It's Jim Young's final appearance on the show! He marks the occasion with Dallas Wells by going back to the beginning, more than six years ago, and comparing what commercial banking was like then, vs. now.
Helpful Links
- Things I Wish I Knew My First Year of Commercial Banking
- Earn It: Chapters 2 & 3 - Price Setting and Price Getting
- Preparing for Mergers & Acquisitions
- The Dos and Don'ts of Vendor Implementations
- The Goldilocks Approach to Buying Bank Technology
- 7 Deadly Sins of Pricing
Transcript
Jim Young:
Hi, and welcome to The Purposeful Banker, the podcast brought to you by Q2 PrecisionLender. We discuss the big topics of the minds of today's best bankers. I'm your host, Jim Young, Senior Content Strategist at Q2, joined again today by Dallas Wells, Head of Product at Q2. So, I didn't really want to record this podcast episode, because it's going to be the final one for me. I am moving on from Q2 PrecisionLender and The Purposeful Banker podcast after six-plus years.
But, enough about me, honestly, that's at least the way I felt about it. I was in favor of just turning the podcast cast reins over quietly, exiting stage left. Dallas seemed to think that our listeners might actually notice that I wasn't around. Agree to disagree on that. But that we should have sort of a transition episode.
So, fortunately, I still run the production side of this podcast. So, I have at least ensured that this will not turn into some maudlin, this is your commercial banking life-type sendoff with special guests appearing and that sort of thing. Instead, what Dallas and I decided might be interesting to do would be to look back on what we were talking about in the early days of The Purposeful Banker podcast, circa 2015, 2016. And to see what's changed and what's remained the same in the commercial banking industry. So, Dallas, thanks again for joining me on this episode. And if you make me cry, I will edit it out. Just know that.
Dallas Wells:
Fair enough. And I did insist on this one, because whenever we get feedback about the podcast, it's a lot of times about, "Hey, we love Jim and that other guy on the podcast." So, it felt wrong to just keep the other guy and not even acknowledge that Jim was moving on. So, hopefully this isn't like the final episode of Seinfeld and a big let down, but we'll talk about some things we've talked about over the years, but we will, of course, bring it back to how that compares to things currently. And we'll make this relevant for you. So, thank you for indulging us as we go down this and wrap up this phase of the podcast.
Jim Young:
And we will not do a Sopranos-type thing and just suddenly cut it off. Like middle of Dallas is answering last question-
Dallas Wells:
Yeah, hopefully not.
Jim Young:
... just cut off right there. So, okay. So, again, I know neither of us wants this to be about us, but as I was putting together this show and thinking about it, thinking back to 2015, 2016, one of the things I feel certain was that if you had asked 2016 me if this show would be around six years later, I would've been, shall we say, skeptical, but how about you? Are you surprised that we're still doing this 200, gosh, I would say about 300 episodes in?
Dallas Wells:
I didn't even realize we were officially starting a podcast when we started this. I certainly didn't think it was something that was going to last on the magnitude of 300 episode. This started way back in the old days as podcasts were a much smaller thing than they are now. We did it just as a way to record talking about this kind of stuff. And we thought, "Well, we can maybe share some of that internally." We were hiring a bunch of people and maybe there was a topic that they'd be able to get up to speed on or whatever.
And also, then the marketing team could just talk to me or talk to Carl Ryden and talk about some industry thing and then take it back and turn it into a piece of content. We really viewed this audio stuff as just the raw material. And we thought, "Well, why not just package it up just a little and put it out as a podcast?" But the response to it was really good. We're not like Joe Rogan level audience here, but we have a decent amount of people who listen on a regular basis. And the feedback that we get is like, "Hey, we really appreciate this. There's not a lot of stuff like this about this corner of the banking world." So, we've stuck with it. It's changed a bunch. We've adjusted the format and who's included and how it's included. But yeah, a little shocked that we're still here chugging along with this thing,
Jim Young:
I was not around at the time, but I believe after you finally finished recording the first episode, I believe your famous words were, "I think I need a drink." I believe was what it was.
Dallas Wells:
Yeah.
