In this episode, Sean and Gina discuss what’s on the minds of banking and credit union leaders as they face the headwinds that are still present after a year and a half of pandemic life. With the need for profitability and fintech nipping at community banking’s heels, how to continue to serve customers and meet expectations often means new partnerships. Whether it’s a fintech collaboration like the one that delivered Chime to the marketplace or a financial wellness pairing, like Regina King and Wells Fargo teaming up to help serve the underbanked, when banks and credit unions look at new and novel ways to meet the people at the point of need, banking builds on the trusting relationship financial institutions have with their customers and communities.
Intro: This is Believe in Banking, a podcast series for decision-makers, influencers, and leaders, featuring experts taking on the financial industry’s most pressing issues with insight and empathy. The podcast features information and conversations designed to enlighten and empower. Here are your Believe in Banking hosts, Sean Keathley and Gina Bleedorn.
Sean Keathley: Welcome to our podcast for Believe in Banking. I am Sean Keathley, President and CEO of Adrenaline.
Gina Bleedorn: And I’m Gina Bleedorn, Chief Experience Officer at Adrenaline. One of the things we’ve always done is get to the heart of what matters to our clients. We’re doing that now more ever with so much change happening. Sean, what are we hearing right now? What’s keeping our clients and bankers up at night?
Sean Keathley: Well, I think it’s an interesting time. For all of us in a lot of ways, we’re learning to live with the pandemic that has reshaped all of our lives. We have a typical time in a fiscal year, we’re starting to plan for 2022, and yet there are still headwinds. We have this incredible challenge that a lot of the banking industry has taken head on around really more serving people over the profits and hoping that the profits will come as a result of that. And that is an idea that really started this notion of believe in banking. And while we did this, we do believe that is true. Now that we’ve pushed forward over a year and a half, there are some interesting themes coming out. Last year, we saw a lot of people forgiving loan late payments, overdraft penalties. We’ve highlighted several of our clients that were helping people navigate the challenging times.
Sean Keathley: But if you’re honest and you’re in a boardroom, how are we going to stay profitable? There is a responsibility for the bank to be solvent, to hire and retain good staff, and they need to be successful to do the things that they’re willing to do at the neighborhood level to do good. The other thing we’ve been talking about is FinTech. We had Luvleen on with BankMobile and some of the exciting things where FinTech is coming to the community banking market, more as seeking partnership versus threatening. And I think those things are starting to dovetail together.
Sean Keathley: We’re about to be an NBA season starting, baseballs in playoffs. And you look at the Dallas Mavericks and you kind of lookup and like, oh my gosh, their corporate banking sponsor is Chime. And so the times are changing. But if you unpack that a little bit, there is a small bank in Oklahoma that is actually the bank behind Chime. And it’s an unlikely marriage with a bank with over a hundred years of age and the annual reports have fields and agriculture and then Chime, which is this FinTech. But Gina, this idea of banking as a service might be able to thread a needle through all the things I’ve talked about, looking for fee income, doing good, how we partnership with FinTech. And I think it’s an interesting conversation happening in a lot of boardrooms.
Gina Bleedorn: I think the important really critical message here is that partnering has got to be the way forward. Otherwise traditional banking may eventually lose business. It is already happening. For the first time, C&I lending of non-banks has caught up to that with banks in C&I. That was shocking to me. And it’s FinTechs beyond the consumer market in capital investment markets. It’s beyond just insurance and payments. Partnering has got to be the way forward, and there are examples of it happening. We had Luvleen Sidhu, CEO of BM Technologies on the podcast a few episodes ago. And they’re exploring this very thing, looking for partners to become banking as a service partners with BankMobile as the FinTech driving them. The partnership between the two has to be the way forward.
Sean Keathley: I’ll give you another example. I’m going to be accused of being a Dallas fan, although with the Atlanta football team, I am looking for more of a winning program. But it happens to be back to Mark Cuban NBA. One of our great clients and one of the leaders in community banking, Jill Castilla, who is at the Citizens Bank of Oklahoma, she actually sent Mark a tweet last year. And it was in response to the problem with getting funding into the hands of people that need it. Anyone know a very agile FDIC SBI preferred lender bank that I can work with to get cash advances into people’s hands ASAP? The three-week wait is too long.
Sean Keathley: And Cuban responded. And in four days they came up with a line of credit for her to do just that. Basically take the three-week wait, because of the rush of everyone looking for the government help, and get the money in small businesses and people’s hands and knowing the federal government would back it. It’s just yet another example of thinking out of the box, thinking about ways to partner with unusual people to do good. And I think the theme in these examples is really trying to believe in banking, help the people at the Main Street level and do it in non-traditional ways.
Gina Bleedorn: So Sean, sticking to the theme of things that keep our clients up at night. The IRS situation, this proposal has the whole financial industry paying attention because its implications are vast. Sean, what are we hearing from bankers about the feelings around this?
Sean Keathley: Well, you’re talking about the proposal and it’s just a proposal and we’re not going to get into all the things going on in Washington. There’s a lot of other media outlets and podcasts that if you want to think and hear about that, there are better places for that. What we’re worried about is the strength of the community banking system, community banks and credit unions and what they do at the neighborhood levels and their focus on the health and safety and trust of the people they serve. And so I think that’s what has struck a nerve in the financial industry. The proposal is to start to review debits and withdrawals that are of $600 or more. And the idea is the IRS is looking for tax income, knowing that there is a problem in the United States with people that don’t all pay their taxes, let’s say.
Sean Keathley: The reason the banking industry doesn’t believe this is the right way to get there is it really starts to put negative energy and trust on the consumer. It’s invasive. Let’s forget about it being hard to monitor and measure, but just the idea of having the IRS that deep into the daily transactions of an individual or a small business, because it applies to personal in business, is not a great idea. According to the banking industry, there could be other ways to go get the revenue.
