What words describe 2016 GonzoBankers? Volatile … surprising … crazy … big league or bigly?
As the year draws to a close, there’s a theme resonating throughout the industry: tired and complacent financial institutions are being pushed around and torn apart. A deep mistrust is growing for anything that feels bureaucratic or obfuscated, and bankers stand at a crossroads as to where they may fall in this shakeout.
In the post-Wells-scandal world where the shift from people and bricks to machines and digital is getting very real, bankers are scrambling to build new generations of their businesses. We can’t bank on this near-term stock rally staying around forever. Instead we need to pay serious attention to how technology is changing strategy in our industry and develop gritty tactics to address this shift.
So it’s time to light a fire, grab a big tumbler of Scotch and rest up for a busy 2017 as you experience one of the holiday’s greatest traditions: the annual GonzoBanker Awards. We hope you enjoy our take on the good, the bad and the bigly of 2016.
THE BANKING AWARDS
The 2016 Headline That Will Give You a Headache – “Wells Fargo CEO Says the Ethics Hotline Was Mostly Ethical.” We got nothing here – this one stands on its own.
GonzoBanker of the Year – Larry Richman, CEO of the PrivateBancorp Bank. Since Richman and about 100 other bankers from LaSalle Bank in Chicago joined PrivateBancorp nearly a decade ago, the bank has grown to an $18 billion solid niche player with $10 billion in assets under management. Richman and his shareholders now must decide if their $3.8 billion offer made this year from CIBC is rich enough after the “Trump Rally.” Hats off to a decade of strong leadership and hard work.
Merger of the Year – Hope Bancorp. While this deal was announced late last year, the heavy lifting was done in 2016 as BBCN Bancorp and Wilshire Bancorp came together under a new brand to create the largest Korean American bank. Kudos to Hope CEO Kevin S. Kim, the executives and the boards of both organizations who put rivalry aside to gain scale in the new world of banking where differentiation matters and community can be more than geography.
The “Slo Mo” Merger Award – Goes to New York Community Bancorp for its glacial wait for approval of its proposed acquisition of Astoria Financial Corp. NYCB recently announced it would not receive approval in 2016 and may face a termination decision by either institution’s board under the merger agreement. Maybe a regulator was out sick or on maternity leave, but this is one crawling bureaucratic nightmare.
Mergerama Region of the Year – The Midwest: Huntington-First Merit, Chemical-Talmer, Old National-Anchor … the list goes on. Is it in the water? Or the need to take market share in a slowest growth region?
Acquisition of the Year – Guaranty Bank and Trust Company in Colorado for its acquisition of Home State Bank. A wonderful franchise and team picked up by Guaranty in-market at a decent price.
Sale of the Year – Scott Custer, Terry Earley and the gang at Yadkin Bank for their successful sale to FNB Pennsylvania and the creation of a new regional power in the Mid-Atlantic and Southern states. This was one fast ride to more than $7 billion in assets, including a recent merger with NewBridge bank, before a very respectable exit strategy for the shareholders. This industry is consolidating fast!
A “Get Your Act Together” Statistic if There Ever Was One – Non-banks will account for over half of mortgage production in 2016. It’s time for banks to focus hard on marketing and the borrower experience.
Handy Handout – Tinker Federal Credit Union branded jumper cables given to board members at its strategic planning retreat. Let’s energize this session!
Conference Panelist and Moderator Match-up of the Year – At BAI Beacon, moderator Robert Barba from American Banker asked clearly unexpected questions that challenged his panelists to the point of some declines-to-answer. Joe Reilly, CIO at Zions Bank, rose to the challenge and shared solid details about business change deriving from a system switch. Kudos to Reilly! Consolidating 13 loan processing centers into two and better integrated treasury is real change.
Agile Banking Quote of the Year – “If something takes three years to build, it’s too late. The big bang project is over.” From Hancock Bank’s Jennifer Wilson at FIS Connect.
Be Careful What You Wish for Award – To all those Fintech providers that can now get an official bank charter to operate within the confines of simple regulatory requirements.
Best Free Market Research a Retail Banker Will Ever Get
The 2016 Gonzo Marketing Medal – Goes to Elevations Credit Union for its “Egg Lending” campaign. It’s funny, tongue-in-cheek and just plain different. Check it out [1] on YouTube.
