Fintech Made Easy: Where to Begin for Community Banking Professionals

A Q&A with Alex Jimenez, Vice President and Senior Strategist at Zions Bancorporation
By Jennifer Brooks, Chief Marketing Officer
Spring 2018

Alex Jimenez portrait

Fintech, Blockchain, Neo-Bank, Digital Disruption. These topics have increasingly become commonplace in the banking industry. You want to better understand these concepts, so you Google and find numerous articles on the subject matter. After researching, you can't help but think to yourself, “Interesting, but how does this affect me and my financial institution?”

Fintech:computer programs and other technology used to support or enable banking and financial services.
Blockchain:a digital ledger in which transactions made in bitcoin or another cryptocurrency are recorded chronologically and publicly.
Neo-Bank:a new type of app-only, online bank with no brick and mortar branches or ties to legacy banking systems.
Digital Disruption:any level of change to normal business models and practices caused by new digital technology or processes.

Sound familiar? Don’t worry; you are not alone!

I was happy to have the opportunity to ask several fintech-related questions to Alex Jimenez. Currently, Alex leads the technology investment planning process for Zions Bancorporation. He was named one of the top 100 global influencers in Financial Technology (Fintech) by Onalytica, Hot Topics and Jay Palter. Mr. Jimenez has been quoted in the Wall Street Journal, the Boston Globe, The Financial Brand, the American Banker and the Boston Business Journal on this subject.

The following are Alex’s insights specific to community-based financial institutions…and, some of his answers might surprise you!

Q. What should community banks and credit unions worry about when it comes to blockchain technologies?

A. While there is significant industry attention and investment in blockchain technology, community banks and credit unions don’t need to lose sleep yet. The promise of blockchain technology to revolutionize banking, and many other industries, might prove to be true. However, use-cases for the average banking customer are still in the development and testing phase. Scalability and adoption are areas that need to be addressed.

Community banks and credit unions should become aware and educate themselves about the space. They should take opportunities to remain knowledgeable, and if interested participate in tests from their technology partners. They should be ready to jump in when commercially available solutions are available that address a customer or member need.

Q. Are mergers and acquisitions between small and mid-sized financial institutions going to be the only way for them to succeed (from a Fintech perspective)?

A. Absolutely not! Community banks and credit unions can play in the fintech space just as much as any other kind of financial institution. The focus needs to be on meeting customer or member needs and not on what shiny technology is available. Fintech brings a focus on customer experiences that are not saddled with legacy thinking and systems. Community banks and credit unions are better tooled to understand the customer experiences that their customers or members expect compared to the larger institutions. For smaller institutions, the knowledge of their customer base is an asset that can be leveraged to partner with fintech companies - and beat their larger competitors.

Currency symbols emerging from phone into cupped hand

Q. Concerning the future of Fintech, if you were the CEO of a $500 million asset financial institution where would you focus in 2018?

A. Understanding your customers’ or members’ needs is key. That doesn’t mean doing surveys and cataloging what they perceive about you. Instead, organizations should endeavor to understand customer needs and behaviors. Merely asking them what they want won’t bring you any insights. Financial institutions should work on anticipating customer experiences that will address customer needs and wants.

As Henry Ford once said, “If I had asked people what they wanted, they would have said faster horses.” Financial institutions that stick to looking for faster horses will eventually lose all their customers. In this age of digital transformation, a company’s strategy should be built on customers’ needs, and not just in digital spaces - but in all interactions.

Q. When talking about “Digital Disruption,” what might that look like in the next 12 months in the community banking space?

A. I expect to see more partnerships between fintech companies and community banks or credit unions. I’m not sure if this will start within the next 12 months. The larger and most-forward looking organizations (not always the same) are already moving away from the pack. In the next 12 months, the difference between “digital strategic” organizations and those that are waiting to follow will be very evident. At that point, some will have a very difficult time catching up. In the age of digital disruption, there is no such thing as a fast follower, particularly in an industry where the least complicated technology project takes a year at best.

Currency symbols hovering over social graph between two phones

Q. What is a “Neo-Bank” and what effects will that have in the banking industry over the next five years?

A. A Neo-Bank is a fintech bank that is 100% digital. Unlike an established bank, they are built on brand new platforms for both the underlying systems and the customers’ experience. There are very few banks in the U.S. in that space mostly because of regulatory hurdles in starting a new bank. There are many newer digital-only banking providers from established organizations like TIAA-CREF and Discovery. However, most of them are built on legacy systems and suffer from the same limitations as traditional banks’ digital efforts.

Other brand-new, digital-only banks, like Moven and Simple (now part of Spain’s BBVA), get closer to the ideal of Neo-Banks, but they still must contend with a certain level of non-digital legacy systems from their partner banks. Goldman Sachs' Marcus is said to be a true Neo-Bank built from the ground up using digital technology. There are many Neo-Banks in Europe like Germany’s N26 and Fidor or the UK’s Monzo and Sterling. The bottom line is that we will see a lot of innovation coming from other markets, but the average U.S. community bank and credit union won’t have to worry about them anytime soon. These first models are an opportunity to learn from and, in some cases, partner with in the future.

For more information about Alex Jimenez, visit his website at alexjimenez.info or email alex@alexjimenez.info. You can also follow Alex on Twitter and LinkedIn.

Jennifer Brooks has over 20 years in the financial marketing industry. She is Chief Marketing Officer at Stellar Strategic Group. To learn more about digital marketing, please contact jennifer.brooks@stellarstrategic.com or 402-281-0692.

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