Where do community banks sit in the financial service competitive landscape? James Yacobucci, Head of Bank Partnerships at Torpago discusses with Digital Journal about the importance of community banks, technology modernization and stimulating growth in 2023.
Torpago is a business credit card and spend management platform provider. Prior to joining Torpago, Yacobucci held roles in business development at Marqeta and principal investments at JPMorgan Chase.
Digital Journal: Where do community banks sit in the financial services competitive landscape?
James Yacobucci: Community banks offer customers much more than a place to deposit money. They are essential to local communities, serving as investors in local businesses and community projects, often becoming pillars within their respective markets. Living among their customers, community bankers may identify opportunities to offer bespoke solutions where a larger regional or national institution may not. While having their own strengths, the largest financial institutions are not set up to understand the financial goals and needs of the typical community banking customer.
DJ: What are some of the common struggles faced by community banks?
Yacobucci: Community banks have a growth problem. Over the last decade, many traditional banks have consolidated, while challenger fintechs have received tens of billions of investment. In this context, community banks have faced three core challenges. The first is fewer resources than the competition. Resources include not only absolute headcount and dollars, but also the specific talent required to compete in today’s market. The second is fewer products and an increasingly aging infrastructure, which means fewer ways to innovate and monetize their customer base. This challenge is largely a result of the resource problem. The third struggle relates to broader industry instability following the bank failures of 2023. In today’s environment, community banks have fewer levers to pull when seeking to retain and attract deposits.
DJ: What can community banks do to protect deposits and stimulate growth?
Yacobucci: In the short-term, community banks can protect deposits by increasing deposit betas. In other words, they can reward their depositors with a higher yield that tracks rate increases from the Federal Reserve. Longer-term, however, this is not a sustainable differentiator or growth driver. Rather, community banks must invest in their people, technology and products to improve their value proposition in noticeable ways. In doing so, the bank will become more attractive to both new and existing customers.
DJ: How does Torpago work with community banks?
Yacobucci: Torpago provides a white-label (bank-branded) commercial credit card and expense management software for community banks and credit unions. Our customers typically use vendors who are over 20 years old, or are launching a card program for the first time. If launching a card program for the first time, banks immediately add a new revenue stream and product offering. If upgrading an existing program, our clients see improvements across UI/UX, card controls, transaction data, fraud monitoring, underwriting flexibility, and program customization. Our customers’ goals in using Torpago typically include: deposit retention and growth, increased card spend, enhanced customer experience and improved operating efficiency.
DJ: How should community banks think about working with Torpago?
Yacobucci: Torpago was built to facilitate modernization in a manner that minimizes disruption to the bank’s systems best kept unchanged. Banks who want to ‘own more’ can pick and choose the modules and features they want to use from us as our platform data is available via API. Alternatively, we provide a more out-of-the-box program that allows banks to get to market faster with less investment. In this instance, Torpago can bring the balance sheet, web and mobile applications, servicing and support, easing the burden of an initial program launch. Programs can be launched between two and six months, depending on the chosen go to market strategy.
DJ: What is your recommendation to community banks interested in technology modernization?
Yacobucci: For community banks, starting the modernization journey can be daunting, but the impact the changes will have on the bank’s employees and customers is worth the work. From an employee perspective, working with modern technology can attract the best talent. Jobs can also be more enjoyable with technology that facilitates process improvements, growth opportunity, and happy customers. From a customer perspective, the ability to integrate with and offer the latest technology is essential. In an increasingly competitive market, community banks must upgrade systems to keep customers and expand footprint. The bank does not have to do this alone. Finding a modernization partner who can fill technical or talent gaps to facilitate this journey will be worth the investment.
