EXCLUSIVE – If the future of banking is partnering with #fintech #startups, then finding the most innovative and efficient fintechs becomes crucial for #banks’ success. This demand has led to the rise of third-party run #accelerator programs. One such program is Little Rock, Ark.-based The Venture Center’s FinTech Accelerator program, which is backed by financial […]
Bank Innovation
U.K.-based #CreditLadder, an online platform that enables tenants to help build credit score, launched an #open #banking #service today, making it the first in its sector to do so. Thanks to European regulation PSD2, users can now authorize CreditLadder to access their banking transactions through open APIs. By accessing information on a user’s transaction history, […]
Bank Innovation
Shouldn’t #banks be more like Apple stores? And shouldn&8217;t #fintech conferences be more like Apple stores? #Bank #Innovation #2018 will be. The event, taking place March 5-6 at the Parc 55 Hotel in San Francisco, will feature three financial experts at their own “bars,” ready to dispense financial advice. They may even have signature cocktails […]
Bank Innovation
EXCLUSIVE – The two fundamental keys to most challenges #retail #banks and payment companies face on the #innovation front are personalization and efficiency, according to Alberto Corvo, a founding partner at #fintech focused investment firm #Motive Partners. To help banks find these solutions, Corvo’s Motive Partners, along with Allied Irish Bank, Bradesco, Emirates NBD, Royal […]
Bank Innovation
This post marks the beginning of my career as an Accenture blogger. I’m looking forward to communicating with you in 2018 and beyond and to commenting on developments in the #banking industry in Europe. I joined Accenture late last year as head of the banking practice in Europe. I am an industry veteran with extensive experience both as a consultant and as a banker.
This is an enormously exciting time to be working in the banking industry, particularly in Europe. There is #massive change taking place on many fronts:
As Accenture has noted, most banks in Europe have been vertically integrated, covering all aspects of the value chain from origination to servicing. The universal bank concept is well-established, with the retail sector more stable in recent years than the commercial and investment banking side. Within Europe, there has been more regulation, but regulatory barriers to entry have enabled intra-industry competition. While regulation has deterred cross-industry threats from retailers, telecoms and consumer tech giants, it has also fostered a wide variety of institutions, including private, mutual and cooperative banks.
This is all about to change. The combination of competitive disruption and regulatory actions like PSD2 in Europe and the Open Banking initiative in the UK is forcing banks to open up faster than other industries while maintaining the security that is part of their DNA. Before too long, bank customers will be able to share access to their financial data with non-bank third parties, and third parties will be able to integrate their services with those of a bank to create a better banking experience while keeping client data secure.
#European banks are facing many other challenges, including continuing low levels of profitability and the need to formulate and execute digital strategies. Digital strategies, in turn, call for a new look at how people are selected, trained and motivated as banks shift from product-driven to customer- and people-driven organizations.
I will be writing about these and other topics in the months to come, particularly as they pertain to Accenture’s own vision and its view of banking strategy, #technology and operations. I welcome your comments and questions, and look forward to a lively exchange of ideas.
The post Confronting massive changes in European banking appeared first on Accenture Banking Blog.
INV #Global, which includes INV #Fintech, this site’s sister accelerator, announced its upcoming #token #offering at the North American #Bitcoin Conference (#TNABC on Twitter) yesterday in Miami. The global accelerator is launching an application to support the #corporate venture ecosystem by connecting them with the most relevant startups. The INV application aims to streamline the interactions and transactions […]
Bank Innovation
EXCLUSIVE – There’s a new #banking app in town &8211; #Emma. The British #fintech company, which is still in beta, is gearing up for its launch in the U.K now that it received FCA approval to operate under the new PSD2 mandate. “This is a big deal for us,” Emma co-founder and CEO Edoardo Moreni […]
Bank Innovation
Three years ago, SAP’s acquisition of #expense #management software provider Concur sent shockwaves through the expense management industry. Its impact continues to shape the evolution of the #market today. The pairing of Concur, already the expense management market share leader, with SAP, one of the largest ERP software providers in the world, sent a clear message to the rest of the market: significant advancements and changes would be required to keep pace with the market leader. As a result, competing providers have responded with a flurry of product enhancements and strategic partnerships.
As shown in Figure 1, some of the major players in the expense management market have moved quickly to leverage new, customer experience-enhancing #technology. They have pursued partnerships with complementary providers to compete with the massive scale achieved by SAP and Concur together. Perhaps most notably, Certify united with a number of leading expense management specialist providers in the past year to broaden its offering and emerge as a formidable challenger.
As the market continues to evolve, the coming years will reveal what roles providers and commercial card issuers will play in #shaping the future expense management landscape.
To see how consumer interest in expense management services vary by age groups, read our recent report: Driving the Future of Payments: 10 Mega Trends
The post Top 5 trends shaping the expense management market appeared first on Accenture Banking Blog.
Indian #fintech #RazorPay has raised $ 20 million in a Series B for its #payments #gateway, the company announced yesterday. A round led by #Tiger #Global, as well as Silicon Valley’s Y #Combinator, the influx of capital brings the #startup’s total valuation to more than $ 100 million, TechCrunch reported yesterday. The funding should allow the startup […]
Bank Innovation
Financial #technology (#fintech) firms have been disrupting the financial landscape through innovative products and efficient operations. That disruption is now entering the realm of operating models, as leading #fintechs recently initiated efforts to #become #banks. SoFi1 and Square2 applied for Industrial Loan Company charters in June 2017 and September 2017, respectively. SoFi since withdrew its application, citing recent leadership transition as the primary reason3. Varo applied for a National Bank Charter in July 20174. Others may pursue Special Purpose National Bank Charters, should they become available. Achieving such charter status could increase fintechs’ ability to gain market share and would place them in direct competition with legacy providers. The decision on the applications—whether yay or nay—is likely to have significant implications for the future of the financial services industry.
