Penny Crosman: (00:03)
Welcome to the American Banker podcast, I’m Penny Crosman. What are the very best methods and locations for banks to buy innovation and fintech collaborations? We’re here today with Frank Sorrentino, CEO of LinkOne, an $8 billion-asset neighborhood bank based in Englewood Cliffs, New Jersey. He’s going to show us a few of the important things he’s been doing at his bank and how he takes a look at tech financial investment and FinTech collaborations. So welcome Frank.
Frank Sorrentino: (00:34)
Thank you, Penny. Great to be with you once again.
Penny Crosman: (00:36)
Thank you. So in your newest revenues call, you stated that you have actually constructed a strong technological structure and you’re well placed to make the most of the competitive fintech environment. What were a few of the important things you wanted there? What are a few of the aspects of that technological structure that you’ve constructed?
Frank Sorrentino: (00:57)
Well, Penny, you understand, LinkOne Bank has actually constantly thought about itself as a technological leader. And I do not imply that in possibly the very same method that some banks think of it. We we have actually constantly considered whatever we do through the lens of our customer and decreasing friction in how our customer has the ability to access our bank and our services and the important things that they they require in order to make their services more effective. And so whether it’s, we can get them a response much faster, or we have much better services and products or we’re offered more, all those things minimize friction in the market and have actually developed a culture both within LinkOne, however likewise this awareness in the market that LinkOne is actually here for the customer’s advantage. So this decrease of friction has actually been something that’s belonged of LinkOne considering that the start. We was among the very first banks that went totally into the cloud.
Frank Sorrentino: (01:55)
When the COVID environment hit, we essentially had no downtime, whatsoever. We had the ability to actually engage with our customers, with the rest of our staff members, to be able to supply our customer services, even when the remainder of the world was closing down, since of the method we considered how we established our organization. On the opposite of that, there are all these more recent services and products that are being established in the fintech area that are taking specific market specific niches and actually going really deep, not so large, however really deep into specific locations of customer needs and customer requirements. And we took a dive into that number of years ago with the purchase of our Boefly system, where Boefly is a market for franchisors and franchisees, and there’s a loaning chance there that’s developed for these franchisee chances. So once again, a really, really focused section of the market that we’re establishing some knowledge around. So when you take a look at business today in banking, you need to think of the more comprehensive, more standard banking customer, however you likewise need to think of these numerous market specific niches that are being established.
Penny Crosman: (03:10)
So, so simply to push you on the initial declaration, you spoke about developing a strong technological structure. Where’s the distinction in between a strong innovation structure and a weak one?
Frank Sorrentino: (03:23)
Well, I believe it boils down to what would your customer state about their experience with your company? If you need to go through all sort of hoops and various approaches to get something done, and you’re requiring them to sign 72 pieces of documents with damp signatures and requiring them to physically appear at your places, I do not believe you can make the claim that you have a technological background, if your personnel can’t operate or run without needing to enter the workplace and be anywhere anytime, then I do not believe you can address the concern either. So for us, it’s been establishing this foundation of having the ability to keep the business running through basically any environment and supplying a background for all of our staff members and our customers to access us in any method at any time.
Frank Sorrentino: (04:22)
And so to me, that’s what it’s everything about. And it has to do with having those services and products that are particularly customized for a specific market. You understand, if you take a look at the method LinkOne does building and construction loaning, it’s really various than the method lots of other companies do it that just do it as a side organization. We’re really focused there. We have particular services and products that have actually been constructed into our facilities to permit a much better shipment of services. We deal with business like nCino and Built to be able to supply a high level of customer engagement and service, a lot so that those customers we’ll normally select LinkOne to do their next deal since of the method which we do it. And so that’s how we think of things. And we think of every one of the verticals that we’re associated with.
Penny Crosman: (05:12)
So I believe nCino has loan software application that lets you manage loans online and Built, I think, is a fintech that assists with building and construction loans. Is that remedy?
Frank Sorrentino: (05:26)
So, yeah, Built is an item that simplifies the whole building and construction part of the program. So after the loan is authorized, the capability for a specialist, a designer to ask for the next financing draw and how that entire procedure happens. It’s a really, really troublesome procedure at lots of organizations. And generally debtors grumble since it takes a long period of time from the time they make the demand to the time they really get the financing. And that financing is seriously essential to keep a task website carrying on time. And so we took the effort really early on to simply significantly enhance that entire procedure. So that financing piece comes quicker than what they would anticipate that most other companies, Built has the innovation to be able to standardize a great deal of that procedure and have the ability to do it all in a real-time style, all with innovation.
