On Oct. 10 the state of Pennsylvania enacted significant changes to its Contractor and Subcontractor Payment Act (CASPA). In short, the amendments provide increased protections for payment on private construction projects, while at the same time impose new and additional notice requirements of which owners, lenders, contractors and subcontractors must all be aware. For the full article visit PaymentsSource
CUs and fintechs represent unique spaces, but they can pair together perfectly to provide the best services.
While fintechs are synonymous with innovation and modernism, credit unions are, and have always been, symbols of stability and tradition. In order for these two powerful payments players to work together, each needs to understand the other and use its strengths to form a valuable partnership.
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MBA Insights recently held a roundtable discussion with several industry executives for their perspectives on the housing market, mortgage technology and the future of real estate finance.
Matt Johner, President and Co-Founder of BankLabs, Little Rock, Ark. He is responsible for corporate strategy, branding and growth plans including the execution of all sales, marketing, business development and customer success activities, with the goal of reimagining banking products of the future through community-oriented technologies that create new fee income, attract deposits, expand loan opportunities and differentiate the financial institution from competitors.
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By Matt Johnner
Construction lending is a growing sector of the mortgage industry and one that has traditionally been dominated by big banks. Recently however, these big banks are taking a more conservative approach on construction loans, creating opportunities for smaller, community-focused banks to seize the steady flow of capital.
While big banks are choosing to limit exposure by focusing more on existing customers, other financial institutions can jump in to fill the void. Of course, this means that the competition between small and mid-level banks focused on construction lending is reaching an all-time high.
So, how can a financial institution differentiate itself in such a competitive market? The answer is by offering solutions that automate the entire construction loan process, making life easier for all parties involved.
Establishing a Successful Partnership Between a Financial Institution and a Fintech
By Matt Johnner, president and co-founder of BankLabs
As featured in William Mills Agency’s 2018 Bankers as Buyers Report.
Our society associates financial institutions with stability and trust, while fintechs typically epitomize change and innovation. These two opposing forces may seem to have very little in common, but that does not mean they can’t successfully work together to achieve a common goal.
According to PricewaterhouseCooper’s (PwC) 2017 Global Fintech Report, over 80 percent of financial institutions believe business is at risk to innovators. That may be true if the innovator is attempting to stand alone or replace financial institutions altogether. However, by partnering with a financial institution, innovators can work with a bank or credit union to solve an issue or meet a need.
Additionally, PwC reports that 82 percent of financial institutions expect to increase partnerships with fintechs in the next three to five years. This shows that financial institutions are willing to explore the innovative world of financial technology in order to provide better service to their customers, or scale a product outside of their traditional market.
Benefits of Partnerships between Financial Institutions and Fintechs
By partnering with a fintech provider, financial institutions improve upon the things they are already doing well. Technology can be used to solve an issue, update an existing process or enhance customer interactions. Fintechs have a lot to offer financial institutions, such as advanced, forward-looking technology and a fresh, outside perspective.
Of course, the partnership is just as beneficial to the fintech provider. Fintechs may hope to disrupt the industry by creating an unparalleled user experience, but solely focusing on this is not enough to be successful. A fintech provider without a financial institution to serve often ends up biting off more than they can chew.
With the implementation of a fintech service, financial institutions can differentiate themselves from other lenders in the space. By automating services and providing consumers with an innovative and efficient tool to make their lives easier, the financial institution becomes more competitive while also broadening their market. And, customers receiving a positive user experience from their bank or credit union will likely choose to stay with that bank or credit union.
A successful fintech partnership can also provide an additional revenue stream for the financial institution. Some fintechs can offer financial institutions modern, user-centric services that fulfill consumers’ needs while simultaneously charging a small fee on transactions that goes straight back to the financial institution. Think about how many paper checks still exist in unique industries or processes.
Tips to Create a Successful Partnership
Let’s start with an unsuccessful partnership; this is one that is created with the purpose of looking for a problem rather than solving one. A successful partnership begins when a fintech and a financial institution see a solution to an existing problem and need each other’s help in bringing that solution to life.
A smart fintech understands that a financial institution’s brand is extremely important to its success and cannot be jeopardized. Fintechs must approach potential partnerships with a thoughtful, conservative mindset. A failed fintech reflects poorly on the financial institution and its brand.
An equally important factor in a successful partnership is the financial institution ensuring its fintech provider has a strong background in banking. While fintechs offer unique, outside perspectives, they should also understand the fundamentals and the complexities of banking. The best fintechs have established bankers as part of their team or board of directors who understand the banking industry and the sanctity of its brand, needs and technology.
In addition, fintechs should leverage the financial institution’s existing products if speed to market and velocity is important. The solution must seamlessly integrate into the existing landscape and utilize the financial institution’s pre-existing product or distribution to solve a problem.
Lastly, open communication between the financial institution and fintech provider is key. The two should take part in an open discussion at the beginning of the partnership to determine goals and expectations. As previously mentioned, each party has a very different way of thinking, so it is imperative to discuss the definition of success early in the relationship.
It is important to remember that fintechs and financial institutions should not be competing with each other; they should be supporting each other. The best partnership is one in which both the parties achieve a goal that helps improve processes, reduce costs and enhance the user experience.
