Jack Henry's 2026 Benchmark: Why Banks Lose Deposits to Fintechs

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Jim Marous (00:11):

Most banks and credit unions are chasing deposits harder than ever, but are still coming up short. At the same time, fintechs have moved to the top of the threat list, and in many cases, are opening more accounts than ever, even more than the largest financial institutions. And despite increased technology spend, growth remains uneven. So, what actually is getting in the way?

Jim Marous (00:35):

Today, I’m joined again by Lee Wetherington from Jack Henry to break down their 2026 strategy benchmark study, and what it reveals about where banks are losing ground and where a few have started to pull ahead.

Jim Marous (00:49):

It's going to be interesting to talk about the differences between both the banks and credit unions, but also look at the gap that we're trying to fill because there's not just one issue to fix in isolation. It's a shift in how banking works, who owns the relationship, and where value is really created.

Jim Marous (01:08):

So, Lee, welcome back to the show. It's great to see you again. How you been?

Lee Wetherington (01:12):

Yeah, Jim, I'm doing great. Thanks so much for having me back. I am inspired to be here, and I know your red shoes are out of frame, but I know they're there, so I'm doubly excited to be here. It's good to see you.

Jim Marous (01:24):

They are for sure. It's interesting. Your report covers a lot of ground, very much like our annual trends and predictions report that we do. There's so much going on. There's so much change. It's happening so fast.

Jim Marous (01:37):

And yet some of the trends are showing up that have shown up before while there's new ones cropping up. So, if you step back from all the data, what's the one finding that should get the most attention from banking leaders as they open up your report?

Lee Wetherington (01:54):

I think the thing that stood out top line to me this year more than anything else was that banks and credit unions are both really struggling and challenged by growth, but they frame it in two completely different ways. It's like they're talking about the same thing through two completely disparate lenses.

Lee Wetherington (02:17):

Banks, like they did last year, are saying that deposit growth is their top priority. Credit unions, their top priority per our benchmark this year was efficiency, but at a very close number two is the perennial we've got to acquire younger members to make up for what we're losing as they grey out and die off.

Lee Wetherington (02:39):

And what really comes into stark relief going through the other questions in the benchmark – and by the way, this benchmark, we’re just shy of 200 CEOs answering the questions in the benchmark with banks and credit unions. And so, it's the comparing and the contrasting where it gets really interesting.

Lee Wetherington (02:57):

But again, what stood out was that banks are again talking about how important growing deposits is. Credit unions talking about how important acquiring new and younger account holders is, and they don't understand they're talking about the same exact thing. It's all about growth, but the real opportunity is to understand why and how it is that they're talking about the same thing.

Lee Wetherington (03:26):

Banks don't understand how Gen Z is driving most small business formation in the United States now, and therefore, don't make the connection to small business deposits, which are typically four to five times larger than retail deposits.

Lee Wetherington (03:40):

So, if you're really trying to get serious about growing deposits, it would be really good to understand the demographic and psychographic profile of small businesses now. Over on the credit union side, they're looking at how do we get Gen Z to the door? How do we get Gen Alpha to the door?

Lee Wetherington (03:57):

We don't have millions of dollars like Chime to spend on national ad campaigns to get them to the door. So, what do we do, especially within the confines and constraints of the particular charter types that credit unions have.

Lee Wetherington (04:11):

But they're finally beginning to wake up to other ways of getting Gen Z to the door, especially in the context of an economy that's slowing down, and where pressure on the bottom of the K – we don't really have a K-shaped economy, we have an E-shaped economy. If you want to talk about that, we can get into that.

Lee Wetherington (04:29):

But that pressure on the bottom of the K where most of Gen Z resides means they're going to be leaning on their Gen X parents in a way that they haven't in a while. And if you look at that not only as a challenge, but as an opportunity to bring Gen X parents together with Gen Z in a structured way and even build products and services around connecting them in a meaningful way as the economy sours here for the foreseeable future.

Lee Wetherington (04:59):

That is one very effective way of not only bringing Gen Z back to, in this instance, the credit union, but also beginning to reestablish some generational continuity that's been fundamentally disrupted by the likes of SoFi and all these other big fintechs that have mastered their go-to-market Henry strategies that have disrupted that historical analogue handoff generation to generation in both community banks and credit unions.

Jim Marous (05:26):

So, interestingly, both banks and credit unions are saying growth is their biggest challenge. One says deposit growth, the other one says segment growth. And the reality is this is not like the holy grail. It's not completely impossible to break down what they're trying to achieve and say, “Geez, have you looked at this? Have you looked at that?”

Jim Marous (05:48):

One thing I rail on almost every podcast (I'm doing it again now) is the fact that we haven't made it easy to get in the front door from new account growth. So, we have a 12 to 17 to 22-minute new account opening process on a phone, and yet there's solutions out there that can make it so you can get down to three to five minutes.

Jim Marous (06:10):

You talked about the generational combining the older and the younger generation. Well, let's go a step further and say, there's a huge wealth transfer that's going to happen between the baby boomers and their kids, be it Gen X or Gen Z. And the reality is we're not building that really well.

