DIGITAL BANKING TRACKERTM DECEMBER 2016 When Banking Frustration Closes A Door, An App Opens A Window Chase debuts new digital payment solution for Best Buy, Starbucks customers Bill.com aims to improve business relationships with new digital payments service Mobile-only bank bunq to use VeridiumID hand recognition software in its app Digital Banking TrackerTM Table of Contents 03 What’s Inside 04 Cover Story 08 Scoring Methodology 10 Top Power Rankings 14 Watch List – New Additions 15 News 20 Scorecard – B2C 55 Scorecard – B2B 84 About © 2016 PYMNTS.com all rights reserved 2 What’s Inside What’s Inside More digital technology solutions are being implemented across the banking industry with several institutions offering customers new ways to open new accounts and pay for in-store purchases. These solutions are also providing customers with new ways to improve their saving habits, send money to friends and family members using an app, and monitor multiple accounts. Banks are also realizing new opportunities to connect with clients in the digital age. Some institutions are finding new ways to connect with business clients with an improved billing system, while new research provides a strategy for banks to improve customer relations based on users’ preferred notification methods. Another opportunity to reach consumers lies with mobile-first digital banking, which appears to be gaining traction as an alternative to traditional banking. This month, PYMNTS reconnected with Chime CEO Chris Britt about what bigger banks can learn from newcomers as they try to attract millennial consumers. Here’s a snapshot of some notable news items from the last month: Several banks are experimenting with solutions aimed at offering customers digital wallet solutions and new tools to monitor their financial health. Chase recently launched its digital payment solution, Chase Pay, which works through a smartphone app at Starbucks and Best Buy stores. Meanwhile, Citibank launched its new mobile wallet, Citi Pay, that allows Citi shoppers with an Android-supported device to make in-store purchases at retailers supporting NFC technology. Banks are also looking to keep customers focused on making strong financial choices. Mobile banking app Pepper is working with Playbuzz to improve customer engagement by offering greater interactivity through its platform, and Moven has offered a new mobile app, compatible with wearable devices, that offers users tips to improve their saving habits. But while the banking industry continues to adopt new technology trends, several institutions also seeking and implementing solutions to better engage with customers and businesses. New research from Fiserv outlines what type of alerts and notifications are most effective how banks can improve engagement with customers and businesses. Meanwhile, Bill.com launched a new digital payments service to help banks improve their relationships with small and medium-sized businesses. The Digital Banking Tracker December Updates This issue of the Digital Banking Tracker™ features 266 global providers in our Scorecard, which highlights players from around the space. Ten companies have been added to the growing list of providers: BUDGT, bunq, Fintonic, Five Degrees, Limitless Technology Group, Malauzai Software, Netiks, ScienceSoft, Syntel and Zero. © 2016 PYMNTS.com all rights reserved 3 Cover Story We think the current “ state of traditional banking creates a great opportunity for new entrants like Chime, and I think we’ve seen that over the course of 2016.” When Banking Frustration Closes A Door, An App Opens A Window With a new year on the horizon, it’s out with the old and in with the new. For the banking industry, this could be an ideal time to consider if the traditional rules of business are still working or if the industry could benefit from a fresh approach. According to Chris Britt, CEO of mobile-first banking platform Chime, consumers are getting frustrated with larger, traditional financial institutions. And this frustration has created an opening for digital banking newcomers like Chime to swoop in and address these consumers’ concerns. PYMNTS.com spoke with Britt in June about how digital banking is appealing to millennial customers. As 2016 wraps up, PYMNTS reconnected with Britt to reflect on the year in banking and look ahead to what 2017 could have in store. Doing what the big banks won’t? Britt pointed to the recent Wells Fargo scandal in which bank employees enrolled customers in bank accounts, credit cards and insurance policies without their permission as evidence of what infuriates consumers about bigger banking players. © 2016 PYMNTS.com all rights reserved 4 Cover Story “Some of that scandal is symbolic of the broader trend that’s happened around the huge frustration that exists among consumers with their ...some of these traditional banks,” said Britt. bigger