Tearsheet

‘Combining our customer-first focus and local brand’: Inside Seattle Bank’s partnership ...

Thu, 26 Nov 2020 12:45:00 GMT

We’ve been talking for a long time about big tech’s move into financial services. We’ve seen Apple’s launch of a credit card, Amazon and Shopify lending to merchants, and Facebook move deeper into payments on its messaging apps.

News hit this week that gave us more insight into Google’s moves in banking. The company is launching Plex accounts, smarter and simpler bank accounts within a redesgined Google Pay app. Google isn’t becoming a bank — these accounts are launched in collaboration with chartered banks, like Citi and BBVA.

Seattle Bank also landed a partnership with Google. The sub-$1 billion community bank in the Pacific Northwest will also work with Google to launch a Plex account. I spoke with John Blizzard, Seattle Bank’s president and CEO about the move and what it means for the community bank. We discuss if other small firms can and will replicate these types of partnerships with big tech. John shares his vision for the future of small banks and technology.

Tearsheet Podcast · ‘Combining our customer-first focus and local brand’: Seattle Bank’s partnership with Google

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The following excerpts were edited for clarity.

Source: Google

The partnership with Google

We’re very excited about [our partnership with Google]. And for us, it’s great, because we really did this for three reasons. And that was to offer the best product we can in the market. We don’t try to be all things to all people. But when we do enter a niche or a market area, we want to offer the very best products or services. So [this partnership] enabled us to do that.

For us, it’s a new market opportunity with digital first customers, which is terrific, versus our traditional commercial clients that are more hands on.

And [working with Google] really allows us to leverage our technology strategy, which is a cloud based, API-ready, core system.

Tech strategy for a community bank

Our tech strategy has been in the works for years. We learned early on, and maybe naively, say five to six years ago, when we tried to do new fintech-oriented stuff for our clients — where we could really add cool, valuable experiences, we learned pretty quickly, you actually can’t do much of that with traditional bank legacy technology. It’s very difficult. The way the systems and the vendors are all set up, there’s just no good alignment there.

And so we decided over a couple year period, that ultimately we needed to change our core system and regain control of our tech stack. For us, that meant making the change to a new core provider and a new system. We moved to Finastra, a cloud-based core. This was all in the works before Google even showed up on the map.

We did a core conversion that we finished earlier this year. There are probably fewer than 50 banks in the country in a year that will do a conversion because it is the hardest thing you can do in banking. It’s by far harder than an IPO or an M&A deal. It is. There are lots of reasons banks don’t do it, even though they can be highly frustrated with their legacy core providers. It is very, very challenging.

So, we were in the midst of that when we interacted with Google. It’s just one example of the kind of things we can do with the right technology stack and collaboration and partnership with the right groups.

It’s pretty cool for a bank with one location and 60 employees that we can do something like this.

Competing as a community bank

If you’ve been in the industry, or looking at the industry, you’ve seen the commoditization, which is significant over the last 20 years. Just look at the number of banks in the country, particularly community banks, and how that has shrunk. Just in our county alone, where Seattle’s located, we had 22 banks charter in our county. I think it’s like five or six now. From the mid 2000s to today, you see that [consolidation] at the state level, as well. There are just way less community banks because it’s a commoditizing industry.

As a community bank, you’ve got to find ways to safely run your bank, to make a profit and serve your clients. Community banks are incredibly entrepreneurial — they typically have been entrepreneurial on the credit side, whether you’re an ag bank, or doing leasing, or whatever. Now, it is really critical they get innovative with digital on the deposit side.

Partnering with big tech

Big tech has different strategies for the space. I think you will see more and more types of collaboration between tech firms and community banks. I’m a huge proponent of community banks. I think it’s critical that we find ways to partner with big players to do unique things for clients. And, you know, this is great that Google is doing this.

Expansion strategies

We do have some things we’ve had in kind of Skunk Works for a while that we’re going to expand, things that have been marinating for some time, things that really needed to be on this kind of technology of a digital core. We’re going to be embarking on those in the future. We have other ways we think we can deliver value to clients through use of technology and that’s kind of exciting.

Changing core software

I probably would have started the process sooner.We’ve been working for some time on really figuring out our technology strategy to serve our clients in a digital world. While we’ve made the change, it would have been great to do that a year earlier. That would have enabled us to do things sooner. That probably is the is the biggest thing. It’s really about gaining your point of control. The way to think about it actually is in the past, these core systems, which are kind of the guts of a banking tech stack, they usually just impact the back office. This was all back office stuff that didn’t impact the customer.

Now that we got into digital banking over the last 10 to 15 years, that’s become front and center. That core infrastructure really impacts your ability to do things for clients. Today, most banks are buying what their vendors sell them. They’re not really innovating new things for their customers on the front end, where the fintechs are doing all sorts of cool stuff.

Partnership and dumb pipes

Our strategy is pretty simple. It’s like how do we drive as much value to clients as possible, and continue to do that, so it’s not a one and done thing? You have to be continuously innovating. You have to continuously collaborate with the best and strongest partners out there. What we don’t want to do is partner on a few things that are not viable, and that wastes our resources, and we don’t deliver for our customers. We think if we move fast, but pick the right collaborations, the right partnerships, then we can keep moving fast. That’ll be the difference.

If we’re delivering to customers, we’re less concerned about being the dumb pipes. The reality is that you better be driving value, or you will become a pipe anyway. It’s happening anyway. Recognize you’re in a commoditized industry that has a lot of cool innovation finally happening. Take that innovation and create a niche. That’s an opportunity for community banks and credit unions.

Competition from money centers

We probably get 90% of our new clients from big banks. We’re a net grower of business. So our boutique bank has been a very fast growing business for us. Aside from this new technology stuff we’re doing, we have a niche for folks with complexity in our private bank. That works very well: we’re very well capitalized, we’re profitable, and we have very strong credit risk. Those are the things you want to have as you innovate in banking. We’re a risk management company, number one. And we want to keep that front and center in all the things that we do. If we do that, then opportunities pop up all around us.

Working with Google to bring in new types of clients

A lot of banks will say, “We’re high tech, high touch.” Our boutique bank has a broader set of services than would be included in the new Google Plex account, which is very consumer oriented. We’re actively working with businesses and folks that have complexity at the individual level that’s more like a business.

What’s great for us is we get to go after a whole new digital first market [with Google]. It’s is a big opportunity for us to bring in new clients to the bank, and do it in an efficient way and do it through a digital first approach. That’s how we’re looking at leveraging digital and delivering the best in the industry. If we’re going to do something, let’s try to be the absolute best we can be and drive real value to customers. That’s why we’re excited about this partnership.

Looking ahead

We’re focused on delivering on the Plex accounts — getting that to market will be key. That’ll be one of our goals for the new year. We really have three different business lines, and we’ll be looking to grow all three of those. The collaboration with Google falls in our fintech business line. We also have our boutique bank, and then we have an asset management business. And all three of those are growing rapidly and have huge opportunity.

We’re super excited about the the Google Plex account by Seattle Bank. It will be a really neat, cool initiative, but it’s one of quite a few we have for 2021. It should be a very big year for Seattle Bank.

‘For us, Pride never stops’: Financial services emerge to serve the LGBTQ community

Thu, 26 Nov 2020 12:45:00 GMT

LGBTQ banking and financial services are increasingly emerging among challenger and traditional banks. Banks are recognizing the financial significance of targeting LGBTQ consumers who hold massive spending power, estimated to be around $1 trillion. Despite recent advances, financial institutions and the banking industry still struggle with systemic bias and discrimination.

“LGBTQ people have to make compromises to operate within a financial system that wasn’t designed for them, and as a result, excludes them,” said Billie Simmons co-founder of America’s first LGBTQ digital bank Daylight. “Within the banking system itself, we face three to eight percent lower mortgage approval rates, indicating systemic LGBTQ bias. We pay higher fees, up to $86 million per year more than non-LGBTQ people, and financial institutions struggle to build products tailored toward our needs.”

Created by members of the LGBTQ community, Daylight offers an array of financial management tools such as access to finance coaches who specialize in LGBTQ life events and money management, a unique finance feed tailored to fit individual needs, advice on spending habits and options for customers to select their preferred name on their Visa card. The LGBTQ community has to deal with a lot of circumstances that put considerable financial strain on people — things like lower incomes and workplace protections, higher debt and expensive transitioning, family planning and HIV health management costs. LGBTQ millenials are less likely to feel confident about their current finances and retirement prospects as compared to straight and cisgender millennials. 50 percent of straight millennials expect to feel financially secure during their retirement, compared to 38 percent of LGBTQ millennials.

Daylight wants to redeem LGBTQ banking experiences. “We’re rethinking and redesigning the relationship our customers will have with their bank,” said Simmons. “Why shouldn’t your banking partner help you navigate access to surrogacies, partner with you to improve your financial literacy, or ensure that your travel insurance doesn’t reject your claims when you’re travelling in countries with anti-LGBTQ laws?”

In the same vein as Daylight, startup LGBTQ financial services site and credit union Superbia is planning on releasing banking services for its customers. The company is also expanding into health insurance, life insurance and money management services to counter discriminatory practices in the financial services industry against the LGBTQ community.

