S2 - Episode 7: Community Banking and Fintech - John McNair, President, Community Bankers Association of Georgia and Anindya Majumdar, MS-Information Systems, Georgia State

John McNair, President of the Community Bankers Association of Georgia joins Anindya Majumdar of the Robinson College of Business, Georgia State. This conversation explores the important role of community banks in the financial services industry and the role community banks play in fintech innovation.

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Speaker 1 0:06

Welcome to the Georgia FinTech Academy podcast. The Georgia FinTech Academy is a collaboration between Georgia's FinTech industry and the university system of Georgia. This talent development initiative addresses a massive demand for FinTech professionals and give learners the specialized education experiences needed to enter the FinTech sector.

Speaker 2 0:26

This is Tommy Marshall , the executive director of the Georgia FinTech Academy. And welcome to season two, episode seven. I have two phenomenal guests with us today, and we are going to be talking about community banking, one of my favorite topics and one that is highly relevant to the FinTech industry. So I want to welcome John McNair, the president of the community bankers association of Georgia, and a Ninja Lajune , Dar who is a management of science and information systems student at Georgia state Robinson college of business. Welcome to you both. Thanks Tom . John, I want to start with intro. I want to start intros with you , uh, and help us understand your career journey and how you came into working in this phenomenal, not just financial services industry, but this great part of the financial services industry that is focused on community banking .

Speaker 3 1:27

Well, thank you, Tommy, for the opportunity. It's a privilege to be here with, with both of you and appreciate your passion for the community banking industry. Yeah. I graduated , uh , undergraduate school. Uh, I'm embarrassed to say this back in 1988. So yes, I'm a living dinosaur , uh, for , to many of you , uh, celebrating over 30 years out of undergraduate. I graduated graduate school in the mid nineties and I had a , uh , economics degree , uh, have an economics degree from the university of Delaware. So , uh, obviously a good degree path to enter into the financial services , uh, arena. And that was always the intent in , um , kind of started right out of college with the John Harlan company, which is headquartered here in Atlanta. And I was living in Delaware and Pennsylvania at the time. Now, back in the day, Harlan was just primarily H printing company checks like real checks, like checks that you like hand write . You know, I don't think again was dinosaurs. We still write checks these days. My wife is a CPA and an MBA, and she still pays most of our bills by hand. So I'm embarrassed to say that as well, but that's how we were trained and that's what we do, but that's what we did. So we , uh, went to banks, mostly community banks and mid-sized banks, and try to get them to use the John Harland company for their check printing services. So that's how I really got into the financial , uh , arena , uh, working with banks and, and , uh , checks at the time was in Stowe is a big source of non-interesting time for banks. And , uh, as we'll probably talk , uh , as we get onto the segment, non-interest income is very important to community banks. And so they are always looking to maximize their non-interest income and provide a good product to their customers. So , uh, from there, I was really in and around the financial services industry, my entire career in different capacities. I went to a competing firm , uh, of, of , uh, the John Harlan company. You know, it's funny when I think about Harlan today, Harlan today is not thought of as a check printing company, they're thought of as a technology company, which they have really transitioned into becoming a leading provider of, of, of , uh , FinTech and financial services for , uh, for the community banking industry. So I've been in and around it, my entire career. Um , my wife and I actually owned our own business , uh, working with financial institutions, providing , uh , uh, uh, uh, commercial documents for banks, customers, primarily , uh , uh, checks and statements and forms for the most part. This is now, this is now we're talking mid nineties when small, this is customers started to incorporate technology into their bookkeeping and accounting. They started to buy , move away from manual accounting systems and start in, started to buy software packages such as Peachtree, QuickBooks, mass 90. And so that was really my transition into technology in printing because it was our job at banquet, hire my wife and I to go out and meet with their small business customers and , uh, determine which forms aligned properly with the bank software, their , their printers, et cetera. So that was kind of, and again, that's mid , mid to late nineties. Uh, we, we, we ran that business for five or six years and received a nice offer to sell it. And I then transitioned into , uh, the commercial appraisal business , uh, in which I , uh, was, was a commercial real estate appraiser, primarily focusing on recreational properties , such as golf courts , uh , golf courses, ski resorts, and , uh , FTOs , which are small airports. So it was kind of the fun segment. I wasn't just appraising, you know , commercial real estate buildings, but I've actually gone to the golf courses and appraising those, which I'm a lifelong golfer. So that was really cool to learn about that. And then from there, I left there after five years and went to work for the independent community bankers of America, out of Washington, DC. And ICBA is the , is the largest , uh, community actually the largest bank trade association in the country, but there in terms of members , uh, but their focus is exclusively on community banks. So from there I re I got reintroduced or re-engaged again with the community banking industry on a national level, beating banks of all shapes and sizes, all charter types throughout the country, and was there from 2004 through, through 2014. So I went through the financial crash, which was not a lot of fun , uh, but then also after the crash really started to see the ad that patient of FinTech and technology into the community bank model , uh, in , in , uh, uh, ICBA was very involved in, in that process. And, and , uh, always looking for technology providers. I remember we were considering a , uh , partnering with a cloud-based company called CompuServe out of , uh, California , uh, that ultimately sold and merged. And , and that was, geez , I'm going to , I'm going to say that was probably 2012, 2013, and we all looked at each other and we all re I , I remember sitting around the table except a senior management person, having the conversation, looking at each other, saying, this is the way of the future banks are going to get rid of their servers. They're going to start putting things into the cloud. It's more efficient , uh , greater security over time. And then lo and behold, here we are , uh , today , uh, you know, I think virtually every bank in the country, regardless of size is fully integrated into the cloud , uh, one way shape or form or another. Uh, but then I came to Georgia in 2018. I was offered the , uh , of the CEO job, the community bankers association of Georgia. And I've been here ever since. And I was blessed to , uh , come here in Georgia and learn about the incredibly deep and vibrant FinTech community that is here and being someone who has been again, been in and around the industry for all these years, very passionate about community banking. And while I am a dinosaur, I am kind of stuck in some old ways. I've always been able to have the ability to think forward and , and , and see , uh , uh, seeing the benefits of, of , uh, of things that are coming down the pike. And , uh, it's been a real privilege to be able to connect with the FinTech Academy and the other FinTech organizations here in Georgia and build relationships and , uh , talk about how , um , we all can partner together for the benefit of the community banking industry. So again, Tommy, I appreciate the opportunity to be here today, and it's a real privilege.

