Digitizing Documentation: The Missed Opportunity in Banking

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To keep up in an increasingly competitive world, banks have embraced the need for digital transformation, upgrading their technology stacks to automate processes and harness data to help them grow and find operational efficiencies.

However, while today’s community and regional banks are increasingly making the move to digital, their documentation and contracting are still often overlooked in this transformation – and left behind. This “forgotten transformation” means their documentation remains analog, which means their processes also remain analog, increasing costs, time, data errors and risk.

What’s more, documentation is the key that drives the back-office operations for all banks. Everything from relationship management to maintenance updates and new business proposals rely on documents. This is especially true for onboarding new clients.

The Challenges of Onboarding
Onboarding has been a major focus of digital transformation efforts for many banks. While account opening has become more accessible, it also arguably requires more customer effort than ever. These pain points are often tied back to documentation: requesting multiple forms of ID or the plethora of financial details needed for background verification and compliance. This creates friction at the first, and most important, interaction with a new customer.

While evolving regulatory concerns in areas such as Know-Your-Customer rules as well as Bank Secrecy Act and anti-money laundering compliance have helped lower banks’ risks, it often comes at the expense of the customer experience. Slow and burdensome processes can frustrate customers who are accustomed to smoother experiences in other aspects of their digital lives.

The truth is that a customer’s perception of the effort required to work with a bank is a big predictor of loyalty. Ensuring customers have a quick, seamless onboarding experience is critical to building a strong relationship from the start, and better documentation plays a key role in better onboarding.

An additional challenge for many banks is that employees see onboarding and its associated documentation as a time consuming and complicated process from an operations perspective. It can take days or even weeks to onboard a new retail customer and for business accounts it can be much worse; a Deloitte report suggests it can take some banks up to 16 weeks to onboard a new commercial customer. Most often, the main problems in onboarding stem from backend processes that are manual when it comes to documentation, still being largely comprised of emails, word documents and repositories that sit in unrelated silos across an organization, collecting numerous, often redundant, pieces of data.

While all data can be important, better onboarding requires more collaboration and transparency between banks and their customers. This means banks should be more thoughtful in their approach to onboarding, ensuring they are using data from their core to the fullest to reduce redundant and manual processes and to make the overall process more streamlined. The goal is to maximize the speed for the customer while minimizing the risk for the bank.

Better Banking Through Better Documentation
Many banks do not see documentation as a data issue. However, by taking a data-driven approach, one that uses data from the core and feed backs into it, banks transform documents into data and, in turn, into an opportunity. Onboarding documents become a key component of the bank’s overall, end-to-end digital chain. This can have major impacts for banks’ operational efficiencies as well as bottom lines. In addition to faster onboarding to help build stronger customer relationships, a better documentation process means better structured data, which can offer significant competitive advantages in a crowded market.

When it comes to documentation capabilities, flexibility is key. This can be especially true for commercial customers. An adaptable solution can feel less “off the shelf” and provide the flexibility to meet individual client needs, while giving a great customer experience and maintaining regulatory guidelines. This can also provide community bankers with the ability to focus on what they do best, building relationships and providing value to their customers, rather than manually gathering and building documents.

While digitizing the documents is critical, it is in many ways the first step to a better overall process. Banks must also be able to effectively leverage this digitized data, getting it to the core, and having it work with other data sources.

Digital transformation has become an imperative for most community banks, but documentation continues to be overlooked entirely in these projects. Even discounting the operational impacts, documents ultimately represent the two most important “Rs” for banks – relationships and revenue, which are inextricably tied. By changing how they approach and treat client documentation, banks can be much more effective in not only the customer onboarding process, but also in responding to those customer needs moving forward, strengthening those relationships and driving revenue now and in the future.

3 Reasons to Add SBA Lending

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There were nearly 32 million small businesses in the United States at the end of the third quarter in 2020, according to the Small Business Administration.

That means 99% of all businesses in this country are small businesses, which is defined by the agency as 500 employees or fewer. They employ nearly 50% of all private sector employees and account for 65% of net new jobs between 2000 and 2019.

