Fintech Hustle // Allison Netzer and Scott Happ

Everybody, thanks a lot for joining another episode of the Fintech Hustle. I’m Ron Shevlin, director of research at Cornerstone Advisors, and my co-host, of course, is Sam Kilmer, senior director here and leader of the fintech advisory practice at Cornerstone.

Welcome to another episode of the Fintech Hustle.

We have two really great guests today that I want to introduce. The first is Allison Netzer, the chief marketing and strategy officer. I had to think which one went first on that one. It probably doesn’t matter because she does both pieces very well.

I’m sure many of you know who Allison is. She is an industry veteran. She’s done some stints at Total Expert, of course, was an SVP, EVP, chief marketing officer, whatever the title was, at CUneXus, and then over at Temenos after they acquired them.

I would be remiss not to mention that Allison is a fellow Forbes contributor. She had a great piece come out just a few days ago on how Gen Zers and millennials can reinvent or impact the banking industry. So please check that out on Forbes.

Our other guest is Scott Happ, president of secondary marketing technologies for Black Knight. Scott was CEO, and I think founder or co-founder, of Optimal Blue, which has now been acquired by Black Knight.

Scott too is a veteran entrepreneur in the fintech space. He was founder or co-founder and CEO of Mortgagebot.

Allison, Scott, thanks a lot for joining us.

Sam, as always, appreciate your leadership of this.

I’ll get things kicked off here because we typically ask our guests what’s working and not working in the industry. We’ll get to that a little later on.

One of the things that I think is top of mind for a lot of people this week, with some of the news of a recent big acquisition in the fintech space, is mergers and acquisitions in financial technology.

A lot is going on there.

Allison, you’ve actually been part of a couple now. I don’t want to ask you about the most recent deal in particular, but from a trend perspective, what do you think is going on with mergers and acquisitions, and where do you see things going over the next couple years?

Sure.

Financial services, or the people in fintech, are naturally acquisitive and inquisitive.

I think some of the trend has to do with the people leading these companies. We immediately go to the tech trends driving acquisition, but it’s interesting to look at some of the leadership, especially as you see more folks with true banking and credit-union backgrounds moving into fintech and vice versa.

There are just naturally acquisitive personalities.

There’s also the desire for data.

Even acquisitions that we don’t put in a “this is a data acquisition” bucket are, underneath, in some sense about data, whether we realize it or not going in.

The third is really consumer demand.

In a sense, we push each other a lot. There are positives and negatives to that, but consumers themselves are voting for this type of trend with their downloads and dollars.

It’s pushing us, which I think is the right dynamic, quite frankly.

Okay, but a lot of this doesn’t necessarily touch the consumer. A lot of the clients are financial institutions.

I’m not convinced they’re always so keen on some of these acquisitions.

How do you take into account the impact it has on financial institutions as clients?

Sure.

It introduces churn into the equation, which is kind of where I think you were going with that.

It’s never as simple as buying technology or buying innovation.

You could argue you can’t buy innovation. You can buy technology that then innovates and has to become part and parcel of the bank or credit union.

So you make a fair point.

Whether you’re being acquired or are the acquirer, it’s not always a joyful experience.

But I think it can be once the technology changes hands and you really look at the culture, the processes and everything it’s going to go into and support.

That’s where I think there starts to become some consumer benefit.

Having been through this, if you were advising the acquirer of another company in the space, what would you tell them to go tell the clients and prospects of the acquired company?

That’s a good question.

The answer is not, “It’s going to be business as usual.”

Sam has advised me on that over many dinners through the years, because why would you be doing it if it’s going to be business as usual? That doesn’t actually make any sense.

You want to reassure as much as you have the power and autonomy to reassure.

But part of it is leaning into the fact that, especially if you’re a fintech, your early customers decided to go on the adventure with you and you might not have had everything figured out.

Rather than saying, “Ron, it’s business as usual,” it’s, “Ron, this is our next adventure together. We’re taking this leap together, and I’m not going to let you down. I’m going to break rocks for you just like I did when you purchased the software before anybody else did.”

I would lean into the new adventure and new chapter, not “It’s going to be more of the same. Nothing is going to change.”

That’s interesting.

