Deposits, Demographics, and Disruption: What's Next in Banking?

Transcript

Virginia Heyburn (00:02.808)
Hi everyone and welcome back to another episode of FinTech Unleashed. I'm Virginia Habern, Director of Research, Insights and Advocacy at EngageFI. It's the new year. It's a time for looking back on lessons learned and looking forward to brand new strategies for banks and credit unions. And in this episode, I'm joined by a couple of heavyweight industry experts to talk about how 2026 is going to redefine strategy for financial institutions who are positioning to win in an environment uncertainty, there's margin pressure, deposit competition, and lending risks. And all of this is happening amid a massive demographic shift and the largest wealth transfer in history. This is gonna require banks and credit unions to invest in the right technology faster than ever before. And it bears repeating, we have faced the need to innovate before, no question, but never at the speed that is required right now. And to have this important conversation, I'm joined by two incredible colleagues, who are trusted and respected across the financial services industry. Fabio Biasella, he's the Director of Strategic Services and a recognized expert in financial services strategy. And James White, Principal Strategist and recognized expert in technology strategy for financial services institutions. Fabio and James can talk about anything related to financial services strategy. That's why I love having them on the podcast. I know it's gonna be a terrific conversation. Fabio and James are on the market every day.

James White (01:25.869)
Yes.

Virginia Heyburn (01:31.308)
They're having C-level and board conversations about how to compete, how to win, how to grow in today's market. And they have really good advice on creating efficiencies, finding scale and deepening relationships with customers and members. It's important. It's a necessary conversation. I'm excited to bring it to you today.

Fabio Biasella (01:55.296)
Hello.

Virginia Heyburn (01:56.022)
Fabio and James welcome back to the podcast.

James White (01:56.462)
Hello, Thanks for having us.

Fabio Biasella (01:58.976)
Hello, Virginia.

Virginia Heyburn (02:03.83)
I love this kind of conversation where we have the benefit of an entire year to look back on. Certainly it's been eventful and then going into the future. It's always nice to have a little bit of a clean slate, but certainly a lot of the planning necessary to be successful in 2026 probably should have already happened. I want to talk about that. But as we get into our conversation, let's start with the economic environment. And Fabio, if I could go to you.

How do you expect the environment that we're in, rates, inflation, consumer confidence, to shape strategies for banks and credit unions in 2026?

Fabio Biasella (02:43.158)
Virginia, thanks. It's always good to see you. James, welcome to the party as well. These conversations were front and center in this year's planning cycle for certain. Continued sense of unease, sense of uncertainty. Most of the economic data is pinned within narrow ranges.

but we're not seeing the kind of responsiveness in terms of growth at many institutions or engagement in many institutions that they have historically seen. So it's becoming quite concerning for them. So when we look forward, when we're talking about looking forward, we're seeing this kind of continued kind of muddling along, continued transition into a different type of economy and really continued kind of.

You you've heard these terms come around the bifurcated economy, the barbelling of the American consumer engine. Those forces seem set to continue here in 2026. At least that's what we were factoring in to a lot of our planning discussions here in the last half of 206. So how do we deal with the fact that growth or economic activity is not as uniform as it has traditionally had been?

And then you get volatility in the numbers. One month it's good, next month it's bad. Pick your poison on which one it is. We do seem to be in a downward interest rate environment, lot more downward pressure than upward pressure for the moment, all things being equal. So perhaps that will help demand. But again, that's coming in this world of where the consumers are splitting into two, Virginia. And I don't know how much...

interest rate reductions will continue to stimulate loan demand, for example, the way it has historically. So that's been on the mind of a lot of C-suites. James, want to let you chime in there too.

James White (04:37.58)
No, I agree completely. We're entering into a really weird kind of strange middle ground. The rates aren't ever going to return back to emergency lows. They're more normalizing now. so, and as Fabio mentioned, consumer confidence is just kind of oddly bifurcated. So, the people with assets, they feel great. But then you also have people living paycheck to paycheck that feel squeezed. And so,

It's really going to be interesting how the institutions can adopt or adapt to that because ultimately it's what's old is new again, as what I always say, and we've got to get back to focusing on relationship bank.

