Power in Pineapples: Why Less Isn’t More in Financial Education

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One of the first things we’re taught about money is that it is imperative to save it. But that is often where the lesson ends.

What type of loans should students take out? When is the best time to start investing? Should we invest and where? Where should we go in a financial emergency?

For a society that prides itself on its economy, most of its citizens are lacking the basic knowledge of how its primary building block — money —  works. The 2021 TIAA Institute GFLEC Personal Finance Index, which measures working financial knowledge in adults 18 years and older, found that, on average, respondents were only able to answer half of its questions accurately. The disparities were great between race and ethnic groups. While 55% of non-Hispanic white respondents answered its index questions correctly, Hispanic and Black Americans scored 41%, and 37%, respectfully.

On top of that, debt is soaring. Experian found that overall consumer debt hit an all-time high of $14.88 trillion in 2020. Student loan debt accounted for over $1.5 trillion, auto loan debt reached $1.35 trillion and mortgage debt climbed to an astounding $10.3 trillion. Federal student loan payments, which were suspended during the pandemic, resume October 1, putting more pressure on student borrowers in the months ahead.

Banks have long offered personal finance education in local schools and through partnerships with various nonprofits. Transitioning into the digital age, many of them also offer budgeting and money management apps. Even so, consumers may not be thrilled with what banks have to offer. A February 2021 study from the Ipsos-Forbes Advisor U.S. Consumer Confidence Tracker found that only 5% of respondents ranked their bank’s budgeting and tracking tools as one of its top three most valuable mobile features. Mobile check deposit, viewing statements and account balances and transferring funds between accounts took the top three spots.

Ready to go to work on this issue is Bolun Li, one of the founders and CEO of Durham, North Carolina-based Zogo Finance, an emerging trailblazer in the financial literacy fintech sector. Zogo aims to keep financial education sourced at a consumer’s primary financial institution. Banks can white-label Zogo’s gamified app, can use it to teach customers about general financial topics as well as bank-specific product offerings, and track usage and engagement.

While Zogo was created with the Gen-Z and Millennials in mind, it claims users of all ages, backgrounds and demographics. If a bank has the app, any of its customers can access it.

“Too few students — particularly those from low-income backgrounds — receive any personal finance education during their K-12 years,’’ says Li. “Even existing financial education initiatives, where they exist, often overlook the learning preferences and needs of younger generations. In many instances, these offerings are boring, complex, and intimidating.”

A Council for Economic Education report last year found only 21 states require high school students to take a class in personal finance.

Li says: “Upon reaching adulthood, however, people are confronted with an array of major financial decisions regarding student debt, credit cards, housing, car ownership, retirement planning and taxes.”

Black Americans in particular have a disadvantage when it comes to financial wellness. But Kevin Cohee, chairman, CEO and owner of Boston-based, black-owned and fully digital OneUnited Bank, with $653 million in assets as of March, views digital solutions as a way to start empowering consumers. “This online banking product [digital banking platforms] allows for a broader base of communication that can be used for things like teaching financial literacy,” he told Forbes earlier this year.

OneUnited Bank pioneered OneTransaction Conference, a free and virtual financial conference, on Juneteenth (June 19) of this year, capitalizing on the community’s need for better and equalized access to financial education resources. The event had over 25,000 participants sign up.

What seems clear is that this type of financial education must increasingly be delivered through online or mobile channels for today’s consumers. With digital solutions like Zogo, users can access hundreds of lessons at any time, anywhere. Users accumulate pineapples — selected as the app’s gamified coin due to the fruit’s popularity — as they learn. The fintech further sweetens the pot by rewarding users for completing learning milestones, with options such as gift cards and bank-specific products and discounts.

Zogo understands what consumers want: access to everything online, incentives and bite-sized bits of knowledge.

In a June article detailing where banks have traditionally fallen short in providing financial health resources to its consumers, former bank executive Evan Siegel writes, “Navigating the journey [of personal finance management] requires a series of personalized, bite-sized action plans. The advice must be delivered in discrete chunks, so as not to overwhelm, and served up as an ongoing diet because financial improvement requires many actions.” If not, the knowledge won’t stick, and consumers can quickly get overwhelmed.

