Reimagining A2A Transfers in a World of Real-Time Payments

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In today’s world of payments, speed matters.

Consumers increasingly expect faster everything, demands that are driven by the proliferation of peer-to-peer (P2P) payments enabling individuals to quickly send money to a friend or pay for products and services. The access, speed and convenience of faster or real-time payments are becoming the norm — that means greater opportunity for financial institutions to differentiate the money movement experiences they deliver to their customers. One area slower to initiate real-time speed is in traditional account-to-account, or A2A, transfers.

A2A transfers happen when a customer transfers funds between their own accounts (brokerage, crypto, savings and checking) held at two different financial institutions: for example, transferring funds from a savings or brokerage account to a separate checking account. Too often, consumers must rely on outdated processes such as traditional Automated Clearing House methods that can take days to complete, ultimately impacting time-sensitive investment opportunities and on-time bill payments.

“Today, consumers are accustomed to being able to quickly send money to friends and family using various P2P payment platforms. But moving money between your own accounts is still a lengthy and inefficient process,” says Yanilsa Gonzalez-Ore, senior vice president, North America head of Visa Direct.

Surveyed U.S. consumers own, on average, 8 financial accounts and conduct 15 transactions between them a year, accounting for $3 trillion in annual money movement via A2A transfers, according to a survey by Visa and Aite Group. This diffusion of their financial picture can result in the subsequent need to optimize finances and investments across those accounts — compounded by the desire and expectation that they can do it with ease anytime, anywhere.

We also found that 90% of surveyed U.S. consumers want the flexibility of real-time transfers between their financial accounts. And 70% of surveyed U.S. consumers said they prefer card-based real-time payments for transfers.

“Two factors that are driving customer demand today are user interface simplicity and real-time money movement,” says Gonzalez-Ore. “Disrupting the A2A space and delivering real-time payments can be a win-win for any financial institution. You may receive deposits faster, and in turn, you’ll potentially see higher retention from those clients by meeting their demand. There are potential benefits for everyone in the ecosystem.”

Younger demographics tend to be a step ahead when it comes to technology adoption and digital experiences. Quick gratification is the expectation for millennial and Generation Z customers. This matters now because there will likely be an overall demographic shift in the U.S., propelled by a transfer of wealth across generations. Banks should think about how they can expand their own money movement offerings in the ever-changing payments landscape.

“We will likely see more and more demand for faster, more seamless transfers and transactions,” says Gonzalez-Ore.

5 Reasons to Integrate Consumer, Mortgage Lending

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In today’s economy, banks should aim to deliver personalized offers for products and services that consumers need at the exact moment when they need them.

Unfortunately, many financial institutions house data about their various products, including consumer and mortgage loans, in departmental silos, resulting in lost opportunities to cross-sell products and services. Lost cross-sell opportunities may cause banks to lose money and account holders. When loan officers within each business unit are only interested in increasing the sales of their individual products, rather than enabling the sale of multiple lending products across their institution, they leave money on the table. Moreover, account holders may have different experiences, or be asked for the same information multiple times when applying for each loan type.

Although banks can offer affordable and competitive loan products and services to consumers, they need an effective strategy to break down silos and reach borrowers wherever they may be on their financial journey.

Millennial and Generation Z consumers, for example, are often first-time borrowers. As more members of these generations look to purchase homes, lenders will want to provide top-notch digital and personalized experiences and educate them about other financial products and opportunities.

Compounding that, rising costs due to inflation and the ever-changing economy are also taking their toll on consumers’ pocketbooks as they deal with debt, including credit card debt and student and auto loans. Forty-five percent of millennial and Gen Z adults are concerned that they will be denied mortgage loans because they have more debt than income, according to the Maxwell 2022 Millennial & Gen Z Borrower Sentiment Report.

While it’s no secret that consumers expect more from their digital interactions, financial institutions face challenges keeping up with technology change. Consumers are left feeling that their bank doesn’t offer the seamless experiences, value for the money or the innovation they want from their digital relationships.

To create the best possible experiences, banks should consider the benefits of integrating consumer and mortgage lending. Here are the main reasons why they should:

1. Eliminate Silos
Disparate consumer and mortgage lending teams create silos within a financial institution. A unified lending experience removes these silos and can lead to better communication, enhanced cross-sell opportunities and an improved overall consumer experience.

2. Create Better Application Visibility
Banks can streamline the lending process with the ability to access all open applications. This means that if a mortgage applicant has an existing application in progress within an integrated platform, lenders and bankers have visibility across systems.

3. Modernize Application Pre-Fill
Borrowers can save time and reduce errors when filling out new applications with a pre-fill feature. Pre-fill enables mortgage loan officers to access a consumer’s profile from the banking core data and use it to pre-fill a new mortgage loan application. This feature delivers a better, faster and more satisfying consumer experience.

