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TECH FOCUS • Digital Branches • Successful Martech • Trends To 2025

INSIGHT Small Biz Lending In 2020

THE LURKING THREATS Cybersecurity Advice That Can Protect Your Bank


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FEB 2020

>> Follow us on Twitter at @BankingNYmag STAFF


COVER STORY: CYBERTHREATS … Banks do OK combating challenges but can’t rest




Eric C. Peck





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IBANYS President's Update Tackling the challenges of banking consolidation and more.


IBANYS Public Affairs Update

Gov. Cuomo’s 2020 plan and how it impacts community banks.


IBANYS Member Profile

Third-party administrators play an important role

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Businesses have a cautious approach to success in 2020



Digital branches lower cost of opening vs. the traditional models.

The shape of small business lending in 2020





On The Move

Local professionals making their mark in New York banking



Digital trends for the next five years


Did You See?

The four options you need for successful Martech solutions



Highlights from the weekly Banking New York eNewsletter




Did You See?

The varied threats attacking banks’ cybersecurity





How to aid customers with mental health issues

Digital Trends Banking New York | Issue One 2020 | 3





Consolidation Presents Challenges To Community Banking Industry

n the current banking environment, among the biggest issues facing community banks – and the customers and communities we serve -- remains the challenge posed by the merger and acquisition market. Consolidation has been a reality in the banking industry for decades, and recently it has been escalating. In the aftermath of the 2008 financial crisis, and the heightened industry regulation that followed under Dodd-Frank, mergers and acquisitions in the banking sector slowed somewhat. However, a decade later consolidation has returned. Overall, as of March 2019, the number of banks dropped by nearly 9,800, or 64 percent, since 1990. While the decline in the number of banking charters is

4 | Banking New York | Issue One 2020

slightly lower - 264 in 2018 compared to an annual average of 355 banks, the pace as a percentage is slightly higher - 4.7 percent in 2018 compared to average of 3.6 percent. As of the third quarter of 2019, there were still 5,113 community bank charters in the United State, and the community bank consolidation rate was at 4.2 percent YoY. (Numbers from “Banking Strategist”) Why is consolidation taking place? There are a number of reasons. Increasing technology and compliance costs have made scale more attractive … competition from the mega and large regional banks, startups and non-banks (tax-exempt including credit unions). . . the o-called “middle-tier” banks expanding their

balance sheets, leading them to pursue other ways of growing. Moreover, the Federal Reserve made it easier for banks to merge by lifting the combined size threshold that would trigger a much deeper regulatory probe. Another spur to consolidation comes with the 2018 bank-relief law that exempted small and mid-sized lenders from a number of the regulatory restraints that apply to the mega banks Smaller community banks have continued to show a net reduction. For one thing, nearly 97 percent of all the nation’s banks are community banks, creating an obvious, available pool for merger activity. Many continue to include mergers and acquisitions in their strategic planning process.

IBANYS 2019-2020 BOARD OF DIRECTORS Chairman Michael Wimer Cattaraugus County Bank, Little Valley, NY Vice Chair Thomas Carr Elmira Savings Bank, Elmira, NY Treasurer Mario Martinez Catskill Hudson Bank, Kingston, NY Immediate Past Chairman Thomas Amell Pioneer Bank, Albany, NY ______________________________

In New York State alone, we have seen a wave of mergers and acquisitions that directly impacted community banks have been announced: • Bank of Buffalo (CNB from PA) with Bank of Akron • Community Bank’s acquisition of SteubenTrust and Kinderhook Bank • Empire National Bank’s acquisition by Flushing Bank merges • Evans Bank’s acquisition of Fairport Savings • Victory State Bank’s (Staten Island) acquisition by Northfield Bancorp • Country Bank’s acquisition by OceanFirst Financial (New Jersey) • Upstate New York (USNY) Bank’s acquisition by Norwood Financial Corp. (parent of Wayne Bank, Pennsylvania,) Many of these mergers occurred within the same marketplace, and most involved institutions with similar business models and strategic approaches. From a customer and community standpoint, these communities will continue to enjoy the many benefits of local banking. From an industry and trade association perspective, consolidation creates a different kind of impact. Fewer community banks presents a potential challenge to our leverage when working with state and federal government: After all, the old adage, “strength in numbers” is based in reality. However, IBANYS continues to represent the segment of the banking industry closest to the customers and communities it serves. Community banks – even as they may be fewer in number – are still the best option to provide local decision-making, knowledge of

customer and community, and a commitment to meeting local the housing, small business and consumer needs. Our community bank members must, and will, work harder than ever to continue to present a strong, united presence in Albany and Washington, D.C. One last thing: While we have not yet seen evidence of it in New York, in other states credit unions are  buying  small  banks  in record numbers. Last September, S&P Global Market Intelligence reported that credit unions  had acquired 21 U.S.  banks  since 2018, compared with 12 purchases in the prior five years. Congress and the regulators should take note of this trend, in which a typically large, growth-oriented credit union expands its taxpayer-subsidized footprint by buying up a smaller, taxpaying community bank. It has a negative impact on the tax base of states and localities because earnings on the bank’s assets become tax exempt when bought by a credit union. Further, the credit union’s tax-exempt status, together with capital and other rules, allow it to pay a higher price for the bank than another bank could. Community banks have more than enough competition and challenge without allowing tax-exempt credit unions to enter the fray. ■


John Witkowski is president and CEO of the Independent Bankers Association of New York State. He may be reached at johnw@ ibanys.net or (518) 4364646.

R. Michael Briggs USNY Bank, Geneva, NY John Buhrmaster First National Bank of Scotia, Scotia, NY Anthony Delmonte Bank of Akron, Akron, NY Ronald Denniston First National Bank of Dryden, Dryden, NY Director Emeritus Christopher Dowd Ballston Spa National Bank, Ballston Spa, NY John Eagleton Steuben Trust, Hornell, NY Gerald Klein Tompkins Mahopac Bank, Brewster, NY Douglas Manditch Empire National Bank, Islandia, NY Paul Mello Solvay Bank, Solvay, NY Theresa Phalon North Country Savings Bank, Canton, NY Phil Pecora Genesee Regional Bank, Rochester, NY Anders Tomson Chemung Canal Trust Company, Elmira, NY Kathleen Whelehan Upstate National Bank, Rochester, NY Steven Woodard Alden State Bank, Alden, NY IBANYS STAFF John J. Witkowski President and CEO Stephen W. Rice Vice President of Government Relations and Communications William Y. Crowell III Legislative Counsel Linda Gregware Director of Administration and Membership Services

Banking New York | Issue One 2020 | 5





Governor Cuomo’s State Of The State Address Launches 2020 New York State Legislature

n Albany, Governor Andrew Cuomo delivered his 10th annual State of the State address on Wednesday, January 8, officially kicking off the 2020 session of the New York State Legislature. The governor included several proposals that would have a direct impact on New York community banks. The message included a proposal for “expanding access to safe and affordable financial services.”  The governor urged creating an “Excelsior Banking Network” to “increase access to safe, affordable bank accounts and small-dollar loans in underserved low-income communities.” He also proposed establishing a statewide Office of Financial Inclusion and Empowerment  “to meet the financial services needs of low-and middle-income New Yorkers.” His address further included proposals regarding strengthening consumer protection laws, elder financial fraud, the licensing and monitoring of debt collectors, In the first months of the session, the legislature will be considering how to address a state budget deficit of more than $6 billion. There has been talk among some lawmakers of an effort to raise revenue by, among other measures, revisiting bank taxes and/or imposing some version of a wealth tax on high earners.

6 | Banking New York | Issue One 2020

Credit Unions Encroach

IBANYS’ Government Relations Committee has discussed the upcoming session and focused on our strategy for the coming year. We reviewed a number of proposals related to community banks. We have met with the Governor’s office and State DFS to address our priorities and concerns, Specifically, we expressed our concerns on credit unions seeking to enter the overall municipal deposits business – an effort we were able to stop once again last year. With the current budget deficit, allowing tax-exempt credit unions into the bidding process would present a potential loss in state revenue of at least $18 million. For community banks, it would also pose a safety and soundness issue for those that lose their muni revenue and could curtail their ability to lend.  We plan to pursue a number of “pro-active” bills, related to state CRA exemptions, enhancing the State Community Bank Deposit Program and establishing community bank service corporations.  Clearly, community banks have our work cut out for us. We need your input and participation.

