What Is FinXTech Connect?

WASHINGTON, DC — Last month, our team celebrated ten years of “Bank Director 2.0.” As I look back on what we’ve accomplished, a few projects stand out. Today, I’m shining a light on the development of our FinXTech Platform, which we built specifically for financial institutions.

Bank Director’s FinXTech debuted on March 1, 2016 at Nasdaq’s MarketSite in Times Square. Positioned at the intersection of Financial Institutions and Technology Leaders, FinXTech connects key decision makers across the financial sector around shared areas of interest.

We initially focused on bank technology companies providing solutions geared to Security, leveraging Data + Analytics, making better Lending decisions, getting smarter with Payments, enhancing Digital Banking, streamlining Compliance and/or improving the Customer Experience.

As our brand (and team) grew, we heard from a number of bank executives about the challenges they faced in discovering potential technology partners and solutions. To help solve this issue, we built FinXTech Connect.

Sorting through the technology landscape is no easy feat. Nor is finding, comparing and vetting potential technology partners. But week-by-week, and month-by-month, we added to this proprietary platform by engaging with bankers and fintech executives alike. All the while, asking (whenever we could) bankers who they wanted to learn more about at events like our annual Summit or Experience FinXTech events.

Banks today are in the eye of a digital revolution storm. A reality brought about, in no small part, by this year’s Covid-19 pandemic. So I am proud that the work we do helps banks make smarter business decisions that ultimately help their clients and communities. To wit, the various relationships struck up between banks and fintechs to turn the SBA’s PPP program into a reality.

As we look ahead, I’m excited to see Bank Director’s editorial team continue to carefully vet potential partners with a history of financial performance and proven roster of financial industry clients. For those companies working with financial institutions that would like to be considered for inclusion in FinXTech Connect, I invite you to submit your company for consideration.

Shh, Disruption in Banking Continues

Quickly:

  • I spent yesterday afternoon at Capital One Growth Ventures’ inaugural VC & Startup Summit, an event that inspired today’s post.

WASHINGTON, DC — I’m hard pressed to find anyone willing to contest the notion that technology continues to disrupt traditional banking models. Now, I realize the “D” word jumped the shark years ago. Personally, I try my best to keep my distance from employing the adjective to describe what’s taking place in the financial world vis-a-vis technology. However, banks of all sizes continue to reassess, and re-imagine, how financial services might be structured, offered and embraced given the proliferation of new digital offerings and strategies.

As I reflect on the first quarter of 2018, it strikes me that we’re living in an industry marked by both consolidation and displacement. Yes, many bank executives have fully embraced the idea that technology — and technological innovation — is a key strategic imperative. However, few banks have a clear strategy to acquire the necessary talent to fully leverage new technologies. On the flip side, I get the sense that a number of once-prominent FinTech companies are struggling to scale and gain customer adoption at a level needed to stay in business. Nonetheless, the divide between both parties remains problematic given the potential to help both sides grow and remain relevant.

While banks explore new ways to generate top-line growth and bottom-line profits through partnerships, collaboration and technology investments, I have some concerns. For instance, the digital expectations of consumers and small & mid-sized businesses may become cost-prohibitive for banks under $1Bn in assets. So allow me to share what’s on my mind given recent conversations, presentations and observations about the intersection of fin and tech.

FIVE ON MY MIND

  1. With all the data issues coming to light courtesy of Facebook, how can banks extract the most revenue from the data available to them (*and how much will it cost)?
  2. As banks become more dependent on technology partners, what level of control —over both costs and data — should a bank be willing to trust to third parties?
  3. What does the arrival of new technologies, such as artificial intelligence, mean for a financial institutions’ current workforces?
  4. Amazon’s announced checking account partnership with JPMorgan Chase begs the question: how dependent should banks become on big technology companies?
  5. How many larger banks will acquire smaller institutions that cannot keep up with the cost and pace of technology in Q2?

Significant technological changes continue to impact the financial community. In the weeks to come, I’ll relay what I learn about these five issues in subsequent posts. If you’re interested, I tweet @AlDominick and encourage you to check out @BankDirector and @FinXTech for more.

