What We’re Reading: Mobile Banking Scorecard, Social Media, Big Data

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.

  • Fifth Third CEO: Social Media Keeping Banks Honest

American Banker

The Consumer Financial Protection Bureau was created to ensure that banks treat customers fairly, but Facebook and Twitter are even more effective at keeping banks honest, argues Fifth Third Bancorp (FITB) Chief Executive Kevin Kabat. In a speech that largely focused on the regulatory response to the crisis, Kabat said social media is now taking a central role in helping banks assess their standing among customers and shareholders. Banks don’t really need new guidelines and mandates from regulators, he said, since every action — from the introduction of a new product to new disclosures on checking accounts — can be censured in real time.

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  • Study: Banking’s branch of tomorrow

ATM Marketplace

In new research, “Arriving Now — Banking’s Branch of Tomorrow,” Mercator Advisory Group reviews continuing evolution of branches today in banks and other financial institutions, according to a news release about the study. “With recent advancements occurring in the self-service banking channels — including ATM, online, and mobile banking — coupled with an expansion of teller duties in both full- and assisted-service roles, branches continue to evolve at many financial institutions, with branch reconfiguration at the center of many FIs’ branch strateg[ies],” said Ed O’Brien, director of the banking channels advisory service at Mercator, and author of the report.

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  • Chase Tops Keynote Mobile Banking Scorecard

Bank Systems & Technology

Banks are moving towards offering more robust, transactional mobile services and capabilities, the scorecard finds. Chase achieved the top overall score in the 2013 Mobile Banking Scorecard from Keynote Competitive Research, the industry analysis group of San Mateo, Calif.-based Keynote Systems. The scorecard compared the mobile banking offerings of the top 15 U.S. banks and ranked the banks across four mobile categories: text, mobile Web, iPhone app and Android app. The banks were ranked in four categories, functionality, ease of use, quality & availability and privacy & security.

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  • Sibos #2 – Your Weather Forecast for 2014

Celent Banking Blog

The headline is that Sibos is back. Swift would argue that it never went away, but after the rather damp squid that was Osaka, the difference was clearly different, with the halls full and buzzing. Swift clam 7,648 delegates, which breaks out to roughly 44% Europe, 29% Middle East & Africa, 16% Asia Pacific and limping in last, 11% Americas.  Considering the size of the delegations from the large US banks, the latter number shows that Swift needs to continue to make sure the conference returns to the US regularly.

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  • How CUs Can Use Big Data To Drive Big Revenue

Credit Union Journal

The ever-growing file of aggregated, disparate information known as “big data” is leaving many credit unions with more questions than answers. A new report, however, shines some light on how CUs can use predicative analysis to increase revenues. “Big data is something we have recently begun to focus on but we are new to it,” said Robert Keats, vice president of information technology for Grow Financial FCU. “I believe there probably have been some missed opportunities in the past, but if we had all the data in front of us, and understood it, better decisions could be made.”

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  • Behind eBay’s $800M buy: Braintree will replace PayPal’s developer platform

GigaOm

eBay’s $800 million purchase of Braintree is primarily motivated by one big factor: PayPal’s need for a nimble and flexible commerce platforms that met the demands of the new generation of startups and mobile app developers. That’s according to John Lunn, PayPal’s global director of developer networks, who spoke with GigaOM Thursday morning.

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  • Chase leads US mobile banking segment

Telecompaper

According to new mobile banking data from Keynote, Chase achieved its fourth consecutive win for Overall Score. Following Chase was Wells Fargo and Bank of America, with US Bank moving into the top tier, tying with Bank of America for third place.

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Smartphone, Meet the ATM

For all the focus on banking technologies, there’s one tool that gets virtually no attention, even though it’s indispensable. In fact, most of us still turn to it more often than we do to the branch, the website, or mobile apps. Can you even think what it is?

The ATM.

ATM

Yes, the automated teller machine, the banking-without-a-bank resource that’s been around since the ’60s. It’s allowed consumers of every stripe to perform routine functions (withdrawals, deposits, transfers) inside grocery stores, malls, casinos and a host of other locations. In some ways, even as it took some of the personalization out, it represented the first true advance in innovation and convenience.

Ironically, innovation is not a term we associate with it now. In some ways, the ATM seems a little like the TV set. The screen has gotten sharper, there’s more functionality and greater security, but it’s basically a big, reliable block of hardware that we use the same way we always have, even while the environment around it has undergone a radical transformation. To the naked eye, at least, it hasn’t evolved much in decades.

