Leaders in Lending
Leaders in Lending

Episode · 11 months ago

Digital Transformation and the Community Reinvestment Act: Partnering with Fintechs to Serve LMI Communities


The community reinvestment act (CRA) is a decades-old law requiring banks to meet the credit needs of their community, but with all the changes that have taken place in banking over the last 10 years, how can FIs can partner with fintechs to best serve their communities. ? 

In this episode, Nathalia Artus, SVP, Director of Community Development and Reinvestment & CRA Officer at Atlantic Union Bank, discusses how her bank approaches CRA and how strategic partnerships will play a part in community development in the future.

We discuss: 

- How the digital transformation affected the customers CRA serves 

- Partnering with fintechs to extend credit to borrowers 

- How each bank approaches CRA differently 

- Ways to measure impact on the community and successfully track data 

To hear more from Leaders in Lending, check us out on Apple Podcasts, Spotify, or on our website. 

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Sira is working through a lot of reforms and there is a change for the regulatory agencies to make it more seamless and to Updade the regulation to bring it up to speed to today's needs. You're listening to leaders and lending from upstart, a podcast dedicated to helping consumer lenders grow their programs and improve their product offerings. Each week here, decision makers in the finance industry offer insights into the future of the lending industry, Best Practices around digital transformation. In more let's get into the show. Welcome to leaders and lending. I'm your host, Jeff Keltner. This week's episode features a conversation with the Talia artist, the director of community development and reinvestment in Atlantic Union Bank. I love this topic and it was really fun to talk and it's how you we kind of covered things from how the shift to more digital delivery has an impact on economic mobility and how you think about that in the context of serving diverse communities that might have different ways of traditionally interacting with the bank and ensuring that you're reaching entire communities. We talked about ESG and how you measure community impact, how you think about different measurements, different objectives and how you really think about success and what that looks like, both in the context of kind of the ESG, but also the profit for the bank actual, the business value of from from reaching a broader community. And finally, we talked a little bit about their investment into minority depository institutions, but about what upstart is done in that space and particularly how we can help those institutions not only with cash, because they've often seen an influx of cash of late, but how we can help them put that cash to work to further their missions and better serve the communities that are in often minority community. So I think there's a really great topic. So, without further do please enjoy this conversation with Natalia artist, the director of community development and reinvestment at Atlantic Union Bank. Natal you, thanks so much for joining the podcast today. I appreciate you making the time. Thank you so much for the opportunity to be here. Thank you, Jeff. Yeah, I know we had a little bit of trouble scheduling this, but I've been looking forward to the conversation, so I'm glad. I'm glad it happened today. Now, you know, a lot of my guests talk about digital transformation and the acceleration of adoption of digital technologies that was driven by Covid in. A lot of that they think about from the technology point of view, but I think, given your role, I'd love to ask you how you think about how that's impacted economic mobility, the kinds of customers you can serve, if they're caveats are issues, because certainly not all consumers have the same access or comfort with digital technology. So you know, where do you see, from kind of not just community reinvestment but reaching out to different parts of the community, what's happening and how the digital transformation is kind of shifting the landscape there? Well, thank you for a did question. Is really interesting because before kind of like the pandemic, we looked in the digital for sery mostly on how can we deliver financial literacy for a different community, different platforms. Right. So we actually have a hundred percent financial literacy platform...

...that we can deliver, you know, education to focus on their mobile their desktops and so forth. But whenever we had the pandemic, we were just kind of, you know, pivoting and then we did see that there was a nine two percent increase in customer transaction volume for for, for example, one of our money transaction platforms just called Zel, and then that single data really provided us with more information and power to invest in ways that we can have and provide more technology to our customers, including our loader moderate cus moderate income customers, which is focus on Cra right, which is a regulation now there for over forty years and is again really focus on loader moderate income communities and individuals. So we develop the report and it's run quartally now and we have the intention of doing this on a monthly basis where we're going to measure the usage off the digital platforms by low income individuals and customers. Interesting and then we can have more opportunity to see where we've been active and highlight opportunities and locations where we can be more active. And that's just a not a touch point where we can engage our community partners right as for their help in identifying channels and ways to reach out to the communities where we operate. That's about ninety two percent increase in adoption. That's, you know, that's start up type growth numbers. Frankly, that's what everybody in silicon valid wants, is doubling year over year. That's pretty hard to adapt to, I imagine. Where there any lessons you learned or you know you see the adoption on certain areas are like. What were your takeaways from that or areas where you got feedback that said, hey, here's something that we need to improve and about how we're enabling this or where people are struggling to move to this new kind of interaction mode. We're sue in a process of working through that right and exploring how we can leverage her fine text have been successful, and one of those points is through regarding credit availability. We do know the fifty percent of the customers use the FINTAC shifteen a personal long so there's definitely an opportunity to build upon dead and to bring more value to our customers, and one of them has been through a partnership with upstart. Well, so tell me a little bit about I mean, I obviously about our partnership, but tell me a little about why engaging with upstart was important to the bank, like what was it that made that interesting for you? So another interesting data point, right. So it was shared with us through the up star team that there are several studies that have shown that less than half of the Americans have access to prime credit. Yes, Eighty get. Eighty percent of the Americans have never defaulted on alone. So that get really suggested that lending using the traditional credit score models can be excluding or are excluding a large population of credit worthy borrowers. Yeah, I mean that's such a such a key point to me when you talk about reaching to load of moderate income communities is how do we you know, I think everybody intuitively knows that borrowers are more credit worthy than most banks are willing. I mean you just you know, a subprime pool isn't like ninety percent losses. You know, it's like right, it's like twenty thirty percent losses, which means there's a ton of good applicants in...

