Part of a series of posts by John Gartner of Matter Network:
While the federal government is engaged in an overhaul of the banking industry, e3bank wants to redefine how banks interact with their customers.
The bank, to be headquartered in suburban Philadelphia (Malvern), will actively encourage its customers to live sustainably by offering preferential rates on green investments. E3bank chairman Sandy Wiggins says lending based on the sustainability of a project is “a powerful opportunity to leverage change [that] was sorely needed.”
Wiggins, who worked in real estate for 30 years, had a sustainable “awakening” in 1996 that led him to commit to building green. His adherence to the triple bottom line principle led him to become chair of the U.S. Green Building Council.
After leaving the post he was contemplating retirement, but got a call from veteran banker Frank J. Baldassarre, who is now e3bank’s President and CEO. Though never imagined working in the financial industry, he signed on with the company in 2008.
The bank’s principles, which tout the goals of enterprise, environment and social equity, are evident in their lending guidelines, which give preferential treatment to loans for green projects. Wiggins says finance rates for a loan will be reduced as projects reach higher levels of sustainability. For example, as a new building or retrofit attains higher levels of LEED certification (silver, gold and platinum), the interest rate drops.
Similarly customers looking to buy a fuel efficient vehicle will have a better opportunity for a loan from e3bank than someone looking for a gas guzzler. Wiggins says his intuition tells him green customers “have a lower risk profile because they are forward thinking.”
Customers looking for a home loan to add renewable energy won’t have to endure the same obstacles, Wiggins says. The bank’s employees will all be LEED certified, and will provide coaching on the intricacies of all stages of the process, from finding solar installers to applying for government incentives.
Loans for LEED certified projects are also good bets for the bank because “the customer is controlling the volatility of future energy prices, and the chance that energy prices will effect their ability to retain a loan is lower,” Wiggins says. Customers have the option of transferring the carbon offsets to the bank, which Wiggins says can bundle them and resell them as a tradable commodity.
The bank, which is scheduled to open its virtual doors in June, will walk the sustainable walk. The bank won’t have branches and will limit the number of paper checks to keep its environmental footprint to a minimum. Its Malvern headquarters will be within walking distance of a regional rail station, and a Philadelphia customer center will be centrally located for proximity to mass transit.
Instead of requiring customers to meet at a branch office, e3bank will make use of available space by meeting customers in retail locations such as coffee shops. The bank will not only transfer funds electronically, but also will extensively communicate with customers online. Representatives will be available for online chats, and the bank will even provide webcams to enable video calls via Skype.
Customers won’t have to visit the bank to deposit checks. Instead, scanners and software will enable “remote capture” technology that identifies the necessary information and automatically makes the deposit without the bank touching the physical check. Wiggins says the bank will provide “house calls” to commercial customers — representatives will come to their offices instead.
Customers also won’t be required to meet in person to sign all loan papers — Wiggins says this customary practice is not required by law, and e3bank will utilize digital signatures, and in the future biometric identification. Not having branches, which can cost $3 million or more to open and are expensive to operate, eliminates significant expense for the bank.
Wiggins says the bank and customers will benefit from the frustrating lessons he learned while developing green buildings. He said on one project of LEED gold-certified homes, prospective homeowners were unable to obtain mortgages because the properties didn’t have conventional heating systems, instead relying on solar thermal power and energy efficiency to keep the homes warm. To get loans approved, they had install propane fireplaces.
Talking to lenders who don’t understand the lifecycle costs of adding two percent in upfront costs to obtain 40 percent energy savings is “like staring at a brick wall,” Wiggins says.
The bank will offer retail products to customers across the U.S. when it opens. The bank raised its initial at risk capital n two days, and Wiggins expects another $30 million in capital to be in place before the company goes live.
The financial meltdown has expanded the opportunity for e3bank, according to Wiggins. “The credit crisis provides opportunity for banks without legacy issues, ….we’re coming to market with clean slate.”
– By John Gartner, Matter Network