DIGITAL BANKING TRACKERTM Powered by JULY 2016
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DIGITAL BANKING TRACKERTM powered by JULY 2016 Does Digital Have Banking’s Number? 44 banks and Number26 receives credit unions sign on to $40 million in Series B funding Apple Pay SDC and Signicat partner to deliver cross-border digital signing capabilities to 120 banks in Europe 48 percent of consumers would rather pay with a phone than with a credit card or cash TM Digital Banking Tracker powered by Table of Contents 03 What’s Inside 05 Cover Story 08 Scoring Methodology 10 Top 20 Power Rankings 15 Watch List – New Additions 16 News 20 Scorecard – B2C 43 Scorecard – B2B 60 About © 2016 PYMNTS.com all rights reserved 2 What’s Inside What’s Inside While we still call them phones, consumers use their mobile devices for a world of other uses besides a simple phone call. From email to gaming and from music to directions, smartphones can do an impressive range of tasks. With the rise of mobile wallets like Apple Pay and Android Pay, that includes paying for goods and services. Recently, both Bank of America and Chase studied just how often consumers are using their mobile devices as a form of payment. While their surveys produced some divergent results, both banks reported that consumers are planning to make more purchases with their mobile phones in the years ahead. In order to make sure the market’s mobile consumers will utilize their services, digital banking companies and FinTech institutions around the space are planning new ways to help millennials simply pay for purchases or access their financial information on their mobile devices. Here’s a snapshot of some notable news items from the last month: The Apple Pay party is only getting more crowded, as Apple announced that dozens of companies had signed on to the mobile wallet over the course of two weeks. Most recently, 44 banks and credit unions announced they would join 30 additional institutions that joined Apple Pay just two weeks earlier. Customers of those banks will now be able to use their debit and credit cards to pay for purchases via the mobile wallet. Apple is far from the only company looking to grow its mobile payments capabilities, however. Chase, for one, said its customers will soon be able to conduct peer-to-peer transactions, in real time, with customers from other banks via Chase QuickPay, the bank’s mobile wallet. QuickPay, which was released in October 2015, will soon allow customers to use the funds to pay bills or withdraw them from an ATM. Meanwhile, Barclays rolled out their own contactless mobile payment option in the U.K. last month via Google’s Android Pay. Barclays customers will now be able to make contactless payments of up to £100 via Android Pay, and more quickly replace stolen or lost cards. VocaLink also announced a new mobile payments app called the “Pay by Bank” mobile payments app. The app was created in partnership with four of the largest banks in the U.K., Bank of Scotland, Barclays, Halifax and Lloyds Bank, and will allow customers to instantly pay for products and services via secure digital tokens. For a more in-depth look at what’s happening across the digital banking space, check out the Tracker’s News section. As it turns out, spending via mobile devices seems to go hand in hand with consumers using their mobile devices to save and keep track of their finances. According to recently unveiled research, 67 percent of consumers believe that using digital banking tools make it easier to save money. © 2016 PYMNTS.com all rights reserved 3 What’s Inside For this month’s Tracker cover story, PYMNTS caught up with Valentin Stalf, co-founder and CEO of German bank Number26, about building a digital bank on the back of top-flight technology, the advantages and challenges that go with it and what’s to come as digital banking steadily evolves. The Digital Banking June Tracker Updates In this issue, we’ve profiled 78 players from the FinTech and consumer banking spaces, including 10 additions to the Tracker: Chime, Debitize, Fidor Bank, Pockit, Thumbworks Technologies, Bottomline Technologies, Fiserv, NF Innova, Qulix Systems and Zenmonics. © 2016 PYMNTS.com all rights reserved 4 Cover Story ...from a business model perspective, it’s really about “ the technology that we’re using.” Does Digital Have Banking’s Number? Traditional financial institutions have certain advantages over their new, and often much smaller, digital counterparts. Large, prominent banks typically have more resources, bigger customer bases and more experience working with consumers and financial markets. But big banks don’t hold all the cards when it comes to the new digital landscape. Well-established financial institutions often have big costs and outdated existing technology, which can make them slow to react to trends and developments in the rapidly evolving digital banking space. Meanwhile, small, digital-only banks with deep roots in technology are able to shift nimbly, enabling them to more quickly react to consumer feedback in order to improve customer experience. One of those online banks finding success – due in large part to its digital roots – is German bank Number26. PYMNTS caught up with Valentin Stalf, the company’s co-founder and CEO, to talk more about building a bank on the back of top-flight technology, the advantages and challenges that go with it, and what’s to come as digital banking steadily evolves. The L-word and a banking app? Stalf emphasized the importance of Number26’s foundation in technology, which he said allows the bank to be more receptive to customer feedback and build a better offering. “One of our big advantages is that we are not locked into an old legacy system,” he said. “So we can actually build the bank of tomorrow based on the technology of today.” © 2016 PYMNTS.com all rights reserved 5 Cover Story Stalf said those roots give Number26 two key advantages: low costs and high customer satisfaction. More customers than ever before are looking to use digital tools to improve their banking, just as they use them in almost all other areas of their life, Stalf noted. And, by basing its offering on digital technology, Number26 can offer more features than large, slower-moving institutions. As a result, Stalf said he believes that his offering has a leg up when it comes to customer satisfaction. “With our user experience, we do a much better job at the moment than most traditional banks,” Stalf said. He then cited Number26 as having been I would say in the singled out by Apple as the only banking provider in Europe that is also a leading app in the digital giant’s App Store. “We have taken a different end we have done approach – we try to innovate banking without coming out of banking. It a good job in allows us to think much more freely on what we want to achieve and how it “ is achievable.” building a product In order to build that different approach, Stalf and his team did not look to people love.” other financial institutions for inspiration. Instead, they turned to popular tech-based companies in other industries – apps like Spotify, Uber or Airbnb. “We looked at their customer experience for inspiration to build the best user experience in banking,” Stalf explained. He said that approach has led Number26 to be more innovative than many other banks. Then he took it slightly further. “I would say in the end we have done a good job in building a product people love.” Giving customers what they want Stalf noted that small companies like his are able to be more responsive to customer feedback than big banks because of cost rather than a lack of capability. He said that it costs a digital company like his much less to make shifts in technology or strategy than it does for long-established financial institutions. “If you look at our system and the scalable technology that we’re using, we’re in the position to offer an account at about 10 times lower costs than a traditional bank,” he said. Additionally, Stalf said, those higher costs for traditional banks lead to an inability to take risks or implement innovative solutions. “Their problem is that they’re paralyzed by their old legacy systems, which are slow to change,” Stalf said. “I think it’s our technology base that lets us think and act as freely as we do.” In order to set themselves apart from other banks, Stalf and team introduced features designed to improve customer experience, including a streamlined registration process. Rather than a traditional bank, which often requires a lot of paperwork and possibly hours or days to open an account, he said, “We have a fully digital sign-up. It takes only few minutes to type in your details. It is very similar to a Facebook sign-up from a user experience perspective,” he said, pointing again to popular apps Uber and Airbnb as being central inspirations for the digital banking innovation. © 2016 PYMNTS.com all rights reserved 6 Cover Story “We try to do things very simply. Users can do many things with a simple click, like blocking or unblocking their card or activating an overdraft. We do this to give the user transparency and control over their account,” he explained. “A lot of what we’re doing is enabled by the lean tech infrastructure we are based on. Most of the traditional banking systems are built with a backward-looking reporting focus, while our system has been built for real-time insights to give user transparency.