Will COVID-19 Be the Final Straw for Cash and the Branch?

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There are two things that the COVID-19 crisis is teaching us. Be careful of what you touch. And be careful of who you are near.

Neither one is a good message for the future of cash nor the bank branch, two staples of 20th century financial life whose demise analysts and prognosticators have been anticipating for decades.

Could a global pandemic that forces society into “social distancing” prove to be the final straw that breaks the back of both our commitment to cash and what’s left of the bank branch?

Cash: The Irresistible Force

For all the innovations in digital payments, and the increasing adoption of these technologies by younger generations, the persistence of cash in modern economies has been impressive. In part, this is because technology has not yet been able to outperform cash where it performs best: convertibility, convenience, and anonymity.

Of late, however, one of cash’s biggest – and probably least considered – downsides has become impossible to ignore: cash is dirty. At the end of the day, regardless of whatever hero, politician, or artistic talent adorns it, cash is a slip of cotton paper passed from hand to hand, over and over again. In a article published in Scientific American three years ago, Dina Fine Maron noted:

The fibrous surfaces of U.S. currency provide ample crevices for bacteria to make themselves at home. And the longer any of that money stays in circulation, the more opportunity it has to become contaminated.

And bad news for those who limit their cash exposure to a “just couple of bucks” for tips and tiny purchases.

Lower-denomination bills are used more often, so studies suggest our ones, fives and tens are more likely to be teeming with disease-causing bacteria. Some of these pathogens are known to survive for months …

Countries around the world have already begun a coronavirus-induced assault on cash, with South Korea’s central bank both quarantining and even burning bank notes, as well as resorting to a “high-heat laundering process” to help stem the spread of the virus. Paper money has faced a similar fate in China, and even the U.S. Federal Reserve is getting into the act (albeit with currency imported from China).

Not everyone believes that COVID-19 will herald the beginning of the end of cash. Maybe it is because of doubts that, as dirty as cash is, paper money may not be a reliable transmitter of viral infection. Possibly, like young revelers at beaches in Florida well into last month, we are just too accustomed to our habits to change.

But again, the emphasis on which “we” is being discussed is probably what matters. While there is a tendency to equate people’s willingness to use digital payments as one of many options with a desire to use digital payment method exclusively, the generational trends away from cash are clear. For those who grow up in a world in which cash is increasingly under assault from one source or another, it may simply be the passage of time that ends up accomplishing what neither global pandemic nor technological innovation – combined – could not.

Branches: The Immovable Object

As thousands of traditionally on-premises employees find themselves working from home, businesses all over the world are seeing a version of themselves that is far less dependent on a brick and mortar presence – let alone multiple ones. In banking, where the value of the local branch office with lobby, tellers, and loan officers is hotly debated, it seems like the COVID-19 crisis will make the case for branches that much more of a challenge to make.

Although essential businesses that are allowed to remain open in most instances during the pandemic, banks have dramatically cut back on access to their physical locations. Often, as is the case with my bank, access is limited to a drive-through window – complete with gloved and masked teller who has you to sign your withdrawal receipt with a branded pen she asks you not to give back.

As someone who still regularly visits his bank branch – and has for decades – I actually found the experience no less impersonal than the ATMs I’ve avoided for years. Could our social distancing response to the coronavirus pandemic encourage a long-time branch-lover like me to stay away? Asked whether the COVID crisis will accelerate the trend toward fewer bank branches, KeyBank EVP and head of digital banking Jamie Warder told The Financial Brand’s Jim Marous that more “thoughtful consolidation” wouldn’t surprise him. But Warder suggested that the world still had a need for the branch, even as it “continue(d) to morph and become more digitized.”

Many innovations in the branch designed to accommodate a more digitally-savvy customer, for example, could survive the demise of the branch. Self-service kiosks that enable bank customers to perform a number of routine banking tasks without the intervention of a human teller could find homes in locations ranging from fitness centers to restaurants and other recreation hubs. The ubiquitous bank branch in any U.S. supermarket of even middling size is a reminder of how compatible these banking kiosks could be with a wide number of environments.

Unfortunately, those innovations that are geared toward making the branch itself a more enjoyable place to spend your time may struggle in the current public health climate. More luxurious accommodations – including addition of full-service cafes – could be a weak draw in a world in which we are conditioned to keep our distance.

