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‘The house Jamie built’: How JPMorgan Chase became the industry’s conscience

For anyone who works at, for or with JPMorgan Chase, there’s a familiar mantra that runs through the entire company.

It’s “do the right thing,” a Chase principle that emerged in CEO Jamie Dimon’s first annual letter to shareholders as CEO in March 2006. “Jamie always says, ‘you know what the right thing to do is, we all know what the right thing to do is,’” said Susan Canavari, Chase’s chief brand officer. “He says it consistently.”

It’s a surprising mantra, more at home in a Silicon Valley tech startup than coming from the leader of the largest U.S. bank by assets and highest paid bank CEO in the country.

After all, America loves to hate banks and bankers: They’re often portrayed as soulless money making machines that make the rich more rich and the poor more poor, often by politicians. Fear of a greater wealth divide helped amplify the break-up-the-banks rhetoric and fueled drain-the-swamp promises of the 2016 U.S. presidential election. Millennials especially tend to be more critical of financial brands and institutions, said Kellan Terry, PR data manager at Brandwatch; they lived the 2008 recession and either experienced the loss of jobs or the difficulty in finding jobs that came out of it.

But somehow, JPMorgan Chase has emerged as the responsible one, the do-good, do-the-right-thing entity that stands, at least externally, separate from its peers.

But JPMorgan’s connection with the public today seems especially pronounced next to its quieter peers. Brands know well not to upset their customers and maintain the largest possible audience of potential consumers. Banks in particular tend to appear disconnected since they’re always tied up with a political or other corporate interest. “Do the right thing” is not the Chase slogan, but this summer alone the bank has emerged as the voice of conscience in its industry through its various statements, tweets, initiatives and donations.

Since August 1, JPMorgan has been mentioned more than 88,000 times online, according to Brandwatch. Within the past month JPM online sentiment has skewed positive at a rate of 57.8 percent.

“What JPMorgan has figured out before some of its peers is they need to speak on what they want this world to represent and reflect,” Terry said.

Chase is putting its mouth where its money is
In June, Chase removed its local TV and digital ads from all NBC news programming until after a planned interview with right-wing provocateur Alex Jones by Megyn Kelly aired.

The bank’s chief marketing officer, Kristin Lemkau, wasted no time showing where she, and therefore Chase, stood on the controversial interview.

The presidential election changed the landscape of social media permanently and majorly, Terry said. Instead of talking about who’s wearing what designer and meme sharing, people began to need to know who’s on what side of the political divide.

“You lead by example and by your own personal brand, and for [Dimon’s] own CMO to be able to do that — it comes from the top,” said Sam Maule, North American managing director for fintech consultancy 11:FS.

Just a year ago brands were still sticking to the old rule of thumb: don’t upset your customers or potential customers. Today, brands don’t have the luxury of appealing to everyone, Terry said. They’re wising up to the fact that in the current social media environment they have to upset some people — because Americans are that polarized today.

A few weeks after the Alex Jones incident, an internal memo to staff from Peter Scher, head of corporate responsibility, surfaced online, saying the company would pledge $1 million to be split between the Southern Poverty Law Center and the Anti-Defamation League “to further their work in tracking, exposing and fighting hate groups and other extremist organizations across the country.”

Of course, this plays into marketing. After all, people love brands that “take a stand” on issues that matter to them. Research shows 75 percent of consumers expect brands to make a contribution to their quality of life, but only 40 percent believe they do.

“As long as it raises some eyebrows and people start to consider your bank as more of an entity comprised of human beings that go to work and live in the same environment that you do, as more relatable — that’s not a bad thing,” Terry said.

A word from Jamie
Between those two events, violence erupted when white supremacist and neo-Nazi groups protested the removal of a Confederate statue in Charlottesville, Virginia. Dimon sent a note to employees saying he “strongly disagrees with President Trump’s reaction,” to the incident. 

That note struck a chord with the public. That day, August 16, JPMorgan was mentioned more than 7,300 times on social media. The major topic and theme behind these mentions was Jamie Dimon’s statement and how he deviated away from what Trump said about Charlottesville, Terry said.

“People weren’t necessarily shocked by it, but they thought it was unique because not as many companies — especially banks and financial institutions — are coming out critically of this administration,” he said.

Then Chase took another stand when Dimon resigned from Trump’s manufacturing council.

