Coder In The Cornfields

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PROFILE

Cant KnockHis HustleIowan Wade Arnold is among the latest crop of techiesthat at any other time wouldnt consider banking

By Sean Sposito

Wade Arnold leans against the wood veneer bar at Zsavooz, a busy strip mall

restaurant lled with pool tables and dart boards o highway 58 in Cedar

Falls, Iowa. The 34-year-old head of the banking technoloy company

Banno gestures around the noisy room.

I have all my internal meetings here, he says. We call it Banno East.

This 40,000-person city is far from the tech capitals of New York and San Francisco. But

it is where, with no acumen for banking at the start, Arnold transformed his company from

a web design shop into one of the top nancial technoloy outts to watch in the coming

year.Roughly four years ago, in a series of lunch meetings at this bar, he negotiated a deal

that netted Banno a half-million dollars in investments from local commercial real estate

developers.

Now there are nearly 60 programmers, sales people and IT sta; about $4 million in rev-

enue; and almost 400 bank customers.

This former, semi-pro BMX rider is part of a new generation of entrepreneurs trying to

capitalize on the growing need for technoloy at banks.

Today you can tell hes excited. His voice rises at the end of every sentence, his blue eyes

wide.

Arnolds tiny company has just landed its biggest get yet: a partnership with ProtStars, a

division of established core banking company Jack Henry (JKHY).

ProtStars just began oering bill pay and mobile remote deposit capture technoloy

through Bannos Grip a smartphone app that helps bank customers decide whether to

WADE ARNOLD

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PROFILE

make purchases, without requiring integration with a

banks core system.

And earlier this fall, Banno launched a billpay

switching service with Deluxe that gives banks and

credit unions the ability to help new customers

change banks. The roughly $178-billion-asset Sun-

Trust is piloting that feature as a part of Deluxes

SwitchAgent software.

For Banno, such high-prole partnerships area stab at legitimacy in an industry so risk-averse

that newcomers selling technoloy are ignored as a

matter of course.

The barrier to entry to [oer] ntech directly to

banks is humongous, Arnold says. Its been a wild

past 14 months.

Barriers to Bank techFew early-stage companies get as far as Banno, and

even fewer last.

Traditionally, banks have wanted everything

under their own roof. Executives were hesitant toeven rely on proven third parties such as IBM, much

less unknowns.

I dont know if Id [hire] somebody from Iowa

in the rst place, jokes Brian Riley, a former bank

executive, who i s currently a senior research director

in the bank cards and retail banking practice at CEB

Towergroup.

That, however, has star ted to change.

Over the past decade, our world has become so

highly interconnected that today, if there is a good

idea somewhere in the world, I could be on a plane

to get there tonight, says Philip J. Philliou, a pay-

ments consultant who evaluates startups nationwide.Even so, those selling Web services to even the

smallest of banks must catalogue every change not

to mention every version, whether its displayed on a

desktop, tablet or other mobile device.

Its a matter of self-preservation. A passel of

regulators could, at any time, call on a bank or credit

union to produce the rate changes displayed on a

mobile app or static Web page at an earlier date.

Many larger banks will at-out refuse to work with

outsiders that dont have millions of dollars in liquid-

ity, simply for liability reasons, Riley says.

And then theres the series of certications an

entrepreneur must pay for and pass, to convince

potential customers its safe to use the startups ser-

vices. Yet there is no question where much progress

in this industry starts with people like Arnold.

hacker @ heartIn the mid-2000s, before working on big banking

problems, Arnold was plugging away on open source

software, specically working on a way to push data

immediately from a server to a Flash player (Adobesmultimedia platform used to add animation, video,

and interactivity to Web pages).

He co-wrote The Essential Guide to Open Source

Flash Development, after so impressing Adobe

executives with his work that they hired him to speak

at conferences and evangelize their software.

In 2007 Arnold joined T8 Design, what is today

Banno. He became the lead on a dozen projects for

the then two-year-old ad agency, most of them con-

tracts with fast food restaurants.

Arnold was paid in common stock, a move hed

later regret when he realized that T8 was heavily

in debt. He eventually approached two real estate

developers for help keeping the company aoat and

preserving his shares.

What happened instead was a series of drama-

lled events in which the previous CEO was forced

out and the pair of investors wrote a check for

$500,000 directly to the bank (they now own half of

Banno) and put Arnold in charge of the new T8 Web-

ware at the beginning of 2008.

Bannos bank website business took o the fol-lowing year. The longer story is that the majority

of our revenue came from companies like Hardys,

AT&T and McDonalds and Fortune 500 companies

that we were doing software development for, says

Arnold, who then was selling to the companys larg-

est accounts. Then in 2009, we had one month in

which the rest of the company sold more in banking

than I sold in professional services.

That created a shift in focus.

The company began oering services that evolved

into Cre8 My Card, a product that lets banks oer cus-

tomers a way to customize debit cards with photos.

Just this past year, Banno began selling respon-sively-designed websites to community banks and

credit unions that keep track of a customers prefer-

ences, redesigning content based on a users device,

whether thats a tablet, smartphone or desktop.

