Embracing Gender Diversity as a Pathway to Success

A prolonged flat yield curve, economic contraction, increasing compliance and technology costs, not to mention the pandemic-induced pressure on stock valuations, have left banks in a difficult operating environment with limited opportunities for profitability.

Yet, there is an untapped opportunity for banks to capitalize on a strong and growing talent pool and profitable customer base: women. Research repeatedly shows that increasing gender diversity on bank boards and in C-suites drives better performance. Forward-thinking banks should look to women in their communities for growth inside and outside the institution.

Women now receive nearly 60% of all degrees, make up 50% of the workforce and, prior to the pandemic, held more jobs in the U.S. than men. They are the primary breadwinner in over 40% of U.S. households and comprise more than 50% of stock owners. A McKinsey & Co. report found that U.S. women currently control $10.9 trillion in assets; by 2030, that could grow to as much as $30 trillion in assets. Women also started 1,821 net new businesses a day in 2017 and 2018, employing 9.2 million in 2018 and recording $1.8 trillion in revenues. Startups founded by women pulled in $18.6 billion in investments across 2,304 deals in 2019 — still, lack of capital is the greatest challenge reported by female small business owners.

Broadly, research also supports a positive correlation between a critical mass of gender diversity in leadership and performance.

A study of tech and financial services stocks found a 20% increase in stock price momentum within 24 months of appointing a female CEO, a 6% increase in profitability and 8% larger stock returns with a female CFO. And they may achieve better execution on deals. In a review of 16,763 publicly announced M&A transactions globally over the last 20 years, boards that were more than 30% female performed better in terms of stock price and operational metrics than all-male boards.


Note: Performance metrics are market-adjusted
Source: M&A Research Centre at Cass Business School, University of London and SS&C Intralinks: “Gender Diversity and M&A Outcomes; How Female Board-Level Representation Affects Corporate Dealmaking” (February 2020)

But as of 2018, women held just 40 CEO positions at U.S. public banks, or 4.31%. Nearly 20% of banks have no women board members; the median is just over 16%. Banks should start by gender diversifying their boards; gender-diverse boards lead to gender-diverse C-suites.

Usually, boards feature an “accidental” composition that results from social norms: board members source new directors from their social and immediate networks. An intentional board, by comparison, is deliberate in composing a governance structure that is best equipped to evaluate and address current demands and future challenges. Boards can address this in three ways.

  1. Expand your networks. The median male board member has social connections to 62% of other men on their boards but no social connections to women on their boards. Broaden the traditional recruitment channels to ensure a more qualified, diverse slate.
  2. Seek diverse skill sets. Qualified female candidates may emerge through indirect career paths, other sectors of the financial industry or are in finance but outside of financial services. Women with nonprofit experience and small business owners can bring local market knowledge and relevant experience to bank boards.
  3. Insist on gender diverse slates. A diverse slate of candidates negates tokenism, while a diverse interviewer slate demonstrates to candidates that your bank is diverse.

But diversity in recruiting and hiring alone won’t improve a bank’s performance. To be effective, a diverse board must intentionally engage all members. Boards can address this in three ways.

  1. Ensure buy-in. Support from key board members when it comes to diversifying your board is critical to success. Provide coaching for inclusive leadership.
  2. Review director on-boarding and ongoing engagement. Make sure it’s welcoming to people with different connections or social backgrounds, builds trust and facilitates open communication.
  3. Thoughtful composition of board committees. Integrate new directors into the board’s culture and make corporate governance more inclusive and effective.

The long-term performance benefits of a gender diverse board and c-suite are compelling, especially in the current challenging operating environment for banks. Over time, an intentional board and C-suite that mirrors the gender diversity of your bank’s key constituents — your customer base, your employee base and your shareholder base — will out-perform banks that do not adapt.

Three Reasons to Take Banking to the Cloud

Bankers challenged by legacy technology can leverage a low-cost workaround as a way to keep up with the latest innovation.

Today’s marketplace is challenging bankers to keep pace with the rate of technology innovation and provide a level of functionality and service that meets — or hopefully, exceeds — their customers’ expectations. Many find, however, that they must first overcome the limitations of existing legacy technology in order to deliver the customer experience that will keep them competitive.

A revolution of sorts has been developing within the computing world: a shift to internet-based, cloud services has introduced a more cost-effective, scalable and reliable approach to computing. With essentially no or little cost to join and access to on-demand platforms and application programming interfaces (APIs), users are empowered to leverage virtually unlimited resources while paying on a metered basis. An additional benefit of the cloud is its ability to support transformation over time, providing options to configure services based on users’ specific needs as they evolve — which has a direct application for bankers.

