Essential Banking News: House Passes Financial Choice Act, Apple Releases P2P Payments, MX Partners with COCC
Get up to speed with banking news in less than 5 minutes.
October 2008: The global financial crisis led major banks to make acquisitions in an effort to shore up deposits and stave off systemic collapse. Wells Fargo aquired Wachovia; Bank of America acquired Merrill Lynch and Countrywide; J.P. Morgan acquired Bear Stearns and Washington Mutual. In addition, some floundering banks were sold off in pieces post-crash, creating a hodgepodge of disintegrated banking structures.
We've found that it's often harder than it should be to find data on banks in the United States. Because of this, we've compiled simple views on data, such as this one on asset size.
We've found that gathering data on income on banks and credit unions is often more difficult than it should be. To make things easier, we've gathered data on both interest income and non-interest income from the National Credit Union Association (NCUA) and displayed it here. Feel free to use it in your research.
CFPB RFI Around Consumer Access To Financial Records Draws The Battle Lines Between FIs And Aggregators
On November 14 the Consumer Financial Protection Bureau (CFPB) announced an inquiry into the challenges consumers face in accessing, using and securely sharing their financial records. This came on the heels of CFPB director Richard Cordray telling a Money 20/20 audience in October that the agency believes consumers should be able to access their financial data and give permission for third party companies to access it as well. The bureau was acting in the wake of high profile cases where banks — including Wells Fargo, JPMorgan Chase and Bank of America — cut off access to third-party sites and apps like Mint.
Despite all the talk about shrinking government it is relatively rare that a federal agency is eliminated. In 1998 Congress dissolved the U.S. Information Agency, a public relations wing of the government that communicated to 150 nations at the height of the Cold War, with its responsibilities being absorbed by the Department of State. In 1996 Bill Clinton and Newt Gingrich had a rare moment of agreement as they eliminated the Interstate Commerce Commission, which had regulated everything from telephone companies to railroads for more than a century. But the last two decades have been dominated by many more instances where politicians talked a big game about slashing government — particularly plans to dismantle Cabinet-level agencies such as Education, Energy and Commerce — and ran into roadblocks.
On Friday President Donald Trump signed an executive order calling for his administration to review the Dodd-Frank Wall Street Reform and Consumer Protection Act and issued a memorandum to delay — and potentially cancel — the Department of Labor’s Fiduciary Rule.
The Great Khaleesi Daenerys Stormborn Targaryen from Game of Thrones wasn’t the only one riding dragons to victory last year. So-called Chinese "fintech dragons" have breathed some financial fire of their own in 2016, capturing the top spot in the fintech investment space. The big question is whether winter is coming for US and EU fintech firms, or whether this is just a temporary shift in focus from venture capitalists.
Bloomberg.com just showed why traders are shorting department stores en masse, and the proof should concern banks that are still focused on branches. Put simply, department stores accounted for 9% of all retail sales in the early nineties but now account for less than 3%. At the same time non-store retailers (including Amazon.com) now account for over 10% of all retail sales.
In many ways, 2017 is looking positive for financial institutions. Quarterly net income is trending upward, lending is up, the stock market is up, unemployment is down, interest rates have started to rise, etc.
The Biggest Challenge Facing Banks in 2017
When Moorad Choudhry, author of The Principles of Banking, was asked what’s the biggest challenge facing banks right now, he said that it’s “to stay engaged with the customer.”
Treasury Secretary nominee Steve Mnuchin, a former head of Goldman Sachs’ mortgage-backed securities desk, banker, hedge fund manager and film financier, was no doubt a strange choice for a candidate who bashed Wall Street on the campaign trail and warned that Goldman Sachs controlled rivals Ted Cruz and Hillary Clinton. He also represents a sea change for a federal government that has regulated banks more stringently in the wake of the financial crisis and focused on limiting corporate tax avoidance over trimming rates.
From Brexit in the UK to Trump’s election in the US, this year has been a wild ride for global capital, financial markets, and political institutions. As we look forward to 2017, let’s take a moment to step back and assess the impact of these changes on the financial technology marketplace. One thing 2016 taught us? Forces of convergence and divergence continue to push and pull at our interconnected world, generating new opportunities and risks for the fintech sector. Here’s what to watch in 2017:
Navy Federal Named Best Overall Online Banking Leader By Javelin; BBVA Compass, Citibank, SunTrust and USAA Garner Financial Management Praise
Navy Federal, USAA, Bank of America, Citibank, BBVA Compass, Bank of the West, BMO Harris, SunTrust and PNC lead the pack in the inaugural edition of Javelin’s Online Banking Scorecard, a competitive analysis of the nation’s top 30 retail banks and credit unions. Navy Federal Credit Union earned the 2016 Best Overall Online Banking Leader award while being awarded 67% of the total points possible. Javelin's scorecard assesses more than 200 features offered by FIs across the categories of Financial Management, Money Movement and Customer-First Banking, the latter encompassing personalized guidance from product selection to financial well-being.
CFPB Launches Inquiry Into Challenges Consumers Face In Sharing Access To Their Digital Financial Records
If financial institutions make it difficult for consumers to share access to their digital financial records, they’ll be blocking a new generation of consumer-friendly products and services, warned Consumer Financial Protection Bureau director Richard Cordray at a field hearing in Salt Lake City yesterday.
Every week, financial services companies are launching new and improved APIs (Application Program Interfaces). Some APIs are aggressively targeting service lines or sector market share and others are targeting customers by addressing needs with greater efficiency. Financial firms have been late to the game, but most now realize that business sectors and revenue centers could be disrupted if they do not launch progressive API and Banking as a Platform (BaaP) initiatives.
With the threat of a hard Brexit looming on the horizon, the European banking system is at a tipping point. For the casual American observer, the politics of closed border, closed systems and closed economies appear to have won.
But there’s more going on in European banking than meets the eye.
Wells Fargo Considers New Performance Metrics, Venmo Grows Rapidly: Essential Fintech Reading Oct 15-21
The Hardest Job In Banking?
Emily Glazer of the Wall Street Journal writes that Mary Mack, the head of retail banking at Wells Fargo & Co., must change the sales culture of the firm. In the wake of a settlement with regulators Wells Fargo scrapped sales goals for retail bank employees but the bank has not abandoned cross-selling, efforts to sell multiple product to individual households.
Is your company working to develop or select a strong API (Application Program Interface) environment? If the answer is no, hustle quickly to remedy that problem. Over the past few weeks, MoneySummit has covered some of the benefits of re-orienting bank APIs towards Bank to Developer (B2D) and Banking as a Platform (BaaP) models. This week’s API focus: How can your company balance API speed to market with data security considerations?
For decades, banks have been located at the center of communities. Go to any town or city and most likely you will find a common space with a religious building, a government building, and a bank smack dab in the middle. The advent of the (Internet-connected) smartphone changed this organization and shifted the hub of community activities to wherever anyone happened to be online. Most banks responded to this shift by offering traditional products and services online, hoping that their offerings would generate revenue and preserve relevance as a central institution. However, as online competition grew, service fees and revenues eroded leaving banks in a difficult position on the periphery.
In recent weeks, the banking chickens have come home to roost. The leaders of two of the world’s largest banks, Wells Fargo and Deutsche Bank, are staring deeply into the abyss – probably wondering how things got so far off course. The answers seem pretty clear. A lack of transparency, poor management, and complex fraud caused customer revolt, regulatory penalties, and massive stock devaluations.
Wells Fargo Scandal Means Renewed Scrutiny Of Big Banks
Lucinda Shen of Fortune writes that the Wells Fargo scandal "could again force regulators to take a deeper look at bank culture. Banks have been increasingly pressured to widen profit margins despite low interest rates and heavier regulation since the financial crisis ... Advocacy groups have also noted aggressive sales tactics, similar to those that led Wells employees to create fake accounts" at other financial institutions.
Mobile Deposit Key To Customer Satisfaction, Wells Fargo Enters Damage Control Mode: Essential Fintech Reading Sept 10-16
Wells Fargo Attempts To Repair Image, Regulator Highlights Risks Of Cross-Selling
The LA Times reports that Wells Fargo will eliminate all sales goals for credit cards, checking accounts and other retail banking products as the bank tries to repair its image. The U.S. Comptroller of the Currency, Thomas Curry, said on Thursday that other banks should review what risks arise from efforts to cross-sell to existing customers. Curry's office was among the regulators with whom Wells Fargo reached a $190 million settlement last week, following claims that it had created two million accounts that customers did not want.
In case you missed it, last week there was a bit of a dust up at Wells Fargo. While investigations are still ongoing, current reports allege that Wells Fargo employees illegally used current customer data to open upwards of 1.5 million fake or unauthorized accounts. Thus far, Wells Fargo has agreed to a $100 million fine and $85 million in penalties and restitutions – and the company’s stock and brand has been significantly devalued. Richard Cordray, Director of the Consumer Financial Protection Bureau, says the Wells Fargo investigation puts “the entire banking industry on notice.”
