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In this episode, I head to Fintech Nexus New York for a live conversation with Luvleen Sidhu, CEO & Founder of BM Technologies (NYSE American: BMTX) a US Banking-as-a-Service platform that serves over two million account holders and hundreds of colleges and universities.
In this episode, we discuss:
Pivoting BM Technologies from B2C to a B2B2C model
“One of our pillars is that we need to have a net income and growth model that is at least equal to, if not better, than a traditional bank. And we were not hitting that. And so it was really a moment of introspection about how do we continue to keep going, how do we survive? What pivot is needed to survive?”
BMTX was initially launched with a direct-to-consumer strategy, but they quickly found that customer acquisition costs were too high, and a lot of their accounts were experimental and fraudulent. This led company leadership to reanalyze their model and ultimately pivot the business to a business-to-business-to-consumer (B2B2C) model. By partnering with institutions and companies that already have an entrenched customer base, they could lower acquisition costs while maintaining their original mission of providing an affordable, transparent, consumer-friendly banking experience.
Building a Banking as a Service company and navigating a highly regulated environment
BMTX was born out of a bank, which means compliance is embedded in their DNA. The company doesn't rely solely on banks to run their Banking as a Service programs; instead, they act as program managers. As the regulator scrutinize the oversight provided by banks to their FinTech partners, BMTX’s in-house compliance and risk teams play crucial roles in managing all aspects of these partnerships and managing the whole regulatory process from beginning to end.
Pros and cons of going public through a SPAC in 2021 as a profitable company
“It's a wonderful process to go through as a public company, there's definitely perks. There's liquidity and access to capital. There's the ability to be able to attract and retain talent, because you actually have liquid equity to give them. And you just are more on the radar.”
According to Luvleen, going public offers several advantages, including liquidity, easier access to capital, enhanced ability to attract and retain talent with liquid equity, and increased visibility. It also imposes a level of discipline because of the heightened scrutiny and quarterly pressure to grow and develop rapidly. That said, there are also downsides – specifically, Luvleen argues that the pressure to meet quarterly expectations at the expense of long-term investments, can lead to poor trade-offs. She advises other businesses to think hard about whether access to capital, liquidity and increased visibility would genuinely benefit their business growth. If not, staying private could be an easier option.
Putting yourself in the client’s shoes, Leadership lessons… and a lot more!
“You always have to put yourself in the client's shoes and always be thinking about what are their pain points? And are you delivering and trying to solve for those pain points? How is what you're delivering beneficial to their core business?”
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Miguel Armaza is Co-Founder & Managing General Partner of Gilgamesh Ventures, a seed-stage investment fund focused on fintech in the Americas. He also hosts and writes the Fintech Leaders podcast and newsletter.
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