Archive for the ‘banking’ tag
Online payment network Dwolla has pulled in$16.5 million in a third funding round led by elite venture capital firm Andreessen Horowitz.
Dwolla’s software allows anyone or anything connected to the Internet to move money. Individuals all the way up to enterprise companies can use the technology to send, request, and accept money from anyone else, and transactions can be conducted through email, mobile devices, and even social media.
“Dwolla has created its own, standalone payment network,” said director of communications Jordan Lampe in an email. “This allows the company to bypass traditional fees, problems, and delays associated with card and check-based networks. But it doesn’t stop there; by starting completely over, we’re able to create a versatile payment network that’s able to work with any bank account. This means that the same system that is used to buy a cup of coffee at your favorite java spot is also the same system that’s allowing retailers in the state of Iowa to pay over $125 million in taxes. Trippy stuff.”
As he mentioned, Dwolla formed a partnership with the state of Iowa last year to process taxes. The company also introduced FiSync, which it claims is the nation’s first real-time payment network for financial institutions and tackles on some of the problems of the Automated Clearing House (ACH) transfer system. Dwolla also made an “800 bank and credit unions partnership” with mFoundry. These partnerships accelerated Dwolla’s growth, and its annual processing run-rate is now in the billions, with a fast growing user base as well. The scaleability of the system, as well as its flexibility, make the technology attractive to investors as well as individuals and businesses.
“[Andreessen Horowitz] makes bets on companies that change the underlying fabric of their markets and, like Facebook, Twitter, and GitHub; we think Dwolla is going to do it in the banking world,” said Andreessen partner Scott Weiss in a statement. “The fact that Dwolla’s network can simultaneously meet the needs of a complex enterprise or government, while allowing a parent to pay the babysitter with her phone, reflects just how simple and strikingly different this solution is in the marketplace.”
Dwolla’s network securely connects to your bank accounts and allows you to send money for $.25 cents per transaction (free for transactions $10 or less). The money can only be transferred between Dwolla accounts, so the recipient will need to create one to use the funds. The fees are so low because there are no credit and debit cards, and the company said this approach is far more secure than credit cards and checks because your information is not exposed to strangers. Dwolla also offers tools for developers to integrate the technology into their own sites.
The company will use this third round of financing to further develop its enterprise products, and support customer/geographic growth. Dwolla is headquartered in Des Moines, Iowa and will open its fifth U.S. office in San Francisco to complete its “coast-to-coast” pipeline, as well as add to the teams in other offices. Previous investors Village Ventures, Thrive Capital, and Union Square Ventures also contributed. Dwolla raised its $5 million Series B round in February 2012.
The financial industry is in a state of transformation right now as forces like Bitcoin take it by storm and startups are revolutionizing payments from all angles, whether it is through mobile point-of-sale systems like Square, peer-to-peer social payments like Venmo, or backend payment support like Stripe. Dwolla’s idea is that people and businesses shouldn’t have to rely on large corporate third-party institutions like credit card companies or banks to do business. You shouldn’t have to lose money to move money.
Photo Credit: Anna Jones
Simple, a bank built from the ground up with the idea of modernizing banking, is now open and running. There’s a pretty long wait list to start, but it might be worth it, especially if you’re looking for a bank you can run entirely from your iPhone. More »
Dwolla’s First FiSync Banking Customer Goes Live, Eliminates ACH Delays With Real-Time Bank Transfers
A major milestone for disruptive payments platform Dwolla: the company has just switched on FiSync, its real-time money transfer system which aims to replace the outdated – and much slower – ACH process. ACH, or Automated Clearing House, is the traditional means for making electronic payments here in the United States. A 40-year old system, ACH enables money to move from Bank A to Bank B, but the transactions take two to five days to complete. FiSync basically blows that system up, offering banks, credit unions and service providers access to a real-time alternative.