Neil O'Brien, SVP Director Digital Banking at Santander, analyzes whether Zelle offers enough advantages to persuade millennials to leave Venmo behind. His analysis is consistently astute, and I agree with his conclusions — which are that it's going to be a difficult win.
Could Your Bank Charge For Its Mobile App?
According to an S&P Global Market Intelligence Survey of 4,000 U.S. bank app users, 21% would pay as much as $3 a month for their banking app and 40% would be willing to pay $1 a month. Telis Demos of the Wall Street Journal reports that banks could generate as much as $500 million more in revenue, with the bulk going to Bank of America, Wells Fargo and J.P. Morgan Chase. 26% of Bank of America's users indicated they would be willing to pay $3 a month. Demos writes that banks may still hesitate because younger consumers often cite fees as a reason they switch banks.
Mobile Banking Trends, Millennial Debt, Wall Street Revolution: Essential Fintech Reading: Aug 13-19
This week we look at the latest mobile banking numbers from the Federal Reserve, the latest trends from millennials and debt, and changes on Wall Street.
In 2014, TD Bank produced a commercial showing off its new concept ATM, also known as an “Automated Thanking Machine.” In the commercial, the ATM technology understands everything about particular customers and offers the customers “thank you” gifts based on their needs and life situations. While large U.S. banks have improved customer service over the last year, TD Bank’s customer service technology concept is not particularly scalable or cost effective industry wide. That being said, this commercial does highlight an important point. Customer service, whether in-person or digital, can be enhanced by developing empathy with customers.
Blockchain And Machine Learning Key To Banks' FutureWriting for American Banker, Paul Schaus makes the case that banks must tap the power of blockchain technology and machine learning or "risk losing millennials to fintech companies that aren't bogged down with old technology."
Banks are beating credit unions in mobile banking utilization and it’s not even close. As a group, banks with a mobile app boast 27% enrollment whereas credit unions stand at 12.6% enrollment. In an age where mobile banking has a huge impact on overall customer satisfaction and plays a vital role in capturing the millennial and emerging affluent segments, the quality of one’s mobile offering is crucial. Moreover, increased mobile banking usage drives improved financial performance for FIs. A successful mobile banking app drives customers to a lower cost channel; Chase cites a cost of 65 cents for each teller deposit vs only 3 cents using mobile. As big bank customers have flocked to the mobile channel and become less dependent on in-person interactions, that has allowed these institutions to eliminate branches and reduce cost structure.
We interviewed Joe Sullivan, CEO of MarketInsights. Sullivan outlines what has changed in financial services marketing as well as examples of how to best navigate the change. Ultimately, he says, banks and credit unions must think about how consumers feel in order to win their business loyalty.
We talked with Sam Kilmer, Senior Director at Cornerstone Advisors, about how banks and credit unions need to adapt for the age of digital technology. Kilmer talks through the need for bankers to learn a variety of roles and focus on their skills with technology.
Mobile Banking Investments Drive Customer Satisfaction Improvement
The mobile banking investments of the big banks — Bank of America, Chase, Wells Fargo, Citibank — are creating a huge uptick in their customer satisfaction scores, reports Jim Marous of the Financial Brand. “The large banks’ satisfaction scores increased by more than 50 points between 2012 and 2016, and are now slightly higher than the scores for both regional and mid-sized banks. Why? Increased investment in digital delivery by the largest banks has to be one important reason," Ron Shevlin, director of research at Cornerstone Advisors, tells Marous.
We interviewed Mark Thompson, VP of Growth and Brand at Mazuma Credit Union, about how credit union marketing can be positively impacted by community and member advocacy, and the importance of creating a strategy to reach the millennial audience.
Last year in the U.S., over 500 million financial records were hacked and over half of the U.S. adult population had their data stolen. "We're in a day when a person can commit about 15,000 bank robberies sitting in their basement," said Robert Anderson, executive assistant director of the FBI's Criminal Cyber Response and Services Branch. Data breaches are occurring at banks, on the web, in consumer brand databases, and deep within government databases. As the barrage of attacks on consumers continues to grow, banks are stepping in and improving their security measures. But, will these measures provide enough security to keep customers safe and happy?
Bank of America Mobile App Redesign Brings Enhanced Functionality
Deon Roberts of the Charlotte Observer reports that Bank of America has redesigned its mobile app, providing a Spanish language option, allowing customers to redeem credit card rewards and view their credit scores. “We want to be where our customers are, which is why we are proud to deliver these new features that provide increased convenience to our 20 million active mobile users,” said Michelle Moore, head of digital banking. Bank of America said its number of active mobile banking users grew 15 percent in the last year. Mobile transactions cost the bank one-tenth of what it would cost to conduct them in a branch.
In a recent retail banking review, Accenture defines three bank business models that together could double bank revenue growth while “reducing cost to serve by 20 percent or more”:
Glenn Van Deusen is a co-founder at Van Deusen and Levitt Associates, a corporate branding firm. In this interview we talk about how banks and credit unions are increasingly aware of the need for branding, the importance of asking "why?", and the importance of quantitative research.
Mobile Banking Capability Lures Small Businesses To Mega-Banks
The demand for mobile banking solutions is rising among small businesses according to new data released by Raddon Financial Group. 52 percent of SMEs surveyed by Raddon indicated that they rely on mobile banking platforms to manage and access their accounts, a number that rises to 68 percent among millennial SME owners.
We talked with James Robert Lay, CEO of CU Grow, about the state of marketing in financial services and the importance of exceeding consumer demand for digital solutions.
We talked to Tom Fishburne, Founder and CEO at Marketoonist, about the state of marketing in financial services, what bank marketers should be focused on, and how to focus on micro-moments. "I feel like sometimes there's a bit of a herd mentality that people get so excited about the shiny new thing that they can sometimes forget about the fundamentals, what's really meaningful to audiences," Fishburne says.
“Make fun of debt.” – Paul J. Burt, Chairman/CEO of SaveUp
This week we interviewed Gregory Simon, co-founder at Loyyal. Loyyal is a startup company that uses blockchain and smart contract technology to create solutions for the loyalty rewards industry. Simon says that as technology continues to change, financial institutions need to think of themselves as experience providers.
The future of retirement is changing rapidly.
Mitch Roschelle, Partner and Business Development Leader at PricewaterhouseCoopers (PwC), has spent a lot of time in New York schools. He’s part of PwC’s Earn Your Future initiative, which sends financial educators into schools to train students on best money management practices.
Not all debt is created equal but we can all agree that Americans have a lot of it.
This week we talked to Jeff Mandel, CEO and President of ApprovalGUARD & iQual Corporation, a national credit advisory service in the United States. ApprovalGUARD helps consumers understand what their credit information means and what to do about it. For example, if a consumer has a credit-related goal — wanting to buy a mortgage, get a car, open a credit card, build credit, rebuild credit, etc. — ApprovalGUARD provides them with information and education via their their advisors who have an average of 18 years of industry experience.
The first thing to note about Brett King’s book Augmented is that it’s a joy to read. You can flip to any page and find a fascinating trend, data point, or anecdote about the future of technology. What’s more, King’s tone is consistently one of exuberance and wonder. You can’t help but feel his optimism shine through on each page.
A bank with a two-week wait list to join? No, that’s not a typo. After Simple, a fee-free Internet only replacement bank launched in 2013, so many customers inundated the fintech startup with requests to join that Simple had to institute a two-week wait list.
Mobile Cross-Selling And Contextual Money Management Capabilities Underdeveloped At Largest Banks
Forrester’s US Mobile Banking Functionality Benchmark, evaluating offerings from the five largest retail banks, reveals that mobile cross selling is underutilized. “Too few banks use the context of a customer’s current product portfolio, recent life events, physical locations, past behavior or other factors to offer personalized marketing in their mobile apps,” writes Forrester. The report also reveals that contextual money management tools are largely lacking at the five largest retail banks. Wells Fargo is a notable exception, with the bank providing money management graphics within its mobile app. In analyzing Forrester’s research, Jim Marous also notes that “one of the biggest opportunities (and shortfalls) at the vast majority of financial institutions is not having the ability to open a new account entirely on a mobile device. A notable leader with mobile account opening noted by Forrester is Bank of America, where a customer can apply for multiple accounts directly from their mobile app.”
The annual Financial Brand Forum was an enormous success — full of great speakers and networking opportunities.
HSBC Trims Branch Network In IndiaHSBC is halving its branch count in India to 26, focusing its attention on digital banking. “This change reflects changes in customer behaviour, who are increasingly using digital channels for their banking,” HSBC said in a statement. Rethish Varma, head of research at Aditya Trading Solutions, told Bloomberg that “this move suits HSBC as their target retail customers are mostly in urban centers and are affluent with access to digital-banking channels.” Among HSBC’s competitors in India, Singapore’s DBS Group Holdings Ltd. has also pursued a digital strategy.
