A Roadblock That Ruins Futures


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Culture is one of the best things a bank has going for it. It’s also one of the worst.

While I am bullish on the future of banking as a concept, I am admittedly concerned about what’s to come for many banks who struggle with cultural mindsets resistant to change. Specifically, the same mindsets that helped weather the last few years’ regulatory challenges and anemic economic growth may now prevent adoption of strategically important, but operationally risky, relationships with financial technology companies.

Most banks don’t have business models designed to adapt and respond to rapid change. So how should they think about innovation? I will raise that question and others at our upcomingFinTech Weekin New York City startingtoday, a look at how technology continues to change the nature of banking. Those in attendance include banks both large and small, as well as numerous financial technology companies.

More so than any regulatory cost or compliance burden, I sense that the organizational design and cultural expectations at many banks present a major obstacle to future growth through technology.While I am buoyed by the idea that smaller, nimble banks can compete with the largest institutions, that concept of agility is inherently foreign to most legacy players. It doesn’t have to be. Indeed, Richard Davis, the chairman and CEO of the fifth largest bank in the country, U.S. Bancorp, shared at our Acquire or Be Acquired Conference in Phoenix last January that banks can and should partner with fintech companies on opportunities outside of traditional banking while working together to create better products, better customer service and better recognition of customer needs.

The urgency to adapt and evolve should be evident by now.The very nature of financial services has undergone a major change in recent years, driven in part by digital transformation taking place outside banking.Most banks—big and small—boast legacy investments.They have people doing things on multi-year plans, where the DNA of the bank and culture does not empower change in truly meaningful ways.For some, it may prove far better to avoid major change and build a career on the status quo then to explore the what-if scenarios.Here, I suggest paying attention to stories like those shared by our Editor-in-Chief Jack Milligan, who just wrote about PNC Financial Services Group in our current issue of Bank Director magazine. As his profile of Bill Demchak reveals, it is possible to be a conservative banker who wants to revolutionize how a company does business.But morphing from a low-risk bank during a time of profound change requires more than just executive courage. It takes enormous smarts to figure out how to move a large, complex organization that has always done everything one way, to one that evolves quickly.

Of course, it’s not just technological innovation where culture can be a roadblock.Indeed, culture is a long-standing impediment to a successful bank M&A deal, as any experienced banker knows. So, just as in M&A deals, I’d suggest setting a tone at the top for digital transformation.

Here are three seemingly simple questions I suggest asking in an executive team meeting:

  • Do you know what problems you’re trying to solve?
  • What areas are most important to profit and near-term growth?
  • Which customer segments are critical for your bank?

From here, it might be easy to create a strategic direction to improve efficiency and bolster growth in the years ahead.But be prepared for false starts, fruitless detours and yes, stretches of inactivity.As Fifth Third Bank CEO Greg Carmichael recently shared in an issue of Bank Director magazine, “Not every problem needs to be solved with technology… But when technology is a solution, what technology do you select? Is it cost efficient? How do you get it in as quickly as possible?You have to maintain it going forward, and hold management accountable for the business outcomes that result if the technology is deployed correctly.”

Be aware that technology companies move at a different speed, and it’s imperative that you are nimble enough to change, and change again, as marketplace demands may be different in the future. Let your team know that you are comfortable taking on certain kinds of risk and will handle them correctly. Some aspects of your business may be harmed by new technology, and you will have to make difficult trade-offs. Just as in M&A, I see this is an opportunity to engage with regulators.Seek out your primary regulator and share what you’re looking for and help regulators craft an appropriate standard for dealing with fintech companies.

Culture should not be mistaken for a destination.If you know that change is here, digital is the expectation and you’re not where you want to be, don’t ignore the cultural roadblocks. Address them.

Advice for Fintech Companies Working with Banks


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For any fintech company that is just beginning to work with banks, the experience can at times be frustrating if ultimately rewarding. Banking and fintech companies are worlds apart in their perspectives. One is highly regulated and brings a risk adverse mentality to many of its decisions (guess which one that is), while the other is populated by entrepreneurial startups that fit the very definition of 21st century capitalism. One often approaches technological innovation with reticence if not outright resistance, while the other is all about technological innovation.

