From New Apps to Newer Portals

When it comes to mobile banking, it’s hard to pinpoint something new because there’s always something new. Every week, financial services and technology companies alike put new apps into the marketplace. Many seek to replace or otherwise improve on what’s in place now, while others try to come up with entirely new functionality.

Still, it’s important to monitor key milestones and emerging trends, and that’s just one reason why the news this week about Numbrs is quite interesting. In fact, there might be 3.8 million reasons, since that’s how many dollars its backer, Centralway, just pumped into it to prepare for a U.S. launch. The new cash infusion follows a $7.7 million investment the same backer has committed to making in Numbrs for a push in Germany, and there are also plans for a major invasion of the U.K. market. (Sticking with the international flavor, Centralway is Swiss.)

So what is it about Numbrs that generates this kind of multi-market enthusiasm? It’s essentially a dashboard, not unlike Mint.com, that enables users not only to track or even predict their spending, but also conduct transactions and pay bills from within the app. Perhaps more interestingly—and this is where potential revenue streams may lie—it boasts of having the ability to predict future spending patterns. That’s surely a powerful lure to data-driven marketers.

On a completely unrelated note, technology provider Backbase, which bills itself as the Bank 2.0 portal specialist, this week added to its portfolio with software for commercial banking. The portal, which is sold directly to banks, features an all-purpose dashboard that’s fully personalized and enables users to work with every kind of existing app on every popular piece of hardware, from smartphones to desktops.

Sure, nobody’s talked about portals in the past 15 years, and dashboards aren’t supposed to be cutting-edge either. But these slightly retro concepts, and others like them, do point to subtle changes in the market. Essentially, they acknowledge that users will draw on a variety of apps from a variety of developers, regardless of the financial institution they count on, to do what they need to do. It’s up to the banks to accommodate them, rather than insisting on pushing their own products exclusively.

In this regard, the nature of the user demographic is very significant. The new xAd/Telmetrics Mobile Path to Purchase Study, out this week, shows more clearly than ever before which way the market is headed. To put in bluntly, the millennials dominate: Almost half of all mobile bankers are younger than 35, and a third cite their smartphone as the most important device for banking.

The numbers are clearly telling: Nearly two-thirds of these younger bankers relied on their devices throughout the transaction, from research to conversion. Even more, nearly 75%, say they noticed the mobile ads that popped up during the process. Bottom line: Nearly half of all online banking transactions now take place via mobile devices.

It’s easy to get rattled not just by the changes but the pace at which they’re occurring. The banking world has long counted on stability, longevity and loyalty, while the technology industry delights in going from upstart to legacy seemingly overnight. The regular flow of new apps with new capabilities, all of which have a direct effect on user behavior, seems designed to reward fickleness. But that’s the price we pay for the constant pursuit of innovation.

The new generation of core banking customers is accustomed to convenience and instant gratification, regardless of where they get it, and it’s up to the financial services industry to keep up. The flow of apps isn’t going to be cut off anytime soon, and platform technologies and methodologies, not to mention revenue models, must be broad enough to encompass them. Those that do it right, whether with innovative approaches like dashboards and portals or newer alternatives, stand to do very well.

Infographic: The Future of Work in Financial Services

CEB Financial released an infographic with statistics from recent trends in financial services for various fields including commercial banking, retail banking, operations, insurance and retirement. Statistics highlight issues such as 75 percent of commercial banking executives feel threatened by vendor consolidation. Read on for more information.

The Financial Services Industry Gives Back to Hurricane Sandy Victims

The Partnership for a Secure Financial Future has released its latest “I Am Financial Services” video. In this edition, financial services employees talk about what they have done to help the victims of Hurricane Sandy recover from the disaster.

In the video below, employees in the financial services industry were asked: What have you done, either personally or professionally, to assist the victims of Hurricane Sandy?

Stability, Meet Innovation

Think financial services and technology—the two industries have so much to do with each other, yet in some ways they couldn’t be further apart.

To see that strange level of symbiosis, you need look no further that the testimony offered by Paul Volcker, former chairman of the U.S. Federal Reserve, to a British parliamentary commission recently. In sum, Mr. Volcker is distinctly unimpressed by much of the “innovative financial engineering” found in capital markets these days. He believes that unless things change, financial institutions will commingle their accounts with the retail side of the business, and that will cause broad-scale problems.

Long lionized as an elder statesman of the industry, the former Fed chairman is widely credited with holding down inflation during his long tenure, and in that time earned praise (and some criticism for his regulatory stance) from both sides of the political aisle. Even in his ’80s, he led what was then called the Economic Recovery Advisory Board (now known as the President’s Council on Jobs and Competitiveness). Most famously, he is the force behind the Volcker Rule, a section of broader regulation that restricts U.S. banks from making certain investments that don’t benefit their customers.

So why is someone so visionary opposed to “innovative financial engineering?” This is perhaps where the chasm between technology and financial services is widest.

