Digital Banking Growth Strategies for 2023

Jim Marous:

Hello, and welcome to Banking Transformed, the top podcast in retail banking. I'm your host, Jim Marous, owner/CEO of the Digital Bank Report and co-publisher of The Financial Brand. We're coming at you today through Financial Brand Forum, the largest retail banking event in the industry. The banking industry is facing an onslaught of competitive pressures, from revenues and profit margins to marketshare and adoption rates. Banking executives have been forced to re-evaluate long-held assumptions as they completely rethink acquisition and growth strategies.

What is needed to attract, engage, and expand relationships? How can banks and credit unions rethink their current operating model from the inside out to become future ready? My guest on the Banking Transformed podcast is Jeffery Kendall, CEO and Founder of Nimbus. Jeffery discusses strategies financial institutions should consider as we enter a new age of banking. So Jeffery, good to see you again.

Jeffery Kendall:

It's good to see you.

Jim Marous:

It's been a little while.

Jeffery Kendall:

It's like two and a half, three years, pre-pandemic.

Jim Marous:

Oh, definitely pre-pandemic, yes. Well, it's interesting too because you've changed companies, a lot of things have changed. You've changed companies since we last met. I'm doing a podcast that I wasn't doing the last time we met. But we did do interviews.

Jeffery Kendall:

That's right.

Jim Marous:

So we did video. So first of all, for people who are not familiar with you, can you tell us a little bit about your career path and a little bit about what Nimbus does?

Jeffery Kendall:

Yeah, so I'm a career technologist, so I started out right out of college focused on programming and development. But what was a little bit different about my path is I was also heavily involved in advertising, branding, and marketing. So I had this unique opportunity to have technology and brand strategy from the very early stages of my career, and that's kept with me as I've grown over the past 20 years.

And now, I'm really excited because I'm going to have the opportunity to lead a company that's right at the forefront of making sure that technology, branding, and strategy are all tied together versus independent silos. So we're having a lot of fun in what we're doing in our unique point of view in the market.

Jim Marous:

Well, it's interesting, because yesterday, somebody came up to me and said, "It's not about technology and branding as in separate silos." He goes, "Now more than ever, they got to feed off of each other. The branding has to be driven by some of the technology and the data analytics, but in much the same way, you can't have technology without having the branding and the experiences are out there."

So how do you and how does your firm stay ahead of what's happening in the marketplace? Because really, what you're trying to do is not really just respond to what the marketplace sees as banks and credit unions, you're really trying to respond to what the consumers are expecting and delivering that to the banks and credit unions. So how do you stay ahead of what's going on?

Jeffery Kendall:

Yeah, I think the first thing is we're always looking for opportunities for growth. This is the thing that never changes in banking. How you grow, what you're interested in growing, those things all change. 12 months ago, nobody really cared about deposits. They were cheap. So the flavor of the day was-

Jim Marous:

Right. It was easy. Yeah, yeah.

Jeffery Kendall:

... "How do we loan?" That's all changed now. The macro economic conditions have now presented us with interest rates that are more interesting, so now low cost of funds is the topic du jour today. So you can never really keep ahead of the curve unless you're actually looking for... If I'm looking for growth, I'm going to always be looking forward, and that's our perspective on it.

But what's challenging in banking is we're selling pretty commoditized products. I mean, there's only so many ways you can do another deposit product or another loan without really truly innovating. The real innovation opportunity in banking is how you go to market, and how you present those offers out into communities which might be underserved and how do you position a product to fit, to actually solve a problem for someone specifically?

That's our point of view and why we focus on niche segmentation. You'll hear us talk all the time about how niche is the new local, because we think that banking has evolved beyond community, meaning geography, and now community meaning a deeper sense of purpose in where you can serve those customers.

Jim Marous:

So you did a presentation today, and it was really interesting because one of the things you brought out was that there's four major go-to-market strategies, I think you mentioned. And can you describe a little bit about what those were and why organizations have to determine how they're going to be going to market going forward?

Jeffery Kendall:

Yeah. I mean, you can only grow in so many ways. You can grow your top line revenue, which means that you have to sell more products or have more people to sell it to. Or you can grow through margin expansion, and that means controlling your costs and cutting. It's just Business 101, but where we look for opportunities is to say where are the big banks going? And if you think about just providing a competitive advantage to credit unions, community banks, and regional banks, the big banks are going very generic.

