Rick Morgan, news editor at Bank Innovation

Hello, everyone, and welcome to this special preview episode of the new Bank Innovation PremiumPlus Pulse of the Industry and product. I’m Rick Morgan, a news editor at Bank Innovation and your host for today’s webinar. The bank innovation team is proud to be able to deliver actionable information and insights throughout premier events presented regularly throughout the year. But we don’t want the conversation to end at the close of the event. In the coming months, people will love the full bank innovation Premium Plus product, which encompasses registration to all our live events, exclusive monthly webinars like this one, access to an archive of bi event recordings and a premium subscription to finainews.com each monthly webinars designed to give you keen insights into crucial industry trends and developments and be a reference for you as you move your business forward. Stay tuned for more information on the full launch of the bank innovation Premium Plus service. It is now my pleasure to welcome our guest speaker Chris Tremont, executive vice president of virtual banking at Radius Bank, and more importantly a fellow Cleveland Browns fan. Chris is responsible recommend. Hey Chris. Chris is responsible for managing the virtual bank radius his approach to digital National Consumer and small business banking that combines innovative products leading edge technology, FinTech partnerships and superior customer service. He also oversees the bank’s marketing and public relations department. Prior to joining radius bank in December of 2008, Chris held various roles within Key Bank’s consumer finance division, Boston based radius bank has 1.4 billion in assets. The former Community Bank has transitioned to be a one branch bank over the past decade and it’s grown a nationwide footprint through its digital channels. The bank is also the bank, the banking service provider for fintechs like Brex and NorthOne, and in February LendingClub announced it would be acquiring radius for a cool 185 million. So it’s an exciting time for the bank to say the least. Chris, thanks for joining us.

Chris Tremont, executive vice president of virtual banking at Radius Bank

Thanks for having me, Rick.

Rick Morgan 

Chris, can you tell us a little bit about your role at radius and then maybe give some quick background on the bank and sort of the transition intimated recently?

Chris Tremont

Sure, I think, you know, your intro summed it up pretty well, but radius itself was founded in 1987, probably have undergone quite a bit of changes ourselves over the last decade, as we focus more on digital than, say, physical in terms of how we’ve gone to market. We’re both a full service, commercial bank as well as consumer. And that kind of ties into my role where I head of what we call the virtual bank, which has been our approach to really call retail banking, focus on consumer and small business primarily deposit gathering, client acquisition, retention engagement, and we do so through two channels. One is our direct to consumer channel going after consumers and small businesses under the radius brand and then the second channel is an indirect, which we call FinTech partnerships is where we develop these strategic partnerships for FinTech, where our banking as a service platform, which is really an extension of our direct technology. We extend out via API’s to FinTech or other tech companies looking to offer an FDIC insured bank product. So that’s a little bit about my role been with the company a little over 11 years. And we’re focused on primarily deposit gathering to support that side of the balance sheet and to drive deposits in a digital space versus through a physical branch infrastructure. And then obviously, you know, lending those out primarily on the commercial side

Rick Morgan

Last year, I got like announcement after announcement after announcement from radius about some new FinTech, you were partnering. It was Huddle, it was NorthOne, there was Brex cash, Stackin. Why did radios decide to really dig in on this platform approach. 

