Citizens Bank and Fundation Mobilize Credit Delivery


partnership-5-16-18.pngWhile Citizens Bank and Fundation are certainly not the first bank and fintech company to work collaboratively together, theirs is unlike any other, both parties say, because of the relationship that exists between the two organizations.

Providence, Rhode Island-based Citizens, a top-20 U.S. bank at $152 billion in assets, partnered with Fundation, a fintech firm in Reston, Virginia that focuses on credit delivery to improve the efficiency and turnaround time for small business loans under $150,000.

Fundation’s technology serves as the entire front end, essentially a white-labeled online application, for Citizens’ commercial lending line of products, providing a technology platform that includes underwriting, closing and engagement tools, and features a decision engine that, based on certain criteria, determines “up front” which loan goes to Citizens and which to Fundation, according to Jack Murphy, president of the business banking division at Citizens.

“What makes the partnership unique is there’s a fair amount of folks in this space who outsource this type of lending to the partner,” Murphy said. Instead, the application process is integrated into Citizens’ own digital platform, a top priority for the bank, Murphy said.

“We wanted to integrate (it) into our technology.”

Citizens and Fundation won Bank Director’s Best of FinXTech Partnership award, presented May 10 at the FinXTech Annual Summit, held at The Phoenician resort in Scottsdale, Arizona.

The platform allows for an entirely electronic application process, and enables Citizens’ lending team to physically go to and visit its small business customers to start or complete that application. Customers can also begin the application process in a branch, and finish at home, “or in their car,” Murphy joked, though he doesn’t advocate driving and applying for a commercial loan at the same time.

“It’s really become the front-end to our core underwriting system,” Murphy said.

Fundation has multiple bank clients, but its credit delivery platform uses data and a decision engine to automate much of the decision-making framework that many banks have and still use when reviewing applications. It also simplifies the compliance assessment, including the Customer Due Diligence (CDD) final rule that was developed just two years ago and became effective in May 2018.

There is automated scoring in approving small loans, allowing Citizens to focus its human capital on other strategies, like bigger, more intensive applications and projects that need more careful review while also reducing paperwork that can be cumbersome. It also has in some ways upended the entire underwriting process—they use bank statements instead of financial statements as part of the application process, and the technology determines which loan goes to the bank and which goes to the partner automatically up front.

The technology has only been available to all customers since the end of March 2018, but getting to that point involved months of due diligence, whittling down a list of nearly two dozen other firms before ultimately selecting Fundation.
“We took about a year to research who might be the best partner for us,” Murphy said, noting that it all began with the goal of improving the customer experience through a digital platform.

The board considered whether to buy, build or partner with a fintech, but ultimately there was only one choice.
“The fintechs have not had the balance sheets or cost of funds or the customer bases that the banks have, so partnership is really the best way for the two companies to business,” Murphy said.

Culture and cohesion between the two companies was half the driving force behind the decision to choose Fundation, Murphy said, in a crowded and competitive fintech market. Murphy said they wanted to partner with somebody who was “not just a tech company,” but a “partner that has a similar vision.”

Like other banks, Citizens has several relationships with fintech companies which provide other services, like SigFig, for instance, a tech-based personal investment platform. But Fundation offered something that was new to the bank, and has in just a short time already proven its worth.

It’s shortened the time from application to credit delivery to as little as three days, which in previous generations could have taken weeks, and generated “many multiples” of increased demand since a series of pilots with the software last fall.

The transformation of this credit delivery, he said, is far more than what some banks have done, which Murphy described rudimentarily as simply taking a paper-based loan application and converting it to an online webform.
“That’s not digital,” Murphy said. “Digital is literally the entire experience being electronic.”

Citizens wanted to make its application process fully digital, Murphy said, which has reduced costs and improved efficiency for the bank. And that result has not only transformed the bank’s commercial lending process, but how it strategizes its future.

“This is for us, I would say step one in a journey of multiple products and multiple ways of making it easier to do business with the bank, not vice versa,” Murphy said.

When It Comes to Fintech Partnerships, Look Before You Leap


fintech-5-12-18.pngAt the risk of oversimplification, there are essentially three categories of innovation in banking. There is a small but growing number of banks that have positioned themselves as early adopters of new technology. There are also fast followers, which are not the first banks to try a new technology but don’t lag far behind. Then there are the late adopters.

