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The Phab Factor

April 29, 2013 By Banking.com Staff 1 Comment

When it comes to technology, the banking industry spends a lot of time just trying to keep up. From the glut of function-specific applications arriving daily to new hardware like Google Glass, there’s always something new just around the corner, and every fresh entry has the potential to change everything.

But what if there was a new market already here that hasn’t been categorized as such? Would that offer some interesting possibilities?

Meet the phablet. Actually, you probably met it a while ago and carry it around all the time.

A bit of context here: The driving force behind Apple’s revolutionary iPad was to bridge the yawning chasm between the laptop and phone. The former—despite its designation as something we could carry around and perch on our knees—was entirely too big, while the later was just too small. (A few mini-notebooks attracted some attention but never really caught fire.) The tablet fit the bill perfectly and the touch-screen functionality, complete with keyboard, was the cherry on top.

But now, as avid consumers search for new modes of consumption, we want more (or less, depending on the device). That’s why we have the iPad mini, alongside smaller versions of non-Apple tablets. This is technically a new market, and users seem to grasp the concept—quite a few have bought one in addition to the regular-sized device they bought earlier. But what’s equally interesting, though perhaps less noticed, is that while tablets have gotten smaller, phones have gotten larger.

That brings us back to the phablet, which eliminates the apparent gap between phones and tablets. The category is loosely defined as devices with larger screens, but it’s not only about size. Some devices in this market feature software designed and/or customized for the phablet as a form factor. For example, the Samsung Galaxy Note touts a self-storing S Pen stylus for certain functions (which users with a memory might remember from earlier Palm devices).

It’s easy to make phun, sorry, fun, of the phablet. Even the word reeks of geekery run amok, a pointless portmanteau for an unnecessary category. (‘Superphone,’ a newer addition to the vocabulary, is even more groan-inducing.)  A recent piece on the subject in American Banker actually begins with the words, “They may look ridiculous, but. . .”

But that ‘but’ is important—despite the derision, this segment continues to spike at a staggering pace. The new report “Phablets and Superphones Market – Global Industry Analysis, Size, Share, Growth and Forecast, 2012 – 2018” predicts that the phablet (let’s just get used to saying it) market is growing at a compound annual growth rate (CAGR) of 44.1% from 2012 to 2018, reaching 825 million units and $116.4 billion.

This puts us in a strange place—here’s a market that’s already vast and will keep growing, yet there’s virtually no functionality customized specifically for it.

It’s easy to dismiss the notion of any real difference between smartphones and phablets, and this could be just another fad, of course. Still, there’s no question that a huge audience has emerged specifically for larger phones—a complete reversal of long-held beliefs that we like our phones to be as small and light as possible. And just to be practical, the phablet will fit into clothes in a way the tablet won’t.

So here’s how this will play out. The phablet will remain what it is, a phone with a larger screen that eases multimedia functions. Alternatively, it will become a specific hardware category, thanks in part to innovators who can thread the needle and develop apps and capabilities that dovetail perfectly with this form factor. Those individuals and the organizations that back them will reap the rewards. The rest of us will wonder why we didn’t think of that.

Mobile banking is literally in its infancy—it didn’t even exist just a few years ago. Today, facing frantic competition, every financial services institution is pouring resources into the field, with dazzling apps that can function on every kind of platform. Staying ahead of the curve for once might make for a healthy change.

Filed Under Industry News Tagged With Google Glass, phablets, smartphone, superphones, tablets

What We’re Reading: Google Glass, Payments and Branches

April 26, 2013 By Banking.com Staff Leave a Comment

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.

 

  • Google’s Glass Guidelines Provide Clues to Future Bank Apps

American Banker

Banks will be prohibited from advertising on Google Glass, the wearable computing product the tech giant has just started releasing to privileged developers and early adopters. In guidelines and best practices Google released this week, the search engine company told developers it will reject apps for the device — so-called “Glassware” — that it considers an irritation to users. “Google is very clear about apps limiting distraction, not [bothering] people all the time, so this isn’t something that banks can use as a platform to coax their customers 100 times a day,” says Sarah Rotman Epps, an analyst with Forrester Research. “But it is potentially a platform for them to deliver utility when it could be most useful.”