You kind of turned my question around a little bit, which was good.

You’re saying it’s really the acquired company that needs to reach out to its client base, versus the acquirer saying, “Okay, we’re here now and taking over, but don’t worry, everything’s going to be fine.”

Because nobody’s really buying that.

Absolutely.

Ron, for future best practice for Fintech Hustle sessions, when a guest turns a question back on us, I think that’s a check mark.

I was going to do that.

Good job, Allison.

That’s the way.

See how many times you can twist Ron’s questions around on him and pin them back. It’s a good game to play.

Scott, what’s your take?

You’ve actually been through this yourself a couple times with Mortgagebot and Optimal Blue.

What do you see as the trend in the space?

Allison mentioned data, and of course that’s very applicable to what you’ve been doing.

What’s your take on the trends and where you think things are going in the next couple years?

I think there are a few different forces.

There have been some big transactions in the mortgage-tech piece of the fintech world.

If you look at the transaction with Ellie Mae, ICE is famous for electronifying marketplaces, bringing more analog processes into a digital environment, and it’s very strong in the data and scale area.

I think that’s what drove that transaction, their belief that they could help further electronify the mortgage process.

In the case of Optimal Blue’s sale to Black Knight, I think you have a player that’s really trying to bring a true end-to-end capability to the market in the mortgage segment.

So it’s a different driver.

Electronification and data are the ICE driver.

I think Black Knight is more about bringing a fully integrated process from the listing all the way to recapture of the loan 10 years into servicing.

We’ve got different drivers.

In the first M&A transaction I was involved in, when we sold Mortgagebot to a Canadian firm, they just wanted to plant their flag in the U.S.

That was a different drive.

On the “what changes” part of the discussion, ideally, and I think you see it both in the ICE deal and in the Black Knight deal with Optimal Blue, there are integration opportunities in both transactions.

The companies already own mortgage-tech assets, and there are opportunities to plug those assets together with the newly acquired businesses and actually create value for customers.

There’s a nice narrative in both cases.

You need that because customers get anxious, and they want to be reassured that there’s some benefit in here for them.

I think in both cases there is.

Scott, when I try to look at the broad history of acquisitions in the space, it seems to have gone from very large companies like the big cores, FIS and Fiserv, acquiring to expand their application set and capabilities, to now moving into new businesses.

They acquired and merged with some really big players in the merchant-payment space.

Now it seems maybe more of the merger activity is about acquiring innovation capabilities.

Do you see the nature of acquisitions shifting over time, and where do we go from here?

I think there’s a consistent theme over the long haul.

It ebbs and flows a bit, but innovators, typically people doing startups, the way Allison’s team has and my team has, are often coming out of the industry and developing an innovation.

Sometimes you see surges in the number of firms innovating.

We saw that in the mortgage space five or six years ago.

Other times, you see consolidation.

To drive that point home, I was involved in Mortgagebot, which was a point-of-sale provider, and we sold it in 2012.

There were maybe two providers at that time in the space.

I left the business for a while, took some time off and came back four years later.

There were, I think, 13 point-of-sale providers.

Four years later, an absolute explosion in innovation and activity.

It does ebb and flow.

Ultimately, there’ll probably be some consolidation and shakeout, but this has been going on in the tech world from the beginning, and I don’t see it slowing down.

In fact, the barrier to entry is lower.

You don’t even need to buy a server these days.

You don’t need an office.

You just need a good idea, some hardworking people who know how to code, maybe a credit union, bank or mortgage lender to sponsor you, and you’re off and running.

The barriers to entry are lower than ever.

I think we’re going to see more innovation than ever before.

Again, it’ll ebb and flow.

Before you get into that, Sam, I want to comment on something Scott said because he basically exposed my whole business plan here.

I’ve launched something called SOAP.

It’s Shevlin’s Online Accounting Program.

I don’t have any employees.

I don’t have any code.

I don’t have anything.

But I do have a name.

So if anybody wants to acquire my company now to get in early, please send me the offers.

It’s called SOAP.

Let me get to you, Sam.

I know you’re a fervent watcher of this space.

What’s your take on what’s going on?

For starters, I would say your valuation is currently 45 times revenue.

The bad news is you don’t have any revenue, so I think that’s your valuation.

