Friday Fun: Searching for “Mobile Banks”

If you could choose one banking term to dominate in Google searches, “mobile bank” would be near the top of your list. In the past two months, Google has served 1 million searches for the term (see chart above). And not surprisingly, 75% were conducted from mobile devices.

So who’s on the first page today? When searching “mobile bank” from my Seattle IP address I expected to see the usual mega-banks. And yes, they were there. Among organic results (see desktop screenshot below, mobile search results were similar), US Bank was #2, BofA was #3 & #4, PNC was #5 (despite no branch network in Washington state), Citizen’s Bank was #7 (also with no branches here) with Key Bank, Union Bank, and TCF finishing off the first page.

Nothing too surprising there, other than perhaps the omission of Chase and Wells, which evidently need to boost SEO efforts. But what did surprise me was who finished #1 AND #6, BankMobile from Customers Bank. Next year, the mobile bank is expected to be spun-off in a $110 million merger with Flagship Community Bank, which is wisely keeping the BankMobile name.

Bottom line: Thinking about it, I shouldn’t have been surprised by the results. BankMobile has 1.8 million mobile accounts, ranking it among the 10 largest U.S. mobile banks (after BofA, Chase, Wells, US Bank, Capital One, Discover, Amex and perhaps Barclays and/or TD Bank), I guess Google had it right after all. Enjoy your weekend!

Author: Jim Bruene (@netbanker) is Founder & Senior Advisor at Finovate as well as Principal of BUX Advisors, a financial services user-experience consultancy. 


Google search results for mobile bank (17 Nov 2017, Seattle IP address)

Turning the Tables: AI Will Help Consumers Fight Bank Fees & Penalties

There’s an interesting article in today’s WSJ about DoNotPay, a free AI-powered chat-based service that was built to help London residents automatically fight parking tickets.  That service has now assisted 400,000 consumers fight off $11 million in fines (more background at TechCrunch).

It’s the brainchild of then 17-year old Joshua Browder (who is now 19, and of course, studying CS at Stanford). But Browder is not content beating the meter reader. He is now gearing up to equip everyone with free AI-powered law tools to take on bigger injustices and issues (see DoNotPay overview video above). His latest work, a tool to make it easy to process a no-fault divorce, something that typically can cost $10,000.

The article mentioned a few more areas ripe for this type of tool: airline restitution for delays and lost luggage and battling telemarketers and landlords.

But one area that’s sure to attract multiple consumer AI startups: bank fees, penalties, credit decisions, and more. What are you going to do when you start receiving hundreds, if not thousands, of cease & desist letters challenging NSF charges, late payment fees, and so on? Or worse, suing you in small claims court or threatening arbitration (see the current default “problem” at DoNotPay, how to sue Equifax for $25,000, inset).

You are not going to be able to afford the legal expense to fight for a $35 NSF fee. Eventually, you’ll have your own AI to fight their AI, but that’s a ways away (though if you saw Tim Huber’s AI talk at FF, it may be closer than we think).

An even bigger issue are all those sketchy charges on bank credit and debit card. It’s not a stretch to imaging the consumer’s AI routinely filing disputes and following up over and over again until you and/or the merchant capitulate.

Bottom line: Make sure your penalty fees are appropriate, well communicated, and understood by customers. And you might want to pay a bit more attention to new technologies available to answer customer queries, and even legal threats, in a semi-automated fashion.

Author: Jim Bruene (@netbanker) is Founder & Senior Advisor to Finovate as well as Principal of BUX Advisors, a financial services user-experience consultancy. 

Educating Customers About Breaches: Equifax Edition

Mistakes happen. Ultimately, it’s how you respond that makes or breaks you. Clearly, Equifax could have done better. But this isn’t about them it’s about you.

Banks and credit unions have an opportunity, even a responsibility, to advise customers on important financial matters. And I think this qualifies as one. So what do you tell them about the latest breach?

Other than Wells Fargo (see screenshots 1 & 2 below), it’s mostly silence from the top-10 US banks who are understandably conflicted here. Where did Equifax get information leaked in the hack? Financial institutions are feeding millions of records every week into the credit bureaus, and using the pooled information to fuel massive loan programs.

CU Examples
But I did find some credit unions helping their members sort things out. The first one I ran across (and the inspiration for this post) was at BECU, the sixth largest credit union in the United States. Last week, BECU had a warning notice running in the lower part of its homepage (see screenshot #3 below; which was taken down over the weekend). The warning led to a full page (posted Sep 8th), discussing the breach and how to protect your accounts at BECU and elsewhere. NASA FCU has a more prominent notice, running in the main part of its homepage, in rotation with seven other items.

