It was a rather breathless piece reporting that NCR (once called National Cash Register) will be introducing a new ATM dubbed the SelfServ 80 to a number of major banks as well as several community banking organizations.
In addition to dispensing cash, the SelfServ 80 machines have large touchscreens and video conferencing capabilities that will enable banking customers to do “virtually anything” they’d normally go into the bank to transact, according to the news article.
This includes applying for loans or credit cards – or any other communications that would typically occur with a bank officer.
It sounds quite intriguing – and major step forward for ATMs, which haven’t changed that much since they were unveiled decades ago.
It’s easy to forget that ATMs were among the very first devices to “automate” activities previous carried out by humans, because they’ve seemed rather “old hat” for a while. They haven’t quite kept up with the times …
… Or maybe they have?
Reading this news piece my brother Nelson Nones, who has lived and worked outside the United States for more than 20 years, was amused. Here’s what he wrote to me:
Those new machines from NCR may seem “futuristic” in the United States, but they are nothing new in the Far East. In Thailand, for instance, you can go to just about any bank branch and you’ll see three types of machines lined up in a row:
ATMs (Automatic Teller Machines)
Unlike in the United States, these ATMs aren’t only for withdrawing cash and depositing checks. With your debit card you can also use these machines to transfer funds to other bank accounts within Thailand, and you can also pay bills, too – either on-the-spot or in advance. Other functions are also available as well. [See the image to the right.]
Most consumer-facing businesses which send out monthly statements to customers put a barcode on the bottom of the statement. The ATMs have barcode scanners and so, when paying a bill, you just scan the barcode at the ATM. All transactions take effect instantaneously.
These services are available at any ATM – not just the ones at bank branches. As an example, every single one of Thailand’s approximately 9,400 7-Eleven stores has full-service ATMs for all the country’s banks.
CDMs (Cash Deposit Machines)
These machines allow you to deposit cash straight into your bank account – with or without a debit card. The machines come with money counters; just put your bank notes in the slot (local currency only) and the machine will count them for you.
PUMs (Passbook Update Machines)
Passbook accounts might be a thing of the past in the United States, but they are still widely used in Thailand. Want to update your passbook? Just go to any PUM and insert your book. The machine will read it and then print all the transactions needed to bring it fully up to date.
Of all the places I’ve ever visited, Thailand has the most automated banking machinery I’ve ever seen.
Imagine that: United States banking and commerce trying to keep up with … Thailand!
My brother providef this photo of an automated banking kiosk located in the lobby of a hospital in Bangkok, Thailand. (My sister-in-law is also in the picture, looking elegant and happy.)
What about you? If you’ve encountered similarly sophisticated financial services automation in other countries that makes the U.S. system seem hopelessly outmoded, please share your experiences as well.
There’s no doubt that electronic banking is a win-win for both bank customers and banks themselves. Not only has convenience been improved exponentially, but electronic banking has helped financial institutions expand the scope of their services without incurring as much of the cost associated with bricks-and-mortar branch banking expansion.
And yet … with nearly a half-century of electronic banking behind us, consumer attitudes about personalized banking services persist.
We’re reminded of this in Nielsen’s latest survey of American consumers, conducted this summer. The study shows that while apps, online banking services, and the granddaddy of them all — ATMs — have made banking easier than ever before, there’s still a fundamental desire for physical branches.
The reason? The “customer experience” plays a major role in financial services, and for many consumers, that experience plays out in the trust that comes with personal interaction.
Nielsen’s June 2016 research shows that consumers prefer using a physical bank branch for a variety of reasons — paramount among them being the personal interaction with bank employees. Here’s how this and the other reasons stack up:
Personal service and interaction with bank associates: ~31% cited as a reason for preferring visiting a physical banking facility
Convenience: ~24%
Ease of use: ~14%
Concern about the security of a transaction: ~14%
The dollar amount of the transaction: ~5%
Prefer not to use a computer or mobile device to interact with the bank: ~4%
Note that an aversion to using computers or mobile devices is hardly a factor in consumers’ preferences to dealing with a physical banking location. It might have been at one time, but that factor is rapidly disappearing as a reason.
