A Poughkeepsie bank is putting on its own morning show

It’s like “Good Morning America,” but it’s produced by a bank.

Every Monday at 8 a.m., the “Wake Up with Rhinebeck Bank” online video show targets Hudson Valley residents, highlighting interesting people and issues in the area. Episodes run from five to 15 minutes, and topics include a profile of a millennial chef, a trip to a local distillery and a chat with the head of a mental health nonprofit. It’s a way the Poughkeepsie, New York-based bank is marketing itself as a community partner.

“It’s really helped build a buzz, with businesses and nonprofits sharing the videos on their social media channels and websites,” said Michelle Barone-Lepore, svp of marketing. “We want to tell people what’s going on in the community and give them something shareable.”

The show launched in May 2016 and gets posted on Facebook and YouTube every week when it’s not on summer hiatus. Barone-Lepore, who co-hosts the show with vp and area sales leader Mark Malone, said Facebook is the primary distribution channel, garnering around 10,000 views a week.

A handful of staff members at the bank brainstorm ideas and guests for the show every week, which local online television station Hudson Valley News Network films, Barone-Lepore said. The videos are relatively inexpensive to produce, costing between $650 to $700 per episode. The bank has experimented with different types of content, and it’s learned that compelling stories rather than product promotions drive viewership.

“We’ve done three episodes where we talked about products — they did badly because of the content,” said Barone-Lepore. “People care more about building a community or telling a story.”

Through interest in the stories and social sharing of the videos by influential locals, the bank hopes customers will stay tied to the brand, which will drive business back to the bank.

Barone-Lepore said it’s difficult to know for sure whether increased interest in the bank’s product offerings is directly attributable to the show, but the number of deposit account openings have edged up since the show’s launch. From January to April 2016, before the show started airing, the bank would open 162 to 172 new accounts per month. After the show started running in May, that number increased; from June to December of the same year, the number of new monthly deposit account openings ranged from 188 to 287. Commercial loan volume was up 29 percent in 2016 compared to the previous year.

Financial services marketers have been increasingly drawn to video in recent years. As Tearsheet reported in April, they have strived to create authentic enough content to forge a human connection with customers. Examples include T. Rowe Price, Charles Schwab, Bank of America and TD.

“They are not putting themselves front and center. … They are pitching themselves as enablers of other people’s dreams and desire to do good,” Dan Latimore, svp of Celent’s banking practice, told American Banker.

The use of Facebook as a distribution channel suggests the show may be more about customer engagement rather than acquisition, said Jackie Brown, principal at financial services marketing agency JB Communications Group.

“If they are mainly using Facebook as the means to distribute the show, I would say their uptick in certain products is likely coming from existing customers, as most people who engage with a financial institution on Facebook are already using that bank or credit union.”

Rhinebeck said its preference for prerecorded rather than live streaming video is to ensure its compliance team can review the content while allowing the flexibility to add b-roll and other finishing touches. Brown said this type of content may appeal to particular demographics.

“Prerecording certainly helps to manage the message much more tightly than streaming live,” said Brown. “The polished videos probably appeal more to an older crowd than the streaming events.”

Still, Barone-Lepore said the bank intends to move into channels more frequently used by younger people and plans to post shorter versions of the videos on Instagram and launch a Snapchat channel this fall. The challenge, she said, is keeping the content interesting.

“We’re working on making the content flow better and working on different formats so people will be interested — different angles and camera cuts will help,” she said. “As video changes, we’re going to change; as long as we keep on top of that, we’re going to be in a position to win.”

The next frontier for cashless payments: Pocket money

A child who expects a reward from the tooth fairy may soon find it in the form of a digital money deposit rather than physical money under the pillow.

As the world of payments between friends and family goes digital through tools like Venmo, Zelle, Square Cash and Apple’s peer-to-peer payments feature, one of the last vestiges of the cash economy is payments from parents to kids. But now, banks and startups are offering ways parents can make digital payments to their children, a move that goes far beyond the convenience factor — it’s designed to help teach children personal finance skills early in life.

