Why Deregulation Means More Work for Banks


regulation-8-20-18.pngMany banks are claiming victory over the promise of regulatory reform from bill S.2155, often called the Crapo Bill. However, the celebration and dreams of returning to the way it once was before the Dodd-Frank Act are premature.

There is still a long road for deregulation, with many obstacles. The bill’s limited scope and applicability, coupled with the uncertainty of the regulatory landscape, call into question the breadth and longevity of this so-called regulatory relief. Bankers must realize that any change, whether adding or reducing regulations, translates to extra work.

There’s nothing wrong with being cautiously optimistic about the potential for regulatory relief, but bankers should gain a deeper understanding of the details before declaring victory. Banks that work to comprehend the scope of the bill’s effects, the potential for political shifts, and what deregulation means for management will be better equipped to navigate the unpredictable regulatory landscape.

The nitty gritty: a not-so-sweeping reform
Many in the industry view the bill as enacting regulatory relief – and that’s where their understanding ends. Those who have properly digested the bill— whether bankers themselves or their regtech partners—have realized it isn’t the sweeping reform some claim. In reality, the bill is only a limited set of reforms, with restricted applicability and several distinctions based on asset size and product mix.

There is also confusion around timing and deadlines. Sections of the new law contain various effective dates, ranging from May 28, 2018, to three years from the enactment date. However, it is important to understand that regulatory relief differs from traditional rulemaking when it comes to effective dates. Typically, an effective date represents a deadline by which all implementation must be accomplished. For regulatory relief, the date represents the deadline by which a burden should be lifted or reduced.

Because of this discrepancy, questions remain around when the reduction of regulation is required versus when it is optional. This ambiguity is problematic, as some bankers will make changes right away, while others will wait until forced to do so. Complicating matters, software and technology updates won’t be readily available, causing friction in processes.

Furthermore, where provisions of the bill conflict with existing regulations, there is uncertainty about how the regulations will address these conflicts. How examinations will be conducted while there are inconsistencies between law and regulation are unclear at the time of this writing.

The unpredictable political landscape raises questions
Washington’s tendency to deregulate banking is not a surprise. The current leadership has created a “pro-business” sentiment that favors limiting regulations. But political whims can change quickly. With midterm elections in November, there is potential for a regulatory shift in the other direction. Some reforms and regulatory relief promised in the Crapo Bill may never come to fruition, depending on what happens this fall.

Instead of trying to predict political outcomes, bankers should remain diligent about complying with regulations already solidified. For example, CECL will have many ramifications for how banks handle themselves fiscally, and bankers shouldn’t let chatter around regulatory relief distract them from that upcoming deadline. Until we have a more definite sense of the political climate for the next two years, bankers will benefit from focusing on the regulations in front of them now, rather than what may or may not be coming from S.2155.

Deregulation means more work
Even if the trend continues, rolling back regulations isn’t as simple as it sounds. It will take just as long to undo portions of Dodd-Frank as it took to implement the rules. With technology challenges and limited flexibility at even the most progressive institutions, deregulation forces short-term pain without necessarily guaranteeing long-term gain.

With any change, institutions are forced through a complex management cycle. This includes retraining staff, upgrading technology, reevaluating risk and tweaking operational procedures. Significant adjustments follow any deviation from the norm, even with toning down or eliminating rules. Therefore, bankers will have to closely monitor the efforts of their vendors and work closely with regtech partners to interpret and respond to regulatory changes.

Technology can help navigate the pendulum swing of regulation by automating compliance processes, interpreting regulations and centralizing efforts. It has become too much to manage compliance with manual processes and the regulatory landscape is too complex and changes too quickly. An advanced compliance management system can help banks remain agile and ease the pain points associated with reconfiguring processes and procedures.

No matter the path of proposed deregulation, banks must quickly interpret and adapt to remain compliant. Banks that recognize the uncertainty of the current political arena and are realistic about the managing the work associated with the change – while closely collaborating with their regtech partners – will be better positioned to navigate the unpredictable days ahead.

How Switching to a Boutique Core Enhanced CNB’s Customer Experience


technology-8-15-18.pngThe bulk of the banking industry may work with the big three core providers—FIS, Fiserv or Jack Henry & Associates—but some banks are finding that smaller, boutique providers can be the better fit. That’s the case for $3 billion asset CNB Financial Corp., based in Clearfield, Pennsylvania, which made the switch from its big core provider a little more than two years ago to one that’s smaller, nimbler and more willing to collaborate with its client banks.