New Banks Committee Chair

There is a new chairman of the State Assembly

Thomas Abinanti

Banks Committee: Speaker Carl Heastie (D-Bronx) has appointed Thomas Abinanti (D-Westchester County). Chairman Abinanti was elected to the Assembly in 2010 after serving in the Westchester County Legislature. He has previously chaired the Assembly Committee on Oversight, Analysis and Investigation, and has served on the Committees on Codes, Judiciary, Environmental Conservation and Health. IBANYS will meet with the chairman and his senior staff to discuss the New York community banking industry, our concerns, priorities and background.

Washington News

Meanwhile, in Washington, Congress is also back in session, community banks – through IBANYS’ partner on the federal level, the Independent Community Bankers of America (ICBA) announced a 2020 agenda that includes: • Modernize the Bank Secrecy Act • Establish a cannabis-banking safe harbor • Close the industrial loan company loophole and • “Wake Up” to credit union and Farm Credit System practices.

The House Financial Services Committee Chair Maxine Waters (D-CA) released a schedule of  January hearings, including sessions on the Community Reinvestment Act, Financial Accounting Standards Board oversight, interest rate caps, mobile payments.  IBANYS strongly supports ICBA’s message to Congress that credit unions are using their tax exemption to buy community banks, pay undisclosed salaries to top executives, and name sporting venues after themselves. Drawn from ICBA’s “Do They Know They’re Tax-Exempt?” research paper,  it notes credit unions with more than $1 billion in assets saw their share of the tax subsidy increase by 260 percent over the past two decades. ICBA is conducting an ongoing campaign  urging policymakers and the public to “Wake Up” to the risky practices, costly tax subsidies, and irresponsibly lax oversight of the nation’s credit unions. ■ Stephen W. Rice is Director of Government Relations & Communications for the Independent Bankers Association of New York State. STEPHEN W. RICE

The governor urged creating an “Excelsior Banking Network” to “increase access to safe, affordable bank accounts and small-dollar loans in underserved low-income communities.” Banking New York | Issue One 2020 | 7




Underscoring The Importance Of BOLI Third-Party Administrators


he percentage of banks holding bank-owned life insurance (BOLI) assets in 2019 was approximately 64 percent with a total cash surrender value of approaching $173 billion. One of Pentegra’s goals is to help our bank clients understand the significant benefits of having a Fabrizio D’Uva separate BOLI administrator and BOLI service provider – something that is a critical component when considering vendor risk management and regulatory oversight in this space. The Office of the Comptroller of the Currency (OCC) -- an independent bureau within the U.S. Treasury Department that charters, regulates and supervises all national banks and thrift institutions – strongly recommends that when it comes to BOLI purchases, banks use a third party to supply the verification and prudence necessary to ensure compliance with regulatory guidelines. As the bureau put it in its OCC 2004-56 bulletin: “An institution should be aware that the vendor’s financial benefit from the sale of insurance may provide the vendor with an incentive to emphasize the benefits of a BOLI purchase to the institution without a commensurate explanation of the associated risks. Therefore, reliance solely upon pre-packaged, vendor-supplied compliance information does not demonstrate prudence with respect to the purchase of insurance. An institution should not delegate its selection of product design features to its vendors. An institution that is unable to demonstrate a thorough understanding of BOLI products it has purchased and the associated risks may be subject to supervisory action.” So, what can a third-party administrator (TPA) actually do for a bank’s BOLI purchase? With its fee-for-service-only structure, a TPA does not participate directly or indirectly in the sale of life insurance products, annuities, mutual funds, or other financial products; therefore, it is not dependent on BOLI sales and/ or commissions, thus maintaining a truly independent position with no conflicts of interest. Pentegra, which acts as a BOLI service provider, uses The Pangburn Group (Pangburn) as its TPA for its BOLI and nonqualified executive benefit plan business. Independently owned and operated, Pangburn services more than 25 percent of the nation’s banks with BOLI. While other firms operating in the BOLI space perform both administrative and service functions in what they call a “turnkey” approach -- indicating that by doing both “in-house,” they are saving a client time and money and 8 | Banking New York | Issue One 2020

reducing the number of vendors that the bank must engage – this can be a slippery slope, especially in our current era of mergers and acquisitions (M&A) in the banking sector. Already on a strong pace over the past few years, banking M&A activity is only expected to increase in the face of the recently passed Economic Growth, Regulatory Relief and Consumer Protection Act, which rolls back many of the regulations imposed by the Dodd–Frank Wall Street Reform and Consumer Protection Act in the wake of the 2007-08 financial crisis. “By raising the threshold for stricter supervision under Dodd-Frank from $50 billion in assets to $250 billion, the new law effectively removes a disincentive for mergers and acquisitions,” noted Barron’s. How can M&A deals affect the BOLI space? With fewer banks, a BOLI administrator/service provider that is solely reliant on the sale of new BOLI to generate commissions and ongoing trail revenue may have difficulty sustaining a model to support the infrastructure of its company and its administrative platform. That in turn makes them more susceptible to acquisition. Whenever a company has gone through several rebranding or renaming iterations or has been acquired, concerns about how it can consistently perform its administrative duties (among other issues) tend to follow. In addition, typically a TPA’s proprietary software is 100 percent owned by the administrator and remains independent from other commercial providers, allowing for a higher level of security control. TPAs also meet with federal regulators on a regular basis to stay abreast of regulatory developments and to provide input where applicable, thus ensuring that its bank clients are as up-to-date as they can be – something that may not necessarily occur if BOLI functions are being managed inhouse. The unbundled alternative offers expert and customtailored plan design and personalized, local service to support client relationships and help drive better results over time. Our unbundled approach includes offering clients diversified business risk versus single provider models; deeper technical expertise, which results in higher quality service; complete fee transparency; rapid response to the market and regulatory needs; flexibility to develop services tailored to a particular client; and combined resources that result in increased market knowledge and capability. We continue to encourage banks that have not explored BOLI to do so. We also advocate that banks that have BOLI but use a “turnkey” service consider a different option.■ Fabrizio D’Uva is Pentegra’s regional director, BOLI and non-qualified benefit plans.





Businesses Expect Success in 2020, But Have Doubts About Economy

ost small and midsize U.S. business leaders expect continued growth for their companies this year amid a less robust economic environment, according to the annual JPMorgan Chase Business Leaders Outlook survey. Three out of 4 businesses – 76 percent of midsize companies and 74 percent of small ones – are optimistic about their own performance, and the majority expect to grow sales this year (70 percent of midsize companies and 62 percent of small ones). They’re leaning into this expected growth through measures including more widespread adoption of new technology and increased hiring. The national and global business outlooks are more cautious, with midsize companies reporting a drop in optimism from 2019. While more than half of midsize (59 percent) and small (52 percent) businesses remain optimistic about the national economy, this marks a decline of 14 and 3 points from a year ago, respectively. Compared to the rest of the country, midsize companies in New York are more cautious about the national economy (56 percent optimistic vs. 59 percent all U.S.) and the local economy (45 percent optimistic vs. 63 percent all U.S.). Jim Glassman, senior economist at JPMorgan Chase, said the New York numbers are driven by an economy that didn’t suffer as much. He told Banking New York, “Compared to most of the country, New York had a quick recovery from the last recession, and things there have settled back into more of a mature economy, with companies experiencing the normal stresses that come from that. As a result, New York, as a whole, is Jim Glassman experiencing a slightly different dynamic from other parts of the rest of the country where the recovery is still ongoing. “New York’s midsize businesses often operate in a very competitive local economy, which can sometimes lead to a less optimistic economic outlook. However, we’ve found overall that individual business owners have a positive outlook for their own company’s performance in the upcoming year, including prospects for revenue and sales growth.” Glassman said there is an important caveat: slowing economic growth isn’t a sign of weakness. “While economic growth may not be as rapid as it was in previous years, the economy is still expanding, which is good news for small and midsize businesses,” he said. “

Hiring from a Shrinking Talent Pool

Businesses want to hire to prepare for an expected uptick in sales, but a limited supply of qualified candidates is making it increasingly difficult to do so. • For the second consecutive year, midsize businesses rank this as the #1 challenge, constrained by a lack of applicants and unique skills needed for the job. This is a reality for small businesses as well: 31 percent report that they are

extremely or very concerned about the candidate supply, up from 28 percent last year. • Still, businesses are forging ahead: 55 percent of midsize businesses and 39 percent of small ones expect to increase full-time employees over the next year. Small businesses also expect a jump in part-time employment, with 38 percent planning to hire, up 7 percentage points from 2019. • To retain talent, businesses plan to increase compensation, improve benefits and provide flexible hours. Midsize companies in New York are slightly more likely to hire (59 percent vs. 55 percent all U.S.). The percentage of companies planning to increase compensation is the same as at the national level (71 percent). “This is actually good news for workers and is a reflection of the strong economy,” said Glassman. “Low unemployment means there are fewer people looking for jobs, so the job market is more competitive. This means companies looking to attract and retain talent are going to need to implement changes to be more competitive including better wages and benefits, which we’re seeing reflected in our survey.”

