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FinTech Can’t Beat Community Banks

By | Blog

My team and I have been called contrarian, which we will take as a compliment; we believe that the best community banks will beat the best FinTech players. Best on best so to speak.

Why do we feel this way?

Because, FinTech cannot win against modern community banks that combine their in-market, relationship-based banking with progressive technology.

To start, we define things a bit differently than most…

Community Bank(ing): ‘It is a way of doing business, not a size. It is about in-market, relationship-based banking.’

Progressive Technology: ‘Mobile-first products built to be banker-first (not bank) to enhance customer relationships, plus, marketplace technology that expands loan opportunities.’

BankLabs‘ ‘why’ is to ensure the survival and growth of community banks. Traditional financial institutions and the companies that have historically served them face disruption like never before. There are approximately 2,400 FinTech companies hunting for success and community banking customers are in their crosshairs.

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Beginnings and Endings in Banking and FinTech

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In ancient Roman religion and mythology, Janus was the god of beginnings and transitions, doorways and endings. Considered to be one of the most important Roman gods, Janus was often depicted with two faces looking in opposite directions, the past and the future.

This is a great metaphor for what FinTech is not just doing to, but also for regional and community banks… Much like Janus has two faces that represent beginnings and endings; FinTech has unknowingly created a Face of Opportunity for progressive banks looking towards the future, not just the Face of Doom that most have latched onto.

FinTech has technology, easy processes and speed. But now some progressive community banks are deploying mobility technology to get their bankers out of the office, to work with borrowers in person and for those same borrowers to use the mobile technology to get money faster and easier. Community banks are winning this battle now because they can combine the new Mobile Technology + In-market relationship-based banking whereas FinTech just has the tech.

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Sarbanes-Oxley, Construction Lending, and the “Stone Age” of Spreadsheets

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Sarbanes-Oxley mandates improving risk management and making operations more effective and efficient

Does your construction lending department manage its construction loan activities using spreadsheets? Has your bank unintentionally over-funded any construction loans? Has it been a while since you assessed the effectiveness and efficiency of your construction loan administration?

As a board member, audit committee member, or member of the internal audit group, if you answered “yes” to any of these questions, are you feeling uneasy? Well, you should be.

By now, everyone in banking considers Sarbanes-Oxley to be old news. After all, it’s been around since 2002, and virtually every bank has beefed up its internal audit capabilities to bring the bank into SOX compliance. What is not so obvious is that Sarbanes-Oxley standards also require that the bank’s internal audit activity evaluate and contribute to the improvement of the organization’s risk management, control, and governance processes. And, internal audit activities must be designed to provide reasonable assurance regarding the “effectiveness and efficiency of operations”.

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Two Traits of Community Banks that Will Survive FinTech

By | Blog

First, let me start with our bias. We believe that everyone, even millennials benefit when they have a community banking relationship.  Why? There simply is no replacement for a face-to-face conversation when something special is needed or goes wrong in your work or personal life.  FinTech startups cannot handle this easily (at least today, but watch for retail partnerships).

Don’t get me wrong, I personally use many electronic only financial institutions and would not give up my investment bank, my ability to deposit checks with a camera, etc.   But they will not have my back when I need something special or unique.  Electronic only is great for single purpose, fast, commoditized transactions for relatively simple exchanges (this too will evolve).

My point?  Community banks that focus on timely, in-market relationship-based banking will do well as we continue along the FinTech disruption continuum. But relationships alone will not be enough; community banks also need modern, easy-to-use, mobile technology for their bankers (notice my emphasis on bankers not banks) to negate the tremendous technology advantage that the new guys bring to the table.

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