Banks, Make Your Move Into the Cloud

Quickly:

  • To deliver a truly end-to-end digital customer experience, banks need to figure out how and when to move into the cloud.

PHOENIX — As we kicked off this year’s FinXTech Summit, I found myself engaged in a conversation about how (and why) banks might “freeze and wrap” their data using their current core system while moving their customer engagement and analytics into the cloud.  While this was my first time hearing that particular description/approach, the underlying logic certainly applies for many of the bankers joining us at the Phoenician.  In fact, it inspired this short video shot during today’s lunch.

As a company, we’ve been writing about banks realizing that the benefits of cloud computing outweigh added security risks for a while now.  But it strikes me that interest in cloud-based platforms has been on the rise of late.  As our friends at Blend shared on BankDirector.com, “the cloud presents opportunities for enhanced efficiencies and flexibility — without any security trade-offs — so it’s no surprise that we’re seeing more organizations shift to the software as a service (SaaS) model.”

Interested to see what a move into the cloud might means for banks?  Take a look at these five cloud-based companies:

  • nCino – expediting loans and workflow on top of force.com;
  • Apiture – an API-banking joint venture between Live Oak and First Data;
  • Payrailz – an API-based payments platform “check-free killer;”
  • Defense Storm – where Big Data meets Cyber for banks; and
  • Greenlight – offering debit cards for kids.

I’ll check in later tonight to recap several presentations that explore what makes for a strong, digitally-solid bank.  Before that posts, I invite you to follow the conference conversations via our social channels.  You can follow me @AlDominick on Twitter — and our team shares ideas and information through @BankDirector plus our @Fin_X_Tech platform. Finally, search & follow #FinXTech18 to see what’s being shared with (and by) our attendees.

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FWIW, my reference to Amazon.com, Salesforce.com and Oracle in this video traces back to January 2, when Bloomberg reported the first two were “actively working to replace Oracle software running on crucial business systems with lower cost open-source database software.”  For more: Amazon, Salesforce Shifting Business Away From Oracle: Report

Kicking off FinXTech’s Summit

Quickly:

  • Technology continues to transform nearly every aspect of the financial services industry — from mobile payments to peer-to-peer lending to financial management.

PHOENIX — Tomorrow morning, we kick off our annual FinXTech Summit.  As I wrote yesterday, this annual event serves as our “in-person” bridge between banks and qualified technology companies.  Personally, I am so impressed to witness numerous financial institutions transforming how they offer banking products and services to businesses and individuals.  As such, I find myself eager to engage in tomorrow’s conversations around:

  • Partnerships, collaboration and enablement;
  • How and where banks can invest in cloud-based software; and
  • The business potential of machine learning, advanced analytics and natural language processors.

Joining us at the Phoenician are senior executives from high-performance banks like Capital One, Customers Bank, Dime Community Bancshares, First Interstate Bank, IBERIABANK, Mechanics Bank, Mutual of Omaha Bank, PacWest, Pinnacle Financial, Seacoast National Bank, Silicon Valley Bank, South State Bank, TCF National Bank, Umpqua, Union Bank & Trust, USAA and US Bancorp.  Long-time tech players like Microsoft share their opinions alongside strong upstarts like AutoBooks during this two-day program.  So before I welcome nearly 200 men and women to this year’s conference, allow me to share a few of my preliminary thoughts going into the event:

For those with us here in Arizona, you’ll find nearly every presentation explores what makes for a strong, digitally-solid bank.  So to see what’s trending, I invite you to follow the conference conversations via our social channels. For instance, I am @AlDominick on Twitter — and our team shares ideas and information through @BankDirector plus our @Fin_X_Tech platform.  Finally, search & follow #FinXTech18 to see what’s being shared with (and by) our attendees.

The Intersection of Ideas and Opportunities

Quickly:

  • In a few days, the lights come up on the annual FinXTech Summit, a program that explores ways for banks to delight customers, generate top-line growth and enhance bottom-line profits through partnerships and investments in technology companies.

PHOENIX — When I last stepped foot in Arizona, it was to host Bank Director’s annual Acquire or Be Acquired Conference.  The January event attracts a hugely influential audience focused on mergers, acquisitions and growth strategies & tactics.  While there, we noticed quite a few presentations explored how and where financial institutions might invest in, or better integrate, digital opportunities.  So, as a complement to Acquire or Be Acquired, I’m back in the desert to dive deeper into myriad ideas for banks to improve profitability and efficiency with the help of technology firms.