Planning For the New Decade

Businesses should get comfortable with today’s complex operating environment, and keep the following considerations in mind as they plan for the year ahead: 1. Don’t be fazed by the US economy’s new normal. The durability of today’s expansion is unlike anything we’ve seen before. Rather than compare to business cycles of the past, look instead to key metrics like unemployment and inflation to get a fuller picture of the economy’s health. With strong fundamentals and no clear recessionary trigger, it seems likely the expansion could continue at a slower pace for a sustained period. 2. Embrace technological change head-on. The most successful businesses are using technology to stay ahead of the competition, drive efficiency and build a seamless customer experience. Evaluate the latest tools to make sure your business isn’t left behind. Learn more. 3. Educate staff on cybersecurity. With the pace of cyberattacks rapidly accelerating, 2020 is the year to make cybersecurity a priority. Defenses are only as strong as your least-prepared employee, so investing in training and controls can help protect against the threat of sophisticated attacks. Learn more. 4. Make your values central to your business. In a tight labor market, defining and investing in your company’s environmental, social and governance priorities can be a differentiator in employee recruitment and retention. Learn more. 5. Take advantage of global expansion. Despite geopolitical complexities, international business opportunities are too significant to ignore—and the ease of technology and travel make them more accessible than ever for companies. Evaluate global markets and supply chains carefully to determine how to best tap into new markets. ■ Banking New York | Issue One 2020 | 9





‘Bank-in-a-Box’ Service Speeds Going Digital

anks are always hungry for more deposits, more loan volume, more customers. Often that search involves expanding into different markets, but the cost of opening a new brickand-mortar branch can run upwards of $1 million, not including the land and employee salaries, a major investment for a small bank – and with no guarantee it will succeed. Acquiring another bank is an even more expensive option, plus it brings with it an 18-month or more integration project. So, growing digitally might make a lot of sense. Banks just need to ensure digital solutions are done well across a variety of platforms. That’s the goal of NYMBUS SmartLaunch. The company’s “bank-in-a-box” solution enables financial institutions with either federal or state charters to create a turnkey digital bank under their existing charter in as little as 90 days. The company’s website says this eliminates the need to undergo a conversion or hire additional staff. NYMBUS provides the required operational and technical resources required, 10 | Banking New York | Issue One 2020

including 24/7 support and targeted digital marketing and website services, “so that financial institutions can quickly generate sustainable new deposits and revenue.” Not only that, but it promises to do so without the bank putting up any money upfront, says Drew Dizon, NYMBUS’s senior vice president for strategic solutions. There are also no setup, integration or implementation fees. The bank doesn’t pay anything until its digital offspring is ready to go Drew Dizon live, when it pays a monthly platform fee – which Dizon says is “significantly less than what they would pay to start a traditional brick-and-mortar branch” – and transaction fees based on the products and services that customers use, such as bill pay, debit card usage and the like.

Multi-Year Commitment

“A true digital experience is designed to reduce friction as much as possible.” ––Rutger van Faassen

Banks make a three- to seven-year commitment to SmartLaunch. The length varies depending on the product set purchased, the number of states a bank wants to enter and/or the desired demographic or affinity they want to target. Dizon says the platform fee typically is less than an average fully loaded branch depending on location. Typical branches take upwards of three years to break-even with less and less people utilizing the branch network. “Depending again on the target states, demographics or affinity groups, our clients can break even in year one especially with the ability to collect a significant amount of interchange income from digital customers who utilize their debit cards much more frequently instead of using a branch for making transactions,” he says. “I haven’t seen anyone in the banking business doing what we’re doing,” Dizon says. “We package holistically the entire front-office and back-office operation – including marketing, office operations, infrastructure, fraud management, security, everything you would do to run a digital bank – and launch it faster than anybody else in the market. From soup to nuts, NYMBUS can run the entire digital bank for our clients.” While other companies can handle the back-office technology part of creating and running a digital bank, what sets NYMBUS apart, Dizon says, is its ability to help bank clients target new customers on the web. Essentially, Dizon says, the bank tells NYMBUS the demographic group it’s trying to attract and NYMBUS does the rest. “Our secret sauce is the marketing piece,” he says. “We started as a platform for the media industry. The big media companies use our platform for digital marketing. We use that same platform for our banking platform for digital advertising.” “One of the nice things about our database and our platform coming from the media space is that we have all that data already built into our platform,” Dizon says. “Once we identify the customer or client profile that the bank is looking to attract, our marketing platform can really drill down and find the exact customers they want and advertise on the sites where they go. We are using a variety of tools to market but also to follow those users online.”

Ten Branches ‘Built’

NYMBUS’s marketing job doesn’t end once a prospect becomes a customer. Its platform sends out email notifications to cross-sell customers on other bank products or to get them to utilize services that they haven’t been using. So far NYMBUS has created 10 digital banks that are up and running, such as BankMD, a digital brand for medical professionals started by TransPecos Bank in Texas. Another 10 are in the implementation process, seven of which are expected to go live in the next few months. In addition, the Miami Beachbased company is doing traditional core technology replacements for banks that are migrating to the NYMBUS platform. It is also working with three de novo banks that are working on getting a banking charter. “Customer expectation is rapidly moving towards demanding a digital option,” so only a handful of banks can get by long-term without one, says Rutger van Faassen, vice president of consumer lending at Informa Financial Intelligence. But he warns, “like with many things, doing something badly could be more harmful than not doing it at all. So, if not done correctly, a bad digital experience can create Rutger van Faassen increased customer frustration.” “It is very important for a traditional brick-and-mortar bank to create a true digital experience and not simply a digitized experience,” he advises. “A digitized experience is taking an offline process and creating the online version of it, such as taking a loan application form and putting it online without adjusting it for an online experience. A true digital experience is designed to reduce friction as much as possible.”

Building Without A Charter

The company is also looking to help financial technology companies, retailers and others to launch digital banks. If they don’t have a banking charter of their own, they can partner with one of NYMBUS’s banks. “There are a lot of well-known brands out there that are looking to leverage that brand by partnering with banks,” Dizon Banking New York | Issue One 2020 | 11

says. “They can target their employees or customers and offer rewards and incentives and the bank can serve as a revenue generator.” NYMBUS recently helped Surety Bank in Florida launch booyah!, a digital bank that targets young professionals. “We wanted to have a brand that is separate from Surety Bank, something that could be at a more national level,” says Ryan James, president and CEO of the four-branch bank. “The greatest thing about digital Ryan James banking is you can finely target advertisements and learn and evolve and if things don’t work in an area you can change on a dime,” he says. “You’re not committed to a physical location. But if something is working you can add more ad dollars to that specific group that you’re targeting. You can brand many different ways. It’s a way to test the waters.” “What’s great about this is you reduce your advertising costs and you don’t have the hard fixed-asset cost of traditional banking,” he adds. Getting a new customer in

a traditional retail banking environment might cost about $500 once all the costs are considered. “At booyah! we are already seeing that cut in half,” James says. Surety has plans to open two more digital banks in the near future, including one targeting former professional athletes and their fans.