Many banks have already learned that a move to the cloud not only helps them increase efficiencies and reduce operational costs, but can drive innovation where it matters most: the customer experience. The inherent advantages of the cloud are being applied within retail banking to provide a modern banking experience for customers through services that are offered in a scalable, “pay-as-you-go” format that grows and evolves over time.

Most importantly, the cloud helps bankers build off of their existing technology infrastructure to more easily create new services and experiences for their customers, particularly in three ways:

Faster innovation. The cloud breaks down the barriers to innovate across departments, eliminating a disintermediated, “spaghetti” architecture and allowing banks to go to market faster. Projects that may have taken months or years to implement before can now often be completed through a click and initiated within days. Much like an appstore, the cloud allows banks to subscribe, try and launch new products almost instantly, as well as delete applications that no longer serve their account holders.

More cost savings. Compared to the expense of enterprise and on-premises solutions, the cloud minimizes the need for costly investments, like physical infrastructure or storage and maintenance fees. Instead, banks pay only for the specific applications they use. Services that were once available only through binding, long-term contracts are now accessible entirely within the cloud on a metered basis, removing the significant upfront costs associated with legacy technology.

Improved flexibility. The number of resources and tools available within the cloud environment is growing daily, which drives growth in the developer community as a whole. This leads to more participants who are creating and contributing even better offerings. Banks benefit through the ability to implement new products or services quickly and easily in response to market demand or the specific banking needs of account holders. If the bank finds a certain application does not provide enough value, the cloud offers the flexibility to try other services until it identifies the product with the best fit for its unique situation.

For too long, too many banks have simply settled for “good enough” from an innovation perspective, hamstrung by their legacy technology’s complex infrastructure. In most cases, banks’ core technology investments have been sound ones — the technology is stable, secure and reliable and has a proven track record. But it can create limitations when it comes to flexibility, ease and speed to deploy new capabilities. With cloud computing, bankers can effectively extend the value of their core technology investments by leveraging all of the benefits that they provide, while cost-effectively supporting a more innovative approach to providing customers with a true, modern banking experience.

A Pandemic-Proof Process Transformation Game Plan

Initiatives without execution are dreams that never become plans.

At MX, we’re helping banks use financial data to improve the financial lives of more than 30 million people. Banks need a secure foundation to build on at a time when profits have stalled, laying the groundwork for ways to increase revenue, offset losses and impact to your bottom line.

To get a better understanding of what financial institutions are focusing on, we recently surveyed more than 400 financial institution clients for their top initiatives this year and beyond. We believe these priorities will gain even more importance across the industry. The top five initiatives are:

  1. Enabling Emerging Technologies, Continued Innovation
  2. Improving Analytics, Insights
  3. Increasing Customer Engagement
  4. Leveraging Open Banking, API Partnerships
  5. Strategically Growing Customer Acquisition, Accounts

But identifying the initiatives to prioritize is merely the first step. Banks need to align their top initiatives throughout their organization to lay down the project’s foundation. Sustainable transformation is not accomplished by simply plugging in a new technology or process. True transformation requires a shift in the way the organization operates day to day. Without a commitment to changing the way you do business your efforts will be stunted and you will not achieve the outcomes promised in the initial business case.

The first thing banks need to do is ensure that their organizational goals translate top down, from executive leadership through department levels, all the way to individual contributors. If certain priorities don’t align from top to bottom, it’s important to address these outliers right away to ensure everyone is moving ahead in the same direction.

Banks will also want to make sure they’re effectively tracking their performance against the company strategy and organizational vision through Objectives and Key Results (OKRs) and department metrics. Look at the top initiatives in the industry and see how they align within your bank’s own organizational goals.

This practice might reveal that that not all initiatives work together. Three critical questions to ask during this process are: Are we focused on understanding and solving the needs of our customers? How do we shift priorities to align with where we should be going as an organization? Where is overlap or conflict of priorities between all stakeholders?

Here’s a brief overview of how banks can create a game plan to guide their process transformation:

1. Align OKRs With Vision
Break down your bank’s vision into objectives. This can be anything from helping employees develop the right skills to acquiring the right technologies and so on. From there, break those objectives down into quarterly Objectives and Key Results and translate them across each department and individual employee.

2. Specify Metrics
Ensure your bank has the right metrics in place for measuring your OKRs. The more clarity your bank can get around what you’re measuring and why, the easier it will be to understand if your efforts’ progress and success.

3. Find Champions
Identifying champions within your organization is a great way to move things forward. These critical stakeholders will be just as motivated as you to get certain things done. If you’re considering new technologies or new programs, work with them to translate the need and opportunity to the executive suite.

