Track 1: The Evolution of Fintech Partnerships: Lessons Learned

Transcription:

 Jon Briggs (00:08):

Talking just a little bit about the history or evolution of our FinTech partnership strategy. So we've been active in leveraging fintech's as partners to advance our strategy and our roadmap in a significant and truncated way for almost nine years now. And where we started versus where we are now. It has certainly evolved. We've made mistakes along the way, we've learned.

Chana Schoenberger (00:38):

Test and iterate.

 Jon Briggs (00:41):

Absolutely. You learn that sometimes the best mousetrap that you see in the market doesn't always make the best partner to be able to commercialize and deliver that mousetrap to the market, so.

Chana Schoenberger (00:54):

They can't necessarily catch your mouse.

 Jon Briggs (00:58):

Yes, that is correct. So for us, we look for four things in a FinTech partnership. So obviously we like to integrate, commercialize their product. We like to ride on our rails. At the end of the day, these are our clients. We want it to be an integrated experience. We like to power that FinTech as well. And so they use our rails beyond for our key bank clients. And with these companies, we invest a lot of sweat equity in them in helping mature them. And so we also like to make sure we're aligned in terms of outcomes. And we do that by placing an equity investment at times in these firms to really cement and have ensure we have a close partnership. But the biggest piece I will tell you in what makes a successful partnership is a cultural one. There is how you start with any partner you going to run. There's going to be bumps in the road and making sure you're culturally aligned and there's a good cultural exchange. And you have a shared vision allows you to navigate those bumps and curves that you encounter. And that's what I just described is the foundation of a partnership versus a vendor, which is not nearly as integrated in terms of how you engage, how you operate day to day.

Chana Schoenberger (02:31):

So the vendor is the guy who sells you branded pens. Your partner is the FinTech that you're deeply integrated with.

 Jon Briggs (02:38):

And the vendor is the individual that you look to the contract and say, Hey, you said you would do X, Y, and Z. The partner is the one you can pick up the phone and you have a deep operating relationship with and you can navigate through problems.

Chana Schoenberger (02:55):

Just in five words or less, what is the culture you're looking for out of these fintech's?

 Jon Briggs (03:02):

Adaptive because, well, you said five words or less, sorry.

Chana Schoenberger (03:07):

Adaptive.

 Jon Briggs (03:09):

I'd say dynamic able. And what I mean by that can throttle up and down and we don't always move at the pace that FinTech necessarily moves as a bank. And we need them to be able to be dynamic in that regard. And then at the end of the day, there are clients that we're distributing the capability too, and we need them to take safety and soundness and maintaining that trust that we have for their clients as serious as we do.

Chana Schoenberger (03:46):

Makes sense. Okay. Okay. So do you want to talk about, you guys are working on a very cool payments project together. Do you want to talk about the project and what it means and what it does and the ups and downs of it?

 Jon Briggs (04:01):

You want to kick it off?

Patricia Montesi (04:02):

Yeah, absolutely. And just to sort of piggyback off of what Jon said in terms of the nature of our partnership is I think we have a unique combination of being a startup and being agile and being super fast. But we also have a founding team that's been in payments and payment processing for over 20 years. So they're grownups, grownups, healthy respect for and knowledge of working with banks and understanding what comes with that. So we definitely try to have a balance as it relates to that. I also think of when a partnership becomes strategic, and I'll use that word right, it is about do your visions align? Does one plus one equal five when you come together? And I think that's what we found once we engaged with KeyBank, is that they could leverage our platform in a way that was going to be truly disruptive for them and truly solve a problem.

(04:55):

And so what we are on the cusp of launching together is something called keyvan virtual account management. So KeyBank is able to utilize our technology, which is built at the infrastructure level. At the end of the day, we are three things. We are payments card and a ledger all wrapped into one. And so using our technology, they can actually power instant cloud-based virtual accounts within levels of sub-accounts. And so that flexibility and that simplification of what it does to their augmenting their legacy technology is what really at the end of the day will push them forward to have a better, more competitive solution in the marketplace for commercial clients.

Chana Schoenberger (05:37):

And what sort of a customer needs this?

 Jon Briggs (05:41):

I mean, it really covers the gamut. We're primarily focusing initially out the gate real estate clients, healthcare insurance companies, our initial clients that is actually just core SMBs, lower end of the middle market type clients. And what all of these clients have in common is, and we know this as payments professionals, many of our clients use bank accounts as part of their financial infrastructure in terms of how they run their business, segregate, segregate payments, funds, et cetera. What we're able to do with Qolo and the bank platform is put control back in the hands of treasury and finance professionals around driving the bus in terms of account opening and literally instant account opening, provisioning of payments capabilities at the hands of our clients versus a cumbersome onboarding process that's prevalent in the market today.

