In 2019, William Hockey, the co-founder of fintech company Plaid, announced that he would step down as chief technology officer and president of Plaid. After helping to build Plaid into a multi-billion dollar company with co-founder Zach Perret, Hockney left for other pursuits and – as he said in a June 2019 Tweeter – make room for more “great leaders”.
Hockey has kept a low profile ever since, retaining a seat on Plaid’s board of directors as the company, now valued at $13.4 billion, expands its global financial network. But he has been anything but idle, quietly creating the platform for what he believes to be the first bank of its kind: a “financial infrastructure” bank. To rephrase, Hockey founded a bank called Column.
“[Column is] a nationally chartered bank, but have built every facet of the technology from the ground up,” Hockey told TechCrunch in an email interview. “We are both the bank and the technology provider.”
A bank focused on developers
The column emerges from stealth today to – if Hockey’s statements are to be believed – overthrow the fintech industry. For years, fintechs have had to rely on middleware vendors (e.g. Modern Treasury, Synctera, Sila Money, etc.) and core processors (FiServ, Jack Henry, and FIS) that wrap the former sponsor banks to provide products such as wire transfers, checks processing and loan origination. The reason? Because businesses need federal deposit insurance to access the payments system, the U.S. Federal Reserve controls — a steep ask for a non-bank. (Robinhood in 2018 clashed with regulators for not having the proper insurance to offer a checking account.)
The are ways to get around this. Non-banks can apply to be an Industrial Loan Company, or ILC, which allows them to issue loans and accept federally insured deposits. Varo in 2020 became the first consumer fintech to be granted a national banking charter. But the process is often loadedmaking partnering with banks an easier pill for most fintechs to swallow.
Unfortunately, systems between fintechs, vendors, and banks can be rigid and costly. And that can lead to poor customer experience.
“The most sore point of building financial services and fintech is the supply chain on which it relies. There is an unnecessary separation between the regulated chartered bank and the middleware and platform companies that fintechs rely on,” Hockey said. “This leads to unclear responsibility and ownership [and] unnecessary costs. »
In contrast, Column, a nationally chartered bank with a direct link to the Fed, has an internal ledger and data model to power various fintech services. Developers can use Column to build apps that pull and push money to any bank account, for example, or maintain FDIC-insured checking and savings accounts.
Peeling back the curtains, Column is a well-known community bank — Northern California National Bank, or NorCal — that Hockey bought for $50 million last year. A small operation, NorCal has only one physical branch in Chico, California, and the bank’s day-to-day operations remain separate from Column.
With Column, a fintech can launch a debit or credit program with any issuing processor. Or they can become an originator partner, offering debt financing and credit buyout products.
“I’ve spent time with (literally) thousands of companies that build financial services and it’s painfully obvious that the biggest bottleneck to their growth and innovation are the underlying banks they’re on. rely on,” said Hockey, who is co-CEO of Column. with his wife, Annie, said. “Financial services must first be consumers, developers and the Internet; however, to do this, he needs a new spine. Three years ago, we set out to solve this problem, starting from first principles and building a bank from scratch. »
A growing fintech trend
While Column is unique in the breadth of services it provides, Hockey’s business positions itself against other established chartered banks that already manage the backends of billion-dollar fintech companies (think Stripe and Square). Prepaid debit card seller Green Dot handles banking for Uber and Stash. Chime Mobile Bank works with The Bancorp Bank to offer savings and debit cards. And Cross River Bank, which recently raised $620 million in funding at a valuation north of $3 billion, backs Coinbase products as well as fintechs like Affirm, Rocket Loans, Best Egg and Checkout.com.
But Hockey highlights what it believes to be Column’s differentiators, such as its ownership structure. The startup – whose customers include Plaid, commercial credit card provider Brex and mobile banks Oxygen and Nearside – is wholly owned by its founders and a staff of around 60 people, he says, and funded with his own money and its profits. (Column charges fees for services such as bank transfers per transaction and on a monthly basis.)
Bootstrapping may be wise at a time when fintech funding is taking a fall. While some $18.2 billion in funding was disbursed to fintech companies in the first month and a half of 2022, in late February and early March watch a precipitous decline.
“If something goes wrong, we take 100% of the risk… If we add more stakeholders to this mix, the incentives can get perverse and we can’t do the best job,” Hockey wrote, perhaps taking a swipe at VC River-backed Cross, in a blog post shared with TechCrunch. “That means we may not grow as fast as we could or maybe investors will get FOMO and go fund a competitor! However, we think these trade-offs are worth it. We are here to build a loved and long-term company and our capitalization table and funding should show it.
Hockey declined to say what the future may hold for Column, but customer acquisition is likely high on the list. Starting today, Column is open to all developers who want to build on its platform.