The Bank of America Discount

Not so long ago—just last fall, in fact—Bank of America was in the news for all the wrong reasons. The company had instituted a $5 debit card fee, and faced a strong consumer backlash as a result. The incident was at least partly responsible for giving rise to the movement dubbed Bank Transfer Day.

It was likely in the works earlier, of course, but the country’s second largest back is back in the spotlight with a very different initiative. This one, however, is designed to help customers save money. In a pilot program being rolled out this week (to employees only, for now), the bank’s online customers will receive discounts from selected retail partners based on their previous spending patterns. Customers don’t even need to sign up for the service or go to a separate site, a la Groupon, discounts will be awarded in the form of cash payments once a month.

The savings won’t be immediate. Online customers will see discount offers embedded in their bank statements, or potentially in a separate tab, and buy what they choose, paying full price, then receive cash back in their accounts.

Perhaps most interestingly, the bank itself will receive no compensation from the retailers and merchants involved. It will instead use the discounts to extend relationships with existing customers—who will use their bank accounts and credit cards in the process—and of course draw new ones. For the record, BofA says it won’t share incoming customer spending data with the retail partners or anyone else, through presumably it will use the information internally.

While other banks have launched similar efforts, BofA is likely the largest financial services institution to enter this nascent field. This also means that there will be a flood of other financial institutions plunging into the business. As consumer spending patterns and habits evolve in the age of online shopping driven by social media tools and techniques, this is exactly the kind of forward-thinking initiative the industry needs to build on.

Many financial services firms still have the mentality that, in a sense, they need to remain above the fray. They finance these initiatives but they’re not directly involved, since it’s not a core competency. That may be true, but the reality is that they have the resources, they have the technology, they have the information, and most of all they have the customers. For banks to stay completely out of the transaction means denying themselves potentially significant revenue streams.

As other financial institutions enter the fray, we will likely see the process becoming simpler and more commoditized—the savings will be immediate, retailers will share the revenue, and so on. If that’s the case, then this initiative could be seen as a major turning point. Let us know your thoughts by posting below, or Tweet @bankingdotcom.

Mobile Credit Crunch

For a long time now, one key question in mobile banking has been: When? When will the integration of mobile devices and credit cards become truly mainstream, when will one open technology standard (or one clear proprietary winner) emerge, when will the market be described as stable rather than volatile?

The apparent answer still is. . .not anytime soon. But is that a bad thing?

To be sure, there’s no shortage of competitive options. Just a few days ago, FIS released its Mobile Wallet, which enables downloadable proprietary apps from selected financial institutions and retailers. As with other entrants in this market, it gives consumers the option to securely use their credit cards to make purchases via a smartphone either online or at the point of sale.

What makes this market so fascinating is that each new offering joins a lengthy list of innovative options already available from an array of providers.  Credit cards giants such as Visa and Mastercard have entered the arena, as has Internet behemoth Google. PayPal, the undisputed market leader in online payments, has multiple approaches, including its acquisition of mobile payment startup Fig Card. While some financial institutions are waiting it out to see who takes the lead, a few have entered the fray on their own, such as ClearXChange, a joint effort from Bank of America, JPMorgan Chase and Wells Fargo. And of course, as with any emerging market, there are very interesting newer players, including Intuit’s GoPayment and Square, launched by a co-founder of Twitter and now backed partly by Visa. And that’s by no means a complete list.

In other words, there may be just too many intriguing possibilities for a clear consensus to emerge anytime soon. But again, is that what the market needs? Can real growth only come through consolidation and a real standard?

Historically, that’s sometimes been the case. The VCR market saw a battle royal between VHS and Betamax, and it can be argued that only with the emergence of the VHS format did usage explode. The modem market waited for a standard as at least two formats fought for leadership. Microsoft’s DOS, and later Windows, captured a huge lead it the PC arena by beating out the Macintosh and holding off competitors such as IBM’s OS/2.

However, this has definitely not been the case with the mobile market. Apple’s iPhone has both mind and market share, but there are still plenty of other options in operating systems and formats alike, and that’s also the story with tablets.

