What We’re Reading

Below are interesting stories the Banking.com staff has been reading over the past week. What have you been reading? Let us know in the comments section below.

  • Defending Your Brand 2.0

American Banker
More and more bank managers are slowly coming around to the fact that thousands of conversations are occurring online every day about their brands, and not surprisingly, many of them aren’t very nice. A simple Google search for the phrase “I hate banks,” for example, yields more than 43 million results. SunTrust, Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and Discover Financial Services are among those companies that have established teams devoted to monitoring and responding to comments online. As consumers’ use of social media grows — there are now more than 500 million users on Facebook and 175 million on Twitter — it is becoming increasingly important for banks to monitor and respond to what is being said about them online, in an effort to protect their corporate identity
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  • Boston Fed: Cash Use Rose in 2009

American Banker
Consumers’ use of cash to make payments grew in 2009, a Federal Reserve Bank of Boston study released April 7 found. While debit cards were still the most commonly used payment method, cash use increased. Consumers made an average of 19 debit card payments a month, compared with 18.4 for cash. In 2008, consumers reported making 21.2 debit card transactions a month and 14.5 cash transactions. The Boston Fed’s Consumer Payments Research Center attributed the shift to the economic downturn and card regulation, which it said may have affected card use in general.
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  • Bank earnings will provide a snapshot of how the recovery is going; JPMorgan goes first

Associated Press Newswires
A lot of big banks had a free ride to higher earnings the last few quarters. That could be ending soon. As the economy gets better, investors want to see if banks can improve their core businesses of writing loans, issuing credit cards and advising on corporate deals. Several major banks including Wells Fargo & Co., JPMorgan Chase & Co. and Citigroup Inc. recorded substantial gains in income in recent quarters from accounting adjustments in their loan loss reserves. Those adjustments, which are perfectly legal, reflected a decline in the likelihood that their borrowers would default on loans.
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  • Rediscovering Character in Small Business Lending

Barlow Research Newsletter
Many of the five pillars of credit worthiness in small business lending have been cracked at their foundations during the recent recession. In the past, a banker’s analysis of a company’s Collateral, Capital, Conditions, and Capacity became easier with their bank’s centralized systems and automated credit-scoring models. But during the economic downturn, these systems did not always adequately prepare the lender for a swiftly deteriorating loan portfolio.  Meanwhile, Character had become the lost C in the 5 C’s of credit analysis.
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  • Banks want a favor — at your expense

CNN.com
You might think the big banks would be too embarrassed to ask Congress for more special favors. You think wrong. The big banks are pressing Congress for a favor that will cost the average American household $230 a year. The bankers argue that the favor is needed to support small community banks. But since the lion’s share of the favor will be collected by just four banks, it might be cheaper to subsidize community banks with a check direct from the Treasury. Banks keep debit fees higher than necessary in order to protect their much more lucrative credit card business.
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  • Welcome to Facebank

Javelin Strategy & Research Blog
Slowly but surely the banks and large financial institutions appear to be losing their stranglehold and franchise on the right to keep and process your money. Paypal was one of the first to break the mold.  While they got their start in the world of person-to-person payments, they are now a major processor of financial transactions.  Facebook recently set-up a legal entity known as “Facebook Payments Inc”.  Facebook has the advantage of being a ‘destination’.
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