Clear Definitions

“When creating a digital experience, it is also important to define it differently for each channel, such as desktop, mobile, mobile app, chat and the like,” advises van Faassen. “Each channel has unique characteristics, so replicating a desktop website to a mobile browser does not create the best experience for a mobile customer. “This also brings up the need for an omni-channel approach, where customers can choose their preferred channel at each step of the process and resume in another channel without having to restart the process. This can be a key point of frustration. If banks create a digital experience that does not allow a customer to move between different channels without losing information, the experience can be worse than being forced to do everything in a branch.” ■

BankMobile Rolling Out Digital Banking Enhancements BankMobile, a division of Customers Bank, and among America’s largest and fastest-growing digital banks, announced continued innovations and enhancements to its digital banking platform. BankMobile will offer a two-day paycheck advance, a savings account with a rate that is equal or higher than that offered by Marcus, Ally and Capital One 360, and a team of personal bankers for every direct deposit customer. All three enhancements will be rolled out in the first quarter of 2020. “One-third of Americans are living paycheck to paycheck and almost 50 percent do not have enough to pay for a $400 emergency. BankMobile is addressing this pain point with a two-day paycheck advance offering. In addition, most challenger banks are targeting the low-income segment; however, we believe there is also an opportunity to serve the mass and emerging affluent and our new savings account will compete for these customers. “Lastly, as banks continue to become more high-tech, consumers are missing out on a high-touch experience. We believe in the value of a personal approach to banking and are thrilled to announce that all of our customers with a direct deposit will have a team of personal bankers available to discuss their banking needs,” said Jay Sidhu, chairman and CEO of Customers Bank and executive chairman of BankMobile, which operates out of New York City. Sidhu discussed these enhancements at The Digital Money

12 | Banking New York | Issue One 2020

Forum taking place at CES as part of “The Digital Revolution in Banking” panel that took place Jan. 7, 2020. The Digital Money Forum is focused on helping the tech community make the shift to digital currency. Launched in January 2015, BankMobile’s mission is to provide a compliant, mobile-first banking experience that is simple, affordable and financially empowering. Over the past five years, BankMobile has grown to be in the Top 15 banks in the U.S. in terms of number of consumer checking accounts serviced. Named “Most Innovative Bank” by LendIt in 2019, BankMobile has also developed its own proprietary technology meant to attract and engage customers for full-service consumer banking with a focus on exceptional customer experience. The bank has approximately 270 team members, with over 40 percent entirely focused on technology development and user experience design. The bank also has a disruptive, multi-partner distribution model, known as “Banking-as-a-Service” (BaaS). Today, BankMobile provides its BaaS platform to colleges and universities through BankMobile Disbursements, which serves more than five million students on nearly 800 campuses nationwide. Through this distribution channel, BankMobile serves one in every three college students in the country. Earlier in 2019, the company expanded its BaaS strategy with T-Mobile for the launch of T-Mobile MONEY. ■





Cybersecurity: The Defense Can Never Rest

hile banks can never let down their guard, it does appear that they’re doing a good job of staying ahead of cybercriminals, according to the Office of the Comptroller of the Currency. “Banks generally have appropriate controls for operational stability and protection of bank and customer data,” the agency said in its most recent Semiannual Risk Perspective, published in the fall of 2019. “As a result, cybersecurity-related matters trends have decreased and have remained relatively stable over recent quarters, reflecting increasing maturity of banks’ cybersecurity programs. Trends in this area have improved.” Nevertheless, it warns, “cybersecurity remains a significant risk area for banks, with opportunities for further improvement.”

Threat Evolving

Kevin Greenfield

“There is a good level of preparedness, but cyberthreats and cybersecurity are always evolving,” says Kevin Greenfield, the OCC’s deputy comptroller for operational risk. “It’s something that banks, no matter how good or how strong or how focused they are on them, there

One of the most pernicious and most difficult threats to defend against is when the attack comes from inside the organization, whether it’s from a rogue employee or – more often – an unsuspecting employee or vendor whose identity has been compromised. are risks. It’s very important to make sure that there is ongoing training for your employees and staff and that you are regularly testing and re-evaluating your security controls. While we see the same fundamental attack methods being used, what they look like and the different ways that the threat actors are approaching them are evolving all the time. So, everyone needs to stay on their toes and be ready to respond if there is an attack.” As the Capital One hack last July shows, one of the most pernicious and most difficult threats to defend against is when the attack comes from inside the organization, whether it’s from a rogue employee, as in the case of Capital One, or – more

Banking New York | Issue One 2020 | 13

Traditional signature-based antivirus software is not cutting it anymore. often – an unsuspecting employee or vendor whose identity has been compromised.

‘Inadvertent Insider’

John Rogers, director of advisory services at Tyler Cybersecurity in Plano, Texas, calls that an “inadvertent insider,” and that “is the most common threat there is,” he says. “The inadvertent insider is someone who either through their own actions, such as by clicking on a link or visiting a website they shouldn’t or selecting weak email passwords,” unintentionally allows a cybercriminal access to the bank’s internal databases, Rogers says. “Once they have that identity, they have trust and credibility by the organization John Rodgers and a variety of attacks can occur. The criminal is going to leverage that to get things they couldn’t normally get.” An even bigger challenge is monitoring what a bank’s external vendors are doing. As the OCC and other bank regulators have said, banks are responsible for the actions of their vendors, whether intentional or not. “We actually dealt with that [recently] with a construction company where one of their subcontractors’ email accounts was compromised,” notes Nathaniel Gravel, vice president of information security and information technology practice at GraVoc Associates in Peabody, Mass. “They sent an address change notification to send payment to a different address, and without thinking the employee from the construction company changed the system without telling anyone. They were sending checks to Nathaniel Gravel the fraudulent address for almost three months.”

Stormy Cloud

The evolution to more cloud-based and web-based applications can increase the risk of data theft, Gravel adds. “A lot of infrastructure is moving out of the bank and into a software-as-a-service application,” he says. “The biggest jump we saw in 2019 is companies getting rid of their old servers and moving to Office 365. In doing so their email is now hosted in Microsoft’s cloud and it’s publicly accessible at that point. The way they need to secure that is a bit different than when it was on their own internal network.” At the same time, he says, “we see a lot of community banks establishing a brick-and-mortar presence in new communities, and in doing so they are building them with state-of-the-art technology, which usually means they are connected to the internet. Everything from their HVAC systems to their water heaters can all be WiFi-enabled. The problem is that a lot of times they are not wired with any of the default settings being changed, including the default passwords for administration. So sometimes the way into a bank’s internal network is through those devices.”

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What can banks do?

All devices that bank employees use – whether it’s computers, laptops, tablets, whatever – “need to be secured, managed, monitored and properly configured and kept up to date with patches,” OCC’s Greenfield advises. “The malicious actor doesn’t need to break into the core system and go through all those walls of security if they’re able to plant malware on your internal network from one of those devices. You need to look at security from an end-to endperspective.” “It’s as much a people issue as it is a technology issue,” says Rogers, who advocates strict controls on what bank employees have – and don’t have – access to. “The number one control is, ‘Know Thyself,’” he says. “Know the normal flow of information traffic. Have a very clear role-access model where you can spot someone trying to access data that they shouldn’t or don’t normally access. Know what you have, where it is, and who has access to it and perform regular reviews and audits of that access. Make sure the access changes as an employee moves from role to role within the organization. “The more you limit people’s ability to traverse a network and get to different places, the better off you are, because you’re going to be putting up roadblocks that they can’t compromise without effort. People should only have access to what they need and no more.”

Exfiltration Is Key

Rogers recommends installing secure email systems with exfiltration controls that monitor data leakage. “A deep robust email monitoring system is capable of monitoring data leaving the organization and either blocking it or encrypting the data or notifying the sender or someone within the organization that data has left,” he explains. “Make sure your email system is properly configured and that you have an appropriate level of authentication controls in place to block entry” from an outsider, adds the OCC’s Greenfield. Gravel notes that the old ways of cybersecurity aren’t keeping up with the times. “Traditional signature-based antivirus software is not cutting it anymore,” he says. “Studies have shown that over 50 percent of malware is scripted to what the traditional antivirus is looking for, so in effect traditional antivirus is really only blocking less than 50 percent of malware today, so that offers inadequate protection.” “The alternative,” he advises, “is to layer on what is called Next Generation antivirus to an endpoint detection and response solution, or EDR, that looks for behavioral-based symptoms on a system to prevent some of that malicious activity from going on, the most common of which is ransomware.” Gravel also says he sees a lot of banks investing in perimeter security to try to keep cybercriminals out, but not spending as heavily in detective and response controls to be able to respond in a timely manner when they do have a compromise. “Because of that imbalance there is an exposure to mitigate the attack or minimize the loss,” he says. ■


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BankMobile Promotes Co-Founder Luvleen Sidhu to CEO

BankMobile, a division of Customers Bank, and among America’s largest and fastest-growing mobile-first banks, announced the promotion of co-founder Luvleen Sidhu to CEO. Jay Sidhu, chairman and CEO of Customers Bank, will serve as executive chairman of BankMobile. Jay Sidhu said, “Luvleen has helped BankMobile grow tremendously since launching in 2015 and has overseen many of its advancements over the past five years. We are excited to see the bank continue to develop under her strategy and guidance.” Luvleen Sidhu was recently named “Fintech Woman of the Year” by LendIt in 2019 and one of Crain’s New York’s 2019 Notable Women in Banking & Finance. Under her leadership, BankMobile has grown to be in the Top 15 banks in the U.S. in terms of number of consumer checking accounts serviced. The bank has also developed its own proprietary technology, which was built to attract and engage customers for full-service consumer banking with a focus on outstanding customer experience delivered in the most compliant fashion. Luvleen Sidhu also helped launch the bank’s disruptive, multi-partner distribution model known as “Banking-as-a-Service” (BaaS). Today, BankMobile provides its BaaS platform to colleges and universities through

16 | Banking New York | Issue One 2020

BankMobile Disbursements, which serves more than five million students on nearly 800 campuses nationwide. Through this distribution channel, BankMobile serves one in every three college students in the country.

