Fintech Hustle // Samantha Paxson Nathan Baumeister

Well, hello out there, and welcome to another episode of Fintech Hustle. I am your host, Sam Kilmer, managing director of Cornerstone Advisors, contributor to GonzoBanker, and I am really, really jazzed to be here with a few industry rock stars today to talk shop about what’s going on in the industry.

I’m joined by my guest co-host today, Miss Mary Wisniewski of Cornerstone Advisors, and we are joined by two industry rock stars, straight off the road, I suspect.

Although we’ve just come out of the holidays, so maybe there’s been a little bit of downtime.

We have Samantha “Sam” Paxson of Co-op Solutions.

Hi, Sam.

Hi. Good to be here.

Glad to have you.

And CEO and co-founder of ZSuite Tech, Nathan Baumeister.

Nathan, hello.

Hey, how’s it going?

It’s going great.

I should have mentioned Sam Paxson is the chief experience officer of Co-op Solutions.

One thing I always like to talk about on Fintech Hustle is the lives of people in the industry.

Sam, I know beyond the work that you’ve done at Co-op Solutions, you’ve done a lot of work establishing Shades Up for Kids.

Mad respect and tip of my hat to what you’ve done there.

I’d love to hear about a day in the life of the other Sam on the podcast, what you’ve been doing with Co-op Solutions and the rest of it.

I know you’re on boards and all kinds of great stuff, as well as what you do with Shades Up.

Take it away, Sam.

Tell us about a day in the life of Sam Paxson.

A day in the life of Sam Paxson.

We’re Sam squared on this podcast today, so I like the Sam power here.

I meet with a lot of credit unions.

I do a lot of speaking engagements on our proprietary research that we’ve done at Co-op.

And now Co-op and PSCU, there’s been a merger in our industry, so we’ve been out talking to so many credit unions about where they should be placing their strategic bets.

So many leaders right now are really almost paralyzed.

What they have done, their set of assumptions, has changed.

They’re really leaning on industry thought leaders, CUSOs, advisories, so many organizations like Cornerstone and everybody here today, to say, “Where should I be investing?”

My day is really advising credit unions on their growth strategy and helping them design their organizations as closely to the consumer as possible so that they can have greater precision around their P&L.

I do that.

I go to Pilates.

I hang out with my son and travel around the country and meet up with so many friends.

It’s just so fun to be here virtually with each of you.

That’s great.

Tell me a little bit about Shades Up.

I think that’s an interesting story in and of itself because that’s a personal story too, isn’t it?

It is a personal story.

I have to fly a lot.

I go out and, you know the credit union industry, we like to meet up.

So I get to be on airplanes a lot.

What many people don’t know is I’m a very fearful flyer.

I have all these things that I do to help myself not be afraid when the plane starts going like this and I’m in this little metal tube 30,000 feet in the sky.

About five years ago, it’s been five and a half years since this started, I was on a flight that was really bumpy.

I was sitting in the aisle seat, and I put out a tweet saying, “I don’t understand why people buy the window seat and they shut the shade. Why? A girl needs context.”

My friends in the industry started doing this thing where they were saying, “Shades up for Sam.”

They would take a selfie with themselves in front of this window shade.

I just thought, well, this is an opportunity.

We’re a mission-driven industry.

We should focus on how to be local and support the National Credit Union Foundation and Credit Unions for Kids.

I said, “What if, for every shade raised and selfie taken, we donate $10 to Children’s Miracle Network Hospitals and to the National Credit Union Foundation?”

It took off.

Since the time that it started, we’ve raised about $100,000 with people raising their shade and showing their support for these two critically important platforms that really demonstrate our mission.

I know at Cornerstone Advisors, you all talk about financial performance.

Health and wellness really go together in terms of people’s financial performance.

People get into medical debt.

They have so many financial pressures.

Demonstrating your mission through the ways that you help the average consumer with their day-to-day challenges in maintaining their financial performance, these things that the National Credit Union Foundation and Credit Unions for Kids are doing, is really aligned with credit unions’ mission of helping their members in their daily financial lives.

It was based on my fear, and then it turned into something good.

That helps me when I’m on a plane and not feeling so secure.

At least raising my shade helps kids in their financial lives and helps families.

Well, I love how it came from something personal, and then sort of built out from there.

We always hear people talk about authenticity, but it’s almost like you don’t have to aim for that.

It came from that place.

Mad respect for that, and I loved hearing about that.

I’m a big believer in turning something negative into a positive, always.

Why not do that in something that is really aligned with who we are as an industry?

