KeyBank’s Jon Briggs has a relationship with fintechs that can sometimes have an air of arcane diplomacy. Just as nations deal with other countries in multiple ways and levels, so too does Briggs.
A central part of his operation — he is head of KeyBank commercial payments and innovation — hinges on embedding Key’s commercial payment services into third-party fintech applications provided to businesses of all sizes. But exclusivity typically doesn’t play a part in these arrangements, on either side.
“One of the unique things about having a fintech strategy is this: I can have a fintech partner, and simultaneously, this partner may also be a vendor, who is also a client, and who is also a competitor,” says Briggs. “All those things can be true at once in this market.”
Brigg’s operation has relationships with more than a dozen B2B fintechs. The nature of the relationship with each — at least the facet of the relationship in play at the moment — can dictate how Briggs operates in such multitiered situations.
Say, for example, that both KeyBank and the fintech are pursuing the business of the same company.
“Such channel conflict requires good cultural alignment to be able to work things through in a thoughtful way,” says Briggs. He says that he’s often asked the difference between a vendor relationship with a fintech and a partnership.
“With a vendor, everybody points to the contract, ‘Hey, the contract says this is how we’re going to handle it’,” says Briggs. On the other hand, he says, at a partnership level, “I pick up the phone, call the fintech’s CEO, and we work through it.”
Briggs much prefers the latter.
It’s not just in the bank’s interest, he insists. “A fintech’s batting average is going to be a lot higher when they partner with Key than it would be on their own,” says Briggs, because the bank brings business credit — working capital — to the table for the ultimate clients.
Handling such bank-fintech diplomacy is part of the job, and not merely a nicety. About four years ago, in the wake of a rethink and realignment of business banking functions,, KeyBank began seeking partnerships with fintechs in order to provide embedded payment and banking services to companies using leading-edge fintech software.
In KeyCorp.’s 2023 annual report, Chris Gorman, chairman and CEO, flagged the embedded payments effort as one of a trio of product areas the company would be emphasizing.
Gorman said that the push offered the opportunity to build share of wallet in business payments both across the bank’s geographic footprint as well as in vertical business specialties. Both organically and via acquisitions, for example, Key has beefed up its presence in the healthcare business, including buying Cain Brothers, which specializes in healthcare investment banking, and Laurel Road, which among other things provides student loan refinancing for doctors.
During KeyCorp’s second quarter earnings briefing, Gorman noted that the embedded payments push “was well-timed, given the growth we’re seeing in that market.”
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Embedding Payments into Fintechs’ Software
Business banking and business payments increasingly revolve around software at some level. Briggs says KeyBank realized that the company couldn’t be all things to all companies. The bank saw relationships with fintechs that offer specialized software to companies as an inroad to providing payment services (and other forms of business banking) to the fintechs’ client companies. The company also saw how more and more money is shifting to platforms.
“Layers are being built between banks and the actual work that their clients are doing,” says Briggs. In a drive for efficiency, companies have put more and more operations into enterprise resource planning (ERP) and accounting systems.
“As companies continue down that digital road to drive more efficiencies in how they do their work and provide better experiences for their end clients, banks must figure out how to get our services out of our proverbial four walls and natively into where they are doing their work.”
— Jon Briggs, KeyBank
One of the latest projects launched by Brigg’s group is a relationship with Zentist, a fintech that offers software that helps “dental support organizations,” which serve dental practices, handle insurance claim processing. This is an another example of a vertical play for Briggs’ operation.
Trying to become a Zentist from scratch entails far too much unique work. Briggs says it makes more sense to seek out relationships with “a team that wakes up thinking about how to make the operations of a dentist office better every single day.” The bank plans to introduce Zentist’s Remi AI software to the numerous dental support organizations that the bank already serves. The association can be a two-way street — the bank gains opportunities to provide access to payments streams, and the fintech can also gain entrée to the bank’s own commercial and corporate customers.
