never let a good crisis go to waste — the pandemic is ... · world series of poker winner daniel...

September 2020 | americanbanker.com

Never let a good crisis go to waste — the pandemic is giving banks the opportunity to create goodwill with consumers and our annual survey of bank reputations offers some insight on how to keep the positive momentum going

REPUTATION REBOUND

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September 2020 American Banker 1americanbanker.com

September 2020 | VOL. 130 | NO. 9Contents

Briefings3A bet on bettorsLexicon Bank in Las Vegas is inviting poker players to open accounts for depositing their tournament winnings

4Can’t pay? It’s OK.One consumer lender dismissed all pending collections cases and suspended filings of new cases to help customers amid the pandemic

5Inscrutable could mean ‘un-investable’Some investors, struggling to assess community banks’ earnings potential, are giving up

6Looking past the rap sheetA revised FDIC rule makes it easier for banks to hire people with minor criminal backgrounds

BankTechnology 7How to offer weary students optionsFintechs that help students manage college debt are eager to sign up bank partners

9From hot asset to fire saleWhy OnDeck agreed to a deal worth less than 10% of what its market value was in 2015

9DoorDash to the rescueHow the food delivery app and the challenger bank BlueVine helped a California eatery stay in business

11SoFi knocks on banking doorThe fintech is trying again to become a bank, joining a handful of others actively pursuing regulatory approval

11A challenger bank’s new strategyRho Business Banking rolled out a list of interesting new features to appeal to larger businesses than the startups it initially attracted

BankThink22Don’t lose the privacy debateData has tremendous power to improve lives when employed the right way, and the financial services industry should call out exemplary cases, Katherine Flocken and Tyler Griffin write

BackPorch24Quotes from former Congressman Barney Frank, Bank of America’s Haim Israel, Berkshire Bank’s Malia Lazu and more

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14On the reboundBuoyed by its efforts to help consumers and businesses weather the pandemic, the banking industry saw its reputation improve for the first time in several years. Our annual survey offers some insight on how to keep the goodwill flowing.

Talking pointsThe coronavirus crisis shows how much crisis communications matter. Wells Fargo is among the banks getting credit from consumers for doing well on that front.

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REPUTATION SURVEY

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2 American Banker September 2020

Editor’s ViewWhat’s going on @americanbanker.com

Mortgages get returned to senderA jump in buybacks — required for servicers of delinquent Ginnie Mae-backed loans — is one of the first real signs of how the pandemic is hitting banks’ loan books. The amount Wells Fargo had to purchase in July far surpassed that of any other servicer.

A more forgiving process, pleaseLenders called on lawmakers and regulators to do more to cut red tape after seeing the steps the Small Business Administration laid out for getting approval for loan forgiveness under the Paycheck Protection Program.

MOST READ

Evolving processHere are steps the SBA has taken to clarify how lenders should pursue approval for forgiveness of PPP loans

May 15: Introduces 11-page application

June 17: Unveils shorter "EZ" form

July 17: Says it's willing to consider blanket forgiveness for smaller loans

July 23: Details submission procedures for applications

Aug. 10: Will launch online portal where applictions may be filed

MOST SHARED

www.americanbanker.com

American Banker (ISSN 2162-3198) Vol. 130 No. 9, is published monthly by Arizent, One State Street Plaza, 27th Floor New York, NY 10004. Subscription price: $149 per year in the U.S.; $229 per year for all other countries. Periodical postage paid at New York, NY and additional U.S. mailing offices. POSTMASTER: send all address changes to American Banker, One State Street Plaza, New York, NY 10004. For subscriptions, renewals, address changes and delivery service issues contact our Customer Service department at (212) 803-8500 or email: [email protected]. Send editorial inquires and manuscripts to American Banker, One State Street Plaza, 27th Floor, New York, NY 10004. This publication is designed to provide accurate and authoritative information regarding the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering financial, legal, accounting, tax or other professional service. American Banker is a registered trademark used herein under license. ©2020 Arizent and American Banker. All rights reserved.www.americanbanker.com.

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A bank with a poker faceLexicon Bank in Las Vegas gives gamblers a safe place to deposit their winnings — often six-figure sums — without triggering suspicion of money laundering

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BriefingsCUSTOMER STRATEGY | DEBT COLLECTION | COMMUNITY BANKING | REGULATION

By Jim Dobbs

Lexicon Bank in Las Vegas, founded nearly a year ago by poker enthusiasts, is betting big on the professional gamblers who help make the de novo’s hometown a major gaming destination.

Bigger banks have been pulling back from poker because of elevated compliance demands. Large transac-tions such as wire transfers conducted by poker players who frequently participate in tournaments are more susceptible to money-laundering scrutiny.

Players face delays that jeopardize tournament entry and their accounts are often closed when regulators take notice because larger banks would

rather avoid being hassled for what they see as small sums of money.

But for a young bank like Lexicon, which began 2020 with less than $100 million in assets, the six-figure deposits — and sometimes more — that prominent players park in their accounts is a substantial funding source, said Russell Rosenblum, the bank’s chairman. “There’s a very big gap” between a player’s needs and the availability of reliable banking services, Rosenblum said.

A recent case in point: Six-time World Series of Poker winner Daniel Negreanu moved his poker winnings to Lexicon after another financial institu-

tion closed his account in July.Poker winnings are posted publicly,

said Rosenblum, who has competed professionally as a poker player, including in several World Series of Poker events. The public posting makes it easier for banks with gaming expertise and a willingness to track tournament participation and winnings to verify the legitimacy of deposits.

“If you know poker, you know a pro player is actually easier to vet than your typical retail business,” said Rosenblum, who also owns several Five Guys burger restaurants in Las Vegas. “We can see all of a player’s cash winnings — ever — and we can get their full tournament

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americanbanker.com4 American Banker September 2020

Briefings

really good changes for our business.”Vazquez said that “several thousand”

customers would be affected by Oportun’s decision to dismiss pending collections cases. He did not quantify the value of the loans that could be dismissed, but said that a typical loan in collections is for under $3,500.

The lender ultimately ends up dismissing about two-thirds of all the collections cases it files, usually if it’s learned that a borrower has suffered a job loss or other hardship, he said. Emphasizing that collection is a last resort, Vazquez said the company would be developing new tools and approaches to work with borrowers in order to achieve that 60% reduction.

For example, during the pandemic and shelter-in-place orders, the lender came up with a new text campaign targeting customers who hadn’t been in communication for a while. Oportun sent out a text to those customers offer-ing them the option to defer a loan payment simply by texting back the word “defer.”

“We think there’s a lot more of that that we can do to try to deliver that goal,” Vazquez said.

Known as Progreso Financiero until 2015, Oportun has long positioned itself as a consumer-friendly alternative to payday lenders. The firm serves customers online and over the phone in 19 states and has more than 340 retail locations across nine of those states. Oportun went public last year.

On its first quarter earnings confer-ence call in May, Oportun executives said emergency hardship deferrals had peaked at 14.6% in mid-April before falling to 8.6% in mid-May. The 8.9% annualized net charge-off rate for the first quarter was better than expected, they said at that time.

Emergency deferral requests fell to 5% in July, the company said.

schedule and align that with winning to verify deposits.”

Lexicon also has extensive conversa-tions with the players, Rosenblum said. “We ask a lot of questions.”

The players tend to welcome the oversight, he added. “They just want to make sure their account won’t get closed on them, leaving them stuck without a bank.”

Lexicon offers a private concierge service for professional poker clients, managing their full-year tournament schedules and finding out what is needed to transfer entry funds. This helps to minimize issues concerning wires into and out of the bank from major tournament sites, while decreas-ing risk by giving Lexicon direct knowledge of tournament dates and locations.

While professional poker player winnings tend to collectively account for no more than 5% of Lexicon’s total deposits, Rosenblum said it can climb to as high as 20%. Lexicon had $40.5 million in deposits on March 31.

The $249 million-asset bank more than tripled in size during the second quarter because of its participation in the Paycheck Protection Program, originating more than $100 million in loans as part of the effort. Roughly 90% of Lexicon’s PPP loans were to new customers.

While most PPP loans are expected to be forgiven by the federal govern-ment, Rosenblum said he expects Lexicon will retain many of the custom-ers it gained. The bank wants to keep adding deposits to fund more loans to those small businesses.

As Lexicon grows, it is focusing on building a robust Bank Secrecy Act and anti-money-laundering compliance program so that, over time, it can gather deposits and enter other niche businesses.

While Rosenblum declined to discuss specific opportunities, Nevada’s rapidly growing cannabis industry could be a possibility for banks that figure out how to serve the industry without excess regulatory complications.

Such specialty areas could prove important since the coronavirus pandemic has rocked the travel industry and, by extension, Las Vegas’ hospitality and casino industry.

Community banks nationwide will likely be on the hunt for profitable niches because of the economic malaise imposed by the virus, said Piper Sandler analyst Stephen Scouten. Those that can successfully enter new business lines will likely have an advantage, at least in the near term.

“For now, the overall top line outlook looks pretty bleak” for banks, Scouten said.

Virtually all of Lexicon’s borrowers are current on their loans heading into August, Rosenblum said. Many received deferrals, while others have been helped by government stimulus programs, including the PPP.

The concern is that the benefits from those efforts may not be enough for some businesses to survive a second wave of virus outbreaks that have jolted several parts of the country, including Las Vegas.

The city is particularly vulnerable to the virus, Rosenblum said. While officials can implement smart practices to contain the disease, Las Vegas still relies heavily on tourists. With them comes the risk of spreading the virus. Without them, the local economy becomes listless.

Las Vegas’ unemployment rate swelled from 3.9% in February to 29% in May, higher than any other major metropolitan market. Nevada’s jobless rate, while down in June after casinos reopened, remains high at 18%.

The city’s economy has lost 145,600 private payroll jobs since June 2019, said John Restrepo, principal of Las Vegas-based RCG Economics. “Vulnera-ble low-wage workers were hit hardest,” he said.

Las Vegas is resilient, but Rosenblum said the city’s recovery will be bumpy.

“I personally have some concerns about softness in the economy,” he said. “I think there could be some more pain ahead.”

Timeout on collectionsOportun gives customers hurt by the pandemic a break. Some changes will be permanent.Oportun Financial will cap rates on all its loans at 36% and will largely stop taking legal action against customers who fall behind on their debts.

The San Carlos, Calif.-based consumer lender said it decided to dismiss all pending collections cases and suspend filings of new cases because of the economic toll COVID-19 has taken, particularly on low-income communities. Many of its borrowers are from low-income, underserved commu-nities that have been hit hard by the pandemic.

When it does eventually resume collections, it will file about 60% fewer cases, Chief Executive Raul Vazquez said. He acknowledged that the decisions to suspend collections and cap rates would pose challenges in the short term but said they will ultimately build loyalty with Oportun’s customer base.

“There’s been a lot of analysis that’s gone into both of these,” he said. “We’ve taken this step forward with the view that these are permanent and sustain-able changes for our business — and

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really good changes for our business.”Vazquez said that “several thousand”

customers would be affected by Oportun’s decision to dismiss pending collections cases. He did not quantify the value of the loans that could be dismissed, but said that a typical loan in collections is for under $3,500.

The lender ultimately ends up dismissing about two-thirds of all the collections cases it files, usually if it’s learned that a borrower has suffered a job loss or other hardship, he said. Emphasizing that collection is a last resort, Vazquez said the company would be developing new tools and approaches to work with borrowers in order to achieve that 60% reduction.