Many of the nation’s newest businesses are concentrated in industries like food and restaurant, retail, business services, healthy, beauty and fitness, and resident and commercial services. This is a potentially huge opportunity for your bank, if it’s ready and equipped for when these entrepreneurs come to you for financing. But if your bank is not prepared, it may be leaving serious money on the table that could otherwise provide a steady stream of valuable loan income.

That’s because these are the ideal customers for a SBA loan. If that’s not something your bank offers yet, here are three reasons to consider adding SBA lending to the loan portfolio this year.

1. New Avenue for Long-Term Customers
Small business customers often provide the longest-term value to their banks, both in terms of fee income generated and in dollars deposited. But not having the right loan solution to help new businesses launch or scale means missing out on a significant and lucrative wave of entrepreneurial activity. That’s where SBA lending comes in.

SBA loans provide the right solution to small businesses, at the right time. It’s an ideal conversation starter and tool for your bank team to turn to again and again and a way to kick off relationships with businesses that, in the long run, could bring your bank big returns. It’s also a great option to provide to current small business customers who may only have a deposit relationship.

2. Fee Income With Little Hassle
In addition to deeper relationships with your customers, SBA lending is an avenue to grow fee income through the opportunity for businesses to refinance their existing SBA loans with your bank. It broadens your portfolio with very little hassle.

And when banks choose to outsource their SBA lending, they not only get the benefit of fee income, but incur no overhead, start up or staffing costs. The SBA lender service provider acts as the go-between for the bank and the SBA, and they handle closing and servicing.

3. Add Value, Subtract Risk
SBA loans can add value to any bank, both in income and in relationship building. In addition, the SBA guarantees 75% to 85% of each loan, which can then be sold on the secondary market for additional revenue.

As with any product addition, your bank is probably conscientious of the risks. But when you offer the option to refinance SBA loans, your bank quickly reduces exposure to any one borrower. With the government’s guarantee of a significant portion, banks have lots to gain but little to lose.

Why There Is No ‘Back to Normal’ for Banks

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In the past few weeks, I’ve started to go back into the office more frequently. Despite any inconveniences, it’s refreshing and invigorating to see colleagues and clients in person again. It’s clear that most of us are ready for things to go back to normal.

Except, they most likely won’t.

Last year was largely favorable for banks, with industry ETFs outperforming the broader market and rebounding from 2020’s contractions. Larger banks with diversified revenue sources — including mortgage lending and banks with active capital markets or wealth management businesses — did particularly well.

Now, with rising inflation and a rapidly shifting geopolitical landscape, there may be different winners and losers. But after two years of the global pandemic, we have learned what the future of work could look like, and how much the environment will continue to evolve. The recent challenges in Eastern Europe remind us that ongoing change is the only certainty.

In PwC’s latest look at the banking environment, Next In Banking and Capital Markets, we see investors being far more interested in growth than in saving a few dollars. And we see potential for that growth across the banking industry — regardless of size, geography or customer segment. In particular, we see five opportunities for institutions that focus on digital transformation, build trust — with a particular emphasis on environmental, social and governance (ESG) issues, win deals, review and respond to regulation, and adopt cloud technology.

Digital Transformation: My colleagues researched how consumer behavior has changed over the past two years. We found that the pandemic significantly accelerated the trend toward digital banking — and many banks weren’t prepared. The implications go far beyond adding a peer-to-peer payment tool to your consumer app. In fact, nearly every bank should be thinking about developing a growth strategy based on a customer focus that is much sharper than “They live near our branches” or “Businesses need access to capital.” Digital transformation is here to stay; aligning to a disciplined growth strategy can help make technology investments successful.

Environmental, Social and Governance (ESG) Frameworks: Community reinvestment, diversity initiatives and strong governance models are not new issues for banks. In fact, the industry has been laser-focused on building stakeholder trust since the 2008 financial crisis. But with a solid baseline of social and governance investments, banks have now shifted their focus to helping define and deliver commitments around the environment, namely climate change. Banking industry leaders are looking for more effective ways to integrate climate risk management throughout their operations. But the data we use to report on ESG issues is very different from typical financial metrics, and most firms struggle to tell their story. Leading firms can help enhance transparency with trustworthy data, while developing strategies to drive their climate agenda.

