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One challenger’s goal: Banking that digs deeper into small-business operations

Despite a recent crop of challenger banks being formed to cater to small businesses, a new entrant named Rho argues there are still gaps in these emerging offerings that it intends to fill.

Rho, which launched in October, announced Tuesday it was offering a corporate card and tool to help a company's finance manager view a snapshot of a business' performance when it comes to cash flow in real time.

“What we’ve announced [for these products] is really our second step into what is our firm belief is an end platform for banking, which is rooted in this concept of a team banking, our code for the financial platform to build businesses on top of,” says Alex Wheldon, a co-founder of Rho.

Rho, which is based in New York, is part of a bevy of new challenger banks, including Mercury, NorthOne and Brex, that have all built up mobile offerings for small-business customers during the past year.

Wheldon, and Rho’s other co-founder, Everett Cook, its CEO, spoke with American Banker about the startup’s positioning within a fast-growing space. Among the challenges, they noted, is regulator attitudes toward startups in general.

The following conversation has been edited for length and clarity.

Fintechs in general are facing increased governmental scrutiny as of late. Is that fair considering startups like Rho are attempting to fill in service gaps left by traditional banks?

EVERETT COOK: Everyone’s trying to make the market safe, right? That’s first and foremost. It’s hard to say what a regulator should or should not do. If you contrast the U.K. and the U.S., there’s definitely very different regulatory attitudes, and in some ways, the U.K. has moved faster because the U.S. market is much larger and a complex place. I think the regulators here are moving at a safe pace. We look to them for guidance and are following what they say.

ALEX WHELDON: When you go to Europe, sure it’s historic, but they’ve had digital payments there for 15 to 20 years. It’s just a very different type of market in the U.S. People’s wants and needs are different and regulators are going to do whatever they can to make it as safe as they can. As far as whether that’s unfair to fintechs, I don’t think there’s an easy answer there.

A number of challengers and neobanks are trying to move away from those labels. What do make of that trend?

WHELDON: We talk about this all the time, and it’s not a strange question. It’s not our job to label ourselves. Our job is to make sure our customers understand that they’re getting a full slate of banking. Trying to say whether we’re a challenger bank or technology company, it really depends on what angle you’re coming from.


I think it’s important to ask, do the normal conventions of describing us or others fit into what we’re providing? Should we be classified as a bank? That’s kind of up to someone else. We’re providing a service. Some people will just think of us as a technology company. I’m sure there are lot of people with different opinions on what we and others provide.

What is Rho doing that makes it different from other challengers in this area?

WHELDON: People will ask us if we’re like Brex. We do get a lot of comparisons to Mercury too. Mercury is very much trying to build a surface-level bank that can capture some limited automation and make it a little bit easier to hold funds. We're talking about building an operational system to run your business off of at its core layer. Our value proposition is you will run more efficiently and save more money by adopting us as your bank.

That’s achieved in a few ways. One is cost savings on the product level. We're dealing with commodities on our side. So, we’re looking for the best rates and we work with partners to derive the best rates. We offer free payments and that helps to lower costs. Another part is the workflow and integration and that saves actual hours that people spend on managing and integrating data.

Lastly, we enable teams to make better decisions faster and easier, which depending on the business, is the real value. An example of that is streamlining the process of approving travel and expenses for someone to go to a conference.

How are the products you’re introducing different than from what other small-business banking challengers are offering?

WHELDON: The important thing to understand is our perspective on banking in general. There's this real fight to be the product for "X." But business banking is completely different from consumer banking, which is providing this sort of surface-level banking that is not really a good option for business banking.

Business banking is a lot more detailed and the needs are generally a lot more complicated than consumer banking. When we talk about banking, we mean providing services, from payments, treasury custody, data security, data level, analytics, that sort of thing.

When we first launched that was just the announced availability of Rho. What we’ve announced now is really our second step into an end platform for banking, which is rooted in this concept of team banking, our code for the financial platform to build businesses on top of. It's not just the account-taking custody of funds. It’s to help manage and run businesses.

Several business banking challengers though have talked about the need to develop a great digital experience that’s similar to consumer banking. How do you arrive at that point?

WHELDON: It takes a lot of research, feedback and common sense. The first thing is you have to remember is, who is your client?

Everyone wants a beautiful interface and we're no different. And we frankly invest heavily in that area. I've run consumer companies. One of the main things that we can bring to the table is great design and great user experience. But our view is to try and reduce the amount of time you're spending with a bank. That is the objective.

We’re not trying to drive engagement. We’re trying to drive operational efficiency. That's a completely different goal and design is oriented that way. Within the TeamAccounts feature we're launching, you’ll see first-glance analytics. Everything is based around like trying to understand what's happening at any given time. You're not necessarily always trying to take a deep dive with chart. You’re trying to understand what happened, and when did it happen.

As far as what products come next, is that based on a road map, what customers want, or a combination of both?

COOK: It’s a combination. We try to listen to our customers as much as possible. That’s one of the nice things about being focused on businesses versus consumers is that you can sit down and have real one-on-one conversations with the customers and really understand their needs on like a nuanced basis.

We also have real people that support our clients. We’re not just a digital bank where you sign up and you’re forgotten about. You get an assigned person. We have the ability to get lots of feedback that way, and our customers appreciate that.

What about lending?

COOK: We’re not lending at this time. In our view, we wanted to drive operational efficiencies first for the businesses. That’s something that I think is important to us, and we know it's important to our customers. We wanted to focus on where we can make the most impact first and then go from there.

What more can be done in this area by challengers to better compete against traditional banks?

COOK: There’s actually a lot out there. It’s easy to come up with technical solutions, but it’s really hard to build them. We see a lot of problems and issues out there, and we continue to do our best to push the pace forward in terms of innovation.

Look at finance departments both at banks and at our clients: They’re still very much paper-based. Everything is on paper, whether you’re waiting for an approval on something, or waiting for documentation. That area needs improving, and I’m sure we’ll work to improve that over the next several years.

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