Big Ideas from BAI’s Retail Delivery

imageEditor’s note: This guest post was written by Daniel Thomas, a 25-year strategy and product development veteran of the financial services industry. He is a principal consultant with Mindful Insights LLC.

BAI’s annual Retail Delivery was held this year in Chicago during Chicago Ideas Week. So, it only seemed fitting to hit the vendor expo floor with a single question:

“What is your company’s big idea in the financial services retail channel?” 

Here are a few of my favorite answers:

Access Softek
image CEO Chris Doner demonstrated a new location-based security feature of their mobile banking platform that he says none of the other mobile banking products have. Others protect against fraud when a mobile phone is lost or stolen by asking the traditional security questions based on what you know (username and password) and what you have (something in your wallet). However, depending on how the user retains these secrets on their phone, they may still be subject to having a bad guy figure it out and transfer money out of their account. 

Access Softek adds a third level of security that allows mobile bankers to designate geo-location “safe zones” where they are allowed to log-in to the mobile banking app. But when outside the zone they can not. Doner says that studies show that 98% of the time people log in to their mobile app from just 2 or 3 specific locations.  He believes that this feature will increase overall mobile banking usage as it helps overcome security fears holding back adoption.

imageCEO Drew Edwards believes his company has the long-awaited solution to funding stored-value debit cards or other accounts. It teamed with Cachet Financial Solutions and several other mobile remote deposit capture (RDC) providers to provide guarantee checks deposited using photo deposit services. 

Edwards says Chexar’s guarantee allows the funds from the check to be available to the account holder immediately without fear that the transaction will be reversed should the check bounce.  Chexar claims that this will be especially meaningful to the underbanked who pay high fees to cash checks and then pay another fee to load the cash onto a debit card.

Chexar charges 1.5% to 3.5% fees to cover fraud losses and collections. But that’s considerably lower than fees charged by check-cashing companies.

Chris Craver says their new idea is a service that allows FI customers to configure customized settings that trigger alerts. What’s so new about that? Instead of finding so-called alerts in your email box a day or two later, Clairmail sends real-time text messages which are much more likely to be noticed.

imageIn a world where FIs are fortifying their systems to defend against fraudulent card use, they neglect one of the most important parties helping them with the battle—the cardholder! Now, users can ask to be alerted when a transaction exceeds their unique limits. And users can make their issuer aware of suspicious purchases so the account can be monitored closely or frozen to reduce subsequent fraudulent charges.
Editor’s note: Love the cumulative transaction count on the Clairmail homepage (see inset).

image Not every good idea has to be about online or mobile. Good old customer service goes a long way in maintaining a loyal relationship. Russ Belland at Deluxe Corporation explained that their new SwitchAgent is a high-touch service that FIs can offer new customers to solve one a big pain point when changing banks: Moving recurring debits/credits to the new account without incurring NSF fees in the old account.

This is no easy task even for savvy customers because it can be difficult to reach the right party at the company that initiates the recurring charges.

Belland says that Deluxe agents will personally contact the new customer and track down all the hidden “ACH skeletons” (it takes an average of 2.6 phone calls with users to find them all). The agent contacts all parties to ensure a smooth transition. Deluxe has thirteen banks live on the service and is ramping up for expected high growth. From someone who recently had to open a new account because of a stolen wallet, I can personally attest that this is a great idea!

Harland Clarke
image Scott Osman explained their great idea for making person-to person (P2P) funds transfers more ubiquitous in the US. Today, adoption is slowed because recipients outside the sender’s FI must register with the sender’s FI to get the funds. And recipients may need to belong to several P2P services to receive money from friends, family and colleagues. 

Harland’s hopes to solve that problem by offering the P2P user interface for its FI clients and to situate itself in the middle to form a national P2P network with a brand (Harland Clarke) that consumers
know and trust.


If you were at the BAI last week and heard of other ideas worthy of Chicago Ideas Week, feel free to add a comment to this post by clicking Comments above.