With such a profound difference in their basic nature, it might seem amazing that they are capable of working together, and yet there are many examples (and the numbers are growing) of banks and fintech companies cooperating to their mutual benefit. From the perspective of the fintech company, it helps to understand how most banks approach the issue of working with outside organizations, and their views on technological change in general.

“Fintech companies and banks each come with their own set of perspectives, and if you can empathize with each other, then you can marry those perspectives effectively,” says Sima Gandhi, head of business development at Plaid Technologies, a San Francisco-based fintech company that helps banks share their data with third-party apps through the development of APIs, or application programming interfaces. “Investing time to understand each other takes patience, but the returns are well worth it.”

For fintech companies, that can begin with an understanding of how many banks view technological change. Chicago-based Akouba provides financial institutions with a secure cloud-based platform for the origination of small business loans. Loan underwriting as it is still done today at most banks is a time consuming and paper intensive manual process, and Akouba’s goal is to speed up the application, decisions and administrative process by digitalizing it from beginning to end. And yet, according to Akouba CEO Chris Rentner, some banks push back at the idea of weaning their loan officers off paper. “They’re like, —Hey, you know what? We’ll just take the digital application, and we’re going to print off those forms and type the information into our old systems,’” he says. “I find it interesting that as banks are trying to buy new digital onboarding software, they don’t want the true digital engagement with a borrower.” The lesson here for fintech companies is that some banks will say they want to embrace innovation, but may limit themselves in the degree to which they will change old habits.

It’s also important to understand that the native conservatism that banks typically bring to third-party engagements is partly the result of strict regulatory requirements for vendor management, including data security. In recent years, federal regulators have become much more prescriptive in terms of how banks are expected to manage those relationships. Because in many cases, the bank would be giving the fintech company some access to its customer data, thereby creating a potential cybersecurity risk, it will most likely want to fully investigate a potential partner’s own cybersecurity program. This could very well include an onsite visit and extensive interviews with the fintech company’s information security personnel.

The federal requirements for vendor management that banks must adhere to are publicly available, so fintech companies should know them. “Don’t go into a bank trying to sell a product before you’ve gone through and collected your vendor management information, and reviewed and understood the standard that banks are being held to,” says Rentner.

The final piece of advice for fintech companies is to practice patience without sacrificing your company’s core principals. Gandhi says that successful collaboration rests on “the art of the possible.” “It’s important to remember that every problem is solvable,” she adds. “When the conversations get tough and you’re running low on patience, keep in mind that you’re both there because there’s a common goal. And you can best achieve that goal together.”

But if patience and an honest search for common ground ultimately doesn’t lead to a solution, Rentner says that fintech companies should resist making material changes to their products if they don’t believe that’s the right thing to do. Banks are slowly beginning to change as a growing number of them see the need for technological innovation, even if the pace of change is still slower than what the fintech industry wants. “Hold to your guns,” Rentner says. “Move forward, continue to sell your product. If you have enough time with a good product, you will get customers.”

A Review of Emerging Technology Trends


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The emergence of a vibrant financial technology sector has dramatically changed the banking industry by enabling new products and services that cater to the needs and preferences of consumers in today’s digital age. In preparation for FinTech Week, an event that FinXTechis holding April 25-26 in New York, here is a look back at our recent coverage of emerging technology trends and innovation strategies for banks. These stories have appeared on the BankDirector.com website, and in digital and print versions of Bank Director magazine.

ARE YOU A BANKER OR A VISIONARY?
The power of digital banking goes beyond a fundamentally different, more satisfying customer experience.

MAKING SENSE OF FINTECH LENDING MODELS
What type of fintech lending solution should your bank pursue? In this video, Mike Dillon of Akouba outlines what management teams and boards need to know about these lending models, and how each can benefit the bank.

PAYPAL’S BIG BET
The former eBay subsidiary is turning itself into a global payments powerhouse with mobile at the heart of its strategy.

CYBERSECURITY: A BOARDROOM CONVERSATION
Radius Bank CEO Mike Butler sits down for an interview about how to manage the risk of doing business with fintech companies.

COMMUNITY BANKS TO FINTECH: WE NEED YOU
Banks attending the Acquire or Be Acquired Conference in Phoenix, Arizona, discussed ways that technology companies could improve profitability and the customer experience.