The reason they're winning is over scale. It's not over brand and offer. It's just the fact that they just are-

Jim Marous:

They're everywhere. They're everywhere, yeah.

Jeffery Kendall:

Coverage is everywhere. So if you're a community bank and you're looking at how do I actually go compete against this, you have to go deeper into the specialized areas than those generic offers are happening. So that for us is one of the major opportunities in go-to-market. Now that we're in a digital age, you don't have to be tied to a branch strategy only. You can have branch plus a national footprint, for example.

And those are the things that we think are the big rock opportunities that people have for growing and creating those new strategies. So it's about creating a product fit, finding a market that is underserved, and going after those in full force.

Jim Marous:

One thing we discussed before we even went on the air was the fact that organizations also have to understand what business they're in and how they deliver that's different from their perspective than the organization down the street. And you just talked about the fact that they've got to figure out their new strategy, all these things. But they've got to stay within their brand, don't they?

Jeffery Kendall:

Mm-hmm, they absolutely do. And even if you look at a market opportunity that maybe your brand doesn't fit today, that needs to be part of your thinking about how do I evolve our brand to make sure that our customers expect the product that I want to offer to them, and they believe that I'm the right person or the right brand to present it to them. So a good example of this, we see it all the time is over 44% of the banks, the 5,000 banks in this country have the word national first.

I can't remember the other one, but it's old, I think is the other one, or trust. And what happens is you look at these brands that say, "Hey, we're looking at digital transformation. We need to be more digital forward with our consumers." But there's dissonance between a company that's named First Old National Trust Bank of Wherever and, "Oh, we're also providing crypto services." If you're a consumer, you're looking at that going, "Well, wait a minute. Why am I getting modern technology services from this bedrock legacy bank?" It doesn't make sense.

And the best brands in the world that aren't banks, they know this and know how to do this. Nike is a great example of this, a shoe company. Their value proposition is around enabling athletes and innovating in that area. But we also now are starting to use technology from Nike. We have Apple Watch apps, we have things that are now digital, but they're tied to a shoe company. But that didn't happen overnight. Nike had to participate in the market and evolve their brand before consumers would trust to get digital solutions from them. That's where banks are missing the opportunity at some points now.

Jim Marous:

Well, your crypto example's a good one, that yeah, there's going to be customers to ask for it, and people are going to think, "We've got to do this because everybody's doing it." But your First National Bank & Trust out of Duluth is not necessarily... That's not their positioning, most likely. And it was interesting because this weekend, I was in the middle of Georgia, and truly in the middle of Georgia. Nowhere near any regular city, what I would call regular city.

And I went to the branch to get some money for a wedding we were going to, and the branch had cars from the auto teller around the back of the branch, around the front of the branch, completely across the parking lot down the driveway, out to the street, five cars on one street, and four cars on an access road to get to that street. And I'm going, "Am I showing up at a branch or Chick-Fil-A?" Because it was insane, but what was interesting too is nobody was in the ATM line, so these people want the human interaction.

And then I said, "Well, I'll go inside." Well, I had to stand outside to start the process of going inside. I thought I was taken back 40 years when I used to work at a branch before direct deposit. I finally got to a teller. I said, "What's going on here? I've never seen this before." And I said, [inaudible 00:09:10].

She goes, "Well, it's right after a holiday, Veteran's Day." And she goes, "But it happens often." And I said, "Well, why?" She goes, "People get checks here. They don't direct deposit them. They work with cash and it's not like they don't trust banking, but they want to do it their way." I think that was a big a-ha moment for me, because I talk about advancement in digital on this to realize that we really have to think about who our customers are.

Being the best digital bank is probably not the best way to invest there compared to maybe they needed two or three more tellers in the line. And it's interesting because when you start to understand who you are, that's really the first question. Who are we? Not who do we want to become, and then how do I prioritize to be better at that? And you've talked about the fact that maybe it's going to be multiple channels.

So we talk a lot about back office transformation to make the front office work. What's your feeling around having to focus on back office and more importantly, what part of back office first should most financial institutions... because just in the same way you say you have to target, there's going to be listeners to this that say, "Nah, I've been there, done that." But for the most part in financial institutions you visit, what's the area of back office transformation that financial institutions really should focus on in 2023?

Jeffery Kendall:

Well, when I think of back office and this is probably just because of the wares that we sell, if you will, but core processing is the meat of back office. There are lots of other back office tools, but if I just pick on core, well, one of the things over time is nobody wants to buy a new core platform.

Jim Marous:

No, not at all.