Best of BAI Retail Delivery 2011

image BAI held its giant banktech trade show, Retail Delivery, in its hometown this year, the first time it’s been held in Chicago since I began attending in 1993. It was a good year for announcing interesting FI partnerships:

  • PayPal and USAA for mobile P2P payments
  • Cardlytics and PNC for merchant-funded rewards
  • On Deck Capital and US Bank for small business alternative lending

And there was a merger of two popular Finovate alums:

  • oFlows and Andera

Finally, here are the highlights form my show notes, or what I call the Netbanker Awards (see note). Monday we’ll also publish more thoughts from our friend and crafty correspondent Dan Thomas from Mindful Insights.


2011 Retail Delivery Netbanker Awards

  • Biggest "aha" moment: Varolli shedding light on the huge win-win benefit from proactively managing customer communications across various channels for "financial events" (e.g, new account onboarding, collections, service issues, fraud issues, etc.)
  • Best mobile UI idea: USAA mobile app which toggles between "spending mode" and "personal finance management" mode
  • Best booth magnet: Fiserv’s blindfolded guy (mentalist I guess)
  • Best freebie: The massive "sucker statue" from FIS (I think)
  • Energizer Bunny award: Still going strong, even on day 3, the Yodlee crew
  • Most entertaining presentation: Jeremy Gutsche, Founder,
    Note: Though not sure if "creating a cultural bond" with customers is realistic for most banks. Credit unions, maybe. TrendHunter also takes the dubious honor of having "the most blatant sales pitch in a keynote" for its last slide pitching workshops and special free offers <> (see it worked!)
  • imageBiggest mixed message on delivery priorities: "I do 80% of my banking by mobile phone and I go to the branch every week" Randi Zuckerberg during keynote interview
  • Best idea for getting new revenues (deja vu): Merchant-funded rewards from Cardlytics, FreeMonee and others
  • Best demo: Alkami Technology which showed PC, iPad, and iPhone all at once (see inset)
  • Biggest tease: USAA’s Neff Hudson saying he "was going to show us screenshots of the new USAA mobile wallet," but it wasn’t quite far enough along in testing. (Later he told me that it shouldn’t be more than a few months out before he can show it.) But he did say that the wallet will hold more than just USAA cards, that it will be a separate standalone app (although it will likely be integrated into main mobile app at some point), and that it will have PayPal-powered P2P payments.
  • Most likely to "change the world": On Deck Capital’s small business credit/lending engine
  • Best free PR: President Clinton talking about On Deck Capital in his opening keynote
  • Bank that got the most attention (in a good way): USAA
  • Most surprising announcement: PayPal enabled ATMs from NCR and S1
    Comment: I did not see that one coming, but it makes sense, especially for international remittances
  • Best conference amenity: Wifi that worked throughout!
  • Best kept secret: The Starbucks hidden not more than 25 steps, but around a corner, from the exhibit hall entrance (hat tip to Susan Casella, a fellow Seattleite, and Varolii exec who bought me a much-needed Americano)
  • Coolest conference innovation: The QR codes in the printed program that opened up the powerpoint deck on your mobile (especially if you used iPad 2)
  • Best mobile positioning statement (tie): In back-to-back, but separate sessions, Neff Hudson, USAA and Bret King, Bank 2.0/Movenbank said almost the same thing: that banking has always been a destination (visit branch, call the VRU, or login in to online banking). And with mobile, banking goes direct to the customer.
  • Most though-provoking idea:  Brett King says Movenbank will have no product "applications", ever. The bank will never require customer to "apply " for any banking product. Movenbank will gradually ask for customer info and permissions and then will make appropriate products available  without formal application process.
    Comment: Even if you can’t remove EVERY application, this is a good direction to head in.
  • Best meal: Pizzanos Pizza with my brother and his family (thanks!)


Best stats

  • During last 10 days BECU has added 5,200 new accounts, more than 2x its normal pace of about 7,000 per month
  • BECU has processed $10 million in P2P payments and $10 million in remote deposits (didn’t say time period)
  • 92% of BECU transactions occur in remote channel (online/mobile)
  • 58% of online banking users at least look at one offer from Cardlytics during the first month the rewards program is offered
  • Cardlytics is only getting 14 support calls per month per million accounts (granted, banks are the first line of support, but few of those questions are getting escalated to Cardlytics)
  • Cardlytics clients are seeing 15% increase in online banking logins after deployment
  • Cardlytics has a 1.6% opt-out rate from the in-statement rewards program
  • Fiserv ZashPay has more than 1,000 FI clients
  • On Deck Capital is seeing under 5% loss rates in its $150 million small biz alt-lending portfolio
  • FI exec rating of branches as very/extremely important dropped 9 points, from 82% to 71% in past year (see inset)