The digital economy is moving so fast that no bank today can afford to be in the final category. Being an early adopter is probably too risky for many institutions, but at the very least they need to be fast followers or risk getting left behind as the pace of the industry’s digitalization begins to accelerate.

How and when to successfully engage with a fintech company was a recurrent theme at Bank Director’s 2018 FinXTech Annual Summit, held May 10-11 at The Phoenician resort in Scottsdale, Arizona. Deciding to work with a fintech company on the development of a new consumer banking app or the automation of an internal process like small business lending is more than just another vendor relationship. Typically, these are highly collaborative partnerships where the fintech will be given at least some access to the bank’s systems and operations—and could be a risk to the bank if all does not go well.

The first piece of advice for any bank contemplating this kind of engagement is to perform a thorough due diligence of your intended partner. As highly regulated entities, banks need to make sure that any third-party service or product provider they work with have security and compliance processes in place that will satisfy the bank’s regulators. And the younger the fintech company, the less likely they have a compliance environment that most banks would (or should) be comfortable with.

Mark P. Jacobsen, president and chief executive officer at Arlington, Virginia-based Promontory Interfinancial Network, cautioned during a presentation that banks should not consider working with an early-stage fintech unless they have “an extremely experienced CIO, a very robust risk management system and access to very experienced legal talent.” It also makes sense for banks, to check a fintech’s references before finalizing its selection. “There are so many new things out there that it’s important to get that outside validation,” said Adom Greenland, senior vice president and chief operating officer at ChoiceOne Financial Services, a $622 million asset bank headquartered in Sparta, Michigan.

Cultural difference was also a recurrent theme at the Summit. Banks with a culture of innovation are more likely to be early adopters or, at the very least, fast followers. “Culture is a huge barrier to innovation,” said Bill McNulty, operating partner at Capital One Growth Ventures, a unit of Capital One Financial Corp., during a presentation on some of the common obstacles to innovation. “And culture always starts with people.”

McNulty said while he senses the urgency around innovation in banking is beginning to change, he knows of large fintech players that originally wanted to partner with banks, but have grown frustrated with the conservative culture at many institutions. “They decided it is too hard and takes too long and they would do it themselves,” he said. “If we don’t address culture, the best fintechs will do it themselves. Some of these companies will build [their own] banks.”

Bank Director announced the winners for its 2018 Annual Best of FinXTech Awards on May 10, choosing from among 10 finalists across three award categories, and while big banks were represented among the finalists—including U.S. Bancorp, Citizens Financial Corp., Pinnacle Financial Partners and USAA—two of the winners were community banks. And that fact underlines an important point when talking about innovation in banking. Small banks can play this game just as well and maybe even better than their larger peers.

Defining, Adopting and Executing on Fintech


fintech-9-5-17.pngFintech has become a convenient (and amorphous) term applied to virtually any technology or technology-enabled process that is, or might be, applied within financial services. While the technologies are complex, the vast array of the current wave of fintech boils down to three simple dynamics: (1) leveraging technology to measure or predict customer need or behavior; (2) meeting customer need through the best customer experience possible; and (3) the ability to execute more nimbly to evolve products and services and how they are delivered.

Every reasonably well-versed person in fintech knows that the ability to predict customer need or behavior is achieved through a strong data infrastructure combined with a high-quality analytics function. But what defines the quality of the customer experience? At Fundation, we believe the quality of the customer experience within financial services is determined by the convenience, simplicity, transparency, intuitiveness and security of the process by which a product or service is delivered. The challenge for many financial services companies in developing the optimal customer experience lies in the rigidity of their legacy systems. They lack the flexibility to continually innovate products and services and how they are delivered.

The distinct advantage that fintech firms like Fundation have over traditional financial services companies is the flexibility gained from building their technology infrastructures from scratch on modern technology. With in-house application development and data operations capabilities, fintechs can rapidly engineer and, more importantly, reengineer the customer experience and their business processes. The capacity to reengineer user interface (UI), user experience (UX) and back-end processes is a major factor in the ability of financial services companies to maintain a competitive edge in the digital era where customers are accustomed to engaging with the likes of Google, Amazon, Facebook and Apple in their digital lives.

