June 2017 Issue 738 www.retailbankerinternational.com

IT’S NOT EASY BEING GREEN – OR IS IT?

New providers aim to deliver ethical and sustainable banking

● DISTRIBUTION: Avidia ● ANALYSIS: Social Finance ● DIGITAL: Bank of Montreal ● RESEARCH: Customer Experience

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Key Issues

Recognising regulatory changes and trends in private banking this year Identifying the needs and preferences of today’s clients Next generation banking and how it is evolving How is digital shaking up the wealth management industry? Family O ces: How can they continue to succeed in today’s market? The importance of conduct risk at London’s private banks Brexit: how will this shape the future of private banking in Switzerland and Europe

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Private Banking Swiss_2017_ad.indd 2 13/06/2017 11:38 Retail Banker International EDITOR’S LETTER

CONTENTS

3 S NEW : ANALYSIS Patrick Brusnahan reports back from EBAday 2017 in Dublin. Are banks To the rescue! missing a trick with PSD2? And is Dublin set to become the next financial hub?

3 GUEST COMMENT: MONESE Despite the explosion of contactless and mobile payments, financial exclusion, sadly, still exists in the UK, writes enable it to continue as a standalone entity Monese VP Mulenga Agley and “safeguard the bank’s values and ethics”. 4 STRATEGY: SUSTAINABLE BANKING However, there are a number of new play- Banking can be described as many ers in the market also aiming for an ethical or things, but the words ‘ethical’ or ‘sustainable’ rarely come up. However, sustainable way to do business. If customers some providers are hoping to change really want an ethical bank to manage their this, writes Patrick Brusnahan finances, it remains to be seen if the Co-op 6 ANALYSIS: SOCIAL FINANCE will remain their first port of call. US online lender Social Finance plans In terms of needing rescue, Co-op is far to apply for an industrial bank charter from alone. Banco Popular in Spain had to so it can offer bank accounts and credit cards. Robin Arnfield speaks to industry be saved by Santander, increasing that behe- analysts to gauge its chances of success moth’s already impressive scale. At the time,

8 PRODUCTS: PREPAID IN CANADA Popular was Spain’s sixth-biggest bank, so Two Vancouver-based fintechs have that’s quite a fall. launched mobile-enabled prepaid Italy has to cough up $19m to clean up two cards targeting Canadian millennial banks in the Veneto region: Banca Popolare di consumers. Robin Arnfield assesses the market’s promise and headwinds Vincenza SpA and Veneto Banca SpA. Not far behind, the world’s oldest bank, Banca Monte 10 AL DIGIT : BANK OF MONTREAL dei Paschi di Siena SpA, is in talks with Euro- BMO Bank of Montreal has won Celent’s Model Bank 2017 Award for process Another twist in the overlong tale of The pean authorities about a precautionary recap- automation. Robin Arnfield talks to Niti Co-operative Bank (Co-op Bank) and its italisation, hoping that will be enough to help Badarinath to find out more about the struggles since 2013, as the ethical bank has it remain the world’s oldest surviving bank. progress of the bank’s digital initiatives ceased plans for its sale. European banks really are testing the value 12 DISTRIBUTION: AVIDIA It hopes a new rescue plan from its hedge of the phrase ‘too big to fail’. Avidia Bank is using social media fund owners will save the firm. in conjunction with a branch transformation programme and outreach Co-op Bank put itself on the market in Real co-operation to the local community. CarrieAnne February after it was unable to reach a strong I am obliged to Efma and Capgemini for Cormier explains all to Robin Arnfield enough footing to satisfy Bank of England their latest World Retail Banking Report. It 14 RESEARCH: CUSTOMER EXPERIENCE regulations. It also said it needed £750m states what we have all been thinking: Cus- One thing that new digital banks and ($961m) to fill a capital shortfall. tomers are having more positive experiences fintechs potentially offer is a new, more But in June, it said it was in “advanced dis- with newer players than with their banks. positive experience for the customer. And it seems that many are actually cussions” with a group of existing investors The battle for the customer relationship is delivering. Patrick Brusnahan reports on recapitalisation. truly underway. Without providing positive Now the bank says the plan has been “sub- experiences, the age-old incumbents could 20 GUEST COMMENT: EQUIMEDIA How can banks ensure that their stantially agreed”. It must be one hell of a res- easily fall behind. businesses and products are easily cue plan: According to reports, the rescue is It goes without saying that banks still have discoverable by Google? equimedia’s valued at approximately £700m. the money and the scale that fintechs can only offers some key advice Jonathan Moore The Co-op Bank, in which the Co-opera- dream of, but many state that co-operating tive Group still has a 20% stake, was rescued with tech-savvy players is the way forward. from the brink of collapse by a group of hedge Is this the key to survival? Let’s hope so, funds in 2013. Earlier this year, it reported as some institutions are in desperate need of its fifth annual loss in a row, although the a solution. £477m deficit for 2016 was an improvement on the £610m loss recorded in 2015. Patrick Brusnahan The Co-op Bank has four million custom- [email protected] ers and is well known for its ethical stand- point. The lender said the rescue plan would Douglas Blakey is currently away

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RBI 738.indd 1 28/06/2017 17:39:49 NEWS: ANALYSIS Retail Banker International

EBAday 2017: Banks missing a trick with PSD2 With the Second Payment Services Directive (PSD2) deadline quickly approaching, which banks will make the cut and which ones will be left behind? More to the point, why is there so much hesitation in how banks prepare for compliance? Patrick Brusnahan speaks with experts to gauge the industry’s readiness

Steve Kirsch, CEO at Token, believes the While meeting the PSD2 regulation’s cri- hesitation about PSD2 is just part of the way teria is crucial, compliance for compliance’s banks work. sake could be a waste of time when there are He says: “Bankers hate making decisions. other – quite possibly greater – applications How many bankers does it take to screw in and opportunities. a light bulb? They wonder if something will Ben Robinson, chief strategy officer at happen tomorrow which makes the decision Temenos, says: “The vast majority of our they make the wrong decision. customers will be compliant in time. I think “Our position is: You are out of time, make what we would really like to be doing is hav- the best decision possible.” ing a strategic conversation on doing much Asked whether banks will be compliant by more than just compliance. the PSD2 deadline, he adds: “For some, yes. “The problem is, because the deadline is For others, maybe not. approaching so quickly, it is difficult to have “It is silly, but it would be like being the last “This is despite the fact that our research that conversation. bank on the internet. The guys who moved and the market both say that APIs and real- “We’ve had interesting conversations with slowly onto the internet got crushed and are time are the new things.” banks that want to become true open banks, at a permanent competitive disadvantage. Jerry Norton, vice-president of financial Robinson continues. Why would anyone want that?” services at CGI, continues: “I think it is a real “In the way we define it, they do not just Tim Brew, global lead of financial services disappointment. It is an opportunity missed. aggregate their customers’ accounts, but marketing at CGI Global Payments, says: Most banks, for lots of reasons, want to see distribute products and accounts through “Bankers really have not got their ducks in that open API interface. It seems somewhat third parties – and that is a very interesting a row regarding PSD2, and there is a strong perverse to me that screen-scraping and proposition. possibility that it will not deliver what it set whatever is sufficient. It is bizarre, and an For the banks that do that successfully, out to do in the first place. opportunity missed in Europe.” there is a massive market opportunity.” < EBAday 2017: Dublin set to be the next financial hub? As more than 1,400 attendees, a new record, entered the latest EBAday, host city Dublin took the spotlight. With ongoing Brexit-related uncertainty leaving numerous question marks over London’s future, is the Irish capital on the verge of stealing at least part of the UK capital’s crown? Patrick Brusnahan writes Wolfgang Ehrmann, chair of the board of the In excess of 400 Irish and international Euro Banking Association, praised Dublin companies are based in Ireland, with a con- as a “prospering financial hub” in his EBA- centration on Dublin as the capital as 40% of day 2017 welcoming speech. Irish companies’ jobs are located outside the He said: “The payments industry is cur- city, with only 30% of international-based rently struggling to find answers to ques- companies’ jobs outside Dublin. tions. The players are striving to reorient Ryan continued: “Ireland is now the EU themselves in ongoing market transforma- fourth- largest exporter of financial services. tion. Change is always a chance for success.” This is due to the three Ls: Law, Language These statements come in the middle of the and Location.” UK’s Brexit negotiations, which has led to Location was highlighted as crucial for many rumours that parts of the financial sec- Dublin as “Ireland has been regarded as a tor in Britain could migrate to Ireland – and, small island on the periphery of Europe, in particular, Dublin. but that’s led to our success. Being between Paul Ryan, director for international North America and Europe helps us to work finance at Ireland’s Department of Finance, with key companies in both locations.” was even more enthusiastic about Dublin’s With regards to Brexit, Ryan offered an future in the wider sphere of international He discussed IFS 2020, an action plan for enticing arrangement. He explained: “We financial services. Ireland over the next four years. Its set to put are guaranteed passporting and access to He stated: “Government policy remains Dublin as a key area for data and analytics, EU markets. unchanged and remains supportive of the IFS artificial intelligence, fintechs and so on “Ireland’s relationship to the EU is critically [internationally traded financial services] sec- One of the plan’s many targets was to cre- important. It is perfect for companies look- tor. We want to focus building our strengths ate 40,000 new jobs in Ireland through the ing for access to the EU, both inside the UK and talent.” “twin targets of employment and activity”. and elsewhere.” <

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RBI 738.indd 2 28/06/2017 17:39:54 Retail Banker International GUEST COMMENT: MONESE

Financial exclusion in the UK: It will get better not by chance, but by change

With the explosion of contactless and mobile payments, and a conveyor belt of new financial apps for smartphones, you would think that the UK is ahead of the personal finance curve. Yet, sadly, despite these impressive advances, financial exclusion still exists, writes Monese VP Mulenga Agley