GETTING THE MOST OUT OF MOBILE
If you’re on a bank board, it pays to ask some questions about mobile.

HOW STRONG IS YOUR CORE TECHNOLOGY?
Changes in customer preferences and pressure from fintech competitors are forcing banks to innovate. Is your core provider up to the task?

2016 BANK DIRECTOR’S TECHNOLOGY SURVEY
As the banking industry struggles to innovate to meet shifting consumer expectations, 81 percent of bank chief information officers and chief technology officers responding to Bank Director’s 2016 Technology Survey say that their core processor is slow to respond to innovations in the marketplace.

Innovation Spotlight: BankMobile


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Dan Armstrong, Managing Director and Chief Digital Officer, BankMobile

In his role as chief digital officer, Dan Armstrong is responsible for co-leading BankMobile Labs, which houses BankMobile’s technology development team focused on user experience and innovation. In this interview, he discusses how BankMobile has taken ownership of its technology to provide a curated consumer experience. In early March, BankMobile announced its acquisition by Flagship Community Bank in Clearwater, Florida, for $175 million. Previously, it had been a division of Wyomissing, Pennsylvania-based Customers Bancorp.

Who helps execute the innovation strategy at BankMobile?
We have BankMobile Labs—a whole division of programmers, business systems analysts, graphic designers, onboarding and fraud specialists and more, all in-house. We also have a student labs division in New Haven, Connecticut, managing the BankMobile Disbursements business and the BankMobile Vibe app for students. We have so many people charged with innovation, and it’s pretty much the core of our consumer proposition.

How does BankMobile keep a pulse on changing consumer expectations?
I suppose the same way other banks do: media, conferences, trends, recommendations, reading and participating on panels. We have a very strong strategy of testing other fintech products in the market, too, to see what we can learn about making a better customer experience.

When it comes to implementing a fintech solution, would you rather buy, build or partner?
In May 2015, BankMobile set up a fintech software and services development division, so we build 90 percent of our technology in-house. We do have vendors for elements of our solutions, like cards, remote check deposit, photo billpay and P2P payments, as well as risk, fraud and credit-scoring—but they are all integrated into our in-house technology, platforms and apps. We don’t put vendor/partner technology directly in the hands of customers, as we strongly like to create and curate the customer experience, and differentiate where possible.

Smart Data Emphasizes Quality, Not Quantity


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International Data Corp. (IDC) suggests that worldwide revenues for big data and business analytics will grow from $130 billion in 2016 to more than $203 billion in 2020. The commercial interest in data comes as no surprise given the immense role it plays in facilitating innovation in the financial services industry and beyond. After all, for banks of any size, data is at the core of their vital business decisions. It enables the appropriate risk assessment of every financial operation and allows banks to accurately estimate the creditworthiness of existing and potential customers, among other things.

The value of data, however, has long been correlated with its quantity rather than quality, laying a foundation for big data analytic tools and intensive data generation in relationships between companies and consumers. While we can’t deny the value of such an approach in displaying major industry trends and assessing customer groups on a general level, financial technology startups nowadays are proving that innovation in the financial services industry will likely come from a smart use of more limited, but higher quality data rather than its scale. In addition, given the diversity of sources and ever-accelerating speed of data generation, it becomes more difficult to drive meaningful insights.

Smart Data’s Value as Raw Material
Smart data represents a more sophisticated approach to data collection and analysis, focusing on meaningful pieces of information for more accurate decisions. Coupled with advanced capabilities of AI and machine learning, smart data presents an opportunity for startups to efficiently derive deeper insights from limited, but relevant data points. Professionals from Siemens and an increasing number of organizations across industries believe that smart data is more important than big data. Moreover, in the future, the most important raw material will be smart data.

For banks, smart data represents an opportunity to change the way a prospective customer’s creditworthiness is assessed, hence, a chance to expand credit to new groups of population that have previously been overlooked. In fact, financial inclusion starts with the use of smart data. While national financial institutions are looking for reasons to deny someone of access to financial services, tech companies like Smart Token Chain, BanQu and others are looking for reasons to expand connectivity and open new opportunities for those excluded from the financial system. Those companies aim to leverage a different set of records for inclusive growth and a better tomorrow.