“We needed it, we need strong leadership now and if from a political standpoint we’re not going to get it, business needs to stand up,” Maule said.

The conversations that generally circulate around these banks and other financial brands on social media are a lot like those among airlines: both generally use social media to address customer concerns and complaints. Those conversations tend to be more negative; customers run to Twitter to tweet out a problem they’re having, like why their debit card isn’t working or why the mobile banking app is janky.

But as a brand and institution in general it’s now important to address things that garner public reaction; otherwise, people will notice the bank’s silence, Terry said.

“If Jamie Dimon hadn’t come out and said anything like this — instead of talking about if this message was resonating with millennials we would be talking about why there hasn’t been any message at all ever.”

Is it genuine?
Dimon has a reputation for being outspoken and never shying away from the world stage. Some of that has to do with the narrative he’s built for himself, said one former employee of the bank, who remains positive about Dimon’s authenticity.

“I think it’s pretty genuine,” said a former JPMorgan employee. “Of course he cares about the business and the shareholders but I do believe he cares about doing good and right by customers.” 

Dimon’s vision extends to the everyday business. While he once famously declared Silicon Valley is coming to eat Wall Street’s lunch, he then also led the company through its push into fintech and it has emerged as a leader in innovation among its legacy banking peers. It’s at the forefront of Wall Street’s relationships with fintech startups, having invested $600 million just in partnerships with fintech startups in 2016. Last year it also began shifting its data trove to public cloud storage and creating its own private cloud. And that was part of a greater $9.5 billion budget dedicated to technology. Chase’s transformation from a slow, siloed organization to a more agile, open one has brought the importance of company culture and leadership to the fore.

“With this digital push in the firm, it’s really hard to devise an overall culture for the entire company,” the ex-JPM employee said. “It’s very driven by each division of the bank and how the head of that division drives down culture for that side of the house. Jamie is in an interesting role because he does act differently depending on which side of the bank he lands… on the investment banking side he’s not as ‘nice and friendly’ but on the Chase side he 100 percent is.”

The arrival of fintech has presented an opportunity for banks to change mainstream consumer perception of retail banks and distance themselves from investment banking’s reckless investors.While other banks are also pushing forward on fintech innovation, they’re keeping things closer to their chest, which doesn’t make for good marketing. Last year Goldman Sachs made its first foray into consumer banking, launching an online bank with a $1 minimum deposit. This year it launched an online consumer lending startup with the slogan “Debt happens. It’s how you get out that counts.” In 2015 Citi launched its FinTech unit, which is dedicated to making its workplace feel like a startup and breaking the misconception that large banks are “too big to change,” its CEO told Tearsheet in March.

“Chase sees an opportunity to differentiate itself from ‘Wall Street,'” the former employee said. “There’s only one Jamie at the entire bank. It’s like the house that Jamie built.”

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Why finance brands are so hot on content marketing

With more and more companies — startups and legacy firms alike — increasing content marketing for their customers, it’s no longer much of a “differentiator” as it once was for some fintech startups trying to distinguish their offerings.

For example, Acorns recently ran an article called “First-Time Home Buyers Share What They Got Right—and Wrong.” Chase ran something similar under the headline “How this millennial woman bought a home on her own.” Meanwhile, Wealthsimple ran “How To Know What Kind of Mortgage You Can Afford.” A sea of sameness engulfs these companies, a problem when you’re trying to stand out.

Firms from Chase to Acorns to Bond Street are on a mission to educate customers and promote financial literacy through content marketing — something previously done, for the most part, by employees of the bank — to keep up with customers’ increasing need for control and self-service. It’s clear they’re trying to keep emotional ties with customers strong, since most opt to manage their money digitally now, through a banking app or roboadvisor.

“They don’t want people to park their money and go,” said April Rudin, chief executive and founder of wealth marketing strategy firm The Rudin Group. “Content is one way to make people return back to their site to add more money, to add value… The problem is there’s no one-size-fits-all advice for customers, and the majority of the firms haven’t figured out how to serve up content that’s not one-size-fits-all.”

Good advice — and content — will ensure people will return back to their site to see new updates, buy new products and invest more money. Many of the accounts being targeted in the content are on the lower asset level, but to keep business running, firms need more investors, larger investors and ultimately to grow their assets under management.