Speaker 2 8:04

Awesome. Thanks for that background, John. And I want to come back to CVA Georgia in a second. Um, uh , just a few things as you were, as you're in your, in your intro that, that jumped out to me. Um, you know, one, when I think about like Harlem , you know, in a kind of an amazing franchise, you know, re kind of highly regarded right in our industry. Um, and I think it's important to remember that all the check , the use of checks is, you know, been decreasing exponentially year over year for the , like say the last five or six years as , um, there's been better digital payment options, more use of cards, debit cards, et cetera, but you gotta remember, I'm saying kind of just to the audience that, that, you know, in the seventies, eighties, even through the early nineties, most were made by writing the check , um, and you, you go to the grocery store, you would write a check when your , you were checking out. And , um, that was the common , uh, payment type , but after check after cash. And so it's , um, it really, it , it, I enjoy looking back at the history or how these companies evolve , like Harlan , like deluxe to see how they've really , um, you know, really kind of pivoted into , uh, transforming their companies to , to make sure they're offering really remarkable products and services , um, to their , to their bank clients. Um, and then the other thing you mentioned was Peachtree software, which was this kind of remarkable kind of accounting, like you were saying, it was like getting , uh , businesses out of just essentially paper and pencil recordkeeping into really computer based record keeping now. And that company many would say Peachtree software founded by Ben Dyer is really one of the moat is kind of the beginning of a kind of early stage to really growth technology companies coming from Atlanta. I mean, most would say that was the first one that was the first really, really, really big success , um, kind of born and grown out of Atlanta. And, and , uh, we're also very fortunate that now Ben dire , um, who was founder Petri software is now our , uh, an entrepreneur in residence at Georgia tech at the, at the ATDC he kind of officially joined ATDC. Um, I think at the beginning of this year of being in a 2021. So it's like , um, that's been very, just exciting for me. I know exciting for the ATDC team at Georgia tech, because of course, you know, legendary founder technology standpoint, you know, just amazing amounts of , uh , wisdom to provide to , um, our, our startup technology founders here in this marketplace, FinTech and otherwise. Um, so it's cool to hear you talk about , um, your experience with that. Um , but in India, tell us about you. Um, uh, who are you tell us about your interest in FinTech, what you're doing now?