At heart, Arnolds a geek who codes as way to

learn about the world around him.

It shows through his repertoire of weekend activi-

ties over the past year. Hes reverse engineered a

Square-like smartphone app after ordering a 99-cent

card reader from the Chinese manufacturer that

makes Jack Dorseys dongles; built his own processor

software that completes American Express trans-

actions, and created a mobile payment app afterborrowing point-of-sale equipment from a bar and

restaurant company, Barmuda, that shares oce

space with Banno. All, just in his spare time.

And he renamed the company last year after his

young sons imaginary friend. It was his way, he says,

of claiming Banno as his own absolutely nothing

from T8 Design remained.

Bannos gripThere has been a urry of interest in the company

since Arnold and his product manager, Ben Metz,

announced Bannos mobile banking application Grip

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at FinovateFall in 2011. The startup has had meetings

with executives from some biggies, including Citi,

Capital One and Visa.Grip oers mobile personal nancial management

and beyond. Banno buys information from search

engine giant Google and scrapes the social Web for

clues on where people shop and check-in: think Four-

Square. But though the iPhone app took only a month

to develop, the process behind it involves complex

machine learning and took a year and a half for Ban-

nos programmers to build.

Its an engine that will someday be used to allow

banks to cross-sell mortgages and target oers based

on algorithms that track bank customers, Arnold

says. The company wants to eventually give banks an

intelligence report on each of their customers. Thismight include a tip sheet on a customer who should

be oered a car loan because the amount of cash in

her bank account has jumped by 22 percent over the

past month and she constantly searches online for

new Ferraris.

the hawkeye effectPerhaps Bannos greatest strength is that Arnold kept

it in Iowa.

In a state college grads cant wait to leave, the

median age in the oce i snt much older than 25,

says Abby Goltz, a 26-year-old account manager at

Banno. The atmosphere here is light, with Arnold, a

rap music acionado with a pension for Jay-Z, oftenmaking sure it stays that way.

So the other day we were in a standup [meeting]...

and someone was explaining something that we got

completed, and Wade says: So, translation, youre

the s**t, Goltz says, laughing. And Im thinking

Clique on the new album by Kanye West.

The whole feel of the company is young and hip,

with tall Steelcase chairs and chest-high tables.

Indeed, in Bannos wing of the shared oce space,

theres a foosball table, free Red Bull, and there are

no oces except for Arnolds, which is more ceremo-

nial than functional. Its mainly where he keeps a keg

of Stella Artois (the Budweiser of Belgian beers) alongwith a bottle of Bombay Sapphire.

Not even Metz, Arnolds No. 2 man, has his own

desk. Metz roams the halls speaking to developers,

copywriters and account managers. The entire build-

ing feels like the common area of a dorm room lled

with friends. For instance, Eric Batterson, Bannos

head of user interface design, was the best man at

Arnolds wedding.

And to bolster Bannos recruiting program, Arnold

is a member on the computer science advisory board

at the nearby University of Northern Iowa, Arnolds

alma mater. There is no better hire you c an make

then a kid that grew up on a farm that has a computer

science degree, says Metz. When you tell a farm kid

he doesnt have to work from sunup to sundown and

gets to sit down all day, the Iowa-grown 20-some-

things sometimes look at you funny.

There have been state-funded perks, as well.

In September, the Iowa Economics Development

Authoritys Innovation Acceleration Fund matched a

$1 million private loan from one of Bannos lenders,

according to a published report.Earlier this year, that same agency doled out

$120,000 in tax incentives to the startup.

whats around the cornerIts a cold night on the plains as Arnold drives his late

model GMC Yukon downtown.

He usually isnt dressed this chic in designer

jeans and $400 Allen Edmonds leather shoes. Its

usually graphic tees, often times carrying his compa-

nys logo, and sneakers.

Arnold walks through the employee entrance

at Montage, a restaurant that could, except for theprices, be easily transplanted to Midtown Manhattan.

Several senior members of Arnolds sta (all

under 40) are waiting for him at a table in the back,

among metal sculptures made by a local artist . The

centerpiece is a tall, hollow prism supporting a solid

sphere.

And the wine ows: At least one $145, four-year-

old bottle of c abernet sauvignon from Napa.

The conversation quickly turns to bank tech.

When asked, Arnold insists that hes completely

uninterested in selling his company in the cornelds.

He blurts out that last year he was oered eight

gures (read: more than $10 million) from an estab-lished Austin ntech vendor whose CEO has an

anity for the movie 300.

Everyone laughs.

Metz would later say Arnolds greatest strength

is that hes a product guy, someone who gets the

design, functionality and utility of a piece of software.

Thats on display as Arnold sketches out Bannos

long-term business plan on a piece of notebook paper

sitting on the table something other executives who

have worked with him say hes prone to doing.

I still feel like Im hustling and trying to catch up,

he says. All I know is that we have to get somewhere,

and see whats around the corner.

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