Episode 7: Fintech & Banks: Breaking Down Language Barriers to Work Better Together
Ernest Rolfson 00:00
Hey, this is Ernest Rolfson, the CEO and founder of Finexio. Welcome to B2B Cashflow Conversations, the podcast dedicated to sharing insights and innovations in business to business payments, working capital and cash flow management, and FinTech entrepreneurship. In each episode, my guests and I tackle questions in the ever evolving world of FinTech and payments. An industry that's rapidly evolving and of great interest to investors and businesses alike. Looking forward to having this conversation.
Ernest Rolfson 00:29
Today we've got Dion Lisle, Managing Partner at Forty Grand and a thought leader in FinTech for over 20 years. Dion recently merged his advisory firm Facere with investment bank MJC partners to launch Forty Grand, a consulting firm focused on driving value for community banks by delivering FinTech focused innovation. Dion, welcome to the podcast.
Dion Lisle 00:55
Great to see again, Ernest. It's it's nice to reconnect. It's been way too long. I love what you're doing at Finexio.
Ernest Rolfson 01:01
Absolutely. What vineyard do you have there in the in the background?
Dion Lisle 01:06
Oh, so it's funny. I have slotted doors and they look like they're moving on video. So I had to cover it. And that is just a random Sonoma County fall vineyard picture. Just to prevent the moving slats on closet doors.
Ernest Rolfson 01:21
Lovely. So you're someone I enjoy being around and chatting with so much that I haven't talked to you in several years.
Dion Lisle 01:32
Yeah, exactly. Exactly. Yeah, in order to get away from me.
Ernest Rolfson 01:39
That's right. That's right. But you're always a good time and have something very interesting to say. So before we get into what you're doing now, why don't you share just kind of how you got involved in this payments, space? And we'll hear about how you're a leader in it today, which you are, but always good to get some of the backstory.
Dion Lisle 02:01
I appreciate that. I'm probably one of the few who came into payments and banking via information security. So I started in an obscure technology called PKI, private key infrastructure, very technical, and I was with a company that needed a vertical expert to get them deeper into banks. And so I looked at the technology and started to think about how to apply it for digital signatures on treasury wire transfers, letters of credit, trade, finance. And I became that expert just by attending silos, AFP and other bank events. You got to remember and we didn't always have Money 2020 and, and Finovate. We used to have to meet bankers, you know, where they actually hung out. And there was no, there was no FinTech back then. So I became a vertical expert around trade, treasury and payments.
Ernest Rolfson 02:53
You started multiple startups and multiple consulting firms. You started Facere essentially, to be the Rosetta Stone between, you know, banks and FinTech startups. You know, banks really, as you know, have a challenge navigating this this FinTech arena, I guess, tell us about that analogy or, or what is this barrier that you and I know well, but perhaps others don't?
Dion Lisle 03:18
I stumbled upon the Rosetta Stone analogy when I was doing a podcast at Money 2020 Europe with JP Nichols. And I happen to just blurt that out because my daughter had the Rosetta Stone. She was learning Hindi at the time and became fluent. So it works. But to that point, yeah. So I stumbled upon the Rosetta Stone between banks and fintechs. And you and I both know, we've dealt with the big banks, I'm one of the unusual people. I've been in big bank, Citibank data biggest payments processor. And I've been in FinTech startups, early employee eight, nine or 10, and a couple startups, some more successful than others. And I realized there was a huge language barrier. And but not only language by cadence, the way they operate, the way they look at things, the way they talk things, everything between these two worlds, like two giant gears that just couldn't match, right? And I thought, you know, but they need each other, and I never really bought into the fintechs gonna eliminate banks. I never believed that narrative. And I'm glad to see most people that are past that. But I really wanted to be the Rosetta Stone quite literally between these two disparate worlds and help them work together to deliver better value for customers, whether they be b2b or b2c.
Ernest Rolfson 04:41
Well, what are some of the specific barriers to digital adoption that you've seen? asking how you overcome them is is probably too simple of a question, but maybe how have you helped navigate or overcome some of these things? And what are some of the most typical barriers that you're seeing?
Dion Lisle 04:58
Yeah, I think my favorite expression I heard a while back is "culture eats technology for lunch", right? Yeah, it's always down to people, right? You and I both know that it's hard to get people to understand the value of technology and how it improves their work. If they keep pushing back. I've worked on a project in Italy a couple years back with trade finance group, but we're doing this pretty complex blockchain trade finance letter credit thing. And the ladies, they're all ladies who ran the letter of credit operation kept holding back everything like no, we're not going to tell you how we do that. No, we're not going to tell you how to do that. And when it turned out, they were afraid of being replaced before they could retire. They were all 50 something and they thought, look, I've worked for this big bank, and I just want to retire as you know, some letter or credit person. And we never got them over the hurdle of understanding we were there to help make their job better. So now when I really look at things, I really start with the people and I really try to get them to understand, we're here to help make your job better. We're not here to replace you. Digital is a tool for you to offer better service. I tell community banks all the time, personal service plus digital equals concierge service. That's what I want bankers to understand more than anything. So a
Ernest Rolfson 06:10
lot of these places will particularly in the community backspace. They're coming in with a low tech note, tech environment. to a large degree is that fair to say?