Banks Remain Well Positioned to Win With Fintech
Armed with these capabilities, we, like so many fintechs, could be thumping our chests about how we are going to transform banking. But at Fundation, we see the future differently. We believe that the biggest disruption to banking is not going to come from outside of the banking industry—it’s going to come from the inside. A handful of banks (and maybe more) will reengineer their technology and data infrastructure using modern systems and processes, developed internally and augmented through highly integrated partnerships with fintechs. As a result, these banks will generate superior financial returns and take market share as customers migrate to firms that provide the experiences they expect.

In addition to enjoying a lower cost of capital advantage versus fintechs, we believe banks are well positioned for three other reasons. First, banks will remain the dominant choice of customers for financial products given their brand strength and existing market share. Second, banks have far more data than the average fintech that can be used to develop predictive analytics to determine customer need or behavior. Third, and perhaps most important, banks have what we at Fundation call the “trust asset:” their customers trust that they will protect their information and privacy and that they will recommend products best suited to their needs.

Be the Manufacturer or the General Contractor
Banks are in a strong position to win the fintech revolution but what remains are the complexities of how to execute. There are a few basic strategies:

  1. Do nothing
  2. Manufacture your own capabilities
  3. Operate as the general contractor, aligning your institution with third parties that can do the manufacturing
  4. Some combination of manufacturing and general contracting

For banks that are predominantly in relationship-driven lines of business rather than transactional lines of business, doing nothing is viable for now. The pressures on your business are not as severe, and a wait-and-see approach may enable you to make more informed decisions when the time is right.

For others, doing nothing is fraught with peril. Assuming that you choose one of the remaining three options, the implementation process will be hard, but what may be even harder is the change in organizational psychology necessary to execute on your decision. Resistance to change is natural.

That is why fintech initiatives should be driven top-down. Executive leadership should command these initiatives and set the vision. More important, executive leaders should explain why the institution is pursuing a fintech initiative and why it has decided to build, partner or outsource. Explaining why can reduce the natural resistance to, and fear of, change.

Manufacturing your own capabilities is hard work but has advantages. It provides maximum control over the project and limits your vendor management risk. The downside is that the skill sets required to execute are wide-ranging. That said, building in-house doesn’t mean that everything needs to be proprietary technology. Most fintech platforms are a combination of proprietary technology along with third-party customized components. Should you elect to build off of third-party software, you must ensure that the platform is highly configurable and customizable. If you don’t have significant influence over customization, you will lose the opportunity to reengineer the processes necessary to rapidly innovate and evolve.

Being the general contractor isn’t easy, either, but banks are very adept at it. You could make the argument that most banks are just an amalgamation of business lines, each of which employs a different system (mostly third-party) and are already operating as general contractors. The business line leaders we have come to know have significant experience managing critical third-party vendors and therefore have the skill set and knowledge to manage even the most innovative financial technology partners. What’s more, they often know what they would want their operating platforms to do, as opposed to what they are built to do today.

Should your institution decide to outsource services to a fintech firm, it is paramount to align interests. Banks should embrace their fintech counterparty as a partner, not simply a vendor. Welcome the flexibility that they offer, and allow them to empower your institution to innovate and evolve.

Don’t Squander the “Trust Asset”
In a world where Amazon, Google, Facebook and Apple dominate the digital landscape, deliver ideal customer experiences, and may possess a “trust asset” of their own, the status quo is not an option, no matter how painful change can be. If your financial institution intends to compete over the long term, executing on a fintech road map is vital, moving towards infrastructures with a foundation of flexibility. Over the next decade, flexibility will allow financial services companies to compete more effectively by delivering the products, services and experiences that customers will demand. Flexibility is what will allow your institution to maintain its competitive position over the long term.

Innovation Spotlight: First Internet Bank


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David Becker, President and CEO

Before he understood banking, David Becker understood technology and its ability to shape the customer experience. Highly attuned to how people would want to bank in the future, Becker started First Internet Bank in 1999, now a $2.4 billion asset institution in Fishers, Indiana. In his 35 years working in financial services technology, Becker has created five companies listed in Inc. magazine’s 500 fast growing companies and continues to engage in philanthropic initiatives to support the economic growth of central Indiana.

When you first told people you were starting a branchless bank, what reaction did you receive?
Nearly 20 years ago, I had an idea to create a bank that lived entirely online. At the time, I had three financial services software companies. Today, we would call them fintechs. My experience as a service provider to the financial services industry, and my years as a consumer and business bank client, gave me deep insight into how banks worked, and, candidly, how they could improve.