Jeffery Kendall:

And I run a core software platform, which it sounds odd, but the fact is that it is massively complex software, and history has taught us that doing core conversions are challenging and painful, so the market generally accepts hey, let's try to do everything we can to transform, but let's not change the core.

Jim Marous:

Without doing that, yeah.

Jeffery Kendall:

And it's because people think that it could be career limiting or maybe they don't see the value in it. So there's really two things though that people miss, and this is I've been on both sides of this. Prior to this, I was with Kony. We were running a front end digital banking platform, and our value proposition was unlocked digital stuff without having to change the core. But I can tell you, we did run into a lot of challenges when you want to develop new solutions if you don't have a modern core.

And some of that could be just because modern cores are event driven, and so getting real time notifications out of a modern core, super simple. It's designed to do that. A legacy core, you got to work at it. You got to build a lot of route-arounds to get it. Well, when you have to build a lot of route-arounds to get the value out of the core, that expense grows. So you see people who are spending millions and millions of dollars just to get around the core. Well, eventually, technical debt always comes calling and needs to be paid.

So you're going to have to do a core conversion eventually. What we've tried to do is de-risk it, and say, "Look, it's not about a big bang approach. It's something that you can do other things with a modern core in more of a side-by-side, not necessarily have to convert your full core." And people are starting to understand that that gives an advantage, because it makes digital front end easier. Part of the challenge, you hear this all the time is I've got an independent digital banking front end, and I've got the core on the back end.

They don't want to play well together. They don't talk to each other. I got to pay this person $300,000 for access to an API. The nightmares go on and on. So that's where I think you do need to at least plan for a back office transformation as well as a front office transformation if you're really going to get where you want to go. You can't ignore it forever.

Jim Marous:

Well, and the good news is those who waited are benefiting from the fact you mentioned, that you can build this in components that can work together, which means you don't have to take over the whole... You don't have to change everything. But when you meet with financial institutions and you're trying to have them invest in something like you just mentioned, they already have I'm going to say one of the four, five, pick your number, major core back offices.

How do you convince or how do you work with a financial institution to get them over the hump of saying, "Am I having to double invest for what I should get for my legacy core provider?" How do you get them to understand the value of this is not something you can do overnight, and you need to pick a specialist, but more importantly, it is going to take some double investment?

Jeffery Kendall:

I think where we've tried to major is the market is always cyclical, in all things. So you see technology, it used to all be about we want prepackaged stuff off the shelf, but then people felt like the cores were falling behind in their digital solutions on the front end, so they said, "Well, if they're not going to do it, we better build it ourselves, or go find other partners to stitch on top of it." So then it turned more into, "We will take control of our own destiny. It doesn't have to be off the shelf. If we're going to do it, we got to build it custom."

Well, now people are feeling the effects of having gone down that path, because it's expensive and hard. And access to talent and all sorts of things make that a challenge. Now you're seeing people come back to, "Okay, maybe I don't need to be a development shop as a bank. Maybe I need some things that are more prepackaged now. And yes, I might not get the handmade Ferrari that I want with everything exactly where I spec it, but it's going to be a great car for me to drive and sports car for me to take to the track."

That's where people are seeing the opportunity now with something like Nimbus is saying, "Is there something that's modern, that's prepackaged, where we don't have to do a lot to it, but we could still drive growth and value with it?" And that's it. That's what people want right now. That's what bank CEOs want.

Jim Marous:

They want some customization, but they want the core to be tested, multiple institutions. I mean, that's really, as we're at the financial [inaudible 00:15:15] form, it's amazing all the participants, the third party solution providers that are at the show, but they've all figured out that they can't just say, "Here's your plug and play, buy it as we sell it."

Jeffery Kendall:

That's right.

Jim Marous:

They also know it's a little hard right now to sell the entire package. You got to be able to make a component base, and thirdly, you have to have the flexibility to say, "It's going to look like me." Now, you mentioned the fact we always in our minds think, "Well, the big banks can build it themselves. They have a lot of people." The reality is, Chase built a brand new digital banking platform in the UK not by themselves. In fact, they didn't build it at all. They found a third party provider that said, "We can deliver it on-time, on-scale. It's going to be customizable." And they're doing it in a way that has been tested already.

So you have those benefits. When you're out there also working with financial institutions, how important as far as what you're presenting to them as opposed to maybe what they're buying is speed and scalability right now?