Which activities are best “aligned” with the personal experience many consumers expect to receive? Nielsen found that these are the most important ones to accommodate:
Opening checking or time savings accounts
Cashing and depositing checks
Seeking financial advice
Taking out a loan
The Nielsen study provides clues for financial institutions as to how they can align their products and services at each physical location — which might not be the same at each branch, based on the “dynamics” of the customer base being served.
More information about the Nielsen study can be viewed here.
How about you? How often do you take trips to the bank versus handling everything online? Would you miss having your branch easily accessible if suddenly it was located more than 10 miles away from you? Please share your perspectives with other readers.
In 2011, ~96% of Google’s revenues came from PPC advertising. In 2014, it’s ~97%.
But Google isn’t the only behemoth whose income is completely tied to advertising. Over at Facebook, ~93% of the company’s more than ~12 billion in revenues come from advertising as well.
Compared to Google, Facebook is a relative newcomer to the advertising game. But once it got in on the action, its growth was very robust.
In 2014 alone, Facebook’s advertising revenues were up 58% over the previous year.
But … there’s a bit of a problem. In a world where advertising revenues are tied to “eyeballs,“ Facebook’s user growth isn’t on the right trajectory. When the network has nearly 1.5 billion active users already, there’s not a lot of room for expansion.
This is reflected in Facebook’s Q4 year-over-year percentage growth stats as published by Mediassociates, a media planning and buying agency:
2009: ~260% year-over-year growth
2010: ~69% growth
2011: ~39% growth
2012: ~25% growth
2013: ~16% growth
2014: ~13% growth
One can easily imagine 2015’s growth figure dipping into the single digits, giving Facebook all the hallmarks of being a mature company in a maturing market.
But the always-enterprising folks at Facebook have had something up their sleeve which they’re rolling out to the market now: getting into the multi-billion credit-card payments business.
They’re starting small: introducing a “send-friends-money” functionality to Facebook’s Messenger app. But this rather innocuous addition hardly does justice to Facebook’s end-game strategy.
When you think about it, Facebook’s aims make a lot of sense. With nearly 1.5 billion active users around the world, Facebook’s accounts make PayPal’s ~162 million active accounts seem pretty paltry by comparison.
But revenue from PayPal’s transaction tolls isn’t chump change at all: nearly $8 billion last year alone.
Without doubt, Facebook is also looking at the huge amount of business done by American Express and VISA; think of the billions of dollars those companies earn by charging merchants between 2% and 3.5% on the value of each credit-card transaction.
Facebook’s entry into the business can be facilitated neatly through its Messenger mobile app, making it just as easy (or easier) to pay for goods and services as with a credit card.
Considering that Facebook’s users with mobile phones are already spending time on the network an average of an hour per day, it’s pretty easy to see how people could make the transition from traditional credit and debit card payments to using their Facebook app for precisely the same purposes.
And Facebook could sweeten the pot by working with retailers and marketers to offer real cash loads that would likely juice participation even more – sort of a cash rebate in advance of the purchase rather than afterward.
So we shouldn’t think of Facebook’s new “send-friends-money” feature as a one-off function.
Instead, it’s just the tip of the iceberg. If I were a manager at VISA or AmEx, I’d be thinking long and hard about the real motivations – and real implications – of Facebook’s latest moves.
What’s happening with e-invoicing support services for small businesses these days?
Minneapolis, MN-based financial services industry market research firm Barlow Research Associates, Inc. reported in January 2014 that two of the three large banking institutions that had been offering e-invoicing services have now retired those programs.
Indeed, you won’t find mention of them anywhere on their small business online banking websites.
Donna Arce
According to Donna Arce, a Barlow Research client executive, both Chase and Wells Fargo dropped e-invoicing in 2013, making Bank of America the only one of the nation’s 14 top banks still offering this service. (Existing e-invoicing customers at Chase remain grandfathered in … for now.)
Reportedly, the reason behind the elimination of e-invoicing services was low usage.
