How Peoples Bancorp Prevailed Through PPP

“You only learn who has been swimming naked when the tide goes out,” wrote Warren Buffett in his 2004 annual letter.

He was referring to operations that trade derivatives. You don’t really know the value of what you hold in opaque markets, he explained, until it’s tested in hard times.

The same can be said about banking.

Rarely has the industry faced an environment as acute as today.

The scope and speed of this downturn are without modern precedent,” said Federal Reserve Chairman Jerome Powell earlier this week. It’s “significantly worse than any recession since World War II.”

It’s hardly an exaggeration to say that bankers bear much of the burden of saving the economy from oblivion. “If doctors and nurses are first responders to those who are sick,” says Robyn Stevens, chief credit officer at Peoples Bancorp, “bankers are the first responders for businesses, communities and economies.”

Stevens would know.

Within its three-state footprint spanning Ohio, West Virginia and Kentucky, Peoples was the top-performing bank in the first round of the Paycheck Protection Program measured by dollars of PPP loans approved per assets.

“A culture is tested when times get tough,” says Ryan Kirkham, general counsel at the $4.5 billion bank based in Marietta, Ohio. “You find out whether it is real or just lip service. We passed the test.”

The success of Peoples in the first round of PPP reveals a flaw in one of the principal narratives that has emerged from the unfolding crisis — that banks with the most advanced technology were the ones best positioned to manage the onslaught of loan applications.

It’s not that Peoples Bank hasn’t invested in technology in recent years, because it has. But the secret to its success in the first round of PPP was simple elbow grease.

Personnel from the top of the bank to the bottom volunteered to enter data into the Small Business Administration portal to process customer loan applications.

“Banks had to decide whether they were going to do it automated or whether they were going to do it manually,” says CEO Chuck Sulerzyski. “Peoples tried an automated approach but then opted for manual.”

“Many of our most senior executives have done data entry until 8, 9, 10, 11, 12 at night,” he adds. “We did over 100 of these loans on Easter Sunday. And when they shut banks over $1 billion out from 6 p.m. to midnight one evening, we had a couple dozen people volunteer to work midnight to 4 a.m. putting in the entries.”

This success reflects a culmination of a decade’s worth of effort, spearheaded by Sulerzyski, who joined the bank from KeyCorp in 2011.

The 62-year-old CEO spent the previous four decades working up the corporate ladder at multiple prominent banks. He worked at Citibank during the Walter Wriston era. He was at Chemical Bank when Walter Shipley was CEO. And he spent eight years at Bank One, working closely with President Don McWhorter and CEO John B. McCoy.

Sulerzyski has been there and done that, in other words. One lesson he’s learned along the way has been the importance of culture and customer relationships. It’s a lesson that has paid off in spades over the past three months.

“From a competitive standpoint, a lot of the large banks struggled with PPP,” Sulerzyski says. “One of the large regionals couldn’t do any loans the first few days. Another one started, but then had to shut down. Each of the bigger banks we compete against had their own degree of difficulties with this. Because our customers were well taken care of, CPAs and attorneys started referring business to us and it kind of snowballed on itself.”

Sulerzyski’s team speaks in single voice on this.

Our commitment to our communities and the importance that plays resonates with our employees,” says Thomas Frawley, senior vice president, consumer lending. “They start the call as a banker and end the call as a counselor, listening to the fears of our customers while assuring them that we are going to do our best to help them.”

“We have several associates who are working day and night,” says Ann Helmick, director of enterprise risk management. “They are doing this for the good of the client. For most, there will not be a personal gain.”

“It is easy to come up with a mission, vision and values. And when times are good, it can be easy to live by those values,” says Jason Phipps, regional president. “It is when a company or person faces adversity that you find out who a person or who an organization really is.”

One can argue all day long about the importance of scale and technology, and how it could soon be a principle competitive differentiator in banking. But technology is only a tool to help bankers ply their trade. The soul of any organization, and the true source of performance, lies instead in the people who run it.

“Bankers may have got a bad rap during the last crisis,” says Stevens, “but ours have been heroes during this one!”

Guarding Against Virtual Viruses in a Pandemic

As healthcare experts work to mitigate the Covid-19 pandemic, the banking industry is faced with fighting other viruses.

Cyber attackers are known to be opportunistic, pouncing during times of anxiety and uncertainty. Rest assured, they won’t let up once the coronavirus has run its course. While information technology directors are focusing their attention on processing huge volumes of Small Business Administration loans and assisting bankers working remotely for the first time, computer virus and malware threats continue to rise. If not handled effectively, this could threaten the security of the financial system.

Dr. Anthony Fauci, head of the National Institute of Allergy and Infectious Diseases, cautions that Americans need to prepare for the possibility that Covid-19 could return — or even become a seasonal disease. With such prospects, savvy bank directors should familiarize themselves with their institutions’ data security and technology infrastructure. Here are six points to consider when assessing the future of their bank’s information security system:

Look again at business continuity plans. While your bank may have one, it likely did not consider the immediate worldwide demands for laptops and network hardware needed to configure remote work capabilities. Nor did these plans likely consider supply chain interruptions when factories shut down in Asia, where the virus was first detected. The lesson: If you wait until the next global emergency occurs, you might be too late. Plan now.