So maybe the real answer with mobile payments is that, for the foreseeable future, there will be more competition rather than consolidation, and that will drive the market rather than constrict it. Of course, if there’s one prediction in technology that always holds true, it’s that every prediction turns out to be wrong. Any guesses?

 

 

Image: Idea go / FreeDigitalPhotos.net

State of the Financial Industry

To no one’s surprise, President Obama’s State of the Union speech this week had plenty of red meat on the financial services industry. We heard about the “deficit of trust between Main Street and Wall Street.” There was a clarion call prohibiting big banks and other financial institutions from making “risky bets with your customers’ deposits. Mortgage lenders, credit card companies and others in the business shouldn’t be “signing people up for products they can’t afford with confusing forms and deceptive practices.”

Perhaps most interestingly, there’s word of a Financial Crimes Unit that will crack down on large-scale fraud, with harsher penalties for repeat offenders. This is to benefit not just consumers but also “the vast majority of bankers and financial service professionals who do the right thing.”

No one seems quite sure what effect this will have, tangential or otherwise, in the other legal aspect of this equation. As we all know, state and federal in investigators are continue to negotiate a settlement with some of the nation’s largest banks that could reach as much as $25 billion and significantly revamp foreclosure and mortgage servicing practices nationwide. While specifics of the deal are being held closely to the vest, there’s been outspoken opposition from, among others, California Attorney General Kamala D. Harris and her New York counterpart, Eric Schneiderman. Coincidentally, Mr. Schneiderman is also set to lead the Financial Crimes unit at the state level.

The reaction to the speech has played out along predictable lines. While specific banking segments have been a political piñata for a while now, some observers saw the speech as expanding the bull’s-eye already painted on the industry’s back. Others, meanwhile, saw it as a welcome move toward accountability in a market segment that’s run amok.

The truth is, of course, that most institutions and individuals in the financial services industry played no role, pro or con, in any of the activities that drew all this attention.  But the spotlight isn’t going away anytime soon.

The way out of this will be what it has been for every industry caught in the glare of negative publicity: new products, great customer service, relationship building and innovative delivery mechanisms. The tools and technologies now available to every company and every consumer offer a unique opportunity to make a break from the past and do things very differently.

Customers don’t come in like they used to—they’re online, they’re mobile, they’re virtual.  They expect instant access with high quality, and if they don’t get it, they know they can go somewhere else easily. They demand a high level of transparency, along with a high level of security.

There’s more competition, more accountability, more options and more potential than ever before. These are all good things, and the best institutions will benefit from them—and next year’s State of the Union speech should reflect that.

What We’re Reading: The Debit Card Switch, Point of Sale Systems and more on Bank Transfer Day

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 or Tweet @bankingdotcom.

  • PayPal Tests Its Point of Sale System at Office Depot

American Banker

PayPal Inc., which has been testing a point of sale payment system with Home Depot, is reportedly testing the same system with Office Depot Inc. The system, which PayPal is testing at 51 Home Depot stores, is also being tested at “a few” Office Depot stores, Reuters reported Sunday, citing an interview with the president of Office Depot’s North American unit. PayPal, a unit of eBay Inc. of San Jose, is testing a method for accessing its online payment system at the point of sale with or without a plastic card. PayPal users who choose to forgo the card can enter a phone number and a PIN instead.

Read more

  • NACHA Campaigns to Make “ACH” a Household Word

American Banker

Scott Lang wants folks who are using NACHA’s automated clearing house network (ACH) to watch their language, particularly when discussing the actual service. “Different organizations were using different terms [for 'direct payment via ACH'], says Lang, senior vice president of association services for NACHA. To fix that problem, NACHA, a nonprofit that manages the ACH network on behalf of 10,000 financial institutions, has launched a micro site and campaign get financial institutions, merchants, and other stakeholders in the ACH network to use the phrase “via ACH” in their marketing materials, on their websites and in in-store displays. “Direct deposit has a very high awareness rate,” Lang says.

Read more

  • Banks Turn to Staff Scheduling Software to Cut Costs

American Banker

At Bangor Savings Bank, making sure there were enough employees in its 54 branches at any given moment was itself a laborious expenditure of human capital — a process that was no longer fitting given the need to optimize resources amid declining branch volume. Consequently, the bank has outsourced its staff management to a web-based software that matches teller schedules to anticipated volume. Such programs have been well used by larger banks in the past, but are now gaining traction at smaller banks. Beyond reduced branch volume, these banks are also facing lower fee income and increased regulatory expense, and are looking to shed costs anyway they can.

