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Evolve Bank & Trust in West Memphis has lived up to its name in an era of technological innovation and banking-as-a-service bringing new revenue.
Founded in Parkin in 1925, it became Evolve after a 2005 acquisition by a group led by chairman Scot Lenoir, which then relocated its banking franchise to West Memphis, with its corporate headquarters across the Mississippi River.
“We’ve been working with them since they bought, and they’re one of the most entrepreneurial banks in the state, especially when it comes to working with fintechs and providing banking services,” said Randy Dennis, banking expert, Little Rock President and Managing Partner of DD&F Consulting.
Evolve’s total assets have essentially doubled in 18 months, from $691 million at the end of 2020 to $1.3 billion as of June 30, 2022. Most of that happened this year: The bank ended 2020 with $788 million in assets, followed by a 65% increase for six months, even if Evolve didn’t make any acquisitions.
The bank has also been rapidly building trust assets. No. Ranked No. 3 among Arkansas banks with $2.65 billion in trust assets under management at the end of 2020, that number ballooned to $9.75 billion a year later and is now over $12 billion, the state’s largest total in assets, exceeding Simons Pine Cliffs Bank, the perennial trust asset leader.
Deposits increased by more than 135% compared to $425 million in June 2021, reaching $1.06 billion by the end of June 2022. All of this growth is related in some way to technology offerings or partnerships, said W. Scott Stafford, president of the bank. CEO.
“We’re a community bank with a lot of mortgage operations and small business loan development officers across the country,” he said. Evolve also has longstanding businesses such as a specialty finance company called Physicians Capital, which helps physicians finance surgery centers and Medical equipment provides funding, as well as a trust and wealth management group that Stafford considers a core competency.
But Stafford said the banking industry itself had evolved. “We’re in the lead because we feel like the banking industry is changing and we’ve embraced that.”
Evolve has become synonymous with open banking. “We’ve been offering Banking-as-a-Service for about five years, and it’s been even longer to prepare,” Stafford said.
Essentially, Evolve’s offering powers more than 400 fintech partners “in the country and beyond,” Stafford said on a conference call, including the bank’s former chief technology officer and current opener Hank Word, President of Banking.
“We have a technology stack that includes ACH [a computer-based electronic network for processing transactions]remote deposit capture, domestic and international wire transfers, virtual accounts and other products and services,” Stafford said.
“All of these are accessible through the API [a software interface] Our fintech partners make them available to their users,” Stafford continued. “It has increased our non-interest income, and now that interest rates are rising, we are benefiting from the deposits we have accumulated. It really brought a change to us. “
Stafford also attributed much of the trust’s growth to open banking.
“We power these fintech companies, which in turn provide financial services to their users, so they are both consumers and business customers,” he explained. “So we either keep them on our balance sheet or we bring them into our trust division. So both our balance sheet and the assets we have in trust in our trust division are showing growth in a very positive way. “
Over the past year, Evolve has joined a new trade group, the Banking-as-a-Service Association, and announced partnerships with fintech brands Marqeta and Bond Financial Technologies. Marqueta, a Bay Area-focused digital-only credit card startup, recently partnered with JPMorgan to let corporate cardholders use their accounts in a mobile app without having to wait for a physical card. Bond Financial Technologies is an embedded financial platform that helps clients build, launch and operate their own financial products.
Bond represents one of two general customer types that Evolve serves in open banking, Word said. “We work with BaaS [banking as a service] Providers, which typically have a set of API services built around or on top of the services we provide. They sell their services to fintech clients who integrate with them and use their APIs, and the banks are in the back office, providing account and transaction services to those BaaS providers and ultimately those fintech platforms,”Word said.
“But if a fintech platform has a certain scale, a certain level of experience or sophistication, then we can work directly with that fintech. Bond is what we call an aggregator, and it’s a first-class BaaS provider.”
Dennis, a consultant at Little Rock Bank, said fintechs, known as neobanks, need banks like Evolve as partners to provide their users with appropriate services.
“They’re not banks; they’re a lot like banks,” he said. “They have to have an independent bank as a backbone that gives them access to the payment system and they can connect all these services so they can look like a bank. In short, it’s banking as a service. An independent bank provides customer-facing capabilities . . For a new bank without these relationships, if you have a problem, it’s your worst nightmare. You go through a myriad of phone systems trying to find someone.”
Expand Community Mission
Word says Evolve remains firmly rooted in its community. “We are definitely a community bank, but to survive in a world where regional and national banks continue to scale up and squeeze smaller institutions, open banking is a way for us to continue to provide community banking services and benefits, but through our fintech partnerships partners to make it happen,” Word said. “We’re expanding our mission as a community bank.”
Stafford said Evolve’s fintech partners are critical in modern efforts to reach unbanked customers looking for financial providers. “Banks have been trying to find an efficient way to serve underserved groups for decades, and I think through technology, many of our fintech partners are frankly doing a better job of customer acquisition and customer onboarding,” said the chief said the executive. “Frankly, I think they found a way to distribute financial services to a larger market than traditional banks.”
As the Office of the Comptroller of the Currency pointed out in a recent warning to all banks, open banking poses compliance and fraud risks. But these risks are manageable at Evolve, which has invested heavily in compliance systems and a Bank Secrecy Act framework.
“BSA/KYC/AML compliance is also at risk,” Stafford said, referring to “know your customer” requirements for verifying customer identities and anti-money laundering safeguards. “It’s something that regulators are very concerned about, like we are. For those who are looking at this space, they need to make sure they have the right people to manage the risk. We certainly have done that.”
Evolve has offices in West Memphis, Memphis, Marion, Parkin, Jonesboro, Highlands (Sharp County) and Wayne. It also has home loan centers in nine states other than Arkansas and Tennessee.
“We’re customer-centric first,” Stafford said. “We have every confidence that technology is here to stay and we want to be a leader in bringing financial services to a wider group, ultimately benefiting our consumers. We look forward to seeing other banks get involved and we see more banks starting to think about it This type of business. We encourage it, but we want people to think about it and understand what they’re doing.”