Dion Lisle 06:20
It's almost worse because what they come in with is a we do whatever if I ask jack Henry tell us to do environment, which is actually worse, because they're they're almost captive audience to that very narrow view of technology.
Ernest Rolfson 06:34
Absolutely. Well, congrats on forming Forty Grand. Tell us a bit about you know that what was the inspiration there? And I guess the value you're trying to bring to community banks with that with that formation? Is it more of the same? is there is there some other element here around FinTech oriented digital technology for banks?
Dion Lisle 06:54
Yes and no. So you know, I realized two things one, after Facere, three plus years, and I on onboarding with the mega banks was the hardest part of that job. The actual work was fantastic. Once you were on board, I hated the onboarding. Yeah, many banks don't have that issue. And I met Mike and Carlton, my partners in Forty Grand. They run MJC partners and investment bank for community banks. And what they're doing is they're in the boardroom talking merger, acquisition divesture. subordinated debt, really great, high level financial stuff. And they kept getting well what about FinTech? What was what should we do like, you know, some bank just don't air quoting FinTech or digital or technology. And these are banks between call 250 300 million and 5 billion they don't have the CTO Chief Digital Officer certainly don't have a CTO nor should they. And their IT team is literally a guy or gal with a USB token going around updating windows on laptops and notebooks, like very low tech footprint to your point. And we realize this is an opportunity to help these bags add value to their footprint with digital right. And so rather than work with the large banks, I really brought to 40 grand this focus on Let's help these banks get digitally fit. They don't need to digitally transform, they don't need a giant PwC Accenture program.
Ernest Rolfson 08:19
So the digital transformation, change the whole back office, go to the cloud, we've got to everything is upside down.
Dion Lisle 08:26
Exactly, exactly. I even wrote a blog about this digital transformation is too big to succeed, right. And it magazine called digital transformation. They said 80% of all digital transformations fail later. That's like Car and Driver saying it sucks to drive a car. Like that's a horrible way to look at digital transformation. And yet, that's the reality, which is why I always talk about one process at a time, get digitally fit in onboarding, get digitally fit that love mission. Right?
Ernest Rolfson 08:57
I understand. So it's almost like driving up the value for them by being more laser focused and bringing in I don't want to say a point solution but a purpose built solution for the specific bank pain point.
Dion Lisle 09:16
Yeah, that because I don't want them to think too narrow. But also I don't want them to think boil the ocean wide. It's about fixing a process, a method, getting your customers engaged digitally, as well as the personal service, that community banks rightfully take a lot of pride on.
Ernest Rolfson 09:32
What's the benefit here to the end user, to the corporates, to the CFOs? And how much would you say the banks think about that? And I'd love to hear to you know, how do you view engaging with you and engaging with FinTech more broadly, you're one of the whispers in the industry, how does that help impact the bank as well? Ultimately, yeah, so see how much you think about the end user and Endor your bet your customers, these banks, think about that. That'd be of interest. To how that plays into things?
Dion Lisle 10:03
Fair question. I like to say all they're obsessed with is their end user experience, but their board of directors, they have profit margins that they have to meet and all of that. But I will say this community banks think a lot about their small business customers, they really feel connected to them. And I think this period of time, this pandemic has shown us the value of local, the value of our local business, I know I've started to shop at a local market instead of the whole foods. I have a local don't judge me liquor store, it is pandemic time. So I have a local liquor store I go to.
Ernest Rolfson 10:38
Only gonna judge you if you're at the liquor store, eight times a week, otherwise, we're no judgement. Otherwise, you're in a judgment free zone.
Dion Lisle 10:48
Perfect. This guy's great. And I go in, and he's like, hey, Dion, how you doing? Hey, you asked about the relationship.
Ernest Rolfson 10:57
And this is the bank, the banks are investing more in the relationship.
Dion Lisle 11:02
Yes, they are. Particularly most of the banks I work with talk to see, evaluate the SMB, they really want to find that perfect balance, and their ideal customer is high net worth plus SMB million dollars net worth, and they have a two to $3 million local business. That's just a sweet spot. But those customers are now demanding digital, it's no longer enough to go into the bank, shake hands, say, Hey, Mike, how's your business? Good to hear?
Ernest Rolfson 11:34
The customers want more digital tools? That's, and the bank is driving a balance between making these customers happy. And to your point. They're not running a charity. They're running a bank and yeah, their drive for profit margin as well here. That's right. So to summarize this element here, it's really not about cost takeout, is what I'm hearing. I mean, that may drive some of it. You've talked about some efficiency, but it really is, it sounds like investing in growth, investing in capability, investing in customer retention, satisfaction, less about I want, I'm trying to save a nickel and cut some headcount here, although I think you were gonna say something there.
