5 Key Factors for Fintech Partnerships

As banks explore ways to expand their products and services, many are choosing to partner with fintech companies to enhance their offerings. These partnerships are valuable opportunities for a bank that otherwise would not have the resources to develop the technology or expertise in-house to meet customer demand.

However, banks need to be cautious when partnering with fintech companies — they are subcontracting critical services and functions to a third-party provider. They should “dig in” when assessing their fintech partners to reduce the regulatory, operational and reputational risk exposure to the bank. There are a few things banks should consider to ensure they are partnering with third party that is safe and reputable to provide downstream services to their customers.

1. Look for fintech companies that have strong expertise and experience in complying with applicable banking regulations.

  • Consider the banking regulations that apply to support the product the fintech offers, and ask the provider how they meet these compliance standards.
  • Ask about the fintech’s policies, procedures, training and internal control that satisfy any legal and regulatory requirements.
  • Ensure contract terms clearly define legal and compliance duties, particularly for reporting, data privacy, customer complaints and recordkeeping requirements.

2. Data and cybersecurity should be a top priority.

  • Assess your provider’s information security controls to ensure they meet the bank’s standards.
  • Review the fintech’s policies and procedures to evaluate their incident management and response practices, compliance with applicable privacy laws and regulations and training requirements for staff.

3. Engage with fintechs that have customer focus in mind — even when the bank maintains the direct interaction with its customers.

  • Look for systems and providers that make recommendations for required agreements and disclosures for application use.
  • Select firms that can provide white-labeled services, allowing bank customer to use the product directly.
  • Work with fintechs that are open to tailoring and enhancing the end-user customer experience to further the continuity of the bank/customer relationship.

4. Look for a fintech that employs strong technology professionals who can provide a smooth integration process that allows information to easily flow into the bank’s systems and processes.

  • Using a company that employs talented technology staff can save time and money when solving technology issues or developing operational efficiencies.

5. Make sure your fintech has reliable operations with minimal risk of disruption.

  • Review your provider’s business continuity and disaster recovery plans to make sure there are appropriate incident response measures.
  • Make sure the provider’s service level agreements meet the needs of your banking operations; if you are providing a 24-hour service, make sure your fintech also supports those same hours.
  • Require insurance coverage from your provider, so the bank is covered if a serious incident occurs.

Establishing a relationship with a fintech can provide a bank with a faster go-to-market strategy for new product offerings while delivering a customer experience that would be challenging for a bank to recreate. However, the responsibility of choosing a reputable tech firm should not be taken lightly. By taking some of these factors into consideration, banks can continue to follow sound banking practices while providing a great customer experience and demonstrating a commitment to innovation.

FinXTech’s Need to Know: Augmented Intelligence

Banks are exploring how to best develop and retain personal relationships as financial interactions move online.

Here’s what they need to know.

Replicating in-branch experiences isn’t only about providing customers with tailored responses and greeting them by name. It’s also about giving those customers the ability to control their interactions: how, when and with whom they handle their financial situations.

Some customers may want to call, some may feel more comfortable texting and some may change their mind and want to head to their local branch in the middle of a conversation. Chatbots — often powered by rules-based artificial intelligence — can automatically populate responses, but may fall short when it comes to fluid and intuitive communications that customers want, potentially complicating their issue resolution.

To address this shortcoming and improve digital communication capabilities, some banks have decided to build their own technology. Umpqua Holdings Corp., which has $30.9 billion in assets and is headquartered in Portland, Oregon, launched its customized Umpqua Go-To platform in 2018. The stand-alone app was developed and built in-house at Umpqua’s innovation lab, Pivotus Ventures, according to The Financial Brand. Umpqua Go-To allows customers to personally select which banker they want to interact with based on who was available online.

But many banks don’t have the bandwidth, resources or budget to build their own technology from scratch. Instead, a bank can choose to partner with a financial technology company such as Agent IQ.

The San Francisco-based fintech helps banks communicate with their customers using augmented intelligence. Augmented intelligence is used to enhance and assist human-based communication, unlike artificial intelligence, which often aims to replace it.

At institutions that use Agent IQ, customers can choose a specific, personal banker to communicate with through digital channels, which can include mobile messaging, web chat and SMS text messaging, as well as social media channels like Whatsapp and Facebook Messenger.

