Why a 4-Year-Old Neobank is Investing Heavily in Digital Transformation

Panacea Financial, a digital-only bank focused on serving doctors, dentists and veterinarians, has an ambitious goal to be the bank of choice for every physician. It's planning a big investment in technology to help it get there.

“Digital transformation” may be the most overused term in the banking industry for several years running. It’s also a bit of an amorphous term; for one bank digital transformation may simply mean adding some new mobile products or features; for others it may mean building a strategic roadmap focused on years into the future.

For Panacea Financial, a neobank formed in 2020, transformation is about reaching the next level.

“We want to have the best-in-class digital banking experience,” says Dr. Michael Jerkins, president and co-founder of Panacea. “Our current online and mobile experience is good, but we want it to be great.”

By Doctors, For Doctors

Little Rock, Ark.-based Panacea exclusively serves physicians, dentists and veterinarians. It was co-founded by Jerkins, COO Dr. Ned Palmer and Tyler Stafford, who serves as CEO and comes from a background in banking and investment banking. Both Jerkins and Palmer still practice medicine alongside their work for Panacea.

Panacea Financial Holdings partners with Primis Bank, Member FDIC, to deliver banking services through its Panacea Financial Division. Primis is also a part owner of Panacea Financial Holdings. (Based in Virginia, Primis has offices in that state and Maryland and Washington, D.C.)

The genesis of the digital bank began as Palmer and Jerkins grappled with how medical students and newly minted doctors often struggle to obtain loans or financing from traditional financial institutions.

“A resident is probably not making a lot of money and they have $350,000 in student debt — and that doesn’t compute when put into a bank’s spreadsheet,” Jerkins told The Financial Brand.

Doctors “make money later in life than the average American and typically have more debt than the average American.”

However, Jerkins notes once doctors become more established and make more money, the irony is that banks typically “bend over backwards” to court them as clients. Panacea aims to serve these customers early in their careers and build lifelong relationships.

Panacea’s first-ever customer was an ER physician who received a personal loan from the startup. Since then, Panacea has served more than 5,000 customers. Its products now include checking accounts, high yield savings accounts, personal loans and student loan refinancing. It also has commercial banking products, such as financing for doctors looking to expand their practice or acquire a practice, as well as business banking accounts.

Ultimately Panacea’s goal is to become “the most-used bank by doctors nationwide,” says Jerkins.

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Throwing Gasoline on the Digital Growth Fire

Panacea hopes to accomplish this ambitious goal through a digital transformation project that it is currently undergoing. The company raised $24 million in a Series B funding round in January, and much of that capital is earmarked towards this project.

“We were already profitable but wanted to throw gasoline on the fire in regard to digital growth,” says Jerkins.

Stafford, in a press release announcing the funding round noted that, “Our goal is to build a widely diversified and deeply integrated suite of financial products and services for doctors, their practices, and ultimately the broader healthcare industry.”

The project involves overhauling the bank’s customer-facing app and website and back-end systems and processes to support more automated decision-making.

“This project will enable us to offer more effective relationship-driven customer service and provide an infrastructure to support our future growth,” Jerkins says. “We want to deliver to our customers what they need, when they need it more efficiently.”

Building Out: Funding Round Capital for New Tech Hires

To help achieve this, Panacea used a portion of its Series B funding capital to bring on several technologists that will help to build this new digital infrastructure internally.

This includes the bank’s new CTO Ryan Gorney, tasked with spearheading the project. Gorney is an experienced bank technologist; he joined Panacea in January from Florida-based Seacoast Bank, where he served as that institution’s chief technology officer and chief innovation officer. He transitioned to that role following Seacoast Bank’s January 2023 acquisition of Coral Gables, Fla.-based Professional Bank, where he had previously worked as EVP, chief information officer since late 2018.

“We’ve brought in this technical team that has experience in things like core conversions and digital transformations, and they’ll also be working closely with Primis on this project,” says Jerkins.

“So many financial institutions spend all this money to bring customers in. Then they don’t engage them and they walk right out the back door.”

— Laurie McLachlan

Panacea also partners with Detroit-based Bankjoy; it uses Bankjoy’s suite of digital banking tools, such as digital account opening, on its customer-facing mobile and online banking platform. Bankjoy directly integrates with Panacea’s core system via Fiserv Communicator Open.

Panacea is also working with Digital Onboarding, a digital engagement vendor that works with traditional banks, credit unions and neobanks. The firm’s platform helps power marketing efforts such as personalized cross-selling, relationship building and customer retention.

Laurie McLachlan, Digital Onboarding’s chief marketing officer, says many financial institutions of all types struggle to engage with customers once they have been onboarded. She praised Panacea’s strategy of engaging with customers early in their careers and building lifelong relationships.

“You have to have a way to engage customers once they come in the front door,” McLachlan says. “So many financial institutions spend all this money to bring customers in. Then they don’t engage them and they walk right out the back door.”

For banks thinking about undergoing a digital transformation such as Panacea’s, it’s imperative that everyone in the organization is aligned. Digital transformations are only successful when they are accompanied by complete buy-in from the entire organization, says Chris Miller, senior director at Cornerstone Advisors.

“It’s not a one-and-done scenario, it is progressive change,” says Miller, “It’s a marathon, not a sprint.”

Transformation vs. Evolution

In fact, Miller says he dislikes the term “digital transformation” preferring instead “digital evolution” which more accurately reflects how such projects should be thought of.

“The processes and the way of thinking have to change, not just the technology,” he adds “Or else you’re just replacing the technology but have the same archaic processes in place.”

Miller says traditional, legacy banks and neobanks such as Panacea each have their own potential pros and cons when it comes to these projects. Traditional banks must overcome both legacy thinking and the costly replacement of legacy technology. For neobanks, it’s easier to be nimbler when it comes to technology, but they may lack the institutional knowledge that established banks have.

Panacea believes it has that knowledge, especially after bringing in Gorney and other industry veterans in January.

“We feel really good about the talent we have,” says Jerkins.

Miller says Panacea has one big advantage over other  neobanks in that it has “a clearly defined target market.”

“That’s a hurdle that many other digital-only banks have not yet overcome,” he adds.

And for Panacea, that target market is at the heart of its mission.

“We’re a mission-driven company and our mission is to make doctor’s lives better,” says Jerkins.

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