Dion Lisle 12:18
Well, so they have something they call efficiency ratio, which, which I kind of like, which is just, we want to grow the business, but maintain ft ease. I've not met anyone who says I want to get rid of anyone. It's mainly about I've got 48 FTS, full time employees, I just want to make them more efficient. I want to go from being a $500 million institution to $800 million institution like not adding anyone. Well, the only way you fill that gap is digital.
Ernest Rolfson 12:46
Well, we'll keep talking about this. I wanted to say, is there a unique way you have to work with these smaller banks. And as I understood it, you've got a few different frameworks, the paid framework, the fast framework, in terms of driving innovation with folks, is there something unique that you found is working with these types of institutions that need to engage in a unique way in this area?
Dion Lisle 13:11
Yeah, so I tell them, I said, Listen, you know, you're a great bag, you've done a lot of good stuff, you don't have a Chief Digital Officer, digital is one of the most important things now. I am your outsourced Chief Digital Officer, all things digital, I'm going to give you valuation recommendation and architecture and help you build that digital footprint that you need. The paid framework actually built that for larger institutions. But it works perfectly here. And that's parallel, agile, innovation delivery. And the key is parallel. I work in parallel with the bank, I'm outside pushing the project, you're inside being a bank or doing bank stuff. And it's agile, it's fast, it's responsive, but it's innovation delivery, because one of the things I really started consulting to avoid is innovation theater, right? We've all seen the innovation theater, oh, this is such a great project bubble never gets to market. I'm not interested in that I want to deliver. Now the fast the flexible, autonomous, specific, timely architecture that's unique to community banks. And really, this is a statement that I want you to break away from FiOS and jack Henry's roadmap. Yeah, not rip and replace their services or their their system. But just break away and hollow the core, build some services around that you can later decide if you want to.
Ernest Rolfson 14:25
Yes, we're starting to work with banks now ourself. You might have seen Bank of California invested here recently. So we're working with those folks. There's a number of other banks, we're talking to you that have come to us and they're like, we love what you're doing. We love your digital tools around accounts payable. We want to offer more of these capabilities to our customers. We would love to do more of this off of our own rails or integrating our own products or, hey, we have an idea. We want to bring in real time payments, how can you support that and we're kind of like well, what are your core providers? Provide you what how can you? What tools and services do you have to be able to expose to a FinTech to make it easy, and let's talk about what the timeframe is and what the constraints are. And, you know, you share that with these guys. And they're kind of like scratching their heads and then haven't really considered that and know how to know how to leverage that.
Dion Lisle 15:19
So it's funny you say that. I'll build on that. So I got an RFP RFI from the bank for a new rip and replace core. All the checkboxes, wires ach blah, blah, blah, just checkbox. This is this is great who you send it to jack Henry FiOS, DCI said, Well, what about a cloud? Bass provider? Banking is certainly, they're like, Dion, we wouldn't know who to send it to. We don't know what we don't know. So fair enough. That's exactly what Forty Grand is designed to do is fill in that gap.
Ernest Rolfson 15:48
I think it is pretty hard to find out what new things are there. Right? Especially if in your banker world, you can go to those conferences, do you see the banks wanting to or needing to do the bleeding edge, or I guess what's the maturity level of the types of solutions you can bring in that are even palatable, because it's, it feels like and I'm in this camp, so I don't want to speak for you but the FiOS is jack Henry's of the world, or not probably the best place that these folks need to be looking for. If they really want to do something that is, you know, 2021 standard, you know, that's really gonna have, if they run it really want to maximize delight. It's not going to be with those big players at all.
Dion Lisle 16:31
I can tell you, you're spot on, the fact is, if you think of the classic McKinsey three, horizon, one, two and three, you know, call it 12-18-24-36 months, whatever, right? The fact is, most of them are here. They're their horizon, one, maybe horizon two, maybe a couple surprise areas that I've heard from bankers, they're not looking at blockchain. They wouldn't even know what to think about it right now. But back to your point about the conferences. Do you know what the number one conference is for community bankers? It is called Aoba. Acquire or be acquired. That is their number one. That is their annual conference that they all live to go to now think about what that says about community banks live or die. I mean, that's where these banks are, yeah, yes. help to prevent being on the bottom of that food chain when the ayoba conference happens. They want to be the top of that food chain. Right? And to your point, FiOS Jack Henry, all lovely people, blah, blah, blah, all that, but those people are not going to help you get out of horizon 122. They're not even at horizon one yet now. So I really try to help them see that. They're perfectly keep your core, keep working with it, hollow it work around. And that sounds like what you're talking to your bags about as well.
Ernest Rolfson 17:50
So I think it's the only path that makes the path you're recommending is the only path that really makes any sense, to be honest, which is exactly what else would you do. The only other thing is rip and replace the whole thing, which is not palatable for a lot of these folks.
Dion Lisle 18:05
You know, it's funny, you look at CEOs of the banks I'm talking to and there's a bell curve, there's an absolutely older bankers forward looking ready to make changes. And there are some that are like, you know, what, I'm five years from retirement, I don't want to be responsible for a referee place that goes badly wide bell curve there. But what I am finding is the middle of the bell curve is where they really need the help. They're really open to it, but they're not quite sure how to make it out. Those are the folks that I get most excited about. Those are the opportunities I enjoy.
