WASHINGTON, DC — It turns out, Bono knew something about banking.
Thirty-four years ago, an Irish band came up with an album that sounded revolutionary for its time. U2’s “The Joshua Tree” went on to sell more than 25 million copies, firmly positioning it as one of the world’s best-selling albums. Hits like “I Still Haven’t Found What I’m Looking For” remain in heavy rotation on the radio, television and movies.
Talk about staying relevant. As it turns out, U2 had some wisdom for us all.
Relevance is one of those concepts that drives so many business decisions. For Bank Director, the term carries special importance, as we postpone our annual Acquire or Be Acquired Conference to January 30 through Feb. 1, 2022. In past years, this special event drew more than 1,300 bankers, bank directors and advisors to discuss concepts of relevance and competition in Phoenix.
While we wait for our return to the Arizona desert, we got to work on a new digital offering to fill the sizable peer-insight chasm that now exists.
Think of this as a new pop-up website, one that disappears after a few glorious weeks. Available exclusively on BankDirector.com, this on-demand package consists of timely short-form videos, CEO interviews, live “ask me anything”-type sessions and proprietary research. Topics range from building value to doing a deal, enhancing culture to addressing competition — and yes, technology’s continued impact on our industry.
Everything within this board-level intelligence package provides insight from exceptionally experienced investment bankers, attorneys, consultants, accountants, fintech executives and bank CEOs. So with a nod towards Paul David Hewson (akaBono) and his bandmates in U2, here’s a loose interpretation of how three of their Joshua Tree songs are relevant to bank leadership teams.
With or Without You
(The question all dealmakers ask themselves.)
Many aspects of an M&A deal are quantifiable: think dilution, valuation and cost savings. But perhaps the most important aspect — whether the deal ultimately makes strategic sense — is not. As regional banks continue to pair off with their peers, I talked with a successful dealmaker, Bryan Jordan, the CEO of First Horizon National Corp., about mergers of equals.
Where the Streets Have No Name
(Banks can help clients when they need it most.)
A flood of new small businesses emerged in 2020. In the third quarter 2020 alone, more than 1.5 million new business applications were filed in the United States, according to the U.S. Census Bureau, nearly double the figure for the same period the year before. Small businesses need help from banks as they wander the streets of their new ventures. So, I asked Dorothy Savarese, the Chair and CEO of Cape Cod 5, how her community bank positions itself to help these new business customers. One part of her answer really resonated with me, as you’ll see in this short video clip.
Running to Stand Still
(Slow to embrace new opportunities? Don’t let this become your song.)
With the rising demand for more compelling delivery solutions, banks continue to find themselves in competition with technology companies. Here, open banking provides real opportunities for incumbents to partner with newer players. Ideally, such relationships provide customers greater ownership over their financial information, a point reinforced by Michael Coghlan, the CEO of BrightFi.
These short videos provide a snapshot of the conversations and presentations that will be available February 4. To find out more about Inspired By Acquire or Be Acquired, I invite you to take a longer look at what’s on our two-week playlist.
WASHINGTON, DC — Five years ago, Bank Director published a special supplement to our quarterly magazine — one dedicated to the intersection of banking and technology. A precursor to our FinXTech efforts, this fifteen-page series of case studies explained advances in technology. All, to help bankers address specific business challenges that remain relevant in 2021.
At the time, financial technology elicited grumbles about disruption or displacement… while sparking interest in new applications for mobile banking. In 2015, 68% of American adults connected to the Internet with smartphones or mobile devices. That figure, courtesy of the Pew Research Center, figures to be much higher today.
Five years ago, banks faced pressures to grow revenue and reduce expenses. Time hasn’t changed that equation for banks.
Certainly, there was, and is, money to be both made and saved in banking. Some of the more ambitious companies, who want to stay relevant and solve their customers’ problems, trimmed expenses while growing revenues.
This supplement provides a fun history lesson as to how they did.
As we wind down the year, I’m taking a look back on the biggest tech IPO of 2020.
WASHINGTON, DC — I first ventured into nCino‘s Wilmington, NC headquarters when the pioneer in cloud banking and digital transformation solutions employed less than ten people. Today, that number exceeds 1,000. Since that first flight into ILM, I have met a number of their senior team, enjoyed myself at their annual nSight conferences and heard how cloud-based companies like theirs appeal to bank executives and their boards.
Their employment growth parallels the success of their business, one that transitioned from a private company to a public one this summer. As you can see, their IPO (code-named “Project Jackson”) made it on the cover of BankDirector magazine this summer.