“A slight change in manner occurs during a traditional banking experience, when the representative becomes aware that you are part of the LGBTQ community,” said Superbia’s founder, Myles Meyers. “Overall, the experience lacks an affirming environment for people in our community. So, the experience feels different, looks different and is different – creating estrangement. 60 percent of the community feel that financial institutions don’t want to help people like us. Superbia is changing that.”

Although the financial industry hasn’t fully embraced serving LGBTQ clients, some banks and other financial firms offer LGBTQ centered products, policies and advocacy.

Banks are starting to target the LGBTQ community both as customers and employees. “Given the higher disposable income among LGBTQ professionals, many financial services and banking firms have started targeting LGBTQ customers with advertisements or sponsorships during Pride,” said LGBTQ finance blogger, John from Financial Freedom Countdown. “They have also begun offering equal benefits to their LGBTQ employees to attract and retain talent. These trends are a step in the right direction.”

Wells Fargo has a 30 year record of commitment to LGBTQ equality through its work with LGBTQ organizations like the Trevor Project, GLSEN, Point Foundation and SAGE. The bank has provided more than $50 million in support to LGBTQ organizations. In 2009, Wells Fargo established the Accredited Domestic Partner Advisor program with the College for Financial Planning to educate financial advisors on meeting the financial needs of same-sex couples.

“Our initiatives to support LGBTQ customers are part of Wells Fargo’s overall commitment to diversity, inclusion and equity, and our drive to help all of our customers reach their financial goals,” said John Lake, Wells Fargo’s senior vice president for diverse segment marketing.

“We recognize that all diverse customers, including LGBTQ customers, often face unique needs on their financial journey.”

Life insurance company MassMutual was one of the original signatories for the repeal of the Defense of Marriage Act (DOMA). The company also has a 100 percent rating on Human Rights Campaign’s Corporate Equality Index. In 2015, MassMutual released its Vow to Protect digital marketing campaign featuring same-sex couples discussing the significance of marriage to demonstrate its comitment to marriage equality.

In 2019, BMO Harris Bank rolled out its True Name feature with Mastercard, which allows transgender and non-binary customers to use their preferred names on their personal debit cards without a legal name change. In June, the bank extended this functionality to include personal and small business credit cards.

LGBTQ inclusion in the banking and finance sphere parallels the move towards greater minority representation within banks and fintechs. The Fintech Equality Coalition was recently created by challenger bank Betterment as a reaction to the Black Lives Matter movement. In July, HSBC pledged to double the number of its black staff in higher management. Goldman Sachs recently appointed 60 new women and ethnic minority partners.

With all the positive changes, critical consumers are often wary of businesses paying lip service to minority representation in attempts to appear woke, despite workplace policies and culture moving in the right direction. ‘Rainbow washing’ is recognized as the appropriation of LGBTQ culture as a marketing ploy to appeal to LGBTQ sensitivies without actually improving comitment to LGBTQ customers or causes.

“For us, Pride never stops,” said Superbia’s Meyers. “It is not one time a year to wave a flag or have our logo shown. Each action traditional banks make on behalf of the community is measured against financial return, brand reputation risk, and shareholder reaction. Continuing to support the community is fully welcomed, but they need to add genuine impact, not just help throw a parade,” said Meyers.

According to Daylight’s CEO Rob Curtis, rainbow washing can be countered by focusing on customer needs beyond just marketing to them. “Our internal mantra is ‘no rainbows on cards’, as a statement of principle that we need to go further than just getting the marketing right,” said Curtis. “We describe ourselves as ‘queer geeks solving our own problems, no matter how small’ as we believe this is the right attitude to have to address the LGBTQ wealth gap.”

“Banks that deliver half a solution and run ad campaigns to shout about it are missing the bigger picture.”

‘How can we do this?’: A day in the life of Women in Fintech founder Gemma Young

Wed, 25 Nov 2020 12:45:00 GMT

Fintech companies that want to establish themselves as disruptors in their industry and bring in venture capital constantly focus on growing their customer base. And without the right marketing and PR, there’s no way to do that.

Some fintechs looking for growth turn to Gemma Young, a marketing consultant with 17 years experience in the fintech industry. She’s helped organize, promote, and execute several successful fintech events, including the first ever speed-networking event hosted by law firm Ashurst, and “How to Build a Bank” where she had a fireside chat with Anne Boden, founder and CEO of Starling Bank.

On top of that, Gemma is the founder of Women in Fintech, a movement with 3000+ members that aims to get rid of gender inequality and promote diversity all across the financial sector. Here, she oversees STEM programs and manages conferences and events.

She started the movement four years ago, while she was pregnant with her fourth child.

“When I was pregnant, I realized that in the banking industry, the way that you could bank had gone up exponentially,” said Young. “But the way in which you could come back as a working mother had kind of stayed stagnant at the same time. And so I set up Women in FinTech as a community to just see if there were other women out there feeling the same that I could support. And it grew throughout my maternity leave to 2000 women.”

Young spends her days juggling these two roles.

Here’s a lightly-edited look at what a typical day in Young’s life looks like:

Morning: Coffee, Chaos and Catch-Up

Morning is chaotic, because I have four children. So it’s packing bags, and getting everyone ready for the day. And for breakfast– very strong coffee to see me through that.

Once they’re at school — that’s when I catch up on all my phone calls. It’s also when I interview my clients to discuss marketing strategy. This way there are no distractions.

Afternoon: Admin, Writing, and Brainstorming

In the afternoon, it’s more admin and anything that I can do writing-wise, including clients’ requests and press releases. I try to limit my work to the things I can do while my kids are around.

Afternoon is also when I do my brainstorming sessions (the fun bit, I would say): coming up with the bigger plans for marketing and business development ideas for how the company I’m working with can scale and grow. I work as a contractor. So at the moment, I’m working for a company called Realization Group, a marketing agency that focuses only on fintech.

My brainstorming session is very much about trying to think outside the box. Particularly now, when life is completely different because of the pandemic, we can’t go down the usual routes of ‘let’s do an event around that’. So it’s more about how we can get companies to still promote what they do to audiences that are not necessarily based in London anymore, but rather at home.

Evenings: Women in Fintech

Evenings, I shouldn’t be working. But I can’t help myself. That’s when I kind of go back to Women in FinTech and answering to those kinds of tasks as well.

Because Women in Fintech is a community, a lot of the work there comes through in the evening, when people aren’t at their day jobs. So they might have thought of something during the day, but then they might contact after hours and just say “how can we do this?” And whereas we used to meet up monthly, we can’t do that now. So sometimes it’s like, “Can you put me in contact with someone who does this?”

We have a WhatsApp group now as well for contacting each other. So it’s just making sure that people have read those and getting back to the ones that have requests and making sure that the community is still working.

Building the Marcus brand: Goldman’s 2021 vision for its consumer banking product

Wed, 25 Nov 2020 12:45:00 GMT

The acceleration of digital banking that took hold during the pandemic allowed for continued adoption of Goldman Sachs’s consumer banking product suite.

Marcus by Goldman Sachs, which launched four years ago, had $96 billion in deposits as of the third quarter of 2020. With personal loans, savings accounts, and Marcus Insights, its personal finance analysis tool, Goldman is building a comprehensive product suite. The bank has fully integrated the capabilities of the Clarity Money app, which it acquired in 2018.

“The long-term objective of what we’re setting ourselves to do in consumer is to create a complete business that has a very robust platform on which millions of consumers will be able to control their financial destiny either through their own balance sheet or cash flow,” said Stephen Scherr, chief financial officer at Goldman Sachs, speaking at the Bank of America Merrill Lynch Future of Financials Conference this month. “Our ambition is to grow out the product set that’s there, including in 2021, seeing checking and a wealth module to again grow out that platform in a more profound way.”

On today’s podcast, we speak with Melissa Manne, who is vice president and head of product at Marcus Digital Storefront. She was previously vice president of product management at Clarity Money and director of software product management at American Express. Manne reflects on her journey from Clarity Money to Marcus by Goldman Sachs and the next steps for Marcus.

Tearsheet Podcast · Building the Marcus brand: Goldman’s 2021 vision for its consumer banking product

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The following excerpts were edited for clarity.

The road to Marcus by Goldman Sachs

Most of my career has been in personal finance. I worked at American Express for about a decade, building products and features for their consumer and small business division. And from there, I joined the Clarity Money team. I was really inspired by the vision of building out a personal financial management tool that would help empower customers to take control of their financial lives and be champions of their money. In 2018, I came over and joined the Marcus product team, which has been a terrific opportunity. It’s been great to scale and work both on the Clarity Money side, as well as on the Marcus site and app.

The Marcus product strategy

We have a big opportunity at Marcus to really demonstrate to the world what a modern consumer bank is. We are working on products that will support how people spend, how they borrow, how they plan and how they invest. The common thread through all of those is we want to do it in a way that’s really transparent, where customers know exactly what they’re getting and what they’re paying for, without hidden fees or costs. We think there’s a big opportunity to do it in a way that’s simple, that’s engaging and that’s intuitive.

Incorporating lessons from the Clarity Money app

A lot of us who came from Clarity Money are on the same team that built out Marcus Insights and the Marcus app. There was so much that we were able to leverage to really give us momentum as we were building out Insights.

