Your Data: Open for Business

Giving Control

Despite all the talk about big brother-like tactics, Twitter, LinkedIn, and Facebook (the Cambridge Analytica scandal, notwithstanding—but we’ll get to that in a bit) actually provide their users with a significant amount of control. Users can set their privacy and access settings for data downloads, block people, enable and disable logins, as well as receive alerts when they log in from other devices.

Taking Control

Considering how much personal consumer information they have, financial institutions have nothing comparable. In fact, they’re being screen-scraped by everyone from Mint to their own credit card marketing teams. And what’s worse, users may or may not know this. There’s no warning message or communication from the banks to their customers and if there is something, it’s probably buried in the Terms of Service of the scraper itself. Banks have no visibility into the data sharing practices or downstream uses and they have zero ability to turn-off these authentications on the banks’ site.

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So while you can choose to block a high school sweetheart or de-link your Facebook account from Tinder, once you set up an auto-payment with Stash to Bank of America, BofA has no control on where the data is going, how the data is used or when the data is accessed. It’s a lose-lose for the banks and consumers.

Open Banking

APIs are the only way to address the issue. The US is already behind Europe’s PSD2 (Second Payment Services Directive) Initiative which creates Open Banking, allowing brokers to open up data via API, providing a secure and compliant means for data transfer. This change provides greater control and limits the potential misuse of screen-scraped data. That’s why the emphasis on control and compliant access is a foundational principle of TradeIt’s platform, providing connectivity to brokers and financial institutions.

After what recently came out with regards to Facebook and Cambridge Analytica, 50 million people just got a big wake-up call when it comes to how their information is being used and disseminated. It’s likely only a matter of time before Open Banking comes to our friendly shores and once it does, everyone’s going to have to play nice in the banking sandbox.

Where’s Jamie Dimon when we need him?

Before this happens, the smart US financial institutions will need to build the APIs and control centers and start educating consumers on the risks associated with scraping and gaining control of their data. In fact, some, like Fidelity, are already doing that. Their new Fidelity AccessSM product allows consumers to see which third parties the consumer has permitted to access their data. Consumers can even go one step further to disable a token that’s in place, thereby removing the connectivity and the third party’s access to the investor’s data.

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Under Lock and Key

Privacy and controlled access are a mantra for Financial Institutions and people expect security, especially with the increasing numbers of hacks and data breaches. Now more than ever, providing users with control over who has access to their data is vital. Financial Institutions need to jump on the bandwagon with features that control their customers’ data. And FinTechs who partner with them need to push for APIs with secure and compliant access that allows customers to control that data. Open Banking should spur innovation, not deter it, but it needs to be done with security and compliance at the forefront. After all, they are the tenets of our industry.  

Why the US Consumer Loses with Loose Change

The antiquated US Financial regulatory framework continues to undermine technical innovation and hold consumers back from making the most of their money. And most of them don’t even realize it.  

As far back as the late 90s, the US Regulatory frameworks for banking services in technology have yielded to the pressure of lobbyists and incumbents rather than evolving to meet changing industry dynamics, customer opportunities and increasingly global marginalization in tech innovation. While the OCC FinTech Charter is a starting point, legislators and regulators should be aggressively pushing for initiatives to enable competitive technical stacks.  

Capitalism by Any Other Name

In the 1900s, companies like BMW, GE, GM, VW, Target, Goldman Sachs and Toyota were granted a creative means of undertaking banking activities by creating an Industrial Loan Corp License in select states. In some instances, the banking activities of these companies were more valuable than the bankrupt core business, as was the case with Conseco. However, there have been no hearings or approved ILCs that would receive FDIC insurance in almost a decade.

Walmart and Home Depot are still in a holding pattern, yet Target and GM were approved— begging the question of why and what’s the criteria for consideration? In fact, the Independent Community Bankers of America has stressed that Congress should close the ILC loophole, stating it not only threatens the financial system but creates an uneven playing field for community banks, allowing them to play on their relationships to essentially pillage customers.

