Cause and Effect: If you build it, will they come?

July 23, 2014
/   Spotlight

Many financial institutions assume that digital banking is lucrative because the most valuable customers happen to bank online. While there is certainly a correlation between online bankers and higher profitability, quantitative evidence suggests that...

Fast Facts: Student Loans

January 22, 2013
/   Insights

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

Intuit 2020 Report: The Future of Financial Services

April 11, 2011
/   Insights

Today, Intuit released the latest edition of the Intuit 2020 report, Intuit 2020 Report: The Future of Financial Services, which identifies and examines four key trend areas that will  transform the financial services industry...

Small Business: Perception vs. Reality

November 21, 2012
/   Insights

In the most recent election cycle, like most others before it, the one sector of the economy that got the most attention was small business.  This is the future, we were told by every...

The Top 10 Trends in the Digital Banking Industry

December 18, 2013
/   Spotlight

2014 is rapidly approaching and as the year wraps, the Digital Insight team has pulled together the top 10 trends in the digital banking industry based on data and trends from studying financial institutions....

Mobile Banking Engagement: Data from Digital Insight

June 24, 2013
/   Spotlight

Intuit Financial Services has been conducting a comprehensive and ongoing study of financial institution customers. From these studies, the company has been able to provide a deeper view of banking customer behavior across several...

Industry Perception, Optical Delusion

January 14, 2013
/   Insights

In Washington, they talk a lot about ‘optics.’ This has nothing to do with regulatory scrutiny, or government mandates on eyeglasses. It has to do with perception—how something looks, the way a particular story...

Social Banking: Blessing or Curse?

August 1, 2012
/   Insights

While the topic of Facebook and banking has generated plenty of heat (though not necessarily a lot of light), the debate seems mostly focused on two broad issues: The much-maligned IPO, and the notion...

Not so long ago—just last fall, in fact—Bank of America was in the news for all the wrong reasons. The company had instituted a $5 debit card fee, and faced a strong consumer backlash as a result. The incident was at least partly responsible for giving rise to the movement dubbed Bank Transfer Day.

It was likely in the works earlier, of course, but the country’s second largest back is back in the spotlight with a very different initiative. This one, however, is designed to help customers save money. In a pilot program being rolled out this week (to employees only, for now), the bank’s online customers will receive discounts from selected retail partners based on their previous spending patterns. Customers don’t even need to sign up for the service or go to a separate site, a la Groupon, discounts will be awarded in the form of cash payments once a month.

The savings won’t be immediate. Online customers will see discount offers embedded in their bank statements, or potentially in a separate tab, and buy what they choose, paying full price, then receive cash back in their accounts.

Perhaps most interestingly, the bank itself will receive no compensation from the retailers and merchants involved. It will instead use the discounts to extend relationships with existing customers—who will use their bank accounts and credit cards in the process—and of course draw new ones. For the record, BofA says it won’t share incoming customer spending data with the retail partners or anyone else, through presumably it will use the information internally.

While other banks have launched similar efforts, BofA is likely the largest financial services institution to enter this nascent field. This also means that there will be a flood of other financial institutions plunging into the business. As consumer spending patterns and habits evolve in the age of online shopping driven by social media tools and techniques, this is exactly the kind of forward-thinking initiative the industry needs to build on.

Many financial services firms still have the mentality that, in a sense, they need to remain above the fray. They finance these initiatives but they’re not directly involved, since it’s not a core competency. That may be true, but the reality is that they have the resources, they have the technology, they have the information, and most of all they have the customers. For banks to stay completely out of the transaction means denying themselves potentially significant revenue streams.

As other financial institutions enter the fray, we will likely see the process becoming simpler and more commoditized—the savings will be immediate, retailers will share the revenue, and so on. If that’s the case, then this initiative could be seen as a major turning point. Let us know your thoughts by posting below, or Tweet @bankingdotcom.

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James W. Gabberty

Gabberty is a professor of information systems at Pace University in New York City. An alumnus of the Massachusetts Institute of Technology and New York University Polytechnic Institute, he has served as an expert witness in telecommunication and information security at the federal and state levels and holds numerous certifications from SANS & ISACA.

Zachary Ehrlich

25-year-old writer, and as a native San Franciscan, I am unreasonably loyal to Bank of America, if only for their superhero-like origin story, involving the 1906 earthquake and Italian fruit vendors.

Brad Strothkamp

http://www.forrester.com/rb/analyst/brad_strothkamp

Marisa Mann

Marisa Mann brings over 15 years of experience in consulting and financial services industries to the Solstice team, working on large scale enterprise initiatives across many technologies, including specializing in the digital space – Internet and mobile. Mann is passionate about mobile and the endless possibilities for the enterprise, delivering business value through strong brand recognition and driving to excellence in the consumer experience. Prior to Solstice, Mann worked at JP Morgan Chase, Diamond Management and Technology Consultants, Washington Mutual, Inc, and Accenture.