The Independent Bankers Association of Texas (IBAT) is the largest state association dedicated exclusively to advocating for community bankers. And they’ve been on the job for more than four decades. When we ask President and CEO Christopher L. Williston VI why community bankers from Texas need their own association, he’s quick to remind us that it’s naive to think community banks and the biggest multi-national banks should function under the same set of rules. “We've learned again and again over the last fifteen years, the significant variants of negative impact that a big bank can have versus a small bank,” he says.
Williston thinks it’s because the smaller banks are intertwined with the communities they serve. “They take deposits from the communities where they make loans. They are responsible, ultimately, to the people that they sit next to in church or run into at the grocery store, so there's a real palatability,” he says. “The further and further away you get from the people that you serve, the more and more potential there often is for destructiveness or recklessness — the big banks have proven that time and time again.”
In recent years, IBAT has started to focus on being a resource to Texas’ community bankers looking to bolster their technological offerings through partnerships and collaborations. Williston has watched as small-town banks have dove headfirst into the fintech revolution. But he knows there’s more work to be done. The community banks can’t just buy some new software. “I don't just mean table-stakes tech,” he says. “I mean leveraging technology that truly meets new, unique customer needs and leveraging technology for legitimate technology-enabled efficiency."
We gave Williston a call to learn more about how Texas community banks are meeting the new financial moment and how IBAT is there to be an asset to their association of banks.
The rise of fintech is creating an inflection point for community banking right now. In some ways, it has shown how important relationship banking is, and in others, it has challenged community banks to be more techforward. And I don't just mean table-stakes tech. I mean leveraging technology that truly meets new, unique customer needs and leveraging technology for legitimate technology-enabled efficiency.
Community bankers have bought lots of software over the years, but I wouldn't say that they have ever fully had the opportunity to realize some of the promises of technology-enabled efficiency. So, I think what I see now with this era of fintech is the first real opportunity for community banks to benefit from some of these promises.
This technological boom comes at a really, really important time, because it's becoming harder and harder to find the right people to do certain functions within the bank, especially highly specialized compliance functions. For a bank in rural parts of the state, it can be a challenge to hire the right person for those essential positions. That's why RegTech, to use one fintech example, can help them fill gaps to keep them around and able to do what they need to do to be valuable functioning organizations in their communities.
You know, community banks were the original democratization of finance. They were the original decentralization play in finance. The accelerating centralization of assets over the last 30 years and the decline of community banking has made us lose sight of that. But I think we really are returning back to the first principle: that desire of a group of local people coming together for a purpose and a cause to better the place that they live; putting their resources together and leveraging those resources to be impactful throughout their community. That's what community banking was all about.
So, community bankers often think that what's happening in crypto or in other parts of the new digital economy is at variance with their original vision for the world. But I believe there are a lot of similar philosophical themes that are at the heart of both industries.
It's about education first. We're talking to banks on a daily basis, through formal education programs, but also just through one-off conversations about what is happening. We're helping them see something beyond just monsters hiding under the bed. That's the natural, visceral response to change: that it's just pure threat. And yes, some of it is threatening. But our mission is to show that there are opportunities for collaboration and partnership, especially when the fintechs are coming with a similar mindset.
The other side is to convince fintech leaders that community banks, who they believe must be old and stodgy, are really are their most logical partners in this process. Obviously, you guys at Unifimoney understand that well!
What I'm most fascinated by right now are these extremely limited-term, limited use-case financial relationships. The other day, I was shown a fintech that created a tool that lets a group of friends pool their resources for a vacation or camping trip. Multiple people can draw upon those resources to buy the food or the materials or whatever they may need. It's such a basic service for a very small use case for a micro period of time. But it's extremely valuable for that trip.
We're all looking for convenience, and these limited use case apps create a very different type of financial relationship than the old model of traditional banking. What changes when we have these 30, 60, 90, or 120 day relationships with a niche financial services provider. That's just never been possible before.
The question then becomes: how does a community bank fit into that new financial reality? Do they become back-end providers for the apps? Or do they fold these kind of niche services into their offerings? That's why the idea of collaboration and partnership between community banks and fintechs is so exciting. This app is just one of a thousand coming down the pike that can truly change the way we interact with money going forward.
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