How can digital banking offer deep innovative solutions to niche business and professional communities? Hear from our panel of experts the challenges and opportunities for building a product that meets the specific needs of a professional group, how to tailor the experience and features to the unique needs of specific professional groups and what's the value in catering to a segment of small business owners?
Transcription:
00:00:12:05 - 00:00:39:18
Miriam Cross
Hi. Welcome to American Banker’s Digital Banking Conference. My name is Miriam Cross, and I'm a technology reporter, an American Banker. Today, I'm going to be speaking with Alyssa Schaefer, the chief experience officer at Laurel Road. And John Waupsh, a co-founder of Nerve, in a session titled The Future of Digital Banking: Niching Down to Scale Up. We are going to be accepting audience questions, though, if you have any, please send them in as they come up.
00:00:40:15 - 00:00:42:17
Miriam Cross
And Alyssa, John, thank you so much for joining us.
00:00:43:17 - 00:00:44:00
John Waupsh
Thank you.
00:00:44:28 - 00:00:52:17
Miriam Cross
I'll start by asking you to each introduce yourselves and tell us a bit about the banks you're representing. John, how about I start with you?
00:00:53:14 - 00:01:18:22
John Waupsh
Sure. The so I'm John Waupsh. I've been in this space now for I guess, over 15 years and am the co-founder of a neobank for music creators. We just launched about two months ago. Exactly. And the bank that we're representing would be Perimont Bank in New York. Is that what you mean, the bank that we work with.
00:01:19:19 - 00:01:21:13
Miriam Cross
Or I mean, tell me about Nerve, basically.
00:01:21:18 - 00:01:47:19
John Waupsh
Oh, okay. Yes, yes. So what we do is we're a neobank for music creators, specifically anybody who makes money in or with their music. So deejays, songwriters, could be bands or rappers. Anybody makes money in music and thinks of their world as a career in music. We help them with that.
00:01:49:07 - 00:02:00:07
Miriam Cross
Alyssa, I think people traditionally know Laurel Road as student refinancing, but I know it's expanded a bit since then.
00:02:01:08 - 00:02:19:22
Alyssa Schaefer
That's right. So we did start as a fintech company back in 2013. At that time, we were known as [inaudible]. And I used to make a little bit of a joke that when I first got to [inaudible], I couldn't even say very and or wait and let alone where know where they were two towns in Connecticut.
00:02:19:22 - 00:02:47:10
Alyssa Schaefer
So we rebranded in 2017 when I got to the bank Laurel Road, and we were a fintech company, really focused lending, primarily with student loan refinance and mortgage and a couple of years ago we actually got acquired by KeyBank. So we are still very much a digital banking platform now, we say, but we're actually part of the KeyBank family and operating as Laurel Road very much like we were operating before the acquisition in a lot of ways.
00:02:47:22 - 00:03:10:14
Alyssa Schaefer
And so the difference, though, is that we've expanded our product set and we narrowed our focus a bit to hyper focus on the medical segment, specifically doctors and dentists. So we have a range of lending products, but also a range of deposit products now and some perks and other fun things. But specifically for doctors and dentists, we may expand from there, but that's really our primary focus.
00:03:10:27 - 00:03:32:05
Alyssa Schaefer
And we've actually just launched a whole suite of products specifically for doctors and dentists in March of this year. Coincidentally, March 30th is actually National Doctor's Day. So that's when we launched our national central bank, we call it internally for doctors and dentists. Externally we call it Laurel Road for Doctors. So that's a little bit about us. And I am the chief experience officer at Laurel Road.
00:03:32:05 - 00:03:43:25
Alyssa Schaefer
So what does that mean? It basically means all the touchpoints that the customer may interface with. So product pricing, marketing and operation.
00:03:44:12 - 00:03:56:15
Miriam Cross
So both of you work for digital banks or digital banking platforms that focus on pretty specific audiences and Alyssa, what would you say is the value in serving a specific audience rather than a broad one?
00:03:57:18 - 00:04:18:21
Alyssa Schaefer
Sure. I mean, I think it allows you to be more creative, but in a targeted way. And so it's sort of like, you know, how can you be creative but targeted? Because there's some kind guardrails there. I don't think it's profitable to be creative from a product standpoint or a product design standpoint for dozens of segments.
00:04:18:21 - 00:04:38:15
Alyssa Schaefer
But it is very possible to be creative for one or a couple of very particular segments. And so that's what we've done, at Laurel Road. I think that's a huge advantage because they're able to be creative with the product that you're able to be creative with. The messaging is very specific to that, and you're able to be creative with the third thing experience as well.
00:04:38:15 - 00:04:51:16
Alyssa Schaefer
So there's just a lot of more specific ways you can speak to them, interact with them. That makes it for me at least a lot more interesting being a target as we are in.
