Imagining Innovation – What Banks Can Expect Beyond 2014


(Re-Post From My Two Part Interview With BankNxt – Part 2)

 

Stories from the Vault: Real Insight from Real Bankers

In this year’s final installment of the BANKNXT exclusive series on innovation in banking, acclaimed financial technologist Bradley Leimer shares his thoughts on what the next wave of technology holds in store for banks in and beyond 2014.

This is the second installment of this interview.

Bradley Leimer

Bradley Leimer, financial services industry technologist, consultant, and commentator, leads digital strategy for Northern California-based Mechanics Bank. His focus is on developing and integrating technology applications and partnerships geared toward improving the client experience and profitability of digital channels. He brings additional perspective from leading marketing and technology efforts within the bank and credit union industry and from a decade driving database marketing and analytic programs for more than 6,500 national, regional, and community bank clients. Bradley is a sought after adviser for startups entering the financial and payments space

“How you view the current environment likely correlates to your sense of urgency and overall disruption in the banking industry. While we may not all agree on the impact, the shift to digital will certainly have consequences. We’re moving toward an era of engagement banking – a marketing, sales and service model that deploys technology to achieve customer intimacy at scale.”

You’re recognized as a leading financial technologist – what are some of your over-arching goals in leveraging technology within financial services?

While people may associate me with fintech, I certainly tweet enough about it, I think I might be more of a social scientist or macro-economist at heart. I’ve always been very curious about consumer behavior and why people act the way they do. Especially why they buy what they buy, how they pay for goods and services, how the movement of goods reflect societal value, and what society gets in return for those exchanges. While there are certainly differences in delivery and scale across social and economic spectrums and geography, there are basic human needs that financial applications help fulfill. Whether that need is fulfilled by an existing bank today, or will be in the future is another story.

We shouldn’t be selling products and services; we’re facilitating daily human needs and enabling people’s dreams. My ultimate goal is to be part of making these functions more inclusive, to really improve the banking system as whole. I think the way we leverage technology in the future will have a lot to do with helping our industry move forward. I also think it’s critical that technologists, and everyone in banking really, strive to be perpetually curious and always working to understand how we can improve the lives of the people and businesses in our communities, to see the bigger picture of where dots are connecting a ways off into the distance. It’s a critical time for banks to review their place in society and in their communities, not just here in the U.S., but worldwide. The traditional banking model certainly has some cracks in it.

Is the difficulty banks have in embracing change one of their biggest obstacles in terms of innovating?

I think it’s about more than just embracing change. Our industry is overly fixated on regulation and risk. We’re too afraid to experiment. And at this point of history in financial services, FIs under twenty to fifty billion in assets don’t have the scale to screw around and not take additional risks to stand out. We start with ‘no’ as our default answer far too often. This mindset leads to a legacy of friction that disruptors are starting to exploit. Our model simply must adapt to changes more quickly. We must keep up with the simplicity, usability and transparency customers now demand. The disruptors see that the future of financial services will be won by removing traditional barriers and rapidly embracing the shift in consumer and business behavior. Things are moving incredibly fast.

Do you think that the digital channels could help community banks recreate that traditional ‘one-to-one relationship’ feeling that was previously the domain of small town bricks-and-mortar banks?

I think it’s incredibly valuable to have smaller, community based financial institutions as a natural economic hedge to promote financial inclusion and drive more equitable financial relationships with local businesses and consumers. I wrote a piece about this question earlier this year as part of American Banker’s Future Model of Banking series called “There Will Be Blood: The Era of Engagement Banking”. In this piece, I tried to make it perfectly clear: The rise of personalized digital financial and payment experiences are the likely death knell for community banking institutions. The next five to ten years is absolutely critical if you are a financial institution with under twenty to fifty billion in assets.

Decades ago financial relationships were much simpler. You put money in a local bank or credit union and you accessed your accounts in person or wrote checks. When credit and debit came along, you had cards linked to these accounts at that local bank and accessed cash through ATMs. We pushed people out of the branch and ‘Oops’, now they aren’t coming back (and branches aren’t convenient anyway, so why should they?). Now your financial life is much broader, your financial relationships have wider scope and are likely at seven or more institutions. With the rise of the app ecosystem, your financials decisions are becoming much more integrated with other decisions you make throughout the day. Decisions that are more likely driven by a national bank, credit card, or third party financial experience than anything else. While every industry is impacted by the rise of highly personalized digital experiences, it’s very hard for smaller banks to keep up without scale and agile development. Ask Blockbuster how they fared as Netflix and digital flipped the equation. The same will go for banking.

While there are an increasing number of digital opportunities to leverage financial decisions before, during, and after payment, which is becoming the crux of what many disruptors in financial services are targeting (the form and frequency of payment and the associated revenue of those decisions), there’s thankfully more to banking revenue than choosing a particular payment rail. In an industry where the top 150 banks control 81% of deposit relationships and 75% of lending relationships, scale is obviously critical. But there’s great revenue opportunity in niches if your technology can deliver, so even though I come across as pessimistic, I’m actually hopeful.

What should fintech companies be doing or focusing on to help banks achieve a more personalized banking model?

I’d love to blame legacy technology partners for every problem we’re facing, but I can’t. Consumers have changed, technology has changed, and financial experiences have changed. We’re the ones that haven’t changed enough in response. The conservative nature of financial institutions’ is stopping them from embracing real innovation. But still, technology is a critical factor, and the smaller the FI, the more reliant they are on external technology partners bringing new innovations to the table. From core banking to digital service delivery, especially as API driven strategies multiply, we’re seeing entirely new business models emerge for building financial applications and legacy fintech players, just like their banking clients, are having a hard time keeping up. What used to take a year of development can now take months; what took months now can take weeks. Application development is becoming cheaper and faster. The fintech partners we choose to do business with need to be more agile and able to differentiate solutions from big bank services. They need to help the FIs drive more digital revenue to create opportunities to better compete.

How do you compete with Chase, or Wells Fargo, or Bank of America? We need to stop the process of just copying their technology and offer differentiation of value through innovative products and services. This sometimes starts with some navel gazing; clearly defining the type of financial services firm you are trying to be and who you are trying to serve. That done, you can begin to focus on serving customer needs by choosing the right technology and service partners, or continue to build out your own teams, in order to be more responsive to the market and your customer. It’s not rocket science, but we often get this step wrong.

You’re an advocate for incorporating social media and networks into banking, would you say that ‘social’ or ‘mobile’ has been the biggest disruptor to date?

It’s the proverbial chicken and the egg question in a digital context. Both social and mobile have fundamentally changed how we communicate and interact with our customers forever. Social and mobile financial applications have combined to form this perfect storm that is fundamentally shifting the financial relationship back to the consumer and in many ways away from banks themselves.

Banks really missed the initial opportunity in social, which was to drive more personal service relationships with their customers across the channel of their choice, along with the transparency and intimacy that goes along with that. Remember, social isn’t just about networks, it’s about something much bigger than that; the change of expectation that has arisen because of social activity. The industry is coming around to
these larger changes and embracing more socialized, personalized services and customer interactions. There are many great examples, from USAA to Fidor to Simple, where social is a primary component of a scalable business model… unless you’re HSBC and don’t know who Brett King is, and you missed the post about closing his account in the Huffington Post. The key is using social to help people understand their own financial picture, let their data tell a personal story. Help them in context when they need you, and work toward developing a deeper customer relationship through both digital and personal means. It can be done and it is being done today.

Mobile is a bit different, I think we’re a bit more evolved there, but I shudder to think that most bank customers think mobile deposit is our most innovative service. We need to get much better at designing more engaging financial experiences through our mobile applications before someone else does, namely payment providers with deep retail partnerships. As it is, less than half of financial institutions have a mobile banking app. Long term, I see the continued rise of financial applications dominated by non-bank providers – maybe permanently. You can see what type of social and mobile technology inspires me a bit here.

The other question around these two topics that I’m interested in is if the rising expectation of immediacy and intimacy will ever really butt heads with demands for security and privacy. Consumers seem destined to share more and more personal information, but is that starting to shift with the rise of temporary messaging and images like SnapChat? With all the NSA news around data snooping, and a perpetual stream of compromised financial data, are consumers going to put the genie that is social and mobile back in the bottle and choose privacy and transparency? I’m not sure they will, and I think there are many opportunities for banks to lead in these areas.

What is your vision for the future of banking, taking into account the rapid advancements we’ve seen in just the last few years?

Technology is simply accelerating an existing shift in traditional relationships with our customers and this is having an impact on the banking industry’s historical sources of revenue. While we may not all agree on the impact, the shift to digital will certainly have consequences. The banking model is moving towards a truly contextual, customer-centric view. Shifts in consumer behavior demand less intrusive authentication, social connectivity and crowd sourcing, hyper-personalization of everything from offers to usability, as well as tailored assistance and support at critical moments. We are now face-to-face with an engaged customer base that expects a completely frictionless experience. As we move further into the realm of digital experiences, the next decade will be even more incredibly disruptive than what we saw in the recent economic downturn. As I’ve said before: There will be blood.

Delivering contextually aware financial services in beautifully crafted experiences is becoming a necessity to maintain relevance with digital natives. Over the next decade we’ll see: an incredible focus on customizing financial data and personalizing interfaces for varied consumer segments; a focus on simplified authentication using multiple forms of bio-metrics and contextual assessments, from proximity to login patterns; attention shifting to real-time money movement at low or no-cost; further integration of social media into both marketing and banking applications; leveraging and connecting offline and online behavior to disrupt the payment and procurement paradigm to serve up personalized insights – just think of how we could use SKU level data; offering service alternatives through proximity awareness such as actionable notifications that prompt users through their mobile device to move money or pay bills to avoid fees or to better manage their current account spending, continuous assessments of financial wellness that prompt the consumer to take a specific action after a transaction, as well as delivering daily or on-demand personalized information around the customer’s financial health and aggregated account status. I could go on, the possibilities are practically endless.

