JJ Hornblass, Royal Media CEO  

Hi, everyone. I’m JJ Hornblass and welcome to FinTech Unfiltered from Bank Innovation, the leading digital news service on banking and FinTech. This is our weekly wrap for what’s happening in banking innovation for the week of July 20 2020. Before beginning I want to thank bank innovation advertisers, Abe.ai, Mambu and Infogroup for their support. So thank you very much to them. And I am joined by Rick Morgan, from the bank innovation team. Hi, Rick. It is Friday, July 24 2020. Probably the most interesting earnings report of this past week for the second quarter earnings, it seems from a bank innovation standpoint was US Bank Digital adoption among its customers hit a high of for, the institution of 77%. 77% of its customers during the second quarter used its active customers use digital channels, which was a 5% quarter over quarter increase. So the CEO said about this quote, “We expect digital adoption by customers to stick even after the economy is fully reopened.” So, so first of all, let’s talk about just kind of the driver of this digital adoption, hitting 77%. And then secondly, Rick, I mean, likely is it that the CEOs prognosis will come true. Meaning that the adoption will stick even after the economy fully reopens?

Rick Morgan, news editor at Bank Innovation 

Yeah. So it’s interesting to look at US Bank given a lot of the new sort of tech initiatives that they’ve, that they’ve really launched, they’re involved heavily with a company called Personetics, which is a conversational AI company that does a lot of their chatbot capabilities. They just recently launched, launched a voice chat bot capabilities, as well as text. And they also do a lot of loan automation processes through Blend that helps them a lot as well. So they’re working with a lot of people to automate and digitize as many processes as possible. So I guess it’s not terribly surprising that their digital option hit that high given all the initiatives that they’re undertaking. In terms of you know, whether or not it’s true that this will stick, a lot of people have been saying that in general about this digital adoption that we’re seeing with the coronavirus pandemic, forcing people to use digital channels. We discovered a Forrester report this week that said that the effects could last the better part of a decade and beyond. I mean, as people migrate to these digital channels, they get used to it, they realize that it’s convenient. And they start to wonder, why would I ever drive into the branch to begin with people that might not have ever done that before? And yeah, I mean, the US Bank numbers, which were reported by our colleague Vaidik Trivedi were pretty interesting. The fact that they hit that record high is really relevant given the fact that they have been taking these initiatives like with Personetics, and with Blend and they just launched some new voice chatbot capabilities, and it’ll be interesting to see if that takes it even further.

JJ Hornblass 

A question I would ask. In response to that, then Rick is what about the other 33% so if you’ve got adoption moving higher? Five points higher? I think we can probably agree that I mean, yes, they’ve added certain features functionality through other service providers and so on. But at least some of it has to be coming from the pandemic.,

Rick Morgan 

Oh yeah

JJ Hornblass 

For sure. So, so what about the other 33%? Who are also quarantined? and haven’t and you know, they don’t know why, they’re, you know, you can look this is a glass half full glass. Yeah.

Rick Morgan

So why is it not even higher? Yeah.

JJ Hornblass  

Yeah, yeah. So what’s your sense from there? I mean, like, what’s the hesitancy I guess?

Rick Morgan  

Um, yeah, it’d be interesting to see like a more granular look at these numbers, I think to really answer that question just because 33% I mean, interesting to look at are the 33% of customers that are not going through digital channels. Are they only doing, you know, high dollar value transactions? Are they people that you know, are doing, like very important for their small business things that are complicated that they might not trust to do online or they might have questions and they don’t want to talk to a customer service agent on the phone, they want to sit down with their own personal banker. I don’t know exactly what the 33% is coming from. But I have to imagine that it’s mostly people that don’t trust doing something over the digital channel just because it’s not a simple process, I would imagine or something that’s so important to their livelihood. It is whether a small business or or a household or what have you that they just don’t trust doing it through an app or through a call center. They want to sit down with Probably the person that they know at the bank that’s worked with them before. And that’s what they feel comfortable doing. And I, again, if we had a more granular look at, here’s what those 33% of transactions are. That would be interesting to look at. And it’s hard to say why the number is not even higher, you’re right, because it feels at this point. I can’t imagine what would be causing a customer to go to the bank to, you know, deposit a check at this point.

JJ Hornblass 

Right, you got to be pretty determined, or pretty, pretty uncomfortable with, with digital solutions to, to, you know, to not use them or to go to the branch or whatever, during a pandemic. 

Rick Morgan  

Yeah, I mean, you have to be more uncomfortable with doing that than with exposing yourself to a bunch of strangers at a bank, perhaps you know what I mean? So it’ll be it. I can’t imagine that it’s 33% of people that are just that stubborn about it, I have to imagine that there’s some reason that they’ve someone felt it was important enough to go to the bank branch.

JJ Hornblass

So we saw Well, maybe, I guess, based on this data from his Sitel Group, maybe the technology is not good enough. There was an interesting survey came out on the degree to which consumers view banks as being most innovative in technology. And and that that number plummeted, compared to they did the survey, maybe give us some details on that.

Rick Morgan  

Yeah, so it was a survey, there was two sort of comparing compressing contrasting two separate surveys. One was in March and one was in May. And so the pre the march one was really Sort of pre Coronavirus for the most part. And it asked consumers which industry do you think is the most innovative when it comes to using new technology? And the other categories were I think travel and healthcare, retail, telecommunications, obviously financial services and there was a couple others but financial services was actually in the lead before the coronavirus pandemic, believe it or not, it was like 27% of all respondents thought that banking had the most innovative technology. And that dropped to 16% post or during the pandemic during the May interview. Whereas retail did the exact opposite retail was in second place that like 17% and skyrocket up to 27% or 16 to 27% or something along those lines, basically took the lead and sort of flip flopped with financial services. And the studies just talked about basically how banking didn’t do as good of a job capitalizing on you know, what consumers were looking for during the pandemic, whereas retail had you know, click to collect. Probably a lot more delivery functions, you know, a lot more online ordering things like that. And for whatever reason, banking did not really have as quick of a reaction maybe to this. And then it might, you know, I was looking I was thinking about the numbers and it might not even necessarily be that financial services did anything wrong. It’s just that if the question is, which do you think use the most it makes the best use of technology, maybe retail just had such a better job that like, they were bound to, you know, make a jump in financial services

JJ Hornblass 

Right or maybe or maybe during, you know, during the pandemic period, where needs were different. And they were and consumers were forced to use different applications or different services that they it kind of you They it revealed or it showed those consumers that you know, maybe this isn’t that good.

Rick Morgan 

Yeah, maybe if you’re forced to use online banking all the time, you started to realize that Oh, the maybe Yeah, exactly like you’re saying, well, maybe the mobile check function isn’t as smooth as I thought it was, or maybe getting a hold of an agent or you know, using this chat bot. It’s not as conversational as I would have liked. I never really had to use it before and now I do and it’s not that great. So it’s hard to say which one it is specifically. And you know, obviously there was a lot of headlines about the PPP as you know, the e-trans portal being backed up and that’s not necessarily fair to pin on banks, but it’s still a headline that your average consumer might see that and they go man, banks can’t get it together. Right. That’s true. So it’s, it could just be perceptions of things to everyone else.

JJ Hornblass  

Radius Bank. You had a very interesting conversation this week with Chris Tremont over at radius. And I guess what’s interesting is juxtaposing it to the Sitel Group. Data is, you know, here’s a bank that has particularly pursued a digital roadmap. It’s also in the middle of a for the banking industry, a relatively high profile acquisition by LendingClub, which has to close we’re not going to deal with that issue right now. But you did get some really interesting insights into radius is digital roadmap. So it kind of at a high level, what what has been their their kind of trajectory for a digital centric strategy?

Rick Morgan  

Yeah, it was pretty interesting because radius is a name that’s well known as sort of a digital bank, but like a true digital bank, you know, they have a charter etc. They used to be a community bank, they’ve kind of gone from being this Boston based community bank to being a national nationwide footprint digital bank. And they’ve also been the back end banking service provider for a lot of fintechs, like Brex, NorthOne, Stackin and a few other big names. So they’ve really kind of transformed themselves. And we’ve sat down and chatted about how that happened, because that’s obviously not something that happens overnight. And it’s obviously not something that’s easy, or else everyone would do it. And he basically laid out how in about 2016, they decided, Okay, they’ve done some digital initiatives before they had, you know, online banking in 2008. They’ve done some deals with or some partnerships with some fintechs in 2013 2014, but in 2016 2017, Chris said, they really sort of like nailed down sat down and really like hammered out their strategy. And they basically decided that shutting down their whole core and like revamping it was going to be too much to do. So they started to work with a variety of different vendors to basically keep everything running but totally revamp all their technology functions. So they worked with Treasury Prime to upgrade their API’s. They worked with MANTL to upgrade their digital account opening. They worked with Alloy to do a lot of online KYC AML. They worked with a company called Narmi to totally revamp their UX functions. So in I guess the the best way to put it would be it takes a village. But they kind of brought in all these different players that they liked to to really build around their core and create a much more digital friendly bank that could not only handle consumer facing digital forms. But also handle partnerships that they wanted to part power as well as small business banking. So it took a long time and they said it was a better part of three years before they really kind of got it off the ground. And to be frank, he said, you know, it’s ongoing even today, like still something we’re obviously working on. Is there

JJ Hornblass  

Did you get a sense for which of those vendors was most significant to their progress like it you know, if there was one that was excluded, it really would have been problematic.

Rick Morgan 

I think, from my understanding Treasury Prime and MANTL were like the two big ones that they really needed us to get off the ground. Treasury primes like the having a more seamless use of API’s for this type of bank is obviously crucial to both connect with FinTech partners that want to power the back end banking services and also to onboard other fintechs that need to just make their own digital banking better. That’s not gonna work if you can’t, you know, play nice with others, so to speak. And so Treasury prime also does a lot of the I think Chris called it like money movement and plumbing. So a lot of that back end stuff that that wouldn’t otherwise happen. So that was the first one he mentioned in the one we spent a great deal of time talking about. So I think Treasury prime was really kicked all that off for them and made the other things possible and MANTL obviously, for any kind of digital bank, being able to open an account easily without going into a branch is, you know, you gotta crawl before you can walk and do anything else essentially. So, so MANTL I think was also probably pretty crucial to their

JJ Hornblass

I mean, if they ever get this LendingClub deal closed, I would think that which I don’t know if they mean, you know, to have a deal, announced in February right before Yeah, the pandemic, it all came down. That seems that seems stopped but but I would think that if that deal closed, I would also think that Treasury prime will be a crucial element to, you know, further integration, how much easier is it to integrate using API’s then to sort of rebuild technology and so on?

Rick Morgan  

Yeah, definitely. I mean, it’ll be interesting. I don’t, you know, Chris couldn’t talk about it too much. And it’ll be interesting to see, you know, what brand do they use? So they say LendingClub, do they stay radius? Do they make a new name, but who knows? And to be fair, they did say it was gonna take between 12 and 15 months, so it’s not like at the time, which was February so it’s, they still have quite a bit of time to close the deal. And it’s not it’s not abnormal that we haven’t heard any major developments on that front yet. But yeah, I think definitely, whatever this new brand is going to be that they end up launching is going to have to seamlessly integrate with a lot of new tech players because obviously they’ll be using lending clubs, technology vendors and radiuses technology vendors. There’s just going to be a lot more people at the table and having those seamless API integrations is going to be pretty important.

JJ Hornblass  

So what are we working on for next week, Rick?

Rick Morgan   

The bank innovation team is working on a bunch of different things. We’re looking at facial recognition technology, and how banking can avoid some of the same pitfalls that other agencies and other other groups have run into such as you know, law enforcement is obviously hit a lot of pitfalls and come under a lot of scrutiny for their use of facial recognition technology. And obviously, government agencies as well. So we’ll be looking at what banking can do to sort of avoid some of the same problems that other people have run into. And we’re also going to be looking at how banks and financial institutions are using technology to appeal to consumers’ conscience, so it’ll be an interesting week, to take Keep an eye on what we have coming up. They’re coming down the chute.

JJ Hornblass

All right. Thanks. Thanks, Rick. I want to remind everyone that Bank Innovation Build it will be taking place in September, you could check out bankinnovationbuild.com to learn more. That’s the virtual conference that will be holding that explores best practices in innovation operations at financial services companies. And please be sure to rate FinTech Unfiltered wherever you listen to your podcasts. And let us know what you think. You can email us at info@bankinnovation.net we’d love to hear from you. We’d also love you, love for you to follow us on Twitter, and LinkedIn and of course, visit us online at finainews.com thanks, Rick. And thanks, everyone. For Joining us until next time, keep it unfiltered.