The Anatomy of Smart Data
Mike Mondelli, senior vice president of TransUnion Alternative Data Services, listed property, tax, deed records, checking and debit account management, payday lending information, address stability and club subscriptions as some of the sources for alternative data. As he emphasized, “These alternative data sources have proven to accurately score more than 90 percent of applicants who otherwise would be returned as no-hit or thin-file by traditional models.”

Other alternative sources of data used by technology companies include web search history, phone usage, social media and more. Sources can be combined into clusters, which some professionals distinguish as traditional, social and online.


Source: Forbes, LetsTalkPayments.com

The data sources emphasized above are certainly not exhaustive and their combination can vary depending on the goal and availability. In any case, the goal is to find the most relevant, even though limited, data that corresponds with the goal of its use. Fortunately, there is a variety of fintech companies leveraging the benefits of alternative data for inclusive initiatives, credit extension and more. Such examples include ZestFinance, Affirm, LendUp—all of which use data from sources such as social media, online behavior and data brokers to determine the creditworthiness of tens of thousands of U.S. consumers who don’t have access to loans.

Companies like Lenddo, FriendlyScore and ModernLend use non-traditional data to provide credit scoring and verification along with basic financial services. Those companies are creating alternative ways to indicate creditworthiness rather than relying on traditional FICO scores. For banks, such companies open up opportunities to expand their customer base without compromising their financial returns and security, while leveraging technological advancements for adopting innovative ideas and enhancing community resilience.

How Can Your Bank Tap Into the Internet of Things?


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The Internet of Things (IoT) has officially moved beyond hype. IoT is now well known and defined—basically putting data-gathering sensors on machines, products and people, and making the data available on the Internet—and companies are already using IoT to drive improvements in operational performance, customer experience and product pricing. Gartner predicts we’ll see 25 billion IoT data-gathering endpoints installed worldwide by 2020.

While IoT is delivering on its promise in a wide range of industries, many bankers are still struggling to find the value in finance, an industry largely built on intangibles. We see two primary IoT opportunities for banks:

  • Direct use of sensor data (location, activities, habits) to better engage customers and assess creditworthiness.
  • Partnering with companies that manufacture or integrate sensors into products to provide payment services for device-initiated transactions.

Engaging customers and assessing creditworthiness
Like most businesses, your bank can simply use IoT to understand—and serve—customers better. Banks are already implementing smart phone beacon technology that identifies customers as they walk in the door. Customers who opt in can be greeted by name, served more quickly and generally treated with more personalized care. You can also take advantage of sensor data outside of the bank to market more relevant services to customers. For example, data from sensors could alert your bank when a customer’s car goes into a repair shop; after the third service call, you might offer the customer an auto loan for a new car. This type of tailored service and marketing can change a customer’s relationship with your bank dramatically: Pleasant experiences and valued information are a time-tested path to loyalty.

IoT sensor data can also supplement traditional methods for predicting creditworthiness and protecting against fraud, especially for customers with little or no credit history. For example, if a small business HVAC contractor applies for a commercial loan, you can request access to data from shipping and manufacturing control sensors to track the flow of actual product into buildings. This can help the bank confirm how the business is doing. For product manufacturers, you can track and monitor goods, including return rates, and if the return rate is high the bank can adjust the loan pricing and decisions accordingly. Leveraging alerts on credit cards and processed payments can provide information about where and how often an individual or business is making purchases, providing clues about creditworthiness without requiring access to detailed credit card records. In short, with billions of sensors all over the world, IoT will offer you more data that can help you assess creditworthiness and prevent fraud.

Providing payment services for device-initiated transactions
To illustrate the potential of IoT, proponents often cite the “smart” refrigerator, which senses when a household is low on milk and automatically orders more. Similarly, in the commercial space, sensors can automatically trigger a call for maintenance when a piece of equipment is due for service. In these device-initiated transactions, your bank could partner with the providers to offer payment services as an integrated component of the IoT package.

On a more local level, as small businesses begin to take advantage of IoT sensors to automatically reorder supplies—paper, toner, medical supplies, salon products—your bank can tie payments into the IoT-triggered reordering system. In addition to broadening your market for payments, being part of this solution can strengthen attachment to your bank among small businesses in your community.

