The Rise of the Subscription Society: Three Important Takeaways for Banks


revenue-8-11-17.pngSubscription services are spreading like wildfire with huge leaps in subscription rates. Amazon Prime saw a 22 million household jump in 12 months, with 85 million Americans currently subscribed. Spotify started in 2011 with just 1 million subscribers and now, just 6 years later, has grown to 50 million paid subscribers. Then there’s Netflix, which just announced it has over 100 million total subscribers, about half of them in the U.S.

Success like this illustrates the subscription model isn’t merely a transactional structure, but has become the way for modern consumers to purchase (i.e. access to and use of product in reasonable installment payments as opposed to buying a product outright and owning it). Banks looking to make their products more attractive to consumers can use these companies’ successes as a model for their own service offerings.

So what makes the subscription-based model so compelling?

High Value, Low Cost
Subscription models provide a high amount of value at a lower cost than purchasing a product outright.

Take Amazon Prime, for example. Members are able to gain access to a large, discounted marketplace of products, free or discounted shipping that will deliver most purchases directly to their doors in under 48 hours, access to video streaming, music streaming, book libraries and personalized recommendations for just $10.99 per month (or discounted to $100 a year if they prepay in advance). These savings not only help the consumer save but also indirectly result in the development of healthier financial habits through Amazon’s network of discounts.

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Spotify’s high value, low cost model offers the ability to pay a low monthly fee for access to unlimited music streaming as opposed to paying for each song individually or buying the DVD.

And a bank is taking notice of and acting on this subscription success. To make the Spotify subscription even more valuable, it has teamed with Capital One to reduce the monthly fee by 50 percent for 50 million potential customers, if the monthly payment source is a Capital One credit card.

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Personalized Experience
Subscription services are also usually molded around the subscriber’s habits and preferences to deliver a personalized experience. Personalization ensures value is relevant to individual subscribers, as these services usually offer a wide library of products to ensure they’re universally appealing and accommodate various consumer needs.

This is another example where Spotify delivers. The service includes a so-called Discover portal dedicated to helping users find new music they would enjoy based on their streaming history and even delivers custom playlists on a weekly basis. Netflix and Amazon Prime also create a personalized list of recommendations and display them prominently on their websites so that users are immediately greeted by a relevant experience.

Banks have tremendous access to customers to provide relevant and timely offers and personalized deliverables to encourage engagement that goes beyond just traditional transactional experiences.

Convenience and Instant Access
In today’s technology-rich culture, consumers have come to expect instant access to the services, information and products they need. The subscription model was purposely built around providing convenience and immediacy.
In the not-so-distant past before Netflix, consumers would have to visit a video store or a movie theater if they wanted to watch a title on demand. More recently, they could order movies on demand from their cable or satellite providers, but this required purchasing titles individually and was often costly.

However, with video streaming services like Netflix, consumers now have a whole library of movies and TV shows to stream on demand whenever they want and they don’t have to purchase each title separately. Instead, they have access to Netflix’s full library for only $7.99 per month, which is about equivalent to purchasing one title.

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Banks, of course, do have online and mobile banking products. What banks haven’t been able to do is fully monetize, with recurring revenue, this convenience and instant access. The next logical step is to find what new, non-traditional services can be instantly delivered through online and mobile platforms that customers will pay for.

The subscription model that delivers value, personalization and instant access can be successful for banks looking to build a more marketable brand and a larger and steadier stream of revenue. Amazon Prime, Spotify and Netflix are clearly examples of top performers of this model, but banks need to search out ways they can make their products more attractive and provide a value-rich, relevant and convenient experience for their customers.

Blockchain Technology Could Disrupt Everything. Are You Ready?


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Large banks are making the news with big bets on blockchain, but regional banks should also be looking at opportunities to leverage blockchain. The financial services industry has moved beyond the proof of concept stage and is now beginning to embrace the transformational potential of blockchain-based digital ID, digital banking, smart identity, smart contracts, trade finance, voting, reinsurance, KYC, onboarding, cross-border payments, loyalty and rewards, and real estate management. Just for starters.