Banking technology is undergoing a period of rapid innovation. The financial technology industry (fintech) is developing a suite of technologies to improve every feature of the financial services industry. Large banks, insurance companies, and other financial services intermediaries are being pushed daily to innovate or lose market share. These innovations are expected to incrementally improve security, speed, access, and customer experience, but what hidden convergences will become massive breakthroughs? While we can never be certain of the future, in this six-part series, we will examine the future of banking through six distinct lenses…starting with the convergence of wearable technology and point-of-sale.
LendingClub CEO Ousted, Loan Buyers Flee
LendingClub CEO Renaud Laplanche was fired after the peer-to-peer lending firm acknowledged it had sold $22 million worth of loans that did not meet a buyer's criteria. While LendingClub quickly bought the loans back from the buyer, investment bank Jefferies, the news triggered a chain reaction.
"The Founding Fathers didn't set up a government based on trust. They could have designed a government based on trust in our ability to govern fairly but they knew that power corrupts so they invented checks and balances. That was genius.” – Senator Arnold Vinick, The West Wing
This week we talked to Zaydoon Munir, the founder & CEO of RevolutionCredit, a company that uses behavioral data to help consumers and financial companies interact with each other more effectively.
This week we talked to Chris Tremont, EVP of Virtual Banking at Radius Bank. Chris talked to us about what it’s like to be part of a relatively young bank, how digital has changed banking forever, and what makes for a good fintech partnership.
The rapid proliferation of mobile banking raises the question of where online banking will fit in the future. As mobile becomes the preferred channel for basic transactions, Javelin predicts that online banking will have to deliver a richer experience defined by insight, coaching and advice, trust building interactions that will drive consumers to their primary FI for loans, wealth management and other services.
The world is gathering in New York City this week to “make blockchain real.” Over the last few weeks, we have provided an introduction to blockchain technology and a background on the current state of blockchain based cryptocurrency technology. This week, we examine blockchain based “smart contracts” to determine if the buzz around this technology is hype or the “killer app” that the Internet was invented for.
Personal Capital Rejects Chase Proposal That Would Limit Aggregators
JPMorgan Chase CEO Jamie Dimon has expressed concern as customers have allowed outside parties, including aggregators, to access their accounts. While he sympathizes with Dimon's concerns over data security, Personal Capital chief marketing officer Mark Goines tells Samantha Sharf of Forbes that not using all available data "borders on malpractice because it means not analyzing a person's full financial picture." Dimon has proposed switching to a system where banks would "push select information to third parties with customer permission, rather than the current set up where third parties pull data from banks as they see fit." Goines rejects this proposal as well. Sharf notes that Chase and Wells Fargo shut off Mint and other aggregators' access to data feeds for a few days last fall. Both banks told the Wall Street Journal that the blackouts were a result of security and traffic management decisions "rather than attempts to be anti-competitive."
We sat down to talk with Andy Harmening, Vice Chairman of the Consumer Banking Division at Bank of the West. Harmening details how improvements in digital technology have changed the industry and how banks and fintech providers can work together to move the industry forward.
We talked to Brock Blake, founder and CEO of Lendio and a contributor at Forbes.com, about the state of small business lending and financial technology in general.
We've built a growing collection of interviews at MoneySummit with the biggest names in fintech and banking.
Since we've always recorded the audio for the interviews, we've decided to also release a podcast in conjunction with the interview series.
Kenneth Lin, CEO of Credit Karma, talked to us about how the rise of fintech has given consumers more access to their data than ever before. By walking through how Credit Karma increases transparency for end users, Lin shows that the financial industry is about to change in big ways. He also explains how banks and fintech companies can get on board.
Banks may not die off and go the way of Blockbuster but they face the dual threats of disintermediation and commoditization and will have to innovate digitally in order to remain relevant. In a January 14 webinar Forrester Research analyst Peter Wannemacher shared a series of predictions for 2016 and beyond, keying on the strategies that digital executives will have to employ in order to better win, serve and retain customers.
Hiring a videographer might be a new concept for many banks and credit unions, especially for those institutions that have a marketing team of one or two people. However, since video is becoming a mainstay in the digital age, having an in-house team makes more sense now than ever before.
If you were to ask professional designers for a list of industries that are setting trends in design, chances are that none of them would include the banking industry. That’s in part because bankers haven’t felt pressure to set design trends. They’ve been satisfied with building traditional bank branches and releasing functional (if not always user-friendly) apps and websites. In the past, this was okay since all of their competitors did the same thing.
As with all industries, modern-day marketers of financial institutions are tasked with fulfilling on a myriad of items unique to the digital age. Websites, marketing automation software, social media strategy, paid advertising options, and a staggeringly long list of potential content types make up the selection of new tasks these marketers need to wrestle with. Given the breadth of options, and the often limited resources of financial institution marketing teams, decisions have to be made where to invest time and money. Especially in the case of smaller financial institutions, there is one channel that is essential to drive growth, increase awareness, and establish a competitive edge: local marketing.
From decorations to greeting cards, from holiday meals to cookies and treats, the end of the year also brought the season where we not only spent time with family, we also spent a whole bunch of money.
Given that 4 out of 5 consumers use search engines to research local businesses, you run the risk of not being found online if you don’t have a strong search engine optimization (SEO) and paid search strategy.
In the past five years the percentage of weekly mobile banking users has more than tripled — from 9% in 2010 to 30% in 2015 — while weekly branch visitors fell from 40% to 24% in the same time frame. 2015 marked the first time that weekly mobile bankers (30%) exceeded branch bankers (24%) in Javelin’s survey. “What is driving this incredible growth? Smartphones and tablets are gaining rapidly in consumer adoption but it’s also a function of the fact that mobile banking services have not only proliferated but increased in the quality and features they offer consumers,” said Javelin analyst Daniel Van Dyke during a January 27 webinar reviewing the firm’s Mobile Banking, Smartphone and Tablet Forecast.
Between watching padded athletes slam into each other, viewers of this year's Super Bowl were barraged with ads for junk food: Skittles, Doritos, Taco Bell, Jack in the Box, Mountain Dew, Pepsi, Coca Cola, Butterfinger, Bud Light, and so on. Make a meal out of all that, and you'll be set to... fall into a sugar coma.
American Banker's Penny Crosman covers the news about the continued fintech boom. Given the dramatic rise of venture capital money in 2015, many analysts wondered what would happen in 2016. Now we know. The first quarter of 2016 brought a 67% investment increase over the same period in 2015, indicating that fintech is still hot.
We synced up with Zack Friedman, VP and Head of Finance at CommonBond, to talk about the state of fintech.
While there is continued growth in consumer loans thanks to auto finance and credit card lines, mortgages and HELOCs continue to languish and cap FI revenue growth. During a February 11 American Banker webinar, Aite analyst Christine Pratt said that U.S. economic conditions have slowed consumer demand for credit and lender growth, along with significant regulatory hurdles that could continue for two years. “For regulated FIs, demands for compliance and transparency result in less time for customers,” said Pratt, noting that these demands severely impact IT and operations’ available resources.
Content marketing has been around for decades, but the concept is still generally unfamiliar to the world. Some people call it “inbound marketing” because it serves as a useful contrast to “outbound marketing,” while others call it “permission marketing” because it serves as useful contrast to “interruption marketing.”
This week we talked to Ron Suber, President at Prosper Marketplace, about the rapid rise of alternative lending and what financial institutions should be doing about it. Suber recounted Prosper's fast growth and gets into details about how banks and fintech companies can better work together to help consumers.
Christopher Liechty, VP of Marketing at Bank of American Fork, owned a marketing design firm for 15 years. After working with several financial services companies, including American Express, Liechty entered the finance industry and has remained here for the past 8 years. We talked to him about how bank marketing has changed, and what can be done to balance logical and emotional appeals within banking.
We caught up with Lani Hayward, EVP of Creative Strategies at Umpqua Bank, to talk about the innovative ways that Umpqua has navigated the shift to the digital age. From making use of a 40-foot dome to simplifying a 147-step loan process, Umpqua is consistently leading the pack when it comes to fresh thinking. Hayward shows how other financial institutions can replicate Umpqua’s efforts below.
Many community banks and credit unions have become primary FIs in name only as a significant number of their customers turn to secondary FIs for credit cards, mortgages and other loans. This "silent churn" —where customers open up a checking account with their primary FI but buy other banking products elsewhere — is a profit killer that poses an "existential threat" to community banks and credit unions. Javelin presents these findings in its latest report, Bank Switching: Combating 'Silent Churn' To Maximize Primary FI Status. "In a way, it could be said that consumers are 'cheating' on their smaller FI primary relationships with secondary relationships that are transactional and commoditized," writes Javelin. "Unfortunately, this behavior is centered on the most profitable loan products."
If you were born before digital banking became a mainstay of the financial services industry, your first banking experience likely occurred inside a branch. Perhaps your parents took you to meet with a customer service representative who helped you set up your account and then gave you a paper ledger to keep track of your expenses.
