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Beer, banking and "These regulators work for agencies that are underfunded,

understaffed, and underappreciated. The regulations
blockchain require constant reporting and inspection. Tracking the
expenditures and income and projecting them to provide
a solid understanding of the financial operations. Being
By Brandes Elitch intimately aware of the company's financial health is as
important as monitoring your fermentations or selecting
CrossCheck Inc. hops."

've been writing a monthly column for The Green Readers of The Green Sheet tend to pay more attention to
Sheet for about eight years. I typically start with a the card brands, major payment processors and new
lead-in about Sonoma County, where CrossCheck developments in mobile and other emerging technologies
I is located. For most people, Sonoma County means than to the banks behind the curtain that issue cards and
Wine Country. But this month I'm introducing something acquire the transactions. That is a mistake, because these
different: beer. banks control the entire process.

Sonoma County was a hop growing region before ISOs devote considerable attention to worrying about the
Prohibition, so there is a rich history of brewing. Today, potential payment disruptors, Google, Apple, Facebook,
it is a world class brewery destination, with such notable Amazon, and Microsoft (known as GAFAM). Are they
brands as Lagunitas Brewing Co., which is now owned by going to become real banks like the major issuers and
Heineken and is thus technically no longer a craft beer, and acquirers today? Yes, they offer payments products, such
Russian River Brewing Co., whose Pliny the Younger was as mobile wallets, person-to-person money transfers and,
called the "top beer in the world" by BeerAdvocate. in some cases, even loans to small and midsize businesses
(SMBs). They have plenty of capital, too. It is estimated that
There are approximately 50 breweries and cideries with Google, Apple, and Microsoft have over $400 billion in cash
an unmatched range of variety, niche and specialization, on the balance sheet!
including craft/micro breweries and nanobreweries (brew
houses that produces 90 gallons or fewer of each batch). Let's start with Aite Group's Top 10 Trends in Financial
Services, 2018. The first is "Tech firms become banks." The
Making beer is different from making wine. With wine, second is "Banks become tech firms." Aite said, "Financial
it's a long time after bottling before you can taste and institutions' ability to overcome organizational and
evaluate it. A lot of time passes between vintages. The raw technology constraints and turn data into intelligence will
material is constantly changing; the finished product has dictate whether they can survive and thrive."
to be stored for six months to a year; and it is vulnerable
to poor storage conditions, light, cork taint, oxidation, etc. Developments affecting banking
With beer, you can brew something and put it into different
batches, ferment them differently at different temperatures, Things are changing in the world of commercial banking.
use different yeasts, and run parallel experiments in the I'll explore a few of these topics, because as an ISO, you
course of a day or two. need to understand what is happening in banking. First,
the new tax law requires banks to write down the value
Brewing is 90 percent cleaning and 10 percent paperwork, of their tax-deferred assets. Citigroup Inc. will take a $16
according to local HenHouse Brewing Co. brewer Collin billion hit to quarterly earnings as a result. The other side
McDonnell, who said, "Beer requires an absurd amount of the coin is that banks will see their corporate tax rate
of sanitary vessels to make and the fermentation and drop from 35 percent to 21 percent, which will supercharge
packaging process leaves a trail of very dirty vessels, tools their earnings in the future.
and instruments in its wake. … It's hot, dirty and wet. It's
labor-intensive work that will give you some borderline- Banks already have a very strong capital position, and
OCD cleaning tendencies." credit quality today is also healthy. Banks curtailed
lending activities, starting with the recession in 2008 and
Regulation, a common thread continuing up to today, but as interest rates rise (the Fed
is likely to raise rates at least two or three times this year)
Now, let's talk about the similarities between brewing and lending will pick up, as will margins.
my central topic: banking. McDonnell's statement about
doing business today will sound familiar to anyone with There are more than 5,000 commercial banks in the
even a little knowledge of banking. "As co-owner of a small United States, but a dozen of the largest banks completely
brewery I spend way more time working on regulatory dominate the statistics. For instance, the four largest banks
compliance than I do making beer ‒ same with digging have a total of $8.7 trillion in assets. The fifth largest
through P&L statements and writing budgets," he said. bank (U.S. Bancorp) is only 25 percent the size of number
"And sales work is endless and exhausting. Beer is a heavily four, Citigroup. Second, it's important to understand the
regulated industry, regulated by federal and state agencies difference between an average bank and a high-performing
and wastewater treatment agencies. bank. When you look at a bank, you want to see certain

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