MOBILE FINANCE 2016 TRENDS AND INNOVATIONS

1 Table of Contents

 Introduction

• Wearable Technology  2015 Mobile Trends & Innovations • 3D Force Touch • Widgets & Previews • Wearables • Transactions  2016 and Beyond • Virtual & Augmented • Mobile Account Openings Reality • Security • Bitcoin Wallet Security • Mobile Innovators  About Us • Corporate Insight • Key Takeaways • Mobile Monitor

2 Introduction Keeping up with Mobile Finance

2015 saw financial institutions continue their shift toward a mobile-centric approach, as this channel quickly becomes the primary means of interaction between consumers and firms. According to a March 2015 report from the Federal Reserve, 35% of mobile phone users with a bank account used mobile banking in 2014, up 150% from 2010. Additionally, 52% of all smartphone owners have used mobile banking in the last 12 months.1 Building a strong mobile offering can help reinforce a positive relationship with clients, especially younger, more tech-focused Millennials. As a result, mobile finance apps continue to evolve to provide consumers with the information they want, when they want it.

Financial services firms continued to improve and refine their smartphone capabilities, and have begun to capitalize on new and trendy devices such as wearables. Traditional, established players are also taking inspiration from fintech firms and bitcoin wallet providers to provide a better experience to their clients.

In December 2014, we published our year-end review of noteworthy mobile finance trends that had occurred that year. Now, at the start of 2016, we take at look at how those trends have advanced and highlight some new developments that have emerged. We supplement this report with our recent research on mobile account opening, Apple Watch apps, money movement and fintech mobile innovators.

4 Consumer and Mobile Financial Services 2015. Federal Reserve Board. March 2015. 2015 Mobile Trends & • Wearable Technology • 3D Force Touch Innovations • Widgets & Previews • Transactions • Mobile Account Openings • Security • Mobile Innovators Wearable Technology The release of the Apple Watch reenergized the wearables market

• The Apple Watch was released on April 24, 2015 and had an immediate impact on the financial services industry 2015 Smart Wristwear Market Share

• While other wearable devices had been on the 8% market for several years (e.g., Pebble), few 9% financial services firms had invested any effort in developing apps on these platforms

17% • In less than a year since its release, many financial services firms have already updated 58% their iPhone apps to support the Apple Watch, including Bank of America, Capital One, Charles Schwab, Citi, Discover, E*TRADE, Fidelity, TD Ameritrade, USAA and Apple Watch Android Wear Pebble RTOS Source: IDC

6 Wearable Technology Apple Watch capabilities from traditional firms remain limited in scope

• While the Apple Watch may one day offer robust functionality, financial services firms are limited in what they currently provide clients

. Banks and credit card providers tend to only offer account balance details

. Most brokerage firms only provide basic information about Charles Schwab Initiate Trade markets and watch lists

• Charles Schwab and TD Ameritrade stand out for allowing clients to initiate trades via the Apple Watch, though the transactions must be completed on the synched iPhone

• Fidelity offers detailed market information and charts that effectively utilize the Apple Watch’s limited screen space Fidelity Markets Fidelity Details

7 Wearable Technology Fintech investing, budgeting and P2P firms provide more robust transaction capabilities

• allows clients to complete a trade directly through its Apple Watch app

Robinhood Trade Process

• Additional transaction capabilities at other firms include deposits and contributions toward goals (Acorns and Betterment) and P2P payments (Square Cash)

Acorn Deposits Betterment Deposits Square Cash Payment 8 3D Force Touch Apple introduced 3D Touch capabilities to its iPhone 6s, providing users with a new way to interact with apps

• 3D Touch provides different interactions depending on how hard the user presses on the screen, including what Apple calls “Peek and Pop” and “Quick Actions”

• Users can tap firmer than usual on a screen component to get a peek at what it consists of, and then tap more firmly to “pop” the window into full view

. On the USAA credit card Transactions screen, clients can use 3D Touch on a transaction to view additional details without USAA Peek and USAA Quick navigating to a separate details screen Pop Actions

