Surety Bank faces the same geographic limits to growth that other small community banks do. The $137 million bank operates four branches in Daytona Beach, Pierson, Lake Mary and DeLand, Florida, its headquarters. These are, at most, no more than 45 miles from one another.
But CEO Ryan James believes the bank can fuel deposit growth nationwide through the launch of a digital brand, booyah!, which targets college students and young graduates with fee-free deposit accounts. The bank’s relationship with its core is enabling him to make this bet.
Surety converted from a legacy core provider to the Nymbus SmartCore in 2018. It launched booyah! a year later using Nymbus SmartLaunch, a bank-in-a-box product designed to help banks quickly and inexpensively stand up a digital branch under an existing charter.
Nymbus SmartLaunch received the award for the Best Solution for Customer Experience at Bank Director’s 2020 Best of FinXTech Awards in May. Backbase, a digital banking provider, and Pinkaloo, a white-labeled charitable giving platform, were also finalists in the category. (Read more about how Pinkaloo worked with a Massachusetts community bank here.)
Bigger banks have reported mixed results from their efforts to establish digital brands. Wyomissing, Pennsylvania-based Customers Bancorp was one of the first to do so when it established its BankMobile division in 2015, targeting millennials. The $12 billion bank partnered with T-Mobile US three years later to offer accounts to the cell phone carrier’s 86 million customers. Meanwhile, JPMorgan Chase & Co. closed its digital bank, Finn, last year.
Growth costs money. Opening a freestanding branch can cost anywhere from $500,000 to $4.5 million, according to a 2019 Bancography survey. And unlike bigger banks, small institutions face significant obstacles in opening a separate digital brand to differentiate themselves nationwide — they don’t have capital to spend on experiments.
But if a small bank can establish a new digital brand at a reasonable cost, the experiment becomes more feasible.
“Why can’t you start a digital bank cheap?” says James. Surety’s legacy customers and booyah!’s new customers share the same user experience — SmartLaunch offers online applications for deposit and loan accounts, along with remote deposit capture, payment options, bill pay and debit card management. Bank customers can also set custom alerts and take advantage of personal financial management tools. Creating booyah! was really just a matter of adding a new logo and color scheme.
“It’s the same thing [we] already have,” he says. “Why does it have to be hundreds of millions of dollars in investments?”
That was the story from his old core provider, he says. But Nymbus didn’t leverage hefty fees to make booyah! a reality. What’s more, Surety isn’t locked into its experiment.
“What I love about them is you test, you pivot, and you do what makes sense” for your bank, James says. “You don’t have to give away years of your profits to try something new.”
Whether or not booyah! is a success, Nymbus provides Surety with the flexibility to quickly and easily spin up other brands that focus on specific customer segments, or shutter anything that doesn’t work, like Chase did with Finn.
If its digital brand works, Surety has a lot to gain. With the industry squeezed for profits in a prolonged low-rate environment, cheaply expanding its footprint to draw more deposits could help the bank maintain its high level of profitability in an increasingly challenging environment. The bank maintains a high return on equity (15.11% as of Dec. 31, 2019), return on assets (1.68%) and net interest margin (4.05%), according to the Federal Deposit Insurance Corp.
In a world populated with countless First National Banks, Farmers Banks and the like, booyah! certainly doesn’t sound like a typical bank. So, why booyah? Curious, I asked James. “Why not?” he replies.
The name, frankly, isn’t the point.
Ultimately, Chase didn’t need Finn; it was already a nationwide bank with an established, well-recognized brand and millions of customers using its mobile app. But for Surety Bank, booyah! represents the potential to gain deposits outside its Florida footprint — without putting the bank’s bottom line at risk.