00:04:51:17 - 00:04:58:24
Miriam Cross
John, what are your thoughts you're on mute.
00:05:01:07 - 00:05:38:29
John Waupsh
Why would I put. Oh, sorry about that. Classic Zoom fail over two years. Anyway, the the I think it's a it's in many ways a reboot of the community banking paradigm that of 100 years ago where you know when when when banks and even credit unions at their start were really focused on niche audiences whether that's the the community the geographic community that happens to be right around my my facility or it's the community that I grew out of because I serve a population that happens to work for a certain employer.
00:05:39:15 - 00:06:05:08
John Waupsh
I know how to speak to them. I know what their problems are. The problems typically are very unique and compared to a very broad set of people. And so as a result, I can you know, I, like Alyssa said, be creative. You know, I think of it as and maybe it's just my own cynical view, but solving problems right whether it's being creative in that way, it's getting to the root of the problems.
00:06:05:19 - 00:06:33:05
John Waupsh
There's no way to solve real problems if you don't dig deep and and that's that's the key is really understanding where where people are having issues, why they're having issues, why they are not banked into the degree that maybe other populations are, and in helping to alleviate those challenges. But it all starts with understanding a community, which is pretty much where banking started in this country.
00:06:35:13 - 00:06:41:22
Miriam Cross
And my understanding is you have a particular understanding of the musician community because you have a background in music.
00:06:42:17 - 00:07:18:09
John Waupsh
Yeah. Yeah. You know, I, I, I've spent the last couple of decades with on kind of a crazy archeological hunt of finding music that was recorded but never actually released and where the creators themselves were kind of lost the time and work with a number of people, including a couple of business partners, to try to find those artists and help them make money with their long lost music.
00:07:18:09 - 00:07:42:03
John Waupsh
And so that has always been just a fun passion project of mine where I've lost way more money than I'd ever care to recount. But you know, what Nerve is effectively is combining the two passions fintech for the last 15 something years and and in the music side for for longer. So it's a it's definitely a merger of the two passions.
00:07:42:22 - 00:07:54:09
Miriam Cross
All right. And, you know, I'll start with you, Alyssa, for this question. Why do you think this particular audience is underserved? You know, theoretically, a doctor or a dentist could go to any traditional bank.
00:07:56:00 - 00:08:21:26
Alyssa Schaefer
Sure. I don't know if they're underserved in a traditional sense. There's lots of options out there for them. But I think they're underserved in a representation in a product sense as we think about what they go through every day. But more so their journey I like what John was talking about in terms of the music being his passion and him having such a personal connection with what he's doing right now.
00:08:22:03 - 00:08:46:10
Alyssa Schaefer
I have a little bit of a similar story, but it's it's obviously different than John's. I'm married to a physician, and we've actually been together for quite a while through medical school and residency fellowship. And now he's attending doctor. And so that journey is so unique and it just it's it's you know, it's this delayed gratification in many ways because you're in medical school for so long.
00:08:46:10 - 00:09:05:22
Alyssa Schaefer
Then you have all this training for several years, and then the doctors feel like the banks pay attention to them more. So when they're they sort of arrive, you know, they're that attending, doctor, and all of a sudden they start getting the phone calls and they start getting, you know, the the the invitation to join this private bank or private bank there.
00:09:05:22 - 00:09:32:02
Alyssa Schaefer
But when they're in the thick of their training, one, they don't have time to research options. Right. But to they don't have a lot of options for credit or a mortgage or for even a credit card sometimes. So we are very much designing our products both from a pricing and a credit standpoint for their journey and trying to actually engage them much, much earlier than other banks.
00:09:32:02 - 00:09:37:19
Alyssa Schaefer
So they're underserved, I would say, at certain points of that journey. And that's where we're trying to fill that gap.
00:09:38:20 - 00:09:45:04
Miriam Cross
Okay. And how do you fill that gap? What sort of features have you designed to meet those particular needs?
00:09:46:18 - 00:10:04:15
Alyssa Schaefer
Sure. So it started to mention a little bit around our products and pricing. But maybe I'll just back up for a second and tell you a little bit about how we our process of how we've even started to focus on them. So we actually have had at Laurel Road a focus on the medical community for quite a while, even before we were acquired by KeyBank.
00:10:04:25 - 00:10:31:01
Alyssa Schaefer
We were the first to launch a refinance the student loan refinance product for residents We had a particular focus on doctors through a lot of our partnerships, and we carry that over now with an expansion of product, but we very much do that based on research. So over the last year alone, we talked to about 1200 different doctors and physicians and really garnered their needs and their pain points.
00:10:31:01 - 00:10:48:17
Alyssa Schaefer
Like John was saying before, you know, what are the problems that we need to help solve for them? And they're actually banking problems and credit problems, not that they're problems but their needs and they're also life, the types of thing, right? So we have a whole program of perks that help them with their everyday life, the things that they're too busy to worry about.
