Diverse-Owned Businesses

Transcription:

Abid Hasan (00:09):

Okay, we can get started. So welcome here. Thank you so much for joining this very, very interesting topic of diverse owned businesses, and especially now given in the light of a lot of changes that have come in the Community Reinvestment Act, the revisions that were announced last month in October. My name is Abid Hasan, I'm the Head of Product at Uplinq. Uplinq is a credit decision support technology, and we have helped lenders in the US and globally underwrite 1.4 trillion, so trillion with a trillion dollars leveraging 10,000 plus data sources, which is around 12 billion data series in the US alone. One of the key ways that Uplinqing is helping lenders manage this perceived risk in diverse and LMI, low and medium in income communities is by helping them assess the true economic potential of small and medium businesses. And how do we do that? It's going beyond the traditional sources of data by looking at things that are not captured on the balance sheet.

(01:12):

So for example, what is the resilience of the business? What is the demand and supply factors that the business is operating in the community they operate in? So understanding the difference in the communities, understanding how that plays a role in assessing the risk and understanding the true potential is what Uplinq is doing. And the whole idea is to bring transparency in lending, both for the lender and the business alike. But without further ado, I would like to welcome our esteemed panelists. So thank you so much for embracing us for this panel. The first one is Ronald Milsap. He's the director for US Zero Barriers to Business at BMO Bank. Thank you Ronald for joining us.

Ronald Milsap (01:53):

Pleasure to meet everyone.

Abid Hasan (01:58):

To Ronald's right is Sineria Ordonez, who is the VP of External Affairs and National Hispanic Development Manager for Comerica. Thank you, Sineria. Thank you. And last but not least, Betsy Varvin, who's the president of SMC Marketing, who's also going to moderate this session. So thank you Betsy, and over to you.

Betsy Varvin (02:18):

Thank you very much. Thank you. Well welcome everyone. It's great to see so many people here and we're sure glad you're here and glad you're enjoying the conference today. You're going to hear from a panel of experts as was introduced about their programs for diverse small business owners. And before we begin, just a little curious, we're interested in learning. How many of you have specific programs for diverse or minority small business owners for your institution?

(02:53):

So we see a lot. Good. How many of you are thinking of having a program for diverse or minority but haven't done so yet? Good. So we're getting some traction in that area too. I know that this has been an issue that we're familiar with for years. Having programs for minority, small businesses may be new to us in terms of the small business banking area, but certainly looking at helping minorities has not been something we haven't done in banking for so many years. I can remember I came out of Great Western Bank and didn't we all at the end of the year kind of go through the CRA regulations of, well, did we do this? Did we do this? Have we met this regulation? Have we met our goals? But it's more than that. And that's what this particular session is about. It's really learning how to have a conversation with the small business owners and learning what's important to them.

(03:53):

What are their needs? How can we really help them aspire to and realize their goals? And today as it was introduced, we have Ron Millsap of BMO who has zero barriers to business and we have scenario or ordonez, if I pronounced it correctly, and she's in charge of Hispanic business for Comerica. So both of them have a little bit different perspectives. Both of them, however, have national responsibilities when it comes to really ensuring that this initiative is followed. And how they do that is what we're here to find out because some of them will do it differently. I know that there's some practices, we've heard a lot about pitch contests for women. I don't know how much they're doing pitch contests for different diverse communities. I know there's one in New York that's doing something like that, but why is that important and how are we servicing them? What can we do better? How do we make sure that the front line, we may have this wonderful initiative and we may have the best of intentions, but are we really making that happen when it comes to the front line? As we begin our program today, one of the things I want to ask our panelists about is what have you found that is contributing best? How did you decide to have a program that really addresses nationally diverse small business owners?

Ronald Milsap (05:30):

I can start with that answer. And Bemo in 2020 made very bold commitments to be able to support our community. It's a five year multi-year strategy across every line of business. And I think anytime you set a strategy, it really boils down to the leadership and the accountability that's driving that strategy and how it's moving throughout the entire organization. So the commitment was internal and it was also very public. Today, that's our BMO Empower 2.0 program where we have 45 billion in commitments across our footprint. And in that design of that type of commitment is driven through your supply. Diversity is driven through your hiring efforts. So our zero barriers to inclusion publishes quite broadly how we're doing on hiring efforts. I like to think I'm a byproduct of BMO's strategy of going out and identifying diverse talent and bringing them to the bank. I spent the better part of 20 years of my career in community banking.

