The following chart is financial services usage data across 230 million U.S. mobile phone users aged 18 or older (note 2) in the United States as of year-end 2012. It includes any type of financial content, secure or public (i.e. this is not limited to secure access by account holders).
The data shows that 62 million (27%) of mobile users accessed financial content during the prior month (Dec. 2012 figures). The vast majority of those (87%) accessed bank content. Credit card or electronic payments (e.g. PayPal) were each used by about half the segment. And brokerage or insurance content was accessed by about 20% of mobile financial users.
Observation: The banking numbers have been widely circulated, but I hadn’t seen recent breakouts in insurance and brokerage. Both were surprisingly high, especially insurance. If you assume there is generally one mobile financial user per household, that means that about 10% of all U.S. households are using mobile insurance info. Same on the brokerage side.
Source: comScore, compiled Dec. 2012
1. If you have requests, drop me a line and I’ll see what I can find.
2. Users of any type of mobile phone, smartphone or otherwise. Also includes text-message queries.
When I was in business school, the professors and their data convinced me that it was foolish to try to beat the market by purchasing individual stocks. The optimal plan is to stay fully invested across a mix of assets, minimize fees with index funds, and rebalance over time.
That was more than 20 years ago, and back then unless you were super-wealthy and could afford to spend 1% to 2% annually on a wealth manager, you had to do most of the work yourself. But today, web-based tools and advisors are available to fulfill my professor’s wishes at a fraction of the cost.
We’ve written about Betterment, FutureAdvisor, and Personal Capital (Update: See also, JemStep, demoing at FinovateSpring 2013). All are approaching the market with diverse investment choices (primarily ETFs) provided at much lower cost than the old-school wealth manager.
Another company gaining traction, along with a $20-million VC round last week, is Wealthfront (previously known as KaChing). It is a Palo Alto, CA-based startup targeting the 25- to 40-year olds in the tech industry. According to its Feb SEC filing it had 2,100 customers with $130 million of assets under management (AUM). That’s a solid $60,000 average account balance. In its latest press release, the company says it now has $170 million AUM (perhaps that includes the latest venture round).
Wealthfront provides a balanced portfolio of domestic and foreign-equity ETFs and bonds, depending on your risk tolerances. It also includes real estate (REITs), something Betterment does not currently offer. The startup manages your first $10,000 free of charge, then it charges 0.25% of your assets under management, similar to Betterment (note 1). The minimum investment is $5,000.
The company takes an active role in helping customers determine their risk tolerance. A series of 10 simple questions (screenshot 2) places customers into a portfolio optimized for their age, assets, income and risk-tolerance (screenshot 3). And the whole thing is overseen by a very biz-school-approved Chief Investment Officer, Burton Malkiel, the author of one of my college textbooks.
Bottom line: Banks and credit unions absolutely should be offering simple investment tools such as those found at WealthFront, Betterment and others. The problem, of course, is that investment accounts cannibalize deposits. There is just no way of getting around the fact that $20,000 transferred into an ETF (with a 25 basis-point fee) is $20,000 you can’t loan out (at a 4%-plus spread).
But consumers won’t be risk-averse forever. Eventually, those five-figure balances will find their way into something other than a 0.2% savings account. You might as well be the financial institution where customers make intelligent savings AND investment choices.
Wealthfront’s homepage emphasizes value-investing basics (25 March 2013)
Wealthfront risk-assessment question, number 1 of 10
1. Betterment charges a sliding scale depending on your minimum balance, 0.35% for accounts under $10,000, 0.25% for those under $100,000 or 0.15% for those above $100,000.
2. For a comparison of Betterment vs. Wealthfront, see the Quora debate.
3. For more info on bank-appropriate investment products, see our last report on online investing (May 2008, subscription). We also looked at Betterment, Simple and Personal Capital, in our True Virtual Banking Has Arrived (Oct 2011, subscription).
Betterment, a simplified investing platform, launched a gift registry last week that is super slick. Betterment customers can set up a custom page where friends and family can pitch in to fund a goal. It takes just two or three minutes to set up a basic page and publish it to the web at <gifts.betterment.com/yourevent>. See sample below.
Visitors can choose which gift/goal to fund, add it to their cart and checkout by paying with MasterCard, Visa, American Express or Discover. The funds are placed into the Betterment investment platform where users can track their progress (see screenshot #3). According to Betterment’s terms, gifts must be held for at least 90 days.
