Rethinking Banking Strategy in an Era of AI and Tokenization with Lee Wetherington

Chris (00:24.319)
Lee, thanks for being on the podcast. Good to see you. How have you been?

Lee Wetherington (00:27.532)
I’ve been great, Chris. Things are fun. And by fun, mean chaotic, which I consider fun. How about you? How are you doing?

Chris (00:35.935)
Banking has a lot going on. I agree with the volatility in the marketplace. Some of the things we’re gonna talk about, some of the changes, potentially rising rates. I think now’s the time and I think, you I wanted to take this time to kind of pick your brain and hear what you thought about banking. I know you guys, Jack Henry just released a survey called, I think you guys gathered data January, February. So kind of pre-war, but still had some core thoughts. So let’s start there.

you know, 2025 looked strong, these banks were somewhat optimistic, but there are some underlying currents there, particularly deposits. Talk a little bit about what bankers are thinking out there from your survey data.

Lee Wetherington (01:17.09)
Yeah, for sure. So top line, mean, just to give everybody the skinny on that, we do what we call a strategy benchmark survey of our CEOs, clients, both banks and credit unions at the top of the year every year. Like you said, we fielded it in January and February that was pre-war. And some of the top line findings, I mean, some of the things were what they were last year on the bank side of the big question about what they’re strategically prioritizing this year and next year.

Banks that’s still growing deposits that stayed at a very high level, about 64 % of our bank CEOs said that that was their top priority. If you looked at an aggregate across all of the CEOs, including the credit unions, the top priority was actually improving operational efficiency. So that gets you into all of the things, data, analytics, automation, AI, what to now of course to do about a Gentic, et cetera, et cetera.

One thing that really struck me in looking at, I like to look at where there’s difference and to see why those differences are there and then really is it a difference or do we have semantics going on? I think both our bank and credit union CEOs are really focused on the right path to growth. And they just talk about it in two different ways. Banks frame it in terms of deposits, credit unions frame it in terms of demographics.

But sometimes I feel like there’s this missing link and they don’t understand they’re in many respects talking about the same thing, especially in the cohort of Gen Z who is driving most small business formation now. If you understand that small business deposits are four to five X what retail deposits are, and you really are concerned about deposit growth, the lowest hanging fruit is really to figure out that small business formula, 13 to 35 % of

chris (02:46.76)
you

Lee Wetherington (03:12.086)
retail DDAs are camouflaging micro and small business owners that have been going out to third parties, fintechs, payment apps, et cetera, to collect payments. Only one of every $8 ever makes its way back to the bank. And here we are, banks scratching their heads wondering about how to continue growing deposits. Now, this gets us into your bailiwick about whether or not they should necessarily, if they’re trying to grow deposits just to continue and maintain

the loan growth pace that they’ve had, maybe that’s not such the right posture to take in terms of balance sheet exposure in this environment, especially managing through to the end of 2026. And by the way, I love what you’ve been writing about that. I’ve noticed I’ve been sharing your stuff out on LinkedIn about that because I’m all about the blind spots. And I think you do that probably better than anybody is really point out those blind spots. And I think we’re in a big one right now.

chris (03:59.382)
Okay.

Yes, thank you.

chris (04:09.702)
I do worry about, I mean, money, we have fiscal and monetary stimulus. Things are cheap, but in the age of volatility, in the era of inflation, I do worry like, is this the time to really be putting on risk? Particularly when I see a lot of Wall Street firms pulling back with their securitizations and their trading portfolios. I see some conservativeness there, but banks are still growing and still causing themselves their own problems. And so I think as you and I talked about,

Lee Wetherington (04:36.8)
you

chris (04:38.917)
you know, if a bank’s gonna grow at 10 % and they’re wondering why they’re only growing deposits at two or 3%, I’m like, well, you’re creating your own deposit pressures. But let’s go back to your point, because I think it’s one that it may be lost. Like every bank wants to grow deposits. I think your position was just that small business is a great place to start. Like, right, if you have your choice of upper commercial or middle market or consumer.

Lee Wetherington (04:47.083)
That’s right.

chris (05:06.201)
That small business is kind of that sweet spot in there. Lots of activities. I don’t really see any bank doing that right. I think banks doing parts of that right. So great opportunity. I’m with you on that one. But from your point of view, like how do you attack that market? Is it about products? Is it about a sales force? Is it about people? Is culture? How do you do that?

