The Key to Humanizing Digital Banking

Well, before we jump in, actually, I wanted to kind

of give the audience a little bit more of a, kind

of a background of Jenius Bank.

So, Jenius Bank is a newer bank.

They just went live in 2023.

They’re a subsidiary of SMBC,

and they had a bit of a non-traditional entry into the

marketplace in the sense that they really are focused on

loans and high yield savings accounts.

Right. They also are a digital only bank, which

is important because what that has allowed them to do

is pass on a lot of those savings in the form

of interest rates to customers.

So I think as of today,

your high yield savings account is at a 4.2%, correct?

Yep. Correct. Awesome. John, you joined Genius in 2021

as the bank president, right?

I started it, yeah. Started, yes.

After two decades in the financial space? Correct. Awesome.

And, under John's leadership, within the first year,

actually, before you hit 1 year old,

you guys had over a billion in deposits

and 700 million in loans.

Loans, personal loans, yes. Yeah, which is fantastic.

Thank you. Prior to coming to Jenius

and I guess even prior

to your financial industry experience,

you also served in the military. Cool.

nd Special Forces as a Green Beret. Yeah.

Well, thank you for your service. You're very welcome.

I'd like to maybe start with what are the things

that you learned as part of your military experience

that you've brought with you into your experience, both

with Jenius and just in the financial space?

Yeah, so, probably one

of the first things I learned was if you take off in a

plane, it's a lot more convenient, safe,

and less stressful to land with the same plane.

jumping out is a little,

you know, more stressful, a little more anxiety,

But also it can be fun.

But seriously, the military taught me a lot

of things about leadership, taught me a lot

of things about how you approach challenges.

There's a great quote, it's been probably the most

re-quoted things I've ever heard.

Mike Tyson re-quoted it recently.

He said, you know, everyone has a plan

until you get punched in the mouth.

Right. That quote actually goes back to 1880.

A guy named Field Marshall Helmuth von Moltke,

who said that the greatest military plans don't survive

contact with the enemy.

While I've also heard it expressed in business terms,

which is you can have a great plan,

but it likely won't survive when you

launch to the customer.

And what it really means is you have to learn, you have

to adapt, and you have to overcome.

And so it's true in the military, it's true in business.

You're going to have challenges, you're going

to hit obstacles.

How you respond to those

differentiates the best from everyone else.

I'm curious in your experience,

especially launching a digital only bank,

have there been any challenges that you didn't anticipate

that you've had to overcome?

And anything you'd like to share

that others might learn from?

Yeah. Well,

I'll tell you two really cool things we did

that were really smart until they collided.

So we figured when we launched the bank, we didn't want

to have to deal with a lot

of credit applications from people

that we would never give credit to.

We also didn't want to open ourselves up

to more fraudulent applications.

We wanted to manage how much, you know, volume

we were going to put through a brand new platform

that's 100% cloud-based.

And so we said we're only gonna offer loans

through aggregators.

And aggregators are folks like Credit Karma or LendingTree,

and I call 'em food courts for finance.

Right? You go there, you're planning to eat,

you can pick from multiple options.

You can see the prices, you can smell the food.

Same thing with Credit Karma or LendingTree.

You can see all these loan offers from different banks.

And what they typically do is behind the scenes,

they only offer loans...

They only make the offers from different banks

to customers that meet the credit criteria

that those banks have said that they would lend to.

So we really liked this model

because it really narrowed our target audience,

if you will, to people that we wanted to lend

to based on our credit models.

So this approach seemed really smart

and it worked very well.

And then we say, well, how are we going to differentiate?

Well, let's not have an origination fee.

So a lot of the banks today

that make unsecured personal loans will charge you a

3% fee upfront.

You don't have to pay the fee.

It just comes out of the principal, right?

So when you, let's say, get a $40,000 loan

and you have a 3% origination fee, $1,200 is already paid.

It's part of that loan.

You're only going get, what is it, $38,800

in actual money passed out in cashflow

when you get that loan.

Some of that money's already sunk in that origination fee.

We said, we're not gonna do that. You want a $40,000 loan,

we're gonna give you $40,000

and then you're gonna pay a little higher rate

because you're not paying the origination fee.

Well, that worked well for a while.

It actually attracted a lot of customers,

but then these aggregators are smart.

They reach back out to these customers a few months later

and say, “hey, there's better rates

available on Credit Karma.”

They don't mention that there's an origination fee.

So now they're comparing my rate at 13%

to another rate at 11% with this origination fee.

And we started seeing a lot of

customers refinancing the same debt.

Guess what? Credit Karma got paid twice for that loan.

We didn't even make enough

to offset the acquisition cost.

So we call this the pre-payment problem, if you will.

So the two strategies made a lot of sense separately,

but when they came together,

it really didn't work out as well as we expected.

So we're revisiting our whole approach there.

Okay, you've worked in both big banks

and also a lot of digital ventures.

