By Roy Urrico
Recognizing a need to harmonize with the specific banking needs of musicians, Austin, Texas-based Nerve announced the creation of a neobank through a mobile app that merges user experience, data from streaming revenue sources and financial technologies, to help strengthen musical artist communities.
Nerve, which officially launched Sept. 15, 2021, offers a variety of customized tools to help English and Spanish-speaking musicians manage their finances. Nerve co-founders John Waupsh (CEO) and Ben Morrison (chief technology officer), drew upon their 15-plus years as consumer banking and fintech innovators to develop the service.
In the past, financial institutions offered services based on their local geographic needs. “Today, banking communities are not defined by rivers and railroads, but by the shared experience and goals of their customers,” said Waupsh. “Financial empowerment for musicians means giving them a banking platform that understands their unique needs with the tools to help them better manage their money.”
Waupsh emphasized, “Musicians and bands at all stages of their development need smart financial management, access to the real-time data that drives their business — not to mention two-minute digital account opening — and collaboration and business banking features to run their brands effectively.”
Striking a Banking Nerve with Rhythm
Waupsh described musicians as small business owners. In most cases a traditional institution will greet their desire to open a business account with a monthly rate quote and requests for forms and documentation. “And before, you know it, your eyes kind of glaze over,” he said.
That is a big reason many musicians pass up opening a business account and end up commingling earned income from gigs into their personal checking accounts. Expenses come from the same pot, as well. Waupsh explained, “It's really hard for (musicians) to have access to many traditional banking products and services.”
The Nerve neobank concept developed after musicians shared the financial challenges they encounter, many of which relate to blending money, the difficulty in opening a business account, or getting a loan, which some musicians need to fund tours. They asked questions like: Why can't I get the same loan rate the bank or credit union offers to everybody? Why is my rate suddenly three times more?
Because musicians receive compensation through a variety of oddball ways, they may not be able to present to banks and credit unions the typical credit data required to secure loans. “(To the financial institution) they often look like much riskier loans, even though they may not be,” Waupsh suggested.
Waupsh pointed out there are some financial institutions that cater to the entertainment community. “But their digital products are like off-the-shelf mobile banking products, just like every other credit union or bank has.” Other financial institutions do not have the technology built-in to help that musician really understand their business. “So, we started to realize we should incorporate data that involves their business, that's outside of the traditional banking world.”
Nerve services include:
· FDIC-insured (through Piermont Bank) business debit and savings accounts to help the musician separate business and personal financial life.
· Artist’s streaming and social follower data.
· A private networking feature to help professional musicians find each other, make payments, and collaborate.
· Free instant payments to anyone with a Nerve account.
· Access to 55,000 free ATMs (perfect for the traveling musician).
Nerve plans to announce additional features and services for musicians in the near future.
Showing Musicians the Money
“We are grabbing all this data - normally they would have to go to a bunch of different services - and bringing it all in for them,” Waupsh added. This ultimately helps musicians in a number of ways, such as perhaps paying a session drummer, kicking out an invoice or receiving payments from venues on the spot. “Right now, it looks a little bit like Venmo for musicians, but over the next month or so it's going to look a lot more like LinkedIn for musicians.” That is, a close network consisting of musicians directly paid through Nerve or invited to join. “These are not just random strangers; these are my friends.”
The app can also herd other payments, such as from direct deposits, selling stuff on Bandcamp or deriving extra income from a rideshare service. Nerve also offers the capability to round up, hold back a percentage of the deposits for value-added taxes, or assign an accountability partner that helps manage money. “That person has to approve you moving money from savings to checking,” Waupsh said.
The app even allows users to demonstrate Nerve to others in an anonymous mode. “If you want to demonstrate this app to your buddies, you just shake the device and it all goes to X's, and I could show you how cool it is without being embarrassed or without showing you how much cash I have.”
In addition, Waupsh revealed they are talking with performance rights organizations like BMI, ASCAP and SESAY. “All of these different groups pay artists. So, for instance, we have an organization that we cannot announce yet, but we will tell their artists,
‘Hey, you can get paid through PayPal, or you can get paid 10 days earlier if you open accounts with Nerve and choose to get paid through Nerve.”
