Category: Data Intelligence

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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.

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Trending Topics from CBALive!

Quickly:
  • A few quick-hit thoughts from this week’s CBALive! conference, where I spent the past three days engaged in conversations about consumer behavior and emerging digital initiatives.

ORLANDO, FL — When the Former Director of the National Security Agency and the Central Intelligence Agency says that the private sector needs to step in and take more responsibility for cyber safety and protection, it is a lede I dare not bury.

To paraphrase General Michael Hayden, now a Principal at The Chertoff Group, nation-states like North Korea and Iran pose major challenges to the fabric of our financial industry.  The Russians, though, remain in a class of their own.  As he explained, their focus on information dominance, not just cyber dominance, reflects a coordinated and concentrated fight to control the American public’s perceptions. As the recent presidential election proved, their ability to create “information bubbles” gives them a weapon with which to hurt companies’ reputations in addition to using other cyber hacking techniques to corrupt an institution’s data or to steal money.

While many bank boards have a tight pulse on their organization’s cybersecurity preparedness, Gen. Hayden made clear that the U.S. government views cyber as a new domain of warfare (alongside the traditional domains of air, sea, land and space).  Whether they want to or not, banks of all sizes form the cavalry that needs to ride to the country’s rescue as the cyber threats continue to proliferate.

Gen. Hayden discussed our virtual vulnerabilities and the real risks for our country during his afternoon’s keynote presentation at the Consumer Bankers Association CBALive! conference at the Hilton Orlando Bonnet Creek.  In addition to these remarks, I made note of three key issues that tie into their conference theme of “beyond the bank:”

The race to grow deposits continues.

The digital presence and marketing efforts of the biggest banks in the U.S. continue to enable them to acquire an outsized share of consumer and commercial relationships.  Given that deposits proved the big theme at our Acquire or Be Acquired Conference, I made note of Novantas‘ perspectives as they apply to community banks trying to grow and compete.  Given their involvement with financial institutions — the firm provides information, analyses and automated solutions designed to improve revenue generation — they believe acquisitive banks must apply the same discipline to evaluating a potential acquisition bank’s deposit portfolio as they historically have given to the lending book.  As they shared in a white paper, “the importance of such rigor has increased with higher rates: the low-rate banks of yesterday can wind up with unattractive deposit positions tomorrow.”

Artificial intelligence remains the ultimate buzzword.

Alistair Rennie, General Manager, Solutions at IBM Watson Financial Services opined on the promise of machine learning and artificial intelligence, highlighting the intersection of digital, offline and social identity data as a means to improve enterprise-wide visibility into regulatory and internal compliance controls.  As he shared, cognitive technologies promise to fundamentally change how banks identify customer behaviors and patterns. Personally, I found his most interesting point for bank leadership came from his first audience-specific question (*see the image that leads off today’s post).

Can you really “own” the customer experience?

Forgive me if you caught me rolling my eyes during presentations that began with “banks need to own the customer experience,” especially when delivered as if a novel approach to business.  Marketing 101 starts with a basic premise: know your customer — and give them what they want.  So when looking for the characteristics of disruption that might strengthen a relationship, I liked this particular tweet:

While we covered a lot of ground, these three thoughts accompany me on my flight home to D.C.  My thanks to Richard Hunt and his team at the CBA for inviting me and our CMO, Michelle King, to join them in Orlando.  The CBA represents America’s retail banks and does a great job bringing together some of the biggest institutions in the U.S. to address issues such as these.  If you’re not following Richard on Twitter, his handle is @cajunbanker and for the CBA, check out @consumerbankers.

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Bank CEOs and Their Boards Can Lay Claim to These 5 Technologies

Quickly:

▪ Regional and community banks continue to lay claim to innovative technologies that attract new customers, enhance retention efforts, improve efficiencies, cut costs and bolster security.

By Al Dominick, CEO of DirectorCorps — parent co. to Bank Director & FinXTech

ATLANTA — The digital distribution of financial goods and services is a HUGE issue for bank executives and their boards.  Margins on banking products continue to decline due to increased competition.  In my opinion, this provides ample incentivize for banks to seek partnerships with specialized product and service providers.

I shared this thought earlier today at Bank Director’s annual Bank Board Training Forum. During my remarks to an audience of 203 officers and directors (representing 84 financial institutions), I laid out five potential area of collaboration that community bank CEOs and their boards might spend more time discussing:

1. New core technologies;
2. Machine learning / Artificial intelligence applications;
3. RegTech;
4. Payments; and
5. White labeling product offerings.