Read more

  • Phablet, Superphone Shipments Expected to Reach 825 Million Units in 2018

American Banker

They may look ridiculous, but phablets and superphones — mini tablets and extra-large phones — have a bright future, according to research released today by Transparency Market Research. According to a new market report, “Phablets and Superphones Market — Global Industry Analysis, Size, Share, Growth and Forecast, 2012 — 2018,” the global phablets and superphones market is expected to reach $116.4 billion by 2018, growing at a compound annual growth rate of 44.1% from 2012 to 2018. The number of units of the devices is expected to grow at a CAGR of 25.8% from 2012 to 2018, and reach 825 million by 2018.

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  • Critical Bank Management Skills for the 21st Century

Bank Systems & Technology

In the past, your teams needed to be able to demonstrate a detailed grasp of policy, rigor in analyzing reports, and dedication to data quality — but to tackle today’s challenges, a different form of expertise is required. The rapidly shifting economic and regulatory conditions of the 21st century, mean that market changes often outpace management skills. In the past, your teams needed to be able to demonstrate a detailed grasp of policy, rigor in analyzing reports, and dedication to data quality – but to tackle today’s challenges, a different form of expertise is required.

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  • How Apple and Amazon Will Shape Mobile Payments

Bank Systems & Technology

Apple and Amazon will continue to drive customer expectations and create big shifts in the retail world even if they don’t release a mobile payments solution. Many traditional payments players like banks have been worried for a while about the possibility of Apple entering the mobile payments space at the point of sale. Many speculated that the last iPhone release would include an NFC chip, which did not happen to the relief of those who would have to compete with Apple. Although Apple already has a bridgehead into the payments business thanks to iTunes, experts seem to think Apple will refrain from entering the mobile payments business.

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  • Small Banks Excel at Industry Specialization

Barlow Research Analyst’s Journal

Many business banking customers value financial institutions and banking relationships that cater to their specific industry’s needs. Unfortunately, not all business customers believe their bank is industry-focused. However, customers that believe their primary bank caters to their specific industry needs appear to be more confident about the financial condition of their company, as well as their industry and believe their banker is more knowledgeable about their business. Barlow Research’s Second Quarter 2013 Economic Pulse provides valuable information about business banking customers’ need for industry-focused financial institutions.

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  • The five layers of Online banking security

CIOL

It is becoming increasingly critical that financial institutions ensure their consumer and corporate banking customers are able to access their accounts with the highest reasonable security, using a process that is very straightforward and approachable. There have been significant changes in the threat landscape for online banking. In order to protect customers using Internet-based products and services, such as applications, the Federal Financial Institutions Examination Council (FIEC) and other regulators have instituted significantly more stringent requirements for financial institutions. Ensuring a compliant security program requires the execution of a good, multi-faceted authentication solution.

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  • Retailers likely to be winners in m-payments, with banks making it work, suggests leading banker

Internet Retailer

Mobile payments is currently a three way battle for consumers being fought out between retailers, banks and mobile network operators – each keen to ‘own the customer’ – but it will be retailers and banks that win, leading m-payment experts concluded at the International Payment Summit (IPS) in London last week. Mobile operators are likely to end up just as dumb pipes. Retailers, banks and operators are all looking towards mobile wallets as the key to mobile payments and this is likely how the technology will start to gain traction in mainstream retail and it is through this that mobile payments will start to be used. But who will brand the wallets and how do you make sure not every retailer, bank and brand that a consumer uses has its own wallet?

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  • What Bank Branch Closures Mean for Consumers

U.S. News

The traditional notion of banking, in which customers visit their local branch to deposit money, check their balance or take out a loan, may no longer be the reality. In the past year, American banks shuttered more than 2,000 branch locations—and news of additional closings appears on a regular basis. Banks cite rising operation costs and shifts in consumer-banking behaviors as primary causes for reducing the number of branches. For banks, these decisions are a matter of improving their bottom line, but for customers, these closings may force them to develop new habits. In one way or another, most people are likely to notice a change in how they interact with their bank.

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Filed Under Industry News Tagged With Amazon, Apple, bank branches, FFIEC, Google, Google Glass

Old-Time Finance, Newfangled Technology

April 24, 2013 By Banking.com Staff Leave a Comment

It’s almost an article of faith that when it comes to technology, the financial services sector is ahead of most other vertical markets. The industry resides at the critical intersection of money and information, and for that reason alone—let alone compliance, security, competitive pressure, etc.—staying at the edge is critical. And of course, by just glancing at the budgets many Wall Street titans work with, we can get a sense of the enormous commitment.