Clarity Money had millions of customers, and so we have a ton of learnings and feedback from those customers in terms of analytics, which features they used the most and how they engaged with the app. We were really able to use all of that to inform the next kind of iteration of [the Marcus] toolset. From a technology perspective, we also really benefited from having that foundation. One specific example is something that we feel is really important to bringing this experience to life — getting that [spending] categorization right. That’s something we spent a lot of time and effort on in Clarity Money, analyzing the billions of transactions that came through from our customers.

The Marcus Insights approach to personal finance

We know that personal finances can be hard, and people sometimes don’t engage with them as much as they feel like they should. We’ve also rolled out our feature set with an eye on making the experience simple [and] engaging, using simple visualizations, to really bring Insights to life that empower customers.

Some of our features include the ability to link accounts and aggregate them to see them all in one place, which provides a view of spend across all of your accounts, broken out by about 20 different spend categories like home shopping, dining, and drinks, etc. We have a snapshot feature that allows [customers] to see relative to the amount of income they’ve taken home, how much they’ve spent, how much they’ve saved, how much they’ve invested and then how much is left over. We show them how much they’ve spent in a certain time period at some of their most frequented merchants. How much [customers] spend at those habit-driven places can sometimes help to raise awareness and help them make decisions to support their longer-term financial goals.

How Marcus dealt with the COVID-19 crisis

Marcus really prides itself on taking care of its customers. From a customer perspective, the first thing that we thought of was how can we support people who are going through a really tough time. We were one of the first companies to announce a customer assistance program, where our customers could defer a loan payment for a month; not accrue any interest charged during that deferral; and the loan term was actually extended by a month. Similarly, on the deposit side, we waived the early withdrawal penalty for customers who needed access to their funding sooner than expected.

On the people side, there were tons of people moving mountains to make sure that everybody could safely pivot to remote work. It was really amazing to see how, within 72 hours, almost our entire customer support team was able to work remotely, as well as all of us who were building products and features.

The competition

What we often hear is actually the biggest competitor isn’t a specific brand, but it’s actually just inertia. People tend to have financial accounts with the same institution for years and years, if not decades, and it’s just really hard to make a switch, even if you know that you could be potentially optimizing your money somewhere else.

2021 priorities

We’ve already built lending, savings and card capabilities. Right now, we’re focusing on building checking and investing products for launch in 2021. We’re really excited to expand the feature set in a way that can build off of some of the things that are core to Marcus, built on a trusted legacy of 150 years of customer experience.

We’re making sure that we’re transparent, that we’re simple, [and] that people can intuitively find what they need.

Goldman Sachs has big plans for TxB, its new banking-as-a-service platform

Tue, 24 Nov 2020 12:45:00 GMT

Speaking at Tearsheet’s second annual Embedded Conference about the inspiration informing TxB, head of engineering at Goldman Sachs Transaction Banking, Luc Teboul said that Goldman looked at technology companies that have successfully developed and scaled products as a service. “At Goldman Sachs, we really focused on the idea of the financial cloud, really taking inspiration from how cloud providers have enabled a new era of technology products,” he said. “We hope to do exactly the same to financial services, and to enable a brand new set of players to innovate within the financial services space.”

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Embedded finance enables any business to incorporate banking services and products. Goldman Sachs’ new transaction banking-as-a-service platform, TxB, offers enterprise clients banking services that they can embed into their products and software platforms.

Goldman Sachs’ transaction banking APIs marry technology with banking services such as deposit payments, liquidity solutions, virtual accounts and escrow services.

Similar to Goldman Sachs’ other digital venture, Marcus, which offers personal loans and high-yield savings accounts to consumers, TxB aligns with Goldman Sachs’ digital strategy to expand its reach and businesses.

This content is available exclusively to Tearsheet Outlier members.

Behind City National’s embedded finance platform banking Hollywood

Tue, 24 Nov 2020 12:45:00 GMT

City National Bank, a bank with its roots in the entertainment industry, has been slowly upping its fintech game. The bank has widened its scope of technology services by offering more API and cloud-based features — part of its embedded finance platform, a suite of complementary financial services specifically catering to the entertainment industry.

“We want to be that one-stop shop for our entertainment clients.” said Linda Duncombe, executive vice president and chief marketing, product and digital officer, at Tearsheet’s Embedded Conference last week. In 2010, the bank bought Datafaction, an accounting software company which specializes in the entertainment industry and family wealth firms. Since then, CNB has acquired additional specialized finance companies to round out the banking services it provides Hollywood.

Last year, City National acquired FilmTrack, a scalable, cloud-based platform that manages royalties and residuals for people in the entertainment industry. The fintech tracks and analyzes billions of dollars’ worth of revenue. It also manages the lifecycle of property rights, including contracts, invoices, and royalty calculations.

“It’s scalable, where the previous model wasn’t, and it’s in the cloud, so it’s really easy to use,” she said.

A year before that, the bank bought Exactuals, a SaaS provider that focuses on payment methods for the entertainment industry. The acquisition gave the bank access to PaymentHub, an automated payment system which allows people within the industry to process direct deposits and manage tax documentation.

As the world turns more digital, and paper checks become more outdated, Duncombe said services like PaymentHub have become more important in providing clients with the best payment methods possible. Now, during the pandemic, this is more true.

“Even celebrities — they’re people like us,” said Duncombe. “And so, we’ve been making sure we have the right digital capabilities.”

CNB launched its new mobile app around the time the pandemic hit. Month over month, the bank has seen an increase of 800% compared to pre-pandemic numbers.

The entertainment industry has suffered significant losses as a result of the pandemic. PwC predicts revenue loss for the entertainment and media industry to be $117.6 billion in 2020. With many revenue streams cut off, people in the business are struggling. And consequently, CNB is also facing challenges in figuring out how to best serve its industry clients.

“It’s been harder this year, because a lot of the verticals within entertainment have really been hit badly by the pandemic,” said Duncombe. “And so, we’re finding ways to be more creative as we start to think about how we can help with cash flows and making sure that we’re able to do that.”

CNB is creating an ecosystem around its financial services for entertainers. And with the pandemic, the bank’s embedded platform has become more important for the industry.

“For us, it’s your typical core baking, which I think is not hard to duplicate,” said Duncombe. “Everybody’s gonna check it out, everybody’s got a credit card. But then when you start thinking about things like FilmTrack, Exactuals, Datafaction, and how we support all of that with the things that are important to the clients — it’s something we love doing.”

‘With Boost, we had to break things’: Experian’s Gregory Wright

Mon, 23 Nov 2020 12:45:00 GMT

Today’s guest on the podcast is Experian’s Chief Product Officer, Gregory Wright. Listening to Greg, you get a real feel for how the role of credit bureau is changing — to the point of even who they serve is evolving.

We discuss fintech trends, like cloud, APIs and alt data, and how they’re impacting Experian’s ecosystem. Greg shares his thoughts on expanding credit to more people and how the credit score is changing with the times.

Tearsheet Podcast · ‘More and more, we think about being a B2B2C player’: Experian’s Gregory Wright

Subscribe: Apple Podcasts I SoundCloud I Spotify I Google Podcasts
The following excerpts were edited for clarity.

The evolving credit bureau

More and more, the way I think about how we drive innovation and new solutions to market is not only through data, but also through advanced analytics. Not just your traditional analytics, but through machine learning, and AI, and all that rests upon having really world class technology platforms. It includes having cloud-based solutions, leveraging the power of the cloud, and having easy integration points through modern API’s.

It really is changing how consumer credit works, how people interact with their lenders, how they interact with getting the right kinds of products. When we think about who we want to be as a credit bureau, we want to be the consumer’s bureau. That was a mission that our CEO, Brian Cassin, set us on more than five years ago.

More focus on the consumer

More and more, we think about being a B2B2C player, where at the end of the day, we’re enabling our lenders to serve the consumer at points in their life when they have really big, important decisions, like buying a house, buying a car, maybe getting their first job, maybe getting their first apartment.

One of the biggest changes in consumer expectations is things like smartphones, instant access to apps and cloud based solutions, where things happen at the speed of your thumb. You expect that to be available in your pocket, 24/7 — not just thinking about which hours the branch is open. So, we now have to enable that for our lenders, and our financial institutions and our landlords, anytime a consumer wants to engage.

Hiring for the future

I’m not your traditional financial services credit expert (although I’ve had to become one in this role). My background is more from Silicon Valley. I spent eight years at Intuit. I ran teams for product and design and marketing for small business and direct to consumer products, like QuickBooks and mint.com and Quicken. And there, I really learned how to become customer obsessed and really understand what the job is that we’re trying to solve.

I’ve been able to translate that into thinking through, what the consumer is ultimately trying to do through their lender or through their landlord or through whatever job they’re trying to get done. And then re-engineering how we accomplish that through data and analytics and technology for our lenders and for our financial institutions to create the best consumer experience possible.