Fabio Biasella (05:23.131)
Yeah, Virginia, I would add to that. That's a key point you had mentioned in your intro, the need for flexibility and sensitivity. A lot of that in plans now. I've seen plans where you kind of have these general longer term approaches, two, three, five year approaches. That has really shrunk down now to two years or less more often than not.

particularly when we're thinking about tactical adoption of a given strategy for a client. And it's increasingly, the primary filter seems to be, if I do this tactic, how flexible can it make me or will it make me on the operational side? Or how responsive does it make me on the customer-facing, member-facing side?

to be able to adapt to the things James was just describing. Really interesting kind of evolution in thinking taking place inside the C suites and boardrooms.

Virginia Heyburn (06:16.491)
And when we talk about this need to adapt, do you think the impact is going to differ for large institutions versus smaller community players? And if so, how?

Fabio Biasella (06:28.26)
James, you want to go first this time?

James White (06:29.688)
Sure. Yeah, I'll start this time. the look, excuse me, the large institutions, you know, they're going to be able to lean into things like wealth management and cross selling. When deposits are expensive and loans are slow, you know, the play can be fee income and capturing the wallet share, you know, the customers who have the money to manage, they'll be able to lean into that. But the community players, they've got to focus on relationship and trust and, you know, as

those rates normalize, the mega banks, just, they can't buy deposits anymore. So the smaller institutions that actually know the members or customers that can compete on customer service, speed, you local knowledge, you know, things that matter when the rates cool down.

Fabio Biasella (07:15.573)
Yeah, intimacy, right? And that leads right into the generational transfer concepts you also talked in the beginning. I really do see clients beginning to embark, at least from a strategic marketing, strategic communication perspective, Virginia, on how do we begin to build those intergenerational communication?

approaches where we're talking to parents and grandparents, not just about what the particular need is for the parents and grandparents, but as part of a larger overarching conversation that leverages to the strengths that smaller organizations have historically had, which is those long-term relationships where we kind of know the name of the parties in question. And finally coalescing that into the goal that it really is.

for many smaller institutions is a key point of differentiation that I've seen emerge in the planning sessions for this year, for sure.

Virginia Heyburn (08:09.281)
Yeah, and James, you said something really important. You said relationship banking, we've got to get back to the basics. And in so many ways, I think, through this whole process of digital transformation, we've in a way pushed the customer and the member farther away. So we lost some of that intimacy. And what I'm hearing you saying, and Fabio, you too, is we've got to bring the member and the customer closer. And that's where our sphere of competition exists, not necessarily.

getting deposits just by winning the rape war. Did I get that right?

James White (08:42.304)
Yeah, absolutely. Well, and historically, at least in my experience, we've really looked at customers or members in two big categories. It's either our older members or our younger members or customers and how to attract them. And now we've really got to break that down even further. And each generational segment has different needs, wants and want to be interacted with in a certain way. And so we've really got to break that down. can't.

leave our traditionalist or our baby boomers because they're the ones that fund the organization. But so we want to make sure we're catering to them, but continue to cater to millennials, Gen Z and even Gen A.

Fabio Biasella (09:25.514)
Right, and I'll add a vector to what James is saying there. Used to be you could separate your channels, your channel activity and messaging accordingly, right? Now it's not only just a consistent message across the channels, if you will, but it's mostly you've got to have everything passing through a digital strategy for each of the generational segments or subsets that you create as well. Because each of them will have digital behaviors and digital needs that will be different than the ones that we

have traditionally taken care of via the branch or branch network. And we have to begin to bring that into our thinking and bring that into our approach to product design and feature design going forward now. So right, it used to be you separate the old and the young and the younger tended to be more digital and you could communicate them with them in the digital channels. Still true, but their experience needs to be a lot different than the digital experience for the older member now.

who's our customer who's also going into those channels increasingly as much. it's a real more vector of complexity that I think clients are now finally starting to say, yeah, that makes sense. You got to have a digital set of lenses that takes care of a lot of your strategies as well as your physical lenses as well.

Virginia Heyburn (10:45.535)
Yeah, let's dig into that a little bit because it sounds like there's one way of engaging with older generations and I will include myself in that. But then there's another way to engage with the younger demographics is what we're saying here is you need to have a divergent digital strategy to be able to really meet the needs of these different generations.

James White (10:46.062)
Thank

James White (11:00.558)
You

James White (11:10.898)
That's exactly what we're saying. And it's more than just two. Fabio is really old. Let's just put him in the really old section. You interact with Fabio very different than you do me, which I'm just barely a Gen Xer versus somebody who's a millennial. And so there's a balance and a mix between.

Fabio Biasella (11:18.528)
What a keen observation on your part, yes.

