THURSDAY JUNE 24, 2021 VOL. 186 No. 120 AMERICANBANKER.COM Follow us on Twitter @AmerBanker Nicolet Bankshares 5 acquiring rival Wisconsin bank for $219 million Reasons for being In buying the $1.5 billion-asset County Bancorp, Nicolet would become the second- unbanked largest bank in Wisconsin and the state’s No. 1 dairy lender. It’s the second bank Balance minimums lead the list of explanations unbanked acquisition deal Nicolet has announced this consumers give for not having a bank account. The proposed quarter. Page 5 FedAccounts would bar such limits. See story on page 2 P2P payments surged 6 during pandemic. So did the complaints about them. Lack funds to meet mininum balance requirements Gripes against peer-to-peer payments 29% services spiked during the past year as U.S. Don't trust banks consumers flocked to Venmo, Cash App, 16.1% Zelle and the like to transfer money. Page 6 Problems with personal ID, credit or former bank account 8% Fees are too high Sterling Bancorp’s AI assistant 7.3% 7 tackles half of customer calls Privacy fears The suburban New York bank says Skye, 7.1% its conversational artificial intelligence assistant, is doing the work of 100 full-time 0% 5% 10% 15%20% 25%30% employees. Page 6

Source: FDIC survey in 2019 of 32,904 households More than prepaid: Payoneer 8 broadens its sales pitch ahead of public listing The fintech, which is going public through a dailybriefing Cross River buys lending merger with a special-purpose acquisition 3 fintech, exec says company, has updated its logo and ‘more to come’ messaging to emphasize its capabilities FedAccounts billed as gift to The bank’s holding company, CRB Group, in e-commerce and digital marketing. It’s 1 bankers. Many are dubious. has acquired PeerIQ, an online lending part of a trend of traditional payments such No-fee digital bank accounts subsidized by marketplace data provider backed by as TransferWise, Fattmerchant and even the Federal Reserve would help community the former CEOs of Morgan Stanley and Mastercard repositioning themselves to win banks draw in new customers and pay for Citigroup. It’s said it wants more deals like over investors. Page 8 technology upgrades, proponents of the idea this one. Page 3 say. But it’s a hard sell to executives skeptical $36B wealth manager eyes of government involvement in retail Arkansas CDFI channeling 9 credit union expansion with LPL banking. (See chart above.) Page 2 4 funds from Square into apps Most credit unions don’t offer planning for underbanked services, and affiliating with the No. 1 IBD Fifth Third buying Southern Bancorp, a community could help CUNA Brokerage change that, the 2 health care lender Provide development financial institution, will firm’s president says.Page 9 The fintech specializes in lending to dentists, devote part of a multimillion-dollar veterinarians and other solo providers investment from the payments giant to Loan modifications are up looking to grow or establish their own developing technology that helps consumers 10 for the first time in a year, practice. Page 3 budget, buy a home and more. Page 4 FHFA finds Evaluations for payment reduction still represent a relatively small share of home retention actions but their uptick could add incrementally to servicers’ workloads. Page 10 THURSDAY JUNE 24, 2021 AMERICANBANKER.COM PAGE 2

the option to do so, also. The Fed would community banks,” said Lev Menand, an CONSUMER BANKING reimburse banks with assets under $10 academic fellow at Columbia Law School billion each quarter for the costs they incur who co-authored a 2018 paper outlining to set up and operate the accounts; the the benefits of a public banking option. “It FedAccounts amount of reimbursement has not been would bring in millions of households that specified. are currently not in the system. … And that billed as gift Bankers’ main objection to the legislation sort of thing, entrance into the mainstream is that the accounts would be offered money and payment system, means that through the Postal Service, an independent there are more people who are able to enter to bankers. government agency that the industry the market for financial products.” believes isn’t equipped to offer basic banking Mehrsa Baradaran, a professor at Many are services. They also oppose the Federal University of California, Irvine School of Reserve’s involvement in banking activities Law and author of “How the Other Half that traditionally have been conducted in Banks,” said that offering free FedAccounts dubious. the private sector. to consumers at bank branches ultimately But advocates of the legislation contend it would increase banks’ lending opportunities. By Neil Haggerty could be a boon for the industry. “You can ask most bankers and they June 23, 2021 Saule Omarova, a professor of corporate would say that the deposit gets you in the WASHINGTON — Senate Banking law and financial regulation at Cornell Law door, but the real money, of course, is in Committee Chairman Sherrod Brown has School, said that the proposal would help lending,” Baradaran said. spent months advocating for his legislation smaller banks that are struggling to keep up Jesse Van Tol, CEO of the National to offer all consumers free government- with advances in technology. Community Reinvestment Coalition, said backed digital bank accounts available “For small banks this really is their kind that FedAccounts could help banks attract through bank branches and U.S. Postal of best chance of longer-term survival customers who don’t trust banks with their Service offices. in the current environment within the money. While the proposal has been met with industry itself … with all of this technology “I do think that historically products widespread opposition from the banking and digitization,” she said. “Big Wall Street that have the imprimatur of the federal industry, Brown argues the legislation will banks, like JPMorgan and Bank of America, government are helpful in overcoming that not only bring new customers into bank or big tech companies, like the Amazons and trust deficit,” Van Tol said. branches, but also help smaller banks build Facebooks of the world, have a structural Roughly 16% of unbanked consumers their technology infrastructure. advantage that cannot be eroded.” cited a lack of trust in financial institutions “It’s getting harder and harder for small Other advocates say that banks will be as the main reason why they don’t have bank banks to compete for new customers when able to cross-sell to new customers who walk accounts, according to the FDIC survey. big tech companies can afford to spend through the doors of their