Piermont Bank partners with fintechs, but it's not content to stay in the background, only mentioned in tiny print at the bottom of a website.
The New York bank, which
Cai-Lee describes Piermont, which has $117 million of assets, as a “hybrid” bank: a cross between a fintech and a traditional commercial bank. We spoke with her just after her bank partnered with Treasury Prime to provide application programming interfaces to banking-as-a-service clients.
What does it mean to be a hybrid bank?
WENDY CAI-LEE: The idea was to use technology to transform the way commercial banks deliver products and services without sacrificing that face time that's needed with our target demographic, which is small and midsize companies. That's a demographic that requires more handholding.
The premise was, how do we use technology to get the commercial banking products as quickly and as efficiently as we can to SMBs? And to take what technology has done for consumer banking and do the same for commercial business.
What are Piermont’s fintech characteristics?
I'm always hesitant to say we're a fintech because we are a truly regulated bank, fully insured by the Federal Deposit Insurance Corp. But we don't do the manual work legacy banks do. We do commercial loans up to $10 million, and we make those loan decisions in three days, using technology, versus three weeks. We can close a commercial loan as quickly and sometimes quicker than people can close a residential loan.
Did you build this loan technology yourselves, or are you using a vendor?
We do both. We always remind ourselves that we're not a software company. Our goal is not to be a technology player. We partner with application programming interface providers like Treasury Prime to quickly onboard fintechs. If someone already has the technology we need, we work to integrate that into our existing platform and process quickly.
What appealed to you about Treasury Prime?
Treasury Prime’s CEO and founding team came out of Silicon Valley Bank. I really liked that experience from the senior management team. They understand the workings and the pain points of a commercial bank.
What do you use the APIs for?
We're using APIs to deliver our products and services. Right now with Treasury Prime, it's all payments solutions. It's your cash management, wire, automated clearinghouse payments. We will be working with them on developing lending products later.
Can you walk me through an example of how you would offer a new product or service through an API?
Let's say you are a fintech that is providing accounting and banking products like checking and debit cards. All the contractors out there — the plumbers, the electricians and the contractors — use your app. We could set up a payment platform where the electricians can take payments from any customer with a tap on their phone, using Apple Pay or a debit card, for instance.
Usually when we have fintechs like that, and they want to work with a bank, it takes a long time for the bank to onboard them.
But using APIs, the fintech can get onboarded within days instead of months.
Are you aiming to be a bank that backs fintechs, the way Evolve Bank & Trust, Cross River and The Bancorp Bank are?
No, we're trying to take this to the next level. Evolve Bank & Trust, Cross River Bank, and The Bancorp Bank were the trailblazers. But we don’t want a rent-a-charter type of situation, where you only see our name in a tiny font size or it's a mystery where the bank comes from.
We work with Treasury Prime to go to market together. From day one, we work with the fintech directly. So it's not like the fintech doesn't know who the bank is and doesn't touch the bank.
The next phase is that we're going to be the face on their user activity. We will custom design lending solutions for the fintechs.
If you don't push yourself to the forefront, you cannot get to the next stage of creating solutions that make sense.
I have heard some fintechs say that their bank partnerships are limiting because if they want to innovate on something, they have to wait for the bank to execute the idea. And it can take a long time for a traditional bank to create something new.
You just got it. It has to be done more in real time. We have more API partners and platform providers that want to work with us because we're not a legacy bank. We have a simplified and open architecture. It’s much easier for the fintechs to work with us. Also it's a mentality difference. During recruiting, we focused on hiring people that operate like we are a startup, like a fintech. We do everything at the same speed, if not even faster than our API partners.
You mentioned that your core architecture and infrastructure is simplified and open. Can you tell me which core system you're using?
You're going to laugh and I don't want you to judge us. We are sitting on Fiserv Premier. We looked at Temenos. We looked at a lot of younger generation systems. The regulators have a hard time wrapping their head around open architectural platforms. We went with Premier so that the regulators can get comfortable with us.
Are all of your customers fintechs, or is that just a segment that you're serving?
It's just one of the key segments. We have a commercial real estate business. We have manufacturers of lighting systems, for example. We’re doing things like fast account opening, which appeals to everybody.
How do you vet fintechs before taking them on as customers or partners?
With Treasury Prime, we co-developed a fintech onboarding due diligence process.
As part of our due diligence, we look at the management team and the investors. We look at what stage they’re at in terms of revenue generation. Most of them are pre-profit. If they’re pre-profit, what does their burn rate look like? What does their trajectory look like to breaking even? In this whole unicorn-seeking environment, a lot of them focus on, as long as I have a lot of customers to show, it doesn't matter if I'm making money. That may work for other services; it doesn't work well in banking. When it comes to financial services, they have to make money somehow.
