Diana Powell: Welcome to The Vault, unlocking stories that matter. I'm your host, Diana Powell. Today we're going to be talking about world trade, and why it's important to us as individuals and how it impacts businesses and the global economy. I'm joined by our special guest, Michael Salerno, our Vice President of Global Banking and Institutional Payments here at FNBO. So, Michael, thanks for being on the podcast.

Michael Salerno: Thank you, Diana. It's great to be here.

Diana Powell: Your title is a mouthful. Why don't you tell us what you do, how long you've been at the bank?

Michael Salerno: Oh, I've been with the bank now just a little over 24 years. Uh, 23 of that has really been in the International Banking uh, division. Today, I lead a team of roughly 16 individuals that are really focused on helping our customers and the communities participate in the international economy. We have a team that is focused on making sure that we can move money efficiently and effectively in and out of the country for the bank, our partners and our customers.

And then I have another team that really is helping making sure that if you're going to sell overseas, you get paid. Uh, and if you are importing something from overseas, you're getting what you want when you want. Uh, and then the last couple of teams that are really just advising clients on making sure that their payments are being uh, sell it appropriately or advising clients on the different strategies uh, to execute on their uh, international goals and strategies.

Diana Powell: So, you're saying that global banking is more than just me going to a teller and saying, I need some euros for my vacation?

Michael Salerno: That's correct. We do get some of those calls, but when you go to the teller line to get banknotes, as we call them, that's really a retail product, and that's important for our consumers. But what we're really focused on is small businesses, commercial and corporate customers that need to transact or do business outside the United States, and really to try to help them focus on what they do best and sit by, fill the gap for them, advise them, and really be a trusted partner, to ensure that they are accomplishing their goals or their strategic initiatives with confidence.

Diana Powell: Gosh, Michael, something that I love about your team is just how we kind of surprise our customers sometimes. They think of us as this great partner and big Midwestern bank. They might not know we have all this expertise and experience and global banking and really sophisticated tools where we can help our customers.

Michael Salerno: Yeah, I always get the question, "does it really make sense to have an international team at a bank in the Midwest?" And I think when people look at just our footprint, a big part of what we do is feed the world. And all of that, all those products, whether it is actual, you know, food products or ag equipment or ag technology, we're really good at that in the Midwest. And we are exporting that all over the world. And a lot of the companies that are really getting these sales are providing innovative products and services are small businesses and they don't have a compliance team or someone that can really help them with export controls or credit terms and foreign exchange, but they have customers abroad. And that's the gap that we can help fill is really help them take that product globally. Let them continue to be innovative, build relationships with the customers and rely on us to make sure that we can move the money, give them the guarantees where there are so they can continue to grow internationally and really do what they're great at with the confidence knowing that we are backing them with our products and services.

Diana Powell: So, it actually makes more sense that we would have a team like this to support our customers.

It's May and it's World Trade Month. So, this is something celebrated across the United States. We celebrate it here at FNBO. What is World Trade Month? Why should we care about it?

Michael Salerno: International trade is really important, not only to the bank, but more importantly to our customers. So, for us, it's really about celebrating what we do, how we do it, as well as bringing awareness. Not a lot of our own employees, let alone our customers know that we have an international banking team and know the different products and services and capabilities that we can actually add, um, to our customers and to our communities. So, it's really about bringing awareness of how trade really is a part of our everyday life as individuals and in the companies at work and how dependent most of the businesses are, that trade can flow freely, and be able to bridge these gaps between the different countries.

Diana Powell: That's awesome. And you mentioned small businesses again, and happens to be that May is also Small Business Month, so we have to share that month with them. How does global trade affect our small business customers? Does it matter to them at all?

Michael Salerno: It does. I think everyone knows how important small businesses are to the US economy. And if we look at our exports, more than 95% of the exports from the United States are small businesses. So, that really is showing the international commerce is a key component of small businesses. The challenge that it poses to them is, again, they don't have the resources to be able to do a lot of what the larger companies can do on their own. And they don't always have access to the products and services that a large corporate can, due to the multinational banks, just that's not who their target market is. So, I feel like that's a really big niche and a source of pride for FNBO is that our team is able to work with small businesses and we're be able to provide them the same technology, the same products and services that multinationals have, but with a little bit more care. We're able to advise them, we're able to connect them to other partners and resources and really make sure that they can compete globally and securely.

Diana Powell: Yeah, I see that in your team every day, how we're just thinking about our customers, how to serve them, how to help them do business in a better way. It's the FNBO way that we're thinking about our customers first.

What's like an example of maybe a small business that's used our team or how we were able to help them?

