“Top Fintech and Banking Trends Over The Next 3 Years”, with Frank Sanchez CEO Finxact
I had the pleasure of interviewing Frank Sanchez, the Founder and CEO of Finxact. Finxact is disrupting a multibillion-dollar industry which underpins the mission critical systems that every bank in the world relies upon.
Thank you so much for doing this with us! What is your “backstory”?
I started hanging out in bank operations centers with my brother in the late 60’s when my dad would bring us along with him on the weekends. He would spend the days writing programs for the brand-new computer technology that was changing how banks would operate. Our effort, on the other hand, was focused on how much confetti we could generate on the keypunch machines, from the keypunch machines which was really cool for a kid my age.
In college my dad, brother and I started our first company, Sanchez Computer Associates. While Gates and Jobs were in their Silicon Valley garages, we worked out of a self-storage facility in PA. We hired some of our dorm-mates to help start writing software and ultimately succeeded in taking the company public and then being acquired by the largest global provider of financial services solutions, Fidelity Information Systems (FIS). That was in 2004.
I was an executive at FIS until retiring in 2011. However, my retirement plan was short-lived because a former customer and banking industry legend persuaded me to join him to build a new kind of bank. I commuted between Jacksonville, FL and Silicon Valley where I spent another four years building Zenbanx. It was there, as a customer, where I realized how technically deficient even the most modern banking systems had become.
In a big company, the focus is often on operational efficiency and incremental improvements. There is little appetite or opportunity to start over, to work with a clean slate. Often the legacy pressures are too strong to overcome. But as a serial entrepreneur, I saw an opportunity. At Zenbanx, we struggled to innovate with even the most current technologies available — and we were a startup bank! Having worked with banks for 35 years, I knew the challenges that more established banks faced with their legacy infrastructure.
The catalyst for me to re-engage was when another serial banking entrepreneur convinced me that his bank and his peers needed a new platform — now! Follow-on conversations with investors and bank executives confirmed for me that what the industry needed was not an incremental upgrade, but rather, a completely transformative approach. The analogy we sometimes use at Finxact is an industry stuck with turntables, trying to upgrade to DVD players, and we’re delivering Spotify.
What do you think makes your company stand out during these disruptive times? Can you share a story?
Finxact is developing what’s referred to as a “Core Banking System”. It’s at the heart of every bank, processing the deposit and loan accounts and transactions.
What makes Finxact stand out is that we are starting with a completely clean slate focused on the requirements of a digital banking era, using the most modern technology and platforms that are available today. We’re not interested in incrementally modernizing the existing systems, we’re focused on radically changing the way bank products and operations are supported.
While our team is highly experienced, we have committed to and exponential scale of improvements in efficiency, scalability, reliability and delivery. Netflix didn’t think about creating a better DVD player, and Spotify didn’t think about an MP3 player with more capacity. They both leveraged the internet to re-invent how to distribute digital content efficiently and dynamically.
When we meet with banking business innovators the attraction to what we are building is immediate and intense, it’s an exhilarating confirmation of both the technology design and engineering we’ve invested. Oftentimes though it takes longer to break through, especially when we’re presenting to established banks with existing core systems and surrounding infrastructure. Frankly, sometimes we never break through at all.
We can sense the tipping point in the meetings when there are epiphanies around the level of consolidation and simplification that could be achieved by deprecating and eliminating the need for many of the existing applications that support their operations. The beauty of a single, real-time, system of record is that it actually eliminates many of the processes that a bank requires to manage its accounts, transactions and financial integrity. Many of the systems in place were implemented to control a highly fractured and federated operation, and are no longer required in a Finxact world.
What advice would you give to other CEOs or founders to help their employees to thrive?
Focus. Define and articulate a strategy and a roadmap and stay committed. Don’t let the inevitable roadblocks and distractions pull you of course. Staying committed is the difference between success and failure. And this relentless focus has to be part of your team’s DNA so it permeates even the smallest details.
The other thing I would say is give your team room to grow. This is a balance act with focusing a team in one direction. But for hyper-growth scale, it is critical your team develops a way to scale itself and support the company’s vision.
Keeping focus while allowing for reasonable failure and celebrating successes is one of the most important things a CEO can do for the team.
Can you share what you believe will be the “Top 5 Fintech and Banking Trends Over The Next 3 Years” (Please share a story or example for each.)
I recently saw a chart showing the top Google search trends over the past several years. It tracked four terms; AI, Machine Learning, Data Analytics, and Big Data. What is striking about the chart is that since 2014 people have been searching for “Big Data”. This trend has not diminished in all the while that the other three terms have peaked.
This means that regardless of the latest technology people are still struggling with data. Now, for the first time in decades, the banking industry has a way to consolidate all of its mission critical data, in real time. What’s more, this data is now rich, and accessible. This itself will drive transformation in customer experience, security, and efficiencies.
2. A bifurcation of the banking industry. We know what banks are capable of doing with modern technology, and we will see a clear distinction between banks that make a leap and those who lag. That may sound self-serving, but the capabilities and economics will allow many banks to truly transform. What is interesting is that because we’re not talking about something incremental, it won’t just be banks that are further ahead who will benefit. And it may not be easy to point out the winners because in some respects they may not even look like a traditional bank, which leads to my third trend.
3. Banks will become — less bank like.
We all have an image of a bank and it hasn’t changed much, regardless of what year we made our first deposit. But with AI, consolidated rich data, and elastically scalable services, the function of “banking” will become embedded in the fabric of our lives. We’re not going to see mass closures of branches, or a glut of pop-up banks alongside food trucks, but the banking service will become more invisible. Banks will leverage their trust, data, and expertise in ways that support their customer’s lives and businesses. And this will be done more proactively and even predictively.
4. We might even see banks organize around “Reactive Services” and “Predictive Services”. There will always be a need for reactive services like ATMs, mobile banking, and branches.
But banks that have been focusing on “proactive services” realize that cross selling can be intrusive. Therefore, bank’s will think in terms of “Predictive Services”. These are services driven by rich data, AI, and machine learning. And the key to all this will be a rich, real time data. We’re seeing some of the first wave of predictive services with robo-advisors, and AI driven chatbots.
Banks have the opportunity to become the nexus for a customer’s financial lives and well-being, even if they don’t hold all the assets or process all the transactions. But being the nexus for all the transactions, and an enabler of a customer’s critical assets, will give banks new life in the lives of their customers.
Can you please give us your favorite “Life Lesson Quote”?
One of my favorite quotes lately is from Aristotle who said, “Time is a study of motion”. What do you expect from someone who studied astrophysics and finance in college? I’ve always related physics with how we engineer solutions in finance. It’s particularly important now because what we’re dealing with is literally a study of motion as we think about how bits are processed in real time around the world, in the cloud.
You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)
I see a world where people worry less about their finances. It sounds simple, but people worry for very different reasons, some of which are legitimate and others that are not. People worry because of things out of their control like bad actors who dupe them or steal from them. They worry about the economy, their jobs, and their health. And they worry about their lack of knowledge or capabilities. This shouldn’t be the case. Allowing people to better understand their future, guiding them with predictive actions and constraints, and protecting them from themselves and others will go a long way to giving people some peace. It may not be world peace but we all need a bit more personal peace.