#JPMorgan #Chase leads the #race for the most #mobile #users among the top three largest consumer #banks in the U.S. — still. With 31.6 million active mobile users, JPMorgan Chase is well ahead of Bank of America’s 25.3 million active mobile users for 2Q18. In the same period, Wells Fargo reported 22 million and Citigroup 10 million. Chase’s […]
Bank Innovation
#Online #lenders may own more than half of the personal lending market, but they face serious headwinds. For one thing, rising interest rates will increase their cost of funds, and perhaps make their offerings less attractive, and for another, regulations may arrive that make operating their businesses more expensive. In New #York #State, perhaps anticipating a […]
Bank Innovation
#Banks have been working for years to achieve straight-through-processing (STP) but now #Citi has partnered with #HighRadius to bring artificial intelligence to the task.
Financial Technology
#Consumers want to engage with #banks on an omnichannel level, and right now, the mobile channel seems to be the #most popular. The percentage of “mobile-dominate” customers, who prefer to bank from their smartphones, has increased from 10% to 15% of consumers YoY, according to a June 2018 report published by Price Waters Cooper. Mobile […]
Bank Innovation
French essayist and critic Charles Du Bos summed up the ability of humans to change when he wrote, “The important thing is this: to be able at any moment to sacrifice what we are for what we could become.”
For a long time, most #banks have been one thing: vertically integrated product manufacturers and distributors, shops that sell only their own brand products. But with the move towards regulatory-driven Open Banking in competitive-friendly markets like the U.K., Hong Kong and Australia, new business models are emerging—including #Open #Platform Player, one of four bank business models we identified as winners in the digital economy.
Is the open platform bank an intermediate point on the journey towards lifestyle platforms, on which financial services are just one of many offerings?
Unlike a traditional bank, a banking open platform is like a department store that carries all your favourite brands and also helps you coordinate outfits and do your interior decorating. Open platforms create a market where producers (supply side) and consumers (demand side) connect and interact in efficient exchanges of value. The result is a bank-branded app store where consumers shop to assemble the products and services they need to satisfy their everyday financial needs, building their own bank from components they know will work easily together. In this business model, the platform owner has the opportunity to maintain management of the customer experience and vet the third-party products and services being offered in that experience. In turn, aggregation of demand allows them to extract economic rents from suppliers.
This business model is attractive to new entrants because it allows them to aggregate #fintech product innovations while focusing on customer navigation and advice. A good example is Belgium-based fintech banqUP. It offers a current business account, credit and debit cards, and business apps in a unified small- business banking platform. Another is the UK challenger bank Starling, which has moved to offer a wide array of third-party products and services anchored on a core current account.
For incumbent banks, the economic equation of becoming an Open Platform Player can be more challenging. While an open model offering best-in-breed products can be enticing for customers, replacing balance-sheet income with fees isn’t always an attractive trade-off. A $ 100,000 mortgage with a three-percent net interest margin is equivalent to a lot of traffic on a toll road. So rather than pivot completely to an open platform model, we are beginning to see established #players—like HSBC and RBS in the UK—experimenting with the introduction of third-party products that they either can’t produce as well as other providers, or which, for risk appetite reasons, they may not want to provide. In the US, for example, eight of the top 10 banks now have some sort of alternative credit provider for small-business lending that falls outside their risk appetite, creating an emerging platform model in that segment.
Of course, in an open platform model, there must also be suppliers. While fintechs like Transferwise are most prominent, there is also scope for traditional banks to componentise their product offerings and create APIs that allow easy plug-and-play with open platforms. This export model, where the customer interaction is ceded to a platform owner, requires changes in how a bank deploys its resources, people and #technology. For example, the focus of relationship managers and banking sales representatives would need to evolve to emphasize B2B customers, developers and community builders, rather than B2C interactions. It also means excelling at broader skills, such as ecosystem analytics, API security and identity management.
While becoming an Open Platform Player may look attractive to both new entrants and incumbents, it is interesting to ask the question of if the open platform bank is just an intermediate point on the journey towards lifestyle platforms, on which financial services are just one of many offerings.
Speculation is rife that Amazon will begin to offer a wider array of retail financial services products—including a checking account—which may pay no interest but instead offer discounts on other Amazon products and services as compensation for holding your balances in that account (balances which could be insured by them being held on a regulated bank balance sheet). In China, the WeChat messaging app has already become a true lifestyle platform where consumers are able to conduct a huge array of financial and non-financial transactions without leaving the app. In this world, the “Alibabas” and “Amazons” may truly become the “everything” stores through which we run our lives.
