Bringing Legacy Banks into the 21st Century

FinovateFall brought together fintech innovators from all over the world and representatives from some of the largest banks in the U.S., so naturally there were discussions around forging new partnerships and benefiting from the culture and technology shared between the different sides. We sat down with some of the key speakers to get their insights on how legacy banks and financial institutions can compete or collaborate in this new era.

Jeremy Balkin, Head of Innovation, Retail Banking & Wealth Management, HSBC USA on successful innovation projects and how to get them off the ground.

Mary Jane Ajodah, Vice President, Strategy, BNY Mellon, on how legacy banks can leapfrog start-ups – when they have the right strategy.

Steven Ramirez, CEO at Beyond the Arc, discusses the new trends he’s noticed emerging from the shadows.

Jim Marous, Publisher / Fintech Strategist, The Financial Brand/The Digital Banking Report explores why historical success can be a liability, as well as an asset for a bank.

Day Two at Bank Innovation 2015: Mobile Helps Banks Matter to Millennials

Day Two at Bank Innovation 2015: Mobile Helps Banks Matter to Millennials


In a conference dedicated to the future of banking, it is helpful to remember that there is an inherent problem in trying to “look ahead” at a time of rapid technological advances. “Just seven years ago, there was no iPhone,” reminded Niti Badarinath, senior vice president for mobile banking and payments at U.S. Bank, during his Fireside Chat session on Day Two of Bank Innovation 2015.

Fortunately, in many ways, the future is already here. And the future is as much as about demography as it about technology.

Niti Badarinath believes that millennials, a generation expected to rival baby boomers in size, have made it clear what they want from technology and commerce. And the good news is that, in this, banks are no different from any other institution that will have to adapt to new and potentially disruptive demands from a new cohort of consumers.

Niti_Badarinath_BI2015_stage-thumb-175x175-15040-thumb-150x150-15041What matters most to millennials? According to Badarinath, location, fees, and mobile are the three areas where banks must be most sensitive to the shift in consumer preferences. Branches are not dead, he insists. But he also cited a poll showing that over 70% of millennials responding would rather go to the dentist than talk to a banker. Moreover, “fees” is a four-letter word for most millennial consumers, and a quality mobile experience is increasingly a minimum expectation for anyone under the age of 35.

To this end, Badarinath recommends innovating around two themes: reducing friction and real-time delivery. “Tell me what I need to know when I need to know it,” is the millennial’s push-friendly mantra when it comes to the kind of interaction consumers will want from their technology, as far as Badarinath is concerned. “Relevancy is key,” he said. “The technology must be able to tell who I am, where I am, and what I’m doing.”

Here Badarinath made two especially interesting points. The first was that innovators should be wary of the lure of “feature parity.” “What is the point of making it easy to complete a loan application on a smartphone if no one is actually going to do that?” he asked. Seamlessness and continuity are important. But a simplistic approach to multichannel can create more negative experiences than positive ones. Instead, improving the technology that allows a consumer to save in one channel and retrieve in another might be the better solution. “Knowing what not to do is as important as knowing what to do,” Badarinath said.


The second point worth highlighting was his optimism that, by embracing mobile technologies, financial institutions could position themselves to onboard young, millennial customers for life. “Get them when they are young,” Badarinath said, “and keep them through their transitions.”

“If you look ahead far enough,” he explained, “the 25-year-old with $500 in the bank is more valuable than the 60-year-old with $5,000. We have to change the way we value our customers.”

Badarinath admits it’s not yet a conversation he is “winning every time” when he talks with banks. It is true that millennials are limited in terms of providing fee revenue, and are still net spenders rather than net savers. But a little look down the road can go a long way, and mobile is what might help banks get there. “Mobile is a way of growing the bank in the direction people are moving,” Badarinath said.

Top 8 Memes and Themes from Bank Innovation 2014


The research team from Finovate had a blast at the Bank Innovation 2014 event here in Seattle this week. And from the look of the event’s Twitter feed (#BI14), it seems as if those who were attending in spirit were having a good time, as well.

But for those who were not able to be there in person, here’s a look at some of the memes and themes that seemed to get the most chatter out of an engaged, energetic audience, both online and in-person.