Dion Lisle 18:15
What are the areas that they're in the most need of call it modernization or the areas where they're in the most pain right now.
Dion Lisle 18:42
It's the basics. It's digital onboarding, it's it's just right onboarding, loan origination, treasury services, their stack is--Why, you know, it's a wire system. That's astronauts, it's, you've seen it, I know, you've seen this. And, and it is a matter of just getting them to understand there are tools out there. And to your point, you're spot on. I had a banker said, Hey, I'm going to Finovate I said, Great. When we got back, he's like, I don't know what to say I'm overwhelmed. There was so much there. Like, I don't even know how to put this.
Ernest Rolfson 19:17
Which is where you would fit in.
I would hope that I could help them make sense of that. Absolutely.
Ernest Rolfson 19:22
Mm hmm. I guess that's really interesting. So how do you go about identifying what the right solutions are the right partners to bring in? And what do you look for? Or is it is it completely, that you have a couple of key vendor relationships that you you know, feel like you can rely on bring to customers, given that some of these areas tend to repeat themselves? Or how do you how do you think about that?
Dion Lisle 19:49
Yeah, really what I start with, and I've added this to the paid process is at the front of the gap analysis. Here's where you are, here's the bank. You want to be What's that gap? And then stack order those to say, well, onboarding luck, that's where the relationship starts. You got to improve onboarding. Let's digitize onboarding first. Second, let's look at your Treasury stack. What are you offering now? Well, that's woefully insufficient. What's next? What's next? And then prioritizing that. But the other step that I've added, honestly, is a process audit. The number of banks where I've sat with their wire person, where their lending team or whatever the case may be said, well, you have 48 steps here. Why is that? Well, we've always done it that way. I'm like, No, you're not allowed to say you've always done it that way. What is this step? What is this? And when you break down the process, it's amazing how many banks 10 year old process never questioned. And I can't imagine, earnest in our line in FinTech world, nobody's gonna accept the process for 10 years with no changes. We're even auditing and asking the question,
Ernest Rolfson 20:56
Not if you're on a real, not if you're at a real startup, for real? Yeah.
Exactly. Yeah. Yeah, it's all about efficiency.
Ernest Rolfson 21:04
So they don't even stop to ask the question, essentially. Exactly.
Dion Lisle 21:09
Because they're busy running in the back, I get it. And no, and and I was talking about the other day, the bank started to assign these tasks to people in the bank. And I'm like, Well, what about their day job? They already had it. eight hour, 10 hour day job? How are you gonna do that? Are you?
Dion Lisle 21:26
Sure. Well, it's it's just you don't you don't you know, it's everything's when you're at the top. Let's say everything seems easy. Oh, you can't fit that in too? Oh, you can't do that as well. What? You know what I mean, it's not realistic. So it's the same thing like what we tell, right, our solution is about digitizing accounts payable payments. And well, you could have your staff do this themselves. But you've got to onboard, like 2000 vendors to pay. And so your staff could just I guess, pick up the phone and do that. But when do they have time to do that? Aren't they? Aren't they employed doing something for you already? And then are they trained to do that? Do they want someone on your team have the competency and training to be able to have a thorough negotiated conversation around a number of electronic payment options for someone-- costs, speed, security efficiency and be able to navigate and complete enrollment around that?
Dion Lisle 22:23
That's right. Yeah, an operations person is not your best innovation driver, right? Operations people are very good at rinse and repeat events, right? And look at the statistics. I wish I had pulled this up. The number of accounting finance departments that don't close at the end of the month, end of the quarter, because they're behind, it's most of them. Right? And why? Because they're using Excel, they're using outdated tools. The bank information is not coming in cleanly. It's not Yeah, it's not scrubbed data. There's no data, hygiene, all of this stuff and to you and I were like, Well, why would you do that? We've always done that that was the answer. Wrong answer. Let's, let's stop the, you know, the hamster wheel address that and give you tools. So that it's not a horrible end of the month, end of the quarter?
Ernest Rolfson 23:10
I think two areas around this, I wanted to kind of tease out I guess what have you seen having the biggest impact on your customers on these banks so far? Or even in the last three years, let's say and you've been engaged in the space force? I mean, forever. Yeah. And so you've got a lot of war stories, but I guess what is making a big impact and or accelerating the impact and would love to hear to, if anything, to your knowledge impact on the end customers and users? And? And if so, what is that? What do you think that might be?
Dion Lisle 23:39
It's pretty basic. And I, I often talk to bankers about data and they say, Yeah, okay, I hear Big Data, Data warehouse. Data to me is you enter it once. And it's done. Right. And what most people don't realize is the number of times they enter data and re enter data, I sat with a wire transfer person, where she took a PDF of a wire request and keyed it all in I'm like, now what do I request from Why? Why is that data entered here? And again, and then confirm that Yes. Right. So my thing is, that's the number one thing if you think of data as enter once use many, that would solve a huge percentage of what I'm seeing as the biggest efficiency problem. And they're just used to it. This woman lovely woman doing a great job and rarely made mistakes. Rarely in wire transfers isn't enough. That's got to be five nines like you can never get right. I mean, yeah, you're in the payments, you know that.
