<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=142903126066768&amp;ev=PageView&amp;noscript=1">

Essential Fintech Reading: Aug 29 - Sept 5

True Advocacy: The Future of Banking

Ryan Caldwell, CEO at MX, writes about how amplified consumer choice has forced financial institutions to become true advocates for end users. Caldwell asserts that the shift to digital banking is in full swing now that certain products such as aggregation and peer-to-peer lending have reached a point of minimum viability. "When the automobile first came on the scene in the 1890s, the critics scoffed at it for decades," Caldwell writes. "They’d see car owners stuck on the side of the road, spending hours trying to fix their vehicle while they drove past in a horse and buggy. It wasn’t until the 1910s that cars started to pass a point of minimal viability, and then … everything changed." Caldwell illustrates that just as the automobile reached widespread adoption once it passed a certain threshold, so has digital banking.

Marketing, Engagement Strategies And Functionality Hold Back Mobile Banking Adoption

While 78% of banks and credit unions offer mobile banking services, just 4% of financial institutions report that more than half of their retail customers are enrolled and active users. These are the findings of a survey released from the Federal Reserve Banks of Atlanta, Boston, Dallas, Minneapolis and Richmond, as reported by Jim Marous of the Financial Brand. 80% of FIs reported that less than 20% of their customers are active mobile banking users. 70 percent of FIs perceive lack of customer awareness and security concerns as barriers to mobile banking adoption, while 59 percent note that customers' banking needs are being met by other channels. "Not only do active marketing and engagement strategies need to be implemented, but enhancement of offerings must be prioritized," writes Marous. "From contextual engagement capabilities, to differentiated small business services and optimized mobile account opening capabilities, banks and credit unions must exceed expectations ... additionally, more advanced services like (mobile remote deposit capture), mobile P2P payments, and personal financial management need further development to expand adoption."

Payoff and Affirm In The Spotlight

This week Bloomberg talks with four Fintech entrepreneurs about disruption. Scott Saunders, CEO of Payoff, describes how behavioral science can be applied to help individuals refinance their debt. "The credit card companies and banks are perpetuating the cycle of debt," charges Saunders. "We're reinventing lending from the perspective of wealth management. We actually want people to pay off their loans and we don't want them to get a second, third, or fourth loan from us." Payoff made earlier headlines by hiring Dr. Galen Buckwalter, the creator of the eHarmony relationship algorithm, to develop online personality tests that help the company understand how customers handle their money. Max Levchin, co-founder of PayPal, also details his plans for Affirm, which aims to help millennials with loans for education and other high cost items. Levchin discusses how he was motivated to start the firm based on his personal experiences, including credit card debt tied to his first failed startup and being denied a root canal by a dentist because of his credit. 

The Path To True Customer Advocacy

MX's Erin Caldwell discusses how organizations can build authentic customer advocacy at MoneySummit. Identifying those touch points that matter most to your customers and delivering an exceptional customer experience (customer attitude), combined with being an enterprise that puts the customer at the heart of its decision making, is key. "The best kind of customer advocacy focuses on a balanced exchange of value between customer and organization, where the internal conversation is as much about how the organization can better serve the customer as it is about the intended business results. When your customers can feel your sincere commitment to them and their well being, the return loyalty is almost automatic," writes Caldwell. 

Why Do Banks Struggle In Building Relationships?

Having a conversation with a customer or prospect does not necessarily constitute a relationship. Rather, a meaningful engagement builds a relationship, argues Ron Shevlin, Director of Research at Cornerstone Advisors.  Shevlin builds on an earlier piece by Eric Weikart noting that bankers spend 75% of their time during the new customer/account process on the computer versus building relationships. Weikart attributes this to a lack of system integration and capable workflow functionality. Shevlin notes that relationships are built when a customer can ask a question and receive advice that proves the institution has their best interests in mind. He adds that such meaningful engagements are a struggle for banks and credit union branches, as they often cannot provide the right advice on the spot.

Dwolla Launches White-Label Payments Processing Service

Businesses and banks can now use Dwolla's money-transfer system without putting Dwolla's name on it. Instead of relying on consumer-to-consumer payments, Dwolla is now going after more financial intuitions and businesses that transfer large amounts of money, reports The Des Moines Register. "There's a little bit of hilariousness in the fact that, if we’re really successful, we’re going to move a lot of money for a lot of businesses and no one is ever going to see our name or know we do it. Somehow that’s actually good for our business," said Dwolla CEO Ben Milne.