Bottom line: It’s no fun communicating negative information especially when you are part of the industry that created the problem to begin with. And I think all 3 of the explanations show below create more questions than they answer. But your customers need help. And it’s so hard to find the truth about data breaches and financial information in general amidst the sea of detritus that is the modern Internet. You should be the trusted place to turn to in times of financial concerns. That should be part of the definition of “primary financial institution.”

Author: Jim Bruene (@netbanker) is Founder & Senior Advisor to Finovate as well as Principal of BUX Advisors, a financial services user-experience consultancy. 


1. Wells Fargo homepage (2 Oct 2017)

 

2. Wells Fargo landing page (link)


3. BECU homepage
(29 Sep 2017)

4. BECU landing page (link)

 

5. NASA FCU homepage (2 Oct 2017)

NASA FCU landing page (link)


Note: Top graphic from Gemalto’s BreachLevelIndex.com

Feature Friday: Sweep Accounts for the Mass Market

Does anyone remember when sweep accounts were all the rage? They were disruptive technology in the 1980s. The idea was to automatically sweep idle cash from non-interest bearing accounts to savings or investment accounts with higher yields. It’s still a core feature in treasury management accounts for large businesses, but you don’t hear much about it these days on the retail side.

Why? The small differential between checking and savings or money markets hardly justifies the trouble. If the average annual amount swept to savings was $2,500, it would only net an extra $1 or $2 annually (after tax) from a typical large U.S. bank, or up to $10 in a “high interest” account from a community bank or credit union.

But if instead of sweeping idle cash into savings, what if you could use it to pay down, even temporarily, a personal loan or revolving credit balance? All of a sudden, that $2,500 cushion is worth $300 or more annually (assuming 12% APR), 150x the return of sweeping to a bank savings account. That’s enough to get your customers’ attention.

Some overdraft credit lines work this way. You can freely transfer money between credit line and checking to minimize interest charges. I had the feature at US Bank years ago. During cash-strapped times, I would keep $0 in checking and every time I wrote a check it would trigger an automatic (and fee-free) credit line advance. It was a great system, but when the bank started charging fees on each automatic transfer, I abandoned my “sweep account” hack.

Fast-forward 10 years and Kasasa has reinvented the credit-line sweep with its hybrid loan product launched today. Kasasa loans offer a “take back” feature which allows consumers to pay down their loan balance at any time, and then get those extra funds back at any time in the future free of charge. Basically, in banking jargon, it’s a fixed-rate installment loan (with a repayment schedule), married to a credit line that allows you to move money in and out up to the extra amount you’ve paid in (see note 1). One sees this in the home equity space, but not in the personal loan arena.

A key part of the account’s appeal is the Loan Management Dashboard. Without the dashboard, the changing balances and available “excess” would be a customer services nightmare to explain and track. The dashboard makes it (relatively) simple to move money back and forth. There will be some customer service questions, but they should primarily be one-time only.

Bottom line: Kasasa’s hybrid loan is a winning concept, especially for its community bank and credit union clients looking to differentiate themselves from the big banks and online lenders. It’s a user-friendly approach that should play well with their loyal customer/member bases. The laon does have the downside of cannibalizing deposits while lowering loan balances. But with proper marketing, a Kasasa speciality, the incremental loan balances (and customers) should far outweigh the lower deposit totals.

Author: Jim Bruene (@netbanker) is Founder & Senior Advisor to Finovate as well as Principal of BUX Advisors, a financial services user-experience consultancy. 


Note:
(1) Unlike a credit line where you can always borrow to the maximum credit line, in the Kasasa Loan, you can only borrow back your excess contributions. This is a benefit for consumers who prefer the discipline of a fixed repayment period rather than an open-ended credit line.

Voice Banking: What’s Old is New Again

Capital One was the first U.S. bank to integrate with Amazon’s Alexa platform.

I am as excited about Alexa/Cortana/Siri/Google as the next geek (except maybe for this guy) and look forward to seeing many examples at Finovate in 2 weeks. We already own a pair of Amazon Echos and we’ll probably get more. Our biggest uses: music, the grocery shopping list (which still requires a visual to use when shopping), and as a kitchen timer. We love it. But is it a great interface for financial services? I’m not sure.

1987 AT&T advertisement

Roll back the clock three decades. Voice banking was the newest thing. It offered 24/7 access to bank balances and transactions. No more waiting for a paper statement, queuing up at an ATM or even going to a branch.

However, when the Internet arrived in the late 1990s, routine automated queries began migrating from the phone, where it was tedious and time consuming to “listen” to data, to the wonderful new visual medium. Users could comprehend a series of numbers much, much faster visually than orally.