Deals: The industry experienced historic rates of bank mergers and acquisitions last year — everything from some foreign banks stepping away from the U.S. market, to regional bank consolidation, to banks of all sizes adding specialty businesses. But with valuations at current levels, corporate development teams should get far pickier to make the numbers work. Increasingly, this may require a greater emphasis on creating growth than on finding cost synergies. To do that, banks and their leaders need to have a very clear idea of whom they’re serving, and why.

Regulation: Evolving concerns over the global economy have resulted in a different approach to regulation. While this does not represent a 180° turn from where we had been, it is clear that banks have been attracting new attention from regulators and legislators, especially with respect to consumer protection, cybersecurity, climate risk, taxation and digital assets. Banks should be particularly diligent about control effectiveness, as well as identifying effective ways to collect, analyze and report data. But regulation isn’t just a matter of defense: The more banks understand and manage risk, the more they can take advantage of “new economy” opportunities like mitigating climate change and digital assets.

Cloud: Virtually every bank has moved some of its work to cloud-based systems. But with definitions of “cloud” as imprecise as they are, it is no wonder that many executives have not yet seen the value they had hoped for. If you set out to consolidate data centers by moving some background processing to the cloud, don’t expect major rewards. But emerging cloud capabilities can, for example, help banks improve the customer experience by being more agile when responding to client demands — and this could be a game changer. Today’s cloud technology can help institutions rethink their core business systems to be more efficient. It can even help solve new problems by more efficiently integrating services from a third party. This year, we’re likely to see some banks pull farther ahead of their peers — perhaps, even leapfrogging competitors — by making strategic choices about how to use cloud technology to jump-start digital transformation, rather than just as a way to manage costs.

Last year, I made the case that banks needed to stay agile, given economic uncertainty and the rapid pace of change. This is still the case. But bankers and boards should also keep their eyes on the prize: Whether you are a community bank, a large regional institution or a global powerhouse, you will have plenty of chances to grow this year. The five opportunities described above can offer significant value to banks that adopt them strategically.

The Future of Banking in the Metaverse

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From Nike’s acquisition of RTFKT to Meta Platform’s Chairman and CEO Mark Zuckerberg playing virtual pingpong, the metaverse has evolved from a buzzword into a way of doing business.

The metaverse could become a “river of entertainment in which the content and commerce flow freely,” according to Microsoft Corp. Chairman and Chief Executive Satya Nadella in “The Coming Battle Over Banking in the Metaverse.” Created by integrating virtual and augmented reality, artificial intelligence, cryptocurrency, and other technologies, the metaverse is a 3D virtual space with different worlds for its users to enhance their personal and professional experiences, from gaming and socializing to business and financial growth.

That means banking may ultimately come to play a significant role in the metaverse. Whether exchanging currencies between different worlds, converting virtual or real-world assets or creating compliant “meta-lending” options, financial institutions will have no shortage of new and traditional ways to expand their operations within this young virtual space. Companies like JPMorgan Chase & Co. and South Korea’s KB Kookmin Bank already have a foot in the metaverse. JPMorgan has the Onyx Lounge; Kookmin offers one-on-one consultations. However, banks will find they cannot operate in their traditional ways in this virtual space.

One aspect that might experience a drastic change is the branches themselves. The industry should expect an adjustment period to best facilitate the needs of their metaverse banking customers. These virtual bank branches will need to be flexible in accepting cryptocurrencies, non-fungible tokens, blockchains and alternative forms of virtual currency if they are to survive in the metaverse.

However, not everyone agrees that bank branches will be that relevant in the metaverse. The idea is that online banking already accomplishes the tasks that a branch located in the metaverse might fulfill. Another issue is that there is little current need for bank branches because the migration to the metaverse is nascent. Only time will tell how banking companies adapt to this new virtual world and the problems that come with it.

