How does Synctera view banks that provide both vertical banking and BaaS functionality?

Our tech stack will work with any bank. That's the starting point. It's optimized for community banks under $10 billion in assets because of Durban. However, we've started to engage with bigger banks, because we now have these things called smart charge cards—a charge card out front which runs on the credit rails and is backed by a checking account on the backend, which allows the bigger banks, to participate, which is really attractive to them. 

The folks like Cross River and Column, that have said from the get-go, "We want to be a tech-forward bank, and we want to have our own stack internally that we share with our fintech partners etc.," are awesome. It's a high burden, so they're very different disciplines. The discipline of being a banker versus the difference of being a technologist—they're quite different.

The really, really big banks, like Bank of America and Chase, have tens of thousands of people in their organization to do the tech stuff and tens of thousand people to do the banking stuff. If you're a small community bank, you can't afford that. You outsource all of your tech stack to [inaudible 00:45:43], Jack Henry, or one of those tech providers. It's when you get blurry—and the early banks like MetaBank, aka Pathward now, and Green Dot and others did a little bit of this—that you say, "We're going to both be a community bank and this." One of our customers, Coastal Community Bank, has been quite successful at being a retail bank in the Seattle, Washington area, and has allowed fintechs to connect to the bank, but it's relatively unusual. 

Completely tech-forward banks have been few and far between. Column is a good one. Cross River has built an amazing franchise. They've been in the game for a long time, and they're a very strong partner, potential partner, but even they have scalability concerns or limitations. It won't surprise me that folks like them will come to us eventually and say, "Hey! Can we work together?" We, Synctera, have a great deal flow, and we can help them get into the market faster than if they were trying to close every deal themselves and have that ecosystem. 

What's pretty clear in this market is developers’ zeitgeist, productivity, and engineering success are really strong differentiators. As a bank-bank, you've got this dual hat that you have to wear. "Can I build the stuff to run the bank, and can I build tech stuff?" Unless you're really well capitalized and capitalized like a software company, not a bank, it'll be hard for you to divert the resources necessary to be competitive, unless you're Bank of America, or Chase, or whatever.

I think there's something really powerful about having a marketplace with multiple banks in it, and the deal dynamics of who wants what deal is not exactly what I expected. A lot of it really just comes down to chemistry. Some banks really like certain deals and certain founders, and there's a chemistry that exists there. I think, for the banks that are really looking at investing in this—it's a very capital heavy activity. You're going to build an engineering team, maintain this stuff, manage it and on top of that, you're not going to want to take all the deals. 

There's a matching problem here of finding the right deals for the right banks. I think, ultimately, a marketplace approach wins, and I hope it's us that is the winner with that approach, but I think ultimately banking is about assessing risk and being able to launch the right programs with the right risk understanding and being able to price that risk. Ultimately, it comes down to reducing the friction of that marketplace to just make that happen as effectively as possible. It's been great for us to see. When our banks get together with our integrators, and they've got that chemistry, and our platform facilitates the tech side of it—to see that relationship really flourish and grow has been really powerful for us.