Fintech is planting seeds in the agriculture industry.
Agribusinesses face
Standard bank technology can solve some of the issues that crop up for ag customers. For example, farmers may be located hundreds of miles from branches, making mobile check deposit and e-signatures more of a necessity than a mere convenience. Some farmers have to spend their day in their fields, and thus rely on digital banking in the evening hours.
Sophisticated
Agribusiness owners are ready for it.
"Historically, folks assume that farmers, ranchers and producers will be slow to accept technology," said Jennifer Roths, who leads the agriculture lending group at West Monroe. She finds that farmers are advanced in the technology they use to manage their operations and expect their banks and lenders to keep up with them.
"They don't want to drive to a branch to sign a document," said Roths. "They may want to sit down for conversations about succession planning, transformation and growth, but besides that, they are very open to doing a lot of 'transactional activity' in a digital manner."
The Independent Community Bankers of America has noticed a growing need among its members.
"We started talking to bankers over the last year and a half about digging deeper into their problem areas," said Charles Potts, the chief innovation officer for the Independent Community Bankers of America. "Agtech is one of the big areas that continues to percolate."
Lofty fertilizer and equipment costs are forecast to cut into profits this year. Farmers are expected to seek loans to cover higher expenses, but bankers are likely to be cautious in granting credit given recessionary pressures.
Currently, the pool of agriculture-oriented fintechs is small. But several banks have identified specific needs and are taking concrete steps to get there.
The $15.9 billion-asset Bremer Bank is sourcing agtech through several avenues. Schober helped open an ag-specific accelerator in Fargo, North Dakota, through the Plug and Play network. He plays an advising role with Techstars Farm to Fork in Minneapolis, and will sometimes advise or explore partnerships with companies that come out of Gener8tor's agtech accelerator. Recently, he launched a "reverse pitch" through innovation platform Bold Open in Minnesota to solicit fast decision-making products for small ag loans.
"Broadly, we're looking for any type of solution that will help generate more revenue for our ag customers or create efficiencies," said Schober. "Part of my role is to keep Bremer as a relevant ag bank three, five, 10 years from now."
The bank is exploring ways to import data from customers more efficiently. Its one-to two-year roadmap includes customizing digital products for ag customers, whether that means a specific set of accounts with treasury management solutions embedded in them, or functionality that sweeps money from loans to deposit accounts.
Already, it has made one tweak specific to ag customers: bumping up the monthly limit on mobile check deposits.
First Bank in Carmi, Illinois, whose legal name is First National Bank of Carmi, is also fielding new ideas for its customers. Its CEO and president, Nikki Roser, is on an innovation committee with the Community Bankers Association of Illinois that is focusing on agtech.
"Today, there is not a whole lot we use technology for to benefit our ag clients," said Roser. "In the future, there could be." She points out that agribusiness has complexities that go beyond general vendor solutions for consumers and small businesses.
At the top of the $616.7 million-asset bank's wish list is a system that would help ag clients more easily gather and submit critical information to the bank. First Bank requires a significant amount of data from its ag customers, including crop yields, production history, and income per acre and per crop. Smaller operations may do bookkeeping themselves rather than hiring an accountant. Right now, bankers typically sit down with customers to collect their financial information. An ideal system would not only ease this burden, but also let the bank message the client's accountant, crop insurance agent, or chemical and fertilizer dealer to ask questions or gather additional data to run projections.
"We're the experts on financials, so if we get the data, we could crunch the numbers, sit down with them and talk about the things that matter," said Roser.
First National Bank of Omaha in Omaha, Nebraska, known as FNBO, is deploying technology in a different way to reach its ag customers: social media.
Regina DeMars, director of content marketing social media at the $28.3 billion-asset bank, points to a study from Hillsgreen, a marketing agency for agriculture businesses in the United Kingdom, that found 85% of farmers use social media regularly in 2020, compared with 33% five years earlier. The numbers are likely comparable to the U.S.
This means sharing blog posts written by ag experts at FNBO, creating giveaways, filming short videos starring farm animals, highlighting the contributions that farmers make (which they can then share themselves), and more with an "edutainment" vibe. Blog posts "allow us to position our ag business team as thought leaders," she said. "It demonstrates that they not only know banking, but also farming. We can talk knowledgeably about the industry. All this builds trust in the bank, its employees and its services." DeMars aligns the cadence of content with the seasonality of farming. That means generating campaigns during National Agriculture Month in March, when customers will be on the lookout for content, rather than during harvest season.
DeMars is exploring the prospect of using influencers,
Although social media campaigns don't typically return quantifiable results, they serve as "air cover," or a way to boost awareness of FNBO's services and expertise.
"We have heard the ag team say, 'this content added value to my conversation or meeting with a new prospect'," said DeMars. LinkedIn posts tend to generate the most engagement.
A fintech project on the horizon is a digital banking and cash management app for young farmers.
Bank technology provider Nymbus is actively shopping Prospr, its niche digital banking concept, to find a home with a financial institution. The Prospr brand will target young and beginner farmers, where young is defined as those who are 35 or younger, and "beginner" refers to those with 10 years of experience or less. Jody Guetter, the executive vice president of market innovation at Nymbus, has seen statistics from several years ago estimating that 70% of family farms will change hands over the next 15 years. That lines up with her own observations of succession planning in farming when she worked at Minnwest Bank in Redwood Falls, Minnesota.
"There is an immense amount of knowledge that is not getting transferred from legacy operations to the next generation of farmers," said Guetter.
She has seen debts incurred by young farmers and high debt-to-income ratios that prevent them from accessing capital to expand their operations and a lack of legacy knowledge can hinder their business management. They may not understand their input costs, or operating expenses, as well as their margins and profitability.
"All this created a perfect storm in limiting their growth potential," she said.
Prospr is meant to solve those issues while catering to a young farmer's preference to operate digitally and make data-driven decisions.
"We saw a lot of opportunity to aggregate and visualize data, from spending insights to cash flow projections to inputs, to help them understand their business better so they can be more profitable," she said.
The Prospr app will offer deposit accounts and a debit card. It will help farmers visualize their inputs and make cash flow projections, which is particularly important for cyclical businesses. It will organize farm expenses for taxes, deliver insights for marketing crops, dispense advice, and spotlight information about state or federal financial assistance programs
Some experts note that innovation happening in other facets of ag banking can be instructive to traditional banks.
Associations within the Farm Credit System, a network of financial institutions that lend to farmers but do not accept deposits, will pool resources to invest in technology that benefits them all, said Roths, of West Monroe. She has seen less such collaboration among community banks to invest in technology, even though small institutions may otherwise find it difficult to justify these expenditures.
Niall Haughey, the founder of Graze, which publishes an agri fintech newsletter out of the U.K., has also observed some vendors embed financing into their platforms by connecting users with non-bank lenders — an opportunity he thinks banks are missing right now. Business management software provider AgVend and Tractor Zoo, which helps farmers find equipment, are two examples.
Nymbus is not only pitching Prospr to banks, but also to agricultural-related companies that may wish to embed banking services.
One area that is ripe for innovation is faster business-to-business payments, says Haughey. An example is Bushel Wallet, a real-time payment app for agribusinesses and farmers, that was created by grain-buying software company Bushel. Evolve Bank & Trust in Memphis, Tennessee, provides the underlying account.
"If I was in a bank, I'd look at workflows that are specific to ag and involve payments, and start to integrate faster payments with those workflows," said Haughey.