Lee Wetherington (05:14.434)
Right.

Lee Wetherington (05:27.199)
It’s a little bit of all the above, but I mean, the playbook is not a mystery. mean, just look at what the fintechs have been bringing and doing for the last 15 years. You start with payments, you get a window into payment flows, that gives you all you need to score for credit risk and then begin extending.

chris (05:34.755)
That’s right.

Lee Wetherington (05:48.822)
credit when the entity needs it and then you just add and add and add and then suddenly you look and feel and smell just like a bank. That’s what they’ve been doing. I think a lot of times we forget the primer of the pump of the flywheel of the bank charter. Payments and being able to help people do things with moving money or taking money or sending money or paying bills.

That’s what gets them in the door. then, okay, now you get their deposits and with their deposits, you can do your fractional reserve lending. I think sometimes we don’t think very deliberately about the flywheel of the charter. And that’s been to our detriment. Fintechs have pilfered something like $3 trillion in deposits from both banks and credit unions over the past few years. Now we’re looking at…

chris (06:22.659)
you

chris (06:33.735)
Thank you.

Lee Wetherington (06:41.345)
tokenized money, we’re looking at stable coins and depending on whose forecast you believe in, that could be one to two trillion more in deposit attrition that might leave the demand deposit base for backing of stable coin reserves at a handful of really big banks in the United States, primarily behind one stable coin because there is only one payment stable coin of consequence in USDC. So when you look at all that together, structurally it’s hard. And then in terms of

chris (07:05.054)
That’s right.

Lee Wetherington (07:10.551)
cracking that small business nut, you do have to understand small business behavior. I should say this, Gen Z behavior, Gen Z psychographics, Gen Z behavioral and attitudinal drivers. And by the way, they’re not monolithic, right? Because right now the Gen Z cohort encompasses eighth graders, high schoolers, kids in college, people graduating in college, trying to first get that first job.

chris (07:25.449)
That’s right.

Lee Wetherington (07:38.284)
that is evaporating because of what’s happening with the AI phenomena on up to people who are now about to turn 30. So they’re all over the map in terms of where they are with milestones in their financial life cycle. You have to understand all of that, but specifically you have to understand how they define and roll in terms of the micro businesses, the side hustles, basically how they roll as a sole proprietor. Sole proprietors, as you know, make up the super majority of all small businesses in the United States. And if you don’t understand how Gen Z does it,

what they need, what they’re looking for, and what they’re not getting sitting in a camouflage in a retail checking account. And they’re going out to those third parties. And that’s what’s been happening for 15 years. So where you start, this is not a mystery. Where you start is make it as simple as a tap of the phone to begin accepting payments on whatever phone they have. Android, iPhone doesn’t matter, right? So that they can begin, they can get paid easily.

chris (08:17.088)
Thank you.

Lee Wetherington (08:34.413)
I grew up, Chris, grew up in, I don’t know what you grew up, where you cut your teeth. I grew up in payments and we used to have this really tired old joke is like, what do you call an incoming payment? You call it a deposit. And sometimes I, it’s supposed to be a joke, but I literally don’t know if people get that sometimes.

chris (08:36.576)
you

That’s it.

I agree. I scratch my head why banks haven’t taken on instant payments more. They’re happy with receive, but they don’t want to send them. Like, well, you got to be able to do both to capture the imagination. As you said, it’s always great to receive money and get the deposit, but they’re only going to use your bank as a primary bank if you have those capabilities.

Lee Wetherington (09:08.341)
Yeah, then you’ve got to, and then, so, I mean, once you give them the ability to actually accept money, to get paid, okay, you’re a long way to solving sort of your deposit pressures if you have them, self-created or not, that’s going to be sort of your lowest hanging fruit. And then it all becomes about cashflow, cashflow projections. And then, because you need that, you need to visualize those flows in order then to get…

to the next piece, is lending them what they need when they need it and putting all of those pieces together. And now you’re doing that in the context of an environment where you saw that announcement probably last week from Anthropic. It’s like, okay, we just dropped Claude for small business. Wait a minute. What eight pre-built agentic workflows for things like invoicing and like these things that are at the foundation of that.

chris (09:47.165)
That’s right.

chris (09:55.079)
Yes.

That’s right.

