Bitcoin Trading, Mobile Payments: What’s Next for Quontic Bank

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Quontic Bank, a community development financial institution in New York City, has made a name for itself as an innovator.

It was the first American bank to have a bitcoin reward card; it refunds 1.5% in bitcoin rewards for every debit card transaction. The bank has other products in the works, including a ring that enables debit card purchases.

Quontic, with assets of $ 1.4 billion, has also grown its mortgage business. It uses a new method of underwriting that allows people with good credit but low income to afford a home; 70% of its mortgage loans are granted to these customers.

“If you don’t have the idea of ​​taking risks, innovating and trying new things in your DNA, recruit someone to your team who does and find someone who will push you,” says Steven Schnall, Founder and CEO of Quontic Bank.

DENNIS CAHLO

In a recent interview, Founder and CEO Steven Schnall provided an update on the bank’s bitcoin-related business, its process of implementing new ideas, and its progress in the mortgage industry.

How is the bitcoin rewards card doing? Have people signed up and is it working as you expected?

STEVEN SCHNALL: It’s too early to tell, because we’re still in beta testing. The only reason we’re still in beta testing is because we haven’t finished developing the mobile app that will enable all of the rewards program’s functionality. So right now the customers who signed up are earning the rewards. They can trade or sell the bitcoin they receive however they want, but they aren’t able to see all of this activity on the mobile app.

We want to be able to deliver a first-class customer experience before we launch it into the mass market. So we’re going to register whoever finds us, but we haven’t started marketing it yet. We don’t yet know what the full potential of this product is, but we like the fact that we are at least allowing consumers who don’t have access to bitcoin to familiarize themselves with it, and consumers who are already passionate about it. to earn more for free.

Have you been concerned about the price of bitcoin over the past month?

When we designed this product, one of the things we found really interesting about it was that unlike miles or membership points, or even cash rewards, these are rewards that have the ability to be appreciated in a meaningful way. Of course, it will likely remain volatile for the foreseeable future, but the good thing is that you don’t have to pay for it. We give it to you for free. So you hope he enjoys it. But the main advantage of the program is that you get bitcoin without risking your own money.

Is there anything else on your product’s drawing board related to bitcoin?

We want to allow customers to buy and sell bitcoin. It is not something that we have planned to launch because the technology and integration has not yet been built. But that’s one of the things NYDIG [Quontics tech partner on its bitcoin rewards product] work on. NYDIG partners with all major banking software vendors to make buying and selling easier for customers.

And so I think we have a head start over other banks because our board is already very comfortable with NYDIG and bitcoin in general. And we will try to do it early. And we will do it without any risk to ourselves, because we are not counting bitcoin, we are just a technological facilitation.

Once consumers can buy bitcoin from their bank, they will have a much higher level of comfort with it, and you might see massive adoption like we’ve never seen before.

Was it difficult for you when Patrick Sells, your chief innovation officer, left for NYDIG?

When we made the decision to go all digital, branchless, it took a lot of help. And so to bring someone with the energy and intellect of Patrick to this point in our history who had a skill set outside of what anyone in the bank had, he was the right fit for the job. good job at the right time. We benefit from everything he and I have been able to do together, and I wish him good luck in his development. We are still friends and I talk to him almost daily. But he left his mark for sure.

From an entrepreneurial CEO perspective, he was 28 when he arrived, and he pushed me really hard to do things that I probably wouldn’t have done if it hadn’t been for someone. ‘one from outside the bank that hasn’t been beaten by the regulators and the whole building of being a bank where banks don’t innovate, banks don’t evolve, banks don’t pivot, they do not attack new things. And he didn’t know these rules. So he pushed me to do things that I might not have done. One of the things I believe now is that if you don’t have the idea of ​​taking risks, innovating and trying new things in your DNA, find someone on your team who does it, and find someone who will push you.

