The ‘Cross’ Sequence that Mature FIs are Headed Down

There’s a running chorus of catchphrases echoing across the banking industry: Build once, use many. Create a single customer database. Simplify the customer experience. Operate like one company around the world.

All great suggestions, right? No one would argue the benefits of any of these catchphrases, but it’s tough to accomplish even one of them, let alone all of them. That said: if you have the money, resources, and wherewithal to do all of these at once then give me a call. I’d love to be your Chief Miracle Implementation Officer.

Seriously, though: if you’re coming to the FinTech Partnerships conference, I assume you’re in the same boat I am: trying to improve things for your digital channel customers and improving your company’s bottom line, all with limited resources. We all have our roadmaps for which functions we’d add to the online and mobile channels, but we also need to look at making the channels themselves more productive, customer-centric, and nimble.


Here’s how I’m approaching it:

• Cross-channel: Channels in silos simply aren’t going to work anymore. It costs too much to deploy functionality in online, then pay as much again to deploy it in mobile, and then again on the tablet. For this you need a single services layer in your architecture (if you don’t have one by now, you need to sit your chief architect down for a serious heart-to-heart), and some excellent responsive design resources. Your customer might not see a difference, but your IT run budget will thank you.

• Cross-LOB: There are few things customers hate more than when we make them figure out our org structure. There are undoubtedly good reasons why banks built separate secure sites for banking vs. billpay vs. investments. But your customer couldn't care less about those reasons. And don’t say “single sign-on” -- that’s a stop-gap...Imagine the cross-sell opportunities when you can tie, say, day-to-day transactions together with investing: “Hey, you spend $150/month on coffee, but other customers like you only spend $100. Click here and we’ll set up a new investment account with an automatic savings plan of $50, and send an alert to your phone when you get close to your new monthly coffee budget.” There’s a lot of work involved in making that a reality – a single enterprise-wide customer CIF, for one – but that kind of guidance and advice is exactly what we owe our customers. There may be infrastructure cost savings from shutting down extraneous sites too.

• Cross-segment: Serving personal customers, small business customers, mid-size commercial customers, and large corporate customers with the same digital channels may have questionable returns. But if you have your solid services layer and a single customer CIF, and you want to ensure that you capture 100% of your commercial customers’ personal business (and vice versa), then this may be important to you. It won’t be easy, but portal technologies like Backbase give you a fighting chance.

• Cross-border: Customers may not differ that much across geographies, but regulators and payment methods sure do, so tread carefully. If you want to serve all your customers around the world with one digital channel, you’d better be on a single core system or a perfectly disaggregated services layer. Otherwise, pick your spots: figure out which functions customers need to be cross-border and tackle those. Oh, and this likely involves going cross-language too, so hire some translators.

Our Guest Author, Dan Dickinson is the Managing Director, Online and Mobile Banking (Canada) for BMO Bank of Montreal. He is responsible for the strategy, project development, and sales growth of BMO’s digital channels in Canada, which serve over 2 million active customers. In recent years his team has delivered such customer enhancements as BMO MoneyLogic, real-time branch appointment booking via the online and mobile channels, and real-time multichannel sales lead delivery to online banking.

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Q&A with Sarika Abbi, Director of Ideation, at D2D Fund

There have been lots of innovations surfacing for GPR cards, and one that’s particularly gotten the industry’s attention is savings pockets. At Prepaid Expo in March, Sarika Abbi, Director of Ideation at D2D Fund, provided some interesting research on savings pockets’ impact on GPR card stickiness and users’ financial health. Now, with D2D’s new report, Paving the Way Forward: Savings On Prepaid Cards, she dives even deeper. Check out the report, and our exclusive Q&A with her below.


1. This recent report has some sobering facts, including that 50% of Americans are not confident they could manage a $2,000 financial emergency. What’s the single most important thing the financial services industry should be doing to turn statistics like these around?

The financial services industry can help turn statistics like this around by keeping in mind that helping consumers on a path towards financial stability will be a win-win proposition – consumers that are not liquidity constrained and have stronger household balance sheets will be more satisfied, engaged, and profitable consumers. 

