[00:00:00] Josh DeTar: Welcome to another episode of the Digital Banking Podcast. My guest today is Don MacDonald, who recently retired after 30-plus years between Intel, Qualcomm, Fiserv, and MX, to name a few. Now, I could actually use the entire podcast today just to attempt to introduce Don, and I still wouldn't cover it all.
[00:01:51] I have the very real privilege of having Don on this show very shortly after his retirement announcement, and after a novel-worthy career, there are a few things Don says he'll look back on and miss, but there's also a host of things that he looks forward to, from spending more time with his family to doing more scuba diving and beekeeping,
[00:02:13] side note, want to talk about amazing little creatures we can learn a ton from, and we'll actually talk about some applications for the business world here today, look no further than bees to putting a huge focus on amplifying his philanthropic work, primarily around mental health support and awareness.
[00:02:30] This episode we plan to cover everything from Andy Grove's approach to challenging everything, including examples like how highly effective treatments, such as the use of psychedelics for PTSD, and veterans are shunned because we won't buck up and challenge the status quo, to how Don's model predicts.
[00:02:50] We'll get to a point where we will need no more than 300 banks and credit unions here in the United States. Don, I hope folks have cleared their calendars for the day 'cause you and I got a lot to talk about, so welcome to the show.
[00:03:01] Don MacDonald: Hey, Josh, yeah, we live in a fascinating period of time, and we live in a fascinating industry, so there is, there's a lot of fun stuff and a lot of important stuff to talk about.
[00:03:09] Josh DeTar: Well, I think, you know, if we were to just sum up into one giant bucket what we're really gonna be talking about today, it's change, and it's understanding what is change, what change needs to happen, what does it look like, and what's good change and what's bad change, right? But, you know, you mentioned to me before we started recording how, you know, you're one of those folks that just is always curious.
[00:03:31] So, so, you wanna know why, and especially around this concept of change. So, maybe talk to me a little bit about why that's something that's always been so interesting to you, and maybe if you want to kick off by just talking a little bit about, you know, the Andy Grove philosophy and, and how that has kind of permeated a lot of your life.
[00:03:48] Don MacDonald: Sure, I mean, Intel in particular, and particularly Andy Grove, has had a profound impact in terms of my thinking, and I think people, I worked for Intel for over 20 years, um, most likely being Chief Marketing Officer worldwide, but the point with Andy Grove was, he always instilled the discipline to look at the world the way it is, not the way you'd like it to be,
[00:04:08] and I think that's so important anyway, but particularly important when you're undergoing an era, an era or a period of change, and I think one of the skills for every listener that they need to acquire is how to adapt and how to deal with strategy under uncertainty. We live in very uncertain times, and I'm not just talking about COVID or the Ukrainian war, or the Russian war on Ukraine, I should say, but we're talking about natural inflection points in any industry.
[00:04:34] And so, if any of the, uh, listeners have ever read Ron Chernow's book, The House of Morgan, it's a big, big book, but it's wonderful. It charters basically the history of banking up to a certain period, and he talks about three, um, eras or epochs of banking, the Baronial Age in the early days, the role of the government when, you know, the Baronial Age kind almost caused the country to go bankrupt.
[00:04:54] And then, in the 1980s, savings and loans crisis and so on the Casino Age, I actually took that and, um, kind of extended it when I worked at Fiserv towards basically two, two points. One was that we were in the digital age at the time, we were getting kicked out of customers who said, you know, mobile banking will never ch, uh, catch on,
[00:05:10] internet banking will never catch on 'cause people won't trust their applications and so on. Obviously, that's, uh, kind of come and gone. And now, I believe we're in the fifth age of banking, the Analytics or the Data Age of banking. But the, the interesting point about it was if you pause and say, "Okay, we can look back in history at these epochs, but could you spot the catalyst, the actual forensics that would say, "With hindsight, you should have known these were coming."
[00:05:34] And I think you can, and specifically, I think there are four forces, which if they happen together, um, you, you can forecast and say, "Yeah, this is lots of noise." There's always noise, there's always change, but if you can see these four forces at the same time in a significant way, I would argue that any industry, in fact, in this case, the banking industry, it's about to undergo radical change, in this case, the fifth year of banking.
[00:05:59] And those changes, by the way, would be changes in regulatory, significant changes in social, significant changes in technology, and significant changes in the economy or the economics of that industry, in this case, banking. So, A, I think it's predictable, B, I think you can build strategies around there, and you can define success for your institution or the company you work for.
[00:06:20] If you can have a half-baked guest using these, um, forecasting tools to say, "This is not just noise, this is actually fundamental change." And so, Grove would often get lots of credit for saying, "Wow, Intel was so, had so much foresight." And he said, "That's bullshit." Um, what we did was we invested in lots of areas,
[00:06:40] very rarely did we get it right, but we were always open to strategic recognition, asking the questions to say, "Hey, we're in the right zip code, now we can make a short move to the strategy that will bring success to us." And I think that's something that every one of us need to embrace because none of us are smart enough, no disrespect, but none of us are smart enough to call the future.
[00:07:00] There are so many variables. I do think, however, we can actually just say, "If this happens, what would we do? If something else happens, what would we do?" And if you can actually differentiate, like I said, between just more noise, we always have noise, and a strategic inflection point, then you're gonna be coming from a smart time to say, "Right now, the question is what's the right timing and the right level of investment to prepare your company, your bank, your credit union for this inflection point?"
[00:07:25] But make no mistake, I'm absolutely certain there is an inflection point, the fifth inflection point in this industry, and we are very much at the beginning, especially around the use of data analytics and how you serve customers.
[00:07:36] Josh DeTar: You know, that's a, a really good point, Don, you know, I think if you oversimplify it, right, change is inevitable. So, change is going to happen. And to your point, you know, you're never gonna be able to have a crystal ball and foresee exactly what it is, right? If that was the case, would, all be very independently wealthy with our stock predictions?
[00:07:55] But if you can take some of the learnings of the past and apply that to the future, you can at least be better positioned for change. The change may not be exactly what you predicted, but at least, like you said, if you're in the right zip code, you're gonna have some things in place to be prepared to handle or be equipped for that change.
[00:08:16] And I think, you know, we saw a lot of that in, um, you know, the start of the pandemic for COVID. And we saw all of a sudden this, you know, cataclysmic forced change, or forced change, sorry, and, you know, we looked at just across all industries, varying levels of preparedness for that. And I think if you had asked
[00:08:39] pretty much any of us, "Hey, is there gonna be a pandemic in our lifetime where all of a sudden we're not allowed to be within six feet of another human? And, you know, all in-person transactions are gonna grind to an, a halt overnight." I mean, we'd all laughed, none of us had that in our business continuity plans, right?
[00:08:58] That specific, but those that had plans in place for what happens if something similar, not necessarily even a pandemic, but what happens if something causes us to have to do X, Y, and Z? Well, let's put some of these things in place. So, how do you encourage folks to take, you know, those learnings from the past, and then look at, you know, those, you know, four signs that you mentioned of regulatory, social technology, and economic factors? How do you apply those into making sure that you are prepared for some degrees of change?
[00:09:34] Don MacDonald: Yeah, I mean, I think the first thing, um, is really looking at the data, I don't mean customer data, I mean talking about industry data to say, are things changing enough? For example, if you actually look at the asset under management for credit unions and banks, things look awesome, we continue to grow to 20-something trillion dollars.
[00:09:52] And so, the challenge is that you as an individual credit union or an individual bank, or, uh, whoever you are, you could be losing share, and yet you're still growing. And so, the concern there would be if you could pull yourself very easily, most people embrace change when the ship's burning, it's just, you know, you end up panicking and saying, "Yeah, everyone understands we have to make these crazy bad decisions."
[00:10:14] It's very rare that people make the change while they're on the front foot, and that's really the skill that I think well-managed companies have cultivated over, you know, many, many decades. And so, again, you begin looking and saying, right, how would we know that there is something that we should pay attention to?
[00:10:30] And so, the, again, in my opinion, from what I've seen, I've had the privilege of being, working with a load of very wonderful companies. The very best practices would have some form of strategic planning that would involve a completely isolated look at what's happening in our industry. How many banks are there? How many branches are there? How many consumers are now getting mortgages from a non-fi? The answer's a lot.
[00:10:53] How many are getting car loans from non-fi? The answer is a lot. But because there are so many more car loans up until recently happening and, uh, mortgages growing and everything else, and everything else and everything else, profits in our industry have actually covered up the fact that there's been a reallocation,
[00:11:08] obviously, the top 100 banks now account for about 80% of all assets under management. And so, you begin looking at the top credit unions, they've also done extremely well, large and medium credit, sorry, really big credit unions and large credit unions have grown, they've got more branches, they've got more employees, more asset center management.
[00:11:25] But obviously, if you were a smaller credit union, life's been very, very tough. And so, again, you've got to look at what's really happening and what your role is in there. And then, secondly, I think you need to be able to look and say, you know, with precision, this is a marketing failure across all industries, particularly those who are very lucrative, like banking,
[00:11:43] 'cause you can be pretty dumb, quite frankly, and still make money, but you need to be able to ask the question, "Who is my audience? Who's not my audience? What do I want them to do? What am I gonna say to them? How am I gonna reach them?" And so, being able to sort of be agile is not something the banking industry is famous for.
[00:11:58] And so, you know, fortunately, the number of companies like Typo, like Airex, like, you know, pick the favorite FinTech, have been able to provide and almost democratize a lot of the technology that previously we've only been available to a chase or be, and so on. And so, there's kind of things that are mitigating this, um, impact of change,
[00:12:16] but nevertheless, I think strategic recognition becomes the number one activity 'cause it can revolutionize your fortunes. You know, Josh, a simple example of this in these four forces, if you go back to the terrible events of 9/11, we had several things happening, one of them, of course, was that the planes were grounded, and so, therefore, you had billions and billions, and billions of dollars of checks stuck in aircraft holds, and they weren't able to get out.
[00:12:41] And yet what happened was this combination of these forces is that, you know, um, government regulations said that the image of a check I'm checking on the image of the check is as valid as the check itself. So, you removed a regulatory hurdle. You then had, obviously, the fact that, as consumers, we had that remote deposit capture device,
[00:12:58] our phone, we didn't ask, no matter what anyone said, we didn't ask them to put a camera in there. We were jolly glad they did, 'cause now we use it to take all our photos and videos, and whole new industries have been born on top of that. Um, and then, obviously, in terms of the economics, it was great for the banks,
[00:13:12] it was great for the consumer. And so, this combination of actually people being comfortable to take pictures and send it in, this combination of regulatory technology, economic and social, basically led to remote deposit capture that, you know, most of us could not do without now, although most of us also don't have checks now either.
