How KeyBank Competes by Picking Its Battles

Q: Can you share examples of successful fintech investments and acquisitions that have enhanced your capabilities and business performance?
Alexander: Our first foray into fintech was largely driven by our commercial payments franchise. We had some opportunities to see capabilities that would initially improve our clients’ performance. This firm is addressing a need that we could also fulfill. It would require time, money, effort and distract us from something else. And these guys are already way ahead of us. They have a really good capability. We could scale it across our client base.

So, you start with that and the conversation just evolves, “Hey, do you want to partner?” Sometimes there are opportunities to, yeah, no, let’s — they were looking for an investment partner. Let’s invest. It’s a way to increase our exposure, essentially and enhance our connectivity to the business. In some cases, we secured a formal board seat or board observer position. So, it’s a nice way for us to help that business grow and also for us to observe how they conduct their business.

Specialized Market Strategies

Q: How did KeyBank develop its focus on the healthcare sector and what role does Laurel Road play in this focus?
Alexander: We bought a business called Laurel Road in 2019. At the time, it was essentially a student loan refinance platform for doctors and dentists. It was mostly a physician-focused student lending business. Again, that was five or six years ago.

Over time, we’ve invested in that business to broaden its product set, where it’s today — a national digital bank, with a significant focus on healthcare and student loan refinance remains an important product.
Still, it offers a full suite of deposit and savings products that can help anyone, as the government has created forgiveness programs over the last few years. We can also help advise individuals with student debt in those circumstances.

Dig deeper:

Q: What drove the decision to create a dedicated mass affluent banking offering?
Alexander: One example that we’ve invested in recently and again, it’s a compliment to the healthcare strategies we’ve invested in the mass affluent business. I ran the mortgage business in 2019. I knew we had a lot of clients who had a need for a jumbo mortgage. And by mass affluent, we define that as a family with investible assets typically ranging from $ 250,000 to $2 million.

As I mentioned, we’ve been around for about 200 years. We’ve had mass affluent clients in and out of every one of those 950 branches for much of that timeframe. However, we never really had anything special for them in either our retail franchise or our wealth franchise.

They had just done the stock offering and we said, “Hey, I think there’s an opportunity to…