The Millenials as Funding Award – Goes to Dime Community Bank for attracting press attention when it appealed to hipsters in Brooklyn as a means of funding its powerful commercial real estate niche. (see https://www.bloomberg.com/news/articles/2016-06-01/this-is-how-a-banker-in-brooklyn-makes-money-on-millennials [2])
The FinTech Partner Best Practice Award – Goes to Cambridge Savings Bank and SigFig for their digital investment platform partnership. CSB was one of the first banks to offer roboadvising and partner with this startup out of San Francisco, which just announced another partnership with Wells Fargo. A Gonzo community bank being a leader and not a fast follower – that’s pretty cool!
Hippest Acquisition of the Year – First Republic Bank’s acquisition of student loan repayment fintech firm Gradifi. Fun to see a stellar private bank searching for new fee-based sources of revenue like this young upstart company.
A “Making a Difference” Nod – Goes to Sandy Dubois, executive secretary at People’s Utah Bancorp in American Fork, Utah, for her work in establishing “Project Teddy Bear.” Project Teddy Bear collects stuffed animals and gives them to at-risk children in Utah. Small things can make big differences.
Sabre Rattling Award for 2016 – Visa and Walmart. So, first Walmart says it will no longer accept Visa at some locations in Canada. Then, Visa puts an ad out in Manitoba offering $10 in free groceries to anybody who shops anywhere but Walmart. What’s next, rage in the cage, two CEOs, winner take all? And, not to detract from what is seriously good chest-puffing, but why is this all good for customers?
A Shout Out for a Gutsy Call – Scott Reckard, a reporter for the Los Angeles Times, who first wrote about Wells Fargo’s branch pressure tactics in 2013. Reckard called it when everybody else didn’t and when it wasn’t so easy to get outraged. Well done. (see https://www.latimes.com/business/la-fi-wells-fargo-sale-pressure-20131222-story.html [3])
THE TECHNOLOGY AWARDS
Technology of the Year – Machine Learning. While there has been plenty of talk for years around big data, intelligence and analytics, pragmatic applications of machine learning in other industries has inspired a great deal of new funding and projects this year. Some will be cute and fail, but others will trigger the transformation of banking away from branches and people toward data, automated processes and digital apps.
“Whoa Horsey” Technology Trend – Chatbots. There are going to be plenty of useful applications for this hot natural language speech technology craze. USAA is finding drive-time banking to be a key example. However, we’ve gone from spotty Siri performance and playing with Amazon Alexa with our stereo system to Bank of America predicting its chatbot, Erica, will become customers’ new financial advisor. Let’s apply healthy skepticism to this craze in 2017.
Most Important Tech Challenge of 2017 – The urgent need to meld digital banking with digital marketing. The days of list-driven, monthly promotions are dead. But will bankers capture the opportunity to turn gritty customer interaction data into the next real revenue growth opportunity? Most won’t unless they get on the stick.
The “Whatever Happened To?” Award – MCX. The juggernaut that was going to change the payments landscape, the group that had banks fretting about payments disruption like no other, has produced nary a peep in 2016. The take-away? Maybe nobody can get that many retailers to agree on anything.
The Vanity is Alive Award – Goes to the Chase Sapphire Reserve card that went gangbusters with millennials who were willing to pay a $450 annual fee for a metal travel card. Hats off to Chase for uncovering something that attracts millennials to the credit card product that most banks missed.
The Trends That Must Expire 12/31/16 Award – Goes to customer and member “experience” initiatives being birthed at banks and credit unions that are self-congratulatory yet have no beefy success metrics or any business case for how this will drive revenue. Sure, Amazon is experience-focused, but it also turned that focus into $100+ billion of revenue. This is how banks and credit unions need to start thinking.
Differentiation Valuation Award – To LinkedIn, for creating a network with differentiated value so unique in social selling, it drove a bidding match between Salesforce and Microsoft resulting in a $26B December sale to Microsoft. 8X revenue and 84X EBITDA for you GonzoBankers watching for actual earnings. Holy cow, that’s value. Let’s hope it’s just a coincidence that LinkedIn’s blue logo is the same color as Microsoft’s historic blue-screen-of-death.
Best Pragmatic Use of SalesForce – SchoolsFirst Credit Union for its disciplined business development approach to engage its education-based field of membership. Good business development runs on client details and performance metrics, and SchoolsFirst executes well on both fronts.
Demand in Need of a Supply – Online/mobile commercial loan origination.