Early signs point to a combination of traditional and new banking styles. One of the first products from the metaverse is already shining a light on potential challenges: The purchase and sale of virtual space has significantly changed over the past year. In Ron Shevlin’s article, “JPMorgan Opens A Bank Branch In The Metaverse (But It’s Not What You Think It’s For),” he writes, “the average investment in land was about $5,300, but prices have grown considerably from an average of $100 per land in January to $15,000 in December of 2021, with rapid growth in the fourth quarter when the Sandbox Alpha was released.”

The increasing number of virtual real estate transactions also means the introduction of lending and other financial assistance options. This can already be seen with TerraZero Technologies providing what could be described as the first mortgage. This is just the beginning as we see opportunities for the development of banking services more clearly as the metaverse, its different worlds and its functions and services mature.

Even though the metaverse is still young and there are many challenges ahead, it is clear to see the potential it could have on not only banking, but the way we live as we know it.

Is Crypto the Future of Money?

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Regardless of their involvement in the financial services industry, anyone paying attention to the news lately will know that cryptocurrencies are making headlines.

As the worldwide economy becomes less predictable, regulatory agencies are wondering whether cryptocurrencies could be used to transfer money if other assets become subject to international sanctions, likening crypto to gold. According to an early March article from CNN Business, the price of gold has spiked and could surpass its all-time high before long, while bitcoin is trading 4% higher.

Crypto has also been in the news because of an executive order recently issued by President Joe Biden. The order requires the Department of the Treasury, the Department of Commerce and other agencies to look into and report on the “future of money,” specifically relating to cryptocurrencies.

As part of that order, those agencies need to outline the benefits and risks of creating a central bank digital currency (CBDC), informally known as the digital dollar. The digital dollar can be thought of as the Federal Reserve’s answer to crypto. It would act like cryptocurrency, with one big difference: It would be issued and regulated by the Fed.

How would this work? One idea involves government-issued digital wallets to store digital dollars. While the U.S. is not likely to take imminent action on creating a CBDC — Congress would need to approve it — it would not be a big leap to sell this concept to the American public. The Federal Reserve reports that cash use accounted for just 19% of transactions in 2021. Digital payments, meanwhile, are up. According to McKinsey’s 2021 Digital Payments Consumer Survey, 82% of Americans used digital payments last year, which includes paying for purchases from a digital wallet like Apple Pay. Using digital dollars, in a similar kind of digital wallet, wouldn’t be all that different. The future state of digital currency and the current state of online payments, credit cards, buy now, pay later purchases and more are, in effect, exchanging bills and notes for 1s and 0s.

What this means for financial institutions is a need to focus on education and information, and an ear toward new regulations.

Educating account holders will be vital. Pew Research reports that 86% of Americans are familiar with cryptocurrencies, while 16% say they have invested. The reason more people haven’t invested? They don’t fully understand it. This is a huge growth opportunity for banks to partner with account holders as a trusted voice of information, within the confines of current regulations.

  • Use account holder transaction data to spot trends in cryptocurrency purchases within their ecosystem and inform them on how to communicate and educate account holders.
  • Task an employee to become the in-house cryptocurrency expert, in the ins and outs of crypto’s current and future state.
  • Develop a section on the website with information for account holders.
  • Create an email campaign that shows account holders a history of investment product adoption with links back to the bank’s website for resources about the latest news on cryptocurrencies. Even if the institution doesn’t facilitate sales, it is important to set the institution up as a trusted resource for industry data.

Crypto fraud is rampant because the majority of people still aren’t quite sure how crypto works. That’s why it’s so important for financial institutions to be the source of truth for their account holders.

Further, fintech is already in the crypto arena. Ally Bank, Revolut, Chime and others are working with their account holders to help facilitate crypto transactions. And even established institutions like U.S. Bank are offering cryptocurrency custody services.

