how innovation fintech will · • servicing/collections –how do we handle out‐of‐footprint...

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How Innovation & Fintech Will Shape the Future of Banking

Kevin Tweddle, Chief Operating Officer & Chief Innovation OfficerIndependent Community Bankers of America

AgendaOrganizing for Innovation

Why Fintech?

Competition

Fintech Trends

Approaches to Fintech

ICBA Fintech Resources

Summary and Conclusions

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Embracing Change at a Faster Pace

“We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the text ten.

Don’t let yourself be lulled into inaction.

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Where does your bank need to improve on technology?

Source: Bank Director 2018 Technology Survey

Independent Community Bankers of America®

Organizing for Innovation

• Use cases

• Simplicity

• Leadership

• Education

• Ability to accept failure

• Diversity

• Collaboration

• Talent

• Incentive

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Characteristics of Strategically Innovative Companies

Source: Dr. Marc Sniukas, Author of “The Art of Opportunity”

Why Fintech?

FAST SIMPLESECURE AFFORDABLE

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Community Banks Use Fintech Because They Help:

MITIGATE RISK & FRAUD

IMPROVE THE CUSTOMER EXPERIENCE AND/OR

GIVE THEM A BETTER UNDERSTANDING OF THEIR CUSTOMERS

GROW REVENUE

LOWER COSTS & INCREASE EFFICIENCY


Fintech Priorities for Bankers

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“…incumbent financial institutions have been able to catch up faster than many expected, treating the proliferation of fintechs as a supermarket for capabilities that allow them to use acquisitions and partnerships to rapidly deploy new offerings.”

—R. Jesse McWaters, Financial Innovation Lead at the World Economic Forum.

Fintech’s Wide Reach

Wealth & Personal Financial Mgmt

Data & Cyber‐security

HR, Benefits & Training

Lending

Cloud & API

Data & Analytics

Payments

Marketing, Sales & CRM

Compliance & RegTech

Finance, Business

Intelligence and Liability Management


Fintech Objectives for Bankers

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Importance of Fintech Partnerships in 2019

SOURCE: Cornerstone Advisors surveys of community‐based financial institution executives, 2018


Lending and Payments Dominate Fintech Funding

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The Competition

GAFA

Eric Cook, MBA Digital Strategist, WSI“Community Banking and the Amazon Effect”, ICBALIVE18, March 2018

Biggest Threats: Amazon

• Amazon Payments‐already 33M users

• Amazon Lending—already doing small business lending ($3B since 2011)

• Amazon Reload—2% cash back on all prime purchases

• Amazon Cash—prepaid cards

• Amazon Allowance—in process of planning

• Looking to partner with JPMorgan Chase or Capital One for checking accounts

• Partners with JPMorgan Chase and Synchrony for credit cards

• Reportedly exploring mortgage options

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Source: “Fintech Trends to Watch in 2018”; CB Insights

Source: CB Insights ‐World Fintech Report 2018, Alibaba investor presentations


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Digital Wallets Will Impact Deposit Competition

Online Lending Satisfaction is Improving

Source: Federal Reserve Banks Small Credit Survey 2019 (Large banks are > $10B in deposits)

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Approval and Speed, not Cost, is the Leading Choice Factor


76% of Small Businesses want loans < $250K


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Key Considerations with Digital Lending

• Strategic alignment – Is this offensive or defensive?, hold the loans and service or sell them?; drive fee income, cross‐sell efforts

• Product strategy – rates, terms, structure vs. competition and “credit box” (implications for approval rate and customer experience)

• Fraud – what does fraud look like in a digital lending environment?

• KYC/CIP – documented resources or undocumented, analytical resources?

• Servicing/collections – how do we handle out‐of‐footprint customers?

• Marketing – Existing customers and/or prospects? Identify target market

Source: Fundation

Core Processing Market Trends

• New market players entering with rising expectations about user experience

• Outsourcing, private cloud systems continue to gain momentum

• Integration is becoming more critical to success

• Customer‐centricity is the catalyst for the digital transformation journey

• Greater need for a unified API ecosystem

Source: Aite Group – “AIM Evaluation: The Leading Providers of U.S. Core Banking Systems” February 2019

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Core Processing Market Trends

• Emerging New Vendors• FinXact

• Nymbus

• Corelation Inc.

