Banking crisis ‘has created a lot of doubts’ about regional banks, Tassat CEO says

Tassat CEO & Chairman Kevin Greene joins Yahoo Finance Live to discuss SVB’s fallout, Sec. Janet Yellen’s remarks on preserving the diversity of the U.S. banking system, and the outlook for the banking sector.

Video Transcript

JULIE HYMAN: Well, turning back now to the failure of Silicon Valley Bank, which opens a new threat to the health of community, midsize, and regional banks, as a fundamental shift may be on the horizon for the American banking system. Here to break it all down is Kevin Greene, Tassat Chairman and CEO.

And this is something that Janet Yellen talked about this morning, as well, Kevin. Thanks for coming in. That the Treasury-- I almost said the Fed, thinking of her old position. That the Treasury stands ready to support these kinds of banks. You just wrote an op-ed recently on this very topic. And this is something that's been discussed a lot that all these deposits are now going to flow to the big banks. What is the risk here?

KEVIN GREENE: The risk is that the trend that you described continues. The current shake up has created a lot of doubts about small and regional banks, and it would be a tragedy if those banks went away.

We've-- we're really had a crossroads here in the banking industry, which that is our model for the future increasing dominance by a handful of banks? What I call the European model. That model has been proven not to be good in terms of productivity, economic growth, and innovation. Or can we preserve what's been the strength of the US economy, which is small and medium-sized banks operating in local communities close to small businesses, close to small borrowers, able to serve them well? And calling into question those banks is really problematic.

BRAD SMITH: Now, you actually at Tassat, you work on blockchain-based instant payment networks for banks. Did you work with any of these banks?

KEVIN GREENE: So we were a provider to Signature Bank, their Signet platform. Our platform-- look, the way the world works right now is that B2B payments are moving towards real-time around-the-clock infrastructure. The way I describe it to people is everything all of us do throughout our day is instantaneous, it's around-the-clock, except for one thing.

If you're a company and you want to move money within a bank, you've got to only do it 40 hours-- 40 hours a week and sometimes you have to wait days. That's going to be changing. So our platform enables that to happen. And we're particularly focused on empowering small and medium-sized banks. That's our purpose.

Now, those banks originate 60% of all the small business loans in America, 80% of all the agricultural loans. So we try to empower them with technology to compete on a level-footing. In fact, we think they can outperform the megabanks. And without that technology, it would be difficult for them to do that.

JULIE HYMAN: So are you work-- how many small and midsized banks are you working with right now? And are you-- I mean, I'll hold my next question until you answer that.

KEVIN GREENE: Go ahead. So yeah, we're right now empowered in several banks, currently. We've got a working group of about 50 banks, a pipeline of about 70 banks. So we're still relatively early in our process. What we're seeing is that when those banks actually provide this capability to their customers-- so think about most customers. They can only operate 40 hours a day. It breaks down regularly. Our platform operates around-the-clock flawlessly.

Once those corporations use our platform, they don't go back to doing it the old way. So the beauty for the banks is that their customers love them. Really, they develop deep relationships. They're providing a service that actually the megabanks can't perform now. And it allows them to grow their client base, their customers, the deposits they've got, and how they interact with those banks-- with those companies.

JULIE HYMAN: Yeah, I mean, even a-- even at a big bank a wire transfer is as a pain to execute.


JULIE HYMAN: I guess I would ask, though, yes, we see that there are-- there's this perception of trouble at regional banks. But like, are regional banks really going-- are small and midsized banks, is there really a threat to them right now?

KEVIN GREENE: Well, historically, we've seen a tremendous consolidation of banks so there really is an issue of how many banks will remain. Secondly, it's a real question on a lot of people's minds, given that you've had pretty significant banks fail. People are reasonably asking themselves, is my money safe in a particular bank? That's a real issue.

I'm actually very pleased to see that Janet Yellen has said they are trying to do whatever they can to keep those banks that have gotten in trouble, preserved and not have them swallowed up by the big banks. That's a real positive. It means that she and other policymakers are paying attention to the need to preserve the diversity of the US banking system, which is really important.

BRAD SMITH: Given the partnerships that you do have with some of these banks, as you mentioned a moment ago, has there been an interim or a material impact to your business right now?

KEVIN GREENE: What we've seen is actually it's been a positive for us. That I think the banks are starting to realize that technology really does matter, that they really do have to upgrade, that they have to get more competitive. They have to offer their customers more than just, deposit your money with me. They've got to offer them added services, added capability, and real-time payments around-the-clock that are safe and secure, is what every corporation is looking for.

JULIE HYMAN: There's not a lot of companies that are doing what you're doing right now, right? I mean, Signature was doing something similar, if I understand it correctly. Or they-- or were you-- were they working with you? Can you explain that to us a little bit?

KEVIN GREENE: Yeah, so our-- actually, our technology that was powering Signet. So that was our relationship with Signature Bank.

JULIE HYMAN: OK, gotcha.

KEVIN GREENE: But there are not many other players out there. We expect there will be over time. But we've pretty much got a pretty big position right now. We're gonna keep growing it. But we expect competition.

JULIE HYMAN: Well, we'll check back in with you as that develops. Kevin, thanks for being here. Kevin Greene, Tassat Chairman and CEO, appreciate it.