I was delighted that our editorial team chose both the story name, and cover art, based on the inspiration behind “Project Jackson.” In addition, proud that we shed light on a much bigger story; namely, how the Covid-19 pandemic impacts the process of going public.
As an early New Years gift, I took this out from behind the BankDirector.com paywall and share the unabridged article, authored by John Maxfield, below.
Nobody at nCino slept well the night of July 13, 2020. The company, a pioneer of cloud-based services for financial institutions, was going public the next day. Never before had the spotlight shone so intensely on the rapidly growing technology company based in Wilmington, North Carolina. It was a moment of truth. Its leadership team and employees had spent almost a decade building the company — now investors would judge it over the course of a single day. Going public is always a gamble, but never more so than in a global pandemic.
Dory Weiss woke up early the next morning. The 41-year-old vice president of engineering at nCino was scrambling to upload photos onto a mobile app. The app would broadcast images taken by nCino employees onto Nasdaq’s seven-story monitor in Times Square. What better way to mark the occasion, Weiss thought, than a picture of her cats with an nCino-themed pinata that a colleague gave her for Cinco de Mayo? There was only one problem. “Getting cats to do anything you want them to do is a fool’s errand,” Weiss laments. “So there was this laughably bad photograph of the cats and my partner, Katie, trying to stage them.”
Similar scenes were unfolding in hundreds of homes across Wilmington and around the world. Over 900 nCino employees in 12 countries uploaded more than 6,000 photos that morning. They then spent hours watching a livestream of Nasdaq’s giant monitor as it cycled through the images.
Weiss arrived at nCino’s headquarters around 8 a.m. Hundreds of her colleagues would have done the same, but for the social-distancing restrictions enacted to slow the spread of Covid-19. The few dozen who showed up that morning planted themselves in a pair of common areas on the second and third floors, with the rest patched in remotely.
Everyone was watching CNBC.
“There’s an IPO today,” announced David Faber, co-anchor of CNBC’s morning show, Squawk on the Street. “nCino, N-C-N-O. Cloud software for financial institutions — fintech.”
“I want that,” co-anchor and Mad Money host Jim Cramer responded. “What is it? nCino?”
“Yeah. N-C-N-O,” Faber repeated.
“Done. I want 10%.”
After pricing at $31 per share the night before, nCino’s stock opened for trading at $71 two minutes before noon. People erupted into cheers. By the end of the day, nCino’s stock closed at $91.59, good for a 195% surge on its first day as a public company. Only one other technology company in the past 20 years — China’s search engine giant, Baidu, which debuted in 2005 — performed better.
Had this been the height of the tech bubble in early 2000, no one would have been surprised. But this was two weeks after the close of the worst economic quarter in the United States since the Great Depression. Nearly a third of economic output had vanished. Four months earlier, 6.9 million people filed for unemployment benefits in a single week. How did nCino’s share price nearly triple in this environment? And how did its executives, employees and advisors navigate the intricacies of filing an initial public offering — from securing regulatory approval, to enticing investors, to actually listing on the exchange — when they couldn’t meet with each other, let alone investors, in person?
The story of nCino’s IPO — code-named “Project Jackson,” after CEO Pierre Naudé’s cat, which was named after the nCino employee, Reid Jackson, whose car it was found under one day in the company’s parking lot — is compelling on its own. Yet, it also sheds light on a bigger story about how the process of going public may have been permanently altered by the Covid-19 pandemic.
The journey to become a publicly traded company started for nCino at a meeting on the 27th floor of Bank of America Corp.’s building in midtown Manhattan on Sept. 24, 2019. The nation’s second largest bank by assets was acting as its lead underwriter; it’s also an nCino client. “We sat down, talked about the company and mapped out the process, working backward from when we wanted to go public,” recalls Jonathan Rowe, chief marketing officer of nCino.
The original plan was to debut in late May. That way, nCino could benefit from the results of its latest fiscal year, which would close on Jan. 31, yet still beat the summer lull when traders and portfolio managers flee New York City for places like the Hamptons.
The biggest undertaking at that stage was drafting the S-1, the document submitted to the Securities and Exchange Commission for an IPO. In nCino’s case, its S-1 ran 322 pages, densely packed with legalese, risk factors, an explanation of the business and financial statements for the preceding three years. “Drafting the S-1 is an incredibly involved process,” says nCino’s chief corporate development and legal officer, Greg Orenstein, who took the lead on the process. “Essentially, we are describing over eight years’ worth of work, product development, innovation and customer success in one document for investors to use to decide whether to invest in our company.” Hours were spent parsing the simplest terms, like how to distinguish between banks that were customers of nCino, and customers of those banks — nCino has “customers,” it decided; its bank customers have “clients.”