Speaker 4 11:12

Uh, first of all, thanks so much Tommy , for giving me this opportunity to share this session with you and John. And I'm really looking forward to learn a lot of , uh, insight regarding community bank and so that I can use it in my carrier . So regarding myself, I have undergraduate in information technology and that thing , I was a tech savvy person from my childhood. I was very much , uh , interested towards knowing how this computer works and things like that. Then certainly one of , uh , you know, I was working with some project of , uh , uh , IBM student Academy project. And I found that there some issue with my development skills and that was mostly bugs and security patches. And then that made me realize that I need to learn more about it security. And then I joined another program for enhance my skills from information technology, security system and infrastructure. Then from there, I joined Barclays and started working there in the payments , uh, processing , uh , team, and mostly working with legacy servers. And from there I was introduced to FinTech. And then I was amazed to know that whatever technology we're using somehow it's been initiated by financial technology to be very honest, just like today, the data is the fuel , but if you see in technology is always the FinTech. So starting from, if I take one simple example of mainframe, so I have not maintained has been used over a lot of different, different domains, just like your traffic controlling system. Like with the management system, like a space exploration system from where they started, they started from the bank. There's a lot of visualization where the bank are using because we have the finance with them. They can pump some , uh , fund and they can integrate things. So innovation is only possible when there is a financial backup. So FinTech is actually the driving , uh , part of technology in today's era . So then I was really interested over all the banks, you know, internal part. And then I started knowing things. And then I moved to the security space of bank and started learning about how we are securing our infrastructure and how we can making the payments secure. And then from there, I worked for you , uh , with , uh , with MasterCard for a few days, and I was helping them do securing their ID passwords and workovers to application. And from there, I was like more interested over not only the technology, but how we can implement this technology to make the business and how we can help the people to , to make smoother payment , to make them, you know, this payment technology available to each and everyone . And then I joined the program. I am purchasing right now, it's Ms. In information system with constitution and digital innovation. So this is, as of now my Gator parts and I am right now learning the business pieces about FinTech mostly because our program is focused over FinTech. So that's,

Speaker 2 14:10

And you're at the Robinson college of business at Georgia state. Um, and in that , uh, in that program, in the masters in information security program, right?

Speaker 4 14:22

Yeah . If I were in a system in yeah. In Georgia student college , uh , Robinson college of business ,

Speaker 2 14:28

Um, so , um, professor ballroom Romesh who's that department head, right? He , uh, is a huge supporter of our efforts, which I am very grateful for. Uh, and , uh, and as I've been getting to know him on I'm, you know, beginning to Mo evermore appreciate the depth of his understanding this space. Uh, and he's , uh, I I've often felt fortunate that he's , uh, that he's engaged with , uh, with our efforts in the, in the FinTech industry. Um, I wanted to ask you a few questions, one. So , um, Barclays , uh, is one of the largest financial institutions in the world. Uh, it's not one that may be familiar to a lot of the students listening to us because it's really kind of, it's, it's a better known brand in Europe and in Asia Pacific. Um, and , uh , but, but also, you know, has meaningful operations in, in Delaware. Uh, and, and John's all stomping grounds. Barclaycard is what I'm thinking of. Um, but , um, so you were, you, you were working , were you working with Barkley ? Uh, Barclay's out of , um, India out of Poona

Speaker 4 15:49

Yes. In the office. I was , uh , working, but I was supporting global Barclays . So mostly I was working for the global payments service and also for the global command center and also for the global security technology center. So basically , uh, regarding Barclays, what I, because I have worked more than five years with markets . So to be very honest , uh, I came to know after joining Barclays that they are the one who funded for the steam engine event, they are the one who helped IBM to fund. And then they , you know, Wade maintenance is that is what I was dealing . See . So whenever we are talking about some innovation, they need funding. So banks are the one having that much of a capacity to fund a technology and they can use it. And later in other domains , we can use it.

Speaker 2 16:33

Yeah, it's a really good point that there is this , um, kind of interdependence , uh , in many ways between large financial institutions and the growth , uh, and , um, innovation around technologies. And there's at the big, large, large scale. So like you're mentioning this IBM Barclays relationship and Barclays was like, okay, I'm going to give you a certain amount of money to help evolve this mainframe technology. And then I'll , and then of course, Barkley bought the technology from IBM. And so there's revenue, you know , flying back and forth, which is important because of course you're going to take more risk and be willing to innovate , um, or take the risks that are necessary in order to innovate. When, you know, you've got a large tech partner , um, or sorry, a large institution as you're as , um, to, to buy from you or to help even co-fund or co-invest in those efforts. And , um, you know, that's a really great point because that phenomena is not new. I mean, this goes back probably half a century, these types of relationships, and there's one, and they're ones that, you know, John, we see today , um, in terms of like relationships that you all, that you and I are working on, trying to establish with these earlier stage fintechs and community banks , um, helping them to say, okay, Hey, there's some cooperative kind of arrangements in discussions that you could have that may , um, kind of de-risk the opportunities for these groups to get together and evolve a useful technology for, for the industry. Um, I guess Ninja one last question was , um, were you, did you come to the Georgia state program from India, or did you like come to the U S with MasterCard and then coming to this program? I'm just curious about your thoughts .