Chana Schoenberger (06:43):

Got it. Okay. Let's talk about some of the pitfalls that you overcame when designing and implementing this project. What went wrong? How'd you fix it? I'm sure something went wrong.

Patricia Montesi (06:53):

Absolutely nothing went wrong.

 Jon Briggs (06:54):

No. Yeah, nothing ever goes wrong. Did we change scope at all?

Patricia Montesi (06:58):

No, never. Never, never. I think what I will say, it's been a very healthy relationship in terms of a lot goes prior proper planning. The more you can uncover upfront, the better off you are. The more you recognize upfront that we're a startup and we have a certain methodology to how we develop, they're a bank, they have a certain methodology to how they develop software and code, what do the two look like together? And they're never going to be a match. So how do we anticipate where there might pitfalls ahead of time? So we do a lot of that. We certainly have had conversations where out of left field we are headed on trajectory planned, let's plan down, something goes off. I think it's back to the cultural alignment around how do we handle that and how do we call each other up and say, what is this about and how do we navigate through it in the best positive way for both parties? And I think that's what we've been able to do, no matter what comes our way is that we have easy conversations, frankly, to address those issues.

 Jon Briggs (08:01):

When you innovate and which is we are doing something very, very innovative together. You're pushing within a bank, your internal partners pushing the envelope, bringing them along. There's a lot of education that's required. And so in a way it's very, it's not unsurprising that you run into bumps in the road as people are digesting what it is we're putting in front of 'em and saying, Hey, this could be an issue, or Hey, this is going to be an issue. Didn't realize it. Sorry, I wish we would've realized this two months ago. But those things happen, especially when you're on the leading edge of something.

Chana Schoenberger (08:43):

Right. Okay. How did the scope change after the banking crisis of last year?

 Jon Briggs (08:49):

Yeah, so I think for all banks, deposit growth frankly is the gating item for growth going forward. And if you were to ask me what our roadmap looked like sitting in January of last year versus what it looked like in April, it was fundamentally different. And that was true for this project as well. When we initially set out to build Keyvan, we really had a very narrow lens. It was really focused on serving technology companies and fintech's. And what we quickly realized is that post the banking crisis, we're going to need an enduring way to be able to compete for deposits, that kind of deposits we like, which is core operating accounts and a way to compete that isn't simply price or rate driven, but to be able to deliver innovative technology to our clients. And so with that, we massively expanded the scope and the use cases that we were trying to tackle with the solution.

Chana Schoenberger (10:02):

So, you took something you were building anyway and said, why don't we take this thing and just use it for everybody?

 Jon Briggs (10:08):

Correct.

Chana Schoenberger (10:09):

Yep. And what did you guys do on that end when you got that phone call?

 Jon Briggs (10:15):

Elation.

Patricia Montesi (10:21):

For us, KeyBank is a strategic entree into a vertical that we hadn't played in yet. And when we looked at what they wanted, part of I think the selection of Qolo by KeyBank is that we actually built and architected our system so it can support a number of use cases. So for the most part what they want, whether it's for real estate or healthcare or you name it, you're not looking at our platform and saying, oh, well for this vertically we have to do a bunch of custom code. It's not like that at all. Now there were expanded scope, which means your launch time gets elongated, et cetera. So we worked it out and we worked through it. And I think at the end of the day, we both have line of sight to really disrupting and solving a huge problem that if you expand the scope, we're going to get it done and we're going to figure out how to launch it in the best way possible for as many use cases as possible.

(11:12):

So we have done that. And I think in comment to earlier around the partnership and his internal partners as well, one of the things we look to do to help provide outside of our platform or technology is to help provide services and really help look at KeyBank and what their needs are, whether it's compliance, risk, et cetera. When you start talking about a number of sub-accounts and virtual accounts and real time and clouds, we really look at it as our job to help translate traditional to that. And what does that mean from a risk perspective, what does that mean from a compliance perspective? A lot of people's head starts spinning when they start throwing out, what we can do is whatever you want. And we have all these applic accounts and they're like, well, where is it? Where's the account? Where's the server? So we look at that as really helping our partner overcome some of those things and educate their partners, internal partners along the way.

Chana Schoenberger (12:06):

Great. So this is the perfect entry to my next question, which is as a FinTech, what is it like to work with a bank where, I mean, for every bank compliance and dialogue with the regulators is paramount. If it does not work for the regulators, it's not going to happen, which is not the way fintech's generally operates.

