Creating Options

Earlier this week, I welcomed officers and directors from across the United States to Nashville, TN. From a stage (and not a Zoom), I asked them:

What are your options as we head into the Fall? No, not your personal ability to buy or sell an asset or security.  Rather, the options you, as a leaders of your bank, see for the institution you are a part of today?

Strategically speaking, this is a fundamental issue for those in a leadership position to address.

Sure, there are topics that will dominate boardroom discussions — such as diversifying earnings streams and differentiating the bank’s reputation relative to others.

But let me ask you: who are your competitors? By extension, who are the peer groups that you should be basing your performance against?  Once answering these, what options do you know are available, right now, that can put space between your bank and their business?  Further, what options do you need to create in order to stay both relevant, and competitive in the months ahead?

Creating “optionality” is a concept that continues to rattle around in my mind. Indeed, it ties into the concept of franchise value and is one that members of a bank’s board need to prioritize. It opens conversations around delivery methods and channels, business relationships and partnerships — and yes, growth opportunities (be it organic or through acquisition).

As we talked about in Nashville, banks are under enormous pressure to prepare for an unknown future. Ahead of this year’s exclusive in-person event, I came up with three basic questions I find timely and relevant. Take a read and let me know if you agree.

The SouthState Podcast: My Take On Banking, Leadership and FinTech

Last week, I had the pleasure of spending a few minutes with Tom Fitzgerald and Caleb Stevens on their Community Bank Podcast. Produced by SouthState’s Correspondent Division, the two dedicate their pod to helping community bankers grow themselves, their team — and their profits. For about 23 minutes, the three of us explored:

  • The hallmarks of a great business leaders;
  • The biggest trends I’ve observed in banking over the last 5 years;
  • The role of community banks (less than 1B in assets);
  • Who’s gaining traction in the bank technology space; and
  • How I feel about curiosity & empathy.

Oh yes, and I botched my ice cream analogy early on. As someone with a sweet tooth, I meant to reference Baskin & Robbins‘ 31 flavors of ice cream while talking leadership characteristics. As a child in Needham, MA, the idea that I’d have to choose between chocolate, coffee, oreo, cookie dough, etc posed a real challenge — especially as we’d go as a post-dentist treat! So when Caleb asks me about key facets of leadership in banking today, please understand my Covid-brain took me back to those fun childhood memories… which is how I wound up bellyflopping on the analogy!!

Inspired By Banking’s Modernization Efforts

 “Trying to cut your way out of falling profit and revenue is like trying to lift a bucket by standing inside it and pulling up on the handles. It feels like progress but it’s a lot of wasted energy to go nowhere.”  

One of the biggest changes, ever, is going on in the financial sector. So I talked with Greg Carmichael, the chairman and CEO of Cincinnati-based Fifth Third Bancorp, about staying relevant and competitive. As the business of banking undergoes significant technological transformation, I found his views on legacy system modernization particularly compelling:

In my experience, many banks are rooted in legacy technology — and just starting out on their multi-year digital / delivery transformation. So as part of Bank Director’s Inspired By Acquire or Be Acquired program on BankDirector.com, we explore this issue in the context of growth options and opportunities. To access this premium content — which includes my full conversation with Greg — register or log-in here.

5 Years Ago!

WASHINGTON, DC — Five years ago, Bank Director published a special supplement to our quarterly magazine — one dedicated to the intersection of banking and technology. A precursor to our FinXTech efforts, this fifteen-page series of case studies explained advances in technology. All, to help bankers address specific business challenges that remain relevant in 2021.

At the time, financial technology elicited grumbles about disruption or displacement… while sparking interest in new applications for mobile banking. In 2015, 68% of American adults connected to the Internet with smartphones or mobile devices. That figure, courtesy of the Pew Research Center, figures to be much higher today.

Five years ago, banks faced pressures to grow revenue and reduce expenses. Time hasn’t changed that equation for banks.

Certainly, there was, and is, money to be both made and saved in banking. Some of the more ambitious companies, who want to stay relevant and solve their customers’ problems, trimmed expenses while growing revenues.