“Our intention is to use the branded product to build trust with musicians and show them there is somebody who really cares about helping them building sustainable businesses,” Waupsh said. “We are super open to working with any company out there that has a base of musicians who are looking to either save money on paying their artists, or looking to just provide another service to their musicians helps them build sustainable careers.”
Why a Neobank?
Neobanks, also called “challenger banks” or online-only banks, are fintech firms that offer apps, software and other technologies to streamline mobile and online banking. Waupsh said to think of them as the customer service/marketing layer on top of a financial institution. Generally speaking, neobanks are not state-or federally-chartered banks. To provide the crucial security of FDIC coverage, neobanks partner with one or more chartered banks.
For Nerve, Piermont Bank, based in New York City, is Nerve’s U.S. bank partner and technology infrastructure provider. Waupsh revealed they were a perfect fit for Nerve, because Piermont, formed in 2019 as New York’s first new bank chartered since before the 2008 financial crisis, set out to focus on serving fintechs who work with businesses. “They were super-efficient, very technology focused, and that allows us to have a lower cost to serve so that we can offer these products for free to musicians.”
Credit unions also provided some inspiration for the conception of neobanks, according to Waupsh. “You look at the models of the credit unions where they were really very targeted and primarily based on a group.” Like in his book, Bankruption: How Community Banking Can Survive Fintech, Waupsh conveyed, “Credit unions knew the needs of members and their needs were usually pretty succinct. They were very dialed in, knew how to talk to them.” He explained community banks had the same foundation. “(Local banks) knew the needs of that community.”
Credit unions, however, started expanding into community charters and looking more like traditional banks; and community banks started branching out into urban areas that had much more diverse needs, explained Waupsh. “Now somebody did not need an Ag loan, they needed an auto loan; customers did not need a silo loan anymore, they needed need to buy an RV.” “Everything started to look a little bit different,” said Waupsh, adding the test for these financial institutions became how do you relate. “Suddenly a marketer's job becomes a heck of a lot more challenging.”
Waupsh described how the early days of neobanks focused on digital enablement for the mass market. However, over the last year or so the emphasis changed. “What you're seeing now is the next wave of those neobanks, where they're going after specific communities, not just from a marketing perspective, but from a services perspective.”
Many fintech firms observed a community or group lacking financial services from traditional establishments and set out to fill those gaps. That might include better lending access, onboarding instruments, or business-oriented tools and services. “What they are really taking, quite frankly, is an age-old model in banking: Find a group that has very particular needs and solve them. But doing it in a very digital way,” Waupsh said.
While Nerve centers on musicians, a number of neobanks focus on other diverse groups, such as climate/green (Aspiration, Bunq, Current, Ando); Black/Latino/Asian/Muslim (Greenwood, First Boulevard, Wicket, Viva First, Niyah, C;heese); kids and teens, (FamPay, Spriggy, Greenlight); and LGBT plus (Pride Bank, Superbia, Daylight).
Fulfilling Global Financial Needs for Musicians
Waupsh wants Nerve to become a global institution. “The world of musicians is our target market, which is over 100 million worldwide. We just really want to go deep in the music space.” He said they have heard from a number of potential international partners that want to offer Nerve through a local bank in their country, but first Nerve expects to expand into Canada, then Mexico over the next couple of months.
Nerve Tech Inc., which owns Nerve, also has a beta project called Nerve.fm, a direct-to-fan streaming app that allows creators to earn subscription revenue from all of their self-generated audio and video content.
“It’s not like Spotify, where you just subscribe because you like music. It’s more like Patreon, it’s offered directly by the musician to their fans for $5 per month, and the fan subscribes on a particular musician’s landing page,” explained Waupsh. Fans can also subscribe for $10 per month and access all the of the content and artists on Nerve.fm. Musicians keep up to 80% of the generated revenue, and all the user data as well. “It helps make musicians a heck of a lot more money than putting their music on something like Spotify.”
Waupsh is also a strategic advisor to financial service firm Kasasa, where he previously served as chief innovation officer; and is founder and CEO of Preservation Project, which specializes in recovering and curating obscure music from the 1960s, 1970s and 1980s.