A FINTECH Q&A: VANCE SMILEY OF SOUTHERN BANCORP AND WAYNE MILLER OF THE VENTURE CENTER

Posted on October 4, 2021
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This Q&A was originally published in the September 2021 issue of Arkansas Money & Politics, and appeared online here. 

Financial technology has become so established as a branch of the financial services industry that “fintech” was spawned to describe it. Indeed, as the world becomes more digital by the day, fintech is an increasingly important component to banking and finance.

Broadly speaking, fintech can refer to any innovation in the way business is transacted, according to Investopedia. Mobile money transfers, depositing a check on your smartphone, applying for a loan or credit card online…. All fintech.

And Arkansas has a nice fintech pedigree. Walter Smiley’s Systematics, founded in 1968 in Little Rock as a data processing software firm, grew into a national leader in its field, even attracting a large investment from the Stephens family. Smiley eventually licensed his software to banks, took the company public and then sold it to Alltel, another homegrown firm, in 1990.

Alltel then sold the division to the Fortune 500 Fidelity Information Services (FIS) in 2003.

Each year, The Venture Center in Little Rock hosts two prominent, global accelerator programs for fintech startups — the FIS Fintech Accelerator and the ICBA ThinkTECH Accelerator. And Arkansas-based financial institutions like Southern Bancorp, which serves rural residents and small businesses mostly in the Arkansas and Mississippi delta regions, are striving to carry on the state’s fintech pedigree.

Arkansas Money & Politics visited with Southern Bancorp’s Vance Smiley, son of Systematics founder Walter, and Wayne Miller of The Venture Center, about the growth of fintech and issues facing the industry. Smiley now presides over Southern Bancorp’s fintech endeavors as chief innovation officer. Miller is executive director of The Venture Center, which strives to grow innovation in the startup ecosystem through education, collaboration and acceleration.

AMP: How has Southern Bancorp utilized fintech?

Smiley: Fintech is a broad term, but generally speaking, we consider it the discipline of rethinking the technology, payments, processes and user interface normally found in classic banks. At Southern Bancorp, we are creating fintech groups to build more focused customer experiences through our digital division known as TeamWALT (wealth accumulation and lifestyle tech).

Our TeamWALT solutions are designed to be nearly 100 percent self-service through mobile devices. A lot of upfront work goes into making sure customers can do what they need to do without talking to a person, thereby alleviating pressure on a staffed call center.

AMP: How important are the FIS Fintech and ICBA ThinkTECH accelerators to advancing the industry?

Miller: Both accelerator programs play a crucial role in advancing the financial services industry. The Independent Community Bankers of America (ICBA) represents nearly 5,500 banks across the country, and FIS facilitates the movement of roughly $10 trillion through the processing of approximately 79 billion transactions for over 20,000 clients worldwide.

The Venture Center and the boots-on-the-ground financial services experts and decision-makers collaborate to define the most relevant industry challenges and opportunities. Armed with this information, The Venture Center vets thousands of fintechs in the marketplace to find the most promising companies with high-impact solutions. Only 10 fintech companies make the cut for each program.

Once the program begins, visitors meet one-on-one with fintech company founders to provide critical feedback. This collaboration helps shape the fintech’s go-to-market strategy and can impact the overall solution, so it better fits potential clients’ needs.

  

AMP: Tell us about traditional banking’s relationship with fintech startups.

Miller: This year, The Venture Center saw hundreds of banks come through the FIS Fintech and ICBA ThinkTECH programs or attend our fintech events. When a bank or financial institution visits the program, The Venture Center team curates a full day of meetings and demos, allowing the visitors to explore technologies we’ve selected from thousands of fintechs.

While the relationship between traditional banks and fintech startups may have been met with skepticism or reticence at one time, today we see collaboration and a quickly growing number of partnerships between the two. These partnerships are a win-win, as banks are able to effectively meet the quickly changing needs of a growing digital customer base, while customers are able to enjoy the digital experience they need while keeping their trusted banking relationships.

Smiley: We are always willing to hear from potential fintech partners, though many in that space are aiming to work with classic banks by integrating their solution into the classic tech stack. We are avoiding the classic core altogether by building our own back-end tech. While this limits our fintech startup audience, we believe our eventual partners will be those fintechs struggling with the limitations imposed by classic core systems.

 

AMP: What are the benefits of fintech for consumers? For banking institutions?

Smiley: There is a lot of overhead in the way banks operate in this country. Ultimately, consumers are paying for that (e.g., staffing costs, artificially high interchange fees, NSF fees, interest rates, etc.). If pure digital offerings reduce cost, ultimately that savings should make its way back to the consumer.

Miller: Today’s consumers do everything possible online and through mobile devices. From shopping and socializing to working and planning, technology has provided convenience, efficiency and delight — and with fintech advancements, banking is no different. Today’s customers can open a bank account with a few clicks, and that’s invaluable.

Additionally, many fintechs focus on increasing financial inclusion for previously underserved and underbanked people and communities. Tools that allow banks to serve people considered “credit invisible” are critical in the effort to ensure everyone has the ability to access loans to start businesses or buy homes.

 

AMP: How are banks handling increased security risks posed by fintech implementation?

Smiley: Ironically, banks outsourced most of their tech (and innovation for that matter) years ago. We are already skilled at dealing with external vendors, so we’re not convinced the risk is actually higher. Though, perhaps doing business with a fintech means we can get our arms around all the moving parts easier.

Miller: As the world continues to move online, it’s important to remember that bad actors will always look for a way to capitalize. But through fintech partnerships, banks can mitigate risks, identify fraudulent activity faster and strengthen the security behaviors of their employees. A focus on cybersecurity is critical for all businesses today.

 

AMP: In terms of fintech implementation, how do

Arkansas institutions measure up?

Miller: Arkansas institutions and startups are among the best in the world. Gov. Asa Hutchinson often touts Arkansas as the birthplace of fintech, and today we remain a vital fintech hub. Back in 1968, Little Rock’s Walter Smiley started the very first fintech, Systematics.

Systematics eventually became Fidelity National Information Systems, or FIS, which today has 55,000 employees and is arguably the biggest fintech in the world. Fintech is in Arkansas’ DNA, and it shows in the companies we have grown here, including Teslar Software, FI Works, BankLabs and CobblerTech. In short, Arkansas fintechs are top-notch.

Smiley: Compared to the rest of the country, we’re probably a little behind. In this part of the country, personal customer relationships are the priority. Though the question is, how long that remains the case. Our position is that we need to get started now, learning how to have just as good of a customer relationship online as we do when they walk into a branch.

 

AMP: What’s next for fintech?

Smiley: Payments are clearly a place we need to improve. We’re far behind some countries in our adoption of real-time payments (i.e., cash replacements).

The cryptos and their blockchains are working hard to blaze the trail. We also think banks are going to have to get back to the business of providing value and not remain a commodity as the transition from in-person to online happens. Fintechs are demonstrating all the ways we should be thinking about our customers, but they need regulated and chartered institutions to take their companies to the next level.

Miller: The future of fintech is bright. From banking as a service, artificial intelligence and machine learning, blockchain, IoT or Internet of Things, an increase in API platforms and marketplaces and a cross-industry application of fintech, the industry will continue to grow and gain traction in the years to come.