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Tracking fintech, banking & financial services innovations since 1994
After a a deluge of new announcements during its hardware event last week, Amazon is coming to us with something new again this week.
The company revealedAmazon One, a contactless palm reading device to help users make a transaction in-store, present a loyalty card, or authenticate themselves for entry into a secure location.
Amazon is piloting the new devices in select Amazon Go stores, concept stores that offer consumers a checkout-free shopping experience by using AI to track what they place in their cart. The Amazon One terminals will be offered as an option for consumers to authenticate themselves upon entering the store.
There is a slight bit of friction involved. Upon arriving at the store, the shopper enters their credit card into the Amazon One terminal, hovers their palm over the device, and follows prompts on the screen that associate their card with their unique palm print. Shoppers can enroll with one palm or both.
After enrolling, shoppers can use their palm print to enter Amazon Go stores. In the coming months, Amazon One will be available at additional Amazon stores, as well.
“[W]e believe Amazon One has broad applicability beyond our retail stores, so we also plan to offer the service to third parties like retailers, stadiums, and office buildings so that more people can benefit from this ease and convenience in more places,” said Dilip Kumar, Vice President of Physical Retail and Technology at Amazon.
The tech giant cited a handful of reasons for using a palm print over other biometrics. First, unlike many facial recognition solutions, humans can’t identify a person by simply looking at the palm of their hand. Also, unlike facial recognition, Amazon One requires users to make an intentional gesture by holding their hand up in front of the device. And, of course, the palm reader is contactless, easing fears about virus transmission.
If you’ve been following fintech for any length of time you’re likely aware that Amazon isn’t the first company using contactless palm print biometrics. Both iProov and Redrock Biometrics have been working in the space since 2011 and 2015, respectively.
As biometric authentication methods rise in popularity, we’ll likely see palm prints being the body part of choice for authentication. That’s because, in addition to Amazon’s point regarding the ability to recognize others’ palm prints, it is also much more difficult to spoof someone else’s palm than it is to spoof their fingerprint of face.
I was pretty excited for my first ride in my nephew’s brand new Tesla. The car was a major upgrade from his previous vehicle: a Jeep with “character” that had both broken down and been broken into a few times too many. His visit – and the Tesla’s – also marked the first time my wife and I would have company over for dinner since the COVID-19 pandemic struck, so there was more than a little to look forward to.
And while the Greek burgers were good and the tzatziki and baklava even better, my ride in the brand new Tesla was … kinda underwhelming.
Admittedly the experience as a rider in a Tesla is not identical to the experience as a driver. But as I slowly emerged from my initial shock at the lack of ornamentation, the absence of anything even resembling a full service dashboard and began to appreciate the machine’s unnaturally silent acceleration, its “It’s-All-on-the-Tablet” functionality, and “front trunk,” it dawned on me just how dramatically Tesla had reduced the driving experience to its most essential features and then turned them up to eleven.
What does this have to do with banking?
My Tesla experience reminded me of the challenge of distilling customer experience into its most necessary aspects. This is what drives innovation in everything from PFM apps that provide account balances without requiring login to mobile brokerages that cut out the stock market’s most hated middle man – commissions. Yet what is a trifle to one customer can be a can’t-do-without attraction to another. In the same way that I found myself in my nephew’s Tesla actually missing the dials, buttons, and other dashboard gizmos that had once defined automotive technological sophistication, so will many consumers find the leanness of new digital banks, for example, and perhaps even the trend away from what might be called “the human touch” in financial services to be a less appealing customer experience rather than a more fulfilling one.
In this way, I wonder if it is helpful to think of two innovation tracks for banks and financial services. One track is the one we spend most of our time reading and thinking about in fintech circles: the digital-first if not digital-only mobile bank that caters to the young, the mobile and, ironically, to both the hyper social connected individual and the asocial consumer who believes that automated checkouts at the grocery store are the best thing since sliced bread. Here the innovations are mostly technological, leveraging AI, machine learning, Big Data, and other leading technologies to provide more data, more services, faster, with a premium on seamless, frictionless, no frills interactivity.