I’m very much what you see is what you get, so I’ll share my all the time.

Go ahead, Mary.

I was just going to say, that’s cool.

All of my awful moments, I like to always write about them five to 10 years later because I’m like, “All right, well, I published it.”

Exactly.

If I came to meet you, Sam Paxson, through Shades Up for Kids and traveling, similar to you, in that steel tube up in the sky, I think, Nathan, you and I probably met at an AFT meeting.

Although it might be possible that it was somewhere else, but now it all sort of runs together because of that world that we came from.

I’ve even got my AFT coffee mug here.

Yeah, from Vancouver.

Tell us a little bit about the day in the life of Nathan Baumeister at ZSuite and with many of the other things that you’re doing.

Yeah.

I think crazy pretty much sums up a day in the life over here at the Baumeister household.

I’ll start with the actual craziness.

Four kids, from 12 years old to two years old.

The 12-year-olds are twins, so pack in some extra fun there.

We’ve got a wonderful standard poodle that we get to play with.

We have a full household, and I bet you can imagine they keep me on my toes all the time.

Then I have this wonderful privilege of getting to be the CEO of ZSuite Tech, where we work with so many financial institutions across the United States.

I’m constantly talking to my leadership team and trying to figure out what’s going on there, talking with our different team members and figuring out how their lives are going, then talking to a prospect, then jumping on a plane to go to an industry conference.

Within there, we always have to make sure that we make enough time for delicious food.

That’s always a big part of my life because if you’re going to have to eat, you might as well make it enjoyable, right?

Then I have a problem.

I have too many hobbies, Sam.

You can see my guitars in the background.

I can see I’m not the only one with some guitars in the background.

Obviously, we share some common interests there.

But I love rock climbing.

I love trail running.

I love CrossFit.

It’s crazy.

That’s the way I start, and that’s the way I’ll end.

The day in the life definitely is crazy, but it’s just so much fun and so engaging.

Hashtag crazy.

Mary, were you going to pop in there with a question?

I was just wondering, what’s your favorite delicious meal?

It’s interesting because I just love food so much that there’s really no style of food I don’t like.

I will say that for a long time I perhaps had an addiction to bacon cheeseburgers.

I may or may not have eaten them every day.

I had to set a rule for myself.

I’m a big believer in living by principles, but I also realized that I am not disciplined enough to always live by principles, so I need to set some rules.

For about a three-year period, I had a very hard-and-fast rule that I could only eat one hamburger a week because it got out of control.

Now it’s back in control.

I’m good now.

I’ve gotten past the addiction.

I love all types of food, but if I get right down to it, it’s probably that bacon cheeseburger that I end up with.

Nathan, it sounds like this is why you have trail running and rock climbing and those other things equally as a hobby and a passion.

Yeah.

Some people ask me why I work out so hard.

“Do you enjoy it?”

It’s like, “No, I love to eat.”

Yeah.

My wife and I go on vacations.

I have a tendency, I’m one of these flawed individuals, where I get up in the morning and I have to do something to feel like I’m alive.

I oftentimes refer to it as earning my beer.

My wife’s always like, “Why can’t we just relax?”

But anyway, it is my relaxing.

That is my relaxing.

Exactly.

I do the same thing.

I’m a morning walker and hiker.

I just spent a week in Sedona hiking and doing meditation and yoga, so I’m with you.

Good stuff.

I’m really curious, given all of your travels.

You guys are both on that proverbial steel tube, constantly going from industry event to industry event, meeting clients and prospects.

I’d love to hear a sense for, here we are in 2024 and we’ve had a really interesting couple of years in fintech.

If you look back and take 2019, then take out 2020 through 2023, which was kind of an interesting little bubble, it would almost look smooth.

This would probably be a great point where I would be using graphical tools instead of my hands, but you get what I mean.

There was this really weird bubble that happened over the last couple years of rapid, sometimes even vacuous, interest in a lot of things and then a falling off of it.

But it seems like it’s kind of maybe more normal.

I was really curious for your take on the industry right now.

What do you see that appeals to you that you think is working really well in the industry?

When you’re in your conversations with other banks and credit unions and fintech companies, what are you really jazzed by right now?

What seems to be working well?

As you might imagine, we’ll come back around to the dark side and ask you what you think may not be working great.

Nathan, since we started with Sam before, you want to give it a shot?

Yeah.

I’ll tell you the thing that I have seen over the last couple years, more so than ever before, is that the willingness to collaborate has really increased quite a bit.

Sam, you and I, you mentioned AFT.

That’s an association for financial technology companies.

