Hartford Business Journal

15 HARTFORDBUSINESS.COM | NOVEMBER 29, 2021 Jorge Santiago Cynthia Merkle Source: CB Insights' State of Venture Q3'21 Report. Kelli-Marie Vallieres is the state's workforce development czar and she also sits on the Social Equity Council. Global funding for fintech companies Funding (Billions) Year platforms with more than 10 million live users across the U.S. "We wanted to find one combined platform that could support retail, small business, and cash management for digital/mobile banking," Mitchell said. Liberty, which has $7.3 billion in assets, has also inked a deal with Glastonbury-based Payrailz to be its new money movement partner, supporting account-to-account transfers, new account funding and loan services. It has also added new partners to support financial wellness and credit monitoring, as well as one to help small businesses to manage invoicing and payments, and another to provide digital customer service. Meantime, the parent company of Stamford-based Patriot Bank, with $962.8 million in assets, announced earlier this month it was buying American Challenger Development Corp. to establish a new digital national bank headquartered in Connecticut. For many banks, new partnerships with financial technology companies are a survival strategy, as fintech adoption by consumers has risen steadily in recent years — from 16% of global consumers using at least one fintech platform in 2016 to more than 60% in 2019, according to Ernst & Young survey data. And COVID-19 only hastened the pace of fintech adoption, says Cynthia Merkle, president and CEO of Danbury-based Union Savings Bank. "The pandemic accelerated the use of mobile and [customers] moving away from [bank] branches for transactions," Merkle said. Bigger tech budgets Union Savings Bank's stepped-up focus on fintech adoption pre-dates the pandemic, Merkle says. For the past five years, the bank's innovation center team — composed of cross-functional representatives from product management, IT, marketing, data and customer service — has been working collaboratively, including on new fintech partnerships. In Aug. 2020, the bank launched a contactless debit card and in October of this year it announced a new early payday service that will give customers — with a Union Savings Bank checking and direct deposit account — access to their paycheck up to two days early. "A lot of consumers are living paycheck to paycheck these days," Merkle said. "And if we can help in a little way, we want to do that." By year's end, Union Savings Bank, which has $2.96 billion in assets, will also launch a new financial insights service to help customers track how they spend their money and how they can better budget. The important and evolving role financial technology will play in the future is reflected in Union Savings Bank's technology budget, which Merkle says is increasing by 20% this year compared to the more typical 5% increase in recent years. Merkle says Union Savings Bank's brick-and- mortar locations, which have scaled back hours over the past year, have become less about transactions and more about offering consultation services for customers. The ability to meet customers in-person still helps differentiate traditional banks and adds a layer of trust with customers, bankers say. At the same time, partnering with banks versus competing with them can help fintechs leverage lenders' existing customer relationships, according to Jorge Santiago, executive vice president of Milford Bank, who oversees the lender's digital strategy. "By working [with fintechs] we can improve our service to our customers and [our partner] is able to work with a trusted resource because our customers trust us to [select] good partners," Santiago said. Santiago said Milford Bank, which has $528.4 million in assets, conducts customer surveys and focus groups to learn about services they want. Milford Bank's newest partnership, launched in October, is with FutureFuel.io and offers personalized student debt management services, including loan consolidation and refinancing and programs to convert cash-back rewards and spare change into student debt payments. "It's hard for a community bank to have one specialist on hand who can help with student loan debt, but by partnering with [a fintech], we're able to bring these services at a very [cost-effective] rate to our customers," Santiago said. Google/Amazon experience It's not just the innovation, speed and convenience of today's fintechs that are changing the banking experience, it's also the integrated nature of these digital tools, says Liberty Bank's Mitchell. "Unfortunately, financial services in the United States have [historically] been behind on technology, so the core systems that ran the banks were 30- to 40-year-old technologies within a closed system and new features or functions would release twice a year," Mitchell said. "The newer technologies are part of 'open banking' so different systems [talk] to each other." That's allowed banks like Liberty to better communicate a united financial picture for customers. He points as an example to the various apps consumers use for person-to-person transactions, to pay bills or check their credit score. "We can now embed all these fintech vendors [behind the scenes] to give the [financial picture] in one spot," Mitchell said. And that is something the majority (60%) of fintech users say they want from a provider. They also want processes to be faster, according to the Ernst & Young survey. Mitchell says Liberty's new customer onboarding process, which used to take 15 minutes, can now be done in less than five minutes. "You scan your license and the system populates the information and processes the 'Know Your Customer' information that is required by regulators," Mitchell said. "The user experience [for banking] has to be like Google or Amazon because that's what people want and are used to." With the global fintech market expected to grow annually at a nearly 14% rate to $190 billion by 2026, the only thing certain for the banking sector is more innovation. "Traditional banks had been doing things [largely] the same way for 200 years," Mitchell said. "But everything has changed." Social Equity Council outlines cannabis business workforce development standards By Sean Teehan steehan@hartfordbusiness.com T he Social Equity Council, a major regulator of Connecticut's adult-use cannabis industry, may use a point system to determine whether business license applicants have an acceptable workforce development plan. At a recent meeting of the SEC's Workforce Committee, the subcommittee's chair Kelli-Marie Vallieres — who also heads the Connecticut Workforce Unit — presented a draft rubric the Council could use when judging workforce plans. Under Connecticut's adult-use cannabis legalization statute, both social equity and general applicants seeking marijuana business licenses must submit a workforce development plan to reinvest or provide jobs and training opportunities for individuals in areas disproportionately impacted by the 50-year war on drugs. The law tasks the SEC with approving or rejecting each applicants' plan. The draft rubric consists of eight questions companies would answer, and criteria for what the SEC would consider for each question. It assigns a point value for each question and says successful applicants must reach at least 80 out of a possible 100 points for approval. For example, one question worth 20 points asks prospective businesses how they will try to hire racial minorities and individuals who have been affected by a marijuana- related arrest. The draft rubric also assigns 30 points to plans for training and recruiting employees. Members of the SEC's workforce subcommittee unanimously voted to put the rubric in front of the full Social Equity Council for review. At its final meeting of the year, on Dec. 7, the Social Equity Council plans to vote on final criteria for social equity cannabis business applicants, effectively starting the clock on the formation of legal marijuana businesses in Connecticut. If SEC members pass final criteria as planned, the Department of Consumer Protection will begin accepting business applications 30 days later.

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