...that category that we're just not able to tease out. And of course, the history of credit scores, and you asked what indicate that there's going to be a disproportionate portion of loado moderate income or communities of color in that percentage. That's that's being caught for credit score. So it's it's a fascinating question to me of how do we not just take Cira from a you know, we're doing the thing on the side to make our obligations and make it actually a part of the core business of the bank to actually serve those cook those communities more actively, not just from a social good but from a business point of view. Oh, absolutely, from a business point of view. So we have our core values, which is we care, we're committed and we're courageous, and nothing like that match has to our recently work here. We're committed and workageous. So those are two core values of Atlantic can in bank and that is kind of the driver, or business in Cira is the basis for all of that. So we couldn't be more, you know, driven into our business strategy. And when you think about a business as publicly traded, you have to think about ESG. The environmental, social governance and when investors are expecting from an organization. So again, cray's and other platform and delivers into those three levels, as well as your approach to Cira, compliance of it. I I'm very from with the CIRA and yet I often feel like the exact ways in which an institution are is asked to comply and measured and rated, it's still maybe black box is the wrong thing for a guy works at an AI company to say, but that feels like a bit of a black box to me. So you don't have to explain it all here. But but I love your take on are there shifts and how you see your institution or others approaching compliance with and meeting the requirements of the CIRA, because it feels like a place where there's it's not the same way for every bank. It's not the same approach or the kind of criteria and requirements and I wonder if there are shifts and how people are approaching their requirements and maybe im come opportunities to serve communities to the CIRA. That is so interesting that you bring that out, Jeff. So it shows that you already know more about saring some of the Serra practitioners. But CIRAS and art and not a science. Right it twink does it differently. So the regulators have a guidance. So now how we collect data? Of course everybody does the same way collecting data, but how you use that data and how you interact with the communities where we operate can be very different bank to bank. Right against theory was annected by the Congress in one thousand nine hundred and seventy seven over forty years ago. It's a very old rule in law and it does require to banks to help meet the credit needs of their communities in any particularly neighborhoods. Again, I'm going to keep repeating myself with lottle, moderate income in these and individuals. But I don't than that. I mean you have guidances that have said there were issue like twenty years ago and then again ten years ago. and think about how the banking industry has changed in the last ten years, the last five years, last few years. So we can now take a photo of our check with your phone and that's consider a deposit right and...

...then back in a day you had to go to an actual branch and that's what was the definition for CIRA for a location. But once you take a deposit in Arizona for a bank that's in New York, what does that mean? So CIRA is working through a lot of reforms and there is a change for the regulatory agencies to make it more seamless and to update the regulation to bring it up to speed to today's needs and to the industries. Just just how where we stand today? So, like I said, Sarah's and are in our science. I don't think that you will ever change to be a science, that we're all going to do the same thing, but it is kind of a different way on how different banks approach this regulation. I'm going to answer that way. The next time I have to go through my CIRA training I'm going to say Ciras an art, not a science. There is no definitive answer to your question. I don't think my chief compliance officer is gonna going to accept that answer on the task, but I might have to use it. We good it a good a smile. So that's a that's a lot of step ahead. Yeah, that's fascinating and I and I know part of your role is kind of this input the CIRA and the community impact into the ESG. How do you think about measuring impact in a community in a bility to serve like Loto moderate income communities versus, you know, more affluent communities? Obviously, like things like mortgages are so easily targeted at an affluent community that lots of people buy homes, lots of people are income at a harder in a lotto moderate income community where there might be more renting, et ceters a. How do you think about both, you know, improving your ability to serve those communities but also, importantly, measuring the impact your policies and practices are having so you can tell if you're, you know, doing what you can and being effective and meeting the goal of serving the needs of that community perfect so I think I got to is like how you know we can do it and how we can measure rights? WHO FOR IMPACT? So how we can do it is more and more through digital platforms. Right, we have to figure out how we can reach out your customers where they are in a majority of them are on their phone. So we have to think, you know, what we can do about that. So one of the things that we have is a narrow focus on how we can serve our communities and is only through three pillars inside the entire, you know, range of what you can do under the community vestment act and CSUR and SG and is affordable housing, financial literacy and economic development. So we really focus on those three in also financial literacy. So we have an already mentioned before. It's a perm that's a hundred percent digital and accessible any time, anywhere with any device, and we also offer services such as online budgeting and money management tools and over one third of our customers are assign up for debt service. So we will love and hope to see the numbers increasing. So how do I measure dad? Is through data tracking, is through reports and with our community partners. So we vest in a lot of CDFIS, which are community development financial situation. That what technical assistance for individuals and for small businesses as...

