What We’re Reading: Fewer Data Breaches, M&As and Social

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.

 

  • Data Losses Overall Are Up, But Bank Data Breaches Are Fewer: Report

American Banker

A report released by KPMG on Tuesday finds that globally, there’s been a 40% increase in the number of publicly disclosed data loss incidents in the past two years. However, financial services firms have seen an 80% decrease in number of incidents in the past five years. The improvement is a result of effort on the industry’s part, Greg Bell, global and Americas service leader for information protection at KPMG says; “Financial services organizations have done a much better job at defending themselves from cyberattack,” he says.

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  • JPM Plans ‘Organic’ Growth Through Technology, Job Cuts

American Banker

JPMorgan Chase, the country’s largest bank, on Tuesday convened its top executives to discuss its growth strategies. A major component: cutting a net 17,000 jobs over the next two years. But more notable than the job cuts, composed largely of planned attrition in JPMorgan’s consumer bank and about 15,000 cuts in its mortgage operations, was the bank’s resigned attitude about boosting business while waiting for interest rates, regulatory pressures and the overall economy to improve.

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  • What Banks Need To Know About Vendor M&As

Bank Systems & Technology

The recent Fiserv/Open Solutions and FIS/mFoundry deals suggest that the banking industry is going through another wave of vendor consolidation. In 2009, within IDC Financial Insights’ FinTech 100, we lost only two vendors through acquisition. Last year, the number doubled again to eight. The main reason continues to be that companies must increase scale in order to make money in such a competitive environment. Vendors have realized that they need to figure out how to grow organically, acquire competing or complimentary solutions, or become an acquisition target themselves.

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  • Intuit Founder: ‘Success Makes Companies Stupid’

Business Insider

Intuit’s founder, Scott Cook, believes that success can actually be dangerous to the company. At a seminar with Harvard Business School faculty, he said that “Success is a powerful thing, it tends to make companies stupid, and they become less and less innovative.” According to Harvard Business School Working Knowledge, Cook argues that companies need to adopt the lean startup model pioneered by Eric Ries. That means “launching as quickly as possible with a “minimum viable product,” a bare-bones creation that includes just enough features to allow for useful feedback from early adopters. The company then releases a quick succession of product upgrades, forming hypotheses and conducting experiments with each new version along the way.”

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  • Seven Killer Apps All Small Business Owners Should Add to Their Everyday Operation

Business 2 Community

If you don’t already know about Mint, you’ll be glad you do now. A subsidiary of Intuit (the makers of TurboTax and Quicken) Mint is a free web-based tool that manages your personal finances, provides an in-depth look at all of your expenses, and even helps set budgetary goals to help you stay on track. By organizing all of your expenses, you can keep a close eye on every penny you spend on business supplies, gas, food, utilities, etc. When your budget is limited, it’s certainly important to stay on top of your finances in order to reach your goals

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  • As Financial Firms Go Social: The Key Is Integration

Forbes.com

Actiance provides a customizable platform Socialite that firms can use to monitor social media as it is used by its advisors, and ensure that it’s compliant. “Companies are starting to realize that doing social media is not a point product,” Actiance CEO Kailash Ambwani said when asked about his expectations for 2013. “It’s something that needs to be integrated into the firm’s enterprise platform. And it requires resources, overseeing and management.”

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  • It Was A Wonderful Life: How Banks Can Revive Their Reputations

Fast Company

The banks’ Financial Trust Index remained stagnant at 28 percent for December 2012. In other words, three out of four Americans don’t trust their financial institutions. That’s a far cry from the days when public confidence sat at 75 percent–a figure that stood for more than three decades after Clarence got his wings. More specifically, Ernst & Young’s Global Consumer Banking Survey 2012 finds that the number of consumers planning to change banks grew 5 percent last year; that customers with only one bank (also known as brand loyalty) fell 10 percent last year; and that customers with three or more banks are up 11 percent from 2011.

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  • The Future Of Mobile Banking Fueled By Smartphone Cameras

The Financial Brand

The impetus for financial institutions to provide mobile remote deposit capture and mobile photo bill pay is growing. A full 58% of iPhone users finding mobile deposit desirable, and 42% of mobile bankers say they’d like to use photo bill pay. Currently, 40% of all consumers and 66% of mobile bankers find mobile RDC desirable. Another 15% want it but their financial institution doesn’t offer it. This according to a report from Javelin Strategy & Research, who also says that 64% of the top 25 retail banks in the U.S. are now offering mobile deposit.

