I have worn many hats working in the financial technology vertical including business development, product, marketing and partnership development. In fact, I managed the IBM partnership for a PFM technology provider I joined in 2010. IBM played an important role for the PFM technology provider for it opened access to many of the financial institutions that run on the IBM technology to support core, online and mobile banking systems. Specifically, the PFM solution ran on IBM’s Websphere mobile software and on the IBM DB2 data base software. The software compatibility proved to be a strong selling point during business development discussions with banks that ran core legacy banking systems on Big Blue.
I learned fairly quickly that one of the biggest objections from mid-tier and larger banking executives was, “love your technology….but it MUST run on our legacy core and online banking systems.” Fortunately for us, we overcame this objection by playing the “we run on IBM” card to continue conversations. Unfortunately for IBM, these legacy limitations prevent many financial institutions from launching new tools and features that help consumers access their money through a mobile device. As we fintechers all know, these mid-tier and large banks are losing customers to the more sophisticated, innovative and mobile centric financial institutions…like Moven, Simple or GoBank. An April 2013 Forrester study found that nearly 50% of respondents said they would be willing to switch to a bank with a better mobile experience.
The recently announced partnership between Apple and IBM could fix this and will position both companies very well for continued growth in the mobile banking and payments verticals..even with Millennials. I know, this is shocking …but in the words of Kevin Nealon, “now hear me out.”
As part of this partnership, IBM will be launching roughly 100 native mobile apps developed specifically for iOS. These apps are part of the MobileFirst platform IBM launched earlier this year and will adhere to the security, backup and data movement capabilities IBM is known for across the high technology industry. These capabilities are what keep banking IT executives coming back to Big Blue and a few of these iOS apps will strategically address the specific needs of the banking vertical.
The collaboration between IBM and Apple to build these apps will allow legacy systems written in Assembler or COBOL to run on the iPhones and iPads. Penny Crosmen at American Banker states, “Making existing mainframe applications usable on iPads could help banks bring mobility to old technology.” This is HUGE for it helps banks easily engage with customers within the branch, through merchants or at home through a mobile device without having to make heavy investments in new technology or go through the lengthy process of selecting a clunky third party provider. For example, a bank will no longer need to license mobile platform technology from a Kony or mFoundry for their IBM partnership will open up mobile functionality through iOS sitting on top of legacy software. This is cool for the banks…but SCARY for mobile platform providers.
The biggest use cases for the IBM/Apple mobile technology marriage can be seen at the branch and merchant levels. I can easily envision a wealth management representative having an in-branch investment conversation with a client using an iPad. The representative easily accesses a client’s core banking information from the mobile device and displays current balances, checking account activity and recommended investment opportunities right on the tablet. Taking this one step closer to the consumer, I envision the consumer later that evening going back to the banking application and sharing the investment recommendations with his/her spouse. Together the couple reviews the recommended investments, discusses financial goals and asks for further detail from their adviser directly from the iOS application. Tadaaaaaah! The mobile/table user experience is helping the bank build deeper customer relationships through helping consumers manage their money…leveraging a channel the consumer prefers.
The second benefit of this marriage comes at the business banking level. This relationship should make payment providers pause…and maybe even shit. Imagine a small retail merchant opens a business banking account that includes the “rental” of a payments tool like a card reader. The Apple/IBM relationship enables the bank to provide payments tools, card processors, etc. through already widely adopted iOS products. The bank may even function as a third party retailer for the iOS hardware and will save money by phasing out those clunky counter top card processors. Banks will take away a key competitive advantages from payment providers who boast about the ease of use and mobility of collecting payments. Additional benefits for the bank are the ability for business bankers to track small business activity and recommend lower cost banking products, loan savings opportunities based on the specific business activity and transactions. Banks can also FINALLY find the right channel to provide those ever so sought after (and never well executed) locally targeted special offers and discounts to consumers.
For those of you keeping score at home, the consumer will also benefit from the IBM/Apple partnership. The iOS loving consumer will now be part of the same payment ecosystem merchants have with their banks. The iOS system now includes Passbook and it is no far leap to envision this evolving into a wallet that holds bank provided payment cards. This is “duh” obvious. Given that merchants, banks and consumers are all part of the same iOs payment system, consumers can easily continue using their long held VISA and Mastercards on their mobile device. Continued adoption of the same payment ecosystem may provide opportunities for lower processing fees for all involved. Unfortunately, at this point the mobile payment providers are now banking on lower fees as their main value proposition. However, if banks are able to provide an easily adopted mobile wallet with many iOS supported merchants accepting these payments, even lower fees may be a moot point. Consumers will be able to FINALLY use their mobile wallets at the merchants and service providers they have always used.