Consider the increased risk with more employees working remotely. The larger the inventory — coupled with less control of who uses the computer — the tougher it is to protect. An even more concerning practice is allowing bank employees to use personal computers to access bank networks. Firewalls, spam filters, anti-virus software and other security measures should not be determined by individual employees.

The Cybersecurity and Infrastructure Security Agency has issued guidance related to remote work and defending against Covid-19 scams. One of their tips is to ensure virtual private networks, or VPNs, have the latest software package and configurations, and that current anti-virus software is installed and up-to-date. Multi-factor authentication is another must-have for protecting your bank’s network.

Make sure you have enough IT support. Even before Covid-19, there were not enough qualified technical staff to fill available positions. The increased demand for remote connectivity has further stretched IT departments. Make sure your technology departments are fully staffed, or have access qualified outside help.

Be sure employees are hyper-vigilant. Attackers hope that more distance between coworkers will equate to guards being lowered. Ensure that employees are regularly reminded of social engineering, email and other current threats to increase top-of-mind awareness of cyber security.

Be aware that some attacks are physical. We typically think of cyberattacks occurring “invisibly,” through system networks and software. But at least one entity is now mass-mailing infected “free” USB drives to financial institutions. Remind employees to discard any hardware that comes from unknown sources.

Consider the benefits of cloud technology. A recent article in The Wall Street Journal described how remote-work capabilities could become more common as money tightens and daily operations need more flexibility. Cloud computing is both more efficient and flexible, and is easily scalable. Bank regulators have taken notice, saying that outsourcing such technologies gives banks more options.

Time will tell, but this may be a turning point for American business. As more workers have established a routine for working from home — and have found surprising levels of efficiency and productivity — it’s expected that this could become more of the norm, at least in the near term.

Some in the financial services industry have been slow to change; they may now be forced to out of necessity. It’s incumbent upon directors to champion for this flexibility and resiliency by ensuring their data security and information infrastructure is ready to handle it.

Bank Director Reveals 2020 FinXTech Connect Award Winners

In 1993, Bill Oesterle was looking for contractors that could work on an old house he purchased in Indianapolis’ Meridian-Kessler neighborhood. He had been burned by contractors before and didn’t want to rely on the phone book to find a new one.

A co-worker pointed him to Unified Alliance, a group of neighbors that shared resources and recommendations through a newsletter and call-in service. He joined the group and grew to depend on it.

When Oesterle moved to Columbus, Ohio, a few years later, he was dismayed to find that a similar group didn’t exist there and enlisted a former intern, Angie Hicks, to build a new version. After researching service providers and customers, the company launched a website that came to be known as Angie’s List. It had 5 million members by 2016.

FinXTech Connect takes a page from the same playbook.

No one knows banking technology better than the people who use it. Given this, FinXTech gathers insights from bankers, aggregates those insights, and then distills them into actionable information to help banks find reliable technology partners.

The intelligence we gather from banks powers our FinXTech Connect platform, a curated directory of bank-friendly fintechs. It also informs our annual FinXTech Connect awards.

This week marked Bank Director’s second annual Experience FinXTech conference. The event brings together bank and technology leaders for demonstrations and conversations about what’s now and next in banking. Demos are open to technology companies that have been vetted for the Connect platform, so attendees can be sure they’re hearing from proven partners.

The event and awards have never been more important, given the role technology plays in making it possible for banks to provide service in a socially distanced world.

Great examples can be found among this year’s Best of FinXTech award winners, which were announced on the final day of the event.

The Best Solution for Customer Experience went to SmartLaunch, a digital bank-in-a-box that helps institutions provide services and grow deposits remotely. Created by NYMBUS, SmartLaunch enables banks to launch standalone digital brands that operate on the NYMBUS SmartCore. In this way, a bank’s digital brand can run parallel to its legacy systems — providing a low risk way to experiment with new digital offerings.

Another example is performance-marketing solution, Fintel Connect. With travel significantly curtailed, billboards and signage don’t provide the marketing punch they used to. Bank marketers are looking to retool their strategies, with performance-based, digital marketing offering an alternative avenue for acquiring customers online.

Fintel Connect won the Best Solution for Revenue Growth category, as well as the overall Best of FinXTech Connect award this year. Their technology enables banks to approach digital marketing from a new angle — instead of paying for impressions or clicks, banks only pay when viewers convert into customers.

Here’s the full list of winners:

  • Best Solution for Customer Experience: NYMBUS SmartLaunch
  • Best Solution for Loan Growth: SavvyMoney
  • Best Solution for Improving Operations: Cinchy
  • Best Business Solution: Brex
  • Best Solution for Protecting the Bank: ARGO OASIS
  • Best Solution for Revenue Growth: Fintel Connect
  • Best of FinXTech Connect: Fintel Connect

More information on these solutions can be found here.