Dwolla announced the updated FiSync integration for financial institutions back in March, and is only a few days behind its promise of the go-live date for its debut banking partner. Originally, the plan was to bring Waterloo, Iowa’s Veridian Credit Union online on June 4. It’s mid-June today as Veridian goes live, but that’s not a major delay by any means, especially when you’re talking about building an entirely new money transfer system from scratch.
According to the company’s blog post, the Veridian integration will switch on the real-time transactions for over 160,000 banking customers. The system is not only quicker than ACH, Dwolla explains, but actually protects customers better due to a verification process that allows banks to protect clients by requiring that other financial institutions verify account information prior to engaging in transactions. Banks can also hold deposits, if need be.
Also, unlike ACH, FiSync doesn’t take banking holidays or weekends off. It’s real-time, 24/7. (Finally.)
Veridian is the first banking partner with access to the real-time transactions portion of Dwolla’s FiSync system. The company previously signed up a number of banking partners to a system also called “FiSync” (for example), but that earlier version of the product did not include the real-time component. In other words, this is the first bank to sign up for what’s essentially a very different service than what was available before. Dwolla’s communications director, Jordan Lampe even just admitted to me that they really should have branded this new, real-time version of FiSync something else, to eliminate confusion. (I made some suggestions, too. Let’s see if they use them!)
The company outlined several of the benefits of the new system and Dwolla itself, including the following:
- Free real-time bank transfers: FiSync members can move funds to and from their bank accounts to the Dwolla platform, friends or businesses for no cost and without the traditional 2 to 3 day wait times.
- Improved security and safety: With PINs, passwords, email notifications and other authentication processes, FiSync adds new layers of security not embedded in traditional bank transfer networks.
- Harmless transactions: Removing the sensitive financial information, or “data exhaust,” from its transactions, Dwolla users and merchants exchange money without many of the liabilities associated with card networks (e.g. card theft, data breaches, etc.).
- Business friendly: Free or 25 cents per transaction, as well as near instant liquidity allows online, retail or business to business merchants to stay competitive.
- Mobile payments: Dwolla users are able to purchase goods and services or share money with their friends via the network’s Android and Apple applications. (Note: A new business using Dwolla for electronic cash payments is NY’s GetTaxi, for example)
- Pay friends or family: Dwolla users securely send money to Facebook friends, Twitter followers, LinkedIn connections, SM-enabled phones, nearby devices and email addresses.
- Free distribution and integration: FiSync is freely available to financial institutions and service providers at fisync.dwolla.com. Interbank transactions are comparable to traditional ACH costs.
As you can see from the above, FiSync is only one piece to the network that Dwolla is building. The company is designing what money management (mobile, banking, transfers, peer-to-peer, payments, etc.) would look like, if it was built today, without having to take into account legacy systems. By designing its payments network from the ground up, Dwolla has been able to eliminate a number of issues, like the ACH delays, that come from having to support legacy systems, hardware, processes, and their associated challenges.
According to Lampe, Veridian is only the first of Dwolla’s FiSync banking partners that will use the new system. Others will arrive in the “next coming few months,” he says.
TransferWise today announced funding of $1.3m for its scheme to sidestep the banks using cheap, peer-to-peer currency exchange. Among the new investors is Max Levchin, the co-founder of PayPal.
Banks charge 3-6 percent more than the mid-market rates for currency exchange. The mid-market rate is halfway between the “buy” and “sell” rate for a particular currency on the global currency markets. Transferwise cuts out the banks by matching your exchange, e.g. from Euros to British pounds, with others who want to turn pounds into Euros. For example, if I want to send 1000 EUR from Amsterdam to the UK, Transferwise would save me around 40 EUR at the current exchange rates.
Transferwise was founded by Taavet Hinrikus, one of Skype’s first employees. Hinrikus is Estonian but lives in London. He says he often needed to transfer money home. An informal market emerged where Estonians would exchange currencies. Transferwise automates this process.
