Traditional, brick-and-mortar businesses aren’t the only ones paying the cost of refraining from going digital. Coronavirus (Covid-19) is also teaching banks that there’s a high cost to relying on physical branches to keep in touch with their customers. 

Some banks had already launched their apps long before the bug broke out. But, at a global scale, they’re still lagging behind in attracting and retaining users in comparison to some of the ferocious fintechs out there. 

And this isn’t just a statement to laud them. A recent report from marketing startup, Liftoff, and data analysis startup, App Annie, provides evidence of this.

Brazil already caught the fintech bug

According to this report, from 2018 to 2019, in Brazil, the number of users for both banking apps and fintech apps grew. Although fintechs are ousting banks in that category. On that note, the report also showed that Nubank is Brazilians’ preferred fintech. 

But that’s not surprising. Earlier this year, Nubank announced that it had 20 million customers divided amongst two of its core products. And while by its customer base, it’s the sixth-largest financial institution in Brazil. In terms of app users, the report from Liftoff and App Annie gives the fintech the win.

And at the moment, digital applications are more relevant than bank branches.

So,due to Covid-19 confinements, it’s likely that Nubank and other similar fintechs in Brazil and the region saw a surge in user signups as of March.

The future of fintech in Latin America

This doesn’t mean that banks will sit by idly and wait to be killed by their competition. But rather, they’re pushing for more user-friendly digital solutions. And to that end, they’ve embraced various strategies. 

Some have launched corporate venture arms to invest in fintechs that satisfy their needs. Others created their own fintech spin-offs.

Another common approach is to buy fintechs or a specific product from them, rather than build a solution from scratch. As did Brazilian banco BV with the acquisition of fintech Guiabolso’s loaning platform last year.

While there are also banks that have opted to hire startups to help them develop their digital products.

For example, the Banco de Crédito de Bolivia (BCP for its Spanish acronym) announced that it worked with Chilean startup Rocketbot. On that occasion, it was to help it set up the automation features for its app.

Who will win?: As fintech and banking apps continue to emerge, fill the market, and the fighting gets down and dirty, the details (beyond costs and marketing budgets) will definitely separate the winners from the losers.

It won’t just be a matter of user interfaces, customization, and artificial intelligence (AI), mind you.

Ironically enough, factors that crippled the customer experience with traditional banks will also come into play in the digital realm. Examples include speed and customer service.

So watch the digital details, go big, or go home.

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Revolut founders Nikolay Storonsky and Vlad Yatsenko and some executive staff are forgoing their salaries for a year to help keep the banking service afloat.

The fintech, first reported by Financial News, appears to have followed in the footsteps of its competitor Monzo, who announced earlier this month that CEO Tom Blomfield wouldn’t receive a salary for 12 months and executive staff got 25 per cent pay cuts. 

The financial app has also apparently offered staff the opportunity to swap a proportion of their salaries for shares.

According to the report, the salary swap scheme will allow staff to swap £1 of salary for £2 worth of shares in the e-money institution.

Revolut, like many other fintechs, has begun to feel the financial pinch because of lockdowns customers are spending more conservatively and travelling less, hurting the digital banking service’s revenue.

Just under a month ago, Revolut had to quash rumours of financial difficulty after a slew of fake news about the company was spread via WhatsApp.

In a message sent to the bank’s customers, Nikolay Storonsky said: “I want to make clear that for Revolut it’s business as usual.”

The fintech is currently valued at $5.5bn following a mammoth $500m Series D funding round earlier this year. 

Despite the current economic uncertainty, Revolut is reportedly seeking a British Banking licence, after having operated in the UK for five years without one.

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San Francisco-headquartered Varo Money, an established mobile banking service provider, is reportedly planning to accommodate the former clients of digital bank Moven, which recently closed down its direct-to-consumer product offering.

In March 2020, Moven’s management had reported that it experienced funding challenges due to the Coronavirus (COVID-19) outbreak. The company confirmed that it would be shutting down its consumer offering for US customers. Moven added that it would mainly focus on selling its proprietary technology to banks and other financial institutions.

Moven said it would be closing all of its consumer accounts by April 30, 2020. However, the firm has now made a deal to move its existing clients to Varo Money’s platform. The number of customers being transferred has not been shared publicly.

Varo, which is in the process of becoming one of the first mobile-focused financial services firms to acquire a national bank charter, is also holding discussions with Moven’s management about potentially using the company’s technology.