[00:13:28] So, again, changes there as well, but, again, if you're paying attention to what could happen, then I think it's an interesting intellectual exercise that will allow you, you know, you had Ron Shevlin on recently, being able to listen to them and say, "Do I agree? Do I disagree? Do I agree? And if so, to what extent?"
[00:13:45] But unless you've got that intellectual curiosity unless you're challenging the status quo, and especially if you're successful, you are most likely to fall flat on your face when that change happens, and it's too late, and like I said, if you're in, if you're kind of struggling, most people embrace change.
[00:14:01] If life is good to you, it's usually the people who are most successful who are the least adapted to change. And so, it's almost like a regeneration and a rebirth of new participants, new players coming in. If you look at the company that's got the bank that's got the most branches, most people would be surprised that it's China 'cause of all the grocery store branches if you define many branches.
[00:14:20] So, there's so many ways that change can happen and can blindside you, and the more successful you are, the higher, the riskier you're gonna get.
[00:14:29] Josh DeTar: Yeah, you know, I want to come back to, um, it's funny you mentioned that I had Ron on the episode recently, he made a comment that I wanna get your perspective on, but, you know, going back to change in our industry, I agree with you, I think, you know, we definitely are at an inflection point, change is coming.
[00:14:48] But our industry is also interesting in the other statement that you made in that, sometimes we are slow to embrace or move on that change, and even just the simple example, which has come up multiple times on the podcast of, you know, we're a pretty safe industry, like you said, I mean, I don't want to mean this into any disrespect, but, um, you know, you can be pretty dumb and still make money in banking,
[00:15:11] it's a pretty solid business model, and we've heard that said multiple times before. And so, a lot of times we, we rest on our laurels for things like marketing and working to go out and, you know, gain more customer base. So, we're, we're having our customer base chipped away at that change is happening, some are doing something about it, some are not.
[00:15:33] But one of the things that I think is interesting is, is that when we look back at the, you know, now 60-plus episodes this podcast has run, one of the most common recurring themes we have picked up on is this idea of digital transformation, it's probably one of the biggest buzzwords in our industry right now.
[00:15:52] Um, everybody's got their own take on what it actually means, but I think where I'm going with this is that because that's the buzzword, I think it's a recognition of change, I think it's our industry saying we need to do something because change is coming. What do you think of that?
[00:16:11] Don MacDonald: Yeah, I think the intention is totally there. I've seen so many financial institutions where you sit down and have a strategic conversation and you don't get any pushback anymore. The problem is you are dealing with, you know, I think it was Isaac Asimov that said that life is fun, you know, death is peaceful,
[00:16:28] it's the transition that's painful. And if you are a bank with 400 branches and you don't need 400 branches, you know, you've gotta lay people off, you've got leases, you've got all sorts of physical challenges to actually make that happen. If you're a startup or you're chime or whoever it is, you're basically starting up with nothing to lose and everything to gain.
[00:16:47] Again, it's an incredibly lucrative industry, the most lucrative industry on this planet. So, you've got participants who don't have who, like, some of the baggage or some of the, um, you know, some of the considerations that they have to be incredibly thoughtful about. And so, um, yeah, you've got competitors who don't have your challenges, and therefore, that just makes it much more difficult to actually embrace the change, but more importantly, to execute that change.
[00:17:10] So, I don't think there's very many at all who wouldn't say, "Yeah, we should be using the data to help understand our customers and deliver them products and services and advice that is actually gonna really help improve their lives." But the reality is most of the institutions have been set up on functions and on, what's the word I'm looking for?
[00:17:28] Basically, in terms of silos, which are not customer-centric, they're kind of, you know, the lending group here, you've got the marketing group here, you've got the branch retail people here, and it's very difficult to make the really hard changes that say, "How do we become incredibly customer-centric?" And then, you know, the other thing is that just, change is just, you know, really hard.
[00:17:48] I think the area that's most difficult is this consumer experience, and part of that is because most banks gather deposits, they make loans, they get paid for making payments. And so, the role of the bank has eroded when you've got new competitors coming into this space. So, for example, if you're gonna transfer money from, you know, dollars to pans, you would actually be very expensive using a bank.
[00:18:09] But if you were to use TransferWise, or why is that called now? You would save thousands of dollars depending on how much you transfer. And so, so, again, you, you mentioned this earlier, the danger is that you get part of your profit stream being needs in way, you lose customers, except you don't lose customers,
[00:18:24] they just stay a zombie accounts, and people can just open up, uh, a new account without closing down their old one. And so, the reality is that consumers today have more choices, they have less friction to change, I can open up an account with a click of a mouse or a few keystrokes, and customers work,
[00:18:43] consumers are waking up to that fact, they expect more and they expect better, and I think a lot of customer experiences is built, frankly, on a foundation of sound. You know, we talk about banks failing their customers because they don't take advantage of the plethora of data that they have. So, they should know the customers.
[00:19:00] Well, frankly, that's nice, I mean, that's my background with MX. That stuff is really valuable, but if you didn't do that, that would still be okay, but you've still got a lot of banks out there, especially after COVID, who are making their customers wait for, you know, an hour on the phone, they don't have call back things, so you don't have to wait on the phone like Delta does or somebody else on there.
[00:19:18] So, the customer experience is truly awful, and part of that is because the processes at your average bank are not built around the consumer. And so, you know, I had a really awful experience just replacing a debit card, the follow up was over 90 days, believe it or not, and I was un, unable to make a payment for house purchase
[00:19:35] I was doing, and I'm not gonna name the bank, but let's just say friends, don't let friends bank at NatWest International, but anyway, um, I mean it really is back to basics, treat me like a human being. And then, there's actually the, the nice stuff, you know, the monolithic customer file view that most banks have had historically is you kind of look at fraudsters,
[00:19:53] we all hate fraudsters, but we used to love fee payers, we weren't that bothered about economizers, we didn't really have that much to lend out or make generate that much fee payment, but we love balance holders 'cause we could lend that out, and the reality is you ended up with some kind of really bad practices
[00:20:08] 'cause you may be a high net worth customer, it's just not with your bank. So, again, using the data can help you do some really smart things that will help you, um, you know, deal with a very, um, stressful economic situation in terms of reducing costs, growing revenues, even if loans are fairly slow. So, there's lots of reasons why that's the right thing to do, and some banks are embracing it and doing very well.
[00:20:28] But the change in mindset is the biggest barrier that most banks are struggling with. And then, you get onto, actually the consumers, consumers don't want to do banking, sorry, but they don't, you know, consumers, I, I used to do this, um, work with a psychologist who worked with me at Intel, but you begin to look at everything that consumers want to do,
[00:20:47] they want to be in control of their lives, you know, I wanna be in control of the things that happen to me and so on, I want to advance, whether that's sending my kid to school, I want togetherness time with my family, I want access to all my stuff in real-time when I want it, on whichever device I want it.
[00:21:03] You know, I want to pursue love and spirituality, um, and I want to escape some of the challenges of, you know, all the bad news around COVID and wars and dreadful things that we see in the press every day on there. So, the question is, how can banks help that? Finance is at the root of everything we need to get things done.
[00:21:20] So, the role of banking should be probably the number one thing in our lives, but we've turned it into a series of transactions as opposed to really helping customers. So, I think, you know, you've got this thing from just getting back to basics and looking after your customers, answering the phone and so on.
[00:21:34] People should not be investing in anyone else's software until they get that stuff put to bed. Secondly, you can then start using the data to help you reduce costs, grow revenues, support customers. And then, thirdly, you can actually say, wow, just like every industry is using data to change that industry, healthcare, Massachusetts General Hospital using AI to go through terabytes of data to better actually have outcomes on cancer detection, for example.
[00:22:01] Or even just, I was looking at the, um, retail in terms of the market cap of Amazon, you know, it's still down from a few months ago, but 1.1 trillion dollars compared to 17.5 billion dollars a decade and a half ago. And you look at Sears down 100%, Nordstrom down 75%, Macy's down 79%, Kohl's down, I think it's 86%, and so on.
[00:22:23] How do you use data to fundamentally realign your business for the cost-effectiveness that will be required for the challenges against competitors that will be required. So, you're better solving customers, you're helping them with recommendations rather than just giving them more work to do, which is what we've really done with data over the last, um, few years.
[00:22:43] So, I think it's really exciting, I don't mean to be so negative, I think there's a huge opportunity for winners in this world we're describing here, and the good thing is, from the consumer point of view is that if you're friendly bank or credit union, doesn't help you with this, there'll be somebody else popping up who can, but again, credit unions, in particular, exist to improve the lives of their members.
[00:23:05] And so, I love my credit union, but they can do more for me to actually say, "Give me the help, give me the advice, take out the grunt work, so I'm not gonna spend a week working out this, give me the information, you know, way before my kids gone to college to help me with a tax-friendly saving plan." So, I think that's gonna require some adjustments in things like, you know, being an RIA or whatever it might be.
[00:23:25] But more importantly, you know your customer, and just like retail, just like Massachusetts General, use the data to help you get through huge amounts of information. So, your help, your advice can be truly personalized for me as an individual, not just for massive groups of people.
[00:23:41] Josh DeTar: You know, we've, we've talked about this concept in the past on the podcast, and it actually popped back up. I was talking to our CEO, Siva, the other day about this, also a former Andy Grover Inteler, um, and, and Siva and I were talking about this, and he said, he said somebody from our industry, and again, will be nice enough, won't name any names, but, you know, somebody from our industry made a comment to him recently, and they said, "Well, why would I do that?
[00:24:08] That sounds like cannibalizing my own business." And Siva said, "That's exactly what you should be doing then." Because to the point you made a, a bit ago, Don, if there's money to be made, somebody's gonna do it, right? And if there's money to be made, and a lot of money to be made, somebody's gonna want a piece of that pie.
[00:24:27] And if there's an opportunity to take some of your business, they're going to, and we're seeing a lot of that in our industry, in, you know, folks coming in and focusing on, you know, niche products, features for specific groups and being able to say I understand people like Don McDonald, and so people like Don McDonald need services from a financial institution like this, delivered this way.
