How ZenBusiness helps small businesses grow by adding embedded banking
ZenBusiness makes running a small business accessible to a diverse range of entrepreneurs through its guided business formation and growth platform. That means the company builds relationships with founders early in their journey, right when those founders have determined they have a viable idea.
So what happens when early-stage businesses mature? Customers that ZenBusiness onboarded when it launched in 2017 are now four years old. A lot changes in that amount of time. A lot has changed even for ZenBusiness. Since March 2020, the company has grown more than 400 percent and now helps over 200,000 small business owners on their journeys to success.
“ZenBusiness not only helps its customers launch, but also run and grow successful businesses,” said ZenBusiness senior vice president of product Lamine Zarrad.
Customers increasingly wanted to link ZenBusiness’s services to their own FDIC-insured commercial bank accounts, which would enable them to cash checks, send and accept wire transfers, and accept ACH payments.
The company decided in 2018 to offer accounts through LendingClub Bank (formerly Radius Bank). LendingClub Bank referred ZenBusiness to Treasury Prime, a leading banking as a service (BaaS) provider, to manage the integration.
“As customers mature, they do want a real bank account with FDIC insurance and all the flexibility bank accounts entail,” said Zarrad.
“Banking is complicated”
ZenBusiness had a dilemma. Customers wanted their own commercial bank accounts – but ZenBusiness is not a banking tool. It’s a platform for managing and scaling businesses, with features that handle administrative processes like filing taxes and legal paperwork.
“Banking is complicated, it's burdensome, there are a lot of regulations,” said Zarrad. “For a fintech with a very specific narrow value proposition, there's very little value in bringing in banking along with it, unless it’s very much part of the stack and has to be there.”
The company needed an API banking provider to handle bank integration. At the same time, they wanted to maintain their hands-on approach to helping customers. Customers who open LendingClub Bank accounts through ZenBusiness understandably expect ZenBusiness to help them with those accounts when they have questions.
Opening bank accounts quickly through a BaaS solution
Treasury Prime gave ZenBusiness a novel option for offering accounts: An affiliate relationship with LendingClub Bank. LendingClub Bank holds the accounts and manages regulatory and compliance requirements, but ZenBusiness can quickly open bank accounts accounts on behalf of customers and view activity within accounts.
“LendingClub Bank works to provide businesses like ZenBusiness a platform that will propel their business in the right direction,” said Anuj Nayar, financial health officer at LendingClub. “Our partnership with ZenBusiness offers small businesses a simplified and safe financial experience.”
ZenBusiness is a high-value partner for LendingClub Bank because it provides commercial deposits. As bank customers, businesses tend to hold higher balances than personal bank accounts, are more likely to seek bank loans, and tend to be more reliable when it comes to paying back loans.
“We did not want to hold the bank accounts – but we still wanted to own the experience of opening a bank account,” said Zarrad. “Treasury Prime gave us a really unique ability to have our cake and eat it too.”
Streamlining customer support
ZenBusiness founder and CEO Ross Buhrdorf said that with Treasury Prime and LendingClub Bank as partners, ZenBusiness is able to focus on customer needs rather than grapple with the intricacies of banking technology.
“We want to focus on what we do best, which is helping our customers each step of the way on their business journey toward success. Entrepreneurship is stressful and intimidating as it is, especially for founders from marginalized communities who haven’t always had access to the same tools as leading companies,” said Buhrdorf. “By relying on partners to handle the banking technology side of things, our team can remain available for directly supporting our customers.”
While customers bank directly with LendingClub Bank, ZenBusiness still often provides support on those accounts. The company is able to do this because Treasury Prime facilitates direct relationships between fintechs and banks, so ZenBusiness can contact LendingClub Bank immediately whenever needed. With another BaaS provider, ZenBusiness would have to direct customers to make a separate call to LendingClub Bank to troubleshoot. This hand-off would disrupt customer experience.
“Customers have often worked with us since their official founding. They’re used to relying on ZenBusiness for all of their back-end support. So they continue to come to us for support with their LendingClub Bank accounts even though we don’t hold those accounts,” said Zarrad.
Data and compliance solutions
ZenBusiness's integration with LendingClub Bank through Treasury Prime also includes additional features that make the customer experience easier. Treasury Prime’s API allows ZenBusiness to use data from its platform to open bank accounts on behalf of customers who request it. Once accounts are opened, the API gives ZenBusiness visibility into them, allowing the fintech to track and categorize business expenses. The company uses this information to help customers file taxes.
Meanwhile, ZenBusiness doesn’t have to worry about the most challenging parts of banking: Regulations, compliance, fraud prevention, or identity verification. All these things are handled by the bank. ZenBusiness also has not had to build out its own tools for integrating with LendingClub Bank. By relying on Treasury Prime to facilitate its affiliate relationship with the bank, ZenBusiness is able to focus on what it does best: Help small businesses grow.
“When businesses are forced to spend precious time filing business paperwork, and communicating separately with their bank and accountant, they have less time to devote to their actual product or service,” said CEO Buhrdorf. “Our goal is to give them that time back and make things easier. And to be a great partner in that way, we also need great partners.”