When I joined the team at Experian more than four years ago, you really had to think differently about how the product team partners with our development and engineering teams. We were going through a transformation to agile development and the partnership and collaboration between sales and product and engineering had to evolve as we went through that process. Who you bring onto your team also changes — people who have a mobile-first mindset, people who are more entrepreneurial have to balance with the technical product managers, with a lot of the folks that we already had on a team, who were credit domain experts and client-facing, who really understood our needs of our clients. We were probably more overweighted towards financial services, client experts and domain expertise. And so, I’ve evolved the team, bringing on more agile development processes, as well as having product managers who can engage in that agile and innovative process. It’s been a lot of fun.

Consumer-permissioned data

It goes to the heart of what it means to be the consumer’s bureau. If you think about traditional credit reporting agencies, like traditional credit bureaus, you don’t necessarily see them as thinking about the consumer journey, the consumer experience, but that’s really the challenge that we put ourselves to. I think what you see more and more in today’s world is consumers want to control the access to their own data, they want to be in the driver’s seat. And we want to enable that.

The vast majority of connections to long-tail banks is still through username, password — credentials. But we’re moving into a new world of more federated sign-on, new tokenization and more secure and direct connections to banks. I’m excited to see where that goes. Because I think it’s a future that will provide even more control for the consumer, if we go about it in the right way.

Getting consumers to take part

When I came to the credit bureau, I thought long and hard about how to bring a consumer-permissioned model to the credit bureau. There have been ideas bouncing around within Experian for more than 10 years about having consumers contribute data to their credit report to improve their credit access to provide a more holistic, comprehensive view of the credit report.

The reality is, it was really hard. There’s a lot of regulations you have to work through, there’s the technology of the credit report itself that we’re still running on relatively legacy technology and a lot of barriers. And so that’s what I love about innovation. Innovation is all about driving through barriers, questioning the way we always did things, and seeing if there’s a new way we can solve a job for consumer.

We developed a product called Experian Boost. And if you watch any type of live sports, you’ve probably seen a commercial for Experian Boost, and you may have seen our purple cow. But behind all the marketing, which is awesome, is really a fundamental change in how we view the credit report itself: that consumers should be able to provide a more comprehensive view of their financial life. And that should improve lenders’ ability to lend to them because they see a more complete financial picture.

Excitement around Boost

One of the ways that we challenged the status quo is Experian has been trying to get utility providers, mobile carriers, and TV and cable providers to furnish data like banks do to the credit bureaus. Historically, they just have not done that. And so that data, your bill, your positive bill payment history is not part of your credit report, for the most part.

Now, we showed through advanced analytics that positive utility payments, on a regular basis, actually do show that you are a better credit risk. When we added in the positive bill payment history to their behavior, you actually see that the consumer behaves at a higher credit score. We wanted to make that available to all consumers, and we wanted to do it for free.

You can go to Experian Boost, add your bank account where you pay your bills. And when you do that, we we get your bank credentials, we download 24 months of bank statement data, which is read only. And then we categorize it and find all your positive bill payment history, whether it’s utility bills, your water bill, your electric bill, your cell phone bill, your cable TV. Now we’ve added Netflix and Hulu. You can add that directly to your credit report. It’s not added as a supplement — it’s added as an actual trade line to the credit report itself.

To do that, we had to break a lot of things: we had to be able to instantly add new data to your credit report, which if you know anything about credit reports, generally that’s updated on a monthly basis. So now, in real time on a phone, you put in your bank credentials, and within minutes, it’s added to your credit report. We had to instantly recalculate your FICO score, and send it back to you. And so again, within minutes, you can connect your bank account, add your trade lines that are utility payments and cell phone and then instantly see the improvement to your credit score, which we call Experian Boost.

We now have had millions of people connect their bank account information to Experian Boost, and over two and a half million have seen their credit scores go up. Basically, about two thirds of the time someone will see an improvement in their score, because if you think about it, this is positive bill payment data. It’s just you paying more bills on time. And the best part about it is as a consumer, you are completely in control.

Expanding credit to more people

We also work very closely with lenders. 89% of lenders believe that harnessing and using extended FCRA data, or what people call alternative credit data, acts as a way to serve more clients and serve more consumers. Especially when you think about thin files.

We’ve invested in and acquired assets like Clarity Services, which is an alternative financial services firm that serves the payday lending and short term installment loan space, with really accurate credit data that doesn’t show up on your credit report. We have other assets we’ve acquired over time, like what we call the Rent Bureau, which is actually looking at and collecting rental history. Paying your rent on time is actually another really great credit determinant. We’re looking at how we can leverage different types of data assets. And then when you combine the alternative data assets or extended FCRA data assets with advanced analytics, that’s where you can really drive up predictiveness.

Looking at into the near future

We’ve seen fraud tick up. During the pandemic, we launched a new product that we’re excited to get traction with some of our largest clients. It’s called Sure Profile. It’s the first time the industry has combined the traditional credit report itself with an assurance that this is an authentic identity. Fraudsters create identities out of pieces of other identities. And then they use that and cultivate that to then, nine to maybe 12 months later, breakout. They might have stacked up personal loans or credit cards or other things and then leverage those all at once. They take all the money, and then they disappear.

We’ve been able to use advanced analytics and all of our various data assets to figure out whether a credit report actually represents a real person. And we assure that this is a real person. About 90-95% of the time, we can say, yeah, this is a real person. And in fact, we’re so sure of that, if we get it wrong, we can negotiate with lenders that will actually take part of that credit loss if they actually were a victim of synthetic identity. So it’s a pretty game-changing approach to thinking about credit risk and fraud and combining that in the top of the funnel, rather than in a lot of projects that happen after the fact.

Fintech strategies require data aggregation

Mon, 23 Nov 2020 12:45:00 GMT

Modern financial apps are powered by user data. The more robust this data — the more all-encompassing the data — the more powerful the fintech service.

Modern digital banks can pull together spending data from all of their users’ bank accounts in order to provide financial advice. Accounting software platforms, when they include accounts payable and accounts receivable information, can help small business owners forecast whether they can make payroll on a given month.

Access to financial data drives innovation. “Data is the new oil,” argues Linda Jeng, a senior fellow at Georgetown Law and former Federal Reserve official. “If you have access to data, then you have the ingredients to build better services.”

Fintech firms continue to produce and consume vast reams of financial data. Technology firms entering into financial services bring with them lots of demographic and behavioral information about their users. The future of financial services is as much about financial data as it is about innovative new products.

To connect to users’ various accounts across institutions, fintechs generally turn to data aggregators. These technology and connectivity platforms provide fintech companies with access across tens of thousands of financial institutions, account types, and data sources — a monumental task.

There are a handful of major data aggregators that work with banks and fintechs to provide consumer-permissioned financial data. Each generally has its own strengths, differentiating themselves in how wide their coverage of banking institutions is or in the mechanics of their data structure.

Data aggregators continue to roll out new products and services, as they serve as the underpinning of the modern financial experience.

A new whitepaper by Fiserv outlines five categories of evaluation criteria for selecting a data aggregator. These include data reliability and cleanliness, coverage of institutional sources and data type handling, platform adaptability and support for innovation, security practices, and privacy, transparency, and reliability.

Announcing Tearsheet’s 2020 Embedded Awards winners

Fri, 20 Nov 2020 12:45:28 GMT

Embedded Finance and the platformification of financial services are redefining consumer relationships with brands and the role of banks. Businesses intent on incorporating Embedded Finance into their products are establishing brand loyalty and trust among consumers by invoking the seamless integration of banking into their services.

Tearsheet’s 2020 Embedded Awards honor the top players leading the movement towards Embedded Finance. The Awards celebrate the industry’s top Embedded Finance platforms by recognizing their creativity, innovative drive and consumer value.

This year’s award winners feature exceptional Embedded Finance solutions and designs. The award winners were announced at the end of the Embedded Conference, held Thursday, November 19th.

The 2020 Embedded Awards winners

Best Banking as a Service Platform:

Goldman Sachs Transaction Banking Platform: Goldman Sachs decided to make a big play in the Treasury and transaction banking world. This digital-first, multi-currency, cloud-based platform has been built around APIs, making it a seriously advanced Open-Banking platform in the corporate treasury space. Goldman is opening up these APIs to partners and fintechs so they can integrate with them, using their servicing platform, and begin leveraging the tools Goldman has already built while still giving them complete control over the user experience they want to create.

Goldman’s virtual accounts provide users with flexibility, mirroring the functionality of a physical account with all the advantages of virtual accounts, like instant opening and closing of as many virtual accounts as needed, the simplification of reconciliations, and the centralization of liquidity with virtual pooling structures and releasing trapped cash.

Best New Product:

Intuit Quickbooks Cash: From managing spreadsheets, moving money from one account to another, tracking expenses and spending hours each week figuring out how they’re going to pay invoices or employees — small businesses face complex financial decisions everyday. Small businesses now juggle 6 to 8 different software solutions to solve their financial management needs.

In 2020, QuickBooks introduced QuickBooks Cash, a business bank account that helps small businesses pay their teams, do their books, and earn money with a high-yield interest account. It’s an all-in-one banking account with a debit card that is connected to the QuickBooks fintech platform, saving businesses money by eliminating the need for separate solutions, while also helping them get paid faster and have access to insights on business performance. QuickBooks Cash offers no minimum balance, and no waiting for incoming funds to clear or doing the latency math on when businesses can pay their teams or restock supplies.