branch locations Minimum balance requirements were an billions on marketing and technology,” to access FedAccounts. even bigger factor — 29% all unbanked cited the Ohio Democrat said in statement to “I think that Sen. Brown is totally correct balance minimums at financial institutions American Banker. “Under my proposal to say that his legislation would be an avenue as the main reason they don’t have bank for no-fee accounts, small banks would for strengthening the business model of accounts. Other reasons include high fees, be reimbursed for the operating costs of providing these accounts, giving them an affordable way to attract and retain new Established 1836 One State Street Plaza, 27th floor, New York, NY 10004 customers for the long run.” Phone 212-803-8200 AmericanBanker.com The financial industry remains skeptical of Brown’s bill, which was introduced in the Editor in Chief Alan Kline 571.403.3846 Copy Editor Neil Cassidy 212.803.8440 early months of the coronavirus pandemic Managing Editor Dean Anason 770.621.9935 when the government was struggling to get Reporters/Producers stimulus payments to unbanked consumers. Executive Editor Bonnie McGeer 212.803.8430 Laura Alix 860.836.5431, Kate Berry 562.434.5432 More than 5% of Americans are unbanked, Washington Bureau Chief Joe Adler 571.403.3832 according to a 2019 survey by the Federal Executive Editor, Technology Miriam Cross 571.403.3834 Deposit Insurance Corp. Penny Crosman 212.803.8673 Jim Dobbs 605.310.7780 Brown’s bill would give all consumers BankThink Editor Rachel Witkowski 571.403.3857 access to free digital bank accounts, known John Heltman 571.403.3847, Allissa Kline 716.243.2679 Community Banking Editor Paul Davis 336.852.9496 as FedAccounts, that would be held at the Hannah Lang 571.403.3855 Federal Reserve and accessible at bank Contributing Editor Daniel Wolfe 212.803.8397 John Reosti 571.403.3864, Gary Siegel 212.803.1560 branches and post offices. Fed-member Digital Managing Editor banks would be required to offer the Christopher Wood 212.803.8437 Kevin Wack 626.486.2341 accounts, and nonmember banks have

For up to date and complete coverage go to AmericanBanker.com THURSDAY JUNE 24, 2021 AMERICANBANKER.COM PAGE 3 credit or personal identification issues, and that lower-income Americans need easier middle-market and corporate clients,” Greg privacy concerns. FedAccounts would have access to the financial system say that Carmichael, Fifth Third’s chairman and not minimum balance requirements or Brown’s FedAccounts legislation would be CEO, said in the press release. account fees. a win-win for customers and community Provide specializes in practice lending to Brown’s legislation still faces an uphill banks. health care professionals looking to grow climb to enactment. Sen. Pat Toomey, R-Pa., “There’s something in this bill for or establish their own practice. Its clients the top Republican on the Senate Banking everyone,” said Porter McConnell, campaign include dentists, veterinarians, optometrists panel, said he would fight the legislation director at Take on Wall Street. “The ability to or other small or solo providers. Those “very aggressively” if it gains traction in have foot traffic coming through that you can borrowers tend to be early in their careers Congress. market your accounts to is a considerable and often have hundreds of thousands of Skeptics of Brown’s proposal have argued advantage.” dollars’ worth of student debt, as well. that it wouldn’t necessarily increase banks’ Key to the deal will be the opportunity account holders or lending opportunities, to Fifth Third’s offer banking services to because the deposits in the accounts would COMMERCIAL LENDING Provide’s borrowers, Fifth Third said in a ultimately be held at the Federal Reserve. regulatory filing. Provide will retain its name Karen Petrou, managing partner at Federal and will continue to operate nationwide. Financial Analytics, said that the proposal Fifth Third Fifth Third currently holds around $400 could pull customers away from traditional million of Provide’s loans and will retain all bank accounts. buying health of its new originations. The fintech has made “The big decision that customers will around $1 billion in commercial loans since make is bank versus Fed,” said Petrou. “The 2016. overall proposal really reconstructs the care lender The deal is expected to add around window into the payment system in favor of $6 million of revenue and $14 million of the central bank, which is a hard competitor Provide expenses in 2021, Fifth Third said in the to beat.” filing. And bankers continue to lobby against By Laura Alix the proposal. June 22, 2021 “I think the banking industry in general … Fifth Third Bancorp in Cincinnati is COMMUNITY BANKING they have real misgivings about the public buying Provide, a fintech that lends to health sector getting involved” in banking, said Ian care professionals and in which the bank is Katz, a director at Capital Alpha Partners. already an investor. Cross River Paul Merski, group executive vice The $207 billion-asset Fifth Third first president for congressional relations and invested in Provide in 2018 and began buys lending strategy at the Independent Community funding loans through its platform last year, Bankers of America, said that banking it said in a press release announcing the deal services should be left to the private sector. late Tuesday. Fifth Third did not disclose fintech, exec “The Fed is an independent agency not financial terms of the acquisition. designed to be involved in retail banking,” Health care has been a hot niche for the says ‘more to Merski said. “It’s in charge of monetary banking industry. KeyCorp in Cleveland, policy and watching inflation. It’s not for example, recently launched a national designed to be involved in retail bank online bank for health care professionals. come’ accounts.” Synchrony Financial in Stamford, Jonathan Mintz, CEO of Cities for Connecticut, recently bought a health care- By Jim Dobbs Financial Empowerment Fund, a New York- focused consumer lender and also created a June 23, 2021 based nonprofit that sets national standards new health and wellness division as part of a Long a partner of financial technology for low-fee bank and credit union accounts larger reorganization. Bank of America has companies, Cross River Bank in Fort Lee, through its Bank On initiative, said that recently made tech investments in payment New Jersey, is now set on buying them. Congress should focus on encouraging processing services for health care providers CRB Group, the bank’s holding company, unbanked consumers to open up