Figure, New York Community team up on blockchain projects

New York Community Bancorp will work with Figure Technologies on a series of blockchain-related initiatives and will make an equity investment in the fintech.

The $57.5 billion-asset regional bank said it wants to use distributed ledger technology to increase financial inclusion in banking and credit, reduce cost in the mortgage business and create a more efficient payments system.

"We chose Figure because of its focus on and knowledge of banking and payment systems,” Thomas R. Cangemi, the chairman and CEO of New York Community, said in a news release Monday announcing its strategic relationship with Figure. “Our agreement with Figure is a part of NYCB's strategic focus on the operational and cost benefits that blockchain technology can bring to bear across many areas of banking.”

A New York Community spokesman declined to say how much the Hicksville, New York, company plans to invest in Figure or how large a stake it would buy. It is the second bank to invest in Figure. National Bank Holdings in Denver, which announced a partnership with Figure last week, has also invested an undisclosed amount in the company.

NBHC, whose subsidiary NBH Bank operates under several brands including Community Banks of Colorado and Community Banks Mortgage, will collaborate with Figure on payment solutions for small and midsize businesses.

Also in August, Figure announced that it would merge with Homebridge Financial Services, a nonbank lender.

The partnership brings together New York Community, which is buying Flagstar Bancorp and seeking to diversify beyond beyond the multifamily loans and certificates of deposit it has focused on for decades, with Figure, a fintech company that is pursuing a specialized bank charter.

The CEO of Figure, Mike Cagney, co-founded Social Finance in 2011 but was removed in 2017 after allegations of sexual harassment surfaced at the company. He started Figure the next year.

The San Francisco-based Figure will help New York Community build its blockchain infrastructure. They will use the Provenance Blockchain, an open source distributed ledger for the financial services industry that Figure set up to trade consumer loans and, more recently, sell securities.

New York Community and Figure will also invest in a fund from JAM Fintop that is dedicated to building blockchain infrastructure and businesses. Cagney and June Ou, Figure's chief operating officer, will serve as advisors to the fund. JAM Fintop is a joint venture between JAM Special Opportunity Ventures, whose affiliate Jacobs Asset Management invests in community banks, and Fintop Capital, a fintech investor that funds technology providers to financial institutions and has 66 community bank partners.

“We're pursuing innovative blockchain solutions in fields such as payments, lending and exchanges," Cagney said in the release. “We see banks as an essential part of the Provenance ecosystem, and we expect to announce several initiatives which will benefit Figure, Provenance and NYCB stakeholders."

At the same time, Figure is in the midst of pursuing a specialized bank charter from the Office of the Comptroller of Currency. The effort is controversial in part because the bank wouldn't take deposits backed by the Federal Deposit Insurance Corp.; instead, it would take uninsured deposits of over $250,000. Most recently, the Conference of State Bank Supervisors paused litigation over Figure’s charter application for 90 days but plans to resume its suit if the OCC restarts efforts to promote its fintech charter.

A number of bank trade associations, including the Bank Policy Institute and the American Bankers Association, have also objected to Figure’s bank charter application.