For example, during the pandemic and shelter-in-place orders, the lender came up with a new text campaign targeting customers who hadn’t been in communication for a while. Oportun sent out a text to those customers offer-ing them the option to defer a loan payment simply by texting back the word “defer.”

“We think there’s a lot more of that that we can do to try to deliver that goal,” Vazquez said.

Known as Progreso Financiero until 2015, Oportun has long positioned itself as a consumer-friendly alternative to payday lenders. The firm serves customers online and over the phone in 19 states and has more than 340 retail locations across nine of those states. Oportun went public last year.

On its first quarter earnings confer-ence call in May, Oportun executives said emergency hardship deferrals had peaked at 14.6% in mid-April before falling to 8.6% in mid-May. The 8.9% annualized net charge-off rate for the first quarter was better than expected, they said at that time.

Emergency deferral requests fell to 5% in July, the company said.

Vazquez said that Oportun has wanted to get its interest rate cap under 36% for some time but had to achieve scale, refine its risk models and improve its technology to do so. He also said that while other lenders cap rates but then try to make money off of fees or products like credit insurance, Oportun will not add ancillary products that would effectively raise the APR.

“For years there has been this idea that if you’re going to serve unbanked or underbanked consumers, you have to do it above 36% or you have to sell ancillary products like credit insurance,” he said. “We feel that the scale we’ve achieved today and the environment that we’re in created an opportunity for us to take this step.” — Laura Alix

‘We didn’t learn much’ Community banks’ financials leave investors so perplexed that some are exitingUncertain credit quality, historically low interest rates and the potential for stiffer regulation after the upcoming election are making it harder for investors to determine the earnings potential for community banks.

Smaller institutions tend to have easy-to-understand financials, driven by net interest income. But deferrals and modifications, along with the amortization of fees from the Paycheck Protection Program, are skewing results and creating more complexity.

“The toughest part about this earnings season is that we really didn’t learn much,” said Stephen Scouten, an analyst at Piper Sandler.

“Many, many banks are taking big reserves now, trying to get in front of what may be ahead,” Scouten added. “But we really don’t know what is

happening yet and how much, in terms of reserves, might be enough because nobody really has a good handle on what loan losses could be.”

Castine Capital Management in Boston, which has focused on commu-nity banks, said in a July letter to investors that it plans to close its funds after it was “unable to judge whether or not the banks’ recent financial state-ments are even reliable.”

Bank stocks “will be un-investable for at least the intermediate future,” added Castine, which has stakes in banks such as Westbury Bancorp in West Bend, Wis., Community Bankers Trust in Richmond, Va., and HMN Financial in Rochester, Minn. The company pointed to the “opaqueness of the numbers and bankers’ lack of conviction in their own outlooks, combined with a complete lack of any COVID-19 strategy at the federal level.”

While a Castine representative declined to comment further, more investors have been shying away from the banking industry in recent months.

The KBW Nasdaq Bank Index was down more than 30% this year as of early August, despite a broader market recovery from the lows reached in the first quarter. In comparison the S&P 500 was up slightly.

The wild card remains the coronavi-rus pandemic, including its unclear duration, ultimate impact on the econo-my and, by extension, the damage it might inflict on banks’ balance sheets and earnings.

Most analysts agree that the economy began to recover in May and June, as businesses began to reopen and consumer spending picked up from April’s lows. Unemployment, while still high, has improved substantially.

Such progress fed optimism among bankers that borrowers would catch up on their deferred loan payments and

The city’s economy has lost 145,600 private payroll jobs since June 2019, said John Restrepo, principal of Las Vegas-based RCG Economics. “Vulnera-ble low-wage workers were hit hardest,” he said.

Las Vegas is resilient, but Rosenblum said the city’s recovery will be bumpy.

“I personally have some concerns about softness in the economy,” he said. “I think there could be some more pain ahead.”

Timeout on collectionsOportun gives customers hurt by the pandemic a break. Some changes will be permanent.Oportun Financial will cap rates on all its loans at 36% and will largely stop taking legal action against customers who fall behind on their debts.

The San Carlos, Calif.-based consumer lender said it decided to dismiss all pending collections cases and suspend filings of new cases because of the economic toll COVID-19 has taken, particularly on low-income communities. Many of its borrowers are from low-income, underserved commu-nities that have been hit hard by the pandemic.

When it does eventually resume collections, it will file about 60% fewer cases, Chief Executive Raul Vazquez said. He acknowledged that the decisions to suspend collections and cap rates would pose challenges in the short term but said they will ultimately build loyalty with Oportun’s customer base.

“There’s been a lot of analysis that’s gone into both of these,” he said. “We’ve taken this step forward with the view that these are permanent and sustain-able changes for our business — and

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that, outside of the hardest-hit sectors, lenders would avoid widespread credit deterioration.

Then the pandemic worsened in July, as outbreaks and record daily case levels drove several heavily populated states such as Florida and California, to pause or roll back portions of their reopening plans. Pandemic-related unemployment benefits expired at the end of July, and lawmakers bickered over the details of a new stimulus package, creating a lot of angst. “The path forward depends on the virus, the efforts to contain it, and the amount of fiscal support,” said Scott Brown, chief economist at Raymond James.

July’s setbacks injected new doses of uncertainty and raised concerns that the pandemic could derail the burgeon-ing recovery, potentially leading to new rounds of deferral requests and, eventually, more soured loans for banks to sort through.

“It is very challenging right now to really understand” banks’ exposure to loan losses, said Damon DelMonte, an analyst at Keefe, Bruyette & Woods.

Bankers are doing the best they can to provide clarity and address concerns. Several smaller banks said during earnings season that inquiries about extended loan deferrals were far fewer this summer than initial requests received in March and April. But requests continue to roll in nonetheless and, with many things unclear, bankers were careful to emphasize uncertainty.

Hope Bancorp in Los Angeles was among the banks to stress the “fluid situation” it faces. The $17.2 billion-asset company expects about 60% of its commercial borrowers will request a second deferral, Chairman and Chief Executive Kevin Kim said during Hope’s quarterly call with analysts. Hope “will be requesting, on a best-effort basis, concessions in the form of additional

collateral, payment reserves or some other type of credit enhancement.”

Executives at South State said on the Winter Haven, Fla., company’s quarterly call that it already pulled its most powerful levers — 90-day loan pay-ment deferrals and aggressive PPP lending — which helped its customers weather initial setbacks.

The $37.7 billion-asset company, created by the June merger of South State and CenterState, made about 19,000 PPP loans totaling $2.4 billion, or a tenth of total loans. Deferrals accounted for 17% of its portfolio at the end of June before settling down to about 11.5% late last month.

It is unclear whether those efforts will ward off, or merely delay, defaults in the future.

“We estimate we’ll end up in the mid-single-digit percentage of loans on deferral” by late August, Daniel Bockhorst, South State’s chief credit officer, said on the call, though he added that “the future is still somewhat unknown … and there is the potential” for another increase down the road.

That uncertainty played heavily into Castine’s decision. While an optimistic scenario would feature a relatively quick recovery and a resumption in loan payments, the company noted that a negative outcome, where deferrals last a long time and borrowers struggle with payments, “is not difficult to envision in the case of hotel, travel, restaurant, and other retail borrowers.”

Some investors are hopeful that the banking industry’s underlying strength prior to the crisis will help it weather the aftermath of the pandemic.

Robert Bolton, a bank investor and president of Iron Bay Capital, noted that banks, by and large, entered the crisis well capitalized. And they had generally strong credit quality.

But the next few quarters will be

bumpy. “Banks do not operate in a vacuum,” Bolton said. “It’s definitely going to be challenging until we contain the virus and know its duration. And we could see new challenges after the election. There are definitely some very big wild cards.” — Jim Dobbs

Crime and recruitmentFDIC eases restrictions on hiring people with a recordThe Federal Deposit Insurance Corp. has finalized a rule allowing banks to hire employees with minor criminal backgrounds.

Since 1950, banks have been restricted by Section 19 of the Federal Deposit Insurance Act, which said that banks could not hire anyone “convicted of any criminal offense involving dishonesty, breach of trust, or money laundering” without prior written consent from the FDIC.

The agency proposed easing those limits late last year in response to complaints from banks and criminal justice advocates that the framework unfairly punished individuals for trivial — or “de minimis” — crimes. The final rule, which replaces previous guidance from 1998, is largely the same as the November proposal but with some exceptions.

One change from the proposed rule is banks can now hire people convicted of crimes that were expunged or sealed without seeking the FDIC’s consent. According to the FDIC, the change will result in a roughly 10% drop in applica-tions for Section 19 exceptions.

The final rule will also expand the criteria for “de minimis” crimes by raising the minor crime threshold from one to two convictions before FDIC consent is required. — Brendan Pedersen

Briefings

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Bank Technology

The bank as student counselorFifth Third offers an app to help customers manage student debt. Now more banks are looking to do the same, with fintechs stepping in to help.

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By Miriam Cross

Student loan debt isn’t just a financial problem for consumers. It’s an emotion-al problem too.

When Mike Crawford and his team at Fifth Third Bank in Cincinnati were exploring new ways to meet the needs of millennial customers several years ago, they came to this realization at a focus group, where discussions of student loan debt brought a 30-year-old borrower to tears.

“The best innovations typically aren’t focused on new functional needs but how do you fill in the gaps in emotional needs?” said Crawford, vice president and senior manager of digital-first product development at the $185

billion-asset Fifth Third. “One struggle in this generation is the feeling that student loan debt is different from a mortgage or car loan, that they can’t get out of it and have no control over it.”

Enter Fifth Third Momentum, an app that automatically rounds up custom-ers’ debit card purchases to the nearest dollar and puts these amounts toward their student loan balances. There have been nearly 100,000 downloads of the app since it launched in 2017; about two-thirds of the users are millennials, and a third belong to older generations.

“The notion of how do you create this accountability partner, but not in a shameful way, was at the root of what

we were trying to do,” said Crawford.Momentum is not the only tool

designed to help consumers manage their debt load, but it is one of the few offered directly by a bank.

Fintechs such as FutureFuel.io, Savi and Summer would like to change that. They see the services they offer to help navigate different aspects of the student loan repayment process as complementary to banks and are slowly making inroads with bank partnerships.

Their argument: Banks can benefit from helping their customers lower their student loan payments, because borrowers who free up potentially hundreds of dollars a month can stay

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Bank Technology

OnDeck’s rise and fallThe troubles forcing this online lender to sell on the cheap predate the COVID-19 crisis

It would be simplistic to say that the pandemic doomed OnDeck Capital, an online lender that recently announced it had agreed to be sold for less than 10% of what its market value was in 2015.

Certainly the virus-induced recession was the near-term catalyst for the New York company’s deal to be acquired by Enova International, another publicly traded online lender but one with a more diversified business model. OnDeck focuses on businesses small enough and risky enough that banks generally are not interested in lending to them.

Those mom-and-pop shops have been hammered. At the end of June, 39.5% of OnDeck’s loans were at least 15 days past due, up from just 10.3% three months earlier. In May, the company temporarily stopped originat-ing new loans.

But OnDeck’s troubles went deeper. The 14-year-old fintech struggled to meet the expectations that accompa-nied its 2014 initial public offering, recording $94.5 million in losses in its first two years as a public company. Cost-cutting eventually brought modest profitability, but investors were seeking margins more in line with those generated in the tech sector.

