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Leaders In Payments
Leaders In Payments
Carey Ransom, Managing Director of BankTech Ventures | Episode 314
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The digital transformation of community banks is not just a buzzword; it's a vital pivot towards sustaining relevance and competitive edge in an increasingly tech-centric financial world. The latest episode of the Leaders in Payments podcast, featuring Carey Ransom, Managing Director of BankTech Ventures, provides a deep dive into this transformation.
BankTech Ventures stands out by directly involving bankers in the investment process, ensuring the solutions not only fit the banks' needs but also resonate with the communities they serve. The organization acts as an R&D arm, navigating through the plethora of available fintech options to guide community banks toward top-tier, strategic solutions. This careful selection is driven by a dual focus on cost reduction and revenue enhancement, targeting both customer-facing and internal processes.
The episode is a must-listen for anyone in the banking or fintech industries, as well as for those interested in how technology reshapes traditional business models. With a comprehensive examination of the state of community banking and the strategic use of technology, the podcast stands as a testament to the transformative power of fintech and the enduring spirit of community banking.
Welcome to the Leaders in Payments podcast, where we talk to C-level leaders from across the payments landscape. We'll be discussing the products and services that impact the payment space today, as well as trends and predictions for the future of payments. We will also hear stories from our guests about their journeys to the top.
Speaker 2We have already, on our side, developed what we think of as that sort of puzzle of the future digitally transformed community bank and a lot of these companies end up being puzzle pieces that we are piecing together, and each bank is going to ultimately have its own version of that puzzle, and we try to help by understanding the bank where they are today, where they're trying to go, be that matchmaker with the right companies at the right time, and so payments is actually a very topical area right now, and there are a number of different elements of that that banks are looking to upgrade or add to their service stack.
Speaker 3That was Kerry Ransom, the Managing Director of Bank Tech Ventures, and he is my special guest on this episode, episode 314 of the Leaders of Payments podcast, and I'm your host, greg Myers. More than 100 community banks have invested in Bank Tech Ventures, who then identifies and invests these funds in the leading bank technology companies. This ecosystem they've created is their greatest strength. Keri and I take a deep dive into BankTech Ventures, including what makes it unique and how they look for solutions that can either help the community banks save money or increase revenue, or both. We've got a great episode ahead, so let's get started. Hi, kerry, thank you for being here, and welcome to the Leaders in Payments podcast. Thanks, greg, great to be here, so let's go ahead and dive in. If you don't mind, tell our audience a little bit about yourself, maybe where you grew up, where you went to school, where you currently live, a few things like that, and we'll circle back to your professional journey in a few minutes.
Speaker 2Sounds great. Well, I hail from Frankfurt, indiana, originally. I grew up in a hundred year plus old family business there and just outside of Indianapolis, I stayed home, went to school at Indiana, so I'm a proud Hoosier. And just over 20 years ago I relocated and moved out to Southern California and have been here ever since. I was really drawn both by the weather and, I think, mostly the big ideas that I saw emerging out in California and felt like I needed to be in and around that. That I saw emerging out in California and felt like I needed to be in and around that.
Speaker 3Okay, well, let's discuss BankTech Ventures. So tell us what BankTech Ventures does.
Speaker 2Sure so. Banktech Ventures is a strategic investment fund for the future of the community banking industry and we pulled together just over 100 community banks across the country who all invest in the fund as what are called limited partners and they look to us to help them identify and evaluate, ultimately de-risk and then bring them emerging technology companies that are building really next generation solutions for community banks to improve operations, find new streams of revenue, differentiate themselves, remain more relevant and competitive in the overall financial services marketplace.
Speaker 1Okay.
Speaker 3So these can be any kind of technology company or they specialize in certain niches.
Speaker 2So the niche I guess, as I would think about it, is they view community banks as a key part of the equation for their business.
Speaker 2So either they are looking to sell these solutions to community banks or they are looking to partner with community banks to potentially use that as distribution to their end consumer or commercial customers, or somehow they play a role where having a big number of community banks involved in their company are going to be additive to the business but also to the banks.