4. Identify Trusted Partners 
Now’s the time to lean on trusted partners for support. Your customers are actively looking to you for alternative digital solutions to manage their money. Instead of going at it alone and trying to build everything in-house, it may be faster to partner with financial technology firms and other third parties that can get your products to market more efficiently.  

At MX, we’re working closely with our partners and clients to ensure they have the tools they need to optimize their digital experiences and complete their top initiatives, even in these challenging times. Banks must create comprehensive strategies around their digital channels and offerings, so they can continue to lead during uncertainty and change. This is a valuable opportunity for all of us to be better to one another and to the communities we serve.

Five Digital Banking Initiatives for Second Half of 2020

As the calendar nears the midpoint of 2020 and banks continue adjusting to a new normal, it’s more important than ever to keep pace with planned initiatives.

To get a better understanding of what financial institutions are focusing on, MX surveyed more than 400 financial institution clients for their top initiatives this year and beyond. We believe these priorities will gain even more importance across the industry.

1. Enabling Emerging Technologies, Continued Innovation
Nearly 20% of clients see digital and mobile as their top initiatives for the coming years. Digital and mobile initiatives can help banks limit the traffic into physical locations, as well as reduce volume to your call centers. Your employees can focus on more complex cases or on better alternatives for customers.

Data-led digital experiences allow you to promote attractive interest rates, keep customers informed about upcoming payments and empower them to budget and track expenses in simple and intuitive ways. 

2. Improving Analytics, Insights
Knowing how to leverage data to make smarter business decisions is a key focus for financial institutions; 22% of our clients say this is the top initiative for them this year. There are endless ways to leverage data to serve customers better and become a more strategic organization.

Data insights can indicate customers in industries that are at risk of job loss or layoffs or the concentration of customers who are already in financial crisis or will be if their income stops, using key income, spending and savings ratios. Foreseeing who might be at risk financially can help you be proactive in offering solutions to minimize the long-term impact for both your customers and your institution.

3. Increasing Customer Engagement
Improving and increasing customer engagement is a top priority for 14% of our clients. Financial institutions are well positioned to become advocates for their customers by helping them with the right tools and technologies.

Transaction analytics is one foundational tool for understanding customer behavior and patterns. The insights derived from transactions and customer data can show customers how they can reduce unnecessary spending through personal financial management and expert guidance.

But it’s crucial to offer a great user experience in all your customer-facing tools and technologies. Consumers have become savvier in the way they use and interact with digital channels and apps and expect that experience from your organization. Intuitive, simple, and functional applications could be the difference between your customers choosing your financial institution or switching to a different provider.

4. Leveraging Open Banking, API Partnerships
Open banking and application programming interfaces, or APIs, are fast becoming a new norm in financial services. The future of banking may very well depend on it. Our findings show that 15% of clients are considering these types of solutions as their main initiative this year. Third-party relationships can help financial institutions go to market faster with innovative technologies, can strengthen the customer experience and compete more effectively with big banks and challengers.

Financial institutions can leverage third parties for their agile approach and rapid innovation, allowing them to allocate resources more strategically, expand lines of business, and reduce errors in production. These new innovations will help your financial institution compete more effectively and gives customers better, smarter and more advanced tools to manage their financial lives.

But not all partnerships are created equally. The Office of the Comptroller of the Currency recently released changes surrounding third-party relationships, security and use of customers’ data, requiring financial institutions to provide third-party traffic reports of companies that scrape data. Right now, the vast majority of institutions only have scrape-based connections as the means for customers to give access to their data — another reason why financial institutions should be selective and strategic with third-party providers.

5. Strategically Growing Customer Acquisition, Accounts
As banking continues to transform, so will the need to adapt including the way we grow. Nearly 30% of our clients see this as a primary goal for 2020 and beyond. Growth is a foundational part of success for every organization. And financial institutions generally have relied on the same model for growth: customer acquisitions, increasing accounts and deposits and loan origination. However, the methods to accomplish these growth strategies are changing, and they’re changing fast.

Right now, we’re being faced with one of the hardest times in recent history. The pandemic has fundamentally changed how we do business, halting our day-to-day lives. As we continue to navigate this new environment, financial institutions should lean on strategic partnerships to help fill gaps to facilitate greater focus on their customers.

Doing More In Branches With Less

Frugality breeds innovation, which means right now is a prime opportunity for change.

Budgets are tight and resources are stretched thin for banks. The good news is that they can do more with less by implementing a universal associate model with the right enabling technology. When executed optimally, this model can help reduce staffing costs, reduce technology costs, and increase advisory conversations at the same time. A win all around, especially in these times.

