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Protocol | Fintech

‘The game really hasn't been played yet’: Why One thinks it can reinvent banking in a crowded market

One CEO Brian Hamilton thinks managing the new fintech's banking core is an advantage over Chime and Varo — but can he handle the risk of lending in a pandemic?

One neobank

One wants to "reinvent banking for the middle class."

Image: One and Protocol

Brian Hamilton's been here before. A former SVP at Capital One, he later worked at BBVA where he launched Azlo, a freelancer-focused neobank. But while he says that project was a success, he concedes it "had some limitations," with BBVA's ownership limiting its creativity and growth.

So why now, in 2020, when the world itself seems to limit creativity and growth as well as piling on risk, is he back with another fintech in the shape of One, launching today?

Hamilton's vision is far from modest: He wants to "reinvent banking for the middle class," he told Protocol. If you think that sounds like a big gamble right now, then you wouldn't be entirely wrong.

Hamilton's new startup is yet another neobank launching into a crowded market. Chime, which recently boosted its valuation to $14.5 billion, is the U.S. market leader, while earlier this year Varo Money became the first consumer fintech to be granted a national charter. Meanwhile, a host of European innovators are trying to enter the U.S. Starting from scratch in this environment seems tricky, to say the least.

But Hamilton thinks One has found a gap in the market. "There's become such a fragmentation" in digital finance, he said. A traditional bank offers credit cards, mortgages, savings products and shared accounts, to name just a few. "If I go to one of the neobanks today, it'll do one of those things for me, maybe two," Hamilton said. "I've got to go over here to Acorns ... in order to get some kind of meaningful savings back, and then maybe I'm going to go over to ... Greenlight in order to get my child access account." This fragmentation, Hamilton thinks, is ripe for a rebundling. "Why wouldn't I get all of those from one place?" he asked. Specifically, why not from One?

One, which is partnered with Coastal Community Bank, has the ultimate aim of being a comprehensive banking service in the vein of Wells Fargo or Chase, but with a better customer experience. To start with, it's offering a typical checking account, high-yield savings on your paycheck, a credit line that grows with your salary and a secret weapon that it calls "Pockets." Those are sort of like sub-accounts, which you can create for a specific financial goal or purpose — and which can be shared.

"You can spin up a Pocket, and I can share it with you, and you can point your One card at it and we can share expenses for whatever you and I put into that Pocket on an ongoing basis," Hamilton said. He gave examples such as two roommates using it to handle bills, or people using it to support their elderly parents' expenses. The feature has the side-effect of being a growth hack, by bringing new customers into the One platform. "The [Pocket] product is inherently viral," Hamilton said.

Credit is another area where One thinks it can innovate. "None of [the other neobanks] do meaningful credit," Hamilton said. While Chime and Varo offer small overdrafts, it's hard to find much more than that. Hamilton wants to change that: Every One account comes with an unsecured line of credit, which can be accessed like an overdraft. If you set up a direct deposit for your paycheck, that credit line will grow based on your income, and you'll be allowed to use the credit line like a credit card: "You can just swipe and have it sit on that line while you still maintain a cash balance," Hamilton explained.

This seems like an obvious thing to offer — yet no one else has. The key, Hamilton thinks, is the way in which One was built. "We decided to start from scratch, and build the stack from scratch, with a core that actually allows us to configure and run loan products, and deposit products, and savings payment products," he said. One is "built closer down to the rails," allowing it to "configure the actual financial products behind the scenes." The core, offered by Finxact, is operated by One — letting the company go beyond putting a UX on top of a sponsor bank's offering.

"Because the technology, operations and compliance teams at One come from regulatory and bank tech backgrounds, we are able to responsibly and reliably do this, in partnership with our bank sponsor, at a level that satisfies regulators and enables independent ownership and operation of the infrastructure," Hamilton elaborated via email. Other neobanks might avoid doing this because "it can be quite complicated" compared to the plug-and-play infrastructure provided by API platforms, he said, to such an extent that many early-stage companies might forgo it altogether.