James White (11:39.18)
I'm still going to go into a branch from time to time, but the mobile experience is very important to me. And then my daughter is never going to go into a branch unless she has a really complex transaction that she really needs help with. And so it is very different.

Virginia Heyburn (11:56.704)
In which case, if your daughter does walk into a branch, they better have something to say to her when she does because it's a rare occasion, right? And that's where trust is established too.

Fabio Biasella (12:06.066)
Yeah, and I posed that, I posed that in the reverse, right? James is young and spry, right? But imagine...

James White (12:06.542)
Thanks.

Fabio Biasella (12:13.116)
availing yourself the way Virginia and I perhaps have availed ourselves of bankers or banking expertise in the past, flowing across a physical desk, if you will. I've really challenged clients to think about how you take that banker who is your institution's software and hardware, if you will, and figuring out how to pump it through your digital channel into your digital experience, either in the form of a digital concierge or a digital personal banker,

or something like that so that when the more digital native enters those channels, they're actually can avail themselves of the same kind of human interaction that we would have otherwise.

done so at the branch. I think that's a real point of opportunity. And that's a complicated problem, I understand, but that's one where I think if you figure that out, you have a significant point of differentiation and a significant first mover advantage that you can embed in your digital experience in particular. And also transform how you staff and use your branches as well. So, sides.

Virginia Heyburn (13:19.287)
There's a lot there, right? So if I'm a smaller financial institution listening, I'm totally on board. I get everything that you're saying, but at the same time, I have a budget. There's a limit, right, to what I can do, what I can invest in. If you think about the technology investments that are needed to accomplish what you both have just described, which of those investments will deliver the greatest ROI in 2026? In other words, what should smaller financial institutions prioritize?

James White (13:40.942)
Thank

James White (13:50.766)
Well, I definitely have an opinion. So first off, I would say the smaller institutions really should look to band together. You know, I've seen a lot of QSo's startup and being able to help one another. what we're talking about from interacting on the digital side in different ways, according to the generational segments, that can seem overwhelming because first you've got to get your data in order. And so

Just start on trying to get what I call the golden record or the 360 degree view. Get all of the disparate data into one location, cleaned and normalized so that you know all of the activities and services that you're providing to a specific member so that then you can begin to understand them and get to how you're going to interact with them. But starting to get data cleanup and data strategy is crucial now more than ever for interacting with the

customer remember, or if you really want to leverage AI, you've got to start doing that too. there's really getting the data cleaned up is important.

Fabio Biasella (14:56.353)
Yeah, exactly, James and Virginia. Once the data is cleaned up, are seeing tools, tool sets and fintechs emerging.

Virginia Heyburn (14:56.438)
Mm-hmm.

Fabio Biasella (15:05.291)
which can help provide that flexibility and kind of nimbleness or agility that oftentimes has been missing in the kind of the historical development of our digital experiences at clients. So that's the good news. It's on its way. And if we have a limited budget, there are ways to focus and prioritize what's the most important thing around your data strategy. For example, stop trying to boil the ocean. Get me these particular key items in this particular manner inside of this digital

digital experience and work with partners that can do that and find partners that can do that. Increasingly, I'm seeing that as a criteria that's floating upward in clients decision thinking processes is how flexible would this partnership or this investment with this FinTech make me not just for today, but the thing I've got to be able to do in the future that I don't know about right now.

So we're seeing clients start to think and reshape their entire technical posture around that reality where appropriate. So that's how I would counsel a smaller shop. Let's get our few, one or two, three key priorities on the messaging and the interaction we want to have with our customers in what channels, through what experience, get the data required just for that.

if need be and focus there, get good at that and then build musculature and scale from there.

Virginia Heyburn (16:37.591)
I love that. what we're talking about here is really reimagining the experience that a customer and member has with a financial institution. And I think it's a great irony that historically technology has moved us in some ways further away from the customer and member and now AI is going to bring us closer. It's going to give smaller financial institutions that ability to compete. So there's that innovation angle. But then there's also

And I think this is against the backdrop of the great wealth transfer, a need for financial institutions to deliver new products, brand new products. And that's something that financial institutions have not really done much of in the last couple of decades. Am I right? Wrong? Alternative views?

Fabio Biasella (17:24.525)
No, I think you're correct there, Virginia. If I heard you correctly, because we did lose you a little bit in transmission there, you were talking about how the role that AI and the advanced analytics and the advanced platform can play in the wealth generation.

Virginia Heyburn (17:43.958)
Yes.

Fabio Biasella (17:44.769)
Yes.

