Finovate Roundup

Finovate Roundup
I had the opportunity to attend Finovate Startup in San Francisco earlier this week. It was a great event with a slew of fintech companies showcasing their wares to the captive audience. Each company was given 7 minutes to live demo their product – not an easy task. I’m very much a hands-on person so I appreciated this format. The demos were great and I got a pretty good feel for each firm’s product. The audience was a mix of vendors, press, analysts, financial institutions and VCs. I was surprised and disappointed to see how few banks were in attendance. Only 17% of the attendees were from financial institutions, and 40% of the FI attendees were from a single institution. Banks need to do more with regards to innovation and this event is a perfect place to learn more, and formulate thoughts and ideas. It’s also a great opportunity to look for vendor solutions that will improve feature/function, customer experience and overall competitiveness. While many of the startups offer their solutions directly to consumers on the web, there are a good number of firms that would be quite happy to sell their product to a bank. Some takeaways and trends from the show: PFM is where it’s at. I was amazed at the number of PFM solutions that were showcased at Finovate. Vendors include, moneyStrands, Wesabe, Mint, Jwaala, and greensherpa. I am a big proponent of PFM (see the following blog entries ) and was happy to see the emphasis. However, the market cannot sustain this many vendors and some will have trouble staying alive. PFM is expanding beyond budgeting and tracking. A number of vendors (Mint, greensherpa, Rudder, and Simplifi) demonstrated solutions that provide a picture of a consumer’s financial health/viability and financial planning. Grades/rankings are provided and customers can see where they need help and can plan for the future. BillShrink demonstrated an impressive solution that can help consumers save money on their wireless bills, gaz, and credit cards. Lending related solutions are gaining popularity. Tight fisted banks are driving consumers to a variety of places and P2P lending companies are capitalizing on this. Vendors here include, Prosper (now reopened), Lending Club, People Capital, and Pertuity Direct. Other vendors showed off lending and credit related offerings. These include Know Before You Apply, Credit Karma, Home-Account, ZimpleMoney, and SmartHippo. Payments offerings. A number of companies had payments solutions – SmartPay, HomeATM, Moneta , and Tempo Payments. Mobile Solutions. iPhone apps were the talk of the town (some live, some in development). Mobank demonstrated a neat e-commerce iPhone app. Not enough emphasis on security. Only 2 security vendors were part of the mix. Aradiom with a soft token for mobile phones and mobile banking, and Silver Tail Systems with their forensics solution. I was worried about the security of some of the solutions that I saw at Finovate. One vendor, Tempo Payments actually showed a form that contained a full SSN – not something you ever want to request or display online! The audience was given the opportunity to vote for best of show. BillShrink, Prosper, Silver Tail Systems and Simplifi were selected (in no particular order). Look for an upcoming Celent report authored by yours truly that examines the fintech space and what it means for banks.

NACHA Payments – Trends and Thoughts Related to Online Banking

NACHA Payments – Trends and Thoughts Related to Online Banking
I got back late last night from the NACHA Payments conference in Orlando. It was a good event, although not surprisingly, it was apparent that attendance was down. Sessions seemed to be well attended, although exhibit hall traffic was light (and much smaller this year to boot). I spent most of my time at the conference in meetings with our clients – a mix of banks and software vendors. Most of my meetings centered around online banking and payments, particularly for small businesses and large corporates. A few noticeable trends emerged:
  • Web 2.0 is finally arriving to the business online banking space. Almost all the vendors I met with either talked about or showed me fresh GUIs with better navigation and layout. This is long overdue. A couple of the vendors have been working on this for a little while, and their advances made it into my upcoming online cash management vendor evaluation report (the report is complete. It’s now time for it to be edited and for the vendors to review their profiles prior to publication). Bank of America had an interesting but basic presentation on next generation Web 2.0 cash management solutions. I was quoted in the presentation, and it’s nice to see a bank thinking about the next generation of solutions.
  • Dashboards are a key component of next generation online banking solutions. This was definitely the buzzword. I discussed this at length in my report, Web 2.0: A Quantum Leap for Wholesale Banking .
  • Banks still don’t get the importance of PFM for small business. I seemed to be the one asking the questions about this. I would have liked to see greater emphasis on PFM, particularly with the Web 2.0 demos and discussions.
I also gave a presentation together with Bremer Bank and Fiserv called, Courting a New Kind of Customer: Serving Small Business Online. The session was well attended and there were a few good questions at the end.

Move Over Token! My Phone Can do The Trick.