From the banking side, Denmark’s Danske Bank has taken an early lead. Last week, it launched a pocket money app for kids ages 8 to 12 that is free to use for parents who are Danske Bank customers. In a consumer environment where mobile payments are commonplace (89 percent of Danes used mobile payments last year, according to Visa), using cash to pay children’s allowances often isn’t easy for parents.

“Since we are very digital, we have mobile payments solutions; it’s very common that parents simply don’t carry cash,” said Line Munkholm Haukrogh, head of digital payments at Danske Bank. “Sometimes kids don’t get paid on a regular basis, even if the parents promise.”

Through the app (called Lommepenge, which means pocket money in Danish), parents can pay their children allowance money through the Danske Bank mobile app, which can be transferred to their child’s Lommepenge account. The bank also offers a debit card for the child’s Lommepenge account. The pocket money app lets parents and children create a “virtual vault” of savings, a means for them to begin a conversation about money.

“It could be that they’re saving up for a bike or whatever they want to save up for,” Haukrogh said. “It’s a way to enable parents to say, ‘Hey, what are we going to spend our money on?'” The app also lets parents monitor the spending of their children, set up recurring transfers, block access to the debit card and set up spending limits.

In North America, where mobile payments haven’t caught on as quickly (a recent study from Accenture found that regular adoption last year stood at 19 percent), startups have forged an early path on payments from parents to children. A Bank of America spokesperson told Tearsheet that the bank’s peer-to-peer payments service Zelle allows for parent-to-child digital payments, but Current, a startup that launched in the U.S. last month, is taking that further by creating a platform that merges task assignments from parents with digital payments to children. Current can be accessed through the web and a mobile app.

“What you can do is set up one-off chores or tasks — No. 2 is poop duty to clean up the dog poop and No. 1 is cleaning up one’s room,” said Current founder and CEO Stuart Sopp. Current, which has 2,500 users so far, connects to parents’ bank accounts through an API and offers a debit card for the child. Current is supported by subscription fees; a one-year subscription to the service costs parents $3 a month.

According to Sopp, a task assignment sequence could unfold as follows: A parent assigns a room-cleaning task to the child, the child cleans the room and sends a picture of the clean room to the parent, who then sends a digital payment upon approval. Current also offers parents capabilities to monitor their child’s spending, set up spending limits or block access to the debit card. For Sopp, the drive to set up this kind of tool was a means to offer digital payments to his daughter for household tasks.

“I wanted to be able to give my daughter [digital] money and teach her good financial habits,” said Sopp. “There was no good way of doing this, and with the digitization of families and money along different devices, they have nothing to buy with cash anymore.” Current offers users three types of wallets — one for spending, one for saving and a third for donations to charities.

The under-18 customer segment is a vast market ignored by the major U.S. banks, said Sopp.

“There’s a lethargy around banks in general, and they have enough problems dealing with the erosion of their customer base without having to deal with the trouble of marketing custodial products,” he said. “[Current] is the digitization of an old financial discipline — we want to start that here as a cultural norm in this country to teach financial education.”

Photo credit: Current

Ohio welcomes global talent through startup accelerator Fintech71

Beyond the tech hubs of San Francisco and New York, one Midwest state is gunning to become a global center of innovation in financial technology — via a new accelerator program in Columbus, Ohio, that multiple banks and insurers are setting up.

Fintech71 is an accelerator program for startups operating in banking, payments, insurance, health care, investing and regtech. The accelerator is named for Interstate 71, the highway that connects Ohio’s largest cities of Cincinnati, Columbus and Cleveland. It’s sponsored by some important players such as KeyBank, Grange Insurance, Huntington Bank and Visa, along with JobsOhio, a nonprofit economic development corporation. Industry heavyweights including JPMorgan Chase, Capital One and Silicon Valley Bank will offer support through mentorship. Backers of the accelerator are keen on keeping local talent in the state and attracting global innovators who could possibly set up shop there.

The world is fighting over people with good ideas,” said Ray Leach, CEO of JumpStart, a Cleveland-based nonprofit and venture development group.

