Considering Conversational AI? Make Sure Your Solution Has These 3 Things


AI-10-9-18.pngThe pace at which consumers adopt new technologies has never been faster. Whether it’s buying coffee, booking travel, or getting a ride, or a date, consumers expect immediacy, personalization, and satisfaction. Banking is no different. According to a study by Oracle, when banks fall short of their consumers’ digital expectations, a third of consumers are open to trying a non-bank provider to get what they want – and what they want, increasingly, is a digital experience that’s smart, intuitive, and easy to use.

Conversational AI—a platform that powers a virtual assistant across your mobile app, website, and messaging platforms—is core to providing the experience consumers want. Whether you choose to build or buy a conversational AI solution, it needs three key things.

Pre-packaged Banking Knowledge
A platform with deep domain expertise in banking is what gives you a head start and accelerates time to market. A solution fluent in banking and concepts such as accounts, transactions, payments, transfers, offers, FAQs, and more, is one that saves you time training it about the basics of banking. Deep domain expertise is also necessary for a virtual assistant or “bot” to hold an intelligent conversation.

Your conversational AI solution should already be deeply familiar with concepts and actions common in banking, including:

  • Information about accounts – so customers can check balances and credit card details such as available credit, minimum payment and credit limit.
  • Information about transactions – so customers can request transactions by specific accounts or account types, amount, amount range (or above, or under), check number, date or date range, category, location or vendor.
  • Information about payments – so customers can move money and make payments using their bank accounts or a payment service such as Zelle or Venmo.

Human-like Conversations
Most conversational AI systems answer a question, but then leave it up to the customer as to what they should do next. Few conversational AI systems go beyond answering basic questions and helping customers accomplish one simple goal at a time, and that’s sure to disappoint some customers.

A conversational AI platform should be able to track goals and intents so bots and virtual assistants can do more for consumers. It should go beyond basic Natural Language Understanding and combine deep-domain expertise with the ability to reason and interpret context. This is what gives it the ability to help customers achieve multiple goals in a fluid conversation – creating a “human-like” conversation that not only understands what the customer is texting or saying but tracks what the customer is trying to do, even when the conversation jumps between multiple topics.

Platform Tools
Under the hood of every Conversational AI platform are the deep-learning tools. Effective analysis of data is at the core of every good conversational AI platform—understand how it collects and federates, builds, trains, customizes and integrates data. This will have a huge impact on the accuracy and performance of the virtual assistant or bot.

After you deploy the system, you want to be empowered to take full control of the future of your conversational AI platform and not be trapped in a professional services cycle. Make sure you have a full suite of tools that allow you to customize, maintain and grow the conversational experiences across your channels. You’ll need to measure engagement and continually train the virtual assistant to respond to ever-changing business goals, so you’ll want an easy way to manage content and add new features and services, channels, and markets.

Above all – is it Proven in Production?
There is a huge difference between a proof of concept or internal pilot with a few hundred employees to a full deployment with a virtual assistant or bot engaging with customers at scale in multiple channels. A conversational AI platform is not truly tested until it’s crossed this chasm, and from there can improve and grow with additional use cases, products and services and new markets.

During the evaluation, ask for customer engagement metrics, AI training stats, and business KPIs based on production deployments. Delve into timelines related to integration – are the APIs integrating with your backend systems fully tested in production? Understand how the system is trained to extend and do more. What did it take to roll out new features with a system already deployed?

If the platform has been deployed in production several times with several different financial institutions, you know it has been optimized and tested for performance, scalability, security and compliance. You can have confidence the solution was designed to work with your back-end and front-end ecosystem, channels and infrastructure. Only then has it been truly validated and proven to integrate and adhere to many leading banks’ rigorous and challenging regulatory, IT and architecture standards and technologies.

There’s just no way to underscore the value of production deployments as a way to separate the enterprise-ready from the merely POC-tested solutions.

Is It Time to Get Aboard the Zelle Train?


zelle-8-3-18.pngConsumers moved $25 billion in the first quarter of this year using Zelle, the peer-to-peer (P2P) real-time mobile payments service introduced late last year. That puts consumers on track to spend an estimated $100 billion through Zelle this year, a 33-percent increase from 2017. While this indicates an impressive level of growth, it is less clear whether consumer acceptance will be widespread enough to fuel mass adoption by the nation’s financial institutions. But bank leaders can’t ignore the important role payments could play in their organizations.

Few financial institutions offer Zelle to their customers. Zelle lists 113 financial partners, a fraction of the more than 10,000 U.S. banks and credit unions. Twenty-nine banks have launched the service so far, including the seven big banks that partnered together to form Early Warning, the company that owns Zelle. (The consortium also owned Zelle’s predecessor, clearXchange, which was deactivated shortly following Zelle’s September 2017 launch; Zelle’s transaction data includes clearXchange.)