Michael Salerno: There's a lot. I think what we see the most is we get a small business that comes to us and they have a really good product and their customers are going to take them to a new market or they're at a trade show and they meet somebody that's going to take them internationally. And we've done everything from helping them identify their customer overseas, helping them create credit terms and figuring out how they can export that on a letter of credit to get a bank guarantee, helps them feel like they've got more security in there. But what really, I think, helps them is knowing if they've never done a letter of credit, our team is there to help. We're doing the education, talking about the documentation, making sure we're reviewing that documentation before it goes overseas so that we protect their guarantee. Uh, that's really helped I think customers gain confidence and being able to grow.

We've also helped customers, a small business that, you know, as times get a little bit tight and stress is on cash flow. We've able to help them buy equipment overseas in euros. What that does, it could save them 10% to 12% on that equipment. But also, if we tie that to a letter of credit, make sure that we include things in that letter of credit that ensures that they get the equipment on time, it's got an inspection certificate, so it works as intended, and really just builds the confidence in the transaction.

And majority of where we do spend our time is our small businesses. We do have commercial and corporate customers that maybe don't need, um, as much care, and they love our technology. But I think what separates us is the, just the advice and the guidance that our team is able to spend with our small businesses and help them be educated and grow, uh, kind of in this journey and get them to the place that they want, uh, and then rely on us for the rest.

Diana Powell: You mentioned protection, and I was just thinking about if I was a business going international, I would be nervous about how do I make sure my payment gets from here to there? You know, you hear horror stories, and you mention protection, making sure you actually get what you were asking for, what are some ways that we can help customers there with maybe with risk management?

Michael Salerno: Yeah, so I'd say that one of the biggest things that's new probably to the industry is what we call Swift GPI. So, we are a bank that's on the Swift network, or one of the very few regional banks that actually has subscribed to the GPI initiative. This has really helped our customers with understanding where their payments are. I think there was always a fear that when I wire funds overseas, I have no idea where it's at and when it's going to get there. And I remember, you know, starting off that we would say, you know, a wire could take seven to 10 business days. And that just seemed ridiculous at the time.

What GPI allows us to do is track the payment in real time. And it also has SLAs to make sure it gets there with a new amount of speed. So, the day of not knowing where your payment is has been gone, but it brings complete transparency. It's a tracker where we can go online and see where it's at. We can see every bank that's touched it. We can see if they held it, and if they did, for why and how long. If they took a fee, how much? And if they converted the currency at what rate. So, it really brings certainty to the payment stream. And more importantly, we're getting payments there same day, next day, rather than the seven to 10 business days, and it's never more than the two day spot value or the day that it's intended to be there. And then on top of that, to continue advancement of this product is allowing us to fight fraud at the same time.

Diana Powell: Oh.

Michael Salerno: So, if the payment hasn't reached the beneficiary and there's something wrong with it, we can kill the transaction in real time using what we call stop and recall, and return the funds to the customers before they ever get to the beneficiary. We continue to work with the international banking community to build enhancements around fraud because most people are worried that payments are going to go faster, you're going to have less time. But that's been the big change for us and I think taking that away, that uncertainty of where your payment has been the thing that's used the most by our customers.

And then just the risk management piece of, if you know, you've got a payment, our CFOs or Controllers or Bookkeepers don't want to wake up every day and figure out what's that going to cost to me in USD? So, we can actually lock in the rate using forward contracts so they know exactly how many euros they're going to pay in 90 days and then you know the exact amount of USD that'll be debited from their account. So again, transparency within that transaction, and that's really what our team tries to do is bring transparency and predictability to everything that we do for our customers.

Diana Powell: That's great. All right, so it's pretty clear that world trade and global payments are really important. How do they affect us as individuals or our businesses that we run?

Michael Salerno: Well, I think that's been pretty clear with the recent news, you know, everyone is starting to realize our everyday lives are really affected by international trade. Because so much of the products and services that we are consuming as consumers or our businesses, really have an international component to it. So, as a consumer, we're sitting back and we've talked about trade lanes that have been affected in supply chain disruptions. What that really is translated to the individual is, your prices have gone up. You've seen the supply decrease, which has created again increased prices or just non-availability of the everyday goods and services. We all know that coffee is not grown in the United States, and that's a big part of my day.

Diana Powell: Yeah, same thing.

Michael Salerno: So, we're all seeing the things that we use every day or know and love having impact with international trade - for good or for worse. From a business perspective, we've seen shifts and strategies. And what that has related to is some examples locally is they've had to redo their supply chains and as they shifted from one country to the next, they might have quality or just other issues with that product. And what we've started here from our customers is we're going to start doing some of this stuff here locally. So, not only just exporting, but now we're seeing rather than them diversifying their supply chain is, they're bringing new vendors for multiple countries. Bringing these components into the U.S. and starting assembling and manufacturing the finished product here.