How did bankers react? I initially presented my concept to a traditional bank, explaining how a bank could build a nationwide business with an all-online presence. After the presentation, though, the bank’s CEO rejected our concept. He claimed computers weren’t fast enough and the alleged consumer wouldn’t buy in. Essentially, he said it couldn’t be done.

Fortunately, consumers did not share the same skepticism. What’s unique about our story is that this online banking model was born following a focus group with my friends and neighbors. I asked them about how they’d prefer to bank. The ideas flowed. Eighteen years and $2 billion in assets later, we have demonstrated the success that can follow when you remain focused on the customer.

What lessons did you learn working in the technology sector that later helped you as you were growing First Internet Bank?
Before launching First Internet Bank, I worked in and around financial services for years. I saw an opportunity to improve upon the industry’s shortcomings—primarily improving efficiency and the customer experience, both of which rely heavily on technology paired with a human touch.

What’s helped us grow so quickly is that we’ve recognized that we need talented people who can handle anything that comes in the door. Because we have no tellers, per se, everyone who works on our retail banking team, for example, needs to be trained across multiple technologies to handle multiple functions, from complex IRA transactions to mobile functionality to starting new deposit accounts.

And because we’re using technology like mobile banking and biometrics, to revolutionize the banking process, there really isn’t any limit to our potential growth.

How can bank boards start to adapt an entrepreneurial mindset that allows for innovation?
Because we were a pioneer of the branchless model, we’ve learned to use technology to help us adapt to challenges and reinvent ourselves. Technology enables us to expand our business, enter new verticals to diversify our revenue streams, and serve customers across the country—without a costly branch network.

Technology is an increasingly important part of our business, and there is much to be said about the ways fintech is changing the landscape of our industry. However, I would caution boards against looking to a fintech solution as a quick fix to bring innovation to your organization. If you truly want to foster a culture of innovation, look to your existing team.

Today, our hire is the “dissatisfied banker.” We look for the banker who says, “What if we did this instead?” We want the people who challenge the status quo and offer solutions to help us make it better. At First Internet Bank, we call this our “entrepreneurial spirit,” and it permeates the organization.

Our people are the key to our success. Some are bankers that have finally been empowered to do what they’ve always wanted to do. Others are industry outsiders that we’ve hired to bring new solutions to old problems.

Banks Will Play a Critical Role in Digital Identity Adoption


digital-identity-6-26-17.pngWhat could be more important than your identity?

The recognition and authentication of an individual’s identity, together with associated rights, is becoming a priority for governments around the world.

From a world development perspective, identification—whether through civil registries or other national identification systems—means inclusion and access to essential services, such as health care, education, electoral rights, financial services, social safety net programs, as well as effective and efficient administration of public services, transparent policy decisions and improved governance.

It’s equally important for the business world. Banks and businesses across verticals are facing harsh competition from technology companies that build seamless online experiences around one’s digital identity. Ever-increasing volumes of digital transactions and the complexity of the payments ecosystem, including watches that allow consumers to pay for purchase, force financial institutions to understand the role of a digital identity in security and growth opportunities. Five key trends, according to the World Economic Forum, are increasing the need for efficient and effective identity systems:

  • Increasing transaction volumes: The number of identity-dependent transactions is growing through increased use of the digital channel and increasing connectivity between entities.
  • Increasing transaction complexity: Transactions increasingly involve very disparate entities without previously established relationships (e.g., customers and businesses transacting cross?border).
  • Rising customer expectations: Customers expect seamless, omnichannel service delivery and will migrate to services that offer the best customer experience.
  • More stringent regulatory requirements: Regulators are demanding increased transparency around transactions, meaning that financial institutions require greater granularity and accuracy in the identity information that they capture and are increasingly being held liable for inaccurate or missing identity information.
  • Increasing speed of financial and reputational damage: Bad actors in financial systems are increasingly sophisticated in the technology and tools that they use to conduct illicit activity.

Meanwhile, solutions like PayPal, Venmo, Stripe, Square Cash, and other leading examples set the bar for financial institutions of any size so high, that consumers’ expectations alone can bury a traditional institution that is not able to catch up. One of the reasons those solutions have been able to gain ground is the ease of signup and use. They are tied to strong digital identity verification and authentication rails, enabling them to offer smooth and secure mobile payments and online shopping experiences.