Ernest Rolfson 24:48
Im thinking of Gattica--cool movie, maybe that was 2001, right where they've got rooms of people, right and you're taking drugs and you're bioengineered. So you never have a bad keystroke, and whatever and that's, you know, they were like, What? Why did something go wrong in payments? What you mean that one payment was screwed up? And it's like, well, I'm at these banks. They don't actually have robots working for them at these banks just wires or it's actually people. And maybe 1.5% of the time something will get screwed up.
Dion Lisle 25:23
Well look at say that. Remember the Citibank one that just short time ago? Half a billion dollars? They were like yeah.
Ernest Rolfson 25:33
Yeah, so we accidentally sent you half a billion. Just send me just send that back. That'd be awesome. And yeah, awkward.
Dion Lisle 25:43
Did you read about it? So I blogged about it. I remember well, that.
Ernest Rolfson 25:49
Well, no, it was for that bond payment. If you were I think it was a bond payment, and they they ended up not getting some of the money back. Right. And they were holding it.
Dion Lisle 25:58
Money did not come back. Yeah. Everyone says, Oh, they lost it. No. But what they did was they hold garbage bonds for a decade at a loss rate. And they lost and you know, we'll come back to working capital, they lost the ability to use that working capital. And three people had to sign off on that transaction to those were not employees. Here's a process question for you. How do you allow a half billion dollar process to be signed off by two non employees of Citibank using a system and I looked at the screenshots. Ernest, you guys like, Oh, my God, this stuff was from the 80s. had to be.
Ernest Rolfson 26:37
Green screen. Nonsense.
Dion Lisle 26:39
Yeah. Really? Nonsense. Yeah. But but but now look at a community bank that Citibank, they have billions in IT budget. And this has happened. Now let's go to our friends at the community back. What do they do?
Ernest Rolfson 26:53
It's the worst, if worse, if not same. It's just on a smaller scale less room for
Dion Lisle 27:00
smaller scale, same issues. That's it? Yeah.
Ernest Rolfson 27:03
So are the smaller banks, okay, with I don't know, perhaps ceding some control of some of these things to, let's say, third parties and or relying on things that they didn't build themselves or these new processes. Because like, I think on one hand, the bank may say, oh, but we've got a tighter control on this, because Wanda is the one that's looking at it eyeballing entering it in.
Dion Lisle 27:26
Honestly, it's a bell curve. Like I meet banks like that, but most of them are in the middle of this, like, we get it. We know we're dated, we're antiquated. work with us on our budget and our timescale so that we can break out of that. And just like when I used to sell the big banks, like discovers city and others, you find that champion, you know, you find somebody that gets it and wants to make the change.
Ernest Rolfson 27:50
How are they thinking about technology and it and risk and mitigation around that and bringing new solutions to customers? And we're certainly white labeled by different folks I'm sure some of the banks you're working with are just straight up turnkey, adopting different tools that are out there. Is this a stumbling block? Or banks, especially smaller banks, are they more flexible and loose around this? are they thinking about it in a in a way that's pragmatic and can make it work? Are they are banks after all, so they are heavily regulated and have certain compliance things that they're unable to be flexible on? But I guess what are they? What are they being flexible on? What what has been creatively adopted to make things work?
Dion Lisle 28:34
Yeah, the outsource thing is no pushback, because they've been outsourcing their core to jack, Henry FiOS and others for decades, right? So the outsource question, unlike the big shops, never been an issue, okay, the compliance piece is just a matter of they want to get in there and really see how it works. And what are the touch points? And where can they influence it and that type of thing. But as far as like the actual outsource and all of that non issue, little pushback on the cloud, but that's just lack of knowledge. They just don't understand it. But but that part's not been the issue.
Ernest Rolfson 29:09
Are they concerned about them and their safety? Or their compliance? Or and to what extent is it more that they care about their customers the CFOs that they're working with and those businesses or is it both or is that nuanced? Not
Dion Lisle 29:24
I you know what I will say this about community banks, I find they talk about their customers, both retail and mainly b2b much more than the big banks did. It's much more about our customers need this. Our customers asked us this. We need to deliver this to our customers. I will say enjoy that change, going from the big shops to the community banks, they're much more our service matters. Our reputation matters. This is everything does our customers. Happiness matters.
Ernest Rolfson 29:51
And we're talking about the big boys we're talking about like the top five biggest things right they just is the blanket statement. I think people would agree. Care less bout service care less about customers and more like what commodity thing can we push out there?
