John Schulte, Mercantile Bank of Michigan's CIO, was hired as employee No. 3 when the bank was formed in 1997 by a number of employees who had formerly worked at First Michigan Bank before it was acquired by Huntington Bank. "We felt strongly that there needed to be a locally based Michigan bank focused on serving the community," Schulte recalls.
Mercantile Bank ($1.4 billion in assets) didn't invest in an extensive branch network from the beginning, which has required the bank to emphasize its digital delivery channels, Schulte shares. In the years since the financial crisis, much of the industry has also rolled back branch networks and invested in online and mobile channels. To stay competitive with its digital services, Schulte has developed a strategy of partnering early with new innovative companies that can bring best-of-breed solutions to the bank.
For example, Mercantile was the first bank to partner with PayPal to bring peer-to-peer payments to its customers through the online and mobile channel. In 2010, when the partnership was formed, most banks didn't view PayPal as a potential partner, Schulte notes. But Mercantile was able to build a successful partnership with the payments company, he says. Nearly 10% of the bank's mobile banking users take advantage of PayPal's service, and Mercantile has seen growing usage of the P2P service each month since its rollout, he reports.
Last year, Mercantile also became the first bank to partner with Bill.com for online accounts receivables and accounts payables services, Schulte adds, making it easier for Mercantile's small-business clients to manage their cash flow.
"I think the most successful strategy is to be on the lookout for innovative organizations that are at the forefront of where things are headed and are willing to become partners with banks," Schulte says.
Being the first bank to experiment with a nontraditional partner can be risky, but it also provides benefits, such as a lower cost, to Mercantile that Schulte says are worth the gamble. "Companies are willing to partner and deliver something together to first beta testers and give them a break on the cost it takes to build the interfaces, processes or technology behind the scenes," he says.
Being an early partner also means that Mercantile gets some input in how the product is put together and deployed, Schulte adds. "Being on the front end, you have more influence over the product or service than if you were the 100th bank to sign up for it," he says.
Schulte's personal use of technology also influences his vision of how Mercantile can improve its digital banking services. As a father with a daughter in graduate school, he makes frequent use of personal financial management (PFM) tools to run his own family's finances. Schulte has also worked to offer quality PFM tools to Mercantile's online banking customers through partnerships. The bank's first foray into online PFM was with FinanceWorks, a PFM application developed by Digital Insight. But the bank is now in the process of rolling out MoneyDesktop's PFM offering, which Schulte says he feels is a superior product.
His own tastes in PFM tools as a user have also colored his views on what makes a quality PFM product. "I want to see my entire financial picture in one place. And I want to manage all of my short-term financial needs -- budgeting, cash flow, expense categorization -- but I also want to see what my long-term financial outlook is," he says.