Daniel Cohen, Banking Leader & Entrepreneur – Fintech is Transforming the Financial Industry, but Banks Can Still Thrive
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I sit down with Daniel Cohen, Co-Founder of Cohen Circle, an investment firm; Cohen & Company, an asset manager with $2.2+ billion AUM; and The Bancorp, a bank specialized in fintech as a service and payments. Notably, Daniel has had a successful career in banking, along with his co-founder and Mother, Betsy Cohen.
In this episode, we discuss:
Impact of some of the biggest changes in banking and financial services over the last decades
“The obvious biggest change, is that we're living through the first time where you can instantaneously request all of your money to be instantaneously wired to another institution. That's brand new.”
The most significant changes to banking have come with the acceleration of payments. This shift has created a mechanism for customers to express an instantaneous vote of no confidence in their banks, which has greatly increased customer expectations. The velocity of money, the ability to transfer funds, and the ability to manage diverse transactions have dramatically evolved over the last 50 to 60 years, particularly in the last decade. This evolution will persist and might even accelerate, especially as the fintech industry adapts to meet the needs of consumers managing their money.
The turmoil of US regional banks in 2023 and what it means for the industry
“Neither the regulators nor the depositors really wanted to play along with the fiction that there was no impact from having 30-year mortgages that were made at two and a half percent, in an area where it seems like our 0% interest rate environment is ending.”
Why bankers should never overestimate the loyalty of your customers
“The best way to destroy a friendship is to involve money in it, because no matter how loyal your friends are, the money is very important to them.”
Daniel has been in banking for a long time and has dealt with loan officers and customers for a long time. One of his main lessons is that bankers should always be cognizant of the fragility of customer relationships.
- Don't overestimate customer loyalty in banking; relationships often hinge on best deals rather than personal ties.
- Bankers' perception of relationships tends to differ from customers'; bankers see it as a chance to offer better deals, while customers see it as an opportunity to receive them.
- A lender-borrower relationship essentially grants the lender a "last look" at market conditions and decisions on a loan, rather than guaranteeing long-term loyalty.
- Long-standing customers may not necessarily stand by their banks during hard times. The safety of their money often trumps loyalty.
- In moments of financial risk, customers are likely to switch banks swiftly for the sake of their assets.
Opportunities for banks to work closely with fintechs … and a lot more!
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“A banker (and fintech) today needs to remember that compliance is first. Consumer compliance and treating a consumer fairly. And not being not taking advantage of them.”
Fintechs looking to work with banks have to remember that from a Bank’s view any consumer interacting with a fintech is viewed as the bank’s own customer. Regulators will strictly enforce fair treatment of these customers, aligning with the current mentality of successful banks in nurturing their customer relationships. Fintechs need to understand the compliance-first and customer-first approach of banks, and align their operations accordingly. Conveying this mentality from top to bottom in the fintech organization will minimize issues when partnering with banks, whether it's in credit sponsorship, BIN sponsorship, or other areas.
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Miguel Armaza is Co-Founder & Managing General Partner of Gilgamesh Ventures, a seed-stage investment fund focused on fintech in the Americas. He also hosts and writes the Fintech Leaders podcast and newsletter.