Suze Orman Puts a Feather in The Bancorp’s Cap

While the blogosphere grades Suze Orman on her new Approved prepaid card — it looks like she gets a B buoyed by the credit reporting element, but misses that A because the card lacks a savings account feature — one of the underlying stories of the new product launch yesterday has been missed. That is, how The Bancorp is slowly becoming the “Intel Inside of Banking.”

Talk about below the radar, The Bancorp Inc. is the bank everyone sees, but no one knows. The company is publicly traded [ticker: TBBK], with a market capitalization of about $258 million, and is based in — no surprise — Wilmington, Del. What it is doing is allowing all sorts of financial services ventures to launch products, all the while taking care of the backend — and as we know, there is a lot of “backend” in banking.

In addition to the Approved Card, The Bancorp is powering PerkStreet Financial and Simple, among other innovative FI startups.

But that is not all that is driving The Bancorp’s net income growth of 77% for the nine months that ended last Sept. 30. Credit the Dodd-Frank Act. That’s right, Dodd-Frank is actually creating new business at The Bancorp, not the reverse. Dodd-Frank, as many of you know, has certain restrictions for banks with $10 billion of more of assets. So The Bancorp has stepped in and provided services that don’t have such restrictions. 

Here’s how Frank M. Mastrangelo, president of The Bancorp, explained it last October:

There are really three primary themes that are driving what is an extremely robust pipeline [at The Bancorp]. … One … of course is Durbin. So [clients] are in a large program sitting inside of large banks that are looking to convert, obviously the Durbin related interchange caps went into effect on October 1. So some of those programs are scrambling now, attempting to get as quick of a conversion as they possibly can. We have a lot of focus around that. There is a significant amount of business tied to that conversion. …

Beyond that, we’ve talked in the past that there has been some disruptions in the market through regulatory issues that other competitors of ours that certainly kicked a fair amount of business into play. We’ve a significant pipeline related to that. And again, these are programs with existing volume, where at least a portion we book to convert to Bancorp. I would say that’s more, late Q1, Q2, possibly even Q3 impact in 2012.

The third category that’s really driving the very robust pipeline today is a focus of new entrants into the alternative payment space, either Mobile Wallet or other payment space, where firms might need bank sponsorship of some sort for their alternative payments plan. So those firms typically don’t have existing volume, but some of them have very, very wide distribution in the core business, and have the potential to be very, very attractive programs.

The bank’s financials are rocketing higher. Prepaid card fees, buoyed by those “new entrants into the alternative payment space, increased 62% through 3Q11 compared to the first nine months of 2010 and 45% in the third quarter alone. “Both of those are very good numbers we feel,” Betsy Zubrow Cohen, CEO of The Bancorp, has said.

Additionally, stored-value income at The Bancorp climbed 45% year-over-year in 3Q11, non-interest income, excluding securities, increased 35% year-over-year. This when other banks are facing pressure to limit fee income.

What I like most about The Bancorp is that its executives understand the future of the banking business. At The Bancorp, company officials specifically position products for longer-term success, and a great example of that is the mobile wallet program it has launched. Cohen explains The Bancorp’s approach to mobile wallets as such:

[S]ome of the programs we’ve put on, such as Mobile Wallet programs, we don’t put on because we expect large volume tomorrow. We put them on because we expect those to be growing sectors, and we want to stake out our place, and we try to balance that with conversion, such as those that are generated by Durbin, where a portfolio exists, and you can have an immediate impact. But this is an art, not a science. And so we’re trying those to penetrate market presence in new areas, as well as bring on business that will have instant impact, so that’s balancing act.

Amen, sister.