As I was thinking about this, one connective piece here is that, Allison, I know at Nymbus you guys have account origination as part of your suite.

Both with Mortgagebot, Scott, and also with Black Knight, obviously origination was a theme.

One of the interesting things is I was even at one of the large core-provider conferences a couple years ago, and even then origination and helping a bank grow, actually not lead the run-the-bank transactions and servicing, but actually grow the bank, wasn’t really seen as an area that was expected of a large enterprise provider.

It was more about enabling the running of the shop, not the growing of the shop.

It seems interesting that so many acquisitions have involved that area.

We saw NCR’s acquisition of Terafina, and I think you can follow a whole line of them.

MeridianLink acquired a couple different providers.

More recently, TCI.

FIS and Zenmonics.

They have some origination capabilities.

One connective thing I’ve seen is understanding the sales process and bringing a client, customer or member into the fold, as opposed to just processing them once they’re in.

I think it’s interesting too that deposit origination continues to be hot, even though we’ve just had a year when people had plenty of deposits.

It’s not like we need a lot of deposits.

But it’s like the payments relationship.

What we used to talk about, when I was a banker and had hair, was the idea of the primary financial institution associated with the payments account, the checking-account relationship.

Now it’s the debit card and credit card.

It seems like bringing on commercial relationships, mortgage relationships, cross-selling the deposit and getting cash management in businesses is as hot as ever.

You guys talked about data-related things too.

With Optimal Blue, Scott, I think it was interesting.

One of the things you mentioned about Mortgagebot was when it was doing what it was doing, I remember this because at the last firm I was at, Harland Financial Solutions, we had a partnership with Mortgagebot.

You were one of just a couple people doing it.

Then when you became CEO of Optimal Blue and you and the team joined up there, I couldn’t name more than two or three or four firms at the time that were doing pricing-specific data analysis in mortgage.

I could probably only name two.

It’s interesting that these entrepreneurs, whether the system has been there for a while in the industry or you’ve launched it out of whole cloth through sheer force of nature and will, you’re one of only a couple of players.

It’s good to be one of only a couple players in a space.

There’s one other interesting thing on the acquisition side that ties into data.

Maybe you see this on the core-banking side as well.

Some of these businesses are data businesses.

They’re SaaS businesses.

But when you peel away the layers of the onion, you realize that they’re network businesses.

Those network businesses are powerful and often where you get a very dominant player because of the network effects.

Verafin, of course, we saw the Nasdaq acquisition of Verafin for an incredible valuation.

That’s a data business.

It’s a SaaS business.

But based on their model, the more clients they have, the more valuable that data is.

The same is true with Ellie.

That’s a network.

Optimal Blue is a network.

We have data, we’re a SaaS platform, but it’s that network effect that makes some of these business models particularly powerful and valuable.

That’s why you end up with so few players, because that network effect can propel you to a very strong, dominant place.

Those businesses are few and far between, but they’re quite interesting and quite good to be involved in.

I think that’s a good point about the network effect.

Many of you may have also seen in the last three or four months that Promontory rebranded as IntraFi.

They were the people that had CDARS.

It just tried to expand the value of that network.

One of the great things about Optimal Blue was that it had so many institutions on it.

Verafin, so many institutions on it already.

Even Mortgagebot, when I think back on that, you were able to do peer-to-peer studies because you had all that benchmarking.

Right.

All that benchmarking becomes more meaningful.

You blend together a SaaS business.

You have visibility into the data.

Of course, you anonymize it and aggregate it.

But the more clients you have, the more meaningful those benchmark measures, market-share measures and productivity measures become.

That network is quite an important underlying factor in some of the valuations and market positions we’re seeing in certain segments of fintech.

Very interesting.

Maybe let’s jump into another topic.

We’ve kicked around the acquisition can a little bit.

Something we saw recently in the news was Walmart announcing that they were getting into a partnership with Ribbit Capital, whose founders are associated with Robinhood and other firms.

Walmart wasn’t very specific about what they’re planning to do other than, “We want to get into fintech and financial services.”

Very vague.

Very vague.

Allison, any thoughts on what these guys might do?

I know we’re asking for idle speculation here, but what the heck?

