The Pandemic Is Giving Banks the Opportunity to Create Goodwill With

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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0C2_ABM0920 2 8/12/2020 2:30:18 PM Contents September 2020 | VOL. 130 | NO. 9

REPUTATION SURVEY

14 14 On the rebound Buoyed 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. 20 Talking points The 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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Briefings BankTechnology 11 A challenger bank’s new strategy 3 7 Rho Business Banking rolled out a list of A bet on bettors How to offer weary students options interesting new features to appeal to larger Lexicon Bank in Las Vegas is inviting poker Fintechs that help students manage college businesses than the startups it initially attracted players to open accounts for depositing their debt are eager to sign up bank partners tournament winnings 9 4 From hot asset to fire sale BankThink Can’t pay? It’s OK. Why OnDeck agreed to a deal worth less than 22 One consumer lender dismissed all pending 10% of what its market value was in 2015 Don’t lose the privacy debate collections cases and suspended filings of new Data has tremendous power to improve lives cases to help customers amid the pandemic 9 when employed the right way, and the financial DoorDash to the rescue services industry should call out exemplary 5 cases, Katherine Flocken and Tyler Griffin write How the food delivery app and the challenger Inscrutable could mean ‘un-investable’ bank BlueVine helped a California eatery stay Some investors, struggling to assess community in business banks’ earnings potential, are giving up BackPorch 6 11 24 SoFi knocks on banking door Looking past the rap sheet Quotes from former Congressman Barney Frank, The fintech is trying again to become a bank, A revised FDIC rule makes it easier for banks to Bank of America’s Haim Israel, Berkshire Bank’s joining a handful of others actively pursuing hire people with minor criminal backgrounds Malia Lazu and more regulatory approval

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001_ABM0920_001 1 8/12/2020 1:58:33 PM Volume 130, No. 9 What’s going on american banker.com Editor’s View Executive Editor Bonnie McGeer Senior Designer Nick Perkins @americanbanker.com Contributors Laura Alix, Miriam Cross, Matthew de Paula, Jim Dobbs, Brendan Pedersen, Kevin Wack

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2 American Banker September 2020

002_ABM0920 2 8/10/2020 1:54:49 PM Briefings CUSTOMER STRATEGY | DEBT COLLECTION | COMMUNITY BANKING | REGULATION ART FROM GETTYIMAGES FROM ART A bank with a poker face

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

By Jim Dobbs

Lexicon Bank in Las Vegas, founded rather avoid being hassled for what tion closed his account in July. nearly a year ago by poker enthusiasts, they see as small sums of money. Poker winnings are posted publicly, is betting big on the professional But for a young bank like Lexicon, said Rosenblum, who has competed gamblers who help make the de novo’s which began 2020 with less than $100 professionally as a poker player, hometown a major gaming destination. million in assets, the six-figure deposits including in several World Series of Bigger banks have been pulling back — and sometimes more — that Poker events. The public posting makes from poker because of elevated prominent players park in their it easier for banks with gaming compliance demands. Large transac- accounts is a substantial funding expertise and a willingness to track tions such as wire transfers conducted source, said Russell Rosenblum, the tournament participation and winnings by poker players who frequently bank’s chairman. “There’s a very big to verify the legitimacy of deposits. participate in tournaments are more gap” between a player’s needs and the “If you know poker, you know a pro susceptible to money-laundering availability of reliable banking services, player is actually easier to vet than your scrutiny. Rosenblum said. typical retail business,” said Rosenblum, Players face delays that jeopardize A recent case in point: Six-time who also owns several Five Guys burger tournament entry and their accounts World Series of Poker winner Daniel restaurants in Las Vegas. “We can see are often closed when regulators take Negreanu moved his poker winnings to all of a player’s cash winnings — ever notice because larger banks would Lexicon after another financial institu- — and we can get their full tournament

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schedule and align that with winning to While Rosenblum declined to discuss The city’s economy has lost 145,600 really good changes for our business.” verify deposits.” specific opportunities, Nevada’s rapidly private payroll jobs since June 2019, Vazquez said that “several thousand” Lexicon also has extensive conversa- growing cannabis industry could be a said John Restrepo, principal of Las customers would be affected by tions with the players, Rosenblum said. possibility for banks that figure out how Vegas-based RCG Economics. “Vulnera- Oportun’s decision to dismiss pending “We ask a lot of questions.” to serve the industry without excess ble low-wage workers were hit hardest,” collections cases. He did not quantify The players tend to welcome the regulatory complications. he said. the value of the loans that could be oversight, he added. “They just want to Such specialty areas could prove Las Vegas is resilient, but Rosenblum dismissed, but said that a typical loan make sure their account won’t get important since the coronavirus said the city’s recovery will be bumpy. in collections is for under $3,500. closed on them, leaving them stuck pandemic has rocked the travel “I personally have some concerns The lender ultimately ends up without a bank.” industry and, by extension, Las Vegas’ about softness in the economy,” he dismissing about two-thirds of all the Lexicon offers a private concierge hospitality and casino industry. said. “I think there could be some more collections cases it files, usually if it’s service for professional poker clients, Community banks nationwide will pain ahead.” learned that a borrower has suffered a managing their full-year tournament likely be on the hunt for profitable job loss or other hardship, he said. schedules and finding out what is niches because of the economic Emphasizing that collection is a last needed to transfer entry funds. This malaise imposed by the virus, said Piper Timeout on resort, Vazquez said the company helps to minimize issues concerning Sandler analyst Stephen Scouten. would be developing new tools and wires into and out of the bank from Those that can successfully enter new collections approaches to work with borrowers in major tournament sites, while decreas- business lines will likely have an Oportun gives customers hurt order to achieve that 60% reduction. ing risk by giving Lexicon direct advantage, at least in the near term. by the pandemic a break. Some For example, during the pandemic knowledge of tournament dates and “For now, the overall top line outlook changes will be permanent. and shelter-in-place orders, the lender locations. looks pretty bleak” for banks, Scouten Oportun Financial will cap rates on all came up with a new text campaign While professional poker player said. its loans at 36% and will largely stop targeting customers who hadn’t been in winnings tend to collectively account Virtually all of Lexicon’s borrowers taking legal action against customers communication for a while. Oportun for no more than 5% of Lexicon’s total are current on their loans heading into who fall behind on their debts. sent out a text to those customers offer- deposits, Rosenblum said it can climb August, Rosenblum said. Many received The San Carlos, Calif.-based ing them the option to defer a loan to as high as 20%. Lexicon had $40.5 deferrals, while others have been consumer lender said it decided to payment simply by texting back the million in deposits on March 31. helped by government stimulus dismiss all pending collections cases word “defer.” The $249 million-asset bank more programs, including the PPP. and suspend filings of new cases “We think there’s a lot more of that than tripled in size during the second The concern is that the benefits from because of the economic toll COVID-19 that we can do to try to deliver that quarter because of its participation in those efforts may not be enough for has taken, particularly on low-income goal,” Vazquez said. the Paycheck Protection Program, some businesses to survive a second communities. Many of its borrowers are Known as Progreso Financiero until originating more than $100 million in wave of virus outbreaks that have jolted from low-income, underserved commu- 2015, Oportun has long positioned itself loans as part of the effort. Roughly several parts of the country, including nities that have been hit hard by the as a consumer-friendly alternative to 90% of Lexicon’s PPP loans were to Las Vegas. pandemic. payday lenders. The firm serves new customers. The city is particularly vulnerable to When it does eventually resume customers online and over the phone in While most PPP loans are expected the virus, Rosenblum said. While collections, it will file about 60% fewer 19 states and has more than 340 retail to be forgiven by the federal govern- officials can implement smart practices cases, Chief Executive Raul Vazquez locations across nine of those states. ment, Rosenblum said he expects to contain the disease, Las Vegas still said. He acknowledged that the Oportun went public last year. Lexicon will retain many of the custom- relies heavily on tourists. With them decisions to suspend collections and On its first quarter earnings confer- ers it gained. The bank wants to keep comes the risk of spreading the virus. cap rates would pose challenges in ence call in May, Oportun executives adding deposits to fund more loans to Without them, the local economy the short term but said they will said emergency hardship deferrals had those small businesses. becomes listless. ultimately build loyalty with Oportun’s peaked at 14.6% in mid-April before As Lexicon grows, it is focusing on Las Vegas’ unemployment rate customer base. falling to 8.6% in mid-May. The 8.9% building a robust Bank Secrecy Act and swelled from 3.9% in February to 29% “There’s been a lot of analysis that’s annualized net charge-off rate for the anti-money-laundering compliance in May, higher than any other major gone into both of these,” he said. “We’ve first quarter was better than expected, program so that, over time, it can metropolitan market. Nevada’s jobless taken this step forward with the view they said at that time. gather deposits and enter other niche rate, while down in June after casinos that these are permanent and sustain- Emergency deferral requests fell to businesses. reopened, remains high at 18%. able changes for our business — and 5% in July, the company said.

