BankMobile has the most customers of any mobile-only bank, according to Cornerstone Advisors. The bank reports 1.064 million active accounts, and 1.8 million open accounts. It has built those numbers through student banking by acquiring HigherOne which provides student checking accounts that are linked to their school’s disbursement of refunds and student aid and more recently through a partnership with T-Mobile.
BankMobile started four and a half years ago, said Luvleen Sidhu, co-founder, president and chief strategy officer, with a direct consumer strategy and then realized there was a better way to grow — through student accounts with a low acquisition cost.
Now it is has relationships with 800 college and university campuses with one in every three college-bound students. Unlike some traditional banks which pay universities to be the preferred bank, BankMobile has a different model, Sidhu said.
“Our company is in the business of solving pain points, and one of their pain points was delivering payments, especially financial aid refunds. We help schools save an average of a quarter million a year, so they pay us a subscription fee for our service. We get accounts at close to zero cost of acquisition.”
Students have a choice of a BankMobile account or they can be paid through paper checks or ACH, she added.
The publication Inside Higher Ed cited a Consumer Finance Protection Board (CFPB) study that showed Higher One, acquired by BankMobile, had low fees – just over $12 a year.
BankMobile has budgeting tools showing students how much they are spending and how much is safe to spend, along with a prize for good financial behavior, good money management and academic achievement with a top prize of $10,000 toward college loans awarded four times a year.
The bank offers a high-yield savings account in a joint promotion with T-Mobile, with 4% interest up to $3,000 for users who make regular deposits. The partnership was a way for T-Mobile to get into banking and provide an incentive for people to move to T-Mobile. The T-Mobile accounts offer overdraft protection — users aren’t charged for overdrafts up to $50 per calendar month.
“The reality is there’s a lot of inertia when it comes to switching banks, which is why we are looking for unique opportunities, and that’s why we like our B2B2C model,” said Sidhu.
While branches average about one new account per week, BankMobile opens 5,000 new accounts weekly, she added. The bank is a division of Customers Bank a $10 billion commercial bank.
“You don’t create profitable accounts if you don’t have direct deposits coming,” Sidhu said. “We have a customer for life strategy,” Sidhu said. Once students graduate, the bank offers personal loans, credit cards and student loan refinancing.
She admits that challenger banks like BankMobile face big challenges. For all the talk of digital banking, customers in the U.S. still like branches, she said, because they bring a sense of trust.
“But the reality is that even in the last year, the top four banks brought in 50% of growth of overall deposits. The big banks are still growing, but I think the challenger banks have a huge opportunity.”
BankMobile actively engages with its customers through a digital experience that feels high touch, and on a vairety of social media platforms, Sidhu added.
The challengers are listening to customers, she explained, and customers want to avoid costs like monthly account fees and overdraft fees. They also want ready access to their money, which BankMobile and several other challenger banks often offer through 55,000 Allpoint ATMs.
How well is BankMobile doing at retaining accounts after students graduate? The bank isn’t releasing that number she said. But she finds the field exciting with newcomers like N26 and Revolut plus fintechs like SoFi and Robinhood looking at banking, and GoBank which has done B2B2C with Uber and Lyft drivers.
“All of us have a similar mission, transparency and affordability.”