Inside Cross River Bank’s plans to build a killer banking app

Cross River Bank is a mysterious little bank with a big name in fintech. If you don't believe it, ask the biggest venture capitalists in Silicon Valley, who last year invested $28 million in the New Jersey bank to help it expand its technology and product development teams and continue investing in its compliance infrastructure. Cross River banks some of the biggest names in fintech, including at least a dozen online lending companies like Affirm, Marlette and Rocket Loans. It has also developed payments solutions for faster, more secure and lower-cost transfers that have been integrated by TransferWise and the bitcoin wallet Coinbase, as well as Google Wallet and Stripe in the past. Tearsheet caught up with its CEO, Gilles Gade, at the Money 2020 conference in Las Vegas Monday on what CRB has been up to since its eye-popping VC fund raise last year, its API strategy, why it's developing a mobile banking app consumers and why a bank so focused on back-end infrastructure is focusing on the front-end experience. The following has been edited for length and clarity. It’s been almost a year since you announced your VC funding. How have you been using it? We have absorbed the capital very quickly, managed to deploy it on the marketplace lending side. We like to retain loans from the origination platforms so instead of selling 100 percent of the origination we retain 10 percent. As our partners are growing nicely, naturally that 10 percent has kept increasing. We invest in technology very heavily — mostly for API-driven bank-as-a-service and now bank-as-a-platform. We are developing our own core processor that will be probably out of box in the first quarter or early in the second quarter. Are you looking to raise more? Yes we are. We haven't started yet, but it’s in our plans. What’s your attitude toward becoming a platform, as a bank that doesn't directly serve consumers? Consumers spend a lot of time managing their apps and less time managing their money. They count on the apps to manage their money but then it takes them a while to manage the them because there are so many different product offerings out there. So we’re trying to create a ubiquitous environment in which the decisions consumers make are not functionality driven, but more existential, critical to their finances, so they can refocus on what’s important. How does this manifest for your own clients? We want to be the Cisco routers of the banking industry. You have fiber optic cables and satellite telecommunications and a bunch of different channels and rails — and then you have Cisco that like a switch just offers you the ability to push data through one channel or the other depending on whatever is more efficient and better priced at any given time. We want to offer the same thing to our partners which in turn they can offer to their consumers. What would that look like? Let’s use Amazon as an example (though it is not our client). If merchants want to get paid in real time, that would obviously be a different price point than if they wanted a three-day ACH payment to hit their account. We want to give the merchant the ability to select at any given time in a ubiquitous and cost-effective manner. Can both banks and fintech vendors deliver banking-as-a-service? We’re strong believers that BaaS has to be delivered by a bank. The fintech players need access to payment rails and they're going to use a bank ultimately to do that. As a service, the bank could be either the facilitator of a transaction or the purchaser of the BaaS technology to provide it to consumers. There is a level playing field now — consumers can have the same functionalities in a small bank in Nebraska that they can have with a Chase or Wells Fargo. Are banks prepared? Most banks are not equipped or not API-driven, ubiquitous, priced properly — and the banks that are, the big banks, have been unwilling to do that because it would cannibalize some of their business or presents high risk — do they have the required compliance and adequate staff to be able to manage the operations? What’s going on inside Almond? Almond is our exploratory R&D lab for us to understand the aspirations of consumers. We’re trying to develop a front-end solution that could possibly be a killer app that we could white label and sell as one BaaS functionality — so that would be an online or mobile app for a bank account. We’re moving from the back end to the front end. Would it compete with some of the digital-first or Neo-banks in the market? We have yet to decide if we’re going to bring it to market or not. As it stands now, probably not. We’re not in the consumer game, we don’t think we could win that battle. You have big banks and big brands like Amazon, Facebook, Google, Nike, Starbucks that own the consumer. And they all want to offer everything to the customer. Everyone has aspirations to provide an end-to-end solution including a bank account, or financial services component, or payment processing component. You could start like a PayPal and move to other channels or start like an Amazon and move to the financial component, it goes both ways. This could be a compelling solution to offer to a company like Amazon that could potentially spare it from having to file for a banking license.