Kicking off FinXTech’s Summit

Quickly:

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

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

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

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

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

Three Strategic Issues Shaping Financial Services

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

Quickly:

  • Banks need to think beyond the notion that they can either build a technology solution or buy it — for inspiration, take a look at how Silicon Valley Bank uses APIs to tap into technology from third party providers.
  • Thanks to products like Amazon’s Alexa, financial institutions must now prepare for “hands-free banking.”
  • Various startups are using behavioral economics to nudge people towards making better financial choices for saving & investing.

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If you have been to any of our conferences, you’ve probably heard me (and others) encourage participants to get up & out from their offices to see what’s happening with their customers, potential partners and competition.  I do my best to practice what is preached — and have recent trips to San Francisco, New York City and Austin to prove it.  As I re-read hand written notes, dog-eared white papers and highlighted sections of annual reports, I realize just how much time I’ve spent talking about technology-driven trends shaping the financial industry.  To me, three of the bigger issues being discussed right now involve:

  1. The push for retail customers, which may already be spurring dealmaking.
  2. How customers experience and interact with their bank — which broadly ties into the question should an institution buy, partner or mimic a fintech; and
  3. Given all the hype surrounding machine learning and advanced decision modeling, leadership teams want to know how to augment a bank’s revenues & relationships with such technologies.

To these three trends, both our editor-in-chief, Jack Milligan, and I agree that most bankers understand the imperative to innovate around key aspects of their business, whether it’s payments, mobile in all its many permutations, lending, new account onboarding or data.

Personally, when it comes to knowing one’s customer (and potential customer), I find any good experience starts with great data.  As Carl Ryden, the CEO and Co-Founder at PrecisionLender, made clear at their recent Bank of Purpose conference, “if you hold your data close to the vest and you don’t do anything with it, it’s not an asset. It’s a liability.”

So with that in mind, let me close by sharing a link to our newest issue of Bank Director magazine.  This is our “Great Ideas” issue, one in which we highlight companies like USAA who crowdsource upwards of 10,000 ideas per year for products and new technology.  At a time when banks of all sizes are starting to take advantage of platform-based services, this new digital issue is one that I am really proud to share.

 

3 Examples of Next’Gen Partnerships

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

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

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

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

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

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

The Convergence of Bob Dylan and Banking

Some of the most visible innovations in the banking world today are platform-based, data intensive and capital light.  Personally, I’m just as encouraged by “incumbent” institutions supporting new fintech entrants — with infrastructure and access to services — as I am creative new companies (like Nymbus, nCino, etc.) providing smaller and mid-sized banks with sophisticated new capabilities.

This video, filmed during Bank Director’s annual FinTech Day in New York City at the Nasdaq Marketsite, is but one of eight videos we’ve shared on BankDirector.com.  To see what industry leaders from Silicon Valley Bank, the Fintech Collective, BizEquity, DaonDeloitte Consulting and the World Bank’s IFC think are the challenges & opportunities facing traditional banks, I invite you to take a look at this compilation of videos FinTech Day Recap: Rapid Transformation Through Collaboration.

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Al Dominick is the President & CEO of Bank Director, a privately held media & publishing company designed around strategically important business issues that a CEO, executive and/or board member(s) need to know — and be prepared to address. An information resource to the financial community since 1991, we publish Bank Director magazine, host conferences like “Acquire or Be Acquired,” conduct board-level research, provide board education & training programs, run BankDirector.com… and recently launched FinXTech.

Pushing Forward: The Future of Financial Services?

Yesterday, the L.A. Times wrote about a bank that is “part lender, part consultant, part cheerleader and part investor… a nursemaid to countless start-ups — Airbnb, Fitbit, Pinterest and TrueCar, to name some recent ones — as well as banking the venture capitalists who fund them.” Curious to learn more about this California-based innovator with a great reputation for serving software, hardware, biotech and healthcare start-ups? Read on.

By Al Dominick // @aldominick

Bank Director’s managing editor, Naomi Snyder, recently wrote that “banks are used to identifying, monitoring and mitigating risks, more so than they are adept at innovating. But an argument gaining increasing weight is the notion that banks really are technology companies and need to think more like a technology company.”  But what if, instead of transforming one’s business model to resemble a tech firm, an institution instead acted like Silicon Valley Bank, the Santa Clara-based powerhouse that has financed scores of the highest-flying tech companies like those mentioned above.