The best-use case is weddings where it is customary to help your guests figure out how to give meaningful gifts. The startup lists other gift-giving events such as birthdays, house-warmings, retirements, and so on. But for most of those, it would be presumptuous to ask your friends to pitch in to buy you a trip to Bermuda.
At first, I was surprised that a gift registry made it into Betterment’s roadmap so soon in the company’s life. It seems a relatively narrow niche. But I can see the appeal to the company’s 20- and 30-something customers as they plan weddings. Or maybe the startup is just showing off its design chops. It’s an elegant template that creates professional-looking results.
Relevance for banks/CUs: This would be a nice little tool for banks to provide for parents. Not just for weddings, but for high-school graduations, bar mitzvahs, major birthdays and other events where family members typically send paper checks. The money is housed in special savings accounts with various parental controls (note 1).
Wedding registry at Betterment (link; 20 Sep 2012)
Checkout using Visa, MasterCard, AmEx, Discover
1. For more on family/youth banking, see our last summer’s Online Banking Report(subscription).
2. We also looked at Betterment, Simple and Personal Capital, last fall in our True Virtual Banking Has Arrived (subscription).
by JP Nicols
JP Nicols, CFP, is CEO of the advisory firm Clientific and has served in various industry leadership positions, most recently as Chief Private Banking Officer for U.S. Bank. He writes about the intersection of leadership, advice and innovation on his blog at jpnicols.com.
Disruption of long-held paradigms and business models are common themes in fintech generally, and at Finovate especially. Some of the most notable traction to date has been in the payments and personal finance space.
Now, innovative specialty lenders and crowdsourcing platforms are also breaching what had long been banks’ deepest moat — the ability to leverage and monetize their balance sheets.
Wealth management in the digital age
The wealth management business has been less commoditized, and some firms have deployed impressive intellectual capital to help clients grow, preserve and transfer their wealth. Despite the rise of digital personal finance platforms and tools, clients with higher levels of wealth and complexity need and want advice from time to time.
A recent American Banker article cited a KPMG survey that said 9 out of 10 banks were considering a major overhaul of their strategy, and 40% said that wealth management was essential to growing revenue. For good reason. Wealth management operations are typically efficient users of capital, represent lower risk business models and are higher producers of precious fee income.
It makes sense for incumbent firms to increase investment in higher-margin businesses while new entrants are left to focus on lower-cost solutions. This is the classic pattern of disruptive innovation as described by Clayton Christensen and others.
Then as these new entrants gain market share, they inevitably move upmarket. In fact, that is already happening.
From the underbanked to the overbanked
There has been considerable discussion about the unbanked and underbanked, people who either cannot or will not use traditional financial institutions. Prepaid cards, payday loans, check cashing, remittances and other services that fill the gaps have seen new innovations and new investments from both inside and outside the industry.
On the other hand, wealthier households, or the overbanked, have no shortage of providers eager for their profitable business. But disruptive forces are at play here from two areas:
- Smaller firms which differentiate with high touch, lower client/advisor ratios, better defined market niches and more responsive service.
- High-tech competitors with better user interfaces, more robust web and mobile tools and sophisticated analytics.
The convergence zone
The effectiveness of those two approaches varies somewhat along demographic lines, but it’s not as simple as assuming all older customers prefer high-touch while the younger set always wants a technology solution.
Web and mobile adoption rates in older age groups rise with higher income, and affluent customers are looking for something more than a stock jockey with a briefcase full of papers.
On the flip side, even the savviest do-it-yourself millennial wants help from an expert every now and then, and simply replacing the irrelevant stock jockey with a prettier, but equally irrelevant, screen full of dials and charts isn’t enough for many.
So these powerful forces are beginning to converge in a couple of exciting ways:
- Enterprise solutions have been gaining traction at Finovate. Past alums like InStream and Balance Financial created inviting portals for advisors to manage their business and collaborate with clients in ways previously not possible.
- A few firms have built their own advice and back-office platforms behind compelling interfaces. Finovate alums like Wealthfront and Betterment offer low-cost professional money management to every investor.
Three firms to watch at FinovateFall 2012
I will be paying particular attention to three firms that are contributing to the convergence of high tech and high touch at FinovateFall 2012:
- Personal Capital a Best of Show winner at FinovateSpring 2012, leverages it’s PayPal and Intuit DNA (CEO Bill Harris led those companies too) to create what they call a "next-generation financial advisor completely personalized around you." Users can easily get started for free with their attractive and useful PFM tool, then upgrade to their money management services.
