BankHorizons April 2019__Fintech Disruption_Redacted

FINTECH DISRUPTION
OF THE
CORE IT OBSTRUCTION
Navigating market, economic and contractual obstacles to
fintech adoption and digital transformation

2Copyright Paladin fs, LLC 2019 Contact: paladin-fs.com 877-746-4859 | goldencontract.com 844-674-6533
ALEX LOPATINE
Managing Director, Paladin Fintech Advantage
Fintech Visionary and Expert
Twenty years of international business experience in finance,
banking and technology recognized as a visionary strategist in fintech
and banking. Educated in the U.S. and Switzerland, speaking three
languages has lived in five diﬀerent countries.
Managing Partner of Park Capital
Executive Chairman of Wysh
Executive Chairman
of Blockchain ShiftCo-Chair of the Florida
Blockchain Foundation
Former CEO & Founder of Nymbus
First Cloud-based Core Supplier in U.S.

LINDA STAHL
National Partner Executive
Business Development Northeast
$108 Million in Merger
Value Accretion
$346 Million in
Cost Reduction
138 Wins / 0 Losses
Paladin Blue Book
Launched June 2016
Group “Offensive”
Negotiations
100+ Institutions
$500 Billion + 30 years
IT Contract Negotiations

The world has changed rapidly,
with technology advancing our
society in countless ways
Unfortunately, the financial services
industry, especially retail banking,
hasn’t really kept up
That finally changes now
A CHANGING LANDSCAPE

SMALL TO MIDSIZE BANKS ARE UNDER SEVERE PRESSURE
Smaller banks are being squeezed by big banks, big tech and fintech
HOW CAN COMMUNITY BANKS COMPETE AGAINST SCALE, CUSTOMERS AND TECHNOLOGY?
In a Year of Tremendous Growth Community
Banks have Underperformed Relative to
Midsize and Large Banks
Large Banks Dominate FinTech Investment
8.74%
13.20%
15.75%
18.56%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Community
Banks
S&P 500 Midsize Banks Large Banks

ANTIQUE SOFTWARE AND INFRASTRUCTURE
5 Core IT suppliers with a combined market cap of $90 billion own the banking technology industry.
Lack of innovation combined with
are crippling smaller financial institutions - who really have no choice
Long implementation processes Ridiculously high fees Long term, one-sided contracts
Fintech companies have diﬃculties to integrate to the legacy stack This can be addressed without converting to a new core
Information redacted due to confidentiality limitations. Please request full version by filling out the form, or contact Paladin @ info@paladin-
fs.com

institutions ABOVE
$1 billions assets
THE DECK IS STACKED. NO LEVERAGE.
American Banker May 2017
institutions BELOW
$1 billion assets93% 85%

DEFINE “FINTECH"
Disruptive –
competing with banks
Collaborative ”friendly”
- enhancing banks
Legacy – Fiserv, FIS,
Jack Henry, etc.
Over 10,000
companies worldwide
Larger banks are actively
investing, incubating, partnering
Smaller banks counting on the
core vendors to innovate
VC/PE investment
continues to grow

9.15% 8.77%
10.71%
0.30%
3.75%
15.08%
13.75%
19.76%
12.78%
8.67%
2014 2015 2016 2017 2018
PercentIncrease
Total Non Interest Expense Data Processing Expense
TECHNOLOGY & RISING
Technology cost rising faster than other non-interest expenses
Source: Financial Information Systems
Core IT
Solution Market
Competitiveness
Information redacted due to confidentiality limitations. Please request full version by filling out the form, or contact Paladin @
info@paladin-fs.com

TECHNOLOGY & RISING
Technology cost rising faster than other non-interest expenses
Source: Financial Information Systems
9.15% 8.77%
10.71%
0.30%
3.75%
15.08%
13.75%
19.76%
12.78%
8.67%
2013 2014 2015 2016 2017
PercentIncrease
Total Non Interest Expense Data Processing Expense
Core IT
Solution Market
Competitiveness
Core IT Suppliers are essentially hedge funds…
They haven’t innovated or invented anything new in many years.
They buy, bluster, bolt-on and then make their clients pay to convert their
really legacy services to the outdated solutions they just acquired…
Because they can!
”
-Alex Lopatine