The biggest banks hold the lion’s share of deposits—the consortium accounts for more than 40 percent of domestic deposits, according to an analysis of Federal Deposit Insurance Corp. data—so many consumers already have access to Zelle.

“P2P really works when all of your friends and family can use it,” says Jimmy Stead, the chief consumer banking officer at $31.5 billion asset Frost Bank. Frost was an early Zelle adopter, signing on with clearXchange in September 2016. He says customers love it, and use of the service has grown by roughly 300 percent over the past year.

Zelle is free for consumers and easily accessible through their bank’s online and mobile banking channels. (Consumers can use the Zelle app if their bank hasn’t launched the service.)

Early Warning’s efforts to generate buzz around the Zelle brand—most notably through a series of TV ads featuring Hamilton actor Daveed Diggs—help partner banks get their customers on board. And Zelle only has to convert existing bank customers to the service, while services like Venmo have to attract individual new users, notes Ron Shevlin, director of research at Cornerstone Advisors.

A lack of interoperability between payments services has dampened mobile P2P adoption by consumers, says Talie Baker, a senior analyst at Aite Group. “[Zelle] will be the only interoperable network for mobile P2P payments once all the banks get on board with it—and it basically is right now because of their partnership” with Visa and Mastercard, she says. Eventually, “a bank that’s not participating in [Zelle] is going to have a hard time being in business.”

Eighty-four of the financial institutions partnering with Zelle have yet to launch the service, and the rest of the industry is waiting in the wings. But implementation isn’t as easy as just flipping a switch.

“This is a very complex system—it’s spread across multiple banking platforms, multiple electronic data providers,” says Frank Sorrentino, CEO of $5.2 billion asset ConnectOne Bancorp in Englewood Cliffs, New Jersey. The bank plans to launch Zelle in August. A Zelle spokesperson confirms the payments system must be integrated with the bank’s core, which includes integrating messaging, and putting policies and procedures in place around risk management and customer support.

It’s interesting to note that the Zelle TV spots feature a diverse cast of actors, not just millennials. Stead says that adoption leans toward Frost Bank’s younger customers, but older customers are using the service, too. Cross-generational payments—a college kid getting rent money from mom and dad, for example—are common. This sets Zelle apart from the millennial-heavy Venmo, which doesn’t put funds directly into a bank account (users have a Venmo balance) and has a lower average transaction compared to Zelle.

But the payments space isn’t poised to end like Highlander, the 1986 Sean Connery film in which immortal beings fought until only one survived. Connery may have said “there can be only one,” but there doesn’t have to be—and there’s unlikely to be—one winner here. Venmo is also growing with consumers, with its social media-like feed, debit card and new partnership with Uber. “[Venmo is] hardly suffering as a result of the launch of Zelle,” says Shevlin.

In today’s competitive deposit market, payments should be a part of any bank’s core deposits strategy, says Shevlin. Services like Zelle can help keep deposits in the bank, while an institution that offers an outdated solution—or doesn’t offer one at all—may find its deposits lured away by a competitor, whether that’s a Zelle bank or a fintech account like Venmo.

Have MVB and BillGO Reached True Financial Symbiosis?


payments-7-18-18.pngSometimes a fintech partnership doesn’t result in a new product or service for the bank but can still result in new opportunities for both organizations. The relationship between BillGO, a real-time payments provider based in Fort Collins, Colorado, and MVB Financial Corp., a $1.6 billion asset financial holding company headquartered in Fairmont, West Virginia, isn’t your typical partnership story. Instead, it’s an example of true symbiosis between a bank and a fintech firm, with MVB gaining deposits and fee income while helping BillGO scale its real-time payments solution to more than 5,000 banks and credit unions. Less than a year ago, the company worked with just 200 institutions. It plans to go live with another 3,000 in the next few months.

The two companies were recognized as finalists for the Best of FinXTech Partnership at Bank Director’s 2018 Best of FinXTech Awards.

MVB supports BillGO’s growth in a number of ways. The bank processes its payments, resulting in fee income for MVB. The bank also holds deposits for the company and its B2B clients in connection with their transactions. And the bank’s compliance expertise is another key benefit. “We keep them out of trouble, so to speak,” says MVB CEO Larry Mazza.

This growing understanding of the fintech industry’s needs, gained in part due to its relationship with BillGO, is quietly turning MVB into a bank of choice for fintech firms.