Start with the end in mind
This is undeniably an exciting time in banking. Between fintech offerings and IoT applications, it’s tempting to move quickly for advantage, but we all know that investments are far more likely to pay off when you treat the process with rigor and resist the urge to grab bright shiny objects. IoT is no different: Before you start buying systems and aggregating data, know what problems you’re trying to solve and what data you’ll need for the outcomes you want to achieve. In banking, the most promising returns on IoT investment are likely to be found in improved customer experiences and marketing effectiveness, reduction in loan default and fraud, and growth in your payments business. But with all the dramatic changes unfolding, who knows what innovations might be ahead—your bank might find opportunities for IoT no one else predicted.

 

Contributed by: John Matley, Principal, Deloitte Consulting LLP;Akash Tayal, Principal, Deloitte Consulting LLP;William Mullaney, Managing Director, Consulting LLP

How Fintech Can Improve the Customer Experience in Construction Lending


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One of the most underserved areas in financial technology is construction lending, which exposes banks and non-bank lenders to unnecessary risk, costs shareholders money and negatively impacts the client experience for borrowers. For an asset class that is finally gaining steam after punishing many lenders during the Great Recession, this is an area that can’t be ignored.

The problem? Once a construction loan closes, it’s booked into a loan servicing system. But to be properly serviced, that requires paper files, spreadsheets, emails and phone calls between lender staff, borrowers, builders, draw inspectors (people who go out to the job site and validate that the work is being done before a bank can release loan funds from a draw request) and title companies throughout the construction period. This coordination between parties is critical for lenders to mitigate risk and ensure that every dollar is actually going into their collateral. However, this reactive rather than proactive process is not only slow and costly, but it prevents even the most sophisticated internal systems from providing lenders with real-time visibility into what’s going on, much less their clients.

The concept of applying technology to a problem within lending in order to greatly reduce risk, increase transparency, eliminate friction, improve the customer experience and drive cost savings did not make its way into construction lending until recently. Most lenders don’t realize there is a better way.

This is the perfect example of how fintech can help solve a problem faced by banks and non-bank lenders alike.

Where Fintech Can Help

Risk: Construction loans are often perceived as the riskiest loans in a bank’s portfolio. As such, they garner significant attention from regulatory agencies that want to ensure risk is being properly managed. Technology applied to construction lending allows key information to be transparent and consumable in real-time. This reduces the opportunity for human error, ensures loans aren’t being overfunded and helps a lender maintain a first lien position throughout the life of a construction project. And perhaps the most exciting byproduct of bringing these loans into the digital world is the data. Analytics can now be used to help lenders make better decisions about the loans they make as well as proactively manage risk in their active portfolio. For instance, imagine proactive notifications to alert appropriate lender personnel that a construction project has gone stale or that a borrower has materially changed their behavior based on historical data.

Efficiency: Construction loans require more post-closing support and ongoing administration effort to be properly serviced than any other type of lending. While critical, this effort costs lenders more money than they likely realize. By bringing collaboration and automation into construction lending, lenders can now connect with their borrowers, builders, draw inspectors, and others in real-time, allowing each party to push things forward while knowing where (and with whom) things stand in the process. This eliminates countless steps and saves everyone significant time. Not only does this improve a lender’s efficiency, but it also gets borrowers their money safer and faster–creating happier builders and allowing lenders to accrue more interest.

Customer Experience: Today, the customer experience for a borrower managing a construction loan is sadly lacking. If a borrower or builder wants to make a draw on their loan, or wants to know where a loan currently stands, it requires a phone call or an email to their lender. This triggers a domino effect of events that usually results in stale information and disrupts the lender’s workflow. Through technology, borrowers and builders have full transparency into what’s going on, and can often self-serve from their phone or computer. That ends up being a better customer experience even though there is no human-to-human contact. Technology also means faster access to draws, which means that projects can be pushed forward faster.

The best part is that with the right technology solution, lenders don’t have to choose which of these three areas is most important because they can have their cake and eat it too. As with most areas of the financial services industry, fintech’s introduction to construction lending is changing everything for the better.