“We’re not a change agent by any means, but we’re constantly changing and evolving to what we believe the clients need and what our markets want, and when we talked with our prior provider, they didn’t have that same impetus,” says CNB CEO Joe Bower. “Customer experience wasn’t their focus.”

So the bank began a long and exhaustive search, spending 18 months exploring 11 different core providers, including the big three. COCC, a client-owned, cooperative core platform in Southington, Connecticut, won the contract.

The ability for CNB to be part-owners of COCC played a role in that decision: As owners, the provider’s clients have a larger voice, so advocating for a new feature is an easier process than CNB experienced with its former provider, which would demand money up front and put the request in a queue. Research and development on new features was charged by the hour. The process was slow and expensive. Enhancements to CNB’s mobile banking platform were expected to be a two-year project with the old core provider, for example.

Now, “action begins to take place almost immediately,” says Bower.

This isn’t because CNB is a bigger fish for COCC—Bower says the core provider is just as responsive to smaller client institutions with good ideas. And any new feature is then available to all COCC users, so everyone benefits.

And Bower says COCC’s proactive approach to innovation and the deployment of new technology played a role in its selection as CNB’s core. “We were looking for somebody [that] wasn’t stuck in their ways or too large to make major changes within their structure,” he says.

Perhaps because of this, COCC is open to working with startup technology providers and is nimble enough to vet them quickly. COCC directly partners with startups, and along with COCC’s own capabilities, it helps CNB get new features to market more quickly. For a technology company that’s not one of COCC’s partners, but rather the bank’s vendor, the core still coordinates integration efforts. CNB has experienced at least two fairly large integrations with outside technology firms—a commercial underwriting platform and a new peer-to-peer (P2P) payments solution.

“When new ideas surface—whether it’s from us or a small fintech startup—they’re nimble enough to take a look at it, review it and within months, as opposed to years, if we all feel like it’s a direction we ought to take, it happens, it comes aboard,” says Bowers.

Converting to COCC from its older core was more challenging in today’s 24/7 economy. CNB started fresh, converting everything—including its online and mobile banking platform—and timing this to ensure minimal disruption to customers was difficult. The core conversion began on a Friday in May 2016, and the bank and COCC only had until the following Monday to work out any major bugs. While the initial conversion went off without a hitch, dealing with smaller issues impacting a small percentage of customers at a time—problems with money transfers, incorrect statement descriptions, misapplied fees—kept bank staff busy long after the initial implementation.

“I would estimate close to 12 full months where your eye comes off the ball a bit in regards to new client acquisition, continuing to grow your assets—some of that has to take a back seat for a while,” says Bower.

Despite the conversion headaches, all-in-all Bowers says it was worth the hassle. “We’re a much better company today than we were before the transition,” he says. “Because of our ability to offer more programs, have better say in what happens with our core processor, and what services and what our client actually sees is something we [now] have some control [over].”

And the improvements aren’t just due to working with a core provider more suited to CNB’s business and strategy. Providing a better customer experience was a key driver in its decision to move to COCC, but the bank did some soul searching and realized that like its former core provider, it wasn’t thinking through the customer journey, either. So, roughly four years ago, Bowers put an executive in charge of the customer experience, promoting Leanne Kassab, who has a background in marketing, to a new position as executive vice president of customer experience and marketing. It’s position more commonly referred to as a customer experience officer, or CXO. In her role, she maps out every experience a customer could have with the bank to identify where to improve each process. She also oversees internal and external communications, and is in charge of the bank’s marketing department and call center.

Kassab also established employee task force groups to focus on different areas of the customer experience—the bank’s branches, commercial banking, new customers and existing clients—as well as employee training. These groups have been so successful that the bank’s human resources head borrowed the idea to create groups focused on the employee experience.

The bank has also changed its training programs to focus more on the client, rather than solely on operations. “We want the employees to understand the first onus on us is customer satisfaction,” says Bowers.

Bowers admits that better communication could have improved the relationship with its former provider, and his team actively works to keep the communication lines open with COCC. The bank participates in a commercial-banking roundtable to weigh in on future projects and frequently participates in user group meetings. Bowers has biannual conversations with COCC executives.

