Starting a merchant bank Mercuryfounded in 2017, is now launching a consumer banking product. Mercury today serves more than 100,000 businesses, many of which are startups, through its B2B practice.
The expansion is a natural move for the company and has been in the works for a few years, according to Immad Akhund, co-founder and CEO of Mercury.
“We already have a few hundred thousand users of our business banking product, and a lot of people have expressed a desire for a personal banking product,” he told TechCrunch in an interview.
Although there are many neobanks, many of them “focus on the underbanked.” It’s not a big market for power users” who need features like wire transfers or support for multiple users, features offered by the Mercury service, according to Akhund. Other features are the type expected by banking industry power users: multiple debit cards with personalized spending limits, access to up to $5 million in FDIC insurance through its partner banks and their swipe networks , and interest-bearing savings accounts.
Essentially, Mercury hopes to convert many of its corporate clients into customers. He doesn’t go after the masses like, say, Chime or Dave.
The expansion of personal banking comes at an interesting time for Mercury, which recently made headlines for being the target of federal scrutiny over its practice of allowing foreign companies to open accounts through through one of its partners, Choice Bank.
According to a report from The informationthe FDIC was “concerned” that Choice “opened Mercury accounts in legally risky countries.” Officials also reportedly chastised Choice for letting overseas Mercury customers “open thousands of accounts using questionable methods to prove they had a presence in the United States.”
And that’s not all. The FDIC was also not happy that Choice had not “audited a compliance system used by Mercury, which the agency said reported a curiously low number of suspicious transactions.”
Adding fuel to the fire, Mercury also reportedly told its users earlier this year Debit cards issued by Evolve Bank & Trust that these cards no longer works where the merchant has a legal address in 41 countries, including Turkey, Ukraine, Cuba and Iran. (Evolve also partners with Mercury.) When TechCrunch asked about these allegations, the company declined to comment.
Asked about The Information’s report, a Mercury spokesperson stressed that the the company invests in its risk management and compliance teams. The person also said the fintech partner bank market as a whole has been the target of increased regulatory scrutiny.
Alexey Likuev, who led the creation of the consumer offering for Mercury, acknowledges that there are “significantly more rigorous consumer protection regulations” and said the company took those regulations into account when developing its consumer product.
To cross
But success in B2B banking doesn’t automatically require Mercury to handle consumer banking. Each has different regulations and compliance issues, noted Agustin Rubini, an analyst at Gartner. Risk management for personal banking, for example, involves assessing the individual’s financial stability, “which may be less predictable than that of businesses,” he said.
Additionally, adhering to strict regulatory requirements can be “a challenge” for startups, he warns. “Complexity increases when partnering with a bank due to the additional layers of regulation that apply to banking services,” he said. “This includes everything from anti-money laundering (AML) protocols to meeting capital requirements.”
Rubini added that partnering with a bank can help the startup by providing an initial platform and compliance framework, but expanding operations to a wider customer base can then open a different Pandora’s box. Startups need “substantial capital and strategic planning” to achieve this while remaining competitive and without running afoul of regulators.
Cesare Fracassi, associate professor of finance at the University of Texas at Austin, also told TechCrunch that business and personal banking are “two different beasts, two different types of services.” But he’s a little more optimistic about fintechs trying both because he sees “obvious synergies involved in owning both the business and the person” in the banking space.
This is one of the main reasons why Mercury is developing in this direction. It could leverage much of the software that powers its B2B product for its consumer offering, Akhund said.
It’s not the only fintech to think this way, either. Onyx Private, with a similar offer, recently backtracked, move from B2C to B2B.
In addition to generating revenue through interchange fees and interest rate spreads, Mercury will make money by charging users an annual subscription fee of $240 upon first deposit and annually thereafter. the sequel. Last year he praised Strong growth in activity following the SVB crisis, and a recent report from Kruze Consulting showed that 40% of startups created after the SVB crisis have an account with Mercury.
The company said it had seven consecutive quarters of cash flow and EBITDA profitability from March 2024. While it doesn’t reveal concrete revenue figures, it also claims its new revenues grew 180% last year while its customer base soared by 60% and trading volume by 90% to reach $95 billion in January 2024.
With this growth, the startup has hired. Currently, Mercury has 620 employees, up from 440 at the start of 2023.
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