In 2018, OnDeck launched a new subsidiary that provided online lending capabilities to banks — a move that, if it panned out, could have justified a loftier stock price. OnDeck had gotten early momentum in this business through a partnership with JPMorgan Chase.

But further progress on bank partnerships was slow. A deal with PNC

on top of bills, take the plunge on homeownership or other large purchas-es, and ultimately feel more loyalty toward their financial institution.

Some of these startups also say the matter is urgent. Direct federal loan payments are paused through Septem-ber under the coronavirus relief bill, but borrowers will need to resume pay-ments in October. At the same time, some older federal loans as well as private loans were not covered under this relief measure.

John Thompson, chief program officer at the Financial Health Network, acknowledged that student loan payments are one of several challenges people are facing right now and are not the top priority for everyone.

But, “for many people, dealing with student debt is in the early part of their financial lives,” Thompson said. “If actionable advice on how to manage student debt comes from a bank, that’s a critical part of establishing loyalty and trust.”

A $1.6 trillion problemIn its latest Report on the Economic Well-Being of U.S. Households, the Federal Reserve found that as of late 2019, 43% of those who went to college, representing 31% of all adults, had incurred some debt for their education (largely student loans, but some debt is in the form of credit cards, home equity lines of credit and other loans as well).

Borrowers owe a total of $1.6 trillion in student loan debt, according to the Federal Reserve Bank of St. Louis.

The impact of student loan debt can also be measured in terms of financial health. The Financial Health Network’s U.S. Financial Health Pulse survey from May found that only 18% of those with student debt are financially healthy, compared with 36% of those without student debt. The assessment takes

several factors into account, such as the ability to pay bills on time and maintain sufficient liquid savings.

Savi is one startup that addresses this problem by combing through national and state repayment and forgiveness programs for its users and matching them with the best option — say, a forgiveness program based on the borrower’s profession. Users can manually enter their loan information or sync it using Plaid, and Savi will pre-fill application forms to enroll them in the appropriate program.

Savi is available to customers or members of partner organizations. The financial services provider TIAA, which owns TIAA Bank, is one such partner.

Savi is offering a lightweight version of the software free for a few months to those hurt financially by the pandemic.

Tobin Van Ostern, co-founder of Savi, sees his tool as a fit for banks in two ways: freeing up their customers’ cash flow and supporting those who face financial hardship.

“If we’re able to improve the financial wellness of their end users, that has a broad, positive ripple effect,” he said. “If we’re saving $150 per month, that is immediate cash flow that folks might set aside for retirement or use to buy a house or purchase a car.”

On the flipside, customers who have lost a job or are in financial distress are more likely to struggle keeping up with their other debts. If they can get a temporary reprieve on student loan payments with an income-driven repayment plan, they increase their odds of staying current on other bills.

Consumers can use the basic version of Summer, a similar service, for free. They can organize their loans in one dashboard, check eligibility across 100 assistance and repayment programs, compare options, submit their applica-tions and more. A premium version

includes financial advice and other perks.

Will Sealy, co-founder and chief executive of Summer, said the startup is in talks with 40 banks and credit unions to integrate into their servicing and collections units. “Financial institutions see value in improving the cash flow of existing customers,” especially those at risk of defaulting on loans, Sealy said. Institutions recognize that, when government assistance expires, “there is a reckoning coming with potentially millions of people defaulting on mortgages and car loans and missing credit card payments.”

The tool from Summer can help banks be proactive, he said. For example, if a customer’s checking account balance drops significantly, the bank could potentially target that customer for an income-driven repay-ment plan. Anyone unemployed may be eligible for a $0 monthly payment.

A third service for student loan borrowers is FutureFuel.io. Besides guiding users through repayment plan options and helping them apply for loan forgiveness, this tool has features that put spare change toward loan balances and lets users earn back cash for shopping at certain merchants.

FutureFuel.io’s service is available to customers of the challenger banks Chime and MoneyLion. The fintech has also partnered with credit unions, which largely offer its service as an employee benefit, but rollouts to credit union members are planned.

How these tools integrate with financial institutions varies. Depending on the tool, the options include an application programming interface, a hybrid approach of API and embedded framed-in widgets that launch from the institution’s own website, a web link to a co-branded version, or a white-label product.

008_ABM0920 8 8/10/2020 5:46:42 PM


OnDeck’s rise and fallThe troubles forcing this online lender to sell on the cheap predate the COVID-19 crisis

It would be simplistic to say that the pandemic doomed OnDeck Capital, an online lender that recently announced it had agreed to be sold for less than 10% of what its market value was in 2015.

Certainly the virus-induced recession was the near-term catalyst for the New York company’s deal to be acquired by Enova International, another publicly traded online lender but one with a more diversified business model. OnDeck focuses on businesses small enough and risky enough that banks generally are not interested in lending to them.

Those mom-and-pop shops have been hammered. At the end of June, 39.5% of OnDeck’s loans were at least 15 days past due, up from just 10.3% three months earlier. In May, the company temporarily stopped originat-ing new loans.

But OnDeck’s troubles went deeper. The 14-year-old fintech struggled to meet the expectations that accompa-nied its 2014 initial public offering, recording $94.5 million in losses in its first two years as a public company. Cost-cutting eventually brought modest profitability, but investors were seeking margins more in line with those generated in the tech sector.

In 2018, OnDeck launched a new subsidiary that provided online lending capabilities to banks — a move that, if it panned out, could have justified a loftier stock price. OnDeck had gotten early momentum in this business through a partnership with JPMorgan Chase.

But further progress on bank partnerships was slow. A deal with PNC

Financial Services in late 2018 was offset by JPMorgan’s decision to cut ties with OnDeck last year.

Before the sale announcement, OnDeck was pursuing a bank charter, which would have lowered its funding costs and made it less susceptible to the periodic market disruptions that can make it difficult to operate a nonbank across economic cycles.

Enova Chief Executive David Fisher said during a conference call that if the sale closes, the combined company will continue to explore the possibility of a bank charter. The two firms said that they expect the deal to close this year.

The price of the deal is $90 million — $8 million to be paid in cash and the remainder to be paid in Enova stock.

Fisher called OnDeck “highly complementary” to Enova, saying that both companies operate entirely online and have pioneered the use of analytics and data to make real-time loan decisions.

Enova plans to add the OnDeck brand, products and services to its existing array of consumer and small-business lending units. In the small-business realm, Enova operates as The Business Backer and Headway Capital, though neither of those brands is currently accepting new loan applica-tions amid the COVID-19 outbreak.

Fisher acknowledged that there is a degree of overlap between its existing small-business loans and those offered by OnDeck. “But we did tend to tap into slightly different markets from time to time,” he said.

OnDeck CEO Noah Breslow will join Chicago-based Enova as vice chair-man. As OnDeck’s creditors circled in recent months, he had been facing pressure to find an exit.

“Our mission at OnDeck has been to make lending easier for our small-busi-ness clients, and this opportunity

delivers that promise on a larger scale,” Breslow said during the conference call. He added that OnDeck’s analytics capabilities and advanced fraud detection would add value for Enova.

In the consumer lending sphere, Enova offers payday loans under the CashNetUSA brand and personal loans as NetCredit. Consumer loans currently make up 84% of the company’s portfolio, which would fall to 39% once the OnDeck acquisition closes, accord-ing to Enova.

Fisher said that Enova believes that the competition in small-business lending is not as intense as it is in consumer lending. “And certainly from a regulatory standpoint, we think there’s significantly less regulatory risk and regulatory overhang than the consumer side,” he added.

Enova reported second-quarter net income of $48 million, up from $25 million in last year’s second quarter. The company indicated that government stimulus payments helped some borrowers keep up with their loans but also said that loan performance did not deteriorate when certain stimulus programs wound down in summer.

OnDeck swung to a $2.1 million profit in the second quarter after a surge in its allowance for credit losses drove a $59 million net loss in the quarter that ended March 31. — Kevin Wack

DoorDash deliversPartnership with challenger bank helped save a restaurant

On the first Friday that Paycheck Protection Program loans were avail-able, Jazmine Lalicker touched base with her business banker at a large bank who promised someone would contact her about applying. She was

includes financial advice and other perks.

Will Sealy, co-founder and chief executive of Summer, said the startup is in talks with 40 banks and credit unions to integrate into their servicing and collections units. “Financial institutions see value in improving the cash flow of existing customers,” especially those at risk of defaulting on loans, Sealy said. Institutions recognize that, when government assistance expires, “there is a reckoning coming with potentially millions of people defaulting on mortgages and car loans and missing credit card payments.”

The tool from Summer can help banks be proactive, he said. For example, if a customer’s checking account balance drops significantly, the bank could potentially target that customer for an income-driven repay-ment plan. Anyone unemployed may be eligible for a $0 monthly payment.

A third service for student loan borrowers is FutureFuel.io. Besides guiding users through repayment plan options and helping them apply for loan forgiveness, this tool has features that put spare change toward loan balances and lets users earn back cash for shopping at certain merchants.

FutureFuel.io’s service is available to customers of the challenger banks Chime and MoneyLion. The fintech has also partnered with credit unions, which largely offer its service as an employee benefit, but rollouts to credit union members are planned.

How these tools integrate with financial institutions varies. Depending on the tool, the options include an application programming interface, a hybrid approach of API and embedded framed-in widgets that launch from the institution’s own website, a web link to a co-branded version, or a white-label product.

009_ABM0920 9 8/10/2020 5:46:43 PM


SoFi Bank? It hopes soOne fintech already has a national bank charter. SoFi aims to be next.

Social Finance is trying again to become a bank — joining a list of fintechs actively pursuing a charter.

SoFi filed a de novo bank applica-tion on July 8 with the Office of the Comptroller of the Currency. The move comes close to three years after the San Francisco company pulled the plug on an earlier attempt to open an industrial loan company.

In late July, Varo Money, which offers online consumer deposit accounts, received approval for deposit insurance and conditional approval for a national bank charter, becoming the first fintech to do so. Varo’s journey took three and a half years.

One benefit of becoming a bank is being able to operate under a single set of regulations, rather than the 50-state scheme that applies to nonbank lenders — which should result in cost savings.

SoFi, which was one of the first fintechs to achieve a $1 billion-plus valuation, offers student loans, mort-gages, personal loans, investment services and a cash management account. Chief Executive Anthony Noto said a bank charter would allow SoFi to add offerings, but did not get specific.

A copy of SoFi’s charter application was not immediately available. But a source familiar with SoFi’s thinking said that it expects the move to lower its cost of funds, which could level the playing field with traditional banks. .

SoFi applied to open an industrial bank back in 2017. That effort fell apart after former CEO Mike Cagney left the company amid a scandal involving sexual harassment allegations. The

eager for a loan to help keep The Shuckery, her oyster bar and seafood restaurant in Petaluma, Calif., afloat. But when she called again on Monday, after not hearing anything, her bank was no longer accepting applications.

“That was pretty disheartening and shocking,” she said.

To get by, Lalicker took out a line of credit and shook up her business model, adding meat to her menu, emphasizing items that would travel well and joining DoorDash to get a delivery service off the ground. She considered applying for a loan with a smaller, local bank, but “it was this mad dash for PPP loans and small banks weren’t accepting new accounts, but trying to take care of their existing customers,” she said. Her application to her regular bank for a slice of the second round of PPP funding went nowhere.