But perhaps most importantly, CNB chose to focus a junior executive on fostering a direct relationship through weekly communication with COCC. She’s newer to banking, and Bower says this fresh perspective is a benefit. She runs the bank’s e-solutions, managing what the customer sees online. Because of this, Bowers believes her perspective on new products, services and ideas inherently includes what the customer reaction could be—and she can communicate that to COCC.

Putting more effort into communicating with its core provider has created a more fruitful relationship, says Bower. “They understand where we want to be, and they understand where we think they ought to be in the world of banking today.”

Why Management and Directors Need to Consider Blockchain in Overall Digital Strategy


blockchain-8-15-18.pngIf we think back to what we were doing in 1994, we would say we were using a gigantic cell phone, just hearing about the internet, addicted to the fax machine, and just starting to use email. Fast forward, and we are with blockchain where we were with the internet and email in 1994.

After the sale of Mechanics Bank in 2015 and subsequently leaving my role as CEO, I embarked upon a journey that has forever changed how I think; how I problem solve; how I view the boardroom; the secret society of the c-suite and most importantly, how I view technology, people and process.

There is a convergence of social media, digital retail, robotics, artificial intelligence, wearables, blockchain, Internet of Things, big data and advanced analytics. We must think about the big picture and how all of these pieces fit together in overall corporate and organizational digital strategy.

Forbes recently reported the top 20 largest businesses in the world, including top financial institutions, are all now exploring blockchain. These same companies are simultaneously evaluating and implementing the use of big data, predictive analytics, artificial intelligence and machine learning.

Since 90 percent of goods in global trade are transported through the shipping industry supply chain, let’s use the announced partnership of Maersk and IBM as our first example.

As you may know, Maersk is the largest shipping container company in the world, transporting 15 percent of the world GDP each year.

The shipping industry supply chain consists of:

  • Land transportation brokers
  • Customs brokers
  • Ports
  • Freight forwarders
  • Governments
  • Ocean carriers

Like many bank functions in the U.S., global trade functions are antiquated. The industry is still largely paper intensive with organizational silos and a heavy reliance on Excel. A typical transaction can take up to 30 people and more than 200 communications to complete. Maersk is not immune to these same challenges, but recently embarked on its own digital transformation through two partnerships:

  • Microsoft Enterprise Services to move five regional datacenters to the cloud, improve IT performance, bolster customer services, and reduce operational risk;
  • IBM to improve transparency and efficiency, with complete visibility of tracking millions of container shipments each year.

Each participant in a supply chain ecosystem can view the progress through the supply chain. They can also see the status of customs documents, view bills of lading and other data. This will all be done using blockchain technology and smart contracts.

So, what does all of this mean? Let’s take a look at how this all ties in to what I call “the digital innovation melting pot” and why we as bankers must pay attention:

In this video, the bank is partnered with the shipping, wearable device, driverless car, identity, virtual agent/chatbot, social media, social media influencers, predictive analytics, retailer, airline, and hotel industries. These 11 industries are working together to offer products, complete transactions and improve the customer experience with little in-person human interaction.

My view of blockchain, innovation and its place in the new digital world is from my role as a CEO who’s been accountable to shareholders, responsible for the bottom line. Though the top banks in the country have caught on to this trend, many banks are still in the dark ages, plagued by denial, lack of innovation knowledge and the right talent.
Many institutions still have bricked-up infrastructure, engrained in the mentality that “this is the way it’s always been done,” with a lot of outdated, dysfunctional and inefficient processes, policies and procedures.

The disregard of digital technology disruption and innovation is like a termite infestation that destroys the structure if you don’t pay attention to warnings and maintain the property.

Key Takeaways
Partnerships are the way of the future. A bank can no longer rely solely on its own infrastructure and core vendor relationships. The new digital world converges industries, so make sure you pick the right partners. To do so, understand existing infrastructure and look through the lens of generational age groups with a customer focus.

  • Does the customer want simple to use technology services and want it now?
  • Do they prefer more traditional services, and are they less trusting of new market entrants? Do they still value human advice?
  • Do they value high-quality service and view “trust as a must,” but are interested in innovation and want to be educated?
  • Is there forward-thinking leadership in the boardroom and C-suite?
  • How does the board get refreshed with new perspective?
  • Would board members be willing to give up their board seat to allow fresh perspective?
  • Has there been evaluation about current state and future growth?
  • Is there understanding about existing system capabilities, shortfalls, what works, what doesn’t?

