Transcript
Well, hello out there. This is Sam Kilmer, managing director of Cornerstone Advisors, and your host of Fintech Hustle.
It’s good to be with you again in the halls here at The Financial Brand Forum.
I’m joined by my co-host, Ron Shevlin, chief research officer at Cornerstone Advisors, and we have a couple of rock-star CEOs joining us to talk a little bit about the industry and what they see going on out there in the business.
Nicky Senyard, CEO and founder of Fintel Connect, and Ted Brown, CEO and co-founder of Digital Onboarding, are joining us.
Thanks for joining us, guys.
You bet.
I’m just curious.
I’ve never been a CEO before, certainly not been a founder or a co-founder.
I’m just curious about what your day in the life looks like.
What does a day in the life of Ted Brown look like?
It’s an interesting question because you could go down to your local lawyer, found a company, and they’ll call you CEO.
So CEO means a very different thing depending on what stage your business is at.
You could be the CEO of a one-person team, the CEO of a two-person team.
The title itself, that’s why I identify as a co-founder.
My job has changed a lot.
I’ve been doing this for almost nine years, and I can tell you, whatever you call me, my job is very different today than it was nine years ago.
Nine years ago, I did everything but code.
My fantastic co-founder did all the coding, Jonathan.
I’ve been able to build a rock-star team of people.
As you go along that path, you always try to replace yourself.
You always try to replace whatever it is you’re doing.
Hire someone better than you.
That’s how you win, through self-awareness and humility.
You seek out hiring people better than you to do whatever you’re currently doing, and then you continue to do that.
The team gets better and better.
The company gets better and better.
I think that’s the only way it works.
Thanks, Ted.
I’d have to 100% agree.
When you’re a CEO of two people versus 100 people versus a thousand people, the job’s very different.
When somebody talks about what the job as CEO is, I talk about plate spinning.
I’m spinning a lot of plates, and my job is to clean up the spilled milk.
Because what happens is, if you’ve got an innovative team, if you’re basically trying to grow, then you’ve got growing pains.
Sometimes milk gets spilled.
In that situation, somebody has to clean it up.
Somebody has to see a pathway out of it.
That’s what my job ends up being, which is great because every time we break something, we fix it so much better.
That’s where the innovation comes, and that’s where development of things that you never thought you’d find out about come along.
We’re like Ted.
You hire great people and give them opportunity, but nobody’s perfect.
At the end of the day, whatever we do, whatever the company does, we’re responsible for and we have to make better or change as it goes along.
Good stuff.
I love the point about team and hiring great people.
I’ll back you up on one of those points, not that I have any direct experience with it, but I had an experience today.
I went to Trisha’s session here, which, by the way, was standing room only.
There were people sitting on the floor around the corners.
She was sharing examples about how to make banking fun.
She said there are a lot of people who think banking is unfun, not fun, whatever.
She laid out really specific examples, as a former banker, of how you gamify the onboarding experience and have fun.
To your point around surrounding yourself with people who are smart and make an impact, I was, as somebody who spent a chunk of my career at a couple different banks, and I kind of like to say you get a little institutionalized, I’ve been in this industry on both sides, or on all sides.
I’ve always thought there are fun aspects to it.
So I love the fact that Trisha did that, and it supports both of your points about team.
Ron, I don’t know what percentage of the participants in the What’s Going On in Banking study that you author every year are CEOs, but it’s a fair chunk, right?
About 40%.
I would love your take on CEO sentiment.
To the points that they raised around their day in the life as being a CEO, how different do you think it is for the bank CEOs that you talk to versus the fintech CEOs?
You’re going to regret asking me that question, my friend.
I have asked over the past couple years of all respondents, not just the CEOs, what are the big threats in the industry?
The typical stuff, the big banks, the big tech companies, the smaller fintech companies, whatever.
In this past year, this past survey, I threw another prompt into the answer that said the U.S. government as a threat.
Now, I was thinking of that from a regulatory perspective, not the idea that the government was going to get into banking and be a competitor.
But 40% of the bank CEO respondents said the U.S. government is a significant threat to the banking industry.
That’s a palpable and meaningful number.
The percentage was a little bit less with the credit unions.
I think they’re feeling a little less heat on that.
