Hi guys, welcome to the Fintech Coffee Break. I’m your host, Isabelle Castro. This week I spoke to Laura Merling, chief transformation and Operations Officer at Arvest Bank.
Community banks have faced a difficult environment this year. And there have been concerns in the media about whether there is still a place for them in the banking ecosystem.
We spoke about the idea of the Community Bank and how they can approach the digital age, still keeping their engagement with the communities they serve.
Isabelle Castro 0:33
Hi, Laura, how are you today?
Laura Merling 0:35 Hi, Izzy. I’m great. Thank you.
Isabelle Castro 0:38 Good. How are you? I’m good. I’m good. Thank you. It’s really good to have you on the show. I’ve been looking forward to this. So to begin with, what gets you up in the morning?
Laura Merling 0:48 Oh, what gets you up in the morning? Being able to have an impact gets me up every day. I am a you know, I want to feel like this. The the things that I do every day have an impact on community, a business on other people. For me, that’s that’s what gets me up.
Isabelle Castro 1:10 I think that’s a great reason to give up. Definitely. Tell me a bit about your journey to Arvest Bank.
Laura Merling 1:18 It’s a it’s an unusual journey. So that’s a great question. So I’ve been this this week is my two year anniversary at Arvest bank. My my path here has been long and sorted. My early career was in technology. So I worked in software companies in Silicon Valley, even ran a high tech nonprofit helping developers find venture capital money. So I’ve done a little bit of everything in the in the technology sector. And several years back, gosh, probably 2006 2007, when I would say when API’s started to be cool, so application programming interfaces started to be cool. Mostly in the in the software community. So think the Amazons of the world and the startup ecosystem in the world. I went to an API management vendor, so somebody that helps manage that traffic flow today, you might think of it as mule soft or an apogee at the time, it was a company called Mashery. And I was working at that company. And part of what we had to do in order to sell the product. Why do you need API management, you had to first tell people why they needed API’s. And so it was I spent a lot of my time helping customers figure out what a business strategy would be for why you wanted your services, your data, your news articles, your products to be sold in someone else’s site. And that got me intrigued on the other side of the business. So instead of being on the technology side, how do you go on the industry side? And so I made the leap. And I went into the other side of it and the industry side of it. So I started in Alcatel Lucent and AT&T. So think about how do you turn the network into a set of API’s like, which was software? How do you turn the network into software? And then how do you turn that into a business model? And there was disruption at that time from from a bunch of small things. Twilio at the time was a really small startup. I mean, a couple like 50 people in a room but and they were giving you know, at&t a run for their money. So it was a how do you rethink that model, left there got recruited by by Ford to go do connected vehicles with autonomous vehicles, which really was the way you’re gonna make money off of autonomy is connected vehicles. And so then that went into aircraft and connected aircraft. And then I was like, Okay, this is really great. But I think I’m getting too far away from technology. I was more business strategy, new revenue generation, using technology as a means to the end. I went and did some consulting, went back to Google, got a role at Google, which was a chief transformation officer where I would help customers figure out how to use cloud computing infrastructure. How do you use AI and machine learning to transform your business? And, oddly enough, that’s when I was like, Okay, I really want to be back on the other side, helping people do it, like, I have ideas and how we can do it. How do we go do it? I got recruited by Arvest and I was like, you realise I know nothing about banking. And they’re like, yes, but we also assume you knew nothing about these other businesses that you were in. So we think it’s great to maybe have a different perspective, a different point of view, and help us think differently about what it what it means to be a bank and in the in the future. And how do we leverage technology as a means to the end of of transforming the bank? That’s how I got here. So like I said, it’s kind of a it went from technology to ended Three and then industries? And then how do you do transformation?
Isabelle Castro 5:04 Okay, I really liked this approach because it really kind of it means that you’re coming to the bank with a kind of blank slate, not a completely blank slate, but in terms of kind of like the way that banking goes right?