affordable and Zions Bancorp. in Salt Lake City also said Wednesday it had acquired an online accounts that are already available at banks. recently said that it would expand its own lending marketplace data provider backed “There are safe and deeply affordable practice lending business nationwide. by the former CEOs of Morgan Stanley, national Bank On certified bank and credit “The health care industry is one of the Citigroup and other Wall Street titans. The union accounts … available in tens of largest and fastest growing segments of the seller is Synthetic P2P Holdings Corp., which thousands of branches all across the country U.S. economy. Over the last decade, Fifth does business as PeerIQ. It will function as today,” Mintz said. “Why is [Brown] ignoring Third’s health care team has expanded its an affiliate of Cross River, which has $13.5 them, rather than using them?” presence and expertise to become one of billion of assets. Still, consumer advocates who believe the top health care banking platforms for This is CRB’s second purchase of a fintech

For up to date and complete coverage go to AmericanBanker.com THURSDAY JUNE 24, 2021 AMERICANBANKER.COM PAGE 4 after its 2019 acquisition of small-business prominent investors included former Arkadelphia, Arkansas, is using an infusion banking company Seed. More such deals are Morgan Stanley CEO John Mack, former Citi of cash from Square to develop niche digital likely to follow, said Phil Goldfeder, senior CEO Vikram Pandit and Bloomberg CEO banking services for segments of its customer vice president of global public affairs at Dan Doctoroff, among several others from base. Cross River. major financial firms. Square made a multimillion-dollar “We are always looking for additional Additionally, last week, Cross River investment in Southern as part of a larger companies that can broaden our reach and formed a venture capital arm to invest in $100 million pledge to support minority help us better service our partners,” he said startups. Cross River Digital Ventures will and underserved communities, the bank in an interview. “I would say more to come.” fund and advise early-stage companies that announced this month. With this funding, The bank and the fintech have partnered focus on lending, payments, investing and Southern intends to create customized apps, since 2018, combining Cross River’s capital, fintech. each designed to address a specific situation technology, and regulatory compliance Cross River has newfound heft after rising for a well-defined underserved group. processes with PeerIQ’s risk management to prominence in 2020 and early 2021 as the “We think the true growth opportunity platform, loan and borrower data sets, and most active Paycheck Protection Program for our bank is digital,” said Darrin Williams, data-verification tools. lender among community banks. It drew Southern’s CEO. “We’re very excited Square Cross River was founded in 2008 with on its myriad fintech alliances to develop took note of the work we do. That capital will the intent of becoming a tech-savvy bank. It simple and quick ways to field and process allow us to reach deeper into underserved has since partnered with dozens of fintechs. PPP loans. Last year, it ranked behind only markets.” Cross River originates, packages and sells Bank of America and JPMorgan Chase in Southern developed its first app, loans; it partners with fintechs to service PPP loans made. Wealthable, for young people embarking on them. Working with several partners, including their careers. Wealthable is built around a Cross River and PeerIQ helped community Intuit and Kabbage (a unit of American zero-fee account that accrues interest daily. banks and other loan buyers tap into the Express), Cross River reached well beyond It calculates a “Wealthability” score based digital lending sector. They will continue to its pre-pandemic customer base to serve on customers’ adherence to personal finance do that but under the same ownership. borrowers that bigger banks overlooked, best practices such as spending below The deal is part of an ongoing effort at the executives said. income, maintaining autopay for bills, and bank to expand offerings, said Gilles Gade, It started 2020 with about $2.5 billion of saving regularly. the founder, president and CEO of Cross assets but swelled to an $11.8 billion-asset Buoyed by Square, Southern hopes to River. “Cross River is constantly adapting to bank by the close of the third quarter last develop apps that are even more precisely the evolving landscape of financial services year. It exceeded $13 billion of assets by the targeted. with an insatiable thirst to innovate,” Gade close of the first quarter this year. “We want to solve very narrow problems said in a prepared statement. for a smaller group of people,” Williams said. The two companies did not disclose “We’re not trying to be a mass digital bank.” financial terms of the deal, which has closed. CONSUMER BANKING That said, Southern has also been an The privately held PeerIQ declined to active acquirer and expects to deploy provide its annual revenue or other financial some of the added capital toward a roll-up performance data. But the New York Arkansas strategy focused on buying small, profitable company’s founder, Ram Ahluwalia, said in community banks headquartered within an interview that PeerIQ could accelerate CDFI a 150-mile radius of its home office in growth by capitalizing on shared resources Arkadelphia. with Cross River. Williams was introduced to Square in “We can do more together than as a channeling February. Both companies participated partner that is one step removed,” he said. in a conference organized by the Clinton Ahluwalia and the firm’s roughly dozen funds from Foundation to examine how CDFIs can employees have joined the combined better promote financial inclusivity. That company. meeting led to a follow-up conference Ahluwalia described PeerIQ as “the Square into call with Courtney Robinson, Square’s Bloomberg for marketplace lending.” The head of financial inclusion and public firm’s data and analytics tools are used apps for policy development, and ultimately to the by loan buyers to assess risk and develop investment. informed points of view about given loans’ Williams wants to deepen the relationship likely performance and value, he said. Its underbanked between Southern and Square. tools, for example, help buyers to assess the “Square has a real dedication to financial value of a loan if interest rates rise or fall or By John Reosti inclusion,” Williams said. “We’re hopeful we its likely durability in stressed scenarios. June 22, 2021 might have a real partnership to help us think PeerIQ attracted fanfare when it was Southern Bancorp, a community through technology issues.” founded in 2014 because its early and development financial institution in Southern was well capitalized before

