Finding Fintechs: How This Young Bank Pursues Partners

Hi, it’s Mary Wisniewski here, Cornerstone Advisors editor-at-large.

In today’s show, we have Rodrigo Suarez, who’s the chief banking officer at Piermont Bank, and among his responsibilities is helping the bank stay ahead on innovation. Yes, you heard that right.

One thing that is striking about this bank is that it is only a handful of years old. That is not that common.

In our conversation, we explore the idea of a fintech company not moving slower because of its bank partner. If you’re thinking, “Wow,” you should be.

We also talk about how the bank is thinking about fintech partnerships at a time of added regulatory scrutiny and innovations for the small business customer.

Here’s our conversation.

All right, Rodrigo, thanks so much for joining Money Isn’t Everything. It’s great to have you on the show.

Yeah, thanks so much for having me.

It’s not every day I get to speak to a young bank employee, and that’s kind of where I want to start us because your bank formed in 2019?

2019, yeah.

There aren’t many of us. We were actually the first bank that was chartered in New York since the financial crisis.

There have been a handful of new banks over the last few years. It’s been quite an interesting ride for us, in a very positive way.

Yeah, I bet it’s been quite a ride.

I’m just like, “Youngster bank.” It’s not a phrase I get to say except for today, so I’m overly excited about that.

What does that mean? I always hear banks and credit unions talk about their legacy tech, their legacy tech.

You’re a bank that came out in 2019. You’re a handful of years old. Does this give you freedoms?

Yeah. I think it gives us the freedom to think about how to build something from the ground up in a way that’s relevant and attuned to where we see the market has needs.

It’s definitely an advantage, and it also allows us to move faster.

If you look at some of the banks that have been around for a while that are trying to get into new lines of business or launch digital-first propositions, they typically struggle both with the tech, but also with process, because everything has already been built in a way to support a legacy business, which typically includes a branch network and layers and layers of bureaucracy.

In our case, we’ve been very intentional about how to build things, both from a technology perspective, but more importantly, the culture, the folks that we bring in, and how we deliver.

It’s been really interesting for me to be part of that process, and we look forward to continuing growing in that way.

Yeah. Let’s talk more about the talent.

What are you looking for in someone that joins the bank that has, fresh face is the wrong word, but a fresh attitude perhaps is the right phrasing?

What are you looking for?

There are a few things.

In addition to being a new bank that’s trying to do things differently and with a more tech-forward approach, we’re also a minority depository institution and one of a handful of multiracial minority depository institutions.

We really believe in diversity, including diversity of thought.

We look for folks that bring a different perspective, that can contribute toward creating a more diverse environment generally.

Then, as it relates to the more tech-forward angle that we’re pursuing, we look for folks that have had both a more traditional banking background in certain cases, but also people that have worked with technology companies and at technology companies in the past.

In my team, as an example, I have folks that have worked both at more traditional banks, at banks that have unique business models in the embedded banking space, as an example, and also folks that have worked directly at fintech and technology companies.

It’s the combination of those things that allows us to build stuff in the way that we’re looking to build it.

Yeah, I think that’s so intriguing.

I want to definitely dial into the diversity of thought specifically, but before we do, there’s one segment that we do here. It’s called “That’s What You Said.”

I think you just lined it up for the theme that I wanted to address.

You went on another podcast and you said, and this was from 2021, so this may have changed, but you said then, “What we try to live by is to make sure that the fintech is not moving slower because of us.”

Yeah. That’s still true today.

That’s still true today.

I mean, the environment is very different. We can get into that too.

But that’s what we have been doing from the beginning and still live by.

The way that I would answer that question, and maybe a follow-up question that you may be already thinking about, is that we’re currently focusing more on quality versus quantity of programs and fintechs that we work with, given the shift in the environment.

But for the programs that we support, we still pretty much believe in being the right bank, the right partner, for both of us to be in a relationship that’s fruitful.

I think that’s where we differentiate ourselves from other banks that operate in the banking-as-a-service and embedded banking space.

I think just even saying you want to work faster is a notable thing because I know the bankers and the credit unioners listening are aware of what speed looks like at a bank, but an entrepreneur listening might not.

