Community banking can be one of the most rewarding and most challenging areas of financial services in which to work — that’s the view, anyway, of Rebeca Romero Rainey, president and CEO of Independent Community Bankers of America (ICBA), who recently joined the nation’s leading advocacy organization that exclusively represents community banks.
Rainey is a third-generation community banker who spent her entire career at all levels of the industry — literally: She grew up in her family bank, starting in the mailroom before she was 15 years old, and worked in all areas of the bank – from the teller line to the clean-up crew – up until the time she left for college. She was chairman and CEO of her family’s bank before making the move to ICBA.
“I loved what I was doing with the community bank. But it became very clear to me that this was an opportunity to take what I was doing at Centinel Bank and apply it to every community bank in this country,” Rainey said.
That’s because, she noted, community banks have a lot to offer consumers; they want to help them beyond just completing a transaction. Rainey also pointed out that community banks administer more than half of all small business loans, and more than 80 percent of agricultural loans, across the country. However, for them to distribute those offerings — and deliver on them — community banks have technological and regulatory challenges to clear on the path going forward.
Keeping up When the Pace Is Fast
Rainey told PYMNTS that financial services, particularly around payments, is evolving and changing at a pace never before seen in the industry. That can be a massive challenge, particularly for smaller community banks that have never faced a pace of change quite like this. However, Rainey views this as an opportunity for community banks, rather than an impediment.
“I heard someone say recently that ‘today will be the slowest day of the rest of your life,’ and that is very much how I think about the pace of change and the evolution of technology — it is only going to keep getting faster, and community banks have a huge opportunity to innovate and fill a unique niche,” she said.
The challenge for community banks, she added, is that they aren’t housing an army of in-house technologists that provide access to those services. It’s one of the reasons ICBA moved to create ICBA Bancard, its wholly owned payments services subsidiary.
“The goal of Bancard was to tap into an opportunity to give banks access to comprehensive and affordable payment services to meet their customers’ needs — and their community’s needs. It really dovetails with ICBA’s goal of creating an environment where community banks flourish. The ability [to] offer the latest and greatest of products in this space is very important to our customers’ competitive future,” Rainey said.
Bancard’s President and CEO, Tina Giorgio, also came up in community banking, particularly in operations, Rainey noted — which has been critical in developing and rolling out products to their partners’ banks.
“Tina has a hands-on and unique perspective of what community banks are looking for in terms of actual products, managing vendor relationships and delivering on consumer needs,” Rainey said.
The goal, she added, is for Bancard to offer community banks access to the latest products without feeling like they are necessarily jumping into “uncharted territory.”
The Changing Regulatory Environment
Though the last decade has brought challenges in terms of burdensome over-regulation for community banks, the last month has brought significant progress on that front. Most recently, Congress voted to loosen the strictures of Dodd-Frank, particularly in regard to how it treated small and medium-sized banks.
Advocates of the Economic Growth, Regulatory Relief and Consumer Protection Act, signed into law by the President late last month, noted that the bill set to remedy the criticism that too many of the provisions of the original Dodd-Frank legislation treated small community banks as fundamentally the same as banks with trillions in assets — and thus subjected those small banks to regulations that weren’t tiered and scaled to the low systemic risk that they pose to the economy. The huge onslaught of community bank regulatory burden resulted in fewer loans to local families, entrepreneurs and farmers—stifling local economic growth.
ICBA was the driving advocacy force behind the bill, which achieves numerous policy goals from ICBA’s Plan for Prosperity, including relief from “qualified mortgage,” capital and HMDA rules.
“This hard-fought, long-awaited community bank regulatory relief legislation will put community banks in an enhanced position to foster local economic growth and prosperity. By unraveling some of the suffocating regulatory burdens community banks face, they are better able to unleash their full economic potential to the benefit of their customers and communities,” Romero Rainey said in a statement following House passage of the bill.
Community banks — despite some reputation for provincialism — are faring well when it comes to adopting the future of digital financial technology. Mobile banking, P2P payments, digital check deposits — these features are already online or coming online in community banks nationwide.
Rainey noted that the future of community banking is not so much about what as it is about who — millennials, to be exact. The goal now is outreach to that generation of banking customers. Community banks, she said, have the digital services that younger consumers want, and are developing them at pace with the market. In that regard, they are comparable to their larger counterparts to a greater degree than most people would probably guess.
Beyond the tools, she added, community banks offer something that millennial consumers have increasingly said they want in their financial services relationships, even as they become more digitally mediated: a more directly connected relationship with their banker. A personal experience.
This, combined with the fact that millennials are an entrepreneurial generation, signals a mutually beneficial opportunity for both millennials and community banks.
“There are some things where consumers are looking for dialogue beyond the transaction, especially when they are starting a business, buying a home and planning their financial future,” Rainey said. “This is really the specialty for community banks. As relationship lenders, they know their customers and work with their customers — that’s something special, and something that benefits community bank customers and the communities they call home.”