Piermont Bank in New York has forged an unusual path under the guidance of Wendy Cai-Lee, a veteran of commercial and investment banking.
The company wants to be the go-to bank for fintechs, according to Cai-Lee, which is why she built Piermont for banking-as-a-service. But Piermont does not become invisible by renting out its charter or passively taking royalties in exchange for access to its APIs. Instead, the bank fosters a deeper relationship with the companies it serves, helping them navigate regulations as only industry experts can.
“I was seeing the impact on the banking industry that fintechs were making,” said Cai-Lee, who left East West Bank in 2017 to start building Piermont. She is currently Piermont’s CEO. “To sit there and think we as banks could just keep our heads down and be fine — I mean, it may be fine for a little, but at least during my career, it certainly won’t be fine.”
She added that the consumer side of things had already changed by the time she had her mind set on Piermont, naming the online retail giant Amazon as a primary disruptor. “How banking clients carry inventory and their receivables have all changed,” she said. “How is it that we don’t have to change as banks?”
Cai-Lee said 2021 was the year her company went from “zero to one,” a reference to the book by the same name and another way of saying she has created something new and scalable. Piermont opened in 2019, but the bank went to market with its major offerings this past year.
Last year, Piermont onboarded 30 fintechs and its assets grew more than 120% to $364 million, while deposits grew roughly 137% to $313 million. It also launched its lending API BancFi and initiated a partnership with the banking-as-a-service startup Unit, which helps companies embed financial products into their customer experiences.
This gives Piermont customers the ability to issue branded debit cards, enable invoicing, process deposits and incorporate lending products into their apps. According to Cai-Lee, last year Piermont graduated from processing a couple of hundred transactions a month to 125,000 a month. The bank can now onboard a fintech in four weeks.
All of Cai-Lee’s accomplishments have led to her being recognized by American Banker as part of its Digital Banker of the Year for 2022 coverage.
The difference for Piermont that has allowed it to more than double in size has been “technology, focus and their speed to market,” according to Steve Didion, co-founder and portfolio manager of the hedge fund JCSD Partners, an investor in Piermont.
“Piermont is one of the — if not the — only pure player in banking-as-a-service, since the bank was built from the ground up to execute on it,” Didion said. His fund has invested in multiple banks that serve a similar role, namely onboarding fintechs and providing them the means to offer banking products and services.
Didion said small and midsize fintechs flock to Cai-Lee and her team for a variety of reasons. But regulations are a big reason.
“Banking is so specific to a regulatory structure that it is not user friendly,” Didion said. “You have to have gone through it to see how important it is to live within those rules.”
Cai-Lee has gone through it. She started her career at Chemical Bank, which is now known as JPMorgan Chase. She also had a one-year stint with Citi and spent five years turning around underperforming divisions of East West Bank’s commercial and consumer banking practices.
Cai-Lee’s familiarity with the regulatory landscape also attracted the health care savings platform First Dollar to Piermont in June 2021, after its original partner, Radius Bank, was acquired by LendingClub.
Colin Anawaty, First Dollar co-founder and chief product officer, said Cai-Lee and her leadership team impressed him. Piermont’s “whole team is aligned on the mission and vision of serving fintechs,” Anawaty said. “That allows us to get the things we need that are specific to our business and get it out to market as quickly as possible.”
Piermont works as a close partner with its clients rather than acting as an invisible platform that offers only a set of typical products, Anawaty said. First Dollar leans on Piermont for regulatory compliance, fraud mitigation, credit underwriting and other services.
“That’s what makes a great relationship with a bank,” Anawaty said. “They’re not just there to hold deposits.”
In fact, First Dollar’s partnership with Piermont involves custom solutions rather than the standard products the bank offers — a crucial capability considering the regulatory structure the health wallet must face.
As a company at the intersection of finance and health care, First Dollar must comply with a robust set of regulations, and Anawaty said Cai-Lee, as a veteran of the banking industry, has an “appreciation” for that type of structure.
Cai-Lee said her banking background complements the fintech founders with whom she works. That crowd, she said, has “more creative people, because what fintechs do better than traditional banks is create that much more relevant user experience.”
Given her experience working at large banks in the past, Cai-Lee “realizes that she’s managing much more than growth of a lending and deposit business,” Didion said. “She’s managing an entire organization.” As such, she has “surrounded herself with good people.”
Those good people, Cai-Lee said, include the fintechs they serve.
“We look at our fintech clients as our partners,” she said. The bank is focused on small and medium-sized partners, she said, so the size of the institution means less than the value it creates and its staying power. “We want to bank people and partner with companies that are going to be around,” she said.
