What We’re Reading: Thanksgiving Edition

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.

  • Mobile Thursday? Plans for Thanksgiving Day smartphone and tablet shopping almost double, Digitas study finds


In fact, 28 percent of adult smartphone and tablet owners plan to shop using those mobile devices on Thanksgiving Day, according to a new study conducted by Harris Interactive for Digitas. That’s almost double the 15 percent of U.S. adults age 18 and older who made the same claim in 2011. “The fact that it’s just about a 100 percent year-over-year increase shows the big behavioral change that mobile devices are causing,” said Chia Chen, mobile lead at Digitas. “Mobile is not just a channel—it’s really about this kind of technology-driven cultural change.”

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  • Mobile Payments to Top $1 Trillion by 2017: IDC

American Banker

In new research released Wednesday, IDC Financial Insights is predicting that by 2017, worldwide purchase volume over mobile devices will reach $1 trillion. Most of the overall volume in mobile will come from mobile commerce, which IDC Financial Insights defines as digital media consumed on the device as well as electronic commerce performed through a mobile web browser. IDC Financial Insight’s forecast is focused on consumer and business spending over mobile networks, on goods and services and direct fund transfers, from 2012 to 2017. This does not include spending by service providers on technology to enable such services.

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  • Tweet This: 1 In 5 Banks Are Twitter Quitters

Financial Brand

Who’s adding the most followers? Does tweeting more boost follower counts? Answers to banks’ tough Twitter questions in this exclusive study from The Financial Brand — follower growth, tweeting efficiency and other performance metrics for over 300 U.S. retail banks. The hard data doesn’t lie. This study encompassed 314 banks on Twitter, estimated to represent around 4.2% of all U.S-based deposit-taking retail institutions in the U.S. and at least 20% of all such banks on Twitter. Only banks that sent at least one tweet from a public Twitter account with a customized profile were included.

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  • Black Friday Puts Payment Processing Stocks Into Focus


The days of waking up at 3:00 in the morning on Black Friday to go shopping is a tradition that may never go away. But it is increasingly sharing the stage with people staying at home in their pajamas and taking advantage of Black Friday specials online. The stakes are huge. Last year, shoppers in the U.S. spent an incredible $52 billion over the long holiday weekend, nearly $20 billion online.

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  • Online Outages Wear on Profits, Not Just Customers’ Patience

Fox Business

Outages become even more of a threat as consumers become more reliant on the Internet for daily activities, from banking and shopping to directions and communication. Cyber Monday, for example, has become the busiest online shopping day of the year with sales in 2011 reaching $1.3 billion and Adobe (ADBE) forecasting sales will grow 18% this year to $2 billion, marking the most lucrative online shopping day in history.As retailers prepare for the rapidly approaching Black Friday weekend, having mechanisms in place to prepare for an influx in traffic as well as tightening security to help fend off third-party cyber crimes might mean the difference between success and failure not only this holiday season but in the future as well.

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  • Global consumer survey finds 88% of mobile media users now engage in mobile content and commerce

Internet Retailing

Nearly nine in ten (88%) of the world’s mobile media users now engage in mobile content and commerce – up from 82% in 2011 – according to the findings of the MEF’s latest annual global consumer survey published today. Conducted in partnership with On Device Research, the study across 10 countries – which defines mobile commerce as “anyone using a mobile phone for research, purchase or banking” – reveals that the mobile market is maturing, with 80% of all consumers using their phones for research, rising to 88% among over. Similarly 55% of people have purchased from their mobile but the figure is 64% for over 35s. There is also a rise in mobile banking, with 64% of consumers now use their devices to conduct mobile banking (up from 57% in 2011). Interestingly, payment via card has taken over from operator billing, with 27% of those surveyed used a card for m-commerce, against just 14% making payments via the phone bill (not including purchasing airtime).

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  • Mobile Plays A Growing Role In Cyber Monday Shopping [Infographic]

Read Write

Read Write released an infographic which showed that mobile plays a growing role in cyber Monday shopping. The infographic said that a total of almost $1.25 billion was spent on Cyber Monday in 2011. That was nearly 12% of all the money spent by November online shoppers in one day. In 2011, 12% of shoppers visited a website from their mobile devices, of which 6.7% made a purchase, double the rate from 2010. The average mobile shopper (42%) is between the ages of 25 and 44, with men spending more money than women from their mobile devices ($312 to $222, respectively).

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  • 10 Apps To Manage Black Friday Mayhem

Silicon Beat

Retailers have upped the Black Friday ante with more and bigger sales on the classically American retail holiday that used to arrive the day after Thanksgiving. This year the shopping frenzy starts early Thursday evening, at about pumpkin pie o’clock, and the 30-hour marathon of staggered sales and promotions is enough to leave even the most professional shopper frazzled.