Everything proceeded like clockwork in the two months after nCino confidentially filed its S-1 on the Thursday before Christmas 2019. Its IPO working group responded to questions and addressed requested edits to the document from the SEC. Its financial team closed the books on the 2020 fiscal year. And its executives and advisors began preparing the presentation they would use on its roadshow, a grueling two weeks spent flying around the country pitching the company’s stock to institutional investors.
Then Covid-19 struck.
“We were moving along as the virus spread around the country, then the markets started getting hit,” recalls David Rudow, nCino’s chief financial officer. “The speed at which the stock market declined was very concerning. To me, it’s like, ‘The market is discounting some really bad news.’”
By mid-March, the stock market was in freefall. The S&P 500 dropped 9.5% on March 12 — the sixth worst drop in the history of the index. Four days later, it tumbled 12% — the biggest single-day decline since Black Monday on Oct. 19, 1987. All told, the S&P 500 had lost 38% of its value by then. Meanwhile, the Chicago Board Options Exchange’s Volatility Index, or VIX, a measure of expected future stock market volatility, spiked by a factor of five — exceeded in recent years only in the immediate wake of Lehman Brothers’ bankruptcy in 2008.
“The arrival of the pandemic and market volatility was really an opportunity to sit back and try to figure out what was going to happen,” says Martin Wellington, managing partner at Sidley Austin’s office in Palo Alto, California, who served as nCino’s outside counsel in the IPO process. “I’ve done IPOs and lots of other capital markets transactions in the midst of market volatility, but the thing that made this fundamentally different was the inability to have physical interactions with people.”
By late March, Rudow says, it became a foregone conclusion. “We said, ‘You know what? We’re just going to hold off.’”
The decision to delay the IPO fell to nCino’s CEO, Naudé, a distinguished-looking South African who’s built like a rugby player and speaks with an Afrikaans accent.
The 61-year-old executive grew up as one of five children of a well-to-do farmer in Worcester, South Africa. From an early age, he fit the psychological profile of an entrepreneur, exhibiting a restless disdain for authority and an appetite for competition. “I always struggled with authority over me, people trying to tell me what to do,” he says. Despite this, Naudé served an obligatory year in the South African military after graduating from high school. He spent three months in basic training and two months in guerrilla warfare training before returning to his hometown for the last seven months to effectively serve as a beat cop. “Nothing ever happened,” he says. “If I think back, still to this day, I think we were as useless as you possibly could get.”
A turning point came after Naudé finished his military service. “I sat back and said, ‘What am I going to do now?’” he recalls. “I literally did not have a plan.” So he applied for a job at a bank — Boland Bank, the equivalent of a regional bank in the United States. He spent the next few months learning how to program, and then the following eight years doing just that. One of Boland’s claims to fame during Naudé’s time at the bank, and a project he was intimately involved in, was stringing together the first ATM network in South Africa. “We wrote lots of code, wrote the core, wrote teller systems, wrote deposit systems, a loan system, et cetera,” Naudé says.
After traveling to the United States to train and scout technology for Boland, Naudé immigrated with his wife and infant daughter to America in 1987. He moved first to Philadelphia, where he worked as a consultant. He then moved to Iowa, working while going to school at Upper Iowa University, before a former colleague from Boland recruited him to work at S1 Corp., a software development company near Atlanta. It was at S1, which specialized in payment processing and financial services software, that Naudé made the connections that later brought him to nCino.
Naudé is a popular leader by all accounts. “Why do I always tear up when this man talks,” commented an nCino employee in an internal chat log provided to the author from a company “all-hands” meeting in April 2020. “For those of you who are starting on your career paths and are fortunate enough to be part of the nCino family,” wrote another, “embrace it and appreciate it. There is no other company that even comes close in culture to what we have here.”
This is intentional. “The thing I want to make sure you understand is that we have never paid a consultant to come and tell us about culture and values and those things,” Naudé says. “I think the benefit of being 30 years old, coming to America, starting at the bottom again, and working for a variety of managers — that experience gave me a deep understanding of the value of people. And so when we started the company, literally after about six months, we probably had 20 people, I thought, ‘Well, it’s probably time to get our values together.’ So I drew them up. They’re the same values that drive us today.”
Among Naudé’s colleagues at nCino, Orenstein probably knows him best. “I’ve been fortunate to know Pierre for 15 years and I consider him a dear friend,” says Orenstein, who had previously worked with Naudé at S1. “Pierre is just Pierre. There’s no pretending to be someone he’s not. He’s just an extremely transparent person, and as you spend time with him, you pick up on that.”