Laura Merling 5:20 Exactly is it and I like that it’s really a blank slate in terms of at least from my point of view in the room, there’s a lot of the people that know banking so they can help me in, I feel like I’ve gotten a lot smarter about banking over the last two years, I’m still clearly don’t have as much information as some of the folks that have been here for 40 years, but or even 20 years, but at least enough to be able to frame where we might be able to reshape what we do and what we offer to customers. But it’s also taking that customer point of view, I think is kind of what what I also have learned through transformation is a lot of people will go transformation is about technology, while technology is really the means to the end. And then as if you’re a bank, you’re like, Well, I have a bunch of financial services products. So you know, we have credit cards, and we have Treasury products, and we have deposit products, and it’s like, Okay, those are all great. But really, what’s the problem you’re solving for the customer? And that’s really what transformation brings is a different point of view of how do you look at it through the end customer that you serve? What is it that you’re trying to solve for them? And that’s a very different mindset change?
Isabelle Castro 6:32 No, definitely. And I think this is something that I see the banking kind of ecosystem going through, particularly this year. I mean, it happened earlier than this year, obviously. But I mean, you’ve seen the bank failures, you’ve seen kind of a lot of different factors coming into play, and making banks kind of rethink how they go about business. So I’m interested to hear from you kind of how you think, kind of the factors of this year, the bank failures, the rate hikes, all of this stuff that’s going on around banking, how has it affected community banks?
Laura Merling 7:20 Ooh, that’s a that’s a big question. I think. No, I, you know, I don’t know. I think, really, for everybody, every bank, not just community banks, it’s been a, it’s been a step back to think about how do we approach you know, there’s a bunch of different levers, you can use it a bank to, to drive revenue, or to create opportunities for customers or offer them different things. It’s rethinking how we shape that because over and above those things, you also have regulatory changes happening, right? And so all of those different levers, you have to revisit, rethink how you approach it. for community banks, I think across the board at all. Community banks and even credit unions, right part of it is stepping back and saying, how do we best serve the customer? We do it through relationships? And what do we have in those relationships? How do we leverage those relationships? How do we better serve people relative to those relationships? Because that’s what community banks are known for? You know, the part about it, and it’s also how we serve the customer and best serve the customer. Right? So for example, yes, the bank failures, you know, some of it’s about liquidity, right? When I look at Arvest’s liquidity, we’re in a, we’re in a great liquidity position. Now, are there other things that impact what you do as a bank? So you know, as CFPB made changes to fee, the fee structures, fee revenues that impacted everybody’s revenue and how we think about it. So then you go look at what are the different revenue sources that you have? And how do you how do you address that? So it’s, it’s all kind of tied together. But I think it’s hunkering down to who do you serve? And how do you best serve them is really my point of view, at least of what what we’ve done? And it’s been across the board. Like I said, I think I think regulatory has had just as much impact, as you know, as the couple of bank failures.
Isabelle Castro 9:41 No, I agree.
Laura Merling 9:43 With your question, I hope it did. Yes,
Isabelle Castro 9:45 it did. It did. I’m gonna ask some more questions kind of like go more deep into that. Because it sounds like from what you’re saying that the community banks, their place within the whole banking system, there is still a place for them and it really kind of catering to the consumer? Is this? Is this your view?
Laura Merling 10:05 I’d say the consumer, but also the small businesses that serve that that make up communities. Right. So a community is an ecosystem of, of, we’ll say, businesses, individuals and nonprofits, and how do you help serve that broader ecosystem? And, you know, one of things, it’s interesting in an age of personalization, so what we look at what we’re trying to solve for is what does it mean to be a community bank? In a digital world? Right? Everybody’s going digital? How do you still keep that relationship? And part of that relationship is yes, it’s using the data that you have to know your customer and make personalised services. But you don’t want to lose the one to one, right. You don’t want to lose the fact that I know who you are, I see your face, I recognise you, I see you in the town hall, I see you at a baseball game. But online, I might still see you as part of a online community. We have. Interestingly enough, we have some really fun things happening with our own Arvest associates, we have one associate who has, she runs a community online. She has a community of quilters. And they do she has a podcast, she has an Instagram following. And you know, we ask her. So what does it mean to be community for you because you have physical community, which is what we do in our banks and our branches. And then you have your online community. And the online community allows you to serve people and help people that you might not ever be able to serve or might not know that you exist. Or like in quilting, she’s like, well, you know, you who you might think does quilting, it might broaden your opinion of who does quilting, it might also have somebody that does quilting in a remote town somewhere might not have access to other people that do quilting. So by having the online community, they get to learn from others, that they can’t meet in person because they don’t exist. So what we’re trying to do is figure out what is that intersection? And I think that’s what all community banks are doing is in this digital and physical world. And we’re communities happen online and in person. How do we revisit what our role is, and I don’t think our role changes, it’s more about how we engage. And that’s why part of ours focus is what’s the technology stack, and the implementation of that technology that lets us still have the relationship, and doesn’t make us be some things people don’t want to engage with an individual. But when they do, how do we make it still a relationship based experience? So maybe it’s video calls that we all did during, you know, during part of our normal banking process? Now you schedule a video call? Do I have all the data I need about you to then have a conversation? And do I have a single view of a customer because I might not see you all the time physically in the branch or in the bank, but when you do call, I want to make sure I can actually serve best serve you. So I think it’s I think it’s really finding the convergence of physical and digital and in and then how do you serve a community in that combined physical, digital world, and it’s really going to be a combination of the technology mechanisms that we use, and how we use them from a customer point of view. And whether that’s a small business or a consumer? How do we address them?
