Greg Ohlendorf, President/CEO, First Community Bank and Trust, Beecher
This article was published in the May 2021 Issue of Banknotes, the Official Publication of the Community Bankers Association of Illinois (CBAI).

 

The headlines read “Fintech Will Make Community Baking Obsolete,” “Fintech Disruptors Will Change Banking Forever” and “Fintech Charters Are the Wave of the Future.”

I guess it’s time to throw in the proverbial towel. Game over. We should all just give up.

 

If you believe the hype, that would be your natural conclusion, but I'm not buying, and neither should you. Fintech firms may think they will take over the world, but we've heard those threats before from many other competitors.

Whatever your position is, you can't afford to overlook fintech, and I'm going to propose that you do precisely the opposite and embrace it. Now it would be naive to ignore that some fintech firms are trying to change the landscape of financial services and will do anything it takes to drive customers away from your bank to their platform. But many other fintechs are looking to actively partner with community banks to make your bank better, faster and more relevant than it's ever been.

That’s where The Venture Center in Little Rock, Arkansas, comes in with their partnership with the Independent Community Bankers of America's (ICBA) ThinkTECH Accelerator program, now in its 3.0 iteration. The program's goal is to find a wide variety of fintech firms that offer products and services that will improve community banks.

“Fintech partnerships are a critical aspect of community bank innovation and are the genesis behind the ICBA ThinkTECH Accelerator program, which helps facilitate community bank-fintech partnerships that produce measurable results to meet banks’ business objectives and create high-tech, high-touch customer experiences,” said Charles Potts, senior vice president and chief innovation officer at ICBA.

The timing of this couldn’t be better. The core software vendors that power community banks have become less responsive as they have become larger and larger. Their time to market with innovative products and services can often be measured in years rather than months. Community banks need to find alternative ways to stay in the game.

The accelerator program is one of those ways. First Community Bank and Trust, Beecher, (FCBT) participated in the 2.0 version in January 2020, having no idea what to expect. After completing the day and a half session, First Community Bank and Trust CIO Karen Burgess said, “The accelerator program was one of the most exciting days I’ve had in banking in a long time. To get to see new and advancing technologies, presented by their founding entrepreneurs in a one-on-one setting, was amazing.”

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"WHATEVER YOUR POSITION IS, YOU CAN’T AFFORD TO OVERLOOK FINTECH, AND I’M GOING TO PROPOSE THAT YOU DO PRECISELY THE OPPOSITE AND EMBRACE IT."

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Since meeting those first 10 companies and ultimately many of the ones from the 1.0 cohort, the 2020 FIS Accelerator, and now the 3.0 ThinkTECH version from January 2021, FCBT has spun up eight new fintech relationships. They cover products and services as diverse as cybersecurity, co-browsing technologies, financial literacy, digital marketing, workflow improvement, CRM embedded in a marketing database, network and vulnerability assessments and secure file transfers.

Most required very little core integration, so the bank could get the majority of these offerings up and running without a huge time commitment from IT staff. Additionally, several were more cost-effective than the incumbent product they replaced, helping our bank lower its operating costs.

One perfect example of an excellent fintech solution is the services provided to our bank by Adlumin, an Accelerator 1.0 graduate. Adlumin works in the area of network security and assessments. FCBT was using a big-name company for this but could only afford to monitor a handful of critical servers due to the cost. With Adlumin, all the bank’s services are monitored in real-time, 24 hours a day, seven days a week. If anything is amiss, they provide updates on the issues that need correcting. They offer recommendations on our network configuration and provide a scorecard of our performance over time to track our progress. Their solution was looked on very favorably at the bank’s last IT exam, which is a bonus.

So how can your bank get involved? My first suggestion would be to participate in the ThinkTECH Accelerator program. It’s free to ICBA members and only requires a day or so of time for you and your staff. This year’s 3.0 version was virtual, so we 'met' the 10 companies online. We spent 20 to 25 minutes with each and then filled out a review form for The Venture Center following the presentations. If we were interested in a particular company, we could set up follow-up meetings later. Think of it as a cross between speed dating and Shark Tank!

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FINTECH AND YOUR FUTURE
Greg Ohlendorf will be presenting “Fintech and Your Future” at the CDD Spring Meeting on May 18 in Springfield. Visit www.cbai.com for more information.

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Daniel Schutte, managing director, Accelerator Programs for The Venture Center, said, “Bankers tell me that the program helps them think 12 to 16 months into the future by learning what is new in the marketplace, which helps set their future strategies.

Trust me, you won’t need all of the 10 companies' offerings, but I’ll bet that one, two, or maybe three will be pretty attention-grabbing. FCBT is already under contract with two of this year’s program participants.

Even if none of the products are things you need today, just being exposed to the process is invaluable. The access to the founders after the accelerator has been excellent. These companies genuinely want to learn about community banking and how they can help your bank. They are interested in your ideas and your suggestions to enhance their offerings. How novel!

Now understand that there are certainly some risks associated with working with young fintech companies. You have to do your due diligence to see if their products and services are viable. Our bank focused on several key questions.

1. How are they handling your data? What type of security assessments have they performed? Are they SOC2 compliant?
2. How many customers are “live” on their systems? How many are community banks? Can you get real user referrals?
3. What are the terms of their contract? Can you live with them? How can your bank de-risk the transaction if the product doesn’t ultimately meet your needs?
4. What other companies offer the same services? Which are more feature-rich? Do you have any integration issues to deal with?
5. What is the roadmap for product enhancements? Will those enhancements get done when you need them?
6. Are they profitable or at least cash flow positive? How much venture capital have they raised, and from what sources? Will they need more money to operate soon?

That may seem overwhelming at first, but we all have vendor management programs up and running, so this isn’t much of a stretch from what we’ve been doing for years.

Working with fintechs can help your bank grow and stay independent, which is essential for the communities you serve. You owe it to yourself to put a toe in the fintech pond to see what products and services may be there to help your bank. You’ll be glad you did.

Greg Ohlendorf, President and CEO,
First Community Bank and Trust,
Beecher, serves on the ICBA’s ThinkTECH
Selection Committee.