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MonJa’s Digital Banking and Lending Monthly Roundup – Why Subscribe?
Digital banking and lending is evolving rapidly. Recent fintech-banking partnerships and innovation in technology with the introduction of AI, ML and blockchain herald a new era in lending. Fintech’s are changing the competitive ecosystem, empowering lenders to process loans faster and smarter. In a world full of noise, understanding how the technologies and developments may impact your financial institution’s credit decisions and credit portfolio is of critical importance. With MonJa’s Digital Banking and Lending Monthly Roundup, it’s easy to stay up to date on what’s happening in the space. Get the latest updates, analysis and commentary on digital banking and lending segment!
3/18/2021 Federal Reserve’s Powell Says CBDCs ‘Need to Coexist With Cash’ (Coindesk)
Federal Reserve’s chairman Jerome Powell while speaking at a virtual payments conference, which the Basel Committee on Banking Supervision hosted, instanced a report on CBDC’s by the Bank of International Settlements and the group of seven central banks, including the Fed. He said that central bank digital currencies (CBDC’s) would need to coexist with cash and other types of money in a compliant and innovative payment system, as highlighted in the report. Powell also added that the Federal Reserve Bank of Boston and the Massachusetts Institute of Technology are actively carrying out experiments on CBDC’s, a digital dollar initiative. Lately, Powell has indicated that the U.S. may not be issuing a digital dollar that soon due to physical dollar’s dominant position as the global reserve currency. CBDC’s are an early-stage payments initiative of the government. These were developed hoping that they’ll increase payments and thus lower costs by running on blockchains.
3/18/2021 What’s Driving Nonbanks to Buy Banks? Cheap Deposits (American Banker)
DLP, a private real estate investment company, offers residential mortgages, but higher-cost private placement funds currently fund those loans. Recently, it entered into an agreement with Sunnyside Bancorp, a federally-chartered stock savings and loan association headquartered in Irvington, New York. The move was largely motivated to scoop up low-cost deposits to fund its loans. The firm believes that bank deposits will shrink the cost to fund those loans. Apart from the deposits, Sunnyside is an attractive target for DLP because it’s primarily a real estate lender. About 75% of Sunnyside’s loans are in real estate, and nearly half are in one- to four-family mortgages. DLP’s deal with Sunnyside will not only help it to move into new business lines, including commercial real estate and commercial and industrial lending but will also spur other real estate investment companies to make similar moves. DLP also plans to pump capital into the bank to expand geographically, beef up its digital banking capabilities and create two key fee income drivers: wealth management and trust services.3/18/2021 6 Risk Management Tactics for Credit Unions in 2021 (CU Insight)
With many positives coming out of 2021, credit unions still need to take realistic precautions regarding risk and recovery management. Although we continue to recover from the COVID-19 pandemic, the actual state of the economy is yet uncertain. Not only that, in 2021, the true state of delinquency is also dubious as current recovery protocols and restrictions in place are concealing some realities and data trends.
For understanding associated risks that might impact the institution, credit unions should follow industrywide metrics and strategically execute preventative tactics to restrict exposure. To ensure service processes compliance, it becomes increasingly important to keep yourself updated with changing regulations and federal guidelines. Tools such as predictive modeling, location services, insurance tracking, and loss mitigation can help credit unions to protect their portfolios and reduce risk in the meantime.
3/17/2021 How U.S. Bank Tripled Its Digital Account Openings (Banking Dive)
Although the new streamlined platform of the U.S. Bank for opening a checking account online has nearly tripled the number of digital account openings, the biggest pain point of using this application is the sheer length of time it takes to get through. Jonathan Burns, senior vice president and head of digital sales experience at U.S. Bank, says that it took customers 10 minutes to get through this application, and that’s way too long. The purpose of launching this platform by the bank was to cut its average account opening time in half by aggregating general questions in its application and eliminating requests for unnecessary information. The Bank launched the platform amid the coronavirus pandemic and it has spurred more customers to open accounts digitally. The platform has expanded to U.S. Bank’s State Farm partnership and its business checking and personal line-of-credit products. The Bank believes that despite the digital platform enhancement, customers value a human connection in financial services. And they’ll connect their customers with a human being along with the digital platform’ offering when we come out of this pandemic.
3/15/2021 How Fintechs and Social Changes Are Radically Reshaping Banking (The Financial Brand)
An industry that has survived as a fundamental support to society for hundreds of years, the concept of “radical change” might seem implausible. There’s no doubt that the business model of traditional financial institutions will not change overnight, but there are signs that the banking industry could be fundamentally different within ten years. The intersection of technology, social changes, and new competition could be pivotal in shaping individual banks’ and credit unions’ future differently.
