rhetoric could rub potential partners the wrong way. Moreover, its public descriptions of its banking ties and other aspects of its business may be misleading and could come back to haunt it, the observers said.

Good Money, which is scheduled to launch in the third quarter of 2019, says it will offer savings accounts that pay 2% interest. Because it does not have a banking charter, it says it has been establishing partnerships with multiple banks that will eventually hold those customer assets. It declined to name its bank partners or provide more details about exactly how they would work together.

It also wants to offer customers the opportunity to own a piece of the company, Lovelace says. Good Money is planning to register its securities in 2019, he says. Customers' shares could be tied to the size of their holdings, but Lovelace said the details still must be worked out.

Its marketing descriptions of itself are already raising eyebrows, especially how it used the word "bank" in promotional material.

The tag line on Good Money's website had been "Now you own the bank," but it recently changed that to "Now, you're an owner."

One investor in fintechs said that if Good Money is going to disrupt banks, one of the things it needs to prove is that it is more transparent than banks.

“They’re not a bank. If you’re going to say you own part of the bank, then you need to be a bank," said Ryan Gilbert, a partner at Propel Venture Partners, the investment arm of BBVA. “They’ve got to clarify the message or at least have more disclosure on their websites.”

An Aite Group analyst agreed. "It matters to be fully transparent to consumers, and they should disclose the fact that they work with many banks on the back end," said David Albertazzi, senior analyst at Aite.

Gilbert also said that Good Money's initial tag line could have violated Unfair, Deceptive or Abusive Acts and Practices regulations.

Good Money did not direcly answer questions about whether its messaging was misleading or violates consumer protection rules.

In a written statement to American Banker, Good Money called itself a financial technology company that plans to offer banking products and services through third-party partnerships.

"We are still in the development process," Lovelace said. "When we launch, our customers will understand exactly how the products on our platform work."

Lovelace stressed that the company's platform is still in pre-launch stage and that the company is working closely with experienced advisers.

"Our press release was focused on the close of our Series A funding round," Lovelace said. "The goal was to share our plan, not to announce a product launch. ... Transparency is a core part of our philosophy, and as we shift from development to marketing, we will continue to share the information that we believe is essential to becoming a trusted alternative to traditional banks.”

Gilbert pointed out the recent experience of another fintech, Robinhood, which ran into trouble after announcing it would launch a checking and savings accounts that were insured by the Securities Investor Protection Corp. But the head of the SIPC said it had not reviewed or approved the product, and questions swirled whether Robinhood's claims were misleading consumers or possibly breaking the law.

Robinhood has since removed all references to checking and savings accounts from its website and social media channels. In a blog post to explain the change, Robinhood said its new product would be a "cash management" service.

“The Robinhood issue showed very clearly that federal regulators are not going to stand by if they see things that aren’t being conducted properly,” Gilbert said.

It is critical that consumers be made aware of where their money is being held, said Laurie Stewart, CEO and president of Sound Community Bank and chair-elect of the American Bankers Association.

"I worry a little about a generation of folks that had this comfort with PayPal and left large sums there and don't understand the value of deposit insurance," Stewart said.

Some neobank founders question whether bashing the incumbents is an effective marketing strategy.

“Some of the early fintechs have had pretty aggressive language towards the more established institutions to rally customers frustrated with the status quo,” said Nicolas Kopp, the U.S. CEO of N26, a neobank that was given a full German banking license in 2016. “We’re not in that camp actually. We focus more on showcasing our product versus bashing others. Because you do need to partner with incumbent institutions.”

N26 chose to get a banking license because it believed it could keep its customers financial assets more secure that way. The Berlin-based startup also wanted to be able to control the user’s total experience.

Its U.S. strategy mirrors the one it used in Germany. It would enter this new market by partnering with a traditional financial institution. But the startup hopes to eventually get a U.S. banking charter.

“We have our views, and we will find out five to ten years from now if they were correct or not,” Kopp said. “From my perspective getting the charter in Europe was the right step. We could offer products and innovate across the whole value chain.”

Getting a U.S. banking charter has been difficult for neobanks, though. Shamir Karkal, founder of Simple and founder and CEO of the developer platform Sila, said he is encouraged by Varo Money, a fintech company that recently got past one of the steps in this process. Varo Money received preliminary and conditional approval for a bank charter application from the Office of the Comptroller of the Currency.

Building up a bank’s balance sheet at the growth rate that startups are accustomed to makes regulators nervous, Karkal added. Neobanks will have to raise capital just to hold as equity.

For now, Good Money is putting some of its recently raised capital to work by doing product development and marketing. The Series A round was led by Galaxy Digital through its Galaxy EOS VC Fund. The investors also included Breyer Capital, Blocktower Capital, Boost VC, Ken Howery, Blockchange Ventures, Cross Culture Ventures, Troy Carter, Mitch Kapor, Peter Diamandis, Blake Mycoskie, Justin Rosenstein and others.

Good Money says it does not plan to obtain a banking license. Aite's Albertazzi said that neobanks can get by without a banking charter at first but that they will need one if they hope to live up to their rhetoric about changing banking.

“Early on, to get started, it does not matter,” said Albertazzi. “But to disrupt the banks and gain consumer trust, the path to success for neobanks is to acquire a banking license.”

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