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  • Card Networks Take On Plastic With Mobile Platforms

Wall Street Journal

The world’s largest payments networks are angling to capture more electronic transactions by eliminating plastic from the equation. Visa Inc. and MasterCard Inc. on Monday unveiled industry partnerships and technology systems intended to make it easier for consumers to make purchases online, on mobile devices and in physical stores without having to pull out a credit or debit card. MasterCard said its new MasterPass platform will allow cardholders to store their card information in a single software program that can be used to make payments through merchants who sign up for their service.

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Markers of Change

Some of the most significant news in the Federal Deposit Insurance Corp.’s Quarterly Banking Profile ranks dead last in the lengthy list of news nuggets highlighted in the introduction. It has to do with bank failures.

It’s not a surprise that the subject typically ranks low in the report, since there’s plenty of good news to tout upfront. As the media will surely promote, net income rose by more than a third over the year-ago quarter, non-interest income rebounded, large-denomination deposit balances surged, loan losses improved across all loan categories and, in big picture terms, full-year earnings turned out to be the second-highest ever. For the record, it’s not all rosy—there’s been a reduction in equity capital, which can be attributed to the decline in securities value. It as economic reports go, it seems positive overall.

This is why the news of banks going under needs to be seen in context. According to the report, which analyses the last quarter of 2012, eight insured institutions failed during this period. That’s the smallest number of failures in a quarter since the second quarter of 2008.

That’s fully four and a half years ago, but it’s significant for another reason. As the Business Cycle Dating Committee of the National Bureau of Economic Research pointed out late that year, this was around the time the recession took hold.

There’s other news related to this area: The new FDIC reports states that the number of insured commercial banks and savings institutions reporting financial results actually fell from 7,181 to 7,083 and 88 institutions were merged into other banks. The number of institutions on the FDIC’s “Problem List” fell for the seventh consecutive quarter, this time from 694 to 651, and the assets in them declined from $262 billion to $233 billion

But then there’s this nugget: The year 2012 also marks the first in FDIC history in which absolutely no new reporting institutions were added.

It’s easy to attribute too much importance to a single report; three months from now the news might be very different either way. In fact, as this blog noted at the time, the FDIC report from two quarters ago fit into the narrative of ‘cautious optimism.’

As this new snapshot in time reveals, we still have reason to be cautiously optimistic. There is no question that for many different reasons—economic contraction and (hopefully) expansion, changing consumer and other market expectations, the evolving role played by technology in everything from the back end infrastructure to custom mobile applications—we’re in a time of transition, and we’re going to stay that way.

The banking industry has long been associated with gradual change, and that seems like an anachronism in a time of technology-fueled rapid upgrades and instant gratification. It’ll be interesting to see how many failures and other trends might be in the FDIC quarterly profile a year from now. Any predictions?

 

Anti-Social Media Hacks

Burger King and Jeep have nothing to do with financial services. But both banking professionals and the customers they serve would be wise to keep a close eye on the fast-food retailer and the automaker as they seek to recover from high-profile hacks this week. It could just be a sign of things to come.

As has been widely reported, both companies this week had their Twitter accounts hacked and, in different ways, defaced. There’s already been wide speculation regarding the perpetrators, but at this point that’s almost less important than the fact that the hacks occurred at all. The primary motive seems to have been to cause mischief, but most such intrusions have a more malevolent intent.

The news of these high-profile Twitter hacks comes shortly after the granddaddy of social media, Facebook, revealed that it was the victim of a “a sophisticated attack. . .that occurred when a handful of employees visited a mobile developer website that was compromised.” Facebook didn’t identify the developer site in question, though it has been identified named elsewhere.

So what does all this have to do with banking?

The reality is that this where many aspects of the financial services industry are headed. And unlike fast food or even cars, this is a practice fundamentally built around private information that needs to be kept secure. The most recent data breaches make it clear that we’re far from that level of security.

Most institutions are already active in the social media sphere, but the current initiatives mainly revolve around marketing and messaging. It seems only a matter of time before at least a few brave organizations make the leap into trying to develop Facebook into a transaction platform and transmit private information via channels such as Twitter.

In some ways, it’s a throwback to the early days of the Internet. The Credit Union National Association reports that a third of all credit unions now offer mobile banking, and all of the rest will have joined the fray within the next two years. That’s nearly twice the adoption rate for online banking when it arrived, which means that we’re already entering the second generation of mobile banking capabilities.

When social media is thrown into the mix, as seems almost inevitable, the growth rate will likely be even more accelerated—there’s an entire generation primed to enter the workforce that has a problem remembering a time before these technologies were fully integrated into every aspect of daily life.

The question is not whether social media channels need to become more secure; the focus should be on how to make them more secure, and who should lead the effort. We already have best practices in place for consumers, but it’s fair to think few will heed the advice. It’s up to us.

