Below are interesting stories the Banking.com staff has been reading over the past week. What have you been reading? Let us know in the comments section below or Tweet @bankingdotcom.
- Using Big Data to Reduce Risk in Small-Dollar Lending
The innovations being born at consumer finance start-ups are part of a larger, heavily hyped big data movement, which seeks to upend long-standing business models in industries from retailing to real estate. Using big data to underwrite loans provides new tools for evaluating risk, but it also presents lenders with a new set of challenges. Because the loans are made online, the data-driven lenders are encountering the risk that applicants are not who they claim to be. This is less of an issue in traditional payday storefronts.
- How Banks Can Escape the Fate of ‘Dumb Pipes’
New innovations from nonbanks will need a platform to provide distribution and the ability to scale quickly, and smart bankers will partner with startups to provide together what neither could do alone. Even entrepreneurial darlings Moven and Simple removed the word “bank” from their names and partnered with banks to provide the underlying chassis to carry their innovative customer experience. As banks scramble to react to cutting edge technologies developed by startups and launch innovations of their own, some of the brightest glimmers of the future may actually come from cooperation and collaboration.
- Banks Struggle with the Decision to Offer Small Business Apps
Since Apple released the iPhone in 2007, mobile banking apps for retail banking customers have become the financial equivalent of the little black dress — a must have. Yet, one customer type has been neglected in the app stores: small business owners. “The commercial market is still growing and there are a lot of things people are trying to figure out,” says Megan Minich, head of product delivery and channel delivery at Silicon Valley Bank. She has worked on commercial mobile apps since 2006.
- BITS on Low-Tech Ways to Fight Fraud
When it comes to fighting fraud, technology can only go so far, says Nancy Guglielmo of BITS. So, how can banking institutions truly correct the user behavior that enables many fraud schemes? It may be the cliché answer, but employee and customer education is the key, says Guglielmo, vice president of the fraud reduction program for BITS, the technology policy division of The Financial Services Roundtable, which represents 100 of the largest U.S. financial services companies. “Technology is starting to catch up, but we still need to keep up with education,” she says during this interview with Information Security Media Group.
- On Financial Reform: ‘The Banking Lobby Is Simply Too Strong To Allow It To Happen’
The 21st Century Glass-Steagall Act (PDF) would reestablish a wall between these high-risk practices and commercial banking – which, as Senator Warren had put so elegantly, “should be boring.” It would make the financial system more stable and secure, she said. Gobs of people have been clamoring for this kind of financial and regulatory reform. It would be the biggest threat to bankers, their industry, their bonuses, their source of free money, their way of life, their egos, their religion even.
- IBM Extends Its Banking Tech Expertise Into Emerging Markets
IBM is extending its expertise in laying the foundation for banking beyond the established world and into emerging countries. A modern, reliable, secure banking system is a basic requirement for economic growth. For emerging economies, developing such a banking system is both a challenge and opportunity; large portions of their populations may not have bank accounts or use banks regularly, creating an impediment to growth and development. McKinsey & Co. reports that more than a billion people in emerging nations have cell phones but not bank accounts.
- Free Checking Accounts Might be Dead by 2014
Losses from foreclosures and short sales caused by the deflation of the housing bubble over the last five years have also left many financial institutions with shortfalls that must be covered. In response to these financial hits, many banks have chosen to raise existing fees and assess new fees. In June of 2011, PNC Bank announced that it would stop offering a free checking account option, joining a number of other large banks who no longer offer free checking accounts. In fact, according to one survey, the number of free non-interest checking accounts dropped from 76 percent in 2009 to just 39 percent in 2013.
- Bank security breaches destroy customer trust
85 percent of U.S. adults with banking accounts are at least somewhat concerned about online banking fraud, according to Entersekt. Such fraud can include phishing, malware, man-in-the-browser and brute force attacks. According to the poll, almost six in ten (58%) U.S. adults would be at least somewhat willing to take an active role in securing their online banking transactions if this meant using their mobile phones to authenticate activities, such as purchases, logins, transfers or bill payments.
- Retailers’ mobile payments use to explode
Retail industry association eyes mobile payments as a source of customer loyalty and spending amid retail downturn. The use of mobile payment technology among Australian retailers may be set to explode, thanks to a strong desire among bricks and mortar retailers to cut transaction times, access customer loyalty programs and boost face-to-face interactions. Speaking to ZDNet, Russel Zimmerman, executive director at the Australian Retailers Association (ARA) said that the adoption of mobile payments by major retailers — such as Coles own rollout of a contactless payment system — was creating confidence among smaller retailers that the technology was becoming “the norm” and was here for the long-term.