Speaker 4 18:25

No. So I came from India for this program, and so I was very much in first of all the course module. And because I want to know about, because there was a lot of other programs in the country and internationally, also it is one of the most organized program. So because I was really interested with FinTech and one more thing that Georgia and Atlanta is going market for printing. So there is like a lot of learning. I can have you . So one more thing that, because us as the developed country and I am from a developing country, so I can see there's a change in the mindset and just like how we are using FinTech . So there is a big school in a developing country because the infrastructure , everything they are now investing, to be very honest, if I see comfort because I am here since last two, three months. And if I compare the Indian FinTech market with a us FinTech market. So because they are right now implementing things so they can, you know, take a risk and they can go with the latest technology, but here, things are already invested. Then first you already invest and they have to run it . And there is, again, one more part. We, whenever we talk about banking and financial services, there's two major part , one is regulatory. And the second part is that, what are we using ? It should be very stable because it's about people's money. We cannot just use anything. It shouldn't be, it should be really seven product.

Speaker 2 19:47

I'm glad you come to Georgia state from, from India. Um, the , uh, I continued to really well, first, I should say we have several listeners in Poona and Bangalore. Like I look at the podcast metrics and I'll see like a certain number of people that are, that are listening. So you may have friends at husk that are listening. Uh, and then, you know, also it's just what I I've been in this role that I'm in now for about a year and a half. And of course, every day , I'm learning more and more about the institutions in our university system. And I really just been struck by the , uh, the awareness , uh , globally of several of our institutions. I mean, particularly Georgia state, particularly Georgia tech , uh , UGA in countries like India. Um, my anecdote is this a little about this time last year, January last year, I was in , uh , Israel and in Jericho , um, visiting. And so we just, you know , stopped in Jericho to like get lunch in this like kind of interesting cafeteria space, kind of cool little restaurant. And we roll into the restaurant and I'm just like waiting for the table. And I look above the , uh, where the kind of manager was sitting and there's this Georgia state Robinson college of business MBA certificate. And I'm like, what the heck? I was like, are you kidding me? He was like, Oh, yes. I went to the Robinson college of business , uh , to get a , a degree in hospitality management. And I'm like, wow, this is amazing. Like , not just this kind of level of , uh, recognition is , um , kind of pretty significant, so glad you're in the program and , um, and, and engage with this. Um, well, John, I want to come back to you tell us about the community bankers association of Georgia and , um, this organization that you lead and the role it provides. And then, and then I guess maybe in the midst of that kind of just help us understand community banking a little bit.