The strain between distancing and the branch will be most acute for those who live in communities where the bank branch serves as the center of everyday financial activity. Often this consists of bill payments, check cashing, money transfers, but notably does not include short-term personal loans, a major source of financial activity in many of these communities. While a great deal of time is spent envisioning a Branch 2.0 that would appeal to the digitally-savvy and already well-banked, it may be the case that the future of the branch – to the extent that there is one – is best geared to the real needs of these communities above all others.

Six Banks Giving their Branches a Shot of Espresso

When digital banking makes bank branches less necessary, should banks keep their branches simple and cater to those that are less technologically savvy or should they transform their branches into high tech havens with kiosks and robots? As it turns out, a handful of banks are trying something in between.

Six banks across the globe are piloting coffee shop branches. These locations not only serve as a way for folks to buy a coffee and a snack, they are also co-working spaces, meeting rooms for non-profits, a place to gain education about personal financial management and, of course, a location where customers and prospective customers can conduct banking activity and apply for a loan.

Check out each bank’s different approach:

Capital One

Capital One was the pioneer in the bank-coffee shop branch model, launching its flagship location in 2017. The bank now has 31 Capital One Cafes and has replaced its bank tellers with “ambassadors” to make banking more friendly and approachable. These locations also offer free, one-on-one money coaching sessions (that don’t apply any sales pressure) for members and non-members alike.

Capital One has partnered with Peets Coffee and offers Capital One cardholders 50% off coffee beverages.

Each cafe offers free wifi and power outlets, comfortable seating, and private community rooms that are free for nonprofit, alumni, and student group meetings and events.

Chase

Photo credit: Bankrate.com

Chase opened its first coffee shop branch in December of 2019. The bank teamed up with Joe Coffee for the pilot of a full service coffee shop in downtown Manhattan.

In some respects, calling Chase’s new branch a coffee shop is a bit of a longshot. It looks like the majority of bank branches I’ve walked into. Chase doesn’t even offer any differentiation on the home page of the branch.

That said, the new location has a more modern look, offers a kid’s play area, and is dog friendly. Another differentiating factor is that the branch has only one teller window and it is located in the very back of the branch.

Tangerine

Scotiabank subsidiary Tangerine has built its image around the cafe concept. As the bank’s website states, “People who know Tangerine know we’re not a typical bank. Typical banks have typical bank branches. We don’t. We have Cafés located in some of the busiest Canadian communities.”

Tangerine’s cafes have a laid back, modern atmosphere. Each location has free wifi as well as coffee and treats for sale (all proceeds go to charity).

Unlike other bank cafes, Tangerine does not offer any teller services since it is a fully digital bank. The bank offers ATMs for cash deposits and withdrawals and employs representatives (called cafe associates) for client acquisition, to upsell products, and to answer client questions.

CaxiaBank

In 2016, CaxiaBank launched imaginBank, a mobile-only bank aimed to serve millennial customers. A year later the bank opened a single physical location, ImaginCafe, to appeal to its user base.

ImaginCafe isn’t quite a bank branch, however. It’s not a place where members can deposit cash or speak with bank representatives. Instead, as CaxiaBank CMO Xavier Mas explained, the cafe is “a place where the ‘imaginBank’ brand is rendered tangible thanks to a blend of innovation, immediacy, the combination of the online and offline environments, interaction with users, and the interests of young people.”

As with many bank-cafes, this location serves as a coworking space and has private meeting rooms and spaces available to rent for meetings and events. It also has an art exhibition space, a fashion showcase room, a modern theatre, a multimedia laboratory, and a gaming area. ImaginCafe hosts multiple events each month including art expos, music discussions, shows, gaming events, and concerts.

Umpqua

Photo credit: Tearsheet

Umpqua bank calls its branch locations “stores” and incorporates retail and hotel-like amenities into the locations to make them more welcoming.

EVP of Umpqua Bank Brian Read explained that factors contributing to the uniqueness of the stores include free Umpqua-branded coffee, a dog-friendly environment, and community spaces that host yoga classes and non-profit meetings.

Santander

Work Café

Santander has eight Work Cafes across the globe. These locations look like traditional coffee houses and aim to make visiting a bank something that consumers want to do, not an obligation.