Colin Walsh, CEO at Varo Money, stated:

“Moven has been a pioneer in the digital banking space and a long-time inspiration. We are excited to welcome their customers and deliver on the types of technology and features they have grown to love.”

Walsh added:

“Amidst the beginning waves of consolidation and change in the fintech industry, Varo is focused on becoming the first and only digital bank with a national charter. This will allow us to provide a greater breadth of digital banking solutions that meet the needs of the way people live and work today.”

Brett King established Movenbank back in 2011. At the time, it was one of the world’s very first mobile-only, low-fee banking services.

Movenbank offered a convenient and intuitive banking app that allowed users to take care of their day-to-day financial transactions. King won the Innovator of the Year award, which he received from a sister publication of American Banker.

King received the award a year after launching Movebank. It was given to him in recognition of the mobile-based bank’s customer-friendly, user-centric approach that was new (at that time). Movenbank provided a legitimate alternative to traditional banking.

Several other banking challengers have been introduced after Movenbank, including Digit, Chime, Varo Money, Even, Dave, and Qapital.

Varo Money continues to expand its services. In February 2020, it teamed up with WorldRemit, a cross-border funds transfer company, in order to give its customers direct access to the WorldRemit service via the Varo app.

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Amid the coronavirus pandemic, a significant number of bank branches shuttered.

And where there are branches, hours are staggered.

As Doug Brown, senior vice president and general manager of NCR, told Karen Webster, fundamental shifts are underway in financial services and the very way in which those services are delivered — and the shifts will be permanent.

“It’s clear that people rely heavily on their bankers and their banking relationships during crises; we’ve seen that before in prior events,” said Brown. “This crisis — perhaps more than ever — seems to have triggered the need for connections between people, their money and information.”

As social distancing takes root, as consumers are wary about coming into physical environments that might expose them to the coronavirus, consumers are embracing new behaviors, said Brown, while leaning on the trust they have in the relationships they’ve forged with traditional financial institutions (FIs). 

Individuals are embracing technology more and leveraging relatively new offerings, such as remote agent assists, text chats and interactive teller machines, sometimes accessed from their cars.

“These things have proven to not only be effective, but once delivered, they have helped encourage people to have ‘wow moments’ — enough so that they might not go back to the old ways because they realize the advantage and convenience,” said Brown.

The “wow” factor can help smaller FIs offset the top-line impact of mandates to close branches or reduce hours, especially in metropolitan and urban environments.

But for FIs of all sizes, Brown noted that the pandemic is forcing what he termed an “optimization of the branch and the branch footprint.” Firms will look to reassess not only how many branches they operate, but also how activities within the physical setting can be streamlined and made relevant to tech-savvy consumers.

Digital-First

A digital-first mentality will become critical for FIs, a strategic imperative that offers smaller banks a chance to shine. The credit unions (CUs) and community banks, said Brown, are not just brokers of funds — they are now brokers of critical information.

He noted that NCR has helped clients with Small Business Association (SBA) loan origination activity, where information is critical across the application process (for underwriting purposes, for example).

But FIs must also become the source of information for the borrowers/customers. The government makes most things overly complicated and confusing, Brown said, changing the rules seemingly every 24 hours.

“That’s where the banker steps in, telling the customers that ‘I will guide you through this, and I will explain what’s needed,’” he told Webster.

Bankers are becoming advisers and counselors against a landscape where decisioning cycles are speeding up, where job losses and volatile markets can send people scrambling for answers about their financial lives, Brown noted.

A digital-first world can help guide people as they synthesize information, as they look to push pause on their credit card payments, or as they worry about the risk of delinquencies and aim to stretch every dollar.

As Brown said, digital marketing efforts, along with the assistance of companies like digital marketing services Brisbane, can help spur consumers to become aware of, and use, features like “skip a payment” across platforms such as NCR’s. But the marketing efforts must be timely, and FIs have to leverage analytics to reach clients effectively via simplified messaging.

“It’s not just about ‘build it, they will come.’ That was the old bottle,” said Brown. “Now it’s ‘build it, tell them that it’s there, and tell them how to use it, and tell them again.’”

Along the way, analytics, APIs and other advanced technologies can help FIs improve their operations and customer interactions as well as gain the confidence to innovate.

Brown told Webster that small CUs, with the help of APIs, have been able to scale into activity that rivals much larger firms. Where they had been processing perhaps 10 SBA loans a month, now they are able to do 1,000 loans every day — with speed and agility.

“We’ve had a breakthrough moment when it comes to analysis paralysis,” he said, “and it gets me excited and motivated to see the light at the end of this tunnel.”