Lee Wetherington (10:01.701)
the things that you’ve got to put in place so that you can get to that spot of being able to lend to them. So now we’re having a more fundamental conversation about, in the longer view, is there a new center of gravity for where small business UX is? In other words, who is gonna make it most convenient to access the agentic workflows that small businesses are gonna use to run their business and…

take care of all the things that they hate having to take care of manually historically, including things, getting paid invoices, tracking things down, know, accounts receivable, all this kind of stuff. It’s a really interesting little window we’re in right now.

chris (10:46.524)
It really is, and not only interesting, I think it has a large impact. And while some bankers will throw up their hands and say, well, I’m never going to get my head around the banks, never going to do anything on the engendic side. I counter that by saying, now it’s easier than ever. You can compete and now the small business isn’t locked in any particular software that you have to get on, that a JP Morgan Chase might be able to get on, but you’ll never be able to get on. Right now it’s a free for all. So now I think it’s just a question of that CEO’s

or executive teams mentality, do they wanna lean in, make their website agent friendly, make their applications agent friendly, choose vendors that are agent friendly and be off to the races, because I think that’s a wide open space that just opened up. And when I saw the anthropic tools for small business, I’m like, wow, what I wouldn’t wanna be is an incumbent software provider that’s now stuck because this just leaped over seven or eight applications that were on my mind.

Lee Wetherington (11:42.539)
Right. Yeah.

chris (11:43.257)
now better than ever. So, okay, so you mentioned product with the Ingenix side, we talked strategy. I think you’ll agree with me that banks probably need to dedicate certain people, certain sales force that focus on small business. They got to know small business. I think you did mention that. you’re there. And then pricing’s my last one is that, you know, banks can’t price it like a retail application. They can’t price it like a middle market application. We need bundled special pricing for small business to capture that. And that’s.

Lee Wetherington (12:11.565)
Or sure. Yeah, absolutely. if you need a proof point for really believing that and knowing sort of where to begin anchoring those price points, take a look at Coinbase, right? Look at what Coinbase charges if you actually want a human being to be available to you when you have a question or something goes wrong at Coinbase. Unless you’re at some fairly high threshold with what you’re keeping in custody with them, it’s 200, 300 bucks a month.

chris (12:12.568)
That’s a way to get going.

chris (12:22.82)
Yes.

Lee Wetherington (12:39.629)
for you to have access to a real live human at Coinbase. I think to me that kind of presages what I think we’re going to see happen in that, you know, being able to access real human beings in real time when you need them in and around issues around money is going to be considered a concierge type service that commands a premium. And understanding how that sort of extends the relationship based banking model.

chris (12:56.723)
Thank Thank you.

Lee Wetherington (13:08.415)
of community banking is really important to tack toward that and take advantage of that, especially in the small business bundle or bundles that you’re putting together for all these folks launching businesses. mean, we’re still kicking off, I think it’s like four or five million new small businesses being formed every year in the United States. And I think the majority of those are actually from the Gen Z cohort. So again, it all gets back to understanding how all these things interconnect.

chris (13:26.209)
That’s it.

chris (13:35.512)
And a cohort that values self-service. So, I always kind of scratch my head too, like bank is fine with investing in a million dollar branch, but that branch can only do so much better to invest in more technology, self-service, and then layer a banker on top of that. Like you said, charge or not charge, but deliver that human touch with that self-service capabilities. Which brings me to the next point, I think next to deposits, efficiency was right up there.

Lee Wetherington (14:04.417)
Yes.

chris (14:04.463)
as a concern for both banks and credit unions. Is that more about optimizing and lowering costs or do you think it’s more about survival? Like what’s the imperative there for when it comes to efficiency?

Lee Wetherington (14:16.139)
That depends on your asset size. The smaller, I mean, I was just, we were doing a sort of second order run of analysis now on those same results by asset size. And one thing that really stood out and was really clear is that if you’re under 500 million in assets, by the way, this is for both banks and credit unions, it’s an existential question. Operational efficiency is an existential question, which is really interesting because what’s not gonna get you there

chris (14:18.249)
Okay.

Lee Wetherington (14:44.721)
is everybody having access to a licensed version of Gemini or Copilot just for incremental productivity gains, what you’re looking for are really large order, meaningful sort of cost savings and or efficiency gains operationally. And so the question that we did ask in the benchmark was one of how important is improving operational efficiency? And that’s the way we define it.

chris (15:11.772)
Right.