So when I see the hype around voice banking, it’s hard not to think that we’ve just gone backwards in UX by two decades. I don’t think the current crop of voice products are all that compelling for day-to-day banking. Sure, “Alexa, what’s my balance?” is easier and faster than calling a toll-free number or even logging in to mobile banking. But most customers looking for their balance also need to understand the transactions that created it. And for that a visual aid is much better than a recital of a bunch of figures.

To add value, voice interfaces must handle requests AND deliver results that are not better served with visuals. (Note: We are not talking about voice commands for mobile or desktop banking which do add value for almost any task.) What might those use cases be?

  • Annotating transactions:
    Trigger: “Alexa ask me what my recent purchases were for?”
    Alexa: “$12.77 at Pizza Press yesterday?”
    User: “Lunch with Charlie at school”
    Alexa: “$64.12 at Office Depot on Monday?”
    User: “Business expense for office supplies”
  • Second factor for online/mobile banking
  • Alerts (assuming Alex could proactively start a conversation with you)
  • Routine customer service questions (such as Capital One example above)

Bottom line: For marketing and convenience reasons, financial institutions will Alexa-enable a wide variety of tasks such as transaction queries, transferring funds, authorizing payments, and so on. But few of those tasks are handled more effectively by two-way voice communications. Sometimes, it may prove more convenient (e.g., think of a busy parent trying to avoid an overdraft while making dinner for their 3-year old). But even if they can use Alexa, I think most people will pull out their mobile phone for the majority of banking tasks, very likely using voice commands to simplify the input process.

Author: Jim Bruene (@netbanker) is Founder & Senior Advisor to Finovate as well as Principal of BUX Advisors, a financial services user-experience consultancy. 


Photo credit

Friday Fun: Top 12 U.S. Cities for Fintech Startups

Yesterday, Bank Innovations named five emerging U.S. fintech hubs (outside NYC, Silicon Valley and Boston). Its up-and-comers were: Atlanta, Austin, Lincoln, Miami and Washington DC. While Austin and Atlanta made sense, I was surprised by Miami, DC and especially Lincoln, Nebraska.

The article didn’t include a methodology, so to test their hypothesis I searched AngelList’s database of fintech and financial services startups (financial technology, financial services, payments, fin tech or insurance). Miami did in fact make the top 12, but Lincoln (7 startups) and Washington DC (9 startups) are pretty far out of the running, at least from a startup perspective. Admittedly, Bank Innovations was considering more than just startup activity.

Here’s the 10 most common U.S. homes of fintech startups outside SF and NYC:
(Note: this is by no means clean data, so consider it a proxy only; also it does not include neighboring cities such as San Jose or Brooklyn.)

HQ/Number of Startups

  1. NYC 1,367
  2. San Francisco 1,241
  3. LA 431
  4. Chicago 267
  5. Boston 246
  6. Austin 226
  7. Atlanta 161
  8. San Diego 156
  9. Palo Alto 136
  10. Seattle 116 (tie)
  11. Dallas 116 (tie)
  12. Miami 107

Source: Angel List, 18 Aug 2017

Enjoy your weekend all!

Author: Jim Bruene is Founder & Senior Advisor to Finovate as well as Principal of BUX Advisors, a financial services user-experience consultancy. 


Photo credit, LA Fintech Meetup Aug 22

 

HoneyDue Tackles Major PFM Challenge: Collaborative Spending

Managing a relationship is stressful enough without introducing unnecessary miscommunications about day-to-day spending. This is one reason why many couples maintain separate spending accounts with pre-defined responsibilities (e.g. you pay the rent, I’ll pay the utilities, etc.). But that doesn’t alleviate the need to communicate, especially when one person has more “discretionary” funds. And separate accounts can lead to more trouble if one person is more of a free spender than the other, or if one has more trouble avoiding overdrafts and/or tapping out accounts well in advance of payday.

Joint accounts have the advantage of keeping funds in a single bucket which is statistically easier to keep above zero compared to stretching funds across two or more accounts. And joint accounts by definition require the couple to work together as a team to manage spending. But many couples, especially early on, aren’t entirely ready to cede “control” over their paychecks. Overall, it’s an area ripe for disagreements and resentment.

That’s why we love Simple’s best-of-both-worlds solution, the Simple Shared plan which offers 3 accounts: an individual spending account for each person, along with a joint account for the pair. While that’s a great foundation, it still doesn’t address the day-to-day communications necessary to keep both partners on the same page.