[00:24:53] And I think we're starting to see a response again from our industry in this, you know, concept of kind of hyper-personalization. So, what are your thoughts on, you know, us needing to take a step back and say, "Hey, we may have to actually do things very different, and it may kind of feel like cannibalizing our business, but we may have to be a little bit more selective and specific so that we can be more personalized and offer services that are actually gonna provide meaningful benefit and value to consumers, therefore, they are going to want to do more of their business with me."
[00:25:28] Don MacDonald: Yeah, I mean, it's all about intelligent cannibalization, consume your own business before somebody else does, that was a mantra of Intel. And so, you know, whenever we actually introduced a new CPU, it seems so crazy. I think this, this week was the 30th anniversary of the IBM ThinkPad, and in the early days, it was like a 20 megahertz chip.
[00:25:47] And so, the idea was that, you know, when you actually cannibalized your 286 business with the Intel 386, then you cannibalized it with the 486, then you cannibalize, it would've been tempting to stay still because the OEMs didn't, the manufacturers didn't want to actually new, embrace a new chip, for example,
[00:26:03] it was so much work in paying, but consumers did, we wanted faster chips, and better software. We wanted to have better memory subsystems and so on and so forth. A better experience, shall we say, and banking is not immune from this. And so, again, the challenge is it's so much easier just to do nothing. And so, complacency is the issue.
[00:26:21] But I think people forget that, um, you know, Intel nearly went outta business, they were originally a memory company. They nearly went outta business because Japan started subsidizing DRAM memory at the time, heavily. And so, the Intel Trio of Grove, Noyce, and Gordon Moore got together and said, "If we were starting Intel today, would we be in memories?"
[00:26:41] The answer was, "Hell no." And so, they said, "So, why are we waiting for the board to fire our backsides? Why don't we actually reinvent the company?" And, you know, we take it for granted now because everyone uses processes at the Wazo, but back then, that was a very risky decision to made, to make, but they knew that just contain, continuing on the current path
[00:26:59] was a fool's errand, they, they were doomed to die just because of the subsidies from Japanese government. And so, you know, in a way, they basically took it on the front foot with some pressure, and they, they, they've got to, you know, you've got to be able to cannibalize your own, um, business, but that means that you know what's going on.
[00:27:16] Are you able to articulate, have you, if you're a credit union or a bank, have you signed up for chime? Have you signed up for, you know, whatever it might be, are you listening to the messaging that's coming out from some of these, um, you know, new challenges? And just going back to something you said in terms of the segmentation, there is a massive kind of top and bottom segmentation going on. At the top side,
[00:27:38] what I mean by that is you can look at people like USAA, serving military vets, they've got the highest customer satisfaction out any bank, not a single branch, technically they've got one, but they don't have any branches, and yet they have fantastic customer, uh, net new net promoter scores or loyalty, whatever your loyalty metric would be.
[00:27:56] And then, you've got OneUnited Bank, the largest black-owned bank in the US, and, um, I'm actually a customer even though I'm not the target demographic perhaps, but their messaging is simply stunning. What have you done if you're an institution to look at other competitive banks and find out just how brilliant the messaging is, rather than it being like spam and blah, blah, blah, bloody blah?
[00:28:16] And then, um, people like She Banks, Julie Rasmussen, Banking for Women. So, you get in these segments, Daylight bank, banking for the LGBTQ+ community. And so, you're beginning to see segmentation that will then allow you to do products that are required for, um, the needs of your general audiences. So, obviously, the military needs are very, very difficult moving around and all sorts of things.
[00:28:39] The needs of the LGBTQ community in certain areas are incredibly different and so on and so forth. And then, you can get down to the micro-segmentation, which is, why am I, you know, living in Utah, 60% of the population is Mormon and don't drink. So, if you were a retail store, you'd be wasting your money sending them back to saying, "Hey, $10 off a bottle of whiskey." And what a waste of money.
[00:28:59] But we do that all the time, I get requests from me for a mortgage, I don't even have a bloody mortgage, I don't want a mortgage. And they know that, but they still send me offer with it. And so, again, it goes back to if you are making so much money, you do become complacent, you do become wasteful. And so, but more importantly, is you are missing the points.
[00:29:18] And, again, a lot of the messaging is about here's more data, here's how you spent your money. That's kind of interesting, but why do I care? Give me a "So what?" with that, you know, hey, your kids are at this age, you could save $100,000 for your three children by saving a college plan starting now, and it learning cost you $10 a week or whatever it might be.
[00:29:35] So, again, most people are too successful, unfortunately, and they're missing the point. So, they're gonna get nickel and dined. Banks are in danger of having all the lucrative portions eaten away by individual a la carte players, and then you've left with the expensive stuff, running a branch, having people in the branches, um, you know, processing the remaining number of checks, blah, blah, blah, blah, blah.
[00:29:57] And so, again, what's the strategy for that? And by the way, when do you pull the trigger? Timing is really important. And again, with Intel, we used to build, perhaps, $5 billion, dig a hole in the ground, we weren't quite sure what was gonna go in there. So, you have to take a certain amount of risk taken, but it was built on, you know that your strategy is uncertain and therefore, you need to craft the what ifs, pay attention to it every year, every quarter even,
[00:30:19] and then pay huge attention to what's happening with your target audience and people serving them, and your competitors may not be the ones you think they are, you know, your competitors may be Google, they may not be that bank down the road, um, you know, your competitors may be looking at people who are gonna provide a service for free 'cause they get paid somewhere else.
[00:30:37] Just go back to the, the browser wars when Netscape used to charge for a browser, but Microsoft would give it away for free as part of their operating system, got paid on the operating system. What are the things that are happening that will really throw a wrench into your business? And that's what banks have to be doing right now with a vengeance.
[00:30:54] It's a fun project to do, it's one that needs to be driven, um, every quarter of your strategic kind of world map, we used to call it, here's what's happening in our world, nothing to do with who we are, where we are, what we're investing in, you gotta keep the product people away from that 'cause nobody likes to say that my baby's ugly.
[00:31:10] And so, if you have them do the world map with them to say, "Yeah, the world looks like what I'm building for." And then, you would actually have your kind of strategic long-range plan where you have debates, dialogue, discussion, and it's got to be intellectually honest. And then, you can do your product line planning, and then you can do your budget planning to say, "How much are we gonna spend to address this grading world?"
[00:31:28] Or indeed, stay the same, but those are some of the skills which I think are really important at this particular time. You know, you look at what's happened with COVID, you mentioned COVID earlier. I don't think the problem was COVID, I mean, there was loans, there was all sorts of things that help banks and credit unions out.
[00:31:44] But, um, the reality is that what we saw was we saw this move towards digital money. That was a big, big trend, we kind of saw the move towards, you know, this ubiquitous connectivity that AI can do a better job than a human. If I can actually detect cancer tumors more accurately using AI and huge amounts of data, I actually think probably things like credit risk can be done by AI and huge amount of data better than, you know, Billy or Betty, whoever's doing, whoever's your loan officer.
[00:32:13] And so, I think you've got these trends of the AI processing power is trending towards zero. We've got more computing power than we've ever had, and then the needs of the consumer. How do you convert that into a service of value, not just simply more work? So, again, I think there's huge opportunity and extremely optimistic as long as the institutions themselves are paying attention to who is my customer.
[00:32:38] What is my customer need, and what are we doing to better serve them? And again, experimentation, trying new things, they don't have to be expensive, a lot of the messaging is essentially free, but messaging, and banking is pretty well paid, so that's one area I'd certainly recommend.
[00:32:54] Josh DeTar: You know, that's, it's funny, I, my age, and I, you know, you're a part of this as well, but, you know, we, we're, we are in an age where a lot of us can remember, either ourselves or our parents talking about having to balance the checkbook, right? And I don't know about you, Don, but I look back on remembering my mom and dad talking about balancing a checkbook.
[00:33:18] And I don't ever recall a time where they were like, "Hey, you know what? I really wanna go outside and play with you, but I'm just so excited to balance the checkbook that I want to do that more than hang out with you. So, so, I'm just really excited to balance my checkbook right now, right?" It was a task, it was something we had to do,
[00:33:37] and I think, you know, we see a lot of that even today in banking, right? I look at myself personally, I, I love this industry, I work in this industry, I, you know, volunteer in this industry, like, I care about this industry. I hate doing banking, I'm sorry, but I would way rather do a million other things than do my banking transactions, right?
[00:33:58] So, why does someone do a banking transaction? Why does somebody log into digital banking? Why do they go into a branch? Well, it's 'cause they need to learn something, or they need to accomplish something. That's about it. They are not doing this for fun, and I think that that's an important message that a lot of folks need to hear in our industry is that, you know, consumers are not looking at us going, you know, you are a fun business to do business with, and I'm excited to do that business.
[00:34:25] And look, there's lots of good that is done, and people are excited about that, right? But just the menial task of doing my banking needs day to day, that's not something I look forward to, it's not fun. And so, you know, different companies, like what we have talked about, have come in and said, "Well, I'm gonna service a very specific group of people in a very specific way, and I'm gonna make it far more efficient for them to be able to do their banking needs so that they can go back to, let's face it, hanging out on Instagram, seeing, you know, what their friends are doing." Right? So, when I kind of put that lens on, and I think about it that way, I, I think that's where, to your point, I, I'm optimistic, right? Because if, if we start to think that way and we start to think about change isn't just coming, it's here, but what does that change? What does that change look like?
[00:35:13] What are consumer's expectations? And what can we be doing differently to meet those? And you were talking about a second ago, just even, you know, structuring your own operational efficiencies and leveraging things like data to make smarter decisions, and, you know, sorry, I'm, I'm gonna bunny trail on this, but you're gonna get where I'm going here in a second.
[00:35:33] I, I also think that apparently, it's the thing you're supposed to do when you are retiring, and that's become a beekeeper, because also my father-in-law, who just recently retired, started doing beekeeping and, and, you know, where I was going with this is I, bees are fascinating, they're absolutely fascinating, and it's become one of my new favorite topics to talk to my father-in-law about is just how incredibly efficient these little buggers are and how smart they are.
[00:36:02] And yet, with how smart, efficient, hardworking they are, they all work together towards a common goal. And so, they all have a very clear definition of what does success look like to them and how do they accomplish it together as a, as a hive. So, I guess, Don, this is my long-winded way of saying, you know, kind of put your beekeeper hat on, and what do you think are some of the lessons that we can take,
[00:36:26] maybe from actual bees or, but from, you know, other change that has happened and how can we set ourselves up in areas like operational efficiency, you know, leveraging data and putting policies and things in place so that we are prepared for that change as a colony?
