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Rose Oswald PoelsBy Rose Oswald Poels

I’m pleased to announce that the Wisconsin Bankers Association (WBA) is partnering with state bankers associations nationwide and data provider FedFis to offer access to Bankers Helping Bankers to WBA members.

Bankers Helping Bankers is a bankers only platform for collaboration and research. Through data tools and dynamic user groups, Bankers Helping Bankers provides community bankers with a knowledge base focused on bank technology and emerging Fintech companies, as well as hot topics such as cryptocurrencies, banking as a service, and direct digital banking.

In October 2021, the Independent Bankers Association of Texas (IBAT) was the first state banking association to partner with FedFis, a provider of fintech data analytics and a strategy system which tracks financial, M&A, and vendor data (including technology vendors) on every bank and credit union in the United States. Since then, the exclusive, banker-only platform has been expanding to states across the nation.

Given the rapidly changing landscape of banking technology, it is hard to keep up through in-person events alone. Bankers Helping Bankers provides an additional way for bankers to connect with one another via forums and access a wide range of fintech data.

WBA continues to offer our WBA Connect and CEOnly/CFOnly peer groups that provide in-person and online networking for Wisconsin bankers only. Through the new collaboration with Bankers Helping Bankers, we aim to bring even more value to WBA members by offering an additional opportunity that lets bankers connect with their peers across the country, with a focus on banking technology.

If you or any member of your team would like to take advantage of the Bankers Helping Bankers opportunity, please fill out the form to gain access to the platform. You will receive an email within a couple of weeks with details on how to create your account.

BNPL already making a dent in banks’ profits

By Paul Gores

When Joe Sullivan decided to buy a Peloton home exercise machine, he pulled out a credit card to pay for it. But the salesman stopped him.

“The guy says, ‘Oh no, no. You don’t need that. We can do this. You can pay 0% interest. You can pay over time,’” Sullivan recalled.

The Peloton salesman asked whether Sullivan had a cell phone. When he said yes, the salesman texted a link to his phone — an application that took about 30 seconds to complete.

“It was approved, and within three minutes the loan documents were in my email,” said Sullivan, who is chief executive officer of the consulting firm Market Insights Inc. in Seattle. “I completed this entire transaction on my mobile phone. The whole thing took less than five minutes.”

The speed and ease of that transaction — along with the promise of 0% interest over the payment period — are among reasons banks should pay heed to the rapid rise of Buy Now Pay Later firms, Sullivan said.

There’s no question they cut into banks’ credit card business, and payment systems run by BNPL firms like Affirm (the company used in Sullivan’s 2020 Peloton purchase), Klarna, and Afterpay are especially attractive to millennials and Generation Z, who have learned to do — and expect to do — much of their business on a mobile phone.

“It’s going to be a huge disrupter. It already is,” said Sullivan. “It’s going to hit the traditional providers of consumer credit more. It means less credit card business, it means lost interchange revenue, it means less interest rate and fee income.”

While BNPL firms aren’t new, their growth has been explosive in the last few years. A 2021 report by the consulting firm Accenture said the number of BNPL users in the U.S. had increased by more than 300% since 2018, reaching 45 million active users in 2021 — users who were spending more than $20.8 billion.

“This is equivalent to 2.4% of U.S. online retail and 12% of U.S. online fashion retail,” Accenture stated.

Accenture predicted BNPL transactions would reach 10% of all e-commerce nationally by 2024.

“The growth of Buy Now Pay Later is pretty astronomical,” said Michael Emancipator, vice president and regulatory counsel for the Independent Community Bankers of America.

Emancipator cited the Accenture report as evidence.

“When you see numbers like that, it does make you sit up and take notice. And there are other entities — other startups — that are also taking notice and see that as a growth area,” he said. “I think it stands to reason that it’s only going to grow more as more startups see that as a potentially lucrative opportunity.”

The expansion of BNPL firms has the attention of bank trade associations and regulators, such as the Federal Reserve Bank of Kansas City, which published a new report on the industry in December.

The Kansas City Fed report stated BNPL is “already making a dent in banks’ profits.”

“According to McKinsey’s Consumer Lending Pools data, over the past couple of years banks lost $8 billion to $10 billion in revenue per year to fintechs offering BNPL products,” the Fed reported. The Fed also reported that a survey by C+R Research found 38% of BNPL users said BNPL would eventually replace their credit cards.

The Fed noted: “BNPL products may be more appealing than credit cards. Unlike credit cards, BNPL products can be approved without a full credit check and offer consumers flexible financing options, transparent terms, predetermined repayment schedules, and lower or no interest fees.”

Millennials and Generation Z consumers tend to eschew credit cards, given their general dislike of high-interest debt, the Kansas City Fed said. For those groups, the Fed said, point-of-sale BNPL may be a more attractive option. For merchants, BNPL products offer the ability to settle sales quickly, with BNPL providers assuming the risks of chargebacks and fraud, the Fed said.

BNPL firms already have thousands of partnerships with merchants large and small, and are seeking more. For instance, Amazon said last summer it would join with Affirm to let customers break up purchases of $50 or more into monthly installments. Here in Wisconsin, Dodgeville-based clothing retailer Lands’ End has employed PayPal’s “Pay in 4” system. With Pay in 4, a customer pays a down payment at the time of purchase, followed by three payments, each two weeks apart.

Accenture said BNPL is used most often for purchases of electronics, fashion, home goods, and health and beauty goods, but the potential for growth is huge.

To deal with BNPL’s encroachment on their lending business, some banks have engaged with BNPL fintechs in partnerships of their own, while others are trying to offer similar products to their customers.

Sullivan said no matter a bank’s business model, all banks should be addressing the rise of BNPL.

“They have to know that this is out there and not say, ‘Well, this doesn’t apply to us because we don’t offer credit cards anyway,’” he said. “That’s not the point. What they have to pay attention to is what is it that consumers are really needing, and this ease-of-use idea is really, really critical.”

While large banks with greater resources might find it easier to cope with increasing competition from BNPL firms, community banks also need to be looking into what they can do, Sullivan said.

“It’s definitely more difficult. It’s personnel and technical management. They need different people with different skill sets, they need different technologies, and that’s where community banks are behind,” he said.

Banks will need to have technology through which they can offer merchants the BNPL option, he said. It could come via firms like Amount, which has white label BNPL products that a bank could obtain.

“That’s the key here. There’s white label products for this kind of thing out there that would allow a smaller institution to get into the space,” Sullivan said. “They obviously can’t get into the Amazons and Best Buys and the Targets, but they could collaborate with a good partner to offer these BNPL services.”