Data will be an important key. Pew Research reveals that 43% of men ages 18 to 29 have invested in, traded or used a cryptocurrency. But what does that mean for your specific account holders? Look closely at spending data with a focus on crypto transactions; it’s an extremely useful metric to use for planning for future service offerings.

The role that traditional financial institutions will play in the cryptocurrency market is, admittedly, ill-defined right now. Many personal bankers and financial advisors feel hamstrung by fiduciary responsibilities and won’t even discuss it. But U.S. banking regulators are working to clarify matters, and exploring CBDC, in 2022.

Is cryptocurrency the future of money? Will a digital dollar overtake it? It’s too early to tell. But all signs point to the wisdom of banks developing a crypto and CBDC strategy now.

3 Ways to Drive Radical Efficiency in Business Lending

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Community banks find themselves in a high-pressure lending environment, as businesses rebound from the depths of the pandemic and grapple with inflation levels that have not been seen for 40 years.

This economic landscape has created ample opportunity for growth among business lenders, but the rising demand for capital has also invited stiffer competition. In a crowded market, tech-savvy, radically efficient lenders — be they traditional financial institutions or alternative lenders — will outperform their counterparts to win more relationships in an increasingly digitizing industry. Banks can achieve this efficiency by modernizing three important areas of lending: Small Business Administration programs, small credits and self-service lending.

Enhancing SBA Lending
After successfully issuing Paycheck Protection Program loans, many financial institutions are considering offering other types of SBA loans to their business customers. Unfortunately, many balk at the risk associated with issuing government-backed loans and the overhead that goes along with them. But the right technology can create digital guardrails that help banks ensure that loans are documented correctly and that the collected data is accurate — ultimately reducing work by more than 75%.

When looking for tools that drive efficiency in SBA lending, bank executives should prioritize features like guided application experiences that enforce SBA policies, rules engines that recommend offers based on SBA eligibility and platforms that automatically generate execution-ready documents.

Small Credits Efficiencies
Most of the demand for small business loans are for credits under $100,000; more than half of such loans are originated by just five national lenders. The one thing all five of these lenders have in common is the ability to originate business loans online.

Loans that are less than $100,000 are customer acquisition opportunities for banks and can help grow small business portfolios. They’re also a key piece of creating long-term relationships that financial institutions covet. But to compete in this space, community institutions need to combine their strength in local markets with digital tools that deliver a winning experience.

Omnichannel support here is crucial. Providing borrowers with a choice of in person, online or over-the-phone service creates a competitive advantage that alternative lenders can’t replicate with an online-only business model.

A best-in-class customer experience is equally critical. Business customers’ expectations of convenience and service are often shaped by their experiences as consumers. They need a lending experience that is efficient and easy to navigate from beginning to end.

It will be difficult for banks to drive efficiency in small credits without transforming their sales processes. Many lenders began their digital transformations during the pandemic, but there is still significant room for continued innovation. To maximize customer interactions, every relationship manager, retail banker, and call center employee should be able to begin the process of applying for a small business loan. Banks need to ensure their application process is simple enough to enable this service across their organization.

Self-Service Experiences
From credit cards to auto financing to mortgages, a loan or line of credit is usually only a few clicks away for consumers. Business owners who are seeking a new loan or line of credit, however, have fewer options available to them and can likely expect a more arduous process. That’s because business banking products are more complicated to sell and require more interactions between business owners and their lending partners before closing documents can be signed.

This means there are many opportunities for banks to find efficiency within this process; the right technology can even allow institutions to offer self-service business loans.

The appetite for self-service business loans exists: Two years of an expectation-shifting pandemic led many business borrowers to prioritize speed, efficiency and ease of use for all their customer experiences — business banking included. Digitizing the front end for borrowers provides a modern experience that accelerates data gathering and risk review, without requiring an institution to compromise or modify their existing underwriting workflow.

In the crowded market of small business lending, efficiency is an absolute must for success. Many banks have plenty of opportunities to improve their efficiency in the small business lending process using a number of tools available today. Regardless of tech choice, community banks will find their best and greatest return on investment by focusing on gains in SBA lending, small credits and self-service lending.

