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Hi 5! The top five fintech stories we’re following today

top 5 weekly fintech stories

Big data, big organizational challenges

Forget all the discussion about new user acquisition. How about focusing on servicing existing clients? Here’s how Vanguard uses data to deepen relationships with its customers. It’s not easy and requires a lot of organizational discipline, but there’s tangible payoff at the end.

Only 3 percent of banks claim they’ve created continuity across all customer touchpoints. It’s no wonder why digital efforts end up so fragmented. The old silos and departmental structures frequently impede change.

Top fintech podcasts

After we published our recommendations of the best fintech podcasts, readers joked that this wasn’t a best of list – it’s actually all of ‘em. Of course, implied in this bit of listicle-making is a request for you to check out our podcast.

(I)nsuring people stay healthy with Fitbit

Insurers are just beginning use consumer technology to encourage compliant behavior. For example, John Hancock’s Vitality program provides a feedback loop that encourages exercise. Using a Fitbit and a smartphone app, the insurer incentivizes policyholders to get off the couch and get moving.

I like big chatbots and I cannot lie

Ron Shevlin, Director of Research at Cornerstone Advisors, has been covering the financial services space for 25 years. At the Tradestreaming Money Conference last month, Tradestreaming editor Zack Miller had the opportunity to pepper him in a game of free association. Unscripted and unrehearsed, he riffed on things like chatbots, the future of the bank branch, credit unions.

Cashless societies

Physical money has been getting a lot of press recently, thanks to India’s recent move towards demonetization. There are lots of different views on whether the world will really phase out cash, but regardless of which side of the aisle you’re on, here are 3 stranger-than-fiction scenarios that wouldn’t pose a problem in a world without physical currency.

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‘Chatbots are getting way over hyped’: Ron Shevlin on the future of people in banking

Last week, we hosted our first conference, the Tradestreaming Money Conference. We had hundreds of top speakers and attendees from the largest financial institutions like Vanguard, US Bank, Goldman Sachs, JP Morgan, NY Life, and Fidelity a join us to talk about reigniting growth in our industry.

Those discussions took different forms. Some of our sessions talked about the state-of-the-art in marketing. What are current best practices to acquire and retain new customers? Other sessions focused on how to drive more innovation within large financial institutions and attract new top talent. All in, it was a great event to learn, network, and collaborate.

Ron Shevlin, Director of Research at Cornerstone Advisors was one of those speakers. An analyst’s analyst, Shevlin has been covering the financial services space for 25 years. One of the things I appreciate most about Ron is his no-nonsense delivery style. He frequently questions consensus thinking, going deeper and more honest into many of the hot-button issues our industry faces. He shares those views on his blog, Snarketing 2.0

Shevlin participated in a unique format session at our conference called Pardon the Interruption. Unscripted and unprepared, I threw various words and concepts at him, letting him riff off of them for a minute in front of our audience. The following recording joins that conversation part way through.

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Below are highlights, edited for clarity, from the episode.

Chatbots

Chatbots are getting really overhyped in terms of what their current capabilities are and what they can deliver. That’s just a maturity issue. If I had a dollar for every credit union CEO who told me that his firm’s competitive advantage is its people, I could retire. It’s not really true. The promise of chatbots is a more consistent user experience with customers and prospects delivered via technology.

Community banks and credit unions

Many community banks are looking at the consumer market and are giving up on it. They think consumer banking is just about gathering deposits. These banks are going to face big trouble. In a low interest environment, consumer behavior around deposits has changed significantly. There is more than $1 billion deposited on to Starbucks Cards and I’ve heard numbers that it’s double that. That’s more money than most community banks have and that’s money that community banks can’t lend out.

Fintech partnerships

Fintech partnerships are way overhyped. To develop and execute on partnerships requires a lot of time, effort and resources. The reality is that no matter how big a bank you are, you’re resource constrained when it comes to managing partnerships. My firm does a lot of strategic planning work with midsize banks and credit unions and they’re all thinking about these types of partnerships with fintech firms. There’s no way Jim over there in IT who’s also doing security and device management is going to handle a partnership. Or, they look to their core vendors, like FIS, Fiserv, and Jack Henry. They’re doing to do the partnership? The reality is that this is too resource dependent for most financial institutions.

 

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‘Fintech will not fix banking’: Ron Shevlin on widespread financial institution underperformance

bi and analytics, big data at Anodot

If leading financial institutions are struggling to generate growth, many players in the market are struggling just to keep up. From checking accounts to credit cards, banks and other financial firms are challenged across many of their product lines. Underperforming their peers, these institutions are leaving money on the table.