Speaker 2And so as I think about that landscape, I sort of draw in my mind a two-by-two matrix, if you're familiar with that, and on one end of the x-axis I would say you could have cost savings. On the other end of that you could have new revenue generation, and then on your y-axis you could have new revenue generation and then on your Y-axis you could have customer facing solutions that these products ultimately deliver, and on the other end, or the other pole, you could have internally facing solutions. And so if you think about that two by two matrix, we literally could cover the entirety of that, and we look at things that are just helping those banks to more digitally transform parts of that product mix or service stack or operations capability that they have.
Speaker 3So for those in the audience that may not know, can you define a community bank?
Speaker 2Sure. So typically that would be one by sort of most definition, one that probably 10 billion or less in asset size and that today is about just under 4,000 banks still left in the US. That sort of fit that category, and so the vast majority of the banks that are involved with us really fit that community bank definition.
Speaker 3And how do you find the companies that you invest in, or do they find you?
Speaker 2It's a little bit of both.
Speaker 2We have a team that is spread across the country, so we have folks in places like New York and Boston and Seattle and Northern California, southern California.
Speaker 2I have partners in Atlanta and the Denver area, and so we have people in a number of those places that I mentioned which are, for the most part, where a lot of startups are either coming out of the ground or going to at various times, because maybe that's where other investors are or other startups or support resources.
Speaker 2So we meet them in those communities, we meet them at events, we meet them through our banks. Our banks meet some of these folks in their communities and will often introduce them to us as well. We have a number of different ways that we meet them. And then we also will go out into the market specifically looking for companies that maybe address a particular need that we are seeing amongst community banks. So we have inbound activity, where companies get introduced to us and we determine if they're a good fit for us and our banks. And then we have other cases where we develop a thesis because we're seeing a clear need being expressed or opportunity being expressed by a significant number of our banks and cover the marketplace and see who is addressing this, and so in some cases, that leads us to go find or meet companies that are trying to be the next generation problem solvers.
Speaker 3Are there certain stages that you invest in or dollar amounts? What's sort of the view of the investment side? Sure Great great question.
Speaker 2I would say we have kind of our sweet spot, which would be a company that has developed a clear solution to a problem or opportunity for community banks at least a few banks that they are already working with and they've somewhat established the value proposition or pricing of how this is going to work in the market, and that could mean they're doing somewhere between, call it, a half million dollars and maybe up to a couple million dollars in revenue at that point.
Speaker 2That would be what I would characterize as our sweet spot, and we can come in as a really strategic scaling partner because we have such a network of banks available to us and to the company, and so in that case we might invest a million to a few million dollars in the company to help do that, and so that's sort of the sweet spot, as I would think about it.
Speaker 2And then on both sides of that we might also choose to get involved. So we might get involved in something that's later stage and it's just the right time for us to get involved, because they want to now work more explicitly with community banks or they're coming down market from the larger bank market to community banks or something like that, and so we've been able to get involved in some companies a little bit later stage what might be considered like a series B, by the way. Capital stages might occur and then we also could get involved earlier in a company if it's really strategic or we need to help them really prove that value proposition and product. But we feel like it's worth it.
Speaker 3In a few cases not often, but in rare cases we could also get involved really really early like that as well like that as well, and you mentioned before sort of the cost savings versus driving new revenue as one kind of way to look at it. Is there another way to categorize it by product, like obviously this shows more around payments and fintech. Is there sort of a payments you know, look at it and then maybe a you know account opening or KYC kind of stuff? I mean, are there different buckets that you put things in?
Speaker 2Absolutely there are, and the clearer where this fits in the bank's architecture that the company is, frankly, the easier it is for the bank to consider whether this could fit in their bank and where it might fit on their priority list for adoption.
Speaker 2So we have already, on our side, developed what we think of as that sort of puzzle of the future digitally transformed community bank, and a lot of these companies end up being puzzle pieces that we are piecing together, and each bank is going to ultimately have its own version of that puzzle, and we try to help by understanding the bank where they are today, where they're trying to go, be that matchmaker with the right companies at the right time.
