Can Small Banks Play the Innovation Game?


innovation-4-27-17.pngWhen it comes to innovation, community banks generally don’t have the resources—either financial or people—to compete with the country’s largest banks—where the technical staff focused just on innovation alone is probably several times larger than a smaller institution’s entire workforce.

Of course, no one expects smaller banks to compete with a megabank like Wells Fargo & Co., but there are smaller institutions that are playing the innovation game very well.

One of those is Radius Bank, a Boston-based bank that has approximately $1 billion in assets and four years ago made the radical decision to close all of its branches except for one, and convert its local brick-and-mortar retail operation to a digital platform that operates nationally. President and CEO Michael Butler, who appeared on a panel of like minded bankers at Bank Director’s FinXTech Annual Summit in New York on April 26, said that one of the more challenging aspects of that decision was changing Radius’ culture to support its new business strategy. Not all of the bank’s employees were happy about the change in strategy, and Butler said there has been approximately a 50 percent turnover in the bank’s workforce over the last four years. Many of the older employees who resisted the change have been replaced by younger, more tech savvy employees who normally would choose to work at a tech company rather than a bank. Butler said the company has spent a lot of time trying to create the kind of “vibe” that will attract those kind of individuals. “It’s a lot about the people you bring into your organization,” said Butler. At 57, Butler has the background of a traditional banker even though he has led the charge towards digitalization. “My job as the grey hair is to not let them kill themselves,” he joked about some of the bank’s younger staff members.

Another panel member—Jay Tuli, senior vice president for retail banking and residential lending at Leader Bank, a $1 billion bank located in Arlington, Massachusetts—was instrumental in creating ZRent, an online portal that the bank launched in January 2015. It enables landlords to automatically collect rent payments via ACH transactions. ZRent has been a successful customer acquisition tool for Leader Bank, and it is now licensing the software to other banks that want to use it.

Radius and Leader Bank are both located in the Boston area (Arlington is just six miles northwest of the city), so they have the advantage of taping a deep talent pool in one of the country’s most attractive locations, with a number of highly regarded universities in their backyard. Like Radius, Leader Bank has seen a big turnover in its staff over the last eight years. Tuli said that the average age of its 300 or so employees is 31. “There’s a lot of young talent in Boston, and we’ve benefited from that,” he said.

So, if being located in a large urban market is a key element in the innovation game, how to account for the success of Somerset Trust Co., a $1 billion bank headquartered in Somerset, Pennsylvania, a small community situated about 80 miles southeast of Pittsburgh? Somerset had just 6,277 residents according to the 2010 census. A third panelist, Chief Operating Officer John C. Gill, said the bank has always placed a very high premium on having excellent technology, and sees this as a critical component of its organic growth strategy. Only about 19 percent of its consumer banking transactions occur in the branch today. It sees innovation as an imperative despite its rural location.

Somerset has learned to play the innovation game by partnering up with fintech companies. A couple of years ago, Somerset teamed up with Malauzai Software in Austin, Texas, to develop a mobile banking solution that allows Somerset’s retail banking customers to securely check balances, use picture bill pay and remotely deposit checks from any location or device. There are banks much larger in size that are still working on delivering these capabilities to their retail customers. Working with another fintech company, Bethlehem, Pennsylvania-based BOLTS Technologies, Somerset has also launched a new mobile account opening platform that has greatly reduced the time it takes to open a new account, and is expected to save the bank approximately $200,000 a year. Somerset and BOLTS were finalists in the 2017 Best of FinXTech Awards, which were announced at the event.

Gill said that Somerset is very comfortable partnering with fintech companies to develop product capabilities that it would not be able to develop on its own. “Banks have the customers and low cost funding,” he said. “Fintech companies bring innovation.”

Banks Face the Imperative to Innovate


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I’ve seen enough to believe there are no barriers to innovation in banking. Certainly, there are speed bumps, gate crossings and rumble strips that banks will encounter on the road to innovation, but nothing that flat out prevents them from getting there. Indeed, there are a growing number of banks, including community banks, that have made important achievements that serve as good examples of innovation. (For a great list, see the Best of FinXTech Award Winners announced at Nasdaq this week.) Some innovation projects have been quite ambitious, others more modest, but they all spring from the same source—a recognition that banks need to begin simplifying and speeding up various aspects of their businesses to keep pace with (or at least, not fall too far behind) where the customer is heading.