Fintech71 will be housed in 15,000 square feet of space in a remodeled art deco building in Columbus located across the street from the Ohio Statehouse. The Columbus location is a nod to the area’s prominence to the sector, where JPMorgan Chase’s largest tech hub in the world and Morgan Stanley’s recently launched center of excellence are housed. Columbus’ recent designation by real estate and investment firm CBRE as a “new city of finance” seems appropriate.

“The financial services industry is the second-largest private industry in Ohio — you wouldn’t necessarily think that, but there’s a huge number of insurance companies and banks, a lot of acquiring banks, and innovation in fintech is increasingly important for Ohio’s economy,” said Leach.

For one bank partner, the accelerator is a hands-on way of supporting innovation in priority areas it has already identified.

“There are a number of institutions that are writing checks to the fintech companies, and that’s an exploratory method,” said Ken Gavrity, head of KeyBank’s commercial payments group and a Fintech71 board member. “But for us, we start with a customer pain point, what are the salient points, and from that, we work backwards.”

Among the areas being considered, priorities include payments, digital banking and institutional processes, Gavrity said.

The 12 companies selected will be offered $100,000 in investment (Fintech71 takes up to a 6 percent equity stake in the companies) and 10 weeks of training in Columbus. Matt Armstead, executive director of Fintech71, said he hopes the accelerator can help retain the talent coming out of some of Ohio’s best universities, and at the same time, attract some of the best global talent.

“We need to be supportive to bring in anyone from anywhere, and that includes people from around the world,” he said. “We need more diversity in startups.” Armstead added that Fintech71, working with JobsOhio, can help new companies, including those from outside of the country, wade through the red tape to get their businesses off the ground. 

Jeff Carter, a general partner at West Loop Ventures, a Chicago-based venture capital firm that focuses on financial technology companies, said the Midwest offers new companies low labor and real estate costs, along with an ecosystem of support. The accelerator program is a good strategy to get startups to stay in the area.

If they have early success, they’ll stay there,” he said.

Carter said in contrast to the coastal fintech hubs of New York and San Francisco that have major players in business-to-consumer technology, the Midwest has long been a center of innovation for business-to-business financial technology products. 

For KeyBank, the accelerator is an opportunity to begin longer-term partnerships or even set the stage for future acquisitions.

“Those business options are always on the table,” said Gavrity. “It may not happen in the accelerator, but maybe it’s five years down the road — anytime we can be early in the funnel to tap talent, that’s a great place for KeyBank to be.”

Photo of Fintech71 workspace courtesy of JobsOhio / Mark Wiggins

Mobile-first, but not digital-only: Why the bank of the future may still center around people

With the talk of “employee-less branches,” bots and cognitive agents, the notion of being able to meet all of one’s banking needs without any kind of human intervention may still be quite far off.

While the decline of the old-fashioned retail bank branch is well-documented  — a JLL study estimates that the number of bank branches in the U.S. is expected to drop 20 percent over the next five years — recent research shows people still want to come into a branch. Banks — even so-called virtual ones — are experimenting with technological solutions to get the mix of human and virtual interaction right.

“Branch revenue growth has slowed down, and a lot of financial institutions are looking at how to address that,” said David Albertazzi, senior analyst at Aite Group. “They’re trying to figure out how to maximize their yield on their most mature channel, the brick-and-mortar branch.”

For one new entrant in the virtual banking space, Luvleen Sidhu, president and co-founder of the branchless BankMobile, the branch won’t disappear, but its purpose will change.

“Although we are a mobile-first strategy and we bank millennials with an average age of 27, about 60 percent of our customers feel a bank branch is important to establishing a primary banking relationship,” said Sidhu. “It adds an element of security and credibility.”

The virtual bank, which was set up two years ago and has two million accounts, said it will open up “pop-up branches” at universities to reinforce the connection to customers. Another new virtual bank, Iam Bank, will launch in the U.S. this fall with customer experience centers on the ground. These smart branches will be equipped for technologically-savvy customers, but in-person staff will guide those who need a little more help.

