Moven inks deal with TD Bank – For PFM?

Moven inks deal with TD Bank – For PFM?
The rumors have been swirling for some time now that Moven was going to sign up a Canadian bank. This was announced today and I read about it in The Globe and Mail. Curiously, the article is titled, “TD Bank helps its customers pinch pennies with new app.” What does this mean exactly for Moven and TD? Is TD going to start a digital only bank/account or are they merely going to add PFM capabilities? It’s not clear to me if this will require the opening of a new account or not. I’m also not clear on if this will be a separate app or if it will be integrated into the existing TD apps. It is however quite clear that TD is honing in on PFM capabilities.
“We’ve been interested in [personal financial management], but adoption is very low.” – Rizwan Khalfan, SVP and Chief Digital Officer, TD Bank Group
The Canadian banking scene is super conservative, so this is no doubt an interesting move. This deal can provide great opportunities and also comes with some challenges. Great opportunities:
  • Banks absolutely need to try new things. Kudos to TD for taking a leap here in an effort to innovate and try something new. Their recent mobile wallet announcement is another great example.
  • Canadian consumers could benefit from new, exciting and useful mobile tools. The Canadian mobile landscape has been pretty quiet, with the most recent “innovation” being the launch of mobile remote deposit capture by some of the banks. There have been interesting mobile payments announcements (e.g. RBC and Bionym), but not much as it relates to classic banking.
  • Consumers need help managing their money and turn to their bank for advice. Our US consumer survey and Canadian consumer survey point quite clearly to this. Americans and Canadians prefer to use bank provided tools to manage their personal finances.
Possible challenges:
  • Adding features to TD’s simplistic mobile app could present technical and user experience challenges. Moven has a keen focus on the user experience. The existing TD smartphone app – well, not so much. TD’s Canadian tablet app is slow and buggy. We could not even install this app on our Android test tablets due to compatibility issues. This leads me to believe that TD will either completely overhaul their app or release Moven as a separate app/account.
  • Most PFM endeavours have not been very successful when it comes to customer adoption. Will Moven and TD manage to figure out how to get customers on board and actively using PFM? This is going to be extremely challenging. Celent has done all kinds of research on PFM and will be publishing a fresh report on this topic in the new year. The report will encourage banks to take a completely different approach to PFM – stay tuned for our insights on this topic.
  • The viability of a digital only bank is questionable. Can Canada or the United States sustain a digital only bank? Is there a future for the neobanks? See the following blog post for our viewpoint on this. The Canadian bank switch rate is quite low overall, though it is quite high (13% in 2013) for the 18-25 year old segment. Neobanks have a place, though they will have difficulty being successful in the near term.
Overall, I think this is a great announcement. I love the fact that TD is going to try something new here, and attempt to shake up the market a bit. I’m looking forward to seeing how this one plays out.

Should your bank acquire a UX design firm?

Should your bank acquire a UX design firm?
I was very intrigued and excited when I heard about Capital One’s acquisition of Adaptive Path. When was the last time you heard of a bank acquiring a design firm? This fresh thinking is exactly what is needed in the banking space. I’d also like to see some of the major software vendors acquire firms like this (cc:@dmgerbino). I think it’s a great idea for several reasons:
  • Design and user experience (UX) are critical to digital AND brick and mortar banking. From a cultural perspective, it makes a huge difference to have designers and UX specialists “on the team” as opposed to engaging external contractors. UX becomes embedded in projects and in thinking.
  • Design / UX should be a horizontal function at financial institutions. Creating a horizontal function can be beneficial to all parts of the bank. There are parts of the bank that require even more help than retail banking (corporate digital banking is a great example) . It can really help to be able to tap into an internal department and have this approach permeate through various parts of the enterprise.
  • Labs and UX go hand in hand. If your bank has a lab or is thinking about a lab, you are likely going to have a bunch of new projects. Development and design belong together.
  • It makes for an awesome PR buzz : )
Banking UX isn’t just about the business case, it’s about an approach. This is the quote I gave to American Banker:
“When the paint starts to peel on the walls of the branch and the carpet starts to fray and the glass is scratched, what happens? It gets renovated,” said Jacob Jegher, a research director at Celent. “Same can be said for digital banking.”
Or so I would like to think… like it or not, banking projects have to be justified, compete for scarce IT dollars, and can be very hard to pull off if they don’t have a direct link to revenue. Banks often come to us for advice on how to tweak their business case to show increasing revenues, # of customers, etc. if they move forward with a new UX and design. Many banks resort to creative accounting in order to get their business cases approved. We often point them in the direction of customer retention metrics since it’s about delighting your customer. Happy customers are loyal customers. I’m looking forward to the day when UX becomes part of banking culture and isn’t just another metric in a business case. Sounds like Capital One is on the right track.  

