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Americas Next Direct Bank?

2 February 2010

Perhaps it is a sign of aging that I see events unfold in “waves”. The wave phenomena is probably my brains feeble attempt to connect new information to prior personal experiences… reinforcing some neural networks and restructuring others. Along side this gray matter re-wiring are events that ARE actually connected as ideas are discussed and lessons learned among leaders and investors leveraging new market insight to build new products and businesses.

This week’s “Wave” was related to direct banking. The country direct bank leaders I had a Citi were just fantastic, each one a local crucible of business and technology innovation. I viewed the principal challenge for Citi as finding a way to learn our lessons once (as opposed to 47 times). While I had international, Steve Kietz grew Citi’s US Direct Bank to be the fastest growing bank in the history of US ($6B in deposits in first 8 months).  Internationally UK, Australia, Singapore, Japan, Columbia, India (NRI) and HK stood out as excellent examples.  Our key lesson is that there are opportunities for a “direct bank” model globally and established banks have challenges attacking it because of margins (Innovator’s Dilemma).

This week I learned of the latest DirectBank “Black” initiative by Bill Harris and Rob  Foregger: Safecorp.  From Rob’s Linkedin:

Co-Founder, Chief Strategy Officer at SafeCorp Financial. Envisioning the future of financial services and building it today. SafeCorp Financial is building America’s next-generation electronic finance company, focused on reshaping the retail financial services industry for the 21st century. SafeCorp Financial will offer a full suite of customer-centric retail banking, payments and investment services for the mass affluent market. SafeCorp Financial will operate as a branchless financial services organization, efficiently servicing customers in all 50 states.

Given Rob’s background at Fidelity and Bill’s background from X.com (pre paypal) I would make the following assumptions on their business model:

  • Focus on Affluent, Fed chartered FSI
  • Aggressive push for Customer Acquisition with Direct Deposit (Salary Domiciliation)
  • Yodlee Aggregation and advance financial tools (think of this as quicken lite) for both planning and investing. Bill has excellent relationship with Yodlee.
  • Open Payments architecture for pay anyone.. a key feature missing with most major banks. Perhaps a bill pay driven by Yodlee’s bill direct (driving card transaction fees).
  • Highly competitive rate driving product play. Example interest checking bearing 1.5% and no fee.
  • Investment Products (perhaps later in cycle),  through partnerships
  • Integrated rewards for balances, and use of debit card with tiering in investment products

Thoughts appreciated

See Previous post on Citi’s challenges in Direct Banking

http://tomnoyes.wordpress.com/2009/09/17/citi-bank-of-the-future/

Fidelity Bank…

http://tomnoyes.wordpress.com/2007/07/17/11/

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Written by tomnoyes

February 2, 2010 at 4:52 pm

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