Digital Money, Mobile Wallets & Latin America

In our world of 100%+ mobile penetration, companies in Latin America will soon need to think like their next wave of prospective customers, most of whom are unbanked. This means understanding their lifestyles, habits and needs in order to decide how to best generate value.

Similarly, recent global and regional corporate announcements regarding digital money and mobile wallets targeting Latin America’s unbanked consumers have casual and close followers wondering what this means for the region.

What exactly are they talking about?

Simply put, mobile wallets aim to create a phone-based equivalent of a physical wallet – a cloud and/or SIM-based collection of personal identification, financial and non-financial account information. The different money, payments and banking offerings refer mostly to the ability to purchase and perform other value-based transactions with a mobile handset.

In Latin America, these details are very important given the fact that more than 90% of mobile users are on prepaid plans – many of them unbanked – and use devices with varying features and capabilities.

Who are the key players?

We’ve seen the arrival of several initiatives to improve Latin America’s mobile payment transactions and incorporate unbanked users. These include: banks, telcos, retail chains, global acquiring and acceptance networks and specialized entrepreneurs who have launched initiatives in countries such as Mexico, Argentina, Venezuela, Peru, the Dominican Republic and Haiti.

What business are they after?

What each of them shares is a common motivation: to capture the favor of the increasingly mobile-dependent user, most of whom are unbanked, and hence their relationships, transactions, and related data.

Given the way the mobile phone has gradually replaced or replicated nearly every item on our nightstands (alarm clock), desks (email, browser), briefcases, purses and pockets (agenda, reading material, games, camera) and even our televisions, it stands to reason that the wallet would be the next object of interest.

What does this world look like?

Look inside a typical Latin American consumer’s wallet today and imagine what their future mobile wallet might look like…

  • Better security: For the unbanked consumer, electronic money will continue to be more secure than carrying physical cash.
  • More local apps: User-friendly apps are great for simplifying the delivery of information and services.
  • Virtual labor marketplace: From street vendors to self-employed, blue-collar laborers, their services can be broadcast and found.
  • Bill-payment simplification: Paper bills, long lines and late bills are avoided – a win-win for both payer and provider.
  • More effective promotions: Mobile phones enable product promotions to bypass the challenge of a legally unrecognized residence.
  • Electronic documentation: From transit passes to IDs to receipts, all documents typically carried by an unbanked consumer will be provided electronically.

What does the future hold?

The ultimate goal of this mobile era should be the creation of a payments ecosystem – where open and accessible systems, once set in motion, flourish by attracting a diversity of interconnected and interacting players. There are several regional challenges to overcome, but it can be done.

Thankfully, the wireless industry has given us some concrete examples like GSM, Bluetooth and other consortium-led efforts. If we continue at the current pace, it could take our region 15 years and millions of dollars wasted in isolated iterations. However, if done properly, 15 years can be cut to five. 2018 sounds pretty good to me.

 

Anabel Pérez is President & CEO of NovoPayment, the leading payments technology services company in Latin America, providing prepaid/stored-value program design, implementation and Platform as a Service (PaaS). 

What We’re Reading: Mobile Home Banking, Payments, Online Lenders

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.

  • Mobile Home Banking: How 5 Banks Take to the Road (slideshow)

American Banker

Wells Fargo’s (WFC) mobile ATMs were used for disaster recovery after Superstorm Sandy hit the East Coast last year. PNC Bank opened a temporary pop-up branch in Atlanta to test out a relatively unexplored market for the Pittsburgh bank. Fifth Third Bank’s (FITB) “ebuses” provide job hunting tools, credit counseling and financial education resources for customers. In past years, BankUnited’s (BKU) bank on wheels has included an ATM and teller window.

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  • The Promise Of Payments

Bank Systems & Technology

Payments are a classic illustration of a long-standing paradox around technology’s role in banking. Technology has enabled banks to process payments more quickly, efficiently and securely, to profitably offer payments products and services (such as credit and debit cards) to a wider array of consumer and corporate customers, and to make effective payments handling a foundation of multifaceted and revenue-generating client relationships. Payment technology also has created many challenges for banks.