[00:36:44] Don MacDonald: Yeah. Well, you know, I mean, it's not all kumbaya in the beekeeping world. This time of year, what happens is that the queen will start, stop laying eggs, they'll replace all the actual brood with, um, honey where they used to lay eggs and us to pull up the honey so they can survive the winter, especially in place like Utah where you've got snow on the ground for five months of the year, right?
[00:37:02] But one of the, one of the lessons that everyone who's listening on here should take away from is there's a very sad thing that happens is the bees are in survival mode, and it's probably the single biggest skill they have of all the things that they do very, very well, and you're right, they're very interesting creatures, but survival is their number one instinct.
[00:37:20] So, they'll gather pollen and nectar for the winter, turn it into honey and just go on there. But one thing they also do is they get rid of any unnecessary, um, cost or overhead. And so, typically, in a hive of about 50,000 bees, they'll all be female except for about 10 drones who are the males, but come the winter, they don't need the men.
[00:37:40] And what you'll see, it's a really sad thing, but it's a prescient lesson for everyone on the call, is you'll see four or five of the worker bee dragging the men out of the hive, and they'll run, they're about twice the size of the females, they'll try and run back in, but they'll drag them out to die in the colds,
[00:37:56] they won't let them back in the hive. Why? Because they are an unnecessary expense over winter. And then, when the spring comes and they're hatching again, though we are some of them 10 or 15 of them as males, but the point is they're ruthless about being efficient 'cause they know if they're not, they're gonna buy a business.
[00:38:11] And that I think is a precedent lesson for banking industry is what's necessary, what's nice to have, and what's essential. Looking after your customers is essential 'cause it's no problem for me as a consumer to go somewhere else. And so, you know, I think the beekeeping analogy is actually a very good one
[00:38:29] in the sense of, you've gotta make decisions now while you can afford to do it while you're on the front foot, but also look at what happened in COVID, we drove huge volumes now towards digital payments, and what that meant is you've got bucket loads more data than you ever had, so you now know more about your customers than you've ever had,
[00:38:48] um, COVID actually kind of accelerated, it wasn't the cause of it, it was happening anyway, and it will continue to happen anyway. But it actually meant that, um, you know, most shops refuse to take cash, and so you actually end up with lot, you know, more about your consumers, and there is no excuse not to use that data and then to provide those services.
[00:39:06] And again, I think, you know, you can begin to look at some of the opportunities that are happening in the industry. One is the data ecosystem is being connected, and it's kind of like a technical thing, it's easier, you don't get those lost connections that you used to do with screen scraping.
[00:39:19] There's an opportunity to create an open finance value exchange where you can bring people like yourselves, whether you're the data provider or the data recipient, to do things that provide a mutually beneficial relationship. Remember as a, an entrepreneur as a, a creator, a builder, you don't have to build everything,
[00:39:35] you can build on top of the people who brought us the internet, people who brought us mobile phones, people who brought us whatever it might be. And then we can eventually deliver on embedded finance a way to actually deliver what we've done for, you know, a couple hundred years more efficiently and more, easily than ever before.
[00:39:52] But the most important thing is it's gonna allow you to have much greater engagement for things that are fun. So, it doesn't have to be the boring stuff, and if it is, you can put the boring stuff to automate it. Secondly, you can use that then, from that higher engagement, make, make it compelling, make it interactive, gamify it, give behavioral rewards.
[00:40:11] A lot of companies will struggle to think, what does that mean? How do I do that? But there's people out there that can help. So, engagement is one huge opportunity. The second is, how do I personalize that with increasingly deeper consumer data? But you have that data, all those trends in terms of the digitization of those transactions is giving you more and more of that data.
[00:40:30] And then in a way to actually make that happen, how do you automate it, so you're not doing the expensive brunt stuff? Make it easy for consumers to move money, to make financial decisions with confidence. And so, again, think engagement, personalization, and automation, and then look for partners, if you can't do it yourself, look for partners
[00:40:48] who can help you do that. But, again, there's a huge opportunity not just to simply survive but to really take banking into this fifth age where you're gonna provide more value, you're gonna provide more help. Your customers will be in love with you, not just tolerate you, where they're gonna be able to say, "Wow, I would never have figured this out until it was too late."
[00:41:05] You mentioned about retirement. I need retirement advice 20 years ago not when I've retired, fortunately I did get retirement advice 20 years ago. But things like this are an opportunity when you think about the huge savings that you can provide, the huge financial impact you can make to improve and advance mankind improving their financial wellness.
[00:41:24] There is a massive role, but you've gotta get your communication right, you've gotta make sure you're having the right conversation with the right people, um, but it's there for the taking, and you've got a better relationship than newcomers who don't have your relationship, don't have your brand, but you need to make sure your brand doesn't stand for something obsolete.
[00:41:40] It stands for something that is exciting, enticing, and something that a family says, "Hey, we've gotta use this. This is really important for our family wellness and our pursuit of the American Dream."
[00:41:51] Josh DeTar: Well, this brings me to one of the more shock and awe statements that we dropped in just introducing you as a guest today, which is, you know, as we talk about moving towards operational efficiency servicing, um, you know, niche groups, you're gonna see consolidation, right? And you made a comment that, you know, you've kind of run some data models that say, realistically, we only need about 300 banks and credit unions in the US. Why do you believe that?
[00:42:20] Don MacDonald: So, first of all, consolidation's been happening for 35, 40 years. You've had a, a number of branches, consolidation, or, sorry, the number of banks consolidating at a rate of about 3.5% for three decades. So, um, it has been happening regardless of what my opinion is or not.
[00:42:35] And one of the reasons for that has been, if you go back into the, um, the 1900s, many states forbid, uh, multi-state or even in, interstate banking and branching. So, up until the 1990s, Chase couldn't open a branch in Colorado, for example. And then you had regulation that basically got rid of all that.
[00:42:53] So, you can branch where the hell you like, as long as you were fit for the purpose. So if you, if you look in Canada, for example, Canada around about the 1900s, actually 1880s or something like that, you had to have $500,000 to charter a bank. At the same time, roughly, in a small town in America, you could do that with $25,000.
[00:43:10] So, you ended up with this model of, one bank, one branch, you know, tens of thousands of them. So, we, we really had a very artificial artifact of how many banks and branches we had. Then you got the interstate banking regulations said, "Hey, you can bank where you like." So, you saw consolidation where you now had a lot less banks but a lot more branches.
[00:43:28] So, and then we've now started seeing the reduction in branches. But the reason I say that is because the Canadian model said Canadians got more of a footprint, including more rural areas than the US, and if you actually use their model in the US, it would spit out a number that said, actually, you could cover all of the US using the Canadian model.
[00:43:46] And Canadian model's obviously a lot smaller, it's in the, in terms of real banks there, and not just simply people with a, a foreign bank footprint in there. It's like 20 or 30 in reality, but applying that to the American model, that would be about 350, again, there's a whole bunch of factors I put in there.
[00:44:02] If you look at California, California has had no regulations preventing interstate banking and branching since early 1900s, I forget the exact date. And so, you can actually argue that's a petri dish for a state that's got 10% of the population and saying how many banks would be on there, and if you follow the California model, you would not need any more than 3,500.
[00:44:22] Now, what I haven't done yet is really build in some factors to say what about the role of neobanks, online banks, um, and so on and so forth. So, arguably it should be lower, I haven't finished that work. I will do, but I haven't finished it yet. And so, when you just use common sense, if you were a coffee shop and you had 10 coffee shops within literally throwing distance of a stone where you could throw stone through the window of each of those 10, they wouldn't survive.
[00:44:46] And that's because obviously the margin, well actually margins on copy are probably pretty good, but the volume and so on wouldn't sustain them. But I was in, uh, the city of Bath, beautiful UNESCO heritage city in Bath in the UK, two days ago. And you can actually see 10 banks, literally, you could throw a stone and hit the window with a door of 10 banks.
[00:45:05] So, this is not in the interest of consumers that you need so many branches, you know, and again, that doesn't even take into account actually, why do I even wanna go into a branch anyway? Some people do, some people do not, I do not, personally. I want my app to do everything. And so, anyway, the actual analytical models say we started, the US is unlike any other country in the world.
[00:45:24] We started from a position of artificial construct with way too many banks and credit unions. And then, in terms of what consumers would need to actually do banking, and we slowly treated that for three decades, and if it wasn't for the fact that banks make so much money, then that would've accelerated a lot faster.
[00:45:41] Now, you're seeing people eating lots of that money. And so, when the going gets tough, the banking industry's very good at the cyclical, you know, bearing the cyclicals ups and downs, and they, you know, they, they adjust as normal, but in this inflection point, I can't help thinking this is gonna be a game changer.
[00:45:56] And then, when you look at it around the world, North America, you know, you're looking at kind of like 25 to 30 between North America, European Union in terms of branches, a hundred thousand people. If you look at the Middle East and Latin America, it's less than 15. And if you look at South Asia, it's less than 10.
[00:46:12] So, many of the countries have, especially in China and so on, have, um, developed alternatives that are not using the banking industry at all when you begin to look at payment industries in China using, uh, non-banks, using, uh, retail chains and so on. So, all of this is demonstrably doable, um, but it's there to be lost if you are a bank or a credit union.
[00:46:35] But it's, it can be done, and it will be done unless people step up and better serve their customers. Because like we said, with all the trillions, you know, what is it like $200 billion of profits from just interchange alone, nevermind the interest on loans, never, I mean, it's so lucrative, competition, sorry,
[00:46:53] profits attract competition, and the amount of regulatory protection that most banks and credit unions have historically had is nowhere near as strong as it used to be. So, I can actually provide a lot of these services without being a bank of a credit union. So, like we've said, it's already been declining too many.
[00:47:09] You've got incredible competition, you've got learning models from other countries where new players, and again, your competition may not be another bank, your competition may be Amazon, Google, uh, you know, Microsoft, whoever it may be, uh, somebody who's never even thought of, um, and so that's why I believe that people should pay attention.
[00:47:27] And, you know, most people can say, you know, that's nonsense, there's no way it's gonna be 350, and it probably won't because we can actually hang on with all the properties branch and, um, bank is making, but, um, there is gonna be fallout, there's gonna be, there has been substantial fallout, and there will continue to be substantial fallout.