Best quotes

"We were probably lucky that the Chicago chapter of "occupy wall street" didn’t know what BAI stood for."
     — Name withheld

"Mobile will be the primary (most-used) channel for transactions at USAA by 2015"
     — Neff Hudson, USAA

These observations are based solely on the small part of the overall show that I personally took in. I talked to 25-30 companies out of more than 200 exhibiting. And I attended about 10 sessions out of 100 or so. My apologies to all the companies with cool stuff that I either didn’t see or didn’t comprehend.

Best of BAI Retail Delivery 2010

image For bank-tech geeks, it doesn’t get much better than the annual trade show in the desert, BAI Retail Delivery.

Although able to take in only a tiny fraction of the show’s offerings, I’m still jazzed to be offering my annual list of personal favorites from Tuesday and Wednesday’s lineup in Las Vegas (note 1):

The Netbanker Awards (note 2)

  • Best new product: Mitek mobile bill capture via scan-and-pay using iPhone camera (blog entry to follow) 
  • Best mobile innovation: See above
  • Biggest marketing opportunity: Marketing via Facebook
  • Best year-over-year gainer: Cardlytics going from 0 to 100+ bank deployments since its statement rewards programs launched a year ago
    Runner up: ClariMail was up sixfold in mobile-transaction volume and revenues (press release)
  • Best self-service idea: Customer service popup chat after customer incorrectly enters password several times, but BEFORE they are locked out (credit to Sykes VP Marketing, Mike Clarkin)
  • Best celebrity general session: Tom Kelley, GM IDEO, who made me laugh and made me think; the perfect keynote recipe 
    Biggest conundrum (from above): Tom Kelley pointed out that the top of the value pyramid is selling the “experience” (commodity >>> product >>> service >>> experience). Is this something that banking can aspire to or does the retail experience realistically stop at the “service” level?
  • Best presentation by an FI: BBVA Compass with SmartyPig
  • Best mobile evangelist: Drew Sievers, mFoundry CEO
  • Best place to hang out on the show floor: Yodlee’s booth (again)
  • Best schwag: Squeeze “ball” in the shape of an ATM from uGenius
  • Best tease: The “huge announcement” coming next week from PayPal
  • Missing in action: No espresso giveaways on the show floor

Things seen on the show floor that I want on my personal accounts now (in order of importance):

  • An automated phone call to authorize high-value transactions (see PhoneFactor)
  • PayPal integration within online banking
  • Mobile bill capture (see Mitek)
  • Contactless payment sticker for my phone (see Bling Nation)
  • In-statement offers (see Cardlytics and Billshrink)

Best stats:

  • 80% of Western Union payment customers have a bank account, it’s just too much of a hassle to use it for international remittances (per Dan Schatt, PayPal)
  • SMS messages have a 70% open rate (per Carl Tsukahara, CMO ClairMail)
  • $1.4 billion in savings goals have been established on SmartyPig’s platform
  • Active mobile banking users will grow fivefold in next four years, from 10 mil at YE 2009 to 53 mil at YE 2013 (per Tower Group in study commissioned by ClairMail)

Best quotes:

“Most major banks are doing something on Facebook. Most just got started (and aren’t live yet).”
         — Brad Smallwood, Facebook

“(PayPal) believes it can take risk out of the banking system”
          — Dan Schatt, PayPal

“(Users) are more likely to achieve financial goals that they have shared with friends”
         — Bob Weinschenk, SmartyPig



1. I jetted back last night, and missed today’s partial-day closing. So these observations are based on what I saw Tuesday and Wednesday. Again, I talked to only a couple dozen companies of the 200+ on the floor, and attended nine or ten sessions of the 100+. My apologies to all the companies with cool stuff that I either didn’t see or didn’t understand.
2. The “bests” excludes the 56 launches at Finovate 2010 two weeks ago
3. I’ll post the links from my presentation, “Six Big Ideas from Finovate 2010” in a separate entry.