Today, questions about blockchain are both strategic—should I do it or wait?—and practical—if I go in, where do I start?

Smaller banks will have to be smart and focused about time and resource investments. Forming groups—or consortia—can help create the aggregation of abilities and shared risk to take advantage of blockchain, either to do things differently or to do different things.

Three Pieces of Advice

Make choices early. Make decisions about what you want to achieve with blockchain before you put money on the table. Start from a business point of view, and with a business issue you want to solve. You can’t do everything, so make choices early and pick goals that are specific to your business and your bank: grow, create new ways to generate revenue, or cut costs with a cheaper or faster platform.

Start from a place of strength. Choose a specific use case close to your core competitive advantages, something you’re confident could help secure your current market position or open opportunities that you have the resources to pursue successfully.

Don’t go at it on your own. Like the internet, the value of blockchain derives from group participation. Establish a minimal viable ecosystem (MVE) to start. For example, if you want to use blockchain to address syndicated lending, first identify all the abilities required to bring it to market. Identify who needs to be part of that system to make it successful and form a consortium to bring them all together. Start small—that’s what MVE is all about—to validate that it works so you can extract value, then create and run a pilot, and finally expand to include others.

Three Areas of Focus

Get smart. Dedicate a team to study blockchain and develop a proof of concept. This should include a business strategist, a developer who knows blockchain or programing languages like Java, Bison and C#, and a technical architect who can connect dots between technology and the business. Build something beyond a pilot and learn from the effort so you can recognize limitations and identify the best potential opportunities for your bank.

Improve what you’re doing. Pick a specific use case that solves a problem in your organization. Take into account the platform you’re using today, a consortium you’re part of, or how you’re delivering services—and then consider how blockchain can help you be more cost effective or deliver better value in that one area to improve what you’re already doing.

Innovate. Once you’ve identified ways to cut costs or improve on services you already deliver, consider adopting services you don’t deliver today. Blockchain can help you identify new opportunities to help you keep a leadership position or expand a position of strength. If you’re a leader in large loans for farmers, consider the two-part question: How can blockchain make farm loans better, faster or cheaper–and how can it help open new opportunities for an agriculture bank?

The bottom line for bankers: To get value out of blockchain, do it with others. A good first step is to join or create a consortium that supports your goals. Hundreds are already established, for specific use cases, for creating technology techniques and standards, and for redesigning business processes. You can also buy or invest in a startup to bring resources and ideas to a use case you have a strong position for. Either way, focus on one specific goal—the narrower it is, the more likely that people will be passionate and specialized—and able to build an ecosystem that can help everyone improve their business position with blockchain.

Mobile Deposit Penetration Key Indicator of Readiness for Digital Transformation


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Banking is being dramatically transformed by digital and mobile technologies. The widespread proliferation of smartphones, with their sophisticated cameras and mobile capture capabilities, creates a valuable opportunity for banks to shift both their retail and commercial customers from the physical banking habits of the past to new, digital channels—which can increase customer loyalty and save banks billions of dollars in operating costs. According to research by Bain & Company, branch visits are expensive for the bank, at an average cost of $4 to complete the same transaction that would cost about 40 cents if done through a mobile channel, and the branch traffic that persists today is dominated by routine transactions that could easily be transitioned to digital. As much as 8 percent of branch visits are simply to check an account balance, and a whopping 31 percent are to deposit checks.

Clearly, U.S. banks have a tremendous opportunity ahead of them if they can migrate more of their consumer and commercial customers from high-cost branches to self-service mobile channels for routine transactions. Mobile deposit technology can provide a strategic advantage by helping banks accelerate this migration. It has long been understood that mobile deposit is one of the most powerful options available to financial institutions for driving increased adoption of all mobile banking services.

Forward-thinking banks, analysts and investors are all recognizing the role that mobile deposit plays as a key indicator of a bank’s readiness for the digital future. That’s why banks like Bank of America Corp. are now reporting their mobile deposit growth rates in their quarterly earnings reports. They understand that demonstrating growing mobile deposit penetration indicates to investors that they are not only on the path to digital transformation, but that they also have the type of mobile-first customer base that every bank wants.