Jeffery Kendall:

Speed and scalability is everything in the conversations that we're in, because the market dynamics are actually changing so fast, that people are understanding that they have to adapt even more quickly than say, three years ago. We all got put through the ringer in terms of having to pivot and adjust during the pandemic. So I think we started working some of those muscles. Now you see interest rate environment has completely changed, almost overnight. People are having to pivot again.

They're having to focus on different solutions. So being able to do that quickly and nimbly, and not say, "Well, yeah, that's on the road map for three years," is really powerful when you're in that position, so.

Jim Marous:

Well, it's interesting because that's where bankers really have to get out of their legacy thinking, because a lot of bankers you say, "When are you going to do this?" "We decided we're going to make it a 2023 initiative, which puts it December 31st." I keep on telling people, you got to be looking at much shorter time frames. And even if it means incremental implementation, but you got to be looking at March. You got to be looking at February.

You got to be looking maybe at the end of January, because the story's been told many times, but I went to Shenzhen, China at the beginning of 2020 and visited WeBank. And there was nothing more impactful than them saying they go from ideation to implementation in 14 days or less, which is insane. Because you think of most banks including the big guys will talk about some major thing they're going through, this is going to take about 18 months, and you go, "Okay, so what guarantees that the stuff you started on in the beginning isn't outdated by the time you get to that 18-month finish line?" There's no finish line.

When you're working with financial institutions, and I know this is a challenge a lot for third party providers, you have things you're selling them that you know how they're going to perform. How do you deal with those institutions that go, "I bought you because I love your vision, I love everything you do. I love the way you're going to implement. But one thing, I want you to make sure you don't say that I have to do it this way, because we do things this way." And you're in your mind saying, "That's the one item that makes what we do right."

I mean, we see this in new account openings, where I know some new account opening companies out there that say... They come in, they're ready to go, and they say, "By the way, we want to make sure we still do the driver's license in the beginning." You go, "That added five minutes just by those words."

And you go, "Okay, so I can't deliver what I said I was going to do deliver," because you're jimmying it up based on your own legacy products. How do you deal with that as a provider? Because I think it's important for bankers to understand how they have to change their thinking as well.

Jeffery Kendall:

I think it's all about the relationship you establish with your customer and client very much upfront and at the beginning. First off, not every client is right for every vendor. I mean, there have been times where we've worked with folks and said, "Look, you want to stay the same and we're about helping you transform. Maybe this isn't the right fit for you." So I think finding a vendor that's willing to say you might not be the right fit can be helpful.

Jim Marous:

Well, it's interesting that you say that, because in sales, they sometimes say saying, "You know what? Thank you but no thank you," is sometimes the best answer. Because we all want to sell. We all want to mooch to the next level. But sometimes, being able to say, "You know what? It might be best for us to go our separate paths, because we see a different vision. We see a different way of getting to the place we want to go."

Jeffery Kendall:

Yeah. I've had to have those hard conversations before, and they've always turned out positive. If you go back and you just say, "Look, I understand what you're asking for, but I just am not going to be able to make you successful." They trust you. Or you say, "Well, what would it take to be successful?" And then you can have a disarmed conversation about maybe you need to transform, but I also believe that vendors make a mistake if they go in saying, "This is how it has to be," because nobody knows everything.

I'm always afraid of missing the opportunity, and maybe we're not seeing it right. Maybe the customer knows better than us, so you have to balance being considerate and understand versus driving to what you know based on your experience, because that's what they're paying you for.

They're not paying you because you're new to the game. They're paying you because you've done it a few times. So I think that you just have to carefully balance that. It's when it takes you off your focus that you really need to pay attention as a CEO of a vendor type company. You can't be distracted from your mission, and that's where people get into trouble.

Jim Marous:

I worked for a company once and my boss said, "You can't put spoiled milk in your refrigerator and expect it to get good again."

Jeffery Kendall:

That's true.

Jim Marous:

And that's a really important thing to take in mind, because if it starts off ugly, it doesn't get better with time.

Jeffery Kendall:

Oh, no.

Jim Marous:

And by the way, that's on either side of the equation. If you've picked a vendor and you go, "Oh my God, this wasn't what we thought," or "I missed the mark on what they were looking for," or the other way around and the financial institution says, or you say about a financial institution, "This is going to be an extraordinarily painful process," nobody has that kind of resources around to be able to take those on, even in the best or worst of times. So let's take a short break here and recognize the sponsors of this podcast.