hile most of us are familiar with bold in challenging existing processes checking our account balances on and assumptions. our iPhones, or even using quirky Risk-based decisions on whether to take apps that help us track our spend- on a new customer should be based on the W product the customer is looking for, not what ing on a monthly basis, this is a stark contrast to the financial experiences of 1.7m adults you think you might be able to sell them later. in the UK. they are getting for their money, with no Therefore, it is absolutely fundamental At the end of March, the full extent of this nasty surprises at the end of the month. Any- that the minister seeks advice and input from problem was brought to light by the House thing that adds to financial stress for vulner- challenger banks in order to think outside the of Lords Financial Exclusion Committee able customers must be stamped out. box and create solutions that will really have Report. The report’s fundamental goal was an impact. to figure out how to work towards a future Challengers must be advisers whereby the “scandal of the poorest being As a result of relying on the myth of ‘free’ Put a stop to ‘problem profiteering’ excluded from even basic financial services” banking for too long, traditional banks sim- While bank greed is generally understood by no longer exists. ply have no financial incentive to encourage the public, it is sad to see that this mentality One of the primary recommendations financial inclusion. Their dependence on hid- extends also to national customer advice and within the report is the appointment of a den fees as a revenue stream is now so severe support groups. Minister for Financial Inclusion. Having a that it stops them from looking to alterna- It is not unheard of for challenger brands government official devoted to solving this tives, meaning we are now truly at a ‘revenue to attempt to join forces with these groups in issue is a great idea in theory, and would over reason’ situation. a bid to tackle financial exclusion by promot- really help to bring relevant parties together This is best illustrated in the instances of ing alternative services. Sadly, revenue bells to shine the spotlight on the problem. How- people being declined current accounts due start ringing, and these organisations can- ever, for this person to truly make a differ- to having a bad credit rating. The question not help but to start to look at what money ence, they must be ready to address a few we should be asking in response to these sto- could be made from a lead referral-type deal key areas. ries is: Why should credit come into this if it to alternative providers. is not a service they are asking for? Frankly, These organisations are designed to help Bust the ‘free’ banking myth it should not. the most vulnerable of consumers by guid- While the myth of ‘free’ banking is begin- The banks’ rationale for asking the ques- ing them to financial options that best suit ning to dissipate, we need to ensure that this tion is due to their credit-and-lending- their needs. They should be in no position facade is exposed once and for all. The banks focused business model. For banks, prospec- to turn down potential landscape-changing have long been making money from current tive customers are only valuable to them if partnerships if they don’t receive a monetary accounts through hidden fees such as on they can lend to them in the future. While the kickback. missed direct debits, or extortionate extras government did force them to provide basic Until this mercenary approach is dealt like hefty charges on overseas payments. accounts, they do not promote them and with, and advice bureaux start thinking These fees prop up bank revenues and can consumer awareness is low. Banks’ business about the wider benefits of financial inclu- send vulnerable consumers into a world of models mean they can not make it profitable sion and education, there is no way that debt. The real stinger here is the ‘unavoid- with legacy infrastructure, expensive branch they can fulfil support the function that they able’ costs, where customers are forced to networks, and slow, overbearing processes should be. spend money that simply is not there – like holding them back. It is great to see that financial inclusion has the fees charged when you dip into your This mentality means that if the prospec- jumped up the priority ladder for the govern- overdraft for a week or two before payday, tive minister only consults incumbents when ment, and a dedicated minister could be the for example. looking to solve the problem, we are unlikely step required to drive real change. Provided This must be a top priority for an incoming to see any change. that the potential minister keeps this – and minister – they must realise that ‘free’ bank- Challenger banks take a rather different the other issues discussed – in mind, there is ing cannot be accepted as an industry stand- approach. Organisations that fall under this the real chance that we can finally fulfil the ard because it does not exist. If it seems too umbrella recognise that in order to serve this needs of the financially underserved and look good to be true, it probably is. historically underserved group, it is impera- to a fully inclusive financial landscape. Instead, the minister must work to promote tive to challenge and change the status quo. Situations do not get better by chance, but financial providers that are completely trans- Should we see the appointment of a by change. We look forward to supporting parent – by charging a customer a monthly Financial Inclusion Minister, this per - the government on this journey to create a fee, for example, so they know exactly what son must acknowledge this also, and be fairer financial system. <

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RBI 738.indd 3 28/06/2017 17:39:55 STRATEGY: SUSTAINABLE BANKING Retail Banker International

Sustainable banking: Is it a realistic goal?

Banking can be described as many things, but ‘ethical’ or ‘sustainable’ rarely come up, especially if one has just received an unexpected overdraft charge. Even the ‘friendly’ Co-op has been on the receiving end of negative press. However, some providers are now hoping to change this, writes Patrick Brusnahan s ethical banking a feasible option? can actually strengthen financial markets of grown than GSIFIs with regards to loans, It has certainly been tried before. and bring steady financial returns. deposits, assets, equity and total income over The most prominent example in Marcos Eguiguren, executive director a five- and a ten-year period. However, the I the UK is the Co-operative Bank. It of the GABV, explains: “We can find these SFBs have come from a much lower base. operates an ethical policy which, by and [sustainability-focused] banking institutions large, excludes the provision of any bank- in different markets, all serving diverse needs, What’s out there? ing services to businesses which took part but they all are using specific business mod- While ethical investments or lending to wor- in certain business activities or sectors. els driven by a set of common guidelines, the thy causes are achievable goals, an ethical However, recent years have not been kind Principles of Sustainable Banking. current account is an entirely different prop- to the Co-op. In 2013-2014 the bank needed “One of the reasons why these banks are osition. One operator hoping to have a go is a rescue plan to address a capital shortfall growing in size and number is because they Triodos Bank. of approximately £1.9bn ($2.4bn). Over the are meeting the needs of individuals and Founded in 1980 in the Netherlands, the last five years, it has accumulated losses of enterprises in the local communities.” bank has been in the UK for 22 years, but £2.6bn, and since 2012 its branch network The alliance’s 2016 report states: “Sustain- has decided to move into the current account has been cut from 353 locations to 95. In ability-focused banks (SFBs) are growing in space in an ethical way. So, what specifically February 2017, the bank’s board announced strength and number because they focus on does that entail? it was “inviting offers” for a possible sale. real human needs in the real human economy. Huw Davies, head of retail banking at Away from financial stability, other unethi- “Since the financial crisis seven years ago, Triodos, tells RBI: “We are challenging how cal stories emerged regarding the Co-op, a group of SFBs have demonstrated that a banking is done. We’re trying to do things with former chair Paul Flowers caught buy- focus on the real economy, with a dedica - differently, and we think money can be one ing crack cocaine and methamphetamine. tion to supporting economic social and envi- of the most powerful forms of democracy If the most prominent ethical bank in the ronment impact, delivers steady financial and force for good that there is. country turned into this, what chance does returns.” “We have quite a simple model: We take in anyone else have? According to the report, SFBs are big retail deposits from customers – and we’re financers of the real economy in terms of talking about UK savers – and we lend them Are ethics sustainable for a bank? loans to total assets, which was 76.8% in out into sustainable lending in some key sec- Ethics can be a costly endeavour, as the 2015. This is nearly double the loans-to- tors that we think are important in terms of Co-op can attest. However, it does not have total-assets ratio of Globally Systemically sustainability. to be that way. Important Financial Institutions (GSIFIs), “Importantly, the way we do that – and The Global Alliance for Banking on Values which include banks such as Barclays, there’s a lot of talk about transparency – we (GABV), which comprises 40 banking insti- Deutsche Bank and Santander. In addition, in show every single loan that we make. I think tutions worldwide, believes this alternative terms of growth, SFBs have had higher levels that’s refreshing in the sector.”

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RBI 738.indd 4 28/06/2017 17:40:01 Retail Banker International STRATEGY: SUSTAINABLE BANKING

Unity Trust launched a new website in April 2017 in an attempt to make engage- ment quicker and easier. This was followed by six digital sheet advertisements in train stations across the UK, as well as radio and print advertising. Triodos recognises the struggle, but is mak- “We help organisations to prosper ing attempts to gain some attention past its and contribute to economic, current 50,000 customers in the UK. “We’ve had that problem for a while now,” community and social change. says Davies. “We’ve been growing sustain- Put simply, we’re here to help ably and we have a wide range of ways of create a better society” getting our message out. “Interestingly, I think we’re quite a rare Daryl Wilkinson, Unity Bank example of a bank of which our customers are very fond because of the nature of what we’re doing, and that we’re facilitating posi- tive change,” Davis continues. “When they know about us, they think it’s a great idea. The challenge we have is quite According to research from Triodos, two- you look at most sectors, whether its energy, different from a lot of the banks in that it’s thirds of people want to know where banks transport or food, it’s possible to make a sus- a positive message that we need to get out, are lending their money, and three-quarters tainable choice as a consumer. I would argue rather than being known but not liked. It’s are unaware of where it ends up. strongly that financial services, as such a big a distinct marketing challenge, and one that This ethical mentality also applies to how part of our economy, has been behind in that we’ve been dealing with for a while now. bank works internally. There are no perfor- trend.” “We’ve had the initial launch and were mance bonuses and the minimum-to-maxi- Triodos charges £3 a month for its current pleased with the coverage. We have a lot of mum pay ratio is less than 10 – a fair distance account, a move that goes slightly against the engagement on social media – maybe unusu- apart from some of the bigger banks. grain of the multitude of ‘free’ UK accounts. ally for a bank. We have a huge amount of UK-based Unity Trust Bank has a similar “The UK really is an anomaly in the world, social media engagement with customers and approach. While not offering a personal cur- and in Europe, in terms of our model of so- non-customers, possibly due to our stories.” rent account – business current accounts are called ‘free’ banking. We really sat back and available at the moment – the firm only lends saw an opportunity to do something differ- So, what’s the goal? to organisations that contribute to economic ent,” Davies explains. Davies claims Triodos’s target is to double its and social change, particularly in the provi- “There is no such thing as free banking. We customer number in the UK within a couple sion of community and care facilities. all know that the banks make £1.2bn in rev- of years. If the demand is higher, then the Becoming independent in 2015, the bank enue from fees and charges often related to situation will be evaluated for sustainable loaned £76.9m in 2016, with £15.1m in unarranged overdrafts and hidden penalty growth. additional finance leveraged. Through its fees. The notion that it is free is a myth, in He says: “It’s fair to say, by any bank’s work, 1,895 jobs were created and protected, our opinion, because someone is always pay- standards, doubling a bank’s numbers in a and 1,026 bed spaces created and renovated. ing and the minority of people are absolutely couple of years is quite an ambitious target.” Daryl Wilkinson, director of customer subsidising free banking for a lot of people. Bringing it back to Co-operative Bank, propositions and strategic marketing for “We could have carried on with the fee how can Triodos succeed where, arguably, Unity Bank, says: “We help organisations to structure, but we didn’t think that was right. Co-op failed? How will this offering be any prosper and contribute to economic, com- We took a different approach and decided different? munity and social change. Put simply, we’re to charge a flat monthly fee to everybody to Davies concludes: “The main difference here to help create a better society.” contribute in part to the day-to-day running between us and Co-op, which has done some Unity CEO Margaret Willis says: “We and provision of the account. really good work with bringing in that voice were established over 30 years ago, with a “On the flip side, we’re not going to be tak- in high-street banking, is that its focus is on vision to create a bank that would serve the ing the high and hidden charges that other negative screening. We take that a step fur- needs of its customers and enrich society as banks may take. We’ll have a competitive ther and only lend to people making a posi- a whole.” arranged overdraft rate. Any payments over tive impact. It can’t be neutral. an arranged overdraft would be returned or “I think we need different banks and dif- Why now? declined, but we will make sure that the cus- ferent bankers. Financial services have really “We’ve been growing steadily over 22 years tomer is aware when coming up to limits.” lost their way in the last 10-20 years. I sup- and we’ve long considered a current account pose part of our message is to really think to be the next step for us,” Davies says. Getting the message out about the role of money. The notion that “I think there’s been an increasing shift over The problem with a new bank or current banks are big untouchable organisations the past five to ten years to what we’re trying account in the market is making the public that cannot be changed is something that I to do. As a business, we feel we’re in a place aware of the offering. With big banks hav- do not believe.” to deliver this. ing histories – and marketing budgets – that This is certainly a strong message, but it “More and more people care about how are unavailable to newer entrants, how can remains to be seen whether the customers they use their money. I would argue that if anyone hope to compete? believe it as well. <

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RBI 738.indd 5 28/06/2017 17:40:05 ANALYSIS: SOCIAL FINANCE Retail Banker International

