Transcript
Well, this is a very different episode of Plugged In.
I’m Al Dominick, still with Steve Williams, so it’s not that different.
Typically, we like to either have a guest come in or have Steve and me go real-time with some questions and conversations.
But we just held our first Smarter Bank event for some 500 bank and credit union executives spread across the U.S.
All across the U.S.
These troublemakers tuned in to hear some concepts around what makes a smarter bank, not just in 2023, but projecting out to 2030.
We’re going to use the next 25 or 30 minutes to share basically what we covered by taking the audio file and dropping it in so you can listen at your leisure.
But we want to provide some context as to how we got to this point.
Al, about seven or eight years ago, our chief research officer and kind of social media star Ron Shevlin wrote a book called Smarter Bank.
For those who don’t know what a book is, it’s paper. It’s hardcover. Usually you’d have to pick it up and put it on the plane with you to read.
But Ron’s been working here at Cornerstone all that time, and we took that book, read it, and started talking about the term “smarter bank.”
We loved it because it was really indicative of how we’re going to bring digitization, data, platforms, automation, a new talent marketplace, and the collision of banking and fintech together.
What’s it going to look like?
We don’t think we are going to get down to 10 banks in America.
We’re going to get down to this really diverse group of niched, modernized institutions.
Smarter Bank is our call to action and our discussion around what that’s going to look like over the next seven years.
Being niche-focused has suddenly picked up a negative connotation because of concentration risk that a handful of banks in March were accused of having.
But being hyper-focused, hyper-efficient, diligent, and disciplined in the way that you approach opportunities, that’s what a smarter bank looks like today.
As Steve’s talking about Ron being a catalyst for the title Smarter Bank, what struck me over the years from the outside looking into Cornerstone is this real discipline around tech strategy and creating a roadmap.
Understanding where there are gaps.
What we tried to do with this is really pull that concept forward and say to people, “Look, you could be running a smart business today. That doesn’t mean you can’t get smarter in the very near term.”
It’s a messy slog out there.
We have about 100 consultants every day working with financial institutions on new technology, performance improvement, strategy implementation, and more.
We tried to take all those things.
What we want to tell people is, if you look at all the best practices and interesting things going on now, it really gets you fired up.
We should be optimistic about what we can do with the typical regional bank, community bank, or credit union using the new tools.
Smarter Bank is not a concept that was born in a lab.
It’s not Steve and me retiring for a few hours to come up with something catchy.
It reflects conversations we’ve had on Plugged In with people like Collyn Gilbert, chief strategy officer at Valley National.
It looks at things like what Brent Beardall at WaFd and Jim Reuter at FirstBank have shared with us about how they’ve set up their teams.
We try to put faces and names against these concepts so you don’t think it’s just some pie-in-the-sky concept or dumb consultant theory.
No.
It’s these troublemakers.
We like to call them entrepreneurs.
Creative folks. Curious folks. People trying new stuff, testing and learning, sometimes failing, but getting back up.
To us, that’s the conversation we want to keep having around this term “smarter.”
That’s why we have Plugged In, and that’s why we’re going to take you back in time to the Smarter Bank presentation that Steve Williams and I just wrapped up.
We hope you listen to the stories about Chip and about Brent and about Jill and about Jim and about Eric.
Five bankers you should know.
Welcome.
Steve Williams. Al Dominick.
We’re holding it down in Scottsdale, Arizona, and by my account, it is 11:00 a.m. Pacific Time, 2:00 p.m. East Coast.
We’re going to get into some really interesting conversations.
I want to bring a little gift to my man Steve so that you understand.
I’m representing the East Coast.
You are.
I’m representing the West Coast.
Gin and juice.
Gin and juice mindset.
We’re going to talk East Coast, West Coast, really everything in between for this Smarter Bank conversation.
Thanks for joining us today.
Let’s hop right in.
I’ve got a little housekeeping, though.
Guys, we’re going to take some polls from you today, from the crowd out there in America.
When you do that, there’s going to be both a Q&A and a polling area to the right.
When it’s time to answer the poll, answer to the right.
Don’t try to answer the text on the screen or you might freeze your screen.
As my dad used to say, “Don’t touch that.”
A little bit of housekeeping.
Parent corner.
Parent corner is done.
Let’s roll.
Let’s roll with the Smarter Bank.
Oh, surprise. It’s a Taylor Swift concert that you all entered into.
Really?