So when an email from DoorDash advertising its partnership with the challenger bank BlueVine landed in her inbox on May 4, she was willing to take a chance on a lender she had never heard of. She clicked the link, filled out the application and was approved for $125,000 the next day.

The BlueVine-DoorDash partnership, which formed in mid-April, has enabled $6 million of PPP funding to be distributed to nearly 200 DoorDash restaurants. Through this and other partnerships, BlueVine has generated more than $4 billion in PPP loans for more than 125,000 small businesses.

The lender is catering to very small businesses, the type that may have felt left out of the first round of PPP funding or become frustrated with their traditional bank. By using technology to make the loan application process easier, and partnering with a brand that was recognizable to restaurant owners, BlueVine persuaded small businesses like The Shuckery that may have

banked elsewhere to give it a shot.Early on in the pandemic, DoorDash,

which is based in San Francisco, hosted a webinar and learned from its mer-chants that many found traditional banks’ PPP loan application processes confusing and complex.

To help its customers out, DoorDash forged an alliance with BlueVine in Redwood City, Calif., which had already adapted its small-business lending platform to accommodate PPP loan applications.

Their goal was to help very small businesses get funding. The vast majority they serve employ fewer than 10 people.

Under the partnership, DoorDash would refer its merchants to BlueVine, typically via email and through its merchant portal, and restaurants would apply for PPP loans through BlueVine. (DoorDash donates its proceeds from these referrals to organizations helping small businesses affected by the pandemic.)

“This was a great opportunity for us to find a population of clients we knew would be hurting during this crisis,” said Brad Brodigan, chief commercial officer of BlueVine. “The partnership made a ton of sense for us because DoorDash has a very strong relationship with restaurants and we had access to the PPP application process.”

To automate the application process, BlueVine uses optical character recognition, or OCR technology, which digitally scans documents that users upload to lift relevant information, such as identification details or the number of employees, without the need for human review. For example, BlueVine’s technology can scan payroll documents such as W-2 or 941 forms and parse out payroll details.

Its underwriting technology accesses third-party data sources to perform

know-your-customer checks, validate bank account authenticity and owner-ship, and more. BlueVine also devel-oped additional counterfraud measures, such as PDF manipulation detectors, to reduce risk while servicing its new influx of businesses.

For the DoorDash partnership specifically, BlueVine customized the form with DoorDash’s logo. It also would pass detailed customer data back to DoorDash, such as where merchants were in the application process and how much they applied for, in the interest of helping keep nervous customers informed and figuring out which to include or exclude in subse-quent rounds of communication.

BlueVine does not lend directly; it originates loans and processes applica-tions, but works with community banks on the back end, including Cross River Bank in Fort Lee, N.J., and Celtic Bank in Salt Lake City, to fund the loans.

Lalicker, of The Shuckery, held onto her funds until the Small Business Administration extended the period in which borrowers could spend their PPP loans from eight weeks to 24. When Sonoma County permitted outdoor dining, she used the money to bring her staff back on July 10 and purchase a new point-of-sale system.

Once she repays her line of credit, she also plans to leave the large bank that couldn’t help her secure a loan. “I’m 100% switching to a smaller local bank,” she said.

For now, she’s grateful that there was another option after her first attempts to secure funding failed.

“You work hard to create a relation-ship with your bank, and I was surprised they weren’t able to help me in a time of crisis,” said Lalicker. “I didn’t even know these smaller technology-based companies existed, but it saved my business.” — Miriam Cross

Bank Technology

010_ABM0920 10 8/10/2020 5:46:44 PM


SoFi Bank? It hopes soOne fintech already has a national bank charter. SoFi aims to be next.

Social Finance is trying again to become a bank — joining a list of fintechs actively pursuing a charter.

SoFi filed a de novo bank applica-tion on July 8 with the Office of the Comptroller of the Currency. The move comes close to three years after the San Francisco company pulled the plug on an earlier attempt to open an industrial loan company.

In late July, Varo Money, which offers online consumer deposit accounts, received approval for deposit insurance and conditional approval for a national bank charter, becoming the first fintech to do so. Varo’s journey took three and a half years.

One benefit of becoming a bank is being able to operate under a single set of regulations, rather than the 50-state scheme that applies to nonbank lenders — which should result in cost savings.

SoFi, which was one of the first fintechs to achieve a $1 billion-plus valuation, offers student loans, mort-gages, personal loans, investment services and a cash management account. Chief Executive Anthony Noto said a bank charter would allow SoFi to add offerings, but did not get specific.

A copy of SoFi’s charter application was not immediately available. But a source familiar with SoFi’s thinking said that it expects the move to lower its cost of funds, which could level the playing field with traditional banks. .

SoFi applied to open an industrial bank back in 2017. That effort fell apart after former CEO Mike Cagney left the company amid a scandal involving sexual harassment allegations. The

company did not say why it is now seeking to become a national bank rather than an industrial bank.

At least three other fintechs aim to become banks. Robin Hood, which offers commission-free investing on mobile phones, filed a national bank application last year. Square, a payment processor that also offers financing to small-business customers, and Rakuten, often described as the Amazon.com of Japan, both want to be an industrial bank. Square received conditional approval for deposit insurance in March. Rakuten applied for deposit insurance in May after discon-tinuing an earlier effort. — Kevin Wack

Angling for bigger fishChallenger bank goes after 100- to 200-employee firms

Rho Business Banking has rolled out a new set of features aimed at larger businesses than the venture capi-tal-backed startups it initially attracted.

The challenger bank started out last October with checking and a treasury management account that holds up to $75 million per customer by spreading $250,000 “packets” of funds among partner banks. It also offers free domes-tic Automated Clearing House and wire payments, an expense management system that lets employees from a single team upload receipts and invoices, and a corporate credit card with same-day settlement that pays 1% cash back for companies that spend more than $100,000 each year.

Those features were all designed to appeal to small startups. The new ones are for businesses with closer to 100 to 200 employees. There will be no fees to send international wire transfers, aside

from a 0.5% foreign exchange fee. Companies can get up to five checking accounts per single tax ID and keep track of these accounts in one dash-board. And the account owner can customize permissions so that people in various roles at the company, such as employees, investors, bookkeepers and finance administrators, can share Rho logins to use virtual corporate cards, initiate wire transfers, approve pay-ments and view company financials.

“This enables companies to offer their whole teams a place within Rho,” said Alex Wheldon, a co-founder of the New York company. “That could be an employee simply getting free access to safe and controlled spending to investors that want read-only access.”

Wheldon said that Rho acquired several new customers in the second quarter, mostly through referrals from existing clients, and that 90% of them came from larger institutions such as Bank of America and JPMorgan Chase.

“Their demands were different,” Wheldon said of the larger clients Rho has landed. “They expected ready access to things like permissions and dual controls.”

Rho said that several hundred businesses bank with it. Checking deposits are held at Evolve Bank & Trust in Memphis, Tenn., while credit and treasury products are held at more than 100 banks and lenders.

Neobanks argue that their services are increasingly in demand among small businesses, especially since the pandemic has eliminated many traditional jobs. For example, they offer accounts with low or no fees, digital onboarding, assistance with expense categorization and more. Only eight of the top 30 U.S. banks offer digital onboarding to small businesses, according to Javelin Strategy & Research. — Miriam Cross

know-your-customer checks, validate bank account authenticity and owner-ship, and more. BlueVine also devel-oped additional counterfraud measures, such as PDF manipulation detectors, to reduce risk while servicing its new influx of businesses.

For the DoorDash partnership specifically, BlueVine customized the form with DoorDash’s logo. It also would pass detailed customer data back to DoorDash, such as where merchants were in the application process and how much they applied for, in the interest of helping keep nervous customers informed and figuring out which to include or exclude in subse-quent rounds of communication.

BlueVine does not lend directly; it originates loans and processes applica-tions, but works with community banks on the back end, including Cross River Bank in Fort Lee, N.J., and Celtic Bank in Salt Lake City, to fund the loans.

Lalicker, of The Shuckery, held onto her funds until the Small Business Administration extended the period in which borrowers could spend their PPP loans from eight weeks to 24. When Sonoma County permitted outdoor dining, she used the money to bring her staff back on July 10 and purchase a new point-of-sale system.

Once she repays her line of credit, she also plans to leave the large bank that couldn’t help her secure a loan. “I’m 100% switching to a smaller local bank,” she said.

For now, she’s grateful that there was another option after her first attempts to secure funding failed.

“You work hard to create a relation-ship with your bank, and I was surprised they weren’t able to help me in a time of crisis,” said Lalicker. “I didn’t even know these smaller technology-based companies existed, but it saved my business.” — Miriam Cross

011_ABM0920 11 8/10/2020 5:46:45 PM


ADVANCES IN TECHHosted by

In today’s global circumstances, leaders in the banking and financial services community are looking for innovative ways to help their firms make progress on the path to the new normal. Advances in Tech brings together some of the latest technologies that are helping the industry move forward. Explore these short demos to see what new capabilities are available.

To watch the demos, visit americanbanker.com/advances-in-tech

Advances in Tech

ALIASWIREDirectBiller powered by AliaswireDirectBiller by Aliaswire is a customizable and configurable out-of-the box Electronic Bill Payment and Presentment (EBPP) solution that fully automates the AR process for bill payments. It enables business to deliver the pay when, where, and how experience customers now demand.

PRESENTER

Brent Watters Marketing Director617-393-5300Email: [email protected]

DMS: DIGITAL MATRIX SYSTEMSGain credit policy testingGo beyond traditional credit policy testing with DMS TestLab®. This powerful testing tool helps companies gain better control over credit policy testing and improve processes. It provides quick access to test data contained in private test regions, and features a built-in editor, repository and simulator.

PRESENTER

Kara Maccabe Business Development Mgr.Anthony Henard Director, QA & Client Services800-367-1800www.dms.net

GLIABring the in-branch experience to your website and mobile apps Glia’s Customer Service Platform lets you reinvent how you serve customers in the digital world. The platform enables banks to identify high-value website visitors, react to inbound communication requests, or proactively reach out via chat, video, or audio.

PRESENTER

Dan MichaeliCo Founder & CEOwww.glia.com

NICE ACTIMIZEBreak down the siloes with ActOne ExtendTo manage financial crime risk, analysts need to leverage disparate systems and ingest massive quantities of data. Transform the way you view risk and gain a holistic view of all relevant data surrounding an investigation. Leverage groundbreaking technology to ensure operational efficiency, agility and oversight.

PRESENTER

Olga KryvetsPre-Sales LeadEmail: [email protected]

AB_0920_advances in tech.indd 12 8/10/20 11:55 AM





Advances in Tech

PRESENTER


NUTANIXSee how tasks that used to take weeks can be done in a few clicksGo Hands-on with Nutanix, the ultimate “inside cloud” experience. A modern financial services digital enterprise must be built on a hybrid cloud infrastructure designed for operational resilience, security, and simplicity. Nutanix delivers a management control plane and self-service tools designed to delight IT and DevOps practitioners.

PRESENTER

Chris Brown Product Marketing Mgr.855-NUTANIXwww.nutanix.com/contact

PRESENTER


ONESPANEnable greater trust between your bank and customersDigital Account Opening: Enabling greater trust between your bank and customers. Despite the push for end-to-end digitization of digital onboarding processes, banks and other FIs are still struggling with legacy systems. The good news is new approaches to digital fulfillment with ID verification and e-signature technologies present an opportunity to eliminate the need for in-branch verification.repository and simulator.