But the bankers are feeling the heat that the government does not like the banking industry.
That’s just one more thing on top of all the pressures that they’ve already had with big tech, fintech, megabanks and all the other stuff going on.
Interesting.
I would love your takes on things that you think are working well and maybe not working well.
I’ve always found, as a consultant, it’s kind of easier and maybe even sometimes more fun to go negative first.
So let’s just go ahead and do that.
What do you guys think is messed up or broken in the business?
What’s something you think could be a lot better that just isn’t?
I would love your take on things that you think could be a lot better.
I’m going to be biased in terms of what we do as a company because if we thought there was a bigger problem to solve out there, we have the agency to go solve it.
For us, it’s all about customer and member engagement.
If you look at the big picture, we work with community institutions that have built great businesses traditionally through involvement with the community.
People walking into a branch, having a cup of coffee, building a relationship.
The way the world is moving is digital.
There are fewer face-to-face interactions.
There are fewer chances to grab a cup of coffee with someone.
Most institutions in this country have not built the core competencies to stay engaged digitally.
But they’re sitting on a gold mine.
The cost of acquisition in this industry is through the roof.
Over 50%, and I think this is probably Ron’s research that I’m quoting, of accounts last year were opened online at neobanks.
But only 5% of neobanks have ever turned a profit because the cost of acquisition is huge.
So if you’re a community institution that has spent decades building a loyal customer or membership base, should you be spending $10 to go get someone new to replace the person who just left?
Or should you be spending $1 to go bring that person new technology, new experiences, so they don’t go somewhere else to get it?
So they don’t go to a neobank.
They don’t go to a competitor like Chase.
It’s just a smarter way to go about it and to focus on your comparative advantages.
Your comparative advantage is a captured, loyal affinity group that you should continue to bring new services to, satisfy their needs, grow the relationships so they don’t leave.
You’re going to get smoked if you go try to outspend Chime or JPMorgan Chase on the internet to get a new relationship.
That’s what I mean.
That’s what we do.
If I thought there was a bigger challenge or more important thing for a community institution, we would probably do that.
But that’s what we do as a company.
That’s why I think it’s so important.
Thanks.
Just building on what Ted said, once you’ve got that, once you’ve been able to create the affinity with your current clients and you do want to grow, because if you talk about what I think the industry has the most opportunity for, so put it as an opportunity rather than a negative, is the fact that these guys are at the heart of what banking is with the community.
They need to be where their customers are.
That means they need to be online.
They need to give that experience for digital account opening, the product that’s competitive with the bigger guys.
Because if there’s no reason for your customer to leave because they can come to you and sign up online, they don’t have to go into a branch, and they have a great experience through the onboarding of the product, then that’s where the really big opportunity is.
So when you initially asked the question, what I actually saw was not innovation but actually catching up and investing where people are at.
If you look at the usage of phones, if you look at the way people interact with online content, everybody wants to be able to do something when they want to be able to do it.
The phone gives you that ability.
The internet gives you that ability.
I think there are a whole lot of banks out there that are being too apprehensive to put that toe in the pond.
A lot of them have, but they do it half-committed, sort of.
They don’t really do it.
If you’re going to go online and get new customers or have the product to get new customers, then you need to do what Ted’s talking about.
It’s not doing one section of the process.
A lot of people will do what Ted’s doing last.
You just need to go through the whole process of what you need to do to get there.
I just think that banking in America is so unique in terms of the communities, in terms of the history of a lot of the banks.
I think what happened is people who are more innovative, which is the neobanks, are sort of crushing it, but not in a way that’s necessarily heartfelt.
They’re not necessarily creating the communities.
I think the banks are in a really good place to be able to do that.
I like Ted’s answer.
I think engagement is a huge issue.
I think there are so many challenges around that.
First of all, I think bankers have got to define the problem, maybe not as engagement, but the problem as relationship.
The relationship isn’t as strong and deep as it could be.
Then the question becomes, how do we address that problem?
The answer is actually through better and deeper engagement.
But that begs the question, what the hell does that mean?
When the term engagement started becoming popular, and it’s close to 20 years ago at this point, I remember a couple of things.
One is I started writing about it when I was at Forrester Research.
I had a colleague who had been in the banking world for 20 years, and I remember her looking at me and going, “Engagement? What are you talking about? It’s like touchy-feely stuff. No banker is going to buy into this.”