Best Card Issuing Platform:

Marqeta: Marqeta’s modern card issuing platform empowers companies to bring world-class products to market. Marqeta continues to release innovative products to disrupt the card-issuing space.

Marqeta’s Tokenization-as-a-Service (TaaS) solution was released in September, an advanced product that helps card issuers easily implement tokenized card programs. JPMorgan has already tapped Marqeta to deploy its card tokenization capabilities into its commercial card programs and instantly issue payments into any mobile wallet. JPMorgan will be able to issue virtual card numbers directly through its mobile application that can be immediately tokenized for consumers to use.

Best Customer Onboarding Program:

Narmi: To ensure a solid onboarding experience for customers, Narmi built progressive and integrated back-office tools so that financial institutions are set up for success in a digital first environment. With its admin platform, financial institutions have experienced an overall reduction in time spent by more than 50% for staff, as well as a 63% improvement in support response time.

Narmi Engineering, Implementation, and Customer Success teams work together to build a tailored plan for each customer, outlining responsibilities, key launch dates, and other project details. For the $13B Berkshire Bank, Narmi and Berkshire worked together to bring 23 cross-functional stakeholders and 8 core project team members. Narmi customers have experienced a 75% year over year increase in accounts opened and a 45% year over year increases in digital deposits balances.

Best New Embedded Program:

Bond: Founded March 2019, Bond accelerates the innovation of embedded finance. Typically, brands must secure a banking partner, integrate dozens of disparate technology solutions, and navigate complex compliance requirements just to launch one financial product.

Bond’s product suite gives brands a single platform to embed multiple financial products. Bond Studio allows developers to offer debit, credit, and high yield deposits through one unified platform. Bond OS reduces time to launch by standardizing and automating documentation for brands and banks to collaborate effectively. Bond Comply allows banks and brands to gain real-time insights on the health of the products. Bond’s Person Centric Ledger standardizes processor data, allowing Brands to be vendor agnostic.

The company closed its Series A investment round in July 2020, led by Coatue with participation from strategic investors Goldman Sachs and Mastercard.

Best Overall Embedded Platform:

Plaid: Plaid offers a comprehensive suite of infrastructure products for creating, delivering and scaling digital financial services. Plaid’s products power thousands of fintech apps and services, including challenger banks, lenders, and financial management tools.

Plaid has powered innovators like Venmo, Square, Acorns, Blend and now, established companies both inside and outside of the traditional financial services industry are pursuing embedded fintech strategies as a way to build new and differentiated services and create new revenue streams. Recent embedded fintech customer examples include a partnership with Microsoft to turn Microsoft Money in Excel into a fintech app, by allowing users to connect their financial accounts and import data directly into templates for budgeting, financial planning and more.

In May 2020, Plaid launched Plaid Exchange, an open finance “API in a box,” designed to accelerate consumer-permissioned data access strategies for financial institutions of any size.

Best Payments as a Service Platform:

Galileo Financial Technologies: Galileo’s APIs have become standard for many top fintechs and financial services firms to create sophisticated payment card programs and digital banking solutions. The addition of Galileo Instant enables any business — including startups and businesses that need a fast and easy payout solution– to become a fintech through the use of embedded payments.

In addition to Chime and Robinhood, Galileo powers MoneyLion, Greenlight, Current, Aspiration, KOHO, the U.S. divisions of Monzo, Revolut, TransferWise, Paysafe, and MoneyLion. According to one independent assessment, Galileo drives >95% of fintech digital banking in the U.S. Galileo was acquired by SoFi, a client of the firm, in June 2020 for $1.2 billion.

The importance of embracing fintech during a crisis

Thu, 19 Nov 2020 12:45:00 GMT

Global concerns about the Coronavirus pandemic continue to rise, as we now face an escalating health crisis.

Many of us in self-quarantine, waiting for this unprecedented storm to finally calm and pass, have to reflect on the negative economic impact all this will have. Everyone will be affected in one way or another and that’s a hard truth to swallow.

Economically speaking, it could be disastrous as a full-fledged recession looms and uncertainty has now become the new norm. Some analysts predict that the crisis caused by the spread of the coronavirus will be worse than the global financial crisis of 2008.

Many industries are being affected by this pandemic, some harder than others. Airline, leisure, and travel companies have been some of the most vulnerable. Government bailouts are in the works to help ease the suffering and to help pump life back into the financial systems that are the lifelines of the global economy. With troubling times come challenges and opportunities.

Some businesses will have to embrace digital technologies to maintain operational efficiency as countries go into lockdown and compel many people to keep socially distant and work from home. As a result, the digital infrastructures we have in place now will become crucial, and more depended on, in our everyday lives.

Companies are waking up to the reality that business will become more difficult. As countermeasures, some companies are investing more in technology and processes that will transform their way of working and quite possibly redefine their own business models. This could help save and navigate them through the rough waters ahead.

Necessary shift for banks and financial services

When it comes to banking and financial services companies, they too are feeling the pain from the current Coronavirus pandemic, internally and externally. Many banks will play an important role in this as they will be needed to stabilize the system for their customers, their employees, and for the economy.

And those that in recent years have been undergoing digital transformation and scrambling to adopt new technologies and services throughout the company are now forced to accelerate that development and deployment. These reactionary measures, which before had a lot to do with cost reductions, are now necessary for survival as they coincide with a crisis that is radically changing consumer behavior, pushing many to take all their banking needs online.

Today, retail banks, both locally and nationwide, are taking measures to decrease the amount of foot traffic to their branches with the aim of slowing the spread of the virus. Take Chase, for example. The bank is planning to temporarily close a fifth of their branches (roughly 1,000) to protect employees and customers. An inconvenient as this seems, however, this is an opportunity for banks to show their range of digital banking options and aim to improve services that are currently not set up to operate remotely.

Mobile money over hard cash

The World Health Organization has advised people to stop using banknotes and instead switch to contactless payments and other systems to help the Coronavirus from spreading.

With this in mind, perhaps it’s the moment to implement new initiatives around cashless services and products that will help curtail the growth of the pandemic and cater to customers’ demands. It would be a win-win.

One noteworthy example of this is M-Pesa, East Africa’s leading mobile-money product, which will implement a fee-waiver to reduce the physical exchange of currency in response to the COVID-19 outbreak.

Many other banks are working hard at adjusting to the unprecedented situation and ‘banking’ on their own digital competencies, channels, products, and services, to remain accessible and competitive.

Fintechs at the forefront

Along with banking and financial services firms, fintech companies are also finding opportunities to make an impact. They have been coming up with new proposals and products to help optimize the banking value chain at every stage.

Many of them are capitalizing on the need for people-free services such as fast money transfers, managing investments, depositing checks, and checking credit scores. These services have grown quickly in popularity as consumers continue to gravitate to mobile devices and online technologies to accomplish these tasks, as opposed to face-to-face contact.

Fintechs that provide “computing capabilities and digital technologies, such as advanced analytics, machine learning, and the cloud, will transform the nature of services and delivery channels in banking,” according to The Economist. This is more than just icing on the cake.

As fintechs continue to use and fast-track their digital capabilities for the better, they will be in the best position to adapt to this growing pandemic and the technological challenges it brings. As they innovate and make the best out of these dire circumstances, they will ultimately come out on top.

Strands, like many other companies, is adjusting to the situation daily and is taking the appropriate measures to continue to provide the excellent services our clients expect of us.

We will continue to work tirelessly to offer banks cutting-edge AI banking services as they continue to embrace digital transformation, evolve their product offerings, and look for enterprise cloud-based banking platforms to help them improve and excel during these difficult times.

The first LGBTQ digital bank launches in the U.S.

Thu, 19 Nov 2020 12:45:00 GMT

Daylight is the first LGBTQ digital bank in the U.S.

The new challenger bank provides its LGBTQ customers with benefits like Visa-branded cards in their preferred name (and not necessarily their legal name), a network of finance coaches, unique personalized feeds on financial advice, tools to monitor and improve spending habits, along with a space for donations to LGBTQ charities.

Daylight, which was known as Be Money before it took on customers, will offer consumers benefits such as money management on LGBTQ specific life events such as gender transitioning, having children and retirement.

The launch and rebranding comes at a time when the worldwide pandemic has severely strained the financial health of LGBTQ people in the U.S. Poverty, unemployment and discrimination underscore some of the harsh realities facing LGBTQ Americans since the beginning of the pandemic.

Human Rights Campaign’s recent research brief found that 20 percent of LGBTQ people in the U.S. believe that their personal finances are worse off than they were in the previous year. 62 percent of LGBTQ Americans reported facing financial challenges as a consequence of their gender identity or sexual orientation, according to Experian’s 2018 LGBTQ Money Survey. The community on average carries higher debt and less insurance.

Although there are an estimated 30 million LGBTQ Americans with $1 trillion in spending power, the community still feels underserved within the incumbent financial industry.

“LGBTQ people still face systemic discrimination from incumbent and challenger banks alike, including lower mortgage approval rates, higher fees or risk assessments, impersonal and insensitive services,” said Daylight’s CEO Rob Curtis. “For example, when addressing a gay man ‘sir, what does your wife do?’ or misgendering a trans person. The financial system has had a long time — and an incumbent advantage — to address these issues and has failed. We are taking matters into our own hands.”