Baker Tapped As Summit CEO

After a nationwide search, The Summit Federal Credit Union has chosen Laurie Baker as president and CEO, starting Feb. 1. Baker, currently The Summit’s Senior Vice President and Chief Operating Officer (COO), will replace Mike Vadala, who is retiring after working at The Summit over 35 years, 25 of those as CEO. Baker brings to the role a wealth of experience as a credit union senior executive, as an industry advisor and strategist, and as a community leader. She has been employed at The Summit for over 25 years, including as chief operating officer since 2001. As COO, Baker oversees The Summit’s human resources, marketing, business relations, member service center, branch operations and retirement & investment services units. Outside The Summit, Baker has chaired and is a member of several community and industry boards of directors. As a board member and former board chair of Villa of Hope, Baker was honored as the organization’s inaugural “Champion of Hope” in 2017. Baker was also a finalist

for 2018’s Rochester Business Journal Athena Award, recognizing female leaders in the Rochester area. “Having worked with Laurie for over 25 years, her appointment as president and CEO reinforces my confidence in The Summit’s future,” said Vadala. “Laurie has a lot of accomplishments, and her strategic acumen is a huge asset to The Summit.”

Becker Named CEO Of First National Bank of LI

The First of Long Island Corporation announced that Christopher Becker succeeded Michael Vittorio as president and CEO and was elected to the board of directors of The First of Long Island Corporation and The First National Bank of Long Island effective Jan. 1. The planned succession was originally announced on March 19, 2019, and Messrs. Becker and Vittorio have worked together throughout the remainder of 2019 to assure a smooth transition. Christopher Becker commented, “Our Company’s long history of strong financial performance provides a solid foundation to our current leadership team. I have utmost confidence in their ability to maintain our focus on relationship banking while expanding our business to better serve customers in our branch network as well as through digital channels. Broadening our message, expanding our brand and

serving communities on Long Island and within New York City remain among our key strategies. Asset quality continues to be a priority. I look forward to working with our Board of Directors and over four hundred employees in executing a shared vision for future success.” The First of Long Island Corporation also announced that Jay P. McConie has been promoted to executive vice president and chief financial officer of The First of Long Island Corporation and The First National Bank of Long Island effective Jan. 1. McConie has been employed as senior vice president and chief investment officer of the bank since 2015. Prior to that time, McConie served as executive vice president and chief financial officer of Community National Bank from 2007 to 2015. McConie began his career at KPMG LLP in their Financial Services Group. He is a graduate of Long Island University with a B.S. in Accounting and a Certified Public Accountant.

Citizens Names Smith as President, Upstate NY Region

Citizens Commercial Banking has named J. Theodore Smith as its president of the Upstate New York Region. Smith, who joined Citizens in 2017 as market executive, has more than two decades of experience advising and serving the banking needs of corporate clients throughout the region. Smith joined Citizens following a 23year career at M&T Bank. A graduate of LeMoyne College in Syracuse, he has an MBA from the University of Rochester’s William E. Simon Graduate School of Business Administration.

Burruano Promoted At Five Star Bank

Financial Institutions Inc., parent company of Five Star Bank in Warsaw,

N.Y.,, SDN Insurance Agency, Courier Capital, and HNP Capital, announced that Samuel J. Burruano Jr. was named general counsel. In addition to his duties as general counsel, he will also continue to serve as senior vice president and corporate secretary. Burruano has provided legal advice to the organization for the past three years and worked closely with William L. Kreienberg, chief banking and revenue officer and former general counsel, to prepare him to take on this role as the company’s chief legal adviser. This planned organizational change enables Kreienberg to focus his full attention on leading the organization’s revenue and relationship-building businesses for banking, insurance and wealth management. CEO Martin K. Birmingham said, “Over the past three years, Sam has proven to be a trusted and valuable resource. He brings more than 24 years of experience advising the finance industry on complex banking and lending matters and has the knowledge and experience to effectively lead our internal legal team.” Burruano joined Five Star Bank in October 2016 as assistant general counsel and director of regulatory compliance. He was named deputy general counsel and corporate secretary in November 2018. Previously, he served as assistant general counsel at First Niagara Bank and as partner at the law firm Hiscock & Barclay, LLP. Burruano earned a B.S. degree in Business Administration from the University of Buffalo with a concentration in Finance and a law degree from the Cleveland Marshall College of Law. He is a director of the Niagara Frontier Association of Corporate Counsel and a member of the American Bankers Association where he has spoken on risk matters, National Association of Corporate

Directors, Bank Director, Society of Corporate Governance, and the Erie County Bar Association.

Plants Joins Five Star Bank as Corporate Treasurer

Five Star Bank, subsidiary of Financial Institutions, Inc., announced the hiring of W. Jack Plants II as senior vice president and corporate treasurer. In this role, he is dedicated to overall management of the bank’s treasury function including liquidity, interest rate risk and the investment portfolio. This addition provides Justin K. Bigham, executive vice president and chief financial officer, with greater opportunity to meet the evolving financial needs of the organization. Plants most recently served as senior vice president and treasurer of United Bank, a financial services firm offering commercial, small business, wealth management and consumer banking products and services to customers throughout Connecticut, Massachusetts and Rhode Island. Prior to its acquisition in November 2019, United Bank had more than 50 branches in three states and $7 billion in assets. During his seven-year tenure at United Bank, Plants progressed from treasury manager to treasurer, growing the Treasury team to 10 and building tactical expertise in balance sheet management, investment accounting and treasury operations. Plants is a graduate of St. Bonaventure University where he earned a Bachelor of Business Administration in Finance with a Minor in Economics and an MBA in Finance and Accounting.

Pioneer Bank Announces Nichols as SVP Commercial Development

Pioneer Bank in Albany announced the appointment of Rob Nichols to the leadership position of senior

vice president of commercial development. Nichols, who most recently served as director of commercial banking at Key Bank, will serve as an integral part of the Bank’s commercial leadership team, as well as focus on developing new opportunities for Pioneer in the technology and innovation sectors. He began in his new role earlier this month. In addition to his lengthy and successful career in commercial banking, Nichols is an actively engaged Angel Investor, both individually and as a member of the Eastern NY Angels investment fund, where he serves on the investment screening committee. Nichols has been a program mentor for student teams in the National Science Foundation ICorps at Rensselaer Polytechnic Institute and in corporate sustainability projects at University at Albany. He is a multi-year judge of the NYS Business Plan Competition. “Rob’s extensive experience working with startups and in the technology space will be a true asset to Pioneer Bank as we expand our commercial banking division and pursue innovative new programming and offerings,” said Pioneer Bank CEO Thomas Amell. Nichols is a board member at the Capital District YMCA (audit committee), as well as a member of Upstate Venture Connect’s UNY50 leadership network and is on the advisory board of the New York State Business Plan Competition. Nichols has recently been on the advisory boards of the Upstate Capital Association, NY Global Business Network and Pine Street Capital. He holds degrees from the University at Albany and Union College, and certificates from Babson College and Harvard University.

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DePledge Appointed President of Secured Finance Network’s Executive Committee

John DePledge, head of asset based lending at Bank Leumi USA, has been appointed to the executive committee of Secured Finance Network (SFNet), an international trade association for organizations and professionals delivering secured financing solutions to businesses totaling $4.1 trillion across seven different segments: asset-based lending, factoring, supply chain finance, equipment finance and leasing, leveraged lending, cash flow lending, and securitization. Executive Committee members are elected by SFNet member directors to help the association set strategy, make policy decisions, confirm new members, and lead critical initiatives –including advocacy, education, information resources, networking and thought leadership. In addition to Bank Leumi, oncoming committee members hail from Citibank, JPMorgan, Wells Fargo, PNC and Fifth Third Bank, among other leading financial and professional services providers in the space. In addition to this committee, DePledge is the president of SFNet and serves on the board of directors of the Secured Finance Foundation. DePledge’s involvement with the SFNet spans over two decades and has included various leadership roles with the Philadelphia Chapter as well as serving on a variety of standing committees at the national level. DePledge has variously served as a member of SFNet’s executive and management committees since 2009 and 2014, respectively. “John has a long and impressive track record of establishing and building successful asset-based lending practices,” said Shawn McGowen, Leumi’s Chief Banking Officer. “The perspectives generated

over his extensive business career, in combination with the depth of his involvement with SFNet, will continue to benefit the members of this organization and our industry at large.”