Three Strategic Issues Shaping Financial Services

By Al Dominick, CEO of DirectorCorps (parent co. to Bank Director & FinXTech) | @aldominick

Quickly:

  • Banks need to think beyond the notion that they can either build a technology solution or buy it — for inspiration, take a look at how Silicon Valley Bank uses APIs to tap into technology from third party providers.
  • Thanks to products like Amazon’s Alexa, financial institutions must now prepare for “hands-free banking.”
  • Various startups are using behavioral economics to nudge people towards making better financial choices for saving & investing.

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If you have been to any of our conferences, you’ve probably heard me (and others) encourage participants to get up & out from their offices to see what’s happening with their customers, potential partners and competition.  I do my best to practice what is preached — and have recent trips to San Francisco, New York City and Austin to prove it.  As I re-read hand written notes, dog-eared white papers and highlighted sections of annual reports, I realize just how much time I’ve spent talking about technology-driven trends shaping the financial industry.  To me, three of the bigger issues being discussed right now involve:

  1. The push for retail customers, which may already be spurring dealmaking.
  2. How customers experience and interact with their bank — which broadly ties into the question should an institution buy, partner or mimic a fintech; and
  3. Given all the hype surrounding machine learning and advanced decision modeling, leadership teams want to know how to augment a bank’s revenues & relationships with such technologies.

To these three trends, both our editor-in-chief, Jack Milligan, and I agree that most bankers understand the imperative to innovate around key aspects of their business, whether it’s payments, mobile in all its many permutations, lending, new account onboarding or data.

Personally, when it comes to knowing one’s customer (and potential customer), I find any good experience starts with great data.  As Carl Ryden, the CEO and Co-Founder at PrecisionLender, made clear at their recent Bank of Purpose conference, “if you hold your data close to the vest and you don’t do anything with it, it’s not an asset. It’s a liability.”

So with that in mind, let me close by sharing a link to our newest issue of Bank Director magazine.  This is our “Great Ideas” issue, one in which we highlight companies like USAA who crowdsource upwards of 10,000 ideas per year for products and new technology.  At a time when banks of all sizes are starting to take advantage of platform-based services, this new digital issue is one that I am really proud to share.

 

5 Cybersecurity Companies Bank Execs & Board Members Need to Know

When it comes to cybersecurity, the best defense might just be a great offense.  Whereas cybersecurity once focused on how banks could avoid losing money, my team and I are working on a program for 2017 to help officers and directors address potential scenarios (and develop realistic response plans) should a hack, breech or attack occur.  Indeed, protecting the bank against a cyber attack is a core responsibility of every member of a bank’s board and executive team.

In recent posts, I’ve highlighted various fintechs that I find compelling given their relationships with financial institutions.  In terms of cybersecurity, I’ve had the chance to learn more about companies like DefenseStorm (given their support of companies like nCino and LiveOak Bank) that I greatly respect.  Below are five more companies that I think bank leadership teams need to know:

Cognizant

A global cybersecurity solution and service provider, Cognizant supports multiple industry verticals and information security service lines.  I encourage you to take a look at their thoughts on what traditional banks can do to rebuild trust in the digital era.

Centrify

California-based Centrify offers identity & access management solutions to help secure enterprise identities against cyberthreats that target today’s IT environment of cloud computing.  Banking customers include such recognizable names as BB&T, SunTrust, Citi and RBS.

Lookout

Lookout has taken a mobile-first approach to security.  Indeed, one of the world’s largest investment management firms chose Lookout to provide threat and data leakage protection to over 10,000 managed iOS and Android devices.

Feedzai

Founded by data scientists and aerospace engineers, Feedzai’s mission is to “make commerce safe for business customers and create a better experience for their consumers through artificially intelligent machine learning.”

Brighterion

Since the founding of Brighterion, its core technology has been adapted and improved for real-time applications in the fields of payment, healthcare, marketing and homeland security.  For instance, its analysis of payments provides “unprecedented behavioral insights,” from the spending behavior of customers to the constantly evolving techniques of fraudsters.

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As a complement to these five businesses, let me wrap up by sharing a recent FinXTech article:Emerging Technologies Combat Cybercrime.  As you will read, banks are doing everything they can to reassure customers that their digital information is safe and secure.

Can Banks Keep Up?