Many traditional banking services pigeonhole transgender and non-binary consumers into ‘deadnaming’ themselves by having them verify themselves through their birth names. This poses considerable security and mental health risks. Daylight customers can choose a name for their debit card that they’re comfortable identifying as, making it easier to authenticate when they make a transaction.

“Traditional banks need to go further by addressing the systemic issues faced by the community, offering real and meaningful support for the 20 percent of LGBTQ people who are unbanked or underbanked,” said Daylight’s Co-founder Billie Simmons, “Daylight is different. Rather than address the symptoms of the problem, we are looking at the root cause. For example, we aim to redefine the traditional Know Your Customer process so that trans people with mixed forms of identity are not subjected to higher rates of false positives for identity theft and subjected to longer SLAs for account opening and approvals.”

Visa and Marqeta partnered to launch Daylight, which will soon grant public access to its services. “We’ve heard from over 1000 LGBTQ people and many in our community feel in the dark about their finances. We believe Daylight reflects our commitment to shining a light on LGBTQ money and being positive, affirming champions for members of the community to reach their goals, whatever they may be,” said Simmons.

Daylight is part of the Fast Track Program, Visa’s accelerator that offers fintechs tools and guidance to quickly get up and running on the Visa payment rails through its large global network and digital payment solutions. The program has around 140 international fintechs, like Australian based Airwallex and Columbian multivertical company Rappi.

“Fintechs play a critical role in bridging financial gaps and expanding access of financial services to diverse communities around the world,” said Terry Angelos, senior vice president and global head of fintech at Visa. “By partnering with companies like Daylight, we are working to create a more inclusive and accessible financial ecosystem, and will remain committed to creating offerings for those who have long been underrepresented in this sector.”

This isn’t the first time Visa has collaborated on a project to address the LGBTQ community. The company has partnered with Out and Equal, an organization that works towards workplace equality. Visa has also committed to the Human Rights Campaign’s Business Coalition for Equality Act, which is aimed towards workplace protection from harassment and discrimination.

Announcing Tearsheet’s 2020 Embedded Awards finalists

Wed, 18 Nov 2020 12:45:47 GMT

This year’s award finalists feature exceptional Embedded Finance solutions and designs. The award winners will be announced at the end of the Embedded Conference this Thursday, November 19th.

The 2020 Embedded Awards finalists

Best Banking as a Service Platform:

Goldman Sachs
Treasury Prime
Wells Fargo Bank

Best New Product:

Intuit Quickbooks Cash
Plaid Exchange
Quontic Bank

Best Card Issuing Platform:

Extend
Marqeta

Best Customer Onboarding Program:

Radius Bank
Narmi

Best New Embedded Program:

Payitoff
Orum
Bond

Best Overall Embedded Platform:

Plaid
Payveris
Finix

Best Payments as a Service Platform:

Fattmerchant
Galileo Financial Technologies
Payveris

‘Making a meaningful impact throughout our footprint’: CIT Bank launches its Thanksgiving ...

Wed, 18 Nov 2020 12:45:39 GMT

Since 2018, CIT has partnered with Feeding America on a Thanksgiving campaign that enlists the help of its clients to feed America’s hungry. Last year, the $50+ billion bank surpassed its goal of donating 1 million meals by 50%. For its 2020 campaign, CIT is raising its goal to 2 million.

The campaign started November 10 and is set to end December 15. CIT customers can support the campaign by donating directly to Feeding America. But they can also do so in other ways. For example, for every new person who signs up to receive electronic statements from CIT, finances equipment through the bank, or opens a new account at a CIT branch, the company will donate 100 meals.

The Thanksgiving campaign comes at a hard time in history. “This year, food insecurity is more pressing than ever,” said Susan Fitzpatrick, director of communications at CIT. “According to a recent study conducted by Feeding America, the demand for food assistance is dramatically elevated in all 50 states and an estimated 23% of U.S. households with children may face hunger as a result of the COVID-19 health emergency.”

Feeding America is one of the largest U.S. hunger relief organizations, with over 60,000 food pantries and 200 food banks. Headquartered in Chicago, the non-profit works by securing, shipping, and distributing food across all 50 States to people who need it. The organization has partnered with major financial firms, including Bank of America, Visa, and Wells Fargo.

For CIT, its partnership with the organization is part of the company’s larger initiative to give back to its community.

“We are a vital part of the communities where we live and work and partner with organizations that make a meaningful impact throughout our footprint,” said Fitzpatrick.

CIT encourages employees, customers, and social media followers to all take part in the event by clicking “like” and sharing its posts.

CIT is promoting this campaign through all major social media channels, including Facebook, Twitter, Instagram, Linkedin, and YouTube, with the caption “Two Million Meals, One Cause” and the hashtag #TwoMillionMeals.

‘Be explicit about civility’: Working from home, companies increasingly combat toxic ...

Tue, 17 Nov 2020 12:45:00 GMT

COVID-19 has made working from home the new normal for many companies. As entire offices shifted to working from home, employees find themselves spending more time in video conferencing, including Zoom, Microsoft Teams, and other tools.

But new platforms bring new challenges. 38% of employees have reported experiencing toxic communication through these new channels of communication, including bullying and racist and sexist comments. That’s according to a new study, conducted by Writer, an AI writing assistant for teams. The company conducted a cross industry survey of over 1,000 employees to explore how workplace communication has changed as a result of working from home.

With this new environment comes new ways for toxic behavior to manifest, said May Habib, founder and CEO of Writer.

“Now that so much of our communication is asynchronous and it’s in these new non-personal, non-live, non-real-life channels, it shouldn’t be a surprise that toxic communication has made it to those channels as well, and in many ways it’s actually made it easier for people to be mean to each other,” said Habib.

Like other disruptive behaviors in the workplace, naming what constitutes toxic communication is a good first step. Companies can fight toxic behavior by being totally open about what qualifies as appropriate behavior and what absolutely does not. “Be explicit about civility,” she said. “It is a value. Don’t tolerate aggressive communication.”

Oxygen Bank, a new challenger bank which now has more than 30 employees, uses a no-nonsense approach to toxic communication when it hires new workers.

“Like most startups, we put a lot of thought into hiring and put a premium on enthusiasm for our mission and culture fit,” said Hussein Ahmed, founder and CEO of Oxygen. “To that end, we have zero tolerance for toxicity of any kind.”

But even with the best employees, digital channels can still distort messages. And this can lead to misunderstandings. Lack of perceived body language is a major culprit here.

“[A] lot can be lost when you are typing something versus saying it in real life — even on video, we’re looking at the shoulders and up,” said Habib. “We’re not seeing all of the body language. And so your message will always be read in the worst possible tone and intonation that it could be read in because that’s just human nature.”

Rho Business Banking, which has 27 employees, knows its way around remote forms of management. Most of the company was hired during the pandemic. Alex Wheldon, co-founder of the company, said he’s even more used to managing a team remotely than in person. “I don’t know any other way except [to] develop remote teams,” he said.

One way Rho has made up for lack of body language over remote communication is by assigning context to each communication tool used.

“We actually use a different tool for video conferencing within a team. And then we use another tool for outward conferencing,” said Wheldon. “So, [you] understand the context based on the tool you engage your team with. And it becomes like second nature.”

In addition to context, said Wheldon, it’s important to keep interactions organized. For Rho, this means “a consistency of meetings, keeping things semi-normal and understanding that [they] are going to check in everyday.”

But even these steps alone are not enough, said Wheldon. Empathy is important, too.

“You have to be very empathetic to your team. You also have to be mindful that they’re at home. You have to be mindful that it’s their space,” he said.

And for Oxygen Bank, empathy is translated into patience and openness to criticism.

“We are constantly soliciting feedback from both our customers and employees to better understand where we need to focus and how to best motivate,” said Ahmed. “It takes a lot of time but there is no substitute.”

Work-from-home options won’t go away after the pandemic, said Habib, so learning how to instill healthy communication both digitally and face-to-face is crucial for staying relevant post-pandemic.

“The companies that can take the best of Covid work-from-home culture and the best of real life office culture,” said Habib, “they’re going to win the war for talent.”

‘Changes will not happen overnight’: With speakers at conferences and new hiring ...

Mon, 16 Nov 2020 12:45:00 GMT

While looking for speakers for Tearsheet’s Challenger Conference September, we reached out to Stash, a challenger bank with over 1 million banking customers. The company responded that they have a new policy in place: Stash will only provide speakers to conferences that feature people of color and cover topics specific to the Black community.

“We’ve not only committed to hosting and participating in forums and events that highlight Black speakers,” said Gloria Basem, Stash’s chief people officer. “But also to only participate in these events if there is a diverse lineup of speakers.”

Stash’s commitment to diversity extends beyond its participation in conferences. It’s taking steps to improve diversity within its culture. The company recently hired its first Diversity and Talent Acquisition Manager. It also holds workshops and offers anti-bias training for its employees. The company is already seeing progress.

“(T)hrough concerted efforts to attract more diverse talent, 20% of our new hires this year identify as Black and/or Latinx.” said Basem.

