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5 Seismic Shifts in Banking Expected in 2017

Software AG has released its top five predictions for the banking industry in 2017. Laura Crozier, CFA, global industry director, Banking, of Software AG noted: “There will be some seismic shifts in the banking industry in 2017 as threats and opportunities from digital banks, fintechs and regulation continue to shake up the landscape.”

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Priority One: Improving Customer Experience

Banking’s future is dependent upon meeting new expectations.

By Michael Scheibach

 

“Traditional banks see fintech startups and digital banks as threats to their business, and rightly so because these new entries into financial services tout an appealing, user-friendly customer experience, which can help successfully target groups like millennials.”

The comments of Will Weidman, senior vice president, Applied Predictive Technologies (www.predictivetechnologies.com), reflect those being made throughout the industry — an industry repeatedly being warned about its impending disruption. Yet Weidman also emphasizes that traditional banks have a competitive edge in their ability to provide customers with personalized service, which is essential in building long-lasting relationships. The key is to learn from the disruptors and implement more efficient, streamlined, integrated online and mobile offerings.

According to APT’s recent State of Business Experimentation report, traditional financial institutions are, in fact, doing just that. Eighty-eight percent of those surveyed are improving mobile capabilities, and 50 percent are adding Smart ATMs and self-serve technology to further entice customers eager for cutting-edge convenience.

“Traditional banks are actively investing in mobile and online offerings to meet growing demand for digital banking options,” said Weidman. “If they once were behind, they now seem to be catching up.”

Weidman cites the fact that banks are beginning to offer promotions encouraging customers to migrate to lower-cost mobile or online channels, while others are testing strategies to engage and onboard customers that open accounts outside the branch. According to the SOBE report, all financial institutions surveyed are striving to improve their digital onboarding processes to accelerate channel migration, with 78 percent of respondents marketing new mobile and online app features. Seventy percent of respondents said enhancing their online banking platform is a strategic priority, and 60 percent said that channel migration is as well. In addition to tackling the mobile and online spheres, banks are adapting their physical branch networks to cut costs by carefully closing less-valuable locations while trying to retain valuable customer relationships.

Weidman points out that banks are increasingly training branch and call center staff to assume more universal roles than just fulfilling traditional teller responsibilities. This is essential as customers using these channels not only want to conduct transactions; they also want financial expertise. As branch closures increase, contact centers are becoming increasingly integral customer service resources. Banks are experimenting with the traditional call center model by focusing more on proactive outreach and cross-sell activities, rather than just fielding incoming requests.

Undoubtedly, traditional financial institutions need to move toward omnichannel or digital banking. But this is not the complete answer. They also need to personalize the customer experience. Weidman notes that some banks are now using beacons, Bluetooth-enabled devices that communicate with smartphones, to send nearby customers localized event information and promotional offers. Others are embracing innovative branch formats in hopes of connecting with customers on a more personal level.

“Not all new programs will necessarily be well-received by customers,” said Weidman. “For example, video-conferencing technology may save costs and appeal to younger tech-savvy customers but alienate those that prefer in-person interaction over talking to a screen. By testing new customer interaction strategies on a smaller scale, sophisticated banks can identify which programs they should target to different branches and customer profiles before making sweeping changes.”

The bottom line, according to Weidman, is to focus on customer preferences and conduct personalized outreach. Disruptive players are forcing traditional financial institutions to innovate quickly and implement the most effective changes possible. These institutions must prioritize mobile banking and channel migration, and incentivize conversion to these new digital services with online-only promotions and user-friendly, personalized interfaces.

 

Michael Scheibach is executive editor of BankNews.

Partnering for Payments

Fintech payments solutions offer new challenge.

By Michael Scheibach

Generating revenue, improving product offerings, streamlining operations and better serving customers are among the top priorities for financial institutions in 2017. They also are the priorities for small businesses, especially retailers, who constantly look for ways to reduce costs, better serve their customers and increase revenues. Many retailers, in fact, are now part of the Merchants Payments Coalition — representing nearly 3 million stores — whose mission is to reduce credit card fees and create “a more transparent system that works better for consumers and merchants.”

Needless to say, banks must confront this changing payments landscape or risk losing their retail customers to fintech startups. In a report released last year, “Banks, Retailers and Fintech: Reimaging Payments Relationships,” the authors point out that fintech companies “sense an opportunity” in payments and are “muscling in” on banks’ traditional turf. “Banks cannot afford to be complacent,” reads the report. “Changes sweeping the industry suggest that there is a lot more disruption ahead, with potentially much more significant impact on banks.”

An even greater threat than payments processing, however, may be the weakening of the overall business relationship with a retail customer — an area of strength for banks. In other words, fintech payments solutions often have expanded capabilities that strengthen the fintech’s connection with its customers.