During Experience FinXTech, Bank Director also launched a new research product, leveraging lessons we’ve learned from curating the Connect platform. Our inaugural data intelligence report is titled “APIs: Creating New Opportunities for Revenue and Efficiency.” You can access it for free by clicking here. Angie’s List capitalized on the dawning of the internet to replicate neighborly advice. In a similar way, FinXTech relies on the collective wisdom of bankers to cut through the noise in the technology landscape and help banks find ideal partners.

How Innovative Banks Fight Covid Through Giving

Charitable initiatives are not new to banks.

Many have foundations, donation-matching programs or standing committees dedicated to giving back. What is new to banks, however, is how fast they’re being expected to contribute to vital causes while juggling other time-sensitive priorities created by the Covid-19 crisis.

Launching an impactful, Covid-specific relief program could be a non-starter for banks unless they leverage technology to make it happen quickly. Two Northeastern banks have proved that it’s possible to spin up new products and programs in days with the help of fintech partners.

As the extent of the Covid-19 crisis became clear, the Community Engagement Steering Committee at The Cape Cod Five Cents Savings Bank, a unit of Cape Cod Five Mutual Company, kicked its planning into high gear. The committee includes employees from different areas of the Massachusetts-based bank.

Before Covid-19 struck, it convened on a weekly basis to plan community initiatives and review applications for support. Now, the committee needed to move quickly to help local healthcare organizations battling the virus on the frontlines. That goal led to a partnership between the bank and Pinkaloo, a charitable-giving fintech the bank connected with at an industry event last year.

Pinkaloo had been presenting to the bank’s internal teams since January, but the arrival of Covid pushed Cape Cod 5, as the bank is called, to formalize the partnership. “Speed to market was important to us because of the emergent need,” says Stephanie Dennehy, chief marketing officer for the $3.6 billion bank.

In a week, the fintech and bank launched giving portals for seven different healthcare providers in the bank’s footprint.

To make it happen, Pinkaloo stayed in close contact with the bank’s team and everyone — from information security to legal to executive leadership — worked quickly to streamline the implementation process. The result was that a vendor management program that would normally take two to three weeks was completed in two to three days, says Adrian Sullivan, the bank’s chief digital officer.

Covid has showed banks that they can move fast in exigent circumstances, but will those lessons last beyond the current crisis?

Sullivan thinks they will. “The way we’ve done things remotely and in such an expedited fashion — I think that becomes new normal,” he says. “We realized how fast it really can be done, so I think we will shift for the better and start to work in a more agile fashion.”

To the southeast of Cape Cod 5 is a single-branch, digital-first bank that’s no stranger to iterating quickly. Quontic Bank, based in Astoria, New York, chose to support relief efforts with a new savings account.

The Drawbridge Savings account pays depositors an annual percentage yield of 0.50% on balances up to $250,000; the bank matches the interest paid on these accounts with a donation towards its #BeTheDrawbridge campaign. The savings account approach made sense to Quontic. They didn’t want to rely on a transaction-based account when people are changing their spending habits and stockpiling funds, says Patrick Sells, Quontic’s chief innovation officer.

To make the idea a reality, Sells put in a call to one of the bank’s existing technology partners, MANTL. MANTL’s account-opening solution automatically books new accounts to the bank’s core. MANTL engineers worked through the weekend and delivered the new savings product in three days. The bank’s team worked all weekend too, preparing disclosures, developing marketing plans and completing all the other steps required to bring the new financial product to market.

Although the stakes are higher in times of crisis, the $395 million bank is used to working in an agile manner. “One of the core values that applies here is progress, not perfection,” says Sells. “Striving for perfection so often gets in the way of progress, and especially quick progress.” Quontic can pivot if it makes a decision that doesn’t work, but the bank recognizes it can’t make any decisions when it’s frozen in the planning stage.

Covid-19 is changing the world quickly. Banks that want to help will need to lean on technology to put their plans in motion fast.

Viewing the COVID-19 Crisis From a New Vantage Point

Fintech companies have a unique vantage point from which to view the COVID-19 crisis.

Technology leaders are working long hours to help banks go remote, fill in customer service gaps and meet unprecedented loan demand. They’re providing millions of dollars in free services, and rapidly releasing new products. They’re talking to bankers all day, every day, and many of them are former bankers themselves.

Bank Director crowdsourced insights about banks’ pandemic-fueled tech initiatives from 30 fintech companies and distilled their viewpoints into five observations that can help banks sort through the digital demands they face today.

“Nice to Have” Technology Is Now “Must Have”
Online account opening, digital banking, financial wellness and customer service are garnering fresh attention as a result of the COVID-19 crisis.

Before the pandemic, these areas were thought of as “nice to have,” but they weren’t at the top of any bank’s tech expenditure list. COVID changed that.

