Welcome to the fifth edition of Accrued: After Hours 🎙️! This weekly newsletter will provide you a short recap and the main takeaways of each episode from LoanPro’s Accrued podcast series on Fintech Confidential.
Hosted by Tedd Huff and LoanPro’s CMO, Colton Pond, Accrued explores fintech through the lens of lending with insightful conversations from experts and leaders across the industry.
Listen to the Accrued episodes on the following platforms:
Today’s newsletter will cover season 1, episode 5: Sponsor Banking Redefined: Column‘s Blueprint for the Future w/ Brian Fishbein.
In this episode, Tedd and Colton talk with Brian Fishbein, Column’s Head of Investing and Treasury, about Column’s innovative approach to sponsor banking and how it’s reshaping the financial landscape.
Here’s what went down👂
History of sponsor banking
Before jumping into Column’s role and impact on sponsor banking, Brian gives a brief overview of sponsor banking’s history that gives some insight into what is actually “new and novel” about banking sponsorship and how people are (and have been) thinking about it.
Most people think of sponsor banking coming about post-2010 after the Great Financial Crisis when banks were looking for new ways to drive revenue, but Brian brings up a point about sponsor banking’s roots going farther back.
“If you think about it, [sponsor banking] is kind of a large corporation working with large financial institutions to acquire customers in a different way. A very easy example of this is Citi Bank’s relationship with American Airlines since 1984 to basically do sponsor banking.”
Back then, the big players were the only ones who could really create these relationships and services, but better technology became the catalyst for the rapid rise of sponsor banking in post-2010 that gave companies resources to access sponsor banking without having massive scale.
Technology is the core
When Column acquired Northern California National Bank in 2021, they knew they wanted to bring their technology to bear to provide a better service and solution for customers.
Technology is a driving factor in what Column does to build the robust systems that power financial services. Brian explains that they keep compliance, risk, and overall loan management in the forefront of their minds as they’re building behind the scenes. That way, their customers can easily reconcile and manage their loan management softwares.
Column also values having a direct relationship with their partners instead of focusing on working through other softwares. Brian credits this to the technology that the team at Column has built themselves that allows them to rely less on other vendors.
“Where we think our value is to a lot of companies is much more in the breadth of the offering.”
What gets the team at Column and their customers excited is the expansion into new loans and financial products that goes beyond just offering credit. Columns holistic offering is an important, strategic move into broadening the customer relationship and wallet.
Shaping the future of credit sponsorship
Moving forward with credit sponsorship, Brian believes that differentiation will look less at capabilities that reduce manual operational tasks, and instead deal more with the ability to access, use, and leverage real-time data. By utilizing real-time data in the right way, you can not only optimize your operations, but also bask in the benefits of performing tasks in real-time and improve efficiency.
“If I’m receiving an Excel file the next day for originations that were approved yesterday, the earliest I can disperse is the next day. Whereas, if we’re directly integrated with your application process, somebody walks in the door at 2 P.M., fills in their information, and it all looks good and they’re approved for a $1,000 loan, there’s no reason why at 2:05 P.M. we can’t begin initiating that disbursement. So, you start to think, “How do I create a better customer experience for folks?’, and it’s through things like that.”
Brian also talks about Columns approach with tech to help fintech partnerships drive optimization. One of these ways that they do this is through their flexibility that allows companies to provide significant value to the users. Column invests in their partners and the relationships they have with them, giving them more creative freedom to tailor their services to customers needs while still maintaining compliance.
Innovation + Balance
Balancing compliance and innovation is a tricky aspect in financial services and especially in sponsor banking. Brian believes that you can balance innovation and compliance—in regards to what you want to do, he believes that you need to put in the work to make it happen.
At Column, they’ve developed things in house to solely help their risk and compliance teams. That way, these teams have the level of insight that they expect, and help pave an easier path towards innovation.
“Every day, we have conversations between our legal, risk and compliance people that are talking to customers and [these teams] say ‘Here’s the way I want to do this, or here’s this thing that would be super interesting and here’s why our customers need it.’ Our response is: Let’s iterate on that and do it the right way rather than saying ‘we can’t do it’”
Column is continuously building out the tech that they’ve already built, constantly asking themselves “How can we make this a better product?” Regulations are constantly changing in the financial landscape, but there’s still sufficient room to innovate within the established, regulatory lines.
What can we take away from these experts? 🧠
🪴 Scalability for vitality. To stay ahead, lenders will need to operate at some scale. Lenders who target a very niche customer segment, or only offer credit, will still exist, but they’ll need to operate at some scale or expand their offerings if they want to have a vital business.
⚖️ Innovation and compliance can be balanced. Brian says in the episode, “It’s not no—it’s ‘how do we do that’?” Of course, there are non-negotiable ideas that can’t be built out, but once you pass through the regulatory requirements, there’s no reason why you can’t innovate.
⭐ Real-time data is a goldmine. If you’ve been following each episode so far, you might have noticed a pattern of real-time data being mentioned as an essential part of providing a best-in-class customer experience. Brian reintroduces this point, emphasizing how using real-time data in a way that boosts efficiency will enhance the customer experience.