Welcome back to Banking Transformed. I'm joined today by Jeffery Kendall, CEO and Founder of Nimbus. We've been discussing how financial institutions must involve their digital banking strategies and their business options as we look forward to 2023 and beyond. So Jeffery, how should banks leverage data and analytics to make digital happen going forward?

Jeffery Kendall:

Yeah, it's a really interesting challenge that banks are in because I give it the, "It's so close, but so far." They have the most powerful data in the world. When you think about what a bank has in terms of ledgering all the transactions of our daily lives, what they essentially have is a blueprint of everything that we do every single day. They know that I went to Safeway, they know that I went to have sushi at this restaurant. They know that I'm a gamer. They know that I'm a shoe collector. They know all sorts of things about me that nobody else in the world does.

It's all trapped in that big box they call the core, but the challenge is that sometimes, it's really difficult to get access to the data. So you have one big problem, which is just cannot get it out and manipulate and understand it. The second thing is they don't always know the right questions to ask. What can I do with this data? And really start on those pieces. So what we see, this will clue you in as to why it's so important, one of the things that we see in niche banking is a lot of consumer brands like Home Depot, Walgreens, Walmart who are getting into financial services.

And every single time we talk to a brand leader at one of these retailers or consumer driven brands, I always ask like, "Okay, you're interested in getting into providing embedded financial services or banking services?" "Yep, yep, we're interested." "Well, you know there's not a lot of money on interchange?" "Yep, yep. We understand that." "So you still want to go for it?" "Yeah, it's very valuable." "Why?" "The data." That's the first thing they go to, is-

Jim Marous:

Oh, yeah. Yeah.

Jeffery Kendall:

... I want to know where these people are spending money, what are they doing, how can I add products and services that integrate into their lives? And that is where they get it.

So I always tell banks and credit unions, I'm like, "You need to pay attention to the fact that there's other people in the world that think you're sitting on the most valuable resource in the industry and leverage it." And how do you partner to get those things out? So it's super critical, important, but it's also very hard to do.

Jim Marous:

It's interesting. Most banks and credit unions are going to say, if you want to come to them and say, "We want to do this, this, and this, and we're going to use data." They're going to say in most cases, "Wait for awhile. We're trying to get our data in better shape." Does Nimbus and do most other third party providers now do a really decent job of taking data, even in its worst condition, not bad data but in its siloed format, and condition it for what they need to deliver?

Jeffery Kendall:

Yeah. I think so. I think that's part of the promise of a modern core, is it's not necessarily that the data models themselves are so vastly different, although that can be one of the advantages. It's really about API access and getting at the data and really being able to quickly pull parts of it out, versus saying, "Hey, I need to do a mass extract. It's going to take literally 24 hours to run a job on my core to get all that data out."

I think real time feeds and things like that is... The elements of the data aren't the issue. It's how fast can I get them to do something with it in real time? That's where a modern core can really give someone an advantage of saying, "I know today that Jeffery went to Starbucks," not, "Oh yeah, I see over time that Jeffery's gone to Starbucks 12 times over the past 12 months." It's more interesting if I can get the data right then and do something with it.

Jim Marous:

Do something with it?

Jeffery Kendall:

Yeah.

Jim Marous:

That is what's interesting, is most financial institutions are trying to work on sometimes the AI and machine learning, but most times, just segmentation and niche banking. But they get the information and it stays in reports. I mean, I say many times, my personal bank is Wells Fargo. I know that if I went in, I'd be almost frightened to the degree of saying, "Oh my God, they know all of this." But the rubber hits the road as to how does Wells Fargo show me they know me? And almost every financial institution does a terrible job at doing that.

And yet, you have some FinTechs, I'll pick Acorn, they're continually communicating with me about how I can make more use of their service. But in a way that helps me, not something that I think is a sales pitch. How do you see in the whole concept of niche banking, modern core, all these different things, how do you see the importance of really talking on... I'm going to call it personalized, but it's more than that. On a personalized level, to drive engagement as opposed to just experiences?

Jeffery Kendall:

Yeah, so I think that people get confused about what engagement and personalization can mean. I think 10 years ago, if you had asked what personalization is, it was does my app say, "Good morning, Jeffery?"

Jim Marous:

Yes, yeah.

Jeffery Kendall:

That it somehow knows context about me, where I am, what I'm doing. I think personalization is shifting, and it's really more about understanding the problems that the person has. Not individual as Jim and Jeffery, but what are Jim and Jeffery categorically doing? And how do I address a problem in their community? So I'll give you a great example.