00:10:48:17 - 00:11:07:24
Alyssa Schaefer
So we're trying to go beyond just the traditional banking products to some other areas as well. But again, it's all based on research and it's all based on our conversations that we have with doctors in more formal respects, but just every day. So I would say I'm going to give you a kind of a classic marketing answer to wrap this up.
00:11:08:05 - 00:11:32:11
Alyssa Schaefer
Is product. So our products are very much focused on that journey that I talked about. And where are you in that journey and how can we adapt credit and or pricing differently for that journey and where you are? You know, how can we kind of make that get on you as a doctor? Because we know what your journey looks like and adapt our product that way more so than a typical bank.
00:11:32:11 - 00:12:01:09
Alyssa Schaefer
What's the product and pricing and then partnerships I talked a little bit about. So we have a number of partnerships that are just just great wealth of knowledge for not only learning from the doctors, but also just gaining some access to them and doing some great content development with them. I think talked about some of them, but I probably shouldn’t mentioned without their permission, but some really great partnerships that doctors feel are part of their community and part of their network and part of their learning.
00:12:01:18 - 00:12:03:12
Alyssa Schaefer
So that's a big part of our strategy as well.
00:12:04:12 - 00:12:25:14
Miriam Cross
Okay. And John, in your case, you know, a musician or music creator could theoretically go to a traditional bank for a small banking. There's also a plethora of digital banks out there for small business owners, freelancers, etc. So why do you think musicians, musicians or music creators in particular need a dedicated product?
00:12:26:01 - 00:12:55:09
John Waupsh
Yeah, it's funny what Alyssa was saying that, you know, you don't want a bank, a musician. And so until they have quote unquote made it. Right. And that's a it's a it's I mean, I can't tell you the number of people since we launched the bank number of questions from journalists or from other bankers, which is, you know, why on earth would you ever would you would you want to or would you want to target this?
00:12:55:26 - 00:13:22:15
John Waupsh
The segment that doesn't make any money, right? I mean, that's if it's either it's too small or doesn't make any money. And and it's in and, you know, to which I think that people think that in general, you know, that's fine. But the reality of it is music creators in many ways have been kind of starved of their economic dignity.
00:13:23:11 - 00:13:49:05
John Waupsh
You know, from a business perspective, and that's a really frustrating and terrible place to be for humans. And so what would you know, we realized the very kind of if you think about the journey to Alyssa’s point, the very start of it, whenever we talk to music creators, is getting a business account is super challenging.
00:13:49:05 - 00:14:15:24
John Waupsh
There are startups. I mean, there are companies that are focused on quote unquote, startups. There are banks, traditional banks that have entertainment divisions. There are even depending upon certain physical markets, there are even a couple of banks that are focused on entertainers. However, the digital tools are the off the shelf tools that you would get from any of core banking service.
00:14:16:01 - 00:14:46:27
John Waupsh
And so that means that they are everything for everybody, which means you're nothing to nobody and and you're not solving the particular needs that they have. So when we talk to music creators, there's questions around, okay, first of all, it's really challenging getting accounts. You know, the organization wants me to come in because they don't, they don't see the data that I have about myself or I'm unable that I'm not necessarily in the credit system or they require $3,500 a month as a minimum balance.
00:14:46:27 - 00:15:08:00
John Waupsh
And, you know, I don't have that as a business, you know, all of the reasons, right? So we enable you to do it digitally inside of 45 seconds. You create the account right on your phone and super fast and we don't have paperwork required. It's all free. And then the second issue is around like, okay, cool.
00:15:08:00 - 00:15:32:05
John Waupsh
Once I have an account with a name, your bank, none of my bandmates or my group mates can actually see this account. So they're all, you know, not trusting how much money we actually made or how much we spent on gas or name your thing. There are challenges around this and and, you know, like if, you know, commercial banking or commercial online banking products or digital banking products, you're like, wait a second.
00:15:32:05 - 00:15:57:03
John Waupsh
There's levels of permission. Everything else. Yeah, for sure. Companies that banks feel are worth it. Right. But not for a band starting out or a group starting out or not necessarily making a certain amount of revenue. And so so we have a new feature that we call collabs that comes out in about a week and that enables these artists to to build formal collabs.
00:15:57:03 - 00:16:25:22
John Waupsh
So if they have an entity structure around their band like an LLC or an S-Corp, we enable that. And you can really easily do account switching inside the app just like you would on Instagram or Facebook. And so anyway, so. So the. And then we also have casual collab. So that can be, you know, you and a buddy actually wrote a song one time and you still get paid through BMI, so you get paid, but you don't have an entity around it.