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004_ABM0920 4 8/10/2020 6:00:58 PM The city’s economy has lost 145,600 really good changes for our business.” Vazquez said that Oportun has happening yet and how much, in terms private payroll jobs since June 2019, Vazquez said that “several thousand” wanted to get its interest rate cap of reserves, might be enough because said John Restrepo, principal of Las customers would be affected by under 36% for some time but had to nobody really has a good handle on Vegas-based RCG Economics. “Vulnera- Oportun’s decision to dismiss pending achieve scale, refine its risk models and what loan losses could be.” ble low-wage workers were hit hardest,” collections cases. He did not quantify improve its technology to do so. He also Castine Capital Management in he said. the value of the loans that could be said that while other lenders cap rates Boston, which has focused on commu- Las Vegas is resilient, but Rosenblum dismissed, but said that a typical loan but then try to make money off of fees nity banks, said in a July letter to said the city’s recovery will be bumpy. in collections is for under $3,500. or products like credit insurance, investors that it plans to close its funds “I personally have some concerns The lender ultimately ends up Oportun will not add ancillary products after it was “unable to judge whether or about softness in the economy,” he dismissing about two-thirds of all the that would effectively raise the APR. not the banks’ recent financial state- said. “I think there could be some more collections cases it files, usually if it’s “For years there has been this idea ments are even reliable.” pain ahead.” learned that a borrower has suffered a that if you’re going to serve unbanked Bank stocks “will be un-investable for job loss or other hardship, he said. or underbanked consumers, you have to at least the intermediate future,” added Emphasizing that collection is a last do it above 36% or you have to sell Castine, which has stakes in banks such Timeout on resort, Vazquez said the company ancillary products like credit insurance,” as Westbury Bancorp in West Bend, would be developing new tools and he said. “We feel that the scale we’ve Wis., Community Bankers Trust in collections approaches to work with borrowers in achieved today and the environment Richmond, Va., and HMN Financial in Oportun gives customers hurt order to achieve that 60% reduction. that we’re in created an opportunity for Rochester, Minn. The company pointed by the pandemic a break. Some For example, during the pandemic us to take this step.” — Laura Alix to the “opaqueness of the numbers and changes will be permanent. and shelter-in-place orders, the lender bankers’ lack of conviction in their own Oportun Financial will cap rates on all came up with a new text campaign outlooks, combined with a complete its loans at 36% and will largely stop targeting customers who hadn’t been in ‘We didn’t lack of any COVID-19 strategy at the taking legal action against customers communication for a while. Oportun federal level.” who fall behind on their debts. sent out a text to those customers offer- learn much’ While a Castine representative The San Carlos, Calif.-based ing them the option to defer a loan Community banks’ financials declined to comment further, more consumer lender said it decided to payment simply by texting back the leave investors so perplexed investors have been shying away from dismiss all pending collections cases word “defer.” that some are exiting the banking industry in recent months. and suspend filings of new cases “We think there’s a lot more of that Uncertain credit quality, historically low The KBW Nasdaq Bank Index was because of the economic toll COVID-19 that we can do to try to deliver that interest rates and the potential for down more than 30% this year as of has taken, particularly on low-income goal,” Vazquez said. stiffer regulation after the upcoming early August, despite a broader market communities. Many of its borrowers are Known as Progreso Financiero until election are making it harder for recovery from the lows reached in the from low-income, underserved commu- 2015, Oportun has long positioned itself investors to determine the earnings first quarter. In comparison the S&P 500 nities that have been hit hard by the as a consumer-friendly alternative to potential for community banks. was up slightly. pandemic. payday lenders. The firm serves Smaller institutions tend to have The wild card remains the coronavi- When it does eventually resume customers online and over the phone in easy-to-understand financials, driven rus pandemic, including its unclear collections, it will file about 60% fewer 19 states and has more than 340 retail by net interest income. But deferrals duration, ultimate impact on the econo- cases, Chief Executive Raul Vazquez locations across nine of those states. and modifications, along with the my and, by extension, the damage it said. He acknowledged that the Oportun went public last year. amortization of fees from the Paycheck might inflict on banks’ balance sheets decisions to suspend collections and On its first quarter earnings confer- Protection Program, are skewing results and earnings. cap rates would pose challenges in ence call in May, Oportun executives and creating more complexity. Most analysts agree that the the short term but said they will said emergency hardship deferrals had “The toughest part about this economy began to recover in May and ultimately build loyalty with Oportun’s peaked at 14.6% in mid-April before earnings season is that we really didn’t June, as businesses began to reopen customer base. falling to 8.6% in mid-May. The 8.9% learn much,” said Stephen Scouten, an and consumer spending picked up from “There’s been a lot of analysis that’s annualized net charge-off rate for the analyst at Piper Sandler. April’s lows. Unemployment, while still gone into both of these,” he said. “We’ve first quarter was better than expected, “Many, many banks are taking big high, has improved substantially. taken this step forward with the view they said at that time. reserves now, trying to get in front of Such progress fed optimism among that these are permanent and sustain- Emergency deferral requests fell to what may be ahead,” Scouten added. bankers that borrowers would catch up able changes for our business — and 5% in July, the company said. “But we really don’t know what is on their deferred loan payments and

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that, outside of the hardest-hit sectors, collateral, payment reserves or some bumpy. “Banks do not operate in a lenders would avoid widespread credit other type of credit enhancement.” vacuum,” Bolton said. “It’s definitely deterioration. Executives at South State said on the going to be challenging until we Then the pandemic worsened in July, Winter Haven, Fla., company’s quarterly contain the virus and know its duration. as outbreaks and record daily case call that it already pulled its most And we could see new challenges after levels drove several heavily populated powerful levers — 90-day loan pay- the election. There are definitely some states such as Florida and California, to ment deferrals and aggressive PPP very big wild cards.” — Jim Dobbs pause or roll back portions of their lending — which helped its customers reopening plans. Pandemic-related weather initial setbacks. unemployment benefits expired at the The $37.7 billion-asset company, Crime and end of July, and lawmakers bickered created by the June merger of South over the details of a new stimulus State and CenterState, made about recruitment package, creating a lot of angst. “The 19,000 PPP loans totaling $2.4 billion, or FDIC eases restrictions on path forward depends on the virus, the a tenth of total loans. Deferrals hiring people with a record efforts to contain it, and the amount of accounted for 17% of its portfolio at the The Federal Deposit Insurance Corp. fiscal support,” said Scott Brown, chief end of June before settling down to has finalized a rule allowing banks to economist at Raymond James. about 11.5% late last month. hire employees with minor criminal July’s setbacks injected new doses of It is unclear whether those efforts will backgrounds. uncertainty and raised concerns that ward off, or merely delay, defaults in Since 1950, banks have been the pandemic could derail the burgeon- the future. restricted by Section 19 of the Federal ing recovery, potentially leading to new “We estimate we’ll end up in the Deposit Insurance Act, which said that rounds of deferral requests and, mid-single-digit percentage of loans on banks could not hire anyone “convicted eventually, more soured loans for banks deferral” by late August, Daniel of any criminal offense involving to sort through. Bockhorst, South State’s chief credit dishonesty, breach of trust, or money “It is very challenging right now to officer, said on the call, though he laundering” without prior written really understand” banks’ exposure to added that “the future is still somewhat consent from the FDIC. loan losses, said Damon DelMonte, an unknown … and there is the potential” The agency proposed easing those analyst at Keefe, Bruyette & Woods. for another increase down the road. limits late last year in response to Bankers are doing the best they can That uncertainty played heavily into complaints from banks and criminal to provide clarity and address concerns. Castine’s decision. While an optimistic justice advocates that the framework Several smaller banks said during scenario would feature a relatively unfairly punished individuals for trivial earnings season that inquiries about quick recovery and a resumption in loan — or “de minimis” — crimes. The final extended loan deferrals were far fewer payments, the company noted that a rule, which replaces previous guidance this summer than initial requests negative outcome, where deferrals last from 1998, is largely the same as the received in March and April. But a long time and borrowers struggle with November proposal but with some requests continue to roll in nonetheless payments, “is not difficult to envision in exceptions. and, with many things unclear, bankers the case of hotel, travel, restaurant, and One change from the proposed rule were careful to emphasize uncertainty. other retail borrowers.” is banks can now hire people convicted Hope Bancorp in Los Angeles was Some investors are hopeful that the of crimes that were expunged or sealed among the banks to stress the “fluid banking industry’s underlying strength without seeking the FDIC’s consent. situation” it faces. The $17.2 billion-asset prior to the crisis will help it weather the According to the FDIC, the change will company expects about 60% of its aftermath of the pandemic. result in a roughly 10% drop in applica- commercial borrowers will request a Robert Bolton, a bank investor and tions for Section 19 exceptions. second deferral, Chairman and Chief president of Iron Bay Capital, noted The final rule will also expand the Executive Kevin Kim said during Hope’s that banks, by and large, entered the criteria for “de minimis” crimes by quarterly call with analysts. Hope “will crisis well capitalized. And they had raising the minor crime threshold from be requesting, on a best-effort basis, generally strong credit quality. one to two convictions before FDIC concessions in the form of additional But the next few quarters will be consent is required. — Brendan Pedersen

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006_ABM0920 6 8/10/2020 6:01:00 PM Bank Technology ART FROM GETTYIMAGES FROM ART The bank as student counselor Fifth 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.

By Miriam Cross

Student loan debt isn’t just a financial billion-asset Fifth Third. “One struggle in we were trying to do,” said Crawford. problem for consumers. It’s an emotion- this generation is the feeling that Momentum is not the only tool al problem too. student loan debt is different from a designed to help consumers manage When Mike Crawford and his team mortgage or car loan, that they can’t their debt load, but it is one of the few at Fifth Third Bank in Cincinnati were get out of it and have no control over it.” offered directly by a bank. exploring new ways to meet the needs Enter Fifth Third Momentum, an app Fintechs such as FutureFuel.io, Savi of millennial customers several years that automatically rounds up custom- and Summer would like to change that. ago, they came to this realization at a ers’ debit card purchases to the nearest They see the services they offer to help focus group, where discussions of dollar and puts these amounts toward navigate different aspects of the student loan debt brought a 30-year- their student loan balances. There have student loan repayment process as old borrower to tears. been nearly 100,000 downloads of the complementary to banks and are slowly “The best innovations typically aren’t app since it launched in 2017; about making inroads with bank partnerships. focused on new functional needs but two-thirds of the users are millennials, Their argument: Banks can benefit how do you fill in the gaps in emotional and a third belong to older generations. from helping their customers lower their needs?” said Crawford, vice president “The notion of how do you create this student loan payments, because and senior manager of digital-first accountability partner, but not in a borrowers who free up potentially product development at the $185 shameful way, was at the root of what hundreds of dollars a month can stay