Speaker 2And so payments is actually a very topical area right now income revenue opportunities, or taking the bank outside of the bank and embedding payments into their customers in more unique and relevant and compelling ways. That also is even new types of payment rails that banks are looking at because they're seeing demand in the market from their customers to do so, and so we have started to, and I'm happy to talk about a couple of the companies that we are involved with that are helping there, and it's also an area that we're spending a lot of time meeting and getting to know other companies that are helping in the area as I broadly think about it helping move money around.
Speaker 3Yeah, happy to do that. Why don't you mention a couple of them and maybe what they're doing if they're on the payment side, because that'll definitely be relevant to our audience.
Speaker 2Sure. So first one I'll talk about. We have a company that is having great progress and we're super excited about called Torpago, and in the case of Torpago, they have built a platform that allows a bank to go out and offer a commercial card program coupled with expense management for their commercial clients. And so, as you think about the type of treasury management offerings that a community bank is looking to upgrade, being able to provide a bank-branded physical card, virtual card program, as well as the ability to track all of those expenses and allow for reimbursements of those two employees as well, is something that many smaller commercial customers just don't have great capabilities.
Speaker 2The banks have not had a great solution that's been upgraded in the last decade, and so they have not been actively marketing and selling those kinds of solutions to their customers in most cases, and so we've seen as our banks start to realize how much money is being spent by their customers with other types of card programs.
Speaker 2They see the opportunity that they could drive a lot of stickiness with their customers as well as non-interest income by offering this to them, and so that's been something that we've seen a ton of interest in the last year from community banks around the country who are really excited to upgrade those capabilities and compete with some of the fintechs that have gotten a lot of traction, like Brex or Ramp, as an example. That have gotten a lot of traction like Brex or Ramp as an example where the local customer probably doesn't maybe know who those folks are and would rather get it from their community bank, and so they have a very equivalently competitive offering now that they can offer with the bank's brand and their CEO was on the show about, I think nine months ago, I think.
Speaker 3Brent Jackson, do I have that right?
Speaker 2Yes, that is right and yeah, brent and team have made great progress in that time. Since he was on, so excited to share that as well.
BankTech Ventures Managing Director Interview
Speaker 3Awesome. Well, obviously you've kind of built this, I don't know. I kind of see it as this ecosystem and maybe that's what differentiates you, but, in your words, what differentiates your company from, say, your competitors out there?
Speaker 2So I think there are a couple things that are very clearly different. Number one we have two bankers who are actually a key part of the entire fund and machinery of what we built at BankTech Ventures, and we are very clear that everything that we are identifying and investing in are broadly beneficial and usable by community banks, and we'll take the time when needed to go prove that. And so I'm fortunate to have a couple CEOs of banks who are willing to put their banks forward for the good of the community banking industry and they'll pilot things when we need to to really prove them. And we're committed that when we invest which really is an implicit endorsement in these companies, that we're very confident that they are the best of breed solution for this particular area and are going to be a great partner to community banks, and so that's a really key part of how we differentiate. The other thing that I think we clearly understand as part of this ecosystem is that, yes, we do make investments in companies, but our core work is really understanding the priorities of community banks around the country, how they're looking to continue to transform and differentiate their businesses and who are the companies out there trying to help them do that, and so a ton of our work is meeting and understanding the competitive landscape, the emerging company landscape and cataloging all of that, and so we make it our business to know as many of these companies as we can, whether we invest in them or not, Because our banks really look to us as a supplement to their research and development and innovation efforts and they are increasingly looking at us as the first call when they're thinking about upgrading or enhancing their capability.
Speaker 2And we get those calls like who should we talk to that is doing this If they're looking to upgrade their digital account opening capability, they're going to call us and ask us who they should be talking to, and there could be 50 companies that could potentially work with them. They don't have the time nor the desire to meet with 50, but they would love to know the top two or three that we've seen, why we believe that and have seen that and how they might fit into that bank, and so that's a key part of the role that we play is doing that work and we get to invest in some small number of those companies when all the characteristics line up for us to do it. But all that work of meeting and getting to know and keeping track of all the companies out there. That is a central part of the work that we do and the value that we offer to our member banks that are part of this.