Determine your game plan:

  • Does the front end need digitization?
  • Fix front end while gradually replacing legacy infrastructure and integrating middle and back office?
  • Go digital native – full overhaul?
  • Evaluate whether systems, processes, procedures and policies are still relevant?

Don’t forget impact on your people. Make sure new offerings do not cannibalize existing product offering and pricing. Remember that a digital expert is unnecessary in the boardroom. Instead find a digital technology translator; someone who understands the cause and effect of decisions made at the macro level. Lastly, and most importantly, figure out how to disrupt your business model before it becomes disrupted.

How You Can Foster an Entrepreneurial Environment


entrepreneur-8-8-18.pngGone are the days of bank employees repetitively completing their tasks. A productive day in today’s banking environment consists of collaboration and teamwork to solve challenging problems.

Community banks and credit unions need to deliver on two industry trends to succeed: 1) managing interest rate, compliance, and regulatory risks, and 2) adapting with technology and products to compete against a decline in branch visitors, check volume, and cash transactions. The question is, how?

The answer is new ideas. Managers and leaders must cultivate an entrepreneurial environment where employees are not afraid to share them, because they are the future of the banking industry.

1. Refine the team
Leader Bank itself is an entrepreneurial venture started in 2002 with $6 million in assets. After spending the first six years focusing on implementing traditional methods, we began shifting our hiring practices to include employees with little or no banking experience but that had a lot of potential for creative problem solving. Today, almost 40 percent of our employees (excluding loan officers) are new to the banking industry.

By not hiring solely based on education and experience, and focusing more on potential, we have seen some of our most successful periods of growth to date.

2. Listen to customers
New ideas often present themselves as customer issues.

Take this example: A landlord customer encounters legal complications with his tenant’s security deposit, so to avoid future issues he assumes a greater risk by no longer requiring security deposits. Identifying this real-world problem led to the creation of a new security deposit platform that manages compliance headaches for landlords.

3. Pursue lopsided opportunities
All ideas come with upsides and downsides, but as we all know, the best ideas are asymmetrical, meaning the upsides outweigh the downsides.

A great example is when we developed our rewards checking product.

Before developing the product, we knew we not only wanted to grow deposits but also reward our customers for using us as their primary bank. We analyzed the downside versus the potential upside before deciding to move forward.

The downside vs. the upside
A downside is best kept small and finite. It’s something you would be comfortable with if it actually happened.

With our rewards checking product, the only real downside we could foresee was lack of participation. There is always a risk with a new product or process that the client may not fully adopt it.

However, in this particular situation, the upsides significantly outweighed our fear of failure.

To start, we developed Zeugma in-house. We had existing employees working on it, to keep our cost of investment low. It gave us control of the product features, which allowed us to differentiate leading to strong growth in deposits.

Assessing the upside vs. downside
With any new idea, senior management and the board will want to know what the downside is, and if it is limited. That limitation is finite and can be articulated, then odds of approval increase.

When trying to measure the downsides relative to the upsides, there are questions we ask to lean one way or the other:

  • Is the total potential financial loss greater than the cost of the project?
  • Could the project cause significant reputational damage?
  • Does the project require additional resources?
  • Does the project effort need significant interdepartmental coordination?

If the answers are “no,” then the idea likely carries low risk and can move quickly.

There are also additional ways to mitigate risks throughout the launch process of any new idea.

Start a focus group
There is no better way to see how a new idea works before launching full-force than experimenting with beta groups. Testing the product with hand-selected, vested people first helps gives managers an idea how customers will use the product and understand pitfalls before going live.

Conduct weekly meetings
Weekly meetings are great for adapting procedures as necessary throughout the development and launch process. Teams from product development to marketing can share ideas on how to develop and grow the product to its utmost potential.

Maintain strong financial tracking
Tracking every penny will ease the anxiety that comes along with the development and launch process of any new idea. Start a shared spreadsheet among involved employees and enter in the income and expenses along the way. If the financial budget is kept in check, it is easier to plan where to allocate future expenses.

Also don’t forget to track success, including each new customer acquired or deposit gathered.

Moving forward
Banks are inherently risk-management institutions, which is why understanding the downsides of new ideas is so important.

Transitioning a financial institution to an entrepreneurial, spirited workforce takes time, patience and dedication. Every idea, whether a success or a failure, is a stepping stone to the next. Over time, even in a highly regulated industry like banking, a culture of energy and entrepreneurship can be a competitive advantage.

