Our keynote session featured a wide-ranging panel Q&A with Tom Michaud, President & CEO of investment bank KBW, and Krista Snelling, President & CEO of Santa Cruz County Bank. The panel was moderated by Narmi Co-President Nikhil Lakhanpal.
Krista: “The hottest topic is the war for deposits. The funding has gotten tighter and tighter the last couple of years. [….] We are using a digital transformation process to enable our employee base to deliver exceptional client service, because that’s what is going to help us compete. It’s an all day, every day discussion in our boardroom.”
Tom: “There are two big things. Credit quality been exceptional this cycle, even with some of the bumps along the road last year. If anything, the industry is probably over-earning on credit quality.
“The second is the state of deposits. When the government responded to COVID, very quickly FDIC-insured deposits grew 38%. Normally, those deposits were growing 5% a year. So, you had this flooding of zero-cost liquidity into the industry. Then, when the policy reversed, we saw the sharpest decline in deposits in my 38 years in banking. Deposits have leveled out, but I still think the tightest constraint in the industry right now is not capital, but deposits. [….] Now, most banks are husbanding their balance sheets and deposit bases with their best clients.”
Krista: “Our technology is great. When you take our products and line them up against a Wells Fargo or a Chase, they stack up. Where we get competitive is when our prospect has a niche where they need a specific tweak, or an essential API connection. They’ll call us to ask about if we can do it, and we’ll go, ‘Yeah. Let me call my CIO, and we can hook it up tomorrow.’ Could you imagine working through the infrastructure and the bureaucracy to make something like that happen at a big bank?”
Tom: "Banking is becoming a short-answer quiz: ‘My bank is going to be good at “blank,” and really focused on it, and really good at it.’ You can’t out-mass-market the big banks. You have to be more focused and more strategic than ever. If service is your thing, then master it. Companies of all sizes should know what their niche is, and really excel at it. There are winners and losers in every size category.”
Krista: “It takes a lot of work to get buy-in from the team. We’re constantly seeking feedback from people — it’s all well and good for me to have an idea, but it’s important to engage with the people on the front line, who know the pain points best.
“[To champion change], the pitch needs to be well-articulated and compelling — don’t have it be just a complaint. I’m a recovering CFO-type, so I like numbers. Find me a solution.”
Tom: “It’s those that have forward momentum. The industry has been evolving for decades. So the question is: where is your bank going to be 3-5 years from now?
“Another factor — when I come across a company that has a difficult decision to make, I often ask, ‘If you owned 100% of the bank yourself, what would you do?’ If you take that type of thought process and apply it to the design of your company and your daily customer service, it should always be for the next generation, for the next turn in the economy.
“Right now, the industry is operating with an inverted yield curve, with tremendous competition from non-banks. That’s going to change at some point. The question that banks and credit unions are going to want to ask themselves is, ‘What did we do during that period before we got back to the growth spurt?’”
Tom: “There are winners and losers in every size category.”
Krista: “Change is hard. But change is great.”
Ron Shevlin, Chief Research Advisor at Cornerstone Advisors, and author of the Fintech Snark Tank column in Forbes Magazine, outlined some of the top statistics from Cornerstone’s 2024 Digital Banking Performance Metrics study, where they polled a wide set of financial institutions ranging from small community banks and credit unions to midsize FIs.
Using NeuroID’s unique research on the state of fraud attacks in the US in 2023, Mitul Parmar, SVP of Product & Strategy at NeuroID, began with a startling data point: 57% of US FIs experienced an increase in attacks in 2023, affecting both consumer and business accounts.
Fraudsters are increasingly using tactics such as deepfakes, synthetic ID creation, fake documents, and bots. The latter are developing especially quickly due to advancements in Natural Language Processing, with next-generation bots simulating human-like behavior while rotating user agents, IP addresses, and more.
"We’re seeing a massive increase in AI attacks. One of our customers has seen a 3X increase in bot activity. We've got some customers where 30% of their overall traffic will be bots on particularly tough fraud days.” - Mitul Parmar, NeuroID
Using NeuroID’s patented behavioral analytics to calibrate its data model, we can see how fraud activity changes throughout the course of the year, even by the season:
What’s causing this trend?
Major financial transactions and PII exposure events occur during this time of year, including tax season, the end of an important fiscal quarter, spring break, Mother’s Day, Ramadan, and companies launching new products.
What’s causing this trend?