- MoneyDesktop is another Best of Show winner at Finovate Spring 2012 that brings a slick mobile- and tablet-friendly PFM desktop with customizable widgets as a white label solutions for FIs stuck with outdated interfaces. They recently acquired MoneyReef to further bolster their mobile PFM offerings.
- Actiance: Fear of running afoul of FINRA, SEC and other compliance requirements is one of the barriers in large wealth management firms’ struggle to be relevant in social media, and significant intellectual capital too often remains in proprietary channels as a result. Actiance has been a very visible solution provider with their Socialite platform, and at Finovate they will be showing off their integration with Salesforce to further integrate social data.
I will be back after the show with my thoughts on the latest developments in wealth management and track th
e convergence through integrated offerings and enterprise solutions.
Changing the world is hard. Changing bank IT departments takes a little longer.
1. Image licensed from ShutterStock
2. For more on Personal Capital and the rise of the truly virtual financial institution, see OBR #198 (Oct 2011, subscription)
If you dream of being Mark Cuban, Mr. Wonderful, or one of other Shark Tank investors (note 1), a wave of new angel-investing platforms are springing up all over the world.
TechStars, a NY-based incubator, said it had more than 30 applications from crowdfunding startups for its summer 2012 class.
In the United States, the recently enacted JOBS Act has spurred interest since it is expected to expand the market to several million more investors. But more importantly, the new legislation will lift the ridiculous “quiet period” rules that are supposed to keep companies from openly soliciting investors (note 2).
Once companies can openly look for investors (expected by early summer), private-placement investment platforms have a lot more to offer to companies seeking capital, namely a marketing opportunity.
Think about it. If you need $500,000 to launch a new line of organic granola bars sold nationwide, would it be better to get it from a couple local angels, or from 100 investor-fans kicking in $5,000 each? The latter approach gives you 100 evangelists in all corners of the country. And with only $5,000 invested, each investor has far less ability to meddle in your affairs.
In the past, the paperwork involved in booking $5k investments made it prohibitively expensive, even if you could find the investors under the old quiet period rules. But the new investment platforms promise to standardize the paperwork, reporting, and sales of small blocks of company shares.
So, who are the leaders in the space? AngelList certainly, but it focuses on tech only. Of the newcomers, CircleUp which is launching this week, seems to have the most traction, at least measured by press mentions. Co-founder Ryan Caldbeck has recently been featured in the WSJ, NY Times, TechCrunch and the other tech blogs (note 4).
I’ve been using the beta version for a week, and am impressed. Circleup is focused on consumer products, and three companies are currently featured within the site, raising $100,000 to $500,000 each. I’m itching to drop the minimum investment ($3,333) into one of them just for fun. However, my wife wonders if that will be the same “fun” we had the last time I thought I could pick stocks (note 5). So, I’m still just an observer for now, but a very interested one.
How it works
Circleup is a lot like a simplified version of P2P lending. Companies seeking capital post their investor deck, introductory video, and any other info they deem important to their story. An online forum allows investors to ask questions that the companies can answer publicly (though this was little used during private beta).
Investing is as simple as clicking on a button, agreeing to the terms, and pledging the funds. Once the minimum investment round is reached, the money is taken from investor bank accounts.
Relevance to Netbankers
If it’s allowed to flourish without being crushed by the SEC when the inevitable scams appear, crowdfunding could eventually provide stiff competition in small business lending. Probably not in its current form, where the investments are speculative, ill-liquid equity bets.
But fast-forward a few years and imagine a marriage of crowdfunding with P2P lending, and with the liquidity issue fixed through secondary markets. Small- and mid-sized businesses could use a crowdfunding platform as one safe source to get a mix of equity, debt, and receivables financing.
Banks should also consider getting involved in crowdfunding by partnering with the platforms to provide debt and other banking services to the small business participants. Banks could even start, or at least invest in, crowdfunding initiatives of their own.
Company info page
Note: Fictitious listing; note investment button in middle-right.
Note: For $25,000 (the max allowed), I get 134,000 shares, or 0.51% of the company.
Actual company seeking capital through Circleup, name masked due to the soon-to-be-ending prohibitions against soliciting investors.