While Naudé decided in early March to delay nCino’s IPO, the project’s working group of executives, legal advisors and investment bankers continued laboring behind the scenes. It was never a matter of if nCino would go public, only a matter of when. One question looming over them was whether it was even possible to pull off an IPO in a pandemic, given that they wouldn’t be able to meet prospective investors in person.
It was proposed in early April that they start testing the waters with investors over video-conferencing platforms like Zoom Video Communications and BlueJeans by Verizon. The initial reaction, Wellington recalls, was, “We’ll never do that. Let’s just wait for this to pass, and then in May, when we can get back together with people, we’ll go around and do the usual testing-the-waters meetings.” Within weeks, however, their perspective had shifted. “We were like, ‘Okay, we’re doing this virtually,’” says Wellington, who advises regularly on IPOs. “The bankers were saying, ‘Yeah, we’ve done one or two, and it seems to work pretty well. But of course, we’ll wait for this to pass before we can do the roadshow, because no one would ever invest in an IPO without being able to meet the management team in person.’”
After the federal government declared the Covid-19 pandemic a national emergency on March 12, the IPO market froze. Not a single company went public for the rest of the month, compared to nine IPOs over the same period in 2019. The market started thawing in April, with new listings slowly trickling out. The pace picked up in May, with seven IPOs in the first week alone. But the breakthrough moment came on May 21.
That day, shares of direct-to-consumer insurance company SelectQuote climbed 35% on its first day of trading. That opened the floodgates. Thirty-seven companies went public in June, nearly a dozen more than in June 2019. Among those was ZoomInfo Technologies, which closed 62% higher in its debut. Far from being an IPO apocalypse, 2020 had become a bonanza.
“We thought in late March and early April that you would never get an IPO done in this market,” Wellington says. “But not only were IPOs getting done, the receptivity to them was surprising, frankly.”
The Federal Reserve is largely to thank for this. By March 15, it had cut the federal funds rate to 0%. That same day, it announced a round of quantitative easing, an unconventional monetary policy tool first deployed in the financial crisis of 2008-09 that floods capital markets with liquidity in order to drive down long-term interest rates. Over the next two and a half months, the Fed purchased $2.8 trillion worth of government bonds and other long-term securities. This lowered bond yields and triggered a deluge of capital into equities — especially technology stocks. Throughout the following four months, despite a steep drop in economic activity and sharp increase in unemployment, the S&P 500 recovered most of its lost ground, led by the likes of Amazon.com, Microsoft Corp. and Apple.
These events coincided with auspicious developments within nCino, too. On May 18, it completed its first-quarter review, capturing the company’s success with the Paycheck Protection Program, a loan program administered by the Small Business Administration designed to help small businesses survive the pandemic. All told, banks originated over $50 billion in PPP loans using nCino’s cloud-based Bank Operating System. New customers purchased its software; existing customers subscribed to new services. The coronavirus crisis had become a proving ground for nCino.
The moment was ripe, nCino’s executives concluded. They decided to pull the trigger after Memorial Day. The company would go public in mid-July.
“We wanted to be one of the companies that helped open the IPO market,” Rowe explains. “We’ve always seen ourselves as a leader in cloud banking, so we brought that same mentality to the IPO process — not only from the perspective of the financial services industry, but for the economy overall.”
The success of nCino through the early stages of the Covid-19 pandemic wouldn’t come as a surprise to anyone who had followed the company. Amongst its founding software benefits, as it incubated within Live Oak Bancshares in 2010, was facilitating remote work.
The Wilmington-based bank specialized in originating SBA loans to veterinarians, which minimized credit risk because the loans were backed by the government. But to generate enough scale to earn a respectable profit, the strategy had to expand nationwide. In lieu of branches, Live Oak bought a pair of corporate jets — “branches in the sky” — to shuttle loan officers around the country winning business. There was just one catch. To make the vision a reality, the bank needed software that enabled its loan officers to remotely complete loan files from end to end.
Of the millions of lines of code embedded in nCino’s software, Nathan Snell wrote the first one. Even on a video conference call, the 34-year-old chief innovation officer of nCino emits the peculiar breed of confidence that’s born from a union of acute intelligence and knowing success from a young age. As the son of an engineer, Snell grew up surrounded by technology in Santa Cruz, California. His earliest memory is of using a soldering iron to build computers. He taught himself how to program and, at age 11, convinced a popular talk radio host in San Francisco to hire him to design her website.