Social Finance to apply for industrial bank charter in US

After acquiring multi-currency digital bank Zenbanx, US online lender Social Finance (SoFi) plans to apply for an industrial bank charter so it can offer bank accounts and credit cards. However, whether it will be successful in its attempt is far from certain. Robin Arnfieldspeaks to industry analysts to find out more

oFi CEO Mike Cagney told US maga- banking licences. If SoFi’s ILC application FDIC continues its efforts to provide inter- zine TechCrunch in May 2017 that is approved, it would be the first firm to be ested organising groups with a clear path to SoFi plans to apply for an industrial granted an ILC charter in a decade in the US. forming a new insured depository institu- loan company (ILC) banking charter ILCs differ from standard banks as they tion, regardless of the type of charter pur - S are not owned by a bank holding company, sued by an organising group.” within the next month. A SoFi spokesperson confirmed to RBI that the TechCrunch story but by a commercial venture such as a car is accurate, but declined to provide details. manufacturer. Currently, seven US states Rush of new entrants Cagney said Zenbanx’s technology pro- including Utah, California and Nevada, “If SoFi’s application for an industrial lend- vides the infrastructure for SoFi’s move offer ILC charters. If its ILC application ing licence is successful, this could really into banking and that, by combining bank- is unsuccessful, SoFi could conceivably start a rush of new fintech entrants applying ing services with its lending products, SoFi partner with Wilmington, Delaware-based for similar licenses,” says Greer. could offer discounted rates to members WSFS Bank which provides banking servic- “My feeling is that it won’t be easy for who set up auto-pay between their accounts. es for Zenbanx in the US. SoFi to get an industrial lending licence. Cagney admitted that FDIC approval for its According to the Utah Department of Also, there are implications about being an ILC application cannot be taken for granted Financial Institutions: “An industrial bank industrial bank as opposed to a traditional “SoFi’s plan to apply for an ILC charter is is a state-chartered depository institution chartered bank, namely that industrial banks’ Don’t have online account details? a progression step on its part,” says Joseph that is eligible for FDIC insurance, exempt- holding companies aren’t subject to oversight Walent, associate director, customer interac- ed from the technical definition of a bank by the Federal Reserve. tion advisory service, at Mercator Advisory for the purposes of the Bank Holding Com- “It’ll be interesting to see if fintechs go this You and your associates may be entitled to online Group. “By becoming an industrial bank, pany Act of 1956, and otherwise generally route, or try to take advantage of the OCC’s SoFi will be able to build its banking func- subject to the same banking laws and regu- fintech charter. However, this won’t include login credentials. The benefits of full online tionality from the ground up and take total lations as other bank charter types.” deposit insurance, so it’s unclear what the access are as follows: control of the financial institution.” Industrial banks are subject to FDIC regu- value will be.” The topic of fintech regulation is contro- lation. Following the 2008 financial crisis, Launched in 2011, SoFi initially refi - versial in the US. In December 2016, the US the Dodd-Frank Wall Street Reform and nanced student loans, and then expanded • Timely daily news updates Office of the Comptroller of the Currency Consumer Protection Act set a three-year into personal loans, mortgages, wealth man- (OCC) proposed that fintechs such as online moratorium on FDIC approval of ILC appli- agement and life insurance. • Access the latest analysis lenders be offered special charters, allowing cations for deposit insurance after Novem- On its website, SoFi states: “We look • Monthly editions sent directly to your inbox them to offer banking services nationwide. ber 2009. behind just credit scores and debt-to-income New York State’s banking regulator, the In a July 2016 speech to the US House of ratios to consider factors like estimated cash- • News alerts direct to your inbox New York Department of Financial Services, Representatives’ Committee on Oversight flow, career, and education. While other lead- filed a lawsuit in May 2017, arguing that the and Government Reform, FDIC chair Mar- ers charge higher rates to account for the pos- • Comments from key industry influencers and leaders plan to offer national charters was “lawless, tin Gruenberg said: “The current economic sibility that borrowers won’t pay back their ill-conceived and destabilising of financial environment with narrow net interest mar- loans, our unique underwriting process helps • Search for specific, relevant content markets” which are best regulated by the gins and modest overall economic growth ensure our members have a high likelihood • Access the archive state, Reuters said. In April 2017, the Con- remains challenging for US banks and the of making their payments.” ference of State Banking Supervisors filed a establishment of de novo institutions. In 2016, SoFi originated $8bn in loans, up similar lawsuit against the OCC. “The FDIC is committed to working with, from $5bn in 2015, and expanded its mem- Celent banking analyst Stephen Greer and providing support to, groups with an ber base to 225,000 from 100,000 over the To create or activate your account please contact: says there is strong opposition from estab- interest in organising a bank or an indus - same period. At the end of 2016, the com- lished banks to fintechs being granted trial loan company. As outlined earlier, the pany had 750 total staff. [email protected] 6 y June 2017 www.retailbankerinternational.com www. www.privatebankerinternational.com

RBI 738.indd 6 28/06/2017 17:40:15 Digital touch briefings ad copy - RBI 18042016.indd 1 18/04/2016 10:59:39 Retail Banker International ANALYSIS: SOCIAL FINANCE

Last year, SoFi launched Student Loan an undisclosed sum. It also raised $500m in DUCA Financial Services Credit Union. Kuh- Payoff Refi for home mortgages and student Series F financing in February 2017 led by lmann has taken an executive role leading loans in partnership with Fannie Mae. In private equity firm Silver Lake Partners. The banking products at SoFi, and Zenbanx staff addition to new lending products, SoFi intro- investment, which brings the company’s total have also joined SoFi. duced its SoFi at Work brand for employee funding to $1.9bn, will be used to speed up “With Zenbanx joining SoFi, we’re mov- financial wellness, SoFi Wealth for modern SoFi’s expansion into new product areas and ing one step closer to becoming the centre investment management, and a partnership countries outside the US. of our members’ financial lives by adding with Protective to offer term life insurance. In a SoFi blog, Cagney wrote: “We’ve SoFi deposit, money transfer, and credit SoFi focuses primarily on student lend- never been shy about SoFi’s ambitions to card products to our offerings for members,” ing to clients who are at top universities become the center of our member’s financial Cagney said in February 2017. and have the potential to become HNWIs,” lives. Offering deposits, credit cards, and “The logic behind SoFI’s acquisition of Greer says. “It wants to offer banking ser- payment solutions is key to that ambition, Zenbanx is twofold,” explains Ron Shev- vices on top of loans to these clients. SoFi and we think we can offer something better lin, director of research at US-based Cor- makes money from securitising its loans and than incumbent players with the same kind nerstone Advisors. “SoFi needs deposits to from its refinancing and lending process.” of innovation we’ve brought to other areas fund its lending business, and it wants a bank According to the Wall Street Journal, SoFi of finance, like student loan refinancing, per- offering to become the provider of choice to estimates it will generate $600m in revenue sonal loans, and mortgages. young upwardly mobile consumers. in 2017, after receiving $40m in adjusted Zenbanx, established in 2012 by Arkadi “It isn’t going to scale. Zenbanx has little profit in the first quarter. Kuhlmann, founder of ING Direct Canada name recognition and won’t be much of a In April 2017, SoFi launched an invest- and ING Direct USA, offers mobile banking draw to many SoFi customers who are per- ment fund to give investors access to its accounts that let customers save and send fectly happy with the mobile offerings of loan portfolio, disclosing in a Securities money in multiple currencies domestically their existing banks.” and Exchange Commission filing that it and internationally. Following its purchase of Zenbanx, SoFi raised $105m for its SoFi Prime Income Its mobile app was designed to eliminate plans to launch a range of mobile deposit, Fund. Each investor contributed a minimum the complexities of international banking credit, and payment products to its US mem- of $500,000. for people who bank cross-border. US Zen- bers in 2017, as well as offer its products in In February 2017, SoFi bought Delaware, banx accounts are available through WSFS Australia and Canada by 2017 end, SoFi said California- and Toronto-based Zenbanx for Bank, and in Canada through Toronto-based in a news release. <

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RBI 738.indd 7 28/06/2017 17:40:23 Digital touch briefings ad copy - RBI 18042016.indd 1 18/04/2016 10:59:39 PRODUCTS: PREPAID IN CANADA Retail Banker International

Fintechs enter Canada’s prepaid card market

Two Vancouver-based fintechs, Koho and Mogo Finance Technology, have launched mobile-enabled prepaid cards targeting Canadian millennial consumers looking to avoid the country’s notoriously high bank charges and expensive credit cards. Robin Arnfieldassesses the market’s promise and headwinds

oho’s prepaid Visa card is linked to card. The company says most transactions On its Roadmap website, Koho lists sup- a mobile personal financial manage- are free, with the exception of out-of-net- port for Apple Pay and Android Pay in the ment (PFM) app, and is issued by work ATM withdrawals. near term, plus photo cheque deposits. Vancouver-based Peoples Trust. Customers fund their Koho accounts K through salary direct deposits and transfers Mogo’s prepaid Visa card is issued by Customer experience Home Trust, a subsidiary of Canadian from their bank accounts. Including transac- “Not being a deposit-taking bank and being mortgage lender Home Capital, which in tions during its beta trial, Koho had handled a pure technology play, we’re able to build April 2017 saw an exodus of savers after the C$2m worth of transactions on its prepaid a rich, elegant customer experience tethered Ontario Securities Commission alleged it had cards up to April 2017. to a prepaid card,” says Eberhard. “From a misled investors in its handling of a scandal “The average Koho user is about 30 and pre- customer usage perspective, prepaid cards involving falsified mortgage applications. dominantly male, but we’re trying to change make a lot of sense.” On 1 May, Home Capital said Home Trust that,” says Koho CEO Daniel Eberhard. Koho’s customers can set up Interac had drawn down C$1bn ($731m) from its “Their average income is about C$74,000. e-transfers from the account linked to their C$2bn credit line provided by a facility led Our goal is to get 100,000 customers, and prepaid card and also perform Koho-to- by the Healthcare of Ontario Pension Plan. we’re only interested in social media plat- Koho transfers. Interac e-transfers are P2P forms that can scale in terms of promotions. payments using Canadian debit scheme Cash-in We’ve done 100-120 customer-acquisition Interac’s infrastructure. The two startups hope to cash in on young experiments through major digital channels.” “Our Smart Spending Account is a PFM Canadians’ dislike of high bank fees and “The way we view the Canadian prepaid tool that lets customers set control categories desire for mobile-friendly banking services. card market is that prepaid is virtually identi- for their spending,” says Eberhard. CBC cites Statistics Canada as saying Cana- cal in terms of core feature set to any other “We look at a lot of the data sets traditional dians paid “an average of C$216 annually in primary bank account Canadians use,” says PFMs don’t examine because they just scrape bank service fees in 2015”. Eberhard. your bank account. Whereas in the US, prepaid has been most- “What we did was map out the function- “For example, we look at merchant catego- ly stuck in the sub-prime lending market, in ality people expect from a primary account risation codes and several other variables to Canada the key driver for prepaid adoption – such as bill payments and money transfers give consumers real-time insight into their is the concept of spending accounts to avoid – then layer this functionality around a pre- spending behaviour to provide the context excessively high banking fees and high-inter- paid card and offer a much richer feature set.” for their financial life. est credit cards. Currently, Koho does not offer mobile “We’re accurate 99% of the time in terms Vancouver-based Koho has received payments or cheques. “There is a low ROI of budget categories, and let consumers C$2.6m in backing from Canada’s Power in giving people the ability to write cheques break down their supermarket spending, for Financial Corp., and other investors includ- from their prepaid account, although we example, into sub-categories like groceries ing the founders of social media tech com- might offer that at some point,” explains and lifestyle/health. It’s very easy to either pany Hootsuite, and e-commerce business Eberhard. permanently or temporarily change these Shopify. In April 2017, Koho launched its “We plan to offer NFC payments on smart- categories.” Smart Spending Account and linked prepaid phones in quarter three of 2017.” Eberhard says it takes three minutes to get

