Solutions for Sucess A Wolf in Sheep’s Clothing

Solutions for Success:

A Wolf in Sheep’s Clothing

The Solutions for Success features timely issues and best practices from CBA Associate Members. CBA recently met with FITECH employees, Tanner Rizenbergs, Manager of Financial Institutions, and Sarah Humphrey, Director of Sales, to learn about the ways community banks can both identify and protect themselves from encroaching fintechs.

The age-old idiom, a wolf in sheep’s clothing, epitomizes today’s fintechs and the risk they pose to community banks. Fintechs may appear harmless, but they are powerful, and they are rapidly taking away both commercial customers and depository fee income from community banks. And in many cases, community banks are unknowingly helping them to do so.

Detecting the risk

As today’s merchants embrace new technologies, their desire for convenience is creating a threat to traditional banking models as providers like Square, Quickbooks and PayPal now offer payroll solutions, take payments, and even make loans. With these services—the backbone of community banks—fintechs are blurring the lines for merchant services and jeopardizing your long-term relationship with business customers.

Rethinking treasury management

When was the last time your institution performed an ACH scrub to identify where deposits are coming from?

Community banks across the country have spent millions of dollars integrating with Quickbooks, but this accounting solution partners with Green Dot Bank, and is providing competitive banking services such as interest-yielding accounts, ACH transfers and Visa debit cards directly to the commercial accounts being shared with them. Are you making it too easy for your merchants to go elsewhere? You’re not alone.

Fitech recently helped a community bank in South Carolina identify that 800 of its commercial accounts were using either PayPal, Square or Quickbooks. This lost business equated to nearly $27 million in initial deposits and $60,000 worth of merchant fee income in one year.

If your commercial account portfolio is stagnant, or declining, odds are your customers are going elsewhere. Find a payment partner to help you compete in the marketplace and insulate your institution against customer attrition, not poach your customers. Banks that control how their small business customers get paid, control where the deposits go.

Knowing fact vs. fiction

Fintechs and fintechs-turned-bank, like Square, provide rapid onboarding with no monthly fees, thereby eliminating the most common barriers to payment processing. However, there can be a downside. Because there are no pre-qualification criteria, Square often works with higherrisk businesses and has been known to hold merchant funds, sometimes for days or weeks, without notice. Additionally, Square charges a higher flat rate than other processors, and requires the purchase of equipment that cannot be used with other systems.

Fitech, as an example, offers multiple ways to set up a merchant account, including a digitally secure application that can have the merchant accepting payments in as few as 24 hours. Plus, both pricing and billing are fully transparent, and funds are deposited the next day, with no unexpected account holds. Moreover, our non-proprietary equipment allows merchants to choose their processor; they are never “locked in” because of the equipment or software they use.

Finding the right partner

Speed and convenience are important in a competitive, technology-driven environment, but you can’t forget about service. Your payment partner should be an adviser, an advocate, working in tandem with your institution to create a roadmap to reinforce your brand and to deliver a superior customer experience 24/7. If you aren’t taking care of your customers’ needs, someone else will.

Fitech, like the CBA, focuses on the interests of community banks. For help crafting a payment strategy that keeps you ahead of the competitors —both known and emerging — visit Fitech.com.

Tanner Rizenbergs

Manager, Financial Institutions

Sarah Humphrey

Director of Sales