No one-trick pony: How Ally got to $100b in deposits

With the rise of digital-only challenger banks, it’s easy to overlook Ally Bank. But Detroit-based Ally, which has no branches, was the one of the earliest digital-only banking players, rolling out a product suite a decade ago when it rebranded from General Motors Acceptance Corporation.

Dinesh Chopra, chief strategy officer, Ally Financial

Since then, Ally has acquired more than 1.9 million customers and $100 billion in deposits and claims it has more than 90 percent customer retention, milestones the company confirmed this week. Its pitch to customers is a digital experience backed up by human support, along with ongoing product evolution, some of which has been spurred on by fintech partnerships or acquisitions.

“Many of the challenger banks — [they’re] following what we did essentially 10 years back,” Dinesh Chopra, chief strategy officer at Ally, told Bank Innovation. “We’re not competing just on rate; we’re bringing the best of digital and human into the equation.”

Ally is differentiating on two key points from digital-only players, including quick onboarding in minutes backed up by round the clock human technical support, along with a product roadmap that’s more diverse than a simple no-fee deposit play. Instead, Ally is rolling out a series of products that, when put together, help customers gain a 360-degree view of their financial lives.

“Customers in the U.S. market are very sophisticated; they can actually curate the best of breed products themselves,” Chopra said, noting that customers no longer feel compelled to purchase all of their products from the same institution.

Ally estimates that it currently has 15% market share in the digital-only banking sphere, and it’s been looking to build a more diverse product set that combines tech and customer experience. In recent years, it’s used startup partnerships and acquisitions to make this happen.

“We have to build the other verticals [beyond checking], but what we are trying to build there is the value proposition that could stand by itself,” said Chopra. “We will be able to develop connectivity between our products to create a holistic solution.”

Ally’s product strategy to go beyond deposits was a priority early on in the brand’s development, with the rollout of no-penalty certificates a decade ago. The bank’s product approach involves addressing “white spaces” where it is not present, beyond auto lending and deposits, and its entry into mortgages, investments and unsecured lending are part of this effort.

To advance product development journeys, the bank has looked outside to advance innovation. Among its outside developments are the acquisition of robo-adviser TradeKing for $275 million in 2016; a partnership with fintech startup Better.com in April to develop Ally’s digital mortgage platform (Ally also invested $20 million in Better.com); and the bank’s acquisition of Health Credit Services for $190 million in July to grow its point-of-sale lending business.

Speaking about Ally’s Better.com partnership, Chopra said the tie-up brought together an end-to-end digital mortgage solution, complemented by the brand and customer experience expertise of Ally. “[Better.com] has an end-to-end digital experience for origination and fulfillment, which we could leverage, and we bring in the brand, our customer base, our balance sheet and our customer experience prowess,” he explained.

Meanwhile, on the unsecured lending front, Ally is throwing its weight behind point-of-sale lending, capabilities boosted by its Health Credit Services acquisition. “It’s essentially a digital payment of the future because it gives [consumers] complete transactional-level flexibility,” Chopra said. The acquisition comes on the heels of Ally exiting its credit card partnership with TD Bank in July.

Asked whether digital-only challenger banks — whether from Europe or the U.S. — are a threat, Chopra stressed that the digital-only bank sphere is big enough to accommodate multiple players, but he argued that Ally’s product strategy and customer-oriented approach puts it in a competitive position.  “The pie is big enough for many players to try,” he said. “Are there significant or meaningful threats to us? I don’t see it right now. At the end of the day, it’s going to be around who can win customers and retain them.”