Links from my Oct 19 BAI Retail Delivery presentation

Thanks BAI, what a great week at Retail Delivery again (see my personal highlights from the show). This year, I had the honor of presenting six key ideas from Finovate 2010 at an afternoon breakout session.

Following are the ideas and the Finovate 2010 companies used to illustrate them. Videos of all FinovateFall 2010 demos will be available free of charge at soon. Videos from earlier events are already available. 

1. Mobile everything (note 1)

2. Simpler is Better (includes paperless)

3. Youth Banking

4. Advanced payments at the POS (for on- and off-line)

5. Selling behind the password (aka Marketing via OLB)LeadFusion

6. App Stores

Note: I showed just three mobile apps because my presentation preceded a 45-minute panel on mobile apps. Also in the intro, I showed mobile apps from USAA, PayPal, Amazon, Y-12 FCU, and StateFarm. 

The Best of BAI Retail Delivery 2009

imageLast week, I attended the BAI Retail Delivery conference in Boston (for more background on the event, see note 1). I enjoyed the show tremendously.

What’s not to like? Famous speakers, new products, several thousand attendees, statistics galore, and a floor filled with new bank tech. For me, the only disappointments were the non-industry keynoters, who are not why I attend, but are something to tell your friends and family about when you get home (note 2).

Like last year, I’ll cut to the chase and hand out my personal awards for the event. I saw only a tiny fraction of the companies, so the list below shows merely my favorites culled from about two dozen company interviews. 

The Netbanker awards

  • Biggest buzz: Person-to-person payments (we’ll cover it in Online Banking Report soon
    Runner up: Mobile banking and payments
  • Most likely to make the cover of FastCompany: Cardlytics (will cover next week)
  • New solution most likely to be used by 1000 financial institutions: Continuity Engine’s semi-automated, compliance task-management service
    Least likely: Microsoft Surface, as cool as it looks, I just don’t see banks deploying it in large numbers
  • Most audacious business plan: Monetawinner of this very award last year, but did indeed appear in Boston with a major client win, SunTrust (see Celent’s Jacob Jegher’s not-at-all enthusiastic post on the announcement)
  • Best ah-ha moment: When Joe Salesky, Clairmail founder, observed that mobile banking is a 100% solution, meaning it’s for every customer NOT just the half that do online banking
  • Biggest surprise: The buzz around person-to-person payments and relative lack of buzz around online PFM
  • Most-talked-about vendor without a booth: PayPal which announced partnerships with three large bank tech companies: S1, FIS, and First Data’s STAR unit
  • Coolest online feature, not yet available: Credit card available-balance meter displayed directly on the user’s PC desktop, powered by Worklight
  • Coolest new GUI feature: Fiserv’s ebill snapshots
  • Best demo (I’d not seen before): Dynamic Card Solution’s instant issue of a credit card with my picture on it along with a background image I chose from hundreds available
  • Best-attended breakout session (that I attended): Checking 2.0 which analyzed what the product might look like if NSF/OD fee revenues are materially limited
  • Best number: From the opening remarks by BAI director, Debbie Bianucci: According to BAI research five years ago, one-third of consumers preferred to deal with their bank remotely; now, two-thirds do
    Runner up: Bank of America’s Doug Brown revealed in his presentation that BofA has 3.5 million active mobile banking users (see recent monthly growth below)image
  • Scariest number: A prediction from Sherief Meleis (Novantas) that new regulation could wipe out 20% to 40% of total checking account revenue
  • Missing in action: Security solutions
  • Coolest new event technology: Real-time text voting in the Checking 2.0 session
    Runner up: Wifi available conference-wide for the first time ever
  • Most intriguing co-brand opportunity: Getting the bank logo on PayPal messaging (FIS, S1) to payment recipients or during payment sessions (FirstData STAR)
  • Product I most wanted to use now: Digital Insight’s (Intuit) FinanceWorks with Turbotax integration
  • Best screenshot: Lamping on the iPhone (powered by ClairMail); I call it the “little red number” superimposed over iPhone icons, that tells you how many messages are available (see inset)
    Runner up: Worklight’s visualization of its widget running in four environments with essentially the same GUI (see below)
  • Best party: Geezeo’s blowout at Lucky’s
  • Best freebie on the floor: Fresh lemonade from the wonderful people with a booth by the front entrance
  • Netbanker spotting: Quote in BofA’s Doug Brown’s Powerpoint regarding BofA threepeat (in the mobile marketplaces)