The reality is that banking is no longer something customers just do. It’s becoming an experience they will completely control. We are moving away from a banking relationship defined by the goal of being a customer’s primary financial institution to one where we focus on becoming their primary financial application. It’s no longer about wallet share. It’s about app-driven mindshare – being ready for the moment our customers reach into their pockets for their mobile device, or their glasses, or other form of wearable technology, and start thinking about their financial relationship choices – before, during and after a financial moment of truth.

The question really is, how is your bank or credit union going to survive the next decade?

Prue Duggan is a writer for BANKNXT, a contributor to several other FinTech and innovation related websites, and community manager at leading Bank 2.0 software company, Backbase. With a background in advertising, branding and content strategy, Prue is a passionate observer of how the web is changing the way consumers and brands interact online and the evolving science of UX design. She has worked as a copywriter for large retail brands, from Nike to Tommy Hilfiger and first became interested in the nexus between communication and technology while working at Booking.com

WhatsApp, Simple, NextBank, And The Financial Services Delivery Model


The majority of this post was written Wednesday night at 38K feet. I held off publishing earlier because Simple’s being acquired by BBVA was pertinent to the conversation.

Wednesday, February 19, 2014. Somewhere Over Wisconsin, Iowa, and Nebraska 

I am really excited. Like, too much caffeine excited. Or perhaps sleep deprived excited, it’s hard to tell the difference lately. The past few months have been incredibly invigorating, as we’ve completed important app updates and initiated long term planning for the next few year’s digital strategy at our bank’s home offices. Lots of changes going on would be an understatement. But that’s the financial services industry right now – lots of disruption.

I’ve also been very fortunate to have had weekly engaging conversations with various founders and fintechers, a variety of interesting opportunities to learn from others in the space and contribute ideas and content, as well as what has seemed like a continuous run of good news for so many of my friends in fintech.

The year has been personally rewarding as well. I’m out speaking a bunch more and I’m helping plan a few fun industry conferences. One of the four companies I advise, CUneXus, will present at Finovate Spring and two companies I advise (CUneXus and Nerture) will be presenting at Bank Innovation’s DEMOvation. I’m really excited for them both.

So you can see it’s been a busy year already. This week was no different.

hatching twitter

SFO – BOS – SFO NextBank Advisory Board Meeting 

In the past day, I’ve travelled between San Francisco and Boston and back (in the air almost as much as on the ground it seemed), read Hatching Twitter cover to cover (about time, right?), saw some snow for the first time in quite a while (I’ll try to send some back home – we need it in California), and spent much of the day with my fellow Advisory Board members planning the next iteration of NextBank (today’s meeting included Brett King, Jim Marous, Beth Lee, and Phil Swisher – and with additional input coming from JP Nicols and Ron Shevlin – a great group to be involved with).

adv-board

After talking about many great potential topics and speakers and different ways to position NextBank within the crowded conversation of the future of financial services, we got on the subject of external industry innovations.  I jumped in by extolling some of my ideas on how IFTTT and actionable personalization may change the way we think about financial services delivery (extending the push toward a Primary Financial Application connecting actionable services through APIs). We talked about future revenue models, the internet of things, the importance of visualization, of the evolution of customer experiences, and how to best engage an audience used to an onslaught of seven minute demos and vendor case study after case study. We even had a bit of a tussle about the future use of bank branches. Imagine that. Overall, a great session meeting to discuss topics, agenda, and planning for the event.

Learn more about NextBank – hopefully we’ll see you in Boston in June.

nextbank

WhatsApp + Facebook: What’s That Again? 

My twitter blew up at 5:08 ET after Techcrunch posted the first of what would soon be dozens and dozens of quickly written articles. This was just about ten minutes before I boarded my flight home to the Bay Area. Great, it looks like I’ll be paying for on-board wifi again while watching the Olympics (thanks VirginAmerica for both options).

WhatsApp Acquired By Facebook For $19 Billion read the first article. Then from the Verge, then more from Techcrunch…it didn’t stop.

Boom. Zuck drops the mic. Nice job Mark.

zuck-2012-disrupt

Not SnapChat. No, the $3 billion that seemed so big was obviously far too small.

WhatsApp. $19 freaking billion dollars. Holy shit.

whatsapp

After reading on the flight over to Boston about Zuckerberg losing out on his attempts to acquire Twitter, and after SnapChat’s recent very public rebuff, the Facebook founder clearly is trying to re-establish his deal-making prowess, stealing some of the other valley giants recent thunder. Zuckerberg action showed he will do everything to keep Facebook relevant. He wants Facebook to be the first 2 billion, 5 billion, 7 billion user company. I hoped this works to revive whatever mojo he needed recharging after being rejected one too many times in his own living room or while on one of his Jobs-like walks with other young founders (What is it with these guys and walks anyway? From plotting revolutions to coding revolutions, coffee shops are the source of all disruption).

My favorite tweets about the WhatsApp deal came from Box’s Aaron Levie, who said “Zuck is literally the most badass ceo of all time. This guy doesn’t screw around with innovators dilemma” and from Startup L. Jackson “A good founder plays where the Zuck is. A great founder plays where the Zuck is going to be” as well as “And that is the sound of every startup in the Valley pivoting to messaging.” Indeed.

Clearly the valley was abuzz.

What’s Special About WhatsApp? 

What likely worried Zuckerberg was that WhatsApp had a more compelling product than SnapChat, a cross-device dead simple chat product that appealed to a much larger and more diverse global audience. One that was mobile only, and one that was on a trajectory to be the first billion user mobile first application (the graph above = hockey stick). After reading Wired UK’s great overview of WhatsApp and its founders, I really get it.

whatsapp-growth

I can certainly relate to the founders message about wanting to build a simple tool that facilitated communication between users across networks that could also be archived, because it was most often used between friends and family (not that I ever bought into the idea that SnapChat was all about sexting teens, but it’s stealth nature of disappearing images with squiggles did rule out grandma using it a little bit). I could also relate to the idea of of the founders not wanting to advertise (I’ll have to create a whole other post about transaction based rewards and alternative revenue paths and transaction based monetization – I don’t think future revenues are obvious…and I think WhatsApp holds some clues). After reading that Wired profile, I have a lot of respect for both WhatsApp founders.

whatsapp-noads

While images (and voice) are a huge part of WhatsApp, it was a very different model than what the narrower SnapChat offered. Rather than focus on deleting your past, WhatsApp focuses on facilitating your present, curating a dialogue of your connections from your contacts across devices, and this simple app helps preserve those communications (and why not integrate to dedicated cloud storage and take that one step further, but I digress).

snapchat-uh-oh

WhatsApp Lessons For Financial Services? 

What are some lesson for banks and payment providers? Really, it’s a continuation of disruption’s course de rigueur. WhatsApp, driving more messages than the entire SMS network and likley more shared images than Facebook and Instagram combined, reflects the larger changes and the simpler needs of communication trends. Other interesting points about the WhatsApp deal (especially for app developers and their UX counterparts) were brought up by Andreessen Horowitz‘s Benedict Evans on the valuation and what it means in the larger picture.  

(The WhatsApp acquisition) is interesting in all sorts of ways – it illustrates most of the key trends in consumer tech today in one deal. First, it shows the continued determination of Facebook to be the ‘next’ Facebook….

Second, the winner-takes-all dynamics of social on the desktop web do not appear to apply on mobile, and if there are winner-takes-all dynamics for mobile social it’s not yet clear what they are. There are four main aspects to this:

  • Smartphone apps can access your address book, bypassing the  need to rebuild your social graph on a new service
  • They can access your photo library, where uploading photos to different websites is a pain
  • They can use push notifications instead of relying on emails and on people bothering to check multiple websites
  • Crucially, they all get an icon on the home screen.

Any smartphone app is just two taps away – a desktop site can crush a new competitor by adding it as a feature with a new menubar icon but on mobile there isn’t room to do that. Mobile tends to favor single-purpose, specialized apps.

Third, the sheer scale of the numbers involved is a good illustration of what the shift to mobile means. I produced a presentation here to try to drive home this point: mobile is the next computing platform and it is several times larger than the desktop internet.

There are now roughly the same number of smartphones and PCs on earth – those PCs are mostly shared and immobile or locked-down corporate boxes, while the smartphones are mobile and personal.

Meanwhile, the widely-discussed collapse in the cost of creating a startup in the last decade combines with both the much larger scale of mobile and the routes to market and virality offered by mobile platforms to mean that if you’re very good (and lucky) you can get to astonishing scale in a short time. This scale is at the heart of the valuations we’re starting to see – WhatsApp is probably now sending more messages than the entire global SMS system.

Video, Imagery, Simplicity, And User Focused Design  

Brett King brought up another salient point during our NextBank planning session about the future belonging more and more to video (and I’d echo that with the continued onslaught of photos, shared imagery). People want to tell stories, share their own stories, and connect…and more and more that is a visual connection. Where is visualization in banking? What’s the SnapChat, WhatsApp equivalent in financial services? We have a few neo-banks like Simple leveraging embedded images (to provide connections to receipts, or photos associated with experiences tied to transaction level data), and we have some pretty established banks leveraging Mitek and Kofax to leverage the camera, but I think there will be a host of image related financial innovations this year. People underestimate the power of personalized visualization within financial application user experience design.

After more conversation, Brett challenged the group with ‘where is the Elon Musk of financial services?’ Considering Elon helped bring about PayPal, I’ll let him slide a bit on that one…but I get the idea. And I think we’ve already had the Steve Jobs of banking, as the iPhone simply changed everything (and there’s only one Steve Jobs, sorry @jack). I’d be happy if we had a Mark Zuckerberg of banking, or even the equivalent of WhatsApp’s founders as builders of financial applications.

In some ways we do. At least, we collectively have the intellectual fire power being aimed at cracks in the banking system. I meet these people all the time. Founders of payment companies, small teams of developers, corporate rebels pulling innovation along within financial institutions of all sizes. Some of their efforts are getting a lot of traction with small to mid-size FIs (my friends at perennial Finovate Best of Show Money Desktop come to mind), others are being acqui-hired by incubators or venture arms of bigger (often international) banks (from Finovate companies to two person shops, great little applications abound), others are making inroads within banks and larger fintech players.

That’s all great, but it’s still not enough.

