New York-based Quontic Bank bills itself as an adaptive digital bank; it’s also a $1 billion community development financial institution (CDFI), lending to immigrants, low-income populations, gig-economy workers and borrowers who struggle to get a traditional mortgage. That mission means that the bank’s executives — including chief innovation officer Patrick Sells — tend to think about banking a little differently.
Its culture is a true competitive advantage of the bank — and that goes beyond having good, talented people on staff who get along with one another. It requires a mission, he says, and “strategic anchors” that can guide decision-making and empower employees.
Banks were already facing an “existential crisis” around digital and technology, Sells continues. “The pandemic that we found ourselves in has only exacerbated that tension,” he says. “[W]hen there is anxiety, we tend to act irrationally, we can tend to act scattered, we go back and forth. And what’s really critical is a steady hand as to who we are and what we need to do, and how we navigate through this, so we don’t get sucked into all of that. The culture, the clarity that we have, has definitely helped us navigate this storm.” Quontic has hired almost 90 new employees during the pandemic, he adds.
Sells discusses this further in this interview with Emily McCormick, Bank Director’s vice president of research. It has been edited for brevity, clarity and flow.
BD: It’s very easy to think about innovation, and focus on the nuts and bolts of the technology, but the culture and the mindset are so critical. How do you think through culture as it applies to innovation?
PS: There’s a tragedy in that innovation is often synonymous with technology, especially in this industry, and it really shouldn’t be. Innovation as much more than that. The thing that perhaps needed the most innovation, and would yield the greatest results, was culture that I think many banks don’t have. I think culture is an area where they’ve struggled. When you compare it to what’s gone on in the world around us — there’s so many things happening, and banks haven’t kept up with that.
These issues all interplay with each other. I think the greatest existential threat to the industry of community banking is culture. We have lost the war on talent. As the first digitally-native generation grew up and came out of college, they didn’t want to go work at a community bank. So today, we’re so behind from a technology standpoint, and we’re frantically, as an industry, trying to say, “We need this, we need that.” And that’s really a Band-Aid.
If we don’t figure out how to change this and lose the next decade of talent, we don’t stand a chance. The technology that’s new and cool today, we know the pace it’s accelerating at will be nothing compared to two, three years from now. … We also know in the data that’s coming out around millennials and the generations that follow, is that the sense of purpose matters immensely. And so for us, where we really focused on innovating, or what to do differently, is all in and around culture: How do we do that, and how do we bring that to life at Quontic? That will drive us into the future and where we want to go.
BD: You’re active on Twitter; one of your recent tweets focused on the fact that culture doesn’t end at the bank, it extends to the customer. Could you expand on that concept and how that informs how Quontic meets customer needs?
PS: There’s three components to Quontic’s culture: the mission, the de-centralized decision [making], and the shared language. Core values became that shared language, but one of our core values is try it on. For example, we want to be quick to try something new, even if we don’t know if it’s the right thing or not.
The other one is saying, “Cheese.” The next time someone asks to take a picture of you and they say, “Cheese,” what happens? Both of you smile, and usually the photographer is also smiling. How do we create that interaction? I think most customers expect, when you call your bank, you’re going to get very black-and-white answers as to what can and can’t be done. And there isn’t so much a focus on making it a pleasant experience.
An example of that, when Covid[-19] first happened at the end of March or early April, as an online bank, we picked up a lot of CD customers. For the consumer, one of the great things about CDs is you commit to putting your money in for a period of time, and you typically get the highest interest rate. If you break the CD, you lose all that interest. We knew a lot of customers would be nervous about what that meant for their financials, so we quickly reached out to say, “If you need to break your CD, you can do that penalty free.”
The majority of people said, “Thank you for offering this. As of now, I don’t want to do that.” But there was another group of people who said, “Yes, I want to do that.” Those same people called us back later and said, “I ended up being OK. I want to re-establish my account with you, and I’m going to tell everyone I know about what you’ve done for me, because it was so above and beyond.”
We want to be a spot, even though there’s a lot of anxiety going on, where we can bring smiles to people’s faces. I don’t know the data, but I doubt many banks emailed their CD customers to say, “You can break penalty-free if you need to.” We’re trying something on, and what happened from it? It deepened relationships and brought new relationships because it resonates the culture of who we are with the customer that we serve.
BD: We know that small businesses continue to be devastated by this pandemic. How is Quontic thinking through meeting the needs of small businesses, as this crisis continues and past it?
PS: This gives us the opportunity, in any crisis, to reframe, which is something I talk about in terms of innovation. What is innovation? Can you reframe what’s going on? Can we become aware of these underlying assumptions that haven’t changed in a while? If we change nothing but that, everything changes — that’s where you can find your most effective innovation.
For example, there’s a lot of small business owners who are behind the ball in terms of e-commerce. There [are] two ladies that own a [boutique] that I’ve gotten to know, and they wanted to open up a Shopify account to sell products online. I helped them do that. In one lens, helping [our small business customers] establish Shopify and e-commerce doesn’t result in any new revenue for the bank; but it strengthens the relationship and the [role] that banks historically played as a resource for small business owners.
There’s an opportunity to rethink branches. … While there’s great technology out there, like Shopify and Square, they don’t have people who can help you. What if the branch became a place where small business owners could get help [digitalizing themselves?] Now you’re utilizing the space that so many banks already have, and you’re beginning to play that meaningful role again in society. I think there’s a tremendous opportunity for banks to think differently, and say, “How do we help our customers also embrace technology that will ultimately help their businesses thrive?” That’s an example of a way banks can reframe what those relationships look like and deepen those relationships that’s outside of the norm as to what we think banks should be doing.
BD: So essentially, it’s about having that talent and expertise within the branch that can help the customer, and empowering employees to do that.
PS: This goes back to the mission [of] financial empowerment. It’s both that the products banks offer [are] one size fits all, and that the culture or the skills are largely the same. What if banks said, “We’re going to hire kids out of college who understand social media and e-commerce natively to help our small business customers.” Now you have talent that can help your bank figure out how to evolve. You solve two problems with one stone, and begin to change the reputation and everything. Not only does that have an impact for today, [but] my suspicion is the ROI on that over a decade is tremendous.
But you have to be willing to do something different. That’s where banks struggle, understandably; we’re taught to mitigate risk and to think about risk in everything. That can stand in the way of trying things that aren’t all that risky … it’s not that risky to add another digital bell and whistle that our core provides. It may be new for the bank, but it’s not really risky or innovative. We actually have to challenge ourselves to be bold and do something differently.