The ‘S’ in ESG refers to social performance which describes the relationship a company has with its employees, customers, suppliers, investors, and community. Financial institutions can support the social needs of these constituencies by empowering them to share their voices, and then responding in an empathetic, proactive way that nurtures positive relationships. Listening technologies can help with this, along with partnerships with other organizations.
The Community Reinvestment Act has not changed significantly since it was introduced in 1977. Proposed changes (currently in the comment stage) represent a step towards updating the regulation for the digital age. Key changes include evaluating both the access to and the responsiveness of both credit and deposit products/services designed to meet the needs of low- and moderate-income communities and small businesses. The ‘community development’ definition is also being expanded to include new criteria specifically aimed at serving the most underserved.
Live Oak Bank was founded in 2008 and became the nation’s top-ranked SBA lender in just 9 years. Its business is focused on industry-specific verticals such as veterinary practices and funeral homes. The bank provides SBA and conventional loans to these companies through its modern technology stack built on FinXact, which it helped develop and fund. Its loan origination system was also developed internally and subsequently spun off to create the software company nCino. The bank is now working on more effectively addressing the deposit side of its business through banking solutions embedded in software sold by other companies that target the broader business needs of many of the same industry verticals that Live Oak currently lends to.
Innovation labs at Truist and TD Bank take different approaches to their mission of creating innovative experiences for their customers. Both companies are alike, however, in their emphasis on the experiential component of development by inviting actual customers to test new products, services, and service-delivery environments. Truist also has a group exploring cutting-edge technologies such as quantum computing.
The current inflationary pressures are causing customers to focus even more on financial wellness issues. Financial institutions should be prepared to help customers “make confident, well-informed money-related decisions resulting in financial security for both the short and long term.” Meeting these needs requires the use of data analytics to be able to present relevant, personalized offers to customers.