FIS Fiserv Jack Henry
Free Cash Flow $1.6 Billion (+$100M) $1.2 Billion (+$100M) $228 Million (-$3M)
Capital Expenditures 7% of revenue 5% of revenue 2% of revenue
Product Development 8% of revenue 8% of revenue 12% of revenue
Focus Modernization of Core
and Payments platforms
User experience updates Treasury services
ERM
Biller Direct
Code-Connect (gateway) Enhancements to platforms Banno Mobile
Data center consolidation Payments integration Faster payments
Secure cloud
Information redacted due to confidentiality limitations. Please request full version by filling out the
form, or contact Paladin @ info@paladin-fs.com

COMPETITIVE TECHNOLOGY “CHASM” IS LARGE
Friendly FinTech is moving to fill the IT CHASM created by Legacy Core & IT
Loan
Origination
Systems
Robot
Process
Automation
Online
Banking
Artificial
Intelligence
Advanced
Payments
Mobile
Banking
Decision
Intelligence
Block
Chain
Voice
Banking
Chat
BOTs
Crypto-
Currencies
IT CHASM

IT CHASM
COMPETITIVE TECHNOLOGY “CHASM” IS LARGE
Friendly FinTech is moving to fill the IT CHASM created by Legacy Core & IT
Loan
Origination
Systems
Robot
Process
Automation
Online
Banking
Artificial
Intelligence
Advanced
Payments
Mobile
Banking
Decision
Intelligence
Block
Chain
Voice
Banking
Chat
BOTs
Crypto-
Currencies

Footer
RESULT
SMALL INSTITUTIONS ARE UNABLE TO COMPETE WITH LARGER COMPETITORS
N
O
O
PEN
APIs
CORE IT CONTRACTS AND TECHNOLOGY
INTENTIONALLY LIMIT FUTURE COMPETITIVENESS
Information redacted due to confidentiality limitations. Please request full version by filling out
the form, or contact Paladin @ info@paladin-fs.com

CONTRACTS ARE LIMITING FINTECH ACCESS
RESULT:
SMALL INSTITUTIONS ARE UNABLE TO COMPETE
WITH LARGER COMPETITORS
Major barriers to change
Significant cost constraints
Implement fintech at their leisure
Toll roads, not highways

BARRIERS TO FINTECH ACCESS
Contractual and Financial Penalties designed by Core IT Suppliers
Your
Data

SURVEY – RAISE YOUR HAND
Have you formed a fintech steering committee yet?
Does your bank understand the specific anti-fintech contractual issues embedded in your agreements today?
Do you feel the executive management team understands the technological hurdles posed by your legacy
software stack?

FINTECH ADOPTION AND INNOVATION
PLANNING CHECKLIST
Educate your executive team
and board of directors.
Assess your technology stack.
Determine where fintech can help.
Develop a 3-5 year fintech
innovation plan.
Restructure Core & IT deals, improve
access to fintech. Reduce dependence
on legacy suppliers.
Repurpose cost savings toward
fintech initiatives.
Execute. Stick with it.
Information redacted due to confidentiality limitations. Please request full version by filling out
the form, or contact Paladin @ info@paladin-fs.com

FINTECH ADVANTAGE
RESEARCH
BEFORE CONSULTING
$0 Benchmarking Session with Alex Lopatine
Discuss Core, IT
and Fintech barriers
you may be facing.
What are other
franchises
like yours doing?
Outline high-level
Fintech strategy.
Ask me anything!

$0 CORE & IT COST ASSESSMENT
Email /Call / Web:
877.746.4859
paladin-fs.com
3 Current Invoices
+ Contracts
Completely
Confidential
No Cost
No Obligation

Don’t leave without handing in your
response card

THANK YOU
Footer
Linda Stahl
National Partner Executive
Business Development Northeast
Paladin fs, LLC
877-746-4859 x 723
lstahl@paladin-fs.com
Alex Lopatine
Managing Director
Paladin Fintech Advantage
877-746-4859 x 712
alopatine@paladin-fs.com

BankHorizons April 2019__Fintech Disruption_Redacted

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