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Full-service bank opens as app only, no branches

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BankMobile says it is the first full-service mobile-only bank.

Taking a trip to your local bank may no longer be necessary.

BankMobile, a division of Customers Bank, launched Wednesday, claiming to be the first bank to allow customers to open checking and savings accounts and even get a credit line solely through a mobile app.

BankMobile hopes to cater to wired millennials, who are expected to make up 50% of the workforce by 2020.

Of course an app still can’t dispense cash, the most analog of financial instruments. To solve that problem, BankMobile will offer customers access to 55,000 ATMs nationwide, and reimburse them the cost of ATM surcharges. The ATMs, however, must be part of the STAR network. There are about 5,800 STAR network ATMs in the tristate area, according to the state Department of Labor. Prominent retail banks Bank of America, JPMorgan Chase and Citigroup, though, are not part of the STAR network.



For Jay Sidhu, CEO of Customers Bank and BankMobile, the launch represents a second chance at getting mobile banking right. During the dot-com bubble, he spearheaded, Sovereign Bank’s attempt at branchless banking, which lasted about a year.

At a press conference at The Harvard Club of New York Wednesday, Mr. Sidhu said the bank is the first of its kind to charge no fees to customers while operating as an app for tablets and smartphones but without a retail presence. (Customers Bank has only 13 branches nationwide, with just one in New York City.)

“We want to become America’s true bank that is in the palm of your hands,” said Mr. Sidhu.

Branchless bankswhich are Web-onlymake up only a small part of the U.S. consumer banking market, holding less than 5% of household deposits, according to consulting firm AlixParters.

But Mr. Sidhu, a veteran in the banking industry and former chief executive of Sovereign Bancorp, now known as Santander, said he is sure his venture will having lasting power.

He noted that banks today are “addicted to fees” and that bank branches sustain themselves through the fees millions of Americans accrue each year.

Most large banks have overdraft fees that average $35 per week for a $100 overdraft that is repaid in one week, according to a 2012 Consumer Federation of America report. This is not the case with BankMobile.

BankMobile can afford to waive fees because without branches its operating costs are low. The bank will still charge interest on loans.

“The amount of interest we collect that way is pennies compared to other banking firms,” Mr. Sidhu said.

Bank branches have been shrinking in number in recent years, with locations dropping 1.5% per year on average, Mr. Sidhu said. He believes bank branches will eventually go the way of movie-rental stores.

Today, most traditional banks offer online and mobile banking. But Mr. Sidhu says BankMobile is the first bank to offer all traditional banking services online.

BankMobile launched its first phase Wednesday, which means that three features are now available for use. It offers a free checking account, savings account and unsecured line of credit of up to $5,000 depending on the credit score of the individual.

Users can download the app and take a picture of their driver’s license, state ID or passport. This auto-populates most information required to open an account.

Luvleen Sidhu, Mr. Sidhu’s daughter and the company’s chief marketing officer, pointed out that 90% of state IDs are accepted.

Like other mobile-banking apps, BankMobile enables customers to take pictures of their checks to deposit and pay bills. It also allows users to transfer money to anyone with any bank via their email address or phone number, and allows users to check their balance without logging in every single time.

Some worry about security risks with the transaction, but Ms. Sidhu said the app has multilayered security checks to protect accounts. While the bank will issue plastic debit cards, the app connects with mobile-payment system Apple Pay.

The mobile bank said it has committed to investing $5 million over the next two years but declined to comment further on how much the app’s inception has cost them so far, according to Mr. Lewis. He declined to provide any other details.

Ms. Sidhu said that the company’s goal this year is to open 25,000 new accounts and 250,000 accounts over a five-year period. In its next phase, which is expected to begin in 60 to 90 days, the app will also feature text and video customer service chats, preapproved auto loans and the ability to search and buy cars nearby.

Read More at Crain’s Business 

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