But was this usage a function of low demand … or was it actually the result of limited market availability?
After all, Arce reports that overall invoice volumes are notable. For the typical small business enterprise, approximately 75 paper invoices and 10 electronic invoices are generated in any given month.
In the middle market segment, the volume of invoices is quite a bit higher: Those companies average just over 1,250 paper invoices and more than 250 electronic invoices in the average month.
For answers to the question about inherent e-invoicing demand, we can look to PayPal, one of several non-bank providers of e-invoicing services.
According to Chris Morse, a PayPal spokesperson, “millions of users” have accessed company’s online invoicing services – particularly since 2011 when the product was redesigned with more robust functionality and features.
For an analyst’s column she wrote on the topic, Barlow Research’s Donna Arce reported on remarks made by René Lacerte, founder and CEO of invoice management firm Bill.com, on the elements that are essential for making sure that e-invoicing is a viable solution for business owners.
Quoting Lacerte:
“Working in an entirely online environment is not realistic for many businesses, [which] need a receivables solution that will track and manage both paper-based and electronic invoices and payments in one system.
“Integration with accounting software is key to businesses adopting any financial management tool, including e-invoicing. Without integration, businesses must re-key data from one system to another, which is both time-consuming and can be fraught with errors.
“Issuing the invoicing and accepting payment are just part of the overall receivables process … The ability to collaborate with customers via a portal where invoices can be referenced, documents shared and notes exchanged, dramatically reduces the time businesses spend managing these inquiries.”
The PayPal approach is quite flexible in terms of the payment options for the recipient of the invoice. Choices include its own PayPal bill payment option, along with credit and debit card payments as alternatives.
Contrast this with Bank of America, which requires the recipient to log on to a payment center, agree to terms, and then upload account information to make a payment – debit and credit cards not accepted.
Contrasting PayPal and the approach of the commercial banks, is it any wonder that the one is experiencing growth … while the others have seen low usage?
Of course, there’s also the issue of fees charged for e-invoicing services. PayPal’s fee structure is different than how the commercial banks have charged for services, in that a portion of PayPal’s fee is based on a percentage of the transaction value (currently around 3%). Depending on each company’s individual characteristics, that pricing model may or may not be the most lucrative for users.
Bottom-line, it’s clear that e-invoicing isn’t a dying service. But how flexibly it’s presented – and the degree to which it can actually reduce inherently labor-intensive in-house administrative activities – spells the difference between its success or failure as a business service.
In other words … the difference between PayPal and the giant commercial banks.
It’s been more than 35 years since I began my post-collegiate working career in the commercial banking business. At that time, there were well more than 17,000 federally chartered banking institutions in the United States.
The reasons for the high tally were clear. Most states didn’t allow commercial branch banking across state lines. And quite a few others – mainly in the Midwest and Plains regions – put severe restrictions on state branch banking as well.
That’s why states like Illinois and several others could have as many as 1,500 or more independent banking institutions each.
Of course, this hardly meant that these banks were operating in a vacuum. Not only were there efficient automated clearing houses to process interbank transactions, there were also robust correspondent banking networks interlinking smaller and larger banks.
These networks enabled community banks to offer many of the same deposit, lending and cash management services provided by the larger institutions.
“Bigger is Better …”
Beginning in the late 1980s and early 1990s, many of the regulatory barriers began to fall. States relaxed prohibitions on branch banking, while branching across state lines became common. It wasn’t long before a string of acquisitions created large, consolidated banks. The banking system began to look a lot more like Europe and Canada and a lot less like … well, the United States.
But then a countervailing trend developed, and it wasn’t the proverbial “dead-cat bounce.” Consolidation caused voids in local banking coverage in many regions. As a result, some businesses and consumers sought a return to banking institutions where ownership and management were part of the community, and where decision-making was based on a more intimate knowledge of the local economy.
So the commercial banking industry actually witnessed an uptick in the number of institutions during the late 1990s and early 2000s.
… Until the Great Recession of 2008/09 hit.
Today, the number of federally chartered U.S. banking institutions now stands at its lowest level since the Great Depression.