Among merchants that could use a community bank’s BNPL service: doctors, dentists, and auto repair shops. Unless the customer were paying with a debit card, larger expenses like those typically would go on a credit card. But a no-interest BNPL transaction might be more appealing, and help customers budget for their larger costs.

Emancipator said his organization is concerned that BNPL is another fintech offering bank-like products without having to comply with regulations and consumer protections banks must follow.

Consumer data privacy is one possible issue, he said. Some research suggests BNPL firms are “offering these products at a loss to pretty much gobble up the consumer data,” he said.

“And then they use that for cross marketing purposes, or just simply selling that to other merchants to get a better sense of the consumers from that perspective,” Emancipator said. “Banks don’t do that.”

Last November, the U.S. House Committee on Financial Services held a hearing titled, “Buy Now, Pay More Later? Investigating Risks and Benefits of BNPL and Other Emerging Fintech Cash Flow Products.” In that hearing, Penny Lee, CEO of the Financial Technology Association, stated that BNPL is a new generation of fintech innovators that offer consumers new payment options that can reduce debt and alleviate budget stress.

“Americans on average pay approximately $1,000 per year in interest on revolving credit card debt, and credit card interest rates are amongst the highest as compared to other major consumer finance product categories,” Lee said.

In her written testimony, Lee said a survey found that BNPL users are predominantly female and younger, with millennials and Gen Z customers making up the vast majority of users. She said
the user base also includes lower-income consumers, which may reflect a lack of access to traditional forms of credit or bank services.

“BNPL products are structured to have payment terms that require consumers to pay for a purchase in a matter of weeks or a few months,” Lee said. “This contrasts with revolving credit and high interest products that may take years to pay down, blur the cost impact of a purchase, and oftentimes keep consumers in a vicious cycle of debt due to continuous interest charges or rollovers.”

Lee also asserted that the BNPL industry already is subject to “robust regulation.”

“All BNPL products are subject to key consumer protection laws and regulations, including around anti-money laundering, fair lending, credit reporting, debt collection, privacy, fair treatment of customers, and electronic fund transfers,” Lee stated. “They also are subject to similar state consumer protection laws.”

But Emancipator said BNPL firms should have to follow rules similar to the
rules banks face.

“Right now our position is more so to cast a light on these fintech players that are just growing all the time — casting a light that they need to have the same set of rules, abide by the same set of rules, that community banks do,” Emancipator said. “That’s the best way to have fair competition, but it’s also, at the end of the day, the best way that consumers are being protected.”

Sullivan said there are about 170 BNPL firms right now, and some consolidation is probable, with the strongest ones surviving.

“Banks will likely partner with fintech firms to enter the space,” Sullivan said. “And Buy Now Pay Later fintechs are going to rush to partner with banks to comply with new regulations that are undoubtedly probably going to come.”

He said BNPL is “here to stay.”

“Ultimately, regardless of regulation and consolidation, consumer demand for this kind of credit flexibility will fuel growth for years to come,” Sullivan said.

Paul Gores is a journalist who covered business news for the Milwaukee Journal Sentinel for 20 years.

Rose Oswald PoelsBy Rose Oswald Poels

Last week for the first time in two years, I was back in Washington D.C. with a small group of nine bankers from Wisconsin for meetings with banking regulators and a few members of Congress. Joining WBA was a delegation of six bankers and two staff from the Illinois Bankers Association. While our meetings with regulators were still virtual, all meetings were productive affording the smaller group of bankers ample time to ask questions and hear directly from senior officials about a wide variety of issues.

We began the first day in the afternoon with briefings from the FDIC and OCC. FDIC Board Director Martin Gruenberg led the conversation highlighting the fact that while the FDIC anticipated stress in the banking system heading into the pandemic that did not materialize and notably, there have not been any bank failures in 2021. Areas of focus for the FDIC remain on commercial real estate, tailoring climate change risk concerns based on the impact to different markets and/or the size of the institution, and on the impact of non-bank companies to the financial system. OCC Acting Director Michael Hsu led the discussion with bankers emphasizing his support for community banks, his understanding of the need to tailor regulation to the size and complexity of each institution, and robust discussions around both FinTechs and climate change.

The next day featured conversations with FinCEN and CFPB. Naturally, the discussion with FinCEN was largely around the status of their development of a beneficial ownership registry which remains in process. Until one is finally launched, banks will still have to follow the current beneficial ownership rules. A representative from FinCEN’s Financial Intelligence Division indicated that they have seen an increase in all types of crime notably COVID-19 fraud, work at home scams, cyberthreats of all types (e.g. ransomware and account takeovers), and illicit use of cryptocurrency. The primary focus of our conversation and questions with the CFPB was around the upcoming Section 1071, small business data collection proposal. The bankers took turns stressing the hardships of the current proposal and asking for an extension of the comment period deadline so that the industry had adequate time to respond to the many issues raised in the over 900-page document. CFPB staff indicated that they have been in meetings with the core providers on this proposal already to help prep them ahead of time so that data collection would be easier once the proposal is finalized.

These meetings are impactful largely due to the proactive engagement of the bankers in the room. I encourage you to take advantage of these opportunities as they arise and be involved because each regulator we met with unequivocally stated they want to hear directly from bankers about the impact proposals have on their operations. While WBA certainly represents the industry’s concerns, bankers truly make the best advocates in sharing specific examples about the impact on the operations of individual banks.

By WBA Legal

In late August, the Board of Governors of the Federal Reserve System (FRB), Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) issued a new resource titled, Conducting Due Diligence on Financial Technology Companies, A Guide for Community Banks (Guide), which was intended to help community banks in conducting due diligence when considering relationships with fintech companies.

Use of the Guide is voluntary, and it does not anticipate all types of third-party relationships and risks. Therefore, a community bank can tailor how it uses relevant information in the Guide, based on its specific circumstances, the risks posed by each third-party relationship, and the related product, service, or activity (herein, activities) offered by the fintech company.

While the Guide is written from a community bank perspective, the fundamental concepts may be useful for banks of varying size and for other types of third-party relationships. Due diligence is an important component of an effective third-party risk management process, as highlighted in the federal banking agencies’ respective guidance; which, for FRB-regulated banks is SR Letter 13-19, for FDIC-regulated banks is FIL-44-2008, and for OCC banks is Bulletin-2013-29.

During due diligence, a community bank collects and analyzes information to determine whether third-party relationships would support its strategic and financial goals and whether the relationship can be implemented in a safe and sound manner, consistent with applicable legal and regulatory requirements. The scope and depth of due diligence performed by a community bank will depend on the risk to the bank from the nature and criticality of the prospective activity. Banks may also choose to supplement or augment their due diligence efforts with other resources as appropriate, such as use of industry utilities or consortiums that focus on third-party oversight.