Digital Account Opening: Crucial In Staking Claim As Customer's Primary FI But Threat Of Fraud Looms
Digital account opening is critical for financial institutions seeking to attract and retain profitable account holders but expect a surge in fraud as a result of data breaches compromising personal data. These are the findings of a Javelin white paper, Making Digital Account Opening Simpler, Safer and Seamless, which were discussed during an October 22 webinar. "We expect expect a new account fraud surge will ripple through the industry," said Mark Schwanhausser, Director of Omnichannel Financial Services at Javelin. "It's a damage to the brand reputation and of course it hurts the consumer who has to undo this and may hold a grudge against the bank and may change their behavior in where they shop and how they use their cards."
If history is a sign of things to come (and it is, as you’ll see below), companies that ignore fintech do so at their own peril. Luckily, there’s still time to get ahead of the curve and start innovating. Forward-looking financial institutions will reap rewards for years.
Technology affects nearly every aspect of our lives. Almost everyone has shopped online, found entertainment online, even dated online – shouldn’t the banking industry also be digital? As consumers we expect everything to be available digitally, providing on-the-go access to fit our busy lives. This digital shift is pressuring even slower-moving industries like banking to accommodate.
In his American Banker article “There Will Be Blood: The Era of Engagement Banking,” thought leader Bradley Leimer discusses the future of the banking industry. Leimer suggests the next big challenge facing the industry is the full-on shift to a mobile platform. He goes on to say that the economic imperative to innovate and shift has finally come to an industry not known for innovation. Inspired by signs of mobile adaptation, an entirely new financial market and business model emerged — financial technology, or fintech for short.
Fintech is about disruption. Making life easier for financial institutions to manage their responsibilities and easier for account holders to manage their full financial picture. Some fintech companies partner directly with financial institutions, while some offer products directly to account holders, completely bypassing the financial institution. Other companies seek to replace financial institutions completely, such as Moven and GoBank, referred to as NeoBanks.
In 2011 Javelin Strategy & Research quietly introduced a new way of segmenting and studying different types of account holders. This new theory of consumer segmentation was not shaped by age or income per usual, but instead broke down the general banking public by regular use of online and mobile banking. The group that represented the apex of this digital-first mentality was given a truly sexy name: Moneyhawks.
The consumer shift to mobile continues to reduce service costs for financial institutions but not everyone is eager to jump on board. Chase cites a cost of 65 cents for each teller deposit vs only 3 cents using mobile but 35 percent of consumers use direct deposit for all checks, 31 percent prefer depositing checks in person and another 22 percent worry about the security of mobile deposit. Javelin detailed these adoption roadblocks in a September 30 webinar titled "Connecting the Dots with Mobile Imaging to Create a Full Mobile Banking Experience."
Adblocking on Mobile
The newest version of Apple’s mobile operating system, iOS 9, is unnerving publishers and advertisers alike. For the first time, Apple has opened the way for content blocking on Safari, enabling developers to create “a fast and efficient way to block cookies, images, resources, pop-ups, and other content.” Just like that, paid advertising has been cut from the most widely used mobile browser in the United States. That’s a dramatic change.
The sharing capabilities of social media have led consumers to expect the same ease in moving money and a mobile-first mindset has them demanding a way to do it with their smartphone. Mobile P2P users, who digitally transfer money over a mobile device, are expected to grow from 69 million adults in 2015 to 126 million by 2020, reported Javelin Strategy & Research during an October 21 webinar. However, giant banks are sweeping the field, as 46 percent of their mobile device users have utilized mobile P2P while only 21 percent of credit union and 13 percent of community bank users have.
John Waupsh is the Chief Innovation Officer at BancVue where he helps spearhead technology and marketing solutions such as Kasasa. His upcoming book, Bankruption, is set for release in 2016. We talked to him about the state of fintech today.
Consumers double the number of relationships they hold with financial institutions between age 20 and 35 but most of the financial products they're purchasing go to secondary FIs, largely giant and regional banks that dominate in credit cards, mortgages and HELOCs. While 35 percent of checking accounts are opened with community banks and credit unions, these institutions only account for 14 percent of credit cards, 19 percent of mortgages and 25 percent of HELOCs. Ian Benton, a research specialist in Javelin's Omnichannel Financial Services practice, told attendees of MX's Fintech Festival that this presents an existential threat to smaller FIs. "Silent churn is where you have your checking account, primary relationship with a bank but all of these other secondary relationships for other products," said Benton, who shared upcoming research with MX's audience on October 22. "The primary FI is losing out on those additional products and they don't even know it."
Credit unions know that they have to appeal to younger, tech savvy customers in order to survive and thrive but their path to digital transformation is littered with challenges. Digital leaders cite the fragmentation of product types requiring support in payments and wearables, difficulty wooing talent and the threat of disintermediation from fintech startups that are unbundling the relationship credit unions hold with account holders. An American Banker webinar on Nov. 3 highlighted some of the strategies being employed by Ent Federal Credit Union, DuPont Community Credit Union and CFE Federal Credit Union as they court millennials — the first generation of digital natives — and transform the digital banking experience.
CarrieAnne Cormier has worked at Avidia, a $1.2B community bank outside of Boston, for 10 years. Now serving as the Head of Retail Operations and Strategy, she has helped Avidia work with vendors to lead the transition to digital — launching online account opening in 2008, mobile in 2009, remote deposit in 2012, P2P payments in 2013, and cardless cash this year.
We caught up with Ron Shevlin, author of the blog Snarketing and the book Smarter Bank, to talk about the state of fintech and financial services. Read what he has to say about the possibility of a large fintech competitor, a conversation he had years ago with Elon Musk, the need for banks and fintech companies to build a culture of advice, and why he chooses to be snarky.
9:05am: Bizfi demonstrated an online marketplace with SBA loans, equipment finance loans, term loans and lines of credit targeting business owners. Bizfi is also a lender on the platform. The platform collects a business owner's information and then narrows down the field of lenders that would suit their needs. A funding concierge walks business owners through the pros and cons of each option available to them. A pilot program was launched in Japan four months ago with Credit Saison.
Dan Mercurio is the SVP of consumer banking at Cambridge Savings Bank (CSB), where he oversees retail banking and residential and consumer lending. He develops strategic initiatives and manages performance metrics in each of these areas.
In this interview we talk about how Cambridge Savings Bank has navigated the shift to digital banking.
While financial institutions and billers have saved $2.2 billion since 2010 by turning off paper statements, a surprising number of consumers are hesitant to switch to digital. Javelin's recent study, "Paperless Banking and Billing 2015: Closing The Digital Commitment Gap," found that consumers pay 72 percent of their bills through digital channels but only 39 percent of their bill statements are delivered digitally. And while 83 percent of checking accounts are now accessed online, only 58 percent of checking account statements are received digitally. Double dipping — the practice of consumers receiving both digital and paper statements — has also increased from 20 to 24 percent since 2010.
Customer advocacy has become a hot topic, but there is some ambiguity about what it really means. Does it mean creating customers that are advocates for your organization? Or that your organization acts as an advocate for your customers?
The August 10 acquisition of financial data mining and personal financial management solutions provider Yodlee by Envestnet sent shockwaves across the industry, heralding a new age where personal financial management and wealth management converge. While the deal signaled a desire to build up Envestnet's capabilities for financial advisers and place them in a better position to see a client's entire financial picture, its implications for banks were far less clear.
As part of our research process for our latest white paper, "The Banker's Guide to Digital Advocacy," we surveyed 504 random U.S. consumers and asked about their digital banking preferences. Here are 7 charts we made based on the results.
We've created this quiz to complement the release of our white paper "The Banker's Guide to Digital Advocacy."
Take it to find out whether you're a leader, a learner, or a laggard (terminology from JP Nicols).
In a recent white paper titled The Millennial Generation and the Future of Finance: A Different Kind of Trust, Innotribe shows that when it comes to business interactions, millennials generally favor using technology over going into a branch. Specifically, Innotribe says, “Because millennials trust technology even more than face-to-face relationships and the ‘brick and mortar’ user experience, they are looking for entirely new digital products that are relevant to their daily lives.”
This week we talk to Chris Nichols, Chief Strategy Officer at CenterState Bank. Nichols outlines the state of community banking and strategies for the future, including the possibility of offering an omnibus account.
In the age of Google, account holder expectations have changed. It’s no longer acceptable for financial institutions to wait around for quarterly reports on account holder profiles. That’s way too long in the digital age. Google works in milliseconds not quarters, and financial institutions should follow suit.
Finovate is off and running. I am sitting elbow to elbow with hundreds of other FinTech enthusiasts at the Civic in San Jose. I just hope I don’t spill my coffee on the guy next to me. The Civic is home to several rock legend performances including Buddy Holly, The Beach Boys, and Fleetwood Mac. Ugh…I have to admit as a long time resident of the San Jose area, I had NO IDEA so many famous acts came through here. Now financial technology rock stars are playing their tunes at FinovateSpring [INSERT AIR GUITAR RIFF].
Three dead copywriters — Claude Hopkins, John Caples, and David Ogilvy — can show you how to get users to click your content.
FinovateSpring is off and running. Session 1 jitters are out and we are now on to Session 2. I’m up the press room surrounded by pictures of rock legends who have performed here; Tower of Power, Chicago, Jefferson Airplane. There is no picture of Dionne Warwick singing “Do you know the way to San Jose.” I need to get on that. Does anyone know her?