[00:47:44] But more importantly, look at the big trend. 80% of all that profit pool is going to 100 banks. So, the writing's on the wall, but because we've got the assets under management grown so rapidly, most, you know, midsize banks and credit unions and certainly smaller institutions, um, are probably not feeling the pain,
[00:48:03] but they will feel the pain. And I think that's why they should be having an, and growth moment at their institution to say, "What do we need to do to make ourselves relevant for 2022 and beyond?"
[00:48:15] Josh DeTar: You know, I wanna put a pin in that, uh, interchange conversation, I wanna come back to that, um, but, you know, I had a, another guest on recently, uh, Don Shafer from Quilo, and, and, you know, Don is just a, I dunno, maybe that's a, uh, is that a Don trait? You guys are just fantastic characters and a ton of fun to talk to.
[00:48:39] And he went on a pretty solid rant of how, you know, the number of small institutions that did focus on the individual and the community is one of the things that, you know, he personally attributes to the quote, success of giving people the opportunity of the American dream here in America. So, as we look at, you know, consolidation of that, you know, I even think about my own personal credit union that, you know, we service, uh, a seg base. We are, you know, under 5,000 member credit union,
[00:49:11] um, but, you know, we have a very narrow focus, and that's who we service, and, you know, we custom tailor products and services to meet their needs. And as that consolidation happens, do you think that that factor continues to play into it, Don, or do you think that at some point, it becomes irrelevant?
[00:49:30] And, and what do you think the role of technology is gonna play on whether that stays relevant or is completely unnecessary in the future, and we really do only need a, you know, small handful of financial institutions?
[00:49:46] Don MacDonald: Um, well, for one, I think technology allows the democratization of services. If you look at the music industry, for example, um, you know, in the past you'd have to go and go to the record labels, get permission. If they liked you, that was great, if they didn't like you, you got nowhere, um, recording studios or the film industry would be a similar parallel.
[00:50:05] And yet, the reality is that today you can go into Best Buy and you can buy your recording studio, you can record your editing software, you can, you can buy everything you need, you can use the internet to distribute your music or your film. In fact, a while ago, when I was at Intel at the, um, Cinequest Film Festival, the winning movie on there, the Owl, and I forget the second part of it,
[00:50:27] it was a Thai film filmed in the zoo, everything was purchased, recorded from, uh, was recorded and edited on stuff that was bought from Best Buy. And so, um, and then you can distribute on the internet through independent film festivals and so on. So, the point being is that processors, storage, cost of them is trending to zero.
[00:50:45] You look at the cost per gigabyte compared to historical numbers that were just ridiculous expensive. We've got world computing power that is just unbelievably more than we ever known in our entire lives, and then, like you said, you've got this ability for you to democratize the goods and services,
[00:51:00] whether it's the film industry, the music industry, or indeed payments or banking. And so, the barrier to entry does not rely on huge amounts of capital. However, word of caution, I love credit unions, I bank with a credit union, actually three credit unions. And the reality is that what credit unions do is necessary but not sufficient.
[00:51:18] Credit union generally give you more money for your deposits, charge you less for your loans, and are generally, you know, more about looking after members than they are about maximizing, um, profits. But the results show that, does that really matter? Because more than 50% of the adult population is a member of the credit union, and yet only 10% of all the assets under management are with the credit union.
[00:51:41] So, like I said, I think credit unions, everyone, but credit unions in particular, they have to say what we're doing is obviously not sufficient, and it's necessary but not sufficient. And so, you know, again, they're in a unique position, quite frankly. Where they can just say, "Wow, I can help you with the definition of the American dream."
[00:51:59] The, so could the community bank, so could the large bank if they do it, and, um, most of them do not do it. And in the case of smaller credit unions, they kind of don't do it 'cause they're too small. The access to technology from a plethora of different FinTechs means that they have access to technology that otherwise they could never possibly develop themselves.
[00:52:19] So, if you go back in time, it used to be you'd get, you know, you build everything yourself. Then you went through, you know, when I worked at Fiserv, it was basically buy everything from Fiserv, you know, your core banking, your online banking, your mobile banking, your reporting, your anti-money laundering, your blah, blah, blah, blah, blah.
[00:52:35] And now what we've seen in this generation, in the last five years, is a move towards, no, I'm gonna get my account opening from Encino, I'm gonna get my data platform or PFM from MX, I'm gonna get my mobile banking from Typo, I'm gonna get whatever it might be, and you've got more choices from lots of vendors, from any of those things.
[00:52:52] So, now you can actually build and construct based on some, some incredibly creative and innovative solutions that can come from third parties. So, this notion is that you get everything as long as you get it all from the Fiserv, or everything from an FIS, or everything from a Jack Henry, those days are gone because, frankly, in no disrespect to any of those companies, it's very difficult to be number one at mobile banking.
[00:53:15] You know, especially if you've also got to be number one at core banking, and by the way, many of those vendors I mentioned have got 20 or so core banking platforms to look after. So, again, it's one of those challenges I mentioned earlier in the podcast. Sometimes it's very difficult to change if you actually have a lot of stuff that you've inherited from your early years of success, whether it's 20 calls or whatever it might be.
[00:53:35] How are you brilliant at 20 calls and mobile banking? And so, the nice thing is we live in an a la carte world where we can cherry-pick, if you're a credit union or a small bank, you can cherry-pick and say, "Hey, I'm gonna pay based on the number of users I have." So, it's actually a very friendly way to get access to the technology, but you can have that technology.
[00:53:53] The key is how are you gonna use it, how is it gonna work? You've got the integration to do, so that's a non-trivial challenge, but how do you turn that into something that says, I love my credit union, I love my bank. And that is the goal, the battle is not the deposits, the battle is not price center management.
[00:54:09] The battle is for the share of mind and the share of love if you like your customer base. And there's so many things that banking can extend into that can do that, and you can remind them to say, "Hey, we were the ones who helped put the kids through college. We were the ones who helped you get up and running.
[00:54:24] We were the ones who helped you, you know, go through a difficult patch." A good example of this healthcare, and this is something I've always wanted to do, and even though I'm retired now, I'm still gonna push to get this done, is if you go back to the, um, the old days, the, you know, 2008, if Mary had been a lifelong customer of a bank, absolutely wonderful, no issues whatsoever.
[00:54:43] She suddenly gets breast cancer, you know, she gets lots of checkups, she goes to United Healthcare, her payments pop up on the system 7, 8, 9 times, eventually overwhelmed her 'cause he can't pay. She misses a payment. What happens? We kick her while she's down, she misses a payment, her interest rate goes up, her credit rating goes down.
[00:55:01] And she just feels terrible. Well, why wouldn't something, this is just an esoteric example, but why wouldn't it be that, uh, and again, there's, there's, um, all sorts of reasons why you can't do it, but I was brought up not to ask what you can't do, I was asked to brought out what you can do. Why couldn't the actual identify and say, "Wow, something's going on.
[00:55:18] The system can identify this. You've got, obviously, medical HIPAA regulations to pay attention to, but hey, seven unites healthcare copays big payments." Okay. We should automatically say, "Mary, you've got a mortgage. You're entitled to convert your mortgage from interest and principle to interest only for the next two years."
[00:55:34] And, you know, just when she needs help, you provide help. Now, that is service. And so, things like that, and there's a million things you can do. And again, you have to be sensible and common sense about how you use the data, but the general we have at MX, we have this thing, don't be creepy. Brand Dot knows to talk about this is don't be creepy, is if you are doing this genuinely for the best interest of your consumer, generally, you are right.
[00:55:55] Just don't screw it up by avoiding common sense. But there are so many things, so many touch points where the finance, financial industry can absolutely delight you and help you with things that we've never even entertained as part of the financial industry. So, come on, get creative, think about what help really looks like, not just simply gather the deposit, make loans. Those are important, but it's not enough.
[00:56:17] Josh DeTar: You know, I was, uh, I was scrambling while you were talking to find this business card that I knew was on my desk somewhere, of this gentleman I heard speak at a conference, and I wanna say it was at, I think it was at the Corelation Core Conference, actually, in, uh, San Diego. And his name's Andy Janning.
[00:56:35] And very similar example to what you were just talking about, Don, of how, you know, this industry has such a unique opportunity to be really looking out for what is happening in people's personal lives and how does money impact that, and, you know, his whole thing was really the credit union industry alone could actually pay all of the medical bills of cancer patients.
[00:57:01] And he had some mathematical model where he broke it all down to show, you know, this is the need that is left over, and this is how credit unions could essentially fund it a hundred percent if everybody bought into it. And, you know, it was a really interesting concept and, and I think just, it speaks to what you were talking about, right, of
[00:57:19] we have a really unique opportunity in how our business models are structured to care about the people. And then, we're an industry that actually does make a lot of money and has an opportunity to do a lot of good, even with just doing the things that we do to make money, even just by offering loans at better rates than a payday lender.
[00:57:42] We've done a service to that member, and we've made money, and we've funneled it back to do good like these, I mean, there's just, there's a really cool circle that can happen in this industry. So, I think this is why folks like yourself, and, you know, me, are, are so passionate about ensuring that this industry stays viable and that it doesn't get cannibalized by somebody who doesn't hold true to those same values that our industry does.
[00:58:09] Don MacDonald: Yeah, there's nothing wrong with making money if you're, if you're adding value, if you are delivering good, you should get paid for that. I always go back to the Michael Charles Kettering and, uh, you go back to the recession in thirties in the US, he was the inventor of the electric starter motor. So, the next time on a cold cross, the Oregon morning, you turn the key in your car,
[00:58:27] just be grateful you're not outside with a hand crank, and, um, you know, he invented this and his philosophy was eventually acquired by General Motors back in the thirties. But his philosophy was, you know, business will come back when we start delivering products that people want. The electric start motor was a product that people wanted and, um, that was in the depth of the recession.
[00:58:47] So, again, the invitation to every single member in the financial industry is build products that people want. And then, by the way, there's no reason whatsoever why you wouldn't get paid a hell of a lot more, there's just so much capability, there's so many innovative people out there, but the financial industry is in a unique position of trust where they should be able to do a lot of these without somebody having to leave your brand.