It’s called Fintech Hustle.

I can do idle speculation all day.

It may be because I don’t think Walmart knows yet.

I actually think that’s okay.

Going back to the data theme, retailers have always known the power of customer data.

You could argue that financial services, absent credit unions, has lagged in really understanding the importance of that and not just seeing it as homogeneous data.

I think the Walmart piece is interesting.

You could lump it in with, “Insert retail name here wants to be a bank. We should all be scared about this.”

I don’t actually think they’re interested in banking.

I think they’re interested in bank data.

I think they’re going to look at money movement, not a banking relationship as we know it and strive for.

So I think it’s interesting.

We talk about the pace of the industry.

It’s nice that we’re starting to see this fail-fast or fail-succeed mentality.

You don’t necessarily have to know the end game if you know the ingredients.

You’ll be able to make something really interesting from it.

It may work and it may not, but that’s one of the interesting things about the market.

I think they’re in it for the data.

They’re certainly masters at utilizing that.

But I don’t think they want to be a bank.

I think they just want bank data.

Scott, you’ve got some insight here.

This is so interesting.

It definitely feels like history is repeating itself with online banks or specialized internet-based banks.

We saw this 20, 21 or 22 years ago.

Bank One is an old name.

They launched Wingspan Bank.

Pathfinder Bank launched a virtual bank.

EverBank was one of the first, working with Wilmington Savings Fund Society.

That experiment didn’t work out.

The major issue was that cost-effective acquisition was too high to make it work.

Maybe someone will figure that out this time.

Maybe Chime will figure that out.

I totally agree with you, Walmart will do something much more nuanced than they attempted to do the last time they looked to get into banking.

I did share this story.

Twenty years ago, they were looking to launch a virtual bank.

They were looking for a mortgage platform.

I went down to pitch Mortgagebot.

We were going to do their front end as well as their backend fulfillment.

I did marvel at the fact that they really walked the talk and didn’t spend a penny on anything that wasn’t absolutely necessary for the business or added value to the customer.

I remember buying a cup of coffee in their lobby waiting to see their vendor-management people, and I had to pay three cents for the creamer that went into my coffee.

They were quite frugal, and I was blown away by how true they were to their brand.

But they ended up not really proceeding with that initiative.

Now, 20 years later, a lot of these ideas are resurfacing.

I think this time 2.0 will be more nuanced, and we’ll see if someone can find the recipe.

It’s certainly going to be interesting to see it unfold.

Timing is everything.

We automatically assume first-mover advantage.

There are advantages and disadvantages.

When you talk about digital-only or virtual banks, having an online bank where you remove the teller is not the digital-bank definition today.

When we talk about the road being littered with failed digital banks, what I would submit, to Scott’s point, is that was 1.0.

We should all be grateful to the folks that led that charge.

It was a huge unknown at the time.

But customer-acquisition cost is lower now.

There is a second-mover advantage in learning that it’s not just about convenience.

Digital is the default now.

Just taking the teller out doesn’t necessarily provide value.

You do need to provide the data play, and branding plays really strongly into that too.

It’ll be interesting to see what Walmart does.

We’re starting to see these second and third forays, which is not a bad thing.

There should be no shame in trying something again with more information, more knowledge and more inspiration.

We should applaud that.

As things open and close, I don’t necessarily see that as failure.

I just feel like that’s the maturation of what we’re doing.

Not every idea works.

That doesn’t mean you should never try it.

It should spur you to do it better the next time.

I think that’s probably an even stronger trend than the M&A piece, that second, third or fourth at-bat doing better and better.

That’s probably the most exciting trend I see coming up shortly.

Maybe Walmart was ahead of its time on pay-for-your-creamer because we’re all sitting at home.

While I see that you all have comfy chairs in the background, we all have to buy our own creamer.

Yes, we do.

And our chair.

I bought this chair.

So Nymbus, if you’re listening, reimburse me.

That’s right.

There’s an analogous set of events on the mortgage side.

If you think about it, there was the same 1.0 20 years ago, attempts to build a national online brand and disrupt the entire mortgage area.

It didn’t happen.

But now we are seeing national brands established in the direct-to-consumer environment.

People are finding recipes.