Changes in consumer behavior around this time of year, where spending is actually less frequent: people are enjoying vacations they already paid for; are spending more time outdoors; prepping for returning to school or work after a long break; and companies are holding fewer product launches.
[NB: With this in mind, NeuroID suggests that companies use the summer as a time to refresh their strategy against fraud, and avoid testing fraud solutions against summer production data.]
What’s causing this trend?
In autumn, fraud defense teams and fraudsters engage in a tug-of-war, owing to the fact that 56% of US holiday shopping has started; end-of-fiscal year purchases occur; and credit card offers flourish ahead of the holiday season.
What’s causing this trend?
Huge swings in fraud controls. Fraudsters take advantage of loose controls in the wake of increased holiday spending through the new year, including more first-party fraud.
Our co-founder Chris Griffin sat with Erik VanBramer, SVP and Head of Customer Relations for Federal Reserve Financial Services, to talk all things FedNow, including the impact that the service has had in its first year, the payments efficiencies it will represent, and how preventing fraud will always be top of mind, even as the service scales.
Since last year’s July 19th launch, VanBramer mentioned that the Federal Reserve “could not be happier with the adoption [they’ve] been seeing.” There are now 820 FIs live on the network, which exceeds adoption projections. They are also seeing a diverse network of FIs by asset size take advantage of the service, which was “one of the reasons why [they] launched FedNow in the first place.”
Despite this, the volumes of exchange on the network are not yet significant: the majority of the FIs on the FedNow network have started in receive mode, with less than 10% of them actually sending across the network. However, there is optimism after seeing increased adoption of sending capabilities recently — especially over the next six months.
“It’s very exciting to see that network-level approach that the Fed is investing in, and it will pay a lot of dividends in defending against fraud.” - Chris Griffin, Narmi
While VanBramer says that there have been “minuscule amounts of fraud” on FedNow to date, preventing fraud on the network is the Federal Reserve’s top concern. Through controls like dollar thresholds, mandatory reporting policies, and negative lists, the Federal Reserve is not only establishing practices that prevent fraud from taking place, but are also collecting data on fraud activity that will contribute to FedNow’s ongoing fraud prevention product roadmap as the network scales — including state-of-the-art features like anomaly detection and velocity checks.
The obvious conclusion when thinking about a service like FedNow is its potential to revolutionize the P2P space. However, where the Federal Reserve is seeing the majority of its growth in payment volume are through transactions like disbursements and earned wage access, a testament to how a service like FedNow can enable financial agency across all layers of the economy: "Being able to bank the unbanked presents an opportunity to gain a new cohort of users. Getting paid every day is now being presented as a benefit of workplaces now,” said VanBramer.
The future of FedNow depends on continued adoption of this revolutionary service. When asked what would compel FIs to do so, Narmi co-founder Chris Griffin was direct: “It’s a competitive advantage.”
“We think this is absolutely going to become table stakes to compete with the FI across the street.” - Erik VanBramer, Federal Reserve Financial Services
William Chau, General Manager at Narmi, spoke to Taylor Hatch, Director of Banking Operations at Maine-based Northeast Bank, about the most important takeaways from their digital transformation journey with Narmi.
Northeast’s top priority when undergoing its digital transformation was to improve customer experience, specifically with regard to channel parity; no customer should feel as though one channel lagged behind another in terms of functionality.
"We want our banking experience for our customers to be omnichannel. We want to all speak the same language moving forward.” - Taylor Hatch, Northeast Bank
The bank, which previously used a core product for its digital banking functions, reached a point where it could begin to offer compelling rates to customers — especially on the CD side. After struggling with an unclear application flow and high abandonment rates, Northeast gathered input from across its organization on priorities in choosing a vendor.
The ensuing process involved multiple vendors dropping out due to concerns about being able to meet Northeast’s needs. After interviews with the final options, executive team meetings, and more internal conversation, Northeast Bank chose Narmi because it met all requirements — or, in some cases, spurred conversations that got the Northeast team to think about their requirements in new ways.
“That was one of my favorite parts,” said Hatch. “It wasn’t just selecting a new vendor, but it was also rethinking how we did things, and changing some of our internal processes, which has made us more efficient than I could’ve imagined.”
As this was their first time running an API connection into its core, Northeast had its reservations about the implementation process. These concerns were quelled by their “amazing” implementation project manager, who presented a clean, clear process upfront, including a firm schedule, expectations from both sides, and a strong vision for the end product. The project ended as one of the fastest implementations Narmi has completed — so far!
