Digital-only First Internet Bank retains 90% of its original customers

As upstart digital-only banks face increasing pressure to acquire and retain customers, a 20-year-old online-only bank has managed to hold on to most of its original customer base.

David Becker, CEO of Fishers, Indiana-based First Internet Bank, told Bank Innovation that it has kept 90% of its original customer base as a result of its niche product strategy. The bank, which has about 120 employees and another 80 in the mortgage business, should close in on $4 billion in assets by year’s end.

The bank broke ground on a new headquarters last week, signifying the success of its long-term strategic growth plan. Since 2013, when the bank went public, its assets are up nearly 500% and its employee count has risen by 75%. With a digital footprint in all 50 states, the bank offers small business deposits, consumer loans, residential mortgages, commercial and industrial loans, small business administration financing and treasury management services.

In an interview with Bank Innovation, Becker outlined the bank’s growth plans. An edited version of the discussion follows.

BI: Who are First Internet Bank’s customers?

Becker: Our initial customer base was males in their early- to mid-50s with high net worth and high deposit balances. They were very computer-literate individuals who were basically rogue warriors at heart, or they were entrepreneurs like myself who could not make traditional banking hours work for them. The fact that we had all of our online, real-time services interconnected gave them access to a one-stop shop, which was fabulous. We hit the ground running and we actually blew through our five-year business plan within the first six months.

Today’s age group has come down, in part, because a lot of my initial customers from 20 years ago — their children became customers, particularly those going off to college. Our bank was the best way to manage money for their children and move funds back and forth.

BI: What’s behind the growth you’ve seen since 2013?

Becker: The real key to success is finding niches where there’s not a lot of traditional bank competition — and even not a lot of fintech competition at this point — and really maximizing the opportunities in those markets. During the financial crisis, when people were getting out of consumer mortgages, we got in. When people were getting out of commercial real estate, we got in. When people were getting out of commercial and industrial lending, we got in. When times are the craziest, that’s also the time of greatest opportunity.

It all kind of came together with a public offering in 2013. We had new platforms, new products and new asset generators that had a nationwide footprint, and it all just kind of gelled and the growth really took off.

BI: What technologies or areas of innovation are you most interested in?

Becker: Robo-advising is definitely something that’s on the horizon for us. I actually sold one of my software companies in the early days after I had launched the bank, and we had written a real-time interface into the brokerage market allowing you to trade and move money interactively between checking accounts and the brokerage accounts. The firm that acquired my company decided that was too complicated a process and nobody would be interested in it, so it got dropped.

Now, with the advent of rob- advisers and that type of connectivity, I think there’s a good opportunity. If there’s one product that we don’t really have anything today, particularly for the consumer side, it would be that investment vehicle. I think we’re talking to a couple different organizations about the ability to bring on such a robo-advisory product.

BI: What does the bank do in-house and when does it bring in third parties?

Becker: Most of the things that we do are done through third parties. We are firm believers in short contracts that keep them on their toes and find the best in breed. It gives us the flexibility to maneuver, especially as we’re getting into multi-billion dollars in size and it’s a little tough to jump from one vendor to another.

The real innovation work we do internally is the development of the APIs to interconnect all the tools and services. We don’t do a lot of pure product innovation; we just tie them together. We have about 14 different core systems doing different products and services for us. It’s all about trying to get that holistic look into the customers’ work and everything they’re doing with us at all levels.