What's next for newly public BankMobile

BankMobile's recent debut on the New York Stock Exchange will give the digital bank more avenues to diversify beyond its core customer base of college students.

The newly publicly traded company, until recently a unit of Customers Bancorp in Wyomissing, Pa., has also been developing two other business models in recent years: selling banking as a service technology and providing bank products through employers to their staffs.

BankMobile is best known for disbursing financial aid refunds to college students on 722 campuses, which they can route to an existing bank account or to a BankMobile Vibe checking account. Through its banking-as-a-service platform, BankMobile is also behind T-Mobile’s T-Mobile Money checking account. BankMobile recently became part of a special-purpose acquisition company, or blank-check company, called Megalith Financial Acquisition Corp. On Jan. 6, BankMobile went public through a merger with Megalith and formed BM Technologies, which trades on the New York Stock Exchange.

BankMobile has sought to increase its white-label partnerships beyond T-Mobile in recent years and bolster its workplace banking program, and a public listing could help it achieve those goals.

“We’re excited for the opportunities that lie ahead as a publicly traded company,” said Luvleen Sidhu, BM Technologies' chief executive. “This gives us access to capital in ways we didn’t have before.”

Fintechs going public through blank-check companies could be part of a trend — the day after BankMobile closed its deal, Social Finance Inc., the online lender known as SoFi, announced that it would go public as part of a SPAC transaction. The ability to source capital outside venture funding could help fintechs diversify their product offerings and become more competitive with banks.

Customers' divestiture of BankMobile has been in the works for years. In August, the $18.8 billion-asset Customers announced that it had agreed to sell BankMobile Technologies to Megalith, which was formed in November 2017 to buy financial services and fintech companies. (Sam Sidhu, Luvleen’s brother and the chief operating officer at Customers Bank, was Megalith Financial's CEO; Jay Sidhu, Luvleen's father, and Sam Sidhu were beneficial owners.)

Stephen Greer, senior analyst at Celent, a research and advisory firm in Boston, said it will be easier for BankMobile to raise capital as a publicly traded company than directly through investors.

He says many challenger banks funnel their resources to customer acquisition, where the costs can be high, but stall at the next step: diversifying their products. Challenger banks need customers to be profitable but need a varied set of products to become viable.

“You might have millions of customers, like many of the challengers do, but you might only be offering a debit card and spending account and trying to make money off of interchange,” Greer said. “That doesn’t leave you a lot of wiggle room to build on top of that and launch products in the consumer lending or investment space.”

In contrast, “BankMobile is a little past that in the sense it has been around for a while and its operating model is fairly mature,” he said. “Maybe this is a way for them to expand the possibilities for where they want to take the product and accessing additional capital they might not have been able to raise through traditional venture-backed sources.” Sidhu co-founded BankMobile with her father in 2014.

Sidhu declined to elaborate on how BM Technologies would use that capital to enhance its products, but she ticked off a number of goals for the upcoming year.

“Our vision for the next three to five years is that we build BM Technologies with a market cap of $500 million to $1 billion,” she said. “Our goal is to acquire a million accounts a year.”

Sidhu hopes to add one substantial partner a year to its white-label service, describing the ideal partner as a strong brand with a large customer base and a transactional relationship with its customers, where interjecting a bank account makes sense. BankMobile is also one of eight institutions that will be offering digital bank accounts in partnership with Google.

In an August interview, she pointed out that offering accounts through Google Pay could help raise BankMobile’s profile among its customers.

“For some of our students, it takes some time to even learn about BankMobile,” she said at the time. “But no doubt they have heard of Google.”

Sidhu is also focusing on BankMobile’s workplace banking division, which provides deposit accounts and credit products through companies to their employees, along with wellness-centric features including money management tools and financial coaching. This could include companies offering online payroll and human resources solutions providers, member benefits companies or any organization that wants to provide financial wellness perks.

In September, BankMobile announced its first partnership in this division, with BenefitHub, a provider of cloud-based employee and member benefit portals.

“We look forward to growing this third vertical in 2021,” Sidhu said.

She also foresees more fintechs going public, pointing to SoFi’s merger with Social Capital Hedosophia Holdings Corp. V, a blank-check company founded by former Facebook executive Chamath Palihapitiya.

“There will likely be other neobanking fintechs in the next year or two emulating the steps we’ve already taken,” Sidhu said.