It’s not just consumer banking that can benefit from shifting transactions towards mobile. The commercial side of the business has a major opportunity to increase mobile banking services with mobile deposit as well. Paper checks remain the dominant form of payment for many businesses. A full 97 percent of small businesses still rely on paper checks to make and receive B2B payments, and according to the Federal Reserve, more than 17 billion checks were circulated in 2015. Yet, too many banks continue to rely on outdated practices, providing proprietary hardware to their commercial clients for scanning checks or simply expecting businesses to visit a branch or ATM to make their deposits. By leveraging commercial mobile deposit technology, businesses can batch deposit multiple checks using a mobile device faster than they can via a typical single-feed scanner. As the research firm Celent puts it, “mobile is the new scanner.” Celent also states that banks have an opportunity for 10 percent annual revenue growth over the short term by transitioning more of their commercial customers to mobile deposit.

To help transition both consumer and commercial customers from the physical banking habits of the past to the more mobile, self-service model of the future, banks must provide a superior mobile user experience. The research firm Futurion Digital conducted a thorough analysis of the mobile deposit user experience at 15 of the top U.S. banks and discovered a direct correlation between the quality of the user experience and adoption rates for mobile banking services. Banks that want to increase customer usage of their mobile banking applications would be wise to review the best practices and recommendations identified in the report in order to better position themselves against their peers.

In short, as physical branches become less important to a bank’s consumer or business banking strategy, transitioning customers to digital channels will be critically important to ensure they still have access to the services they need. Doing so can actually help banks increase customer loyalty and save billions of dollars by moving routine transactions to lower-cost, self-service channels. As one of the most popular features among mobile banking services, mobile deposit plays a strategic role in enticing customers to adopt all mobile banking services, and a bank’s mobile deposit penetration rates serve as a key indicator of its readiness for digital transformation. By focusing on delivering a superior mobile user experience and actively engaging with customers to help them make the transition to mobile, banks will be well-positioned for the future.

Three Top Trends in Mobile Banking: What You Need to Know


mobile-banking-6-21-17.pngIt comes as no surprise that today’s banks need mobile solutions to stand a chance of satisfying their customers. You’ve probably heard of the Big 5 of mobile banking, the essential features that are now an absolute must-have for the modern customer, including: the ability to transfer funds between accounts, pay bills, make deposits, locate ATMs and branches and conduct peer-to-peer payments.

These essentials are an excellent starting point for banks developing mobile solutions. However, the truth of the matter is that the basics are no longer enough. Any bank that has entered the 21st century provides their customers these capabilities. In order to differentiate their products, drive profits and keep their customers satisfied, modern banks must find ways to use mobile to offer customers more value and convenience and be more relevant to their daily lives.

Many of the largest banks have already realized this and have been working diligently to develop creative new solutions. Perhaps that’s a large part of why these banks have managed to pull ahead of community banks in customer satisfaction rates, a surprising development considering that community banks are commonly thought to have the personal touch.

However, who’s really owning the mobile banking space are companies that aren’t banks at all. Apps like Venmo have taken the mobile banking world by storm and are edging banks out of their rightful place as financial service providers. To stay on top of the latest mobile banking trends, banks should keep an eye on three larger mobile trends and follow suit with their own offerings.

So, what’s the latest?

No. 1: Intuitive Interfacing
The banks who have been most successful with their mobile banking have found ways to make the experience as intuitive for their customers as possible. One of the ways they’ve done this is through eliminating complicated menus and interfacing mobile capabilities into the features that customers are already familiar with.

For example, customers can now use their smartphones’ voice control to request and make payments from PayPal’s Venmo, one of the most popular peer-to-peer payments apps. Users don’t have to navigate the app—or even directly use it—to transfer money between friends. Instead, they can simply instruct their phone and their payments are taken care of.

To ensure their mobile offerings are attractive, banks should first and foremost make sure they’re easy-to-use and provide customers with a seamless experience they don’t have to think about twice.