Where is the pressure to innovate coming from? The popular boogeymen are fintech companies that compete with banks in payments, lending and personal financial management. But companies in that space are simply reacting to a much deeper trend, which is the profound way that technology is changing our lives. Banks must do the same, and a growing number of them seem to realize it.

On April 26, Bank Director hosted the FinXTech Annual Summit at the Nasdaq MarketSite in New York. The event brought together 200-plus bank executives, directors and fintech executives to explore how technology is changing the industry. Underlying themes were innovation, the opportunities for partnership between banks and fintech companies, and how banks can move forward.

I believe 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. What many of them lack is a roadmap for how to innovate. Actually, a “roadmap” is probably the wrong metaphor to describe what they need because innovation is really a process rather than a destination—something you do rather than a place that you go. So maybe bankers need something like a yoga chant (Om!) to help focus their energy as they stretch to innovate.

There are several issues that need to be dealt with, starting with a vision of what projects to undertake. They can’t change everything at once, so where should they start? Here are a couple of questions they should ask. What are the greatest friction points within their most important businesses? Where are they seeing the greatest competition, and how would digitalization tilt the competitive balance more in their favor? What has the greatest potential to positively impact their profitability?

Innovation costs money, so they will have to budget for it. Based on my conversations with bankers that have begun to automate key parts of their operations, they should expect their innovation projects to cost more and take longer than originally estimated. Innovation can be messy, so perseverance and patience are important. They also have to make sure that their bank’s culture will embrace change. When I say “culture,” I really mean people. Banks must ensure that their employees are open to new ways of doing things, because innovation will change job descriptions, processes and work habits, and many of their staff will feel threatened by this. It’s not enough that executive management teams and boards commit to a large project like a new automated underwriting platform for small business lending and allocate the necessary resources to make that happen. They will also have to sell this change to people in their organization whose buy-in is critical.

For most banks—and particularly community banks with a finite amount of money to spend—innovation isn’t something they can do by themselves, so banks will have to work in partnership with fintech companies that can help achieve their objectives. This is more complicated than it sounds, because banks and fintech companies have very different perspectives when it comes to how they do business. Banking is a highly regulated industry, so they need a partner who knows how to work within a prescriptive environment that has lots of rules. Fintech companies that have experience working with banks understand this and have learned how to manage change in an ecosystem that tends to discourage it.

The innovation imperative is real, and banks must act upon it. Their world is changing faster than they realize, and the longer they wait to embrace that change, the further behind they will fall.

What Venture Capitalists Predict in the World of Fintech


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Fintech is no longer the enemy of banking. While much of the talk among fintech companies just a year or two ago was that they wanted to disrupt the dinosaurs of banking, now the tone has changed, said several speakers at the FinXTech Annual Summit Wednesday in New York City.

“I’ve seen a slight change in the business model, where it’s now about —How can we partner with the banks?’’’ said Jim Hale, the founding partner of FTV Capital, a venture capital firm. “The tone has changed.”

The event gathered more than 200 entrepreneurs and bankers together to discuss partnerships, financial technology and trends. Hale was one of several venture capitalists at the conference giving his perspective on future trends in financial technology and the challenges of partnering with banks.

In fact, many of the biggest banks, some of them in attendance, such as Wells Fargo & Co. and Citigroup, have started venture capital arms to invest in fintech startups, so they can learn and influence the direction of future technology.

The most active banks investing in fintech startups are Banco Santander, Goldman Sachs, Citigroup, Mizuho Financial Group and JPMorgan Chase & Co., according to a new report from CBInsights, which tracks financial technology investments globally.

The report said global venture capital funding and deal activity fell slightly in the first quarter compared to a year ago, but rose compared to the fourth quarter of 2016, a trend that venture capitalist Ryan Gilbert, a partner at Propel Venture Partners, said was likely the result of uncertainty brought on by Brexit and the U.S. presidential election.

There were 226 venture-backed investments in financial technology companies globally in the first quarter of 2017, receiving $2.7 billion in funding, compared to 256 investments and $4.9 billion in the first quarter of 2016, according to CBInsights. In the U.S., there were 90 deals financed in the first quarter with $1.1 billion in cash, compared to 137 in the first quarter of last year at $1.8 billion.

Hale estimated that 90 percent of fintech companies focus directly on consumers, but he is more interested in funding solutions that solve the back-office problems and infrastructure needs of banks. He is also interested in solutions that manage data quicker, faster and cheaper than current solutions do.