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  • Many Online Lenders Driven From Business

Credit Union Journal

After years of futile attempts to drive high-cost online lenders out of business, at least one state’s regulators appear to have hit on a successful strategy: cutting off their access to the payments system. Since Aug. 5, when New York state regulators put a target on 35 specific lenders that it said were not licensed to make loans in the state, at least nine of the companies have halted operations. Key to the state’s effort was a letter it sent to more than 100 banks in which it pressured them to prohibit online lenders from accessing customers’ checking accounts. The banking industry has largely been mum about how it has responded to the regulatory edict, but it appears banks are falling quickly into line, according to American Banker, an affiliate of Credit Union Journal.
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  • Giant reality-check

The Economist

“China’s banks are not real banks,” says Andrew Rothman of CLSA, a broker recently acquired by China’s CITIC Securities. The country’s biggest financial institutions are so closely held by the state that they are, in effect, arms of the treasury. Cosseted by rules that protect them from competition, they deliver huge profits in good times: bank profits as a share of China’s economic output equalled nearly 3% last year, whereas the highest ratio achieved in recent decades by American banks was only 1% of GDP (in 2006). In bad times the state is there to clean up, just as it did during a surge in dud loans in 1990s.
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  • Enterprise Gets Serious About Cloud Computing

ReadWrite

The use of the cloud within the enterprise is still growing at a healthy pace, but in a much more disciplined manner than in recent years. New data suggests that cloud computing is becoming less of an experimental tool but a production workhorse in the enterprise. The data comes from just-released 2013 State of the Enterprise Cloud Report, an eight-page whitepaper from Verizon to positively portray its Verizon Terremark unit within the cloud market. Even taken with that grain of salt, the data within was interesting, such as: [Since January 2012 to June 2013], the use of cloud-based memory increased by 100 percent, and cloud storage by 90 percent.

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  • Gartner: Only 38% of Organizations Use Cloud?

Talkin’ Cloud

A report by IT research firm Gartner, Inc.  found that only 38 percent of all organizations surveyed in the report use cloud services today. But we wonder: Does the report reflect the fact that many employees use cloud services — Dropbox, Box, Google Apps and more — on their own and without corporate approval at work? Regardless, cloud use continues to rise. According to the report, 80 percent of organizations said that they intend to use cloud services in some form within 12 months, including 55 percent of the organizations not doing so today.

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What We’re Reading: Mobile Banking, Remote Tellers and EMV

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.

 

  • GoBank, the Pay-What-You-Want Mobile Bank Account, Launches Out of Beta (Video)

AllThingsD

Alok Deshpande, GoBank’s vice president of product development, said the company keeps its costs low in part because it doesn’t operate any brick-and-mortar bank branches. But does it actually think its customers will choose to pay a monthly fee of anywhere from nothing to $9 for a checking account, when they don’t have to? Deshpande said it’s too early to tell, since beta users weren’t given this option, but that the feedback the GoBank team has gotten is that beta users liked what the messaging around the payment option said about the type of banking relationship GoBank is trying to foster. Still, Deshpande hinted that the company may build out the bank’s feature set in the future, allowing for additional ways to make money.

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  • Consumers More Willing to Pay for Mobile Banking: Study

American Banker

Over the past year, consumers have become more willing to pay for mobile banking services, according to a new report by ath Power Consulting. According to the study, one in three consumers would be willing to pay something for mobile banking services, which is a 13% bump up from 2012′s study results. Last year, one in five consumers said they would pay for mobile services. The online survey polled 3,201 banking and credit union customers across the United States. Those reluctant to charge tend to think of mobile as a lower-cost channel and express concerns about consumer backlash. The majority of small businesses (63%) said they would pay something to use mobile banking, according to the report.

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  • Bank branches test remote teller system: Devices allow more after-hours services, but staff cuts are likely.

Atlanta Journal – Constitution

Across metro Atlanta and elsewhere, banks and credit unions are rolling out new technology that adds Skype-like video connections to oversize ATMs, letting you talk to tellers early in the morning and into the night. With them, you can complete complicated transactions that can’t be done at the ATM, even when the bank is closed.

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  • Andera, Intuit Partner on Account Opening Technology

Bank Systems & Technology

Andera’s oFlows solution has been selected as the new account opening technology by Intuit Financial Services. Andera’s cloud-based platform, oFlows has been chosen to be the new account opening technology for Intuit Financial Services’ institutional clients. The platform offers customers the ability to send in identity verifying signatures and documents to open accounts in digital and mobile channels.

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  • Wells Fargo offering text message receipts at its ATMs starting today  Mobile

Engadget

Forward-thinking financial institution Wells Fargo is offering its customers the choice of receiving a text message receipt — in addition to its e-receipt and email options — whenever you use one of the bank’s ATMs.