No. 2: Artificial Intelligence
Voice-activated devices like Amazon’s Alexa have recently introduced artificial intelligence into the mainstream. Banks on the cutting edge have already recognized this technology’s potential to provide an enhanced customer experience that offers more value and have begun capitalizing on it.

Perhaps the best example of this is Erica, Bank of America’s soon-to-be-released chatbot, which can now go beyond the Big 5 basics to impart personalized advice on customers’ finances.

Companies outside of financial services are finding creative ways to utilize artificial intelligence as well. One interesting example is the app Digit, which helps the user build savings by connecting to his or her checking account and automatically making transfers to an FDIC-insured savings account based on income and spending activity. Users no longer need to think about practicing better financial habits; instead; they have an algorithm to do it for them.

No. 3: The Subscription-Based Model
Subscription-based services like Spotify, Netflix and Amazon Prime are influencing purchase trends and consumers’ expectations of the companies they work with, including their banks. These fee-based services offer value at an affordable price and can easily be controlled and customized based on the user’s need.

Also interesting to note is that a recent survey indicated access to discounts as a primary impetus for customers to not switch from their current bank. Money-saving deals can promote better fiscal health and allow customers to save more than they’re able to make in today’s interest rate environment. Plus, the bank is at the point of sale whenever consumers make a purchase.

The payment models utilized by services such as Amazon can clue banks in to how they should structure their own mobile offerings. And in fact, the top six banks have all been developing their own rewards-based shopping programs, which may be part of the reason why they’ve managed to pull ahead in customer satisfaction.

These are just a few of many mobile trends that are currently all the rage in banking. But it’s important to remember that mobile is ever-evolving, and today’s trends won’t be tomorrow’s. Banks must be ever-vigilant about observing what’s happening in the mobile space and think about ways they can keep innovating their own offerings to stand apart from the crowd and make sure their products and services please their customers.

Bringing Finance to the Unbanked in India


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With about 40 percent of its entire population currently unbanked, India represents a unique challenge for banks and financial institutions looking to expand their services to the country’s consumers. Moreover, around 70 percent of the roughly 1.3 billion people in India live in rural areas, many of which lack reliable infrastructure and are difficult to access by road.

Add those factors to the Indian government’s recent demonetization program to take physical money out of circulation in favor of digital banking and payments and you have a tough environment for banks when it comes to signing up new customers.

That’s precisely what the Infrastructure Development Finance Company (IDFC) Bank, a newly formed commercial and consumer bank based in Mumbai, was faced with in 2015. IDFC has been in existence since 1997, but solely as a lending institution for infrastructure projects. As IDFC grew, the bank decided it was time to tackle the more traditional consumer and business markets for financial services.

But in order to obtain (and maintain) a license to operate in the consumer sector, the Reserve Bank of India (RBI) mandated that IDFC expand into rural areas and commit to serving the unbanked in those communities. In addition, the RBI gave IDFC a deadline of only 18 months to be operational in rural communities. Failure would result in the cancellation of IDFC’s license to operate in the consumer market.

IDFC needed a technology partner that had both a track record of success, as well as the capability, commitment and innovation to help solve the problem of reaching the unbanked. IDFC ended up partnering with Indian multinational IT company Tata Consultancy Services (TCS). Tata Consultancy works with organizations across the world to effectively integrate technology to achieve their business goals, and in 2015 was ranked the 64th most innovative company in the world by Forbes, making it the highest-ranked IT services company—as well as the top Indian company.

What Tata did for IDFC was develop a system called the TCS BaNCS core banking solution, designed to transform the bank from a vehicle for infrastructure financing into a full-service institution catering to a broad spectrum of customers, from wealthy corporate clients to the rural unbanked. Tata had already rolled out similar projects worldwide over 300 times, for some of the world’s largest banks. BaNCS is an all-encompassing enterprise banking system, supporting the premise that customers should have a seamless, convenient banking experience from any device, anywhere. This is especially critical for serving the unbanked, as smartphones are often their only access to basic financial services.