Think about it: Every corner of the technology industry thrives on innovation, and it is always understood that there’s a price tag attached. The new inevitably replaces the old, whether it’s a smartphone upgrade or an entire platform shift. In fact, ‘old’ is a relative term, since there’s always a next big thing or a new/new thing just around the corner. And we all want it that way; this is an industry where ‘disruptive’ technologies get complimented and bankrolled.

It’s not that the issue of regulation doesn’t come up occasionally—the government has certainly kept Microsoft’s lawyers busy for a long time with antitrust concerns, among other examples—but by and large new companies emerge by dint of merit and proudly take on a leadership position. That’s how it was with Microsoft, Google, Facebook, Apple and many others. Even the industry’s brightest minds have no idea what the next name in that pantheon will be; but you can bet that whatever technologies it offers will be not just innovative but disruptive. They’ll prompt (even force) everyone else to change, and that’s a good thing.

The one constant in all this change is that somehow, while the new gadgets and capabilities are always better and faster, they’re also cheaper. New companies and new technologies—all innovative, many disruptive—emerging on a regular basis, radically enhancing the entire landscape while cutting costs: How many other industries can we say that about? Financial services?

Well, these upstart start-ups couldn’t exist without financing, as the fine folks on Sand Hill Road in Menlo Park, the Flatiron district in New York and other hubs of venture capital can attest. There’s also tremendous risk involved; for every one Facebook that generates billions and changes the world, there are many that go nowhere. But still, the stark difference is the way the two industries operate (and are judged)—innovation and disruption is great in one and perilous in the other.

While there’s plenty of action at lower levels, most of the names at the top of the financial services industry pyramid have remained unchanged for decades. The only changes come when some conglomerate merge, or venerable companies go under through too many bad investments. For the most part, what we see now is what we’ve seen for a long time.

Mr. Volcker surely has a point about innovative financial engineering gone bad, but are there alternatives? Will stability in the financial services industry always mean essentially the same set of companies making cautious moves, while the technology side exercises rampant creativity to shift the paradigm regularly? Or can each industry learn more from each other?

 

What do you think? Let us know by tweeting at @bankingdotcom or posting in the comments below.

New Technologies Are Coming for Unbanked, Underbanked

*This post originally appeared on MyBankTracker

In the past year, countless prepaid cards have flooded the nation to target the large portion of the American population that is either unbanked or underbanked. Acknowledging that the market for these alternative financial products is rapidly growing, more tech companies are catering to this group of consumers.

According to a recent survey by the FDIC, in 2011, 8.2 percent of U.S. households do not have bank accounts, up from 7.6 percent in 2009. And 20.1 percent of U.S. households have bank accounts, but rely on alternative channels for financial services (e.g., check-cashing, payday loans and money orders), up from 18.2 percent in 2009.

Even traditional banks have jumped on the bandwagon to compete against non-bank prepaid-card companies and get a piece of the prepaid-card market.

Last fall, Regions Bank started rolling out asuite of products and services that included a prepaid card and check-cashing and Western Union services. In July, Chase, the largest bank in the country, launched the Liquid prepaid card that does almost everything that a regular Chase checking account can do.

“As banks have steadily inflated the cost of banking, more and more depositors are seeking substitutes for bank accounts with escalating costs, high minimum balances and surprise fees,” said Jim Wells, president of Wellspring Consulting, a firm that specializes in solutions for the unbanked and underbanked.

But, with the proliferation of financial technology, the focus is shifting to serving the unbanked and underbanked through mobile devices.

Last week, at a Finovate conference, two companies demonstrated their versions of a mobile wallet for the unbanked or underbanked consumer.

The CAT (Cash and Transact) mobile wallet, by Emida, is an app that is based solely on the consumer’s smartphone. Through participating retailers, users can refill their CAT accounts with cash (for a convenience fee of $1.50). Then, they can use the funds to pay for purchases through the app.

The Flip mobile wallet, from PreCash, is an app that allows users to perform instant mobile check deposit and make expedited bill payments — two services that were never before available on a prepaid card account.

“Although these mobile-enabled, prepaid card-based accounts are attractive to far more than just low-income consumers, one key to success will be in making the services available via even the simplest of mobile devices,” said Wells.

In countries where financial institutions are hard to come by, mobile devices are the preferred channel for financial transactions. For example, more than 17 million mobile subscribers in Kenya use a mobile-phone-based money transfer service called M-Pesa, which enables users to deposit and withdraw money, pay bills, buy phone minutes and send money to bank accounts or other users.

In the U.S., the decreasing cost of smartphones may make it seem like everyone has a smartphone — but non-smartphones are still the most common mobile devices among the low-income population.

According to the Federal Reserve, 64 percent of the unbanked have access to a mobile phone (18 percent have a smartphone) while 91 percent of the underbanked have access to a mobile phone (57 percent have a smartphone).

Regardless of the types of mobile devices, the demand for alternative financial products and services is there.

And, history tells us that unbanked and underbanked consumers could be the users of the next wave of financial innovation.

In last year’s fall Finovate conference, card-linked offers made regular appearances on stage. Since then, card-linked offers became more available to bank customers. Bank of America, Capital One, American Express and many other financial institutions began providing card-linked deals.