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on top of bills, take the plunge on several factors into account, such as the includes financial advice and other homeownership or other large purchas- ability to pay bills on time and maintain perks. OnDeck’s es, and ultimately feel more loyalty sufficient liquid savings. Will Sealy, co-founder and chief toward their financial institution. Savi is one startup that addresses executive of Summer, said the startup is rise and fall Some of these startups also say the this problem by combing through in talks with 40 banks and credit unions The troubles forcing this online lender to sell on the cheap matter is urgent. Direct federal loan national and state repayment and to integrate into their servicing and predate the COVID-19 crisis payments are paused through Septem- forgiveness programs for its users and collections units. “Financial institutions ber under the coronavirus relief bill, but matching them with the best option — see value in improving the cash flow of It would be simplistic to say that the borrowers will need to resume pay- say, a forgiveness program based on existing customers,” especially those at pandemic doomed OnDeck Capital, an ments in October. At the same time, the borrower’s profession. Users can risk of defaulting on loans, Sealy said. online lender that recently announced it some older federal loans as well as manually enter their loan information Institutions recognize that, when had agreed to be sold for less than 10% private loans were not covered under or sync it using Plaid, and Savi will government assistance expires, “there is of what its market value was in 2015. this relief measure. pre-fill application forms to enroll them a reckoning coming with potentially Certainly the virus-induced recession John Thompson, chief program in the appropriate program. millions of people defaulting on was the near-term catalyst for the New officer at the Financial Health Network, Savi is available to customers or mortgages and car loans and missing York company’s deal to be acquired by acknowledged that student loan members of partner organizations. The credit card payments.” Enova International, another publicly payments are one of several challenges financial services provider TIAA, which The tool from Summer can help traded online lender but one with a people are facing right now and are not owns TIAA Bank, is one such partner. banks be proactive, he said. For more diversified business model. the top priority for everyone. Savi is offering a lightweight version example, if a customer’s checking OnDeck focuses on businesses small But, “for many people, dealing with of the software free for a few months to account balance drops significantly, the enough and risky enough that banks student debt is in the early part of their those hurt financially by the pandemic. bank could potentially target that generally are not interested in lending financial lives,” Thompson said. “If Tobin Van Ostern, co-founder of customer for an income-driven repay- to them. actionable advice on how to manage Savi, sees his tool as a fit for banks in ment plan. Anyone unemployed may Those mom-and-pop shops have student debt comes from a bank, that’s two ways: freeing up their customers’ be eligible for a $0 monthly payment. been hammered. At the end of June, a critical part of establishing loyalty cash flow and supporting those who A third service for student loan 39.5% of OnDeck’s loans were at least and trust.” face financial hardship. borrowers is FutureFuel.io. Besides 15 days past due, up from just 10.3% “If we’re able to improve the financial guiding users through repayment plan three months earlier. In May, the A $1.6 trillion problem wellness of their end users, that has a options and helping them apply for company temporarily stopped originat- In its latest Report on the Economic broad, positive ripple effect,” he said. “If loan forgiveness, this tool has features ing new loans. Well-Being of U.S. Households, the we’re saving $150 per month, that is that put spare change toward loan But OnDeck’s troubles went deeper. Federal Reserve found that as of late immediate cash flow that folks might balances and lets users earn back cash The 14-year-old fintech struggled to 2019, 43% of those who went to college, set aside for retirement or use to buy a for shopping at certain merchants. meet the expectations that accompa- representing 31% of all adults, had house or purchase a car.” FutureFuel.io’s service is available to nied its 2014 initial public offering, incurred some debt for their education On the flipside, customers who have customers of the challenger banks recording $94.5 million in losses in its (largely student loans, but some debt is lost a job or are in financial distress are Chime and MoneyLion. The fintech has first two years as a public company. in the form of credit cards, home equity more likely to struggle keeping up with also partnered with credit unions, which Cost-cutting eventually brought modest lines of credit and other loans as well). their other debts. If they can get a largely offer its service as an employee profitability, but investors were seeking Borrowers owe a total of $1.6 trillion temporary reprieve on student loan benefit, but rollouts to credit union margins more in line with those in student loan debt, according to the payments with an income-driven members are planned. generated in the tech sector. Federal Reserve Bank of St. Louis. repayment plan, they increase their How these tools integrate with In 2018, OnDeck launched a new The impact of student loan debt can odds of staying current on other bills. financial institutions varies. Depending subsidiary that provided online lending also be measured in terms of financial Consumers can use the basic version on the tool, the options include an capabilities to banks — a move that, if it health. The Financial Health Network’s of Summer, a similar service, for free. application programming interface, a panned out, could have justified a loftier U.S. Financial Health Pulse survey from They can organize their loans in one hybrid approach of API and embedded stock price. OnDeck had gotten early May found that only 18% of those with dashboard, check eligibility across 100 framed-in widgets that launch from the momentum in this business through a student debt are financially healthy, assistance and repayment programs, institution’s own website, a web link to a partnership with JPMorgan Chase. compared with 36% of those without compare options, submit their applica- co-branded version, or a white-label But further progress on bank student debt. The assessment takes tions and more. A premium version product. partnerships was slow. A deal with PNC

8 American Banker September 2020 americanbanker.com

008_ABM0920 8 8/10/2020 5:46:42 PM includes financial advice and other Financial Services in late 2018 was delivers that promise on a larger scale,” perks. OnDeck’s offset by JPMorgan’s decision to cut ties Breslow said during the conference call. Will Sealy, co-founder and chief with OnDeck last year. He added that OnDeck’s analytics executive of Summer, said the startup is rise and fall Before the sale announcement, capabilities and advanced fraud in talks with 40 banks and credit unions The troubles forcing this online OnDeck was pursuing a bank charter, detection would add value for Enova. lender to sell on the cheap to integrate into their servicing and which would have lowered its funding In the consumer lending sphere, predate the COVID-19 crisis collections units. “Financial institutions costs and made it less susceptible to Enova offers payday loans under the see value in improving the cash flow of It would be simplistic to say that the the periodic market disruptions that CashNetUSA brand and personal loans existing customers,” especially those at pandemic doomed OnDeck Capital, an can make it difficult to operate a as NetCredit. Consumer loans currently risk of defaulting on loans, Sealy said. online lender that recently announced it nonbank across economic cycles. make up 84% of the company’s Institutions recognize that, when had agreed to be sold for less than 10% Enova Chief Executive David Fisher portfolio, which would fall to 39% once government assistance expires, “there is of what its market value was in 2015. said during a conference call that if the the OnDeck acquisition closes, accord- a reckoning coming with potentially Certainly the virus-induced recession sale closes, the combined company will ing to Enova. millions of people defaulting on was the near-term catalyst for the New continue to explore the possibility of a Fisher said that Enova believes that mortgages and car loans and missing York company’s deal to be acquired by bank charter. The two firms said that the competition in small-business credit card payments.” Enova International, another publicly they expect the deal to close this year. lending is not as intense as it is in The tool from Summer can help traded online lender but one with a The price of the deal is $90 million consumer lending. “And certainly from a banks be proactive, he said. For more diversified business model. — $8 million to be paid in cash and the regulatory standpoint, we think there’s example, if a customer’s checking OnDeck focuses on businesses small remainder to be paid in Enova stock. significantly less regulatory risk and account balance drops significantly, the enough and risky enough that banks Fisher called OnDeck “highly regulatory overhang than the consumer bank could potentially target that generally are not interested in lending complementary” to Enova, saying that side,” he added. customer for an income-driven repay- to them. both companies operate entirely online Enova reported second-quarter net ment plan. Anyone unemployed may Those mom-and-pop shops have and have pioneered the use of analytics income of $48 million, up from $25 be eligible for a $0 monthly payment. been hammered. At the end of June, and data to make real-time loan million in last year’s second quarter. The A third service for student loan 39.5% of OnDeck’s loans were at least decisions. company indicated that government borrowers is FutureFuel.io. Besides 15 days past due, up from just 10.3% Enova plans to add the OnDeck stimulus payments helped some guiding users through repayment plan three months earlier. In May, the brand, products and services to its borrowers keep up with their loans but options and helping them apply for company temporarily stopped originat- existing array of consumer and also said that loan performance did not loan forgiveness, this tool has features ing new loans. small-business lending units. In the deteriorate when certain stimulus that put spare change toward loan But OnDeck’s troubles went deeper. small-business realm, Enova operates programs wound down in summer. balances and lets users earn back cash The 14-year-old fintech struggled to as The Business Backer and Headway OnDeck swung to a $2.1 million profit for shopping at certain merchants. meet the expectations that accompa- Capital, though neither of those brands in the second quarter after a surge in its FutureFuel.io’s service is available to nied its 2014 initial public offering, is currently accepting new loan applica- allowance for credit losses drove a $59 customers of the challenger banks recording $94.5 million in losses in its tions amid the COVID-19 outbreak. million net loss in the quarter that Chime and MoneyLion. The fintech has first two years as a public company. Fisher acknowledged that there is a ended March 31. — Kevin Wack also partnered with credit unions, which Cost-cutting eventually brought modest degree of overlap between its existing largely offer its service as an employee profitability, but investors were seeking small-business loans and those offered benefit, but rollouts to credit union margins more in line with those by OnDeck. “But we did tend to tap into DoorDash members are planned. generated in the tech sector. slightly different markets from time to How these tools integrate with In 2018, OnDeck launched a new time,” he said. delivers financial institutions varies. Depending subsidiary that provided online lending OnDeck CEO Noah Breslow will join Partnership with challenger on the tool, the options include an capabilities to banks — a move that, if it Chicago-based Enova as vice chair- bank helped save a restaurant application programming interface, a panned out, could have justified a loftier man. As OnDeck’s creditors circled in On the first Friday that Paycheck hybrid approach of API and embedded stock price. OnDeck had gotten early recent months, he had been facing Protection Program loans were avail- framed-in widgets that launch from the momentum in this business through a pressure to find an exit. able, Jazmine Lalicker touched base institution’s own website, a web link to a partnership with JPMorgan Chase. “Our mission at OnDeck has been to with her business banker at a large co-branded version, or a white-label But further progress on bank make lending easier for our small-busi- bank who promised someone would product. partnerships was slow. A deal with PNC ness clients, and this opportunity contact her about applying. She was