It’s been around for over 50 years.

We get together twice a year to figure out, how can we help the industry be better, even though many of us are competitors?

That’s been there for a while.

I know the credit union movement obviously has a lot of that in there as well, and banking associations have that as well.

But the big difference, or the big change, that I think I’ve seen over the last couple years is that all of the communities are collapsing to figure out how to work together.

For the longest time, the technology providers within the banking industry, or the fintechs, were seen as something scary, bad, perhaps competitive, folks that you had to stay away from.

I’m really seeing this tangible collapse of the communities for all of us to realize that we actually all coexist and have to work together to be able to do it.

It’s not just reaching out to competitors between bankers to bankers, credit unions to credit unions or fintechers to fintechers.

It’s actually, how can the whole ecosystem come together?

I think one of the most tangible places that I’ve seen that come to action is all the different VC funds that have been put together where financial institutions are actually the ones putting the money in place to invest in and drive growth for fintech companies and technology providers who are working on solutions that are helpful for the greater ecosystem.

Then they put it back into the marketplace to make it all better and make sure that they’re doing stuff to help the industry move forward.

I’ve been the beneficiary of it at ZSuite Tech.

We went through the ICBA accelerator at The Venture Center early on.

That absolutely helped us.

We were able to get in front of about 120 financial institutions in a three-month period at the time that we were developing our product.

You can’t get that level of feedback in any scenario I’ve ever been a part of.

That fundamentally changed what we could do as a company.

Then, from our cap table perspective, or our investors, two of our VC firms are JAM FINTOP and BankTech Ventures, two of these bank-led VC funds.

That’s just one tangible example.

There are so many more.

But that’s what I think we’ve made some awesome progress on, and I think it’s helping a lot of companies out there be more successful.

Really interesting.

Sam, what are some things you see going on right now that you’re jazzed by, that you think are working?

I’m excited to see exactly what Nathan just talked about, that idea of collaboration.

I think it comes down to why we are collaborating so much.

Why is this important right now?

In the timeframe that you just talked about, 2019 to 2024, we had these sets of assumptions in 2019.

We can lean on the products that we’ve had.

We have these competitors out there.

Business as usual is still working.

We know this change is on the horizon, but we can kind of wait.

In the last four years, we have had such an abrupt smack in the face about what we need to do differently as an industry.

I think Nathan is completely spot on that instead of seeing each other as competitors, where fintechs are looking for scale and traditional financial institutions are looking to take these members, these consumers, out of dormancy and help engage them to improve deposits, liquidity and growth, what we’re seeing is that instead of having such a focus on product centricity, the why is, how do we engage the consumer?

Every company in the world today is battling for consumer attention.

The consumer has no patience.

No patience at all.

They’re incredibly empowered.

They have this ability to switch and move and get the use cases they need to get their daily lives, their daily financial lives and their daily financial performance needs in place over here, and then have to worry about the long game and what that means for their long-term financial performance.

What I’m excited about is I’m seeing bank CEOs, community bank CEOs and credit union CEOs say, “Okay, we need to design ourselves around the consumer.”

When we do that, we’ll improve utilization of our FI and pick and prioritize the use cases that will engage them in the day-to-day, help their short-term financial performance and engage them long-term with those big-ticket items that improve our overall credit union’s financial performance or the bank’s financial performance and the member or consumer’s financial performance.

That’s really where most brands are going.

The most successful brands that are out there today, brands like Starbucks, Tesla, Apple and Amazon, this is their strategy.

That’s what the consumer expects.

What a beautiful thing to collaborate, for fintechs to continue to build scale and for financial institutions to realize active members that improve deposits and liquidity and long-term financial performance.

Good stuff.

Mary, we need to get you in here.

Any thoughts on some of Nathan or Sam’s thoughts?

Or I guess the other thing would be, is there anything that’s really jazzing you going into 2024 here?

I’ll piggyback off of this growth theme because, Sam, I definitely want to ask you a little bit more about this.

But first, I’ll give an example.

Right before the holiday, I interviewed the CEO of StellarFI, who’s trying to, it’s a credit-building product that tracks bill payments.

That startup, very early stage, bought a bunch of debt from debt collectors and then forgave it as part of its customer acquisition strategy.

I have never heard of anything like that.

Imagine you’ve been dodging the debt for a long time, and then they were like, “Oh, what’s the startup that just forgave me?”

For them to even connect those dots for the consumer is interesting.

To me, that’s a novel example of how to try to grow your customers because that’s what it’s trying to do.

It’s a subscription-based product.

But Sam, I wanted to ask you more.