Well, I wish it was.
Sadly, all we can use is Miss Swift as our North Star for the conversations today because I think we have to acknowledge she is not a pop star anymore.
She is now a movement.
She’s got people talking, thinking, and really aspiring to do some creative and cool things.
As we think about the business of banking and what’s taking place in this great industry of ours, I think we have to find inspiration from many sources.
Taylor Swift is the one that we’ve decided.
Smarter Bank is the Taylor Swift of banking.
Let’s see what Al has to say at the end of this too.
I want to tell you a story about two $5 billion banks sitting here in the tough times of 2023.
Legacy Bank just kind of plows it along.
Middle-of-the-road growth.
Knocks out a little bit of expense control, but not real breakthrough efficiency.
Doesn’t really change their franchise.
Then there’s Smarter Bank.
Smarter Bank finds ways to grow faster.
They find a new frontier of efficiency with digital-first automation, data, AI, and talented folks.
They find uniqueness in their franchise to get a higher multiple.
When you add up growth, efficiency, and a better multiple over that period, it’s a billion dollars.
Instead of being worth $700 million in 2030, go for the bank being worth $1.7 billion.
This happens all the time.
We want to break down how you go on that journey.
Where we are in 2023, we’ve got to have some outcomes that we drive toward.
Those 2030 numbers might seem aspirational, but we’re going to show you how to get after them.
The math can work.
This is not meant to be a conversation around saving your way to profitability.
That’s a fool’s errand, where we just start to compete on price.
That’s not what we want to do.
We’re not trying to commoditize an industry that some people have already described as just another utility industry in waiting.
We believe there’s a great opportunity for banks, credit unions, and tech companies across this country to do some really meaningful work on behalf of consumers and commercial customers.
But here’s the bummer.
Right now, we’re on this little thing called a 500-plus-basis-point ride up with the Fed.
Obviously, we’re seeing lower net interest margin and lower forecast earnings for 2024.
What the heck do we do?
We buckle down.
Importantly, we keep investing.
Right now, for all you executives, action item number one: My marketing executive, my data executive, my digital executive, they need to be joined at the hips.
They need to be thinking about the digital front door to fight the deposit war.
We can’t just kind of get by in this environment.
Action item number one: open up the digital front door.
It’s going to be higher rates for longer.
We’re in a deposit war.
Amen to that.
If you have any kids at home who walk in and see you looking at this slide, it’ll probably scare them right out of the room.
Again, we’re talking Smarter Bank concepts right now, and I think we’ve got to be aware that there are some voices that are very prominent in the industry talking about the demise of the banking space.
Let’s go to the next slide.
Good old Matt Harris, right?
Matt Harris is super smart.
Bain Capital Ventures, incredible organization.
This is not a shot at Matt.
This is something that I’ve been made aware of in various boardroom conversations.
I know you’ve been as well.
He has this kind of treatise on this fog of war that’s coming to the fintech space that will bleed into what banks and credit unions have to deal with.
I want to take a little umbrage with the number that he uses.
He says there are about 8,000 banks in the U.S.
We crunched the numbers.
There are 4,601 banks and 4,764 credit unions.
Total financial institutions: 9,365.
Let’s see what you guys think.
We’re going to do a polling question right now.
Where do you think we land in 2030?
Seven years from now, end of 2030, how many total banks and credit unions?
If we start with 9,365, is it still more than 8,000?
Is it 6,000 to 8,000?
Is it 4,000 to 6,000?
Or do we really get walloped and it’s less than 4,000?
Let’s see what the crowd thinks.
We’re going to let that run for about a minute and then come back and check the results.
Let’s go to our next slide.
This really ties in with the whole transformation competition.
Our chief research officer, Ron Shevlin, has done some great consumer research in the last year.
He’s found that when it comes to a checking, payment, or spend account, whatever you want to call that, 47% of those are getting opened at either challenger banks or fintechs and not at traditional institutions.
Why?
Easier customer experience and better marketing.
Two things that we’ve got to up our game in if we’re going to still be raising those core deposits.
Let’s just call it what it is.
Ron’s an incredibly smart guy, but he says Chime has won the war.
Chime has won the deposit war.
We’ve got to be aware there are big names, big forces, that are impacting the industry right now.
This is a wake-up call in terms of this consumer data because we don’t really see it.
Some of this Gen Z is not in our client base.
Let’s check the poll results.
All right.
