First National Bank of Omaha (FNBO) has always been at the forefront of credit innovation.

Over the last two years, big banks have been notoriously hesitant to hop on to the emerging fintech trends that are dominating the market today.

However, First National Bank of Omaha (FNBO) knows how important it is to embrace the change.

On this week’s episode, Jerry O’Flanagan, EVP at FNBO, sits down with us to chat about how he’s leading his team to new heights by nurturing innovation.

You’ll learn about…

• Building and maintaining a team for a credit program
• The impact of buy now pay later
• Gaining inspiration for innovation from fintechs
• The strategy behind standing up a national digital bank

Building and maintaining a team

The first building block of innovation is constructing dynamic, organized teams.

According to O’Flanagan, “Regardless of whether you're a $100 billion receivable company or a $10 billion one, you still need the organizational apparatus, the sophistication to execute against marketing programs, credit programs, analytical programs.”

This requires investment which can make it difficult for smaller banks to level up in the same way legacy banks can.

FNBO has been in the game for ​​generations now, so they understand the value in putting money into an organizational structure that lasts.

“There's no doing this halfway,” said O’Flanagan.

FNBO goes the distance by attracting top tech talent across the nation with exciting projects around technology, marketing and credit. 

Innovation

The reason the lending space has seen higher amounts of innovation investment in technology and analytics is because it helps institutions like FNBO scale their programs efficiently.

Running a successful, modern consumer lending franchise is impossible without credible tools and efficient scoring algorithms.

For bigger banks to outcompete smaller lending institutions, they must be able to expand their scoring capabilities and adjudicate risk accurately on a mass scale.

With more alternative forms of data available, each bank is attempting to optimize their systems as efficiently as possible by learning to best leverage AI and machine learning. 

According to O’Flanagan, this competitive environment, “breeds a sort of spirit of innovation that continues to this day.”

BNPL

If anything has struck a competitive edge between financial institutions, it’s the ever-popular Buy Now Pay Later (BNPL) model that has taken the consumer market by storm.

Initially, O’Flanagan dismissed the trend, seeing it as a less-efficient, more time-consuming version of a credit card.

However, since the model has taken off amongst consumers, he’s seen the, “power of the digital experience and the single purpose in discrete purchases with that offer from a consumer standpoint, and the excellent value.”

In 2021, O’Flanagan decided to move forward and stand up a BNPL branch at the bank, which exploded with success.

While he still doesn’t believe BNPL is an existential threat to credit cards, he does see it as a perfect conduit to more credit card adoption.

It helps consumers that FNBO has not traditionally underwritten earn access to a credit card and become long term clients.

It's an alternative lending tactic that offers consumers a way to discreetly and safely manage their finances and build credit.

In tandem, O’Flanagan is confident that BNPL and credit card programs can provide a mutually beneficial service to both consumers and their financial institutions.

Fintechs

Banks like FNBO recognize that their endeavors need to be supported by fintech advancements.

While many financial institutions see fintech as the enemy, O’Flanagan and his team leverage it as inspiration.

“I am amazed at the creativity and the elegance of what they're bringing to market. They're not saddled with legacy technology that most institutions like mine are. It'll never catch up in any meaningful way to a startup that has no baggage,” said O’Flanagan.

If FNBO has anything to teach, it’s that in order for traditional banks to effectively compete, they must be willing to disrupt themselves by taking inspiration from fintechs, and building a new business centered around a modern technology stack.

Credit Card as a Service

This year, FNBO has big plans.

One of them is to pursue credit-card-as-a-service. 

“All of this has been achieved through a recognition that we couldn't do it in the existing technology stack,” said O’Flanagan, “we needed to break off and think of a new way”.

Fintechs have helped pave the way for traditional legacy banks to begin thinking innovatively.

To break the mold, banks need to go out on a limb and create something unique and to leverage fintech partnerships to learn new tricks.

National Digital Bank

FNBO’s other big endeavor this year is to stand up a fully digitized national bank.

Due to their commitment to keep moving forward and innovate as much as possible, they began to realize that a digital franchise would be one of their most valuable assets.

It would enable easier deposits and provide more empowering services to their customers, like BNPL and credit-card-as-a-service. That’s why it became a priority for O’Flanagan.

With a small, dedicated team, they’re diving head first into the direct-to-consumer space.

“I don't have all the answers yet. But I believe it's through doing that you learn, and hopefully over time, there will be knowledge and technology transfers back to the court, as we learn our way,” said O’Flanagan, “but for a bank, like us to get into a national space like this and do deposit gathering, we could not use our existing infrastructure to do it. It had to be done in a completely innovative, unique, new way.”

Stay tuned for new episodes every week on the Leaders in Lending Podcast.