Three years ago JP Morgan’s CEO Jamie Dimon warned banks that Silicon Valley was coming to eat their lunch. As they developed new digital baking services, start-up tech companies, in the hybrid industry known as “fin-tech,” would take away services that established banks had traditionally had a virtual monopoly on.
But now it’s become clear: Tech companies “didn’t displace banks; they disrupted them,” said Robert Barba, senior banking and fin-tech writer and analyst at the financial website Bankrate.com. Banks, which had been pushing online products for more than a decade, “woke up” to the services that technology companies were delivering to a savvier younger generation.
“Millennial generation banking has shifted to mobile much much faster. Many of those folks don’t even own a computer they do everything on their phone,” said Michelle Leibowitz, senior vice president of First Bank, the largest community bank in the state in terms of assets.
In their rush to reach these new customers, banks are implementing new products that go beyond online banking and mobile apps and are trying new approaches.
For example, M&F Bancorp, which is based in Durham, has launched a Millennial Advising Board. “We’ve set it up just like a real corporate board,” said James H. Sills, M&F’s president and CEO. “They’re basically advising us on how we can engage the community more.”
The bank is also working on a product for millennials to use on their smart phones but Sills declined to get into the specifics of the product yet, saying only it would have “different features that millenials would probably gravitate toward.”
Others, like Bank of America, are turning to artificial intelligence to set themselves apart.
After all, it’s not just competition from financial start-ups that traditional banks are dealing with; they’ve also had to adjust to consumers’ digital expectations, Barba said.
“A customer doesn’t compare Bank of America’s experience to Chase and Citi; they compare it to Netflix and Amazon and Uber and every other digital experience they encounter,” he said. Banks are “being judged across the entire digital universe.”
At the same time, banks have to deal with security measures, underscored by the recent Equifax breach, in which 145.5 million had their personal information accessed or stolen, as well as the concern that a digital emphasis takes away from the personal touch of banking.
Leibowitz said there were some technologies that First Bank would be unwilling to embrace. An example? Chatbox. “(It’s a) chat feature that doesn’t actually have a human on the other end,” she said. For standard questions, the chatbox can provide standard answers. “There’s no human touch there, and that’s where the community banks are the strongest,” Leibowitz said. “It really isn’t part of our DNA.
“You’ll hear about bigger banks that are cutting back on branches,” she said. “We’re very strategic in our focus on how, where, and when people want to do their banking. We believe that the digital channel simply serves to enhance our branch network.”
Here’s a look at some of the digital products that area banks are offering – or planning to launch soon.
Erica: Bank of America
Named after the last five letters of America, “Erica” is “virtual assistant that will live inside our app,” said Michelle Moore, Bank of America’s head of digital banking.
In a recent demonstration, Moore showed how Erica will send texts to Bank of America’s app users. “I have a text from Erica – she’s found a way to save me $300,” Moore said. Erica shows Moore how – by making a higher payment on her credit card – she can save money over the long term on finance charges.
“Would you like to update your scheduled payment plan, or keep it the same?” Erica asks. “Update plan,” Moore replies. Erica then updated the plan, and scheduled the new credit card payments monthly.
“When we first launch Erica, she’ll assist with simple, everyday tasks like transferring money between accounts and scheduling payments. As we continue to develop Erica over time, she’ll provide even more proactive guidance to anticipate customers’ financial needs,” said Bank of America spokesperson Jennifer Darwin. The guidance includes showing Bank of America users how to manage their spending and savings.
“I’ve noticed your spending is higher than usual this month. This could lead to a low balance or over-draft,” Erica tells Moore. Erica then brings up a graph showing Moore’s spending over the past months.
“Because this is inside the app, she has access to all my financials and what I want to do,” Moore explained.
Darwin said Eric will come with multiple layers of security, including fingerprint ID, when she launches early next year.
Zelle: Multiple banks
Currently offered by more than 30 banks, Zelle is a mobile banking app that allows users to directly transfer money to each other. Zelle was launched by a company called Early Warning, which is owned by eight banks: Bank of America, Wells Fargo, BB&T, PNC, Chase, Capital One, JP Morgan and US Bank. The app will be available from all eight banks.
With similar apps, such as Venmo, “The money is typically held within a third party,” said Meghan Fintland, director of Influencer Relations with Early Warning. But with Zelle, she said, “the money is going within minutes from bank account to bank account.”
Users don’t need to store funds in a separate account. They can use Zelle to directly transfer money between accounts, even if those accounts are at different banks. All parties must be enrolled with Zelle.
You can use it to request send money, request money or split the check and then request each member of your dinner party that owes you money.
Home Insight Planner: PNC
Prospective home-owners have to keep track of many distinct elements in many different places. PNC sought to change that with its Home Insight Planner, released on May 8. “It connects all the processes into one place,” said Jim Hansen, PNC’s regional president. From when, “you start your search, through the mortgage closing process.”
The planner, lets potential home buyers figure out what homes they can afford based on their actual spending and income information. They can then search for homes on the site that are within their budget, compare prices, and instantly see a home’s monthly costs.
Hansen said that the same approach that banks used to develop the money transfer app like Zelle, led PNC to develop Home Insight Planner. “We look at the overall landscape and our role as a financial institution to make the process easier and transparent for our clients as they go through it and the best way to do it is through digital capabilities,” he said