Account opening and digital banking are essential when branch lobbies are closed, and customers are looking to their banks for advice in ways they never have before in times of widespread uncertainty.

These new demands have created a unique opportunity to push technology initiatives forward. Ben Morales, who had a 24-year tenure in banking before founding personal loan fintech QCash, observed that bank leaders shouldn’t “waste an emergency. Now is the time to push bank boards to invest.”

Bank boards are already talking about COVID as a potential inflection point for tech adoption, says Jon Rigsby, a former banker who co-founded and now is the CEO of Hawthorn River Lending. He notes that this moment is different from past crises. “In my 27-year banking career, I’ve never seen bankers change so fast. It was quite phenomenal.”

Customer Service, Financial Wellness Are Taking Center Stage
Consumers are increasingly seeking guidance from their banks, inundating call centers. As a result, communication and financial wellness tools are getting their moment in the sun.

Boston-based fintech Micronotes has witnessed exponential growth in demand for their product that helps banks initiate conversations with their customers digitally. Micronotes introduced a new program that’s purpose built for pandemic in mid-March. The Goodwill Program helps banks proactively communicate with their customers around issues like relief assistance and the Small Business Administration’s Paycheck Protection Program (PPP). Inbound interest in the firm from banks was nearly eight-times higher two weeks after the program launched, compared to the two weeks prior to launch, Micronotes reports.

Banks already equipped with digital communication tools are seeing an uptick in usage. Kasisto, a New York-based fintech, reported that several clients have seen a 20% to 30% increase in the use of KAI, a virtual assistant that can converse with customers and lessen the burden on call centers.

Financial wellness initiatives are also seeing liftoff. Happy Money, a personal loan fintech that uses financial and psychometric data to predict a borrower’s willingness to repay a loan, launched a free financial stress relief product for its bank partners’ customers. And SavvyMoney, a fintech that provides credit information to borrowers alongside pre-qualified loan offers, is seeing an influx of inquiries from banks that “understand the need to provide their customers with tools so they can better manage their money during uncertain financial times,” says CEO JB Orecchia.

Due Diligence Can Move Faster, When It Has To
Several fintechs have noted that banks are speeding up their vendor due diligence processes immensely — but not by relaxing standards.

Vendor onboarding programs can sometimes stretch to fill an entire year, according to Rishi Khosla, CEO of London-based digital bank OakNorth, but they don’t have to. OakNorth developed its own credit underwriting and monitoring solution, and recently spun out a technology company by the same name to provide the tools to banks outside of the U.K.

Khosla has a unique perspective given his dual roles as both a banker and technologist. He says some banks have created “unbelievable processes” that, when cut down, actually only amount to 10 to 20 hours of work. In this environment, he says, a commercial bank partner can get 20 hours of work done within days. They’re in “war mode,” so they can take a dramatically different approach, but with no less rigor.

“It’s not like they’re taking shortcuts. They’re going through all the right processes,” he says. “It’s just they’re doing it in a very efficient, streamlined manner without the bureaucracy.”

Approach Existing Partners First
Banks now wanting to adopt new technology may find themselves at the end of a long waitlist as fintechs are inundated with new demand. Fintech providers are prioritizing implementations for existing customers first — just as most banks prioritize existing borrowers for PPP loans.

To get the technology they need fast, some banks are getting creative in rejiggering the tech they do have to meet immediate needs.

Matt Johnner, a bank board member and the president of construction lending fintech BankLabs, got a call from a bank client a few days after the rollout of PPP loans. The bank wanted to customize the BankLabs construction loan automation tool to process PPP loans. Johnner says the bank “called because they know our software is customizable … and that we go live in 1 hour.”

Because of the exponential rise in digital demand, a bank’s success with technology during the pandemic has been based largely on what they had in place before the outbreak, according to many fintechs.

“Some banks are innovating through this and are thinking near and long term, especially those that have made good investments in digital banking and have a solid foundation to build out from,” explains Derik Sutton, VP of product and experience for small business solution Autobooks. “The most common response we get [from banks] is ‘We wish we had done this sooner.’”

Resist the Urge to Slash-and-Burn
There are typically three ways that banks respond in crisis, according to Joe Zeibert, who started his banking career as an intern at Bank of America Corp. in summer 2008. He recently joined pricing and analytics platform Nomis as managing director of global lending solutions after an 11-year career in banking, and believes history can be a useful indicator here.

Similar to the financial crisis, we see some banks rushing to innovate who will be ahead of the curve when they get out of the downturn. Others are playing wait and see, and then others are slashing tech and innovation budgets to cut costs wherever they can,” says Zeibert. According to him, the more innovative banks came out of the last crisis better off than their peers that cut tech spending. “They came out of the downturn with a 5-year innovation lead over their competitors — a gap that is almost impossible to close,” he says. Banks now should resist the urge to slash and burn and, instead, focus on investing in technology that will help them emerge from the crisis stronger.

