In this excerpt from Reinventing Banking, Bank Director’s special podcast series sponsored by Microsoft Corp., Derik Sutton points to the value that community banks provide to their local small businesses. But that’s evolving in the digital age, as businesses have new ways to access capital and get paid. In the conversation, he discusses:
What’s Changed in Banking Small Businesses
How Mobile Apps Could Become Payments Terminals
Reconnecting With Customers
To listen to this episode in its entirety, click here.
For years banks have looked to fintechs to make their digital offerings more convenient, an area where legacy core systems have been slow to develop. That remains a primary goal for some institutions that have been slower to adopt modern digital capabilities.
Banks attending Finovate Fall Sept. 24-26 in New York City were looking for fintech partners that could help them bolster their main value proposition: deep customer relationships and personalized customer service. Several companies are serving up unique capabilities such as providing restaurant recommendations or basing savings goals on how well your favorite soccer team performs.
Dan Latimore, senior vice president of banking at the research firm Celent, tweeted that customer experience was the leading topic of discussion at this year’s fintech-heavy U.S. conference, but it’s not just the conveniences of a robust mobile app that banks are rolling out. Some banks are working with fintechs to build unusual but highly personalized capabilities in their digital experience to drive human interaction and improve the quality of their customer relationships.
Three unique examples of bringing the bank and its customers closer together involve recommendations from the bank through its fintech partner.
Tinkoff Bank – Tinkoff Bank, a branchless Russian bank with $278 billion in assets according to its most recent disclosure, bills itself as a “digital ecosystem of financial and lifestyle products.” The bank’s mobile app goes beyond traditional banking services to provide things like restaurant recommendations, user tips and troubleshooting advice. Tinkoff engages its user base of about 7 million customers through stories that are similar to those used in popular social media apps like Instagram.
Meniga – This London-based fintech’s transaction categorization engine helps banks personalize their digital channels. Meniga presented at the conference with client Tangerine Bank, a Canadian direct bank and subsidiary of Toronto-based Scotiabank with $38 billion in total assets. The bank’s app recommends personalized savings goals.
For example, Tangerine’s app will notice if a user is a fan of a particular soccer team based on their purchasing history. The app can then automate a savings challenge for the user that will move money from their checking account to savings every time the team scores a goal.
Bond.AI – One of several chatbots in attendance at Finovate, Bond brands itself as an “empathy engine” that understands the context of financial data. In addition to answering basic banking inquiries, Bond proactively recommends behaviors users should take and products that fit their lifestyle.
Meniga and Bond.AI were both awarded Best in Show by conference attendees. They represent an emerging focus on understanding a customer’s lifestyle through transaction data and then making helpful recommendations to them based on that information, which are often described as artificial intelligence or machine learning. This is the latest stage in the innovation of fintech capabilities, which began by making the bank’s digital experience more convenient and friendly to mobile users.
These capabilities have been popular topics at national conferences, including Bank Director’s FinXTech Summit, held in May at The Phoenician in Phoenix, Arizona.
There’s no doubt that the challenges of partnering with fintechs was a much different proposition than when fintech firms were stood up some 10 years ago. Now, more than a decade into some fintech life cycles, the firms have matured.
Fintechs have learned to work within the regulatory framework, core system capabilities and other legacy issues banks have long been familiar with. Banks, on the other hand, have become more open to partnership with smaller, nimble tech companies.
The technology banks need to engage customers on a meaningful level has arrived. Fintechs have established themselves as viable business partners. Consumers are demanding more convenient digital experiences and many banks are progressing in meeting those demands, but those who don’t continue to lose ground in being able to grow or remain competitive.
In the spring of 2015, new leadership took over TCF Financial Corp., based in Minneapolis, and set about a course that would reshape the bank from the inside out.
At that time, the bank was in the midst of rebranding itself when Craig Dahl took over as CEO, and hired Tom Butterfield as chief information officer to usher in a new era of online banking that would keep the $23 billion asset bank on a level playing field with much larger competitors.
“We were not there. We had identified some pretty significant gaps in our market to our competitors,” Butterfield says. “Not the least of which was mobile remote deposit capture.”
That specific capability is coveted by both bankers and customers, who favor on-the-go functionality while banks enjoy the ability to increase their core deposits at a time when the competition for customer loyalty and their funds has increased sharply.
The bank went to market with a very specific request for information, or RFI, that solicited a very specific technological architecture that would remake its online user experience to be seamless between devices, but also adapt to its highly customized core technology and allow the opportunity for scale. While this limited the number of firms capable of handling the project, it also allowed the bank to customize its own technology. D3 Banking Technologies, based in Omaha, Nebraska, was one of the few who could handle the specific and unique request.
