Tech expands ‘community’ beyond geographical boundaries

The geographic walls of the community banking world have been crumbling for some time now as tech breaches these limitations. This has resulted in more branchless banks that offer full services to anyone in the country. This more advanced style of e-banking — and the fintech partnerships that make it a reality — is still somewhat in its infancy, but it's becoming clearer that community banks can partner with myriad companies from all over the country, if not the globe, and make a meaningful impact on their product offerings. And partnerships with fintechs can create interesting ways to find new customers. .Take the recent announcement by Miami-based BMG Money and Salt Lake City-based WebBank. These two companies have partnered in an effort to provide access to significantly lower cost loans to underserved communities across the United States. Loan programs like this have historically been tricky to get off the ground and tended to be the province of physical banks working directly in lower income areas. .This partnership aims to help people with limited access to loan programs and is particularly aimed at helping lower income individuals and families. WebBank, which has FDIC insurance and a state charter, has originated and funded more than $195 billion in consumer and commercial credit products since its inception in 1997. One of its main goals has been helping retail and small businesses customers obtain affordable credit..The partnership has some interesting components. BMG Money provides access to a suite of services, including employment-based loans, credit monitoring and credit education programs. The company is "committed to the public good and raising the underserved to be part of the mainstream American economy" and has offered access to flexible loan options totaling more than $3.9 billion, the company said. .The new product being introduced by WebBank is called LoansAtWork. BMG Money helps find potential borrowers and, in part, backs the loans that are issued by WebBank. This program is an employment-based loan available to customers irrespective of their credit scores, which sometimes may fail to accurately assess a person's credit-worthiness. Loans typically range from $500 to $10,000 and are deposited directly into customers' bank accounts. The repayments are scheduled around the customer's employment pay schedule and are collected automatically to avoid missed payments. Payment amounts are designed to be affordable and manageable, with no prepayment penalties. The program also includes a system to help keep customers on sound financial footing in the future, as the loan performance will be reported to the credit bureaus.. "As BMG Money strives to level the playing field for the financially underserved, our alignment with WebBank's incredible team extends holistic services to more customers in need," said Kieran Noonan, president and CEO at BMG Money. "This partnership offers tremendous value for thousands of individuals, and we look forward to the nationwide impact it will have."."WebBank's partnership with BMG Money is a testament to our commitment to support underserved individuals and communities," added Jason Lloyd, WebBank president and CEO. "We believe that everyone deserves access to financial services and the opportunity to achieve economic stability.".There are a lot of lending opportunities out there to make a program like this good for the customer and the bank. Experian estimates that nearly 106 million U.S. adults do not have access to good credit, either because of a low score or no score. Meanwhile, nearly half of Americans say 2024 has been a financially stressful year. This necessarily has an impact on the workplace, and one big idea about this partnership is that making loans based on employment status has a side benefit of easing workplace tension as a job's value gets a boost. Morgan Stanley reported that one in five employees admits that productivity at work has been impacted by financial worries, and 49 percent say they spend three or more hours each week distracted by financial issues. .Will creative, employment-based loans fostered by fintech-bank partnerships help quell these concerns a bit? Time will tell, but it's exciting to see banks diving into new ways of doing business. In theory, this particular example can align with a community bank's traditional goal of making community knowledge and hands-on customer relationships part of the calculus when deciding when to make a lending decision, even though a lender may be making a loan to someone they will never meet in person, in a far away state. A lot of community bank decision-makers might find this to be a stretch, but geographical boundaries continue to disappear, and it's worth following to see how it plays out.