americanbanker.com September 2020 American Banker 9

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

eager for a loan to help keep The banked elsewhere to give it a shot. know-your-customer checks, validate Shuckery, her oyster bar and seafood Early on in the pandemic, DoorDash, bank account authenticity and owner- SoFi Bank? restaurant in Petaluma, Calif., afloat. which is based in San Francisco, hosted ship, and more. BlueVine also devel- It hopes so But when she called again on Monday, a webinar and learned from its mer- oped additional counterfraud measures, One fintech already has a after not hearing anything, her bank chants that many found traditional such as PDF manipulation detectors, to national bank charter. SoFi banks’ PPP loan application processes reduce risk while servicing its new influx was no longer accepting applications. aims to be next. “That was pretty disheartening and confusing and complex. of businesses. shocking,” she said. To help its customers out, DoorDash For the DoorDash partnership Social Finance is trying again to To get by, Lalicker took out a line of forged an alliance with BlueVine in specifically, BlueVine customized the become a bank — joining a list of credit and shook up her business model, Redwood City, Calif., which had already form with DoorDash’s logo. It also fintechs actively pursuing a charter. adding meat to her menu, emphasizing adapted its small-business lending would pass detailed customer data SoFi filed a de novo bank applica- items that would travel well and joining platform to accommodate PPP loan back to DoorDash, such as where tion on July 8 with the Office of the DoorDash to get a delivery service off applications. merchants were in the application Comptroller of the Currency. The move the ground. She considered applying for Their goal was to help very small process and how much they applied for, comes close to three years after the a loan with a smaller, local bank, but “it businesses get funding. The vast in the interest of helping keep nervous San Francisco company pulled the plug was this mad dash for PPP loans and majority they serve employ fewer than customers informed and figuring out on an earlier attempt to open an small banks weren’t accepting new 10 people. which to include or exclude in subse- industrial loan company. accounts, but trying to take care of Under the partnership, DoorDash quent rounds of communication. In late July, Varo Money, which offers their existing customers,” she said. Her would refer its merchants to BlueVine, BlueVine does not lend directly; it online consumer deposit accounts, application to her regular bank for a typically via email and through its originates loans and processes applica- received approval for deposit insurance slice of the second round of PPP merchant portal, and restaurants would tions, but works with community banks and conditional approval for a national funding went nowhere. apply for PPP loans through BlueVine. on the back end, including Cross River bank charter, becoming the first fintech So when an email from DoorDash (DoorDash donates its proceeds from Bank in Fort Lee, N.J., and Celtic Bank to do so. Varo’s journey took three and advertising its partnership with the these referrals to organizations helping in Salt Lake City, to fund the loans. a half years. challenger bank BlueVine landed in her small businesses affected by the Lalicker, of The Shuckery, held onto One benefit of becoming a bank is inbox on May 4, she was willing to take pandemic.) her funds until the Small Business being able to operate under a single set a chance on a lender she had never “This was a great opportunity for us Administration extended the period in of regulations, rather than the 50-state heard of. She clicked the link, filled out to find a population of clients we knew which borrowers could spend their PPP scheme that applies to nonbank lenders the application and was approved for would be hurting during this crisis,” said loans from eight weeks to 24. When — which should result in cost savings. $125,000 the next day. Brad Brodigan, chief commercial officer Sonoma County permitted outdoor SoFi, which was one of the first The BlueVine-DoorDash partnership, of BlueVine. “The partnership made a dining, she used the money to bring her fintechs to achieve a $1 billion-plus which formed in mid-April, has enabled ton of sense for us because DoorDash staff back on July 10 and purchase a valuation, offers student loans, mort- $6 million of PPP funding to be has a very strong relationship with new point-of-sale system. gages, personal loans, investment distributed to nearly 200 DoorDash restaurants and we had access to the Once she repays her line of credit, services and a cash management restaurants. Through this and other PPP application process.” she also plans to leave the large bank account. Chief Executive Anthony Noto partnerships, BlueVine has generated To automate the application process, that couldn’t help her secure a loan. said a bank charter would allow SoFi to more than $4 billion in PPP loans for BlueVine uses optical character “I’m 100% switching to a smaller local add offerings, but did not get specific. more than 125,000 small businesses. recognition, or OCR technology, which bank,” she said. A copy of SoFi’s charter application The lender is catering to very small digitally scans documents that users For now, she’s grateful that there was was not immediately available. But a businesses, the type that may have felt upload to lift relevant information, such another option after her first attempts source familiar with SoFi’s thinking said left out of the first round of PPP funding as identification details or the number to secure funding failed. that it expects the move to lower its or become frustrated with their of employees, without the need for “You work hard to create a relation- cost of funds, which could level the traditional bank. By using technology to human review. For example, BlueVine’s ship with your bank, and I was surprised playing field with traditional banks. . make the loan application process technology can scan payroll documents they weren’t able to help me in a time SoFi applied to open an industrial easier, and partnering with a brand that such as W-2 or 941 forms and parse out of crisis,” said Lalicker. “I didn’t even bank back in 2017. That effort fell apart was recognizable to restaurant owners, payroll details. know these smaller technology-based after former CEO Mike Cagney left the BlueVine persuaded small businesses Its underwriting technology accesses companies existed, but it saved my company amid a scandal involving like The Shuckery that may have third-party data sources to perform business.” — Miriam Cross sexual harassment allegations. The

10 American Banker September 2020 americanbanker.com

010_ABM0920 10 8/10/2020 5:46:44 PM know-your-customer checks, validate company did not say why it is now from a 0.5% foreign exchange fee. bank account authenticity and owner- SoFi Bank? seeking to become a national bank Companies can get up to five checking ship, and more. BlueVine also devel- It hopes so rather than an industrial bank. accounts per single tax ID and keep oped additional counterfraud measures, At least three other fintechs aim to track of these accounts in one dash- One fintech already has a such as PDF manipulation detectors, to become banks. Robin Hood, which board. And the account owner can national bank charter. SoFi offers commission-free investing on customize permissions so that people in reduce risk while servicing its new influx aims to be next. of businesses. mobile phones, filed a national bank various roles at the company, such as For the DoorDash partnership Social Finance is trying again to application last year. Square, a employees, investors, bookkeepers and specifically, BlueVine customized the become a bank — joining a list of payment processor that also offers finance administrators, can share Rho form with DoorDash’s logo. It also fintechs actively pursuing a charter. financing to small-business customers, logins to use virtual corporate cards, would pass detailed customer data SoFi filed a de novo bank applica- and Rakuten, often described as the initiate wire transfers, approve pay- back to DoorDash, such as where tion on July 8 with the Office of the Amazon.com of Japan, both want to be ments and view company financials. merchants were in the application Comptroller of the Currency. The move an industrial bank. Square received “This enables companies to offer process and how much they applied for, comes close to three years after the conditional approval for deposit their whole teams a place within Rho,” in the interest of helping keep nervous San Francisco company pulled the plug insurance in March. Rakuten applied for said Alex Wheldon, a co-founder of the customers informed and figuring out on an earlier attempt to open an deposit insurance in May after discon- New York company. “That could be an which to include or exclude in subse- industrial loan company. tinuing an earlier effort. — Kevin Wack employee simply getting free access to quent rounds of communication. In late July, Varo Money, which offers safe and controlled spending to BlueVine does not lend directly; it online consumer deposit accounts, investors that want read-only access.” originates loans and processes applica- received approval for deposit insurance Wheldon said that Rho acquired tions, but works with community banks and conditional approval for a national Angling for several new customers in the second on the back end, including Cross River bank charter, becoming the first fintech bigger fish quarter, mostly through referrals from Bank in Fort Lee, N.J., and Celtic Bank to do so. Varo’s journey took three and existing clients, and that 90% of them Challenger bank goes after in Salt Lake City, to fund the loans. a half years. came from larger institutions such as 100- to 200-employee firms Lalicker, of The Shuckery, held onto One benefit of becoming a bank is Bank of America and JPMorgan Chase. her funds until the Small Business being able to operate under a single set Rho Business Banking has rolled out a “Their demands were different,” Administration extended the period in of regulations, rather than the 50-state new set of features aimed at larger Wheldon said of the larger clients Rho which borrowers could spend their PPP scheme that applies to nonbank lenders businesses than the venture capi- has landed. “They expected ready loans from eight weeks to 24. When — which should result in cost savings. tal-backed startups it initially attracted. access to things like permissions and Sonoma County permitted outdoor SoFi, which was one of the first The challenger bank started out last dual controls.” dining, she used the money to bring her fintechs to achieve a $1 billion-plus October with checking and a treasury Rho said that several hundred staff back on July 10 and purchase a valuation, offers student loans, mort- management account that holds up to businesses bank with it. Checking new point-of-sale system. gages, personal loans, investment $75 million per customer by spreading deposits are held at Evolve Bank & Trust Once she repays her line of credit, services and a cash management $250,000 “packets” of funds among in Memphis, Tenn., while credit and she also plans to leave the large bank account. Chief Executive Anthony Noto partner banks. It also offers free domes- treasury products are held at more than that couldn’t help her secure a loan. said a bank charter would allow SoFi to tic Automated Clearing House and wire 100 banks and lenders. “I’m 100% switching to a smaller local add offerings, but did not get specific. payments, an expense management Neobanks argue that their services bank,” she said. A copy of SoFi’s charter application system that lets employees from a are increasingly in demand among For now, she’s grateful that there was was not immediately available. But a single team upload receipts and small businesses, especially since the another option after her first attempts source familiar with SoFi’s thinking said invoices, and a corporate credit card pandemic has eliminated many to secure funding failed. that it expects the move to lower its with same-day settlement that pays 1% traditional jobs. For example, they offer “You work hard to create a relation- cost of funds, which could level the cash back for companies that spend accounts with low or no fees, digital ship with your bank, and I was surprised playing field with traditional banks. . more than $100,000 each year. onboarding, assistance with expense they weren’t able to help me in a time SoFi applied to open an industrial Those features were all designed to categorization and more. Only eight of of crisis,” said Lalicker. “I didn’t even bank back in 2017. That effort fell apart appeal to small startups. The new ones the top 30 U.S. banks offer digital know these smaller technology-based after former CEO Mike Cagney left the are for businesses with closer to 100 to onboarding to small businesses, companies existed, but it saved my company amid a scandal involving 200 employees. There will be no fees to according to Javelin Strategy & business.” — Miriam Cross sexual harassment allegations. The send international wire transfers, aside Research. — Miriam Cross

americanbanker.com September 2020 American Banker 11

011_ABM0920 11 8/10/2020 5:46:45 PM AdvancesAdvances in in Tech Tech ADVANCESADVANCES IN IN TECH TECH NUTANIX PRESENTER HostedHosted by by See how tasks that used to take weeks can Chris Brown be done in a few clicks Product Marketing Mgr. Go Hands-on with Nutanix, the ultimate “inside cloud” experience. A 855-NUTANIX modern financial services digital enterprise must be built on a hybrid www.nutanix.com/contact 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.

