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.

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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.

3 Examples of Next’Gen Partnerships

News & Notes from February 13 – 17
By Al Dominick, CEO of DirectorCorps (parent co. to Bank Director & FinXTech) | @aldominick

A few weeks ago, I made note of an interesting new relationship between a bank and a technology firm.  Specifically, BBVA Compass’s announcement that it has been piloting Amazon Lockers in eleven of its Austin-area branches.  This is the first time Amazon Lockers are available with a bank in the United States — and may provide a creative spark to those thinking about how to increase traffic into an existing branch network.

Since sharing my observation on this partnership, I’ve made note of a number of new relationships that reflect the changing nature of the financial industry.  This week, three things caught my eye:

In addition, I took note of Wells Fargo forming a new innovation team (called Payments, Virtual Solutions, and Innovations) to better build out its digital banking experiences.  The three pillars of this effort revolve around payments, artificial intelligence and APIs. For Wells Fargo — and banks in general:

  • Payments are a critical driver of relationships for consumer, small business, and commercial and corporate banking customers.
  • In terms of artificial intelligence, the bank sees an increasing number of opportunities to better leverage data to provide personalized customer service through its bankers and digital channels.
  • Application Programming Interfaces (APIs) technology enables commercial and corporate banking customers to integrate products, services and information into their own digital environments.

So as financial institutions continue to search for new growth opportunities, I intend to share weekly recaps like this as a way to share what I find compelling.  Let me know what you think — and if there are other news & notes I might share.

10 Banks and Fintechs Doing it Right

In advance of April’s FinXtech Summit
By Al Dominick, CEO of DirectorCorps (parent co. to Bank Director & FinXTech) | @aldominick

Quickly:

  • An increasing number of financial institutions are using partnerships with technology companies to improve operations and better meet customer needs.
  • For the past few months, banks and/or fintechs submitted case studies on specific technology solutions helping financial institutions produce real, quantifiable results to our team at FinXTech.
  • With more then 100 submissions in hand, a committee of FinXTech advisors worked with our team to compile a top-10 list during Bank Director’s Acquire or Be Acquired Conference in Arizona last week.

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Throughout Bank Director’s annual Acquire or Be Acquired conference, I found myself in quite a few conversations about the continually changing nature of financial services. Many of these discussions revolved around the possibilities generated by traditional institutions partnering with emerging technology firms.  Some of these took place on-stage; for instance, I opened the second full day of the conference by polling an audience of 900+ on a variety of technology-related issues:

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With results like these precipitating editorial coverage from our team and attendees alike, you’ll probably understand why I find the just-released ten finalists for our “Best of FinXTech Awards” so compelling.  Indeed, as the financial landscape continues to evolve, and executives grapple with a fast-changing operating environment that requires partnerships and collaboration, each of these relationships shows what is really possible when leaders explore something new together.

  • Bank of Nova Scotia (Scotiabank) + Sensibill: Scotiabank’s customers can store, organize and retrieve paper and electronic receipts through the Toronto, Canada bank’s mobile banking app and wallet, the result of a partnership with Sensibill, also based in Toronto. The service was launched in October 2016.
  • Franklin Synergy Bank + Built Technologies, Inc.: Built Technologies, in Nashville, Tennessee, improved the loan administration process for Franklin Synergy Bank, in Franklin, Tennessee. The $3 billion asset bank now manages a greater number of construction loans with fewer staff.
  • Green Dot (Go Bank) + Uber: Pasadena, California-based Green Dot Corp., which issues prepaid credit cards, partnered with Uber to provide the San Francisco transportation company’s drivers a fee-free debit card and an instant pay solution that allows drivers to be paid instantly.
  • IDFC Bank + TATA Consultancy Services (TCS): Due to a regulatory mandate, India’s IDFC Bank had just 18 months to expand into rural areas to better serve unbanked customers. The bank’s partnership with TCS, based in Mumbai, India, included the use of micro ATMs, which are modified point-of-sale terminals that expand the bank’s reach in rural areas.
  • National Bank of Kansas City + Roostify: San Francisco-based Roostify improved National Bank of Kansas City’s formerly inefficient and incomplete digital mortgage application process. Customers at the bank, based in Overland Park, Kansas with more than $600 million in assets, can now fill out a mortgage application in a little as 20 minutes, with no need for a phone call or trip to the branch to visit a loan officer.
  • Somerset Trust Company + BOLTS Technologies: BOLTS, based in Bethlehem, Pennsylvania, improved the account opening process at Somerset Trust Company, saving the $1 billion asset community bank in Somerset, Pennsylvania, roughly $200,000 in the first year by better automating the process and reducing error rates. Customers can start and complete the process on multiple channels.
  • Toronto-Dominion Bank (TD Bank) + Moven: TD Bank, based in Toronto, Canada, launched a real-time money management application in April 2016, developed by Moven in New York.
  • USAA + Nuance: USAA, based in San Antonio, Texas, made its website a little smarter in 2016 with the virtual assistant Nina, which provides support for USAA’s members. This use of artificial intelligence is the result of a collaboration with Nuance in Burlington, Massachusetts.
  • Woodforest National Bank + PrecisionLender: Partnering with Charlotte, North Carolina-based PrecisionLender to improve its loan pricing strategy helped $4.8 billion asset Woodforest National Bank, in The Woodlands, Texas, grow commercial loans by 16 percent and gain almost 20 basis points in net interest margin.
  • WSFS Bank + LendKey: WSFS Financial Corp., headquartered in Wilmington, Delaware, with $6.6 billion in assets, partnered with the lending platform LendKey, in New York, to expand the bank’s consumer loan portfolio with a student loan and refinancing product.