Read more

  • Wells Fargo Underscores the Importance of Aligning Channel Strategies

Barlow Research Analyst’s Journal

As digital banking touch points expand, the customer is benefitting from 24/7 access through alternative lower cost service channels. It’s a win-win situation as long as the experience for both the bank and the customer is reliable and consistent. Execution is everything. As technological advances are made, the challenges are simplifying usability, eliminating downtime and ensuring consistency.

Read more

  • The State of Bank and Credit Union Marketing in the U.S.

Finextra

Today’s bank and credit union marketers are facing a period of big data, increasing devices and more communication channels than ever before. In addition, consumers are challenging the pricing and service levels they receive from their financial institution, and are willing to speak their mind using lightning fast social media channels.  To better understand what bank and credit union marketers are thinking and doing during this period of unprecedented change and opportunity, Jim Marous partnered with Jeffry Pilcher from The Financial Brand to develop the 2012 Bank and Credit Union Financial Marketing Survey. More than 300 bankers responded from banks and credit unions of all sizes thanks in no small measure to our many friends on Twitter who helped distribute the links to the survey.

Read more

  • Bank Transfer Day Trademark Quest Turned Over to CUNA

Credit Union Times

At the urging of South Carolina credit unions, CUNA has taken over the drive to formally own the “Every Day Is Bank Transfer Day” slogan. But it might take until spring before the slogan can be adapted widely in CU ads across the U.S. after CUNA wins formal approval on a trademark application now pending with the U.S. Patent and Trademark Office. The hand off of the legal maneuvering to CUNA by a group of South Carolina CUs led by the $1.3 billion South Carolina FCU, North Charleston, and the South Carolina Credit Union League took place last month. It came just after the “Bank Transfer Day” Facebook founder, Los Angeles art store owner Kristen Christian, spoke during a CUNA webinar.

Read more

  • By 2020, half of all Visa Europe’s payments will be mobile

GigaOm

Visa Europe sees a very mobile future and now predicts that more than half of all Visa payments in Europe will be mobile by 2020. The credit card company shared its prediction as part of a look back at 2011, in which Visa Europe users spent €1.16 trillion ($1.48 trillion), up 14 percent over the previous year. Visa Europe, which exists as a European membership organization that licenses Visa Inc.’s brand and technology, expects 2012 to be a turning point as it starts rolling out its own mobile payment and digital wallet services. Visa Inc. introduced its digital wallet offering in November called V.me, which will start rolling out this year.

Read more

  • The Debit Card On/Off Switch from City Bank of Texas

Net Banker

City Bank of Texas has been a mobile innovator for more than four years, launching a ClairMail-powered mobile site in Oct 2008. City Bank now offers a full range of apps including Android, iPhone and iPad, which make for a pretty impressive graphic (see below). And, in a world where most apps look pretty much the same, it has managed to pioneer several unique features: Debit card on/off switch: If customers ever want to switch off their debit card, because it was misplaced, or if funds are running low, they simply move the toggle on the My Cards page of the mobile app.

Read more

 

Social Banking

The infographic from ZoneAlarm which we highlighted recently warns users of security concerns related to online banking and has an interesting ranking on online activities. It lists shopping at number one, followed by banking at number two, and social networking at number six.

Actually, this kind of ranking is obsolete. In the real world these activities are distinct; in the digital world, they blend seamlessly, and the sooner professionals in every field adapt to that reality, the better.

Take shopping. Real-world retailers have long been losing market share to their online counterparts, but there’s now a host of social media tools to help them to fight back. A new generation of shoppers—the one that goes shopping with an iPhone and a million applications—can be lured away from what they’ve been doing online.

You like a dress you see in a store? Tried it on, want to buy it? Take a picture, press a button, and there’s an application that tells you instantly how many stores within a one-mile radius has the same dress at a lower price. Perfect fit, instant gratification. Or let’s say you bought a dress last week, and you happen to walking past that store again—an in-store app senses you’re close by and sends you a text: “Thanks again for buying that dress last week. And since you’re so close, if you come in within the next hour, you’ll get these shoes, which match your dress perfectly, for 40 percent off.” Talk about impulse shopping.