As with many other banks’ concept branches, Santander’s locations offer spaces where events, conferences, and classes are hosted. These cafes are also geared toward offering entrepreneurs a co-working space and offers advertising opportunities for small businesses.

These concept branches have been successful for the Spain-based bank, which reports that anywhere from 2x to 4x more accounts are opened at Work Cafes than at its traditional branches. Additionally, at the bank’s Spain location the number of customers is increasing by 11% per year and new loan production has been boosted by 73%.

5 Ways Edge Computing Can Benefit Banks

One of my favorite sayings is, “If you’re not living on the edge, you’re taking up too much space.” Can the same be said of banks who don’t use edge computing? Not exactly.

First, let’s take a look of what edge computing is as it relates to the financial services sector. Edge computing refers to when data processing and storage occurs closer to the person or item creating the data. It is an alternative to cloud processing, in which data is processed at a data center that could be located thousands of miles from the source.

The classic edge computing illustration is an autonomous vehicle. The AI that the driverless car uses has to process a lot of data very quickly in order to be a successful (and safe) driver. Taking too long to decipher between a tree and a person could mean life or death, so being able to process that data as close to the vehicle as possible is key.

Edge computing sounds fancy and has obvious benefits across the technology landscape, but what can it do for banks?

Increase security

Because edge computing eliminates the need to send consumers’ personal information into the public cloud, the security risks inherent to the process of moving data are eliminated. The closer the data stays to its source, the fewer the places cyberattackers can penetrate.

Lower latency

With edge computing, data is able to be processed much faster since it does not have to travel to and from a data center. This increased speed can be beneficial when businesses must make decisions in near-real time.

Boost the use of the Internet of Things (IoT)

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Banks are increasingly relying on IoT to interface with their customers. Bank apps, ATMs, kiosks, and technologies such as HSBC’s Pepper all require increased data processing capability. Edge computing opens up possibilities for more IoT options with fewer data limits.

Increased innovation

When security is less of a concern, speed is no longer an issue, and a bank has more options for IoT implementation, innovation is able to flow more freely. This, combined with edge computing’s potential cost benefits, can help banks implement new solutions that otherwise may have been on the back burner.

Lower cost

When there is no need for a data center, costs associated with the data center itself, as well as the costs of sending data back-and-forth to data centers or the cloud are diminished.

6 Banks Making Saving as Easy as Spending

Automatic saving tools have been around since the dawn of the new millennium. You’re probably familiar with how they work; the tools allow users to contribute to savings goals on a regular basis using microtransfers. Some take a randomized approach to the contributions, transfering under $10 a few times a week from a user’s checking account to their savings account. Other tools round up the amount of everyday purchases and contribute the “spare change” to a savings account.

Though Bank of America’s autosave tool has been available since 2005, it wasn’t until the launch of investing app Acorns in 2012 that the industry picked up on the possibility of success for autosave and payment round-up tools.

Banks were quick to notice not only the positive consumer response to such tools but also the potential for more consumer deposits and increased debit card usage. While many banks offer a straightforward version of autosave, a handful offer more robust features, such as purchase round-ups, to entice users to keep a few more bucks in the bank. Below are autosave programs from six banks.

USAA’s Tracker

Tracker from USAA tries to make saving a bit more approachable with the use of a German Shepherd. The tool does not implement purchase round-ups, however. Instead Tracker randomly withdraws small amounts ranging from $2 to $9 from a user’s checking account one to four times per week. To keep the user involved, Tracker texts the user every day to inform them of their checking account balance.

Bank of America’s Keep the Change

Bank of America was well ahead of its time when it launched Keep the Change in 2005. The savings program rounds up consumers’ purchases to the nearest dollar and deposits the extra change into a separate savings account.

The tool is still available and is relatively unchanged today.

KeyBank’s EasyUp

KeyBank’s savings tool, EasyUp, is tied to a user’s debit card and works by automatically transfering $1 to a specified savings account every time a user makes a purchase. While customers can use the savings balance any way they choose, KeyBank specifically highlights using EasyUp to pay down debt faster.

