The Daily Dividend: Industry News

News, notes and insights from around the industry

APRIL 23, 2018
Digital Banking Trends  Globally
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

Digital Banking Trends--GloballyCustomers all around the world want more digital options from their financial institutions. Whether by necessity or choice, in the richest and the poorest countries, people are embracing digital banking. Two recent global studies highlight some of the key trends internationally.

67% of global customers are already using digital banking.

People love digital banking – the majority of customers are using it already, and 86% want digital payment, 68% want digital personal loans and 62% want digital mortgages.


67% of Americans would try a new digital platform.
Less receptive than customers in India or China, Americans still show openness to new digital banking options.


52% of adults worldwide sent or received a digital payment last year.
Digital payments are increasingly popular, with the number of users having risen by 11 percentage points since 2014. Even in developing countries, 44% are on board with digital payments.


140 million unbanked individuals opened their first account last year.
Almost 70% of adults globally now have a bank account, in no small part due to the growth of digital payments – many opened their account specifically to receive payment from a job that paid digitally.


40% said their traditional bank didn’t help them with personal finance management.
These respondents said non-bank alternatives were better suited to help them manage their personal finances and look into investment options – a red flag for institutions that aren’t doing enough to guide their customers to financial literacy.


Traditional banks are more trusted than digital banks.
Digital banks are still lagging behind traditional institutions when it comes to trust and stability, but digital banks deliver superior experiences and better rates of return. As digital banks gain even more of a foothold, their perceived stability is likely to grow in the eyes of customers, who may be wooed away from traditional institutions altogether.

APRIL 20, 2018
A Tough Decision
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

A Tough DecisionPart of being a leader is making tough decisions. Part of being a good leader is getting people to accept those decisions. But when there’s no way to make everyone happy, what do you do?

David Maxwell has some pointers on how to make complex decisions with unknown outcomes. By understanding what makes these choices so tough, you can cut through your own clouded judgment to make a wise assessment.


Face issues head on

Problems can often feel like they came out of nowhere, but that’s rarely the case. It’s tempting to avoid tough calls until they become inescapable and demand your attention, but waiting until trouble reaches a boiling point actually allows the problem to grow and do more damage.

Have a sounding board

When you’re facing a terrible decision with no miraculous solution, it can be tempting to isolate and stew. But a better bet is to get as many perspectives as you can from a circle of trustworthy confidants. There may not be a magic bullet, but there could be a better option you wouldn’t have thought of on your own.

Minimize the damage

In the worst scenarios, there’s likely no way to avoid damage entirely – whether to your employees, your customers or your reputation. But once you’ve made your choice, communicate it clearly and get to work minimizing the harm done. Find ways to help those harmed by the decision, and don’t obsess over worst-case scenarios. On the other hand, don’t downplay what happened – recognize those who will bear the brunt of your decision.


Like Sophie or Solomon, leaders may one day have to make an impossible choice. But if they more fully understand the factors that go into their decision-making process, they will hopefully end up closer to Solomon’s choice than to Sophie’s.

APRIL 17, 2018
Millennials and Their Money
By Mark Loehrke, Editor, Financial Managers Society

Millennials and Their MoneyWhy are Millennials becoming more and more interested in wealth management services? The story behind that story has to do with their overall relationship with money, which is rooted in several distinct generational trends and attitudes: 

Skepticism and Wariness

Having witnessed firsthand the damage caused by the Great Recession, Millennials are more likely to avoid the stock market, keep their savings in cash or checking and focus their spending on necessities like education and health care.


Debt Concerns

Speaking of education, the greatest lesson Millennials have learned is that pursuing that college degree has left them with another mountain to climb – a mountain of student loan debt. Now it’s a burden that weighs heavily on most purchase and investing decisions. 


Time is of the Essence

When Millennials do decide to spend, they tend to favor items or services that help save them time – such as online purchases with same-day delivery or dining out instead of taking the time to prepare a meal at home – as opposed to the conspicuous consumption of luxury brands.


Given the above considerations, banks and credit unions need to tailor their approaches to this generation mindfully, with an eye toward forging an institution-customer partnership that goes far beyond a traditional transactional setup. Show them that you share their goals – and demonstrate how you can help them get there – and you may have the key to a long-term relationship.

APRIL 16, 2018
Cybersecurity Guidance
By Mark Loehrke, Editor, Financial Managers Society

As they survey the daunting landscape of cyber threats and look for ways to better shore up their defenses and response mechanisms, institutions can turn to two helpful new online guides to help them navigate the terrain.

Cyber Insurance


Even though it may lack the familiar comic appeal of a friendly talking gecko, FFIEC’s recent statement on issues to consider when determining whether to include cyber insurance as part of a risk management program can nevertheless be seen a useful addition to the debate. While FFIEC members (the Federal Reserve Board, OCC and FDIC) do not require financial institutions to maintain cyber insurance and the statement does not put forth any new regulatory expectations, the collective is looking to help facilitate the discussion around cyber insurance as more institutions begin to consider it as an option in light of the increasing volume and sophistication of cyber attacks.    


In short, the statement notes that traditional general liability insurance policies may not provide effective coverage for all potential exposures caused by cyber events. Cyber insurance could therefore offset financial losses from a variety of exposures – including data breaches resulting in the loss of confidential information – that may not be covered by other policies. Institutions should assess the scope of their current coverage and consider how cyber insurance may fit into their overall risk management framework, but should understand that cyber insurance is not a replacement for a sound and effective risk management program, which should continue to include identifying, measuring, mitigating and monitoring ongoing cyber risk exposure.