Gregg Schoenberg, the founder of Westcott Capital, said he sees opportunity to make asset management more efficient, since the cost structure in these organizations is high. Banks also have a tremendous amount of data on their customers and could use that more effectively. Few other industries are required by law to collect as much data on their customers as banks are, which have to meet know-your-customer and anti-money laundering mandates, he said.

For examples of how technology can create more efficient processes, banks might look to successful companies such as Domino’s Pizza, which has a high stock price not based on the quality of its pizza, but by its distribution system, Schoenberg said. The company has a robotics division and 17 different ways to order a pizza, he added.

Gilbert is looking to invest in emerging technologies such as voice recognition and artificial intelligence, enabling capabilities like having conversations anytime with your “banker” in the form of a chat bot, for example.

“That’s really rethink and rebuild,” he said. Gilbert is often more excited about innovation happening outside the U.S., such as Singapore, a country with a lot of wealth and a stable, central regulator, and where banks are using chat bots and voice recognition software.

In the U.S., there are more hurdles, and multiple regulatory bodies for the banking industry, including federal and state agencies. Just yesterday, the Conference of State Bank Supervisors sued the Office of the Comptroller of the Currency over the latter’s proposal to regulate fintech firms.

Still, Gilbert is not pessimistic. “Now is not the time to give up,’’ he said in an interview yesterday. “We have 5,800 banks and there are a lot of opportunities to turn these institutions into great things. Technology is developing at such a rapid pace. The best is yet to come.”

Best of FinXTech Award Winners Announced at Nasdaq


award-winner-4-26-17.pngWhile many bankers still think of them as a source of competition, most fintech companies focus on providing solutions that will ultimately make financial institutions more efficient and profitable. True, some fintech firms do compete head-to-head with banks, but the great majority of them are more interested in partnering with banks in ways that will benefit both sides. In recognition of this growing trend towards cooperation, FinXTech.com recently held its 2nd annual Best of FinXTech Awards, which highlights collaborative efforts between banks and fintech companies working together in a successful partnership. From a pool of 10 finalists, three winners were chosen by this year’s FinXTech Advisory Group. The judging criteria were strength of integration, innovation and growth in revenue, reputation and the customer base that resulted form the project. The three teams, whose stories are detailed below, were honored today at the FinXTech Summit in New York.

USAA and Nuance

Headquartered in San Antonio, Texas, USAA wanted to develop a stronger relationship with current customers while also attracting new customers through the use of technology that would meet their needs and preferences. Since 2013, USAA has utilized Burlington, Massachusetts-based Nuance’s virtual assistant technology—called Nina—on its mobile banking app. Nina leverages natural language understanding and artificial intelligence to provide a proactive and personalized customer experience. In 2016, following Nina’s widespread adoption by USAA members on the mobile channel, the bank deployed Nina on its usaa.com website.

On usaa.com, Nina provides immediate, human-like support and assists USAA members with tasks such as activating cards, changing a PIN, adding travel notifications and reporting lost or stolen cards. Nina goes far beyond a static question-and-answer capability to deliver a more human experience that speaks, listens, understands and helps USAA members get things done efficiently. Nina responds to 1.4 million requests per month and eliminates the need for USAA members to sift through menus, ensuring that every interaction begins and ends with an effortless, natural experience. Through its partnership with Nuance, USAA is able to provide its customers with a compelling, multi-channel, automated customer service experience that keeps it ahead of the pack.

Scotiabank and Sensibill

In October 2016, Scotiabank—Canada’s third largest bank—and Sensibill, both of Toronto, launched eReceipts, a service that allows customers to store, organize and retrieve any receipt (paper or electronic) directly from Scotiabank’s mobile banking app and wallet. Scotiabank is the first of the Canadian Tier 1 banks to rollout the solution, and Scotiabank CEO Brian Porter has referred to it as a “game-changing application.”

Sensibill’s receipt processing engines uses deep learning and machine-learning to extract and structure information about each item, including product names and SKU codes. This adds clarity to otherwise vague transactions and reduces the friction associated with searching for a specific purchase. The service is also the first to offer consumers automatic matching of receipts to card transaction histories, which supports customers’ need for convenience and accessibility and enables Scotiabank to provide a seamless end-to-end payment experience.

