Three Observations from the Bank Board Growth & Innovation Conference

Select news and notes from the first day of Bank Director’s annual growth conference at the Ritz-Carlton New Orleans.

By Al Dominick // @aldominick

I mentioned this from the stage earlier today… every January, Bank Director hosts a huge event in Arizona focused on bank mergers and acquisitions.  Known as “AOBA,” our Acquire or Be Acquired conference has grown significantly over the years (this year, we welcomed some 800 to the desert).  After the banking M&A market tumbled to a 20-year low in 2009 of just 109 transactions, it has gradually recovered from the effects of the crisis. In fact, there were 288 bank and thrift deals last year, which was a considerable improvement on volume of 224 deals in 2013.  As our editorial team has noted, the buying and selling of banks has been the industry’s great game for the last couple of decades, but it’s a game that not all banks can — or want to — play.  Indeed, many bank CEOs have a preference to grow organically, and its to these growth efforts that we base today and tomorrow’s program.

Key Takeaway

To kick things off, we invited Fred Cannon, Executive Vice President & Director of Research at KBW, to share his thoughts on what constitutes franchise value. While he opened with a straight-forward equation to quantify franchise value over time — (ROE – Cost of Equity) × Market Premium — what really stuck with me during his presentation is the fact that a logo does not create franchise value, a brand does.  As he made clear, it is contextual (e.g. by industry’s served, technologies leveraged and clients maintained) and requires focus (e.g. you can’t be all things to all people).  Most notably, small and focused institutions trump small and complex ones.

Trending Topics

Anecdotally, the issues I took note of where, in no particular order:

  • Banks must be selective when integrating new technology into their systems.
  • The ability to analyze data proves fundamental to one’s ability to innovate.
  • When it comes to “data-driven decisions,” the proverbial life cycle can be thought of as (1) capture (2) store (3) analyze (4) act.
  • You don’t need a big deposit franchise to be a strong performing bank (for example, take a look at County Bancorp in Wisconsin)
  • We’ve heard this before, but size does matter… and as the size of bank’s balance sheet progresses to $10 billion, publicly traded banks generate stronger profitability and capture healthier valuations.

Picked Up Pieces

A really full day here in New Orleans, LA — with quite a few spirited discussions/debates.  Here are some of the more salient points I made note of throughout the day:

  • Selling services to large, highly regulated organization is a real challenge to many tech companies.
  • Shadow banking? Maybe its time I start calling them “Challenger banks.”
  • CB Insight’s has a blog called “unbundling the bank” — to understand the FinTech ecosystem, take a look at how they depict how “traditional banks are under attack from a number of emerging specialist startups.”
  • A few sidebar conversations about Wells Fargo’s incubator program, which the San Francisco bank began last August… interest in how the program involves direct investment in a select group of startups and six months of mentoring for their leaders.

To see what’s being written and said here in New Orleans, I invite you to follow @bankdirector, @aldominick + #BDGrow15.

Focused on Financial Analytics

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

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

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

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

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

Today is FinTech Day at NASDAQ (here’s what you need to know)

The who, what, when, where and why of FinTech Day at NASDAQ, a collaboration between the exchange and my company, Bank Director, that celebrates the contributions of financial technology companies — fintech for short — to banks across the U.S.

 

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Who: Bank Director, a privately-held media & publishing company focused on issues fundamental to a bank’s CEO, senior leadership team and board members, teams up with the NASDAQ OMX to showcase various technology-driven strategies and tactics successful banks use to fuel profitable, sustainable growth.

What: FinTech Day at the NASDAQ

When: Today, September 8

Where: The NASDAQ MarketSite (4 Times Square – 43rd & Broadway)

Why: Because who says there is no innovation in banking?  During this day-long event, we keep our focus on a board’s level, exploring growth opportunities made possible by various technology products and services.

To Watch: We will welcome a number of executives from the Fintech community throughout the day, along with one of the country’s biggest (and actually, oldest) institutions: BNY Mellon.  Personally, I’m looking forward to chatting with their Managing Director – Strategic Growth Initiatives, Declan Denehan, at 2 PM ET for an hour-long session focused on innovation, competition and staying relevant. Thanks to our friends at NASDAQ, you can watch the live feed for free (click here to register and watch).  At 3:55 ET, I’ll join our publisher, Kelsey Weaver, to ring the closing bell. A webcast of the NASDAQ Closing Bell will be available (click here or here) if you are keen to see how we wrap up FinTech day.

Of Social Note: To follow the conversation, let me suggest these twitter handles: @bankdirector, @nasdaqomx, @bankdirectorpub and @aldominick. For photos from the ceremony and event, you can visit NASDAQ’s Instagram Page or Facebook page later today.  As we are all about being a part of the community and broader conversations, Bank Director will use #fintech for its tweets.