The Guide focuses on six key due diligence topics, including relevant considerations and a list of potential sources of information. The following is a summary of the key due diligence topics within the Guide.

Business Experience and Qualifications

The agencies have identified that by evaluating a fintech company’s business experience, strategic goals, and overall qualifications, a community bank can better consider a fintech company’s experience in conducting the activity and its ability to meet the bank’s needs. Review of operational history will provide insight into a fintech company’s ability to meet a community bank’s needs, including, for example, the ability to adequately provide the activities being considered in a manner that enables a community bank to comply with regulatory requirements and meet customer needs.

Review of client references and complaints about a fintech company may provide useful information when considering, among other things, whether a fintech company has adequate experience and expertise to meet a community bank’s needs and resolve issues, including experience with other community banking clients. Review of legal or regulatory actions against a fintech company can be indicators of the company’s track record in providing activities.

When a community bank is considering a third-party relationship, discussing a fintech company’s strategic plans can provide insight on key decisions it is considering, such as plans to launch new products or pursue new arrangements (such as acquisitions, joint ventures, or joint marketing initiatives). A community bank may subsequently consider whether the fintech company’s strategies or any planned initiatives would affect the prospective activity. Further, inquiring about a fintech company’s strategies and management style may help a community bank assess whether a fintech company’s culture, values, and business style fit those of the community bank.

The agencies further instruct that understanding the background and expertise of a fintech company’s directors and executive leadership may provide a community bank useful information on the fintech company’s board and management knowledge and experience related to the activity sought by the community bank. A community bank may also consider whether the company has sufficient management and staff with appropriate expertise to handle the prospective activity.

For example, imagine that a fintech company, its directors, or its management have varying levels of expertise conducting activities similar to what a community bank is seeking. A fintech company’s historical experience also may not include engaging in relationships with community banks. As part of due diligence, a community bank may therefore consider how a fintech company’s particular experiences could affect the success of the proposed activity and overall relationship. Understanding a fintech company’s qualifications and strategic direction will help a community bank assess the fintech company’s ability to meet the community bank’s expectations and support a community bank’s objectives. When evaluating the potential relationship, a community bank may consider a fintech company’s willingness and ability to align the proposed activity with the community bank’s needs, its plans to adapt activities for the community bank’s regulatory environment, and whether there is a need to address any integration challenges with community bank systems and operations.

Financial Condition

Another step the agencies identified is for a bank to evaluate a fintech company’s financial condition to help the bank assess the company’s ability to remain in business and fulfill any obligations created by the relationship. Review of financial reports provide useful information when evaluating a fintech company’s capacity to provide the activity under consideration, remain a going concern, and fulfill any of its obligations, including its obligations to the community bank. Understanding funding sources provide useful information in assessing a fintech company’s financial condition. A fintech company may be able to fund operations and growth through cash flow and profitability or it may rely on other sources, such as loans, capital injections, venture capital, or planned public offerings.

Additionally, information about a fintech company’s competitive environment may provide additional insight on the company’s viability. Review of information on a fintech company’s client base can shed insight into any reliance a fintech company may have on a few significant clients. A few critical clients may provide key sources of operating cash flow and support growth but may also demand much of a fintech company’s resources. Loss of a critical client may negatively affect revenue and hinder a fintech company’s ability to fulfill its obligations with a community bank. A community bank may also consider a fintech company’s susceptibility to external risks, such as geopolitical events that may affect the company’s financial condition.

For example, some fintech companies, such as those in an early or expansion stage, have yet to achieve profitability or may not possess financial stability comparable to more established companies. Some newer fintech companies may also be unable to provide several years of financial reporting, which may impact a community bank’s ability to apply its traditional financial analysis processes. When audited financial statements are not available, a community bank may want to seek other financial information to gain confidence that a fintech company can continue to operate, provide the activity satisfactorily, and fulfill its obligations. For example, a community bank may consider a fintech company’s access to funds, its funding sources, earnings, net cash flow, expected growth, projected borrowing capacity, and other factors that may affect a fintech company’s overall financial performance.

Legal and Regulatory Compliance

The Guide further outlines how in evaluating a fintech company’s legal standing, its knowledge about legal and regulatory requirements applicable to the proposed activity, and its experience working within the legal and regulatory framework, better enables a community bank to verify a fintech company’s ability to comply with applicable laws and regulations.

A bank may want to consider reviewing organizational documents and business licenses, charters, and registrations as such documentation provides information on where a fintech company is domiciled and authorized to operate (for example, domestically or internationally) and legally permissible activities under governing laws and regulations. Reviewing the nature of the proposed relationship, including roles and responsibilities of each party involved, may also help a community bank identify legal considerations. Assessing any outstanding legal or regulatory issues may provide insight into a fintech company’s management, its operating environment, and its ability to provide certain activities.

A bank could also consider reviewing a fintech company’s risk and compliance processes to help assess the fintech company’s ability to support the community bank’s legal and regulatory requirements, including privacy, consumer protection, fair lending, anti-money-laundering, and other matters. A fintech company’s experience working with other community banks may provide insight into the fintech company’s familiarity with the community bank’s regulatory environment. Reviewing information surrounding any consumer-facing applications, delivery channels, disclosures, and marketing materials for community bank customers can assist a community bank to anticipate and address potential consumer compliance issues. Considering industry ratings (for example, Better Business Bureau) and the nature of any complaints against a fintech company may provide insight into potential customer service and compliance issues or other consumer protection matters.

For example, some fintech companies may have limited experience working within the legal and regulatory framework in which a community bank operates. To protect its interests, community banks may consider including contract terms requiring (a) compliance with relevant legal and regulatory requirements, including federal consumer protection laws and regulations, as applicable; (b) authorization for a community bank and the bank’s primary supervisory agency to access a fintech company’s records; or (c) authorization for a community bank to monitor and periodically review or audit a fintech company for compliance with the agreed-upon terms. Other approaches could include (1) instituting approval mechanisms (for example, community bank signs off on any changes to marketing materials related to the activity), or (2) periodically reviewing customer complaints, if available, related to the activity.

Risk Management and Controls

The agencies have also identified that by banks evaluating the effectiveness of a fintech company’s risk management policies, processes, and controls, such review helps a community bank to assess the company’s ability to conduct the activity in a safe and sound manner, consistent with the community bank’s risk appetite and in compliance with relevant legal and regulatory requirements.