Wow, way to go Apple. You created a true mobile wallet.
Last week Moven announced an expanded strategic partnership with MoneyDesktop. The two companies have been dancing together for a while. However, this recent move changes their dance from a waltz to a passionate tango. To refresh memories, Moven is a disruptive and leading innovator in the mobile banking space. MoneyDesktop is a cutting edge developer of personal finance management (PFM) tools and eye-popping UI. Together, Moven and MoneyDesktop bring unique and compatible assets that when combined will ignite the FinTech “dance floor.” Vavoom.
The recently announcedpartnership is focused less on providing a dazzling user interface and more on a back-end feature that will make the Moven value proposition even more relevant for consumers. Moven will use MoneyDesktop to aggregate financial information from external accounts. Conversely, MoneyDesktop will gain access to a growing consumer audience who is willing to leave their current bank for a financial institution that provides a better mobile banking experience.
MoneyDesktop continues to win awards at several FinTech conferences for their innovative solutions and clean functional user interface design. The primary buyer groups of their technology are online banking executives at mid and small tiered financial institutions. MoneyDesktop is boasting that over 400 financial institutions and 29 online banking, core and payment network providers use their technology. However, each of their clients is an “old school” FI striving to update their online and mobile banking experience to avoid losing customers. A relationship with Moven enables them to partner with an innovator who is proactive in acquiring new customers by building a strong mobile banking experience from the ground up. MoneyDesktop is well positioned to benefit from the mobile banking revolution.
Moven also continues to win awards and provide groundbreaking mobile banking technology and services. Moven’s solution is driven from the mobile device and offers features of major banks….without the fees. However, like the other mobile bank innovators, like GoBank, they face the hurdle of acquiring enough users to scale their business. Let’s face it, all of us have accounts with the major banks. Telling a customer to drop any current banking relationships they have to join a mobile driven bank is a tough sell. Moven’s partnership with MoneyDekstop helps address this hurdle.
MoneyDesktop’s aggregation technology is as much a product feature improvement as a customer acquisition tool for Moven. Consumers can now join Moven and use the solution to track their banking activity with all financial institutions. Moven becomes the financial hub. Well-planned cross-sell marketing from Moven will inform users of other great features and tools. Eventually, the consumer will start to fall in love with the Moven solution and will depend on it more as a primary banking tool. Well, at least that is the goal.
The key for this strategic partnership will be how well both parties can execute and take advantage of the open opportunities to deliver customer value. If they do it right, their tango will catch the attention of the millions of unsatisfied big bank customers. I hope Moven and MoneyDesktop have a big dance floor.
Financial technology bloggers have written a lot recently about the implications of BBVA’s acquisition of Simple and Facebook’s acquistion of WhatsApp. I know, what does the WhatsApp acquisition have to do with FinTech? Industry pundit, Jim Marous, points out that the WhatsApp acquisition points to an ENORMOUS industry trend that sends a huge warning signal to all financial institutions. That trend, and this should be no surprise, is the significant shift for consumers from the desktop to the mobile device in not only social media, but in banking too. The warning signal? Consumers want to engage with their bank through the mobile device as the primary channel of engagement. Banks need to get their mobile house in order or customers are headed out the door, through the windows and maybe even through the ATM. The most salient mobile app feature that banks must get right to address this trend is account creation. Banks who make account creation easy from the mobile device will turn the tide …and will attract more customers away from banks who do not embarce mobile.
Marous sites, “While Facebook was built for the desktop and migrated to mobile, WhatsApp was built for mobile first, giving the network an advantage in today’s marketplace.” Similar to Facebook, a bank’s consumer products and user experience has been desktop based and is gaining momentum to migrate to mobile devices. I am a Wells Fargo user and have downloaded the mobile app that offers a snapshot into my bank account online. Aside from remote deposit capture, the application offers very little additional value that leverages the power of my mobile device. As I’ve mentioned in previous blog posts, there are many FinTech innovators who are creating banks and banking technology that put mobile first. GoBank, Moven and Simple are prime examples.
The most significant opportunity to drive mobile banking adoption is to fully leverage the camera feature on a smartphone. Yes, most banks do utilize the camera by enabling mobile deposit capture and photo bill pay. However, the camera needs to be enabled for a much more significant functionality: The ability to capture the PII needed to open a bank account without asking the consumer to key it in using a device key pad. Without this feature, the mobile channel will always be secondary to the online banking channel where consumers create and manage banking relationships.