Lee Wetherington (15:13.005)
the way we set it up in the survey instrument. And that gets down to, and these are things that you talk about, I know, in terms of getting your cost basis per dollar lent out way down, materially down, 10, 15, 20 % by being able to do underwriting in a materially more efficient, faster and better, higher quality way all at the same time. That’s not now all possible.

chris (15:33.174)
.

Lee Wetherington (15:40.29)
with not just alternative data sources, but again, with these agents that can help coordinate and make those efficiency gains possible. yeah, efficiency is a very big deal. The smaller you are, it is an existential issue. It does tie into analytics. Most of the AI use cases, we ask the question for those that are prioritizing AI either as a technology spend or as a strategic priority, we ask follow-up questions.

chris (16:02.518)
Yeah.

Lee Wetherington (16:09.653)
One of those is, so what are you doing? What use cases are you chasing with AI? Usually we just see the run of the mill sort of, just back office automation type stuff, right? This year was the first time that the top answer was AI assist for scaling personal service. And so what you’re talking about there is, assisting real people at the bank to be able to do faster, better.

higher quality responses and support in real time, but not necessarily surrendering that by default to an agent to do directly. A lot of them are still not comfortable given where we are. We don’t really have a lot of very granular guidance yet on what’s kosher and what’s not in terms of direct exposure, but a lot of them are doing that AI assist during the day when people are at the bank, and then they revert to a self-serve very

chris (16:38.613)
Thanks.

Lee Wetherington (17:04.877)
sort of a rules-based model at night to handle a small, predictable subset of requests that can be done automatically at night. Otherwise, you’re gonna get a placeholder for triage with a live person in the morning, that kind of thing. So that’s what we see at the top of that AI use case priority list.

chris (17:19.604)
And what do you, you know, outside, even with AI, what are you seeing tech spend? What does the survey say about tech spend? And as we set up for next year, what’s your best guess about where that comes out? Or what would you advise banks on how much to spend on the tech side for AI and general automation?

Lee Wetherington (17:41.421)
Yeah, that’s a really good question. That’s a really good question to ask to a big tech provider, right? Are you going to get a straight answer? So we got a very bullish response on that question about, know, what are you planning to increase tech spend for 2026, 2027? 75 % of our CEO respondents said, yeah, we’re definitely going to increase tech spend. The biggest segment of those answering that way, 41 % said,

chris (17:47.011)
hahahaha

Lee Wetherington (18:09.741)
We’re gonna increase tech spend by six to 10%. Banks much more bullish going into this year versus going into 2025. year, credit unions were really, really bullish and it kind of flipped this year. Credit unions pulled back a bit, banks got a whole lot more bullish. But again, this was in January and February. So we didn’t really have this Middle East wild card sort of rippling through and revising forecast for the balance of the year.

at the time we asked that question. In terms of what I would advise, mean, it really gets down to your asset size. Most of the smaller institutions to survive are gonna have to not just get more efficient, but get more efficient materially to free up what they’re spending to not really even differentiate, but to catch up in certain areas because…

the gap between the haves and the have nots. Now, whether you draw that at the 1 billion asset mark or the 5 billion asset mark, and we could kind of maybe have some conversations about where that is, you’re not viable. You’re not viable at some point unless you’re being really strategic with whatever your tech spend is or how much you’re going to increase it. I think I would say that at a minimum, especially those lower

those smaller financial institutions are gonna have to be spending at least in the 5 % range. I don’t see how they survive doing anything south of that. And then they’ve got to be really strategic with where they put it. One thing that organizes sort of day in, day out at Jack Henry is where are the biggest bang for buck sort of ways for us to help improve base unit economics of running a bank, cheaper, faster, better. And so we’ve been…

chris (19:53.26)
Right. you

Lee Wetherington (20:01.9)
I mean, we’ve placed the biggest bets in the history of our company on rebuilding the tech stack underneath community banks so that they’ve got the optionality, not just with AI, but you gotta have your data. First of all, you’ve gotta have the data that you have in order that is ready to feed an LLM or even to feed a machine learning algorithm if you’re trying to do black and white kind of process improvements in the back room. But you also, this has been another thing, most banks and…

chris (20:07.439)
Okay.