“Banking is broken and that people want simple and cheap solutions,” says Hinrikus. “Banking needs to be democratized in the way that low cost airlines did 20 yrs ago in aviation or Skype did 10 yrs ago in Telecoms.”
Since the company launched in January 2011, Transferwise users have exchanged $13 million (10 million Euros (10 million EUR) and saved more than $654, 000 dollars (500,000 EUR) in the process. Most users are pensioners, students or professional expats. The average size of transfer is around 1500 GBP.
As a user, you transfer the money you want to exchange to Transferwise’s UK or Irish account. Your cash is matched with one or many other parties at the mid-market rate currently available on the currency markets. The cash is converted, for example, from British pounds to Euros and transferred to the designated recipient. Transferwise charges 1 GBP for each transfer. No banks or brokers get a commission on the exchange process.
Currently, you can only exchange British pounds to Euros, and vice versa, but Hinrikus told me that additional European currencies will be added in about a month. The American dollar is one of the most requested currencies.
Transferwise is based in London, has 10 employees and was founded in 2010. The new investment of $1.3 investment was led by IA Ventures, Index Ventures, Max Levchin (co-founder of PayPal) and a group of strategic angel investors.
One more sign of the mobile money space continuing to grow up: some significant consolidation underway. Today, the UK-based mobile banking specialists Monitise announced that it is buying Clairmail, a U.S.-based competitor, for $173 million, as part of its global expansion.
The combined group says it will serve 13 million customers world-wide processing some $10 billion of payments weekly, and will give Monitise a much bigger and direct presence in the North American market: one-third of the top 50 U.S. financial institutions are now clients of the group.
Among the services that Monitise and Clairmail offer to its customers: the backend to let banks and other financial institutions to offer mobile banking, payment and shopping services to its customers.
In truth, as mobile banking and mobile money services continue to mature (and see many new entrants enter the game, from PayPal to Square and so many more), it’s inevitable to see consolidation in the space to further the global reach of such services.
And similarly, given the now-global reach of the company, it gives those customers of Monitise access to providing banking services on a much wider international scale.
“This deal is transformational for our customers, our team, our shareholders and our company. It is a compelling combination and great news for all those wanting to offer bank-grade mobile money services to billions of consumers, not only in the US but worldwide,” commented Alastair Lukies, Monitise Group CEO, in a statement.
That is also furthered by Monitise’s existing strategic relationships with payments giants Visa Inc. and FIS. (Visa, of course, has been making other big investments into how it can best leverage the development of mobile money services, from partnerships with operators to acquisitions, such as its purchase of Fundamo last year.)
Pete Daffern, the CEO of Clairmail, will continue on as the head of Clairmail within the combined company and will also join the group executive board.
Full statement below:
Clairmail to be Acquired by Monitise
Acquisition Unites Mobile Money Leaders to Power a New Generation of Global Financial Institutions and Consumers Through a Comprehensive Set of Mobile Banking, Payment and Commerce Solutions
SAN RAFAEL, CA–(Marketwire – Mar 26, 2012) – Clairmail, Inc., a leading North American mobile banking and payments provider, today announced that it has entered into a definitive acquisition agreement with Monitise plc (LSE: MONI.L), the technology and services company delivering mobile money networks worldwide. Monitise will acquire Clairmail for $173 million, pending regulatory and shareholder approvals.
Through the acquisition, Monitise will further enhance its position as the global leader in the fast expanding market for mobile money, spanning banking, payments and commerce.
The combined entity will encompass 13 million registered consumers across four continents. Clairmail and Monitise process billions of transactions a year and more than $10 billion of payments and transfers on a current weekly annualized basis.
On completion of the acquisition, the combined businesses will provide mobile money services to the widest possible range of financial institutions in the US. A third of the top 50 North American financial institutions (including 8 of the top 13) have chosen the companies’ services alongside hundreds of smaller and medium sized financial institutions customers.
