Successful people reimagine how things should be done, according to entrepreneur Mark Cuban. “They don’t ask people what they would want. They envision a complete reapplication. Then they decide what to do with what they just created.” With that definition, Totem Bank could end up being the poster child for entrepreneurial success.
Six years ago, Amber Buker, a newly-minted lawyer, had dreams of home ownership. She went to her bank to inquire about a down payment mortgage program for Native Americans. The first person she talked to said the program didn’t exist, the second knew of the program but couldn’t figure out if Buker qualified, and the third person wasn’t willing to look into it. That experience of trying to access tribal benefits as it related to banking was the genesis for a neobank that caters to Native Americans. Buker, co-founder of Totem along with Richard Chance, decided “let’s just build the bank that we need.”
“Our people need help with basic building blocks of banking and credit,” said Buker, an enrolled member of the Choctaw Nation of Oklahoma. “That’s how we’re building our product, walking every step of that path with customers.”
Some Native Americans will travel up to 60 miles to get to an ATM, three times further than the average non-indigenous American. However, 96 percent of Native Americans own smartphones that are capable of doing transactions, Buker said. So a mobile banking app that allows them to pay bills online, transfer money or check their accounts “is huge in solving that equation for our people.” Totem also will be working with Allpoint because its ATMs are in places like Walgreens, CVS and Walmart, “places that are close to people on reservations.”
The neobank also will offer secured credit cards to help customers build credit. Native Americans are “more likely to be credit invisible than [have] bad credit [because] they use cash to buy,” Buker said. “We’re starting at a very foundational level when it comes to building trust and assets.” Later Totem will look at offering the HUD 184 mortgages that Buker had found so elusive.
Totem already has begun coordinating with various tribes to have the Totem debit card double as a tribal identification card, offering a tab in the app that highlights federal programs and benefits for tribal members. “We also plan to have B2B revenue with tribal partnership. We’ll be offering a white-label product — offer our accounts using [the tribes’] names, colors, native language,” Buker said, allowing the tribes to communicate with members located anywhere in the United States through the app. Totem plans to move into tribal benefit payouts and payroll disbursements, also, an opportunity that is largely untapped. “I think working with tribes is a missed opportunity,” Buker said. “Tribes have these really sophisticated economic development engines.
“The implications of sovereignty and what that means for product development is incredible,” she said. “You hear scary things about trust lands, sovereign immunity. When you get past that” a new vista opens up. “Get a good lawyer,” she urges, because “deals are done in Indian country every day.”
Initially, Totem will be making its money through a negotiated “upward-bound interchange split” with its partner, First Pryority Bank, headquartered in Tulsa, Okla. “We tried hard to find a Native bank that could do that for us,” but none were properly equipped, she said.
The partnership with the $388 million bank gets Totem access to FDIC insurance and the ability to issue Visa-branded debit cards.
First Pryority has been working with fintechs for about two-and-a-half years. “We’ve learned a lot,” said Gentry Parker, bank executive vice president and chief operating officer. “We don’t do a lot of the technical IT stuff — just from an operational side. Reconciliation and the ACH side are the big things.”
Parker said that after due diligence is done, working with fintechs is “not a big lift on us other than weekly meetings and [making sure] that they understand our compliance policies.” The process doesn’t even require formal regulatory approval, but the regulators do need to be informed, he said. In working with fintechs, “we haven’t seen a downside yet,” he said.
Working with Totem also provides advantages for First Pryority. The partnership “makes sense for us as a smaller community bank. It’s hard to keep up with the technology the big boys have,” Parker said. “Through [Totem’s] tech, we can reach out to the Native community. It allows us to gain some deposits … With less manpower, we gain a bigger footprint.”
The bank charges a processing fee for debit transactions and also will receive a portion of the interchange fee, which is split between them, Totem, and partner tribes which receive a portion every time a Totem card is swiped by one of their enrolled tribal members.
“We think [Totem has] hit a great niche in the market they’re going after, especially in Oklahoma. We’re really excited about the program and the reach that it can have,” Parker said.
The neobank was recently capitalized with $2.2 million with Raven Indigenous Partners out of Canada as the lead investors. “This is only their third investment in the U.S.,” Buker said. “It took a Native investor who knows the tribal market, the economic development side, to be able to look at us and see the promise of what we can do.”