The Digital Big Mo’ Award – Goes to Kony for its continued growth in the digital tool set and platform space. Banks with enough scale want the ability to customize mobile apps and meld them into their work flows and customer experience. Kony has attracted both bank and analyst community credibility with its Mobility Platform. Big caveat emptor: developing custom apps means having the architecture, development talent and lifecycle discipline to stay out of trouble. Most banks are nowhere close to being able to execute on a toolkit like Kony today.
Lending Big Mo’ Award – Goes to nCino for nabbing a number of high profile banks this year including SunTrust, Regions and Eastern while gaining lots of partnership and analyst attention and praise. Great software solutions take time to bake but hats off to Pierre Naude and the rest of the team for provoking the industry to ponder the possibilities of a cloud-based operating system for critical banking processes.
Favorite Warm-and-Fuzzy Message from Your Local Store – No chip reader.
Tough Sledding Award for 2016 – EMV conversion and implementation. Many issuers are scratching their heads and wondering why the heck they even did this. EMV is good for the long term, but kudos to the front-line people who had to make v1.0 work when there were many more problems than anybody thought.
The Elephant Dancing Award – Goes to Microsoft for regaining its mojo and credibility among techies in the corporate world. CEO Satya Nadella has turned out to be the right leader at the right time as the world’s largest tech giant has honed its cloud vision and opened its mind to an API-driven economy. Predictions of Linux, Oracle, Sun Microsystems toppling the desktop and server from ages ago – where are they now?
Gutsy Pitch Award – CRM software solutions pointing to their sales audit trail of customer interest as a means to protect against regulatory scrutiny after the Wells fiasco. So the same tools that might have been used to pummel product at people can be used to protect against scrutiny for … pummeling product at people? What next? 100% self-service online account opening to protect against employee account opening fraud?
THE STINKIN’ FEDS AWARDS
The Four Letters Worse than TRID for Mortgage Lenders Award – HMDA. Get ready for more painful software changes and mountains of new HMDA data reporting. Let’s hope bankers can keep evolving their mortgage business and borrower experiences among all this compliance chaos.
Regulatory “De-Clawing” Award – Goes to the CFPB. Consider Trump, Mnuchin and Sessions vs. what everyone expected in a Hilary Clinton, Elizabeth Warren, and Loretta Lynch mob world. The CFPB won’t go away, but bankers are wishing this Christmas for a much less scary tiger in the years ahead.
THE VENDOR AWARDS
Bank Implementation Deal of the Year – TCS (Tata Consulting Services), for going live at Zions three years after signing. There have been lots of eyes on this one, and it’s clear the project has faced challenges but it’s a major step for a foreign-based core to gain this foothold.
Bank Signing of the Year – Temenos nabs $25 billion Commerce Bank for deposit servicing late in the year in what will be another multistage custom deployment effort.
Credit Union Core Conversion of the Year – Goes to Fiserv for its conversion of Space Coast Credit Union. Hairy project with tons of households and transactions executed well by both sides. Hats off to Fiserv to putting muscle and resources behind the DNA core product acquired from OSI in 2013.
Welcome Back Kotter Award – Scott Happ, Sue Baker, and Bob Brandt … all of Mortgagebot fame and now with what appears to be big plans to take on the market at Optimal Blue.
Worst Quote from an Instant Issue Card Vendor in 2016 – “We are not sure what the system will do after updates.” From an employee who works in development while on a call with the client and a Cornerstone consultant.
Nice Acquisition Pickups Award – goes to Fiserv, which bookended its 2016 with announced acquisitions of ACI Architect and OBS. You have to hand it to Fiserv here. It saw the need to beef up its digital capabilities and pulled the cash out of the big orange acquisition wallet to make it happen. These were really nice adds for Fiserv, but can Big Orange resist the temptation to destroy these products like it did with the Corillians and Banklinks of the past?
GREAT MOMENTS IN SYSTEM DEMOS
Golden Cuff Links Award – It’s a Tie!
- Paul Drobot, Ellie Mae Encompass. Paul adeptly highlights system bells and whistles but can also get gritty on the technical details. And he doesn’t pass the buck on tough client questions. This year, Paul helped Ellie ink a deal with former Gonzo high performer [6] Idaho Central, one of the highest producing credit union mortgage teams in the country.
- Erica Jourdain, Fiserv Apperio Demo. Anybody who can weave Cookie Lyon (Empire, FOX) into the use cases requested by the prospect is truly creative. “Cookie just got released from prison and needs an account as a first step to getting her fair share of Empire. She has a co-signer so risk can be mitigated.” The use case was hilarious and informative, holding the client’s attention throughout what could have been a mind-numbing demo about account opening.