Understanding the Cannabis Banking Opportunity

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The legal cannabis industry is growing exponentially each year, creating extraordinary opportunities for financial institutions to offer services to this largely underbanked, niche market.

Revenue from direct marijuana businesses alone is expected to exceed $48 billion by 2025, part of a larger $125 billion cannabis opportunity that includes hemp, CBD and other support businesses, according to information from Arcview and BDS Analytics.

In the last few years, the number of banks providing services to cannabis businesses has increased, along with an expansion of the products they are offering. Financial institutions are moving far beyond being “a place to park cash’ which defined the pioneer era of cannabis banking. Today, our bank clients are approaching the industry as a new market to deploy all of their existing products and services, including online cash management, ACH origination, wire transfers, lending, insurance, payments and wealth management. Additionally, a contingent of banks are trailblazing bespoke solutions.

For banks wanting to better understand what the current cannabis banking opportunity looks like, we recommend starting by:

Exploring the Entire Cannabis Ecosystem
A common pitfall for banks considering a cannabis line of business is failing to grasp the true market opportunity. It’s important that bankers explore the entire supply chain: growers, cultivators, manufacturers, distributors and delivery operations and public-facing retail and medical dispensaries that make up the direct cannabis ecosystem.

Beyond that, there is a supporting cast of businesses that service the industry: armored couriers, security firms, consultants, accountants, lighting companies, packaging companies, doctors who prescribe medical cannabis, and many more. These are not plant-touching businesses, but they require additional scrutiny and often struggle with non-cannabis-friendly institutions. All this is in addition to the significant hemp market, which represents an additional $40 billion opportunity by 2025.

Thinking Beyond Fees
Aside from low-cost deposits, many financial institutions initially entered this niche line of business for additional fee income. While the industry still provides strong fee opportunities, including account opening fees, monthly account fees per license, deposit fees and fees for services such as ACH and cash pickup, these can vary greatly from market to market and will decrease as more financial institutions build programs.

Instead of limiting their focus to fees and deposits, banks should understand the full breadth of the services and solutions they can offer these underserved businesses. Most services that a bank provides their average business customer can be offered to legal cannabis businesses — and there is a significant opportunity to create additional services. We believe there are products this industry needs that haven’t been created by banks yet.

Banks thinking about where to start and what products to add should consider common challenges that legal cannabis businesses face: electronic payment products, cash logistics, fair lending and the numerous difficulties around providing opportunities to new business owners and social equity entrepreneurs. Bankers should become familiar with the industry; find out what it’s most similar to — namely agriculture, food processing and manufacturing — as well as how it is unique. That’s where the real opportunity lies.

Building a Scalable Program
To safely service this industry and meet examiner expectations, banks need to demonstrate they understand the risks and institutional impact of banking cannabis and have the capabilities to accomplish the following, at a minimum:

  • Consistent, transparent and thorough monitoring of their cannabis business clients and their activity, to demonstrate that only state legal activity and the associated funds are entering the financial system.
  • Timely and thorough filing of currency transaction reports (CTRs) and suspicious activity reports (SARs).
  • Ability to gracefully exit the line of business, should the bank’s strategy or the industry’s legality change.
  • An understanding of the beneficial ownership structures, particularly when working with multi-state operators.

Performing these tasks manually is time consuming, prone to error and not suitable for scale. Technology allows banks to automate the most tedious and complicated aspects of cannabis banking compliance and effectively grow their programs. Look for technology that offers advanced due diligence during onboarding, detailed transaction monitoring, automated SAR/CTR reporting and account monitoring to ensure full transparency and portfolio management in your program.

Finding a Trusted Partner
When it comes to partners, banks must consider whether their partner can quickly adapt to changes in rules and regulations. Do their tools support visibility into transaction level sales data, peer comparisons and historical performance? Have they worked with your examiners? What do they offer to help banks service both direct and indirect businesses? Can they help their institutions offer new and innovative products to this line of business?

Banks weighing which partners they should take on this journey need to consider their viability for the long run.