As we prepare to host our FinXTech Annual Summit at the Phoenician, take note: smart banks are investing and/or partnering with technology companies because they realize it’s cheaper and faster than building something themselves.  Further, the largest banks in the U.S. are rapidly evolving with advances in artificial intelligence across chatbots, robo-advisors, claims, underwriting, IoT and soon blockchain — all of which add another layer of potential to further shake-up traditional business models.  In fact, there was a palatable sense among bankers at AOBA about the evolution in financial technology.

Nonetheless, many banks, especially those between $500M and $30Bn in assets, are on the outside looking in — and this is where FinXTech’s Summit story begins.

From exploring data to leveraging cognitive computing to gaining efficiencies in backroom processes, this year’s event surfaces a number of potent ideas.  For instance, we shine a light on how bank leadership can truly unleash the potential of a technology partner.  Further, we pull current quotes and issues like these to discuss and debate:

One thing I love about customers is that they are divinely discontent. Their expectations are never static — they go up. It’s human nature. We didn’t ascend from our hunter-gatherer days by being satisfied. People have a voracious appetite for a better way, and yesterday’s ‘wow’ quickly becomes today’s ‘ordinary’
Jeff Bezos, Founder and Chief Executive Officer

Likewise, we share our takes on key acquisitions — like JP Morgan’s acquisition of WePay — while identifying how institutions leverage newer technologies to improve efficiency ratios and in some cases, boost franchise valuations.

In a sense, FinXTech’s Summit serves as our “in-person” bridge between banks and qualified technology companies.  For those joining us, we’ll touch on various products and services for security, data & analytics, infrastructure, lending, mobile banking, payments and regtech while convening an exceptionally senior audience of 200+.  Throughout the event, I’ll share my thoughts via Twitter, where I’m @AlDominick and using #FinXTech18.  Finally, I’ll author a daily update on this site with my observations from the conference.

3 Key RegTech Themes

Quickly:

  • Machine learning, advanced analytics and natural language processors dominated conversations at yesterday’s RegTech program at NASDAQ’s MarketSite.

NEW YORK — Where will technology take us next?  As many banks embrace digital tools and strategies, they inevitably grapple with regulatory uncertainty.  This naturally creates friction in terms of staffing levels, operational expenses and investment horizons.  With so many regional and national banks continuing to grow in size and complexity, the responsibility to provide appropriate oversight and management escalates in kind.

Likewise, as more and more community banks rely on technology partners to transform how they offer banking products and services, management teams and boards of directors grapple to assess how such relationships impact compliance programs and regulatory expectations.  Can technology truly deliver on its promise of efficiency, risk mitigation and greater insight into customer behavior?

To address questions and observations like these, my team hosted the Reality of RegTech at NASDAQ’s MarketSite on April 18.  Entering the MarketSite, we aspired to surface ideas for banks to better detect compliance and regulatory risks, assess risk exposure and anticipate future threats by engaging with technology partners.

Over the years, our annual one trek to NASDAQ’s New York home afforded us opportunities to:

  • Learn how BNY Mellon encourages innovation on a global scale;
  • Identify where early-stage technology firms realistically collaborate with financial services providers; and
  • Explore lending strategies and solutions for community banks.

This year, we focused on the intersection of technology with regulation, noting that banks can and should expect an overall increase in regulatory constraints on topics including supervision, systemic risk (such as stress tests), data protection and customer protection.

For Forward-Thinking Banks

At Bank Director, we see the emergence of regulatory-focused technology companies helping leadership teams to bridge the need for efficiency and security with growth aspirations. However, understanding how and when to leverage such technologies confounds many executives.  As our Emily McCormick wrote in advance of the event, forward-thinking banks are looking within their own organizations to figure out how the deployment of regtech fits into the institution’s overall strategic goals while matching up with culture, policies, processes and talent.

Key Takeaways

  1. RegTech is, by its very nature, constantly evolving.  Current solutions focus on one of two things: reducing the cost of compliance via automation or leveraging technology to deliver more effective compliance.
  2. The flip side to the promise of these solutions is a skepticism and concern by both regulators and banks that RegTechs really are in this for the long-haul, are reliable and “safe” to work with.
  3. A first step for banks not already using RegTech?  Develop an implementation road map for one specific need (e.g. BSA / AML) which aligns to the overall strategic vision of the organization (in this case, a desire to grow through acquisition).

