A dozen community banks have formed a group to explore fintech opportunities.
Alloy Labs Alliance is managed by the consulting group FinTech Forge. While the alliance is in its early stages, Alloy's members are optimistic that they can leverage their combined resources to meet small banks' technology needs.
The alliance, which provides a platform for banks to share ideas and best practices, includes Citizens Bank of Edmond in Oklahoma, Reading Cooperative Bank in Massachusetts, NBKC Bank in Kansas and CenterState Banks in Florida.
Other industry groups have recently announced efforts to promote small bank collaboration and innovation. The Independent Community Bankers of America, in conjunction with the Venture Center, launched a community bank-focused fintech
Most community banks lack the manpower and budgets that big banks have to innovate and experiment with emerging technology. So collaborative efforts could help small banks stay relevant and provide a competitive advantage, said Jason Henrichs, FinTech Forge's founder and managing director.
FinTech Forge had been thinking about launching a consortium for about four years. The initiative gained momentum in the last 18 months.
Henrichs, who produces the Breaking Banks radio show, said he expects the group to have 50 to 60 community banks by the end of next year. Crowe, an accounting, consulting and technology firm in Chicago, will provide the alliance with advice on regulatory and compliance matters.
Small banks mostly rely on core vendors to meet technology needs, Henrichs said, adding that he believes it will be more informative for banks to brainstorm with like-minded peers to decide where to allocate resources. All banks are welcome to join, whether they are just starting their innovation strategies or if they have experience partnering with fintechs.
Mercantile Bank of Michigan in Grand Rapids has worked with
“We’ve been doing this in a vacuum ourselves and in some cases we partnered with other banks on a one-off basis,” Schulte said. “Alloy gives us a more formal structure" to pursue fintech partnerships.
The alliance plans to take a proactive approach finding fintech and other techology firms to work with to solve problems, Schulte said.
Banks can join the alliance for an annual fee. Organizers declined to disclose the amount, though bankers said it is not a significant cost. Members have access to a Slack channel, regular phone meetings and in-person meetings.
The consortium has smaller work groups that hone in on specific topics, such as simplifying banks’ onboarding processes or peer-to-peer payments. The work groups take a deeper dive into individual projects and could lead to proof of concepts or fintech partnerships, members said.
CenterState in Winter Haven, Fla., is considering investing in interactive teller machines, among other tech projects. It will be helpful for CenterState executives to ask other bankers how they deployed ITMs and structured other pilot programs, said Chris Nichols, the $10.5 billion-asset company’s chief strategy officer.
First National Bank of Omaha also has experience working with fintechs, but it is interested in learning and understanding more about how other banks are approaching innovation.
“There is strength in numbers — we all have similar problems we want to solve,” said Marc Butterfield, the $17 billion-asset bank’s senior vice president of enterprise digital solutions and emerging business.
Butterfield said appreciates the consortium’s structure, which lets members be casual observers. On the other hand, members could join a work group and decide that they want to commit more resources to certain areas.
"I'm hoping one of these work groups will bear some fruit for us," Butterfield said.