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Square’s investment, reporting a common teams — it calls them Mod Squads after Tuesday to acquire in-state competitor equity Tier 1 capital ratio of 12.93% on March the early 1970s television series — that can County Bancorp for $219 million in cash and 31. Southern has declined to specify the exact design and launch the additional customized stock. amount of the equity stake Square took. apps Williams envisions. The first trial run The deal, expected to close in the fourth A Square spokeswoman declined to could come this summer. quarter, would create the second-largest comment on the specifics of its investment. Southern is in talks with an Arkansas Wisconsin-headquartered bank, with assets She cited a June 10 statement by Amrita hospital that approached the bank for of $7.5 billion and deposits of $6.3 billion. Ahuja, Square’s chief financial officer, who help counseling female employees The $35 billion-asset Associated Banc-Corp, called the investments “a small way we can seeking to purchase a home. Southern has also based in Green Bay, is the state’s largest empower other businesses to take up this homeownership counselors it could have bank. important work.” put on the task. Williams saw a different Manitowoc-based County Bancorp is the opportunity. holding company for the $1.5 billion-asset National impact “I said, ‘Sure, we can do that, but maybe Investors Community Bank. Square’s investment comes at a time we can go a step further,’ ” Williams said. Agricultural lending, one of Investors’ when large banks have made unprecedented “ ’Maybe we can actually create a fintech strong suits, played a central role in bringing efforts to support Black-owned and Black-led application for your workforce, if you partner the two companies together. Nicolet wanted financial institutions. with us.’ ” to grow its book of ag loans but always In the wake of George Floyd’s death in The effort would bring Southern’s digital ran into stiff competition from its rival, May 2020 and the civil unrest that followed, bankers together with members of the target Chairman Bob Atwell said in a news release. JPMorgan Chase, Wells Fargo, Citigroup, group to craft a homeownership solution. If “Agricultural production lending has long Bank of America, U.S. Bancorp, Fifth Third it’s successful, Williams hopes Southern can been underweighted in our overall loan Bancorp and other money-center institutions apply the concept to more hospitals, as well portfolio precisely because Investors has have pledged hundreds of millions of dollars as to other groups facing their own unique been so good,” Atwell said. in equity investments and grants, as well as challenges. Agricultural loans would make up 15% other assistance. As for Wealthable, Southern plans to add of the combined bank’s $4.9 billion loan The trend is ongoing. Friday, Fifth Third a debit card along with capacity to make portfolio, and Nicolet would be the No. 1 announced it would invest another $2.5 small personal loans to offer an alternative dairy lender in the nation’s second-largest million in the $324 million-asset First to payday lenders, which maintain a heavy dairy-producing state. Independence Bank in Detroit, boosting its presence throughout Southern’s Arkansas- Nicolet also intends to bring a portion of investment in the Black-owned company to Mississippi footprint. County Bancorp’s $842 million agricultural $5.5 million. “If I can deliver a $1,000 payday loan loan servicing book onto its balance sheet. A day earlier, Bank of America and Carver advance digitally … I can hopefully disrupt In a research note Tuesday, Janney Bancorp in New York, a $686 million-asset some of that business and save people Montgomery Scott analyst Brian Martin certified minority depository institution, money,” Williams said. pointed out that a sustained recovery in milk announced they would provide a revolving prices has driven a significant improvement credit facility for BlackRock’s alternative in County’s asset quality since the end solutions group. The deal marked one of the M&A of the first quarter. According to County, first times a minority depository institution nonperforming assets totaled $39.1 million has been tapped to participate in a corporate- on May 31, down from $58.2 million on level credit line transaction. Nicolet March 31. While Southern is not designated as Nicolet has been an active acquirer of a Black-owned bank, Williams, who has Bankshares community banks over the past decade, been CEO since 2013, is African American. most recently announcing it was buying Financial inclusion has been one of the $1.5 billion-asset Mackinac Financial Southern’s top priorities throughout his acquiring rival in Manistique, Michigan. That $248 million tenure with the company. deal, announced April 12, is expected to “I’ve always been pretty impressed by Wisconsin close in the third quarter. them,” said William Michael Cunningham, Under terms of Tuesday’s deal, County CEO of Creative Investment Research and shareholders will receive 0.48 Nicolet shares an expert on the Black banking sector. “Their bank for $219 or $37.48 in cash for each County share, performance has always been solid, better with cash to make up no more than 20% of than a lot of the small, Black-owned banks.” million the consideration mix. Nicolet expects to achieve cost savings equal to 33% of County’s Next steps By John Reosti noninterest expense base. County reported With Square’s money behind it, Southern June 22, 2021 noninterest expenses totaling $39.7 million plans to continue adding to its digital banking Nicolet Bankshares in Green Bay, for 2020 and $8.8 million in the first quarter. workforce, with an eye toward setting up Wisconsin, announced an agreement Tangible book value dilution of 1.2%