The Finovate crowd now has the lethargy (is this a word?) associated with a huge lunch. Finovate lunches are generally really good. I over ate like everyone else and I’m now double fisting coffee. Wait, how do I double fist coffee while I’m typing? He he…it’s a skill I learned in college.
The one constant over the past two days at Finovate is incremental change. Outside of the PrivatBank topless ATM demo (easily one of the top five demos in the seven year history of Finovate), much of what we’ve seen is an incremental improvement of services, selective disruption and movement toward bank-like services through new form factors and non-bank service providers. All of these efforts - from the clean interfaces of FinBuddy and SaveUp, automation of advice in Yseop, to the ongoing focus of the securitization of transactions with companies like Encap - are collectively moving financial services forward.
I’ve been thinking about the genesis of Finovate in 2007 and just how much this conference has influenced the financial services industry. Before Finovate, no single conference provided a venue to demonstrate the latest technology impacting our customers - whether that meant a solution that a bank or credit union could deploy - or whether that meant some form of disruption that we had to be concerned about.
Session 3 of Day 2 is ALWAYS a struggle. Festivities from the night before catch up to everyone. I see a lot of heads nodding off and people checking their Facebook app as a distraction to stay awake. Ugh…given this, it’s tough presenting on Session 3 let alone Session 4. Some great things were presented in Session 3. Highlights for me include Yseop, SaveUp, Zumigo and….of course…PrivatBank.
Last week I attended FinovateSpring in San Jose. I was excited to see the latest innovations around mobile payment technology from companies including Loop, Quisk, WePay and Red Giant. However, I was most intrigued by what Ondot presented and the value the technology provides to consumers and to financial institutions. Their technology was so well received last week that Ondot won a Best of Show award.
Last week Novantas, a banking analytics firm, published a 3,000-person survey that demonstrated how personal financial management (PFM) apps are on the rise.
eBay is yet another giant consumer brand that has fallen victim to a cyber attack. Like many of us, I raced to change my password when I heard the news break early Wednesday morning. Of course the news media and many eBay users assumed the worst had happened and that personal and financial information had been breached. Fortunately, the attack was limited to a corporate network and only a small amount of employee login credentials were breached. eBay’s PayPal business unit did not show evidence of user personal or financial information being exposed. Phew.
You might say that millennials hate Wall Street.
The recent twitterstorm from Marc Andreessen outlines why timing is so crucial to the success of startups. He says that startups typically overestimate the importance of being first to market and that being too early can be a bigger risk than being too late. In fact, Andreessen goes so far as to say that the moment when a startup worries that they’ve missed the window of opportunity might be the sign that the timing is just right.
What a day! So much great technology and innovation was presented throughout the day. I admire everyone who gets up there to present. It’s tough. Being up on stage is much different than rehearsing in the mirror or in front of your colleagues in a conference room. I have empathy for those that have to present in the final session of the day…yet alone the final session of the last day. If I ever have to present during the final session of the last day I will be maximizing the entertainment factor replete with fireworks and maybe even a FinTech inspired musical number as a nod to Broadway.
Business Insider Just Released Their FUTURE OF DIGITAL Deck. These Are the Slides That Directly Relate to Banking.
Business Insider published 121 slides on the future of digital today, and they're full of amazing info. We pulled a handful of the slides that relate to banking, but the whole deck is worth checking out.
The Wave of Mobile Banking Users
Recently we wrote about the oncoming wave of users who prefer mobile banking to other channels, and last week Juniper Research confirmed how real this wave is. Juniper predicts that mobile banking users will exceed online banking users within five years. In addition, they predict that within five years the 800 million people worldwide who currently use their phones for banking will more than double to 1.75 billion.
There’s no reason to think that this wave toward greater convenience will ever reverse. In fact, Nielsen shows that mobile media consumption has skyrocketed since 2012. One of their recent studies reveals that while TV is still king when it comes to captivating consumer audiences, the future isn’t trending in TV’s favor. Instead, people are increasingly drawn to their smartphones.
What’s even more telling is that since 2012 the amount of time spent using the Internet on a computer has decreased in parallel with the increased time spent browsing the Internet on a smartphone:
What does all of this mean for financial institutions? Well, for one thing, it means that if you’re not pursuing mobile banking aggressively, you’re not prepared for the future. It also means you need to start thinking about mobile as the keystone of the banking experience. Your users now expect to start interacting with your products via a smartphone and then be able to continue the process exactly where they left off when they use a desktop or visit a branch. This mobile-first concept is a core part of any omnichannel experience.
A majority of retail banks understand this. A survey from CEB TowerGroup shows that 66 percent of respondents said delivering a consistent customer experience across channels will be a major focus for the next 12 months:
This segment of respondents understands the state of the financial industry. They understand what BAI’s internal data showed them, which is that omnichannel banking can:
- Boost sales of complex products such as mortgages by up to 60%
- Dramatically increase productivity of valued specialists
- Deliver double-digit improvement in customer net satisfactions
Omnichannel banking does away with the siloed and fractured banking experience, replacing it with something cohesive and seamless. It’s the key to winning wallet share in the digital age.
The problem is that many financial institutions aren’t anticipating how account aggregation could drastically help or hinder their mobile strategy. That is, many banks and credit unions don’t realize that once a competitor offers a mobile banking app with the ability to aggregate outside accounts, users will lose the need for multiple financial apps.
Picture this: You have two financial apps on your smartphone. One lets you aggregate all your accounts in one view; the other doesn’t. Which one do you think stands the best chance of becoming your primary financial application? If you’re drawn to the one that lets you see all your accounts in one place, you understand the increasing consumer impulse to enjoy that same benefit.
Once consumers choose a primary financial application, they’ll spend more and more time with the institution that offers it. At that point the institution that offers the primary financial app will quickly steal wallet share from their competitors. The smartphone then becomes the portal to the total banking experience.
A recent study from Google shows why this is the case. It says, “[Smartphones] have the highest number of user interactions per day and serve as the most common starting point for activities across multiple screens.” As we covered in a prior post, the Google study also shows that 59 percent of financial management activities were started on a smartphone, and 56 percent of those activities were continued or finished on a desktop. It’s clear from data like this that the smartphone opens up a way for users to become more loyal to particular financial institutions — institutions that offer a primary financial application.
Within a few years, a majority of financial institutions will understand how the convenience of account aggregation affects their wallet share. The institutions at the frontier of fintech already understand this. They know, for instance, that 72 percent of millennials would bank at companies like Wal-Mart, T-Mobile, or Google if these companies offered such services. They also know that companies likeLending Club have already started to encroach on the traditional lending business model. For the first time, major competitors to financial institutions can build a banking experience that fits in a user’s pocket. Never before has banking been so easy to access. Clearly, fintech is the way of the future.
In order to meet the demands of the rising wave of mobile users, financial institutions should quickly adopt the fundamentals of fintech and offer a primary financial application that will pull them through the next five years and beyond.
"Today, if you are not a data-driven company you will not survive." - Peter Diamandis, author of BOLD
Mobile-first account holders have high profitability, but they're more likely to switch primary financial institutions than online and branch-first account holders and would most likely do so because of fee sensitivity. Only 13 percent of account holders are identified by Javelin Strategy & Research as fitting into this segment but they represent 31 percent of deposits. They trend younger (average age of 39) than online first (50) and branch first (53) customers and are largely concentrated at giant banks.
As bankers see fewer people visiting the branch, they’re realizing they need a strategy for the digital age. The old mailers aren’t cutting it anymore, and the need for adoption of digital products is higher than ever.
Here are a five tips that can help you make the transition.
Below is an excerpt from our white paper, "How Banking Should Use Big Data to Be More Like Google."
In the last few years Google has rapidly expanded into new markets — selling laptops, inventing wearables, producing self-driving cars, etc. And yet nearly 70 percent of the company’s revenue still comes from a single source: Advertising.
The rise of mobile in the past few years has been drastic. 85% of consumers say mobile devices are a central part of everyday life. Furthermore, at a number of financial institutions, mobile has now become the primary channel for Millennials and Gen X. For example, BECU in Seattle, Washington shared at our March Fintech Festival that it has found mobile to be the number one channel for members aged 18-44.
Parin Kothari leads the strategy and communications practice for digital channels at TD Bank, North America. In this interview we talk about how TD Bank is using analytics to create a richer customer experience.
This morning Personal Capital sent out an email offering $10 to every end user who links an account to their service. Here's their email header image, followed by some of the text in their email:
We’re excited to announce our first white paper.
When we first began discussing the idea and concepts behind Money Summit, we knew that we wanted to create something more than a typical "blog." Money Summit was to be a forum where cyclical chatter was rejected in favor of purposeful dialogue — less talk, more action. Really it boiled down to people breaking down the walls of "client" & "vendor," and working together to make interacting with money a better experience for everyone involved.
