Community banks thriving under Dodd-Frank

29 December, 2015 (10:52) | Blog | By: admin

By Kevin Cirilli

Sen. Elizabeth Warren (D-Mass.) maintained Thursday that the 2010 Dodd-Frank Wall Street reform law has helped community banks do better than big banks.

Warren made the claim at a Senate Banking Committee hearing on community banking regulations, during which she also chided Daniel Blanton, chairman-elect of the American Bankers Association (ABA), who testified.

Blanton and community banking officials have pushed for exemptions from certain parts of Dodd-Frank, such as mortgage-lending requirements, that they argue should only be applied to big banks.

They say that small- and medium-sized banks are being unfairly punished for big banks’ role in the 2008 economic crisis and have found a sympathetic ear among centrist Democrats and Republicans.

Not Warren.

“If as you claim community banks were particularly hard hit by Dodd-Frank’s new rules, why are they making more money since the rules went into effect and doing better than big banks?” Warren asked Blanton.

“There’s not a direct correlation between [the rules] passing and the success of the banks,” Blanton answered.

Warren fired back, charging, “their profitability seems to suggest they’re doing better than ever after the regulations went into effect.”

She pointed to data from the Federal Deposit Insurance Corporation (FDIC) that found community bankers’ earnings increased at a higher rate last year than the banking industry as a whole.

“I don’t think it’s because of the regulations that the banks are doing better,” Blanton responded. “It’s tangling up our process to do mortgages, it’s making it much more difficult.”

Their exchange was the second time this week that Warren, striking an aggressive tone, accused big banks of using small banks to weaken regulations. She also made the assertion at a Senate Banking hearing on Tuesday.

“We should be very skeptical of regulatory relief bills that are promoted as helping small banks but are pushed by ABA lobbyists for the big banks,” Warren said at Thursday’s hearing.

Most regulators define small banks as having $10 billion in assets, among other criteria. The definition allows those banks to be exempt from certain Dodd-Frank regulations.

Community bankers and credit unions are pushing to increase that limit to $50 billion. By comparison, JPMorgan, the largest U.S. bank, had $2.6 trillion in assets in 2014.

Tony Fratto, a partner at Washington-based Hamilton Place Strategies, which works with banks, criticized Warren for attempting to equate small banks to big banks.

“Apparently, ‘big banks’ and ‘Wall Street’ now includes supposed behemoths like … the Bank of Hawaii,” which has reported $14 billion in assets, quipped Fratto, a former White House and Treasury official in the George W. Bush administration.

Warren said at the hearing that “bank lobbyists love to come into our offices and talk about how community banks are being crushed and they need our help.”

“But a lot of the time the changes that they’re talking about aren’t really about helping community banks,” Warren said.

Fratto said that casting community bank relief as cover for Wall Street is “just ridiculous.”

“Dodd-Frank is the biggest and most complex piece of legislation in the history of the U.S.,” Fratto said. “We need honest debates over it and the regulations that flow from it.”

Last month, officials at the Consumer Financial Protection Bureau proposed tweaking mortgage rules for smaller lenders, a lobbying victory for the community banking industry.

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The Best Mobile Banking Apps

29 December, 2015 (10:49) | Blog | By: admin

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By Nick Clements – Contributor – Opinions expressed by Forbes Contributors are their own.

Americans are doing more of their banking online and at ATMs. Chase recently reported that more checks were deposited through cell phones and at ATMs than in branches. As transactions move from branches to cell phones, the quality of mobile banking apps will become increasingly important and a point of differentiation for banks as they battle to retain existing and lure new customers.

MagnifyMoney (where I work) compiled the user ratings of iOS and Android apps from the 100 largest banks and credit unions in the country. Prominent internet banks were also included. A weighted average of the ratings from iTunes and Google GOOGL +2.05% Play were used to identify the best and worst apps in the country.

Users are demanding both form and function. The best apps must have a good, intuitive user interface. People love Touch ID, as it removes the need to remember and change complicated passwords. Even more important, the best apps are filled with critical functionality. People want to be able to do everything on their phones that they can do in a branch or on the website. Being able to deposit checks with a phone is a great feature. But having a low deposit limit is frustrating. The most highly rated apps have both great design and functionality.

