Welcome to the SMB Tech Innovators podcast blog series powered by Gusto Embedded, where we explore embedded fintech and embedded payroll with leaders from vertical SaaS applications. We aim to share stories, advice, and best practices from the leaders and investors behind today’s cutting-edge small business financial services.
In this episode, we speak with Herman Man, the chief product officer at Bluevine. Bluevine is a financial technology company that offers business banking solutions to help businesses thrive. They offer simple, accessible end-to-end banking, including streamlined checking, lending, and bill pay, built to help main-street businesses grow.
Our conversation with Herman covers how he approaches product strategy and product execution. And what SaaS applications should consider before adding banking solutions to their offerings, and what else they can offer to stay competitive in their markets.
- Who is Bluevine, and what do you offer customers that banks don’t?
- Why it’s easier to offer banking products today.
- Adopting an embedded lending solution versus creating your own.
- Using customer segmentation to drive roadmap priorities.
- Advice to companies considering offering banking solutions.
The following excerpts are from the podcast and have been transcribed and edited for clarity.
What makes Bluevine unique from other small-business banking providers?
Bluevine’s really about serving the main street small business; it’s not the small business that happened to be Andreessen Horowitz or Sequoia funded. It is the contractor that worked on my remodel. It is my architect that partnered with him to get this done. Those are the main street small businesses that we’re talking about, and Bluevine had this mission to really go serve them. We want to be the financial hub for small businesses. We want to provide the financial services and everything that the small business actually needs. And so that goes from things like checking accounts all the way through to lending products.
If you think about the market that exists today around financial services for these small businesses, they often get overlooked. And when they go into a bank, what they quickly realize is the banker is trying to make them fit in one mold or another. Are they retail customers, meaning are they consumer customers, or are they actually commercial customers, which is more enterprise? And the reality is they’re neither. So these small businesses just don’t get the services they need either through customer support at its basic need, all the way through to the experiences around the digital experiences and the banking experiences that are tailored and customized for them. And that’s what Bluevine wants to do. We want to build a solution that is tailored for the main street small business, and we think that it is a major, major need serving America, and we believe that we are poised to do that well.
“Small businesses are vastly, vastly underserved. It’s true across banking, software, and so many other industries out there.”
Chief Product Officer, Bluevine
What are the barriers to offering banking products? Is it easier today than it was a few years ago?
I think as we talk about embedded banking and as we talk about BaaS in general, yes, it’s created a layer where it’s really easy for these startups to essentially become fintechs, but it’s extremely hard for them to do it right. And what I mean by that is when you look at the regulatory requirements as you look at the compliance requirements, many of these BaaS providers actually don’t provide that. And what that ends up ultimately is the customer of that fintech startup that relied on BaaS ends up paying the price.
Because ultimately, what ends up happening is the regulators come in, they constrain all the money movement, they constrain the ability for that fintech to do anything for that customer, and that’s where they pay that price. So I think there is a startup mentality around banking. BaaS certainly has enabled that to occur. But I think there also is; people have to keep in mind that, look, it’s important to not only start something but to finish something. And I think in 2023, especially with a macro environment and the regulatory environment, there’s going to be a lot of consolidation, MNA, and there’s just going to be a lot of weeding out of those solutions that popped up that maybe weren’t really as intended as customers have thought.
If we have listeners out there that are deciding between partnering with Bluevine directly versus engaging and building its own embedded lending product, what would you say to them?
I would actually say that to be clear, not all embedded lending is bad. Here’s what I’m saying. Embedded lending is good when you actually have full alignment contractually as well as just the North Star alignment of where you’re going with your partner. That is good. So Mindbody has that deep integration; really, what I’m talking about is a full end-to-end connection here. Where it’s problematic is when you basically outsource your lending to the embedded lending provider, which is to say, “Hey, I just need you to provide capital for this. Let’s not worry about the details,” because it’s the details at the end of the day that actually matter. So for those that actually want to provide an embedded lending solution, I think it is, one, to be very clear, make sure that if they’re going to go work with that embedded lending solution, get very clear. Who’s doing the KYC, KYB, and fraud checks?
Who’s accountable for fraud, capital-wise, whenever that does happen? Make that very clear. And if you can establish a relationship there and if you can establish alignment there, then it may not necessarily be a bad thing. Where Bluevine, I think, has the advantages is when you look at Bluevine, and you want to find a provider that has weathered the storm through cycles, Bluevine obviously is the one. And when you think about different capital products, and then we’re about to launch more, Bluevine perhaps may come out ahead there in the sense of just choice.
How do you use customer segmentation to drive roadmap priorities?
It starts with, at the end of the day, understanding your customer and you’re pattern matching many of the times. There is some commonality between the different customers and the micro-small business segment of what they need. They need great money movement at the end of the day. The faster you can move their money and the longer they can hold on to their money, that’s universally true regardless of whether or not they’re a contractor or they’re a retail business. When you start looking at capabilities around bills and paying bills, the approval workflows are common. It might be that there are two or three layers, or it originates through an accountant or a clerk, but the workflows are very common. And so it starts with us with really understanding what the customer wants, and that goes through qualitative interviews that we do with customers, surveys that we do with prospects. And to be very clear, we spend so much time with customers, both past and present. Those that have turned from Bluevine, we equally want to hear from them.
What were we insufficient with? So we do spend our time there, and we get a very, very clear view across that. The other thing that we do is also use Mixpanel and the quantitative nature of just knowing what the behavior is. And so a combination of everything helps us inform what are the things that we want to do. And lastly, I’ll say that obviously, as chief product officer, I feel convicted about certain things we will go build. That conviction, again, will be tested with customers before we build, right? Or sometimes, if it’s small enough, we just launch it, and then we see how it performs. I’d be stupid to ignore what else the market is also doing. Our competitors in the challenger space, our incumbents, what are they doing? Better understanding that, but then also understanding industry trends as well. We’ve seen social influence so much more around behavior and how people behave. Social basically help push forward the whole Ubers of the world around the gig economy. So I’m constantly looking at what are the macro trends that are happening as well to inform potentially where banking might actually go.
Many companies are considering adding small business financial services to their platforms. Whether they should or not that’s a separate question. What advice do you have for them?
My advice for them is if the bank account experience is core to what you’re trying to do, then you got to build it right. It’s part of the definition of your company and who you are. And there’s really no quick win, is ultimately that. And yes, you can start something maybe with BaaS, but it’s not going to be the solution that takes you to the promised land, so to speak. Compliance and regulation cannot take a backseat to innovation. It just can’t. If anything, I would say that compliance and regulation can help speed that up if you do it right because the regulators aren’t on you, and so you really need to know that.
“In 2023, due to the macro environment, I think anyone who doesn’t own a cohesive customer experience end-to-end will end up falling behind.”
Chief Product Officer, Bluevine
And so that whole mindset around moving fast and breaking things around the social era, while it somewhat applies to banking, the major difference is there are regulatory guardrails on banking that you just can’t side-skirt. So my advice to them is to spend the time to properly understand the regulatory and compliance requirements and the frameworks that you need to do. Implement those, implement the controls in your own company, get the right expertise and staff appropriately, and develop a relationship. If it is with a BaaS provider, develop the relationship and clearly understand where they stop and where you start. But you, as the company that wants to do the embedding, must be responsible for fully understanding that you cannot outsource that if you want to be successful.