Transcription:
Penny Crosman: (
Welcome to the American Banker Podcast, I'm Penny Crosman. The people who willingly sacrifice their lives for their country, military members, are also the most likely to be scammed or taken advantage of financially. According to a recent AARP survey, service members, veterans and their families, are nearly 40% more likely to lose money to scams and fraud than the civilian population. Military bases are often surrounded by pawn shops, payday lenders, and used car dealerships. The New York Times recently reported that at Fort Campbell in Kentucky, 40% of the soldiers have at least one predatory loan. We are here today with Jill Castilla, president and CEO of Citizens Bank of Edmond, who is a veteran herself and who has launched a new digital bank designed to help military members with their finances. Welcome, Jill.
Jill Castilla: (
Hi, Penny. It's great to be on. Thank you.
Penny Crosman: (
Can you tell us a little bit about your military service?
Jill Castilla: (
Yeah, so when I was growing up, I grew up with a single father and we really didn't have the means nor support to go to college, but I did find a way, after working in the grocery store for a couple years, to be able to pay for college, and transfer with the grocery store to, the new city where my college was located and trying to work and go to school, I quickly ran out of money trying to pay for school in that manner and just happened to carry groceries out for an Army recruiter right when I was about to have to leave school, who said that, if I enlisted, then I would have the opportunity to earn the GI bill and potentially scholarships after I completed my enlistment. And I literally went the next day and enlisted into army service and became a construction surveyor at the age of 19. I went to basic training and my AIT service and stayed up Fort Linderwood, Missouri, and then went into the Oklahoma National Guard after that point in time and met my husband when I was able to return to college. He ended up serving for 28 years, in the Army and the Army Reserves. And then we have a son who is on active duty in the Army's West Point graduate, and a daughter who is currently at the Naval Academy.
Penny Crosman: (
It's impressive that you're all so involved. I would think that when you're on a tour of duty or doing training or just in the military, it might be hard to manage your finances, like even finding the time and the wherewithal to pay your bills and keep up with your debt and things like that. Is that true?
Jill Castilla: (
It is. Especially when I went in, there wasn't any kind of digital access, so my money was actually coming to Citizens Bank, was direct deposited there, and then we would go and cash our subsistence allowance on base. And during that time, a family member wrote checks on my account the entire time that I was in training when I returned from the service to buy new clothes, cause I had bulked all up from carbing up in the military, I found that the $15,000 I thought I had saved for college had been, someone had had written checks on my account and used that. And I didn't know that forgery would, the bank would have to reimburse me that amount, so I had to start over again. And unfortunately, that's the story of so many service members and that with your away from your account or your phone and the ability to digitally monitor your account and activity and it's easy, you get taken advantage of. And as you mentioned in your introduction, military training bases especially are usually surrounded by payday lenders, pawn shops and, and unscrupulous used car lots that can take advantage of that service member. An entry level private makes just under $22,000 a year. So, making $11 an hour. Many are coming like me from desperate situations, with little financial literacy tools surrounding them when they enter the service. And so they're very vulnerable to someone taking advantage of them.
Penny Crosman: (
Yeah. Wow. What a story. What was the intent of that family member?
Jill Castilla: (
I'm not sure. It was a very close family member and they didn't spend it all at once. They just spent it over time. And so I think unfortunately, a lot of young people face untrustworthy family and friends that can take advantage of some situation, either because of their own financial insecurity or just not having those lines and boundaries between financial assets of a child.
Penny Crosman: (
Wow.
Jill Castilla: (
Yeah. So this is very close to my heart and something, it's so neat to come full circle to potentially be able to protect some service members that may be in similar situations.
Penny Crosman: (
Yeah. And given that the salaries are pretty low, as you're describing, why are military members such a magnet for these kind of sketchy financial providers and scammers?
Jill Castilla: (
I think a lot of it comes from your entering the service usually at a younger age. So in my case, I was 19 years old, and that's not dissimilar to military recruits nowadays, usually you're targeting between the 18 to 25 year old that's enlisted. So they don't have a lot of experience with finance, it may be their first job. It may be the first job in their family that someone has. And so there's just not a lot of sophistication around the management of finances. Whenever we went to one of the training bases, they said 75% of their recruits come to the training site without having a bank set up. So even though the recruiter has given them direct deposit forms and counsel them on what they would need to bring to the recruit to the duty station that they're first going to attend basic training, 75% of them have to be bused to a local bank, to be able to open an account because they're unbanked. And so it's just whenever you're looking at military service in that age group, I think the lack of sophistication, I can really only speak to my own experience and just that worldly knowledge that somebody may take advantage of you, you think that everyone has great intentions and that these are individuals that entering the service that obviously are seeking a high degree of integrity and ethics, and they may make that assumption that everyone around them or anyone serving the military would have those same intentions.
Penny Crosman: (
That idealism. It's interesting. Does the military or the government more broadly do anything to try to help?
