Wade Arnold: Coder in the Cornfields

Wade Arnold leans against the wood veneer bar at Zsavooz, a busy strip mall restaurant filled with pool tables and dart boards off highway 58 in Cedar Falls, Iowa. The 34-year-old head of the banking technology company Banno gestures around the noisy room.

"I have all my internal meetings here," he says. "We call it Banno East."

This 40,000-person city is far from the tech capitals of New York and San Francisco. But it is where, with no acumen for banking at the start, Arnold transformed his company from a web design shop into one of the top financial technology outfits to watch in the coming year.

Roughly four years ago, in a series of lunch meetings at this bar, he negotiated a deal that netted Banno a half-million dollars in investments from local commercial real estate developers.

Now there are nearly 60 programmers, sales people and IT staff; about $4 million in revenue; and almost 400 bank customers.

This former, semi-pro BMX rider is part of a new generation of entrepreneurs trying to capitalize on the growing need for technology at banks.

Today you can tell he's excited. His voice rises at the end of every sentence, his blue eyes wide.

Arnold's tiny company has just landed its biggest get yet: a partnership with ProfitStars, a division of established core banking company Jack Henry (JKHY).

ProfitStars just began offering bill pay and mobile remote deposit capture technology through Banno's Grip - a smartphone app that helps bank customers decide whether to make purchases, without requiring integration with a bank's core system.

And earlier this fall, Banno launched a billpay switching service with Deluxe that gives banks and credit unions the ability to help new customers change banks. The roughly $178-billion-asset SunTrust is piloting that feature as a part of Deluxe's SwitchAgent software.

For Banno, such high-profile partnerships are a stab at legitimacy in an industry so risk-averse that newcomers selling technology are ignored as a matter of course.

"The barrier to entry to [offer] fintech directly to banks is humongous," Arnold says. "It's been a wild past 14 months."

BARRIERS TO BANK TECH

Few early-stage companies get as far as Banno, and even fewer last.

Traditionally, banks have wanted everything under their own roof. Executives were hesitant to even rely on proven third parties such as IBM, much less unknowns.

"I don't know if I'd [hire] somebody from Iowa in the first place," jokes Brian Riley, a former bank executive, who is currently a senior research director in the bank cards and retail banking practice at CEB Towergroup.

That, however, has started to change.

Over the past decade, "our world has become so highly interconnected that today, if there is a good idea somewhere in the world, I could be on a plane to get there tonight," says Philip J. Philliou, a payments consultant who evaluates startups nationwide.

Even so, those selling Web services to even the smallest of banks must catalogue every change - not to mention every version, whether it's displayed on a desktop, tablet or other mobile device.

It's a matter of self-preservation. A passel of regulators could, at any time, call on a bank or credit union to produce the rate changes displayed on a mobile app or static Web page at an earlier date.

Many larger banks will flat-out refuse to work with outsiders that don't have millions of dollars in liquidity, simply for liability reasons, Riley says.