In Intoday’s today’s global global circumstances, circumstances, leaders leaders in inthe the banking banking and and financial financial services services community community are are ONESPAN PRESENTER Enable greater trust between your bank lookinglooking for for innovative innovative ways ways to tohelp help their their firms firms make make progress progress on on the the path path to tothe the new new normal. normal. Will LaSala and customers Sr. Director Global Solutions Digital Account Opening: Enabling greater trust between your bank AdvancesAdvances in inTech Tech brings brings together together some some of ofthe the latest latest technologies technologies that that are are helping helping the the industry industry 312-766-4001 and customers. Despite the push for end-to-end digitization of www.onespan.com movemove forward. forward. Explore Explore these these short short demos demos to tosee see what what new new capabilities capabilities are are available. available. 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 ToTo watch watch the the demos, demos, visit visit americanbanker.com/advances-in-tech americanbanker.com/advances-in-tech an opportunity to eliminate the need for in-branch verification. repository and simulator.

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12 American Banker September 2020 americanbanker.comamericanbanker.com September 2020 American Banker 13

012_ABM0920AB_0920_advances 12 in tech.indd 12 8/13/20208/10/20 9:35:00 11:55 AMAM AB_0920_advances in tech.indd 13 8/10/20 11:55 AM AdvancesAdvances in in Tech Tech ADVANCESADVANCES IN IN TECH TECH NUTANIX PRESENTER HostedHosted by by See how tasks that used to take weeks can Chris Brown be done in a few clicks Product Marketing Mgr. Go Hands-on with Nutanix, the ultimate “inside cloud” experience. A 855-NUTANIX modern financial services digital enterprise must be built on a hybrid www.nutanix.com/contact 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.

12 American Banker September 2020 americanbanker.comamericanbanker.com September 2020 American Banker 13

AB_0920_advances in tech.indd 12 8/10/20 11:55 AM AB_0920_advances013_ABM0920 in13 tech.indd 13 8/13/20208/10/20 11:55 9:35:01 AM AM REPUTATION REBOUND Bouyed 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

hen BOK Financial conducted a leadership Waudit 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 A company has to live its values, BOK policy and recruiting, including Financial’s chief executive, Steven Bradshaw, experimenting with artificial intelli- says. “It’s more about actions than words.” gence to reduce unconscious bias.

14 American Banker September 2020 americanbanker.com

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

hen BOK Financial Such changes within the Tulsa, Okla., products and services, innovation, conducted a leadership company also appear to have made a leadership, performance, citizenship Waudit as part of its positive impression outside of it, based and governance. succession planning process two on the annual American Banker/ In a year when the banking indus- years ago, some worrisome gaps RepTrak Survey of Bank Reputations. try’s reputation surged, BOK registered emerged. (The RepTrak Co. was formerly called the biggest improvement of all the “It was skewed pretty banks among noncustomers, significantly by age — 55 Turnaround vaulting to first place in that and older,” said Steven The banking industry has recovered most of the reputation losses it has suffered ranking, ahead of even USAA since 2017. That translates into renewed goodwill from consumers, as measured Bradshaw, president and by their willingness to give banks the benefit of the doubt in a crisis. Bank, which had been at the top chief executive of the $40 2017 2018 2019 2020 for two years running. billion-asset BOK. “It doesn’t 0 Bradshaw said one of the likely -1 take much of a jump to -2 reasons BOK made such a realize that you’re going to -3 favorable impression on noncus- -4 have a pretty significant tomers is that its employees have -5 change in leadership over -6 been especially visible during the the next 10 years as you’re -7 pandemic in helping local -8 seeing people retire.” -9 nonprofits. The upper ranks also -10 “I’m proud of that and proud of Bank reputations Benefit of doubt lacked diversity, in contrast the industry, because I see a lot of to other levels of the banks stepping up to do that as organization, he said. the Reputation Institute.) well,” he said. This exercise prompted BOK to Of the 40 banks evaluated in the create a diversity and inclusion council, survey, BOK earned the highest rating From villain to hero which since its inception in 2019 has in the workplace category among After dropping for the past two years, spearheaded changes in corporate noncustomers familiar with it. bank reputations are once again on the policy and recruiting, including BOK also ranked second with rise, thanks in large part to the goodwill experimenting with artificial intelli- noncustomers in each of the six banks have generated by helping gence to reduce unconscious bias. other categories the survey looks at: customers and employees weather

americanbanker.com September 2020 American Banker 15

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

the pandemic. poorly perceived pivoting during RANKINGS BASED ON CUSTOMER SCORES In the survey conducted this the COVID crisis to not only do Gaining ground — finally 2020 2019 Change Reputations have improved enough with spring, the banking industry as a good things, but for once get credit customers that large banks as a group whole scored a 68.6 out of a for it without a lot of skepticism,” 1 USAA Bank 85.8 88.2 -2.4 moved into the “strong” tier and possible 100 — a 5.4-point Hecht said. 2 Webster Bank 83.8 77.7 6.1 nontraditional banks edged into the more rarified excellent tier. The overall improvement from last year. Besides banking, Hecht cited the 3 BMO Harris Bank 80.9 75.1 5.8 improvement has been even more “Not only is that statistically oft-maligned pharmaceutical 4 Regions 80.8 76.6 4.2 pronounced among noncustomers, with significant by a long shot, that’s a industry — which is tasked with 5 Discover Bank 80.3 78.2 2 the largest boost going to regional banks. big move overall for an industry,” creating a vaccine for the novel 6 Capital One 79.9 75.6 4.3 LARGE BANKS said Bradley Hecht, an executive coronavirus — as another benefac- 7 First Citizens 79.6 78.6 1 vice president at RepTrak. tor of current consumer goodwill. 8 BOK Financial 79.5 76.9 2.6 Though the score is still consid- The upshot is that both banking 9 People's United 78.4 74.3 4.1 ered “average,” the industry and pharma have been able to 10 Ally Bank 78.4 73.0 5.4 71.5 52.1 regained nearly all of the ground it “rewrite their reputations” as a 11 Bank of the West 78.4 75.7 2.7 had lost since 2017, coming close to result of the pandemic, Hecht said. 12 Associated Bank 78.3 75.9 2.4 +2.9 +3.4 the 70-point mark that signifies a One of the benefits of that is 13 Union Bank 78.2 77.1 1.1 “strong” reputation. people are more willing to give a 14 Citizens Bank 78.2 79.2 -1 With the pandemic battering the bank the benefit of the doubt when 15 BNY Mellon 78.1 68.9 9.2 REGIONAL BANKS economy, and consumers and something goes wrong. 16 Northern Trust 78.1 77.7 0.4 businesses suffering, banks have A stronger reputation also 17 Huntington Bank 77.9 80.4 -2.5 been thrust into the news more translates into a greater willingness 18 M&T Bank 77.7 70.3 7.4 often than usual in recent months, to do business with a bank and 77.4 66.4 19 BankUnited 77.5 73.6 3.9 recommend it to others. mostly in positive ways. 20 CIT Bank 77.5 71.6 5.8 Many consumers were allowed All three of those metrics have 21 U.S. Bank 77.4 75.3 2.2 +2.3 +6.6 to temporarily skip payments on increased from last year, but the 22 FNB of Pennsylvania 77.4 74.1 3.3 home and auto loans without it steepest improvement is with the 23 Fifth Third Bank 77.3 74.4 2.8 NONTRADITIONAL BANKS impacting their credit score. Many benefit of the doubt, which means 24 Chase 76.5 74.1 2.4 struggling small businesses banks are regaining trust, Hecht 25 TD Bank 76.2 72.6 3.6 received a lifeline in the form of said. 26 Comerica 76.1 75.0 1.1 Paycheck Protection Program 27 Truist Bank 76.0 NEW NEW 80.5 67.3 loans. And many banks are increas- Gaining momentum 28 Cullen/Frost 75.4 77.5 -2.1 ing their philanthropic efforts to Banks are also benefiting from 29 First Tennessee 75.3 76.0 -0.8 +2.7 +5.1 help community organizations like some momentum they started to 30 PNC 75.3 78.6 -3.3 food banks keep up with demand. create before the pandemic hit. 31 Valley National Bank 75.1 NEW NEW The positivity that is being Many banks have taken note of ALL BANKS INDUSTRY AVERAGE 32 KeyBank 75.1 72.8 2.3 generated by such efforts stands in how the public’s expectations on 33 Santander 74.9 73.4 1.6 stark contrast to how people have corporate citizenship and social 34 Synovus Financial 74.8 69.8 5 reacted to the banking industry activism are changing. Some 35 BBVA Compass 74.8 75.1 -0.3 during previous crises, Hecht said. executives are becoming more 76.5 64.7 Because banks have much more visible and vocal advocates for 36 Bank of America 73.7 67.2 6.5 of a capital buffer to sustain them tackling issues like racial injustice, 37 Citibank 73.1 73.5 -0.3 +2.0 +6.0 these days, the industry cast as the climate change and gender 38 Zions Bank 72.2 71.1 1.1 villain of the financial crisis has discrimination. 39 HSBC 70.9 65.8 5.1 Excellent/Top Tier Above 80 Scores from customers 40 Wells Fargo 63.4 62.8 0.6 Scores from noncustomers Strong/Robust 70-79 managed to play more of a hero The survey offers some insight Increase from 2019 Average/Moderate 60-69 this time — at least so far. into how such factors influence Excellent/Top Tier Above 80 Weak/Vulnerable 40-59 Strong/Robust 70-79 “It really is a fascinating perceptions of a bank, which in Average/Moderate 60-69 intersection between a select few turn can help inform the strategy Weak/Vulnerable 40-59 Source: Survey of Bank Reputations 2020 Poor/Bottom Tier Below 40 industries that historically were for improving a bank’s reputation. Source: American Banker/RepTrak Survey of Bank Reputations 2020