Interesting Reads on RegTech

Multiple presentations touched on how and where banks can maximize the potential benefits of their RegTech endeavors by addressing key risks; for instance: uncertain development paths, provider reliability, increased regulatory scrutiny, limited judgment and privacy concerns.  For those looking to go deeper on these issues:

  1. PwC authored a Regulatory Brief that discusses (a) how banks are using RegTechs, (b) the current RegTech landscape, and (c) what banks should do to prepare for RegTech.
  2. Continuity offers an e-book along with a step-by-step system for predictable, repeatable compliance results.
  3. Ascent blogs about the impact of artificial intelligence on regulatory compliance in its Top 5 Ways AI in Compliance Will Affect You in 2017.

Multiple members of the team shared insight and inspiration with #RegTech18 on Twitter (usually tying into our @Fin_X_Tech and @BankDirector handles).  Finally, be sure to check out BankDirector.com (no subscription required) as our editorial team offers up a number of perspectives on RegTech and this year’s event.

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.

10 Questions I Plan To Ask During Acquire Or Be Acquired

Quickly:

  • Despite improving economic conditions, the business of banking remains difficult.

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

PHOENIX, AZ — For all the talk of bank consolidation, there are still 5,700+ banks in the United States.  But let’s not kid ourselves.  For many community banks today, earnings pressures + regulatory and compliance costs + the continued impact of technology = a recurring challenge.

While the number of banks in business will inevitably shrink over the next 10 years — perhaps being cut in half — I remain bullish on the overall future of this industry. If December’s tax reform spurs capital spending and job creation by small- and medium-sized businesses, many of the banks joining us here in Arizona stand to benefit. But will the recent tax cut induce companies to invest more than they already planned to? This is but one of a number of questions I look forward to asking on stage through the first day of Bank Director’s Acquire or Be Acquired Conference.

Below, ten more questions I anticipate asking:

  1. Are FinTechs the industry’s new de novos?
  2. What does it mean that the banking world is deposit rich yet asset poor?
  3. Why are certain credit unions thinking about about buying banks?
  4. In terms of technology spending levels, where are dollars being earmarked and/or spent?
  5. With respect to small business lending, do credit unions or FinTechs pose a more immediate challenge to community banks?
  6. What is an appropriate efficiency ratio for a bank today?
  7. Will big M&A buyers get back in the game this year?
  8. What are some of the critical items in due diligence that are under appreciated?
  9. What does an activist investor look for in a bank?
  10. Is voice recognition the next huge source of growth for banks?

We have an exciting — and full day — coming up at the Arizona Biltmore. To keep track of the conversations via Twitter, I invite you to follow @AlDominick @BankDirector and @Fin_X_Tech.  In addition, to see all that is shared with (and by) our attendees, we’re using the conference hashtag #AOBA18.

Three Things to Know About the Digital Delivery of Financial Products and Services

Quickly:

  • Technology continues to reshape what it means to lead, to innovate and to offer in terms of financial goods and services.

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

WASHINGTON, DC — It is no secret that financial institutions are in a race to figure out how and where innovative technologies can help win and keep loyal customers, improve operational efficiencies and enhance their overall cyber-security measures.  While we might disagree on how fast changes will occur, can we all agree that the ever-expanding expectations for the digital delivery of products and services will dramatically impact banking’s future?

I put this not-quite-rhetorical question out in advance of our annual Acquire or Be Acquired Conference at the Arizona Biltmore.  Indeed, the technological shifts taking place in this industry are significant, and I anticipate quite a few conversations about what our “digital future” might look like.  In the spirit of sharing information and ideas prior to this Sunday’s presentations, this video surfaces a few areas I think a bank’s board needs to pay closer attention to.

If you’re interested in following conversations that focus on issues like these during Acquire or Be Acquired, I invite you to follow me on Twitter via @AlDominick, check out what the team shares through @BankDirector plus our @Fin_X_Tech platform and search & follow #AOBA18 to see what the social shares with (and by) our attendees.

*This video — which is normally available only through our special bank membership program — foreshadows several presentations at Acquire or Be Acquired.  It also tees up our FinXTech Annual Summit.  Held the past few years at the NASDAQ’s MarketSite in NYC, we’ve partnered with Promontory Interfinancial Network to best explore opportunities to generate top line growth and bottom line profits through partnerships, collaboration and investments. Held at The Phoenician in Scottsdale, AZ on May 10th and 11th, I invite you to take a peek at the recently updated agenda.

The Paths High Performing Banks Take to Growth and Innovation

Quickly:

  • I’m in Utah at the Montage Deer Valley for the second day of the Association for Financial Technology’s Fall Summit.
  • This afternoon, I shared my thoughts on the pace of change impacting banks as part of AFT’s Fintech Leadership Industry Update.