"We also have access to the bank balance sheet for the lending products," Hamilton said, giving One a "competitive cost of funds, let's call it, as opposed to building some third-party funding mechanism like most non-traditional lenders do." Hamilton said that allows One to offer much more competitive loans than even big banks, which have significant margins given the current rock-bottom interest rate environment. "That bank margin is our opportunity," he said, adopting a reported Jeff Bezos aphorism.

One's partnership with Coastal Community Bank, then, seems more like regulatory box-ticking than much else: Hamilton described One as "much closer to what a traditional bank, [in terms of] economics and tech stack and regulatory relationship, would look like, even though we are not a bank ourselves right now."

But One is adopting far more risk than the average neobank. Credit in particular right now, is "a bit of a falling knife, in some ways, that you're trying to catch," Hamilton said. "You really have to take some risk there." He said linking the credit line to the size of your income offers some "natural risk mitigation," but the company will still need to be very careful. Managing that risk is hard even for fintechs dedicated to credit products: doing it alongside everything else that comes with a bank might be even harder. And then there's all the competition, from well-funded and more established neobanks that have been doing parts of this for years.

Hamilton downplayed the competition. "It is a crowded market," he said, but "there's more space than people think. Because if you add up all of the accounts of all of the neobanks, you're still talking about low single digits [share] of the potential market." So he's optimistic that One still has a chance. "The game really hasn't been played yet," he said

Clarification: This story was updated on Sept. 22 to clarify that Varo Money was the first consumer fintech to be granted a national charter.

Power

Google wants to help you get a life

Digital car windows, curved AR glasses, automatic presentations and other patents from Big Tech.

A new patent from Google offers a few suggestions.

Image: USPTO

Another week has come to pass, meaning it's time again for Big Tech patents! You've hopefully been busy reading all the new Manual Series stories that have come out this week and are now looking forward to hearing what comes after what comes next. Google wants to get rid of your double-chin selfie videos and find things for you as you sit bored at home; Apple wants to bring translucent displays to car windows; and Microsoft is exploring how much you can stress out a virtual assistant.

And remember: The big tech companies file all kinds of crazy patents for things, and though most never amount to anything, some end up defining the future.

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Mike Murphy

Mike Murphy ( @mcwm) is the director of special projects at Protocol, focusing on the industries being rapidly upended by technology and the companies disrupting incumbents. Previously, Mike was the technology editor at Quartz, where he frequently wrote on robotics, artificial intelligence, and consumer electronics.

Sponsored Content

The future of computing at the edge: an interview with Intel’s Tom Lantzsch

An interview with Tom Lantzsch, SVP and GM, Internet of Things Group at Intel

An interview with Tom Lantzsch

Senior Vice President and General Manager of the Internet of Things Group (IoT) at Intel Corporation

Edge computing had been on the rise in the last 18 months – and accelerated amid the need for new applications to solve challenges created by the Covid-19 pandemic. Tom Lantzsch, Senior Vice President and General Manager of the Internet of Things Group (IoT) at Intel Corp., thinks there are more innovations to come – and wants technology leaders to think equally about data and the algorithms as critical differentiators.

In his role at Intel, Lantzsch leads the worldwide group of solutions architects across IoT market segments, including retail, banking, hospitality, education, industrial, transportation, smart cities and healthcare. And he's seen first-hand how artificial intelligence run at the edge can have a big impact on customers' success.

Protocol sat down with Lantzsch to talk about the challenges faced by companies seeking to move from the cloud to the edge; some of the surprising ways that Intel has found to help customers and the next big breakthrough in this space.

What are the biggest trends you are seeing with edge computing and IoT?

A few years ago, there was a notion that the edge was going to be a simplistic model, where we were going to have everything connected up into the cloud and all the compute was going to happen in the cloud. At Intel, we had a bit of a contrarian view. We thought much of the interesting compute was going to happen closer to where data was created. And we believed, at that time, that camera technology was going to be the driving force – that just the sheer amount of content that was created would be overwhelming to ship to the cloud – so we'd have to do compute at the edge. A few years later – that hypothesis is in action and we're seeing edge compute happen in a big way.

