At his core, Paul Hickman, president and CEO of the Arizona Bankers Association, is a hopeful person. He believes that good intentions, ambition, and hard work will get you to where you’re going in his industry. And, when it comes to his positive outlook, Hickman carries optimism over to what lies ahead for Arizona’s banking industry in 2021. But, it’s not simply his uplifting attitude and demeanor that Hickman enacts when looking ahead.
As a decade-long lobbyist for Arizona’s banking industry, navigating the recession and now a pandemic, Hickman has developed the innate ability to predict and adapt to whatever challenges and trends culminate within the market.
Az Business: There has been talk of new community banks opening in Arizona. What does this de novo activity mean for Arizona consumers and what does it mean for the state’s banking industry?
Paul Hickman: I think it’s a good thing, frankly. We don’t look at it as merely more competition, since more competition is actually better for us. We see the activity as making us better bankers. And in terms of consumer impact, it can only be good. It’s more choices.
In terms of the human resources component, there are more options there as well. Arizona’s got a great labor pool for banking right now. If you count the investment banks here, and the credit union sector, we have upwards of 75,000 employees. These are relatively high-wage jobs that come with benefits. They add to the tax base, and they take the pressure off of public assistance. From the economic development point of view of government, they should say “the more the merrier.”
AB: What does this de novo activity say about the business environment in Arizona?
PH: It says that it’s sustainable. We’ve seen proof in the tempo leading right up to the beginning of the pandemic and through COVID. Despite being suppressed significantly across all industries, business activity was not depressed entirely. Arizona’s business’ environment remained active and stayed alive. I think it’s a positive statement in terms of growth and the business community, as well as the ability to grow commerce in this marketplace.
AB: What has been the biggest impact of COVID-19 on Arizona’s banking industry?
PH: We’ve been given a sense of just how invaluable the banking industry is — not just in Arizona, but throughout the country. Our national leadership used the banking industry to deploy about $600 billion back into the economy to keep idle employees on payrolls and not on public assistance. In the face of adversity, they stepped up when they could have said, “no.”
I am really, really proud of the people who populate this industry. You saw many bankers who took on different roles, some from necessity, but others out of sheer willingness to help. You had bankers that were not in loan servicing, or maybe tellers, that said, “Yeah, I’ll learn how to process credit to do this because we know there’s going to be a crush of it right away and we know that it’s going to keep this economy alive.”
I think this experience has enhanced the reputation of this industry, and we’re not done. There’s $130 billion left if Congress will get its act together. And, I am cautiously optimistic that they will.
AB: Has the banking industry taken any lessons away from the pandemic that will make it even stronger moving forward?
PH: I would reiterate that the big lesson is we CAN do this. We are integral. I’ve been saying this for 10 years since I’ve been in this position: this industry is akin to the cardiovascular system of any economy. Nothing happens without the banking industry anywhere in the world. And Arizona is no exception.
I think it shows our leaders and our customers also, that we can be relied on when the chips are down, and we want to help.
AB: How has the presence of the FinTech sandbox impacted Arizona’s banking industry?
PH: I think FinTech is maybe one of the more revolutionary components of our economy, and particularly when it comes to banking — especially as I look to the horizon. What we have with FinTech is algorithm-based technologies applied to the financial services sector.
I think that these products are going to get integrated into banking. Some of them are not, and they’re going to compete with banks as they are now, like Sofi. Others are going to become banks like Verdigris, that went through Arizona’s FinTech Sandbox. That’s the first FinTech to receive a national banking charter from the Office of the Comptroller of the Currency (OCC).
We worked with the chambers, the Arizona Technology Council, the Arizona Commerce Authority and GPEC, to create a temporary regulatory safe harbor where FinTechs could test their products (for a two-year period). It was passed in 2018. It was tweaked in 2019. Now, we’re in the third year, and it has not been availed to the degree of its potential.
And so, the Arizona Bankers Association has partnered with one of our associate members, Catalyst Consulting Group, to create a FinTech council. The idea is to get about 25 or 30 subject-matter experts from banks, and some of the public policy stakeholders that have an interest in the success of the sandbox.
It’s formatted similar to Shark Tank, where FinTechs come in from all over the world to present the application they intend to submit to the staff of the FinTech sandbox. Then, the council provides feedback and critiques and potentially enters into a proof of concept partnership with FinTechs in the sandbox.
AB: What do you hope comes from this?
PH: This is a long-term play for us because these businesses are going to bank somewhere and hopefully they’ll bank at one of our banks. But, they also have the potential to bring in high-technology and services that have global markets and are in higher-wage industries.
AB: What are some of the issues that could impact the banking industry in 2021?
PH: I think FinTech is a big one, and in a positive way. Another issue is what’s going to happen with recreational marijuana. The amount of money that is on the table is phenomenal. Yet, it can’t be banked under federal law.
It raises problems when you’ve got a highly cash-intensive industry without a bank. It’s a dangerous situation. Although legislation is gaining momentum at the federal level to allow this to be banked, it doesn’t say we’re legalizing, but rather that if it’s legal in that state, it will have access to the banking industry. That’s a good first step. And so we’ll see what happens with that in the next congress.
Last, if the political class changes in terms of the leadership at the federal level — say in the Senate and the White House — will there be a retrenchment from the regulatory reform that we saw in the Trump administration? We were at ground-zero with respect to the crash in 2009 and 2010. It came right out of the financial services sector. And, even more specifically, the housing finance sector. We had seen seven years of growth in housing finance. We innovated several new products and services that the regulatory state were behind.
They didn’t get in front of those. And then there were some bad actors, and the whole thing fell apart. Then, what generally happens is banking regulation is a reaction to crises — The Banking Act, the FDIC, Gramm-Leach-Bliley. So then we got Dodd-Frank, which in our view was a disproportionate reaction. There needed to be some cleanup, certainly, and the government had to be involved, but we think there was a major overreaction.
I’m hopeful that given the way the banking industry stepped up in this crisis, which didn’t come out of the banking sector, that we won’t get blamed. And there won’t be another exaggerated effort to pull back the reform that we were able to put in place.
AB: What are some of the trends Arizona residents can expect to see in the banking industry in 2021?
PH: I am bullish on banking. I think the financial services sector is as healthy as it’s ever been, partly due to Dodd-Frank, and new capital standards and requirements. Twenty years ago, there were three times as many banks in the United States as there are today. After the crash in 2009, we saw no de novos for eight years. I am hopeful that we see more of them because a vibrant and robust banking sector is good for economic growth — and it’s good for economic diversity. It’s a little too early to make a prediction, but hope springs eternal. So we’ll see what happens.