But there is – or at least could be – another bank. And while it is digital, as well, and provides many if not most of the same basic financial services as any other bank, this bank focuses more on responding to the personal and social worlds of its customers. This bank puts financial inclusion and wellness at the center of its mission, sponsoring and providing educational opportunities for members of the local community – including their children who are likely getting precious little financial education in school. In-person credit counseling and financial planning would also be a good fit for an institution like this, which would play a role in the private sphere of a community that is similar to the role a local library or post office plays in the public sphere. At more advanced levels, coursework and training for individuals looking for careers in financial services could be offered, as well.
Not necessarily 100% or exclusively brick and mortar, this truly community-based financial institution would provide a customer experience that would be very different from its all-digital cousin, but one that could be just as innovative by using technology to make finance and financial services easier to understand and easier to incorporate constructively in the average working and middle class person’s life.
A couple weeks back I had a conversation with Andrew Besheer, Head of North America for Appway, about the rise of challenger banks. Our discussion centered around some of the data points in Ron Shevlin’s piece, The Online Banking Insurgency of 2020, published in Forbes last month.
One of the questions that came up was if this surge in new challenger bank accounts is an accident of digital transformation? In other words, are Millennials and Gen Z consumers gravitating towards challenger banks because their websites appear more digitally savvy?
At its core, this is a chicken-and-egg question. Are challenger banks successful because their tech-first approach satisfies consumers? Or are underserved consumers driving challenger banks to create new products and services that banks are unable (or unwilling) to offer?
First, its important to recognize that both challenger banks and incumbents know their target market. That is, the challenger banks are catering to an audience looking for a different bank experience than the one that appeals to their parents.
To answer this question, first, take a look at the outward appearance. Traditional banks’ websites are text-heavy, with long-winded fine print, and are intimidating enough to drive away less experienced consumers. Conversely, challenger banks use colloquial language and present websites that look simple and transparent. As an example, take a look at Charles Schwab’s website:
And now look at Dave’s:
Both are relatively technologically and digitally advanced banks, but they are appealing to two entirely different demographics.
Taking a look under the surface, the products and services each bank offers are also different. Schwab’s are heavily geared toward investing and trading, while what Dave offers– paycheck advances and credit building tools– seems to center around keeping its users afloat.
In the end, the two approaches are perfectly suited for users on opposite sides of the generational spectrum. My father and grandfather would never bank somewhere that had a cartoon as a mascot. And younger, Generation Z users don’t trust incumbent banks’ language and apparent lack of transparency.
Now, to answer the question, “are Millennials and Gen Z consumers gravitating towards challenger banks because their websites appear more digitally savvy?” The answer is no. Challenger banks are built from the ground up to entice this generation of users. And while the banks’ advanced digital capabilities help to draw users in, they are not the sole reason younger, tech-savvy users choose them.
You can check out the full interview, where Besheer and I delve further into the challenger banking conversation, on Appway’s website.
If there are any lingering doubts about the power (and popularity) of the Buy Now Pay Later (BNPL) movement, installment payments platform Splitit has 71.5 million reasons to cast those doubts aside.
The New York-based company, which made its Finovate debut as PayItSimple in 2014, announced that it has raised $71.5 million in a private placement and share purchase plan (SPP). With institutional investors such as Woodson Capital Management, the company plans to use the capital to “accelerate sales and marketing, plus (make) further investments in product and technology” according to a statement. Splitit boasts more than 1,000 ecommerce merchants using its technology, and 300,000+ shoppers with an average order value of $893.
Splitit’s fundraising comes as the company reports record Q2 growth, including processing more than $65 million in merchant sales volume, and growth of 1.76x quarter over quarter and 2.6x year over year. In discussing the company’s success, CEO Brad Paterson credited a new willingness on the part of consumers to “maximize their existing credit to preserve cash flow” while at the same time not incurring additional new debt.
Paterson also noted that while the COVID-19 crisis has helped move digital transformation in ecommerce toward the top of the agenda, it was important for those involved in payments to make it easier for merchants to accommodate their customer’s cash management requirements.
As such, it’s hard not wonder if, once again, crisis is responsible for accelerating innovation. After all, one of the initial innovations in retail, the layaway program, emerged during the Great Depression as a way to maintain at least a minimal level of consumption of non-essential goods during a severe economic retraction. By enabling customers to pay for items in small increments over time and then receive those items once they had been fully paid for, the growing retail economy was able to survive an extended period of historically low demand.