Speaker 3Well, when you think about payments, and from what you hear from these community banks, where do you see payments headed, say in the next three to five years?
Speaker 2Sure, I have a general belief that the banks that are going to remain relevant, competitive banks that are going to remain relevant, competitive and independent as community banks are going to have much more enhanced payment capabilities than most currently do.
Speaker 2If you look back, a lot of community banks have relied on third parties to do almost all of the payments work for them and in doing so they've really given away almost all the revenue and all the customer relationship capability there, and I think they're smartly starting to realize that they need to take more control of some of the rails, certainly of the customer experience and also of the fraud and risk and pricing, and a lot of the elements are in and around payments.
Speaker 2And so my general view is that we're going to see a lot more enablement capability and we're seeing it coming forward to put the banks in the position to really look like payments capability or you could even think of it as software capability providers to their customer segments, that it makes sense for them to provide that too, and that could be, as I mentioned earlier, embedded with APIs and the bank is standing behind it and really providing that knowledge and capability. And I just think payments is a central function of a really competitive, modern, technically enabled bank, and so my general view is banks are going to have to get much smarter and more capable in this area.
Speaker 3Yeah, I would tend to agree with you there, for sure. Well, let's switch gears a little bit and talk about you. So tell us about your journey to your role there as the managing director bit and talk about you, so tell us about your journey to your role there as the managing director.
Speaker 2Well, as I mentioned earlier, I grew up in family business. We were retail merchants and because we were one of the longer standing community businesses, we were involved in the community bank, and so my earliest exposure to financial services was the local community bank, the Farmers Bank in Frankfort, indiana, and have been a shareholder and a customer there for really my entire life, and my grandfather was on the board there for a long time. My father just stepped down from the board as he aged out, and that was my earliest exposure to financial services. I then decided my journey for life was likely to be one in and around technology, and so I got into the software industry shortly after college and have really been in and around that ever since. I proceeded to work through a couple software companies before the dot-com crash which introduced it to me. I then proceeded to move to California.
Speaker 2As I mentioned earlier, I used graduate school and kind of waiting out the downturn after the dot-com crash as my excuse to move to California.
Speaker 2I hung out in business school for a couple years, and most of my second year I actually started working on a startup which became another software company that I jumped into and proceeded to work through almost 10 different startups across a number of software types and industries.
Speaker 2About 10 years ago, I had a founder convince me to come join him and help him start a company in fintech, and so it was about a little over a decade ago that I really had walked away from being in and around financial services other than as a customer of the financial service industry, and it was a really charismatic founder who convinced me to come help him launch and build a company in fintech, and that really brought me back, and so for most of the last 10 years, I have been deeply in the financial and financial technology world, lived it initially from that other side, as a disruptor, working with what are often referred to as sponsor or partner banks, and it really was the COVID and PPP era that reawakened me to all the work that community banks do around the country, and the idea for Bank Tech Ventures came from a group of us that all partnered together in 2021, as we saw community banks stepping up around the country serving their respective communities, helping keep small businesses alive at a time when branches were closed and many of their businesses were closed and they needed those PPP lifelines to just keep their doors open.
Speaker 2And we saw community banks adopting technology at a rate that they really hadn't, in most cases, ever previously, and we saw that as a catalyzing moment where they understood they needed to keep investing in technology, to keep going from there, and we felt like if we could bring a group of them together and do it in a more collective effort way that we could help the industry remain independent, remain competitive and relevant for the years to come.
Speaker 2And so we went out with that message and started talking to banks, mostly in those early days over Zoom, because most of them were not in person either, and we ended up, as I mentioned earlier, getting just over 100 to join our efforts back in 2021. And so we launched, we closed, the fund in August of 2022. And we've now made almost 20 investments since then and we've built a team all over the country, as I mentioned earlier, who are part of the team and part of the mission to really help community banks continue to transform and be better for themselves and for their customers so they can keep doing the great work that they do.
Speaker 3Well, what are some things you're passionate about? So, maybe one work-related passion and one personal passion.