Maximizing the Power of Predictive Analytics



Data analytics affects all areas of the bank, from better understanding the customer to addressing regulatory issues like stress testing. However, organizations face several barriers that prevent unlocking the power of predictive analytics. John Sjaastad, a senior director at SAS, outlines these barriers, and shares how bank management teams and boards can address these issues in this video.

  • The Importance of Predictive Analytics
  • Barriers to Using Predictive Analytics
  • Considerations for Bank Leaders

Understanding the New Age of Integrated Payables


payments-7-25-18.pngUntil now, treasury management solutions have been focused almost solely on helping clients execute payments. These solutions have emphasized simplified payments and payment method flexibility. This can be referred to as Integrated Payables 1.0.

New and disruptive accounts payable automation has enabled banks to offer a more holistic solution, which caters to their customers’ end-to-end accounts payable process while addressing an even broader range of customer pain points. This can be called Integrated Payables 2.0.

Offering solutions that leverage automated processes can provide benefits for commercial banks they aren’t realizing with the legacy solutions. A couple of key benefits that offering Integrated Payables 2.0 technology provides to banks in comparison to traditional Integrated Payables 1.0 solutions include:

Addressing the end-to-end accounts payable process, instead of just payment execution, provides customers with more value.

The first step to understanding the benefits Integrated Payables 2.0 solutions provide is centered on understanding the end-to-end accounts payable process for their customers. This process, regardless of company or industry, generally involves four steps:

  1. Invoice Capture: Lifting data from vendor invoices and coding it into an accounting system.
  2. Invoice Approval: Confirming vendor invoices are accurate and reflect the agreed upon amount.
  3. Payment Authorization: Creating a payment run, getting the payment approved by an authorizer, and leveraging the correct payment type and bank account to use.
  4. Payment Execution: Sending money to vendors.

Within this process, Integrated Payable 1.0 solutions are only serving step #4: Payment Execution. The truth is every payment is the result of an invoice, and the process of making a payment includes all of the steps in between receiving the invoice and paying it. By not streamlining steps leading up to the payment, Integrated Payables 1.0 solutions allow opportunity to improve efficiency.

Integrated Payables 2.0 solutions streamline all four steps by providing one simple user interface that eliminates unnecessary manual processing. By offering Integrated Payables 2.0 solutions, banks provide more value to their customers by addressing the pain each of these manual steps brings throughout the AP process.

Becoming a strategic partner (instead of just a solution provider) to customers drives retention by creating switching costs.

There are a lot of costs associated with manual accounts payable that businesses face every day. Some are very straightforward and easy to track, like processing fees. But there are other costs that are less apparent, but have much broader cost implications on the business. These costs include:

  • Wasted time reconciling duplicate invoice payments.
  • Missed revenue from rebates and early-pay discounts.
  • Value-added projects that never get done.

With the middle-market businesses paying more than 100 invoices every month, costs add up tremendously over the course of a year. When you can eliminate these costs from your customers’ accounts payable process by providing them with an end-to-end accounts payable solution, you will be able to establish a loyal list of customers.

With only a small fraction of businesses currently automating accounts payable, it is clear Integrated Payables 2.0 solutions are still approaching it’s tipping point.

Banks have an opportunity to get ahead of competitors and differentiate themselves by offering a disruptive solution. Then, when their customers get offers from other banks to switch, the switching costs associated with going back to manual accounts payable are likely to dissuade them from making the switch.

Although Integrated Payables 1.0 solutions have been helpful to your customers for years, new disruptive technology is creating even greater capabilities for mid-sized businesses to efficiently pay their bills, and for you to further strengthen your relationships with customers by providing this technology in the form of a white-label solution.

ChoiceOne and Autobooks Bring Rural Customers into the Digital Age


sba-6-20-18.pngAdom Greenland works with a lawn care specialist who was running his business in a way reminiscent of a bygone era. He’d leave a carbon copy invoice on the counter when he finished his work, Greenland would cut a check and some three weeks later, the small-business owner would finally be compensated for the work he had done weeks prior.

That arrangement is one that still exists in many rural areas, but Greenland, the chief operating officer at $642 million asset ChoiceOne Bank, headquartered in Sparta, Michigan, saw an opportunity to help rural customers like his lawn care specialist usher themselves into the 21st century by partnering with Autobooks.