Best App for A Large Bank – Chase

Chase had the best mobile app of large banks in the country, with a rating of 4.2. The average rating for large banks was 3.7. Chase saw its score increase 9% from last year and dethroned Capital One, which was number one last year. Chase has been investing heavily in its app, having added Touch ID login for iPhones. The app is full of features, allowing users to send money to friends, send wire transfers (including internationally), see statements and more. The app also has small, fun design features. If you use the app in New York, you will see images of New York City. If you use the app in Southern California, expect to see pictures of the beach.

Best App for A Large Credit Union – PenFed

PenFed is one of the largest credit unions in the country, with more than $19 billion in assets. The app achieved a 4.4 rating, compared to a 3.8 rating for all credit unions reviewed. PenFed has been growing aggressively with a strategy that delivers very low interest rates on auto loans and mortgages. These reviews demonstrate that the credit union is also focusing on customer experience. Although PenFed is a credit union, it is relatively easy for anyone to join.

Best Apps Overall

Eight of the best ten apps overall came from credit unions. Five credit unions tied for first place, with a score of 4.7. Those credit unions included Eastman Credit Union, ESL, SEFCU, Redstone Credit Union and VyStar Credit Union. Most of the winning credit unions outsource their app development to a company called Digital Insight, in contrast to the in-house teams employed by most large banks. The Digital Insight app has been applauded for the simplicity of its design and its reliability.

Best Internet Banks

Over the last decade, a number of internet-only banks have launched. The best app from an internet bank with at least 500 user reviews was Simple, which was acquired by BBVA (a Spanish bank) for $117 million in 2014.

You can read the full study at MagnifyMoney.

Legacy systems – still the big barrier to banking innovation

21 December, 2015 (14:41) | Blog | By: admin

By Banking Tech

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Nimish Shah is banking sector lead at Talend

Outdated legacy IT systems are a major stumbling block for traditional UK high street banks as they look to fight back against their often more agile rivals, widely known as ‘challenger banks’, who unhindered by complex, unwieldy IT infrastructures are typically better positioned to innovate, writes Nimish Shah.

In a recent survey by Talend, nearly half of the banking industry professionals that were polled made reference to the limits of legacy systems as the biggest IT challenge facing the sector, with 43% also citing it as the main barrier to realising the benefits of big data analytics.

Often too, it’s the bank’s existing infrastructure that holds them back from making optimum use of their most valuable asset: their data. 56% of respondents blamed legacy systems for the lack of data integration while 45% claimed that the quality of their data was preventing ‘real-time insights for the business.’

Extracting insight from key data is crucial for banks if they want to retain customers in a world where the industry is increasingly pushing to make it easier to change. Recent years have seen the establishment of the Current Account Switch Service specifically set up to make the process more straightforward, together with an ongoing push by the Competition and Markets Authority to make it easier for customers to take charge of their accounts. Adding to the uncertainty for the big banks, we are living in a world where challenger organisations are achieving ever greater successes.

Indeed, KPMG’s inaugural Challenger banking benchmarking report, The Game Changers, recently revealed that based on its research, challengers are outperforming the Big Five banks in terms of growth.

However, there are clear signals that the banks know what they need and want to do to stay ahead of the pack and perhaps unsurprisingly, big data plays a key role in that. More than three-quarters (76%) of the banking professionals agreed that the industry has a clear understanding of the benefits of big data, and more than half (51%) see it as a way to innovate faster and more effectively against industry rivals. Equally, nearly a third (32%) believe that big data can help counteract economic pressures facing the banking industry.

This is all positive but banks still face that familiar gap between the vision and reality. There’s a clear divide between the growing understanding of the potential benefits that big data can bring and real world implementations that actively utilise it. For example, today, just 30% of junior managers and professionals claim that their organisation is well advanced in their big data initiatives.

So what’s continuing to hold uptake levels back? The survey highlighted the integration of multi-channel data (referenced by 34% of the sample); managing the data explosion (33%) and gaining actionable insight from customer data (25%) as critical areas of concern. The ongoing shortage of expert resource is another key issue, a problem exacerbated by the continuing complexity of the big data environment. As data science has evolved, the technology required has become increasingly advanced and the pool of engineers capable of using it in commercial applications – or even understanding it – has not grown accordingly. Today, 28% of respondents see their lack of in-house skills as a major barrier to big data adoption. The truth is there are few staff with big data skills on the market and so those with the knowledge are extortionately expensive.