Departing Administration Leaves Gift of Fintech Principles


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It may strike some as odd that President Barack Obama’s White House’s National Economic Council just published a “Framework for FinTech paper on administration policy just before departing, but having been a part of several conversations that helped to shape this policy perspective, I see it from a much different angle.Given that traditional financial institutions are increasingly investing resources in innovationalong with the challenges facing many regulatory bodies to keep pace with the fast-moving fintech sector, I see this as a pragmatic attempt to provide the incoming administration with ideas upon which to build while making note of current issues.Indeed, we all must appreciate that technology isn’t just changing the financial services industry, it’s changing the way consumers and business owners relate to their finances—and the way institutions function in our financial system.

The Special Assistant to the President for Economic Policy Adrienne Harris and Alex Zerden, a presidential management fellow, wrote a blog that describes the outline of the paper.

I agree with their assertion thatfintech has tremendous potential to revolutionize access to financial services, improve the functioning of the financial system, and promote economic growth. Accordingly, as the fabric of the financial industry continues to evolve, three points from this white paper strike me as especially important:

  • In order for the U.S. financial system to remain competitive in the global economy, the United States must continue to prioritize consumer protection, safety and soundness, while also continuing to lead in innovation. Such leadership requires fostering innovation in financial services, whether from incumbent institutions or fintech start-ups, while also protecting consumers and being mindful of other potential risks.
  • Fintech companies, financial institutions, and government authorities should consistently engage with one another… [indeed] close collaboration potentially could accelerate innovation and commercialization by surfacing issues sooner or highlighting problems awaiting technological solutions. Such engagement has the potential to add value for consumers, industry and the broader economy.
  • As the financial sector changes, policymakers and regulators must seek to understand the different benefits of and risks posed by fintech innovations.While new and untested innovations may increase efficiency and have economic benefits, they potentially could pose risks to the existing financial infrastructure and be detrimental to financial stability if their risks are not understood and proactively managed.

A product of ongoing public-private cooperation, I see this just-released whitepaper as a potential roadmap for future collaboration.In fact, as the fintech ecosystem continues to evolve, this statement of principles could serve as a resource to guide the development of smart, pragmatic and innovative cross-sector engagement much like then-outgoing president Bill Clinton’s “Framework for Global Electronic Commerce” did for internet technology companies some 16 years ago.

Trends in Financial Technology to Watch


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The FinXTech Advisory Group is comprised of several respected fintech leaders from around the globe, and we are honored to have Christa Steele, former CEO of Mechanics Bank in Walnut Creek, California, as a part of the group. During her time with Mechanics Bank, she improved core earnings 43 percent in a single calendar year, doubled the stock price, evaluated three separate and vastly different M&A combinations and in 2015 led the company through its successful sale to a Dallas-based investment firm at a market premium of 1.64x tangible book value. Since then, she has been involved in a variety of initiatives including alternative lending, robo-advisory, mobile/digital payments and blockchain. As a director for a mix of public/private company boards, and as an advisor to two blockchain organization, we asked Christa to share her thoughts on the future of banking and how blockchain will impact financial services. Here are her written responses.

What trends in financial technology should we all be watching?
The banking industry must adhere to the required paradigm shift being caused by digital, mobile, e-commerce and other robust cloud-based technology trends. The traditional bank financial model is under siege by competitors from outside the industry.

Did you know:

  • Online lender SOFI, which started out refinancing student debt and now funds home loans, offers wealth management services for a flat fee of $60 per year?
  • PayPal has more customer money than all but the 20 largest U.S. banks? Did you also know that PayPal’s deposits are not insured?
  • The transaction volume at Venmo, PayPal’s peer-to-peer payment processor, exceeds $1 billion a month and the company is now piloting a merchant program?
  • Mobile banking apps are becoming gamified to enhance customer engagement and attract and retain millennials?
  • Facebook Messenger is processing Bank of America client transactions and is said to be engaged with over 1,000 payment vendors to offer client services that interact through Messenger with a single sign-in process?
  • Over 60 of the world’s largest banks are testing a new technology called blockchain that could single handedly revolutionize how financial transactions are conducted today?

As a former bank CEO, what are some of the challenges that bank leadership teams must overcome during this period of digital transformation?
Each bank is different. Geography, economic trends, client mix (i.e., retail, commercial and wealth management), institution size and product offerings can all be different. My advice is to pay attention and understand how fintech is impacting client acquisition, client retention—and, ultimately, your bottom line. Evaluate whether your current infrastructure and growth strategy meets the needs of a digital world.

