Less Talk. More Action.
The Financial Health Network’s Jennifer Tescher (@jentescher) made a forceful and compelling argument for banks to focus more on products and services that improve their customers’ financial health and less on education programs that do little to improve customers’ financial literacy (but do satisfy Community Reinvestment Act requirements). Most interesting to me was this tidbit:
in a new survey of C-suite leaders by my organization, more than two-thirds said that improving customer financial health was an important strategic priority, and that it was both profitable and a way to increase customer loyalty.
Profitable is the key word there. Financial health has always made for a great 30 second spot:
but we won’t see significant, wide-spread investment in financial health products or services until banks find predictable and measurable ways to align their customers’ financial health with their own portfolio performance and profitability metrics.
Additional Reading
Ron Shevlin (@rshevlin) at Cornerstone Advisors contemplates the good and the bad if financial services starts to emulate healthcare’s focus on outcomes. He also makes the case for a ‘Fitbit of Banking’.
Penny Crosman (@pennycrosman) at American Banker interviews David Tyrie, Bank of America’s head of advanced solutions and digital banking about his plan to create a ‘Mission Control’ for their customers’ financial lives.
On Point
Point-of-sale (POS) lending—a transparent and often more affordable alternative to credit cards—is having a moment right now.
Affirm—the POS lender founded by PayPal co-founder Max Levchin—raised $300 million in a Series F funding round to help drive significant expansion (while delaying taking the company public). This comes on the heels of a partnership with Walmart, which will put Affirm’s lending product on the retail giant’s website and in nearly 4,000 of its stores. Not a bad few months.
Perhaps spurred by the success of Affirm (and others), traditional payment and lending providers are jumping into the space. Mastercard announced it’s acquiring Vyze, a fintech startup that provides a platform for connecting merchants to lenders for POS financing. Visa announced a new, API-driven service that will connect Visa issuers with merchants in order to facilitate real-time, pre-approved installment loans during checkout. And Ally Financial announced it’s ending its credit card program and moving to point-of-sale lending (through an acquisition of Health Credit Services).
Going down a slightly different track, American Express, JPMorgan Chase, and Citi have all introduced installment lending features within their existing credit card products. The idea is to give cardholders the option to convert large purchases into fixed-fee payment plans or to allow them to borrow money against their existing credit lines and pay it back in fixed installments. And in the case of American Express, the idea appears to have some merit (at least with Millennials).
Additional Reading
FICO teamed up with Ron Shevlin at Cornerstone Advisors to study how the emergence of POS Lending and the use of ‘activity-based marketing’ is creating new opportunities for banks and credit unions to acquire customers. Read Ron’s analysis and dig in to how his findings will impact lenders’ marketing, origination, and analytics processes.
Over at American Banker, I make the case that credit card issuers’ introduction of installment lending features doesn’t go far enough in addressing consumers’ underlying needs.
And it’s not just credit cards. According to research from Auriemma Group, 40% of debit card holders say they would consider using an installment loan at the point of sale for everyday purchases like groceries.
Homework
Take 30 minutes and read Mercator Advisory Group’s thorough overview of digital-only banks and the impact they are having on the war for deposits. Ken Paterson provides an excellent overview of the space and the strategic impact it is having for larger banks (Marcus by Goldman Sachs) and smaller banks (Citizens Access).
For fun
Then spend 10 minutes indulging your sense of schadenfreude with a tour of history’s dumbest quotes from business executives misjudging the disruptive impact of new technologies (courtesy of @CBinsights).
Thanks,
Alex Johnson