Crafting a commercial bank’s tech stack from a blank slate

American Banker’s Miriam Cross speaks with Allan Rayson, American Banker’s Digital Banker of the Year and the chief innovation officer and chief technology officer of Encore Bank, about how he built the company’s tech stack from the ground up and makes a case for using emerging fintech vendors.

Miriam Cross: (00:09)

Hi, my name is Miriam Cross and I'm a technology reporter at American Banker. I'm at the Digital Banking conference in Austin. And today I'm speaking with Allan Rayson, our Digital Banker of the Year, as well as the chief technology officer and chief innovation officer of Encore Bank. Allan, thank you so much for being with us. So where did your interest in banking and technology come from?

Allan Rayson: (00:31)

Great question. It's probably probably many years in the making, but I had an opportunity. I started in banking back in, uh, early 2001 and spent about two thirds of my career in corporate and commercial banking, but had an opportunity to leave banking altogether. At one point in my career to go out into the FinTech space though, nobody was using the word FinTech at the time. That's ultimately ultimately what it became, but I just became fascinated in, in the technology and sort of that intersection of, of banking and technology.

Miriam Cross: (01:07)

And the FinTech you refer to is PaidUp, you started in 2014? Yeah. That's funny.

Allan Rayson: (01:15)

Yeah. I feel like fin the word Fintech's been around for a long time. I think it's, uh, somebody told me the other day it's about seven or eight, you know, seven or eight years old that FinTech has, has been a, has been a term like that. But, um, I moved to Austin. I lived in the Dallas area for about 15 years and moved to Austin in 2013 and sort of caught that entrepreneurial bug, as many do around here. And had an opportunity with a co-founder to try to leverage a bunch of years of experience in the, in the banking business and apply that in the financial technology space. So we, we both left pretty pretty nice paying jobs. I would say at the time to go out into the startup space and launch PaidUp.

Miriam Cross: (02:05)

And when we spoke before you described launching PaidUp as taking a big risk, how prone are you to taking big risks in your career?

Allan Rayson: (02:13)

um, I consider myself to be pretty conservative. You know, if I'm being honest with myself, I guess, but, I would maybe say more, um, more, uh, risks that I, that I feel like I can, I can mitigate in some way shape or form, you know, either through just applied experiences or opportunities that exist in the market, but there's, it was nothing short of a huge risk. As we've talked about, took out a second mortgage on my home, um, you know, cashed in a cashed in an IRA for the, for the initial seed capital to, to get PaidUp launched while at the same time had young kids and a household to support.

Miriam Cross: (03:05)

But as you said, that experience led to your job at Encore Bank.

Allan Rayson: (03:11)

It really did. I mean, at the time prior to launching PaidUp really had, had, had done well in commercial banking and was fortunate to have been exposed to a bunch of different entrepreneurs and, you know, different business models. So I had, I felt like I had seen a lot at that point, you know from a business standpoint, but it wasn't too long after we launched that you sort of figure out, I don't know anything. I gotta, you know, I gotta catch up. I gotta figure out how to, you know, I gotta figure out sales and marketing and technology and, you know, all these things at the, at the same time where you're trying to build a business. But you know, when you're under pressure like that, I guess you, you figure out how to, how to make it work. And, um, you know, try to try to build the business and meet the customers needs while continuing to evolve the product so that it, so that there is a good fit in the market.

Miriam Cross: (04:12)

Do you ever feel that way or did you ever feel that way at Encore? Like, I don't know what I'm doing.

Allan Rayson: (04:16)

Oh, all the time. Yeah. yeah, yeah, no, we, we're, we're a small team, you know, we're, I think today we have 287 associates across nine states in about, in about 21 markets. So, you know, with a relatively early stage company, everybody's wearing a lot of hats including myself. So, you know oftentimes we're going into projects, you know, with limited insight, limited experience and having to figure it out, but it's kind of what the early stage, more entrepreneurial journey is like, I think.

Miriam Cross: (04:57)

Yeah. And when, so when you were hired at Encore, you were hired into two roles to start the Austin market. And as head of technology and innovation. What was it like juggling both those jobs.

Allan Rayson: (05:06)

It was hard. Yeah. It was very hard. I, um, admittedly didn't necessarily know what I was getting into, but, um, you know, back to taking mitigated risks, I guess, that was, that was part of my thought process. But my background, as you know, is, is banking and technology. I kind of sit at the intersection of those two things. So when I was given that opportunity in October of 2020, right in the middle of the pandemic, it was a much smaller company at that point. We were about a third of where we are today with respect to number of employees and asset size and things like that. So you know, doing both of those roles well was achievable at that point, but it wasn't too far down the road where it, you know, it

Miriam Cross: (05:58)

Wouldn't be achievable at this point.