OK, so banking isn’t shopping. But just one generation ago, when the Internet itself emerged, remember what it did to stock trading. The economy was bubbling over back then, a ton of dot-coms was galvanizing the marketplace, and people had money to invest. So everyone from Merrill Lynch and Charles Schwab to newer players like eTrade and ScottTrade got in on the action with a raft of online trading tools. Bottom line: people got into the market because they could, they did research because they could, they traded relentlessly because they could.

Social media represents the second coming of the Internet. Retailers, educators, service providers of every stripe are scrambling to offer applications that play to their specific audiences. In many cases, this means getting customers not only to what they’ve done before, but take advantage of entirely new capabilities.

So, a year from now, what will financial institutions enable their customers to do that they can’t do now? And which companies will be first out of the gate with exciting new capabilities? Let’s speculate.

Identity Thieves: How They Do it and How to Stop Them

*This blog was originally posted on The Intuit Network

We look both ways before crossing the street. We lock our doors at night. We bundle up in the cold. But when it comes to our personal information, are we doing all we can to keep it safe and secure?

Data Privacy Day, a day that promotes privacy awareness and education, is being celebrated Saturday, January 28. In support of Data Privacy Day here are five tips from Intuit to help you protect data.

If it’s too good to be true, it probably is – Beware of phishing scams. They come in two forms – via social networking sites and email. The messages often look authentic and appear to come from a friend or connection, legitimate company or government agency. To entice you via email, they often claim an urgent or threatening condition concerning your account, or offer you a prize or reward as a way to obtain your personal information. Some clues to watch for: these often contain misspellings, or the grammar isn’t quite correct. On social networking sites, the post or invitation may look incomplete and often invites you to “check out this cool video.”

The goal is the same – to steal your information. If in doubt, do not reply or click on links without verifying the request is legitimate through another channel, such as a company’s official website, Twitter handle or the social network support site. Websites like www.snopes.com can help demystify some of the urban legends or too-good-to-be-true offers.

Don’t lose it if you lose your mobile device – If you lose your mobile device, report it immediately to your carrier or your employer, if it’s owned by your company. Go online and change passwords for financial and personal accounts to prevent any identity theft or fraud.

Be passionate about passwords – Use syllables or acronyms. Avoid using complete words that appear in any dictionary regardless of the language. One option is to start with the first letters of a familiar phrase. For example, “Mary had a little lamb” becomes Mhall, which could be part of a secure password. Check out the list of the worst passwords of 2011 from SplashData.

Get what is yours for free – Identity theft occurs every day, and is particularly high during tax season when volumes of personal information, such as W2s, are being circulated. The Fair Credit Reporting Act requires each of the nationwide consumer reporting companies – Equifax, Experian, and TransUnion – to provide you with a free copy of your credit report, at your request, once every 12 months. Monitor your credit report to help spot identity theft and keep your personal information accurate and current. Visit www.annualcreditreport.com for more information.

Location, location, location – You’re working on a report and need some fresh air and inspiration. So you decide to work at a coffee shop for the afternoon. Are you protecting your company’s data out of the office? Is your screen visible as you step away for your second latte? Mobile devices need to be secured at all times. Set passwords on the device and on any mobile applications that offer that capability. You can also attach a privacy screen to your laptop or mobile device to discourage wandering eyes. Remember, the person next to you might be might be out for more than just a cup of coffee.

As technology changes, so do the opportunities to make your data work for you in new and exciting ways. And these advances in technology are often accompanied by increased data threats. Intuit’s chief privacy officer, Barb Lawler, an advocate for customer privacy says, “The best defense is staying current on ways to protect yourself and remaining in control of your data.  Know what data you have, what data you choose to make public, and take steps to protect it.”

Bank Transfer Days, And Beyond

In a sense, the much-heralded “Bank Transfer Day,” designated as such for November 5, 2011, fit nicely into the overall narrative for the year just passed. We had monumental, activist-oriented, from-the-ground-up, socially networked movements around the world, from Arab Spring demonstrations toppling near-permanent fiefdoms in the Middle East to the multi-branched ‘Occupy’ rallies here at home. In that vein, moving accounts from large corporations to down-home non-profits seemed like an idea whose time has come.