Banks, nonetheless, play a role as major gatekeepers for third-party solutions as identity is currently a critical pain point for innovation in the financial services industry. The lack of digital identity limits the development and delivery of efficient and secure, digital-based fintech offerings.

Many fintech startups are trying to deliver pure digital offerings, but the process of identifying users consistently forces them to use traditional rails established by institutional sector. These fintech innovators now see the development of a new generation of digital identity systems as being crucial to continuing innovation. Banks, being the primary verifiers of one’s identity in the financial sector, hold the keys to development of innovative, digital-based solutions. Digital identity would allow financial institutions to perform critical activities with increased accuracy over that afforded by physical identity, and to streamline and partially or fully automate many processes, according to the World Economic Forum.

The WEF suggests that physical identity systems currently put users at risk due to overexposure of information and the high risk of information loss or theft; they also put society at risk due to the potential for identity theft, allowing illicit actors to access public and private services, using easy-to-steal numbers such as credit cards and social security numbers. Digital identity would streamline the completion of these public and private transactions.

Having established massive repositories of records and deep understanding of their customers, banks have a unique opportunity to transition from reliable physical information to reliable digital identity systems. Identity enables many societal transactions, making strong identity systems critical to the function of society as a whole, according to the World Economic Forum.

Identity is also central to the broader financial services industry, enabling delivery of basic financial products and services. Reliance on physical identity protocols introduces inefficiency and error to these processes. Digital identity has great potential to improve core financial services processes and open up new opportunities.

How MySpend by TD & Moven Helps People Track Expenses


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If there’s one thing most consumers wish they could do better when it comes to managing their finances, it’s keeping tabs on spending. And while various technologies, apps and solutions have hit the market to help banking customers track their spending, one unique partnership is helping people get even more insight into where, when and how much they spend.

As the second largest bank in Canada—and 19th largest in the world—Toronto-based TD Bank serves over 22 million customers worldwide and over 11 million in Canada alone. And as an international big banking player, TD Bank faces stiff competition from competitors when it comes to offering branded money management and expense tracking technology. More and more, consumers are looking for apps that can help them monitor their expenses in real-time, on-the-go via smartphones and tablets. Bank of America, for instance, incorporated budgeting and expense tracking capabilities into the latest update of its mobile banking application.

Enter Moven, a New York-based fintech company focused on providing mobile capabilities to consumer facing financial services companies. Moven’s current white-label mobile product offerings to banks include a variety of functionality—from credit score monitoring and mobile banking to budgeting and expense tracking. That’s why Moven was a logical partner when TD Bank was searching for a company to help it develop a next-generation mobile expense tracking app. The result of this partnership was MySpend, a mobile, real-time expense tracking and money management app, made available to TD’s Canadian customer base.

The TD MySpend app was released in April of 2016, and quickly shot up to the number one spot in the category of free money management apps in the Canadian app store.

“Within nine months [MySpend] exceeded 850,000 registered users,” says Rizwan Khalfan, TD Banks’ chief digital officer. “[And] we are seeing customers who are using the app reduce their spending by around four to eight percent, with most frequent users seeing the greatest impact.”

MySpend alerts customers in real-time when any spending occurs using a TD Bank product or service, from a cashed check to credit card expenditures. Not only does this help customers keep tabs on their spending, it also serves to address potential fraudulent activity as soon as possible. MySpend also automatically categorizes all transactions, so customers can quickly log into the app and see how much they spent on rent, utilities, entertainment and so on. For a deeper level of insight, Moven built in a feature that compares a customer’s current month’s spending with their average normal spending patterns of prior months.

“I think the most compelling [MySpend] feature is the continual engagement with customers with the notifications,” notes Greg Midtbo, Moven’s chief revenue officer. “Before they even put their card away they get a notification, for example, of how much they spent dining out and how it fits into their monthly budget.”

The partnership with TD is also a great strategic move for Moven, as the firm is able to reach even more consumers with their technology using the white-label partnership model.

“We realized early on that we couldn’t get tens of millions of customers using the app across multiple geographies without partners like TD,” says Brett King, CEO and founder of Moven. “[Partners like TD] bring us real scale and solve one of the biggest problems that fintechs face today, which is recurring revenue growth.”