Zogo, coming off of signing its 100th financial institution, was asked what types of lessons and categories its users were flocking to. It doesn’t concern federal aid, mortgages or even cryptocurrency.

It’s investing.

“We’re seeing young people really gravitate towards our ‘Start Investing’ and ‘Save Money’ categories,” Li says. “Their behavior in the app has suggested people are really hungry for investing education — so much so that we released another category in the app called ‘Advanced Investing.’ Older people, on the other hand, tend to gravitate towards our ‘Save for Retirement’ category.”

Li wants Zogo to put banks and credit unions in a better position to tackle America’s financial illiteracy problem, one pineapple at a time.

Fraud Attempts on the Rise Since Pandemic’s Start

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As Covid-19 passes its one year anniversary in the United States, businesses are still adjusting to the pandemic’s impacts on their industry.

Banking is no exception. While banks have quickly adjusted to new initiatives like the Small Business Administration’s Paycheck Protection Program, the most notable impact to financial institutions has been the demand for online capabilities. Banks needed to adjust their offerings to ensure they didn’t lose their client base.

“ATM activity is up, drive-through banking is up 10% to 20% and deposits made through our mobile app are up 40%,” said Dale Oberkfell, president and CFO of Midwest Bank Centre last June.

The shift to digital account openings has been drastic. The chart below looks at the percent change in cumulative number of evaluations from 2019 to 2020 for a cohort of Alloy customers, limited to organizations that were clients for both years. Since the onset of the pandemic, digital account opening has increased year-over-year by at least 25%.

Although the shift to digital was necessary to meet consumer demands, online banking opens up the possibility of new types of fraud. To study the pandemic’s impact on fraudulent applications, we took a closer look at changes in consumer risk scores since the onset of the pandemic. Similar to credit scores, risk scores predict the likelihood of identity or synthetic fraud based on discrepancies in information provided, behavioral characteristics and consortium data about past fraud activity.

Comparing the pandemic months of March 2020 to December 2020 to the same period in 2019, Alloy clients saw a dramatic rise in high-risk applications. Total high-risk applications increased by 137%, driven both by overall growth in digital application volume and a comparatively riskier population of applicants.

There are several ways for you to protect your organization against this growing threat. One way is to use multiple data sources to create a more holistic understanding of your applicants and identify risky behaviors. It also ensures that you are not falling victim to compromised data from any one source. It’s a universal best practice; Alloy customers use, on average, at least 4 data sources.

Another way for you to protect your institution is by using an identity decisioning platform to understand and report on trends in your customer’s application data. Many data providers will return the values that triggered higher fraud scores, such as email and device type. An identity decisioning platform can store that data for future reference. So, even if a risky application is approved at onboarding, you can continue to monitor it throughout its lifetime with you.

Digital banking adoption and usage is expected to only increase in the future. Banks need to ensure that their processes for online capabilities are continuously improving. If your organization is spending too much time running manual reviews or using an in-house technology, it may be time for an upgrade. Click here to see how an identity decisioning platform can improve your process and help you on-board more legitimate customers.

Positive Outlook for Bank M&A as the Pandemic Subsides

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Will there be an acceleration of bank merger and acquisition activity in 2021 and beyond?

The short answer is yes.

As the Covid-19 pandemic recedes, we expect bank M&A activity to rebound, both in terms of branch and whole-bank acquisitions. Banks and their advisors have evolved since the pandemic’s onset forced office closures and the implementation of a new remote working environment. In the past year, institutions and their boards of directors improved technology and online banking capabilities in response to customer needs and expectations. They also gained substantial experience providing banking products and services in a remote environment. This familiarity with technology and remote operations should cause acquirors and sellers alike to reconsider where they stand in the M&A market in 2021 and beyond.

We see a number of factors supporting an improved M&A market in 2021. First, many acquirors and potential deals were sidelined in the spring of 2020, as the pandemic’s uncertainty setting in and the markets were in turmoil. We expect a number of these deals to be rekindled in mid- to late-2021, if they haven’t already resurfaced. We also expect a robust set of acquirors to return to the market looking to add deposits, retail and commercial customers, lending teams, and additional capabilities.