One of the niche communities that I think is... It's my favorite to talk about, is truck drivers.

Jim Marous:

Oh, yeah.

Jeffery Kendall:

Truck drivers are the backbone of this country. They supply with all of our different needs and foods and products and services. And yet they all when you focus down on the business of truck driving, there's some really interesting financial challenges that most banks ignore. Cashflow is a major issue for truck drivers. I go, I drop off a delivery, 90 days later, I might get paid on the invoice, but I got to manage that.

If I'm an independent contractor, that's a long time to wait for my money. So a couple banks in the country have figured that out, TAB and Triumph and some of those folks. And they've created massive, multi-million dollar revenue streams off of we're going to go give these truck drivers a way to get paid earlier through invoice factoring. They solved a problem for this particular community. Doesn't apply to everybody else, but it applies to your type of business and I think that's the type of personalization where banks have the biggest opportunity. It's not, "I know exactly what Jeffery needs." That's really hard to know because we're complex people. But at least if we can get it down to the categories, I think that's where the opportunity is.

Jim Marous:

TAB is an interesting example, because I've been trying to get them on the podcast, because I think if people can squint a little bit, they can see that well, maybe banking for truck drivers is not my thing, but there's millions of segments out there. And I think one thing that's been interesting where open banking has really succeeded is a couple institutions overseas that have built what I'm going to call youth platforms, and it's a banking service, but really they've made partners with gaming companies, with technology companies, with social media companies, with all these different companies that are actually financing the platform to draw all these under 25-year-old kids into the banking platform without pushing banking on them.

What's interesting about that is it's changing a revenue model. So TAB Bank and others, Key Bank with doctors, they can get then, if you get a good segment here, you've got people that want to, as you mentioned earlier, tap into that segment. It changes your revenue model so you don't have to worry about interchange. You don't have to worry about fees. You're getting your revenue from outside the banking environment, and again, it gets back to the modern core that you can't do that in three different ways, because we don't even have categories for that.

So from your company's perspective, how important do you see content becoming from the perspective where it's not a product, not a service, but it's a flow of marketing information or solutions that are outside of what would be traditionally thought of as being banking?

Jeffery Kendall:

Yeah, I think it's huge, it's everything, and there's such a big opportunity if the content is delivered in the sense of helping customers understand that you understand them. That's really the power. It's hard to educate experts in their field or in their business, but if you can start talking the talk and walking the walk, then it makes your brand more well-positioned to serve that company.

I'll give you a great example. One of the niche banks that we're building out right now with a partner, ConnectOne Bank is a bank for VC backed tech companies. Well, you can imagine I was sitting down one say with the CEO of ConnectOne and I said, "I'm a software as a service company, and I went to my bank to try to get a loan to finance a software purchase that I had to make, and they told me, "Sorry, Jeffery, we don't finance intangible software." I said, "But your brand as a bank is all around software companies. What do you mean you don't do that?"" And the deeper I dug with them, I was like, "You really don't understand software businesses at all. You don't understand the challenges I'm going through."

Jim Marous:

He picked a niche [inaudible 00:30:49].

Jeffery Kendall:

Exactly. And then I was right in the middle of the niche, which was fun. So working with Frank at ConnectOne, we said, "Look, let's build a bank that really understands VC backed software companies."

Jim Marous:

Right, yeah.

Jeffery Kendall:

And his attitude was so perfect for it, because it was, "I just want to fix problems for people." And if I look and narrow down who I'm working with, I can understand their problems. I can talk like them. I can start to really dig in and hold hands with them and the business.

Jim Marous:

I can hire content specialists, yeah.

Jeffery Kendall:

Exactly. But that's exactly it. Now they're investing and saying, "We're going to build up that part of our brand and our capability." We're going to speak the language and provide content, so that people know we're a good home for them." That is where banking can really, really advance right now. The products are all the same. Again, it's just narrowly focusing on it, so you can solve this particular group's problem.

Jim Marous:

Well, it's interesting. This story came out of probably five years ago, Dentons Bank out of Turkey, they built a farm-based product set that worked with farmers and built digital solutions because most people don't realize farmers are extraordinarily digital. Everything they do has to do with how to farm the fields and all kinds of information. But they have a lot of solution providers. They've got the people that are climatologists, that can tell them what's going to happen in the climate for the next 12 months. They got seed people, they have equipment people, huge equipment people. They have people that can tell you what should you do, what ingredients or what fertilizers do you need for the ground.