Enter the newest PFM player, HoneyDue (formerly WalletIQ), currently toiling away in Y Combinator’s summer class (S17). After a stint as one of Apple’s favorite apps in May, the company already has 20,000 registered users, 60% of which are female. The app debuted on Product Hunt two days ago, and was the most popular product of the day (currently 820 upvotes) and so far is fifth highest of the week. You’ll be hearing more about them in two weeks when they officially debut at the incubator’s demo days (Aug 21-23).

HoneyDue uses Yodlee (probably) to aggregate transaction accounts across multiple FIs into one mobile app. Then it provides tools to make it easy to annotate expenses and communicate with each other about what they were.

Bottom line: Collaborative spending tools are an attractive account management option that absolutely should be offered by every bank, credit union, card issuer and PFM provider. HoneyDue is a good example of how the UI can work. And banks, consider joining the company’s seed round, if only as an R&D effort (strategic seed investing).

JP Morgan Chase’s Startup Portfolio with CFSi

JP Morgan Chase is more than halfway through its 5-year $30 million commitment to startup innovation in its partnership with CFSi’s FinLab. Each of the past three years, fintech startups have been invited to apply to the accelerator which is focused on finding financial solutions for low- and moderate-income consumers (for example, this year’s challenge).

So far, CFSi/Chase have invested $250,000 each in 24 for-profit companies for a total of $6.0 million (notes 1, 2). In addition, they’ve made two grants totalling $500,000  The investments (note 3) were made in June 2015, June 2016, and this month, so it’s too early to see how well the venture is at picking winners (official rules here).

We do know that two of last year’s class are already out of business, Bee and Remedy, a surprising result for companies winning a quarter-million investment from the third largest bank in the world just 12 months ago. On the other hand, the class of 2015 already has six early winners from the 9 investments (below), so things look good overall:

  • Digit, the impulse savings app which has raised $36.5 million
  • LendStreet, a marketplace-lending platform which has raised $28.25 million
  • Ascend, the loan management service, which has raised $12.75 million
  • Even, the income smoothing service, which has raised $12.25 million
  • SupportPay, the child-support management app, which has raised $7.1 million
  • Propel, the food-stamp support app, which has raised $5.4 million

Since the average investment is just 12 month’s old, it’s too early to judge CFSi/Chase’s seed-stage investing prowess. And that isn’t even the primary goal of the joint program with CFSI. But it’s always nice to turn a profit while doing good. Based on the excellent performance of its first class, we estimate that the venture is already sitting on a paper gain in excess of $1.5 million (note 3) across the 21 for-profit companies still in business, a 50% total gain on an average of $3 million invested. And they may have had some return of capital with the acquisition of Prism by PayNearMe.

 


Total Return (2015 to 2017)

Total invested: $6.0 million in 24 companies (note 2)

Total grants: $500,000 in 2 non-profits (note 3)

Total returned: 1 exit, unknown valuation

Total market value: $7.5 million+ (note 4)

Paper gain: $1.5 million+ (50% total gain on average of $3 million invested from July 2015 to date)


 

Results by cohort:

2017 Investments


Total invested: $2.0 million

Total market value: $2.0 million

Paper gain/loss: $0


Blueprint Income: Creating the future pension – a simple, pre-determined income stream backed by insurance companies.

Total funding: $250,000

DavePredicts your “7-day low” checking account balance and offers advances on your paycheck at 0% interest to help prevent overdraft.

Total funding: $3.25 million

EverSafeMonitors seniors’ bank and investment accounts, credit cards and credit reports — serving as an extra set of eyes to detect fraud, scams, and identity theft.

Total funding: $250,000 (Finovate alum)

Grove: Personalized, comprehensive financial advice that is accessible and affordable.

Total funding: $250,000

Nova: World’s first cross-border credit reporting agency by building data partnerships across the globe.

Total funding: $250,000

Point: Home-equity platform giving homeowners cash today for a share of their home’s future appreciation.

Total funding: $250,000

Token TransitMobile app to quickly and easily pay for public transportation.

Total funding: $250,000

Tomorrow: Providing long-term financial security to busy millennials and working families.

Total funding: $2.85 million

 

2016 Investments


Total $ invested: $2.0 million + $250,000 non-profit grant

Total $ returned: 2 startups shut down, assume $0 return to investors

Total market value: $1.5 million

Paper gain/loss: ($500,000)


Albert: Mobile app that improves financial health with practical, actionable financial recommendations.

Total funding: $2.85 million

Value to Chase/CFSi: $250,000+

Bee: Mobile banking alternative to the under/un-banked (In process of shutting down)

Total funding: $4.85 million

Value to Chase/CFSi = $0

Earn: Non-profit leveraging technology to solve America’s savings crisis.

