FinTech

More Than Any Other Industry, FinTech Needs Accelerators | PandoDaily

Great post today by Erin Griffith on PandoDaily about the nature of innovation at financial institutions:

Startups in the finance industry face a set of challenges so unique that, without help from accelerator, they have no real chance of survival. Finance startups need accelerators because of their mentors -they need someone to teach them to sell to the legacy industry they’re disrupting.

The six startups that FinTech Innovation Lab graduated today seemed successful enough. But the world of finance is so backwards, slow-moving, and risk-averse that even if they managed to get any major institutions to agree to use their products, it’d take them years to actually implement it, facing mountains of red tape and miles of hoops to jump through.

In startup time, a few years is long enough to run out of money.

It’s not even the banks’ fault, necessarily. There is compliance, regulatory oversight, security, and risk to consider. Consumers don’t necessarily want their banks to be terribly innovative. It is the bank’s first responsibility to safely store your money, after all. The elaborate systems of checks and balances are there for a reason.

Still, they’re stifling innovation. “Banks won’t give you a quick yes or no. They’ll give you long maybes until you die,” Yaron Samid, the founder BillGuard told me. “Even if they say yes, it takes 36 months to deploy.”

Read the entire article: More Than Any Other Industry, FinTech Needs Accelerators | PandoDaily.

Two Surefire Ways to Irritate Your Customers

This is my shortest post ever. I have sat in numerous financial services conference sessions over the past several days as I try to contemplate all of the ways that the megatrends of social, mobile, analytics and cloud might impact the future of the client-advisor relationship. One of the biggest things for me is to figure out is how strongly Generation Y‘s current preference for self-service will prevail as they face new life stages and increasing financial complexity in the future.

There are lots of conflicting research, opinions and predictions, and I struggle to assimilate all of the data, but I think I can safely say that either of these two methods will irritate the wealth management clients of the future as much as they do today:

Force your clients into self-service options when they want someone to help them.
Force your clients into getting someone to help them when they want to do it themselves.

You’re welcome. My consulting bill is in the mail.

Social and Channels and Brands, Oh My!

Hopefully readers can forgive me if I sometimes seem a little disjointed in my writings.

I attend wealth management conferences and find myself the only person talking about digital marketing, social media and engaging clients across multiple delivery channels. Then I attend social media and financial technology events and find myself the only person talking about wealth management, at least in terms of the kind that involves financial advisors actually helping clients.

Then I read, as I have referenced before, Ron Shevlin‘s BS-busting work on his blog Snarketing 2.0 and he skewers the very notion that some of this stuff even matters:

And so what if banks do create a “consistent brand experience across all channels”? Do you think bank customers will be lulled into forgetting the other issues and problems with their <sic> that they face?

He is right, of course. But I’ll come back to that.

Last week I sat in a room in New York full of bright wealth management executives to discuss important ways that firms can improve client service and grow their businesses. Booz & Company showed research that wealth management was one of the bright spots (along with payments) for growth in a sluggish financial industry. Their research showed an expected growth in the wealth management business of 3x GNP growth. That sounds pretty good until you realize that GNP growth has averaged about 1.5% over the past ten quarters.

Voice of the client largely missing

There were lots of good discussions on lots of relevant topics, but what struck me the most was how internally focused our industry has become. Maybe we have always been this way. Aside from my friends at the VIP Forum and WISE Gateway, most of the discussion was about the firms, their people, the investment strategies and the sales and marketing, rather than the clients themselves.

I can’t count the number of surveys and studies that show the increasing expectations of integrated mobile and web offerings, and the affluent have higher adoption rates than the general population. Yet someone in the room actually said out loud that they haven’t done anything with mobile technology because their clients haven’t been asking for it.

Henry Ford famously said (or perhaps never said, according to Patrick Vlaskovits in the Harvard Business Review) “If I had asked people what they wanted, they would have said faster horses.” Whether he said it or not, the apocryphal quote highlights both sides of the same coin for me.

Listen to your clients. But also use your own intuition to design something to solve their problems in a better, faster or cleaner way. That is the essence of innovation, and what is too often lacking in financial services. (See Five Things Banks Can Learn from Start-Ups.)

Don’t repaint when you need to fix a cracked foundation

Which brings me back to Ron Shevlin’s comments. In my mind, it’s not that financial firms shouldn’t strive to “create a consistent brand experience across all channels” (or engage in social media, or build their brand), it’s that too many firms are focused on the window dressing instead of addressing the core issues that consumers want us to address. Shevlin’s closing comments are spot on:

If, however, the focus was on “fixing problems” or “redesigning” processes and interactions, then maybe funds would flow to the places where they’re really needed.

But you’re not going to effectively prioritize those investment alternatives by asking consumers about their channel preferences.

I am now in Boston and off to another conference, surely filled with bright people. Let’s see who’s really focused on the clients…

More here next week.

Finovate Spring 2012 Recap

Sorry to take a little while to get this posted, but I had an important Mothers Day post to write.

