Customized Technology Helps Calnet Woo Business Clients

An experienced team of community bankers has put together a state-of-the-art technology infrastructure to meet the needs of the Sacramento, Calif. business community.

The brainchild of two former executives of River City Bank, Sacramento, the new venture, Calnet Business Bank, initially intends to service a market of approximately 40,000 area businesses having revenues of up to $50 million and borrowing needs ranging from $250,000 to $1.5 million.

The venture intends to start operations in late September, after closing its initial offering period with $10 million of private capital and then receiving the necessary regulatory approvals to begin operations.

Since Sacramento enjoys a strong housing cost differential compared to other areas in California, much of the target market includes participants in the real estate industry, including homebuilders, buyers, property managers and homeowners' associations. "Sacramento's economy, to a significant extent, is based upon real estate activity," said Peter Raffetto, president and CEO of Calnet. "Real estate is an area that traditionally the community banks serve well and so will we."

But the startup also wants to use technology to build ties with larger customers, even to those with established banking relationships elsewhere. "In the traditional banking relationship, customers manage their deposit and lending relationships with the bank," said Robert Wood, chief technology officer at Calnet. "Our intention is to extend that so that they manage their transaction processing relationship as well."

Even if a business maintains a $10 million line of credit at a super-regional or national bank, Calnet hopes to win some of its business using a combination of personal service and customized information management services, including treasury management, accounting and payroll systems.

"Maybe they don't want to change their lending relationship over to a community bank, or maybe they have to participate that out to a number of different banks," said Wood. "But it may make sense for them to look for efficiencies in their treasury management services."

"We believe a significant portion of our customers will do just that," he added.

This strategy opens up opportunities that might be too big for the traditional community bank, while too small for the super-regionals. "A community bank that's starting up with lending limits like ours will generally have a target audience that's much smaller than what ours is going to be," said Wood. At the same time, Calnet hopes to be more nimble and accommodating than its larger competitors.

To support its strategy, Calnet embarked on its own internal development of interfaces and systems for cash management and transaction processing, designed for tight integration with customer systems. "The improvements in technology over the past couple of years provide an opportunity to really have bank systems talk to customer systems, and vice versa," said Wood. "This will improve the efficiency of not only the customer operation but of the interaction between the customer and the bank."

"The inevitable conclusion for banks as we know them today is to provide a continued interface service to their customers," said Wood. "In ten years you're going to see a lot of this kind of thing-or banks changing to this kind of business model."

The bank uses a database engine from Oracle, Redwood Shores, Calif., and the e-Commerce Banker 2 core banking system from Open Solutions, Glastonbury, Conn. Calnet will also offer account aggregation services from ettache, Fremont, Calif., and image management and delivery using software from Ceyoniq, Herndon, Va.

The ability to assemble a bank using the latest generation of software had its advantages. "Financially, it's easier for a bank to just start over than for it to write off its existing core system and change its operations and processes around," said Wood.

For his part, Raffetto doesn't seem to have the usual startup jitters. "Myself, and the people that are doing this, have done bank startups quite successfully numerous times over."