It looks like most of us think we’re going to be somewhere in the middle there.
Forty-three percent in 6,000 to 8,000.
Forty-four percent in 4,000 to 6,000.
So some big consolidation.
Maybe not.
We’re not dead yet, as Monty Python would say.
Amen to that.
Again, we’re thinking Smarter Bank.
There are five pillars that we’ve been able to tease out of conversations throughout the past nine months.
When we talk to bank executives, some of them are saying, “Hey, it’s not just the immediate future that we have to address. It’s the long-term viability.”
How do we differentiate our business?
How do we diversify our earning opportunities?
They’ve shared with us some of the tactics that they’re considering.
We’ve tried to aggregate these for everyone’s benefit.
There are five of them.
We know every meeting we’ve been in, and we have a hundred consultants out on the street every day at Cornerstone, deposit growth is job number one.
Priority number one.
We’re going to do a poll right now.
What’s priority number two?
If we could pop up our next poll.
Is priority number two reducing expenses?
Is it enhancing your digital transformation right now to support growth, like we need in deposits and customers?
Is it putting the balance sheet to work on the asset side with higher-yielding loans now that we’ve taken the wallop on cost of funds already?
Or is it getting more out of your data for both efficiency and, obviously, getting closer to your customers?
We just say, pick one.
Obviously, these are all important.
But you’ve got to prioritize.
Again, to Steve’s point, we know deposits, deposits, deposits.
That’s front and center.
But what’s immediately after that is the question right here.
I think we’re seeing all of these things right now.
When it comes to cutting expenses, it’s not just expenses, but productivity.
A lot of folks think they’ve got to keep investing in digital.
We’re not going to be able to fight the deposit war otherwise.
Let’s see what the gang thought about priority number two, since deposits is number one.
Wow.
Digital experience for the win.
Interesting to see because I think that’s exciting.
We’re not going to cut back so much that it’s going to be boring around these banks and credit unions.
Let’s jump into the five pillars of what a smarter bank is.
Pillar number one: hyper-efficient.
Let’s go to the next slide.
Pillar number one, hyper-efficient.
I want to go on record saying I’m in favor of it.
But how do we get there?
I want to show you a little bit of data.
This looks at both the net interest margin and the non-interest expense in banking over the past 30-plus years.
You can see in the gray that net interest margin melts decade after decade.
Now it’s down to about 2.5% in this environment.
To make up for that, we get more efficient.
Our non-interest expense-to-asset ratio also goes down.
You trendline that through the PC era, the dot-com era, the mobile-first era, and now we’re in the generative AI era.
We think you could look for margins around 2.5% on average, maybe the non-interest expense ratio around 2%.
Whatever your expense ratio is, take 50 basis points off for 2030.
We see that today in the difference between low, medium, and high performers.
There are high performers out there with NIE ratios below two, with low sub-50 efficiency ratios, and importantly, with more robots, digital self-service, and automation in the future.
Here’s a number to look at, executives: revenue per employee.
High performers today are at $287,000.
Now I think it’s going to be up around $400,000 per employee by 2030.
It’s got to be, because robots don’t take mental health days, and there are going to be more of them in the future.
They don’t take them yet.
They don’t take them yet, until they unionize.
One example of how we’re going to get there, and it’s going to be across every department and every line of business.
Here’s just one simple example.
A typical $5 billion bank may have 50 commercial officers.
When we use our Cornerstone benchmarking and say, “What about if we move from median to the 75th percentile, what we call the high performer?”
In just a $5 billion bank, that unlocks $2.3 million of compensation and savings.
We don’t have fewer lenders because our lenders are more productive.
When you do that across every function, every line of business, that’s how you free up the money for transformation.
If we go to the next slide, you’ve got a great example of someone who believes in the next wave of hyper-efficiency.
You can send people to Plugged In, this podcast series we’ve done.
Jim Reuter is the CEO of FirstBank.
He shared his take on how he controls his destiny.
I think it’s really cool for us to think about using a word: discipline.
He’s been disciplined from the jump.
He’s managed internally to set expectations around how technology provides great value to his customers.
He was an in-house core developer.
He’s made a shift recently over to Finxact, which is a headless core that gives him flexibility to be what his customers need him to be.
He doesn’t have to wait in line for something to be updated.
His entire idea is, “Let’s be an open bank.”
He was being an open bank long before that term became cool.
Great guy.
Seeing them scale from $5 billion to $28 billion with great efficiency.