“I remember points during the implementation where we’d look at each other internally and go, ‘Is it really this easy?’” - Taylor Hatch, Northeast Bank
With Narmi’s technology fully implemented, Northeast Bank was able to pursue its growth goals by freeing up staff to negotiate rates on maturing CDs, attaining retention rates of over 80% on an offering apt to churn to other banks. Overall, Northeast’s CD growth since partnering with Narmi has been well over 300%.
Another avenue where the bank has seen success in raising deposit rates is through a high-yield savings offering. The savings accounts, which are available digitally, have allowed Northeast Bank to secure deposits by applying variable rates as economic conditions change.
“Our confidence with your product, and seeing all the doors we haven’t even opened yet with this technology, shows us all the potential we have. Taking this partnership to the next level and utilizing all that Narmi offers can allow us to be that bank of choice for CDs and money markets: not just in our market, but in the state of Maine, and the country.”
Citing their 2024 State of Fraud Benchmark Report, Jason Ioannides, Senior Director of Solutions Engineering at identity risk management platform Alloy, provided even more metrics on the contemporary fraud landscape in the US. We learned that many companies reported over $500,000 in fraud losses last year, with a troubling concentration of community banks and credit unions affected (79%).
The three most common fraud types affecting US companies:
The response from FIs has not been subtle: 99% of them have made changes to their policies and controls for fraud prevention, and 71% of them have increased their spending on it YoY.
But how do companies navigate the tension between managing the checks and layered verification necessary for fraud prevention with the speedy, seamless digital experiences consumers have come to expect?
One solution — and, it could be argued, the solution — is for FIs to consolidate all of their risk decisions on one platform, called an Identity Risk Solution. Allowing for sturdy third-party integrations and streamlined access to comprehensive data, an Identity Risk Solution seamlessly integrates into an FI’s tech stack to give them visibility into decisions around identity verification, credit underwriting, and ongoing financial activity. "Gone are the days of bouncing from dashboard to dashboard. Because fraud attacks are now more frequent and more sophisticated, a holistic customer view allows you to see how this person onboarded, and every step beyond.”
Using Alloy as an example, Ioannides illustrated how Alloy slots into the Narmi Account Opening solution, using customizable workflows and third-party data for real-time decisioning on applicant information. This allows FIs to look at their data beyond the transaction level, and begin to consider user behavior as key to detecting fraud.
“Transactions don’t commit fraud, people do. We want to look at people really closely, starting at onboarding.” - Jason Ioannides, Alloy
The result is an opportunity for fraud/compliance and digital experience teams to work hand-in-hand, with a solution that engenders trust with applicants through modern product design, and modern fraud defense.
In the wake of interest rate pressure, there is wide agreement that small-and-medium businesses (SMBs) offer an attractive revenue opportunity through deposits and non-interest income. Narmi Senior Advisor Norm DeLuca and Director of Product at Grasshopper Bank Luther Liang sat down to discuss this opportunity, and how to overcome the difficulty in finding the slice of the SMB market to dive into.
How can a financial services provider communicate its value to SMBs, given the diversity of their needs and the complexity of the consumers? “The problem is we’re looking at things through the banking lens, but the business approaches it through the lens of their expertise, whether its a craftsman job or medical service,” said Liang. “A lot of go-to-market institutional issues come from that mindset.”
With SMBs representing 99% of businesses in the US, the question of how to specialize within any corner of this market can induce organizational paralysis. For Liang and Grasshopper Bank, it’s meant that they’ve discovered a “sweet spot” in terms of how to segment the market.
“Our clients are in what we call the ‘innovation economy.’ And that’s very different from your traditional mom-and-pop. Understanding this can have profound implications on your product offerings.” - Luther Liang, Grasshopper Bank
This is an area where financial institutions can step in and set the one for many SMBs; many of these businesses require counsel on their finances, banking, and forecasting. FIs with the right strategy can communicate that they understand these concerns on a granular level, put their SMB clients on the right financial path, and become a primary provider — and trusted partner.
Another way in which FIs can be of further service to the needs of SMBs is by offering a fleshed out partnership ecosystem. A varied set of point solution technology partnerships — integrated, consolidated, and presented as one banking solution — can provide a sense of reassurance to SMBs navigating an equally varied set of challenges as they grow. The key is to approach partnerships with a considered strategy: “I’d rather see banks deeply integrated with a few strategic partners, than lightly integrated with many that don’t do much,” said DeLuca.