ChoiceOne found itself in a position that many banks in the country have found themselves in at some juncture in the last several years: recognizing the need to make a move to remain competitive with booming fintech firms popping up all over the place. Located in a largely rural area in western Michigan—Grand Rapids, with about 200,000 residents, is the largest city in its area—the bank has been a fixture for its rural community but is slowly moving into urban markets, Greenland says. Its specialties include agricultural and small business borrowers that are comfortable with antiquated practices that often aren’t driven by technology. But in an increasingly digital world, Greenland says the move was made to make both the bank and its commercial customers competitive by improving its existing core banking platform to digitize treasury services for commercial customers.

ChoiceOne chose Autobooks to digitize its small business accounting and deposit process in 2017, a journey the bank began three years ago after realizing that the technology wave rolling over the banking industry was going to be essential for the bank’s future. But identifying potential partners and wading into the due diligence process was at times frustrating, Greenland says. “Everything was either, you had to pay a quarter-million dollars and then had to hope to sell it to somebody, or it was just 10-year-old technologies that weren’t significantly better than what we already had.”

Autobooks, through an array of application programming interfaces, or APIs, essentially automates much of the bank’s existing treasury services such as invoicing, accounting and check cashing processes. The system sits on top of the bank’s existing banking platform from Jack Henry, but works with FIS and Fiserv core systems as well.

With just 12 branches in a predominantly rural market, Greenland says this has become a game changer for the bank and its customers.

“My sprinkler guy could have been doing this a long time ago, but this will accelerate the adoption of technology [by] my rural customers,” Greenland says. “It’s bringing my customers to the next century in a really safe and easy way.”

The partnership between Autobooks and ChoiceOne generates revenue for both companies through fees. It is a similar arrangement to that of Square, QuickBooks or PayPal, the competitors Greenland is trying to outmaneuver while integrating similar accounting, invoicing and payments functionalities.

So far, the partnership has been able to reduce the receivables time by about two weeks, and automates many time-consuming tasks like recurring invoicing, fee processing and automatic payments. It also cuts expenses for the bank’s customers that have been using multiple third-party providers for similar services, which has driven loyalty for the bank. ChoiceOne hasn’t generated significant revenue from the partnership—Greenland says it’s at essentially a breakeven point—but the loyalty boost has been the biggest benefit, an attribute that’s becoming increasingly important as competition for deposits rises.

And the results are visible for small businesses, like Greenland’s sprinkler technician. “For that kind of business, this thing is absolutely revolutionary.”

The Good and the Bad Facing Audit and Risk Committees Today


committee-6-12-18.pngIn today’s news cycle, it seems barely a week goes by before another headline flitters across a social news feed about a data breach at some major U.S. or foreign company. Hackers and scams seem to abound across the marketplace, regardless of industry or any defining factor.

Cybersecurity itself has become an increasingly important issue for bank boards—84 percent of directors and executives responding to Bank Director’s 2018 Risk Survey earlier this year cited cybersecurity as one of the top categories of risk they worry about most. Facing the industry’s cyber threats has become a principal focus for many audit and risk committees as well, along with their oversight of other external and internal threats.

Technology’s influence in banking has forced institutions to come to terms with both the inevitability of not just integrating technology somewhere within the bank’s operation, but the risk that’s involved with that enhancement. Add to that the percolating influence of blockchain and cryptocurrency and the impending implementation of the new current expected credit loss (CECL) standards issued by the Financial Accounting Standards Board, and bank boards—especially the audit and risk committees within those boards—have been thrust into uncharted waters in many ways and have few points of reference on which to guide them, other than what might be general provisions in their charters.

And lest we forget, audit and risk committees still face conventional yet equally important duties related to identifying and hiring the independent auditor, oversight of the internal and external audit function, and managing interest rate risk and credit risk for the bank—all still top priorities for individual banks and their regulators.

The industry is also in a welcome period of transition as the economy has regained its health, which has influenced interest rates and driven competition to new heights, and the current administration is bent on rolling back regulations imposed in the wake of the 2008 crisis that have affected institutions of all sizes.

These topics and more will be addressed at Bank Director’s 2018 Audit & Risk Committees Conference, held June 12-13 at Swissôtel in Chicago, covering everything from politics and the economy to stress testing, CECL and fintech partnerships.