“Clairmail is an undisputed mobile banking leader with a strong roster of financial institutions of all sizes, having been chosen by more than a third of the top 50 North American banks to provide innovative mobile solutions to their customers,” said Alastair Lukies, Monitise Group CEO. “Clairmail shares Monitise’s customer-centric approach and dedication to bringing the best possible mobile experience and technology through constant innovation and a focus on delivering bank-grade mobile services to their customers. This deal is transformational for our customers, our team, our shareholders and our company. It is a compelling combination and great news for all those wanting to offer bank-grade mobile money services to billions of consumers, not only in the US but worldwide.”
The acquisition further enhances Monitise’s mobile money reach into North America through Clairmail’s direct sales channel and deep relationships with leading financial institutions. For Clairmail, the acquisition brings the potential to expand the company’s award-winning mobile banking technology to new customers across new markets. The acquisition provides a step change in growth potential for Monitise through direct sales in the US driven by Clairmail’s mobile banking team and expertise. This, combined with Monitise’s existing and unmatched strategic partnerships with Visa Inc. and FIS, provides the enlarged group with a leading position in the US and three commanding routes to market.
New and current customers of both companies will benefit from the balanced deployment models of on-premise and hosted mobile banking, payments and commerce products, providing a variety of options in the deployment and customization process. The suite of Clairmail products will be maintained and enhanced with both companies enriching each other’s mobile offerings.
“This acquisition validates the vision behind both companies’ strategies in the exploding mobile money market where Monitise has established a clear global leadership position,” said Pete Daffern, Clairmail CEO. “Both companies have incredible synergy and are dedicated to offering bank-grade services that empower consumers to bank, pay and shop across any mobile device. I could not be more proud of the Clairmail team and its accomplishments since founding in 2004, and look forward to working with the seasoned team behind Monitise to continue innovating and pushing the boundaries of mobile banking, payments and commerce worldwide.”
Pete Daffern will remain in his role as Head of the Clairmail business and will also join the Group Executive Board of Monitise, bringing his substantial experience and expertise to bear across the Group growth strategy.
In a comprehensive 28-page report titled The State of Online & Mobile Banking, comScore explores challenging topics such as email marketing, social media, online customer engagement and more from a financial marketer’s perspective. The report can help answer questions such as: Are consumers interacting with financial institutions via social media? Is email marketing still effective? Are [...]
Bank Technology News reported on a study conducted by a few financial services technology providers which found that:
“Eighty-seven percent of respondents say the hope of strengthening customer ties is driving the development of mobile banking apps at their institution. Competitive pressure was cited by 71%. Surprisingly, only 55% said that moving transactions to lower-cost channels was a driver and 53% cited new relationship acquisition.”
My take: What flavor of kool-aid are the 87% drinking that make them think that mobile banking apps will “strengthen customer ties”?
Every time I see this particular survey result (and I see it all the time), I’m reminded of something that Pat Swannick, who used to run the online channel group at Key Bank, once said to me:
“If every project that we invest in in the name of improving customer retention actually delivered on its promise, we’d be at 800% retention.”
The delusion of “strengthening customer ties” has been a part of the justification for nearly every new technology in the banking space for the past 15 years: online banking, online bill pay, eBills, PFM, and now mobile.
Did none of the people that left their bank for a credit union or smaller bank in the weeks leading up to, and including, Bank Transfer Day, use their bank’s mobile banking capabilities?
While the percentage of banks that offer mobile banking is growing, the largest banks — those presumably hardest hit by BTD — have been the early adopters.
So what has online banking online bill pay, eBills, and mobile banking — not to mention the billions of dollars invested in enterprise-wide CRM applications — done for those banks’ customer retention efforts?
You’ll pardon me if I conclude: Very little.
The 87% expecting to “strengthen customer ties” would also appear to be ignoring some market research conducted in 2011 by the American Bankers Association on consumers’ channel preferences which found that:
The least preferred method of banking was the mobile channel, which dropped from 3% in 2011 to 1% this year.