“Fintech partnerships are a great way to materially advance our capabilities in a very targeted way in verticals that are important to us,” says Briggs. Technologically, a key element in making these relationships work is KeyBank’s development of a variety of APIs (application programming interfaces) as well as “connectors” that hitch ERPs and the like to payment capabilities.
One example is automated clearinghouse transactions, a workhorse of the payments business. Briggs explains that many types of money movement are necessary. In the medical field, for example, there’s acceptance of payments for treatment, refunds for overbilling, any number of items.
“At the core of all of those potential use cases,” says Briggs, “it’s just an ACH payment.”
Read more: As Business Payments Go Digital, Banks Must Keep Up with Fintechs
Embedding Fintechs with Something Else: KeyBank Capital
Injecting payment capability is an essential part of these deals, but so is another element: capital.
One card that KeyBank plays is direct investment. “These fintechs are typically in the earlier stages of their journey,” says Briggs. He says that often the bank is in the position of helping the fintech enter financial services for the bank’s customer companies. Investing in the fintech firms brings KeyBank closer to their founders and managers and builds connections that the bank can serve with banking services. The Zentist deal, as an example, includes a minority investment by KeyBank.
“It keeps the relationship tight,” says Briggs of direct investments in general. “It also allows us to benefit from all the sweat equity we inevitably put into these types of companies, as we help them grow and scale.” (Sometimes direct investments wind up growing into acquisitions of the fintechs by the bank.)
A concurrent financial strategy is the bank’s investments in fintech-oriented investment funds. It has money in multiple funds, including Canapi Ventures.
“These investments give us access to portfolios of fintechs that we can get to know — and potentially work with,” says Briggs. Canapi, for example, currently lists 29 fintechs in its portfolio, ranging from consumer banking and lending fintechs to construction finance specialists to digital identity solutions for both consumers and businesses.
One lesson Briggs has learned is to beware of “falling in love with the mousetrap.”
“I’ve partnered with fintechs that have by far the best product, the best solution for clients,” says Briggs. “But you get into things and you find that you’re not culturally aligned. They’re not as committed to the bank channel, for example. Such things can completely erode the quality of the product you’re taking to market, and the overall strategy.”
Read more: The Next Phase of the Fintech Revolution: Inside the Disruption and the Challenges Facing Banking
Bringing KeyBank’s Own Technology into the Mix
At times, figuring out where the fintech ends and the bank begins in embedded arrangements isn’t easy, and that’s testimony to the embedding concept. KeyBank isn’t just pouring payments into fintechs’ molds. It brings tech of its own to the matter.
Some tech is devised by KeyBank experts, and some relies on hybrid relationships with outside developers. An example of the latter is “KeyVAM,” the product of a collaboration between KeyBank and Qolo, a fintech payments processor.
The “VAM” stands for “virtual account management.” KeyVAM allows the bank’s commercial customers to manage their transactions from one main account while having the ability to assign virtual accounts to divisions, branches or clients. Administering payments in this way, allowing everything to reside in one actual account, has several advantages.
“This means they can take advantage of a unified account structure, which offers better cash management, enhanced cash flow, and lower account upkeep expenses, while still keeping the accuracy, balance, oversight and adaptability of a separate account structure,” according to a bank backgrounder.
One example of how KeyVAM can help would involve a franchise business with multiple locations. Each location has virtual accounts for collecting retail receipts and other revenue. The KeyVAM arrangement would leave centralized payments to the parent company, while giving each location its own routing and account numbers.
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Assessing the Future of Embedded Payments in Today’s Environment
With the pressures on banking as a service relationships, due to rising regulatory involvement and concerns, embedded banking and payments won’t be immune.
Briggs was brought into the payments area from a risk management post. He says much of the perceived stiffening of rules reflects policies that have long been in place.
What has changed, he says, is fintechs’ perception of banking institutions as regulators crack down. Increasing pressure will continue to drive this change.
“You’re going to see rebalancing of the banks that power fintechs. We’re already seeing a bias towards fintechs working with more risk-sophisticated banks,” says Briggs. “That’s been a benefit to us.”