00:16:27:10 - 00:16:47:22
John Waupsh
There's no you know, no bank is going to say yes simply you know, we'll create an account with you in 45 seconds so we can get these deposits and help you with your base. We do and and so it really it's filling like this need about getting started getting organized and then reducing stress. You know, the velocity of payments in the music space is exceptionally slow.
00:16:48:05 - 00:17:10:24
John Waupsh
It can take you know, it could be as fast as a week, but it could be upwards of 24 months before you get your money. So we have kind of this underlying theme of the fact that you should, you know, you should get paid your money as soon as you earn it. And, and, you know, it's sort of a driving philosophy of ours, but it comes down to it like reducing stress, helping you get paid faster, helping you deal with your business taxes.
00:17:10:24 - 00:17:31:24
John Waupsh
Because typically those where they're really challenging. If you're a music creator, getting paid in this space and then ultimately helping with things like insurance you know, you're going out on the road again, you're concerned about gear, insurance, that sort of thing. Where do you typically find this stuff? And it's you know, we aim to be that sort of one stop to solve all these problems.
00:17:33:01 - 00:17:50:10
Miriam Cross
Those are definitely a lot of features. I never would have thought that someone would need it. And I just know from looking at Nerve before you also another feature that caught my eye that is seems very specific for musicians is their performance. You aggregate all their performance and social media statistics.
00:17:50:15 - 00:18:19:00
John Waupsh
Data transparency is something that is unfortunately or rather maybe it's not a common occurrence in the music space. It can be if you pay a lot of money or if you make a lot of money, but if you're in a quote unquote, long tail of artists, you're sometimes left out to dry. So we get all sorts of data that helps you drive your business forward.
00:18:19:00 - 00:18:21:09
John Waupsh
And offer for free inside of the app.
00:18:24:02 - 00:18:43:16
Miriam Cross
And in terms of standing out, I mean, you know, Nerve, as far as I know, is the only digital bank out there that's dedicated for musicians. But Alyssa, you know, even though a bank for doctors is pretty unique still, I know there are a few others out there that either are like do something similar. So how would you say Laurel Road stands out?
00:18:45:00 - 00:19:09:08
Alyssa Schaefer
I would actually disagree with you, Miram. Respectfully, there really isn't anyone doing what we're doing. There's not a bigger banks are out there saying that they have a bank, not a bank with doctors, but certain products for doctors. And that can be through there's a couple of very small players out there that say they're a bank for doctors or even founded by doctors, for doctors.
00:19:09:24 - 00:19:37:12
Alyssa Schaefer
But I'm not so sure how sophisticated they're underwriting our product and pricing is specifically for that journey that I talked about. And I'm not sure how sophisticated their research is, even though, you know, they've got some some backing by doctors and the partnerships that we have, really the breadth of knowledge coming from some of the largest professional organizations for doctors in the country.
00:19:38:26 - 00:20:03:27
Alyssa Schaefer
So I think what we're doing is actually pretty unique. Now, it's not to say that what we are doing can't be replicated. And I, I, it keeps me up at night, to be honest. With you. And there are certainly banks and fintech companies that are catching on to this whole new strategy. So we absolutely recognize that. But I think what we're doing is really taking what we see internally a lot as it's the sum of the parts.
00:20:03:27 - 00:20:27:22
Alyssa Schaefer
It's not only product, it's not only pricing it's not only the perks that you get for being a member. It's not only our partnership, but it's really the sum of the parts that makes us unique and makes us so targeted to doctors and and dentists. We actually this is an example. We held our inaugural. I mean, it's supposed to be something that was kind of two years in the making.
00:20:27:22 - 00:20:48:09
Alyssa Schaefer
But given the pandemic, we couldn't do it until now. But we had our inaugural, what we call advisor member council, and we had 15 members that were all doctors and dentists come in to New York City about last week and weekend before. And we talked about our strategy with them. We talked about what our plans were for expansion.
00:20:48:09 - 00:21:07:14
Alyssa Schaefer
They gave us very pointed, very specific, very candid feedback. We are going to take that into account as we continue to grow and continue to iterate on our product. That and one of the things that we did at the end was just basically ask them to describe how they felt about the day or about Laurel Road you know, being members.
00:21:07:14 - 00:21:25:02
Alyssa Schaefer
And there are, like I said, there are 52 of them or so, and a number of them said you're different. You know, I've, I've looked, I've done my homework I've looked at what other banks are doing out there and I'm not saying this at all. It's just really the sum of the parts. Things are different. You are really out there doing something different for us.
00:21:25:10 - 00:21:52:04
Alyssa Schaefer
We feel like we, you know, you understand our journey. So that was validating to hear. But like I said, it's not to say that other banks are testing on and doing something somewhat similar, but for us it's really kind of the sum of the parts. And one of those parts is also the servicing experience. So everything is online we originate billions of dollars of loans without a whole lot of human interaction.