Snell eventually made his way to Live Oak in 2010, after graduating from the University of North Carolina Wilmington and getting to know the bank’s founder and CEO, James “Chip” Mahan, and president, Neil Underwood. “I wasn’t actually sure if I wanted to join them fully, so I did some consulting to start,” Snell says. “About a week in, I was looking at how they were operating and was like, ‘Wow, there’s a lot of opportunity here.’ I spent a lot of time with Chip and Neil, and they were both just phenomenal. As a budding entrepreneur, I was like, ‘Wow, it would be amazing to be able to work directly with these guys and learn from them.’ So I shuttered what I was doing and joined them full-time.”
In doing so, Snell became nCino’s first employee.
From its earliest days, nCino had grand ambitions. Naudé hung a sign in its makeshift office space declaring it the global headquarters of the worldwide leader in cloud banking. “Every day you walked in and you’re like, ‘Wow, we’re the worldwide leader with only 10 people,’” recounts Rowe, who joined the company eight years ago as one of its earliest employees.
The year 2012 proved to be a seminal one for nCino. After other banks expressed interest in Live Oak’s software, nCino, a play on the Spanish word for “oak,” was spun out as a separate company. By the end of that year, the newly independent company had raised $9 million in capital, hired more employees and signed on 25 customers. It followed that in 2013 by raising $10 million from Wellington Management Co., a prominent institutional investor in the banking space, and hosting its first user conference, nSight, which long-tenured employees look back on as the company’s coming-out party. Over the next five years, nCino would grow to 130 customers and 270 employees.
Originally, nCino focused on the smaller institutions that populate the financial services industry — community and regional banks as well as credit unions. But that changed in late 2014, when SunTrust Banks, a $205 billion bank at the time, became its first enterprise banking client. (SunTrust has since merged with BB&T Corp. to form Truist Financial Corp., the sixth largest commercial bank in the United States. It remains an nCino customer.)
SunTrust was spending north of $20 million a year to digitize its commercial lending system. That’s when Pam Kilday, head of operations for its wholesale bank, came across nCino. “I thought, ‘This is exactly what I’m trying to build for not only commercial loans, but all of business banking,’” Kilday recalls. “We decided to investigate the feasibility of bringing nCino in, doing kind of a co-development, which flew in the face of everything we had been doing. At first, just about everybody wanted to fire me.”
(A year after retiring from SunTrust in 2018, Kilday joined nCino’s board of directors.)
The technology wasn’t the only thing that attracted SunTrust to nCino, Kilday says — it was also the people. “I thought Pierre was the real deal,” she says. “Everything we saw, every commitment they made to us at that time, they delivered. Whether it was documentation on their security setup, whether it was their contractual agreements with Salesforce at the time. Everything they told me was true. If they could do something, they would say it. If they couldn’t, they would tell me.”
That may sound trite, but it’s a frequent refrain of nCino customers. “Our relationship with nCino developed before I got to know Pierre, though I’ll say he sealed the deal as most CEOs can do when they get into a high-pressure situation,” says Frank Sorrentino III, chairman and CEO of ConnectOne Bancorp, a $7.6 billion bank based in Englewood Cliffs, New Jersey. “But the nCino organization sold the relationship on its own. There’s a great group of people there. They’re committed to building a better mousetrap to help banks provide a level of service that clients will expect in the future.”
By the time nCino publicly filed its S-1 with the SEC on June 22, 2020, it boasted more than 1,100 bank and credit union customers, over 900 employees spread across seven global offices and $138 million in annual revenue.
On July 14, the morning of nCino’s IPO, Rowe woke up at 4 a.m. and walked three blocks to the beach. Nine years earlier, he left a position as a professor at the University of North Carolina Wilmington to join the embryonic nCino team. Rowe is a study in contrasts. He masks intensity with levity. He’s an executive at nCino yet takes video calls during the pandemic in the unfinished basement of his house, framed by hastily constructed shelves and insulation falling from the ceiling.
Sitting on the beach that morning waiting for the sunrise, Rowe was more reflective than ecstatic. He had been involved in Project Jackson since the beginning. And now, despite nCino’s decision to go public in a global pandemic, there was little doubt that it would be a success. The evening before, 8 million shares of nCino’s stock, equal to 8.5% of its total outstanding share count, were allocated to institutional investors at $31 per share. The demand for the offering was 49 times oversubscribed. Far from being a hindrance, conducting a virtual roadshow, consisting of more than 50 meetings over five days, proved to be a blessing in disguise. “I didn’t think about it until now,” says Rudow, “but because you’re touching so many more people, it probably helped build the book.”