However, as a recent piece in InformationWeek makes clear, the reality is quite different. The IT budgets are somehow both colossal and constrained, hampered by everything from tight markets to increased regulatory pressures. As a result, while many of these corporations might excel at developing and releasing new market-facing applications and other tools, they’re functioning with 40-year-old legacy architectures.

In the past couple of decades, this highly sensitive arena has seen hundreds of mergers and acquisitions, and chief priority has been integration—finding or building common layers between vastly heterogeneous infrastructures. It’s surely expensive to maintain, but would be even more costly to replace.

That said, major changes are virtually unavoidable. The operating environment has undergone seismic shifts in just the past few years. Tech-savvy consumers have a plethora of tools—and competitive options—at their disposal, and re ready to take full advantage of them. For their part, institutions must be able to offer a seamless customer experience during transactions that are initiated with, say, a mobile app and completed inside a branch setting. This mandates a back-end infrastructure that can handled wildly divergent technologies. Those institutions that can’t handle it are destined to lose business.

And who they might lose business represents a very different, yet equally significant, aspect of industry transformation. For a very wide range of services, old-line banks are no longer the only game in town.

As many industry observers make clear, there’s a banking revolution taking place, and it’s got nothing to do with the Occupy folks. It’s from a new generation of technology entrepreneurs who see a market that’s primed for change, and they’ve for the technologies to do it. Aggressive startups such as Billfloat to GreenDot are not financial services institutions in the traditional sense—they’re really tech players whose core product happens to involve the handling of money. In the process, they’re perfectly positioned to service millions of individuals whose needs revolve around speed, flexibility, convenience and customization, all of which come from agile technologies and new-wave innovation, not lumbering titans with legacy infrastructures.

This surely plays to some simplistic stereotypes, and it’s unfair to paint every major financial service firm with the same broad brush. But the reality is that with the broad-scale development, implementation and adoption of greatly empowering financial tools and technologies, the divide between individual and institutional has become a chasm. There’s an entire generation of potential customers that doesn’t see or at least appreciate the credibility built up by longtime banks and other financial services providers. They want instant gratification of the kind that only tech-savvy institutions can offer, and pedigree matters much less than it did before.

The ever-present industry shakeout might yet reach a phase where larger banks rely almost entirely on B2B services built around consolidation and size, while younger and nimbler enterprises with a mix of technology and moxie compete for consumer business. Of course, that leaves many current institutions that don’t fit into either category out in the cold. It should be interesting to watch.

Filed Under Industry News Tagged With Billfloat, GreenDot, IT budgets, technology

Making the Grade: Are Americans Failing Financial Literacy? (Infographic)

April 23, 2013 By Banking.com Staff 1 Comment

April is almost over, which means there is one week left in Financial Literacy Month (FLM). Although there is extra attention on financial literacy in April, consumers should be aware of their financial heath year-round. A study by the National Foundation for Credit Counseling found that many Americans grade themselves with mediocre scores: a C, D, or F letter grade for financial literacy and money management skills.

The infographic below looks at where Americans could use some finance lessons.

Financial Literacy Month Infographic

Filed Under Data & Research Tagged With consumer finances, consumer spending, financial literacy, Financial Literacy Month, FLM, National Foundation for Credit Counseling

FI Spotlight: Pan American Bank

April 19, 2013 By Banking.com Staff 3 Comments

Pan American Bank

Banks and credit unions are making headway building their own social media presence and with the influence of the Federal Financial Institutions Examination Council (FFIEC) are beginning to determine how their activities fit into company policies. Financial institutions looking to go social have a bevy of resources to learn from, whether listening to webinars from experts, talking with lawyers familiar with the guidelines or hearing from other members of their community.

For our latest FI Spotlight, we touched base with Jesse Torres, President and CEO of Pan American Bank in Los Angeles, California. Jesse recently posted an instructional video for bankers and directors on social media. To learn more, Jesse provided further insight to Banking.com on his experience with social media at Pan American.

Jesse Torres - Pan American BankQ: You seem to have a great perspective and experience with social media? How did Pan American Bank build its social channels, and what was your general philosophy?

