After being robbed three times in two weeks as a teller, David Reiling took quite the interest in bank security. 

Now serving as the Chief Executive Officer, FinTech Leader, B Corp Advisor and Board Chair at Sunrise Banks, David joined the show to share invaluable expertise gained through years of operational experience ensuring security in every area of banking. Forming fintech partnerships can alleviate a host of difficulties plaguing banks, but banks must also ensure they have proper cybersecurity in place.

Join us as we discuss: 

• Cybersecurity, liquidity management, and bank collapses
• Fintech partnership risk management
• Community banking: creating long-term franchise value

Cybersecurity, liquidity management, and bank collapses

Reiling experienced three robberies as a bank teller before purchasing a failing bank, reinvigorating it, and taking special care with all matters of security, cyber included.

From liquidity management to credit quality issues, community banks have their hands full in the coming years — especially with talks of an upcoming recession. However, one concern shadows the rest.

“One thing community bankers are not very well equipped for is, ‘Do they have their cybersecurity tight and in check?’ It's a battle for any business, bank or otherwise. It's always in the back of your mind.” Reiling said.

Even with regulators aiming to ensure bank safety, the threat of cyber attacks lingers on the sidelines. Reiling implores banks to ask themselves a few key questions: 

• Are you moving into the cloud?
• Do you have the correct core system to meet your needs?
• Can you sustain your system?

“There is a pulse to cybersecurity, and it requires you to be on top of it. Because the hackers, the bad guys, whether it's a government or some other organized group, they're getting better and better,” Reiling said. “Making sure that not only from an infrastructure standpoint, you're there, but the hardest part is your people — what's coming in on your email server every day, and what are people clicking on?”

Liquidity management and bank collapses

Banks are practicing caution with lending in light of the recent bank collapses. Lending has slowed down, with some only lending to existing customers or selectively bringing new customers in. 

“If there's anything we learned in the Great Recession, it’s to diversify your deposit base, as well as your loan book of business,” Reiling said. “You can't just concentrate on construction lending or so on. There's a focus on ‘Can we keep and retain our existing liquidity? Can we grow it in certain areas? Can we diversify?’ That pertains to different particular strategies.”

Diversification is forefront when it comes to the quality of liquidity. 

Fintech partnership risk management

AI continues to integrate into more and more areas of our lives, including banking. But the good guys are not the only ones leveraging AI technology. From scammers to identity fraud, the risks are high.

“We have protocols and procedures in which you're going to try to affirm the identity of somebody, not only at the origination time when somebody actually gets an account or gets a loan but then looking at the characteristics afterward,” Reiling said. 

These affirmations should continue beyond account activation. There should be systems in place monitoring alerts for typical or atypical activity.

“You need the help of other AI tools, and so forth, to alert you to abnormal behavior that if you miss it on the very front end, if you get fooled by the social engineering, that you can identify characteristics that are not common in the account,” he continued.

There must be multiple lines of defense for catching synthetic identities. 

With these risks in mind, Sunrise Banks takes extra care to screen the fintech companies they partner with.  

They determine if there is a value alignment — are they trying to be heroes for the same people? Sunrise Banks does everything with a consumer-first approach. That includes targeting organizations with a solid grasp on compliance.

“Compliance will win the day in the long term of a partnership, but also, that compliance mindset not only needs to be at the bank, but it also needs to be in the fintech partner, and the two teams have to work together,” Reiling said. “If it's a combative relationship about every little detail, that's not going to work. The idea is to run a safe and secure product or service and for you both to have a sustainable business as a result.”

Community banking: creating long-term franchise value

The luxury of long, drawn-out, deliberate change is fading away as banks hustle to adapt to new structures and consumer expectations. Community banks are no exception — bankers must lean into entrepreneurial mindsets to take the right risks.

“If you don't do that, I don't think you'd have a franchise anymore. You stop growing,” Reiling said. “And as a result, costs keep going up, compliance becomes more, you will not have the ability to sustain yourself, and you're losing franchise value.”

The way to maintain franchise value is alignment from the leadership to board members to team members. 

“A huge portion of the franchise value of a bank is in the deposits. The deposits always sell at a premium, and loans always sell at a discount, right?” Reiling said. “People are gonna go, ‘That's a bad loan, that's a bad loan,’ they're gonna pick things out, or they're going to discount it. Now, the better the quality of portfolio you have on the loan side and investment side, the fewer the discounts.”

The higher the quality of a deposit portfolio — its diversification and characteristics in terms of stability and growth — is critical for creating long-term franchise value. 

Achieving that takes an entrepreneurial culture dedicated to risk management and organization evolution at the same time. 

Stay tuned for new episodes every week on the Leaders in Lending Podcast.