So it took a long time for engagement as a term.
The other thing was that you talk to an advertiser, “Oh, engagement is about how long did somebody look at my ad?”
So you’ve got a definition problem.
It’s funny, I tried to put out years ago a definition of engagement as a series of meaningful interactions and transactions.
The word meaningful was important because checking your account balance every day is just not necessarily a very meaningful thing.
But helping people make smarter decisions, understanding their financial life and context, all those things are the things that they remember.
So it isn’t just something you can solve by driving more online utilization.
There has to be an emotional kind of context to it.
Now even I feel like this is too touchy-feely for me, and it’s got to be for a lot of other CFOs who are being asked to invest in this stuff.
So I’ve got a lot of challenges and problems in this one.
But I do agree with you, Ted, about the engagement aspect.
Just one thing as I pass it over to Ted is the appetite for growth.
That’s where I think there’s still, and it backs into whatever you’re going to do digitally or within engagement or whatever, this appetite to actually grow and actually be part of the conversation.
I kind of just want to get very specific and use a very simple and specific example, which can be replicated in many different ways.
Let’s take getting paid two days early.
This was the major innovation that the largest and, I think, very profitable neobank, Chime, innovated.
You sign up for us, you set up direct deposit, we’ll give you your paycheck two days early.
There’s a large population that had a great benefit from that.
I know so many community institutions, credit unions, banks, that had that feature.
That’s not a new thing.
But they did not have the ability to drive adoption of that feature.
So what they would do was they’d create this new benefit.
If you set up direct deposit, we’ll give you your paycheck two days early so you don’t have to go to a payday lender or whoever else you’re going to for it.
But they sat and printed brochures.
They trained their branch staff.
“When so-and-so walks in, hand them this brochure. Tell them about the service.”
If you didn’t walk into the branch, you had no idea you could get that from your credit union.
That’s what I’m talking about.
It’s basic blocking and tackling.
The bar here is really low.
This is a very specific example of what happens in the real world.
A community institution could partner with a new innovative fintech, far more innovative than that example I just used.
They’d sign up.
They’d have this great plan and nothing to go execute on that because they just wait for people to walk in.
People just aren’t walking in the way they used to.
You need the competencies to go to them digitally.
Engage.
Send a text message.
Send an email.
Make it easy for that person to adopt the new innovation that you’ve come up with.
That’s what needs to be continuously happening and repeating itself over and over and over again so that these members don’t leave.
That’s what I’m talking about with engagement.
Let me ask you one thing though, Ted, and I’ll get you into this too, Nicky.
I think there’s a big challenge at the attitudinal and cultural level with this.
I think there’s still a prevalent mindset among a lot of bank executives that relationship is built people to people, person to person.
I’m always reminded of the comment from Vernon Hill, who was the founder of Commerce Bank.
This goes back a while because everything I say goes back a while.
I don’t remember anything that happened in the last 10 years, which is why I have to go back 20 and 30.
American Banker asked him, “How come you’re not investing in online banking?”
His answer was pretty clever.
He said, “Because nobody wants a relationship with a machine.”
But I think he missed the point because nobody wants a relationship with a brick either.
The point is that you can actually have, I mean, how many people know anybody at Apple?
But there are a lot of Apple fanboys and fangirls out there because the experience, and it’s all technology-based experience, drives this affinity.
So the digital engagement aspect of this has got to overcome some of the cultural and attitudinal hurdles.
Want to comment on that?
Exactly.
I don’t know that I would have had quite the courage to go there, but actually within each of the institutions that we deal with, it is the position, I won’t even say attitude, it’s the position in very influential positions that stops the innovation, stops the growth, and stops the adoption of actually understanding that we are all digital creatures now.
This is how we do our lives.
We want banking to keep pace with that.
I think the attitude of a lot of the people, and it’s apprehension.
I think the apprehension is what stops the flow.
That’s where it comes in.
I know you want to move on to the next one, but I have to violently agree.
I have to admit it took me probably longer than it should have in my career to realize this, that the value is the relationship.
The account is worthless.
I started my career, as you guys know, building with the team at Andera the first way to open up a bank account online.
Boy, we just tried to get that transaction done as fast as possible.