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  • 7 ways to avoid overspending and being duped during holiday season

Sun Sentinel

‘Tis the season to shop until you drop. Or is it? You’ve heard of all the things to do this shopping season. Here are some things you don’t want to do. You don’t want to waste your money, bust your budget or even carelessly let your guard down for thieves to steal your credit cards — and even your identity — while shopping for door-buster deals. Here are seven “Don’ts” to assure you have a memorable — and safe — holiday season without going over budget.

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Small Business: Perception vs. Reality

In the most recent election cycle, like most others before it, the one sector of the economy that got the most attention was small business.  This is the future, we were told by every candidate—the very backbone of the nation’s economic infrastructure, the greatest source of employment and innovation, the foundation of America’ greatness.

The new J.D. Power and Associates 2012 US Small Business Banking Satisfaction Study paints quite a different picture. It uncovers an environment where optimism co-exists with uncertainty, and where tapping capital resources remains an unnecessarily onerous task. Far from being lauded, this is a market  that is looking for support, deserves it, but too often doesn’t get it.

There’s no question that as the economy continues to recover, however slowly, small businesses will play a critical role. Those already in the market are on track to keep growing, and this will turn help fuel the creation of others. Indeed, the study highlights a degree of optimism in this sector.  There’s a clearly perceptible spike in the percentage of small business banking customers who report being better off now than they were a year ago. It’s still far from a majority at 33 percent, but that’s still a 10 percent jump over last year’s corresponding number, and even better news compared to the 15 percent who now say they’re worse off.

“There is a long road ahead to economic recovery, but it’s positive to see that small business banking customers report they are better off this year over 2011,” said Jim Miller, senior director of banking at J.D. Power and Associates.  “Since 2009, we have seen the percentage of those who reported to be ‘better off’ jump from 16 percent in 2009 to 33 percent in 2012.”

For banks in particular, there’s even more good news.  The JD Power study reports that, on average, small businesses hold deposits four times greater and loan balances 15 times greater than retail banking customers. The people running the businesses are doing well too: these customers carry higher levels of personal banking business than the average consumer.

And finally, there’s the profit factor. Perhaps contrary to conventional wisdom, profit margins associated with small business customers are typically higher than those associated with larger corporate banking customers.

However, the gulf between perception and reality extends into other areas as well, with less happy results.  As the JD power study makes clear, this market doesn’t get the respect it clearly merits. For the record, there is a higher level of overall satisfaction in the most recent report, but that’s still cold comfort. In fact, it still ranks near the bottom among the financial services businesses that the study covers (only mortgage servicing ranks lower). Even the credit card business, which long languished at the bottom, has now moved past small business banking in satisfaction to levels enjoyed in the retail banking sector.

The elephant in the room, of course, is credit, or rather the lack of it. Oddly, the hard numbers don’t necessarily show a decline here: 82 percent of small business loan applicants say got approved for their most recent loan, the same as the year before.  However, a recent research effort conducted by the Small Business Administration that went a level deeper revealed that lending  this sector has been falling steadily since 2008, the year of the banking meltdown. This is likely  one factor behind the declining Availability of credit rating, which is down from 6.71 (on a 10-point scale) last year to 6.65 in this year. That’s actually  one of the lowest-rated attributes in the 2012 study.

Again, all the clichés ascribed to the small business sector—hardy, entrepreneurial, innovative—are real. This is a risky proposition, and we all know just how many new ventures don’t survive. At the same time, as every good candidate will point out in every stump speech, small business is exactly what will fuel overall economic recovery.

In the next piece, we’ll look more closely at the pain points in this market. But for now, the unmistakable takeaway is that small businesses are healthier than they’ve been for a while, they’re vital for economic growth, and there are significant profit margins involved. The market is good for companies, good for individuals, and good for the economy. Given those considerations, the banking satisfaction levels identified by the new report are lamentably low, and it should be the industry’s goal to do better.

* Now in its seventh year, the U.S. Small Business Banking Satisfaction Study measures small business customer satisfaction with the overall banking experience by examining eight factors: product offerings; account manager; facility; account information; problem resolution; credit services; fees; and account activities. The 2012 study includes responses from nearly 7,246 small business owners or financial decision-makers who use business banking services. The study was fielded from August 10, 2012, through September 10, 2012.

For more information about the J.D. Power and Associates 2012 US Small Business Banking Satisfaction Study, please contact: Holly Zagresky at (248) 680-6319 or via email at Holly_Zagresky@jdpa.com

Fast Facts: Economic Impact of the Fiscal Cliff

The Financial Services Roundtable recently released another iteration of it’s Fast Facts, reliable, bullet-point research about issues facing the financial services industry. Topics span TARP, Dodd-Frank, insurance, lending, retirement savings and more.  Below are some updated Fast Facts on the economic impact of the fiscal cliff.

FACT: The fiscal cliff consists of dramatic tax increases and automatic spending cuts scheduled to go into effect on January 1, 2013.

