Episode 1: Jon Briggs from KeyBank

Greg Myers: Hi, Jon, and welcome to this episode of the Leaders in Payments Podcast where we’re going to be doing a deep dive on embedded finance. So welcome to the show.

Jon Briggs: Thanks, Greg, thanks. I appreciate you having me today.

Greg Myers: Absolutely. So, Jon, if you don’t mind, tell us about your current role at KeyBank and maybe a little personal and career background and how you got there.

Jon Briggs: Sure. So, on the professional front, today, I lead product and innovation for KeyBank and just a fantastic team of product professionals. I’ve been with the bank now for nothing to give you the actual number of years, but it’s been a number of years in a variety of different roles. So, I come with an accounting background, CPA by training, so spent time in accounting, finance, treasury, strategy, risk management, now I’ve been in payments now for the past six years. So, for many that are in the payments industry, I’m relatively new on the scene. On the personal side, I would say I have a very supportive wife at home, that keeps our home life in order with our four kids. And I think as many can relate these, I spend most of my time either at practices or at games on the weekend. So that is my professional and personal life these days, Greg,

Greg Myers: Awesome. Thanks for sharing that. Well, let’s talk a minute about KeyBank, I think most of our audience will know about KeyBank, but if you don’t mind, give us a little background about the company.

Jon Briggs: Sure. So, we’ve been around for a little while. So, we’re, I believe we’re close to 200 years old. At this point, we’re a regional bank, about 190 billion in assets. We’ve got a retail branch footprint that covers 15 states, predominantly across the Northeast, Midwest and Pacific Northwest, our commercial business, we have clients in all 50 states, across 11 different client verticals, and particularly relevant to our conversation today with one of those verticals being the technology vertical, which is really important to us.

Greg Myers: Okay, great. Well, let’s go ahead and dive into the topic, which of course, like I said earlier, is embedded finance. So, let’s talk about some of the terms because I think there’s a lot of terms out there. And in my view, embedded finance includes, embedding any financial product could be lending could be credit cards, could be other banking products, even insurance. Is that how you guys at KeyBank see it? Or do you see embedded banking or banking as a service? Do you see that as something different?

Jon Briggs: It’s a great question. It’s a question we get often. And I think in the industry, it really depends on who you’re talking to how they answer that question. From a from a KeyBank perspective, I would tell you, we share how you just defined embedded finance. So, we view it as the embedded finance as being how do I take every product and service that we offer as a bank today? Whether being making a payment, receiving a payment, creating liquidity in the moment through lending or depository services? And how do I take that and get it placed in platforms to enable the end client. As part of doing that there’s enabling products or infrastructure required to deliver that end capability to the end client. So, for example, if we’re enabling a SaaS company to offer payments, payment acceptance, as part of that journey, or that value chain, underwriting capabilities are required such as gateway KYC, we don’t view knowing your client and the technology to be able to enable that process as a standalone product. But more is something that is part of enabling that value chain and delivering that end-product to the customer. And I think where it starts to, you know, embedded finance and banking as a service start to overlap or mesh together is you have a there’s a lot of providers out there that will provide things like KYC as a standalone service for us. We’re not in that business we are in the business of enabling payment acceptance. And we’ll enable some of the banking as a service type of capabilities to be able to complete that journey.

Greg Myers: Okay, yeah, thanks. Thanks for sharing that. So, when KeyBank thinks about embedded finance, what is your strategy? What are you looking to do?

Jon Briggs: Sure. So, as I mentioned, we see our embedded banking journey is really about delivering banking or financial solutions through platforms. So, for four years in the industry, you know, the industry has talked about this convergence of software and financial services, we’ve seen that trend accelerate in recent years. So, for example, if you go back to 2015, about 10%, of card acceptance volume was through non-traditional providers. So, think of ISVs versus banks and the legacy bank and ISO model. Fast forward to 2020, that’s up to 40%. And I’m sure it’s even greater today. And so we see that accelerating our goal, as KeyBank is to be one of the leading providers of embedded banking and powering these platform ecosystems.