Open the account.
Now to this day there are dozens of providers who do that, and their value prop is, “I can open it faster than the next person.”
“Okay, you should buy mine because I can open the account in six minutes.”
“No, mine’s five minutes.”
“Okay, mine’s four minutes.”
I spent the first part of my career driving that.
Then I realized, which a lot of smart people realized before me, smart bankers realized before me, that’s missing the point.
It’s the relationship.
You’re automating away the relationship, and that’s where the value was.
Because you can open up a million accounts if you want in two seconds each, but if people don’t use those products, you’re just losing money every time you achieve your goal, quote unquote.
Ted, all of those vendors have lost the game because they don’t understand that the real winner of that game was Wells Fargo, who opened up their accounts for the other people in zero minutes.
You’re going to get a lot of grief for that one, Sam.
I think it is right because it’s your podcast, buddy.
One thing I wanted to follow up on this is I think one of the issues that I’ve seen inside financial institutions is because we’re financial, and many of our CEOs were former CFOs and so on and so forth, I’ve seen a heavy reliance on financial accounting, as you would expect.
It’s what the industry is about.
But an under-reliance on management accounting and actually valuing relationships and actually looking at how the math works.
To the extent that, to the point you were making around people versus machines, what I find one of the underlying sensibilities or false narratives is that people are associated with revenue and technology is associated with costs.
To your point about they don’t want to talk or have a relationship with a brick, ironically, oftentimes facilities are psychologically paired with revenue, but technology is psychologically paired with cost center.
One of the things, and this sounds like I hate to be sort of arcane about it, but to your point about getting specific, one of the things that Jim Marous and I were talking about in our session here earlier today, we actually have taken banks through an exercise, if you want to call it shadow accounting.
It’s where you create essentially another way of accounting for where all the money goes and you just look at it by delivery.
Or I think, Ron, you’ve talked about before, you should do it by product or by person.
But the point is that you should not do it by just tying it to a person or tying it to a facility, or you’ve biased, stacked the deck against your ability to improve something that will actually get people to the promised land, as it were, of improving the actual relationships.
It’s almost like we’ve proxied things and we’ve lined them up in a narrative that just, it’s a false narrative.
One of the things, me personally anyway, I’m just curious for your thoughts on what you’re seeing.
First of all, I think this forum, The Financial Brand Forum, because it’s about marketing, and I say lowercase-m marketing, not Marketing the department, but marketing the practices of growth and those techniques.
Some of the things that Trisha was talking about.
I think this is where I hear more CEOs and chief lending officers and others coming to forums like this realizing that if they want to be an organic grower, it’s not all just about deals and finances and people.
It’s about process to actually do it systematically.
But I’m just curious what you guys are hearing in the hall here.
What topics have been going to the top of the conversations that you’ve been having with people?
It’s been really interesting.
I’ve been speaking to some of the bankers here, and they get a little overwhelmed by choice.
There are so many different vendors, and the vendors are getting so deep down in terms of what they’re offering.
Not so much holistic services, what Ted’s doing with Digital Onboarding, but things about data.
They don’t even have the processes in place yet.
So the bankers that I’ve been talking to are a little overwhelmed that there is no clear pathway to be able to take advantage of everything that is here because they’re in a space where the direction isn’t necessarily clear for the bank with technological processes and how they’re working in place.
I think the uninitiated coming here, I mean I haven’t been here very long, this is only my second year, but there is so much choice that unless you come here with a very clear plan, and I’ve met a whole lot of people who have been here for the first time, it’s a little overwhelming.
Because the industry has sprung up based on need.
Somebody has developed something based on need.
But to the point, if the bank doesn’t have a clear strategy on how they’re wanting to approach that need, then it can be really overwhelming.
I want to double down on your observation, which I’ve seen not just at this forum but across the industry, which I think is moving in this direction and it’s important.
There was a time when marketing was top of funnel.
So this conference had your CMO.
It had people, and all their goals were top of funnel.
Build awareness.
Buy radio ads, TV ads, billboards.
Get people to know about our brand.
Traditional marketing.
Today you have chief lending officers here, chief operating officers, member experience people.
That’s really important.
It needs to continue to happen.
I just finished visiting about 10% of our customers, about 15 banks and credit unions.
