By Robert MacMahon, Executive Vice President, Business Development & Channel Management
By now, practically every traditional bank or credit union understands that they have to find ways to either compete with or embrace FinTech to attract and keep customers.
But it’s not just about retail customers, particularly Millennials who have been bred to expect that technology should meet just about every demand at their fingertips.
FinTech firms also have their eye on business customers, including a plethora of alternative financial services startups backed by investors and venture capitalists, lending money to small businesses that traditional institutions turn down – small businesses who then leave those institutions for good.
How can a traditional bank or credit union compete? By being even more of a full-service institution and providing as many products and services to make commercial customers’ lives easier, particularly using the mobile channel.
This not only means offering mobile merchant services and treasury management solutions such as remote cash deposit services, Check 21 compliant check images, expedited payments and interconnected vaults at merchant locations, but also an increasing array of cloud-based solutions such as invoice presentment, advanced online payables, account management, taxes, payroll and other human resource solutions that more businesses – particularly small and micro-businesses like lawn care services and dog walkers – would love to have at the tip of their fingers.
Traditional banks and credit unions can even capitalize on the alternative lending movement – you name it – institutions can leverage any FinTech solution that a business customer could possibly need.
But how can institutions below the top 30 money center banks and large regionals -- institutions with limited resources -- offer solutions like that?
Let’s just look at one example at how challenging adopting FinTech solutions on a piecemeal basis can be for one of those institutions: offering a mobile app for remote deposit capture. It’s seemingly a relatively simple app to offer, but to get that solution to market, an institution typically has to rely on its core processor to allow a third-party app developer to connect its solution to the core system. However, most core vendors do not want to open up their systems in real time for posting those deposits because they don’t want the third-party assessing the core -- that’s a problem.
Then an institution has to figure out how to handle potential security issues that remote deposit capture poses. For example, a fraudster could take a picture of a fake check, or take a picture and deposit a real check remotely, but then immediately try to cash the check at the institution’s branch or at another institution. That’s another challenge.
Suppose an institution decides to just work with a third-party app provider, but then there are issues importing images, and upgrades not being delivered. On top of that, an institution has so much already on its plate, that it can’t even imagine also handling sales and marketing of these third-party apps.
This example pales in comparison with what a bank or credit union has to do to provide solutions to commercial customers. While an institution’s niche may be primarily banking merchants and corporate entities, its focus may really be just on commercial lending. However, to increase the stickiness of commercial customers, institutions should strongly consider offering a much fuller array of products, and those solutions must be cloud-based and easily accessible via mobile.
Therein lies the most daunting challenge of all: contending with the financial industry’s own version of the Four Horsemen of the Apocalypse -- operations, compliance, IT and sales. If institutions try to launch these solutions on their own, or in partnership with FinTech vendors for each separate solution, handling the due diligence for those Four Horsemen make such endeavors extremely tough.
That’s where we come in.
We like to call ourselves the “outsourced innovation lab,” a firm that can be a full-service outsourcing partner for institutions, helping them implement an ever-broadening array of solutions by a cadre of FinTech vendors that are either part of our portfolio of companies or trusted partners. Solutions that go well beyond the typical merchant and treasury management offerings – solutions that can make an institution truly full-service.
We want our financial institution clients to drive the implementation strategy. We sit down with our clients, taking the time to truly get a feel for where they want to go long term, which industry verticals fit well with their strategy, which target markets they want to focus on and which solutions they want to offer that we, our portfolio companies, or partners can then build out.
We also like to call ourselves a concierge service, because we are experts in helping our clients implement solutions while keeping the necessary due diligence of those Four Horsemen – operations, compliance, IT and sales.
We not only have partners that can produce either white-label off-the-shelf solutions or build customized solutions, but we can also go far beyond typical marketing and training support: We have experts who are just a phone call away from helping sales personnel answer complicated questions posed by prospects in the field, or the experts can even accompany them on the sales call to help close the deal.
We have a client-oriented approach: it’s all about service and support to institutions that have limited resources and may not want complicated systems. Many of our client institutions don’t serve large or medium companies, but instead focus on sole proprietors or outfits with just one or two principals, and they really only need low cost-of-entry, simplified solutions. They might not even need co-branding – perhaps they just prefer something right out of the box to satisfy 75% of their business needs.
The last piece of our business model: We aim to provide our clients with a predictable margin for each solution below what a company would have to pay in the open market from a provider directly for that solution.
We aim to give our clients an interest-free income revenue stream, in a way that is easily quantifiable. With our concierge outsourcing services, our clients won’t have to offer FinTech solutions as loss leaders – they won’t have to try to fight for something by cutting the price down to bare minimum or sell it at a loss.
We aim to help our clients successfully compete in the new world so they can attract and retain more business customers, in ways that can also greatly boost their own bottom line, without having to add staff or dedicate already thin resources.