FACT:  The fiscal cliff would remove approximately $600 billion from the economy in 2013 (twice the projected growth in U.S. GDP this year) and more than $8 trillion over the next ten years.

FACT:  The Congressional Budget Office projects that the U.S. economy will go into a recession in 2013 (including real GDP contracting by 2.9% in the first quarter of 2013 and an unemployment rate over 9%) if Congress and the Administration do not address the fiscal cliff before the end of the year.

FACT:  Many independent groups are speaking out about the negative economic impacts if the fiscal cliff occurs.  Moreover, businesses are saying that uncertainty surrounding the fiscal cliff is negatively impacting their lending, hiring, and company growth right now.

  • Failure to reach even a temporary arrangement to prevent the fiscal cliff and a repeat of the August 2011 debt ceiling episode would mean that the general election had not resolved the political gridlock in Washington and would probably result in a sovereign rating downgrade by Fitch. Fitch Ratings.  November 7, 2012.
  • If <fiscal> negotiations fail to produce policies that lead to debt stabilization and ultimately reduction, then we expect to lower the rating, probably to Aa1.  Moody’s Investors Service.  November 7, 2012.
  • If the U.S. falls off the fiscal cliff, it will take most of the decade for economic activity and employment levels to recover from the fiscal shock.  There will be a recession in 2013 and dramatically slowed growth in 2014.  More than 6 million jobs will be lost; the unemployment rate will be more than 11 percent; and there will be a cumulative 12.8 percent drop in GDP.  National Association of Manufacturers.  October 26, 2012.
  • Economists from member companies of The Financial Services Roundtable convened on October 25th and unanimously agreed the fiscal cliff is imposing a negative drag on business lending, hiring, spending, and investment right now. The Financial Services Roundtable. October 25, 2012.
  • Chief executives from 80 big-name U.S. corporations have banded together in the “Campaign to Fix the Debt,” ringing the opening bell at the NYSE and urging policymakers to deal with America’s out-of-control national debt by forging a comprehensive, bipartisan deal, not by going over the fiscal cliff.  Campaign to Fix the Debt.October 25, 2012.
  • At the end of the day, the United States is the biggest economy in the world and the dollar is the reserve currency in the world. I think it behooves us to act in a much more responsible way <with respect to the fiscal cliff.> Lloyd Blankfein, CEO Goldman Sachs. October 24, 2012.
  • General Electric refinanced $5 billion of bonds reaching maturity early next year to avoid any market downturn ahead of the looming fiscal cliff. General Electric. October 22, 2012.
  • Fifteen CEOs of the largest banks in the U.S. sent a letter to the President and to Congress, saying, “The consequences of inaction – for stability in global financial markets, for economic growth, for millions of Americans still without work and for the financial circumstances of American businesses and households – would be very grave.” The Financial Services Forum. October 18, 2012.
  • 42% of fund managers report that the fiscal cliff is their number one investment risk– up from 35% in September and 26% in August. Bank of America Merrill Lynch. October 16, 2012.
  • U.S. Bancorp in Minneapolis lowered its loan-growth expectations for the fourth quarter to reflect borrower uncertainty about the election, the fiscal cliff and the overall economic environment. Richard Davis, CEO U.S. Bank. October 17, 2012.
  • 61% of American clients say the fiscal cliff is affecting their hiring plans. J.P. Morgan.  October 6, 2012.
  • Macro Risk Advisors October survey of market uncertainty factors shows the risk most cited by U.S. investors as relevant to market conditions is the fiscal cliff and upcoming elections. Macro Risk Advisors. October 2012.
  • It would be smart to at least temporarily stop the full implementation of spending cuts, which would cause a lot of angst. Blackrock Investment Institute. October 2012.
  • We expect that the S&P 500 will fall sharply following the election when investors finally recognize the serious possibility that the ‘fiscal cliff’ problem will not be solved in a smooth fashion.  Goldman Sachs Global Economics, Commodities and Strategy Research team, September 25, 2012.
  • In our view, the U.S. economy is being hit with an uncertainty shock because of the looming fiscal cliff. Our forecast assumes that the uncertainty shock slows growth to 1.0 percent in the fourth quarter of this year.” Bank of America Merrill Lynch,  September 24, 2012.
  • Despite individual bank improvements, outlook for bank stocks is negative, predominately due to “a challenging domestic operating environment, characterized by low interest rates, high unemployment, weak economic growth and uncertainty over US fiscal policy.” Moody’s Investment Outlook for Banks. September 13, 2012.
  • More than 40% of companies cite the fiscal cliff as a major reason for their spending restraint.  Morgan Stanley. August 5, 2012.
  • Small business owners rated the severity of 75 business issues. Uncertainty about the economy ranked second while uncertainty about government policy ranked fourth, followed by unreasonable government regulations (fifth); federal taxes on business income (sixth); tax complexity (seventh), and; frequent changes in federal tax laws and rules (eighth). For perspective, securing long term funding was 56thNational Federation of Independent Business.  August 2012.
  • Nine out of ten small businesses are concerned about Congress’ ability to reach consensus on the fiscal cliff; 59% say failure to address the fiscal cliff will have a direct impact on their company’s growth.  U.S.  Chamber of Commerce.  July 16, 2012.