Greg Myers: Okay. And obviously, you mentioned part of your responsibility is product. So how do you look at it down at the product level, I think one of the things that people in this industry sort of started embedded payments, right. And I think it’s broadened, embedded finances much larger, it’s more than payments, it’s more than just payments. So, there’s a product component to it right around lending, or credit cards, or deposit accounts, or whatever it might be. So, you as someone who’s running product at a big company like KeyBank what is your perspective from just pure product perspective?

Jon Briggs: Yeah. So maybe I’ll start by giving you the lens of kind of what we see in terms of the need out in the system. And this is, at a higher level, a bit more generic, but we see a client’s that is pretty diverse across the spectrum of maturity both from a technology standpoint, maturity around banking and financial services, and what it means to actually ingest support and service, some of those products, as well as risk spectrum, some clients are, they’ve mature, they’re scaled, enabled to take on certain aspects of the risk equation, and then you have others that don’t want any part of it. And so, at a high level we as a bank, at the end of the day, we’re looking to support our client, our client here is the technology company or for the platform. And so, we’re building a flexible model, including flexible technology to be able to support all those flavors of client that exist out there. From a product feature perspective. Obviously, this as you said, Greg, you know, the industry is most mature around the payments portion of it. That’s absolutely where we’re focused. So, the ability enabling clients to accept payments, make payments, whether it’s a disbursements play or leveraging,-VCC rails or issuing, sponsored versus non-sponsored, those are all products we’re either enabling today in the market or are on our very near term roadmap. What’s interesting is, as you as a bank in the space, and you start to have conversations, and maybe it’s a conversation centered around payments, the broader need, where clients may have a specific use case where they need to inject liquidity into the value chain, or enable some new feature on their platform. And it quickly dovetails into just a broader banking conversation where lending is it becomes in scope or is required. So, it goes back to as I think we’re uniquely advantaged as a bank participating in this space. Because we’re in the business today of enabling and delivering all these products and our mission from an embedded banking perspective is getting them all positioned in a way, leveraging modern technology and infrastructure to be able to deploy them to these clients in a really flexible way that meets their needs and allows them to build the experience they’re trying to build.

Greg Myers: Right. And, one of the conversations that that I hear a lot or have myself is that with payments, there’s so much data that is collected, right? So how do you then take that data and make smart decisions? Whether you’re a technology company or a platform, and maybe those decisions are around lending. So much data about a client that you feel comfortable lending? I mean, do you see that as kind of data being so important? And if you do see that, are you guys doing anything unique, there are different than what maybe others are doing? Or is that just part of the process?

Jon Briggs: Data is such an important part of the strategy. So whether it’s passing back data for clients to enable, specific use cases around reconciliation as an example, or even where you were going, Greg, which is what I call modern underwriting, if you just step back for a minute and look at the way banks, traditionally, the traditional underwriting process for a client, it’s one that’s all backwards looking, right. So banks tend to ask for financial statements over a period of time, tax documents, depending on the size of the company, the sophistication of the company, it could be audited financials, it could be financials that might as well be written on a cocktail napkin, you have that entire spectrum of client maturity that’s out there but it’s all everything’s predicated on looking at historicals versus the beauty of transactional banking. And payments is, you have data in real-time, right? And so I know what your value your I can, I can predict what your site, your sales are going to be likely today, next week or a month from now, because I have daily, if not hourly, transactional information going back in time, and so I have the best pulse on the health of you as a company. And we at KeyBank, we see that as a very important and rich source of insights for us to be able to enable a more modern underwriting experience. And it’s something we’re not in the market with today, Greg, but I would tell you, it’s certainly that is something on our roadmap.

