Nbkc bank in Overland Park, Kan., is comfortable sitting at the same table as many of the banking industry’s biggest innovators.

The $632 million-asset bank, a unit of Ameri-National Corp., recently participated in a $16 million investment in Greenlight Financial Technology, which offers debit cards for kids that parents can control from their phones. Other investors included the Amazon Alexa Fund, SunTrust Bank and Ally Financial.

Fintech firms are eager to have community banks as investors because smaller institutions are generally able to approve deals faster than larger counterparts. In turn, small banks are slowly warming up to engaging with fintech, realizing that doing so can broaden management’s understanding about new technology and open doors to future investments and products.

“My belief is that the speed and agility that we can provide may be somewhat different — and hopefully favorable — when compared to the very large banks,” said Brian Unruh, nbkc's president and CEO. “Our speed and agility match up with what’s appealing about the fintech space.”

Nbkc’s interest in fintech goes back to 2001, when it was approached by two people who had a plan to offer second mortgages online. Though the pair had been rejected by eight other banks, nbkc “loved the idea,” Unruh said. The venture, eSmartloan, was profitable in its third month and helped drive returns at nbkc. Capital One bought the home equity loan originator from the bank for $155 million in cash in 2005.

“We’ve always had this unique entrepreneurial spirit,” Unruh said.

Nbkc has long been overcapitalized, and Unruh contemplated using that money for acquisitions. After attending a conference where almost every attendee considered themselves buyers rather than sellers, Unruh decided it was “crazy to use bank acquisitions to pursue growth,” he said.

Instead, he turned his attention back to fintech. Nbkc partnered with Roostify in 2014 on a project that lets customers apply for mortgages online in as little as 20 minutes.

The bank was introduced to Greenlight through its investment banker, Banks Street Partners.

Banks Street frequently has financial institutions visit Atlanta, where it is based, because it is a hotbed for fintech, including developments in payments, said CEO Lee Burrows. Over the course of a few days, bank management teams are able to meet with roughly a dozen companies.

Few small banks are actually able to invest in startups, for a variety of reasons. Everything must align for a deal to happen, including the pricing and having a fintech firm that is mature enough to draw a community bank's interest, Burrows said.

In addition to a potential financial return, banks will often use the technology produced by their investment.

Community banks curious about investing in fintech should do their homework, including speaking to bankers who are experienced in the area, said Thomas Rudkin, a principal at DD&F Consulting Group. Events put on by state banking associations are a good option, he added.

“Originally banks thought fintech products were a threat to their way of doing business,” Rudkin said. “But I think they're coming around in some cases to see that fintech products can be more cost-efficient and more profitable than originally thought. They're coming around to embracing this as an opportunity.”

Fintech firms like banks, especially ones that are closely held, because they can quickly make decisions. Privately held banks will likely have an easier time investing in a fintech firm because they can take a longer-term view on the endeavor without having to obsess about a quick return, said Bob Wray, managing director at the Capital Corp. Generally, a bank may aim to hold onto a tech investment for three to five years before looking for a chance to exit, he said.

Brian Unruh
Brian Unruh, CEO of nbkc bank, has long been an advocate of partnering with fintech firms.

Nbkc is also launching an incubator that will target businesses that could eventually help the bank improve the customer experience or boost efforts to bring in deposits, small-business loans and mortgages, Unruh said. The bank plans to provide free space and mentoring to startups; it is also possible that nbkc could invest in the firms over time.

Interest has been strong for the three to five spots Unruh envisions having in the incubator.

The Kansas City, Mo., area has a vibrant startup community, Wray said. Several private equity and venture capital groups are based there, and the cost of living is cheaper than in many other urban centers, he added.

Kansas City “has a more laid-back atmosphere that appeals to people in tech,” Wray said.

Overall, nbkc boasts a culture that is similar to the technology industry, Unruh said. The bank has game rooms on every floor and employees are allowed to dress casually all the time. Its main auditorium has a keg of beer.

“We're more of a tech company that is providing financial services,” Unruh said. “That's how we think of ourselves.”

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.