“We will also have behavioral psychologists and independent financial advisers at our member experience centers, so that members can speak in confidence with professionals who will hopefully be able to help them through managing their finances in difficult times,” said Simona Stankovska, Iam Bank’s head of communications.

The incumbents aren’t saying much publicly on their future plans, but recent moves show they are experimenting with the right amount of ‘human touch’ combined with digital tools. Among the big banks, Citi has opened digital branches where customers review their banking details on computers while bank staff members assist. Bank of America’s minimally-staffed branches let customers make the most of mobile banking tools and allow them to connect to banking representatives through video conferences, with employees on hand to provide guidance when needed.

“Although our clients are using our digital tools more and more, they still rely on in-person conversations with financial center professionals for some of their more complex financial needs, such as buying a home and saving for retirement or college,” said a Bank of America spokeswoman.

The new type of brick-and-mortar branch allows a more digitally-literate customer to stay connected to the brand.

“If financial institutions are able to make their branch more digital, they’ll be in better position to drive incremental sales, build customer loyalty and provide that outstanding experience that customers are looking for,” said Albertazzi.

For Samsung, which said it’s working with many leading U.S. banks on branch modernization through technology, the branch that acts as a fast track to expert advice is what meets younger customers’ expectations.

“Millennials still want to visit the branch, but they don’t want to meet with generalists as much, they want to access experts much more quickly — they’ll want to speak to a mortgage adviser about a mortgage, and branches need to invest in technological solutions to have video conferencing capability,” said John Curtis, vice president of regulated markets at Samsung.

Curtis said the company is working with banks to make the banking experience more seamless for customers, allowing them to easily video conference experts, with branch employees available to assist when needed.

The branch, said Sidhu, is becoming more of a tool to retain customers than to attract them.

“I think what’s dead is the branch serving as the primary customer acquisition strategy for banks,” she said. “Banks are only opening one net new checking account per branch per week —  through our unique strategy of replacing branches with technology we are opening about 10,000 accounts per week. This is the future.”

 

#Pride: How banks are reaching LGBT customers

As cities across the world mark LGBT Pride Month this June, banks are using these events as opportunities to reach new customers and employees.

Since the late 1990s and early 2000s, banks have been sporting the rainbow flag at Pride Month. All major North American banks, including JPMorgan Chase, Bank of America, and Citi are pulling out all the stops in their LGBT-inclusive marketing and participation in Pride Month. But LGBT marketing efforts go beyond just pride floats and bank-branded paraphernalia; they are elements of banks’ strategies to attract and retain customers and talent.

“We recognized that a lot of our customers are not traditional white families with about two kids,” said Ann Dyste, US Bank’s LGBT strategy manager, a position that was created eight months ago. “They are modern families of all varieties — we want to make sure all the services we provide are reflective of the community.” The bank has sponsored 33 festivals across 25 states, and was ranked a “best place to work” for the 10th year in a row by the Human Rights Campaign on Tuesday.

US Bank found in its research that customers want to do business with companies that have an authentic interest in the community and its organizations. “We needed to take a step back and make sure we have the right kind of experience and there’s a person focusing on that end-to-end experience — it’s data driven.”

In addition to visibility on bank products (the bank launched a debit card in rainbow colors last month) Pride Month is an opportunity to draw attention to outreach materials geared at LGBT customers, including an LGBT customer-focused website that the bank launched two months ago. The website includes financial planning articles tailored to LGBT audiences, with recent headlines including “Modern Legacy Planning — Getting Started,” and “Is a joint bank account right for you and your partner?”

“A lot of it has been since the U.S. Supreme Court decision in 2015 leveled the playing field,” Dyste said. “People are going through a series of firsts, and the lived history of going through that is much shorter than the general market and we’re trying to help them navigate.”

Affiliating a bank’s brand with inclusivity is important for customer retention and employee morale.

“It’s such a key celebration — we want to be there as a brand celebrating with them,” said Claudine Dupont, vice president of global brand and corporate sponsorship at TD Bank Group. “We are there year-round, but we also want to demonstrate our commitment for key celebrations for the community in general.”