Pan American Bank began using social media in late 2009 in response to the backlash against banks. As a conservative community bank, Pan American Bank never participated in subprime lending and other questionable lending practices. However, due to the broad and sensational messaging delivered by the media, Pan American Bank and other community-focused banks were painted with the same brush as those that violated public trust through questionable lending practices. Social media provided Pan American Bank with the platform to tell its story – one person at a time.

Through social media, the bank has been able to demonstrate its commitment to the community and other stakeholders. Social media is a tremendous tool for “personalizing” the institution and creating a venue for honest and transparent two-way communication.

While Pan American Bank maintains a presence on Twitter, LinkedIn and YouTube, it has chosen to focus the majority of its social media resources on Facebook. Facebook was chosen due to its broad adoption (over 1 billion worldwide users) and its mix of tools (e.g., status updates, video, photos, the ability to create and host events). These factors allow Pan American Bank to maintain an ongoing relationship with stakeholders using information in a variety of formats.

Q: What’s your best piece of advice for a financial institution just beginning to establish their social media presence?

Institutions need to realize that social media is now a regulatory hot button. During the past five years social media has transformed from an emerging technology to a mature technology. Many institutions now believe that it is time to incorporate social media into their strategy – perhaps due to having greater familiarity with the technology or because of competitive pressure. As such, the social media space is becoming increasingly occupied by financial institutions.

Regulators have noticed the growing trend but, until recently, have been unable to focus on social.  As the industry recovers and as fewer banks risk failure, regulators are returning to business as usual. Any institution pursuing social media must become adequately familiar with the regulatory expectations – governance, policies and procedures, third party due diligence, training, content monitoring, audit, and board reporting. At a minimum, institutions should address social media through a risk assessment, policy and training.

Q: What’s one unexpected difficulty that banks can prepare for when developing their social media policies?

The main challenge in developing a social media policy is the governance structure. Contrary to what many may believe, social media risk is not a technology risk. It is a human resource risk. The dangers involved with social media do not involve malfunctions of technology or similar events. The dangers arise from employees being poorly trained and unintentionally creating risk for the institution. As such, the governing individual or body should have sufficient influence to require adequate employee training. This fact is many times lost as social media is often assigned to the IT department rather than to a department with broader human resource training capabilities. Ideally, due to social media’s broad impact of an organization (compliance, legal, sales, marketing, information technology, etc.), an appropriate governing structure should include a cross-departmental team.

Q: What do you see as the next trend for financial institutions on social media?

While adoption has increased over the past five years within the banking industry, the recent January 2013 FFIEC draft social media issuance and pending final regulations will slow adoption as the regulatory process works itself out. Once adoption resumes, financial institutions will increase their use of social media as a customer service channel. More progressive institutions, with greater risk appetites, will consider its use in completing financial transactions (think Chirpify). Others may utilize the platform for underwriting, using the social networks as an indicator of credit risk (good credit risks beget, or befriend, good credit risks). However, most institutions will limit its use to community building and brand differentiation due to their conservative nature and the rise of hacking incidents of both bank and social media platforms coupled with regulatory skepticism over the security afforded to bank customers through social media channels.

Want to hear more from Pan American Bank? Follow them on Facebook.

Think your FI deserves special recognition? Submit your FI here.

Filed Under Financial Institution Spotlights Tagged With banks, FFIEC, FI Spotlight, Pan American Bank, policies, social media

What We’re Reading: Malware, Fees and Tablets

April 18, 2013 By Banking.com Staff 4 Comments

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.

 

  • Prepaid Cards Still Have Lots of Fees: Survey

American Banker

A survey by Bankrate.com compares 24 prepaid cards based on the fees they charge consumers. For example, the 2012 survey found that 14 of 18 prepaid cards charged customers a balance inquiry fee on at least some automatic teller machines. This year, 18 of 24 cards charged such a fee on at least some ATMs. In last year’s survey six out of 18 prepaid cards charged fees for at least some declined transactions. This year, nine out of 24 cards did.

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  • FDIC on Social Media Risks

Bank Info Security

As the use of social media grows among banking institutions, federal banking regulators warn those institutions need to be mindful of phishing and spoofing schemes. Drafted guidance issued by the Federal Financial Institutions Examination Council now details how banks and credit unions can prepare to mitigate the new and emerging risks social media poses. The drafted guidance, issued in January, references applicable laws and regulations banking institutions should consider when planning and conducting their activities related to social media, says Elizabeth Khalil, of the Federal Deposit Insurance Corp., which is part of the FFIEC.