Agent IQ uses asynchronous technology: Customers and bankers can pick up conversations where they left off, at any time and through any channel. The conversation records are saved after a banker or customer leaves a session and can be referenced afterward by either party, by another banker or for compliance purposes.

Bankers are always looking to improve their customers’ experience. In fact, Bank Director’s 2021 Technology Survey found this to be the second most popular response driving banks’ technology strategy; 68% included it in their top three objectives.

And as it turns out, customers respond well to 24/7 access to personal bankers.

Independent Bank Corp., the $14.5 billion parent of Rockland Trust Company based in Rockland, Massachusetts, has seen significant engagement with the Agent IQ platform since its implementation. Since late May 2021, over 37,000 customers — approximately one fifth of their online customers — have used the platform without the bank marketing it or notifying customers of its presence, said Patrick Myron, Rockland’s senior vice president of retail network strategy and sales analytics, during a recent webinar hosted by Agent IQ. That’s an average of 500 to 600 weekly conversations that customers are opting into because they want to reach their banker digitally.

“We’ve done customer surveys,’’ he said. “The majority [of the results] are seven out of seven. They really like the engagement – the ability to talk to a banker any time they want.”

Chatbots are built to interact with customers with predetermined responses. That automation can be useful for directing traffic to certain webpages or answering yes and no questions, but many financial situations are complex and can’t be appropriately addressed solely by chatbots. Instead of being transferred to a bank representative 10 minutes into a conversation with a chatbot, Agent IQ will show the customer who’s available to communicate at the start of the interaction.

According to Bank Director’s 2021 Technology Survey, chatbots may not even be what banks want. Seventy-eight percent of respondents stated the bank doesn’t use chatbots. Only 15% had chatbots and 7% were unsure if the bank had them.

Augmented intelligence can enhance digital communication between banks and their customers, not replace it with algorithms. Firms that leverage it, like Agent IQ, may be an attractive solution for banks looking to create and maintain digital relationships with their customers.

Agent IQ is included in FinXTech Connect, a curated directory of technology companies who strategically partner with financial institutions of all sizes. For more information about how to gain access to the directory, please email finxtech@bankdirector.com.

Fintechs Are Starting to Buy Banks, But Why?

A common maxim in the mergers and acquisitions industry is that very small banks have a tough time finding buyers. But last week, we learned there’s an exception. And it comes from financial technology companies, one of which announced plans to buy a $154 million bank in Seattle called First Sound Bank for $23 million.

The acquirer is BM Technologies, the Radnor, Pennsylvania-based technology company that was spun off from Customers Bancorp earlier this year and trades on the New York Stock Exchange. The price translates to a premium of 166.4% for the bank, which trades on the pink sheets, according to investment bank Hovde Group.

“Fintechs are getting more aggressive in buying small bank charters,” says Curtis Carpenter, senior managing director for the investment bank Hovde Group, which was not involved in the deal. Fintechs may also be willing to pay more for a small bank than another bank will. For a large fintech company, getting access to a bank charter may be critical for their business plan going forward; paying an extra $1 million or $2 million may not be a lot of money for the fintech, but might be meaningful for the small bank.

It’s tough to see what kinds of premiums fintechs are paying for banks, because most fintechs are privately owned or the deals are so small, the financials sometimes aren’t disclosed. Granted, there are not a lot of U.S. financial technology companies buying banks. This year, there were six such announced deals. They included San Francisco-based SoFi Technologies’ planned purchase in March of $150 million Golden Pacific Bancorp in Sacramento, California, according to an analysis by Piper Sandler & Co. using S&P Global Market Intelligence data.

U.S. Financial Technology Companies Buying Banks

Deal announcement Buyer Target
Nov. 15, 2021 BM Technologies First Sound Bank
Aug. 2, 2021 Newtek Business Services Corp. National Bank of New York City
June 15, 2021 KMD Partners Liberty Bank
June 14, 2021 Cornerstone Home Lending The Roscoe State Bank
March 9, 2021 SoFi Technologies Golden Pacific Bancorp
Jan. 1, 2021 DXC Technology Co. AXA Bank AG
Feb. 18, 2020 LendingClub Corp. Radius Bancorp
Nov. 18, 2019 Crossroads Systems Rice Bancshares

SOURCE: Piper Sandler & Co. using data from S&P Global Market Intelligence

 

There’s not a lot of banks buying fintechs either, as Bank Director Vice President of Research Emily McCormick explored recently. Banks aren’t as interested in buying fintechs as they are interested in buying other banks, mostly because of cultural hurdles and lack of comfort with valuations, according to Bank Director’s 2021 M&A Survey. Fintechs, on the other hand, have started to get really drawn to bank charters, as Bank Director Managing Editor Kiah Haslett showed in her second quarter 2021 magazine story, “The Latest, Oldest Thing in Banking” (available with a subscription).