Chime’s Automatic Savings

Chime, a U.S. challenger bank that was founded in 2013, uses the round-up concept to help users save money every time they make a purchase. In conjunction with this way to save, the bank also allows users to automatically transfer a percentage of each paycheck into their savings account. While this isn’t a new concept, Chime has built a user experience around the transfer capability and sends push notifications regarding savings progress to make it more accessible for users.

Qapital’s Rules

Qapital uses the concept of If This, Then That (IFTTT) to help users set up a structure around their savings transfers. The tool leverages behavioral economics to get users to save when certain actions are triggered. For example, accountholders can have Qapital set a small amount of money aside each time they visit the gym, every time it rains, or each time Donald Trump tweets.

Simple’s Round-Up Rules

Simple’s saving program, Round-up Rules, works similarly to Bank of America’s Keep the Change tool by depositing the “spare change” from each of a customer’s purchases into a separate savings account. The one difference with Simple’s savings tool, however, is that it waits until the spare change adds up to or exceeds $5 before transfering the cash into the savings account.

Influencers as Innovation: Fintechs Turn to the Famous in Bid to Boost Visibility

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Expensify’s 2019 Super Bowl advertisement – Expensify Th!$ – featuring Adam Scott and rap star 2Chainz – was not the first time a fintech leveraged the shine from pop culture to illuminate itself.

But as Snoop Dogg celebrates his first anniversary as a high-profile Klarna shareholder and RDC announces that it has hired a network of social media influencers to help promote its new digital banking app, it’s clear that firms are all-in when it comes to using celebrity to showcase everything fintech – from expense management to pay-later ecommerce solutions. Alec Baldwin, who has become one of pop culture’s more potent pitchmen, was recently enlisted by eToro to help boost its CopyTrader marketing campaign.

The financial world has been as much a fan of celebrity as a customer engagement tool as any other industry with brands to build. Today, Mastercard announced that it was working with Swedish singer Nadine Randle to produce a song that “integrates the payment giant’s ‘sonic brand.” The company’s ‘sonic brand’ identity itself is the fruit of a partnership between Linkin Park co-founder Mike Shinoda, who developed the score last year.

And from the local sports hero to the homecoming veteran, credit unions and community banks have long leveraged the willingness of regional-minded stars and celebrities to “give back” to the communities and neighborhoods they grew up in.

But as fintechs increasingly partner with and compete with these and other financial institutions – and take advantage of new forms of celebrity such as social media influencers – they are increasingly taking a page from the FI marketing playbooks when it comes to using star power to shine a light on the work they do.

Expensify CEO and founder David Barrett highlighted the way his company’s technology would make it easier for talents like 2Chainz to “make the most epic music video ever” in his Expensify Th!$ ad. But he also told Fast Company at the time that even though Expensify had the “strongest brand” in the expense management game, and was the fastest-growing such firm with the biggest customer base, “virtually nobody in the world knows who we are.”

The celebrity approach to marketing is not without its detractors. In a post at Medium.com last year, Millennium Management COO Ajay Nagpal noted data from the 2018 Sprout Social Index that suggested that consumers are more likely to buy a product or service recommended by a friend than a celebrity. Moreover, Nagpal raised an interesting question as to whether or not the star endorsement of a brand in fashion, for example, would have the same impact as the same star’s endorsement of a brand in wealth management or tax planning.

Perhaps it depends on the star. Last fall, Finovate audiences were treated to a surprise appearance from noted Canadian investor and star of the reality show Shark Tank, Kevin O’Leary, who provided an on-stage, end-of-demo endorsement of Bambu’s Beanstox investing solution. And it’s a good bet that “Mr. Wonderful” is likely to be a more powerful advocate for white- label, B2B robo advisory technology than he might be for, say, leggings …

Additionally, as Director of Brand Strategy at Weber Marketing Group John Mathes wrote for The Financial Brand, even the best celebrity branding works better over time rather than as a one-off. Calling the practice “borrowed interest,” Mathes warned that while carefully targeted star power can produce positive results “brand building is usually a slow process. It takes time. It’s not a single campaign or gimmick.”

The impact of celebrity and influencers on the visibility of and engagement with fintech remains to be seen. But maybe more to the point, the fact that a growing number of fintechs are adopting the same approach to brand-boosting as their peers and rivals in the rest of the financial world may be a positive sign for the fintech industry in and of itself.