PRESENTER

Will LaSalaSr. Director Global Solutions312-766-4001www.onespan.com

OPTIMAL BLUECreate sustainable competitive advantages drive success Discover the five key automations imperative for today’s mortgage lenders. Win more business with a product and pricing solution that delivers comprehensive functionality, enhances workflow efficiencies, and enables lenders to stay competitive and profitable.

PRESENTER

Bob BrandtVice President of Marketing and Strategic Alliances844-465-1002Email: [email protected]

PRESENTER


ORACLEFuture ready finance solutions for bankingSee how your institution can benefit from a cloud-native set of financial management tools that include automation, AI, and ma-chine learning built in. Oracle provides a modern finance, planning, and accounting solution for banks and FSIs that helps streamline operations and reporting, and advance decision-making.

PRESENTER

Kimberly Ellison-TaylorExecutive Director, Finance Thought Leadership, ERP, EPM Product Marketing800-633-0738www.oracle.comexplore.oracle.com

SMARTVAULTSave time and improve efficiencyAutomate your document workflow with the platform trusted by over 20,000 business professionals. SmartVault offers secure, cloud-based document management and client portals specifically built for the unique security, compliance, and workflow needs of finance professionals.

PRESENTER

Daniel FritzDirector of Products866-674-6785www.smartvault.com

SALESFORCE CUSTOMER360Be a bridge to economic recoveryBanking customers are experiencing hardship like never before. Now is the time for banks and lenders to help. See how banks can leverage Salesforce Financial Services Cloud and the Customer360Platform to identify customers that are at-risk of defaulting and enable them to request relief.

PRESENTER

Amelia GuertinIndustries Product Marketing, Banking & Lending800-667-6389financialservicescloud.com

PRESENTER


AB_0920_advances in tech.indd 13 8/10/20 11:55 AM012_ABM0920 12 8/13/2020 9:35:00 AM





Advances in Tech

ALIASWIREDirectBiller powered by AliaswireDirectBiller by Aliaswire is a customizable and configurable out-of-the box Electronic Bill Payment and Presentment (EBPP) solution that fully automates the AR process for bill payments. It enables business to deliver the pay when, where, and how experience customers now demand.

PRESENTER


DMS: DIGITAL MATRIX SYSTEMSGain credit policy testingGo beyond traditional credit policy testing with DMS TestLab®. This powerful testing tool helps companies gain better control over credit policy testing and improve processes. It provides quick access to test data contained in private test regions, and features a built-in editor, repository and simulator.

PRESENTER


GLIABring the in-branch experience to your website and mobile apps Glia’s Customer Service Platform lets you reinvent how you serve customers in the digital world. The platform enables banks to identify high-value website visitors, react to inbound communication requests, or proactively reach out via chat, video, or audio.

PRESENTER


NICE ACTIMIZEBreak down the siloes with ActOne ExtendTo manage financial crime risk, analysts need to leverage disparate systems and ingest massive quantities of data. Transform the way you view risk and gain a holistic view of all relevant data surrounding an investigation. Leverage groundbreaking technology to ensure operational efficiency, agility and oversight.

PRESENTER


AB_0920_advances in tech.indd 12 8/10/20 11:55 AM





Advances in Tech

PRESENTER


NUTANIXSee how tasks that used to take weeks can be done in a few clicksGo Hands-on with Nutanix, the ultimate “inside cloud” experience. A modern financial services digital enterprise must be built on a hybrid cloud infrastructure designed for operational resilience, security, and simplicity. Nutanix delivers a management control plane and self-service tools designed to delight IT and DevOps practitioners.

PRESENTER

Chris Brown Product Marketing Mgr.855-NUTANIXwww.nutanix.com/contact

PRESENTER


ONESPANEnable greater trust between your bank and customersDigital Account Opening: Enabling greater trust between your bank and customers. Despite the push for end-to-end digitization of digital onboarding processes, banks and other FIs are still struggling with legacy systems. The good news is new approaches to digital fulfillment with ID verification and e-signature technologies present an opportunity to eliminate the need for in-branch verification.repository and simulator.

PRESENTER

Will LaSalaSr. Director Global Solutions312-766-4001www.onespan.com

OPTIMAL BLUECreate sustainable competitive advantages drive success Discover the five key automations imperative for today’s mortgage lenders. Win more business with a product and pricing solution that delivers comprehensive functionality, enhances workflow efficiencies, and enables lenders to stay competitive and profitable.

PRESENTER

Bob BrandtVice President of Marketing and Strategic Alliances844-465-1002Email: [email protected]

PRESENTER


ORACLEFuture ready finance solutions for bankingSee how your institution can benefit from a cloud-native set of financial management tools that include automation, AI, and ma-chine learning built in. Oracle provides a modern finance, planning, and accounting solution for banks and FSIs that helps streamline operations and reporting, and advance decision-making.

PRESENTER

Kimberly Ellison-TaylorExecutive Director, Finance Thought Leadership, ERP, EPM Product Marketing800-633-0738www.oracle.comexplore.oracle.com

SMARTVAULTSave time and improve efficiencyAutomate your document workflow with the platform trusted by over 20,000 business professionals. SmartVault offers secure, cloud-based document management and client portals specifically built for the unique security, compliance, and workflow needs of finance professionals.

PRESENTER

Daniel FritzDirector of Products866-674-6785www.smartvault.com

SALESFORCE CUSTOMER360Be a bridge to economic recoveryBanking customers are experiencing hardship like never before. Now is the time for banks and lenders to help. See how banks can leverage Salesforce Financial Services Cloud and the Customer360Platform to identify customers that are at-risk of defaulting and enable them to request relief.

PRESENTER

Amelia GuertinIndustries Product Marketing, Banking & Lending800-667-6389financialservicescloud.com

PRESENTER


AB_0920_advances in tech.indd 13 8/10/20 11:55 AM013_ABM0920 13 8/13/2020 9:35:01 AM


When BOK Financial conducted a leadership audit as part of its

succession planning process two years ago, some worrisome gaps emerged.

“It was skewed pretty significantly by age — 55 and older,” said Steven Bradshaw, president and chief executive of the $40 billion-asset BOK. “It doesn’t take much of a jump to realize that you’re going to have a pretty significant change in leadership over the next 10 years as you’re seeing people retire.”

The upper ranks also lacked diversity, in contrast to other levels of the organization, he said.

This exercise prompted BOK to create a diversity and inclusion council, which since its inception in 2019 has spearheaded changes in corporate policy and recruiting, including experimenting with artificial intelli-gence to reduce unconscious bias.

REPUTATION REBOUNDBouyed by its efforts to help consumers and businesses weather the pandemic, the banking industry saw its reputation improve for the first time in several years. Our annual survey offers some insight on how to keep the goodwill flowing.

By Matthew de Paula

A company has to live its values, BOK Financial’s chief executive, Steven Bradshaw, says. “It’s more about actions than words.”

014_ABM0920_001 14 8/12/2020 1:55:19 PM


When BOK Financial conducted a leadership audit as part of its

succession planning process two years ago, some worrisome gaps emerged.

“It was skewed pretty significantly by age — 55 and older,” said Steven Bradshaw, president and chief executive of the $40 billion-asset BOK. “It doesn’t take much of a jump to realize that you’re going to have a pretty significant change in leadership over the next 10 years as you’re seeing people retire.”

The upper ranks also lacked diversity, in contrast to other levels of the organization, he said.

This exercise prompted BOK to create a diversity and inclusion council, which since its inception in 2019 has spearheaded changes in corporate policy and recruiting, including experimenting with artificial intelli-gence to reduce unconscious bias.

Such changes within the Tulsa, Okla., company also appear to have made a positive impression outside of it, based on the annual American Banker/RepTrak Survey of Bank Reputations. (The RepTrak Co. was formerly called

the Reputation Institute.)Of the 40 banks evaluated in the

survey, BOK earned the highest rating in the workplace category among noncustomers familiar with it.

BOK also ranked second with noncustomers in each of the six other categories the survey looks at:

products and services, innovation, leadership, performance, citizenship and governance.

In a year when the banking indus-try’s reputation surged, BOK registered the biggest improvement of all the

banks among noncustomers, vaulting to first place in that ranking, ahead of even USAA Bank, which had been at the top for two years running.

Bradshaw said one of the likely reasons BOK made such a favorable impression on noncus-tomers is that its employees have been especially visible during the pandemic in helping local nonprofits.

“I’m proud of that and proud of the industry, because I see a lot of banks stepping up to do that as

well,” he said.

From villain to heroAfter dropping for the past two years, bank reputations are once again on the rise, thanks in large part to the goodwill banks have generated by helping customers and employees weather

REPUTATION REBOUNDBouyed by its efforts to help consumers and businesses weather the pandemic, the banking industry saw its reputation improve for the first time in several years. Our annual survey offers some insight on how to keep the goodwill flowing.

By Matthew de Paula

Bank reputations Benefit of doubt

Turnaround The banking industry has recovered most of the reputation losses it has suffered since 2017. That translates into renewed goodwill from consumers, as measured by their willingness to give banks the benefit of the doubt in a crisis.

-10-9-8-7-6-5-4-3-2-10

2017 2018 2019 2020

015_ABM0920_001 15 8/12/2020 1:55:22 PM


RANKINGS BASED ON CUSTOMER SCORES

Source: American Banker/RepTrak Survey of Bank Reputations 2020

Excellent/Top Tier Above 80Strong/Robust 70-79Average/Moderate 60-69Weak/Vulnerable 40-59Poor/Bottom Tier Below 40

1 USAA Bank 85.8 88.2 -2.4

2 Webster Bank 83.8 77.7 6.1

3 BMO Harris Bank 80.9 75.1 5.8

4 Regions 80.8 76.6 4.2

5 Discover Bank 80.3 78.2 2

6 Capital One 79.9 75.6 4.3

7 First Citizens 79.6 78.6 1

8 BOK Financial 79.5 76.9 2.6

9 People's United 78.4 74.3 4.1

10 Ally Bank 78.4 73.0 5.4

11 Bank of the West 78.4 75.7 2.7

12 Associated Bank 78.3 75.9 2.4

13 Union Bank 78.2 77.1 1.1

14 Citizens Bank 78.2 79.2 -1

15 BNY Mellon 78.1 68.9 9.2

16 Northern Trust 78.1 77.7 0.4

17 Huntington Bank 77.9 80.4 -2.5

18 M&T Bank 77.7 70.3 7.4

19 BankUnited 77.5 73.6 3.9

20 CIT Bank 77.5 71.6 5.8

21 U.S. Bank 77.4 75.3 2.2

22 FNB of Pennsylvania 77.4 74.1 3.3

23 Fifth Third Bank 77.3 74.4 2.8

24 Chase 76.5 74.1 2.4

25 TD Bank 76.2 72.6 3.6

26 Comerica 76.1 75.0 1.1

27 Truist Bank 76.0 NEW NEW

28 Cullen/Frost 75.4 77.5 -2.1

29 First Tennessee 75.3 76.0 -0.8

30 PNC 75.3 78.6 -3.3

31 Valley National Bank 75.1 NEW NEW

32 KeyBank 75.1 72.8 2.3

33 Santander 74.9 73.4 1.6

34 Synovus Financial 74.8 69.8 5

35 BBVA Compass 74.8 75.1 -0.3

36 Bank of America 73.7 67.2 6.5

37 Citibank 73.1 73.5 -0.3

38 Zions Bank 72.2 71.1 1.1

39 HSBC 70.9 65.8 5.1

40 Wells Fargo 63.4 62.8 0.6

2020 2019 Change

the pandemic.In the survey conducted this

spring, the banking industry as a whole scored a 68.6 out of a possible 100 — a 5.4-point improvement from last year.