In an era of increasing fragmentation, banks could choose to establish Open Banking platforms that focus on financial services aggregation. However, we suspect that many banks will accept that competing against the likes of WeChat, Amazon and other bigtechs of the world is a losing proposition, and decide to focus on being a product supplier instead of trying to hold onto managing the customer relationship.
I invite you to read more about open platform banking in A New Era: Open platform banking
The post Banks as open platform players appeared first on Accenture Banking Blog.
If there is one way to describe Umpqua Bank’s innovation plans it would be “#digital human,” according to the bank’s new CEO, Cort O’Haver. Digital human, as O’Haver explained, is the marriage of digital innovation with the physical retail banking experience. (Coincidentally, it’s also the title of a Chris Skinner book.) O’Haver is not talking […]
Bank Innovation
A new #fintech startup is letting consumers make loans to peers and positioning itself as an alternative to the #payday #loan industry, and there’s something in it for #banks too. Since launching this past April, #SoLo #Funds, a P2P lending platform, has processed nearly $ 200,000 in small-dollar short-term loans. With small loan amounts and a default rate […]
Bank Innovation
On March 29, 2017, Britain decided to leave the European Union (EU) and invoked Article 50—following the referendum held on June 23, 2016, in which 51.9 percent of the participating UK electorate voted to leave the EU. Though the UK will officially leave the EU by March 29, 2019, followed by a transition period of 21 months, the exit decision itself triggered exchange rates so volatile that it became difficult for businesses to maintain clear visibility on their international transfers. #Brexit will eventually have an #impact on business, payment service providers, and consumers—but it will largely depend on how the UK’s future trading relationship is going to be with the EU.
In the absence of clarity of the eventual shape of Brexit, certain financial institutions are planning for the “hard” Brexit scenario and making decisions about locations, hiring and #technology changes. From a #payments perspective, #banks are reviewing their solutions across Liquidity (notional pooling, cash concentration), payments (SCT, SDD, high-value payments, FX), cash management services (virtual accounts, receivables management) and Euro-denominated products to continue to operate across borders.
Post the transition period, the UK might also lose direct access to Euro Clearing & Settlement Mechanisms (CSMs) such as TARGET2, EBA EURO1 and EBA STEP2. UK banks may need to build Euro-clearing propositions in Europe to handle affiliates and third party/correspondent bank high-value clearing, which would involve rerouting transactions, indirect memberships via Europe branches, Nostro setups, reviewing charging models, etc.
Non-EU financial institutions will not be able to use their UK branches to pay and collect funds after Brexit takes place, and would need to consider transferring SEPA access sponsorship from the UK to European branches. However, if they remain part of the European Economic Area (EEA) and the European Free Trade Association (EFTA), they can continue to take advantage of SEPA.
Acquiring players may have to move their headquarters to other European markets and take new contracts to operate in the EU. Split of acquiring entities means a significant overhead by splitting scheme submissions across multiple BINs. Card machine providers would need to reclassify their machines as international or inter-regional so that customers and merchants are aware of all the changes while making card payments. The interchange classification of the UK will significantly affect merchant pricing with open questions such as the UK’s registration as part of the EEA post Brexit having significant impact on interchange base costs. Also, unknown regulatory position post Brexit on key issues such as interchange caps and card surcharges.
PSD2 is applicable to UK banks since it came into effect in January 2018. Banks have already spent more than GBP750 million in preparation for the regulation, but once UK has officially left the EU, the UK Open Banking initiative is more likely to replace PSD2 and potentially have limited impact on a practical level.
The UK startup ecosystem massively supported the “Remain” vote as it provides them easy access to the Single Market, which is an important asset for startups’ business development potential. Now, they are quickly adapting to the fast-changing environment—and developing cross-border business is anyway part of the tech entrepreneur’s DNA.
While negotiating exit from the EU, it is important from a payments perspective that there is no detriment for customers or businesses, and that the UK economy continues to operate smoothly. Without any solid evidence on the changes to current legislation, firms need to ensure that compliance and change teams are on the front foot to meet the requirements of the new ecosystem.
The post Brexit impact on payments appeared first on Accenture Banking Blog.
#Laurel #Road, a #bank that is selling #fintech products and services, has scored a sales win, securing #Country Bank as a client. Laurel Bank Road is hitting on a trend: more small #banks are considering #digital methods for loan underwriting. Larger banks like Bank of America and SunTrust Banks Inc. have recently added digital mortgage #lending, and that same […]
Bank Innovation
Bank of America has Erica, Capital One has Eno, Bank of Montreal has Bolt. Safe to say that most major #banks are at least exploring the possibility of a virtual assistant, if they don’t already have one. And there is more to this virtual assistant than just the cool factor, for banks these #chatbots improve […]
Bank Innovation
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