The ability of financial institutions to attract workers, raise capital, navigate regulatory scrutiny, and sustain profitability and growth will increasingly rely on their focus on bringing a net-positive social impact, thus representing a shift in viewpoint from shareholder capitalism to stakeholder capitalism. Since financial institutions sit at the center of the economy, they are in the best position to help move society in a different direction. In recent years, payment companies and other fee-based financial firms have seen valuations rise faster than traditional banks. A few financial institutions (Citibank, Standard Chartered, and MUFG Union Bank among the larger ones) offer green deposits, in which funds are loaned to environmentally conscious projects or companies. To survive in a transformed landscape, tech companies and fintechs must accelerate and strengthen co-creative alliances with disruptors and nonfinancial services partners. Financial services are becoming more commoditized and disintermediated as consumers are becoming more sophisticated. And by 2030, the banking marketplace will become highly fluid and interdependent, demanding alliance ecosystems and innovative business models.3/15/2021 Strike the Right Balance in Regulating Small-Dollar Lending (American Banker)
Small-dollar lending is a vital bridge for consumers who lack access to credit and who live without any actual savings. Apart from that, it is a spectrum that spans from mainstream banks to peripheral actors, including pawnshops and storefront payday lenders. Given the variation of players that exist within the small-dollar lending space, it becomes crucial for the Biden administration to get the balance right for this industry from a public policy perspective. For that, the Consumer Financial Protection Bureau should make sure that the borrowers have the ability to repay before issuing loans. This also helps any potential regulation address the rampant problem of borrowers needing to take out additional loans to pay back an initial loan. Just like mortgages, the concept of paying off the principal with every single payment should be applied for all small-dollar loans.
The Federal Reserve recently showed that loan amount must be $2,530 or greater for lenders to break even on costs when charging capping interest rates at a 36% annual percentage rate. But when it comes to helping consumers gain access to traditional forms of credit, small-dollar loans should provide the lowest-stakes on-ramp for banks to offer broader access to the U.S. financial system. Small-dollar loans are necessary as they can improve financial outcomes for people. While regulations remove the ability for bad actors to operate within the space, new regulations should also be implemented carefully not to hinder emergency credit flows to millions who desperately need it.
3/15/2021 Making a Branch Decision? Here’s How Data Can Guide You (Credit Union Times)
Credit Unions have been a physical home to banking services in communities across the country. With the branch’s fate being the hot topic of discussion, digital acceleration has given a new shape to the conversation in the pandemic. “Rightsizing” the branch footprint is the top-most priority in 2021. As credit unions foresee significant branch decisions, a data-driven process can be a reliable guide in making the right balance between physical and digital. For doing a holistic evaluation of the branch’s role in the credit union’s delivery channels; analysis is needed on when, how, and which channels are used by members for meeting their multitude of financial services needs.
Members leaving the credit union upon the closure of a branch is one of the biggest threats. But with data modeling, leaders can assess the engagement behaviors of the members and how high their digital usage is. With the help of this information, the best, worst, and most likely scenarios can be predicted in terms of attrition. Most importantly, these insights help to ensure that credit unions truly understand members’ needs and can help in making them feel valued.
3/15/2021 Branch Transformation Continues During COVID-19 (Credit Union Times)
Despite being delayed by the state moratorium on construction projects, the Michigan Legacy’s headquarters branch in Wyandotte has undergone renovation amid the pandemic.
The Credit Union has found that their staff is thriving while working in this exhilarating and fun-themed environment. In conjunction with the downsizing of square footage, it did emphasize mobile and online banking products and introduced a mobile app in July that included the video teller. Not only that, but a branch network-wide replacement of ATMs was executed because of technology, functionality, and user experience reasons.
The global pandemic made it learn the importance of a meaningful and sustainable strategic plan to fulfill any commitment through the renovation process. Above all, the best surprise was discovering a photo and cornerstone from the original building dated 1956 during the demolition process. Both of these have been incorporated in the renovated headquarters branch.
3/09/2021 Too Many Small Banks Are ‘Digital Have-Nots’: FDIC Innovation Chief (American Banker)
Sultan Meghji, who has been appointed as the new chief innovation officer at the FDIC on Feb16, was formerly the founder and CEO of Neocova. In an inclusive interview, he defines his new role, where he says that he wants to lead on innovation, especially around inclusion. He will also be looking at the resilience of the overall system and figuring out the needs of people in terms of traditional community banks, fintechs, and everything in between. He feels that after spending nearly 30 years in technology, he will naturally be drawn to where technology is helping and where is the need to accelerate that or to do work to keep it from being a roadblock.
A gap, according to him, is the difficulty people face in figuring out a safe, stable, and secure system, as there are a lot of players in the market that touch the banking sector but aren’t banks. Looking at the entire ecosystem, he feels that there is a divide between where technology is and where it’s being implemented, especially in places like artificial intelligence.
3/09/2021 SoFi is Acquiring a California Community Bank (LendIt Fintech News)
The first quarter of 2021 has been a busy one for SoFi with an announcement of a groundbreaking merger that valued the company at $8.65 billion. The company is going public via a SPAC. But apart from that, SoFi, is acquiring a community bank called Golden Pacific Bank based in the Sacramento region. The deal is expected to close by the year-end, costing around $22 million. Initially, the OCC application form was filled for a national bank charter, and now it is going to change. If Federal Reserve and the OCC approve the merger, then Golden Pacific bank’s name will be changed to SoFi Bank, wherein SoFi will be contributing an additional amount of $750 million in capital. One of the most interesting parts of this merger is that SoFi will get an entry point for their Galileo division to expand by providing their technology platform to community banks. But is this merger the start of a new trend?