And, to add insult to injury, over the past two decades, the collective assets of these ILCs have increased by more than 5,000% and some of them are now among the largest financial institutions in the country.  

Finding a Loophole

We’re watching as fintech Titans, Affirm and SoFi, are applying for Industrial Loan Licenses, whereas other fintech companies, TransferWise and Coinbase, have created “clever” workarounds by partnering with innovative community banks like Cross RiverBank of New Jersey. PayPal, the largest and oldest fintech company with over $13BN in customers’ loose change has been plagued by the FDIC question since its earliest days. Now, as they continue expanding with lending via SWIFT Financial, you wonder when PayPal will start returning money to their customers rather than taking it from them.

Loose Change Infographic.pngOutsourcing Innovation

When a communist country like China, whose PayPal equivalent Ant financial, nets users an annual return of close to 5% versus PayPal’s 0% on funds left in your account, you know something’s gotta give. But the current regulatory frameworks don’t really lend to PayPal making that change anytime soon. And if it doesn’t benefit them, why would they do it of their own volition? When you stack Ant Financial’s Yu’E Bao product—which essentially translates to “Loose Treasure”—and that has 325 Million customers with $1.14TN in assets earning about 5% annually, and you compare it to Paypal’s 179 Million customers with $13BN earning nothing, you wonder what’s broken in the US system.

It’s Time to Put Change Back in America’s Pocket

If they aren’t already, Senator Warren and the CFPB should be looking overseas to see how to put money in consumers pockets, not keep the companies that people prefer from being insured, monitored and innovating. In the end, regulations need to help support and drive innovation so we all win, whether that’s through ILCs or sharing the “loose change”.

 

The Importance of Understanding the Psychographics of your Consumer – Part II

Last week we touched on the importance of psychographics vs. demographics when it comes to targeting and knowing your audience. This week, we’re highlighting the importance of design and user experience in creating stickiness and limiting barriers to entry.

How can you use behavior when it comes to your site or app experience? In other words, what are the visuals, words, and features that reinforce psychographic “clues” to help a user get or stay engaged if you want to serve both?

Color plays an important role in psychographics and making people feel good.

Think about a politician’s red power tie or why a blue bedroom is so soothing for sleep. And yet how many banking sites think about color when creating their look and feel? An app and site like Mint uses light and fun colors as well as space to literally make people feel like they can breathe when they see the home page. It’s clean, simple and dare we say—fun.

Screen Shot 2017-10-05 at 9.01.01 AM.pngCompare that to a banking site like Bank of America. It’s cluttered, adding more stress to someone already on the edge about their finances. And the color does nothing to soothe an anxious investor. In fact, it just looks like everything else out there. It’s cookie cutter. And in today’s market, you can’t afford to be mundane.

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It’s not what you say, it’s how you say it.

Your mother was right about this. Words play a huge role in making people feel welcome and comfortable. Let’s look at the home pages of sites like Lending Tree and Bankrate.

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Both simply have rate comparisons above the fold. Nothing welcoming. Nothing suggesting a comfort and simplicity for the visitor. Nothing offering help. (Let’s not even talk about the awful colors and design of Lending Tree.)

Contrast these with Robinhood and Betterment.

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Both instantly try to reassure the visitor. They let them know their sites are different. They want to help. Plus, look at how airy they are. The sites aren’t congested and the colors are clean and soothing, not harsh.

Keep it simple stupid.

For most of us in the industry, finance is easy. But, for most consumers, it’s overwhelming and difficult. Make them feel like you understand that and make your site as easy to use as possible. Create tools, like the ability to import their portfolio. Yahoo! Finance was an early master of this and now uses TradeIt to allow users to sync their brokerage portfolios in order to buy and sell stocks without leaving the app. This encourages people to come back repeatedly to look at their net worth. It’s the stickiest thing you can do and it becomes a daily habit, creating daily visits.

Think of it this way: You have one runway to land a plane. If you put the terminals in front of the runway, the plane crashes. In other words, help people know where to go by directing them around your site. Show them the runway and watch them become a frequent flyer of your site.