Reimagining A2A Transfers in a World of Real-Time Payments

Written by

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 Too often, consumers must rely on outdated processes such as traditional Automated Clearing House methods that can take days to complete, ultimately impacting time-sensitive investment opportunities and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

Written by

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

Written by

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.

The Future of Commercial Banking

Written by

Most of the attention around bank digitalization has focused on the retail experience. Retail banks have readily embraced technology to enhance the customer experience. But commercial banking can catch up, complete with business insights that increase customer engagement and add real value. In doing so, a bank can elevate its position from trusted transactional banker to strategic business partner.

In the U.S., there were more than 32 million small-to-medium size businesses (SMBs) in 2021, according to the Small Business Administration. Collectively they create 1.5 million jobs annually, according to Fundera, citing SBA data; this is around 64% of total new jobs. But the stakes of owning an SMB are high: almost half fail within the first five years and 20% fail within the first year, according to the Bureau of Labor Statistics. Most failures cite cash flow as a major contributor to failure. Banks can and should do more to help.

With a wealth of transactions data at their fingertips, banks can help SMBs understand their cash flow and manage their liquidity better. But transactional data is only part of the story. If banks can access their customer data held on internal accounting systems, they can obtain a holistic view of cash flow, gain unique insight into how their customer’s business is running, and offer help exactly when and where it’s needed.

Bank customers are increasingly willing to share their data: 82% of SMBs say they are willing to share data with their primary financial provider, particularly in return for business benefits, according to FIS research conducted in 2022. Moreover, we found that 66% of SMBs are interested in trusted advisory services. The time is right for such services.

Technically, it is quite simple for a bank to orchestrate data flows. Over 64% of SMBs in the U.S. use accounting software, such as Quickbooks, Xero, Sage and a handful of others, minimizing the amount of integration work and number of interfaces needed. So how can banks help SMBs businesses survive and prosper?

The Ideal SMB Banking Overview
A combined view of transactional bank data and accounting data allows banks to help an SMB understand exactly how much cash it has now and whether it has sufficient liquidity to meet upcoming obligations.

Incorporating accounting data can pull in open invoices and bills combined with cash flow forecast to build an accurate picture of how money is flowing throughout the business and compute standard accounting ratios. Such information can give an SMB owner, most of which don’t have much knowledge of accounting, some valuable business insight into how their business is performing.

A snapshot of cash flows allows users to modeling future performance by using “what if” criteria. Users can set thresholds of a minimum cash position to eliminate financial shocks to the business. If cash shortfalls seem likely, the user can be prompted to transfer funds from account, consider credit options or arrange to speak with a banker.

Benefits for Banks
All of this information that’s available to the customer can also be accessed by a banker, who can help with financial decisions and offer advice. Although this may be an opportunity for a bank to sell products, the real benefit is to add value to the relationship and build customer loyalty.

With all the relevant information in one place, bankers can be better prepared for customer meetings and, if required, can meet customers where they are. With many bank branches being repurposed as advice centers, bankers can use tablets to review customer business plans either in branch, at a remote location or in a virtual meeting. Whatever the location, this is relationship banking at its very best.

Millennials are currently the largest group of bank customers, according to the American Bankers Association. In the wake of Covid-19, many have reflected on their career choices; some have launched new businesses and entrepreneurship is a goal for 56% of the cohort. These individuals have bank accounts, and many will need business banking either now or in future. They see little distinction between retail and commercial banking. Banks must acknowledge that the retail customers of today are the business owners of tomorrow.

Monotto: Friend or Foe

Written by


friend-or-foe-3.png

Not since the baby boomer generation has a single demographic cohort been more sought after by the financial services industry than millennials currently are. A smart, cost-conscious and tech-savvy bunch, millennials are perceived as being almost ruthless when it comes to cutting ties with their bank for a better option. And this has put pressure on traditional institutions to come up with new, innovative ways to attract millennial customers—and even more so, keep them loyal. This is especially challenging as it relates to unexciting, but necessary, services like savings accounts.

And that’s exactly the problem that Atlanta, Georgia-based fintech startup Monotto is solving. A white-label software solution designed for banks to fold into their services, Monotto is designed to make saving money less frustrating (and more engaging) for millennial customers. More than just an automated savings-to-checking application, Monotto’s algorithm analyzes a person’s debts, savings, investments, financial history and designated goals to determine the right amount of automated savings.

Sounds great on the surface, but is Monotto truly poised to be a friend of banks, or is it potentially a foe? Let’s take a closer look and find out.

THE GOOD
The phenomenon of users discontinuing certain services at their main bank in lieu of other fintech services or applications has come to be known as “unbundling.” Monotto provides banks with tools to prevent this from happening, specifically with millennials. While it’s true that millennials love to try new apps and services outside of their main bank, statistics also show that they’re four times more likely to use an app they need if it’s offered by their current financial services provider. Monotto enables both banks and credit unions to provide competitive personal finance tools to their customers, therefore decreasing the risk of unbundling and creating a stickier relationship with account holders. But what makes Monotto stand out from the crowd of similar automated savings apps is that its Artificial Intelligence (AI) makes sure that the amount of money being transferred is suitable for that particular account holder, at that specific point in time. If someone is behind on a savings goal, it may automatically transfer more on a particular month. But the AI will also take into account past spending patterns and not transfer so much that it will impact a person’s monthly budget.

This creates a true “set it and forget it” savings experience that automatically adjusts depending upon changing life circumstances. Users can also quickly adjust current financial goals or set new ones. If someone has an urge to plan a vacation to the Bahamas, for example, they can easily place that in the application and have it determine how much more money they need to save each month to achieve that goal. Finally, Monotto’s predictive AI also benefits the upsell and cross-sell capabilities of banks. Based on spending patterns, financial goals and life events, Monotto’s engine can then push and promote highly relevant additional services that are well suited to the individual at that specific point in time.

THE BAD
One of the main hurdles that Monotto will eventually need to overcome is the amount of competition that exists in the automated savings space. This entails both third-party apps that millennials will use to unbundle, as well as those that seek to emulate Monotto’s approach by switching from a business-to-consumers approach to targeting banks directly. Digit, Qapital and Level are just a few examples in the space that perform similar functions. Rather than should a bank partner with one of these services, the question could very well become which program to choose.

Banks will need to familiarize themselves with Monotto’s analytics platform in order to gain an adequate understanding of the return on investment they’re receiving, as well as passing necessary information on to regulatory bodies. Operating on a SaaS model, Monotto does entail an ongoing cost to banks that use its services, rather than just a one-time capital expenditure to build out an application. This means that in order for Monotto to be the best option, banks will need to make sure they are able to engage in a way that allows them to utilize the tool as a revenue generator, rather than just supplying the feature, by identifying potential customers at their time of need for particular, stated, goals and products.

OUR VERDICT: FRIEND
Keeping up with third-party fintech applications can be a tough game for banks and credit unions. Anything that makes it easier for traditional institutions to keep pace is of great potential value. That’s why we’re putting Monotto in the “friend” category. Primarily, Monotto allows banks to offer millennial customers a top-notch automated savings application within their own ecosystem. And more than just another monthly checking-to-savings app, Monotto’s AI is able to understand customers over time and adjust to their specific needs, the main goal being to prevent millennial customers from unbundling and using third-party apps. Bankers should think of Monotto as a way to capture, maintain and grow deposits, find new loan opportunities with its existing customer base and ultimately to decrease the risk of losing savings accounts. Many millennials want to save; they just don’t know how—yet. With Monotto, saving is easy, intelligent, and maybe even fun—if you can say that about a savings account!