Second, there remains a growing number of small banks struggling to compete that would likely consider potential merger partners with similar cultures and in similar geographic markets. Similarly, risk management and compliance costs continue to challenge bank managers amid tough competition from community banks, credit unions and other non-bank financial institutions. Some small banks have also struggled to provide the digital offerings that have become commonplace since the pandemic began. These challenges are sure to have smaller banks considering merger partners or new investors.

Third, larger banks are looking to grow deposits and market share as they look to compete with more regional players that have the necessary compliance infrastructure and digital offerings. We expect these more regional players to use acquisition partners as a way to grow core deposits and increase efficiencies. Acquiring new deposits and customers also affords these regional banks the ability to cross-sell other products that smaller banks may not have been able to offer the same customers before — increasing revenue in a sustained low-interest rate environment.

Finally, the low-interest rate environment has opened the capital markets to banks of all sizes looking to raise subordinated debt, which may support community bank M&A. Many subordinated debt offerings are priced in the 4% to 5% range, and often are oversubscribed within just a few days. Banks have found these offerings to be an attractive tool to pay off debt with higher interest rates, fund investments in digital infrastructure, provide liquidity to shareholders through buyback programs and seek branch or whole-bank acquisition targets.

We are already seeing activity pick up in bank M&A, and expect that as the economy — and life itself — begins to normalize in 2021, more transactions to be announced. The prospects for an active merger market in 2020 were cut off before spring arrived. This year, as we approach spring once again, the M&A market is not likely to return to pre-pandemic levels, but the outlook is certainly much more optimistic for bank M&A.

A Costly Problem Facing Banks

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Bill pay is a central tool in digital banking suites — but most customers aren’t actively using it.

It’s counterintuitive: Banks play a central role in our financial lives, yet most consumers opt to pay billers directly, according to “How Americans Pay Their Bills: Sizing Bill Pay Channels and Methods,” a survey conducted by Aite Group. The online survey of more than 3,000 U.S. consumers was commissioned by the bill-pay platform BillGO.

Almost 60% of bills are paid online, according to the survey, which finds that the percentage of online bill payments paid directly via a biller’s website — already accounting for the vast majority — increased by 14 points since 2010. In that same time period, banks’ share declined by 16 points as third-party entrants entered the space.

The result is chaos for consumers seeking to pay their bills on time and a missed opportunity for their banks.

“[For] many financial institutions, bill pay has been a fairly strategic component of the consumer relationship,” says David Albertazzi, Aite’s research director in the retail banking and payments practice. Along with automated loan payments and direct deposits, bill pay is viewed as a core element of the primary financial relationship.

There’s also the real cost associated with this problem: One bank recently shared with Bank Director that it built a bot just to deregister inactive bill-pay users sitting on its core system.

Bank Director’s 2020 Technology Survey finds that improving the customer experience is a top technology objective. Albertazzi says that bill pay should be part of that strategic consideration — and the experience needs to improve. Dramatically.

“The actual model and the experience have not changed for many years,” he says. “Today, it’s pretty prone to friction.” Payees must be added manually by the customer, and there’s a risk of mis-keying that information. Customers can’t choose how to pay, beyond their primary checking account. They aren’t notified by the bank when the bill is due. The payments lack information and context, and they don’t occur in real time.

These barriers limit the experience, driving more than three-quarters of the Americans who pay bills online to just go directly to their biller’s website.

Financial institutions need to shift from a transactional to a customer-centric mindset, says Albertazzi. “Once financial institutions do that, then there’s a great opportunity to recapture market share,” he says.

Banks should also consider how they can change customer behavior. Just a third of bills are scheduled to be paid on a recurring basis, according to survey respondents, which points to another gap where banks lose a bill-pay user, according to Albertazzi. Encouraging customers to enroll in automatic payments means they’re more likely to keep using their bank’s bill-pay capabilities.

Most customers trust their bank, but poor experiences have driven consumers to a decentralized model that benefits no one. With the massive adoption of digital channels that accompanied Covid-19, banks have a chance to change consumer behaviors.

“Providing that convenience to the consumer, the transparency in the process and addressing efficiencies to the entire consumer bill-pay experience will help drive change in consumer bill payment behavior over time,” says Albertazzi.

Three Steps to Mastering Digital Connection

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Before the coronavirus crisis, I heard bank leaders talk about “becoming digital,” but less than 15% considered themselves digital transformation leaders.