The buy now pay later phenomenon is layaway in reverse, allowing customers to gain the benefits of the purchase immediately and moderating the impact of the cost by paying for that purchase over time. But the goal – to accelerate consumer activity and expand the ability of people to spend – remains the same. The only difference is that layaway tended to disappear once credit cards became ubiquitous, while buy now pay later appears to be rising at a time when we are realizing that affordable consumer financing might not be as ubiquitous as we thought.
For Finovate fans, Klarna has been the pioneer in the Buy Now Pay Later space, with fellow alums like Sezzle also earning recognition for its interest-free buy now pay later option. Founded in 2005 and 2016, respectively, both companies are reminders of how fintechs have been providing consumers with alternative financing options well before the coronavirus hit.
That said, it is clear that COVID-19 has stimulated interest in Buy Now Pay Later options. The Business of Finance reported earlier this week that BNPL had become “fashion’s go-to during the pandemic.” Also this week, American Express announced that it would extend its buy now pay later service to more of its cards. The Wall Street Journal featured Australian Buy Now Pay Later specialist Afterpay at the beginning of this month in the wake of the firm’s announcement that it had signed up more than 1.6 million U.S. users since the onset of the coronavirus in March. And Shopify announced this month that merchants on its platform would have access to BNPL financing from installment payment company Affirm. Affirm looks like it is ready to maximize the Buy Now Pay Later moment with an initial public offering, according to reporting in the Wall Street Journal.
Even the big banks are getting into the Buy Now Pay Later game. Goldman Sachs has introduced a new, installment payment feature called MarcusPay – in partnership with JetBlue Airways – as part of a bigger “build-out” of its Marcus by Goldman Sachs digital banking platform. This week, Citi partnered with Amazon to launch its own BNPL offering Citi Flex Plan.
It’s been five years since eBay and PayPal split into separate companies – which means the five-year operating agreement that maintained the firms’ payments relationship in the years since the breakup is about to run out.
This week eBay announced that it is now ready to expand the managed payment system that will take PayPal’s place. Developed in partnership with payments provider Adyen, the new payment system is being used by 42,000 sellers – with more than 255,000 additional merchants who the company said will be activated by the end of the year. eBay has processed more than $4.7 billion in volume in the U.S. and Germany via its managed payments offering, and the company reported that sellers using managed payments have saved $17 million in transaction fees. eBay President and CEO Jamie Iannone praised the momentum behind managed payments, and said he expects it to “deliver $2 billion in revenue and $500 million of operating income in 2022.”
eBay is currently managing payments in five countries – the U.S., Canada, Germany, Australia, and the U.K. – and plans to expand the program to all countries where it operates.
For buyers, eBay’s managed payments provides a more flexible checkout experience with more payment options. Sellers benefit from a simplified process – involving one company (eBay) rather than two (eBay + PayPal) – that provides for easier reconciliation, faster service, and more effective support when issues arise. The company quoted one 20-year veteran eBay merchant from Germany who has been using managed payments since the spring. “I don’t care how the payment goes,” she said, “the main thing is that the customer buys and pays and my account fills up.”
VP of Global Payments Alyssa Cutright added that the offering was a win for both buyers and sellers that provides a simpler, more modern managed marketplace. “By managing payments, eBay is taking control of its own destiny,” Cutright wrote. “We are investing in our buyers and sellers, creating an integrated end-to-end platform, and enhancing the eBay experience by breaking down and removing complexities for our customers.”
Adyen, eBay’s payments partner, is based in Amsterdam, The Netherlands, and was founded in 2006. Companies ranging from Facebook and Uber to Microsoft and Singapore Airlines rely on Adyen’s technology to deliver seamless, friction-free payments across mobile, online, and in-person channels. The company, which processed $278 billion (€240 billion) in volume last year, is publicly traded on the Euronext and has a market capitalization of $47 billion.
With a growing consciousness worldwide on the topic of systemic racism, corporations are doing everything from pro-diversity affirmations (arguably not enough) to mass board resignations (arguably far too much) in order to stay (or get) on the right side of public opinion on a key issue for many of their customers.
We took a look at some of the ways those fighting in favor of a more inclusive financial services and fintech sector can learn from the successes of the women’s movement a few days ago. Here, we offer a few more specific examples of not just what financial institutions can do to help promote ethnic diversity in their companies, but also what financial institutions and fintechs are actually doing.
