Banking Without Boundaries


Instill an innovative mindset to push your bank into the future

By Sam Schaust

Innovation is not a word solely owned by today’s tech giants in Silicon Valley. Or so thinks Jim Carroll, a futurist from Toronto who has given dozens of keynote speeches on the power of innovation to companies such as Walt Disney, Wells Fargo and NASA.

“A lot of eyes gloss over the word ‘innovation,’ and people think the word only applies to someone like Steve Jobs who designed cool stuff that changed the world,” Carroll says. “They might think, ‘I’m a banker. What can I do?’”

To Carroll, anyone is capable of innovating an aspect of the community banking industry. However, he believes to do so, three essential questions must be asked, the first of which is: What can be done to run the business better?

“There are plenty of opportunities to implement more information technology to reduce costs, streamline processes and become more efficient,” he says. Which begs the second question: What can be done to grow the business?

Meet the 2016 IB Innovation Award Recipients

View 2016 IB Innovation Award Recipients here.

Independent Banker® magazine recognizes three community banks that overcame challenges and achieved excellence through resourceful thinking and innovative problem solving, such as rebuilding critical banking channels, going digital-only and teaming up with proactive industry partners. This year’s panel of judges evaluated submissions from community bankers across the country who showcased how new ways of doing business increased their efficiencies or profitability before selecting those that received final recognition.

Concepts regarding “how to use mobile to capture the millennial generation” and “how to utilize leading-edge transaction technology or new products to attract untapped customers,” Carroll notes, are typical subsections of this question. “Essentially, it all comes down to how you think differently to attract new sources of revenue,” he says.

Finally comes the question: What can be done to transform the business? “Transformation of the business is all about preparing for the fact that, for example, with credit-card payments, now Apple and PayPal are competitors,” Carroll says. “With an increasing number of organizations getting into the banking space, you may need to change the essence of what you do and how you do it to keep up with reality.”

Staying current with today’s banking industry—along with innovating for the future—could require an internal shake-up. As Carroll suggests, “By hiring somebody who thinks just like you, you aren’t going to get any creative, innovative ideas. Instead, if you hire somebody you don’t like or who is dramatically different from you, then you’ll get those different opinions.”

Groundbreaking ideas often can come from outside of your field of business, Carroll believes, adding that adopting “an outsider mentality” could prove to be a valuable asset.

A paradigm shift
Joel Barker, a Minneapolis-based futurist and author of “Paradigms: The Business of Discovering the Future,” shares a similar belief with Carroll on the value of outsider opinion. “As a general theory,” he says, “paradigm shifts come from outsiders.”

Barker, in the 1980s, was lauded as the first person to popularize the concept of “paradigm shifts” for the business world. He has taught his concepts on paradigms—or the set of rules and regulations a business faces—in countries around the world, including Venezuela, Canada, Mexico and Peru.

“With an increasing number of organizations getting into the banking space, you may need to change the essence of what you do and how you do it to keep up with reality.”
—Jim Carroll, Futurist

A paradigm shift, Barker explains, comes from looking beyond the industry’s current limitations, and it occurs when an innovation shakes up business as usual. “If you want examples of where paradigm shifts are often taking place,” he says, “all you have to do is look at Apple, Microsoft and the whole information technology industry.”

Suresh Ramamurthi’s motivation to innovate came from a roadblock he experienced while working for Google. In the 2000s, Ramamurthi was developing the tech giant’s online payment processing system; however, he realized Google’s lack of access to payment channels controlled by banks left it limited in scope.

Eventually, in 2009, Ramamurthi purchased the Citizens Bank of Weir, a $20 million-asset community bank out of Weir, Kan. Upon becoming the bank’s chief technology officer, he set about the task of accelerating payment speeds, a frustrating issue for today’s mobile generation, in particular. In an effort to speed the pace of payment from days to a real-time turnaround, he built a platform called ONECard that could manage payment card authorizations. Coupled with a real-time risk-scoring engine, ONECard offered customers a self-service portal that allowed them to view and manage their funds and send money instantly within the United States and India.

In the end, Ramamurthi’s paradigm shift (and outsider mentality) allowed CBW Bank to reduce the time it takes to deliver a payment from three days to one minute. Most notably, the bank grew from a negative return on equity in 2013 to a nearly 75 percent ROE the next year.

