Transcript
Hello out there, and welcome to Fintech Hustle live from Finovate in the hall.
This is Sam Kilmer, managing director at Cornerstone Advisors.
I’m joined by my co-host, Mary Wisniewski of Cornerstone Advisors, and we are here with a rock-star group of fintechers that Mary and I have the privilege of talking with over the next few minutes here at Finovate.
Let’s just get right to the introductions.
I’ve got Reggie here, who is a veteran banker. You were at SunTrust, you were at all these different places, and now you’re on multiple boards, including Coastal Community, right?
That is right.
Yep.
Great.
And Nymbus.
On the board of Nymbus.
And Atlantic Union.
Thank you for joining us.
You betcha.
We also have Tammy Bangs, vice president at PortX.
Thanks for joining us, Tammy.
Thank you for having me, Sam.
And I see you’ve got the coffee, the lipstick right there on top of the coffee.
That’s okay.
So we’re going there.
Then also Jeffrey Kendall, CEO of Nymbus.
Good morning.
Right, it is.
Yes, it is early.
And thank you, by the way, Jeffrey, for sponsoring the coffee tray that you brought down.
You’re humble.
Anyway, great to be with you guys.
I think, as you know, we just do an unscripted chat.
There’s no hidden agenda or big mission.
There’s no script, crib notes, none of that kind of stuff.
No preparation.
Yeah.
So if this sounds like it’s the demo tape, folks, it’s the demo tape.
I always like to start by asking, what are you hearing or seeing?
Any big nuggets you’re taking away from Finovate?
Oh, I’m up first?
Absolutely.
Let’s see.
Day one was yesterday.
What I will say is I’m noticing a difference in some of the fintechs in that they’re more interested in looking at partnerships and maybe even acquisition from banks.
I think fintechs are realizing how hard it is out there to raise capital in this environment.
We’re also seeing some consolidation in fintechs that have similar value propositions.
They’re also realizing the importance of scale because of regulatory concerns.
I think that’s shifting from just trying to sell their capability to thinking about different ways of going to market, partnering with banks, partnering with other fintechs and potentially even looking to sell their technology to an organization that can scale it and grow it faster.
Excellent.
Tammy, what about you?
Any perspectives from day one?
I just keep hearing best of breed over best of suite.
That’s what I’m constantly hearing from customers and prospects alike.
I think that was a best-of-suite alarm going off.
Good stuff.
What about you, Jeffrey?
The biggest thing I’ve started to see at conferences is that there’s been a dilution of the content.
But one of the things I’ve seen at this instance of Finovate is that the panels are a little bit more honest.
They’re a little bit more authentic.
I think that’s bringing some fresh perspective to some of the talking-head points you kind of get caught up with at a lot of conferences.
This is now the format, I think, for content delivery at conferences.
It’s good to see it improving and getting out of the same thing we’ve heard at every conference over and over.
Yeah.
Mary?
Sure, I’ll take it.
It’s good timing on that comment, Jeffrey, because Jason of Alloy just put out a blog post about how people should not be saying all this BS stuff, all these platitudes and blah, blah, blah.
Which I feel like I’m doing right now, but hopefully in a more fun way.
To your point, what caught my eye, I guess this was before the show, was Fifth Third acquiring Rize.
I just think that’s remarkably interesting.
I’m also looking at acquisitions.
Here, there’s more debate on what the long-term viability of neobanks is.
I know Daylight had released news this past week that it’s closing down.
I think a lot of people are also looking at what’s going to happen to other neobanks.
I thought it was pretty gutsy, Reggie, on the panel you were on yesterday.
I really liked how you brought up, okay, we’ve been talking, including me, about niches for the longest time.
They’re really valuable.
They can also come with concentration risks.
There’s this trade-off.
It’s not just SVB.
It’s First Republic.
It’s all these different things where it’s good in principle, but the issue is in the details of how you do that.
I’d love to get your thoughts on niche versus concentration and how to strike the balance.
A year ago, we would have said that Silicon Valley was a hero, and now there has been a complete change.
I think what they got right, and what we can all learn from, is they really understood the needs of the segment of customers they served and they owned it.
They really had prominent market share with VC-backed companies.
The problem is all those VC-backed companies lost some of their VC funding at the same time.
They started using up their deposits and running deposits down.