With Juneteenth taking place this Friday, some financial institutions have decided to treat the date – which marks the moment African slaves in Texas in 1865 learned of the Emancipation Proclamation – as the official occasion many African Americans have always believed it to be. Fifth Third Bancorp and Truist Financial are among a number of companies that have elected to recognize Juneteenth as a holiday for their employees and customers.
“As we consider the tremendous significance of this day and what it represents, it also reminds us of how far we still must go to have equality and inclusion for all,” Greg D. Carmichael, chairman, president and CEO of Fifth Third Bancorp said earlier this week. “As we observe Juneteeth, each of us should pause, reflect, and contemplate its significance and what it meant 155 years ago, what it means today, and how we might take action to make tomorrow better for everyone.”
Fifth Third will close its offices early on Friday, shutting down at 2pm local time. And while a number of other major financial institutions have made similar commemorations, Fifth Third is believed to be the first FI to offer its employees Juneteenth as a paid holiday.
Show the Money
The $40 million Netflix CEO Reed Hastings and his wife Patty Quillin have announced they will donate to the United Negro College Fund, and a pair of historically black colleges Spelman and Morehouse, is an example of the kind of “put your money where your mouth is” act that many pro-diversity advocates have called for.
Some of the biggest financial services companies and banks in the United States have unveiled similar initiatives. Citi, for example, announced that it will direct $8 million to the NAACP Legal Defense Fund, the Lawyers’ Committee for Civil Rights, the National Urban League, and the National Fair Housing Alliance.
Also pulling out the checkbook in the name of diversity are firms like Bank of America, which announced a $1 billion/four year commitment to help local communities of color at a time when the COVID-19 crisis is making a disproportionate impact on black and brown Americans.
“Underlying economic and social disparities that exist have accelerated and intensified during the global pandemic,” Bank of America CEO Brian Moynihan said earlier this month when the initiative was announced. “The events of the past week have created a sense of true urgency that has arisen across our nation, particularly in view of the racial injustices we have seen in the communities where we work and live. We all need to do more.”
People Who Need People
Honoring the past is important. And putting real resources to work to make opportunities possible for historically excluded groups is a critical component in achieving a more inclusive world. But, without putting too fine a point to it, the best way to promote diversity is to hire more diverse people.
Analysts looking at the barriers to increasing diversity have cited three chief hurdles: (1) finding diverse candidates to interview, (2) retaining diverse employees, and (3) getting diverse candidates past interview stage. And while the second two issues have a lot to do with the culture of a company, something that may not substantially improve until after diversity and inclusivity gains are made, the first challenge – finding good candidates – is one all companies and organizations should pledge to overcome.
For many companies, this may mean looking in typically overlooked places for otherwise untapped talent. Student organizations, including a very active African American collegiate and post-collegiate fraternity and sorority system, can be a an excellent way to reach today many of the people who will be leaders in their communities tomorrow. Diversity-oriented venture capital firms – such as Harlem Capital Partners, the Black Angel Tech Fund, and Base Ventures – are excellent sources for insight into black and brown entrepreneurship in the technology sector.
As Chamath Palihaptiya, venture capitalist and founder of Social Capital, wrote almost five years ago:
We need to recapture our potential and open the doors. Invite more people into the decision making: young people, Blacks, Latinos, females, LGBT and others who aren’t necessarily part of the obvious majority. Surround ourselves with a more diverse set of experiences and maybe we will prioritize a more diverse set of things. Maybe we will find more courage to do the hard things.
Half a decade later, many of us in the technology community in general and the fintech world in specific are still waiting. But it appears increasingly the case that, for now, our communities are ready to act.
Taxes, especially in the U.S., can be anxiety-inducing not only for consumers but also for small businesses. And even though this year’s tax filing deadline has been extended to July 15, the filing and payment requirements remain unchanged.
“The daunting task of gathering documents for a year that has passed is one that is difficult for small business owners, especially when they already feel overwhelmed at tax time,” said Lil Roberts, CEO and founder of Xendoo. “Coupling that pain point with small businesses feeling that federal tax is a “black box” and understanding how to maximize tax savings is also extremely frustrating.”
Fortunately, where there is a financial problem there is a fintech solution. There are many fintechs available to help both individuals and businesses not only understand their taxes but also to facilitate tax payment. Below, we’ve highlighted the top 10 tax-focused fintechs.