Jill Castilla: (
Actually the military and the government both are exceptional in how they support the service members. Just recently the sergeant major of the Army tweeted out a series of tweets showing the resources, financial literacy tools, available through the government and other nonprofit service providers. Most of the branches have some type of loan relief program where they'll provide interest free loans on an emergency basis to service members. I'm really familiar with the Army's program. I get to serve the Army as a civilian aid to the Secretary of the Army. And so I get to learn firsthand a lot of the tools and the priority that the Department of Defense and specifically the Army has placed on educating our service members, and the survey results have shown that they're becoming much more educated. There's also been laws that have passed that have protected the service members.
Jill Castilla: (
So we talked about payday lenders previously and those that kind can take advantage of those, especially new entrant recruits. They are now capped in how much they can charge service members. I think it's 36%, as the limit. But still 35% is a very high interest rate that you could potentially charge someone. And so now you're seeing robust digital, loan acquisition tools are similar to payday loans, but the military and the specific branches provide a lot of education around, and it's decreased some of the usage, but now that they stay right below and there's that legal limit, there's a lot less monitoring availability of some of these, payday lenders. But the military really does a great job both in the new recruit through career counseling and for veterans, but they still end up being the most economically vulnerable.
Jill Castilla: (
And I think it really goes back to that idealism that we were talking about before. You're part of an organization your entire career that is founded on integrity and ethics, and so you don't realize that you're potentially being taken advantage of. There's also a lot of vulnerability when it comes to spousal employment that can put military families in vulnerable situations. And so that can make it where you have stress finances and where you have to turn to other, not your typical kind of lending solutions, to be able to help with economic relief.
Penny Crosman: (
I know that you are just about to launch a digital bank for military members. Can you tell us a little bit about that?
Jill Castilla: (
Yes, and I have to give credit to our team because it only appears that I can do so much because we have a team that's really amazing. Over 20% of our team has served in the military or is currently serving, and then we have many military family members. So this is a passion project and they're very focused, and so it makes me look like I'm doing a lot more maybe Penny than I am. So we were approached last year with a potential partnership to launch a digital bank. We're a small community bank in one location, and we're trying to be mindful on our growth. We're not looking to be a $5 billion bank in five years.
Jill Castilla: (
We just want to be an organically growing bank. But whenever this idea of a potential way to help our service members, especially those are entry level service members, it just felt so right with our team that it just became part of our DNA that this is a yes for us. And so when we found the partner of Nymbus, and that was really interesting in how that came to be, I think the universe conspires for a project to come to fruition even when it looks like you're getting stop signs. And that's certainly what happened when Nymbus, they are equally passionate about this project and want to find a way to make it work. And so with this digital bank, we're able to have a standalone core, state of the art digital banking experience with the highest level and most robust support system that we could ever imagine as a small community bank for our service members.
Jill Castilla: (
And that's really through the power of members that we're able to get to that solution. We're really excited because they'll have lots of opportunities for the service member to immediately be able to open their account whenever they're at the reception station or with a recruiter be able to produce their direct deposit form for the military just within a couple minutes. And then they're not having to delay getting that first paycheck. So right now, when they have to open an account during the recruit reception environment when they first come into the military, they may miss one or two paychecks waiting for that direct deposit to be processed. And we just think we can make that process better for them. We also can accelerate their ability to have access to their paycheck. We're excited to be able to offer a really cool savings tool that will have attached to it a cash secured credit card that will allow the service member to build and monitor their credit and really get a strong credit score, even though they're at potentially the lowest levels of our military.
Jill Castilla: (
And so that they're really set up. So when they want to buy that car, when they finish their training, they've got some savings, they've got a great credit score, and they can go and actually be competitive and have a conventional process in buying a car or whatever they choose to do, rather than potentially being vulnerable to someone with dubious intent.
Penny Crosman: (
That sounds pretty useful. How are you going to tell military recruits about this? Are you going to be able to have a presence at some of these bases or can you get lists or something?
Jill Castilla: (
We want to be really respectful. There's a great military banking community that already exists, support spaces and what we think we can provide as a way for those deposits potentially to come to those current banking partners, because again, we're not trying to grow as a bank. We would like to be a conduit for those banks to be able to provide the highest level of digital access and management for service members, but then they could keep the deposit accounts that they've worked hard over decades to be able to have those relationships with the banks, with the bases. So we also will be talking with recruiters and getting it in their hands so that they're able to easily allow the recruit to scan a QR code and complete the application process very expeditiously. And so that'll be a mechanism that we use.
Jill Castilla: (
We're also, I sit on the board of the military bank association and there's great tools in which the Department of Defense provides a list of banks that meet certain qualifications for veterans. And we meet those qualifications and are part of that list that the Department of Defense provides. So there's lots of mechanisms we can use without really being a competitor to the current military banks serving the community, but be able to be able to serve them better and prepare them and the soldier to potentially use those same banks for loans in the future as they go and buy a car or a fancy stereo system.
Penny Crosman: (
So this would be sort of like a digital face to some of these banks and that will help make them more accessible, more understandable to new recruits and help them understand what's available.