So that's great. It allows them to take more control of their products and the quality and quantity that they have. It creates additional risk by having new partners. Um, it could have some currency risk, but it's also creating jobs and creating them to have more control. So, international trade really affects our everyday lives. Most importantly, personally, I think everyone feels that and sees that. But there's a lot of complexities from a business perspective that's having real impacts that could really affect a business's cash flow. It could change their business model. It could create more manufacturing jobs here. It could create, you know, bigger supply chains, more vendor management and different types of stuff to really take control of their inventory. So, it's probably not top of mind for everybody, but when you sit back and think about it, your lives are affected multiple times by the international trade activity that is happening locally as well as across the globe.

Diana Powell: Yeah, and you mentioned jobs, you know, how are how is the job market impacted by the fluctuations in global trade?

Michael Salerno: Well, I think in the Midwest, we feel it quite closely related to some of the ag products that we're exporting, and we see, again, that there's a lot of innovation within this space, and we're starting to see services starting to be exported as well. As customers are starting to grow their companies, there's always so much they can do domestically. There's tough competition. There's only so much market share. So naturally, they start going internationally. And there's a lot of services that are available through partners like the US Commercial Service and SBA that help, you know, create some guarantees and different funding mechanisms to help customers grow internationally. And the reason is the United States wants us to continue to export products because there's more customers. It's more revenue, and that really brings more job creation back home. So, it's really important for jobs to continue to export. If we're going to continue to manufacture stuff and grow our manufacturing base, we're gonna have to get inputs from other countries. So, as long as we can keep the products flowing through international trade, it really does help our companies grow, which in turn creates into job creation.

Diana Powell: As you're thinking about World Trade Month and how we're talking with our customers, are there kind of some key themes or topics that people are really interested in right now?

Michael Salerno: I would say from my perspective, what most of our businesses are ultra focused on, big and small, is really risk management. And I say that for a couple different things. As there's more uncertainty globally and as they shift supply chains, they've built relationships over decades. And as they start new relationships, you just don't want to have an open account or have credit terms with someone that you're selling to. So, we're really working with them to help identify who those customers are, and their banks, help them understand the risks associated with them in the country, and use our old traditional products, like letters of credit, and documentary collections that maybe five, 10 years ago, we thought would be obsolete. But in times like now, we want some certainty. We want some guarantees. We want to make sure there's money can't be released from that country. Um, any of the export controls are met. They have the proper documentation to get stuff here in the US. So, we're really seeing more trade products to reduce the risk of not getting your product or something happening.

The second part is active management of the foreign currency. A lot of our small business have relied on selling and buying in US dollars. And what they're starting to see is there's a lot of volatility in the currencies. And someone is managing that. And if they can take that management on through paying in a foreign currency or using forward contracts to lock in rates. It gives them more control. It allows them to really understand their cash flow and usually it creates quite a bit of savings for them as well.

Diana Powell: Fascinating. So, paying for products from another country in that country's currency can be a saving.

Michael Salerno: Yes

Diana Powell: Wow, that's great.

Michael Salerno: Yeah, we just had an example of the customer that is redoing their manufacturing floor, and they needed new equipment, and they were going to spend, you know, it was a pretty capital-intensive project buying this equipment from Germany. And as we get involved from it from one of our relationship managers talking to us about what's going on and we ask them what's the euro price, they found out that there was a significant savings for them. So, we were able to purchase that, send the funds in euro, trace it in real time, make sure the full amount got there. And they were able to save almost 11% on that purchase.

Diana Powell: Oh my goodness. So, Michael, what if we have customers who are looking to expand their business internationally or perhaps they're already international and they want to expand that? What's some advice that you have for them?

Michael Salerno: The advice I have for all these companies is don't do it on your own. So, I know it can be a, you know, a very daunting thought about how we're going to go about this and where do you actually start? And what I say is you have to have a trusted partner that's done this. And what we like to do when they call our team is really understand have have they've done? What is their knowledge base today and where are the gaps and how can we help fill that?

There are a lot of resources that are available to company stay, big and small. And we always try to bring in the right partners. And it could be your accountant, it could be your lawyer. It all depends on what your strategy is. Are you going to open up a subsidiary overseas? Do you just need a sales office and have someone be an HR partner to get contract workers for you? Is it truly you just want to expert for the first time and maybe a distributor could be the best bet for you? What we like to do is really understand the strategy, the sophistication of the staff, and their knowledge base to make sure that they have a really good path to go forward with and that they can review. Just like any other business venture, you need to have a roadmap, and you have to make sure you're on track. Uh, and that should be reviewed with your partners and I think what most people don't understand is that how much FNBO can help. And if we see something in particular, we can get them in touch with other customers that have been on that same journey.

