Creating Better Banking Experiences

Earlier this week, we published our quarterly print issue of Bank Director magazine.  If you haven’t seen it, our talented editor, Naomi Snyder, shines a light on the “tech bets” being made by Fifth Third, a $142 billion asset institution.  Having worked for an IT firm, I appreciate the three questions their President & CEO, Greg Carmichael, asks his team to consider before investing in new technologies:

  1. Does it improve the bank’s ability to serve customers?
  2. Does it drive efficiency?
  3. Does it create a better experience for customers?

As he shares, “not every problem needs to be solved with technology… But when technology is a solution, what technology do you select? Is it cost efficient? How do you get it in as quickly as possible?  You have to maintain it going forward, and hold management accountable for the business outcomes that result if the technology is deployed correctly.”

“The challenges are how to grow the franchise and reposition the franchise to serve our customers in the way they want to be served, which is more of a digital infrastructure.”

-Greg Carmichael, President & CEO, Fifth Third Bank

While Fifth Third plans to invest some $60M this year in technology, Naomi notes that the bank doesn’t have an R&D lab with a staff separated from the rest of the bank and dedicated to inventing things (like its competitor U.S. Bancorp).  Nor does Fifth Third have the reputation of being highly innovative, like a BBVA.  Nonetheless, the regional bank, headquartered in Cincinnati, has a laser focus on developing practical solutions to everyday problems.

So to build on this issue’s cover story — and the efforts we’re making with our FinXTech platform — let me offer my take on who I consider standouts in the payments, lending and retail space today.  Those addressing “everyday problems” may find inspiration from the work being done and/or want to explore partnership opportunities.

Payments + Transfer

When one thinks about payments — and the movement of  value via cash, credit card, check and other transactions — some big names come to mind: Apple Pay, Chase Pay, Square, Paypal, etc.  But don’t sleep on these companies:

Lending

In the lending sector, a lot of people continue to talk about LendingClub’s travails, scoff at SoFi’s change of heart from anti-bank to pro-partnerships and follow Prosper’s efforts to shore up its business.  Within the lending space, these companies also deserve time and attention:

  • Affirm, a digital lender that provides installment financing;
  • Orchard, a technology and infrastructure provider for marketplace lending;
  • Lendio for small business loans;
  • Even, a new kind of financial app that turns variable pay into a steady, reliable income; and
  • Earnest,  a technology-enabled lender that enables one to consolidate and refinance  student loans.

Retail banking

Considering the core functions of retail banking remain the establishment of deposits and making of loans, those pushing the envelope in a way consumers desire include:

  • Ally Bank, known for its “No Branches = Great Rates” tag line;
  • Atom Bank, one of the first Challenger Banks in the UK;
  • Tandem, a new digital bank in the UK;
  • Moven, a pioneer in smart phone banking; and
  • Simple, part of the BBVA family that is reinventing online banking.

While these banks are pushing forward, many legacy institutions will be challenged to meet the expectations of their customers.  They will need to assess the additional risks, costs and supervisory concerns associated with providing new financial services and products.  Accordingly, I’m not alone in believing that financial institutions need to invest in services “for life’s needs” through collaboration and partnerships with companies like those shared in today’s post.

##

I realize there are a number of companies “doing it right” in these three sectors – and this simply highlights some of the players that standout to me.  Feel free to comment below on others that I might highlight in future posts.

5 Fintechs I’m Keen On

My first post in 2015 focused on three “up & coming” fintech companies: Wealthfront (an automated investment service), Kabbage (an online business loan provider) and Dwolla (a major player in real-time payment processing).  Since writing that piece, I’ve kept tabs on their successes while learning about other interesting and compelling businesses in the financial community.  So today, five more that I am keen on.