Jim Marous (06:26):

And then on top of that, we have silent attrition that's eating away at the sides where we have organisations that continually have money flowing out on a regular basis, things that are trackable, and yet we do nothing about it. I rant about it because we talk about what our problems are, but we don't take care of what I believe are the easiest low hanging fruit.

Jim Marous (06:53):

What are you seeing as the biggest challenge in these organisations actually achieving the growth that they say they crave so much?

Lee Wetherington (07:01):

It really gets down to lowest hanging fruit. And one of the biggest blind spots that both banks and credit unions have been suffering from at this nexus of where growth can happen is they're not doing that, they're not doing those scans that you're talking about. They're not even doing the basic sort of payments analytics to know where they have net deposit attrition and who those third parties are, how much attrition is happening, what does the rate of attrition look like now? How is that rate of attrition changing over time?

Lee Wetherington (07:36):

You have to be looking at it, not just one off. You have to be kind of perpetually looking at those flows to understand what kind of deposit attrition you're up against and what the mechanisms drawing that deposit attrition look like. Somewhere between 13 to 35% of all retail checking accounts in both banks and credit unions are camouflaging micro and small business owners, and most of those, by the way, are Gen Z.

Lee Wetherington (08:04):

And because those micro and small business owners don't see any way to easily get paid or to accept payments inside of the context of that digital retail checking account relationship, they have for the last 15 plus years been going out to third parties, payment apps, et cetera, that make accepting payments really easy.

Lee Wetherington (08:25):

And then the problem is that only one of every $8 collected in those third party settings ever makes its way back to the bank or credit union. So, if you're a bank who's like, "We have got to grow deposits," this is where you would begin. It's doing not only the payment flow analytics, but then surfacing and identifying the camouflage micro and small business owners by way of those analytics, and then giving them what they want. And the first order thing that they want and need is an easy way to get paid.

Lee Wetherington (08:59):

This is why over the last couple of years, we've really focused most of our R&D and innovation efforts in and around debit based real time money movement and payment acceptance. We rolled out something called tap to local, and we offer it only exclusively through the banks and credit unions that we serve so that they can in real time, enable an account holder to at the top of a button begin accepting payments on their phone.

Lee Wetherington (09:26):

It doesn't matter if it's an iPhone or an Android or whatever, they can accept any and all card payments with a tap, they can do QR codes, the whole shebang. I grew up in payments and there's a long entire joke there about what's another name for an incoming payment? It's a deposit. And so, it's much easier to go ahead and just remedy these things. These are not mysteries.

Lee Wetherington (09:50):

This is the modus operandi of all of these big fintechs and payment apps that have been draining – and Mr. Shevlin gave us the number. He quantified that 3 trillion in deposits have been drained out of banks and credit unions and gone to fintech savings accounts and fintech investment accounts over the last three years.

Lee Wetherington (10:09):

Now, we're talking about stablecoin uptake forecasts and depending on who you believe there, we could see another one to 2 trillion leave the demand deposit base of both banks and credit unions over the next two to three years. That would be a 6 to 7% hit to the average bank or credit union.

Lee Wetherington (10:27):

On top of all of this other fintech driven attrition, the OCC is handing out national trust bank charters like candy to the new slew of crypto concerns who are chomping at the bit because of the new territory that's been opened up by the GENIUS Act, and all of this is happening at the same time.

Lee Wetherington (10:48):

So, the point is not to be overwhelmed, it's to start with what you can know. Do the analytics, surface the camouflage small business owners, give them that ability to accept payments on their phone easily. And by the way, in real time, this is another thing. We'll get to probably data and AI and fragmentation and all the rest of it as we go.

Lee Wetherington (11:11):

But one of the big strengths that both banks and credit unions have not levered is this goldmine of transaction data sitting in their cores, which gives them the ability to do a whole lot of things that they're not yet sort of doing, one of which is, I can approve Jim right now. I can pre-approve him actually.

Lee Wetherington (11:32):

The underwriting to begin taking payments on his phone, you don't have to wait two to four days like you would with a PayFac, like a Square or one of the Venmo, et cetera. You can tap and have that ability right here, right now. And then there's the whole issue of, "Hey, if you can get Gen Z or Gen Alpha to the door," like you say, you've got to get the account opening right.

Lee Wetherington (11:55):

And the thing is it’s got to be mobile only account opening. It's got to be done preferably under three minutes, no more than five. You can't do a manual KYC challenge, and then you stop. You get them through that three to five-minute mobile only process and you welcome them to the bank, you welcome them to the credit union, and welcome. Don't worry about funding. We'll take care of that later. Divorce account opening from account funding. That's the biggest thing.

Jim Marous (12:26):

But allow it all on the mobile platform.

Lee Wetherington (12:29):

It’s the biggest single tactic. That's where all of the shopping card abandonment happens and trying to capture or to get Gen Z and Gen Alpha through the door. And then you give them a timeline, 30, 45 days, whatever it is to say, you can fund your account now in the $100 or whatever you may require in the 30 to 45 days.

Lee Wetherington (12:48):

And by the way, you can fund it using your Cash App, whatever you've got in Cash App or whatever you've got in Venmo. Why? Because all of those fintechs that have been drinking the milkshakes of banks and credit unions over the ... I mean, not just the last three years, but much longer than that-

Jim Marous (13:04):

About 10 years now, yeah.