Last week I attended the fifth annual Finovate financial technology conference in San Francisco. This year’s event was the largest yet, with nearly 1200 entrepreneurs, bankers, investors, analysts and FinTech fans experiencing 63 product demos in 2 days. A few trends I noted:

SoMoLo+Big Data= Deals

As usual, there were lots of innovative companies in the payments space, displaying all kinds of creative ways to move dollars and data from wherever they are to wherever you want them to be. The SoMoLo (social, mobile, local) trend is very evident here, and increasingly being mashed up with Big Data to create specialized Deals– merchant funded rewards, targeted offers, digital coupons, customer loyalty programs, geo-rewards, geo-offers, card-linked offers, offer wallets, etc.

Perhaps one of the most customizable is Giftly, which allows you to gift just about anything from anywhere to anyone– your gift becomes a credit on the recipient’s credit card for a place and amount of your choosing. For instance, you can respond to a friend’s check-in at the local pub with a round on you from across the globe. Pretty cool.

Another very customizable card product is the GlobalVCard, which allows you to issue single or limited use MasterCard numbers for ultra-secure payments. Users can even positively or negatively restrict the types of merchant codes allowed (airlines, restaurants, etc.) and/or limited dollar amounts. Simple and effective user interfaces for iPhone and iPad too. Right now it is only available for CSI MasterCard Corporate Card customers.

Crowdsourcing and White Labeling

There were quite a few white label apps, and as my friend and discerning technologist Bradley Leimer noted on his Twitter feed, it underscores the need for a better user experience in online and mobile banking. Some will leverage their handsome design to help asset hungry banks source new loans, with new social criteria mixed into the underwriting, including OnDeck Capital and Best Of Show winner SoMoLend.

The Gamification of Personal Finance

I have written about my tendency to overuse sports analogies before, but Portfolio Football takes it to a whole new level as personal finance and portfolio management principals are gamified, fantasy football style.

Wall Street Survivor takes a more straight-forward approach, and focuses more on stock trading.

PFM and more for the “Overbanked”

There were lots of great solutions to help empower the “underbanked” (even though analyst and Snarketing 2.0 blogger Ron Shevlin says it’s time to retire that term. As readers of this site know, for better or worse, I have spent most of my career working with the other end of the spectrum. I guess I should call them the “overbanked”.

I am usually somewhat rare at events like this, but I actually heard the term “wealth management” uttered from the stage, not once, but twice. Three of the seven Best Of Show winners involved some form of more sophisticated Personal Financial Management (PFM) tools, including impressive offerings from Personal Capital, MoneyDesktop and iQuantifi.

Also relevant for innovative wealth managers were investor insights from DCisions, a social, communications and collaboration platform manager from Actiance, and a very nice client engagement and management platform “designed by financial advisors for financial advisors” by inStream.

If this trend continues, I won’t be as lonely at future events. That will be good for the wealth management business. I’ve often said that our industry too often makes clients choose between great technology or great people. (Actually, Ron Shevlin would probably approve of the much snarkier way I describe it in person, but I won’t write it here.)

We need to deliver both to be truly excellent.

Congratulations Finovate Spring 2012 Winners!

Congratulations to the Finovate Best of Show winners (in alphabetical order):

All in all a great show, and I enjoyed meeting lots of great people as I explore the intersection of leadership, advice and technology. More of my impressions and my personal favorites coming soon.

BehavioSec

BillGuard

SoMoLend

Finovate Spring 2012 Preview

This week I will be back in San Francisco attending the Finovate Spring 2012 financial innovation conference.

Finovate is a two-day showcase of the newest financial and banking technology innovations from both established companies and startups. Short company demos of just seven minutes each are presented in back-to-back blasts, and no slides are allowed, so presenters have to focus on the key benefits and what makes their product stand out.

I am looking forward to networking with some old friends and meeting some new ones as I once again take my exploration of leadership, advice and technology on the road.

I will be back here with my notes and observations.

FinovateSpring 2012 Presenting Companies

http://www.finovate.com/spring2012/presenters/imagerotator.swf

Access Development	CoverHound	Kabbage	SaveUp
Actiance	CSI globalVCard	Keynote DeviceAnywhere	Serverside Group
Affinity Solutions	DCisions	Klarna	Silver Tail Systems
Applause Learning	DeviceFidelity	Kuspit	Social Money
Balance Street	Dwolla	Linkable Networks	SoMoLend
BancBox	Dynamics	Mitek Systems	Swipely
BankersLab	eDeposit	MoneyDesktop	TASCET
Bazaarvoice	edo Interactive	mSHIFT	Taulia
BehavioSec	Expensify	NICE Systems	Thomson Reuters
Bill.com	Experian	Nomis Solutions	TIO Networks
BillGuard	Flint Mobile	On Deck Capital	Transparency Labs
Blaze Mobile	FutureAdvisor	PaySimple	Virtual Piggy
Cachet Financial Solutions	Giftly	Personal Capital	Wall Street Survivor
Cardlytics	inStream Solutions	Pindrop Security	WattzOn
Clover Network	IP Commerce	Portfolio Football	Wipit
Concur	iQuantifi	ProfitStars	ZipZap

Five Things Banks Can Learn From Start-Ups

Most bankers don’t spend a lot of time with start-up companies. The need for bankers’ loan decisions to be right 99% of the time tends to not mix well with most start-ups’ risky and voracious appetite for capital.