Many banks will say they already have this model in place, but we find that a true universal associate model is rare.

Leadership typically believes they already have deployed a universal banker model, but when we break it down for them and go through what each associate should be able to deliver at every touchpoint, it becomes clear that they are far from a universal banker,” says Krista Litvack, director of Professional Services, the training and banking consulting arm at DBSI.

Universal associates are cross-trained employees who can fulfill nearly every task and transaction type within the branch, including the workload of tellers and the majority of the platform staff responsibilities. This model can reduce teller costs and eliminate the need for specialized roles and customer hand-offs. At the same time, universal associates are often experts at transitioning high-cost, low-value transactions — like a check deposit or withdraw — to low-cost channels such as self-service or mobile.

Universal associates are a way for banks to turn every interaction into an advisory or sales conversation using their depth and breadth of product knowledge. For example, a universal associate might offer a college savings account to a customer with new or young children. These types of advisory conversations can improve the customer experience significantly. According to a J.D. Power consumer study, customer satisfaction doubled when they received higher-level interactions that led to either additional savings or improved financial journey products, such as retirement planning.​

Training is an important component, but the missing link to a true universal associate model is often technology. A universal banking model with the right technology and process in place can save up to $92,412 per branch, per year. That’s a massive cost reduction worth considering. There are three key areas banks should address to create a seamless integration of technology, people and process.

Cash Automation
Universal associates can’t operate efficiently without removing the largest distractions that a traditional teller has: balancing.​ Staying in balance, counting each individual transaction three times and the cumbersome end-of-night processes all distract from building relationships that secure long-term patronage. Teller cash recyclers are a step in the right direction and help shift the focus from balancing and counting cash to advising and helping the customer. When designed and located properly, these devices eliminate stress, allow for open branch design by increasing security and make overall cash management more effective.​

Technology Optimization
Cash recycler limitations keep many branches from achieving full automation because they limit access for two staff members at a time. This disrupts the customer experience and the workflow of the associates if a third associate needs to use the machine. Instead of investing in more machines, banks can use technology such as remote transaction assist. It helps optimize recylers by allowing cash transactions to be sent from any part of the branch to any recycler or dispenser, pulled down from a queuing system that uses a unique identification number once the associate is at the device.​ One recyclers can now easily be shared among multiple staff members, greatly reducing technology costs and creating more convenience.

Banks can optimize their cash recycler investments even further with kiosks to handle all types of transactions to more-efficient channels while tablet-equipped associates advise customers. This opens up recyclers for associate and customer use.

Tablet-Equipped Associates
The in-branch experience doesn’t have to be tied to a desk or an office: Imagine a universal associate who can help customers from anywhere in the branch to create a unique experience that maximizes branch square footage. Tablet-based teller applications that connect associates to cash automation machines or even self-service kiosks is the final piece in creating a frictionless customer experience and a true universal associate model.

Break down the teller line and remove the need for a hand-off entirely with a tablet that has teller transaction functionality and empower universal associates. Banks that want to implement a universal associate model will need the right design, technology, and process to make the shift. Now is the time to make those investments and position your bank for its post-pandemic future through lowered costs and better customer experiences.

How Innovative Banks Fight Covid Through Giving

Charitable initiatives are not new to banks.

Many have foundations, donation-matching programs or standing committees dedicated to giving back. What is new to banks, however, is how fast they’re being expected to contribute to vital causes while juggling other time-sensitive priorities created by the Covid-19 crisis.

Launching an impactful, Covid-specific relief program could be a non-starter for banks unless they leverage technology to make it happen quickly. Two Northeastern banks have proved that it’s possible to spin up new products and programs in days with the help of fintech partners.

As the extent of the Covid-19 crisis became clear, the Community Engagement Steering Committee at The Cape Cod Five Cents Savings Bank, a unit of Cape Cod Five Mutual Company, kicked its planning into high gear. The committee includes employees from different areas of the Massachusetts-based bank.

Before Covid-19 struck, it convened on a weekly basis to plan community initiatives and review applications for support. Now, the committee needed to move quickly to help local healthcare organizations battling the virus on the frontlines. That goal led to a partnership between the bank and Pinkaloo, a charitable-giving fintech the bank connected with at an industry event last year.

Pinkaloo had been presenting to the bank’s internal teams since January, but the arrival of Covid pushed Cape Cod 5, as the bank is called, to formalize the partnership. “Speed to market was important to us because of the emergent need,” says Stephanie Dennehy, chief marketing officer for the $3.6 billion bank.