But Rowe and the marketing team’s work wasn’t done. They mailed over 900 swag boxes to employees, packed with miniature nCino-themed bells to mark the occasion. They repainted and reconfigured Naudé’s office to serve as a makeshift studio for the media interviews he would conduct that day. And along with Nasdaq, they co-hosted an internal broadcast giving nCino employees a behind-the-scenes view of the day’s events, walking them through exactly how a company goes public.
While the stock market opens for trading at 9:30 a.m. EST, it isn’t until later in the morning that newly listed companies on Nasdaq start to actively trade. “We do not open up our IPOs at the same time as the broader market,” explains Joe Brantuk, chief client officer at Nasdaq. “There’s about 8,000 publicly traded companies in the United States and we want to give portfolio managers and traders an opportunity to position their existing holdings at the market open before turning their focus to new listings.”
Instead, Nasdaq reserves a “quotation window” for each new listing on the morning it debuts. This is the on-deck circle, if you will, just before a company’s stock begins trading. During this window, which can last from 10 minutes to multiple hours, Nasdaq’s market makers work with a stock’s underwriters to find an “indicative price” at which there’s a balance between buyers and sellers. If there are too many sellers relative to buyers, the stock could dramatically fall. If there are too many buyers relative to sellers, the reverse will happen. Neither is ideal. To minimize volatility, the goal is to find the price at which approximately 10% of the newly listed shares will trade hands — nCino’s magic number was 800,000 shares.
The quotation window for nCino opened at 10:10 a.m.
At 10:15 a.m., Nasdaq’s market makers were fielding buy orders for 4.7 million shares versus sell orders of 200,000 shares.
At 10:48 a.m., 486,000 shares were paired off at $62.
At 11:00 a.m., 708,000 shares were paired off at $65.
At 11:15 a.m., the threshold had been reached: 931,000 shares paired off at $70.
Still, they kept going.
By 11:40 a.m., 1.5 million shares were paired at $71 — about 20% of the total raise.
At 11:55 a.m., Jay Heller, head of capital markets at Nasdaq, gave the two-minute warning.
At 11:58 a.m., nCino’s stock opened for trading at $71 per share.
By 4 p.m., when the market closed for the day, nCino’s stock stood at $91.59 per share.
There is no single answer to the question of what makes for a successful IPO. The timing must be right. The story must be right. The market dynamics must be right. And, especially in the case of nCino, which went public in a pandemic, you must make the most of a challenging situation.
There is no question that nCino prevailed on all accounts. It is a company that is leading the digital revolution of one of the biggest industries in America. Its culture and story appeal to investors across the board. And its nimble response to the restrictions imposed on the IPO process from the pandemic — from negotiating the inability to meet with investors in person to orchestrating an IPO experience that nearly 1,000 remote employees could participate in — made it, in many ways, bespoke for this moment.
WASHINGTON, DC — In 2017, Bank Director magazine featured a story titled “The API Effect.” It showed how banks could earn revenue by using application programming interfaces, or APIs. It considered the pros (and cons) of banks turning themselves into technology platforms. And it concluded with a prediction:
APIs will be so prevalent in five years that banks who are not leveraging them will be similar to banks that don’t offer a mobile banking application.
Less than three years later, the banking industry is on a fast track to proving that hypothesis.
Let’s start with the basics. An application program interface, or API, controls interactions between software and systems. As the American Banker recently shared, “APIs are the glue of the internet and allow digital businesses to interact seamlessly. Banks create a digital-first business model by offering services, such as treasury or loan origination, through APIs in an open-banking system.”
So to help bank executives better understand the promise and potential of APIs, our team developed a special FinXTechIntelligenceReport. In it, we explore use cases with a focus on banking, and detail the forces driving adoption of the technology among financial institutions of all sizes.
Divided into five parts, we explore:
— Market trends driving the adoption of APIs; — Actionable API use cases for growing revenue and creating efficiencies; — An in-depth case study of TAB Bank, which reimagined its data infrastructure with APIs; — Key considerations for leadership teams developing an API strategy; and — A map of the API provider landscape, highlighting the leading companies enabling API transformation.
Kudos to the talented Amber Buker for spearheading this effort. As she makes clear, there are several ways for banks to implement APIs. Some will work with their cores (e.g. FIS, Fiserv and Jack Henry) to access the necessary connectivity. Ready-made APIs from fintech providers can quickly address the most common connectivity requirements.
For more complex use cases — like large banks running on old mainframes — the line from systems of record to end users could be longer, with several providers along the path. Regardless of where you are on your journey, understanding the landscape of API providers helps banks get a firmer grasp on the technology and start conceptualizing the scale and design of their potential API project.