Most technology companies are reporting an influx of inbound interest from banks, and strong momentum on current projects. Fintechs appear to be rising to the occasion, and one sentiment they all seem to share is that it’s their time to give back; to help banks and, as a result, the nation, weather this crisis together.

*All of the companies mentioned in this article are offering new products, expedited implementations or free services to banks during COVID-19. To learn more about them, you can access their profiles in Bank Director’s FinXTech Connect platform.

Banks Risk Losing Small Businesses Forever

Have you ever been through a breakup you didn’t see coming? Judging by the stories small businesses share about their banks — and the stories that banks tell themselves about those same relationships — it seems the industry is on the verge of needing a pint of ice cream and a good cry.

It might be over between small businesses and banks.

I talk to a lot of bankers, and many tout their banks’ focus on small businesses — the restaurants, hairdressers and other staples that fuel local economies. These bankers pride themselves and their teams on knowing their clients well. If a hard rain floods the local lake, they pick up the phone to call their marina clients to make sure they’re doing OK. It’s special — but in a springtime pockmarked by pandemic, it might not be enough.

The relationships between banks and their small business customers are more strained than banks might realize, according to a January research report sponsored by Autobooks and conducted by Aite Group.

“Less than half (47%) of U.S.-based small businesses believe their primary institution understands their needs,” stated Autobooks, a Detroit-based fintech that provides small business accounting tools, in a release about the research. Aite also found that more than 60% of small businesses have turned to a nonbank provider to meet at least one financial need that their bank can’t fill.

These shortfalls have been ongoing, but changing market conditions caused by the outbreak of COVID-19 could be the final straw for underserved small businesses.

It boils down to this: Banks that haven’t invested in technology are behind the curve when it comes to helping their small business clients weather crises. At the same time, technology companies that are already providing small business customers with products they love now have clear paths to offering financial services that only banks used to be able to provide. Cash management, payments and fast loans will be crucial to the survival of small businesses; technology is going to be the key to saving them.

Nowhere is the importance of technology more crystallized than in the current debate over emergency small business loans. Banks are struggling to keep up with rising loan demand. Complicated applications, slow underwriting and a lack of payment options may convince small business customers to turn to nonbank lenders for fast funding, even if they pay a higher interest rate.

The same scenario is unfolding in the realm of government-backed loans from the Small Business Administration. Until recently, banks were the only institutions that could serve as conduits for the Economic Injury Disaster Loans that help troubled businesses in times of crisis. But big, national fintech lenders were quick to lobby for an expansion of that rule, and they got it. Congressional coronavirus relief gave the U.S. Treasury Department the authority to allow “additional lenders” to make these loans. Congress acquiesced to the change because timing is everything when it comes to small business loans in a crisis.

Half of small businesses only have enough cash on hand to operate for 27 days, and an additional 25% only have enough cash reserves to operate for 13 days without new revenue, according to an oft-cited 2016 survey from JPMorgan Chase & Co. SBA loans made through partner banks typically take several months before the cash is available to borrowers — an untenable timeline for companies with mounting expenses and no revenue. Fintech lenders say they could push emergency loans out in days, potentially saving many businesses from failure but funneling significant volume away from banks.

The loans businesses need to survive today could easily morph into larger relationships with nonbanks tomorrow, as fintechs cross old regulatory moats by securing their own charters and deposit insurance.

So far, 2020 has seen significant fintech advances into banking from Varo Money and LendingClub Corp. But the move that seems to have caused the most hand-wringing among traditional banks is Square’s approval for deposit insurance as part of its Utah industrial loan charter. The payments heavyweight has an established national brand among small businesses, and could divert large amounts of small business clients away from brick-and-mortar banks when it starts offering loans and deposit products in 2021.

Square has provided mission-critical financial services for small businesses since its inception. Many businesses trust their payment products for every transaction they make. Square may have the loyalty it needs to earn the entire banking relationship.

Technology companies like Square aren’t going to pick up the phone to check in on a marina client after the local lake floods. But they are going to provide timely, tuned-in products. In a crisis, that may matter more.

COVID-19: A Make-or-Break Moment for Customer Loyalty

It seems like the world is spinning faster these days. COVID-19 has caused dramatic shifts in the way people live their lives and manage their finances. Add record job loss to the mix, and you get a groundswell of people relying on their banks more than ever. It’s a make-or-break moment, as customers form new habits in response to their new reality.

Ryan Caldwell has a bird’s-eye view of how customers are relying on their financial institutions’ data and digital tools in this moment of crisis. As the CEO of MX, a Utah-based fintech, Caldwell helps financial institutions collect, analyze, present and act on data. Right now, the data is telling him this moment offers an opportunity for banks to cultivate loyalty. At the same time, it presents big risks for banks that don’t rise to the occasion.

In a recent interview, Caldwell told a story that serves as an interesting corollary for two approaches banks might take to navigate the crisis.

