Sep 22, 2020
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Cross River Bank is known as a loan originator and banking services partner to fintechs. But the $9.9 billion-asset lender also wants to be a direct-to-consumer bank, and those ambitions were sped up when the coronavirus pamdemic struck in the spring and it needed to drum up hundreds of millions of dollars — fast — to help fund emergency loans to struggling small businesses.
When the Paycheck Protection Program was announced in March, Cross River wanted to get involved, but it didn't have the deposits on hand to fund the loans. This was before the Federal Reserve had set up its liquidity facility, which allowed banks to remove PPP loans from their balance sheets so they could help more small businesses.
When the Paycheck Protection Program came out, Cross River Bank wanted in, says Phil Goldfeder, senior vice president at the bank.
“We were excited about not just the prospect of providing service to small businesses, but to do it in a way only fintech companies could — make it safe and efficient at the same time and provide access to capital,” said Phil Goldfeder, senior vice president of public affairs at the Teaneck, N.J., bank. “But we recognized that one of our limits was our ability to fund the loans.”
Raising consumer deposits was already part of Cross River's plans: The bank had partnered with Mantl, an account-opening software firm, back in November. Together, the two companies expedited the process with a springtime campaign promoting jumbo certificates of deposit that was meant to raise $20 million in deposits in a month and $250 million within six months.
Instead, the bank hit the $250 million mark in 15 days from when its BrixDirect CDs were launched on April 12. By June, it ranked among the top 15 PPP lenders in net dollars, according to the Small Business Administration, and fourth in loan count — just after Bank of America, JPMorgan Chase and Wells Fargo. It had made $5.4 billion worth of PPP loans as of June 30. Cross River ended up originating more than $6 billion in PPP loans, up from the $50 million in SBA-backed loans it made in 2019.
The story of how Cross River gathered $250 million in two weeks is one about the benefits of fintech collaboration and the usefulness of quick online account opening.
Cross River’s above-average 2.25% rate may have caught new customers’ attention, but some other tactics employed by Mantl behind the scenes ensured this campaign ran smoothly and the bank could open more than 2,000 accounts efficiently. At the same time, the experience has given Cross River a way to raise capital for its lending division, increase its balance sheet for new fintech clients and potentially deepen its consumer offerings.
The benefit of using Mantl's software is that it allows parameters to be changed in near-real time, Goldfeder said. “We could set our rates and our minimum deposit amount, and then adjust it on the fly,” he said.
Mantl’s intention is to provide community and regional banks and credit unions with an online account-opening platform that rivals the ones deployed by fintechs and large banks.
In speaking about Mantl's broader mission, Chief Financial and Operating Officer Raj Patel said, "Community and regional banks and credit unions provide amazing service to customers and have very competitive products, but are really underserved from a technology perspective. If we can help them bridge that technology gap, it will be a healthier market for consumers.”
The two companies worked backward before they could move forwards. They began by defining their goals, including how much money Cross River wanted to raise and how quickly.
“One thing Cross River focused on was generating as many deposits as it could from as concentrated a customer base as it could, with as high a level of automation as it could,” said Patel. The partners decided jumbo CDs, with a $50,000 minimum, could maximize deposits from customers.
Cross River advertised its CDs on Google, social media and Bankrate.com. The bank expected that the average account size would be $60,000, but customers deposited an average of $137,000 per account.
Rather than setting the maximum at the Federal Deposit Insurance Corp. limit of $250,000, the bank capped account deposits at $10 million. Paving the way for consumers to lock up such high amounts was crucial: According to Mantl’s analysis, accounts of more than $250,000 made up 17% of all CDs opened but 47% of all deposits raised through the campaign.
Another piece of the strategy involved underwriting the new accounts as fast as possible while remaining in compliance. For more secure identity verification, Mantl recommends that banks use six to 12 different data sources to validate a customer’s identity when underwriting deposit accounts, rather than one or two. (Mantl typically pulls data from sources like White Pages Pro, LexisNexis and Equifax.)
After the bank hit its goal of $250 million, it lowered its CD rate significantly, but raised an additional $30 million in the next 16 days anyway.