Customer satisfaction is a drastically different game than it was a few years ago. Today, consumers expect companies we interact with to provide us a consistent, relevant experience when we shop and to remember our preferences. As consumers ourselves, how many of us have been pestered by retail clerks to open a line of credit with a company every time we shop there? As if being asked more times will cause us to change our minds, when in fact the opposite is probably occurring - the more times we’re asked, the more frustrated we become.
Why We Use Illustrator Presets
At MoneyDesktop, we do most of our UI design in Illustrator. We find that the vector workflow keeps file sizes small and allows us to scale assets for any resolution without losing quality. Overall, Illustrator is a great tool, but out of the box it’s optimized for print design and illustration. Swatches are set to CMYK instead of RGB, graphic styles are preset with busy patterns, and the stock set of symbols is hideous. (I mean, who uses a “Gerbera Flower” or “Vector Grime”?)
In order to optimize Illustrator for our needs as UI designers, we initially just created a style guide with a set of patterns. These patterns gave the UI more consistency, but it was cumbersome to enter the same values repeatedly and left a lot of room for accidental deviation from the style guide.
Instead of limiting ourselves to patterns in a style guide, we created a totally new library of presets (which did away with the useless ones Illustrator comes with out of the box). This new library of presets makes it easy for us to adhere to our design patterns by making those patterns easily accessible. By doing this, we’ve built a dynamic style guide that grows and changes as we use it.
Once you have a solid library of presets established, it becomes obvious when new patterns emerge. If you find yourself manually entering the same values over and over, it’s time to consider adding a new preset to the template.
Here is how we optimize Illustrator for building user interfaces.
We started by building a template file (.ait file) that loads art boards that are sized for our phone, tablet, and desktop apps. Then we created the following seven presets:
1. Grid System
Personal financial management (PFM) software has existed since the earliest days of the PC, and yet consumer adoption of the products has often been lackluster. Rick Claypoole, Director of Retail Product Management and Marketing at Cadence Bank, tells one reason for the low adoption. He says, “Looking back at early PFM solutions, the only consumers who would really use those tools were the hardcore budgeters... And, while the early solutions were pretty cool for those users who wanted to do a lot, they were not very user friendly. And, in reality, almost nobody wants to do a budget, so the potential market for the solution was limited. It’s a chore, it’s laborious, and it’s not fun.”
Selfies, Siri, Snapchat
When I think about the current state of consumer software, three words immediately spring to mind: Selfies, Siri, and Snapchat. This trio symbolizes a standard of right-now, me-centered service, which is what we’ve all come to expect. We expect to take a picture of ourselves and instantly share it. We expect to say, "Siri, how can I get a cup of coffee?” and get an immediate answer. In short, we expect instant service through the supercomputers in our pocket.
We recently caught up with Scott Bales, author of Mobile Ready and the previous Chief Mobile Officer for Moven. He believes mobile is not about the technology but about behavior, context, and utility. He has found that when you embrace this idea, technology as an issue disappears. We delved into this topic in this interview, and you can also read more about it in his book here.
GPS software learns users' personal behavior and then gives them customized options based on their preferences. Banks can do the same.
We recently caught up with Matthias Kroner, CEO of Fidor Bank, one the world’s most innovative banks. Fidor has completely rethought the traditional concept of banking and produced an outstanding digital-only bank. All charts have come from Slideshare (here and here).
We recently caught up with Anthony Thomson, the Former Chairman and Founder of Metro Bank, the first bank to launch in the UK in over 100 years. After a successful venture there, here’s now spearheading a new mobile-first bank named Atom Bank.
In our three latest MoneyMinute videos below, we hear from Craig Focardi, Senior Research Director at CEB Towergroup, Rick Claypoole, Director of Retail Product Management and Marketing at Cadence Bank, and Pankaj Parekh, VP of Mobile Banking at Wells Fargo.
Alex Waters is a developer in New York who has been working on Bitcoin for five years. He’s currently the CEO of Coin.co, a company that gives entrepreneurs the ability to reach global markets through the use of Bitcoin.
Augie Ray is a customer experience professional at a F100 financial institution. We caught up in Manhattan and had a fascinating discussion about the disruption currently occurring in financial services. Some parts of this article have beenrepurposed from Augie’s blog.
We recently caught up with Kevin Mullins, COO at Sevier County Bank to talk about the state of community banks. Not only does he have 117,000 Twitter followers, but he first became a CFO at age 25. He served as a CFO for 26 years and has been a COO for the last 3 years. He believes that community banks must embrace technology, focus on being personal, and improve financial literacy of account holders.
We recently had a conversation with JP Nicols, president and COO of the innovation analytics and advisory firm Innosect, wherein we discussed the future of banking. Nicols offers useful mental models that will help banks and credit unions lead the digital banking revolution.
We recently caught up with Mohamed Khalil, the Head of Product, Data & Marketing at Moven, to talk about user experience. He shared with us his thoughts and explained how Moven is set to re-imagine how people interact with their money.
Whether financial institutions know it or not, the fight to remain top of mind and be the primary financial institution for account holders is THE (or one of the) biggest challenges they face. Consumer trends, banking revenue models, the competitive landscape, and the rise of digital have fundamentally changed the game.
In the era of digital banking, data is king. Only financial institutions that value it and put it to use stand a chance in the coming decade.
Bank of America recently released a report titled “Year-End Millennial Snapshot” discussing the financial attitudes and preferences of Millennials. Results from the survey found that Millennial financial attitudes are still influenced by a negative perception of the economy established from the Great Recession and influence from our parents and their financial relationships.
Darrick Weeks, Chief Operations Officer at Wright-Patt Credit Union, has worked with credit unions since 1995. He has been instrumental in helping Wright-Patt expand their digital offerings — including a network of video tellers, which he talks about below.
Last week, we had a bit of fun describing basic cryptocurrency blockchain technology functions using an X-Files analogy. This week, we’ll dive deeper into the blockchain based cryptocurrency fintech space (yes, we are excluding Ripple for now) to identify strengths and limitations of the blockchain application in banking and law.
We talked to Jill Castilla, president and CEO of Citizens Bank of Edmond, about social media strategy at financial institutions. As is clear from this interview, Citizens Bank is setting the standard for community banks on the digital front. They’ve sold their branches, created an interactive ATM experience, and regularly draw 20,000 people to their customer appreciation days. In short, there’s a lot for community banks to learn here.
Blockchain technology is one of the biggest technological breakthroughs of the last half-century. Not since TCP/IP (the building blocks of the Internet) has a technology emerged with the potential to change everything. Many people have become familiar with blockchain technology through Bitcoin, an asset (or currency) that is built upon blockchain technology. While the rise, fall, and future of Bitcoin is a hot topic for pundits, this MoneySummit series will instead focus on the underlying history, technology, and future applications for blockchain technology.
I was 12 years old when my father took me to open my first bank account. What initially seemed like an exciting rite of passage turned out to be a bit of a let down. As the account manager described why opening an account was a great decision, I grew bored and complacent. At the time I thought that a bank was just a place where you put money until you needed it, and I didn’t see the point adding this extra step to accessing my funds.
We recently sat down to chat about the state of fintech with David Gerbino. David is a data-driven marketing consultant for banks and fintech startups who also serves as a board member and director of marketing strategy for NYPAY, New York’s leading forum for innovators in payments and mobile commerce. You can follow him on Twitter here.
It’s a shame that home buying isn’t like buying a TV. Go to the store, decide between a few brands, flash the cashier a coupon, and leave excited about your upgraded viewing experience with your new TV. Some aspects are similar, but for good reason, home buying is a weightier process that merits a more thorough review.
The convenience of online and mobile banking threatens to dilute the connection that financial institutions have with their customers, who are less likely to enter a branch and hold face-to-face conversations that position the FI as a trusted authority. Instead of being reactive and waiting for customers to come in, FIs have to be proactive and initiate daily conversations with their customers. In a February webinar Javelin made the case that mobile messaging is a way for banks and credit unions to cement their status as the customer’s primary FI and be their go-to option when that customer looks to open a new account or take out a loan. But it will require a change in the kind of messaging FIs employ. “What I see typically at banks and credit unions is alerting that is reporting someone’s status —confirming a transaction, telling that you’ve got a statement available. That’s a fine place to start but that’s not where we need to go,” said Mark Schwanhausser, Director of Omnichannel Financial Services at Javelin Strategy & Research. “Where we want to be going is to a point where we’re delivering advice or coaching or recommendations. Those are the kind of proactive conversations that can be powerful because they can position a bank or credit union in a place of trust.”
In part one of this two part blog series, we examined the need for co-opetition between the fintech and banking industries. In short, fintech firms need to scale quickly and financial institutions need to implement better services and technologies or risk losing market share. Both industries agree that the need for smooth integration is required, but few companies are successfully achieving this outcome. Partnerships between small, nimble fintech companies and large banking institutions are structurally difficult to execute. Regulated and non-regulated industries encounter complex impasses. Industry experts are hard at work analyzing case studies of these problems. In this article, we will highlight their findings and best practices.