Lee Wetherington (13:06):

All of them issue debit cards. Why do they issue debit cards? Because that's Gen Z's preferred payment method, especially if that debit card is just sitting and accessible in a digital wallet somewhere.

Lee Wetherington (13:16):

So, if you understand all of that, then do the three-minute mobile only account opening, give them a time window, give them the option to put a debit card to just file, put a debit card on file from Venmo, from Cash App, from Chime, whoever they got it from.

Lee Wetherington (13:31):

And now, they can in real time not only fund that new account with the bank or credit union, but hey, then you say, "Hey, by the way, anybody that's issued you a debit card, put it in here, and now you can use us as home base to move money around in real time on the debit card rails that you prefer."

Lee Wetherington (13:47):

This is not a mystery. But by the way, all of this is what informed, again, the R&D and the innovation and payments that we've brought to bear, at least for our clients over the last several years.

Jim Marous (13:57):

Lee, it's interesting. This is not rocket science. I just did a video on new account opening and on silent attrition. And bottom line is there are dozens, literally dozens of vendors that can help you get a funds flow analysis done, and a new account opening process done in less than 90 days. This is not something that's going to take a year to build.

Jim Marous (14:21):

The reason why it doesn't happen in my mind is we get in our own way. We create challenges. We say we need a driver's license. Oh, we can't fund them immediately. We're worried about risk. You have to still do due diligence, but the reality is these solutions are, as you said, we're not even talking about lowest hanging fruit, we're talking about fruit that's on the ground.

Jim Marous (14:40):

I mean, it is not rocket science, and yet we keep on saying what are challenges of growth and yet these opportunities are there and we have partners there to solve them for you almost. I mean, at Jack Henry, for instance, the fund flow analysis could be probably implemented and put in place to some degree within a week. I mean, it's there. You just have to ask for it and get it.

Jim Marous (15:03):

Yet, while we talk about this growth being the number one thing that was number one on your strategy list, was number one on ours, operational efficiency still ranks right up there alongside growth as a priority.

Jim Marous (15:17):

Do you believe that institutions are maybe leaning too hard or toward efficiency at the expense of growth, or do you see a difference how banks and credit unions are balancing that trade-off?

Lee Wetherington (15:27):

Well, the problem is they all know because at least we serve a lot of the smaller and mid-tier financial institutions, and they know that to survive, to be viable, they've got to actually achieve some efficiency gains. I think the problem is thinking that you can win the new game through efficiency gains, and you can't win the game, especially when the game has changed.

Jim Marous (15:52):

The race to the bottom.

Lee Wetherington (15:54):

So, strategy is now not about winning the game, the old game. It's about understanding that you're playing a new game. It's about understanding the new game that you want to win. And so, efficiency doesn't get there, especially if your idea of efficiency is making something irrelevant more efficient. That simply is a downward spiral. Like you say, it actually just gets you closer to your inevitable demise.

Jim Marous (16:27):

Faster. It gets you there faster.

Lee Wetherington (16:29):

It gets you to a relevancy faster. That's exactly right. So, look, yes, efficiency matters. If you're not thinking about efficiency from an infrastructure up standpoint, that's going to be problematic. I mean, even now, like in all of the conversations in and around tokenized money, stablecoins, tokenized deposit, deposit tokens, we're up here fixated on the surface level about which use case is going to get to adoption and material scale on what timelines, et cetera.

Lee Wetherington (17:06):

When all the action right now is, "Hey, do you have the right infrastructure to bridge fiat to crypto, crypto to fiat, and maintain a single control pane so that you as the financial institution are the indispensable bridge for this new hybrid monetary era so that you have the visibility, the observability that you can control?"

Lee Wetherington (17:29):

I mean, most banks and credit unions right now don't really have a full understanding of even what the risks are with stablecoins, much less therefore, what infrastructure you need in place to mitigate those risks – not just be in compliance with whatever final form of regulation we get, operationalizing genius, but are you going to be able to maintain that single control pane that you have historically in the fiat era with your core, your general ledger, et cetera?

Lee Wetherington (18:00):

By the way, what does a hybrid ledger mean? What does it mean to clear and settle and orchestrate value between centralized ledgers and decentralized ledgers? There are answers to all of these things by the way.

Lee Wetherington (18:13):

And that's why our biggest bet over the last seven years has been literally to rebuild the entire tech stack underneath our banks and credit unions because fortunately, we've had a visionary named Ben Metz around for long enough at Jack Henry who my first conversation with him like 15 years ago was he said, "Where we are now is going to happen and we've got to rebuild that tech stack." So, getting to hybrid ledger is important.

Jim Marous (18:41):

We'll get into the Stablecoin issue maybe a little bit later, but do you see a difference between ... you say you already have a solution to be able to prep your organisations, your partner organisations to be ready for stablecoin. Do you see a difference in the speed to desire for covering that between banks and credit unions? Are they about the same? Are they more defined by asset size as opposed to organization structure?