Next pillar, folks.
Well differentiated.
It’s a word that means things to different folks.
As a visual learner, I want to give you this example of how differentiated are we really.
A little rom-com for you.
I secretly will watch one or two of these.
But if I look at this Pretty Woman and James Bond movie poster, they’re kind of the same.
Or Matthew McConaughey with all his crappy movies.
Hey, hey, let’s be careful about that.
I just look at this and it gives me that pause of, if the movie industry can take not that many chances and is just going to create a brand that’s very similar, it’s comforting.
You can walk into it, you kind of know what you’re going to get.
Are we accidentally doing the same thing as a bank?
I don’t think we need to follow this particular pattern.
Let’s think about the smarter bank in the future.
It may not be a bank in 2030.
A couple quick statistics.
Apple, with their savings account and embedded finance this year, probably one of the big stories.
More than $10 billion of savings generated in just about five months.
They’d already have the CFPB coming in if they were a bank at that size.
Four billion dollars of Apple Pay revenue now in 2023.
SoFi has gained five million new customers since the COVID lockdowns and more than quadrupled their size.
Then talk about the artist formerly known as Twitter, X, and Elon Musk and what they plan for.
I thought it was artist formerly known as Elon Musk.
In the middle, we have Twitter’s rebrand to X, and everyone thinks, “Oh, that’s a new logo.”
If you’ve been reading Walter Isaacson’s great book about Elon Musk, you’ll realize that X has been in circulation, at least in Elon’s mind, since the ’90s.
This is a guy who is willing to take radical risk and somebody who, let’s put people in space, let’s get to Mars, electric cars for all, one bank for everyone.
That mindset of embedding payments into the X environment, of being able to do things with technology, we might think that he’s crazy, but he is crazy smart.
He’s willing to take chances that I would bet none of us on this are really willing to do.
When I think about what the future is going to look like, there are forces that are around us right now that we have to acknowledge will get us out of our comfort zone, even if we don’t want to be.
Action item: have your chief digital officer watch the evolution of X.
He has told his team he’s going to take his $25 billion market value and turn it into $250 billion by going into payments and finance.
That payments thing has been going on in his mind for a long time.
Now, I don’t want to bum you out because there are rebels and mavericks out there thinking about differentiation at your size today.
You’ve got a favorite down in Edmond, Oklahoma.
What if I told you about a city block party that Jill Castilla was able to arrange in this little town in Oklahoma where, on a monthly basis, she’s able to bring vendors and the whole community together?
I look at the math.
They’ve got over a million different attendees for this, 2,000 vendors.
They’ve been able to put about $44 million in economic development to this one thing that this community bank created.
It’s not just creating a fun party that lets people have a fun Friday night.
It’s around introducing a digital bank called Roger, which has been stood up to help the military community and really early enlistees into the U.S. military so that they have financial health that maybe they wouldn’t normally have.
She’s somebody who took Twitter, back when it was still called Twitter, and befriended Mark Cuban during the PPP rollout, created some pretty interesting products.
All doing this at a bank that’s $100 million in assets.
When SVB failed, she cleaned up, taking a lot of great tech-company deposit relationships across Oklahoma, using the IntraFi network to keep it all insured.
She’s always leaning into that entrepreneurial side.
Follow her on social because that’ll give you inspiration.
You can be differentiated in good old plain-vanilla banking.
Absolutely.
Let’s go to the third pillar.
We’re going to retire the word “agile.”
It got a little worn out.
But you like “nimble.”
A little stale.
But nimble blends that concept of being fast, being ambitious, and maybe being opportunistic, which I know is a future pillar.
Not one executive I talk to in strategic planning is real proud of our speed to market right now.
We’re trying to get better.
Let’s put this visual in our mind.
Apple.
Every year, another release.
Sometimes we think about technology transformation as these events, and then we can rest when it’s over.
Apple can never rest.
If the iPhone 15 was a year late, someone would really be in trouble.
We have projects that are a year late all the time.
How do we get that speed to market?
Action item for executives: make sure you start to build a release mentality in your organization.
Very visible in your organization should be your customer experience and operating capability release roadmap.
What’s going to happen Q1, Q4?
Hold your team accountable to this.
Make this transparent.
Make this a United Way thermometer for your whole employee base.
Of course, share this with your board because this is the kind of development and speed to market.
We have a friend, a CEO in banking, who really got serious about speed to market like this.
