Will New Digital-Only Jenius Bank Succeed Where Others Have Failed?

Digital-only banks that are divisions of established financial institutions have emerged as strong contenders in the modern banking ecosystem. By leveraging modern technology, these firms can provide convenient, user-friendly and innovative banking experiences for customers, without the need for traditional brick-and-mortar branches. Jenius Bank is the newest example of such an organization.

The importance of digital transformation and meeting consumer needs for more robust digital banking solutions has prompted some organizations to build separate digital banking units within the legacy banking organization. As an example of this shift, Jenius Bank, the new digital-only banking division of California-based Manufacturers Bank, a wholly-owned subsidiary of SMBC Americas Holdings, Inc., a member of the 400-year-old Japan-based SMBC Group, has just announced the launch of its inaugural consumer lending product.

Creating a separate digital-only bank by a legacy financial institution is considered by some to be an opportunity to build a new, high-growth business that leverages the parent’s experience, brand and capital. The challenge is moving from a rapid initial growth phase to delivering sustainable returns, without being challenged by an existing legacy mindset, outdated back-office or a reduction in funding from the parent or from the marketplace.

Jenius Bank is certainly not the first example of either a stand-alone digital bank or of a traditional financial institution introducing a digital-only division. Yet, despite the apparent logic of doing so, surprisingly few autonomous digital-only banks have been successful in the U.S. Organizations like Simple, Moven, Varo, Finn, Marcus, N26 and others have all tried to build a modern digital banking organization from scratch with varying levels of success. For others, such as Chime, Square, LendingClub, SoFi and Ally, successes have been celebrated, but challenges remain.

To get an inside look at the creation and vision behind Jenius Bank, we interviewed veteran banking executive John Rosenfeld on the Banking Transformed podcast. Prior to becoming the president at Jenius, Rosenfeld spent over 20 years in leadership roles at Bank of America, TD Bank and Citizens Bank, where he headed its digital bank, Citizens Access.

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John Rosenfeld, president of Jenius Bank

The new organization wants to offer more than just traditional banking products and services. “We’re going to build a new bank that is more focused on the customer’s success than our own,” says Rosenfeld. “We’re building it on the latest technology without the typical baggage that almost every other traditional bank carries – like costly branch networks, manual and paper-based processes or aging technology.”

Jenius will offer personal loans initially, with savings and checking accounts rolling out within the next 12 to 18 months. The personal loans will feature a highly competitive rate and a completely digital loan application and approval process that will often be executed in less than 10 minutes, Rosenfeld said.

Listen to the podcast: A New Digital-Only Bank with a 400-Year History

The Appeal of Digital-Only Banks

The rationale behind building a digital-only bank is rooted in the evolving needs and preferences of consumers in an increasingly digital world. With the widespread adoption of smartphones and advancements in technology, consumer behavior has shifted towards digital channels. Customers now expect seamless, convenient and accessible banking services that align with their digital lifestyles.

Compared to traditional branch-based financial institutions, digital-only banks can operate with significantly lower overhead costs. By eliminating the need for physical branches and associated expenses, digital-only banks can allocate resources more efficiently, resulting in cost savings that can be passed on to customers through competitive interest rates, reduced fees and improved product offerings.

For instance, more organizations are considering the option of creating a separate digital brand to support the acquisition of high-yield savings accounts that will grow deposits and liquidity without cannibalizing existing customers or significantly impacting the legacy brand. For many organizations, a separate digital-only brand puts increased focus on personalized experiences, innovative technologies, and customer-centric design. It also allows for lower cost expansion beyond existing geographic boundaries and quicker adaption to changing market dynamics and customer demands due to cloud-based agile operational structures.

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Jenius Bank: Building a Differentiated Experience

Backed by a $150 million initial investment from SMBC Group, Jenius Bank is well-positioned to tap into the growing trend of customers transitioning from traditional banks to digital banking solutions. The bank aims to attract customers in the 25 to 44 age range with complex financial needs and digital engagement expectations. Initially, the bank will focus on digital and viral marketing strategies, forgoing an extensive media push.