Driving down the streets of Lehi last week, Caldwell noticed construction in the parking lot of a Chick-fil-A. He was curious so, at the stoplight, he opened their app and placed an order. When he pulled up to the window, the Chick-fil-A manager confirmed his order and handed it over with sterile gloves. The receipt was in the app. It was an optimal, socially distanced experience.

Caldwell asked the manager about the construction. In a time when most restaurants are struggling to stay afloat, Chick-fil-A, Caldwell was told, is converting half its parking spots into mobile ordering stations. They’re experiencing exponential growth in mobile usage and, without customers spending 45 minutes in the store, they’re able to operate at redline capacity. They’re busier than ever.

Shortly after his Chick-fil-A experience, Caldwell had an experience that better aligns with refrains we’re hearing in the news about how restaurants are getting slaughtered without dine-in customers.

Caldwell’s family frequents a local pancake place, but the restaurant has no mobile app and a terrible website. Still, when your four-year old daughter has been cooped up in the house for weeks, you run out of options. So Caldwell placed a phone order and ventured out.

When he pulled up, the restaurant looked deserted. He parked and went inside to pay for the order — touching door handles and PIN pads along the way. The pancake place’s manager had a completely different problem from Chick-fil-A’s: without dine-in customers, they had virtually no business. Caldwell says everyone in town loves this place’s pancakes — a lot more than they like Chick-fil-A — but it didn’t matter how much people love it if they don’t have a safe, easy way to get to it.

The restaurant analogy easily applies to banks. The ones that provide a modern mobile experience are not only processing basic transactions for their clients, they’re using data to provide helpful insights and peace of mind in this crucial time. They’re able to increase engagement and help their customers figure out just how much is safe to spend on toilet paper stockpiles. They play a key role helping customers tackle daily struggles.

Banks that aren’t leaning into technology risk losing out on these opportunities. Worse, they may not see that loss until we’re on the other side of this crisis.

Banks without data aggregation have no way of knowing how their customers’ behavior is changing in response to this crisis. They can’t see it when social distancing and closed branches cause customers to download new apps, apply for a loan from a fintech or find a new way to move money.

“Banks are completely blind to changing consumer habits regarding digital banking if they don’t have aggregation,” Caldwell says. “So I think a lot of banks may think they’re going to come out of this at the end even stronger, but they are not realizing they’ve already lost a battle. It’s just a question of time before that lingering account dwindles down to the low balance, and then it either sits as a zombie account or it goes to zero.”

In times of rapid change, banks can’t afford to fly blind by using lagging indicators based on last month’s reports. Caldwell says leading indicators — the tiny tremors in behavioral changes that only artificial intelligence can detect — will be crucial in helping customers and de-risking the bank.

And banks need to get their data and digital experiences in place fast. The healthcare industry’s response to COVID isn’t to take 18 months building a new hospital from the ground up, Caldwell says. Healthcare administrators triage; they set up tents in parking lots and do whatever they have to do to provide help where it’s needed most.

It is possible for banks to play catch-up quickly. Fintechs have come out in droves to support banks with accelerated launches and discounted services. For MX’s part, they can set up a data-driven mobile app that sits alongside the bank’s existing app in a matter of weeks.

“You don’t have time to retrofit your ancient hospital,” Caldwell says. “If you want to take good care of your customers and not let them down, you need to launch something in the next few weeks. The world you live in right now is a world where that is not only possible, but it’s requisite.”

How to Respond to LendingClub’s Bank Buy

For me, the news that LendingClub Corp. agreed to purchase Radius Bancorp for $185 million was an “Uh oh” moment in the evolution of banking and fintechs.

The announcement was the second time I could recall where a fintech bought the bank, rather than the other way around (the first being Green Dot Corp. buying Bonneville Bank in 2011 for $15.7 million). For the most part, fintechs have been food for banks. Banks like BBVA USA Bancshares, JPMorgan Chase & Co and The Goldman Sachs Group have purchased emerging technology as a way to juice their innovation engines and incorporate them into their strategic roadmaps.

Some fintechs have tried graduating from banking-as-a-service providers like The Bancorp and Cross River Bank by applying for their own bank charters. Robinhood Markets, On Deck Capital, and Square have all struggled to apply for a charter. Varo is one of the rare examples where a fintech successfully acquired a charter, and it took them two attempts.

It shouldn’t be surprising that a publicly traded fintech like LendingClub just decided to buy the bank outright. But why does this acquisition matter to banks?

First off, if this deal receives regulatory approval within the company’s 12 to 15 month target, it could forge a new path for fintechs seeking more control over their banking future. It could also give community banks a new path for an exit.

Second, banks like Radius typically leverage technology that abstract the core away from key digital services. And deeper pockets from LendingClub could allow them to spend even more, which would create a community bank with a dynamic, robust way of delivering innovative features. Existing smaller banks may just fall further behind in their delivery of new digital services.