As with those other movements, Bank Transfer Day was a consumer-driven initiative calling for systemic change—in this case, a voluntary switch from commercial banking conglomerates to non-profit credit unions. Prompted by one consumer’s decision to protest one bank’s customer service and debit card fees, the action was quickly propelled to a massive audience through spontaneous yet skillful use of social media. Even the date selected had a symbolic origin: November 5, commemorating Guy Fawkes, who was charged with attempting to blow up the British House of Lords in 1605. (That event has also permeated pop culture via films such as V for Vendetta and the eponymous masks worn by some Occupy protesters.)

It’s unlikely anything could live up to the hype, and in many ways Bank Transfer Day didn’t. Financial institutions across the board saw a flurry of activity for a short time, the larger banks still won’t tell how many accounts they lost, and a few credit unions are using the term in their marketing collateral. Otherwise, the movement seems to have faded from the public consciousness. Still, financial services professionals who dismiss the root causes do so at their own peril.

This is not your father’s banking industry. More than a singular protest, the factors roiling the market now are both more prosaic, and more revolutionary, than Guy Fawkes could ever be.

Consumers today have far more tools to conduct transactions with, far more options to choose from, and far greater expectations of each provider than even a few years ago. At the same time, new entrants to the market are building on innovative services to lure business away from big business. And of course, regulatory mandates, not to mention the pending potential of the Consumer Financial Protection Bureau, will add more pressure to the industry, and those institutions that don’t keep pace with are set to lose, even lose big.

Consumers now demand, and expect, high levels of transparency, flexibility, convenience and access. Banking used to be shaped by the act of walking into a branch or getting on the phone; today, it’s one of the most common online activities, and institutions are virtually required to develop personalized and otherwise customizable applications that meet a broad range of user needs.

Some have done this, but many others haven’t. There’s also a significant lag between user behavior and corporate accommodation, at least in some markets—while some larger institutions are still struggling to develop brand-specific mobile applications, many smaller providers have already embraced newer alternatives such as Remote Deposit Capture (RDC).

As the innovations keep coming, we’ll track them on this blog, warts and all. But the inescapable, irrevocable conclusion is that, far from the clamor of protests and rallies, consumers today have a quiet but powerful toolset to draw from, and they’re not shy about drawing from it to make a point, or even a transfer. That’s what change is all about.

What We’re Reading: IT Spending Predictions, Mobile Banking, E-Payments and Bank Fees

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 or Tweet @bankingdotcom.

  • Gartner Revises Down Bank IT Spending Predictions

American Banker

Most experts are predicting a recovery in bank IT spending, and an uptick is indeed underway. But according to Gartner, the next dark cloud is just around the corner. Gartner says the European debt crisis will cause a third of European institutions to fail in the next two years and will crimp IT spending for banks around the world. Other experts, however, believe U.S. banks won’t be affected for some time.

Read more

  • PwC Research: Mobile Banking to Be Norm By 2015

Credit Union Times

New research into mobile banking out of consultancy PwC has generated two bold-faced headlines: mobile banking will be the norm by 2015 and consumers will be willing to pay up to $15 per month for mobile banking services that offer convenience and value. Key to the PwC research is its prediction that by 2015 mobile will overtake branch networks as the dominant channel of customer interaction with financial institutions. Another finding is that the bar is getting raised: to attract Gen Y customers, financial institutions need to improve their digital banking products. The PwC research is based on a survey of 3,000 customers globally

Read more

  • Convenient, but How Secure?

The New York Times

According to a survey commissioned by the American Bankers Association last year, 62 percent of Americans preferred to do their banking online rather than at a branch or ATM. Banks and their online customers also lost more than $2 billion in 2010 because of payment card scams, fraudulent wire transfers and other Internet swindles, according to data from the Federal Deposit Insurance Corporation as reported by The Financial Times. Losses have declined from their peak of $8 billion in 2006, as banks have gotten better at preventing fraud. But criminals aren’t giving up and regulators have decided that current security systems based on passwords, tokens and cookies aren’t strong enough.

