Business Analysis: GoBank

Banking is no longer just about making loans and selling investment products, according to GoBank, whose strategy revolves around technology-driven deposit taking. The online bank is among the growing number of pseudo-banks that aim to reduce hidden fees and provide self-service features to its customers. Like the fellow pseudo-bank, Simple, GoBank takes a customer-centric approach that many traditional banks are working to replicate.

GoBank provides online and mobile checking account services in exchange for customer-determined fees each month (ranging from $0 to $9). The bank does not issue loans or savings products, in contrast to traditional banks. Instead, the company relies exclusively on fee income to support its deposit-driven operating model. Technology is at the helm of its business, with an easy-to-use mobile app that displays one’s current balance on the login screen and debit cards that sport a customized picture for only $9.

Products and Services

Given its tech-focused value proposition, GoBank has naturally kept pace with industry standards like remote deposit of checks (RDC). Where GoBank differs is in the issuance of checks, which is handled through the mailing checks by the bank after payment details are entered online or through the mobile app. GoBank partnered with Wal-Mart to allow its customers access to over 3,900 stores to deposit cash, which is about all one would expect as deposit of cash continues to die off.

Large ATM networks have served as a marketing line for banks of late as they try to resonate with customers’ dissatisfaction of costly ATM fees. GoBank is no different, quick to call attention to its network of 42,000-plus ATMs. In my experience, however, the large-scale network wasn’t much of a difference-maker as the nearest in-network ATM for GoBank was just as close to my apartment complex as the nearest Chase ATM (my other bank). The silver lining of this finding is that the scale of a bank’s ATM network may not matter unless fees are reimbursed from every ATM, like with Schwab Bank and Ally Bank.

imagesBeing limited to checking account services, GoBank offers a feature akin to the common savings account, deemed ‘the money vault’. The feature is similar to a savings account in that its purpose is to keep funds away from transactional activity, though depositors don’t earn interest on their contributions. Like most other banks, GoBank offers a budgeting and spend management tool that is limited to bank-branded accounts, making the PFM feature useless if a credit card is your primary spending tool.

Drawbacks

GoBank is quick to promote its check-mailing service but has not made the use of this feature so intuitive in its app. When attempting to write a check to my brother for concert tickets last month, I was forced to add his information through the bill pay portal. He received the check five business days after I submitted the payment, which is unimpressive turnaround for a bank touting this feature. GoBank’s peer-to-peer (P2P) fund transfer feature is hardly a check alternative as eligible recipients must have either a GoBank or PayPal account.

To a banking customer that isn’t used to paying many fees outside of the occasional ATM fee, I was hard-pressed to throw more than a dollar GoBank’s way each month, even when I still had a positive opinion of the bank. The concept of ‘pay us what you think we deserve’ comes across as altruistic, but the reality is that GoBank will need to blow customers away with its services to capture substantial income from this type of revenue stream. With the lack of a seamless payments service, I don’t see GoBank as worthy of more than a dollar in service fees each month.

Outlook

GoBank has the right idea in getting away from the traditional banking operating model. However, its services as not as cutting edge as advertised. Consumers that are excited to trying new banking features are likely to be equally as disappointed as I was after discovering the hassle of check issuance and major limitations of its PFM product. It’s understandable that every new business needs time to work through the kinks, but in a highly competitive banking environment that’s undergoing transformation each day, GoBank cannot afford to waste time.

With no cost to open or close a checking account at most banks, attrition is high, meaning banks must find ways to commit customers through differentiated product offerings. GoBank has certainly incorporated a unique element in its products but must identify ways of making them special (i.e. What can the money vault do that a savings account can’t?). Next, GoBank must make its products more reliable, starting with the simple issuance of a check. If the bank fails to take these two steps, they will watch more customers migrate to Moven and Simple, like yours truly.

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