Jim Young:
Glad you stuck with it. But all right, enough about us. In fact, actually, the first episode I wanted to go back to actually predates me. It's a show you recorded with Jess Stone titled Things I Wish I Knew My First Year of Commercial Banking, in which you gave advice to your 22-year-old self about the industry.
So, I was curious, now seven years later on that, what's the advice you would give the 22 year old or what's the advice you would give the 2015 person, who's given the 22... When you look at it, you go, "Yeah, the principles remain the same," or would you alter it altogether?
Dallas Wells:
I scanned down it. Most of it, I wasn't too embarrassed of. The thing that was most shocking to me was that, seven years ago, I still remembered entering the industry and all of that now has just become such a blur. So, it feels like, and you say seven years ago, in the grand scheme of things, it's not that long, but holy cows, is that a lot of miles ago, as far as where we went as a company and where the industry's gone to.
So, a lot of what I was talking about there was just like a newbie coming into the business, whether as a college grad or new person into a company advice there. I think a lot of that largely sticks, but, man, it's a different world now. So, what you're entering is... I had advice in there, like knowing the details of your deals and I guess that's always a good idea, but banks really have become more technology companies that happen to offer a banking service.
Navigating all those projects, all the new tools and figuring out how to keep the core essence of banking and what sets your individual bank apart from the competition, how to keep that stuff intact, has just become much more important. And I think, as banks go out and bring in new talent of any kind, that's what they're looking for. They don't need just more of the same, of the old school banker approach. They got that in spades still.
And what they're desperate for is that like, how do you keep us modern and relevant and how do you help us enter the next phase of what this industry looks like? And that's what I would add to that list is like, do your homework to be able to come up to speed on what technology means for this industry and how to keep yourself relevant there. Just because it's super valuable, that skillset is in such short supply, that you will be well-served, whatever your role is, whatever institution you've been hired into. If you've got some basic good tech instincts and understanding, you'll have a whole lot more options than if you don't.
Jim Young:
Yeah, yeah. That makes a ton of sense. And I know one of the things too is a lot of the ways that you came into banking, I'm not trying to make it sound like you're Mr. Old-timer here, but the sort of training path that you took, I think, in a lot of ways, isn't even available anymore.
Dallas Wells:
Doesn't exist.
Jim Young:
Does not exist. Yeah. All right. Then tracking back, I believe my first episode as host was sometime in early 2016, I believe I was actually looking back at the script of it and I, at the time, labeled it a bloodless coup, and I think that may have been right. I took it over from Jess Stone and then we could pry it from my hands. But the occasion for our first discussion was about the book we wrote in 2016 called Earn It: Building Your Bank's Brand One Relationship at a Time. There are a ton of topics in that book, but for now I just want to stick to your general review of Earn It. Does it hold up six years later? Should we have done a second edition of the thing? Third edition?
Dallas Wells:
Again, that's something that was a while ago, but not too long ago. It was when we first started doing all the... Everything was on Zoom. So, as the pandemic started, the CEO of Q2, Matt Flake. So, the guy who just a couple months before had acquired PrecisionLender was speaking at a Q2 All-Hands Meeting and on the bookshelf right behind him, you and I both took a screenshot of it, was a copy of that book where he was like, "Hey, we're going to spend a bunch of money for this company. I want to read the book they wrote."
And I had this little moment of panic of like, "Oh my gosh, I hope that thing's not crap. I kind of don't remember exactly everything we talked about in there." So, I gave it a quick skim of what were the topics, and thankfully they seem to have held up pretty well.
Now, what I thought was, there's nothing in there that I want to cut. There's plenty of things I want to add. And I think that's kind of the nature of the business now is we tried to build that around core tenets. So, it wasn't a, here's the flavor of the week that you need to implement, but these are the core things that are not going to change. You got to do these well. So, what tools you use or exactly how you go about it may evolve over time, but the basic fundamentals, if you get these right, your institution will do really well around relationship banking.
So, again, I would add to that. There's stuff, heck, that we just learned by doing this a bunch more times and doing it with different kinds of institutions. So, larger global banks that face different sorts of issues. So, I would add some of the stuff that we learned from that, but otherwise I think we did okay with it.