4. Maximize Cross-Sell Opportunities
The consumer experience shouldn’t stop with simply fulfilling a borrower’s initial request. The bank’s system and processes should work to cross-sell and cross-qualify consumers to improve their financial well-being and deepen the relationship.

5. Optimize Consumer Debt
One innovative way that bans can go beyond the initial closing is enhancing customer relationships using a debt optimization approach. This approach reviews the borrower’s outstanding loans to find and recommend refinance options for auto and personal loans to help reduce the borrower’s debt-to-income ratio. This can increase the chances that a borrower will be approved for a better home loan, saving them money.

Integrated consumer and mortgage loan origination systems simplify the digital lending process. Forward-thinking lenders use data to tailor their products to borrowers’ needs, offering consumers the right products and services at the right time to create positive experiences along with additional banking products.

Winning the Trust and Loyalty of Younger Generations

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Traditional banking is rapidly evolving; long gone are the days when community banks could impress potential customers simply with the number of brick and mortar locations they have or a wholesome in-person experience.

Members of millennials and Generation Z make up the largest population demographic in the United States. They have high expectations from the companies they do business with, including their financial institution. Unlike their parents and generations before them, customers of these younger generations value the digital experience that companies can provide, and often use that as the determining factor when choosing their primary bank.

Millennials and Gen Z customers are considered digital natives who have grown up surrounded by tech companies using electronic payments; they’re used to digital experiences that are instant and seamless, in every aspect of their lives. This creates an expectation that daily banking will be built around them and their needs — but unfortunately, community banks are having trouble keeping up. While these institutions are known for creating high-touch, personalized experiences for their customers in person, translating this capability to digital experiences isn’t always easy.

There are three things community banks can do to win the trust and loyalty of younger generations.

1. Create a Human, Digital Connection
Although a seamless digital experience may be the top priority for millennials and Gen Z, they still have a desire for a human connection for situations where they cannot find a solution or answer online. The key for banks is to find the balance in providing both — this requires understanding what younger generations want from a bank and putting that in the context of a digital experience. Banks must put forth effort in embedding digital banking with their face-to-face interactions.

2. Provide Tailored Experiences
Taking on a “people first” mindset is essential to thriving in the platform era. Potential customers enjoy very tailored experiences from companies like Apple and Uber Technologies; they carry those same expectations for their community financial institutions. Personal and tailored interactions that go beyond addressing customers by their first name can greatly improve long term loyalty and trust.

One competitive advantage community banks have over fintechs and neobanks is the large amount of data they can use to improve their cross-selling and upselling efforts.

3. Utilize an Engagement Banking Platform
To thrive in the platform era, community banks need to make a paradigm shift from vertical silos that can be hard to change — and even harder to stitch together — when attempting to meet the needs of customers. Instead, they must move to a single customer-centric platform, leaving fragmented journeys behind and leading into the new era of banking. An engagement banking platform can eliminate fragmented member experiences by plugging into your institution’s core banking systems, integrating with the latest fintechs and providing ready-to-go apps for the bank’s various business lines.

The platform era isn’t going anywhere; choosing to continue traditional banking practices isn’t an option for community banks that hope to thrive and become industry leaders. It’s time to embrace the disruption, rather than run from it, and prepare for digital transformations that will re-architect banking around customers.

Renew, Recharge and Reassess Customer Service

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As interest rates rise and the retail housing market cools down, lenders are bracing for an uncertain environment.

While banks cannot control the market, they can control how they respond and future-proof their business. Successful navigation in these unchartered waters requires institutions to reassess traditional product, service and industry boundaries in order to capture and create new sources of value. Digital transformation and innovation will remain an important strategic priority in 2023 and beyond — however, it is now equally important for institutions to provide lasting value to customers through personalized, highly tailored services.

The slowing housing market creates a unique opportunity for financial institutions to revisit and refresh these fundamentals, including exploring how they can deliver a more personalized experience. As banks remain focused on their roles as financial intermediaries, this time of challenge can also be a time of opportunity to strengthen existing relationships and expand loyalty with customers. Lenders can also take advantage of a slower market by implementing new automation strategies to further streamline their mortgage loan process. Successful institutions will recognize that this slower pace enables them to recharge, rethink and renew their focus on providing customers a superior experience.

Accelerating personalization and building loyalty is critical in today’s increasingly competitive financial services market. The answer isn’t just faster, more automated technology; financial institutions must adapt a hyper-personalized approach. According to a recent NCR study, 60% of U.S. banking consumers want their primary financial institution to provide personalized financial advice. Many Americans are facing an uncertain financial future and don’t believe their financial institution is providing the necessary support.

To successfully deliver that personalized experience, institutions must leverage data to provide more relevant, timely support. That means more effectively gathering and analyzing data to yield insights that ultimately help the bank connect with the customer. Banks should have the most accurate and complete picture of their customer’s economic health, which allows them to make meaningful suggestions and provide impactful advice. Consumers can then look to their data enabled and informed banker as a guiding force helping them build a more stable financial future.