An example of a fintech company offering more than a simple payments solution is Fattmerchant (www.fattmerchant.com), a subscription-based merchant processing company. Its solution also includes one-time and recurring online payments, invoicing capabilities, a reporting dashboard with analytics, a mobile app, technical support, customized reports and more.

Although Fattmerchant has focused primarily on retailers, professional services and ecommerce companies, it also knows the importance of working with banks because of their longstanding small-business customer base. To do this, the company recently introduced a white-label Partner Program for banks and credit unions that is fully customizable according to the financial institution’s brand standards. A financial institution that becomes a partner has access to tools and resources for marketing, customer service, technical support and account management. Plus, the program allows institutions to analyze merchant processing savings for clients and helps clients switch processors, all while the institution earns money.

CEO Suneera Madhani emphasizes that one of the biggest benefits of the program for financial institutions is the ability to partner with a merchant services provider with no markups. Financial institutions have traditionally worked with standard processors cutting into their customers’ bottom lines, says Madhani. Now they are able to recommend a company that works for the mutual benefit of both the merchant and the institution.

“Customers of financial institutions enrolled in our Partner Program have access to a network of available resources and transparent pricing to help them succeed,” said Madhani. “The program provides updated technology such as a detailed analytics dashboard and tools, as well as a fully integrated virtual terminal. By using Fattmerchant, merchants are offered major savings through no markups and no contract. Merchants also have the added benefit of working with both their bank and the Fattmerchant team to find ways to save, essentially expanding their financial support system.”

Although the Partner Program is new, Madhani said the early response has been positive, with small to medium-sized financial institutions seeing the greatest return. One such institution is Axiom Bank in Orlando, Fla. According to Daniel Davis, president and CEO, the bank and Fattmerchant are working together to provide customers with affordable merchant processing, and to ensure that customers are improving their return each month and reducing unnecessary spending on exorbitant bills.

“Small-business owners are seeking convenience, clarity and trustworthy services,” said Davis, “and that’s what they’ll find with this partnership.”

 

 Michael Scheibach is executive editor of BankNews.

 

 

The Case for Mobile Deposit

By Michael Scheibach

Mobile banking users want mobile deposit, or MD. The Federal Reserve’s report, “Consumers and Mobile Financial Services 2016,” in fact, found that MD is the second most common activity among these users, right behind receiving bank alerts; and 82 percent of mobile banking users have their bank’s application on their smartphones. This would indicate that every financial institution needs to move ahead, if it hasn’t already, with offering MD.

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The Future of Authentication

New technologies help improve consumer identification.

By Michael Scheibach

As banks continue their digital transformation, with expanded web-based and mobile offerings, the need for improved safeguards to protect their customers’ accounts and transactions is becoming even more critical . . . and daunting.

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Fintech, Payments and Banking

Creating opportunities by leveraging fintech and payments industry knowledge

By Chris McNulty

It has been many years since the local community bank required only a reasonable delivery of core banking skills to thrive. Yet most community banks still think of their business clients and payments in two separate ways. One is related to merchant services and how to provide this critical service to their business clients. The other is a more traditional cash management view of payments led by the need for ACH payments and bill pay functionality.

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Exploring Synergies of Fintech Partnership

By Toni Lapp

As some banks try to regain ground lost to fintechs, others are forming partnerships. Consider the case of Central Bank of Kansas City. CBKC has long prided itself for serving customers of moderate means. A Community Development Financial Institution, CBKC was probably hit harder than most banks during the recession.

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The Fintech Factor

By Ray Ruga and Francisco Geller

Community banks sit at the crosshairs of an array of forces that threaten to wipe them off the competitive map. The recent trends in fintech have the potential to become a game changer for individuals seeking loans, and especially for small and mid-sized enterprises, or SMEs. Because lending platforms created by fintech companies are highly effective and efficient on a smaller scale, it is the SME that stands to benefit most from these disruptive solutions.

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Nearly 3 in 10 Consumers Willing to Use Mobile Wallets in the Next Six Months

August 10 – Although mobile wallets are a relatively new form of payment, nearly 3 in 10 consumers (29 percent) expressed a willingness to adopt this emerging payments alternative in the next six months, according to recently released results from a consumer survey by Computer Services, Inc., a leading provider of financial technology solutions. (more…)

Growing Pains for Marketplace Lenders

By Toni Lapp

Like many other fintech innovations, marketplace lending’s business model can be compared to that of Uber’s in that it offers a platform that brings together two parties in a transaction. Still in its infancy, marketplace lending is experiencing an Uber-like speedbump these days with Lending Club’s founder being forced out amid questions of impropriety, Prosper Marketplace and Avant announcing workforce reductions and OnDeck Capital reporting a $12.6 million first-quarter loss.

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