With the pace of disruption in payments alone (there are now over 977 payment startups on AngelList alone), talented developers are looking at the possibilities to improve banking in many interesting ways, as I’ve detailed pretty well in what some people call my Manifesto for Financial Services. Why do we make financial related experiences so difficult? Why is the U.S. the most backwards, least innovative financial landscape in the world? OK, that’s a little harsh, because there are a lot of great financial innovations slowly moving this great battleship, but come on. Signature cards, three day transfers, complicated product sets. And as you move from retail to small business to corporate and wealth, it only gets worse.

payments-feb-20-2014

 Fintech Investment Starting To Heat Up  

The amount of fintech deals by VCs last year was around what, $2 billion? And the industry we’re talking about disrupting is multiples of trillions? There is a disconnect. Maybe disappearing images and multi-national multi-network chats are sexier, but I’m thinking 2014 is going to see a lot more investment in both fintech and ancillary services in the financial ecosystem. Just like enterprise apps, financial services may not have the glitter, but when you’re talking about experiences that touch multiple billions of people on the globe, there’s a lot to potentially tackle…albeit with plenty of profit for embedded players and niche disruptors. While the amount of movement toward larger disruptions in the financial space is moving toward simpler experiences that benefit the customer, that enhance the customer experience, it’s still not fast enough. Not at the speed driven through changes in customer behavior driven by social and mobile experiences.

Like Facebook, payment providers and financial giants will be making more investments to acquire people and truly build great experiences. (When I talk about Simple a bit later, this tweet came to mind – click through and follow this thread…VCs are very interested in financial services…expect a lot more interesting deals in the coming years).

My last tweet before I boarded my flight to Boston:

You don’t have to be a twenty-something founder (or thirty or forty year old founder as in the case of WhatsApp) to be excited about that. It’s not about a billion dollars (or 16 billion) being cool anymore, it’s about changing the role of money in society. Like the power of social, mobile, and technology trends enabling and wrapping themselves around changing human behavior, this revolution is already happening. Most of us are merely foot soldiers in this great endeavor, but change in the financial services space is only starting to accelerate.

We ain’t seen nothing yet. That’s exactly why it’s exciting.

And then the next day we woke up to the news about Simple.

Thursday, February 20, 2014. Somewhere On Highway 80 With Simple 

I’m driving into the office and my Twitter feed erupts again with the Simple news. Here we go again. Different valuation, different model, different scale, but the inevitable comparisons and navel gazing. Obviously very different topics, but almost as interesting to those of us who have rooted for Simple from the start. For me, a sort of melancholy ending.

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What should we learn from Simple-BBVA partnership? Start at how the company was formed. Like many people involved in fintech and digital strategy, I was very excited and supportive when Simple was first announced. I always felt they could carve out a successful niche in banking, whether they partnered with a bank (or even several), established their interface as a white label offering, or if they took the time and considerable effort to get a full banking license.

simple-thank-you-service-photo

What the team at Simple likely discovered is what everyone in the industry already knew: it’s hard to be a bank (or even a payment provider due to the regulation and transmitter license requirements), it’s hard to partner with banks of almost any size and get beyond their risk aversion, and it’s even more difficult to start a de novo bank with the capital requirements and regulatory burden. This is the case even for a branchless digital only de novo. So their pivot to partner with Bancorp Bank made perfect sense.

Simple’s journey in building out a savings focused application with limited negative customer impact was inspiring. As was their focus on simplified onboarding (with a cheeky waiting list to boot), welcoming Apple-like debit card packaging and delivery, trickle of application updates bringing thoughtful touches of user-focused innovation (Safe to Spend, debit card toggle, user embedded transaction based images, Dropbox integration); it was all there, with much more in the hopper. Then you add a non-bank like transparency and personally engaging un-bank-like social media strategy on top of customer focused simplified experiences – this was a winning combination.

I know very few people I truly respect in the industry that didn’t appreciate what Simple accomplished in the past four years. Josh and Shamir simply made banking a better place.

simple-basics

While critics took their swipes (and some things could have certainly been improved), Simple customers didn’t care. Nor would they even know, because critics were generally from the industry Simple was attempting to disrupt, and average consumers outside of industry weren’t going to find much disparaging coverage in the mainstream press.

The eventual issue likely came down to running out of money as Simple required additional investment to grow. Burning through their initial $15-16 million investment, the revenue model needed to expand as much as their team in Portland. With a transparent goal of reducing bank fees, credit products and traditional loan income needed to be bolted
On. A deposit focused NeoBank could not live on interchange alone.

Do I think Simple had been quietly shopping itself for much of the past year? I’ve had several people tell me that, but I don’t know for sure. They needed additional investment to grow, that’s all but certain. They needed an expanded customer base to grow profit from key credit segments, and a critical flush of cash or outright purchase made perfect sense. I’m surprised it hadn’t happened earlier to be honest.

Something needed to change.

Enter BBVA.

simple-blog

BBVA + Simple: What Next?

What should we learn from BBVA’s acquiring of their new trinket? That the cofounders are great salesmen for one. They got one hell of an valuation for such a small customer deposit base in my opinion (update: more people seem to thinking was too low). There’s been plenty of coverage of their price per user, and far too many comparisons to WhatsApp this week. It’s just a little silly to compare the two, but in some ways the lessons are the same: building simplified digital experiences, especially in financial services is critical to institutional survival.

Is BBVA trying to build a global direct bank brand through Simple? Possibly, at least they’ll now need to work with the Simple team to figure out how to scale this in multiple markets. Would this compete with BBVA Compass? Certainly, but who cares? Let customers choose their own flavor. Markets will do the rest.

Was it an acqui-hire for the 90-plus Portland based Simple team? With the rise of more and more direct digital only versions of foreign banks, BBVA is smart to lock in this talent for a while and learn from their efforts. My only fear is that with the inevitable departure of the founders, what has really been gained? More in that in a minute. The team at BBVA is a technology forward, aggressive minded Spanish bank with a broad global footprint. Like Citi Ventures, Amex, NAB, Standard Chartered, and countless other bank incubators and innovation arms, early development fintech firms and leading technologists are being courted and constantly evaluated. The Simple team was a valuable prize.
We’ll likely see much more acquisitions of this type in the next few years.

There Will Be Blood: Part II

Simple’s acquisition further proves to me that the coming contraction in the banking industry is not only real, but this reality should drive bank’s primary strategy to focus in building scale and profit through digital (this contraction is here to stay, whether through unprecedented M&A, mass customer migration toward larger deep pocket national and super regionals, or the rapid influx of foreign banks like BBVA, Santander, and BNP Paribas. Will BBVA + Simple become a new powerhouse bank, challenging top 10 global financial brands? Maybe. But does it matter when in less than ten years time, most banks in our market will have to be over $50 billion in assets just to compete for relevancy? That doesn’t leave very many financial institutions from the sub-14K we have today. Moving right along.

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Other quick lessons from Simple’s acquisition: Reducing friction, adding transparency, and driving toward customer focused design within beautifully crafted applications is critical not just for messenging or social media apps, they’re a necessity for financial institutions as well. Social media in financial services should be fun, and focused on solving a customers problems, engaging customers in personal ways, and is a 24/7 role. Banking can be inspiring as long as the people building the bank are as well.

simple

You know from this blog (and from Twitter) that I am a huge Simple supporter. I’ve had several conversations and countless chats on Twitter with Simple’s co-founders Josh and Shamir over the years and I always found them incredibly genuine, passionate, focused, and acutely aware that Simple shifted some of the conversation around innovation within financial services.  Whether the story of Simple will go down as part of their founder’s myth, or whether they continue to make a dent in the banking universe remains to be seen. I, for one, see their influence in the financial space as only beginning. And we should be inspired and thankful for it.

My congratulatory tweet said something to this effect: Thank you @i2pi (Josh) and @shamir_k and the @simple team for building a bank that ‘doesn’t suck.’

We should all be focused on a similar mission.

josh-shamir

The email that started Simple…hopefully something that will be tacked up on the wall at BBVA (and a few startups I can’t talk about).

simple-email

Related Articles

WhatsApp 

Facebook buys Whatsapp for $19 billion: Value and Pricing Perspectives (Aswath Damodaran)

WhatsApp And 19Bn (Benedict Evans)

WhatsApp: The Inside Story (Wired UK)

How Things Change (Techcrunch)

5 Lessons Bankers Can Learn From WhatsApp(Jim Marous) 

Simple

The Next Chapter (Simple Blog/Joshua Reich)

BBVA Buys Simple in Path to Digital Transformation (Bank Technology News)

Why BBVA Is Good For Simple (Felix Salmon)

Simple: In Name Only (Ron Shevlin)

Simple Acquired For $117 (Techcrunch)

For BBVA, Simple Deal Can’t Be About Its Business (Bank Innovation)

BBVA’s Simple Purchase Reflects Mobile Banking’s Sizzle (American Banker)

Just In Time For Finovate: Adding More Fun (And More Focus) To Fintech Applications


FinovateFall 2013 Combined

How can we add more fun to fintech applications?
…or at least a bit more focus?

As you look above at the dominant themes of applications at this week’s Finovate in New York – aka the Disneyland of Fintech™ – do you envision a series of engaging user experiences? How many of these seven minute demos will inspire us to actually use the product or service ourselves, as opposed to just offering it (or copying it) for our bank, credit union, or (hopefully well-funded) fintech startup?

Do you get a sense that you’ll be seeing great singular purpose financial applications that offer a simple premise and a simplified (yet elegant) user experience that truly engages its intended audience? Let me know what your score card looks like after two days of seventy demos. We can compare notes.

While respected analysts like Aite’s Ron Shevlin have great points about what they’re looking for at Finovate, I’m thinking holistically about the range of experiences I’ve seen demoed over my seven years of attending this conference and how many of these applications I’ve actually been excited to use – compared to every other application I carry in my pocket every day. I can only think of a handful of fintech apps seen at Finovate that are still on my mobile device today.

Think about your own application usage. Beyond the utility of email, contacts, search – what apps are still offering engagement past the initial few days of appcitement? You likely use plenty of social apps, from Facebook to Twitter to different flavors of chat. You might do some shopping (or in-store price comparisons), check the weather, get directions. And beyond the occasional payment, mobile deposit, transfer, or balance check…how much time do you spend with your financial applications? That’s what I thought.