Scotiabank customers use the service to track both personal and business expenses, with approximately 38 interactions with the service per month per customer. In the same way that online and mobile bill pay serves as a “sticky” product that retains customers who do not want to move their information to another bank, eReceipts has the propensity to reduce attrition. Forty-eight percent of eReceipts users use the app’s folders and notes to keep themselves organized, with captured receipts often being revisited. Not only does the app improve the customer experience, it also has the potential to lower the bank’s costs. For example, Scotiabank believes that 20 percent of credit and debit card queries could have been resolved through the Sensibill app, which ultimately should lead to a reduction in call center activity.

Green Dot Corp. and Uber Technologies Inc.

One of the biggest challenges workers in the gig economy face is gaining speedy access to their earnings. In March 2016, Uber, the transportation network company headquartered in San Francisco, and Green Dot, a prepaid card issuer located in Pasadena, California, launched a customized business version of Green Dot’s GoBank mobile checking account. Initially piloted in San Francisco and a few other cities, the solution provides Uber drivers with immediate access to their funds through a feature called Instant Pay. All drivers do is open a free Uber debit card from a mobile GoBank checking account and use this account to access their earnings instantly, for free, up to five times per day. Drivers are also able to use their Uber debit card for free at any of GoBank’s 42,000 ATMs spread across the country, and can also use it for transactions wherever Visa cards are accepted.

The pilot was so successful that in June 2016, Uber offered the solution to all of its drivers nationally, resulting in over 100,000 drivers signing up since August. That same month, in response to driver feedback and increasing demand, Uber and Green Dot announced it was expanding Instant Pay to work with not only a GoBank account, but almost any U.S. MasterCard, Visa or Discover debit card that is attached to a traditional checking and savings account. The expanded debit card program has scaled quickly, with millions of transactions having occurred between the August launch date and September 30, 2016.

The other seven finalists in this year’s Best of FinXTech Awards were IDFC Bank and TATA Consultancy Services, Franklin Synergy Bank and Built Technologies, National Bank of Kansas City and Roostify, Somerset Trust Co. and BOLTS Technologies, Toronto-Dominion Bank and Moven, Woodforest National Bank and PrecisionLender, and WSFS Bank and LendKey.

Recognizing How Fintech Companies Are Making Banks Better


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While the financial technology sector is still viewed as a source of competition, most fintech companies focus on providing solutions that will ultimately make banks more efficient and profitable. True, some fintech firms do compete head-to-head with banks, but the great majority of them are more interested in partnering with banks in ways that will benefit both sides. In recognition of this growing trend towards cooperation, FinXTech.com recently held its 2nd annual Best of FinXTech Awards, which highlights collaborative efforts between banks and fintech companies working together in a successful partnership. From a pool of 10 finalists, three winners were chosen by this year’s FinXTech Advisory Group. The judging criteria were strength of integration, innovation and growth in revenue, reputation and the customer base that resulted form the project. The three teams, whose stories are detailed below, were honored today at the FinXTech Summit in New York.

USAA and Nuance

Headquartered in San Antonio, Texas, USAA wanted to develop a stronger relationship with current customers while also attracting new customers through the use of technology that would meet their needs and preferences. Since 2013, USAA has utilized Burlington, Massachusetts-based Nuance’s virtual assistant technology—called Nina—on its mobile banking app. Nina leverages natural language understanding and artificial intelligence to provide a proactive and personalized customer experience. In 2016, following Nina’s widespread adoption by USAA members on the mobile channel, the bank deployed Nina on its usaa.com website.

On usaa.com, Nina provides immediate, human-like support and assists USAA members with tasks such as activating cards, changing a PIN, adding travel notifications and reporting lost or stolen cards. Nina goes far beyond a static question-and-answer capability to deliver a more human experience that speaks, listens, understands and helps USAA members get things done efficiently. Nina responds to 1.4 million requests per month and eliminates the need for USAA members to sift through menus, ensuring that every interaction begins and ends with an effortless, natural experience. Through its partnership with Nuance, USAA is able to provide its customers with a compelling, multi-channel, automated customer service experience that keeps it ahead of the pack.

Scotiabank and Sensibill

In October 2016, Scotiabank—Canada’s third largest bank—and Sensibill, both of Toronto, launched eReceipts, a service that allows customers to store, organize and retrieve any receipt (paper or electronic) directly from Scotiabank’s mobile banking app and wallet. Scotiabank is the first of the Canadian Tier 1 banks to rollout the solution, and Scotiabank CEO Brian Porter has referred to it as a “game-changing application.”