Rodrigo, tell me, in terms of weeks or months, what’s fast in forming a partnership, and what’s slow today in 2024?

There are many aspects that I think are relevant to answering that question.

For what we control, I think first what we try to do is provide certainty as far as timelines.

What sometimes happens is, speed aside, things drag along and don’t necessarily provide clarity in what the expected response time should be.

There are certain things that, frankly, do take a few weeks for us to make a decision.

But when that’s the case, when we know it requires an escalated approval, we do our best to be upfront about that.

Now, as it relates to your broader question, standing up a program is an example of something that we typically do in two to three months.

That includes the technology integration, it includes the diligence aspect, and it includes the legal workstream.

How we do things, I think, is a little bit different.

This is not rocket science in any way, but for those three components, we typically parallel-track them.

Instead of proceeding sequentially and first doing the diligence, then doing the integration, then doing the contracting work, we do our best to have a very clear and informed perspective on certainty of execution from the start.

Then those three workstreams can move in parallel smoothly.

That’s really how we’re able to do things a little bit faster.

I was going to ask, is that rarer?

Yes. I think, for the most part, the approach tends to be more sequential.

There are exceptions, but banks, at least the ones that we have seen, tend to operate sequentially and, in some cases, provide very little comfort to the underlying company they’re working with around even certainty of approval.

I’ve seen cases where the underlying fintech does not know if they’re going to be approved and whether they’re going to be able to go live with their program until the very last minute.

Then, at that point, there’s a full set of additional requirements that are triggered.

We just try to make that a little bit of a better fintech and partner experience, which goes a long way for many of those companies that value speed, responsiveness, and certainty.

Gosh, because I know sometimes, I remember when I was covering fintech like a decade ago, the fintech entrepreneur would be so surprised by the long sales cycle, but even by the time they got through one gate, then that person they were dealing with left the bank or whatever.

It’s very hard to navigate what I was calling then, and I still call it now, a labyrinth. The banking labyrinth.

Right.

I think that’s something else where our approach is a little bit different.

There are senior folks that are involved in the process from that very early stage, where we screen a potential opportunity, all the way to bringing that program live.

Involvement from the decision-makers and commitment and buy-in from decision-makers at all levels is also very important here.

We don’t operate with a structure where you talk to an RM who then shares that with a manager they work with, then brings that to the actual decision-maker.

I’m directly involved in most of those conversations, and I have very, very close relationships with all fintechs.

That is very notable.

You’ve already alluded to how things have changed with fintech partnerships.

Clearly, this has been, I’ve got to say, one of the most chaotic years, last year too, for banking as a service.

Certainly, this is the year I’ve heard referred to as the year of the consent order from the bank standpoint.

I know you’re working at a young bank, but I’m sure it’s changed the way you approach your fintech partnerships from when you formed to now.

Tell me about how you’re thinking about what feels like extra, extra regulatory scrutiny.

My broader perspective on what we’re seeing in the ecosystem is that, first, there’s clearly a shift, as I said before, from quantity to quality.

I think that is true both of banks as well as fintechs.

What we’re going to continue seeing is that there will be fewer fintechs. There will be companies that are more mature, or teams that are more mature, that have more solid backing, better financials to support the use case as well, and a better product and a real value proposition.

We were seeing a lot of use cases and programs back in 2021 that were more a reflection of there just being a lot of capital in the ecosystem and people throwing money at anyone who had an idea.

Many of those were actually very bad ideas.

We’re looking at the space differently from that perspective.

Then, on the bank side, I think for us what hasn’t changed is our level of commitment.

I think that’s what’s going to make the difference between the banks that are going to be doing this versus those that are not going to continue investing in the business and decide to exit instead.

That’s what’s happening already.

What has changed is more of a doubling down, if you will, where we recognize that the environment right now is a difficult one and that this requires serious commitment, serious investment.

We were committed to this before, and we’re committed to this right now.

We’re pushing hard and investing in bringing the right people, putting the right additional tools in place, and making sure that this is something that we continue to scale for years to come.

Yeah.

When you’re looking for better quality and numbers looking better, what’s an example or two that you would say you’re screening for now and perhaps weren’t earlier, or you’re doing more of it than perhaps earlier?