Lee Wetherington (19:06):

Yeah, that's a really good question. So, we're still in a hype cycle. There's a lot of FOMO. I mean, ever since GENIUS passed last July, we don't have a final rule. We've been in direct conversations with all the Prudential regulators. The OCC dropped their proposed rule in February, the FDIC just dropped its proposed rule. NCUA is chiming in on different things.

Lee Wetherington (19:35):

It's important (in the context of all of that FOMO) to step back, take a breath, try to get out to the 30,000-foot view and realize one, this is not a consumer or even a business-driven demand cycle yet. You have a lot of big infrastructure providers, Shopify, the card network schemes, et cetera, that are going to enable sort of stablecoin based and other forms of tokenized money-based ways of moving money around 24/7, 365.

Lee Wetherington (20:09):

So, there's this misperception because of the FOMO that as soon as we get a final rule or set of rules from the regulators in July or sometime in the summer, that, "Oh my God, everything's going to change and we're going to be left behind." No, no, no, no. Most banks and credit unions are not experiencing account holders with Pitchforks saying, "Hey, I want to be able to buy my hamburger with a stablecoin, or I want to be able to even accept payment as a business with a stablecoin."

Lee Wetherington (20:44):

But the benefits of the innovation of what tokenized money makes possible will eventually catch up and we'll see how it compares and contrasts to the value of different real time payment rails. But my point is that these banks and credit unions, in terms of who's ahead, who's behind – everybody's talking about stablecoins and tokenized money, but we ask the question, who's got a formal strategy for that? Zero banks have a formal strategy, at least according to our benchmark.

Lee Wetherington (21:17):

About 6% of credit unions have it. And by the way, we also asked about concerns and fears. Banks are much more fearful of what the impact of stablecoins are going to be to their deposit franchise, which makes sense because that's their number one priority. Credit unions much less fearful.

Lee Wetherington (21:34):

They just say, "Hey, we have some members that are doing things with Coinbase and doing things with brokerages, and we just want to make this easy, and we want to be a part of enabling what they need again, for that bridge between on chain and fiat networks and accounts." So, they're a little bit more sort of comfortable, I guess I should say.

Jim Marous (21:59):

Or maybe, it's just a prioritization issue. When there's so many things on the table you have to worry about, right now, at this moment, they hope their vendors are going to be able to turn it on when they need it, but right now, it's not the top five, it's just not there.

Jim Marous (22:16):

One thing that your study showed, there is something that's top five, which is the non-banks, the fintechs, the neobanks that are considered top competitive threats. And we went on a little bit of a low where everybody's saying there are more partners than threats, but I think we've now defined the difference between those organisations that are partner organisations that can get them into an innovative mode that they hadn't seen.

Jim Marous (22:41):

But when they're looking at who's taking their deposits, who's taking their growth, they have a real fear, fintech and neobanks. What are banks and credit unions doing differently with regard to not only addressing who's the challenge but worried about that?

Jim Marous (22:57):

Because it's certainly not, they're not worried about the biggest banks anymore because they feel like they can implement pretty close to what they can do in many ways if they wanted to, but they're really worried about the Chimes, the SoFis at some point, NuBank or somebody else.

Jim Marous (23:13):

Are the banks and credit unions looking at this differently or are they pretty much taking them in total and saying, "We've got to start implementing and building for the seamless integration of technology the way those have?"

Lee Wetherington (23:25):

So, I want to take a beat here and say that the most shocking turnaround year over year in our respondent pool to the strategy benchmark was on this question of who's your biggest competitive threat. This is the eighth instance of the benchmark. For the entire stretch before that, all seven instances of the benchmark, when we asked this question, our banks and our credit union clients all pointed to each other, like it's the bank down the street, it's the credit union down the street.

Lee Wetherington (23:55):

And we would holler and we would try to show them the data about deposit attrition to fintechs and that kind of thing. But they did a 180 statistically speaking year over year. This year finally, our clientele by far, in fact, it was a 20 to 30-point drop in concern about each other, and a 20 to 30 point rise in, "Oh my God, it's the big fintechs," and the poster child right now would be Coinbase. Coinbase is coming for us.

Lee Wetherington (24:26):

I'm not sure if you saw that KlariVis study that came out within the last month, and they did the payment analytics on 150 community banks, 90% of them had net deposit outflows to Coinbase. And then when they looked at the actual dollar amount, so for every $2.77 that left the bank or credit union for Coinbase, they only ever saw a dollar come back.

Lee Wetherington (24:55):

So, they're basically losing a $1.77 for every instance of a movement of funds or deposits out of the bank over to Coinbase. So, this is what I'm saying, they're really waking up to the threat, and that's where you have to start. You've got to do those scans to know who's the threat, how much is going out? Why is that happening? What can we do to staunch that?

Lee Wetherington (25:22):

And if you look at that, then you get back to another Gen Z driver, is Gen Z is psychologically and behaviorally anchored to wherever their money is growing fastest. They could care less about watching a savings account grow or a CD grow. They want action. They want some form of asset that's going to appreciate in a way that they're going to be very interested in tracking over time.

Lee Wetherington (25:46):

This is why Robinhood has been such a juggernaut with the Gen Z cohort. So, you've got to get some kind of wealth tech embedded, some kind of fractional share investing capability. If you really want to cook with gas, put a fractional share reward benefit on a debit card, it's catnip for Gen Z. We know that's what works in other settings.