(06:26):

So I've lived this journey of being in community serving black and brown businesses and doing it from a real integral standpoint where I know that I made a difference and I felt that difference in a small community banking segment. So when BMO put that out there for the universe, it drew me in to really explore career opportunities at BMO. So I was ecstatic not only to get hired by BMO, but to lead this program, which I felt like coalesced a lot of my skills over my career in banking. So I was a CRA officer for a smallish community bank based in South Holland, Illinois. And I was doing some micro lending on a very small scale, and I saw BMO stepping into a place traditionally where large regionals and large nationals at the pace of where we lend. So ours is a very kind of micro lending program where we're lending up to $50,000 supporting these diverse business segments.

(07:17):

Banks of our size typically don't do the micro loans, right? It's a lot of risk associated with it. It's a lot of time involved in it, but we invested over $6 million to develop a platform that could be really efficient around how we service that client. The program sits in our branches, so it's connected to the retail staff that touches that customer. And when you put a banner out that says that you want to attract this type of clientele, they hear that message loud. I learned early in my career in community banking, the street talks. So as I think about colleagues at some of our larger institutions, I think about small businesses that we've encountered. They are hearing more and more about the good that BMO is doing through these programs. So there's a lot of intentionality. I talked about having leadership at the top that really drives it. So we sit in our business banking segment. This isn't a part of our corporate philanthropy. This isn't set off in a different area of community development. It's attached to the business line. So it's the impact that we're making on those small businesses that's driving real growth to the bottom line of our business.

Betsy Varvin (08:19):

That's a really good point that you make. It's attached to a business unit. It's not just part of a donation. And that's how I think we have experienced so much of what we've done in the diverse communities and banking for so many years, and that's where the CRA efforts really we're starting to take effect. But you're doing something that really translates into the branch experience, and that's what I want to talk to Sineria about because what she's doing is a national profile. And explain to us how what you're doing for Hispanic business development works with the small business banking community.

Sineria Ordonez (09:02):

Yes. Well, hello s it's a pleasure to be here. So first I want to kind of set the stage on what we do and under the umbrella that we work, and then kind of lead into what my space looks like at the national level. Perfect. So I actually have two roles rolled into the corporate responsibility. In the corporate responsibility. We truly believe that raising expectations for the community that we walk with them, that we understand, that we listen is synonymous to how we build business relationship. It's not one or the other. It's congruent. It's the right and the left. And so if we can harmonize that, that's where corporate responsibility comes in. And we're not a silo. We come and work with other business lines as well because at the end of the day, we want to make sure that we have all the resources that are coming together to best use and best serve that community, that business owner, because there's so many levels of intersection when it comes to our diverse business owners.

(09:59):

There's two different things happening. One, the expectations of what the bank thinks, a business where they should be, and the other when we heard it earlier on. And the second one is where that business truly is and what it would take to get them to that measure of growth, not in comparison to where the bank wants it to be, but in comparison to their own vision and goals. And so those are two very different points that if we can align them together, then we can say that we are doing the right things for the right reason for the business. So on the side of external affairs, that's the kind of work that we're leading the CRA, the community reinvestments. Yes, those numbers, those metrics are important, but we're not talking about a data centric point, we're talking about a human. And so when we talk about the differentiator or value proposition, it's that human capital when we go out into the community.

(10:48):

So the second thing, the work that I kind of help lead is on the national scale, our Hispanic Latino segment of the population. And so what that does and what that looks like is do we really understand the needs of our Hispanic Latino businesses? Do we know where they are? Do we know how to champion them? Because we know that the level of let's say potential is there. So can we help them walk again for their own measure of success, which can be a little different than what other expectations are. So if we believe in that potential, can we erase the nebulous process? That can be the banking industry that takes people, that takes you knowing and understanding your audience. So that's where I can come in and help the bank in a community mindset, help them remove those nebulous nuisance. Is that correct in English nuisance into what we're really providing for the businesses or for the group.