Matt Johnner is president and co-founder of BankLabs, a national provider of innovative, mobile technology products that help community banks improve efficiency, increase time for relationships with customers and create marketplace options that expand business opportunities. BankLabs believes that community banking is a way of doing business, not a size. For more information, visit www.banklabs.com.
As featured in American Banker.
As construction lending starts to make a comeback, many community banks relying on lending to developers and builders are looking to use cutting-edge digital interfaces to help them attract more clients.
“It’s important for us to create convenience not only for our clients but for their clients as well [such as subcontractors] and give them quicker and more convenient access to funds,” said David Veurink, chief credit officer and head of commercial banking at Chicago-based Countryside Bank.
In today’s digital world, instant gratification is not only desired but expected. People expect to click a button and be able to pay bills online, schedule an appointment and receive texts to refill a prescription. Our patience has declined, and with it has come a pressing need for automation in all aspects of our lives.
One sector that has been slow to catch on to the automation obsession is the construction industry, particularly construction lending. For too long, builders and contractors were using computer spreadsheets, creating draw sheets by hand and emailing confidential documents to inspectors. Needless to say, this needed to change and the industry is finally using technology that automates these processes.
AUTOMATING CONSTRUCTION LENDING
Commercial developers, general contractors and residential home builders have started working with lenders who use innovative technology to automate the post-closing administration of construction loans. Accessible from any phone, tablet or computer, this technology eliminates the need for paper files and spreadsheets, lets the developer check on the status from any device and improves the experience for the developer, lender and borrower. People are making better business decisions enabled by real-time text messages showing draw availability and areas of risk.
The best solutions reduce loan administration time by 50 percent or more, lower inspection costs, identify and mitigate potential risks and enhance working relationships through mobile access.
This part of the construction industry has come a long way, but what about the other side of the construction loan process? While lenders and developers are being offered innovative technology to help automate their business, contractors are still working in the dark ages.
For instance, builders continue to pay their subcontractors via paper checks, after collecting paper invoices and paper lien waivers. The subcontractor must then drive to pick up the check, deposit it and wait days for funds availability. In addition, builders are completing 1099 tax forms and other reporting material by hand, which can be difficult and time-consuming.
For these reasons, construction developers, builders and contractors must partner with lenders who are not only using technology to automate the post-close administration of loans, but those who understand that the entire payment process must be automated to be most effective.
Desirable lenders are typically community banks that have implemented new technology to complement the automation tools they are currently using. The new solution is ideally a mobile and web-based service that automates the construction payment stream with electronic submittal of lien waivers and invoices from subcontractors to the builder. This is coupled with electronic payments using same-day ACH that replace checks, much like online bill pay that has made our personal lives easier.
In short, payments are made faster and more reliably. Builders are able to pay their subcontractors instantly, enabling them to focus on building and saving the subcontractors significant amounts of time and frustration. With a more efficient payment process, everyone can concentrate on what they have been hired to do.
Implementing this technology also increases transparency in the payment stream process and reduces unnecessary friction between builders and subcontractors. With mobile access, it is easy to log into the system while on the construction site to check for any errors and assess the status of projects. Subcontractors have all of their payment questions answered by checking their phone, which eases the burden of manual interactions with the builder.
Also, it is safe to say that the best contractors look to work with the best developers, and the best developers try to seek out the best lenders.
Using technology to automate the post-close administration of construction loans is important, but now is the time to take automation a step further. By working with lenders who are also using an automated payment stream tool, construction professionals can speed cycle times and payments, improve communication and focus on their important work at hand.
Written by Matt Johnner – President and Co-founder, BankLabs
BankLabs is a national provider of innovative mobile technology products that help community banks improve efficiency, differentiate with customers, create new fee income, increase deposits and create marketplace options that expand business opportunities. BankLabs believes that community banking is a way of doing business, not a size.
A startup that provides innovative technology to community banks is revolutionizing the process for making construction loans while also arming the institutions with another weapon against their biggest competitors — FinTechs and large multinational banks.
BankLabs, which is equally based in Dallas and Little Rock, was formed as part of Radius Group, a Little Rock, Arkansas holding company, in January 2016. It immediately hit the market with Construct, it’s appropriately named product that enables banks to automate the construction loan process.
BankLabs describes the current procedure used by most banks as a “noisy process” involving spreadsheets, paper files, and emails, creating “unnecessary delays and wasted opportunities to increase profit and enhance customer relationships.” By switching to the Construct app, BankLabs President Matt Johnner of Dallas said banks can improve efficiency by 50 percent.
As featured in American Banker.
Lending to developers and builders is community bankers’ bailiwick … and sometimes their bane.
In good times construction lending keeps community banks thriving, but the financial crisis of 2008 brought down hundreds of small banks because they were heavily exposed to commercial real estate.
Perhaps there is a tech solution to avoid or soften the bad times, some fintech vendors say. Granted, no software can prevent real estate downturns, but construction lenders’ reliance on spreadsheets, file folders and sticky notes is said to add hazards. Their platforms, the vendors say, can streamline the process and make it safer.