The pandemic has pushed banks to close the digital experience gap. Executives must take a hard look at what their customers expect and what digital tools (and products) they need to weather this crisis.

Digital transformation can’t happen without mastering the art of digital connection, which requires both technology and authentic human connection. To do this, banks must harness the power of data, technology, and their people to create customers for life. Here are three steps to help your bank master the art of digital connection.

Maximize Customers Data to Transform the Experience
If a customer walked into a branch for a typical transaction, the teller would have immediate visibility into their entire relationship and recent interactions — and would be empowered to recommend additional, relevant bank products or services. They would feel known and well-served by your teller.

Your digital infrastructure should provide the same humanized experience through email, customer service and other interactions with your bank. But unorganized, siloed data causes problems and impedes creating this experience. To maximize your customers’ data, you’ll need to:

  • Consolidate your view of each customer.
  • Ensure that teams have access to a high-level view of customer data and activity, from marketing to customer service.
  • Group them by segments in order to deliver relevant information about products and services. This step requires a solid understanding of your customer, their financial needs and their goals.

Invest in Technology That Reaches Customers Today
To inform, educate and engage your customers during this time of transition, you need sophisticated, best-in-class banking technology. Many banks have already come to this conclusion and are looking for help modernizing their banking experience.

A key component in meeting your customers where they are is quite literal. While some of your customers are well-versed in online banking, others have exclusively used their branch for their financial needs. The information these two audiences will need during this transition will look different, based on their previous interactions. Compared to customers who are already familiar with digital banking, those who have never done it before will need more specific, useful instructions to help them navigate their financial options and a clear pathway to 1-on-1 assistance. This kind of segmentation requires modern marketing technology that works in tandem with banking and lending tools.

Amplify Human Connections to Build Trust
Many banks have trouble letting go of the branch experience; customers have had the same reservations. In an Accenture survey of financial services, 59% of customers said it was important to have a real person available to give in-person advice about more complex products.

Now that going into a branch is not an option, your bank must find a way to use technology to amplify the human connections between your customers and staff. Especially now, sending meaningful, humanized communications will position your bank as a trusted financial partner. To transform your digital experience, and keep people at the center of every interaction, you must:

  • Personalize your messages — beyond just putting a customer’s name in the salutation. Data allows emails to be very specific to segments or even individuals. Don’t send out generic emails that contain irrelevant product offers.
  • Humanize your customer experience. Communicate that you know who you’re talking to each time a customer picks up the phone or contacts your help line.
  • Support a seamless omnichannel experience. Provide customers with clear avenues to get advice from your staff, whether that’s by email, phone or text.

Investment in innovation comes from the top down. Your bank must buy into this opportunity to transform your customer experience from leadership to all lines of your business. The opportunity is here now; this shift toward digital interactions is here to stay.

There’s no longer a question of whether a fully digital banking experience is necessary. Banks must leverage modern technology and the human connections their customers know them for to improve their overall customer experience. Excellent customer experience comes from delivering value at every touchpoint. This is the new bar all banks must meet.

How TCF Financial Reinvented the Customer Experience

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deposit-6-15-18.pngIn the spring of 2015, new leadership took over TCF Financial Corp., based in Minneapolis, and set about a course that would reshape the bank from the inside out.

At that time, the bank was in the midst of rebranding itself when Craig Dahl took over as CEO, and hired Tom Butterfield as chief information officer to usher in a new era of online banking that would keep the $23 billion asset bank on a level playing field with much larger competitors.

“We were not there. We had identified some pretty significant gaps in our market to our competitors,” Butterfield says. “Not the least of which was mobile remote deposit capture.”

That specific capability is coveted by both bankers and customers, who favor on-the-go functionality while banks enjoy the ability to increase their core deposits at a time when the competition for customer loyalty and their funds has increased sharply.

The bank went to market with a very specific request for information, or RFI, that solicited a very specific technological architecture that would remake its online user experience to be seamless between devices, but also adapt to its highly customized core technology and allow the opportunity for scale. While this limited the number of firms capable of handling the project, it also allowed the bank to customize its own technology. D3 Banking Technologies, based in Omaha, Nebraska, was one of the few who could handle the specific and unique request.

In the end, the D3 built an all-new online banking experience for TCF, which migrated 1.2 million accounts to the new platform over 15 months, from the time the board approved the funding for the project to complete migration, which they completed last fall.