I think the main example that I would give you is when we first started, our perspective was, okay, we’re not VCs, so who are we to judge whether this business model is going to take off or not?

We did look at the business model, and we obviously evaluated that.

There were a lot of segment-specific card programs, just as an example, that were more amenable to work with.

Right now, we have understood that we do need to have a very intentional perspective and a strong belief in the underlying business model and its sustainability for us to pursue a partnership with a fintech or another technology company.

What that means for us, and I’m providing very general parameters, is that there needs to be value in the product beyond just the payments or banking component.

If that’s the main value driver, it’s typically very hard to make that product successful.

Instead of working maybe more with card-focused, interchange-driven models that are looking to go after a specific segment, we’re now pursuing partnerships with vertical SaaS companies that have an existing solution with users that already value and pay for the product, where overlaying the banking or payments piece just adds incremental value, but is not necessarily the main value driver.

Those are the types of use cases that we see as having more quality and more sustainability for us.

It is so interesting because I hear it at a lot of conferences now too, and I didn’t before, and it’s kind of surprising, but it’s just how much that business model does matter.

What’s at stake is, in fact, the ability to innovate.

It seems like, even though it’s the business side, it’s absolutely affecting the creative side and the creative cycle.

Yeah.

I think it’s also where you approach the delivery from.

If you’re building something where the differentiator is just going to be a slightly better banking application with some custom components for a given segment that you’re going after, there were neobanks for musicians, neobanks for X, Y, and Z segments, that’s going to be very hard to do.

Frankly, a lot of the larger money center banks that have retail businesses have pretty good products already. They have good mobile and online banking applications.

Where there is true differentiation is in meeting those users, maybe talking about the business side, at the point of need.

Instead of just giving them a slightly better mobile banking application, give them something where they’re a construction-focused SMB and they’re using software to manage their construction business for project management, expense management, whatnot.

The banking product being embedded in that truly provides more value from this perspective, and that’s what we feel is more relevant right now.

More relevant, yeah.

That’s a huge, notable change, I would say.

You brought up small business because I feel like your bank specializes in looking at innovations within small business. Am I right to think this?

Yes. Yes.

Tell me about this.

This has been such a sleepier area of fintech.

I hear people over the years go, “We’ve got to do something for small business. We’ve got to do something for small business.”

But it still seems sleepier.

Tell me what you’re looking for.

We just mentioned the construction example, but what’s on your radar for small business and gig?

There are, I think, two different channels through which we approach the delivery of products to different SMB segments.

One is what I was just describing, which is through our embedded banking business and partnerships with software companies.

Our focus there is identifying companies that focus on one segment and have a very differentiated offering.

I mentioned construction.

That’s a real example.

We work with a company that has vertical SaaS for construction-focused SMBs, where a lot of the processes historically have been very manual for project management, vendor and supplier management, expense management.

Now all of that is being digitized.

With that product, we’re also embedding a banking and payments offering that makes it a lot more interesting for those SMBs to do everything within one platform.

Like that example, we work with other companies in the private aviation space.

We also work with companies across a number of other segments where the vertical SaaS offering someone else has built, combined with products that we can deliver through that channel, provides true differentiation because many of those companies want something that looks at their business more holistically and addresses various needs within the same platform.

That’s one way that we pursue innovation within the SMB space.

Then through our more direct channel, where we deliver products without a software partner, we look for similar things.

I think a lot of the differentiation right now is coming from third-party integrations that allow those businesses to address other needs with more digital sophistication.

A very straightforward example of that is integrations into different accounting systems that those businesses use.

It’s a lot easier for them to manage their business if they can easily go into whatever accounting system they’re used to and just pull all the banking data and be able to do whatever is needed from an accounting perspective there, versus having to download something, upload it manually, adjust it.

Similarly, as far as accounts payable and accounts receivable, there are a lot of new tools that businesses are adopting where having a more seamless integration with the bank product just makes things a lot easier for them.

We look at it from a digital differentiation perspective, but also, just going to the fundamentals of banking, I think the relationship management aspect of it continues to be very relevant.

Our approach is like a hybrid digital/high-touch one, where we do think the digital proposition matters, but having a human that you can talk to is also very relevant, especially for those SMBs that have more sophisticated needs and need someone to provide valuable advice.