00:21:52:04 - 00:22:07:09
Alyssa Schaefer
But if we want that, it's there and the hours are very much supported you, our staff, to support doctors and dentists on the off chance that they're, you know, having a late hour early shift. So it's all those pieces together really, I think that makes it stand out.
00:22:08:18 - 00:22:42:06
Miriam Cross
Thank you. And both of you have touched on this topic a bit earlier when you were talking about why traditional banks haven’t been either caught on to these audiences or are not serving them optimally. So what are some of the challenges you've encountered in building digital banks for these audiences, whether it comes to credit underwriting, pricing, dealing with people with either they're deeply in debt or in debt for now that their incomes will rise over time or their income could be quite uneven.
00:22:42:15 - 00:22:44:09
Miriam Cross
John, I'll start with you.
00:22:45:00 - 00:22:54:02
John Waupsh
Thank you. Yeah. What are problems that would be related to problems that we've discovered in serving the music creators is that we really.
00:22:54:02 - 00:23:00:04
Miriam Cross
Challenges in onboarding them or serving them, like you mentioned before. You know, there's a misconception that they may not have a lot of money or.
00:23:01:14 - 00:23:55:19
John Waupsh
I mean, certainly the. Yeah, the the the I would say wasn't unexpected is the inflows and outflows of of of their money is is is certainly something that probably, you know, in talking definitely and talking with with creators who have moved over to us, they have had issues with prior banks essentially, you know, having concerns around how the heck did $50,000 just hit your account and all the way to why do you need to spend $45,000 of it today and and you know well you know I've got a tour and it's all you know and so you know there's there's usually rationale behind it but almost an unwillingness for traditional institutions to kind of seemingly learn that rationale and
00:23:55:19 - 00:24:20:15
John Waupsh
then and then be able to apply it over time. Like you can talk through it one time on the phone but then you know again the next week I have an expense in Italy and the bank shuts down everything because they think it's fraud. And so, you know, you hear these stories. And so, you know, we're trying to learn as much as we can and apply that to the technology that we build and we assemble through, you know, other wonderful fintech companies out there who build this stuff.
00:24:21:19 - 00:24:54:08
John Waupsh
But I think the most surprising for us, which, you know, we thought we would have a good handle on, was the verification of whether or not this person is actually a music creator. Imagine how to do that. You know, it's like, well, how do you how do you really know? And and I would say I would say for that reason, we've absolutely nicely removed ten times more account holders than we have today.
00:24:56:12 - 00:25:17:12
John Waupsh
Just because we you know, we do pretty well on on fraud rules and and all of that kind of stuff. And, you know, we're always getting better. But I would say if we just thought about people who were people who were wanting accounts, not, you know, they weren't necessarily bad actors. They just they just aren't who we're focused on.
00:25:19:03 - 00:25:42:01
John Waupsh
It's incredible. If I wanted, you know, thousands and thousands of accounts tomorrow and say, hey, I'm a bank that's got, you know, tens of thousands of accounts, I don't think it's necessarily a challenge. But but focusing and making sure that those account holders really are people who are making money in music and are and are going to think of this as a business account, that's been, you know, the surprising challenge, actually.
00:25:42:25 - 00:25:49:04
Miriam Cross
That's really interesting. So how do you verify or kind of what's your criteria for somebody to get an account?
00:25:49:15 - 00:26:14:09
John Waupsh
Yeah, we well, we on the on the front end of it, we've gotten a lot more we we pay attention to first of all, there's a couple of data things that we do on the front end. But but on the back end, mainly what we do is, you know, look at the transactional activity and try to make sure that it's coming from certain sources that we know, you know, pay music creators.
00:26:14:09 - 00:26:31:18
John Waupsh
That obviously helps a lot. We also have some partnerships that we're forming that with other companies in the space that help with that verification process as well. But I'd rather not go into that. But anyway, yeah, we find fun tricks. I put it that way.
00:26:32:16 - 00:26:33:05
Miriam Cross
Interesting.
00:26:35:05 - 00:26:47:07
Miriam Cross
Alyssa on your end mean I know you don't necessarily don't restrict Laurel Road to just doctors, even though that's who the products are designed for. What sort of challenges have you come up with, especially when it comes to credit underwriting?
00:26:48:27 - 00:27:18:05
Alyssa Schaefer
Yeah. I mean, because of the doctor journey, their debt to income ratio is are typically much higher than, you know, somebody else with an equivalent educational background. Right. So that's a big challenge that we you know, we adjust our underwriting for and we develop, you know, specific products for like our mortgage product, for example, specifically for doctors and dentists with a certain degree so DTI is certainly one of those things.