This supplement provides a fun history lesson as to how they did.

On behalf of our Bank Director | FinXTech team, please enjoy this special historical supplement. You will find certain themes as relevant today as they were when this supplement first mailed.

Here’s To The Optimists

Fad diets, self-care recommendations and admonishments to “turn the page.”

We all know what’s coming up in our news feeds. But before we give into these New Year’s cliches, let’s take a minute to appreciate how so many were able to pivot in such unexpected ways.

Knowing that one can successfully change should serve many well in this new year.

While resilience — and perseverance — took center stage in 2020, I find culture, technology and growth showed up in new ways as well.

CULTURE, REVEALED

During the darkest of economic times, I was amazed by examples of creativity, commitment and collaboration to roll out the Small Business Administration’s Paycheck Protection Program. When social issues exploded, proud to see industry leaders stand tall against racism, prejudice, discrimination and bigotry. With work-from-home pressures challenging the concepts of teamwork and camaraderie, delighted by how banks embraced new and novel ways to communicate.

TECHNOLOGY, FIRST

Seeing business leaders share their intelligence and experiences to help build others’ confidence stands out. So, too, does how few shied away from technology, which clearly accelerated the transformation of the financial sector. The rush to digital this spring forced banking leaders to assess their capabilities — and embrace new tools and strategies to “do something more.” As the financial sectors’ technology integration continues, this mindset of finding answers — rather than merely identifying barriers — should benefit quite a few.

GROWTH, POSSIBLE

Many banks considered JPMorgan Chase & Co, Bank of America Corp. and Citigroup as their biggest challenges and competitors entering 2020. Now, I’d wager Venmo, Square and Chime command as much attention. However, competition typically brings out the best in executives; with mergers and acquisitions activity poised to resume and new fintech relationships taking root, growing one’s bank is still possible.

##

So here’s to the optimists. Leaders are defined by their actions, and many deserve to take a well-earned bow for making their colleagues’ and clients’ lives better. While we leave a year marked by incredible unemployment, economic uncertainties and political scars, I’ve found a negative mindset never leads to a happy life. Rather than lament all that went sideways this year, I choose to commemorate the unexpected positives. As I do, I extend my best to you and yours.

With appreciation,

Al

*This reflection also appears in Bank Director’s newsletter, The Slant. A new addition to our editorial suite of products in 2020, I invite you to sign up for this free Saturday newsletter here.

What APIs Can Do For Your Bank

WASHINGTON, DC — In 2017, Bank Director magazine featured a story titled “The API Effect.” It showed how banks could earn revenue by using application programming interfaces, or APIs. It considered the pros (and cons) of banks turning themselves into technology platforms. And it concluded with a prediction:

APIs will be so prevalent in five years that banks who are not leveraging them will be similar to banks that don’t offer a mobile banking application.

Less than three years later, the banking industry is on a fast track to proving that hypothesis.

Let’s start with the basics. An application program interface, or API, controls interactions between software and systems. As the American Banker recently shared, “APIs are the glue of the internet and allow digital businesses to interact seamlessly. Banks create a digital-first business model by offering services, such as treasury or loan origination, through APIs in an open-banking system.”

So to help bank executives better understand the promise and potential of APIs, our team developed a special FinXTech Intelligence Report. In it, we explore use cases with a focus on banking, and detail the forces driving adoption of the technology among financial institutions of all sizes.

Divided into five parts, we explore:

— Market trends driving the adoption of APIs;
— Actionable API use cases for growing revenue and creating efficiencies;
— An in-depth case study of TAB Bank, which reimagined its data infrastructure with APIs;
— Key considerations for leadership teams developing an API strategy; and
— A map of the API provider landscape, highlighting the leading companies enabling API transformation.

Kudos to the talented Amber Buker for spearheading this effort. As she makes clear, there are several ways for banks to implement APIs. Some will work with their cores (e.g. FIS, Fiserv and Jack Henry) to access the necessary connectivity. Ready-made APIs from fintech providers can quickly address the most common connectivity requirements.

