A collection of observations, ruminations, predictions and random thoughts from Cornerstone Advisors.

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September 20, 2016 by Ron Shevlin Ron Shevlin

A GonzoBanker Guide to Finovate Fall 2016

If you’ve ever attended a Finovate conference (now in its 10th year of existence), you know that it’s truly a firehose of information, an assault on one’s ability to comprehend and process anything, as 70 companies present their spiels in seven-minute spots. Then there are the nearly 1,500 attendees walking around, making it almost impossible to get close to the coffee.

Despite all that, it’s still this GonzoBanker’s favorite conference to attend (maybe because I only have a seven-minute attention span?). There are, however, a few things that drive me nuts about Finovate:

No rhyme or reason to the order and flow. The conference intentionally does not group presenters by technology or category or anything else. But as an attendee, I’d like to see all PFM providers in one segment, or all security/authentication vendors in one segment. Mostly so I could compare and contrast more easily, but also so I could choose to bail out of one segment and go meet with people. In each 10-presenter segment, I probably only really care about five or six of them—but I can’t leave and come back in, because of the random order.

The line between reality and hype is paper thin. Finovate has a strict rule: no PowerPoint slides. That doesn’t mean, though, that what attendees see are real demos of live systems. And please don’t think that presenters will make that clear.

People (i.e., attendees) are so shallow. When it comes to voting for “best in show,” the presenters with the flashiest interfaces invariably win, regardless of the business potential or technological innovation of what was presented. One firm, a security/authentication vendor, won a best-in-show award, in no small part because the presenter was funny. Guy gets up there and says “I don’t know why we need a seven-minute presentation. Will only take me 30 seconds to show our technology.” He takes a selfie, logs into this account and says: “OK, five minutes and 45 seconds left. What do I do now? OK, let me show you that again.” Which he did. Four or five more times. And he wins an award. Really, people?

* * *

Here’s a rundown of each of the 72 presenters.

Just kidding. Doing that would be more painful for us than it would be for you trying to read it. Instead, here are three of the major themes that emerged:

1. Bots are hot. Lots of bot demos, including those from Personetics and Kore, which presented strong use cases (i.e, customer service and advice/guidance). Those presenting “transactional” use cases were less compelling. We’ve got a low tolerance for gee-whiz technology with no strong business case/impact, so if we had heard one more presenter say, “Alexa, how much money is in my account?” or—even worse—say, “Alexa, can I afford to spend $150 for dinner?” we might have rushed the stage and thrown the presenter off. Dismissing the cutesy Alexa questions, the important underlying trend here that needs attention is that AI technology has really come a long way to delivering highly credible customer service capabilities.

2. Security/authentication. In the context of the conference, security/authentication technology demos poorly. Like the example discussed above, what’s there to show? You take a picture, read a fingerprint, scan an eye, analyze spit … whatever … and log in or get rejected. Ho hum. But the number of presenters showing their technologies in this area demonstrates the importance of the technology, and the amount of money that’s going into improving security/authentication.

3. If Finovate is any predictor of the zeitgeist in banking, then big data is dead. That said, if Finovate is a predictor of banking zeitgeist, then long live analytics! A number of firms presented their data analytics capabilities, but amazingly—and thankfully—not one of them used the term Big Data. The presenters in this space generally diverged on one point: whether they use their own proprietary data source(s), like TransUnion showing some really good analytics capabilities tied to their data, or whether they provide generic data analytics capabilities like MapD and QEData.

As a side note, some of the presentations in this segment were just a blur of colors as the presenters seem to think that clicking through a million things to get to some multi-colored graph is useful. Then again, if you recall the “people are shallow” comment, then maybe we’re the minority here.

Speaking of colors … one firm presented its ability to “color code” customer conversations. The firm’s technology color codes call center or Web interactions based on the emotional level or content discussed in an interaction. The presenter talked about banks’ desire to have a “four-color conversation” with customers. WE TOTALLY DID NOT UNDERSTAND ANY OF THIS.