Jim Young:
Yeah. I think you're right about that. I guess the one thing I thought about is how much nowadays we talk about the deal outside just the loan. I do feel like Earn It was a lot about loan pricing. We used the phrase, I think, lenders more than relationship managers. I think I remember having a big debate about whether we should use the word lenders or not. And that sort of thing. You would still file that under the conversations about relationships and relationship banking and being able to see that. So yeah, I would say most of it, I would certainly update the graphics on it. I mean, maybe get a professional publisher this time as opposed to the self-publish.
Dallas Wells:
Maybe so, yeah.
Jim Young:
But yeah. And we take Carl's name off of there too. So, at this point, let's just be real. So, we've done a fair number of M&A conversations over the years. One we did back in 2016 was an interview with John Freechack of the investment bank Piper Jaffray. And Dallas, to me, it feels like M&A is still very much a fact of life of the industry. I mean, you look no further than the continued popularity of Bank Director's Acquire or Be Acquired Conference. I'm curious, in your mind, because it was very, very big back in 2016, we had that conversation with John, are we still at the same levels to you? Is it just a constant, a fact of life? Or is it the kind of thing that's had some ebbs and flows?
Dallas Wells:
It does tend to be a little bit cyclical and there will be some ebbs and flows. But it has been just a steady march to a more consolidated industry. That's been true since the '80s. What tends to happen is that where the deal activity is shifts depending on what the climate is. So, recently we've seen a lot of really big mergers of equals is what they are branded as typically, but where you get these big regional banks joining together to become gigantic regional banks.
They're all after that same sort of scale. And I think that that scale, after the financial crisis, there was this new regulatory burden that had to be overcome. The standards went up in your safety and soundness exams after that, rightfully so. So, it just became a lot harder for the $150 million local institution to deal with that. And frankly, for it to be worth it for them as people to deal with that, it was rough.
Now, what you're seeing is there's the top four, the really big institutions that have just had the budgets and the wherewithal to kind of lap the rest of the industry, at least in terms of what they're spending and investing in the future of their businesses. Now, they don't always get it right, but just by the sheer size of the checks that they write, their innovation has been pretty impressive and continues to be so.
So, now, if you're a $50 billion regional bank, you kind of have all the headaches of a big bank, but not quite enough scale to spend $12 billion a year on technology like JPMorgan does. So, it's a weird tweener zone. So, they're joining up so that they can, frankly, just combine technology budgets and try to make a bigger dent in it. The logic behind it changes, where the flurries of deal activity are changes and shifts over time. But it has been a steady march of like the assets continue to consolidate. And there's no sign that that changes anytime soon.
Jim Young:
Yeah. I remember, I think we did one, this may have been more like two years ago, that reverse Goldilocks of what we might have called it about the regional banks, too big to have the personalized field, not big enough to have just the economies of scale that the big guys have and the difficulties that go with that.
Actually, the big bank, when comes into the conversation, because then we get back to the concept of buying bank tech. Back in the day, I know I took a little jab at Carl and how much he wrote or didn't wrote of that initial book, but he did write the famous, at least in the halls of PrecisionLender, the five C's of vetting vendors that time, basing it on the loan, what's the word I'm looking for here? Oh my God, I'm going to blank on it. Approval? Maybe? That's the word I'm looking for?
Dallas Wells:
Yeah. Loan underwriting.
Jim Young:
Underwriting, my God, you think I'd be doing this podcast for six years, I could remember the word underwriting.
Dallas Wells:
I think you'd figure that one out. Yeah.
Jim Young:
Yeah. Anyways, which was kind of interesting. He basically took the underwriting process that every bank uses for a loan and says, "This is kind of what you should be doing. You should be underwriting your vendors. This is how you should think about this." And you had one that you'd wrote that ended up in the book about like, "Here's the things you should not do in the process."
If you were suddenly thrown into a role of bank technology consultant, where you basically are talking to banks about how they should buy tech and how they should work with vendors, would you go back to those two pieces of content and to the podcast we had about it and say, "Hey, just take this, you're good." Or do you think things would be different now?