Sensibill’s receipt processing engines uses deep learning and machine-learning to extract and structure information about each item, including product names and SKU codes. This adds clarity to otherwise vague transactions and reduces the friction associated with searching for a specific purchase. The service is also the first to offer consumers automatic matching of receipts to card transaction histories, which supports customers’ need for convenience and accessibility and enables Scotiabank to provide a seamless end-to-end payment experience.

Scotiabank customers use the service to track both personal and business expenses, with approximately 38 interactions with the service per month per customer. In the same way that online and mobile bill pay serves as a “sticky” product that retains customers who do not want to move their information to another bank, eReceipts has the propensity to reduce attrition. Forty-eight percent of eReceipts users use the app’s folders and notes to keep themselves organized, with captured receipts often being revisited. Not only does the app improve the customer experience, it also has the potential to lower the bank’s costs. For example, Scotiabank believes that 20 percent of credit and debit card queries could have been resolved through the Sensibill app, which ultimately should lead to a reduction in call center activity.

Green Dot Corp. and Uber Technologies Inc.

One of the biggest challenges workers in the gig economy face is gaining speedy access to their earnings. In March 2016, Uber, the transportation network company headquartered in San Francisco, and Green Dot, a prepaid card issuer located in Pasadena, California, launched a customized business version of Green Dot’s GoBank mobile checking account. Initially piloted in San Francisco and a few other cities, the solution provides Uber drivers with immediate access to their funds through a feature called Instant Pay. All drivers do is open a free Uber debit card from a mobile GoBank checking account and use this account to access their earnings instantly, for free, up to five times per day. Drivers are also able to use their Uber debit card for free at any of GoBank’s 42,000 ATMs spread across the country, and can also use it for transactions wherever Visa cards are accepted.

The pilot was so successful that in June 2016, Uber offered the solution to all of its drivers nationally, resulting in over 100,000 drivers signing up since August. That same month, in response to driver feedback and increasing demand, Uber and Green Dot announced it was expanding Instant Pay to work with not only a GoBank account, but almost any U.S. MasterCard, Visa or Discover debit card that is attached to a traditional checking and savings account. The expanded debit card program has scaled quickly, with millions of transactions having occurred between the August launch date and September 30, 2016.

The other seven finalists in this year’s Best of FinXTech Awards were IDFC Bank and TATA Consultancy Services, Franklin Synergy Bank and Built Technologies, National Bank of Kansas City and Roostify, Somerset Trust Co. and BOLTS Technologies, Toronto-Dominion Bank and Moven, Woodforest National Bank and PrecisionLender, and WSFS Bank and LendKey.

Q&A: What Do Fintech Companies Commonly Miss?


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Banks are increasingly interested in having conversations with fintech companies and exploring the potential to partner with them. They have a lot to gain: better technology, increased efficiencies and improved market share. On the other hand, fintech companies don’t necessarily know how to best pitch their products and services to banks. Banking regulations are significant and can complicate any partnership. Large banking organizations are complex and difficult to understand. So we reached out to some of the banking experts speaking at the FinXTech Annual Summit in New York City April 26, with the goal of helping fintech companies improve their approach.

Q: How could fintech companies better sell to banks? What do they commonly miss?

A common problem is that they don’t understand the banks’ regulatory requirements for working with a so-called third party. Banks have to comply with extensive rules on managing the risk around third-party relationships. The fintech companies should read those rules based on the type of bank it is, should be ready to satisfy those questions, and explain how they are working with other banks to give each bank confidence. The bank is responsible for what the fintech does in most of these relationships, including meeting standards for cybersecurity, consumer protection, anti-money laundering and disclosures. Know what those rules are. Many fintechs are caught by surprise by the complexity and difficulty of satisfying these requirements.

Jo Ann S. Barefoot, CEO, Barefoot Innovation Group


What can your technology do now versus what is on the roadmap ahead? At some stage in the pitching process, you’ll need to review your financials, funding, staffing and sales pipeline. Be prepared with details for evaluation of things like what your cost model is and how you are positioned to compete and defend against copycats.—•?_Work your contacts. Avoid the urge to send an email blast to everybody you can get to via LinkedIn. This has a counter-productive effect on a company’s appetite to engage and is a colossal waste of resources for all. A more effective method is to approach a company through a referral from your investor partner, a board member or a key business or technology executive. Also, do your homework! Most larger companies have a wealth of public information in print, online and social media. Understand the company’s scale, business imperatives, risk appetite and more by doing your research ahead of time. Also know who you’re meeting with. Is it senior technology leaders? Their team? Know who they are, and tailor your message for the audience.

