Reflections on Fintech at Bank Director’s Acquire or Be Acquired Conference


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I spent the first part of last week in Phoenix at the Bank Director Acquire or Be Acquired (AOBA) conference and as always I came away feeling like I knew more about industry conditions and expectations than I did when I got on the plane. If you are a bank executive, you should probably be there every year and may want to consider taking your team on a rotating basis every year. If you serve the industry in some way, you must be there as well. If you are, like me, a serious bank stock investor, you need to be there at least once every few years to stay on top of how bankers feel about their industry and how they plan to grow their banks.

The mood this year was much more upbeat than last year. All the concerns about low interest rates, regulatory costs and other potential headwinds have been blown away by a blast of post-election enthusiasm. Bankers were almost giddy in anticipation of higher rates, a stronger economy and possible regulatory relief. Everyone I talked with during my three-day stay was upbeat and enthusiastic about the future of banking.

There has also been a tremendous change in bankers’ view of fintech of late. Fintech companies have often been viewed as the enemy of smaller banks, and I have talked with many community bankers who are legitimately concerned about their ability to keep up with the new high-tech world. One older gentleman told me at Bank Director’s Growing the Bank conference last May in Dallas that if this was where the industry was going, he would just retire as there was no way he could compete with the upstart fintech companies.

Over the course of the last year, however, a different reality has begun to set in. Fintech companies have discovered that the regulators and bankers were not ready to concede their traditional turf and consumers still like to conduct business within the highly regulated, insured-deposit world of traditional banking. Banks have begun to realize that instead of relying on their traditional practices, much of what fintech companies are doing could make them more efficient and enable them to offer services that attract new customers and make those relationships stickier.

It has become apparent to many of the bankers I chatted with that fintech is not a revolution but an extension of changes that has been going on for years. Drive through bank branches and ATMs were also thought to be revolutionary developments when they were introduced, and today they are considered standard must-have items for any bank branch. Mobile banking is just another step along the evolutionary scale. More customers today interact with their mobile devices than through traditional means like branch visits, phone calls and ATM transactions. That’s not going to change, and bankers are adjusting.

Chris Nichols of CenterState Bank spoke in a breakout session about using fintech to improve the bottom line. He pointed out that if you used the traditional banking approach based on in-branch transactions it cost about $390 per customer per year to service your clients. Using the same cash required to build a branch and spending it to improve the bank’s mobile offering could bring the annual cost per customer down to just $20 a year. Processing a customer deposit costs the average bank about $2 if done in a branch and just $0.20 if done via a mobile phone. Nichols also suggested that acquiring a C&I loan customer could be as high as $14,200 when done via traditional banking methods, but the expense drops to just $3,060 if the transaction is done on a mobile platform.

The proper use of fintech, according to Nichols’ presentation, should also allow banks to lower their efficiency ratio and increase their returns on assets and equity. That is the kind of news that gets bank CEOs and boards excited about expanding the use of technology even if they still carry flip phones and use AOL for home internet.

While you can expect to see partnerships between bankers and fintech companies expanding in the future, bankers will use the technology that reduces costs or creates more revenue streams. They will offer the mobile payment and deposit services customers demand today. The litmus test for technology is, “Does it make or save me money or dramatically improve my customer relationship?” If the answer to these questions is no, then banks will pass on even the most exciting and innovative fintech ideas. They are bankers, after all, not tech gurus.

Three Ways Fintech is Riding the Social Commerce Wave


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

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

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

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

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

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

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

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

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

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

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

Taking a Chance on the Unbanked


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Financial inclusion is a hot topic in our community, and for good reason. The banking industry faces a real challenge serving those people who don’t have access to traditional banking services.

According to the Federal Deposit Insurance Corp.’s latest annual survey on underbanked and unbanked, 7 percent of Americans didn’t have access to banking services in 2015. That represents nine million U.S. households. The number gets even bigger when you consider underbanked households, which are defined as those that supplement their bank accounts with nonbank products such as prepaid debit cards.

Some banks look at this market and only see the risks; others deem it outside of their target audience demographic. In either instance, the outcome is avoidance. Fintech leaders, by contrast, see an emerging opportunity and are proactively developing innovative solutions to fill the gap. Which poses the question: Is it possible for banks to do the same?

Deciding to move forward with this type of initiative must start with the data. One of the areas that we pay close attention to is application approval rates. We’ve been opening accounts via our digital platform since 2009, and we were initially surprised by lower-than-anticipated account approval rates. Why was this happening? As the number of consumers who want to open a bank account online increases, there are inherent risks that must be mitigated. From what we’ve learned, identity verification and funding methods for new accounts, for example, pose heightened challenges in the anonymous world of digital banking. As such, we have stringent controls in place to protect the bank from increasingly sophisticated and aggressive fraud attempts. This is a good thing, as security is not something we are willing to compromise.

