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MonJa’s Digital Banking and Lending Monthly Roundup – Why Subscribe?
Digital banking and lending are evolving rapidly. Recent fintech-banking partnerships and innovation in technology with the introduction of AI, ML and blockchain herald a new era in lending. Fintech’s are changing the competitive ecosystem, empowering lenders to process loans faster and smarter. In a world full of noise, understanding how the technologies and developments may impact your financial institution’s credit decisions and credit portfolio is of critical importance. With MonJa’s Digital Banking and Lending Monthly Roundup, it’s easy to stay up to date on what’s happening in the space. Get the latest updates, analysis and commentary on digital banking and lending segment!
7/25/2021 Analysts Respond to Bankers’ Fee Proposal for CUs (CU Today)
Independent Community Bankers of America (ICBA) is necessitating the “exit fee,” claiming that it would offset lost tax revenue. The banker’s trade group also proposed that the exit fee would be equal to 10% of the gross value of the acquired bank’s assets. However, experts say that the proposal is just another way of putting across the same demand as that in Washington. ICBA also affirms precedent for implementing an exit fee on entities that remove tax-paying organizations from the tax base. But some experts believe that these attempts are not in the interests of the association members. NAFCU, in response, said that the complaints are nothing but more of a Trojan Horse, merely to eliminate competition for community banks.
7/22/2021 Fifth Third closing dozens of branches to help pay for digital upgrades (American Banker)
Fifth Third Bancorp plans to consolidate 42 branches in legacy markets to pay for digital upgrades early next year. It has already closed 43 branches in established markets, and the planned closure will bring the total to 85. It also plans to open new branches in high-growth markets across the Southeast. Fifth Third is playing the long game to remain competitive through digital upgrade investments. It ultimately plans to open 125 new branches by 2025 across the Southeast while closing its branches in the legacy market. The company has a clear path of achieving around 8% market share with this expansion.
7/21/2021 Midwest BankCentre shows how community banks can compete with new players (Tearsheet)
Community Banks play an essential role in the communities they serve. But with deep-pocketed (tech) players entering the space, community banks like Midwest BankCentre have started developing next-gen digital solutions to help grow customers and retain them. Community banks help consumers who are denied access to mainstream financial services. Community Banks account for 40% of all agricultural loans and 43% of all business loans.
It is now directly competing with tech giants like PayPal, Apple, Amazon, and many more. Apart from that, it is also competing with multinational retailers like Walmart and telecom companies like Verizon. But to find new ways to grow core deposits, Midwest collaborated with a tech player and launched a new digital bank, Rising Bank, in 2019. Midwest BankCentre grew its deposits to $200 million in just two years and is expected to generate around $230 billion in revenue in the next five years. So, if community banks leverage the technological possibilities, they can thrive better in the new competitive environment.
7/21/2021 3 ways to create a more personalized credit union member experience (CU Insight)
In order to differentiate themselves and stand apart in today’s world, credit unions have come up with 3 ways to create a personalized experience for members and meet consumer expectations. The first one is personalizing the way members want to reach out to credit unions. Potential members must be given more options to connect with credit unions other than website visits or phone calls. Adding a textable number to the Google My Business listing will make the entire experience much convenient.
The second one is personalizing conversations for members on the go. Webchat conversations can be converted to a text thread, making it easier for members to continue chatting with credit unions even through their mobile devices. The third one is personalizing member offers via text. Wherein personalized offers can be communicated to members through a 98% open rate channel – texting.
7/21/2021 New Legislation Could End ‘Archaic’ FOM Restrictions for Credit Unions (Credit Union Times)
Supported by CUNA and NAFCU, the legislation would give federal credit unions the ability to expand their field of membership (FOM) by adding underserved areas. Rural areas would benefit the most from this legislation. CUNA President stated that the legislation would make three changes in the Federal Credit Union act to promote financial inclusion at no cost to the taxpayer and encourage credit unions to serve the underserved communities. However, not all credit unions will be able to add underserved areas. CUNA President, in his letter to committee members, has urged to either create a new government program or reform the archaic FOM restrictions.
7/20/2021 Billionaire Jack Dorsey’s Square Launches A Small Business Checking Account (Forbes)
Square Checking, the new banking service that Square will launch for small businesses, will have no account minimums, recurring fees, or overdraft fees. According to Q2 2020 survey, out of around 1.8 million small businesses that accept Square payments, 1.2 million are finding new banking relationships apart from Square. The company’s public relations issue regarding withholding merchant funds could also dismay the interest of small businesses for Square’s new checking account. Despite all this, the product launch is a caution to other competitors battling for small businesses. Square leveraged its working relationships into financial relationships and got its foot in small businesses.
The recent Fannie Mae National Housing Survey (NHS) cited that around 88% of the homebuyers expressed satisfaction with their mortgage process in Q1 2021, which remained unchanged from Q1 2020. The research results align with the other findings from the Fannie Mae Economic and Strategic Research Group. Fannie Mae also reported that despite the slight increase from previous years, consumers didn’t report a substantial increase in the use of online channels for mortgage related activities. 57% of borrowers said that the pandemic had no impact on their decision to use online channels. Fannie believes that since buying a home is an intricate expense and infrequent, moving to digital channels is an imperfect solution for many borrowers.
7/19/2021 Cambridge Savings Bank launches digital bank to expand national reach (Banking Dive)
Massachusetts-based Cambridge Savings Bank launched its digital-only bank called Ivy Bank. The bank aims to compete with other market players and will help Cambridge take its services nationwide. Ivy delivers best-in-class digital offerings backed by Cambridge’s heritage as a relationship-oriented, customer-centric bank. It provides consumers with the ability to access their financial lifecycle at their fingertips. Ivy’s money management tool lets customers view their bank accounts on a single dashboard, manage budgets, debt and view net worth. To launch the platform, Cambridge is partnering with third-party providers and several fintechs.
7/16/2021 Who Will Challenge the Challengers? (Credit Union Times)
Post-pandemic has seen the emergence of a subgroup of financial institutions called challenger banks. Mostly digital or app-based, these banks aim to compete with traditional banks by taking advantage of technology. Majorly targeting Millennials and Gen Z, many challengers saw a nice boost due to their smooth digital experience. Brightwell, Chime, and Varo are some of the successful challenger banks. Credit unions can do everything to deliver value to their members. But in order to challenge the challengers, credit unions must take actionable steps by translating financial data insights into action. These include understanding member friction, generate better solutions and develop an innovative value chain for member-centric solutions.
7/12/2021 Rethinking overdraft (Banking Dive)
Jamie Dimon, the CEO of JP Morgan Chase, was called the star of the overdraft show by Sen. Elizabeth Warren because of the $1.5 billion in overdraft fees collected by the bank during the pandemic. However, in response, the bank said that it waived more than $430 million in overdraft fees from Jan’20 to Mar’21 on customer’s requests. Last year, the nation’s community banks were most reliant on service charges for operating revenue. The nation’s largest banks and regional institutions are now shifting towards new products and service offerings so as to enable customers to avoid overdraft fees.
Although many stakeholders believe that banks should rethink overdraft fees, it is still unsure whether the legislation will dictate that change. Some banks, however, aren’t waiting for Congress to impose change. Banks like Columbus, PNC, Frost Bank have already revised their overdraft policy. Rethink in overdraft fees by banks is not because of the pressure from lawmakers and Fintechs; it is due to the drop in the revenue from the fees. Another reason is the competition from challenger banks.
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