Small US Banks Join to Fight Fintech Challenge: Alloy Labs Alliance Targets Innovation

Yesterday, a consortium of smaller banks announced their intent to better manage the Fintech challenge with the creation of the Alloy Labs Alliance.

Twelve community and regional banks have joined in the Alliance as the banking sector fights to adapt to profound sector disruption and relevance in a market that is quickly going digital. Consulting and accounting group Fintech Forge will manage the new initiative.

Chris Nichols, Chief Strategy Officer of CenterState Bank, stated: “No bank wants to be the next Sears.” A worrying concern reflecting the fact that the once mighty retailer has dissolved into bankruptcy as management was unable to change with the times.

“To survive, every bank needs to innovate in order to drive down operating costs while ramping up the value we can deliver to the customer,” said Nichols. “Community banks play a special role in the lives of our customers,”added Julie Thurlow, CEO of Reading Cooperative Bank, “but we don’t have the same IT and innovation budgets as the big banks to capitalize on that relationship.”

The Alliance will help to identify areas of opportunity where constituent members can work together. Additionally, the group hopes to work with Fintechs to help shape their solutions while mitigating sector risk.

The Alliance says it is currently working on customer-facing applications as well as back-office efficiencies. Incorporating new technology has become a vital need for survival.

Jason Henrichs, founder and Managing Director at FinTech Forge, explained that some are just creating their internal capacity while others are looking to extend their impact by working with others.

“There’s a mistaken perception that smaller banks aren’t as innovative as the largest players,” clarified Jill Castilla, CEO of Citizens of Edmond. “We absolutely are, but need to take a different approach to maximize the impact.”

Of course, the truism is that entrenched businesses struggle to disrupt themselves. Academician Clayton Christensen outlined the phenomenon in his widely cited work. It’s very hard for executives in positions of prominence to share relevance with the future – a future that undermines the business that pays the bills. Just look at what happened to the once sturdy newspaper industry.

Alloy Labs Alliance is a member-directed innovation lab and accelerator. Founding members are said to represent institutions ranging from $251million to nearly $20 billion in assets.

Currently, the Alliance Members are as follows:

  • CenterState Bank – Florida
  • Citizens & Northern Bank – Pennsylvania
  • Citizens Bank of Edmond – Oklahoma
  • Columbia Bank – Washington
  • First National Bank of Omaha – Nebraska
  • Gulf Coast Bank & Trust Company – Louisiana
  • Inland Bank – Illinois
  • Lincoln Savings Bank – Iowa
  • Mercantile Bank of Michigan – Michigan
  • nbkc Bank – Missouri
  • QCR Holdings – Illinois
  • Reading Cooperative Bank – Massachusetts
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