Tucker Named Chairman Of Ulster Savings

The Board of Trustees of Ulster Savings Bank in Kingston has appointed F. Michael Tucker as its new chairman. Tucker is President of Tucker Strategies, Inc., an energy, real estate, and economic development firm providing services throughout the Hudson Valley. Tucker previously served as president and CEO of the Center for Economic Growth and was a principal with Mercer Companies, a real estate development firm. A graduate of Villanova University and Villanova School of Law, he is active in economic development and not-for-profit organizations throughout the Hudson Valley, including the New York State Economic Development Council and Pattern for Progress.

Scott, Gill Redesignated Chair, Deputy Chair of NY Fed Board

The Federal Reserve Bank of New York announced that the Board of Governors of the Federal Reserve System has redesignated Denise Scott chair of the New York Fed’s Board of Directors for 2020. Scott, executive vice president for programs at the Local Initiatives Support Corporation, has served as a Class C director since August 2016 and has served as chair since January 2019. The board also redesignated Rosa Gil deputy chair. Dr. Gil is the founder, president and CEO of Comunilife Inc. She joined the New York Fed’s Board as a Class C director in January 2018 and has served as deputy chair since January 2019. ■




Four Considerations When Vetting Martech Solutions For Your Bank


oday, there are almost as many marketing technology solutions as there are banks and credit unions in the United States. The explosion in the number of Martech options — which totaled roughly 150 in 2011 and now  exceeds 7,000 — is mostly Rick Hall in response to the ever-changing obstacles marketers face. But in the financial institution world, those overwhelming numbers create their own challenge. Bank marketers are having trouble keeping up with their technological options. The “2019 State of Content Marketing for Financial Services” report found that 52% of marketers say evaluating technology is among the most significant challenges they face.

Where Martech Solutions Come From

Martech is a catch-all term to describe technology solutions built for or adapted to marketing products and services. In some form or another, all banks use marketing technology, whether it’s marketing automation solutions, business intelligence, or data analytics programs. As ubiquitous as these digital tools are, their importance is growing exponentially. This is particularly true for community banks and credit unions, as financial institutions of all sizes seek more from their marketing spend, especially the improved ability to accurately track performance. After all, the challenges these bank marketers face are similar. Each needs help with: • Maintaining messaging consistency across all channels. • Reaching the right audience. • Generating traffic and converting viewers into new customers.

Banking New York | Issue One 2020 | 19

The need for technological solutions is real, but the task of selecting among them requires a strategy for identifying the right solutions for your institution as efficiently as possible. What follows is a discussion of the four considerations we’ve found useful in making that job more manageable.

situation, ask for proof of the concept, preferably using your organization’s data. After all, to get buy-in from your executive team, you will need to build a case for why this solution is likely to produce a return on the investment.

4. Look for Evidence of a Commitment

For many new tech companies, the fun part was developing the application. Seek out those firms that view Essentially, all banks have the same underlying drivers: establishing and maintaining long-term partnerships with justifying any investment in new marketing tools and their clients as just as fulfilling. being able to accurately track their success in contributing Because your return on investment will be measured to financial and growth objectives. over the life cycle of the solution, that solution needs to Although the marketing area typically chooses and uses have staying power and remain relevant given rapidly these tools, the technology area still needs to operate the changing industry conditions. Look for evidence that solution within the bank’s current platform while meeting the vendor intends to support the technology through risk and security controls for it to be a viable option. frequent updates and that it has its eye on continuing As a result, vendor decisions need to meet your future needs. The representatives from both departments provider’s development, support, and at the table when meeting on Martech innovation curve should align with options to determine the viability and your bank’s priorities for growth and The need for applicability of any proposed solution. efficiency. Before committing to any solution, technological 2. Adjust Your Analytical you should understand how you solutions is real, Approach will interface with the vendor after There are two conflicting realities the solution is in place.  Determine but the task of when it comes to evaluating Martech. how much control you will have as selecting among The first is that many bank marketers users of the solution versus being lack experience in data management, dependent upon the vendor to them requires analytics, and predictive modeling. update, customize, or create a new a strategy for These are core capabilities that are offering. becoming increasingly necessary in Too often, when these details aren’t identifying the banking. specified upfront, bank marketers right solutions. The other reality is that marketers find themselves having to go back need these capabilities to ask in-depth to leadership to let them know that questions of Martech vendors. They what the bank is asking for cannot are also expected to interpret data be easily supported by the Martech from the solutions being considered to ensure appropriate vendor. It is not a conversation you want to have. analysis and recommendations are made to support While some vendors sell direct to banks, many internal growth programs. Martech firms have a pre-existing relationship with an While working toward closing this gap between organization’s core provider. These vendors rely on the today’s needs and knowledge, it helps to stay focused core providers to resell their offerings. Defaulting to your on two main points when reviewing Martech options. organization’s core provider for a Martech solution might First,  think in terms of future opportunities, not seem practical, and their options are certainly worth yesterday’s problems. This requires thinking three to five considering. But a pre-existing relationship should not be years out when evaluating each tool.  Also, understand a determining factor. what problem the technology offers to solve. This helps Instead, start your search by determining what you are in determining whether that problem exists at your trying to accomplish and how you will define success. institution and to what degree. By answering that question objectively and achieving consensus internally, you can address the risk of getting 3. Understand the Proposed Solution caught up in the latest trend or user interface instead of Too many vendors rely on buzzwords to entice a purchase. staying focused on how the solution can help move your Don’t mistake this for expertise. Instead, seek out those bank forward. In the end, your mantra should be: When solution providers whose messaging is clear, is concise, it comes to financial Martech, solutions are bought, not and demonstrates a true sense of your institution’s need. sold. Then, focus your attention and subsequent discussions on the use cases they provide to determine whether their Rick Hall is the managing director of the banking and financial solution will address a problem you face. If you are not Services practice at BKM Marketing, a boutique marketing identifying with the case studies, move on.  communications and strategy firm based in the Boston area with Where a vendor’s pitch does resonate with your a deep focus on the financial services industry.

1. Incorporate Other Perspectives

20 | Banking New York | Issue One 2020




Predictions for Small Business Lending in 2020


FinTech companies revolutionized the industry with technological innovations that quickened the small business loan application and approval process.

or the past decade, FinTech companies have developed and leveraged technology and data analytics to streamline the small business lending process. Their innovations have expanded access to capital, shortened the decision-making process significantly, and reduced risk to the point such that, for many lenders, the default rate is miniscule. Banks that have gone digital themselves or partnered with a FinTech firm that enables them to accept online loan applications Rohit Arora have sped up the approval timeline by weeks (and sometimes months) and dramatically reduced the stack of paperwork that previously comprised loan applications. FinTech firms kept cash flowing to small businesses when traditional bank lenders turned off the spigot during the post-Great Recession “cash crunch.” Banks ceded market share to alternative lenders and never fully regained it. FinTech companies like mine, Biz2Credit, revolutionized the industry with technological innovations that quickened the small business loan application and approval process. Now banks that have not invested in their own capabilities are partnering with innovators who can enable the banks to accept loan applications via laptop or cell phones. While banks have at times viewed FinTech firms as the competition, but that is not necessarily the case. Look for the following trends in 2020: CONVERGENCE Convergence between banks and Fintech will continue in 2020. Banks – particularly small and mid-sized banks -- are realizing that they have to play catch-up. Most big banks ($10 billion+ in assets) have already developed their own capabilities or partnered with a FinTech firm to get the job done. The smaller players might not have the deep pockets that the big banks have in order to invest in technological upgrades, yet they have to keep up in order to survive. Today’s business borrowers – particularly Millennials – are increasingly going digital and they need to be met with an all-digital experience. LOW INTEREST RATES The Federal Reserve lowed interest rates throughout 2019, and I expect that they will remain low as we head into 2020. This is great news for business owners, whose cost of capital should continue to go down. Many business loans are variable rate loans, which means they can expect lower payments in 2020. Since the overall economy has been good, entrepreneurs seem willing to borrow and invest in the growth of their companies. Lower interest rates help make the decision easier. SIGNS OF ECONOMIC SOFTENING I expect the economy to soften in 2020, which will put more pressure on VC-backed startups. As a result, profitability of your business will be increasingly important, and small business owners need to be cautious of their expense lines during this time. Even Banking New York | Issue One 2020 | 21

