In the increasingly crowded field of challenger banks, Branch is placing its bet on where people work.
The five-year-old fintech offers a suite of services that employers can offer to their wage-earning employees as a way to improve their financial situation: early-pay access, free checking, a bill tracker, and a tool for working extra shifts, among other things.
“We want to be the financial wellness solution for people who are in that low- to moderate-income range," said Brian Whalen, the company’s CFO.
Whalen joined Branch last month after co-founding and running the financial operation of Baltimore-based purchase-card company, Blispay. His hiring signals a new phase for Branch as it seeks to build on a relationship it entered into last year with Evolve Bank and Trust. Branch offers Federal Deposit Insurance Corp. (FDIC)-insured checking accounts through its partnership with the Memphis-based bank.
Plans for growth
Whalen says he has three goals at Branch: Setting up controls to insure the company’s financial function operates with transparency and independence, instituting an analytical framework and business process for guiding its investment strategy, and developing a system for managing its equity and debt providers as it scales its business.
"We’re at the stage where [we need to] get the controls in place to make sure we’re completely above board and make sure we have that independent financial function," he said. "We move money, so it has to be perfect.
"That’s one of the fist things we’re going to build out: that accounting and settlement function," he said. "We have to be down to the penny every day. The money has to be moving, on time, and without issue. Money can be moving into us from our debt providers as well as out in the form of debit transactions."
Branch is seeking to build its customer base across the United States, and so far it has relationships with McDonalds, Planet Fitness and other franchisees with a sizable wage-earning workforce.
"The key to our success is having these national employers," he said. "So, it’s a pretty unique differentiator in this marketplace."
Although the company’s early-pay access service generates much of the media’s attention — under its version of the service, employees can access all or a portion of their pay up to two days early — it’s the way the company combines a number of services into a single financial wellness tool Whalen believes is the main value-add Branch offers employees.
"We give them budgeting tools," he said. "We give them a debit card so that they can instantly spend their paycheck on whatever they may need: their power bill, their insurance bill, their car bill. They get the paycheck up to two days earlier. It’s basically, 'How do we get money into the employees' hands faster so they can be a little bit more financially stable?' And if they’re short on cash and there are a couple of extra shifts open, we give them the tool so they can raise their hand and fill in those shifts."
For the employer, the benefit is in having this financial wellness package to offer employees as a benefit. "As you can imagine, a financially stable employee is a better employee,” he said. "Higher retention, lower absenteeism."
The service is free for both the employer and the employee; the company makes its money on the interchange fee generated by the debit card purchases.
"As long as they’re spending [their wages] on that debit card, it’s perfectly free," he said. "We make our money off the slice that the merchant pays on card transactions. So … we avoid any of those subscription fees, any of those ATM fees, any of that kind of stuff."
Since the employer doesn’t pay a monthly subscription fee to offer the service to its employees, Branch isn’t accurately described as a software-as-a-service (SaaS) model, Whalen said, but rather a traditional fintech. Even so, he expects to track the company’s performance going forward much as he would if it were a SaaS model.
"The most important thing for us is to make sure we’re analyzing the full funnel," He said. "How did sales do last month in signing up employers? How will that cascade into new employees? How will those new employees then cascade into deposits? And so, it’s managing that entire metrics flow and rebuilding the financial model to reflect that.
"It’s a business-to-business-to-consumer model," he said. "We think all three parties — ourselves, the employers and the employees — can benefit from it."