Speaker 3 21:53

Yeah, sure. Thank you. Um, well, CBA of Georgia is a very robust organization. We're a five Oh one C6. Uh, we have about 140 community bank members in the association. And George's is really, you know, first of all, United States is rather unique in terms of the overall network of community banking. And so I think people need to realize that you, you think of community banking, it is kind of something that's just unique to the United States. We really don't have, I mean, other parts of the world, there's maybe five or six super large banks and credit unions and , and, and that's about it. So there's community bank and community banking industry here in the country is very, very unique. Georgia is blessed to have about 140 of these community institutions, and we have the that's about the fifth, most of any state in the country. So it's a, it's a very robust industry of all shapes and sizes. I believe one of the smaller banks in the state is about 30 million in assets. And , um, you know, I'm talking about banks that are chartered here in the state and , uh, you know, some , some of the larger ones go up to 25, 30 billion Synovis is, is , uh , about 53 50 , uh , four or 5 billion. Uh, they're sort of over that community banks threshold, if you will, but still , um, you know, a good , good size mid tier institution. What we do with the association, we were formed 53 years ago, primarily to represent the interest of community banks in the state house. Most of the banks that are, are here in Georgia are state chartered institution institutions. So you won't see many first national bank of here in Georgia, you'll see state bank of , uh, or , or main street state bank, or peach state bank, if you will, which is one of our members. So they, their , their prime, their primary regulator is the, is the Georgia department of banking and finance. And so the association was, it was again formed over 50 years ago to represent their specific interests in the state house. So I'm a registered lobbyist here in Georgia. We have two other , uh, registered lobbyists here that are all my staff. And right now the legislative session is going on. We just went through crossover days . So we're, we're 18 days away till the end of the session. It's a 40 day session. So we're down at the Capitol while we're down at the Capitol virtually every day, because they really don't want it down there. Um , physically monitoring bills and, and, and proposing changes to bills with the impact , uh, primarily of what we see as being an impact on the community banking industry. So there's really, there's really three legs of the stool advocacy is there's the first leg and , you know , one legs gotta be bigger than the other. That's, that's the bigger leg. Then the other, the other two legs are education and programs and services. So from an education standpoint, we have actually the most robust , um, uh , professional development program in the entire Southeast or community banks, the very significant part of our business. And as we'll talk about later banking, the banking industry in particular is very, very regulated. And so there's, there's , there's certain classes, programs, et cetera, that bankers have to take on an ongoing basis. BSA, AML hummed a home mortgage disclosure act to stay in compliance. And so we, we provide those basic compliance training programs that the bankers need out from a community banking perspective. You know, a bank, a small community bank is not going to necessarily want to take a class that, that Wells, the Wells Fargo people are taking because th you know, there's different needs. There there's a different business model. So , um, but then we also provide a whole bunch of additional training specific for commercial lenders, consumer lenders , uh, technology, the , the it areas. I mean, we have a cybersecurity summit , uh , that we do every year, and that's a growing , uh, uh, segment of, of, of , uh, of our education. I mean, the numbers , uh, the attendance numbers in that program continue to grow year after year for obvious reasons. So we are constantly looking at curriculum, updating our curriculum, modernizing the curriculum, adding new programs, and based on what the, what the times call for it. But it , we were all over the state. Um, we we've, we've gone back to in-person training with virtual, with a virtual component. So folks that are vaccinated and comfortable, they want to come to an in-person class. They can do it folks that want to plug in virtually. They can do that as well. And then the third thing, the third leg of the store, if you will, as programs and services. So banks use a multitude of different vendors, third party providers for, for any number of services. Uh, obviously there's there's technology providers. They work with their core processor, various FinTech platforms. Obviously, that's what we're here to talk about today, but then there's other providers of services to companies to help them with , uh, with their mortgages, with their mortgage underwriting, with SBA loans, with debit cards, credit cards, you name it. Um, we, we actively search for best in class providers, all those products and services. We have a member services committee that that's those companies. And then ultimately we partner with those companies to offer their programs and services, and then also to our members, but to also to get those folks plugged in to our professional development curriculum, we're looking at them as industry experts in their segment to help us train our bankers, to be more, more adapted and more competent in those various areas. So that's kind of the, the association, in a nutshell, we have also 12 standing committees and, you know, the, the, the asset mix of our banks is diverse. Many of them , uh, do what you think of as small, but everyone thinks of small business loans being the local dentist, the local pizza shop, et cetera. I mean, that's what we do. That's our bread and butter. Uh, and I , and I'll talk about that in a second, but also , uh, ag lenders, Georgia's a heavy agriculture state and our banks are the predominant lenders of a small, to medium, to medium size , uh , uh , farmers as well. So we have, we have an agricultural committee and education committee, and then a committee that I put together not too long ago is, is an innovation committee. And that, that is probably one of the more robust committees of our 12th. Uh, we have bankers that are plugged in again with all the four major FinTech organizations here in Georgia. Uh, they're attending their, their, their, their functions , um, meeting the people and then reporting back to our, our, our overall committee, what they're finding and how best CBA can plug in and integrate further into those organizations. So , uh, talk a little bit about , uh, you asked me about community banks and some of the differences between other financial services providers, you know, really , um, there's no hard and fast definition of a community bank. Uh, my personal definition is which is the , the, the old, if you just want to look at it from an asset size standpoint, which is not always the best way to look at it, but that's what legislators like to look at when they pass laws and regulators, et cetera, because it's kind of easy to put, put banks into buckets based on asset size. I kind of used the old , uh, SIFI designation, which stands for systemically important financial institutions that came about as part of the Dodd-Frank act, which is 50 billion and under. So any bank to me from an asset size, it's 50 billion. And under, I consider them a community bank. Now that definition has been pushed up in recent years to 250 billion , um, which is pretty large, but, you know, banks are growing every year in terms of assets. So I think it's sort of a , a threshold that will be more applicable, maybe 10, 15 years down the road, but that's kind of my definition of it. And really the business model between community banks and larger financial services providers is very, very different. And it is the best way I can describe it is that community banking is a relationship banking model , uh , larger institutions, your Wells Fargo, your P your , you know , your PNC, your bank of America. It's more of a transactional business model. Okay. And what I mean by that is that the per the most of their day to day transactions are taking place via technology. Now, community banks have all that technology as well to process your day-to-day transactions, but they also have the personal relationships to go along with that. And where that really came into play , uh, is recently with the PPP loans. You know , you know , a lot of small businesses, so many, you know, thousands and thousands of small businesses that apply for the PPP loads and is the transactional model showed limitations in that process. The relationship model with applicable technology proved to be most successful because bankers bankers know their customers and customers know their bankers. I mean, in a community bank world , uh, the bank CEO , uh, his or her children may be going to the same schools as the, the local dentist, the local lawyer, the, the local car dealership, the local pizza shop, et cetera, they see each other in the grocery stores. And so , uh , they're driving up and down main street. Uh , they know each other in, in that makes a difference when it comes down to , uh, uh, the critical function of, of, of a small business or actually any lending for that matter. And you really saw that plate play out. So , uh, um, I think that's the important distinction. Uh, you , you know, you hear a lot about credit unions as well. Credit unions really aren't , they're , they're very much more consumer focused. Uh, they, they don't really do small business lending. It's not in their charter. I think by statute they only 12 and a half percent of their assets can , can , uh , be comprised of CRE and CNI loan . So it's not really what they're geared, geared to do. They're also tax exempt organizations. And so , um , right . Whereas community banks are, they're basically small businesses themselves. They're , they're , they're paying all applicable taxes, you know , state, federal, local, municipal , uh, et cetera. So those are just some of the differences, that's what we do at the association. And just some of the differences in the business model.

