Transcript: How KeyBank is Simplifying Mid-Market Banking with APIs

Brett Turner:
Welcome to FinTech Corner. Here we are, an episode at AFP in Nashville. And I’m joined with Matt Vickers and Mark Smith from KeyBank. We’ve had a great partnership for a while, so we’d love to kind of dig in and see what’s on your guys’ mind in terms of what we’ve been doing, but especially, you know, what’s KeyBank doing? Where’s it going? Innovation and all this good stuff. So I’ll let you guys introduce yourself.

Matt Vickers:
Yep. Well, thank you, Brett. First and foremost, thank you for having us. It’s a pleasure to be here. So I’m Matt Vickers. I head up product for our commercial grade digital banking platform, which is a suite of online and mobile solutions that we brand and market as KeyNavigator. And Brett, I’ve also had just the pleasure of working with you and Trovata and the Trovata team. I spearheaded, you know, kind of the relationship from a KeyBank perspective. So it’s great to be here talking about what we’ve got going on in the market.

Mark Smith:
Then Mark Smith, I run all of commercial banks, commercial digital platforms. We have two different platforms that support our clients from small business, business bank, all the way up to multinational public traded institutions as well. And then I also own our commercial credit product solutions as well for all of our commercial bank clients. 

Brett Turner:

And I don’t know, I don’t know if I ever showed this to you guys. When I, my first job out of college, when I went to work for Deloitte in Seattle, the building that we were in was the key tower.

Matt Vickers:
That’s awesome. 

Mark Smith:

That’s where we probably had the Supersonics arena back then. 

Brett Turner:

Yeah. Yes. Key arena. KeyBank kind of has a little bit of a special sentimental aspect to it.

Matt Vickers:
I love that story, Brett. That’s very cool. 

Mark Smith:

Hopefully you made your deposits at a KeyBank branch.

Brett Turner:
I think so. Well, you guys are a big middle market bank too. Like what are you guys bullish out right now about middle market?

Mark Smith:
Yeah, so one I think is just the size of it. You know, there’s roughly around 200,000 clients that are out there, companies are out there, employ almost 50 million people across the U.S. economy, make about 30% of the private sector GDP. So we know it’s a really large opportunity. It’s an important part of the U.S. economy. The other part is that, you have a lot of clients in the space that have both, you know, single bank, privately held to also, you know, private equity-backed multi-bank relationships, you’ve got a lot of different products and services that those clients can need. And I think one of the things that Key’s invest in our platform is how do we have some differentiation, both the credit perspective, we can be meaningful to those clients, we have some really innovative payment solutions that can help some of those clients. And then to tie it back, it goes back to our regional, super regional bank, is how do we bring that relationship to life. And I think that’s one of the things that we noted, and where we think we have differentiation. 

We see that in some of the Greenwich Awards that we win as well from our clients is how do we bring that advice, that consultation to that relationship so we think that we can have an impact for those clients that others in the industry can’t. 

Brett Turner:

And you look at all the things going on, this explosion of digitization and so much that’s happened on the cloud side and so much innovation. Now it’s all just kind of catching up. You know, it’s an exciting time in banking. But all, you know, finance, treasury, customers, they’re also, if you’re a middle market company, might not have access to a lot of different things. Maybe some of the big companies. What are some of the challenges that a lot of these mid-market companies are facing that you guys feel like, you know, you guys can jump in to help them?

Matt Vickers:
Yeah, it’s a great question, Brett. And I would actually point to two things. So number one is middle market companies, they have a lot of the same challenges and needs that the larger enterprises have, yet they have a fraction of the staff to do it. So that’s number one. And number two is, I believe that the middle market, it’s really been an underserved segment for quite a bit of time by the industry. And let’s poke into each of those a little bit further. 

So in terms of having the needs that a larger enterprise does, but the fraction of the staff. So think about a client’s financial operations. They still have complicated AP and AR processes that they’re trying to automate. They still need to reconcile bank to book. They still need financial reporting to drive operational and strategic decisions. Yet they do that with a fraction of the staff. So that’s number one. 

Number two is on the underserved side. So let’s go back in history, maybe about a decade or so ago. And if you’re a bank or a service provider in the industry, you essentially had two different levers you can pull to try to meet the needs of a middle market client. So number one is you could build a solution from the ground up. Or number two is you can find software out in the industry, buy it, implement it into your data center, roll it out. Each of those, Brett, had their drawback to them. So if you went the build path, your investment dollars can only stretch so far, you can only run so fast. And then if you went the buy path, those solutions ended up being fairly vanilla and basic. Either way you went, you ended up underserving the needs.

