While writing my latest for BankDirector.com, “Three Things Bank Boards Can Do to Improve the Use of Technology”, I had the chance to speak with Ryan Gilbert, a board member at Sacramento-based River City Bank. In his day job, he’s the CEO of Better Finance Inc., a financial technology company that provides leasing and credit solutions to consumers and small businesses. As both a director of a traditional community bank as well as the head of a fintech company, he has a unique perspective on the intersection of banking and innovation. So I was curious what he thought about the impact of non-bank competitors, like Square (where Gilbert serves as an advisory board member), on the industry.
His thought? If you can’t beat ’em, join ’em. While many disruptive fintech companies may be chomping at the bit to change the game and beat the banks while doing it, it’s just not in the cards for now. The same regulators that give bankers pause when it comes to making innovative moves also ensure the safety and soundness of these grand old institutions. For once, the system might be on banks’ side. Gilbert says:
You can’t compete with banks. You can’t operate in a regulated financial environment unless you PARTNER with banks.
We talked in advance of BBVA’s purchase of Simple, a move that I can’t help but think will prompt similar moves throughout the industry (and I’m not the only one who wonders if we’ll see a wave of fintech start-ups bought up by big banks). Sounds to me like a win-win situation. Gilbert says of the almost 7,000 FDIC-insured financial institutions across the U.S., he knows of fewer than 10 that actively work with fintech companies to bring innovative financial services to the consumer. He thinks the industry could see a lot of benefits from these partnerships:
It’s a shame, because if we could have more institutions saying ‘We’re going to work with NBFI’s [non-bank financial institutions], we would see better innovation. We’d see more innovation.