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  • Creating A Customized Banking Experience With Big Data

Bank Systems & Technology

Big data opens the door for banks to group their customers according to their banking preferences, which can make customers more satisfied and more profitable. Banks have been increasingly focused on customer experience in recent years, but they’ve been taking an approach that is too broad, says Dean Nicolackis, a partner at PwC’s banking and capital markets practice. While many banks are trying to configure a customer experience that is consistent for every customer across every channel, the key to a really great customer experience is providing a different personalized experience that fits different customer segments, Nicolackis contends. Different customers just want different things – and are willing to pay for different things – from their bank.

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  • Are Tablets Their Own Channel And Does It Matter?

Business 2 Community

The latest research from Javelin Strategy and Research indicates that the tablet users are older; between the ages of 35 to 54, have an average household income of $75,000, and half of them consider themselves to be early adopters. When compared with mobile banking, statistics show that users spend more time on tablets. The question though is not whether it should be considered a separate channel. However, whether separate or not, the bottom line, from a customer experience point of view, the service has to be consistent, and that is the key – it has to be fully integrated into all the other channels and the interchange between the channels has to be seamless.

Read more

  • SaveUp Program, Other Tools Target Millenials

Credit Union Journal

Frankenmuth Credit Union CEO Vickie Schmitzer is continually focused on implementing industry innovations to attract members of all ages, but especially Millenials. That focus stems from the credit union’s work in the field. “We work as much as we possibly can with our local public and parochial schools at every grade level,” said Schmitzer. “We know they are our credit union’s future and that new technology is what attracts them to a financial institution or business of any kind, for that matter,” said Schmitzer.

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  • First Tech Also First CU to Launch Windows App

Credit Union Journal

First Tech FCU, the credit union for Microsoft Corp., said it has introduced a new Windows Phone mobile banking application, the first credit union in the U.S. to introduce a native Windows Phone mobile banking app complete with integrated mobile deposit and bill pay functionality. First Tech launched its new Windows phone app on-site at the main Microsoft campus in Redmond, Wash., giving employees of Microsoft an in-depth look at this new platform. Microsoft employees and First Tech members will be able to view the app on a giant Microtile phone display, chat with First Tech App experts and personalize their Windows Phone at a laser engraving station.

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  • Malware Attacks Growing, Getting Smarter, Targeting Android: Report

eWEEK

In 2012, 95 percent of malware threats targeted Android, says a new report. Malware attacks are increasing, getting smarter and targeting Google’s Android mobile operating system, according to a new report from NQ Mobile, a mobile security solutions provider that based the report on the findings of its Security Lab. Mobile malware threats increased by 163 percent in 2012, and 95 percent of all threats were targeted at Android, said the report. The firm estimates that 32.8 million Android devices were infected in 2012, an increase of 200 percent from the 10.8 million infected in 2011.

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  • Banks Are Designing Branches to Look Like Apple Stores In a Struggle to Remain Relevant

Go Banking Rates

There are a few regional banks, like Umpaqua, that fully embraced “smart banking” years ago. For major, national banks, it was Citi that sparked the trend. In 2008, beginning with its Singapore location, the bank began constructing futuristic branch prototypes that swapped tellers for touchscreens, size with efficiency, and gave locations the overall look and feel of Apple stores.. Rather than reinventing the wheel when it came to modern design, Citi actually hired the services of Eight, Inc., the architectural and strategic design firm behind Apple, according to The Financial Brand.

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Filed Under Industry News Tagged With app, data, malware, mobile, security, social media, tablet, what we're reading

Fast Facts: Cybersecurity

April 17, 2013 By Banking.com Staff Leave a Comment

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. 

The financial services sector and private industry are increasingly targeted by complex cyber-attacks. Attacks can have potentially disastrous effects including theft of confidential data, damage to critical infrastructure, and denial of access to customers, shareholders, or investors.

FACT: The White House has recognized the importance and need for increased cyber defense and information sharing through both a policy directive and executive order signed February 12, 2013.

FACT: The financial industry has successfully withstood three waves of distributed denial of service (DDoS) attacks beginning in September 2012.

  • DDoS attacks involve a flood of electronic traffic from locations around the world to a website intended to slow down or disable an institutions site.
  • While DDoS attacks are not designed to steal confidential data or expose sensitive personal information, they inconvenience consumers and businesses attempting to access online services and could be leveraged as a distraction for more harmful attacks.