The Least Common Denominator Award – This one goes to the vendor presenter (you know who you are!) who shared lascivious selfies of himself/herself to some prospects – over dinner. It didn’t work, but you gotta applaud giving it the old college try.
OVERHEARD IN SYSTEM DEMONSTRATIONS:
- During a demo when users were pointing out several shortcomings in the system, the presenter finally looked at them and said, “What you need to remember is that everything you’re bringing up is really just a simple matter of programming.” Uhhh huhhhh. He got stares from about 40 people who all were wondering if he realized that they had just decided not to buy his system.
- Vendor: “You will have lights-out integration with [product name] because [product name] is a [big company name] company. We’re family!”
CU: “So how did you handle the outage a couple weeks ago where clients couldn’t access [product name] for a week?”
Vendor: “What outage?” - [During a 60-minute conference call demo session] “Our system demo usually takes four days …” [Dog in the background immediately starts barking.]
- “Alexa, what’s the balance in my checking account?” [Crickets chirping. No response. Repeat question and answer multiple times.]
- “If you open the background materials, let’s discuss our clients here in your state …” [Prospect is in New England, all references provided are in the Mid-Atlantic.]
- Loud burp right in the middle of the presentation. [No apology. No acknowledgement. Just a pause for the burp.]
- Question [after a one-hour core system presentation]: “Does your company have a core system product?”
Answer: “Let me get back to you on that.” - Banker: “Do you offer instructions on how to best use your company’s training extranet?”
Vendor: “Yes, of course.”
B: “Where would I find that?”
V: “On the training extranet.” - Banker: “The items you just described on your development roadmap are already available with other products on the market today. What are you doing to try to be more proactive and innovative with R&D?”
Vendor: “Well, we’re right on schedule with our development roadmap.” - Vendor: “Our product is going through a major transformation – literally tens of thousands of hours of development – that will greatly improve the user experience.”
Bank CIO: “Your transformation is scheduled to be completed in 2019, but we’d be converting in 2017. That kinda scares me.”
Vendor: “Well, it’s really more of a facelift than a transformation.”
GREAT MOMENTS IN SYSTEM CONVERSIONS
3:00 PM Sunday Afternoon:
The Stage: Cornerstone consultant Alison walks into Board Room … with headache … no makeup … very little sleep during an intense core system conversion
Client CEO: “Are you OK?”
Alison: “Oh yeah I’m fine … just have a headache.”
CEO: “Because you look really bad … <Pause> I mean … You look REALLY BAD!”
Alison: “THANK YOU SIR.”
THE REST
Gonzo Lifetime Leadership Award – John Glenn. Veteran of two wars, astronaut, senator, lifetime learner and risk taker, loyal husband of 70+ years. Godspeed.
Purple Gonzo Award – Prince. Gonna miss that guy. And shout out to the Outside the Line band for helping the Gonzo team holiday gathering party like it’s 1999.
Election Year Gonzo Holiday Gift Award – Chia Clinton vs. Chia Trump
Knowledge Culture Quote of the Year – “Let’s not breathe our own exhaust. Good marketing shouldn’t feel like marketing.” –Tom Fishburne at Financial Brand Forum
Get Over Yourselves Award – To the Supposedly Influential Lists of the Most Influential Influencers According to Somebody Supposedly Influential About Influencers. Who freakin’ cares?
And finally …
In honor of some of rock’s best fallen heroes in 2016, we close by remembering these words:
We’re all excited
But we don’t know why
Maybe it’s cause
We’re all gonna die
Come inside, the show’s about to start
Guaranteed to blow your head apart
Though nothing will drive them away
We can beat them, just for one day
We may lose and we may win, though we will never be here again
So open up I’m climbin’ in, so take it easy
And even though it all went wrong
I’ll stand before the lord of song
With nothing on my tongue but hallelujah
Hallelujah!
For many, 2016 was a year to put it in the vault and forget about it. Yet the truth is the challenges of 2016 are coming back for encores in 2017 and beyond. There was plenty of negativity during the year, but everywhere the GonzoBankers at Cornerstone [7] traveled, we saw our clients working their tails off while supporting their communities with time and money.
The grass-roots of financial services is alive and kicking in America – and our team couldn’t be more proud to work with the trouble-making banks and credit unions that are determined to play hard and win in the future. Happy holidays, Gonzo family!
-GB