“We’re meeting other, more mature fintech companies that allow us to help them in different ways,” Mazza says. “It’s really started to be very positive for us, in learning fintech [and] in profitability, deposits as well as fee income.”

“They don’t really advertise it, but they do have a specialty with fintech because of their compliance [expertise], because of their ability with payments and their ability with partnerships to deliver some unique offerings that fintech companies can’t normally do by themselves,” says BillGO CEO Dan Holt.

Before partnering with MVB, BillGO worked with a larger bank, but Holt says MVB is a Goldilocks-style bank for the company: Big enough to help the company scale, but small enough to make decisions quickly and develop an in-depth relationship with his company. Holt adds that his company has access to MVB’s executive team, unlike his previous banking provider.

And MVB is an investor in BillGO. “I felt this would be a really good [way] for us to start the process of investing in fintech,” says Mazza. “Once you invest money in it, it definitely piques your interest.” He describes the bank as an active investor, and Mazza has served on the company’s board since January 2017.

This expertise has been invaluable for BillGO, given Mazza’s financial background and his ability to shed light on the needs of the banking industry, says Holt.

Just as the BillGO relationship is a strong reputation-builder for MVB with other fintech firms, Holt says that MVB’s investment in BillGO speaks volumes about his company’s reputation to potential bank clients. New customers feel more comfortable knowing a traditional financial institution is an investor and has completed the associated due diligence.

Holt joined the MVB board late last year as an extension of the partnership between the two organizations, and Mazza says his background has been highly beneficial to the bank. “[Holt] has intimate knowledge into the industry and payment processing,” says Mazza, and his expertise enhances board discussions about technology trends and opportunities. “Our board members could see the difference.”

Many bank boards struggle to add tech-savvy directors, with 44 percent of bank directors and executives in Bank Director’s 2018 Compensation Survey citing this as a key challenge.

“Banks are more traditional. They really honor regulation,” says Mazza. “It’s our lifeblood, and we have taken regulation extremely seriously. We see regulation as a competitive advantage, if we do it right.” But partnering with BillGO, and adding Holt to the board, is helping MVB think like a startup as well. “That has changed our lives,” he says. “BillGO has helped us think more innovatively [and be] more forward-thinking.”

Powering Payments For Your Business Customers



Business payments are evolving rapidly, with capabilities advanced by technology and rising expectations from business users for simple and seamless payments. In this video, Bill Wardwell of Bottomline Technologies explains:

  • The Business Payments Landscape
  • What Business Customers Want in a Solution
  • Exceeding Customer Expectations

CBW and Yantra Bring ‘Common Sense’ to Fintech Space


CBW-5-23-18.pngIt’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.

Banking Blockchain: Making Virtual Currencies a Reality for Your Bank


blockchain-10-17-17.pngBlockchain-based virtual currencies are gaining in popularity and evolving quickly. Blockchain currencies often are described as disruptive, but also have the potential to radically revolutionize the banking industry in a positive manner. The reality is that blockchain currencies may develop into a useful tool for banks. Their acceptance, however, is hindered by their own innovative nature as regulators attempt to keep pace with the technological developments. Potential blockchain currency users struggle to understand their utility. Despite these hurdles, many banks are embracing opportunities to further develop blockchain currencies to make them work for their customers.

What Are Virtual Currencies and Blockchain?
Virtual currencies, also referred to as “digital currencies,” are generally described as a digital, unregulated form of money accepted by a community of users. Currently, blockchain currencies are not centrally regulated in the United States. For example, the federal government’s Financial Crimes Enforcement Network (FinCEN) and the Securities and Exchange Commission view blockchain currencies as money, the Commodities Futures Trading Commission sees them as a commodity, and the Internal Revenue Service calls them property. The IRS has attempted to define virtual currency as:

a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value [and] does not have legal tender status in any jurisdiction.

FinCEN, the agency with the most developed guidance regarding virtual currency, regards it in a more practical fashion as a medium of exchange that operates like a currency in some environments, but does not have all the attributes of real currency. Whatever the regulatory definition, virtual currencies need more certainty in form and function before their use becomes commonplace.

Blockchain technology brings benefits to payment systems and other transactions that are quite revolutionary. Blockchain technology is essentially a decentralized virtual ledger (aka, distributed ledger), utilizing a comprehensive set of algorithms that records virtual currencies chronologically and publicly.

Some examples of blockchain currencies currently in use are Bitcoin, Dash, Ether, Litecoin and Ripple. These currencies are constantly evolving and are being developed by individuals, technology-based peer groups or financial institutions. In August 2016, a consortium of banks, led by UBS, Deutsche Bank, Santander and BNY Mellon, announced the development of the “utility settlement coin” or USC. The USC is meant to allow banks to transact payments in real time without the use of an intermediary. It is expected to go live in 2018.