There’s no single constituency that can do everything related to security. The banks, the social media providers, the government, commercial and technology vendors—everyone must be involved. We need expert working groups, industry standards and new technologies. And we need them now.

What We’re Reading: Mobile Money, Outages and PFM

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.

 

  • JPMorgan Chase Endures Website Outage

American Banker

JPMorgan Chase’s (JPM) website was shut down for some Friday, stopping bank customers from retrieving their accounts. The New York bank took to Twitter to tell customers its online banking was “experiencing intermittent issues” that the company was working to resolve. The outage endured for a few hours, bank spokesman Tom Kelly told American Banker. “We’re back to normal response times now,” Kelly said. JPMorgan Chase is researching the cause of the outage, Kelly said.

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  • Moven From Mobile Banking to Mobile Money

Bank Marketing Strategy

February is definitely a pivotal month for the start-up previously known as Movenbank, having changed its name to Moven, winning the best of show honors at Finovate Europe and gearing up for a February 25 closed beta launch of its mobile-optimized financial services application. Similar to Simple, while not having a banking charter, Moven provides a unique customer experience interface with a traditional banking organization working in the background (with banking licenses, FDIC insurance, etc.).

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  • A Look At What Citi Is Doing With Online Platform

Credit Union Journal

After Forrester Research dubbed Citi’s online banking site the best in the U.S. recently, Tracey Weber, Citigroup’s head of internet and mobile banking and Bank Technology News’ Mobile Banker of the Year for 2012, spoke about the bank’s latest initiatives. The developers made the site simpler, cleaner, and easier to navigate, she says. “We elevated a lot of the quick tasks that you do on a regular basis, like paying a bill, without having to continually have to find your way back to the dashboard. We also integrated PFM and account integration into the dashboard.” Citi partners with Yodlee for PFM and account aggregation.

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  • Four Common Misjudgments About Whether Consumers Want PFM

Javelin Strategy & Research Blog

There is a spirited conversation occurring in a Personal Finance Management subgroup on LinkedIn, spurred by Mary Wisniewski’s column in American Banker about how “PFM Defies Definition.” The heart of the discussion points to the growing awareness that PFM must break free from the 1980s definition of budgeting and investment tools for do-it-yourself PC enthusiasts with a masochistic delight for details, tracking, and quantitative analysis. The financial services industry makes a number of fundamental mistakes in their thinking and approach to PFM.

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  • Banks to spend $118B on tech, mobile banking in 2013

Mobile Payments Today

Retail banks worldwide will increase their IT spending by 3.4 percent this year — to a total of $118.6 billion. Industry analysts at Ovum predict that spending in Asia will rise 5.1 percent, followed by North America at 3.3 percent, and Europe at 1.8 percent. In a new business trends report, Ovum said that mobile banking would be a “clear IT investment priority in 2013.” The company suggested that total spending for online channels — including online and mobile browser-based services — will grow by 6.2 percent in 2013.

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  • More Than 12 Million Identity Fraud Victims in 2012 According to Latest Javelin Strategy & Research Report

PYMNTS.com

The 2013 Identity Fraud Report released today by Javelin Strategy & Research reports that in 2012 identity fraud incidents increased by more than one million victims and fraudsters stole more than $21 billion, the highest amount since 2009. The study found 12.6 million victims of identity fraud in the United States in the past year, which equates to 1 victim every 3 seconds. The report also found that nearly 1 in 4 data breach letter recipients became a victim of identity fraud, with breaches involving Social Security numbers to be the most damaging. Over the past year, companies are responding more quickly which means a consumer’s information is being misused for fewer days than ever before, and the mean cost per victim has been flattening.

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  • Finance and the American poor: Margin calls

The Economist

In December the Federal Deposit Insurance Corporation (FDIC) released a survey that found roughly one in 12 American households, or some 17m adults, are “unbanked”, meaning they lack a current or savings account. The survey also found that one in every five American households is “underbanked”, meaning that they have a bank account but also rely on alternative services–typically, high-cost products such as payday loans, cheque-cashing services, non-bank money orders or pawn shops. Not all the unbanked are poor, nor do all poor people lack bank accounts. But the rate of the unbanked among low-income households (defined in the FDIC survey as those with an annual income below $15,000) is more than three times the overall rate.

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  • Mobile Banking Now Vital To Customer Acquisition

The Financial Brand

A survey recently fielded on FindABetterBank uncovered that 88% of shoppers who said mobile banking is a “must have” feature are already mobile banking users. Therefore, as more consumers download their bank’s mobile apps and begin using them, you can expect the number of consumers demanding mobile banking when they’re shopping for a new institution to increase steadily. Few people, however, defect from an institution simply because mobile banking isn’t offered.

