Building the bank for startups: Immad Akhund of Mercury [Interview]

Fintech startups have become undeniably attractive in the last few years, receiving a lot of attention from media outlets and VCs. I spoke with Immad Akhund, co-founder and CEO of Mercury, to understand the vision for his new company that aims to define the future of banking for startups.

- What is Mercury?

- Mercury is building a bank for tech companies. We offer business checking accounts, savings accounts, and a debit card. All features are available online, and we also support foreign founders. We are trying to build tools to help you run your business, so we have an API and are adding other analytical tools.

- What made you start a bank? What experiences led you to that decision?

- I've been running companies for thirteen years, and this is my first fintech startup. As an entrepreneur, I felt the pain of dealing with incumbent banks. I was very frustrated with the lack of basics like transparency in customer service, and also felt like they didn't launch any new tools to progress. Those are the main inspirations. I wanted to fix something for myself. I like entrepreneurs a lot, and I was excited about making something that would be helpful to others like myself.

- Mercury has a good focus on startups. What makes Mercury startup-friendly?

- In the traditional bank space, there's a tendency to skip out on a lot of features, so many banks give you a debit card, but they don't give you the wires and check deposits. We are working with startups, and many of our customers have raised more than 10 million dollars. These are serious companies, and they expect all of these features, so part one for Mercury is having completeness of features that founders want.

Another part is how we think about fraud and compliance. If someone receives $5M in funding from a VC, that is very expected, whereas in the regular non-startup contract, receiving $5M will be reviewed with suspicion.

When someone signs up, we look at the website to see if this is a legitimate company, and that helps us do our internal KYC.

We are also building a lot of tools for startups. We have an API now. We've also launched a "Tea room," which is our premium tier, and we have a bunch of rewards associated with it. 

So we are thinking about startups every step of the way.

- What's on the roadmap? What are the new features that you are planning to launch?

- We launched the first API version last month. You can do a bunch of things – view transactions and balances, make ACH payments, etc. We are going to add new features over time.

One of the things we are working on is adding and editing recipients for payments. Another prominent feature is user permissions — there's a lot of fairly fine-grained permissions that we are going to allow.

And, obviously, the iOS app. Currently, Mercury is website-only, but a lot of our users are excited about the iOS app, so we are working on that. We have a busy schedule ahead of us.

- Mercury works with BBVA Compass and Evolve Bank & Trust to store deposits, how did you go about the process of choosing the banks to partner with?

- It's a long process. I met with sixty banks back in 2017 when we were starting out, and it was somewhat restricted because we were looking for banks that had complete features sets. Banks typically don't have all the features that we need. We were also trying to launch as quickly as possible.

Things like economics were also important. Most banks only work with huge companies, and Mercury is a startup, so we can't necessarily pay as much money upfront.

There are a lot of pieces when it comes to optimizing these bank deals, which we had to learn, but we're happy with the banks we've ended up with.

- Can you tell me more about each feature that Mercury offers? Some of them (online check deposits, savings accounts) are pretty exciting.

- The online onboarding process is super easy and only takes 10 minutes. You can add multiple team members and have multiple debit cards. You can also add multiple checking accounts if you need to. Savings accounts currently have an annual APY of 1.35%.

We've spent a lot of time making it a great experience. There are some obvious things like Quickbooks, Xero, and Plaid integrations, so, hopefully, whatever you use for accounting will work with Mercury.

We also let you search for your transactions and make that process as seamless as possible.

Then, when it comes to receiving money, you can connect to a third-party bank and pull money from there. Or you can simply take a picture of the check and deposit it.

We give our customers a routing number, which they can use whenever they want to send a wire. We also support ACH, which is a slightly slow and cheap payment rail. 

Domestic wire through Mercury costs $5. International wire transfers are supported by 54 countries right now, and you can send a wire for about $35.

- How did you come up with an idea for the Tea room? What are the perks & benefits of being a tea room member?

- It was my co-founder's idea. We didn't want to call it "platinum," "executive," or "gold member." We tried to make it a little more friendly.

We give everyone the same interest rate, but soon we will provide tea room customers with a higher rate, so that's a significant benefit. We're also planning to send some custom packages with tea and few other bits of swag. It's just a 'thank you' to these customers.

Tearoom members get credits and special offers from AWS, Google, Airtable, and a bunch of other companies. 

As a Tea Room, you get access to these sets of rewards, which are pretty good once you add them all up. Also, we may potentially have slightly higher fraud limits for Tea Room customers because we know them better.

- Who was Mercury built for, and who are your actual users based on the data you have?