Lee Wetherington (26:08):

So, it's just a matter of, again, these are known knowns. It's just a matter of deciding we have to execute now, but I think the only way you get to that volition is if you get scared enough to act. And I think we're finally hitting that.

Jim Marous (26:22):

We bury our head in the sand. We don't do the transfer analysis that you brought up in the first question. And as a result, we don't know what we don't know. I referenced it in an insight video I just did where I'll get in the room with 2000 bankers and say, "How many of you have closed a primary financial relationship in the last five years?" And as expected, virtually nobody raises their hand.

Jim Marous (26:44):

Then I say, "How many of you have opened an account at a fintech, a neobank, or an organisation that was not in existence over 10 years ago," and virtually everybody raised their hand? This is silent attrition that unless you measure it, you're not going to know it's there because you still see the same attrition rate. You still see an attrition rate of 1 to 2%. You say, "Oh, I'm okay." Well, that means the account didn't close.

Jim Marous (27:07):

I haven't closed my accounts, but I'm not using them the way I did. I'm sending money to Acorns. I'm sending money to Robinhood and SoFi on a regular basis. And you realize that it doesn't bother you until you see it.

Jim Marous (27:21):

And what's really challenging here, and we kept on talking about it, is that it's available to you today. We can show you that fund flow through various vendors very much almost on a turnkey basis if you ask for it, but then you have to understand what you're looking at.

Jim Marous (27:37):

And you talked about you're a payments guy and come from the payments environment. And when we talk about innovation, we talk about growth, we talk about engagement, nothing says it more than what's going on in the payment space, and there's more innovation going on there.

Jim Marous (27:52):

What are you seeing financial institutions doing to respond to what really is control of the way funds flow as opposed to saying, "I need to have the primary checking." Is primary checking even the primary account anymore, or it's maybe Venmo or is maybe your debit card or credit card? What really drives engagement right now.

Lee Wetherington (28:17):

The answer to this question is also contingent on who you ask, which cohort, which psychographics specifically. For Gen Z, a lot of them, it's like, "Hey, the first app that does something with money for me, I guess that's my primary financial institution. Whether it's an actual financial institution or not."

Lee Wetherington (28:38):

And so, back to this question, we asked our CEOs, we asked, "Okay, what do you have a formal strategy for? " All of them checked the box on a deposit strategy, all of them checked the box on a lending strategy. Only 36% of them said they had a payment strategy, which is really interesting.

Lee Wetherington (28:58):

When you think about the charter franchise, you take deposits, you lend them out, you can also … or at least historically, payments was supposed to be part of that franchise as well. Payments is the primer of the pump of that flywheel. Payments is what is supposed to get the account holder into the door.

Lee Wetherington (29:16):

And by the way, that understanding is what fintechs got. That's what they implemented. That's the tool they use to get their foot in the door, and then to begin … once you can do payments really fast or well or easy or cheap or fast or all of the above, then it suddenly went, "Wow, things are so easy here. If my deposits come in over here at the bank of credit, I'm just going to move them right over here where I can do the meaningful things with money."

Lee Wetherington (29:43):

Here's the thing: payments follow deposits. Another way of saying that is also data follows deposits by way of payments. Payments are the data gold, and this is the other awakening that's happening. What you're describing, of course, and you and I have talked about this before – it's been happening over the last 15 to 20 years, but it's the slow financial fragmentation of all relationships that have to do with money.

Lee Wetherington (30:10):

They're parsed out over 10 to 15 different apps on the phone. Your money's scattered all over the place. The other big problem, AI has backed the entire industry, banks and credit unions alike into the epiphany that they don't have a preponderance even of the financial data of their existing account holders.

Lee Wetherington (30:33):

At best, average bank or credit union, especially average size bank or credit union might have 20 to 25% of their account holder’s total financial data. Well, what are you going to get if you feed 25% of Jim's data into an LLM and then say, "Hey, give Jim next best product or service." You're going to get absolute crap and it's going to betray the fact that not only do you not have the data on Jim, you don't really know Jim.

Lee Wetherington (30:57):

And that's going to be a surprise to Jim because you're supposed to be his community bank or his community credit union: "I thought you really knew me." So, it's like AI has backed the entire industry into having to get really serious and sober about what the state of the data that they have is in, which is broken and disparate and siloed and not unified, clean, normalized, and ready in real time to feed to LLMs or machine learning algorithms.

Lee Wetherington (31:23):

But also, even when you get all of that done, you still don't have enough data on Jim to do the most compelling things with all forms of AI and machine learning. You still are operating at massive data deficits. This is what we call, hey, you've got to have a strategy that gets you to minimum viable data on Jim.

Lee Wetherington (31:44):

And that brings us to a conversation about open banking and how to plug data deficits on Jim, and how to get Jim's permission to plug those data deficits, and how to get to first app status by way of doing that.

Lee Wetherington (31:56):

I'm telling all banks and credit unions right now, if you're sitting on your hands because we don't know whether the CFPB is dead or alive or whether it's just a few dudes who are sitting at a desk at the Department of Justice or the Treasury or something, are we ever going to get a revised version of PFDR with revised compliance deadlines for how financial data is going to be exchanged?