By Al Dominick // @aldominick

With continuous pressure to innovate, I’m not surprised to see traditional financial institutions learning from new challengers, adapting their offerings and identifying opportunities to collaborate with emerging players.  From tokenization to integrated payments, security tools to alternative lending platforms, the investments (and efforts) being made throughout the financial sector continues to impress and amaze me.  As I shared in 15 Banks and Fintechs Doing it Right, there are very real and immediate opportunities to expand what banking means to individual and business customers.  Personally, I am excited by the work being done by quite a few companies and what follows are five businesses I’ve learned more about while recently traveling between D.C., San Francisco and New York City:

logo

i2c, a global card processing company, provides back-end processing and settlement for cards, virtual accounts and mobile payments.  What’s interesting about them? According to a brief shared by Bridge by Deloitte (a web platform connecting enterprises with startups to accelerate innovation and growth), i2c recently teamed up with Oxfam, Visa and Philippines-based UnionBank to channel funds to people in disaster-affected communities through prepaid cards.

adyen-logo

With Money20/20 fast approaching, expect to see a lot of #payments trending on twitter.  Trending in terms of financial investment: Adyen, a company receiving a lot of attention for wrapping up a huge round of funding that values the payment service provider at $2.3B.  Adyen, which provides its services to a number of large organizations including Facebook and Netflix, excels in having a highly integrated platform, unlike others with multiple platforms.

Blend labs

When it comes to technology “powering the new wave of mortgage lending,” take a look at the work being done at BlendLabs.  Developing software & data applications for mortgage lenders, the company acknowledges that “accommodating complex rules and regulation changes is time-consuming and costly.” For this reason, the company has quietly rolled out technology that empowers some of the country’s largest lenders to originate mortgages more efficiently and compliantly than ever before while offering their borrowers a more compelling user experience.

logo

As the head of a company, I know first-hand how much time and effort is spent on efforts and ideas designed to maximize revenue and profits.  So the promise and premise of nCino is hugely attractive.  Co-founded by a fellow W&L grad (and the former CEO of S1) nCino is the leader in cloud banking.  With banks like Enterprise in St. Louis (lead by a CEO that I have huge respect for) as customers, take a look at their Bank Operating System, a comprehensive, fully-integrated banking management system that was created by bankers for bankers that sits alongside a bank’s core operating system.

logo

While not solely focused on the financial industry, Narrative Science is a leader in advanced natural language generation.  Serving customers in a number of industries, including marketing services, education, financial services and government, their relationship with USAA and MasterCard caught my eye.  As FinXTech’s Chief Visionary Officer recently shared with me, the Chicago-based enterprise software company created artificial intelligence that mines data for important information and transforms it into language for written reports.

##

In addition to these U.S.-based companies, you might look at how Fidor, a digital bank in Europe that offers all-electronic consumer banking services, links interest rates to Facebook likes and give cash rewards based on customers’ level of interaction with the bank (e.g. how many customer financial questions answered).  Clearly, the fabric of the financial industry continues to evolve as new technology players emerge, institutions like Fidor expand their footprint and traditional participants transform their business models.  So if you follow me on twitter (@aldominick), let me know of other fintech companies you’re impressed by these days.

Quick Guide: Banking’s Digital Transformation (#Payments)

Developing faster payments capabilities is a critical element within the banking industry’s digital transformation.

In yesterday’s post (The 5 Corners of Technological Innovation in Financial Services), I looked at the introduction of an Innovation Group at Wells Fargo that, in the words of their CEO, “puts an even larger focus on creating the products, services, and technologies” that will allow the institution to stay competitive and allow its customers to do their banking when, where, and how they would like.

As I dug into the Wells story — which received a lot of play from the press — It strikes me that to successfully transition one’s business model, innovation teams such as this one need to work in concert with major business groups like wholesale and commercial banking, commercial real estate, trust and wealth management, and payments / consumer banking.  As I consider how banks actually operate — e.g. how work is done, the degree of automation, the pricing and design of products and underlying compensation systems — I revisited several videos from Bank Director’s annual FinTech Day @ NASDAQ.  One, of Ben Plotkin, Vice Chairman of Stifel / Executive Vice President of Keefe, Bruyette & Woods, stands out, as he shares his perspective on how banks of all sizes can find success.