• Quick Actions menu options appear when users press firmly on app icons from the phone’s Home screen

. USAA and Vanguard clients can use 3D Touch on an app icon to gain quick access the most commonly used sections of the apps

9 Vanguard Quick Actions Widgets & Previews Widgets and previews offer quick access to account information without logging in

• Access to account balances is a vital aspect of any firm’s mobile app • With that in mind, firms have developed two ways to provide clients with quick access to their balances:

Widgets In-App Account Previews

. Firms including Discover, E*TRADE, Fidelity, Fifth Third and . Firms including Discover, Fidelity, Fifth Third, PNC and Wells Merrill Lynch/Edge all offer iOS and Android widgets Fargo offer account previews without having to log in

Discover Card Widget - E*TRADE & Charles Schwab Citibank Mobile Snapshot - Android 10 iPhone Widgets - Android Transactions Several firms improved or enhanced their existing transaction capabilities

• Ally Bank and U.S. Bank introduced rush delivery on bill payments

• Retirement firms introduced new IRA contribution capabilities

. USAA now allows customers to make contributions to their IRA

. Voya Financial’s MyOrangeMoney retirement projection tool allows participants to update their contribution rate

• TD Ameritrade clients can create new custom option strategies from the firm’s thinkorswim app

U.S. Bank Express Bill Pay thinkorswim Custom Option by choosing up to four option legs

11 Mobile Account Opening Leading firms have finally begun to offer a mobile account opening experience

• Of the 27 firms tracked by Mobile Monitor, 19% now offer the ability to start a new relationship via their mobile app, while 52% provide access to a mobile-optimized account application when visiting the firm’s site from a mobile device

• Bank of America, Fidelity, KeyBank, USAA, and Vanguard allow clients to open a new account directly from their mobile apps

. Expedited applications with pre-filled information for existing clients help to streamline the process

• USAA and Wells Fargo (mobile site) offer an innovative feature that auto-populates key fields in the application with information drawn from a photo of one’s drivers license

Bank of America Expedited USAA Photo Capabilities Application

12 Security Mobile security continues to be a focus for enhancements

• Discover, USAA and Capital One Wallet’s apps include the ability to temporarily lock or freeze a credit card if it is misplaced or stolen

• Biometric security is increasingly prevalent with Touch ID as the most common implementation

. 44% of the firms covered in Mobile Monitor now provide Touch ID login

• Bank of America and Chase provide an alternative second-factor authentication option to log in with the use of a token

Discover Freeze Account Chase – Use Token

13 Mobile Innovators Fintech startups are offering a more streamlined registration/aggregation experience

• Innovators such as Square Cash and Venmo borrow mobile-first social design characteristics to simplify the registration and use of the app . Venmo customers can link a Facebook account and send money to people on their friends list . Square Cash’s payment activity mimics that of a messaging interface, drawing inspiration from outside of financial services • Acorns, Coinbase and Robinhood use account aggregation to quickly link multiple external accounts . Customers can simply choose their bank from a set of logos and enter their online banking username and password to establish a connection

Venmo Enrollment Square Cash Payment Activity Coinbase Account Aggregation 14 Mobile Finance: 2016 and • Wearable Technology Beyond • Virtual & Augmented Reality • Bitcoin Wallet Security • Key Takeaways Wearable Technology Wearable devices will begin to provide a wider range of transaction capabilities

• We expect to see more financial services firms introduce new transaction capabilities to their wearable apps as developers learn the strengths and weaknesses of the platform . Banks will support transfers, P2P payments and bill pay with a tap from the app

CIBC - Transfers

. Brokerages will allow clients to initiate and even complete trades on the Apple Watch

Robinhood - Trade 16 Virtual & Augmented Reality Firms will explore new uses for augmented & virtual reality apps • With the release of Oculus Rift and Samsung Gear VR last year, firms are beginning to experiment with virtual reality capabilities to create visual and fun experiences for clients . Fidelity created the StockCity app for Oculus in 2014. It visualizes portfolio data as a city where different building heights correlate to at different prices. • On a more practical level, USAA offers a “Specs” feature for homebuyers that uses augmented reality to view property information • Magic Leap, the augmented reality startup, secured $793.5 million in funding from several prominent investors including Fidelity and J.P. Morgan. The technology could allow firms to superimpose 3D imagery over real world experiences.

