The World’s Most Innovative Companies: Where Are the Financial Institutions?

Forbes recently released its list of the World’s Most Innovative Companies, aiming to answer the question, “Which leading-edge corporations are most likely to succeed now and in the future?”

The list, which is based on an eight-year study, used a unique methodology to calculate the companies that made the final cut. Rather than ask executives to vote on which companies should appear, factors such as financial performance, investors’ bids on stock prices and expectations of future results (new products, services, markets) determined the companies on the list.

Tech giants such as Apple, Amazon, Google, Oracle, Intuit and Salesforce were on the list, as well as consumer facing companies Starbucks, PepsiCo and Hershey.  One sector without a large presence on this list: financial institutions. You can view the complete list here.

As the staff read through the list, we wondered, why aren’t there more financial institutions on this list? What are your thoughts? Leave us a message in the comments section below.

What We’re Reading

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

  • Customer security big opportunity for financial institutions

ABA Journal

Data shows that financial institutions are in a prime position to sell security solutions to consumers to combat fraud, as almost four out of ten consumers have no identity protection services, according to the 2011 Second Annual Antivirus, Browser, and Mobile Security report recently issued by Javelin Strategy & Research. The report, based on data from almost 25,000 consumers, presents year-to-year comparisons of consumer behaviors, evaluations of antivirus and mobile and browser security products, and highlights revenue opportunities for financial institutions. Opportunities were found among consumer groups where the levels of internet device ownership are high and adoption rates of antivirus software are low. Javelin found that, overall, while consumers are using internet devices at exploding rates—smartphone ownership alone increased 42% from 2010 to 2011—slightly more than half of consumers do not have any antivirus software.

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  • The Two Different Worlds of Bank Tech — U.S. and the Other 194 Countries

Bank Systems & Technology

There are 15,215 banks and credit unions in the U.S. right now, diminishing at a rate of 3 percent per year. That’s not a mystery; It has been every Fed Chairman’s hidden agenda to have fewer banks. Some think it’ll continue to happen at a greater rate of decline because not even an optimist like Donald Trump would ever think of starting a bank in today’s “new normal.” The U.S. number (307) is diminishing or leveling off because technology is maturing, and bankers are reasonably happy with the technology they have.

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  • The trillion-dollar question: Who will power your mobile wallet?

CNN Money

If you want to get a smackdown going, throw together five executives each angling for a lucrative piece of a $4 trillion market. The retail payments space is one of tech’s hottest battlefields. The reigning technology, magnetic stripes on debit and credit cards, is nearing the end of its 50-year run — “it’s just the U.S. and sub-Saharan Africa” left clinging on, quipped Verifone (PAY) CEO Doug Bergeron — as NFC (near field communication) chips embedded in smartphones and other devices begin their ascent. A new way of making payments opens the door for innovation. It also gives an army of new players the chance to try to wedge themselves into the payments stream.

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  • Consumers hold high hopes for new bureau

Chicago Tribune

If you’ve ever thought someone was playing fast and loose with the rules on your credit cards, credit score or mortgage, but you had no idea where to go with your complaint, you now have a place to turn. The Consumer Financial Protection Bureau was launched last week. And it is supposed to stop lenders from tricking you into a high-interest loan or some other financial product that is not what it appears to be. It also gives consumers an outlet for their complaints on everything from student loans to payday lenders.

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  • Is this Just the First Step? Google to Offer Business Credit Cards

Javelin Strategy & Research Blog

Google is going into the credit card business, improving its margins on advertising by moving down the food chain. The catch is 1) the business MasterCard issued by World Financial Capital Bank is only available to selected customers of Google’s advertising service and 2) can only be used to buy advertising through the AdWords unit. Initially, interest will be set at 8.99% with no annual fee. The card is Google’s first (but unlikely its last) venture into vendor financing.  While more typically offered for capital expenditures, service spend can be expanded with judicious credit use and Google is the king of search ad spend.

