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.
And then there's the series of certifications an entrepreneur must pay for and pass, to convince potential customers it's safe to use the startup's services. Yet there is no question where much progress in this industry starts - with people like Arnold.
HACKER @ HEART
In the mid-2000s, before working on big banking problems, Arnold was plugging away on open source software, specifically working on a way to push data immediately from a server to a Flash player (Adobe's multimedia platform used to add animation, video, and interactivity to Web pages).
He co-wrote "The Essential Guide to Open Source Flash Development," after so impressing Adobe executives with his work that they hired him to speak at conferences and "evangelize" their software.
In 2007 Arnold joined T8 Design, what is today Banno. He became the lead on a dozen projects for the then two-year-old ad agency, most of them contracts with fast food restaurants.
Arnold was paid in common stock, a move he'd later regret when he realized that T8 was heavily in debt. He eventually approached two real estate developers for help keeping the company afloat and preserving his shares.
What happened instead was a series of drama-filled events in which the previous CEO was forced out and the pair of investors wrote a check for $500,000 directly to the bank (they now own half of Banno) and put Arnold in charge of the new T8 Webware at the beginning of 2008.
Banno's bank website business took off the following year. "The longer story is that the majority of our revenue came from companies like Hardy's, AT&T and McDonald's and Fortune 500 companies that we were doing software development for," says Arnold, who then was selling to the company's largest accounts. "Then in 2009, we had one month in which the rest of the company sold more in banking than I sold in professional services."
That created a shift in focus.
The company began offering services that evolved into Cre8 My Card, a product that lets banks offer customers a way to customize debit cards with photos.
Just this past year, Banno began selling responsively-designed websites to community banks and credit unions that keep track of a customer's preferences, redesigning content based on a user's device, whether that's a tablet, smartphone or desktop.
At heart, Arnold's a geek who codes as way to learn about the world around him.
It shows through his repertoire of weekend activities over the past year. He's reverse engineered a Square-like smartphone app after ordering a 99-cent card reader from the Chinese manufacturer that makes Jack Dorsey's dongles; built his own processor software that completes American Express transactions, and created a mobile payment app after borrowing point-of-sale equipment from a bar and restaurant company, Barmuda, that shares office space with Banno. All, just in his spare time.
And he renamed the company last year after his young son's imaginary friend. It was his way, he says, of claiming Banno as his own - absolutely nothing from T8 Design remained.
There has been a flurry of interest in the company since Arnold and his product manager, Ben Metz, announced Banno's mobile banking application Grip at FinovateFall in 2011. The startup has had meetings with executives from some biggies, including Citi, Capital One and Visa.
Grip offers mobile personal financial management and beyond. Banno buys information from search engine giant Google and scrapes the social Web for clues on where people shop and check-in: think FourSquare. But though the iPhone app took only a month to develop, the process behind it involves complex machine learning and took a year and a half for Banno's programmers to build.
It's an engine that will someday be used to allow banks to cross-sell mortgages and target offers based on algorithms that track bank customers, Arnold says. The company wants to eventually give banks an intelligence report on each of their customers. This might include a tip sheet on a customer who should be offered a car loan because the amount of cash in her bank account has jumped by 22 percent over the past month and she constantly searches online for new Ferraris.
THE HAWKEYE EFFECT
Perhaps Banno's greatest strength is that Arnold kept it in Iowa.
In a state college grads can't wait to leave, the median age in the office isn't much older than 25, says Abby Goltz, a 26-year-old account manager at Banno. The atmosphere here is light, with Arnold, a rap music aficionado with a penchant for Jay-Z, often making sure it stays that way.
"So the other day we were in a standup [meeting]... and someone was explaining something that we got completed, and Wade says: 'So, translation, you're the s**t,'" Goltz says, laughing. "And I'm thinking 'Clique' on the new album by Kanye West."
The whole feel of the company is young and hip, with tall Steelcase chairs and chest-high tables.
Indeed, in Banno's wing of the shared office space, there's a foosball table, free Red Bull, and there are no offices except for Arnold's, which is more ceremonial than functional. It's mainly where he keeps a keg of Stella Artois (the Budweiser of Belgian beers) along with a bottle of Bombay Sapphire.
Not even Metz, Arnold's No. 2 man, has his own desk. Metz roams the halls speaking to developers, copywriters and account managers. The entire building feels like the common area of a dorm room filled with friends. For instance, Eric Batterson, Banno's head of user interface design, was the best man at Arnold's wedding.
And to bolster Banno's recruiting program, Arnold is a member on the computer science advisory board at the nearby University of Northern Iowa, Arnold's alma mater. "There is no better hire you can make then a kid that grew up on a farm that has a computer science degree," says Metz. When you tell a farm kid he doesn't have to work from sunup to sundown and gets to sit down all day, the Iowa-grown 20-somethings sometimes look at you funny.
There have been state-funded perks, as well.
In September, the Iowa Economics Development Authority's Innovation Acceleration Fund matched a $1 million private loan from one of Banno's lenders, according to a published report.
Earlier this year, that same agency doled out $120,000 in tax incentives to the startup.
WHAT'S AROUND THE CORNER
It's a cold night on the plains as Arnold drives his late model GMC Yukon downtown.
He usually isn't dressed this chic - in designer jeans and $400 Allen Edmonds leather shoes. It's usually graphic tees, often times carrying his company's logo, and sneakers.
Arnold walks through the employee entrance at Montage, a restaurant that could, except for the prices, be easily transplanted to Midtown Manhattan.
Several senior members of Arnold's staff (all under 40) are waiting for him at a table in the back, among metal sculptures made by a local artist. The centerpiece is a tall, hollow prism supporting a solid sphere.
And the wine flows: At least one $145, four-year-old bottle of cabernet sauvignon from Napa.
The conversation quickly turns to bank tech.
When asked, Arnold insists that he's completely uninterested in selling his company in the cornfields.
He blurts out that last year he was offered eight figures (read: more than $10 million) from an established Austin fintech vendor whose CEO has an affinity for the movie "300."
Metz would later say Arnold's greatest strength is that he's a "product guy," someone who gets the design, functionality and utility of a piece of software.
That's on display as Arnold sketches out Banno's long-term business plan on a piece of notebook paper sitting on the table - something other executives who have worked with him say he's prone to doing.
"I still feel like I'm hustling and trying to catch up," he says. "All I know is that we have to get somewhere, and see what's around the corner."