However, we realize that not everyone we decline is due to potential fraud, and that therein lies a major opportunity. A large portion of declinations we see are a result of poor prior banking history. Here’s the kind of story we see often, which may resonate with you as well: A consumer overdrew their bank account and for one reason or another didn’t fix the issue immediately, so they get hit with an overdraft fee. Before long those fees add up and the customer owes hundreds of dollars as a result of the oversight. Frustrated and confused, the customer walks away without repaying the fees. Perhaps unknowingly, the customer now has a “black mark” on their banking reports and may face challenges in opening a new account at another bank. Suddenly, they find themselves needing to turn to nonbank options.

I am not excusing the behavior of that customer: Consumers need to take responsibility for managing their finances. But, shouldn’t we banks be accountable for asking ourselves if we’re doing enough to help customers with their personal financial management? Shouldn’t we allow room for instances in which consumers deserve a “second chance,” so to speak?

At Radius we believe the answer to that question is “yes,” which brings us back to my earlier point around opportunity. Just a few weeks ago we released a new personal checking account, Radius Rebound, a virtual second chance checking account. We now have a way to provide a convenient, secure, FDIC-insured checking account to customers we used to have to turn down. In doing so, we’re able to provide banking services to a broader audience in the communities we serve across the country.

Because of the virtual nature of the account, I was particularly encouraged by the FDIC’s finding that online banking is on the rise among the underbanked, and that smartphone usage for banking related activities is rapidly increasing as well. Fintech companies are already utilizing the mobile platform to increase economic inclusion; we believe that Radius is on the forefront of banks doing the same, and look forward to helping consumers regain their footing with banks.

Let me be clear, providing solutions for the unbanked and underbanked is more than a “feel good” opportunity for a bank—it’s a strategic business opportunity. A takeaway from the FDIC report is that the majority of underbanked households think banks have no interest in serving them, and a large portion do not trust banks. It’s upon banks to address and overcome those issues. At the same time, nonbank alternatives are increasing in availability and adoption. Like anything worth pursuing, there are risks involved and they need to be properly scoped and mitigated. But while some banks still can’t see beyond the risks, I think ignoring this opportunity would be the biggest risk of all.

A Cautionary Fish Tale for Bankers


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Last September I was lucky enough to have been invited to give a presentation in Bali, Indonesia.It’s a beautiful island.As I was walking along the beach, enjoying the views and soaking up the atmosphere, I stumbled across a large, dead fish.The fish looked very healthy, apart from being dead.I imagine it had spent the last few days and months feeding around the coral reef off the shore, gradually swimming closer and closer to the shore and oblivious to the fact that the waves and tides were strong.It was fat, happy and finding lots more to eat.Then, on the day I was there, a great big wave washed this poor sucker onto the shore.Once on the beach, it probably wriggled a bit.It would have been desperate to get back into the sea, but _ too late.The beached fish had had its day and now it was a goner.

This may sound like a sad thing to share on a blog.It doesn’t cheer you up much does it?But the reason I’m sharing this is that I feel many of the large banks I deal with are like this fish.They’re bloated with capital. They have millions of customers. They have decades and, in some cases, even centuries of history. Their profits are reliable. Customers don’t leave. The internal structure is challenged, but it works. The products and services aren’t great, but they’re good enough.And they have a management team that is complacent.You get the idea.

Then some kind of disruptive technology comes along.Today we talk about digital. Five years ago we talked about mobile. Ten years ago we talked about the internet, and 20 years ago call centers.So what?For bankers, these are just just technologies they absorb and apply.

And yet I would argue to disagree. Twenty years ago I was presenting technology change to banks and explaining how it fundamentally challenged their core structures.This was when internet banking was first emerging and the challenge was that most banks had systems in place dating back to the 1960s and 1970s that were inflexible and hard to adapt to the internet era.They were ledger systems used for tracking debits and credits and designed for access via internal staff in branches.They were updated overnight through batch processing and had no real-time access.

The people I talked to knew this was a problem but didn’t want to touch or change their core ledger systems and ducked the issue.They did the same thing when mobile came around, which is why most mobile bank apps look like a debit and credit ledger, and they’re still ducking the issue today as we talk about digital.