Virginia Heyburn (17:50.325)
Yep, will do.

Let me remember what my question was because it's all like off the top of my head. I get it.

Fabio Biasella (17:57.934)
AI and generational, I heard the words AI, AI investments and generational wealth transfer something institutions haven't been thinking of.

Virginia Heyburn (18:02.187)
Yeah. Yeah. Okay.

James White (18:04.59)
Thank you.

Virginia Heyburn (18:08.215)
So another question I want to ask you is we've been talking about technology, specifically artificial intelligence, to reimagine the experience that a customer and member has with a financial institution, but there's also a need to innovate in a different way, and that is to deliver brand new products and services. Yes.

that not working.

Fabio Biasella (18:31.531)
You cut out again? I don't think he wants you to ask this question.

James White (18:33.325)
Yeah.

Virginia Heyburn (18:35.211)
HA!

James White (18:38.06)
Yes.

Virginia Heyburn (18:39.703)
Can you hear me fine now?

Fabio Biasella (18:42.743)
Yes, it died immediately when you went into the question. It let you do the preamble.

Virginia Heyburn (18:43.606)
Okay.

Virginia Heyburn (18:49.239)
okay.

We'll try again. I hope this works.

Virginia Heyburn (18:59.36)
Okay.

I'm not used to this, all these cuts. Okay, what was I gonna ask? Yes. Yeah, yeah, yeah. So what we've been talking about is really the need to innovate around the customer and member experience, right? How do we use artificial intelligence to materially improve the intimacy that we have with customers and members? But there's another aspect of innovation that I think is just as important, and that is how do we deliver brand new products and services

Fabio Biasella (19:07.085)
AI, generational wealth transfer. I haven't thought about it.

Virginia Heyburn (19:32.151)
to this demographic that has brand new needs. What are your thoughts on that?

Fabio Biasella (19:37.698)
Now, James, you want to kick that one off? All right. So when I think about product innovation and product design, it touches back to what we were talking about, that intergenerational wealth transfer.

James White (19:39.444)
You go right ahead.

Fabio Biasella (19:51.694)
You now have the Baby Boon generation completely entering retirement. They will be fully retired as a group. There will be stragglers by 2030. And for the overwhelming majority of the Boomer cohort group, the number one asset is the equity in their home, for example.

So we've had as banks and credit unions products for years, helping them cater to acquiring and or improving their homes to help them drive and gain equity, if you will. Well, we're entering into another phase of that, I think, where if you think about that intergenerational conversation that needs to take place, if the equity in the home is the main asset for the parents in question, it would be who've

institutions that have these long time relationships to begin helping them broach that overarching discussion about how to manage that equity A so that they have it for retirement through retirement and or to pass on to their children. So an entirely different approach to how you might present a product, say a home equity or a reverse mortgage to to older, more established customer. But then how you would also then need to to begin thinking about

How do we make sure that they have the appropriate legal documentation, powers of attorneys available to them? And how do we make that as a feature of the product where and when appropriate? So you have all of these opportunities for innovative product design. And that's where tools like AI can help us us standardize some of that, or at least capture some of those baseline conversations. That's just a particular example on wealth management of the key asset, of a key asset for the boomer generation.

number of examples that you can take downstream. James, I know you and I, often talk about the digital private banker. I'm not sure if you want to go there, but that whole notion of having an AI personal banker, private banker, helping an individual manage their financial lifestyle or their financial well-being is, I think, very intriguing.

James White (21:48.398)
you

James White (22:03.192)
Yeah, for sure. So one of the things that Fabio and I talk to customers about as well is leveraging the relationship that you have with those older demographics to start to build and bridge the gap with the relationship with younger prospective members or inactive members. And so we've been trying to historically attract younger demographics with creating new products and services and marketing to them.

just as we would anybody that we're trying to acquire as a new customer. And we're really losing that battle to the big five who are really spending a tremendous amount of marketing dollars to go after those younger demographics. so leveraging those relationships. So there's products and services that you can create that will help leverage that relationship. there can be, we've seen a deposit product as an example that

grandparents and parents can invest in for their children or as their children get Christmas money and holiday money, they put that in and it grows somewhat like the new Trump account that was announced. But there are some credit unions and banks that are starting to offer that internally as well. Just finding ways to try to get the younger demographics to appreciate the value that you bring as a community institution.