“Read outside your industry.”
—Joel Barker, Futurist

According to Barker, the act of looking outside of one’s own industry is a crucial aspect of incentivizing innovation. “The former CEO of Think Mutual Bank in Rochester, Minn., … he used to work for IBM,” Barker says. “He told me he would go to a national conference every year, and it was never a banking conference. It’d be an oil distribution conference, or a makeup conference, or a toy conference.

“The point is: Read outside of your field.”

Thinking opportunistically
To bring about a new revenue opportunity, Carroll sees an advantage in embracing methods that break from the traditional structure. “Part of what I talk about is speed of opportunity,” he says. “What’s happening out there is new opportunities are emerging faster and you’ve got to have a culture and capability to grab onto that very quickly.”

Barker agrees, noting Elon Musk, the entrepreneur behind PayPal, aerospace transport company SpaceX, and electric carmaker Tesla Motors, as an example. “Musk—who has a paradigm-shifting car for starters—didn’t stop there,” Barker says.

Rather than sell its electric cars in a typical auto dealership, Tesla, according to its website, went the route of “deliberately positioning [its] store and gallery locations in high foot traffic, high-visibility retail venues, like malls and shopping streets that people regularly visit in a relatively open-minded buying mood.” Ultimately, with customers able to interact with Tesla’s Model S car as they would a laptop or piece of furniture, it sold out several months in advance.

As for Wausau, Wis.-based River Valley Bank, the high-traffic, high-visibility market it targeted was online. Upon finding itself unable to grow core deposits fast enough to keep pace with loan demand through its brick-and-mortar locations, River Valley created its first online-only division in 2009 and called it IncredibleBank.

At its inception, IncredibleBank offered high-interest deposit accounts, but in 2016 it branched into the underserved, niche market of luxury motor-home financing. Additionally, River Valley Bank officials say that the bank’s partnership with Jack Henry Banking for software and customer-support services helped ensure that customers would feel comfortable with IncredibleBank’s lack of a physical storefront. Over time, customers flocked from around the nation to open accounts with IncredibleBank.

Today, out of River Valley Bank’s 15 branches, IncredibleBank is its third largest retail venue, and the community bank credits its online-only division as a major player in its growth to more than $1 billion in assets.

Growing through experience
Carroll believes that an innovative attitude at a community bank needs to be set from the top. “It’s got to start at the board,” he says. “Although, that’s the toughest thing and it simply doesn’t come overnight.”

By adopting a forward-thinking mindset, mistakes are sure to be made, Carroll adds. “Be an organization that doesn’t just celebrate wins, but failures, too,” he says. “In today’s world, organizations will get ahead through the depth of their financial capital. That’s important, but there’s also our experiential capital—the experience we gain from trying something new.”

Innovation typically comes from a general interest for what’s occurring beyond one’s industry, Carroll notes. By simply embracing the what’s new or unusual, “we build up our experience,” he says. “And the more experiential capital we have, the better positioned we are to make big, bold leaps in the future.”

By hiring somebody who thinks just like you, you aren’t going to get any creative, innovative ideas.”
—Jim Carroll, Futurist

Setting the Standard

Innovation involves creating solutions to accommodate changing requirements and unarticulated needs. For Automated Systems, Inc. (ASI), innovation has been standard business practice since 1981. ASI circumvented heavy mainframe core processing standards by designing the banking core to work from a PC-centric platform.

ASI expanded the core to include new and innovative elective solutions. The real-time iTeller product was added to enhance the bank teller’s experience by combining advanced transaction processing, virtual tickets and convenient access to customer account information. In 2008, ASI created a separate company, Insite Data Services (IDS) to provide banks a secure cloud hosting solution; reducing maintenance costs and providing 24/7 monitoring.

In 2014, ASI released Insite 8, which revolutionized core banking systems. Insite delivers the most cost-effective, user-friendly application available, allowing banks to provide improved customer service using common-sense applications.

At their upcoming Insite Users Conference in October, ASI plans to unveil updates to existing products as well as several new services like IDS On-Time which will provide daily bank processing. Held annually, the Insite Users Conference gives banks an opportunity to meet with software developers to discuss ideas to make their banking suite of products more innovative and useful to their customers.

Automated Systems, Inc.

Insite Data Services, Inc.

—Tim Schmidt, Chief Operations Officer at Automated Systems, Inc.

Sam Schaust is a writer from Minnesota.