[00:59:11] The challenge is a lot of people won't change, and they'll go out of business, and that's fine. That's just a natural consequence of things. It'll be exciting for those who can find new ways to say, this is the definition of this fifth age of banking, and it's richer, it's more lucrative, and I go to bed knowing I've done so much more good for advancing my kind.
[00:59:28] You know, the reality is financial effectiveness, it's bad for individuals, it's bad for, you know, community, for society, even democracy. We need people to be financially well, and if you can get paid for delivering financial wellness more, you know, good luck to you, that's absolutely what you deserve.
[00:59:42] So, it's good or round, like you said, it's, uh, a virtuous cycle, and it's one that needs to be continued. And again, I think going back to the question you originally asked, if you're a small institution, you have the ability to compete just as much as a, you know, mega institution like the chase, if anything, you can be more agile, but you do have to be innovative, and you do have to have a customer-centric perspective to say, what does success look like as measured by my consumers?
[01:00:09] And obviously, it's got to be affordable so we can deliver it, but, um, there's just a huge amount, and it's gonna be fascinating to watch others unfold in the next decade.
[01:00:17] Josh DeTar: Yeah, I mean, there's phenomenal economies of scale and SaaS, right? I mean, that's the whole point behind it. So, especially when you look at, and you referenced this earlier as well, you know, a consumption-based fee model, right? So, a very large credit union that is using a tremendous amount of XY service, processing power, et cetera, you know, may pay more, but there's also economies of scale even for them, right?
[01:00:42] So, maybe their effective rate may be a little bit lower, but because it's based on usage for a really small credit union, they may have a hundred users. But they still may have access to that technology that, to your point, could be something that even a Chase or a Wells or a B of A doesn't even offer, right?
[01:01:01] And, you know, I'm, as everyone hopefully knows, that listens to this podcast, not a fan of shameless plugs, we're not here to talk about products and sell things, but, you know, I think MX was a, is a great example of that, right? Um, I was just on a call with a credit union recently who was looking at some of the new widgets that MX was releasing and the way they could do things, and they went, "Wait, we can have that?"
[01:01:23] And I was like, "Yeah, absolutely. You can have that. You can have that today." And they were like, "Chase doesn't even have that." I was like, "Yeah." That's the cool thing, right, is, again, leveraging the ability to have economies of scale in SaaS providers that are focused on helping this industry to be able to remain competitive in this digital age.
[01:01:42] There's a really unique opportunity there because you don't really have, you know, I mean, unless you're gonna build like 10 branches all at the same time, you hire the same contractor, you buy the lumber from the same place, like you're not getting a lot of economies of scale of building branches, but you're gonna get economies of scale and software. Um, so I think that's a competitive advantage.
[01:02:00] Don MacDonald: It is, and, you know, the, the, the thing is, it doesn't all have to be sometimes, you know, I've been in meetings where people say, "Yeah, it's all very pollyannish. It's all about doing good. We've got a business correct." But, again, if you're a credit union, you've got a 10 to 1 advantage, meaning the asset center management for the entire credit union industry are 10% of the total.
[01:02:18] So, when you begin to look at your average member, the chances are they've probably got 10x the resources with someone else because, you know, you look at the average mortgage that somebody has in, you know, Star One Credit Union is my credit, my credit union in San Jose, um, when I first moved here from the UK, um, you know, the average median house is like $800,000 an hour or something like that,
[01:02:38] it's a really ridiculous number. And so, if that is being held by a competitor, whether it's City Mortgage or Rocket Mortgage or whoever, then if you know that that customer, that member rather has got a financial relationship, possibly paying more, if they're not, then you can't help them, but if they're actually paying more than you would've charge them, then you have an opportunity to get loan in a very, you know, loan constrained environment of interest rates rising and so on.
[01:03:01] So, the point being is that, um, there's so much good that can be done, but it's also, you know, certainly the use of data is a fundamental business tool, it's more, you know, it's the former CMO of, um, Intel. With Intel inside and everything else, I would spend 1.3 billion dollars a year on advertising, and that's a lot of money,
[01:03:19] I certainly didn't have that when I was at MX. But, but the reality is that, uh, you don't need to compete. You can actually use data, you're trying to acquire new customers, then yeah, advertising, billboards, radio, tv, whatever it might be, but if you're actually marketing to an existing customer, you can use the data you already have on that customer to figure out who are they, what do they need, how can I help, or can I help, if I can, how do I reach them?
[01:03:43] And so on. So, there's just an enormous opportunity just on the pure business side as well, from doing the things we've spoken about. And then, of course, if you can actually save the member of the bank customer money, then you're helping them achieve, you know, their financial wellness as well. So, again, we've seen the huge, massive change of share in retail between the Nordstroms, these massive brands that were just too big to fail, move to Amazon wide because it's easier.
[01:04:09] I'd rather have it delivered than go and pick it up. They've got more inventory, it's getting more and more of a spiral where less and less, it's just too expensive for those retail stores to carry all that stock. So, they'll say, "Get it from target.com or get it from, you know, whoever.com." And that's what's happening in banking, less and less
[01:04:24] you can't afford all those services, and so you can get all the lucrative stuff, you're gonna lose that to somebody else. So, be the person that cannibalizes all that done back for our earlier conversation and make it easy for them, so they go to you, whether it's online, not to somebody else, um, again, that sense of urgency I think should be in place.
[01:04:43] But, again, using another Grove, Andy Grove's, it should be his book Only the Paranoid Survive is essential reading, and everyone in the industry should be paranoid, no matter how successful or unsuccessful you are right now, you should be paranoid, and you should have fun putting in plan a place or a strategy that will help you be wildly successful.
[01:05:03] Josh DeTar: I think you'll appreciate this as a marketing person, you know, you're talking about how the data is so incredibly important because it's gonna help you to the best of your ability, predict the change and then be able to make informed, intelligent decisions about how you are going to prepare, adapt, um, and, you know, meet those changes.
[01:05:28] And I think one of my favorite simple advertisements to date was a couple of years ago, and I was driving up, actually, from Star One, your credit union in San Jose, up to another customer of ours, San Francisco Federal Credit Union, in the heart of San Francisco, and I'm getting close to San Francisco, and there's a giant black billboard with just white writing on it.
[01:05:57] And all it said was, "Good morning, San Diego!" Exclamation point. And then, at the bottom, it said, "The data is useless if you don't use it properly."
[01:06:08] Don MacDonald: Very...
[01:06:08] Josh DeTar: So, you have all this data on all these people commuting up, but saying, "Good morning, San Diego" to a bunch of people going into San Francisco, hey, you got it wrong. And so, the messaging didn't resonate.
[01:06:21] Don MacDonald: Yeah, it's important, and again, it's like a talent, just like we learned how to use online banking, we learned how to actually implement mobile banking. Mobile banking today, as you know, beyond anyone, it's so different from mobile banking, banking in the early days. And so, it's very much about evolution.
[01:06:37] And, again, you know, again, our good friend Brandon Dewitt, the late Brandon Dewitt, you know, used to say it was very much the philosophy of MX, which is, you know, we're not looking for all these silver bullets, we're looking for a lot of lead ones, and we're looking to make incremental changes to experiment, to do something, to do a small project.
[01:06:53] You don't need to solve world hunger, but you do need to make sure you understand what's, what the environment's like, what you can do, dip toe in the water to do something, be successful, get your entire company on board with this. So, um, the worst thing you can do is basically the biggest competitor we have in this industry is complacency. And complacency will absolutely, absolutely be the end of, you know, many institutions in our, in US.
[01:07:20] Josh DeTar: Well, I think that's a good segue to come back to a, a comment that you made from earlier that I wanted to put a pin in, and it is, you know, talking about this changing environment for us, uh, having these new competitors come into place, I mean, even some of the just traditional business model of how community financial institutions make money is going to change, and it is going to be disintermediated.
[01:07:47] And where there is an opportunity to make money, somebody's gonna step in, and you called out one, I'll make the blunt statement, I'm willing to throw my hat in the ring, I don't quite know if I'm ready to throw my hat into the ring of when, but debit card interchange is going away, it's going by way. And I am shocked by how many institutions are complacent and think it'll be here for the end of time.
[01:08:12] Don MacDonald: Yeah, I mean, the reality is, even going back from my days in, um, Pfizer from 2008, again, if you go back into the history of, um, interchange, it was always intended to be just the cost of covering, the cost of that transaction. Now, it's turned into yet another profit stream. And so, the reality is if you begin to look at the, um, average debit card, swipe exchange fee, it's about, you know, 2.48%.
[01:08:35] Again, it varies depending on, you know, card not present. And so, if you look at someone like Walmart, over the last three years, their average gross margin has been less than the money they pay on interchange. And so, when you begin looking at the, um, the opportunity for somebody like a Walmart to double their profitability, it would be, it would actually be very supportive of saying, "Hey, get rid of interchange 'cause," or, or rather actually have,
[01:09:00] you know, Walmart provide the interchange capability rather than the, you know, an issuing banking, an acquiring bank kinda model. So, the reality is that even in 2008, the cost of even including a provision for fraud, the cost of providing that interchange is less than a penny. So, the reality is the cost of providing that service is not sustainable in the UK is actually a sliding scale
[01:09:22] depending on how much you buy, you buy a newspaper, it's a hell of a lot less than if you were to buy a $200 something or a $100 grocery bill or something. But the average interchange fee in the, in the UK on a similar kind of purchase model, in terms of the average purchase price, is 10 pence or about, uh, with the current exchange rate right now, about 11 cents.
[01:09:44] And obviously, it's a hell of a lot more than that in, uh, the US, it's more like, you know, 40 cents, 40-something. So, yeah, it's untenable when you begin to get the lobbying from the, you know, the merchant kind of lobby. Right now, consumers aren't seeing it, so they don't really have a voice in this, but it's untenable.
[01:10:00] And, if anyone thinks that this is, you know, a commitment for life, I agree with you, I think it is gonna go away, and it's gonna go away because people like grocery change, non-banks are gonna say, we can do this cheaper, faster, better. Although it's a very efficient system, which is probably a single biggest advantage, it's incredibly sick.
[01:10:18] But again, in a world where everything is ubiquitous and digital and connected, there are more than one way to skin that proverbial cat. And so, again, I think the get the interchange model is gonna be under incredible for new competition.
[01:10:31] Josh DeTar: Well, and this brings me to another topic that, you know, we kind of touched on in just your opening, and it is this idea that sometimes, it's not even just the fear of change or, you know, the change itself that we're scared of, or the inaction to do anything. One of the things that causes us to have issues with changing things is stigmas around them.