TD is sponsoring 63 Pride events across North America, 30 of which are in the U.S. To banks like TD, Pride Month participation is an effort promote itself as a company open to both LGBT employees (TD has a 3,000-member LGBT pride network) and customers.

“You’ll see our efforts demonstrated through some of our marketing pieces,” said Dupont. “We were one of the first banks to advertise using same-sex couples in our mainstream advertising — it’s part of who we are.” The company has featured LGBT individuals in advertising and marketing products since 2008. 

Money conversations aren’t easy, so keep it low-key. #FinanciallyFit

A post shared by TD Canada (@td_canada) on

LGBT customers are a segment banks can ill-afford to ignore, said one analyst.

“Not so much support out of philanthropic reasons, but it’s one that has real business case reasons because of some of the distinctive characteristics of the market,” said Mike Wilke, founder of AdRespect, a nonprofit that promotes inclusivity of LGBT representations in advertising. “It’s a competitive and developed business sector,” he said.

Beyond overt community support and customer outreach, attracting and retaining talent is also an important motivation. The Royal Bank of Canada, a major supporter of pride festivities across Canada and in the U.S. through RBC Capital Markets, said maintaining a welcoming workplace place brand is an important objective of pride efforts.

“In terms of strategy, we focus on talent, clients and community,” said Norma Tombari, senior director of global diversity and inclusion at RBC. “For the LGBT segment, we’re looking at how we make the environment more LGBT-friendly and inclusive, and how can we communicate externally to attract top LGBT talent.”

Among the target demographics, RBC said younger people may more be more drawn to a company that aligns with their values.

“A lot of millennials are interested in working for an organization that has expressed values as it relates to inclusion in a way that’s not just general talk or general speak — they want to know what the organization is doing.”

 

Dating, schmoozing and booze: SoFi is trying to make online lending more social

Last month, a talk at New York City’s Times Center by bestselling author and CNBC host Nicole Lapin drew lines out the door. At first sight, it would seem like any other talk at a storied venue that hosts conferences, some that involve wine and schmoozing afterwards — and there was plenty at this one, too.

But this was different: it was a “social” hosted by online lender SoFi, which wants to make finance more social — hence the moniker. Through a community-building approach, the company, a six-year-old startup, differentiates itself among its competitors that are both startups and banks. SoFi holds over 200 events for its customers (which it calls members) across the U.S. each year. They run the gamut of financial therapy sessions, happy hours, home-buying workshops, and even dating.

“It was interesting — I went there by myself,” said Reetu Sharma, a 34-year-old New York City-based member, about a SoFi singles event. “It started off with cocktails, where you could just mingle with whomever, and then every ten minutes they would ring a bell and you would go to the next person and start talking to them — SoFi had an incentive that if you found someone you liked and went out on a date with them, they would pay for your dinner, so that was really cool.”

The sense of community that SoFi has built is an added benefit, said Sharma.

“It shows that they’re investing in our future, and they want us to have good, well-rounded lives — there’s a lot of good financial benefits that come from being in a relationship, and there’s also financial hurdles that you have to go through that SoFi is wiling to help out with, like buying a house,” she said. “They can tell that everything is interrelated and that they can be a part of people’s lives even when the loans are paid off.”

Through events and community connections, customers’ attraction to the SoFi brand is how it grows its reach.

“If you go back to our core value proposition, it’s around speed, transparency and alignment,” said co-founder and CEO Mike Cagney. “Speed is about mobile-enabled finance, transparency is the fact that we have no fees and deal in a very straightforward manner with members, and alignment is the community piece — we have a vested interest in the success of our people.”

The company, which was founded in 2011 as a peer-to-peer lender between Stanford alumni and graduates, has since evolved to offer lending products (underwritten by the company, and then sold to institutional investors) as well as wealth management and insurance offerings. To get approved for a loan, the company considers factors like cash flow, income, education and professional history, rather than just FICO scores and debt-to-income ratios. It has raised $1.9 billion in equity funding and has originated $19 billion in loans since its inception, and almost $5 billion just this year. While SoFi wouldn’t confirm revenue numbers, it reportedly will earn $200 million on a pre-tax basis in 2017 on revenues of $650 million.