Allan Rayson: (05:59)

It would take a superhuman effort. Um, yeah. You know, to do both of those roles at a high level. Yeah. To, to really do a good job in, in both of them.

Miriam Cross: (06:10)

And I know Encore has an unusual model where you enter a new market and then you recruit 100 to 150 investors, who invest in the bank and are customers of the bank. So what was it like getting that started in Austin? Like how did you get investors on board?

Allan Rayson: (06:26)

One conversation at a time is how we did it and that's our model as you and I have talked a lot about, you know, our business model is dependent on putting the right people around us, with respect to our investor partners. So we're very selective about who we look to be an investor partner, it needs to be, you know, that man or woman needs to be either a business owner themselves, which typically they are, or a highly connected individual in a market. So whether it's Tampa or Austin or Dallas or Nashville, typically our investor partners fit one of those two personas. They're either a business owner or a highly connected individual. But it's a challenging process. It's a challenging process that takes some time to put the right, you know, a hundred to 150 investor partners around you,

Miriam Cross: (07:30)

Especially Encore was such a young bank at that time. You only started in 2019.

Allan Rayson: (07:35)

Yep. That's right. And you know, my experience, part of my experience here in Austin, getting the banking market specifically launched is when I started in October of 2020, part of my job was to not only build a team, get technology and innovation to where it needed to be raised capital, open an office, all those things at the same time, but all of us were working without an office at all. So to your point, when you're selling the vision of Encore without any real evidence or anything to show, you know, such as a physical space, it was, all of it's a challenge, but it only added to the challenge.

Miriam Cross: (08:31)

Was there a technique you hit on to convincing people,

Allan Rayson: (08:35)

You know, for us, I think that's a great question. I mean, for us, we were able to lean on the experience of our co-founders. So Chris Roberts, Phillip Jett, Burt Hicks, you know, in Chris's case, he had built and launched two banks already. So, you know as well as I do, anything entrepreneurial when you can point to experience and point to successful outcomes. Like we were able to point to with Chris Roberts' experience, I mean that helps tremendously. And then with Burt Hicks, for example, he ran M&A, for a much larger bank and acquired seven or eight banks along the way in that role. So we were able to lean pretty heavily on a playbook. For lack of a better word on a playbook of successful outcomes.

Miriam Cross: (09:36)

Yeah. And this is also a pretty unusual model for a bank to get started. Why do you think more banks haven't done this?

Allan Rayson: (09:43)

, I've actually spent a fair amount of time thinking about that, and I'm not sure I have a great answer for you. Other than to say, it's really hard to raise capital that way. I mean, to be that selective about your investor partners and really thoughtful about who you're extending that opportunity to, I mean, today we've managed to put about 1600 investor partners around us in, in the markets that we're in, but to do that, you're talking about thousands and thousands and thousands of conversations. So yeah,

Miriam Cross: (10:24)

It sounds very painstaking.

Allan Rayson: (10:25)

It ss very painstaking. The best answer that I have to, you know, why more people don't do it is it's just extraordinarily hard to execute on that game plan. But I would also say, to our co-founders benefit, you know, when a bank is being launched or capitalized might be a better word, when a bank is being capitalized, it's usually a relatively small group of people that capitalize that bank, that initially put the money in to get the infrastructure built and make some loans. Then what happens is that ownership never gets spread around in a lot of cases. It stays with that small group of people. Whereas in our case, I mean, it's sort of the smaller piece of a bigger pie approach that Chris and Burt and Phillip took, you know, when they were initially kind of conceiving the idea of bringing on investor partners and, you know, in effect [inaudible] themselves. But knowing that we're gonna, you know, all build something even better and more special together. So

Miriam Cross: (11:44)

Yeah,

Allan Rayson: (11:44)

I think those two reasons are maybe why more people don't do it.

Miriam Cross: (11:49)

Yeah. Was it always the plan for you to transition from seeding the Austin market to just heading up technology and innovation?

Allan Rayson: (11:57)

It was. None of us knew when that would happen though. I mean, when we went into it,like we talked about, it was pretty manageable. I was able to put a great team around us on the commercial banking side. And I mean, when you're able to put great people around you, at some point it will, it will not build itself, but you know, you get the idea, whereas, at the same time, the technology and innovation was somewhat basic. You know, didn't necessarily require all hands on deck, but, I think there was there part of the game plan at some point was to transition to a single role from a dual role, but nobody really knew when that was gonna be.

Miriam Cross: (12:55)

I was wondering about that as well, because I know when you started at the end of 2020, the only major technology they had in place was the core system. But then you added loan originations and digital onboarding, things like that. So what was Encore, like, what were the operations like, or how smoothly did it operate? Considering there was a, sounds like a lot that was missing.