(11:56):

So we often say, oh, okay, we want to build a relationship. We want you to build a relationship with the banking institute before you need it. But do we have that trust that we can go to ask the questions that get us to that level of growth? And so if we are really serious about the work that we're doing, then we are asking the right reasons, the right questions, because we want to make sure that they're measuring that growth. And so the way that I come in is helping or coming with our business unit line. You've heard it from Brian earlier today, the drive and the work that they're doing in small business. And what that does is open up opportunities for businesses that there are less hurdles for them to go through so that they can get access to information to the people, to the human capital that they need. That Sandra Fge who is sitting here, that's Theresa Basan working with us to understand what are the other needs. And then on my end is are we building out the programming that is powerful, intentional, innovative? And guess what? In order for you to get to innovation, you have to understand your audience and what it needs. And so whether that is in a dual language because that's another piece depending on the market that you're in. And so that's where I can kind of help the bank with the assessment needs of the communities that we're serving.

Betsy Varvin (13:21):

So how do you make that happen in the branch? I mean, when we're looking at a small business owner coming in who is black or Hispanic or Asian or Filipino or whatever the diverse business owner is, how do we make sure that bankers are really prepared to offer them not only lending ideas, and I think we heard that this morning. It's not just a list of products that the bank has, but what kind of resources they're coming in for. Again, coming in and experience the fact that you're talking to people who most likely could have a personal relationship with the bank already a consumer banking relationship, but now they're also starting as perhaps a sole entrepreneur and they're spending their time preparing this business. How do you make sure that they have the resources, whether it's organizations that they could learn from, the networking effect, the mentoring effect, maybe they're new, they don't have any idea of how finances are set up for a business, what their responsibilities are, what banks are going to look for eventually from them, from their business reports. How do you make sure your frontline knows that?

Ronald Milsap (14:39):

I like to chime in here. Sineria hit it right on the head when she talked about kind of meeting the community and the customer where they are, but then also having a strategy that builds people and puts the right people in place to actually execute it. I talked about the commitment around our lending goals and things that we're going to do to the community benefits agreement, but there was a big commitment to people. So I have a very diverse team of nine business development offers that I lead across our 22 state footprint where we have this program deployed, all very experienced bankers that have had roles in retail as well as roles in our corporate area. So we're constantly building tools to not only support our internal staff, but also building tools to support our external customer training, robust training that's there for everybody to actually take up in their job responsibility.

(15:36):

And it rolls out every year. So they have to recertify in that training to understand the diverse customer that they're serving and the product and the program. It's no surprise that retail is a little bit high turnover. This work is very hard work, make no bones about it. So those nine staff, they're constantly engaged with our partners across our footprint. They're advanced three or four times a night engaging with community partners, but it's passion work. When you hire them, you ask them what is it that drives their why and their purpose for doing this work. So to a person on my team, they all enjoy working with community partners. They enjoy small business. Maybe there's some connection to family that drove them into small business and they really appreciate the work that we're doing. We also try to make sure we encourage them to take the time off and manage their personal wellbeing, but they're constantly driving the education both internally and externally to make sure when we reach that customer, we understand the sensitivity of how they approach the bank in a very first place.

(16:40):

The client ratios are going to be high anytime you're using an algorithm or a technology driven solution to make these loan decisions. So you're going to get nos, it's going to be a part of the process. The bankers that drive it have to understand that and have to be sensitive to that. And then you got to have the right tools enabled to be able to point that client along a journey so they don't feel like you've rejected them, that you turned them away. And it's more the same. A black or Latino client, an Asian client, they come in the bank, they're already coming in with trepidation, all the data, all the analysis. We put business cases behind every program that we launch. It tells us what this demographic is going to experience when they're coming in. So when you do a Latinx program, you better do something in Spanish proficiency.

(17:23):

You better have some partners and some sales sheets and some way of going about that program. So when a client comes in, so how is that driving our strategy? It's not just the business banking segment that is driving, it's driving commercial strategy around how we serve Latinx customers. It is driving personal around how we serve Latinx customers. We rolled out a new process where we designated Spanish speaking branches across our footprint. So when that client walks in, they know that that branch has been designated to serve them. So it's driving hiring practices around. And like I said, it's a top down strategy and if you don't have strong leadership, that really gets behind every aspect of it. This can't exist in a silo. It's not just throwing a program together, seeing if it'll stick. You got to be committed to diversity. And one thing I'm really proud about is that BMO, even before the journey of launching these programs, has a long history of commitment awards of being placed where people want to work and feel a part of something. It's our purpose to bold, grow the good and business and life, and we live it through these programs.