Third, large fintechs like LendingClub don’t have century-old divisions that don’t, or won’t, communicate with each other. Banks frequently have groups that don’t communicate or integrate at all; retail and wealth come to mind. As a result, companies like LendingClub can develop and deploy complementary banking services, whereas many banks’ offerings are limited by legacy systems and departments that don’t collaborate with each other.

The potential outcome of this deal and other bifurcations in the industry is a new breed of bank that is supercharged with core-abstracted technology and a host of innovative, complementary technology features. Challenger banks loaded with venture capital funds and superior economics via bank ownership could be potentially more aggressive, innovative and dangerous competitors to traditional banks.

How should banks respond?

Start by making sure that your bank has a digital channel provider that enables the relatively easy and cost-effective insertion of new third-party features. If your digital channel partner can’t do this, it’s time to draft a request for proposal.

Next, start identifying and speaking to the myriad of enterprise fintechs that effectively recreate the best features of the direct-to-consumer fintechs in a white-label form for banks. Focus on solutions that offer a demonstrable path to revenue retention, growth and clear cost savings — not just “cool” features.

After coming up with a plan, find a partner to help you market the new services either through  the third-party vendors you select or another marketing partner. Banks are notorious for not doing the best job of marketing new products and features to their clients. You can’t just build it and hope that new and existing customers will come.

Finally, leverage the assets you already have: physical branches, a mobile banking app that should be one of the top five on a user’s phone, and pricing advantage over fintechs. Most fintechs won’t be given long runways by their venture capital investors to lose money in order to acquire clients; at some point, they will have to start making money via pricing. Banks still have multiple ways to make money and should use that flexibility to squeeze their fintech competitors.

Change is the only constant in life — and that includes banking. And it has never been more relevant for banks that want to stay relevant in the face of rapidly developing technology and industry-shifting deals.

Turning Compliance From an Exercise Into a Partnership

The Greek philosopher Heraclitus once observed that no one can ever step into the same river twice. If these philosophers tried to define how the financial industry works today, they might say that no bank can ever step into the same technology stream twice.

Twenty-first century innovations, evolving standards and new business requirements keep the landscape fluid — and that’s without factoring in the perpetual challenge of regulatory changes. As you evaluate your institution’s digital strategic plan, consider opportunities to address both technology and compliance transformations with the same solution.

The investments your bank makes in compliance technology will set the stage for how you operate today and in the future. Are you working with a compliance partner who offers the same solution that they did two, five or even 10 years ago? Consider the turnover in consumer electronics in that same period.

Your compliance partner’s reaction time is your bank’s reaction time. If your compliance partner is not integrated with cloud-based systems, does not offer solutions tailored for online banking and does not support an integrated data workflow, then it isn’t likely they can position you for the next technology development, either. If your institution is looking to change core providers, platform providers or extend solutions through application programming interfaces, or APIs, the limitations of a dated compliance solution will pose a multiplying effect on the time and costs associated with these projects.

A compliance partner must also safeguard a bank’s data integrity. Digital data is the backbone of digital banking. You need a compliance partner who doesn’t store personally identifiable information or otherwise expose your institution to risks associated with data breaches. Your compliance data management solution needs to offer secured access tiers while supporting a single system of record.

The best partners know that service is a two-sided coin: providing the support you need while minimizing the support required for their solution. Your compliance partner must understand your business challenges and offering a service model that connects bank staff with legal and technology expertise to address implementation questions. Leading compliance partners also understand that service isn’t just about having seasoned professionals ready to answer questions. It’s also about offering a solution that’s designed to deliver an efficient user experience, is easy to set up and provides training resources that reach across teams and business footprints — minimizing the need to make a support call. Intuitive technology interfaces and asynchronous education delivery can serve as silent accelerators for strategic goals related to digitize lending and deposit operations.

Compliance partners should value and respect a bank’s content control and incorporate configurability into their culture. Your products and terms belong to you. It’s the responsibility of a compliance partner to make sure that your transactions support the configurability needed to service customers. Banks can’t afford a compliance technology approach that restricts their ability to innovate products or permanently chains them to standard products, language or workarounds to achieve the output necessary to serve the customer. Executives can be confident that their banks can competitively adapt today and in the future when configurability is an essential component of their compliance solution.

A compliance partner’s ability to meet a bank’s needs depends on an active feedback loop. Partners never approach their relationship with firms as a once-and-done conversation because they understand that their solution will need to adjust as business demands evolve. Look for partners that cultivate opportunities to learn how they can grow their solution to meet your bank’s challenges.

Compliance solutions shouldn’t be thought of as siloed add-ons to a bank’s digital operations. The right compliance partner aligns their solution with a bank’s overall objectives and helps extend its business reach. Make sure that your compliance technology investment positions your bank for long-term return on investment.

Crafting a Last-Minute Telecommuting Policy

As the COVID-19 pandemic evolves, more banks are asking their employees to stay home and work.

Capital One Financial Corp. asked employees who could do so to begin working remotely effective March 12. JPMorgan Chase & Co. asked its managers around the world to allow employees to work from home, where possible, less than a week later.

