Yeah, Pathward, we take a design thinking approach which includes sort of asking key questions as opposed to solutioning right away. Secondarily we will also use, some prototyping as well, as opposed to, walking into our meeting with partners thinking that we know the answer. After we've done some of that preliminary work, then we'll start to kind of think about what the solutions may look like.
From the American bankers association, this is the ABA banking journal podcast. Welcome back. I'm Evan sparks. Today's episode is presented by Biz2X. And I'm delighted to be joined by Anthony Sharett. Anthony is president of Pathward, which is a bank that's in the business of serving other banks through a variety of financial solutions.
And so I'm delighted to have a conversation about a little bit of a different business model than we often talk about on this podcast, but one that I think is relevant for a lot of the banks that will be listening today. Anthony welcome to the show. I'd love it. If you could introduce yourself and kick us off with telling us how you got into the banking industry and ended up at Pathward.
Well Evan, Thanks for having me today. I really appreciate it. You know, I'm the president for Pathward, and it's been an honor to be able to be a leader at a bank with a purpose like ours, which is enabling financial inclusion. I actually started my career as a lawyer advising banks and fintechs and credit unions around both regulatory and compliance opportunities and with some litigation as well.
I migrated over to the business side during my time with Nationwide as the general counsel of the bank at the time and also became the interim president of the bank and also led one of their other subsidiaries as well. My time here at Pathward in September, I'll be here five years. I, I came to Pathward as the chief legal officer. Then also went on to lead our risk and compliance and public policy teams. And in September, it'll be my 3rd year as the president of the bank.
Right. And I know, you know, so I'm curious, just, you know, I know it's it's sometimes a little a little unusual for someone to come from the risk compliance legal side of the house into the, into the top, into one of, you know, the, the, the, one of the very top jobs in any bank. What was, how do you, how do you think about your path you know, moving into that role and the skills that you bring from your background on, on the legal and risk and compliance side of the house?
Well, as you said, Evan, it is pretty rare that someone migrates over from the legal side in order to and then moving over to running the business. But, you know, for me, I think I've always had an interest in go to market strategies and products and probably most importantly in innovation. I do have a background in that. And and the way that Pathward thinks about that is not only core or adjacent innovation, but really what we focus on is core co creation with our partners.
You know, at Pathward, we want to be the trusted platform that helps our partners grow and scale and thrive. And I think it's through our secret sauce of co innovation with them that was really exciting to me and really aligns with my background. You know, for example, it used to be when I first got here at Pathward, and I think many banks probably operate this way.
For those of us that power fintechs and other companies to go to market, they would bring to us a concept or a product and an opportunity. We would make sure that it could fit within our risk and complaints framework, and then we would launch these days, not only because of customer needs, but also because of the market competitiveness.
We've determined that we actually need to be a part of that product development process you know, from the very beginning as a, as a foundational component of partnering with these companies that we help, and we found that to be a, an advantage for us in many ways, probably a differentiator. And I'm very excited about that.
I want to get into some of these the new and evolving partnerships that you have with financial institutions, but I'd love it if you could kind of set the stage for us a little bit. How did, how did Pathward first get involved with working as a partner bank to financial institutions?
Well, you know, through our solutions for financial institutions, we've rebranded this. But in fact, we've been doing this for gosh, at least a dozen years, if not more. So here's why we got into this. We, we have, we actually noticed that some of the smaller credit unions and community banks, particularly those with a small market or that may be in our rural communities, but serving those who really need it. You know, they were saddled and riddled with some issues.
They may have had a legacy tech or branch infrastructure that did not allow them to bring new products to the market. Perhaps because of the fee structure, they were offering unattractive rates and maybe charging too much to the consumers that really needed these products most. Certainly our goal is in many ways is to reach the underbanked and underserved. Difficult to do that with some of these challenges that I have identified. And then There is an educational component.
For example, if you're in a rural or a smaller community and and financial institution is trying to bring you a general purpose reloadable card product or perhaps a gift, a loyalty card product, or maybe you're a small business that needs working capital. You know, some of these products can be nuanced. They may require a more robust risk and compliance framework. Perhaps a technology that's a little more advanced.