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  • Every company now a digital business

ZDNet

The convergence of social media, mobile computing, analytics and the cloud is transforming the way businesses operate. Companies that adopt available technologies to “go digital” will be better positioned to take advantage of rapidly shifting business opportunities and leap ahead of the competition, according to Accenture’s Technology Vision 2013 report. Since technology is now core to virtually every aspect of a business, every company is a digital business and all senior leaders–not just CIOs–must be able to understand, embrace and drive value from new technologies that affect their organizations, it added.

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Three Ways Banks can Support Innovation in Their Markets

Why did Willie Sutton, famous bank robber from the 1920′s to 1950′s, rob banks? “Because that’s where the money is.” Sutton, by the way, denied the quote. But we can’t deny it’s true. Financial institutions remain the place to go for money.

So why do FIs opt for the sideline in participating more fully in innovation? I recently wrote on these pages that FIs should develop Shark Tank like processes to get early stage equity capital into the hands of nearby entrepreneurs to fuel growth in local markets.

But bankers generally don’t like to be at the tip of the spear in product and service offerings. In many cases, it’s far too risky to undertake a strategic direction that has been untested. The potential for failure is greater. So we opt for making incremental improvements to business as usual. But in my opinion, business as usual is a riskier course. Better to innovate and go out swinging, than to remain mired in the past and go out with a whimper.

But there are some leading edge bankers to use as your guidepost. Take Silicon Valley Bank in Santa Clara, California. Here is a bank that nurtures start-ups from the garage to global distribution (see picture from their investor presentation). Through their Accelerator Solutions, they package products, expertise, and connections into one business unit to improve the likelihood of start-up success. The bank has maintained an ROA at or near 1% throughout the financial and economic doldrums.

SVB 3Q12 Investor Pres Niche Slide

I understand SVB’s location allows them to specialize in serving tech start-ups and venture capital firms. But innovation need not start in northern California. In fact, I would put to you that this region benefits tremendously by having nearby support systems that foster innovation. Your markets can too. And why can’t it start with your FI?

Here are three things I think your FI can do to foster greater innovation in your markets that can drive economic prosperity, and therefore your success, for generations:

1.  Develop specialized expertise within your FI to help entrepreneurs get their businesses off of the ground;

2.  Create flexible product packages to make banking simple for early stage companies;

3.  Find creative means to get capital in the hands of promising companies. This can be done through equity funding similar to what I proposed in my Shark Tank post, partnerships with various VC firms and institutions such as nearby insurance companies, factoring firms, etc., or outright balance sheet lending so long as you put a wall around the risk.

Should we continue to lament about our local economies or should we do something about it?

P.S. Subsequent to this post, Inc. Magazine published an article It Might Be Time to Break Up With Your Bank describing great alternatives to bank financing for small businesses. Why can’t we either do this lending or develop relationships with reputable lenders, as determined by our due diligence, and serve as brokers to this financing and advisers to our client?

*This blog was originally posted on Jeff for Banks

About Jeffrey Marsico: Mr. Marsico specializes in strategic planning, process improvement, performance measurement, and financial advisory. He has over nineteen years of financial industry experience, including: IT, Trust operations, retail branch management, strategic planning, financial institution M&A, consulting, and capital formation. He served seven years in the US Navy, earning three Navy Achievement Medals and other various commendations. He received a B.A. from the University of Hawaii and an MBA from Lebanon Valley College and serves on the faculties of the Pennsylvania and North Carolina Schools of Banking, and the ABA School of Bank Marketing Management.

Jeff can be found on his blog at: Jeff for Banks or the The Kafafian Group

 

What We’re Reading: Cloud Computing, Lending and Device Strategies

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.

 

  • Asked About Digital Wallets, Most Consumers Only Know of PayPal: Study

American Banker

The promise of digital wallets has fueled the conversations and hopes of financial technologists for years. But there are many obstacles to having those dreams realized, including the fact that few consumers know that digital wallets exist. Only 51% of U.S. consumers said they are aware of wallets other than PayPal, according to a comScore Inc. study published this week. comScore defines digital wallets as virtual copy of the contents of a consumer’s physical wallet to facilitate online or offline retail.

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  • Big Banks Boost Lending to Small Businesses: Survey

American Banker

Big banks are showing a growing appetite for loans to small businesses. Banks with at least $10 billion in assets approved 15.3% of loans between $25,000 and $3 million in January, up from 14.9% in December and from 11.7% a year earlier, according to an index published Thursday by Biz2Credit, which connects small and mid-size business borrowers with lenders.