Lee Wetherington (32:22):

If you're sitting on your hands because of that regulatory chaos and an absolute just sort of inanity, just understand that's what these big fintechs want. They're not sitting on their hands waiting to figure out how to plug data deficits or waiting to ask for permission to aggregate back to them the data that they need to get to that preponderance before the bank or credit union does.

Lee Wetherington (32:51):

I'm telling banks or credit unions, you've spent your entire existence building trust, it's time to pull that lever. It's time to monetize trust and to convert it into data that is meaningful so that you can do the most meaningful things in the most efficient ways for your account holders. You've got to act. This gets to your mantra. You've got to act, wake up, get scared, understand what you can do, and act.

Jim Marous (33:18):

And do something.

Jim Marous (33:21):

Let's take a short break here and recognize the sponsor of this podcast.

[Music Playing]

Jim Marous (33:28):

Your minimum viable data is an interesting concept because as you said, maybe my financial institution knows a quarter of what I do. I know my business bank right now, all they know is that I make payments to seven different people every month. I transfer money from my business account to my personal account via writing myself a check and taking a picture of it because the two organisations don't talk to each other, which it's another story altogether.

Jim Marous (33:57):

But the reality is they can't draw any conclusion about who I am, what I need, what I should do. My personal bank has a little bit more information, but they don't look beyond it. They don't look at where I'm paying my mortgage, at least they don't seem to. They don't look at where I'm sending funds to.

Jim Marous (34:16):

Apple Pay has far more information about my life than either one of my financial institutions. That just scared the crap out of most financial institutions. And the reality is if my financial institution said, "Mea culpa, we want to dig into what you're doing, how you're doing it. We'd like to build an agentic tool that helps you to know what you need to do, not to make your decision for you. That's not what we're trying to do. We'd like to know what decisions should be recommended to you overall, no matter where they go."

Jim Marous (34:49):

If you built that based on your trust again, I won't do that for Chime, I won't do that for SoFi, but I'm getting there. And the reality is if my primary financial institution said, "You know what, we want to ask you some basic questions."

Jim Marous (35:02):

And that's all they have to do, basic. "And let me know what kind of accounts you have elsewhere. Just check these things because we want to be able to help you in your overall relationship." I think I'm going to give them that because it's not going to give them any PII that I'm worried about, but it's going to make it so that they can give me better solutions.

Jim Marous (35:20):

Because honestly, I don't have time to think about what's best for me in the way most people would. My wife goes, "You're in banking, you should know this. " I'm going, "Well, that's not really the way it works, unfortunately."

Jim Marous (35:32):

I wish it did. But the reality is we have trust, which is something that no other organizational type has right now, but we're going to lose it as soon as somebody else comes to us and says … Amazon comes to us and says, "Based on everything you're doing with us every day, we think we can build a better model for you because we know where your funds are flowing because you're paying us with it all the time." Which gets back to payments.

Jim Marous (35:56):

Your study found that 90% of the institutions are increasing their technology spend. Where are you seeing that money actually going, and is there a difference between how the banks and credit unions act or maybe between different asset sizes?

Lee Wetherington (36:13):

Actually, this is where they're in concert. For the first time in the history of our benchmark, they told us that their top tech spend priority investment priority for 2026 and 2027 is AI. Coming in at number two for both banks and credit unions, it's digital. Coming in at number three, it's analytics, surprise, surprise, like trying to get their data house in order.

Lee Wetherington (36:36):

It's funny that you mentioned Amazon because this whole idea of agents and what happens when an agent becomes the object of trust, not a financial institution anymore? Financial institutions are just these commoditized providers that sit on the other side of an agent that you actually trust.

Lee Wetherington (36:54):

I was in New York City earlier this week and was listening to the person at Amazon who has launched Alexa Plus and is talking about their conservative kind of approach to try not to creep people out but to try to earn incrementally trust so that Alexa Plus is the agent that you trust to not only shop all the things that you might be interested in, but you can imagine that. Again, they have access to payment.

Jim Marous (37:29):

How about Erica? A decade of insight.

Lee Wetherington (37:33):

By the way, at the same meeting in New York, the CEO, Brian Moynihan of Bank of America said, "Hey, by the way, everybody, 99.6% of all interactions between customers and Bank of America is non-human." And you heard the entire room like gasp and clutch their pearls.

Lee Wetherington (37:58):

So, this is a very big deal because if that agent becomes the object of trust and it's not an agent by the way that the bank or the credit union is offering because by the way, how do you do that too? Okay, we want you to trust us, we know that agents are a better way of maybe interacting with us in the mid to long-term. What does trusting an agent mean?

Lee Wetherington (38:25):

I mean, does the agent need to go shop other banks and credit unions for product or service X, Y, or Z? I mean, these are big fundamental ... I mean, it's not just that mediation or mediated financial services are being called into question by the rise of this new hybrid monetary environment. It's like, "Hey, even a mediation itself, the FI is going to be replaced by an agent?" These are huge big questions, and you don't have an indefinite amount of time to answer them.

