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ratios. These include return on average total common performance goes to Bank of America, with a total of $62
equity, return on average assets, net interest margin, billion in total fines paid for misconduct. You have to
and efficiency ratio. Ideally, these should be in the range, wonder how a Board of Directors can keep management
respectively, of 15 percent, 1.25 percent, 4 percent, and 50 in place for an egregious performance like this.
to 60 percent. You can, and should, look up the primary
bank your company uses and read the 10-K, which is a Fourth is the elephant in the room in the banking
comprehensive annual report summarizing a company's community: replacing banks' core systems. Fintech
financial performance that is required by the Securities companies use a microservices architecture leveraging
and Exchange Commission. It is preferable to bank with a a software development kit network of application
well-managed bank. Why would you bank with a laggard programming interfaces. To quote observer Chris Skinner,
or underperformer? "It's about speed, change, service, updates and vision."
He pointed out that banks have the opposite focus,
Third, there has been copious talk in Washington about "risk, security, stability, control and management," with
reducing the regulatory burden for banks, particularly data spread across multiple systems and silos. These are
community banks (those with less than $1 billion in opposing goalposts for a bank.
total assets). This is a good thing for community banks.
They are spending most of their management attention More than 90 percent of banks use IBM mainframe
on regulatory and compliance issues that really pertain architecture, much of it deployed before Y2K; over 40
to very large banks, and this has caused them to curtail percent use programs written in COBOL. For a big bank, it
lending activity to the SMBs, that is, your bankcard could take five years to replace the old core systems. This
processing clients, their natural constituency. is troubling for banks but good news to fintech insurgents.

But don't overlook what caused this scenario: the fines Trusted business process needed
and penalties that the very largest banks have paid to You might think blockchain will solve these problems, but
the government for unscrupulous conduct covering 14 not so fast. Observers have pointed out that similar prog-
categories during the period from 2012 to 2016. These nostications were made about TCP/IP when it emerged as
numbers are enormous. The award for the absolute worst an experimental network for researchers and universi-
ties. But it took 30 years for it to become
a ubiquitous communications platform
that enabled new products and services.

It took a long time for the players in-
volved in this evolution to turn it into a
trusted business process. Blockchain is
not a magic bullet. When we talk about
restructuring solid, stable and long-
lasting infrastructures, such as clearing
houses and data exchanges, that process
enormous volumes of transactions, it
would be a big mistake to write them off
as inefficient. Checks and balances built
into these systems serve a legitimate
need and purpose. There are a lot of
moving parts in the banking and fintech
world. It is almost a full-time job just to
keep track of them. Hopefully, this col-
umn will provide some help with that.

Brandes Elitch, Director of Partner Acquisition for
CrossCheck Inc., has been a cash management
practitioner for several Fortune 500 companies,
sold cash management services for major banks
and served as a consultant to bankcard acquirers.
A Certified Cash Manager and Accredited ACH
Professional, Brandes has a Master's in Business
Administration from New York University and a
Juris Doctor from Santa Clara University. He can
be reached at brandese@cross-check.com.

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