Sean Keathley: And so I think this one’s a little unique in that there are some conversations happening and I think like one of the places we would point people just to get more information is ICBA site about bank locally and just a quick one and a half minute video from a banking alert. But this one is a little bit different, Gina, in that I think a lot of the boardrooms are talking about this. A lot of institutions are emailing their consumer base and asking them to get involved. And so I think that’s an important distinction between things we typically talk about and just illuminated an issue. We would really like people to learn more about so they can understand it.
Gina Bleedorn: Related is data privacy and issues of trust that we have discussed here before. And we’ve talked about the fact that most consumers actually, across generations, certainly skewing younger but across age ranges, are willing to give up some amount of privacy for value in return. Problem, it seems, with this proposal is that value doesn’t seem to be apparent. And so it is potentially eroding trust with banks with consumers, which is exactly the very thing we’ve talked about is at a desperate point to build in order to retain consumers, to keep them from flocking to FinTech and to grow market share. So this is really boiling down to an issue of consumer trust. And it’ll be interesting to see what happens.
Sean Keathley: Well, it’s a great point and you’ve nailed it, Gina. I think if we kind of back up and think about global strategy, we really urge our clients and everyone in the industry to think about the value of experience and efficiency and those things that help your organization be successful, but not at the expense of the consumer. The banking as a service and the trust, financial education, all the things we’ve been talking about that are ways to build trust and value that benefit the bank needs to be the lens of the financial industry. And so I think when something like this comes up, to your point, it seems to benefit the government. And the government needs benefits. But if it’s going to be the expense of the average consumer, I think they’re going to raise their hand and say, this is something we should we think about.
Sean Keathley: Just like that, I think the other announcement that’s come out is the US Postal Service. They’re wanting to expand into banking and they’ve done a little four-branch pilot. But I can tell you that the intention is sincere and good. We have too many Americans that are underbanked or unbanked, but I don’t think that the answer is the postal service. I think the postal service probably has similar trust issues like the IRS. And I think it just reemphasizes the absolute need of the community banks and credit unions to grow and thrive and expand into growth markets and do what they do best.
Gina Bleedorn: We’ve said this before, but be more of who you are, really is the message. It’s just that people don’t know who you are and they need you more than ever.
Sean Keathley: I kind of chuckled when you were presenting to the Credit Union League in Canada. We opened that Toronto office and we’re expanding to North America and we had all those credit unions listen to you talk about trends. But the big last question was, what advice do you have for the Canadian banking system and all these credit unions? And that was your answer. Be yourself. They just need to trust it. I do believe that the financial institutions at the community level are the best prepared to help people with banking services, nothing against those amazing postal carriers.
Sean Keathley: But I think we’ll leave the delivery of mail to them and let’s let our banking partners serve the communities from banking perspective. With that said, we’re thinking about how to do just that. How do more banks become successful with the headwinds that we’ve been through the last few years? And there’s actually one of the government programs that’s exciting, Gina, the FDIC. And it’s an example of the government helping community banks succeed. Do you want to talk about that a little bit?
Gina Bleedorn: Yeah, especially because it’s really in line with the mission of believe in banking, the mission-driven bank fund. It is matching private investors, as Sean mentioned, with minority-owned banks and community development financial institutions that need funding in ways that help development in underserved communities. And it has received initial funding of 120 million. So this is hopefully going to grow from here. It’s made funding available to 280 minority-focused institutions so far.
Gina Bleedorn: And finally, minority depository institutions, the number of them that have been declining every year since 2014 have gotten an uptick. The strength of diversity in banking specifically was recently proven again by a McKinsey report on racial equity and financial services. It said for every 10% more racially or ethnically diverse a company’s senior team is, earnings before interest and taxes is nearly 1% higher. So essentially, boards with 30% or greater diversity deliver better revenue growth. And so all of these steps towards a more diverse and inclusive culture, especially in banking, will make all of banking strong.
Sean Keathley: We need the boardrooms to look like the coffee shops. We need these neighborhoods to be strong. It’s one of the things I love about the community and regional banks. The bankers live in these communities and that is a reflection of what we’ve talked about with trust. And you talk about money and advice, having a familiar face or someone you believe in is absolutely key to that win-win scenario. And I think this is an exciting step towards a movement that we’re just seeing the beginning of. I think it’s a great one.
Gina Bleedorn: Ultimately, we come back to a theme we often come back to, which is the role the banking industry can play in people’s lives, the lives of real people every day. And that’s helping them be smarter and better about finances to live better lives. Recent data from the CFPB cited 71% of households face difficulty saving because of expenses they didn’t plan for. 60% have experienced a financial shock in the past 12 months. And Fortune recently reported that while technology is groundbreaking, knowledge of new financial tools and financial literacy education lags far behind the sophisticated programs that underpin our financial systems. And certainly that area of underserved and underbanked is the hardest hit in desperately needing financial advice and literacy.
Gina Bleedorn: Regina King has just partnered with Wells Fargo to essentially help boost financial health in Black communities. She said she’s had a head start on financial education that others haven’t and she’s using that as a platform with Wells Fargo to help perpetuate knowledge. The advantage that community institutions have is that they are a product of their communities. They are a reflection of the communities from which they were built from, and as such have inherent trust from those communities. Now is the time to cash in, in a way, on that trust. To capitalize on it, to help build those communities back, especially in the communities that need it most.
Outro: You’ve been listening to Believe in Banking, a podcast series created to empower decision-makers, influencers, and industry leaders in financial services. Be sure to also join us on our flagship site, believeinbanking.com.