JJ Hornblass, CEO of Royal Media

Hi everyone, I’m JJ Hornblass and welcome to Fintech Unfiltered from Bank Innovation, the leading news source on banking and fintech. This is our Weekly Wrap for what’s happening in banking innovation for the week of September 14, 2020. Before we begin, we want to thank our advertisers Blend, Q2ebanking and Mambu for their support, and we thank them very much for that. I am joined today by Rick Morgan from Bank Innovation. Hey, Rick, is Friday, September 18 2020. This week, there was a threat of a shutdown of the federal government. Schools continue to have problems opening or staying open. Even my son’s school went virtual again after one day of classes this week. Federal Reserve signaled that rates will stay, stay near zero excuse me, for at least three years. Softbank continued to sell its assets at remarkable valuations. Peace deals between the State of Israel and two Arab nations were signed this week. And for some reason, a TikTok transaction was still in the news. In banking. We looked at several different trends that were in the marketplace and we’re going to start with branch banking. The notion, Rick that branch banks are dead, or that the death of the branch bank has been, has been predicted many a time. But now a new survey came out saying that really during this pandemic, a sizable shift of Americans have moved over to digital financial services for their banking needs. What are some of the background numbers for that study? And then what are the specific technologies found particularly high adoption during this pandemic period? And why do you think that might be the case?

Rick Morgan, news editor at Bank Innovation

So the big number that jumped out to me when I looked at the study, which was done by Plaid, the data aggregator, it surveyed over 2000 consumers, a lot of which were like not fintech users oto which I found interesting. Anyway, it found that 80% of Americans said they can now bank without going to a branch. And the big one, obviously, that that stood out to me was that, you know, mobile banking has taken off a lot and we’ve seen particularly when talking to banks like Citibank, KeyBank, and TD Bank that they’ve seen huge adoption with mobile check capture. So that’s what really stood out to me in terms of what technology is getting the highest adoption, I think that people have just realized that, you know, the days of going to a bank branch for a transactional, you know, encounter is just no longer necessary. And that they can do it at home, they were sort of forced to do it at home during the pandemic, and now that they realize they can, I think that’s just really taken off. And I don’t think that’s going to go away after the pandemic ends whenever that might be.

JJ Hornblass 

So I mean, you know, RDC has been a driver of adoption for many consumers for a while. But is that kind of enough from a digital link for financial institutions. If payments are becoming more digitized, and we’ve seen great growth rates at some, some at certain Payment providers? Are the attachments or the connection points between financial institutions and consumers? Are they becoming kind of less notable?

Rick Morgan 

I don’t think so, more embedded or you know, I don’t think brand awareness is going down. So and I also don’t think that just because people are using mobile to do more transactional banking, I don’t think that necessarily means that the branch is going away. Bianca, who’s out this week, wrote a story or published a story this week about what a lot of banks are doing with their branches, and it’s not that they’re getting rid of them necessarily. It’s just that they’re using them for more high value interactions or things that would make you a little bit more nervous. You know, for example, you might be totally comfortable doing everything on your phone in terms of mobile deposit capture or direct deposit, paying bills, whatever But for me personally is an example if I was ever going to buy a house, I’ve never done that before. That’s scary to me, I want to talk to a person. I think that’s something that I was still going to a branch for, because I want to talk to a human being and be walked through that process. So I think that these branches are not going to go away. And I don’t think banks are going to have less touchpoints with their consumers necessarily. I just think that the branches are going to be more designed for these big picture sort of big life events and be designed more for an advisory role as opposed to day to day transactions, which obviously can be done through your phone or online at this point.

JJ Hornblass 

So these are pandemic numbers. Is there a sense for what rate what share of this adoption might slide back to in person?

Rick Morgan 

I don’t know. It’s hard to say. I mean, a lot of there was one stat that stood out to me, which was that I think it was 59 percent of the people they interviewed or they surveyed said that they plan on using, they use one or more. They use way more FinTech apps to handle their finances now than they did in the past. And I think it was 70 something percent or so said that they now find fintech to be a lifeline. And I think there was a high percentage over a half I believe, so they can tend to continue to use that I’d have to double check the exact number. But the overwhelming majority of people in the survey have found fintech and digital to be a lifeline and continue to use that and will probably continue to use that even after the pandemic subsides.