[01:10:59] And, you know, you used a very, very harsh but real truth, which is, you know, there is a tremendous amount of stigma around mental health issues globally and, you know, if we look at a very specific segment that has, you know, had struggles in that area, we look at, you know, United States veterans and the traumas that they have been through and the services that they have done to this country.
[01:11:28] And yet, sometimes, we look at them with a stigma, and then on top of that, we have new ways of potentially providing help and support and aid and treatment. But they go against a stigma that we have. And the example that you gave was, you know, they're finding, you know, tremendous success in use of highly controlled psychedelics in treating things like PTSD and mental health issues in our veterans.
[01:12:01] But there's this huge stigma around, oh, the hippies of the sixties and they're LSD are all tripping out, and, you know, guys on bath salts are turning into zombies and trying to eat people in the streets of Florida. And so, we have these stigmas around the things that we need to do, the change that needs to happen.
[01:12:22] We know it needs to happen, and we don't do anything about it because sometimes the prescription is something that we're just not comfortable with.
[01:12:31] Don MacDonald: Yeah, I mean, I think this is just another example of the big trend, which is we don't educate ourselves as a society, I'm talking about now, in terms of what really is the problem we're trying to solve. And so, you begin to look at, I have a 33-year-old, um, adult son in the UK, he has tremendous mental health issues, and he chooses to self-medicate using drinking drugs.
[01:12:53] And it's been a 15, actually a 19-year battle, from early childhood or early teens, anyway, the point being is you begin looking at, uh, just going back to your point, one military vet will commit suicide in the US every 45 minutes, it's horrendous. And so, again, the reality is that there are cures available to us.
[01:13:13] There are cures available in terms of the therapy coupled with, you know, whether it's MDMA treatment, whether it's, um, ketamine, whether it's LSD, whether it's, uh, you know, whatever type of psychedelic drug coupled with therapy. And the reality is that what we, what we see is not necessarily the problem.
[01:13:30] We actually look in the streets, we see a homeless vet who's, you know, probably drunk or high, and many people I know, I used to, so I'm not immune from this. We look at someone with some form of disgust and, oh my God, I'd have to deal with this. And the reality is that person has served their country, that person has seen things that we would never wish anyone to see, let alone ourselves, our family members.
[01:13:51] And yet the reality is their problem is a mental health issue, it's not a drug problem, it's not a homeless problem, they're all consequences of the underlying mental health issue on there. And so, for the last 40 years, we have suppressed some of the treatments using psychedelic drugs, again, with therapy.
[01:14:06] We're not talking about, you know, hippie waves, we're not talking about ecstasy tablets that could be polluted with all kinds of things that are very dangerous, but the reality is MDMA, LSD, things like that, that have provided in the clinical setting with the appropriate therapy have had incredible results.
[01:14:21] I mean, results that you would not believe in veterans in many cases, not even showing signs of the PTSD six months, twelve months down the road, being able to help cure addictions to alcohol, to street drugs and so on. So, again, you know, for people like me, I've never taken a kind of illegal drug in my life, but the fact it's illegal is weird because it should be available, like I said, through, again, containing clinical prescription with the appropriate therapy and so on.
[01:14:49] Again, it just shows you that the narrative that we have can seduce us into having the wrong thoughts. And it was the war on drugs coupled with the hippie movement that made people think this is just, you know, something that bad people do or something that is not good. And the reality is it's much more nuanced than that.
[01:15:05] You know, you can't say branches are good, or branches are bad, it's much more nuanced. The war, you know, the use of, psychedelics is also much more nuanced, used properly, they save thousands of lives.
[01:15:21] Josh DeTar: Yeah, I think you know it's, I mean, we could do a whole podcast on this alone, this is a little outside of the Digital Banking podcast, but it's something I'm very personally passionate about as well. But, you know, just using the topic as a theme for what we're talking about today is, you know, I think you see kind of two sides of it, right?
[01:15:41] You see even just some blocking and tackling, and I apologize if I get this wrong, I got this from a friend, so, you know, fact-checkers out there, you know, shoot me an email if I'm off, but, you know, hopefully, the point will be made, you know, I was talking to a friend about how, you know, the marijuana industry got such a negative rap and how hemp was so bad and, and used to make drugs that got people stoned and made 'em lazy.
[01:16:07] And, and according to my friend, apparently, a lot of this actually stemmed back to, in the very early days, they realized that they could make hemp paper exponentially cheaper than wood paper. And the paper industry did not wanna be disintermediated by this, they didn't want to change, they wanted to keep their process and they wanted to keep making money the way that they did.
[01:16:30] So, instead of just trying to make a better product or more competitive product, or lower their cost of their product, they said, "Well, screw it, let's just make that thing illegal 'cause you can also use it to make drugs." That's easy. Create a stigma around it and our business stays the same, again, I'm not saying that's necessarily a hundred percent true and accurate,
[01:16:50] don't, don't hold me to that one, but, you know, again, I think the idea stays that sometimes there are forces blocking and tackling these things, right? Going back to our earlier topic, I don't think Visa and MasterCard wanna see interchange fees go away anytime soon, they're gonna block and tackle that sucker all day long, right?
[01:17:09] Large financial institutions who, you know, maybe have lost the ability to do, make a bunch of revenue off of interchange fees, maybe they'll try and tackle that. So, there's gonna be this back and forth in that sense. But then, I think where you were going with it too, and, and what I wanna talk a little bit more about is just the, the stigma around things.
[01:17:31] And sometimes we get it in our head that this is for whatever reason bad or not the right thing or whatever. And so, Don, putting your, your banking hat back on, you know, what stigmas do you think our industry has that we've just gotta get over, otherwise they're gonna get in the way of our ability to progress and stay relevant.
[01:17:55] Don MacDonald: I think there's a couple that spring top of mind. One of them is you've got a lot of really honorable institutions who worry about the misuse of the data. And, you know, we've got, um, obviously regulation and legislation that is intended to provide the guidelines and the, the, you know, regulatory framework to say what you can and cannot do.
[01:18:15] But you've also got a lot of people who are stuck in a mindset, which is, oh, you know, using datas like spamming, using datas like intrusion in my personal, in my personal life, and so on. But again, you know, obviously things like opting in to, or even signing up for an application on a mobile phone, for example, that we say, I'm going to voluntarily give you this.
[01:18:34] Tell me what I need to do for my finances, for example. So, there's ways around it, but definitely that's a big one, the other one is almost like the religious war around branches, you know, and again, it's very nuanced, which is, you know, who needs them, who doesn't, and again, if you look at it through the individual customer perspective, it's a, it's a different story.
[01:18:50] Josh DeTar: Before you get off that one, I got, so you, you called him out from earlier, and your friend Ron Shevlin made a comment when I had him on the podcast the other day, and he said he fully believes that we will see a day and probably even in our lifetime, where there is no need for any branches. Period. End of story. Not a single one. What do you think?
[01:19:14] Don MacDonald: Yeah, I could believe that in terms of conceptually, but, you know, when, going back to what I said earlier about some of the really crummy, I mean, absolutely appalling service that you get. So, if you're gonna make me wait on a phone for an hour and a half before you can pick up the damn phone, that ain't gonna happen.
[01:19:30] And, you know, we're already seeing it, you know, branches are a very expensive, um, aspect of, of, uh, banking. And so, if you're gonna cost cats, because, again, you've got competitors chewing away at some of the more lucrative parts of your business, you're gonna be tempted to have fewer branches start by reducing the opening hours not open on certain days.
[01:19:47] And the problem is it's a lousy, lousy experience, if you end up with, like, my, my experience with international, people don't return calls, they don't do what they say, things like this. So, it's gotta be, if, if you're gonna do that, I can imagine doing it if you have the technology to properly resource it.
[01:20:05] So, I can say I've got a question about transferring money from A to B, and I'm a bit confused about ACH versus wire transfer and, you know, I'd like to send some money overseas, I know not everybody does, but those of us who do that can be quite complex, you know, what rate will I get, blah, blah, blah. So, anything where there's advice model required, um, you better make sure that, you know, you have a comfort level.
[01:20:26] You go into that branch, you stand there, and you know darn well, especially these days when not many people go into the branch, ironically, that you are gonna be seen and you're gonna get advice. But if you just then turn that and say, "Hey, that was option A, and now we're gonna turn it off in option B is, I'm gonna make you sit on the phone listening to crummy music for an hour and a half or 45 minutes, or even 20 minutes."
[01:20:45] That ain't gonna work. And so, again, I think that's where people who get it right will be able to do the Ron Shevlin model and be very successful with it. People who then say, "Wow, now suddenly the efficiency ratio of my competitors is so much better than mine because they got it right. They were able to shut down the banks, they were able to retain customers, they were able to improve customer loyalty and satisfaction.
[01:21:07] But I did it wrong, and now I've got this death spiral where I saved the cost, but that led to even lower retention, certainly not, you know, nobody's given me five stars on my bank." Then that will be, I think a race to the bottom. And so, I think it can happen, USAA I think is opposed to child for saying fabulous service, no branches,
[01:21:27] you know, and again, you've still got this definition as to what exactly do you mean by a branch? Can I actually do a, pay a check in at my local supermarket, for example, all chime in which case they've got 8,800 branches or whatever it might be if you actually count them as branches? So, depending on what the average person needs to get done in there, once in a while, like, deposit a check every now and again, you get one.
[01:21:47] Yeah, being able to handle those services and not say, "Hey, shutting down the branches, just put the owners back on me." There needs to be ways, raising the level of, I suddenly get a check from, you know, somebody who paid back a loan and it's $6,000, and your bank only has a $4,000 limit on check for IDC, and there's all these, you know, consumer relevant aspects that have to be put in place first before Ron's vision can happen.
[01:22:13] Josh DeTar: Yeah, and I think that was a lot of Ron's point too, you know, folks, uh, who listen to this episode but haven't had a chance to listen to Ron's will want to go back and listen to it, but, you know, his point was really around, it's once the technology has the ability to service as good, if not better than the humans, that no offense, we humans will be pretty unnecessary.
[01:22:31] And, you know, one of the reasons why I go into a branch is exactly your point, right? Like, Sue has been at the credit union for 20 years and she has more knowledge than anybody. So, I know she can answer my question, but when the AI chatbot actually has more data at its cold fingertips faster, and she doesn't have to go sit there and type into her computer, go look up this thing, this, you know, AI engine of my credit union is crunching all of this information,
[01:23:01] running me against, you know, benchmarking, benchmarking metrics of my peers and all of this to present me the best information and insights possible. Then what do I need the people for? And if I don't need the people, what do I need the branches for?