Isabelle Castro 13:33 Okay, that’s really interesting. I’d really like to kind of go a bit deeper into how Arvest is approaching this kind of in practice, what does that look like?
Laura Merling 13:45 Yeah, so. So in practice, the path that we’re taking is it’s a lot of it’s a lot of research to then make sure we’re doing it right. You know, one aspect of it is, who is the community? Who are the people and businesses that make up the community that we serve today, and we start with our customer base, and then we look at others that maybe aren’t our customer, but make up the communities we serve? What do they need? Who are they, whether it be, you know, farmers or the so whether it be farmers or whether it be skilled trade, or whether it be, you know, nurses and doctors and the healthcare ecosystem, like who are those people? Or maybe it’s the maybe it’s the individual that that has their side gig, right? Who is it that makes up our community, and what are they doing? And then the flip side of it is, what’s the technologies that they’re using, that they’re interacting with in their personal lives that they may want to carry into their interaction or expectations of their interaction with the bank? So it could be biometrics, so maybe it’s facial recognition, maybe it’s a fingerprint recognition. Maybe it is a maybe it’s a zoo. Call to talk to the contact centre. Maybe it’s a virtual agent. A lot of folks are using generative AI, what does that look like? What’s our use cases for generative AI, that bring value to the customer? versus, you know, we don’t want to just, you know, Jaren of AI, there’s lots of use cases, one of the ones that add value. And so it’s looking at all of those and saying, and so it’s kind of meeting in the middle of what a customer’s needs, who are they what are they trying to accomplish? And then the other side of it is what’s the technology that they are going to be expecting that we’re using or that they’re interacting with? And finding that that middle ground? And that’s really the path that we’re on right now? And we’ve been on for the last 18 months or so.
Isabelle Castro 15:46 Okay, cool. That’s really interesting. So, but smaller banks kind of typically have less resources. I don’t I don’t know about Arvest. But in general, Community Bank, smaller banks, they have less resources to implement on new technologies. How much? Does this affect how they’re engaging with the consumer base? And how much they can engage with the consumer base in this digital world? And kind of is the competitivity, with the bigger banks being negatively affected?
Laura Merling 16:31 Yeah, I think. So there’s, there’s pros and cons on every side of it, right? If you look at the bigger banks, they have more investment, more technology, more stuff, more moving carts to modernise and to change what they’re doing and how they’re doing it. They also probably have more processes associated with that, right, as you get bigger, you have more process and overhead. So, so yes, they have the investment. But I think their challenge also might be greater as community banks. You know, historically, we still have technology, we have technology we’ve inherited through mergers and acquisitions and history. But it’s probably a little less complicated and maybe less process. But also, it’s figuring out then, who are the handful of key technology partners. What and we’ve even been doing this is, you know, normally a bank you might have, you know, we have like 3000 different systems on our back end. And there were just a midsize bank, right? A midsize bank that wants to keep our community roots. We, but but how do you get down instead of having all this technology? How do you get down to a few key partners that can help you accelerate what you’re doing and where you’re going. I’ll give you an example. We were just at the myself and a couple of my leaders. Were just at the Dreamforce Conference, which is sales forces conference. You know, when you look at Salesforce, it gives you a combination of of buying something that’s kind of complete thing together the puzzle pieces more of a configuration. But they also have things that you can build on. So you can do by you can do by end, build and find a happy medium, which lets you minimise what you need from a ground up to really get started and get things moving forward. And there were quite a lot of financial services, institutions, they’re of all sizes, and shapes that are using that platform. So it’s finding whether it’s Salesforce or another partner, it’s really finding those handful of vendors that will help you accelerate what you’re trying to do. And that they look at it as a partnership. They’re in it with you to help you grow and learn along the way. They’re not just there to sell you software or to if it’s a professional services team that’s helping you build it, that they’re not just there to make money off of building it for you that they’re there as a partner that you can partner with over the long term because transformation is an ongoing thing. It’s really not a one time, it’s not a one time thing. Usually people are doing it to do a little bit of a pivot in their business and hit a bit of a reset. But really, if you’re if you’re realistic about it, transformation is ongoing. The market always changes. The technology stack always changes, but it’s more about setting yourself up for being able to adapt to those changes.