There aren’t a lot of success stories, but there are a few.

We all know the Rocket story.

Watching the Super Bowl, we also saw Guaranteed Rate with a national ad.

LoanDepot has been in the market as well trying to build a national brand.

There are success stories in this second generation of fintech effort to build more national franchises around a different delivery model.

You can certainly expect the same thing to occur on the banking side as well.

What do you think, Ron?

Any thoughts about Walmart before we move on?

I think there are actually two things going on with Walmart’s fintech plans.

To set up the first one, I should say I’ve been watching a show on Netflix.

In the episode last night, there was this woman who taught her dog to bark every time it heard the word “Pellegrini.”

If you want to hear Walmart bark, just say “interchange.”

That’s what they jump to.

That’s part of their DNA.

I was at a conference a number of years ago and had the opportunity to interview Lee Scott, the former CEO of Walmart.

At the time he was chairman of the board.

This was when MCX, the Merchant Customer Exchange consortium, was starting up.

I asked him, “In light of the fact that so many consortia fail, especially in financial services, what makes you think MCX will succeed?”

What he said I’ve never forgotten.

He said, “I don’t know that MCX will succeed, and I don’t really care if it does, as long as Visa suffers.”

There’s the clue to how Walmart acts and reacts.

Why do they want to get into fintech?

Because they can find ways of avoiding the traditional payments infrastructure and system, so they can avoid, if not eliminate, interchange.

That’s number one.

Number two, and Scott alluded to it, they have been a leader in supply-chain integration and innovation for years.

I think that’s why they announced a cryptocurrency about a year and a half ago.

It’s not because they want consumers to use the Walmart coin.

They want a cryptocurrency to speed up payments within the supply chain.

So I think they’ve been vague about what they’re doing because they don’t want to tip their hand about the payments-avoidance piece.

I think they’re going to look at a lot of unsexy, relatively boring stuff from a fintech supply-chain integration perspective that’s really going to address cost and process cycle times within the supply chain.

I think that’s where Walmart’s going with their fintech plans.

Makes sense.

If it’s okay, I saw a question come in from the audience.

I thought I’d pose it and give you my first throwdown.

What do you see emerging in the next three years in fintech?

I don’t know that I have all the answers to that, but a few threads come to mind.

Everybody’s been investing in origination or account-opening systems, and that’s been hot.

But I see a very immature lead-gen capability in the industry.

As they build out the capability to handle volume, open new accounts and sell better, just because you can sell better doesn’t mean you have the marketing to drive the top end of the pipeline.

I think that’s an area where there are opportunities.

Another area that jumps out at me is what you were talking about on the interchange part, Ron, companies that navigate the commerce and payments area, where they get into very specific industries.

They know a specific industry sector and get into where payments and commerce overlap.

Something in that seems really interesting to me.

I don’t have any specific examples to cite, but something in that area.

I just think niches in general are fascinating.

Allison, you’re a marketer around this.

Not just in fintech, but in banking.

How can a bank choose a community definition that is not a ZIP code, but a group of very specific people?

I think that’s hot, and I don’t even necessarily know why, but I’m intrigued by it.

It’s a fun subject to talk about.

We believe niche is the new local.

It’s that replacement, if you would, for the ZIP code.

Going back to the question about the next three years, banks and credit unions that lean into the fact that their charter is probably the most valuable thing they have, realizing that and utilizing it, are going to separate the pack.

I have a clear bias, but I do believe, and Ron’s probably going to jump in on this, that brand and marketing are the next frontier for banking.

There are only so many ways to check your balance.

There are only so many products that can do that for you.

But the way it’s positioned and who it’s positioned to, to your point about niches, is huge.

Marketing is not a fluffy thing.

It is the value proposition.

When we think about mergers and acquisitions and some of the trends we’ve talked about, in our hearts we feel like it should have worked out better than it did.

I think the fact that the sales motion, martech and sales stack aren’t supported inside the bank or credit union, and there aren’t the people to do it, is a big reason.

Products don’t sell themselves.

I think that’s probably number two.

It’s not always just the technology either.

No, it’s not.

There’s more to it than, “I deployed Adobe and I’m going with God.”

There’s a lot more to it.