[01:23:16] Don MacDonald: Having said that, you know, again, AFCU in Utah, um, my credit union there, they're the most delightful people on the phone or, or going into a branch, but whether it's on the phone or in the branch, um, they've got it right. So, again, and I, I must admit, even though personally I would probably be in the group of people, the segment of people who would say, "Look, just make my mobile phone work.
[01:23:37] Let me do everything I can on the phone, and life is sweet, and I'll get out your way. You can stay in my life, and we'll, we'll be very happy together." But having said that, I actually love the fact that the follow-up and the attention and just the politeness of the people, for example, is actually very valuable to me.
[01:23:53] So, although I'm very much in the technology, you know, digital, remote banking kind of, um, mindset, um, I certainly appreciate it and value it when I appreciate I really properly service-oriented human being.
[01:24:07] Josh DeTar: Yeah, I agree. And, and I think that's, again, you know, one of the elements of charm of, you know, what makes people wanna do business with certain businesses. You know, again, I mean I use this example ad nauseam on this podcast, but, you know, I order a lot of stuff on Amazon, don't get me wrong, but there's definitely times, yesterday I was putting together the final touches for the gift basket that we're donating to, uh, the GoWest Credit Union Association's annual charity auction for their max conference for the credit unions for kids.
[01:24:39] We're putting together a coffee basket, and I needed to get some Yeti mugs 'cause I wanted to put some nice Yeti mugs in our gift basket. I could have totally ordered those on Amazon, Don, but my neighbor owns an Ace hardware store down the street, I know he stocks those things like crazy, and I wasn't sure which one I really wanted.
[01:24:58] Was there like a certain type 'cause my gift basket, spoiler alert, actually this will come out after the thing, so no spoilers, but is coffee plus all the things you might need to turn that, you know, morning coffee into an evening Spanish coffee. So, I wanted to know, you know, which one of these could be, like, lit on fire and, and all of these things.
[01:25:15] And so, I knew, I was like, "Oh, I'll just drive over to Ace real quick. I can talk to Curtis. He'll educate me on the products, and I get to feel good 'cause I supported local." And, and I think you're starting to see a lot of even just the younger generations appreciate that too. So, it's gonna be really interesting to see how that plays out.
[01:25:30] And at what point do we say yes, it's totally possible that I don't go into a branch for 10 years, but one time in that 10 years, I want to go to a branch, and I'm really gonna want that branch. And are our younger generation's gonna say, we're gonna support a business model that allows you to keep those branches
[01:25:48] because once in 10 years, I might want to go to one of those, 'cause I really do every once in a while want that human interaction. And maybe that frequency is even less, right? And maybe our younger generations say, I can do everything digitally, but, you know what? Because finance is such a big important part of my life, I do actually want to go into a branch once a month.
[01:26:06] Maybe, maybe that is what the gen, you know, younger generations are gonna want. I, I don't know, going back to, I think, what you very first started with, right? Like, we don't have a crystal ball, so it'll be interesting to see how all those different factors play into that. Um, I, I wanted to, I know I cut you off, so I wanted to come back to, you know, what are some of the things that you think our industry has stigmas around that we need to just let go of to continue progress?
[01:26:29] Don MacDonald: I think I mentioned the two main ones that I had on there, obviously, um, what else would I think on there? I mean, those are the two big ones. I can't think of any other, what I would really call stigmas and so on. I just think probably the resistance to changes, you know, my customers will never do this, and the reality is that a lot of them may never, but there's, you know, you go back to your millennials or whoever it might be, any segments these are, you begin looking at their behavioral segmentation in terms of what they value, what they admire, what they wanna do with their lives.
[01:27:00] It may not be I wanna work on my life, save money, retire, spend it, it may very well be, and it certainly is, but they want to invest in experiences, they want to during their lifetime. And so, again, I think that's a very different model from the traditional, yep, just open up a savings account and dump it in there.
[01:27:16] Wait until you're nearly, you know, ready to back to pasture, and then off you go. And so, again, how can a bank help you achieve that? And again, you begin looking at some of the applications, where you can actually say for a specific goal, "Hey, I wanna go dive in, in the Galaxy, so I want to be able to buy a Tesla.
[01:27:32] It may not be that we want to say, it may be everyone's definition of the American dream is very different. So, what is your institution doing to enable people to achieve that? So, you know, whether it's a branch or not, it may not matter, it is really, the bigger picture is, um, what are you doing differently than you did for my grandfather?
[01:27:49] And if you don't actually pay attention to that with my grandmother for that matter, if you don't pay attention to that, then um, that's probably the biggest stigma is, "Oh, I know what my customers want." Actually, you don't, you did, you don't know, and I think that's probably the biggest one, especially where
[01:28:04] in some institutions, people don't want to screw up in the last four years of their executive tenure. And so, you're very risk averse and so on, and I name names, but I'm not going to. But that's a real issue for people working further down in the credit union or the bank where they say, "Oh my God, I know we can do this.
[01:28:19] I know we can do that." And they get stifled from above. And so, that is a very internal, I think, barrier to success. You've got talented people, you've got access to the technology like we said, the SaaS model that we spoke about earlier, but basically, you make for a crummy environment where your employees are feeling, I'm gonna have to go somewhere else to really make my mark and contribute towards advancing this industry.
[01:28:41] Josh DeTar: Yeah, I think that's a, that's a really good statement to make, Don, it's a harsh reality that also,
[01:28:46] Don MacDonald: Yes. Yeah.
[01:28:47] Josh DeTar: you know, a hundred percent.
[01:28:49] Don MacDonald: It's still a wonderful industry, though, but we've gotta change with the times and change for, you know, where the market needs us to be. And that's really the, the bottom line.
[01:28:57] Josh DeTar: Well, and I think, yeah, I mean, that sums up, you know, what we've talked about for the last hour and a half is, you know, change can be scary, but change also equals opportunity, and change can bring about some really incredible things, whether it be getting rid of stigmas for how we treat, you know, PTSD in veterans to how we service the next generation of folks with community financial institutions.
[01:29:23] Change is gonna happen, change needs to happen, and it represents a huge opportunity. So, let's take advantage of it.
[01:29:30] Don MacDonald: And I think, you know, one of the reasons why I'm so, so optimistic, I kind of go back to the founders of MX, Ryan Caldwell, and Brandon Dewitt, and, you know, they were able to innovate and do things on an incredible level based on what was an existing one. So, the world is full of people like them who are able to kind of find goodness, to find the ability to be able to do something wonderful.
[01:29:53] And, you know, again, I think the nice thing is you can make lots of revenue, but again, in the worlds of Brand, in the words of Brandon Dewitt, be kind, be bold, do good, and there's a lot of good that can be done in our industry.
[01:30:04] Josh DeTar: I can't say anything after that, you gotta end it on that. That's a great note and a really fitting shout-out to Brandon. So, thank you for that, Don.
[01:30:12] Don, it's just been an absolute pleasure having you on this podcast. I'm gonna probably have to drag you outta retirement at least six more times to do this again with me. But before I let you go, can I, uh, can I ask two final questions that we always end with? And the first is just, you know, where do you go to stay up to date, especially now, on what's happening in our industry and what things people should be paying attention to, and how do you try and predict some of the change.
[01:30:36] Don MacDonald: One, which is boring but really important, is I actually go to the Fed Reports. And so, things like the size, the shape of our markets, I read things like the Fed Reports, the Quarterly Reports, um, FinTech Reports in terms of really trying to look beyond all the narrative and all the, all the kind of verbose kind of statements as well.
[01:30:56] Just look at the hard facts. So, that's a, that's a boring, but it's, I actually find it quite fun, um, secondly, I kind of read, read, read, read, read, and so, I'll pick bank earnings, for example. I'll always listen to the earnings reports, and generally, I find, certainly for the larger bank, you, you just get so much information there.
[01:31:14] But, again, it's usually very formulaic in terms of a, you know, deposit gathering, making loans is up or down, payment is a bright spot, something else is a bright spot, whatever it might be. But as you look at that, you can begin to see what's the impact of all of those other catalysts, whether it's the interest rate, whether it's, you know, fiscal policy in general.
[01:31:35] So, anyway, read, read, read, read, read. I think bank reports are just fascinating, again, you don't need to read all of it, but you get the, certainly, the, um, opening statements of the CEO and CFO, I think. And then, I also look at what's happening in other industries and so, you know, clearly looking at things like processing power, the regulatory stuff is, can be really turgid, but very important.
[01:31:58] And so, you know, we, we obviously have a lot of commentators, the Jim Mars, Ron Shevlin and so on. So, they're always, they're always good. And then, you know, you find a topic that will just interest me. I get my, my email is full of kind of invites to say, "Come and listen to this podcast," or, you know, "Attend this, um, seminar," or whatever it might be.
[01:32:14] But, the basic data world map stuff, I think, is my foundation for everything. And then read, read, read is, uh, kind of like the, the context for those world map numbers.
[01:32:27] Josh DeTar: Awesome. Thank you, sir. And then, uh, final question. If folks want a chance to learn a little bit more about some of the work that you've done, some of the organizations that you've been a part of, or if they want to just connect with you, how can they do that?
[01:32:42] Don MacDonald: They can hit me up on LinkedIn. I mentioned earlier I have some family issues I'm focusing on, which has caused me to be the last year in the UK. So, um, I'll be very honest, but yeah, um, hit me up on LinkedIn. I'm very happy to do that. I'm very happy to share experiences because it's just so stimulating.
[01:32:57] And just stay connected. But it will be dependent on my number one priority is my family. But, you know, to all of you who are listening, this is an incredible industry, you've got an opportunity to do so much good, and anything I can do to help you.
[01:33:13] Josh DeTar: Don, thank you so much for your time today, I mean, if, if this episode was the only thing, it would be all that was needed to be such a clear indicator of what a gem you were to this industry in your time here and the insight that you imparted and, um, the ways in which you help us to think and look at things is just fantastic.
[01:33:34] You've been an incredible guest, and it's been my pleasure to have an opportunity to have you on the show. So, thank you for being on the Digital Banking Podcast today.
[01:33:42] Don MacDonald: You're too kind, too. Thank you.