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Essential Fintech Reading: Sept 5-11

Sep 11, 2015 1:29:00 PM

Betterment Enters 401(k) Market, Appealing To Smaller Employers

Robo-adviser Betterment is breaking new ground as the company will begin offering 401(k) plans to employers, reports InvestmentNews. Competing against behemoths like TIAA-CREF, Vanguard Group, Prudential and Charles Schwab, Betterment is a notably smaller player at $2.6 billion under management. Betterment expects 401(k) fees to range from 0.2-0.7% of assets annually, plus a one-time fee of $1500 for companies with less than $1 million in their retirement plans, reports the Wall Street Journal. This could make Betterment attractive to smaller employers; a 2014 report by BrightScope and the Investment Company Institute found that 401(k) plans with less than $1 million in assets had an average cost of 1.6 percent of the plan's total assets in 2012, compared with 0.54 percent for plans with $100 million to $250 million in assets.

Android Pay Takes On Apple

In an effort to take on Apple Pay in mobile payments, Google is rolling out Android Pay, a one-touch payment app that can be used by Android devices with near-field communication and Google's KitKat 4.4+ OS. Macy's, GameStop and Staples are among the retailers where the payment service can be used and the service will support credit and debit cards on the networks of American Express, Discover, MasterCard and Visa, with Citigroup and Wells Fargo soon following. However, ReadWrite notes that "the component of Android Pay of most interest to developers—the ability to make in-app purchases—is still missing. Google says the feature is coming "later this year" but isn't being any more specific than that." 

Simple Discards All Fees To Improve Customer Experience

In the interest of enhancing customer experience online bank Simple has abandoned all fees, reports TechCrunch. Simple, owned by BBVA Compass, had previously charged for over-the-counter cash withdrawals, international ATM withdrawals, treasurer's checks and card replacement fees but the change was explained by CEO Josh Reich as "the right thing to do. You shouldn't have to worry about how much it's going to cost you to access your money." The company will also not charge customers for overdrafts, account closure or minimum balances.

Customers Are Measuring Banks Against Other Digital Players

Traditional financial services companies will have to become far more customer-centric if they wish to survive, writes Clare Gascoigne at Raconteur. Gascoigne notes that customers are no longer comparing banks with other banks but are instead looking at other "digital players, such as taxi service Uber or peer-to-peer travel agent Airbnb. They are looking for a different kind of experience and service." Mobile-only bank Atom, which recently received a license from the Bank of England, is one of the upstarts highlighted in the piece, along with Starling and emerging small business lender OakNorth Bank. 

Happy, Loyal Customers Present Significant Value For Banks

Loyal customers purchase more banking products, stay longer, cost less to serve and grow deposits faster, writes Kevin Tynan for the Financial Brand. Citing Bain Consulting research, Tynan notes that a "happy affluent banking consumer in the U.S. is worth nearly $10,000 more in net present value over the customer's lifetime than an unhappy, disloyal customer." Marketers must maintain continuous communication with their customers to build loyalty but are also swimming against the tide, as customers are establishing more banking relationships. A 2015 Ernst & Young study found that the number of consumers with three or more banks increased from 21% to 32% since 2011. 

Topics: Technology

Jeff Meredith

Written by Jeff Meredith

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