Move Over Token! My Phone Can do The Trick.
2009-04-01_1643Banks have been issuing tokens to their business and corporate customers for some time. These multifactor authentication devices typically generate a one-time password that the user is required to provide upon login or to confirm a specific activity (e.g. the release of a wire transfer). Customers with multiple banking relationships end up lugging around a bunch of different tokens. They are easily misplaced, and the cost of these devices can also add up quickly (whether they are being paid for by the bank or the customer). Is there an alternative to the good old token? The mobile phone could be a great alternative in the form of out of band authentication (typically a text message sent to the phone containing the one-time password) or an one-time password generating application that resides on the phone. Out of band authentication hasn’t caught on too quickly in the North American marketplace, but Celent predicts that adoption will gather speed as business users rely more on their mobile devices. The password generating application holds a lot of promise as well. Yesterday, Verisign announced the availability of a one-time password generating iPhone application (dubbed VIP Access) that would be a great alternative to a token. The app will be available for other devices as well (Blackberry, etc.). It can currently be used on select consumer sites (PayPal, EBay, AOL, etc.) and a handful of Australian credit unions (click here for list of supported sites). It will be interesting to see which US bank is the first to use this app for online banking MFA. I doubt US banks will be too keen on integrating this into consumer online banking as the bother factor is too high. Consumers are finicky and can get thrown off by too much technical change and interruption. It’s a great small business banking idea however and could have ramifications in the corporate space, particularly if it’s available for Blackberry models.

Banks need to jump onto the PFM bandwagon

Banks need to jump onto the PFM bandwagon
Wesabe announced today that they will start to sell their PFM offering (dubbed Springboard) to banks and credit unions. Wesabe is not the first vendor to start selling directly to banks. Earlier this year, Geezeo made a similar announcement. These are win-win moves for both the banks and the software companies: – Bank PFM tools cannot compete with the rich solutions offered by non-bank providers. They need to update their offerings in order to remain competitive and keep clients attracted to their sites. For more info see my post on PFM Meets Social Networking. – The non-bank PFM providers have been struggling to make money. Their products are offered free of charge to consumers and their online business models are questionable. Direct sales to banks will provide a much needed revenue stream. Expect to see more of this trend as we move forward. It will be interesting to see how this software will affect PFM usage growth at the banks.

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Bank of America Puts a New Spin on Cross Selling and Online Banking

Bank of America Puts a New Spin on Cross Selling and Online Banking
Bank of America recently introduced a new program called Add it Up. This creative program allows BofA credit or check card holders to receive cash back (on their credit card or deposited to their BofA checking account) when they shop online at a variety of merchants. It’s an interesting move as banks don’t typically tie themselves into other industries (retail in this case). The partnerships with retail merchants are certainly a creative way of marketing and relationship building. There is a long list of merchants to choose from and the cash back percentages are quite decent. A couple of things caught my eye: – This is a great way to cross sell.You need to enroll for this via BofA online banking. In other words, if you have a BofA credit card but don’t bank online with them, you must now open an account. Or vice versa (bank online, need to get a credit card). A good way to cross sell and tie complementary products together. – The offer is attractive since people are trying to save money. The rewards offered here are exactly what US consumers are looking for. Money is tight and folks will be more than happy to save wherever they can. – This is the time for banks to solidify customer relationships. Consumers are wary, banks are shaky. This is a move that cost-conscious consumers will appreciate and it can certainly contribute to the relationship stickiness factor. It is important to note that this is NOT a new concept. Receiving a discount or cash back for online shopping has been available for some time through a variety of consumer sites. Examples are www.fatwallet.com and Live Search. Users of these sites don’t have much incentive to switch to BofA. However, Existing BofA customers who are new to the cash back concept will find a lot to like.

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PFM Meets Social Networking?

PFM Meets Social Networking?
There was an interesting article this morning in American Banker called, “E-Banking, Meet Social Networking.” After reading the article I came up with 2 conclusions: – Banks need to improve their personal financial management offerings (PFM). The article talks about how Geezeo is offering a white label version of its PFM software to banks. While many banks have PFM tools that they make available to their customers, they pale in comparison to those offered by non-banks in this space (e.g. Mint.com, Wesabe, Geezeo). I would like to see a few banks come up with more competitive offerings (either on their own, or using a 3rd party). Customers really value these tools and they are being demanded, particularly in tough economic times when folks carefully track their spending. – Social networking can be an interesting component of PFM but is not an absolute requirement. This is a nice to have feature, but not one that will keep customers coming back, particularly in the short term. Basic community features would be nice, or at least some spending stats from the overall user base. However, I see customers gravitating more towards the functional component of PFM as opposed to the social networking aspect. In fact, some banks may be scared off if they have to deploy PFM and social networking features in one swift motion. Banks will want to have the option of choosing the features they want to turn on or off.