Jim Marous (38:59):

You know what, and Lee, this is where I get mad because I go, we're looking at these big, huge things that could be. Financial institutions aren't taking the first step towards that. We trust our GPS system to get us home safely and the fastest way possible. Why can't we trust our finance institutions to give us the small answers to say, "Oh, by the way, don't do this right now because this may happen."

Jim Marous (39:26):

Or, "Oh, by the way, if you go another day with the amount of withdrawals you're having, you are going to get into the negative zone. I'm going to tell you ahead of time rather than tell you after it's already happened." Do the basics well. We can talk about what agents could become, but how about what they can do today?

Jim Marous (39:43):

I interviewed an executive from Bank of America at The Financial Brand Forum this year and they said, "You can't beat what we have in 10 years’ worth of data in conversations. And every day, we're making incremental improvements to say, this conversation could lead here."

Jim Marous (40:04):

And as that happens, the consumer gets more and more likely to say, "You know what, I'm taken for granted because almost every other interaction …" Even when you call the pizza joint, they say, "Do you want the same pizza you ordered last time?" I go, "God, I remember it being pretty good. I could order it again if I knew what I got. Yeah, tell me what I got. "Oh yeah, that sounds good."

Jim Marous (40:23):

We're getting used to that type of interaction. We don't have to make it a decision, but we can make it so it's a choice. And I think when you talk about the technology toward AI, and we dig the level deeper than that and say, okay, so financial institutions are saying their highest technology investment right now is towards AI.

Jim Marous (40:45):

I won't even get into what we may call AI because I think it's the right thing to say in shareholder reports, I'm not too sure if it's happening that way. Where are you seeing or where are you feeling that banks and credit unions are right now putting their AI investments? Is it back office (getting back to one of our first questions) efficiency? Is it customer experience? Where are they really deploying it from a technology standpoint today?

Lee Wetherington (41:11):

We drilled down with a couple of questions for those that said, yes, AI is my top tech spend priority for 2026 and 2027. And it's a combination of both the back-office automation, but the number one response was AI or agent assist for real people at the bank or the credit union who are responding to digital or mobile moments of need.

Lee Wetherington (41:39):

And so, the way that most of our clients are looking at it is we want agents and/or AI assist to turbocharge the relationship-based business model. We want to be able to give faster, quicker, better, higher quality answers and closer to real time as they come in through, again, the mobile app, the digital channel, whatever the case may be – that's the kind of use case where they're going to be spending and investing most of their AI tech spend in 2026 and 2027.

Lee Wetherington (42:12):

You've mentioned if you go with what's happening with the technological evolution underneath these different AI applications, now we're looking at something called neurosymbolic AI, which if you've even sort of studied AI, generally, there's two categories. There's statistical AI, which is your generative stuff. There is the symbolic AI, which is your machine learning, the AI that actually does hard math.

Lee Wetherington (42:40):

And now, they're kind of putting these two together in something called neurosymbolic AI, which can now take the probabilistic models out of just being probabilistically driven to something that's not about correlation but is more about definitive hard causation, and therefore, is much better at its predictive capabilities.

Lee Wetherington (43:01):

And all of this is happening under our feet as we're asking these questions and surveys and how ... So, even what's possible is changing as we're asking these questions. But our clients by and large are looking at human in the loop, AI assisted ways of doing faster, better, cheaper, and at higher quality, the things that they're known for and the things that sort of reinforce that trust layer.

Lee Wetherington (43:24):

But they've got to protect and defend that, but then they need to leverage that trust to ask first and best for the permission to aggregate back to bank or back to credit union, the data that that bank and that credit union does not have that will simplify the account holders' lives, but now they don't have to guess on what's meaningful to Jim or any other account holder.

Lee Wetherington (43:48):

They can know and they can ... again, now you're cooking with gas. You can create the products and services, create the value that otherwise, you just don't have a chance.

Jim Marous (43:58):

We got to get rid of the excuses, we got to go beyond the back office because even when you talk about the assist and make a better customer experience, I think financial institutions, especially higher up, will continually say, this is all for the customer, this is all for the customer. The reality is it's for the bottom line.

Jim Marous (44:15):

I mean, we see this still; AI and all kinds of technology in the back office was first deployed on risk and fraud, good place to do it, good place to continually enhance it, but until I can start feeling it and still you start to say, "I have a better mortgage for you," until you start to say, "Oh, by the way, you're transferring money continuously to Acorns. We have a way we could do this for you as well and it'll be with your trusted financial institution," I'm going to call uncle or call fraud or whatever I want to call on that.

Jim Marous (44:48):

Interestingly, before we end this, I want to make sure that people know that down below, we have a link to the study. It is an extraordinarily good study because it really digs deep into not only what's on financial institution's minds, but the differences between the banks and credit unions, between different asset sizes, there's some very, very quantitative dynamics in this, and there's also qualitative dynamics, which is important because until you understand them both, you can't put them in context.

Jim Marous (45:17):

So, Lee, this is probably going to be what ends up being the takeaway quote or the thumbnail on the YouTube platform. But when you compare banks and credit unions in your study, who do you believe is better prepared for the next few years – not way down the line, but prepared for the next few years and why?

