A Hard Truth Small Banks Need to Hear


“It’s a Wonderful Life” is a film about a failing community bank that became one of the greatest Christmas movies ever made. It’s tells the story of how a run on Bailey Building and Loan pushes George Bailey to the brink of suicide on Christmas eve. Then how the community rallies to rescue the bank after his guardian angel saves his life by reminding him of the importance of family. It’s heartwarming. But it’s cold comfort for today’s community banks who have a new set of problems.

Over 500 U.S. banks have failed in the past 10 years and experts are predicting more closings for small banks. This time the protagonist won’t be an agressive bank or a troubled economy. It will be millennial customers with iphones who want better digital services.

The decentralized economy is giving consumers more control over their money and small banks are losing their relevance. Large banks like J.P. Morgan, who at first ignored this trend, are now investing in fintech and blockchain technology to prepare for what’s coming.

“Smaller banks have to start worrying about their existence,” said Steven Wasserman, CEO of Vments. His company provides a new blockchain network of digital assets. He believes these representations of fiat currency are the competitive edge small banks need.

What’s Worrying Small Bank CEOs

Wasserman pointed out that community banks have more to worry about than big banks. “There’s a bunch of new competitors taking away their deposits and their customers,” he added. New digital banks are coming on strong and alternative lenders are taking loans away from both smaller and larger banks.

Small banks have aging systems and additional regulatory pressures that increase their costs. Regulations pressuring them to hold more capital have decreased their working margins. They must improve their customer experience and create new business models. The only way to do this is with modern technology.

Wasserman’s entrepreneurial background includes proven experience in financial technology. He founded one Inc. 500 company and co-founded another. One of these was eventually acquired by Paypal. He claims he has the solution small banks need.

“I decided to create a platform like Paypal that would level the playing field for small banks and alternative financial services. Vments platform lets them adapt to change with real time peer-to-peer transactions over a blockchain. Then they can create unique customer experiences through end user interfaces built upon the platform.”

A New Approach to Community Banking

Vments core technology involves its virtual fiat money (VFM). This is like digital cash that’s aligned with the local fiat currency, such as the U.S. dollar. Wasserman’s business acts as an enterprise platform for payments, lending and other transactions. “When you transfer VFM from one owner to another you’re transferring those digital assets through the blockchain along with the data about what was purchased,” he explained.

“We call the accounts that the VFM is transferred through, CommunityVcash. This can be re-circulated through the community of local merchants and customers of the community bank or credit union. CommunityVcredit is a credit version using the same VFM which is cash to the receiver. This is only owed when it’s spent.”

He added, “Starbucks knows what their customers are buying – a superb user experience. They have an automated payment mechanism with a scanned mobile device and their own private network. Imagine if all retailers had these capabilities.” Small banks could serve local merchants better than large banks by being more agile. And they could help businesses in their local community in ways a larger bank often won’t.

Through Vments “LoyaltyVpay,” a small bank’s merchants can collect customer data and use it to calculate discounts or other loyalty benefits. Instead of paying 1 to 5 percent in loyalty card fees, they could pass these savings onto their most loyal customers. In addition, they could use their own customer I.D. for in-store and online purchases.

A New Opportunity for the Cannabis Industry

The 6.7 billion Cannabis industry in North America is growing 30% year-over-year (2016 figures). But it’s in desperate need of better financial services. In contrast to small banks, their problem is a having too much cash. Even in states where marijuana is legal, businesses must operate using cash. This includes them walking into their local tax office with bags of money, some of which isn’t reported. Not only are they prevented from having normal banking services, they have a hard time getting loans.

Further, legal cannabis dispensaries face the persistent threat of theft. Wasserman said, “the industry has this problem throughout their entire supply chain. They’re all handling cash transactions. Operators must find new ways to convert this into something they can pay their employees and other bills with.”

Not only does this burden slow down their business, it creates problems for the few banks that allow them to deposit cash. They face additional compliance requirements designed to protect federal banking services such as ACH and FDIC insurance.

Vments would allow state chartered banks and credit unions to open digital only accounts with cannabis merchants and suppliers. Marijuana consumers could convert U.S. dollars into a CommunityVcash debit account to make purchases. Merchants could use it to pay employees and other bills. The merchants would be also be able to offer loyalty benefits to their customers.

A Blockchain Future for Small Banks

The financial industry is changing and small banks must adapt to survive. Competitive pressures from fintech, digital banks and large banks will only increase. Big banks have less to worry about since they have more resources to invest in technology. Small banks need a way to band together, as well as differentiate.

Vments uses blockchain technology to solve a range of problems for the Cannabis industry. Digital-only transactions can let small banks work with them without the risk. Digital cash could give a small community bank or credit union a way to get the new customers nobody else can.

The goodwill of George Bailey helped save Bailey Building and Loan. But it seems that today’s small banks would be better off with help from someone like Steve Wasserman. To learn more visit the Vments website.

Derek Little

Derek Little

CEO or TrailblazerWriting.com and Chief Podcasting Officer of TechnologyTrailblazers.Club

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