Financial technology innovators Jumio and Mitek are making great strides in leveraging the device camera to capture customer data. Jumio recently launched at FinovateEurope a technology that uses the device camera to scan an ID and extract the needed PII to open up a banking account. The technology then “deposits” this needed data into a bank account registration form. Wow. Cool. The technology addresses the significant consumer pain point of using a tiny device keyboard to open up an account ….which is a process filled with typos, frustration, and high abandon rates. The Jumio platform makes opening a bank account fast and easy.
The mobile camera ID scanning technology sounds great…however, from the consumer perspective I can identify several potential hurdles or concerns that have to be addressed. Where does the picture of the scanned ID go? Is the image in my device photo stream? If I lost my phone, could the thief see this data? If the ID image lives in a cloud, who’s cloud is it? What happens if the cloud provider is breached? There are so many questions here that need to be addressed! One thing is for sure, innovators need to have the data security technology locked down and messaging at the ready to educate customers on why this ID verification technology is safe. After all, consumers don’t readily distribute copies of their ID to just anyone offline…and it’s no different in the online world.
The fact that Tim Cook hinted that Apple might be getting into payments is no surprise. It’s more of a “duh.” Apple has the user accounts, consumer credit cards on file, and millions of iPads and iPhones in market. The launch of Touch ID and the iBeacon sensor only connect the dots even further.
Apple’s Passbook paves the way for expanding the wallet beyond loyalty cards and into the ability to make online and offline payments. The launch of the Touch ID addresses security concerns and helps prevent unauthorized payments should the phone, or “wallet”, be lost.
In the online world, it’s not a far stretch to imagine a consumer using their Apple ID to authorize a charge to their credit card for a purchase made on an e-commerce site. However, competitive pressures from Visa, MasterCard, and PayPal may make convincing e-commerce sites to accept Apple payments that much harder. One recent article points to Apple making payments as part of the iOS developer kit…which would easily provide code needed for a developer to add a payment feature to their mobile commerce app.
However, the opportunity for Apple gets more challenging in the offline retail world. Yes, iBeacon creates a network to enable mobile payments through detecting and authenticating a mobile device. Cool. However, Apple faces the challenge of convincing merchants to adopt the payment processing hardware, dongles, etc. Google, Stripe, Square, and Dwolla also face this problem, among others. Even with its big brand recognition and marketing strength, Google was not able to grow offline retail adoption of its wallet.
So what are the opportunities for Apple moving forward? Apple could build its payments business through acquisitions, or strategic partnerships. Square has been a leading innovator in the payments space, is building merchant adoption and has a strong focus on UI/design given their recent hardware release. While a Square acquisition may be expensive, Apple would quickly acquire payments processing technology, a growing user base of merchants and a design focused group of developers. Bloggers have also identified Stripe as a potential, less expensive acquisition.
I think Apple can benefit the most, however, from a strategic partnership with PayPal. Recently a LOT has been written about PayPal feeling the heat from Apple and pitching to help build out their payment network. Some people see this as a signal PayPal is feeling threatened. Yes, the competitive threat is there. However, PayPal has many elements that Apple needs to be a leader in this category. I think together, PayPal and Apple can create a break through wallet that defines the mobile wallet.
First of all, PayPal has addressed many of the cross-boarder (currency) trade challenges that Apple will eventually face. Remember, Apple products are ubiquitous and they face hurdles in every new market they enter. We all know that Apple will not want to limit payments to the US market.
Secondly, PayPal has a merchant program in place and is regularly improving the product feature set. This in market learning will only improve PayPal’s ability to deliver a solution merchants actually want and can easily adopt. PayPal is also co-marketing with merchants to drive consumer adoption.
Lastly, PayPal is seen as the “most trusted” mobile wallet brand as defined by a 2013 Javelin study. Why is this important? In light of the recent data breaches, mobile security will be a big factor for not only consumers, but for merchants. Yes, Apple’s fingerprint ID is fantastic to access the device and authorize transactions. However, there is a lot happening in the payment processing back-end that PayPal has focused on securing for almost 20 years. A partnership with PayPal will enable Apple to address this hurdle and avoid a dreaded data breach. Should the unthinkable actually happen, culpability would most likely NOT fall squarely on the shoulders of the world’s number one brand.
T-mobile just announced that they plan to provide mobile banking services to their customer base. These services include a pre-paid debit card, a mobile banking app, and a basic checking account.
Clearly T-mobile is continuing to offer value to their customer base that has signed up for a phone using a pre-paid contract…. and it’s working. T-mobile is quickly winning customers in the coveted 18 – 35 target market…the segment that is most likely to engage with mobile banking.