though, the overall economy has been strong, now is a good time for business owners to examine their operations, look for inefficiencies, and trim any fat that they have. EXPECT COSTS TO RISE In 2020, many states (and possibly the federal government) will pass minimum wage increases that will raise the costs of doing business for many small companies. Business owners will certainly look to reduce staff hours as way to offset increased hourly wages. Business owners need to turn to new software in 2020 for ‘cash flow management’ - this is the piece that they are currently missing. Small business owners should start to use more automation technology and even AI-driven tools to help them run their businesses smarter. This tech is becoming more and more affordable - don’t get left behind! In New York, New Jersey, and New England specifically, the tax burden could increase in 2020 as it has been for the last few years. The real estate market in these regions has been softening and so business owners will need to look to alternative sources of equity (instead of their personal homes) to fund their businesses. As a result, the demand for business lines of credit will increase as a result. ELECTION YEAR UNCERTAINTY During the contentious political times in which we

currently live, there is much uncertainty about the outcome of the Presidential election in 2020. The Democrats continue to push for impeachment and are focused on trying to make sure Donald Trump is a one-term President. Meanwhile, none of the large Democratic field of candidates has emerged as the clear-cut favorite. Since the outcome still is unknown, business owners may wait until the outcome of Election Day 2020 before making major decisions. How should small business owners deal with the stress of increased uncertainty? One good strategy is to secure the funding you need for your business plan early in the year, well ahead of the election. If things in November turn out surprising, you could have more difficulty getting funding. Hedge against that risk by locking up some working capital ahead of time. Then if the election turns out to be a big nothing (i.e. no negative impact) then you haven’t lost any opportunities. Bank lenders and business borrowers alike should plan to conduct more transactions online that ever before. The need to embrace digital solutions is increasing all the time, and the strongest firms will strike know while times are still good. ■ Rohit Arora is CEO and co-founder of Biz2Credit, a pioneer in the FinTech space. Check out his website at https://www.biz2credit.com/ for more information.


Banking New England publishes a weekly digital newsletter that rounds up the latest news and information about, you guessed it, banking in New England. Here are a few stories from recent editions. If you would like to subscribe to, share your news, or advertise in the Banking New England newsletter, contact us at info@ambizmedia.com. MUNICIPAL CU TO CLOSE SIX BRANCHES

Municipal Credit Union of New York faces more woes as it will be closing six branches by the end of January. The announcement of the closure comes after the $2.9 billion credit union has been in turmoil under fraud and corruption cases. But the announcement is more likely an attempt to slow or stem the credit union’s financial problems after posting huge net income losses in the last two quarters and losing more than 17,000 members in the months after former President/CEO Kam Wong was sentenced to five years in prison for stealing nearly $10 million. His case led to federal charges against the credit union’s former board chair and a supervisory committee member. The announcement posted on MCU’s website homepage made no mention as to why these branches were targeted for closing. The statement also did not address how many employees would be affected by the branch shutdowns, whether they would be laid off or reassigned to the remaining 16 branches throughout New York City. 22 | Banking New York | Issue One 2020


Community Bank customers have nothing to fear despite the news that branch locations in North Country are up for auction. Executive Vice President Scott Kingsley said the sale of the properties would not affect the bank branches. “Our leases go for another 10 years or more,” he said. “So, our position as the tenant is protected. Our leases survive the actions.” The properties that will be put up for auction include Community Banks branches in Saranac Lake, Lake Placid, AuSable Forks, Fort Covington, Long Lake, Indian Lake and North Creek. There are also locations in Tupper Lake and Newcomb where Community Bank is still the tenant but no longer operates. According to a judgment index filed with the Franklin County clerk’s office, all the properties would have to be bought as one parcel costing $4,225,107.59. Kingsley said if the sale allowed splitting up the parcel, Community Bank might be

interested in purchasing seven of the 10 properties itself.


Consumers in New York City are witnessing a lot more empty storefronts as bank branches close up physical locations, as mobile banking gains popularity. New York City is joining a trend that’s already sweeping the rest of the country: Fewer bank branches. Smaller bank branches. Wall Street is plotting a diminished presence on Manhattan’s main streets. “There’s a bank on every single corner, and there’s definitely a backlash on that,” city historian Kevin Draper said. “So many people do banking online and over their phones. Frankly, New Yorkers will be happy to see some of these places going down. But the question is, Are these places going to just be vacant?”




Digital Technology Trends in Banking: 2020-2025

D Nick Miller

igital technology—hardware and software—are driving three major banking industry trends: digital transformation, brand specialization and partnerships. Banking executives need to pay close attention to all three if they expect to capitalize on the opportunities these trends will create.

TREND 1: DIGITAL TRANSFORMATION Digital transformation is huge. It includes a long string of related ripple effects including digital marketing, payments and analytics that will change business models and banks’ relationships with their clients. “A lot of companies are looking for ways (to provide financial services and) we’re behind (in developing and launching digital offerings),” said Linda Duncombe, a City National Bank executive vice-president. “We have to think bigger and we have to move faster on bigger thinking.” For example: Google Duplex has demonstrated the capabilities of AI-driven software to mimic human voice and social interactions while making restaurant reservations. In May 2019, Google announced plans to expand Duplex for automated completion of forms on the Internet. Such

technology could automate customer notification should it detect unusual changes in bank accounts or determine a need for financial services updates. Capgemini, a global technology consultant, reports nearly 25 percent of retail banking customers prefer a voice assistant over personal banking visits—a figure likely to increase in three years. Bank of America’s digital assistant, “Erica,” used by more than seven million customers, handled 50 million interactions in its first year. Additional research finds more mid-sized banks and credit unions are either planning to invest in this chatbot technology or discussing the possibility. TREND 2: BRAND SPECIALIZATION Brand specialization signifies development of one or more types of expertise or signature specialties to differentiate, attract or retain customers who generate additional revenue. The most important question with this trend is strategic. Given the impact of digital transformation, demographic changes and other factors, what do banks want to be in five years. How will they stand out and what will constitute their customer base? Predictable responses focusing on people, service and community dedication no longer cut it, according to Chris Meyers, president and CEO of CVB Financial Corporation. “I think the retail consumer game is over… unless you’re in a Banking New York | Issue One 2020 | 23

small rural area,” he said. It’s over for two reasons. First, it’s nearly impossible to compete with national and super-regional bank brands especially in large urban areas. Citizens Financial attracted $3 billion in new deposits by the end of 2018 with the launch earlier that year of its online Citizens Access while figures from Chase show annual deposit growth of 9.4 percent since 2014, more than twice the 4.6 percent average annual rate for the rest of the industry. These impacts go beyond major markets thanks to multimillion advertising budgets. “Our customers see their TV ads and they all expect that we should be able to open accounts in five minutes,” said a community bank president in Missouri as he explained why his biggest competitor is CapitalOne instead of another local bank. Second, community bank brands need to stand out if they are to compete successfully with other local banks. One answer here is to develop one or more niches or specialties. For example, in the Northeast, Rockland Trust, listed by Forbes among the “World’s Best Banks for 2019,” developed a strong condo homeowner association lending program. Sterling National Bank in New York developed specialties in professional practice financing, law firm banking, and nonprofit services. Cambridge Savings Bank has a specialized residential home builder program that complements its strengths in commercial real estate and construction lending. Stearns Bank, a St. Cloud, Minnesota community bank has taken another approach by launching successful national programs, for example, small ticket equipment leasing. According to Kelly Skalicky, CEO, the bank provides small ticket loans, $20,000 up to $48,000, totaling 12,000 to 13,000 per year, electronically all over the country. TREND 3: PARTNERSHIPS. To remain competitive, traditional banks need to think and act more like the technology companies that have defined customer experience outside of banking. They face three challenges: 1. Cost – the expense of designing and building new products 2. Talent – attracting the design and development talent needed for app building and other digital capabilities 3. Speed – the rapidity with which bank teams internally design and develop products and the speed with which core systems providers implement those products.