Why ‘Branch of the Future’ must be a Priority

Why ‘Branch of the Future’ must be a Priority
Bank Innovation published a piece written by Brett King this week entitled, Can we Stop Talking about the ‘Branch of the Future’? In the article, King cites the industry’s use of the “branch of the future” terminology as evidence of “one of the key hang-ups that banks have over changing distribution models”. In other words, an inordinate amount of effort expended to “save” an obsolete delivery model. He argues that pursuing a “branch of the future” strategy, banks avoid the real work of improving customer engagement via digital channels. I think that’s nonsense. These assertions may resonate with one heavily invested in Moven, a digital-only bank happily growing by serving a niche market. Most retail bankers know the world isn’t as simple as King asserts. The fact is, banks have more than one challenge ahead of them. Specifically: 1. Right-size the branch network. There are two important aspects to this imperative: first is to redesign the branch channel for its emerging purpose: selling and servicing, and away from its legacy — transactional delivery. The second is to reduce branch network costs (both densities and corresponding operating costs) to enable investment in digital channel development. 2. Learn how to sell and service using digital channels. Migrating low-value transactions to self-service channels is no longer adequate. Digital channels must become more self-sufficient. One important aspect involves learning how to engage customers virtually. In-person must no longer require a branch visit. 3. Catalyze growth in self-service channel usage. For the second mandate to have maximum effect, banks must influence digital channel usage. Branch transformation simply isn’t optional as King suggests. Far from it! Why is Branch Transformation Imperative? Many reasons, but two are central in my opinion: 1. Most banks serve a diverse customer base, with widely varying and continually changing engagement preferences. 2. While customers increasingly transact digitally, they PREFER to engage face-to-face. Celent separately surveyed US and Canadian consumers in the fall of 2013, finding similar results. Contrary to what some would have you believe, young adults do visit branches. Both surveys found a rather weak correlation between age and channel usage – except for the mobile channel, which displays a strong relationship between past-30 day usage and age. channel usage by age But, past 30-day usage is mostly about transactions, not necessarily engagement. The same two surveys asked respondents, “If you had an important topic you would like to discuss with a banker, how would you prefer to do so?” Responses to that question paint a very different picture – one that explains precisely why most banks derive the majority of their revenue from the branch network. Most consumers – regardless of age – prefer face-to-face interaction on important topics (at least for now). Interestingly, preference for online appointment booking was much stronger in Canada. Not surprizing, since several of the large Canadian banks have been offering (and advertising) the capability for nearly two years, while the same capability in the US is nascent. preferred engagement by age But that’s where the puck is. Where the puck is going is towards more widespread digital channel usage – and engagement – across age and income demographics. That’s why mobile channel development is the #1 retail channel priority in most North American banks. It should be. Those same banks, however, neglect the branch channel at their peril. Banks Aren’t Alone in This The Wall Street Journal published an excellent article this week that provides some much-needed perspective on the branch channel debate (Seriously, why is there still a debate?). Citing data from ShopperTrack, the article asserts a -5% CAGR in store traffic across a broad mix of retailers. Sound familiar? And, banks aren’t the only retailers enjoying the majority of sales from stores. According to the U.S. Census Bureau, online sales now make up about 6% of total retail sales and are growing at more than 15% per quarter. SIX percent! We can argue about the precision of this figure, but the reality is unavoidable – after two decades of digital commerce growth, in-store shopping still dominates. Why no debate about the “store of the future”? Probably because, unlike banks who have largely neglected the branch channel for a few decades, most stores continually invest in optimizing their retail delivery model. Moven can neglect the branch channel because it chose a delivery strategy that alienates the majority of consumers that value in-person engagement. That’s a fine strategy for a niche player. Mass market institutions don’t have that luxury.

We All Can Be Trendspotters

We All Can Be Trendspotters
As the festive season approaches, this is the time of the year when Celent analysts reflect on what kept us busy through the year and what the future might hold for the next 12 months in our respective coverage areas. We usually publish the results of this thinking and analysis in various trends reports – from Top Trends in Banking to Top Trends in Payments to IT Spending. And we seem to strike a chord with our clients – these reports always tend to rank highly in our “most downloaded” lists. I had the pleasure of attending a very interesting event in London yesterday afternoon. Intelligent Environments, a digital banking software company, was launching Interact, its new platform for “connecting money to people.” It was great to learn more about the new solution and to discuss with the company where digital banking and payments are heading. No one disputes anymore that digital channels have become critical for retail banks. However, one statistic stood out and was probably unexpected to many people in the room – according to the latest research by IE and YouGov, 51% of UK consumers now see digital channels as the primary driver of their bank loyalty, even ahead of customer service. Another highlight of the day was the guest keynote speaker, Magnus Lindkvist, who was introduced as “Trendspotter & Futurist.” Unlike some of the other futurists who predict that soon we will be walking with chips in our heads, Magnus wasn’t making any predictions at all. Instead, he talked about how difficult it is to spot some of the trends and what companies can do if they want to not just compete (i.e. offer slightly better/ cheaper products/ services), but to genuinely create something new and innovative. The answer is experimentation (although increasingly difficult to do in risk-averse and compliance-driven environments), failure recycling (e.g. not all dot com ideas were bad), and (perhaps the hardest one of all), patience & persistence. Magnus is an incredibly engaging speaker and it was an hour filled with wonderful examples and memorable quotes, such as “technology needs to become boring to change the world” and “we are the last generation to believe connectivity is special.” No one can predict the future, but all of us can tune our antennas better to increase our chances of catching that next big trend. Have you spotted a new trend in banking or payments? Let us know – we would love to hear from you!