Chris Tremont

It was a fun year for us in terms of getting those announcements out within our bank as a service platform. But I mean, to understand the strategy, it goes back. It wasn’t something like we just decided to do it overnight, actually goes back a few years, we actually first got into this FinTech partnership business, Rick, probably as far back as like sort of this 2013 2014. in that timeframe. We did a couple of deals with some local companies in Boston that we knew. And it was where we realized that maybe what started off as helping to advance our technology became more of a marketing play for radius, not just advancing our tech but a way to acquire new clients in a new channel. So we started talking about you know, in the old days, maybe you’d go build a branch at the corner of Main Street and first instead of Doing that physically we’re doing it digitally by partnering with a FinTech. So back six, seven years ago, it was companies like gratify aspiration level up where we were building these digital branches at the corner of radius and gratify, for example. Yeah. So that’s, that’s kind of how we got into it. Always, FinTech as a way to help advance our costs. You know, for a while there was that conversation of FinTech was a friend or a foe to banks. And we always said, friend. And so that was that was how we got into it early on just a few deals. And then I’d say probably, over the course of like, 2016 through 2018 was really this focus on a digital roadmap, which we’d never had really before but it was we said, if we’re going to do this, it’s going to be core to what we do. We’re going to make sure we work with the best in breed technology providers. So we kind of, you know, went underground a little bit and really started to build out our technical And now probably over the last 18 months was we got the tech bill, we met up with a partner of ours along the way called Treasury Prime in San Francisco, who said, you know, we’ve got these API’s bill, we had the connection to our core, and our two companies in the third or fourth quarter of 2018 said, Let’s expand our partnership, and really start working with with FinTech that want to grow. And so that’s kind of how this evolved from direct technology to how do we use the, you know, more advanced API’s that weren’t available, you know, say in 2000, or 13, or 14. Now, here we are in 2018 2019. To take our expertise on what we’ve done in the direct digital banking side, coupled with the technology experience of the Treasury Prime team, and we’ve taken it to market and have had a lot of obviously there’s still a lot of learnings, but some early successes. with being able to bring some partner companies to market

Rick morgan

And you, for the people who might not know, can you give some background on Treasury Prime and sort of what they are, what they do and how they help banks with their banking as a service offerings?

Chris Tremont

Yes, absolutely. So Treasury Prime is a startup based out of San Francisco. The founders actually had started up in part of a company called stud standard Treasury. I don’t know I’m gonna have to double check on that. Don’t worry, yeah, don’t, they’re probably going to roll their eyes. And they’re like, I can’t believe you got that wrong. But they eventually were acquired by Silicon Valley Bank. And it was for the API technology that they had built, and they were kind of running that and eventually, they spun out SVB and this is like near the end of 2017 2018, where we got a phone call from them where they said, we’re heading into the Y combinator accelerator, we are looking to demo something on Demo Day in March of 18. Can we work together? And we said, we actually have a use case for it, which was we want to be able to open small business deposit accounts digitally. And so that was the first sort of proof of concept the two companies began working on at the beginning of 18. And it’s advanced from there. So from the beginning, we had this shared vision around how to use technology to help, you know, provide a better client experience. So today, Treasury prime is a partner of ours, a vendor partner of ours on the technology, both direct and the bank as a service, but they work with other financial institutions around the country to help further their own digital roadmap, whether it be you want to open accounts online, API’s for account maintenance, money, movement, that sort of thing. So a lot of like, back office plumbing work via their API’s is kind To what their belief is, and what they do.

Rick Morgan

You mentioned that you guys went underground, as you said, to sort of build up the tech to really make this a seamless process other than Treasury’s APIs, was there anything that stands out that the bank had to sort of really revamped to get it to the point that it’s add to that?

Chris Tremont

Great question. And they The short answer is yes. Sort of like a complete rebuild. But we had been in the call it the digital banking space from account opening to providing online mobile banking tools since probably 08 or 09. So kind of early on for digital account opening. And what we said is we got into 2016 17 was we got to do these things better. And so rather than I think a lot of banks and we had this conversation too was a lot of times it can start with your core banking system. We said that project is hard. And we didn’t have like a better alternative to go to. So rather than shut everything down for a year and replace our core, we were going to focus on sort of building around the core to build a better experience that would help provide a better banking experience for clients grow acquisition efforts and deposits for the bank. And so that’s that roadmap, I mentioned. Sure. And we started with probably the highest pain point first in 2017, with rebuilding account opening for consumers. We did that with a company called Mantl, who actually just announced the close of their series A I think, last week.