Speaker 2 32:16

Yeah. That's, that's helpful. The, and really useful depth from a definitional standpoint. There's a few things you mentioned there, just your committees. Um, I guess I want to say thank you to the innovation committee, because we've got multiple members from that committee , um, supporting some of our student projects, right. Giving them advice and helping those students understand community banking as they're working on a project related to digital innovation transformation in , in banking, which has been phenomenal, that interaction. Um, and then with PPP, I'm glad you brought that up because , you know, obviously we saw this huge tidal wave of need that needed to be addressed , uh, by, by bankers to their customers , um, with , uh, the , uh, access to the, the paycheck protection program loans. And I know , um , from some of the community bankers, you've introduced me to, I got, we , we've gotten into some conversations kind of blast may June, like in the heat of the heat of all the it's , the wave was crashing on the beach in terms of all the work that needed to be done. And , um, I was just a really , um, uh, heartened and amazed to some degree at the level that these bankers were just immediately pivoting into embracing the use of some meaningful , um, newer technologies, like robotics process automation , uh, to help , um, automate some of the back office, middle office back office efforts that needed to be , uh , executed to meet that huge surge in volume. Um, and it just further and Bolden and , uh, my kind of premise that these community banks are just excellent places to foster further innovation , uh, from an operational standpoint, from a technological standpoint , uh , in the financial services industry , uh , broadly.

Speaker 3 34:24

Absolutely. I'd agree with that completely. And there's really two there's two or three key components driving that. First of all, it's the interest rate environment. We are at a historically low interest rate environment. Great. If you're going out to buy a house or , or, or, you know, you want to , you want to get a small business loan, you're going to you , you , you know, you're, you're buying a car , uh , not so great if you're your local community bank that does not, they're not big into charging fees to their customers. I mean, th there w what we call non-interest income sources, they're very, very bad at non-interest income sources because they don't, they , again, they just don't have a lot of fee-based services fee or , or, you know, they don't make a lot of money on overdraft. That's not who they are. They take in deposits and make loans. Now they're not paying a lot for deposits , but it's very tough in a low interest rate environment to keep, to maintain good spreads, which is how they make their money, how they pay their shareholders, keep the lights on , uh , pay their employees, et cetera. So , uh , the technology helps them , uh, improve their overall efficiency ratio and the efficiency ratio, just as simply as it implies, how much is it, how much of a dollar does it cost you to make a dollar? Right? And so if the interest rate environment is low, they've got to look at their cost of operations, right? And so anything that they can do to drive down their costs of operations and make their cost of operations more efficient, they're looking at it in my career. Again, going back to 1988, I've never seen over the last five years, I've never seen community banks looking into their technology the way they have over the past five years, the, the , uh , reduction in, in the , uh, uh, the , the, the overall business tax , uh, uh, structure provided them with some additional capital to invest in their business. And that's what they've been doing. They've been , uh, evaluating their core processors, evaluating the products and services of their core processor , et cetera , uh, other, other , uh , services as well. Again, trying to drive down the efficiency ratio. Then the other part of it too, is frankly, the customers demanding it, right ? The customers is telling the, and, and, and the whole, the corn , the quarantine, and the shutdown really accelerated that because people are doing everything from their home computer they're banking, ordering groceries, et cetera. So it's really the perfect mix. If you will, from the, from a FinTech standpoint, technology standpoint is there's a business reason for it, again, being the , um, it'd be in the interest rate environment, but also the fact that the customer is demanding it as well. So they've been, they've been forced to embrace adapt in , in many cases also even innovate. And I think that's one of the reasons why we're so excited about the , the opportunities that exist here in Georgia with, with your organization and the others , is that we can collaborate as a community banking industry in that innovative and innovation process to develop new technology solutions for the future.