Allan Rayson: (13:14)

Yeah, I would say, I would say it operated fairly smoothly. The volumes were not that high. Though we were growing fast, it was, you know, a fairly smooth operation, but a ton of manual process is probably the best way to explain it. So, you know, at the time to get a commercial loan approved, we were using all the Microsoft tools that we use when we launch businesses and sort of running the company in some regard on the backbone of Excel and Word as as many do. With a lot of manual process, but with our growth, especially early on, we had to be very thoughtful about putting the right technologies in place to not only be able to support that growth, but be able to support that growth in a safe, measured way. I mean, we are in the risk business, but we're trying to mitigate those risks every way we can, using technology or otherwise. So while we started with just a core and some Microsoft tools that didn't last long

Miriam Cross: (14:34)

Do you still use Microsoft?

Allan Rayson: (14:35)

We do still use Microsoft. We are big Teams users and Microsoft tools users, but fortunately we've been able to put loan operating systems, Hawthorne River, we're big fans of Mantl. We use their consumer account opening product and love it. So we've been able to put those technologies and those partnerships around us to continue to grow and be the fastest growing, organically growing bank in the country.

Miriam Cross: (15:15)

And another thing I found interesting about Encore is it seems like you almost intentionally work with young, up-and-coming fintechs as partners. Can you tell me more about why?

Allan Rayson: (15:25)

Yeah, we love, um, I wouldn't say necessarily, like, we're not, you know, not necessarily working with pre-revenue, types of fintechs, but typically fintechs that have, you know, a decent amount of traction. Certainly that can support all the vendor diligence that we put 'em through, but we like partnerships where we're aligned with that partner, maybe they're at a similar stage in their evolution to where we are. So we're able to go in with a mutual expectation that, Hey, this is gonna be a journey, and we're gonna be reliant on each other to, you know, develop that platform at the same time. We're trying to grow really fast. And we've had a lot of success there, whether it's Smiley Technologies or Hawthorne or Mantl or Compliance Systems is a great example. I mean, those types of partners, sounds basic, but they get us, we get them. We all recognize that we're on the journey together.

Miriam Cross: (16:50)

And I was gonna ask you actually, for an example of a company, you feel like is moving at the same pace you were and really in alignment.

Allan Rayson: (16:56)

Yeah. I could give you several examples. But, you know, certainly Hawthorne River comes to mind. It's a great technology. It's an evolving technology, which is important, because as we think about what our main business is, it's, primarily a B2B, commercial banking program, you know, commercial banking platform. So Hawthorne River is a great example of a technology, you know, built on a modern base, built on Salesforce, still evolving and creating efficiencies for us in our commercial lending program. So, you know, that's a great example of just a partnership where we're kind of in the trenches together, so to speak, but very aligned on the direction that we're going and kind of doing that together in all honesty,

Miriam Cross: (17:57)

Has it ever been a challenge to convince other people at the bank to go with more up and coming companies or smaller names?

Allan Rayson: (18:07)

It has. Yeah. I mean, it can be a little uncomfortable when you're aligning with a partner that is not much older than you are from a life cycle perspective, but you know, really it comes down to the people, if we believe in them, if they believe in us, if they have the same outlook on the business and outlook on things in general, then, you know, going in, it's not gonna be perfect. Nobody expects it to be. But we also know that when those challenges and hurdles present themselves, we're gonna have to jump in and figure it out together.

Miriam Cross: (18:56)

And then there's also, you've told me before, I think with Smiley Technologies specifically, but I wondered if this applied to some of the other fintechs you choose, you want ones that are small and nimble and will grow with you?

Allan Rayson: (19:06)

Yeah, definitely. As you and I have talked about, we are in 21, 22 markets from Tampa to Texas at this point, including the Carolinas and now Nashville, now Denver, kind of that broader part of the country. But I would also share that we've got four or five markets that are not anywhere near maturity so they're just, you know, like a Denver or Nashville. They're just coming out of the ground as Austin was doing a year and a half ago. So nowhere near maturity. As they come to maturity over the next six to nine months, let's say, our pace is only going to accelerate. So, you know, the reliance on the technologies that we use, all the ones we've talked about, the Hawthornes and Mantls of the world, there'll be more, more of a reliance to continue to grow and evolve their platforms right alongside us.

Miriam Cross: (20:14)

Yeah. And also in terms of another example you mentioned, I don't think we talked about this in too much depth, but it sounded like you also do some creative things with combining them. Like embedding certain technologies with others. Do you have an example of that?