8 y June 2017 www.retailbankerinternational.com

RBI 738.indd 8 28/06/2017 17:40:29 Retail Banker International PRODUCTS: PREPAID IN CANADA

a Koho account on a smartphone, and the the simplicity and intuitiveness of the expe- Smythe continues. “Its primary business is account can be totally managed via mobile rience. Also, they want to know how much instalment loans and personal line-of-credit devices. they are spending via our PFM tool. B – they accounts. Koho is regulated by the Financial Trans- don’t want a primary account that is going to “Mogo is also a mortgage broker, and this actions and Reports Analysis Centre of Can- charge them fees. C – they want to have their line of business may be facing greater scru- ada (Fintrac), a Canadian government anti- account run by an institution that they trust tiny from lenders which are becoming more money-laundering/anti-terrorist-financing and relate to and which isn’t going to sell cautious as a result of Home Capital’s prob- agency. them things they don’t need, or overly com- lems. Mogo has been in operation for many “We do full KYC and terrorist watchlist- plicate things to make greater profits. There years and is still facing operations losses. Its screening, and part of the intellectual prop- is a mistrust of banks among younger people. staff complement seems to be high, based on erty we’ve built is the decisioning on account “Our ethos is to build a great product and the business being generated,” notes Smythe. applications,” explains Eberhard. not profit from confusion or complexity. “Koho is a recent startup, whose primary People know exactly what they are going to source of revenue is interchange fees and Roadmap get, and that message resonates with them. income from funds on deposits in its prepaid “We’re feature-equal to or better than tradi- Our revenue comes from card interchange card accounts. tional bank accounts,” says Eberhard. “Over and interest on deposits,” Eberhard explains. “It identifies its target clients as people tired the next 18 months, we’ll accelerate in terms “We think that our clients might link their of bank charges. In consumer surveys con- of technology development and continue to Koho account to a savings account with ducted by IDC Canada, we didn’t see bank do unique things with our account. [Canadian digital banks] Tangerine or EQ fees to be a major concern. Desirable clients “Ultimately, what we want is to create Bank. usually have balances large enough to elimi- value throughout the entire financial life of “One of the things that causes a lot of pain nate fee charges. the client. At the moment, we own the spend- for consumers is that they have difficulty Smythe adds: “Koho is trying to convince ing of a lot of our users and a meaningful in getting a holistic understanding of their clients to have their salaries deposited into percentage of them use Koho as their pri - financial life. So we’re laying some of the their prepaid account. mary account. We’re extending the customer functionality of [Canadian digital account- “It suggests anywhere from a third to 100% relationship by adding account aggregation scraper PFM tool] Mint into our PFM tool.” of income so deposits can then be used to so that, with Koho, you’ll see what’s going fund on-going purchases. I doubt Koho will on with all your accounts at any time. Mogo have much success in convincing people to “We’ll also be adding credit facilities such Mogo’s Platinum Prepaid Visa Card is linked deposit their hard-earned money with any- as an overdraft – but it won’t be unsecured to the digital Mogo Spending Account, one but a stable bank. IDC Canada surveys lending at 21% APR.” which consumers can transfer funds to from also show that consumers are very satisfied Koho plans to offer a loyalty programme most Canadian bank accounts. Each time with their banks and the services that they and a referrals reward programme. “We they add money to their Spending Account, provide. think that using our app for P2P transfers they are prompted to set a spending goal. “Koho has some positives going for it, and will be important,” says Eberhard. “Some of The Mogo app provides instant transac- has also been discovered by Power Financial the UK prepaid card issuers like Monzo and tion alerts with each purchase along with as well as several other investors. It seems Loot that are further ahead of us and have updated real-time balances. There are no to have a reasonable staff complement and similar models, see 80% of their customer monthly charges for the account, and Mogo adequate initial funding. It also has an inter- acquisitions come through referrals. prepaid customers have access to Mogo’s esting array of services that enables payments “Koho’s management team takes a different other products including free monthly Equi- while providing real-time information on approach, as we aren’t bankers,” Eberhard fax credit scores, mortgages and a range of how funds are spent. continues. “We’re technology entrepreneurs, different personal loans. “The major challenge Koho faces is the and our team comes from Silicon Valley and In April 2017, Mogo said it had surpassed assumption that there are many bank clients from firms such as Alibaba and PayPal. I co- 400,000 members, up 52,000 from the wanting to switch to a solution that provides founded a wind farm technology company, 348,000 members reported as at 31 Decem- lower fees,” Smythe says. “I don’t think there so I’m basically an entrepreneur. ber 2016. are too many people in this category. It will “The prepaid card model is doing very also be difficult to provide core bank services well in Europe. There has been a lot of noise Future promise – substantial headwinds based on prepaid debit cards. in the US prepaid market, but there hasn’t “I think Koho has future promise, while “This may be why Koho’s projected growth really been a breakout, maybe because of Mogo faces some substantial headwinds,” targets are very low. These need to be the fragmentation in the US market. But I says IDC Canada associate Robert Smythe. increased substantially to make the company understand that the Green Dot/Walmart “Mogo could be affected by the problems viable and to make it a potential acquisition MoneyCard prepaid card is doing very well facing Home Capital, parent of Mogo’s issu- target. in the US.” er Home Trust. With the problems Home “On the positive side, Koho provides inno- Koho’s target market is Canadian millen- Capital is facing, it may be more difficult for vative payment reporting and management nials, or people who want to run their finan- Mogo to get clients to place funds in a Visa services that are currently only offered by TD cial life on their smartphone. account managed by Home Trust. The plus as a result of its partnership with Moven.” Asked why they would get a prepaid card factor may be that most people won’t make Smythe concludes: “Koho needs to target account, Eberhard says: “Everyone in Cana- the connection between the Mogo prepaid being the Canadian equivalent to Moven, da can get bank accounts, and there’s a very Visa card and Home Trust/Home Capital. which involves selling its software solutions small percentage of underbanked people “The other positive for Mogo is that its to banks globally. This will involve abandon- here. People using Koho fall into three cat- main source of revenue isn’t collecting funds ing trying to be a bank and focusing on being egories: A – they want the technology and to be placed in prepaid Visa accounts,” a fintech software vendor.” <

www.retailbankerinternational.com June 2017 y 9

RBI 738.indd 9 28/06/2017 17:40:31 DIGITAL: BANK OF MONTREAL Retail Banker International

BMO leads in digital account-opening

BMO Bank of Montreal has won Celent’s Model Bank 2017 Award for process automation, thanks to its digital account-opening capability. Robin Arnfieldtalks to Niti Badarinath, BMO Financial Group’s head of North American channels, to find out more about how the bank’s digital initiatives are progressing

MO Bank of Montreal is in the midst be used by any business line across BMO mately 40% increase in process efficiency of a digital transformation as it cel- Canada. For example, BMO is rolling the around personal banking on-boarding. BMO ebrates its 200th anniversary. platform out across its Canadian wealth Canada has seen a C$12m ($8.96m) increase “Our FY2017 digital investments in management business.” in revenues from digital account-opening, B she notes. Canada are focused on key strategic objec- tives: making it easy for customers to join Benefits BMO and open accounts, enhancing our “BMO claims that it takes eight minutes to Common IT platform digital [mobile and online] capabilities, and onboard a new customer using a smart - Canadian Banks’ Digital Transformation building a new mobile experience that makes phone, including customer validation and & Maturity Level, a February 2017 report it easy for our customers to bank,” says Niti verification and e-signing of documents,” authored by IDC Canada analysts Rob - Badarinath, BMO Financial Group’s head of McGowan says. ert Smythe and Jason Bremner, found that North American channels. “The process efficiency that BMO has Royal Bank of Canada and Scotiabank are In addition to its Canadian retail banking brought about is very significant, as it went the two Canadian banks most focused on operation, BMO owns BMO Harris Bank, from siloed, highly paper-based processes to financial technology. which is headquartered in Chicago. fully digital onboarding. The two banks came joint first with very “We’re now working on a new mobile expe- “BMO’s personal banking sales force is sav- high levels of digital readiness, while BMO, rience that we’re co-creating with our Cana- ing 15-30 minutes in processing forms for CIBC and TD came joint second. dian customers, with new features allowing new product sales due to the digital account- “While BMO CEO Bill Downe has spoken them to make recurring bill payments and opening platform, which creates efficiencies about digitisation on a number of occasions, transfers, and deposit cheques. and increases revenues for the bank. BMO hasn’t been a leader in terms of pub- “The new user experience will also give “Also, the reduction of paperwork means lic statements about digital,” says Smythe. customers greater control of their finances an 80% efficiency increase in the audit pro- “Scotiabank has been very public about its by offering credit card alerts, card controls cess, and makes the audit trail easier for bank digital plans.” – lock or unlock cards, report lost or stolen compliance officers.” “BMO’s strategy has been to centralise IT cards etcetera – and the ability to view pend- According to McGowan, other benefits support for its Canadian and US operations, ing credit card transactions.” include an up to 80% reduction in errors and to have a single IT platform for banking and irregularities in the personal banking in North America,” Smythe says. Digital onboarding account-opening process, and an approxi- According to the IDC report, BMO’s poli- BMO Canada has introduced a service allow- cy is to integrate all its applications through ing customers to open an account in minutes a connector grid that brings together over using their smartphone, without having to go 1,400 applications across the bank. to a branch or download an app. It also has a “build once” software-devel- The bank partnered with GMC Software opment policy, with over 1,000 reusable and Vasco Data Security’s eSignLive by software-based services employed to cre- Vasco unit to develop the digital account- ate applications quickly and easily, the IDC opening platform, which has been in full report adds. production since December 2016 across its Canadian branches. Mobile payments “Celent gave BMO the Model Bank award “We’re building foundational mobile pay- for process automation in its Digital Trans- ment capabilities to enable simple and con- formation in Personal Banking initiative, as it venient ways to pay,” says Badarinath. has automated and streamlined the customer “In the US, we’ve followed up our 2015 on-boarding process,” says Celent senior Apple Pay launch by delivering Android Pay industry analyst Joan McGowan, author of and Samsung Pay mobile payment capabili- Celent case study BMO: Digital Transforma- ties for Android and Samsung customers in tion in Personal Banking. January 2017.” “BMO has introduced an enterprise-wide BMO also launched the BMO Harris Bank e-forms and e-signature shared services plat- MasterPass digital wallet in the US in Janu- form for personal banking accounts, that lets ary 2017. anyone with a smartphone onboard. The In May 2016, BMO announced that it sup- new digital account-opening platform can ❙❙Niti Badarinath, BMO Financial Group ported Apple Pay in Canada. “In Canada,