In the end, the D3 built an all-new online banking experience for TCF, which migrated 1.2 million accounts to the new platform over 15 months, from the time the board approved the funding for the project to complete migration, which they completed last fall.
D3, like other fintech partnerships, reinvented the TCF customer experience using application programming interfaces, or APIs, that function similar to a server at a restaurant. In TCF’s case, there are two layers of APIs that were necessary to adapt what Butterfield describes as a “highly customized” legacy core system that differs from typical core systems like those offered by Jack Henry, FIS or Fiserv. Butterfield described TCF’s core as “many many years old that doesn’t lend itself to interacting well with these modern technical platforms.”
The top layer is what D3 built and actually makes the experience, but there is a middle layer of APIs the bank built that connects the core, and also enables the bank to be able to customize and scale into other technologies, like voice commands (think Amazon Alexa or Google Home), and others.
The real-world implication of this new technology became clear when Apple rolled out its iOS 10, which swapped fingerprint recognition for facial recognition security. Mobile apps for megabanks like Bank of America were live with the new tech almost instantly. So was TCF.
“We feel like we can compete with the best banks in the country and the best platforms in the country,” Butterfield says.
Customers who had been migrated to the new system also had questions, Butterfield says. In anticipation of that transition, TCF put “digital ambassadors” into branches that offered customers—some of whom physically carried their laptops into the branch to get help—training on the new system, a scenario that represents the transformation that TCF put in place.
“The fact that our branches were a part of this story and part of this journey is a key piece of its success,” Butterfield says
Beyond the tech itself, Butterfield says the move to emphasizing technology inspired wholesale changes within the bank’s own culture. TCF literally tore down cubicle walls and put its IT and business staffs at the same table—often referred to as bench seating—reducing the barriers between the two wings of the bank that typically operate independently.
The integration fundamentally changed the way the bank works, making it unique compared to other banks who still hold true to traditional structures.
“That breaking down of silos is really key of how we got this done in 15 months,” Butterfield says.
Since the completed rollout in the fall of 2017, the bank has reduced payment processing costs by $1.3 million in the first year alone, and Butterfield said there has been a 400 percent increase in adoption rate, and a 250 percent increase in accounts opened by existing customers through the platform, and a reduction of 2.6 percent in checking account attrition, all signs the bank sees the tech has increased loyalty and potential for deposit growth, even as the largest banks grow their deposits over community and regional competitors.
It’s not common to see global fintech firms and healthcare companies eagerly partner with a small bank in Weir, Kansas, but dozens of companies from an array of industries have done just that.
But the chief technology officer who’s led the way with a unique approach to blending technology and banking describes what he’s done over the last nine years as nothing more than “common sense.”
“The wheel was revolutionary for about a minute before everybody else realized they could do it too,” said Suresh Ramamurthi, the CTO of CBW Bank and CEO of Yantra Financial Technologies, the tech firm he established to bring efficiencies to banks and other companies who want to process payments or manage risk.
The state-chartered bank with just $33 million in assets, located in small town Weir, Kansas, is about as far from a major financial hub as any place in America, but the bank helped put the town back on the map. The town first rose to prominence as the place where the flyswatter was created. CBW remains one of the only things still remaining in the town’s center. Less than 1,000 people live there, and it’s the only branch the bank operates.
Ramamurthi and his wife, Suchitra Padmanabhan, acquired the bank in 2009, mostly with personal savings. He came from a career in the tech sector which included a brief stop at Google, while Padmanabhan had a career at Lehman Brothers. CBW had a rough balance sheet, and the two had to spend some time getting the bank back on a solid footing. Ramamurthi and Padmanabhan have been featured in The New York Times and Fortune, and have earned national awards and praise for their innovative approach to banking and technology. The praise is not because they give away cookies and cider in the branch as the Times reported, or that it still is one of the primary lenders to local farmers and home buyers, but because of what they’re doing with fintech.
Ramamurthi, leaning on his experience with Google and tech background, also started Yantra Financial Technologies, a fintech firm that initially focused on speeding up the payments process, which at that time could take days or even weeks if, for example, transfers were being made around the globe. From that beginning has evolved the Y-Labs Marketplace, which enables companies, regardless of sector, to explore banking and payments, specifically, within that marketplace.