Specifically, Tata developed a “Bank-in-a-Box” scheme along with BaNCS, creating a portable device that performs many of the basic functions a physical bank can. Tata refers to the actual technology as a Micro ATM, authenticating each user with cutting edge fingerprint and biometric authentication. These Micro ATMs, along with BaNCS smartphone integration, allowed IDFC to meet the goals set forth by RBI in terms of serving the unbanked market in India.

Customers can open and activate a new account at a Micro ATM in around four minutes, using a combination of biometrics and common identifiers like a mobile number. Micro ATMs have also proven to be cost-effective, with devices costing less than $295. Within nine months of TCS BaNCS implementation, more than one million rural IDFC customers have benefitted from Micro ATMs to do things like transferring cash and paying utility bills. More than 1,000 IDFC Micro ATMs were launched within a year, also resulting in employment opportunities for rural Indians since the Micro ATMs do require an on-site customer service liaison. Today, there are around 6,500 agents, growing at a rate of about 300 daily.

Aside from offering the rural unbanked in India a customer experience head-and-shoulders above what previously existed, IDFC saw its profitability increase six times over the first year of TCS BaNCS, going from US$8.53 million to US$56.91 million in net profits. Tata also had BaNCS operational in only nine months, despite having to link together and integrate 18 disparate systems within IDFC.

Importantly, access to financial services for the underbanked in rural India were also expanded by more than 50 percent for those areas (like the Krishna district of Andhra Pradesh province) serviced by Micro ATMs. The underbanked includes the self-employed, micro-enterprises and marginal farmers, who are now more financially empowered thanks to the partnership between IDFC and Tata.

Today, IDFC’s Micro ATMs are available in 16 states across India, with the underbanked now able to access government welfare benefits and remit payments to relatives in other remote areas. The TCS BaNCS partnership shows that—with an innovative approach and the use of technology—banks can both generate substantial benefits for both themselves and for rural developing communities.

This is one of 10 case studies that focus on examples of successful innovation between banks and financial technology companies working in partnership. The participants featured in this article were finalists at the 2017 Best of FinXTech Awards.

How Green Dot is Helping Uber Drivers Access Cash on the Go


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For just about anyone participating in the on-demand economy—from Uber drivers to Airbnb hosts—there’s always one major question: When will I get paid?

And in many cases, it’s more a matter of having access to funds they’ve already earned than customers paying them for their services. Between ACH transfer delays and bank clearing policies, it can be days (or sometimes weeks) before on-demand workers gain access to their money. This can negatively impact workers’ ability to budget, pay bills and meet their daily living expenses.

That’s precisely when Uber recently decided to partner with Green Dot, a financial services provider specializing in the issuance of pre-paid debit cards. In March 2016, Green Dot and Uber announced the introduction of “GoBank,” a mobile checking account solution for Uber drivers that provides them with access to cash from their Uber accounts almost instantaneously.

At its core, the GoBank concept allows Uber drivers to withdraw cash from their Uber accounts while the transactions are clearing. Green Bank is basically fronting drivers the funds until the transactions have cleared. Drivers can spend the money using an Uber Debit Card wherever Visa is accepted, or withdraw cash from any GoBank’s 42,000 ATMs nationwide without incurring any fees. The debit card is also linked to a small business checking account provided by GoBank, which focuses on mobile banking functionality first and foremost. Another feature called Instant Pay allows drivers to link a GoBank checking account with their Uber account and transfer money immediately into their checking up to five times per day.

These kinds of solutions are in line with Green Dot’s over-arching goal, which is to service the underbanked and low credit score sector of the population by partnering with major brands. For example, Green Dot recently teamed up with Wal-Mart to offer the Wal-Mart Everyday Visa Card. The goal of deals with the likes of Uber and Wal-Mart, according to Green Dot CEO Steve Streit, is to deepen the company’s ties with at least half of all U.S. households that earn less than $50,000 per year. Increasingly, Green Dot is focusing on enhancing its traditional mix of products and services with mobility and mobile solutions, which is one of the reasons that partnering with Uber makes so much sense.