For up to date and complete coverage go to AmericanBanker.com THURSDAY JUNE 24, 2021 AMERICANBANKER.COM PAGE 6 should be earned back in under two years, “People are really frustrated that opening and closing accounts. The CFPB according to Nicolet. Total consideration of these apps don’t try to help them. They also received thousands of complaints $219 million represents 138% of County’s don’t really do much work at it, and their about unauthorized transactions and other tangible book value. responses are very slow,” said report author potentially fraudulent activities. “With the added scale and capital Ed Mierzwinski, who is senior director of U.S. PIRG recommends consumers only of Nicolet, this partnership will rapidly federal consumer programs at the U.S. PIRG use P2P apps to send money to people accelerate our ability to serve existing Education Fund. they trust and to ask people to send customers and build new relationships, The rise in complaints follows a rapid requests for money first to ensure they are County President Tim Schneider said in the increase in consumers’ use of payment apps transferring funds to the right account. It press release. “I am very optimistic about during the coronavirus pandemic. PayPal, also recommends that customers review where we can go as a combined company.” which runs its own digital payments service their privacy and security settings, pointing Schneider will join Nicolet’s senior and also owns Venmo, said in the first to a recent report from BuzzFeed News that management team after the deal closes, quarter that payment volumes for the prior found President Joe Biden’s Venmo account overseeing agricultural lending. Nicolet also 12 months exceeded $1 trillion for the first through a quick search. plans to add one County Bancorp director to time in its history. A Venmo spokesperson said last month its board. Zelle, a P2P app run by the bank-owned that users can make their transactions Early Warning Services LLC, has also private and determine their own privacy experienced more use during the pandemic. settings through the app. PAYMENTS Another top P2P service, Square’s Cash App, In its report, the consumer group also laid saw its profits boom, mostly due to a surge in out two policy recommendations. It is asking bitcoin transactions. the CFPB to require payments firms to more P2P payments The Electronic Transactions Association, diligently investigate errors and fraud and it whose members include Square, PayPal and is urging Congress to change the Electronic surged during Early Warning Services, said in a statement Fund Transfer Act to broaden protections of to American Banker that its members “work consumers who are victims of fraud. directly with consumers to assist them, pandemic. whether it be through online or live phone support.” VIRTUAL ASSISTANTS So did the “Behind the scenes, ETA members are unwavering in their commitment to protecting consumers from fraud, scams, Sterling complaints and unauthorized transactions,” ETA CEO Jodie Kelley said. “The security of consumers Bancorp’s about them. and their account information is always a top priority.” By Polo Rocha PayPal and Square have accounted for AI assistant June 22, 2021 most of the complaints since the CFPB Complaints against peer-to-peer began tracking customer concerns over tackles half payments services spiked during the last digital wallets in 2017, the report found, year, a new report found, as U.S. consumers with 4,431 complaints for PayPal and 1,202 increasingly flocked to apps like Venmo, for Square. of customer Cash App or Zelle to transfer money. A few big banks like PNC Financial Services The findings point to the “hidden costs” of Group, JPMorgan Chase, Bank of America calls using peer-to-peer payment apps, according and Wells Fargo had far fewer complaints to the U.S. Public Interest Research Group, but still made the list of companies with the By Miriam Cross which analyzed complaints submitted to most reports. The four banks are among the June 18, 2021 a Consumer Financial Protection Bureau co-owners of Early Warning Services, which Contact center agents at Sterling Bancorp database. itself received 212 complaints. in Pearl River, New York, are not on duty The group found that complaints to Coinbase, a cryptocurrency trading to solve customer queries at all hours, but the CFPB over mobile or digital wallets — platform, received the third-most Sterling’s intelligent assistant Skye is. where people can store money and make complaints over digital wallets with 755. It In fact, Skye, which communicates with quick transfers to others — jumped to 5,283 also registered 2,182 complaints to the CFPB customers through conversational artificial between May 2020 and April 2021 from 1,819 under the category of virtual currency, the intelligence, is the first voice that customers in the prior-year period. In their complaints, report said. Coinbase did not immediately hear when they call. Unlike traditional customers often mentioned difficulties in respond to a request for comment. interactive voice response systems that resolving issues through the apps’ service Most of the complaints in the CFPB either lock customers in voice-mail jail or departments, the report noted. database revolved around managing, quickly bounce callers to an agent, Skye can

For up to date and complete coverage go to AmericanBanker.com THURSDAY JUNE 24, 2021 AMERICANBANKER.COM PAGE 7 read back a customer’s balance or recent by each client with the name and likeness inbound calls. It solves close to 50% of the purchases and explain why a debit card of their choice. Amelia’s Digital Employee most common customer requests received transaction was declined. Builder lets business process experts by Sterling’s contact center, with the The conversational AI assistant was train the assistant rather than relying on majority relating to balance and transaction built by Amelia, an AI software company developers. inquiries. The goal over the next 12 to 24 in New York. It has been widely deployed Sterling chose Skye by companywide vote. months is to bump up that rate to two-thirds. for a year by the $30 billion-asset Sterling, “Amelia is designed to have a conversation Even if the digital assistant doesn’t have which said in April that it had agreed to be the same way humans would do in her all the answers, “Skye is smart enough sold to Webster Financial in Waterbury, place,” said Chetan Dube, Amelia’s CEO. to determine, based on a hierarchy of Connecticut. He says Amelia can authenticate decisions, whether it can address this client In that time, Skye has handled more than customers, pull up their transaction details, need itself or route to the right place or 2 million customer requests, a number that parse multipronged requests and offer product expert,” Massiani said. Sterling said far exceeded its expectations solutions. When handing a complicated These are two advantages over an and otherwise would have taken more than request off to an agent, Amelia will stay on interactive voice response system, which three years for contact center agents to the line to learn how the human handles it. can’t solve problems