FACT: Economic output would be greater and unemployment lower in 2013 if the fiscal cliff were addressed before the end of the year, according to analysis from the Congressional Budget Office.


For additional resources and examples of member programs, visit http://www.fsround.org/fsr/financial_literacy/financial_literacy_corner.asp.

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

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

  • 31,000,000: The total number of Tweets sent on Election Day 2012. (Source: Twitter)
  • 40: The percentage of time spent on Facebook’s newsfeed; only 12 percent of time is spent on profile and brand pages. (Source: comScore)
  • 4,000,000,000: The number of stories that have been read on the Pulse mobile platform since it launched in May 2010. (Source: Pulse)
  • 3,000,000: The number of tweets published along with #sandy and/or #hurricanesandy during the first 24 hours of the storm making landfall on the East Coast. (Source: Topsy)
  • 604,000,000: The number of monthly mobile users for Facebook in September 2012.  (Source: Facebook)
  • 175,000: The number of new LinkedIn profiles created each day as of September 2012. (Source: LinkedIn)
  • 584,000,000: The number of active daily users on average for Facebook in September 2012. (Source: Facebook)

LinkedIn introduced Thought Leader pages in October. Curious who the most followed thought leaders are? Read LinkedIn’s blog here.

BAI Retail Delivery 2012: Top FinTech CEOs Talk Retail Financial Services

In October, we tuned into BAI Retail Delivery’s FinTech 100 President & CEO Discussion Panel moderated by Bank Technoloyg News Penny Crosman. Top CEOs shared their insights on retail financial services including Brad Smith, President & Chief Executive Officer, Intuit, Raju M. Shivdasani, President & Chief Executive Officer, Harland Financial Solutions and Gary Cawthorne, President, WAUSAU Financial Systems.

You can watch the full panel discussion below.

What do you think about the panel discussion? Sound off in the comments below or by tweeting at @Bankingdotcom.

What We’re Reading: Mobile Payments, Financial Dashboards and Bank Scandals

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.

  • Index of Banking Activity Rises on Better Credit and Optimism

American Banker

Business activity in the banking sector improved significantly in September, rising for the fourth consecutive month, according to industry executives surveyed for American Banker’s latest Index of Banking Activity. The IBA’s September overall reading of 55.4 compared to 53.9 in August. The IBA is a product of American Banker’s regular surveys of bank executives and is published in partnership with VantageScore Solutions. The September index was based on 235 responses.

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  • Mobile Payment Awareness Grows, But Usage Remains Low Among Consumers: Study

American Banker

Even though a significant number of consumers have heard of mobile person-to-person payments, current usage of this technology remains limited, a new report found. Four out of 10 households that have Internet access have heard of P-to-P payments, according to the survey, called “A New Perspective on Consumer Payment Habits” by Synergistics. Awareness is the highest, at 54%, for people between the ages of 18 to 34. Still, about 30% of those who are 50 or older are aware of the service, Synergistics said Thursday. However, only 9% of people have used mobile P-to-P payments, the study found.

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  • Another Square Copycat: Bank of America Launches Mobile Payments

All Things D

Square may get a lot of credit for making mobile payments mainstream, but the ability to accept a credit card using a smartphone is turning into an unmistakable commodity.

The latest to enter the space is Bank of America’s  Merchant Services, which is unveiling today Mobile Pay on Demand, a service that allows small business owners to accept customer payments over a cellphone. “I hate to come out with a commodity product, but every bank should have one,” said Trevor Rubel, the EVP of Bank of America’s Strategy and Emerging Products. Square is perhaps the most high-profile company in the market and is already processing $8 billion in payments annually. But its head-start hasn’t deterred others from entering into the space, including eBay’s PayPal, Groupon, Intuit, Pay Anywhere and many others.

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  • Financial dashboards can help consumers steer better

Globe Advisor

Unless you are one of the 30 per cent of Canadians polled recently who are counting on winning the lottery or inheriting money to provide for their retirement, you are likely going to have to take responsibility for building and protecting your wealth. Luckily, there’s an app for that. Or, more accurately, there are Web-based tools that do what you once had to pay a professional for. In most cases, they are also free. What there doesn’t seem to be, however, is one single, all-encompassing online source. “There are a lot of different solutions, a lot of smaller solutions and niche players,” said Daniel Shain, the founder of online guaranteed investment certificate (GIC) purchase platform Finizi.com.

