Hartford Business Journal

6 Hartford Business Journal • October 19, 2020 • www.HartfordBusiness.com By Matt Pilon mpilon@hartfordbusiness.com L iberty Bank has built the third-largest market share among Connecticut-based banks, but the Middle- town mutual lender doesn't plan to rest on its laurels. Liberty is setting its sights on new potential revenue streams from well beyond its current geographic foot- print, and the bank has hired David Mitchell, a longtime fintech execu- tive with a successful digital bank- ing track record, to lead the way. Next year, Liberty intends to launch its first-ever "digital bank" — an on- line-only platform, perhaps branded under an entirely different name, that targets a specific clientele in other states (think pet lovers, sports fans, or even soccer parents) with custom- tailored checking accounts, loans and other financial services. The goal is to capture business the bank could have never chased under its traditional model of serving Connecti- cut residents and businesses located within its physical turf. And there may be multiple launches in the years ahead. Local competitors will be watching, as Liberty's new initiative puts it on the digital banking forefront, at least for traditional Connecticut-based banks. Mitchell's hire as chief digital officer and digital banking general manager comes at a critical time for banks of all sizes. Online-only banks have poached millions of customers from traditional U.S. lenders in recent years, and giants like Amazon and Walmart present a similar threat as they elbow their way further into the market, offering bank- ing, credit and other financial services to their vast customer bases. The COVID-19 pandemic has only accelerated the trend toward digital financial services, reducing branch foot traffic and calling further into question the financial soundness of the age-old bank strategy of investing in brick-and-mortar branch networks. In a recent interview with the Hart- ford Business Journal, Mitchell said Liberty's leadership doesn't want to be caught flat-footed as online-only digi- tal banks — also known as "neobanks" or "challenger banks" — continue their rapid growth. "The competi- tive landscape has significantly changed," said Mitchell, who started at Lib- erty in August. "We are in an environment with razor-thin margins, operat- ing costs are under pressure, and because of disruptions like COVID-19, we just feel that innovation is now a prereq- uisite so we can quickly respond to market demands and opportunities." "Banks just can't sit still in the old traditional banking model or we will just become utilities," he added. Mitchell likens the severity of the competitive threats to traditional banks from online and giant cor- porate competitors to those that either killed or significantly weak- ened companies like Kodak (digital cameras) and Blockbuster (video streaming services), as well as the taxi industry (Uber and Lyft). "You just can't be complacent because the next Uber or Netflix could be right around the corner in banking," he said. Big players like Bank of America, Wells Fargo and Chase are still com- petitors, of course, but Mitchell has urged Liberty's leadership to focus more on upstart threats like Chime and Ally. With more than 16 million combined customers, the two are CT's biggest bank monitoring online-only competitors as it partners with fintechs W hile Middletown's Liber- ty Bank plans to launch its first online-only or "digital bank" in 2021, that strategy isn't for everyone, including one of Liberty's largest local competitors. Bridgeport-based People's Unit- ed Bank, which has become the top Connecticut-headquartered bank by deposits in recent years — mainly through a series of acquisi- tions — is well aware of threats posed by digital banks. However, at least for now, it has no plans to launch its own. That's according to Ravi Vakacherla, who was recently named chief transformation officer at People's United. "Never say 'never,' but currently we are focused on digitizing the bank and not going to- ward an inter- net-only bank," Vakacherla said in a recent interview. "We continue to look at the market and evaluate our priorities, and while we may take a different path in the future, currently we don't have any imminent plans to launch a standalone digital brand." It's not that People's United isn't focused on improving its customer- facing and back-end technology sys- tems. It's investing heavily in those areas, but it's doing so for customers within its own New England and New York geographic footprint and using its own brand name. People's United has partnered with a variety of fintech com- panies, including Blend, which has helped improve its online mortgage application collections; Numerated, which has boosted the bank's small business digital lending platform; and Zenmonics, which has allowed more custom- ers to open accounts and deposit digitally. Part of the decision to not launch a digital bank comes down to trust and relationships, Vakacherla said. People's United, he said, is focused on "delivering tremendous value, in- depth support and expertise, unique solutions, and developing meaning- ful relationships with our customers, something the challenger banks aren't really known for." "We are known for our 'know how,' and are working on some really interesting ways we can translate that into expertise into the digital space," he said. Digital Future CT fintech veteran Mitchell leads Liberty Bank counteroffensive against online-only challengers Ravi Vakacherla, Chief Transformation Officer, People's United Bank Charles Potts, Chief Innovation Officer, Independent Community Bankers Association Longtime fintech executive David Mitchell is leading Liberty Bank's innovative effort to launch an online-only bank. HBJ PHOTO | STEVE LASCHEVER

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