Fintech: NCino offers to overhaul European banks

This summer, Pullen Daniel, managing director for Europe and co-founder of nCino – and previously a director at Live Oak Bank in North Carolina – will move his family from Wilmington to London and open the US banking technology company’s first European office.

Not heard of nCino? You will. It’s one of those companies that might soon bring to wholesale finance the same kind of transformation that has already reconfigured retail banking.

Spencer Lake, the former head of capital financing and markets at HSBC and currently chairman of ICMA, tells Euromoney: “NCino has developed a cloud-based bank operating system to work through many of the workflows of customer relationship management, loan origination and credit extension, risk monitoring and reporting that hold out the promise of eventually being able to do all this much more efficiently and much, much faster.”

The company was carved out of Live Oak, a specialist lender to US small and medium-sized enterprises (SMEs) set up after the financial crisis in 2008 as a nationwide bank operating without branches and extending credit to funeral homes, vets, dentists, bowling alleys, chicken farms, craft breweries, you name it.

That bank still operates. Live Oak’s chief executive sits on nCino’s board.

Times were hard for those borrowers when credit standards suddenly ratcheted tight, but after the founders realised that other banks were a big group of potential customers for the operating system they had built for Live Oak, they set up a separate company around the technology in 2012.

Daniel tells Euromoney: “Other bankers would come to us at conferences and events and ask: ‘How is Live Oak so efficient? How are you able to do so much for so many customers?’

“And it struck us that, perhaps because they were stuck with old processes and old technology, a lot of smaller US banks almost did not know what they did not know, namely how it was even possible to transform these manual processes and make them digital.”

He adds: “We see a similar opportunity in Europe now that we did in the US in 2012. And we are confident we can take it because our company is more mature, has gained experience and credibility with other banks, and also has strong partnerships with leading systems integrators like Accenture, Deloitte and PwC.” 

The firm has also seen an opportunity to take new systems initially deployed by local US banks in small business lending and apply them to more complex wholesale finance operations of much bigger lenders.

“At the beginning of nCino, we couldn’t talk to the biggest banks about putting their mission critical technology in the public cloud,” says Daniel. “We had to first start with the community banks overhauling processes behind straightforward banking products. In doing that, we learned a lot.”

NCino signed up its first bank customer, Lone Star National – a community bank with a few dozen branches across south Texas and just $2 billion of assets – in 2012.

Daniel says: “We have learned that when you break down the more complicated businesses of the bigger banks, such as trade finance, or syndicated lending, into their component parts, the underlying workflows and processes are actually quite similar to small business lending.”

Banks have long operated complex bureaucracies around commercial lending, with originators bringing lending opportunities from customers to be approved or rejected by: underwriting committees; loan portfolio managers; and risk and compliance departments. Customers that passed those checks then might be presented terms negotiated with multiple inputs also from banks’ treasury and financing groups.

Banks tended not to place too much importance on the user experience, which was uniformly awful. They tended to follow those steps sequentially, with repeat input of the same terms into many separate internal systems that didn’t talk to each other, rather than dealing with each concurrently in ways that might benefit the customer.

In the report Banking the Customer Experience Dividend last year, KPMG Nunwood noted that three of the four biggest UK banks – Barclays, HSBC and Lloyds – don’t even make it into the top 100 customer brands in the country. Failure to do so, reflecting poor customer experience, might equate to a loss of £3.7 billion each in foregone revenues for the three years 2015-2018, based on analyst forecasts.

That now has to change.

“Banks in Europe realise that they cannot carry on doing business in the same way because their customers demand better,” Daniel says. “And the banks are hammering on the doors of the consultants and systems integrators for new solutions.”

NCino’s big breakthrough came late in November when SunTrust, one of the top-10 banks in the US with $205 billion in assets and second only to Wells Fargo as a lender to small businesses, confirmed that its commercial lending division would partner with nCino to overhaul and link up its previously disjointed customer relationship management, commercial loan origination and sales, and risk-management and reporting systems.

A week later it announced Regions Bank, another top-20 US bank, as a customer of its bank operating system.

It’s not a plug-and-play technology solution. This is workflow re-engineering that requires an overhaul of entire business processes. SunTrust began work on its project in 2014 and went public in November 2016. So, it requires some effort.

However, nCino claims that on average US banks that have adopted its operating system enjoy a 19% increase in loan volumes, a 34% decrease in loan processing times and a 17% reduction in operating costs.

Today, nCino counts eight out of the top 20 banks in the US among its 130 customers and has its eyes firmly set on expansion abroad. It has already signed up Bank of the West, owned by BNP Paribas, and is ramping up conversations with banks in Europe.

If nCino’s systems are so good, can banks that incorporate them gain a competitive advantage by negotiating exclusive access and precluding competitors in the same geographic or business markets? Some banks have asked for that, but it’s not the way nCino works.

“We do see a market advantage for those institutions who have been early adopters of the technology,” says Daniel.

“Our biggest US customers, who operate in similar geographic regions and compete for many of the same clients, have found a benefit in collaborating to bring continual improvement to the entire market eco-system. They also collaborate to share ideas, best practices and help influence the direction of our product.”

He explains: “We operate differently from traditional software providers that may customize core systems for specific banks. When we release an update, it goes to all of our customers which takes the same package and that makes it more scalable and efficient in ways that ultimately benefit every bank and its customers.”

Daniel uses an anecdote: “I was talking to one bank recently where it can take six months for large existing corporate customers to get renewal of their backstop credit lines approved. We have to be able to do better than that.

“And I see the notion that we are all in this together now taking hold at the top of many commercial banks.”