Three Questions to Ask About Your Bank’s DNA

March 4th, 2016

Today, numerous financial technology (fintech) companies are developing new strategies, practices and products that will dramatically influence the future of banking. Within this period of transformation, where considerable market share is up for grabs, ambitious banks can leapfrog both traditional and new rivals. Personally, I find the narrative that relates to banks and fintech companies has changed from the confrontational talk that existed just a year or two ago. As we found at this year’s FinTech Day in New York City on Tuesday, far more fintech players are expressing their enthusiasm to partner and collaborate with banking institutions who count their strengths and advantages as strong adherence to regulations, brand visibility, size, scale, trust and security.

With more than 125 attendees at Nasdaq’s MarketSite on Times Square, we explored the fundamental role financial technology firms will play in changing the dynamics of banking. While we heard about interesting upstarts, here are three questions that underpinned the event that I feel a bank’s CEO needs to sit down with his/her team and discuss right now:

1. Are We Exceeding Our Customer’s Digital Experience Expectations?
Chances are, you’re not. But you can re-set the bar to make clear to your team that while customer expectations have shifted in pronounced ways, this is an area that a bank of any size can compete, especially with the help and support of a fintech company. If you are looking for inspiration, take a look at these examples of successful partnerships that we highlighted at FinTech Day:

  • City National Bank in Los Angeles and MineralTree in Cambridge, Massachusetts, developed an online business-to-business, invoice-to-pay solution that enabled the bank to differentiate itself from its competitors and attract new corporate customers. (In June 2015, City National was acquired by Royal Bank of Canada.)
  • USAA in San Antonio, Texas, and Daon in Reston, Virginia, collaborated to roll out a facial, voice and fingerprint recognition platform for mobile biometric authentication that enhances security while enhancing customer satisfaction.
  • Metro Bank teamed up with Zopa, both in the United Kingdom, on a deal which allows Metro Bank to lend money through the peer-to-peer platform the fintech company developed.

Any good experience starts with great data. Many presenters remarked that fintech companies' appetite to leverage analytics (which in turn, allows a business to tailor its customer experience) will continue to expand. However, humans, not machines, still play critical roles in relationship management. Having someone on your team that is well versed in using data analytics to uncover what consumer needs are will become a prized part of any team.

2. How Do We Know If We’re Staying Relevant?
How can new players show us whether the end is near? That is, what part of our business could be considered a profit center today but is seriously threatened in the future? As you contemplate where growth isn’t, here are three companies that came up in discussions at FinTech Day that could potentially help grow one's business:

  • Nymbus, a Miami, Florida-based company which provides a cloud-based core processing system, web site design, marketing and other services to help community banks compete with bigger players.
  • Ripple, a venture-backed startup, whose distributed financial technology allows for banks around the world to directly transact with each other without the need for a central counterparty or correspondent.
  • nCino, based in Wilmington, North Carolina, which developed a cloud-based, end-to-end small business loan origination system that enables banks to compete with alternative lenders with quick processing and approval of loans.

3. Do We Have a “Department of No” Mindset?
Kudos to Michael Tang, a partner at Deloitte Consulting LLP, for surfacing this idea. As he shared at FinTech Day, banks need structure, and when one introduces change or innovation, it creates departments of “no.”

For instance, what would have happened if Amazon’s print book business was able to jettison the idea of selling electronic books? If you refuse to change with your customers, they will find someone else who does. Operationally, banks struggle to make change, but several speakers opined that forward-thinking banks need to hire to a new level to think differently and change.

Throughout FinTech Day, it struck me as important to distinguish between improvements to the status quo and where financial institutions actually try to reimagine their core business. Starting at the customer layer, there appears massive opportunities for collaboration and partnerships between established and emerging companies. The banks that joined us are investing more heavily in innovation; meanwhile, fintechs need to navigate complex regulations, which isn’t easy for anyone. The end result is an equation for fruitful conversations and mutually beneficial relationships.

adominick

Al Dominick is CEO for Bank Director, an information resource for CEOs, executives and members of a bank's board. He writes about bank M&A, growth, fintech and key industry events. You can follow him on Twitter @aldominick, connect via LinkedIn and follow his About That Ratio blog.