As the financial industry adapts to various digitization trends, my team continues to field inquiries from bank CEOs and their executive teams specific to emerging technology strategies and opportunities.  One way we attempt to benchmark current interests (and concerns): an annual research project.  This year, we evaluated industry attitudes toward core providers and fintech firms, including marketplace lenders like Lending Club, in our just-released Bank Director Technology Survey.  While a number of findings jumped out at me, three really caught my eye:

  • Eighty-one percent of bank chief information officers and chief technology officers responding say that their core processor is slow to respond to innovations in the marketplace, making it even more difficult for the banking industry to keep up with shifting consumer expectations regarding technology.
  • Thirty percent of bank CIOs and CTOs report that their bank has pulled back on plans to integrate a more innovative product, service or delivery channel due to the inability or unwillingness of the bank’s core processor to support that activity.
  • Banks are highly reliant on core providers for services beyond core processing, which at its most basic contains vital customer data and processes all customer transactions. Ninety-six percent of respondents say their bank uses their core provider for additional services, including mobile banking (71 percent) and bill pay (75 percent).

Our 2016 Technology Survey, sponsored by the technology solutions provider CDW, reflects the opinions of 199 board members and senior executives of U.S. banks surveyed in June and July.  The size of institutions polled fell between $250 million and $20 billion in assets.  In addition to the points shared above, we found:

  • Thirty-one percent of respondents have converted their bank’s core technology within the past five years. Forty-two percent converted their core more than 10 years ago.  Respondents report that their bank works with a median of five technology firms, including the core provider.
  • Sixty-one percent of participants see fintech firms as both competitors and partners.
    Online marketplace lenders should be more heavily regulated, say 60 percent of respondents. Forty-one percent worry that they’ll lose loans to these lenders, but 18 percent don’t think these lenders have long-term viability.
  • Opinions are mixed on the impact that blockchain—the underlying technology behind the digital currency bitcoin—will have on the banking industry. Twenty-four percent believe it will impact all banks. However, 57 percent don’t understand blockchain enough to form an opinion, or have never heard of the technology.

Finally, cybersecurity continues to loom large.  Having a strong technology infrastructure in place to protect against cyberattacks remains the top technology concern for survey participants, at 72 percent.  Seventy percent indicate that their bank could better use data to serve the needs of existing customers, or identify new customers.  Seventy percent of respondents believe that technological innovation is a priority for their board, but less than half discuss technology at every board meeting.  Thirty-four percent of respondents describe themselves as early adopters of technology.

The full survey results are available online at BankDirector.com, and will be featured in the 4th quarter 2016 issue of Bank Director magazine.

The Convergence of Bob Dylan and Banking

Some of the most visible innovations in the banking world today are platform-based, data intensive and capital light.  Personally, I’m just as encouraged by “incumbent” institutions supporting new fintech entrants — with infrastructure and access to services — as I am creative new companies (like Nymbus, nCino, etc.) providing smaller and mid-sized banks with sophisticated new capabilities.

This video, filmed during Bank Director’s annual FinTech Day in New York City at the Nasdaq Marketsite, is but one of eight videos we’ve shared on BankDirector.com.  To see what industry leaders from Silicon Valley Bank, the Fintech Collective, BizEquity, DaonDeloitte Consulting and the World Bank’s IFC think are the challenges & opportunities facing traditional banks, I invite you to take a look at this compilation of videos FinTech Day Recap: Rapid Transformation Through Collaboration.

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Al Dominick is the President & CEO of Bank Director, a privately held media & publishing company designed around strategically important business issues that a CEO, executive and/or board member(s) need to know — and be prepared to address. An information resource to the financial community since 1991, we publish Bank Director magazine, host conferences like “Acquire or Be Acquired,” conduct board-level research, provide board education & training programs, run BankDirector.com… and recently launched FinXTech.

The 5 Corners of Technological Innovation in Financial Services

To grasp what the future of banking holds, look no further than the five areas of focus for Wells Fargo.  Last week, the best performing large bank in the United States launched an “Innovation Group” in San Francisco.  As they share, this team will will work in partnership with its major businesses to meet evolving customer needs and stay ahead of the shifting competitive landscape.  Initially, such efforts will center on five areas:

  • Research and development;
  • Innovation strategies;
  • Payment strategies;
  • Design and delivery; and
  • Analytics.