Most younger demographics really value community and making a difference and all those things. And especially for a credit union, they have no idea what even a credit union is or the value proposition of a credit union. So once they understand that, that's something that they would naturally lean into. And there's very simple products and services that you can create to be able to help bridge that gap and bridge that relationship with the older demographic.

so that it carries forward into the younger demographic.

Fabio Biasella (24:01.473)
Yeah. And then I would add for, from product on the younger side, you have to be in those digital split spaces. The exercise that I put clients through is during sessions, for example, with boards or what have you, is I have everybody take out their phone and go to the spot in their phone where they have heard it all of their banking and insurance and finance apps. Right. If you're

a typical individual, will place all of those in one file folder or on one screen on your phone for convenience sake. And I point out to them that that in many ways is the reality of what primacy looks like.

Your app needs to be on that screen or in that file folder, first and foremost, to have any attempt at being primary. And then secondly, you look at that, you look at that panoply of apps that's on there and you go, okay, how can I compete with all of these? Well, perhaps it isn't necessarily competing with all of them directly, but it's how well your app facilitates or can play with.

all of those other apps that are on that screen or in that file folder is a different approach and a different mode of thinking that I financial institutions starting to entertain. And I think that's a stronger way to approach the competitive posture, making sure your app is there and it's capable of being there. And then once it's there, can it support the rest of the consumer's financial behaviors?

And you'd be just for giggles. I've done this now for a year. the number of apps range from five. had one individual told me they had 28 different financial apps on their phone. So it gives you an idea.

Virginia Heyburn (25:40.033)
you

That sounds very

Fabio Biasella (25:46.848)
Yeah, and not an insider. not like a research dork like me or a research guru like James, who were downloading apps to save others from having to do it, if you will. But just a typical consumer with a lot going on. And I was struck by that. And then the other corollary that I think is interesting that clients need to be aware of is consumer will download an app to do just one thing with it.

James White (25:47.064)
Yeah.

Fabio Biasella (26:15.437)
as long as it provides a really good experience and it's convenient and capable, right? So that's also something to remember as well. So you're really seeing that atomization of consumer financial behaviors that we have to think about how our products and our mobile apps mitigate.

Virginia Heyburn (26:35.073)
Yes, and we don't want just the deposits, we want the loans, right? So let's talk about credit. Let's talk about the lending segments, consumer, mortgage, commercial, which pose the greatest risk or the greatest opportunity in 2026? And how should institutions, both large and small, be thinking about underwriting and pricing strategies?

Fabio Biasella (26:57.603)
boy, the big one. So James, you wanted me to go or you?

James White (27:02.114)
Yeah, I can start. the greatest risk by far is commercial real estate. So the pain is definitely not over. Remote work has normalized. People are starting to come back into the office to some extent. Retail is consolidated. But ultimately, those loans made in 2018 just assumed that the world wasn't going to exist anymore. And they're all coming up for refinance. they're having a real

rude awakening at the difference in rates. So from a greatest opportunity perspective, consumer lending is really a big opportunity for the middle class. know, the people who have decent credit, you know, who've been priced out of home ownership, but they still need cars or home improvements or emergency cushions, know, community institutions can really underwrite

these and build relationships and use it as an opportunity to establish themselves because the large banks just aren't going to be able to do that. So that's my opinion.

Fabio Biasella (28:10.573)
Great. And I would add two corollaries to that. You are seeing on the student loan side, as amnesty has faded away in 2024 and 2025, student loan delinquencies returned to their historical levels, even a little bit above in certain instances, and had done so across age ranges, at least for the third quarter of 2025.

The incidence of delinquency was as high in the 50-year-old group as it was in the 18 to 25-year-old group, Virginia. So student loans, paying attention to the student loan burden that not just young individuals are carrying, but perhaps Gen X parents are carrying on behalf of their children.

is also something you'd want to be aware of, be aware of. But to James's point, you're absolutely right on the consumer side. I think if we're dealing with that bifurcated world, the haves and the have-lesses, how well we understand the situations of the have-lesses and how well we help them manage that is going to require a lot more story lending, a lot more listening beyond the transaction at hand.

than institutions have historically had to do over the last decade or so. So it'd be interesting to see how they are able to amp up those resources and how these new online tools around AI can certainly maybe help them underwrite differently or take more nuance into the circumstance more clearly. Because that's going to be another point of differentiation, I think. Those clients that are able to better deal with

the nuances of consumer lending to individuals who perhaps are not as obviously able to manage their situation as the wealthier individual is, is going to be a place where we can win and we can maybe create some extra margin to support our business as well, while still taking care of the consumer and being

Fabio Biasella (30:23.027)
and being faithful to the mission, certainly the mission of many credit unions, but most community banks as well.