00:27:18:11 - 00:27:46:01
Alyssa Schaefer
I think also, you know, doctors and dentists are pretty sophisticated and they're very various levels of sophistication from their financial knowledge. And so some of them will admit to us that they don't really know a whole lot about personal finance at all. Right. And so they need us to educate them and they need us to be a resource for them and hopefully an unbiased resource for them, for those for those things and so we have a lot of confidence in those types of things.
00:27:47:07 - 00:28:26:17
Alyssa Schaefer
So you have that end of the spectrum, but then you have doctors that are very financially savvy. Right? And so in making sure that our products are relevant for them, but not just relevant, but really leading products when you have kind of people on opposite ends of the spectrum, is, as John talked about, it takes a tremendous amount of even though we have, you know, a lot of most of our products, you don't have to be a doctor or a dentist to be eligible but the designed target is that it still takes a tremendous amount of discipline and focus to develop products that are relevant because especially given our heritage of the fintech company, we like
00:28:26:21 - 00:28:46:04
Alyssa Schaefer
new things and new ways of doing things, and we like to be innovative. And of course, our products are iterative but it takes a different tremendous amount of focus to always go back to our core design target. And, you know, some of those products are going to be relevant for other professionals as well. But it just really takes a lot of discipline.
00:28:46:04 - 00:29:13:27
Alyssa Schaefer
And so we have to be disciplined about that when we're either launching new products, adding features, or what have you, and that's not easy to do. And then I would say the other challenges, you know, we were acquired that's been by and large a very good thing for Laurel Road and for Laurel Road people and talent. It's been great, but we have a different structure over the last couple of years that I think we're pretty much used to now.
00:29:14:21 - 00:29:39:19
Alyssa Schaefer
But there are some growing pains there having been acquired by a larger bank. So when it comes to our member onboarding and digital solutions, we design the front end and the journeys and all experience experiences. But a lot of those things are tied into the background, technology, [inaudible] And so and certainly the security standards and a lot of the risk standards are driven by feedback.
00:29:39:19 - 00:30:07:23
Alyssa Schaefer
So just really trying to find that balance of an elegant onboarding experience for a member in customer acquisition, we felt very much on prospect and certainly engaging them and growing relationships over time. So it's a balance between all of the risk and all the security and all the things that come from a larger bank and our sort of fintech heritage of being, you know, fast and nimble and, you know, all of that.
00:30:07:23 - 00:30:26:28
Alyssa Schaefer
So the member experience is something that we also very much focus on, and we need to keep iterating to make sure that it is what our members expect. Because even if you are kind of opposite ends of the spectrum for a doctor or dentist and certainly your financial knowledge, you still expect a [inaudible].
00:30:28:06 - 00:30:48:29
Miriam Cross
Yeah. Thank you. And the other question I've been on my mind is you you know, you both talked about how focusing on a specific audience allows you to be more creative and serve them a lot better in ways are not currently being served. On the flip side, you actually have a limited, more limited audience than if you were just a broad based digital bank.
00:30:49:12 - 00:30:59:22
Miriam Cross
So in that case, how will you grow and expand and sustain yourselves? Alyssa, you mentioned before you got some feedback from doctors with their take on how to do that.
00:31:01:00 - 00:31:30:06
Alyssa Schaefer
Yes. So we have always wanted to grow into the doctor [inaudible]. Of course, to penetrate that. That seemed to be really relevant there. But we've always had a vision to think about health care broadly as well. And so we do have plans to expand I think the feedback that we were that we talked through a couple of weeks ago, we need to do that very carefully because, of course, when you expand, there's a risk that you're no longer relevant for that bullseye design target.
00:31:30:06 - 00:31:51:02
Alyssa Schaefer
So we are considering all of that. But I think there is something around health care at large. They may not so doctors or nurses, etc. may not have the same [inaudible], they may not have the same, you know, earning potential or what have you. But there is a lot of similarities there from underserved perspective and, you know, a lot of things not meeting that need.
00:31:52:05 - 00:32:07:16
Alyssa Schaefer
So I think it's tricky, just to be honest, but I think there's a way to do it. You just have to really, again, have focus and discipline, but also take the feedback from your customers and make sure that you're adapting your strategies according to that feedback.
00:32:08:18 - 00:32:15:05
Miriam Cross
And just to clarify, so do you plan to expand to other types of medical professionals or add other products?
00:32:16:11 - 00:32:35:06
Alyssa Schaefer
Yes, both. But like I said, we're we're kind of still digesting a lot of the feedback that came from our advisory council. So we will. But we're I think going to be even more thoughtful about it and even more sort of targeted in terms of how we go about doing that.
00:32:36:03 - 00:32:50:09
Miriam Cross
Okay. And John, on your end, you said you could probably have tens of thousands of accounts if you just accepted anyone. So how do you plan to sustain yourself and grow considering you are being very thoughtful about who you take on as a customer?