Speaker 2 37:42

Uh , yeah, that's , those are great points. And I think it just helps underline that there is a significant incentive for community banks to innovate. And I would suggest that the incentive is more clearly present than it is for a large 300 billion and up asset bank. And my argument is if you look at those balance sheets and those income statements, particularly over the last two to three years, it's the , um, asset management , um, capital markets engaged part of their business that in many ways carried the day. Like if you look at , uh , bank of America, earning reports from the last quarter , um, it was all this engagement that they have is in fact that they are of America Merrill Lynch, and these, all this huge trading volume that's been going on in the markets , um, for the last really, I guess, nine months, I guess, almost 12 months now , um, that really helped carry the day from a , um, you know, all that fee-based income that they received as a result of that is what kinda carried the day from a , from a , from an income statement standpoint. And of course , um, that's not, you know , present in the community bank sphere. It certain , certainly not at that kind of scale. And so they're working on that efficiency ratio, improving the, the, the overall , uh, places where they can innovate to take out costs and address the consumer , uh, small business demands for digital experience , um, really kind of compound on each other to, to really have to, I feel like kind of the right incentives aligned for, for innovation. Um, there was one thing an endo I wanted to touch on with you , um, is you've got some kind of an interesting vantage point of having a bit interesting vantage point when it comes to this important topic of , uh, legacy infrastructure, legacy technology, mainframe, I guess, to use some , uh, some phrases , um , to this , um, what we call now cloud-based infrastructure , um, Amazon web services Azu or Google, Google cloud. Um, tell us, give us a bit of that perspective. You've had an experience you've had kind of working in this, in this world, in this transition point.

Speaker 4 40:14

Yeah, sure. So , uh, to be very honest , uh, as I have walked over both of the technology, so I have seen the pros and cons for both of them. So for banking and for financial services, the main thing is that , uh , they need a hundred percent reliability and uptime. So we cannot afford where there is a issue with the system, which can cause a loss of business. So for an example, if we can consider transaction where payment transaction is happening in the card business, or the IB or the corporate banking . So there's a lot of SLS linked with them. So we can not go with some technology, which is not elaborate. So right now the cloud infrastructure is very robust and they are upgrading themselves, but still , uh , there's issue with regularity. I'm not talking about that, but if I'm just talking about the technology, the legacy service we are working with right now, it's like more than 30, 40, 50 years. If we consider mainframe or HP nonstop tandem, they're 30, 40 years old, they are running over. Cobalts still, the COVID codes are like for most of the banks that they are like 30, 40 years old. And that is one challenge also because the resources with those , uh, global skills are also in the age where they are going to leave the market. And there is a technological knowledge gap because the latest , uh , resources not having that much skills over this kind of technology like COBOL , but still, if it comes to the business, they are going as smooth as they are. We are doing the framing the real time . We are not facing issues with that delay of payment. You're not losing the business, but at the same time, there's challenges also because at the end, we have to move from one industry to second. So the issue with that is migrating the data from a legacy server to we are moving towards a future that is cloud. So there's huge issue with this part. And the second part is security also, because with the latest technology, we have latest challenges and particular declares. That was the part where the legacy servers is actually being shielded because most of today's hackers and that's a good third are like, you know, they are not aware of much about the service , like legal

Speaker 2 42:20

Services . They're not cobalt programs .

Speaker 4 42:23

They don't have tools that, you know, like sophisticated security tools where they can penetrate with servers . They are like very much secure. And that's one of the main reason that the banks are still using them because they are reliable and they are fast and they are secure. So,

Speaker 2 42:42

Yeah, it's a great, no, thanks for that perspective. Those are those a great point . I I'm , uh , I guess I'm personally excited about the cloud. I mean, I'm seeing the , I believe that within the next 10 years, we're going to see a large number of banks moving their infrastructure to the cloud in entirety. Um, you know, we've seen some big brands like capital , one being the most talked about that. Have, I think over 90% of their application workloads are on Amazon, AWS now. And they started that journey five years ago. Um, and you know, there have been a few little hiccups from particular, from a security standpoint. They hadn't kind of major issue, I think, what was it, 18 months ago, so now , um, but there, it , you know, they've remained committed to that. Um, and then we've begun to see some , um, kind of remarkable, remarkable offerings , um, from FinTech companies, large and small , uh , from a cloud core banking standpoint, right. John and , um, there's, I think most banks are beginning to at least talk about this as an option. It's in the consideration set, there's plenty of analysis, lots of , uh, um, kind of , uh, efforts that need to continue to evolve , um, to, to help with those decisions. But it's , uh , it's a very exciting space. And I think , um, an exciting area to me anyway, a FinTech , um, when it comes to , uh, banking specifically ,

Speaker 4 44:21

Uh,

Speaker 2 44:21

Well, we probably should start to wrap up , um , very much enjoyed this conversation. And as, as listeners know, we always wrap up with kind of the top three news stories that have caught our

Speaker 5 44:32

Attention in the past week. So , um, John , I'm going to start with you, what have you seen?