Isabelle Castro 19:33 Okay, great. I guess one of the arguably one of the biggest impacts to the banking system this year, which I think is probably within that whole theme of transformation is the kind of launch of FedNow, what does this technology mean for community banks?
Laura Merling 19:58 Yeah, so for us, so All right, so So fed now is really about moving towards what I’ll call kind of an instant payments, right? We’re in a coffee instant world of I get, you send me money and I actually received the money today is is that’s kind of the world that we’re moving to is we think about what cloud computing and all this great technology lets us do is move from a batch world to an instant, real time world. And there are pros and cons with that. And I think, really what that project and programme lets you do is start to head down that that real time path like instantaneous, I made a transaction that transaction happened. I think the challenge in our role is we’re participating it in it we contribute, we’ve been an observer we we have a plan of what we would want to do, we are not currently participating in the pilot, although we’re in the pilot programme from a learning perspective, one of the one of the one of the things that we all need to think about is what are the use cases where instant payments, make sense and add value, and making sure that both parties are aware of what that means. So, for example, a lot of small businesses, and even larger businesses, right, if you’re used to a batch world, the batch world, it means it might take two days to process something. If it takes two days, that gives you two days to make sure the money is there, it gives you two days to have what we’ll call cash flow management. If I’m used to managing cash flow on a couple of days basis of float, and now something’s going to happen instantaneously, it means I have to change about how I think I run my business. And that’s the basis of I think in the long term. It’s great. And it’s where the world is moving to. The question is, where are the use cases that that we address now? And how do we address them, so that we don’t impact a business? You know, if it’s if it’s, if it’s payment of a payroll in and you work in a if you think back to during COVID. And every day, people that normally made money via cash, like a tip based business, it’d be great if they got actually paid every day out of the cash, we’ll call it the cash that comes in until but nobody’s paying cash, right? It was all credit card, can I get paid exactly in that same day? Can I make an instant payment? Does it go like cash would into their account that day, and they have it in hand? To us? That’s really important. But you also have to think about the cash flow on the business side? And where is the business? And that cash flow management? Some businesses will be able to do that others may not. So that’s kind of really, I think there’s huge value in then it’s finding the right use cases and the right entities that are ready to execute against that.
Isabelle Castro 23:00 Okay. And is that in general? Or is that kind of banks mobilising themselves to be able to kind of engage with their customers and create these use cases?
Laura Merling 23:20 Yeah, I think it is. I think it’s a combination of I think, as a community, everybody that’s participating in the FedNow programme is working through what are those use use cases? Right? What are they? What makes sense? When do we use them? It might be it might make sense that it’s, you know, B2B, where it’s a larger corporation paying a smaller business versus the other way around it? You know, there’s a different set of use cases. And so part of that is the whole reason for the FedNow programme, and how do we learn and participate in that together for us, and where were we were at the time of its launch? You know, we have, we have a couple other priorities that we felt were more valuable to our customer base to focus on at the moment. So while we want to be part of the conversation and contribute, for us, it was more of a you know, we’ve got a couple other things that we felt were going to add more immediate value to the customer base, and that is kind of why we aren’t actively in and doing fed now. But we are involved in the programme.
Isabelle Castro 24:28 Okay. Okay. Interesting. So, in your eyes, from your perspective, what does the future Community Bank look like?