Patricia Montesi (12:30):

And I think, again, to define our as a FinTech and as payment professionals that have been working in this industry for two decades, we've worked with banks our entire lifetime, whether it's on the sponsor bank side, all of our products, whether outside of the banking vertical, we support corporates and fintech's, and we use bank sponsored partnerships to do that. And we also program manage those programs as well as process those programs. So we have owned that risk and compliance element along our journey and certainly at Qolo. So we have pretty high comfort level now, switching off to having a bank like KeyBank as a client, yeah, there's definitely sort of an upgrade to the level of oversight, et cetera that you need. But again, I think when there's concerns or questions about, well, how does this platform change what we did in the past? We literally walk people through it, educate folks, make them very comfortable with what tools we're using for a variety of different compliance elements.

(13:29):

So we're pretty comfortable in the space and we definitely want to move faster than most people in most banks. We really look at that more on the prospecting side to enter into the big channel, you want to look for partners that have the forethought. And I will say this, the forward thinking view that KeyBank has because when you find folks like them that have been immersed in FinTech for a while, they understand the space, they understand what we're good at and how to leverage that. So that's really important too. It's their experience working with fintech's.

Chana Schoenberger (14:00):

Great. And the opposite question for you, which is what is it like for a bank to work with a FinTech that might have a more nimble approach, less of a regulatory model?

 Jon Briggs (14:13):

I think we're very fortunate with Patricia and team that, as she said, very seasoned set of professionals. So the burden of education and maturing and making sure the platform is industrial grade, not only from a technological standpoint, but also from a risk management standpoint. It wasn't nearly as steep as what we've experienced with other partners, but it is back to your question earlier about some of the bumps in the road that you've run into. So Qolo, like other fintech's, they have integrated risk services. And when you are working with most banks of our size and scale, it's like, no, we have that risk service. So be you. Be integrating and consuming our risk service and integrating it into your platform. And those things take time, expand scope. So having a partner that understands that and how to navigate it is critical in terms of making a project go of this magnitude, go as smoothly as possible.

Chana Schoenberger (15:38):

Great, great. Okay. How do you decide what tech a bank should use and how do you integrate it with the existing tech stack? I told someone this story already today, but I used to cover chemicals, and I remember a chemicals equity analyst once telling me that when one of the companies he covered said they were going to do an ERP integration, he recommended shorting the stock because every tech integration takes twice as long and cost twice as much as the executives think. And if the executives don't understand that they're diluting themselves and whatever they tell you, it's going to be more.

 Jon Briggs (16:15):

That is definitely still true.

Chana Schoenberger (16:19):

In front of being a house.

Patricia Montesi (16:20):

In front of being a house, very similar.

 Jon Briggs (16:21):

Yeah, but it's a balance. There are some aspects of a tech stack or architecture that are absolutely non-negotiable. The risk services that we talked about, that's a great example. It's like, no, we're actually not going to have, there's no debate or conversation around how we're going to KYCA customer. That will be through the key process. But then we spent, in terms of the process with Qolo, and we did this with all fintech's, we do some of our own shopping. So we get into their stack, we test their APIs, we test their infrastructure, we compare it to others that have similar capabilities and then against our own ability to be able to build that capability. And then as you go along the way as you're integrating, there always are trade-offs, right? And the trade-off is oftentimes speed to market. And those are some of the things we in a very fluid way work out together where at the margin doesn't compromise our position from a risk perspective. Usually if it allows us to get us there faster and in a more scalable way, we're willing to go the partner's direction.

Chana Schoenberger (17:57):

Makes sense. Okay. What else should banks and fintech's know about working together successfully?

 Jon Briggs (18:05):

You want to kick it off?

Patricia Montesi (18:09):

I really think it is really down to solving problems together. And is it a big enough problem that there's interest from the bank side? And does it ultimately conclude in being a win-win for both parties? And I think that back to the technology front, from a FinTech world, our entire platform is a hundred percent cloud-based capacity is in line on demand. You can do a lot with that really quickly. So a lot of the technology projects are usually runeth over. It can be the case when you're certainly working with these guys and saying, we're going to integrate with your payment rails, or we're going to integrate through risk service. That takes time. But all the other core stuff on a platform, if you find the right FinTech and together you're solving the right problem, it can go pretty quickly. And I think that was the magic is that once you find that, again, one plus one equals five, you can really, I think in general, if you think about our partnership speed market has been pretty good. We were just talking outside about what we've done in a pretty short time. How long? 15 months.