“I think there’s a phenomenon out there; what you want is a bank charter,” says Chris Donat, a managing director and senior equity research analyst at Piper Sandler & Co. “If you go back to the financial crisis, when Ally Financial created its bank, having a bank as a source of deposits to fund loans is generally one of your cheaper ways to fund loans and is also more stable.” Fintechs also get access to the national payment rail networks and the Federal Reserve’s discount window for liquidity purposes.

As fintechs grow their businesses, a stable source of low-cost deposits is incredibly useful. “They’re interested in the paperwork if you will, the charter, and not the deposit franchise of having branches and the loan officers,” Donat says.

BM Technologies will leverage the charter to grow its national digitally focused banking services, which include student loan disbursement services to 725 colleges and universities as well as banking services to about 2 million students, plus a flagship banking program with T-Mobile US, according to an analyst note from Michael Diana, managing director of Maxim Group. But BM Technologies will keep the community bank at First Sound Bank focused on the Seattle area. First Sound Bank CEO Marty Steele will lead the community bank division and serve as COO of the newly formed BMTX Bank, the two companies announced. BM Technologies’ CEO Luvleen Sidhu will serve as chair and CEO of BMTX Bank.

“Together we are looking forward to this partnership to create a nationwide deposit gathering and lending platform with the power to deliver an integrated customer experience at the highest level,” Steele said in a release about the deal.

Diana says First Sound is a successful community bank. Plus, BM Technologies’ acquisition means it avoids having to pay bank partners to hold insured deposits.  When online marketplace LendingClub Corp. bought Radius Bancorp last year for about $185 million in cash and stock, it was for a similar reason.

“It’s all about deposits,” Diana says. “You don’t have to pay anyone else for holding and servicing.”

How the Edges of Financial Technology Could Change Regulation

Financial regulation in the United States follows a longstanding pattern: The presidential administration changes, the other political party takes power and the financial regulation pendulum swings. Those working in compliance inevitably need to recalibrate.

President Joe Biden’s messaging so far has aimed to minimize polarization. This bodes well for moving beyond the typical “financial deregulation” versus “more regulation” dynamic. It gives the industry an opportunity to turn our attention towards pulling the overall framework out of an old, slow, manual and paper-based reality. What the U.S. financial regulatory framework really needs are large, fundamental overhauls and modernizations that will support a healthy, ever-changing financial services marketplace — not just through the next presidential administration, but further beyond, through the next several decades.

The incoming leadership could make regulation smarter and more effective with reforms that:

  • Measure success by outcomes and evidence, as opposed to procedural adherence.
  • Leverage technology to streamline compliance for agencies as well as providers.
  • Catch up and keep up with the ongoing advancements in financial technology.

The time for these sorts of changes just so happens to be ripe.

Digital or cryptocurrencies and charters for financial technologies have an awkward fit within the existing regulatory framework. Cannabis, another fringe area of finance, poses extra layers of legal and regulatory challenge, but its status could change on a dime if the new administration resolves the state and federal disconnect. All three of these peripheral business opportunities have gained significant momentum recently and may force regulators to adapt. To support these new use cases, which would otherwise break existing bank infrastructure, technology providers would have to modernize in ways that would benefit financial service compliance across the board.

As the emerging regulatory lineup takes shape from the legacies of the outgoing agency heads, the swing from the past administration to the present may not be all that dramatic. There are strange bedfellows in fintech. In the last six months of Donald Trump’s administration, there was already a balance between Acting Comptroller of the Currency Brian Brooks and U.S. Treasury Secretary Steven Mnuchin.

Brooks was indeed very active in his short tenure. Under him, the Office of the Comptroller of the Currency issued full-service national bank charters for fintech companies, published interpretive letters supporting digital currencies and published a working paper from its chief economist, Chartering the FinTech Future,” that lent support to the use of stablecoins.