Despite the cost involved in running the events (SoFi wouldn’t share exactly how much), Cagney said it’s worth the investment in a getting a loyal following. The company currently has 300,000 members nationwide.

“We have a huge competitive advantage relative to banks in cost of acquisition,” he said. “We’re all priced roughly at the same rate, it’s not like one of us is much cheaper or more expensive, but we acquire members at a fraction of the cost that banks acquire customers, and we attribute this to what we’ve done on community service and product design.”

With SoFi’s intent to apply for an industrial loan company (ILC) charter (a bank license that allows a non-bank to offer services a bank would provide), the company will be branching out into other product offerings, including bank accounts.

“The ILC is for delivering bank accounts to my members,” he said. “It’s frustrating that today we can’t be a place to deposit your paycheck so this is the step to get to that point.”  And even without a banking license, the company intends to have a SoFi deposit bank account through their broker-dealer, which will be launched later this year.

For those who observe the evolution of industry, SoFi’s foray into other business areas is a smart move.

“There’s plenty of evidence that unsecured consumer lending is pretty risky and there’s a number of good reasons why that market might decline going forward as regulatory steam picks up,” said Celent analyst Stephen Greer.

The company is putting more emphasis on new areas, including wealth and asset management, insurance, and international expansion, Cagney said, noting that he hopes SoFi’s growth will fuel change in the banking industry.

“At some point SoFi is going to go public,” he said. “It’s not that SoFi is going to supplant the banks, but we will drag the banks into a different type of service model that’s more mobile, that’s technology based and has high service and high community value — people will start to understand that what we’re doing is really the way the next generation wants financial services delivered.”

Photo: “Raise Week” event at New York City’s Times Center, courtesy of SoFi

 

‘The biggest challenge is the distraction over disruption’: FIS chief product officer Rob Lee

Fidelity Information Services, one of the world’s largest banking technology companies, provides the back-end software and financial services technologies for 20,000 clients in 130 countries. Headquartered in Jacksonville, Florida, FIS’ main clients are banks. The company runs a Little Rock-based startup accelerator program, which just selected its second class of mentees.

Rob Lee, chief product officer for banking and payments and a mentor for the financial technology accelerator program, spoke to Tearsheet about the biggest issues affecting banking, what motivates the company to support startups through its accelerator program, and the biggest trends affecting the industry. Here are excerpts, edited for clarity.

What’s the biggest issue banks face with the proliferation of startups developing competing lines of business?
The biggest challenge is the distraction of the discussion over disruption. Banks are every day faced with what are they doing with new technologies how are they blocking disruptors or embracing disruptors. I don’t think that our bank clients are being impacted from a transaction perspective with disruptors going into their business.

What’s the biggest bottleneck affecting how banks operate today?
The biggest problem is that the information [about customers] tends to be siloed across the organizations.

Is the purpose of your startup accelerator program to allow others to build software products that can seamlessly interact with bank platforms run by FIS?
We bring 10 new companies that are building things around the financial services world. All those apps need data and customer information to drive their value proposition and our API gateway provides a way to build on top of that.

So you’re really looking for startups that can partner with the banks?
We invest in research and development and innovation and startup companies not in the accelerator — the accelerator is just one way to do that. [The startups] are really pushing the envelope; for example, we have a company called Alpharank, and they’re using the Facebook social graph paradigm and applying that to financial services.

Is there a trend that is overhyped or has lost your attention?
There was a lot of hype about blockchain a year ago when it was seen as a panacea, and we’ve seen that subside somewhat. We’ve seen a lot of public proof of concepts, a lot of consortiums, and not much actually happening to manage real transactions.

What’s the next big thing?
You’ll see massive changes in the use of voice as an input. Today Siri and Alexa are about 95 percent accurate — there is some latency in that but in the next few years, with all the investment, it’s predicted that it will get to 99 percent accuracy with close to zero latency.