“Content marketing is not a nice-to-have; it’s a must-have, but it costs money,” said one conference goer at the Digiday Content Marketing Summit this week. “Where is that money supposed to come from? A sale makes it easier to justify, but you can’t always be selling. That’s a huge turnoff.”

Fintech firms love content marketing. Acorns, the popular micro investing app, has an online magazine called Grow that features news, financial how-tos and interviews with celebrities like Kevin Durant, Ian Kahn and Tony Robbins. Online lending company Bond Street has an online magazine that looks at the cultural and economic impact of independent businesses in New York as well as a podcast. Investing app Stash has a Learn page that aims to help “build a community of confident investors” that includes tips and primers on different money matters and concepts. Last year, Chase redesigned its online banking website to offer news stories as well as advice, guidance and support “the way we have a banker relationship at a bank,” the bank said at the time.

And at a time when people are consuming more content more frequently than ever — and all with one bias or another — so-called advice, education and information offered on their financial services platform can start to become just as noisy as the content coming through their various news streams on their various devices.

“The question is how frequent should it be? They have to figure out what the value is of the content they put out based on how people react to it and if they’re building more confidence and putting more money into their account,” Rudin said. “The fact is that they’re really trying to replace, to some extent, the advisor.”

It’s not just millennials that want advice, and every customer wants to consume advice differently. That’s why despite the popularity of robo advisors, there’s still a role for advisory relationships in financial services, hence the need to create online “communities.”

USAA is addressing this differently. With the creation of its Alexa skill for Amazon Echo devices earlier this month, it’s pushing insights — not advice — to help customers make more sound financial decisions.

“You’ll start to see spending advice as more of a mechanism to make a decision than to get some help,” Darrius Jones, assistant vp at USAA Labs, told Tearsheet at the time. “We think conversationally is the best way to deliver it.”

About 42 percent of ultra high net worth investors will change advisors if they don’t like the digital interface of the company, Rudin said, citing research by Capgemini. But the idea of a digital interface is broader than what people think, she said. It includes communication, not just advice.

In a way, depending on the consumer and his or her needs, content marketing reformats the traditional model of advice. By bringing in technology, as USAA has done with its Alexa skill, financial firms can figure out what customers really need.

“All these things need to be evaluated by banks,” Rudin said. “All that does is give it a remodel instead of a retool. Banks need to take a step back and retool themselves and think: how does this stuff really work?”

 

 

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How JPMorgan is pushing back against fraud in fintech

The market for consumer fintech apps may be a little saturated, but if customers want to use them, JPMorgan is going to let them — if it’s safe.

On Tuesday, the U.S. banking giant announced an API-sharing agreement with the Utah-based data aggregator Finicity, in which the bank would push customer data to Finicity through an application programming interface that would be shared with its various clients, digital lending and personal financial management apps of interest to Chase customers.

“Our customers really want to use these financial apps and they do use them a lot,” said Trish Wexler, a spokeswoman for JPMorgan Chase. “We want them to find a safe, secure and private way for them to be able to do that without having to hand over their bank password. We think using a tokenized method — instead of having an aggregator come in and screen scrape a customer’s full accounts — is a safer and more private way to do that.”

Screen scraping is the most common way for companies to access customer data. When customers log into third-party sites or apps with their bank credentials, their sensitive information gets “scraped” by the company and stored for re-use. That way, the company can log into the bank account as the customer in order to retrieve account data as necessary.

That makes any possible breach of the fintech app a breach of the bank account. Fraud is often a bigger problem for the bank than the customer; customers can usually rest assured the bank will investigate the transactions and return the funds to their accounts. But in a world where customers are sharing data carelessly and frequently in almost everything they do, they’re vulnerable to more extreme consequences of identity fraud.

It’s hard to make them care about that.

“It’s clear that when there’s a screen on a new app doing a refresh that says ‘click here to accept new terms of the agreement’ both of us would raise our hand and say yeah, I didn’t read that,” Wexler said. “It’s like leaving your keys on front door and walking away.”

This is JPMorgan’s second such agreement. At the beginning of the year, it formed a similar one with Intuit, in which it would share data on its customers that sign up for Intuit products and services — QuickBooks, TurboTax and Mint.