What we found evidence is that many of these smaller FIs frankly just did not have the, either the capital or perhaps just did not have the strategy to bring these products to the market. So it's that gap in the market that we found. And, and we have found that through our, our framework and our platform we've been able to reach customers that, but for us, they may not have had these products and solutions that they need.
Yeah, I certainly think about, ABA has been a big supporter for years of the Bank On national standards, which, I feel like anyone who's listening to listening to me is has heard about this before.
But for those who might not have is, is this you know, standards that establish a baseline for an account that allows people to participate in commerce and and, and get it and, and get on the, the first rung of the ladder in terms of financial, the financial services sector in this country, and those standards encompass prepaid cards and you know, these general, general purpose, reloadable cards. You can you talk a little bit about how.
Offering a product like that helps a perhaps a smaller institution that doesn't have the bandwidth to develop a more of an inclusionary financial product get in the game in terms of reaching their community.
I can. Unfortunately, there are millions of americans because of credit worthiness or other challenges that they may have in their financial background that are unable to open up a savings or checking account with a with a bank or a credit union, whether that be a local community bank or a super regional bank or perhaps a national bank.
That causes problems for consumers because just like anyone else consumers should be able to you know, purchase goods and services that they may need, they should be able to pass along dollars to family members and loved ones. They should be able to get an emergency loan if they need to, to pay rent or a hospital expenses for a family member. And they also should be able to send dollars to loved ones or to. pay for bills and things like that.
It is through the general purpose reloadable cards that we are allowing and allowing millions of consumers to do that. But for us standing in the gap with this product, and of course there are other banks that do this as well, but we do consider ourselves a market leader. We're able to partner with these smaller institutions and credit unions so that, you know, through our platform and framework, they too. Can provide these services to those that need it.
You know, there are other options out there. We know that there are small dollar lenders, sometimes known as payday lenders that folks leverage and, you know, I'm not here to debate whether, you know, those are good products and services. But what I am here to say is we want to provide optionality and provide. Alternative options to that to consumers that need it.
Yeah. And for, and in your case, y'all are a bank, you know, fully, fully regulated. You have that bank to bank partnership. Can you speak a little to that to that aspect of how you engage with financial institutions?
We can certainly, you know, we are a nationally chartered bank regulated by the O. C. C. And we, our deposits are insured by the F. D. I. C. So it's that trust. That safety that framework that I think consumers are knowledgeable, whether they have a traditional checking or our savings accounts or not people who want their money protected. And so it's through these bank to bank partnerships, leveraging our technology and our platform to help them go to market.
That's the type of safety and protection that consumers are looking for.
roughly how many partner banks and credit unions do y'all partner with?
you know, through, through our platform, we have thousands of banks and financial services companies that we partner with. You know, some of them are smaller than others. Some of them may just want to provide a general purpose, relatable card products. Some may. Just want to provide a loyalty card product. But, you know, as we look to rebrand and relaunch this, there are certainly other products that we know we're going to be providing for these bank partners.
For example, it could be through our path for line of credit product for individuals. We also are going to have, we're going to be rolling out a secured credit builder product as well. As we think about financial inclusion and financial education and bringing people through that journey of creditworthiness.
We are excited about the credit builder product for small and mid sized businesses, which are really those entrepreneurs are the backbone of, of how we just expand commerce in the United States. We're going to be looking at things like merchant services, SBA, USDA lending, and working capital, the same products that we provide to some of our business customers through our commercial finance business. We want to be able to partner with some of these smaller FIs to do the same.
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The Biz2X platform offers end-to-end coverage of loan origination, including risk analytics tools and configurable customer journeys So, I know y'all have these solutions that you've partnered with you know financial institutions for a long time, like prepaid cards, gift cards. Can you talk a little bit about how the, this service to the to financial institutions is evolving?
I can, you know, again, the, we really trust our bank partners these smaller FIs and credit unions to understand their market.
But as I talked about earlier to tie it back to that co creation, you know, again, when we're sitting at the table with these bank partners and talking about, you know, their market, their customer needs, geographic region who's been reaching out to them, one of the things that we're doing is we are showcasing and showing them the other products that we have for which we can help them go to market.