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  • The Durbin Debit Dilemma with EMV

Javelin Strategy & Research Blog

The Smart Card Alliance describes the problem in the context of the proprietary nature of a network’s chip application – EMV is designed so that transactions only go to the network specific to that chip on that specific card, there is no room for choice. The search therefore is on for a “Common AID”, one that can be shared by all of the debit networks with the level of ubiquity that is currently seen with magnetic stripe cards. But, the issue here is some of the proprietary systems are owned by the very parties that Durbin was seeking to control – Visa and MasterCard. As a result of this, there is effectively a three horse race in terms of solutions to the Durbin Debit Dilemma and predictably, two of these have been presented by Visa and MasterCard, with a third from the cornucopia of regional debit networks.

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What We’re Reading: Cybersecurity, Tablets in CUs and Consumer Spending

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.

 

  • Cybersecurity Should Not Come at Expense of Privacy: White House

American Banker

The White House says the nation needs new laws to reinforce its cyber defenses but that the push should not come at the cost of privacy. The House of Representatives on April 18 passed the Cyber Intelligence Sharing and Protection Act, or CISPA, which would encourage owners of financial networks, utility grids and other critical infrastructure to share information about digital threats with the government and one another. The White House has threatened to veto the bill, saying it lacks sufficient privacy protections. Civil liberties groups and other critics of the measure charge that it would allow companies to share people’s emails and text messages with U.S. intelligence agencies.

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  • Small Business Owners Big on Mobile Technology

American Banker

A survey of 1,305 small business owners conducted by Constant Contact in March found that 66% currently use a mobile device such as a smartphone or tablet in their work. Of the non-mobile users, 65% have no plans to use a mobile device in the future, many citing a lack of demand for mobile access from their customers. This segment is partial to Apple devices, according to the survey — 66% use iPhones, while 39% use Android phones. About 49% use iPads; only 15% use Android tablets.

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  • Keep Wal-Mart Out of Financial Services, Bankers Ask

BusinessWeek

A group of bankers advising the Federal Reserve urged U.S. regulators to consider preventing Wal-Mart Stores Inc. from offering some financial services. The Federal Advisory Council, a body of bankers that includes PNC Financial Services Group Inc. and BB&T Corp., said at a Dec. 19 meeting that Wal-Mart’s sales of prepaid cards warranted greater federal oversight. Minutes of the meeting were obtained yesterday under the Freedom of Information Act.

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  • Consumers spending nearly 10% more than in 2009

CNN Money

American consumers are spending nearly 10% more than they did four years ago when the country was reeling from the effects of the financial crisis, according to an analysis of the spending behaviors of millions of Mint.com account holders. In the first quarter of 2013, the average household spent roughly $4,220 per month — up from about $3,870 in the same period of 2009, according to the inflation-adjusted consumer spending index released Wednesday by Intuit, which owns personal finance site Mint.com.

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  • Why CUs Can’t Afford To Be Left Behind On Tablets

Credit Union Journal

It’s estimated that nearly half of the U.S. Internet population will be using tablets by 2014, which means increasing pressure on credit unions to adapt and conform to the trend. “The proliferation of tablet devices in the U.S alone is impacting everyone who manages their finances via a digital channel, including credit union members,” said Kenneth Hans, executive director of Blackstone Technology Group’s Financial Services Practice. “Much like banks, credit unions are looking for ways to cater to this latest form-factor that offers the power of a laptop in a much smaller and convenient size.” Among credit unions encouraging members to use tablets is the $5.3-billion Suncoast Schools FCU, which has 549,303 members that it has traditionally served via its 53 branches, but mobile devices such as tablets have changed that equation somewhat.

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  • Credit Cards – Game ON!

Gonzo Banker

Credit cards in circulation hit a peak in 2007 at 710 million cards, according to a 2013 Nilson Report. Then the crash of 2008 hit, the Card Act went into play in 2009, and consumer spending changed. From the low point in 2010, the number of cards increased by roughly 50 million in 2011 and continues to climb today, when we have 520 million cards in circulation. Credit card interchange has not been Durbin-damaged as of yet, and interchange is still high. In the United States, 10 issuers own 85.4% of the cards on the market (Source: The Nilson Report, February 2013).

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  • New Fed Report: U.S Mobile Payments Landscape – Two Years Later

Payments News

The Federal Reserve Bank of Boston in conjunction with the Federal Reserve Bank of Atlanta has just published a new report titled “U.S. Mobile Payments Landscape – Two Years Later.” Based upon ongoing meetings of the Mobile Payments Industry Workgroup (MPIW) convened by the Federal Reserve, the report updates an earlier paper from 2011. It examines changes in the evolution of mobile POS retail payments over the past two years, characterized by an expanding fragmented market environment and frequent technology innovations.

