A Friendly Way to Circumvent Your Core

Bankers, as a general rule, don’t like to read about financial technology companies. As a writer and editor at a banking publication, I have data to prove this.

This makes sense. Most financial technology companies are only a few years old, yet they criticize banks for failing to innovative and cater to new generations of customers – never mind that some of the biggest banks today were founded more than 200 years ago, when people rode horses and used whale oil to light their lanterns.

But for bankers that get past that aversion, there are some interesting companies doing interesting things in the fintech space.

A perfect example is MANTL, a fintech founded in 2015. MANTL offers banks a friendly way to circumvent their cores, and its digital account-opening solution is 2.5 to 3.8 times as effective at getting prospective customers through the account-opening process, relative to legacy solutions.

It’s for these reasons that MANTL won Best Solution for Revenue Growth at the 2019 Best of FinXTech Awards. Winners were selected from the most innovative solutions found in the FinXTech Connect platform; the other semifinalists were BlueRush, a provider of digital marketing solutions to financial institutions, and Derivative Path, which provides a capital markets platform to regional and community banks.

MANTL was founded by three friends, who had previously started and sold startups in the food and telecom industries, as well as one who worked as a software engineer for a company that traded corporate bonds over the blockchain.

Their original idea was to build a neobank – a mobile banking app that rents the charter of an existing bank – which were in vogue at the time.

The economics of neobanks aren’t very good, says Raj Patel, chief financial officer of MANTL. They experience high customer churn, with as many as 60% of accounts turning over every year. Also, they don’t have a lot of ways to generate revenue: they aren’t balance sheet lenders that earn interest income, and their business model is predicated on minimizing fees, which limits their noninterest income.

So MANTL pivoted. Instead of competing against banks as a neobank, it licensed its software to regional and community banks.

The inspiration struck in a meeting with Mike Butler, the president and CEO of $1.3 billion Radius Bank in Boston. “Mike was like, ‘We’re happy to help you become a bank, but we would also like to license your technology so that we can use it ourselves,’” Patel says.

“That’s when we decided to pivot the business into enterprise software,” says MANTL’s CEO Nathaniel Harley. “Our thesis was, ‘Okay, let’s not compete with banks, let’s help them. Let’s improve their user experience, let’s help them operate more like a fintech company so that we can essentially level the playing field [between them and the big banks].’”

There’s an important nuance to MANTL that explains its appeal to a growing roster of clients. Its front-end digital account-opening application is built on what MANTL calls its secret sauce: a core-wrapper API, or application programming interface.

One of the biggest challenges a bank faces is that it doesn’t exclusively control the speed at which it innovates; its core provider does. The core providers control the data. They control the systems. And because the core providers are entrenched in a veritable oligopoly, some bankers sense a lack of short-term economic incentive to innovate aggressively, leaving their regional and community bank customers vulnerable to more nimble and better-funded competitors.

“We started talking to a number of different banks and they feel hampered by their core provider,” Harley says. “They were like, ‘We want to do all these things, but we can’t really do them. There are all these fintech companies popping up, we don’t really know how to compete because our core provider doesn’t have the functionality. They move really slow and it’s really expensive.’”

MANTL’s core-wrapper API addresses this by enabling banks to enhance their core by adding third-party digital products on top of it.

At Draper, Utah-based Comenity Capital Bank, which has $9.7 billion in assets, the results speak for themselves, says Glen Jones, senior director of retail banking operations. In Jones’ experience, it’s typical for 60% to 70% of retail customers who begin an online account application at a financial institution to abandon the process before completing it. “With Mantle, without getting into specific numbers, I’d say you can reverse that equation, and you’d be probably pretty close to how it looks for us,” Jones says.

MANTL’s next steps are expanding its offerings to include commercial account openings as well as digital lending solutions.

“I think the future of banking, especially community and regional banking, is moving towards a place around financial product innovation, targeting different segments of the population, creating niche products that serve specific people,” Harley says. “That allows banks to be way more competitive than this cookie-cutter approach the money center banks take. But the problem is they need the technology to be able to do that. And a lot of the technology, as I understand it today, isn’t set up to allow them to do that.”


John Maxfield


John Maxfield is a freelance writer for Bank Director magazine. He was previously the senior banking specialist at The Motley Fool. He regularly writes for Bank Director magazine and His work has been syndicated widely to national publications including USA Today, Time and Business Insider, and he’s been a regular guest on CNBC. John has a bachelor’s degree in economics from Lewis & Clark College and a juris doctorate from Southern Methodist University. He’s a licensed attorney in the State of Oregon.