D3, like other fintech partnerships, reinvented the TCF customer experience using application programming interfaces, or APIs, that function similar to a server at a restaurant. In TCF’s case, there are two layers of APIs that were necessary to adapt what Butterfield describes as a “highly customized” legacy core system that differs from typical core systems like those offered by Jack Henry, FIS or Fiserv. Butterfield described TCF’s core as “many many years old that doesn’t lend itself to interacting well with these modern technical platforms.”

The top layer is what D3 built and actually makes the experience, but there is a middle layer of APIs the bank built that connects the core, and also enables the bank to be able to customize and scale into other technologies, like voice commands (think Amazon Alexa or Google Home), and others.

The real-world implication of this new technology became clear when Apple rolled out its iOS 10, which swapped fingerprint recognition for facial recognition security. Mobile apps for megabanks like Bank of America were live with the new tech almost instantly. So was TCF.

“We feel like we can compete with the best banks in the country and the best platforms in the country,” Butterfield says.

Customers who had been migrated to the new system also had questions, Butterfield says. In anticipation of that transition, TCF put “digital ambassadors” into branches that offered customers—some of whom physically carried their laptops into the branch to get help—training on the new system, a scenario that represents the transformation that TCF put in place.

“The fact that our branches were a part of this story and part of this journey is a key piece of its success,” Butterfield says

Beyond the tech itself, Butterfield says the move to emphasizing technology inspired wholesale changes within the bank’s own culture. TCF literally tore down cubicle walls and put its IT and business staffs at the same table—often referred to as bench seating—reducing the barriers between the two wings of the bank that typically operate independently.

The integration fundamentally changed the way the bank works, making it unique compared to other banks who still hold true to traditional structures.

“That breaking down of silos is really key of how we got this done in 15 months,” Butterfield says.

Since the completed rollout in the fall of 2017, the bank has reduced payment processing costs by $1.3 million in the first year alone, and Butterfield said there has been a 400 percent increase in adoption rate, and a 250 percent increase in accounts opened by existing customers through the platform, and a reduction of 2.6 percent in checking account attrition, all signs the bank sees the tech has increased loyalty and potential for deposit growth, even as the largest banks grow their deposits over community and regional competitors.

“We’re definitely in the ball game,” he says.

Community Banks Released From ADA Liability

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community-bank-12-29-17.pngMany community banks received threatening letters from the advocacy group Access Now alleging that the banks’ websites violated the Americans with Disabilities Act (ADA) for the visually impaired in provision of electronic information technology, including the banks’ websites, online banking, mobile banking and apps, ATM services, and telephone banking (known collectively as electronic banking services). These letters started arriving at banks in late 2016 and generally offered to resolve alleged claims by working with Access Now’s attorneys—Pittsburgh, Pennsylvania-based Carlson Lynch Sweet Kipela and New York-based KamberLaw LLC—to bring the banks’ websites into compliance with the ADA. The banks that chose not to work with Access Now were threatened with potential lawsuits.

On November 20, 2017, the Independent Community Bankers of America (ICBA) announced it had reached an agreement with Access Now to stop the mass distribution of letters to community banks threatening to bring actions against these banks for alleged violations of ADA. The industry trade group reached a mutually agreeable settlement with Access Now, in which the ICBA will adopt and distribute to its current members a restatement of voluntary access principles that are acceptable to Access Now, as a reaffirmation of the banking industry’s ongoing commitment to encourage accessibility for visually impaired persons. Access Now will release ICBA member banks and all U.S. banks with less than $50 billion in assets from all claims related to the provision of electronic banking services and the ADA.

It is unclear if the release requires all ICBA banks and non-member banks with assets of less than $50 billion to adopt the Access Now principles. In addition, it is unclear if adopting and following the Access Now principles by community banks will protect them from threatened litigation by organizations similar to Access Now. However, it is advisable to adopt and follow the principles for protection against claims.

