Q&A: How technology modernization is impacting the community banking space

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Pam Kaur, Head of Bank Technology at BankTech Ventures, discusses digital transformation with Digital Journal. Kaur expand on the work her and BankTech Ventures are doing to bridge the gap between technology and community banks.

Digital Journal: As the Head of Bank Technology, can you dive into your role a bit? What is your focus as it pertains to technology and community banks and how are you actively working to mould the two worlds together?

Pam Kaur: Gladly! In my role, I have the opportunity to work with hungry, innovative fintech companies both pre- and post-investment as well as serve the other side of the BankTech equation, the traditional community banks that have invested in our Fund. Pre-investment, I have the honour of working closely with our investment team to help diligence the companies we meet, specifically looking deeper into the technology they’re providing and how practical rolling that out a bank might be as well as whether the Founders and leadership teams are a good fit for the ecosystems we’ve worked so hard to establish.

We see such a wide variety of solutions at different stages, it’s important to our mission that we continue to bring forth the best-in-class solutions to our partners and ultimately the greater community banking world. Post-investment, I lead BankTech’s efforts in getting our portfolio companies to be what we call “bank ready” – in short, ensuring they have what it takes to meet a bank’s regulatory requirements, understanding the unique bank sales-cycle, and providing them with the tools and support they need to succeed long-term. I like to think of us as an extension of the fintech’s team, wherever they may need assistance.

On the community bank side, I’m able to support the industry by sharing our BankTech diligence, breaking down how our portfolio companies fit into a bank’s tech stack and why it’s something they should implement, and pushing the need for innovation and modernization within banking by helping bridge the technology gap. I believe our ability to bring all of this together harmoniously is our biggest asset and value-add for our investors and active portfolio companies.

DJ: How do you bring up the conversation of technology modernization with community banks and connect with potential LP’s?

Kaur: I try to understand the context around where a bank may be at in their innovation journey to talk about companies or ideas that can be directly applicable to them. We aim to invest in companies that encompass the entire “crawl, walk, run” lifecycle and therefore can meet any bank at wherever it’s most comfortable for them. By understanding a bank’s current state, we are able to highlight industry trends for them and demonstrate how a solution we’ve invested in might help them lower costs, improve customer or employee experience, or possibly meet regulatory requirements. With our “crawl, walk, run” approach to investments – we’re able to easily offer a roadmap community banks can use for technology modernization.

One of the biggest pillars of community banking is building trusting relationships, and we’ve spent the last two years strengthening ours with the banks in our fund and beyond, primarily by showing up and listening to the real problems people are facing in the industry. We’ve had the opportunity to connect, in person, with hundreds of banks across the country in 2023, and it’s only strengthened our investment thesis and drive to find solutions that can make a real difference to the people we meet and serve. Aside from meeting folks in person, our existing LPs, portfolio companies, and other friendly fintech companies have been instrumental in helping create those connections.

DJ: Can you share examples of successful technology implementations or partnerships you’ve been involved in for community banks?

Kaur: One of the biggest value-add projects my team has had an opportunity to be part of is for BankTech Ventures is the banker-friendly vendor due diligence data we’ve compiled for our portfolio companies. One of the biggest gaps we found when investing in earlier stage fintech companies was the absence of guidance on what a bank’s vendor due diligence program might look like. While the companies we invest in do have existing bank customers, the vendor diligence process varies across banks of different sizes and maturity, and often leaves the fintechs doing repeated work across each relationship they’re establishing.

Acknowledging this as a huge efficiency and resource barrier for banks and fintechs alike, we decided one of the key things we’d provide both our partners and portfolio companies is our vendor diligence on companies, with the goal being to take them 75-80 percent of where they need to be in order to comfortably move forward with the relationship. Since launching this initiative, we’ve had several partner banks utilize this offering, cutting out weeks worth of time and effort for all parties. Not only does this result in a huge time savings for all parties, but it also gives us the opportunity to help build stronger companies since we are getting a full 360-view on their operations from pre-investment.

DJ: How is BankTech Ventures working to bridge the gap between the community banks and the technology they need to ease their digital transformation journey?

Kaur: In the dynamic landscape of modern finance, we strive to serve as a conduit, seamlessly bridging the clear existing gap between community banks and cutting-edge technology. Many of the banks we work with don’t have the bandwidth, or don’t have dedicated teams working on digital transformation and innovation, and those that are starting to recognize that gap still have other priorities they’re focused on throughout the day, so progress ultimately slows down. That’s where our expertise comes in, and we act as the boots-on-the-ground R&D efforts for the banks in our fund. We’re able to share the straight facts about a fintech company that a bank actually cares about – what they’re doing – in the simplest terms, whether they’re a safe and sound partnership, and why a bank should care about the problems they’re trying to solve.

Part of our investment process involves thoroughly conducting diligence on each company to ensure alignment on regulatory expectations when working with banks, in addition to all the work that’s done finding best-of-class solutions for our partners. On the other side of that, we also work closely with the fintech companies in our portfolio to help them understand the intricacies of banking and how all parties can work better together. It’s imperative to our mission that we are able to speak the language of both our bank partners and fintechs to truly be the bridge between the two sometimes polarized worlds.

DJ: What is your recommendation to community banks interested in technology modernization?

Kaur: The journey to technology modernization is not just about adopting new tools; it’s a holistic transformation that encompasses people, processes, and technology. By embracing this evolution, you position your community bank for sustained success and relevance in the digital age. Some of things a bank should consider on this evolution are:

• Conduct a Comprehensive Assessment: Begin with a thorough assessment of your current technological infrastructure, identifying areas that require immediate attention and those with potential for improvement. This will provide a solid foundation for your modernization strategy.

• Integrate Technology into Your Strategic Planning: Develop a well-defined technology roadmap that aligns with your business goals. Consider phased implementations to minimize disruptions and allow your team to adapt gradually. Prioritize projects based on impact and urgency.

• Keep a Customer-Centric Approach: Keep the customer at the forefront of your modernization efforts. Invest in digital channels and user-friendly interfaces to enhance customer experiences. This not only attracts new customers but also fosters loyalty among existing ones.

• Consider Data Security and Compliance: Prioritize robust cybersecurity measures to safeguard sensitive customer data. Stay abreast of regulatory requirements and ensure that your technology solutions comply with industry standards. A secure environment builds trust with your customers.

• Invest in Employee Training and Engagement: Equip your team with the necessary skills to navigate and leverage the new technology landscape. Foster a culture of continuous learning to keep everyone engaged and excited about the positive changes that technology can bring.

• Collaborate with Fintech Partners: Explore strategic partnerships with fintech companies to leverage cutting-edge solutions. This can accelerate your modernization efforts and bring innovative services to your customers. Collaboration often leads to synergies that benefit both parties.

• Scalability and Flexibility: Choose technology solutions that are scalable and adaptable to future needs. This ensures that your investments remain relevant and can grow with your bank. Scalability is key to staying competitive in a rapidly evolving financial ecosystem.

• Continue with Regular Evaluation and Adjustment: Periodically assess the effectiveness of your technology initiatives and be prepared to make adjustments as needed. Technology is ever-evolving, and your strategy should reflect the changing landscape.