12 US Community Banks Form Fintech Alliance

Twelve community and regional banks across United States announced on Wednesday (November 7) the inception of Alloy Labs Alliance, a consortium to accelerate the technology adoption.

Some of the banks included in the alliance are CenterState Bank (NASDAQ:CSFL), Citizens and Northern Bank (NASDAQ:CZNZ), Columbia Bank (NASDAQ:COLB), QCR Holdings (NASDAQ:QCRH) and Mercantile Bank (NASDAQ:MBWM). Alloy Labs would ensure banks can work with fintech startups to shape their solutions while reducing execution risk.

The alliance is set to function as a platform for these banks to identify shared areas of opportunity and for them to build smaller workgroups as they zero in on specific opportunities or pain points.

“[E]very bank needs to innovate in order to drive down operating costs while ramping up the value we can deliver to the customer” Chris Nichols, Chief Strategy Officer of CenterState Bank, said in the release.

It was noted that banks that are not ready to adopt new technologies can still be a part of this alliance as they can contribute in the continuing research while scripting the framework of the consortium.

First National Bank of Omaha, a subsidiary of First National Bank of Nebraska (OTCMKTS:FINN) and Lincoln Savings Bank along with NBKC Bank, Reading Cooperative Bank, Inland Bank and Gulf Coast Bank and Trust Company complete the original members of the alliance.

“While we are actively engaged with fintech startups on our own, Alloy Labs was an opportunity to accelerate our efforts,” Claire Devney, head of fintech partnerships at First National Bank of Omaha, said in the release.

The association, whose founding members have assets in the range of US$251 million to S$20 billion, said that the approach would aid banks as they adopt new technology without massive IT budgets.

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

The alliance will be managed by Fintech Forge, a firm that assists financial institutions through strategic fintech partnerships. Crowe LLP, a public consulting firm, is set to provide consulting advice and services.

“Community banks play a special role in the lives of our customers,” Julie Thurlow, CEO of Reading Cooperative Bank, said in the release. “But we don’t have the same IT and innovation budgets as the big banks to capitalize on that relationship.”

In mid-October, Accenture (NYSE:ACN) published two reports which highlighted the progress that fintech sector has made in the US. The firm said that 19 percent of financial institutions in the US are new entrants like challenger banks, non-bank payment institutions and even big tech companies. Together, these firms have captured 3.5 percent of the total banking and payment revenues.

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Securities Disclosure: I, Bala Yogesh, hold no direct investment interest in any company mentioned in this article.