You mentioned at the top of this podcast helping credit unions grow.

I don’t talk with credit unions all the time, but enough to know one of the issues that seems to be on the top of their minds is, how do we get younger members?

I’m curious if you’ve seen any interesting strategies there.

I think they’re finally understanding their existing consumer base.

How do we take our existing membership base and get them to be active?

This comes back to not being product-centric.

Most financial institutions’ bread and butter is on the lending side.

That is every five to seven years.

Well, who needs a loan?

My 12-year-old son, who’s out transacting every day on his Greenlight card, does not need a loan, but he’s building loyalty and usage of an FI, actually a fintech, at age 12.

Nathan and I both have 12-year-olds.

It’s those kinds of strategies that I think are creating more creativity and deeply understanding the user journey or the consumer journey and saying, how can we help them almost like jobs to be done?

How can we help them with their needs today?

That then makes them sticky and want to use us for more.

That then helps us gain their trust and their loyalty for their needs in the future.

I’m seeing this play out.

I serve on the board of a university credit union, and they’re realizing that when students, their main acquisition strategy has been new student orientation for those 18- and 19-year-olds coming in as new students and saying, “Hey, join the credit union.”

They’re finding that most of them are already banked or are already using fintechs and don’t know why they need a traditional FI.

I love this new thinking about how can we introduce the simplest things, like P2P payments, like contactless payments.

There are so many merchants that don’t accept cash anymore.

Young people get birthday money and allowance money, but they need to be able to use it digitally because merchants aren’t necessarily accepting cash these days and it’s not easy to carry.

It’s those kinds of things.

We kind of get in our own operational heads as financial leaders in the banking and FI space.

We need to really lead with empathy and think through the mind of the consumer that we’re seeking to serve.

Once we deeply understand that, know their behavior, we can serve up value bundles that create value innovation, like you were just talking about, that help grow these FIs.

I think we’re starting to see that.

We’re starting to see the mindset shift toward a growth-strategy mindset rather than a fear-based mindset.

They’re realizing we need to change.

I’m loving that.

I’m loving leaning into being bold and trying new things.

Yeah.

But it came out on the dark side.

I don’t know if you all saw that Monzo, I think it was Monzo, did a financial wrap of people’s spending trends.

It sort of backfired on social media, with people being haunted by the, “Oh, I spent a lot on fast food. Oh, here’s my alimony.”

There are wrong ways to do this.

But yeah, it’s interesting to test and learn, as they say.

That’s such an opportunity though.

I think what you just described is a huge opportunity because the consumer is so empowered.

They’re able to pull down any financial app, sign up for any subscription, have their credit card or debit card embedded into these apps, and they don’t know their financial position.

Ron Shevlin, your colleague, says the average consumer has 40 different financial relationships.

Forty.

First, the consumer needs to understand their financial position.

Any use case that a bank or credit union can offer that would say, “Hey, here’s how you’re spending. You have this many subscriptions on Apple. You have Hulu and Disney and Netflix and Apple TV and all of these things that are so easy to buy. Your kids have subscriptions to Nintendo and PlayStation, and they’re buying things for Fortnite. There are all these things coming through that add up.”

Then the consumer can get scared.

They need to reaggregate their understanding of their financial position and then be served solution sets that can help them take the best next action that is seamless, helps them understand and gives guidance for what they should be doing next.

I’m liking that FIs are kind of realizing this and saying there are some simple things that we could do that would create stickiness, engagement and attention that would build trust for that younger consumer to use us.

I’m liking seeing that kind of thinking happening in our industry.

Yeah.

It’s interesting to me too that I can follow that from the consumer side to the business side.

One of the things that’s really jazzed me in the last several months is, Nathan, you mentioned JAM FINTOP and BankTech Ventures and ICBA and what they’re doing.

I’ve been thinking back on some of those events and thinking how prevalent some of the treasury solutions are, a lot like the area that you’re in too, Nathan.

To your point, Sam, earlier about everybody chasing loan volume, all of a sudden, did we take deposits for granted?

For credit unions and community banks in many cases, you know, shore this up and say, what are we doing that’s relevant for consumers?

But then flip side of that, also business clients.

We don’t just want to be commercial real estate loans funded by hot consumer money.

If we have some industry niches or verticals that we’re particularly good at as a bank, and if we don’t have some good solid treasury-type tools or things around the payment flows that bring value for the businesses, it seems like whether it’s Square or whoever, sit here and pick a disruptor or pick a competitor.

It’s sort of the same thread.

It’s just that the pain point, in addition to being a consumer, is a business.

