Nbkc Bank in Kansas City, Mo., is getting the very thing it was looking for: a preview of coming attractions.
It was one of the first community banks to establish its own fintech accelerator, and that early access to startups is giving it sneak peeks at cutting-edge products to invest in and perhaps use (or sell) someday. The accelerator, called Fountain City Fintech in a nod to one of its hometown's nicknames, ran from Oct. 1 to Dec. 14 and involved six companies.
One was Track — a San Francisco firm that handles the taxes of self-employed workers. Track does for freelancers what human resources departments do for employees of large companies. It gives workers a clear picture of what they have earned and what they owe by automatically keeping track of their income and expenses on a daily basis; withholds the right amount on payday; and submits quarterly estimated tax payments to the IRS.
Track envisions down the road giving banks the ability to offer freelancers checking accounts that have Track technology built in. Last week nbkc announced a partnership with, and invested in, the fintech. The bank declined to say how much it invested in Track or other accelerator companies,
The bank, which had $652 million in assets as of Sept. 30, has an interest in not only being an institution that gets a first look at fintech products, but also in offering those products to other banks.
"As an early adopter, nbkc would be Track’s primary and first financial institution to provide a freelancer checking account," said Eric Garretson, chief financial officer of nbkc. And the bank "may assist Track with the distribution of its product through Finastra, nbkc's core banking platform provider."
The bank would not mind doing business with its rivals on a product like this, he insisted.
“We engage frequently with our competition,” Garretson said. “When you think about, we are a part of many different families with our mortgage origination system and banking core system.”
The bank also took a stake in ProPair, an artificial intelligence company that connects mortgage leads to the loan officer who has been most successful with the type of product a prospective customer is seeking instead of doling out clients based on seniority.
While ProPair did not participate in the bank’s accelerator, nbkc was ProPair’s first customer and has had similar opportunities to what nbkc's accelerator participants had.
“We’ve had all their senior executives to use as a laboratory,” said Ethan Ewing, CEO at ProPair. “Fintech innovators don’t have a chance without that partnership. You have to get your product into production.”
Bankers can learn a lot from such partnerships, too.
Brian Surgener, senior vice president of strategy at Mutual of Omaha Mortgage, calls ProPair's Ewing "a thought leader in the industry." Surgener began working with ProPair in 2017 when he was at BBMC Mortgage before certain of BBMC's assets were bought by Mutual of Omaha. "[ProPair has] data scientists and a deep knowledge of this industry, and they give you professional recommendations about your business.”
To take advantage of collaboration with fintechs, they are going to have to be willing to take a back seat sometimes — especially when it comes to deciding how to make products more user-friendly.
“The challenge for banks is changing the way that we think about things,” said Scot Lenoir, chairman of the board and CEO of Evolve Bancorp, the holding company for Evolve Bank & Trust and another one of Track's partners. “We don’t mind playing the bank behind the scenes.”
Still, while Lenoir is eager to experiment with a variety of fintechs, he said they have to prove that they are compliant with know-your-customer, anti-money-laundering and other regulatory requirements. They have to be financially stable as well. If a fintech meets those criteria, Evolve could get its product up and running quickly, Lenoir said.
Trent Bigelow, a co-founder of Track, said the regulatory insights of the bankers were invaluable. "The complexity of compliance and banking regulation were all brand new to a technology startup like Track," Bigelow said. "Nbkc mentored our team on the industry’s best practices so we follow the rules and know why they’re there."
For the next accelerator program, nbkc may focus on fintechs that are less developed than its first batch of companies were, or it could pair successful entrepreneurs with up-and-coming innovators.
“We and other banks have certain needs,” Garretson said. “If there’s an entrepreneur who’s recently exited and looking for a new deal, we can have them champion a new product.”