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  • Cloud Computing Security Rules Put Responsibility on Users

American Banker

The PCI Security Standards Council has published guidelines for protecting sensitive data in the cloud. Although the advice was written to protect card information, the same principles could be applied to any data stored remotely. The report states that installing and maintaining a firewall to protect cardholder data would be a shared responsibility between client and provider under infrastructure-as-a-service and platform-as-a-service cloud configurations. But for software-as-a-service, in which the cloud provider hosts software delivered over the web, the firewall would be the sole responsibility of the provider, the PCI Council has decided.

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  • Understanding the Tablet Banking Customer

BAI Banking Strategies

Tablet usage is growing exponentially, with important implications for retail banking. According to eMarketer, the number of U.S. tablet users was expected to reach nearly 70 million by the end of 2012, up from 34 million in 2011. Adoption is now strong enough to provide an accurate assessment of this user segment and develop a strategy for engaging these consumers in financial services.

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  • Five Things Every Business Leader Should Know About Social Capital and the Influence Economy

Business 2 Community

Though social capital is an intangible, it reflects on how well you’re known, liked and trusted. Social capital can be most simply understood as the good reputation and influence of your business or personal brand. Like the concept of goodwill in business valuation, social capital is an intangible whose value is determined by others. “A brand is no longer what we tell the consumer it is – it is what consumers tell each other it is.” ~ Scott Cook, Intuit

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  • Why You Need To Have A ‘Device Strategy’

Credit Union Journal

A recent study by First Data showed that 61% of Americans use a smartphone and that 56% of smartphone users use their smartphone to bank. Plus, almost one-third say they expect a mobile phone app from their FI. Most respondents go online to bank (86%) and pay bills (81%) frequently. Yet, while web-based transaction services are now the benchmark, ATMs still play an important role in consumer transactions. Although consumers view ATMs traditionally-as devices that enable them to retrieve cash, deposit checks, and monitor account balances-there are new capabilities that enhance individualized communications to promote both cross-selling and customer loyalty.

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  • Now banks have to worry about Apple and Google

St. Louis Business Journal

Financial institutions aren’t keeping up with the customers’ needs and desires in mobile banking, according to a recent survey.  Varollii, a Seattle technology company, found that increasingly tech savvy customers want more than what many banks are giving them and that they’re finding it from providers such as Apple and Google, which are offering competitive consumer-friendly services, such as personal financial management and alerts, The Street reports.
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  • Mobile Banking and Change is Coming

SYS-CON Media

In the book Bank 3.0 by Brett King he writes about the monumental changes taking place in the banking industry due first to the Internet and now mobile.  Here is an excerpt, “The average individual is spending 94 minutes or so a day using apps, checking emails and texting up to 100 times per day.  We’re logging on to mobile banking 20-30 times per month and Internet banking around 7-10 times per month, but visiting a branch (of a bank) only a few times a year.”

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  • Big Banks Bet on Mobility and Super-Powered ATMs

WSJ: CIO Journal

As big banks finish the job of consolidating IT systems and knocking down organizational silos, they are counting on investments in mobile applications for both retail and commercial customers, and more sophisticated ATMs, to increase customer satisfaction, lower transaction costs, and help improve margins and revenue growth. According to PNC Financial Services Group, the average cost of a transaction using an online or mobile device is 56 cents, and 59 cents at an ATM, compared with $3.97 when a customer transacts with a bank teller.

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Platform Shift in the Making

What does the banking industry as a whole have to do with Amazon, Microsoft and Apple? Just about nothing—and down the road, it may turn into a major problem (if it isn’t already).

Consider the many stories emerging from the realm of technology that have to do with financial services. Just last week, Amazon unveiled Amazon Coins, billed as “a new currency for Kindle Fire.” To launch the program, the company will dole out coins to customers (each coin is worth a cent), giving them essentially free access to apps and other services available on Kindle. The company can afford the generosity; late last year, it raised $3 billion through its first bond offering in a long time. Giving customers some free money is a great way to raise goodwill and popularize a new program that represents a new channel for transactions. For their part, app developers get another source of monetization.

See which industry is missing from this process?

Actually, the new “currency” is just the latest salvo in the ongoing battle between Amazon, Google, Apple and Microsoft to seed new apps on their respective platforms: Android, iOS and whatever mobile iteration of Windows happens to be in vogue. It’s not really about new software; it’s about creating mobile and other technologies that become increasingly embedded in the daily lives of consumers and business professionals everywhere. More apps, more users, more transactions, more money—that’s how it works. And at the core of this financially intense ecosystem will be. . .the technology platform companies.

In other words, it won’t be the banks.

The way these conglomerates (and it’s appropriate in this context to see Amazon as a technology provider) are driving app development is itself noteworthy. Each company is using a different model for the platform war, raising comparisons to everything from currency manipulation in China to ‘quantitative easing.’