Fortunately, technology can help to close the talent gap. To start seeing genuine value from big data projects, banks must embrace technology platforms that simplify the process, reduce the need for complex coding and, of course, that integrate with legacy systems and place graphical tools into the hands of users outside the IT department. Only by so doing will banks begin to excel in their big data applications and ensure that 2015/2016 is the timeframe when big data projects start to show real returns.

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Why banks need to learn from their technology counterparts

21 December, 2015 (14:40) | Blog | By: admin

By Max Speur

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The financial services industry has gone through some drastic changes, not least the methods with which individual’s complete financial transactions. From gold, to cash, to phones, methods of paying for goods have come a long way in a short space of time.

Today, transactions are being processed from the comfort of home or on the move thanks to the evolution of mobile technology. Apple has revolutionized this new development with its product Apple Pay, a digital payments platform which offers a cheaper, faster alternative to old-school financial payment processes like Swift. Does being cheaper, however, mean it is good enough to ensure trust and security?

Banks are still currently one of the most trusted institutions when it comes to handling and storing customer data. However, consumer trust and banking cybersecurity postures will be tested by criminals. One only has to look at the recent security breach at TalkTalk, which affected thousands of its customers, who are now battling to reclaim their personal information stored online.

Digital interactions will be the primary way customers and their banks connect with each other. Mobile banking accounts for almost a third of all interactions between bank and customer. According to Brett King, founder of Moven, there has been a 90 per cent reduction in bank branch visits, which coincided with the evolution of digital banking. The public are voting with their finger tips and traditional banks must ensure customers have a consistent experience, no matter where they visit.

The move to digital banking has many benefits for banks too, particularly the customer data that is being created and collected every second of every day. The data collected is often stored in separate silos within the bank’s IT infrastructure, where, consequently, applications in the middle layer pool the data together in a coherent form. By analyzing this data, banks can build a portfolio of new products that suits the needs of the individual, the hard part is getting to that data, and that is where the development of internal IT infrastructures becomes useful.

The introduction of Apple Pay has exacerbated the need for banks to improve their current technology architecture. Apple Pay is becoming extremely popular among those that have iPhones but there are rivals who offer similar services and technologies. bPay for instance, has used its platform to offer consumers promotional offers based on the purchases they make. This platform, which is provided by Barclays, is an ideal illustration of the direction payments are moving towards and confirms the fact that traditional banks are trying to catch up.

Some banks have started this journey of offering a more advanced digital experience, with Nationwide rolling out video banking, which they say will replace face-to-face meetings with bank branch managers. This is to offer services to individuals who live in rural locations, who might have to wait weeks for the opportunity to discuss mortgage plans or to receive financial advice.

Digital transactions are opening financial services to new markets, giving emerging economies, where it might be difficult to open bank accounts, an economic impetus and offering economic independence to the masses. Digital accounts are allowing individuals to transfer money and make payments with only a mobile phone and a text. A particularly useful case is the popularity of mobile banking in Africa, where it is rare to open traditional branch bank accounts. Most people in Africa have a mobile phone which has boosted the adoption of mobile banking and shows the usefulness of technology in providing people with an essential service.

Technology startups and inventions will not signal the end for traditional banks but they are highlighting the fact that people are open to alternatives. This means it is crucial for banks to accept the changing nature of banking and payments and move with the crowd. Banks need to make new technology as accessible and useful as possible to improve the customer experience. If they can improve the services they provide to their customers, banks will retain them for longer by showing true value.

While it is obvious technology businesses have disrupted the banking sector with their offerings, particularly in the realm of payments and money transfers, they still have some way to go to supplant the established giants who have centuries worth of experience.

The opportunity is there for technology companies to move into banking but it will take some time to convince the masses they are trustworthy enough. For banks to thrive in the digital age, however, they need to explore new markets and widen their customer touch-points. Increasing customer interactions using new technology, or even just partnering with young, nimble technology providers will offer banks the opportunity to not only survive, but excel, thanks to their experience in the industry and deep knowledge of their customers.

Max Speur, COO, SunTec

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