“For years, we have been describing the risks – to banks and customers – that arise when customers freely give away their bank passcodes to third-party services, allowing virtually unlimited access to their data,” JPMorgan CEO Jamie Dimon said in his annual letter to shareholders earlier this year. “Customers often do not know the liability this may create for them, if their passcode is misused, and, in many cases, they do not realize how their data are being used. For example, access to the data may continue for years after customers have stopped using the third-party services.”

JPMorgan spent 16 percent of its total expenses on technology in 2016, it said in its annual report. It allotted $3 billion of a total $9.5 billion in spending to “new initiatives,” $600 million of which it used for fintech partnerships and improving digital and mobile services.

It’s Finicity’s second deal with a bank too; in April it signed a deal with Wells Fargo, which wants to establish itself as the leader of the anti-screen-scraping movement. Wells formed a deal with Intuit in February and with Xero a year ago. Banks and other industry players are having many conversations about whether there should be more standardization where data sharing and exchanging is concerned and what those standards might be, Wexler said, adding that Chase has been in talks with “all major aggregators” and will continue having those conversations.

Finicity is slightly different from the other data aggregators in that allows its partners, Wells Fargo and Chase, to move data to the third-party fintech apps that work with it (like Mvelopes, Lendio, Drop and PocketGuard); whereas Intuit and Xero use banks’ customer information for their own financial applications. JPMorgan was swooping up fintech partners — Zelle, Roostify, OnDeck Capital, TrueCar, Symphony — long before the industry as a whole began embracing collaboration and declaring 2017 the year of bank-fintech partnerships.

“Under this arrangement, customers can choose whatever they would like to share and opting to turn these selections on or off  as they see fit,” Dimon said of the Intuit agreement in the annual letter. “We are hoping this sets a new standard for data-sharing relationships.”

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One year in: How JPMorgan is transforming small-business lending

For JPMorgan Chase, small business is big. The bank is the third top lender of Small Business Administration loans by unit in the U.S.

As of May, Chase approved 2,375 loans in 2017 for a total $679 million. But beyond SBA loans, the bank also extended more than $24 billion in credit to 4 million small business customers in 2016 through its business banking, Ink from Chase credit card and commercial term lending. In each of the last four years, it’s extended more than $19 billion in new small business loans.

It’s a market not without its pressures. After the recession, the largest U.S. banks, Chase itself included, halted most of their small business lending, later creating the opportunity for online lenders to enter the market — like Bond Street or OnDeck. Last year, JPMorgan began using OnDeck’s technology for its Chase Business Quick Capital product, a  short-term, quickly funded small business loan. It was one of the first banks to embrace a partnership-type relationship with a fintech startup, at a time when the industry narrative still focused on startups’ potential to displace banks.

“When we think about strategy and product we are very focused on customer experience. If there isn’t a problem worth solving we shouldn’t be in that space. We really wanted to provide a simple and fast experience for our customers to access capital when they needed it,” said Julie Kimmerling, head of Chase Business Quick Capital and a senior manager on the business banking strategy and business development team.

Tearsheet caught up with Kimmerling about small business lending in a digital age and the OnDeck partnership. The following has been edited for length and clarity.

In your six years at Chase, how has small business lending changed?
There is a tremendous amount of data available on customers that is also becoming increasingly digitized and simultaneously, theres a lot more computing power available. Our ability to use that data that’s becoming more centralized has allowed us to think about how you envision credit in a different way. A lot of that has occurred over the last 10 years or so.

Small business lending isn’t alone there.
Lending has benefited, payments has benefited — even more generally, banking services and wealth management have benefited. Retail disruptors like Apple or Amazon have fundamentally changed the way people interact with digital experiences and tech. Consumers and small business owners have basically been able to demand different outcomes from their banks and lenders.

Did that help create the opportunity for lending startups?
All of that together was a perfect storm for a lot of online lenders. [Customers] were demanding changes to the way they experienced banking, and we had to change with those trends. It makes a lot of sense that Chase came into the online lending space — we even went a couple steps beyond what some of the fintechs have done. We have a simpler experience.

You began using OnDeck’s technology a little over a year ago. How’s it going?
We’re pleased with the simplified customer experience we are able to offer our customers with Chase Business Quick Capital. Additionally, our experience with it has also given us tons of ideas of how we can leverage our experience here to make more of our lending products even faster and even simpler. We took a problem that was incredibly difficult with a tremendous amount of process associated with it — universally across the industry it was a difficult customer experience — and we turned it into something that was easy to use.