What's harder? Innovating inside legacy systems

or building something completely new?

Oh, I'll answer that

with a question back to you.

If I asked you to design a brand new luxury sports car

that's electric, by the way,

would you rather start from scratch and buy components

or would you rather I hand you a used Ford Pinto?

Well, uh, my mechanical skills are terrible,

so I'm going to say, I'm going to hire somebody else to do it all.

Exactly. Well, Ford Pintos were designed in the 1970s,

or they launched in the 1970s,

and they were a great car until they started blowing up.

But, you know, the funny thing is a lot

of bank technology was also designed in the 1970s,

and it's sitting on data centers and basements of buildings

and, you know, it's harder to work in on those engines

and those platforms.

So I think the advantage of starting digital

and starting new, almost separate like, well, you know,

Steve Jobs launched Mac

as a skunkworks operation within the Apple Company.

Same concept. Launch it, allow it to kind of fertilize

and grow independent of the mothership.

And then it's whatever point, you know, you desire,

you can then decide whether you flip over

or you somehow merge the two.

And so the approach you're taking is merging the two.

Well, for us at SMBC, I hadn't even heard

of SMBC by the way.

When they sent me an inquiry about working

with them, I had worked for a

several larger U.S. banks.

I was shocked when I found out they were one

of the top 15 banks in the world.

The reason I had never heard of them,

I was in consumer banking my entire career.

And, they don't have any consumer presence in the

United States, so that's why they called me.

They wanted to build a consumer bank in the United States.

And so, you know, I would say we launched it.

We had the opportunity to build something that was kind

of separate because there wasn't anyone else in the company

that had expertise

that would come in and tell us how to do it.

Uh, so I got to hire pretty much the entire team from

scratch, and that was a huge advantage.

That's awesome. One of your, I guess, visionary

claims that you want to work through is

how do you humanize digital banking,

which is an interesting goal being

that you have no branches.

So kind of talk me through like

what is it you're trying to do

and what's your strategy to try to execute that?

Yeah. So I've worked for large, in fact, three

of the top 10 banks in America, all of them branch based.

And they're all doing digital initiatives.

But what I found was every single one of them had things

that you couldn't do online.

You had to go into a branch.

And the reason was, it was easier.

So somebody gets married, they want to

change their name, they have

to bring in their wedding license

and their, you know, new social security card, they want

that in in person 'cause they want to verify

that it's valid documents, right?

So that was one example

and one of my banks that we've never

able to move that online.

So to be a humanized digital bank, you have

to empower customers to do everything that they need to do

with their bank digitally.

So that's step one. Yeah.

Step two is everybody that I've ever met

at some point wants assistance from

somebody else that looks like them.

I.e., a human, right? And so you have to be incredibly available.

There are several digital banks

and startups that have tried to build things

that basically block out the humans

and they say, Hey, we're not gonna let you talk to a human

because it's very inefficient.

We’re going to try to make sure

that you do everything digitally.

In fact, some of these digital

banks, it's hard to find a phone number.

So we said, we're not going to be like that.

We're going to put our phone number on the

homepage and we're going to make it.

I didn't get this past my marketing

department, but I wanted to, you know, put on it, speak

to real humans and then the phone number.

But basically we decided to launch a call center

that's open 24 hours a day, seven days a week.

Very few banks in America, we'll answer the phone

after 2:00 AM on a Sunday night.

We will. So that was one approach.

And then honestly, our partnership

with MX was a key part of humanizing it

because MX is helping us

identify real-world life situations

and then give customers insights

and advice as to how

to be more confident in their decisions.

Awesome. Part of a process that you, I guess

your claim to fame is, is that you made

bill pay free. Talk to me about that.

So I joined Bank of America, that's long ago,

so I can talk about it now.

Back in 2000, and at the time, Nations Bank

and Bank of America had just come together.

They had two separate online,

back then we called it e-commerce.

The term kind of died away, but, online banking

and e-commerce were the same thing.

And we were merging the teams.

And, I joined right at that time

to lead the combined team.

And I started looking around saying, well,

how are we going to make a real difference?

And one of the services that had recently been launched was

bill pay — online bill pay.

I was like, oh, that's kind of neat.

You know, you don't have to lick stamps,

and remember the day when you licked stamps?

Yeah, that’s still gross.

Yeah. But you didn't have

to mail your bills in.

You could just do it all online.

Well, I got my analytics folks in the room

and I said, do we know how these customers behave compared

to people that aren't paying the bills online?

They said, yeah, we have all — oh, John,

no one's ever asked us that —

we have this whole deck. And they pull it out.

They're so excited. They're like, look at this.

They call us fewer times

because they're seeing their information.

They basically are all primary bank accounts.

In other words, they have their

primary checking account with us.

'cause that's where they pay their bills from.

They actually have a higher percentage of customers

that get loans from us

because again, they're comfortable with this experience

of being able to do it all in one place.