Why don’t you tell the group about Brent?
Brent Beardall runs WaFd.
If Brent was here, he’d acknowledge when he kind of stepped into his role, this was a bank that was not tech-forward.
In fact, it was as much a laggard as probably you could describe.
But they have changed the narrative and have said, “Look, we’ve got to have a plan to get to 2025 and have some incredible opportunities to serve our community and our customers.”
What he did, which I think we can all take some lessons from, is look at his existing tech team, his IT department, and say, “You’re already stretched to the max. I can’t expect to put something more on you.”
So he stood up Pike Street Labs, which is now part of Archway.
Pike Street is interesting in that it was 12 to 15 engineers that were hired, all product-focused, all around living and learning in near real time as to what resonated with the clients that WaFd serves.
It really changed the dynamic of the tech mindset within the organization.
I think that’s an action item for executives.
The folks that are doing the plumbing of IT, they’ve got to do security, infrastructure, scale.
You need a separate product company to deliver digital experience, customer experience, data integration.
We had a question, I think, come in.
Even as we wait for the question, I would say one big takeaway from Brent when he stood up Pike Street is he was saying, “Look, we used to say, here’s a problem and here’s how we want it solved.”
He realized, wait, that’s the wrong setup.
It’s, “We have identified a problem, but now you tell us how you’re going to solve it.”
It’s a subtle shift, but it has real impact.
So Ray Wheeler from Sista Bank asks, what’s the difference between digital banking today and where we see it in the future?
When I think about that question and thinking about Brent, in a nutshell, a lot of it’s going to be about integration.
Channel integration, where the branch and the contact center are in the know with what’s happening with digital.
Better integration of products, so things like brokerage and banking are connected.
A lot more usage of data.
The connection between our customers’ data and digital experience today pretty much sucks.
I think it’s going to be that connection and integration.
That’s where you’re going to need a team that’s your glue, data integration, UX, inside the bank or credit union.
That goes to design thinking.
We’ve got various quotes where we can pull from, but I like this one that’s coming.
Sir Jony Ive.
A friend of yours.
Exactly.
I like to say my daughter worked at Apple.
Every product that went out the door when Sir Jony Ive was there, it was his authority.
He either approved the product or not.
The question I ask is, who’s got design authority inside the typical bank?
Usually, we design by committee, and then we get something that looks like a committee designed it.
We’re going to need to bring in this talent that knows how to design digital banking customer experience.
I noted a comment from the CEO of Ally last year.
He said, “Look, it takes a lot of effort to make something look effortless.”
It’s all of our responsibility to understand just because Apple can do it doesn’t mean that we’re going to be able to flip the switch and do it overnight.
But you can create that mindset that we’re going to put in the effort because you control effort and you control attitude.
Just find the talent.
People you trust, their design decisions.
That’s what we need on the customer experience side.
Pillar number four, and that is being data-driven.
I don’t think anyone would doubt that.
But here’s a poster child, Al, in my opinion, on data-driven.
Capital One.
Started long ago by two geniuses, Richard Fairbank and Nigel Morris.
They were consultants who were trying to get banks to use data better.
No one would listen, so they started their own bank.
Today, Capital One does 880,000 data analyses per year.
That’s quite a bit.
Importantly, Capital One has no data centers.
They’ve moved all of their tech infrastructure to the cloud, not just for speed to market, but also so they can take their data, integrate it with other data, and become that smarter bank.
I mean, it’s an incredible story.
Again, it’s not to crash through an open door and say data has to be a priority in your organization.
It’s thinking about how Capital One has exited profitable segments because the data gives them confidence that in the future it’s not going to be where they want to be.
Right.
If you want to see others trying to emulate them, get outside the U.S.
Look at Nubank down in Latin and South America and how they basically modeled their business after Capital One.
It’s almost like a Capital One 2.0.
Our message is not that you have to be big to succeed, like a Capital One or someone else.
But you’ve got a little troublemaker up in the Pacific Northwest.
There’s a lot of troublemakers all over the place.
It’s really a matter of who do we want to talk to.
I actually prefer to talk about a troublemaker at a bigger bank.
Okay.
So this is going to make an appearance in a Cornerstone event.
I know that we normally aren’t putting big banks up on a pedestal.
Great quote from Brian Moynihan.
But if we could, I think I jumped.
Let’s go back to that scorecard.
This is something I love about BofA.
