Mercury: A Fintech Giant Enters the Consumer Banking Sector
Mercury, a notable fintech firm that initially offered financial services to startups and businesses, is making a significant move into the consumer market. The company’s push into consumer banking represents a growing trend where fintechs are blurring the business-to-business and business-to-consumer boundaries. This move is yet another example of digital-focused fintech firms gradually encroaching on the territory traditionally dominated by banks.
“Consumers want a great digital experience across all of their financial services needs. Being able to see and seamlessly transact across one’s banking, traditional investments, and digital assets together under one application is the direction we are heading,” said Jonathan Langlois, a principal of KPMG US’s financial services strategy advisory practice.
On Thursday, Mercury opened applications for its Mercury Personal offering to all U.S. residents aged 18 and over. Previously, the product was only available to individuals who joined a waitlist.
Mercury’s Preparation for Consumer Banking
Mercury, although not a bank, has worked with banking partners Choice Financial Group and Column N.A. to ensure its consumer product meets regulatory requirements. Alexey Likuev, Mercury’s head of personal banking, explained, “Consumer banking carries a different set of operational and regulatory expectations than business banking, so we spent the past year making sure the product could scale responsibly.” The company also worked on scaling its own compliance and support capabilities to serve a broader audience.
Today, Mercury boasts of providing financial services for over 200,000 companies and individuals, a significant increase from just over 100,000 businesses in April 2024. About half of Mercury Personal customers also use Mercury for their businesses, according to Likuev. The other half is entirely new to Mercury.
Mercury Personal: What’s on Offer?
Mercury Personal is built for people who want premium tools to manage their money, including founders and people who value precision, transparency, and control. On average, customers hold balances above $80,000. For a $240 annual subscription fee, customers get a savings account that allows them to earn a 3.5% annual percentage yield. Other benefits include no-fee wire transfers, both domestically and internationally; investment opportunities; joint accounts for up to four people; and deposit insurance of up to $5 million through Mercury’s partner banks and their sweep networks.
Blurring the Lines Between Fintech and Banking
Mercury’s entrance into the consumer market mirrors a larger trend of more fintechs moving into retail banking. For example, crypto exchanges like Coinbase and Wise, which initially focused on cross-border payments, are now planning to open banks. Indranil Bandyopadhyay, a principal analyst at Forrester, believes this trend signifies the blurring of the traditional business-to-business or business-to-consumer fintech model.
“The most valuable long-term position is to own the financial data and relationship at the center of a customer’s life, whether that’s their business life or their personal life,” Bandyopadhyay said. “The winners of the next decade won’t just store money; they will own the networks where money is earned, spent, and saved, effectively becoming closed-loop financial systems.”
What Does This Mean for Traditional Banks?
Traditional banks still have their strengths, including a broad range of products, personal customer service, branches, brand awareness, and consumer trust. However, fintech companies tend to move at a faster pace due to their modern tech infrastructure, disruptive mindset, and startup mentality. They are often hyper-focused on specific use cases and can innovate much quicker than larger banks with layers of governance. But, with fintech companies like Mercury now entering consumer banking, traditional banks are likely to face increased competition.
Mercury is seeking to differentiate itself by offering features such as customizable permissions and access. Its subscription model aims to replace the hidden-fee approach of legacy banks. “Instead of nickel-and-diming customers for domestic wires, minimums, or basic functionality,” Likuev said, “we offer a single, predictable fee for a premium banking experience that … helps people manage their money.”
In March, San Francisco-based Mercury more than doubled its valuation to $3.5 billion after raising $300 million in a Series C round led by Sequoia. It has raised more than $450 million since it was founded in 2017.
This move from Mercury is a testament to the evolving landscape of the financial industry, where fintech companies are playing an increasingly significant role. It remains to be seen how this will shape the future of banking and finance.
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