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Essential Fintech Reading: June 11-17


Digital Revolution Drives More Job Cuts At Bank Of America

CNN reports that Bank of America has 23% fewer branches and 37% fewer workers than it did in 2009. That trend should continue as Bank of America plans to cut another 8,000 jobs from its consumer business, largely through attrition rather than outright layoffs. "Our strategy is putting everything on the mobile phone. If you have a thumb, you can bank," Thong Nguyen, Bank of America's co-head of consumer banking, said at an industry conference on Tuesday. "That's where a lot of our strategy is going to move going forward." In a recent report Citigroup warned that 30% of bank jobs could be lost between 2015 and 2025.

Regulators: Look Before You Leap Into Mobile

Addressing new federal guidelines around mobile security, sources tell Penny Crosman of American Banker that regulators are asking banks to mull risks before rolling out mobile apps. Regulators are "basically saying we recognize there are threats and risks associated with mobile financial services that are different than traditional PC-based browser access, so you need a specific strategy for mobile, and you need to show that strategy and show a defense in depth specific to mobile devices," says Michael Lynch, former head of digital banking authentication strategy and consumer protection at Bank of America and current chief strategy officer at security provider InAuth. Crosman notes that the guidelines include some “surprisingly specific requirements tied to geolocation, annual security tests of apps and cross-site scripting.” Included was a clause that banks use white-hat hacking and code analysis annually to test the security of their apps.

Fintech’s Failures Revisted

In a piece titled “Fintech’s Bright Future Marred By Hype,” authors David S. Evans and Richard Schmalensee recap the disappointments around P2P lending, bitcoin and blockchain. While Stripe’s Patrick Collison stated that P2P lenders “match borrowers and lenders directly the way Uber connects passengers and drivers,” Evans and Schmalensee note that “regular people, quite sensibly, are much happier driving strangers around than they are lending them money. Lending Club found that it couldn’t get enough people to finance loans and had to turn to institutional investors.” Lending Club has lost 80 percent of its market cap since its December 2014 IPO and Prosper also had to lay off a quarter of its workforce. The authors are equally pessimistic about bitcoin startups, observing that they “have struggled to find a problem for which bitcoin could provide a solution that would live up to the hype. This is a classic “technology-in-search-a problem” failure. It turns out that some of the leading bitcoin startups were increasing friction in transactions, not decreasing them, without saving any money.” The failure of the Overstock.com-Coinbase partnership serves as an example.

Insurance Industry Could Be Threatened By Fintech

A new PwC report suggests that the rise of fintech in the insurance industry (InsurTech) could place incumbents at risk. Only 28 percent of insurers are exploring partnerships with fintech companies and less than 14 percent are actively participating in ventures or incubator programs. Only 5 percent of insurers have launched their own InsurTech subsidiary and only 5 percent have acquired a fintech company, representing the lowest figures in the financial services industry. “There is a risk of missing an opportunity to deliver customers a similar experience to one they already receive from retail and technology companies. One size simply does not fit all in insurance anymore and, by working alongside InsurTech companies, companies can begin to reposition themselves at the cutting edge of customer interaction,” said Stephen O’Hearn, global insurance leader at PwC.

Robo-Advisers With A Human Touch

Capital One is the latest firm to offer a robo-adviser in conjunction with human advisers available by phone, reports Time. Under the service, called Advisor Connect, customers with $25,000 can sign up for an automated, algorithm-based portfolio management service and also have access to human advisers. While Vanguard Personal Advisor Services only offers Vanguard funds, the Capital One service does not have proprietary funds and selects products outside the institution. Time notes that Capital One’s platform is most similar to Personal Capital.

Topics: fintech