Small banks hammer out a cheat sheet for innovation

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David Smithers left JPMorgan Chase for a rare opportunity to redesign and rebuild a much smaller bank.

Smithers joined Israel Discount Bank of New York in mid-2017 as chief operating officer and chief information officer. Smithers helped create a new five-year strategic plan to overhaul the customer and employee experience as the $9 billion-asset bank recruited new executives and directors.

"I was enamored by the opportunity they were affording me ... with the freedom to do what was necessary," Smithers said.

Since then, Smithers has set a digital transformation in motion and encouraged a new way of thinking — a mindset that emphasizes innovation and encourages failing fast. It was a top-to-bottom rebuild that required buy-in from employees at every level.

IDB has started to see progress as the culture changes, Smithers said. IDB improved its Salesforce infrastructure, revamped its website and invested more in digital banking. The bank is also set to change its core banking provider while embracing open banking, Smithers said.

Smithers is one of many bankers looking to reinvent their institutions in the face of intense competition and changing customer preferences. Igniting such change is challenging and relies heavily on having strong leadership, industry observers said.

“Change just doesn’t come easy, whether it’s a small or large company,” said Kevin Tweddle, chief operating officer for the ICBA Services Network. “The conundrum is the same. One of the most important things is to have a leader who embraces innovation.”

Eastern Bank in Boston last year hired a new chief digital officer to recreate its innovation lab with a broader mission. The $11.4 billion-asset mutual’s first innovation lab focused mostly on creating Numerated Growth Technologies, a small-business lending startup that Eastern spun off in 2017.

Ashley Nagle Eknaian, a former managing director of State Street's emerging technology center, joined Eastern to promote innovation across business lines and create a more forward-thinking environment overall.

Engaging employees was a critical prerequisite for Nagle Eknaian. Much of her time early on was spent talking about her vision with heads of businesses, the management team and employees. Today her team frequently receives emails and ideas from employees across different business lines.

“I'd like to see every Eastern employee doing something with a Lab project as often as we can to make people feel involved and engaged,” she said.

River Valley Bank in Wausau, Wis., which started the digital-only Incredible Bank in 2009, has emphasized innovation and entrepreneurialism for years, said President and CEO Todd Nagel. The $1.4 billion-asset bank is taking that effort a step further by fully adopting the name of its online bank in a move that shows the bank’s desire to be viewed as tech savvy.

Employees are “fired up and excited” for the change, Nagel said, adding that the ability to serve other markets with the online bank has been empowering.

“We work on being a culture of growth — we must continue to grow all the time," Nagel said.

“Our culture is ready to be called Incredible Bank, so we're retiring the River Valley name,” Nagel said. “Right now we're juggling two brands and two separate marketing budgets. [Once] it’s combined, we will all be working on the same brand, same logo and shirts. We'll all be pulling in the same direction.”

Other banks are modernizing by engaging with fintech.

Nbkc Bank in Kansas City, Mo., launched a fintech accelerator last fall. It was the bank’s latest effort to promote innovation in a “fast-moving environment," said Brian Unruh, its president and CEO.

“It feels like a perfect-fitting puzzle piece,” Unruh said. “Employees have embraced it.”

While nbkc doesn’t try to be different, Unruh says the financial services industry “needs a big shake-up.” The $685 million-asset bank recruits people from outside of the industry; last year it participated in a $16 million investment in Greenlight Financial Technology.

“It’s not our goal to be different — that's the end result,” Unruh said. “We're really just trying to be authentic to who we are, and as the culture has evolved, it’s turned out to be much different.”

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