We Are On To FinTech Week

#AOBA17 conference intel (Friday)
By Al Dominick, CEO of Bank Director | @aldominick

Quickly

  • The “bank of the future” is not about technology, it is all about customers.
  • For many financial institutions, the time may be right to retire legacy systems for cloud-based platforms.
  • Numerous financial technology companies are developing new strategies, practices and products that will dramatically influence the future of banking..

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The intersection of technological innovation with strong depository franchises may lead to more efficient banking processes, reductions in fraud and a win/win/win for banks, financial technology firms (fintechs) and consumers.  Globally, nearly $23 billion of venture capital and growth equity has been deployed to fintechs over the past five years, and this number is growing quickly. Still, the nature and extent of impact that fintechs have on the industry remains unclear.

Throughout this week’s Acquire or Be Acquired conference, bank CEOs talked about the continually changing nature of financial services — with fintech often front and center.  For many, collaboration between traditional institutions and emerging technology firms bodes well for their future.  Here, Bank Director’s FinXTech provides authoritative, relevant and trusted content to a hugely influential audience, specifically:

  • Fintechs who view banks as potentially valuable channels or distribution partners;
  • Banks looking to grow and/or innovate with fintech companies’ help and support; and
  • Institutional investors, venture capitalists, state & federal regulators, government officials and academicians helping to shape the future of banking.

We designed FinXTech as a peer-to-peer resource that connects this hugely influential audience around shared areas of interest and innovation.  As a host of FinTech Week in New York City this April 24 – 28 (along with Empire Startups), we bring together senior executives from banks, technology companies and investment firms from across the U.S. to shine a light on what is really generating top line growth and bottom line profits through partnerships, collaboration and investments.

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Given the changing nature of banking today, this week-long event in New York City looks at the various issues impacting banks, non-banks and technology companies alike.  So as we move towards FinTech Week in New York City, I invite you to follow me on Twitter via @AlDominick, FinXTech’s President, Kelsey Weaver @KelseyWeaverFXT@BankDirector and our @Fin_X_Tech platform and/or check out the FinTech Week New York website for more.

Whether They Want To or Not, Banks Need to Open Up

Apart from interest rates, the two biggest issues that bank executives seem to wrestle with are regulatory and compliance costs.  I sense another emerging challenge coming to shore; specifically, how to “open up” one’s business structure in terms of developing partnerships and permitting others to leverage their customer data and/or capabilities.

For bankers, this challenge comes with significant reputation and customer risk.

Now, it is hard to truly disrupt the concept of banking — and I shared this opinion from the stage at Bank Director’s annual Bank Executive & Board Compensation Conference this morning.  However, I did adjust some of my welcoming remarks based on the Consumer Finance Protection Bureau’s position that consumers can control their own financial data, including to let third parties help them manage their finances.  As I learned from Jo Ann Barefoot’s Fireside Chat with CFPB Director Richard Cordray at Money 2020, the CFPB “is not content to sit passively by as mere spectators watching these technologies develop.”  According to his prepared remarks:

Many exciting products we see… depend on consumers permitting companies to access their financial data from financial providers with whom the consumer does business. We recognize that such access can raise various issues, but we are gravely concerned by reports that some financial institutions are looking for ways to limit, or even shut off, access to financial data rather than exploring ways to make sure that such access, once granted, is safe and secure.

Since reading the CFPB’s position, Ms. Barefoot’s recap and the Wall Street Journal’s synopsis, I decided to talk with various bank executives and board members that are here with us at the Ritz-Carlton in Amelia Island about this stance.  As I note in this video, I sense both an ongoing struggle — and a sincere interest — to truly understand the role of technology.  For those I talked with, this is as much about “becoming sticky” to their customers as it is about embracing or defending themselves against “the new.”

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For more about this year’s conference, I invite you to take a look at BankDirector.com.  Also, a virtual high-five to the team here for a great first day.  You all rock!