Nathan, I think that’s probably where you’re spending so much of your time helping people think through, at least from my understanding of what ZSuite has been focused on.

The whole point of cash management, whether it’s for an individual or for a business, we just cannot take that for granted.

A community bank or credit union should not yield that to the outside.

Seems like that’s a threat, Nathan.

Yeah.

The principles are exactly the same.

Whether you’re on the retail side or the commercial side, it’s all about who’s your customer, what are their pain points, what are they struggling with, how can I help, what are natural and normal ways that I can offer services to them?

One joke I have made many times, which I’m not sure if it’s a joke because it might cut a little bit too close to the truth, is I always tell folks, I have an audience and I have fintechers and bankers sitting there, and I say, “I’ll tell you how both of you do innovation.”

Here’s how a banker does innovation.

You go to Finovate, you get excited about something, then you talk to a whole bunch of fintech companies and say, “Hey, look at me. I’m innovative because I was exposed to a bunch of innovative companies and I decided to move forward with some of them.”

Some people have referred to that as the fintech petting zoo.

I had one financial institution where they were so excited because, “We met with over a thousand fintechs this year.”

I was like, “And this is a good thing?”

It’s like, “Yeah, that’s how the innovation team is working.”

Then you move over, and I was like, “Okay, I’m done poking fun a little bit at our financial institution colleagues. Now I’m going to poke fun at my own colleagues on the fintech side.”

Here’s how we do innovation.

“I have sat in a room for the last three days not eating anything, thinking about the world, and I have seen the future. Here is how the future is going to be, and I am the one that will make it happen. As soon as I make it happen, I’ll build the whole product. I’ll go out to the marketplace, and all of you will tell me how amazing I am and buy my products.”

By the way, they would also get you a bacon cheeseburger.

You bet.

They better after the fact.

If you’re sitting in a room for three days, it takes time.

But the fundamental flaw in both of those is neither of them works because, in the end, who’s actually going to do the things?

Who are you actually building the thing for?

Who’s going to use it?

What problem are you trying to solve?

Innovation is super simple.

Who am I trying to serve?

Get to know them super well.

What is hard?

How can I help you?

What are you wanting to pull your hair out over?

Man, if I can just help that person a little bit more.

Don’t pull any hair out, Sam.

I saw you rub your own head there.

Don’t worry, I won’t be too far behind you in a couple years.

But find out what those are, then fill the need, solve the pain, help them.

That’s innovation.

That’s success.

It’s funny.

This isn’t just in our industry, by the way.

This is true for pretty much any startup company.

This is true for any new product feature or any new product line that a company is providing.

Most of them fail because they just do it within their own viewpoint instead of pushing out.

So yeah, everything that Sam was saying is as true for the commercial side as it is for the consumer side.

I actually think we’re in an amazing renaissance, if you will, on the commercial side because most of the digital transformation that’s happened over the last decade has been on the consumer side.

The reason is because the consumer problems are easier to solve and they’re more uniform.

On the commercial side, the problems are a lot more complicated and there are way more niches.

But the ease of technology builds has gotten easier and easier and easier.

I’m not going to name all the tools for why it’s made it so much less expensive to create more complicated software, but there’s a whole bunch of stuff that’s fed into it.

Now we’re able to take a lot of these digital transformations that consumers have been benefiting from and apply them on the commercial side.

I love that it’s all about the user, the consumer, the end outcome that we’re trying to create.

Nathan, you were just talking.

I love this petting zoo idea, but it’s like the activity for activity’s sake makes you innovative.

Really, what outcomes are you driving for the consumer?

I’ve said this externally, and some people are kind of like, “What does that mean?”

But the member or the consumer is the P&L.

If you design yourself as close to the human that you’re seeking to serve, you understand their behaviors and you’re able to serve up value bundles, I call it value innovation.

If you’re able to do value innovation, you’re able to grow instead of having your revenue engine under attack.

You’re able to really understand, gosh, I can create this flywheel effect of designing or bringing together even existing solution sets that I have that solve for needs that the consumer has, and then I’m able to grow.

This is a new idea.

Actually, it’s an old idea that we’re finally realizing works.

We’re seeing other brands, just like Nathan said, this is the strategy of most companies today.

Those that are really good at it and really deeply understand their consumer are able to thrive really fast.

Isn’t it more fulfilling too?

Yes.

As a human, what are the things that actually bring you true joy?

Is it creating more profit or more revenue for a corporation of some sort?

No.

It’s helping people.

It’s tangibly seeing that you’re making someone’s life better and that you had a part in that.