—Sherrie Littlejohn, executive vice president, Innovation Group at Wells Fargo &Co.


We see many fintech players running into the same roadblocks when selling into banks.At the core, it comes down to not understanding how buying decisions are made in these organizations.For the larger banks, the purchasing process can be complicated and involve a number of parties, including a procurement organization.We’ve seen these smaller start-ups going to procurement after a few demos, thinking that the deal is done, only to start a lengthy process of becoming an approved vendor for the bank.That is usually just the start of the journey.When dealing with smaller banks, the process may not be as involved and procurement may not be as central to the process.However, these banks usually require strong alignment across the leadership group•?__both business and technology•?__and, in many instances, eventually involving the CEO directly. Being smart about the decision process is key.

—Joe Guastella, managing principal, Global Financial Services, Deloitte Consulting


I would challenge the premise, for starters. As in any emerging relationship, the onus should be on both sides, and many banks probably have a lot of room for improvement in listening to startups. By the way, when we talk of fintech companies, banks are the original fintechs, right? That said, there are three basic hygiene tips to help any startup deal with a large, complex organization like a bank. First, “work like a headhunter”—do your homework, figure out who’s who, focus your firepower and engage tactfully. Secondly, be able to explain what actual bank problem you address. The best pitches abbreviate gloating about the merits of their product and give concrete examples of pain points they solve. Third, you would be surprised at how rare it is to find someone who can state clearly what they do or offer. You need to make it simple enough for a banker to understand!

—Andres Wolberg-Stok, global head of policy, Citi FinTech, Citigroup

How to Pick the Right Digital Small Business Lending Tool: Top 10 Must Have Characteristics


lending-4-24-17.pngHaving access to online lending applications has quickly transitioned from a customer convenience to a customer expectation. It’s only a matter of time before all institutions will be providing digital access to small business lending. That much is certain. What isn’t certain is how to find the right fintech partner. Your partner should understand your institution’s lending processes and digital strategy in that space, and provide you with a solution that meets your unique objectives.

Here are the top 10 characteristics you should demand from any digital business lending partner.

1. Friend Not a Foe Business Model
It’s obvious, I know, but find a partner who is not a competitor of yours. There are business lending fintech companies that once had designs on putting banks and credit union lending departments out of business. If the businesses you serve can also go to your partner’s website and apply directly with them for a loan, they’re not a partner. They are a competitor.

2. Timely End-to-End Functionality
Current business lending processes are onerous for both the client and the bank. Applications are submitted incompletely 60 percent of the time, and data is bounced from one party to another and back again. Technology does an amazing job of doing things right the first time every time. The value in your business lending tool resides in its ability to help facilitate everything from the application to closing the loan.

3. Endorsed by a Trusted Source
Most of the financial services industry’s trusted resources and trade associations provide their members with a list of solutions for which they have completed comprehensive due diligence and identified as an endorsed solution. Entities, like the American Bankers Association, Consumer Bankers Association and others, have the resources to conduct due diligence on the companies they recommend. Leverage their expertise.

4. Control…Control…Control
The institution must be able to retain control over every aspect of the process. Your clients should never even know the tech partner exists. The brand, the credit policy, pricing, scoring, decisions, and all aspects of the customer relationship must be fully owned and controlled by the institution.

5. Customer Experience
Find a tech partner that shares your philosophy of putting the borrower at the center of the process. Look for a tool that creates an engaging, simple, and even fun environment for the application portion of the process, and results in a speedier, more efficient and convenient end-to-end process.

6. Enhances Productivity
Find tech that frees up your sales staff to sell, and allows your back office to spend minutes—not hours—making a decision on a business loan. Sales teams should spend their time growing relationships and sourcing new deals as opposed to shepherding deals through the process or chasing documentation. With the right tool, back office can analyze deals quickly and spend more time on second look processes or inspecting larger deals.

7. Builds the Loan Portfolio
Find a tech solution so good that it will draw new opportunities into your shop—even those folks who would never think about walking into a branch. And make sure the application process can accommodate both the borrower who is online and independent, as well as the borrower who wants to sit next to a banker and complete the application together.

8. The Human Touch
The most important relationship is the one between banker and customer. Don’t lose the personal touch by using technology that cuts out the value the banker brings to the relationship. Instead, find a tool that engages the relationship managers and facilitates their trusted advisor status.