The good news is over the last 10 years or so, there’s been a huge advancement in tech. Think about cloud, think about banks opening up APIs. And really what that’s led to is a proliferation of very targeted niche solutions. And Key has been an early and often adopter of leveraging those partnerships and leveraging the broader ecosystem to really bring very targeted solutions to meet the needs of what has traditionally been an underserved client base.

Brett Turner:
Yeah, I know firsthand. I mean, that’s a big part of how kind of our partnership got going. Just at that intersection of like data and APIs and also multibank. If you look at going back to maybe 2008, you know, when there’s the Great Recession and then really there was an explosion of things off of that, of just, you know, that revitalizing in a lot of ways from there. But multibank was one of those things that came out of it. Maybe it’s this managing risk, diversification, but how has that maybe the some of the challenges and the opportunities though with maybe not having that whole view of the client. Now you’ve got to contend with multibank but you know it’s probably presented some opportunities though along the way as well.

Matt Vickers:
It certainly has and I will actually expand that a little bit more. So multibank is clearly something that still is prevalent in the middle market. We’ll find our clients that have two or three banks that they’re doing business with. But even if our client is not multibanked, they still have multiple accounts with us. So in either respect, they’re ending up in a situation where they’re trying to manage multiple data silos. 

And let’s take an example that a client often, you know, is faced with. Let’s say they’re running financial reporting and trying to forecast their cash flow out 30, 60, 90 days, right? So the fact that they’ve got these multiple data silos, operationally, typically what they’re doing is they’re logging into a bank portal or multiple bank portals. They’re downloading information into Excel. They’re slicing it. They’re dicing it. They’re creating their own…Very laborious, very manual, very, at the end of the day, kind of vanilla. Cause again, remember these clients, fractional resources, right? So they don’t have a lot of time, smaller teams. They don’t have a lot of time to go through sophisticated reporting and forecasting.

So what ends up effectively happening is they’re left with stuff that’s kind of pulled together in an ad hoc manner and it’s left with a lot to be desired. So I think that kind of leads us to, and what we’re really excited about with the KeyBank and Trovata partnership is we’ve created an ecosystem now where those data silos are broken down and the information can be consolidated and centralized and there’s a very robust, rich tool set that now lays on top of that that allows clients to really get sophisticated on their reporting and their forecasting and really makes that lean team operate to its best practical extent.

Mark Smith:
Just to add to that, I think, you know, what’s interesting is if you go back historically from the accounting perspective, like, “Hey, I need to do recon and I need to do research,” and now we’re actually able to use that data to more efficiently get some more of the strategic side. So cash flow forecasting is a huge component when you talk to CFOs.

What’s one of your most painful things is how do you forecast your cash flow accurately? So I think that’s just a really good evolution of, we’re not just doing just recon and we’re not just doing research anymore, but how do we have better strategic decisions? How are we managing our cash? Where are we placing that? Obviously, in changing interest rates, like that placement of cash is really critical. And so that’s where I see how do we continually drive value to our clients and help them run their business better every day?

Brett Turner:
Well, you guys, I mean, you know, it’s been great working with you guys from a partnership perspective. It feels like we’re just scratching the surface, like we’re just kind of getting things going. Definitely seeing some interest, of course. And I feel like just innovation in general, like APIs, a lot of companies don’t even quite realize. And even if there’s a lot of legacy solutions out there too. So I’ve even heard from some customers that said, this 35-year-old system said APIs don’t matter. 

Mark Smith:

It’s all bad. It’s all bad. 

Brett Turner:

Yeah. But I mean, it’s awesome that you guys see that, embracing it. You know, it’s out of that really the demand and necessity for, you know, for serving your customers. We’re not the only partner you guys have. I know you guys have worked with fintechs for a number of years. Like how have you found the way to really, you know, how do you select a partner? How do you find the right… How do you then kind of operationalize that partner knowing that’s you know, outside the bank and you’ve got a… The bank’s a different, unique business model and making all that work, getting that to scale. 

Mark Smith:

So I think how we approach it actually goes back a decade. So ironically, Ken Gavrity who runs our commercial bank was over at corporate strategy. I was working over at corporate strategy. We knew we were gonna come over to the payments side and said, “How do we play this game differently?” If you just play the traditional game in a traditionally scaled model we’re not going to win against some of the competitors in the space. 