...well that are, in its majority, minority owned or low income, low and more income, own or a loan more income. Sensus tracks that. We can also rely on their reports that kind of funnel back to US based on our investments in those are organizations. But again, we're always looking to have a fully digitized into and solution for our customers. Yeah, what do you find to be effective metrics to track or you know, for impire you talked about data tracking and analytics, but I'm curious, are they're like key things that you find or hey, these are useful metrics and they help us really separate the wheek from the chaff in terms of maybe a CDFI that's having more impact than last or a program or an initiative that's like really achieving results, versus one that's kind of like that. I I'm a bus Dev guy outside of my podcast hosting and I was talking my boss Yester, you gun. I see those a lot of buses of guys who do deals that don't do anything for you. They said on the shelf and they look good in the press release but they don't drive any any actual value. And I'm always curious for programs in this space. How you think about being able to find the ones that are are meaningfully helping the community versus the ones at hey and we put a partnership press release out, we can you know, we can say we did something, but ultimately you're not really reaching assisting the community. How do you think about the ways that you can find the programs are tract the things that are really making a difference? Yes, so again, I'm wanted only focused on the sprop pillars. So we have affordable housing, financial literacy and economic development. So for sporting with a comic development, the last one. First we figure out and then we look for city of fies and organizations that can provide us with information of how many dollars have we unlocked in the community for each oar that we invested in you? So you know if you are a citified to make small business dollar loans. Like make sure that you know you have a system where you're capturing the the amount of money that you have deployed. So if I invested a million dollars, have you deployed, you know, five million dollars. So one, two, five, we can count that that way. If it's financial literacies, how many people we have served? How many folks have actually entered and read the articles and took the courses? And then how many of those people are in little modern income communities, are alone moder income individuals? And for housing, that's easy. How many affordable housing units have been created or have been maintained, because that's another issue, especially here in Virginia. Virginia, if you've heard, Amazon has an HQ to showing up being or Virginia and that's putting a huge pressure on the housing market. So how many affordable in units can we maintain that's going to be offered for a little mart income individuals? Interesting that is. That is fascinating. I wanted to ask you about one other area that I know you guys have invested in, which is not just cdfis, but minority depository institutions. MDIES, tell me a little bit about the the work you guys have that it's something that's near and dear to our heart. We've done some partnerships with the the National Bankers Association Association minority depository institutions, but what kind of work are you doing and how do you think we as a...

...community can support those institutions best? So it's really interesting. So minority depository institutions were the hard and so with a lot of communities, black communities in America, and a God you know, dis investor, Dis inn franchise for many, many years and recently they have a received huge attention from other institutions and efforts to receive deposits. So they have figure out that they can attract a lot of capital and what we have kind of found out through partnering with Otter Banks and Siia Serry officers, is that there is an issue in the point that capital. Social Stud gotten together to create an MDI kind of committee between the Community Reinvestment Act officers from several different banks and the DNI officers from several different banks to figure out how we can create more guidance for our institutions and for our industry on how to support MDI. So this is all still in flight and a very excited in here that you know you guys are also invested into the the deployment of more efforts and resources for mgis. Yeah, I feel like there's it's such an interesting point that I think there's been a flood of capital to these banks. It's easy to write easy if you have the money, it's easy to write a check, but I do think the question of how you can you deploy that and then the point you made earlier, how do we use more sophisticated ways to understand credit risk, because obviously there's not exactly a ONETO one ratio between MDIS and loado moderate income or lower credit scores, but there's a high correlation between those things and so the communities they serve on averager, lower income, lower credit score, and the question of how do you help them be able to deploy that capital effectively but also into those communities and to serve the greatest number of people in those communities that they can? I think is is really important to say hey, funneling money there is good, but helping them utilize the money to invest in the communities, that's really the heart and soul of what they're trying to do and I think where where we can try and be helpful to those efforts. Yeah, and we're not doing as a loan. So that's the other thing is just like not one institution or one organization or one association is working on as we actually put in our hands together and rolling our sleeves and trying to put our heads together. So, as you know, the banking industry, banks can be quite competitive and we're offering a commoditize service sometimes, but where we can truly partner is in community development. Right, I don't I don't think that we compete with our peers as far as when it comes to think about how we can best serve our community and if you can do the money and we can do the resources, let's just hold our hands together and make sure that the community received the best outcome of our partnership. Yep, awesome. Well, probably before I before I ask You my final three closure questions. Are there any topics areas you wanted to talk about, expected me to ask about and we didn't get a chance to cover today? No, I'm just excited,...