WASHINGTON, DC — Last month, our team celebrated ten years of “Bank Director 2.0.” As I look back on what we’ve accomplished, a few projects stand out. Today, I’m shining a light on the development of our FinXTech Platform, which we built specifically for financial institutions.
Bank Director’s FinXTech debuted on March 1, 2016 at Nasdaq’s MarketSite in Times Square. Positioned at the intersection of Financial Institutions and Technology Leaders, FinXTech connects key decision makers across the financial sector around shared areas of interest.
We initially focused on bank technology companies providing solutions geared to Security, leveraging Data + Analytics, making better Lending decisions, getting smarter with Payments, enhancing Digital Banking, streamlining Compliance and/or improving the Customer Experience.
As our brand (and team) grew, we heard from a number of bank executives about the challenges they faced in discovering potential technology partners and solutions. To help solve this issue, we built FinXTechConnect.
Sorting through the technology landscape is no easy feat. Nor is finding, comparing and vetting potential technology partners. But week-by-week, and month-by-month, we added to this proprietary platform by engaging with bankers and fintech executives alike. All the while, asking (whenever we could) bankers who they wanted to learn more about at events like our annual Summit or Experience FinXTech events.
Banks today are in the eye of a digital revolution storm. A reality brought about, in no small part, by this year’s Covid-19 pandemic. So I am proud that the work we do helps banks make smarter business decisions that ultimately help their clients and communities. To wit, the various relationships struck up between banks and fintechs to turn the SBA’s PPP program into a reality.
As we look ahead, I’m excited to see Bank Director’s editorial team continue to carefully vet potential partners with a history of financial performance and proven roster of financial industry clients. For those companies working with financial institutions that would like to be considered for inclusion in FinXTech Connect, I invite you to submit your company for consideration.
WASHINGTON, DC — With this week’s news that nCino is readying itself for an IPO, I thought to postulate about who “the next nCino” might be in the fintech space. By this, I mean the tech company about whom bank executives cite as doing right by traditional institutions.
For context, nCino developed a cloud-based operating system for financial institutions. The company’s technology enables both customers and financial institutions to work on a single platform that’s optimized for both retail and commercial accounts. In simple terms, they provide everything from retail and commercial account opening to portfolio management for all of a bank’s loans.
In its IPO filing, the company says it works with more than 1,100 financial institutions globally — whose assets range in size from $30 million to $2 trillion. Personally, I remember their start and been impressed with their growth. Indeed, I’ve known about nCino since its early Live Oak Bankdays. I’ve gotten to know many on their executive team, and just last Fall shared a stage with their talented CEO, Pierre Naudé, at our annual Experience FinXTech conference in Chicago.
So as I think about who might become “the next” nCino in bankers’ minds across the United States, I begin by thinking about those offering solutions geared to a bank’s interest in Security, leveraging Data + Analytics, making better Lending decisions, getting smarter with Payments, enhancing Digital Banking, streamlining Compliance and/or improving the Customer Experience. Given their existing roster of bank clients, I believe the “next nCino” might be one of these five fintechs:
While I have spent time with the leadership teams from each of these companies, my sense that they might be “next” reflects more than personal insight. Indeed, our FinXTech Connect platform sheds light on each company’s work in support of traditional banks.
For instance, personal financial management (PFM) tools are often thought of as a nice perk for bank customers, designed to improve their experience and meet their service expectations. But when a PFM is built with data analytics backing it, what was seen as a perk can be transformed into a true solution — one that’s more useful for customers while producing revenue-generating insights for the bank. The money management dashboard built by Utah-based MX Technologies does just that.
Spun out of Eastern Bank in 2017 (itself preparing for an IPO), Boston-based Numerated designed its offering to digitize a bank’s credit policy, automate the data-gathering process and provide marketing and sales tools that help bank clients acquire new small business loans. Unlike many alternative lenders that use a “black box” for credit underwriting, Numerated has an explainable credit box, so its client banks understand the rules behind it.
Providing insight is something that Autobooks helps small business with. As a white-label product that banks can offer to their small-business customers, Autobooks helps to manage business’s accounting, bill pay and invoicing from within the institution’s existing online banking system. Doing so removes the need for small businesses to reconcile their financial records and replaces traditional accounting systems such as Quickbooks.
The New York-based MANTL developed an account opening tool that comes with a core integration solution banks can use to implement this and other third- party products. MANTL allows a bank to keep its existing core infrastructure in place while offering customers a seamless user experience. It also drives efficiency & automation in the back-office.