The principles adopted by the ICBA are as follows:

  1. Ensure accessibility. The ICBA will encourage its members to make reasonable efforts to ensure that digital platforms and services are accessible to visually impaired and low vision customers, as well as potential customers and companions to such customers or potential customers.
  2. Train bank employees. The ICBA will encourage its members to conduct periodic training for bank employees responsible for electronic banking service accessibility to promote greater accessibility.
  3. Develop electronic banking service accessibility guidelines. The ICBA will encourage its members to develop electronic banking service accessibility guidelines that are designed to promote increased independent use of the member’s electronic banking services by customers and potential customers with disabilities, as well as their companions. The details of the accessibility policies adopted, if any, will be at the sole discretion of each member bank.
  4. Implement the principles within the next three years. In the event that formal guidelines are not issued by the U.S. Department of Justice in 2018, the ICBA encourages its members to implement its principles on or before December 31, 2020.
  5. Incorporate access information into existing customer service. The ICBA encourages its members to publicly post notification and contact information in connection with their provision of electronic banking services for customers and potential customers who claim to encounter access barriers. Members are encouraged to respond to inquiries or complaints related to any alleged access barriers in a reasonably prompt manner.
  6. Communicate with third-party vendors. The ICBA encourages its members to utilize their existing vendor management due diligence process and communicate to the vendor that consumer-facing digital content provided by that vendor should conform to the ICBA’s principles.

While the DOJ has not adopted a website accessibility standard, one acceptable set of voluntary principles for accessibility is the World Wide Web Consortium’s Version 2.0 of its Web Accessibility Guidelines. Nothing within the ICBA’s principles intends to suggest that members should adopt an accessibility standard greater than that which may ultimately be adopted by the DOJ, or that equal access may not lawfully be provided in an alternative fashion. All community banks should endeavor to adhere to the principles set out above and watch for the release of website accessibility standards by the Justice Department.

Pursuing the Pole Position in Digital Banking

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digital-banking-11-3-17.pngBanks with unique strategies tend to perform well in the marketplace, and a $1.2 billion asset bank in Wausau, Wisconsin, is proving that formula through a digital platform and a strategy focused on lending to a niche community.

IncredibleBank serves customers nationwide as the digital division of River Valley Bank, a 15-branch community bank serving Wisconsin and the Upper Peninsula of Michigan. The division was established in 2009, when the bank was seeking to grow deposits and looked at the new online banks in the marketplace at the time, such as ING Direct (now Capital One 360). Then, the bank relied more on wholesale funding to fuel loan growth, but growing core deposits was a challenge, says Todd Nagel, River Valley Bank’s chief executive officer. “We started the online bank to create larger distribution in our regional footprint for deposits, and it was a way to replace our wholesale funding. We never dreamed that it would take off the way it did.”

River Valley Bank’s net interest margin, at 4.13 percent per the Federal Deposit Insurance Corp., performs better than its peers, according to BankRegData. So does the bank’s return on assets (1.43 percent) and return on equity (15 percent).

These days, an online banking division focused on deposit gathering isn’t necessarily innovative. The management team has since expanded IncredibleBank’s focus to address the bank’s concentration in commercial real estate loans through a unique niche: motor coach loans. Motor coaches are one of Nagel’s passions, and he has one of his own, says Kathy Strasser, the bank’s chief operating officer. These vehicles aren’t the stereotypical cramped family RV, and the cost of these luxury homes on wheels range from $100,000 to $2 million or more. High-end motor homes are unique, with custom features that make it difficult to pinpoint their value. “That’s the hard part about financing them,” says Nagel. Two loan officers are dedicated entirely to this specialty niche, and these lenders visit motor coach manufacturers regularly to build their expertise in the area. Motor coach financing accounts for roughly 10 percent of River Valley’s overall business, according to Nagel.

In looking for a unique way to market IncredibleBank, Nagel and his team turned to another one of his passions: NASCAR. “There’s 150, 200 motor homes that go to every race, all over the country,” says Nagel. The bank sponsors NASCAR drivers Kyle Busch and Matt DiBenedetto, and brings the bank’s own motor home to entertain customers during meet-and-greets with the drivers at NASCAR races. A promotion around account openings offered a chance for customers to win a VIP pass at Watkins Glen International, a racetrack in Watkins Glen, New York, that hosts NASCAR events.

