How FNBO built Bend, an in-house credit card as a service offering with Marc Butterfield

Whenever I’ve spoken about the transformation of traditional banks, I pointed to Goldman Sachs building Marcus, its new Main Street brand. But look around the industry and there aren’t a lot of good stories of digital transformation. Even Goldman is trying, but it isn’t clear that Marcus is working financially, even though it has attracted a lot of deposits.

That’s why stories about a traditional institution evolving into something new are compelling – it’s just really hard to do. Marc Butterfield heads innovation for the First National Bank of Omaha. And he and his team recently launched Bend, a credit card as a service offering that’s competitive to fintechs in the space. Marc shares how he went about creating a startup within the bank that made the most of its resources and institutional knowledge and experience to punch above its weight. We discuss the new product, Bend, and its work with Greenlight to launch a credit card used by families and kids. 

Marc Butterfield is my guest today on the Tearsheet Podcast.

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The following excerpts were edited for clarity.

I'm Mark Butterfield. I'm the senior vice president of innovation and disruption here at First National Bank of Omaha or FNBO. I also head up our recently launched Bend by FNBO program, which is a credit card as a service offering from FNBO.

We officially announced the launch of Bend by FNBO this summer, but we had been working on it really for years, but I would say May of last year, the team really started executing on it in earnest. It's a credit card as a service offering. It allows brands to embed a digital credit card experience in their own digital experience via consumable, embeddable APIs. So the great thing about it is the bank already does partnership card issuing. We've been doing it for 50 years, and we're really good at it. But like a lot of banks, we have old technology and proven processes, and it works. It's a great program. It's a great product. But when you want to do things in real time, when you want to do things digital-first, you have to transform that technology.

Moving into modern card programs

We learned that there was a whole segment of customers that wanted it delivered differently: in real time, non batch, digital first, API first. And we disrupted ourselves with this Bend by FNBO team. And so we brought a lot of people from the bank into it. But we also brought a lot of outsiders that can help embed the gaps around talent, around engineering and product, that we did not have. And so that's what we launched. We launched our first partner on the platform, Greenlight, which is a money app for teens and kids. And they're a great program, a great digital experience. They were the ideal customer because they wanted to own that experience and embedded a credit card product into that experience. 

The nuances of that are really important. But what I'll say generally is to allow those builders at Greenlight to build an experience, they needed both the tech and the experience because we have to help them and guide them on the complexities of credit cards. But they want it consumed in a very easy way. And that was in conjunction with our great strategic partnership, Marqeta, to enable those APIs to be able to be delivered in that way.

Disrupting the traditional bank

These things don't happen all of a sudden – they happen over the years. And this idea of Bend by FNBO really came out of that macro trend of open banking and banking as a service that our innovation and disruption team had been researching for two years. So the last three years, we've been thinking about it. The disruption as part of my title was intentionalyl added by me because if I pick off people at the bank, I say, well, disruption is in my title. It really is intentional about the mission of the team. And our mission is to identify and respond to banking business model threats.

We adopt a lot of Clayton Christensen's models. The idea of disruptive innovation, and how it needs to coexist with sustainable innovation, is a real thing. And so this innovation and disruption team is a small, scrappy, but focused team and their mission is to look at disruptive innovation, and share it with the rest of the bank, but also potentially to respond to it. Bend is one of the outcomes from that team to build out. And that is a years-long process – this team has been in place since the summer of 2017. And we have four ideas that the team has graduated into early stage commercialization that the team no longer manages. And there are varying degrees of learnings and success. But there's over 40 ideas that we've taken along and killed. And equally important, you have to spin through these concepts quickly, and iterate on them and pivot on them. And that's really the startup model. It's how do you operate like that in a legacy company? And that's something that we strive to do and hope to get better every year that we evolve this process.

Culture as a component

I think of a few different things, but one is definitely communicating with the executives, C suite, whatever people want to call it. And just having a conversation on defining innovation for yourself – like, what do you think innovation means? How would you define disruption? That's my title, but what do you guys think it means and really being open and honest about what that means. And really helping them understand the concept of sustainable innovation versus disruptive innovation. We brought a speaker in that used to work at Kodak. And she talked about the scary part is the C suite at Kodak saw digital photography happening. They tried to do something about it, and they still failed. That should scare everybody. It's not like Blockbuster didn't know Netflix was coming. Management didn't all of a sudden get dumb. 

