Mercantile Bank of Michigan Leverages Unique Partners in Online and Mobile

John Schulte, Mercantile Bank's CIO, is never shy about partnering with new companies that have little or no experience working with banks.

John Schulte, Mercantile Bank of Michigan's CIO, was hired as employee No. 3 when the bank was formed in 1997 by a number of employees who had formerly worked at First Michigan Bank before it was acquired by Huntington Bank. "We felt strongly that there needed to be a locally based Michigan bank focused on serving the community," Schulte recalls.

Mercantile Bank ($1.4 billion in assets) didn't invest in an extensive branch network from the beginning, which has required the bank to emphasize its digital delivery channels, Schulte shares. In the years since the financial crisis, much of the industry has also rolled back branch networks and invested in online and mobile channels. To stay competitive with its digital services, Schulte has developed a strategy of partnering early with new innovative companies that can bring best-of-breed solutions to the bank.

For example, Mercantile was the first bank to partner with PayPal to bring peer-to-peer payments to its customers through the online and mobile channel. In 2010, when the partnership was formed, most banks didn't view PayPal as a potential partner, Schulte notes. But Mercantile was able to build a successful partnership with the payments company, he says. Nearly 10% of the bank's mobile banking users take advantage of PayPal's service, and Mercantile has seen growing usage of the P2P service each month since its rollout, he reports.

Last year, Mercantile also became the first bank to partner with Bill.com for online accounts receivables and accounts payables services, Schulte adds, making it easier for Mercantile's small-business clients to manage their cash flow.

"I think the most successful strategy is to be on the lookout for innovative organizations that are at the forefront of where things are headed and are willing to become partners with banks," Schulte says.

Being the first bank to experiment with a nontraditional partner can be risky, but it also provides benefits, such as a lower cost, to Mercantile that Schulte says are worth the gamble. "Companies are willing to partner and deliver something together to first beta testers and give them a break on the cost it takes to build the interfaces, processes or technology behind the scenes," he says.

Being an early partner also means that Mercantile gets some input in how the product is put together and deployed, Schulte adds. "Being on the front end, you have more influence over the product or service than if you were the 100th bank to sign up for it," he says.

Schulte's personal use of technology also influences his vision of how Mercantile can improve its digital banking services. As a father with a daughter in graduate school, he makes frequent use of personal financial management (PFM) tools to run his own family's finances. Schulte has also worked to offer quality PFM tools to Mercantile's online banking customers through partnerships. The bank's first foray into online PFM was with FinanceWorks, a PFM application developed by Digital Insight. But the bank is now in the process of rolling out MoneyDesktop's PFM offering, which Schulte says he feels is a superior product.

His own tastes in PFM tools as a user have also colored his views on what makes a quality PFM product. "I want to see my entire financial picture in one place. And I want to manage all of my short-term financial needs -- budgeting, cash flow, expense categorization -- but I also want to see what my long-term financial outlook is," he says.

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By offering a PFM product that does all those things, Mercantile can deepen its customer relationships and become the center of its customers' financial lives, Schulte says. "We want our customers to think of Mercantile as their primary bank," he says.

PFM tools have become much more sophisticated in the past few years, and their potential could be greatly enhanced with integration into mobile wallets, Schulte adds. "Then you're getting into real-time budgeting. You'll be able to see how a particular purchase on a whim might change your budget in real time," he says. "I think when you put that in front of consumers, they will see a real value in it."

[The Death of the NFC Mobile Wallet?]

And Schulte has already gotten to work on developing partnerships in the mobile wallet space. The bank has formed partnerships with PayPal, V.me from Visa and with Google Wallet, he says. "We talk regularly with them about what they're doing in the mobile wallet space," he reports. "And if Apple would ever return a phone call, I'd love to talk to them, you know."

Proactively reaching out to new partners has paid off for Schulte, and he says his best advice for current or aspiring CIOs would be to never hesitate to make a cold call to a potential partner and present new ideas. Which means Apple probably can expect some more phone calls.

Personal Snapshot

John Schulte CIO

Mercantile Bank of Michigan

Years at bank: 16

Years in current position: 16

Education: BA in finance from Western Michigan University, ABA Stonier Graduate School of Banking

Positions held: Credit manager, commercial lender at FMB First Michigan Bank (now Huntington), 1994-1997; CIO/senior VP and founding member of Mercantile Bank of Michigan, 1997-present

Hobbies: Traveling and spending time with his wife and two daughters

Jonathan Camhi has been an associate editor with Bank Systems & Technology since 2012. He previously worked as a freelance journalist in New York City covering politics, health and immigration, and has a master's degree from the City University of New York's Graduate School ... View Full Bio