Blockchain Currency Opportunities for Banks
Despite their reputation for being tools of illicit trade, blockchain currencies may be useful to banks in a variety of ways and can achieve certain benefits. Blockchain currencies could:

  • actually reduce fraud, including hacking or theft attempts, because the technology makes every step of the blockchain transparent.
  • reduce costs and risks associated with know-your-customer (KYC) programs because blockchain has the ability to store KYC information.
  • allow a financial institution to establish a new trading platform for exchange that eliminates intermediaries.
  • potentially could transform the payments industry. An obvious example is the USC, which permits payments to be made in real time, without the use of intermediaries; and strengthens the confidence in the authenticity of the transaction. Banks that are either able to establish a blockchain currency or adapt a proven technology for their operations will generate operational efficiencies and obtain a significant competitive advantage.

What Are the Regulatory Challenges?
Blockchain currencies currently are not centrally regulated in the United States. As discussed above, the lack of a uniform definition is a fundamental issue. FinCEN has classified any person or entity involved in the transfer of blockchain currencies as a money transmitter under money services business regulations.

As blockchain currencies continue to evolve, however, additional federal laws and regulations must be drafted to address the most substantial areas of risk. Some states are weighing in on the topic as well. For example, the Illinois Department of Financial and Professional Regulation recently issued guidance on the use of virtual currency in which the Department views virtual currency through the lens of the Illinois’ Transmitters of Money Act.

Additionally, the Uniform Law Commission is developing regulations that would, among other things, create a statutory structure (for each state that adopts it) to regulate the use of virtual currency in consumer and business transactions. Regardless whether the federal government or the states enact legislation affecting blockchain currencies, a more uniform regulatory approach would greatly aid their development and utility.

Conclusion
Blockchain currencies, and the laws and regulations governing them, are in a promising state of development. As new technologies emerge and existing technologies continue to evolve, banks are presented with real opportunities for innovation by successfully adapting blockchain for use by their customers. Those that figure it out are poised for real success.

How Fintech is Improving Back Office Efficiency


ImprovingBackOfficeArticle.jpg

The fintech revolution has had a dramatic impact on the financial services industry. From digital wealth management (robo advisors) to automated payment systems, a variety of disruptive technologies have made their mark on the sector. For banks, the rapid development of financial technology poses the threat of losing business to competitors that are quicker to reap the benefits of automating their operations—whether those competitors are other banks that have purchased or partnered with fintech startups, or the fintech startups themselves.

Automating back office processes offers banks a host of benefits: reduced costs, quicker customer response and easier record keeping for compliance purposes. Given the substantial advantages innovative technologies offer in this regard, a wide variety of bank processes are subject to disruption or enhancement through the use of financial technology. An article by sector expert Naresh Kirpalani lays out some of the most notable areas to watch for fintech innovation in 2016, including:

  • Further development of the blockchain as a crucial technology in several key segments of banking infrastructure.
  • Payments as an area subject to further technology disruption and intense competition.
  • Robotic process automation as a means of dealing with processes related to risk and regulatory issues.
  • Accelerated innovation at banks and a focus on taking aggressive steps to outsource legacy IT applications and replace them with interfaced applications using APIs.

Other areas that have seen increasing focus by banks attempting to add efficiencies to their back office processes include automated decisioning solutions and digital signing.

In the United States, fintech upstarts—while pushing banks and other financial institutions to evolve with new technology—have not (or at least yet) massively disrupted their businesses. This may be at least partly due to the readiness that some banks have shown to purchase promising fintech startups, preventing them from posing a long-term threat to the bank’s business.

A market worthy of the U.S. banking industry’s attention in this regard is payment processing in China, where three nonbank players now dominate the sector. The same article cites a Citigroup report that questions whether banks in the U.S. and Europe can take advantage of innovation before fintech firms gain the scale and distribution needed to disrupt them. The study expects increased technology adoption at banks to result in a decline of 40 percent to 50 percent in headcount as they make cuts in their branch networks. “Branches and associated staff costs make up about 65 percent of the total retail cost base of a larger bank,” the report stated. It further noted that automation could help remove “a lot of these costs.”

When it comes to payments, U.S. banks have adapted by offering their customers the ability to pay bills online as one method of accommodating the demands of the Internet age. Nevertheless, the success of digital payments firm PayPal and the cryptocurrency Bitcoin shows that this is a market ripe for disruption. As a result, it is no surprise to find that a number of banks have announced that they are working with or investing in blockchain technology to develop their own next generation payment systems. Along these lines, global investment bank Goldman Sachs, private equity firm Bain Capital and MasterCard have invested in firms using the blockchain technology for applications dealing with the Bitcoin cryptocurrency.