Fidelity StockCity Oculus App Magic Leap Demo Video 17 USAA’s Specs Feature Bitcoin Wallet Security Firms may begin to adopt the tighter security standards used by Bitcoin wallets

• While many financial institutions use two-factor authentication at login, this technology can be leveraged on a per-transaction basis as an optional layer of additional security

. GreenAddress requires two-factor authentication on a per-transaction basis; Amory requires users to enter their passphrase in order to conduct an outgoing transaction

• Firms may adopt mnemonic passphrases to replace credentials or as a password recovery tool Breadwallet Passphrase & Warning

. Bitcoin wallets typically use a set of between 6-15 random words (e.g., “angry owls cereal carwash bubble curtain”)

. Breadwallet goes as far as requiring customers to create a new phrase if they attempt to take a screenshot of the phrase with their mobile device

• Blockchain offers a password strength tool in the app to ensure users are creating strong credentials

18 GreenAddress Two-Factor Security & Blockchain Password Strength Tool Key Takeaways for Financial Services Firms

• Financial services firms need to recognize that a growing number of clients want a “mobile-only,” or at least “mobile-first,” relationship with them. Today, this kind of relationship is nearly impossible, at least with the major banks, brokerages and card issuers, since so many account capabilities and features are only accessible from these firms' websites. When mobile apps were first introduced, they were viewed as complementary access points to the website for users on the go. Now a growing consumer segment would prefer to use the mobile channel as the main way of interacting with their financial services providers. Firms should provide such a "mobile-only" or "mobile-first“ experience, or they may lose clients to more cutting-edge startups and fintech firms that do provide a truly mobile-focused experience.

• As mobile devices evolve, the possibility to provide a broader range of enhanced capabilities grows. Many of the most common functions available on today’s mobile platforms were not feasible or compatible with the software or hardware found on the first generation of mobile devices. As new and improved smartphones are introduced to the market, financial services firms have the opportunity to provide innovative products, services and experiences.

• Customer experience is being benchmarked across verticals. While innovators such as Betterment, Wealthfront and Venmo have disrupted the competitive landscape within financial services, customer expectations are being shaped by other cutting-edge websites they use in their daily lives. The superb experience provided by companies like Apple, Amazon, Facebook and Google has set a new bar that financial services firms must clear if they hope to delight their customers. With that in mind, it’s critical that financial institutions look beyond their own industry to benchmark the experience they provide against the offerings of these best-in-class organizations.

19 About Us • Corporate Insight • Mobile Monitor About Corporate Insight

• Corporate Insight is a New York-based research and consulting firm that helps financial institutions improve their customer experience and establish a compelling competitive advantage • Our Monitor research offers ongoing competitive intelligence by industry vertical, reporting on the customer experience from a unique firsthand perspective • Our Consulting Services team provides a range of strategic and tactical research services, with a focus on emerging technology and disruptive forces. Our services include:

. Custom research, including mobile-focused engagements

. Survey research, including investor, retirement plan participant and bank customer surveys

. Industry-wide studies on key topics (e.g., Millennials, fintech startups, etc.)

. User research (e.g., user testing, heuristic reviews, etc.)

. Website and Mobile Audits • For more information about Corporate Insight, please contact Craig Sherter at (646) 929-5149 or [email protected].

21 About Mobile Monitor Mobile Monitor’s Cross-Industry Coverage Set • Mobile Monitor is Corporate Insight’s subscription research service that tracks mobile development across the bank, brokerage, credit card and asset management industry segments. • We provide our subscribers with: . Bi-weekly Updates reporting on mobile platform developments at over 100 firms . In-depth Quarterly Reports on such topics as:  Mobile Leaders  Mobile Account Opening  Apple Watch Apps  Money Movement . Quarterly capabilities matrix and films . Analyst support

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