All ten of these partnerships demonstrate the strongest combination of collaboration and results.  For those interested, my colleague Kelsey Weaver (the President of our FinXTech platform) announces the three “winners” on April 26, 2017, during the FinXTech Annual Summit, at the Nasdaq MarketSite.

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Closing bell ceremony at Nasdaq / Bank Director + FinXTech’s FinTech Day (March 1, 2016)

In advance of that announcement, 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 where and how this annual Summit — and these awards — fits into FinTech Week New York that we are hosting along with Empire Startups starting April 24.

3 Quick Takeaways from #fintech16 (aka Bank Director’s FinTech Day at Nasdaq’s MarketSite)

As evidenced by the various conversations at yesterday’s FinTech Day, the next few years promises to be one of profound transformation in the financial sector.

By Al Dominick, President & CEO, Bank Director

At a time when changing consumer behavior and new technologies are inspiring innovation throughout the financial services community, I had a chance to open this year’s FinTech Day program with a look at how collaboration between traditional institutions and emerging technology firms bodes well for the future.  With continuous pressure to innovate, banks today are learning from new challengers, adapting their offerings and identifying opportunities to collaborate. At the same time, we continue to watch as many fintech companies develop strategies, practices and new technologies that will dramatically influence how banking gets done in the future.

Personally, I believe this is a very exciting time to be in banking — a sentiment shared by the vast majority of the 125+ that were with us at Nasdaq’s MarketSite yesterday.  While I plan to go deeper into some of the presentations made in subsequent posts and columns on BankDirector.com, below are three slides from my welcoming remarks that various attendees asked me to share.

7 elements of a digital bank - by Bank Director and FinXTech

For the above image, my team took a step into an entrepreneurs shoe’s and envisioned an opportunity to build a new, digital-only bank from the ground up.  We consider these seven facets as base elements for success — and the companies listed provide real-life examples of financial institutions & fintechs alike that we see “doing it right.”

FinTech Day Deck1 (dragged)

The irony of sharing an idea for a new bank?  Newly chartered banks (de novos) are basically extinct.  So for a program like FinTech Day, I thought it was imperative to provide context to the U.S. banking market by looking at the total number of FDIC-insured institutions.  These numbers are accurate as of last Friday.

FinTech Day Deck1 (dragged) 1

This final slide comes from our annual Acquire or Be Acquired conference in Arizona.  There, we welcomed 930+ to explore financial growth options available to a bank’s CEO and board.  To open our second full day, I polled our audience using a real-time response device to see how likely they are to invite a fintech company in for a conversation.  As you can see from the results above, real opportunities remain for meaningful dialogue and partnership discussions.

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Thanks to all who joined us, the speakers that shard their insights and opinions and our friends from Nasdaq!

Fintech in 2016: A Whole Lot of Collaboration

While some of the largest and most established financial institutions have struck relationships with various financial technology firms (and not just startups / early stage), opportunities for meaningful partnerships abound.  At Bank Director’s annual FinTech Day at Nasdaq’s MarketSite in Times Square next Tuesday, we explore — with executives from the companies depicted above — what’s really possible when banks and fintechs collaborate to help each other’s businesses accelerate and scale.

By Al Dominick, President & CEO, Bank Director

A fundamental truth: 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 and fintech companies alike entails aligning services & product mixes to suit core customers’ current interests and prospective one’s expectations.

Yesterday, I shared how the fabric of the financial industry continues to evolve as new technology players emerge and traditional participants transform their business models. Indeed, many fintech companies are developing strategies, practices and new technologies that will dramatically influence how banking “gets done” in the future. However, within this period of change — where considerable market share will be up for grabs — I believe that ambitious organizations can leapfrog both traditional and emerging rivals.

Clearly, bank CEOs and their teams must seek new 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.

For a bank CEO and his/her executive team, knowing who’s a friend, and who’s a potential foe, is hugely important.  Personally, I have found this to be quite difficult for many regardless of their size or market.  Moreover, I find this to be a two-sided challenge in the sense that for a fintech founder or executive, identifying those banks open to partnering with, investing in or even acquiring a company like the one they run presents as great a challenge as it does opportunity.

So as more & more fintech companies look to partner with legacy players — and banks warm to such a dynamic — I am excited to think about the creative new partnerships that can be explored to ease payment processes, reduce fraud, save users money, promote financial planning and ultimately, move our giant industry forward.

FinTech Day is One Week Away

The fabric of the financial industry continues to evolve as new technology players emerge and traditional participants transform their business models. Through partnerships, acquisitions or direct investments, incumbents and upstarts alike have many real and distinct opportunities to grow and scale.  If 2015 was all about startups talking less about disruption and more about cooperation, I see 2016 as the year that banks reciprocate.

By Al Dominick, President & CEO, Bank Director

Next Tuesday, at Nasdaq’s MarketSite in Time Square, our team hosts our annual “FinTech Day.” With so many new companies pushing their way into markets and product lines that traditionally have been considered the banking industry’s turf, we look at what fintech means for traditional banks. Likewise, we explore where emerging fintech players may become catalysts for significant change with the support of traditional players.  When it comes to trends like the personalization of banking, the challenges of scaling a company in our highly regulated industry and what shifting customer expectations portend for banks and fintechs alike, we have a full day planned. Take a look at some of the issues we will address.

Riding The Wave Of Change
Al Dominick, President & CEO, Bank Director
Robert H. McCooey, Jr., Senior Vice President of Listing Services, Nasdaq

At a time when changing consumer behavior and new technologies are inspiring innovation throughout the financial services community, we open this year’s program with a look at how collaboration between traditional institutions and emerging technology firms bodes well for the future.

Banking’s New DNA
Michael M. Carter, CEO, BizEquity
Vivian Maese, Partner, Latham & Watkins
Eduardo Vergara, Head of Payments Services & Global Treasury Product Sales, Silicon Valley Bank
Moderated by: Al Dominick, President & CEO, Bank Director

With continuous pressure to innovate, banks today are learning from new challengers, adapting their offerings and identifying opportunities to collaborate.  With this opening session, we focus on the most pressing issues facing banks as they leverage new tools and technologies to compete.

Who Has the Power to Transform Banking
Jeana Deninger, Senior Vice President, Marketing, CoverHound, Inc.
Brooks Gibbins, Co-Founder & General Partner, FinTech Collective
Colleen Poynton, Vice President, Core Innovation Capital
Moderated by: Al Dominick, President & CEO, Bank Director

While fintech startups continue to spearhead the technological transformation of financial services, recent efforts by systemically important financial institutions call into question who reallly has the power to tranform banking. From an investment perspective, recent market turmoil may put some opportunities on hold – while others now have a higher, sharper bar to clear. In this session, we talk to investors about the traits that they look for when backing a venture in the context of a changing economic environment.

Opportunities to Reinvigorate the Banking Industry
Tom Kimberly, General Manager, Betterment Institutional
Thomas Jankovich, Principal & Innovation Leader, US Financial Services Practice, Deloitte Consulting LLP
Pete Steger, Head of Business Development, Kabbage, Inc.
Moderated by: Al Dominick, President & CEO, Bank Director

Many fintech companies are developing strategies, practices and new technologies that will dramatically influence how banking gets done in the future. However, within this period of upheaval – where considerable market share will be up for grabs – ambitious banks can leapfrog both traditional and new rivals. During this hour, we explore various opportunities for financial services companies to reinvigorate the industry.

Opportunities to Financially Participate in Fintech
Joseph S. Berry, Jr., Managing Director, Co-Head of Depositories Investment Banking, Keefe, Bruyette & Woods, Inc. A Stifel Company
Kai Martin Schmitz, Leader FinTech Investment LatAm, Global FinTech Investment Group, International Finance Corporation
Moderated by: Al Dominick, President & CEO, Bank Director

While large, multinational banks have made a series of investments in the fintech community, there is a huge, untapped market for banks to become an early-stage investor in fintech companies. Based on the day’s prior conversations, this session looks at opportunities for banks to better support emerging companies looking to grow and scale with their support.

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While this special event on March 1 is sold out, you can follow the conversations by using #Fintech16 @aldominick @bankdirector @finxtech and @bankdirectorpub.  And as a fun fact, I’ll be ringing the closing bell next Tuesday flanked by our Chairman and our Head of Innovation.  So if you are by a television and can turn on CNN, MSNBC, Fox, etc at 3:59, you’ll see some smiling faces waving at the cameras.

15 Banks and Fintechs Doing it Right

15 examples - new blog cover image.001

Many bank CEOs and their executive teams are looking for emerging methods, products and services to reach new customer segments to drive growth. Today, I identify fifteen banks in the United States, all under $20Bn in asset size, that are growing with the help of fintech companies.

By Al Dominick // @aldominick

With the rise of many innovative, non-traditional financial services companies, leaders of financial institutions can find themselves overwhelmed when it comes to selecting the right partners.  If you are running a bank that doesn’t have multiple incubators, accelerators and skunk work projects already under way, knowing where to participate with the fintech community can prove quite the challenge.  Should it be with an upstart touting a new credit decisioning models?  What about one with a new lending model?  In the quest to become more “nimble” and responsive to consumer demands, do you partner? Refer business? Accept referrals?  The list of not-so-rhretorical questions goes on and on…

Now, quite a bit of digital ink has been spilled over the creativity and aspirations of the fintech community (and its many investors) to transform banking.  But not nearly as much for banks looking to do the same.  While the efforts of major players like Wells Fargo and Capital One garner well-deserved attention, it is my belief that for fintech companies keen to collaborate (and not compete) with banks, developing relationships with banks from $1Bn to $10Bn — there are approximately 550 — and those from $10Bn to $50Bn — there are approximately 75 — may prove as lucrative over the next few years as working with the 30 banks that have assets from $50Bn up.

With this parameter in mind, I polled a few of my team at Bank Director to compile a list of banks, all under $20Bn in asset size, that “play well” with fintechs to show that you don’t have to be the biggest of the big to benefit from this wave of new market participants.  Here, in no particular order, are fifteen banks with notable relationships and/or efforts.

  1. Eastern Bank checks in at $9.7B in asset size, and the Massachusetts-based bank stands out for bringing on some great fintech talent; notably, hiring ex-Perkstreet CEO Dan O’Malley and several of his colleagues to lead its innovation unit;
  2. California’s Fremont Bank ($2.7B) caught our eye, as the bank was a fast adopter of Apple Pay;
  3. River City Bank ($1.3B, Sacramento) has a fintech guy — Ryan Gilbert, Better Finance — on their board;
  4. The Bancorp ($4.5B) backs a lot of fintech/nonbank firms like Moven and Simple;
  5. Radius Bank (just under $1Bn) is a Boston institution with just two physical locations — but is forming alliances with fintech startups to be “everywhere;”
  6. Union Bank & Trust in Nebraska works with Betterment, an automated investing service, to offer its customers a smart, simple and easy way to invest;
  7. A real pioneer, CBW Bank ($14.5B) is a community bank in Kansas and one of the first U.S. banks to use the Ripple protocol for modern, real-time payments between the U.S. and other countries globally;
  8. In the Pacific Northwest, Washington Trust ($4B) is vocal on being tech-friendly;
  9. In Texas, First Financial ($6B) is big on mobile and being innovative — working with Mitek, they are the first regional bank to offer mobile photo bill pay);
  10. Banc of California ($6B) uses nCino to automate and standardize its commercial and SBA lending;
  11. PacWest ($16B) are all about lending to technology and fintech companies;
  12. The Bank of the Internet, BofI, is a full-service internet bank with $5 billion in assets;
  13. Everbank ($16B) plays well with Fintech while adorning the stadium of the NFL’s Jacksonville Jaguars;
  14. Rockland Trust has a SVP of digital and payments innovation, which is unusual for a $5.6 billion dollar bank; and
  15. The $17 billion-asset First National Bank of Omaha hosts a weekend-long hackathon, a competition common in the tech world but rarely hosted by banks, to attract talent into its ranks.

By no means is this a complete list of community banks collaborating with fintechs in the U.S.  If I was to expand the list up in size, you can bet larger regional standouts like KeyBank would merit recognition for their work with companies like HelloWallet.  In the spirit of learning/sharing, who else should be added to this list?  Let me know via twitter or by leaving a comment below.