Digital-only banks are losing some of their luster as they go after the same millennial customers. With all of them offering zero in the way of fees, its increasingly hard to stand out.
HMBradley, a new digital banking platform that’s launching early next year is trying to differentiate by unapologetically charging fees. It’s going after customers that would bank at one of the traditional players rather than the millions of consumers the fintechs are courting who have little to no relationship with traditional banks. That’s been a big area of growth for digital banks including Chime and Moven, which have amassed customer bases in the several millions.
“This is not a fee free bank, we want to build a service that you want to use and are happy to pay for,” said Zach Bruhnke, co-founder and CEO of HMBradley. “We don’t believe in the idea that there are no fees. Sometimes it’s necessary.”
Everything about HMBradley from its name to its focus on saving is designed to create an image of a more stodgy, new kind of digital bank. Shunning the one word noun so many fintechs chose to use when naming themselves, Bruhnke and co-founders Dmitry Gritskevich and Germain Cassiere went with the HMBradley moniker. It’s a nod to Warren Buffett, the famed investor, who created Berkshire Hathaway. Bruhnke is a self-proclaimed Buffett nut admitting to reading every one of his annual shareholder letters.
HMBradley CoFounders Germain Cassiere, Zach Bruhnke, and Dmitry Gritskevich.
HMBradley
“When starting this company, we named it to be a holding company, one that was meant to last generations, not just years. With the idea of lasting generations in mind we tipped our hat to Warren, reversed the B and the H from Berkshire Hathaway and Halleman Bradley was born,” said the executive. After feedback from initial customers the name was shortened to HMBradley.
Outside of the name, Bruhnke said focusing on savings accounts is another way it’s trying to distance itself from its peers. Instead of making money mainly on the interchange fees every time a customer swipes a debit card like many of the digital banks, HMBradley is going after deposit accounts. The more it can amass in savings accounts the stronger it becomes as a financial institution. One of the knocks on the digital banks is that while they are getting the critical mass, customers are using it as a secondary not primary bank.
HMBradley will offer a debit and credit card but the idea is to encourage people to save more. When the bank goes live in the early part of next year, customers will get access to one digital bank account that combines checking and saving features. It comes with a variable APR based on the percentage of the customer’s direct deposits that’s saved each quarter. The more the customer socks away, the higher the interest they earn. It also plans to launch a credit card with everyday rewards that increases the APY when their cashback is saved in the digital bank account.
Customers saving more than 20% of their paycheck get a 3% APY, the highest in the market. That declines to 2.25% when they save between 15% and 20% of their salary. Save between 10% and 15% and the APY stands at 1.5%. Between 5% and 10% the APY drops to 1%. The company will also periodically provide credit card offers tailored to a specific customer. The customer knows the terms of the offer and can apply and be approved in one click. The process won’t affect the customer’s credit score.
HMBradley isn’t the only digital bank to go after a niche area of the market as a means to differentiate. But what makes it different is it’s focus on making money outside of a debit card.
It’s an idea that Max Levchin, the founder of PayPal is sold on. He took part in a $3.5 million seed round of funding HMBradley recently completed. It was led by Accomplice Ventures and Walkabout Ventures. Levchin participated through his HVF Labs, which birthed Yelp, Affirm and Divvy Homes among other popular fintechs.
“HMBradley presents an entirely new experience that will change how consumers think about banking,” said Levchin in prepared remarks. “Aside from its digital-first design that makes sense for the way people handle money today, it was developed to help anyone be more responsible with their money”