Allan Rayson: (20:26)

Yeah. I think the Compliance Systems example where, you know, prior to our partnership with Compliance Systems, users on the consumer side of banking were getting pretty static. In some cases, hard to read, hard to understand set of documents and disclosures. We all know when we open up a consumer account, there's a lot of paperwork. That goes along with that. So taking the technology that Compliance Systems has built, for example, and, you know, lack of a better word, embedding that inside of account opening products, for example, it does two things. It helps us create the transparency that we're looking for, which, benefits our clients. Because they now have a set of documents that can actually interpret and read and decipher. And it helps us from a compliance standpoint to know that we're doing everything possible, to support the bank's efforts from a compliance perspective, whether it's North Carolina or Texas, and having the right documents and disclosures, is a key piece of building that business the right way. Yeah.

Miriam Cross: (21:55)

What major pieces of technology do you still have to add?

Allan Rayson: (21:59)

We got a ways to go.

Miriam Cross: (22:01)

I assume it's never ending.

Allan Rayson: (22:02)

It is never ending. It is definitely never ending. Especially as we think about how FinTech is evolving beyond just consumer FinTech, you know, what a lot of what we are seeing today is this evolution of FinTech into the commercial side of the business, into more of the B2B and maybe infrastructure side of the business. That's where it gets exciting. I mean, my prediction is there's a lot of technologies that we're gonna be using three years from now that probably haven't even been created yet. They're probably a thought inside someone's head that, you know, hasn't had action taken on yet, but that's where it gets exciting because most of what we do is B2B or commercial. So seeing FinTech evolve in that direction is pretty exciting.

Miriam Cross: (23:03)

I think the major, the major thing you still have to do is commercial treasury, right?

Allan Rayson: (23:07)

It is. Yes. You're reading my mind. um, we have, we embarked on a major treasury initiative and it helps to understand the why behind that. But, you know, for us we do skew commercial. So we're trying to do everything in our power to support those kind of small and mid-size businesses treasury is, you know, typically your leading edge on the commercial side of the business. Because you know, that's what your clients are using day in and day out. So the technology has got to be great, not good, but great. It was probably the third quarter of last year, roughly nine months ago, we set out to improve and update and upgrade our treasury technology, ultimately have partnered with Q2, happens to be here in Austin. It really comes back to the relationships that we've talked about. Q2 happens to be a pretty mature company at this point. But that type of partnership is mission critical to us. But alongside that, you know, Q2 is able to deliver, really best in the market, small and, and mid-size treasury products that our clients kind of demand at this point.

Miriam Cross: (24:37)

I know you started from zero employees in Austin, you were the original employee here and now you're at 12 and you have office space. What kind of people have you looked for when you've been hiring? Are they people with banking and technology backgrounds or is there something else?

Allan Rayson: (24:52)

Good question. We start with people that have the right DNA and I'll explain what that means because what we're doing and we're the first to admit what we're doing is not for everybody, you know, it is very entrepreneurial. It is relatively early stage company. So what that means kind of day to day is people coming in are gonna wear a lot of hats and there's gonna be an expectation of, you know, pretty rapid development of a skill set. But at the same time, you're going to be in an environment where there's just not a ton of infrastructure around you. So that can be tough for people. And it's just not for everyone. So we're upfront about that. I mean, it's important for that relationship to be transparent and upfront about what this is, what your day to day is going to look like when you're coming into coming into Encore.

Allan Rayson: (26:05)

When we identify those people with the right DNA, you can just see like the sparkle in their eye. And they're like, yes, this is what I've been looking for, for a long time, is that, you know, everybody says that they're entrepreneurial, but you know, few are, I think especially easier said than done in this. Easier said than done, especially in this business, but you can see that twinkle in their eye, as you've explained what Encore is and you whether or not it's the right person.

Miriam Cross: (26:41)

And final question, I think you're wearing your We Win Together bracelet

Allan Rayson: (26:44)

I am.

Miriam Cross: (26:45)

Whose idea was it for everybody in the company to wear those?

Allan Rayson: (26:49)

That's a great question. I'm not sure I know the answer. I would probably have to give our three co-founders, Chris and Burt and Phillip credit for that one. But, you know, they're the first to admit that it's a little hokey, I think is the word that that Phillip uses. But it's just who we are. It's the, you know, 'we win together' mentality is what drives the organization. We're all, literally all of us are owners. All of us have invested our hard-earned personal dollars and are investing in a capital raise or in a stock purchase plan or something like that. The culture that's been created is pretty incredible. It's a high performing culture as you and I have talked about, but just the culture of, Hey, we're in this together, we care about each other, we recognize it's gonna be hard at times, but we come around each other and, and support each other and I think make great things happen as a result.

Miriam Cross: (28:05)

Cool. Well, thank you very much for speaking with me.

Allan Rayson: (28:08)

Thank you. I appreciate it.