#1 A is for API Banking
It was no surprise to see “API banking” go viral on the event Twitter feed as soon as it was introduced as a way to deploy state of the art technologies without overhauling legacy systems. The concept does have its detractors. “API banking will not cure your UX issues,” tweeted one of the idea’s antagonists. “Poorly executed, it just pushes the risk onto another dev team”. 
That said, the dream of finding ways for banks and other financial institutions to upgrade their systems and adopt new technologies faster and more completely isn’t dying any time soon. We’ve not hear the last of “API Banking” – and that’s probably a good thing.
#2 The Myth of the Magical Entrepreneur
This just in: fintech innovation and entrepreneurialism is hard.
That news may not make headlines. But it is sometimes worth comparing innovation in financial technology to innovation in other areas, like consumer technology, where regulations tend to be less onerous and forward-looking incumbents generally more willing to entertain “the new.”
It’s not magic, Ted Tekippe, CEO of DoubleBeam explained. “There’s a lot of failure that goes into it. A lot of bad ideas and dead-ends.”
“It’s not a ‘one-shot thing’ to be a successful fintech entrepreneur and innovator.”
If not magic, then what? Apparently, “misfits”. As Matteo Rizzi, General Partner at SBT Venture Capital suggested, “you can’t innovate without misfits in your organization. Others won’t take the risks necessary.”


#3 Toward a Fintech Startup
The panel discussion based on “Bank-Nonbank Partnerships That Work” may have set the tone, but the theme of collaboration between banks and technology innovators – and the challenge of finding the right partner – came up more than once during the sessions on the second day.
For some, it was a matter of understanding what it takes for a startup to get the attention and trust of an established institution. For others, it was the “do what you’ve got to do” attitude from MyOrder founder and CEO Michael Dooijes that that startups should take when it comes getting your innovations in front of the true decision makers – as opposed to the mere gatekeepers – that impressed most.
Interestingly enough, Dooijes is both at the helm of a startup and simultaneously Head of Strategy & Innovation at Rabobank, one of the largest banks in the Netherlands.
As more than one presenter suggested, selling yourself as a start-up is little different from selling yourself to consumers. By demonstrating the ability to deliver an actual solution to a problem, rather than an idea about a problem, startups have a better chance of getting in the room with a decision maker – whether they prefer the route of knocking on the door or trying to kick it wide open.
#4 Friction = FAIL
The seamless banking experience remains the Holy Grail for every financial institution and fintech startup. Reducing the number of steps, simplifying processes and creating greater efficiencies remains a key goal for innovators on virtually every front, from security and mobile UX/UI to P2P lending and payments.
A dramatic overhaul of a core banking system may do wonders for a bank’s efficiency over time. But the trade-off, in the short term, can be the time and cost of retraining what can be thousands of individual agents and representatives.
Similarly, even the most compelling innovations like fingerprint sensors can go unused by a consumer who feels like the new technology is more nuisance than novel.
#5 “Storing Value, Moving Value, Pricing Risk”
This was how Zac Townsend, President of Standard Treasury, summed up the field for financial companies and the startups that seek to serve the public through them. And success for startups means figuring out which of these challenges best describes the innovation you are developing. 
“Most startups” tend to do one or two of these,” Zac said, noting that under the current regulatory framework, only banks can do all three. This underscores the importance not only of knowing what you are best and truly unique at, but also being sensitive to changes in regulations and the market itself that make some of these lines of business more attractive than others.


#6 Innovation as a Process of Solving Problems
For all the talk of developing a culture of innovation, there is as much or more to be said for simply thinking of innovation as a process dedicated toward solving problems and eliminating “pain-points.”
“Never innovate for the sake of innovating,” warned Citibank’s JP Jolly in his presentation on next generation commercial and corporate banking. “Our clients used to come to us and say, ‘you guys come to us with a lot of ideas. But I never see them come to market.'”
So focusing on innovations that actually can and will be brought to market is key. Another key is remembering that not all innovation in finance is necessarily technical. One interesting discussion revolved around a “tiered KYC” strategy at a bank in Mexico. This tiered system consisted of three levels of service for potential banking customers, making it easier to onboard customers with divergent financial needs.
#7 When It Comes to Innovation, ROI Ain’t Everything
What price tag would you put on something that you can’t imagine living without?
According to more than one panelist at the event this week, this might be a better way for financial institutions – and the decision makers who run them  to look at and understand the value of technological innovation. A panelist from a smaller bank in Texas recalled how his bank was able to weather the Target data breach storm because the bank had the technology to produce new cards for their concerned customers in less than five minutes.
“Think of the peace of mind.” the panelist asked. Compare the ability to respond today with time and expense it would have taken to respond to a similar threat years ago. “What was the ROI on that investment?” 
#8 Consumers > Customers
From a bank mar
keting standpoint, nothing changes the game like social.
Social is what allows banks to make more proactive initiatives, what opens up the human side of our financial lives, what helps turn customers (people who are sold to) into consumers (people with specific, individual needs, wants and goals – and the ability to not just express them, but to broadcast them). 
This was one of the key insights from the panelists on Tuesday. There was unanimity in the way that social had helped their different financial institutions do everything from expand their market range to gaining valuable intelligence on their market in order to provide a better, more personalized set of products and services.