 

 

 

 

SoFi prepares to become a bank

Online lender SoFi is making an about-turn from its “Don’t Bank. SoFi.” tagline by actually becoming a bank.

CEO Mike Cagney’s announcement this week of the company’s intention to apply for a industrial loan company charter — a bank license that allows a non-bank to offer services a bank would provide — is a move that puts the financial technology company in a better position to go head-to-head with the big banks.

The time is ripe for the online lender to move forward with an application, following the acquisition of mobile banking startup Zenbanx, and $1.9 billion in venture capital funding. The industrial loan company (ILC) license would allow it to take FDIC-insured deposits, letting customers open bank accounts, credit cards and undertake other day-to-day banking services that were once only the preserve of the incumbents.

“The fact that we don’t have a deposit product means that we really can’t offer a ‘fire your bank’ proposition,” Cagney told The Financial Revolutionist in March. “[The license] allows a non-bank parent to have a captive bank subsidiary. The reason why that’s important for us is around marketing and brand. It also relates to things that are intrinsic to SoFi that you can’t do as a bank holding company.” SoFi would not comment for this story.

While some may interpret SoFi’s decision to proceed with an ILC as a turning point for the industry, Brian Knight, a senior research fellow at the Mercatus Center at George Mason University, said he doesn’t expect a rash of financial technology company applicants, as a bank license doesn’t suit all business models.

Analysts say the ILC charter is the only surefire way to become a bank, given the uncertainty whether the OCC Charter for Fintech Firms will weather the departure of Comptroller of the Currency Thomas Curry last month and a challenge from state regulators.

“With the ILC, there’s no question about the legality of the charter,” said Knight. Since a moratorium on ILCs initiated on the heels of the financial crisis expired in 2013, no companies have pursued it in a decade.

From a startup perspective, SoFi’s entry into the banking space should concern big banks wary of the competition.

“I think the big banks are worried, almost all of them are identifying fintech as something to watch out for and most of them are trying to innovate,” said Brion Nazzaro, group compliance director at WorldRemit, a financial technology company that offers a digital money transfer service. “Many banks will partner with fintech companies to keep their products and services at a lower cost or offer more value for the consumer.”

Others argue that it’s too early to tell if the growth of financial technology companies will truly present a challenge to the banks — if a firm poses a threat, they can just buy it. Pockets are big enough, as shown by BNP Paribas’ acquisition of digital bank Compte-Nickel last month for 200 million Euros ($217 million) or Ant Financial’s purchase of eye-scan firm EyeVerify in 2016, reportedly for $100 million.

“[The banks] are watching every one of these companies, and they know who’s going to try to pick their pockets, and if they think it’s a good idea they’re going to acquire the company,” said Gerald Blanchard, senior counsel at Bryan Cave.

 

Why a virtual bank is making bank branches part of its US launch

Invoice2Go and Stripe empower developers

Iam Bank, a startup virtual bank based in Ireland that has offices in the U.K., is set to launch in the U.S. this fall — and it’s going to do it via a physical bank branch.

The bank, which is now in the process of buying a Chicago-based bank it declined to name, said it will set up its first branch, known as a “customer experience center” in Milwaukee in the fall.

“We’ve done a lot of research and it all comes down to trust and credibility,” said Simona Stankovska, head of communications for Iam Bank. “For us, the research shows that people have a massive distrust of purely digital offerings. They need to have a human touch, they need to be able to communicate with someone.”

Despite expectations about the death of the branch (for example, a report last month from commercial real estate firm JLL projected that the number of branches across the U.S. will shrink 20 percent in five years), recent surveys support Iam Bank’s view that consumers — especially millennial ones — will continue to demand a human touch to banking. An Accenture survey last year found that 87 percent of customers, including 86 percent of millennials, feel that they will continue to use branches because they trust or sense that they get more value from letting a human deal with their finances.

Iam bank is led by CEO Lee Travers, a financial technology veteran. The company has plans to expand across the U.S. and the U.K., and said it will offer a digital-first banking experience though online and mobile banking, with the help of its virtual assistant, iamEmma. iamEmma will use machine-learning algorithms to provide insights into a customer’s spending habits and offer advice. But when customers feel they need human interaction, they will be able to step into a customer experience center.