And I’m always collecting usage stats and other numerical detritus delivered during the presentations. Here are my notes with (source in parenthesis):

  • 27% of U.S. households are now mobile only (Doug Brown, BofA)
  • New mobile customers at BofA last 3 months: 150,000 (Sep); 210,000 (Aug); 220,000 (July) (Doug Brown, BofA)
  • In U.S. and worldwide, text message volume has surpassed voice call volume (Doug Brown, BofA)
  • 99% of mobile users view balances, 90% view transaction detail, about $10 billion of funds have been moved via mobile transfers/bill pay; 15 million location-based searches being performed (annual run rate)
  • BofA has 35% of all mobile banking users (Doug Brown, citing ComScore numbers in 2009)
  • BofA has added 150,000 new checking accounts due to mobile offering
  • BofA seeing voice calls decline among mobile users, but online banking usage holding steady
  • In pilot, 94% of the users of TurboTax within FinanceWorks chose their host banks to deposit tax refunds (Digital Insight/Intuit)
  • More than 50% of iPhone users have used mobile banking in past 30 days (Javelin Strategy)
  • 33% of mobile banking users monitor accounts daily, 80% wee
    kly (Javelin)
  • Customer willingness to pay fees for (Novantas):
    — Teller transactions 8%
    — Bill pay 12%
    — Mobile banking 12%
    — Paper statement 19%
    — ID protection 27% 
  • At ANZ, 65% of its Yodlee-powered PFM (launched Oct 2008) users visit daily; 89% visit weekly (Doug Brown, ANZ; not a typo, there really were two Doug Browns)
  • 81% of its PFM users rated the service at least 7 points on 10-point scale (31% rated 9 or 10; 50% rated 7 or 8)
  • ANZ’s PFM is a standalone free service that can be used by anyone; so far, 20% are non-ANZ customers; the business case for the service was built on customer acquisition, but they also may charge certain users for certain functions
  • Yodlee-powered PFM users spend twice as much time online at the bank than regular users, and only 1.5% leave the bank each year compared to 7% of regular online banking customers 
  • Worklight case study results:
    — 8% to 15% of online customers install widgets within the first year
    — 95% of widget users are active
    — Customers conducted 15 to 30 sessions/month via widgets

Worklight widgets running on a variety of platforms (4 Nov 2009)


1. About BAI Retail Delivery Conference 2009

BAI Retail Delivery is an annual rite of passage for bank tech strategies, delivery system analysts, and product managers. At the peak, in 1999/2000, there were as many as 10,000 people there (attendees + exhibitors) and close to 500 exhibitors stretching perhaps three or four city blocks in each direction through cavernous exhibit halls. It was a little like Times Square but without the highrises. Some exhibitors had massive 10,000 square foot booths filled with hardware. And the show-floor routinely sold out.

Financial institutions brought teams of people to pour over the new machines and software solutions, be inspired at the general sessions where Bill Gates, Roll Perot, Scott Cook, and other tech-industry luminaries showed up to win over the bankers.

Fast-forward a decade. It’s still an awesome event which I highly recommend. I thoroughly enjoyed every conversation I had and most every session I attended. But the event has downsized considerably. This year, you could walk across the exhibit hall in a few minutes. And if you wanted to, you could have spent five minutes with all 180 companies during the show hours. That would have been impossible last year with around 300 exhibitors. But all-in-all, I’d say there was more energy on the floor this year because the attendee per square foot ratio seemed much better.

2. Unfortunately, on Thursday both Al Gore (planned) and Jack Welch (unplanned back problems) phoned in their keynote addresses via sat-link.