Betsy Varvin (18:27):

When you mentioned two things in scenario, you can talk to this too, is you mentioned the trust. And we heard that this morning that it's really all about establishing trust and it's no difference for us. We've all heard that for many years, but when you think culturally trust is such an important part of banking, but when you think culturally how many of the people that are coming into the bank really didn't grow up trusting financial institutions, and so there's a little bit keeping them suspicious about what's going to happen or at least a little bit detached. So there's an even greater need to establish trust with the diverse community. And that's why having people who can really speak their language or understand where they're coming from is so important. And that really is I think what you wanted to talk about scenario.

Sineria Ordonez (19:24):

I did. I wanted to add a great point, Ron. The other thing that I think the other scope is the work that we are really doing in the community. What does that look like? So we have external affairs across our national footprint who are constantly building out these partnership. So one is the how do we involve the business? Let's say the small business team members, professionals within the organization and helping us go out and meeting the community where they are without expecting them that they're going to come through one of the branches. That's beautiful. That's great. That's one of the specialties conversations like, okay, these are ways part of the training when we have certain community members coming in. But the other aspect of it is when they don't have that relationship, when you have to demystify what a banking that relationship, what that looks like, and then what the banking relationship looks for the banker and what the banking relationship looks for that community or that business is very different because you have, in order to get to trust, you have to remove fear.

(20:37):

Good point. And in order to remove fear, you have to be there with the community. Now that's where the corporate social responsibility comes in because when they see you and you up and they see that you are investing in those programs, that we are then helping in setting those levels of expectations with the community partners who they have already have five, 10 years of relationship. So it's not about duplicating the effort, it's already more about growing what's already in the community that makes it a part of it. Beautiful. And building that partnership when you have that partnership and you can say, we're bringing, we're partnering with human capital at Comerica because their expertise is so unique, it's so important, and we connect them with that partnership. It's a game changer. And so that's why I just want to hone in into the partnership that you have with the local community are even more important than you think because you're trying to get eight years, 10 years of work of relationship when they already have those 10, 20, 30 years of knowledge of understanding the community.

(21:44):

But it's not about you really coming into them and telling them, this is how I think you should run the program. Then I don't think we're doing right by the community. I think we really need to listen to them and say, what's happening? What are you seeing? What is the underlying difficulty to our businesses? And then how do we remove those? That's how we say that we can be a strong partner. The other thing I wanted to mention about when we are looking at the national scale, that also comes with those level of partnerships and seeing through similar, our relationship is also internal and external. So internal, how are we building that cultural awareness within our employee resource groups externally, how are we building our relationship and externally, but with our business resource groups? Here's the other thing, at Comerica Bank, because the the multicultural communities that we serve is so important and it's embedded into what we do daily.

(22:43):

On the external side, there is different segmentation. So I am today speaking on behalf of the National Hispanic Business Development Manager, but we have other entities. We have our national African-American Business Research group lead. We have our national AAPI group lead, Sonya out in California who's also working nationally. We have our Middle Eastern community because the number one place for our Middle Eastern businesses are is based out of Detroit. And so this is again, the importance of, if I was to leave you all with something a nugget, it's the level of understanding of your customer and knowing what that map is, because then that will lead to more intentional programming with your local partners that really gets to what they're looking to access information to, that it's outside of maybe some of the retail spaces. And that comes really when we're doing the community work because I feel that we become that boots on the ground, that keeping the closed ear.

(23:52):

One of the things that was amazing outside of my work in banking is when I worked in marketing and in broadcast media is that you never play a song that you thought was a hit to. You always play the song that was a hit to your audience. And so that meant constantly every day asking the questions and asking if that audience, if that community, if those things that you are doing or truly making inroads and making the change that you're hoping or that you're aiming to see as back an institution. And one last thing I would say, and then I'll give it to you Ron, is that we're here today speaking about our expertise and helping you, how to understand the community and how that naturally builds into good programming that leads to good business for you as a bank is that we're here talking about a banking ecosystem that allows the maturity and the growth of the businesses. And we all are here because we want that for our small businesses, and we're not going to get it in five, six years. We're going to get it into decades. We're talking about what does that work look like in two or three generations and building what, that's the work that's empowering.