“Through the app, you can access your bank account and the onboarding process will be very simple and you’ll be able to speak to customer representatives though FaceTime,” said Stankovska. “But the member experience centers are going to be a backup — if you’ve lost your phone, or just want to speak to a human.”

Through acquisitions, explained Stankovska, the bank will be offering customers an Apple-store type experience where they will be able to speak to real people about any banking issues and take part in personal finance workshops and networking events, including mom-and-baby groups.

Industry watchers note that the branch of the future will be more about building relationships than providing services, a trend Iam Bank is looking to capitalize on and that’s inspiring incumbents like Bank of America to launch employee-less branch pilots.

“Branches are becoming centers that provide personalized financial advice, build relationships, solve problems and, perhaps paradoxically, help customers make the transition to digital,” wrote Richard Fleming and Joe Fielding, in a recent research note from Bain.

While Iam Bank has an ambitious mission, analysts say the startup venture may face some growing pains establishing a foothold in the U.S. market where “challenger banks” have struggled to catch on. “A branch location is an admirable goal, but that’s a significant capital expense to take on, especially if you’re acquiring a branch network in need of a redesign,” said Celent analyst Stephen Greer.

 

Banks are trying to save their online reputations

Perhaps no modern American pastime is as popular as trolling companies on social media. And behind airlines, hating on banks might be the most common. A recent Gallup Poll found that only 27 percent of U.S. residents have a “great deal” or “quite a lot” of confidence in banks.

Now, some banks are trying to fight back.

“If you’re not monitoring your reputational risk online, you’re not only doing yourself a disservice, but probably ignoring something much bigger than you assume or believe to be important,” said Tim McCoy, vp of marketing and e-commerce at InTouch Credit Union.

The Texas-based credit union, which has 20 branches in five states, has been testing software developed by financial technology company Geezeo to monitor the social media review feeds of four branches. McCoy said the he’s seen ratings rise since the company has been using it, particularly for the bank’s main Plano, Texas Branch —  from 2.5 stars to 3.5 stars on Google.

“If your star rating goes up, that’s a relatively easy thing to see, but what is less visible is the effect that has from an SEO standpoint,” said McCoy, who noted that the effort was part of a strategy to improve its placement in Google search results.

“So much of what you see online is people looking for an outlet to vent,” said Jim Craig, vp of consulting services for Geezeo, which launched the product Tuesday to help banks. “Often there’s a disconnect between what you see there and what internal surveys are showing.”

Geezeo, whose main product focus is personal finance management tools for banks and credit unions, said the software scans Facebook and Google reviews to give brands an assessment of their online reputation. It also does keyword searches to identify areas of concern such as long wait times.

Because many reviews tended to be negative, following a discussion with the bank, Geezeo worked with the client to find ways to encourage more customers to leave reviews. According to Geezeo, InTouch has experienced a 132 percent increase in customer sentiment on Google.

“In most cases, people are very happy with their local bank or credit union, but that’s not being reflected in their online platforms,” he said. The software could be used by any bank, but Craig said he expects most business to come from banks and credit unions with assets between $500 million to $2 billion.

While Twitter, Instagram and other platforms were relevant to online reputation, the company said Facebook and Google have the most lasting effect (particularly for searches) and that’s why the software is focusing on them.

InTouch said it worked with Geezeo to approach a couple of hundred customers in each of the targeted branches by email who were encouraged to post reviews. When asked if the move was a means to populate the platforms with mostly positive feedback, McCoy said customers were not given incentives to leave stellar reviews.

These are not bought, we’re just asking members what they think about us,” McCoy said. “I have no interest in gaming the system, but I’ve heard of other platforms buying or manufacturing reviews to improve scores and that’s not what this is.”

Mark Arnold, a branding consultant who works with finance companies, said it’s important for banks to boost online reputations by capturing good customer experiences, but the emphasis should be on superior service that organically drives positive online feedback.

“You need to be doing such great service and products that they’ll naturally want to do that.”