If just 1% of consumers prefer the mobile channel to other channels, then what impact is mobile going to have on their decision to stay with or leave their current provider?
Last year, I published an Aite Group report called The Impact of Mobile Banking: The Case for Mobile Marketing. In the report, I concluded that mobile banking:
- Will have a detrimental impact on revenues. The ability to better monitor balances helps consumers avoid overdrawing on their accounts, which will lead to fewer overdraft fees, negatively impacting bank revenue.
- Doesn’t drive mobile payments. Mobile shopping drives mobile payments, which in turn drives mobile banking.
Don’t get me wrong: I’m a strong proponent for the mobile channel. But I’m also an advocate for making a realistic business case for making mobile channel investments. The realistic business case has three components:
1. Revenue generated from improved marketing efforts. Banks and credit unions must get a whole lot better at mobile marketing — in the form of cross-selling, influencing choice of payment cards, merchant-funded reward offers, and driving mobile payments — in order to recoup their investment in mobile banking.
2. Lower costs from transaction migration. The 55% that said that moving transactions to lower-cost channels was a driver of mobile banking investments are on the right track. But unlike past efforts, this time around banks and credit unions have to realize the potential savings by downsizing other channels, and forcing customers to give them up. The rationale that bankers give for not doing it — fear of losing customers — is ridiculous. They’re losing customers anyway.
3. Competitive differentiation. The battle for differentiation through the mobile channel will come from the deployment of “purely mobile” applications — applications that use the capabilities of the mobile channel that are unique to the channel, and can’t be replicated in other channels (e.g., location awareness, augmented reality).
Porting online banking capabilities to the mobile channel doesn’t qualify as differentiation and will do little to “strengthen customer ties.” Please don’t harbor mobile banking delusions like 87% of your peers appear to do.
Comscore published its annual State of Online and Mobile Banking for 2011. Anyone in financial services with an interest in the online or mobile channels, payments, or marketing should check it out.
Lots of interesting data points and trends in this report. Here’s what caught my eye:
1. PNC is kicking @ss. The bank’s satisfaction level jumped from 57% in Q1 2010 to 79% in Q1 2011. The 57% number was down from 70% in Q1 2009. My guess is that these changes reflect two things: 1) The drop in 2010 reflected PNC/Nat City merger fallout, and 2) The bump in 2011 reflected the great job PNC did with the merger and the bank’s success with its Virtual Wallet product. The 79% level is 9 percentage points higher than Chase or Wells Fargo, 16 points higher than Citi, and 17 points higher than BofA. Kudos to PNC.
2. PFM interest and use is anemic. This might reflect the blending of the demographic segments. In other words, it might be too late to get Boomers, and maybe Gen Xers, interested in PFM. Would love to see the numbers for Gen Yers. But the Comscore numbers are not reassuring for PFM vendors, nor for online channel execs at banks looking for ways to use the online channel to add value to the customer relationship. (Side note: I’ve got an Aite Group report on PFM coming out in late Feb/early March that will define strategies for addressing the issues banks and CUs are having with PFM). Just half of BofA and Wells Fargo customers are aware of those banks’ PFM tools. In contrast, 60% of PNC customers know about Virtual Wallet, and 63% of USAA members know about the Money Manager tool. Both BofA and WF have had their PFM offering a lot longer than PNC and USAA has had theirs.
3. Nobody knows about P2P payments. And of those that do, few use it. This is a cause for concern because a number of the core apps providers I’ve talked to recently are expecting P2P payments to be big, and become a revenue generator for both themselves and the banks that offer it. Personally, I think banks go about marketing P2P payments all wrong, and Comscore’s numbers give me some proof for my contention.
