KeyBank on Tuesday launched Laurel Road for Doctors, a digital bank that offers tailored financial services to healthcare professionals.

The launch, which the regional bank said was forthcoming during its fourth-quarter earnings call in January, comes nearly two years after KeyBank purchased the student loan refinancing startup Laurel Road for an undisclosed amount.

KeyBank started working on its plans to launch the digital bank for Laurel Road’s customers 15 months ago, with the goal to expand the platform nationally, said Jamie Warder, executive vice president and head of digital banking at the Cleveland-based bank.

"Our goal is to, for the first time, extend KeyBank’s consumer bank beyond our footprint," he said. "So we are providing these banking services for doctors and dentists, and eventually healthcare more broadly, in all 50 states."

The bank said it has been studying the demographic closely so it can tailor its banking services to consumers in the medical field. 

"They have an interesting income and debt profile that's different than many professions, and like many of us, they're very short on time," Warder said. "They're also used to having great tools that help them with their jobs."

The digital account’s features include a credit card with 2% cash back to pay down student loans, discounts for bundling savings accounts with student loan refinancing, and a financial insights feature that allows doctors to compare against those in similar specialties on salary and debt. 

The account also offers customers educational content and access to custom insights for budgeting, in addition to perks such as discounts on meal and exercise programs and scrubs. 

"We've created a premium care center for them that will allow them to get live service any time they need it very quickly. We'll take on the work for the busy doctors and dentists, and there’s certainly a portfolio of digital tools that allow them to self-service if that’s how they choose to interact with us," Warder said.

KeyBank expects to add checking and retail investments to the platform this year.

The bank plans to eventually expand the digital banking services to a market that includes pharmacists, physician assistants, nurses and therapists, Warder said.

Bigger ambitions

Laurel Road’s existing partnerships with some of the nation's largest medical associations and hospitals have brought high-quality loans to KeyBank following the 2019 acquisition, Warder said. 

The subsidiary originated more than $2.3 billion in loans last year, including $590 million in loans last quarter, KeyBank Chairman and CEO Chris Gorman said during the bank's fourth-quarter earnings call.

But the bank’s ambitions for Laurel Road have always stretched beyond student loan origination, Warder said.

"We actually identified very early on that the bigger opportunity was how Laurel Road intersected with our strategy," Warder said. 

Warder said the bank is positioning Laurel Road for Doctors to succeed in three key areas: targeted scale, digital and primacy.

"We want to choose specific areas where we want to compete. Those are going to be a bit narrower, but we just know if we can pick those narrow spots, we can compete to win," Warder said.

Other areas where KeyBank has been successful with a narrowed focus include low-income housing and commercial real estate financing, Warder said. 

"When we've chosen our spots, we do really well and we can punch way above our weight," he said. "I think there's a lot of mileage in extending our healthcare focus. Does this mean we would ever pick another segment to focus on? Sure, we might, but the targeted scale strategy says, 'Stay narrow, stay focused.'"

The launch of the platform also fits with the bank’s aspiration to be "digitally progressive," Warder said.  

"We really believe that our clients want us to be more and more digital," he said. "We have an obligation to them to make Key a digital bank for them and provide all of the digital tools and capabilities they need."

The bank also aims to be its customers’ primary bank, Warder said, and the launch of a full-service digital platform for Laurel Road’s existing users aligns with that strategy.

More deals to come

Warder said KeyBank will continue to pursue additional acquisitions similar to its Laurel Road deal, transactions that help it achieve targeted scale as it looks to remain competitive.

KeyBank purchased financial management app HelloWallet in 2017, and closed this month on its purchase of McLean, Virginia-based analytics and data science firm AQN. 

"Not that we would never consider a traditional bank [as an acquisition target]," Warder said. "Our eyes are always open, but we're also looking for these nontraditional pieces that fit our targeted-scale strategy."