Lee Wetherington (20:30.364)
By the way, all financial institutions, they don’t have what I call a Chris minimum viable data on their account holders. mean, average community bank is doing well to have maybe 20, 25 % on average of their existing customers total financial data. Okay, well, if you feed that into an LLM, what are you gonna get out if you’re telling it to spit out a next best product or service? You’re gonna get crap. First of all, it’s gonna be wrong. And then it’s going to…

chris (20:38.863)
That’s right. That’s it.

Lee Wetherington (20:58.228)
reveal to them that you don’t really know them because you don’t have a modicum, much less a preponderance of their total financial data to understand what they’re doing and how they’re rolling. So that’s why open banking still matters. you know, even with the chaos around the CFPB and the regulatory environment in the Trump administration, I’m going to tell you that, you know, the most aggressive players, they’re not waiting, they’re not waiting on some revised form of PFDR to decide, you know, or to decide they’re going to get

their data house in order and decide they’re going to get smart and aggressive about plugging data deficits on customers. They’re not doing that. They’re not waiting. They’re going ahead and they’re asking that I can tell you that the, think the biggest blind spot, Chris, in the age of all this stuff we’re talking about in terms of serve efficiency gains is who’s going to be first and best to ask permission to aggregate data back to bank or back to whatever entity. mean, that’s what’s happened.

Whoever does that first and best, I tell community banks, hey, you’ve spent your entire existence building trust and earning trust. It’s now time to cash in. It’s time to say, yeah, you trust us. So, hey, we see according to some basic analytics on payment flows that you’ve got relationships with six, eight, 10 other financial service providers or payment apps. Would you like to be able to see all of that in one place, one pane of glass here at the community bank?

chris (22:03.523)
Right. So

Lee Wetherington (22:24.372)
And if you do that, by the way, you don’t end there, you have to tell them why you want to do that. Hey, if you will aggregate this back here, not only can you see it in one place, but this will allow us to protect you better in real time from all forms of fraud, cyber, et cetera. Is that okay? And community banks, by the way, we did research on this, primary research on this last year, asking a big pool of consumers who they’re willing to say yes to when…

when presented with data aggregation requests based on what they’re asked, what’s the why behind that request. And community banks won out in that. They’re much willing to say yes to a community bank with a question like that versus a third party FinTech or a payment app that they use, just use in very limited context.

chris (23:05.707)
Should the cores make it easier for that though? I mean, some of these problems stem from some of the cores. Tell me about your perspective on that. I’m biased and my listeners, readers kind of know that I’m no friend of the large cores, but counter that. Like.

Lee Wetherington (23:28.896)
Yeah, so first, yes. mean, this is why we pioneered five years ago on behalf of the community financial institutions that we served. We went to the table, we bellied up to the table with MasterCard and with all of the other financial data exchange platforms to get first of its kind. mean, this stuff was not even, it’s not that it was just not generally available, it wasn’t affordable.

for an average community financial institution to do data aggregation back to bank. So, well, we’re Jack Henry. We’re big enough to go to the mat, to go to the table with a MasterCard, for instance, and get first of its kind pricing, never before possible. Like, had to be signed off on at the very top. Like, this is where we think we bring value is we can belly up to the table with a MasterCard or with a Visa.

chris (23:59.69)
That’s right.

Lee Wetherington (24:24.17)
we can belly up to the table with a Google, which is what we’ve done on infrastructure. Again, we’ve begun or actually mostly, we’re over halfway done sort of rebuilding the entire tech stack underneath our community financial institutions because we understand you can’t get to any of the stuff that matters. AI, if you see a future of the hybrid monetary environment and you’re wanting to clear and settle different forms of tokenized money in the right way in a safe and secure.

way with a single control pane. Like you can’t get there without the modern tech to get you there. But on the data side, let me give you this name. You may not know this guy’s name. Chad Killingsworth. Chad Killingsworth is basically the head of, he’s the engineer’s engineer. Inside of Jack Henry, this guy is a rock star. He’s the biggest rock star nobody’s ever heard of. He architected the biggest plumbing into the open banking ecosystem.

in the history of our industry. This was five years ago. Nobody knew about it, plumbed our digital, all of our digital platform into all of the different financial data exchanges. By the way, ended inbound screen scraping. He did that three years ago, ended it, right? And all of the attendant cyber and fraud threats that come in through that channel ended it. Nobody said boo, nobody knew about it. But I’m giving you the case for how we’ve done things a little, a lot.

chris (25:39.958)
Right.