IncredibleBank accounts for 10 to 15 percent of the bank’s deposits, according to Nagel, and that, along with the division’s digital-only footprint, gives management some leeway to use it as something of an incubator for new technology. Nagel says the management team is working to examine every product offered by the overall organization—including all the necessary documentation—to explore whether it can be offered digitally. If that’s not possible, then “we may not offer it in the future,” he says. “We believe that everyone’s looking for an Amazon-like experience. I don’t want to be like Amazon, but I’d like to replicate the experience with banking.”

Seeing a future where Amazon is beating traditional retailers, Strasser says that River Valley Bank will continue as a traditional community bank in its markets, but won’t grow beyond a 15-branch footprint. The bank has been adding talent without traditional backgrounds—Strasser herself was an executive vice president at a company that is now a subsidiary of Deluxe Corp., which serves the financial industry with website design, customized checks and email marketing, among others. And good relationships with vendors are integral to innovation. The bank has worked closely with its core provider Jack Henry & Associates’ mobile division, Banno, which built IncredibleBank’s mobile banking app.

Still, the industry and its vendors aren’t moving fast enough for Nagel. He has high expectations for digital delivery. “Our greatest challenge is getting our partners in the industry to think like we’re thinking,” says Nagel. “You should be able to open a $1,000 checking account in two minutes. That’s my expectation.”

Innovation Spotlight: First Internet Bank

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David Becker, President and CEO

Before he understood banking, David Becker understood technology and its ability to shape the customer experience. Highly attuned to how people would want to bank in the future, Becker started First Internet Bank in 1999, now a $2.4 billion asset institution in Fishers, Indiana. In his 35 years working in financial services technology, Becker has created five companies listed in Inc. magazine’s 500 fast growing companies and continues to engage in philanthropic initiatives to support the economic growth of central Indiana.

When you first told people you were starting a branchless bank, what reaction did you receive?
Nearly 20 years ago, I had an idea to create a bank that lived entirely online. At the time, I had three financial services software companies. Today, we would call them fintechs. My experience as a service provider to the financial services industry, and my years as a consumer and business bank client, gave me deep insight into how banks worked, and, candidly, how they could improve.

How did bankers react? I initially presented my concept to a traditional bank, explaining how a bank could build a nationwide business with an all-online presence. After the presentation, though, the bank’s CEO rejected our concept. He claimed computers weren’t fast enough and the alleged consumer wouldn’t buy in. Essentially, he said it couldn’t be done.

Fortunately, consumers did not share the same skepticism. What’s unique about our story is that this online banking model was born following a focus group with my friends and neighbors. I asked them about how they’d prefer to bank. The ideas flowed. Eighteen years and $2 billion in assets later, we have demonstrated the success that can follow when you remain focused on the customer.

What lessons did you learn working in the technology sector that later helped you as you were growing First Internet Bank?
Before launching First Internet Bank, I worked in and around financial services for years. I saw an opportunity to improve upon the industry’s shortcomings—primarily improving efficiency and the customer experience, both of which rely heavily on technology paired with a human touch.

What’s helped us grow so quickly is that we’ve recognized that we need talented people who can handle anything that comes in the door. Because we have no tellers, per se, everyone who works on our retail banking team, for example, needs to be trained across multiple technologies to handle multiple functions, from complex IRA transactions to mobile functionality to starting new deposit accounts.

And because we’re using technology like mobile banking and biometrics, to revolutionize the banking process, there really isn’t any limit to our potential growth.

How can bank boards start to adapt an entrepreneurial mindset that allows for innovation?
Because we were a pioneer of the branchless model, we’ve learned to use technology to help us adapt to challenges and reinvent ourselves. Technology enables us to expand our business, enter new verticals to diversify our revenue streams, and serve customers across the country—without a costly branch network.

Technology is an increasingly important part of our business, and there is much to be said about the ways fintech is changing the landscape of our industry. However, I would caution boards against looking to a fintech solution as a quick fix to bring innovation to your organization. If you truly want to foster a culture of innovation, look to your existing team.

Today, our hire is the “dissatisfied banker.” We look for the banker who says, “What if we did this instead?” We want the people who challenge the status quo and offer solutions to help us make it better. At First Internet Bank, we call this our “entrepreneurial spirit,” and it permeates the organization.

Our people are the key to our success. Some are bankers that have finally been empowered to do what they’ve always wanted to do. Others are industry outsiders that we’ve hired to bring new solutions to old problems.