1. Shark Tank is the U.S. version of Dragon Den. It’s my favorite show on television, though I don’t like how founders are sometimes ridiculed by the celebrity investors, whose egos struggle to fit on the same soundstage.
2. Though Shark Tank, watched by millions on prime-time network TV, demonstrates it’s not a well-enforced rule.
3. Ryan Caldbeck’s 10-minute discussion of the JOBS Act is worth watching if you want a quick overview of its impact. TechCrunch covers the launch 18 April 2012 here.
4. Our policy at The Finovate Group is to NOT invest in fintech companies.
5. For more ideas on innovating in the small-biz banking market, see lengthy report on the subject, written 2 years ago.
The new year is a special time for financial services. Many people throw their spending discipline out the window during December — buying gifts, entertaining, and hitting the sales for themselves. Then there’s the New Years Resolution game where you vow not to do for the rest of the year what you just spent the past month doing.
So it’s a good time for financial providers to remind customers about advanced tools available such as alerts, mobile banking, budget tools and so on.
You can also take the approach of Betterment, and provide a wide-ranging list of apps to assist in achieving goals for the new year. The investment startup sent an email to customers on Dec 27 recommending these 5 apps:
- Runkeeper to track your exercise
- Manilla digital file cabinet
- Skillshare to pick up a new skill
- Goodreads to help you find new books
- Sonar for social and business networking
Betterment closed with a pitch for its own simple investment platform and a free webinar scheduled for Jan 5, and personal finance blogging roundup.
It’s a great effort, although maybe a little too much for a single email. I didn’t even see the pitch for the webinar and blog compilation until I posted it here. Overall though, a strong A.
Betterment New Years email (27 Dec 2012)
Note: Google+ link on top
Note: For more info on online investing see our 2008 report.
Over the years, E*Trade has been consistently innovative in both product development and marketing, two areas that provide natural synergies. The company didn’t disappoint with its latest missive to existing customers.
An email arrived yesterday afternoon (Thurs., 11 June 2009) and immediately grabbed my attention with its clever and timely subject line:
Re-plan Your Retirement with E*TRADE and Get Up to $500
One thing I’ve heard consistently from my friends, no matter how secure their jobs, is that they will “be working forever” now that the Great Recession has slammed their net worth with the double whammy of a bear market and home-price declines.
So this is a great time to get in front of customers with new efforts to help them re-plan retirement with new investment ideas, asset rebalancing and just a general reboot of their portfolio. And it’s also an excellent time to discuss 401(k) rollovers, as E*Trade did in this message, with an “up to $500” (see note 1) incentive to roll over a retirement account to the company (see landing page, third screenshot below). As Americans change jobs by necessity, there will be millions of retirement accounts in play.
Security features in email
E*Trade also demonstrates another best practice to improve trust in customer emails: personalization. The company includes customer name and last four digits of their account number to help distinguish the message from fraudulent phishing attempts. E*Trade draws attention to the feature with a Security Enhanced icon on the top-right (see first screenshot below).
Clicking on the Learn More link drops readers to the bottom of the email message where product URLs provide direct-navigation alternatives to paranoid readers (see second screenshot below). I hadn’t seen that before, a nice touch.
E*Trade email promoting 401(k) rollovers (received 11 June, 3 PM Pacific)
Security “fine print” at bottom of above message
Landing page for email offer (link)
- $500 for rollovers of $250,000 or more
- $250 for $100,000 to $250,000
- $100 for $50,000 to $100,000
- $50 for $25,000 to $50,000
This year, much of that largesse is expected to go towards paying down debt or stashed away into FDIC-insured deposits. But there are still some folks looking for better longer-term returns, so ING’s ShareBuilder investment service is giving them a nudge with a $90 new-account bonus offer (note 1) delivered in the March 25 email to Costco customers. This is higher than the $25 to $50 bonuses we’ve seen from them in the past.
The ShareBuilder offer was near the bottom of a lengthy email that arrived at 5:30 PM Pacific time yesterday. In total there were 54 products featured. ShareBuilder was the only financial product.
Email from Costco (25 March 2009)
ShareBuilder landing page (link, 25 March 2009)
1. The $90 rebate applies to Costco Executive members. Business and Gold members receive $70. In addition, Executive members receive a 25% rebate in ongoing investing fees; Business/Gold receive a 10% fee rebate.