Diana Powell: Oh, wow.

Michael Salerno: We can use partners that we have at, you know, the Department of Commerce. We can help them if maybe they need a new freight forwarder because they're freight forwarder doesn't have experience within that country.

If they are talking about changing credit terms and taking a little more risk from a relationship, you underwrite that customer and what's the country risk and what is the real risk of of having a foreign receivable? And should you ensure that receivable through a private insurer or Exim, because it's cheaper and you just want one or two buyers? There's all this knowledge and expertise that's out there that can be leveraged and that's what's most important to us. When we meet with our clients, it's all about listening, trying to hear what their strategy is, figuring out what the problem is, helping them solve that, everything else falls into place.

Diana Powell: That makes so much sense that we would do that. We're all about the relationship, but we're also as FNBO holding relationships with other partners that can be for our customers' benefit. So, I think that's great. And with that, sometimes fraud becomes the biggest concern when we're expanding. Have we ever had an instance where we've been able to help a customer through a fraudulent situation?

Michael Salerno: Unfortunately, our team has quite a bit of experience with that. As you can imagine, anything that happens internationally, our team tries to get involved, and it could be, someone made a mistake to send a wire, or maybe someone did have a fraudulent wire, and we work with the Swift to try to use the stop and recall, if not, work with that foreign bank, tell them it's at fraud, use some of the controls that we have to try to pull those funds back.

But more importantly, I think it's that customer that wants to expand or do something new. And they don't really understand the transaction, and we get involved and we can kind of tell that. This isn't a legitimate transaction. And we've seen all the different types of scenarios that come, but, you know, one that really sticks with me is we had a customer that was an investment firm and had a really big opportunity for a large disbursement of euros, and they started asking us these questions that the customer had really kind of put together that sounded legitimate. They mentioned GPI and real-time tracking. They talked about all these different international things related to Swift and disbursements, and the UATR, which is a tracker, you know, component within GPI. It's something they were in within this terminologies they put together just didn't sound right. And we told our customer to caution, we didn't think it was legitimate transaction. But it was a big opportunity for them, and it would be life changing. So, it was hard to convince, and they got an official bank letter. a large international bank that said it was legitimate, and this was their contact person. And as we got on the phone with our customer and this individual, that was kind of what they were using as a way to say, hey, don't listen to your banker. Let's move forward. We told our customers, we're all banks. We're all a community. We reached out via Swift. I have you know, relationships through different organizations. We were able to call our contact and the Frankfurt office, let them know what was going on and they were well aware of this scenario and said that, no, this is not a legitimate transaction. This person does not work here, and this is not how we would execute these transactions. And we were able to get an official Swift response back, showing the authentication, our customer saying, okay, we know it sounds legitimate, but here is somebody that actually works there. Here's their LinkedIn profile. Here's an authenticated message. It's not a legitimate transaction.

Diana Powell: And you're able to take the emotion out of it, because you mentioned it could be a life-changing transaction that happens. I'm sure they really wanted it to work out, but that emotion is probably clouding their judgment. And it sounds like the fraudster did a pretty good job.

Michael Salerno: Yeah, yeah. And we've seen that same scenario come back recently here in the last two months to another one of our downstream bank's customers. But what we try to do is really do take the emotion out and say, we're going to investigate this, we're gonna give you non-biased proof. This is in, you know, if this individual work there, they'd be in the directory. They're not. This is a message that was authenticated from this bank. They can't send, you know, just messages that would hold them personally liable. So, what we really did is gone down that path. Um, let them know that you're our customer. We're going to do our due diligence, but we're also going to look out for your best interest.

Diana Powell: Yeah, I think that's how we do best by our customers is we're always looking out for them.

All right, so Michael, we've learned a lot about what your team is doing to help our customers. What is trade activity like at FNBO these days?

Michael Salerno: I tell you, it's extremely diverse. So, I think where we're really unique is that we're at a regional bank that punches well above its weight with our capabilities, and not only do we provide this to small businesses, our commercial customers, our corporates, but we also provide this to other community banks. Again, these services are not easy to come by, and we really like to take our capabilities and enable those to our what we call our correspondent banks. So, enabling other regional and community banks to provide these services to their customers. And with that, you know, we can trade or provide payment services and over 90 currencies today. We also can do real-time payments in multiple countries and currencies, which is fascinating to, I think people in their U.S. has, that's becoming more prevalent here domestically. It's been the norm internationally. And as we look at our transactions, we've facilitated trade in more than 170 countries last year alone.

Diana Powell: 170 countries. Well, I wish I had a passport stamp for each of those countries. Thank you, Michael, so much for being here today on The Vault. And thank you for tuning in today. We'll see you next time on our next episode of The Vault.