 Jon Briggs (19:17):

15 months.

Patricia Montesi (19:18):

15 months.

Chana Schoenberger (19:18):

Wow.

Patricia Montesi (19:18):

Okay. Pretty game changing stuff that we're about to launch.

 Jon Briggs (19:25):

And maybe from a bank perspective and advice to other banks, I think one of the things that allows us to move, I would say faster on a comparative basis to other banks is we're very mature at this through a lot of trial and trial and error over many years. And I think that's, so we've built out the processes, the frameworks in terms of how to go about this. And now more than ever, in terms of the focus on third party management and third and fourth parties and data protection from a regulatory standpoint, being having a robust chassis within a bank that you can run partnership strategy through is just critical to be able to fuel the speed to market that we're experiencing.

Patricia Montesi (20:26):

Great for us, I mean, we're a venture backed company and when we talked about going into the bank vertical, there was a big sigh of why whatcha are you thinking? And it's interesting. So as a FinTech, you have to be really careful about how you wade into that space and make sure that you are prepared to really qualify that particular bank. And I know that sounds funny because we're little Qolo and KeyBank ISS the top 20 bank, but our most precious resource is time and people. And so we have to be very sure that we're entering into a partnership that is going to be a win for us. So we look at it as we are very much qualifying these much bigger banks than institutions than we are, but you have to be very mindful that you don't spend cycles on people that aren't serious or don't have the knowledge and the appetite and experience like KeyBank does.

Chana Schoenberger (21:25):

Where the decision makers don't actually have the authority to make the decision.

Patricia Montesi (21:30):

A hundred percent.

 Jon Briggs (21:31):

Yes. And we have a saying key of don't crush the butterfly, but don't trip the elephant. So it's, it's a balance because we recognize, I mean an institution of our size and a company of Qolo size, we could be all consuming, and that can be really good for FinTech can also be their detriment. So that is a balance but then the don't trip the elephant, that is certainly there's a standard at which we need to make sure our partners and all partners are at to make sure.

Chana Schoenberger (22:14):

Something happened to the mic. It's just yours? Mine? Yeah, it's just.

 Jon Briggs (22:21):

You can finish my thought. Oh, there we go. There we go. So what I was saying is the don't trip the elephant. Part of that is, although cognizant of don't be all consuming to Qolo or FinTech partner, but also we can't compromise. At the end of the day, we are a bank, we're selling safety and soundness and trust, and we've built it up over hundreds of years and we have to maintain that.

Chana Schoenberger (22:47):

Great, great. Okay. I'm going to pause here and take some questions from the audience. Now's your chance to ask that burning question about how your FinTech works with the bank or how your bank works with a FinTech. That one over? Yes. Cathy.

(23:01):

Wait, hang on one sec. There's a mic coming your way. Yes.

Audience Member Cathy (23:08):

I was just curious how you both found each other. Was it KeyBank had this need or Qolo sold the need? What was your beginning?

Chana Schoenberger (23:18):

Did someone introduce you?

Patricia Montesi (23:22):

We have a mutual contact that actually someone I worked with for a long time and I talked to him about what we were building at Qolo and he's like, wait a minute, I know someone you should talk to. And literally we got introduced and very timely because they were doing an RFP for them.

 Jon Briggs (23:40):

Can you hear me? Okay? And for us, we deliberately try to spend an enormous amount of time in the venture space talking to venture capital firms, PE firms to see, hear what they're looking at, share ideas and others in the ecosystem. And so it's a great way to understand who's out there, where folks are maybe pushing the envelope or seeing something around the corner that we aren't. And that is frankly how we came to meet.

Chana Schoenberger (24:13):

So, do you have a policy to only work with venture or bad startups?

 Jon Briggs (24:19):

No. No. But these days it's tough to find one that isn't. But we've partnered with and invested in companies anywhere from Siege stage all the way up to later CD stage. So we've covered the gamut.

Chana Schoenberger (24:41):

Great, great. Okay.

 Jon Briggs (24:42):

We have a question over there.

Chana Schoenberger (24:44):

Yes. This one's a planned.

Audience Member 1 (24:53):

Hello? Oh yeah. Alright. I did have a question. So you were talking about this being a new vertical for Qolo. That means this is the first bank you've partnered with.

Patricia Montesi (25:06):

We are partnered with eight or nine different banks in different capacities, more from the services and the sponsorship side, but yet as a client, yes, that was our first entree into that. We've been really focused on and still are focused on other verticals as it relates to fintech's and corporates, but the banking channel is, yes, our first foray and first partner is KeyBank.