“Not only is that statistically significant by a long shot, that’s a big move overall for an industry,” said Bradley Hecht, an executive vice president at RepTrak.

Though the score is still consid-ered “average,” the industry regained nearly all of the ground it had lost since 2017, coming close to the 70-point mark that signifies a “strong” reputation.

With the pandemic battering the economy, and consumers and businesses suffering, banks have been thrust into the news more often than usual in recent months, mostly in positive ways.

Many consumers were allowed to temporarily skip payments on home and auto loans without it impacting their credit score. Many struggling small businesses received a lifeline in the form of Paycheck Protection Program loans. And many banks are increas-ing their philanthropic efforts to help community organizations like food banks keep up with demand.

The positivity that is being generated by such efforts stands in stark contrast to how people have reacted to the banking industry during previous crises, Hecht said.

Because banks have much more of a capital buffer to sustain them these days, the industry cast as the villain of the financial crisis has managed to play more of a hero this time — at least so far.

“It really is a fascinating intersection between a select few industries that historically were

poorly perceived pivoting during the COVID crisis to not only do good things, but for once get credit for it without a lot of skepticism,” Hecht said.

Besides banking, Hecht cited the oft-maligned pharmaceutical industry — which is tasked with creating a vaccine for the novel coronavirus — as another benefac-tor of current consumer goodwill.

The upshot is that both banking and pharma have been able to “rewrite their reputations” as a result of the pandemic, Hecht said.

One of the benefits of that is people are more willing to give a bank the benefit of the doubt when something goes wrong.

A stronger reputation also translates into a greater willingness to do business with a bank and recommend it to others.

All three of those metrics have increased from last year, but the steepest improvement is with the benefit of the doubt, which means banks are regaining trust, Hecht said.

Gaining momentumBanks are also benefiting from some momentum they started to create before the pandemic hit.

Many banks have taken note of how the public’s expectations on corporate citizenship and social activism are changing. Some executives are becoming more visible and vocal advocates for tackling issues like racial injustice, climate change and gender discrimination.

The survey offers some insight into how such factors influence perceptions of a bank, which in turn can help inform the strategy for improving a bank’s reputation.

Source: Survey of Bank Reputations 2020

Gaining ground — finally

Increase from 2019

Scores from customersScores from noncustomers

REGIONAL BANKS

77.4 66.4

LARGE BANKS

71.5 52.1

Excellent/Top Tier Above 80Strong/Robust 70-79Average/Moderate 60-69Weak/Vulnerable 40-59

NONTRADITIONAL BANKS

67.380.5

76.5 64.7

ALL BANKS - INDUSTRY AVERAGE

+2.9

+2.3

+2.7

+6.6

+5.1

+2.0 +6.0

+3.4

Reputations have improved enough with customers that large banks as a group moved into the “strong” tier and nontraditional banks edged into the more rarified excellent tier. The overall improvement has been even more pronounced among noncustomers, with the largest boost going to regional banks.

Reputation Survey

016_ABM0920_001 16 8/12/2020 1:55:23 PM


RANKINGS BASED ON CUSTOMER SCORES



1 USAA Bank 85.8 88.2 -2.4

2 Webster Bank 83.8 77.7 6.1


4 Regions 80.8 76.6 4.2

5 Discover Bank 80.3 78.2 2

6 Capital One 79.9 75.6 4.3

7 First Citizens 79.6 78.6 1



10 Ally Bank 78.4 73.0 5.4

11 Bank of the West 78.4 75.7 2.7


13 Union Bank 78.2 77.1 1.1

14 Citizens Bank 78.2 79.2 -1

15 BNY Mellon 78.1 68.9 9.2


17 Huntington Bank 77.9 80.4 -2.5

18 M&T Bank 77.7 70.3 7.4

19 BankUnited 77.5 73.6 3.9

20 CIT Bank 77.5 71.6 5.8

21 U.S. Bank 77.4 75.3 2.2


23 Fifth Third Bank 77.3 74.4 2.8

24 Chase 76.5 74.1 2.4

25 TD Bank 76.2 72.6 3.6

26 Comerica 76.1 75.0 1.1


28 Cullen/Frost 75.4 77.5 -2.1

29 First Tennessee 75.3 76.0 -0.8

30 PNC 75.3 78.6 -3.3


32 KeyBank 75.1 72.8 2.3

33 Santander 74.9 73.4 1.6

34 Synovus Financial 74.8 69.8 5

35 BBVA Compass 74.8 75.1 -0.3

36 Bank of America 73.7 67.2 6.5

37 Citibank 73.1 73.5 -0.3

38 Zions Bank 72.2 71.1 1.1

39 HSBC 70.9 65.8 5.1

40 Wells Fargo 63.4 62.8 0.6

2020 2019 Change

RANKINGS BASED ON NONCUSTOMER SCORES




2 USAA Bank 73.2 70.2 3

3 Cullen/Frost Bankers 72.1 62.8 9.3



6 Synovus Financial 69.1 62.0 7.1

7 First Tennessee 69.0 63.2 5.8

8 First Citizens 69.0 58.6 10.4

9 Webster Bank 68.7 60.9 7.8

10 TD Bank 68.5 59.5 9

11 BBVA Compass 68.1 59.5 8.6

12 Huntington Bank 67.9 61.2 6.7

13 Citizens Bank 67.6 61.7 5.9

14 Zions Bank 67.6 62.3 5.3



17 Regions 66.4 59.0 7.4

18 BankUnited 66.4 58.0 8.3


20 Ally Bank 65.9 60.2 5.7

21 Union Bank 65.8 61.9 3.9

22 M&T Bank 65.6 63.1 2.5

23 CIT Bank 65.5 58.9 6.6

24 BNY Mellon 65.5 61.5 3.9

25 Comerica 65.3 60.6 4.7


27 Discover Bank 64.8 59.6 5.1

28 Bank of the West 64.5 59.9 4.6


30 Chase 64.2 55.5 8.7

31 Fifth Third Bank 63.5 56.5 7

32 PNC 63.4 58.2 5.2

33 Capital One 61.6 55.4 6.3

34 KeyBank 60.4 59.6 0.8

35 Santander 60.3 54.3 6

36 U.S. Bank 59.5 53.2 6.3

37 HSBC 56.9 52.2 4.8

38 Citibank 54.8 54.4 0.4

39 Bank of America 48.1 46.1 2

40 Wells Fargo 36.6 35.4 1.2

2020 2019 Change

poorly perceived pivoting during the COVID crisis to not only do good things, but for once get credit for it without a lot of skepticism,” Hecht said.

Besides banking, Hecht cited the oft-maligned pharmaceutical industry — which is tasked with creating a vaccine for the novel coronavirus — as another benefac-tor of current consumer goodwill.

The upshot is that both banking and pharma have been able to “rewrite their reputations” as a result of the pandemic, Hecht said.

One of the benefits of that is people are more willing to give a bank the benefit of the doubt when something goes wrong.

A stronger reputation also translates into a greater willingness to do business with a bank and recommend it to others.

All three of those metrics have increased from last year, but the steepest improvement is with the benefit of the doubt, which means banks are regaining trust, Hecht said.

Gaining momentumBanks are also benefiting from some momentum they started to create before the pandemic hit.

Many banks have taken note of how the public’s expectations on corporate citizenship and social activism are changing. Some executives are becoming more visible and vocal advocates for tackling issues like racial injustice, climate change and gender discrimination.

The survey offers some insight into how such factors influence perceptions of a bank, which in turn can help inform the strategy for improving a bank’s reputation.

017_ABM0920_001 17 8/12/2020 1:55:25 PM


“The bank that is perceived to have a higher purpose is much more reputable — that’s why it’s so important,” said Sven Klingemann, research director at RepTrak.

RepTrak has a new Purpose Power Index that helps companies track how well they are doing on that front, and it found a strong correlation between the purpose and reputation scores. The new index gauges consumer percep-tions of companies on four criteria — having a purpose beyond just making a profit, being committed to changing the world for the better, doing things to benefit all stake-holders, not just shareholders, and helping people and communities.

BOK took the top spot with noncustomers in that new index and second place with customers.

Bradshaw said that, while having values and talking about them is important, the key to success is in what a company does to live those values, whether that entails actively pursuing greater diversity in the senior ranks or manning food banks.

“It’s more about actions than words,” he said.He gives a lot of credit to employee-led community

initiatives for generating positive sentiment for his company, saying more than 1,350 people from BOK logged nearly 34,000 volunteer hours last year.

“I think that shapes how people view us,” Bradshaw said. “That’s where they see us, that’s where they get a sense for what the values and the purpose of the company are, and frankly, it leads to more business for us.”

BOK’s community relations team helps organize the volunteer manpower around needs employees themselves identify in their communities, often with the backing of the BOK Foundation, which handles the company’s charitable giving. The corporate communications team helps get the message out, internally and externally.

One area of recent focus has been food insecurity. “We’ve done incremental giving and volunteering in that space because obviously there is a need that’s come out of the pandemic,” Bradshaw said.

Banking on purposeHecht noted several data points that reflect how consumer perceptions of whether a bank has a higher purpose is having greater influence on reputation scores.

Questions about “having a positive societal influence,” “equal workplace opportunities” and “environmental protection” were among those that increased the most in relative importance.

Having a positive societal impact alone saw “almost a 50% increase in relative importance from the prior year as

a reputation driver” among customers, Hecht said. “That’s a big deal.”

As for how banks are living up to expectations with regard to citizenship, both customers and noncustomers rate them higher this year than last. But regional banks as a group got the most credit for being good corporate citizens, with a 6.7-point increase in their citizenship score among noncus-tomers putting them at 66.8.

“That is a huge, huge change,” Hecht said. “That is gigantic, relatively speaking.”

The citizenship score improved by 5.1 points, to 68, for nontraditional banks, a group that includes online players like Ally and Discover, and by just 1.3 points, to 51.8, for large banks.

Citizenship is among the top three drivers of reputation for both customers and noncustomers this year, as is gover-nance, which, in this case, is a gauge of whether people perceive the bank as fair, ethical and transparent. Products and services rounds out the top three in importance.

“It might be the first time in a while that the top three were the same for customers and noncustomers,” Hecht said.

Innovation countsPerhaps because the pandemic is forcing more people to interact with their banks through digital channels, innovation is another reputation driver that has become more important.

Questions about whether a bank “adapts quickly to change” and whether consumers consider it an “innovative company” jumped in relative importance.

At BOK, which had the second-highest innovation score among noncustomers, the biggest jump in digital adoption this year hasn’t been in retail banking — that segment has been going digital for years now, Bradshaw said — but rather on the commercial and wealth management sides of the business.

“We’re a very large organization in terms of wealth management — it’s more than a third of the total revenue of the bank — and that’s a group that has largely been very focused on face-to-face business in order to manage it,” Bradshaw said. “That’s also true for a lot of our larger corporate relationships.”