Frank Sorrentino: (06:25)
So there isn’t a great deal of documents going back and forth and signatures and files being sent out all over production. It’s all done on a typical platform on our nCino platform or loan underwriting loan administration. The capture of customer files, the capability to authorize loans through numerous layers of the company is significantly enhanced in a system that’s offered full-time actual time on the cloud, on the Salesforce or force.com cloud out. And to us, that’s been a remarkable enhancement in our capability to service our customers, to be there when they desire us to be there, close things on time, never ever miss out on a due date. To me that’s been extremely essential and our customers see it and they seek it out when they try to find their next deal.
Penny Crosman: (07:16)
You likewise stated on your revenues call that you’re going continue to make ongoing tactical financial investments in innovation and skill acquisition. Can you share what a few of your upcoming tactical financial investments in innovation might be?
Frank Sorrentino: (07:31)
Well, we talked a bit about, what we’re doing at Boefly and we have actually invested a reasonable quantity of time, energy and monetary investment in developing out that platform to actually make the most of what I believe is a market specific niche. That’s interesting to us, which’s in the franchisor franchisee space and be able to both vertically and horizontally expand what we’re thinking about there at Boefly. So certainly that’s one area where we are definitely looking at building infrastructure, building muscularity and having capability. That’s probably not commonplace in the market today. I think we’re making some successes there and things are going quite well. We have a record number of franchisors that now access the platform. I think even our franchisee count is at near records, even before COVID, that are accessing the platform for service through the Boefly platform.
Frank Sorrentino: (08:27)
So we’re pretty excited about all the various investments that we’re putting into Boefly and what it is being constructed there. On the more traditional side of the bank, the technology and infrastructure improvements there go across a vast spectrum of what we do at ConnectOne from risk management to loan origination, to operations, to standardized products and services for our clients. We’re looking at each one of these areas and making investments either directly or in conjunction with a particular partner, whether it’s a fintech partner or one of the larger technology infrastructure players, to be able to come up with a better way to service our clients. At the end of the day, we want our clients to feel like they’re in a very different environment when they work with ConnectOne. And I think we’re able to accomplish that in a number of areas. We just described the whole construction area. There are many others that are just like that.
Penny Crosman: (09:32)
So just to sort of complete the picture of Boefly in case people aren’t aware, you actually purchased this company. And can you tell us a little bit about what the company was doing and what your hopes are for it going forward under the ConnectOne umbrella?
Frank Sorrentino: (09:50)
Yeah. In simple terms, Boefly is a marketplace that provided a service primarily for franchisors. So think of any franchise that you may come in contact with or buy services from, whether it’s Dunkin’ Donuts or Meineke muffler shops or whatever. So the franchisor will hire Boefly to validate their franchise applicants. And in the process of that validation, Boefly runs those folks through a model to figure out if they are able to actually sustain one of these franchise opportunities. And in the process of doing that, we generally uncover the idea that they’re going to need a loan in order to get that business audited if they’re awarded that franchise. And so the marketplace comes into being where Boefly turns to that franchisee and says, Hey, we have your data, we have your information. We can put you together with a financial institution or a series of financial institutions that are willing to do that loan for you, predominantly in the SBA base.
Frank Sorrentino: (10:58)
And so there are also some 35 banks that are on the Boefly platform, which will compete for that business depending on where it is geographically or what business segment it remains in, or any other particulars that some banks particularly like or don’t like. And so we basically are a dating service where I’m matching up banks with these franchisees, and we’re matching up those franchisees with the franchisors, but there’s a big data play here. And there’s a lot of information that’s gathered. And there are a lot of products and services that we believe may be opportune for that marketplace to be able to deliver in the future.
Penny Crosman: (11:36)
Does ConnectOne and not have an advantage in owning the platform, or do you keep it really democratic?
Frank Sorrentino: (11:44)
We have endeavored incredibly hard to make certain that there is the so-called Chinese wall and that ConnectOne is not treated any differently than any other bank on that platform once that client is out looking for a lending opportunity. And we think that’s important because banks are just as important clients of ours as these franchisee opportunities. So from our perspective, it’s important to the business that we don’t cherry pick any of the opportunities there, but we provide for a high level of integrity and service for the banks and for the clients that access the platform.