CBW and Yantra are the winners of Bank Director’s FinXTech Innovative Solution of the Year, one of three annual awards that recognizes successful collaboration between banks and fintech companies. The awards were announced at Bank Director’s FinXTech Annual Summit, held this May in Scottsdale, Arizona.
CBW and Yantra have published about 500 application programing interfaces, or APIs, which allow third-party developers to build apps and connect them to the bank’s core data systems, while maintaining compliance, which in itself could be a huge financial and legal burden. It’s how banks can keep pace with the rapidly evolving digital marketplace without developing the apps themselves, and allows banks and other firms to come to market at a 21st century pace.
That, Ramamurthi says, is where the common sense lies.
“In banking, your core competence should be in the (area) that (is) the most expensive area for banking, which is compliance,” he says. “If you can digitize all aspects of compliance, then you have an advantage.”
The Y-Labs Marketplace, which Ramamurthi runs as the CEO, has grown its client list to more than 100 that includes mostly other fintech firms like Moven and Simple—known well in the banking industry—in addition to insurance companies, a claims processor, healthcare companies and hospitals, which have used the marketplace to improve their payments systems, while also automating their compliance verifications and other tasks that are often costly and time consuming.
The bank itself remains quite small, though it continues to grow steadily and supports the local community. Ramamurthi has been widely recognized as an innovator and is upending the industry by establishing what he describes as a foundation that will eventually lead to advances in artificial intelligence and machine learning for the banking industry.
And there’s no indication that CBW or Yantra plan on slowing the effort to innovate.
Later this year, he said they plan to launch a “very special” mobile app, which he described as “a common-sense approach to how mobile apps should be for banking.”
Although Ramamurthi declined to discuss details, the app will “rethink” the relationship between customers and the bank, which has traditionally started with common retail accounts and then developed into loans and other more complicated arrangements, he said.
The banking industry saw one of the biggest technological developments of the year in June with the introduction of Zelle, a peer-to-peer (P2P) payments app now offered by over 30 of the leading U.S. financial institutions. Participating are some of the biggest names in banking, such as JPMorgan Chase & Co., Wells Fargo & Co., Bank of America Corp., Citigroup and Capital One Financial Corp., as well as many smaller banks through partnerships with leading payment processors.
The ability to make quick and easy peer-to-peer payments across banks has existed for a few years now, although most banks haven’t had this capability. In fact, PayPal’s Venmo has overwhelmingly dominated the peer-to-peer payments space. The introduction of Zelle marks the first bank-backed response to Venmo, and thus, the banking industry’s most significant attempt to capture some P2P market share from third-party technology providers.
It remains to be seen whether Zelle will be able to trump Venmo’s popularity, but in either case, its launch can teach banks a few valuable lessons about their own service offerings.
The Appeal of Venmo Venmo was launched independently in 2009 and later acquired by PayPal in 2013 after gaining considerable traction, especially among millennials. Perhaps one of the reasons it saw so much popularity with this demographic is the built-in social elements that appeal to millennials’ desire to connect with friends online and to “see and be seen.” Users can view friends’ transactions through a newsfeed, send personalized transaction messages and even integrate with Facebook so it’s easier to locate friends.
Another major reason for Venmo’s popularity is its ease of use. The app now supports text and voice control integration, seamlessly aligning with how users are already using their phones by allowing them to send or request payments simply by sending a text or dictating the command to their phone.
The Introduction of Zelle With the wild popularity of Venmo, many banks realized they were being blown out of the water when it came to peer-to-peer payments. In response, Bank of America, Wells Fargo, and JPMorgan Chase teamed up with payments technology company Early Warning to begin developing their own app that could facilitate payments between their customers.
While Zelle has the disadvantage of its network being limited to participating banks, the app introduces a few compelling benefits that make it a true contender for Venmo. Primarily, there’s a feeling of security that comes with an app associated with the bank itself, since users won’t have to submit sensitive data into a third-party platform.
With transfer between banks using Zelle, users will also be able to receive money instantly instead of having to wait a few days for the transaction to process through Venmo. They’ll also enjoy a more seamless banking experience as Zelle is accessed through the host bank’s existing mobile banking app so customers making P2P transactions can also complete other banking tasks within the same platform.
What Banks Can Learn Ultimately, the launch of Zelle isn’t just a lesson for banks to offer innovative technology. More importantly, it’s a reminder for them to keep an eye on technology companies and the way they’ve influenced bank customers, or else they may be missing out on valuable business opportunities.
So why did banks wait so long to present a competitive solution to Venmo? Even though many noted the popularity of Venmo years ago, they might have waited because there was no straightforward way to generate profit in the P2P space.