Speaker 2I am super passionate about ideas and entrepreneurs, and so I have been one since my earliest days, lifelong entrepreneur. I love sharing my life experience and opinions and energy with others who are trying to dent the universe and make the world better in some way, and so being able to work alongside entrepreneurs in the way that I get to every day is an absolute passion, and I'm just so grateful that I get that opportunity to meet them, to work with them, to help them build better businesses to impact the world in the ways that they are trying to, and so that's absolutely a passion that I have. And then the other would be developing people, and I love giving people opportunities to tackle really worthy challenges and problems and grow through that and help put them in a position to be successful. Okay, what?
Speaker 3about a personal passion.
Speaker 2Well, personal passion. I am a little bit in search of a new one because I have. For the last 10 or so years I have been able to coach. I have three sons who have all played tons of different sports, and I've been able to coach and support them in a number of ways across all these different sports teams and leagues that they've been a part of, and so that's been an absolute joy and passion of mine for the last many, many years. They are now starting to age to a point where I don't get to do that anymore, and so I am probably going to have to find or reignite another passion, maybe golf or something. But I really lean a lot of my time and energy into startups and that's where I really like to spend my time, and so it's probably a good thing that it's both a personal and professional passion to do so.
Speaker 3Right, right, Well, maybe you could add retired coach to your resume. There you go. So final question and I like to ask this of everyone, because I think everyone brings their own experiences to their answers and it is if someone's looking maybe they're coming right out of college and they're looking at the payments or fintech industry and they say, hey, I want to build a career in this industry Maybe not necessarily build a company, but maybe, maybe, go to work for a company in the industry, maybe even your company and they say, Kerry, what do I need to do to be successful in payments or fintech? What would you tell them?
Speaker 2Be so open to learning and challenging and understanding how these things work, and it is a fascinating area because at times it can totally challenge your conventional wisdom of how something should work or why something exists that way, and we need new, fresh eyes at times to imagine how it might be different, how it might be better, and people willing to take the time to understand that and understand that you have, at times, groups that are at almost complete odds with each other.
Speaker 2You have innovators who are trying to break things and change things, and you have longstanding regulated financial institutions and the regulatory bodies behind them that often are trying to not necessarily stand in the way of progress, but are trying to take a much more deliberate and cautious approach to innovation and progress. And understanding both sides of that is how we move things successfully forward and improve it and improve it, and those are the things that lead to better solutions and, frankly, more inclusive and broader opportunities for more people. And I think, understanding that there's a lot to do and there's a lot to fix and it's an exciting place to be. You're not going to learn it in a day or a week or a month, and there's always going to be more to learn, and so people who are curious and interested in that, I think can do a lot of really interesting things in and around payments, and could do it for their entire career, because it's only going to continue to involve.
Speaker 3Yeah, well, I think that's great advice, for sure. Well, we're coming up to the end of the show. We've covered a lot of ground already about you and the company and in the industry. Is there anything else you'd like to add before we wrap up the show?
Speaker 2I don't think so, Greg. I feel like we've covered to your point, covered a lot of ground. We love to meet banks who are trying to think ahead and invest in their future. Those are the types of people that we work great with at BankTech Ventures, and similarly, we love to meet founders who have a big heart and big commitment to helping community banks be better in the days to come. So always happy to meet them and try to see if they could be a potentially great fit for our ecosystem.
Speaker 3Okay, what's the best way for people to learn more?
Speaker 2You can certainly visit us at banktechventurescom. I'm pretty easy to find, I'm pretty active on LinkedIn, and so reach out to us and we're happy to engage in a conversation, or come meet us at a community bank or FinTech event where we usually show up.
Speaker 3Okay, great. Well, Kerry, thank you so much for being on the show today. I know your time is very valuable, so I really appreciate you being here.
Speaker 2Well, thank you, Greg. It's been an absolute pleasure and glad that we've been able to meet and have a few conversations as well.
Speaker 3Yeah, I appreciate it. So, to all you listeners out there, I thank you for your time as well, and until the next story.
Speaker 1Thank you for joining us this week on the Leaders in Payments podcast. Make sure you visit our website at leadersinpaymentscom, where you can subscribe to the show and where you'll find our show notes. If you enjoyed listening, please share on your social channels as well.