You kicked us off talking about people.

There’s a people element to that.

That’s a big deal.

We tend to talk about the move to digital, and obviously that’s happening and people aren’t going to branches.

But branch workers aren’t the only people in a bank.

We tend to think all the people have disappeared.

No, they’re not going into the branches, but there are people tasked with selling the products of the bank or credit union.

That is an area that has not matured at the pace that technology has.

You can get ahead of your skis in the sales cycle when you don’t have the product.

I don’t know what the reverse of being ahead of your skis is, but if your product is here and your sales motion is here, there’s a gap.

That’s a gap that has to be covered.

I think behind your skis is technically off your skis, knocking back a bourbon or something.

I think so too.

Scott, what do you think?

What’s going to be emerging?

Any wild predictions?

It’s a super interesting area.

There have been a number of firms.

You mentioned Total Expert, but there are a whole bunch of firms doing work in mortgage tech around customer-relationship management, retention and outreach.

Top of mind, Total Expert, Mortgage Coach, Sales Boomerang.

There’s a long list of these firms.

They’re all relatively small in scale.

That groundwork, the foundational work, has been done over the last five years.

But the industry has been in such a boom period that companies can’t keep up with the business they have.

I think we’re going to enter a different cycle now.

Rates are going to stabilize.

Maybe they’ll tick up.

I think all these investments these firms have made in customer retention, satisfaction and relationship management are going to pay off.

Firms are going to want to put much more energy into maintaining those relationships.

In the mortgage world, it’s a lot about data and being really quick to market when there’s a refi opportunity.

Most vendors would say they’re not nearly as good at that as they want to be, and they’ll need to be better.

They’ll need to be much more analytical and data-driven.

I think it’s going to be very exciting in the next five years as a lot of these customer relationship-management and retention capabilities get deployed deeply into organizations.

It’s not only putting the tech in.

You put the organization around the tech to make it live, real and part of the company.

I think you hit on the right area.

The innovation is there now.

It has to be implemented deeply and thoroughly in the mortgage industry, and that’s going to happen.

What do you think, Ron?

If you look back over the past three, five or six years of fintech, I think a lot of what has emerged has been very front-end oriented, very user-interface and user-experience oriented.

I think we’re moving into the next phase of fintech development, which is much less sexy, less consumer- or user-focused, and much more about infrastructure.

Maybe that’s what Scott is alluding to when he talks deeper, but it’s not only deeper within banks and credit unions.

It’s deeper even from the technology-provider perspective.

We’ve already seen banking as a service, but it still feels very surface-level.

There’s so much more room to go in terms of lending as a service, card issuing as a service, brokerage or other financial infrastructure.

I think we’re moving from banking as a service to fintech as a service.

The ability to develop, manage and utilize APIs becomes a real critical capability from both a financial-institution perspective and a technology-provider perspective.

Doing so not just to enable financial institutions, but to enable better connection and interconnectivity between partners.

That’s why I think the merger and acquisition stuff, what might have been a way of creating an integration by just acquiring somebody, may not be as necessary anymore.

There are better ways to integrate.

I think that’s one area, more infrastructure.

I also think, going back to the notion of the supply chain, there’s an opportunity to attack supply-chain inefficiencies from a small-business perspective.

Look at what Shopify is doing, what Stripe is doing in partnership with Shopify, coming out with almost banking-as-a-service capabilities.

I think we’re at the tip of that iceberg.

Look at what companies like Moov, Unit, Synctera and Treasury Prime are doing.

I think that’s what we’re going to see much more of in the next three to five years.

If I can pile on there, Ron, on your infrastructure point, I think you’re spot on.

The driver there, at least in the mortgage sector, is that for the first time in 25 years, we actually have the ability to connect.

Vendors can connect with one another via API in a very streamlined, scalable way.

There’s been a lot of talk about system-to-system integration for years.

I remember the old days of EDI.

Now we have these APIs that are becoming more central to what we’re doing.

That allows, if I pick on Optimal Blue, which is an engine, you no longer need to use the UI to get information out.

You can have any system talk to that engine via API.

We are seeing that trend really catch fire.

Hundreds of our clients are now taking advantage of system-to-system integration.

I think that is infrastructure as a service.