FACT: Information sharing remains one of the best defenses against cyber-attacks.

FACT: Establishing a system where the private and public sectors share and use timely threat intelligence will help America create a more capable and expansive cyber-defense network.

  • Protecting the privacy and security of customers is an industry priority. Information shared is limited to data needed to protect from and respond to cybersecurity attacks.

You can view all previous Fast Facts at www.RoundtableResearch.org.

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

 

Filed Under Data & Research Tagged With attacks, cybersecurity, data, Financial Services Roundtable, hacks, security, statistics

Eye on Slovenia

April 16, 2013 By Banking.com Staff Leave a Comment

If you’re in the banking industry, you should keep an eye on Slovenia.

On the face of it, that’s an odd thought—Slovenia is a tiny Central European nation-state with a significantly smaller population than Brooklyn. However, despite the diminutive size and relative obscurity, it perfectly encapsulates the complex issues that dominate the current global economic environment.

A new report from the Organisation for Economic Co-operation and Development (OECD) that builds on an economic survey of the nation’s banking landscape is causing consternation in banking circles worldwide, and it should. The report states that Slovenia is on the brink of a serious banking crisis that could have catastrophic consequences. Here’s a taste: The nation’s public debt is almost half its GDP, just about double what it was barely four years ago. Unless there are drastic changes, the OECD warns, the debt will actually match the GDP by 2025.

What’s particularly scary about the situation is that in this inter-connected economy, if one player gets a cold, then everyone else sneezes. Slovenia is by no means alone in facing a fiscal crunch—for example, Cyprus is dealing with a very messy bailout, with financial contortions that include selling off $525 million worth of gold reserves. In other words, this is possibly a domino effect, and no one is quite sure where the last one stands.

There are historical factors that deserve consideration too. Unlike other former Communist bloc states that joined the European Union, Slovenia stayed mostly public, meaning that its banking sector didn’t go into private ownership. Today, 20/20 hindsight suggests that everything from managerial incompetence to outright political fraud may have contributed to the current blight.

Whatever the reasons, we may be seeing the perfect storm of economic problems: the woes of a long-discredited communist structure combined with the perils of being on the losing end of a competitive, free-market environment.

So if that’s the diagnosis, what’s the cure?

Slovenian Prime Minister Alenka Bratusek maintains that while the situation is critical, and fixing the banking industry is her government’s top priority, the country does not need a bailout. Her view is backed by European Commission president José Manuel Barroso, who dismisses any similarity to Cyprus. So maybe there isn’t a line of dominoes falling.

Still, there’s no question that just averting another bailout in a small nation isn’t exactly a high standard of success. What comes next?

Freshly appointed U.S. Treasury Secretary Jack Lew is currently trekking through Europe discussing these challenges with, among others, Barroso and European Council President Herman Van Rompuy. “Our economy’s strength remains sensitive to events beyond our shores,” he said in what might be described as an understatement.

Lew is aggressively pushing for the creation of a euro zone banking union. This body, which has been in the works for a while, will entail handing over supervision to the European Central Bank, as well as the passage of new bank resolution laws. Reports indicate that the single bank supervision will be implemented sometime in 2014, with a single bank resolution mechanism sometime shortly thereafter. The primary goal would be to allow the 17-nation bloc to handle emerging crises, such as Cyprus, with greater urgency.

In a sense, it’s an ironic twist. The justification behind the creation of the European Union was to draw from strength in numbers and greater flexibility. EU advocates consistently maintained larger members would pull up smaller states, not be dragged down by them. It was also never supposed to lead to constant consolidation.

Besides, the creation of a banking union to deal with emerging crises assumes that crises will continue to emerge—a sobering thought by any measure. But for now, let’s keep our eye on Slovenia and hope it gets through the storm, and that all other dominoes continue to stand upright.

Filed Under Industry News Tagged With European Union, international banking, U.S. Treasury

The Best of Times for Worst-Case Scenarios

April 12, 2013 By Banking.com Staff 2 Comments

Can a worst-case scenario keep getting worse? When it comes to the Senate Banking Committee, which has considerable power in regulating the industry, this is how many in the business see it.