Green Dot’s commitment to mobile goes all the way back to 2012 with the acquisition of a mobile app development company called Loopt. The underlying Loopt technology was utilized to develop the GoBank mobile banking solution. Outside of the ATM network, GoBank has no brick and mortar locations, making it a completely digital bank focused on mobile as its primary distribution channel. That means users can perform unique functions like check their account balance without having to log in, send money via SMS and open a new account solely through the mobile app. This focus on mobile solutions for the underbanked positions GoBank to be an extremely useful partner to Uber and its drivers moving forward. Drivers can even open a GoBank account from within the Uber app itself.

Uber, as the world’s leading ridesharing service, is pushing to streamline its relationships and processes with both drivers and customers, and overcome recent public relations issues. Competition for drivers has been heating up with major rival Lyft, which announced its own proprietary driver cash-out solution called Express Pay, shortly before Uber and Green Dot unveiled the Uber Debit Card by GoBank. Express Pay experiences heavy volume, with upwards of $40 million being cashed out by drivers in any given month. Uber no doubt is expecting Instant Pay to eclipse that number rather quickly, since it still has the lion’s share of drivers signed up to its app nationwide.

Uber began piloting the Uber Debit Card by GoBank shortly after announcing its partnership with Green Dot, and the solution managed to gain significant usage amongst drivers in a relatively short amount of time. This led Uber to open the program to all its drivers nationwide in June 2016, with over 100,000 drivers signed up for the Uber Debit Card by GoBank by August. The positive feedback is leading Green Dot and Uber to extend the functionality of the solution, with the availability of Instant Pay for any checking account (GoBank or otherwise) being one new feature in the development pipeline.

Getting paid in a timely manner has been a longstanding issue for drivers who rely on income from ride-sharing apps like Uber. And it’s clear that Uber understands this by aligning itself with an industry leader in financial services for the underbanked like Green Dot. By allowing these drivers to easily open an account, access funds and make payments (all on the go via mobile), Uber is likely to go a long way towards improving its relationship with drivers. It’s a boost the company could use to alleviate some recent friction with drivers, with some filing lawsuits and others wanting to be recognized as full-time employees. However, the Uber Debit Card by GoBank is already incentivizing drivers to remain on the platform, and should also help make their financial lives a lot easier.

This is one of 10 case studies that focus on examples of successful innovation between banks and financial technology companies working in partnership. The participants featured in this article were finalists at the 2017 Best of FinXTech Awards.

A Review of Emerging Technology Trends


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The emergence of a vibrant financial technology sector has dramatically changed the banking industry by enabling new products and services that cater to the needs and preferences of consumers in today’s digital age. In preparation for FinTech Week, an event that FinXTechis holding April 25-26 in New York, here is a look back at our recent coverage of emerging technology trends and innovation strategies for banks. These stories have appeared on the BankDirector.com website, and in digital and print versions of Bank Director magazine.

ARE YOU A BANKER OR A VISIONARY?
The power of digital banking goes beyond a fundamentally different, more satisfying customer experience.

MAKING SENSE OF FINTECH LENDING MODELS
What type of fintech lending solution should your bank pursue? In this video, Mike Dillon of Akouba outlines what management teams and boards need to know about these lending models, and how each can benefit the bank.

PAYPAL’S BIG BET
The former eBay subsidiary is turning itself into a global payments powerhouse with mobile at the heart of its strategy.

CYBERSECURITY: A BOARDROOM CONVERSATION
Radius Bank CEO Mike Butler sits down for an interview about how to manage the risk of doing business with fintech companies.

COMMUNITY BANKS TO FINTECH: WE NEED YOU
Banks attending the Acquire or Be Acquired Conference in Phoenix, Arizona, discussed ways that technology companies could improve profitability and the customer experience.

GETTING THE MOST OUT OF MOBILE
If you’re on a bank board, it pays to ask some questions about mobile.

HOW STRONG IS YOUR CORE TECHNOLOGY?
Changes in customer preferences and pressure from fintech competitors are forcing banks to innovate. Is your core provider up to the task?