For the record, it looks as if Apple still has a major advantage, thanks in part to being first to market with a smartphone and tablet. But few leads in the technology industry last very long. Kindle still has significant mindshare through its e-reader fan base, Google has racked up major partnerships for Android, and counting out Microsoft is often a mistake. (The company, which has at least as much in assets as Amazon, has been subsidizing developers to the tune of up to $600,000 per app for the Windows Phone, and the just-released Microsoft Surface Pro will likely have even more support, along with the massive user base for Windows PCs.)

We may also see more platforms emerge and find an audience. Facebook, which has already stirred interest with Facebook Credits, could yet become a financial services platform of its own, enabling consumers to pay bills and transfer funds when they go online to post a comment about a movie.

It’s not quite fair to suggest that banks are already irrelevant, but they may be in danger of getting to that point. The financial services industry has long been seen as the enabler for all other forms of commerce, which automatically brought with it a significant level of power. Is that power corroding?

If the role of enabler moves from banking institutions to technology platforms and the companies that own them, and the center of gravity shifts from Wall Street to Silicon Valley—a status some already crave—will that be a good thing?

We’ve commented earlier in this space how the two industries are dramatically different in their operating philosophies. New technologies considered “disruptive” win praise, while new releases from financial services providers that play the same role create instability and roil the markets. There are always new technology companies climbing into the upper echelons of the industry, while the top tier in banking seldom changes except through consolidation.

It’s not as if banks can’t handle technology—they have huge IT departments to run daily operations and regularly release custom apps designed to draw new business and ease customer engagement. But it may be time to go further.

Could banks do what Amazon did and release their own hardware? Should they partner with Apple, Google or Microsoft to gain more control at the platform level? Is it feasible to compete with those companies on their own turf and develop a banking-centric platform?

We don’t have the answers to any of this yet, but we may need some soon.

 

Fast Facts: Child Identity Theft

The Financial Services Roundtable recently released another iteration of its 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 child identity theft as children may be an easy target for identity theft and often don’t discover it until years later when they apply for a job or attempt to take out a loan.

FACT: One in 40 households in the US with children under the age of ages 18 is affected by identity fraud.

FACT: 56% of child identity theft cases reported misuse of the child’s Social Security Number (SSN).

  • Thieves will often create a ‘synthetic identity’ using the child’s SSN and a different name, date of birth, and address, to obtain new bank or credit accounts for financial gain, or services such as utilities, phone, cellular, and Internet.
  • Children’s information is also used to commit non-financial identity theft, including obtaining fraudulent tax returns or government benefits, housing rental, employment, medical treatment, or evading criminal charges.

FACT: Lower income families are disproportionately affected by child identity fraud, with 50% of victims living in households with incomes under $35,000.

  • Of victims who were able to identify the perpetrators of these crimes, 36% found them to be family members, and an additional 35% were family friends.

FACT: Child identity fraud can be avoided. Check early and often.

  • Keep personal information like birth certificates and social security cards locked away and sensitive computer documents password protected. Use a cross-cut paper shredder before disposing of paper documents of this nature.
  • Teach children how to be safe online, particularly while visiting unsecured websites and using social media.

FACT: Federal law under the U.S. Fair Credit Reporting Act allows for the request of one free credit report per year.

  • If your child’s identity has been stolen, contact the three credit reporting agencies to place a fraud alert, and then file the theft claim with the Federal Trade Commission.
  • Because a child’s SSN is often used as part of a synthetic identity, ask each of the three major credit reporting agencies, Equifax (1-800-525-6285), Experian (1-888-397-3742) and TransUnion (childidtheft@transunion.com), for a manual search for your child’s credit report, based only on the child’s SSN.
  • Ask each agency for its mailing address, because you will need to provide a cover letter with proof that you are the child’s parent or legal guardian.
  • You may consider placing a credit freeze to prevent thieves from opening additional accounts under your child’s name.

For more information on how to combat child identity theft and learn preventative measures, visit the Identity Theft Assistance Center website.

 

Copyright © 2013 The Financial Services Roundtable, All rights reserved.

What We’re Reading: Privacy Rules, Mobile Wallets and Banking Acquisitions

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.

  • Four Ways the FTC’s New Privacy Rules Affect Mobile Banking Apps

American Banker

The Federal Trade Commission has been toughening its stance on consumer privacy protection, and this directly affects the mobile applications banks offer their customers. On Saturday the agency issued a report, Mobile Privacy Disclosures: Building Trust Through Transparency, that offers advice on keeping using consumers’ data private. It offers recommendations to four sets of stakeholders: operating system providers (like Apple and Google), app providers, advertising networks, and app developer trade associations. Banks that provide mobile banking, PFM, trading or wallet apps fit in the app provider category.