As a nationwide, diversified, community-based financial services company with $1.7 trillion in assets, Wells Fargo now has six innovation labs along with its startup “accelerator.”  Given that a number of the world’s largest finance sector companies are reviewing their business models following the rapid growth of “fintech” entrants in the sector, the investment in both time and resources by Wells Fargo gives shape to the potential future of banking.

Wells Fargo Labs invite customers to “Come out and Play: Be one of the first to test out latest ideas and technologies – from still-in-development beta offerings to newly launched products.”

Personally, I’m drawn to this new addition to the Wells family in light of a report by the World Economic Forum, supported by Deloitte Consulting, entitled The Future of Financial Services:How disruptive innovations are reshaping the way financial services are structured, provisioned and consumed.

As noted by the paper’s lead author, “for decades, banks and insurers have employed similar, highly profitable business models. But they realize those models are coming under pressure due to fintech innovations… Financial technology companies are deploying online platforms, have small capital bases, and make strategic use of data, to acquire customers and revenues at a fast pace. Banks and insurers noted that, and are contemplating their response.”  So as major players like Wells Fargo explore the “transformative potential of new entrants and innovations on business models in financial services,” seeing the cards they are putting on the table provides real color for what the future holds for many here in the U.S.

Three Observations from the Bank Board Growth & Innovation Conference

Select news and notes from the first day of Bank Director’s annual growth conference at the Ritz-Carlton New Orleans.

By Al Dominick // @aldominick

I mentioned this from the stage earlier today… every January, Bank Director hosts a huge event in Arizona focused on bank mergers and acquisitions.  Known as “AOBA,” our Acquire or Be Acquired conference has grown significantly over the years (this year, we welcomed some 800 to the desert).  After the banking M&A market tumbled to a 20-year low in 2009 of just 109 transactions, it has gradually recovered from the effects of the crisis. In fact, there were 288 bank and thrift deals last year, which was a considerable improvement on volume of 224 deals in 2013.  As our editorial team has noted, the buying and selling of banks has been the industry’s great game for the last couple of decades, but it’s a game that not all banks can — or want to — play.  Indeed, many bank CEOs have a preference to grow organically, and its to these growth efforts that we base today and tomorrow’s program.

Key Takeaway

To kick things off, we invited Fred Cannon, Executive Vice President & Director of Research at KBW, to share his thoughts on what constitutes franchise value. While he opened with a straight-forward equation to quantify franchise value over time — (ROE – Cost of Equity) × Market Premium — what really stuck with me during his presentation is the fact that a logo does not create franchise value, a brand does.  As he made clear, it is contextual (e.g. by industry’s served, technologies leveraged and clients maintained) and requires focus (e.g. you can’t be all things to all people).  Most notably, small and focused institutions trump small and complex ones.

Trending Topics

Anecdotally, the issues I took note of where, in no particular order:

  • Banks must be selective when integrating new technology into their systems.
  • The ability to analyze data proves fundamental to one’s ability to innovate.
  • When it comes to “data-driven decisions,” the proverbial life cycle can be thought of as (1) capture (2) store (3) analyze (4) act.
  • You don’t need a big deposit franchise to be a strong performing bank (for example, take a look at County Bancorp in Wisconsin)
  • We’ve heard this before, but size does matter… and as the size of bank’s balance sheet progresses to $10 billion, publicly traded banks generate stronger profitability and capture healthier valuations.

Picked Up Pieces

A really full day here in New Orleans, LA — with quite a few spirited discussions/debates.  Here are some of the more salient points I made note of throughout the day:

  • Selling services to large, highly regulated organization is a real challenge to many tech companies.
  • Shadow banking? Maybe its time I start calling them “Challenger banks.”
  • CB Insight’s has a blog called “unbundling the bank” — to understand the FinTech ecosystem, take a look at how they depict how “traditional banks are under attack from a number of emerging specialist startups.”
  • A few sidebar conversations about Wells Fargo’s incubator program, which the San Francisco bank began last August… interest in how the program involves direct investment in a select group of startups and six months of mentoring for their leaders.

To see what’s being written and said here in New Orleans, I invite you to follow @bankdirector, @aldominick + #BDGrow15.