Of course, that’s not true, and it’s about to become even less so. According to a new report released this week by the ATM Industry Association (ATMIA), the global trade group with 1,300 members in 50 countries, it could be the next market to watch for real innovation. There’s one area in particular that should be really interesting: mobile.

The international survey released this week by the ATMIA forecasts that mobile or ‘contactless’ access will be the fastest-growing, value-added ATM service in the next five years. For now, this represents transactions initiated by a smartphone instead of the traditional debit or credit card; in future, it could likely go off in other directions as well.

For now, as with most technology innovations that arrive unexpectedly and gain mainstream adoption overnight, we can’t imagine what those directions might be. But looking at even recent advances in ATM banking makes it clear that there’s plenty of innovation in this field.

For example, Piraeus Bank in Greece is taking the charms of social media interaction to heart—once you’ve signed on, its ATMs offer personal greetings, remind you of upcoming milestones such as birthdays and anniversaries and ease the process of buying gifts. ANZ Banking Group of Australia and New Zealand, meanwhile, is taking the environmentally friendly route, with ATMs in containers using solar power. Canada’s Scotiabank sees its ATM properties more as a communications tool than a cash dispenser—and by no coincidence at all, a key component of its overall mobile strategy. (For the record, these were just some of the highlights at the ATMIA 2013 conference earlier this month.)

There are interesting developments on the technology side too. For example, with new services now available, banks are partnering with state lottery boards to dispense lottery tickets, and ‘contactless’ ATM banking via NFC (near-field communications) is already on the market, and gaining popularity in some regions.

All of which brings us back to mobile. There’s a certain inevitability to this—we use smartphones and we use ATMs, which means that at some point vendors will successfully unite the two in ways that consumers find convenient. More than half the industry professionals polled in the ATMIA survey said that mobile-initiated ATM services will enjoy the fastest growth in the next five years. (In case you’re wondering, there’s already been a patent protection application filed for “contactless automated teller machine.”)

So beyond the obvious, how will this work? What can we do with an ATM-smartphone combo that we can’t do as well with either one? Innovators, you have the floor.

Image courtesy of scottchan / FreeDigitalPhotos.net

 

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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Imagining a Cashless Future

*This post originally appeared on the Andera Blog

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

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

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

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

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

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

1) Technology will make things a little easier.

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

2) Banks will consolidate – or evolve.

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

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

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

3) The popular notion of money will change

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

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

 

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

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

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

Bank Robbing 2.0

Financial institutions have plenty to worry about these days: robbers, hackers, fraudsters, scammers, viruses, malware, trojans —and the list goes on. One little talked about threat to FIs and their customers is ATM fraud in the form of skimming.

Skimming is the act of hijacking account information through the use of a card reader, usually installed on an ATM and fabricated to look like a part of the machine. Thieves have even utilized the readers used to unlock after-hours ATM kiosks. Often, a camera accompanies the card reader attached directly on ATMs and records customers entering their PIN.

Fraudsters can then withdraw money directly from the compromised account or sell the information to other criminals. Guns, drugs and other illicit materials can then be purchased with the stolen funds and card information, or criminals can perpetrate identity theft.

A recent post on the Krebs on Security blog, a banking and finance security blog, shows the latest in skimmer technology recovered from a compromised ATM. The unit is an all-in-one card reader with a built-in pinhole camera, seamlessly attached to an ATM — pretty sophisticated stuff.

One expert estimates more than $350,000 stolen from ATMs worldwide every day via skimming. With ATMs seemingly everywhere one could go – grocery stores, movie theaters, malls, gas stations – there is no shortage for opportunity. This reveals another part of the problem: unless you are a bank security expert, chances are remote that anyone from your FI has mentioned skimming or how to minimize the risk.

Here are some simple steps both FIs and their customers can use to lower the chance they will be victimized:

  1. Before inserting your card, always scrutinize the ATM for parts that look out of place, been added on or just plain don’t belong. Check for mismatched and uneven seams or other irregularities.
  2. Use your hand as a shield while you enter your PIN. This is perhaps the easiest preventative measure one can take. It will also prevent shoulder snoopers from spying on you.
  3. Educate yourself about skimming (and other forms of fraud). FIs can do a better job teaching their customers about skimming to help customers and members minimize the risk of being victimized. Hang a poster next to the ATMs or print warnings right on the machines, so it is fresh on the ATM user’s mind.
  4. Remind customers to check their account activity often, and report any unfamiliar transactions to the FI.