Betsy Varvin (25:02):

And building their worth.

Sineria Ordonez (25:03):

That's right.

Betsy Varvin (25:04):

Those businesses. Yes, exactly. And you brought up some really good points on that. I think about what we were talking about this morning and it comes into play. One of the first things bankers typically do is say, well, we have this, this, and this, and what do you want? Sort of, here's the deck of cars, choose one. But it's not about that. It's really about finding out and listening what you were talking about, listening to what the customer has to say. What is the customer telling you? What is the customer telling you by virtue of telling you about his business, about what his needs are? And I know that's something that you've worked on really significantly when you come to developing and as you said, the partnerships with the community organizations. You're in the process of trying to really develop that trust and make sure that you as an institution, as a bank, as the bankers on the front line feel as though you're being trusted. So where do you go to help really leverage that trust? You go to community organizations that can speak on your behalf. You go to the organizations in the community that are working with all of those diverse small businesses, the different chambers of commerce that have a relationship with you who attend some of the events that you're doing, I'm sure. Or maybe you partner with them. Tell us a little bit about that, if you've had those types of experiences.

Ronald Milsap (26:29):

Yeah, I think sometimes an organization like the corporate social responsibility, community giving kind of sits over in its own world. They have their own strategies of how they want to develop these partnerships in those relationships. And I won't say we unlocked the magic Pandora's box around being able to do this and connect it back to the business. But there have been some powerful insights. And I think when you look at a community given relationship and you think about CRA, there's a need to do it. The rules and regulations are going to require you to do so. But the relationships I managed quite differently from those groups versus how the business line would engage. And then there's that slippery slope of we don't want to push product. We don't want to make this salesy because that's a turnoff to the community partner. That's a turnoff to the small business that may be there're just to get technical assistance or education.

(27:22):

So it's going into that opening of learning the full spectrum of how our banks serve community through some of these legacy relationships. That wasn't a visible list that I could see before, but coming into the strategy I walked in, we had 15 partners that we were working with in Chicago in our black segment, maybe it's the Urban League. And we really try to develop that relationship and think about how it's making impact in our Wisconsin footprint. Maybe it's wic, another strong women's based organization providing access to capital and technical assistance. Put a relationship person on that. So take my business development officer, connect them to the team in philanthropy, have them be there as that relationship is being consummated, think about the technical assistance and additional volunteerism that can happen from a team that this is part of their job responsibility. So now they're being tasked to go out in partnership with leadership to really grab around these relationships and figure out a holistic solution around how we impact community.

(28:24):

That was very powerful for me because sometimes I tend to saw those things as being separate, but they really need to do start come together. You could still play in a space where you respect the rules of community giving, but also have a focus of if you're not at the table engaging with the potential homeowner, if you're not at the table engaging with the small business owner, they're going to make a lot of bad decisions between them going out and getting that line or that loan versus having somebody at the table that was there from an educational standpoint. So we enable it through education. Education is perhaps our strongest pillar of everything we do. We know capital will never go away. It's what all the small businesses that we serve need, but we've also seen bad use of capital. We've also seen a lot of mistakes.

(29:11):

So in that sense, you can't beat the education, but I'm learning that the education has to be more than just what we put on the website sometimes even more than what our partners develop. We have to listen and we have to query and we have to survey all the time because if the education isn't timely and relevant to when that small business is going out to execute a lease and they have the right technical partner that can make sure they don't sign up for something that's going to be trepidatious for them, then you miss the boat somehow in that education or in that cohort of learning that you're providing them. So I just think we continue to find, we don't have all the answers. We continue to find out as we continue to move the needle, we create sub programming and coaching internally. We also leverage the sweet spot of what our partners do really, really well.

Betsy Varvin (29:55):

What it'll always be a building exercise because we're always going to be innovating and finding new practices to be able to really be better every time. Talk a little bit about, and I know we're running out of time, but talk a little bit about how you measure the success of your programs. Is there anything that points to, GEE, we did this really well. How do you do sort of a postmortem on what you've done or how do you assess the events or how do you assess the program success?

Sineria Ordonez (30:31):

Thank you.

Betsy Varvin (30:32):

No one wants to talk about.