In a week, the fintech and bank launched giving portals for seven different healthcare providers in the bank’s footprint.

To make it happen, Pinkaloo stayed in close contact with the bank’s team and everyone — from information security to legal to executive leadership — worked quickly to streamline the implementation process. The result was that a vendor management program that would normally take two to three weeks was completed in two to three days, says Adrian Sullivan, the bank’s chief digital officer.

Covid has showed banks that they can move fast in exigent circumstances, but will those lessons last beyond the current crisis?

Sullivan thinks they will. “The way we’ve done things remotely and in such an expedited fashion — I think that becomes new normal,” he says. “We realized how fast it really can be done, so I think we will shift for the better and start to work in a more agile fashion.”

To the southeast of Cape Cod 5 is a single-branch, digital-first bank that’s no stranger to iterating quickly. Quontic Bank, based in Astoria, New York, chose to support relief efforts with a new savings account.

The Drawbridge Savings account pays depositors an annual percentage yield of 0.50% on balances up to $250,000; the bank matches the interest paid on these accounts with a donation towards its #BeTheDrawbridge campaign. The savings account approach made sense to Quontic. They didn’t want to rely on a transaction-based account when people are changing their spending habits and stockpiling funds, says Patrick Sells, Quontic’s chief innovation officer.

To make the idea a reality, Sells put in a call to one of the bank’s existing technology partners, MANTL. MANTL’s account-opening solution automatically books new accounts to the bank’s core. MANTL engineers worked through the weekend and delivered the new savings product in three days. The bank’s team worked all weekend too, preparing disclosures, developing marketing plans and completing all the other steps required to bring the new financial product to market.

Although the stakes are higher in times of crisis, the $395 million bank is used to working in an agile manner. “One of the core values that applies here is progress, not perfection,” says Sells. “Striving for perfection so often gets in the way of progress, and especially quick progress.” Quontic can pivot if it makes a decision that doesn’t work, but the bank recognizes it can’t make any decisions when it’s frozen in the planning stage.

Covid-19 is changing the world quickly. Banks that want to help will need to lean on technology to put their plans in motion fast.

Banking on the Fly at Atlantic Union

When the rapidly spreading COVID-19 virus forced CEO John Asbury to send most of Atlantic Union Bankshare Corp.’s 2,000 employees to work from home, it gave him the chills.

After all, the Richmond, Virginia-based bank is hardly a digital-only enterprise. It has a branch-centric strategy that emphasizes face-to-face customer service. And like most traditional companies, it has lots of people working in big offices.

To Asbury’s immense relief, everyone has quickly adapted to the demands of running a $17.6 billion institution with a distributed workforce. “A month ago, it was quite candidly terrifying, the notion of moving the company to a virtual status,” he says. “But I have to tell you, at this point we’re actually pretty comfortable with it.”

Ninety percent of Atlantic Union’s employees are now working from home, including Asbury and the bank’s senior management team.

As it turned out, working remotely was not the only challenge that Asbury and the bank’s employees would find themselves facing in the early days of the pandemic. Soon thereafter, a second challenge came in the form of an opportunity that hardly anyone was ready for — not just at Atlantic Union but throughout the banking industry.

The Small Business Administration’s Payroll Protection Program, included in a $2.2 trillion stimulus bill passed in late March, was designed to funnel $349 billion in loans to hard hit small businesses that have been forced to close as part of a broad nationwide lockdown intended to curb the virus’ spread. But almost no one was prepared to take loan applications on the program’s April 3 start date, least of all the SBA.

Many banks, including some of the country’s largest, were slow to engage because of their uncertainty about various details in the hastily rolled out program. Asbury, however, decided that Atlantic Union owed it to its small business customers in Virginia, North Carolina and Maryland to quickly embrace the program and help them get funded.

“I think we all feel the weight of our responsibility,” Asbury says. “I never thought we would be an economic first responder. I never thought we would be at the scene of the crash, and here we are. You cannot say to your customers, ‘Sorry, it’s just too much work,’ or ‘Sorry, we just can’t go fast enough,’ or say, ‘Well, we’re going to do this for a privileged few, because the others aren’t worth it.’”

And yet for all of Asbury’s determination to respond quickly, there were many problems that had to be solved along the way. For starters, the bank did not have the right technology to handle the large volume of loan applications that it expected to receive. It had recently licensed an automated workflow solution to build an online account opening system, but the bank’s new head of digital technology concluded that it wasn’t the right solution for account opening. Asbury says she quickly negotiated a credit with the vendor and chose a different technology instead.