Ben touched on the payments space, and I too am curious to explore the role banks must play in the emerging payments ecosystem.  Here, Accenture provides valuable context as the world becomes more digital: “speed in all aspects of financial services is increasingly important. The payments ecosystem is no exception. Faster payments are taking shape across the globe—and may become industry standard.  While faster payments can enhance the customer experience and improve cash flows, it introduces a number of complexities, such as capital costs, and accounting and fraud systems impacts. In the short term, providing the impression of a near-real-time payment through memo posting and verifying the certainty of payment could be implemented sooner, and may meet expected market demand.”

Certainly, the trend toward digital money continues to gain momentum, and when it comes to the payment space, there are emerging technologies that have the potential to dominate the financial landscape (e.g. P2P & Blockchain methods).  Case-in-point, Stripe, the California-based online payments company, has raised new investments which have raised the company valuation to $5 billion.  Per a report in yesterday’s Let’s Talk Payments (h/t Brad Leimer @leimer), the funding “was led by financial giant Visa and experts believe this is a huge endorsement for Stripe. The company had previously raised a total funding of $190 million from high-profile investors including PayPal co-founders, Sequoia Capital, Box CEO Aaron Levie, Khosla Ventures, Andreessen Horowitz and others.”  As The New York Times reported, the companies’ strategic alliance will give Stripe access to Visa’s global network of issuers and acquirers.  BI Intelligence Payments Insider notes the companies will also collaborate to create online checkout solutions and buy buttons that can be plugged into developers’ websites anywhere.

How we pay, borrow and invest continues to change the way we conduct our financial payments.  It is fascinating to watch as companies like Stripe, PayPal, Dwolla, etc hustle to simplify how businesses accept payments through mobile applications while banks like Wells Fargo invest to do the same.

Three FinTech Companies I’m Keen On

It seems not a day goes by where I’m not coming across a story about Venmo.  Maybe I should thank holiday shoppers; more specifically, friends or family member that go in on a joint present for someone.  Rather than accept an IOU, the social payments company has made story titles like “Cash is For Losers!” en vogue by allowing its users to settle debts without cash or check.  So the company’s success had me exploring the world of FinTech and other companies worth taking a look at.  Here are three I’m keen on along with a short overview on what they offer.

wealthfront-logo-e1396828112845

Wealthfront is an automated investment service with over $1 billion in client assets.  The Palo Alto-based company manages a “diversified, continually rebalanced portfolio of index funds” on behalf of its clients.” Their proposition: “Wealthfront takes the guesswork out of sound, long-term investing through effortless automation. Wealthfront manages a personalized online investment account for you that is fully diversified and periodically rebalanced – accessible anytime and anywhere from your desktop, tablet or phone.” For an individual, their service premise is quite attractive, given “the consistent and overwhelming research that proves index funds significantly outperform an actively managed portfolio.”

Unknown

I wrote about Kabbage last year (A Pop Quiz on the Future of Banking) as a platform for online merchants to borrow working capital. Per Time’s Business & Money site, “Kabbage financing resembles a line of credit in that customers only pay for what they use, but it isn’t a loan and doesn’t require merchants to use their personal assets as collateral. Rather, as with a business factor, a Kabbage financing is structured as a cash advance against future sales.”

dwolla-logo

Dwolla is a payment network that allows any business or person to send, request and accept money. As they say, they are “not like those other big payment companies that rely on plastic cards and charge hefty fees.” Instead, the company built its own network that “securely connects to your bank account and allows you to move money for just $0.25 per transaction, or free for transactions $10 or less.”

##

I’m on record with my feelings that bank leaders have real and immediate opportunities to expand what banking means to individual and business customers by offering services that go beyond a traditional business model.  These three companies provide alternatives to traditional lines of business, and are just a few of the many that are working to create a “newer” normal for individuals and businesses.  If you are interested to share your thoughts on FinTechs worth watching, feel free to comment below about those companies you find compelling.