2. According to this study, cards with these savings features tend to experience less churn. Is there a barrier keeping more program managers incorporating savings pockets into their programs?

One significant challenge is that program managers need others in the prepaid value chain (e.g. processor, issuing bank) able to and comfortable (especially from a risk perspective) with offering additional features such as savings. But there is also a misperception of consumers’ interest and demand for this feature as well as how it can be effectively marketed and designed on a prepaid card to work for both providers and consumers. 

We also need to think differently about what “savings” and “successful savings” means for consumers. For some, it is about building a reserve for a near or long-term goal but for others, especially more financially vulnerable consumers, it is about having access to a revolving savings pocket – a place where they can set a little bit aside when available but dip into it for short-term needs such as groceries and emergencies. While savings might not stay long in this pocket and might be perceived as non-savings, it is helping consumers address their liquidity needs. A lack of liquidity can be a significant contributor to financial vulnerability for households.  And access to savings can help consumers rely less on and slowly transition away from alternatives to savings, such as credit, that can be costly and destabilizing. 

3. There’s been some resistance from the regulatory community about offering credit or overdraft on GPR and payroll cards. Do those features help users who are in a financial bind? What’s your take?

Without addressing the regulatory concerns here, which I assume also incorporates concerns over fees, I do believe offering credit (or a form of credit) could be interesting and a value-add from both the consumers’ as well as providers’ perspective.  However, credit would need to be carefully designed and made accessible to address the tension between a need for credit when in a financial bind and access to credit that can be further destabilizing and detrimental to households. So, for instance, it would be interesting to explore credit in conjunction with a savings feature on a prepaid card – made accessible and designed in a way that can and does help consumers in a financial bind. 

4. What’s the next step for you and your team’s product innovation and research? 

We continue looking at innovation that helps scale savings on prepaid cards. Below is some of the work we are interested in: 

• Exploring savings on prepaid cards offered through various channels such as retailers, employers and the government to scale access to savings.
• Designing add-on features, such as a prize-linked savings layer and gamification, to strengthen engagement with savings features by making saving fun and rewarding.
• Bundling savings on prepaid cards with additional financial products or services, such as credit, that can help address the savings gap when a short-term need arises. 
• Exploring ways to commoditize savings, such as gifting savings, and offering stand-alone savings prepaid cards.    

Sarika Abbi is the Director of Ideation at D2D Fund. She works on initiatives to design and pilot new saving products as well as new ways to market and distribute these products to under-served consumers. Prior to joining D2D her work focused on improving financial access for low income households in developing countries. While at Ideas42, she worked with researchers and practitioners in development finance to design financial products and managed a research center and team internationally to pilot test the designs. Before entering the financial inclusion field, she worked in the private sector consulting on executive compensation. She holds a Masters in Public Administration from NYU and a Bachelors of Economics from Univ. of California, Berkeley.

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Five Ways Traditional Banks are Missing Millennials

Over 80 million strong, millennials rival baby boomers in their numbers.  Their purchases already account for a little over  one out of every five dollars spent on consumer goods and services.  And in just over five years they will hit their peak and become a defining force in the US economy.

This me generation matured along with digital technology.  The oldest of them remember dial up modems and the youngest were still in high school when the iPhone debuted.  But all are quick to latch onto the latest innovations, often disrupting entire industries (bye bye, old media).  For banks the impact has so far been manageable, but at Moven we believe all of that is about to change.

Equipped with smart-phones millennials now navigate their social, physical and even service environments in completely brand new ways.  In particular, the rise of mobile applications has fundamentally redefined how they find, select and purchase services.  Traditional banks are missing this shift towards "appification", where constant experimentation and innovation is the new norm.  And while the landscape is changing around them, there are five key principles that they've missed:

1. Download the App
An app is easy to download and set up.  A bank account, not so much.  Whereas the best apps can have millions of users in a very short time, banks struggle to achieve single digit account growth.  Without a streamlined mobile account signup, the app discovery and trial behaviors that millennials love is impossible with banks.