The stark facts are these: A sluggish economy, low interest rates and ever-more complex regulations have diminished the number of federally chartered institutions to below 6,900. The tally, according to FDIC stats, had never fallen below 7,000 since the mid-1930s.
Almost entirely, the recent numerical decline has come among smaller institutions – those with fewer than $100 million in assets. And of the more than 10,000 banks that are now gone, it isn’t only because of mergers and consolidations. Nearly 20% of them simply collapsed.
We’re not simply dealing with a reduction in banking charters; the number of physical bank locations is also declining – by about 3% since late 2009, thanks in part to the rise of online banking in addition to institutional consolidation.
John Barlow
I asked banking industry specialist John Barlow for his thoughts on the latest bank figures. Not only is this expert head of Minneapolis-based Barlow Research, Inc., a nationally recognized financial services industry market research and consulting firm that counts the largest U.S. institutions among its client base, Barlow is also chairman of Iowa Falls State Bank, a family-owned institution that could be characterized as the quintessential “local bank.” (He’s also a former boss of mine back when I was working in the banking industry during the 1970s.)
Barlow noted an additional point about small banks: “By their very nature, community banks are typically closely held – often family-owned enterprises. A significant headwind for continued ownership is the transition of the business to a younger generation. The Baby Boomers had smaller households, and their children are more likely to move away from the business – mentally as well as geographically.”
… or Is it Not Better?
There may be something of a silver lining in the recent trends, however. Actual bank deposits have continued to grow, and consolidations have helped alleviate concerns that an abundance of separate banks leads to lower efficiencies in the financial system and more difficulties in conducting regulatory oversight.
… But only to a degree. “It remains to be seen where the economies of scale exist in banking. According to our studies at Barlow Research, larger banks do appear to be more efficient at generating income. But that’s because they’re more aggressive at charging fees, not because of lower costs,” Barlow reports.
David Kemper, CEO of Missouri-based Commerce Bancshares, may have a point when he notes, “There’s no reason why we need [so] many banks, especially if those smaller banks have a much lower return on capital. The small banks’ bread-and-butter is just not there anymore.”
[To that point, Barlow contends that one of the reasons smaller banks have a lower return on capital is that they have too much capital.]
There’s an important counter-argument to the “consolidation is better” view. It goes like this: Community banks remain critically important to the economy because they are the ones more likely to engage in small-business lending.
Barlow Research’s statistical studies show that the small businesses that deal with community banks are more likely to be able to secure a loan. And the average size of that loan will be larger than one obtained from a large institution.
The Most Startling Trend?
Another FDIC statistic might be the most startling trend of all. Over the decades, each year has witnessed new bank startups – ranging from at least a handful to the low hundreds in any given year. But that’s all changed since the Great Recession.
In fact, there has been just one new federally approved bank charter issued since 2010.
That institution, the Bank of Bird-in-Hand (located in Lancaster County, Pennsylvania), was able to raise approximately $17 million in investment capital. But it also had to expend nearly $1 million in consulting and legal fees to properly prepare its application for a new charter — including spelling out policies and procedures detailing its systems to guard against cyber-attacks and other security risks.
“Intense” doesn’t tell the half of it when describing the effort needed to obtain a new Federal bank charter.
Considering those hurdles, what made the Bird-in-Hand investors think they could run a profitable banking operation in today’s economic and business climate? It’s because they see an opportunity in serving a local community heavily populated by Amish and other rural/farming families. Banking-wise, it’s an underserved community.
There once was a local independent bank, of course … but that one was acquired by a larger entity in 2003. The new bank’s investors believe they can provide services that are better suited to the needs of the local community – which, in turn, will make their new bank successful.
John Barlow adds this observation about community banking: “A well-managed community bank is one of the best investments you can make, as long as you do not make bad loans. Do that, and it’s all over in a couple years.”
And about the degree of governmental regulation in the industry, he remarks: “I grew up in a banking family. My grandfather and father complained about regulators all the time. Banks are regulated businesses: What’s new about that?”
