Community Banking and Fintech

One commentator [1] waggishly described Affirm as an API between Peloton and CRB, due to Peloton being a very large account at the time of their IPO.

Think of a fintech company with a debit card. Square’s Cash App. Chime. Robinhood. Stripe Issuing, and users like Ramp and Bench. All of them, virtually without exemption, are brought to you courtesy of a small financial institution that you are unlikely to have heard of (unless you work in fintech or read Terms and Conditions for fun). Durbin exem... See more

Because the continued existence and thriving of community banking is a policy goal, regulations or competitive measures which would disfavor them versus the large banks and other financial players are actively undermined.

Coordinating the Faster ACH rollout took years, and the community bank lobby was loudly in favor of delaying it, to avoid disadvantaging themselves competitively versus banks with more capability to write software

The business of a community bank is taking deposits cheaply and lending at a higher rate. Both of these functions are historically local in nature, but that is changing. Community banks sell themselves on convenience and having a human-centric relationship with customers, as opposed to the driven-by-algorithms approach of the money center banks.

This let a generation of those apps compete on user experience without being crushed by large banks' pricing power. Customer acquisition for fintechs would be difficult if you could walk into any of the top ten banks and walk out with a 1% rewards debit card (which previously existed but don't anymore at large institutions, due to the Durbin amendm... See more

Cross River Bank is an interesting example; a major line of their business is originating loans for fintechs which are then largely sold to funding sources that the fintech has lined up (such as investors looking for yield in a low interest environment). This gives CRB an interesting cross section of credit risk across the U.S. footprint of their c... See more

There are more than 5,000 banks in the U.S. but only about 400 in each of the U.K. and Japan, for example. One reason for this is that the U.S. is dependent on community banks throughout much of the nation.