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  • Bank scandals can aid financial literacy


Since the financial crisis began in 2008, Americans have witnessed a constant stream of scandals and settlement by the financial services industry. Banking, securities, consumer protection, commodity, asset management and brokerage regulators have all fined and penalized large institutions for putting profit and personal economic gain ahead of the law and doing the right thing for their clients. The LIBOR scandal by itself is shocking enough. Large global banks manipulated the London interbank offer rate on products worth an estimated $800 trillion, and The Wall Street Journal estimates that these banks could face legal liability of $176 billion, excluding regulatory penalties. A LIBOR lawsuit was recently filed by U.S. homeowners against 12 large banks. Ironically, the plaintiffs are suing under a law known as RICO, the Racketeer Influenced and Corrupt Organizations Act, a law that was created to go after the Mafia.

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  • KPMG: Savvy youths value mobile banking security


Young professionals are embracing online and mobile banking technologies with open arms, but they are also worried about security and will be placing greater trust in banks that can give them peace of mind, according to KPMG. All of the major banks have been ramping up their mobile banking and payment efforts, in line with changing customer behaviour. Commonwealth Bank released an Android version of its Kaching app in July, Westpac teamed up with MasterCard for an NFC mobile payments trial a month later, and ANZ announced that it was making a major technology investment with a focus on mobile and online banking in October.

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Banking on Post-Partisanship

The voters have spoken, the commercials are off the air and, in a sign of fiscal prudence, the Romney campaign has had its credit cards canceled (moments after the election was called, in fact). After a $6 billion election, the White House, the Senate and the House of Representatives will have the same parties in charge.

So what happens now?

It’s clearly a mistake to consider this a status quo—while wrangling over who has a mandate will likely intensify, every election brings change, and so will this one. The banking industry would be wise to keep its eye on three specific aspects.

Warren and Peace: Incoming Senator Elizabeth Warren of Massachusetts made attacks on the financial services industry a centerpiece of her campaign, and earlier championed the creation of the Consumer Financial Protection Bureau (CFPB). She was previously considered so toxic that, despite strong liberal support , she wasn’t even nominated to head the agency. Her candidacy was strongly opposed by leading segments of the industry, and even the U.S. Chamber of Commerce, all of whom contributed to her opponent. She won, and won handily. The buzz now is over her next move—will she take the traditional path, working her way up the Senate hierarchy, or will she declare war on Wall Street?

Adding to the intrigue is the speculation that she’s positioning herself for a run at the White House in 2016, just like another new senator, this one from Illinois, did in 2008. Warren has a long history of blending academia with activism from positions of power, and if she takes a confrontational role she will be a formidable adversary. First clue: Will she seek, and get, a spot on the Senate Banking Committee?

Taking Offense Over Regulations: Conventional wisdom holds that an expanded Democratic presence in the Senate and House of Representatives will be emboldened to push for more regulations. However, the real action might on the defensive side. Senate Republicans and Democrats continue to fight over the level of power granted to the CFPB; it has a more centralized structure than either the Securities and Exchange Commission or the Federal Deposit Insurance Corporation, which is anathema to free-market conservatives. In fact, even the legislation that spawned the CFPB, the Dodd–Frank Wall Street Reform and Consumer Protection Act, has been scaled back, and Democrats are determined to give it more teeth.

As with all sweeping legislation, the devil is in the details—whether Dodd-Frank is throttling the free market or simply being ignored by predatory corporations depends largely on who’s doing the talking. The reality is that rather than impose new regulations, the battle will be over how strongly existing regulations are enforced. One particular source of friction will be the House Financial Services Committee—retiring member Rep. Barney Frank (D-MA) has bemoaned the relative lack of action from this body, and that’s probably going to change in the next term.

An Appointment with Activism: For the next few weeks, at least, there will be a parlor game over who gets what job. Keep an eye on the CFPB: current director Richard Cordray only got the role through a recess appointment, a controversial move by any measure, and he has it only until the end of 2013. How active will be now, and who will succeed him? The re-election of the president all but ensures that it won’t be a free-market Republican, but that’s about all we know. There are going to be major changes to both the Senate and House banking committees; whoever gets those plum assignments will be handed the keys to a lot of power.

Perhaps most importantly, while much of the focus will be on who replaces Hillary Clinton at the State Department, another critical appointment will be at the Treasury. There hasn’t been much talk about who, if anyone, will succeed current Secretary (and former president of the New York Fed) Tim Geithner, but whoever it is will be vital to the future of this industry.

Bottom line: Every election induces hand-wringing on the losing side and fears of the country headed for destruction. Judging by what prominent conservatives have been saying, that’s what’s happening now. But let’s face it, this kind of thinking is always silly, regardless of which side is doing it.

Prominent segments of the banking industry vociferously (and financially) opposed President Obama, and he won anyway. Even with Wall Street money lined up against her, Sen.-elect Warren amassed a huge war chest and racked up an eight-point win. Their vision prevailed, and that’s how democracy works. But that’s the point—it’s an election, not Armageddon.