So all these things I said, do they have monetary value?

Can we calculate how much that's worth?

They said, yeah, we did,

it's $120 a year per customer, more value

to the bank if they pay bills with us.

I said, how much are we charging for the service?

They said, well, you know, $4.95

or something per month, so that's what, $60 bucks?

I go, so

they're paying us $60 bucks on top of the $120.

They said, yeah. I said, well what about if we just gave it

to people that aren't getting it now

because they don't want to pay $60 bucks?

And they said, well, we offer it to premiere

customers for free.

I said, well, who's premiere?

And they said, well, you have to meet these criteria,

you know, and if you ever look at a billboard

and it says free, you know, if you qualify, the majority of

Americans assume they won't qualify.

Right. It's like a natural assumption.

They're going to catch me somehow.

So many people were not taking advantage of this

even if they had been able to get it free.

When we made it free, about a third of the customers

that took the service were folks

that never would've paid for it anyways.

But the perception was that they were going to have to pay.

And so the amount of people

that were paying bills online at Bank of America in the 2001

to 2002 timeframe grew exponentially.

And by the end of, I think it was 2002,

we had more people paying bills online at Bank

of America than all the other banks in America combined.

Wow. And it just took off.

That's crazy. I love that.

Big topic for the conference is AI.

So what's your take on using generative AI

in a customer-facing banking tool application,

especially being that your presence is all digital.

I think it's going to take what we're doing.

Ryan mentioned the tsunami.

I think it's going to be a tsunami.

'cause if you think about it right now, you know,

he talked about you have to get the data, then you have

to be able to analyze the data.

Then you have to do that third part he mentioned,

which was the idea that you have to create insights that are

of value to the consumer.

That third part, we're still at

the beginning of, right?

Trying to figure out all the things

that we could tell customers about.

And can I a do a little exercise here?

Absolutely. How many people in here have their paycheck go

to a bank on a fairly regular basis?

Raise your hand. That's good. Most of them are employed.

That's a good thing. How many of you also have like,

regularly scheduled bills that come out of your account?

Like mortgages, auto payments, it's good. They're consumers.

And so how many of you have had your bank notify you

that, based on history,

they know when your check is coming in

and they know when your payments need to go out?

How many of you have had your bank tell you

that in a couple weeks

you're probably going to overdraft your account?

The lights here, I can't see any hands. Can

you?

Yeah.

Well, geez, that's a pretty basic thing, right?

I mean, anticipating, based on your mortgage payment

and your paycheck, when

it's going to go sideways, why won't banks tell you?

Because they get fees when you screw up.

So I think what's going to happen is the banking industry is

going to get turned on its ear when banks come out

and design a new business model

that's not based on generating 30-40%

of their income from punitive fees, late fees,

overdraft fees, extended overdraft fees.

I mean, all these things are punishment to customers

who make a mistake or are lazy in managing their

money or not paying attention.

What if your bank actually helped you do those things

and avoid those mistakes?

And that's what I think is going to change the game.

And AI is going to help us identify these opportunities

to give customers insights when they need it the most.

And, if I can, I'll take one more example. Absolutely.

My neighbor asked me the other day, he goes, John,

what was your water bill last month?

And I go, I don't know, $200 bucks. He goes, mine was $400.

and he lives next door to me. He's my best friend.

And he goes,

and I don't even water my lawn as much

as you do, and I don't have a pool.

He goes, why is my water bill so high?

I said, and I started thinking about it.

I said, maybe you have a leak.

He did. One of his toilets was leaking, which he found.

And can you imagine $200 for a leaking toilet for the month?

Imagine if he didn't pay attention.

Well, as a bank, I could have known

what his normal bill was.

I also know where he lives.

I can go on Zillow and find out how big the house is.

I can look at the weather

and find out if it was warmer that month

and he had to water his lawn mower, I could,

I could probably estimate his bill pretty darn accurately.

So if it was twice what I estimated, why wouldn't me,

as an advisor, tell him you need to look at your house

for some leaks.

Imagine that's an insight

that would've saved him $200 bucks.

Yeah. It's a pretty simple one to put together. Yeah.

Well, one last question.

I'd love to understand, what's your vision for Jenius Bank

and how is it going to refine consumer banking in the U.S.?

So our vision is to help our customers live a richer life.

And when I say a richer life,

I don't mean more money, although that's always nice.

I really mean more confidence, less stress,

people feeling like they're making

better decisions.

And so we're empowering.

We created this thing

that we internally call evolved banking.

We have core banking, which is

what every other bank in America does.

Stores your money, pays bills, transfers, funds, et cetera.

Evolved banking is this whole idea of

becoming your personal advisor, your CFO in your pocket,

help you make better decisions

and feel better about the decisions you make.

That's fantastic. Well, thank you so much

for your time today and, uh, thank you.

We hope you enjoy the conference. Awesome.

Thank you.