Alloy Labs: driving innovation within banking
Jason Henrichs, CEO and Co-Founder of Alloy Labs, describes how the consortium is facilitating collaboration between banks through tech and innovation.
Formed in 2018, Alloy Labs is a consortium of over 40 leading community and mid-sized US banks working together to adopt new technology, drive innovation and shorten the path between the conception and implementation of ideas. Jason Henrichs, CEO and Co-Founder, informs us that, by combined assets Alloy Labs ranks as one of the top 25 banks in the US. A FinTech pioneer with a wealth of valuable experience in thought leadership and collaboration with top-tier companies, Henrichs is well-placed at the helm of an organisation that reaches over 30mn consumers and 6mn SMBs.
“At the moment there is a digital arms race taking place, where the largest banks and some of the more specialised or most profitable banks are noticeably further ahead in their digital transformation,” he explains. “However, the small and medium sized banks are at a disadvantage: they haven't raised hundreds of millions of dollars in venture capital to fund their development and they don’t have the balance sheet, tech teams and incubators like larger players do. By working together, they can be both more efficient and effective at what they do.”
Digital transformation is taking hold in the banking sector; what was once viewed as a purely cosmetic process undertaken by a few now holds revolutionary potential. This is in no small part, Henrichs points out, because of the COVID-19 pandemic which illustrated how all-pervasive digital technology in finance could be. As the first wave focused on user interface gives way to a second phase overhauling back office processes, Alloy Labs is helping to foster the greater utilisation of data through AI (artificial intelligence) based automation and embedded financial experiences. “If you look at even the challenger banks of today, they are mobile and technology first but they still look and feel a lot like traditional checking, savings and spending accounts,” he continues. “When we get to the third wave - business model transformation - we're going to see some very interesting things.”
Identifying Quontic Bank as an example of an organisation quick to comprehend the value of coordinated collaboration, Henrichs compliments the company’s dedication. “Quontic Bank has been great: it’s jumped right in with both feet and said, ‘Hey, we're interested in partnering with others, learning from them and contributing knowledge too’.” Frequently working side-by-side, members of Alloy Labs have been able to help Patrick Sells, CIO, navigate specific industry and technical requirements as Quontic Bank develops its ‘true digital bank’ concept. Conversely, Quontic Bank’s experience with APIs, contactless payments and cultural transformation adds significant value to Alloy Lab’s other members.
The cornerstone of Alloy Labs’ approach is ‘understanding’: what are the challenges of the modern banking sector, what is the customer’s perspective and how can things be better? It is by grouping together and finding answers to these difficult questions that Alloy Labs has helped Quontic Bank and many others formulate a roadmap for the future. “What is the role of a branch?” asks Henrichs. “It's not going away, but it will look different; it will serve a different purpose. Alloy Labs believes in focusing on the things that will really differentiate and lead to growth. That's because new customers have new needs and they don't see them through the lens of a traditional banking relationship anymore.”
Marqeta’s IPO shines a light on fintech fees
Marqeta, a fintech company, raised $1.2 billion with an initial public offering that priced high and exceeded expectations. The company priced its shares at $27, above the expected range of $20 to $24, and giving it a market valuation near $15 billion. Marqeta stock jumped 13%, closing at 30.52 on the stock market today.
This IPO adds to a number of recent fintech listings from companies such as the online lender SoFi and the no-fee brokerage Robinhood.
Founded in 2010 and based in Oakland, California, Marqeta sells payment technology that’s designed to detect potential fraud and ensure that money is properly routed. The company also creates customised branded debit cards and prepaid cards for corporate customers that include the delivery group DoorDash and Swedish fintech Klarna, as well as Square.
A large amount of Marqeta’s revenue comes from interchange fees, which is the transaction fee that merchants pay whenever a customer uses a credit/debit card to make a purchase. Due to the Durbin Amendment in the 2010 Dodd Frank Act, banks that have under $10bn in assets receive higher interchange fees than larger lenders from the transactions.
This has allowed fintech start-ups, such as Marqeta and Chime, which is a personal finance app in the US, to take advantage of this by partnering with small banks and taking a cut of the fees.
An increase in profits
Marqeta’s business has drastically increased during the pandemic as people in lockdown have turned to digital financial services such as Square’s Cash App and ecommerce companies such as DoorDash. The company more than doubled net revenues to $290m last year while narrowing losses to $48m. Business from Square made up 73% of Marqeta’s net revenue in the first quarter, which was an increase from the previous year. Marqeta’s agreements with Square last until 2024, according to the company.
Ian Johnson, SVP, Managing Director, Europe, Marqeta: “As the world becomes increasingly interconnected, more people are relying on digital payments to move through each day. Companies throughout Europe are looking for ways to offer better payment solutions for their customers. Marqeta is proud to be a publicly traded company and looks forward to bringing an even greater focus to scaling our products and delivering modern card issuing that launches cards quickly and provides greater flexibility than traditional card programmes. We’re pleased to support European businesses with ambition and purpose who use our platform to help write the future of payments.”