9. Positive Impact on Profitability
By finding a tool that enhances productivity across the board, you should be able to reduce cost-per-loan booked by as much as two-thirds. That means even the smallest business loans should be processed profitably.

10. Cloud-Based Model
The best way to keep pace with innovation in a cost-effective manner is to find a partner that uses the latest technology, development processes and a cloud-based model, which enhances storage capabilities. Your partner should update and enhance often, and not nickel and dime you for every enhancement or upgrade.

Stick to these guidelines and you’ll be sure to find the right tool for your unique institution.

Tips for Working With Fintech Companies


partnership-4-21-17.pngPartnerships with startup fintech companies can be fraught with difficulties. There are the cultural differences between bankers and tech entrepreneurs, the latter sometimes showing up for business meetings in sandals and jeans. Or there are the more practical problems of risk management with a startup that may not have been in business for more than a year or two.

Still, many banks are very much interested in doing business with fintech companies, in part because they fear innovation will lure customers away from the banking industry, or to more technologically savvy competitors. In a recent PwC survey of some 1,308 financial services executives, including banks, asset managers and insurance companies, 80 percent believe their profits are at risk from innovators, and 82 percent expect to increase their partnerships with fintech companies in the next three to five years.

Of course, banks have relied for a long time on financial technology companies in the form of core processors who provide everything from online banking to transaction services. But the sheer number of new financial technology firms has dwarfed the core processors and is quickly changing the landscape for financial services. Globally, some 6,500 fintech companies have received about $100 billion in funding in the last several years, according CB Insights, a research firm that tracks startup investments.

[Fintech companies] have the innovation, the great user experience and the efficiency the bank doesn’t have,” says Jo Ann Barefoot, a former deputy comptroller of the currency, who is now an advisor and CEO of Barefoot Innovation Group. She is a speaker at the FinXTech Annual Summit Wednesday in New York City, an event for bank executives, fintech companies and venture capitalists. “The banks are hard pressed to build it in-house unless it’s a really big bank, and even the big banks have trouble doing it.”

So what are some tips for banks interested in partnering with fintech companies?

Go Straight to the Investors
There are so many fintech companies out there, it’s hard to get a handle on what the best offerings may be for your bank. Manoj Govindan, a senior vice president in the Office of Innovation and Advanced Tech/Partnerships for Wells Fargo & Co., says the bank reduces the cycle time by building relationships with venture capital firms and angel investors who put their money into fintech companies. That helps the investors know what the bank is looking for and problems it needs to solve. It also helps the bank learn about solutions. Their conversations are “not about shiny objects,” he said. “It’s very focused on the three, or four or five things we know we need to solve for. It’s about educating the venture capitalists [and] that vastly reduces the feedback loop.”

Think Beyond Build or Buy
Govindan also urges banks to think beyond the notion that the bank can either build the technology solution or buy it. APIs, or application programming interfaces, are a great way for innovators to tap into the bank’s customer base and provide what customers need, he says. Wells Fargo and JPMorgan Chase & Co. recently inked a deal with Intuit to develop APIs so the bank’s customers can use Intuit’s products, including Mint and Quicken, in a way the bank can control and secure.

Accept Cultural Differences
One important first step to partnering with fintech companies is to recognize cultural differences. PayPal CEO Dan Schulman, for example, wears sandals or cowboy boots to business meetings. “Banks should recognize that there is a casual culture that is not slacker, or lax or disrespectful,’’ Barefoot says. You need to be open to how young some of these entrepreneurs are, and how great the technology can be, she adds.

Adjust the Vendor Risk Management Process
Traditional aspects of vendor risk management go by the wayside in dealing with fintech companies that haven’t been around for more than a year or two and may not have a source of funding beyond another few years. The $1 billion asset Radius Bank, based in Boston, does physical inspections of vendor sites, interviews the vendors in terms of compliance and risk management and sets up a wall, at least in the early part of the partnership, so that vendors don’t have access to customer data. The bank also has early conversations with regulators to make sure they are comfortable with the partnership and the risk management process, according to president and CEO Mike Butler in this video interview. Barefoot says banks must do serious vetting of fintech companies, especially on cybersecurity and anti-money laundering compliance. Some vendors sell customer data to third parties, so be clear about whether the fintech’s goals and policies match the bank’s. “Most of them are trying to do something good for the customer,” Barefoot says. “But you can’t take that for granted.”

