BankLabs of Little Rock will graduate from this year’s FIS Fintech Accelerator in August as it adds employees and works on a new software product designed to automate agricultural lending for banks.
BankLabs was the only Arkansas company selected from 148 applicants across 31 countries to participate in the program, which is sponsored by financial technology giant FIS of Jacksonville, Florida, and the state of Arkansas and hosted by the Venture Center of Little Rock.
“We like to call ourselves friendly fintech. The reason we use that term is we’re helping banks around the country, regardless of size, defend against the disruptive fintechs,” Matt Johnner, BankLabs president and co-founder, told Arkansas Business. “We’re the friendly fintech that helps the banks deploy additional lending solutions, including some more forward-thinking things, like allowing different companies to make loans to each other, but still benefiting the bank.”
The company was founded in 2016 and employs about 30 people. It’s hiring another 16 over the next year, he said.
“We are really at a point of acceleration, or a tipping point. We’ve signed over 130 banks in the first five years. We’ve now built a great foundation,” Johnner said. “And so now it’s time to go to the next level. We’d like to double our revenue in this coming year. And then double the year after that; we just closed our first outside funding round with some great individual investors.”
He declined to disclose the company’s annual revenue, but said it raised more than the $3 million it sought from the funding round. BankLabs isn’t profitable yet. It “could be profitable in less than one year, but that would sacrifice growth,” Johnner said.
He added that he was not building the company to sell it.
Johnner said BankLabs aims to be a company that has a multi-product portfolio heavily focused on commercial lending and is profitable in the long run. “We will continue to evaluate opportunities. We have had some folks try to acquire us already, and we just determined it wasn’t the right time,” he said.
For now, BankLabs has two main products, Construct and Participate. The company’s new agricultural lending product is unnamed and in the “ideation phase,” Johnner said.
Construct is software that automates construction lending for lenders to make that process — traditionally accomplished with spreadsheets and other paper documents — more profitable and efficient. The automation also reduces risk by providing real-time alerts to lenders.
Participate is software that automates lending between lenders. For example, a small bank that has a loan limit of $6 million could use it to lend $15 million to a borrower, with the additional $9 million participation coming from a partner bank, Johnner said. The software “automates the whole digital lending flow and has a marketplace component to it, to find new partners if that bank doesn’t have enough partners already,” he said.
BankLabs’s goals include signing more banks up for its products and building out the network effect of Participate. “So, if you’re a bank in Arkansas and you have, let’s say, 10 or 15 loan participations on your balance sheet, you might also have 10 unique banks that have bought one or more of those from you,” Johnner said. “And so what we do is we try to leverage that network effect, ... give free access to [the] 10 downstream banks. And then we lovingly land and expand and try to upsell them.”
In addition, BankLabs touts experience in banking and technology from both Johnner and its co-founder, Chairman and CEO Mike Montgomery.
Johnner was an oilfield engineer before he joined Perot Systems Corp., which is now Dell Information Services, in 1994. After that, he worked for numerous technology companies.
Johnner said Montgomery is a third-generation banker who has invested in more than 20 community banks around the country and serves on the board of Southern Bancorp in Arkadelphia. Montgomery was also an executive at Systematics Inc., the Arkansas-based predecessor of FIS.
Johnner called his partner’s past experience “fintech 1.0.”
“We’re trying to help Arkansas expand its economy and bring high-paying jobs back to Arkansas, through what we would call fintech 2.0,” he said. “This is a great time of consolidation for banks. It’s a great threat to banks that don’t innovate. So we seek out and welcome banks that are looking for digital innovation and defense against the bad guys.”