Dallas Wells:
I think they're basically right. Those markets have all matured quite a bit. And I think also banks have largely gotten a lot better at buying technology. So, a lot of what we were talking about there, if you look at it now, it's going to seem overly simplistic. But that was necessary at the time, because we walked into a lot of conversations where we saw banks, not anything to do with our own deal, but just as we talked about, "Hey, what other stuff are you guys working on?" They were making some pretty big mistakes and the way they approached it, I think, was a little backwards. And it was just new.
The way they had always done it. And the way some of them continued to try to do it was, "Well, I need this new piece of technology. So, I'm a Fiserv, or an FIS or a Jack Henry customer. I call them up and say, 'What do you got? I need a CRM. What do you have?' And they're like, 'Good news. We bought one of those five years ago, we've invested $0 and 0 cents into it since then. And here you go, it's made for bankers.'" You pile up enough of those things and they didn't really do the job that you needed them to do. Sometimes they did. I'm not saying that those are universally bad solutions. But that concept of just not even properly shopping for things was pretty common. It was simpler. You had one vendor to manage, one throat to choke. You didn't have to go through a big due diligence process to figure out, is this vendors safe?
I remember back in my banking days, we would do basically credit risk of the vendors that we used, were they a critical vendor? What did their financials look like? And that was hard to do when some of them were tech companies that were just bleeding red ink all over the place. It's like, "Yeah, they don't look all that viable." Now, that seems okay. That's seems a little more like how the world works now. And as long as they're well-funded and backed by solid partners, you get pretty comfortable with it.
But there was a time when that was not the case. You wanted the IBMs of the world in your corner, not the local startup with five dudes in a garage, and that may or may not be there. So, that only using the cores approach was still really common. It is actually still surprisingly common at the very smallest end of the scale. There are still small institutions that that's all the bandwidth they have is to try to manage it that way. So, I do get it.
But that process has matured a lot now. You see institutions, they know how to go about making a selection. They know to run an RFP process. They know how to figure out, is this someone I can trust? The one thing I would say is probably the technology moves so fast now, a lot of institutions are trying to make a decision and they're like, "Here's my checklist of functionality I need to have. I want you to check all the boxes either yes, no, or it's on the roadmap." So, if you're a banker, you've done one of those. If you're a technology vendor, you've filled out thousands of them probably.
But it's a snapshot. It's a point in time. So then, they bring it back and they put it on a grid. And I guess they try to find the most yeses for the amount of money that's charged. And they're back into a decision that way. But really what they don't do as good of a job is understanding like, "Well, where's the vendor headed? What's the point on the horizon that they're building towards. And is that the future I want to be a part of?" You have to really figure out who's going to be the right partner to meet you where you are in your business and build alongside you, because the market will change.
What you think you need today is not going to be what you actually need a year from now. And in fact, you're making a buying decision. You have to go get that approved. You have to sign the contracts. Then you have to actually get it rolled out. For some of these projects, you're talking, you're two years down the road. So, that checklist that you made that you decided on is obsolete by the time you actually kick off the thing.
Instead, you just need to be more comfortable about who you're locking arms with to go on this journey with. That's harder to put into a grid, but I think it's the better way to make the decision. It also keeps your vendors from just like, "Well, sure. We'll add enough stuff to get more yeses in the box," even though that's not really what you need and it's going to satisfy your current itch, but it's not going to be the path you need to be on. So, long answer, but that's because I think it's still an important topic and there's still a wide range of skillsets in there among the institutions we work with.
Jim Young:
Yeah. And I tell you what you've actually given me the itch to go back and look at Carl's five C's, because I think what you were just describing is actually I think Carl did a really good job of that, which is a little bit less about the technology and more about the vendor. Obviously, the technology matters, but as you mentioned, the technology is right now as a point in time, but are they vendors that are very good at taking feedback from their customers? Because Lord knows PrecisionLender, a good deal of innovation came from customers saying, "It would be really cool if you could do this." And are they churning them right and left? That sort of stuff.
Again, like a loan, you're talking about not just is this person good to lend to right now? But will they be still paying this loan back three, four years from now?