While we see the occasional interesting user experience in Finovate offerings, and maybe some targeted applications to certain segments that add elements of gamification, I’m wondering why we don’t more of these critical elements in a single application. If you saw Jim Marous’s great post Lipstick on the PFM Pig?, you’ll get a sense of what I mean.

Something as complicated as personal financial management can be simplified if we approach it through engagement at the transaction level and adding focus toward understanding user behavior around financial management – keeping the customer (and their data) at the center of a personalized experience (see more this through Mapa’s recent research on Designing PFM tools with the customer in mind).

While Finovate regularly offers the best of the best ideas in financial innovation – it is, after all, my favorite conference primarily because of the fast pace of the demos and the ability to access so many interesting people in the space, I always come away asking this question of over half of these solutions: why don’t we have higher expectations? Why don’t we set the bar higher than some blatant push toward an eventual acquisition or exit? Let’s move financial services forward – let’s inspire and be inspired to create something great that moves us beyond this box around financial services.

Why can’t financial services be more focused, more aspirational? Why can’t we approach solving real financial problems – or at least address some realities around financial decisions – through leveraging a more rigorous focus on user experience and needs based design? Why can’t our financial lives offer a bit more fun, some whimsy. Even a taste of occasional serendipity? I’m quite serious.

We need to offer something more, well…more interesting (and more engaging) to survive the great contraction coming soon to the formerly diverse financial services industry.

After all, there will be blood.

I’d prefer to see the future of financial services evolve beyond big banks and their boring apps on one side (107 financial institutions control 81% of all assets in the U.S. market) and small, fragmented startups offering financial alternatives that never gain traction beyond the user base of a small local bank or credit union on the other.

There is an alternative universe where financial applications can exist and offer real value to consumers and small businesses – and help the sub-$20 billion financial institutions survive the coming contraction – if we simply look at our product and service offerings differently – and offer applications that drive solutions that address these often singular financial moments of truth.

I’m not the only one thinking this way…the Financial Brand had a great recent piece on making financial applications more fun to use – by focusing on driving engagement metrics by meeting consumers’ needs, requiring little effort, and simply by being enjoyable.

With that in mind, let’s add a new Best of Show category to Finovate – choosing applications that have a proven ability to drive deeper active use of the applications and improve the financial lives of our application’s end users (yes, those customers, members, and clients we care deeply about) – and by doing so in a fun, focused, and simplified manner guaranteed to be installed on the mobile device and driving active engagement over an extended time. In a series of post-Finovate blog posts, I’ll attempt to do just that – evaluate these solutions along that criteria (and by asking for feedback from you).

Let’s see how the next two days of Finovate inspires us.

First up on the first day is three-time winner MoneyDesktop. If I know anything about their team, they’ll be ready to show us (and inspire us) to drive a singular engaging user experience.

Now if only the rest of fintech would follow suit.

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Day One At Finovate PostScript Lots of interesting ideas at Finovate today, but hands down (as expected) the most chatter outside of the Apple event 3,000 miles away came from my friends at MoneyDesktop. Here’s their promo video: MoneyDesktop Guide Me.

Breaking Banks Bonus: If you missed last week’s episode of Brett King’s radio show Breaking Bank, you missed Eric Mattson (co-founder of Finovate, along side Jim Breune of NetBanker fame) talk about how Finovate got started and what to expect at this week’s show. It’s a great history of how the conference got started. I highly recommend it.

There Will Be Blood: The Era of Engagement Banking


This piece originally posted as part of American Banker’s BankThink two week series on the Future Model of Banking. Join the series contributors in discussing the types of products and services tomorrow’s banks might offer in this Thursday’s Tweet Chat.

“What is the future model of banking? What products and services will tomorrow’s banks offer that truly add value and that customers will be willing, even happy, to pay for? How will banks deliver/market these services? Think big and broad – five years out at least.” 

American Banker Series Introduction
Senior Editor Marc Hochstein

Here was my response to the question: What is the future model of banking.

Customer behavior is changing. Expectations are shifting. Technology is accelerating this shift as it alters traditional relationships with our customers as well as the banking industry’s historical sources of revenue, growth, retention, and customer loyalty.

What is the future of the financial services model? To answer this question, we must also ask: What can we learn from changes in the design of consumer financial applications and in customer behavior? What is the role of financial data and identity in this exchange, and how do we make the concept of big data become a personalized, more meaningful small data experience? In the disruptive shift to digital, are there particular pieces of the model worth salvaging to avoid the fate of so many industries before it?

How you view the current environment likely correlates to your sense of urgency and overall disruption in the banking industry. The recent downturn is (mostly) behind us, the economy has a light breeze at its back, and banks have seen the return of record profits. But in the U.S. market alone, the largest 100 banks (the top 1.5%) hold over 80% of deposit and 75% percent of lending relationships, according to FDIC data. The industry feels uneven, the business model itself for the vast majority of players a bit muddled. David Kerstein of Peak Performance Group projects that by the end of this decade there will be 40% fewer banks and 50% fewer credit unions.

While we may not all agree on the impact, the shift to digital will certainly have consequences. The banking model is moving toward a truly contextual, customer-centric view. We’re competing against players that better leverage proximity, preference, and the proliferation of engaging experiences. From American Express to USAA, from Backbase to Zopa, shifts in consumer behavior demand less intrusive authentication, social connectivity and crowdsourcing, hyper-personalization of everything from offers to usability, as well as tailored assistance and support at critical moments. We are now face to face with an engaged customer base that expects a completely frictionless experience.

The banking industry has traditionally thrived on these areas of friction. It is, of course, where we make much of our profit. Historical friction complicates our customer journeys. New fees and constraints on evolving forms of money movement and management, elongated processes to validate and verify identity and account ownership, non-contextual evaluation of risk to extend credit — these are all cumbersome user experiences that fail to leverage data and associated knowledge in our systems. Friction in the financial system comes from the industry’s strong aversion to risk and attachment to historical centers of profit, its less-than-innovative reaction to regulation, as well as organizational structures focused around inflexible systems and processes.

Our model simply must change to reduce this embedded friction, whether it is in the form of fees or complicated processes. We must keep up with the simplicity, usability, and transparency customers now demand.

The disruptors see that the future of financial services will be won by removing traditional barriers and rapidly embracing the shift in consumer and business behavior. It’s clear that we are moving toward an era of engagement banking – a marketing, sales and service model that deploys technology to achieve customer intimacy at scale.

As we move into this new era, the idea of profiting from glaring areas of friction disappears. The crux of the disruption argument is that banks are being disintermediated. But I think in many ways the industry, at least certain players, are responding, and in many ways reverse engineering the attacks to its foundation. Larger banks and payment players see this shift and are focused on designing digital financial experiences to match nimble technology entrants that are poised to nibble at the industry’s income streams. Some are taking larger chunks, like PayPal and Square, and many more are poised to be equally disruptive (GoBank, Braintree and its Venmo unit). In this new era of applications and partnerships driven by application programming interfaces, you can practically build a complete banking experience on the rails of Twilio, Stripe, and IFTTT (“If This, Then That”). The financial services revolution may not be televised, but it will certainly be driven by APIs. I digress.

As much of traditional banking services become a utility, those that leverage personalized banking experiences for their profitable customer niche segments will thrive. As we move further into digital experience, the next decade will be even more incredibly disruptive than what we saw in the recent economic downturn.

There will be blood.

Delivering contextually aware financial services in beautifully crafted interfaces and experiences is becoming a necessity to maintain relevance with the digital natives. Over the next decade, we’ll see an incredible focus on:

  • Customizing financial data and personalizing interfaces for varied consumer segments (similar to what we see from MoneyDesktop, iQuantifi, and Backbase)
  • A renewed focus on simplified authentication (using multiple forms of biometrics and contextual assessments, from proximity to login patterns, like from BehavioSec, as well as voice driven vetting like that from Nuance Communications),
  • Real time money movement at low or no-cost (as interchange goes to zero and person-to-person and account-to-account transfers go real time and as alternative networks like Dwolla expand),
  • Further social media integration (American Express, CommBank’s Kaching, FNB and ICICI’s Facebook Banking), as well as crowdsourced lending (Zopa, Lending Club, SoMoLend) and JOBS Act-related funding (LearnVest)
  • Leveraging and connecting offline and online behavior to disrupt the payment and procurement paradigm to serve up personalized insights through the use of Stock Keeping Unit transaction data through companies like Nerture,
  • Offering service alternatives through proximity awareness (American Express or Banno’s contextual offers, delivering you specific suggestions for everything from coffee to televisions),
  • Actionable notifications that prompt users through their mobile device to move money or pay bills to avoid fees or to better manage their current account spending (from Monitise to Personetics),
  • Continuous assessments of financial wellness that prompt the consumer to take a specific action after a transaction, like filing a taxi receipt as a business expense or setting aside part of a deposited check as savings (similar to personalized spending and savings goals at Moven and Simple);
  • Delivering daily or on-demand personalized information around the customer’s financial health and aggregated account status (Yseop, Narrative Science). This can range from news affecting an investment portfolio prompting changes in holdings to leveraging storytelling to assist in cross selling financial services.

Banking is no longer something customers do.
It’s an experience they completely control.

So where does that leave us, the bankers?

We are moving away from a banking relationship defined by the goal of being a customer’s primary financial institution to one where we focus on becoming their primary financial application. It’s no longer about wallet share. It’s about app-driven mindshare – as our customers reach into their pockets for their mobile device or use their glasses or other form of wearable technology and think about their financial relationship choices – before, during, and after a financial moment of truth.

So, what’s in your app?

This post was originally part of American Banker’s BankThink Future Model of Banking Series. My post appeared on July 23, 2013 and can be seen here. I encourage you to view (and share) all of the series posts here.

Bradley Leimer leads digital strategy for the Mechanics Bank in Richmond, Calif. He brings additional perspective from prior work leading marketing and business development teams in the credit union industry and through a decade driving big data and database marketing analytic services for national and regional bank clients.

What Inspires Financial Services Innovation?


What Inspires Financial Services Innovation?