Trisha Kulkarni, Senior Product Manager at Narmi, walked attendees through the intricacies and history of the account opening process, emphasizing how a considered and multichannel approach can ease friction and increase deposits.
The advent of the pandemic catalyzed widespread adoption of digital-only account opening practices, which could lead one to the conclusion that the branch experience is on its way out. Quite the opposite: major banks are doubling down on branch investments in accordance to their growth strategy.
And Millennials/Gen Z, despite being digital-first, still value the branch. Branches in new markets provide footholds for expansion, and physical touchpoints can add to differentiation in a flooded market. “The branch is always going to be important,” said Kulkarni. “The strategy is: how are we going to ensure a consistent and balanced approach across channels?”
Through our own in-person research at several FIs, Narmi’s product team saw that to capture the right deposits, they need to optimize for:
The result is an account opening flow that can be entirely digital-forward, with the option of a banker intervening at any step of the way, ensuring maximum control over what will be an applicant’s first touchpoint with an FI. Automated KYC and KYB verification controls also allow business account opening applications to be completed in intervals, which is often necessary while applicants retrieve the right materials.
While it’s a consumer’s introduction to an FI, a flexible and technology-driven account opening flow can be the first step towards attaining bank primacy: “Which institution are you going to trust with your financial progress?”
“The war for deposits is real.”
So began our session with Brian Reilly of BankBound, a digital marketing agency specializing in community FIs. Among other segments, Reilly was able to break down best practices in targeting the 22% of business owners who are considering switching banks in the next 12 months, or the 32% of account holders polled in Q1 who would switch at the next possible occasion (including a specialized search campaign strategy spanning both paid and organic channels).
However, the easiest opportunity to expand your business is with the people who have already bought into your FI’s mission: existing customers. In addition to highlighting the option to target your customers/members with email (an underutilized channel primed for automation) and even print (a significant portion of community FI consumers still value direct mail), Reilly’s research has found that an FI’s digital banking experience is the main conduit for how your brand is perceived. “Your digital banking experience exceeds your bank’s foot and website traffic — likely combined.”
A robust, seamless digital banking experience that users enjoy can also be a central location to do cause marketing. Users aren’t accustomed to thinking of their bank as a pillar of their community, and those FIs who have such a unique opportunity shouldn’t ignore it: “Give people a reason to feel good about where they’re banking.”
“If your product offering is strong, your community bank can grow nationally; so many people are searching for a certain product that with the right marketing and seamless experience, there’s no limits.” - Brian Reilly, BankBound
What is extensibility? It’s many things, but by and large it’s a technological response to the demand for personalization. Whether it’s due to fatigue from the overtures of the attention economy, or the fact that consumer identities are becoming increasingly segmented, the new normal includes an expectation for personalized messaging and experiences.
The banking industry is working from behind on the issue, however: fewer than 1 in 5 financial institutions feel prepared to deliver personalized experiences at scale, as opposed to generic communications.
The simplest way for FIs who are trying to keep up with a consumer set that is moving past them is to embed the best fintech into their offering; by integrating lightweight, flexible technology solutions into banking tech stack, FIs can suddenly find themselves super-customizable, and able to to cater to each consumers’ personal needs — both through technology and by freeing up staff to work on the strategy that works best for your community. And that starts with your first touchpoint — the account opening experience.
As one of the leading open banking platforms on the market, Narmi’s product ethos (which was presented in detail by Lead Software Engineer Kyle Schustak and Forward Deployed Engineer Ryan Siebecker) has always been focused on bringing extensibility to our clients. Our approach to open APIs, enabled by the Narmi Application Framework and exemplified through the customizations built within Narmi Functions, allows financial institutions to integrate with third-party solutions addressing every corner of your Account Opening flow:
The result is a lightning-quick account opening experience that belies enormous technological firepower: low-stress for the end-user in front of the application, high-impact for the FI processes behind it.
And in the spirit of continuous innovation, a reliable fintech provider should acknowledge that your FIs pain points today may be only a small subset of the ones you have tomorrow. With this in mind, Narmi is constantly adding integrations with best-in-class enterprise software, including Slack, Salesforce, Google Cloud & Workspace, Microsoft 365 & Teams, and many more.
Your ideal technology partner should mirror the attitude of care and attention your FI extends towards its community. Our goal is to help FIs optimize for long-term success with a team and technology that supports your dream-state — from ideation to iteration.