2016 BANK DIRECTOR’S TECHNOLOGY SURVEY
As the banking industry struggles to innovate to meet shifting consumer expectations, 81 percent of bank chief information officers and chief technology officers responding to Bank Director’s 2016 Technology Survey say that their core processor is slow to respond to innovations in the marketplace.

Speeding Up the Account Opening Process



Many banks aren’t meeting customers’ digital expectations, and could be losing accounts as a result. Kimberlee Mineo of Bottomline Technologies explains why consumers abandon the account opening process and how financial institutions can improve the experience.

  • Why Customers Abandon Digital Account Applications
  • Tips to Streamline the Account Opening Process

Shaking Up Traditional Banking


banking-strategy-2-10-17.pngUnlike some executives, David Becker likes to be told what he’s doing wrong. The chairman and chief executive officer of First Internet Bank in Fishers, Indiana, says bank interns speak to the senior leadership team at the end of their internships to discuss ways the bank could improve. He expects the same of staff throughout the organization.

“[Our hire] is the dissatisfied banker,’’ he says. “They were in an organization that had a boatload of rules and policies. We take the banker who says, ‘What if we did this?’ We want the person who questions the day-to-day operations.”

Running the bank in such a way has paid off.

The bank’s holding company, $1.8 billion asset First Internet Bancorp, grew loans 31 percent last year from the year before, to $1.3 billion. Net income grew to $12.1 million from $8.9 million in 2015. The bank’s return on average assets was 0.81 percent in the fourth quarter of 2016, and its return on average equity was 11.24 percent. First Internet has its headquarters in Fishers, a suburb of Indianapolis, and a loan production office in Tempe, Arizona, and that’s it. With a focus on digital banking, First Internet can grow its loan book nationally while keeping expenses low. One of its niches is digitally savvy investors who own properties or businesses in multiple states because the bank can accommodate lending that may take place in different parts of the country.

Investment bank Keefe, Bruyette & Woods has an outperform rating on the stock, in part based on its cheapness relative to the bank’s performance. The bank will have to continue to grow to achieve efficiencies, because internet banks have to pay slightly more for deposits than other banks do, says Michael Perito, a KBW analyst who follows the stock.

Becker feels as if the big banks are getting consumers more accustomed to digital banking, and therefore, more likely to leave for digital-only banks. When he first started the internet bank in 1999, customers had to deposit checks by sending them in the mail to the bank. Now, they can just remotely deposit them through the bank’s mobile banking app. If customers use another bank’s ATM, First Internet reimburses them for up to $10 per month in surcharges—making up for the bank’s lack of a branch network.

The bank has been growing lately in part because it is hiring seasoned bankers to tend to its loan book of mortgages, commercial real estate and consumer loans. Becker says the bank has managed to survive by building slowly and carefully in its early years, so as not to overstep its infrastructure. “The team we have on board are all folks at the senior level that worked at multistate, large, regional banks and have the expertise and the ability to help us grow to that multi-billion-dollar position,’’ Becker says. “It is all about the people. We can create computer tools and algorithms, but at the end of the day, somebody has to talk to you if there is a problem and know how to underwrite a loan.”

The bank is acutely focused on customer service, and in its early days, it didn’t hire anyone right out of high school or in their first job. “We needed talented people who could handle anything that came in the door,’’ Becker says. There are no tellers per se, and everyone who works in customer service needs to handle multiple functions, from wire transfers to starting a new deposit account. Staffers can communicate with their customers on the phone, in online chat rooms or via email. They keep track of customer reviews on sites such as Yelp, because bad reviews can damage the company’s reputation. Software vendors are held to account, and the bank doesn’t sign any long-term contracts with vendors, Becker says.

Although the bank relies on vendors rather than developing its own software, it follows the workplace ethic of a tech company: a 24-hour gym is available, and people can show up in jeans to work every day. “We use technology to revolutionize the banking process,’’ Becker says. “There really isn’t any limit to our potential growth. Are we a drop in the bucket in the whole community of financial services? Yes. But the consumer is coming our way. We are getting better at it and we are bigger day by day.”