Banks should consider reviewing a fintech company’s policies and procedures governing the applicable activity as it will provide insight into how the fintech company outlines risk management responsibilities and reporting processes, and how the fintech company’s employees are responsible for complying with policies and procedures. A community bank may also use the information to assess whether a fintech company’s processes are in line with its own risk appetite, policies, and procedures. Information about the nature, scope, and frequency of control reviews, especially those related to the prospective activity, provides a community bank with insight into the quality of the fintech company’s risk management and control environment. A community bank may also want to consider the relative independence and qualifications of those involved in testing. A fintech company may employ an audit function (either in-house or outsourced). In these cases, evaluating the scope and results of relevant audit work may help a community bank determine how a fintech company ensures that its risk management and internal control processes are effective.

Banks should also consider the findings, conclusions, and any related action plans from recent control reviews and audits as the information may provide insight into the effectiveness of a fintech company’s program and the appropriateness and timeliness of any related action plans. Evaluating a fintech company’s reporting helps a community bank to consider how the fintech company monitors key risk, performance, and control indicators; how those indicators relate to the community bank’s desired service-level agreements; and how the fintech company’s reporting processes identify and escalate risk issues and control testing results. A community bank may also consider how it would incorporate such reporting into the bank’s own issue management processes. Review of information on a fintech company’s staffing and expertise, including for risk and compliance, provide a means to assess the overall adequacy of the fintech company’s risk and control processes for the proposed activity.

Information on a fintech company’s training program also assists in considering how the fintech company ensures that its staff remains knowledgeable about regulatory requirements, risks, technology, and other factors that may affect the quality of the activities provided to a community bank.

For example, a fintech company’s audit, risk, and compliance functions will vary with the maturity of the company and the nature and complexity of activities offered. As a result, a fintech company may not have supporting information that responds in full to a community bank’s typical due diligence questionnaires. In other cases, a fintech company may be hesitant to provide certain information that is considered proprietary or a trade secret (for example, their development methodology or model components). In these situations, a community bank may take other steps to identify and manage risks in the third-party relationship and gain confidence that the fintech company can provide the activity satisfactorily.

For example, a community bank may consider on-site visits to help evaluate a fintech company’s operations and control environment, or a community bank’s auditors (or another independent party) may evaluate a fintech company’s operations as part of due diligence. Other approaches could include (a) accepting due diligence limitations, with any necessary approvals and/or exception reporting, compared to the community bank’s normal processes, commensurate with the criticality of the arrangement and in line with the bank’s risk appetite and applicable third-party risk management procedures; (b) incorporating contract provisions that establish the right to audit, conduct on-site visits, monitor performance, and require remediation when issues are identified; (c) establishing a community bank’s right to terminate a third-party relationship, based on a fintech company’s failure to meet specified technical and operational requirements or performance standards. Contract provisions may also provide for a smooth transition to another party (for example, ownership of records and data by the community bank and reasonable termination fees); or (d) outlining risk and performance expectations and related metrics within the contract to address a community bank’s requirements

Information Security

In understanding a fintech company’s operations infrastructure and the security measures for managing operational risk, a community bank may better evaluate whether the measures are appropriate for the prospective activity. A community bank may evaluate whether the proposed activity can be performed using existing systems, or if additional IT investment would be needed at the community bank or at the fintech company to successfully perform the activity. For example, a community bank may evaluate whether the fintech company’s systems can support the bank’s business, customers, and transaction volumes (current and projected). A fintech company’s procedures for deploying new hardware or software, and its policy toward patching and using unsupported (end-of-life) hardware or software, will provide a community bank with information on the prospective third party’s potential security and business impacts to the community bank.

For example, fintech companies’ information security processes may vary, particularly for fintech companies in an early or expansion stage. Community banks may evaluate whether a fintech company’s information security processes are appropriate and commensurate with the risk of the proposed activity. Depending on the activity provided, community banks may also seek to understand a fintech company’s oversight of its subcontractors, including data and information security risks and controls.

For a fintech company that provides transaction processing or that accesses customer data, for example, community banks may request information about how the fintech company restricts access to its systems and data, identifies and corrects vulnerabilities, and updates and replaces hardware or software. The bank may also consider risks and related controls pertaining to its customers’ data, in the event of the fintech company’s security failure. Also, contractual terms that authorize a community bank to access fintech company records can better enable the bank to validate compliance with the laws and regulations related to information security and customer privacy.

Operational Resilience

A community bank may evaluate a fintech company’s ability to continue operations through a disruption. Depending on the activity, a community bank may look to the fintech company’s processes to identify, respond to, and protect itself and customers from threats and potential failures, as well as recover and learn from disruptive events. It is important that third-party continuity and resilience planning be commensurate with the nature and criticality of activities performed for the bank.

Evaluating a fintech company’s business continuity plan, incident response plan, disaster recovery plan and related testing can help a community bank determine the fintech company’s ability to continue operations in the event of a disruption. Also, evaluating a fintech company’s recovery objectives, such as any established recovery time objectives and recovery point objectives, helps to ascertain whether the company’s tolerances for downtime and data loss align with a community bank’s expectations. A community bank that contemplates how a fintech company considers changing operational resilience processes to account for changing conditions, threats, or incidents, as well as how the company handles threat detection (both in-house and outsourced) may provide a community bank with additional information on incident preparation. Discussions with a fintech company, as well as online research, could provide insights into how the company responded to any actual cyber events or operational outages and any impact they had on other clients or customers.

Understanding where a fintech company’s data centers are or will reside, domestically or internationally, helps a community bank to consider which laws or regulations would apply to the community bank’s business and customer data. Another matter for a community bank to consider is whether a fintech company has appropriate insurance policies (for example, hazard insurance or cyber insurance) and whether the fintech company has the financial ability to make the community bank whole in the event of loss.

Service level agreements between a community bank and a fintech company set forth the rights and responsibilities of each party with regard to expected activities and functions. A community bank may consider the reasonableness of the proposed service level agreement and incorporate performance standards to ensure key obligations are met, including activity uptime. A community bank may also consider whether to define default triggers and recourse in the event that a fintech company fails to meet performance standards.

A fintech company’s monitoring of its subcontractors (if used) may offer insight into the company’s own operational resilience. For example, a community bank may inquire as to whether the fintech company depends on a small number of subcontractors for operations, what activities they provide, and how the fintech company will address a subcontractors’ inability to perform. A community bank may assess a fintech company’s processes for conducting background checks on subcontractors, particularly if subcontractors have access to critical systems related to the proposed activity.

For example, as with previous due diligence scenarios, fintech companies may exhibit a range of resiliency and continuity processes, depending on the activities offered. Community banks may evaluate whether a fintech company’s planning and related processes are commensurate with the nature and criticality of activities performed for the bank. For example, community banks may evaluate a fintech company’s ability to meet the community bank’s recovery expectations and identify any subcontractors the fintech company relies upon for recovery operations. A fintech company may have recovery time objectives for the proposed activity that exceed the desired recovery time objectives of a community bank. If a fintech company can meet the community bank’s desired recovery time objectives, the bank may consider including related contractual terms, such as a contract stipulation that the community bank can participate in business continuity testing exercises and that provides appropriate recourse if the recovery time objective is missed in the event of an actual service disruption.