24 | Banking New York | Issue One 2020

Partnerships with fintechs can address all three challenges. Fintechs are tightly focused and significantly faster than banks in innovating new products. Through partnership models, banks can focus on attracting and nurturing a client base and providing products sourced from an ecosystem of partners. Products can be inserted through a platform or withdrawn as needed, providing customers with quicker access to a broader range of products than what the bank could produce on its own. Globally, more than 5,000 fintech organizations offer a variety of products; e.g. lending, expense management, account opening and dashboards. The selections will depend on the bank’s focus such as its target customers and opportunities to overcome customers’ financial challenges. Partnership success depends on developing bankers’ skills and having the expertise to source and negotiate partnerships with fintech providers in the following areas: • Aligning strategy. Agree on focus, e.g. customer experience, new capabilities or new customer segments, and leveraging each party’s strengths. • Finding common ground. Agree and align around best market opportunities, appropriate value propositions, expertise and commitment to regulatory compliance. Just as important--the overall fit of the partnership, especially the bank’s ability to innovate quickly after the partnership begins. • Monetizing partnership investments. Develop a realistic profit strategy in which clients are attracted to a new offering in sufficient scale and in short-enough time to meet both parties’ expectations. • Scaling and adjusting the nature of the partnership. Develop a roadmap that will guide evolution of the partnership as competition, industry conditions, internal bank environments and priorities change. LOOKING AHEAD Digital transformation will fundamentally change bank economics and revenue models in the next decade. To sustain long-term success, banks will need to develop one or more dominant specialties enabling them to compete within and beyond their traditional footprints. Partnerships with fintechs will enable banks to provide clients with services and products banks could not otherwise provide in the accelerated digital atmosphere that is today’s banking world. Nick Miller trains bankers to attract and expand relationships with businesses for more profitable partnerships. He is president of Clarity Advantage based in Concord, Mass. For additional information and articles, please visit www.clarityadvantage.com




By Helping Those With Mental Health Issues, Banks Can Help All Customers


psychiatry professor at Yale University is calling on banks and other financial institutions to make more of their products and services accessible to people with mental health issues. According to the National Alliance on Mental Illness, about 44 million Americans – or about one in five adults – experience a mental health issue every year. For them, “financial situations can be more complicated than they are for the rest of the population,” according to “Banking for All: Why Financial Institutions Need to Offer Supportive Banking Features,” a recently published report. It was headed by Dr. Annie Harper, an associate research scientist in Yale’s Department of Psychiatry. Harper’s report says, “Financial institutions are missing out on an opportunity to effectively serve the millions of Americans who live with a mental health disability.” The study “proposes that financial institutions offer supportive banking features in order to make their products and services more Dr. Annie Harper accessible.”

Three Needed Features

Specifically, the report recommends “three features that responsible financial institutions could easily implement: 1) customizable mobile banking notifications, 2) self-imposed spending limits on debit cards, and 3) view-only account access.”

“These features would both respond to the expressed needs of individuals with mental health disabilities, as well as comply with existing federal banking laws and regulations,” the report says. “In addition, these features will also appeal to a wide range of current and potential customers, such as young adults, individuals with disabilities, and older populations.” TD Bank, for example, offers an “age-friendly” account in which third-parties have varying degrees of access. “This not only demonstrates that the technology to enable those features already exists but that they have also gained traction among personal banking clients,” the report says.

Making Banks More Accessible

In an interview with Banking New England, Harper is quick to note that she’s not recommending that banks create products and services specifically for those with mental illness, and definitely not advising banks to market them that way. Rather, she says these products should be available to all customers. “I think what would make banking more accessible to people with mental illness are actually products that would be great for customers generally, like enabling people to put self-imposed spending limits on themselves, or having customized alerts based on certain types of spending behavior,” she said. “That’s something a lot of people would love. They would be good for everyone, not just people with mental illness. Some of these things don’t have to be seen as only for people with mental illness.” She uses the analogy of cutaway curbs to accommodate Banking New York | Issue One 2020 | 25

people with wheelchairs. “We all have an easier time walking the streets because of cutaway curves that were designed specifically for wheelchairs,” she says. “It’s similar with banking.” “All of us don’t have mental illness, but all of us will be old one day and much of what we are recommending would also apply to the elderly,” Harper adds. “So I think there are ways to frame these services as good for everyone, whether it’s now or later in life.”

Satisfy ADA and CRA

Harper’s report noted that banks are required under the Americans with Disabilities Act to offer “reasonable accommodations” to their services to individuals with mental health disabilities. They also receive Community Reinvestment Act (CRA) Community Development credit for doing so. “This goes to show that there are external incentives for banks that actively strive to serve their under- and unbanked populations,” the report says. In addition to doing what’s right and legally required, it’s also good business, said Paul Hammer, recovery support specialist at the Yale Program for Recovery and Community Health. He and several banking, legal and mental health experts appeared with Harper at a panel discussion on the report before a standing-room-only audience at Yale in early November. Having such products that benefit all customers could give banks that provide them a competitive advantage, Hammer said. Also on the panel was Jorge L. Perez, commissioner of the Connecticut Department of Banking, which regulates state-charted financial institutions. While the department can’t force banks to offer these services, Perez said, it is responsible for making sure that they comply with applicable regulations, such as CRA and ADA. He said his agency’s main function in this regard is “educating” financial institutions about their responsibilities under the law. “This is not a topic that’s going away,” he said.

Model For The Nation

Harper said she is focusing her recommendations right now on local banks in New Haven “with the idea that if we can make something happen locally then it could be a model across the nation.” One of the largest banks in the country – Wells Fargo – already offers a service that meets one of

Harper’s suggestions: an account that allows the holder to assign another person to view it online but not make transactions. “The service can benefit everyone in general but certainly can be useful for people suffering with mental illness,” said Kenneth J. Allison, district manager for Kenneth J. Allison Wells’ Greater New Haven District. The no-fee service is available nationwide to all of the bank’s customers who use online banking. It gives a view-only access option that an account holder can grant to anyone they would like to monitor the account and view transactions, but without the ability to make transactions. Account holders can remove access at any time.

Online Monitoring A Solution

Harper’s report noted that “most financial institutions routinely offer online-monitoring accounts for their commercial banking customers” already, yet consumer accounts usually don’t. So “the technology is out there,” she said. However, she does note that “smaller institutions are more limited by what their systems allow them to do. This is a challenge to some small banks.” Right now, applications from nonbank financial technology firms provide the most widely available option for people who want help managing their finances, but don’t want to give a third-party the kind of access and control associated with joint accounts or financial powers of attorney. Monzo, the U.K.-based fintech that recently opened an office in Los Angeles and plans to begin offerings its services to U.S. consumers this year, offers a set of services with individuals with mental health problems explicitly in mind. That includes what it calls “positive friction,” which makes it harder for people to make financial decisions they may regret later. Monzo’s philosophy, Harper says, is that “if they can serve people with mental health issues better, they can serve all customers better.” ■

“If they can serve people with mental health issues better, they can serve all customers better.” 26 | Banking New York | Issue One 2020

WORKERS WANT TO KEEP IT CLEAN Banking New York, in conjunction with its sister publications Banking Mid Atlantic and Banking New England, polled its readers on this question: “Which of these perks would you like?” The answer choices were:

c c c c







Dry cleaning services Day off to mourn a pet Free beer on Fridays A Kindle with a book allowance

It appears that our readers find free dry cleaning to be the most desirable perk their bank or credit union could offer them. Almost one-third of our readers expressed an interest in this benefit being provided. Coming in at second place was pet mourning. Slightly more than 28 percent of our readers would welcome a paid day off to grieve after a beloved dog or cat passes.


About one-in-four readers (26%) have a literary bent and would enjoy receiving a Kindle with a book allowance. Our readers mostly don’t want to mix IPAs with work. Only 13 percent favor free beer Fridays at work. ■

Have an issue you would like to see addressed in a survey? Or want to subscribe to the Banking New York eNewsletter, contact us at editorial@ ambizmedia.com.

Banking New York | Issue One 2020 | 27

Discover what's on the horizon.

You won't want to miss this.

March 3, 2020 | Resorts Hotel & Casino | Atlantic City, NJ






Learn about emerging opportunities and innovative solutions for the banking industry at the Mid-Atlantic region’s largest and most exciting banking show. At BankHorizons 2020 you will encounter an action-packed day complete with thoughtprovoking educational sessions, interactive panels, leading exhibits, networking, attendee raffle prizes and so much more. BankHorizons is your chance to meet with banking professionals, including management

& key staff involved in operations, technology, lending, retail banking, marketing, human resources, security, compliance and risk management. Also, interact with the latest products and technology and learn about new innovative solutions driving change within the banking industry.



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Banking New York Issue 1 2020  

Banking New York takes a view ahead to the challenges from bank consolidation, as well as what the New York legislature and governor have in...

Banking New York Issue 1 2020  

Banking New York takes a view ahead to the challenges from bank consolidation, as well as what the New York legislature and governor have in...