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

PARK CITY — For those that attended Bank Director’s Acquire or Be Acquired conference this January, you may recall slides illustrating the consolidating nature of the banking industry over the past 25 years.  This decrease in the number of banks is the result of several major factors; most notably, changing banking laws, changing technologies, changing economics and changing consumer behaviors.

Given the audience we share information with (e.g. bank CEOs and their leadership teams), I continue to hear talk about steady, albeit slow, loan growth, some margin improvement and a continued emphasis on expense control.  However, it is apparent from the outside looking in that many banks still lack the true flexibility to continually innovate in terms of both products and services — and how they are delivered.

This is downright scary when you consider that Amazon’s Lending Service surpassed $3 billion in loans to small businesses since it was launched in 2011.  As I shared in my remarks, Amazon loaned over $1 billion to small businesses in the past twelve months.  Over 20,000 small businesses have received a loan from Amazon and more than 50% of the businesses Amazon loans to end up taking a second loan.  This is a major threat to the established financial community, because if there is one thing community banks and large banks agree on, it is that the small business market is important.  This will not change any time soon, and for community banks in particular, a greater share of the small business market may be their only path to survival.

So what I shared this afternoon were real-world examples of bank CEOs focused on carrying out a long-term growth strategy in creative, yet highly focused, ways.  For instance, several of the banks I referenced are attempting to re-engineer their technology and data infrastructure using modern systems and processes, developed internally and augmented through partnerships with fintech companies.  For instance, I cited a newer partnership between First Horizon’s First Tennessee bank unit and D3 Banking. In addition, I used examples like US Bancorp, PNC and Fifth Third before highlighting five more institutions that range from $10Bn to $50Bn in asset size.

I did so because we are witnessing an intense struggle on the part of financial services providers to harness technology in order to maintain relevance in the lives of their customers.  The eight banks I cited today have different leadership approaches; all, however, are considered high-performers. For those interested, here is a link to my presentation: Bank Director and FinXTech 2017 AFT Presentation.

The caveat to my presentation, remarks and writing: it might appear easy to create a strategic direction to improve efficiency and bolster growth in the years ahead. But many bank executives and their boards are being cautioned to prepare for false starts, unexpected detours and yes, stretches of inactivity — all of which impacts tech companies like those here in Park City at AFT.  Still, a vision without action is a dream; action without vision, a nightmare.  For these banks, strong leadership have set a clear course for their futures.

A Community Bank Can Build Innovation Into Its Growth Strategy

Quickly:

  • I’m at the Montage Deer Valley for the Association for Financial Technology’s Fall Summit.
  • “Who do we want to be when we grow up in this new digital, always-on financial services environment?” might be the most important question for a bank CEO to strategize on with his or her team.

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

PARK CITY, UTAH — For the technology companies looking to make a real difference in the financial services world, let me suggest a stronger focus on regional and community banks.  At a time when JPMorgan Chase, Wells Fargo, BofA and the like are investing heavily in digital engagement strategies to connect with digital-savy customers, there are significant pressures on banks not able to spend what the biggest banks do to develop or adopt digital strategies.

As I listened to an afternoon panel discussion on the need for banks to create sustainable, scalable and relevant business models, I went back to my notes on a newer partnership between First Horizon’s First Tennessee bank unit and D3 Banking.  Developed to overhaul First Tennessee using D3’s API-driven platform, I see this type of partnership as one that positions a strong regional player to better compete with much larger banks.

First Tennessee and D3 is one of a number of bank/fintech arrangements I think technology executives here in Park City should know about.  A smaller bank “doing it right” in terms of partnering with technology companies is Somerset Trust Co., a $1 billion asset bank out of western Pennsylvania.

Their COO, John Gill, participated in the panel that precipitated this post.  As we’ve written about at Bank Director, Somerset has learned to play the innovation game by partnering up with some impressive fintech companies.  For example, they teamed up with Malauzai Software in Austin, Texas, to develop a mobile banking solution that allows Somerset’s retail banking customers to securely check balances, use picture bill pay and remotely deposit checks from any location or device.  More recently, Somerset Trust partnered up with BOLTS Technologies to improve its mobile new account customer experience.

It strikes me that figuring out how to move ones business towards a foundation of flexibility is essential.  So too is being open to new ideas and partnership opportunities. Most importantly, just because a bank is small doesn’t mean it can’t build innovation into its growth strategy.