JJ Hornblass  

So there were some rankings on customer experience services that came out this week, and Navy Federal and USAA, both earned top rankings in particular in their particular categories. How much does digital play a role in those customer experience rankings?

Rick Morgan  

A lot. I mean, so Navy Fed and USAA, like you said, took the top spots. And the report really harped on the sort of seamless digital processes. These two institutions have stood up, they pointed out Navy Federal HomeSquad mortgage application process, which pretty much digitizes the whole mortgage application. You don’t need to send in tax returns, you don’t need to send in income statements. You can just upload that all through digital channels. That’s powered by a company called Blend which does a lot of digital mortgage application technology. So that was the big differentiator for Navy Federal and for USAA they talked about the same thing about how, how much creating digital touch points really, really makes it easier for their members and for their customers. So yeah, it played a big role. And I think that those institutions because they do focus so heavily on military service members, who often have to, you know, go to the field or go deploy at a moment’s notice. They need to be able to handle their finances quickly online, and they might not be anywhere near a bank branch for months at a time. So I think that that focus to create such good and thorough digital customer experience has made that a priority for them and really set them apart.

JJ Hornblass  

This I mean, the Blend application or technology that Navy used, I mean, is it a key takeaway of this is the CX data data set, this cx data that really it’s a third party technology provider that is going to get you to the upper ranks of customer experience rankings?

Rick Morgan 

Well, they didn’t. So honestly the report itself didn’t mention Blend. I just know from doing past stories. Navy Federal that they use Blend. You would have I mean if you just go to Navy Federal website, Blend is white-labeled so you’d have no idea that it’s Blend. And the report itself didn’t necessarily mention Blend it just mentioned the product that Blend and Navy Federal launched, which is HomeSquad. So no, there was nothing in the report about Oh, you have to use Blend you have to use this third party to get you know, to the top of the mountain or whatever. It just was really stressing more the end result which is if you can create processes that can be done without having to send in paper and visit a branch all the time. That’s going to create customer experience that exceeds expectations.

JJ Hornblass  

I saw that Discover, Ally and Charles Schwab all ranked pretty highly. Those are I mean Ally, maybe not. But Charles Schwab and Discover are really specialized financial institutions. Sure. Yeah. Why? Does that and then certainly Navy and USAA have a particular mission. Is it the specialization that makes the customer experience exceed expectations?

Rick Morgan   

I think that helps. I mean, the report doesn’t give them that sort of that handicap it, you know, it doesn’t mention that like, Oh, this by the way, these, these three institutions are heavily focused. So they might be more in tune with specific member needs. But yeah, I mean, Discover being a credit card bank. Charles Schwab, I think just got its banking charter, by the way this year. I mean, I think they just got that industrial charter through Utah, pretty recently. So yeah, they aren’t heavily specialized. And I think that probably does give them some advantage because if you’re trying to innovate for a huge swath of the population, it’s hard to know what every person is going to need and you need to create personalized experiences for a while. Right, if people, which is hard to do, you need to probably use more data, you probably need to have a better you know, holistic view of customers, financial lives, which is not easy to do if you’re someone like let’s say Bank of America that has customers from every demographic you can imagine. That’s a harder thing to do. And it relies a lot more on using data intelligently to understand your customers, whereas, yeah, maybe a bank like Discover, USAA, credit unions like Navy Fed or Charles Schwab, as a financial advisor type bank, you know, they probably might already have that more personalized view and that more deep understanding of their customers just because they have a more specific subset of customers.

JJ Hornblass 

So Rick, what, what are you looking at next week?

Rick Morgan  

We’re taking a look at some new ventures.

JJ Hornblass   

Oh, wait, sorry, forgive me. We forgot one area to focus on. And that is the launch recently by Silicon Valley Bank of Bolster. Yeah. Which highlights, the few, I mean, it highlights the advent of incubators, technology intervene into incubators within banks. That’s when Bolster is cited to others. I mean, how many are there out there?

