Greater Wilmington Business Journal
wilmingtonbiz.com
May 7 - 20, 2021
Page 5
| BANKING & FINANCE |
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Digital alerts aim to avoid overdrafts
NC customers now have more power over their checking accounts. The bank, which has five branches in the Wilmington market, has announced Low Cash Mode for its customers who use the bank’s JENNY digital Virtual Wallet bank account and money management program. “Low Cash Mode digital offering … is expected to help Virtual Wallet customers avoid overdraft fees through unprecedented account transparency and control to manage through low-cash moments or mistimed payments,” the Pittsburgh-based financial institution announced last month in a news release. While some customers already have access to it, PNC expects the program to launch nationwide in June and July. Simply put, the new patent-pending tech offering lets customers know when a pending payment will cause an overdraft. Customers can choose to pause the payment until sufficient funds are in the account, or go ahead with the payment and incur an overdraft fee. It’s an improvement from the standard bank approach to automatically covering an overdraft but charging a fee, according to Jim Hansen, PNC regional president for Eastern Carolinas. Hansen Low Cash Mode is part of Virtual Wallet’s Spend (checking) account and gives customers the ability to prioritize by determining whether certain debits (checks and ACH transactions) are processed that otherwise might result in overdrafts, rather than the common industry practice of the bank making the decision. Real-time alerts let customers know when their balance is low and – if it is negative – Low Cash Mode provides a grace period of at least 24 hours to prevent or address overdrafts before fees are charged. “It’s something we’ve been talking
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about for some time and had the technology to do,” Hansen said. “COVID in particular has increased the growth of digital banking: 79% of our consumer transactions are now digital.” Hansen added that PNC is also in the midst of regulatory oversight related to its planned acquisition of Houston-based BBVA USA Bancshares Inc. and its U.S. banking subsidiary BBVA USA. “That pushed us to get this product capability in our clients’ hands,” he said. “While overdraft protection offered across the industry today allows critical payments to be processed, overdraft fees are a systemic frustration that drives dissatisfaction for all customers regardless of their financial situation.” PNC expects to help its customers avoid about $125 million to $150 million in overdraft fees annually, the release stated. In a pilot involving nearly 20,000 customers, Low Cash Mode saved participants more than 60% in overdraft fees, according to the release. PNC’s full year 2021 revenue outlook anticipated this fee reduction, and as a result is not impacted by this change, the release further stated. “PNC is fortunate to have a diversified revenue stream. We’ve been developing this product and forecasting our revenue numbers for the year,” Hansen said. “We are forecasting a $125 million to $150 million drop per year as a result of Low Cash Mode. We’re not significantly impacted by this and, long term, we think it will grow our client base. Moreover, we believe we believe they will be very happy clients.”
Live Oak reports lower losses than expected During Live Oak Bancshares’ first-quarter earnings call in late April, officials announced that their actual losses as a result of the COVID-19-related economic downturn were far less than anticipated. Chairman and CEO James “Chip” Mahan said that Chief Credit Officer Steve Smits had predicted the bank’s losses from loan writeoffs could top $100 million. The bank identified and isolated six of its lending verticals at greatest risk for economic impact – they came to be known as the COVID 6 – and gave special attention to those, including
making numerous site visits. The COVID 6 industries are entertainment centers, hotels, wine and craft beverages, educational services, fitness centers and quick-service restaurants. “I was probably in the $34 million loss expectation in the early days, but today, we’ve taken $11.6 million in charges related to COVID. However, $9.8 million of that was related to our hotel markdown,” Smits said during the call. “So if you exclude the hotels, we’ve charged off $1.7 million in loans that are directly a result of COVID stress. And of that, $1.2 million was in the COVID 6 industries and only $600,000 has been in the non-COVID industry. “I do think it’s important to note, however, that we’ve already reserved an additional $5 million on top of that for loans that were impacted by COVID. They may ultimately turn into charge-offs, but we’re working very closely with them,” Smits continued. “We’ve also reserved another $10.8 million for loans that are experiencing some level of stress due to COVID, but I’m pretty cautiously optimistic as they are trending favorably today, so the expectation is we can avoid losses on most of this.” Smits acknowledged that businesses are “not completely out of the woods” and that the bank does need to be prepared for “potential surprises,” but he said that current information leads him to believe that charge-offs for the remainder of 2021 will be more reflective of preCOVID levels. “We continue to work with borrowers still experiencing stress due to COVID, but at the same time, we’re seeing a notable gain in credit quality across the rest of our portfolio,” he added. “Many businesses are actually stronger today than they were pre-COVID and that’s thanks in large part to the government programs.” Mahan noted that two of the COVID 6 industries – restaurants and wine and craft beverage – may get assistance from the $28 million Restaurant Revitalization Fund that is being administered by the Small Business Administration. Smits said that most of Live Oak’s quick-service restaurant borrowers have fared well during the pandemic, thanks to delivery and drive-through models. But while those businesses may not even need a Restaurant Revitalization grant,
the bank’s wine and craft borrowers could receive critical help from the fund. “This program can be very meaningful to really our smallest breweries who have historically relied pretty heavily on on-site sales in taprooms, for example,” Smits said.
Fintech firm Apiture partners with Zelle Financial technology firm Apiture has inked an alliance with Zelle, the largest bank-sponsored person-to-person payments service in the United States. The new partnership, announced in a late April news release, will incorporate the Zelle feature into the firm’s Apiture Xpress platform. Zelle offers a secure and easy way to send and receive money directly between bank accounts in the U.S., typically within minutes, between enrolled users, the release stated, adding, “By using an email address or U.S. mobile number, customers can send, request and receive money or split the cost of bills with those they know and trust, regardless of where they bank in the U.S.” The new partnership will result in an enhanced experience for customers of banks and credit unions that use Apiture Xpress, Apiture’s Chief Operating Officer Chris Cox said. Currently hundreds of financial institutions and financial technology partners use Apiture Xpress. “We saw an effortless synergy between Apiture and Zelle [that complements] Apiture’s mission to empower financial institutions to accelerate their digital transformation. It’s part of our effort to ensure that our clients have all the capabilities they need to serve their customers,” Cox said. “Zelle provides them with an option that allows their customers to receive and send money to and from other people. Zelle will be inside the mobile banking [solution].” Cox said that Zelle is not yet coupled with the company’s Apiture Open platform, which primarily serves larger financial institutions, but he expects it will be. Wilmington-based Apiture, a joint venture between Live Oak Bancshares and Atlanta-based First Data, was established in 2017 and now employs 233 people at its local headquarters and its Austin, Texas, offices.