In contrast, Mnuchin spent his last month in office encouraging  Financial Crimes Enforcement Network, or FinCEN, to issue a controversial proposed rulemaking that would affect crypto wallets and transactions. Critics argue this would make compliance impossible for decentralized technologies.

The Biden administration may have a similar dynamic between these two regulatory roles, albeit less dramatic. The confirmation of Treasury Secretary Janet Yellen, with her experience and moderate stance, conveys a great deal of stability. Still, she may not champion stablecoins, given her public statements on cryptocurrency.

At writing, Michael Barr is the anticipated pick for comptroller. His extensive and diverse résumé shows a long history of supporting fintech. We anticipate that he would continue the momentum towards modernization that Brooks started.

Gary Gensler, the nominated chair of the Securities and Exchange Commission, has a great deal of expertise and enthusiasm for digital currencies. Since his tenure as chair of the Commodity Futures Trading Commission during Barack Obama’s administration, he has served on faculty at MIT Sloan School of Management, teaching courses on blockchain, digital currencies and other financial technologies. Chris Brummer, the Biden administration’s anticipated choice for the CFTC, currently serves as faculty director at Georgetown University’s Institute of International Economic Law, has written books on the regulation of financial technologies and founded D.C. Fintech Week to help promote discussion of fintech innovation among policymakers.

When we get to the outer edges of finance — to crypto, charters and cannabis — the divide between political camps starts to disappear. But there’s still quite a bit of rigidity in the traditional financial industry and regulatory framework. Combining the slate of steady, open-minded regulators with the building pressures of technology yields reasonable hope for regulatory overhauls that will pull compliance along into the future.

Bank Director Reveals 2020 FinXTech Connect Award Winners

In 1993, Bill Oesterle was looking for contractors that could work on an old house he purchased in Indianapolis’ Meridian-Kessler neighborhood. He had been burned by contractors before and didn’t want to rely on the phone book to find a new one.

A co-worker pointed him to Unified Alliance, a group of neighbors that shared resources and recommendations through a newsletter and call-in service. He joined the group and grew to depend on it.

When Oesterle moved to Columbus, Ohio, a few years later, he was dismayed to find that a similar group didn’t exist there and enlisted a former intern, Angie Hicks, to build a new version. After researching service providers and customers, the company launched a website that came to be known as Angie’s List. It had 5 million members by 2016.

FinXTech Connect takes a page from the same playbook.

No one knows banking technology better than the people who use it. Given this, FinXTech gathers insights from bankers, aggregates those insights, and then distills them into actionable information to help banks find reliable technology partners.

The intelligence we gather from banks powers our FinXTech Connect platform, a curated directory of bank-friendly fintechs. It also informs our annual FinXTech Connect awards.

This week marked Bank Director’s second annual Experience FinXTech conference. The event brings together bank and technology leaders for demonstrations and conversations about what’s now and next in banking. Demos are open to technology companies that have been vetted for the Connect platform, so attendees can be sure they’re hearing from proven partners.

The event and awards have never been more important, given the role technology plays in making it possible for banks to provide service in a socially distanced world.

Great examples can be found among this year’s Best of FinXTech award winners, which were announced on the final day of the event.

The Best Solution for Customer Experience went to SmartLaunch, a digital bank-in-a-box that helps institutions provide services and grow deposits remotely. Created by NYMBUS, SmartLaunch enables banks to launch standalone digital brands that operate on the NYMBUS SmartCore. In this way, a bank’s digital brand can run parallel to its legacy systems — providing a low risk way to experiment with new digital offerings.

Another example is performance-marketing solution, Fintel Connect. With travel significantly curtailed, billboards and signage don’t provide the marketing punch they used to. Bank marketers are looking to retool their strategies, with performance-based, digital marketing offering an alternative avenue for acquiring customers online.

Fintel Connect won the Best Solution for Revenue Growth category, as well as the overall Best of FinXTech Connect award this year. Their technology enables banks to approach digital marketing from a new angle — instead of paying for impressions or clicks, banks only pay when viewers convert into customers.

Here’s the full list of winners:

  • Best Solution for Customer Experience: NYMBUS SmartLaunch
  • Best Solution for Loan Growth: SavvyMoney
  • Best Solution for Improving Operations: Cinchy
  • Best Business Solution: Brex
  • Best Solution for Protecting the Bank: ARGO OASIS
  • Best Solution for Revenue Growth: Fintel Connect
  • Best of FinXTech Connect: Fintel Connect

More information on these solutions can be found here.