Rick Morgan  

I’ve done just some, you know, this isn’t a definitive list, but I’ve looked it up and I’ve found at least like a dozen to two dozen, incubator or accelerator, you know, venture type of programs that are housed inside big incumbent banks. And it’s an interesting trend because a lot of these incubators are launching platforms that are not necessarily directly tied to financial services. For example, Silicon Valley Bank with Bolster. Bolster is a platform that helps you find executive talent for startups. And then Citibank’s D10X, which has its own internal incubator program, launched a program called Proximity, which helps you with like proxy voting for your board decisions, etc. Neither of those are directly financial services, which I found interesting, because these are coming out of bank incubators. What the banks will tell you is that well, even though this isn’t necessarily a financial product or a financial platform, it still helps our clients and at the end of the day, if it’s something that can help our clients and set us apart in terms of customer experience for our corporate clients, or small businesses, whatever, that’s still important to us, even if it’s not, you know, like a small business loan platform or some new payments capability. So it’s interesting that they’re sort of going beyond strict financial services.

JJ Hornblass  

So an executive that runs one of these internal incubators at one of the banks you quoted said the following: “If done right, it becomes an asset for the, quote normal operations unquote teams at the parent rather than a distraction to manage.” But why isn’t this that would imply that it can be a distraction, probably is a distraction at some institutions.

Rick Morgan  

That’s what they’re saying. I don’t know.

JJ Hornblass

Banks have not historically incubated technology and you know, to have to launch one or two applications. Doesn’t seem like a very successful ratio of effort to yield to me, but you know, what’s your sense?

Rick Morgan  

Well, I think the distraction comment was more is kind of pointing to the fact that if you have these incubators, it one thing a common trend that I found is that the incubators do better, if they’re somewhat set aside from the normal day to day operations of the bank, you know, you want the big bank guidance and the big bank name. But if you’re too directly involved in that, you know, it’s going to slow the incubator down. And yeah, it’s gonna, if you’re constantly bothering people who are trying to do day to day operations at the bank, then yeah, it could probably become a distraction and create some friction points. So I think what they’re saying is that if it sits somewhat outside the day to day confines of the bank, it’s more likely to run better on its own and not become a distraction to the bank. So that’s what I kind of took away from that comment.

JJ Hornblass  

Yeah, but then they lose out the real you know, or like what’s happening in the market, and sort of responding to that. So it cuts both ways. I don’t know. I mean, I just wonder, I certainly would, you know, it would seem to me just in talking to so many banks over the years, it would seem to me that this is not for every bank.

Rick Morgan  

I don’t think it is. And I think you’re right. It is hard to balance that. And I think it just takes, and maybe it’s having never worked in one obviously, I think maybe it’s a little bit more trial and error like, you know, are we too close to the bank? Are we not close enough to the bank? I think it just takes some you have to perfect the recipe a little bit over time.

JJ Hornblass 

Right. Now, let’s talk about next week. How about that, right?

Rick Morgan  

Sure. Yeah, sounds good. Honestly, next week, we’re kind of doing some things that are building off of what we talked about this week. So there’s some new venture projects coming out of some big banks like Truist, Santander and BNY Mellon. They’re all kind of getting more into the venture and accelerator space. So we’re going to see how they’re doing it and what their recipe looks like. And if it’s different From Citi and PNC and Silicon Valley and all the banks that we spoke with this week,

JJ Hornblass   

We’re also going to launch a new data set next week. That will, well we’re not going to tell you what it does. And it will be a compliment to our emerging fintech directory, which we introduced. Last week. It was last week, right? I think.

Rick Morgan  

I think it was the week before because last week was Build. So I think it was two weeks ago.

JJ Hornblass  

But if you haven’t checked out the emerging fintech directory, you should and look out for our new data set, this coming week. We certainly want to hear from you at Fintech Unfiltered so please email us at info@bankinnovation.net and follow us on Twitter, and LinkedIn. And, of course, visit us at finainews.com and thanks so much for joining us. We enjoyed having you. We’ll see you next time. Until then, keep it unfiltered.