Chris Tremont

So the funny story, you’ll like this story that they were the first to partner with that. So when they came to us in 2016, is when I met Nathaniel Harley, their CEO, and he at the time Mantl went by a different name. And they were pitching us to power a white label checking account forum. So sort of this banking as a service. Okay. And we said, that’s, that’s interesting, but we’ll tell you a problem that we’re having, which is around how to do maybe a more streamline new account onboarding process. And so conversations kind of quickly evolved with Nathaniel and Ben, their CTO back then, and, and we said, well, we’re gonna have to work on onboarding. If we power your white label product. Is there a chance that you’d want to move actually from like the b2c spotlight to a b2b platform? And this is a question actually, Rick, we asked a number of fintechs back in 2016, around helping us with account opening and most of the time either said doesn’t fit in my roadmap right now I’m going down a different path, or I don’t see the you know, I don’t see it, right. I don’t See the need for it yet. And so, Mantl was the first company that said to us we’re in. And so that was really how that partnership started. So between Mantl, they brought in a company called Alloy out of New York City to help us with KYC and AML. Know your customer processes. So that was sort of the first first thing we worked on. Second was, once we got the accounts opened, how do we provide a better say online and mobile banking experience, that’s where we brought in Narmi on the front end, still with alloy on the back end to provide our online and mobile banking. And then on the business side, so that was consumer. And on the business side, we kind of got said we got to go down that same path. And so we’ve worked with Treasury prime to help us with the onboarding, again with alloy behind the scenes, and then are working to improve the call the SMB Digital banking experience again with Narmi and and have introduced companies like auto books that help with payables receivables. So to help SMBs better manage their money. And so that was a lot of the front facing work that we did. We introduced some back end call call center and CRM technology. And probably the underlying layer behind all this was was sort of a data infrastructure, which we kind of built from the ground up, we brought in a chief data officer have built out a team of data scientists and some fraud prevention folks that have built out, you know, reporting tools, a database, in addition to using alloy. So that’s sort of like the data layer that runs underneath all of that. So that was kind of like, where we step back and said, We got to go build all this and it took us probably about it’s never over. But to get all the things done that I mentioned, probably took us a full two years.

Rick Morgan

Okay, can you talk a little bit about the process Like onboarding some of these new fintechs. So when you’re talking to someone like Brex or NorthOne, what’s the process? Like getting them on board? And what are those conversations like and what makes a good partnership?

Chris Tremont

Yeah, I think, you know, it always starts for us, the good partnerships start with the right type of cultural and strategic alignment. So these conversations, you know, like, like we’re having right now are important early on, to get a chance to, to know the founders, typically, that’s who you’re talking to, depending on the size of the company, but the, you know, the the right players at the company understand, what’s their vision, what’s their mission, sort of long term and even short term strategy. So that’s how a lot of these, you know, they start, that’s how they start. But we’ve noticed I’d say over the last six months or so, you know, the conversations move quicker. As I think you know, these the FinTech company model, there has evolved They’ve gotten a little bit sharper. So we dive pretty quickly into a lot that we’ve talked to know what they want. So not everybody, but they have a good sense of what they’re looking for. There’s a little bit more of acceptance or understanding today than there was two, three years ago around what banking as a service is. So they’ve talked to maybe a couple of other providers and have a good sense of, we’re not all the same, but like there’s general offerings. So the conversations actually get a little bit quicker. That’s like where we spend probably the majority of our time upfront to say, is there the right cultural alignment? Is there a strategic alignment between the two companies around? Can we support them to hit their goals? Are they going to help us because we use it as a tool to help grow deposits and acquisition obviously, so is it is it the right kind of client for us, so thinking through those various sort of strategic risks, and typically if we can check the box on those two things, You know, the process moves its way into let’s put this down on paper to to memorialize what we’re talking about around product development, technology, economics. And so that’s a little bit of where it gets, you know, as you can imagine, like in any discussion or negotiation when you get to contract talks, more, you know, that’s, yeah, that’s a little bit of the back and forth. But we found that like, if you’re upfront from the beginning, usually this part runs pretty smoothly. And so for us, once we’ve made the commitment that we want to work together, and so as the FinTech and we’ve said let’s go do this, we kind of work in parallel around getting vendor management due diligence contract on while at the same time, spinning up a project. And so that’s another thing that we’ve done is we’ve developed sort of a project team to help with these implementations running in an agile mindset and methodology. And so we get those projects going and we’re kind of on top of it and From there, you know, it could take one month, it could take six months, it’s all sort of depends on the complexity. And then it doesn’t stop once they’re live or, you know, you mentioned reading the press release, that we’re doing something with somebody, that’s, that’s the fun part to get to announce it. But then, you know, the real work begins once you get it live, and that you’re, you’re working with the company behind the scenes to ensure you’re both working towards those goals you set out from the beginning.

