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Well Fargo Outage Points to Opportunity in Digital Banking

Wells Fargo finds itself in a tough position after bank goes offline for almost 24 hours.

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Wells Fargo is still digging out from a PR disaster last week when the bank went offline for a large segment of customers due to a fire alarm triggered in a server facility in Minnesota. Customers could not access the mobile app, the website or ATMs. The incident has been used to highlight how big an opportunity there is for fintech firms or more nimble banks.

What the outage shows is that bank infrastructure is still stuck in the past, analysts rightly asked why Wells Fargo did not have the bank running on a cloud based system.

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Is SoFi Money the Bank Account of the Future?

I recently opened up a SoFi Money account, here is my review

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I signed up to the SoFi Money waiting list soon after they opened it back in June of last year. I learned earlier this month that I was now off the list and ready to open an account. So I did.

I have had a relationship with a top 10 bank for more than 26 years. Actually, that is not completely accurate. This large bank bought the mid-sized regional bank, where I had opened an account in 1993, about 20 years ago and hence I became a customer by default. They provide an adequate experience but nothing differentiates their offerings from the other large banks. If it was easy to switch banks I would have done so years ago, so they have maintained my business not out of loyalty but out of inertia. I know I am not alone in this.

Anyway, back to SoFi Money. It is not truly a SoFi bank account because SoFi is not a bank. They are able to offer bank-like services because of a partnership they have with WSFS Bank, a Delaware based bank with a history dating back to 1832. SoFi and WSFS Bank first announced their partnership in December 2017.

There are three main benefits that SoFi touts with the SoFi Money account:

  1. Pay zero account fees.
  2. Earn more interest.
  3. Free ATMs everywhere.

What appealed to me most was the interest. SoFi will pay (as of this writing) 2.25% on balances held in a SoFi Money account. Note about the small print: you will only earn this 2.25% for the first three months and then the interest rate drops to a (still respectable) 1.25% unless you do one of two things. Either setup a salary direct deposit of $3,000 or more a month or do $500 in debit card transactions each month. I am in the process of moving my salary deposit to my SoFi Money account.

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P2P Lender Zopa Granted a Banking License in the UK

The world first P2P lender has achieved another first with the approval of a banking license from regulators in the UK

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CEO of Zopa, Jaidev Janardana, speaking at LendIt Fintech Europe 2018

Back in 2005 Zopa quietly launched their P2P lending platform in the UK, the world’s first. It was the start of a lending revolution that has moved on to all corners of the globe. Today, a new chapter begins as the company announced that regulators have approved Zopa’s banking license. With that Zopa achieves another first: becoming the world’s first combined peer to peer lending platform and digital bank.

When Zopa first announced that they were applying for a banking license back in November 2016 some criticized the move. The company was started as an alternative to banks and by becoming a bank some critics thought they were selling out their original vision. But Zopa brushed off the criticism with CEO Jaidev Janardana arguing that most large banks were not giving consumers what they wanted. Zopa had built a culture of customer centricity and they wanted to extend that into a new kind of bank (for more see Jaidev’s keynote at LendIt Europe 2017 as well as his fireside chat interview from this year’s event).

Zopa has officially been granted a banking license with “restricted approval” which means that it can’t launch just yet. They will enter what is called the “mobilization phase”, this is a normal part of the approval process where it needs to “meet conditions set by the regulators, including testing our new products”. Once it satisfies these conditions Zopa will be granted a full banking license.

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Customer Alignment and The Future of Banking

The bank of the future will have a business model that is designed to win when customers win

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I have been thinking more about customer alignment lately. We are adding this category in the LendIt Fintech Awards in 2019 as Scott Sanborn, the CEO of LendingClub mentioned in his opening keynote in April. It is an issue which gets to the heart of what is wrong with banking today and how fintech can help create change.

First, let me begin with a personal story. I have had a banking relationship with the same large bank since 1993. I opened two accounts, business and personal, when I was getting my first business off the ground. Needless to say money was really tight. I would occasionally bounce checks and I used credit cards as a way to borrow money but I managed to get by. What I really needed back then, but didn’t have, was a financial institution that had my best interests in mind.

I remember one time when I mailed a batch of checks without the money in the bank but was confident by the time the checks were deposited the money would be there to cover them all. It wasn’t. So, I ended up bouncing four or five checks and paying a fortune in overdraft fees. But here was the kicker. The bank could have processed two of these checks but instead the largest one came out first, so all the checks bounced.