Greg Myers: So, you know, I’m always curious about this is there more demand coming to you from your clients? Or is there more of KeyBank being aggressive and going out and promoting and selling this, I guess it’s a push pull kind of thing, or a chicken and egg kind of thing, whatever you want to call it. But just curious, from your perspective? Is it really client driven? Or is it more hey, this is KeyBanks product strategy, and we’re going out selling it?

Jon Briggs: It’s a bit of both, I think, we have a really clear, Northstar vision that I touched on, which is a future where every product or service can be delivered through a platform whether it’s a fully API enabled or through our own hosted UI, but the journey in terms of how we go from here to that point is absolutely shaped by the voice of our customer. So we did before we entered the space and started our build three years ago, we did a ton of listening to our clients because I think the other the other thing that makes us unique here, Greg is a bank provider, a lot of these clients that we are engaging with around embedded banking, their existing bank clients, right so we’re either lending the money helping them with some of their capital markets or capital related needs, and so, these are existing long standing relationships which allows us to have access to them in a unique way. And here are some of the pain points that they have with some of the incumbent providers or some of the problems they’re looking to solve. And so that, that listening, I would say helped us avoid or solution around some of the gaps that we see out in the market or position ourselves in a way as a bank in the space in a really, really unique way. So, client always front and center, I would say today, there is I would say there’s, there’s far more, the demand on us in a really good way is far outpacing our way, or our ability to deliver up against our roadmap or some of their asks. So, it is we have a lot of clients that have very specific points of view around products, they’re looking to solve and are lining up to be partners with us and, and help co- develop and solve some of these problems that exist in the industry, which is really exciting, and I think unique and in in the market.

Greg Myers: Yeah, well, that’s really good segue into the sort of the next question. And I don’t know that we hear this as much as we used to, but there was always kind of bank see fintechs as a threat, or kind of that perspective going around, but it seems like and you mentioned three years ago, you started down this path that KeyBank really has taken a different path to working with fintechs working with payments companies, like how is your so it’s kind of a two part question. Why did KeyBank take this different path? And how is your approach in your view different than what some other banks are doing?

Jon Briggs: Sure. So, we have well, let me first by saying we do fintechs are both, they’re both friends and competitors. And, and I think we at KeyBank have had a FinTech partnership strategy for I believe it’s now eight years. And so, we’ve got a lot of really robust thought and process around what it means to bring on and have a FinTech partner, and partnership, and this includes everything from commercial partnership to equity as well and joint roadmaps. The reason why we started down this path eight years ago, is we had a number of folks on the executive team in our payments business, were just new to the space. And at the time we didn’t have a good sense of where the industry was or where it was going. And so as a result, we spent a lot of time externally with a lot of VCs that are, that are dominant in the space understanding where they were placing their bets, why they were placing bets, what they were seeing, and, and what we quickly realized is, there are there, the FinTech community is, and this is going back seven, eight years ago, it’s advanced materially from then, but they’re so hyper focused on solving the unique pain points of a specific set or cohort of clients. So, whether it’s within a specified specific vertical, or solving any friction point that’s unique in a certain workflow. And what we realized is, as a, as a bank, looking to be able to support our 170 commercial clients, we can’t be everything to everyone. But what we can do is, we can get really good at identifying and partnering with what we viewed to be the best of breed in the industry, and bring some of those FinTech capabilities to market to our bank channel. So, we’ve looked at it as a phenomenal way to advance our product strategy, you know, quickly, and create really deep integrated experiences, whether existing, commercial clients by partnering with these fintechs to have these unique deep solutions.

Greg Myers: Okay, well, obviously, we can’t talk about money movement without talking about risk. So how do you manage risk in this space?