Rick Morgan

How do you ensure like a cultural fit? You know, that’s obviously what you said is one of the more important things so a company like Brex, you know, how do you sort of make sure that you guys are on the same page?

Chris Tremont 

Yeah, I mean, that’s, that’s the part of these are relationships. So they take work, and it’s not just one person at our company making the decision. And I’ll tell you, we, we’ve made the commitment that FinTech partnerships are sort of at the core of what we do. And so from our CEO down is involved in the vetting, sometimes due to the nature The deals like a Brex deal, for example, our CEO is involved, you know, sitting at the table with them, their CEO and others. And it’s, it’s a little bit of a, you know, you got to make a judgment call, you’re kind of each interviewing each other at the beginning, you know, you gotta it’s a little bit of a gut instinct, in addition to, you know, maybe asking around a little bit, as I’m sure they do on us to around reference checks, you know, what do you know, of this company? Are they for real, you do a little your own research online or, you know, through your own centers of influence, and you’re just making a decision, you know, based on some collective data that you gather over a couple week period. Yeah. And, and a committee or like a group of us are talking about it, and we say, like, are we checking the boxes on these things? and cultural is usually, you know, cultural connection is one of them from the beginning that we’re saying, it’s gotta be there because we know that if it’s not it can make for a You know, challenging partnerships down the road.

Rick Morgan

Sure. You know, it’s hard to have this conversation and not at least mentioned the LendingClub acquisition. And I know that you probably can’t talk about it too much. But as best you can like, what does the acquisition mean for the future of radius as banking as a service model? Your FinTech partners and then your consumer facing business?

Chris Tremont

Yeah, obviously, something we’re really excited about. It’s the merger between LendingClub and radius is obviously still pending regulatory approval. So there’s not too much we can talk about, but from a strategic standpoint, one that has from day one, when we met the LendingClub team has made total sense for what they’re trying to do and helping us to further what we’re trying to do as well. You know, we talked a minute ago about cultural connection between a FinTech and a bank partner. There was this connection from the beginning. Culturally, one of those things, like I said, you could just kind of sense it. Feel It, we’ve got a chance to spend more time with LendingClub even better in some of their town halls, things like that. And the way that their CEO Scott Sanborn talks to their, you know, their company in the way he’s thinking about things aligns exactly with how Mike Butler, our CEO, Rockstar team, so it’s like, stuff like that we’re like, Okay, this makes a lot of cultural sense. And in addition to the strategic sense around, obviously, LendingClub is a powerhouse on the online consumer lending side. Not something radius does at all, but we’re really strong on online deposit gathering. And we have some other commercial commercial lending businesses that can actually add some diversification to the portfolio. So a lot of strategic reasons for these two companies to come together kind of grow, you know, grow the balance sheet, and it’s gonna be a lot of fun. If and when it all comes together. Sure. And so we’re looking forward to I think our consumer In small business and commercial clients can look forward to a lot of good changes a lot that I can’t talk about right now. But we’re planning a lot of things. But the us about the banking as a service platform and program that we’re running today as radius will continue in the future under whatever brand we’re on. So the team is going to remain intact, and we’re going to continue what we’re doing today. And to be honest with you, Rick probably will be accelerated a little bit based on lending club experience in, in sort of online lending. That’s not something we do today. We get asked about it a lot. So I think it’s gonna probably help us there. Then on the call, sort of the direct side under the combine lending radius club brand, obviously they do loans today we do deposits bringing that together. For a consumer, there’s probably going to be a lot of good synergies there. Probably some better pricing and user experience, let’s say for, say a LendingClub borrower deposit holder that we’re really excited about. And some other things that will be really good, I think, for us even doing more, more different types of loans on the commercial side and just probably given us a little bit more freedom as a little bit larger bank to go out and do those things. So we’re really excited about