Finally, Apiture’s digital banking platform includes features such as digital account opening, personal financial management, cash flow management for businesses and payments services. What makes Apiture’s business model different from most, though, is that each of those features can also be unbundled from the platform and sold as individual modules that can be used to upgrade any of the bank’s existing systems.
Of course, these are but five of hundreds of technology companies with proven track records of working with financial institutions. Figuring out what a bank needs — and who might support them in a business sense — is not a popularity contest. But I’m keen to see how banks continue to engage with these five companies in the months to come.
PHOENIX —When Bank Director first introduced our Acquire or Be Acquired Conference 25 years ago, some 15,000 banks operated in the United States. While that number has shrunk considerably — there are 5,120 banks today — the inverse holds true for the importance of this annual event. What follows are two short videos from our first day in the desert that surface a few key ideas shared with our 1,300+ attendees.
Three Interesting Stats:
Of the 5,120 banks in the U.S., 4,631 are under $1Bn in asset size and 489 are over that amount.
Two years ago, we talked about the sweet spot of banking being banks between $5B and $10B in asset size; now, its those with assets of $50B+.
Digital channels drive 35% of primary banking relationship moves, while branches drive only 26%.
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Whether you are able to join us in person or are simply interested in following the conference conversations via our social channels, I invite you to follow@AlDominick@BankDirectorand@Fin_X_Techon Twitter. Search & follow#AOBA19to see what is being shared with and by our attendees.
FinXTech’s annual Summit brought together senior executives from across the financial space to focus on new growth strategies and opportunities related to technology.
PHOENIX — I’ve spent the past few days with bank leaders, technology executives, investors and analysts interested to explore emerging trends, opportunities and challenges facing many as they look to grow and scale their businesses. So as I prepare to head home to DC after some wonderfully exciting days at Bank Director’s annual FinXTech Summit, a few highlights from my time in the desert.
The 10 Finalists for 3 FinXTech Awards
For me, one of the signature pieces of this year’s program occurred on Thursday evening. Under the stars, we recognized ten partnerships, each of which exemplified how banks and financial technology companies work together to better serve existing customers, attract new ones, improve efficiencies, bolster security and promote innovation. The finalists for this year’s Best of FinXTech Awards can be seen in this video.
Winners of the 2018 Best of FinXTech Awards
We introduced these awards in 2016 to identify and recognize those partnerships that exemplify how collaborative efforts can lead to innovative solutions and growth in the banking industry. This year, we focused on three areas of business creativity:
Startup Innovation, to recognize successful and innovative partnerships between banks and startup fintech companies that have been operating for less than five years.
Most Innovative Solution of the Year, to highlight forward-thinking ideas, we recognized partnerships that have resulted in new and innovative solutions in the financial space.
Best of FinXTech Partnership, a category to recognize outstanding collaboration between a financial institution and fintech company, we based this award on growth by revenue, customers and/or reputation plus the strength of integration.
The winners? Radius Bank and Alloy for Startup Innovation, CBW Bank and Yantra Financial Technology for Innovative Solution of the Year and Citizens Financial Group and Fundation for Best of FinXTech Partnership. To learn more about each, check out this cover story on BankDirector.com
Thanks to all those who joined us at the Phoenician. For more ideas and insight from this year’s event, I invite you to take a look at what we’ve shared on BankDirector.com (*no registration required).
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;”
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.
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
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.
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.
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.
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.
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:
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.
Continuity offers an e-book along with a step-by-step system for predictable, repeatable compliance results.
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.
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.
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.
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:
Saying hello to as many of the 241 bank CEOs from banks HQ’d in 45 states as I can;
Greeting 669 members of a bank’s board;
Hosting 127 executives with C-level titles (e.g. CFO, CMO and CTO);
Entertaining predictions related to pricing and consolidation trends;
Hearing how a bank’s CEO & board establishes their pricing discipline;
Confirming that banks with strong tangible book value multiples are dominating M&A;
Listening to the approaches one might take to acquire a privately-held/closely-held institution;
Learning how boards debate the size they need to be in the next five years;
Engaging in conversations about aligning current talent with future growth aspirations;
Juxtaposing economic expectations against the possibilities for de novos and IPOs in 2018;
Getting smarter on the current operating environment for banks — and what it might become;
Popping into Show ’n Tells that showcase models for cooperation between banks and FinTechs;
Identifying due diligence pitfalls — and how to avoid them;
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;
Showing how and where banks can invest in cloud-based software;
Encouraging conversations about partnerships, collaboration and enablement;
Addressing three primary risks facing banks — cyber, credit and market; and
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.