...do to to have a head our chat and conversation and I think that we can definitely continue to bring more institutions to think about how we can leverage working text can be successful with helping more access to credit for a little modern income individuals. Yeah, we're excited to, you know, be partnering with you guys and other institutions on thatx. I think it's a it's a tremendous opportunity to better serve the American public and particularly those communities that have been so often left out of more traditional approaches to credit. So it's that's very exciting to me. All Right, let me give you my rapid fire, at least rapid fire questions. You have to give rapid fire answers, but I always like to ask the same three questions to end it in these podcasts. So the first one being what's the best piece of career advice you've ever gotten? Well, one advice that I picked up and carry along is that you don't want work to be work right. It needs to be something that you can enjoy, and if you can do that you can build a great career on it and truly enjoy what were you doing every day? And I'm very past about what I do and I'm very lucky to truly truly enjoy doing what I do every day. So this is doesn't feel work, does it doesn't feel like work if you enjoy I do think people sometimes say life is too long and life is too short, and I think the which of those it feels like is depending on whether you're enjoying what you're doing or not, sometimes whether you whether you like it. So I like that all right. Second, second question. What's the best piece of advice on consumer banking or consumer lending that you've gotten? I think that would go but goes back to when we started right, AI and lending. Ai Landing can really play a huge role in identifying an approving more credit worthy applicants and improve their access to credit and access to affordable credit that never before. All right, I like that. That's true. And then what's your bold prediction for the few? This is my favorite of my hold your feet to the fire, bring you back and we can tell if you're right or I have had to make one or two of these. But what's a bold prediction for the future? Well, it's and put my my future goggles on, goat future goggles. I like it. Yes, I'm well, like look on my my binoculars and I'm going to see that digital is going to be the future or banking. Right and partnership with Vintax are going to be the future of banking. There were there was a time where banks, we're not being attention to ntext that it were paying too most attention to too fintax. I think that now we're going to have a lot of partnership with in text and really explore the digital space, especially with cyber currency. Or Wow, you just for cryptocurrency and there right at the end to throw everybody through a loop. I like that. I would even pivot yours a little bit, which is say, you know, Fintech partnerships maybe the future banking. I think it's also the future of Fintech where I think you're going to see more banks working, more fintext working with banks, or some probably becoming banks, in which case are just just banks at that point. My mine is like you get a charter your bank, so that that's a that's a path for but I think the you know, bringing together the the technology and latest developments from Fintax with the capabilities and...

...communities the banks have is is really how we're going to we're going to best serve the community side. I love that answer. Yeah, with our franchise. I mean how can you you bet in partner with that? A lot of fintext we have found, talking with Finn Tax, is that they don't think of themselves with technology companies, right. They think of themselves as customer experience or customer service company. So it's like this is all we need. We're here to serve our customers. So I bet our way to the to deploy that with the organizations that have become experts on it. Love it. Excellent. When the tie. Thanks so much for make of the time. This was a lot of fun and I appreciate your sharing your insights with the audience. No, thank you so much. Or opportune to be here. Deaf and of start up. Start Partners with banks and credit unions to help grow their consumer loan port folios and deliver a modern, all digital lending experience. As the average consumer becomes more digitally savvy, it only makes sense that their bank does too. Up Starts ailanding platform uses sophisticated machine learning models to more accurately identify risk and approve more applicants than traditional credit models, which fraud rates near zero. Upstarts all digital experience reduces manual processing for banks and offers a simple and convenient experience for consumers. Whether you're looking to grow and enhance your existing personal and auto learning programs or you're just getting started, upstart can help. Upstart offers an into in solution that can help you find more credit worthy borrowers within your risk profile, with all digital underwriting, onboarding, loan closing and servicing. It's all possible with upstart in your corner. Learn more about finding new borrowers, enhancing your credit decisioning process and growing your business by visiting UPSTARTCOM Ford Banks. That's upstartcom forward banks. You've been listening to leaders and lending from upstart. Make sure you never miss an episode. Subscribe to leaders and lending in your favorite podcast player using apple podcast. Leave us a quick rating by tapping the number of stars you think the show deserves. Thanks for listening. Until next time. The views and opinions expressed by the host and guests on the leaders and lending podcast are their own and their participation in this podcast does not imply an endorsement of such views by their organization or themselves. The content provided is for informational purposes only, and the discussion between the host and guests should not be taken as financial advice by companies or individuals.

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