How fast and simple are we talking?
We’ve provided our small business customers with a process that enables them to access credit when they need it. By using data from their existing relationship with us we’re able to pre-score them. When they actually apply for the loan they click through six screens and are able to check out the loan. We can fund the proceeds of the loan into their account the same business day. In the past it could take weeks if not over a month for decisioning and we’ve taken that down to near real time decisioning. They don’t have to submit any additional documentation.

Are those elevated consumer expectations starting to translate to your small business customers?
Every single small business owner is a consumer. Everything that affects the retail space is already a shared demand for our small business owner. In lending we think of ourselves as being near the forefront. With Chase for Business, we’re trying to pioneer the easiest banking experience across multiple areas.

The legacy-startup dynamic has changed in the last three years. OnDeck aside, do you feel Chase competes with the startups?
“Us versus them” is not the perspective JPMorgan Chase takes. In some cases we’ll still determine we’re best positioned to develop the technology ourselves. It’s no secret how much we spend on tech.

How about one of the other technology or retail disruptors?
The narrative is about where it makes business sense. We will absolutely think about being partners and working together instead of always having this narrative of “us versus them.” We always evaluate our path forward based on the use case and determine if we should buy, build or partner.

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Major global banks back R3 with $100 million

Bank consortium R3 CEV has secured $107 million in the second portion of its series A funding round — one of the largest blockchain funding rounds to date.

R3 said it is using the funds on the deployment of its technology and to develop more strategic partnerships. The company endured some minor PR blows last year when some of its high profile members defected from the consortium, including Goldman Sachs, Santander, Morgan Stanley, National Australia Bank and as of last month, JPMorgan Chase.

Bank of America Merrill Lynch, Bank of Montreal, Bank of New York Mellon, Barclays, BBVA, BNP Paribas, Citi, Credit Suisse, Deutsche Bank, HSBC, ING, Mizuho, Royal Bank of Canada, Societe Generale, TD Bank, The Bank of Tokyo-Mitsubishi, The Northern Trust Company, The Royal Bank of Scotland, U.S. Bank, UBS and Wells Fargo are among the 43 member participants. R3 made the first and second portions of the round open to the consortium’s bank members only; the third and final part will also be open to non-member institutional investors. R3 expects to reach at least $150 million when the third tranche closes.

“Our strength has always been our global reach, helping people do business within and across borders all over the world,” said Kaushalya Somasundaram, head of fintech strategy and partnerships at HSBC. “We’re keen to explore ways to make financial markets, and payment and trade networks more connected, more accessible and more secure,” which HSBC plans to achieve through the collaborative approach at the heart of R3’s model.

The company will focus its technology deployment efforts on Corda, its blockchain-like distributed ledger for exchanging financial agreements among financial instituttions; as well as its infrastructure network for partner built financial applications.

R3 did not disclose its valuation or its investment framework, in which interest initially rose in November members began dropping out of the group. Santander said it would refocus its blockchain efforts on other bank co-led projects — like Utility Settlement Coin and the Global Payments Steering Group — and JPMorgan, which is also involved in other bank blockchain collaborations, wanted to pursue a technology path that’s “at odds” with R3’s strategy. But Goldman reportedly backed out when conditions of the investment framework changed.

R3 initially sought to raise $200 million from its members in a round that would have granted them 90 percent of the firm’s equity with the remaining 10 percent going to R3 itself. That deal was renegotiated in the fall to a $150 million target that would give members a a 60 percent equity stake and R3 the remaining 40 percent. Goldman allegedly sought more leverage in the deal and a board seat.

The funding announcement comes a day after R3’s rival Enterprise Ethereum Alliance, the R3-like group building solutions with the open source ethereum, revealed it has exploded in new members — bringing its total membership to 116 from 30.

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What JPMorgan is doing with that $9.5 billion tech spend

JPMorgan Chase CEO Jamie Dimon once said Silicon Valley is coming to eat Wall Street’s lunch, but three years later, the banking behemoth is emerging as a leader in innovation among its legacy banking peers.

The bank revealed in its annual report this week that it spent more than $9.5 billion in technology company-wide in 2016, or 16 percent of its total expenses. Compare that to the $809 million in tech and communications spending Goldman Sachs reported for the same year. Of that $9.5 billion, JPM allotted $3 billion to “new initiatives,” $600 million of which it spent on improving digital and mobile services and on fintech partnerships. The company has more than 40,000 technologists, and roughly 18,000 of them are developers creating intellectual property.

