The Boston start-up PerkStreet Financial failed last year to attract enough customers to compete against traditional banks, but the technology-driven venture did gain an unexpected fan: a nearly 200-year-old, bricks-and-mortar bank.
Eastern Bank, the state’s largest community bank, said Monday that it has hired the financial services disruptors behind PerkStreet to help it launch an initiative to bring new technology products into the staid world of banking.
Eastern’s new technology laboratory will explore ways to use the massive amount of customer data that the bank collects to help come up with better and more appealing services and products. In addition to new products, the goal of Eastern Labs, will be to change the bank’s more conservative culture, said Robert Rivers, Eastern’s president.
Eastern is spending more than $10 million on its technology initiatives, including the lab, Rivers said, and the venture’s success will be based on whether the bank is able to, “build cool stuff,” and “buy cool stuff.”
Dan O’Malley, PerkStreet’s former chief executive, will head Eastern Labs and become the bank’s executive vice president and chief digital officer. Three other former PerkStreet employees also will join Eastern. About 80 existing employees from the bank’s product management, mobile, online, and customer service departments also will be incorporated into the lab.
When it launched six years ago, Boston-based PerkStreet was among a new breed of financial companies that aimed to use the Internet and other technologies to disrupt the traditional banking model and capitalize on the consumer rage over bank-card fees. The company offered online checking accounts and rewards that paid 2 percent cash back on debit card purchases to checking account customers who maintained balances of $5,000 or more than 1 percent for other customers.
But it folded last year after failing to attract enough new investors. The company’s strategy was to profit from fees that merchants pay banks each time customers use their debit cards. But profits were limited by the low-interest rate environment and new laws that capped the fees merchants pay for debit-card swipes.
PerkStreet’s rewards program is unlikely to be adopted by Eastern Bank, executives said. But the bank hopes to use the company’s data expertise.
For example, if banks know a lot about their customer’s financial health, they can do more to structure loans and interest rate offers to individuals, O’Malley said. Banks can also start developing technology products to help businesses gain new customers, he said.
“The revolution in business banking hasn’t happened yet,” O’Malley said.
But O’Malley said that the PerkStreet experience proved that changing the banking industry from the outside is difficult.