The combination of those two things tends to be very powerful.

We don’t think that you can just have a digital-only proposition, and at the same time, just having a branch network without a good digital product is not going to make sense either.

Yeah.

I feel like the pendulum is swinging there because in 2008, you’d hear a lot of fintechs saying, “The branch is dead.”

Now it seems to be just what you’re describing, this coming to believe that, yes, of course you need the easy-to-use digital app, but you do need that human.

Maybe it’s a taller order or just reassurance.

Maybe someone doesn’t even really interact with that person, but sometimes it’s like a safety tool.

Yeah. I think in some cases it’s just reassuring that, if you need something, there’s someone there that’s going to pick up the phone.

But beyond just having that reassurance, there are moments when that relationship-driven model is very relevant.

When you have a business that’s looking for credit, as an example, that requires much deeper conversations.

For certain businesses, it’s not something that you can just automate.

I know many fintechs try to do that, but you typically see that with the very small SMBs.

For SMBs that are not looking for a $50,000 or $70,000 line, but something a little bit bigger than that, having a bank and having a relationship with that bank is really valuable as well.

I wanted to broaden this up a little bit because we’re talking about such interesting examples.

How do you source fresh thinking?

Are you on the conference circuit? Are all these fintech companies approaching you?

I imagine you get spammed a bit.

What are the sources of inspiration and finding compelling fintech products?

We do a little bit of what you’re describing, where we go to conferences. We talk to a lot of folks.

By now, luckily, we’re very well-positioned within the ecosystem.

People know us as well, so they reach out to us.

We love having conversations wherever we can be useful, whether that means us pursuing a partnership with that company or not.

We’re constantly talking to other folks, understanding what they’re building, seeing if there’s a scenario for us to collaborate.

That approach, where we’re in constant communication with other banks that are doing interesting things, fintechs, just people that have a perspective in the ecosystem, is very valuable.

It makes us hopefully continue being relevant and aware of what’s happening and how we can do something that’s relevant without just necessarily following trends.

I think it’s also very important to distinguish what’s real versus what’s just trendy at any given moment.

The combination of all of those things.

It’s a really interesting point because I do feel like there’s a herd mentality in this industry.

It’s like, “Wow, was that even interesting to begin with?”

It’s like, “Hey, that thing did it, so I’ve got to do it now too.”

Yeah.

I think that’s what we’re seeing right now.

There were a lot of those things happening in 2021, and going back to one of your initial questions, there’s a weeding process right now.

I think, as we see that, we’re also becoming more aware of certain decisions that were made by different folks in the ecosystem, starting maybe with VCs, that shouldn’t have.

It’s a good learning experience as well.

I bet it’s a good learning experience because that VC stamp sometimes gives it such power, but if you look at what has happened, it’s not always like, “Don’t just trust that.”

Yeah.

At the top of the call, you were mentioning how the bank is full of a diverse group of people.

I think that’s so notable for a lot of reasons.

One being that’s not very typical at most banks.

But two, I think it does tie to this sourcing of ideas.

This might be a poor example, but it’s one that comes to mind first.

I remember talking to a bunch of bankers, and they were trying to create something for workers, but they were getting paid every two weeks or once a month or whatever their cycle was. It was very regular.

The challenge was fully understanding the cash flow problems because the way that they work is different.

From your perspective, you have executives from, I imagine, broader geographically, who this person is, all very different.

I’m assuming there’s this ability to see a larger range of problems, perhaps.

But I’m really curious how you think about this.

What does a diverse bank mean for sourcing ideas?

I think, first and foremost, it’s recognizing that people with different backgrounds have valuable things to contribute to a discussion.

What banks sometimes struggle with is having folks that have worked at more traditional banks for their entire career, where the thinking tends to be pretty homogeneous.

When you’re trying to solve a problem that maybe has a slightly different angle to it, using the example you provided, those folks tend to struggle just coming up with new ideas and new approaches because banking for them has meant doing things in a certain way.

Now doing them in a slightly different way is very challenging, especially when the conversation doesn’t really surface new ideas.

In our case, I think we have folks that have had backgrounds in a number of different places.

