Jenius Bank, a digital-bank division of SMBC Manubank in Los Angeles, has grown from zero to more than $1 billion of assets in a year, with an almost completely remote team.
It's a rare example of a digital offshoot of a traditional bank that appears to be successful.
In 2018, several banks launched
Because SMBC Manubank is a business bank (with about $5.7 billion of assets), it has no cannibalization problem — any new consumers who sign up for the app are gravy.
Jenius has two products: a no-fee, high-rate savings account and a personal loan with a completely automated underwriting process.
In an interview, Jenius President John Rosenfeld explained the digital bank's strategy and tech stack.
Your website says you're paying 4.8%. How can you afford to do that?
JOHN ROSENFELD: That's a great question. A lot of community bankers ask me how we can afford to not have any fees and to pay such a compelling rate. We're probably one of the only banks that's 100% in the cloud. So we don't have data centers. We don't have computers sitting in a building somewhere. So we're not paying for that. Ninety-eight percent of our employees work remotely, so I don't have offices that I'm paying for. I do have a couple of buildings that we use as kind of meeting places. But our operating costs are dramatically lower than anyone else. Part of the original business concept was to build one of the most efficient banks in the country so we could pass more of that benefit on to customers in lower fees and better rates.
When you say you're 100% in the cloud, are you using a core banking provider like Nymbus that's totally cloud based?
No. We're actually in three clouds. FIS is our core platform provider. And they have a private cloud that they run all of their technology in. We use [Microsoft] Azure for our operating platforms that are not FIS. So think of that like middleware, identity and access management, APIs, our mobile app, all of that sits in Azure. And then all of our data ports into Google. And we use Google Cloud for all of our analytics.
But we also have no paper, so we don't mail anything and we save a lot of money on paper and postage. These are examples of how creating a model from scratch allowed us to do things so much more efficiently.
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How did you build the all-digital experience for personal loans? Was that developed in house?
FIS' Modern Banking Platform is our core system. And then we use a company called Amount for loan origination. We built our own loan-approval workflow process that takes the loan application through the several steps of income verification, identity verification, underwriting, et cetera.
Several years ago, some banks tried to launch digital banks and they mostly fizzled out. What do you think are the criteria for launching a digital bank that survives?
I was at Citizens Bank, and we launched a digital value proposition called Citizens Access. There are three different kinds of paths that I've seen occur. One is, the parent bank launches the new bank as a challenger model, where they're going to test new things, have a different value proposition and partition it so that if customers go over here to this digital value prop, they can't come and use the branches. You have to maintain some separation, because otherwise what happens is, you get better rates over here, lower fees, but you're creating the same cost of a traditional bank so that that model doesn't work. And there's a few different examples out there where that wall started to break down or customers started jumping over it, and the bank had to adjust pricing on one side or the other, or merge it.
But then you also had ones where the challenger model was literally picking up about 75% of existing customers, so the cannibalization killed it.
The third path was to build digital capabilities that the parent bank found very compelling, and then decided to bring in house. So before we launched Citizens Access at Citizens, the bank didn't offer deposits nationally. Now it does, but it offers it all under the Citizens Bank brand instead of maintaining two separate brands.
What we've done with Jenius Bank is we launched a consumer bank where they had no consumer bank in the U.S., so we had no risk of cannibalization or of people jumping over the wall. It's allowed us to grow a little more freely.