They saw a change. They wanted to do it. They couldn't operate with their team culturally, like that was the biggest concern, in my opinion. So that was what we talked about a lot early on in 2017, 2018 – how do we get alignment with the C suite on what this team's mission is? And how do we create a process that can share what we're learning? So that buy in is first and foremost. So when people ask me how I'm able to “get away with it at the bank”, I don't get away with anything –I share and am transparent with everything that we're doing, and why we're doing it. But it's about a mindset shift with the executives of getting buy in, because they're in meetings all day, solving problems and saying, if I spend this amount of money, I need this amount of return. And those are all right decisions. But the sliver of time I get it's shifting their mindset to, you're paying to learn. We have learning KPIs with this team, and we have a modest budget. It's not a huge budget for the team. It's four to six people – we have 5000 employees, and there's four to six people dedicated to this group. But their mission is very clear. And they need to work really fast. And we need to empower them to explore. 

And so everything is counterintuitive to what almost every other department is. But we have to figure out a way to coexist for that culture to work.

Two other things also help. I would say one, we're a privately held bank. So it's much easier to have that conversation with the CEO when he's thinking 30 years out, versus a CEO that's thinking three years or five years out or the next quarter. So we use that to our advantage. And we also use the fact that it is in our bank's DNA – change is part of our mission. We've been around since before Nebraska was a state. We actually became a charter, then we had to amend it once Nebraska became a state. And it goes back to the Kountze brothers having the only safe in town. That was very innovative back then. And they had to guard it with shotguns. And we were a founding member of the Visa network. 

There is a history of change and innovation in the bank. And so we wanted to tie into that –, hey, this team needs to do it because we need to persist with what is already happening at the bank. And any company, when you look back, has innovation because they're successful. They got there because of their standing on the shoulders of innovative people. And so that's what we embedded, what we embraced on the team. And that was the buy in that we got from the executives.

Marshaling resources and support

I think the main pushback was, aren't we already doing this today? We have a credit card issuing program. It is very successful, and we have a really good reputation in this space. Why would we do something different? And that's why you have to flip the model when you're trying to do something disruptive, which is another key tenet of our team, which is desirability, feasibility, viability in that order. And when you are operating a business, it's almost the exact opposite. Will what I spend make money, will it be viable? And then we got to figure out a way to do it. And then I'm assuming our customers want it and our desire, like because then we already have the product. 

But when you're trying to do something new, you need to flip it around and say, what is it that we're exploring that customers want? Like, do they want this thing? And then you decide, feasibly, should we do it? So actually, there was little pushback and it was because we took that approach. And it was because it came out of this innovation team. And it was about accessing new customers and new markets. So we said, there's a quadrant of customers, and mainly fintechs, that are digital native, that offer banking services, that get debit card services from banks, and they cannot offer credit. Like, it's just that simple – that they're not scaled up enough. There are banks that don't want to issue credit cards, like we have a whole market called agent banks that we issue cards to through banks, because it's so complex. 

And so it was about it wasn't about replacing or displacing our current issuing card business, because we have three other quadrants of those groups that they serve, and they do it well. But it was this upper right quadrant, and I'm visualizing in my head – I know it's on a podcast – but it's highly digitally mature companies that offer banking services, which is essentially fintechs. And they want cards delivered to them differently. And that was the research that we did. 

And we showed internally and said, these aren't necessarily brands that the legacy programs want today. But a couple of them, they do, like Greenlight. And there are going to be people moving into that quadrant constantly, like ERP companies are getting digitally, more mature every day. And so that was what we sold: it is about accessing new customers in new markets. And then when you get into the time to the mission that we did five years ago, which is about identifying and responding to new banking, that's how it all aligned. It was just a matter of, hey, is the person running that card business today going to be okay with it? And we brought him along in the process, saying this is what we've seen. And so he views it as disrupting the market, not necessarily disrupting ourselves.

And because we've gone green field, he also views it as he's learning with the tools and the systems that we have, like we have a homegrown system of record that he uses. Today, we're using Marqeta’s system of record, there's a ton of learning that we're going to give in terms of future build by partner. So the biggest difficulty was, hey, do we actually want to commit to the resources doing this? But the what and the why were really well established. And that was because of the groundwork laid by our innovation process and team.

Evolving role of head of innovation

It's been challenging. I've been at the bank 21 years this month. I've never been in a role more than like three or four years, because I either get bored or the team gets too big. I like smaller teams – that's just kind of who I am. I'm kind of an intrapreneur, I guess. Part of the caveat was Butterfield, you need to run that team, because I have card experience background. So there was a lot of trust there that I had as a leader at the bank.  I had to transition away from the innovation and disruption team, and give that to another person to lead. But they still report to me. And it's been challenging because I feel like I'm part of that DNA of what I build. But I also need to be mindful that this is a startup within the bank. We need to build this team out.

