How a $1.3 Billion Institution Launched Its Own Digital Bank

Most community banking providers can't match the digital sophistication of megabanks. But River Valley Bank and its aptly named IncredibleBank online unit prove that small fish can swim with the sharks. Here's how this community bank manages to innovate and thrive without selling its soul.

When IncredibleBank, the online banking division of Wisconsin-based River Valley Bank, made the list of “Top 10 Online Banks”  at GoBankingRates.com, it found itself in good company, right alongside Ally Bank, CIT Bank, Discover Bank, and Synchrony.

While not the only community bank on the list, it’s a significant accomplishment for an institution with only $1.3 billion in assets. And equally noteworthy, IncredibleBank is the only digital-first bank offering loans for luxury RVs. These motor coaches — the ones the size of a tour bus with slide-outs that turn them into 1,200 square foot homes — run upwards of $2 million. PGA golfers, NASCAR drivers, actors and other celebs own these motorized behemoths. But, it turns out, so do many successful small-business owners. And that just happens to be the core market for River Valley Bank.

Nationwide motor coach lending wasn’t actually part of the original plan Todd Nagel hatched when he set out to launch IncredibleBank back in 2009. As the CEO of River Valley Bank, he was simply looking for a way to raise deposits to help fund strong loan demand that was outstripping what the local Wausau, Wisconsin, community could provide. He decided to copy the success of ING Direct, one of the earliest direct/digital banks.

The strategic decision was made to create a separate brand for the new unit using a different name to avoid cannibalizing brick-and-mortar customers, explains Ellie Reineck, President for IncredibleBank.

How’d they pick the name? The previous CEO of River Valley Bank looked like Mr. Incredible from the hit Pixar movie “The Incredibles,” so the people who worked for him came to be known as “IncrediBankers”. Some years later, after Nagel had taken the helm, he ended up choosing “Incredible” as the moniker for the denovo digital bank — a nice way to honor the bank’s legacy.

The online banking model took off quickly, and the deposits flowed in, but as the Great Recession hit full steam, River Valley Bank, primarily a small-business lender, had to hunker down for several years, Reineck recalls.

The online unit continued to supply funding to the parent, but in 2015 Nagel decided to shift gears and expand the online bank’s role as a revenue generator. The strategy? Find and develop a new loan niche with nationwide potential. Reineck says luxury motorhome lending was Nagel’s brainchild. He loves motor coaches, she says, and knows a lot about them.

Expanding the Idea of Community

Despite being a successful local institution, River Valley’s management team recognized that communities increasingly are not defined by geography. Therefore, they reasoned, community banking must also adjust. Using its experience with IncredibleBank’s national reach, the bank saw the next level for the unit as providing community banking for national niche communities, but providing it in the way that people in the community wanted it — i.e. not strictly digitally.

The bank’s primary market segment, she says, is owner-managed small businesses. In researching the luxury motor coach market, the bank found that most of the buyers of these high-end vehicles are successful small business owners who have transitioned, or are transitioning, into a less-hands-on role in their businesses. In other words they fit the institution’s market segment.

Nevertheless, Reineck says they thought a marketing push for the celebrity market would help, and signed a promotional deal with NASCAR driver Kyle Busch for a couple of years. But it didn’t really pan out, Reineck says.

Key Lesson: You have to align your brand with potential customers that live and breathe and fit the same core values you represent. Despite its movie-themed name, IncredibleBank and its parent are not bankers to the rich and famous. Just the rich, in the guise of self-made business people.

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Why The Best App Isn’t Enough

River Valley Bank has concluded that “our best opportunity in the future is to find more of these nationwide business niches that fit what we know and do best,” and serve them through a combination of technology and personal connection, Reineck explains. For these remote “communities,” that personal connection comes largely through a live call center that River Valley Bank operates.

“If you have not built any personal relationships with your customers, when your technology goes down, you’ve got nobody to stick up for you.”
— Ellie Reineck, IncredibleBank

Reineck says many financial institutions, traditional or otherwise, tout “We have the best app and online banking.” But then the technology fails, and consumers don’t have anybody to call, or the person they call is different every time. “People are getting real sick of that. Their tolerance is just done,” Reineck states. “If you have not built any personal relationships with your customers, when your technology goes down, you’ve got no fans, nobody to stick up for you.” Banks and credit unions have to develop both avenues — digital technology and personal connection.

Technology is not a silver bullet, Reineck emphasizes. The bank is continually working with its primary tech vendor to get the kinks worked out and roll out new features. But sometimes, a feature is just “klunky,” she says, “and you better have somebody in place to assist the customer at that point so you don’t lose them.”

Case in point is IncredibleBank’s business savings account. Despite offering a high rate, it hasn’t done well. “The user experience just isn’t where it needs to be,” Reineck candidly admits. The sticking point is that small business customers need to be able to get their money in and out of the account easily. The bank’s core platform currently does not support business bank-to-bank ACH transfers, so customers have to use the bill pay function. “They don’t like that very much,” says Reineck.

Based on research she’s done and IncredibleBank’s experience, Reineck is not convinced that small-business owners want to bank only by using a group of smart-phone apps. “They don’t have time for it. Yes, they want to be able to do the simple stuff on a phone, but they really want somebody to take care of the other things when they need that.”

Timely Shift of Strategy to SBA Communities

Trolling the web for deposits has become an expensive game as rates have risen after years at rock-bottom levels. “Our cost of funds has continued to rise,” Reineck confirms, “and it hasn’t been as easy to make that up on the loan side, particularly with business loans.” She notes that IncredibleBank has decided to not try and play the rate game like it had been doing. “We’re seeing some of the rate-sensitive folks roll off,” says Reineck, “but we’re replacing them with less rate-sensitive customers more closely connected with the bank’s lending program. That’s the type of service model and customer base we’re trying to drive to now.”

“Our greatest opportunity is to continue to find nationwide niche markets that fit what we do best,” Reineck states. “We firmly believe you can build community banking at the national level if you start with one community — or niche market — at a time.”

To that point, River Valley Bank, in September 2018 launched a National SBA Division that will be a part of its IncredibleBank online offerings as well as offered through its legacy bank’s footprint. The new unit is headed by Stephanie Dunn, who ran several vertical markets for North Carolina-based Live Oak Bank, including funeral home financing, which is River Valley’s first SBA community. The new SBA team is based in North Carolina.

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