Going back to what I mentioned, folks that have worked at fintechs first, folks that have worked at other traditional banks as well, which I think is valuable, and folks that have worked at banks that have launched new lines of business and are very innovative themselves.

When we all get together, I think each of those groups, and then you overlay diversity components as far as having, for example, a good portion of our executives being women, our CEO, us being a multiracial MDI, so on and so forth.

The backgrounds that we have, both personally and professionally, I think allow for a very rich discussion.

As it relates to our culture generally, I think there’s a very open environment where people can share ideas, and those ideas are considered.

Then those feed into the decisions that we make and how we problem-solve together.

It’s a lot, and it’s also challenging sometimes to have all of those perspectives as part of our problem-solving process.

But in the end, I think it’s very valuable, especially for the customers that we serve, who in many cases are also underrepresented founders, women business owners, minority business owners.

It makes us relevant, and it allows us to do new things.

How did you join this bank?

What attracted you to working here?

Many of the things that I just said.

I wanted to be part of an organization that was building something new, that was building something relevant.

For me, banking, frankly, I think banking can be quite boring, and it can also be very, very interesting.

Finding a way to innovate within an environment that’s highly regulated, that certain people perceive as commoditized, is a very interesting challenge.

That’s what led me to be part of this.

You mentioned initially the bank has been around since 2019.

I joined shortly after, in 2020, so it’s been over four and a half years now.

It’s been really fun, and that’s what keeps me here.

You don’t hear that that often.

You describe that problem so perfectly.

It can be boring, but it can also be the opposite of that.

What you’re building is the highest stakes possible.

Yeah.

You’re working with some of the same underlying components, right?

ACH is ACH everywhere. Wires are wires everywhere.

It’s a very interesting area to be in where you do need to take those same building blocks but figure out new and more relevant ways to deliver those features or products.

I have at least two questions left for you, but one, and we kind of went into it already, is your prognosis of fintech.

You mentioned not everyone will survive this.

What else? How do you expect the rest of this year to play out?

I would go beyond just this year because it’s crazy, but we’re mid-August, so I’m not sure what else will happen between now and the end of the year.

Going into maybe 2025 as well.

I think what we’re going through right now will continue.

I think we’re still going to go through that weeding-out process, and that will involve, I think, seeing some companies that have been around no longer be sustainable.

We have been seeing some of that happen already.

Then, in parallel, there has also been new business that has been interesting.

We’re also seeing the emergence, I think, of new and very interesting companies and use cases.

My expectation is that as the weeding out happens, we’ll see the new version of embedded banking and fintech.

We’ll have folks that want to do this in the right way and that will focus on having strong, sustainable, compliant, and relevant offerings.

It’ll be better for the ecosystem to get rid of a lot of the noise that we have been seeing recently.

That sounds helpful.

Before I ask my last question, for the entrepreneurs listening, if they wanted to reach out to Piermont Bank, how should they go about doing that?

How can you be found? Anything you want listeners to know?

I’m pretty responsive.

People can usually just ping me on LinkedIn.

I think my email may still be on our website.

We have a section for folks in the innovation ecosystem where anyone that wants to talk to us can also just submit something there, and we’re very likely to respond.

Then I’m just around the conferences and tend to be very easy to approach.

You wear a hat, glasses, and you’re like, “I don’t really want to be recognized?”

No.

I just try to enjoy my time and meet new people and connect with folks that I have already been talking to for a while.

It tends to happen pretty organically.

More than anything else, I enjoy an interesting conversation.

Folks usually are able to find me whenever they have something to talk about.

Well, that’s wonderful news.

Last question, what’s the image on your phone’s lock screen?

On my phone’s lock screen, it’s a picture that I took on a trip to the Seychelles a year ago.

That sounds lovely.

Rodrigo, thanks so much for being on the show. It was great having you.

Yeah. Thank you for having me.

So, one of the things I learned today is the business model matters even from the earliest days of building out an idea.

In two weeks’ time, I sit down with Laurel Taylor, the founder of Candidly, and we’re talking about college debt and empathy.

If you want to keep up with the other fintech happenings catching my eye, subscribe to my newsletter on LinkedIn.

It hits at the end of every month, and it’s called Finteching with Mary.