Then the bank had to sell its investments, and you all know the story from there.
I think there’s something to be learned on both the good side and the bad side.
Really understanding your customers and developing a value proposition that’s unique, that serves unmet needs other normal banks aren’t serving, is something to be learned.
But do that with multiple niches simultaneously.
It’s interesting because, as bankers, we’re risk managers, and that risk was hiding in plain sight.
I bet they didn’t really think about concentration risk in their VC commonality because they were all in different industries.
The boards I’m on now are asking, “What concentration risk do we have that might be hiding in plain sight?”
Are we too dependent on one regulation?
Are we too dependent on one vendor?
Are we too dependent on one product?
Are we too dependent on interest rates going up or down?
We’re really looking at and questioning what we need to think twice about and how we diversify by having multiple strategies happening simultaneously.
Good stuff.
Any other perspectives on that line of thinking from the rest of the folks?
Well, I’m never shy about my comments and opinions.
The one thing I think is really interesting is, if I were a banker sitting back watching everything right now, you could take two approaches.
One is, “Oh my gosh, there’s so much risk going on and so much change. Should we back off and entrench?”
The other opportunity, especially for people who still have a view to grow, is this is one of those times in the industry that’s almost like Formula 1.
If you’re racing on a dry track, there’s actually not that much passing and change going on.
When it starts raining, everything becomes an equal playing field.
With all the different change, and big brands like SVB struggling and having challenges, that’s an opportunity for smaller banks to say, “You know what? Let’s lean into this.”
Opportunity for First Citizens, for sure.
Right.
That’s right.
I think it’s going to be a transfer of who is doing the business, not necessarily that the business is going away.
That’s the opportunity for folks.
Good stuff.
Mary, anything?
A little bit separate, but I sat in on a financial inclusion panel, which was really interesting.
A lot of the points coming up were like, “Hey, we actually haven’t done very much to improve anything over the last decade or so.”
Of course, there are exceptions.
People will argue that banks dropping overdraft fees is evidence of things working a bit better.
But to your point earlier, Jeffrey, people are being more candid at things, and I thought that was striking.
Also, this was separate from this event and is coming out in a Gonzo blog soon, but I’m a little bit obsessed with this new neobank called Charlie.
It has all the problems a lot of new banks will have, including that its revenue model is interchange fee to begin with.
But I’m so intrigued by it because it’s advancing Social Security payments up to four weeks early.
Again, that’s only solving one problem one time.
But I think the vision is, “We’ll help you get discounts on prescriptions.”
One thing that only became clear to me recently is that seniors are overdrafting on paying their prescription bills.
That’s awful, but also an area of opportunity, I think, for financial services.
So it’s a real pain point.
That’s one of the things I’ve always loved about niches.
If we figure out the concentration risk, then there’s a lot of power there.
Jeffrey, I totally agree with your point about the transparency coming through on some of these panels.
The panel you were on, and the panel that Theo was on, had the same thing.
We were getting very specific examples and stepping back away from the blah, blah.
On balance, I think another topic I’m hearing is more confidence around the ability to integrate applications together.
There’s been a lot of appropriate negativity around that.
We just assume that somebody throws out, “Oh yeah, we have an API,” and that’s going to solve world hunger.
It doesn’t.
It turns out there are a lot of problems.
Tammy, you and I have been talking about integrations, and I know you’ve been around integrations for a while.
A while.
We’ve all been around integrations for a while.
Since Charlie.
Wow.
Sorry about that one.
That was really good.
Did my pupils dilate there for a moment?
I’d love some of your perspectives, Tammy, because I know you spend all this time understanding different interfaces and how they work.
Are you hearing more confidence about that at conferences like Finovate?
Absolutely.
Yesterday, the comments from Valley Strong Credit Union really struck a chord with me because she basically said, “Don’t wait for your core. Wait no longer. Don’t be limited by that. Forge your own path from a technological perspective.”
I think we can’t wait around anymore.
We can’t wait around for the second- or third-best thing, which is what the top cores deliver.
Folks are moving into a zone where they’re going to define their own technological future.
Working with someone who is a middleware layer will help them do that, whether it’s sticking with the same core or going with a new core.
These are all things we’re exploring as bankers and together.
It’s so different from how we thought about technology 10 or 15 years ago when I was at one of the big three core providers.
