Big bank executives are opening experimental branches which use technology to provide more services in less space than a traditional branch. The pilot programs engineered by Bank of America and Citigroup resemble Apple stores, with employees holding tablets and tending to customers. JPMorgan found its customers headed to branches for advice rather than to simply go to the tellers. So their experimental branches focus on new express banking kiosks – A.T.M.s, with additional functionality and large flat screens – rather than the teller line. JPMorgan is also testing new ways of replacing debit card swipes at A.T.M.s, including technology that authenticates identity by scanning irises and palms.
A new study from the St. Louis Fed concludes that there is a strong future for community banks and that those most likely to prosper will be those most committed to maintaining risk control standards and whose business plans are well-tailored to their communities. The study uses balance sheet and income statement ratios to identify features that are most associated with thriving community banks. The banks most likely to thrive were small (less than $100 million in assets), rural (agricultural loans have been unusually strong lately), had lower total loan-to-total assets ratios, had more concentration in consumer loans, and had less concentration in construction, land development, commercial real estate, commercial and industrial loans.
Assertions that virtual payments and currencies are on the verge of displacing greenbacks may be premature. More greenbacks are now in circulation than at any time in recent history. Since January 2006, the amount of United States currency in circulation rose about 64 percent, to $1.2 trillion. But at the same time, cash transactions are declining as consumers rely more on debit and credit cards, suggesting that demand for dollars may be driven by hoarders rather than spenders. Americans are also writing half as many checks as they did a decade ago. The number of bank branches, however, has remained relatively stable.
Alternative lenders such as OnDeck and CAN Capital still rely on old-fashioned loan brokers to find their borrowers despite their high-tech packaging. These loan brokers are independent agents who funnel cash-strapped business owners to be sold high-cost loans. They charge sky-high commissions, usually hidden from merchants, which can double the cost of the loan. Some worry the brokers steer costly loans to small businesses that can’t afford them. “It’s a direct parallel to what happened in the subprime mortgage space,” says Mark Pinsky, CEO of CDFI advocacy group Opportunity Finance Network.
The Delta Bridge Project, an initiative backed by Southern Bancorp which coordinates community and economic development efforts in three Arkansas and Mississippi counties, recently unveiled new tourist-friendly way-finding signs in Helena, Ark. The signs are part of Civil War Helena, a tourism promotion which highlights Helena’s numerous Civil War attractions. Southern Bancorp and its partners have invested heavily in Phillips County’s tourism industry in order to diversify the economy and create new economic opportunities in the region. “Civil War Helena is expected to attract over 60,000 annual visitors and create over 40 tourism-related jobs,” stated Cathy Cunningham, a consultant with Southern Bancorp.
Maria Contreras-Sweet, founder and chair of CDFI Bank ProAmérica Bank, has been confirmed by the Senate as the new head of the U.S. Small Business Administration. ProAmérica Bank, which she founded in 2006, serves small and mid-size Latino businesses in the Los Angeles area. Contreras-Sweet fills a role vacated by Karen Mills, who stepped down from the post in August. "Small Business will have a strong advocate in Administrator Contreras-Sweet, a leader with her finger on the pulse of small-business lending," Sen. Maria Cantwell, D-Wash., chairwoman of the Senate Committee on Small Business and Entrepreneurship, said.
One PacificCoast Bank and Sunrise Banks were recognized by B Lab's B Corp Best for the World 2014 award in the midsize business category. One PacificCoast Bank's profile highlighted their innovative governance structure, well-compensated workers, commitment to mission-driven lending and commitment to offsetting green house gas emissions with certified carbon credits and energy efficiency programs. Sunrise Banks' profile featured their environmentally-conscious office practices and locations, employee benefits, community-focused ownership, volunteerism and support of local suppliers.
Increasing numbers of people are finding themselves so close to the financial brink that they must borrow against future wages just to cover the costs of everyday life. Over the past half century, the purchasing power of wages have fallen while access to credit has risen, causing credit to replace wages for an increasing number of purchases. Meanwhile, personal savings have fallen steadily from their 1970's peak. The effect of this dependence on credit is that the average American has very little financial leeway when something unpredictable happens or just needs to scrape together enough money to pay monthly expenses. Those expenses lead to 75% of payday borrowing.
When Carlos Schulte contributed $300 on Kickstarter to Oculus VR, a small but ambitious virtual reality gaming startup, he never expected it to sell out to Facebook for $2 billion. The $300 contribution bought him an early version of the company's gaming platform, but no equity in the company. The passionate online response against the Facebook purchase illustrates how the ethos of crowdfunding can clash with the corporate world. Some contributors fear the purchase will steer the company away from the gamer-friendly vision they had contributed to. Others argue that the sale is the most egregious example yet of crowdfunding's one-sidedness. Two venture capital firms which made early equity investments in the project received a 2,000% return. At that multiple, Mr. Schulte's contribution would have been worth $6000 today.
The Consumer Financial Protection Bureau released a new report on payday lending at a public hearing in Nashville. The agency is nearing the release of new rules to govern the industry. Their report argues that "short term" loans are usually not short term at all, but more often renewed again and again as consumers dig themselves into deeper sinkholes of debt. Half of all loans, for example, come as part of sequences of 10 or more renewed loans — and in one out of five loans, borrowers end up paying more in fees than the initial amount they borrowed. It is not clear what form the upcoming CFPB regulations will take; the Dodd-Frank Act prohibits imposing usury caps, but the CFPB may eliminate lump-sum payday loans or require the loans be modified to incorporate more affordable installment plans.