MySpend also illustrates the trend of banks partnering with fintech players to better utilize the large amount of customer data they possess, to turn back around and help those same customers succeed financially. While massive adoption rates and high app store rankings are great, the most impressive thing about TD and Moven’s partnership is that it’s helping customers save money. People that engage with the MySpend app on a regular basis have been found to spend less money than TD customers who don’t use the app, or use it infrequently.

The success that TD Bank and Moven are seeing with MySpend only increases the likelihood that the partnership will continue to expand. This could mean developing new features and capabilities within the MySpend app—Moven is already established in the mobile payments space—or making MySpend available to its millions of customers in the U.S. and even the U.K.

That’s because for Canadian consumers thus far, it’s been a simple equation—more time on MySpend equals less spending.

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.

Scotiabank Partners with Sensibill to Digitize and Track


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It’s tax time again, and for many people across the U.S. and Canada that entails one major headache—organizing and managing receipts. Whether it’s an individual or business, keeping, organizing and categorizing receipts is critical to maximizing tax deductions, not to mention for good general fiscal management purposes.

However, one Canadian bank is partnering with a fintech innovator to make receipt management much more of a breeze for their customers. Just last year, Toronto-based Scotiabank announced a partnership with Canadian fintech company Sensibill to offer a mobile receipt management solution called eReceipts that will to make it easier for Scotiabank customers to manage their finances. The eReceipts app serves as an extension to Scotiabank’s mobile banking application and digital wallet.

Scotiabank is one of Canada’s largest banks, serving more than 23 million customers across the dominion and 50 countries outside Canada. And at 184 years of age, Scotiabank is older than Canada itself. With over $1 trillion in total assets, Scotiabank invests more than $2 billion per year in technology initiatives. Partnering with Sensibill to create eReceipts was a natural fit, as it’s a Toronto-based startup that was incubated through Ryerson University’s Digital Media Zone initiative. Sensibill has grown to become a white-label software provider of software solutions to help banking customers better manage receipts from both desktop and mobile.

While there has been technology available to aid in receipt management, it’s still incredibly difficult to categorize and drill down into the detail of specific receipts, especially on a mobile device. What makes the eReceipts functionality so unique is that it’s the first app to automatically match specific credit and debit card transactions to the right receipt. After making a purchase, customers can take a photo of the receipt directly from their Scotiabank banking app. Then, through a combination of Optical Character Recognition and machine learning software, the receipt is matched to the proper transaction in the user’s account history. When users drill down into the transaction, information from the receipt has already been extracted, structured and presented in a clear, easy to navigate format. Scotiabank customers can see all the information about a receipt they need without ever having to look at a piece of paper.

Scotiabank customers have been interacting with eReceipts an average of 38 times per month to track both personal and business expenses. So in addition to making their customers’ lives easier, eReceipts is increasing engagement with Scotiabank’s mobile application—and with it the potential to reduce overall customer attrition rates as users continue to rely on it. Receipts can also be categorized as business or personal, and can be annotated, tagged and stored in folders. In fact, around 48 percent of users utilize folders to organize expenses. Hashtags can also be assigned to receipts for ease of search purposes, along with receipt text itself being searchable. And when tax time rolls around, all receipts can be exported in PDF format, along with a matching Excel or CSV file to make preparation easier.

Scotiabank is the first of Canada’s five largest banks to roll out an application like eReceipts that can automatically match paper receipts to the corresponding transaction. Although there are solutions on the market that can capture receipts, eReceipts is the first to extract and contextualize data on such a granular level. Sensibill’s unique deep machine learning, combined with a powerful receipt processing engine, can even associate product names and SKUs with transactions. The result is that otherwise vague transactions become extremely clear when users begin to drill down. Usage of eReceipts has exceeded initial targets by upwards of 300 percent, with positive reviews and shares springing up organically.

In the future, Scotiabank may be able to leverage this additional data to improve customer experience and enhance revenue. Having access to consumer purchase history at the item-level could help Scotiabank better understand, and anticipate, their customers’ needs and preferences. The goal is to better personalize the banking experience, and offer targeted banking products or services based on an analysis of receipt and purchasing history. For example, if Scotiabank notices that a couple is purchasing items like cribs, baby formula and diapers, it might assume there’s a baby on the way and begin marketing a 529 College Savings Plan. In fact, Sensibill is already working to add an “insights” component for partners like Scotiabank, so that customer data generated by eReceipts can be more effectively extracted, organized and analyzed.

