The Spanish banking giant Banco Santander introduced a nationwide digital bank in the United States on Monday, aiming to generate more deposits to help fund its U.S. auto lending business.
Openbank, which has been available in parts of Europe for years, will kick off with a high-yield savings account offering an interest rate of 5.25%, Santander Holdings USA CEO Tim Wennes said in an interview. A checking account, debit cards and certificates of deposit are expected to be available next year, and lending products could come within 18 months or so, Wennes said.
Santander Holdings USA CEO Tim Wennes
Matthew Guillory
The effort is part of Santander's goal to be "a digital bank with branches," a strategy it has teased since at least March, when its U.S. arm announced the hiring of Swati Bhatia, a former head of Goldman Sachs' digital brand Marcus, as its new head of retail banking and transformation.
Historically, Santander's national auto lending portfolio has relied on costlier wholesale funding to make car loans, Wennes said. By rolling out Openbank, Santander U.S. will be able to collect deposits beyond the bank's existing nine-state, 400-plus retail branch franchise.
"We've got a retail presence here in the Northeast, but as you look to fund what is a nearly $60 billion auto portfolio, plus our personal [loan] portfolio and other books, it makes sense for us to launch a digital bank here to augment our branches as opposed to de novo-ing our way there."
Unlike some of its European banking peers, Banco Santander has not retreated from the U.S. market. In 2020, Banco Bilbao Vizcaya Argentaria in Spain sold much of its U.S. presence to PNC Financial Services Group. The following year, HSBC Holdings in London and BNP Paribas in Paris agreed to sell much of their U.S. operations.
Santander's U.S. operations are made up of two primary businesses — Santander Consumer USA, which emphasizes auto financing, and Santander Bank, which includes branches in Florida, New York, Massachusetts, New Jersey, New Hampshire, Pennsylvania, Connecticut, Rhode Island and Delaware. The retail bank had about $75.4 billion of deposits as of June 30, 2024.
That's about 0.43% of the entire U.S. deposit market, according to a research note Monday from Jefferies analysts.
Santander has been trying to better align its auto lending unit with its retail bank, in part to tap into the lower-cost funding opportunities that the retail bank offers, Wennes has previously said.
The launch of Openbank in the U.S. "marks a significant milestone" for Banco Santander's enterprise-wide digital transformation, CEO Ana Botín said in a press release. The U.S. version of Openbank, which allows eligible customers to open new accounts online or in the Openbank application in as little as five minutes, is built on a proprietary technology platform that Santander intends to roll out across its consumer global businesses, according to the press release.
"Openbank reflects our belief that to be the best for both our customers and shareholders, deploying our own core and front-end cloud-based technology globally is essential and will deliver sustainable competitive advantage," Botín said.
Openbank was only previously available in Spain, Germany, Portugal and the Netherlands. Wennes said the platform upon which Openbank has been built creates a competitive advantage for the company.
"It puts us forward-leaning in terms of an overall technology platform architecture," he said. "In terms of development and improvement [of the platform], we will be able to do that in a faster and more agile way."
To be eligible for an Openbank high-yield savings account in America, individuals must not have existing deposit accounts at Santander Bank, nor can they be a current lending customer of the bank.
In their research note, the Jefferies analysts expressed curiosity about whether Santander has plans to make Openbank "a retail challenger in other categories, medium-term, in a highly competitive U.S. market."
Wennes said there are no current plans to close any of Santander's existing U.S. branches.
"In general, this is an augmentation, and our vision is to be a digital bank with branches," he said. "So we want to make sure we're omni-channel."
The North Carolina-based bank rolled out a multiyear program to provide loans, investments and philanthropic support to communities in the western part of the state.
Consumer Financial Protection Bureau Director Rohit Chopra said the FICO credit-scoring model has drawbacks in price, predictiveness and market competition, and stakeholders should develop a more open-sourced model that uses artificial intelligence.
Analysts say lenders' shares could rally on deregulation, lighter tax burdens and a resurgence of M&A. Declining interest rates and lower loan losses could further bolster bottom lines and attract investor interest.
The contract gives the nation's oldest bank access to more than $3 billion in deposits a month. Comerica, the current administrator, has received a three-year extension of service to help with the transfer.
