The payroll API space is on fire. We sat down with one of the entrepreneurs pouring gas on that fire, Jordan Wright, CEO at Atomic.
Jordan is a Serial Entrepreneur, Advisor, and Angel Investor. In 2013, before Atomic, he co-founded Unbill, a mobile billing solution that was acquired by Q2 in 2017 and rebranded as Biller Direct. Since then, Jordan has gone on to co-found Atomic, join the Board of Solera Bank, and continue to advise and invest in fintech upstarts.
After Jordan’s experience building Unbill, he and his co-founder brainstormed applications for a technology like Unbill that encompasses “screen scraping and putting in data on behalf of a user.” Of course, payroll and direct deposit switching was one thought, but they even went as far as to imagine a technology that “could automatically check-in to Southwest for you and claim your seat at the right moment.” A world without wading through six screens of upgrade offers would indeed be a better place.
After brainstorming and whiteboarding until the markers ran dry, Jordan and his co-founder, Scott Weinart, landed on Atomic. Atomic is building APIs for ID and income verification, payroll switching, and balance transfer.
Since founding, tens of millions of Venture Capital dollars have flowed into this newly created category of “Payroll APIs.”
Here are a few of the key takeaways that stuck out to us from our conversation.
1. The Value of a Direct Deposit
Jordan explains, “direct deposit is the leading indicator of profitability of an account...a checking account might be worth anywhere from $1,400 to $3,000 of LTV.”
LTV of a banking customer is generally quantified using these inputs:
- Average balances of loans and savings on a per customer basis
- Average interest rate margin (as a percentage)
- Average income/revenue per customer generated from non-interest income sources (e.g. fees, commissions, and other sales)
- Costs of providing customer services and access (which would include transaction costs, statement costs, potentially a provision for infrastructure costs, and so on)
Reading between the lines, you’ll notice that none of these metrics are worth calculating if you’re not “top of wallet,” usually defined as the main card one uses in everyday life; it’s also associated with where one sends their direct deposit from payroll.
Winning the direct deposit is paramount.
2. These CACs Are Crazy
CAC is a marketing nerd acronym for Cost of Acquisition. The cost of acquisition on a checking account in the US has become a hot topic amongst the fintecherati.
When breaking down the cost of acquisition math, Wright explains that he has, “heard numbers of $1,200 and up. Some as high as $1,500”. To point #1, if the LTV of a checking account is somewhere between $1,400 and $3,000, then why would a competent business spend upwards of $1,000 to acquire a new customer?
The reason this term gets thrown around endlessly when referring to acquiring a new banking customer is simple: Stickiness. Once a bank or fintech has acquired that direct deposit, then the ability to cross-sell more products like mortgage, auto-loans, etc. all becomes easier.
The beauty of the “re-bundling” that we’re seeing in fintech comes from the fact that these single product companies are now giving people access to multiple products on the same platform. It all starts with the direct deposit.
3. Relationships, relationships, relationships
Jordan is a prolific builder of relationships. The world of banking and financial services hinges on relationships that have been built over time.
As an advisor to many companies in the fintech space, Jordan has heard founders say things like, “I can’t get that person who would be an incredible board member for me”. He explains, “Anybody who thinks they want to be a founder in the next five to ten years needs to start thinking about generating those relationships now.”
This is true across the board in our industry. Jordan recommends building relationships early and often; with relationships comes trust and with trust comes business.
That said, relationship building can’t be transactional. They must be built out of a true desire to help and add value.
4. Find Your Niche
There is one key bit of advice that Jordan finds himself repeating when he’s advising banks and startups alike. That advice is simply to “find a niche and execute on that niche...and do it better than anybody else in the entire world.”
He alludes to his experience as a Board Member at Solera National Bank as an example. Solera has a laser focus on Self Directed IRAs and they’ve found a way to own that niche in an incredibly impressive way. They don’t try to be everything to everyone; they focus on a niche and they execute on it.
There’s wisdom in that sentiment for everyone. As a human, a business, or a human working in a business — find your niche, lean into it, and execute execute execute.
Back to work!
If you think your niche involves building seamless integrations into cutting edge technology partners like Atomic, Bond is hiring!
Reach out to email@example.com or check out our careers page and let’s chat!