Independent Banker - July 2019 - 25

Sponsored by
Western Union
Business Solutions
The Simple Genius Behind Fintechs and
How Community Banks Can Compete
by Stephen Kuhl, CFA
At this point, predicting the downfall of big banks is practically a cliché. Their
demise has been forecasted for years, but it wasn't until the 2008 financial crisis
when cracks really started to appear in their foundation. Fintechs were around,
but their use was still somewhat of a novelty and didn't appear to be a match for
the established giants. Fast forward to the present where the leading brands may
give financial CEOs a few sleepless nights.
Dozens of the biggest players are set to reach a $1 billion valuation this year - a
feat that would have seemed impossible a generation ago. Looking at some of
the top companies, it's easy to see how their value skyrocketed so rapidly. The
Collison brothers formed Stripe to help small online retailers with payments,
Avant gives average folks loans and Gusto provides HR for under-100 employers.
In short, the billionaires made their buck serving those that large banks can
inadvertently miss. In this way, they're not unlike community banks, whose
people-first philosophy is akin to the emerging tech giants.
The Next Step for Fintech
Ironically, savvy fintechs are now capitalizing on their popularity to become more
like big banks. Using their already substantial customer base, companies like
Robinhood are now expanding to offer additional financial services. It's a smart
move for the profitable team who first began as a commission-free brokerage.
Users are already highly engaged and seeing a huge chunk of assets transferred
from traditional institutions to these fan favorites in the coming year will be no
surprise. After all, who wouldn't want to consolidate with a platform they actually
like using?
The Opportunity for Community Banks
With the unstoppable growth of fintechs, what's a small bank to do? Because
customers seem to be increasingly open to alternative financial solutions, there
can be opportunity for these institutions to grab a piece of the pie - if they
consider focusing on two major areas:
"
Enabling global trades on a
seamless digital scale is one
of the best methods for both
community banks to help
expand their value and ensure
continued relevance.
"
1. Global trading
2. Digital capabilities
Since their creation, community banks and member-owned organizations have
offered many of the same services as their competitors. However, unlike fintechs,
these financial institutions have already proved their resilience. They too suffered
through the financial crisis, but weathered the storm considerably better than
large corporations who had five-times the failure rate. Community banks smartly
positioned themselves as behind-the-scenes partners with burgeoning tech
giants Square, Stripe and Robinhood.

Independent Banker - July 2019

Table of Contents for the Digital Edition of Independent Banker - July 2019

Table of Contents
Independent Banker - July 2019 - Intro
Independent Banker - July 2019 - Cover1
Independent Banker - July 2019 - Cover2
Independent Banker - July 2019 - Table of Contents
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Independent Banker - July 2019 - Cover3
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