Penny Crosman: (12:26)
So we’ve actually written a bit about some of the things that can go wrong with a fintech partnership. We’ve had some stories recently about fintechs that have exorbitant lending rates that could be called exploitative or abusive, almost. There have been fintechs that have struggled with fraud, with both setting their fraud controls too high and setting them too low and either way, having a lot of difficulties. And then they don’t always have the customer service support to handle that. Most recently we’ve seen fintechs making puppy mill loans. And so their bank partners get tainted by that. So when you’re thinking about partnering with, or as in the case of Boefly acquiring a fintech, what are some of the considerations, some of the evaluation criteria that you use before you agree to work with a company?
Frank Sorrentino: (13:27)
Penny, I couldn’t agree more with this concept that not all that’s going on in the fintech world is good for the banks, the clients, or even the fintechs themselves. Just because you can do something doesn’t mean we should. And I think one of the guiding principles here at ConnectOne has been this concept that we’re always here to manage for the sake of our client, and we want our client to be right at the forefront of every decision we make. It’s part of our culture, it’s built into our logo. It’s part of what we think about when we consider how we’re going to go about doing things. And I think if you think about what’s good for clients, and you sit in their shoes and you walk in their shoes and understand their businesses, you don’t get into those issues that you just described.
Frank Sorrentino: (14:28)
And so charging exorbitant rates or getting involved in businesses that just aren’t, in our opinion, good businesses to be involved with is something we generally don’t face here at ConnectOne or face with our Boefly platform, because that’s not what it’s about. It’s genuinely about helping the small business owner, a small business entrepreneur, get a head start in their business. And it’s about giving them access to products and services that are already in the marketplace, whether it’s through the SBA or the conventional marketplace. And so we’re not about charging exorbitant rates because we can do something in 24 hours or 36 hours that should take three weeks. We’ve seen a lot of that in the marketplace. And honestly I don’t think that’s a sustainable business. A lot of what’s going on in the fintech area is to take advantage of clients and generate high levels of fees and returns for their investors.
Frank Sorrentino: (15:23)
That’s not what we’re here at ConnectOne to do. We’re here to provide primary support for our clients, people who are going to be our clients. One of the issues with fintech is that the fintech itself controls the client. The bank really doesn’t have the capability to access the client directly. And so it doesn’t have a direct say in how that client is being treated here at ConnectOne, everything we do revolves around our clients and how we treat them. And I think that’s a good guiding principle for us to have.
Penny Crosman: (16:00)
Yeah, of course. It seems like sometimes these risks are a little bit hidden. A fintech can look altruistic, can look like its aim is financial inclusion. And then you look at the actual interest rates being charged, and you’re kind of like, holy cow. So sometimes it’s a matter of really discerning the reality from the, the pitch, which I’m sure is part of what you and others are always trying to do.
Frank Sorrentino: (16:31)
Well, I’m always, I’m fascinated by, even when I speak to small business owners who potentially couldn’t get a loan at a banking institution or were turned down for a loan yet, they were able to get a loan at one of these fintech lenders and they were able to get it in 36 hours and they sort of rub it in your face. Like, oh, I could get a loan someplace where your bank wouldn’t even talk to me. And my response in some cases is something as simple as yeah, but should you have that loan? And that’s part of our responsibility as a bank is to educate you about whether or not this is the right thing for you to be doing. We learned a very valuable lesson back in 2008, as an industry and as a society, that just because you could find a way to do homeowner loans at 110% of value doesn’t mean we should. And so some of these small business owners are actually purchasing the rope to go and hang themselves. I don’t want to be the vendor of that.
Penny Crosman: (17:29)
That makes sense. Are there any fintech partnerships or types of fintech partnerships that you’re considering for the coming year or that you might be interested in thinking about for the coming year?
Frank Sorrentino: (17:41)
So there’s a number that we’re constantly taking a look at as we believe about more verticals that we want to be involved in at ConnectOne. And some of the other places that we have interest in providing support for various segments of the economy. I believe there are fintechs who do have specialized skills, specialized capabilities that will allow us, and I think you’ll see over time, as we either announce things or make public some of the initiatives that we have here at LinkOne, but you’ll see that they’re very targeted. They’re going to be very client focused. We’re going to be going after a specific type of client in a particular type of business, and we’re going to be doing it with the support of other partners that are as committed to the success of our client, not just to our own internal successes.
Penny Crosman: (18:34)
All right. Well, Frank Sorrentino, thanks so much for joining us today and thank you all for listening to the American Banker podcast. I produced this episode with audio production by Wen-Wyst Jeanmary. Special thanks this week to Frank Sorrentino at LinkOne. Rate us, examine us and sign up for our material at www.americanbanker.com/subscribe. From American Banker, I’m Penny Crosman and thanks for listening.