I elaborated on why I think our audience needs to explore each area before expanding on how banks might take steps to incorporate such technologies into their culture and business.  I wrapped up by providing examples of companies in each space that attendees might learn more about.

For instance, when it comes to the core technological systems offered by Fiserv, Jack Henry and FIS, many banks are investing in “integration layers” to bridge the needs of client‐facing systems with their core system. While these layers have proven valuable, banks are also aware of the need to migrate away from legacy cores should the flexibility they desire not come from these companies.  Hence the advent of companies like Finxact, a cloud banking platform promising to be the most transparent and open core banking system available.

In terms of machine learning and artificial intelligence, I see five potential use cases for banks to consider: smarter customer acquisition, better Know-Your-Customer efforts, improved customer service, smarter and faster account openings and the ability to offer more competitive loans.  Here, I am impressed with the work being done by companies like Kasisto, whose conversational AI platform is pre-loaded with thousands of banking intents and millions of banking sentences.  It promises to fulfill requests, solve problems, predict customers’ needs and improve performance on its own using sophisticated machine learning.

Given the cost and complexity of compliance, RegTech offerings promise to simplify fraud prevention and detection, improve the interpretation of regulation while accelerating reporting functions.  Further, RegTech companies held simplify data access, storage and management while strengthening risk management efforts.  There are quite a few companies in this fast-growing space that I highlighted.  One is Fortress Risk Management, a company whose advanced analytics predict and detect financial crime while its tool enable efficient case management, dispute management, reporting and regulatory compliance.

With respect to payments, our rapidly changing and oh-so-interconnected markets of debit, credit, mobile, prepaid and digital payments proves both a blessing and a potential curse for traditional institutions. As we move toward a cashless society and payments become less visible, banks need to maximize their opportunities to become the default payment method, and keep abreast of innovations in credit scoring, faster payments, analytics, security and fraud detection.  Case-in-point, BluePay delivers non-interest income to banks of all sizes by aggregating customer data coupled with the latest merchant processing technology.

Finally, white label product offerings are nothing new.  However, technology companies like SimplyCredit and StrategyCorps continue to help banks reshape and rethink customer engagement, setting new and higher bars for their’s clients’ experiences.  For banks seeking innovations like rapid loan adjudication, partnering with technology providers like these enables a bank to keep pace with the customer experience expectations set by large technology firms.

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If you weren’t able to join us in Atlanta and are curious about today’s featured image, here is a link to the pdf: 2017 Bank Board Training Presentation (Tech-focused). As I shared, New Zealand’s All Blacks are the world’s most successful sporting outfit, undefeated in over 75% of their international rugby matches over the last 100 years.  Their willingness to change their game (and their culture) when they were at the top of their game inspired me — and allowed me to challenge our attendees to think if they are willing to do the same with their banks.  I’m also inspired by my colleagues who helped develop this year’s program. From our conference team to editorial group, marketing to data departments, I’m proud to work with a great group dedicated to the idea that a strong board makes contributes to a strong bank.

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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.

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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.

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Looking for Great FinTech Ideas

A fundamental truth about banking today: individuals along with business owners have more choices than ever before in terms of where, when and how they bank. So a big challenge — and dare I suggest, opportunity — for leadership teams at financial institutions of all sizes equates to aligning services and product mixes to suit core customers’ interests and expectations.

By Al Dominick // @aldominick

Sometimes, the temptation to simply copy, paste and quote Bank Director’s editor, Jack Milligan, is too much for me to resist. Recently, Jack made the case that the distinction between a bank and a non-bank has become increasingly meaningless.  In his convincing words:

“The financial service marketplace in the United States has been has crowded with nonbank companies that have competed fiercely with traditional banks for decades. But we seem to be in a particularly fecund period now. Empowered by advances in technology and data analysis, and funded by institutional investors who think they might offer a better play on growth in the U.S. economy than traditional banks, we’re seeing the emergence of a new class of financial technology – or fintech – companies that are taking dead aim at the consumer and small business lending markets that have been banking industry staples for decades.”

Truth-be-told, the fact he successfully employed a word like ‘fecund’ had me hunting down the meaning (*it means fertile).  As a result, that particular paragraph stuck in my mind… a fact worth sharing as it ties into a recent Capgemini World Retail Banking Report that I devoured on a tremendously turbulent, white-knuckling flight from Washington, D.C. to New Orleans this morning (one with a “minor” delay in Montgomery, AL thanks to this morning’s wild weather).