During Experience FinXTech, Bank Director also launched a new research product, leveraging lessons we’ve learned from curating the Connect platform. Our inaugural data intelligence report is titled “APIs: Creating New Opportunities for Revenue and Efficiency.” You can access it for free by clicking here. Angie’s List capitalized on the dawning of the internet to replicate neighborly advice. In a similar way, FinXTech relies on the collective wisdom of bankers to cut through the noise in the technology landscape and help banks find ideal partners.

Developing a Future-Proof Bank

Banks are growing more fintech-friendly, giving them an avenue to strengthen their capabilities. In this video, Mbanq CEO Vlad Lounegov shares how traditional financial institutions can better compete with tech-savvy upstarts in the financial space.  

  • The Changing Relationship Between Banks & Fintechs
  • Examining Core Systems
  • Four Qualities of a Good Solution

FinXTech Annual Summit: Exploring the Power of Collaboration


fintech-5-9-18.pngBanks are increasingly becoming technology companies—not in the eyes of investors, perhaps—but certainly in terms of meeting the expectations of their customers in a rapidly digitizing consumer marketplace. Banks have been heavy users of technology for decades, but the role of technology in virtually every corner of the bank, from operations to distribution, to product design, lending and compliance, is taking on a greater strategic importance.

It was only a few years ago that an emerging fintech sector was viewed by many bankers as a competitive threat, particularly marketplace lenders like Lending Club and SoFi, or new payments options offered by the likes of Apple Pay and Venmo, PayPal’s successful P2P product. While those competitive threats still exist, the focus of most banks today is working with fintech companies in collaborative relationships that benefit both sides. Banks are facing enormous pressure from changing consumer demographics and preferences to develop new products and services that go well beyond what they have traditionally created on their own. The new ideas include more than just new applications that enhance or expand an institution’s mobile banking capability, an area that continues to receive a lot attention. With developments in artificial intelligence (AI) and machine learning, banks are able to bring greater efficiencies and effectiveness to such disparate activities as regulatory compliance and accounts payable.

There are challenges to a partnership approach, however, beginning with the necessity to fully vet the potential fintech partner in a thorough due diligence process. Banks are conservative by nature, while many of the fintech companies developing the systems and applications that enable banks to stay abreast of the rapidly evolving digital economy are quite young and culturally different. Banks that want to work with fintech companies will have to do the necessary due diligence while also bridging the culture gap.

The benefits, and challenges, of working collaboratively with fintech companies will be the focus of Bank Director’s FinXTech Annual Summit, which will take place May 10-11 at The Phoenician resort in Scottsdale, Arizona. The agenda kicks off with back-to-back peer exchange discussions on the dynamics of fintech partnerships and changes in consumer behavior, then provides both general session presentations and case study sessions that examine such topics as innovation, AI, automation in commercial lending, vendor contract management, the digital robotic workforce and the future of the branch in an increasingly digitized world.

Also occurring at the Summit will be the announcement of Bank Director’s 2018 Best of FinXTech Awards, which will be given to banks and their fintech partners for projects where they worked together in a collaborative relationship. From a list 10 finalists, awards will be given a bank and its fintech partner in each of the following award categories: Startup Innovation, Innovative Solution of the Year and Best of FinXTech Partnership.

Why Improving the Customer Experience is the Latest Industry Trend


technology-5-9-18.pngPerhaps you’ve noticed a driving theme across the financial services industry to innovate and improve the customer experience. While the path to achieving the goal varies greatly—from using artificial intelligence to personalize the experience to implementing a single platform—winning the experience and efficiency game comes down to one simple mission: create an enjoyable customer experience.

Everyone watched as this transformation, led by user experience, disrupted industries like e-commerce and entertainment. Companies like Amazon and Netflix have been ahead of the curve in delivering superior experiences to their customers, which often has not just been because they offer a great user experience, but also because of logistical excellence. Today, offering a personalized experience and real-time services across any device is the new normal.

In fact, recent data confirms this expectation even in financial services, according to Barlow Research Associates Inc. Customers cite that a primary driver for working with a bank is often based on how easy the bank is to do business with. Furthermore, customers expect the same seamless and easy-to-use digital interaction with their bank as they do while ordering an Uber, for instance.