“The team literally, in a matter of days, was able to repurpose the solution and stand up an online application web portal and an automated workflow system, which is essentially a virtual assembly line,” Asbury says. Many of the bank’s employees worked 12 hour days and weekends to have the system up and running by April 3. “To be able to build this automated assembly line … recognizing that everyone working on it is sitting in their homes, is unbelievable,” he adds.

Another challenge was the SBA’s failure to provide lenders with a standard note agreement, one reason why some large banks were slow to engage in program. If a bank doesn’t use the SBA’s standard agreement, the agency won’t guarantee the loans. Asbury decided the bank couldn’t afford to wait for the SBA to resolve that issue, so he took a risk. “We used our best educated guess to create our own note, in the spirit of the agreement, and we began to fund,” he says. The agency later said it was okay for banks to use their own note agreements.

Once Atlantic Union began submitting loan applications, the SBA’s “E-Tran” electronic loan processing system kept crashing under the torrent of submissions it was receiving from lenders throughout the industry. The bank had 30 people who manually keyed in data, and is implementing automated technology to import the application data and upload it into the E-Tran system, which will greatly shorten the application process. “We think we can get the cycle time down to one minute for one loan, and that’s really important,” Asbury says.

The bank had 400 employees working full time on the program, including Asbury’s own administrative assistant who was approving loans. Through April 15, 5,717 Atlantic Union customers had been approved for loans totaling $1.42 billion. The program is now out of funds, although the bank has decided to continue accepting application in the hope that Congress will provide additional funding.

The pandemic proved to Atlantic Union that it is both resilient and innovative, traits that will benefit it long after the COVID-19 crisis has passed. “It’s going to cause us to be more courageous,” Asbury says. “I don’t mean we’re going to be hasty [or] impulsive, but I think that we’re going to be able to make big decisions more confidently, and frankly quicker as we’ve proven we can do it.”

Former Bank Disruptor, Turned Ally, Talks Innovation

A career that began with upending traditional banks has given Alexander Sion perspective on what they can do to accelerate growth and innovation.

Sion is the director and co-head of Citibank’s D10X, which is part of Citigroup’s global consumer bank. Prior to that, he oversaw mobile banking and mobile channel governance for the consumer and community banking group as general manager of mobile at JPMorgan Chase & Co.

But before he worked at banks, he attacked them.

Sion co-founded “neobank” Moven in 2011 to focus on the financial wellness of consumers. The mobile bank disruptor has since become a vendor; in March, the company announced it would close retail accounts and pivot completely to enterprise software.

Bank Director recently spoke with Sion about how banks can create new models that generate growth, even as they face disruption and challenges. Below is a transcript that has been edited for clarity and length.

BD: How should banks think about innovation as it relates to their products, services, culture and infrastructure?

AS: Citi Ventures focuses on growth within a dynamic environment of change. It’s very difficult to achieve, and it’s very different from core growth with existing customers. But all innovation, particularly at incumbent firms, has to stem from a desire to grow.

Banks that struggle with growth, or even getting excited about innovation, need to ask themselves two sets of questions. No. 1: Do you have a deep desire to grow? Do you have aggressive ambitions to grow? No. 2: Is that growth going to be coming from new spaces, or spaces that are being disrupted? Or are you considering growth from existing customers?

If a bank is focused on existing customers, retention and efficiencies, it’s going to be hard to get excited about innovation.

BD: What’s the difference for banks between investing in tech and merely consuming it?

AS: They’re very different. If your bank is focused on growing within its core business, then you would lean more towards consuming tech. You’re building off of something that already exists and trying to make it better. You’ve got existing customers on existing platforms and you’re looking for more efficient ways to serve them, retain them or grow share.

If you’re interested in new growth and exploration — new segments, new products, new distribution channels — you might be more inclined to partner in those spaces. You have less to build from, less to leverage, and you’re naturally trying to figure things out, versus trying to optimize things that already exist.

BD: What kind of a talent or skills does a bank need for these types of endeavors? Do people with these skills already work at the bank?

AS: Existing bank employees know the product, they know the customer. At Citi, what we do at D10X and Citi Ventures is to try to expose bank employees to a different way of thinking, expand their mindset to possibilities outside the constraints of what or where the core model leans towards and think from a customer-centric view versus a product-centric view of the world.

The dynamics of customer behaviors are changing so much. There’s so much redefinition of how customers think about money, payments and their financial lives. Creating a more customer-centric view in existing employees that already have the deep knowledge and expertise of not only the product, but how the bank’s customers have evolved — that’s a very powerful combination.

BD: Why should a bank think about new markets or new customers if they found great success with their core?