Detailing a stagnating customer experience, the consultancy’s comprehensive study draws attention “to the pressing problem of the middle- and back-office — two areas of the bank that have not kept pace with the digital transformation occurring in the front-office. Plagued by under-investment, the middle- and back-offices are falling short of the high level of support found in the more advanced front-offices, creating a disjointed customer experience and impeding the industry’s ability to attract, retain, and delight customers.”

Per Evan Bakker for Business Insider, the entirety of the 35-page report suggests “banks are facing two significant business threats. First, customer acquisition costs will increase as existing customers are less likely to refer their bank to others. Second, banks will lose revenue as customers leave for competitors and existing customers buy fewer products. The fact that negative sentiment is global and isn’t limited to a particular type of customer activity points to an industry wide problem. Global dissatisfaction with banks is likely a result of internal problems with products and services as well as the growing number of non-bank providers of competing products and services.”

While dealing with attacks from aggressive, non-bank competitors is certainly not a new phenomenon for traditional banks, I have taken a personal interest in those FinTech companies looking to support (and not compete with) financial institutions.  So as I set up shop at the Ritz-Carlton New Orleans through Wednesday for our annual Bank Board Growth & Innovation conference, let me shine the spotlight on eight companies that may help address some of the challenges I just mentioned. While certainly just the tip of the FinTech iceberg, each company brings something interesting to the table:

As unregulated competition heats up, bank CEOs and their teams need to continue to seek ways to not just stay relevant but to stand out.  While a number of banks seek to extend their footprint and franchise value through acquisition, many more aspire to build the bank internally. Some show organic growth as they build their base of core deposits and expand their customer relationships; others see the value of collaborating with FinTech companies.  To see what’s being written and said here in New Orleans, I invite you to follow @bankdirector, @aldominick + #BDGrow15.

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Focused on Financial Analytics

When it comes to tapping the creativity and ingenuity of the financial technology sector, I think this equation says it best.

For me, the term “big data” jumped the shark a few years ago.  Much like investment bankers shelved their  “wave of consolidation” pitch, I remain hopeful that the clichéd data term gives way to something more appropriate, descriptive and dare I say agile?  Nonetheless, the concept of sifting through massive amounts of structured and unstructured information to identify meaningful insights is nothing to scoff at.  Truth-be-told, it has interested me since my time at Computech, a leader in agile and lean application software development and IT operations & maintenance that was recently acquired by NCI.

Figuring out discrete patterns to better prepare for the future is huge business — and I continue to see the largest financial institutions in the U.S. making investments in financial analytics.  I was reminded of this drive to leverage new technologies while re-reading my notes from a Q&A session I had with BNY Mellon’s head of Strategy and Innovation last September at our FinTech day at NASDAQ.  There, I made note of three companies — Kensho, Discern and ClearStory — that had the potential to transform part of the financial sector.  FinTech Focused.001With said notes in hand, I dove a deeper into each company’s background and offerings, finding all three bring interesting new models and technologies to bear on automating and enhancing the investment research process.  So as I’ve done with past posts (Three FinTech Companies I’m Keen On and Spotlight on FinTech), let me share a little about each one:

  • Kensho is pioneering “real-time statistical computing systems and scalable analytics architectures — the next-generation of improvements to the global financial system.”  Backed by Goldman Sachs and Google Ventures, and with clients that range from Wall Street’s global banks to several of the best performing hedge funds, think of the 2013 startup as a “Siri-style service for investors, analysts and traders” (h/t to the FT for the comparison).
  • In the interest of fair disclosure, all three of my siblings have worked for investment management firms, so they may buckle at Discern’s description of “conventional” investment research relying “on solo analysts armed with narrow expertise, simple tools and a personal network of resources. Nonetheless, it’s an important juxtaposition when you look at what its data aggregation platform offers.  If you agree with their assertion that the “earlier one becomes aware of a risk or opportunity, the less it costs” the more attracted you might be to this SF-based company.
  • Finally, the data intelligence company ClearStory works with financial institutions on collaborative research and customer acquisition analysis.  Their premise is to both speed and simplify the cycle of research across distributed teams, including “accessing, merging, analyzing files and a variety of external data sources.”  As they share, “competitiveness on the front lines of business is dictated by the speed of data access and the quality of informed decision-making.”

Personally, it is very interesting to learn about, and subsequently watch, companies like these these spur transformation. If you are game to share your thoughts on FinTechs worth watching, feel free to comment below — or via twitter, I’m @AlDominick, about those companies and offerings you find compelling.

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