10 y June 2017 www.retailbankerinternational.com

RBI 738.indd 10 28/06/2017 17:40:36 Retail Banker International DIGITAL: BANK OF MONTREAL

we’re working on going beyond just ‘pay by BMO at a glance upload, without the need for the recipients’ phone’, exploring several value-added ser- personal financial information. vices that focus on both pre-purchase and • Over 900 branches in Canada In March 2017, BMO announced free post-purchase aspects of customers’ payment • Almost 600 branches in the US Interac eTransfer transactions for all Cana- journeys,” says Badarinath. • Total assets of C$719bn dian chequeing and Premium Rate Savings • Deposits of $488bn accounts that are part of a banking plan. Emerging technologies BMO also now offers Interac e-Transfer bulk Asked about BMO’s plans for emerg - • Over 45,000 employees disbursement to its commercial customers. ing digital payments such as blockchain, • Around 50% of BMO’s Canadian “Our Mobile Cash service, which was mobile peer-to-peer (P2P) transfers within customers are active digital users, launched in March 2015, allows our US social media apps, and mobile ATM access with 16% of product sales completed customers to stage and make cardless in Canada, Badarinath notes: “The bank digitally, and over 30 million mobile ATM withdrawals via their smartphones,” approaches everything through the ‘customer transactions this year. explains Badarinath. experience’ lens. What will make it easier for “We’re exploring ways of bringing this customers to bank with BMO and manage the BMO Harris Mobile Banking app, with mobile ATM capability to our Canadian their payments? continued investment in P2P capability in ATMs. In the longer term, we’ve been active- “BMO is actively exploring several emerg- Canada through Interac eTransfer enhance- ly learning about and identifying potential ing technologies across social media, mobile ments this year.” applications for blockchain and distributed P2P and mobile cash,” he says. “In the near Interac eTransfer is an email- and cell - financial technologies. Our selected partners term, our social media teams are already phone-based P2P payment service offered by in the blockchain and distributed financial engaged in brand and marketing activities on Canada’s banks, which can also be used by technology space include R3 and Ripple.” Facebook, Twitter, YouTube and Instagram. businesses for bulk payments. Through an “In January 2017, we launched the People- automated file-transfer process, businesses Digital trends Pay mobile P2P capability in the US within can send multiple payments in a single file Badarinath sees several key catalysts that will impact the digital experience. They are: BMO launches Android Pay • Voice – the concept of using ‘my voice as my keyboard’ to simplify data entry and simplicity and security of mobile payments queries to BMO customers with Android Pay. • Biometrics – the concept of ‘me as my Starting today, people will be able to use password’ to reduce or remove the need their Android device to pay at hundreds of for passwords, tokens, etcetera thousands of contactless payment terminals • Social – leveraging customers’ social media in Canada.” circle to enable insight for financial deci- In addition to the contactless mobile sions, and the use of peer influence in solution, BMO has also introduced a number decision-making of new features to help customers stay on • Artificial intelligence – using machine top of everyday spending and rewards: learning and data to complete tasks for • Credit card alerts allow customers to the customer, including chatbots driving stay on top of credit card transactions conversational banking. with timely account updates sent via email and text message alerts. Adoption • Pending credit card transactions BMO said in its first-quarter 2017 earnings help customers remain in control of call on 28 February 2017 that its Cana - transactions and credit card spending dian customers’ digital adoption rate has by displaying current transactions in increased to 49%, with 16% of sales now real time. originated through digital channels. Also, • Real-time rewards balances give mobile transactions are up by 54% in each BMO launched Android Pay in June 2017, customers a tool to view and track of the last two years, BMO added. becoming one of the first Canadian lenders rewards points balances in real time on “A good way to measure how we’re focus- to offer the service. BMO Mobile & Online Banking. ing on our customers’ digital banking needs Commenting on the launch, Jennifer • Rewards site single sign-on allows is to look at digital adoption – the percent- Hawkins, BMO Financial Group’s head of easy access to the rewards-redemption age of our customers who bank online or via North American retail payments, said: site with a simple tap or click from BMO mobile,” says Badarinath. “As digital is increasingly the preferred Mobile & Online Banking. “We’ve grown over 20% year-on-year in channel for managing accounts and making “Alongside quickly bringing to market new Canada and over 10% in the US. Another purchases, our focus continues to be on purchasing capabilities, we’ve also focused measurement is digital usage, which is the providing our customers with more simple on building technology that can streamline percentage of bank transactions that are now and secure choices to meet their evolving our customers’ experience in areas that done digitally. This grew by 27% in Canada needs, and bringing Android Pay to are equally important to them, such as the and 13% in the US for BMO. customers in Canada is a reflection of that ability to track credit card activity in real “An interesting data point is that currently commitment.” time from their mobile device, allowing for Pali Bhat, Google’s vice-president of product a more current and fulsome view of their over a third of all core banking transac - payments added: “We’re excited to bring the finances while on the go,” added Hawkins.< tions at BMO are done via mobile devices in Canada.” <

www.retailbankerinternational.com June 2017 y 11

RBI 738.indd 11 28/06/2017 17:40:40 DISTRIBUTION: AVIDIA Retail Banker International

Branch transformation embraces social media Massachusetts-based Avidia Bank is making innovative use of social media in conjunction with a branch transformation programme and outreach to the local community. CarrieAnne Cormier, Avidia’s digital banking strategist and innovation leader, explains all to Robin Arnfield $1.2bn mutual community bank, “Other banks have told me that they tried Cormier says that, over the last eight years, Avidia was formed in 2007 from the touchscreens, but no one uses them. The rea- Avidia has experienced a decrease of about merger of Hudson Savings Bank and son is that what they put up is basically just 40,000 teller transactions at its branches, A Westborough Bank, both of which a product finder. year on year. were founded in 1869. “We’ve tried to make our touchscreen more “Sure, digital technology plays a huge role engaging. Everyone likes to feel like they are in the downturn in transactions, but the Flagship branch an insider, so our touchscreen shows what other part is just the state of retail banking Avidia has carried out an integrated digital is happening at Avidia behind the scenes. in general,” she says. transformation and community engagement People can see new initiatives and projects “Branches are ugly and remind me of going programme at its flagship 17 Pope Street that are coming up and community volunteer to the post office, or of retail stores that are financial centre in Hudson, Massachusetts, events that we’re doing. outdated and have lots of empty shelves. No which opened in February 2017. “We’re not doing ‘tech’ branches just to do one wants to come into a retail store – or The Pope Street branch, which was reno- it,” explains Cormier. “We’re really reinvent- in our case a branch – more than once or vated following its purchase from Citizens ing our spaces to blend our digital presence twice a year if it always looks the same or Bank in 2016, combines retail, commercial, and our physical presence. We very much if they can get the entire experience online. and investment banking, mortgage lending, integrate social media into everything we do So we’re redesigning our branches, and pro- and community events like farmers’ markets. and feed it into our in-branch digital displays. viding interesting and engaging activities in It also includes a community room, which is “For example, we bring feeds like 17popest. them, to make people want to come in.” available for local events by community part- hscampaigns.com into the touchscreen at the The Pope Street branch offers iPads for use ners and non-profit organisations. Pope Street branch. Also, any time someone by customers, says Cormier. “We’re testing Digital banking strategist and innovation uses the #17PopeSt hashtag, this pulls into a Amazon Alexa in the Pope Street branch so leader CarrieAnne Cormier says: “Our three- feed that we moderate.” customers can see what we are working on year plan calls for us to do the same digital “In the Pope Street branch, we’ve built a with our developer app. They can try out transformation at all our branches that we social thought bubble wall, where people these new services on the iPads.” did at Pope Street. can come and take pictures and share. Usu- “But, before we actually transform our ally, we tie this sort of activity to a contest Cardless ATM access branch spaces, we are bringing our com - or giveaway. Avidia was one of the pioneers of cardless munity emphasis and focus into our branch “We’ve also done some fun events, like live ATM access in the US. In August 2015, it culture at our other branches.” screen-printing of T-shirts in the Pope Street launched Cardless Cash mobile ATM access In July 2017, Avidia, which currently has branch, and will be launching a farmers’ technology from FIS and its partner Paydiant nine branches, will open a new branch with market there starting in June 2017.” – now owned by PayPal – in 2015 on its the same design as Pope Street’s. It is working mobile banking app. with digital design firm The Element Group Brand identity In March 2017, IDG Enterprise named on its branch redesign programme. Cormier adds: “I’ve talked to a lot of banks Avidia as one of 50 US recipients of its 2017 which are doing their branch transforma- Digital Edge award for its promotion of the Display screens tions now, and none of them seem to know launch of its Cardless Cash initiative using At the Pope Street branch, Avidia’s social their brand identity or have a clear goal. multiple social media platforms. media feeds are displayed on digital screens. “A lot of banks are trying to redesign their Leading up to the launch, Avidia Bank “One of these display screens is a touchscreen branches, but just want to do what’s popular promoted Cardless Cash on social media so customers can navigate the display, and without any clear goal or brand. I think we through images, live-stream demonstrations engage with the bank both physically and have a solid brand, which helps us support and employees’ experiences of the feature digitally,” says Cormier. our redesign.” during testing.

12 y June 2017 www.retailbankerinternational.com

RBI 738.indd 12 28/06/2017 17:40:42 Retail Banker International DISTRIBUTION: AVIDIA

“When we launched our Cardless Cash ser- vice, instead of trying to talk to customers about the service or hand out a leaflet, we wore T-shirts saying ‘no card no problem’ on the front and a picture of a phone with our app on the back,” says Cormier. “The clients all wanted to talk about the T-shirts.”

Avidia Smarties To promote the bank, Avidia has a team of tech-savvy and social media-friendly Avidia Smarties, who act as brand ambassadors. “A Smartie takes pride in the job that he or she does for the bank and the communities that Avidia Bank belongs to,” the bank says. “They are knowledgeable about bank prod- ucts and services and industry trends, and love how banking is evolving at a rapid pace. “Each Smartie is put through an interview process and is chosen based on personality, ❙❙ social media experience. The lobby at Avidia’s branch at 17 Pope Street, Hudson, Massachusetts “You will find Avidia Smarties at com - right and its relationship with the commu- sumer, and the fact that overall satisfaction munity events around the Central Massa- nity,” Cavell continues. rates among US customers visiting branches chusetts area. The community is an integral “I believe community engagement is the in the last 12 months were higher than those part of the success of Avidia Bank, and the way forward for the branch, and Avidia who only used digital channels. Avidia Smarties want to support it in any branches are becoming a community hub.” “The JD Power survey stacks up with other way possible.” According to Cavell, there are at least 100 surveys that show that, in the overall channel The Smarties team attend and tweet from different tactics that banks can deploy at a mix, branches are still relevant.” local events, hold Instagram contests and community-focused branch. wear Avidia Smarties bright orange T-shirts. “Every bank or credit union needs a playlist Brand quality They also conduct product promotions and of tactics to enhance the community value of “Community banks win as they build their ‘Smartie Swarms’, where they descend en its branches,” he says. brand quality every time they run something masse on a local business to bring it to the “Some are very lightweight, like giving out in the branch relating to the community,” public’s attention. T-shirts, and others are heavier weight, like explains Cavell. “Avidia staff will check in at different busi- arranging events such as farmers’ markets or “This demonstrates that they are a com- nesses and post pictures of our lunch or expe- art shows in the branch. These events add munity bank, and it’s proven worldwide that rience at that business on our digital screens,” value and provide another reason for people a lot of consumers will buy into the idea of says Cormier. “Local businesses love this, as to go to their branch. This is particularly the banking with their local bank. Also, in the it is additional marketing for them.” case with attracting millennials to the branch. US, credit union member numbers have been “Every time someone says the branch is rising steadily. Analyst views dead, someone else says it’s actually not dead “I don’t think that across the banking Ron Shevlin, director of research at US-based and is in good shape,” Cavell continues. industry there is a good appreciation of Cornerstone Advisors, says: “Countless com- “The key finding of JD Power’s US 2017 what brand means,” says Cavell. “It isn’t just munity banks and credit unions complain Retail Banking Customer Satisfaction Survey image and it isn’t corporate livery. A bank’s about the relatively high average age of their is the rise of the omnichannel banking con- brand is represented by a set of core intrinsic customers or members, and say they want to values and attitudes that customers develop attract younger customers. an emotional connection with and buy into.” “But what do many do about it? Not a Joseph Walent, associate director, custom- whole lot. Kudos to Avidia for committing to er interaction advisory service, at Mercator – and executing – a strategy that uses social Advisory Group continues: “Forward-think- media to create a brand image and propo- ing community banks like Avidia are trying sition that appeals to younger consumers. to see how they can fit into their customers’ Plenty of banks would have run a campaign lives and bring the community back into and moved on; Avidia has demonstrated a their branches. commitment to using social media.” “They can provide an advisory role to “Avidia represents the way forward in two their customer by providing events such as respects,” says retail banking delivery chan- seminars on mortgages and house-buying for nel consultant David Cavell. first-time buyers, for example.” “We’re in an omnichannel/multichannel “Community banks can go digital, but world, and Avidia is taking an active interest then they are in same playing field as the big in digital including social media. banks,” says Celent banking analyst Stephen “Also, Avidia is looking at its branches for Greer. “Their selling point is face-to-face the sake of the branch channel in its own ❙❙Social media is central to Avidia’s strategy interaction in the community.” <

www.retailbankerinternational.com June 2017 y 13

RBI 738.indd 13 28/06/2017 17:40:43 RESEARCH: CUSTOMER EXPERIENCE Retail Banker International