But this is why I am so assertive that digital structures require digital foundations.If we live in an open sourced economy of APIs and apps, where anything and everything can plug and play, how can an old batch system interact?If we see digital as a key part of the fabric of finance, how can an organization with technologies built for physical distribution compete?If we have customers who want real-time access to cash flow forecasts, how can a system that keeps track of past transactions meet that demand?

This last point is illustrated well by a young chap in the U.K. named Ollie Purdue.Ollie is a 23-year-old university dropout who has raised millions of pounds to launch a new bank app calledLoot.When I asked Ollie how he thought he could launch a bank when he’s just a student, his reply was clear: “Because they didn’t give me or my friends what we wanted or needed.” He then told me that bank mobile apps all show what money has come into and out of the account, but he wanted to know what would come in and out of the account in the future.As a student, that’s important as it makes the difference between party night and study night.And the only reason banks have been offering these old transactional apps is because their core systems are built that way.

Bottom line?They say it takes 30 years for a technology to mature.For the past 20 years, digital technology has been evolving in banking.In another decade, it will have matured.It is a technology wave we have seen coming for a long time, and now that wave is building into a breaking wall on the shore as fintech, insurtech, regtech and digital hits home.That means the clever banks will feed further out to sea to avoid getting beached when the technology wave hits.Those banks are redesigning their systems for the open sourced networked age.Meantime, the banks resisting that change are the ones that are happily sitting with millions of customers, billions of capital and years of history.Like a happy fish feeding too close to shore, they don’t see the wave. And they will be a dead fish if they don’t change direction in time.That is why I shared my story of my fish in the opening.You still have time to see the wave and change course.Please do so now.

Mozido: Friend or Foe


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About two billion people are completely unbanked across the globe today. These are individuals with no checking, savings accounts or credit cards. They lack basic financial services that people in developed economies take for granted.

That said, there are also over six billion smartphones in the world. It’s now common even for the unbanked in developing economies to own some kind of mobile device. These individuals represent a huge, ignored opportunity for financial service providers. They’re exactly the people that mobile payments technology provider Mozido aims to serve. Mozido’s core technology is a cloud-based mobile payments platform for both consumers and businesses. Within that are mobile financial services, payments and loyalty programs. All someone needs to make use of the platform is access to a mobile device.

So what does this opportunity look like for banks?

THE GOOD:
One of the best-use scenarios for Mozido is bill bay for the unbanked. These are the people that stand in line at an office or local convenience store to pay their bills with cash. With Mozido’s mobile wallet, consumers can instead “top up” their account through verified merchants. Instead of waiting in line to pay their bills with cash, people can pay through the Mozido mobile wallet. The mobile wallet also functions for a variety of other payments. Think of international money transfers that the unbanked get charged high fees for. Instead of sending an international wire transfer through Western Union, consumers have another option. They can use their Mozido mobile wallet to send money across borders at a fraction of the cost.

THE BAD:
On top of payments, Mozido offers POS and CRM integration for merchants. And an enterprise mobile rewards solution. And a real-time B2B cash-processing solution called mVault. And a cloud-based mobile transaction architecture called MoTEAF.

Get the point?

Mozido has grand ambitions in the payment space, there’s no doubt about that. But is tackling too many aspects all at once taking away from its focus? In the area of mobile payments, strong regional players in developing economies are emerging. They’re servicing the unbanked in localized, efficient and low-cost ways. If you live in Kenya, there’s a mobile payments wallet designed with Kenyans in mind. And so on for Indonesia, Mexico and South Africa. Other areas like POS, CRM and cloud infrastructure are also crowded with superior products. With almost every aspect of Mozido’s suite, you can say almost the exact same thing. Does it work? Yes. Is there a better option out there? Probably.

OUR VERDICT: FOE
Today, Mozido is pursuing a strategy of partnering with and acquiring firms in the mobile payment space. Mozido’s main focus of late has been the Asia-Pacific region, including forays into China and Taiwan. As Mozido continues to push into various areas of mobile payments, we consider Mozido to be a foe, although it is not as much of a threat as many other domestic fintechs, as its focus is not the United States, and the underbanked aren’t necessarily the most sought after (read: profitable) customers a bank could grab. Should Mozido create partnerships here in the states, I might change my tune, but for now it’s positioned closer to the minor nuisance end of the spectrum. For the consumer, Mozido represents an opportunity that many have never had before, and a much needed one—so perhaps there could be a friendly future for all? Time will tell!

How Mobile’s Popularity is Disrupting the Regulators


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The world is going mobile and dragging banking along with it kicking and screaming. I am something of an anachronism as I still go into the branch once in a while and still worry about using my phone to deposit a check. My adult children, on the other hand, use their phone for everything, including all of their banking. They bounce from store to store paying for everything from Starbucks to bar tabs using their phones without a second thought. Banks that want to capture and hold their business will have to be very good at mobile banking and mobile payments.