That’s awesome.

That makes me want to work even harder and do even more.

When you do that, life is just more fulfilling if you focus on stuff like that.

Absolutely.

Organizations are becoming more anticipatory.

When an organization understands what I need to get done in my life, I travel all the time.

I need to understand, okay, where are all these accounts and how can I reaggregate them, and how do I understand how I’m doing?

I need to be able to get internet access on a plane and be able to buy my Starbucks and send donuts to my 12-year-old back at home.

I want to be able to do that super easily.

Not only meet the need to just make my financial transaction happen, but then help me attain an outcome that I’m trying to reach, a savings goal, a short-term goal that I’m trying to accomplish.

That makes me really happy.

I just want to live my life.

Companies that understand me and demonstrate that they’re anticipating my needs bring me joy, and then that creates good financial outcomes for them.

I love that thought, Nathan.

We should talk about that more.

Well, if that’s the positive side of things that we’re getting joy from and seeing working well, other than the petting zoo negative, is there anything else that you look at in the industry right now that you’re either bummed by or just think, man, that could work a lot better?

Speaking of pain and what’s making people pull their hair out, what makes you guys pull your hair out in the industry right now?

What do you think could be done a lot better?

I have some immediate thoughts.

The CEOs that I talk to say, “Sam, I’m bought in. I know I need to do this, but I’m afraid.”

I’m afraid because not only is our revenue engine under attack from us getting in our own way and us leaning on old paradigms, but our revenue engine is under attack because of security, because of the CFPB coming at our fee income, because of technology barriers.

I need to understand my tech environment to know if I can actually connect into all of Nathan’s fintecher friends.

Is that going to work in my core environment, my digital banking environment, my payments platform?

How do those things all fit together for me to add these use cases really easily because I don’t have a developer on staff?

What frustrates me is we’ve created a lot of barriers in our business to be able to grow and meet the needs of the consumer, and that has created inertia that is making people kind of paralyzed.

Then there are things that are making it harder, like security threats and fraudsters have really amped up their pursuit of all of this engagement where other companies are winning.

There’s a thought around sustainability.

If we build it and they come, how do we sustain that business and keep that income safe and keep members safe in the meantime?

I feel like we have opportunity and we have fear.

How do we bring those things together in a really healthy way?

What about you, Nathan?

What bugs you when you’re looking out there?

What do you think we could be doing a better job with in the industry?

I have a lot of thoughts.

A lot of it is self-reflection a little bit as well.

I do think on the fintech side, on the technology side, there is still too much of an obsession with the consumer and there needs to be a focus on commercial.

The commercial use cases are very, very underserved.

You’re starting to see more and more fintech companies coming up in that regard, but we have a long way to go.

There needs to be a lot more technologists.

The problem is that technologists, usually the way founders come up with the problem, is they have their own problem and then they try and fix it.

What is a common experience that pretty much everybody has?

Well, we’re all consumers.

So it’s easier to identify what problems exist.

It’s harder to find out that property managers in Massachusetts are pulling their hair out because the security deposit laws there are crazy.

That’s harder to find out than your average Joe.

So pushing toward that and figuring out how to build ecosystems that drive that, and again JAM FINTOP, BankTech Ventures, some other folks like that, are helping to drive that and make sure that funding is going into those places.

I think the industry is taking note there.

But on the financial institution side, a lot of my thoughts revolve around what Sam is sharing.

Part of it is that any organization is only going to be able to be good at a few things.

That’s just been proven time and time again across all industries, across all the years that we’ve been studying business.

Financial institutions are in a hard spot because they have two different businesses that they’re actually running.

One is compliance, security, management of information, being good stewards of money, making sure that they’re not taking too much risk and managing those risks.

That in and of itself is a discipline that’s extremely important.

In fact, that is what is causing the resiliency of the charter and the value of a charter in the U.S. economy.

However, they also need to be good at identifying consumer pain and being very proactive in innovation.

The thing is, these two things are actually many times opposed.

How is it that you can create an organization, or I might state this in a different way, how can you surround yourself with the appropriate team members?

When you look at your organization, as well as all the other organizations you depend on to do what you’re going to do, can you actually fill the whole picture of what you need to be successful?

This has especially become true, or became super pronounced, in this last rising-rate environment because if you actually look back, the large majority of the CEOs and CFOs of financial institutions right now have never operated in a rising-rate environment.

Now they are, but they don’t have any muscle memory or experience to go back from.

A lot of them were probably in their entry-level positions, maybe starting to get up into middle management.

There was a huge focus.

