The Ad of the Day:

A Traffic Light For Your Spending

By Moven

Moven is a free debit account that gives you real time feedback with every purchase you make so you can spend, save, and live smarter.

In a world of decreasing size and rapidly increasing technological development, the financial sector needs to keep up at the same pace. While physical supply chains have improved to keep track of the digital world, the financial supply chain has not kept pace.

The race toward real-time financial services involves a wide array of stakeholders and possibilities, ranging from common standardization to re-engineering underlying processes and protocols through blockchain technology.

So far, much of the hype in fintech is concentrated around the front-end through P2P-payments like Venmo, Facebook Pay and Snapcash, as well as mobile payments like Apple Pay/Wallet and Android Pay. These solutions change the dynamics of the customer interface, but are mainly built on existing infrastructures (either the banks or the card networks). However, in a world where physical goods can be delivered within the same day, expectations for real-time payments are rising.

For companies like Amazon, which operates on a near zero-margin philosophy, efficient working-capital management is crucial for a well-oiled value chain. This applies to both large volumes of small- to medium-sized transactions, as well as clearing and settlement of large-value payments across global value chains.

However, not only the process of debiting one bank account and crediting another will benefit from increased speed in the overall payment process. Real-time accounting and reporting could potentially reduce fraud and money laundering, as well as give companies better control of their liquidity.

Speed in payments is not only a competitive advantage for traditional value chains, but will also have a great impact on the Internet economy, where time to market is essential. For instance, the delay in payouts from Apple’s app store is as long as 60 days. This time delay could mean the difference between life and death for an app developer, and that money should probably be used to acquire new users as soon as possible, instead of being stored on an intermediary bank account.

For emerging markets, real-time payments would enable a smooth transition from a cash-based economy to a digital-payment world by potentially leapfrogging the process of establishing centralized clearing and settlement functions.

With the rise of the sharing economy, or more precisely stated, an on-demand economy, it is likely that a larger proportion of the future work force will be freelancers. A transition to real-time payments would allow workers to get paid as they go; upon completion of a task, payment would be made directly to a bank account, with all the required tax reporting requirements in place. This could be done weekly, or even daily.

These are only a few examples of how real-time financial services would have an impact.

A transition to real-time payments would allow workers to get paid as they go; upon completion of a task, payment would be made directly to a bank account, with all the required tax reporting requirements in place.

Today, 18 countries has implemented real-time payments, with another 18–30 underway. This is mainly done by upgrading existing infrastructure. For this to work, both the national payment infrastructure and a central real-time system, as well as core banking systems, need to make the transition to real time.

This is a costly process, with large up-front investments and increased operating costs for 24/7/365 operations. There also is the issue of cross-border payments, which is acknowledged as one of the harshest points of friction for international commerce, where the European Commission has launched a pan-European payment clearing and settlement project.

In addition to the incumbent-driven journey toward instant payment processing, blockchain technology provides multiple possibilities for real-time payments through the distributed ledger as well as the possibility to create smart contracts.

The latter would potentially enable real-time verification of pre-defined trade conditions through digitized smart contracts. In addition to solving the friction related to large-value payments for global value chains, blockchain technology would, in theory, make trade finance available to SMEs that would otherwise find it difficult to obtain credit approval.

These approaches are not necessarily mutually exclusive, but can easily co-exist by utilizing ISO 20022 as the message container combined with the blockchain technology as a ledger of ownership to confirm the change of ownership.

With a vast number of unknown variables related to this approach, banks like WestPac, ANZ and Commonwealth Bank of Australia have experimented with the Ripple protocol for real-time cross-border payments integrated with existing payment infrastructures. Australia is not alone on this; banking giant Barclays recently signed an agreement with Swedish blockchain-startup Safello for a proof of concept to explore how the blockchain could be used in traditional finance.

In a world where the banks are at risk of becoming a commodity, the ability to offer real-time financial services could strengthen the position of incumbents in an increasingly smaller world, where availability and speed are essential to stay ahead of the curve.

The life of a bank call center agent is rapidly changing.

