There’s a new weapon seemingly each day in the veritable arms race that is technology in the banking industry.
So, it’s no wonder that not every banker is quick on the trigger when it comes to adopting these tools.
Frank Sorrentino, chairman and CEO at ConnectOne Bank, thinks of bank leaders as fitting into three categories when it comes to perspectives on the latest technology options:
“Every time there a new technology comes to the fore — you’ll have those in the first mover position … that decide to try it and will move on if it doesn’t work out,” he said. “Then, there are those who want to watch and maybe join the second wave, those who want to see the mistakes and then learn from it before hopping in. Finally, you have the naysayers about whether it will take hold, and so they never do anything until clients come to them demanding it.”
Sorrentino considers his Englewood Cliffs-based ConnectOne team as being in the first category. Proving that is it being the first New Jersey community bank to participate in a brand-new concept in peer-to-peer payment technology, a platform referred to as Zelle.
The new platform from fintech company Early Warning Services departs from the norm in that it embeds into mobile banking channels and offers users a way to send and receive money instantaneously between banking accounts from different institutions participating in Zelle’s network.
This approach flies in the face of a recent trend of fintech startups encroaching on bankers’ territory in attempts to disrupt the financial sector. And it’s an experiment that has a local subject in ConnectOne Bank, which will have a native app from Zelle accessible through the bank’s existing digital portals.
This means entirely replacing the bank’s current money transfer platform with Zelle’s solution. Sorrentino said he has no qualms about doing so.
“It’s just going to be a far superior product because of the agnostic nature of it,” Sorrentino said. “Anyone can seamlessly do transfers between any of the institutions in the network. We think it will be easier and more convenient for everyone.”
It’s no surprise Sorrentino is the platform’s biggest advocate. His community bank is among only 30 institutions that are in the platform’s initial network, which will co-exist eventually with a stand-alone app for clients of banks and credit unions outside the network.
Big players such as Bank of America, JPMorgan Chase and Wells Fargo comprise a majority of the starting network. Only 10 community banks — of the more than 5,000 community banks across the country — are part of the product’s first wave of institutional partners.
That could be seen as something of an indicator of the reluctance among some smaller banks to become early adopters of new technology in general.
“I always hear things like, ‘No one has asked for this,’ and of course they haven’t — because they don’t know it exists yet,” Sorrentino said. “But banks (should be focused) on solving issues and providing solutions we already know customers will want in the future.”
In the absence of closer engagement from bankers in technology, applications such as Venmo have been developed that completely sidelined banking institutions. The now-ubiquitous money transfer tool Venmo exploded in popularity so quickly that many in the industry had trouble keeping up.
“I remember walking into rooms not that long ago and asking people if they knew what Venmo was, and you’d only get a hand or two,” Sorrentino said.
Zelle is launching a similar solution to Venmo and other payment platforms, such as the long-running PayPal, in that it leverages a mobile app for payments to users’ friends or acquaintances using a phone number or email.
What’s different this time around is that Zelle is working within current banking infrastructure, not outside of it, Sorrentino said.
“This is an example of how the fintech space is going to partner more and more with banks to provide a higher level of service for both banking clients and nonbanking clients,” he said. “It’s a natural progression. And we think we’re entering a time when we will see many opportunities in forward-thinking technology products both for ConnectOne and other banks.”
Sorrentino, eager to promote closer ties between fintech and banking institutions, says it’s an opportune moment for bankers to bring signature security measures to tech tools. And it’s touted as a competitive advantage when compared to those that have largely bypassed bankers.
“There has been a number of incidents associated with the use of Venmo, involving fraud and other issues,” he said. “Zelle has all the functionality plus the security that people have always come to banks for.”
It remains to be seen if this tool in particular can live up to its own lofty marketing — its objective to “change how money moves.”
Regardless of whether it does or not, the state’s community banks would do best to be along for the ride.
“(Bankers should) look to be out in front of advanced technology that helps transact business for customers,” Sorrentino said. “It’s needed to survive in this sector.”
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