Jill Castilla: (
That's right. So you can think about it like a Chime that has several partner banks, but we would actually be the fintech rather than the bank. Of course, we can be the bank with it, but really this is an opportunity we think to be able to provide great service to the military community, consistency of service where after they PCs overseas or stay locally, that the community bank then is able to maintain that account and that relationship by offering the highest level of technology available, and be able to really compete to wherever that soldier goes in their career to be able to keep them throughout their career. so that's where we're really excited about that. It's not really just for our bank. It's something that we can be inclusive with the rest of the military banking community and be able to ensure that all of our service members are effectively served.
Penny Crosman: (
And is Nymbus providing all the technology or do you have to do some work integration work and other sort of technology upgrades to make this happen?
Jill Castilla: (
It's very little. It's a standalone system. So we do have the integration with our core, that's really the only step that we have to ensure, and then we're responsible from a compliance standpoint. So, doing all the due diligence, ensuring our disclosures are appropriate. But the incredible partnership with Nymbus allows not only the technology solution, but they provide a call center that's exceptionally robust, they provide us incredible market research data where it's, we are only a one location 55 team member bank that's $350 million in asset size. And we have access now to digital marketing, digital research, and data analysis that we would never be able to access as a bank our size. So they're really a bank in the box. And then we get to be the financial institution partnering with them, both from a passion standpoint as well as, being able to hold the deposits and provide the compliance expertise.
Penny Crosman: (
What is the timing on this? Do you know when you'll be able to go live?
Jill Castilla: (
Yeah, so we are on track for, early 2023, then full deployment, we'll have friends and family and likely some of our military community participating in some testing at the very beginning of 2023. We're well on our way though. We've been designing this for over a year now, and it's mainly getting all the screws all in there tightly and, and then we're ready to go.
Penny Crosman: (
So that would be a good thing to watch out for and maybe we'll return to that when you actually go live. I know you always have this sort of broader awareness of what the industry is doing. Do you think that the traditional financial industry is doing enough to help military members? And, if other banks like yours want to step up, are there things that you think banks could be doing that maybe they're neglecting or they just haven't really thought about?
Jill Castilla: (
There's an exceptional community that exists that serves military bases. but where we I think can improve, is that it becomes much more niche for serving veterans. And I think as a community of banks, we believe that we can kind defer that. There's Navy Federal Credit Union, Pentagon Federal Credit Union, there's these players in the military community space already that it can feel like that pie has already been split off to just those really big players when in fact, we all have veterans in our communities that need to be served, that have special opportunities and needs. I think one of the big opportunities we have as banks is we recently expanded our vision for what a team member can look like at Citizens Bank.
Jill Castilla: (
Again, we're only 55 team members in the middle of Oklahoma, but we just hired a military spouse who lives in Germany to be a mortgage processor on our team. And so thinking about military spouses, even though we have under 4% unemployment as a nation military spouses, most recently their unemployment rate was at 40%. And to think about how we could be a resource. I was sitting next to Brian Moynihan the other day at a council meeting, we're talking about the use of military spouses and, and he was like, Wow, this would be a great opportunity for us as we're all looking for exceptional team members. I think opening to thinking about if we're open to remote really marketing to the military spouse community as potential employees, helps improve the financial health of veterans and service members, which so then overall helps potentially their banking relationships as well as just the satisfaction they have in our military.
Penny Crosman: (
Sure. And is that low employment rate because military members tend to move around so much that it's hard to get a job when you're moving every six months?
Jill Castilla: (
Yeah, there's a lot of challenges. Like, if you're overseas and say you're a lawyer, you can't necessarily work in the country in which you are stationed at with your spouse, or civic and other, if you're licensed, there's a lot of the federal government, pass as part of the, allowed for transferability and reimbursement of expenses when a spouse moves that's licensed from one state to another. But states haven't necessarily recognized that our daughter-in-law is a CNA and she graduated from school in Kansas and it's easy to pass that certification. She can do it easily, but the rules are different in New Mexico where she's going to be stationed. And so that cost a couple month delay before she could get hired and, and some vulnerability there, potentially, for other service members maybe there in similar situations.
Jill Castilla: (
So, the government has really tried to do that and it's great that we have the independence of the states to make these determinations, but can make it really difficult for service members of their families. There's also a perception that they may not be here that long and so then they may not, it's not as easy for them to get a job. That was my case when we went to Hawaii, it was really hard to find a job because there was a little bit of a bias against military spouses at that time. I think with remote capabilities, those concerns can be just completely eliminated. And then another big hindrance is childcare accessibility. And so, hopefully that will continue to improve as covid allows businesses to recover and childcare centers to come back. But that's also a big hurdle for spouses and again, remote capabilities to help eliminate that barrier as well.
Penny Crosman: (
Sure. So yeah, the challenges are almost infinite for service members, it seems. Well, Jill Castilla, you've been a wealth of knowledge. Thank you so much for coming on and sharing all these different views with us and the information about your new digital bank. It's always a pleasure to have you on. And to all of you in the audience, thank you for listening to the American Banker podcast. I produced this episode with audio production by Kevin Parise. Special thanks this week to Jill Castilla at Citizens Bank of Edmond. Rate us, Review us and subscribe to our content at www.americanbanker.com/subscribe. For American Banker, I'm Penny Crosman and thanks for listening.