However, providing a relevant, convenient and user-friendly experience is of the utmost importance for banks, as that’s what continues to attract and drive business—and ultimately, does generate a profit. Given how prevalent technology has become to consumers’ daily lives, building technology into this experience is not only essential but expected.
Regardless of whether or not Zelle comes out on top, its launch is only a positive for banks. The innovations Venmo and similar companies have introduced have forced banks to reprioritize and modernize their services, focusing more on building deeper, more valuable relationships with their customers than simply on profits. And with those relationships, profits will come.
Mobile technology is simplifying banking for consumers in a plethora of areas—from payments to investing. But one area that’s been a sticking point for mobile banking, and is undergoing rapid transformation, is the ability for customers to open a brand-new account using nothing else but their smartphone.
The steps required to open a new account with a new financial institution usually require customers to fill out forms, speak to a representative on the phone, or even go into a branch. However, banks and fintech companies are beginning to partner to develop mobile apps that allow new customers to set up an account via their smartphone almost instantaneously.
That’s precisely the area that Somerset Trust Co., a $1 billion asset bank headquartered in Somerset, Pennsylvania, was looking to improve when it partnered up with BOLTS Technologies to improve its mobile new account customer experience. Somerset Trust, which was started by Civil War veteran Edward Scull and his son in 1889, has 29 physical branches across Pennsylvania and Maryland dedicated to customer friendly community banking. Today, Chief Executive Officer Henry Cook, a descendent of Edward Scull, manages the business his family started more than a century ago, but with the goal of leveraging technology to better service their customers.
One of the major problems facing Somerset Trust was the its digital new account signup processes. After conducting an audit of the process, the bank realized that there were serious deficiencies in the customer experience. Somerset Trust was also struggling to grow the business and obtaining funds to invest in modern technology. Customers simply weren’t drawn to Somerset Trust’s product offerings, due in part to apparent complexities in using its digital services. So, the bank decided to partner with BOLTS, located across the state in Bethlehem, Pennsylvania, to develop a sign-up experience designed to be consistent, timely and seamless across channels and devices.
BOLTS Technologies specializes in providing software to assist banks in better meeting customer needs, particularly in new account signups via digital channels. Moreover, BOLTS has worked with community banks for a number of years, and has developed a deep understanding of issues faced by community banks and areas they typically need to improve products or services.
One of the major technologies that banks fail to implement is fingerprint recognition and login, which BOLTS helped integrate into Somerset’s processes. The introduction of fingerprint recognition software on Somerset’s mobile application not only makes account sign-up easier, but allows banking staff to complete tasks seamlessly on mobile devices or tablets.
BOLTS spent several months working with the operations team at Somerset Trust, and early in the process identified the need to empower customer reps as such. This flexibility for branch staff was essential to the bank’s goal of securing an edge in relation to competitors’ approach to mobile technology. The result was a signup application that seamlessly moves from customers’ devices to desktops and tablets of back-end staff. The signup application was also built with a dynamic, rules-based engine that allowed the bank to more easily change and optimize steps in their account opening workflow. Auto-population features were also built in, which reduced data entry errors both from customers and branch staff. Consequently, Somerset Trust can shift its employee training efforts to more critical areas like customer service and interaction.
Somerset Trust customers are now able to start their onboarding on one digital channel, and complete the process on another. Starting an application on a laptop and coming back a day later to complete it on a mobile phone is a breeze. BOLTS also installed dynamic reporting functionality for customer service staff, allowing them to do things like follow up on hot leads and recognize their most valuable customers.
Since recently launching the BOLTS powered account opening product, Somerset Trust has been able to slash the average time it takes to open a new account. This is expected to generate an estimated savings of approximately $200,000 in year one. The new technology has also allowed the bank to expand into new markets that aren’t served by its brick-and-mortar locations, something it had struggled to do previously. Customers now have a reliable way of opening a new account 24/7 on their mobile device, without the need to visit a branch.
The partnership between Somerset and BOLTS continues to evolve, with the two companies currently developing a digital solution for loan and deposit origination utilizing the speed and convenience of tablet devices.
“BOLTS [Technology] has been a true partner to us, giving our bank access to IT talent and resources that compete with the largest of banks,” says Cook.
“Their approach allows us to focus on the customer experience, as well as break the status quo in traditional banking systems. It’s an exciting and invigorating feeling knowing that we have the resources to develop such ideas and position Somerset Trust Co. for a very promising future for our stakeholders.”
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.
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.