Digital Onboarding as a platform looks a lot like a marketing automation platform.
It borrows from a lot of marketing tactics and functionality, but only half of our users are marketers.
It’s usually adopted by digital teams, product teams, operations teams.
Because really what we focus on is what most organizations would call account management, which is engaging with your existing customers and growing those relationships.
But one observation, which I think is really good, when we do work with a marketing team, their mandates have changed.
It’s just happened in the past year or two.
Their mandates have shifted from being top of funnel to, you need to support the whole organization.
That means that when CDs come up for renewal, we need marketing’s help to go reach out to those relationships and have a reasonable strategy instead of just sending them a letter in the mail.
That’s really important.
I’ve only seen that in the past couple years, where marketing’s mandate has been expanding beyond the top of funnel.
In the institutions where that mandate has not expanded yet, we don’t even work with the marketing team.
The marketing team doesn’t know we exist.
We work with the operations or product team because they’re not getting any support from marketing.
So that is definitely an observation that I think you can see here at this forum.
More and more smart teams are either expanding the mandate of marketing to be more than top of funnel, or equipping Ops and other departments with marketing functionality so that they can get their jobs done.
The other thing that one of the bankers had said to me is that marketing has to be moved.
You were going back to seeing how people put things in buckets that may not be right.
Marketing has to move from a cost center into actually a profit center because they’re the ones that are actually creating the relationships, the engagement and all of those sorts of things.
So it can’t be just seen as the fluffy brand stuff that is sometimes very costly.
It’s actually got to be creating that affinity and also being able to create some opportunity for the banks.
First off, I love how you just challenged me there after I wrote a few weeks ago that the customer really is the only profit center out there, and everybody kind of came at me on that one.
But the picture that both of you are painting, and I totally agree with this if this really is the picture you’re painting, is that there is this palpable feeling that the world is getting more complex, not simpler.
This on top of the economic issues and all the regulatory issues.
There is lack of clarity around how.
There’s a palpable feel too.
As consultants, Sam, you and I, we’ve been telling the world, “You’ve got to change. You’ve got to do this.”
The bankers sit and go, “Yeah, when the stuff hits the fan, I’ll start changing.”
The stuff has hit the fan.
I think they’re feeling like things are changing.
But nobody likes the complexity.
So let me ask the two of you, what do they do to better manage the complexity?
It’s not just of marketing, but of managing the business.
I think it comes down to being very clear on the objective of what the business is.
Is it to stay the same?
Is it to move to a different place?
Is it to grow into the market?
Is it to double down?
We’ve got the privilege of working with a company called Live Oak.
Live Oak has been very deliberate.
Their growth has been phenomenal.
We went and saw their premises out at Wilmington a couple of weeks ago, and they are so deliberate.
They are very clear with what their mandate is.
They do the best that they can.
They’ll tell you themselves they’re still learning.
They’re still evolving.
But that’s a very good example of where a bank has doubled down on what it is very specific about and how it does it.
I think they’re a very good example.
They’re not confused about who they are.
They’re not confused about how they do it.
They’re not confused about what they want to achieve.
They’re very clear about it.
They’re slowly but surely rolling in the opportunities of technology and the way that they can weave it all together.
But it makes it very clear to say yes or no to things because it either aligns with their mandate or it doesn’t.
That would be my suggestion.
Live Oak could have done very well with us in a very unique way that we work with businesses to grow through affiliate marketing.
That’s very clear.
They are not the biggest one in the pond, but they are so clear about what they do.
That’s a great answer.
So now, Ted, you can’t give the same one.
Well, obviously mine has to do with onboarding.
What’s your answer?
To reinforce your point, in the world I focus on, 10 years ago, 20 years ago, onboarding wasn’t a problem because it was very simple.
Someone opened up a checking account.
You needed them to have their paycheck set up in there.
I needed to pay money out of the account and have online banking.
Like three things on your checklist.
The checklist has expanded to at least 25.
Online banking, mobile banking, P2P payments, alerts, setups.
The things we are asking consumers to figure out on their own now have gotten so complicated that they’re not doing it.
So you’re spending all this time getting the account open but not providing that level of service to fulfill on the promise.
It used to be a lot easier when your checklist was three items, and now it’s 25.