The Wall Street bailouts so deplored by conservatives were in fact proposed and enacted by a Treasury Secretary in a Republican administration (who, incidentally, previously ran Goldman Sachs). Executives who publicly opposed government intervention took billions in taxpayer money anyway, and the relative success of the Troubled Asset Relief Program (TARP) continues to be debated. On the flip side, the $2 billion loss at JPMorgan Chase earlier this year happened during the tenure of a Democrat-supporting CEO running an institution with government assistance. This is exactly the kind of occurrence the Obama administration’s reforms were supposed to end. This is why most attacks on the financial services industry take aim at excess and abuse, not at standard operating procedures; it’s just that some in our industry have trouble distinguishing between the two.

The best regulation by far is self-regulation. If the public in general and regulatory agencies in particular are convinced we’re taking care of ourselves, they won’t want to take care of us, one way or the other. And that will get everyone’s vote.

Imagining a Cashless Future

*This post originally appeared on the Andera Blog

Working for a financial software company, I’m often struck by how fast things are changing. Financial innovations come in many shapes and sizes from many different places, but for the most part they all follow a general trend: they turn physical processes into digital ones. The so-called “payments revolution” has often made me wonder what will happen when innovation manages to displace the most physical aspect of finance, cash.

In the financial technology world, cash is so uncool that hardly anyone talks about it anymore. The alternative to a mobile payment is a debit card, and the alternative to a debit card is a prepaid card. ATMs get a shout out every once in a while, but that 3-letter acronym comes up less often than either P2P or RDC.

Perhaps that’s because most of us believe, at least partially, that cash is on its way out. Michael Woodford, one of the world’s preeminent monetary economists and author of a paper called “Monetary Policy in a World Without Money,” put it this way:

“It is possible to imagine that in the coming century the development of electronic payments systems could not only substitute for the use of currency in transactions, but also eliminate any advantage of clearing payments through accounts held at the central bank.” (Interest and Prices, 2003).

That’s economist for “At some point, there will be no cash.” The idea makes sense; I use my debit card for almost everything, and when I need to repay a friend or split the bill, I prefer to send P2P payments from my mobile banking app. I really only keep cash in my wallet for two reasons: the local bar and the bagel place on the corner. Even most food trucks in my area use Square. That said, we’re still a ways out from totally getting rid of the nasty green paper.

When I imagine a cashless future, I foresee three things:

1) Technology will make things a little easier.

When they were first introduced in the 1970s, ATMs were a huge leap forward. Consumers could save time they previously spent visiting the branch to withdraw cash. They could choose to withdraw more frequently and feel safer carrying less cash in their pockets. The spread of credit, then debit, and now prepaid cards has had the same effect. Like most participants in the financial technology space, I’m absolutely gaga about mobile payments, and can’t wait until I can leave the house with only my mobile phone. It’s also easy to imagine how advancements in cyber-security will gradually reduce the risk of identity theft. No hassle, no wallet, no risk – what a world that will be.

2) Banks will consolidate – or evolve.

Right now, many of the features that banks compete on, including ATM networks, branch networks, free checks, and early “cashless” technologies like P2P payments, will, in a totally cashless economy, become moot points. As money moves to the cloud, locality will matter less and less, and community financial institutions sheltered by brick-and-mortar monopolies will face competition from every corner of the country. Hundreds of banks have closed or merged with national banks since the financial crisis, and the onward marching wave of technological change will only continue to whittle down the list of U.S. financial institutions. The ones that fail to adopt the latest mobile and online technologies will go first.

As I see it, the banks of the future will live or die on the success of two things: their lending strategy and the quality of their customer experience. Evaluating the risk and return of loans and investments will continue to be difficult long after cash is gone. As it is today, some banks will be better at it than others. If they can collect more from loans, they will be able to offer more on deposit accounts and attract customers away from competitive institutions.

By customer experience, I don’t mean the ease of withdrawing or depositing money. In a cashless economy, neither of those transactions will take place. Instead, I predict that institutions will partner or expand to offer a wider range of financial services, such as brokerage, insurance, and financial planning under one roof or rather, on one website.

3) The popular notion of money will change

I am most curious to see what will happen to the idea of money in a cashless future. When I say money, the first image that probably comes to mind is a green dollar bill, and most people conceive of money as a limited, concrete asset like gold that we chase around and fight over and trade for things like food and shoes. Money is actually a bit more complicated, and its supply has as much to do with credit as it does with the US Treasury printing press. (When you hear, “The Fed is printing money,” what it’s actually doing is manipulating the banking system into lending and borrowing a little more.)  In a cashless economy, how will we talk about money? Will our movies still feature the symbolic suitcase full of 100 dollar bills? Will central bankers and policy wonks still talk about ” the money supply“? Will we spend more with nothing tangible to hold onto or will we spend less when every transaction is digitially traceable (I’m thinking about PFM here)? I’m not sure.