Banks sorely lacking in terms of positive customer experience

One thing that new digital banks and fintechs always seem to offer is a new, more positive experience for the customer. However, it seems that many of the new kids on the financial block are actually delivering, especially in comparison to the long-standing incumbents in the sector. Patrick Brusnahan reports on-traditional providers are mov- While the global average is 40.3% for Younger, tech-savvy consumers are the ing the needle in terms of attracting tech-driven firms and 37.1% for banks, the most likely (42.6%) to embrace the non- customers. This is according to the Europe, Middle East and Africa (EMEA) traditional providers, but only 12.8% of the World Retail Banking Report 2017 region bucked the trend as 35.7% of cus - non-tech-savvy crowd wants to approach N tomers at banks had positive experiences, but them. Furthermore, 37.2% of Gen Y cus - published by Capgemini and Efma, which states that nearly one-third of banking cus- only 33.2% of tech-driven firms’ customers tomers use non-traditional banks, but only tomers are already banking with at least one felt the same way. 22% of other age groups did. non-traditional provider. However, they are Overall, 29.4% of banking customers The report states: “Banks are no stranger yet to grasp significant market share. also used products and services offered by to competition, having faced incursions from the newer players. In addition, 52.4% of credit unions, post offices, brokerages, inter- The search for a positive experience customers that engage with non-traditional net-only banks, and other entities seeking a Fintechs, while new to the sector, are already operators have relationships with three or piece of the multi-billion-dollar global retail offering higher levels of positive customer more of them. banking market. experience than banks. Focusing on specific areas of the banking value chain, and using n CUSTOMERS’ USAGE OF FIRMS n CUSTOMERS’ NUMBER OF RELATIONSHIPS the latest technologies have helped them WITH NON-TRADITIONAL FIRMS deliver frictionless, personalised and attrac- tive offerings to customers. Only non- This is putting added pressure on the tradi- traditional firms 2.9% One tional relationship between a customer and 7.4% a bank. Banks are struggling to respond to the new batch of competitors due to heightened cus- Both 26.5% tomer expectations, a large amount of regu- Two lation, a cultural resistance to change, pres- 40.2% Three or more sures on profits, and legacy infrastructure. 52.4% Only traditional Tech-driven firms reached the most poten- firms 70.6% tial in North America, as they delivered positive experiences to 57.8% of customers, compared to 49.5% for banks. Fintech firms in Asia-Pacific gave 39.5% of their custom- ers a positive experience, a higher level than the 32.6% for banks. Source: World Retail Banking Report 2017 Source: World Retail Banking Report 2017

14 y June 2017 www.retailbankerinternational.com

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n POSITIVE CUSTOMER EXPERIENCE In addition, real-time notifications were highly ranked and traditional banks received Traditional Firms Non-Traditional Firms more credit for that as well. North America 49.5% 57.8% On the other hand, non-traditional firms EMEA 35.7% 33.2% made the best impressions in loan-related transactions. This was attributed to provid- Asia-Pacific 32.6% 39.5% ing real-time loan quotes via mobile and Global 37.1% 40.3% initiating, or closing a loan from a digital Source: World Retail Banking Report 2017 channel.

n TOP FIVE MOMENTS OF TRUTH (GEN Y CUSTOMERS) What can banks do? Banks do not need to completely fear the up- Importance Ascribed Importance Ascribed and-coming firms just yet. by Gen Y by the Tech-Savvy Banks have huge reservoirs of knowledge Digitally update transaction limits 70.4% 76.7% on how to navigate banking networks and Real-time loan quotes on mobile 66.0% 70.7% regulations. They also know of all the tech- nology newer firms employ, despite being Real-time alert notifications 65.9% 75.7% slower to implement them. Large banks have Real-time information to better manage your financial life 63.9% 73.7% the scale and resources that no new fintech Initiate or close a loan from digital channels 63.5% 69.6% can match. And, crucially, the banks have the Source: World Retail Banking Report 2017 customers. However, this will only last for so long. “However, the variety and severity of forc- a result, customers expect the same level of Customers are quickly heading moving away es disrupting traditional banking are now service from their bank that they get from from the usual interactions they have with reaching a new pitch, threatening to disman- other providers. financial companies. Banks need to keep tle long-held ways of doing business. The report continues: “Merely keeping pace with the frictionless experiences that “Most significant is the advancement of up with other banks’ interest rates on sav- the more technically cutting-edge firms can much tougher, technology-driven compe- ing accounts or providing mobile apps will offer. Convenience is key. tition. The new wave of digital banks and not suffice. Today’s competitive landscape Having said all that, there is one remaining fintech companies are wisely putting their requires a broader focus as well as a greater area that could change the balance entirely, efforts into the front-end customer-facing appreciation of new ways of doing things. and that is application programming inter- experience, knowing that winning the cus- Fintechs have been fast and successful at faces (APIs). tomer interface primes them to also win over demonstrating this, and herein lies the threat customer relationships, loyalty, and fees.” for banks.” The potential of APIs One aspect that tech-focused firms often APIs would help the rapid deployment of get right is turning the banking experience Moments of Truth banks’ digital agendas and collaboration into something relevant for more technically Crucial for anyone’s success is the ability to with non-financial services providers to cre- aware users. Atom Bank in the UK was stat- create a Moment of Truth (MoT). ate a value-based marketplace and increased ed as an example for its use of gamification, The report defines MoTs as instances when long-term loyalty. while mobile-only Starling Bank encourages customers interact with their financial servic- Collaboration is expected to be a big part users to record videos of themselves for bio- es provider and form or change an impres- of financial services in the future. Some metric identification. sion about that provider, product or service. 91.3% of banks and 75.3% of fintechs say Banks could be considered to be lagging Gen Y and tech-savvy customers placed they expect to partner each other; both when it comes to these innovations, espe- most importance to the moment when their expect this to improve customer experience, cially considering that huge operators such transaction limits are digitally updated. Both bring new revenue streams, and reduced time Apple, Amazon and Facebook have been groups gave higher marks to traditional to market for new products. utilising these developments for years. As banks for providing those moments. However, there are concerns with data security and customer privacy with open n LIKELIHOOD OF ROLES BANKS WILL PLAY IN FUTURE APIs; nearly three-quarters of banks and fin- techs cited these concerns. Fintechs’ view Banks are the holders of extremely large Banks’ view amounts of customer data that can be used to their benefit. These benefits include Bank as a channel enhancing customer engagement and creat- Bank as a platform ing new revenue sources. If banks monetise their APIs, that is one Product producer new revenue stream instantly. Overall, Bank as a platform 43.5% of banks stated that they preferred a model in which they charge a fee per API Aggregator transaction. 0% 10% 20% 30% 40% 50% 60% However, banks are more enthusiastic about revenue-sharing models than fintechs Source: World Retail Banking Report 2017 (47.8% versus 27.2%). <

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SECURITY STRATEGY ness presence here. Scotland is open for busi- Security scares off almost 40% CIBC names new heads for ness, and this announcement further demon- of US consumers from online wealth and retail businesses strates our position as a prime location for investment and growth,” Sturgeon said. Canadian Imperial Bank of Commerce HSBC’s CEO in Scotland, Alison (CIBC) has appointed Jon Hountalas and McGregor, added: “This expansion pro - Christina Kramer as new heads of wealth gramme spans different locations, skills and management, and personal and small busi- disciplines, supporting lots of communities ness banking respectively, in Canada. in different ways.” Hountalas will replace Steve Geist, who will leave at the end of the year. He will take TECHNOLOGY up responsibility for managing CIBC Asset PayPal to launch instant bank Management, CIBC Wood Gundy and CIBC transfer option in US Private Wealth Management. As well as the new role, Hountalas will PayPal has announced that its US custom- Despite the growth of digital shopping in the continue to head the commercial banking ers will soon be able to instantly transfer US, security concerns have led 37% of con- unit, the bank said in its press statement. funds from Venmo accounts to their bank sumers to avoid making online purchases as He will report to CIBC president and CEO accounts using Visa or MasterCard debit or they feel their payment would not be secure, Victor Dodig, and will also join the group’s credit cards. according to a survey conducted by Ameri- executive committee. The instant transfer feature, which is can Express. Kramer will be responsible for retail dis- already in beta for selected PayPal users, will According to the 2017 American Express tribution, CIBC Imperial Service, small busi- let users transfer money in minutes, rather Digital Payments Survey, consumers are ness, mobile advice and CIBC investor’s edge than a day currently. shopping online more, but have fears about teams, as well as personal and small business “We expect that funds will typically be digital security. banking products. She will succeed David available in your bank account in a matter The survey of 1,020 consumers and 401 Williamson, who will depart from the bank of minutes, although some banks may take merchants highlighted that 90% of US in the first quarter of 2018. up to 30 minutes,” PayPal COO Bill Ready consumers said they had made at least one The bank also appointed PrivateBancorp wrote in an official blog post. online purchase in the past year, and 73% CEO Larry Richman as new group head of The new service will cost $0.25 per trans- had made three or more online purchases. the US region, following completion of the action. PayPal added that the current system Nearly half of online shoppers (47%) said PrivateBancorp acquisition. – in which fund availability typically takes they had increased the frequency of online “At a time when we are positioning our one day and there is no charge – will remain purchases in the past 12 months. bank to embed a client-first culture into available to users. Over 70% of online shoppers had used dig- our DNA, execute our strategy and deliver The move is seen as PayPal’s response to ital payment services such as mobile wallets, growth for our shareholders, these changes Zelle, a new payment-processing service one-click checkout buttons and P2P payment are a natural next step that will build on the backed by the largest banks in the US. apps, and 41% said they always or some- clear momentum we have established and times used digital solutions when paying. provide opportunities to develop our next SECURITY Merchants are prioritising security invest- generation of senior leaders,” Dodig said. BBVA launches new biometric ments to allay consumer fears. In 2016, mer- technology business chants spent 31% of their IT budgets on DISTRIBUTION payment security, according to the survey. HSBC to hire 500 new staff in Spanish banking group BBVA has joined Furthermore, more than half of merchants major Scottish expansion with startup Das-Nano to launch a new tech- (54%) said their budgets for payment secu- nology business that will focus on biometrics. rity will increase over the next year, while The new entity, Veridas, will focus on 53% take the simple step of requiring cus- research and development for software for tomers to enter credit card CVV codes for personal identity verification, through biom- online purchases. etrics such as face, voice, image or document According to the study, 71% of merchants recognition, or fingerprint reading. The new said the proportions of annual sales gener- business will be spearheaded by Das-Nano ated through online and mobile channels had UK banking group HSBC has unveiled plans co-founder Eduardo Azanza. increased over the previous year. to create new 500 jobs in Scotland – its third BBVA said biometric technology will allow Mike Matan, American Express’s vice- expansion in the region in three years. it to simplify access to off-site services and president of industry engagement, product The jobs will be created in the bank’s glob- improve security of digital channels through and marketing, global network business, al risk operation Edinburgh in 2015, and in “authoritative identification of employees and said: “Digital innovation is enabling con- its contact centre in Hamilton. The latest customers remotely”. sumers to buy from merchants when and move increases the bank’s total headcount in BBVA’s head of architecture and IT inno- where it’s most convenient for them. Scotland to 4,500. vation, Ignacio Bernal, said: “Veridas will “But the results of our survey show that for The move was described as “fantastic news contribute the talent, the knowledge and the merchants to capitalise on consumers’ con- for the economy” by Scottish First Minister specialised experience necessary for the tech- tinued shift to online and mobile commerce, Nicola Sturgeon. nological development that will allow us to they need to provide their customers with the “This is testament to our skills and exper- reach our goal, which is to bring the age of confidence that their information is secure.” tise, and builds on HSBC’s significant busi- opportunity to everyone.” <