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Social Media Regulation – Part I: Adapting to New Policies

This is Part I of a two part post on American Banker’s “Banking Regulatory Update: New Social Media Rules” webinar. You can view Part II here.

Last week, the Banking.com team sat in on American Banker’s webinar, “Banking Regulatory Update: New Social Media Rules,” which detailed the current policies around social media use by financial institutions. Moderated by American Banker’s own Penny Crosman, the panel of presenters included:

With content ranging from how to establish a corporate social media policy, general best practices for social media, and analyzing the FFIEC guidance  and call for feedback on social media regulation, we wanted to take a deeper dive on the content and connect with some of the experts ourselves. We first spoke with webinar moderator, Penny Crosman, editor in chief of Bank Technology News and technology editor of American Banker.

 

Q: What social media policies have you seen banks and credit unions using that you think are effective?

Most of the social media policies I know of are dry, legalistic, and boilerplate. The policies drafted by large banks and Wall Street firms seem to be draconian – many don’t allow employees to even access social media sites (except for a few people who work in customer service and marketing). One reason for this is SEC rules that require banks to archive all emails – messages stored on social networks are difficult for a bank to monitor and store. The employees of these companies sometimes use their personal smartphones and tablets to access the sites. I know of Wall Street executives who have Twitter streams under aliases and protect their streams from being viewed by any but their close friends. Commonwealth Bank of Australia last year came out with a harsh policy that insisted that employees report “inappropriate or disparaging content and information stored or posted by others (including non-employees) in the social media environment” or risk being fired. These are examples of going overboard. Banks and credit unions need to find a way to comply with the necessary rules, yet encourage natural, positive engagement on social media. Citi, for one is finding success using software to identify and catch potential rule violations and route those to its legal group, while encouraging its customer services people to maintain friendly and helpful conversations with customers on Twitter and Facebook. I think more banks will turn to software to handle policy compliance, rather than expecting employees to keep all the rules in their heads.

Q: Do you think banks and credit unions are quickly learning how to adapt to these regulations?

Banks and their compliance departments are keeping a close eye on these regulations and are sure to have their own policies in place when the FFIEC publishes its final rules. They are already used to complying with the many existing consumer protection laws the FFIEC cites in its guidance. What some of them may end up doing is freezing all social media activity until they get their policies finalized and employee training conducted.

Q: What would you recommend as the first step for banks to develop social media policies and practices?

I think the logical first step would be to canvass all current social media activity – review all social media pages the bank maintains and ask employees what they’re doing on their own. The second step would be to hire or consult with a good lawyer who can parse out which aspects of the rules apply to the bank’s activities and help create a policy that would enable compliance.

Q: How do you think upcoming Facebook payments capabilities will affect banks’ interactions with social networks?

I think banks may eventually get involved with payments over social networks, but they may be the last to the party, largely because of the regulations they need to be careful of, such as the Electronic Funds Transfer Act. There are also security issues with social media payments, as social passwords are pretty easy to game. Authentication will be tricky and important. I expect banks will be very cautious about this.

 

Interested in hearing more? Check out Part II with our interview with Carl Pry, Senior Director, Treliant Risk Advisors who spoke to us about how he counsels financial institutions on their social media activities.

 

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

Below are interesting stories the Banking.com staff has been reading over the past week. What have you been reading? Let us know in the comments section below or Tweet @bankingdotcom.

 

  • JPMorgan Chase Endures Website Outage

American Banker

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

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  • Moven From Mobile Banking to Mobile Money

Bank Marketing Strategy

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

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  • A Look At What Citi Is Doing With Online Platform

Credit Union Journal

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

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  • Four Common Misjudgments About Whether Consumers Want PFM

Javelin Strategy & Research Blog

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

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

Mobile Payments Today

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

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

PYMNTS.com

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

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  • Finance and the American poor: Margin calls

The Economist

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

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  • Mobile Banking Now Vital To Customer Acquisition

The Financial Brand

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

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  • Every company now a digital business

ZDNet

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

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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.

What We’re Reading: Mobile Payments, Bank Fees and BAI Retail Delivery

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

  • Small Institutions Face a Dangerous Technology Gap

American Banker

Community banks and credit unions are well behind the innovation curve, enough to draw alarms from one of the segment’s most ardent advocates. “What is amazing about our industry is your customers and members use Amazon and Hulu and Square and we think it’s OK that when those customers and members walk into our branches they are going back 30 years,” said Louis Hernandez, chairman and CEO of Open Solutions. Open Solutions operates the DNAappstore in which smaller banks and credit unions can be certified to develop and share tech products, which are called DNAapps.