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As part of AFT’s Fall Summit, I shared a few stories about bank CEOs leadership styles, their team’s investments in fintech companies and ideas, and several innovative solutions that caught my attention.  Interested?  Here is a link to both my presentation and post.

The Intersection of Leadership and Profitability

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

Quickly

  • Key takeaways from one of my favorite summer banking events, Crowe Horwath’s Bank Leadership and Profitability Improvement Conference.

_ _ _

This morning, on the first of my two flights from Washington National to Monterey, California, I learned that Walmart customers might soon be able to get installment loans for big-ticket items through Affirm, a San Francisco-based FinTech I first wrote about in 2014 (For Banks, the Sky IS Falling).  Per the Wall Street Journal, the companies reportedly are nearing an agreement on a pilot program.  This potential partnership caught my eye as I prepared for today and tomorrow’s conference.  Indeed, relationships like these make clear that when it comes to growth and efficiency, the digital distribution of financial goods and services is a significant issue for the banking industry.

This idea took further shape when I walked into the conference center at the Inn at Spanish Bay.  Immediately upon entering the room, I found John Epperson, a partner at Crowe and Jay Tuli, senior vice president retail banking and residential lending at Leader Bank, sharing their opinions on partnership strategies involving banks and FinTechs.  From the stage, they touched on increasing net interest margins via improved pricing strategies on commercial loans, approaches to streamline mortgage application processes, ideas to reduce staff counts for loan administration processes and how to improve customer experiences through online rent payment solutions.

Their perspectives lined up with those we recently shared on BankDirector.com.  To wit, “many banks have realized advantages of bank-FinTech partnerships, including access to assets and customers.  Since most community banks serve discreet markets, even a relatively simple loan purchase arrangement can unlock new customer relationships and diversify geographic concentrations of credit.  Further, a FinTech partnership can help a bank serve its legacy customers; for instance, by enabling the bank to offer small dollar loans to commercial customers that the bank might not otherwise be able to efficiently originate on its own.”

Of all the difficult issues that bank leadership must deal with, I am inclined to place technology at the top of the list.  Banks have long been reliant on technology to run their operations, but in recent years, technology has become a primary driver of retail and small business banking strategy.  John and Jay simply reinforced this belief.

In addition to their thoughts on collaboration, this afternoon’s sessions focused on ‘Liquidity and Balance Sheet Management,’ ‘Fiscal Policy During Regulatory Uncertainty’ and ‘Managing Your Brand in a Digital World.’  While I took note of a number of issues, three points really stood out:

  • Yes, banks can make money while managing decreasing margins and a flat yield curve.
  • Asset growth without earnings growth is a concern for many because of loan pricing.
  • How a CFO sets a target(s) for interest rate risk may start with an “it depends” type response — but gets nuanced quickly thereafter.

Finally, I’m not holding my breath on the industry receiving regulatory relief any time soon.  I get the sense many here aren’t either.  But it would be nice to see some business people brought in to run various agencies and I’m looking forward to the perspectives of tomorrow’s first guest speaker, Congressman John Ratcliffe.

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My thanks to Crowe Horwath, Stifel, Keefe Bruyette & Woods + Luse Gorman for putting together this year’s Bank Leadership and Profitability Improvement Conference at The Inn at Spanish Bay in Pebble Beach, California.  I’ll check in with additional takeaways based on tomorrow’s presentations.

Address the Culture Gap Between Banks and FinTechs

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

Quickly

  • A “bank|fintech partnership” narrative dominated the conversation at last week’s FinTech Week NYC events.
  • If I were running a financial institution right now, I’d focus on the word integration instead of innovation.
  • Culture is one of the best things a bank has going for it. It’s also one of the worst.

_ _ _

While I am bullish on the future of banking as a concept, I am admittedly concerned about what’s to come for many banks who struggle with cultural mindsets resistant to change. As I shared in an op-ed that kicked off last week’s FinTech Week NYC, the same dynamics that helped weather the last few years’ regulatory challenges and anemic economic growth may now prevent adoption of strategically important, but operationally risky, relationships with financial technology companies.

Most banks don’t have business models designed to adapt and respond to rapid change. So how should they think about innovation? I raised that question (and many others) at last Wednesday’s annual FinXTech Summit that we hosted at Nasdaq’s MarketSite. Those in attendance included banks both large and small, as well as numerous financial technology companies — all united around an interest in how technology continues to change the nature of banking.