“One of the reasons we’re performing well as a company is we never stopped investing in technology – this should never change,” Dimon said in his annual letter to shareholders. “The reasons we invest so much in technology… are simple: To benefit customers with better, faster and often cheaper products and services, to reduce errors and to make the firm more efficient.”

JPM has been at the forefront of Wall Street’s relationships with fintech startups. In the last three years it has partnered with OnDeck Capital for small business lending, Symphony for communications systems, TrueCar for auto finance and Roostify for mortgages. It is currently collaborating with Zelle on a consumer payments system that could rival Venmo.

Dimon also highlighted the bank’s Developer Services API store, which would allow third party developers of financial applications to access JPM’s suite of application programming interfaces, and vaguely alluded to some upcoming “bill payment and business services” functionality.

Small business online lending has grown to $9.6 billion as of 2016, up from $1.6 billion in 2012, according to Brian Kleinhanzl, who covers universal banks at investment banking firm Keefe, Bruyette & Woods. While the dollar amount isn’t a huge increase, these figures still make for a 57 percent compound annual growth rate. To capture that market share, JPM has created a Chase Business Quick Capital, a white label offering that allows small businesses to complete a loan application in minutes and get funding the same day.

“[JPM] is really trying to tie all services, such as deposits, payments and lending, across one platform so underwriting decisions are faster,” Kleinhanzl said. “There’s a tremendous value in being able to see across businesses to get a full picture of the client relationship. Ultimately JPM would like to own every part of the client banking relationship and the company is willing to spend to make that happen.”

In the 2016 annual report, chief operating officer Matt Zames detailed the bank’s plans to automate basic processes and save costs by implementing robotics and machine learning. Perhaps the most astounding example of the latter is an intelligence platform that can analyze 12,000 legal documents in seconds. Previously, the process took as much as 360,000 hours, he said.

“JPM really is like a large tech company in some respects,” Kleinhanzl said. “Basically, if you name a process the banks do, JPM is likely trying to automate that process and also grow market share.”

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How Chase is tackling mobile payments

Unlike many banks, Chase is focused on mobile payments, with its four-month-old Chase Pay product.

Late last week, it acquired MCX, a retailer consortium with members like Walmart, Target and Best Buy, its second mobile payments acquisition. Three months ago, Chase partnered with LevelUp, a mobile payments app geared at smaller retailers on the East Coast. The MCX deal is not surprising; Chase announced its Chase Pay product in October 2015, a full year before it became available to its customers, and said at the time that it would be using MCX’s technology.

“The [MCX] deal provides Chase with an important entry point into many of the largest merchants in the U.S., as well as the appropriate technology to integrate with those outside the MCX consortium, but does not guarantee its prospects for adoption,” said Jordan McKee, a principal analyst in 451 Research’s payments practice, in a report on the acquisition.

Retailers in the MCX network are some of the largest in the U.S., which should help drive Chase Pay activity. Those companies don’t accept rival wallets like Apple Pay, so Chase doesn’t appear to be in competition for consumers. However, Chase offers its businesses fixed pricing without the usual fees for interchange, merchant processing or network processing, which would make Chase Pay more appealing to businesses than its rivals, but consumer adoption of any mobile payments still hasn’t really taken off.

There are many reasons mobile payments haven’t reached their tipping point yet. They’re not seamless; placing a mobile device in exactly the right position can be trickier than it should be. It’s hard to make new payments technology run on old, rusty rails. The development of payments infrastructure, at least in the U.S., has been too slow to keep up with consumers’ current standards for fast and secure payments. As payments become increasingly sophisticated, hackers do too and new features meant to tighten data privacy in payments can only be useful for so long.

Existing mobile payments experiences are also inconsistent with each other and none are widely enough accepted to lessen some of the friction, which slows adoption down even more. Every experience is so different; there are different apps to log into, different passwords to remember; some let you authenticate with your fingerprint, some don’t; some pay functionalities live in their own apps, some require you to access it from inside a larger app. There isn’t one single experience where a user can pay multiple ways at a single location.

“The [MCX] consortium became so myopic in its obsession with circumventing the card networks’ transactions fees that it entirely lost sight of how CurrentC would add value for consumers,” McKee said. “Its strategy began to further unravel as members such as Walmart strayed course and launched their own mobile wallets.”