One of the biggest hurdles bankers face is that as unprepared as they were, the regulators were equally unprepared and are now playing catch up with regards to mobile payments. The regulatory picture today is fairly muddled with a mishmash of state and federal agencies offering guidance and opinions to mobile payment providers and consumers. There are gaps in the current laws where no regulations apply to parts of the process—and other situations where two or more rules apply to the same part of the process. As mobile banking and payments continue to grow, the regulators will be looking to create a more coherent regulatory structure and coordinate their inter-agency efforts to protect consumers at every stage of the process.

At a forum held by the Office of the Comptroller of the Currency in late June, Jo Ann Barefoot, a senior fellow at Harvard University, outlined the current regulatory situation. She told the packed room at the meeting that “Agencies are going to have to develop ways to work together, to be faster, to be flexible, to be collaborative with the industry. The disruption of the financial industry is going to disrupt the regulators, too. This is the most pervasively regulated industry to face tech-driven disruption. The regulators are going to be forced to change because of it.”

In a white paper released at the forum, “Supporting Responsible Innovation in the Federal Banking System: An OCC Perspective,” the OCC noted that “Supervision of the financial services industry involves regulatory authorities at the state, federal, and international levels. Exchanging ideas and discussing innovation with other regulators are important to promote a common understanding and consistent application of laws, regulations, and guidance. Such collaborative supervision can support responsible innovation in the financial services industry.”

While the OCC has noted the massive potential benefits that mobile payments and other fintech innovations can offer to consumers, particularly those who were unbanked prior to the widespread development of mobile banking and payment programs, Comptroller Thomas Curry has cautioned against what he called “unnecessary risk for dubious benefit,” and called for responsible innovation that does not increase risks for customers or the banking system itself. Mobile payments programs that target the unbanked are particularly ripe for abuse and unnecessary risk.

The Consumer Financial Protection Bureau is also heavily involved in overseeing and regulating the mobile payments industry. The bureau noted that 87 to 90 percent of the adult population in the United States has a mobile phone and approximately 62 to 64 percent of consumers own smartphones. In 2014, 52 percent of consumers with a mobile phone used it to conduct banking or payment services. The number of users is continuing to grow at a rapid rate and the CFPB is concerned about the security of user data as well as the growing potential for discrimination and fraud.

CFPB Director Richard Cordray addressed these concerns recently when announcing fines and regulatory action against mobile payment provider Dwolla. “Consumers entrust digital payment companies with significant amounts of sensitive personal information,” Cordray said. “With data breaches becoming commonplace and more consumers using these online payment systems, the risk to consumers is growing. It is crucial that companies put systems in place to protect this information and accurately inform consumers about their data security practices.”

The regulators, like the banks themselves, are latecomers to the mobile payments game. I fully expect them to catch up very quickly. The biggest challenge is going to be coordinating the various agencies that oversee elements of the regulatory process, and it looks as though the OCC is auditioning for that role following the June forum on mobile payments. Cyber security systems to keep customers data and personal information safe and secure is going to be a major focus of the regulatory process in the early stages of the coordinated regulatory efforts.

I also expect the CFPB to focus heavily on those mobile payment providers that were formerly unbanked. These tend to be lower income, less financially aware consumers that are more susceptible to fraud and abuse than those already in the banking system, and the bureau will aggressively monitor the marketing and sales practices of mobile payment providers marketing to these individuals.

The regulatory agencies are starting to catch up with the new world of banking and the mobile payment process will be more tightly controlled going forward.

Even: Friend or Foe


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Can you find financial stability in an app? Even, an alternative to payday loans, thinks you can. The application provides a money management tool for those with low or fluctuating incomes.

THE GOOD:
Jon Schlossberg, Even’s CEO, believes it is expensive to be poor. His company started on the basis of wanting to help those in poverty from being tricked into further debt from unfair fees and high interest rates. According to Schlossberg’s blog, over $100 billion is spent annually on items such as payday loans, overdraft fees, low balance fees and late bill fees—and the average working class American spends 10 percent to 20 percent of his or her salary on these items. Premised on the idea that you get “extra money when your pay is low, interest-free” and “intelligent savings when your pay is high,” this tool should immediately appeal to low-income workers or those who find it difficult to manage their money through peaks and valleys.