Jon Briggs: So, we’re a bank and so our business is risk and I think it’s of utmost importance today. And I think as you look forward over the next couple of years there’s a clear line of sight in terms of where regulatory bodies are going, where I would, how I would tell you, we at KeyBank manage risk is we have a risk appetite, that is, it’s unique to us. And we effectively make sure that our appetite for it before whether it’s credit risk, compliance risk, InfoSec risk, you name it, is extended through all the partners and clients that we bring on, and for us to be able to do that we have to without creating a lot of friction with our clients and their clients. And in their end-clients experience, we have to bring to bear a lot of modern technology to make that as seamless as possible for them. And so, it is a lot of heavy investment on the platform side and in data integrations to be able to pass data and make it seamless for our clients so that we can make sure whereas we as a bank are meeting our obligation to our constituents or our stakeholders, from a risk management perspective, the way we execute on that with our clients is we’ve got to be able to support have to have a model that can support those that are more sophisticated or scale from a risk perspective, which as an example a PE or registered Payfac as well as those that aren’t as sophisticated or scaled or don’t really want to own the risk, like a referral partner relationship, or an ISV. And so built tools and technology and a program to be able to support all those flavors.

Greg Myers: Okay, the momentum of this space is, I think, just continues to grow. But do you see given kind of the slowdown and investments in this space and the fear of a potential upcoming recession or any of those kind of macroeconomic headwinds? Do you think that slowing down the momentum in this space at all?

Jon Briggs:  I would say, you know, in terms of investment in the space, it’s, I would say, it’s fair to say there’s just broadly this wait and see type of mentality out there. From a momentum of driving embedded banking, what I would tell you is, and which is what fintechs have known for years and SaaS platforms are certainly learning particularly verticalized, SaaS platforms, which is, there’s a lot of value in the payments revenue stream, and banking revenue stream. And so, we haven’t seen that momentum abate at all. There’s still tons of demand, if not an increase in demand to adopt payments as part of the core part of their platform strategy. So certainly not a headwind there. But as far as clearly new money coming into the space to support new fintechs there’s absolutely a bit of the pause, a bit of a pause at the moment.

Greg Myers: I would agree with you there. So, big picture thinking, what do you think’s next in this space? Do you see consolidation? You know, do you see just continued pedal to the metal growth and companies adding more products to their kind of embedded finance strategy? I mean, where do you think this is all headed?

Jon Briggs: Yeah. For my personal view is, I think there was an n number of fintechs that were born during a period of really, really cheap liquidity. So, we’re seeing a lot of them having a lot of conversations with fintechs, where the economics made sense when Fed Funds was, or rates were near zero versus today where they are. And so, it’s changed the value equation, materially. And as a result, I expect to see some consolidation in the industry, just because I think there’s the good news is there’s a lot of great teams and technology out there, but I’m not sure that all of their business models can be supported in today’s rate environment. And, and I think there’s, as a result, you’re just going to see some consolidation over the next year.

Greg Myers: So yeah, definitely, definitely agree with you there. Well, Jon, we’ve covered a lot of ground about the bank and about you and about, obviously, embedded finance. Is there anything else you’d like to cover before we wrap up?

Jon Briggs: No, I think you had quite a comprehensive set of questions today. I think maybe, where I’d end is, I think what we know today and where the industry is or what the need is today and it’s true today, and maybe not so much tomorrow. And I think that’s what makes payments. And certainly in the embedded banking space, really fun because it is really dynamic. It’s evolving quickly. And I’m really excited about how KeyBank is positioned. And our ability to help lead through a lot change too.

Greg Myers: Great. Well, Jon, thank you so much for being on the show today. I know your time is very valuable. So again, thank you so much for being here today.

Jon Briggs: Absolutely.

Greg Myers: And to all your listeners out there, I thank you for your time as well. And until the next story

00:02:04 - Professional Background

00:03:05 - About KeyBank

00:03:48 - Embedded Finance Defined

00:05:56 - KeyBank's Embedded Finance Strategy

00:06:55 - View of Embedded Finance from a Product Perspective

00:10:00 - Value of Data

00:12:10 - Client Demand

00:14:25 - Fintechs as Friends and Competitors

00:17:00 - Managing Risk

00:18:50 - Embedded Finance Momentum

00:20:05 - What's Next for Embedded Finance