4 min read July 2023 — The Garden State is considered the No. 2 fintech hub in the country — only trailing behind San Francisco. New Jersey is heavily invested in creating a finance powerhouse, with the sector contributing more than $33 billion annually to the state’s economy.
The New Jersey Economic Development Authority (NJEDA) is in the planning stages on a Fintech Innovation Center to attract more of the world’s leading fintech companies to the state. “Gathering insights into how a fintech innovation center could contribute to the economic vitality and quality of life in the state will help us identify best practices and innovative ideas for developing a successful center that makes sense for New Jersey in terms of its long-term economic competitiveness,” said NJEDA CEO Tim Sullivan in May.
Peter Dontas, executive vice president of Wells Fargo, Ellen Marshall, EVP head of NY and NJ middle market banking at Santander Bank and James Vaccaro, chair, president & CEO of Manasquan Bank, share their insights and outlook on what to expect as fintech paves the future of banking in New Jersey and beyond.
How are you looking to capitalize on technological advancements? What are their future implications?
Peter Dontas, Executive Vice President, Wells Fargo: The biggest challenge is reinventing the banking business for a new era. Just 10 or 15 years ago, you wrote a check to pay your bills, or you went to the branch and took out the money that you needed for a week. Basically, everything was more of a manual process. Today, this is completely archaic as you have electronic payment opportunities.
Companies are transitioning in the way they conduct their business, as well as moving from paper to digital and electronic. It is not unusual anymore for companies to pay large sums to their vendors using credit cards instead of checks or wires. There are also certain incentives for paying with credit cards as there are rewards in terms of points. Thus, it is important for us to invest in technology to make this possible. For example, given the size of our operations, it makes sense that we can afford to make those significant investments in making sure that our technology is always upgraded and state-of-the-art. Lastly, one of the major challenges is fraud protection where people with ill intentions come into your system and try to move money around and this happens a lot more often than you think, so there are ways of having products and systems that protect both us and the customer from that happening.
Ellen Marshall, EVP, Head of NY and NJ Middle Market Banking, Santander Bank: There’s certainly been a sea change as the fintech space is an innovative and constantly evolving industry. Established banks are now incorporating fintech features into their offerings, recognizing that fintech companies may lack the capabilities to cater to the needs of corporate entities. While there may be several fintech companies that offer hot and novel services, they may not be equipped to handle the vast array of requirements demanded by businesses. Therefore, incorporating fintech into established banks results in a broader range of offerings for their clients.
Moreover, self-serve capabilities and ease of use are important to clients, alongside concerns about fraud. While products like Positive Pay can be used to preempt fraud, it is still a significant problem in the industry. To keep clients informed, we offer seminars to educate them on how to mitigate their risks. Fraud is constantly evolving, and new products should be introduced to address emerging issues to minimize its impact. Fraud is not something that will go away entirely so we need to offer solutions to mitigate risk as we move forward.
James Vaccaro, Chair, President & CEO, Manasquan Bank: Consumers want to access financial services based upon their preference, whether it is in person, online or through their phone. While there is a shift away from branch banking, it will always be a cornerstone. And will be supplemented by more mobile and digital options, so we can fully serve our clients. We need a distribution system that embraces multiple generations, without disenfranchising any of them. Personal interaction is incredibly important, despite the shift in demand for digital services.
What is your outlook for New Jersey’s financial sector?
Marshall: Overall, I am cautiously optimistic about the state of the economy. Recent banking events and resulting market volatility has made me more attuned to developments, but my clients express a reasonable amount of optimism. While there may be some issues such as inflation, supply chain, and talent shortages—revenue by and large is not a problem. Companies are emerging from the pandemic and thriving, particularly in the hospitality and travel industries that were hit hardest by the pandemic. At Santander Commercial Banking, we are adding market share and prospering in New Jersey, so I am confident that we are headed in the right direction.
Lastly, for companies doing business in Europe or Latin America, Santander is an excellent partner. My colleagues in Santander Corporate & Invest Banking operate in 14 different markets, speak the local languages and know the banking rules, which are essential qualities to have to attract and retain clients or prospects that are doing business in Europe or Latin America.
Vaccaro: If you look at the current economic landscape, the next year or two will be slow growth. I anticipate an estimated growth around 1.5% to 2%, but it will depend on how long the Fed raises rates to get us back to a target level of inflation. The biggest issue in the industry now is liquidity because of the outflow of cash throughout the banking environment. Although we are anticipating slow organic economic growth, we also believe that our growth trajectory may be a bit healthier than other banking organizations. We think that our business model will be successful in growing market share.
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