Rick Morgan

Yeah, I remember talking to Mike Butler, when the deal first was announced, and he was really excited. So yeah, it seems like from that cultural standpoint that you were talking about, at least, it seems to be off to the right foot. Yeah. Right. So, you know, obviously, these are interesting times, we have the COVID-19 pandemic that has really kind of altered modern life in a lot of different areas. Can you talk about what kind of fintechs radio sees is having like staying power to weather the storm, you know, are there certain fintechs that you would be more or less likely to park With during all this

Chris Tremont

Yeah, well, if I had a crystal ball

Rick Morgan

Yeah, we all have crystal balls things would be

Chris Tremont 

tough tough to know, it’s tough to know where this is gonna go you know, Rick how things are gonna play out? But I do think obviously you know this kind of goes without saying but the the fintechs that were able to raise a decent amount of capital like lead up you know into March or April or even some have been able to raise during You know, we’ve seen seen a few announcements of of capital still flowing into FinTech, which I think is a really good sign. But the ones that sort of had had that well capitalization, you know, the money in the bank and were smart about their business plan, obviously well positioned. Of course. This the smart business models will win out so what has become a little bit challenging is The I think like a harder road to go down, though not impossible, is the pure startup looking to offer, say a consumer checking or a savings product, like a to compete against a Chime, or a Varo, you know, to use those examples. Some of these companies have such a market lead, that to try to start that type of company now can be a little bit challenging as the Fed has essentially lower rates, you know, close to zero. And so if you were building a business model that was based on earning some interest on deposits from your bank partner, and interchange, that that could get squeezed a little bit so not saying it can’t happen, but I do think it’s a little challenging and the markets getting a little saturated,

Rick Morgan

Crowded right now. Yeah.

Chris Tremont

So crowded, right. So that’s, that’s probably one area where we’ve said that we have some in our portfolio We love those companies. But today you know where we’re where we stand. We’re probably not bringing a lot of pure, you know, consumer white label checking account, consumer products to market a little bit different though probably on the the SMB, the small and medium sized business side of it, which are big fans of so obviously, you know, with with COVID with PPP, the push to digitalization, probably some disruption finally happening in the small business market. You can have some success there, as we’ve seen with NorthOne you mentioned Brex. So more of these, these companies that are positioned to help small businesses grow, I think is a really interesting one. Though, we don’t know exactly what’s going to happen with small businesses, you know, over the next three to six months, I think longer term. This is a really viable market to be in. So that’s an area where we’re probably you know, we’ve started to talk to more companies in the SMB space. Because of some of our own direct experience, and then some of the partners that we’ve brought to market, so we’re talking to a few of those one that we like, you know, an area that we like a lot. But in general, probably that the the term that I’ve heard out there use sort of like embedded finance. So were kind of the opposite of what I said before, where banking isn’t the sole thing that you do, but offering, say, a checking or savings product, if it’s going to further the cause of of what you’re, you know, what you’re trying to provide your clients is an area where we think it’s really interesting for where some fintechs are going.

Rick Morgan

Yeah, yeah, I spoke with NorthOne recently, and he had some interesting things to talk about with regards to the pandemic and small business. So

Chris Tremont

It will be interesting to really, yeah, they’ve been doing really well have seen, you know, quite an uptick in their numbers, as you’d imagine, thanks to the platform that they built and you know, it’s one of those things about being ready to You never want to capitalize on a pandemic, but being there to, you know, support your, your clients when and where they need you.