More so than any regulatory cost or compliance burden, I sense that the organizational design and cultural expectations at many banks present a major obstacle to future growth through technology. While I am buoyed by the idea that smaller, nimble banks can compete with the largest institutions, that concept of agility is inherently foreign to most legacy players.

It doesn’t have to be.

Indeed, Richard Davis, the chairman and CEO of the fifth largest bank in the country, U.S. Bancorp, shared at our Acquire or Be Acquired Conference in Phoenix last January that banks can and should partner with fintech companies on opportunities outside of traditional banking while working together to create better products, better customer service and better recognition of customer needs.

The urgency to adapt and evolve should be evident by now. The very nature of financial services has undergone a major change in recent years, driven in part by digital transformation taking place outside banking. Most banks—big and small—boast legacy investments. They have people doing things on multi-year plans, where the DNA of the bank and culture does not empower change in truly meaningful ways. For some, it may prove far better to avoid major change and build a career on the status quo then to explore the what-if scenarios.

Here, I suggest paying attention to stories like those shared by our Editor-in-Chief Jack Milligan, who just wrote about PNC Financial Services Group in our current issue of Bank Director magazine. As his profile of Bill Demchak reveals, it is possible to be a conservative banker who wants to revolutionize how a company does business. But morphing from a low-risk bank during a time of profound change requires more than just executive courage. It takes enormous smarts to figure out how to move a large, complex organization that has always done everything one way, to one that evolves quickly.

Of course, it’s not just technological innovation where culture can be a roadblock. Indeed, culture is a long-standing impediment to a successful bank M&A deal, as any experienced banker knows. So, just as in M&A deals, I’d suggest setting a tone at the top for digital transformation.  Here are three seemingly simple questions I suggest asking in an executive team meeting:

  • Do you know what problems you’re trying to solve?
  • What areas are most important to profit and near-term growth?
  • Which customer segments are critical for your bank?

From here, it might be easy to create a strategic direction to improve efficiency and bolster growth in the years ahead. But be prepared for false starts, fruitless detours and yes, stretches of inactivity. As Fifth Third Bank CEO Greg Carmichael recently shared in an issue of Bank Director magazine, “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.”

Be aware that technology companies move at a different speed, and it’s imperative that you are nimble enough to change, and change again, as marketplace demands may be different in the future. Let your team know that you are comfortable taking on certain kinds of risk and will handle them correctly. Some aspects of your business may be harmed by new technology, and you will have to make difficult trade-offs. Just as in M&A, I see this is an opportunity to engage with regulators. Seek out your primary regulator and share what you’re looking for and help regulators craft an appropriate standard for dealing with fintech companies.

Culture should not be mistaken for a destination. If you know that change is here, digital is the expectation and you’re not where you want to be, don’t ignore the cultural roadblocks. Address them.

A Technology Takeover on BankDirector.com

For the next 5 days, I set up shop in my former home of New York City for FinTech Week NYC.  Hosted by Bank Director’s FinXTech in conjunction with Empire Startups, the week can best be understood as a confluence of conferences, round-table discussions, demo days, meetups and networking events across the city.

If you’re not familiar with the various events taking place, here is a quick snapshot of three we’re primarily involved with starting today and running through Friday, the 28th.

The common thread throughout each of these days? A desire to help leaders in the financial sector to better understand how when/where/why to engage with emerging technologies.

Given our cultural mindset to help make others successful, we’re kicking things up a notch with our on-line efforts.  Indeed, we’re “taking over” BankDirector.com and loading the site up with strategic issues and ideas that a bank’s CEO, board and executive team can immediately consider.  In parallel, we’re developing even more content to benefit technology companies keen to work with financial institutions and have some really interesting things planned for our FinXTech.com.  Three examples of this free content:

  • On BankDirector.com, Tips for Working With Fintech Companies by our editor, Naomi Snyder, provides insight from executives at Wells Fargo (one of the country’s biggest) and Radius Bank (a very strong community bank) on how they handle fintech partnerships.
  • On FinXTech.com, Advice for Fintech Companies Working with Banks by our editor-in-chief, Jack Milligan, shares suggestions from SF-based Plaid Technologies and Chicago-based Akouba as to how banks and tech companies can set realistic expectations in terms of cooperating to their mutual benefits.
  • Finally, I authored a piece on a major challenge I see confronting banks when it comes to their digital futures with A Roadblock That Ruins Futures.  As an optimist, things aren’t hopeless; you will see I find inspiration from the CEOs of U.S. Bancorp, PNC and Fifth Third.
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