So how do you actually add value to our clients? And so when we took a step back, do we support a lot of broad middle-market clients? Yes, but then we also have niche verticals that we go after as well. So you think around like healthcare or technology or real estate in the space. And how do we actually have solutions that meet that specific vertical’s needs or have broad applicability.
And so we started the journey very early on as, like, how do we find the right partners to augment the robust solutions we already had? Is there certain niche things that we know that real estate needs to solve or healthcare needs to solve? And do we want to be the, going back to Matt’s point earlier, do we want to go build it ourselves or do we find the right best-to-breed people that are already there investing solely in those needs? And that’s where we decided what is the right time to partner with a potential fintech? And so that’s where the evolution started in that thesis and it’s kind of come to life over the last 10 years. 

What’s really different around how we approach that is, yes, you can just go sell a different solution, but how are you thinking around that experience of a client? And yes, you’re providing a service, but at the end of the day, what’s the onboarding like? What’s the servicing like? When something goes wrong with those relationships, they don’t typically call the fintech, they call us. 

And so how can we navigate with Trovata, with some of the other great partners we have out there. It makes it easier if we can step up things if something’s happened. That’s where we see that partnership in the delivery is equally as important as almost the solution. And how do you actually make that opportunity come to life for a client? 

Matt Vickers:

And if I could be so bold to say, that is where Key really shines. So the history that we have with fintech integrations, look, the reality of it is, is any bank and fintech can strike a deal. The difficult part is the integration. How do you bring those cultures together? How do you create the right go-to-market strategy? How do you operationalize it? How do you manage incentives and align them? And we hear from our clients, we hear from our fintech partners that that’s something we’re really, really strong on and just really helps us differentiate in the marketplace.

Brett Turner:
Well, I was going to say, I mean, it also helps if we can make sure to match that or step that up and make sure to take care of your clients. I think that’s a big part of how we approach things. You know, I’ve kind of been working in startups for most of my career, but more on enterprise startups. And when you’re innovating with bigger companies or in regulated industries, it’s like your tolerance for making mistakes is really, really low. Meaning like, don’t screw up. I think we, you know, we know the seriousness of the gravity of, like, getting the privilege of kind of working with the bank’s customers and, you know, making sure that we can bring that, you know, that same aspect of care and being there and making sure that we can fill that void too. 

Well, when you kind of look at APIs now, what is exciting? Like you mentioned at the outset, talking about how you can’t build everything and everything is speeding up. It seems like there’s so much opportunity and demands are accelerating too. You look at just new experiences. You look at just even what’s been happening for years in tech on the consumer side and then customers get used to certain things like, “Why can’t I do that on the corporate side?” API is now coming. How—maybe describe a little bit about—do you guys see the APIs almost like a demark or some way to interact with you know, a fintech to look at just broadening those experiences or building out things that may be hard to do or in certain ways or accelerate that yourselves in-house.

Matt Vickers:
Sure. The short answer is yes, 100%. Now let’s dig into a little bit around the ‘why’ to that. So Brett, think of API as really the connectivity between a bank, the bank’s clients, and the fintech, right? So how did that work prior to APIs maybe is where we’ll start. And it was really through good old-fashioned batch processing and file exchange through a transmission vehicle. And that is a viable way to go about doing it.

The issue is you sell yourself short on a number of key aspects, primarily around client experience. And what APIs really allow you to do is deliver an experience that’s more timely, it’s more seamless, it has less friction in it, and ultimately that opens up to better capabilities. So I’ll give a couple of examples to illustrate that. 

So one of the beauties about APIs is you can effectively deliver banking services to wherever that client is. So if a client’s working out of their ERP, great, allow them to make payments out of the ERP and then help automate the reconciliation on the back end coming back in. If a client has their own system for their client usage and they need to accept payments on that, APIs can help enable that. And then I’d be remiss if I didn’t talk a little bit about how KeyBank and Trovata have really leveraged APIs to power the experience that we’ve taken to market.

APIs are really the connectivity that brings that data together in a 360-degree view. And by the way, also allows clients to make payments out of the Trovata platform that’s settled through the KeyBank rails. So it really just is a super, super important way to connect the ecosystem together and drive the right client experience.

Mark Smith:
But also, I would also add to that, you know, when you look across the clients, we’re always going to have certain clients that want to go into our treasury platform, that want to look at things screen to screen like ERP and our treasury platform. And then you’re also going to have clients that are like, “No, I want to live in my ERP system or some treasury platform to do business.” 

And we have to support that gambit across it. And so some of the new tools are great now. How do we enable those clients that are more sophisticated, that want to own that experience? And that’s where, when we took a step back at some of our data, when you put transaction behavior or a service request where you’re actually doing that activity versus in a separate module, we saw about a 400% increase in usage for servicing-related items when it’s where they’re trying to do that particular activity versus, “You need to go over here to do that.” 

So as you think around that on the payment side, so where do people live and breathe every day? Like, you know, these people that we’re servicing, this is all they do every day. And so how do you make that job better for them every day? And that’s really thought for my, how do we improve that client experience?