Stash also participates in The Fintech Equality Coalition, an organization that vows to foster inclusivity and equality within the fintech community. In its mission statement, the Coalition vows to increase recruitment of Black employees, support Black-owned businesses, and increase capital for Black entrepreneurs. By joining the alliance, companies promise to only take part in events that have a diverse speaker line-up

The Coalition was kickstarted by Betterment, a fintech focused on investing, banking, and cash management. Even before this initiative, Betterment had prioritized the ideal of equality. Its platform includes an option to donate funds to nonprofits like the Brooklyn Community Bail Fund and The Trevor Project, organizations fighting racism in the criminal legal system and preventing suicide in the LGBTQ community, respectively. The company has been open about its goals to hire more people of color. Betterment has partnered with Jopwell, a career advancement platform for Black, Latinx, and Native American candidates. Other financial companies have also partnered with the platform, including Goldman Sachs, JPMorgan Chase, Visa, and American Express. Its co-founders previously worked at Goldman Sachs.

In the wake of this year’s social unrest and the rise of the Black Lives Matter Movement, Betterment started to explore more actions it could take to fight racism. The company built the Fintech Equality Coalition in an effort to fight racial injustice on an industry-wide level, and not just within its firm.

“Betterment is uniquely positioned in financial services, which is rife with diversity issues, as well as in technology which [has] systemic issues as well,” said Joe Ziemer, vice president of communication and policy at Betterment. “So, we’re at the intersection of those two and we thought [it would] be more advantageous for us to try to create an industry-wide initiative as opposed to just Betterment doing something externally.”

By signing the Fintech Equality Coalition agreement, fintechs commit to only take part in conferences and other public events with racially-diverse panels that include Black, Latinx and Native American speakers.

“We would look at full-day conferences, and it would be just white males,” said Ziemer. “[So] we were in a position to say, we would only do it if you make changes.”

More recently, the coalition also requires member firms to regularly publish a plan showing diversity efforts within their own company. So far, over fifty fintech companies have signed the coalition agreement, including SoFi, Monzo, and Stash.

But even with the renewed efforts this year, fintech isn’t yet a bastion of equality. It’s early days for the Coalition and its efforts. Joe Ziemer calls it “an early growing thing”.

“The biggest challenges in the immediate future are still just the final steps of [how the] organization [should] function,” said Ziemer. “And as the working groups start to make progress on their own, how do we make sure that all the working groups and the steering committee are aware and engaged and looking for opportunities to work together as well?”

Even if organizations like The Fintech Equality Coalition manage to maximize their efforts, it may not be enough. Ensuring equality in the future may mean fostering diverse talent as they come up the ranks.

As it is now, young people of color aren’t getting the same access to opportunities that young white people are. The Greenwood Project is an organization that aims to combat inequality in the financial industry by helping Black and Latinx students prepare for a career in finance.

“These students are really talented,” said Bevon Joseph, co-founder of the Greenwood Project. “What they lack is the social capital, the connections, the network, to even know that these opportunities exist. And that’s what we do. We act as a broker pretty much.”

The Greenwood Project was founded by Bevon and his wife, Elois, both of whom come from a background in finance. “We just always noticed the lack of diversity when it came to entry level talent and internships, in particular at financial services,” said Joseph.“We find, groom, educate, and prepare students — Black and Latinx in particular — for careers in financial services.”

The organization’s goal at first was to help around five students a year. But its success quickly grew.

“Never in a million years we thought we would be at this point right now,” said Joseph. “We just had close to a hundred students this summer. We have 150+ next year in multiple cities.”

2020 has been a big year in particular for the organization. “We did not plan to really expand until 2025,” said Joseph. “But given all that is happening in the US right now with the pandemic, plus racial injustice issues, we’ve gotten a ton of attention from financial firms and firms outside of finance who want to support what we do.”

As companies are making more progress and taking more initiatives to address inequality, there’s still work to do. Stash, which this year doubled its hiring of employees who identify as either Black or Latinx, is still continuing its efforts.

“We recognize that these changes within financial services will not happen overnight,” said Basem. “And so, we are in it for the long haul.”

Case Study: HSBC’S transformation as a bank for small business

Fri, 13 Nov 2020 12:45:00 GMT

The past few years have shown that business banking customers no longer have to wait days or weeks to apply and receive loans to open bank accounts and transact. Many new options are being offered by fintech firms that don’t have to deal with large legacy technology stacks and legacy thinking. This frees them up to focus on servicing small business needs and delivering good banking experiences. Large incumbent banks don’t have this luxury.

HSBC Kinetic is a bold move by the 6th largest bank in the world. It’s an app-only digital bank servicing small businesses, but for the financial institution established in the 1860s, it’s much more than that. With Kinetic, HSBC is building experience in agile development environments, in the cloud, and with a branchless app that offers automated onboarding, in-app overdrafts, a controllable debit card and a range of personal financial management budgeting and cashflow tools.

The following was produced by Tearsheet Studios. We worked with fintech software provider Strands to create a visual and audio case study about HSBC’s transformation as a bank for small businesses.

Tearsheet Podcast · Case Study: HSBC'S transformation as a bank for small business

Working with Strands, Kinetic built a powerful transaction categorization engine within HSBC that is aligned to the UK’s tax office. By categorizing those transactions, the business bank saves its customers days every month trying to manually reconcile what category spending should fall under.

Customers get a cleaner view of where they spend their money. With some additional analytics, Kinetic gives customers a monthly breakdown of the changes in their spending per category.

Additionally, Kinetic uses Strands to take business finance management up a level by building personalized insights for customers. The bank’s smart engine analyzes spending trends to understand all the bills a small business has coming up in the next few weeks to tell it whether it’s likely to hit zero or go into my overdraft. From here, the app gives business customers options to take relevant actions.

A customer can top up his account from another bank or can cancel a payment, amend the payment, or reschedule it for a later date. Or if you need funding, HSBC has options which customers can access straight through the app.

Download the case study to learn

Why HSBC created a new brand — Kinetic — to service small and medium businesses
What HSBC learned about small businesses’ needs after speaking to 3000 of them
What Kinetic, a digital bank without branches, says about the future of the 170 year old banking institution
How the bank offers services not traditionally offered by financial institutions to best serve its clients

Download the Case Study: HSBC’S transformation as a bank for small business

4 charts on why banks need embedded finance to be relevant in the future

Fri, 13 Nov 2020 10:45:00 GMT

Gartner predicts that by 2030, 80 percent of incumbent financial services firms will go out of business through commoditization and ineffective competition.

The Age of Assistance, a term made popular by Google, is turning the financial services industry on its head. With ease of access and exposure to a large and diverse set of digital services, customers are no longer satisfied with just getting what they want. Today’s consumer demands flexibility in how and where they engage financial services to get what they want.

“Banks that take advantage of this shift will outpace their customers and seize a new generation of customers across a multitude of channels. Banks that fail to adapt, risk extinction,” said David Donovan, executive vice president of financial services at Publicis Sapient, in a recent whitepaper.

Thinking outside the app

“Customers think about banking while they’re doing other things, like shopping, making travel plans, and talking to their friends,” said Citi’s head of technology for its consumer bank, Gavin Michael.

Banks shouldn’t focus all their digital transformation efforts on making their brand visible and present everywhere. The true power of a digital transformation initiative is when banks understand the power of invisibility, suggests Donovan. By partnering, leveraging customer trust, and building an embedded ecosystem centered around the customer, banks can find a way to be more relevant for their customers.

Donovan, whose financial services practice at Publicis Sapient develops technology for many of the world’s top banks, encourages banks to think ‘outside the app’ and place their customers at the center of their strategy. This new digital embedded finance ecosystem provides opportunities for banks to integrate with other products and services to offer their customers.

Using Amazon as a model

Today’s banking customers expect similar experiences from their banks as they have from non-financial industries.

Amazon has, through its drive for customer obsession, become the platform of commerce by allowing third parties to participate in their ecosystem, from e-commerce services to cloud-based platforms.

Today more than 50% of Amazon’s revenue comes from being a platform to sell services from third parties. Amazon has implemented a consumer-centric business model that provides the customers with an experience such that they get what they want (the product), but also how (ordering online) and where (to their own homes) they want it.

“The ease of experience and the customer focus has provided Amazon platform an incredible trust equation with their customers,” said Donovan.

How banks are adapting to this shift

Several banks are already in the process of taking advantage of the opportunities provided by embedded finance. Goldman Sachs is a leader, according to Donovan. They’ve built their new platform from the ground up around an ecosystem to plug and play the right partnership model, according to Donovan. Their acquisition strategy also seems to be around enhancing their platform capabilities and services.

PNC Bank’s cooperation with OnDeck’s ODX Platform Service is an example of two companies coming together for mutual benefit while making the loan application process seamless for customers. “Not only does this provide great value to the customers, but it also creates a competitive advantage for both of these companies,” he said.

The partnership ecosystem

China’s ecommerce platforms are examples of banking services putting on the invisibility cloak, according to Donovan. Banks can look to WeChat, with over 1 billion users, as an example of a company that has integrated messaging and finance. WeChat has optimized the user experience by combining online payments with communication. Customers use the communications platform for a diverse set of financial transactions.

“As companies in the financial sector are making these adaptations, the elevated customer experience is becoming the new norm,” said Donovan. “Companies that can be on the cutting edge of this will have the opportunity to get a large amount of business from customers who demand this level of service and will not settle for less. Companies that do not adapt will lose out on those customers. Over time, the majority of consumers in the market will fit this description.”