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  • How to Get With the Mobile-Banking Program

Wall Street Journal

More consumers are buying smartphones, but they’re not embracing mobile banking at the same pace — mostly because they have a misplaced fear of it, according to several studies by research firm Javelin Strategy & Research. In 2009, 26% of smartphone owners were uncomfortable using their phones for banking. A year later, that number jumped to 40%, according to the firm. “It’s very clear to us the consumer is saying, ‘I’m nervous about mobile banking,’” says Phil Blank, managing director of risk, fraud and security for Javelin. If financial institutions don’t address that immediately, he says, “This stagnation is just going to continue.”

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Are Office Depot, Google and Wal-Mart Disrupting Small Business Lending?

In recent weeks Office Depot and Google announced credit programs aimed at small businesses. Office Depot is partnering with Superior Financial Group, a non-bank SBA lending company, to offer small business loans up to $25,000.

Google is offering small businesses a credit card that can only be used to pay for AdWords, Google’s keyword advertising program. Google’s credit card offers a very competitive interest rate and no annual fees.

These companies join another corporate giant – Wal-Mart – in providing credit services to small businesses. Wal-Mart, also in partnership with Superior Financial Group, started offering small business loans last year.

These firms illustrate a broader trend of nontraditional competitors targeting the financial services industry. These new competitors include some the world’s largest corporations and best-funded, venture-backed startups. They are hoping to use disruptive innovation based on both new technology and the shift to online banking to attract customers and gain share in the financial services industry.

Disruptive innovation is a term coined by Harvard Business School professor Clayton Christensen. It describes a process by which a product or service creates a new market or reshapes an existing market by delivering simple, low-cost innovations to a set of customers who are ignored or underserved by industry leaders.

Industry leaders ignore these customers because they aren’t viewed as important enough, or profitable enough, to pursue. After a disruptive competitor establishes themselves with this group, these firms often move up-market, eventually challenging traditional competitors for their best and most profitable customers.

The classic example of disruptive innovation is Southwest Airlines. Southwest initially targeted price sensitive vacation travelers, a segment considered unattractive by the airline industry. Ignored by larger rivals, Southwest moved up-market and over time firmly established itself with business travelers, the airline industry’s most coveted customers.

We think something similar may be happening in the small business credit space.

The customers targeted by Wal-Mart, Office Depot, Google and others are very small businesses, most with less than $1 million in revenue -  a segment seen as unattractive by many financial institutions. But by ignoring this segment, financial institutions are providing an entry point for new competitors who may leverage this beachhead to become significant players in the financial services industry.


About Steve King:  Steve is a Partner at Emergent Research. His current research and consulting is focused on economic decentralization, the growth of small business and the future of work and workplaces. Steve has extensive consulting, marketing and general management experience with both large and small companies.  Steve is a senior fellow and board member at the Society For New Communications Research, a research affiliate at the Future of Work and an advisory board member at Pond Ventures.

About Carolyn Ockels:  Carolyn is the Managing Partner at Emergent Research.  Her current research and consulting is focused on economic decentralization, the growth of small business and Gen Y.  Carolyn has extensive consulting experience, and prior to Emergent Research managed Cambridge Energy Research’s Asian energy consulting business, led market research in Japan for RCM Capital Managment, and held a variety of domestic and international consulting positions with the economic forecasting and planning consulting firm Data Resources, Inc.

Recent American Banker Polls Show Backlash Against Banking Regulation

After our recent survey and interview with Greg  Jacobi of WebsterBank, the staff has become increasingly interested in polls that other banking publications are hosting.

American Banker, which frequently surveys visitors on the publication’s homepage, has extensively covered the recent federal financial laws, particularly concerning the Consumer Financial Protection Bureau and the Dodd-Frank Act. One poll focused on President Obama’s choice of Richard Cordray to lead the Consumer Financial Protection Bureau over Elizabeth Warren. The results displayed an overwhelmingly negative response, with 62 percent of participants indicating they believe Cordray is a “greater threat to bankers than Elizabeth Warren.”

The publication took a more lighthearted look at the Durbin ruling in the Dodd-Frank Act, posing the question: “Which movie title best represents the Dodd-Frank Act?” Readers were incensed by the Federal Reserve Board’s decision, and it was a close race, with One Flew Over the Cuckoo’s Nest narrowly beating out The Good, the Bad and the Ugly.

You can read American Banker’s full list of polls here.

