2 min read December 2021 — With a history dating back over 118 years, the New Jersey Bankers Association aims to support its members by representing the industry with legislators and regulators as well as providing a variety of member services and educational opportunities. President and CEO John McWeeney spoke to Invest: about the banking landscape in the region, the services the association provides, opportunities emerging from the pandemic and the state of financial literacy.
How does the NJBankers Association advocate on behalf of its members?
We are paying close attention to what is going on in Washington and Trenton, the new administration, new programs and new regulatory policies that are important to our industry. Some of the issues we have been active in include the Reconciliation Bill, which is still working its way through the system, and nobody is sure whether it is going to happen or not, what size it will be and what is going to be in it. There was a proposal in the House version of it to have banks collect financial data of all their customers and businesses for any transaction over $600 to make sure they are paying their fair share of taxes. However, asking the banking industry to police that activity raises a lot of concerns. This would scare part of the population away from the banking system and it would also place a burden on the banks in terms of compliance, especially smaller community banks that don’t have the resources to do so. We lobbied intensely on that, and it was pulled out of the House version.
How did the pandemic change your role and the services you provide?
The pandemic gave us an opportunity to validate the importance of the trade association. We have done a lot of advocacy work since the outbreak of the pandemic, and I expect that to continue. The importance of advocacy has only grown during the pandemic and our members recognize that. During the early stages of the pandemic when people were not going into the office, we were a great source of knowledge and education and professional development. We pivoted quickly to go virtual with many of our programs and that also will continue.
Our membership base includes businesses that do business with banks. We have over 175 associate members that include different service providers, such as accountants, lawyers, core data providers and security companies. The relationship with our associate members and the services and solutions they offered our members during the pandemic were critical because our banks had to look at their business model and change how they were doing business, and for many there were challenges.
What is your view on the opportunities emerging from banking sector consolidation?
The banking industry has been consolidating for decades and it will continue in the future. In New Jersey, we have approximately 60 headquartered institutions and we have been losing approximately five banks per year. The reason for that consolidation is that banks need to achieve a level of scale to be efficient and the cost to comply with the regulatory burden is higher. The cost to innovate and invest in technology has also increased and you have to be in that game to provide the services customers want. Scale helps in those cases to cover regulatory costs and to be able to invest more.
From a customer perspective, customers have a lot of options and the banks that are surviving are getting larger. Even though the number of banks has shrunk, they have more services available, and their balance sheets have grown, they are making more loans, taking more deposits and they have more competition now with the fintechs. There are new players in the financial services space and customers have more options. The trend to consolidate will continue.
What is the state of financial literacy in New Jersey?
Financial literacy is critically important. Looking back at the 2008 financial crisis, a lot of people got in over their heads with mortgages that they should not have entered into. Financial education is critical to avoid those issues. People who are successful in their careers do not necessarily know a lot about financial services. For years, the industry has had programs to provide financial education on multiple levels, from teaching school kids how to save, to teaching the importance of credit and opening a checking account to high-schoolers and educating older people who are first-time home buyers. A myriad of programs exist through the banking industry and the government has also stepped in and done more in this space. In New Jersey, there was some legislation to introduce financial education at the high-school level for students.
What is your perspective on the trends in fintech?
Innovation and technology are here to stay, they are not going away or slowing down. If anything, the pandemic just accelerated the adoption of technology. We saw customer preferences in banking change dramatically. A survey released by the American Bankers Association found only 10% of consumers prefer branches for doing transactions. Before the pandemic, it was 17%. Five years ago, it was much higher. Now, the most popular way of doing banking is mobile or online banking for almost 70% of customers. Customers are demanding things faster and cheaper and that is what innovation is doing. In some cases, fintech is partnering with banks and in some other cases it is trying to compete with banks. The banks just want to have a level playing field.
What is your outlook for the financial sector in New Jersey for the next couple of years?
I think that our banks are in a strong position financially given their capital and liquidity. They have embraced the whole technology and digitalization strategy. They are well positioned to serve their customers, serve nonprofits in our state and to survive and prosper. Banking is a great career. There is a war for talent right now, but we are bullish and optimistic about our banks in New Jersey. I think there will be fewer banks, but they will be strong and serve our communities well.
For more information, visit: