JJ Hornblass 0:01
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 the world of banking innovation during the week of September 21 2020. Our thanks to Blend, Mambu and Q2E Banking for their support as advertisers and sponsors of FinTech Unfiltered, so thank you to them, and I am pleased to be joined by Bianca Chan from Bank innovation. Hello Bianca. It is Friday, September 25 2020. This week, there was a data from the Kansas City Federal Reserve Bank that showed improved activity at regional factories which was a positive sign for the manufacturing sector. The the United wholesale mortgage agreed to a $16.1 billion reverse merger this week, which would which will be the largest SPAC deal on record. September also should show according to forecasts new car sells new vehicle sales will decline 12% on a year over year basis while used vehicle sales will climb 11% on a year by year basis. You look surprised Bianca and justice Ruth Bader Ginsburg also passed away this week. And finally, data from Andreessen Horowitz, the venture capital firm showed that among other things, demand for used golf balls went through the roof during the pandemic. What that has to do with FinTech I’m not sure but from American Express, there was new data that definitely relates to the pandemic and that is that 81% of merchants say they intend to make contactless payments a permanent option for customers. It would seem Bianca that contactless payments are kind of here to stay. The question is is you know, to what degree will that really be the case? And then the other question I had was, to what degree This will add costs into the payment infrastructure, if the demand for contactless payments, really does, you know, rise to the kind of level that was implied that is implied by the Amex data?Bianca Chan 3:12
Yes. Lots to dig into here. So the upshot is basically, yes, so merchants and consumers, they both prefer contactless payments. I’m not sure if that’s too much of a surprise to anyone, just given how we’ve all been operating for the past few months. But we’re definitely This is definitely a trend that we’re seeing throughout payments, you know, more businesses, more consumers are using digital payments, contactless payments. And, of course, that’s going to create day to day efficiencies for the financial institutions who are processing these payments for both consumers and businesses, for their clients. But I’m not sure how much of those efficiencies will be translated to the bottom line until or if we ever transition fully away from cash, because to banks, that just means that they now need to maintain and provide these two different kinds of ways to process payments. So something like that. So that was something that I thought was kind of interesting, of course, we’re going to be seeing, you know, streamline processes.JJ Hornblass 4:16
You’re saying that you think that it doesn’t really matter if I’m understanding her it doesn’t really matter the the adoption rate on contactless payments until there’s like a hard stop on let’s say, cash payments as an alternative, because until you have that you still have sort of the whole cost. The cost burden of it in the system. Is that what you’re you kind of you’re that’s what you’re saying.Bianca Chan 4:47
From the bank’s perspective in terms of how much money you know contactless payments and digital payments are actually saving them. Yes, that’s what I think.

JJ Hornblass 4:56
So you guys so I guess a follow on question. Is this You know, can they do it? I mean, can you? I mean, it would it would seem that it is feasible at this point considering that, I mean, I don’t want to raise anyone’s alarms, but I don’t see this situation improving. You know, somebody reminded me yesterday that there was a, there was a prevailing thought it feels like it was, you know, 1000 years ago. But at some point, you know, in, I guess, in the spring, there was a prevailing thought, oh, that by the fall, everything will be fine. I don’t know if you even remember this, too. But that was the prevailing thought. We are, in case you know, anyone has any questions, we are actually in the fall, and there is no end in sight. So So I mean, it would seem that there is this ability to take a hard stop on payments methods that are costly, and not net for financial institutions not necessarily to suffer adversely. I guess it’s kind of like a will issue like, will they? Do they have the will to do that. And I don’t know, if you have a feeling for that at all.

Bianca Chan 6:20
You know, I think that the numbers will continue to kind of trend the way that they have been through the pandemic, but I highly doubt that we will fully ever, you know, get rid of cash, I think it’s going to be a mainstay, it’s too, I think it’s too embedded in the financial services industry, and just how people pay for things and sell things.

JJ Hornblass 6:42
Well, there’s a great cost to it, there’s a great cost as a result. So another kind of pandemic related, a dynamic that we can talk through is Bank of America is patent.

Unknown Speaker 7:07
Perform

JJ Hornblass 7:07
a practice so far this year. So despite the fact that the pandemic has been

Unknown Speaker 7:16
raging,

JJ Hornblass 7:19
the Bank of America in the first half of 2020, alone, secured 184 patents. Now, that’s a 20% increase on a year over year basis. Of course, those patent applications are filed long in advance. I don’t know what the oldest application was, but I’m, I’m assuming it was, you know, certain, certainly pre pandemic. But more interestingly, to me, was that they applied that the bank applied for 415 patents in the first half of the year alone. Why? Why is there such patent activity coming from Bank of America? And my second question, and this is more for us to discuss, Bianca is the degree to which this volume of patents that now has the potential to come down into you know, down in the market, to the degree to which it might stifle innovation in FinTech?

Bianca Chan 8:31
Yeah, okay. I’m excited to dive into that one. But to your first point, I think it’s pretty remarkable. I think something like 80 90%, of Bank of America’s workforce is working remotely, right. And so you think that you need to be in a room with a whiteboard with people with, you know, blank pieces of paper. But it seems maybe that’s not the case. And that may be working from home is created this sort of environment that encourages innovation, at least on like, the cutting edge side of it. When we’re talking about patents here. What was really interesting to me was seeing the breakdown of which areas of banking, these patents relate to. So yeah, so yeah, ai machine learning. That was that took 23% of the for 15. patents. 23%. Yeah, so that that’s interesting. That tells me that even though we’ve been talking about AI machine learning for years now, and we know it’s nothing new, but there’s still there’s still things to be explored and discovered there. Secondly, I thought what was really interesting was mobile and online banking only was 9% of the applications that were filed. And that’s surprising to me, because that has really been a huge trend in our reporting throughout the pandemic. I mean, it’s something that everyone we’ve spoken to is working on in some fashion. So what that tells me is That what the industry is working towards, in terms of mobile and online banking, maybe it’s a, you know, the following footsteps, not necessarily the ones paving paving the road, or

JJ Hornblass 10:12
not necessarily, there’s not necessarily revolutionary technology coming in that in that particular products at. So I thought that that was interesting to Bianca. And so let’s let’s go through the top three, the top three segments of patents, the patent applications from BFA, as you said, number one, AI and machine learning 23%, nearly a quarter of all the applications number two was 22%, security and privacy and number 316 percent programming technology. So of those three, I mean, you’ve expressed that the AI machine learning was kind of a surprise to you, but but of those three, it do does any any one of those surprise you more than the

Bianca Chan 11:08
programming technology. I don’t know if that was the case for you. But as we saw through bi build a few weeks ago, now, especially during the pulse, the market live session that we did, it seems that banks are still trying to figure out how to place not only their innovation teams, next to the business lines, but how to position the software engineer and the programming like resources next to the innovation teams. And I think that that’s something that financial services are kind of grappling with at this point right now, we’re still trying to figure it out. I think that’s because the need for software engineers and software development and programming technology is seeping into almost all different facets of the bank. And so it I guess, it’s something that’s kind of been a new a new trend I’ve been seeing, at least since bill. And so I think that was surprising to me, that bank of america seems, seems to have gotten it. And they’ve put 16% of their of their, you know, innovation power towards that.

JJ Hornblass 12:18
That that is a fair response. I took note of the security and privacy at 22%, I had a different take on that. You know that I think that there is that this is not new, the notion that security and privacy is central to a financial institution is his oldest banks are. But it is, in my view going to increasingly be amplified as the central value proposition for digitized financial services. And so therefore, I actually was surprised that it was not number one, and it was a it was the set only the second largest segment the patents rather than the first. But I took note of that. Very interesting whether with the other question that that I had was whether this might stifle innovation in the sector? I mean, that’s a very difficult question. But I think it’s a question that should remain outstanding. Because this unit day, they they issued patent applications across the entire spectrum of financial technology. There was really, it was really across the board, and is obviously a significant strategic play, intellectually IP strategic play for them. So speaking of innovation, we, which we always speak about, but speaking of innovation, this week, bank and bank innovation introduced its innovation rankings, where we ranked financial institutions for their innovation prowess. Number one on the large financial institution list was Do you know who came in number one? Yes, it’s true. Thank you. I’m just testing you. Just testing. The rankings which we developed with FBI navigator which is a great data shop out there. We we used it was determined based on over 100 retail products, services. It channels within nine different categories. So the nine products within nine different categories were evaluated at each financial institution. And then there were scores attributed for the, for the breadth of the retail offerings. And that’s why, and that’s how the scores were developed. We worked on this for a really long time, as Bianca knows, and we’re very excited about it. We’re very excited about it, because it is is really the first data set that in that aims to quantify something that has generally been not quantified today, which is the innovation strength of financial institutions. So I hope everyone checks that out. And I certainly certainly congratulate truist on coming in. Number one. What, what else do we have slated for next week? Bianca?

Bianca Chan 16:13
Yes. This week, we’re going to be looking at recent hires, and staffing, shuffles in banking and FinTech and we’ll also be taking a look at what a very innovative financial institution in Eastern Europe is doing with robotic process automation. That’s OTP bank.

JJ Hornblass 16:32
You’re not supposed to give out the bank. You’re not supposed to say which. Okay, no, thank you. We’re so happy you joined us. Here on FinTech on filtered, please rate FinTech on filtered on your podcast platform, and and email us at info at Bank innovation dotnet you could check us out on on Twitter and LinkedIn. And of course, please visit with us on bank innovation. dotnet thanks so much for joining us. We’ll see you next time. Thank you.

JJ Hornblass 0:01
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 the world of banking innovation during the week of September 21 2020. Our thanks to Blend, Mambu and Q2E Banking for their support as advertisers and sponsors of FinTech Unfiltered, so thank you to them, and I am pleased to be joined by Bianca Chan from Bank innovation. Hello Bianca. It is Friday, September 25 2020. This week, there was a data from the Kansas City Federal Reserve Bank that showed improved activity at regional factories which was a positive sign for the manufacturing sector. The the United wholesale mortgage agreed to a $16.1 billion reverse merger this week, which would which will be the largest SPAC deal on record. September also should show according to forecasts new car sells new vehicle sales will decline 12% on a year over year basis while used vehicle sales will climb 11% on a year by year basis. You look surprised Bianca and justice Ruth Bader Ginsburg also passed away this week. And finally, data from Andreessen Horowitz, the venture capital firm showed that among other things, demand for used golf balls went through the roof during the pandemic. What that has to do with FinTech I’m not sure but from American Express, there was new data that definitely relates to the pandemic and that is that 81% of merchants say they intend to make contactless payments a permanent option for customers. It would seem Bianca that contactless payments are kind of here to stay. The question is is you know, to what degree will that really be the case? And then the other question I had was, to what degree This will add costs into the payment infrastructure, if the demand for contactless payments, really does, you know, rise to the kind of level that was implied that is implied by the Amex data?Bianca Chan 3:12
Yes. Lots to dig into here. So the upshot is basically, yes, so merchants and consumers, they both prefer contactless payments. I’m not sure if that’s too much of a surprise to anyone, just given how we’ve all been operating for the past few months. But we’re definitely This is definitely a trend that we’re seeing throughout payments, you know, more businesses, more consumers are using digital payments, contactless payments. And, of course, that’s going to create day to day efficiencies for the financial institutions who are processing these payments for both consumers and businesses, for their clients. But I’m not sure how much of those efficiencies will be translated to the bottom line until or if we ever transition fully away from cash, because to banks, that just means that they now need to maintain and provide these two different kinds of ways to process payments. So something like that. So that was something that I thought was kind of interesting, of course, we’re going to be seeing, you know, streamline processes.JJ Hornblass 4:16
You’re saying that you think that it doesn’t really matter if I’m understanding her it doesn’t really matter the the adoption rate on contactless payments until there’s like a hard stop on let’s say, cash payments as an alternative, because until you have that you still have sort of the whole cost. The cost burden of it in the system. Is that what you’re you kind of you’re that’s what you’re saying.Bianca Chan 4:47
From the bank’s perspective in terms of how much money you know contactless payments and digital payments are actually saving them. Yes, that’s what I think.

JJ Hornblass 4:56
So you guys so I guess a follow on question. Is this You know, can they do it? I mean, can you? I mean, it would it would seem that it is feasible at this point considering that, I mean, I don’t want to raise anyone’s alarms, but I don’t see this situation improving. You know, somebody reminded me yesterday that there was a, there was a prevailing thought it feels like it was, you know, 1000 years ago. But at some point, you know, in, I guess, in the spring, there was a prevailing thought, oh, that by the fall, everything will be fine. I don’t know if you even remember this, too. But that was the prevailing thought. We are, in case you know, anyone has any questions, we are actually in the fall, and there is no end in sight. So So I mean, it would seem that there is this ability to take a hard stop on payments methods that are costly, and not net for financial institutions not necessarily to suffer adversely. I guess it’s kind of like a will issue like, will they? Do they have the will to do that. And I don’t know, if you have a feeling for that at all.

Bianca Chan 6:20
You know, I think that the numbers will continue to kind of trend the way that they have been through the pandemic, but I highly doubt that we will fully ever, you know, get rid of cash, I think it’s going to be a mainstay, it’s too, I think it’s too embedded in the financial services industry, and just how people pay for things and sell things.

JJ Hornblass 6:42
Well, there’s a great cost to it, there’s a great cost as a result. So another kind of pandemic related, a dynamic that we can talk through is Bank of America is patent.

Unknown Speaker 7:07
Perform

JJ Hornblass 7:07
a practice so far this year. So despite the fact that the pandemic has been

Unknown Speaker 7:16
raging,

JJ Hornblass 7:19
the Bank of America in the first half of 2020, alone, secured 184 patents. Now, that’s a 20% increase on a year over year basis. Of course, those patent applications are filed long in advance. I don’t know what the oldest application was, but I’m, I’m assuming it was, you know, certain, certainly pre pandemic. But more interestingly, to me, was that they applied that the bank applied for 415 patents in the first half of the year alone. Why? Why is there such patent activity coming from Bank of America? And my second question, and this is more for us to discuss, Bianca is the degree to which this volume of patents that now has the potential to come down into you know, down in the market, to the degree to which it might stifle innovation in FinTech?

Bianca Chan 8:31
Yeah, okay. I’m excited to dive into that one. But to your first point, I think it’s pretty remarkable. I think something like 80 90%, of Bank of America’s workforce is working remotely, right. And so you think that you need to be in a room with a whiteboard with people with, you know, blank pieces of paper. But it seems maybe that’s not the case. And that may be working from home is created this sort of environment that encourages innovation, at least on like, the cutting edge side of it. When we’re talking about patents here. What was really interesting to me was seeing the breakdown of which areas of banking, these patents relate to. So yeah, so yeah, ai machine learning. That was that took 23% of the for 15. patents. 23%. Yeah, so that that’s interesting. That tells me that even though we’ve been talking about AI machine learning for years now, and we know it’s nothing new, but there’s still there’s still things to be explored and discovered there. Secondly, I thought what was really interesting was mobile and online banking only was 9% of the applications that were filed. And that’s surprising to me, because that has really been a huge trend in our reporting throughout the pandemic. I mean, it’s something that everyone we’ve spoken to is working on in some fashion. So what that tells me is That what the industry is working towards, in terms of mobile and online banking, maybe it’s a, you know, the following footsteps, not necessarily the ones paving paving the road, or

JJ Hornblass 10:12
not necessarily, there’s not necessarily revolutionary technology coming in that in that particular products at. So I thought that that was interesting to Bianca. And so let’s let’s go through the top three, the top three segments of patents, the patent applications from BFA, as you said, number one, AI and machine learning 23%, nearly a quarter of all the applications number two was 22%, security and privacy and number 316 percent programming technology. So of those three, I mean, you’ve expressed that the AI machine learning was kind of a surprise to you, but but of those three, it do does any any one of those surprise you more than the

Bianca Chan 11:08
programming technology. I don’t know if that was the case for you. But as we saw through bi build a few weeks ago, now, especially during the pulse, the market live session that we did, it seems that banks are still trying to figure out how to place not only their innovation teams, next to the business lines, but how to position the software engineer and the programming like resources next to the innovation teams. And I think that that’s something that financial services are kind of grappling with at this point right now, we’re still trying to figure it out. I think that’s because the need for software engineers and software development and programming technology is seeping into almost all different facets of the bank. And so it I guess, it’s something that’s kind of been a new a new trend I’ve been seeing, at least since bill. And so I think that was surprising to me, that bank of america seems, seems to have gotten it. And they’ve put 16% of their of their, you know, innovation power towards that.

JJ Hornblass 12:18
That that is a fair response. I took note of the security and privacy at 22%, I had a different take on that. You know that I think that there is that this is not new, the notion that security and privacy is central to a financial institution is his oldest banks are. But it is, in my view going to increasingly be amplified as the central value proposition for digitized financial services. And so therefore, I actually was surprised that it was not number one, and it was a it was the set only the second largest segment the patents rather than the first. But I took note of that. Very interesting whether with the other question that that I had was whether this might stifle innovation in the sector? I mean, that’s a very difficult question. But I think it’s a question that should remain outstanding. Because this unit day, they they issued patent applications across the entire spectrum of financial technology. There was really, it was really across the board, and is obviously a significant strategic play, intellectually IP strategic play for them. So speaking of innovation, we, which we always speak about, but speaking of innovation, this week, bank and bank innovation introduced its innovation rankings, where we ranked financial institutions for their innovation prowess. Number one on the large financial institution list was Do you know who came in number one? Yes, it’s true. Thank you. I’m just testing you. Just testing. The rankings which we developed with FBI navigator which is a great data shop out there. We we used it was determined based on over 100 retail products, services. It channels within nine different categories. So the nine products within nine different categories were evaluated at each financial institution. And then there were scores attributed for the, for the breadth of the retail offerings. And that’s why, and that’s how the scores were developed. We worked on this for a really long time, as Bianca knows, and we’re very excited about it. We’re very excited about it, because it is is really the first data set that in that aims to quantify something that has generally been not quantified today, which is the innovation strength of financial institutions. So I hope everyone checks that out. And I certainly certainly congratulate truist on coming in. Number one. What, what else do we have slated for next week? Bianca?

Bianca Chan 16:13
Yes. This week, we’re going to be looking at recent hires, and staffing, shuffles in banking and FinTech and we’ll also be taking a look at what a very innovative financial institution in Eastern Europe is doing with robotic process automation. That’s OTP bank.

JJ Hornblass 16:32
You’re not supposed to give out the bank. You’re not supposed to say which. Okay, no, thank you. We’re so happy you joined us. Here on FinTech on filtered, please rate FinTech on filtered on your podcast platform, and and email us at info at Bank innovation dotnet you could check us out on on Twitter and LinkedIn. And of course, please visit with us on bank innovation. dotnet thanks so much for joining us. We’ll see you next time. Thank you.