Certainly, this standout financial institution has a knack for staying close to their customers (*take a look at their Innovation Economy Outlook 2015).  So at a time when many banks are shrinking in relevance despite their important role in local economies, I thought to take a look at this “unusual for an FDIC-regulated bank.”  Billed as the bank of the world’s most innovative companies and their investors, the LA Times shared that with $40.2 billion in assets, Silicon Valley Bank now has “the heft to handle them from start-up to initial public offering, multiplying its profits on larger loans and fees.”  Further,

The bank, which recently opened an office in Santa Monica, is more willing than others to focus on a start-up’s growth prospects rather than its current financial condition and to lend money so businesses can expand while awaiting the next round of venture capital funding, said investor Mark Suster, a client and managing partner at Upfront Ventures in Los Angeles.

Now, this doesn’t preclude the bank from identifying a good thing that can help it to continue to push forward the future of financial services.  Case-in-point, I woke up a few days ago to find, via Twitter, that Standard Treasury team joined SVB Financial’s information technology team “to help it expand the bank’s digital banking platform.”  Just as I looked at Capital One’s recent fintech acquisitions in my last post (How Capital One Can Inspire Your Digital Efforts), the fact that the bank hired the team from startup company Standard Treasury to help accelerate the development of its API (application programming interface) banking services underscores the institutions drive to “enable easier collaboration, product development and integration with… clients.”

While catching up to Silicon Valley Bank — which boasts of having half of all startups in the U.S. as clients — will challenge many traditional institutions, I think it makes far more sense to look at what they have accomplished and suggest banks in markets where venture-backed start-ups are taking off try to pattern their business after SVB’s successes rather than radically shifting the underlying business model to emulate what might work for a technology company.

Of course, the LA Times does remind us that “most also don’t come close to Silicon Valley Bank’s well-connected network of outside experts, mentors, tech executives, venture capitalists and current and former clients ready to help its upstart entrepreneurs — no matter how farfetched an idea might seem.” Nevertheless, at a time when individuals along with business owners have more choices than ever before in terms of where, when and how they bank, I think leadership teams at financial institutions of all sizes should pay attention to how Silicon Valley Bank aligns its services (and product mixes) to suit core customers’ interests and expectations.

FI Tip Sheet: Some of Banking’s Best CEOs

Last month on Yahoo Finance, Sydney Finkelstein, professor of management and an associate dean at Dartmouth’s Tuck School of Business, produced a list of the Best CEOs of 2013, one that includes Jeff Bezos of Amazon, Pony Ma of Tencent,  John Idol of Michael Kors, Reed Hastings of Netflix and Akio Toyoda of Toyota.  Inspired by his picks, I reached out to a number of colleagues that work for professional services firms to ask their thoughts on the top CEOs at financial institutions — along with why they hold them in such regard.  What follows in this morning’s tip sheet are myriad thoughts on some of the best CEOs in the business today — broken down into three categories: the “biggest banks” with $50Bn+ in assets, those with more than $5Bn but less than $50Bn and finally, those in the $1Bn to $5Bn size range.

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(1) Top CEOs at financial institutions over $50Bn

The names and logos of institutions over $50Bn — think M&T with some $83Bn in assets, KeyCorps with $90Bn, PNC with $305Bn and US Bancorp with $353Bn — are familiar to most.  Leading these massive organizations are some tremendously talented individuals; for example, John Stumpf, the CEO at Wells Fargo.  Multiple people shared their respect for his leadership of the fourth largest bank in the U.S. (by assets) and the largest bank by market capitalization.  According to Fred Cannon, the Director of Research at Keefe, Bruyette & Woods, John “has created and maintains a unified culture around one brand, (one) that demonstrates strength and stability.  Wells is exhibit #1 in the case for large banks not being bad.”

Similarly, U.S. Bancorp’s Richard Davis garnered near universal respect, with PwC’s Josh Carter remarking “Richard has continued to steer US bank through stormy seas, continuing to stay the course running into the downturn, taking advantage of their position of relative strength, weathering the National Foreclosure issues and managing to avoid being considered part of ‘Wall Street’ even though US Bank is one of the 6 largest banks in the U.S.”

Finally, Steve Steinour, the CEO at Huntington Bancshares, inspired several people to comment on his work at the $56Bn institution.  Case-in-point, Bill Hickey, the co-Head of the Investment Banking Group at Sandler O’Neill, pointed out that since taking the helm in 2009, Steve has led a “remarkable turnaround… Huntington is now a top performer and is positioned to be the dominant regional bank in the Midwest.”