SunTrust Partners with Moneta to Test the Alt-Payment Waters

imageI’ve been waiting 10 years to write this story. A major U.S. bank has finally dared enter the space PayPal has all-but-owned since the first part of this decade (see note 1, 2): secure, non-card-based payments at the point-of-sale, which do not require handing over private info to the merchant. 

imageYes, Bank One, Citibank and Wells Fargo all failed at person-to-person payments in 2000/2001, but this is much different. Those were payment services between individuals, not a point-of-sale option like PayPal, Google Checkout, and most recently,

SunTrust’s partner Moneta is an Atlanta-based startup that debuted its alt-payment system at FinovateStartup earlier this year (video here). The joint effort was announced at BAI Retail Delivery in Boston earlier today (press release).

The program is already being tested on a large group of SunTrust online banking customers who recently received an email offering a $10 cash-back incentive to make a purchase of $50 or more from one of the handful of merchants currently accepting Moneta-powered ACH payments. The biggest merchant is Delta.

Moneta’s appeal to merchants is relatively straightforward: Incremental sales from customers unwilling or unable to pay via credit card online AND reduction in interchange costs by moving card-based transactions to Moneta transactions, with much lower interchange.

For banks, the business case is not as obvious. The hope is that Moneta-issuing banks share of interchange revenue will more than offset what the bank might lose in card-based interchange. While that may turn out to be the case, the more compelling benefit for banks is the brand and relationship value of offering a new payment choice with more perceived security and privacy advantages. There are also intriguing possibilities to add other revenue-producing value to those transactions.

image Last year in my notes from the BAI conference, I named Moneta as the “most audacious business plan.” Right now, it’s too early to say whether Moneta can become a legit competitor to PayPal. But with SunTrust on its side, that audacious plan is MUCH closer to realization.   
1. For the historical perspective, see our first report on person-to-person payments (published, Nov. 1999). 
2. In somewhat-related news: A year after PayPal CEO Scott Thompson made a keynote appeal to bankers at last year’s Retail Delivery, FIS and PayPal announced a partnership today (press release) as did S1 (press release) that could bring PayPal-powered peer-to-peer payments to hundreds of financial institutions.

Highlights from BAI Retail Delivery 2008

image BAI’s Retail Delivery Conference is an annual rite for bank tech geeks from around the world. Although attendance was down 20% or so from last year, causing some grousing on the trade-show floor, I thoroughly enjoyed it.

Here’s my personal list of highlights from the show (see note 1). 

The Netbanker awards:

  • Most audacious business plan: Alt-payment startups Moneta and sister company Acculynk which are looking to disrupt online payments at the point of sale
  • Most likely to succeed: mobile anything 
  • Biggest “wow” factor: Cardless ATMs by Wincor Nixdorf  
  • Best demo of something that actually exists: Bank of Montreal’s demo of its new branch locator using Microsoft Virtual Earth (shown at the Microsoft’s booth)
  • Coolest solution looking for a problem: Microsoft Surface
  • Product most likely to be used in our company: Bankserv remote deposit integrated with QuickBooks 
  • Product least likely to be used in our company: Wii banking from Wincor Nixdorf (but it’s very cool)
  • Best presentation: Don Tapscott, author of Wikinomics and Growing Up Digital 
  • Best buzzword comeback: Push banking (mobile apps, widgets, alerts)
  • Best trade floor freebie: Free espresso from ClairMail 
  • Best financial screenshot during a keynote: PayPal CEO Scott Thompson showed PayPal Mobile from Chase Bank, a pilot program running on several college campuses (Ohio State), where Paypal Mobile is bundled with banking services from Chase Bank
  • Worst financial screenshot during a keynote: Don Tapscott used Zopa USA as an example of a promising new Web 2.0 financial company (Zopa pulled out of the U.S. market last month)
  • Biggest jinx: Second Curve Capital CEO Tom Brown, who Tuesday afternoon explained why he is so bullish on bank stocks; the NASDAQ bank stock index proceeded to drop 200 points (10%) over the next two days (note 2)
  • Most amazing stat: In his keynote, CEO Arkadi Kuhlmann said ING Direct (USA) had originated more than 100,000 mortgages worth $36 billion, and initiated foreclosures only 15 times
  • Best time: Dinner with Trey Reeme and the gang from TDECU who are not only some of the nicest people you could ever meet, but also provided absolutely stimulating conversation and some great laughs

image Best of show: Drum roll please. After dozens of amazing conversations over three days, the company that most intrigued me is alt-payments startup Moneta (note 3). 