Lee Wetherington (25:51.061)
differently than our peers, and especially our peers that are two to three times our size, because our lot is fully cast with community financial institutions. We’re not going around the world. We’re not going out chasing, wanting to be a big merchant acquirer, that kind of stuff. We’re totally focused on making sure that community financial institutions survive, especially community banks, because in our view, we don’t have the American economy.

chris (26:00.836)
That’s right.

chris (26:10.727)
Okay.

Lee Wetherington (26:20.426)
without this constellation of community banks efficiently getting credit into the hands of small businesses on Main Street. We believe that to our core and the only way to serve that and to do right by that is to use our collective leverage to bring to our community banks things that they cannot negotiate for individually on their own.

chris (26:40.358)
Where do you see the cores, the traditional cores evolving to more open, more AI driven? What’s your thoughts there?

Lee Wetherington (26:50.028)
Yeah, well, I can’t speak for all the cores and because by the way, we are not a monolith either. I mean, in terms of just all the cores, we see things quite differently. In terms of being open, we have been, we are and have been for a long time, the most open of all the cores. We were the first to give API coverage even to our foundational cores. That goes all the way back to Jack Henry himself, by the

chris (26:53.722)
Sure. Yeah, that’s right.

chris (27:11.067)
It’s a

Lee Wetherington (27:17.152)
He said from the very beginning, we cannot be all things to all banks. Therefore, we are by default and by design open. And we are going to aggressively integrate and allow integrations into Jack Henry from whatever third parties make it possible for our community banks to do what they need to do on the timeframes that they need to do them. It’s just that now we actually have a technology and technology stacks that are allowing us to double and triple down on

that openness in terms of data. Look, we now have every single product property or solution category inside of Jack Henry feeding what we call a data hub. So, you know, they’re feeding a single instance in GCP that only the community bank has a key to. And then with that consolidated data from everything that you’re using from Jack Henry, and you can tie in other third party data feeds to that too.

chris (28:09.032)
Thank

Lee Wetherington (28:16.246)
so that you’ve got your data in one feed, in one place. You can put it in a lake, you can put it in a data warehouse, and then from there, you can do whatever you want. We’re building analytics and all kinds of visualizations and stuff, reporting and all of the like, a dashboarding on top of all that. But look, we understand how gnarly a problem that was, and so we did Data Hub, and now we’re building out something called Jack Henry Business Intelligence, or BI, so that we’re making, it’s not just all the raw data’s in one place.

We’re unifying, cleaning, normalizing that data so that the least sophisticated of our clients can do meaningful, actionable things with that data. Yeah.

chris (28:49.555)
You can use it.

chris (28:55.255)
deliver insight. What, all in the same vein, what’s your view on the move towards tokenization? with a deposit token, we’re gonna be planning on doing more things on chain than we do on our core and basically feed core back. So for example, interest. So we can now create an account using a smart contract and tokenized deposit that pays higher interest the more you add to it and don’t take money out as an example.

Maybe I wanna pay you extra rate on your birthday or have a co-signer for a senior parent above a certain dollar. I can now do all that on chain, feed the core. What do you see the future of the cores given that logic?

Lee Wetherington (29:39.936)
Yeah, well, that future, we built that future back in October. So because of all of these under the waterline infrastructure investments we’ve been making to rebuild the tech stack, we built a hybrid ledger in two weeks last October. We’ve been iterating, what’s that?

chris (29:56.258)
Virtual ledger,

Lee Wetherington (30:00.341)
It’s a hybrid ledger that actually enables settlement orchestration and clearing between your foundational core, your general ledger, your centralized ledger, right, at the bank, and then all of course these other decentralized ledgers on chain. We built that in two weeks. We’ve been iterating it ever since. We took that into a POC, which is now turned into a pilot at a handful of our clients for purposes of just proving out.

