The robo-advisory service Betterment was launched shortly after the 2008 financial crisis and has grown to over 700,000 clients and $32 billion in assets under management. To continue its growth trajectory the company uses its ‘engineer mindset’ to constantly disrupt itself by creating new client-centric solutions. New services include a checking/savings account, retirement plan offerings for small businesses, tools to help customers pay down debt, and 529 plans for college savings.
New data-sharing rules from the CFPB are likely to alter the banking landscape. The agency’s objective is to make it easier for consumers to share data across institutions and to control what is being shared. While still on the drawing board, the new rules are expected to outlaw screen scraping by requiring secure data-sharing technologies like APIs, prevent providers from making it difficult for consumers to manage how their data are being shared, and decentralizing controls over data use to prevent data sharing frameworks from being dominated by a small number of companies.
A new app uses behavioral science to help consumers manage debt. Traditional debt repayment solutions focus on reducing interest rates or monthly payments but do nothing to change the behaviors that led to excessive debt accumulation in the first place. The app Debbie uses behavioral psychology to help change consumer financial habits, creating a more enduring approach to financial wellness.
Banks are doing what banks do. They are making money for their shareholders, no matter how it pollutes their balance sheets. At the global climate summit in Glasgow last year, some of the world’s biggest financial institutions announced ESG initiatives to end or offset all of their contributions to greenhouse gas emissions by 2050. But just before this year’s conference the group dropped a critical part of their initiative that required them to phase out the financing of fossil fuels. One observer noted that their earlier commitment was never a moral decision. It was, at the time, simply perceived as being good business. Perhaps the big banks can get away with such a cynical and opportunistic move, but community-based institutions would likely face more of a backlash from their customers if they decided to walk back their ESG initiatives.
Federal Reserve banks will waive some fees for the new FedNow instant payments system when it launches next year. Still targeting an introduction of the service in mid-2023, this fee holiday is being offered to stimulate adoption. The Fed also noted that it is not realistic to initially price the system at a level that would ensure the payback of the investment within a 10-year timeframe.
$68.4 trillion of assets could change hands during the baby boomer wealth transfer era. Retaining balances during this generational transfer may be challenging for bank wealth management units. Key areas to focus on include outsourcing back-office functions, enhancing middle- and front-office activities, integrating more closely with sales activities on the traditional banking side, and partnering strategically with outside players.