In another major development in the field, IBM announced recently that it has finished a pilot project in conjunction with China UnionPay, a Chinese credit card company, to help share loyalty bonus points between banks via the use of blockchain technology. The system the two firms has developed is designed to allow consumers around the world to swap bonus points from their banks, enabling them to choose the rewards they desire. In the United Kingdom, Barclays is the first bank there to partner with a virtual currency company, Circle, which uses blockchain technology to aid its goal of building a template for borderless currency.

Workflow automation is another innovative process attracting interest from banks looking to use technology to improve their operational efficiency. The attraction of the technology for many banks is the ability of these types of solutions to eliminate paper as much as possible and improve the productivity of their overall operations. A study on the benefits of automated workflow solutions revealed that the majority of the institutions queried believed that the ability to increase approval and routing speed was the most significant benefit associated with an electronic routing system.

Thirty-one percent of the banks and financial institutions included in the survey indicated they “desperately needed” a system that was more automated so they could close more loans. One respondent bemoaned the difficulties caused by combining paper documents with a mostly paperless process, as the lack of electronic signature functionality caused the need for a paper signature form, which at times would get lost.

These concerns have led to the spread of digital signing technology, which has allowed banks to improve the efficiency of their back office processes. With the passage of the Uniform Electronic Transactions Act, and the adoption of electronic signatures by leading banks such as JP Morgan Chase & Co. and the Royal Bank of Canada, the practice has spread widely among banking institutions.

In addition to enhancing efficiency by speeding up account origination and other basic tasks, digital signing allows retail bank employees to access customer records more easily, improving their ability to interact with and service customers when they visit a branch. In an article about the process, JP Morgan Chase’s Alan Varrasso was quoted as saying of e-signatures: “This has changed the way we open accounts, manage workflow and provide checks and balances and controls.”

The ultimate result of the fintech revolution for banks in North America and Europe is as of yet unknown. Will banks be able to adopt cost-cutting and customer-friendly technology rapidly enough to stave off upstart fintech competitors? Or will banking as we know it be disrupted as other industries have been by technological innovation? A bit of both may be the most likely answer. In any case, what can be said is that the technological innovation unleashed by fintech startups has already had major effects on bank operations—and there is likely still more to come as the automated processes introduced by innovators in the sector continue to work their way through the operational infrastructure of banks both large and small.

Venmo: Friend or Foe


friend-or-foe-3.png

Venmo, a P2P leader that focuses on the millennial market, processed over $7.5 billion in transactions in 2015, and over $1billion in January 2016 alone. Now owned by PayPal, Venmo may not be a direct threat to banks, but it’s certainly worth paying attention to. Let’s dig in a little deeper_

The Good:
Venmo is a great example of the ease and convenience that consumers are looking for when it comes to payments. With the ability to connect by Facebook, phone number or email, anyone is able to transfer money within seconds once they have registered. Not only that, but users can insert emojis and comments for their friends to see. CEO Dan Schulman says that this social feature is what keeps the typical user visiting the app between four and five times a week without any intention of transferring payment. The opportunity for users to see what their friends are up to, not to mention the ability to pay anyone in their contacts or social circles with a process that’s both free and easy–now that’s any millennial’s dream.

Perhaps these social and convenience factors are two attributes banks should look at from an emulation standpoint.

The Bad:
Uncertain about the demand and worried about the costs, banks have been slow to add P2P payment to their consumer products arsenal. If Venmo is indeed making significant progress in providing payments for their customers, this poses a serious threat to their growth and profitability. Give the recent partnerships announced with companies such as Papa Johns and HBO, and Pay With Venmo–a new retail payments program rolling out just now thanks to PayPal—banks have a real problem on their hands as the fees they are used to receiving on credit and debit card transactions could soon be funneled right into Venmo’s pockets, leaving traditional FI’s out to dry.

Venmo has had its share of critics and bad press–and just recently it was announced that the Federal Trade Commission is investigating it for “deceptive or unfair practices,” so stay tuned.

Our Verdict: Foe
Any brand that customers choose to trust their money with over a bank is quite simply a threat to the traditional bank model. How should banks respond? Payveris or Popmoney, offered by Fiserv—a large provider of core processing services to the banking industry–are two examples of fintech solutions that offer up the same consumer proposition. But if banks really want to compete in this market–and not to be reduced to the dumb pipe that transactions flow through, they better act quick and work hard on promoting this feature to their audience. Loyalty is something earned–and right now, Venmo is doing just that. It’s time for banks to catch up!