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Additionally, they need to invest in software applications to make the services available for the customers on the web and mobile platforms. But that is just the tip of the iceberg. Many businesses realize they need to hire an IT company like the IT company CE IT Solutions for business IT services and support. More importantly, they require IT support to keep these applications operating flawlessly and ensure that they deliver excellent customer experiences at all times. When it comes to availing reliable IT support, the managed service model emerges as the best choice for banks. Let us explain why and how managed IT services can serve as the core of digital banking.

Assurance of seamless customer experience  

Going digital means that the bank has to go the extra mile to ensure a seamless customer experience at all times. The competition is stiff in this domain and compromised experiences are likely to translate into lost customers. Downtime remains out of the question because it can hamper customer experience and cost the bank its reputation in the long run. With a managed service provider partnering with them, they can rest assured that downtime will never be a problem. Whether it is the core infrastructure or software applications, the MSP ensures that they are always monitored and maintained. They are also available for emergency troubleshooting to get things back on track when the system or application crashes suddenly.

IT specialization

The banking domain is altogether different from IT and it is hard for the team to understand the entire aspects of technology. With a managed service provider like the managed it services virginia beach collaborating with them, banks get the benefit of IT specialization for handling all their technology needs. Whenever the banking staff gets stuck or requires expert assistance for resolving specific issues, these experts from Treasure Valley IT are there to help. At the same time, managed IT services in Charlotte NC also ensure that the software applications and IT infrastructure are well looked after at all times. The approach is the perfect combination of proactive and preventive, which makes it just right for a service as critical as digital banking.

Cost-effectiveness

Collaborating with an MSP is definitely a smart decision for banks that aspire for digital transformation. This is because this subscription-based model is far more cost-effective as compared to having an in-house IT team. Everyone knows how expensive hiring, training and retaining a full-fledged IT team can be. The best approach would be to look for a partner like Electric for your managed service needs as they take care of end to end requirements so that the team can focus on their core banking operations. These providers offer reliability and round-the-clock availability for providing support when needed.

Commitment to security

The banking sector is fraught with risk, with constant concerns related to the security of applications and the privacy of customer data. They cannot afford to ignore these aspects because any data breach can cause extensive damage to their reputation and loss of customers as well. A managed service provider is committed to delivering top-notch cybersecurity for their systems, networks, and applications. With expert professionals managing their security, banks can have the peace of mind that their network security and customer data will never be compromised. Learn more here about managed network services and the benefits.

Responsibility for upgrades

Another benefit that digital banking systems can derive by partnering with IT consulting services is that the latter will be responsible for upgrades in their systems and applications. Upgrading to new versions speeds up systems and also makes them more secure than before. Missing them, therefore, can be expensive in the long run. Since non-technical people may not even be aware of the impending upgrade, it is not feasible to let them handle these requirements. An MSP, on the other hand, can ensure that the banking systems and applications are always upgraded on time and run on the latest versions.

With an MSP at their service, banks can go one step ahead on their digital transformation journey. These providers serve as reliable partners and play an advisory role as well. They can guide the banks about growing their digital footprint by embracing innovative applications and systems before the competitors do. In this way, they can aid in their growth and secure a competitive advantage for them.

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Banking and finance apps had a big 2019. Thanks to Coronavirus, they’re likely to have an even bigger 2020.

Consumers accessed finance apps over one trillion times and registration in apps grew 71% in 2019, according to a report released today by Liftoffand App Annie. Now, thanks to Coronavirus and shutdowns, that growth is accelerating.

“In the U.S. we saw 35% growth in time spent in finance apps overall from the week of December 29 to peak week in March (Mar 15, 2020),” a Liftoff representative told me via email. “Japan and South Korea have also seen phenomenal growth in time spent finance apps at 85% for the same time period.”

It’s not shocking.

If you can’t go to the bank thanks to COVID-19 shutdowns, the bank has to come to you. And the easiest way to do that, for many, is via a mobile app.

Among the global leaders is Google Pay, which grew the most in Russia and in France. Tex was a leader in India, and Cash App, along with Zelle and Venmo, grew the most in the U.S.. PC Financial and Scotiabank were the top fintech apps in Canada, along with Credit Karma, while China Individual Income Tax and JD Finance led the leaderboard in China.

The good news for consumers is they can bank wherever and whenever they want. The good news for banks and fintech startups is that it’s getting easier and cheaper to onboard new customers to their mobile experiences.