(2) Top CEOs at financial institutions between $5Bn and $50Bn

For banks between $5Bn and $50Bn, Greg Becker at Silicon Valley Bank garnered quite a few votes.  Headquartered in Santa Clara, California, I think they are one of the most innovative banks out there — and several people marveled that it has only grown and diversified under Greg’s leadership.  According to Josh Carter, “what they’re doing is a good example of how a bank can diversify their lending approach while maintaining a prudent credit culture.”  This echoes what Fred Cannon shared with me; specifically, that the $23Bn NASDAQ-listed institution is “the premier growth bank with a differentiated product.”  

Fred also cited the leadership of David Zalman, the Chairman & Chief Executive Officer at Prosperity Bancshares Inc., a $16 billion Houston, Texas-based regional financial holding company listed on the NYSE.  According to Fred, David demonstrates how to grow and integrate through acquisitions that is a model for other bank acquirors.  C.K. Lee, Managing Director for Investment Banking at Commerce Street Capital, elaborated on David’s successes, noting their development “from a small bank outside Houston to one of the most disciplined and practiced acquirers in the country and more than $20 billion in assets. The stock has performed consistently well for investors and the acquired bank shareholders – and now they are looking for additional growth outside Texas.”

Keeping things in the Lone Star state, C.K. also mentioned Dick Evans at Frost Bank.  In C.K.’s words, “this is a bank that stayed true to its Texas roots, maintained a conservative lending philosophy, executed well on targeted acquisitions and a created distinctive brand and culture. As Texas grew into an economic powerhouse, Frost grew with it and Mr. Evans was integral to that success.”

Finally, Nashville’s Terry Turner, the CEO of Pinnacle Financial Partners, drew Bill Hickey’s praise, as he “continues to successfully take market share from the larger regional competitors in Nashville and Knoxville primarily as the result of attracting and retaining high quality bankers. Financial performance has been impressive and as a result, continues to trade at 18x forward earnings and 2.4x tangible book value.”

(3) Top CEOs at financial institutions from $1Bn to $5Bn

For CEOs at banks from $1Bn to $5Bn, men like Rusty Cloutier of MidSouth Bank (“a banker’s banker”), David Brooks of Independent Bank Group (“had a breakout year in 2013”) and Leon Holschbach from Midland States Bancorp (“they’ve not only grown the bank but added significant presence in fee-income businesses like trust/wealth management and merchant processing”) drew praise.  So too did Jorge Gonzalez at City National Bank of Florida.  According to PwC’s Josh Carter, Jorge took over a smaller bank in 2007 “with significant deposit concentrations, large exposures to South Florida Real Estate, weathered a pretty nasty turn in the economy and portfolio value and emerged with a much stronger bank, diversified loan portfolio and retained key relationships.  Jorge has also managed to maintained an exceptional service culture, with a significant efficiency level and has combined relationship driven sales to grow the bank.  Jorge has also diversified the product mix and is one of the few smaller banks that can really deliver on the small bank feel with big bank capabilities.”

In addition, Banner Bank’s CEO, Mark Grescovich, won points for his work at the commercial bank headquartered in Walla Walla, Washington.  Mark became CEO in August 2010 (prior to joining the bank, Mark was the EVP and Chief Corporate Banking Officer for the $24Bn, Ohio-based standout FirstMerit). In Fred Cannon’s words, the transformation “is truly exceptional and Mark accomplished this by encouraging and utilizing a talented team of bankers from legacy Banner.”

Finally, Ashton Ryan at First NBC in New Orleans is one I’ve been told to watch.  Indeed, C.K. Lee shared how “Ryan capitalized on the turmoil in New Orleans banking to turn in strong organic growth, with targeted acquisitions along the way. The bank is recently public and has been rewarded by the market with a strong currency to go with its strong balance sheet and earnings.”

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In addition to the list above, I have been very impressed by Peter Benoist at Enterprise Bank in St. Louis, look up to Michael Shepherd, the Chairman and Chief Executive Officer for Bank of the West and BancWest Corporation and respect the vision of Frank Sorrentino at ConnectOne.  This is by no means a comprehensive list, and I realize there are many, many more leaders who deserve praise and recognition.  Click the “+” button on the bottom right of this page to comment on this piece and let me know who else might be recognized for their leadership prowess.

Aloha Friday!