Do you agree with the results of these polls? What questions would you like answered in the next survey? Tweet @bankingdotcom or let us know in the comments below.

Social Media Statistics: By-the-Numbers, July 2011 Part II

Below are interesting statistics on social media usage. Feel free to share your favorite social media statistics in the comments section.

  • 178,000,000 million US Internet users watched online video content in June for an average of 16.8 hours per viewer (Source: comScore)
  • 58% of Twitter users who have tweeted about a bad experience have never received a response from the offending company (Source: Useful Social Media)
  • 46% of corporate communicators say they use Radian6 as their primary social media listening tool (Source: Access)
  • 50,000,000 websites are powered by WordPress (Source: WordPress)
  • 10,000,000 users for fledgling social network Google+ (Source: Google)
  • 1,000,000 registered Twitter apps, up from 150,000 last year (Source: Twitter)
  • 36,000 businesses have signed up to use Google+ in just two weeks (Source: The Next Web)
  • 550,000 Android devices are activated per day (Source: Google)

Use Google Analytics? The Social Media Examiner outlines how to track Tweets, Facebook Likes and more.

What We’re Reading

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

  • Financial Roundtable Issues Advice for Banks on Social Media Risk

American Banker

Years after social networking sites became mainstream, banks are still trying to figure out the best ways to use them – and in particular, how to manage the risk and compliance issues connected to sites such as LinkedIn, Twitter and Facebook. BITS, the tech arm of the Financial Services Roundtable, this week issued a white paper attempting to provide an assessment of the various risks, as well as some mitigation strategies. BITS placed a particular focus on making customers aware of the fact that privacy rules of social networking sites don’t match those of most banks. It suggested that banks take steps to carefully vet the data aggregation that will take place if social media sites eventually merge.

Read more


  • Isis Network Deals Pave the Way for Banks

American Banker

Isis, the wireless carrier-led mobile payments venture, just crossed off an integral item on its to-do list in signing Visa Inc., American Express Co. and MasterCard Inc. Isis executives said Tuesday that its contractual agreements with the three networks will allow consumers to load their networks’ payment cards into a mobile wallet application scheduled for field trials next year. Specifically, Isis is licensing the networks’ contactless payments specifications for use in its software. Isis initially had a relationship with Discover Financial Services as its only card network. The deals with the other card brands “effectively lay the framework for any of the networks to get their cards, their payment applications, into the mobile wallet,” Jaymee Johnson, the head of marketing for Isis, said in an interview on Tuesday.

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  • It’s Nifty To Be Thrifty, As App Demonstrates

Credit Union Journal

Saving money? Yeah, there’s an app for that-or at least there’s a blueprint for one. “Squirrel,” a project from Verity CU SVP/CMO Shari Storm, was recently named as the runner-up for the first annual COOP THINK Prize at CO-OP Financial Services’ annual THINK Conference. “Squirrel” was conceived as a smart phone app that lets users squirrel away money by diverting funds they would have spent on discretionary items into a savings account. “Credit unions have always promoted thrift,” noted Storm. “We’ve had Christmas clubs for decades, and this is the same concept, really.”

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  • Making Customers Comfortable With Merchant-Funded Rewards Programs

Javelin Strategy & Research Blog

As new merchant-oriented rewards programs like Groupon and LivingSocial have become increasingly popular with consumers, banks have also begun to introduce merchant-funded rewards that can offer consumers a more targeted rewards experience than these e-mail discount services are able to offer. The bank-focused services, detailed in Javelin’s recent report – Evolving Rewards Strategies: How Merchant‐Funded Programs Will Usher in a New Era of Loyalty for FIs – enable precise targeting through analysis of anonymized transaction data. The beauty of the targeted merchant-funded rewards programs described is that neither the bank nor any other party knows the consumer’s particular interests.

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  • Consumers fear mobile banking but they shouldn’t


More consumers are buying smartphones, but they’re not embracing mobile banking at the same pace — mostly because they have a misplaced fear of it, according to a survey released Tuesday. “Mobile banking is the next greatest thing in technology, but the surprising thing is that in spite of the powerful growth of the smartphone, the growth in those who did online banking hardly changed at all,” said Phil Blank, managing director of risk, fraud and security for Javelin Strategy and Research, which compared data from three different surveys taken since 2010. From 2009 to 2010, Javelin tracked a 60% surge in the number of smartphone users.