on its own, and where tackle. The bot is doing the work of 100 full- When Sterling first launched Skye, it was there is no decision matrix efficiently time employees, the company estimates. limited to a few uses such as password resets directing calls to a subject-matter expert. Sterling’s interest in a voice assistant and balance inquiries. The company had “The client experience is better because to answer calls predates the pandemic. tracked the type of inquiries it received to the even when Skye can’t handle the calls, it’s Though Skye officially launched in June call center after hours and on weekends and substantially faster than old technology in 2020, Sterling tested the technology found most were relatively straightforward pointing the client in the right direction,” among friends and family for nine months to manage without a human. Massiani said. “That has been the biggest beforehand. But its use over the past year Sterling has since broadened its uses positive piece of feedback — clients don’t has shown that conversational AI is effective to 12. The most common are balance and wait as long.” at resolving everyday queries without transaction queries, troubleshooting online Customers may get frustrated if clogging the phone lines, and at picking up banking login issues, providing reasons for conversational AI fails to understand their the slack during unusual times when calls debit card declines, and support for debit questions, especially those worded in casual flood in — as they did after stimulus checks card claims. language or spoken with a strong accent, were released. The company also reports that in several and delivers the wrong response, asks them “A recurring thought for quite some time instances, Skye resolved more than one to rephrase or drives them back to the same was, how do we use emerging technology to request in a single, unbroken conversation. agents the bank was hoping to unburden. In best service our clients?” said Luis Massiani, It was recently trained to handle scenarios the case of the phone, the customer may be chief operating officer and president of where clients seek information about directed to the wrong department. Sterling’s banking subsidiary, Sterling different accounts in the same conversation. “There is a huge variety in the quality of National Bank. “It doesn’t get much better In a live demonstration, a Sterling employee natural language processing,” Ward said. than being able to offer 24/7 banking spoke with Skye over the course of three Massiani says the bank is continuously service.” minutes to check her balance, hear a list of monitoring calls for colloquial terms, slang This method of handling customer her most recent transactions, solve login and phrases that confuse Skye and tweaking communications is becoming increasingly troubles and take initial steps to file a claim the product accordingly so it can understand accessible to financial institutions of all over a suspicious transaction. Skye rerouted diversified speech. sizes. her to an agent to handle the claim. “It’s an evolving process that will continue “You go to any banking conference and a Beyond those run-of-the-mill inquiries, to evolve, likely forever,” Massiani said. dozen different conversational AI vendors Skye swooped in when the contact center are offering different solutions,” said was inundated with queries during the Chris Ward, principal consultant in digital pandemic. When the stimulus funds were banking at FBX, part of the London-based paid out, many customers called purely consultancy Informa. “The availability of the to confirm if their checks had cleared and technology has massively grown, and the whether their balances were $1,400 or cost has come down dramatically, so it’s not $2,000 higher. exclusively for the biggest banks and biggest “One of the biggest benefits you see with budgets.” this technology is when there are event- Amelia lets financial instutions and other driven, peak-volume calls,” Massiani said. companies integrate its conversational AI “We could have never staffed up quickly product, which it calls a “digital employee,” enough to absorb the volumes we saw with into back-end applications. It can be applied the Paycheck Protection Program, with the to multiple channels, including phone, text fiscal stimulus checks.” messaging and webchat, and personified Today, Skye greets the vast majority of

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don’t want people who don’t understand seeking to pay freelancers and gig workers. PAYMENT PROCESSING the nuances and arcane aspects of Next came business-to-business and digital payments to get bogged down in trying to commerce services. figure out what this company does,” said FTAC is in the process of reorganizing More than Steve Mott, principal of the consulting firm Payoneer. SPACs like FTAC essentially raise BetterBuyDesign. “TransferWise was a good funds through their own IPOs, then take prepaid: name, but for them to go into something else another company public by merging with besides transfers, it made sense to change that company. the name.” The reorganization this year did not affect Payoneer In Payoneer’s situation, it is important for the Payoneer leadership team, but shifted its the marketing message to steer people away focus to a more appealing investment option broadens its from their impression that the company is — a company that can deliver digital needs probably still just a prepaid card provider, as well as it delivers cross-border B2B and Mott said. e-commerce marketplace payments across sales pitch “That branding gets in your mind and 190 countries. you will think of it first, so you want to The rebranding is another in a series of ahead of change that perception if your company has advancements by payments providers that changed,” Mott added. have become more full-service in their On occasion, a company will continue to offerings to merchant clients and bank public listing advance its technology and services without partners. a need to change its name. “If you find a place where you can define By David Heun “Square is the one that hasn’t had to do a niche and you pay attention and deliver June 22, 2021 any type of rebranding because the name value in serving merchants, it’s pretty easy Payoneer has changed its logo messaging didn’t convey anything about what it really to be successful,” Mott said. to emphasize a more diversified range of did, other than it was a square-shaped The examples range from PayPal, Square, services — and in doing so, joins a growing reader,” Mott said. “Some marketing people Stripe, Adyen and Marqeta, which