What drives us to make things better? Why do we push harder to improve a process, a customer journey, to make continuous tweaks to our application interface…what motivates us to think differently and drive innovation? Whether you’re someone on the financial front lines or the founder of a fintech startup, these are your customers, your members, your clients – the ones that make or break your product, your company, your profit and your underlying ability to pursue all of your passions. That’s what we’re doing by innovating in the financial space – helping people pursue their life’s passions by removing friction from our financial applications.

What’s your inspiration to innovate?

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First off, a warm greeting from San Francisco! I know we have people on the webinar from a lot of different time zones, so we appreciate your tuning in. I’d like to thank Backbase for hosting this ongoing webinar series. I consider them to be one of the most truly innovative partners in the fintech space, so please stick around for their half of the discussion and to ask questions.

We have a lot to talk about, so let’s dive in.

My focus at Mechanics Bank is on developing our client facing applications, expanding our technology partnerships, and building out our digital strategy. While I’d love to call our bank a 110-year-old startup, I think we’re in the beginning stages of tackling the real technology challenges facing banks like ours – but I am really excited about what we’ve been able to do the past couple of years as our bank has leaned forward into fintech development and innovation. We are working diligently to improve the financial lives of our customers, both through internal development, and through being an active partner and constructive advocate within the fintech community.

I see banks like ours as needing to move beyond a set of me-too applications – we need to push ourselves and our partners to truly deliver something brilliant – something that meets the changing set of consumer expectations and behavior. If you follow me through social channels like twitter, or see my thoughts on my blog or commentary in industry publications , you’ll see my continued focus on working toward this idea of engagement banking – a marketing, sales and service model that deploys technology to achieve both customer intimacy and scale. We’ll look at some examples today.

You’re likely tuning in to this webinar because, like me, you have chosen the spectrum of financial technology as your form of improving the world in your own way. Good thing that fintech never sleeps, that it’s such an invigorating place to be. Especially if you’re in payments, or building out new form of customer experience through mobile. Believe me, there’s room for all of us – as long as we continue innovating and adapting to changes in customer behavior. Because in many ways we aren’t yet solving all of our customer’s problems. At best, we’re close to helping them reach a greater level of financial independence, at worst, we’re setting them back by denying them a better solution.

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I heard the term ‘Kodaked’ used as a verb a few times at last week’s Next Bank Asia conference in Hong Kong – I think that’s an apt expression for today’s discussion. Kodak was formed in 1885 and dominated the film industry for a hundred years – at one point it controlled 90% of film and 85% of camera sales. But then it invented the digital camera in 1975 and the rest is history. A good question to ask is how many of Kodak’s employees were users of the very products that caused Kodak’s decline? There are parallels to banking.

The crux of the argument around the change happening to the banking model is that banks are being dis-intermediated – but I think in many ways the industry, at least certain players, are responding – and in many ways reverse engineering the attacks to its foundation.

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At March’s Bank Innovation conference here in San Francisco, our opening panel was challenged when Kristoffer Lawson, Co-Founder of Finland based Holvi, said that we weren’t really discussing, in his opinion, anything all that innovative – and I would agree with him to a certain extent – but not about what’s going on in the banking model itself. I’ve been in the financial services vertical for nearly twenty years – and the developments of the past few years – from social to mobile to payments – has creaky old banking processes starting to really move. There is quite literally a new development worth talking about every single day. That said, I strongly suggest you visit Holvi and see their approach to interface design and to banking itself – they’ve done a lot of great work around socially collaborative finance.

Holvi’s value proposition is an interesting one. It challenges the role of bank’s in society itself– and it’s reflective of experiments happening through the financial ecosystem, from Bitcoin to Zopa. So what’s your take on the health of the traditional banking model? Is it dying or is it innovating as we move more and more services to digital?

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As Zig Ziglar said, ”People don’t buy drills, they buy holes”. And Kodak ignored the hole to protect the drill. So what is the banking model really protecting? As the banking model shifts, are most bank’s even protecting the right holes?

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2013, after all, will be the year that there are more mobile devices than people on the planet. While this slide shows an older statistic, the fact that more people have mobile phones than have access to use a toothbrush (or to clean drinking water for that matter), is kind of an interesting development for humans. We now have more computing power in our pocket than what got us to the moon, and yet people still overdraw their account.
Something doesn’t add up.

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We use our phones for absolutely everything – especially when shopping or doing research for potential purchases before we buy – a critical component of the context for the development of financial applications. When is the last time you forgot your phone? If you left the house without your wallet, would you go back for it? But I bet you do it all the time for your phone.

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Some of the fastest areas of growth for mobile activities revolve around banking and payment, from retail and credit services to direct mobile payments themselves. Mobile can make day to day banking activities more a more engaging experience – we have the ability to deliver transactions and context at the most relevant point – when the customer is about to use, is using, or just after they used their money.

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Mobile is also critical to financial application development because of the adoption trends toward younger and more affluent customers. But as we see the development of a digital divide forming, we shouldn’t assume that the underbanked are not engaging with our technology because they don’t have smartphones – I would say they do – it’s more likely our applications aren’t meeting their needs. Look at the rapid rise in mobile focused pre-paid, P2P and location based payments, from GoBank to Bluebird to Venmo to PayNearMe.

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With evolving hyper-connectivity, smartphones and even smarter financial applications, peer to peer and crowd funding, open source banking fueled by the rise of non-banking partners integrating through APIs, the friction of day to day banking transactions is being removed – most often by players outside the banks themselves. There are not many areas of banking that aren’t going through significant change…and it’s having a pretty dramatic impact on the industry itself – although you wouldn’t know it by looking at one key stat.

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Banking income is on the rebound – the industry recorded near record profits for 2012. Some of the post recession growth is a reflection of changes to loan loss reserve, security gains and losses, rebounding mortgage activity and efforts to gain efficiencies.

So what does this mean for the industry going forward?

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Despite near record profits in 2012, most of the growth is driving further consolidation and contraction within the industry. It could be that as we move from 14,000 financial institutions down toward, say, less than half that in a decade, the new safe zone for economies of scale moves to 10 or even 15 billion in assets. The imperative to grow, to embrace this digital transformation, is really about survival.

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Our competition – from large players to startups – have to be licking their chops, thinking of areas where they can continue to nibble at our revenue streams, from changes in the lending model to the competition in payments…but overall, banking, despite its challenges, remains a lucrative industry with large embedded players that are starting to mobilize.

So, what are we doing with those record profits?

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Some of us built fancy new branches…

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And deploy really big tablets in them …

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Maybe make them feel like our homes or our offices…

Or like the Starship Enterprise…

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Aite Group’s Ron Shevlin had this message for bank’s focused on building out that Apple retail experience in their branch networks – I hope that works out better than it did for JC Penney.

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I hear this from my peers quite frequently – driving change and innovation inside a financial institution can be painful, even hazardous to your health. We’re not agile, we’re over-regulated, and our decision making and processes are bloated. Stop with the excuses already. Are we so afraid of risk that we can’t move to improve our technology and services to better our customer’s financial lives? Sometimes innovation simply means getting things done as Sam Maule from the Carlisle and Gallagher Consulting Group. Let’s break new ground because I think it’s worth the effort to tunnel through granite.

Ron Shevlin asks a key question – why don’t banks innovate? Why haven’t we seen large-scale, transformational change — or innovation — in the industry? Because — until recently — there has been no need for the industry to change. The elements of change simply weren’t in place. Ron goes into recent changes in technology, demographic shifts toward Gen Y and Millennials, and finally into a convincing dialogue around the changing economic equation driving the revenue model – he concludes that “we may actually see some innovation in the industry over the next few years. It’s not like the banks are too stupid or don’t how to innovate. They haven’t had the economic imperative to innovate. Until now.” I highly suggest you follow Ron’s work, both at Aite and on his industry blog.

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How do we provide a safe framework for innovation in large financial organizations? While there are some good examples from throughout financial services, from innovation labs, startup incubators and accelerators, from Citi Ventures to Amex to Capital One to Discover, sponsored meetups with developers with Silicon Valley Bank and others, there is one example I am really drawn to, and that is from SWIFT’s formation of Innotribe in 2009.

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Kosta Peric, co-founder of Innotribe tells a fascinating tale in his book the Castle and the Sandbox about how you can transform conservative companies using innovation – it’s a great read and is highly recommended. What are the concepts around Innotribe?

Chris Skinner provides a great description of Innotribe – a small viral spacecraft that helped spread a new species called creators – the people within the organization that help transform the culture of a larger structured financial organization by initiating change, new ways of thinking – Innotribe acts like a startup inside its larger parent – making its parent act more quickly to the changing environment.

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The book explains that if the core business of an established company is the “castle” (well protected and built to last), innovation is best carried out in “sandboxes” – environments outside the castle where experimentation with new ideas and concepts is easier. The idea is to then bring these experiments back to the castle to make it stronger. How do you do this? Find the intrapreneurs inside your company – find those people that have patience, perserverance, and passion. Having just helped judge some of companies that entered Innotribe’s 2013 StartUp challenge, and being fascinated by their disruptive incubator project centered around digital identity (the Digital Asset Grid) led by Peter Vander Auwera – I can report that Innotribe’s approach to sparking innovation is alive and well. My hats off to the Innotribe team on what they’ve achieved – I highly recommend Kosta’s book. …

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One of the more interesting things from Walter Isaacson’s book on Steve Jobs was his penchant to take long walks with people and just talk about subjects that mattered to him. Let’s take a little walk of our own as we imagine what banking would look like from four of the most influential technology providers.

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While seemingly going through a rough patch now (are they the world’s largest company today? Ask that question again after the next iPhone launches), Apple is a force of innovation unto its own. While Google may be winning mobile platform market share, the real money being made in mobility is going to Apple – from the sale of the devices themselves to the battle of the app stores to the success of their retail efforts. We owe much to Steve Jobs and Apple for innovation in design and process – if they were a bank, I think we would see them incredibly focused on the customer onboarding experience, simplification of security, flexible payments, engaging product delivery from retail to app to online, and on the customer – merchant relationship – and we might see this focus come to the forefront as the rumors of NFC and biometrics emerge as part of the new phone release. I’d love to see more excitement and attention to the customer as we launch financial products as we see in an Apple keynote. In many ways, I’d compare them to the big five banks because of their size – but in the end Moven and Simple make better comparisons because of their dedication to the user experience. I personally don’t think Apple is anywhere near done innovating.