Quite honestly, there were several financial institutions that we were talking to that just disappeared the last year.

They had really important initiatives that they were working on, very focused on growing and trying to do all these innovative things.

They just disappeared because the management of this rising-rate environment took all of their attention.

Now you throw on the additional regulatory scrutiny that’s coming up, some of what Sam was talking about in regard to fraudsters, cybersecurity and how they’re getting smarter and better and harder to stop.

But then you also put in banking as a service and embedded banking and a lot of the scrutiny that’s coming around there.

Now all fintech companies are being painted as the same as well.

Every fintech is as dangerous as a BaaS technology provider.

They’re sitting there like, “What am I supposed to do?”

I think that’s very, very difficult.

I wish I could say I have a solution or anything like that, but this is where we’re at.

We need to figure out how to do this.

I don’t think there’s a very straightforward path that just says, “Well, if we all do this, it’ll happen.”

I like describing that healthy tension between those things, though.

I feel like, Nathan, you just gave a little mini roadmap to a C-suite of an FI to say, how do I make sure that I’m not too all-in on the compliance side or too all-in on the growth side?

You kind of have to have that balanced approach to make sure that we don’t overindex on fear and compliance.

I’ve heard somebody say, “I know how to stop fraud. We’ll just stop all transactions.”

Well then shut down your business.

We need to make sure that we have a really healthy balance between those things, and that those can be positive.

This idea of just seeing this as an opportunity and not this place of paralysis is a good thing.

I’m seeing so many.

We’ve done research for the last five years or so looking at who’s winning in the space.

At the beginning of the research that we did with EY and Mastercard and Filene, PayPal was the most trusted brand in the financial services space because they demonstrated that they had the capability to serve the consumer.

This has slowly changed over the last few years in that JPMorgan Chase, in the last year’s research that we did, was the most trusted because they’re demonstrating they have the capability to serve.

How did they do that?

They started buying up fintechs or ingesting fintech experiences into their environment so that they could both anticipate the consumer needs and meet those needs so that they’re not slowly being disintermediated use case by use case through the empowered consumer.

But they also have the compliance engine and the safety side of the business in play.

It’s really interesting to see this trend over time and really see it as an opportunity to lean into both in a healthy way.

Yeah.

I think you used the term collaboration earlier, and then Nathan used the term collapsing.

It’s interesting talking about JPMorgan there.

They essentially invested in and, in some ways, you could say became the fintech.

Not really in a material way on their balance sheet, but in a more material way to most of us and to the impact of that survey finding.

I’m with you on that, Nathan.

I’ve sometimes used the term at Cornerstone, the trifecta of someone who is a banker or credit union person, a fintecher and an investor, all three, meaning one person.

It’s not that they’re all working better together.

It’s that they’re the same dang people.

They’re not hanging out together at the cocktail party.

They are the cocktail party.

They’re the same people.

To me, that’s a really interesting development that I’ve seen where you want people to collaborate more, but it’s a lot easier to collaborate inside your own home when it’s right there.

Whether it’s your 12-year-olds or my 15-year-old, that perspective.

Anyway, good stuff.

Mary, anything pop out at you there that you’d like to add?

I guess just with fraud.

Check fraud is still wild and out of control.

I think I saw today in American Banker about Regions maybe doing early pay and inviting in more fraud.

I think this has been true, I’ve covered fintech and digital banking since 2007, and this has long been one of the greatest truths of this industry.

The most profound tension is how to create something new and not get overwhelmed by fraud.

There’s no obvious answer.

That Regions Bank example was brought up to me yesterday, Mary.

That was this whole idea of sustainability.

This CEO was saying, “Gosh, I want to invite all of these use cases and bring them in so that I get engagement and I capture the attention of the consumer.”

But a big trend, what Chime started, was the two days early access to your deposit.

That’s inviting fraud.

So he says, “I just don’t know what to do. I don’t know which to do.”

That’s kind of this idea of this challenge.

I think we have an opportunity within FIs to collapse verticals and cooperate and collaborate inside our own FIs.

There are so many operational verticals that are barriers to living this strategy, to having this healthy tension between the compliance side and the growth side, because everybody is operating in their silo.

That’s comfortable.

We’ve always done that.

But the end consumer doesn’t need to feel that.

The fraudster kind of sees that as the opportunity that they can sneak in while these internal teams aren’t really pressure-testing, as I like to say, all of these things that we’re introducing in our go-to-market strategy and finding the ways to deliver those solutions in the most seamless consumer-centric way while making them as secure as possible.

It creates a need for different kinds of leadership.