16 American Banker September 2020 americanbanker.com

016_ABM0920_001 16 8/12/2020 1:55:23 PM poorly perceived pivoting during RANKINGS BASED ON CUSTOMER SCORES RANKINGS BASED ON NONCUSTOMER SCORES the COVID crisis to not only do 2020 2019 Change 2020 2019 Change good things, but for once get credit for it without a lot of skepticism,” 1 USAA Bank 85.8 88.2 -2.4 1 BOK Financial 73.6 58.6 14.9 Hecht said. 2 Webster Bank 83.8 77.7 6.1 2 USAA Bank 73.2 70.2 3 Besides banking, Hecht cited the 3 BMO Harris Bank 80.9 75.1 5.8 3 Cullen/Frost Bankers 72.1 62.8 9.3 oft-maligned pharmaceutical 4 Regions 80.8 76.6 4.2 4 Northern Trust 70.0 61.7 8.3 industry — which is tasked with 5 Discover Bank 80.3 78.2 2 5 FNB of Pennsylvania 69.3 61.0 8.2 creating a vaccine for the novel 6 Capital One 79.9 75.6 4.3 6 Synovus Financial 69.1 62.0 7.1 coronavirus — as another benefac- 7 First Citizens 79.6 78.6 1 7 First Tennessee 69.0 63.2 5.8 tor of current consumer goodwill. 8 BOK Financial 79.5 76.9 2.6 8 First Citizens 69.0 58.6 10.4 The upshot is that both banking 9 People's United 78.4 74.3 4.1 9 Webster Bank 68.7 60.9 7.8 and pharma have been able to 10 Ally Bank 78.4 73.0 5.4 10 TD Bank 68.5 59.5 9 “rewrite their reputations” as a 11 Bank of the West 78.4 75.7 2.7 11 BBVA Compass 68.1 59.5 8.6 result of the pandemic, Hecht said. 12 Associated Bank 78.3 75.9 2.4 12 Huntington Bank 67.9 61.2 6.7 One of the benefits of that is 13 Union Bank 78.2 77.1 1.1 13 Citizens Bank 67.6 61.7 5.9 people are more willing to give a 14 Citizens Bank 78.2 79.2 -1 14 Zions Bank 67.6 62.3 5.3 bank the benefit of the doubt when 15 BNY Mellon 78.1 68.9 9.2 15 Truist Bank 67.5 NEW NEW something goes wrong. 16 Northern Trust 78.1 77.7 0.4 16 BMO Harris Bank 66.7 61.5 5.2 A stronger reputation also 17 Huntington Bank 77.9 80.4 -2.5 17 Regions 66.4 59.0 7.4 translates into a greater willingness 18 M&T Bank 77.7 70.3 7.4 18 BankUnited 66.4 58.0 8.3 to do business with a bank and 19 BankUnited 77.5 73.6 3.9 19 People's United 66.4 59.9 6.5 recommend it to others. 20 CIT Bank 77.5 71.6 5.8 20 Ally Bank 65.9 60.2 5.7 All three of those metrics have 21 U.S. Bank 77.4 75.3 2.2 21 Union Bank 65.8 61.9 3.9 increased from last year, but the 22 FNB of Pennsylvania 77.4 74.1 3.3 22 M&T Bank 65.6 63.1 2.5 steepest improvement is with the 23 Fifth Third Bank 77.3 74.4 2.8 23 CIT Bank 65.5 58.9 6.6 benefit of the doubt, which means 24 Chase 76.5 74.1 2.4 24 BNY Mellon 65.5 61.5 3.9 banks are regaining trust, Hecht 25 TD Bank 76.2 72.6 3.6 25 Comerica 65.3 60.6 4.7 said. 26 Comerica 76.1 75.0 1.1 26 Associated Bank 64.9 60.0 4.8 27 Truist Bank 76.0 NEW NEW 27 Discover Bank 64.8 59.6 5.1 Gaining momentum 28 Cullen/Frost 75.4 77.5 -2.1 28 Bank of the West 64.5 59.9 4.6 Banks are also benefiting from 29 First Tennessee 75.3 76.0 -0.8 29 Valley National Bank 64.3 NEW NEW some momentum they started to 30 PNC 75.3 78.6 -3.3 30 Chase 64.2 55.5 8.7 create before the pandemic hit. 31 Valley National Bank 75.1 NEW NEW 31 Fifth Third Bank 63.5 56.5 7 Many banks have taken note of 32 KeyBank 75.1 72.8 2.3 32 PNC 63.4 58.2 5.2 how the public’s expectations on 33 Santander 74.9 73.4 1.6 33 Capital One 61.6 55.4 6.3 corporate citizenship and social 34 Synovus Financial 74.8 69.8 5 34 KeyBank 60.4 59.6 0.8 activism are changing. Some 35 BBVA Compass 74.8 75.1 -0.3 35 Santander 60.3 54.3 6 executives are becoming more visible and vocal advocates for 36 Bank of America 73.7 67.2 6.5 36 U.S. Bank 59.5 53.2 6.3 tackling issues like racial injustice, 37 Citibank 73.1 73.5 -0.3 37 HSBC 56.9 52.2 4.8 climate change and gender 38 Zions Bank 72.2 71.1 1.1 38 Citibank 54.8 54.4 0.4 discrimination. 39 HSBC 70.9 65.8 5.1 39 Bank of America 48.1 46.1 2 The survey offers some insight 40 Wells Fargo 63.4 62.8 0.6 40 Wells Fargo 36.6 35.4 1.2 into how such factors influence Excellent/Top Tier Above 80 Excellent/Top Tier Above 80 Strong/Robust 70-79 Strong/Robust 70-79 perceptions of a bank, which in Average/Moderate 60-69 Average/Moderate 60-69 turn can help inform the strategy Weak/Vulnerable 40-59 Weak/Vulnerable 40-59 Poor/Bottom Tier Below 40 Poor/Bottom Tier Below 40 for improving a bank’s reputation. Source: American Banker/RepTrak Survey of Bank Reputations 2020 Source: American Banker/RepTrak Survey of Bank Reputations 2020

americanbanker.com September 2020 American Banker 17

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

What matters most when “The bank that is perceived to have a higher purpose is a reputation driver” among customers, Hecht said. “That’s a forming perceptions of a brand? much more reputable — that’s why it’s so important,” said big deal.” This year citizenship replaced performance as one of the most important considerations for customers. Innovation is one of the factors Sven Klingemann, research director at RepTrak. As for how banks are living up to expectations with regard steadily gaining in importance for both customers and noncustomers, RepTrak has a new Purpose Power Index that helps to citizenship, both customers and noncustomers rate them though it hasn’t risen to the level of the top three reputation drivers. companies track how well they are doing on that front, and higher this year than last. But regional banks as a group got Customers Noncustomers it found a strong correlation between the purpose and the most credit for being good corporate citizens, with a

ce Prod nce Produc an uct rma ts/ reputation scores. The new index gauges consumer percep- 6.7-point increase in their citizenship score among noncus- orm s/S fo Se rf e er rv e r P ic P vi e c s tions of companies on four criteria — having a purpose tomers putting them at 66.8. % 1 e % 1 .6 8 s .3 6. 2 .0 p 2 1 i % p 1 % h 1 i h s I r n beyond just making a profit, being committed to changing “That is a huge, huge change,” Hecht said. “That is s I r n e n % 1 e % 1 n d o 3 o a 7 v d 5 2 . . . a v e a 9 . the world for the better, doing things to benefit all stake- gigantic, relatively speaking.” t 3 a L 3

e 4

% o

1 1 L

1 1 holders, not just shareholders, and helping people and The citizenship score improved by 5.1 points, to 68, for

4 4 C C i . . t 0 it 4 i i % z % % z % communities. nontraditional banks, a group that includes online players e 0 e .4 n . n 2 e s 1 3 e s 1 c h 6. 1 c h 17 la ip 5% la ip . 2% p BOK took the top spot with noncustomers in that new like Ally and Discover, and by just 1.3 points, to 51.8, for large p rk rk o o W Go W Gov index and second place with customers. banks. vernance ernance Bradshaw said that, while having values and talking Citizenship is among the top three drivers of reputation for The top 5 scorers for each of the reputation drivers about them is important, the key to success is in what a both customers and noncustomers this year, as is gover- Customers Noncustomers company does to live those values, whether that entails nance, which, in this case, is a gauge of whether people Products & Services Products & Services actively pursuing greater diversity in the senior ranks or perceive the bank as fair, ethical and transparent. Products USAA Bank 83.3 USAA Bank 74.9 Discover Bank 80.9 BOK Financial 73.3 manning food banks. and services rounds out the top three in importance. Capital One 79.4 Cullen/Frost 73.3 “It’s more about actions than words,” he said. “It might be the first time in a while that the top three Regions 79.3 Northern Trust 71.9 First Citizens 78.1 CIT Bank 71.1 He gives a lot of credit to employee-led community were the same for customers and noncustomers,” Hecht said.

Innovation Innovation initiatives for generating positive sentiment for his company, USAA Bank 76.1 First Tennessee 68.7 saying more than 1,350 people from BOK logged nearly Innovation counts Capital One 75.5 BOK Financial 68.2 Webster Bank 75.2 Ally Bank 67.4 34,000 volunteer hours last year. Perhaps because the pandemic is forcing more people to BankUnited 75.1 FNB of Pennsylvania 67.1 “I think that shapes how people view us,” Bradshaw said. interact with their banks through digital channels, innovation Discover Bank 74.3 Cullen/Frost 66.8 “That’s where they see us, that’s where they get a sense for is another reputation driver that has become more important. Workplace Workplace USAA Bank 80.1 BOK Financial 72.7 what the values and the purpose of the company are, and Questions about whether a bank “adapts quickly to Webster Bank 79 USAA Bank 71.8 frankly, it leads to more business for us.” change” and whether consumers consider it an “innovative Citizens Bank 78.8 BBVA Compass 71.1 Regions 78.5 Huntington Bank 70.9 BOK’s community relations team helps organize the company” jumped in relative importance. People's United 76.5 Northern Trust 70.7 volunteer manpower around needs employees themselves At BOK, which had the second-highest innovation score Governance Governance identify in their communities, often with the backing of the among noncustomers, the biggest jump in digital adoption USAA Bank 83 USAA Bank 72.4 Webster Bank 80.1 BOK Financial 72.3 BOK Foundation, which handles the company’s charitable this year hasn’t been in retail banking — that segment has Regions 77.6 Cullen/Frost 71.5 giving. The corporate communications team helps get the been going digital for years now, Bradshaw said — but rather Cullen/Frost 77.4 FNB of Pennsylvania 70.9 First Citizens 77.1 Northern Trust 70.9 message out, internally and externally. on the commercial and wealth management sides of the

