By Toni Lapp
As some banks try to regain ground lost to fintechs, others are forming partnerships. Consider the case of Central Bank of Kansas City. CBKC has long prided itself for serving customers of moderate means. A Community Development Financial Institution, CBKC was probably hit harder than most banks during the recession.
“If unemployment in the Kansas City metro area was 8 percent, it was 30-40 percent in the neighborhoods we serve,” said Trent Sorbe, who joined the bank in 2014 as president of the card division.
In 2002, CBKC began issuing stored-value cards; in 2013, it developed Central Payments division, headquartered in South Dakota, hub of nationwide payment card issuers.
Enter digital startup ChimpChange, a provider of mobile payments, which went looking for a bank partner earlier this year. Its model of alternative banking, according to its prospectus, “includes both the existing functionality expected of traditional banks with the addition of new features.” In its unique fee structure, customers can avoid monthly fees if they spend, withdraw or load money at least once every 60 days. There is no credit check or minimum balance requirement. Its transactional bank accounts enable peer-to-peer transfers using a platform that relies on mobile phone numbers as a unique identifier, replacing lengthy bank account details. ChimpChange’s revenue comes from interchange fees, out-of-network ATM fees and other platform fees.
ChimpChange describes itself as the answer to the “rapidly changing landscape of banking, driven by technological advancement, smartphone adoption and evolving consumer expectations and demographics” tailored for the “fragmented banking market.”
In other words, it is finding customers that elude banks – millennials and the underbanked. ChimpChange announced its partnership with CBKC last month, as it was kicking off its initial public offering.
“Partnering with Central Bank of Kansas City enables us to combine an innovative technology stack we have built, with a fully regulated and insured account issued by the bank,” said CEO Ash Shilkin. “The total becomes greater than the sum of the parts as the customer is provided with a frictionless user experience and value-added features without compromising the safety, security and protections provided by a fully regulated issuing bank.”
Longtime CBKC customers may be unaware of the ChimpChange partnership; bank executives see ChimpChange as a way to attract customers outside of the bank’s current base.
Those who are drawn to download the app may learn that they are opening a CBKC account by reading disclosures during the registration process; “however, our customers are attracted to us because of the fintech experience we have created on top of the account,” said Shilkin.
The App Store tallies the number of installs between 100,000 and 500,000, and customers give it a 3.8 average rating on a 5-point scale.
“Conversion rates on some of the early marketing efforts are exceeding expectations,” said Sorbe, who declined to provide numbers. “So we are excited about the program’s potential.”
Mobile Financial Services: Reaching the Underserved
In a recent FDIC report, Opportunities for Mobile Financial Services to Engage Underserved Consumers, researchers concluded that consumers see mobile as superior to traditional banking channels when it comes to long-term financial management. In particular, consumers rated traditional channels as “weak” for providing control, convenience and affordability. Meanwhile, the mobile channel fell short on perceptions around security and customer service.
“Mobile banking users in the study were vocal about the ways that MFS increased their awareness of available account balances and helped them better understand the timing of when funds leave and enter their accounts,” said the report. “Mobile banking also provides underserved consumers the ability to monitor charges and fees, such as overdraft, and, in some cases, even avoid them.”
Toni Lapp is senior editor of BankNews.