Dion Lisle 30:05
It's its quarterly results right? It's all about luck when you're when you're city when you're be evey when you're JPMorgan. There, they all do a okay job. I was opening my own personal so I switched Facere's bank account over, and I opened with a big bank to remain nameless. And I went into the bank and they said, Oh, the bankers out for the afternoon. The teller offered to help me fill out all the paperwork, open the account all good. Went home, got a text, you have to come back. Oh, I missed something. Come back why is this? She said, Oh, because you did it with the teller not with me, the banker. And I said, that sounds like a you problem, not a me problem. You had all the information. You just want to follow your process for your purposes. So that you the banker, protects your job, I was actually kind of really disappointed. It was about their process, not my outcome. And you could feel it, you can tell that's exactly what happened.
Ernest Rolfson 31:09
Yeah, no, they don't care about your time.
Dion Lisle 31:13
I'm a small business person, and they're gonna have me come all the way back into the bank to redo what I had done, because the person who did it correctly, thank you person. Isn't the person according to their process, their flowchart? Shouldn't it be the outcome? Right now? Not the process the outcome? Yeah, it was compliant. We didn't break any compliance rules. Sure. And yet they made me redo it all.
Ernest Rolfson 31:36
Sure. No, I get it. I get it. Let's talk about what else you're finding interesting. And what's happening around FinTech and payments. And I think this is highly related to both what I'm doing what you're doing. But you're writing a lot. You're blogging about cash flow and cash flow management solutions around that you've recently wrote something about AP automation and b2b payments, you touched on it. It wasn't your first but it was I think it was in your top three areas that you are kind of helping these banks navigate with was around the need for more robust digital Treasury solutions. So what's what's going on with this whole Treasury cash flow Working Capital Management, b2b payments space? How are these banks thinking about this? What are you interested in about this exciting about? Or what are you promoting or pushing any, you know, maybe narratives that these banks should be thinking about? navigating? Given I think competition is kind of heating up or anyway, investment interest in capability interested in minimum is enough?
Dion Lisle 32:41
Yeah, yeah. No, underinvested area, right. Right. The first thing I discovered was I mentioned to a banker. I said, No, you know, there are programs and I worked on a project that first day that we failed full disclosure, we were trying to get our SMBs to give us their data and process it and make recommendations all that for a variety of reasons fail. But I mentioned this to a banker, he's like, Oh, my God, I could actually see my customers QuickBooks, pull it in, analyze it and make predictions in the future. I said, Yeah, that is now doable. It's not rocket science. But if you're used to going out to your customer site with a notebook and taking notes, coming back to the office type, I mean, this is literally what they do. And but they liked that they liked that personal service. And what I'm telling them is, you can do that you can do exactly. That's it. How much better would you be as banker, if you had your customers 90 days of QuickBooks, or even a year of QuickBooks data, that right in your systems analyze and say, Hey, you know what, Bob, your business is up into the right, you should get another truck for your Electrician Business. Let's do a working capital loan that gets you that truck, those trucks over $100,000. They're not cheap. Let's do this. And here's how you can pay for it. Here's the kind of loan we could get you. This guy was like, What? That's possible. I'm like, it's not even hard. This is this is basic stuff, right? And they were just blown away. I don't know what you don't know, right? I mean, that's the theme that I'm finding with community bankers. They want to do the right thing they're trying to, but they're using very manual, very personal methods, instead of digital plus personal to deliver concierge. They're starting to wake up to that. And that's what excites me. Those are the kinds of things that I love.
Ernest Rolfson 34:25
I think the education here is digital tools enable more rich personal interactions and actual, more meaningful customer engagement, and better and more accurate advice. That's right, especially in the predictive side, leveraging trends and analytics. That's right. You do not need AI or machine learning to get to the core of what a $10 million business needs to be successful or one of these couple billion dollar banks and below.
Dion Lisle 34:58
That's exactly I was telling you about. Yeah, it's the basics. I rent in Moran. And I moved here a little while ago you're selling or
Ernest Rolfson 35:06
You're still in Moran, right? Yeah, to give you a large location away. Well, silent on the town.
Dion Lisle 35:13
Yes, but but Moran's lovely but I rent and my bank offers me refi all the time and I'm like I don't own you can see I don't have a mortgage payment every month you don't need an AI bot from you know Stanford University run it on a Cray supercomputer to go, Hey, this guy writes a check to a person every month for this amount and clearly doesn't have a mortgage. You know what, let's stop offering him refi. Let's offer them something else. And yet that basic knowledge that context, bankers miss all the time, whether it's b2b, or b2c does matter. Bankers miss this all the time. And you and I know the tools are available, all you got to do is look at the data. And this is why I say back to the first point data is available, just look at get comfortable with it.
Ernest Rolfson 35:58
They don't Well, they don't I mean, and again, they don't have the tools in place to get access to the systems is the problem, right? It's like everything is a six month integration. Everything is difficult. Everything's a project. As you know.
Dion Lisle 36:12
I'm working on a project now with the bank where they're trying to get some FiOS data out of their system. And they're struggling with it. I'm like it's your data?
Ernest Rolfson 36:22
Is there more to talk about that trend, or there's some other....
Dion Lisle 36:26
Or what I would say to community bankers, let's start with a data structure, a data strategy, a data schema, let's just get the data hygiene going. And from there, you're going to see all these possibilities open up. So that's one of the first things is gap analysis, followed by process audit followed by a data strategy, then everything's possible.