Total funding: $250,000

Value to Chase/CFSi: $0 (non-profit grant)

EarnUp: Platform that intelligently automates loan payments and identifies earning opportunities for the 200 million indebted Americans.

Total funding: $3.25 million

Value to Chase/CFSi: $250,000+

CreditHero: eCreditHero helps consumers fix their credit report errors for free.

Total funding: $250,000

Value to Chase/CFSi: TBD

Everlance: App for freelancers to automatically track their business miles and expenses.

Total funding: $250,000

Value to Chase/CFSi: TBD

RemedyProtects people from medical bill errors and overcharges, saving the average family over $1,000 per year (shut down 14 July 2017)

Total funding: $2.15 million

Value to Chase/CFSi: $0

ScratchModern-day loan servicer that delivers a borrower-first experience.

Total funding: $250,000

Value to Chase/CFSi: TBD

WiseBanyan: Free financial advisor.

Total funding: $250,000 (Finovate alum)

Value to Chase/CFSi: TBD

 

2015 Investments


Total invested: $2.0 million + $250,000 non-profit grant

Total returned: 1 exit, unknown valuation

Total market value: $4 million+

Paper gain: $2 million


AscendReduces risk on current loans and rewards the borrower by lowering interest payments for positive financial behaviors.

Total funding: $12.75 million

Value to Chase/CFSi: $500,000+

DigitAutomated savings tool that identifies small amounts of money that can be moved from checking into savings based on spending habits.

Total funding: $36.5 million

Value to Chase/CFSi: $1 million+

EvenTurns the inconsistent income of hourly and part-time workers into a steady salary.

Total funding: $12.25 million

Value to Chase/CFSi: $500,000+

LendStreetMarketplace-lending platform that helps borrowers reduce their debt and rebuild their credit.

Total funding: $28.25 million

Value to Chase/CFSi: $1 million+

PayGoalNon-profit workplace tool that enables financially underserved workers to improve their financial health.

Total funding: $250,000

Value to Chase/CFSi: $0 (non-profit grant)

PrismComprehensive bill payment and management app that helps people better manage their personal finances. In early 2016, Prism was acquired by fintech company PayNearMe.

Total funding: $3.8 million

Value to Chase/CFSi: Exited at unknown price

PropelSimplifies the food stamp application process by streamlining the initial enrollment form.

Total funding: $5.4 million

Value to Chase/CFSi: $500,000+

PuddleReduces risk on current loans and rewards the borrower by lowering interest payments for positive financial behaviors.

Total funding: $250,000

Value to Chase/CFSi: TBD

SupportPayAutomated payment platform that enables parents to share child expenses and exchange child support.

Total funding: $7.1 million

Value to Chase/CFSi: $500,000+


 

Author: Jim Bruene is Founder & Senior Advisor to Finovate as well as Principal of BUX Advisors, a financial services user-experience consultancy. 


Notes:

  1. We only know that Chase is a “founding partner” in the $30 million effort. We don’t know if Chase is the sole investor, or merely the lead. And we don’t know what happens with any investment gains, whether they go back into CFSi’s balance sheet or accrue to Chase and any other investors involved.
  2. It appears that the companies are each offered a $250,000 convertible note. But we don’t know the overall terms, how many companies accept the financing, or if they are all $250,000. For the sake of this post, we are assuming everyone takes the full $250,000. We also don’t know if Chase is earmarking part of the $30 million commitment for add-on investments. So far, there are no public record of add-on investments in the 26 companies.
  3. Non-profits receive restricted grants of $250,000.
  4. Since none of the companies have revealed valuations in their subsequent financings, to value Chase’s stake, we are assuming a 2x valuation on A-rounds and a 4x valuation on B-rounds.

Friday Fun: Alliant Credit Union Raises Savings Rates

In this era of low rates and stingy credit approvals, it’s always nice to get a little good news from your FI. This week, Chicago’s Alliant Credit Union made the most of its 10 basis point increase in its basic saving rate. On its homepage, the drop-down navigation menus for both Bank and Invest, included a cute graphic touted the new 1.11% APY (see above).

And clicking on Learn More takes you to a page proclaiming rates “15.9x times the national average (I feel like they could just say “15x,” the extra 0.9x just makes it harder to read and is meaningless). See screenshot below.

Bottom line: If you got it, flaunt it. Have a great weekend! (and go Venus!)


P.S. Congratulation Alliant on being named “best HSA for spending” by Morningstar.

Author: Jim Bruene is Founder & Senior Advisor to Finovate as well as Principal of BUX Advisors, a financial services user-experience consultancy.