A community bank may also consider appropriate contingency plans, such as the availability of substitutable service providers, in case the fintech company experiences a business interruption, fails, or declares bankruptcy and is unable to perform the agreed-upon activities. In addition to potential contractual clauses and requirements, a community bank’s management may also consider how it would wind down or transfer the activity in the event the fintech company fails to recover in a timely manner.

Conclusion

The agencies have outlined a number of relevant considerations, non-exhaustive lists of potential sources of information, and illustrative examples to assist community banks with identifying strengths and potential risks when considering relationships with fintech companies. The voluntary Guide helps provide a starting point for banks with their due diligence efforts. The Guide may be viewed here.

Highlighted Special Focus From the October 2021 Compliance Journal

As if there weren’t enough unwanted new realities prompted by the Covid-19 pandemic, bankers and borrowers will have another one to deal with starting Dec. 1 – the Adverse Market Refinance Fee. 

Originally set to begin in September but delayed after backlash from mortgage lenders when it was announced in August, the new 0.50% fee will be assessed on refinanced mortgages of more than $125,000 that are bought by Fannie Mae and Freddie Mac. 

That means an additional $500 in costs for every $100,000 borrowed, with the money going toward what the Federal Housing Finance Agency says is an estimated $6 billion in projected losses to Fannie Mae and Freddie Mac from pandemic protection programs offered to borrowers. 

While it makes sense that Fannie Mae and Freddie Mac would want to recoup some of what they expect to lose from forbearance defaults, foreclosure moratoriums and emergency measures to keep people in their homes, the timing and the amount of the fee are a concern, some bankers say. Homeowners who refinance their mortgage are looking to cut expenses in a tough economy, and the fee could make redoing the loan less advantageous. 

“I just think the timing of the whole thing is challenging for a lot of families that are hurting right now,” said Jimmy Kauffman, chief executive officer of Bank of Sun Prairie.  

“It’s an unfortunate thing at an unfortunate time,” Kauffman said. 

Some banks may try to absorb all or part of the fee. But some already are making plans to pass it along to the borrower, perhaps via a small increase in the interest rate – about one-eighth of a point – for the refinanced mortgage. 

With today’s super-low mortgage rates, the fee shouldn’t price a lot of borrowers out of the refinance market, said Eric Witczak, executive vice president of Green Bay-based Nicolet National Bank. 

Weekly mortgage rates hit another all-time low as of Oct. 15, at 2.81% with 0.6 points for a 30-year fixed rate term, according to Freddie Mac. 

“Rates are still so incredibly low,” Witczak said, noting the new fee already is being built into Nicolet’s pricing. “I don’t think it’s going to have a big effect at all.” 

But Witczak also said he thinks the fee should have been 0.12% or 0.13% instead of 0.50%, which would have made it less controversial and probably would have let Fannie Mae and Freddie Mac start collecting it more quickly.  

Both Fannie Mae and Freddie Mac, which are government-sponsored enterprises, have been in conservatorship under the Federal Housing Finance Agency since the Great Recession in 2008.   

“They’re seeing banks make so much money and, ‘Hey, how do we get a little something?’ I just think 50 bps (basis points) was kind of foolish because it was such a large splash,” Witczak said. “They haven’t made a nickel on it because they’re making it effective December 1.” 

Chris Boland, vice president-consumer lending manager for Brookfield-based North Shore Bank, said the Adverse Market Refinance Fee could make mortgage refinancing a little less desirable, but not enough to slow down the refi boom. 

“I think given where rates are – they’re pretty attractive right now – I don’t think it’s going to have a direct adverse effect on production at this point.” Boland said. 

Boland said each bank is considering for itself what to do, but it’s likely most will pass the fee along to the borrower. 

Kauffman said Bank of Sun Prairie hopes to “absorb the fee as much as we can,” but he’s also waiting to see how the industry in general handles it. He said it’s a shame the fee has come along at a time when some homeowners could really use a lower monthly payment but might struggle with the addition of a new fee. 

“Right now is a good opportunity where you have families where money is a little tighter than it’s been, and there’s an opportunity for them to refinance and get a lower rate,” he said. “And now you’ve got a $1,000 to $1,400 fee that’s kind of hitting them at a time where it’s tough.” 

The Federal Housing Finance Agency stressed that Fannie Mae and Freddie Mac will exempt refinance loans with balances below $125,000, nearly half of which are comprised of lower income borrowers at or below 80% of area median income. Affordable refinance products, Home Ready and Home Possible, are also exempt, the FHFA said. 

Heather MacKinnon, vice president – legal of the Wisconsin Bankers Association said bankers know the fee is coming and have had internal discussions about whether to absorb it or pass all or part of it on to borrowers. 

“Lenders would also be discussing how the fee will impact their low- and moderate-income borrowers and making plans to ensure they still serve those areas of their marketplace,” she said. 

Nicolet’s Witczak said he thinks the fee will continue through all of next year, and maybe longer. 

“There is talk of rates that are going to stay in this ridiculously low environment for three-plus years,” he said. “There’ll come a time where the fee most likely would go away just from a competitive standpoint when it does affect the amount of business – or maybe it’s reduced to 25 bps. But I would plan on this for the next couple of years probably.” 

  

  

 

 

Paul Gores is a journalist who covered business news for the Milwaukee Journal Sentinel for 20 years. Have a story idea? Contact him at paul.gores57@gmail.com

By, Eric Skrum

Wisconsin banker Tom Pamperin says the most-welcoming method for a bank to connect with customers seems to have flipped. 

“It used to be technology was the cold and impersonal interaction,” said Pamperin, president and chief executive officer of Premier Community Bank in Marion. 

But today, amid a pandemic in which bank customers – if the bank lobby is even open – must wear a mask, remain separated from employees by plastic barriers, stand at a distance and likely are leery of touching anything, using a mobile app or a video teller has become a lot more appealing. 

“Now which service has become cold and impersonal?” Pamperin rhetorically asked. 

The invasion of the novel coronavirus early this year has changed a lot of business and consumer behaviors, ranging from how we shop to how we’re entertained to how we meet. How we bank also is on that list. 

The need for social distancing to avoid catching or spreading the virus has increased consumer acceptance of technology that some might have continued to shun as long as they could fearlessly walk into a branch and make their transactions. And it appears probable – now that more consumers and businesses have engaged with technology – many of them will keep using it even after the pandemic subsides. 