By leveraging a robust cloud-based banking platform, Jenius Bank has set out to provide customers with a 100% digital banking experience, promising “smarter banking for a richer life.”

“We’re going to offer a broad set of product offerings, all fully integrated with an omnichannel experience,” Rosenfeld says. “We also intend to build on top of that, what we’ve been calling ‘humanizing digital banking’. We’re going to have 24 by 7 access to real people online or by phone that are there to help consumers, which really is different than a lot of digital banks.”

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SMBC Investor Presentation 1H FY3/2023

Jenius Bank is being positioned as an advocate for its customers. The vision is to empower customers by providing them with real-time financial insights and helping them make better financial decisions. There is also a desire to take advantage of a ‘latecomer advantage’, building from the lessons of firms before them.

The ability to seamlessly aggregate accounts from other financial institutions is another differentiator. “Other banks have allowed a customer to link a bank account from another bank and view some of the transactions or balances,” says Rosenfeld. “If you look at almost anyone that’s done aggregation to date, they’ve done it as a side venture. Jenius will have account integration embedded into every single page of the customer experience.”

Listen to the podcast with John Rosenfeld:
Jenius Bank: A New Digital-Only Bank with a 400-Year History

Embracing the Potential of a Remote Workforce

Jenius Bank’s competitive differentiation also extends to its workforce, leveraging a predominantly remote employee base. Jenius Bank has tapped into experts across the entire U.S. consumer banking industry and hired best-in-class digital experience professionals. The team hails from firms like Wells Fargo, Zenmonics, Barclays, ING-Direct, Capital One, Marcus, SoFi, Ally and a host of other firms steeped in digital excellence.

This remote work approach has enabled the bank to recruit individuals at all levels with expertise in digital banking and leverage virtual collaboration tools for seamless communication. Currently, employees reside in more than 30 different states. By fostering a strong company culture and promoting mission alignment, Jenius Bank ensures its remote workforce remains engaged and motivated.

“We’re relatively unique. I don’t think there are any banks in the country that have 95% of their workforce remote and plan to stay that way,” Rosenfeld said.

Read More: The Most Popular Digital-Only Banks in the World

A Best-in-Class Digital Solution Through Collaboration

To build a unique best-in-class solution at scale, Jenius Bank collaborated with fintech companies, technology providers and other financial organizations to enhance their offerings and capabilities. These partnerships enabled access to cutting-edge technologies, specialized expertise, and innovative solutions that further differentiated the products and services being envisioned by Jenius Bank.

“The vast majority of our technology providers and partners are really fairly mature companies, but we’re using some of their newest products,” states Rosenfeld. “For example, we’re using the newest core platform offered by FIS for the bank. We’re also working with third-party solution providers on the aggregation and some other services. We have probably about 85 key providers that are all part of our ecosystem that we’re building in three cloud environments. The best part is that we can piece together things so much easier than before, and part of that is the new technology around APIs and microservices-based technology.”

Listen to the podcast with John Rosenfeld:
Jenius Bank: A New Digital-Only Bank with a 400-Year History

Challenges Still Exist

Jenius Bank’s entry into the U.S. consumer banking market is an example of what is possible when an organization combines strong leadership, a commitment to personalized experiences, a data-driven mentality, a remote workforce and a significant financial investment from an established and respected financial brand. That said, history has shown that even with these important components, success is far from guaranteed.

“I think my biggest nemesis is probably consumer inertia,” states Rosenfeld. “You’ve heard the old expression, ‘If it ain’t broke, don’t fix it.’ Well, a lot of people think about their bank that way. What we’ve got to do is figure out how to make the switching cost of effort so minimal that consumers will try our brand and start to feel the benefits.”

Jenius Bank plans to focus on accumulating assets by acquiring a high-quality customer base through targeted marketing rather than pursuing scale from the start. After establishing a solid business base, they intend to gradually expand their marketing, increase their product lineup, and cross-sell products.

As customer expectations continue to evolve, banks like Jenius could be well-positioned to meet the demands of digitally-native consumers, providing them with a richer and more convenient banking experience in the digital age. The digital transformation will continue as organizations try to find the secret sauce for banking in the future.

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