Lee Wetherington (45:37):

Look, so I think about this question a lot and I don't think that there's a net-net answer one way or the other.

Jim Marous (45:48):

Oh, come on, Lee.

Lee Wetherington (45:49):

Here's what I would say, you've been asking me asset-based questions, and I haven't really given you any detail of that. Let me say this. The top line takeaway is that banks and credit unions came into 2026 in aggregate on a high. Very, very optimistic. Why? Because net interest margin pressure was relieved and improved. Net income performed pretty well in aggregate.

Lee Wetherington (46:13):

But if you look at within banks and you look within credit unions, it's a tale of two cities in both of those based on asset size. Most of those really attractive performance gains and metrics in 2025 were all in the upper tiers, and it was even more black and white in the credit union space than it was in the bank space. So, here's what I would say.

Lee Wetherington (46:37):

I would say that credit unions are ahead in understanding the demographic and psychographic drivers that are really shaping the next three to five years, but they are constrained by their charters. Banks, on the other hand, have begun to wake up. And by the way, we saw a big jump, not only in their recognition of fintechs as being the biggest competitors, but also banks specific sort of allocation of tech budget dollars to AI, to analytics, to all things data.

Lee Wetherington (47:09):

Why? Because banks have been behind credit unions historically. Credit unions have perforce had to be more efficient, more talented, if you will, at all things data. Why? Because they generate more loans at lower dollar amounts, and to prevent getting upside down on the cost basis of every loan originated out, credit unions have always had to operate more efficiently in the back room based on data.

Lee Wetherington (47:37):

Banks, more commercially focused have really had a buffer, fewer loans for much higher dollar amounts, didn't have to be that efficient. Banks have woken up. So, I would say that credit unions have been ahead on that count. Banks are now quickly catching up on the data front, the sophistication with analytics, what to do now with these different forms of AI and the service of both efficiency and growth for that matter.

Jim Marous (48:03):

It's interesting because I think at the end of the day, a lot of it still gets down to leadership because I've said this before, you hear me say it, that the most progressive organisations tend to be the smallest and the largest, meaning very, very large. Very large because they have the money. Some of the smaller ones, because they have a real fire in them. They're more like the sole proprietors. They're more like the small businesses that really have to work harder to get there. But as a result, that trajectory is different.

Jim Marous (48:35):

I would agree with you that credit unions had a head start from the standpoint of they knew they had challenges. They built the partnerships with fintech firms and organisations like your own far faster than the traditional finances the banks did. But I think we're seeing a switch because people are looking over their shoulders going, "Oh my gosh, I got to catch up." It's not about staying ahead, it's about catching up and staying up.

Jim Marous (49:01):

Everybody knows that digital transformation is not an end goal, it's something we have to do going forward. But I think your study is a great ... between the study we did and certainly, your study, reinforces each other that we're talking a better game than we're playing. There's amazing opportunities, the lowest hanging fruit is right there.

Jim Marous (49:22):

And I think we have to look out for the way people transact more than how much money they have or anything like that. We talked about the AI tools, the Alexas, the Ericas, we talked about payments, which is really the way people transact. That is going to be a nuance that's not by account type, but how they use it, and actually, how digital the consumer is because I think we're going to see that the more digital they are, the more impatient they're going to be, and the more they're going to demand.

Jim Marous (49:55):

We've seen it since COVID for sure, that those people that can do everything by a touch of the phone – I don't carry cash, I don't carry cards with me anymore. It's my phone. I'll walk out of a place and not buy something if they require cash or a card because I don't have it. But Apple Pay has got my life on a phone, and I'm not too sure if I feel better about that, but I know it's more secure than a piece of plastic is and certainly better than cash.

Lee Wetherington (50:21):

Tokenized, yeah. I want to end on a positive note here as we're winding down. Agility is a differentiator in a hyper-disrupted context, but you have to have the will to act, to actually capitalize on the agility of a smaller institute.

[Music Playing]

Jim Marous (50:39):

There’s the quote. You're right. Agility is the differentiator because that takes into account what products you have, how you're deploying them, the leadership you have, and how you can deploy them. And as you said, if you can move fast, it doesn't mean you do move fast. That's really cool.

Jim Marous (50:56):

Lee, great note to end on. I always appreciate getting together with you. It's a great conversation. It's one that always runs longer than our standard podcast, but I don't think we lack good content, so I appreciate that greatly.

Lee Wetherington (51:09):

Always fun. Thanks so much, Jim.

Jim Marous (51:10):

Thanks. And everybody, remember, the link to the report is down below. Please get a copy of it. It's a great read. And if you don't like reading everything, AI gives you a great tool to consolidate the thoughts on what's been said in the report. Thank you again, Lee. Appreciate it.

Lee Wetherington (51:26):

Thank you, Jim.

Jim Marous (51:28):

Thanks for listening to Banking Transformed, the winner of three international awards for podcast excellence. If you enjoy what we're doing, we would really enjoy a positive review. Also, check out my recent articles in The Financial Brand, the research we're doing for the Digital Banking Report.

Jim Marous (51:44):

This has been a production of Evergreen Podcasts, a special thank you to our senior producer, Leah Hasledge; audio engineer, Chris Fafalios, and video producer, Will Pritts.