James White (30:29.25)
Yeah, one of the things that I talked about, this was quite some time ago, say four or five years ago when financial health and financial wellness really started to bubble up to be popular, is there are tools out there that will create a financial health or financial wellness scoring model. So you can use that for education and things like that. But I would argue as you really get into story lending or relationship lending,

being able to have a financial health score in addition to a credit score is a great way to be able to look at that relationship and make a decision that's not necessarily just on credit score.

Fabio Biasella (31:08.597)
I And I think you'll see increasing consumer adoption or least increasing consumer sensitivity to that financial health score in the same manner you're seeing that for the credit, have seen that for the credit score as the younger generations have emerged. So it's an interesting point of differentiation, James. Absolutely.

Virginia Heyburn (31:25.967)
Those are great insights. Let's talk about payments. There's obviously a lot of utility of artificial intelligence when it comes to improving payments. I think this is an important conversation because when we think about how to bring the member or customer closer to us, how to expand the relationship, the payments experience is a big part of how a customer and member views that financial institution. How do you move my money? Is it fast? Is it safe?

Now, what's happening with real-time payments, FedNow, embedded finance, the payments world, that just keeps accelerating. Which developments do you think will most materially impact revenue streams and relationships in 2026? James, do you want to start?

James White (32:11.886)
Yeah, I'll start. So first off, the interchange revenue model has been being disrupted and will continue to be disrupted by these new channel players. payments are going to continue to move from the card rails to real-time rails to even crypto and tokenized as well. And so those institutions need to be prepared

lose those swipe fees. As the dust settles, you know, for all that, there'll be other ways to fee and find replacement revenue, value added services, fraud protection, cashflow forecasting, you know, that kind of stuff. But they have to be prepared because Walmart and Amazon are going to find some way to reduce their interchange expense. And that is a dramatic impact to revenue for these institutions.

Fabio Biasella (33:11.213)
Yeah, in fact, most of the very progressive shops, very forward-looking shops that when we're doing planning, Virginia, are trying to envision a life where interchange revenue goes away.

Think about that for a moment. as, know, so the council I'm giving to those who would be listening to this is we have to incorporate some variant of that into our thinking. And there are ways around, you know, to mitigate this and as James was describing, they're just gonna require a bit of a wholesale change in our thinking and our approach that we really need to, as leadership teams of our respective institutions, get up to speed on

much more quickly and get comfortable with doing. mean, the last planning session I was at, we were actually discussing at length, will the institution need to issue its own stable coin to handle payment settlements in the future? And that is an enormously foreign thought.

for most leaders to have. So it's beginning to happen and I'm heartened by that. And we're gonna need to see a lot more of that because to the extent that there's a good point of differentiation that kind of ties threading together everything we were talking about. If our approach to consumers historically has been deposited loans, gathering deposits and making loans to them, right? A product driven approach for the younger.

individuals, the youngest consumers in particular that are coming online, how we help them manage their payments is as equally important as the deposit-to-loan relationship, if not more so, and is the lead entree point often for them. Because the other force that's at play is you're seeing financial behaviors go into the younger generations, often through their parents now, but at much younger ages.

Fabio Biasella (35:05.421)
Not uncommon for 10 and 12 year olds to have debit cards now. Not uncommon for the first credit card to be gotten at age 18. Certainly a majority of individuals have their first card by the age of 21. So you're talking about adoption while we're still in school, certainly school age years for many.

many of the youngest consumers and that's all around how they're moving money around. So strategically, if we're thinking about protecting our organizations for the future, being central in that world is a great place to start your thinking.

Virginia Heyburn (35:42.274)
Fabio, let me ask you follow-up question there. I agree with you, and at the same time, I'm wondering, are financial institutions organizationally set up to do exactly what you've described, because that payments line of business, it doesn't exist in the same way that loans and deposits exist as sort of a line of business. What would financial institutions really need to do to coalesce strategically around the payments opportunity?

James White (35:42.485)
Fabio Biasella (36:08.885)
Yeah, you would have to literally separate it into its own functional line. Debit cards, credit cards, real time payments, digital money movement, all under the auspices of we are the guarantors of trust for the consumer to the world writ large, the digital world writ large. That's really what the role that primarily financial institutions play. They say,

to the rest of the world that Fabio is who he says he is and is good for what he's trying to do in terms of buying things, if you will. Bringing that into its own separate kind of functional unit or making it prominent amongst your deposit unit, let's say, is really a trend that we're seeing more and more of. And then traditional deposit gathering actually just becomes a subset activity of moving money around.