had a number of fintechs working to reshape their might say, well everyone will just think of similar journey to Payoneer in starting as a identities. that reader, but Square has been able to prepaid card for underbanked or nonbanked Payoneer, which merged with the transcend with that name to do anything it and transforming itself into a technology special-purpose acquisition company wants.” company powering payments for the gig FTAC Olympus Acquisition Corp., supports For Payoneer, it wasn’t quite that easy, economy, as well as services and virtual e-commerce and payments, as well as considering the company has been in the cards for digital banks. Marqeta launched its services for new verticals like e-commerce payments ecosystem for more than 15 years. IPO earlier this month. and digital marketing. Its name is a “When we decided to go through this “Payoneer is as good as anyone in the portmanteau of “pay” and “pioneer.” While rebranding process we realized it is not cross-border space,” Mott said. “The kink in the name isn’t changing, its new rainbow- easy to define what Payoneer is,” said the armor might be the question of how do themed logo emphasizes that it has pushed Jonny Steel, vice president of marketing you get bigger. Do you do it by getting in the beyond its original payment offerings. at Payoneer. “Being around 15 years in the way of Adyen and Stripe, which ultimately Other companies have embarked on world of fintech is significant, and we’ve have the same goals in serving merchants?” similar rebrandings. TransferWise, which been through some stages and changes as a Payoneer is in a good position because it launched in 2010, changed its name this company.” has delivered value, Mott noted. “If you are year to Wise in anticipation of its IPO. Payoneer leaders felt the company brand good and stick with it, and serve merchants Fattmerchant, a payment processor that “wasn’t really articulated as to where we are well, you are going to have a payday.” launched in 2014, became Stax this year. today and where we want to go,” Steel said. Payoneer wants to take advantage of All of these changes were made to reflect Even though its traditional orange color is the data it collects and knowledge it has of the companies’ evolution. In the payments still present, Payoneer’s marketing rebrand merchant clients operating in e-commerce industry, startups and global card networks brings a new color scheme highlighting the marketplaces — and convert that into a alike have had to emphasize that they do color spectrum to illustrate the world of open service offering capital to help businesses more than just handle payments. Mastercard, digital commerce as something available to meet goals. for example, has been emphasizing its role everyone, everywhere, Steel noted. “Seeing a manufacturer selling online in as a partner to the tech industry. As part The company stayed with the name dozens of marketplaces, we get a full view of this process, the company dropped the Payoneer, playing off the concept of being of their global business,” Payoneer’s Steel uppercase C from its name in 2016, and a pioneer in payments technology and now said. “We see all of the money coming in and removed its name from its logo in 2019; prior digital commerce. The company started as the stability of the business and it gives us to that, Mastercard’s logo hadn’t changed in a prepaid card provider and then a mass data and confidence to know we trust this 20 years. payout provider by linking the card to its business and how much we can offer them “When getting a public equity quote, you platform and integrating it with businesses in working capital and a sensible settlement

For up to date and complete coverage go to AmericanBanker.com THURSDAY JUNE 24, 2021 AMERICANBANKER.COM PAGE 9 period to repay it.” Brokerage deal comes after M&T Bank and Payoneer’s Capital Advance program RECRUITING BMO Harris agreed last year to bring about offers capital based on the average 285 advisors and $35 billion in client assets to marketplace payouts of the seller — and LPL in 2021. With institutional moves posing can get as high as up to 140% of the seller’s $36B wealth more complications and often representing monthly volume, which can be as low as many more assets than a standard practice’s $1,000 but capped at $750,000. Different manager eyes transition, CUNA Brokerage is expected to settlement periods and percentages are complete the migration to LPL’s BD, RIA and established, generally with an estimated custodial services early next year. payback period of six months. credit union The firm has been on a multiyear recruiting “This gives us this opportunity to do tear: After two more announcements in the these things that banks and others struggle expansion past week involving practices each managing to do because we have the data and the more than $1 billion in client assets, LPL has confidence in these businesses,” Steel said. grabbed five out of the 13 teams of that size Because of that, Payoneer can quickly with LPL or greater changing firms this year in the determine a capital offer it can make to a IBD sector, according to Financial Planning’s merchant who is possibly seeking some By Tobias Salinger tracking of company recruiting moves. In the extra money for supplies just prior to a June 22, 2021 past three years, the firm’s headcount has holiday season — and set it up with a single- With its mega-move to LPL Financial, a surged by more than a net 1,600 advisors to click on the platform for the merchant to wealth manager and insurer aims to expand reach a record 17,672. obtain the money. access to planning services among members “We try to be the best possible partner “E-commerce is the biggest way we can of credit unions. that we can be for those advisors,” says Rich do working capital,” Steel added. “But as we The nation’s largest independent broker- Steinmeier, LPL’s divisional president of move into merchant services, many have dealer secured what will, in all likelihood, be business development. “We have a reverence their own brand and websites and are not the biggest recruiting move in the sector of for advisors. What you see culminating now just selling in marketplaces.” 