Cybersecurity and the Board


The Center for Audit Quality, meanwhile, has come out with a new tool designed to help guide board members through the issues they need to know in order to stay on top of their institutions’ cybersecurity programs. The tool suggests that board members ask questions designed to help them better understand how the financial statement auditor considers cybersecurity risk, the role of management and responsibilities of the financial statement auditor related to cybersecurity disclosures, and management’s approach to cybersecurity risk management.


Some of the questions the CAQ recommends asking include:


  • How are cybersecurity risks that auditors identify addressed in the audit process?


  • What impact would a cybersecurity breach have on the auditor’s assessment of internal control over financial reporting?


  • What does the auditor consider related to cybersecurity disclosures?


  • What framework does management use in designing its cybersecurity risk management program?


  • What processes are in place to periodically evaluate the cybersecurity risk program and controls?


The tool also compiles cybersecurity-related resources from the CAQ, the American Institute of CPAs, the National Association of Corporate Directors and others.

APRIL 13, 2018
A Wake-Up Call from Zuckerberg
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

A Wake-Up Call from ZuckerbergData analytics are a big deal for financial institutions these days (you may recall the Data Duo story from the November/December 2017 issue of FMS forward explaining the benefits of implementing data analysis).

It’s now pretty much agreed that institutions absolutely have to use customer data to cater to their customers – not only because it’s good for business, but because this is, in fact, what customers want. But Mark Zuckerberg’s time in the hot seat has highlighted the fact that many customers don’t really understand how their data is being collected and used and, in fact, they may not be terribly happy if they were they to find out.


A recent survey showed that a full 30% of consumers think providers using their payment and purchase data is an invasion of privacy that should be prohibited, while another 32% have reached a tepid acceptance, calling it a necessary evil that only occasionally benefits them. Only 15% said it’s a benefit that improves their experience and helps with product recommendation – and an additional 23% said it’s a benefit, but hedged by arguing that they should be compensated for their data or have some other guaranteed benefit in exchange for their personal information.


Financial institutions can take a lesson from Facebook’s public interrogation. Customer data should be protected and kept private (see the September/October 2017 issue of FMS forward for tips on cybersecurity), and customers should also be informed in clear, readable language exactly what you plan on doing with their data. That way, there won’t be any nasty surprises (or, hopefully, congressional hearings).

APRIL 12, 2018
Never-Ending Commercial Lending
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

Never-Ending Commercial LendingNot long ago, bankers were abuzz about the end-to-end commercial lending process – using technology to streamline and smooth the process. But while an end-to-end process certainly can minimize the amount of time and hassle the customer has to invest between application and approval, there are some downsides to viewing commercial lending through this lens.

1. Presenting lending as a process to be sped through can lead to a focus on the paperwork instead of the customer.

A slow, paper-intensive process can signal that an institution is stuck in the past and drive away customers. But there is such a thing as making the process too fast. If your process is smooth and automated, use the time you’re saving to learn more about the customer and their needs. Just because lenders can get someone out the door in five minutes doesn’t mean they should.


2. Viewing lending as a process with a beginning and an end can make you forget that the relationship goes on after the loan is closed.
A focus on an end-to-end process doesn’t mean that your blueprint for the customer relationship should end with that process. You should, instead, have clear steps for what to do after closing the loan, such as assessing additional products that may be well-suited for that customer (data and technology can and should play a part here as well).


3. Technology can replace relationship-building instead of enhancing it.
Online commercial loans have picked up over the last few years, but many of these business lenders offer a lesson in how not to handle commercial lending. A completely smooth process can be devoid of personal contact, which is why it’s important to pay attention to how you’re marrying the two – and using one to enhance the other.


Keep these principles in mind to build a smooth and modern commercial lending arm – one where your customers are eager to return even after they pay off that initial loan.

APRIL 11, 2018
The Absentee Leader
By Mark Loehrke, Editor, Financial Managers Society

The Absentee LeaderIncompetence can come in many forms, but a recent piece from the Harvard Business Review suggests that perhaps its most insidious incarnation in the upper echelons of many organizations is also one of the least obvious – absenteeism.

Contrary to the label (and the photo accompanying this post), we aren’t necessarily talking here about a leader who simply doesn’t physically show up for work (although that would clearly be considered a problem as well). Rather, the absentee leader in this case is the person in a leadership position who, despite the title and the coveted spot on the org chart and the staff of hard-working underlings, is psychologically absent from the role. This is a leader in name only – one who enjoys the perks of the job, but who never engages with his or her team in any meaningful way.


While it’s tempting to think that such a hollow boss would be preferable to an overbearing or overly stern version, the article points to research that suggests that many workers actually consider an absentee leader to be the worst possibility. While the former brands of destructive leadership may immediately degrade job satisfaction, the author argues that the effects of such behavior tend to dissipate after about six months. In contrast, while the impact of absentee leadership may take longer to emerge, it degrades subordinates’ job satisfaction for at least two years, and tends to be related to other negative outcomes for employees, such as role ambiguity, health complaints and increased bullying from team members. The end result is a long-term talent drain that can have a serious impact on the organization’s bottom line.


So think twice when it may seem like letting employees do as they please and withholding criticism is the surest path to being a well-liked leader. Sometimes not doing anything is even worse than doing something that turns out to be wrong. After all, wrong moves can be short-term and quickly undone, while a lack of engagement may be a long-term road to nowhere.


Mark Loehrke

Danielle Holland

Hilary Collins
Specialist, Publications and Research