So we go from a balanced perspective to a transaction perspective on the consumer side and the small business side. So I'm seeing that more and more, those types of discussions. How do I isolate my payments into a functional unit and then support it properly and help it lead the organization in the other areas?

Virginia Heyburn (37:25.985)
Yep, so big question here, and James, I'll maybe ask you to weigh in on this. I mean, we're talking about major shifts, operational, structural, cultural, that need to take place in financial services to be able to take advantage of all these opportunities and also manage these risks and challenges. That leads me to think that maybe the board of the future has to look a little bit different, right, for a financial institution.

James White (37:26.35)
Thanks.

Virginia Heyburn (37:52.023)
How is governance, risk oversight, technology fluency within the board going to need to evolve?

James White (37:58.606)
you

Fabio Biasella (38:01.65)
Number one.

James White (38:01.868)
Yeah, it's going to have to evolve dramatically. I've seen a lot of organizations start to do a lot of our fair amount of board training around technology, around AI, around payments, trying to get them up to speed. But especially in the credit union industry, the boards are obviously volunteers. And so you've really got to lean into those boards to make sure that you have a strong board.

that isn't focused per se on making sure that your organization works well for the demographic that they represent as an individual. And so really forward thinking, some executives from industries that are already more forward thinking so that they can help the organization pull forward because you're absolutely right, there's compounding effects and it translates from the board to the culture of the organization because

the culture of the organization needs to shift to be more agile, as Fabio mentioned earlier, as well as taking risk and compliance and more of a partnership instead of a department that just says no. And so there's going to be a tremendous amount of shifts over the next few years. And some organizations are going to be able to do it and some are not.

Fabio Biasella (39:22.465)
Yeah, there's a headlong movement at the board level to not just incorporate the next generations in more squarely into the governance structure of the board, having seats at the board, if you will, but individuals with this type of comfort level and background, individuals who are used to obviously taking out their phone and solving problems, financial problems, is enormously beneficial.

to organizations and I do see them making a headlong effort on trying to incorporate these people into the, these types of individuals into their board structures, if you will. And then alternating, looking to their governance more as forward looking as these factors come into play. Absolutely, absolutely a big point of, hey, we got to do something and we got to do it now taking place.

Virginia Heyburn (40:17.439)
And it's not just the day to day, right? It's not just the day to day of investing in technology and managing credit and growing deposits. There's some real risks on the horizon. You you think I've been in financial services for almost 30 years and I can't think of a time when we had these, the types of problems that we potentially face. say potentially, geopolitical risks, climate events.

huge technology disruptions that have been in the news in the past couple of years. All of this could be really destructive when it comes to liquidity and operations. How do financial institutions prepare for something like that?

Fabio Biasella (40:57.325)
That's a big one. I do see them not talking enough about it in the way you just described. Now just kind of looking back at this year's efforts. I think what you will begin to...

Virginia Heyburn (41:01.781)
I know and we have to talk about it, right?

Fabio Biasella (41:17.449)
to see is a bolstering of the enterprise risk concepts. ERM will take on a larger role, but will be more of a partner role, as James was describing earlier. But lot of the risks, clients are highly reliant on their third party resources to help them assess.

And we're entering an area where even the third party resources who are extraordinarily fluent and very competent in what they do are concerned about what lies around the corner or maybe latent, latently building, you know, given the proliferation of the AI tools that are out there as well. So it is a big issue and it really places greater and greater emphasis on know thy customer, know thy member and have

James White (42:03.118)
Thank

Fabio Biasella (42:11.489)
have processes in place, parameters in place, that can breathe a little bit but notice quite quickly when something is truly unusual. So I'm seeing that type of sophistication come in, where you have these are my narrower parameters. Hey, this is.

just outside the typical parameter for this customer member, what do we need to do to have a place? And that's where I think the human capital can shine going forward. So if you think of an AI world kind of monitoring things and competing against other AIs, that will still require a human to supervise, run, and differentiate that. So I do see clients making those types of.

investments. had a great year. I'll tie this off with a great example. Talking, talking post post plan session with the CEO saying, how do I need to think about my people differently going forward or into the future, Fabio? And it is really about their came to the conclusion about their ability to begin to show high degrees of vigilance and agency in this new AI driven world. So

realizing that AI won't replace the human, it'll sit there with the human and offer the same types of protections, but just be much quicker at recognizing them than I think we see right now. that's the best I have to offer. Clients better start spending a lot more time thinking about this, but thinking about it as a go-forward proposition, not a reason not to do something. Okay?