- We built Mercury for seed-stage tech startups, and that's a significant part of our customers. But we are definitely open to everyone, and our clients also include consultancy businesses, eCommerce companies, and Amazon sellers.

- What was the most surprising thing you've learned from/about the users?

- There are a lot of surprising things. One of them is banking habits in general. People expect their bank to have a lot of different features – check deposits, international wires, an iOS app, etc. All of these things add up if you're trying to do a great job.

Another somewhat surprising thing is that I didn't realize how excited people would be about Mercury and how many people we've had signing up. There's a general excitement for what we're building.

- For some reason, it's very unusual to see business savings accounts offered by an online bank. Why did you decide to offer this?

- One of our aims is to give everyone products that were only accessible to bigger companies. I think there's a tendency in banking to screw up smaller startups. I don't like that. I believe that smaller companies deserve better – better fees and better features. We had the opportunity to offer a savings account, and our customers liked it. We will continue to promote this approach.

- Mercury is integrated with Plaid. Would you please explain the benefits it gives to your users?

- Plaid enables companies that need access to your financial data, like Gusto, TransferWise, Wave, Bench, and American Express, to verify and communicate with your bank account.

They've added us as a supported bank, meaning you can now connect your Mercury account to other business tools that use Plaid to link to banks. We are the future of banking, so it's crucial for us to have these integrations.

- What is your killer feature?

- We are pretty much the only place where you can sign up for a business checking account online as a startup. There are a few SMB challenger banks, but there's no startup-focused bank like us. That's probably a fairly good killer feature for everyone.

But I would go for a "killer philosophy" rather than a "killer feature." And our philosophy is to build a great customer-facing online bank.

- What are the worst things you've experienced with other banks in the past?

- I hate those stupid password rules; those are killing me. You have to use a semicolon, capital letters, etc. That stuff is awful, and I don't think it's good for security.

I had one bank where I didn't log in for a couple of months, and next time I logged in, nothing was there. I called them up, and they were like, "Oh, sorry, due to inactivity, we disabled your account."

Banks still do crazy things. I could complain about that all day long.

- Are you going to stick with your initial concept? Do you have plans to expand your offering?

- We are looking to evolve the product, but Mercury is not moving away from the initial concept. We're going after startups and focusing on the product we have now.

- Mercury is funded by some of Silicon Valley's sharpest investors. What made them believe in the team and the product?

- I think people appreciate that the initial team worked together on other startups before.

I also think that in terms of timing, the market was good. Startups have become a much more significant part of the economy, and they've gotten a lot of funding over the last four or five years. Also, startups serving other startups have become a much bigger overall trend.

We started in 2017, and I've honed the idea mentally and explained it to people fairly well, I guess those are the elements.

- Anyone who has an account with one of the major US banks knows how old-school big-name banks are. Their online banking and mobile apps seem useless in many ways. Most things still can't be done online, and you have to walk into the branch. Why do you think their functionalities are so limited online?

- These banks are 100-year-old companies. It is natural for us to do everything online, but for them, it's just hard to think in that context. Another reason is that they don't have an in-house engineering team.

There's also this very entrenched view that historically, people are okay going to branches. It was almost a benefit to talk to someone and get things done that way.

I think there are a bunch of reasons for it, and there are just risk-averse organizations that haven't got the need for innovation — that's also an aspect.

- Do you have a goal to obtain your banking license in the future?

- It is not in our short or medium-term plans. Still, we might pursue it in the future, especially if the regulatory environment in the US gets better for fin-tech companies obtaining bank licenses.

- I've heard that you've been working on Mercury silently for almost two years after raising the round. It almost feels like the opposite of the whole culture of the Bay Area — launch things fast, fix them later. What was the idea behind your approach?

- When you are doing something difficult where there are lots of incumbents, and you need to make a 10x product, it makes sense to work on it for one to two years to deliver the best thing. If you are in a new market that is not served by any product, you can do a quick MVP and launch early.

- Many banking startups have a very limited number of features when they launch (probably due to strict regulations), and then they slowly add new features month after month. What was surprising for me is that Mercury seemed like a fully-fledged bank with a lot of great features from day one. How did you accomplish this?

- The problem with banking is that even the infrequently used features can be deal-breakers because when you need them, you need them. We wanted customers to have a great experience using Mercury, so we had to provide all of these features.

- What's behind the name?

- Mercury is the Roman god of financial gain. With the Mercury brand, we want to combine the old with the new.

- Starting a bank is not the easiest thing to do. What would be your best advice to those who like working on hard things?

- Break it down into achievable smaller steps and figure out how to do those.