4. Social media efforts go unnoticed. I’m sure you’re tired of hearing me bash social media gurus and zealots regarding their baseless claims about the miracles of social media, but Comscore’s stats really tell a story. Less than one in five consumers are even aware that their FI has a presence in the social networking space.
5. Email is an effective communication channel. Email sure takes a beating in the blogo- and twitter-sphere. According to the Comscore report:
“…the impact of receiving emails to new account opening activity is on the rise. While the response rate on offers to open a new account is still modest at 6%, it represents a doubling of last year’s rate. In fact, email is highly effective in increasing customer awareness and engagement in other offerings, with 17% of recipients visiting the site to get information on other products.”
6. Remote deposit capture awareness is low. Just 29% of smartphone owners are aware of the ability deposit checks remotely (I know of an 8 year-old who knows about this feature). This surprised me considering the importance so many bankers place on RDC as a way to differentiate their organization, and attract younger consumers.
Overall, lots of good stuff in this report. Nice work, Comscore.
99.8% of the financial services world calls the physical dinosaurs that populate the real world “branches.” There’s .1% that refers to them as “cafes” (ING Direct) and .1% that calls them “stores” (Wells Fargo).
Banks and credit unions are missing a huge opportunity here. Namely, to transform those legacy physical structures into financial “spas.”
You know, the place where you go to get into “financial shape”. Kinda gives new meaning to the term “loan workout”, no?
Seriously though (OK, not too seriously), instead of trying to get people to hang out and drink coffee, if banks transformed their branches into spas, while women were getting their mani/pedis, they could be having meaningful conversations with financial reps about their financial lives.
Open an account (or maintain a certain balance, number of accounts, etc., you get the picture), get the manicure for free.
Think I’m being sexist? Screw that, everybody knows it’s women making the financial decisions in an incredibly high percentage of households. It’s certainly no more sexist than slapping some pink colors on something and calling it “marketing to women” (and you know that there are banks and other types of companies that do that).
You don’t think this idea will fly, do you? That’s OK. Because cafes and high-tech, self-service gizmos aren’t the “branches of the future” either.
American Banker ran an article titled Online Banks’ Deposits Grow at Quadruple Industry Pace which stated:
Among the nation’s largest stand-alone direct banks, deposits have increased by 70% since the first quarter of 2008 to a combined $330 billion as of Sept. 30, or roughly four times the industrywide pace. Even for ING Direct, the largest and most established Internet deposit business, deposit growth of 27% since the first quarter of 2008 to $82 billion at Sept. 30 was far ahead of industrywide growth of 17% to about $10 trillion.
My take: The online banks may have grown far faster than other FIs (70% vs. 17%), but given the smaller base of deposits, that’s not very hard to do. In fact, if AB wanted to further sweeten the online banks’ story, it could have mentioned that their market share of deposits grew from 2.3% in 2008 to 3.3% in 2011 — a 43% jump in market share.
Ah, but now I’m the one quantipulating.
There is another side to this story, however.
Based on the numbers presented by the article, the online banks captured just 9% of the industry’s total deposit growth from 2008 to 2011. Meanwhile the top 5 banks (JPMC, C, BofA, WF, USBank) captured 40% of the deposit growth (my estimate is based on adding Wachovia into the WF numbers, and Wamu into the JPMC total).
While AB points out that the online banks’ growth rate is four times greater than the industry pace, it fails to mention that the top 5 banks’ deposit growth ($, not %) is four times greater than the online banks’ increase. In addition, as the online banks’ share of the total market grew from 2.3% to 3.3%, the top 5 banks’ share remained constant at 41%.
What it means: 1) Despite the “safety scare” of 2008-2009, and the “move your money” and other negative sentiment toward large banks in 2011, the top 5 banks are weathering the industry’s storm, at least from a deposits perspective; and 2) The online banks’ gains would appear to come at the expense of credit unions and community banks.
Oh, and the other thing it means is that, if you’re going to quantipulate, remember that there’s probably another side to the story.