Social media is a relatively new and quickly evolving field — especially as it relates to the financial industry. The biggest benefit it provides is in bringing you closer to your account holders in an age where they may seem distant and anonymous behind their digital screens. Here are 5 tips to help you master social media.
“The holy grail for banks is to become the best at ‘fintegration’.” – Andrew Wolberg-Stok, Global Head of Emerging Platforms and Services at Citibank
At first blush it might seem as though real-world events are a nonstarter in the digital age, but nothing could be further from the truth. Events are still pivotal to good marketing, and digital is only enhanced by real-world efforts. Here are five tips to help you make the most of your events:
As part of our ongoing effort to gather more data about the banking industry, we surveyed 1000+ random U.S. consumers ages 24 through 65+. We asked them five questions about the industry, and we've listed the results below.
This week we interviewed Jim Marous, owner and publisher of the Digital Banking Report and co-publisher of The Financial Brand. Marous recently released the 2016 Retail Banking Trends and Predictions report, where he and his team present highlights from their panel of nearly 100 financial industry global influencers. The report is worth downloading in full, which you can do here.
We recently caught up with Brett King, CEO of Moven, host of Breaking Banks, and author of Bank 3.0 (as well as several other books). In our interview, we talked about branchless banking solutions, contextual moments, the procurement process, institutions that are doing well (USAA, BBVA, Capital One), and an institution that isn't doing so well. We also talked about banking trends to look for in 2016 as well as his new book, Augmented: Life In The Smart Lane, which arrives in May. The interview has been edited for length and clarity.
Digital Disruption Forces Financial Institutions to Rethink Priorities
Jim Marous summarizes the latest results from a Temenos survey that highlights the major concerns bankers have in 2015. According to the survey, bankers have become less focused on regulatory concerns and more focused on meeting changing customer demands. Ben Robinson, Chief Strategy & Marketing Officer at Temenos, says, “As the burden of new regulation diminishes, banks are concentrating on readying themselves for a more digital world, characterised by lower customer loyalty and new, multiform competitors."
Bank Boardrooms Lack Technology Experience
Accenture published a study this week showing that global bank executives are generally ill prepared to lead out when it comes to digital. They show that "only 6 percent of board members and 3 percent of CEOs at the world’s largest banks have professional technology experience. In addition, more than two-fifths (43 percent) of the banks have no board members – and nearly one-third (30 percent) have only one board member – with professional technology experience."
Mondo Takes On The Old Guard Of UK Banking
Bloomberg details the plans of Mondo, a mobile-first bank that is seeking a license from the Bank of England to begin taking deposits and lending money. In the past the approval process was lengthy and had substantial capital requirements but new entrants like Mondo can now hold as little as £1 million in capital initially and common equity Tier 1 capital equivalent to 4.5 percent of risk-weighted assets, less than half of what an existing bank would require. Mondo is part of a flourishing fintech scene in the UK, where startups attracted £343 million last year, triple the amount raised in 2013. Mondo's mobile app allows customers to receive alerts when they're close to overdrawing their account and will even offer loans instead of charging them fees in that scenario.
Why Fintech Is One of the Most Promising Industries of 2015
Maria Aspan writes about how much the fintech industry has skyrocketed lately — especially the subset of peer-to-peer lending. The essential quote for bankers to pay attention to comes from Kabbage CEO Rob Frohwein. "We're just at the beginning of this renaissance in alternative lending," he says, "and I look forward to the day it's not called alternative." That's the attitude of these rival fintech players, and it's an attitude bankers need to treat seriously.
The theme for this week’s Essential Fintech Reading is related to a recent event hosted by MX called the Fintech Festival. During this content-packed educational event, attendees discussed how technology innovators are changing the financial services landscape. The preeminent thought that attendees left with was that financial institutions and fintech companies can work together to produce better results than either could alone. Some industry leaders agree, as can be seen in this week’s collection of fintech reading.
The Bank as Life Coach: The Quest for 'Everyday Banking'
Mary Wisniewski outlines about the concept of "everyday banking," which she says may very well become the norm moving forward. She says, "the idea is that rather than interacting with customers only when they ask to store or move money, the bank becomes their round-the-clock financial advisor, almost a life coach." Bradley Leimer adds, "We are just starting to chip at the surface of what a bank will look like in the coming decades." See our interview with Leimer here.
The Great Bank Debate: Live Recording
This week featured what may have been the biggest debate in fintech history, as Brett King and Robert Tercek teamed up against Michal Panowicz and Ron Shevlin to argue about whether the future will be owned by banks or fintech companies. King and Tercek placed their bets on fintech companies, while Panowicz and Shevlin defended the banks. Both sides made compelling points, and honestly, the truth probably lies somewhere in the middle. The future will likely be owned by a consolidated number of bank/fintech conglomerates. For more about the debate, see Bank Innovation's writeup.
Banking Needs To Put Emotion Into Customer Experience
Duena Blomstrom asserts that when banks and credit unions focus on products instead of emotional needs, they miss the point. Consumers want something that will help them on an emotional level. She says, "People don’t ‘need’ products. They don’t have a checking or current account ‘need’. Consumers have Physiological and Safety needs that these products satisfy. Consumers also don’t have loan ‘needs’, but instead have Belonging, Esteem and Self Actualization needs that a loan would satisfy."
FinovateSpring 2015 Best of Show Winners Announced
Attendees at FinovateSpring this week witnessed the latest in the world of fintech. By showcasing smart credit cards, money management, data storage solutions and more, Finovate once again upheld its standard of being the best place to be to learn more about financial technology.
We talked to Mark Schwanhausser, Javelin's Director of Omnichannel Financial Services, about why engaging account holders is critical to becoming the primary financial institution.
This is an excerpt from an article we wrote for The Financial Brand. Read the full piece here.
The Fintech Revolution: A Wave of Startups Is Changing Finance—For the Better
The Economist gives one of the best rundowns I've ever read on why fintech companies are improving the finance industry. They say that fintech disrupters will 1) cut costs for consumers, 2) create new ways of assessing risk, and 3) diversify the landscape. They conclude with this powerful statement: "The bigger effect from the fintech revolution will be to force flabby incumbents to cut costs and improve the quality of their service. That will change finance as profoundly as any regulator has." If you're interested in how fintech companies will alter the industry, this is certainly essential reading.
Design Is The New Differentiator In Mobile Banking
Sandeep Sood, CEO of Monsoon Company, talks about how getting design right is crucial to a good banking experience.
Bank Deals for Digital-Design Firms Highlight New Mobile Priorities
American Banker's Mary Wisniewski says that a string of recent collaborations between banks and design firms indicates that design is becoming more and more critical to the banking industry. She says, "Once regarded by some as trivial, design is becoming central to banks' efforts to differentiate themselves on mobile and other electronic platforms."
The UX acquisition spree continues. Financial Institutions are finding it increasingly difficult to keep up with consumer expectations in a digital world and thus relying on outside expertise to bring them up to speed.
Fico targets underbanked with alternative credit scoring system
Finextra outlines Fico's new scoring method, which is based on property records, telecommunications and utility information:
The Future of Fintech and Banking: Digitally disrupted or reimagined?
This white paper from Accenture details the state of banking as it relates to fintech. In one of their surveys Accenture interviewed 25 banks and found that these financial institutions only feel minimally equipped to face the digital revolution:
Facebook Introduces Free Friend-To-Friend Payments Through Messages
Techcrunch's Josh Constine dishes out the details about Facebook's entrance into the world of peer-to-peer payments. The new payments feature gives users the option to connect their debit card and send money to friends without getting dinged with fees. It's potentially a game changer since it's built on what is, for most people, their largest digital network.
On Monday, Apple announced more details about the Apple Watch (and perhaps persuaded some people to start saving for a down payment). Citi, Fidelity, and Mint are the first financial service companies set to release apps specifically designed for the watch, as detailed by Finextra. Users can check their balances with Citi, see the latest stock news with Fidelity, and track their spending with Mint. We suspect that other companies may quickly follow as they see how the Apple Watch performs in the market and as they feel the pressure to compete for user engagement.
How to Make Consumers Feel Better About Banking
Deidre Campbell, Global Sector Chair for Financial Services at Edelman, showcases marketing data about the financial industry. According to the data, 69% of consumers think that when a financial institution asks for data, they're just asking for their own gain. In fact, of all the industries surveyed by Edelman, financial services does the worst on this front. Consumers don't trust them. As we talked about in a post this week on gathering data for the benefit of account holders, it's a situation that desperately needs to change.
In Part I of this post, I said that as Boomers get closer to retirement, Gen X & Gen Y (Millennials) are becoming the driving force behind the economy.
Over 200+ PowerPoint Infographics For Financial Marketers
The Financial Brand released an enormously useful repository of charts this week. If you're interested in anything related to the financial industry, we recommend that you download and look through them all. There's likely not a quicker way to understand the state of banking.
Unless you've been dormant for the last decade, it's pretty clear to all of us that there's a significant demographic shift occurring with consumers.