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The Promise of 8 Blockchain Companies

Yesterday, I spent the majority of my day at the Economist Conference’s “Finance Disrupted” in New York City.  As an early hook to their first panel discussion entitled ‘Building the blockchain: The promise and perils’, we learned that venture capitalists invested nearly $500 million in blockchain business last year — up from $2 million just three years ago.  While I’ve shared my perspectives on the potential applications for blockchain in previous posts (Blockchain 101 – a Primer for a Bank’s CEO and Board), panels like these underscore the immense potential of this technology.

“Blockchain technology continues to redefine not only how the exchange sector operates, but the global financial economy as a whole.”

– Bob Greifeld, Chief Executive of NASDAQ

Like many, I see potential for blockchain technology to revolutionize many areas of the financial industry — think securities trading, payments, fraud prevention and regulatory compliance.  Moreover, a new report from Deloitte explores how blockchain could be used in loyalty rewards programs.  Still, as our industry transforms, there is real uncertainty around what the future of the banking industry will look like.

This is why I take note of comments like those from BNY Mellon’s CEO, Gerald Hassell. On his Q1 earnings call, he opined “we think blockchain can be transformative.  We’re spending a lot of time and energy on it, but I think it’s going to take some time to see it play out in a full, meaningful way. We actually see ourselves as one of the major participants in using the technology to improve the efficiency of our operations and the resiliency of our operations.”

While additional big-time players — such as Goldman Sachs, Visa and NASDAQ — garner headlines for their investments in crypto-currencies & blockchain technology, I spent last night and this morning looking at eight blockchain companies that might help you to form your own opinions on the potential of this technology:

For more about these companies — and their funding sources — I encourage you to check out this piece on Lets Talk Payments.  Not familiar with LTP?  It is a fast-growing global destination for news, insights & data-driven research in emerging financial services.  Much like the information shared by both FinXTech and Bank Director, LTP’s content is fiercely independent, thought provoking and always up-to-date, in a way that continues to inform, engage and inspire.

Creating Better Banking Experiences

Earlier this week, we published our quarterly print issue of Bank Director magazine.  If you haven’t seen it, our talented editor, Naomi Snyder, shines a light on the “tech bets” being made by Fifth Third, a $142 billion asset institution.  Having worked for an IT firm, I appreciate the three questions their President & CEO, Greg Carmichael, asks his team to consider before investing in new technologies:

  1. Does it improve the bank’s ability to serve customers?
  2. Does it drive efficiency?
  3. Does it create a better experience for customers?

As he shares, “not every problem needs to be solved with technology… But when technology is a solution, what technology do you select? Is it cost efficient? How do you get it in as quickly as possible?  You have to maintain it going forward, and hold management accountable for the business outcomes that result if the technology is deployed correctly.”

“The challenges are how to grow the franchise and reposition the franchise to serve our customers in the way they want to be served, which is more of a digital infrastructure.”

-Greg Carmichael, President & CEO, Fifth Third Bank

While Fifth Third plans to invest some $60M this year in technology, Naomi notes that the bank doesn’t have an R&D lab with a staff separated from the rest of the bank and dedicated to inventing things (like its competitor U.S. Bancorp).  Nor does Fifth Third have the reputation of being highly innovative, like a BBVA.  Nonetheless, the regional bank, headquartered in Cincinnati, has a laser focus on developing practical solutions to everyday problems.

So to build on this issue’s cover story — and the efforts we’re making with our FinXTech platform — let me offer my take on who I consider standouts in the payments, lending and retail space today.  Those addressing “everyday problems” may find inspiration from the work being done and/or want to explore partnership opportunities.

Payments + Transfer

When one thinks about payments — and the movement of  value via cash, credit card, check and other transactions — some big names come to mind: Apple Pay, Chase Pay, Square, Paypal, etc.  But don’t sleep on these companies:

Lending

In the lending sector, a lot of people continue to talk about LendingClub’s travails, scoff at SoFi’s change of heart from anti-bank to pro-partnerships and follow Prosper’s efforts to shore up its business.  Within the lending space, these companies also deserve time and attention:

  • Affirm, a digital lender that provides installment financing;
  • Orchard, a technology and infrastructure provider for marketplace lending;
  • Lendio for small business loans;
  • Even, a new kind of financial app that turns variable pay into a steady, reliable income; and
  • Earnest,  a technology-enabled lender that enables one to consolidate and refinance  student loans.

