The Daily Dividend
News, notes and insights from around the industry
Research says that Millennials in the U.S.:
• Currently account for more than $1 trillion of consumer spending
• Will soon make up one-third of the adult population
• Will make up around 75% of the workforce by 2025
No wonder so many businesses are obsessed with understanding Millennials and finding out what makes them tick. Here’s some weekend reading to shed some light on this mysterious generation.
Millennials want instant access
New research shows that Millennials want constant access to banking services and expect immediate gratification – not surprising for a consumer segment that prefers to transfer money online and says in large measure (60%) that it can go up to a full year without writing a check. To win over Millennials, your mobile app should be fast and easy to use.
Millennials are scared to invest
New research finds that 20% of Millennials say they will never invest in the markets, and 53% will never be comfortable investing in the markets. Perhaps their local community institution could help them find the link between healthy financial habits and greater investing confidence?
Millennials love apps
Providing financial education Millennials can access online, whether through a mobile app or on a website, might be the key to winning their business. Millennials are more interested in building a financial future than some studies might suggest, but they like to do it on their own time (see above: instant gratification). Providing them with the right resources could go a long way to making them not only loyal customers, but better customers.
SEPTEMBER 21, 2017
The State of Chat
By Hilary Collins, Assistant, Publications and Research, Financial Managers Society
If AI is the wave of the future, then chatbots are at the vanguard as they become more and more prevalent in online customer service. With Siri finding phone numbers and Alexa transferring money for consumers already, how are chatbots infiltrating financial institutions?
• In a consumer survey from earlier this year, only 11% of respondents said they would trust a chatbot to give them mortgage advice. When making major decisions, customers still want to talk to a human.
• AI still has a hard time parsing the slang and context-dependent social cues of human communication. No matter how much information it has, a chatbot can still misinterpret common turns of phrase or simply not have the answer that a customer needs.
As a cautionary example, USAA developed a chatbot with a set of 10,000 answers that still struggled. After more study, the company found that a smaller set of more developed answers (around 3,000) was more effective, but it’s still having trouble finding the sweet spot of what customers are actually searching for.
• Chatbots currently have the most potential to fill the space between a financial institution’s website and its frontline employees. If it’s hard to find an answer on a website but the problem doesn’t warrant a trip to the branch, chatbots could be the answer to simple tasks like replacing a missing card.
SEPTEMBER 20, 2017
Spanning the Breach
By Hilary Collins, Assistant, Research and Publications, Financial Managers Society
One of the most important benefits community institutions can deliver to their customers and members is a sense of security – not only for their finances, but for their personal information as well. Privacy in the age of technology is more important than ever, and there are some important lessons to be learned from the recent Equifax breach.
Make it harder for hackers.
As the benefits of using data to help build customer relationships, make big decisions and more become ever more apparent, it is likewise becoming obvious that as we save, stockpile and sort data for our own purposes, we’re building treasure troves for hackers. As data becomes more accessible and attractive within our own organizations, it’s important to ensure we aren’t making it more accessible and attractive to hackers.
Use more than one layer of defense.
Prevention is important, of course, but having plans in place to mitigate the damage and immediately begin recovery in the event of a breach are essential parts of a good cybersecurity program as well. One mitigation technique is separating sensitive data into smaller chunks and protecting those chunks behind different walls, so one hack is unlikely to access a large amount of information.
Make sure your response helps instead of hurting.
A ham-handed response to a major breach can do more harm than good. A strong plan should restore and improve defenses, help the customer and set the correct tone moving forward. On the other hand, a bad plan can alienate customers, hurt an institution’s public image and permanently weaken both reputation and profitability.
You’ll find more tips on cybersecurity in the cover story of the latest issue of FMS forward, our member magazine.
SEPTEMBER 19, 2017
By Mark Loehrke, Editor, Financial Managers Society
Now that summer is over and school is back in session, it’s a perfect time to catch up with some of the great new pieces that have been added to our Perspectives section over the past couple of months.
Just within the past week, we’ve posted a brand-new article on managing mortgage pipeline risk from Robert Perry of ALM First, as well as the results of our latest FMS Quick Poll on ALCO participation.
Going back a little bit earlier in the summer, you’ll also find insightful pieces you may have missed on model validations, building your investment portfolio and modeling assumptions.
So get started on your fall reading list today!
Autumn may be right around the corner, but there’s still time to fire up the grill and enjoy a few hot links from around the industry.
Building an IA Analytics Program
We’ve got a terrific data analytics story on tap for the next issue of FMS forward, but in the meantime take a look at this worthwhile primer on how to build an analytics program for internal audit.
So it turns out the heavy regulatory scrutiny in the financial services sector has resulted in at least one perhaps unexpected development – the banking industry is now apparently seen as a prime example of how to keep up with shifting compliance requirements. After you’re done patting yourself on the back, though, remember that you’re only as good as your next examination – a great reason to keep in mind the six questions you should be asking about your compliance program.
Rethinking Loan Origination
Millennials may be more open to personal loans than many surveys have previously suggested, but they’re still not terribly excited about walking into a branch to get the process the started. So it may be time to rethink your institution’s lending process – and what it looks like to the next generation of borrowers.
SEPTEMBER 14, 2017
The Tech Lowdown
By Hilary Collins, Assistant, Publications and Research, Financial Managers Society
Ever wonder where your institution stacks up in terms of technology? New research from Bank Director offers a chance to do some peer comparisons against respondents from banks with over $250 million in assets in the areas of technology budgets, data analytics programs and overall digital savvy.
The majority of respondents consider themselves followers rather than leaders in tech, with 62% noting they consider themselves “fast followers” instead of early adopters, and 27% admitting their institution was simply slow to implement new technology. Not surprisingly, banks with $1-$5 billion in assets were more likely to consider themselves industry leaders than those with smaller asset levels.
Out of the banks that were slow to implement new tech, over a third said they struggled to attract tech talent (39%), while another third said they can’t support innovation on the back end (36%) and 19% said that technology simply wasn’t a priority for their Board or management team – a reminder of how difficult it can be to move ahead without support from the top. That lack of support could stream from a lack of understanding, as more than half of respondents (56%) do not believe their Board members have sufficient technological expertise.
Another section of the survey posed the question of who’s in charge of tech at banks, with 67% of respondents noting that all of the business lines at their institution understand and chip in on the technology budget – with the IT department as a partner in the process – while 30% said IT leads the process mostly on its own. As far as outside partnerships with fintech startups, 46% of respondents hadn’t seriously considered it, but an additional 45% were open to it.
Banks have taken notice of the importance of data analytics, and many are making personnel changes to address this growing trend – including the 20% of respondents who said their institution has hired new employees to focus on data, and another 20% that have shifted some current employees to analytics-related projects. Yet while many institutions seem to be adding data analytics staff, they don’t seem to be putting their financial weight behind these endeavors – while a total of 84% of survey respondents have either hired new staff or had existing employees devote some of their time to data, 82% don’t think data analytics is getting enough of the technology budget.
In the big picture, it might be time for banks to decide if they’re happy being a follower or if they want to get ahead of the curve – and for those institutions who barely participating in the tech race to take a hard look at what that might mean for their future going forward.
Editor and Director, Publications and Research
Director, Membership and Marketing
Assistant, Publications and Research