For more complex use cases — like large banks running on old mainframes — the line from systems of record to end users could be longer, with several providers along the path. Regardless of where you are on your journey, understanding the landscape of API providers helps banks get a firmer grasp on the technology and start conceptualizing the scale and design of their potential API project.

To learn more about how banks use APIs, I invited you to download, for free, our FinXTech Intelligence Report, APIs: New Opportunities for Revenue and Efficiency

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.

Tech Trends in Banking (Since WFH Began)

WASHINGTON, DC — Since March, I’ve talked with quite a few bank CEOs about their interest in modern and secure technologies. The underlying focus? Improving the experience provided to their customers.

In parallel to such one-on-one conversations, my colleague, Emily McCormick, surveyed 157 independent directors, chief executive officers, chief operating officers and senior technology executives of U.S. banks to understand how technology drives strategy at their institutions — and how those plans have changed due to the Covid-19 pandemic.

She conducted the survey in June and July — and we just released the results in Bank Director’s 2020 Technology Survey, sponsored by CDW. Here are a few key takeaways:

Focus on Experience
Eighty-one percent of respondents say improving the customer experience drives their bank’s technology strategy; 79% seek efficiencies.

Driving the Strategy Forward
For 64% of respondents, modernizing digital applications represents an important piece of their bank’s overall technology strategy. While banks look to third-party providers for the solutions they need, they’re also participating in industry groups (37%), designating a high-level executive to focus on innovation (37%) and engaging directors through a board-level technology committee (35%). A few are taking internal innovation even further by hiring developers (12%) and/or data scientists (9%), or building an innovation lab or team (15%).

Room for Improvement
Just 13% of respondents say their small business lending process is fully digital, and 55% say commercial customers can’t apply for a loan digitally. Retail lending shows more progress; three-quarters say their process is at least partially digital.

Spending Continues to Rise
Banks budgeted a median of $900,000 for technology spending in fiscal year 2020, up from $750,000 last year. But financial institutions spent above and beyond that to respond to Covid-19, with 64% reporting increased spending due to the pandemic.

Impact on Technology Roadmaps
More than half say their bank adjusted its technology roadmap in response to the current crisis. Of these respondents, 74% want to enhance online and mobile banking capabilities. Two-thirds plan to upgrade — or have upgraded — existing technology, and 55% prioritize adding new digital lending capabilities.

Remote Work Permanent for Some
Forty-two percent say their institution plans to permanently shift more of its employees to remote work arrangements following the Covid-19 crisis; another 23% haven’t made a decision.

Interestingly, this survey reveals that fewer banks rely on their core provider to drive their technology strategy. Forty-one percent indicated that their bank relies on its core to introduce innovative solutions, down from 60% in last year’s survey. Sixty percent look to non-core providers for new solutions. Interested to learn more? I invited you to view the full results of the survey on BankDirector.com.

When Will Bank Mergers Return?

WASHINGTON, DC — The bank M&A market is currently in a deep chill, thanks to the Covid-19 pandemic.  It is unclear when deal activity will heat up, so who better to ask than Tom Michaud, the President & CEO, Keefe, Bruyette & Woods, A Stifel Company, as part of Bank Director’s new AOBA Summer Series.  In this one-on-one, I ask him about:

  • The banking industry’s second quarter results;
  • Why bank stocks have not participated in the overall market recovery;
  • The medium and long term implications of the pandemic on the industry;
  • The area of Fintech he thinks will be the hottest for the balance of 2020; and
  • How the November elections might impact the banking industry.

There are 10 videos in the AOBA Summer Series, with topics directed at C-suite executives or boards. We talk about how important scale has become, given compressing net interest margins, increasing efficiency ratios and climbing credit costs. We explore why banks’ technology strategy cannot be delegated. We observe why some banks will come out of this experience in a bigger, stronger position. And we look at leadership, appreciating that many executives are leading in new, more positive and impactful ways. To watch, click here.