With LevelUp, customers who have downloaded the app link their credit or debit card and scan a QR code at checkout to pay for their items. Their purchases at a single retailer are bundled into a monthly bill that the customer pays later, thereby lowering card fees for the retailer. The payments process has not always been smooth, mostly due to the technology hardware involved.

However, LevelUp also offers a rewards scheme through its retail partners. They vary from one place to another but they generally award you a discount in a dollar amount after spending a certain amount at a given place – you could unlock a $10 credit at a favorite coffee shop after spending $80 there, for example. They’re small rewards, not like racking up points to use when purchasing your next big vacation, but it’s the kind of incentive that other mobile wallets need to change consumer habits, which is ultimately what will allow mobile payments to take off.

If Chase offered the kind of incentives LevelUp offers within the network of MCX merchants, it could bring what’s been missing in mobile payments to a scale.

Now if only Chase’s next payments move would move away from the old QR code.

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10 years on: Once a first mover, Mint must work to stay relevant

Mint was an instant hit when it launched 10 years ago. It came out of nowhere, making something boring but important like budgeting kind of fun. It was easy to use, and best of all, it was free.

It was so full of promise it exceeded its new user acquisition goal of 100,000 in the first six months — by 10 times that. Two years in, it hit 1.5 million and was sold to the data aggregator Intuit for $170 million. It hasn’t had much in the way of competition — until now.

Mint today is a mobile app working to stay relevant in a sea of similar personal financial management (PFM) apps, such as Moven, Clarity and Penny. The popularity of such apps has increased over the last two or three years and will probably continue to do so with the rise of digital assistants like Siri or Alexa, automated savings and investment apps and an overall financial services shift toward customer self-service and control over their money.

Mint still stands out from the crowd, but it hasn’t been able to attract new users like it used to, said Stephen Greer, an analyst in consulting firm Celent’s banking practice. People who like managing and tracking their money carefully tend to check their accounts more frequently today than they did 10 years ago which is running Mint into the same wall blocking all PFM apps: getting secure real time data feeds from the financial institution.

“For a while, Mint was the best on the market because it was the only one on the market,” he said. “It did a good job for a while but the biggest issue for Mint, and one reason it’s gone downhill, has always been the aggregation piece. If the site isn’t accurately reflecting your spending – if it’s not live, it’s not real time, you see discrepancies – you’re most likely not going to use that service.”

Mint now has more than 20 million customers, according to an April 2016 blog post. It hit 10 million users around Aug. 2012. Mint did not provide growth figures over the last 10 years by deadline.

That friction also creates a sort of set-it-and-forget-it mentality, said Tiffani Montez, a senior analyst with Aite Group.

“One of the challenges is [PFM] is like a shiny toy,” she said. “If you try to combat the set-it-and-forget-it mentality you have to be able to provide some additional value that deepens the relationship.”

That may require a smoother flow of customer data between the customer’s bank and PFM app, like the ones Intuit just won from Wells Fargo and JPMorgan Chase. Earlier this year it reached deals with both banks that should theoretically help reduce some of the friction around data sharing. According to the agreement, Chase customers can authorize the bank to share their data electronically with Intuit’s apps: Mint, TurboTax and QuickBooks. Before, customers would give third parties their online banking passwords so they could log in and import customer account information.

Many banks have claimed that common practice compromises cybersecurity and in 2015 several of them, including JPMorgan, temporarily suspended customer data access to third-party data aggregators like Intuit.

However, how much data gets shared is unclear, Greer noted. The banks can probably share basic transactional information like how much money a customer spent in a given period or the current account balance, but might not reveal how much interest a customer is being charged on a credit card or what kinds of fees he or she is paying.

Mint said while it’s always been good at tracking and insights, it is now focusing on moving into transacting on users’ behalf, beginning with its bill pay functionality.

“In the past you got that insight but you had to take action yourself,” said Kevin Kirn, head of product for Mint. “Bill pay is just the beginning of that journey from insight to action. All our teams are looking for ways to connect that action experience through Mint.”

Perhaps the data sharing agreements will help Mint in creating more and more action experiences, but Greer is skeptical.