Anticipating customer needs and catering to them with personalized offerings allows banks to generate increased revenue, all the while meeting customer expectations around personalized experiences. According to the 2019 Accenture Global Financial Services Consumer Study, one in two consumers wants personalized banking advice based on their circumstances. They want an analysis of their spending habits and advice on handling money. Additionally, 48% of respondents indicated that personalized banking data, such as spending, would help them change how they used their money.

A 2021 Capco research report found that 72% of customers say personalization is highly important in today’s financial services landscape. This number increases for younger generations: 79% of Gen Z customers say it is critical their financial institutions provide more personalized offers and/or information to help them reach their financial goals.

Customers provide banks with a lot of information about themselves across their interactions. Banks can use this data carefully, employing technology like artificial intelligence to anticipate customer needs. Anticipating and then proactively acting on those needs is crucial to creating an effective, personalized experience. Banks can also position products with sensitivity, effectively demonstrate their understanding of their customer’s unique needs or suggest curated products that demonstrate a knowledge of that customer’s specific financial needs and ultimately, build lasting loyalty.

Banks should also consider the way they approach economic distress in a manner that doesn’t weaken customers’ future foundation. Institutions should examine their interactions with both the rental market and the single-family ownership market. Banks need to think in terms of households, not consumers. Consider the household and heads of households instead of thinking of them as consumers.

There is an opportunity in this moment for institutions to create more personalized offers that are relevant to their customers. To succeed, banks must take operational steps to authentically personalize offerings to their customers, using technology in a way that’s fair and compliant.

The War for Talent in Banking Is Here to Stay

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It seems that everywhere in the banking world these days, people want to talk about the war for talent. It’s been the subject of many recent presentations at industry conferences and a regular topic of conversation at nearly every roundtable discussion. It’s called many things — the Great Resignation, the Great Reshuffling, quiet quitters or the Great Realignment — but it all comes down to talent management.

There are a number of reasons why this challenge has landed squarely on the shoulders of banks and organizations across the country. In the U.S., the workforce is now primarily comprised of members of Generation X and millennials, cohorts that are smaller than the baby boomers that preceded them. And while the rising Gen Z workforce will eventually be larger, its members have only recently begun graduating from college and entering the workforce.

Even outside of the pandemic disruptions the economy and banking industry has weathered, it is easy to forget that the unemployment rate in this country was 3.5% in December 2019, shortly before the pandemic shutdowns. This was an unprecedented modern era low, which the economy has once again returned to in recent months. Helping to keep this rate in check is a labor force participation rate that remains below historical norms. Add it all up and the demographic trends do not favor employers for the foreseeable future.

It is also well known that most banks have phased out training programs, which now mostly exist in very large banks or stealthily in select community institutions. One of the factors that may motivate a smaller community bank to sell is their inability to locate, attract or competitively compensate the talented bankers needed to ensure continued survival. With these industry headwinds, how should a bank’s board and CEO respond? Some thoughts:

  • Banks must adapt and offer more competitive compensation, whether this is the base hourly rate needed to compete in competition with Amazon.com and Walmart for entry-level workers, or six-figure salaries for commercial lenders. Bank management teams need to come to terms with the competitive pressures that make it more expensive to attract and retain employees, particularly those in revenue-generating roles. Saving a few thousand dollars by hiring a B-player who does not drive an annuity revenue stream is not a long-term strategy for growing earning assets.
  • There has been plentiful discourse supporting the concept that younger workers need to experience engagement and “feel the love” from their institution. They see a clear career path to stick with the bank. Yet most community institutions lack a strategic human resource leader or talent development team that can focus on building a plan for high potential and high-demand employees. Bank can elevate their HR team or partner with an outside resource to manage this need; failing to demonstrate a true commitment to the assertion that “our people are our most important asset” may, over time, erode the retention of your most important people.
  • Many community banks lack robust incentive compensation programs or long-term retention plans. Tying key players’ performance and retention to long-term financial incentives increases the odds that they will feel valued and remain — or at least make it cost-prohibitive for a rival bank to steal your talent.
  • Lastly, every banker says “our culture is unique.” While this may be true, many community banks can do a better job of communicating that story. Use the home page of your website to amplify successful employee growth stories, rather than just your mortgage or CD rates. Focus on what resonates with next generation workers: Your bank is a technology business that gives back to its communities and cares deeply about its customers. Survey employees to see what benefits matter most to them: perhaps a student loan repayment program or pet insurance will resonate more with some workers than your 401(k) match will.

The underlying economic and demographic trend lines that banks are experiencing are unlikely to shift significantly in the near term, barring another catastrophic event. Given the human capital climate, executives and boards should take a hard look at the bank’s employment brand, talent development initiatives and compensation structures. A strategic reevaluation and fresh look at how you are approaching the talent wars will likely be an investment that pays off in the future.