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Google is perpetually experimenting, dominating critical digital infrastructure like search and now mobile OS development. As they move into driverless cars, extending internet connectivity through Google Fiber, breaking new ground through a project like Google Glass – they show they are concerned about remaining relevant and making 10X investments. A bank like Google would be forward thinking and be planning out massive infrastructure investments that would pay off in the long term, a bank like NAB in Australia or a USAA in the States perhaps. As Google goes about collecting every inch of data from the digital spectrum , they are working on new ways to monetize that data. We start seeing that information itself is really a commodity- Insight from that data is what is the most valuable thing. So it’s not about big data – it might be about providing the minimum amount of information required to help a customer get the appropriate results in order to take action. Big data becomes small, personalized to the nth degree. Here are a few examples.

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Banks have been working to best leverage transaction data for decades. Historically we’ve used this data to model financial and insurance products and then now more and more consumer items with Truaxis (now MasterCard), Cardlytics, and Bankons (now CapOne), and card linked offers through companies like Cardify. We’re seeing offers popping up within online banking, within locationally aware mobile banking applications from Intuit and Amex, from Foursquare to Capital One. But how can we refine these offers? Focus on creating less friction by demonstrating that you know your customer’s data and their needs – create a better value exchange. Since there’s a fine line between being influential and being invasive, our focus might be on providing options to record customer taste and preference – perhaps providing options to tap into their social graph – this way we can focus on delivering more effective offers in the proper context. But there is much more to this.

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Enter Nerture. This company combines online and mobile search data with transaction data – and, get this, they have found the secret sauce to provide tier 3 or SKU data to its partners – that’s itemized receipt level data to you and me. Imagine what you can do with this amount of context – you know what the consumer is shopping for before they buy, whether it’s a car, a concert, or a vacation, and then you can provide assistance or offers in order to deliver the most appropriate service to your client in the most appropriate time and context. And then you have the ultimate prize – proof of purchase down to the product SKU level. But this data isn’t just for marketing, it can provide even greater refinement to value driven services to improve personal and business financial management tools. How much did I spend on groceries the past quarter? Can’t I buy those non-perishable items like toilet paper and peanut butter from another source and then save more for that vacation? Now you can the idea. Nerture is still forming its business model and is in active discussion with industry players – please contact me if you are interested in learning more. The possibilities are engaging indeed.

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Facebook is the 800 pound gorilla of social – while not the first, it is and will continue to be the biggest social experiment in human history. That is, unless the next generation rejects its use of personal data once and for all and moves on the next big thing. If Facebook were a bank – we’d be worried about our transactions appearing as ads – or about large scale changes to privacy policies – can you imagine the fun they would have with the FDIC, FFIEC, or the CFPB? But Facebook is an experiment, and so you have to sit back and learn from the ubiquity of social sharing and appreciate the ongoing willingness to alter the user experience for a billion people – most recently with Facebook Home – demonstrating an amazing ability to reinvent itself for mobile in less than a year’s time. It also shows us about their drive to shift new experiences on top of a mobile OS – to bring front and center content, notifications, and activity – whether we want it or not. Fidor from Germany is the bank comparison that comes to mind – the bank that defines itself as a community and drives social banking innovation. This philosophy extends right through to its motto: ‘banking with friends’.

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Amazon is the world’s largest marketplace. While you might describe Amazon as the world’s biggest personal shopping mall – I would suggest that it is the largest repository of interesting data next to Google – it’s where we first saw the mass experiment of reviews deployed, as well as the culmination of personalization driven by algorithm, combining a Pandora-like crowd source of recommendation that drives an incredible commercial engine. Comparisons in my mind are to credit card giants like Capital One, Amex, and Citi – or even the large payment networks themselves like Visa and Mastercard which combine worldwide card activity and analytics for effective cross sell and micro-personalization – something all banks need to master. Also known for placing big bets – like with the Kindle – Amazon is building a 10x organization focused on long term customer value. Are we selling products in similar ways?

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Seth Godin says: The goal is not to find customers for your products, it’s to make products for your customers. A customer simply wants to send money to their kids at college. Or they want a new car, a new home. Or to take a vacation once a year. In comparison, we sell them products, not dreams, not the end result. Maybe we need to be better at communicating the value that banking brings to the needs of our customers – we’re sometimes not the best storytellers in regard to our own services – especially through digital. But I’m getting a little ahead of myself.

Many of us are locked into partnering with the established ecosystem of large fintech players who have primarily focused on further developing online banking during the past decade and are now playing catch up to deliver applications designed to reduce friction through mobile financial engagement. Tell me why I can do more in an online browser than through our mobile applications? It’s a four screen world across two primary application schemas, and whether through native applications (my preference), or HTML5 development, we should develop for application consistency across channel – leveraging the best design for each devices. That’s easier said than done. But it should be our primary goal as we fight for relevancy.

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And you might argue that we’ll see a fifth and sixth screen soon – if Google Glass and other wearable devices like watches creep into our daily life. Ukrain’s PrivatBank is already planning banking apps to use Google Glass – so how long will it be until building apps for more types of wearable tech is the norm? I look forward to automating my family’s grocery needs as our refrigerator talks to other connected devices throughout our house and then advises our financial accounts to deliver groceries as needs arise. We need to have flexible development processes and agile partners in place to meet the changes in technology and consumer behavior.

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If the internet changed the way people find, discover, share, shop, and connect, then this trend toward mobility simply escalates this trend. From the growth of mobile applications devoted to social connectivity and discoverability, to the sharing of photos and other content, mobile financial development is simply hanging on to the coattails of broader development and design trends that best leverage location, big sets of data, and levels of engagement.

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I raise some eyebrows when I say that you could probably start a bank with IFTTT (If Then Then That), Stripe, and Twilio. For a very basic application, you can create the application wrapper, add actionable alerts, the ability to move funds around, and an option to talk to somebody when something goes wrong. This really talks to the rising importance of the API ecosystem and our options in building financial applications as we open up our platforms – we have so many more options today. So what is the new face of mobile then? From a quick balance to payments, from virtual assistants to contextual offers, what should we be focused on as we build mobile financial applications today?

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Simple is a good place to start. From Safe to Spend to the card lock/unlock to the image/receipt attachment to the social engagement with its customers. It’s simple, instant, and personal. It’s about ‘perceived simplicity’ for customers – not about simple products. To know what that means, you need to know your customer. There many lessons here from Josh and Shamir’s team.

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One of them that I take seriously in our development is the trend toward personalized visualization – from Pinterest to Summly to Flipboard – people want their content personalized and presented in a beautiful format via mobile and tablet and web – this should mean financial transactions as well. How are you helping customer’s data tell a story when you don’t let them personalize it? They also have customers that work hard to promote their services – this one picking a fight with Wells Fargo on Twitter – one of my blog’s most read posts of 2012. But that’s a whole other story. Simple just gets it. I’ll leave it at that.

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Moven unveiled its solution at Finovate Europe in February. What Brett King and Alex Sion are doing at Moven is providing a way for consumers to think about banking differently – built from the ground up as a mobile only banking service, Moven relies on NFC payments and continuous transaction engagement to help people really improve their financial lives.

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Having met with Brett King and Alex Sion last week and seeing Moven’s instant receipt categorization in person, I can tell you there are a lot of things Moven is doing that need to be looked at – from the transaction level engagement to the interface design. This is just fantastic stuff.

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Whether on mobile, tablet or browser, Money Desktop continues to demonstrate how we can build applications to change the linear way we look at banking transactions today. This is a simply a more engaging way to look at your budget. My hats off to the team as they continue their success in 2013. Beyond budgets, you’ll probably need some additional financial advice.

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LearnVest adds an interesting feature by not only aggregating your financial data around the concept of long term goals and investment options, but by having you treat transactions like email – something that needs to be dealt with to reach transaction zero – through foldering the data. While possibly more time consuming than categorizing transactions as they occur, I like the idea because it mirrors applications that are trying to simplify both email and calendar data (think Sunrise, Sparrow, Mailbox).

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Personal Capital does some similar things to LearnVest and adds A2A transfers, and direct connectivity to a personal advisor through Facetime. We’ll likely see a lot more of this direct to advisor application as we close more physical locations.

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San Francisco based Planwise takes an outside in approach to money management with engaging interactive tools that walk you through a path toward your financial goals and how your decisions impact them. They have a great team focused on this interesting advancement in financial advice and planning. There are some other ways to further personalize financial data.

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The concept of big data is meaningless unless we wrestle meaning from it – a company called Narrative Science is working within several verticals, and in financial services with Personal Capital, to leverage data to automate a narrative, to personalize what data means at the individual level – its content for an audience of one but at scale. Their service, called Quill, takes large sets of data and delivers a narrative about anything from a day’s worth of financial activity to what a person’s portfolio did in the market that day. The engine will generate personalized stories for mass affluent users, who link an average of 16 accounts to the service. I think we’ll see more banking applications for this technology in the years to come.

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Knowing what your customers want before they even ask and being able to solve their issues quickly. That’s power. So what if every banking transaction contained a quick link to intelligent contextual assistance? That’s what Personetics delivers within online and mobile applications, leveraging tap, type, text or voice interaction with customer data. What is this transaction about? Where did it occur? Why was my payment this much? How much did I pay last month? Personetics has an interesting solution worth checking out.

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Often referenced as one of the most innovative banks, USAA’s mobile application is like a Swiss Army Knife – it has just about every tool you need. On my own mobile must-have check list, it has a quick login option, extensive product cross sell, a claims application that assists you in recording details of an auto accident, as well as industry leading RDC, product calculators, and a few great items like A2A transfers and social integration. But there’s even a few more hidden gems.

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Looking for a house or car? USAA has the most extensive in-application data I’ve seen to assist their members in researching these larger purchases. Think of it as a cars.com and zillow right right within mobile banking. And these services are even better on the tablet.
There’s one more thing.

