May 6, 2023 / VOLUME NO. 260

Profits Over Growth

The last few weeks have been a whirlwind for banking. As bank stock indices plummet and investors make bets about which bank will fail, I’m headed to one of Bank Director’s most important conferences. 

But the agenda isn’t packed with discussion about investor and depositor panic. Experience FinXTech on May 9-10 in Tampa, Florida, is for bankers and technology company leaders who want to make connections and learn from each other. Still, the news headlines will be on people’s minds. I’m thinking about how the new environment is going to impact banks and technology companies.

Two years ago, a consultant to tech companies said to me, “The last five years have found that you don’t have to be profitable to be a company.” Tech founders focused on growth, not profitability; and once they had market share, they went public or sold to a bigger company, taking their billions in equity to retire at 30 on an island in the Caribbean.

The times are changing.

Some banks may pull back on planned tech implementations. I think some fintechs will be forced to sell. Venture capital deals fell 60% in value in the fourth quarter of 2022 compared to a year prior, according to the news site PitchBook. Banks are choosing a vendor or partner while also considering the company’s financial stability. Banks don’t want their partners and vendors to disappear or be gobbled up by larger companies that disinvest in the platform.

But the current environment is not all bad for partnerships, either. In a contrast from two years ago, fintech founders tell me they’re concentrating on profitability these days and not just growth. The good news is that fintechs in general have gotten leaner, more focused and driven to create successful partnerships. 

Bankers still need to act like private detectives and investigate those fintechs. Bank Director Managing Editor Kiah Lau Haslett explores due diligence in Bank Director’s recently released FinXTech report, “Finding Fintechs.” But I’m convinced a group of fintechs focused on bank success — rather than growth for its own sake — can only be good for banks. 

• Naomi Snyder, editor-in-chief of Bank Director

Lessons Gleaned From Bank Failures

Regulators say weak risk management when it came to interest rate, liquidity and growth contributed to the failures of Silicon Valley Bank and Signature Bank. 

“It is the most common story ever told: When you make big goals, you then try to rough up the ref so that you can get the outcomes you’re seeking. The ref in this case is basic bank accounting.” — Peter Conti-Brown, The Wharton School at the University of Pennsylvania

• Kiah Lau Haslett, managing editor of Bank Director

Commercial Real Estate Threatens to Crack Current Calm

Rising interest rates have made credit more expensive for certain borrowers, which could erode banks’ credit quality. 

What Money Movement Means for Deposits

Depositors can move money faster than ever before, so bank leaders should consider creative strategies for holding onto significant clients.

Evening the Score for Small Business Lending in a Down Market

Community banks can serve small business customers by using richer data sets paired with better credit loss models designed specifically for these types of credits.

The Promise and the Pitfalls of Real-Time Payment Networks

Banks will need to layer specific digital tools on top of the real-time payment network rails to create exciting customer experiences.