The U.S. financial services industry is highly regulated. Bank charters are required for membership in the U.S. Federal Reserve System and to engage in a breadth of banking services, including accepting customer deposits. While fintechs offer a myriad of financial products and services, none have yet to obtain national banking status. This limits their ability to quickly expand nationwide and hold and lend against deposits. Fintechs typically rely, instead, on bank partnerships or state-by-state banking licenses to grow their businesses.
1. Bank partnerships—sometimes referred to as a “rent-a-charter” model—allow fintechs to leverage three key assets of their bank partner:
In return, the partner bank gains fees or revenue sharing value generated by the fintech.
2. State-by-state bank licenses allow fintechs to obtain bank charters for the specific states in which they operate. While often helpful for small and new start-ups, established fintechs with national operations often find that differences in individual state laws limit their profitability and agility. State-by-state strategies can be costly and complex and, as such, typically serve as backup plans to the rent-a-charter model.
While fintechs, so far, have relied primarily on these two options to grow business, the array of viable options may be expanding.
Industrial Loan Company (ILCs) charters enable non-financial institutions to establish a bank to engage in lending and other specific banking activities. ILCs have two important distinctions: ILCs may be owned by a commercial company; and ILCs are exempt from the Bank Holding Act and are not subject to supervision or regulation by the Federal Reserve.
ILCs have been around for over a century, and are commonly used by automakers such as GM, Toyota, BMW and others to support their in-house financing activities. However, ILCs have fallen out of favor since Wal-Mart’s 2005 ILC application. An ILC would have enabled Wal-Mart to process its stores’ electronic check, debit card and credit card transactions, eliminating its cost of paying a third-party financial institution to perform these services6. Many large banks pushed back, claiming that an ILC would unfairly advantage Wal-Mart by allowing it to offer financial services without comprehensive regulatory oversight. The Federal Deposit Insurance Corporation (FDIC) implemented a statutory moratorium on ILC applications for commercial companies while it evaluated Wal-Mart’s application, which the retailer withdrew in 2007. The FDIC’s moratorium was followed by a Dodd-Frank imposed moratorium that lasted until 2013. At this point, no ILC applications have been approved in over a decade.
The FDIC recently eased the capital requirements for ILC applicants to encourage new participants. Fintechs are testing the waters. An approval on their applications could re-open ILCs as an attractive, viable alternative to bank partnerships. It would enable fintechs to operate commercial businesses, make loans and accept deposits.
The other option available to fintechs is to apply for a National Bank Charter directly. Under this charter, a bank is not subject to individual state usury laws in exchange for consolidated regulation. While a National Bank Charter would allow a fintech to operate more easily across the country, it comes with significant regulatory burdens (outlined in the Bank Holding Act), which would likely constrain broader commercial activities. As such, most fintechs have chosen not to pursue this path. Varo Money is a recent exception.
Recognizing that modern innovation may warrant a different type of charter for non-banks offering alternative financial solutions, the Office of the Comptroller of the Currency (OCC) announced in 2015 that it was exploring a Special Purpose National Bank Charter for fintechs. Although still under review, recent proposals indicate that it will differ from a National Banking Charter by specifying which banking services fintechs may offer (for example, make loans but not accept deposits) and suspending the requirement for charter holders to comply with the Community Reinvestment Act or the Federal Deposit Insurance Act. Proponents of this charter view it as a responsible way to bring fintechs under the broader regulatory umbrella; opponents argue that the charter would unfairly advantage fintechs over regulated financial institutions. Whether the OCC will eventually offer Special Purpose Charters—and whether fintechs will apply for them—remains to be seen.
Regulators have understandably struggled to keep pace with the evolving landscape of innovative financial services products and providers. Recent activities by the OCC and FDIC (for example, exploration of the Special Purpose Charter and easing of capital requirements for ILCs) suggest that regulators have a vested interest in ensuring that all banking activities fall under regulatory supervision. With this shift in sentiment, an approval of an ILC applicant (e.g., Square) in particular could very well encourage other commercial companies such as Amazon or Google to consider similar paths for their financial services. All eyes will be on the OCC and FDIC as these applications undergo the review process.
[1]TechCrunch, “Sofi applies to be a bank,” June 12, 2017. https://techcrunch.com/2017/06/12/sofi-applies-to-be-a-bank/
[2]TechCrunch, “Square will apply for an industrial loan company license this week, September 6, 2017. https://techcrunch.com/2017/09/06/square-will-apply-for-an-industrial-loan-company-license-this-week/
[3]LendEdu, “SoFi Withdraws Industrial Loan Charter Application, Cites Leadership Changes,” October 18, 2017. https://lendedu.com/news/sofi-withdraws-industrial-loan-charter-application-cites-leadership-changes
[4]BusinessWire, “Varo Bank, N.A. Applies for a National Bank Charter,” July 25, 2017. https://www.businesswire.com/news/home/20170725005537/en/Varo-Bank-N.A.-Applies-National-Bank-Charter
[5]Interest Rate Exportation refers to the way a bank will use its National Bank Charter to “export” the interest rate cap of its headquarter state, and therefore, potentially lend at higher rates than individual state caps.
[6]CNN Money, “Wal-Mart withdraws industrial banking push, March 16, 2007. http://money.cnn.com/2007/03/16/news/companies/walmart/index.htm
The post Might fintechs become banks? appeared first on Accenture Banking Blog.
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