Considering that the conference offers a good idea of what products and services we’ll see in the near future, it wouldn’t be a surprise to find that, by this time next year, there are more prepaid card accounts and other financial services that live on mobile devices.

 What are you offering your customers? Let us know in the comments below!

Social Media: Hype or a Financial Services Reality?

By Brad Strothkamp, Vice President, Principal Analyst – Forrester Research

No topic has straddled the chasm of hype versus ROI as social media has done. The last few years have been a never-ending array of social media success stories as well as pundits questing the validity and value of the social area. The financial services industry is increasingly playing a role in the social space, and the last two years have also provided clarity to its value.

Like other industries, the majority of efforts in the financial services social space were initially focused on marketing. But as it has grown more widespread, at least four areas have shown promise for social outside of pure marketing:

  • Product development and innovation. Who better to ask about new product development or product enhancements than existing customers who own and use the product? Firms such as Chase tap social communities to drive product innovation that starts with the customer are using social very effectively.
  • Community support. While financial decisions may be a personal activity, the path to these decisions is often steeped in social with segments like investors or small businesses looking to one another for peer comparisons and best practice sharing. American Express, TradeKing, and most recently E*Trade are using closed communities to drive service utilization and segment engagement by getting customers to interact with each other in the social space.
  • Customer service. The bread and butter of online strategy for financial services firms have traditionally been customer service, and that aspect is seeing an opportunity in the social space. Twitter can be a hotbed of customer concerns and questions, and a litany of financial services companies are listening and proactively helping these clients. Wells Fargo and Citibank have been leaders here in proactive outreach customer service strategies via Twitter.
  • Online sales. Recommendations from family and friends play a key role in how consumers start the process of choosing a new provider. Social has a logical role here as social is about sharing experiences with family, friends and likeminded individuals. This role is being played at a macro level via customer ratings and reviews that are gaining traction in financial services. USAA has been a leader in this space by harnessing the good will that exists among its member to win new ones.

The area of social media will continue to evolve in financial services, and I am thrilled that I’ll be presenting at the Intuit Financial Services Conference this fall on the topic with a focus on USAA’s social story and its tangible results. In order to make my presentation as relevant as possible, I welcome any and all feedback on the types of questions you’d like to see covered. Those questions can cover anything from process to execution including questions around gaining executive support, tying social strategy to the business strategy, and developing effective measurements.

To join the conversation, visit In:Volve.

About Brad Strothkamp:

Vice President, Principal Analyst, Forrester Research

Brad serves eBusiness & Channel Strategy professionals. He is a leading expert on eCommerce/eBusiness strategy development within financial services, as well as on best practices of financial firms for selling to and servicing online consumers. He does extensive research on how consumers use the Internet to research and purchase financial products — regardless of the channel — as well as the seamless cross-channel customer experience financial firms need to develop and deliver in order to maximize sales.

In his research, Brad covers such eCommerce and finance-oriented topics as the use of interactive help technologies (including online chat), the use of analytics to drive site development decisions, the ways in which financial services customers make product decisions, the role the Web plays during the product research process, and case studies and industry rankings of leaders in financial services.

Social Media is Not the Next New Thing

There is nothing revolutionary or exciting about social media. Building customer relationships has been a bank’s job since the onset of the financial services industry. Over the past hundred years, banks have successfully adopted technologies from telegraphs to telephones, in an effort to better serve customers. Social media is just the latest step in this evolutionary path.

However, to successfully build relationships in social media, financial services firms must rethink a few paradigms of customer engagement. First, customers should not be required to come to the bank’s turf for help or information.  While traditional channels will continue to be important, customers want bankers to step outside their stores and join them in conversations on the sidewalks of the social web.

The first step into the fresh air of social media should be listening to customers to understand current conversations. Once topics and needs are understood, a bank can respond to customers, so long as value can be delivered through the engagement. If a customer requires a private environment to discuss their issue, they should be invited to step back inside a traditional channel where secure servicing can be delivered.

Second, social media breaks through the traditional silos of customer communications and mixes all messages, whether they originate from marketing, customer service or corporate communications in to a messy soup, side by side and often colored by customer commentary. Success in this new reality requires tight coordination between internal teams to ensure quick, consistent and coordinated communications.

Financial services firms may initially feel overwhelmed by the risks and options of social media. Success comes when they approach social media as they would any other program by requiring clear alignment to business priorities and customer needs, articulated success metrics and risk management planning. So long as they start with their customer, financial services firms are not breaking new ground by entering social media. They are simply doing what they have always done­—growing their business through strong customer relationships, with a little help from a new technology.

Kimarie Matthews is Vice President of Social Web for Wells Fargo’s Internet Services Group. For more than 10 years, Kimarie has been helping improve the customer experience in financial services by developing customer listening and satisfaction measurement programs that guide the business to better meet customer needs. She is now on the front lines of proactive customer support managing Wells Fargo’s Twitter channels (@ask_wellsfargo and @wachovia) and developing programs that extend Wells Fargo’s ability to support customers by leveraging social technologies.