Dallas Wells:
Bingo. Yeah. That's why among the five C's was this character thing of like, "Okay, if you're good right now, that's great. But when times get tough, are you still going to pay me back?" And that's kind of the question you're asking your vendor. That's great that you fill the most check boxes right now, but what about next year? Will you still keep investing in this? Are you going to do right by me? That's the question we don't see asked appropriately or answered appropriately in a lot of these big multi-million dollar decisions.
Jim Young:
There's definitely been a lot of progress forward from banks and credit unions in terms of how they think about tech and how... A couple of debates, we used to have a lot of the buy versus build conversations. Feels like that's less of a debate nowadays. Another one within the conversation that, again, we're going to have a lot of links in this podcast show notes. If you listen to this on Apple Podcasts or Google, it's great. But I would recommend coming to the show notes, because we're going to have links to a lot of the podcasts and the blogs that make this one up.
The conversations, at this point, the one with Salesforce involved around the cloud. I mean, that was a big thing, 2015, 2016 was, we were recording episodes about, "Hey, don't freak out about the cloud. The cloud is your friend. It's not that big of a deal." I think it was Salesforce rep we had on the conversation was like, "Here's how we talk to people about the cloud." And that one feels to me like, feels like we can say we put that issue to bed. Does that feel safe?
Dallas Wells:
We don't run into a whole lot of resistance around that anymore. What's interesting though, is that as stuff has actually moved to the cloud, a lot of the capabilities that that unlocks, now you've got institutions facing that for the first time. So, for example, around like continuous deployment. So, this is something that, in the early days of PrecisionLender, so we've built stuff into the cloud there starting in 2009, when the company was founded. One of the very first bank vendors to do it that way.
And in fact, for a lot of our early customers, we were the first cloud technology they ever bought. That meant a lot of them didn't even know what questions to ask. They were just like, "Eh, these chaps seem to know what they're doing, all should be well." But what they didn't realize is that at the time, we didn't even break thing into release cycles. We were just pushing code multiple times a day.
And sometimes they would say, "Hey, it would be great if this thing on this box was a little different." And we'd be like, "Yeah, it's a good idea." And then, we'd call them later that afternoon and be like, "Hey, that thing's live." And they're like, "Wait, what?" They're like, "Where's my disc I have to install?"
But now banks have gotten much more sophisticated about that. But as things move from their private infrastructure into the public cloud, a lot of their vendors are saying, "Hey, this is great. We got you in the cloud now. Now, we don't have to wait for you to take the latest version. We're just going to push stuff to you all the time." And they're like, "Well, but how do I test it?" So, there's a lot of back and forth now in the industry about how that testing works, how much of the infrastructure stuff should just, "You want us doing security patches all the time, right? You don't want to wait and test those."
But if we change a workflow on the screen for your users, you probably do want to test that. How do we figure that out? How do we communicate that with each other? And then, some institutions are like, "Look, we just got nobody sitting around to test this. We're eight versions behind. Now, we're so far behind, we don't know how to ever catch up." Those things become a real problem. There's lots of things like that, that are new issues that, as relatively new entrance to using the cloud, a lot of banks and credit unions are wrestling with. They'll get there, they're problems that all have solutions and there's ways of handling them. But it's a new muscle and it's an important one for folks to get figured out.
Jim Young:
All right. And finally, it was fun for me. It was a little bit like leafing through old yearbooks type of thing. I was going back through and found the podcast five years ago where we were discussing one of the most popular pieces of content, frankly, we've ever produced when we were just PrecisionLender. It was something called The Seven Deadly Sins of Pricing. We put it into a blog post. We had an infographic and a podcast. Dallas, as you reminded me, we had a George Costanza quote in there as well. So, we pretty much had everything that-
Dallas Wells:
Had all the things. Yeah.
Jim Young:
Yeah, exactly. But I'm wondering, again, with that one, when you look through those list of sins, do you look at it and say, "Yeah, pretty much, this is a 10 commandments-type thing that we still keep running across." Or do you go, "Eh, it's not really an issue." Or, "Boy, I tell you what, there's a couple that aren't on this list, it should be."