The current problem goes back to the creation of the U.S. Consumer Financial Protection Bureau (CFPB), which was founded after the passing of the Dodd–Frank Wall Street Reform and Consumer Protection Act, which in turn was prompted by the financial crisis at the end of the last decade. The very idea of a single governmental body with jurisdiction over banks, credit unions, securities firms, mortgage-servicing operations and debt collectors was bad enough, but what really elevated the issue to worst-case status was the driving force behind the agency: academic and policy advocate Elizabeth Warren.

The issue became so contentious that it led to furious lobbying on both sides of the aisle and even an all-star reunion of ‘Saturday Night Live’ alumni reprising their impressions of U.S. Presidents (with a cameo from Jim Carrey) to prod the current occupant of the White House into backing the bureau. It worked, kind of: the CFPB did come to life but without Ms. Warren.

Worst case averted? Not quite. The ousted champion publicly mulled a run for the Senate herself, causing major heartburn among her critics—a presence in the Senate could give her more power than she would have had as director of the CFPB. When she tossed her hat in the ring, many banking heavyweights threw their support behind her opponent, incumbent Senator Scott Brown. It didn’t work—she won by a big margin, and the industry began to fear the worst.

Actually, as discussed on this blog, the only thing worse than her being in the Senate was her landing a seat on the U.S. Senate Banking Committee, a plum assignment not often given to freshmen senators. Again, that’s exactly what happened. To the surprise of absolutely no one, she has since led the charge against lax enforcement of banking regulations.

So it can’t get any worse, can it? Think again.

Senate Banking Committee Chairman Tim Johnson (D-S.D.) recently announced his retirement. No, Sen. Warren does not have the seniority to get the job, but guess who might: Sen. Sherrod Brown (D-Ohio). This has given inside-the-Beltway types a lot to worry about. If it really does happen, banking lobbyists might have some busy days ahead.

For the record, this is far from a done deal.  First of all, nothing is going to change until after the next election, which is not till November 2014, nearly two years from now.  If there’s a change in direction and Republicans take over the Senate, as sometimes happens in off-year elections, then all this will be moot anyway.

Moreover, even if the Democrats retain control, Sen. Brown is actually fourth in line for the chairmanship. But as has been noted, the current ranking member, Sen. Jack Reed (D-R.I.),  might have his eye on the top spot at the Senate Armed Services Committee, another position that will be vacant next fall. The next in line, Sen. Charles Schumer (D-N.Y.), gets much of his campaign support from Wall Street, and the one after him, Sen. Bob Menendez (D-N.J.), has many financial services professionals in his constituency. In other words, it’s not impossible.

So are we at worst-case levels?

There’s no question that  Sen. Brown has been a harsh critic of what he perceives as industry excesses—he has publicly railed against the ‘too big to fail’ trend, which he sees partly as the result of thirty-seven banks merging thirty-three times. In particular, as he points out, “In 1995, the six biggest US banks had assets equal to 18% of GDP. Today, they are about 63% of GDP.” It also probably doesn’t help that he won big in the most recent elections after many in the industry supported his opponent.

But perhaps that’s the problem.

The reality is that there isn’t a constant, inexorable march toward greater regulation and harsher penalties—governmental pressures ebb and flow with the times, and even  administrations thought to be unfriendly have led to boom times for banks nationwide (anyone remember the ’90s?). Going all-in against specific candidates and office-holders, even if it helps avert short-term problems, hurts the industry in the long term.

Rather than bracing against an endless series of worst-case scenarios, working furiously against critics and throwing money at losing campaigns, it might be more beneficial to step back, take a breath and reach across the aisle. We have a sharply divided government because the nation itself is sharply divided, and in some ways this is exactly how it’s supposed to work.

Constantly picking sides (especially the losing side) doesn’t help anyone.  Regardless of who runs the CFPB, the Senate, or the Banking Committee, it’s categorically not a worst-case scenario. We need to work with whoever is there, and if that means we have to alter some basic operating practices, then that’s what we’ll do. We’ve done it before, many times, and will again.

In fact, embracing change rather than fighting it might just make us stronger. And wouldn’t that be for the best?

Filed Under Industry News Tagged With Banking COmmittee, CFPB, Consumer Financial Protection Bureau, Dodd-Frank, GDP, Senate, Senator Elizabeth Warren

What We’re Reading: Digital Wallet, Social Media and Data

April 11, 2013 By Banking.com Staff Leave a Comment

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.