Even though they’re $2.5 trillion, every quarter they show their shareholders, “Here is our report card on digital transformation.”
If you’ll look, 51% of our sales are now done through digital.
We do more Zelle transfers than we do customers writing checks.
We had some jokes about Erica when we first came out with AI and chatbots.
Last quarter, we did 18 million Erica transactions.
Executive action item for you guys: Where is your digital scorecard?
Are you elevating this to the C-suite?
Are you sharing this with your board that the transformation is making progress?
Does your team have this across the organization like a United Way thermometer?
Again, keep it simple.
KISS.
Keep it simple.
This scorecard right here, anyone can look at and understand.
To your Erica point, it was clunky.
People were taking victory laps at its expense.
Now look at it.
It is crushing it.
You can get that in all of five seconds.
Now there is a rebel.
I mentioned earlier I was kind of thinking outside the box in terms of order.
But tell us about Eric Sprink and the world of Coastal Community.
Coastal is one of those really creative, challenging organizations that sees opportunity and acts on it.
Eric is a wonderful entrepreneur who listens well, asks a lot of questions.
He will say yes and then try to figure out how to make it work.
I love that mindset.
It’s not, “No, it can’t work.”
It’s, “Yes, tell me more.”
With Coastal, they’re in the BaaS space.
There are about 80 banks that are doing banking as a service right now.
Eric and I were together a few days ago, and he said, “Hey, look, there are about 20 of us that are doing it professionally.”
Professionally for him means 10-plus tech companies on their platform, five-plus years of having this side of things.
They’ve gone through regulatory cycles, so they’re not fazed when new things come.
What that gives them is access to data, insight.
They’re opening deposits.
They’ve got brands that are tying back into Coastal.
Coastal does things with One Financial, which is basically Walmart.
Think about how a $3 billion bank in Everett, Washington, takes the leap.
It was because they saw trends in technology.
“I want to participate. I want to get into that.”
Again, it goes to that Smarter Bank concept of, let’s figure out not just where we are today, not just where we are in the future, but who’s doing some really creative, compelling work that we can jump on and participate in, add some value.
That goes to our fifth pillar, guys.
Be opportunistic.
We are going to go through whether it’s stagflation, higher for longer, a recession.
But coming out of that, there’s always opportunity.
From Cornerstone, we’re going to talk about this more out in the future.
There’s a new world in IT that we all have to manage.
It’s no longer, “Let’s just call Fiserv, FIS, or Jack Henry.”
They’re going to be involved.
But around that, you’re partnering with fintechs more and more and you have to bring that integration in.
You are looking at venture funds and investing in them.
You need other talent outside the big four and things like integration and development and customer experience.
You need experts to help you implement.
All of that needs to be done with a team internally that understands enterprise integration, data, customer experience.
So we have to transform that world as well.
More to come on that.
What I’d like to say, though, is we’ve got to mix the gene pool.
We wanted to show an example of mixing the gene pool right at the top of the house.
We talked about who’s going to be the bank in the future.
SoFi’s board of directors, I think, is a really interesting example to look at.
Think of most community bank boards right now.
Think about SoFi.
Three VCs, five technologists, and only three bank executives.
What that allows is an opportunity to take a different risk stance, to be more creative when it comes to funding and financing tools.
It’s a mindset that starts at the top that can trickle through the entire organization.
When you’ve got folks who started places like Stripe and Salesforce and Shopify, they’re going to have a lot of pressure at the board level on, “What are you doing in terms of getting new products and experiences out the door?”
They’ll understand some of that execution risk-taking and the investment in tech it’s going to take to be that modern smarter-bank player.
For bank boards, this is a great opportunity for them to say what’s worked in the past may not be what takes us forward.
Let’s not become complacent.
Let’s push.
Let’s really encourage our leadership teams to evaluate how ambitious the strategic plan is that they have in front of us.
All right, last troublemaker of the day.
Someone who gets this new environment where tech collides with traditional banking.
This is the guy who would be the first to say he’s not a technologist.
But my goodness, Chip Mahan, who started Live Oak Bank, has certainly done some incredible things in the tech world.
Live Oak Bank gets stood up because he decided to bank veterinarians and folks who own funeral parlors.
Not necessarily the sexiest niches.
But he was able to figure out how to do SBA lending to them.
In the course of doing all this, he realized there was an opportunity to create more of a dynamic relationship.
That’s where nCino got its start.
nCino starts to go.