I have a stupid question for you.
Okay.
Because I’m the master of the stupid question.
Wouldn’t it be easier for the financial institution to just say, “Hey, this account has P2P, bill pay, alerts,” and just make it part of the product so it is not an add-on but a core feature?
Absolutely.
But then you still have to drive, get people in the habit of using it.
I’ve always said, going back to the account opening conversation, someday you’re going to look at your phone.
It’s going to Face ID you.
It’ll do the initial deposit from Apple Pay, and boom, your account’s open in two seconds.
Are you making money yet?
Answer is no.
So onboarding is everything that happens to make you productive with the product that’s opened.
You’re absolutely right.
All of these things should just automatically be enabled.
Well, one thing I would say is one of the struggles, and we ran into this as bankers with lines of credit for years, is you can turn something on.
All you’ve done if you’ve turned it on but not made it active is increase your costs.
So to your point, Ted, it’s all about getting activity and behavior.
Nicky, I love your example of Live Oak.
I think one of the reasons Ron and I actually had Neil Underwood on the podcast, it’s been a year or so, but I think one of the interesting things, perhaps extraordinary or different things, about Neil and that team is they’ve founded fintech companies, they’ve founded banks, and they’re investors.
I like to call that the trifecta, meaning that they understand the pain point, the messed-up thing that everybody wants to focus on, from all sides.
They’re an investor.
They commercialize things.
They’re a fintecher, and they’re a banker.
I’m seeing more people do that, getting more involved, but it’s still not the norm.
It’s still three different kind of cocktail parties.
I’m just really motivated and inspired by whether they’re a banker that’s ambitious or fintech company folks who are ambitious.
I guess one other question.
Anything else that you’ve heard here?
We’re here, we’re in Vegas, we’re at The Financial Brand Forum.
We’re right down the hall from the Aria wedding chapel.
We have all the promise of the world right here at our hands.
Anything else you’re hearing here that makes you feel good or bad about the business before we let you guys go about your busy CEO days?
Not to rain on a parade.
This is not specifically here.
I think we’re in a high-rate environment.
Generally speaking as an industry, there’s going to be some headwinds until the rates come down.
But that’s nothing insightful.
I think attendance is down at all these conferences.
That’s just an industry-wide cyclical thing.
So that’s the only thing I would add to this conference and others.
But we’ll all adjust as an industry.
So basically get more specific about solving problems because the problems aren’t going anywhere.
In fact, the problems might be getting more complex.
I think, Ron, to your point, anytime there’s change, there’s an opportunity.
I think the ones that thrive in an opportunity are very deliberate.
This isn’t here, but I think the high-rate environment has created some pressure on the banks, which creates some innovation.
I’m having more conversations about how to get deposits in a creative way that is sustainable and valuable and creates relationships for the banks with people that I would never have had that with before.
I think there are some people that I’m dealing with, that I’ve spoken to here, who are taking it as an opportunity to experiment, to break out of the mold.
I think that moves us.
As long as there is movement, then, you know the old saying, when you’re green, you grow. When you’re ripe, you rot.
I think change can create some movement, which means there’s still some growth happening.
I echo a lot of what you guys say.
That’s spot-on stuff.
I think one of the positive things is there’s a general feeling that, and maybe it’s a self-selection thing for people who would come to this conference, that they come because they believe they’re going to get good ideas and they are optimistic about the prospects for their own organizations and the industry as a whole.
Whereas there feels to be, on social media, feelings of kind of negativity.
I think the feeling more at the conference is more positivity than negativity.
Absolutely.
Well, with that, I want to thank you both for joining us today and sharing some of your thoughts.
Nicky, to your earlier point that you raised about fluffy brand stuff, we do have some fluffy brand stuff.
Although it’s not terribly costly.
I’ll turn that out.
That’s a shout-out to our CFO.
Not terribly costly fluffy brand stuff.
Because you’ve joined us today, this coveted double-album set.
You shouldn’t play it.
It’s simply for your drinks.
So for your red wine or your bourbon, we hope you enjoy those.
Thanks for joining us, and have a great rest of the conference.
I guess I might even be seeing you guys at Finovate too.
Thanks again.
For all of you out there, thanks for joining us, and join us again on another episode of Fintech Hustle.
Take care.
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