Speaker 3 44:40

Well, I, in my world , uh, and I have to do more reading into it and again, in, in , uh , really process it more, but I noticed that so five bought a community bank in California, golden Pacific bank. Um, and really, it , it, it makes sense because , um , you know, as I mentioned earlier, banking is very, very regulated and, you know, I think when FinTech really started to , um, come out , uh , all of many FinTech providers start, Oh yeah, we'll get into this space and we'll offer banking services and we'll do loans and we'll do well. They, all of a sudden they get a phone call from the OCC or the FDAC , or, you know, the fed and say, well, wait a minute. You know, before you start offering these backing services , uh , you need a charter and we need to examine you. And by the way, examinations are very expensive. And by the way, there's all these compliance things that you have to adhere to. And it was just it again, having watched this happen in real time, where last several years, I kind of watch all the fintechs, you know, all of a sudden, you know , uh, ex you know, inhale and surprise it . Oh, we didn't realize we didn't realize all this and bumps . And so if you're so far , and you want to , um , or any FinTech and you wanted to begin to get more into the banking, traditional banking space, what do you do? You , you go look for a bank that you can buy, and then Presto, you've got a charter, so smart move on their part. Um, uh, I , I need to educate myself to see , uh , where they're at in the regulatory approval process, because the FTC and the agencies have to approve it. Um, it's in, and so I need to get schooled up on it, but not surprised . And, and , um, you know, so that's , that's one way to go about it if you want, if they want to get more active, the other way is to do what many are doing now, which is seek strategic partnerships. And I think that's, that's a , that's a workable option as well. So that was interesting news from, from my standpoint. And again, I need to familiarize myself a little bit more of the details. That's just Tommy. I think that just came out like , um , Tuesday, I think it was, it was just this week. So , um, anyway, yeah, that, that was, that was interesting.

Speaker 5 46:57

Yeah, that was a big one. Um, and Ninja, how about you, what's caught your attention

Speaker 4 47:02

As I've ever read out of Google. So I was Googling stuff and then certainly I've seen something cause I'm also e-com user . So then I have seen that the retail giant, the Walmart, they are not thinking about, you know, moving into the screen deck space and they actually just hired two senior bank members from the Goldman Sachs. And they also have occurred that rabbit capital and thinking about, you know, establish a new FinTech company. So I think it is a big move for them because they have a lot of customers and many of them are like still not having a relationship with bank. And they also, because Walmart is a big band. So I think that there's a, you know, from the customer side, there's a first love with Walmart. So this, this kind of move Latino at the senior they hire. And the fact that Walmart is a very successful and I know they have everything they do in volume. So this is like a , you know, big ambition from Walmart side . And I think that America one , two back with AMA maybe, yeah,

Speaker 2 48:01

It's a big, that's a that I've noticed that too very big story. I mean, I think all of us that have been inside a Walmart, no they're already in financial services. Uh , there's a whole, typically I know you walk into a Walmart and if you walk in the door and you go, right, there's like a whole money center area where there's like, you can send Western union transfers, there's tons of smart debit card options , um, a variety of different products and services that are certainly within the realm of financial services. Uh, and so they're going to , I think , leverage that knowledge, expand on it. Um, and then these folks they've acquired from Goldman. They were not, you know, your typical Goldman investment banker. These were people that started the Marcus , um, uh, digital bank that Goldman launched a few years ago. And that's the group at Goldman that supports the Apple card, which was, you know, also kind of a tech fin sort of intersection point. So really there's some yeah, pretty meaningful stuff in that I think, as you unpack that whole announcement or as we begin to understand it more. And then the last point news point that , that I'd mentioned is also along the , the bank charter lines. Uh, and it is another amazingly successful FinTech square , um, has created a , uh , another subsidiary entity called square financial services that has received a Utah department of financial institutions charter. Um, this is been kind of historically , uh , a state you could go to, to a chain obtain what were called industrial bank charters that have some national , uh, remit , uh, there , you know, it gets into some arcane kind of stuff , legal stuff around what you can do, what you can't do, but anyway, it's legit and it allows for lending and deposit taking on a national basis with FDI. C's also involved in, in that from a regulatory standpoint. So , um, you know , uh , again, you know, clearly the square is got big plans from a banking standpoint. Uh, and obviously as we've all seen just certainly in the last year, year and a half, it's a major growth , um, in their particular their cash app offering. Um, and I'll mention too, a lot of folks know this square has a meaningful presence in Atlanta. They have a, they have a pretty big office , um, upgraded Atlantic station. Um , so are very involved in our, in our state and in a variety of different ways. And obviously from a direct business standpoint. Well, I'm John [inaudible] . Thank you so much for being with us today. I've really enjoyed this conversation. It's great to hear and begin to understand better the community banking space. Um, John, thanks for the partnership with CB of Georgia. I value it deeply appreciate all your efforts to help the Georgia Findex Academy , uh, and , uh , Ninja. I look forward to let's meet in person soon. You know, the first floor of the Robinson college of business, if it's not part place is the FinTech Academy, right? None of us have been there lately , but we'll all be back soon. So , uh , we'll have to get together on campus. Um, and after the summer,

Speaker 1 51:26

The Georgia tech Academy podcasts are available on iTunes and Spotify to obtain additional information about the Georgia FinTech Academy. Please visit our website@georgiafintechacademy.org.