It went public a few years ago.
Commercial-lending automation for the folks at home.
A lot of banks and credit unions use nCino right now.
Of course, he wasn’t going to stop there.
Finxact is a headless core.
It’s being used by FirstBank, Jim Reuter’s organization.
But Finxact is just one of a portfolio of things that Chip has done.
Canapi Ventures, another thing that Steve alluded to.
How do different venture groups come together, get LPs to put money in so that tech companies and banks can get a little closer together?
Canapi is a really cool example.
It all starts with Chip, who says, “Look, I know a lot, but I know a lot less than others do, so let me surround myself with the talent that’s going to build great businesses.”
If there’s one thing I expect about him, it’s that he knows how to build a team.
Executive action item: Don’t think you have to be a technologist.
Appreciate it.
Start to surround yourself with some of that transformational talent that you need and apply it to great challenges like commercial automation, being the number-one SBA lender, building out a headless core, or having banks collectively invest in new fintechs.
We’ve got about two and a half minutes left, so we want to leave everyone with kind of a parting gift.
We’ve been talking with a number of people about generative AI and the practical applications, the possibilities that are being seen right now.
You and I just got off a conversation with a bank CEO who talked about the dynamic of, “We’ve got quarterly earnings pressures, but I also know that this is going to materially impact our business.”
How do I create some balance?
What are your thoughts on this?
I think the term right now is, let’s figure out the use cases.
I think the executive action right now is, he who learns or she who learns fastest wins.
I would have a mandate to my entire middle-management team.
You need to start learning about this stuff.
We’ll give you some exposure and training, like a SouthState Bank has done for their management team.
Then you have to decide, what are the use cases in your area?
Who are the players out there that I need to know and talk to?
How do we start to build that new capability?
I think it’s a challenge from your C-suites to your middle-management team.
AI would be about fast-learning middle-management teams.
They can really kick somebody in the future, I think.
I just think everyone has an opportunity to roll up their sleeves and do it themselves.
Try it out.
Take some time.
Do it on the weekends.
This is one of the things that’s most interesting and exciting about the industry.
It’s not a chore to have to learn about this.
I think this is the thinking.
We think we don’t have the resources.
We think we don’t have the earnings power.
In the nooks and crannies of what we do every day, Accenture says 54% of what bankers do could be automated by AI.
Maybe they’re a little salacious, but let’s go down that journey.
There’s a lot of frontier for revenue and better efficiency.
I think we’ll end with the last slide here.
We think this is what a smarter bank might look like in the future.
This is an ongoing conversation, though.
We do want to give you the stories of a Jim and a Jill and a Brent and an Eric and a Chip because they’re out there.
They’re imaginative.
They’re creating all kinds of shareholder value.
This game is not going to end with 10 big banks who don’t pay attention to us.
It’s going to be about modernizing grassroots.
Exactly.
Now, we’ve gotten questions that have come in throughout.
We realize we had asked for about 30 minutes.
We’re going to close everything down in a moment.
You and I can probably stick around, try to answer some of the questions that have come in.
If anyone wants to hang, if anyone doesn’t have to go to their next Zoom, we’ll do a little after-hours Q&A.
Thanks for those.
We have one last poll because this one, I think, lines up with our creative Cornerstone spirit.
Done.
Real quick.
We love music at Cornerstone.
Good old John Sahi, chief data officer at Baker Credit Union, wants to know who’s the most data-driven musician.
John is the data geek, and I know he also plays in a new-wave band.
So is it Bowie?
Is it Moby?
Is it Dr. Dre?
Or is it good old Trent Reznor?
A little fun before we close today, folks.
As much as I love Dr. Dre, I’m going Moby on this one.
I’m going Moby.
He’s a weird bald guy, but he loves data and he always seems to have a laptop in front of him.
Let’s see if Moby won.
Well, look, folks, we appreciate it.
Wow.
It’s just a dead heat between Moby, Dre, and Bowie.
We’re going to be doing these things again in the future.
Folks like Ron Shevlin will be making guest appearances.
We thank you for your time.
We’re going to be sending out a link to this.
If you have questions, obviously you can reach out to anyone at Cornerstone.
We’ll do our best to elaborate on some of these points.
As we said, stick around if you want after-hours.
In October, we’re going to be talking about core-system transformation, one of the big things out there from an industry standpoint.
Get Cornerstone’s take.
Again, we just want to say thanks for taking the time.
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