Ernest Rolfson 36:49
You gave some really interesting examples. And the banks we talk to want to increase non interest income. And yes, right and generate that that's a big driver. Is that a big driver for the customers you're engaging with? And or do you see I think this is kind of what I'm formulating, what I'm seeing is, yeah, net interest income, all well and good, they love to have new alternative sources or additional sources of revenue. But at the end of the day, if you can put the bank closer to doing more banker II stuff with the client and or giving them the data to your point to let them better make a loan, they're really happy. They really like that, because that is really what they know. But I think it's like they say they want more fee income, and they want to be able to help customers with that. But at the end of the day, don't they just want a closer relationship to be able to make more make more loans and make sure they don't lose those deposits?
Dion Lisle 37:43
100% I mean, you're you're spot on growing deposits is one of the keys and the one way they look at it, and I'm trying to help them understand the nuance of this is they think, Oh digital allows me to go out of my geographic area. Therefore deposits grow because a bigger geographic area with 4800 and something banks plus credit unions in North America, there's not a lot of geography uncovered. I think our companies will look at it now. Well, maybe you need to do a niche or a vertical or this or that. That's not about geography. It's not it just get closer to your customers, stickier services, better services. And and by the way, I mean, there's so much that small businesses spend they spend 10s to hundreds of 1000s a year on all these small business services, bookkeeping, invoicing, accounts payable receivable, factoring all the stuff that you're a specialist in. And yet these banks sit there and go, Oh, yeah, like no, we don't do any of that. Yeah, exactly. Exactly. And yet, the there's a study from FiOS oddly and pays that shows SMBs would love their banks to offer these services. Nice I saw I saw data that showed 66% of SMBs don't believe their bank understands their business they don't why because they don't look at the data they don't look at anything beyond Hey Bob let's handshake have lunch, smoke cigar whatever you know golf you know, but businesses move beyond that it's digital now right on deck can get you that loan like boom, digital online, no friction. Banks have to learn that digital playbook not giving up the personal I think their personal is hugely important and I think they get that but how to implement it. They get nervous.
Ernest Rolfson 39:26
You're you're pointing out something that's it goes up really into the middle market as well where I live although again some of these banking partners I have you serve small businesses, I certainly have very large channel partners that are dealing with small businesses are having gamut and if you've got 1000s of customers, there's going to be some smaller businesses in there and smaller businesses need payments and working capital management as much as anybody else. But it's you raise it really thing is it like if you're a CFO, and you need help in around financial services. The first call is probably not to your bank. These days, isn't that amazing? It's not your bank, it's you're on the Google. And you're looking for some software thing. And it's some subscription. Or you're looking at your accounting system, or maybe you've adopted accounts payable software or tierpoint. On Deck is now provided, right? But no platforms like that are providing loans. And so would you would agree with this statement, or this general theme, that the bank is basically at risk of being disintermediated?
Dion Lisle 40:30
Yeah. Now the funny thing about a lot of banks I talked to they go, Oh, I don't care about you know, Shopify, or Amazon or square capital. Those are the loans I don't care about. All I care about is loans. Okay. There's a great quote from Ernest Hemingway book that he wrote, where he's, you know, character says, How did you go bankrupt slowly at first, then all of a sudden, with these banks don't realize you let these guys at big tech, eat the edge of your business, and suddenly your box is much smaller, and you're less important, and that stickiness and that relationship deteriorates. Every time you let the edge of that box get smaller. What I'm encouraging is no- be more integrated to your business customers, not just for the big loans, because that's where the profit is, be there when they need you. You know, what is the bank? But if not, you know, and you know, George Bailey classic, you know, it's a wonderful life. It's it's the banker that's there when you need them.
Ernest Rolfson 41:25
Right? That's the way it used to be.
Dion Lisle 41:29
I think it can be I really, yeah.
Ernest Rolfson 41:32
So what's next for you? in this industry? What what are the plans for 40? grand? What are some of the other trends you're seeing? Where do you think community banking as a whole is going give us some, you know, future future state? Where's, where's the world headed?
Dion Lisle 41:51
So I'm pretty excited. So I worked with the folks at Money 2020 and they let me do a community bank workshop on Sunday as the event opens. And so I've got some folks out in October, this October live in Las Vegas, it's gonna be great. Excited to be back to it, right. And we're gonna have somebody from the clearing house, talk about how community banks can do RTP. I'm going to talk with a ModusBox, the founder of ModusBox, David Wexler, we're going to talk about how banks can evaluate a new bass platform in the cloud, right? We're gonna have somebody from Nidek Tammy Banks, who knows community banks, really well talk about how they can do Bitcoin, you know, digital assets, community banks can do this with nidek, right? And we're gonna have this whole agenda the morning from 10 to like, 1230. Just how community banks can do more digital, Nimbus is going to present a couple others. And I'm really excited about that, because I think this is the first step to getting community banks welcome in the money 2020 community and environment, getting them to understand technology is not scary digital lean into it. I was at move moov. The crew out there went to their dev conference in Denver two weeks ago, fantastic. There were only four bankers there. Four. Now it's a it's a FinTech dev conference for bankers. Now maybe they're intimidated, because I was in a session, they pulled up code on the screen, and I was over the tips of my skis.