After COVID-19’s initial shock, lenders begin ramping up originations once again

Thu, 12 Nov 2020 12:45:00 GMT

For fintech lenders, COVID-19 meant a significant drop in loan originations.

In April, leaders in the industry, including Kabbage, OnDeck and LendingClub, began cutting off lending altogether. Existing loans started to go bad as consumers and businesses faced unprecedented financial stress. By the end of April, OnDeck reported 45% of its loans to be in some stage of delinquent. Kabbage, once the largest fintech lender to SMBs, ended up selling itself to American Express for about $850 million– a fraction of the $1.2 billion it was worth in 2017.

With the lending spigot closed, various digital lenders like Square and Kabbage, lobbied the Trump administration to participate in the distribution of funds from the CARES Act. The Paycheck Protection Program proved a godsend for some of these lenders. They also were some of the most active issuers of assistance loans throughout the U.S., rivaling many of the big banks. Kabbage ended up issuing $7 billion in PPP loans, helping nearly 300,000 businesses. After being approved by the SBA to participate in the PPP, BlueVine issued over $4.5 billion, saving 470,000 jobs. Intuit’s QuickBooks Capital originated over $1 billion after standing up a PPP app after just 11 days.

For many lenders, the Payment Protection Program became a lifeline. They could issue loans backed by the U.S. Government amidst the crisis and still stay afloat. But with PPP now out, lenders have to find new ways to stay relevant during the pandemic. What’s happening now is a slow increase in loan originations, as lenders begin to pick themselves up from the initial shock of the pandemic.

Last quarter, OnDeck, a SMB lender, originated $148 million, an increase of over 120% compared to Q2. But originations are still not close to where it was last year at the same time, at $618 million. Like Kabbage, OnDeck needed to be acquired and found a suitor in Enova, a short-term consumer lender. The $90 million acquisition helped OnDeck get back on its feet.

Consumer lenders are dealing with a similar dynamic. LendingClub severely slowed down its originations and is now ramping them up again. LendingClub’s Q3 originations increased by 79% compared to the previous quarter, ending up at a value of $584.1 million. But compared to last year, this is still an 83% decrease.

Though it hasn’t closed yet, LendingClub was already looking for a more permanent source of funds when it acquired Radius Bank in February, before the impact of the crisis was felt. As one of the first examples of a fintech lender buying a bank, this strategy should help the lender weather future financial storms.

Square offers small businesses loans of $300 to $100,000. Its lending arm, Square Capital, has begun issuing loans again after a total cut off in Q2. In Q3, it issued $155 million worth of loans, down 72% compared to last year. Though it’s focused on increasing volumes, it will take the firm some time to get up to pre-crisis levels.

Lenders were hit with a double whammy. It’s not just that lending dropped off a cliff — early on in the crisis, lenders saw their portfolios rapidly degrade in quality. That seems to be tapering off now.

San Francisco-based small business lender Fundbox was one of the only independent platforms that continued originating loans during the pandemic. New CEO Prashant Fuloria said loan delinquency has never been lower.

“We saw our delinquencies rise momentarily from the low single digit percentage points to the high single digit percentage points for a few weeks and then they came back (…)” said Fuloria. “For the last three months or so they’ve been at historic lows — well below pre-COVID levels.”

Fuloria attributed the company’s achievements during the pandemic to its digital and data focused approach. In the last seven years, the company has invested over $100 million in data assets.

“Everybody had challenges,” said Fuloria. “I think we were perhaps more fortunate because of our digital-only approach and our investment in data and how we serve our customers.”

Download Tearsheet’s 2020 Challengers Guide

Wed, 11 Nov 2020 12:45:00 GMT

The entire banking ecosystem has been upended and transformed over the past few years, and COVID-19 has accelerated that process by leaps and bounds.

In September, Tearsheet’s Challengers Conference brought together senior leaders from banks, credit unions, challenger banks, payments firms, and firms outside of banking for a candid discussion about what the top firms are doing with products and services, strategy, talent, and customer acquisition to thrive in today’s unprecedented environment.

We compiled the best of their thinking, experience and advice into Tearsheet’s new Challengers Guide, recognizing companies and professionals that are forging ahead with new services and products to help customers save, move, and borrow money in the modern era.

Tearsheet’s 2020 Challengers Guide explores:

the major trends in the space and how they will shape the future of banking
a new class of challenger banks entering banking from industries like software, investing, retail, and big tech
the top companies in challenger banking and what they’re working on now
how incumbent banks are compete for the future of digital banking
what digital banking customers are looking for today and into the future

Learn from some of the best financial data companies in the business, including N26, Revolut, Varo, Current, Citizens Bank, OakNorth, Aspiration, and more.

Download Tearsheet’s 2020 Challengers Guide (free)

The evolving relationship between banks and SMBs

Tue, 10 Nov 2020 12:45:00 GMT

In the US, small and medium-sized businesses represent over 99% of all U.S. businesses. That is a big slice of the pie and holds a lot of weight. Whether it’s better customer experiences or more user-friendly financial management software solutions, banks are taking notice and this is incentivizing change.

Large banks are shifting their focus to this “overlooked” segment as they continue to embrace new digital technologies and improve their business models. As they go forward, they will need to strengthen their value propositions and give SMBs more attention or risk them turning to other suppliers — such as community or retail banks, or fintechs, that can meet their finance and servicing needs.

But, what is it that the SMBs really want? Or need?

At the core of it, it’s all about being understood and helped by their financial institution.

SMBs in the US have, and continue, to struggle when it comes to accessing sufficient capital from their banks. As a consequence, they face bigger financing obstacles than larger corporations, such as less access to external financing, higher transaction costs, as well as higher risk premiums. Obviously, and it goes without saying, that is not good for business.

One issue prevalent in the industry stems from the fact that many small businesses don’t conduct mandatory financial audits. This means they often provide the incorrect calculations and information when manually applying for loans.

Another, perhaps even bigger issue, has to do with cash flow management and how businesses project their short-term cash flow to make more informed financial decisions. According to industry stats, an astonishing 82% of small businesses fail due to poor cash flow management.

The truth is it doesn’t have to be like this. At least not anymore.

Lately there has been a ton of new development in B2C technologies which allow banks to underwrite competitive loans to their customers (i.e. me and you), however this hasn’t really been appropriately re-engineered to serve SMBs and their immediate needs.

A study by FIS mentions that one of the main reasons SMBs switch banks is because of “being declined for a loan or line of credit and the inability to customize products or services”. SMBs now are shopping around to find solutions to their woes.

Thus, banks need to focus on creating products and solutions catering to small and medium-sized businesses around the operational issues they face. Besides credit or cash flow problems, this could center around other areas that are time sensitive and plague many companies, such as payroll.

A recent article by Payments Journal explains that a majority of senior banking executives are now recognizing small and medium-sized enterprises as the biggest growth opportunity and are shifting their attention accordingly.

With renewed interest, US banks that are now concentrating on the SMB industry are building up their cloud-based software solutions with back end ERP and front end CRM integrations. They offer dashboards to SMBs to give them more visibility and better understanding of their finances — all to help them streamline business processes to boost overall productivity.

When it comes to SMBs needs, these factors are the most commonly demanded:

A holistic view and better understanding of their finances
Comprehensive past spending analysis and forecast
Reconciliation with invoicing and accounting platforms
Cash flow prediction and advance invoice payments
Ability to grow business potential via online channels
Tax provisioning to avoid surprises

If banks pay attention and address these pain points for small and medium-sized companies, they themselves would benefit by expanding their portfolios and growing market share across a number of products that are targeted to this sector.

However, before they begin, banks must ask themselves these five vital questions:

Do we really understand what SMBs want?
Are we ready to become an SMB business partner?
Do we fully grasp the scope involved?
Do we have a cross-selling plan ready to go?
How does this fall into the wider changes in banking?

If they answer yes to these questions, then banks are ready to begin offering digital products to their SMB clients. By doing so, they can improve their own underwriting and lending capabilities and empower their SMBs clients to buy, operate, sell, and be in better control of their finances to boost their business performance. They would be the helping hand SMBs desperately need in today’s competitive world.

Many of the benefits that US banks could obtain by offering these digital banking products to their SMBs include:

Better cash flow management
Attract new customers via invoice aggregation
Increased SMB engagement on digital channels
Greater customer loyalty and better understanding of SMB’s needs
Faster time to market, accelerated rate of innovation
Leverage expertise in AI, predictive analytics and UX/UI
Seamless integration with existing systems

Conclusion

Banks have to take advantage of the opportunity to cater to today’s SMBs and ensure that they offer them the most innovative, company-centric, results-driven technology to help them get ahead. When that happens, that relationship will blossom and both parties will benefit.

To help US banks innovate and enhance their relationships with SMBs, Strands’ BFM solution offers small and medium-sized enterprise customers tools to manage cash flow, accounts payables, receivables, budgets and provisions — and are all powered by a layer of AI and machine-learning models. It allows SMBs to predict income, expenses, forecast balances, receive personalized alerts and notifications and recommend products and services that meet the immediate needs of their business.