The State of Community Banking

At the close of the fintech revolution, on the brink of recession, and in the midst of a banking crisis, community banks have a unique opportunity to innovate and grow. At the heart of community bank growth is the Independent Community Bankers of America, and in Georgia, it is the Georgia CBA, led by President John McNair. In the premiere episode of SeerCast, Adwait interviews John about the current fears of community banks and what vendors should know to help them.

At the close of the fintech revolution, on the brink of recession, and in the midst of a banking crisis, community banks have a unique opportunity to innovate and grow. At the heart of community bank growth is the Independent Community Bankers of America, and in Georgia, it is the Georgia CBA, led by President John McNair.

“I have been in and around the banking industry my entire career.”

After graduating from university, John McNair began working in the finance industry with Harland Clarke, now a part of Vericast. Finishing his time at Harland, he continued working with community banks with his own small business. This included time in real estate as well as work with commercial lenders. Eventually, John took a position at the Independent Community Bankers of America. After 14 years, he left ICBA as an executive vice president to work for community banks in Georgia. Over the past two decades, John has been directly involved in the community banking association industry and has visited hundreds of community banks across the country. His knowledge of small businesses and financial markets fuels his work in the Community Bankers Association today.

“We were founded 55 years ago to be the voice of Georgia’s community banking industry, both in the State House and then also on a grassroots level with regard to our federal legislators.”

As times have changed, CBA of Georgia’s mission and organization have expanded to meet the developing needs of community banks. A major sector of their work now includes education and training services. Georgia CBA provides essential training for their members regarding compliance and regulatory requirements, as well as direct business guidance.

The CBA of Georgia is very involved with the technology scene, and in conjunction with the ICBA, they work to bring the latest technological advancements and innovations, especially those coming out of Atlanta and fintech alley to the main street banks serving rural communities. These efforts go hand-in-hand with their services group that also offers trainings on such technologies. Georgia CBA works to find best-in-class providers and connect them with their member institutions. These service providers include technology companies, insurance companies, loan providers, and more.

John McNair’s role as President and Chief Executive Officer is to oversee all the above-mentioned facets of Georgia CBA. John’s role requires him to stay knowledgeable on regulatory changes being considered by the State House. He oversees and contributes to the advancement of professional development curriculums. Along with facilitating relationships between service providers, partners, and member financial institutions, John maintains the relationship between the national and state level of the Community Bankers Association. He sees himself primarily as a provider, providing resources, information to legislators, counsel and advisor to his team, and innovative technology and education to CBA members.

In the premiere episode of SeerCast, Adwait interviews John about the current fears of community banks and what vendors should know to help them.

“I talk to fintech entrepreneurs about this all the time. I say, understand the bankers’ pain points before you walk in the door. Do not try to sell them something they don’t need.”

For technology providers and other vendors, the advantage of the finance and banking industry is in the public availability of financial and business data. If vendors do their research, they can know a bank’s pain points and how their product or service can address them before even approaching the table. Technology providers can have their story ready to go and immediately prove their value to a bank if they invest the time and data analytics into research. If the product or service is a solution to a pain point, the banker will immediately recognize that return on investment.

Community banks are focused on net-interest margin, operational expenses, and gathering deposits. Unlike large banks, community banks do not find their profit in non-interest income but rather across a spread of products and services. Potential vendors need to be able to address those core issues of efficiency, business costs, deposit gathering, asset concentration, etc. Because community banks have fewer levels of authority and approval, they can recognize and act on potentially beneficial technologies faster than the highly bureaucratic large banks.

Like all banks right now, community banks are wrestling with liquidity as the gap tightens and bonds do not meet expectations. The advantage that large banks have in these scenarios is in deposit gathering. As big banks enter smaller markets, their focus is not often to grant small business loans but instead to gather deposits, and because competition is narrower, they can often undercut prices. The member banks of Community Bankers Association of Georgia focus more heavily on providing loans for commercial real estate, industry, and agriculture. The potential challenge then for community bankers is demonstrating to municipal depositors and other consumers the benefit of keeping that money local.

Community Bank Fears

“On the fintech side, I don’t know. I am not sure if it’s a pushback or fight back, I think we’re through that now.”

A few years ago, most experts feared that fintech would replace banks; however, most banks now see them as potential partners, particularly in the realm of increasing non-interest income, efficiency and improving the customer experience. Payment innovation is a major part of the customer experience that fintechs can improve. Furthermore, the complex regulation of the space and its associated cost caught many fintechs off guard, forcing them to recognize the importance of bank partnerships for survival.

Artificial intelligence, specifically generative AI, is growing in conversation as a threat to community banks, but John expects serious concerns to be nearly a year away. Many community banks are using AI/ML to fight fraud, but the focus for the competitive edge is currently fintech, regtech, and agtech.

In the podcast, John McNair describes three major concerns for Community Banks.

      1. The continued increase of regulation and the further investment it will demand, particularly, the expansion and implementation of the Dodd-Frank Act and CFPB’s Section 1071.

      1. The current talent gap and tight labor market.

      1. Like all banks, deposit gathering and liquidity.

    Next Steps

    Despite the regulation and risk of today’s environment, entrepreneurs in Georgia continue to launch new fintechs, payment companies, and even purchasing banks. John McNair urges those individuals to become involved in the existing ecosystem and capitalize on the available resources. The Community Bankers Association of Georgia includes 140 local institutions as well as nationwide connections via the ICBA and the Department of Banking and Finance. Fintech Atlanta, Technology Association of Georgia, ATDC, the Georgia FinTech Academy, and other partnered programs offer clarification on regulation, education to learn about the complexities of the industry, and connections to local talent pools.

    In 2023, community banks and startups have the incredible opportunity to develop a network of partners, banks, and communities to get their name, share their ideas, and refine their mission and business model prior to launching.

    Written originally for the DataSeers blog by T. McLauchlin based on an interview of John McNair by Adwait Joshi. Edited by Robert Klasen and Gracie Ortiz.

    About DataSeers

    DataSeers is an Atlanta-based B2B SaaS company that helps banks and fintechs take control of their data via onboarding, ACH processing, BSA/AML and consumer compliance, anti-fraud, reconciliation, and analytics. Its flagship product, FinanSeer® is a global enterprise solution that can help organizations across 150+ countries operate efficiently remain in compliance and have global oversight into their data.

    DataSeers was built with a team of experts that understand the value that clean and homogenized data brings to enterprises to increase operational efficiency through workflow automation machine learning and AI.

    DataSeers is a “One-Stop Shop” that allows API connectivity for growth, innovation and movement.  “DataSeers has thought of everything. They’re kind of like a Goldilocks solution for banks, credit unions and fintechs.” The enterprise nature of DataSeers solutions uniquely empowers BaaS banks and community banks branching into payments innovation.

    Since its founding in 2017 at the humble beginnings of Adwait Joshi’s home, DataSeers is now in its fifth office in the US with nearly 100 employees worldwide.

    DataSeers has 25 recognitions from their six short years in business, some of which are listed below:
    2021 100 Fastest Growing Private Companies (Atlanta Business Chronicle)
    2021 12 Best and Most Innovative Alpharetta Payment & Fintech Startups (Daily Finance)
    2021 Most Innovation Payments Tech Company (IPA)
    2021 Best Data Aggregator/Bank Partnership (Tearsheet Data)
    2023 Top 10 Innovative Technology Company in Georgia (TAG)
    And with a three-year revenue growth of 427%, DataSeers received ranking No. 1503 among Inc.’s list of America’s Fastest-Growing Private Companies in 2022.

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