While the number of U.S. banks working with tech startups is very small, their numbers seem to be growing. Just this week I learned of two:
- Social Money is using Iowa-based Lincoln Savings Bank ($630 million assets) to hold deposits generated through prepaid card issuers and other clients of its CorePro, API for savings (more on that below).
- Zions Bank is holding funds transmitted through stealthy mobile payments startup Clinkle. For a sneak peek at its UX, see this supposedly leaked video.
In addition, the 800-lb guerilla is driving deposits to smaller financial institutions. BancVue, just announced that its clients have refunded $10 million in ATM fees through various rewards checking programs including Kasasa.
Banks working with startups potentially benefit in a number of ways:
- Unique source of deposits, independent of their traditional customer base/geographic footprint)
- Exposure to new methods of marketing to younger segments, who often gravitate to startup offerings
- Access to modern tools and design expertise that would be otherwise unattainable
Finally, it can be an interesting project to work on, benefitting all involved.
Bottom line: Does working with a startup have a positive ROI? Not necessarily. There are many pitfalls, not the least of which is making sure that everything satisfies compliance and regulatory watchdogs. But that just means you'll have less competition and can negotiate better terms.
Social Money's new CorePro API
The Des Moines, Iowa-based company has been a leader in the online savings space, launching SmartyPig back in 2008. In total, about $5 billion in transactions have been processed. That has helped add deposits to its partner banks, primarily Compass BBVA, the 15th largest U.S. bank.
Social Money is now offering its powerful savings platform to developers and non-bank financial companies as a Savings API. Features include:
- Multiple goals within a single savings account
- Real-time funds transfer (savings account "issuer" must maintain reserve account at Lincoln Savings)
- Configurable via client admin site
- 1099 filings
Its simple pricing is fully disclosed on the website:
- $495 setup
- $0.39/mo per savings account
- $0.02 per ACH transfer
- $3 to $6 per new account authentication
The startup has had interest from other non-bank financial companies such as prepaid card issuers. It's also getting good feedback from mid-size ecommerce companies looking to offer customers an easy way to save money to make a later purchase (think Christmas Club).
The system is currently in final beta testing and is expected to go live in Q1 2014.
Picture credit: Savings page at Lincoln Savings.
1. Watch Social Money demo GoalSaver at FinovateSpring 2012
2. For more insights into how to leverage your online/mobile channel to boost deposits, see our Online Banking Report (Nov 2008, subscription)