Millennials demand a better mobile experience than they're typically getting from their financial institution. If banks don't improve their mobile offerings, Millennials will look elsewhere. Here's what banks can do.
Today The Financial Brand released a repository of over 200 banking charts. It's a useful collection not just for marketers (as their headline declares) but for everyone who's involved with banking at any level — bank executives, fintech folks, tellers, etc. Everyone. We recommend that you download the full set of charts.
This week Ron Shevlin of Snarketing 2.0 announced that his blog will soon become a regular column on The Financial Brand. It’s exciting news because as anyone in the industry knows, Snarketing 2.0 and The Financial Brand publish the best stuff out there on bank marketing, and now they’ll be better together.
According to a recent study from Gallup Research, over half (53%) of fully engaged customers have received an ad from their primary bank for a product they already had. In the age of targeted marketing, sending general blanket ads to account holders just won't cut it.
Fintech CEOs' Candid Advice, Bold Predictions for 2015 [Slideshow]
American Banker presents a series of quotes from fintech CEOs. Here's one from Jeff Yabuki of Fiserv:
Amazon, Google, and Facebook have changed the way consumers think of advertising. Generalized offers (say, the kind blasted out to a newspaper’s entire readership) used to be acceptable. Now they’re not. Today’s consumers expect ads that are personal and directly relevant for them. They’re accustomed to digital companies that look at aggregated and anonymized user data and create targeted offers based on that data.
Before reading Breaking Banks I'd read Brett King’s earlier books (Bank 2.0 and Bank 3.0) and listened to many of the Breaking Banks radio segments. As a result, I was initially hesitant to dig into this latest work, assuming it'd just be a repeat of what I’d read and heard before. However, I quickly realized that the content of this book was fresh and current — relevant for the year 2014.
This week we saw extended debate about the fluctuating future of the financial industry. How is the digital age changing banks and credit unions? What should financial institutions do with their legacy systems? One proposed solution, supported numerous times in this week's stories, is for financial institutions and fintech startups to collaborate for the good of account holders.
In his latest piece, “Sorry, but Disruptive Technology WILL Kill Banks,” JP Nicols takes issue with a Financial Times article that downplays the role of technology in banking.
We’ve said it before and it bears repeating: Millennials like mobile banking. They’re comfortable with it, they like the convenience it provides, and they’re willing to switch banks to get the mobile experience they’re after.
As Brett King says, “banking is no longer somewhere you go, but something you do.” This sentiment reflects why account holders increasingly demand a consistent banking experience across devices and platforms. However, as anyone who has worked on a cross-platform app knows, building a consistent experience across channels is a challenging problem to solve. More devices are entering the market every week, and each device comes with its own challenges.
When most people are asked whether they think there will be more or fewer bank branches five years from now, the safe bet is on answering fewer. One interesting way to change the question is to first ask whether bank branches will be bigger or smaller in the future.
Clearly, this week's topic was Apple Pay. Are you curious about how Apple's new product will affect banks and credit unions? We've gathered the info you need to stay in the know.
Banks and disintermediation, Part One and Part Two and Part Three
Financial Services Club Blog by @Chris Skinner reminds us all that this isn't the first time the future of the financial industry has been threatened, but is quick to point out the big changes that reshaped the business model.
The Current Conversation
The anxiety is building over whether a tech giant like Google, Amazon, or Facebook will enter the banking industry.
Just last week, two major articles on the topic surfaced — one from Philippe Gelis, CEO at Kantox, and one from Jim Marous, editor at The Financial Brand. Both articles received considerable attention on LinkedIn and Twitter.
Gelis asserts that the tech giants won’t enter the core banking business of accepting deposits and originating loans because 1) they already have more profitable business models than banks do, 2) they despise the regulatory morass the banking industry is stuck in, and 3) they like to scale fast, and banking doesn’t allow for that.
Marous agrees with Gelis that low profitability and high regulations are a hurdle to the tech giants, but he also draws a careful distinction between “becoming a bank” and “entering banking.” He says that while it’s true that tech giants have strong disincentives for officially becoming banks, they could enter banking at the edges — through the form of payment services, prepaid cards, merchant services, etc. Indeed, there’s evidence with Google Wallet, Amazon Wallet, and Facebook Payments that these companies are already thinking this far ahead. They’re starting to eat at the edges of banking.
Both of these articles present astute analyses on the banking industry. Low profitability and high regulations are legitimate deterrents for tech giants, and there absolutely is a big difference between becoming a bank and entering banking.
That said, there is one area that deserves additional attention when it comes to analyzing how the tech giants could enter the industry.
At its core, retail banking is about connecting groups of people. Banks and credit unions are intermediaries that take deposit money and use it to offer loans at interest. That’s the core of the business model — it rests on connecting people.
With the advent of the Internet, industries that connect people have changed forever. For example, Amazon altered the book industry, Airbnb changed the hotel industry, and Uber upended the taxi industry.
Here’s what’s going on, in the simplest terms:
- Amazon connects people who want a book to people who need a book
- Airbnb connects people who have a room to people who need a room
- Uber connects people who have a car to people who need a car ride
It’s all about connecting people. The moment it was possible for someone in Tennessee to order a book from Seattle and get it shipped to them for cheap, the need for a physical bookstore in Tennessee started to diminish. Likewise, once it was possible for riders to connect to a driver via phone, the need for a traditional taxicab started to fade. By making global connection easy, the Internet is eliminating traditional methods of intermediation.
Banks and credit unions should take note.
This week Harvard Business Review wrote a piece on the rise of lending technologies. It says that these technologies — powered by companies like Prosper, Square Capital, Funding Circle, Lending Club, and Fundera — have already started to eat into the small business and personal loan market.
So here’s what’s crucial for banks and credit unions to consider: These lending companies are connecting people who want to invest with people who want a loan, and that alone means that traditional intermediaries are in trouble.
Right now, peer-to-peer lending is insignificant in the grand scheme, but what happens when a tech giant acquires one of these companies? And the tech giant doesn’t necessarily have to be Google, Amazon, or Facebook. It could be one of the major US banks (which are becoming tech giants in their own right), it could be Wal-Mart, or it could be someone totally new to the scene. In fact, it could even be a forward-looking community bank or credit union.
However it happens, the very fact that peer-to-peer lending technology exists and is already being used signifies that the core of the banking industry will likely be upended — just like the core of other industries has been.
To see how real this possibility is, look at this ad from Mint.com showing a partnership with Lending Club:
There you go. If I’m a Mint user, I could already be bypassing my bank or credit union to get a small business loan or an auto loan. That should wake financial institutions up to the fact that Mint is a major competitor to them, and it should wake the bigger banks up to idea that peer-to-peer lending could eventually expand to include larger loans.
It’s really not outside the realm of possibility for peer-to-peer lending to eventually become the norm. I mean, if I’m from Tennessee and I’m looking for a good rate on a loan, why do I care what state the money comes from? If a company like Lending Club can get investors from Seattle or Maine or Texas and offer a better rate, I’ll be tempted to take the offer. And once Lending Club grows bigger or gets acquired by a tech giant it will become an instant threat to the traditional banking business model.
Of course, the concerns that Philippe Gelis and Jim Marous brought up in their articles still hold sway. Profitability is low and regulations are high. Peer-to-peer lenders will likely soon enough find themselves wading through regulatory sludge and they will discover, if they haven’t already, just how difficult it is to enter banking. But the fact that the technology exists means that banking, like almost every other industry, will never be the same. Banks and credit unions can either adopt these new technologies or find themselves irrelevant soon enough. At this point, it’s only a matter of time before banking changes forever.
The more software design I do, the more I realize that people need to be able to see and touch something to truly understand an idea. Trying to convey ideas by words alone is difficult for many reasons, but is especially hard because ideas are not real.
The state of digital banking is in flux like never before. It has only been five years since Bank of America launched the first mobile banking app on the iPhone, and users are now demanding new functionality faster than financial institutions can typically provide it. Today, users want a powerful digital experience, and they’re willing to switch banks to get it.
Recently, Fast Company published an article titled “Sorry Banks, Millennials Hate You.” The article highlights a three-year study from Scratch about disruptive and transformative industries, with a primary focus on the financial services industry. The subjects in the research were described as millennials, a term used to define those born between 1981 and 2000. What’s most interesting is the one word Fast Company used to sum up how millennials feel about banks — hate.
I remember debating the benefits and dangers of the Euro during a Macro Econ class just as the currency was being rolled out. One of the benefits of the Euro is the ability for consumers to pay for goods and services with one common currency significantly reducing costly currency exchange fees. Clearly if you are a citizen of a less economically powerful country, like Greece for example, the Euro is a big boon. All of a sudden your previously lower valued currency is a moot point and you know have equal buying power as someone from a strong country such as Germany. However, there in lies one of the biggest problems with the Euro. Countries of lower economic strength are now at currency parity with stronger countries….at the expense of the most economically strong. Yes, I understand I’m simplifying the issue, but therein lies a real economic problem.
Last week I bought some Stance socks on Amazon, and you know what showed up on my screen the next time I signed in?