The Single Platform Difference
With the rise of financial technology (fintech), there is no shortage of vendors providing an assortment of solutions to help financial institutions offer an improved customer experience. Unfortunately, some banks and credit unions have found themselves with more headaches than enhancements when multiple vendor solutions are implemented across the institution.

Disparate systems often lead to data siloes, expensive integration projects and increased overhead in due diligence and security monitoring. The seamless, multi-channel experience customers want is thrown out the window when multiple, separate systems are implemented and expected to work together, and rarely do.

A single-platform solution has become a strategic imperative to overcome many of the issues associated with disparate systems. With one system managing all channels, banks and credit unions can deliver a unified experience while reducing operational inefficiencies. This is a clear need as more than half of financial institutions customers don’t believe that the digital channel of a bank can service all their needs, recent research data shows.

However, transforming the customer experience doesn’t just mean introducing a slick user interface; back-office processes must also be efficient and meet the real-time demands of customers. There is almost a 50 percent abandonment rate of banking customers starting a process online and then finishing at a branch, according to the 2017 Account Opening and Onboarding Benchmarking Study. This is likely due to another fact: less than 20 percent of financial institutions have implemented an end-to-end process to date.

Streamlining customer and employee interactions within a financial institution to drive increased efficiency, transparency, profitability and regulatory compliance across all lines of business is essential in order to drive a superior customer experience. Regardless of the originating channel, a customer should receive:

  • Transparency into banking processes
  • Convenient access to status updates and document sharing
  • Personalized, seamless customer experience
  • Digital/mobile-enabled access

Where to Begin
Consider these three areas for ensuring a successful transformation.

  1. Plan the journey before you begin. In order to establish a vision to guide the entire organization (or even a line of business), it’s imperative to first understand the journey customers go through when interacting with the institution. This involves considering customers’ emotions, and the cause for those emotions. Dig into these areas while exploring the customer journey to improve the experience.
  2. Pick one product or line of business and take it end-to-end. Many institutions, while taking the correct path of not just implementing a slick user interface, end up trying to take on more digital transformation than they are ready for. Instead of trying to transform the whole bank or department all at once, greater success is often met by starting with a single product, like a secured small business loan, and transforming that experience end-to-end.
  3. Finally, release then iterate. Starting with a single product or a particular line of business provides the opportunity to test and perfect. The iterative process is important not just to improving the customer experience, but also to ensuring that any needed operating model adjustments can be properly vetted.

As technology giants like Amazon continue to push the bounds of customer expectations, it can at times feel daunting to try to make these shifts at your own institution. However, as customer demands for seamless digital experiences grow and become even more a part of the buying decision, the emphasis on a single platform to help deliver both an exceptional experience and logistical excellence is even more pronounced. This growing demand marks the importance and urgency of employing a strategy that focuses on delivering a delightful customer experience from the first interaction all the way to the back office.

What Facebook’s Data Debacle Could Mean for Banking


regulation-5-2-18.pngThere was a particular moment on the second day of his most recent testimony Facebook CEO Mark Zuckerberg struck a rare smile.

Zuckerberg, on Capitol Hill to answer pointed questions about the scraping of company’s data on 87 million of its users by U.K.-based Cambridge Analytica—was asked if Facebook was a financial institution.

The odd inquiry came during a string of questions from Rep. Greg Walden, the Oregon Republican who chairs the House Energy and Commerce Committee that grilled Zuckerberg about the massive company’s complex web of operations, which includes a mechanism for users to make payments to each other using popular apps familiar to bankers like PayPal and Venmo, as well as debit cards.

Facebook is not a financial institution in the traditional sense, of course, but it does have a clear position in the financial services space, even if just by its role in providing a platform for various payment options. It has not disclosed how much has been transferred between its 2 billion users, and it certainly has raised questions about how tech companies—especially those with a much narrower focus on financial technology, or fintech—collect, aggregate, use and share data of its platform’s users.

This relationship could soon change as Washington lawmakers discuss possible legislation that would place a regulatory framework around how data is collected. Virtually any industry today is dependent on customer data to market itself and personalize the customer experience, which is predominantly on mobile devices, with fewer personal interactions.

“I think it’s likely something is going to happen here, because we’ve kind of been behind the curve as it relates to [regulation], especially Western Europe,” says David Wallace, global financial services marketing manager at SAS, a global consulting and analytics firm.

