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.
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."
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 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.
This morning we're up at Sundance for the MX Fintech Festival talking shop with thought leaders in financial services. We have a master series of panelists lined up, and we'll give the highlights here as they happen.
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.