From our perspective, the key was that we decided we didn’t care how someone got at the engine, whether it was through API or through the UI.

We were agnostic in terms of how they accessed it.

So I think it’s a great point.

Infrastructure as a service is clearly going to be something we’ll see more of.

Allison, you must have some thoughts on this coming from Nymbus now.

Yeah, I do have a couple thoughts.

The point you made, Ron, is interesting because you usually have this classic build-or-buy mentality.

What you brought up is interesting, which is it could be build, buy or integrate.

The thought of integration as opposed to acquisition solves a lot of the pieces we talked about earlier when you acquire.

You’ve got the cultural piece, the process piece, the “you’re one of 15 other new things on the shelf” piece.

Leaning into integration, not just as a technical option but also as a business-model and brand option, is super interesting.

I think the open-banking and API economy have been well discussed and they’re there.

But going back to what Sam said, how do you activate that?

How do you turn that into a sales advantage or an advantage for your bank, credit union or fintech?

Just saying you have it and doing it takes care of the technology part, but it doesn’t actually move you forward until it’s integrated into the overall business strategy.

It’s a tick box if you just see it as a technology piece.

It enables you to talk about a broader integration story and potentially save yourself from some of the churn that happens with acquisitions.

No one really churns when you integrate.

There’s no churn.

No one’s crying.

It can be an easier path of least resistance.

But I would say just doing the connection is similar to just acquiring the company.

If you leave it at that, the result will be no different than what you have today.

One of the questions from the audience was more of a comment saying banks and credit unions are declaring progress with martech way too early.

That’s the point you just made there.

Agreed.

So, Ron, what do you think?

You want to move into another topic and keep it moving?

I see some things coming in, and we had some other things on the agenda.

What do you think?

Absolutely.

The question is, do you want to get to challenger banks or what’s working and not working in the industry?

We have time for one more main topic.

Let’s mix it up.

I’ll call an audible.

Let’s talk first about what you’re seeing working and not working in the business right now.

Let’s go there.

Whoever wants to go first.

Scott, do you have any thoughts on what’s working?

Yeah.

Remember last March when the pandemic hit?

Those of us in the real-estate-related world, I think the concern was that the home market, home buying and residential real estate were literally going to shut down.

Of course, the exact opposite happened.

So what’s working?

The home market, the home-buying market and home-financing market are not only working, but we financed $4 trillion of transactions last year.

That’s working.

The mortgage market, the home market, it’s unbelievable how well it’s working.

We had to handle things completely differently than we ever had before, but that’s working.

I’m going to rate that as my number-one item.

Allison?

I think there’s a lot working, and it’s good that I get to go before Ron because I think there’s a lot more working than not.

A macrocosm of what Scott said, what’s working is the pace.

I think the pace is working.

We shouldn’t be wringing our hands about the pace of M&A and the pace of this and that.

We need this pace.

We are making up for lost time and charting a different future.

We need this pace.

I’m starting to see the fail or succeed, just do something fast, mentality take hold even outside of technology.

I think that’s working extremely well.

All right, so let’s go to the other side.

Well, wait.

Before you do, can I throw out one more?

Yeah.

This is just a little thing.

Those things sometimes add up.

Maybe it’s just my personal experience, but single sign-on is finally working.

Just in my own daily life, with all the different portals and systems I have to use, being able to sign on to everything one time.

I know this is not widespread everywhere, but that’s a huge timesaver when you get it working.

I know it’s just a little thing.

Is single sign-on working for you?

Yeah, absolutely.

I think single sign-on and lots of little things.

Maybe it’s just that we’re all working from home and noticing it more, but there are so many little efficiencies in the process.

We talked about supply-chain process.

There are improvements just in overall workflow.

Single sign-on is one.

There are a couple others I can think of.

You’ve got to take the wins big and small.

Thank you.

I just had to throw that out there.

Before you move on to what’s not working, I’ll throw out one comment about what’s working.

It’s not a specific point, but something more general.

I think there’s an overstatement on the part of a lot of fintechs that come into the market, like direct-to-consumer fintech startups, who position everything they do as, “The world of financial services and banking is broken, and we’re going to come in and fix it.”

The reality is that’s not the case.