Capabilities BOK has built up over the past five years that might’ve been overlooked by high-net-worth and commercial banking clients before the pandemic are getting a lot more use now, he said. Some areas of the private wealth manage-ment and retail brokerage business experienced “upwards of a 65% increase” in logins from February to March.

“The other thing is we were quick to adopt virtual meet-ings and virtual forums for our clients,” Bradshaw said. “We


Customers Noncustomers

USAA Bank

Discover Bank

Capital One

Regions

First Citizens

83.3

80.9

79.4

79.3

78.1

Products & Services

USAA Bank

Capital One

Webster Bank

BankUnited

Discover Bank

76.1

75.5

75.2

75.1

74.3

Innovation

USAA Bank

Webster Bank

Citizens Bank

Regions

People's United

80.1

79

78.8

78.5

76.5

Workplace

USAA Bank

Webster Bank

Regions

Cullen/Frost

First Citizens

83

80.1

77.6

77.4

77.1

Governance

USAA Bank

Webster Bank

Regions

First Citizens

BMO Harris Bank

81.1

79.2

78

77

76.7

Citizenship

USAA Bank

Webster Bank

Citizens Bank

Capital One

Regions

81.4

79.9

78.1

77.9

77.4

Leadership

USAA Bank

Regions

Capital One

Webster Bank

Discover Bank

81.1

80.1

79.9

79.1

78.1

Performance

Lead

ersh

ip

Performance Products/Services Innovation

Citizenship

Governance W

orkplace

13.

5%

12.6% 18.0% 12.4%

14.0%

16.5% 13.0

%

Lea

ders

hip

Performance Products/Services Innovation

Citizenship

Governance W

orkplac

e

13.

7%

12.3% 16.1%

13.9%

14.4%

17.2% 12.4

%

NoncustomersCustomers

The top 5 scorers for each of the reputation drivers

What matters most whenforming perceptions of a brand?

USAA Bank

BOK Financial

Cullen/Frost

Northern Trust

CIT Bank

74.9

73.3

73.3

71.9

71.1

Products & Services

First Tennessee

BOK Financial

Ally Bank

FNB of Pennsylvania

Cullen/Frost

68.7

68.2

67.4

67.1

66.8

Innovation

BOK Financial

USAA Bank

BBVA Compass

Huntington Bank

Northern Trust

72.7

71.8

71.1

70.9

70.7

Workplace

USAA Bank

BOK Financial

Cullen/Frost

FNB of Pennsylvania

Northern Trust

72.4

72.3

71.5

70.9

70.9

Governance

USAA Bank

BOK Financial

Cullen/Frost

FNB of Pennsylvania

Huntington Bank

71.4

71.1

70.4

70.1

69.6

Citizenship

USAA Bank

BOK Financial

FNB of Pennsylvania

Cullen/Frost

First Citizens

72.7

72.3

71.6

71.4

71.4

Leadership

USAA Bank

BOK Financial

Ally Bank

First Tennessee

Capital One

73.7

73

72

71.8

71.8

Performance

This year citizenship replaced performance as one of the most important considerations for customers. Innovation is one of the factors steadily gaining in importance for both customers and noncustomers, though it hasn’t risen to the level of the top three reputation drivers.

Reputation Survey

018_ABM0920 18 8/12/2020 4:22:04 PM


“The bank that is perceived to have a higher purpose is much more reputable — that’s why it’s so important,” said Sven Klingemann, research director at RepTrak.

RepTrak has a new Purpose Power Index that helps companies track how well they are doing on that front, and it found a strong correlation between the purpose and reputation scores. The new index gauges consumer percep-tions of companies on four criteria — having a purpose beyond just making a profit, being committed to changing the world for the better, doing things to benefit all stake-holders, not just shareholders, and helping people and communities.

BOK took the top spot with noncustomers in that new index and second place with customers.

Bradshaw said that, while having values and talking about them is important, the key to success is in what a company does to live those values, whether that entails actively pursuing greater diversity in the senior ranks or manning food banks.

“It’s more about actions than words,” he said.He gives a lot of credit to employee-led community

initiatives for generating positive sentiment for his company, saying more than 1,350 people from BOK logged nearly 34,000 volunteer hours last year.

“I think that shapes how people view us,” Bradshaw said. “That’s where they see us, that’s where they get a sense for what the values and the purpose of the company are, and frankly, it leads to more business for us.”

BOK’s community relations team helps organize the volunteer manpower around needs employees themselves identify in their communities, often with the backing of the BOK Foundation, which handles the company’s charitable giving. The corporate communications team helps get the message out, internally and externally.

One area of recent focus has been food insecurity. “We’ve done incremental giving and volunteering in that space because obviously there is a need that’s come out of the pandemic,” Bradshaw said.

Banking on purposeHecht noted several data points that reflect how consumer perceptions of whether a bank has a higher purpose is having greater influence on reputation scores.

Questions about “having a positive societal influence,” “equal workplace opportunities” and “environmental protection” were among those that increased the most in relative importance.

Having a positive societal impact alone saw “almost a 50% increase in relative importance from the prior year as

a reputation driver” among customers, Hecht said. “That’s a big deal.”

As for how banks are living up to expectations with regard to citizenship, both customers and noncustomers rate them higher this year than last. But regional banks as a group got the most credit for being good corporate citizens, with a 6.7-point increase in their citizenship score among noncus-tomers putting them at 66.8.

“That is a huge, huge change,” Hecht said. “That is gigantic, relatively speaking.”

The citizenship score improved by 5.1 points, to 68, for nontraditional banks, a group that includes online players like Ally and Discover, and by just 1.3 points, to 51.8, for large banks.

Citizenship is among the top three drivers of reputation for both customers and noncustomers this year, as is gover-nance, which, in this case, is a gauge of whether people perceive the bank as fair, ethical and transparent. Products and services rounds out the top three in importance.

“It might be the first time in a while that the top three were the same for customers and noncustomers,” Hecht said.

Innovation countsPerhaps because the pandemic is forcing more people to interact with their banks through digital channels, innovation is another reputation driver that has become more important.

Questions about whether a bank “adapts quickly to change” and whether consumers consider it an “innovative company” jumped in relative importance.

At BOK, which had the second-highest innovation score among noncustomers, the biggest jump in digital adoption this year hasn’t been in retail banking — that segment has been going digital for years now, Bradshaw said — but rather on the commercial and wealth management sides of the business.

“We’re a very large organization in terms of wealth management — it’s more than a third of the total revenue of the bank — and that’s a group that has largely been very focused on face-to-face business in order to manage it,” Bradshaw said. “That’s also true for a lot of our larger corporate relationships.”

Capabilities BOK has built up over the past five years that might’ve been overlooked by high-net-worth and commercial banking clients before the pandemic are getting a lot more use now, he said. Some areas of the private wealth manage-ment and retail brokerage business experienced “upwards of a 65% increase” in logins from February to March.

“The other thing is we were quick to adopt virtual meet-ings and virtual forums for our clients,” Bradshaw said. “We

did an awful lot of investment briefings, economic briefings and other things facilitated by our corporate communica-tions group.”

He expects an increase in virtual interactions across all business lines to be a lasting outcome of the pandemic.

The way to win heartsBesides fostering close ties to their communities, banks would do well to focus on developing a more positive and inclusive workplace environment.

The reputation survey shows that consumers increasingly care about how banks treat their employees.

Workplace gained importance as a driver of reputation across the board for every bank type, with customers and noncustomers alike.

Webster Bank scored high enough in the workplace category to rank second of all 40 banks among customers, after USAA. It was also one of only two banks to earn an “excellent” score from customers in the governance category, USAA being the other one. And it got the highest score among customers on the Purpose Power Index.

Chris Motl, the head of commercial banking for the $30 billion-asset Webster, said its strong culture of caring is the basis for how the bank treats both customers and employees.

“I narrow it down to, literally, we do the right thing,” he said.

The five core values it wants employees to embody are codified in “The Webster Way,” which have been printed on the back of everyone’s business cards for as long as he’s worked at the company, which is 16 years, Motl said. One of these mantras is, “We respect the dignity of every individual,” while others speak to a higher purpose, such as earning trust through ethical behavior and giving back to the communities the bank serves.

No matter how it’s defined, there’s something about the culture that resonates with people who stay, Motl said. Those who aren’t on board with it “eventually self-select out,” he said. “I’m glad I fit in the culture, because I think it sort of says something about me too.”

Like BOK, Webster also has made diversity and inclusion a focus.

This is an area that carries more weight with consumers lately. Such topics are top of mind since they have gotten broad media attention via social movements — starting a few years ago with #MeToo sexual harassment scandals in many industries and more recently amid the widespread protests over racial injustice after a Minneapolis police officer killed George Floyd by kneeling on his neck for more than eight minutes while he was handcuffed on the ground.

019_ABM0920_001 19 8/12/2020 1:55:28 PM


“CEOs are taking on a more import-ant role,” said Klingemann, the RepTrak research director. “They’re testifying in front of Congress. There’s a political void and they’re sort of jumping in when it comes to talking about socioeconomic issues or inequality. There is this demand now to know what the bank stands for and I think CEOs have been forced to step up.”

RepTrak has started measuring consumer perceptions of CEOs, and it has found that for every point a CEO’s rating improves, a company’s overall reputation score has a corresponding increase of half a point, according to Klingemann.

This illustrates the importance of the

Based on the survey data, three of the biggest reputation risks for banks involve social justice: unequal pay by gender, unequal opportunities by race, gender or other factors, and discrimina-tory business practices.

“If you don’t pay people well, if you don’t give them equal opportunity, and you discriminate against them in your business, then that’s the trifecta of badness when it comes to risk for banks,” Hecht said.

BOK’s diversity and inclusion council, formed in April 2019, is led by Bradshaw himself, and one of the goals is to diversify its largely white, middle-aged, male leadership.

“I think over the next decade or so,

as we see the accelerated retirement of the baby boomers, there’s going to be an even greater war for talent,” which will make the ability to attract top-notch people a major differentiator for banks, Bradshaw said. “One of the ways you win that war is to make sure that you’re building an organization that appeals as broadly as it can across every type of measurable demographic so that you have a chance at the best of the best.”

As part of that effort, BOK just rolled out unconscious-bias training for its leadership and those with hiring oversight. It also revamped the training for recruiters to make sure they get diversity and inclusion accreditation.

And job descriptions are being updated to remove gender bias and “extreme modifiers,” while university recruitment and internship programs have an increased focus on women and minorities.

“We’re not the kind of company that says, ‘I’m sure it will happen naturally,’ ” Bradshaw said.

“Our message to ourselves was, ‘What can we do to accelerate that and make sure that we see a more diverse transition as we see leadership turnover in the company?’ ”

CEOs, listen upThat sort of leadership is crucial, the reputation survey indicates.

Perceptions of how banks responded to the pandemic are a major factor shaping

public opinion of the industry this year.

But just how positive those percep-tions are depends a lot on the way you ask consumers about them.

Opinions about how banks respond-ed to the crisis overall were consider-ably less favorable than opinions about their particular actions — such as giving employees the flexibility to work from home, showing support for health care professionals or donating to nonprofits that are helping people cope.

“That’s why we’re saying the rational assessment is far more positive than the overall emotional one,” said Sven Klingemann, the director of research for

RepTrak, which conducts the annual reputation survey for American Banker.

