Creating a separate digital banking unit can help a traditional organization attract new customer segments and provide better digital experiences to its existing base. The company will benefit from the lower operating costs of the digital model while levering existing infrastructure and diversifying revenue streams. It can also lead to improved agility and greater speed to market. Achieving the necessary cultural alignment can be a challenge however, along with needing to address legacy technology issues, achieving the necessary integration with the traditional bank’s operations, and recruiting employees with strong technical, data analytics, and user experience design skills
Early Warning Services plans to offer a digital wallet, according to information ‘leaked’ to the press. Details of the new service have been sketchy. But EWS – the same banking industry consortium that runs the Zelle P2P service – published a blog post about a potential digital wallet a day after The Wall Street Journal published an exclusive about the company’s plan in January. They said “We hear from consumers that they want to utilize online payments from their trusted financial institutions. Early Warning is working closely with financial institutions to build a wallet that provides consumers with a secure and easy way to pay. The wallet will also aim to deliver better business outcomes for merchants — including higher transaction approval rates and more completed sales.” More to come. . .
Five years in, Zelle has demonstrated that it can keep attracting new users and increasing transaction volumes. This has been driven in part by significant increases in the number of banks and credit unions that have joined Zelle, leading to more consumer enrollments. Enrollments are also up at financial institutions that have offered Zelle since its start. Small businesses are also becoming more active users of person-to-person payment services for business transactions. P2P payments have become so entrenched in customer expectations that three out of four surveyed said they would take action if their bank discontinued the service.
A regulatory crack-down on crypto-related activities may be misguided. Cryptocurrencies have been having a bad run lately, but in the past so have other permissible banking activities such as mortgage lending and securitization, CRE lending, and consumer lending. Many banks are embracing machine learning today, but that also carries risks. One might question whether the recent problems in the crypto realm were related to the actual technology, or to more ‘classic’ banking risks such as concentration and liquidity risks, and poor management decision-making. Regulators have a responsibility to ensure the stability of the financial system. But they also need to ensure that banks have the freedom to experiment and innovate to remain competitive with unregulated providers of financial services.