“Opacity is in their best interest and withholding a lot of that data works in the financial institution’s best interest,” Greer said. “My curiosity is in how much information they’re actually getting through this ‘direct connection’ and what that entails. My skepticism is around how much value that provides. I’m willing to say its not as much as it could be.”

That’s because even with the agreement, Mint is a direct-to-consumer product. Today there are plenty of companies that sell their PFM solutions to the banks themselves, aggregators like Yodlee, MX and Plaid that provide more value to the bank than Mint does. Mint makes money off its consumer business. When it comes to advice, it makes recommendations in customers’ best interest – and not necessarily in the best interest of the banks.

About a year ago Intuit shut down its financial services aggregation services, probably so it could access a market of direct connections – like those with JPM and Wells – and direct links to feed its specific services, like Mint.

“There’s just more value they can provide,” Greer said of the MXs, Yodlees and other direct-access data aggregators and infrastructure providers. “Mint hasn’t provided a whole lot of value to institutions and banks don’t want to play that game. They’d rather cut off the aggregator from getting data on consumers so the service will buffer – that’s essentially what’s happened.”

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What Bank of America’s race to cardless ATMs says about the future of banking

bank branch closures

It started on Monday when JPMorgan Chase announced it would be introducing card-free ATMs this year. The first generation of these new ATMs, according to a bank spokesperson, will give customers the ability to access the machine via an access code found on their Chase mobile app.

Not to be outdone, Bank of America countered today that they, too, would be rolling out a series of new ATMs that enable clients of the bank to use their phones to withdraw cash or complete other tasks using their cellphones instead of their bank cards.

The bank, according to CNBC, acknowledged the initiative to introduce cardless ATMs in the US with an initial pilot program in Northern California and a few other big cities with a broader launch expected for later in 2016.

War on cash? ATM growth and usage

Total Global Volume of Cash Withdrawals (billions), 2010-2020
Source: Global ATM Market and Forecasts to 2020

For the most part, this is part of larger upgrade cycle underway at most banks around the world. With the exception of China, which according to the Global ATM Market and Forecasts to 2020, grew its domestic ATM footprint by 18% in 2016, most mature economies are seeing flat growth to contraction in their number of ATMs.

But the growth of ATM machines is just part of the picture — while the number of machines may be stabilizing, they’re being used more frequently. ATM usage is seeing a pickup as global ATM cash withdrawal volumes grew by 7% in 2014 with a total of 92 billion withdrawals made. By most measures, with all the talk of bitcoin, blockchain, and other cryptocurrencies, demand for cash is ostensibly strong and in fact, growing.

That’s a far cry from the commentary coming out of Davos as world and business leaders converged on the city situated in the Swiss Alps to talk about the future. Deutsche Bank CEO, John Cryan forecasted the demise of cash by the end of this decade. “Cash I think in ten years time probably won’t (exist). There is no need for it, it is terribly inefficient and expensive,” he said in a group dedicated to discussing fintech.

Banks of the (near) future

The introduction of new ATM technologies at Bank of America and Chase appears to come at the expense of physical branches. Bank of America is on an ATM upgrade cycle as it pares back its own brick-and-mortar locations. Bank of America grew its ATM network by 1% in 2015 to 16038 while its retail locations were scaled back 2.65% to under 4800 in the same time period. Smarter ATMs with more consumer-focused technology enable banks to deliver high quality service with fewer in-person tellers. Indeed, Chase now does more transactions each month via ATMs than with tellers.

Growth in the ATM business is happening amidst the background of an industry merger of two of the largest players in the ATM industry. Diebold’s revenues are expected to just about double after it closes the transaction to acquire its German competitor, Wincor Nixdorf. The deal is valued at $2 billion and is the largest in Diebold’s 156-year history. But the acquisition is more than just about creating a global war chest, according to Diebold’s CEO, Andy Mattes. He explained to Fortune that the new ATMs his company is developing are no longer “cash and dash” machines. Instead, they’re able to “connect the physical worlds of cash with the digital worlds of cash”. ATMs, like the kinds that Chase and Bank America are rolling out, are able to conduct 90% of the jobs traditionally done by tellers.

That resonates well with banks’ younger clientele who are digital natives and comfortable using their smartphones for most financial transactions. And surprisingly, of all demographic groups in the US, millennials actually have the highest usage of cash. So, while the future may or may not be cashless, the present is definitely cardless.

 

Photo credit: pennuja via Visualhunt.com / CC BY