Mercury, a business banking startup founded in 2020, is currently launching consumer banking products. Through his B2B practice, Mercury currently serves over 100,000 businesses, many of which are start-ups.
Immad Akhund, co-founder and CEO of Mercury, said the expansion is a natural move for the company and has been in the works for several years.
“We already have hundreds of thousands of users of our business banking products, and many have expressed a desire for our personal banking products,” he told TechCrunch in an interview.
There are a lot of neobanks, but many of them are “focused on the underbank,” Ackundo said, adding that it's a great market for power users who need features like wire transfers and multi-user support that Mercury's service offers. Other features are the type that banking power users expect, including multiple debit cards with custom spending limits and access to up to $5 million in FDIC insurance through partner banks and their Sweep network. , interest-bearing savings accounts, etc.
Basically, Mercury wants to convert many of its business customers into customers. We're not chasing the masses like Chime or Dave.
The expansion into personal banking comes at an interesting time for Mercury, which recently came under federal scrutiny over its practice of allowing foreign companies to open accounts through one of its partners, Choice Bank. It became a hot topic because of it.
According to a report in The Information, the FDIC was “concerned” that Choice “opened a Mercury account in a legally unsafe country.” Officials also reportedly accused Choice of forcing overseas Mercury customers to “open thousands of accounts using questionable methods to prove their presence in the United States.”
That's not all. The FDIC was also not satisfied that Choice “did not scrutinize the compliance systems used by Mercury, even though the agency had warned that the number of suspicious transactions was mysteriously low.”
Adding fuel to the fire, Mercury announced earlier this year that users of debit cards issued by Evolve Bank & Trust will be given legal domiciles in 41 countries, including Turkey, Ukraine, Cuba and Iran. reportedly told them that the card would no longer be valid. (Evolve is also a partner of Mercury's.) The company declined to comment when TechCrunch asked about these allegations.
Asked about The Information's report, a Mercury spokesperson emphasized that the company is investing in its risk and compliance teams. The person also said the entire fintech partner banking market is subject to increased regulatory scrutiny.
Alexei Likuev, who led the way in building Mercury's consumer products, acknowledged that there are “definitely stricter regulations when it comes to consumer protection” and that the company is relying on those regulations when building its consumer products. He said that he is paying attention to the following.
crossover
But success in B2B banking doesn't automatically mean Mercury is queued up to handle consumer banking. Gartner analyst Agustin Roubini noted that each has different regulatory and compliance issues. For example, risk management in personal banking is about assessing an individual's financial stability, which is “less predictable than in a business,” he said.
Beyond that, he warns, complying with strict regulatory requirements could be “difficult” for startups. “Partnering with a bank increases complexity because there are additional layers of regulation that apply to banking services,” he said. “This includes everything from anti-money laundering (AML) protocols to meeting capital requirements.”
Roubini says partnering with a bank can help startups by providing an initial platform and compliance framework, but then expanding to a larger customer base opens up another nest of worms. He added that there is a possibility. Startups need “significant capital and strategic planning” to stay competitive and navigate it without running afoul of regulators.
Cesare Fracassi, an associate professor of finance at the University of Texas at Austin, also told TechCrunch that business banking and consumer banking are “two different beasts, two different types of services.” However, he is a bit more bullish on fintech companies trying to dabble in both, as he does see “obvious synergies that come with owning both a business and a personal” in the banking industry. is.
That is one of the main reasons why Mercury is expanding in this direction. Akhand said much of the software that powers the company's B2B products could be used in consumer products.
Furthermore, it is not only fintech that thinks this way. Onyx Private, which offers a similar service, recently made the opposite move and pivoted from B2C to B2B.
In addition to making money from exchange fees and interest rate spreads, Mercury makes money by charging users an annual subscription fee of $240 for their first deposit and then annually thereafter. Last year, the company touted a major turnaround in business after the SVB crisis, and a recent report from Kruze Consulting showed that 40% of startups founded after the SVB crisis have accounts on Mercury.
The company said it has had seven consecutive quarters of positive cash flow and EBITDA as of March 2024. Although he did not disclose specific revenue numbers, he said new revenue increased by 180% last year, the customer base increased by 60%, and transaction volume as of January 2024 increased by 90% to 95 billion yen. It became a dollar.
As it grows, the startup is hiring. Mercury currently has 620 employees, but in early 2023 he had 440 employees.
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