Send, Receive of USDC. And now we’re beginning to build out the first sort of use cases with that fundamental capability of Send, Receive USDC. Now, back to the benchmark. We asked our CEOs, how many of you are planning to enable anything in the way of stable coins, tokenized deposits, even crypto? It’s at 18%. And so both banks and credit unions said, in the next two years, we’re gonna be enabling some form

of either stable coins, tokenized deposits, et cetera. When you look at the difference between the responses between the banks and the credit unions, banks, their number, the first things that they said that they were gonna enable and support were tokenized deposits and or deposit tokens. Why? Because they have finally woken up to the threat that payment stable coins present to their deposit base. But now you’ve got, especially if you’re looking at tokenized deposits, you gotta figure out how to get

chris (31:13.984)
Yep.

chris (31:24.543)
Connects us, yep.

Lee Wetherington (31:27.562)
to scale because those things have to be as we understand them currently from the regulators have to be on private chains or private networks. This is why I’ve been telling everybody watch JPM coin, watch the deposit token sitting on a public chain with an end. We know what the end game is. The end game is we want, Chase wants that JPM coin, that deposit token, not only to be on public chains, but to approach the fungibility of a stable coin.

yet they can still rehypothecate what’s backing that deposit token in the form of credit. So we’re in conversations with a whole lot of groups who all have their different sort of tax at building the private networks for tokenized deposits. We’re working with Google, by the way, on, we’re in talks with them about use of their universal ledger for expediting.

chris (31:56.542)
Okay.

you

Lee Wetherington (32:21.864)
a path to tokenized deposits, stay tuned for that. I don’t think I need to say much more about that. We will be talking about that here this summer and we will have something to show for that by Connect, our big flagship conference in October. But all these things, so we’re seeing banks really focus more on tokenized deposits for those reasons that we’ve just mentioned, but then credit unions are really still more focused on just enabling basic B-flat sort of stable coin send receive and that.

chris (32:49.793)
Right.

Lee Wetherington (32:50.506)
or the members who bugged them enough to want to do something with that. What I’m trying to tell everybody is like, look, it doesn’t matter what forms of tokenized money eventually materially support certain use cases at scale in the long frame, this is a new game. I mean, the fact that we’re talking about a hybrid monetary environment at all, it’s a new game. So if you’re still…

chris (32:55.57)
Thank

Lee Wetherington (33:17.046)
playing the old game, you can execute perfectly to win the old game and still lose in a new game if you don’t understand how it’s changing and challenging your franchise, your payment deposit lending flywheel. And if you’re not thinking about ecosystem carryover, where you’re thinking about, what strengths do I have in the fiat monetary environment that I’ve always lived in and breathed in and competed in and how to leverage those advantages to jumpstart

creation and capture of value in on-chain financial services or payments or whatever the case may be You’re gonna be blindsided in a big way. I try not to feed the FOMO, but you Take a breath You’re gonna have time. I came I grew up in payments Like I said, I know I know it nothing happens overnight because I understand humans and what doesn’t change about humans But this is coming and you have to start thinking strategically about what the new game is so that you can have a path to winning

chris (33:57.981)
you

chris (34:15.299)
And just to be clear, the new game, you’re saying beyond efficiencies, it’s a different paradigm shift for now. You have this decentralized ledger, the blockchain, you now interact with that. And now I don’t need a bank per se. I can send that tokenized deposit anytime, anywhere, assuming it’s permitted theoretically or a stable coin without actually having a bank involved. My money’s at a bank, but I can now have this form of payment that’s separate from my bank.

Lee Wetherington (34:44.57)
That’s exactly right. Yeah. And it’s going to take a while for people just to understand that one thing. Okay, wait, it’s not mediated. Right. It’s not mediated. So cryptographic key goes from one wallet on chain to another wallet on chain. And wait, there’s no, oh wait, the bank doesn’t have to be open. The credit union doesn’t have to be open. You don’t have to wait for anybody to be open. It’s just happening 24 seven, 365 based on when criteria are met, that a smart contract is going to execute. That’s right. Then we can have conversations about, hey,

who’s attesting that the criteria have been met to the smart contract? We can talk about Oracle networks, we can talk about identity, we can talk about all of those things that trusted intermediaries like banks are and how they can bring that, create and bring that value to the on-chain environment and get paid for it. I mean, that’s what we’re talking about. It is a brand new world. It is a brand new paradigm.