Among the headlining moments of the conference will be a moderated discussion with Thomas Curry, a former director of the Federal Deposit Insurance Corp. who later became the 30th Comptroller of the Currency, serving a 5-year term under President Barack Obama and, briefly, President Donald Trump.

Curry was at the helm of the OCC during a key time in the post-crisis recovery. Among the topics to come up in the discussion with Bank Director Editor in Chief Jack Milligan are Curry’s views on the risks facing the banking system and his advice for CEOs, boards and committees, and his thoughts about more contemporary influences, including the recently passed regulatory reform package and the shifting regulatory landscape.

Five Benefits to Automating the Credit Process


automation-5-29-18.pngAutomation is a common buzzword these days in the financial services industry. What does it really mean for your business, and how far can you take automation through your credit origination process?

We have compiled the top five benefits of applying automation throughout your credit process.

  1. Reduce back and forth client interactions
    Instead of scanning, emailing, and faxing financial information and supporting documentation, customer-facing interactive portals and APIs can facilitate digital capture of required information.
  2. Eliminate unnecessary manual work
    By leveraging a portal that connects to the borrower’s financial accounting package, and has the technology to read tax forms digitally, you can reduce the amount of unnecessary manual data entry.
  3. Make quicker and smarter decisions
    Through the application of innovative machine-learning technology, the time required to generate financial spreads can be significantly reduced.
  4. Maintain high-quality data accuracy and governance
    Data integrity can potentially be compromised when several systems are used to store the same information. Turn-key integration between your customer engagement portal and loan origination system helps to keep all your data within one system.
  5. Gain a complete view of your portfolio
    With improved accuracy and quick access to available data comes better and faster insights into your portfolio. By reducing the need to consolidate and reconcile data from multiple sources, problems within your portfolio can be addressed in real time.

In a recent whitepaper, Maximize Efficiency: How Automation Can Improve Your Loan Origination Process, Moody’s Analytics explores these benefits and specific use cases for automation throughout key stages of the credit process.

Moody’s Analytics has also produced a video from a recent webinar related to this topic, which you can review here.

Blockchain is Coming, but It’s None of Your Business…Yet


blockchain-5-18-18.pngFor most banks under the $20 billion asset threshold, blockchain technology—the distributed ledger—will be a tool like every other technology tool. Banks under that size will be provided that tool by established providers or very large institutions and the tool itself will enable typical banking businesses like extending credit, payments and wealth management.

While there is a ton of argument about the validity of the distributed ledger as a tool that enables currency that is untethered to a government or regulation, there is widespread belief that the technology behind the currency itself can carry value and be a boon for banks. It is useful because blockchain technology is enables faster, cheaper and fully transparent transactions in near real time.

Blockchain has potential to carry property deeds, stocks or insurance. Many banks have been skeptical about the technology because of the speculative nature of the cryptocurrency market and the dubious ethics of some of the folks running that market. But now many banks are starting to see it as a solution for quicker, cheaper transaction options.

JPMorgan Chase and the National Bank of Canada announced a debt insurance blockchain test. They believe that they can move debt insurance cheaper, faster and more securely on the distributed ledger, and they are doing a year-long test to find out. If that test works, the platform will have faced many challenges and presumably overcome them. It will have to get multiple regulators to sign off on it, it will have to integrate old systems’ data with the new platform, and it will have to prove that this new technology is actually superior to old systems.

Many banks under $20 billion can and will use it when it is rolled out by a reputable provider. So don’t worry too much about blockchain for now—you will be using it when it has been developed by a much larger institution with the capacity to invest in its trials. One important part of that process will be creating shared protocols. Right now, there is no one blockchain, and there is no one common language where one chain can talk to another. That will probably need to change if it is to become ubiquitous.

There are exceptions for banks below $20 billion
When you are a bank that is a specialist in a particular line of business, you should watch the enablers of that specialty with keen interest. If a bank makes 80 percent of its profit through commercial real estate lending, for instance, that bank should be looking at anything that enables better, quicker, easier service, better pricing, or cheaper production. Adopting the technology that gets the bank in front of most competitors will eventually increase potential for growth, profitability and market share.

It doesn’t matter if that technology is Statistical Analysis System (SAS), or on a distributed ledger, someone in the bank should be trying hard to be the second adopter of the technology that will make the bank so much better at what it does well. That is when a bank should care about blockchain—when it is proven enough to not to be a nightmare to your bottom line or your employees, and provides a competitive advantage in an area that really counts.