Read more

  • Bank Tech Vendor Shakeup Continues: FIS to Acquire mFoundry

Bank Systems & Technology

The consolidation trend in the bank technology solution provider space continues to accelerate, with news today that Jacksonville, Fla.-based FIS has signed a definitive agreement to acquire the remaining 78% interest in mobile banking and payment solutions provider mFoundry. Previous to this transaction, FIS held a 22% interest in mFoundry (Larkspur, Calif.), which was founded in 2004 and now serves more than 850 clients in financial services and retailing. According to a statement from FIS, the addition of mFoundry “enables FIS to leverage its technology assets across a broader client base.

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  • The Latest Trends That Will Redefine Online Banking

Business 2 Community

Online banking has had a tremendous effect on banks because people can now complete financial transactions by visiting secure websites that are maintained by brick-and-mortar or virtual banks, credit unions or brokerage houses. While this is convenient consumers are also concerned that their financial information may be accessed by hackers via the Internet, and banks are intent on providing security for their customers and keeping up with the latest technological trends at the same time.

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  • ‘Me Too’ Rules in Mobile Banking

Credit Union Times

Anthony Genovese, a vice president at payments company Compass Plus stated that central advice from Compass Plus to credit unions is to “focus on the importance of the mobile channel” and to take steps to make use of uniquely mobile features such as built-in GPS (the phone knows where it is), a camera, and in an increasing number of phones NFC, the near-field communications payments chip. Genovese added that “the stickiness of mobile user is questionable. Financial institutions aren’t offering many features that compel users to keep using the channel.”

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  • Apple Patent Reveals Peer-To-Peer Mobile Banking Idea, Using iTunes As Bank

Fast Company

Fast Company checks in with last year’s Most Innovative Companies to see how their big ideas fared in 2012–and how they’ll play out in 2013 and beyond. Apple has just revealed one of its more out-there ideas in a patent application titled Ad-Hoc Cash Dispensing Network. The proposed patent, in short, is a peer-to-peer lending concept that would use iTunes accounts as a connection to let people loan or borrow small amounts of money to each other. The patent, which was reported on by the Unwired View website, shows just how far outside the box the thinking goes over at Cupertino.

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  • Will You Be Ready When Mobile Wallets Turn Banking Upside Down?

The Financial Brand

Financial marketers had better wrap their heads around the impending mobile-dominant landscape, and fast. Mobile devices will soon be the central tool consumers use to manage banking relationships. When consumers start embracing mobile wallets and making digital transactions, banking will never be the same again. Around every 10 or 20 years, something big comes along that completely transforms the world of banking — ATMs, debit cards, the internet. Unquestionably, the next big thing to rock banking will be mobile wallets.

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  • The Forgotten Secrets Of The Enterprise Giants: Virality, Word Of Mouth, And Other Radical Experiments

TechCrunch

Today, Intuit is generally recognized as the only party to “own” the accounting channel, but they came at it via a totally radical approach that its competitors seem to have forgotten (which is probably why Intuit has had such firm footing for decades, despite legions of challengers). Don’t be afraid of failure. Be afraid of not trying. Salesforce, Concur and Intuit weren’t, and now we can’t imagine a world without them.

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  • Bank of America’s online banking crashes Angry customers vent frustrations on Twitter.

USA Today

Bank of America says its online banking website crashed Friday, leaving customers unable to access their accounts. Starting late Friday morning, customers trying to log on saw a message that the site was “temporarily unavailable.” The lender announced a few hours later that the problems had been resolved, but not before it endured a fire storm of complaints and criticism. Angry Bank of America customers took to Twitter to say that they were left frustrated, trying to do their banking on the first day of the month.

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  • Identity: The New Security Perimeter

Wired

Traditional security perimeters encircling corporate networks no longer meet the needs of today’s enterprise. As businesses move to cloud computing, employees are able to gain access to their work apps and corporate networks through almost any internet-connected device. The breadth of access, and choice of devices, breaks down traditional security boundaries and forces IT to seek a new security model that can deal with this anywhere reality. Security, therefore, must evolve from an on-site protection model and adapt to securely provide access to off-premises devices.

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The Mobile Revolution: Remote Deposit Capture

The tablet revolution. The post-PC era. The smartphone explosion. No matter what label resonates the most with you personally, the idea is the same: personal computing is changing. People are spending more time with smaller devices, such as tablets and smartphones, and less time on desktops and laptops.