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  • Consumers Hold Back, Hurting Profit at Bank of America and Wells Fargo

New York Times

Even as the big banks stanch their losses, they are reckoning with an unfortunate reality: the anemic recovery is hurting their results. Second-quarter numbers on Tuesday from the nation’s two biggest consumer lenders, Bank of America and Wells Fargo, showed the toll the sluggish economy was taking on revenue growth. As Americans increasingly dig out of debt, lenders’ income is being reduced by a fall-off in mortgages, credit card and other types of consumer loans. Bank of America reported an $8.8 billion loss, after taking a $20 billion hit to clean up a raft of mortgage problems.

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Financial Management Capabilities and Remote Deposit Top Customers “Wish” List

Earlier this month, we hosted a poll and asked our readers, “What one technological feature do your customers ask for the most?” With the myriad of technological features available, we wanted to determine what customers and members are interested in, whether it is mobile banking, remote deposit capture, P2P payments or more.

The results: financial management capabilities, which include budgeting, goal-setting and the ability to see spending/payments all in one place, and remote deposit capture ranked the highest, each claiming 22 percent of the votes. Below is a full breakdown of the results:


To delve into the poll results, Webster Bank, which has more than 180 offices throughout Southern New England and Westchester County, New York, weighed in with additional input from their customers.

Greg Jacobi, Senior Vice President, eBanking, said their customers most often inquire about mobile banking and remote deposit capture for consumers. Webster Bank currently offers mobile Web capabilities, but with the surge of smartphones, users are eager for a mobile app. They have also seen an uptick in their remote deposit capture application for businesses. Greg noted that, “business customers that use remote deposit capture get a tremendous amount of value out of it.” Although it cuts down on bank branch visits, remote deposit capture lets consumers make a deposit on their terms.

Greg adds, “to be honest, we have noticed a trend that customers are not asking (as much) about the marquee features you have in your poll.  Across the industry, they want their existing online banking to be better.  The basics of online banking have not been reconsidered for quite a while.  One path people are taking to get there is PFM.  We love the innovation happening around PFM.  But, I do not think the average customer is asking for it as a separate offering.  They want the benefits of PFM; being able to categorize their transactions, set goals, search better and get useful visualizations of their data integrated into what they already have.”

Are your customers and members asking for the same technological features? Let us know in the comments section below or Tweet @bankingdotcom.


What We’re Reading

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

  • Mobile Payments Grows Worldwide, But Business Issues Remain

American Banker

Many consumers don’t know what near-field communication is, but the services the technology enables are becoming quite popular. That puts an onus on mobile payments projects that use NFC to move beyond disputes over revenue and other issues. “At present the consumer is not looking that far ahead, but once the initial services are established, that will be the next thing the consumer will start demanding — mobile banking/payment ubiquity,” says David Snow, a senior analyst at Juniper Research. A new report from Juniper says the total value of mobile payments for digital and physical goods, money transfers and NFC transactions will reach $670 billion by 2015, up from $240 billion in 2001.

Read more


  • Why PayPal Paid $240 Million for Zong

All Things D

PayPal has spent the past 13 years making it easier for anyone to pay who has an email address. But in today’s world, where cellphones are outnumbering computers, that sounds increasingly archaic. To bridge that gap, the eBay-owned payments company announced yesterday it was acquiring Zong, a mobile payments provider that allows charges to appear on a consumer’s carrier bill. Conceivably, you could imagine that  in the future PayPal could accept payments from anyone with a 10-digit number, switching its focus away from email after all these years to phone numbers.

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  • Regions Introduces P2P Payments for Online Customers

Bank Systems and Technology

Birmingham, Ala.-based Regions Bank today announced Regions Personal Pay, a person-to-person electronic payments service for the checking and money market customers enrolled in online banking. Powered by Fiserv’s ZashPay, Regions Personal Pay allows Region customers to send and receive money from anyone with a U.S. bank account. Regions Personal Pay is a reliable solution to pay friends, family or others for everything from a lunch, to sending money to a child in college, to fundraisers, gifts and more,” said Chris Cox, head of Regions business.

