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of Silicon Valley Bank Last week’s historic meltdown was largely due to worsening business conditions in the company’s concentrated customer base and an ill-timed decision to invest billions in mortgage-backed securities.
But longtime customers and others familiar with how SVB operates tell us that SVB itself didn’t do any good. Between the bank’s refusal to upgrade technology to meet the demands of modern business and the treatment of many emerging customers, SVB’s problems extended beyond its risk profile and difficult economy.
The former SVB manager, who worked on the risk initiative and spoke on condition of anonymity, said the bank remained technologically stagnant despite being a haven for start-ups looking to cutting-edge software and products. As she explained, “The back end of the bank is all bubblegum and wire.”
The three SVB-banked startup CEOs agreed, telling CNBC that the user experience is often clunky and sometimes slow to fulfill requests.
David Selinger, CEO of a physical security company deep sentineltold CNBC that the SVB failed to respond to the Covid pandemic after the government launched the Emergency Payment Protection Program (PPP). Designed to keep you paying.
“With all these companies needing to get PPP funding, it has completely failed,” said Selinger, who spent most of Friday withdrawing assets from the SVB.
Former Selinger Amazon An executive backed by Jeff Bezos of Deep Sentinel said his company tried to use various automated services provided by SVB, but ultimately had to do it all manually and was forced to pay for “PPP funding.” I was desperate to get it,” he said. It didn’t work. “
“I love SVB, but it was horrible for our business,” he said. “They wrote some code to speed it up, but none worked.”
A CEO who kept millions of dollars in SVB, speaking on condition of anonymity, said the bank’s system was horrible, slow and “the worst in the industry.” According to him, the technology appeared to have been manufactured in his 2002.
April 2020, Tech Crunch reported Regarding other SVB customers complaining that their bank mishandled the PPP process.
CNBC has sent an email to SVB’s press address requesting comments on this article, but has not yet received a response.
SVB’s rapid collapse began late Wednesday as the bank sold $21 billion worth of securities for a loss of $1.8 billion and sought to raise additional capital as deposits dwindled. said. By Thursday, Twitter was filled with people offering advice and pleading as stocks plummeted and venture firms directed portfolio companies to withdraw money.
Some SVB advocates told their followers that they needed to come together and support the 40-year-old bank, which has long been central to the tech ecosystem. One startup founder, Robert McLaws, responded to a particular tweet and offered a very different perspective.
“as @SVB_Finance BurnRate.io CEO McLaws wrote: When not in SV, it becomes invisible. “
Villi Iltchev, partner at Two Sigma Ventures and author of the original tweet, responded, “I have had the opposite experience. I love every interaction with them.”
Another Los Angeles-based founder and CEO told CNBC he considered leaving the bank about a year ago after it took him six weeks and five phone calls to transfer the funds needed to open the headquarters. said. He has his $750,000 in his SVB, which is three times his insured amount from the Federal Deposit Insurance Corporation.
The FDIC seized SVB on Friday following a bank run by depositors. It was the second-largest bank failure in US history and the biggest since the financial crisis 15 years ago.
Banking regulators on Sunday devised a plan to bolster SVB deposits in an attempt to quell the feared panic at the SVB. The central bank said it was creating a new bank term funding program aimed at protecting institutions affected by the SVB’s failure. In addition, the regulator said depositors at SVB and New York’s Signature Bank will have full access to their deposits.
Approximately 95% of SVB’s deposits are uninsured, making SVB particularly unique in that it primarily serves businesses. But contagion risks sent shares of other regional banks plummeting on Friday. First Republic and Pacwest Bancorp.
Lack of mobile security
A former SVB manager hired to prepare the bank for its rapidly growing asset base said implementing biometrics in the bank’s mobile banking app was one of technological failures. Building authentication into apps was “deemed too costly, complex, and not adding value for clients,” so startup finance executives were forced into “password-based logins” to protect their funds. It was
Former SVB employees say their attempts to bolster in-house technology through a partnership with payments giant Stripe have been unsuccessful.
In 2016, SVB Contract with Stripe Launches a product called Atlas, “to give entrepreneurs around the world access to the basic building blocks to start a global Internet business.” Get a U.S. bank account from Amazon, a Stripe account to receive payments from anywhere, tax guidance from PwC, legal assistance from Orrick, Herrington & Sutcliffe, tools and credit from Amazon Web, and more. service. “
But a former SVB employee said after the big announcement, “Technically, SVB couldn’t pull it off on our part.” SVB’s lack of investment in technology has made the job of risk compliance difficult, the person said.
Atlas has partnered with fintech companies Mercury and Novo, according to its website.
Stripe did not immediately provide comment on the matter.
SVB was “definitely one of the best banks” for startups, but the person went on to say that as clients grew, the bank’s inferior technology “forced them to switch”.
— CNBC’s Ashley Capoot contributed to this report.
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