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USAA just launched voice banking. Have you ever used Siri or similar services to make a reservation or place a call? Enter Nina from Nuance. Like Siri, Nina can send texts and emails, do a web search, and get directions. But Nina can have “continued conversations with contextual dialogue with a user”. That means it can hold a conversation.

I think USAA is going to remain a technology leader for some time.

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While we’ve looked at some interesting developments, are our applications engaging enough? Why should we want to play Angry Birds more than engage in our own finances – the very thing that enables our ability to pursue those things that most matter to us? Personal assistant applications, like Donna above might waken us up to tell us the events impacting our financial picture that day, as well as a summary of our progress toward our goals. That’s what we’re working toward – meaningful, contextual, intelligent applications designed to improve our financial lives.

There’s are key differences between Wall Street banks and Main Street banks, between national banks and regional banks, from American banks to international banks. We all have different structures, different scale, different scope and different values. I’m not sure I’m ready to give up the mantle of respected financial partner to startups or payment providers, but I’m more than willing to partner with them. Taking no risk is the greatest risk of all. If innovation still means delivering continued value through new customer experiences, then count me in. I hope I can count on you as well. I thank you for your attention today, and I look forward to additional conversations as we connect through the fintech community.

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This post comes from my April 2013 Backbase Webinar. You can view the webinar and download the slides at that link. Let me know what you think.

About The Author

Bradley Leimer, Vice President, Online and Mobile Strategy at Mechanics Bank and financial technologist and engagement banking proponent discusses customer behavior and related design trends impacting financial application development. He explores topics that are relevant to community banking, financial services, and the changing customer expectations developers now face.

Customer behavior is changing. Expectations are shifting. Technology is accelerating this shift as it acts to alter traditional relationships with our customers as well as the traditional sources of revenue, growth, retention, and customer loyalty. We are moving away from a personal banking relationship to one where the primary relationship is that of utility. Banking becomes something you do through an application, not something you do in a defined location. And those applications better be well designed, because the banking model itself is in jeopardy.

What inspires your teams to innovate and iterate? Why are we not seeing more radical changes in financial application design? While we are still only in the middle stages of this digital transformation, the majority of banks seem destined to be left behind. With the variety of experiences available today, what can we learn from changes in design and customer behavior? What is the role of financial data and identity in this change, and how do we make the concept of big data become a personalized, more meaningful small data experience? If our experience design process were more like Apple, Amazon, Google, or Facebook, what would that look like? Where else should we look for inspiration?

Delayed Thoughts On Finovate Spring And The State Of Financial Innovation


This is the transcript of a recent presentation I delivered entitled: WTF?

So – WTF? Let’s get started.

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WTF? of course, stands for ‘What The Finovate?

It’s not often I start a presentation with a question, let alone a questionable acronym.

But I want to start with a book recommendation. I’m just tuning into Brian Solis’s book WTF (which is where I got the inspiration for my title today). What’s the Future of Business? is not a question—it’s an answer. It explains how experience design helps your business and how you can harness its power for business growth. Solis’s book introduces a new movement that aligns the tenets of user experience with innovation and leadership – it may also may inspire us to rethink our business models and approach to client and employee relationships to create amazing, real-world experiences.

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But for now, let’s ask our original question: What The Finovate? So WTF? What is this magical conference?

I’ve coined the conference the Disneyland of Fintech – that’s what I consider it – the most wonderful place on earth (next to Paris) – at least for financial technologists. What’s the background for the conference?

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Finovate is the premier technology conference in the financial services industry. Period, end of story. While there are conferences I really enjoy, from Future of Money to NetFinance to Money2020 to NextBank (and a several others I’m forgetting), this is my favorite format for seeing new technology.

Finovate was started in 2007 by Jim Breune (of blog and banking consulting group – NetBanker and Eric Mattson. It’s grown from its original locations in San Francisco and New York, areas with heavy VC and technology development, to now include London and Singapore. Financial technology development, and disruptive efforts are occurring in every corner of the globe – so the conference has grown to match that geography.

So who goes to Finovate? What organizational titles make up the more than 1300 attendees? Surprisingly more senior, and more from financial services itself now (this is a huge change from 2007 when less than 400 people came and the attendees were dominated by investment firms and fintech players large and small. Now this is where everyone wants to be.

The format is part of why people want to come. 7 minute demos, live product demonstration, no video, no product mock ups allowed – just live applications that (hopefully) clearly demonstrate the value proposition to potential investors and partners. San Francisco’s event showcased 72 companies demoing over two days – which means 504 minutes of live fintech – nearly 8 1/2 hours. What does this feel like?

This conference feels like a firehose.

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Where do the demoing companies come from? All over the map – literally, including more and more from Asia, Europe, and the Middle East. It’s important to look at the financial technology landscape as a global set of providers – our larger competition is looking for best of breed partnerships and investment opportunities – looking at all areas to ensure their relevancy by partnering with the fintech equivalent of Facebook.

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To the demoing companies, it can look like this (slide with stage viewpoint). Not just because they have only 7 minutes in front of 1300 people – some of which are two and three person companies headed by people in their twenties, but because they are doing a live demo through a desktop, mobile, or tablet application that relies on wifi. Thankfully, it’s really good wifi. They also have to fear the gong – because literally they have to stop at seven minutes and their have been people gonged off stage at that mark. It even has it’s own twitter hashtag – #fearthegong

So attend at your own risk. Your results may vary.

The great thing is that if you missed any of the presentations, their now available on demand at finovate.com – all 6 years worth. What did the demos cover this year? Like the presenting companies, it was all over the map, but there were underlying themes.

‘Security’ drove 20% of Finovate presentations. Through many demos, we saw the idea that Payment behavior is really driving ‘banking’ relationships, especially for younger generations that have been taught credit is bad – you should only use your debit card – and what are checks for anyway? As always, User experience (UX) matters – but now more than ever. Financial data is driving contextual, personal, meaningful applications that are nibbling at ‘banking’ experiences at every step. The idea of Crowdfunding and P2P Lending becoming a real alternative – especially on the investment side with changes dictated by the Jobs Act. The demos showed ‘Big Fintech’ players to be less nimble, less critical unless they partner with smaller more agile technology firms. We’re seeing a new reliance on application programming interfaces (APIs). Overall, there’s a renewed sense of urgency around partnerships for execution and delivery – as if we were re-arranging deck chairs on the Titanic. Every area of banking revenue is being targeted and slowly being disrupted. So let’s dive in.

‘Security’ drove 20% of Finovate presentations. Through many demos, we saw the idea
So where would the industry place its bets? During the conference, Oregon based financial consultants Mindful Insights partnered with Finovate within their mobile conference app to ask conference-goers where they would invest a dollar of their own. The results were interesting because only a few lined up with the eventual Best of Show winners.

D3 banking, Mint and MoneyDesktop took the top dollar investments. Each aided cross sell within online and mobile banking and could most easily be translated to eventual ROI. I won’t talk about Mint so much today, but know that Mint is replacing FinanceWorks within Online Banking – but there are some interesting alternatives to this path – I’ll touch on that later when I talk more about MoneyDesktop and PFM. Encap and Trusted Knight add layers of protection for online and mobile banking applications – and offer alternatives to Trusteer.

I’ll talk about Better ATMs in a little bit, but overall it looks like a solid offering and worthy of investment. Moven is Brett King’s startup that is in current beta phase – you’ve heard me talk about them before – it’s really focused on changing the way people think about the utility of banking by creating interactions through mobile at the transaction level – before, during, and after the transaction itself – something that is driving trends throughout fintech. Signifyd fights fraud by using social media to enhance KYC (Know Your Customer) and fight fraud – again, another ongoing trend in fintech solutions – using the social footprint and larger data trail consumer leave behind.

Rounding out the ‘investments’ is Live Plan, which helps businesses understand the KPIs (Key Performance Indicators) that drive their business and how to improve their profit by pairing up business owners with experts in their field, as well as mapping data from the Quickbooks API to bring a data driven story to their own business financials. Wallaby is an open mobile wallet where you place all credit and debit cards in one place to optimize spend to maximize rewards across any payment activity. I’ll talk about BrightFunds and TipFunds in a little bit – but another two great ideas around cause investing and adding transparency to financial analysis.

What other demoing companies were interesting?

Security, security, security. It was everywhere at Finovate. EyeVerify leverages the existing mobile camera to compare your eye’s vein patterns (apparently as unique as fingerprints) to initiate login and additional secure elements of online or mobile banking applications. Other new security elements being demo’d include four factor authentication by ValidSoft and IBSS (voice, face), a single web and mobile ID across all applications (One ID), one time QR codes (Microstrategy), as well as a national private database for ID verification (Picture ID). There are other firms, like TrustedKnight, that offer alternatives to Trusteer on the browser. Security is not going to go away, and while it’s like catnip, we feel we have to load up on it because our regulators say we have to – we just have to make sure it doesn’t get in the way of the user experience.

How can ATMs become a source of income outside of foreign interchange? The answer is pre-paid cards. Better ATMs technology enables ATMs to load, activate and dispense specially designed prepaid cards just like cash directly from ATM cash trays. Our current product line includes ATM-dispensed Visa prepaid gift cards and Discover multi-merchant cards. We are partnered with the world’s major ATM deployers, ATM manufacturers, card brands and card payment networks to capture a share of the more than $549 billion loaded onto prepaid cards in 2012. This new card design is now approved for use by financial institutions throughout the U.S. and international approvals are underway. Financial institutions can now automate their prepaid programs through their existing ATM fleets.

Kofax shows how to capture account on-boarding info like a license or a utility bill using the customer’s mobile phone camera. The product leverages a now ubiquitous technology (mobile camera) to solve an annoying, tedious, practical problem — manual account verification. Kofax will demonstrate how banks can onboard customers to specific products, services or accounts and capture customer content, data, and documents in support of the onboarding process directly from the mobile device. Customers will be prompted to submit information that is automatically extracted, validated for accuracy, and then utilized in the decision process.