  • Digital Wallet Race Is Far From Over

American Banker

Payments players with digital wallet aspirations — including Visa, MasterCard, Google, PayPal, Apple and Isis — are all vying for customers’ virtual pocket books in a race to truly electronic transactions. Yet none have had much luck, so far. There have been delays in launches (e.g. Isis’s delays on launching in its two pilot cities); changes in the way at least one major, digital wallet innovator processes its transactions (think: Google Wallet); and, most importantly, a lack of features appealing enough to spur widespread adoption. “Mobile wallets have been around for a while, and even for us, in the industry, we are only just starting to adopt these technologies,” says Philip Philliou, a payments consultant. “I don’t think anyone is far ahead in terms of disruption. We are still early on.”

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  • 3 Things Banks Must Do to Survive the Mobile Payments Jungle

American Banker

The mobile wallet market appears to be wide open to new entrants, with banks having a slight edge. While more than 20 percent of U.S. online consumers prefer to use their checking account for digital wallet services, 17 percent prefer PayPal, according to Gartner. That gap could quickly close in the next few years. To survive in the mobile payments landscape, banks need to do three things: Integrate mobile into existing offerings. Rebuild loyalty. Banks need to leverage emerging customer analytics techniques, coupled with geo-location services through mobile devices in order to make relevant offers at the right time. Redefine success. It’s no longer sufficient for banks to measure success by counting the number of mobile payments and online users.

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  • All Those New Channels Affecting Accuracy of Data

Credit Union Journal

Credit unions face many challenges as channels diversify and members demand digital options. According to a recent Experian QAS survey, financial institutions are operating through an average of four different channels, the most popular being the organization’s website. While these new channels are exciting endeavors, many credit unions are experiencing problems with collecting accurate contact data. According to that same data, 91% of financial institutions suspect their customer/member and prospect data might be inaccurate in some way. On average, respondents think that as much as 18% of their data might be inaccurate. Even worse, another 27% of respondents are unsure how much of their data is inaccurate.

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  • Introducing The Social Media Power 100 Rankings For Banks And Credit Unions

The Financial Brand

The Power 100 is an interactive list of retail banks and credit unions who have achieved the most social media traction. Components of the Power 100 score include Facebook ‘Likes,’ Facebook engagement rate, Twitter followers, tweets sent, YouTube views and YouTube subscribers. The top 15 institutions in the banking and credit union category are as follows: Chase, Capital One, ICICI Bank, E*TRADE Bank, Bank of American, Axis Bank, GT Bank, Wells Fargo, Citi, Commonwealth, FNB, Navy FCU, Bank of Nova Scotia, NAB and TD Canada.

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  • DDoS: The Worst Case Scenario

Javelin Strategy & Research Blog

Since September of last year, Izz ad-Din al-Qassam has engaged in cyberwarfare against U.S. financial institutions, and it is a war with which they have had a great deal of apparent success if we believe that their goal was to inconvenience U.S. bank customers by rendering online banking portals inaccessible for a number of hours at a time. More than information sharing on best practices is needed – financial institutions should pool resources to ensure the availability of excess network capacity, and network operators must be involved in the effort to identify infected servers and to subsequently stop the malicious traffic its source.  And while intelligence support is a good start, the Federal government must identify those responsible and cripple their ability to continue this campaign.

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  • Facebook tries to get more in your face

Los Angeles Times

It’s hard not to detect a whiff of desperation in Facebook’s new please-don’t-go interface, which is determined to keep people within the social network as long as it can. Facebook Home is intended to dominate Android smartphones, making Facebook your first and last port of call as you traverse the wireless wonderland. It will keep Facebook features front and center, rather than require users to use an app.

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  • Credit Union Takes an Early Lead with E-Signatures

SYS CON Media Blog

Aaron Pugh recently published a story on credit unions using e-signatures on CreditUnions.com. He writes that only eight and a half percent of credit unions larger than $20 million in assets currently offer e-signatures to their customers even though the market for e-signatures as a whole has shot up 48 percent from 2011 to 2012 according to Gartner Research. Among the early adopters in the industry is the Teachers Credit Union in Ontario, Canada. The member-owned financial organization serves employees of education and their families throughout the province. The 15,000 members conduct business through multiple branch locations, ATMs, online and via mobile banking.

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Filed Under Industry News Tagged With data, mobile payments, mobile wallet, rankings, social media, what we're reading
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