At the break, we ran into a client and asked him what he was seeing that he liked. He said that his bank uses the said-company’s tool, which sits on top of the core, analyzes interactions in real-time, and suggests prompts and scripts to call center reps. We asked, “So how many four-color conversations do you have?” To which he replied, “We don’t do anything with colors—I wish the guy hadn’t presented that.” Just goes to show you that a presenter can really screw things up. But those of you involved in technology selection projects already knew that.

* * *

A few other firms that stood out:

Sindeo presented its online mortgage application process. Hot damn, this was slick. Very impressive. Fintech startups continue to raise the bar on customer experience. But that’s not the only threat from an existing financial institution perspective. What the fintech startups are doing is capturing the “convenience” position of the market.

FIS demoed its Avidia Bank deployment of cardless access to ATMs. When FIS presenter Doug Brown told us beforehand that he’d be demoing four use cases in seven minutes, we didn’t think FIS would pull it off—but it did, seamlessly. We caught up with CarrieAnne Cormier from Avidia later in the day and asked: “OK, so what’s the real impact of this? Have you stopped issuing cards? Seeing a decline in replacement cards? Any impact?” She said the biggest benefit was the fact that since they don’t do instant issuing of cards, an Avidia customer can be set up with a new or replacement card on her smartphone and use that immediately, waiting for the physical card to arrive. But she also added, “We try to compete in our market based on having superior mobile capabilities, so to a large extent, we have to have this to be consistent with our stated value proposition.” Kudos for that.

Fiserv demoed something it called Social Lending. The crux of the solution is that if a customer asks a bank for a $30k loan, Fiserv’s technology would enable a bank to say, “We’ll offer $21k at 9%” and get additional sources (friends? family?) to put up the rest (at a different and, likely, higher rate). As demoed, we were a bit skeptical about this. If a customer applies for a loan, and the financial institution tells her, “We’ll give 21k at 9% and 9k at 12%,” don’t you think that customer is likely to say or think, “Why don’t you just give me $30k at 10.5% (or whatever)?” Here’s why we think the technology could be noteworthy: Q. What’s the biggest cause of attrition at credit unions? A. Members who get turned down for a loan. So … if Fiserv could use this technology to enable a credit union to either syndicate a loan, or maybe directly work with a set of other credit unions to fund loan apps, it may be able to collaborate to keep more members in the credit union system.

Avoka demoed its Avoka Exchange, which offers an ability for an FI to seamlessly plug and play different vendors for account opening/onboarding. Avoka got one of this GonzoBanker’s votes for best-in-show, and we found it hard to believe that it didn’t garner enough votes from other attendees. How could that be? Oh yeah, shallow people.

MX demoed two things. MX CEO Ryan Caldwell started by saying, “What we’re going to show you is next-gen account aggregation” and then basically proceeded to slam Yodlee for the abysmal data quality of current account aggregation. Then he switched gears (pun intended) and announced Power Switch, technology that enables a financial institution to go into Amazon, Netflix, etc., and change a user’s default card option to the FI’s card—in effect, making the card “top of wallet.” By the way, when Yodlee presented the next day, it took a shot back at MX. Let the aggregation wars begin!

Special mention to the presenters for whom English isn’t their first language. It’s hard enough to get up and present a seven-minute demo to 1,500 critical (and a few snarky) industry insiders. But doing so in English when it’s not your preferred language makes it even harder. Hats off, and thanks, to the presenters who did it.

Were you at the conference? If so, let us know what you thought, and what caught your eye.


Filed under: Branch Sales & Service, Cards & Payments, Commercial Banking, Information Technology, Mortgage Banking, Retail Banking, Vendor Buzz, Web & Mobile Banking

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September 14, 2016 by Terence Roche Terence Roche

An Open Letter to Wells Fargo Senior Management

To the senior team at Wells Fargo:

We write to you today on behalf of the GonzoBanker team. By way of introduction, you probably don’t know us and we have never worked for you. We consult to the mid-size and community banking space. Like you, we make our livelihood from this industry and have deep respect for the banking business and the people in it. We are writing to you with them in mind.