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Saul Hudson
Saul Hudson has a deep knowledge of creating brand voice identity, especially in understanding and targeting messages in cutting-edge technologies. He enjoys commissioning, editing, writing, and business development, in helping companies to build passionate audiences and accelerate their growth. Hudson has reported from more than 30 countries, from war zones to boardrooms to presidential palaces. He has led multinational, multi-lingual teams and managed operations for hundreds of journalists. Hudson is a Managing Partner at Angle42, a strategic communications consultancy.
People

Making the economy work for Black entrepreneurs

Funding for Black-owned startups needs to grow. That's just the start.

"There is no quick fix to close the racial wealth and opportunity gaps, but there are many ways companies can help," said Mastercard's Michael Froman.

Photo: DigitalVision/Getty Images

Michael Froman is the vice chairman and president of Strategic Growth for Mastercard.

When Tanya Van Court's daughter shared her 9th birthday wish list — a bike and an investment account — Tanya had a moment of inspiration. She wondered whether helping more kids get excited about saving for goals and learning simple financial principles could help them build a pathway to financial security. With a goal of reaching every kid in America, she founded Goalsetter, a savings and financial literacy app for kids. Last month, Tanya brought in backers including NBA stars Kevin Durant and Chris Paul, raising $3.9 million in seed funding.

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Michael Froman
Michael Froman serves as vice chairman and president, Strategic Growth for Mastercard. He and his team drive inclusive growth efforts and partner across public and private sectors to address major societal and economic issues. From 2013 to 2017, Mike served as the U.S. trade representative, President Barack Obama’s principal adviser and negotiator on international trade and investment issues. He is a distinguished fellow of the Council on Foreign Relations and a member of the board of directors of The Walt Disney Company.
Transforming 2021

Blockchain, QR codes and your phone: the race to build vaccine passports

Digital verification systems could give people the freedom to work and travel. Here's how they could actually happen.

One day, you might not need to carry that physical passport around, either.

Photo: CommonPass

There will come a time, hopefully in the near future, when you'll feel comfortable getting on a plane again. You might even stop at the lounge at the airport, head to the regional office when you land and maybe even see a concert that evening. This seemingly distant reality will depend upon vaccine rollouts continuing on schedule, an open-sourced digital verification system and, amazingly, the blockchain.

Several countries around the world have begun to prepare for what comes after vaccinations. Swaths of the population will be vaccinated before others, but that hasn't stopped industries decimated by the pandemic from pioneering ways to get some people back to work and play. One of the most promising efforts is the idea of a "vaccine passport," which would allow individuals to show proof that they've been vaccinated against COVID-19 in a way that could be verified by businesses to allow them to travel, work or relax in public without a great fear of spreading the virus.

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Mike Murphy

Mike Murphy ( @mcwm) is the director of special projects at Protocol, focusing on the industries being rapidly upended by technology and the companies disrupting incumbents. Previously, Mike was the technology editor at Quartz, where he frequently wrote on robotics, artificial intelligence, and consumer electronics.

Protocol | Fintech

These digital banks try to stand out by focusing on niche communities

Banks like Daylight and Purple are serving communities that have been overlooked by big banks.

Upstarts like Purple and Daylight are trying to meet the specific needs of their customers.

Photo: Stephen Phillips/Unsplash

When Billie Simmons and Rob Curtis started the LGBTQ-focused digital bank Daylight last year, they didn't seek to just "stick rainbows" on the product to market to the group. Instead, they decided to focus on building a product that met the specific needs of the population.

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Tomio Geron

Tomio Geron ( @tomiogeron) is a San Francisco-based reporter covering fintech. He was previously a reporter and editor at The Wall Street Journal, covering venture capital and startups. Before that, he worked as a staff writer at Forbes, covering social media and venture capital, and also edited the Midas List of top tech investors. He has also worked at newspapers covering crime, courts, health and other topics. He can be reached at tgeron@protocol.com or tgeron@protonmail.com.

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