Retail banking

Considering the core functions of retail banking remain the establishment of deposits and making of loans, those pushing the envelope in a way consumers desire include:

  • Ally Bank, known for its “No Branches = Great Rates” tag line;
  • Atom Bank, one of the first Challenger Banks in the UK;
  • Tandem, a new digital bank in the UK;
  • Moven, a pioneer in smart phone banking; and
  • Simple, part of the BBVA family that is reinventing online banking.

While these banks are pushing forward, many legacy institutions will be challenged to meet the expectations of their customers.  They will need to assess the additional risks, costs and supervisory concerns associated with providing new financial services and products.  Accordingly, I’m not alone in believing that financial institutions need to invest in services “for life’s needs” through collaboration and partnerships with companies like those shared in today’s post.

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I realize there are a number of companies “doing it right” in these three sectors – and this simply highlights some of the players that standout to me.  Feel free to comment below on others that I might highlight in future posts.

Without A Destination, What Good Is A Map?

Highlight: as executives grapple with a fast-changing operating environment that requires partnerships and collaboration, many wrestle with where they want to be vs. where they need to be.

In this video, I share my thoughts on growing through partnerships (between traditional banks and financial technology firms), becoming “data richer” and enhancing the customer experience you’re delivering.

FWIW, this video lives on FinXTech.com, a site designed to provide authoritative, relevant and trusted content to a hugely influential audience, specifically:

  • Fintech companies who view banks as potentially valuable channels or distribution partners;
  • Banks looking to grow and/or innovate with fintech companies’ help and support; and
  • Institutional investors, venture capitalists, state & federal regulators, government officials and academicians helping to shape the future of banking.

As a platform powered by Bank Director, FinXTech connects this hugely influential audience around shared areas of interest and innovation.  FinXTech specializes in (1) bringing valuable bank relationships to fintechs, and (2) offering banks valuable relationships with fintechs in a way no one else does.

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.

Banking on Fintech DNA

As we talked about at FinTech Day last Tuesday, technology will play a fundamental role in changing the dynamics of banking, be it shining a light on out-dated practices to dramatically enriching the services and experiences being offered to customers.

By Al Dominick, President & CEO, Bank Director

As our editor-in-chief recently wrote, “technology has always been integral to banking, bringing both speed and efficiency to a transaction-intensive business. But in recent years, technology has stepped onto center stage as a prime component in every bank’s growth and distribution strategy. Technology has, in effect, gone from being a way to save money (a crucial function that it still fulfills) to a way to make money. Much of this activity is being driven by the continued growth of mobile and online banking.”

During a panel session entitled “Banking’s New DNA,” I noted how numerous financial technology companies are developing new strategies, practices and products that will dramatically influence the future of banking.  Within this period of transformation, where considerable market share is up for grabs, I believe ambitious banks can leapfrog both traditional and new rivals.

I find the narrative that relates to banks and fintech companies has changed from the confrontational talk that existed just a year or two ago.  As we found at this year’s FinTech Day in New York City, far more fintech players are expressing their enthusiasm to partner and collaborate with banking institutions who count their strengths and advantages as strong adherence to regulations, brand visibility, size, scale, trust and security.  For me, considering such a partnership affords a bank’s leadership team an important chance to look in the mirror and ask:

  1. Are we exceeding our customer’s digital experience expectations?
  2. How do we know if we’re staying relevant?
  3. Do we have a “Department of No” mindset?

I elaborate on these pieces in an article now up on BankDirector.com; to read it, please click here.  Likewise, take a look at the seven facets of building a digital bank.  When it comes to the DNA one needs to compete in the future, I find these elements essential to any operation. 7 elements of a digital bank - by Bank Director and FinXTech

Feel free to comment on these questions and the elements shared above.  What else do you think could/should be added and considered?