James White (43:53.912)
Mm-hmm.

Virginia Heyburn (43:54.519)
I love that.

Fabio Biasella (43:56.534)
Right. Cause that I do see that conversation a lot. Well, we better not cause it's too risky.

The consumers are moving this way. They will find partners who have figured out how to solve these problems, and they will move forward with them. that creates, now it gets us back to the relevancy argument that we started this conversation with again. So fascinating how clearly things are all intertwined now. We've always known it, Virginia, because we've always felt it being inside of shops.

But now most decisions have ripple effects across all of your areas strategically, and they need to be considered that way. That's another change in governance to build on your prior question that I'm seeing much greater understanding and consideration of the ripple effects across the organization in its entirety at the board level.

Virginia Heyburn (44:52.407)
So James.

James White (44:52.679)
Yeah, I would add the compounding effect as well, not just the ripple effect.

Fabio Biasella (44:58.317)
Sure. Good point. Yeah.

Virginia Heyburn (44:59.827)
Absolutely. So closing out the podcast, I want to ask you both a question. Given all of this that we've talked about, I mean, this is a huge conversation. We're talking about major shifts in how financial institutions operate. There's excitement associated with that, and there's probably also a fair amount of concern. But what advice would you give to a CEO of a bank or credit union today?

going into 2026, what to pay attention to.

James White (45:31.084)
Yeah, well, first, I would just say that the institutions that are most successful in 2026, they won't be the ones that have the biggest budget or the fanciest technology. They'll be the ones that stay closest to their members or customers, and they move fast when it matters. And they remember that banking is ultimately a trust and a relationship business.

Fabio Biasella (45:54.05)
Yeah, the advice I would give clients and I have been giving clients is we are entering a period where greater courage is going to be required across the organization. So leadership is moving from just, we got to go that way, but we got to go that way despite whatever issues or challenges we might face. And the degree to which we are able to lead with courage, to change with courage.

where and when appropriate so that we can stay close to our members and our customers and be the arbiters of their trust, if you will, to the marketplace writ large. Will be that that's the kind of thinking that can embed across whatever.

the leaders happened to be doing at that time. And there's not enough of that. There's still a lot of waiting around for more information. There's still a bias towards the status quo and being able to recognize that the status quo is increasingly leaving us behind or boxing us in to what's going to need to be done is not gonna work.

So you've got to be a bit more courageous and be a bit more methodical. It's not even in risk taking. It's just accelerating the evolution of your organization to keep pace with the realities of the world at large. So that would be the advice I give to clients.

Virginia Heyburn (47:19.415)
Thank you both for your time today. This has been a really interesting conversation.

Fabio Biasella (47:25.707)
Wonderful. Thank you, Virginia, so much.

James White (47:26.318)
Thank you.

Virginia Heyburn (47:29.591)
So that's it for this episode of FinTech Unleashed. Today we explored what 2026 might look like for financial institutions from economic trends, margin pressures, technology innovation, and AI strategy. And there are a few action items that I heard in this conversation with Fabio and James. Number one, audit your data strategy. That's something that you should be doing right now. AI and advanced analytics are going to depend on clean, well-governed data.

Number two, revisit your deposit and lending playbook. Align pricing and risk models with evolving market conditions. There is a need for product innovation here and we need to invest. We also have to invest in scalable technology. So prioritize solutions that deliver ROI and can grow with your institution. And above all, your technology environment should be agile. You should have that ability to pivot when you need to.

James White (48:10.155)
you

Virginia Heyburn (48:24.577)
Prepare your board for the future. We talked about that. In short, governance includes technology fluency and risk oversight. And then finally, last but not least, don't go it alone. Explore partnerships to accelerate innovation without overextending your resources, of course. Now, if you enjoyed today's discussion, make FinTech Unleashed part of your routine and share it with your colleagues. If you have any questions or topics you'd like us to cover, reach out. We'd love to hear from you.

Fabio and James, know they would be just so happy to hear from you and have those strategic conversations. That is what we're here for. Thanks for listening. And until next time, here's wishing you a terrific 2026.

Fabio Biasella (49:05.015)
Cheers everyone.