2. Share with Friends
Millennials look to their friends and peer groups for recommendations and are quick to share when pleased.  If getting an app takes minutes, it's far easier to champion the brand.  The best apps go further, creating shareable moments  that complement millenials' own personal social brand.

3. Get Instant Insights
As with a bank relationship, apps are all about usage and retention.  And when it comes to making money decisions, millenials want insights at their fingertips.  Foursquare tells me where my friends are, Yelp how good the food will be, and Google the fastest way to get there.  But what does my bank app do?  My balance is a start, but certainly not the end.  At Moven we've created MoneyPulse™, a real time analysis of your spend compared to your goals, but there's room for lots more experimentation by banks.

4. Be Financial Healthy
Entering the workforce during this great recession with heavy student debt, millenials are making very different money decisions.  Whether it be living at home, buying fewer cars, and even postponing marriage, many are trying to be better savers.  But while the intent is there, the behavior is not as they dedicate more of their spend towards smaller discretionary items.  Traditional banks have yet to tap into this financial angst and provide meaningful, effective solutions that fit the new "appified" service paradigm that millennials prefer.

5. Trust Us
Finally, millenials are extremely skeptical of banks.  It's not that they're unwilling to pay for services, but that they expect banks to take every opportunity to exploit them (cue occupy wall street).  The increasing appeal of prepaid cards in this segment signals their willingness to choose consistency and transparency over hidden fees and the temptation of greater debt.  While banks are moving towards this, they can go even further by committing to an oath, as we have done, assuring customers that their best interests always come first.

Mohamed Khalil, Head of Product, Data & Partnerships at Moven, has over 15 years of experience in financial services management consulting, fintech startups, and retail brokerage and bank strategy.  He has an undergraduate degree from Princeton University and an MBA from Wharton. Moven is a startup dedicated to providing mobile money management services that help consumers spend, save and live smarter.  Moven was awarded a Best in Show at the 2013 Finovate London event.

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Prepaid Expo Evolves… into All Payments Expo (APEX)

The longest-running event in prepaid is unveiling a new name and evolved mission: All Payments Expo (APEX), the NEW home for Prepaid Expo attendees, plans to stimulate cross pollination between prepaid and new and alternative players who are innovating payments, gifting and omni-channel retail strategies. The mission: catalyze the partnerships that are necessary to build the next generation of innovative payments, from the mobile environment to the brick-and-mortar POS.

Since the Expo’s beginnings nearly a decade ago, prepaid has pushed the boundaries of what payments can do – and in the process, evolved way past simple stored value. It’s been an exciting journey to see prepaid move from the fringes to the mainstream, thanks to the growing sophistication of gifting, payroll and GPR.

And as technology has fueled innovation in financial services and retail, prepaid’s flexibility has lent itself as a building block for new innovations, including hybrid products, social gamification, PFM platforms, cash infusions in the mobile wallet, and more. GPR has evolved into alternative financial services; gifting has blossomed as an integral part of Omnichannel retail strategy; and emerging payments are, naturally, impacting the entire ecosystem.

 As technology advances, margins tighten and competition heats up, the prepaid business is changing, and All Payments Expo (APEX) will be focused on helping attendees map the evolution of their businesses. Our loyal attendees will be able to meet with their existing partners, customers and clients – but there will be a lot of new faces, and new potential partners, too.

Here’s a snapshot of how Prepaid Expo has evolved: And a window into how the industry has changed, too.

  

  Prepaid, you’ve come so far… 

2006: 1st Prepaid Expo in Orlando Focuses: Unbanked, Underserved, Payroll 

2014: (APEX) All Payments Expo in Las Vegas 
Focuses: Alternative Financial Services, Omnichannel Retail Strategy, Emerging Payments, Prepaid, Gifting, PFM, Healthcare Reform, Cash-Based Innovations, mPOS, Future of Interchange, Gamification, APIs, Loyalty, the Wallet and MORE.

If you’re in prepaid, your business is changing rapidly. So too, is the longest-running event built for the prepaid industry. See you in Vegas!

And by the way – we are already building out our agenda and speaker faculty for the 2014 event. If you’d like to get involved or speak, please contact Diana Middleton at dmiddleton@iirusa.com.

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