According to the report, which analyzed 22 billion ad impressions, seven million app installs, and five million first-time events in 117 different banking and fintech apps, conversion costs — what it costs to get an app install — dropped by over 76%. Meanwhile, registration rates rose by more than 71%. 

In other words, it’s cheaper to get app installs and more of your app installs are resulting in a sign-up or activation.

And, according to Liftoff, that’s resulting in more time spent in fintech apps. Popular budgeting and banking app Mint, for example, has seen a 20% increase in monthly active users.

As we’re seeing in other areas of the economy, digital transformation is accelerating thanks to Coronavirus. 

“Consumers are turning to finance apps at record levels amidst volatility in the market and uncertainty over the economy,” the Liftoff representative said.

Still, tough times are ahead.

While people may have downloaded and installed banking and finance apps more than ever before, with unemployment rates skyrocketing, there’s less money to invest and manage. That could make things more challenging over the next three to six months.

The full report is available here.

by John Koetsier

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OakNorth is partnering with New York-based Modern Bank to help support US businesses through the Covid-19 pandemic, just days after announcing a similar partnership with another US bank.

The strategic partnership will see OakNorth help Modern Bank with collecting documents and end-to-end processing, as the US bank gears up for an expected influx of hundreds of thousands of businesses applying for the Paycheck Protection Program.

The programme is a lifeline offered to US businesses hit by the economic downturn caused by coronavirus and forms part of the $2.2 trillion (£1.75 trillion) CARES Act passed by Congress to help Americans weather the economic downturn caused by Covid-19.

As part of the tie-up, OakNorth will also provide Modern Bank with extra operational capacity through pre-screening of applicants for loans.

To help offset the financial impact of Covid-19, Modern Bank is providing businesses with less than 500 employees with loans of up to $10m (£7.9m) to help cover payroll costs, interest on mortgages, rent and utilities.

The partnership mirror a similar type partnership struck by OakNorth and US bank Customers Bancorp earlier this month.

Specifically, OakNorth assembles teams to quickly build a bespoke end-to-end solution, which enables Modern Bank- and other banks with are participating in the Paycheck Protection Program- to take existing borrowers through the programme within hours.

The design of the OakNorth platform means that Modern Bank retains complete control of key decision-making and the risk-management processes, such as eligibility for loans and compliance checks.

Rishi Khosla, co-founder of OakNorth, (pictured) said: “Our Platform was built to help get credit to the businesses that needed it most, faster. Modern Bank wants to support US businesses through this crisis, and we want to play our part in helping them and other banks participating in the Program, do this as quickly as possible.”

“As we’ve seen with similar loan programs around the world, banks are experiencing call centre and web traffic that’s up to 50 times the normal levels and are simply unequipped to deal with this level of volume.”

“The operational efficiency gains our solution provides through process streamlining and automation, as well as pre-screening of applications, will enable lenders such as Modern Bank to effectively manage this increase in demand, which means much needed loans will go out to the small businesses who desperately need them.”

 Bippy Siegal, founder of Modern Bank, said: “As a commercial bank built by entrepreneurs, for entrepreneurs, Modern Bank is led by a team that leaped at the chance to be a part of the solution in the midst of the COVID-19 pandemic.”

“The CARES Act’s Paycheck Protection Program gives us the opportunity to serve our existing clients, as well as a much larger universe of commercial clients, who are racing against the clock to get the funds they need to support their valuable businesses.  

“Working closely with our partners at OakNorth, we were able to move quickly to put in place the solution in alignment with our institutional mission: to deliver superior products and services that empower our clients to achieve their individual financial goals – for their businesses, for their family, and for themselves.” 

In the UK, it was recently announced that OakNorth was one of four new lenders to have been added to the government’s emergency coronavirus lending scheme after criticism that it is failing to help companies reeling from the economic fallout of the pandemic.

Funding Circle and Iwoca are among those hoping to be approved to join the programme next week.

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Hong Kong’s newly licensed virtual banks will look to delay their launches due to an ongoing coronavirus pandemic.

Since the Hong Kong Monetary Authority issued eight virtual bank licenses last year and earmarked February this year for the final launches, the city has been victim to over 1,000 cases of coronavirus infections and four deaths.

With the exception of ZA Bank – jointly owned by mainland online insurer ZhongAn Online P&C Insurance and property developer Sinolink Group – no licensed digital lenders have fully kicked off for business. 