2022 when CUNA Brokerage Services agreed is that belief, plus a privileged position in the In operating like a payment facilitator last week to align its wealth management ecosystem to be able to invest in capabilities.” in these instances, Payoneer plans to roll business spanning 550 financial advisors In fact, Steinmeier adds, the company out a service later this year to provide and $36 billion in client assets with LPL’s is only in the early stages of its recruiting more options for small business owners to Institution Services. Bank and credit success. LPL’s ability to serve fee-only accept payments on their websites, tap into union investment programs increasingly planners as an RIA custodian on one side that growth and provide access to working are seeking to outsource compliance and all the way to employee and bank and credit capital. operational tasks while dropping their own union advisors at the other is driving the Payoneer continues to have a major BDs and RIAs or cutting them drastically. firm’s substantial growth, says recruiter Jodie presence in New York City and Tel Aviv, but That’s making them hot recruiting targets Papike of Cross-Search. it has added locations in other markets, among IBDs. “They literally check every box in the including Hong Kong, Serbia, Dubai and In the case of Madison, Wisconsin-based financial services industry of ways that Vietnam. The company has been backed CUNA Brokerage, the wealth management advisors can affiliate with them,” Papike by investments from TCV, Susquehanna arm of insurer and financial services says. “It really covers all aspects of the Growth Equity, Viola Ventures, Wellington firm CUNA Mutual Group, the decision marketplace.” Management, Nyca Partners and Temasek, came down to its plans to boost wealth The broadened scope of LPL’s recruiting among others. management services among credit unions, has arrived at a good time for CUNA President Rob Comfort said in an interview. Brokerage and firms of its type searching CORRECTION Only roughly 1,000 out of 6,000 credit unions for larger partners in an era of higher This story has been updated to clarify the nationwide offer wealth management, and compliance and tech costs, Gavin Spitzner of nature of Payoneer going public through just 3% of members at the institutions with Wealth Consulting Partners said in an email. merger with FTAC Olympus Acquisition planners use the services, according to “What this deal tells us again is that custody Corp. Comfort. and clearing are largely commoditized June 22, 2021 2:08 PM EDT “More than likely, they’re not getting and self-clearing firms with scale that can helped at all with these critical needs,” he offer that in combination with value-added says. “To really fulfill our mission, we aligned technology, practice management and with an integrated technology platform that other growth-based support at attractive will help us reach credit union members in economics while helping firms offload risk multiple ways.” are well-positioned for further industry Although LPL has always been a force consolidation,” Spitzner says. in the bank channel with more than 2,500 For his part, Comfort agrees with Spitzner’s advisors at 800 institutions, the CUNA view of the direction of the marketplace,

For up to date and complete coverage go to AmericanBanker.com THURSDAY JUNE 24, 2021 AMERICANBANKER.COM PAGE 10 though he says CUNA Brokerage offers to mortgage servicers’ workload. An credit union-based advisors relationship assessment process similar to income management, strategic planning and data qualification needed for a new loan is needed analytics that go beyond commoditized for modifications, but not deferrals. services. Although he spent five years with “The deferral returns the borrower to their LPL before joining CUNA Brokerage in 2017, existing payment and ... it is far easier to he notes that the company spent roughly execute operationally than the mod, which a year of due diligence with an outside requires an underwrite of the loan,” said Matt consulting firm before picking the No. 1 IBD. Tully, chief compliance officer and head of “It frees us up to focus on what we really agency affairs at servicing technology firm feel are the unique components of our Sagent, in an email. value proposition,” Comfort says. “Our While mortgage servicers who tend arrangement with LPL was really customized to borrowers’ payments have been able for what we need so that we could continue to manage their workload to date using doing the things that we’re really good at. ... a mix of cross-trained employees and We felt like that could really move the needle automation, that’s in part because staff who and make a difference, so that’s what’s really handle foreclosures have more time due to exciting about this.” temporary government bans, Tully noted. “To handle an influx of deferrals and mods, some of our servicing clients have SERVICING shifted personnel who would traditionally be handling foreclosures — cannot currently do that work due to the moratorium — to focus Loan them on working with borrowers on retention options,” he said. modifications When the government lifts foreclosure and forbearance bans, servicers may need to consider additional use of technology or are up for the hiring. However, they’ve been reluctant to invest prematurely due to repeated extensions first time in of the moratoria and declines in payment suspension rates. Payment suspensions, known as forbearance, now make up less a year, FHFA than half of the home retention actions by the two government-related agencies the finds FHFA oversees, Tully noted. At press time, the two agencies — which focus on serving By Bonnie Sinnock low-to-moderate-income borrowers — were June 22, 2021 scheduled to discontinue their foreclosure Although the average borrower that ban at the end of this month, and had a suspended payments for pandemic hardships particularly low forbearance rate compared is most frequently choosing to resume to the overall market at just over 4%. their original obligations and pay owed “This is all going to be interesting ... if the amounts later, loan-term change requests for foreclosure moratorium actually expires,” affordability reasons have now grown for the said Richard Koss, chief research officer at first time in a year. mortgage analytics provider Recursion, in an There were 11,434 loan modifications interview. “That’s when you will really know as 130,014 deferred payments in the first what is going to happen.” quarter, as compared to 9,347 and 185,112 (respectively) during the previous fiscal This article originally appeared in National period, the Federal Housing Finance Agency Mortgage News. q reported Tuesday. Mods haven’t been this high since the first quarter of 2020, when they © 2021 Arizent and American Banker. totaled 16,773. All rights reserved. That suggests that while loan modifications are still running at a rate well below normal levels, they are starting to add incrementally

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