banks Sensing this frustration, new players like Chime believe there exists an probably try to take opportunity to entice customers with a mobile-first alternative. “ more of a consumer Looking back at 2016, Britt said Chime had an “amazing” year in which the company’s transaction volume increased tenfold, its member base orientation and try doubled and its staff roster expanded by more than 50 percent. to deliver products “We think the current state of traditional banking creates a great that create more opportunity for new entrants like Chime, and I think we’ve seen that over highly satisfied the course of 2016,” said Britt. consumers.” Chime offers several banking solutions for consumers, including an automatic savings account, a debit card and cash-back rewards. The company also awards a 10 percent weekly bonus for automatic savings deposits. “At our heart, we want people to lead healthier financial lives,” he said. Forcing traditional banks to rethink business as usual Britt said many banks have taken an “adversarial” approach to customer relations that has fueled this level of frustration. “The pricing structure is, ‘If you don’t do this, you get a fee. If you overdraft, you get a fee,’” said Britt. “We believe banks don’t do anything to help people get into a healthy rhythm around savings.” These regulations and rules are not only off-putting for consumers, they can be obstacles for getting consumers to save money, he said. He pointed to a recent report from the Federal Reserve that found 46 percent of Americans could not come up with $400 in case of an emergency. “Even just opening up a savings account in one of these big banks, they charge $3 to $5 a month for the privilege to have a savings account if the balance is less than around $500,” he said. But Britt believes that larger financial institutions are catching on that their traditional business models are not working as well for today’s customers. Britt believes mobile-first digital banking platforms like what Chime offers may pressure larger banks to reconsider their traditional playbook. “We believe we’re bringing a fresh approach to banking and consumer banking in particular,” he said. “I think you’ll see some of these bigger banks probably try to take more of a consumer orientation and try to deliver products that create more highly satisfied consumers.” © 2016 PYMNTS.com all rights reserved 5 Cover Story The millennial advantage The appeal of mobile-first banking platforms like Chime to millennials is also a warning sign to bigger banks to shift gears for a growing audience, said Britt. Because millennials are more tech-savvy and willing to try new technological ideals than previous generations, bigger banks could miss out by not offering solutions that work for them. “They’re the folks that are easiest to convert to a new service like ours because they’re so mobile-oriented, so digitally oriented, and they’re just not as set in their ways as someone who might be in their mid-40s or 50s,” said Britt. Larger banking institutions’ traditional business model doesn’t offer much of appeal to younger consumers, he said. Chime attempts to make up the difference by reaching millennial consumers where they shop. “For these younger folks in particular, the notion of going into a bank branch and sitting down with a banker — it’s kind of a foreign concept, and there isn’t a whole lot of value for them,” said Britt. “They’d rather go to an app store and look at the reviews and see what people are saying about them and use products that are highly rated and loved by consumers.” Britt also points out millennials aren’t the only demographic drawn to using Chime. Just as Facebook was once largely dominated by younger users, Chime is now seeing greater interest among older customers. “We’re seeing a broader group than just millennials use our They’re the folks that are product, and we think that some of the slightly older folks will be coming around en masse as well,” he said. easiest to convert to a new service like ours because Coming soon … more connectivity “ Looking ahead to 2017, Britt said he wants to continue they’re so mobile-oriented...” Chime’s growth and add new products to its lineup that appeal to consumers and help them save money. He hopes more consumers and institutions can learn from the lessons of mobile-first banking. As more financial services become available in mobile banking, Britt intends Chime to be in the middle of it all. He wants Chime to provide a gateway for users who have relationships with investors, insurance providers, lenders, stock traders or other financial service partners. “We think of it as your bank account should essentially be a hub, and, through the use of technology and APIs, your bank account hub should allow you to seamlessly connect to a wide range of valuable services and apps that you’ll be using,” said Britt.