Thankfully not all banks do this but it is common practice in many banks and back in the 1990s I am guessing it happened a lot more. But I believe the days are numbered for this kind of program.

A Win-Lose Proposition is a Losing Game

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How Goldman Sachs Created Marcus To Be a Dominant Force in Consumer Banking

In just two years the Goldman Sachs digital initiative called Marcus has changed the banking landscape

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[Editor’s note: This article was written for our Chinese audience and will be translated into Mandarin and released with several other articles at the Lendit Fintech China conference in Shanghai in September.]

It all began at the home of a senior Goldman Sachs executive in the summer of 2014. A select group of leaders were there to discuss new growth opportunities for the firm. They wanted to start a new line of business where there was a large unmet customer need and where Goldman Sachs could leverage its resources to gain a competitive advantage in the market.

After 145 years serving only the very wealthiest of clients it was decided that they would launch a consumer bank. In reality, they already had a banking license because during the financial crisis they opted to become a bank holding company. But for years they had never really used this to launch any new products. That changed in 2016.

First, there was the launch of GS Bank in April 2016. Six months later Goldman Sachs introduced the world to their Marcus brand. They began as an online lending platform offering unsecured consumer loans up to $30,000 with interest rates ranging from 5.99% to 22.99% (they now offer loans up to $40,000 and rates range from 6.99% to 24.99% as of August 2018). Their big differentiator was offering no fees. There was no origination fee for the borrower, no prepayment fees and no late fees.

They gained traction very quickly. They crossed $1 billion in total originations within eight month of launch. At the end of their first year they were at $1.7 billion. At that time they brought their deposit business under the Marcus brand, it was formerly branded under GS Bank. Now when you go to the Marcus website you are presented with two options: personal loans and savings accounts (which includes certificates of deposits).

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Five Things That Excite Me About Fintech Today

There is more change happening in fintech today than ever before but here are five themes that are particularly exciting

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When I started LendIt with my fellow co-founders back in 2013 I was most excited about how online lending could disrupt the banking system. I felt that we were at the beginning of a paradigm shift in banking and that the online lenders would soon rule the world. While it hasn’t turned out exactly like that I am actually more excited today about where finance is heading than ever before.

Today, there are many things that excite me about fintech, here are five themes that I find particularly exciting.

1. Advances in Data Analytics

I have said before that data science is becoming the most important skill in fintech. There is more data generated today than at any time in human history and we need new ways of analyzing this data. Advances in artificial intelligence and machine learning have meant we can now make sense of this vast amount of data.

There are so many benefits to finance of these advances but the most important one I think is what it means to the underserved consumers around the globe. Advanced data analytics combined with the increased use of mobile phones in the developing world means for the first time everyone has the potential to be connected to the financial system. This is going to have huge ramifications globally over the next decade.

2. Blockchain and Distributed Ledger Technology

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Digital Open Banking – A Millennial’s View

Millennials will be the driving force behind the changes coming to banking.

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One of the trends we’ve seen recently is the rapidly shifting digital banking landscape and the focus on serving the tech savvy millennial generation. My personal experiences navigating our current financial system have formed my views on digital banking and beyond. I currently have bank accounts at a local credit union, a larger regional bank in the state I live in and Ally, an online only bank. I’ve gone through the process of applying for three mortgages at three different banks. As a millennial there are four key areas that I believe banks of the future should focus on.

Simplicity

Instead of focusing on adapting traditional banking services, banks should look to make their services more streamlined. SoFi’s newly launched beta product SoFi Money is a perfect example. They have decided to do away with checking and savings accounts altogether and have rolled them into one easy to understand current account paying 1.1% interest.

Another good example is Goldman Sachs’ Marcus savings account. I recently setup an account to better understand their approach to banking. Marcus currently offers three products: savings, CDs and personal loans. They offer some of the highest interest rates on deposits and competitive interest rates on personal loans. Marcus has taken a minimalist approach to the user experience by offering all the actions you can take front and center.

No Fees

It amazes me with the offerings that exist today that some banks still manage to charge for services that are free at the highest rated banks. Requirements such as minimum account balances or monthly deposits eventually will be a thing of the past as the traditional banks catch up.

Features such as transferring money to any other US financial institution should be free. International money transfers can all be done for a fair price through Transferwise or a similar service.

Customer Support How and When You Need It

Millennials can be demanding when it comes to customer service. Since we often are not banking during the business hours we need support during nights and weekends. Banks should make it a priority to be able to address a wide range of requests in whichever way the customer would like to be helped, whether it be phone, email or chat. One of the main problems I see today is either a lack of a chat option altogether or the inability to authenticate users to truly resolve issues over chat. This is the method I prefer when seeking customer support even beyond banking.