The partnership between Scotiabank and Sensibill is noteworthy because it tackles a problem that everyone seems to face in the physical world. With eReceipts, the two companies are taking a huge step towards helping people stay organized, maximize their tax benefits and know exactly how they’re spending their money.

And perhaps most importantly, eReceipts points to a world where we can finally toss that musty old receipt-filled shoebox in the closet.

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.

Three Takeaways from FinTech Week


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New York is always teeming with energy and excitement. Every corner, every street, every person contributes to the hum of the city. There was extra buzz in the air with FinTech Week taking over New York last week with multiple events. I’m now sitting back home in Charlotte, reflecting on my time at the FinXTech Annual Summit and at Empire Startups’ FinTech Conference, and I thought it was important to share some takeaways with you—particularly if you couldn’t make it.

Meeting in Person is Always Valuable
We communicate in so many different ways with our customers, colleagues and friends so it’s easy to think we’re in constant contact, that a rapport is building. Additionally, we send most of our digital communications when we decide—we can pause, think, or not respond at all! We secretly like this control of the conversation. But no matter how many e-mails, phone calls, or text messages you exchange there remains no substitute for meeting someone face to face. Conversations are fluid, you must be in the moment. You can form relationships quickly and you learn a lot more about the person from the minute you say hello. That is incredibly valuable.

What I enjoyed about FinTech Week, and particularly the FinXTech Summit, was the smaller, focused audience. It wasn’t overwhelmed with booths, swag, and marketing; it was hundreds of people, not thousands. I think large conferences and gatherings have their place but when you look back at all the events you attend, how many enable you to meet most of the attendees?

Reader takeaway: Look at the second half of 2017 and search for some more focused events to add to your calendar that enable you to learn and meaningfully connect with the presenters and attendees.

We’re Just Getting Started
Fintech is still figuring out the best path forward, which is a good thing! There is so much activity happening here and around the world (which you shouldn’t ignore). Inevitably, some people are just trying to ride the fintech wave. The crowd at FinTech Week was genuine in its desire to bring fintech innovation to market and to consumers.

There is a common tension in the fintech community and last week was no different. Everyone is excited and understands the potential. Many I met already are working towards the future. The big industry change is always tomorrow, not today. Well, that’s OK. Doing something hard, like changing the financial service industry, takes time.

Most of the 5,000-plus banks in the U.S. are just beginning their journey to digital transformation. Industrywide change doesn’t happen overnight-particularly in financial services. While some may find that frustrating, I find it exciting. It means that every financial institution getting started today has more products, services and industry knowledge from which to leverage and learn. The financial services ecosystem is only going to get better-and that is exciting!

Reader takeaway: If you think you’ve missed the fintech opportunity, you haven’t. We’re all experimenting with how to better serve our customers and there is plenty of room for improvement.

The Need for Action
Do something. Take the first step. Get involved and start implementing new ideas to improve the lives of your customers and employees. The initial stages of learning or doing something new make you feel dumber, not smarter. It makes you realize there is so much you don’t know. This is particularly acute if you’ve been in the industry for a long time. Don’t worry; this phase passes as you continue to familiarize yourself with the technology, new ideas and potential of fintech.

Financial services and banks enable people to invest for the future, buy a house, start a business and get an education. Fintech’s promise is to enable financial services to continue to meet the needs of their customers with a secure, delightful experience that fits in their daily lives-not takes them away from it.

Reader takeaway: Get to it. Next time, you can teach the audience what you’ve learned from fintech.

A week after FinTech Week, I am excited to get back to work helping people discover and engage with fintech. I implore you to go meet some people, find a customer problem to solve, and do something about it.

Advice for Fintech Companies Working with Banks


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For any fintech company that is just beginning to work with banks, the experience can at times be frustrating if ultimately rewarding. Banking and fintech companies are worlds apart in their perspectives. One is highly regulated and brings a risk adverse mentality to many of its decisions (guess which one that is), while the other is populated by entrepreneurial startups that fit the very definition of 21st century capitalism. One often approaches technological innovation with reticence if not outright resistance, while the other is all about technological innovation.