Where once agents mainly answered customers’ routine questions over the telephone, today they are addressing a wider range of technical queries through a growing number of media.

There is live chat on mobile apps and websites. There are Skype-like experiences on ATMs. And in some foreign countries, there are mobile banking apps with video-chat capabilities. There is two-way texting, and of course, there is responding to consumers’ tweets and Facebook requests.

And the cries for help have evolved along with technology, too, like helping consumers find the camera app on their iPhones after Apple updates its operating system.

“There are so many ways consumers interact,” said Matthew Smith, vice president of digital banking at Happy State Bank & Trust in Texas.

The $2.6 billion-asset bank is exploring the idea of using video within its mobile-banking app and letting more employees communicate with customers over social media. It already lets its agents remotely connect to customers’ devices for troubleshooting and other purposes.

“We have to protect the bank’s image, and at same time we have to engage and be where the customers are,” said Smith.

Where consumers prefer to communicate will continue to evolve — and it might be typing instead of talking over the phone.

mBank, a Polish bank regarded as innovative, is testing customer chats over WhatsApp, a popular mobile messaging app, SMS text or any other avenue the bank thinks its smartphone customers prefer.

“Normally, [we] would just call you,” said Jaroslaw Mastalerz, head of operations and IT at mBank. “Some people don’t want to talk over the phone anymore.”

mBank sees the messaging experiment as a way to address an industrywide marketing challenge: as people conduct ever-more transactions on mobile devices, cross-sales opportunities erode as there is less room on the screen to promote additional products.

“You can’t copy and paste things you used to do,” Mastalerz said.

Sure, consumers usually access an app more frequently than they would a website, but they tend to do simple transactions like check their account balances.

“Migration to mobility is really challenging for the business model, even for Internet banks,” Mastalerz said.

The direct bank’s messaging experiment coincides with U.S. financial services companies’ efforts to refine the ways they connect with customers. Orrstown Bank in Shippensburg, Pa., for example, has quietly rolled out a feature that lets customers SMS text with its call center agents. So far, the bank says the most common queries touch on subjects with a sense of urgency, like lost cards.

“We are still very bullish on this medium,” said Benjamin Wallace, executive vice president of operations and technology at Orrstown. “But we are still in early days of rollout.”

As the $1.2 billion-asset bank studies how customers use its two-way texting capability, a number of large banks like Bank of America have recently updated their apps so people can click to connect to call center agents — but over the phone. USAA has a virtual agent that lets members navigate its mobile app via verbal or written queries. And Digit, a service that automatically transfers funds from checking to savings every few days, in amounts its algorithms believe a person can afford, interacts with users through texts.

Ethan Bloch, chief executive of Digit, said consumers of all ages like message by smartphones.

“It’s a no-brainer,” Bloch said. “Everyone is communicating over text and messaging.”

Mary Meeker, a partner at venture capital firm Kleiner Perkins Caufield & Byers, dived into the growing importance of messaging apps in her 196-slide presentation on Internet trends. The annual report, published in May, highlighted how six of the top 10 most-used apps globally are messaging apps.

“It’s a no-brainer,” Bloch said. “Everyone is communicating over text and messaging.”

Unlike typical text-banking — “enter B for account balance” — Digit sends automated messages that are meant to sound casual and can include fun images of comedian and actor Bill Murray.

“We write the messages as if we were sending them to a friend,” Bloch said. “Again, it’s not for everybody.”

Bloch said he could see a day when the savings service works on a messaging platform if doing so would help it reach more potential customers and improve service.

Meanwhile, mBank wants to crunch data about usage of its app so its agents can select the best channel for reaching out to individual consumers — say with a product suggestion. mBank will not see what is being said, or with whom customers are speaking, in other apps on their phones. Rather, it seeks to monitor the frequency with which each mobile banking customer uses services like WhatsApp.

Of course, it could turn out consumers lack an appetite for messaging with bankers. Video chats, which mBank makes available, have proven to be less popular, for example.

“It’s not a preferred channel,” Mastalerz said. “It’s growing but not as we expected.”