Trends in Financial Technology to Watch
The FinXTech Advisory Group is comprised of several respected fintech leaders from around the globe, and we are honored to have Christa Steele, former CEO of Mechanics Bank in Walnut Creek, California, as a part of the group. During her time with Mechanics Bank, she improved core earnings 43 percent in a single calendar year, doubled the stock price, evaluated three separate and vastly different M&A combinations and in 2015 led the company through its successful sale to a Dallas-based investment firm at a market premium of 1.64x tangible book value. Since then, she has been involved in a variety of initiatives including alternative lending, robo-advisory, mobile/digital payments and blockchain. As a director for a mix of public/private company boards, and as an advisor to two blockchain organization, we asked Christa to share her thoughts on the future of banking and how blockchain will impact financial services. Here are her written responses.
What trends in financial technology should we all be watching?
The banking industry must adhere to the required paradigm shift being caused by digital, mobile, e-commerce and other robust cloud-based technology trends. The traditional bank financial model is under siege by competitors from outside the industry.
Did you know:
- Online lender SOFI, which started out refinancing student debt and now funds home loans, offers wealth management services for a flat fee of $60 per year?
- PayPal has more customer money than all but the 20 largest U.S. banks? Did you also know that PayPal’s deposits are not insured?
- The transaction volume at Venmo, PayPal’s peer-to-peer payment processor, exceeds $1 billion a month and the company is now piloting a merchant program?
- Mobile banking apps are becoming gamified to enhance customer engagement and attract and retain millennials?
- Facebook Messenger is processing Bank of America client transactions and is said to be engaged with over 1,000 payment vendors to offer client services that interact through Messenger with a single sign-in process?
- Over 60 of the world’s largest banks are testing a new technology called blockchain that could single handedly revolutionize how financial transactions are conducted today?
As a former bank CEO, what are some of the challenges that bank leadership teams must overcome during this period of digital transformation?
Each bank is different. Geography, economic trends, client mix (i.e., retail, commercial and wealth management), institution size and product offerings can all be different. My advice is to pay attention and understand how fintech is impacting client acquisition, client retention—and, ultimately, your bottom line. Evaluate whether your current infrastructure and growth strategy meets the needs of a digital world.
Based on your experiences, why is there so much time, energy and resources being spent on blockchain?
We’ve all been using cloud-based technology. I remember when banks were slow to move to the cloud at first because of their initial mistrust. Today we are centralized, but there are endless possibilities about where we go from here, including the use of open access IoT networks, public and a private system of records.
Blockchain is a software that enables data sharing across a network of individual computers. A blockchain describes computers transferring blocks of records in a chronological chain aka a distributed ledger. A simple way to explain this technology is to think about vehicle assembly. Blockchain is the assembly line in the manufacturing plant. The end product is a car, or in the case of blockchain, an asset token.
How do you see blockchain impacting the banking industry holistically?
The impact of blockchain will not only affect banking, but we will see enhanced record keeping and data analytics, streamlined processes, cost saves and efficiency gains. Over the next several weeks, I plan to share a series of articles centered around the technology of blockchain and how it will directly impact the financial industry. I’ll take a look at how it works, why it matters, how to make it a reality and highlight some major players in the space. I look forward to sharing with you all the interesting and innovative movements around this dynamic technology.