M&T's new fintech unit rolls out first product

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When the enterprise transformation office at M&T Bank began exploring problems the bank could fix for its small-business customers, the team landed on a challenge facing a very specific niche: solo attorneys and small law firms that struggled to efficiently reconcile their trust accounting.

So M&T hatched a fintech-like unit to solve the issue.

Nota, which is Latin for “note,” is the inaugural product of Project Swan St., the initiative managed by the Buffalo, N.Y., bank’s office tasked with developing new business ideas and tools for its customers. The initiative is named after the location of M&T’s first branch in downtown Buffalo.

Paul Garibian, president, Nota
“We’re a full-blown organization, and we can pull resources from the bank when needed,” says Paul Garibian, president of Nota, M&T Bank's first fintech unit.

The Nota software connects to a lawyer’s trust account and helps organize and reconcile transactions.

But the goal of creating an in-house fintech wasn’t just to build a hit product; it was to acquire capabilities that would drive innovation at the bank.

“We’re trying to have this feel like a fintech,” said Tom Hayes, senior vice president of enterprise transformation at M&T.

The bank hopes this process will benefit the company as a whole, from learning how to bring products to market swiftly to attracting top technology talent. It’s also part of a larger push to prioritize digital transformation at the $139.5 billion-asset bank.

Although the rollout was disrupted by the pandemic, the bank has been pleased with customer acquisition. Nota had 20 users when the pandemic hit in March, and that number has since climbed to 200 despite a three-month pause on outreach efforts before they restarted in June.

But landing on Nota took time. Breakthroughs came from conversing with real-life customers to sense what drove them crazy — including issues that they didn’t quite put into words.

“We learned that you don’t go into something knowing exactly what to build,” said Hayes. “We were out in the world, literally sitting next to attorneys, watching how they do their business.”

The team held a series of “shark tanks” to whittle down dozens of ideas. These sessions started out as short pitches and progressed to longer, more in-depth pitches in front of top company executives, including CEO René Jones.

“Nota ultimately felt right because it linked directly to a bank product we already have, IOLAs and IOLTAs,” Hayes said, using abbreviations for Interest on Lawyers Accounts and Interest on Lawyers Trust Accounts. “Is it nichey? Yes, but practically every attorney has a trust account when holding funds for various purposes. For small and midsize firms, this is a real pain point.”

The market is also bigger than one might think.

Small firms and solo attorneys make up the majority of the legal profession, according to the American Bar Association’s 2019 Legal Technology Survey Report. Of the 63% of respondents who fell into these categories, 32% were solo and 31% were from firms with two to nine employees.

M&T Bank has 150,000 lawyers in its footprint.

Hayes’s team was also excited for the novelty of this project. “Unique solutions can be pretty elusive in banking,” he said. “Most of us have similar products and features and functionality.”

The product boils down trust-account management.

Lawyers have to distribute funds for certain types of transactions, such as immigration, real estate or personal injury fees, from a trust account rather than their business account. To achieve three-way reconciliation, a process recommended by the American Bar Association, their books must be balanced against the transactions in their client ledgers and their trust account’s bank statement.

Firms will sometimes use QuickBooks or practice management software to reconcile their accounts, but Paul Garibian, president of Nota, said that Nota’s solution plugs into the bank account side, which is more reliable. Once a customer links their IOLA or IOLTA account from M&T to Nota, it will help them tag transactions to different clients, make notes, send and receive payments and run reports to ensure that balances are aligned.

Like a fintech, Nota evolved from a minimum viable product to alpha and beta testing phases. It officially launched in August, but relationship managers began introducing it to prospective and existing customers before that.

Right now, Nota is considered an autonomous department in M&T Bank. The bank began development in April 2019 and hired Garibian, previously head of payments for the Americas at Finastra, as president in December. His 20 employees take care of software development, product management, operations and marketing. Before remote work became the norm they were preparing to move to the Innovation Center on the Buffalo Niagara Medical Campus.

“We’re a full-blown organization, and we can pull resources from the bank when needed,” Garibian said.

For now the product is available only to M&T customers, but the bank will consider expanding it to other users in the future.

Hayes’s team is also busy incubating another idea that came out of Swan St. and running sprints with other lines of business. Hayes stresses, however, that the significance is not a singular product but the broader intent.

“Nota is very important to us, but there is a bigger purpose,” he said. “We’re taking what we learned back within the bank, becoming more innovative and going down paths that maybe a decade or two ago we wouldn’t have gone down.”

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