It Is Time for Banks to ‘Pivot’

Bankers need but one mantra today: “my bank is a technology company, my bank is a technology company.”

And exhale.

The truth is this concept appears to be incredibly difficult for the vast majority of American banks to fully grasp even today — unlike European banks, for example.

Why exactly this is the case is somewhat beyond me, but the evidence is clear. Bank Innovation conducted a review of frequency of iOS app updates by major banks and fintech companies, and the differences are stark. Of the 10 largest banks in the U.S., as of today half have not updated their apps in the last three months. Among the 10 fintech companies that boast the most mobile traffic, all updated their apps within the last three months.

For example, US Bank, generally a technology-oriented bank, hasn’t updated its core iOS mobile banking app since Dec. 4, 2014.

Source: Apple, Bank Innovation

This reality is all the more jarring considering how stark is the difference to European banks. CaixaBank, the Spanish financial institution, yesterday introduced its own Android payments wallet. And while the wallet has limitations (it is only compatible with Caixa Visa cards only, for the time being), it exhibits an aggressive, technology-oriented strategy. The fact that La Caixa is fielding 160 million mobile transactions per month today indicates that its strategy is working.

Or consider Starling Bank, which was founded about a year and a half ago in the United Kingdom. The bank is still in its infancy (it is still working toward a banking license), but consider the approach of its new chief technology officer, Mark Hipperson, whose hiring earlier this summer was announced today:

Mark and the team have been busy, and we now have a beautiful demo of our mobile app ready for testing. On that note, we will be in touch shortly to start recruiting for different pieces of customer research – from focus groups on different services we are developing, to our full beta-testing program.

Yes, a bank is beta-ing technology.

Beta-testing is one thing — how about just updating mobile apps. Facebook updates its app every two weeks. Here is the note that comes with updates of Facebook Messenger, its chat app, which is also updated with the same frequency:

We update the app around every two weeks so it continues to work great for you. We’re also working on fun new features, and we’re excited for you to try them out soon.

It is not that updates need to happen with Facebook’s frequency, but I question whether “fun new features” are in the works at the broader population of American banks. I took a few days of vacation recently and when I came back, I looked for “fun new” anything from banks. All I found was La Caixa and Starling.

Glen Blackall, retail practice director of CCG Catalyst, the consulting firm, pointed out earlier this week on Bank Innovation that banks possess a profound “treasure” that they are largely squandering: existing customers. Here’s how Glen described it:

Think of what a Fintech could do with the “assets” of a bank. They have the most coveted natural resource of all: a network of people and businesses that rely on them. In a community bank, that network is even more interesting because the members live near each other. Talk about fertile ground for new money making ideas.

He is completely correct. Glen argues that banks can “try something and find out” whether it works on a scale most fintech startups only dream of. So many startups today pine for “proof of concept” partnership opportunities with banks — yet, banks are largely oblivious to this “asset.” This is both startling and sad.

(In America, so much of banking is wrapped up in its regulatory regime that I cannot but include regulators in the blame for this. Yes, regulators have come a long way — Cross River Bank, a bank not in a technology-moribund state, reports that it has received sufficient support from its regulators — but it is not enough. And that is both for the sake of consumers and for the sake of safety and soundness.)

There is nothing — nothing — a bank can do to better inspire its marketing and customer base than to pursue technology innovation. But this can’t be a “check the box” type of effort, which is evidenced at even some of the largest banks in America. This has to be — to use startup lingo — a pivot. The time is now, and you’ve got the mantra for it.