Reconnecting U.S. And Cuba’s Banks: How Far Have We Come? by [email protected]

Last year, Pompano Beach, Florida-based Stonegate Bank was making early inroads at reconnecting the U.S. and Cuban banking systems. In July of 2015, immediately following the reopening of the U.S. embassy in Cuba and the Cuban embassy in Washington, D.C., Stonegate signed a correspondent banking deal with Banco Internacional de Comercio, a Havana-based bank. Then in November, the bank introduced a debit MasterCard to be used by Americans who qualify to visit the island.

A lot has happened since then, says the bank’s founder and CEO, Dave Seleski. At the second Cuba Opportunity Summit, held in New York in March, Seleski spoke with the [email protected] show on Wharton Business Radio on SiriusXM channel 111 about how the business relationship between Cuba the U.S. has grown, and the surprising area in which the island’s banks outperform their U.S. counterparts. (The summit was organized by [email protected], The Lauder Institute and Momentum.)

Following is an edited transcript of the conversation.

[email protected]: A year ago, the ink was about just drying on everything in terms of the new relationship between the U.S. and Cuba. How has the year gone for you?

Dave Seleski: For us, it’s been very good. But I think for American companies, it’s been great. You look at how many more companies have gotten engaged in Cuba: You’ve got the airlines now, you’ve got the cruise lines. Verizon, Sprint; they’re talking to AT&T now, Starwood. I’d say probably close to 100 Fortune 500 companies have been down there and at least explored the possibilities.

[Last year,] people were saying, “Well, maybe I’ll go down, maybe I’ll see what’s going on; we’ll see what opportunities arise.” Now, it’s tremendous. And we’ve got the President visiting. I think it’s just going to lead to more good things.

[email protected]: How much does President Obama’s visit add to it? [His] going down there, I think, affirms for a lot of people where [the relationship] is headed.

Seleski: I think you’re exactly right. It’s about permanency. The fact that he is going down is just another example of how permanent these changes are and how this really cannot be rolled back at this point. I think it really puts an emphasis on that, and it also is a legacy — in terms of making a change that’s going to significantly impact the Cuban people.

“Their banking system is sophisticated…. They have all the products that we would typically have.”

[email protected]: What have you been doing in the last year to expand your reach into Cuba and build up the banking infrastructure on the island?

Seleski: We’ve been more focused on helping American companies and their financial needs in getting down there. Our correspondent relationship is up and running. A big thing was figuring out how to get money back and forth on a timely basis; that’s been a big issue over the last nine months. Now, we can get money through an intermediary bank in 24 hours or less, which I think is faster than anybody else. We formed our Cuba banking group internally with two people who handle everything related to Cuba. We issue debit cards to travelers who are going down there, and it’s especially important for commercial travelers who have continuous needs.

And we’re working on some other things…. [When] you’re a little bit of a pioneer, there’s a lot of research and development costs as you set this stuff up. So it takes a little bit longer. But we’re very pleased with the results so far.

[email protected]: What do you see as the next level for this whole process?

Seleski: Well, there are some other products and services we’re working on, but I think it’s more a matter of just being a help to these American businesses that are going down there, being able to navigate the financial system — being able to assist them, to add value. You know, a bank is a bank. I mean, let’s face it, you make a car loan; you make a car loan. They’re all the same, right?

[email protected]: Sure.

Seleski: Maybe the interest rate is a little different, but it’s really about service, and it’s really about being able to add value. To be able to help them to navigate the Cuban banking system, for instance, to be able to help the payment systems go back and forth, and that type of thing — I think that’s really going to be the critical component of what we’re really working on.

[email protected]: What are the basic differences between our banking system in the United States and what’s operating right now in Cuba?

Seleski: Well, their banking system is sophisticated. I mean, there are about five or six banks, and they’re all 100% owned by the government, but it is sophisticated. They have all the products that we would typically have. But there are two banks in particular that are focused on international business and they have their bulk of the correspondent relationships. We liaise with those two banks — there are cultural issues, there are language issues and technology issues that need to be sorted out. We hope to be able to bridge that gap for American companies so they don’t have to worry about it.

[email protected]: I would imagine all of that gives you a good overall perspective about what changes still need to happen in Cuba. As [we’ve noted when talking] with a lot of people, it’s clear that there are many things that need to be upgraded to get them to just a basic level.

Seleski: Yes, but I think a lot of it is creating private enterprise down there, and creating self-employed workers. I think we’re up to a half a million privately owned businesses in Cuba, and a lot of that is going to create wealth. It’s the velocity of money. Really, what it boils down to — because like you said, the infrastructure and everything has been neglected for so many years — is you need a significant amount of capital.

You need to get that as foreign investment, or you can self-generate it via businesses doing better in Cuba. Hopefully, between the two, that will all come about.

[email protected]harton: I’d expect the focus on the local business end — whether it be through entrepreneurs, small business or tourism — is going to be a very important piece to this. It’s important to be able to establish that piece of the economic puzzle on Cuba’s end. Foreign direct investment is a great thing, but when you have it right within your own country — the economy and the capital build up — that’s important.

Seleski: Well, obviously, there’s been a lot of immigration from Cuba to America, and we’ve seen how the Cubans have added so much to American society. We just had two presidential candidates who are of Cuban origin. So given the opportunity, I’m sure the Cuban people will make the most of it.

And I think a lot of the measures we’ve taken will be beneficial, especially the last executive order, which lifted some of the travel restrictions and should increase the amount of tourism, which obviously creates more money in Cuba. And we’re allowing of Cuban nationals to open bank accounts in the U.S. They were allowed

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