Why You Shouldn’t Ignore Global Fintech


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It’s difficult to comprehend the size of the global financial services ecosystem. Take just a minute to think about every person on earth with access to financial services (deposits, business loans, microlending and so forth). It’s around 2.5 billion adults.

Despite having access to financial services, many people fall into the category of being underbanked, which means that typical banking services aren’t readily available. And another 2 billion people are unbanked, meaning they don’t have access to formal financial services at all.

Globally, Six and a half times the entire population of the United States are unbanked. The good news is that that number is continuing to drop (700 million since 2011). Most unbanked people are in emerging and developing economies (India, China, sub-saharan Africa). Banks and fintech companies are discovering new ways to acquire previously unbankable customers. It’s a win-win combination: people get access to critical financial services and banks acquire new customers.

To be clear, the takeaway here is not about the underbanked. The takeaway is that there is a necessity for innovation in emerging markets and, as they say, necessity is the mother of invention.

Timing and context matter, a lot
It’s easy to think, “That’s interesting. They’ve got a long way to go before they reach the issues I deal with in a mature banking system!” That’s true, but there are some critical differences to consider.

Community and regional banks in the U.S. didn’t come of age with the following:

  • The internet
  • Pocket supercomputers (smartphones)
  • Cloud computing
  • Machine learning and automation
  • Practically limitless datasets on customers
  • APIs, real-time payments, P2P lending and blockchain

Imagine how different you would bank if you had started from scratch. Imagine how different regulation would be with easy access to real-time data from banks. It’s difficult to imagine this whole new world but it’s exactly why fintech is (rightly) recognized as a great opportunity for the industry and the consumer.

It’s also why fintech’s greatest opportunity is outside the U.S. Banks in developing countries, without so many legacy systems and processes, have the freedom to experiment. Out of necessity, emerging banking ecosystems are creating new products and services to serve un(der)banked customers and qualified customers. No bank is doing it perfectly today, but emerging markets are being forced to gain experience and practice. It’s that practice that is critical. Practice helps build the fintech muscle, which impacts how you conduct business and serve clients better.

Global Fintech is Local Fintech
So, who cares? How does innovation in banking in a country 8,000 miles away apply to you? I see two ways.

First, it’s an opportunity to learn. Innovation is most likely to occur when there are both incentives and constraints. Emerging economies have a huge, untapped customer base. Developing new services to acquire and serve all customers pays in spades over a person’s (and their family’s) lifetime. Emerging economies are digital and mobile first because of infrastructure challenges that make it difficult if not impossible to operate a traditional U.S.-style branch network. That’s not the same experience we have here in the U.S. However, appreciating these new products, services and risk assessment methods may give you insight into how to better serve your customers.

Second, it’s a (future) threat. What happens when the next international bank that can serve everyone, from the rural farmer to the high net worth individual, wants to expand? What market will they target next? What experience and technology will they bring with them that’s been honed to serve all clients. What will you do to compete? How can you widen your moat today?

Take Action
The most important question, what can you do now?

The first step is to start learning about fintech, both at home and abroad. We believe this is critical so we write about it everyday on the Let’s Talk Payments website. The more familiar you are with global trends and technology, the easier it will be to apply that learning to your own bank. It will equip you to have more meaningful conversations with your team, customers and potential fintech vendors.

Next, come up with a list of pain points for your customers (big or small) and start the journey of leveraging fintech to enable a better customer experience, new products and increased operational efficiency at your bank. Remember, it’s that experience that will help you and your team develop your fintech muscle.

As your team evolves your banking experience it’s important to remember that technology isn’t the answer. Technology is merely the great enabler to satisfying the needs of your customer. You need to experiment and gain experience. Your customers, shareholders, and communities will be better for it. So don’t wait, get started.

Patrick Rivenbark is the VP of Strategic Partnerships at Let’s Talk Payments, a global leader in FinTech Insights. He will be presenting at this year’s FinXTech Annual Summit on the panel titled “Ideas Know No Boundaries: A Global Perspective” where he will speak about innovation in financial services taking place outside of the United States.

Gaining a Digital Competitive Advantage



The average small business owner uses technology every day to run the enterprise—and the same is expected of the financial institution, explains Chris Rentner of Akouba Credit. Banks that adopt technology will have a competitive edge in the market.

  • Why Banks Should Explore Fintech Partnerships
  • What Small Business Customers Expect From Their Bank