1. I visited with only a couple dozen of the 300 or so companies in Orlando, so comments here are not meant to be an overview, just the highlights of my experience. As usual, I spent most of my time looking for new ideas and ended up spending half my time talking to mobile providers.
2. To his credit, Mr. Brown did not say bank stocks had bottomed; in fact, he said they could very well go lower. But by this time next year, he expects a substantial turnaround. It was a great presentation.
3. Moneta didn’t have a booth, but board member and investor Ashish Bahl was in attendance and briefed me on his firm. We’ll provide more details on the company later. 

Bank of America’s Online Banking Base Up 11%

The world's largest online banking base (note 1) grew an impressive 11% year-over-year, rising to 22.8 million active users, an increase of 2.2 million from 30 Sep 2006 (note 2). 

Bill payment grew slower, up 7% or 800,000 users, ending the period at 11.6 million active users. Overall bill pay volume is $224 billion annually, or $1,600 per user per month. Bill pay as a percent of online banking fell more than one point to just under 51% (note 3).  

Online Banking     Bill Pay     % of OL using Bill Pay

2007        22.8 mil            11.6 mil              50.8%

2006        20.6 mil            10.8 mil              52.4%

Change    +2.2 mil            +800,000            (1.6%)
                +10.7%               +7.4%

1. As far as we know, no bank in the world has more active online users; however, one could argue that PayPal, with 37.5 million active users in the latest quarter, is larger. Interestingly, ING Direct is closing in on BofA on a worldwide basis. With its Sharebuilder acquisition, ING Direct has 20 million accounts worldwide, about 30% in the United States, although not all are active, which BofA defines as being online within the past 90 days.

2. According to Doug Brown, Bank of America's SVP Product Innovation E-Commerce Channel Services, as cited during his BAI Retail Delivery presentation.

3. See Online Banking Report #137, p. 28, for totals back to 2000. 

Notes from BAI’s Retail Delivery

I'm heading home from my 14th Retail Delivery Show, sponsored by BAI. The show has evolved over the years but at the core, still remains a huge technology conference. With more than 5,000 in attendance, equally split between the buy side and the sell side, it's a one-stop shopping experience for just about any piece of software, hardware, or expertise you'll need for all your retail channels, online, branch, ATM, call center, and especially this year, the mobile front (note 1).

Mobile rules
For the second year in a row, mobile delivery was a hot subject, with a number of great presentations on the subject. I didn't attend them all, but here are highlights of what I saw:

  • Bankinter demonstrated how the mobile channel has as much utility, if not more, than Internet banking. My favorite stat from its presentation: 20% of the bank's retail interest rate swaps, about 200 per month, are initiated via cellphone.
  • South Africa's FNB, Absa, and other banks are having such success with the mobile channel that they expect mobile banking customers to surpass online customers sometime in 2008.
  • Richard Crone, Crone Consulting, was mobbed like a rock star after his presentation the first day; people crowded five deep around the podium to hand over a business card in exchange for a copy of Crone's presentation. 
  • Firethorn CEO Tripp Rackley announced at an invitation-only breakfast-gathering that his company had been acquired hours earlier by Qualcomm for a cool $210 million.
  • Bank of America disclosed it had attracted 500,000 active users to its mobile banking service launched 6 months ago. Although, that's more mobile users than all other U.S. financial institutions combined (note 2), it's only 2% of the bank's 22.8 million active online bankers. According to TowerGroup, 90% of those who tried mobile banking at BofA have remained active with 99% checking balances, 87% looking at transaction history, 10% making funds transfers, and 5% paying a bill.

Online banking is a virtual no-show
While the big online banking vendors were out in force, fewer small companies were out touting online banking solutions. Only 28 of 350 exhibitors listed "online banking" as one of their product areas, compared to 41 showing CRM solutions and 70 with branch banking products. 

There was even less activity in the educational sessions. It wasn't until the second-to-last session of the conference that "online" was included in a session, The Next Generation of Online Banking: Profiting from Untapped Markets, by Forrester's Cathy Graeber, and Washington Trust's Michael Rauh (see BAI coverage here). 