Streaming Now: The AOBA Summer Series

Dreaming of a trip to Phoenix, and the Acquire or Be Acquired Conference, next January doesn’t seem so odd this summer.

WORKING FROM HOME — For decades, business leaders began to book their travel to the Arizona desert — for Bank Director’s Acquire or Be Acquired Conference — in early August. As evidenced by the nearly 1,400 at the Arizona Biltmore earlier this year, the annual event has become a true stomping ground for CEOs, executives and board members. Many laud it as the place to be for those that take the creation of franchise value seriously. I’ve even heard it referred to as the unofficial kickoff of banking’s new year.

Just seven months ago, Acquire or Be Acquired once again brought together industry leaders from across the United States to explore merger opportunities, acquisition trends and financial growth ideas.  With 418 banks represented, participants considered strategies specific to lending, deposit gathering and brand-building. They talked regulation, met with exceptional fintechs and networked with their peers under sunny skies.

Not one openly worried about a global pandemic.

Yet here we are, all of us dealing with fast-moving challenges and unimaginable risks.

So what can we do to help?

This is the question that proved the catalyst for our new AOBA Summer Series.  Indeed, we created this free, on-demand, compilation of thought leadership pieces to provide pragmatic information and real-world insight.

With CEOs and leadership teams being called upon to make decisions they have never been trained for, we realized the type of information typically shared in January has immediate merit this summer.  So instead of waiting until winter, this new Summer Series provides both color and context to the tough decisions — those with profound long-term consequences — that confront executives every day.

Ten videos comprise the AOBA Summer Series, with topics appropriate for the C-suite’s or board’s consideration.  Streaming on BankDirector.com, we talk about how important scale has become in the banking industry… how one’s technology strategy cannot be delegated… how it certainly seems that there will be banks that come out of this in a bigger, stronger state.  Here’s a screen-grab of what you’ll come across:

Screen Shot 2020-08-12 at 5.21.32 PM

In one-on-one conversations like these, we acknowledge how net interest margins are compressing — which will drive up efficiency ratios — and credit costs are climbing.  And we look at leadership, appreciating that many are leading in new, more positive and impactful ways.  In addition, this new series provides:

A SNAPSHOT ON CURRENT CONDITIONS
At our January Acquire or Be Acquired Conference, Tom Michaud, President & CEO, Keefe, Bruyette & Woods, A Stifel Company, provided his outlook for the industry. Now, we ask him to update his perspectives on M&A activity and share his take on the potential implications of the pandemic.  

HOW FINTECHS FIT
A growing number of technology companies have been founded to serve the banking industry.  Not all of them have what it takes to satisfy bankers.  During various sessions we learn how a variety of banks approach innovation — and the specific attributes a leadership team should look for in a new fintech relationship.

THE LEVERS OF VALUE CREATION
With nCino’s CMO, Jonathan Rowe, our Editor-in-Chief talks about the levers of creating value vis-a-vis the flywheel of banking. Together, they explain how certain technologies promote efficiency, which promotes prudence, thereby promoting profits, which can then be invested in technology, starting the cycle all over again.

Screen Shot 2020-08-12 at 5.21.46 PM

Hearing from investment bankers, attorneys, accountants, fintechs, investors and — yes, other bankers — about the outlook for growth and change in the industry proves a hallmark for Acquire or Be Acquired, be it in-person or online. 

As this new series makes clear, The future is being written in ways unimaginable just a few months ago.  We invite you to watch how industry leaders are making sense of the current chaos for free on BankDirector.com.

Who is the Next nCino?

WASHINGTON, DC — With this week’s news that nCino is readying itself for an IPO, I thought to postulate about who “the next nCino” might be in the fintech space. By this, I mean the tech company about whom bank executives cite as doing right by traditional institutions.

For context, nCino developed a cloud-based operating system for financial institutions. The company’s technology enables both customers and financial institutions to work on a single platform that’s optimized for both retail and commercial accounts. In simple terms, they provide everything from retail and commercial account opening to portfolio management for all of a bank’s loans.