You bought everything top to bottom.
Three hundred products.
We sold them all to some institutions.
You’re never going to get a very good set of products if you buy everything from one place.
That’s not the way I live my life.
I don’t buy my milk at Macy’s and I don’t buy my clothes at King Soopers.
Banks shouldn’t do that either.
It’s not the best experience for bankers, in my opinion.
One thing I wanted to add about the conference is I love the diversity.
That’s something I’m noticing.
Not everybody is over 65 in a blue suit.
That’s pretty cool.
Not everybody’s making Charlie.
Not everybody’s making or even knows what Charlie is.
That’s pretty awesome.
Good stuff.
Any other perspectives on integration or anything else you’re seeing here?
Yeah.
I totally agree.
Interoperability is obviously still a topic.
It’s been a topic for the past 15 years, but we are seeing some of the cores catch up.
That’s okay.
That doesn’t mean everybody’s going to replace their core right now.
We know that’s a challenge to do.
Taking an approach where you have an integrated stack on top of it is totally great, especially for people where replacing the core just isn’t practical.
You always have to look at it through the lens of where the customer is, where the bank is.
Everybody’s different.
The one thing I’m struck by coming here, and this idea of best of breed versus a total stack, is if you’re a community banker, it must be really, really intimidating trying to manage all the different vendors we bring to the table to make some things we would say are table stakes work.
You’ve got to have a digital-banking front end.
You’ve got to have an integration layer.
You’ve got to have a data cleanser.
You’ve got to have KYC.
If I were a banker, I’d be going, “How do I navigate the hundred different contracts, the hundred different relationships I now have to start managing?”
That’s not sustainable for small banks.
If you’re a large bank and you have unlimited budgets and unlimited developers, fantastic.
But if you’re a community bank trying to grow from $500 million to $1 billion, you have to prioritize.
How do you do it?
I mean, you sit on the board of two relatively different-sized banks and you see the different challenges.
How are you guys thinking about who you select and when and going through that process?
I would actually say one of the trends that is really becoming an issue for banks is third-party risk management.
Regulators now are saying that you own the risk of all of your vendors.
In Coastal’s business model, where they’re actually offering banking as a service to fintechs who then serve customers, Coastal takes on the risk that fintech has in serving that customer.
The more vendors you have, the more partnerships you have, the more regulatory risk you have.
It’s not just integration risk, not just contract risk or expense.
It’s real regulatory risk, and a lot of organizations are getting slapped with MRAs because of that.
I do think, and what I was saying earlier about what I’m picking up at this conference, a lot of fintechs are looking at how we bundle our solutions.
Not so we’re forcing banks to buy the whole stack, but to integrate multiple things that naturally need to fit together to make it more of a bundle for banks rather than seriously an à la carte menu.
I think that will really help banks minimize the number of different vendors and different risks they have to manage.
Yeah.
Mary?
Totally different direction, but Finovate makes me nostalgic.
I think this was my first event I ever went to covering fintech, like 2008.
I’m going to end on optimism because I remember Jim, who used to run this event.
He was inspired to create this event just seeing a chart in American Banker that made online banking, then called home banking, seem like a thing.
I love to think about that because you think none of this matters, these little charts, but sometimes they inspire a whole conference.
I think about that a lot.
I might need a new hobby.
On that, I love coming here because it is the next generation.
It is a younger group of people, and they are smart.
I mean, they are really smart at understanding market opportunities, capital raising and how to think about reducing some of the pain points of banks.
The level of intellectual curiosity, constant learning and awareness of what’s going on in the market at conferences like Finovate is different from the energy I pick up at other banking conferences where it’s really bank-heavy.
I get inspired and energized when I come.
Yeah.
And the fact that they have one in New York and one in San Francisco, I just think these towns have such energy.
I agree.
I like the idea of ending on a high note.
I thought that was a great reference, Mary.
And Reggie, thank you for joining Fintech Hustle.
These are your commemorative double albums.
Don’t try to put a needle down on these because they are coasters.
Put your favorite beverage down on them.
Thanks again for joining us, guys.
We appreciate you having another in-the-hall, unscripted episode of Fintech Hustle.
Thanks again.
Mary, any closing comments?
Yes.
Thanks, Sam.
All right, rock on, folks.
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