Laura Merling 24:41 If I, if I told you that would be that would be like giving away my secrets. You know, like I said, I will say, I think I think the reality is it is finding the convergence between physical and digital, it is leveraging relationships in the right way. It is high level of personalization that everybody’s expecting anyway. You know? Yeah, I think those are kind of the key factors. And then what does community mean to you in a digital, physical and digital world? And how do you instantiate that? And in the physical world, what is the, you know, if you looked at learnings from, you know, Instagram or tick tock or any of those, what’s what’s the learning to be had? Do we have that fully defined? No. Are we on a path that we’re getting closer to being able to say exactly what that is? Yes. And maybe I’ll be ready to share in a couple of months. How’s that?
Isabelle Castro 25:51 Okay.
Laura Merling 25:53 The framing of it, and the pieces of the puzzle that we’re looking at?
Isabelle Castro 25:57 Nice. Okay, I completely Yes, I will check in or check back in and get more of an insight a couple of months down the line. And so your closing questions, piece of advice that you’ve been given that you would give to someone else?
Laura Merling 26:14 Oh, that’s open about what about what category
Isabelle Castro 26:18 about whatever you like, a piece of any advice? It can be professional, it can be personal? career? I guess that’s professional?
Laura Merling 26:29 Yeah, I mean, I would, I would say on two things on the on the professionals on the on the, like, personal side, and personal professional side, you know, like, I kind of shared this with some folks at a talk I gave, I think, one is just try stuff, write it, you know, here I am sitting here, two years into banking going, I never knew anything about banking. And as you could see, throughout my career, I’ve done that, I would just say just try stuff. Take what you know, and the experience that you have, and figure out how to apply it and keep that growth mindset of there’s something that I bring to the table. And yet there’s something I can also learn when I when I bring that, you know, bring bring that forward? I would say on the on the on the business side on financial services and banking and and that industry in general. I would say my advice is figure out what problem you are solving for the customer, versus figuring out what product to sell them. If you can start with what the problem is that you’re solving, you will serve your customers in a much better way both business customers and consumers. So those are my two pieces of
Isabelle Castro 27:43 advice, or like those two pieces of advice. I’m going to follow them myself your curveball question, if you could learn one new skill, I’m gonna go with personal skill. What would it be? And why?
Laura Merling 28:02 Ooh, one new personal skill. Oh my gosh, there’s so many I would love to learn, you know what I, I have a passion for art. And I would love to learn how to actually paint. You could always take your painting with a twist class, or whatever that is, but but really do do it in a way that expresses, like, I take all my thoughts and ideas and express them in a in a piece of art would be pretty amazing.
Isabelle Castro 28:31 Ya know, when there’s this whole kind of like colour theory and all of that kind of stuff that goes into that. That’d be really interesting. Good. Good choice. I like it. Well, how can people get a hold of you?
Laura Merling 28:46 So I would say, you know, the best way probably is via LinkedIn reaching out to me on on LinkedIn, or? Yeah, that’s probably the fastest way right now. So I’m just when you look me up, I think it’s LinkedIn slash emerling.
Isabelle Castro 29:03 Yeah. Perfect. All right. Well, that’s probably Cool. Thank you so much for coming on the show. I’ve really enjoyed talking to you about community banks and seeing your insight.
Laura Merling 29:15 Great, thank you. I really enjoyed it and appreciate it and look forward to the return when we can talk about really what it means to be a community bank in a digital world.
Isabelle Castro 29:22 Definitely. I was gonna say that I’m really looking forward to like getting your thoughts on that very soon, I will be in touch.
Laura Merling 29:30 All right. Thanks so much, Izzy. Take care you too.
Isabelle Castro 29:32 As always, you can reach out and chat with me or my personal LinkedIn or Twitter @IZYcastrowrites. But for access to great daily content, check out Fintech Nexus on LinkedIn, Twitter, Facebook or Instagram. You can also sign up for our daily newsletter bringing new straight to your inbox. For more fintech podcast fun, check out the website, where you can find more fascinating conversations hosted by Peter Renton and Todd Anderson. That’s it from me until next time enjoy your downtime
Isabelle is a journalist for Fintech Nexus News and leads the Fintech Coffee Break podcast.
Isabelle's interest in fintech comes from a yearning to understand society's rapid digitalization and its potential, a topic she has often addressed during her academic pursuits and journalistic career.