Podcast March 24, 2021

Why speed is of the essence for start-up banks

US regulations mean we don’t see nearly as many startup banks as Europe.

So, if one manages to get past the regulatory hurdles, what do they prioritize? 

For Rodrigo Suarez, Head of Innovation at Piermont Bank, a startup bank serving SMBs, speed and culture are the secret to success.

In this episode, we discuss:

  • The challenges a startup bank faces
  • Why the SMB space is ripe for innovation
  • Why speed and culture matter

Starting up

As Fintech transforms the financial landscape, it stands to reason that banks need to transform, too. 

Often, the legacy banks are slow to adapt to the rapid pace of change and that leaves Fintechs scrambling for banking partners that can address their particular needs. 

“For a Fintech, weeks and months are critical.” — Rodrigo Suarez

So, why aren’t new banks proliferating at the rate that Fintechs are? 

The reason new banks are few and far between in the US is due to one reason: regulatory hurdles. 

Unlike Europe, which has far less of a regulatory burden, the onerous regulatory burden in the US prevents many from even starting a bank. 

In fact, Piermont Bank is the first New York State-Chartered Bank since the financial crisis — that’s how rare newcomers are. 

And with such a high degree of difficulty in getting their charter, Piermont doesn’t want to just become another community bank.

There is a more pressing need.

Namely, serving the woefully underserved SMB segment. 

Serving SMBs

The large legacy banks aren’t just slow to adapt to Fintech, they’re also lagging behind when it comes to serving the needs of SMBs. 

“If you look at the SMB space, and the commercial space more broadly, it has been lagging in innovation compared to the consumer space.” — Rodrigo Suarez

The many amazing innovations that are happening in the consumer space in recent years haven’t yet made their way to the SMB segment — and Piermont hopes to change that.

The company has already rolled out an initial suite of products — with their current focus being on the deposit side of things, including ACH wires, deposit accounts, and debit cards. 

Over time, however, their goal is to support Fintechs more and expand their credit offerings. 

They are a commercial lender and they are always interested in lending to Fintechs — who, of course, are also the ones providing much of the innovation needed by SMBs the company serves.

That means, if they want to make their primary segment happy, they need to make their Fintech partners happy, too. 

Why speed and culture matter

Fintech is all about speed. After all, if you’re not the first to innovate then, well, it’s not really innovation, is it? 

Often, Fintechs are racing their competitors to get their product to market. 

But, once again, traditional banks typically take months — even years — to strike partnerships with these newer, more agile companies. 

That’s perhaps the biggest lesson Piermont has learned from their experience as one of the first new banks in New York in nearly a decade.

If you want strong partnerships with Fintechs, you’ve got to be fast. 

And that means having a culture that values speed. 

“Our value is speed and being able to align on the cultural side.” — Rodrigo Suarez

One advantage of being a startup bank is that Piermont really understands the entrepreneurial mindset that Fintechs operate under. 

They’ve cut much of the bureaucracy plaguing legacy banks — in what, for them, is simply a “common sense” approach — and are proud to be able to offer loans in weeks, not months or years. 

As much of an innovative company as Piermont already is, they are doubly so for the innovations they will be able to enable at record speed for their Fintech partners. 

And that’s good news for Piermont, its partners, and the SMBs they serve. 

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Until next time!

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