In its IPO filing, the company says it works with more than 1,100 financial institutions globally — whose assets range in size from $30 million to $2 trillion. Personally, I remember their start and been impressed with their growth. Indeed, I’ve known about nCino since its early Live Oak Bank days. I’ve gotten to know many on their executive team, and just last Fall shared a stage with their talented CEO, Pierre Naudé, at our annual Experience FinXTech conference in Chicago.

Al Dominick, CEO of Bank Director + FinXTech, Frank Sorrentino, Chairman & CEO of ConnectOne Bank and Pierre Naude, CEO of nCino at 2019’s Experience FinXTech Conference in Chicago, IL.

So as I think about who might become “the next” nCino in bankers’ minds across the United States, I begin by thinking about those offering solutions geared to a bank’s interest in Security, leveraging Data + Analytics, making better Lending decisions, getting smarter with Payments, enhancing Digital Banking, streamlining Compliance and/or improving the Customer Experience. Given their existing roster of bank clients, I believe the “next nCino” might be one of these five fintechs:

While I have spent time with the leadership teams from each of these companies, my sense that they might be “next” reflects more than personal insight. Indeed, our FinXTech Connect platform sheds light on each company’s work in support of traditional banks.

For instance, personal financial management (PFM) tools are often thought of as a nice perk for bank customers, designed to improve their experience and meet their service expectations. But when a PFM is built with data analytics backing it, what was seen as a perk can be transformed into a true solution — one that’s more useful for customers while producing revenue-generating insights for the bank. The money management dashboard built by Utah-based MX Technologies does just that.

Spun out of Eastern Bank in 2017 (itself preparing for an IPO), Boston-based Numerated designed its offering to digitize a bank’s credit policy, automate the data-gathering process and provide marketing and sales tools that help bank clients acquire new small business loans. Unlike many alternative lenders that use a “black box” for credit underwriting, Numerated has an explainable credit box, so its client banks understand the rules behind it.

Providing insight is something that Autobooks helps small business with. As a white-label product that banks can offer to their small-business customers, Autobooks helps to manage business’s accounting, bill pay and invoicing from within the institution’s existing online banking system. Doing so removes the need for small businesses to reconcile their financial records and replaces traditional accounting systems such as Quickbooks.

The New York-based MANTL developed an account opening tool that comes with a core integration solution banks can use to implement this and other third- party products. MANTL allows a bank to keep its existing core infrastructure in place while offering customers a seamless user experience. It also drives efficiency & automation in the back-office.

Finally, Apiture’s digital banking platform includes features such as digital account opening, personal financial management, cash flow management for businesses and payments services. What makes Apiture’s business model different from most, though, is that each of those features can also be unbundled from the platform and sold as individual modules that can be used to upgrade any of the bank’s existing systems.

Of course, these are but five of hundreds of technology companies with proven track records of working with financial institutions. Figuring out what a bank needs — and who might support them in a business sense — is not a popularity contest. But I’m keen to see how banks continue to engage with these five companies in the months to come.

2 Years’ Worth of Transformation in 2 months

WASHINGTON DC — Microsoft Corp. CEO Satya Nadella noted in late April, “we’ve seen two years’ worth of digital transformation in two months,” due to the speedy adoption and implementation of new technology by the U.S. business sector.

As our team at Bank Director writes, “navigating the short-term impacts of these shifts has bankers working round-the-clock to keep pace, but the long-term effects could differentiate the companies that take advantage of this extraordinary moment to pivot their operations.” This transformation makes up the core of the discussions taking place at Microsoft’s Envision Virtual Forum for Financial Services.

As part of that event, I sat down (virtually) with Luke Thomas, Microsoft’s managing director, U.S. banking and financial providers, to discuss how financial institutions can use this opportunity to modernize their operations. Together, we addressed the adoption of technology, legacy vs. new core providers and how business leaders encourage continued improvement.

This seven-minute video runs on both Microsoft and Bank Director’s websites, with a longer write-up on the Covid-19 Shift appearing here.

%d bloggers like this: