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.

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.

Lessons in Leadership c/o David Rubenstein

Quickly:

  • I spent this morning listening to David Rubenstein share his thoughts on leadership.  Best known as the co-founder and co-chief executive officer of The Carlyle Group, a global private equity investment company based in Washington, D.C., today’s post paraphrases a few key takeaways.

WASHINGTON, D.C. — Being in a cult has its perks.  The cult?  Leadership Greater Washington.  Today’s perk?  A morning spent with one of the more philanthropic business leaders in the United States, David Rubenstein.  With the gentle prodding of Richard Bynum, President of Greater Washington & Virginia at PNC, David shared his self-deprecating wit and humor with 100+ of my LGW contemporaries.  Personally, three “don’ts” accentuated his morning remarks.

Don’t hire geniuses

David co-founded The Carlyle Group, one of the world’s largest private equity firms, in 1987.  While the firm now manages $174 billion from 31 offices around the world, he spent his early days on the road “begging for money.”  As the company grew, he looked for humility, a strong work ethic and reasonable intelligence in new hires. When pressed on this last point, he laughed and said managing a genius proved impossible.  Far better to attract talented workers with an appetite to work, learn and make money for “the right reasons” than hire someone who required extraordinary management.

Don’t die the richest man in the cemetery

When Bill Gates conceived the Giving Pledge as a commitment by the world’s wealthiest individuals and families to dedicate the majority of their wealth to philanthropic pursuits, he found an early supporter in David.  Explaining his decision to make this pledge in 2010, he shared that some of the happiest people he knows have the least, while some of the most lonely and unhappy count billions in the bank.  He realized he has no interest in dying the richest man in the cemetery — subtly challenging all in attendance to lead by example and do something more then just making money.

Don’t forget your Mom

How do you know you’re a success?  When your Mom calls and thinks you’re doing something right.  Call it the “Mother’s Test;” for David, his mom never called about the millions he made, but about the millions he gave away.  I’m sure David won’t mind me borrowing this mantra for my own future use.

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*Thanks to Doug Duncan and his team at Leadership Greater Washington for putting together this morning’s inspirational program.  In addition, thank you to Richard and his colleagues at PNC for sharing their 12th floor with the cult!

The Best of Bank Director’s 2018 Acquire Or Be Acquired Conference?

Quickly:

PHOENIX, AZ — Well, that was fun!  Bank Director’s Acquire or Be Acquired Conference wrapped up on Tuesday evening, and with the benefit of a day to reflect on a jammed-packed experience, a few personal highlights from our time at the Arizona Biltmore.

Favorite tweets

Favorite picture

IMG_0518 2

I am SO proud to work with such a great team that truly embodies our #1 core cultural value of helping to make other’s successful.

Three timely (and paraphrased) comments

When it comes to identifying banks to buy… core deposits are more important than loans — David Zalman, Chairman & CEO, Prosperity Bancshares Inc.

Earnings accretion is answer 1,2,3,4 and 5 out of five possible answers to the question “what is most important in bank M&A” — Robert G. Sarver, Chairman & CEO, Western Alliance Bancorporation

If you sell your bank for cash, you’re truly selling your bank.  If you sell your bank for stock, you’re really investing in another’s future — Bill Hickey, Principal, Co-Head, Investment Banking, Sandler O’Neill + Partners, L.P.

Best comment (unintentional comedy)

IMG_0607

On Monday, during the Prioritizing Risk & Reward session that she moderated, our President, Mika Moser, brought the house down.  John Allison, the Chairman of Home BancShares just shared that he’d made a whole lot of millionaires at his bank when Mika deadpanned, “you gotta any available teller positions?”  Great stuff Mika!

Is this really a case to partner with FinTechs?

I’ve seen estimates that some 90% of FinTech startups will fail — for a variety of reasons (e.g. no one wants the product, cash shortage, etc).  So, when I do the math and consider that we have some 5,000 FinTechs looking to make it big, only 10% have a realistic chance. Out of these 500 or so companies, only the ones capable of consolidating and expanding across niches will acquire a significant enough footing in the market to ensure resilience and sustainable long-term growth. Banks, start your engines…

Video Recaps

In case you missed it, we shared a number of videos on BankDirector.com this week.  The page with all videos can be found here: The Pulse of Acquire or Be Acquired. To get a sense of what these short videos look like, here is an example from Sunday.

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If you missed the daily recaps shared on LinkedIn, Twitter and BD.com, here is a thumbnail with all the videos created. To playback the conference conversations via our social channels, I invite you to take search #AOBA18 to see what was shared by our attendees.

Do You Know These 3 Cs of Banking?

Quickly:

  • When it comes to talk about bank mergers and acquisitions, It has been written that the questions rarely change — but the conversations prove irresistible.

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

PHOENIX, AZ — If you’re with us here at the Arizona Biltmore for Bank Director’s annual Acquire or Be Acquired Conference, you’ve heard that banks with low‐cost core deposits continue to attract interest from acquirers.  So as banks wrestle with increased funding costs, that observation sparked an idea about what constitutes the “three Cs” of banking today:

  1. Compliance
  2. Cost Control
  3. Consolidation

For instance, having good on-going relations with one’s regulators is hugely important. In fact, I heard several prominent attorneys share that regulatory risk remains the greatest obstacle to completing an M&A deal.  So having the bank in position to act quickly and confidently when an opportunity arises is a major advantage in today’s competitive M&A environment.  I take this to mean no enforcement actions, satisfactory CRA, good HCR results, etc.

As was discussed yesterday afternoon, when an acquirer can present a credible narrative that a potential deal is consistent with a well-considered strategy — and that the company has the infrastructure appropriate to the new organization, you find a well received merger.

In terms of consolidation, we saw a number of presentations note the 261 bank M&A deals, worth an aggregate $26.38 billion, announced in 2017.  As a point of reference, 241 deals were announced — worth an aggregate $26.79 billion — in 2016.  According to S&P Global Market Intelligence, the median deal value-to-tangible common equity ratio climbed significantly in 2017 to 160.6%, compared to 130.6% for 2016.  Last December alone, 32 deals worth a combined $1.84 billion were announced and the median deal value-to-tangible common equity ratio was 156.5%.

Throughout the fourth quarter, there were 74 bank deals announced in the US, which was the most active quarter since 83 deals were announced in the fourth quarter of 2015. However, last quarter’s $4.4 billion aggregate deal value was the lowest since the third quarter of 2015, which totaled $3.43 billion.

These are by no means the only Cs in banking.  Credit, core technology providers, (tax) cuts… all, huge issues.  So along these lines, I made note of a few more issues for buyers, for sellers — and for those wishing to remain independent.  Take a look:

If you are interested in following the final day of the conference via our social channels, I invite you to follow me on Twitter via @AlDominick, the host company, @BankDirector, or search #AOBA18 to see what is being shared with (and by) our nearly 1,200 attendees.

5 Trending Topics at the Acquire or Be Acquired Conference

Quickly:

  • Large buyers are not in the bank M&A game right now; indeed, banks $25Bn and below continue to drive M&A activity. Case-in-point, 95% of total M&A deals since 2011 have buyer assets less than $25Bn. Might this change in 2018?

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

PHOENIX, AZ — Michael Porter, the noted economist, researcher and teacher, once said, “strategy is about making choices, trade-offs; it’s about deliberately choosing to be different. The essence of strategy is choosing what not to do. No one can tell you which rules to break, but you can acquire more skill in determining which rules to break given your talents and circumstances right now.”

Porter’s perspectives came back to me while listening to KBW’s CEO, Tom Michaud. Yesterday morning, Tom talked about the strategic paths that a bank’s CEO might consider in the years to come. As he shared, pressure from investors to deploy capital stimulated M&A discussions in 2017 — and will continue to impact deals in 2018. He also noted that pressure placed on deposit costs, as interest rates rise, contributes to the potential acceleration of bank consolidation. These were just two of the many notes I jotted down during the first day of our annual event. Broadly speaking, what I heard fell into five categories:

1. Economic trends
2. Regulatory trends
3. Small business lending trends
4. Management succession trends
5. Technological innovation trends

Many banks enter 2018 with steady, albeit slow loan growth — while recognizing modest margin improvement as they continue to focus on controlling expenses. Accordingly, I thought to elaborate on the issues I found interesting and/or compelling. Feel free to comment below if other points caught your eye or ear.

Economic Trends

FJ Capital authored a piece in late October that noted how, as the Fed progresses further into the tightening phase of the interest rate cycle, banks will find it more difficult to fund loan growth by raising new low‐cost deposits. Their view, which I heard echoed here, is banks with low‐cost core deposits will become more valuable over the next few years as banks wrestle with increased funding costs. In addition to this idea, I made note that banks with a strong deposit base could be more attractive to buyers as interest rates rise. However, a remark I’ve heard at past events re-emerged here. Namely, making a small bank profitable is hard; exiting, even harder.

Regulatory Trends

Given the audience here, I wasn’t surprised by the continued talk of removing the synthetic $10Bn designation. If the Fed, FDIC and OCC raise the $50Bn threshold as spelled out in Dodd Frank, we could see more banks in the $20Bn – $40Bn range come together. Given that large regional banks usually can pay high prices for smaller targets, unleashing this capacity could reignite more M&A and boost community bank valuations. In addition, the Community Reinvestment Act remains a major headwind in bank mergers. Many here want improvements in the CRA process, which in turn could reduce regulatory risk for bank M&A.

Small business lending

When it comes to the lifeblood of most banks — small business lending — a recurring question has been where and how community banks can take market share from larger banks. My two cents: closing loans faster is key, as is structuring loans to fit specific borrower profiles while being supremely responsive to the customer. Oh, and credit is a big theme right now — and the best clients typically have the best credit.

Management succession

An inescapable comment / observation: aging management teams and board members has been a primary driver of bank consolidation of late. I noted that the average age of a public bank CEO and Chairman is 60 and 66, respectively. It was suggested that this demographic alone plays a key factor in the next few year’s consolidation activity.

Technological trends

When it comes to bank mergers, one of the big drivers of deals is the rise in technology-driven competition (*along with regulatory costs and executive-succession concerns). I sense that most traditional banks haven’t really figured out the digital migration process we’ve embraced as a world. Finally, it appears that the biggest banks are winning the war for retail deposits.  This is an issue that many management teams and boards should be discussing…

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For those of you interested in following the conference conversations via our social channels, I invite you to follow me on Twitter via @AlDominick, the host company, @BankDirector and our @Fin_X_Tech platform, and search & follow #AOBA18 to see what is being shared with (and by) our attendees.

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.

21 Reasons I Am Excited About Acquire or Be Acquired

Quickly:

  • Making banking digital, personalized and in compliance with regulatory expectations remains an ongoing challenge for the financial industry. This is just one reason why a successful merger — or acquisition — involves more than just finding the right cultural match and negotiating a good deal.

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

PHOENIX, AZ — As the sun comes up on the Arizona Biltmore, I have a huge smile on my face. Indeed, our team is READY to host the premier financial growth event for bank CEOs, senior management and members of the board: Bank Director’s 24th annual Acquire or Be Acquired Conference. This exclusive event brings together key leaders from across the financial industry to explore merger & acquisition strategies, financial growth opportunities and emerging areas of potential collaboration.

AOBA Demographics

The festivities begin later today with a welcoming reception on the Biltmore’s main lawn for all 1,125 of our registered attendees.  But before my team starts to welcome people, let me share what I am looking forward to over the next 72 hours:

  1. Saying hello to as many of the 241 bank CEOs from banks HQ’d in 45 states as I can;
  2. Greeting 669 members of a bank’s board;
  3. Hosting 127 executives with C-level titles (e.g. CFO, CMO and CTO);
  4. Entertaining predictions related to pricing and consolidation trends;
  5. Hearing how a bank’s CEO & board establishes their pricing discipline;
  6. Confirming that banks with strong tangible book value multiples are dominating M&A;
  7. Listening to the approaches one might take to acquire a privately-held/closely-held institution;
  8. Learning how boards debate the size they need to be in the next five years;
  9. Engaging in conversations about aligning current talent with future growth aspirations;
  10. Juxtaposing economic expectations against the possibilities for de novos and IPOs in 2018;
  11. Getting smarter on the current operating environment for banks — and what it might become;
  12. Popping into Show ’n Tells that showcase models for cooperation between banks and FinTechs;
  13. Predicting the intersection of banking and technology with executives from companies like Salesforce, nCino and PrecisionLender;
  14. Noting the emerging opportunities available to banks vis-a-vis payments, data and analytics;
  15. Moderating this year’s Seidman Panel, one comprised of bank CEOs from Fifth Third, Cross River Bank and Southern Missouri Bancorp;
  16. Identifying due diligence pitfalls — and how to avoid them;
  17. Testing the assumption that buyers will continue to capitalize on the strength of their shares to meet seller pricing expectations to seal stock-driven deals;
  18. Showing how and where banks can invest in cloud-based software;
  19. Encouraging conversations about partnerships, collaboration and enablement;
  20. Addressing three primary risks facing banks — cyber, credit and market; and
  21. Welcoming so many exceptional speakers to the stage, starting with Tom Michaud, President & CEO of Keefe, Bruyette & Woods, Inc., a Stifel Company, tomorrow morning.

For those of you interested in following the conference conversations via our social channels, I invite you to follow me on Twitter via @AlDominick, the host company, @BankDirector and our @Fin_X_Tech platform, and search & follow #AOBA18 to see what is being shared with (and by) our attendees.

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.

Ranking the 10 Biggest Banks

Quickly:

  • Bank Director’s year-long Ranking Banking study focuses less on current profitability and market capitalization & more on how the top 10 banks in the U.S. are strategically positioned for success.

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

WASHINGTON, DC — It is with tremendous pride that I share the results of Bank Director’s year-long study on America’s 10 largest banks.
  As my colleague, Bill King, wrote to open our inaugural Ranking Banking, we felt that a truly comprehensive analysis of the largest banks was missing, one that includes not just profitability or customer satisfaction ratings, but also compiles numerous measures of strength and financial health — a project to rank each of the largest banks for each major line of business based on qualities that all big banks need.

For instance, we decided to rank banks for branch networks, mobile banking, innovation and wealth management. We analyzed corporate banking and small business lending. We interviewed experts in the field and did secret shopper visits to the biggest banks to find out what the customer experience was like.  Unlike other rankings, we even included complaints lodged with the Consumer Financial Protection Bureau as one of many customer satisfaction metrics that we analyzed.  In other words, there is little about the biggest banks in the nation that we left out.

So who came out on top?

JPMorgan Chase & Co. topped Bank Director’s 2018 Ranking Banking study.

In fact, Chase won five of the ten individual categories and ranked near the top in three more, and was judged by Bank Director to be the most worthy claimant of the title Best of the Biggest Banks.  The individual category winners are:

Best Branch Network: Wells Fargo & Co.

Despite its well-publicized unauthorized account opening scandal, Wells Fargo topped the branch category by showing the best balance of deposit growth and efficiency, and scored well on customer experience reports from Bank Director’s on-site visits.

Best Board: Citigroup

In ranking the boards of directors of the big banks, Bank Director analyzed board composition by factors such as critical skill sets, diversity, median compensation relative to profitability and independence. Citigroup’s board best balanced all components.

Best Brand: JPMorgan Chase & Co.

Chase and runner-up Capital One Financial Corp. stood out for their media spend as a percentage of revenue, and both exhibited strong customer perception metrics.

Best Mobile Strategy: JPMorgan Chase & Co.

Chase has been successful in driving new and existing customers to its mobile products, leading to an impressive digital footprint, measured through mobile app downloads. The bank’s app also scored well with consumers.

Best Core Deposit Growth Strategy: BB&T Corp.

BB&T had a low cost of funds compared to the other ranked banks, and its acquisitions played a strong role in its core deposit growth, which far surpassed the other banks in the ranking.

Most Innovative: JPMorgan Chase & Co.

Chase most successfully balanced actual results with sizeable investments in technological innovation. These initiatives include an in-residence program and a financial commitment to the CFSI Financial Solutions Lab. Chase has also been an active investor in fintech companies.

Best Credit Card Program: JPMorgan Chase & Co.

Chase barely edged out fast-growing Capital One to take the credit card category, outpacing most of its competitors in terms of credit card loan volume and the breadth of its product offering. Chase also scored well with outside brand and market perception studies.

Best Small Business Program: Wells Fargo & Co.

Wells Fargo has long been recognized as a national leader in banking to small businesses, largely because of its extensive branch structure, and showed strong loan growth, which is difficult to manage from a large base. Wells Fargo is also the nation’s most active SBA lender and had the highest volume of small business loans.