16 y June 2017 www.retailbankerinternational.com

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REGULATION STRATEGY the ability to handle high traffic volumes, we Barclays faces fraud charges TSYS, Tesco Bank extend needed a network that came with round-the- over Qatar capital raising payments agreement clock support for peace of mind.” John Tait, MD of TNS’s payments divi- UK banking group Barclays and four former sion for the Asia-Pacific region, said: “A sig- executives have been charged with conspira- nificant proportion of ATM2Go’s 270-strong cy to commit fraud over capital raising from ATM estate covers mobile sites, which fre- Qatari investors in 2008. quently change. We have extensive experience The charges relate to two capital raisings managing the demanding requirements of this with Qatar Holding and Challenger Univer- type of ATM, such as the critical need to be sal between June and October 2008, and a US-based payment solutions provider TSYS able to connect quickly and easily when sited. $3bn loan made available to Qatar through has extended its payments agreement with “Often deployed at a moment’s notice, we the economy and finance ministry in Novem- Tesco Bank to continue to support the bank’s are able to support the communications ber 2008. credit card business in the UK. TSYS will requirements instantly, including high-traffic The executives charged are ex-Barclays offer full customer account-management locations which can see in excess of 1,000 CEO John Silvester Varley, former Barclays services on its TS2 platform. transactions a day.” Capital executive chair of investment bank- Tesco Bank runs 8.1m accounts and poli- ing and investment management in the Mid- cies, providing a line of core retail banking MOBILE dle East and North Africa Roger Allan Jen- and general insurance products. PNC Bank launches mobile app kins, former Barclays Wealth and Investment Tesco Bank MD David McCreadie said: for Visa commercial cardholders Management CEO Thomas Llewellyn Kala- “TSYS has proven itself as the right part - ris, and former European head of financial ner for Tesco Bank as we continue to look US-based PNC Bank has launched a mobile institutions Richard William Boath. for new and innovative ways to grow and payment app that allows Visa commercial All four executives and the bank have been improve our credit card business. cardholders to make purchases through accused of making representations related to “With their outstanding client service and Apple Pay, Android Pay and Samsung Pay the June 2008 capital raising. Barclays, Var- deep understanding of our business, we’re con- using a smartphone or mobile device. ley and Jenkins have also been charged with fident that they will continue to help us pro- The bank said the new payment technol- fraud in relation to the October capital rais- vide a seamless experience to our customers.” ogy will enhance security and convenience ing, and for unlawful financial assistance. TSYS International group execu - for businesses’ travel-related and in-store Barclays issued a statement saying that it is tive Rob Hudson said: “This is a great purchases, while responding to the changing “considering its position in relation to these example of how TSYS values long-term demographics of the US labour force. developments” and that it “awaits further client relationships. When customers transact through PNC’s details of the charges from the SFO”. “Tesco’s market-leading retail experience mobile payment option, their commercial together with TSYS’s payments expertise has card numbers are not stored on the mobile REGULATION proven to be a dynamic combination in pro- device; instead a unique virtual account num- FCA chair to step down as five- viding an outstanding cardholder experience.” ber is assigned by the app for each transac- year tenure comes to an end tion, to ensure safety of sensitive data. Addi- DISTRIBUTION tionally, account numbers are not shared John Griffith-Jones, chair of the UK’s Finan- Australia’s ATM2Go to migrate with the merchant. cial Conduct Authority (FCA) and Payment its ATM estate to TNS When adding a commercial card, holders Systems Regulator (PSR), has decided to step are authenticated through a two-step identi- down from his role at the end of his five-year Australian ATM operator ATM2Go has fication and verification process. term on 31 March 2018. signed a multi-year agreement to migrate PNC Bank’s executive vice-president and Griffith-Jones took up the role of FCA its entire ATM estate to Transaction Net - head of product management for treas - chair in April 2013, and has chaired PSR work Services (TNS). The deal also includes ury management, Christopher Ward, said: since its establishment in April 2014. The 4G coverage for both mobile and retail “Increased security, convenience and ease of UK treasury is now set to begin a search for ATM sites. reconciliation are critical to administrators Griffith-Jones’s replacement. The ATM operator will use the TNSLink who oversee commercial card programmes. “I committed to a five-year fixed term for ATMs solution to manage communica- Companies also are focused on the changing to chair the FCA and, in so doing, to help tions from the wide range of locations its demographics of the US labour force. ensure that conduct regulation became a terminals serve. TNS claims its platform will “Payment options for businesses today respected part of the UK financial landscape,” enable ATM2Go to maximise uptime and must keep pace with the technology available Griffith-Jones stated. reliability, while cutting capital and operat- to individuals, who would like to give up the UK Chancellor of the Exchequer Philip ing costs. reach into their wallets for plastic cards in Hammond said: “John Griffith-Jones The integrated TNSOnline and TNSVision favour of pointing or waving a smartphone has provided strong leadership to both analytics tools will also offer critical insight to complete a purchase.” boards during his tenure, helping to estab- into ATM fleet performance in near-real time, Visa’s global head of products and solu- lish them as key parts of the UK financial according to TNS. tions, Vicky Bindra, said: “Visa’s collabora- regulatory system.” ATM2Go director Jenny Marsh said: “We tion with PNC is helping bring the conveni- Prior to his time at the UK regulator, Grif- have chosen TNS because of its proven and ence and security of mobile payments to their fith-Jones worked at KPMG. He previously reliable hardware, its reputation and the 24/7 corporate cardholders and meet the growing faced calls for resignation in connection with support it offers. Many of our mobile termi- demand for convenient business payments fraud at HBOS, that was audited by KPMG. nals are deployed at weekends, so as well as for everyone, everywhere.” <

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PAYMENTS once all TSB customers are migrated onto REGULATION UK card payments volume more MasterCard-branded cards. Visa is currently Swedish payments business than doubles in 10 years TSB’s debit card issuing partner. Klarna secures banking licence The agreement also covers TSB commer- The number of transactions made using debit cial cards, allowing the bank’s business cus- Swedish e-commerce business Klarna has and credit cards in the UK has more than tomers to benefit from enhanced functional- received a full banking licence from Finansin- doubled in the last 10 years, according to a ity in the future. spektionen, Sweden’s financial supervisor. report by The UK Cards Association. Commenting on the agreement, Master- Klarna, which currently caters to 60 mil- The UK Card Payments 2017 report high- Card’s divisional president for the UK and lion consumers and works with 70,000 mer- lighted that debit and credit cards were used Ireland, Mark Barnett, said: “As a trusted chants, applied for the licence in October to make 16.4 billion purchases in 2016, a and successful challenger bank, which puts 2015. The licence allows it to expand its 146% increase from 6.7 billion in 2006. It the consumer at the heart of what it offers, offerings for customers and merchants. means cardholders both in the UK and trav- we are excited to deepen our relationship Klarna CEO Sebastian Siemiatkowski elling overseas made 518 card payments with TSB and build out its debit card offer- said: “Klarna has played a role in disrupt- every second last year. ing together. ing payments services for the better, and now Growth in the number of card transactions “This deal is an example of our com - as a consumer-oriented, product-driven and has surpassed the increase in the amount mitment to grow the issuance of debit technology-intensive bank, we have the tools spent, indicating consumers’ increasing MasterCard among our banking partners, to drive change in retail banking. preference for using cards instead of cash and as such we are best placed to support “We will do this by providing solutions that for lower-value payments. In 2016, the aver- TSB with its transactional and digital bank- ensure a smooth customer experience, help age value of a card transaction fell to £43.47 ing plans.” people streamline their financial lives, and ($55), its lowest level in 15 years. TSB director of product Jatin Patel said: continue to support businesses by solving the According to statistics released by the UK “This partnership presents lots of opportu- complexity in handling payments.” Cards Association, by the end of 2016 39% nities for TSB and our customers in 2018 Klarna, set up in 2005, is valued at over of card transactions were either online or and beyond. $2bn. The firm has operations in 18 markets made using a contactless card, compared to “We’re looking forward to seeing these and employs over 1,500 staff. 24% during the previous year. opportunities develop and sharing more UK Cards Association CEO Graham Pea- about what’s in store next year as we contin- SECURITY cop said: “Card payments play a central role ue on our mission to bring more competition BSP asks Philippine banks to in our economy, with spending equivalent to to UK banking, and ultimately make banking migrate to EMV by June 2018 a third of the UK’s GDP. better for all UK consumers.” “As consumers continue to make the switch Bangko Sentral ng Pilipinas (BSP), the Philip- from cash to contactless, and with the rise of M&A pines’ central bank, has extended its deadline the app economy, we forecast that the num- Blom Bank completes HSBC for banks to migrate to EMV chip technol- ber of card payments will grow substantially Lebanon acquisition ogy to 30 June 2018. over the next decade too.” In 2014 the central bank announced that The study further highlighted that £709bn local card-issuing businesses would have to was spent by UK debit and credit card hold- implement EMV standards by 1 January ers both domestically and overseas in 2016. 2017, as EMV chip cards are more secure Debit cards represented 75% of this total than traditional magnetic stripe cards. spend, amounting to £530bn. Some banks are yet to meet that order, Payment cards were used for 77% of so BSP has extended the deadline by a year, all retail spending in the UK in 2016. warning that non-compliance will be pun- Cardholders spent most on food and ished by monetary sanctions. drink (£114bn), followed by other services Lebanese lender Blom Bank has completed In a statement, BSP said: “BSFIs [BSP- (£100bn), financial services (£80bn) and the acquisition of assets and liabilities of supervised financial institutions] are given entertainment (£57bn). HSBC’s Lebanon operations for an undis- until 30 June 2018 to fully comply with the closed sum. EMV requirement. DISTRIBUTION The move follows receipt of approval from “Failure to do so will subject BSFIs to TSB partners with MasterCard Lebanon’s central Banque du Liban. monetary sanctions provided under relevant to issue debit and credit cards HSBC Bank Middle East – Lebanon, a sub- provisions in the Manual of Regulations for sidiary of UK banking group HSBC, operates Banks and Manual of Regulations for Non- TSB, the UK’s biggest challenger bank, three branches in Dora, Ras Beirut and Zai- Bank Financial Institutions.” has signed a seven-year agreement with tunay Bay. Employees of HSBC Lebanon’s “In the interim, non- or partially compliant MasterCard through which the UK lend- operations will be retained as part of the deal. BSFIs are mandated to book provisions for er will issue new MasterCard-branded Blom said the transaction, announced in probable fraud losses starting 30 September debit cards to all current account holders November 2016, is part of plans to expand 2017 until full compliance is achieved.” from 2018. its customer base, and diversify its assets and BSP said the new guidelines will push the TSB will continue to issue MasterCard- revenue sources. banking industry towards full adoption of branded credit cards during this period. “The transaction will help Blom Bank to EMV technology at a much faster pace. MasterCard said TSB, which was spun off expand its corporate and commercial busi- The regulator also asked lenders to take from Lloyds in 2013, will become the larg- nesses as well as its retail activities,” Blom extra steps to invite cardholders to exchange est issuer of MasterCard-branded debit cards said in a statement. old cards with upgraded EMV chip cards. <

