CSpring’s Mike Butler, Chief Data Officer, talks with Justin Dunmyer, Chief Digital Officer of Citizen’s State Bank, about digital and data in financial services in this 3 part series.
Part 1: Digital Strategy, Financial Fragmentation, Payments
Hi, Justin. Nice to do this with you! I’ve been looking forward to having some banking conversations and talking about digital transformation, data strategy, and anything else we wanted to discuss.
Thank you, Mike, for inviting me to talk with you.
Yeah, absolutely. You’re the Chief Digital Officer for Citizen State Bank and one of our Accelerant partners! Why don’t you tell us about what you do at the bank?
Thank you, Mike. About what my scope here at Citizen State Bank is. I’m our chief digital officer, and in my day-to-day, I oversee our digital strategy and execution. Including things like our online banking experience and how we mitigate and monitor fraud online. In addition, I also oversee our data analytics department, where we work on reporting, understand our data, and make decisions with our data. I also lead our marketing area. My role ties in digital customer experience, marketing, and data all together and is focused on constantly improving our clients experience with our digital offerings.
That’s awesome. That’s a wide array of things you own. All right, so let’s jump in. We’ve got some questions we’re going to go through. To get us started, it’s the beginning of the year; what things are on your plate as you think about strategy going into 2023?
I have a couple of high-level thoughts related to our strategy in 2023. We are always working on digital banking enhancements, and have a couple of new and very exciting features on the roadmap. Some of the new features will be focused on improving the level of personalization in digital banking. That, I’ll say, is almost always my number one goal.. From a data standpoint, it’s just continuing to use the data to make banking with us easier. We like leveraging our data to help identify pain points and streamline processes to make it easier for our clients to bank with us. You can bank many places we want to be an easy place to bank.
Fantastic. It occurred to me while you were talking that you have some great data strategies from a digital banking perspective, the personalized digital experience, and you’re extending transactions. You’re extending data services for your clients to help them be more data literate! That’s pretty cool, and that’s the stuff I like to talk about.
I think those will feed our conversation really well. I’m curious to get your perspective on several of these. I played the chief technology officer for many years, but not from a digital perspective, not with marketing and your business insight. What are some of your current trends and interests in banking?
Number one; changes to the payments landscape. Banking is constantly changing. We’ve seen a significant adoption of real-time payments, but it is certainly an area of banking that is still in its infancy. You’re probably familiar with Zelle as a person-to-person real-time payment solution. There’s also FedNow and the Real Time Payments (RTP) Network beginning to be used. I believe The payments landscape will change significantly in the coming years based on how real-time payments are adopted in the United States.
Certainly, money will be able move faster. I think the most significant impact is yet to come. We’ve seen pretty reasonable level of adoption of real-time payment in the person-to-person payment space (Ie. CashApp, Venmo, Zelle etc.) . I think there’ll be a lot more meaningful transactions happening in the B2B space. Start asking, how will real-time payments eventually replace ACH or change the ACH network? How will it change international business? How are you settling payments internationally? I think we’ll see many challenges to some of our existing payment channels, wires, ACH, and so on.
In addition to the changing payments landscape, I have also been closely paying attention to the entire Fintech ecosystem. In particular how fintech companies are partnering with banks is interesting. From a banker’s perspective, if you go back ~5-7 years ago, we started hearing about fintech and how fintech would take over the world one day. At that point, there was this big conversation: Is fintech a friend or a foe? Should we be working with fintech providers or should we steer clear? I think throughout the past several years, that question has been answered.
Many banks are partnering with fintech providers . A new niche that’s been created in the banking industry is something called “banking as a service” (BaaS). BaaS can take on many different shapes, but essentially when a bank deploys a “Banking as a Service” strategy they are partnering with Fintech providers to give them, and the fintechs customers, access to banking service – such as debit cards, ACH, check clearing etc. This has allowed a huge variety of fintech providers to spin up – and offer bank-like products and services to their customers – without having to be a bank themselves. While we do not currently offer and BaaS services at Citizens State Bank, it is a trend in the banking industry we are paying close attention too.
That’s a super exciting business model. It’s still developing, and we’re monitoring it closely. There’s certainly been a few pitfalls there, right. You have to be very careful about how you select the partner and how you manage those relationships. At this point, I’d say it’s a trend that interests me. It’s not something we’re doing here, a citizen state bank yet. Still, we’re paying attention. The next generations, Millennials, Gen Z, and so on, often use these fintech apps. This leads to the concept that you’ll hear different terms. The term that works the best, in my opinion, is financial fragmentation.
One last interesting trend I am following is Financial Fragmentation. As we study banking behavior of millennials and Gen Z in particular, we are finding that its very common for them to have 30 or more financial relationships. I first heard that stat, questioned it, opened up my phone, and started scrolling through all my various apps – and sure enough I had way more financial relationships than I would have initially thought. Much of this is being driven by all the choices and new apps available. You have apps for trading & investing, apps for crypto, a huge variety of credit card options, P2P payment apps, budgeting & money management apps, payment processing/payment acceptance apps, and a seemingly endless number of other “financial” apps available.
If you went back 10 – 20 years ago and asked somebody, “who do you bank with?” They’d probably tell you the name of a bank. If you ask someone that same question today you are much more likely to hear that they have a variety of banking / financial relationships. Financial fragmentation is real and it is a really fascinating trend in banking.
Yeah, I love the payments fintech. Financial fragmentation is interesting, and I haven’t heard that term yet. I’m going to have to look at my phone here in a few minutes and see how many because I was trying to count my head while you were talking about that. I bet I have at least 15, if not more, that I’m not thinking of.
Yeah, it’s wild.
Yeah, that’s pretty cool. So I love your thoughts on payments. I’ve been following FedNow and where they’re going, and they say they’re on target with some of the deliverables. So we’ll see if it comes out on time. But I agree with you. I think that has real potential to change the space. 100% on B to B. I see your position on fintech, I like that too. I like how you think about banking as a service, which we’ll talk more about here in a another post. I think that’s a fantastic opportunity for banks to start thinking about how do you take back some of the revenue loss from some of these fintechs. They’re eating a piece of the transaction fees and things like that now that they’re trying to play in the space so much.
Part 2 will be released in the coming weeks!
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