Best Bank for Big Business: JPMorgan Chase & Co.

Big banks serve big businesses well, and finding qualitative differences among the biggest players in this category—Chase, Bank of America and Citigroup—is difficult. But Chase takes the category due to its high level of deposit share, loan volume and market penetration.

Best Wealth Management Program: Bank of America Corp.

With Merrill Lynch fueling its wealth management division, Bank of America topped the category by scoring highly in a variety of metrics, including number of advisors (more than 18,000 at last count) and net revenue for wealth and asset management, as well as earning high marks for market perception and from Bank Director’s panel of experts.

FWIW…

The 10 largest U.S. retail banks play an enormously important role in the nation’s economy and the lives of everyday Americans. For example, at the end of 2016, the top 10 banks accounted for over 53 percent of total industry assets, and 57 percent of total domestic deposits, according to the Federal Deposit Insurance Corp. The top four credit card issuers in 2016—JPMorgan Chase & Co., Bank of America Corp., Citigroup and Capital One Financial Corp.—put more than 303 million pieces of plastic in the hands of eager U.S. consumers, according to The Nilson Report.

Blockchain: What It Is and How It Works

Quickly:

  • Many speculate that blockchain could turn out to be one of the most revolutionary technologies ever developed.

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

WASHINGTON, DC — J.P. Morgan’s CEO, Jamie Dimon, recently threw some big time shade at bitcoin.  However, as the Wall Street Journal shared this morning, he’s “still enamored with the technology that underpins it and other virtual currencies.”  For those wondering about where and why blockchain might revolutionize the business of banking, take a look at our just-released Q4 issue of Bank Director Magazine.  We dedicated our cover story to “Understanding Blockchain,” and this post teases out some of the key concepts bank executives and board members might focus in on.  Authored by John Engen, the full piece can be found, for free, here.  As you’ll read, the article covers three major points:

What is Blockchain

If you’re on the board of a typical U.S. bank, odds are that you don’t know much about blockchain, or distributed ledgers, except that there’s a heavy buzz around the space—and a lot of big bets being made. As John Engen wrote, being a know-nothing might be fine for now, but going forward could be untenable.

At its most basic, blockchain is a digital-ledger technology that allows market participants, including banks, to transfer assets across the internet quickly and without a centralized third party.

Some describe it as the next, inevitable step in the evolution of the internet; a structure to help confront concerns about security, trust and complexity that have emerged from a technology that has opened the world to sharing information.  To others, it looks more like business-process improvement software—a way to improve transparency, speed up transaction times and eliminate billions of dollars in expenses that markets pay to reconcile things like credit default swaps, corporate syndicated debt and other high-volume assets.

Where are things heading

“Trying to guess how blockchain is going to affect us in the next 20 years is kind of like standing in 1995 and trying to imagine mobile-banking technology,” said Amber Baldet, New York-based JPMorgan Chase & Co.’s blockchain program leader, in an online interview. “I’m sure the ultimate applications are things we can’t even imagine right now.”

For now, the space certainly has the feel of the 1990s internet, with hundreds of startups and billions of investment dollars chasing distributed-ledger initiatives.  Armonk, New York-based IBM Corp., a big blockchain supporter, estimates that 90 percent of “major” banks in the world—mostly those with trading, securities, payments, correspondent banking and trade finance operations—are experimenting with blockchain in some way.

Collaboration is the current buzzword

Most large banks are involved in consortiums with names like Ripple, Hyperledger, R3 and Enterprise Ethereum Alliance.  Smaller banks are taking more of a wait-and-see approach.  For all the promise of speed and efficiency, blockchain’s real power lies in its transparency, which makes data both trackable and immutable.  Ultimately, blockchain could usher in new business models, which require different ways of thinking.

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For members of a bank’s board, we created this “Blockchain 101” video.  In it, I touch on the potential application of blockchain in terms of digital identities, digital banking and cross-border payments.  In addition, the ten minute video surfaces key concepts and business ideas that remain material to many today.

*This video is just one of the offerings found in our Bank Services program designed to help board members and senior executives develop strategies to help their bank grow, while demonstrating excellence in corporate governance that shareholders and customers deserve and today’s regulators demand.