Citizenship Citizenship One area of recent focus has been food insecurity. business. USAA Bank 81.1 USAA Bank 71.4 “We’ve done incremental giving and volunteering in that “We’re a very large organization in terms of wealth Webster Bank 79.2 BOK Financial 71.1 Regions 78 Cullen/Frost 70.4 space because obviously there is a need that’s come out of management — it’s more than a third of the total revenue of First Citizens 77 FNB of Pennsylvania 70.1 the pandemic,” Bradshaw said. the bank — and that’s a group that has largely been very BMO Harris Bank 76.7 Huntington Bank 69.6 focused on face-to-face business in order to manage it,” Leadership Leadership USAA Bank 81.4 USAA Bank 72.7 Banking on purpose Bradshaw said. “That’s also true for a lot of our larger Webster Bank 79.9 BOK Financial 72.3 Hecht noted several data points that reflect how consumer corporate relationships.” Citizens Bank 78.1 FNB of Pennsylvania 71.6 Capital One 77.9 Cullen/Frost 71.4 perceptions of whether a bank has a higher purpose is Capabilities BOK has built up over the past five years that Regions 77.4 First Citizens 71.4 having greater influence on reputation scores. might’ve been overlooked by high-net-worth and commercial Performance Performance Questions about “having a positive societal influence,” banking clients before the pandemic are getting a lot more USAA Bank 81.1 USAA Bank 73.7 Regions 80.1 BOK Financial 73 “equal workplace opportunities” and “environmental use now, he said. Some areas of the private wealth manage- Capital One 79.9 Ally Bank 72 protection” were among those that increased the most in ment and retail brokerage business experienced “upwards of Webster Bank 79.1 First Tennessee 71.8 Discover Bank 78.1 Capital One 71.8 relative importance. a 65% increase” in logins from February to March. Having a positive societal impact alone saw “almost a “The other thing is we were quick to adopt virtual meet- Source: American Banker/RepTrak Survey of Bank Reputations 2020 50% increase in relative importance from the prior year as ings and virtual forums for our clients,” Bradshaw said. “We

18 American Banker September 2020 americanbanker.com

018_ABM0920 18 8/12/2020 4:22:04 PM “The bank that is perceived to have a higher purpose is a reputation driver” among customers, Hecht said. “That’s a did an awful lot of investment briefings, economic briefings much more reputable — that’s why it’s so important,” said big deal.” and other things facilitated by our corporate communica- Sven Klingemann, research director at RepTrak. As for how banks are living up to expectations with regard tions group.” RepTrak has a new Purpose Power Index that helps to citizenship, both customers and noncustomers rate them He expects an increase in virtual interactions across all companies track how well they are doing on that front, and higher this year than last. But regional banks as a group got business lines to be a lasting outcome of the pandemic. it found a strong correlation between the purpose and the most credit for being good corporate citizens, with a reputation scores. The new index gauges consumer percep- 6.7-point increase in their citizenship score among noncus- The way to win hearts tions of companies on four criteria — having a purpose tomers putting them at 66.8. Besides fostering close ties to their communities, banks beyond just making a profit, being committed to changing “That is a huge, huge change,” Hecht said. “That is would do well to focus on developing a more positive and the world for the better, doing things to benefit all stake- gigantic, relatively speaking.” inclusive workplace environment. holders, not just shareholders, and helping people and The citizenship score improved by 5.1 points, to 68, for The reputation survey shows that consumers increasingly communities. nontraditional banks, a group that includes online players care about how banks treat their employees. BOK took the top spot with noncustomers in that new like Ally and Discover, and by just 1.3 points, to 51.8, for large Workplace gained importance as a driver of reputation index and second place with customers. banks. across the board for every bank type, with customers and Bradshaw said that, while having values and talking Citizenship is among the top three drivers of reputation for noncustomers alike. about them is important, the key to success is in what a both customers and noncustomers this year, as is gover- Webster Bank scored high enough in the workplace company does to live those values, whether that entails nance, which, in this case, is a gauge of whether people category to rank second of all 40 banks among customers, actively pursuing greater diversity in the senior ranks or perceive the bank as fair, ethical and transparent. Products after USAA. It was also one of only two banks to earn an manning food banks. and services rounds out the top three in importance. “excellent” score from customers in the governance category, “It’s more about actions than words,” he said. “It might be the first time in a while that the top three USAA being the other one. And it got the highest score He gives a lot of credit to employee-led community were the same for customers and noncustomers,” Hecht said. among customers on the Purpose Power Index. initiatives for generating positive sentiment for his company, Chris Motl, the head of commercial banking for the $30 saying more than 1,350 people from BOK logged nearly Innovation counts billion-asset Webster, said its strong culture of caring is the 34,000 volunteer hours last year. Perhaps because the pandemic is forcing more people to basis for how the bank treats both customers and employees. “I think that shapes how people view us,” Bradshaw said. interact with their banks through digital channels, innovation “I narrow it down to, literally, we do the right thing,” he “That’s where they see us, that’s where they get a sense for is another reputation driver that has become more important. said. what the values and the purpose of the company are, and Questions about whether a bank “adapts quickly to The five core values it wants employees to embody are frankly, it leads to more business for us.” change” and whether consumers consider it an “innovative codified in “The Webster Way,” which have been printed on BOK’s community relations team helps organize the company” jumped in relative importance. the back of everyone’s business cards for as long as he’s volunteer manpower around needs employees themselves At BOK, which had the second-highest innovation score worked at the company, which is 16 years, Motl said. One of identify in their communities, often with the backing of the among noncustomers, the biggest jump in digital adoption these mantras is, “We respect the dignity of every individual,” BOK Foundation, which handles the company’s charitable this year hasn’t been in retail banking — that segment has while others speak to a higher purpose, such as earning trust giving. The corporate communications team helps get the been going digital for years now, Bradshaw said — but rather through ethical behavior and giving back to the communities message out, internally and externally. on the commercial and wealth management sides of the the bank serves. One area of recent focus has been food insecurity. business. No matter how it’s defined, there’s something about the “We’ve done incremental giving and volunteering in that “We’re a very large organization in terms of wealth culture that resonates with people who stay, Motl said. Those space because obviously there is a need that’s come out of management — it’s more than a third of the total revenue of who aren’t on board with it “eventually self-select out,” he the pandemic,” Bradshaw said. the bank — and that’s a group that has largely been very said. “I’m glad I fit in the culture, because I think it sort of focused on face-to-face business in order to manage it,” says something about me too.” Banking on purpose Bradshaw said. “That’s also true for a lot of our larger Like BOK, Webster also has made diversity and inclusion a Hecht noted several data points that reflect how consumer corporate relationships.” focus. perceptions of whether a bank has a higher purpose is Capabilities BOK has built up over the past five years that This is an area that carries more weight with consumers having greater influence on reputation scores. might’ve been overlooked by high-net-worth and commercial lately. Such topics are top of mind since they have gotten Questions about “having a positive societal influence,” banking clients before the pandemic are getting a lot more broad media attention via social movements — starting a “equal workplace opportunities” and “environmental use now, he said. Some areas of the private wealth manage- few years ago with #MeToo sexual harassment scandals in protection” were among those that increased the most in ment and retail brokerage business experienced “upwards of many industries and more recently amid the widespread relative importance. a 65% increase” in logins from February to March. protests over racial injustice after a Minneapolis police officer Having a positive societal impact alone saw “almost a “The other thing is we were quick to adopt virtual meet- killed George Floyd by kneeling on his neck for more than 50% increase in relative importance from the prior year as ings and virtual forums for our clients,” Bradshaw said. “We eight minutes while he was handcuffed on the ground.

americanbanker.com September 2020 American Banker 19

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

Based on the survey data, three of as we see the accelerated retirement of And job descriptions are being updated “CEOs are taking on a more import- the biggest reputation risks for banks the baby boomers, there’s going to be to remove gender bias and “extreme ant role,” said Klingemann, the RepTrak involve social justice: unequal pay by an even greater war for talent,” which modifiers,” while university recruitment research director. “They’re testifying in gender, unequal opportunities by race, will make the ability to attract top- and internship programs have an front of Congress. There’s a political gender or other factors, and discrimina- notch people a major differentiator for increased focus on women and void and they’re sort of jumping in tory business practices. banks, Bradshaw said. “One of the ways minorities. when it comes to talking about “If you don’t pay people well, if you you win that war is to make sure that “We’re not the kind of company that socioeconomic issues or inequality. don’t give them equal opportunity, and you’re building an organization that says, ‘I’m sure it will happen naturally,’ ” There is this demand now to know what you discriminate against them in your appeals as broadly as it can across Bradshaw said. the bank stands for and I think CEOs business, then that’s the trifecta of every type of measurable demographic “Our message to ourselves was, have been forced to step up.” badness when it comes to risk for so that you have a chance at the best ‘What can we do to accelerate that and RepTrak has started measuring banks,” Hecht said. of the best.” make sure that we see a more diverse consumer perceptions of CEOs, and it BOK’s diversity and inclusion council, As part of that effort, BOK just rolled transition as we see leadership turnover has found that for every point a CEO’s formed in April 2019, is led by Bradshaw out unconscious-bias training for its in the company?’ ” rating improves, a company’s overall himself, and one of the goals is to leadership and those with hiring reputation score has a corresponding diversify its largely white, middle-aged, oversight. It also revamped the training CEOs, listen up increase of half a point, according to male leadership. for recruiters to make sure they get That sort of leadership is crucial, the Klingemann. “I think over the next decade or so, diversity and inclusion accreditation. reputation survey indicates. This illustrates the importance of the

with customers across multiple chan- Talking Points nels — proactively and frequently. A message about the availability of The coronavirus pandemic shows how much loan forbearance appeared prominent- crisis communications matter ly on the mobile banking app and website for all users. “We made it front By Matthew de Paula and center on your mobile app to ask erceptions of how banks RepTrak, which conducts the annual you if you needed help and then tried responded to the pandemic reputation survey for American Banker. to make it as frictionless as possible to Pare a major factor shaping The survey results underscore how get help,” Mack said. public opinion of the industry this important communicating is in a crisis A strategy the bank hadn’t used year. — and making sure customers and before involved reaching out to branch But just how positive those percep- noncustomers notice. It helped earn visitors and letting them know about tions are depends a lot on the way you some banks double-digit reputation digital alternatives for doing the ask consumers about them. gains. transaction they had completed, if one Opinions about how banks respond- “The key takeaway here is overall was available. It was framed as an ed to the crisis overall were consider- banks are actually getting pretty good option to keep them safer. ably less favorable than opinions about grades on how they have responded “We looked at transactions on a their particular actions — such as specifically to things surrounding the daily basis to see the customers that giving employees the flexibility to work COVID-19 crisis,” Klingemann said. came into our branch and then we from home, showing support for health Wells Fargo is a case in point. Mary Mack communicated back to a number of care professionals or donating to Though its overall reputation score is those customers and said, ‘Look, it was nonprofits that are helping people cope. still recovering from the massive hit it the pandemic. great to see you in the branch yester- “That’s why we’re saying the rational took in the wake of the phony-accounts To help make sure its messages got day, and we’re always here to help, but assessment is far more positive than scandal, Wells edged out the other noticed, Mary Mack, Wells Fargo’s chief did you know that you could have done the overall emotional one,” said Sven large banks specifically on how executive of consumer and small-busi- that transaction online? If you would Klingemann, the director of research for consumers scored its response to ness banking, said it communicated like for us to walk you through how to