AS: If most banks in the United States were honest with themselves, I think many would admit that they’re struggling with growth. America is a very banked place. The banking environment hasn’t changed all that much, and most banks are established. Their focus has been on existing customers, efficiency of the model and maybe deepening within that customer base.

But now, fintechs coming in. These commerce, payments and technology players are doing two things. No. 1: They are legitimately opening up new markets of growth and segments that weren’t reachable, or the traditional model wasn’t really addressing. No. 2, and maybe more important, is they are widening and changing the perspective on customer behavior. I don’t think any bank is immune from those two trajectories; your bank can be defensive or offensive to those two angles, but you’ve got to be one or the other.

BD: What are some lessons you or Citi has learned from its testing, refining and launching new solutions?

AS: Venture incubation has to be about learning. There’s a saying that every startup is a product, service or idea in search of a business model. The challenge that every existing incumbent bank will have is that we have existing business models.

Banks need to be able to test ideas very rapidly. It’s easy to test an idea and rapidly iterate when you’re in search of a business model. It’s much more difficult to test new ideas in an already-operating business model. A typical idea is debated internally, watered down significantly and will go through the wringer before the first customer gets to click on anything. In this kind of world, that’s a difficult strategy to win on.

How Innovative Banks Make Mortgages Work

“Push button. Get mortgage.”

That’s the simple value proposition touted by Rocket Mortgage — and it’s a message that was heard by over 100 million people this month in a star-studded Super Bowl 54 ad that may have cost upwards of $15 million. How can community banks compete with such bold promises and big budgets? The secret could lie in working with the same technology titans that have shaped current customer expectations around financing home purchases.

Mortgages are a notoriously volatile product for financial institutions to offer — both from an economic standpoint and a regulatory one — and many banks struggle to break even on them. While a spike in refinancing and a healthy purchase market led to increased profits in the last half of 2019, the Mortgage Bankers Association (MBA) warned that an anticipated dip in refinancing during the second half of 2020 could once again increase margin pressures. Those pressures may result in numbers reminiscent of 2018, when mortgage banking production profits fell to just $367 per loan, according to data from the MBA.

The challenges posed by heightened competition and pricing pressure are accompanied by rules and requirements that are constantly shifting. For banks, it’s not as simple as “Push button. Get mortgage” to make these loans safely, soundly and profitably.

Yet mortgages are a touchstone product that customers expect their bank to provide. This is the rock and the hard place that Brett Fulk, president and CEO of Riverview Financial Corp., found his institution between after his team worked for over a year to set up an FHA loan product.

“We no sooner got ourselves approved, with all of the vendors we needed lined up, [when] the market shifted from FHA to USDA,” he says. “We were now ready to go with a product that wasn’t necessarily the lead product anymore in our market, and I thought there has to be a better way to do this.”

The bank, which has $1.1 billion in assets and is headquartered in Harrisburg, Pennsylvania, found an unlikely ally in Quicken Loans, the parent company of Rocket Mortgage. And Fulk built a partnership that gave the bank access to technology and new products, while insulating it from rivalry with Rocket.

Riverview is working with Quicken through its wholesale program. The bank uses Quicken’s technology platform, underwriting and servicing to make mortgages to its clients, who benefit from Quicken’s slick interface and fast turnaround. Riverview keeps the customer relationship through the application process, staying front and center to provide customer service and also exploring in-house loan options if the application doesn’t conform to Quicken’s protocols.  Quicken retains the servicing for the life of the loan so customers won’t see their loans being sold and resold.

The bank’s customer relationships are further insulated by some rules of engagement that Rocket Mortgage must follow. Riverview customers do not receive offers from Rocket and, if a current bank customer applies through Rocket for refinancing, that application is immediately kicked back over to the bank.

The partnership has translated into tangible benefits. It gives the bank access to Quicken’s full suite of products, while removing processing and underwriting pressures from the bank’s staff. Quicken has made it possible to increase the bank’s mortgage volume without increasing headcount, Fulk says.

And technology isn’t just helping in terms of efficiency. Riverview makes more on transactions when they sell loans because of the volume the bank has achieved through Quicken.

Banks that are examining their mortgage businesses closely need to consider a wide range of technology options at play. Word on the street is that Black Knight Empower is a popular choice for big banks looking to completely replace legacy loan origination systems, and it’s hard to miss the mega funding rounds that Blend, a San Francisco-based fintech firm, has raised for its mortgage-focused consumer lending platform.

Headliners aside, there are numerous other technology companies helping banks of all sizes make mortgages work from multiple angles. Some help banks take part in aspects of the customer’s home-buying journey that institutions don’t usually play a part in; others streamline back office requirements and closing processes. Whatever the application, mortgage tech solutions could be a critical component to helping banks stay in the game.