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  • Jack Henry to Offer Chip-and-Signature Cards

Credit Union Times

JHA Payment Processing Solutions said it will begin offering chip-and-signature debit and credit cards to its credit union customers, enabling them to better serve members who live or work abroad. EMV (Europay, MasterCard and Visa) cards have been widely adopted in international markets and are expected to gain traction in the United States because of their enhanced security, said the payments division of Jack Henry & Associates in Monett, Mo. In addition to the embedded microchip that meets the EMV standard, the Visa-branded cards have the standard magnetic stripe for use in any traditional card reader in the United States, the company said. The $5.6 billion Star One Credit Union in Sunnyvale, Calif., is beta testing the card, the company said.

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  • Bank of Internet Launches Free Rewards Checking Account

My Bank Tracker

A new free checking product from Bank of Internet is hitting the shelves as the industry cuts back on free checking and debit card rewards programs. Bank of Internet (NASDAQ: BOFI) has launched its Rewards Checking account that offers a comprehensive array of desirable features at no cost. It is a free checking account with no monthly account fee or required minimum balance, free debit card, free online bill pay, free initial order of checks, unlimited ATM fee refunds, and FinanceWorks, a free budgeting tool powered by Quicken. Additionally, Bank of Internet tracks on the Purchase Rewards debit card cash back program, which will reimburse your account when you complete a purchase of a targeted, retailer-specific offer.

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  • Financial services firms get updated authentication guidance

Network World

The Federal Financial Institutions Examination Council (FFIEC) recently updated the authentication guidance it provides to financial services firms that conduct online banking services. The supplement is to the Authentication in an Internet Banking Environment guidance issued in October 2005.This month’s update is designed to reinforce risk-based authentication for customers and covers layered security and other controls designed to mitigate transaction risk. Expert reaction to the guidance’s efficacy has been mixed.

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  • Google’s Punchd acquisition to push mobile wallet uptake


On first glance, Google’s acquisition of Punchd (a mobile phone-based loyalty service), a company barely a year and a half old, with little revenue and less than $150K in funding for $10M (reported widely) seems crazy. Initial speculation was that Google was making the move to add talent to its Android engineering team. But the fact that it is keeping the Punchd service going (likely moving to Google’s mobile wallet) points to a more strategic objective. Google has invested a lot in mobile payments. Despite all the work that has gone into the Google Wallet product, the results so far have been less than stellar.

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Who Are Your Customers? A Breakdown of the New Financial Customer

Consumers are a diverse group, all of whom have different tastes, opinions and feelings toward the products they use and purchase. Financial customers are no different in their diversity, and banks and credit unions have to offer an extensive list of services to retain and attract customers and members. In recent years, through the expansion of new technology products including online banking tools, mobile banking and remote check deposit, consumers are looking for even more diversity from their financial institutions.

To delve into what consumers are looking for, First Data and Market Strategies International conducted a survey of 2,000 U.S. consumers to determine their attitudes toward technology adoption. The results of the study, which are available in a white paper published by First Data, examine the different customer segments on which financial institutions need to focus. Below is a breakdown of the groups:

Consumer Segments  Overview
Fast Trackers Young technology enthusiasts who make and spend money and are always online 
Young Aspirationals  Younger consumers who are curious about technology, are budget-conscious and need help saving money
Middle-of-the-Roaders Traditional when it comes to using mobile technology, these consumers like to spend money despite moderate incomes 
Value Seekers Financially stable, older consumers who are motivated by rewards and frequently use credit cards 
Simplifiers Older, lower-income consumers with simple banking needs who are not that interested in new technology 
Conventional Stalwarts Older, traditional-minded consumers who prefer to pay by cash and check, visit their bank often and use technology lightly 

What consumer segments are you catering to at your FI? Let us know in the comments section below, or Tweet @bankingdotcom.


Video: Durbin Update with Michael Croal of Cornerstone Advisors

Michael Croal, senior director at Cornerstone Advisors, explains the implications and intricacies of the Durbin Amendment and gives his opinion on what this means for the financial industry.

You can also view the video here.

What do you think of the implications of the Durbin Amendment? Let us know in the comments section below or Tweet @bankingdotcom.