The survey results underscore how important communicating is in a crisis — and making sure customers and noncustomers notice. It helped earn some banks double-digit reputation gains.

“The key takeaway here is overall banks are actually getting pretty good grades on how they have responded specifically to things surrounding the COVID-19 crisis,” Klingemann said.

Wells Fargo is a case in point.Though its overall reputation score is

still recovering from the massive hit it took in the wake of the phony-accounts scandal, Wells edged out the other large banks specifically on how consumers scored its response to

the pandemic.To help make sure its messages got

noticed, Mary Mack, Wells Fargo’s chief executive of consumer and small-busi-ness banking, said it communicated

with customers across multiple chan-nels — proactively and frequently.

A message about the availability of loan forbearance appeared prominent-ly on the mobile banking app and website for all users. “We made it front and center on your mobile app to ask you if you needed help and then tried to make it as frictionless as possible to get help,” Mack said.

A strategy the bank hadn’t used before involved reaching out to branch visitors and letting them know about digital alternatives for doing the transaction they had completed, if one was available. It was framed as an option to keep them safer.

“We looked at transactions on a daily basis to see the customers that came into our branch and then we communicated back to a number of those customers and said, ‘Look, it was great to see you in the branch yester-day, and we’re always here to help, but did you know that you could have done that transaction online? If you would like for us to walk you through how to

Talking PointsThe coronavirus pandemic shows how much crisis communications matter

Reputation Survey

Mary Mack

By Matthew de Paula

020_ABM0920_001 20 8/12/2020 1:55:29 PM


“CEOs are taking on a more import-ant role,” said Klingemann, the RepTrak research director. “They’re testifying in front of Congress. There’s a political void and they’re sort of jumping in when it comes to talking about socioeconomic issues or inequality. There is this demand now to know what the bank stands for and I think CEOs have been forced to step up.”

RepTrak has started measuring consumer perceptions of CEOs, and it has found that for every point a CEO’s rating improves, a company’s overall reputation score has a corresponding increase of half a point, according to Klingemann.

This illustrates the importance of the

CEO’s own reputation in either damag-ing or elevating the bank’s reputation overall, he said.

To help lift a bank’s reputation, CEOs should exercise their influence for the greater good, especially during a crisis like the pandemic, where all constitu-ents, inside and outside of banks, are experiencing such a profound impact, he said.

Of the four drivers measured to evaluate CEO reputations — influence, leadership, management and responsi-bility — the importance of influence increased the most this year.

What that means is, “he or she needs to be able to make a difference,” Klingemann said. □

And job descriptions are being updated to remove gender bias and “extreme modifiers,” while university recruitment and internship programs have an increased focus on women and minorities.

“We’re not the kind of company that says, ‘I’m sure it will happen naturally,’ ” Bradshaw said.

“Our message to ourselves was, ‘What can we do to accelerate that and make sure that we see a more diverse transition as we see leadership turnover in the company?’ ”

CEOs, listen upThat sort of leadership is crucial, the reputation survey indicates.

the pandemic.To help make sure its messages got

noticed, Mary Mack, Wells Fargo’s chief executive of consumer and small-busi-ness banking, said it communicated

with customers across multiple chan-nels — proactively and frequently.

A message about the availability of loan forbearance appeared prominent-ly on the mobile banking app and website for all users. “We made it front and center on your mobile app to ask you if you needed help and then tried to make it as frictionless as possible to get help,” Mack said.

A strategy the bank hadn’t used before involved reaching out to branch visitors and letting them know about digital alternatives for doing the transaction they had completed, if one was available. It was framed as an option to keep them safer.

“We looked at transactions on a daily basis to see the customers that came into our branch and then we communicated back to a number of those customers and said, ‘Look, it was great to see you in the branch yester-day, and we’re always here to help, but did you know that you could have done that transaction online? If you would like for us to walk you through how to

do that, we’re happy to,’ ” Mack said.The bank was already educating

customers about digital processes before the pandemic, but not in such an automated and personalized way.

“The opportunity to pull up informa-tion from yesterday’s transactions in almost real time to help you see how you can do that at home was new for us, particularly at that kind of scale,” Mack said.

Starting in March, Wells Fargo fully closed 27% of its branches. The rest remained open in “one of four safe formats,” ranging from fully open with social distancing, mask guidelines and protective barriers in place to keeping drive-up windows open but allowing branch visits by appointment only.

“A number of customers who are contacting us on our phone lines want to go into a branch to meet with somebody, so we help them with where they can go and how to set those appointments up online,” Mack said.

To provide more flexibility, Wells increased mobile deposit and ATM

limits and communicated broadly with customers about it.

It also cashed government stimulus checks for customers and noncustom-ers, with no fee and immediate availability for those deposits, Mack said.

On the community-development side, Wells announced a program, dubbed Open for Business, that will donate all of its proceeds from the Paycheck Protection Program — ap-proximately $400 million in processing fees, according to the bank’s website — to support small businesses impact-ed by the pandemic, with a specific focus on Black-owned businesses.

“External data would tell you that Black-owned businesses are failing at twice the rate of the overall small-busi-ness population,” Mack said.

“So how can we help? What role can we play in recovery? That’s a very intentional part of the dialogue as we think about our customers, our employ-ees, what they need from us, what that conversation looks like.” □

The coronavirus pandemic shows how much crisis communications matter

Mary Mack

COMPANY SELECTION:Companies drawn from the Federal

Reserve’s list of large commercial banks, with final selections by American Banker based on total assets and retail business strength

RATINGS: Ratings were collected via online

questionnaire in May 2020 At least 100 customers and 100

noncustomers rated each company, with more than 14,000 respondents overall

Each respondent was very or some-what familiar with the companies they rated

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Financial services innovators are at risk of losing access to data that’s critical to their businesses if Congress passes a recently proposed data privacy bill or one of several like it.

Lawmakers are concerned that Americans continue to sacrifice privacy in exchange for products they can’t live without, especially as the coronavirus pandemic forces more commerce online. Simply by using a cellphone or the internet to make a purchase, consumers must share their data.

Such a trade-off, however, is a forced choice born of a misunderstanding of what privacy really means. The financial services industry must take a different approach to defining the problem and crafting solutions.

Privacy advocates are often more concerned about the sheer volume of consumer data being shared between institutions and third parties than what is done with that information. This view of quantity-as-privacy-violation is counterproductive on two counts. First, it leads consumers to adopt a hopeless-ly resigned view of privacy, and second, it can lead companies and policymak-ers to propose inadequate or even harmful solutions..

A 21st-century definition of “privacy violation” should focus on situations in which a company takes or shares data from people without their knowledge or permission, handles data irresponsibly and enables access by bad actors, or uses data in a manipulative manner.

Critically, companies should be free

to use data to provide valuable products, but they should be prohibited from mishandling, underhandedly exploiting or inadequately safeguarding that data.

While it is tempting to suggest legislation requiring these safeguards, there is reason to be cautious. It is imperative that businesses not face a state-by-state patchwork of regulation.

Every business, from startups to multinationals, needs to ensure compliance with every statute on day one of operation — a feat often easier for the largest and most well-capital-ized corporations.

Accepting federal preemption in this matter, however, means states can’t be used as the testing ground to help guide the way.

Any proposed policy must also acknowledge that individuals have vastly different priorities and tolerances.

Yet frustration with tech’s historically casual approach to privacy is high, both among voters broadly and policymakers in particular.

Bills can come quickly — especially amid an election year and crisis — and bits of rapidly drafted legislation can squeeze into must-pass legislation.

It is up to financial services innova-tors to demonstrate to lawmakers that they are doing good, not harming consumers. A consumer-first approach to product development is the best way to avoid a heavy regulatory backlash.

There is much the industry can do. Customers must have choice, the

choice must be informed and it cannot be merely theoretical. The existing “informed consent” model doesn’t work.

Esoteric terms of service that obscure as much as they reveal offer no choice, and are rarely read. Instead, developers can provide clear, plain-lan-guage requests to obtain and use data to their users in real time.

Responsible actors should explain to customers why the data requested is necessary and articulate clearly the benefits of sharing data with them. The same message should be provided clearly to lawmakers considering privacy legislation.

Anything policymakers do not understand is a threat to every business that relies on data use. And because the legislating process is largely public, lawmakers often view silence as tacit acceptance of proposed legislation.

There is a narrow window now for innovators to define their stance on privacy to preserve their ability to access and use data responsibly. If stakeholders engage proactively with policymakers, there is still time to work together to craft flexible solutions that benefit consumers and businesses alike.

Katherine Flocken is a senior policy adviser at Allon Advocacy and Tyler Griffin is a managing partner at Financial Venture Studio, which invests in fintech startups.

Reframe the privacy debate — quicklyBy Katherine Flocken and Tyler Griffin

BankThink

022_ABM0920 22 8/10/2020 1:55:25 PM

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BackPorch

Former Democratic Congressman best known for the Dodd-Frank Act, lauding Federal Reserve Chairman Jerome Powell for doing a good job ED FRANCIS

“We call it the gift that keeps on giving in this market.”Chairman and CEO of InBank, saying it added 350 customers because of PPP, mostly from big banks

JEROME POWELL“There’s been a lot of pain and injustice and unfair treatment that women have experienced in the workplace … among economists and at the Fed. That’s been going on for far too long.” Federal Reserve chairman, responding to charges by a former Fed economist that the agency and the broader economics profession foster a toxic culture

HAIM ISRAEL “The coronavirus is not just a temporary crisis; it’s a permanent disruptor. It’s one of those rare events in history that will completely reshape geopolitics, societies and markets.” Head of thematic investing at BofA Global Research, discussing his report, “The World After COVID”

STAN DOIDA“Bottom line is I needed you and I got no response. I’m voting with my dollars at this point.”Attorney, telling the branch manager at a big bank he switched to a small one that gave his law firm a PPP loan

BARNEY FRANK“Powell has been the best Trump appointee — despite the fact Trump yells at him all the time.”

LISA RICE“There were a lot of people in lending institutions who were saying, ‘We can’t go this far, guys.’ ” National Fair Housing Alliance CEO, on objections even from many bankers to a weakening of the disparate impact rule

MALIA LAZU “The question is, once this dies down, are we going to put this away until the next video … or does this lead to different hiring processes? Does this lead to the underbanked being served? Does this lead to more homeownership?” Chief experience and culture officer at Berkshire Bank, on the need to make sure outrage over George Floyd’s killing leads to impactful responses to racial injustice

Pho

to: G

etty

Imag

es

ROBERT FRANKO“None of the bankers I’ve talked to regret participating, but we’re worn out from borrowers asking when their loans will be forgiven.”President and CEO of First Choice Bancorp on the Paycheck Protection Program

JAMIE DIMON“This word ‘unprecedent-ed’ rarely is used properly. This time it’s being used properly. It’s unprece-dented what’s going on around the world.”JPMorgan Chase chairman and CEO, saying the economic havoc from the pandemic is unpredictable and the outlook is “much murkier” than in June

PAVIA ROSATI “What a Marriott hotel can do for you is perhaps more sophisticated than what a 10-room family inn can do for you, but you’re much more anonymous at the Marriott.”New York small-business owner, on ditching her big bank for the small one that helped her get a PPP loan

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never let a good crisis go to waste — the pandemic is ... · world series of poker winner daniel...

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