BI 2012: An Industry of Plumbers, and Other Opportunities in Banking
SAN FRANCISCO–It’s an honorable profession, plumbing. Plumbers, they make a nice living.
No, not those plumbers; I write of banking plumbers.
One of the themes from Day One of Bank Innovation 2012 was the idea that banks can increasingly provide the “plumbing” for more adventurous financial services ventures. There’s something to this.
We have noted that many a startup runs off the back office of more established banks. One is PerkStreet Financial, the founder of which, Dan O’Malley, participated in a panel discussion at Bank Innovation yesterday. Heck, wholesale banking has been around for a long time. Yet, the “Intel Inside” notion of banking rarely gets discussed. It did yesterday, and I was struck by the wide-ranging implications. Iker Marcaide, founder of Peer Transfer and someone I think highly of, pointed out that banks have increasing opportunities to provide that financial plumbing, as startups blossom. Peer Transfer itself works with many banks to facilitate its international cash transfer business. Even Todd Sandler at ING Direct said during his panel discussion that ING Direct doesn’t consider itself a bank, but a marketing and technology company. In other words, and I am paraphrasing here, the banking part is just plumbing.
This notion of core banking services plays into another theme at the conference, and that is the necessity to simplify banking. ING Direct has but seven products. Most banks have many more, with the largest banks offering well over 100 products. No one sales person can know so many products, which is why large banks are little more than conglomerations of product verticals.
Making product sets and products, for that matter, simple is not easy. At Simple, company officials have responded to more than 20,000 emails from consumers to try to better understand their wants and needs. That’s respond as in personally, one at a time, said Josh Reich, a Simple founder. Reich said Simple holds “email parties” on occasion to crank through emails while the Simple team shares pizza. I doubt the pizzas offer much consolation for the herculean effort that Simple goes through to better understand consumers.
If I had to sum up Day One, it would be as follows: innovation takes a lot of hard, painstaking, gut-wrenching work. I spent time with Shawn Budde, one of the founders of ZestCash, about the evolutionary process at the startup, which provides payday loans. The founders of ZestCash repeatedly ask each other extremely hard questions about their business. And they don’t always agree, but it’s the only way to force a startup to evolve, Budde said.
Much more to come today on Day Two of Bank Innovation 2012. The evolution, I expect, will continue.