Barlow and the Bird-in-Hand bank investors may well be right about the prospects for smaller banks in America. Still … one wonders how many new banking institutions will be starting up in the current economic and regulatory environment.
… Or that the prospective investors will determine that it’s even worth the effort.
Do we need another book about bank failures? In the case of Seattle-based, Washington Mutual, I think so. After all, it represents the largest bank failure in U.S. history.
A new book has just been published about WaMu: The Lost Bank, by Kirsten Grind. Ms. Grind is a reporter for The Wall Street Journal and a former writer for the Washington State’s Puget Sound Business Journal. Having reported about WaMu for years, she brings a trove of knowledge and context to a story that goes well beyond the proceedings from Capitol Hill hearings.
In fact, one of the major reasons to read this book is the peek behind the curtain it provides … so that we can begin to understand “why” things happened, not just “what” happened.
Washington Mutual represents an ugly off-note in the oh-so-harmonious corporate world of Seattle — home to vaunted progressive organizations such as Starbucks, Boeing and Microsoft. And for decades, the financial institution was just another regional banking entity, making safe loans and turning in a decent financial performance at the end of each year.
What happened?
The trajectory of WaMu’s brief, dramatic ascent into the stratosphere – and subsequent disastrous plunge – was set when the institution, no longer the closely held institution it had once been, gambled on growth by acquiring Long Beach Mortgage in 1999. Unlike WaMu, LBM was a leading participant in the sub-prime mortgage lending market, with a national presence.
Ms. Grind notes that some of the impetus for acquiring Long Beach Mortgage came from a desire to be in accord with Congressional aims to expand home mortgage lending to people who had traditionally not been able to participate in the housing market due to low incomes, poor credit, or a lack of credit history.
Herein begins yet another example of the old adage: “The road to hell is paved with good intentions.”
And in fact, it wasn’t long before WaMu started expanding its loan offerings to include adjustable rate mortgages and other “innovations” designed to increase loans and commensurate deposits.
It was all too easy. Then the greed set in. As long as home values continued to climb, WaMu found it could continue to originate mortgage loans, collect fees, sell the loans, and continue to grow its lending business, deposits and earnings.
The bank set aggressive goals to become one of the nation’s top two or three mortgage lenders, even as it came to possess a 2,000+ branch network.
But by 2007, barely eight years after the run-up began, the bank’s own officers began to realize major problems with the sub-prime division, leading to its collapse barely a years later and the fire-sale takeover of its assets by J.P. Morgan.
The legacy of WaMu’s bad lending practices has been bedeviling J.P. Morgan ever since. After initially marking down WaMu’s portfolio of mortgage loans by some $31 billion, J.P. Morgan has had to set aside an additional ~$6 billion because of further deterioration of the portfolio. The fallout from WaMu’s collapse will continue to reverberate in the coming years.
The Lost Bank is a good read even for people who aren’t well-versed in the financial side of business. Unlike other books I’ve encountered on banking topics that seem to be “long on tedium,” this one definitely keeps your interest from first page to last.
I find this book on par with two others that brought their corporate subjects to light in a similarly real way – and also well-worth reading:
Liars Poker by Michael Lewis (about Salomon Brothers and the Wall Street investment crisis of the late 1980s)
Roy Neuberger: Financier and art patron extraordinaire.When someone lives to the age of 107, that’s news in and of itself.
But when Roy R. Neuberger died at 107 on Christmas Eve Day, he was far more than just a person who had lived an extraordinarily long life. He was one of the most significant figures in 20th Century American finance, along with being an important patron of the arts.
Neuberger’s life story follows the arc of America’s modern history. Born into a family of wealth in Bridgeport, CT in 1903, he was orphaned at an early age. At first Neuberger was interested in a journalism career, but found college studies unfulfilling and dropped out of New York University before earning his degree.
Neuberger’s first job in business was with B. Altmans, a famous New York department store. He would later recall that this experience prepared him not just for a life in business, but also nurtured a lifelong appreciation for art.
Neuberger then took a sabbatical from business in his early 20s to travel to Europe, where he dabbled in painting and lived the life of a Bohemian in Paris along with other American expatriates.