T-mobile is partnering with The Bancorp Bank to provide this customer value. Sprint was the first carrier to partner with Boost Mobile to provide similar banking features to its customers. These strategic partnerships provide a great deal of value to both partners in the mobile and banking verticals. Many T-mobile and Sprint customers have pre-paid contracts so it’s not a far leap to understand this segment would also see value in a pre-paid debit card and low fee banking products. The banks providing these services gain access to a mobile savvy customer base that is not being well served by the Top 100 banks.
These strategic partnerships should raise the neck hairs of executives at the remaining mobile carriers and at the Top 100 banks. Yes, Verizon and AT&T are big guerillas. However, similar to bank sentiment, mobile carrier sentiment is low too. Consumers are tired of paying high fees for mobile service. However, by providing additional value to a high life time value audience, these carriers can attract customers away from the larger carriers…even if it’s a slow and steady rate. Remember the tale of the tortoise and the hare? AT&T and Verizon should consider opportunities that may be available with yet “un-wed” mobile banking providers like GoBank, Moven or Simple. I’m wonder if the pay as you go mobile provider, Ting, is talking with any of these similarly minded banking providers? There could be an interesting partnership there.
From the banking perspective, executives are aware that it’s all about mobile. Contrary to recent articles touting that top banks are aware of the importance of mobile, it’s well understood that most banking technology innovation will occur OUTSIDE of the banking industry. I’ve heard this big bank mobile focus described as a mobile arms race. However, I think banks may need to buy their “arms” from outside the banking industry providers, to continue the metaphor.
Over time, maybe within just 5 years, a young and frustrated segment of customers will be evaluating and switching to banking providers who meet their needs in the most cost effective way through a channel that is most convenient. It’s no secret that this channel is mobile.
Banking executives must quickly evaluate how they can meet the needs of customers beyond banking and providing special offers that can be found already in a Penny Saver. Because of the negative sentiment towards banks, financial institutions may consider being an unbranded, silent partner where they provide the banking back end and rely on a partner to provide the branded consumer facing front end. However, could a big financial institution that is used to being the “alpha male” in a relationship be open to playing a more balanced role with an innovative partner? Over time, the bank’s future as a leading financial institution may depend on this as the coveted 18-30 population ages and mobile banking becomes more ubiquitous. *
* The use of the word “ubiquitous” is brought to you by Starbucks, a brand with retail locations everywhere. 🙂
My family and I received several checks from family members as gifts and as payback for gifts purchased. My wife typically handles the day-to-day checking account and generally handles making deposits at the nearest Wells Fargo ATM. I suggested that she try using the mobile deposit feature on the Wells Fargo mobile application. Being the wife of someone who works in FinTech, she agreed to try out the feature….despite all the negative feedback about the application. Unfortunately, she successfully validated the negative comments splattered across iTunes.
The biggest disappointment came through the application crashing after each attempt to deposit a check using the mobile deposit feature. What I found most interesting were my wife’s comments after the 3rd attempt. “Well, Wells Fargo, I guess you REALLY don’t want me to use this feature,” was the first comment. The second comment was “What happened to the pics of the checks I took before the app crashed? Are they stuck in the app or are they with Wells? Can someone steal the money?”
Three interesting thoughts came to mind as I digested her valid complains. One, when it comes to getting customers to try new features that involve their money, banks better be sure the feature works for the customer the first time. Yes, app crashes can happen for many reasons. Unfortunately, several reviews reflected the same frustration and experience my wife had…which implies that improvements need to be made to the application. From my wife’s point of view, Wells Fargo implicitly told her mobile deposit is not ready for prime time and to keep using the ATM. Wells needs to track that these customers are and target them with a “mea culpa” CRM program to win back their trust with new technology. After all, according to a recent study, 49% of consumers will change banks for a better mobile experience.
Secondly, I think my wife’s concerns about where the check pictures have gone after the application crashes point to an engrained reaction that stems from frequent e-commerce transactions. I think similar “where’s my money now?” concerns come up when a consumer enters in a credit card number online, presses submit and the site crashes. “Did my credit card go through? Do I need to re-enter my credit card? If I do, will I get double charged? Is my card number safe?” All are common questions following an e-commerce site crash. I think it’s only natural for my wife to ask similar questions after a mobile banking application fails. In-application messaging must be delivered immediately to consumers to quell their anxiety when things don’t go as planned.
Lastly, the low application star rating and poor review indicate that mobile is NOT a big priority for Wells Fargo. In an effort to win customers, I would imagine that the mobile team would quickly iterate and redeploy an application as quickly as possible. Unfortunately, Wells Fargo is not the only major bank that appears less focused on winning customers through mobile. Chase and Bank of America have similarly low rated mobile applications. If these major banks do not step up their focus on mobile, the door will remain WIDE OPEN for innovative mobile banks like GoBank and Simple to entice customers through compelling mobile banking experiences.