THE BAD:
The industry that Even seeks to disrupt is worth $100 billion a year—no small amount of revenue displaced. While many charges such as overdraft fees that consumers pay could be unreasonable, we are willing to bet there are many customers whose spending patterns are routinely careless. Even is basically providing interest-free loans in exchange for $3 per week. For Even’s sake, we hope there is some accountability forced upon its customers to ensure quality spending behaviors, and a safety net catch for multiple offenders. For a customer without a guilty conscience, $3 per week may be worth the price to overspend, and for Even, this could be a business model killer.

OUR VERDICT: FRIEND
Even has set out to be a “different” kind of bank…but the catch is, it’s not really a bank, by traditional terms. Although customers’ savings are insured by the Federal Deposit Insurance Corp., Even itself is not a bank; rather, it’s a partner to banks. While Even may not add significant financial reward to your institution, its contribution to a healthier consumer (and economy overall) should appeal to digitally savvy consumers that want to be part of a more financially stable population.

Why Banks Are Buying Design Firms


design-1-22-16.pngWithin the past 18 months, two of the industry’s more innovative banks have made some seemingly odd acquisitions. McLean, Virginia-based Capital One Financial Corp., in October 2014, acquired Adaptive Path. The Spanish-based BBVA (Banco Bilbao Vizcaya Argentaria) acquired Spring Studio in April 2015. The common thread between these acquisitions? Both are San Francisco-based user experience and design firms.

Banks are seeing a critical need to improve customer experience, says Norm DeLuca, managing director of digital banking at Bottomline Technologies, a technology provider for commercial banks. He believes that changing consumer expectations and competition both within the industry and from fintech startups are contributing to a heightened focus on user experience. “One of the biggest differentiators that fintechs and new innovators lead with is a much simpler and [more] attractive user experience,” he says.

Customers increasingly identify their financial institution through their online experiences more than personal interactions, says Simon Mathews, chief strategy officer at San Francisco-based Extractable, a digital design agency. He believes that Capital One and BBVA found a way to more quickly improve the digital experience at their institutions. It’s a relatively new field, and good user experience designers aren’t easy to find. “What’s the quickest way to build a team? Go buy one,” says Mathews.

Design is only one piece of the puzzle. “Great design is important, but it really is only the tip of the iceberg on user experience,” says DeLuca.

A bank can’t expect to place a great design on top of outdated technology and create a good user experience, says Mathews. Data plays a key role. Customers with multiple accounts want to see their total relationship with the bank in one spot. That requires good, clean data, says Mathews.

The products and services offered by a financial institution need to be integrated. Can the customer easily manage and access separate products, such as loans and deposit accounts? Often, the process can be disjointed, and it’s a competitive disadvantage for the bank. “You might as well be buying from separate providers, if the experiences are separate,” says DeLuca.

Data analytics can also help banks personalize products and services for the customer, says Stephen Greer, an analyst with the research firm Celent. The industry is spending a lot on data analytics, “largely to craft that perfect customer experience,” he says.

While technology can be updated, organizational challenges are more difficult to overcome. Banks tend to operate within silos–deposit accounts in one area, wealth management in another and that doesn’t align with the needs of the consumer. “They don’t think, necessarily, about the total experience the user has,” says Mathews. “Users move fluidly between [delivery] channels.”

Great user experience requires “a really deep understanding of customer’s lives, and the environment they’re in, and what they’re trying to do and why,” says Jimmy Stead, executive vice president of e-commerce at Frost Bank, based in San Antonio, Texas, with $28 billion in assets.

Many banks rely on vendors for their technology needs, but “if the user experience relies on the vendors that they’re working with, and those vendors have solutions that are not customizable, then it’s really hard for them to address the customer experience,” says Alex Jimenez, a consultant and formerly senior vice president of digital and payments innovation at $7.1 billion asset Rockland Trust Co., based in Rockland, Massachusetts.

According to a June 2015 poll of banks and credit unions conducted by Celent, more than one-third rely on the user experience supplied by the bank’s vendor for online banking, mobile and tablet applications, with minimal customization. Realizing the increasing importance of the online channel, Frost Bank decided to build its own online banking platform internally in 2000, and continues to manage its user experience in-house. The bank still works with vendors, but is picky when it comes to those relationships. “How can we integrate them seamlessly into our experience?” Stead says he asks of vendors.

Today, expectations are shaped by Apple and Amazon, companies that have done a great job of defining the consumer experience. While more innovative banks like BBVA and Capital One are making user experience a priority, many financial institutions don’t provide a cohesive digital experience, or let their website and mobile app lag behind consumer expectations.

“We can’t fall too much in love with what we have today,” says Stead. “Technology moves so fast.”