Rick Morgan

Yeah, he talked a lot about how they were able to so rapidly kind of like, pivot on a few things. And it seems like that really helped them in their customers a lot during a pretty difficult time. So, right, so it will be interesting to keep an eye on that for sure. Along those notes, I mean, you know, how has consumer behavior sort of changed from radiuses perspective since a pandemic to cold? And how is Radius sort of reacting to these changes.

Chris Tremont

So as I mentioned earlier, we’ve been in the sort of the direct to consumer small business digital space for quite some time. And I’d say it’s like this combination for us around the marketing working a little bit better getting smarter and how we use our data, but obviously, the pandemic pushing more people towards you know, getting comfortable with having to use digital technologies we’ve seen on the call it the new client acquisition side as a lot of banks have as well. A real uptick in people taking us up on our offering new clients coming aboard as clients of radius, both on the consumer side and probably even faster in the SMB space. So we’ve seen a lot of, you know, sort of some rapid growth that I don’t see slowing down anytime soon, which is really a good sign. So a lot of new clients coming in. And in terms of like, current clients or the portfolio what they’re doing. We’ve seen probably a 40% uptick in mobile banking usage today versus say sit you know, pre pandemic, so more people logging in on desktop, probably 40% more engaging on the mobile app. We offer a personal financial management tool, so like budgeting And things like that to consumers in our app powered by a company called MX. We’ve seen some really big, you know, spike in budgeting tools. So I think people just thinking about saving and what does my budget look like money in money out just like more awareness of it? Yeah, so a lot more use of the PFM tool itself within our digital banking suite. And then probably Lastly, I’d say we’ve seen a lot more spend on our debit card, which is kind of interesting. Like maybe you think people aren’t spending money but I think in general, people are you know, saving more but when they have to spend there might be this flight a little bit away from using credit cards, debit the safety of it. So we’ve seen something like an 80% month over month spike today versus six months ago and debit card spend. on the consumer side. The SMB business debit card is just it’s almost like comical to quote a percentage because of how fast that portfolio has grown. Sure, yeah, but, but we’ve done a couple things, Rick, actually, to support clients during this time that’s helped kind of increase those numbers. So it’s not just people using debit cards more. But we have a program where we would give back 1% of your total spend each month is in terms of just cash back into your account. When the pandemic hit, we actually picked a couple of categories where people could probably benefit the most like health and wellness, grocery, things like that food delivery, and we’re given one one and a half percent back on a debit card spend. And so that’s helped, I think, increase usage probably increase some satisfaction. It puts a little bit more money back in people’s pockets for things that they were going to spend on anyways. We’ve gotten some really good feedback and we do that both consumer and for our business clients as well. So it’s been really interesting month over month since April to kind of watch those numbers tick up with sort of no sign of slowing down.

Rick Morgan

Do any of those strike you as something that’s going to go into kind of maintain its hold even after life gets back to normal whenever that is?

Chris Tremont

I think so. I mean, at some point, we’ll see most banks are kind of a lot of banks have seen rising deposit levels it kind of a washes, you know, it’s more people are saving spending is down. So at some point people will get back to normal and I think, for us, we’ll keep as best we can keep these programs running for our clients. And yeah, I see it, you know, just continuing.

Rick Morgan

Awesome. Well, Chris, this was a lot of fun. Thanks so much for joining us today. It’s a blast. We look forward to following the developments over Radius. Like I said, it’s an interesting time for the bank. So we will Definitely be keeping an eye on that.

Chris Tremont 

Thanks, Rick, it was great chatting with you today.

Rick Morgan

And lastly, I want to thank all our readers for joining us on this preview episode of PremiumPlus Pulse of the Industry. With this video, you’ll see the full transcript of the conversation. We really hope you enjoyed this Premium Plus event. Please let us know how we did by emailing us at info@bankinnovation.net or reaching out to us via one of our social channels on LinkedIn and Twitter. We’re excited to share more information on the bank innovation PremiumPlus product soon. Thanks again Until next time.