00:32:52:04 - 00:33:29:00
John Waupsh
Well, rather than give a roadmap. I'll just say, you know, we are definitely considering other products and services similar to, you know, Laurel Road. Yeah, there's that. And as I've mentioned earlier there, there are a variety of different products and services that are in and around banking that that music creators both either want and or might expect from a banking provider that maybe they aren't getting today as well.
00:33:29:00 - 00:33:55:24
John Waupsh
There's a you know, you this is a global issue. So if we ever did consider to move outside of the United States, there are untold number of of people who have kind of raised their hand and said, can you please make it to Australia? Can you make it to wherever right you know, where I need this thing where I live.
00:33:55:24 - 00:34:18:02
John Waupsh
And so that's also an opportunity for us. Right now. We're hyper focused on the United States and hyper focused on building out the absolute best banking experience for music creators. And and kind of listening to what their problems are and what their needs are and making sure that we're we're there to fill the gap.
00:34:19:03 - 00:34:48:27
John Waupsh
You know, the final thing I would say is I've always been very interested in what is now seen as kind of the defi space and you know, there's a lot of opportunities there as well as just digital currencies in general from currency FX reduction in costs. If you're traveling, if you're going across borders, you're paying artists across borders, all that kind of stuff.
00:34:49:14 - 00:34:55:16
John Waupsh
So we have a lot of I guess I guess there's a lot of different opportunities and we're just taking them one step at a time.
00:34:56:15 - 00:35:13:19
Miriam Cross
Okay. Yeah, that sounds fascinating. And I have a follow up question for both of you on that topic, but we've got an audience question for Alyssa. So and the question is, what were the challenges of being acquired by a much bigger bank, for example, less autonomy, changing the product roadmap or cultural differences.
00:35:16:11 - 00:35:51:21
Alyssa Schaefer
All of the above. But I will start by saying that there's no recipe for this, really. There's a certain there's tons of books out there and literature around making acquisitions work. And, you know, the main pitfalls of acquisitions. But there's lots of ways to do it. And I'm so thankful that the leaders of KeyBank, how they integrated us and what they did was they very much kept us intact as a team rather than sort of dispersing and integrating fully to other parts of the organization.
00:35:51:21 - 00:36:13:12
Alyssa Schaefer
So, you know, I do a couple other things now, but when we were acquired, I was just leading marketing and I kept leading marketing for Laurel Road reporting to the actually, they had a digital at Key rather than kind of being splitting off, splitting off functionally and reporting to the CMO, you know, like he's got a great important job to do.
00:36:13:12 - 00:36:33:25
Alyssa Schaefer
And I have a very important job to do here. And those things are very different. So made a whole lot of sense. The way that they organize stuff was to really keep us intact. They also kept the brand with a lot of us, including myself, of course, was very appreciative of the time. we still are and that was something we worked hard to create some meaning behind.
00:36:33:26 - 00:36:57:05
Alyssa Schaefer
Is it a huge brand that has a is a household name not name? No, but it is in the face of student lending for sure. It's a well-known brand and it's gaining some traction in the in the doctor space now. So that was a great decision that we all felt good about. But I think it made sense in the business sense because we could put meaning behind and certainly be more focused from a segment standpoint.
00:36:57:05 - 00:37:19:15
Alyssa Schaefer
All the stuff that we've talked about. I do think [inaudible] has a place to play, but it also helping employees feel really good. So they just made a lot of choices that was good for the business and good for employees, which helped us retain and attract talent that we needed, obviously. And so there was just a lot of great things that they did.
00:37:19:16 - 00:37:40:12
Alyssa Schaefer
So all of that said that this made things sort of work. It made things kind of go as smoothly as possible as far as the challenges. There was a lot of cultural differences. You know, we were we're based in New York City, but between New York City, Bridgeport, Connecticut and San Diego, but our headquarters are here in New York City.
00:37:40:12 - 00:38:09:03
Alyssa Schaefer
And so between those three locations, we had about 200 or so employees when we were acquired and we were acquired by KeyBank, which is, you know, I think I think 10,000, 11,000 employees. So New York City fintechs, these tiny, tiny, 200 person company acquired by a regional bank gained a lot of traction in the digital space, making a lot of progress, but still very much branch dependent, you know, based in Ohio.
00:38:09:03 - 00:38:37:07
Alyssa Schaefer
So a lot of cultural differences there with just the speed of not only how we work, you know, and what we do on a daily basis and, you know, all of that, all of the things that you can imagine. So lots of cultural differences. I remember I'm kind of used to it now, but the kind of early days, you know, in like the first the first 10 minutes of a call was just the introductions and, you know, just the pleasantries and it's just kind of like I’m tapping my foot.