6 Out of 7 Delayed

Of the seven remaining virtual banks, three have made soft launches for trials – Ant Bank, Airstar Bank – jointly owned by mobile maker Xiaomi and Hong Kong-headquartered financial services group AMTD – and Mox.

The remaining four – WeLab Virtual Bank, Ping An OneConnect Bank, Tencent-backed Fusion Bank and Bank of China (Hong Kong)-backed Livi Bank – have yet to announce any launch dates, according to an «SCMP» report citing the pandemic as the cause for delay. 

Digital Disrupted

«The outbreak of Covid-19 has inevitably affected the virtual banks’ preparation for the launch of the business,» according to a statement from the HKMA.

Hong Kong is not alone in delaying digital banking launches in a region where various financial hubs have been vying to enhance their capabilities in the space including, most notably, rival Singapore. The city-state had originally planned to unveil up to five license winners from the reported 21 applicants in June 2020.

«[The delayed license issuance will allow applicants to] focus resources on ensuring monetary and financial stability, and ensuring that financial institutions remain resilient, and able to perform their role in supporting businesses and individuals through this challenging time,» the MAS said, adding it could resume the process in the second half of the year.

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Finanteq, a software and consulting firm that specializes in digital banking solutions, recently launched a new program for banks.

Andrzej Sierpiński, managing director at Finanteq, stated:

“The number of [physical] bank branches has been decreasing for years. But as a result of the COVID-19 crisis, many organizations have closed branches completely. To help banks in overcoming the crisis we are offering two of our solutions free of charge till the end of the pandemic.”

Sierpiński confirmed that the solutions may be implemented easily and will aim to replace brick-and-mortar locations with a fully operational digital-only banking platform.

One of Finanteq’s main solutions, the Pocket Branch, serves as a remote channel for banks. It will aim to provide the assistance they require as they struggle to cope with major challenges, following the Coronavirus (COVID-19) outbreak.

Pocket Branch allows customers to access banking services through audio, video, or text chat.

The platform has been developed for mobile and web or desktop-based applications.

Finanteq’s second product is called Extentum. It’s described as a no-code tool for extending digital banking capabilities. Banks will be able to integrate new features without having to  introduce updated versions of their web and mobile-based systems. The solution may be used to digitize normal banking processes that were only accessible when customers would visit a physical branch.

Bank customers will be looking for ways to make adjustments to rapidly changing financial circumstances, due to the Coronavirus crisis. Pocket Branch aims to provide the assistance people need through chat, screen-sharing or co-browsing features.

Artur Małek, head of marketing at Finanteq, noted:

“Our digital branch will also help in giving video advice to VIP customers, transferring documents or verifying clients and authorizing transactions.”

Finanteq’s management said that it recognizes the Coronavirus as a pandemic according to how the World Health Organization (WHO) has defined it (officially declared on March 12, 2020).

The Fintech company confirmed that the promotion for its products will end when the WHO announces that the pandemic is over.

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Following approval by the British Business Bank as  CBILS lender, Starling Bank – a digital-only bank, has issued a statement. Starling is a fully licensed and regulated bank, founded by Anne Boden, former Allied Irish Banks COO, in 2014.

Helen Bierton, Starling Bank’s Chief Banking Officer, said:

“Business owners who have poured their heart and soul, not to mention their life savings, into successful enterprises are crying out for help. The important thing now is to get money into their hands. We believe that CBILS is the best way to do this. We’re delighted to be working with the British Business Bank as a CBILS lender.”

The government-backed Coronavirus Business Interruption Loan Scheme(CBILS) will enable term loans between £5,000 and £250,000 to small and medium-sized enterprises (SMEs) that are struggling financially as a result of the coronavirus emergency. Starling Bank said it will shortly confirm the date from which it will be ready to start receiving CBILS applications.

Under CBILS, the first 12 months of interest on the facility and any arrangement fees will be paid by the UK government as a Business Interruption Payment. Smaller businesses will benefit from no upfront costs and lower initial repayments.

Importantly, no personal guarantees will be required, so borrowers and guarantors will not have to put up their principal private residence as security.

SMEs with an annual turnover of up to £45 million can apply for a Starling CBILS term loan, if they meet all of the following criteria:

• Limited Company or Limited Liability Partnership
• Trading for more than 18 months
• Have a good credit history with no arrears or defaults

Additionally, Starling is also offering business overdrafts of £1k to £150k under the Scheme, with Sole Trader businesses also eligible to access a business overdraft up to £25k. Loans are available for terms of up to 5 years. Overdrafts are a revolving credit facility and renewable annually.

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