18 y June 2017 www.retailbankerinternational.com

RBI 738.indd 18 28/06/2017 17:41:00 Retail Banker International NEWS: DIGEST

REGULATION a contactless payment terminal. Merchants ent of remittances. “According to World Dutch regulator fines ABN do not require any additional hardware or Bank reports, Indian migrants sent $62.7bn Amro’s card business €2.4m software to accept payments. Worldline is in FY 2016-17, which is in fact greater than currently working on a large-scale operation FDI inflows to India,” Sur stated. The Netherlands’ Authority for the Finan- to ensure that all merchants can accept this Yes Bank’s group president and global cial Markets (AFM) has imposed a €2.4m type of payment by next year. head of international banking, Arun Agraw- ($2.6m) penalty on International Card Ser- When a consumer makes a contactless al, said: “We are glad to partner with Ter- vices (ICS), a wholly owned subsidiary of payment, the card number is replaced by raPay to enable a convenient, cashless remit- ABN Amro, for providing excessive credit an encrypted unique number, considerably tance option for migrants looking to transfer limits to clients. decreasing the risk of fraud. money to India. The fine relates to shortcomings in ICS’s equensWorldline Belgium general manager “This 24/7 service is backed by Yes Bank’s lending practices from June 2012 to March Daniel Braeckman said: “Contactless pay- state-of-the-art API Banking platform and 2015. Some ICS clients were provided credit ment via smartphone will drastically change superior security protocols, and will help limits that were too high, for which they paid our way of paying. Worldline is particu - boost granular FX inflows into India.” interest and, in some cases, fees. larly proud to bring this innovation to the ICS took the initiative in March, by pre- Belgian market. REGULATION paring a compensation plan for the clients “Thanks to the incorporation of Bancon- Bahrain’s central bank sets up concerned. ICS said it has extended its full tact, it is also possible to pay with a smart- regulatory sandbox for fintechs co-operation in the AFM’s probe into the phone in a large number of large and small matter, and has taken necessary steps to retailers. The innovation also enables banks The Central Bank of Bahrain (CBB) has improve shortcomings in its service. to provide secure, reliable and innovative launched a new regulatory sandbox to help ICS has started to implement the compen- solutions for customers, and enables retail- fintech startups test banking technology. sation plan for affected clients, which it said ers to accept all types of payment.” To meet the eligibility criteria, the solutions is proceeding as expected. Users do not need to enter a PIN for tested should be innovative, offer customer ICS operates a portfolio of more than 3m payment amounts below €20; for higher benefits, and be implemented in Bahrain. credit cards, and has issued and operated amounts, users enter a PIN on their smart- The solutions can be tested for nine Visa and MasterCard credit cards in the phone to validate the transaction. months, with an option to extend for up to Netherlands for over 25 years. three months. The sandbox will be avail - STRATEGY able to CBB licensees, as well as other local PAYMENTS Yes Bank, TerraPay collaborate and foreign operators, and offers a “virtual Belfius Bank launches HCE for cross-border money transfer space” for startups to test solutions. mobile payments in Belgium CBB governor Rasheed Mohammed Indian private-sector lender Yes Bank has Al Maraj said: “We are living in an era of Belgium-based Belfius Bank, in collaboration joined with mobile payments switch Terra- unprecedented changes, mainly brought with Worldline, has introduced host card Pay to facilitate international money trans- about by technological advancement, where emulation (HCE)-based mobile payments fers to bank accounts in India. we are witnessing how technology is defining for its customers in the country. The Rupee Drawing Arrangement will financial services. CBB remains at the fore- Belfius has incorporated Worldline’s HCE allow Indian migrants to transfer money front of these developments to enable the technology in its contactless payment mobile to bank accounts in real time through Ter- industry to advance similarly.” app with all card types, including Bancontact raPay’s network partners. For accounts with Bahrain has been bolstering its fintech cards. The solution was developed by World- banks other than Yes Bank, funds will be capabilities, and in 2014 launched two new line subsidiary equensWorldline. disbursed through the immediate payment licence types, payment services and card- Belfius Bank customers using the Belfius service, IMPS. processing services, to provide support to Mobile app can now make payments with According to TerraPay founder and CEO non-bank companies looking to enter the an Android mobile phone by tapping it to Ambar Sur, India is the world’s largest recipi- banking space. <

Director of Events: Ray Giddings London Office Tel: +44 (0)20 3096 2585 71-73 Carter Lane Email: [email protected] London EC4V 5EQ Editor: Douglas Blakey Head of Subscriptions: Sharon Howley Tel: +44 (0)20 7406 6523 Tel: +44 (0)20 7096 2636 Asia Office Email: [email protected] Email: [email protected] 1 Finlayson Green, #09-01 Deputy Editor: Anna Milne Sales Executive: Alex Aubrey Singapore 049246 Tel: +44 (0)20 7406 6701 Tel: +44 (0)20 3096 2602 Tel: +65 6383 4688 Email: [email protected] Email: [email protected] Fax: +65 6383 5433 Did you know? Email: [email protected] Senior Reporter: Patrick Brusnahan Customer Services: Your subscription to this newsletter entitles you to Tel: +44 (0)20 7406 6526 Tel: +44 (0)20 3096 2636 Financial News Publishing Ltd, 2012 access its five-year online archive. Email: [email protected] or +44 (0)20 3096 2622 Registered in the UK No 6931627 Go to www.retailbankerinternational.com Email: [email protected] Unauthorised photocopying is illegal. The contents Ameet Phadnis Group Publisher: of this publication, either in whole or part, may not For more information on Verdict, visit our Tel: +44 (0)20 7406 6561 be reproduced, stored in a data retrieval system Email: [email protected] website at www.verdict.co.uk. As a subscriber, or transmitted by any form or means, electronic, you are automatically entitled to online access mechanical, photocopying, recording or otherwise, Sub-editor: Nick Midgley to Retail Banker International. For more without the prior permission of the publishers. information, telephone +44 (0)20 7406 6536 For information on additional copies or syndicated or email [email protected]. online access to this newsletter, please contact Customer Services.

www.retailbankerinternational.com June 2017 y 19

RBI 738.indd 19 28/06/2017 17:41:04 GUEST COMMENT: EQUIMEDIA Retail Banker International

Nurturing SEO strategy in a competitive financial services market

In such a crowded and competitive space, how can banks ensure that their businesses and products are easily discoverable through Google? Jonathan Moore, SEO group head at equimedia, takes a look at the key findings from the business’s recent white paper on search rankings to offer four critical pieces of advice

t is not news to state that the financial to revisit their strategy to improve results, Supermarket perform so well in search rank- services space is more competitive than across eight financial services categories. ings: Their sites are content-rich and take ever, not least because there are many We compared these before and after Goog- cues from specific search terms, such as ‘best external factors impacting on the sector. le’s Penguin algorithm update to see how the rate savings accounts’. I top 20 natural search ranking on Google Last year, a report from Citibank predict- A solid development strategy does pay off. ed that up to 30% of current employees in across the eight categories had changed. Tescobank.co.uk gained visibility in the ISA banks across Europe and the US may lose Here are some of the key learnings from market over our research period thanks to jobs to technology by 2025. our findings that will help you ensure your a strategy designed to answer users’ queries Challenger banks like Metro Bank have business and products are easily discoverable and provide valuable information by creat- shaken up the landscape in recent years, and through Google: ing specific landing pages for niche search fintech firms are continually entering the terms like ‘fixed-rate cash ISAs’. market with new offerings for customers. Make sure your basics are in order Challenges exist in the digital space as First, if you have not already done so, you Trial paid-for activity well as on the high street – independent must plan for your business’s site to transi- It is also worth considering incorporating a research online and the prominence of finan- tion to an https:// domain, as it is the now the paid-for element into your content strategy cial aggregators like Money Saving Expert preferred protocol for security reasons. to boost brand- and product-related searches mean consumers no longer have to rely on Not making the change, or conducting a throughout the customer journey. financial advisers when considering products poorly managed migration, can have a nega- When implementing paid-for components and services. tive impact on rankings. In the insurance into your marketing strategy, it is important In today’s market, when it comes to getting rankings, Sainsburysbank.co.uk rose five to adopt a ‘test, analyse and learn’ approach. in front of consumers looking for financial slots over the period of our research, likely Google analytics is an effective tool, help- products, the importance of Google search thanks to a well-executed migration. ing you to determine how your investment rankings cannot be overstated: It is how peo- Preparing for a site migration is also a will benefit your business, and the results ple research and make financial decisions in good opportunity to conduct a site audit and of paid-for campaigns can show where con- the modern age. make sure all your SEO basic best practices sumer interest lies and further inform your The Financial Times recently reported that are up to standard. content development. mobile advertising made up more than half For example, remove dead pages and links When testing paid-for activity, it is impor- of the digital advertising spend in the US last from your site to improve credibility, and tant to monitor search trends and keyword year, underlying the prevalent and increasing make sure you do not have duplicate pages changes as well; these need to be reviewed use of smartphones to find news and con- live under different URLs. Neglecting site regularly so your business can create new sume media. basics such as these will send confusing sig- content to answer changing consumer needs. Google has been one of the biggest ben- nals to Google. In the mortgage rankings, change was eficiaries of the growth in digital advertising, likely driven by searches for terms like ‘help and the increase in advertising revenue could Develop useful content for consumers to buy’ and other first-time-buyer schemes. signal a further shift from a mobile-first Once your site is fully transitioned, the single strategy to a mobile-only one, emphasising most important thing is to develop a healthy Amplify content via social platforms the importance of developing and sustaining content strategy. Once you have established a solid content a search engine optimisation (SEO) strategy The way people search has changed: strategy for your website, it is time to think to improve ranking results. Instead of just searching for ‘mortgage pro- about how your content can be amplified via However, in such a crowded and competi- viders’, people are now more likely to search social media. tive space, how can banks ensure that their for a specific question or instruction, such as Social engagement from moneyadvice- businesses and products are easily discover- ‘what is the best high street mortgage lending service.org.uk increased its ranking during able through Google? rate?’ or ‘compare interest rates’. our period of research, likely as a result of There are a few key things to consider. We Your content should be informative, root- its informative content attracting those recently conducted research over a nine- ed in answering the implied need of searches researching financial products to the site. month period for our white paper, Has and provide the answers that your prospec- In practice, your content strategy and Google breathed new life in financial services’ tive customers are looking for. social media profiles must work hand in SEO?, by analysing the rankings of the 3,077 It should also be original to your site and hand to boost your products’ visibility and most commonly used insurance and financial products, as Google will downgrade pages broaden the availability of your content, to services search phrases, to see which brands with duplicated content. This is why aggre- attract both customers’ eyes and the Google are performing well and which ones need gators like Money Saving Expert and Money algorithm’s attention. <

20 y June 2017 www.retailbankerinternational.com

RBI 738.indd 20 28/06/2017 17:41:04 Simple, secure and effortless digital solutions for fi nancial services organisations

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