Now anytime we’re looking to do something new and interesting, I don’t have that same filter where I say, well, I’m only going to hire someone with banking experience. My marketing director has never worked in a bank, but he’s really good at digital innovation, branding and marketing. My IT security manager was not from a bank. And I think it’s really beneficial for people to broaden the lens. And now, with Remote Workforce, you can hire anyone, anywhere. So you have this national talent pool to recruit from.

Are you still working on developing a portable debit card ring?

It cooks slowly. There are a number of different third party vendors that we rely on to bring this to life. And we are making progress every day. We’re probably still a good quarter down. You have to be prepared to accept that you are going to try new things and everything takes forever, but we are thrilled about it. A portable debit card ring is a really cool thing that no one has done before. And there will be a number of consumers who will want this, whether you are a runner or a cyclist or you don’t want to carry your phone, you can always go and buy your Gatorade or whatever by tapping your ring on the contactless reader. We had a beta version of it a year ago. When I was wearing mine, I would walk into a store, wave my hand over the card reader, and they would look at me like I had three heads. And then they see the thing ping, the transaction is approved.

Did the ring look good? Is it stylish?

Yep, that was awesome. I actually have a wedding ring that looks exactly like this ring, except it’s rubber. This one is ceramic, but it’s quite stylish and I liked wearing it.

You mentioned the low doc loans. I know you had a strong quarter in terms of low income household mortgage growth. What do you attribute this to? Is it linked to the pandemic?

The mortgage market as a whole tends to follow two things. First, if interest rates have fallen significantly over a period of time, everyone is running into refinancing and the housing market. So rates have been low for so long that there will come a time when you will have saturated the refinancing industry. It’s a multi-billion dollar market, but probably the majority of people who are going to refinance for rates have already done so. And secondly, housing starts to cool down a bit, partly because of a lack of inventory, partly because prices have gone up so much. But we tend to focus on something completely different. So, for example, over the past 12 months, most major traditional mortgage lenders have done a lot of refinancing. For us, over the past 12 months 90% of our business has been purchasing.

We had to give up refinancing because we are focusing on lending to low income households. And most of the people who live in low income households cannot run out and get the 2.75% interest rate. Rather, it’s people who want to own a home who can’t, and the reason they can’t is not necessarily related to the pandemic, although the pandemic has made it worse. The reason they can’t is because after the last credit crunch, there was this Dodd-Frank law that put in place, among other things, a repayment capacity rule. And under the repayment capacity rule, lenders are now required to collect independently prepared third-party documents on tax returns and the calculated debt-to-income ratio not exceeding 43%. Now this rule makes sense because the world went haywire before the credit crunch with high LTV, no doc loans to people who didn’t even have jobs. And what has happened as a result are massive foreclosures and a global economic downturn.

And so the Dodd-Frank legislation was responsibly trying to address that problem and say, look, banks and mortgage companies, on owner-occupied property you can’t make a loan unless you have checked someone’s income and calculated an affordable debt-to-income ratio. ratio greater than less than 43%. So that was the good news. The bad news is that there are millions of consumers who have resources. They have a down payment, they have good credit, but for various reasons they are not able to meet the ATR standard under Dodd-Frank. And so they just won’t be able to get a home loan. And most of these people are small business owners. And so COVID is a great example of how the small business owner got the tree as a result of this rule because maybe your small business had five or eight good years in a row then 2020 was. annihilation.

And so, the niche that we serve is that of all the people who would like to own a home, who are creditworthy, as evidenced by a credit score of 700+. They have a propensity to save as evidenced by a 20% or 30% down payment, but they cannot meet ATR documentation and debt-to-income ratio guidelines set out under Dodd-Frank. So he is the one we serve. And there are millions and millions of such people out there.

It is something that no one does. It is something innovative. This is something we have to be prepared to attempt, not from a credit risk perspective, but what people will think if we give loans to consumers without requiring tax returns. We are responding to an invaluable market need and we are doing it responsibly.

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