For many years, we all respected and admired the phenomenal brand you built—the folksy, hometown bank that scaled without compromising values. The bank that didn’t dive into reverse swaps and other Wall Street shenanigans that caused so much pain back in 2008. The bank whose CEO, Dick Kovacevich, famously proclaimed that you didn’t need that damn TARP money because you were doing fine. The bank that Warren Buffet bought for his portfolio. The bank that Jim Cramer and just about every other industry pundit called the best big bank in America.

So, after the events of last week, we’re not writing to tell you that the great brand you built is now severely tarnished. It is. Or that the behavior this uncovered was flat-out disgraceful. It was. You already know this. Fines for student loan fees. Fines for mortgage practices. And now this latest revelation of unauthorized accounts and fees. You have dragged your name down to the reputation level of payday lenders and collection agencies.

We’re not writing to ask why it took the CFPB to make this public instead of you doing it proactively. You’ve already answered that. When asked by Bloomberg why this issue had not been reported in any filings, your answer was, “We determined that the matter was not material.” Really? Not material to whom? The customers who were affected by this? Your corporate culture and the 5,300 employees you fired? Or maybe you just meant that it wasn’t material to your bottom line? We can tell you that this would have been material to most of our clients if it had involved even one employee or affected one customer.

We’re not writing to point out that you all profited from this personally. You did. We all know that. Your senior executive who led the retail business when all this happened and who “retired” in July took a package estimated by Fortune at $125 million. We can only guess how well the rest of the top brass did.

No, the reason we’re writing is to ask this: what are you going to do now? Because the way we see it, you have two choices: you can work hard and quietly to make this go away, or you can work hard and transparently to make it right. Which will it be?

The fact is that the financial impact from all of this will be pretty negligible. A $185 million fine? A literal blip in 2016 earnings, and arguably too little based on the extent of this behavior. 5,300 employees? 2% of your workforce and we’d guess that you’re hiring already. Investors, especially institutional ones? We’d wager that there will be very few institutional trades out of your stock this week based on moral outrage.

The truth is that you can probably be pretty successful over time trying to make this go away. Or you can try and make this right.

Let’s assume you really want to make it right. Let’s start with the tens of thousands of employees who are all wondering what happens now. The 5,000 employees you fired didn’t create the culture that produced this debacle. You did. Or you turned a blind eye and let it happen, which is even worse.

Your announcement this week that you would eliminate product sales incentives is an encouraging start, and it will make a difference to employee morale. However, we all know that what you say and do a year from now, and three years from now, is the real story. You need to let employees know that instead of your culture celebrating the amount of fees they can generate, you will celebrate them doing right by your customers. You need to continue to change incentive plans that back that up. You need to listen to good employees who let you know that they are being pressured to do things they don’t believe in and act on their concerns when they’re valid.

Your customers? Well, we’re sure that as part of your settlement you will be sending all sorts of correspondence and refunds to the customers that had to put up with this. But, like your employees, what really matters is what they will experience when they walk into a branch or call your call center in a year. Or three.

You can try and make this go away. Or you can try and make it right.

You also need, in some way, to apologize to your peers and competitors. Two of their biggest fears are the cost of compliance and the CFPB and other regulators overstepping their mandates. Your actions gave the CFPB absolute legitimacy for years. Now we have to worry how much time and money the rest of the banking industry will need to spend to prove that they didn’t do what you did—just like they had to after the mortgage mess of 2008.

By the way, don’t think that managers at community banks and credit unions are high-fiving each other because this occurred. They aren’t. The truth is that although it can be hard to compete with you because of your size and muscle, all they really want is a playing field that has smart, ethical competition, because at the end of the day that environment makes everybody better.