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GoBank is the first bank account designed from scratch to be opened and used on a mobile device. With GoBank, users have full access and control of their money from their smartphone or tablet, have no overdraft fees or minimum balance requirements, and can withdraw cash from more than 42,000 fee-free ATMs in the U.S. Complete on-boarding from a mobile device, mobile RDC, design your own debit card from your photo, mobile PFM, and a Fortune Teller to assist in purchase decisions. Go Bank’s parent company is Green Dot, a publicly traded bank holding company – and it shows what a bank can do through investing/acqui-hiring a financial non-bank P2P pre-paid startup.

Braintree is the fastest growing payment platform for online and mobile businesses, offering all the tools merchants need to accept payments and provide consumers a frictionless experience at checkout. Braintree operates internationally and allows merchants in 40 countries in North America, Europe and Australia to accept payments in over 130 currencies. Braintree’s consumer brand, Venmo, offers a digital wallet and person-to-person payment application that makes it easy for consumers to make payments on mobile devices. Venmo Touch eliminates the need to constantly re-type your credit card information when making purchases on your mobile device. It provides a connective layer across all the apps on your smartphone.

Credit Sesame is the consumer’s credit and lending expert, providing smarter financing for your life. They provide a complete picture of your credit and loans in one place, including your credit score, credit monitoring, personalized financing analysis, and unbiased, pre-qualified loan and savings recommendations — all for free. You receive unbiased recommendations on mortgages, auto loans, credit cards and other loans, customized for your financial goals. Their smartphone app comes with integrated Goals, Visual Mortgage Comparison Tool and Free Credit Monitoring. They already have $2M users, over $60B loans under system management, and have identified $600M in user savings. They have 32 employees and have raised over $19.35M in initial investments. Based in Mountain View.

BrightFunds is where the mutual fund model meets philanthropy. Bright Funds brings an investment approach to individual philanthropy, a $300 billion market in the U.S. alone. By combining the sophistication of investing with innovations in design and technology, Bright Funds provides a financial service that addresses a growing need in online charitable giving. Users can invest in a portfolio of pre-defined “funds” associated with high level causes — like poverty, education, and environment as well as design their own funds. It’s available as white label to banks and investment firms, as well as 401K programs like what the bank offers.

Balance Financial is a digital work space for finance professionals to interact privately with their clients. It provides a secure network for securely transmitting data and documents between clients and financial institutions. Balance helps financial advisors, loan officers & private bankers drive revenue growth, improve client engagement and scale service delivery with a powerful suite of client facing technologies. Their white-labeled digital workspace application includes common PFM features, bill payment, file sharing and more. How could this help communications bewteen the bank and its clients?

Kabbage has pioneered the first financial services data and technology platform to provide funding to small businesses in fewer than 7 minutes. Kabbage leverages data generated through business activity such as seller channels, social media, shipping data, and other sources to understand performance and deliver financing to small businesses. Kabbage has partnered with Intuit to provide simple and easy access to funding for QuickBooks customers. Kabbage is the first company on Intuit’s QuickBooks Financing Platform to underwrite customers solely based on QuickBooks data. With Kabbage, customers receive instant approvals; funds can be available within minutes when they use PayPal to receive funding.

Despite the current limitations on equity crowd funding, the industry continues to gather steam; in 2012, crowd funding raised $2.7 billion compared to $1.5 billion a year earlier. While Propser and Lending Club are P2P lending heavy weights, business crowd funding is a bit different model (brought about with 2012’s JOBS Act) – essentially asking people for money to fund a project, business or charitable endeavor.

As it stands now, the general population is limited to donation or reward-based crowd funding through platforms such as Kickstarter. People hoping to raise money through crowd funding can give out products or prizes in exchange for donations, but not equity stakes in the business. Once fully enacted, the JOBS Act removes some of the barriers to direct investing by non-accredited investors.

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One such firm already gaining steam (initially starting with accredited investors) is Finovate presenter P2B Investor. They provide businesses with competitively priced working capital while offering the crowd returns of 7-12% APR. Their website is operational and open to Accredited Investors, average earnings are 9.5% APR. Investors own a percentage of every invoice in a portfolio and earn their returns in cash every month. Investors can liquidate part or all of their portfolios without fees with 60 days notice. Buying a proportionate percentage of every invoice in the portfolio [remember, receivables financing, so you are lending against the small businesses pending payments from larger customers that are more secure]

On April 5, 2012, the Jumpstart Our Business Startups Act or JOBS Act, a law intended to encourage an easier path toward funding of US based small businesses by easing various securities regulations was passed, including the way investors are have to be accredited and raises the number of shareholders a company can have before it is forced to go public. Congress is now pressuring the SEC to complete the plan to enact the law by fall 2013.

Realty Mogul is a marketplace for investors to pool money online and buy shares of pre-vetted investment properties like apartment buildings, office buildings and retail centers; it’s crowdfunding for real estate. Similar to P2P lending, they are asset based investments, already live and running, initially with Accredited investors only until the JOBS Act is finalized.

BBC Easy offers cloud-based software that automates the collection of financial data from borrowers. Data is read directly from borrower accounting systems and is used to provide financial insights to lenders on the risk and trends of their commercial borrowers. BBC Easy reads lender-specified data directly from the borrower’s accounting systems for verifying loan compliance and financial viability. They fully calculate the borrowing base certificate for borrowers saving time for lenders and borrowers.

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Narrative Science was one of two providers (the other is Yseop out of Israel) that is automating business analytics through natural language communication technology that helps organizations transform data into narrative insight. Their artificial intelligence engine, Quill automatically analyzes data and creates stories that are contextually relevant and personalized to any audience. Narratives can be produced in many formats, including business reports, articles, summaries, visualizations, headlines, and Tweets, allowing companies to improve decision-making, create new products, and optimize customer interactions. One of the first financial players working with this solution is Personal Capital – aimed at delivering daily contextual, personal, and relevant insights into their investor’s portfolio.

At the end of each day of presentations, conference attendees select their best of show and these are tabulated to show the winners. The top 5 vote getters win each Finovate – and no one gets to know who the top selection is – their all winners for being named Best of Show.

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FamZoo’s online and mobile banking helps parents teach kids good personal finance habits through real-world, hands-on practice. Parents set up a private, fully customizable “Virtual Family Bank” to manage their children’s earnings, spending, saving, and charitable giving using IOU accounts or optional prepaid card accounts. They also offer a co-branded version to banks with a built-in targeted marketing platform that allows financial institutions to deliver youth financial education while promoting their brand, expanding their family product offerings, cross-selling related products, and establishing a long-term relationship with their next generation customers.

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LendUp’s target audience are people who have been declined for conventional loans. They believe these borrowers deserve “something better” than predatory payday and title loans. Loan amounts are initially kept small to mitigate risk is that borrowers can build up their credit ranking to score bigger and better loans.

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TipRanks online tools collect performance data for stock analysts and pickers, then rates them, with scores – much like baseball batting averages. The company uses public data – mainly past picks and stock performance data – to generate its scores and provide a mechanism to rank analysts and hold them accountable for their public recommendations. Their singular goal is to give power back to the individual investor. TipRanks ensures accountability, objectivity, and is proudly unaffiliated with any investment firm.

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PayNearMe operates a cash transaction network that allows consumers to pay with cash for a range of goods and services from companies in e-commerce, property management, consumer finance, and transportation. Consumers can pay their bills with cash at thousands of participating merchants (including 7,000 7-11s). Its primary market are unbanked/underbanked consumers who may not have checking accounts but who want to avoid the steep fees some money order retailers impose. PayNearMe is a white-label treasury services product that any financial institution can offer to their merchants.

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PFM juggernaut MoneyDesktop debuted analytical tools that are designed to help financial institutions gain deeper insights into what their consumers need and offer more targeted products and services. MoneyDesktop now serves over 400 financial institution clients. See there demo here.

This is a just a slice of disruption from Finovate. There are hundreds (if not thousands) of companies like this in U.S. alone. Many solutions are potential partners for banks, not outside disruptors. The most important elements are trends that erode banking’s traditional ability to profit from financial credit and payment transactions. Fee income is changing, payment income is changing, credit is becoming more and more competitive. The changing banking model should consider partnering/investing in these type of companies. So we need to really look at where we can gain efficiencies from partners, by simplifying, by pairing back services, and focusing on what’s relevant for the future.

But the most important thing we can learn after attending a conference like Finovate is something I heard from Neff Hudson of USAA this week (now, a month back):

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‘What The Finovate?’ isn’t really a question in the end – it’s an answer.

finovate-wtf

I hope to see you in New York in September.

While I can’t share the entire presentation deck, I wanted to share some of my recent thoughts on Finovate, partnerships, and the process of innovation in financial services. Parts of this content is borrowed from the official Finovate site and combines thoughts from several analysts and Twitter fintecheratti. We’re all moving the conversation forward – now let’s move banking forward.

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Inspiration For Innovation: Considerations For Financial Application Design


Thank you for tuning in to my webinar with Backbase yesterday.  I’m posting the slides and recording after the description below.  Let me know what you think – I appreciate your feedback and your tuning in. Keep innovating!

Backbase Bank 2.0 Webinar Series April 23, 2013

Inspiration For Innovation: Considerations For Financial Application Design

In this Backbase webinar, Bradley Leimer, Vice President, Online and Mobile Strategy at Mechanics Bank and renowned financial technologist and engagement banking proponent discusses customer behavior and related design trends impacting financial application development. He explores topics that are relevant to community banking, financial services, and the changing customer expectations developers now face.

Customer behavior is changing. Expectations are shifting. Technology is accelerating this shift as it acts to alter traditional relationships with our customers as well as the traditional sources of revenue, growth, retention, and customer loyalty. We are moving away from a personal banking relationship to one where the primary relationship is that of utility. Banking becomes something you do through an application, not something you do in a defined location. And those applications better be well designed, because the banking model itself is in jeopardy.

What inspires your teams to innovate and iterate? Why are we not seeing more radical changes in financial application design? While we are still only in the middle stages of this digital transformation, the majority of banks seem destined to be left behind. With the variety of experiences available today, what can we learn from changes in design and customer behavior? What is the role of financial data and identity in this change, and how do we make the concept of big data become a personalized, more meaningful small data experience? If our experience design process were more like Apple, Amazon, Google, or Facebook, what would that look like? Where else should we look for inspiration?