Read more

  • Banks start playing games with your money

Reuters

Financial firms are turning to games to attract a younger demographic that may be impervious to advertising. Online games afford banks a cheaper way to attract customers in an era when interest rates on savings are practically nil, debit card fees are capped and banks have small margins and little leeway to throw rewards at consumers. “It doesn’t cost much” for bankers to market this way, he says. And the ability to push games out in smart phone and tablet applications probably contributes to the interest, too.

Read more

 

  • E-payments rapidly phasing out paper checks as an option

USA TODAY

Even in this fast-paced, high-tech electronic age, some of us prefer letters to e-mails, phone calls to texts, and one-on-one conversations — ideally, over a cup of tea — to Skype. Likewise, some people would rather not venture into the shadowy world of direct deposit and other types of electronic transactions. Alarmed by tales of unshaven hackers with nefarious intentions, they’re more comfortable writing and receiving tangible paper checks. Increasingly, though, even traditionalists will have no choice but to accept electronic payments for everything from retirement benefits to tax refunds. While change is difficult, there are good reasons to embrace electronic payments. Among them: It’s faster. It’s safer. It’s cheaper.

Read more

  • Pushing Mobile Payments — Amid Slow Customer Adoption, Companies Tout the Technology’s ‘Side Benefits’

The Wall Street Journal

Sprint Nextel Corp. this week tripled the number of smartphones it offers with a seldom-used technology for tap-and-go payments, as the carrier and its rivals try to convince a reluctant public to make mobile payments mainstream. Sprint, which announced at the Consumer Electronics Show that it will add LG Electronics Co.’s Viper and Samsung Electronics Co. Galaxy Nexus to its lineup, is among those betting big on the idea that people will want to use their smartphones as credit cards. So far customers and retailers have remained tepid toward the technology, called near-field communication, or NFC, prompting Sprint and others at the Las Vegas show to try a different tack: touting NFC’s “side benefits,” which include mobile coupons and digital-key replacement.

Read more

  • Attack of the New Bank Fees

Wall Street Journal

Dodd-Frank, here is thy sting. The 2010 legislation that limited banks’ ability to charge some fees left lenders with a choice: Take a profit hit or dream up new fees that aren’t on regulators’ radar.  Many banks are likely to choose the latter, experts say. Bank of America’s since-abandoned plan to charge users a monthly $5 debit-card fee, which set off widespread public outrage late last year, was just the beginning of the onslaught, experts say.

Read more

Social Media Statistics: By-the-Numbers, January 2012

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

  • 52.1% of all sharing on the web is driven by Facebook, with Twitter generating just 13.5 percent of all shares. (Source: Clearsping)
  • 256% increase in mobile data usage by teens in the US age 13-17 over the past year. The average teen used 320MB of data per month on their phone. (Source: Nielsen)
  • 3% of adults say they get news and information about local restaurants, bars and clubs from social media, while 38 percent claim to use Internet search engines. (Source: Pew Internet)
  • 49,000,000 the number of US visitors to the Google+ platform in December 2011, a 55 percent increase from November. (Source Hitwise)
  • 82% of the world’s online population are reached by social networking sites, representing 1.2 billion users around the world. (Source: comScore)
  • 79% of European online adults engage with social media, 86 percent of US adults do the same. (Source: Forrester)
  • 19.7% of the total Facebook user base is located in the United States. (Source: AllFacebook)

Curious what social networks your financial institution should focus on in 2012? Check out this infographic.

 

 

 

 

 

 

 

 

 

* Graphic provided by:

Image: tungphoto / FreeDigitalPhotos.net

Infographic: Online Banking Raises Security Concerns

ZoneAlarm has released an infographic on the security concerns related to online banking. With the prevalence of using online tools for everyday tasks such as banking, consumers need to be aware of how to protect their online assets. According to the infographic, banking is one of the six most commonly performed online activities. Banking comes in at number two, under online shopping, and a few percentage points above using the Internet for social networking.


Via Column Five for ZoneAlarm

Do the statistics in this infographic mirror what your customers and members are saying about online banking security, and what types of devices they are using to store data? Let us know in the comments section below or Tweet @bankingdotcom.