Cornerstone's Ron Shevlin
Cornerstone’s Ron Shevlin

This underperformance can cost a firm millions of dollars in revenue. Using his firm’s Performance Report benchmark data, Cornerstone Advisors‘ analyst Ron Shevlin found five key ares that banks are leaving money on the table, adding up to $10 million for a financial institution with $1.5 billion in assets.

Tradestreaming had the chance to discuss these current trends with Cornerstone Advisors’ Ron Shevlin.

financial institutions are losing millions in revenue because of underperformance
5 key areas of FI underperformance

 

Branch-centric banking doesn’t work for the most part anymore. Have we reached Branchamegaddon?

Branch-centric banking may not work anymore, but that doesn’t mean that there isn’t a place for branches in a bank’s channel delivery strategy. Despite the death proclamations from the pundits, we haven’t reached Branchamegaddon — yet. The real impetus for the implosion isn’t mobile technology and mobile adoption. It’s the development and deployment of AI in tools like chatbots. When these tools and technologies mature, branches are toast.

How are so many financial institutions underperforming and what to do about it?

There’s a bimodal bifurcation in the banking industry. I don’t know that I’m using the words “bimodal bifurcation” correctly, but it sounds good. What I mean is this: there are many well performing FIs in the industry and many underperforming. The underperformers may be in the “wrong” geographic area, may be too small to compete, may be overwhelmed by compliance costs, may be laggards from a technology perspective, may simply not have evolved fast enough for today’s competitive demand.

What to do about it? For many the answer is going to have to sell and get acquired. Plain and simple. There will continue to be a ton of consolidation in the banking and credit union markets for at least another 5 years.

Fintech will fix banking. True of false?

False. Here’s reality: There will always be some group of people who will claim that banking is broken: whether it be entrepreneurs looking for opportunities, consumer advocate groups who believe that people have been wronged, or politicians looking for scapegoats to blame for their own stupid regulatory actions. Whatever impact fintech has on “fixing” banking will be downplayed by those with a vested interest in painting banking as broken.

You’re now CEO of Wells Fargo (sorry!). What do you do?

Let’s assume you mean the new CEO of Wells Fargo. Because if you mean, I’m John Stumpf, then the answer is clear: I donate some (significant) portion of my past bonuses to a fund to be used for restitution to the victims — who, by the way — are both customers and remaining employees.

As the new CEO, I do 2 things: 1) I announce a new FREE checking account. FREE means no monthly fee, but means no overdraft fees, no ATM fees, no any freaking fees, to be offered for the next 5 years. 2) I announce the elimination of “products per customer” as an internal performance measure, and adopt a new performance metric that a consultant named Ron Shevlin calls the Referral Performance Score.

Hear more from Ron Shevlin as he presents at Tradestreaming Money 2016 on November 14 in New York City.

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[podcast] Uberization of finance? Ron Shevlin on the bank of the future

Ron Shevlin on the bank of the future
Ron Shevlin, Cornerstone Advisors
Ron Shevlin, Cornerstone Advisors

If you listen to NPR, you’ll sometimes hear a recording artist, someone like Lyle Lovett, referred to as “an artist’s artist”. Meaning, an artist that other people of the same craft can appreciate and love.

Our guest on this episode of the Tradestreaming Podcast is an analyst’s analyst. For the past 25 years, Ron Shevlin’s worked with the leading financial services, consumer products, retail, and manufacturing firms in the world. Ron’s the Director of Research at Cornerstone Advisors, a consulting firm to the banking and credit union industries, where he specializes in retail banking issues including sales and marketing technologies, customer and marketing analytics, social media, customer experience and consumer behavior. He was previously at Aite and Forrester covering the financial services space.

Most importantly for us, he’s the author of weekly articles he calls Snarketing published on the Financial Brand website that combine his keen eye for trends and opportunities for growth in the financial services space with his great sense of humor. It’s a must read for me and I hope it will become part of your reading list, too.

Listen to the FULL episode

In this episode, we:

  • explore whether financial services is truly becoming uberized
  • dive deeper into Ron’s vision for the future of financial services which he describes as the industry’s migration from product providers to a platform or ecosystem of financial services much like Amazon’s platform for ecommerce

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Photo credit: COMSALUD via Visual hunt / CC BY