Ernest Rolfson 43:18
Yeah, that's well, that's not ideal.
Dion Lisle 43:21
Well, for me, it's not. But what I liked about the conference in general was this focus that and they open it with developers are going to develop the future, let's work with them. Let's not be afraid of that. The final thing that I'm really excited about, honestly, of course, AI, ML data, blah, blah, blah, low code, no code systems, I think they have a ton of potential for community banks, get a business analyst gets really good at a low code, no code platform, and begin to redo your process, right. And then you can update it regularly. Everyone can buy into it, it can be more of a team sport, instead of just delivering this technology that no one understands.
Ernest Rolfson 44:01
So like process, automation style back-end business. Yeah, machine to human to machine interactions.
Ernest Rolfson 44:10
Third Party integrations.
Dion Lisle 44:11
I use monday.com for everything. It's a no code platform, and I'm not a coder, right? I coded in college and basic and COBOL to show you how old I am. And then I just decided that I'm not a coder. But I have the business mind. I like the business analysis. I like the process. Monday.com allows me to manage my own day to day business very easily with no code. There are platforms more sophisticated than Monday that a bank could use to deliver these automations between departments, between customers and back office and that type of thing. That I'm really excited.
Ernest Rolfson 44:44
I wanted to ask Would it be okay if bigger banks engaged in attended that community banking event at Money 2020 like And would it be relevant for them? What is the unique element right now about community banks, we have to engage with them in a different way. L
Dion Lisle 45:02
Yeah, I mean, yeah, no, you bring up a good point. I mean, it's Yeah, absolutely relevant for any banker who's not yet doing digital assets, doing RTP. Looking at bass as a service, it's relevant for any and all of them. What also it's good for is just getting the dialogue of FinTech to bank, Rosetta Stone, get them talking, get them understanding the other side of the aisle. I think that's really key.
Ernest Rolfson 45:31
That makes sense. Well, any parting thoughts here? Before we wrap up, or anything we didn't touch on that we really should have?
Dion Lisle 45:39
you know, we should probably do another one in the near future where you and I,
Ernest Rolfson 45:43
we should probably talk more than once every, like, four years or something?
Dion Lisle 45:46
Yeah, let's make a note of that. Yeah, let's talk working capital next time and kind of what Finexio is doing and how you help mid-tier businesses deliver on that, because a lot of the banks I've talked to, you know, they focus on SMBs. But they go up to the mid tier, you know, SMBs grow up.
Ernest Rolfson 46:02
No, no, that's what we're helping them. I mean, the banks that we're working with right now is they serve a range of customers. And we're working with more the bigger side of the small side, if that makes sense. We're not working with the mini ones. And we do have investors that are invested in on the board of a number of community banks. So we are able to gain and have dialogue around some of these insights that you've been sharing. And the good news is, I think what we hear from our investors and that are sit on these bank boards is similar to what you're sharing in some of these challenges. So always good to be validating and, and talking through these topics with smart people, if they have a 15% of their business is with some of the larger clients. They want to keep those larger clients, they want to serve those larger clients, they want a more robust tool set, they want better, digital modern tools improve the consumer experience, because they're concerned that maybe there's a path of graduation away from the community bank, to a chase to a wells to a bank of america, and they're like, Hey, I don't offer accounts payable payments as a service. I don't offer Working Capital Management, I don't have digital reporting that someone is kind of showing them over here, right. And so it's like, it's almost that bells and whistles component, that you want to be relevant to everybody. But the bank can't be doing a custom build out to have something that's going to serve all these. Some of these customer needs are a little bit different. And yeah, the big banks can get more away with it. And the bigger banks can have dedicated teams and resources and Dev and products for all different types and sizes of customers. You can add a larger community bank.
Dion Lisle 47:42
Personal matters, but digital can be the difference maker anzai encouraged community banks again, here's your personal service. You're known for it. It's great. Here's digital, here's concierge service. Keep working on that spectrum to deliver that better touch.
Ernest Rolfson 47:57
Again, Dion, thank you so much. This was a convo with Deon Lisle at Forty Grand. Look, man, always fun. This was great. I learned a lot. Hopefully the audience learned a lot got something of interest from it. I know I did. Let's sit down. If we can grab a coffee or something at Money 2020 I will be out there. That I'll be good too. It'll be good to reconnect with you sincerely. Thank you so much, man.
Ernest Rolfson 48:27
Thanks for listening to b2b cash flow conversations. This is Ernest Rolfson, the CEO and founder of Finexio. I welcome your questions and comments. You can reach me at firstname.lastname@example.org You can also find us on Twitter @FinexioPayments. To subscribe, you can go to Finexio.com/podcast. Be sure to check out my new episodes on Apple podcasts, Spotify, or wherever else you listen to podcasts. Thanks and talk with you again soon.