Chana Schoenberger (25:27):

Would you do it again? Would you do another bank?

Patricia Montesi (25:31):

Say, yeah, absolutely. Yes. Yes.

Audience Member 1 (25:35):

That's actually just if I can build off of Chana's question, what lessons do you think you've learned from this that you can now apply to either other bank partners or other partners in other verticals?

Patricia Montesi (25:49):

I didn't catch the last part. I'm sorry.

Audience Member 1 (25:52):

Going forward, working with other banks, what lessons did you learn here either for working with other banks or that you can apply to the other verticals that you're already more familiar with?

 Jon Briggs (26:03):

What mistakes did you make with the Key that you won't make again with your next.

Chana Schoenberger (26:08):

Or more positively, what will you do differently next time?

Patricia Montesi (26:10):

There's a lot we will do differently, and I just mean that as it's been a very great partnership and we've learned a lot along the way. I think. So again, it's that discipline on the front end, on the go to market side for us, there's a big bulk of our business that where we have a good motion already flywheel humming when it relates to selling into fintech's, when it relates to selling into corporates, we know how to qualify those deals. We know how to shrink the time to value on those deals. We're very, very good at that. And again, we're taking the bank channel and we're just being a lot more thoughtful and mindful about frankly qualifying them right? Again, it's like are they serious? Do they have a budget? Is there a decision maker? Is there a logical entree? Are we really solving a problem together? Yes or no? So we're just being very careful about it because we don't, to his point, you can get crushed and you can become a professional services shop for banks when that is not exactly what you set out to do. I think there's a ton of opportunity out there for us to find additional bank partners and customers, but we're just being very careful about how we approach it.

Chana Schoenberger (27:15):

I mean, you also don't want to be a pet FinTech, right? You want to be a FinTech as one customer and more customers, not just one.

Patricia Montesi (27:22):

Yeah. I mean, again, going back to what we built and why we built it and the fact that it's architected to support so many different use cases. I mean the last two years for venture as all of you I'm sure aware, right, have not been an easy road, right? We are very, very disciplined around what we say no to, what we allow and even the top of our funnel. So I have a CRO that is like, no, no, no. Right? It is taking that discipline and really saying, where do we want to play? How can we make the most money in the fastest amount of time get to profitability? And who in those verticals makes sense for us to partner with?

 Jon Briggs (27:59):

And what I'd add from a banking perspective, I joke that I don't want Qolo to have any more banking partners, but the reality is it is good for any FinTech to have multiple banking partners, multiple different client types, because the diversity of perspective and continual push of the product and the roadmap really benefits everybody.

Chana Schoenberger (28:24):

And it makes the company more viable. You are less risky that way.

Patricia Montesi (28:28):

Absolutely.

 Jon Briggs (28:28):

Yep.

Chana Schoenberger (28:30):

Cool. Okay. We have time for one more question. Anyone has one more question? Okay. I have one more question then. Do you want to talk about the design process real quick? What you were saying about, you got to know at the beginning, how do you sit down and design a thing together?

 Jon Briggs (28:55):

It was incredibly iterative, especially as we talked about the massive scope change. So we knew our hypothesis was spot on in terms of the need in the market, but as you start to peel it back, there's so much nuance, and I rattled off a couple of the verticals that we're looking to be able to serve. What we did is go talk to the clients, understand how they've conducting their business and running their financial operations today, if they're using another virtual ledger product, what they like, what they don't like. And we did that. I mean, we did that iteratively over probably a seven month period in the beginning as we're building the core UI look and feel of the platform, but also then iterating as we're growing, getting customer feedback as we build. At least that's how it felt from my perspective.

Patricia Montesi (30:04):

Yeah, no, no, absolutely. And I'll say pictures and diagrams and flows. So I'm the least technical of my family partners, and I need them to make me a picture and show me exactly what's happening from A to Z in this use case, in this use case, in this use case. Now, obviously that gets drilled down into when it gets to the product requirements and the engineers, it goes way, way deeper. But when you check in on your teams, what you want to make sure of is the outcome that we both want and the picture that we saw, what has or has not changed, and are we clear about what the direction that we're headed in? And I think for me, it's always the easiest way to say is let's make this very, very simple, very easy to understand. Take out the super techy stuff and roll it up. That's always been my approach to make sure what comes out on the other side is what this gentleman wants. Right.

Chana Schoenberger (30:58):

Great. Great. Wonderful. Well, thank you so much. This was super interesting. I'm sure people will be lining up to talk to you later.

 Jon Briggs (31:05):

Thank you.