 You can try and make this go away. Or you can try and make it right.

As for your shareholders, some of us here probably own your stock, at least through mutual funds. Here’s our shareholder input. If you give us a choice of $4.07 annual earnings per share including this behavior or $3.50 a share without it, we vote 100% for the latter. If that means your share price would be $45 instead of $50, so be it. We are pretty sure we speak for a large percentage of your individual shareholders and probably some institutional ones as well on this topic.

And finally, we have a suggestion for you, the senior leaders of your company. You need to take whatever amount of money each of you made in salary, bonus and options because of this and give it back. Take it out of your pocket and give it back. Or give it to charity. Because you don’t deserve a penny of it. You need to show all of your constituents, in a very concrete way, that you understand this.

You have said the right things in the last week. Now everybody is watching to see if you do the right things in the long term. Or whether you’ll try and make it go away.

You may also want to read: The End of Sales Culture B.S.


Filed under: Branch Sales & Service, Consumer Lending, Retail Banking

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September 9, 2016 by Terence Roche Terence Roche

Is Your Vendor a Partner? Ask These 10 Questions to Find Out

“Some people ask the secret of our long relationship. We take time to go to a restaurant two times a week. A little candlelight, dinner, soft music and dancing. She goes Tuesdays, I go Fridays.” —Henny Youngman

Man, vendor management is getting to be a hot topic these days. You’re talking about it. The regulators are talking about it. We at Cornerstone Advisors are sure talking about it, to the point where some of you have asked whether we own the soapbox or just rent it when we need to stand on it. (Answer: own.) We’re pretty sure we heard it mentioned once or twice by Bob Costas on the Olympic broadcasts. Yes, really.

There are a lot of components to this topic. Today, let’s focus on the strategic part of vendor management and start with this premise: the relationship, or partnership, you develop with your vendors, and how that translates into competitiveness on the street, is a make-or-break issue for you. Period. And make-or-break issues require hard management focus and talk.

Like anything else, that talk needs to get specific and measurable. How can you measure whether or not you have partnership with your vendor? Here are 10 specific questions we at Cornerstone think need to be asked and answered.

1. Is my vendor doing research for me or am I doing it for them? When you want to know about what is going on with, let’s say, online lending, or Bitcoin, or Samsung Pay, or cloud computing, is your vendor bringing the information to you about latest developments? Best practices? Peer success stories? Suggested responses/strategies? If a vendor is a partner, there should be a feeling of joint research and proactive sharing of new developments (i.e., not just once a year at the conference during the chicken lunch).

2. Is my vendor managing interfaces, integration with other vendors or am I? By this time, we have all figured out that 99% of you will not buy every product from one vendor. So vendors that compete against each other with products will be in the position of having to integrate and work with each other when you need them to. If they are doing this proactively and only involving you when they need you, you have partners. If you’re scheduling the calls and pushing for cooperation and arbitrating between them using a gavel, you don’t.

3. Is my vendor approaching me to understand my unique needs or am I having to approach them? Every one of you, every one, has some unique system requirement that will turn into a system customization request. It could be a report, or one flag on the system, or one processing rule for your customers—but it’s something. Our experience is that most vendors look at these requests as annoyances and you’ll see a price quote that pretty much confirms that. So, here’s a question: when is the last time a vendor really dug into a unique need of yours that their system could meet and turned it into a project for you? Is that too much to expect from a partner? (Hint: no.)

4. Is my vendor worried about how I best spend my money with them or am I on my own with that? So, like Deep Throat told Woodward and Bernstein, follow the money. Here’s the truth: we look at invoices from vendors every day. We see stuff you’re paying for that you shouldn’t, either as much as you’re paying or at all. It makes our heads spin. Then we see stuff you don’t have from that vendor that you should (re-spin). And we have never seen a bad contract that wasn’t enforced 100% to the last day. Here’s our take: if a financial institution thinks the vendor is worried about it getting the best bang for its technology buck, it will spend more with that vendor long term. More. The FI wins. The vendor wins. How simple is that?