Well, this bank said, "We got to bring all these together and especially during COVID, where they can interchange, we can bring all these to the table in one call and deal with the farmers' real problems," which banking takes care of it, but banking's not the problem they have. They need to grow crops, but [inaudible 00:32:37]. When you're looking one to three years down the road, now, let's get into the future a little bit here, what do you see to be the biggest change that you see going forward in banking? And what trend do you see as standing out among all others?

Jeffery Kendall:

Yeah, I think we'll see things move away from just purely institutional type products to be expanded out through embedded finance into other aspects and integrated into other experiences in our life. I think we've been seeing that coming for 20 years, there's been elements of it or hints of it. But I think that primetime is now, because people have figured out the wiring and the piping to make that happen. I think buy now, pay later is going to see its reckoning, in terms of the fraud and-

Jim Marous:

It's going to be done differently.

Jeffery Kendall:

It is.

Jim Marous:

I think the solution's still strong. It was probably done wrong.

Jeffery Kendall:

I agree.

Jim Marous:

It's done great for the environment we were in six months ago, 12 months ago. But the reality is the solution's a strong one.

Jeffery Kendall:

That's right.

Jim Marous:

As our savings products, which we haven't addressed in decades, but what's going to withstand the test of time, whatever could happen?

Jeffery Kendall:

Yeah, and when credit's free and cheap, it's easy to offer and sell. But then when it's higher, now people are finding oh, that's actually slowing down, it's really changing. And you've got a lot of fraud and charge-offs going on, so that's where I think embedded finance though in terms of in context of other businesses, that's what I think people are going to be focused on. We're working with Synovus and their new Maast brand on exactly that. It's how do we go imbed banking services into the middle of tech companies, and I think they've got a brilliant strategy around that.

Jim Marous:

So let's take that example. How do you then implement that at speed when most financial institutions are not used to what is going to be a massive change of direction, but with a big implementation? How do you keep that speed going? Both on the client side, but also on your side?

Jeffery Kendall:

First off, you have to have the right tools, so that's maybe basic and fundamental. But if you've ever done a DIY project and you've figured out, "Oh, I've got the wrong kind of wrench," it's a nightmare and frustrating. But then you get the right tool and you're like, "Well, that was super easy," as long as you had the right tool. I think one of it is you got to have modern stuff to be working with. One of the things that slows people down is when they try to get into an integration project that says, "Well, we've got to integrate into all our old legacy stuff." Well, maybe that's true.

But if you didn't, could you get there 10 times faster and could you still start extracting value out of it? But it's so funny, whenever we talk to customers, it's like, "Well, how does this integrate into my core?" And you're like, "It doesn't. You don't need to integrate into your core." You might share some raw, general ledger type data back to the core, but actually if you try to integrate it into your other stuff, that's what's going to slow you down and make it really expensive. Be okay with it being on its own.

Jim Marous:

It's also interesting too because we've interviewed Liz Wolverton from Synovus, and one of the things that we all forget sometimes is it takes leadership. It's got to take the very, very top of the organization and every layer down to say, "We agree that speed is important. We agree that we're going to focus on this and get it implemented, and nothing's going to stand in our way." What's tough sometimes, and as you see it sometimes, you implement and you've implemented to the middle layer and somewhere during the process, you're realizing we hear that there's complete buy-in, but we're not getting action that plays against that.

So again, I've talked about it quite a bit on the podcast, the people that are listening that at the end of the day, leadership's going to guide whether or not this thing's going to be successful in many cases.

Jeffery Kendall:

100%. And one of the things when I first got into selling to banks and credit unions that was a huge mistake was I focused on the size of the institution. Every vendor in the world talks about, "Well, what asset size do you serve? Is it 250 million, 500 million?" Whatever. And it was only a couple years ago that I figured out that doesn't really matter. It doesn't matter what size the institution is. The mentality and the mindset of the institution is what you really want to look for.

Jim Marous:

Oh, yeah.

Jeffery Kendall:

I can go sell to any size of bank, and if they're just not ready to transform or they don't believe they need to, then bad customer for me. Flip side is I can work with a tiny, 100 million asset de novo, but they have ambition to grow.

Jim Marous:

And I could get implemented in a very quick amount of time.

Jeffery Kendall:

That's right.

Jim Marous:

Much sooner than I would've done the big guy that-

Jeffery Kendall:

Yeah, I love to hang out with those people. I don't need to always have multi-billion dollar banks as customers. I want the people who are ready to make a difference, because that's where we can succeed together.