While banks are somewhat like doctors and hospitals in the level of trust that consumers historically have had with them, that confidence is finite, Wallace says.

Survey data from SAS released in March shows consumers want their banks to use data to protect them from fraud and identity theft, but they aren’t crazy about getting sales pitches.

At the same time, payments services like Paypal’s Venmo and Zelle, a competing service that was developed by a consortium of banks, also collect data, but have a lower “score” with consumers in trust, according to Wallace.

Where’s the Rub?
The question from Walden barely registered on the national news radar, but it also highlights new areas of concern as banks begin to adopt emerging technologies like artificial intelligence, and market new products that are often driven by the same kind of data that Facebook collects.

The recent SAS survey also asked respondents about their interactions with banks, and how AI might influence those. Most of the survey respondents say they are generally comfortable with their bank collecting their personal data, but primarily in the context of fraud and identity theft protections. Sixty-nine percent of the respondents say they don’t want banks looking into their credit history to pitch products like credit cards and home mortgages.

As the Cambridge Analytica situation demonstrates, there is a fine balance that must be observed giving all companies the opportunity and space to succeed in an increasingly digital environment while protecting consumers from the misuse of their personal data.

Congress tends to be a hammer that treats every problem like a nail—so don’t be surprised if the use of customer data is eventually regulated. Thus far, the only regulatory framework in existence that’s been suggested as a model of what might be established in the U.S. is the GDPR, or General Data Protection Regulation, currently rolling out in Europe. It essentially requires users to opt-in to allowing their data to be shared with individual apps or companies, and is being phased in across the EU.

How that approach might be applied to U.S. banks, and what the impact might be, is still unclear. It could boil down to a “creepy or cool” factor, says Lisa Loftis, a customer intelligence consultant with SAS.

“If you provide your (health) info to a provider or pharmacy, and they use that information to determine positive outcomes for you, like treatments or new meds you might want to try, that might factor into the cool stage,” Loftis explains.

If you walk by a bank branch, whether you go in it or not, [and] you get a message popping up on your phone suggesting that you consider a certain product or come in to talk to someone about your investments without signing up for it, that’s creepy,” she adds.

Any regulation would likely affect banks in some way, but it could be again viewed as a hammer, especially for those fintech firms who currently have a generally regulation-free workspace as compared to their bank counterparts.

Bank Director’s Bank Compensation & Talent Conference to Highlight Culture


culture-10-23-17.pngCorporate culture will be on center stage at Bank Director’s 2017 Bank Compensation & Talent Conference, which begins on Monday, October 23, at The Ritz-Carlton Amelia Island in Florida with peer exchanges and a workshop. On Tuesday and Wednesday, October 24-25, the main conference takes place with presentations on incentive compensation, leadership development, business strategy and insights from bank CEOs and directors.

Culture is an important but under-examined topic in banking because of the connection between the culture of a company and its financial performance and regulatory compliance track record. To understand that, look no further than the fraudulent account opening scandal at Wells Fargo & Co. This was clearly a cultural issue, where a large number of people in the retail bank were willing to break the law just to elevate their own compensation, or keep their jobs.

The opening general session on Tuesday, “Culture Eats Compensation for Breakfast,” will examine the importance of culture in a bank’s performance, and how its compensation philosophy and practices can reinforce culture. A second general session on Tuesday, “Creating a Company That Scales,” will look at how bank management teams with experience acquiring other banks are able to take the cultures of two banks and successfully integrate them to get the full value of the acquisition.

One of the most important responsibilities of the board is to make sure the bank is doing a good job of managing its talent, from the CEO’s office down to middle management. A session titled “The Board’s Role in Leadership Development” will review some best practices for bringing talented people into the organization and then making sure they have an opportunity to grow and expand. Managing the CEO succession process is especially important given the key role that individual plays in the bank.

Other general sessions scheduled on Tuesday and Wednesday include “All Business Models Are Not Created Equal,” will look at how three factors—the increased use of technology, the continued popularity of online and mobile channels, and the changing demographics of banking’s customer base—are impacting the talent selection process. The impact that disruptive market forces like financial technology is having on how banks interact and attract customers and recruit talent will be explored Wednesday in the general session titled “Managing Disruption & Compensating for Innovation.”