Current built its own banking tech. It’s a secret weapon in a crowded field.

For Trevor Marshall, the CTO of challenger bank Current, there was a prelude before he entered his tech career.

He attended the Juilliard Pre-College program and wanted to become a professional musician when he attended Columbia. But a freshman economics class opened his eyes to math and computer science, which he went on to get degrees in. "It was computer science that came out of my love of music," Marshall said. "Just like writing music, computer science scratched the same itch for me."

Now at Current, he's taken an unorthodox approach when it comes to building the company's underlying technology: The startup built its own core banking infrastructure, whereas most other digital banks have outsourced this technology to other vendors.

This enables Current to do things like account opening, debit card processing, real-time transaction decisioning and direct integration for rewards, cash deposits, ACH transfers and mobile check deposit by itself. It's a key part of the company's business differentiation — and also shows how different perspectives in technology can come from many unexpected places.

"He was a musician going to Juilliard and then went into CS and maths at Columbia," said Current founder and CEO Stuart Sopp, who originally met Marshall in 2011 and hired him as an intern in 2012 on the foreign exchange desk at Morgan Stanley. "I think it gives him an edge on how he looks [at] and solves problems from a fundamentally different point of view to most."

Marshall, who joined Morgan Stanley full-time after his internship, sees it similarly. "When writing code and I'm in a flow state, I'm able to actually construct outputs: It's immensely gratifying," he said. "I'm primarily motivated by that creativity and build state."

He still writes music. But his interest in math, economics, computer science and technology are what grabbed Sopp's attention when Marshall shared the original bitcoin whitepaper with him.

"I was trying to work out why he was so excited over so much math," Sopp recalls.

From crypto to core banking

Sopp found out soon enough. After working together off and on for three years at Morgan Stanley, the pair worked together on several startup ideas, joining Uber co-founder Garrett Camp's startup studio Expa. They tested several ideas: one in which employees could pay other employees through Slack; another focused on an API "scaffolding" for digital currency Ripple. They eventually decided crypto was too early for consumer uses, but that scaffolding concept became the basis of the core banking engine at Current.

"We kept many of the same principles with respect to multi-user account access and event-sourced accounting of balances," Marshall said.

Founded in 2015, Current started off focusing on custodial accounts for teenagers, which it launched in 2017. The company now targets people who live paycheck to paycheck, a market of 130 million people in the U.S. Having launched personal checking accounts in February 2019, Current now has more than 2 million users. Many of its members are young — their average age is 27 — have lower credit scores, live in cities like Atlanta, Houston or Chicago and haven't had a bank account before.

Digital banks are a crowded field, where features such as no fees or minimum balance requirements have become standard. Current's competitors include the larger Chime, which recently raised capital at a $14.5 billion valuation, as well as smaller bank startups that are looking to target specific interest or demographic groups with niche offerings.

"[T]hey had identified a very large problem that needed to be solved and that no one else was addressing: specifically that over a third of people in this country were not being properly served by traditional banks," said Frank Rotman, founding partner at Current investor QED Investors.

That crypto scaffolding has turned into a new type of bank account structure. Whereas most banks have separate systems for checking, credit cards, loans and other products, Marshall designed "graphs" on which "wallets" were built. Those wallets became digital ledgers to track transactions — akin to the idea of a private blockchain -- and allow flexibility to build a range of features. (That is all private for Current customers, but someday parts of it could be opened up to create new products, Marshall said.) This system, built on MongoDB, is fully compliant with regulators, Marshall said.

"A lot of what makes our engine unique is we have a unique account structure," Marshall said. "That translates into a fully compliant way that can be regulated by FDIC. That ledger enabled us to create pretty unique experiences."

This ledger is a private database which is a "single source of truth for transactions for our customer and our partners," he said. This is different from other challenger banks, which have to plug into card processors or banks to get this data. When Current has partnerships it's easy for it to provide direct APIs to parts of its core, resulting in quick integration.

Current can also quickly do things like make authorization checks or security checks to decline fraudulent activity. It can also check a merchant's physical location, to show it to users or for fraud checks — which credit cards don't typically provide.

Build it yourself

Unlike other challenger banks, Marshall and Sopp decided to build all of Current's back-end banking infrastructure, known as core banking, in-house.

"As we dug deeper, there were two paths to take a challenger bank," Marshall said. "The two key areas a challenger bank can focus on is building a bank versus building technology. We are focused exclusively on building technology that enables us to work with many strong partners on the banking side."

"We saw a very large problem, namely fair access to financial services, which no one was solving and could be solved through innovation in financial technology," Sopp added.

Plugging into other companies' banking software would probably have been faster and cheaper in the short term, but Current's approach offered longer-term advantages. "[T]hey were taking a unique approach in the industry by building their own banking technology that dramatically lowered costs and to this day still gives them the ability to build products no one else can," Rotman said. "The unit economics also made sense with a sustainable business model including multiple revenue streams, which was also unusual for a fintech."

Because Current owns its ledger, it can now perform a variety of transactions itself such as debit, ACH, direct deposit, peer-to-peer payments, mobile check deposits, cash deposits, points rewards and points redemptions. And a customer can have balances across multiple underlying issuing banks, since different banks can handle different features and have different economics.

But perhaps only now, as the number of challenger banks multiplies, is one of the other major benefits of building its own technology truly coming into view. The problem for challenger banks with using a vendor for its core banking is that your product will be the same as all the other banks, Marshall said.

"The real danger is you put all your development push to a processor, then your feature set is uniform," Marshall said.

One ledger, two products

Two products show the benefits of Current's own backend technology: its points product for debit cards, and cash deposits.

Because Current has its own banking ledger of record, Current was able to build its own in-house debit card points product, with ledgered balances redeemable for cash, which is something many others outsource to third-party providers. This also allows Current to show merchants direct connections between points offers on the Current app and purchases with merchants — it shows "intent," the physical presence of the user and the actual transaction.

Current has seen the difference these offers can make. For example, one fast-food chain saw a significant lift in purchases in one city with an offer, compared to an adjacent city's stores without it. Current also provides this data to merchants in real time, whereas it can usually take 30 days or more for other providers.

With its cash deposit product, customers who deposit cash have it available faster than with competitors, and Current can also charge less for this service since it owns the technology and there's fewer providers involved in the transaction, Marshall said.

Current users can deposit cash at 60,000 locations, such as CVS and 7-Eleven stores, where the cashier takes the money and scans a barcode on the app. Current directly connects its APIs with its cash-deposit partner InComm, which means the cash shows up immediately for customers. "This is only possible with the check-and-assign semantics of operating the ledger yourself," he said.

For competitors without their own core banking, high traffic times can cause a backlog on networks, so it can take 10 to 15 minutes for a customer to get confirmation of the cash being deposited. "With our direct relationship, that's there immediately available, which provides a lot more comfort," Marshall said.

Ultimately, the decision to build its own infrastructure has given the company a leg up in a hyper-competitive market, where banking-as-a-service software has made it relatively easy for a variety of banking startups to launch. Current says it has more products coming that will take advantage of this technology.

"The early inclination was, we were building a tech company, so we should be controlling our means of production," Marshall said. "Current is a tech company. Processing is the fundamental tech of our business."

Update: A previous version of this article oversimplified the impact on product differentiation of using a single payment processor. Updated Feb. 16.