Alt-payments on stage
On the first day, Steve Mott of BetterBuyDesign chaired a panel discussion, Debit – The Next Generation of Profitability, with PayPal's Dan Schatt (formerly of Celent) and HSBC's Daniel J. Eckert discussing Tempo (formerly DebitMan). The session barely touched on traditional debit and was much more focused on what's now called "decoupled debit" and its potential to disrupt the Visa/MasterCard/AmEx/Discover hegemony (see HSBC article below).  

More information
BAI's online coverage included blogs, podcasts, and longer articles (here).

American Banker Technology Editor Steve Bills filed several reports from the conference (subscription required):


1. Mobile consultant Richard Crone counts 76 mobile vendors operating in the United States plus at least four more operating in stealth mode.

2. Online Banking Report estimate, also same conclusion reached by TowerGroup in recent report.

Who Cares about the Bank Branch “Experience”?

Editor's Note: I've been sitting on this post for a few weeks because I don't want to sound like I'm on a virtual soapbox. But since so many influential banking execs were in attendance, I feel it's important to provide an alternative view. So…

<Climbing on soapbox> Am I the only one who thought the "branch experience" keynote at November's BAI Retail Delivery Conference was about 5 to 10 years behind the times?

Sure, I like the Umpqua Bank story as much as the next person, probably more so. I went to CEO Ray Davis's talk in a back room at Retail Delivery about ten years ago and was blown away by his retail innovations. It's in the top four or five most memorable presentations I've ever heard, and I'm glad the strategy has worked so well for them.

And I'm all for remodeling branches to keep up with times, but the Microsoft-produced video he showed, which was shot in Umpqua's Pearl District branch in Portland, was so far-fetched it bordered on ludicrous. (Note: This was Microsoft's "vision" of banking's future, not the bank's. Umpqua merely provided the futuristic location. Here's Microsoft's press release.)

The video intended to demonstrate how in the future a fully networked high-tech, high-touch branch could serve customers better was visually appealing, and, if there was no Internet, it might even be on the mark. But why would the wired diva in the video pay $20 to take a cab to a branch to complete her mortgage application? Surely she would have logged in, perhaps via video conference if needed, and handled it from her home or office, saving not only the $40, but also the half-hour trip. 

Umpqua succeeded because it's a great community bank, not because it had its own brand of coffee and Starbucks-like interiors. Those gimmicks grabbed attention and brought in new customers, but the bank thrived because it created an environment where its front-line employees were able to pay attention to customers and serve them better than its mega-bank competitors.

But today it would be a waste of resources to embark on a strategy similar to Umpqua's. By the time it would become fully implemented, 2009/2010 at the earliest, the world will have moved still further from the old apply-for-your-mortgage-in-our-lovely-branch model.

What's far more important going forward is the "out-of-branch experience" online, phone, and mobile-phone hybrids. You will have ten, twenty, even 100 times more interactions with your customers outside the branch than inside.

Yes, those branch interactions are still vitally important, especially if they involve a new account or serious service issue. But branches will never again be the driver of customer satisfaction they once were. Bank on it. <Stepping down now>

For more information:

CashEdge Claims 25% Share of 2006 Online Account Openings

I had a good chat with CashEdge <> VP Neil Platt at BAI's Retail Delivery last week. The company is busy working on a much-needed channel integration initiative so that account applications begun online can be completed with a phone call or even a branch visit, with no need to start all over from scratch.

Source: Cashedge CLICK TO ENLARGEThe company hopes it can capture half of what it estimates is 70% of completed online applications that go unfunded
(see chart inset).
If that's true, the payback for the solution, at least at larger financial institutions, will likely be measured in months, if not weeks.

Other projects in the works:

  • Cross-selling other bank products during the new account-opening process
  • Facilitating other types of applications, such as loans
  • Improving risk management by tapping additional data sources outside the credit bureau

CashEdge is a great example of a specialist that carves out a profitable niche in a relatively narrow, but risky area of online operations, new account funding. Thanks to big clients such as Citibank, the company is on track to facilitate one million online account openings this year, about a quarter of the estimated 3.5 to 4 million new checking and savings accounts opened this year online (Note: CashEdge estimates). 

The company ranked number 101 in INC Magazine's list of the 500 fastest growing private companies. According to the published figures, the 177-person company grew from just over $1 million in revenues in 2002, to approximately $10 million in 2005.