Banks and bankers are critical drivers of economic growth. So, understanding what drives the industry is crucial to making sense of where the state’s economy and business community is going.

NJBIZ recently asked Brittany Wheeler, vice president and director of government affairs for the New Jersey Bankers Association, for a read on where the organization and its members stand on the issues and challenges facing the state as it moves into 2024. The questions and answers have been edited for style and clarity.

NJBIZ: Let’s start with current events. What is the association’s view of the proposed Consumer Financial Protection Board rule that would limit overdraft fees? What are the implications for the industry?

Brittany Wheeler: The proposal overlooks the substantial voluntary changes that numerous banks have already implemented in their overdraft programs. This includes the increasing availability of accounts, such as Bank On certified accounts, which do not impose overdraft fees. Implementing the proposed government-imposed price cap could disrupt this competitive market, limiting access to overdraft services.

Q: Federal Reserve Board officials have indicated that the central bank might start cutting interest rates next year. How does that shift affect the outlook for lending over the next 12 months?

A: A reduction in interest rates typically makes borrowing more affordable, encouraging businesses and individuals to seek loans for various purposes. Lower interest rates can stimulate economic activity by promoting investments, expanding businesses and increasing consumer spending. This, in turn, may lead to an uptick in demand for loans, fostering a more favorable environment for lending institutions as they can attract borrowers with more competitive and accessible financineg options.

Q: How is technology, especially artificial intelligence, changing the way banks do business?

A: Implementing agile methodologies and streamlining internal processes can enhance the responsiveness of traditional banks to market changes, enabling them to achieve more with limited resources. The use of artificial intelligence presents businesses with the opportunity to improve productivity and efficiencies. What remains to be seen is how legislators and regulators respond to the pending avalanche in innovation surrounding the use of these new technologies.

Q: What role should banks play in increasing access to capital, especially to traditionally underserved businesses, communities and individuals?

A: Our members firmly believe a well-capitalized and innovative banking industry is a critical component of a strong national economy and critical for the communities they serve. Banks operating in New Jersey are highly regulated and subject to the Community Reinvestment Act requirements. This federal law mandates financial institutions meet the credit needs of the communities in which they operate, particularly low- and moderate-income areas. New Jersey banks are consistently rated Outstanding or Satisfactory by the United States Government. This is an evolving standard. In fact, as recently as October 2023, federal bank regulators jointly issued a final rule to strengthen and modernize the CRA regulations to better achieve the purpose of the CRA.

Q: How are customer expectations evolving in the post-pandemic era? Will online banking replace branches?

A: Traditional banks in New Jersey continue to adopt digital technologies, providing user-friendly online platforms and mobile apps. This not only enhances the customer experience but also positions them competitively in the digital landscape specific to the region. Prior to the COVID-19 pandemic, customers expected convenience with respect to the services they are provided from their bank and that remains unchanged. However, we found that during the pandemic many customers, particularly those receiving PPP [Paycheck Protection Program] loans, still value trusted relationship with their bankers. We are a customer service-oriented industry.

Q: What is the best way for banks to deal with competition from non-bank financial services providers?

A: Entities outside the traditional banking sector, such as major technology companies and e-commerce platforms, are venturing into the financial services domain. This undoubtedly heightens the competition for customer attention and presents a challenge for traditional banks to distinguish themselves. Some ways banks can handle this new challenge is by embracing new technologies, forming strategic partnerships with fintech companies to leverage the strengths of traditional banking and innovative solutions, and continue to prioritize the customer experience.

Q: What are the biggest cybersecurity threats banks face now and how can banks assure customers that their data is safe? Are there any emerging threats that require attention?

A: Banks have the highest level of security among critical industries in the United States and the most stringent regulatory requirements. The capacity and capability to prepare for and prevent cybersecurity attacks is always a top priority for banks. Threats are constantly evolving and therefore so must the ability to respond. Most recently, ransomware attacks have proved the most disruptive to our institutions. Fortunately, these incidents were resolved without significant disruption to the broader market.

Q: How do you assess the overall economic outlook? Is a recession still a possibility?

A: There is a lot of uncertainty in today’s world. Anything is possible depending upon who you listen to. However, I can say with certainty that our industry remains vigilant in assessing operational risks and steadfast in working with regulators to ensure institutions remain healthy and customer demands are met with complete confidence.

Q: Relatedly, how will geopolitical uncertainties affect the economy?

A: Geopolitical uncertainties can influence the economic outlook by introducing new factors of instability and unpredictability, which is never a good thing. Trade tensions, diplomatic issues, or geopolitical conflicts contribute to market volatility, affecting investor confidence and business decision-making. The resulting impact could include fluctuations in currency values, changes in commodity prices, and adjustments in trade policies, all of which can collectively influence the overall economic performance of the United States.

Q: What are you hearing from your members on their outlook? Are they confident, concerned cautious, optimistic?

A: Our members remain cautious yet optimistic. Our banks invest significant time and resources to forecast different economic outcomes and ensure regulatory compliance, enabling them to effectively manage risk exposure and implement controls in response to market changes, be they positive or negative.