Sineria Ordonez (30:35):

No, no. We can look every day that we're saying we're making an investment in the community. We want to make sure, did we do, did we reach the goals that we're aiming to do with them in mind and what does that look like? And then sometimes that means, and we have to take that into consideration for one, our strategic objectives are based on what the needs of the community are. And so next year, based on what we seeing, some of those examples are then we need to pivot. That's where the level of innovation is that you can be a big bank, but be small enough that you innovate because you are constantly thinking of the next best thing for them. So an example with that, and what I mean with strategic objectives is during covid, shortly during that COVID period, what we found is that a lot of our elders were in a lot of fraud cases.

(31:29):

And so that was a big thing. And so back to a level of education, when you think about a business owner, A business owner is not its own entity per say. They are connected to other things. That business owner has an elder parent and they have a younger child at home. And so everything was coming across in a level of a pressure boiling point for our small businesses. So when we see that there is this high level of elder fraud, then our strategic objective that following year had to be on how can we provide a lot more of the education and component to avoid fraud cases with our elders during that time. What we also saw, and I think we all know the numbers, I don't need to repeat them verbatim, but we saw that the women, small businesses were heavily impacted. And the highest number of businesses closing out were women businesses.

(32:29):

Again, because they're impacted by several things, there's a lot of points of intersections. And so for us, every year we do that with our partners have a committee we call the CDAC, which is our community advisory committee, and we meet with them on a quarterly basis and through all of our markets so that we can understand through all the levels in what is being experienced and what are some of those pain points in the community. So that's one way that we are rolling out what we're seeing as a measure. The second is that on the community reinvestment side and the LMI, we are tracking, okay, how many community members are we serving? How many businesses under the 1 million revenue are CDFI investments touch? How many did we, so we internally have to track that because at the end we have to make that evaluation on can we do more?

(33:26):

What does it look like to do more? And a lot of times for a lot of you who are in the process of building out your program for diverse business owners, really sometimes it starts with asking the right question. Good point. That's the most powerful thing. Why? Because again, that you have to remove your assumptions of what you think or where you think that they should be. And asking that powerful question that creates dialogue opens up to the things and the opportunities that you can create. So for us, just to summarize it, we have those two internal components, our CDAC members, our key partners with us, and understanding what the needs are because we roll them out into then what becomes our strategic objectives for the following year. That means that we deploy more of our human capital, more of our investments into those areas. The second tier is what are the numbers of businesses that we're serving? What does that look like? What's the capacity and where do we have to shift?

Ronald Milsap (34:24):

So we have regional scorecards, we have OKRs that we report on monthly KPIs that report on monthly that I'll draft to the desks of the most senior leaders in the organization. From an accountability standpoint, three years into the program, we serve roughly 3,700 small businesses across those black women, Latinx and native owned small businesses across our footprint and gotten roughly $84 million out of the door. So it is the basics of how is it in deposits, how is it going in lending? But then that nuance of really looking at, okay, how many community service hours? So we've put close to a thousand hours of community service into this work. We supported over 5,000 small businesses, and this was across an eight state footprint, so be more acquired Bank of the West. And the synergy of that partnership has just been great. We're really excited about the opportunities that exist in that California market and already starting to see results in the program out there on the west coast.

(35:21):

So it's looking at it all the way across the board. It's continuing to tighten it up and refine it. My manager and director who's sitting in the audience need Christopher. She turns a dial to make sure we are really accountable around what we are doing, and then we're accountable internally and externally. So we have social responsibility reports that go out that talk about the impact of this work. We're going to do $200 million of this lending over the next five years that really hit that micro segment of small business and our commercial segment. We're going to do 500 million of lending that hit the key minority targets that we are after in terms of serving our communities.

Betsy Varvin (36:00):

I really could spend much more time talking to both of you because it's so interesting to hear everything you were saying and I haven't even gotten to the point where I wanted to talk about CDFI. So I don't know if we are somewhere near our we time.

(36:18):

Have we gone way past? Is that where we are? Well see. It's good to know. I really appreciate so much having both of you, Sineria. Thank you, Sineria and Ron, it's a pleasure to finally meet you and to have some time to learn more about everything that you're doing and the opportunities for business, especially for diverse people and the wonderful team you're leading. It's really terrific. I want to thank the audience for being so involved and for helping me understand who's all here. Thanks so much. And I want to thank the American Banker for everything they're doing to make this possible because having this time just to talk about diverse is so important. Thank you.