I know people say this, but it's true. That's why it's a cliche: it's the people you hire. So that the people you bring on, you embed the values and the commitment and the dedication of what you want to do, and it makes it a lot easier to transition. But personally, for me, it's been challenging because I like doing both and I know I can't do both. So probably 90% of my time is Bend by FINBO and 10% as the innovation and disruption team.

Finding the right talent

Yeah, I think about that a lot. We've got to relentlessly reinforce what Bend is doing. There are values and there's a culture that FNBO has, and we don't want to step on that. We want to add to that. We want to say, so what is this team doing that's additive to that culture and values? And a lot of it's around empowerment. It's around allowing people to go do their work, have shared accountability, but specific accountability for functions. 

We had a scrum master that was a contractor and recently moved on. And I had an exit interview with him because he was here from the beginning. And I asked him what he really liked about working here. He said the freedom to do stuff. He had worked at other banks and had worked at other tech companies. He basically just said empowerment. And that really was good to hear. Because that's what we try to focus on: allowing people to go do their jobs. It's not fail fast. It's learning and saying that, hey, you guys make the decision, you make the judgment calls. And our job as leaders is to just make sure you don't screw up too badly. Or if we do, we'll fix it.

And so that empowerment and no fear of failure is really what embodies the Bend culture. It's really what the leaders and the executives at the bank say they want more of in the bank. It's like, why are people just going and doing stuff? I'm like, well, we're a bank – you can't just do whatever you want. And that sometimes eats away at what you do every day.

The work with Greenlight

We launched in October, so it's still really new with Greenlight. But what I will say is twofold. One, the Greenlight product is an amazing product. I actually was using it even before we talked to them, I have three kids, they're older, so they're kind of out of their sweet spot: Greenlight targets parents of 7 to 15 year olds. This gets back to the purity of why fintechs exist: Greenlight built an experience that honestly banks should have done, which is how are you doing a better job of engaging with your children on managing money and having those conversations with a digital experience?

They have evolved as a company over the years as parents want to know more about finances. They're having this joint conversation as a family. So they want to evolve to a family ecosystem. And they also want to make sure how they accelerate investing in their kids’ accounts. They looked at credit cards and said that with a credit card, we can actually fund investing and rewards. We could build a rewards program, and at the same time, we can help educate parents on the proper way to use responsible credit. And so that was why they wanted to put a credit card in their app. 

It's an MVP version of their product. And I don't want to share what's on their roadmap. But I will say they have a larger vision for what they want to do with credit cards and how they want to evolve that with the kids, but also with the parents. And the early feedback is really good. I mean, it's doing what we wanted it to do. It's a spend based rewards program up to 3%. And the main feature is to auto invest it back into your kids investment accounts.

After launching Bend into market

There's still a lot of learning around product market fit. This is a new market, even though credit cards aren’t new, but how we deliver it is new. I still tell the team, we have to have a bias towards learning, like what products that we're offering can be treated as products by themselves. In the end, the analogy I like to use is there's 20 big things that you need to do to do credit card issuing really well. And with this platform, we build modularized all 20. So if you just want one piece of it, like rewards or underwriting or KYC, we've modularized all those pieces. But what we haven't done is productize them all yet. And it's because the market is new.

There's still a lot of market listening that we need to do. But the model that we've embraced, I would say, is the vertical model of if you want a credit card program, and you want it through a bank, and you want it to be tech first, product lead, API first, we will deliver that. There are non banks in this space today. They were in it before we launched –  that was part of the learnings. And we felt like larger fintechs and even fintechs that want to grow up are going to want that tech, but they're going to want the safety and soundness of a bank. But a lot of them don't like working with banks. So that was the strategic partnership we did with Marqeta. And we believe, long term, the future of credit cards is vertical. But this horizontal concept of  these 20 services that we're providing for credit cards, how can they be monetized and productized? And I think that's still the product market fit learning that we're doing.

Looking ahead

I would say it is to continue to work with Greenlight as our first partner and learn a lot from them on what they want, because I believe they're at the forefront of offering banking services that people love. And my big goal would be to launch five more Greenlights. Like I think there are brands out there, digital brands, that have a lot of debit card customers that would be well placed to offer credit to their customer base. And they should deliver because they already deliver really good digital banking experiences today to them. So a shout out to all the large digital bank customer-facing fintechs to say there's a lot of economic value and a lot of customer value for offering credit cards. And they should do it and come work with Bend by FNBO.