A report this summer by the accounting and consulting firm Deloitte and the Institute of International Finance said COVID-19 has been a catalyst for adoption of bank technology.  

“Looking ahead, it is abundantly clear digital transformation will not only accelerate, but financial institutions that do not fully embrace digital transformation – and adapt to new ways of working – risk being left behind,” the report stated. 

At a recent meeting of the Federal Reserve Bank of Chicago’s Community Depository Institutions Advisory Council, the consensus among a dozen Midwest bank executives on the panel was that COVID-19 has significantly boosted the use of financial technology, said Douglas Gordon, CEO of Waterstone Financial Inc., the Wauwatosa parent company of WaterStone Bank. 

“The pandemic has really accelerated the digital platform probably by three to five years,” Gordon said. 

Among new adopters of bank technology are people opening accounts, businesses and “even senior citizens who have historically been more averse to it,” he said. 

“They (bankers on the council) think people are getting comfortable with the digital platforms,” Gordon said. “It’s probably a more profitable way to do it. Everybody is looking for cost cutting because net interest margins are slim, being in a zero-interest rate environment.” 

Brookfield-based North Shore Bank installed its first video teller unit in a Kenosha grocery store in late 2014. Today it has almost 30 at 18 locations, mostly in drive-through lanes at branches. At the video teller sites, consumers make transactions while chatting, similar to a Zoom encounter, with a specially trained banker who might be miles away.  

When the pandemic hit and people couldn’t go inside bank lobbies, use of the video tellers quickly grew. 

“All drive-up transactions, but specifically our video teller transactions, just surged,” said Sue Doyle, senior vice president and head of retail banking for North Shore Bank. 

Doyle said all electronic forms of banking, such as mobile banking and person-to-person payments, had been increasing even prior to the arrival of the new virus.  

“COVID just took that trajectory and accelerated it,” she said. 

Ergo Bank in Markesan also uses interactive teller machines, or ITMs, in its market. 

“We were seeing a steady increase month over month prior to COVID, and then when COVID hit and the lobbies got closed down, that technology just took off,” said Kyle Witt, president and CEO of Ergo Bank. 

Even though lobbies have reopened, the use of the ITM video units is up. 

“So people said, “OK, this is nicer than walking in and talking with someone. I can actually talk to someone on the screen. Everything is happening in front of me,’” Witt said. 

Video teller capability also helps the bank cope with staffing issues if one or more employees can’t come to work, Witt said. 

Pamperin said at Premier Community Bank, the mobile app has seen the most growth since the virus appeared. 

“The walking-into-the-lobby experience of a bank – I think that has permanently changed,” he said, noting that having an existing app immediately met the need of customers and didn’t require much marketing. 

“It was a coming together nicely for us to have this product that we’ve had out there for a number of years now and many people were using it,” he said. “But we had kind of plateaued in acceptance of it or new application of it by our customer base. And now it’s just exploded.” 

Paul Gores is a journalist who covered business news for the Milwaukee Journal Sentinel for 20 years. Have a story idea? Contact him at paul.gores57@gmail.com

By, Ally Bates

“The new normal is here to stay. Technology is the new normal in banking!”
Marcia (“Marci”) Malzahn, president & founder of Malzahn Strategic

Banks that had been consistently working to improve and update their online systems and platforms were more prepared for the sudden onslaught of customers, both business clients and consumers, who needed to utilize those tools in order to conduct their banking business during the height of the COVID-19 pandemic. 

There are a variety of methodologies to use for innovation, but Malzahn boils it down to three main action steps: 

  1. Adopt an open mindset – “If you’re not open to new ideas and ways of doing things, you won’t be able to move forward and will remain stagnant,” Malzahn explained. “Be open to new ideas from everyone, employees, customers, the community, regulators, and competitors such as fintechs.”
  2. Form an Innovation Strategic Committee – Malzahn recommends establishing a formal Innovation Strategic Committee charged with sorting through all new ideas and systematically determining which are a good fit for your institution. The Committee may also be responsible for creating the action plan for implementing new ideas. 
  3. Assess each initiative’s risk before committing – For each new potential project, banks should conduct a thorough risk assessment, including implementation timeline and costs, vendors to partner with, and the new risks and opportunities the idea brings. 

Of the three, Malzahn says #1 is the most important for banks to be successful at innovation. 

With that three-step framework in mind, banks can begin looking for areas of the institution ripe for innovation. Malzahn suggests two possibilities: Enterprise Risk Management (ERM) and Treasury Management. 

The pandemic triggered all risk categories into high alert, especially credit, technology (with increased cyber risk), operations, compliance, liquidity, interest rate risk, and human resource risk, according to Malzahn. “Now is the time to complete your ERM program and automate all the processes you can to ensure you stay on top of managing all the risk categories at the same time,” she said. 

Banks should integrate ERM into their strategic plan, and Malzahn suggests doing so by including the responses to two questions in the plan: 

  1. What are the new risks coming to our organization because of our new strategic objectives? – This question should be asked when the bank defines its top strategic goals during the planning phase. 
  2. What are our strategies to mitigate the top risks that can impact our bank? – This question should be asked after the bank conducts an ERM Risk Assessment and prioritizes its top risks. 

When integrating ERM into the strategic plan, Malzahn advises bankers keep a broad view of their risks, since all risks are connected. “Your reputation, capital, and earnings risk, in the end, are affected by all the other risks,” she said. 

Treasury Management is another key area of opportunity for innovation, according to Malzahn. “Treasury Management is one of the most important tools you can use to respond to the increased pressure to grow non-interest fee income and to increase core deposits,” she explained. Another reason to invest in innovative treasury management solutions is to deepen (or build) client relationships with the next generation of business leaders. “The new generation may be more open to utilizing the technology banking products you offer,” Malzahn said. In addition, banks should be prepared to offer at least one digital payment solution via treasury management to their clients as that sector continues to grow. 

Malzahn offered one major caveat to innovation. Before launching any new change initiative, bank leadership should pause to assess their staff’s current ability to navigate the challenges of the endeavor. Community banks across the country just underwent a period of massive change and innovation in order to process Paycheck Protection Program (PPP) loans for their customers, stepping up to innovate in operations and systems to accommodate continual changes. 

Many bankers worked nights and weekends to ensure their clients would have access to PPP funds while simultaneously adjusting to the pandemic’s disruptions to their personal lives. “I encourage bank leaders to keep an eye on their employees to ensure there is balance between serving the bank clients with excellence and taking care of your most precious assets, your employees,” Malzahn said.

By, Ally Bates

P2P payment apps, mobile deposit, digital account opening, APIs… 

Since the advent of the ATM, it seems banks have been caught in a constant battle of technology one-upmanship, with community banks struggling to keep up with larger firms (and nonbanks like Amazon and Google) as they sprint ahead. For community banks, “winning” the tech battle requires building a vision of the future, not inventing something brand new. 