Opportunities For Transformative Growth

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The bank space has fundamentally changed, and that has financial institutions working with more and more third-party providers to generate efficiencies and craft a better digital experience — all while seeking new sources of revenue. In this conversation, Microsoft Corp.’s Roman Chwyl describes the rapid changes occurring today and how software-as-a-service solutions help banks quickly respond to these shifts. He also provides advice for banks seeking to better engage their technology providers.

Topics addressed include:

  • Focusing Technology Strategies
  • Partnership Considerations
  • Leveraging Digital for Growth
  • Planning for 2022 and Beyond

How to Build a Bank From Scratch

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Corey LeBlanc is best known as the man behind the @InkedBanker Twitter handle, inspired by his affection for tattoos. He’s also co-founder, chief operating officer and chief technology officer of Locality Bank, a newly chartered digital bank based in Fort Lauderdale, Florida. In the interview below, which has been edited for length, clarity and flow, he talks about the value of standing out and the process of standing up a de novo digital bank.

BD: How did you become known as the InkedBanker?
CL: A few years ago, Jim Marous, co-publisher of The Financial Brand, told me that I had to get on Twitter. When my wife and I created the profile, we needed something that made sense. I’ve had tattoos since I was 18 – full sleeves on both arms, on my back and chest — so that’s what we picked. It’s turned out to be incredibly important for my career. People remember me. It gives me an edge and helps me stand out in an industry where it’s easy to get lost in the mix.

             Corey LeBlanc, Locality Bank

BD: What’s your vision for Locality Bank?
CL: The best way to think about Locality is as a digital bank that’s focused on the south Florida market. There’s a void left in a community after its locally owned banks are either bought by bigger, out-of-state rivals or grow so much that they no longer pay attention to their legacy markets. Our vision is to fill that void using digital distribution channels.

BD: Was it hard to raise capital?
CL: Not especially. Our CEO, Keith Costello, has been a banker for many years and was able to raise an initial $1.8 million in December 2020 from local investors to get us off the ground. We later went back to that same group to raise the actual capital for the bank, and they committed another $18 million. Altogether, including additional investors, we raised $35 million between October and November of 2021. Because that was more than the $28 million we had committed to raise, we had to go back to the regulators to make adjustments to our business plan, which delayed our opening.

BD: How long did it take to get your charter?
CL: It was about 10 months. We filed our charter application on St. Patrick’s Day of 2021. We received our conditional approvals from the state in mid-September, and then we had our conditional approval from the [Federal Deposit Insurance Corp.] in early November. Our full approval came on Jan. 11, 2022.

BD: What was it like working with the regulators?
CL: You hear bankers say that regulators make everything difficult and stop you from doing what you want to do. But we didn’t find that to be the case. Just the opposite. They served more like partners to us. They worked with us to fine-tune our business plan to better meet the needs of the customers and markets we’re targeting, while still trying to accomplish our original objectives.

BD: What’s your go-to-market strategy?
CL: We’re going to be a lend-first institution. Our primary focus is on the south Florida commercial market — small to medium-sized businesses all the way up to early stage, larger enterprises. We’ll expand as we grow, but we want to be hyper-focused on serving that market. To start out, we’re offering two commercial accounts: a basic commercial checking account and a money market account. Then we’ll expand to providing accounts with more sophisticated capabilities as well as [Interest on Lawyer Trust Accounts] for lawyers. Because of the markets we’re in, those two accounts are absolutely necessary.

BD: As a new bank, how do you ensure that you’re making good loans?
CL: It was a top priority for us to recruit good, trusted bankers who understand that you need to balance the needs of the bank and the needs of the market. The bankers we’ve hired know how to do that. On top of this, if you can get a banker who’s been successful with the tool set that most traditional institutions give them, and then you give them a better set of tools, imagine the experience that you’re creating for those bankers and their customers. You’re empowering them to do something exponentially greater than they could in the past. And by giving them that set of tools, you’ve now inspired and motivated them to push even further and start challenging systems that otherwise they would have never challenged. We see it very much as a virtuous circle.