Based on your experiences, why is there so much time, energy and resources being spent on blockchain?
We’ve all been using cloud-based technology. I remember when banks were slow to move to the cloud at first because of their initial mistrust. Today we are centralized, but there are endless possibilities about where we go from here, including the use of open access IoT networks, public and a private system of records.

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Blockchain is a software that enables data sharing across a network of individual computers. A blockchain describes computers transferring blocks of records in a chronological chain aka a distributed ledger. A simple way to explain this technology is to think about vehicle assembly. Blockchain is the assembly line in the manufacturing plant. The end product is a car, or in the case of blockchain, an asset token.

How do you see blockchain impacting the banking industry holistically?
The impact of blockchain will not only affect banking, but we will see enhanced record keeping and data analytics, streamlined processes, cost saves and efficiency gains. Over the next several weeks, I plan to share a series of articles centered around the technology of blockchain and how it will directly impact the financial industry. I’ll take a look at how it works, why it matters, how to make it a reality and highlight some major players in the space. I look forward to sharing with you all the interesting and innovative movements around this dynamic technology.

Want to Go Fast, Go Alone. Want to Go Far, Go Together.


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There was a plaque in my father’s office that is attributed to the late David Ogilvy, often called “The Father of Advertising. It read, “Search the parks in all your cities, you’ll find no statues of committees,” which I always interpreted to mean, “YOU need to make something happen; don’t wait on others to get going.”

But going it alone in the banking industry is extremely difficult because of the complexities around regulation, underwriting, competition and the thousands of vendors that serve it. Combine that with record breaking investment in financial technology and the next few years may very well serve as our “big bang” and usher in a new era of banking.

I’ve observed how companies seeking to make a real impact within the industry rarely do it alone. While we need committees in business, maybe what we need more is a “virtual committee,” or community of fintech players, to better understand the nuances within the landscape. The value of this fintech community is to provide industry intelligence, serve as a sounding-board for new ideas and foster relationships to move you faster in achieving your organizational goals.

The fintech community should also include thought leaders, published research and reports—and most importantly, peers from outside your organization. Even competitors can be valuable resources for your company and contribute to your personal development.

The banking segment will likely see more action than the rest of the economy. In the future we will probably witness the following:

  • The adoption of a new fintech charter
  • A relaxation of the regulatory burden
  • Improved bank earnings, helped in part by rising interest rates
  • Increased customer expectations

Individuals and organizations that embrace the industry as a community and foster relationships will have a competitive advantage.

Why Dramatic Change in Banking is Hard
Many of the products and services that banks offer are mature, even bordering on commodity status. Technology advances we see in our industry tend to fall into a few categories:

  • How banks deliver products (channel)
  • Customer insights and recommendations (managing their money better)
  • Ease of doing business (speed, simplicity and service)
  • Tweaks to traditional business models (sources of funding, hyper-focused segmentation)
  • Operational improvements (automated processes, enhanced security and improved regulatory compliance processes, to name three)

Many of the platforms we used today are in the process of being either rewritten or replaced. According to one vendor, the life cycle of fintech moving forward will be five years or less on average.

The technology that the vast majority of financial institutions use today is a result of decisions spanning over many years and engagements with a lot of vendors—typically from dozens to hundreds of relationships.

Media, fintech executives and investors have a tendency to focus on new and shiny technology without an appreciation of how hard it is to run a technology company in the financial industry, much less what it takes to achieve long-term success.

Agents For Change
Vendors looking to grow their businesses seek focused education and networking opportunities. Organizations such as the Association for Financial Technology, or AFT, enable vendors to learn about technologies, which organizations are doing well, and gain industry insights that help provide a perspective for decision-making. This particular fintech community includes companies of all sizes that have implementations in virtually every U.S. financial institution.

Ultimately, people do business with people, and fintech advances won’t happen until two people or two companies agree on a shared vision. Finding your community, and being a good citizen within it, will enable you to grow professionally and help your company succeed and make a positive impact.

Additional resource: “What You Need to Know About AFT Fall Summit 2016” by Kelly Williams.