“Community bankers hear ‘innovation’ and think they need to invent something completely new,” said Trent Fleming, principal of Trent Fleming Consulting. “But their core competency is not invention, it’s personalized service.” Truly knowing and understanding their customers and their communities is the foundation community banks have built on for nearly two centuries. With the pace of technological change increasing at an exponential rate, what knowing and understanding the customer looks like has changed as well. Fortunately, community banks don’t need to be on the bleeding edge in order to deliver quality customer service. “The tendency is to look for the next really cool product, but the next really cool product is better delivery of the customer’s financial information,” Fleming explained. “Focus on improving your customers’ access to their own information so their quality of life improves.” 

To hear more from Fleming about creating a vision for your bank’s technology future, including the latest on emerging products and trends, attend the upcoming WBA Secur-I.T. Conference! Now fully virtual (it’s a tech conference, after all!), the conference will span two days and feature seven hours of presentations, networking opportunities, a vendor showroom, and more. Join your peers at the only Wisconsin technology event by and for bankers on Sept. 22-23! Visit www.wisbank.com/Secur-IT to learn more and register. 

If they don't have one already, bank leadership should begin creating their vision today, but with the customer at the center. The best question to start with, according to Fleming, is Are we preparing for our next customer-base? 

Bank leaders should closely examine demographic and commercial trends in their geographic footprint. In five years, what will the neighborhood around the branch look like? Will it still be retail and suburban, or will there be a shift to industrial? What’s happening with the population regarding age, race, and level of education? “It’s not just who your customers are, but what lines of business they’re in, the footprint, and what kinds of products and services they’ll need,” Fleming explained. “That helps you plan for what kind of institution you’ll be and how you’ll serve today’s and tomorrow’s customers.” 

Tactics for Post-Pandemic Banking 

With their strategic vision to guide them, bank leaders should build their bank’s future with the following best practices in mind: 

1: Implement Fast 

The biggest difference between banks with more than $15 billion in assets and those with less, according to Fleming, is the speed at which they can roll out new technology. Fortunately, community banks don’t need to develop and implement with lightning speed. “Most banks have access to what they need, they just haven’t implemented it,” said Fleming. By working with the third-party vendors they already have, many banks will find they can better leverage the tools they have available to them. “You need to aggressively embrace technology, because that’s what your customers are doing,” said Fleming. 

2: Keep Momentum Going 

The COVID-19 pandemic has caused massive disruption in nearly every area of life, but Fleming says the behavior changes it forced upon consumers should be encouraged if they are beneficial. “Going forward, banks should make sure they capture the value of changed customer behavior,” he said. “Slipping back into business-as-usual is the single biggest mistake banks could make.” One area ripe with opportunity for improving customer experience and bank efficiency is scheduling. “Smaller banks will innovate in offering appointment scheduling,” Fleming predicted. “Whether it’s online or in-person, scheduling driven by the customer is a huge opportunity.” 

3: Fill in Gaps 

In the pandemic’s wake, banks should reassess their branch strategy and where they have opportunities to meet new customer needs. “It’s important banks identify where they have gaps between what they offer and what customers want,” Fleming advised. Especially for the next generation of bank customers, face-to-face interaction isn’t the first choice. Fleming suggests cultivating more “invisible loyalty.” “A customer who only uses the bank’s remote channels can be as loyal and more profitable than a customer who you see all the time,” he explained. “The customer you see often isn’t taking advantage of your offerings.” 

4: Prioritize CX 

Banks should fiercely prioritize customer experience (CX). “The core of banking hasn’t changed,” Fleming said. “What will change is the quality of the delivery of information, giving customers what’s relevant for their current situation.” By knowing and delivering exactly what each customer is looking for, banks can grow satisfaction and loyalty. “The less time a customer spends successfully completing their banking business, the more satisfied and loyal they will be,” said Fleming. “Banks need to embrace and prepare for that concept.” 

5: Engage Employees 

To get ROI on investments in technology products, banks need to achieve high adoption and usage rates among customers. Fleming says knowledgeable, enthusiastic employees are the best way to achieve that. “Have employees use and adopt the new technology themselves, because that’s how they become knowledgeable about it,” he said. “It takes some training effort, but you’ll see customer adoption go up by a quarter to a third.” Another method is to empower an employee who shows great aptitude by naming him or her the Virtual Branch Manager—a position Fleming says shows current and potential customers that the bank isn’t looking at digital as an afterthought. 

Seitz is WBA operations manager and senior writer.

By, Amber Seitz

Bank-Fintech Partnerships Enter Uncharted Territory

On Feb. 18, fintech LendingClub announced it had signed a definitive agreement to acquire Radius Bancorp and its wholly owned subsidiary Radius Bank. If approved, LendingClub will become the first company in the online lending sector’s history to purchase a traditional bank. The seminal deal has the potential to be a harbinger for the U.S. banking system, signaling the beginning of a new trend; LendingClub and Radius may be forging the path to insured deposits that fintechs have historically sought via national charter applications.

Opposites Attract
Customer service cultures and complementary products brought LendingClub and Radius together

LendingClub President Steve Allocca told American Banker the company spent the past year “scouring the earth” for a merger or acquisition partner in addition to applying for a national bank charter with the OCC. So, what made Radius an attractive target?

In several press interviews, Allocca mentioned seeking “stability.” Launched in 2007, LendingClub offers peer-to-peer lending, allowing borrowers to create unsecured personal loans between $1,000 and $40,000 with a standard period of three years. Investors search or browse loan listings on the LendingClub website and select the loans they want to invest in based on information supplied about the borrower, amount of the loan, and loan purpose (investors make money from interest). LendingClub’s income is derived from origination fees (for borrowers) and service fees (for investors). LendingClub is the number one provider of personal loans in the country, facilitating more than $12.3 billion in loans in 2019.

Buying Radius gives LendingClub a stable source of funding (insured deposits) for future loan growth, as well as expanding its product and service offerings. In 2014, LendingClub began partnering with banks to offer direct-to-consumer loans, including auto loans and mortgages. With direct access to funding, LendingClub will no longer need to share revenue with a partner bank. Radius was also an attractive target because the bank has a national online presence but no overhead from a physical branch network (one of only 13 such banks in the country, according to Sanborn).

From the bank’s perspective, LendingClub’s acquisition offer presented an opportunity to provide the bank’s deposit customers with consumer loan products. Radius CEO Mike Butler told American Banker the two companies were a good fit because they had zero overlap—LendingClub didn’t offer savings or checking accounts and Radius didn’t offer consumer loans. Both companies’ leaders cited customer service and experience as a motivating factor, as well. According to LendingClub’s press release, “combining Radius and LendingClub will create a digitally native marketplace bank at scale with the power to deliver an integrated customer experience, enabling consumers to both pay less when borrowing and earn more when saving.”