Integration and Open Banking

More and more I am logging into apps such as Personal Capital to get an overview of my financial life. These types of apps have the opportunity to be the front end to our entire banking experience and there are tremendous opportunities as open banking begins to take hold in the US. Those that embrace the inevitable advent of open banking will be successful over the long term. It is becoming apparent that customers will receive solutions from multiple vendors as banks begin to focus on being world class at a select few services instead of trying to provide every service.

Conclusion

I expect we will experience a radical shift in banking over the next five years. More Americans will become comfortable with online only banks as more complicated services such as mortgages move online. The local branch experience will change substantially and even the way we think about banking will change. Millennials will be the generation that drives this change and the newer entrants in this space have the potential to leapfrog the incumbents.

New Technologies and New Customer Experiences Drive Banking Today

Key Takeaways from American Banker’s Digital Banking Conference

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The discussion at American Banker’s annual Digital Banking Conference in Austin last week revolved around new technologies like AI and blockchain and the future of customer experience. Banks of all sizes have implemented some level of technology in recent years, almost all have mobile apps and they have begun the process of digitizing their core functions.

There were also a lot of lessons from non-banks that were on display, Starbucks mobile payments adoption and p2p payments app Venmo were popular discussion points on the keynote stage. Starbucks has seen over 40% of the 55 million U.S. smartphone users make an in-store mobile payment through the Starbucks’s app at least once in the last 6 months. Venmo’s payment volume continues to rise, even with competition from Zelle, and it was interesting to hear where the idea came from. Venmo founder Iqram Magdon-Ismail explained that he and fellow co-founder Andrew Kortina thought of the idea because paying one another back was awkward. They devised an app where you can exchange money quickly without having the awkward conversation.

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Leading Banks are Embracing Digital Strategies More Than Ever

We take a look at how the major US banks are adopting digital strategies into their business

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While banks might have initially been slow to act when it came to embracing digital strategies they are now able to offer a comparable product to their fintech competitors. Through building their own technology, partnering with or acquiring emerging fintech companies, banks have received the message that they need to fully embrace the digital age.

The digital strategy at banks is now considered a core part of their business and essential to future growth. We wanted to explore how some of the biggest banks have been integrating digital strategies and making strategic acquisitions to enhance the customer experience or replace falling revenue in other areas of their business.

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Banks Going Digital – Transforming Branches, Apps and a Focus on Customer Experience

Banks know they must go digital and many are embracing new technology to improve the customer experience

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In Austin last week American Banker hosted their annual Digital Banking Conference where banks of all sizes gathered to discuss the innovation in banking today. There were a few main themes that came out of the event; banks are focused on transforming the customer experience, mobile first approaches are prevalent and technology solutions like AI and cyber security are becoming must haves within the bank.

The big banks have all started to understand that the traditional way of banking is a thing of the past. Keynote speaker Yolande Piazza, CEO, Citi Fintech talked about disrupting from within, changing how they operate to enable the customer and move to a mobile first approach. She explained how this approach is radical for a bank and the layers of compliance did not make the transition smooth. They have completely rethought how they hire, 50 percent of their fintech talent is from outside the company. They have looked towards fintech and technology companies to fill their pool, while the banking talent comes from within.

Consumer oriented experiences really drove a lot of the conversations at the event, banks and the vendors were all talking about how to best utilize the consumer’s time when they engage. Mobile apps seem to have become a bit of a competition among the banks, though some would describe it more as a competition of experience and not necessarily as a competition between different banks. No longer are banks looking to drive where the customers should go, they are looking for the customers to drive what they want in the experience.

Consumer experience is not limited to the digital channel; banks and companies like Samsung are also focused on changing the way people interact within the branch. In speaking to Reginald Jones, Director of Sales for Regulated Industries, he talked about how the consumer electronics giant is working with banks to help change the way people think and interact with their local branches. [Read more…]

ABOUT LENDIT FINTECH NEWS

LendIt Fintech News, Powered by Lend Academy, has been bringing you all the news and information about fintech and online lending since 2010 when it was founded by Peter Renton. We not only have the industry’s most active news site, but also the largest investor forum and the first and most popular podcast.

We are a team of fintech enthusiasts who have been covering the industry for many years. With a deep knowledge of online lending, digital banking, blockchain, artificial intelligence and more our team covers the daily news and writes in-depth editorials.

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