William Hockey, the co-founder of Plaid, announced that he would step down from his position as the company's chief technology officer and president. Making room for more was one of the things that Hockney left for after helping to grow Plaid into a multi-billion-dollar business.
Hockey has kept a low profile since, and still sits on the board of the company that is now valued at $13.4 billion. He quietly created the platform for what he believes is the first bank of its kind. Hockey founded a bank called Column.
Hockey said in an email interview that the column is a nationally chartered bank but have built every facet of the technology from scratch.
If Hockey's pronouncements are to be believed, the industry will be turned on its head. Legacy sponsor banks have been used to deliver products like wire transfers, check processing, and other services by the fintech companies. The reason? The U.S. Federal Reserve controls deposit insurance in order for companies to access the payment system. Robinhood ran afoul of regulators for lacking the proper insurance to offer a checking account.
There are ways around this. Nonbanks can apply to be an industrial loan company, which allows them to issue loans and accept deposits. Varo was granted a national bank charter in 2020. The partnership with banks is an easier pill to swallow for most fintechs.
The systems between banks and vendors can be expensive. A poor customer experience can be caused by this.
The biggest pain point in building in financial services is the supply chain. Hockey said there is an unnecessary separation between the bank and the platform companies.
Column, a nationally chartered bank with a direct connection to the Fed, has an in-house ledger and data model. Column can be used to build apps that pull and push money to any bank account, or to maintain FDIC-insured checking and savings accounts.
Hockey bought Northern California National Bank for $50 million last year and renamed it Column. The day-to-day operations of the bank remain separate from Column, as NorCal only has a single physical branch in Chico, California.
Column can be used to launch a credit or debit program. They can offer products for debt financing and loan repurchase.
Hockey has spent time with thousands of companies building in financial services and it is obvious that the biggest roadblock to their growth and innovation is the underlying banks they rely on. Three years ago, we set out to fix this, starting from first principles and building a bank from the ground up.
Hockey's venture is positioned against other established banks that are already running the back-offices for billion-dollar fintech firms. Green Dot handles the banking for the two companies. Chime and The Bancorp Bank offer savings and debit cards. Cross River Bank, which recently raised $620 million in funding at a valuation north of $3 billion, backs products from a number of companies.
Hockey highlights the differences between Column and other things, like its ownership structure. He claims that the startup is funded by its own money and profits and is owned by its co-founders. Fees for wire transfers are charged on a per-transaction and monthly basis.
At a time when funding is falling, bootstrapping is a good idea. In the first half of the year, some $18.2 billion in financing flowed to fintech companies, but late February and early March showed a decline.
If we add more stakeholders into that mix, incentives may get perverse and we can't do the best job. We think the tradeoffs are worth it. The funding and cap table should show that we are in it to build a long-term company.
Hockey wouldn't say what the future might hold for Column, but customer acquisition was near the top of the list. Column is open to all developers who want to build on its platform.
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