“We understand that this may be a disruptive decision, but we believe that is in the best interests of our associates and our communities,” said Capital One Chairman and CEO Richard Fairbank in an internal memo. “And it will create more space and distance for those who still need to come into work.”

Some employees — those in customer-facing positions, for example — can’t work from home. But remote work can keep others safe and enable in-branch workers to better practice so-called social distancing, helping to prevent the spread of the novel coronavirus while still keeping the business running.

The pandemic promises to disrupt all workplaces, at least temporarily. Yet, few banks are prepared for this mode of work. Directors and executives responding to Bank Director’s 2018 Compensation Survey indicated less than one-third offered telecommuting options to at least some of their employees.

So, what do banks need to know about putting a remote-work plan in place? To find out, Bank Director reached out to a few banks to see how their telecommuting program has evolved.

Ensure a secure workplace
Memphis, Tennessee-based Triumph Bank limited telecommuting to its mortgage division before the pandemic hit, and it was a natural place to start when the $837 million bank began implementing social-distancing measures.

Triumph doesn’t have a set policy in place for remote work, but it has established guidelines — starting with ensuring that the employee’s workplace is safe from a data security perspective. The bank doesn’t want sensitive information easily accessed by an employee’s spouse, child, roommate or anyone visiting that person’s home.

With that in mind, the bank asked loan officers and some loan processors to work from home in response to the pandemic — a decision made, for the processors, based on each employee’s at-home environment. “You evaluate each situation: Does [the employee] have an area that they can work from at home that is a secure spot, where you don’t have to worry about customer information, [and] they won’t be distracted by young children or a spouse,” says Catherine Duncan, the bank’s vice president of human resources. Those factors are taken into consideration. “We were able to send those [employees] home, and we separated everybody else.”

Port Angeles, Washington-based First Northwest Bancorp is allowed to examine employees’ at-home workspaces to ensure data security, if needed. The $1.3 billion bank’s remote-work policy also outlines equipment usage, and what to do if something goes wrong — if the internet goes down, for example. “Whatever that is, expectations of you as an employee, what you’re expected to do at that moment,” says Chief Human Resources and Marketing Officer Derek Brown. 

Get the technology in order
TAB Bank Holdings was able to shift to remote work quickly — from about 10% of staff roughly three weeks ago to 96% as of March 18. The $827 million digital bank unit operates out of one location: its Ogden, Utah headquarters.

The fact that the bank has digital onboarding in place for loans and deposits, and moved from paper-based processes five years ago, enabled it to move rapidly.

It was really just a matter of setting up VPNs and machines, because the workloads are the same no matter where you sit,” says President Curt Queyrouze. A VPN is a virtual private network, which allows the user to send and receive data as if their computer were operating on a private network.

Following the bank’s disaster recovery meeting about the pandemic almost a month ago, staff identified where they needed more VPN licenses, and which employees lacked a personal computer or access to the internet at their home. This gap wasn’t limited to older employees; younger workers tend to rely on smartphones when they’re not in the office.

In response, TAB Bank ordered $400 laptops to distribute to select employees and granted stipends so staff could access the internet at home. That early move was critical — Queyrouze says a later trip to purchase a few more laptops came up empty, as stores wrestled with demand.

Banks need to consider all the technology required by the employee. For example, Duncan says Triumph Bank updated its payroll system so employees can now clock in remotely. That’s necessary for those that are eligible for overtime pay.

Enable communication between employees and teams
Technology facilitates communication and collaboration. Both TAB Bank and First Northwest use Microsoft Teams, a communication and collaboration platform tied to Office 365.

“To the extent that [employees] have video capabilities on their laptop or desktop [computer], we’re really encouraging them to use those so that we can see each other and feel more connected,” says Queyrouze. “We’re finding that it actually makes a difference.” He regularly emails staff, and they’re clearly communicating tasks that need to be accomplished as the situation evolves. “We have some employees whose actual work activity is going down because of reduced activity in some of our areas; for instance, loan demand’s down,” he says. “We’re trying to be purposeful about getting them engaged in other projects.”

Enabling communication is particularly critical for employees at this uncertain time.

“It’s been so fast moving that I’ve been just working to create communications and a sense of security for our employees,” says Brown. The situation is evolving rapidly, as new guidance comes from government agencies, legislative and executive bodies pass new rules, and banks work to digest it all and react appropriately for their employees, customers and communities. “We’re meeting every day to assess the situation.”

Teresa Tschida, a senior practice expert at Gallup, recommends setting clear expectations for staff, communicating frequently and gaining feedback along the way. Great managers “help people know what’s expected,” she says. And in a period of intense uncertainty — as schools and businesses close, and people are asked to isolate themselves in their homes — the daily grind of work can be a source of comfort.

“If done right, management and the company itself can be a respite from some of the stuff that we’re facing in our inboxes, or with our families and whatnot,” she says. “At least with our companies, we feel well taken care of.”