- Baby’s Twitter page (screenshot #1 below and note 1;): This is a new effort launched Jan. 22, the same day the 2009 outtakes clip was released into the wild via YouTube and press release. The baby Tweeted a few times on the days leading up to the game, and a few since, but the funniest part was the 26 game-day Tweets that actually incorporated real-time events into the script. There are only 650 followers today, but that’s up 150 since Monday morning — not a bad start for a low-cost marketing tool.
- Baby’s Facebook page (screenshot #2 below): Also launched around Jan. 22, the E*Trade baby Facebook page already has 3,825 fans. The commercials are posted along with a photo album.
The E*Trade homepage has also been used before and after the game to take advantage of interest in the baby ads. The baby dominated E*Trade’s homepage the day after the big game (see screenshot #3 below of the Monday morning homepage).
Lessons for financial institutions
You don’t have to be a Super Bowl advertiser to use social media to support your advertising campaigns. Banks and credit unions of any size can use these relatively low-cost tactics.
Here are the eight key support elements to consider for your next campaign:
1. Press release
2. Blog entries
3. Facebook page
4. Twitter stream
5. YouTube page
6. Homepage placement
7. Landing page
8. Google keyword buys (see screenshot #4 below)
1. E*Trade baby Twitter page (link, 3 Feb. 2009)
2. E*Trade Facebook page (link, 3 Feb. 2009)
3. E*Trade homepage the morning after Super Bowl XVIII (2 Feb. 2009)
4. E*Trade is running Google ads on searches for “etrade baby”
(3 Feb. 2009, 6PM Pacific)
1. Thanks Jeffry Pilcher for the Twitter tip.
2. See our Online Banking Report: Bank 2.0 for more ideas.
I go online at a Tully’s coffee shop every few weeks, but I don’t recall ever being pitched something outside the usual Costa Rican blend when logging in to its free Internet connection.
But today, Charles Schwab owned the Tully’s landing page, with three banners running across the page touting its High Yield Investor Checking among other things (see below). The two on the right have financial questions that, when clicked, take the user to an article on the Schwab.com site (see last screenshot).
The banner lower-left is more interesting. Little squares scroll across the banner in a very Web 2.0 way and, when clicked, additional info is delivered directly within the banner. Users stay on the Tully’s page unless they click the Open an Account Today button.
The three scrolling graphics include:
- ATM fee graphic leads to an ATM calculator (see below)
- The High Yield Investor Checking graphic (not shown) leads to a description of that product
- The map leads to a short animated audio visual piece promoting ATM access and the High Yield account
Comment: This type of grassroots marketing can be done by financial institutions of all sizes. Just find a local coffee shop or cafe and see if they’d like a little cash to subsidize that bandwidth each month.
Schwab banner ads on Tully’s landing page displayed after logging in to free WiFi at a coffee shop (Seattle, 3 PM, Friday, 5 Dec 2008)
Users can move to the slider to calculate the cost of a foreign ATM.
Schwab landing page after clicking on question in right-hand banners
(link, 5 Dec 2008)
Apparently, Citibank has been testing a new investment advisory service this summer, myFi, targeting certain Citibank credit card customers. Its first online mention appeared in a frequent-flyer forum, FlyerTalk, May 31 (here) and in the personal finance forum, FatWallet, June 13 (here). The bank has been testing mileage premiums for opening a myFi account and/or increasing spending on a Citi card.
The service consists of a Web-based investment area which will include trading and account-aggregation services later this year (see note 1), combined with telephone and in-person help from non-commissioned Citi Smith Barney advisors. The NY Times's Your Money columnist Ron Lieber tested the human portion of the offering in a Long Island branch and reported on it in his column today.
myFi's director of financial advice is Jonathon Clements, a long-time Wall Street Journal personal finance writer who recently left the paper. If he can instill his pragmatic personal finance outlook to Citi's offering, it would help differentiate it from similar offerings. Andy Sieg is managing director of the service.
The initial creative approach is to use a "financial wellness" theme. Today, the website is bare bones (screenshot below), with a few PDF files available for download. It's clearly a work in progress. The bank should slap a "beta" tag in the upper-right corner so that it's not unfairly judged as a complete offering.
1. For more information, see our Online Banking Report on Account Aggregation.
2. According to Compete, myfi.com had 2,400 unique visitors in July, the first month with any significant traffic.