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!
After sweeping the sidewalk, the first job G. Henry Cook had more than four decades ago at his family-owned Somerset Trust Co. in Somerset, Pennsylvania, was putting checks in alphabetical order. This was the “most mindless, frustrating and stupid job I have ever done in my life,’’ he says. “That week was when I developed a commitment to figure out how technology can make banks smarter, so we can free up our people to really take care of customers.”
Today, Cook is president, chairman and CEO of Somerset Trust Co., which is on the leading edge of community banks in terms of mobile technology. At roughly $1 billion in assets, the bank has a mobile app that allows customers to log in with a fingerprint instead of a password, turn on and off their debit cards using the app and pay their bills with their smartphone camera. Soon, the bank will make it possible for new customers to open an account using the mobile app, instead of signing up through online banking or walking into a branch. The first step is to roll out the mobile platform inside a couple of branches, so bank staff can quickly enroll new customers using an iPad. In the first quarter, the bank hopes to make mobile account opening available to customers using their own devices anywhere, says Chief Operating Officer John Gill.
Mobile account opening is so new, it’s hard to find statistics on it. Almost all the banks that allow it are larger than $50 billion in assets. But it’s increasingly talked about as an avenue to generate new customers and accounts in an age when consumers increasingly rely on their smartphones for everything.
“Most community institutions do not really have a good strategy for account opening on the phone,’’ says Jim Burson, senior director at Cornerstone Advisors, a consulting firm in Scottsdale, Arizona. “Most people have the basic functional [items such as], ‘I can make a payment, I can check my account balance.’ But the big gap that needs to be closed is the account origination and loan origination piece of mobile.”
Gill says the bank simplified a lot of its own front-end and back-end processes to make it happen, so the app, for example, will scan identification such as a driver’s license, process the identification verification and order debit cards automatically. The bank also sends disclosures electronically. The same account opening system will work online as on the mobile app. “We’re trying to make this device independent,’’ he says. “Our branches say it is so time consuming to open an account. It really makes the customer experience better.”
Somerset is using Bolts Technologies to launch the new account opening platform. It already uses Malauzai Software for its mobile platform and Fiserv as its core processor. Gill and Cook declined to provide estimates of the costs and savings associated with mobile account opening. But being a privately owned bank certainly helped justify the investment, Cook says. “An awful lot of traditional businesses [are] very afraid of taking the incremental risk because some Wall Street types are going to be on their backs: ‘What about this quarter?’ The job of the CEO is to maximize shareholder wealth over time, and somehow that has been lost.”
Only about 10.6 percent of all the banks and credit unions in the country had fingerprint authentication as of March, 2016, according to an estimate in Mobile Banking Quantified, a report by research firm Celent and FI Navigator. Fewer than 1 percent had photo bill pay and 4.1 percent had debit card on/off switches in the app.
Why does Somerset, a community bank, want to be in the league of only a few banks offering such services? In the late 90s, the bank was struggling to grow and had only about $200 million in assets. It surveyed about 10,000 people, who said they wanted to do business with a community bank, but perceived that community banks just can’t “keep up.” Cook decided that the bank, in fact, would need to keep up. “Why do people not deal with local banks? They don’t think they’re experts. What does an expert mean in this day and age? We think technology is part of that answer.”
For years banks have looked to fintechs to make their digital offerings more convenient, an area where legacy core systems have been slow to develop. That remains a primary goal for some institutions that have been slower to adopt modern digital capabilities.
In the spring of 2015, new leadership took over TCF Financial Corp., based in Minneapolis, and set about a course that would reshape the bank from the inside out.
It’s not common to see global fintech firms and healthcare companies eagerly partner with a small bank in Weir, Kansas, but dozens of companies from an array of industries have done just that.
The banking industry saw one of the biggest technological developments of the year in June with the introduction of Zelle, a peer-to-peer (P2P) payments app now offered by over 30 of the leading U.S. financial institutions. Participating are some of the biggest names in banking, such as JPMorgan Chase & Co., Wells Fargo & Co., Bank of America Corp., Citigroup and Capital One Financial Corp., as well as many smaller banks through partnerships with leading payment processors.
After sweeping the sidewalk, the first job G. Henry Cook had more than four decades ago at his family-owned Somerset Trust Co. in Somerset, Pennsylvania, was putting checks in alphabetical order. This was the “most mindless, frustrating and stupid job I have ever done in my life,’’ he says. “That week was when I developed a commitment to figure out how technology can make banks smarter, so we can free up our people to really take care of customers.”