A cashless future may be a long way off, but I genuinely believe that I could be living in it before I die. I’m only 22, so that’s about 60 years. 60 years ago, Walt founded Disney, Walton founded Wal-Mart, and most of the banks on Wall Street were already decades old. Perhaps its time to start preparing.


Melanie Freidrichs: Melanie likes writing and data. She “coordinates,” among other things, Andera’s blog, Andera’s webinars and Andera’s twitter feed.  In addition to financial technology and marketing, her favorite topics to blog about include financial regulation, monetary policy, and increasing access to financial services.

She is a member of the first class of Venture for America, a two-year fellowship that seeks to revitalize American urban centers through entrepreneurship by matching recent college graduates with start-ups in low-income cities.

Melanie grew up in Bethesda Maryland, and received an A.B. in Economics from Brown University in 2012.  She thinks Providence is a pretty cool town.

What We’re Reading: Mobile Banking, Windows 8 and 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.

  • Consumers Share Their Mobile Banking Pet Peeves

American Banker

72% – of U.S. adult smartphone users have encountered difficulty when trying to use a mobile banking app, research released this week has found. The survey of 600 smartphone users was conducted by The Adcom Group of Companies and commissioned by Virtual Hold Technology. Consumers shared their specific issues with mobile banking apps: 28% said the mobile app freezes or crashes, 26% have experienced a dropped internet connection while mobile banking, 25% said there were insufficient transaction details or filtering options, 21% said they could not easily speak to a customer service representative, 20% had problems opening an app, 19% have had problems logging in or setting up an app, 18% reported missing pending transactions or balance discrepancies, 17% said there were missing historic transactions, 16% have experienced delays due to payment fulfillment constraints, 15% were unable to schedule or modify payments or transfer funds, and the list goes on.

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  • Tech Companies Start Creating Windows 8 Mobile Banking Apps

American Banker

On the heels of Windows 8 officially hitting the market, financial services technology vendors have begun supporting Microsoft’s (MSFT) overhauled operating system for laptops, desktops and tablets. Harland Financial Solutions and Kony Solutions are among the first to create mobile banking apps for this platform. Windows 8, which officially hit the market late October, introduces a plethora of new features that are easily visible on its homepage. Indeed, the Start button has been replaced with a Start screen that showcases live tiles that stream information from third parties, such as weather or business metrics. Users can drill down into details from these widgets by using the touch screen. Harland Financial Solutions has been readying a Windows 8 app for customers of its Cavion internet banking software.

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  • How Secure is Mobile Banking?

Consumer Affairs

A new report from Reportlinker.com suggests mobile banking is fairly secure for now. Its Mobile Banking Security Insight Report suggests the financial services industry will continue to benefit from the immediacy that smart mobile devices (SMDs) offer but there are significant risks that must be counteracted before consumers are confident in accepting them. Banks like mobile banking because it’s good business. Mobile customers are generally young and affluent.

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  • Three Features That Will Change Mobile Money

Credit Union Magazine

Mobile data allows members to check balances, sure. But it also promises much deeper member relationships for the credit unions that invest well. Filene’s “The Future of Member-Facing Technologies in Credit Unions” points toward three services that will tie mobile members to their credit union: Location awareness. The goal of location-aware applications is to provide users with information based on the context of the situation or location they’re in. Augmented reality. Not to be confused with virtual reality, augmented reality builds on location awareness to create new capabilities.

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  • Bank Transfer Day: More People Transferred, but to Another Bank!

Javelin Strategy & Research Blog

There were two major surprises in the Bank Transfer Day research, which was created from both large-scale national polling and walking around actual Occupy sites to interview people. The primary finding was that, despite stated intentions, not many people actually transferred their money to a credit union from a large bank. The second finding, perhaps hidden in the shadow of the primary one, is that more people did transfer their money out of a large bank. This is the surprise research finding that no one is talking about, and my belief is that it has significant implications for how investments create value within the realm of financial services.

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  • Google Wallet Turning to Plastic?

Payments Journal

A leaked version of Google Wallet suggests Google is preparing to offer a plastic payment card that will work alongside the product. This would enable Google Wallet users to pay with their Google Wallet accounts at locations that don’t accept NFC. While the legitimacy of the leaked version has not yet been verified by Google, it does fit into their stated goal of expanding the potential uses for Google Wallet. Google already has merged Wallet with their Google Checkout product, enabling users to conduct eCommerce with their Google Wallet accounts.