With such a profound difference in their basic nature, it might seem amazing that they are capable of working together, and yet there are many examples (and the numbers are growing) of banks and fintech companies cooperating to their mutual benefit. From the perspective of the fintech company, it helps to understand how most banks approach the issue of working with outside organizations, and their views on technological change in general.

“Fintech companies and banks each come with their own set of perspectives, and if you can empathize with each other, then you can marry those perspectives effectively,” says Sima Gandhi, head of business development at Plaid Technologies, a San Francisco-based fintech company that helps banks share their data with third-party apps through the development of APIs, or application programming interfaces. “Investing time to understand each other takes patience, but the returns are well worth it.”

For fintech companies, that can begin with an understanding of how many banks view technological change. Chicago-based Akouba provides financial institutions with a secure cloud-based platform for the origination of small business loans. Loan underwriting as it is still done today at most banks is a time consuming and paper intensive manual process, and Akouba’s goal is to speed up the application, decisions and administrative process by digitalizing it from beginning to end. And yet, according to Akouba CEO Chris Rentner, some banks push back at the idea of weaning their loan officers off paper. “They’re like, —Hey, you know what? We’ll just take the digital application, and we’re going to print off those forms and type the information into our old systems,’” he says. “I find it interesting that as banks are trying to buy new digital onboarding software, they don’t want the true digital engagement with a borrower.” The lesson here for fintech companies is that some banks will say they want to embrace innovation, but may limit themselves in the degree to which they will change old habits.

It’s also important to understand that the native conservatism that banks typically bring to third-party engagements is partly the result of strict regulatory requirements for vendor management, including data security. In recent years, federal regulators have become much more prescriptive in terms of how banks are expected to manage those relationships. Because in many cases, the bank would be giving the fintech company some access to its customer data, thereby creating a potential cybersecurity risk, it will most likely want to fully investigate a potential partner’s own cybersecurity program. This could very well include an onsite visit and extensive interviews with the fintech company’s information security personnel.

The federal requirements for vendor management that banks must adhere to are publicly available, so fintech companies should know them. “Don’t go into a bank trying to sell a product before you’ve gone through and collected your vendor management information, and reviewed and understood the standard that banks are being held to,” says Rentner.

The final piece of advice for fintech companies is to practice patience without sacrificing your company’s core principals. Gandhi says that successful collaboration rests on “the art of the possible.” “It’s important to remember that every problem is solvable,” she adds. “When the conversations get tough and you’re running low on patience, keep in mind that you’re both there because there’s a common goal. And you can best achieve that goal together.”

But if patience and an honest search for common ground ultimately doesn’t lead to a solution, Rentner says that fintech companies should resist making material changes to their products if they don’t believe that’s the right thing to do. Banks are slowly beginning to change as a growing number of them see the need for technological innovation, even if the pace of change is still slower than what the fintech industry wants. “Hold to your guns,” Rentner says. “Move forward, continue to sell your product. If you have enough time with a good product, you will get customers.”

How Can Your Bank Tap Into the Internet of Things?


internet-of-things-3-28-17.pngThe Internet of Things (IoT) has officially moved beyond hype. IoT is now well known and defined—basically putting data-gathering sensors on machines, products and people, and making the data available on the Internet—and companies are already using IoT to drive improvements in operational performance, customer experience and product pricing. Gartner predicts we’ll see 25 billion IoT data-gathering endpoints installed worldwide by 2020.

While IoT is delivering on its promise in a wide range of industries, many bankers are still struggling to find the value in finance, an industry largely built on intangibles. We see two primary IoT opportunities for banks:

  • Direct use of sensor data (location, activities, habits) to better engage customers and assess creditworthiness.
  • Partnering with companies that manufacture or integrate sensors into products to provide payment services for device-initiated transactions.

Engaging customers and assessing creditworthiness
Like most businesses, your bank can simply use IoT to understand—and serve—customers better. Banks are already implementing smart phone beacon technology that identifies customers as they walk in the door. Customers who opt in can be greeted by name, served more quickly and generally treated with more personalized care. You can also take advantage of sensor data outside of the bank to market more relevant services to customers. For example, data from sensors could […]

This content was originally written for FinXTech.com. For the complete article, please click here.