Leading Indicators
It’s a new M&A marketplace… Are banks the buyers or the product?

Could more fintech purchases of banks be on the horizon? It’s possible, though the fields of potential buyers and sellers are both small. Likely acquirers include fintech companies that have applied for bank charters, such as Square and Robinhood. The “Big 5” tech companies (Amazon, Apple, Facebook, Google, Microsoft) are more likely to continue partnering with the largest financial institutions, (e.g. Apple’s partnership with Goldman Sachs to provide the AppleCard) simply due to the challenge of scaling a smaller institution to meet their needs.

Another potential fintech buyer is Varo Money, which offers fee-free online savings and checking accounts and peer-to-peer payments. In early February, the FDIC approved Varo's application for deposit insurance, and Varo had previously received conditional approval from the OCC for a national bank charter, but then withdrew its application. Once the Federal Reserve and OCC sign off on Varo’s application, it will be the first fintech provider among several similar applicants to get the go-ahead from federal banking regulators. Purchasing a bank would be an expedient scaling strategy for the startup.

Target banks, like Radius, will have wide online footprints with little (or no) physical locations, and will also have robust technology platforms ready to integrate with the purchasing fintech’s systems. Radius’s platform offered not only online check deposit, bill pay, and card management, but also a personal financial management dashboard and open APIs to offer BaaS (banking-as-a-service) functionality. More importantly, those banks will need to be interested in selling, rather than growing through acquisitions of their own.

Though it has the potential to show fintechs a path to “bank hood” via acquisition, the LendingClub-Radius merger is—most likely—not the first pebble in a landslide of fintech-bank deals. Instead, it is a powerful reminder to banks that seamless technology and customer experience are critical for success in today’s financial services marketplace, and that partnering with fintech companies can be the best way for an institution to obtain them.

Seitz is WBA operations manager and senior writer.

Further reading:

By, Amber Seitz

To date, while some federal agencies have made public statements, Congress has not exercised its constitutional power under the commerce clause to regulate cryptocurrencies and blockchain technology to the exclusion of the states. This means that the states remain free to enforce their own legislation. Sixteen states have enacted legislation related to virtual currency or cryptocurrencies and nine states have enacted or adopted laws that reference blockchain technology. 

To help assist lawmakers (and the general public), the State of Wisconsin Legislative Reference Bureau (LRB) created a summary that highlights the responses of major economic players as well as innovative practices on cryptocurrency and blockchain technologies. The report is designed to help gain a broad perspective of the current global regulatory market and the breadth of proposals for further policy and legislative guidance. Cryptocurrency, a subset of digital currency, is held up by some as the "currency of the future," and the technology that allows its existence could revolutionize business and government. 

As cryptocurrency becomes more mainstream, governments around the world have taken the first steps toward regulation; however, advances in technology frequently outpace legislation. The LRB report describes the principal characteristics of cryptocurrencies and the underlying technology that enables its existence-decentralized, distributed ledgers based on blockchains. The report then details recent developments in regulations in the United States by various federal regulatory and enforcement agencies and the most relevant case law. Finally, the report explores developments at the state level and summarizes the global regulatory landscape of international responses to the regulation of cryptocurrency. 

How Blockchains Work: A Sample Case Study

  1. Charlotte and Susie download digital wallets, providing the encryption keys necessary for the transaction. 
  2. Charlotte creates a message requesting a $15 transaction to repay Susie for dinner. The message is encrypted using Susie's public key, ensuring that only Susie can decrypt the message using her private key. The message also includes Charlotte's private key to validate her status as the initiating entity.
  3. The message is broadcast to a peer-to-peer (P2P) network consisting of private computers, or nodes. 
  4. The network validates the transaction and Charlotte's user status, then records and time-stamps it to verify that the cryptocurrency has changed possession. 
  5. The transaction is combined with other transactions to create a new block of data for the ledger.
  6. The new block of data is added to the existing blockchain in a way that is permanent and unalterable.

If you'd like to read the full LRB report please visit www.banconomics.com.

By, Amber Seitz

Events

Fintech companies are dramatically changing the financial services industry. Many community banks are entering into business relationships with fintech companies to provide innovative products to enhance customer satisfaction, increase the bank’s efficiency, and reduce costs. Due diligence and risk evaluation have always been important components in a bank’s third-party risk management process, and this is especially important when “partnering” with fintech companies. This webinar will detail the specific items that bank regulators require you to consider when conducting due diligence and evaluating a fintech company. You’ll also learn the practical business issues to address when entering into such a relationship.

Attendance certificate provided to self-report CE credits.

AFTER THIS WEBINAR YOU’LL BE ABLE TO:
Understand the regulatory and legal requirements of partnering with a fintech company
Explain both the bank and the fintech company’s roles and responsibilities in their relationship
Conduct the required regulatory due diligence
Properly evaluate the risks and benefits before entering into a relationship
Create the best relationship structure with a fintech company
Negotiate with a fintech company to obtain favorable contract terms

WHO SHOULD ATTEND?
This informative session will benefit bank management, loan and deposit operations personnel, technology staff, new product staff, vendor management personnel, compliance officers, auditors, attorneys, and others involved in the strategic planning, due diligence, and evaluation processes.

TAKE-AWAY TOOLKIT
Guide for community banks (published by the FDIC, OCC, and Federal Reserve) titled Conducting Due Diligence on Financial Technology Companies – A Guide for Community Banks
Due diligence checklist specifically designed to evaluate fintech companies
Employee training log
Interactive quiz

NOTE: All materials are subject to copyright. Transmission, retransmission, or republishing of any webinar to other institutions or those not employed by your financial institution is prohibited. Print materials may be copied for eligible participants only.

MEET THE PRESENTER
Elizabeth Fast, JD & CPA, Spencer Fane LLP

Elizabeth Fast is a partner with Spencer Fane Britt & Browne LLP where she specializes in the representation of financial institutions. Elizabeth is the head of the firm’s training division. She received her law degree from the University of Kansas and her undergraduate degree from Pittsburg State University. In addition, she has a Master of Business Administration degree and she is a Certified Public Accountant. Before joining Spencer Fane, she was General Counsel, Senior Vice President, and Corporate Secretary of a $9 billion bank with more than 130 branches, where she managed all legal, regulatory, and compliance functions.

REGISTRATION OPTIONS

Live Webinar Access – $245
On-Demand Access + Digital Download _ $245
Both Live & On-Demand Access + Digital Download – $350