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  • Google Wallet May End Up Inside Your Actual Wallet

Slash Dot

Several outlets are reporting, based on screenshots posted by Android Police that Google is about to introduce a lower-tech variant on its smartphone-based Google Wallet payment system. Instead of transferring payment information from an NFC-equipped phone, this would mean a physical payment card (like a conventional plastic credit or debit card), but one linked via Google’s databanks to the user’s existing bank or credit accounts. Upsides: less to carry, a simple way to suspend or cancel service on them (should the card be lost or stolen), and doesn’t require you to carry your phone to make a credit or debit transaction — handy, since NFC readers are still thin on the ground. Downside: while perhaps no worse than putting the same information on your phone, it’s one more step toward giving a third party all of your personal information in one place.

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  • Retailers find profits with paperless receipts

USA Today

As smartphones proliferate, more stores and banks are offering to e-mail shoppers their receipts rather than giving them a printed copy. These electronic or digital receipts, touted as green for saving paper and convenient for saving time, enable retailers to market directly to customers.” It’s a growing trend,” says John Talbott, of Indiana University’s Center for Education and Research in Retailing. He says companies are rushing to mimic what Apple started in 2005, adding he expects “any retailer worth their salt will offer this.”

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  • Banks kept eyes on storm and on their ATMs

Washington Post

As Hurricane Sandy made its way to the Washington area last month, residents didn’t just load up on bottled water and batteries. Many also looked to withdraw extra cash to prepare for possible power outages that would make ATM withdrawals and credit card transactions impossible – serving as a new test of the banking system’s continuity plans. Sandy Spring Bank began filling its 44 ATMs with cash the Friday before the storm, and again on Saturday and Monday. Banks and credit unions, which are required by regulatory agencies to have expansive disaster relief plans and secure backup networks, say the immediate challenge during unexpected emergencies and power outages is making sure customers have access to the bank’s services – and cash.

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RPE: Measuring Employee Worth

Citigroup is one of the biggest financial services corporations in the world, so it’s no surprise that the sudden switch in the company’s two top executive spots continues to generate considerable attention. It’s even being reported that the Securities and Exchange Commission is investigating the circumstances behind the high-level shakeup.

But there’s another aspect to the story that’s also intriguing: While newly appointed CEO Michael Corbat has announced plans to optimize efficiencies at the venerable institution, the buzz is that he’s got his work cut out for him. That’s because, by some accounts at least, Citi has one of Wall Street’s least productive workforces.

The numbers seem to bear out that assertion. Citigroup generated about $206,000 in revenue per employee (RPE) through the first nine months of the year, down 7.5% from the year-ago period. Some other institutions, meanwhile, posted increases during the same time span.  This comes after the cutting of 100,000 jobs during the tenure of outgoing CEO Vikram Pandit. If current trends hold, according to estimates from Bloomberg, Citi will be one of only a half-dozen major lenders with a lower RPE than it had in 2005.

It’s easy—but according to experts, quite wrong—to overestimate the RPE metric when judging the business performance of not just banks but organizations in other industries.  “There’s only one metric that really matters when measuring HR.  It’s called Revenue per Employee (RPE),” claims a recent post in The HR Capitalist. “That’s all you need to know. The rest is BS.” That sentiment is echoed in other business performance sources as well.

So given the importance of this metric, how does the industry as a whole and, Citi in particular, stack up against other high-profile companies and industries?

24/7 Wall Street, which offers commentary for equity investors, did just such an analysis recently—tagging it as a study of companies with the ‘least valuable employees’—and the results make for interesting reading. Retailers and market-facing restaurant chains don’t fare too well: Sears (which also owns other brands) makes an appearance with an RPE of $139,000, as does Gap, with an RPE of $113,000, and JCPenney with $98,000. Starbucks may have some problems brewing at $89,000, and the stories of Mcjobs at McDonald’s may be true; the fast-food giant shows an RPE of only $65,000.

On the other side of the coin is Apple—the perfect company with the perfect products and the perfect market cap has one of the highest RPEs of any public corporation: $2.4 million. Even other flourishing tech brands can’t match that; for example, despite the much smaller employee base, Facebook (and coincidentally Google) come in at $1.2 million.

But here’s an element left out of this equation. Apple has come under attack for outsourcing much of its manufacturing; iPads and iPhones, among other devices, are made at corporations in China and elsewhere that pay a significantly smaller wage than Apple pays its own employees. There have also been numerous reports of less-than-ideal working conditions at some of these facilities, and even a recent strike at one.  If Apple built its products in-house, what would its RPE be then? And how would the market judge its performance?

Futurists frequently question the need for a central facility in a business environment where online collaboration technologies negate the need for a physical workplace. With business and support professionals virtually assembled around the world, it’s even possible to imagine a business world without Wall Street. But what other effects would this have?

RPE is surely a vital statistic, and it will be interesting to see how the new management team at Citigroup goes about raising productivity. But it’s also important to remember that in a complex global ecosystem, where jobs can be passed around between different economies and regions almost at will, it may be only one factor (and not the only factor) in gauging how good a company is at doing what it does.

What do you think about RPE? Let us know by tweeting at @bankingdotcom or replying in the comments section below.