• Regional Vendors• Shazam

• COCC

• International Vendors• Temenos

• Accenture

• EdgVerve

• Tata

• SAP

• Oracle

Approaches to Fintech

Buy – Their Way; Time is of the Essence

Partnerships – Our Way; Shared Risk & Reward

Build – My Way; Technology Ownership

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Fintech Evaluation Risk Factors• Strategy/Mission Fit

• Financial State

• Executive Evaluation

• Technology Maturity

• Ease of integration/Scalability

• Customer Impact

• Regulatory impact

• Benefit/ROI• Revenue Growth• Cost Savings• Risk Mitigation• Customer experience

Emerging Trends to Watch Going Forward

• Mobile‐first platforms

• Open banking

• Financial literacy engines

• Automated customer onboarding

• Self‐service/Personal digital assistants

• Blockchain/cryptocurrencies

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High‐Tech, High‐Touch:The Future of Community Banking

The Community Bank WayHIGH‐TECH & HIGH‐TOUCH

Business Driven ByHuman Interaction

Business Driven ByDigital Experience

ICBA Innovation – Fulfilling Our Mission

Education• Educating fintech companies and community banks on innovation

Outreach• Publications

• Fintech Strategy Roadmap

• Innovation Station

• Active social media presence

Conferences• ICBA LIVE® Convention• Sponsored conferences

o FIFintech conferenceo FinXTech

• Partnerships• Curated fintech directory for banks• Find partners focused on community banking

• Accelerator program

“To create and promote an environment where community banks flourish”

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ICBA ThinkTECH NetworkPowered by FinXTech Connect

• Is a curated, online directory of technology companies that are strategically partnering with financial institutions

• ICBA wanted to create an experience for community bankers which would be similar to Yelp, Consumer Reports or Angie’s List

• Partnering with Bank Director/FinXTech to help provide this solution to our membership

• Launched in 2019

ICBA ThinkTECH AcceleratorIn partnership with The Venture Center in Little Rock, Ark.

• Partnership to create a “community bank only” focused accelerator to work with fintech companies helping to solve community bank specific problems as part of our mission

• Began the program/process in October 2018 and are now starting the second year of the program

• Provides a structured process to innovation and allows us to focus purely on community bank issues and involve our members

• Provides a feeder system of early stage companies/fintech's to bring on new corporate members

• Provides interaction and investment opportunities for ICBA and our community bank members

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ICBA ThinkTECH Accelerator• How does the accelerator program work?

• Focused on solving community bank problems/issues and potential future opportunities

• Selection committee consist of member banks and ICBA senior leadership• Select 6‐10 fintech companies for the accelerator program • ICBA will invest in the in the program participants and help fund the accelerator program

• The Venture Center will run their 12‐week program in Little Rock, AR• We’d cycle in ICBA subject matter experts and approximately 20‐40 community banks as part of the program

• ThinkTECH participants would demo as part of the ThinkTECH showcase at ICBA LIVE and in a local community event in Little Rock

Summary and Conclusions• For innovation/fintech to be successful, it must be interwoven as part of your culture and strategy at the bank.

• There is no “one‐size‐fits‐all” approach on innovation organizational structures for banks.

• Fintech partnerships (“Fintegration”) have already become a standard operating procedure for community banks.

• While fintech’s failed to disrupt banks, they did raise the pace, volume and complexity of change.

• Emotional consumer experiences and “high‐tech, high touch” are the go‐to strategies for banks trying to balance digital vs. human interactions.

• Change and education will be “constants” going forward for innovation in banking.

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Fintech Education & Resources

• SNL Financial

• Finxtech

• American Banker

• Financial Brand

• CB Insights

• Bank Innovation

• Cornerstone Advisors

• FMS

• EPC News

• PYMNTS.com

• Aite

• McKinsey

• Fintech Weekly

• Mobile Business Insights

• BAI Banking Strategies

• Digital Transaction News

• Federal Reserve

• KrebsOnSecurity

• FT Partners

• Fintech Weekly

• Community Banking Brief

• FinExtra

@Mike Quindadazzi@SpirosMargaris@sbmeunier@JillCastilla@kathystrasser@Clagett@leewetherington@wadearnold@sammaule@ScarlettSieber@JPNicols@BryanYurcan

@Chris_Skinner@JimMarous@innov8tr@nsturgill@FinXTech@TechCrunch@brettKing@evankirstel@jackson_mueller@waupsh@rshevlin@BrianRoemmele

Publications Social Medial Follows

www.icba.org/solutions/thinktech• ICBA Fintech Strategy Roadmap (including a fintech partnership/joint venture checklist)• ICBA Core Processor Resource Guide

ICBA Resources

Q & A

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Thank You!

Kevin Tweddle

Chief Operating Officer and Chief innovation Officer

[email protected]

p: 202‐821‐4419 c: 404‐769‐5788 @TweddleKevin

how innovation fintech will · • servicing/collections –how do we handle out‐of‐footprint...

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