00:38:37:08 - 00:39:06:12
Alyssa Schaefer
Like, when are we getting going? So a lot of that and I would say the risk appetite was very different. So we were actually an FDIC insured bank before we got acquired, but we were very tiny with three branches, you know, but we did have a banking charter. So the oversight in terms of the regulatory bodies and the audit group and all of that was very, very different like night and day from both pre and post acquisition.
00:39:06:12 - 00:39:27:20
Alyssa Schaefer
So just learning that structure, having some patience to work through a lot of those things and, you know, different standards when it comes to it was a huge, huge adjustment for all of us.. And I would say that's probably the main challenge as far as some of the other challenge that you made, you might expect.
00:39:28:16 - 00:39:52:25
Alyssa Schaefer
We've been really blessed to have just great support by our leadership team. So funding and all that is actually better now than it was before. So it all kind of I wouldn't even say balances out. The positives are definitely overcoming some of the challenges, but the challenges were real. And, you know, some of us that were part of the company before we got acquired there, they're still there, right?
00:39:52:26 - 00:40:05:03
Alyssa Schaefer
They're still sort of like, oh, this takes a lot more time or there's a lot more people to talk to or align with before you put out a product. But I would say after a couple of years, we're pretty it's kind of the new normal.
00:40:07:25 - 00:40:21:06
Miriam Cross
And we actually have two questions for John and hopefully we have time for both. We've got 5 minutes left. So, John, can you talk about how you make the the build versus buy decision for which functions you keep in-house? Versus partner with others?
00:40:21:19 - 00:40:49:26
John Waupsh
Sure. Yeah, that's handle it real quickly. We is kind to criteria that we look at that are the biggest. Obviously, you start getting into ROI and all that other stuff. But the the two biggest ones are, you know, can we Is this something that we're that we're the best in the world? That if we're not the best in the world as a team, I'd rather find somebody off the shelf who who wants to be best in the world at that.
00:40:49:26 - 00:41:21:09
John Waupsh
And and that's their drive. And let's, you know, buy it from them and, you know, related is, is a speed to market question. You know, we I'm not foolish enough to think that first the market is always the winner. But I at least I've been around in banking long enough to know that it's giving your customers what they want is kind of a big deal.
00:41:21:24 - 00:41:34:14
John Waupsh
And I'd rather not, you know, spend three years building something that we think that one day we want to be the best in the world and lose all of the market share that we could attain.
00:41:37:07 - 00:42:02:25
John Waupsh
Partnering with somebody and said, so, you know, I mean, I think I think really if you look at if you look at us today, we're obviously very small, but I'd say we have an in almost probably an inordinate number of partners compared to you know, we're probably I wouldn't say toe for toe on a with a community bank as far as the number of partners that they work with.
00:42:02:25 - 00:42:17:28
John Waupsh
But we have a large number of partners. And the reason is because, you know, we have a deep understanding that we can't nor should we build everything ourselves. It's a fool's errand or at least at our size and certainly probably at any size.
00:42:18:26 - 00:42:30:09
Miriam Cross
Okay. And then the second question you mentioned analyzing your customer's data are you referring to transactional data or other have you gained any insight into what you found? That's for John.
00:42:31:10 - 00:43:03:11
John Waupsh
Yes. Yes. We look at all of the data in different, different ways. We you know, insights we found primarily the reason why we do it is to drive insights to figure out where should we. A lot of times people won't tell you things in surveys, period. They may over accentuate things that don't really matter to them or they don't say things that actually do matter.
00:43:03:11 - 00:43:41:12
John Waupsh
For all sorts of reasons. And in my opinion, data is truth. And so and so we can, you know, you can you can kind of get at what you know, what are the things that we need to be building here? How do we need to be solving this? And it doesn't necessarily need to equate to something that a business like a music creator's business might need may equate to something that that we need as an operation to to verify ownership or to, you know, to from a fraud perspective or naming at risk is another one opportunity.
00:43:41:12 - 00:44:17:03
John Waupsh
But, you know, there's there's there's so many tools that as we're not a bank, clearly, but a banking app and presumably a bank can can buy and use today to increase their operations and improve their functionality of the back of of all of their workflow that, you know, it really kind of the data more than anything tends to spark those those discussions as to, wow, this is something that we should really be looking at and and we had no idea that we needed it the week prior.
00:44:18:13 - 00:44:31:18
Miriam Cross
Okay. Thank you very much. And we're just about done so thank you both, John and Alyssa for speaking with us. Thank you to the audience for listening and asking questions. And next, we'll see you tomorrow.
00:44:32:21 - 00:44:33:02
John Waupsh
Thank you.
00:44:33:04 - 00:44:33:19
Alyssa Schaefer
Thank you.
The Future of Digital Banking: Niching Down to Scale Up
March 31, 2022 11:15 AM
45:28