In her last role at Leumi Card, Lilach Bar David had a conversation with her boss about leaving. It was time to go out and start a fintech startup, she told her. But her boss, the chairman of Leumi Card at the time, had a different suggestion. Why not stay at Leumi, one of Israel's largest financial institutions, and build a startup within the bank?
Lilach did stay and a year and a half ago helped found Pepper, a standalone digital bank that both enjoys support from Leumi but also some independence. The company, which sits in a different office building than its corporate parent, began with just eight employees and after launching into production last week now has over 150 full-timers.
Pepper was started from scratch, by imagining what type of bank was worth building from the ground up if it was freed from a legacy technology stack and bank politics. The company began with a simple premise: "We wanted to challenge the status quo of banking," said Bar David at the Bank Innovation Israel conference last week. "When you start looking at evolving industries, companies either innovate themselves or others do it to them."
Pepper's early team began designing the app by extensively interviewing customers, but quickly found that customers don't really know what they want. However, they do know what their banking pain points are. "They don't want to go to the branch or use call centers," said Bar David, who rose through Leumi's ranks in both technology and finance roles. "They want an experience every bit as good as Google and Facebook and they want a better, more beautiful, better designed, fun banking experience."
In terms of technology, Bar David decided early on that Pepper needed to free itself from its parent's banking infrastructure and start from scratch. The company brought in Temenos and began building its own R&D capabilities. "How do you decide what to build?" asked Bar David. "To get people to switch, we knew we needed a competitive offering. So we started with the full suite of banking capabilities, including current accounts, payments, and investments, and will develop them in stages." Pepper has a two to three year product roadmap.
One feature the executive was adamant about was personal loans. The digital bank plans to give away a lot of services for free, relying on lending to pay the bills. Bar David explains that personal loan origination is core to Pepper and occurs right at the point of account opening. "It was really important for us to start and finish the signup process in one session and that it's visible," she said.
Pepper users download the app from an app store and take a picture of their ID to get things going. Israeli law requires a bank employee to meet with new clients and that's done via a video conference from within the app. Consumer credit is scored and users are informed of their credit limit and personal loan options within eight minutes.
Pepper is currently in live production and Bar David plans on making it available to consumers in the next few months. Of course, getting the word out and getting millennial clients excited about the app is the next big step. "Our goal is to get people on the street wearing Pepper t-shirts," said Bar David. "We want to see people having fun and connecting with the brand. If they do, we've succeeded."