Fulk says the partnership with Quicken helped keep Riverview Bank in the mortgage business. It stands to reason that the right technology partners could help other institutions do the same.

Potential Technology Partners

Blend

Powering the mortgage experiences for Wells Fargo & Co., U.S. Bancorp and community banks alike, Blend’s “one-tap” pre-approval feature launched in 2019 to compete head-to-head with Rocket Mortgage.

Roostify

This digital mortgage solution boasts impressive loan officer adoption rates. The company has invested heavily in new integrations with pricing systems, document originators and other key vendors over the last few years.

NestReady

NestReady helps banks become hubs for the home-buying journey with a co-branded search tool that locates everything customers need from their real estate agent to their ideal neighborhood and mortgage loan officer.

LenderClose

This aggregation platform accelerates loan processing by delivering all of the reports and services required to close on a loan — from flood certification and valuation products to title reports and e-recording — in seconds.

SimpleNexus

SimpleNexus automates the information flow between loan officers, borrowers and referral partners. The digital mortgage platform allows banks to track loan officer activity and see when referral partners are sharing the app with potential clients.

Learn more about the technology providers in this piece by accessing their profiles in Bank Director’s FinXTech Connect platform.

Winners Announced for the 2019 Best of FinXTech Awards


Awards-9-10-19.pngBanks face a fundamental paradox: They need to adopt increasingly sophisticated technology to stay competitive, but most have neither the budget nor the risk appetite to develop the technology themselves.

To help banks address this challenge, a legion of fintech companies have sprung up in the past decade. The best of these are solving common problems faced by financial institutions today, from improving the customer experience, growing loans, serving small business customers and protecting against cybersecurity threats.

To this end, we at Bank Director and FinXTech have spent the past few months analyzing the most innovative solutions deployed by banks today. We evaluated the performance results and feedback from banks about their work with fintech companies, as well as the opinions of a panel of industry experts. These fintechs had already been vetted further for inclusion in our FinXTech Connect platform. We sought to identify technology companies that are tried and true — those that have successfully cultivated relationships with banks and delivered value to their clients.

Then, we highlighted those companies at this year’s Experience FinXTech event, co-hosted by Bank Director and FinXTech this week at the JW Marriott in Chicago.

At our awards luncheon on Tuesday, we announced the winning technology solutions in six categories that cover a spectrum of important challenges faced by banks today: customer experience, revenue growth, loan growth, operations, small business solutions and security.

We also announced the Best of FinXTech Connect award, a technology-agnostic category that recognizes technology firms that work closely with bank clients to co-create or customize a solution, or demonstrated consistent collaboration with financial institutions.

The winners in each category are below:

Best Solution for Customer Experience: Apiture

Apiture uses application programming interfaces (APIs) to upgrade a bank’s digital banking experience. Its platform includes digital account opening, personal financial management, cash flow management for businesses and payments services. Each feature can be unbundled from the platform.

Best Solution for Revenue Growth: Mantl

MANTL developed an account-opening tool that works with a bank’s existing core infrastructure. Its Core Wrapper API reads and writes directly to the core, allowing banks to set up, configure and maintain the account-opening product

Best Solution for Loan Growth: ProPair

ProPair helps banks pair the right loan officer with the right lead. It integrates with a bank’s systems to analyze the bank’s data for insights into behaviors, patterns and lender performance to predict which officer should be connected with a particular client.

Best Small Business Solution: P2BInvestor

P2Binvestor provides an asset-based lending solution for banks that helps them monitor risk, track collateral and administer loans. It partners with banks to give them a pipeline of qualified borrowers.

Best Solution for Improving Operations: Sandbox Banking

Sandbox Banking builds custom APIs that communicate between a bank’s legacy core systems like core processors, loan origination, customer relationship management software and data warehouses. It also builds APIs that integrate new products and automate data flow.

Best Solution for Protecting the Bank: Illusive Networks

Illusive Networks uses an approach called “endpoint-focused deception” to detect breaches into a bank’s IT system. It plants false information across a bank’s network endpoints, detects when an attacker acts on the information and captures forensics from the compromised machine. It also detects unnecessary files that could serve as tools for hackers.

Best of FinXTech Connect: Sandbox Banking

The middleware platform, which also won the “Best Solution for Improving Operations” category, was also noted for working hand-in-hand with bank staff to create custom API connections to solve specific bank issues. In addition, banks can access three-hour blocks of developer time each month to work on special projects outside of regular technical support.