And in fact, we actually have our own sort of internal research team that takes a look at market demand customer needs. And at times, upon their request, we'll share that information with them. Because again, we don't want this just to be someone. Asked for a solution from us that they maybe saw that we have through our website or through some sort of external source, but we actually want to be true partners with them.
And so 1 of the things that we do is use our, our innovation techniques and our market research, share that with them. And it enables not only them to provide services that they need, but actually helps them. Them grow and scale their banks as well. We believe that we're all in this together. And when, and certainly when we meet the smaller banks that have a like minded mission and purpose of enabling financial inclusion, you know, that's a win win for all of us.
You talked about this work of co creation. how does that work at Pathward, what are you, how, how are you. spending time sitting down, getting to know the needs of, of your banks, taking ideas in with them, sharing ideas with them. What's that, what does that process of innovation look like within Pathward?
Yeah, Pathward, we take a design thinking approach which includes sort of asking key questions as opposed to solutioning right away. Secondarily we will also use, some prototyping as well, as opposed to, walking into our meeting with partners thinking that we know the answer. We'll go ahead and prototype multiple scenarios to see what may be a good fit and work for some of these FIs as well. You know, third, we'll obviously take a look at, is there a gap in the market?
There's lots of banks out there that are providing valuable services to customers, providing solutions, providing products that they need, but is there a gap? Is there an area for which a customer need may not be met either because of a innovative product could be a geographic region. It could be lots of different things.
So, and then after we kind of go through all of that, we'll, we'll take a few days, come back, reassess what we've all discussed and then after we've done some of that preliminary work, then we'll start to kind of think about what the solutions may look like. And, of course, typically, there's a technology component to that. There is a product component to that, but there's also a human component to that too.
We want to make sure that we're not stepping in the shoes of the product development teams for these FIs, but we are coming at this from a partnership perspective as well.
Before we go, I, know Pathward is a relatively new brand in the financial services marketplace. I'd love it if you could tell me a little bit about The story behind going from what y'all where y'all were before to what y'all are today as Pathward . Anthony Sharett: Well, you know, the bank has been around as Midwest Roots dating back to 1954. MetaBank was a name that was really good for us, particularly as we evolved from a traditional community bank to one that was more of innovative.
Using our platform to help our partners grow and scale. But as we thought about our, our purpose and our mission, and really path word is you can imagine is the combination of the words path and forward, we felt to be one enterprise, as opposed to sort of a combination of maybe seven or eight different side load businesses through acquisitions and things like that. We wanted to go to market and wanted people to know us as one brand having one voice with one purpose.
And that's financial inclusion for all and enabling that through our trusted platform. And we felt that path word embodied that. One of the things we're probably the most proud of is that we did not come up with this name in a vacuum. You know, we did lots of market research, but most importantly, we involved our employees a great deal as we came up with this new name.
We thought not only would that be a great engagement opportunity for us, but do we really value the opinions and the perspectives of our employees who know our customers best? So, well, you know, we're very proud of the, the rebrand but most importantly we're very proud of our brand purpose and we think Pathward really does embody that. Yeah, absolutely. And I'm curious, was the did the drive to kind of to move away from MetaBank? Was that driven driven on from internally?
Or was that was that driven by you know, the the newly named you know, 500 pound gorilla in the in the meta space?
You know, it for us, it really was an internal driver, but with multiple stakeholders, right? So, you know, our executive leadership team, certainly our board of directors. Most importantly, our employees, that was really the driver, you know timing was good, Evan. So it just so happened that you know, we had an opportunity to transfer our marks around that at the same time.
But you know, it was really internally driven and we're very happy that ultimately that Pathward was the name that was chosen.
Great. Well Anthony, anything I, anything I should have asked you, but didn't about Pathward or any of the the, the work y'all are doing in the in the financial services space.
I don't think so. I just really appreciated this discussion, the opportunity to talk about solutions for financial institutions. And certainly we always thank the ABA for the great work that they do across the board for the industry.
Great. Thank you so much, Anthony. Appreciate, appreciate having you, having you with me today. For our listeners, you can find this in previous episodes at aba.com/banking journal podcast. Thanks again to Biz2X for sponsoring this episode. And we'll be back with you again very soon.