The APIs are just a tool to do that and potentially solve that faster than how things legacy work. But it’s more like, how do you meet your client where they’re at in that moment for what they’re trying to accomplish more efficiently?

Brett Turner:
Yeah. What about automation, AI? You know, AI is kind of like a freight train. I’m sure you guys are talking about that a lot. Of course, you know, does the API start to—mean, in some ways—like a building block just to sort of fuel those kind of next-gen experiences and services?

Mark Smith:
So I would tie it back to, I’m much more focused on do I have the right data architecture in place to support that. And so that’s a place that we’re spending a lot of time. How do we continually enable our business to capture more opportunities there? APIs are a way that we can pass data back and forth. There’s other ways that—how do we consolidate all the different things that are happening across a client relationship into a single view that you can actually then action and take value off of? 

So I think APIs are one piece of it, but I think of that data orchestration behind it as so critical for how do you train? How do you monitor? How do you then—as you feed in different things that are happening on a client—are you providing insights or alerts back that we see based upon other things that are happening there? Is there ways that we can serve as a client better? We’re saying, “Hey, we think there’s going to be an issue with your cash flow because we’re now forecasting certain situations are happening with your cash flow that we saw in two other clients that we can action.” 

So I view it as more like you’ve got to have the right data structure to support it. And then it’s like, “Then how do you enable those insights on top of it?” And obviously, you know, generative AI gets a huge, you know, attention, but I still think there’s traditional AI and ML that are still huge opportunities that banks need to use in general, in order to—how do we continually make that client experience better for our clients.

Brett Turner:

Data architecture, multi-bank data, APIs, and then changing the world?

Mark Smith:
Yeah, exactly. Per one API clerk at a time. 

Brett Turner:

Awesome. Awesome. Well, what are you guys most excited about? Like if you maybe looked ahead just even next year or if you want to go out a few years, where are you guys seeing some of the, you know, where innovation is going or coming from?

Mark Smith:
Yeah, see we’re product people so we could be here all day. So I’ll keep it to like two short ones. One is—we spent a lot of time talking around today—is data. How do we continually provide that data back to our client in the most efficient way possible so they can run their business better? Is it the operational reconciliation research? Is it the cash flow forecasting and different tools that we partner with you guys on as well? It’s how do we continually provide better insights to our clients so they can manage their business better every day? How do they generate more sales? How do they have more effective working capital? Especially in a higher interest rate environment, you know, every dollar is important for them.

The next bucket actually ties to our deposit account as well. So our virtual account management allows larger institutions that have multiple deposit account needs that they have—both the ability to transact, investigate, move money, manage, open, close. We have invested in some unique differentiation in that space that we think can solve for some of our real estate clients, our tech partners that are heavy in that deposit account money movement space that we’re feeling really bullish around our opportunity next year to kind of continue that progress and the differentiation in the marketplace.

Matt Vickers:
I would say probably two adds on my end, Brett. So number one is around insights and analytics. I think we as an industry, we’ve still only scratched the surface over how do you really give our clients truly insightful and analytical tools and, you know, get a wealth of data, right? How do we leverage that to the best possible extent? I think we’ve still only scratched the surface there. 

And then the second, as wild as this sounds, is really on the servicing side. In commercial, commercial is still a very human-centric servicing ecosystem. And we have a lot of opportunity in front of us to bring a digital-first mentality to that. So you can have a digital experience that’s complemented with a human servicing and relationship-based experience. And if we can thread that nicely, I think there’s some really cool innovative solutions that we can get to market.

Brett Turner:
You think eventually, like, you look at just proactiveness or anticipating client needs. I mean, you look at things to build off from the data or seeing trends to be able to then just be one step ahead or try to be one step ahead of the clients, I guess.

Mark Smith:

I mean, that’s where your generative AI and other AI opportunities come in. So one is how do you use some of those tools to solve things for our clients without having to have a physical person touch it? And then once you free up capacity in those physical people, how do you then provide those insights back? And you can tee some of those opportunities up through some of those new tools that are out there.

Or it’s also like, I know the client, I know Brett, I know what’s going on with his business, and now I can be much more practical in servicing you and your needs because I freed up capacity through some of those tools. And so it’s kind of a two-pronged approach that we think there’s opportunities, and it goes back to data, which is why we’re here—multi-bank, how do you cash flow forecast, but how do we actually, you know, enable our ability to go work directly with the client to solve their need better and better every day.

Brett Turner:
Awesome. Good stuff. Well, thank you guys—Mark and Matt—for being on the podcast.

Matt Vickers:
Thank you Brett. I appreciate it.