Jim Marous:

That's funny, we talked about this a few years ago and we met before that. Putting that square peg in the round hole, we keep on thinking it's going to happen. We have that beautiful vision, and I now do many presentations to organizations that sell to the banks, and banks going, "Guys, you got to focus on who you're selling to, because while you may get all kinds of rewards talking about the big sale and the big company, the reality is find people that are ready to buy, because if you're having to sell, you're doing something wrong.

So you're visiting a lot of financial institutions, you're visiting a lot of the Financial Brand Forum. Inside or outside of what Nimbus does, what is the one priority financial institutions, most financial institutions that you meet have to address now in order to be successful from 2023 and beyond?

Jeffery Kendall:

Yeah, I think the biggest thing is just getting their strategies set. I think one of the things that I continually find out is that people are confused because what they thought they were going to invest in 12 months ago, they're less convinced that they're going to invest in it now. And crypto's a good example of that. Banking as a service is a good example of this.

When the industry was... that was the darling topic or the shiny object, people started making real moves. Now, they're having to pull back. And I think getting that strategy set and saying, "What are we going to build over the next three years?" is the most important thing. It's not going to be the same answer for every bank. The whole point is what's your strategy, and now you're going to focus on what you actually need to enable and build to do that.

But I think at the end of the day, everybody still has to become a digital athlete. If you think that you can just do one digital project every five to 10 years and go through a conversion of your digital banking front end and that's going to be good enough for you to survive in the future, you might want to relook at that. I think it's not enough practice. You need to be doing these smaller digital initiatives so that when you need to do big transformation writ large, you have the basics and the understanding how to do it.

Jim Marous:

Well, actually, right now especially with the economy being very much uncertain, it's better to focus on those things that are aligned with what your brand is, as you said at the very beginning of this podcast. That's low-hanging fruit. We use that term quite a bit, but the reality is if it can pay for itself, you're going to get funding even during bad times. And get modern.

Jeffery Kendall:

That's right.

Jim Marous:

At the end of the day, you've got to modernize the back office.

Jeffery Kendall:

Yeah, and I think that people when it comes to finding new routes to market, you talked about lifetime value of a customer. Obviously, very, very important. But lifetime value always has to be in context of cost of acquisition.

Jim Marous:

Right.

Jeffery Kendall:

Because lifetime value, if it's a penny and it's nothing, it could be great. But that's not how it is. So I think where banks, they have to figure out how to go forward. And this is for every bank, regardless of what your segment is, is focus on that cost of acquisition and how do you make sure that what you're doing is... If you can't change the pricing on the commodity, then the LTV's hard to move. So now, you got to focus on the CAC.

That's where you got to move. That's one reason we love this concept of niche banking, because it's like fishing from a barrel. You've got a focused community. You know exactly what's in there. You know how to go get it. It's easier, cheaper, and faster to acquire customers when you know them.

Jim Marous:

And if you do that right, it makes it so that you're actually going to keep the customers, and they're going to rebuy from you.

Jeffery Kendall:

That's right.

Jim Marous:

Because what we're seeing right now is... I bring it up in all my presentations, how many of you closed a major financial relationship in the last five years? Firstly, nobody raised their hand. How many of them opened a new one in the last two years? Everybody raised their hands. So in other words, while you've kept your accounts, you're losing all the additional business that's going elsewhere now.

The only way to address that is to take care of the experiences and the engagement of that small, niche group that you have, that really says if I can get this right, I'm not going to lose those people. They're not going to look elsewhere.

Jeffery Kendall:

That's right.

Jim Marous:

Because I'm going to be addressing their specific needs. Jeffery, as always, thank you so much for being on the show and for some conversation we haven't had for a long time.

Jeffery Kendall:

I love it. Always good to talk to you. Thank you, my friend.

Jim Marous:

Thanks. Thanks for listening to Banking Transformed, the winner of three International Awards for Podcast Excellence. If you enjoy what we're going, please be sure to give our show a five-star rating on your favorite podcast app. Also be sure to catch my recent articles in The Financial Brand and the research we're doing for the Digital Bank Report.

This has been a production of Evergreen Podcasts. A special thank you to our producer Leah Haslage, audio engineer Shaun Rule-Hoffman and Dave Douglas, and video producer Will Pritts. I'm your host, Jim Marous. Until next time, remember, if you continue to do what you've always done, you'll probably get worse results than you've had in the past.