Three Ways Fintech is Riding the Social Commerce Wave


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Consider two of the most prevalent digital trends over the last decade or so: social media and e-commerce. A growing number of users are interacting with companies on social media platforms such as Facebook, Pinterest and Instagram. An increasing number of people are also turning to the internet and e-commerce to purchase virtually any item, for any occasion. For these reasons, the emerging “social commerce” trend makes a lot of sense.

Social commerce is roughly defined as the intersection of social media and e-commerce. For example, Facebook has added a “buy” button, so consumers can make purchases directly without ever leaving the social network. In many ways, 2016 was the “Year of Social Commerce.” Worldwide, revenue earned directly through e-commerce using social media totaled $20 billion dollars in 2014, according to the software provider ReadyCloud.

As social commerce grows, so will the demand for products and services to manage the flow of payments from social networks to vendors and institutions on the back end. Fintech startups and banks are coming up with new ways to meet these demands. Here are three examples.

Social Gifting
There’s something inherently social about gift giving. Over the years, gift cards have become popular among both consumers and brands of all shapes and sizes. While gift cards might seem tailor-made for social commerce on a surface level, for the most part, people are still buying physical gift cards at retail locations and gifting them to friends and family, who then have to keep them in their wallet with countless others, which can be inconvenient.

That’s the problem that Texas social commerce startup Swych is aiming to solve. Swych has created a digital platform where consumers can send, manage and redeem their gift cards all in one place. Currently, Swych is available as an iOS app for U.S. consumers, and major retailers such as Amazon, REI and Sephora offer gift cards through the platform. Swych users can eliminate their physical gift cards by uploading them into the application if the retailer is on Swych. The company also introduced “Swychable” gift cards that can be redeemed with any retailer within the Swych ecosystem.

Swych aims to transform the gift card market from obsolete technology and a clunky user experience to a convenient and connected social future. Users can view friends’ profiles on Swych, see what brands they prefer and give a gift card that closely matches those preferences. Swych is tackling an outdated industry and making the experience better for both consumers and retailers.

Social Banking Apps
Many banks are wrestling with exactly how to adopt new technologies to capitalize on the social commerce phenomenon. Rather than spending the resources to develop social commerce technologies in-house, many banks are turning to white-label solutions. Urban FT helps banks integrate social commerce features into their online and mobile banking applications.

Specifically, Urban FT helps banks build social payment capabilities into the banks’ own apps, similar to what Venmo accomplishes. Moreover, banks can use Urban FT to provide retail customers with Yelp-style reviews, geolocation, coupons and other social features that people would typically find in third-party apps such as Foursquare or Groupon. Users can even make restaurant reservations or purchase gifts through banking apps that utilize Urban FT’s social commerce technology. Banks partnering with Urban FT realize that if they can offer these services within their own online and mobile banking ecosystem, they’ll be able to increase the lifetime value of those customers and learn more about their social commerce preferences.

Shopify Gets Social
Shopify is one of the largest players in back-end merchant e-commerce services. Anyone who wants to set up an online store, sell goods or services and collect payments recognizes that Shopify is probably the most comprehensive solution available. So it’s no surprise that Shopify is now introducing technologies that will make buying and selling on social media easy for everyday people. The company has developed a free app-based platform called Sello that allows anyone to easily set up an online store, share products on social networks and allow people to purchase these products on their mobile devices.

Sello exemplifies a broader movement within social commerce, which is the democratization of buying and selling, as social media has also done for content creation. Anyone can start a blog and share what they’ve written quickly and easily, so shouldn’t setting up a shop in order to sell something you’ve made be just as simple? Unlike online retailers like Etsy, Shopify has built Sello with social commerce at its core. The most direct purchase path of the future will be creating products, sharing them on social media and enabling a direct purchase from that point. In the future, Shopify hopes that novice Sello users become successful enough to start their own e-commerce business and migrate onto the full Shopify business platform.

Social media may be mature, but social commerce is still in a stage of growth and experimentation. The challenges of the future will be to make purchasing even more frictionless and leveraging social networks to better personalize product offerings. With innovations like social gifting and white label in-app social commerce for banks, it’s clear that our experiences on social media will likely involve much more buying and selling in the near future.