By Karen Kroll
Esquire Bank has built a national banking platform focused on the litigation market, with an emphasis on plaintiffs’ law firms that operate on a contingency-fee model, says Andrew Sagliocca, CEO and president of the $2.4 billion institution. The bank provides commercial banking and lending solutions tailored to the economics of these firms’ practices and case inventories, he says. Over the past five years, total assets of Esquire Finance Holdings have more than doubled, while net income has almost tripled.
Like Esquire, a notable number of banks are focusing on specific customer segments. Several broader shifts are driving this approach. The largest financial institutions can deploy hefty budgets for technology, marketing and other functions. Even sizable regional banks may struggle to compete against them. Rather than trying to be all things to all people, banks can identify customer segments in which they have an advantage, such as industry expertise, that provides a differentiated “right to win,” says Samit Soni, head of the Americas banking practice at Bain.
Moreover, this advantage can compound over time. “The more clients you serve in an industry, the more you understand its needs and the better you can tailor your products and technology, and the more valuable you can become to those clients,” Sagliocca says. Specialization has become one of Esquire Bank’s strongest competitive advantages, he adds.
Some banks are taking a “one bank approach” that encompasses both business and personal banking relationships, Soni says. This often lends itself to specialization.
A number of commercial lending teams at $189 billion Key Bank have focused on healthcare organizations, particularly since the bank’s 2017 acquisition of Cain Brothers, a healthcare-focused investment banking and public finance firm.
Key Bank has also developed expertise and products that can help physicians manage their personal finances. For example, many physicians graduate with significant debt, but also have high earning potential. While traditional mortgage underwriting often doesn’t capture this reality, the bank offers a specialized product that does, says Cathy O’Malley Kearney, EVP and national head of Key Private Bank.
Banks looking to expand beyond their traditional geographic base might also take a more niche approach. Zynlo Bank is a division of People’s Bank, which has focused on communities in western Massachusetts and Connecticut for almost 150 years, says Brittny Williams, SVP of digital growth. As a digital bank, Zynlo provides a national footprint while targeting millennials (generally those born between 1981 and 1996) and members of Gen Z (those born between about 1997 and 2012). Since its launch in 2020, Zynlo has grown to about $250 million in assets, Williams says.
Steps to specializing
A key starting point for specialization is accurate and consistent product and customer data. This enables the bank to understand who it currently serves, and provides a clear view of its customer relationships, says Drew Dado, senior manager in West Monroe’s banking practice. Armed with this information, the bank is better positioned to decide which groups it wants to reach, and how best to target them.
When identifying a niche, “it’s important to not simply let enthusiasm carry the day,” Soni says. Instead, assess whether the bank has a genuine advantage due to its specialized underwriting skills, industry expertise, or another capability. If the bank doesn’t have an advantage, determine the investment required to gain one. “Do the math,” Soni says.
Cultivating a specific industry market requires developing a thorough understanding of the prevailing business model and then using this expertise to develop the products, technology and people that will allow the bank to meet the needs of this market. “Choosing a niche is not enough,” Sagliocca says.
Esquire Bank offers a line of credit that’s designed for contingency-fee law firms, Sagliocca says. These firms often advance funds to cover their clients’ case costs during the litigation process, such as expenses for expert witnesses, medical records and investigations. By understanding this business model and evaluating each firm holistically, Esquire can offer a lending solution that allows law firms to borrow against their contingent assets — that is, their case costs and case inventory, he says. The law firms can invest in ongoing litigation, support their operations and pursue growth opportunities without waiting for their cases to be resolved.
Many physicians also can benefit from products and service tailored to their needs. As doctors advance in their careers, some decide to open their own practices. This often requires investing in equipment and real estate. Key Bank has expertise in practice acquisition and expansion and can help with real estate and equipment financing, as well as with working capital, Kearney says. Key’s business advisory services team can also help medical professionals determine the value of their practices so they can eventually transition out of them, if that’s their goal.
The role of financial education
Financial education can be critical in reaching some customer segments. Zynlo focuses on education and helping its millennial and Gen Z customers save for their future. “That’s where our passion is,” Williams says.
Zynlo clients often want to know how to manage their money, yet may not have stashed away enough to warrant a financial planner. Zynlo’s products are aimed at addressing these and other issues. Amounts deposited into Zynlo savings accounts can be allocated to different goals. This way, clients can progress toward a range of savings goals, without having to maintain multiple savings accounts.
Zynlo also offers a “roundup and match” feature. When a customer makes a debit purchase, it’s rounded to the nearest dollar and the extra change moved into savings. Zynlo then matches the round ups — what it calls a ZYNG.
Executing effectively on the basic blocking and tackling of banking is also critical to retaining customers. For Zynlo, this means focusing on a seamless digital user experience so customers can quickly and easily open and manage their accounts, Williams says.
Earning client’s trust
Before most clients will work with him, Orly Garcia, SVP and managing director of sports and entertainment with Orlando-based Cogent Bank, must earn their trust. Many athletes and entertainers “get guys calling them all the time, saying, ‘Hey, listen, I can represent you,’” Garcia says. Some callers may just like being associated with an athlete or entertainer they will later see on the football field or on stage.
The athletes themselves want to know a banker is authentic and truly has their backs, Garcia says. His clients have his personal number and can reach him anytime
Education is also critical, especially when working with college athletes who are earning name/image/likeness (NIL) money, Garcia adds. Often, this is the first time these athletes have had to manage sizable sums of money. His goal is to help educate not just the athlete, but often his or her parents and even grandparents.
Garcia also tries to help athletes who signed predatory contracts as teens. Sometimes 14– or 15-year-old baseball players from other countries sign contracts in which they promise an agent 20 percent of their earnings, including if they make it into the major leagues. “Often, it’s because they don’t know better and have limited options,” he says. When possible, Garcia tries to help them refinance the contracts.
Along with working with his clients one-on-one, Garcia participates in lunch-and-learns, panels, and other events focused on wealth management, estate planning, and similar subjects. “For me, it all starts and ends with education,” he says. “That’s the most important thing I think we can offer.”
Like Esquire and Key Bank, Cogent Bank offers products tailored to its customer segment. One example is contract-based financing. If a baseball player, for instance, has a five-year deal and wants to purchase a business, Cogent will evaluate the contract, including the guaranteed portion, and calculate a loan amount that makes sense, Garcia says.
Niche marketing
Targeting a niche customer segment can require a different marketing approach than a bank might use to reach a general audience. To engage its Gen Z and millennial audience, Zynlo uses a tone and aesthetic that’s more youthful than most traditional bank marketing. “It’s a little bit more colorful and we use more casual language,” Williams says.
Willams and her team analyze all paid media to ensure Zynlo is buying the right ads, in the right volumes and on the channels that will reach the bank’s target audience. “It’s very easy to spend a million dollars on paid media and not know what worked,” she says. Instead, Williams will evaluate the marketing results and then adjust as needed.
The trend to specialization appears likely to continue. Not many institutions can spread their financial investments across every customer segment, Soni says. Instead, banks benefit when they identify the segments in which they hold advantages, whether in expertise, products, or relationships, and focus there, he says.
Karen Kroll is a regular contributor to the ABA Banking Journal.