So you can either be really, really scared and I totally get that, or you can just decide, hey, I’d like to sleep better at night. I’m going to be excited instead of scared out of my wits.

chris (35:52.857)
Well, as you possibly could have scared some bankers out there listening to this, let’s bring it back as we wrap up. What’s your advice to bankers? And when we talk strategy looking ahead, we talked about AI and energetic AI. We talked about, you know, redoing, know, restructuring your balance sheet, focusing on deposits, small business. What, if there’s one thing like, or the next steps that you would advise a banker to do or a bank executive management team to do.

What would that be when we look for 2027? Where to focus and how to get educated.

Lee Wetherington (36:25.067)
I would say first of all, read more Chris Nichols. Number two is I would say get serious about data strategy and payment strategy. Data strategy, want to get whatever data you have in order, right? You want to get it cleaned, normalized, standardized, preferably unified so that you can feed it to whatever machine learning algorithms, yeah, or LLM.

chris (36:29.945)
I love you, that’s what we have you on.

chris (36:51.274)
Anything. It makes your deposits better. It makes your loans better. It makes everything better.

Lee Wetherington (36:56.157)
It makes everything better. It’s a force multiplier. It’s a force multiplier across the board. Then when you’ve gotten your data unified and together, recognize how much data you don’t have and measure that too. And then get serious about being first and best to ask for permission to aggregate the disparate fragmented data that your customers have scattered across five, 10, 15 different financial service providers and apps. Aggregate back.

And then you don’t have to guess anymore what’s important to them, what they might want to want, what might be relevant next to offer them. You will know definitively because you will have the holy grail of data. If you can get to a preponderance of data, not in 100%, that’s unrealistic, but if you can get to a preponderance of data, 70, 60, 70 % of the financial data on your customers just by asking and making it more convenient for them to see.

you’re gonna shut down more fraud, you’re gonna have less risk. Like you said, it’s forced multiplier across the board. And now you can actually suggest next best product or service. And you’re gonna be doing that at the same time that agentic workflows are becoming embedded into what you’ve been calling your digital banking layer, your mobile banking app, et cetera. the trust issue is gonna be really crucial here with agents. Can you trust an agent? Who do you trust more, your agent or your community bank?

This is going to be a big deal because if people writ large begin trusting their agents to be objective and dispassionate and that displaces the trust they’ve historically had in this community bank that they’ve been banking with, that’s a problem. That’s a problem for all of us. It’s a problem to the whole model and the entire ethos of community banking.

chris (38:42.288)
Just another way the banking is changing rapidly. I think it’s exciting time to be a banker. think like if you’re a $400 million bank, you can now compete better than ever before if you embrace it. And if you’re a legacy bank at even 100 billion, you need to turn a big battleship, big cargo ship to make the changes but.

It’s your survival as you pointed out. it’s, yeah.

Lee Wetherington (39:05.003)
That’s exactly right. On the payment strategy front, recognize that Gen Z’s preferred method of payment, it’s not close, it’s debit cards. Real-time payments on debit rails, even if those debit cards, and especially as those debit cards are parked in various digital wallets, that’s the way Gen Z rolls. If you wanna crack the Gen Z small business nut, you’ve gotta understand that about their behavior and you’ve gotta make it easy for them to just begin.

tap and pay on their phones wherever they are or accept QR codes or do invoicing. It should be easy and now cheap, like you said, because of these different agentic flows that are coming online from the big LLMs, especially Anthropic. It’s an exciting time. The possibilities are endless. We’re better off with community banks in the United States. I don’t think we’re there in the United States without community banks. So we’re gonna figure this out and…

chris (39:59.953)
Heck yeah.

Lee Wetherington (40:00.841)
just take advantage of the possibilities now that make it faster, cheaper, better to scale relationship-based banks.

chris (40:08.723)
Billy, as usual, your wealth of knowledge and passion, appreciate it. If our listeners want to find you and listen to you more, where can they track you?

Lee Wetherington (40:16.651)
Just Google my name, Lee Weatherington, just Google it, you’ll see. By the way, I’m not building homes down in Tampa. That’s a different Lee Weatherington. But if you want to think that’s me, that’s fine too. But you’ll see just Lee Weatherington or Jack Henry or both, and you’ll find stuff littered out there on the internet.

chris (40:35.143)
Sounds good, Lee, thank you very much. Be safe out there and thanks for all the ideas and everything you do for the industry.

Lee Wetherington (40:40.063)
Thank you, Chris. I appreciate it. Back at you.