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  • Finance CIOs reveal plans to recover from recession

Computer Weekly

The Financial Services Report research out by IT giant Fujitsu analysed the activities and plans of 55 banks across the retail, investment and wholesale banking sectors. CIOs were asked for their top three IT priorities for the next three years. Over half (51%) listed reducing cost as a top priority, while 27% said upgrading IT systems, 22% improving customer experience, 20% mobile banking and 18% said moving to the cloud. A total of 85% said the IT department is attempting to meet the needs of the business by doing more with less. Mobile banking is high on the agenda. A significant 71% of the CIOs surveyed said mobile banking is important for customers compared to 49% that were asked the question three years ago. The biggest overall benefit of mobile banking is the ability to generate new revenue streams, with 80% citing it as a key benefit. Better customer retention is a key benefit according to 76% of respondents.

Read more

  • How Checking Account Fees and Terms Vary by State

New York Times Bucks Blog

No one likes to pay bank fees. And they are even more annoying when it is clear that the amount and variety of fees can vary depending not only on where you bank, but also on the state where you live. The Pew Safe Checking in the Electronic Age project, part of the Pew Charitable Trusts, recently analyzed the fees and terms offered to consumers in the 50 states, using the country’s 12 biggest banks by deposits. Nationally, for instance, Pew found that 89 percent of checking accounts had a monthly fee. The median fee was $12, and the median minimum balance amount necessary to avoid the monthly fee was $2,000. The median length of a bank disclosure, meanwhile, was 69 pages. And the median number of “extra” fees – categories beyond the 12 most common fees charged by many banks – was 26.

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  • At BAI: The Mobile Wallet Wars Are On: Onsite Coverage

Credit Union Times

The mobile wallet wars will be over inside two years. That was the chilling prediction offered on Thursday at the BAI Retail Delivery conference by Carl Tsukahara, chief marketing officer at Monitise. The U.K.-based mobile apps developer recently acquired ClairMail, which had succeeded in staking out a foothold in the U.S. market “but as Monitise we are unknown in the U.S.,” Tsukahara shrugged. Tsukahara’s message to financial institutions is that the time has passed for sitting on the sidelines because non-banks – think PayPal, Google, Amazon, possibly Apple – are circling and they seem ready to attempt to disintermediate financial institutions. Tsukahara cited third-party research that showed 50% of consumers indicated a preference for PayPal as their mobile wallet provider. Thirty-percent (30) liked Google. A similar number liked Apple.

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  • Who’s Securing Mobile Payments?

Bank Info Security
Google and Facebook are in the mobile payments arena. But consumers still expect their banking institutions to secure the mobile wallet, says Alphonse Pascual of Javelin. What role must banks play? Pascual, who focuses in security, risk and fraud at Javelin Strategy & Research, says banking institutions must declare their roles as security experts in mobile payments, and they have to stake their claims early. As more non-traditional financial players take seats at the emerging payments table, the burden of security leadership and fraud prevention will fall on the shoulders of traditional financial-services providers, he says.

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  • How to Cut Bank Fees

Barron’s

Get ready to see banking costs and balance requirements go up while free checking is put on the endangered-species list. That’s the expensive state of banking, according to BankRate.com’s 15th annual checking survey, which concludes that banks are in a “fee-ing frenzy.” The average monthly fee on basic checking accounts rose 25% over the past year to a record $5.48, says the survey. The average minimum balance required to avoid that charge on “free” checking accounts rose 23% to $723 nationwide, also a record. Neither a checking nor basic savings account pays enough interest these days to bother calculating. Accounts still called “free” have dwindled from 76% of all checking in 2009 to about 39%, notes McBride, and will grow scarcer.

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Video: The History of Payments

Mobile payments continue to gain momentum as consumers look for easy ways to pay for goods and services via their smartphone devices. Gartner recently predicted that the number of consumers paying for items on mobile devices will surpass 141 million this year, a 38.2 percent increase over 2010.

To make light of a flourishing technology, Barclaycard in the UK created a humorous video depicting the history of payments.

You can read more about the “re-imaged” history of payments on Celent’s Banking Blog.

What are your thoughts on the future of payments? Leave us a comment below or Tweet @bankingdotcom.

Bank of America, Wells Fargo and JPMorgan Start Payments Service

Research shows that customer’s payment preferences are moving to online and mobile channels. Financial institutions have to engage customers on their terms, in order to meet the changing customer landscape.
Three of the U.S.’s top banks declared their strategy Wednesday. What’s yours?