ANNA offers a business bank account and mobile tax app that help merchants with their invoicing, expense tracking, and taxes. The company’s app reminds businesses about tax deadlines and helps them prepare by estimating how much they owe as they earn revenue. ANNA also has a team of accountants to help prepare and submit tax returns.
Avalara offers tax compliance tools for a range of businesses. The Seattle-based company, which counts customers such as Pinterest, Adidas, and Bed Bath & Beyond, offers products to help companies calculate sales tax, gather data to prepare and file tax returns, as well as collect, store, and manage tax documents on behalf of the business. Avalara offers products tailored to specific businesses, including ecommerce, lodging, communications, and restaurants.
In 2016, financial health company Credit Karmalaunched a free tax filing service. Interestingly, the company was recently purchased by TurboTax parent Intuit for $7 billion. In comparison with Credit Karma’s free service, TurboTax charges users anywhere from $60 to $120 for a federal return and $45 for a state return.
DAVO launched in 2011 to be the ADP for merchants’ sales tax. In other words, DAVO automates the entire sales tax process on a business’ behalf. The company connects to the merchant’s point-of-sale technology to collect sales data and sets aside taxes on a daily basis. When sales tax is due, DAVO files and pays on the small business’ behalf.
HR and payroll company Gusto has a robust set of services to make small business owners’ lives easier. The company automatically files payroll taxes and distributes I-9s, 1099s, and W-2s to employees. Gusto also helps businesses stay compliant by staying up-to-date on changing tax laws and doing all tax-related calculations on the business’ behalf.
Refundo offers a suite of solutions to help tax preparers bring their operations into the digital age. Among the company’s products are mobile document transfers, audit assistance, tax preparation fee collection service, payment acceptance tools, and refund advance technology. At the end of the day, the company’s solutions not only make the tax preparer’s life easier, they make the lives of their taxpaying clients easier, as well.
With a mission to make self-employment easier, RoamHR automatically removes tax withholdings from users’ accounts once they get paid and places the funds into a RoamHR Tax Withholding Account. The company also offers tools that help users track deductible expenses, such as mileage, and helps them file their business taxes each quarter.
Taxnology has built a digital tax compliance center, a web-based solution to help businesses manage their taxes digitally. The company stores business’ historical tax data in the cloud so that it can be used for future cash flow planning and budget purposes or retrieved in the event of an audit. Taxnology is currently only available in Hungary.
Xendoo offers bookkeeping and CPA services that connect with businesses’ financial accounts to deliver monthly reports, business insights, and tax filing. Because Xendoo has a comprehensive view of the merchant’s financials, the company is able to provide tax consulting services, as well.
Cloud accounting software company Xero has been helping small businesses with their bookkeeping since it was founded in 2006. The company also offers solutions to help tax preparers who have Xero clients automate and customize tax-related tasks. For businesses who prepare taxes on their own, Xero offers tools to file taxes online, as well as prepare sales tax returns using software that leverages a company’s sales data to automatically calculate the taxes.
Roberts added one final thought for those businesses working toward that July 15 deadline. “For a smooth process, best practice is to have monthly bookkeeping done so tax benefits are being collected all year, and having books in order to make tax time more peaceful.” And during a pandemic, anything that can make a process more peaceful is worth doing.
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.
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 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 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.
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.
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 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 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%.
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?
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.
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)
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.
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.
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.
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.
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 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 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 $5 before transfering the cash into the savings account.
The financial world has been as much a fan of celebrity as a customer engagement tool as any other industry with brands to build. Today, Mastercardannounced that it was working with Swedish singer Nadine Randle to produce a song that “integrates the payment giant’s ‘sonic brand.” The company’s ‘sonic brand’ identity itself is the fruit of a partnership between Linkin Park co-founder Mike Shinoda, who developed the score last year.
And from the local sports hero to the homecoming veteran, credit unions and community banks have long leveraged the willingness of regional-minded stars and celebrities to “give back” to the communities and neighborhoods they grew up in.
But as fintechs increasingly partner with and compete with these and other financial institutions – and take advantage of new forms of celebrity such as social media influencers – they are increasingly taking a page from the FI marketing playbooks when it comes to using star power to shine a light on the work they do.
Expensify CEO and founder David Barrett highlighted the way his company’s technology would make it easier for talents like 2Chainz to “make the most epic music video ever” in his Expensify Th!$ 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.