20 American Banker September 2020 americanbanker.com

020_ABM0920_001 20 8/12/2020 1:55:29 PM And job descriptions are being updated “CEOs are taking on a more import- CEO’s own reputation in either damag- to remove gender bias and “extreme ant role,” said Klingemann, the RepTrak ing or elevating the bank’s reputation COMPANY SELECTION: modifiers,” while university recruitment research director. “They’re testifying in overall, he said. Companies drawn from the Federal and internship programs have an front of Congress. There’s a political To help lift a bank’s reputation, CEOs Reserve’s list of large commercial increased focus on women and void and they’re sort of jumping in should exercise their influence for the banks, with final selections by minorities. when it comes to talking about greater good, especially during a crisis American Banker based on total “We’re not the kind of company that socioeconomic issues or inequality. like the pandemic, where all constitu- assets and retail business strength says, ‘I’m sure it will happen naturally,’ ” There is this demand now to know what ents, inside and outside of banks, are Bradshaw said. the bank stands for and I think CEOs experiencing such a profound impact, RATINGS: “Our message to ourselves was, have been forced to step up.” he said. Ratings were collected via online ‘What can we do to accelerate that and RepTrak has started measuring Of the four drivers measured to questionnaire in May 2020 make sure that we see a more diverse consumer perceptions of CEOs, and it evaluate CEO reputations — influence, At least 100 customers and 100 transition as we see leadership turnover has found that for every point a CEO’s leadership, management and responsi- noncustomers rated each company, with more than 14,000 respondents in the company?’ ” rating improves, a company’s overall bility — the importance of influence overall reputation score has a corresponding increased the most this year. Each respondent was very or some- CEOs, listen up increase of half a point, according to What that means is, “he or she needs what familiar with the companies they That sort of leadership is crucial, the Klingemann. to be able to make a difference,” rated reputation survey indicates. This illustrates the importance of the Klingemann said. □

with customers across multiple chan- do that, we’re happy to,’ ” Mack said. limits and communicated broadly with nels — proactively and frequently. The bank was already educating customers about it. A message about the availability of customers about digital processes It also cashed government stimulus The coronavirus pandemic shows how much loan forbearance appeared prominent- before the pandemic, but not in such an checks for customers and noncustom- crisis communications matter ly on the mobile banking app and automated and personalized way. ers, with no fee and immediate website for all users. “We made it front “The opportunity to pull up informa- availability for those deposits, Mack and center on your mobile app to ask tion from yesterday’s transactions in said. you if you needed help and then tried almost real time to help you see how On the community-development to make it as frictionless as possible to you can do that at home was new for side, Wells announced a program, get help,” Mack said. us, particularly at that kind of scale,” dubbed Open for Business, that will A strategy the bank hadn’t used Mack said. donate all of its proceeds from the before involved reaching out to branch Starting in March, Wells Fargo fully Paycheck Protection Program — ap- visitors and letting them know about closed 27% of its branches. The rest proximately $400 million in processing digital alternatives for doing the remained open in “one of four safe fees, according to the bank’s website transaction they had completed, if one formats,” ranging from fully open with — to support small businesses impact- was available. It was framed as an social distancing, mask guidelines and ed by the pandemic, with a specific option to keep them safer. protective barriers in place to keeping focus on Black-owned businesses. “We looked at transactions on a drive-up windows open but allowing “External data would tell you that daily basis to see the customers that branch visits by appointment only. Black-owned businesses are failing at came into our branch and then we “A number of customers who are twice the rate of the overall small-busi- Mary Mack communicated back to a number of contacting us on our phone lines want ness population,” Mack said. those customers and said, ‘Look, it was to go into a branch to meet with “So how can we help? What role can the pandemic. great to see you in the branch yester- somebody, so we help them with where we play in recovery? That’s a very To help make sure its messages got day, and we’re always here to help, but they can go and how to set those intentional part of the dialogue as we noticed, Mary Mack, Wells Fargo’s chief did you know that you could have done appointments up online,” Mack said. think about our customers, our employ- executive of consumer and small-busi- that transaction online? If you would To provide more flexibility, Wells ees, what they need from us, what that ness banking, said it communicated like for us to walk you through how to increased mobile deposit and ATM conversation looks like.” □

americanbanker.com September 2020 American Banker 21

021_ABM0920_001 21 8/12/2020 1:55:31 PM BankThink

Reframe the privacy debate — quickly

By Katherine Flocken and Tyler Griffin

Financial services innovators are at risk to use data to provide valuable of losing access to data that’s critical to products, but they should be prohibited their businesses if Congress passes a from mishandling, underhandedly recently proposed data privacy bill or exploiting or inadequately safeguarding one of several like it. that data. choice must be informed and it cannot Lawmakers are concerned that While it is tempting to suggest be merely theoretical. The existing Americans continue to sacrifice privacy legislation requiring these safeguards, “informed consent” model doesn’t work. in exchange for products they can’t live there is reason to be cautious. It is Esoteric terms of service that without, especially as the coronavirus imperative that businesses not face a obscure as much as they reveal offer no pandemic forces more commerce state-by-state patchwork of regulation. choice, and are rarely read. Instead, online. Simply by using a cellphone or Every business, from startups to developers can provide clear, plain-lan- the internet to make a purchase, multinationals, needs to ensure guage requests to obtain and use data consumers must share their data. compliance with every statute on day to their users in real time. Such a trade-off, however, is a forced one of operation — a feat often easier Responsible actors should explain to choice born of a misunderstanding of for the largest and most well-capital- customers why the data requested is what privacy really means. The ized corporations. necessary and articulate clearly the financial services industry must take a Accepting federal preemption in this benefits of sharing data with them. The different approach to defining the matter, however, means states can’t be same message should be provided problem and crafting solutions. used as the testing ground to help clearly to lawmakers considering Privacy advocates are often more guide the way. privacy legislation. concerned about the sheer volume of Any proposed policy must also Anything policymakers do not consumer data being shared between acknowledge that individuals have understand is a threat to every business institutions and third parties than what vastly different priorities and tolerances. that relies on data use. And because is done with that information. This view Yet frustration with tech’s historically the legislating process is largely public, of quantity-as-privacy-violation is casual approach to privacy is high, lawmakers often view silence as tacit counterproductive on two counts. First, both among voters broadly and acceptance of proposed legislation. it leads consumers to adopt a hopeless- policymakers in particular. There is a narrow window now for ly resigned view of privacy, and second, Bills can come quickly — especially innovators to define their stance on it can lead companies and policymak- amid an election year and crisis — and privacy to preserve their ability to ers to propose inadequate or even bits of rapidly drafted legislation can access and use data responsibly. If harmful solutions.. squeeze into must-pass legislation. stakeholders engage proactively with A 21st-century definition of “privacy It is up to financial services innova- policymakers, there is still time to work violation” should focus on situations in tors to demonstrate to lawmakers that together to craft flexible solutions that which a company takes or shares data they are doing good, not harming benefit consumers and businesses alike. from people without their knowledge or consumers. A consumer-first approach permission, handles data irresponsibly to product development is the best way Katherine Flocken is a senior policy adviser and enables access by bad actors, or to avoid a heavy regulatory backlash. at Allon Advocacy and Tyler Griffin is a uses data in a manipulative manner. There is much the industry can do. managing partner at Financial Venture Critically, companies should be free Customers must have choice, the Studio, which invests in fintech startups.

22 American Banker September 2020

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023_ABM0920_001023_ABM0920 23 23 7/30/20208/12/2020 1:14:422:35:40 PM BackPorch

HAIM ISRAEL PAVIA ROSATI “The coronavirus is not just a temporary crisis; “What a Marriott hotel it’s a permanent disruptor. It’s one of those rare can do for you is perhaps events in history that will completely reshape more sophisticated than geopolitics, societies and markets.” what a 10-room family inn Head of thematic investing at BofA Global Research, can do for you, but you’re discussing his report, “The World After COVID” much more anonymous at the Marriott.” New York small-business owner, on ditching her big bank for the BARNEY small one that helped her get a FRANK PPP loan ROBERT “Powell has been the best Trump STAN DOIDA FRANKO appointee — “Bottom line is I needed “None of the bankers despite the fact you and I got no response. I’ve talked to regret I’m voting with my dollars Trump yells at him participating, but we’re at this point.” all the time.” worn out from borrowers Attorney, telling the branch asking when their loans manager at a big bank he Former Democratic will be forgiven.” switched to a small one that Congressman best known gave his law firm a PPP loan President and CEO of First for the Dodd-Frank Act, Choice Bancorp on the lauding Federal Reserve Paycheck Protection Program Chairman Jerome Powell for doing a good job ED FRANCIS “We call it the gift that keeps on giving in this JAMIE DIMON market.” “This word ‘unprecedent- Chairman and CEO of InBank, ed’ rarely is used properly. saying it added 350 customers This time it’s being used because of PPP, mostly from properly. It’s unprece- big banks dented what’s going on around the world.” JPMorgan Chase chairman JEROME and CEO, saying the economic havoc from the pandemic is Photo: Getty Images POWELL unpredictable and the outlook “There’s been a lot of pain is “much murkier” than in June and injustice and unfair treatment that women MALIA LAZU have experienced in the LISA RICE “The question is, once this dies down, workplace … among “There were a lot of are we going to put this away until the economists and at the people in lending next video … or does this lead to different Fed. That’s been going on institutions who were hiring processes? Does this lead to the for far too long.” saying, ‘We can’t go this underbanked being served? Does this lead Federal Reserve chairman, far, guys.’ ” to more homeownership?” responding to charges by a National Fair Housing Alliance Chief experience and culture officer at Berkshire Bank, on former Fed economist that CEO, on objections even from the need to make sure outrage over George Floyd’s killing the agency and the broader many bankers to a weakening leads to impactful responses to racial injustice economics profession foster a of the disparate impact rule toxic culture

24 American Banker September 2020

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