Recent data from Forrester Research, Digital Insight and Bain & Company point to this mobile revolution:

  • Approximately 90 percent of adults own a mobile device, of which smartphones are rapidly approaching half of all mobile devices in the marketplace.
  • Approximately 96 percent of U.S. households have at least one wireless subscription.
  • Roughly over 1/3 of online bankers are actively using their mobile device to engage with their financial institution, and mobile bankers are accessing their financial information 59 percent more often than non-mobile online bankers.
  • Roughly three-quarters of branch interactions are routine (deposits, withdrawals and account balance inquiries), driving up costs and diverting resources from more important interactions.

The new online and mobile lifestyle requires digital banking as a new way of delivering a connected lifestyle.  Customers would like to bank anytime, anywhere and on any device. Giving your customers the ability to deposit checks anytime and anywhere using a mobile banking app is the next revolution in that connected state.

I recently had the opportunity to analyze the behavior of customers who utilized mobile remote deposit, which was offered by a financial institution who uses Digital Insight for their online and mobile banking platforms. The analysis solely focused on customers who had an open checking account and made at least one deposit into the financial institution in each month of the analyzed time period.

Although the financial institution was less than six months into the product lifecycle, the results were extremely encouraging:

  • Does mobile remote deposit cause customers to frequent the branch/ATM less for their deposit needs?

Digital Insight research indicates the answer is YES. Mobile remote deposit is changing consumer behavior and transferring more of those routine, costly “human” touch points to a less costly channel. Customers which ultimately used mobile remote deposit were using the branch for 29 percent of their deposits prior to using mobile remote deposit. Once the consumer starting using the service, their deposit behavior at the branch decreased to 19 percent – mobile remote deposit diverted 10 percent of all deposits away from the branch. Customers who never used mobile remote deposit did not experience a shift in their branch behavior. Usage of the ATM for deposits also declined for mobile remote deposit customers – 9.2 percent in the “before” period vs. 6.5 percent in the “after” period.

With the cost of gasoline over $3.50/gallon in most places, from the consumer perspective, think how much it costs (including time inefficiency) to drive to your local branch and make a deposit. Mobile remote deposit saves consumers money and is a more efficient alternative that savvy customers will demand.

What will this shift in behavior – from in-branch to mobile remote deposit – mean for the brick and mortar business model? In the short-term, it doesn’t appear financial institutions are in a hurry to reduce customer service headcount or slow the pace of new branch openings. The digital banking channel has created a more efficient operation; however, should not be viewed as an alternative channel. Rather, digital banking is moving towards more of an extension of the branch and with the reduction of “routine” transactions, in-branch representatives can invest more of their time cross-selling products rather than depositing a check.

  • Does mobile remote deposit cause customers to increase their deposit activity?

Study results from Digital Insight indicate the answer is YES. Customers who used mobile remote deposit increased their monthly number of deposits by two percent, while those customers who didn’t use the service actually experienced a decline in their number of monthly deposits by three percent. Did the customer using mobile remote deposit magically begin receiving more checks once they started using the service? Likely not, but rather, instead of depositing a check into another financial institution, (perhaps for a savings or retirement account) they now deposited these funds into the financial institution which offered mobile remote deposit, which means the financial institution has further positioned themselves as the customers’ preferred financial institution.

  • Does mobile remote deposit lead to higher consumer acquisition and/or lower consumer attrition?

To be determined. When I measured the results of mobile remote deposit, the financial institution was less than six months into the product offering with its customers The hypothesis is that mobile remote deposit will strengthen the consumer relationship and thus extend the consumer lifecycle. Additionally, now that the financial institution is offering this value-added service, the belief is that this product will attract new customers to the financial institution and win business from the competition. This could be especially true for the Gen Y and Gen X segments. The comment “attracting a younger demographic” is posed as a strategic initiative in my conversations with financial institutions. Over 75 percent of mobile bankers are Gen X and Gen Y, so these demographics will be the most likely to utilize mobile remote deposit.

The customers most likely to adopt the mobile remote deposit feature are cost‐effective bankers. They monitor their finances through the Web or their mobile phone at a higher propensity than all other customers, which lowers operational costs for the financial institution. In short, customers who desire mobile remote deposit utilize technology that is beneficial for the financial institution and the consumer.

About Jason Weinick: Jason is a Senior Analyst with Digital Insight and leads the initiative on client profitability analyses, providing banks and credit unions a valuable in-depth look into the value of the online channel. Jason’s background includes 15 years experience within the financial services sector, focusing on consumer behavior, risk modeling, reporting, and financial analysis. Jason holds a Bachelor of Science degree in Finance from Clemson University.

Sources: Forrester Research, May 2011; Digital Insight Profitability Study, April 2012; Bain & Company Customer Loyalty in Retail Banking Americas, 2011