Dallas Wells:
This one I think actually was pretty good. The thing about the seven deadly sins is they are kind of universal and stay the same over time. I think we did a pretty good job of making these pricing ones the same. As I looked through these, I was a little worried of like, did we... Like when you talked about in the book, did we take too much of a loan-centric approach to this?
I think some of our examples are about doing loans and pricing and structuring loans rather than relationships. But those things to avoid, those seven deadly sins, all translate to whether you're pricing wealth management or insurance products or treasury services, whatever the thing is, those same concepts apply. I think those are worth going back to, and anytime you can open a technical banking blog post with an, "I'm back baby," from George Costanza, you're off to a good start.
Jim Young:
Absolutely. That will do it for this week's show. And sadly, that will do it for me on this podcast. So, I want to thank all of our listeners and believe me, if you're like, "Okay, this is where it gets maudlin and I'm cutting out," go for it.
I did want to say, there have been several times behind the curtains over the years when folks, and when I say folks, I mean people at PrecisionLender, have come up to Dallas and me and said, "Really? A podcast on commercial banking? Are we sure we need to be doing this? Is this the best use of our time?" And it felt like inevitably and understandably, when people would ask that question, and we'd start to wonder like, "Is this something we should be doing?" We'd get feedback from a loyal listener or, Dallas, you'd be on site at some bank and somebody would come up to you and go, "You know what? I really enjoy listening to your... You guys are The Purposeful Banker guys?"
Or for me, back when everybody was in the office, pre-pandemic days, new employees would come up to me and it was a running joke here that I was some sort of minor celebrity, because it would be like, "You're the guy on the podcast."
Dallas Wells:
Yeah.
Jim Young:
And they would say like, "That's sort of how I started to understand commercial banking or understand PrecisionLender," and that sort of thing. And that, it reminded, I think, for me, I may speak for you on this too, that strange as it may seem, there really was an audience and is an audience that cares about what we had to say about commercial banking.
So, thank you again to the listeners for giving me the opportunity to have those conversations with you over the past six years. And finally, thanks, Dallas, for making this possible. You are one half of the voice of this podcast, but 99% of the brains of this podcast. I cannot count the number of times, and yes, this episode included, in which I have sent you the questions, the script for this podcast at approximately five minutes before we're about to record, and you have handled it smoothly as if we've been prepping for weeks. So, I will miss this doing this show, but most of all, I will miss doing it with you.
Dallas Wells:
Oh, thanks, Jim. The sentiment is shared. It's been a fun ride doing this thing. What I hope we can keep intact is, as you can probably tell from listening to this, Jim and I do not script this.
So, there will be like, "Hey, here's five questions I'm going to ask you." And we'll throw those together kind of as we're plugging in cords a lot of times. But it's just a couple people talking about current issues.
So, it's been helpful for us to talk through things. We figure out if we have an opinion on these, we figure out, does this resonate with folks out there? So, it's been useful to us. Hopefully, it's been useful to a couple of you out there listening to it too. So, Jim, thanks were making sure that this thing happened. All the episodes got done on time, roughly on time.
Jim Young:
Roughly.
Dallas Wells:
And as they were supposed to for keeping me somewhat on track, and best of luck in what's next for you, bud.
Jim Young:
And should be clear here, we're talking about me going off the podcast. We're not talking about the podcast going away. I'm working --
Dallas Wells:
That's right, we'll still be here.
Jim Young:
... to put succession plans in place on that. So, obviously, the podcast will miss tremendous loss of star power. So, I walk out the door, sorry, couldn't say that with a straight face. But no, The Purposeful Banker will continue to go on. I'm very happy about that as well.
Okay. Promised myself I wouldn't cry. So, time to sign off with a few friendly reminders. If you want to listen to more shows, you can go to the podcast page at explore.precisionlender.com, or you can head over to q2.com to learn more about the company behind the content. If you like what you've been hearing, make sure to subscribe to the feed in Apple Podcasts, Google Play or Stitcher. We love to get ratings and feedback on all of those platforms. Until next time, this is Jim Young, Dallas Wells. You've been listening to The Purposeful Banker.
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