After this wanderlust wore off and he was back in the United States, Neuberger stepped back into the business world by beginning his career on Wall Street – mere months before the stock market crash of 1929. Soldiering on during the years of the Depression, by 1939 he had co-founded Neuberger Berman, an investment firm that would later establish one of the first no-load mutual funds in America (the Guardian Fund – still in operation today).
But Neuberger’s love of art and painting was never far from his mind. In fact, by the early 1940s he was well on his way to becoming one of America’s most important art patrons. Neuberger was an early admirer of the paintings of Peter Hurd, promoting his works and helping to put this artist on the cultural map. It was a pattern that would be repeated over the years, as Neuberger championed the works of such luminaries as Edward Hopper, Milton Avery, Alexander Calder and Jackson Pollock.
On the social scene, Roy Neuberger was a fixture in New York business, political and artistic circles. He was a close personal friend of Gov. and later Vice President Nelson Rockefeller. In later years, after the death of his wife, he was a regular escort of the glamorous singer, actress and fellow art patron Kitty Carlisle Hart – another member of the glitterati who lived a long and celebrated life (96 years).
Throughout his many decades of involvement in the arts scene, Neuberger never severed ties to his business or the world of finance. Indeed, he was a person who seemed genuinely comfortable operating in both realms – two worlds that sometimes do not get along so well.
Neuberger even found time to write his memoirs: So Far, So Good – the First 94 Years was published 13 years before his death … and he penned a second book on art collecting as late as 2003.
Clearly, Roy Neuberger was someone who had a real zest for life and who never stopped growing and learning … which surely makes him an inspiration to many. But if that’s not enough for you, just the fact that he lived to be 107 years old is noteworthy in itself!
Those of us who live our daily lives online from sun-up to sun-down may need to be gently reminded that many people are only being brought to the online world kicking and screaming.
The results of a new survey on consumer banking habits underscores this fact. Market research firm Empathica Consumer Insights surveyed more than 15,000 Americans and Canadians on their preferences for how they do their banking. The results show that while Internet banking has certainly made its mark, many people still have a preference for traditional methods when it comes to transacting routine banking business:
Prefer Internet banking: ~41%
Prefer branch banking: ~33%
Prefer an ATM machine: 23%
Prefer a mobile (M-banking) channel: 2%
Prefer telephone banking: 1%
Moreover, it’s when dealing with an account issue or problem that consumer preferences for “tried and true” banking interfaces really come to the fore:
Prefer to visit the bank/branch office to deal with an account issue: ~60%
Prefer the telephone to deal with an account issue: ~34%
Prefer online contact to deal with an account issue: ~6%
What’s more, consumers’ brand loyalty to a banking organization is mostly dependent on their perceptions of how well the bank deals with account issues or problems — not everyday banking transactions.
The quicker and easier a bank addresses an account issue, people are more apt to be brand loyal – even when compared to consumers who have never faced a banking issue or concern with their bank.
In other words, the notion of “making lemonade out of lemons” is at work here.
What about other major transactions like applying for a loan or opening a new account? The survey showed that there’s the same preference for dealing with the bank in traditional ways – face-to-face.
One of the more surprising findings of the Empathica study was how few people are using the mobile channel for their routine banking transactions. At the moment, it’s barely a blip on the scale. One factor that may be at play is that more than half of the respondents say they don’t trust the security of mobile banking (whereas only a quarter don’t trust the security of banking by computer).
But here’s a nugget that may be a harbinger of future behavior … those consumers who do use the mobile channel for everyday banking transactions say they’re highly satisfied with this aspect of their banking, and they express a high degree of affinity with their banking institution.
Like we’re seeing with so many other market segments, the mobile channel appears to be lurking just around the corner …
Unlike in the United States, these ATMs aren’t only for withdrawing cash and depositing checks. With your debit card you can also use these machines to transfer funds to other bank accounts within Thailand, and you can also pay bills, too – either on-the-spot or in advance. Other functions are also available as well. [See the image to the right.] 
Nones Notes 