We’ve seen so many challenger banks like Monzo and N26 try to come into the U.S.

When I’ve interviewed them, they say, “Traditional banking, mobile banking is so broken. It’s a terrible user experience.”

Reality is, it isn’t terrible.

There’s fairly high satisfaction.

JD Power, I think a couple years ago, actually showed the big banks now have higher satisfaction than the midsize banks and credit unions.

That’s not a knock on midsize banks and credit unions.

It just shows you can come back from being the big, bad, evil provider.

I think some fintech entrepreneurs are overplaying the broken aspect.

For the most part, from the consumer perspective, things are actually not so bad.

I would agree.

I think in some cases they’re solutions looking for problems as opposed to actually addressing real issues.

That doesn’t mean everything is perfect.

But I would agree.

Progress can only be made and sustained if you acknowledge the progress you’re making.

There’s a lot of great momentum out there right now.

I think some of this is self-imposed because we’re all really hard on ourselves.

We want to do the right thing and get to perfect.

But there’s a lot of progress before you get to perfection.

I would agree.

We’ve only got a few more minutes, so we really need to go to what’s not working because if I start that off, we’ll be here for another hour and a half.

So we should have one.

Here’s one thing I’ve always had a problem with, the risk model in fintech.

We beat up banks and credit unions for not being innovative, but at the same time we expect them to carry the entire financial and brand risk anytime they want to do something.

As an outsider coming in, that has always struck me as strange for a bank or credit union to accept that kind of risk.

To me, it’s no wonder that in some cases feet get dragged.

I just think that’s a strange model.

It doesn’t work for anyone.

The vendor’s not accountable.

It’s just a strange model.

So that’s my one thing that’s not working.

I’ll toss one out.

It’s more mortgage-industry specific.

If you’re a runner and you have a tailwind, and that tailwind just goes on and on, at first you realize it’s a tailwind.

Then at some point, you just think, “Well, I’m a better runner. I really am.”

I think the market has been strong for so long that it could breed overconfidence.

The same thing is probably happening in the stock market and in Dogecoin and other assets.

There’s a risk here that memory fades and people interpret the amazing business environment as less a function of wonderful conditions, trends and low rates, and more a function of skill and strategy.

There’s undoubtedly both.

But I do think we run the risk of being overconfident as an industry.

People are well advised to try to keep that in check as best they can.

I would say one area I don’t think is working well, from all of our client engagements, and we talk to banks and credit unions out there, but also industry providers in fintech, is when you get beyond the tried-and-true use cases of data, fraud detection, credit decisions, maybe reducing some costs.

What I find is that most people are interested in using data to grow the bank or grow the fintech.

Yet, more often than not, when we ask for use cases or, “What are you trying to do? Give me three examples of how you’re trying to grow the bank using data,” there’s either nothing there or it’s not specific enough.

I would suggest that anybody using data to solve a problem around growth, basically this gets back to the martech example, it doesn’t have to only be martech, but what are three problems your bank is trying to solve?

Then we’ll go talk about technology and what we throw at it.

But what are the three problems?

Articulating those crisply for the board of directors and employees, having a vested team that’s really motivated and crystal clear, is critical.

I think it’s interesting about something like Optimal Blue.

It was very specific around pricing.

Whenever you’re very specific in what you’re doing, it’s easier.

If you’re broader, it gets more nebulous.

I find people are struggling with that a little bit.

That’s my take on some things that aren’t working.

We’re about four or five minutes to the top of the hour, and I want to make sure we keep to this and let everybody go to their meetings or wherever they need to be.

So I will skip sharing mine on what’s not working.

I should just say I agree with Allison on hers.

I do want to make a quick announcement that for the next Fintech Hustle, we’re going to rename it “Hamina.”

“Hamina” is going to be the new name of the podcast.

On behalf of Sam and the rest of Cornerstone, Allison Netzer, Scott Happ, I want to thank both of you for taking time out of your day to join us and share your thoughts and opinions on what’s going on in the world of fintech and the Fintech Hustle.

Everybody, thanks a lot for joining, and we look forward to seeing you at the next episode of the Fintech Hustle.

Thanks a lot.

Bye now.

Thank you.

Bye-bye.