This growth mindset in our leadership, this idea of integrating functions, this radical collaboration inside FIs to make sure that we’re being really smart in the ways that we’re making these choices.

Yeah.

Go ahead.

I was just going to say I’d love to see creativity for gig workers and for aging parents.

Those are two areas.

I live in L.A., and a lot of people are patching together all these gigs.

Even having to supply the forms every single time is just really obnoxious and time-consuming.

What I love about the gig worker example too is, back to Nathan’s point around there being a tendency to go after the consumer side, think of the gig worker as that classic example of a bridge between consumer and business.

If we’re tackling a merchant problem, is the merchant also a consumer?

Are we tackling it from the merchant through to the consumer?

We’re able to, it’s sort of like a two-birds-with-one-stone analogy, go after it all at once.

That’s why I love gig work so much, because you’re tackling a business problem and really a consumer problem all in the same backdoor collapsing point.

I don’t even know that you really have to try to do that.

It’s just because of the nature of the pain that they have.

It’s much more in the middle of all of that.

Interesting.

One of the thoughts that came to mind, Sam, as you were sharing a little bit about how they can do innovation and move forward and get past fear, as well as the Regions example, and I have no special insider knowledge about that, so any of my comments aren’t directed toward that specifically.

I was talking to one of my good industry friends, Sam, I know you know him very well, Zack Duke, CEO and co-founder of Finosec.

By the way, I do have to give him credit.

I believe he was the one who introduced me to this concept of the fintech petting zoo.

I want to make sure that I can give him credit there.

But we were having a fabulous discussion yesterday, and one of the things we were talking about was failure.

Both of us have fully adopted this idea of vulnerability and failure as being a part of our everyday lives.

But then we asked, well, give me an example of a really big failure.

Both of us struggled to find a really big failure.

The reason is because we make small incremental steps and do small experiments.

We fail at those and fix it or don’t do it.

I think this other concept where a lot of people have this in their mind, if I’m going to do something, it has to be big.

If I’m going to do something, it’s something I’m going to have to roll out to all of my customers or all of my members or all of my businesses, or it’s going to have to be a bank-wide initiative.

I think that type of thinking and those kinds of ideas are one of the things that produce larger failures at big scale, produce more ripeness for big parts of fraud or types of attacks.

It’s more, let’s just do experiments and let those fail and let them succeed, and build on top of those so that you don’t have to do this big thing.

Start with the small thing.

What’s the smallest thing I could do next to test this hypothesis?

If it worked out well, then I’ll go to the next step.

If it didn’t work out well, I’ll go back, readjust, see if it’s something I want to do or not.

That also creates such an agile culture too.

I think we’ve not had this thirst for change because the pain wasn’t big enough in our industry to make change.

I’ve heard this thinking among psychologists that people won’t change until they have enough pain.

I think our industry is finally feeling enough pain to say, “Oh, I need to do something different.”

But that difference seems super scary.

What Nathan’s suggesting is do it in small amounts.

Eat the elephant one bite at a time.

Just try little steps that are going to get you closer to creating either the small business, business or commercial solution set that is going to create more value, or the consumer-focused solution set that is going to create more value.

This is how those organizations are overcoming and shifting their culture.

We actually did it at Co-op.

I started something called the Momentum Program with my team on the CX side.

We were able to do things that didn’t cost us any money.

It was just people’s time.

We brought different groups together.

We said, “How can we improve our service times? How can we reduce call volume? How can we improve our implementation process?”

We were able to reduce tickets and call time by 50% in three months just by bringing teams together and problem-solving around this.

This just requires good brains, bringing different groups together and helping to deeply understand our clients and saying, if we just did this small thing, what kind of change could we see?

That feels good.

Then let’s take it to the next level.

I love this idea, Nathan, and I think it helps us to be less fearful about change and really lean into the pain to create goodness out of it and create really positive change in our industry.

Well, speaking of leaning into pain, I want to be mindful of all of your schedules.

I don’t want you guys to say, “Hey, that Kilmer guy invited me on his podcast and kept me on there for three freaking hours.”

This has been a real blast catching up with you.

I’m looking forward to seeing both of you.

Sam, I’ll probably see you with the shades up on our next steel-tube travels.

Nathan, I’ll be seeing you in Boston at the AFT conference, if not sooner.

Mary, I think we’re probably going to see each other in a week or so here.

Guys, it was so much fun spending time with you.

Thanks to all the rest of you out there who have joined us on this episode of Fintech Hustle.

We’ll see you out there on the road.

Thanks for joining us.