As FIs continue to utilize ATMs for both convenience and cost-savings, the frequency of skimming attacks will only increase in both volume and sophistication. Should these attacks be thwarted, FIs, customers and law enforcement must stay vigilant and ahead of the criminals and their ever-advancing technology.

Does your FI already have preventative measures in place against skimmers? Let us know in the comments section below or Tweet @bankingdotcom.

Editor’s Note: David Sutton has a BA in economics and a MS in business journalism, and his articles have appeared on Forbes.com and in the Boston Business Journal. David has had a bank account since he was three.

Versatility in the (Mobile) Bank

No one can dispute the upward trend in mobile banking, not just in North America and Europe, but also in Africa — where adoption rates have soared. The success stories are remarkable. Mobile banking’s best feature has proved to be its versatility. It has managed to succeed in a wide-range of places all with differing needs.

In Africa, where branches and ATMs aren’t readily accessible, mobile banking enables people to easily manage their finances. It can take days for customers to reach the nearest branch, time that would usually be spent working. To remedy this loss of productivity, employers formed partnerships with financial institutions (FIs) to help facilitate financial transactions with mobile phones. Now workers only need to visit a nearby mobile money agent, usually an existing store or shop, to receive their paycheck.

FIs win as well, as their customer base is expanded without costly infrastructure investments such as brick-and-mortar locations or additional ATMs. FIs don’t have to spend money training new agents either since agents are reputable, local business owners, who are used to handling money.

In North America and Europe, where branches and ATMs are more abundant, mobile banking serves other needs. Checking one’s balance, online bill-pay and account transfers are more commonly utilized. Mobile check deposit is becoming more popular since it saves a trip to a branch or ATM, and lowers the cost of check processing for the FI. Even if visiting a branch doesn’t mean a multi-day trek, who wants to spend their free time visiting a bank, especially when the same transactions can be accomplished with a mobile phone.

Security remains a concern anywhere in the world when dealing with money. FIs have taken this to task by providing a wide array of security measures such as PIN numbers, SMS authentication codes and individualized security questions – all designed to thwart criminals without sacrificing customer convenience. Even if the unthinkable happens and a handset is stolen or lost, the multi-layered security measures in place at most FIs should provide protection.

The world will never be without hackers, malware and thieves waiting to prey on ambivalent consumers. As long as customers and FIs remain diligent, “stuffing the mattress” will remain a much riskier option than banking, anywhere in the world. Mobile banking provides access for many to FIs, who otherwise would be unbanked. As smart phone and tablet adoption sky-rockets globally, so too will the usage of mobile banking. That is a fact you can bank on.

Hefty ATM Fees Add to Consumers’ Dissatisfaction

Bank Transfer Day may have passed, but consumers are still feeling the sting from a variety of bank fees. Most consumers are accustomed to paying ATM fees when withdrawing money at a bank other than their own, but in recent years withdrawal fees have gone up leaving consumers with hefty ATM fees.

Ally Bank recently conducted a survey to see if consumers are aware of how much they pay in ATM fees yearly, and only nine percent of respondents chose the correct answer. To benchmark these numbers, Ally Bank cited research from consulting firm Oliver Wyman. The firm found that Americans spent $7.1 billion in ATM fees in 2010. Ally Bank survey respondents chose answers ranging from $100 million to $2 billion.

Survey respondents were also asked to identify what type of banking fees they feel are acceptable. Here are the top line results:

  • 84 percent of respondents do not believe it is acceptable to charge a fee for checking accounts
  • 79 percent do not believe it is fair to charge a monthly maintenance fee
  • 77 percent do not think it is appropriate to charge an ATM fee

Does your financial institution charge ATM fees, and if so, how do you communicate with customers or members about the fees? Let us know in the comments section below, or Tweet @bankingdotcom.

 

IDC Poll: Financial Services Biggest Technology Breakthrough

IDC analyst Marc DeCastro recently asked readers, “Historically, what technological advancement in financial services do you feel is the industry’s biggest breakthrough?” The result: online banking and bill payment.
Here is the survey breakdown:
• 32 percent, Online Banking and Bill Payment
• 20 percent, ATM
• 20 percent, Debit Card
• 16 percent, Credit Card
• 10 percent, Mobile Banking

DeCastro’s poll also found that the older demographic was, the more they felt ATM’s were the biggest breakthrough, but the 25 – 34 age bracket chose mobile banking. This demographic breakdown demonstrates the ever-increasing challenge that financial institutions face to reach a broad range of customer preferences. Catering to customers’ needs is crucial during this era of rapidly-changing technology. To view the full survey results visit IDC.
What is your institution doing to reach different customer demographics? Leave us a comment below.