5. Is my vendor updating me about project delays and scope reductions or do I get to discover these by myself late in the process? First, let’s agree that there is no chance that every last project you undertake with a vendor will finish on time and on budget. Life and technology don’t work that way. What can happen every time is transparent notification early enough in a project to allow you to make the necessary adjustments for your customers and staff. So many of our clients have shared stories with us about how, when they express surprise on learning about delays at the last minute, their vendors tell them, “You must have known about this before now.” Partners bring bad news like this to the table early and openly.

6. Who escalates a problem or issue: my account rep or me? Our retired partner, Carl Faulkner, told us that when he worked at EDS back in the day, an account rep could not only escalate a client problem internally but could get resources redirected to fix it. How cool is that? So, we’re still not sure exactly what Ross Perot was saying in those 1988 debates (and exactly who James Stockdale was) but, boy, he got that service idea right, didn’t he? When you’re really having a problem, a partner calls you. They don’t wait for you to call them.

7. Has your vendor ever told you how you could be a better customer? One of our clients, Ed Speed, used to tell his staff, “They can’t be a good vendor unless we’re a good customer.” There is wisdom here. Banks need to do their part to make the technology relationship work. Like, say, go to the teensiest bit of training. So, has your vendor ever sat down with you and discussed things you could do to make the relationship work better? We don’t mean as part of a paid engagement; we mean as part of your ongoing relationship. This can be uncomfortable, but partners don’t shy away from uncomfortable conversations.

8. Does anybody know whether you are getting the maximum ROI from your systems? The most basic way you can get a pickup in productivity, or reduced cost, is to make better capabilities of the systems in front of you—process automation, better business intelligence, maximizing self-service tools, to name a few. When we are visiting on the front line with clients and ask users what percentage of their system capabilities they think they are using, they usually say 50%-70%. What if they’re right? Do your vendors worry about this and try and get you nearer to 100%? Do you ask them to?

9. Who talks about and shares the “great” customer experience? If there is one thing that we’re all saying systems absolutely have to do, it is to create great buying and servicing experiences for our customers. All channels, all the time. There is not a vendor out there that isn’t saying that they have developed it. And maybe they have. The question is, how do you know who has also used your systems and created great delivery that you can copy, improve and share? I was at a system demonstration this year and the vendor was asked, “Which of your clients has the best loan sales process and onboarding process?” The answer was, “We have so many options and clients that use them differently it’s really hard for us to know that.” Um, whaaaaaaat? Come on. Partners are passionate about sharing best practices and they bring them to you.

10. If you are not on your vendor’s flagship product, have they talked to you about the roadmap to get there? This is a particularly big question for core systems. All of you that are not on a flagship core product (and we all know exactly which ones they are) know that there’s a conversion in your future—sooner or later. Has your partner laid out the roadmap and recommendation about how to accomplish this with the least customer, employee and cost impact? Have they asked about your roadmap? Or have they told you why they don’t think you need to? If you are in this situation, the roadmap conversation is the basis of the future relationship and partnership.

These questions lead up to one final, really big one. Does this all add up to me believing that I have the right vendor for the next five years, or do I have a system selection in my future? For all the talk about technology, fintech and disruption, it is still the truth that the biggest reason that any FI leaves/replaces a system is that it has lost faith in its vendor or the vendor’s product.

Sometimes, there is nothing to do on the product level. Products can be outgrown or become inadequate for very valid business reasons. So be it. But relationship failure, in a time when so many big technology advancements and projects loom, is just unacceptable. That is the crux of strategic vendor management going forward.

Hopefully, our questions will help in that quest.


 Vendor woes getting you down?

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Visit our web site or contact us today to learn more.



Filed under: Core Processing, Vendor Buzz

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