Outside of a few bankers in Seattle, Silicon Valley and a few other places, the clear exception is the banking innovation and financial technology (fintech) communities. We all get together at great conferences like Banking Innovation and Finovate, and I always learn from bankers, large vendors and entrepreneurs alike.

The best start-ups have lessons that a lot of bankers would do well to learn:

1. Start with the customer

Start-ups that take off and grow are usually designed around a specific set of customers, whose needs and preferences are deeply understood. Most banks want to be all things to all people, so they end up being nothing much to far too many. Of course, there are some interesting exceptions. For some really thought-provoking ideas read about niche banking from Tribed, whose CEO Jeff Stephens I had the pleasure of meeting at a recent conference.

2. Know your value proposition

Great start-ups understand what problems they solve for their customers. They know their pain points how their solutions add value. Many banks are still oriented around selling products that may or may not solve any specific problems. Worse, customers have an even harder time perceiving value from the myriad of add-on fees that too often are not linked to any value-creating activities.

3. Iterate regularly

By their very nature, start-ups that survive and thrive stay close to their customers and make regular iterations of their offerings to better tailor it to what their customers want (and not necessarily what they say they want). While bank customers don’t want change simply for change’s sake, well-considered tweaks for well-defined reasons increase satisfaction and loyalty.

4. Keep it lean

I worked many years for a CEO whose simple mantra was “grow revenue faster than expenses and great things happen”. My review so far of banks’ 1Q earnings shows a continuation of a fair number of banks growing expenses faster than revenue, some of them with efficiency ratios (non-interest expense as a percent of revenues) in excess of 65-70% and even higher. This is not sustainable. If the revenue challenges cannot be met, expenses will have to be cut to maintain EPS growth. Otherwise, merger mania may indeed by imminent, as I have previously posted.

In the start-up world, the dot com boom rally cry of “get big fast” has largely been replaced by lean and mean infrastructures. Instagram– which just sold itself to Facebook for a a billion dollars– has barely a dozen employees.

5. Protect your capital

Entrepreneurs know that capital is precious and they have to allocate it wisely. Signing that expensive lease on a fancy new office suite may mean that you can’t make that critical server upgrade or hire that new business development manager.

Bankers should know that capital is precious too, but I see evidence to the contrary so often that I wonder sometimes. The financial meltdown revealed huge leverage ratios and loan books filled with poorly underwritten loans that quickly depleted capital reserves.

Today’s slow growing environment is causing bankers to be tempted to forget this lesson in the quest for loan growth. Which is why I always say that bankers need to think like private fixed income investors.

Investment Dollars for Start-Ups: Who’s Getting the Cash? (forbes.com)

Best of Bank Innovation 2012- Part 2

Yesterday I brought to you some of the best thoughts from Day One of the Bank Innovation conference held last week in San Francisco. It was a great event filled with some of the sharpest minds in financial innovation. Today, I bring you some of the best ideas from Day Two, plus a few of my closing thoughts.

Channel Agnosticism: Being Everything to Every Customer

“Multi-channel strategy is solving issues that exist in a single channel world…Think full service vs. self service, not traditional vs. alternative (channels)”

—Ginger Schmeltzer, SVP, Digital Channel Management, SunTrust Banks

“Be the right things to the right people in the right channel…Focus on optimization, not migration…” Think in terms of an analogy to eating:

Snacking- wherever, whenever = check your balances, transfers
Lunch- diverse, habitual and regular = online banking, bill pay
Fine dining- staff assisted = important and meaningful decisions”

—Geoff Knapp, Vice President, Online Banking & Consumer Insight, Fiserv

“Mobilize and optimize– don’t miniaturize…Continuously evolve the experience as devices change…so many mobile capabilities to leverage– maps, GPS, messaging, speech input, camera, video, etc., etc.”

—Brian Pearce, SVP, Head of Retail Mobile Channel, Internet Services Group at Wells Fargo & Co

My Closing Thoughts

There continues to be a tremendous amount of innovation in the payments and transaction space, both from within the banking industry and from disruptive forces outside the industry.
Several speakers talked about moving beyond the efficient utility of flawless execution to creating more engaging experiences.
There was also increasing talk of creating more consistency in functionality and experiences across multiple channels (web, mobile, apps, mobile web and “real life”)– what Steve Jobs would have called an “ecosystem”.
Accordingly, financial institutions are beginning to integrate Big Data into the ecosystem (and vice versa), but most have a long way to go.
Most financial institutions are still in the early stages of integrating digital marketing and social media into their overall strategies, and many are still struggling with more basic concerns of sales and revenue growth, talent management and trying to figure out how to take market share from one another.
As far as I know, I was the only person in the room with a background in wealth management. I continue to be energized by how much white space there is to explore at the intersection of leadership, advice and technology.

Where Banking Meets Innovation: Innotribe (bradleyleimer.com)

FinTech

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