The Weekly Extract: October 13, 2020

  • Alex Jimenez
  • October 13, 2020

The Weekly Extract from Extractable is a condensed roundup of digital experience news for financial services institutions, and our take from San Francisco.

This week we examine the widening digital and engagement gaps between the megabanks and the rest of the U.S. retail banking market. We also examine the success of fintech firms throughout the pandemic.


The Digital Gap Widens

Late last year, S&P Global released a report examining the U.S. mobile banking market. A key finding from that report that we continue to hammer home with our banking clients is the functionality gap between the top four banks and all other banks and credit unions.

S&P identified 20 value-added mobile banking features in the market. On average, the top four banks offered 16 features. The next tier, organizations between $50B and $1T in assets, averaged 10 value-added features. The tier between $10B and $50B on average offered only seven of those features. The study didn’t look at lower tiers. However, given that the vendors that serve the under $50B tier also serve the rest of the market, it is safe to assume that the level for the rest is also around seven.

The gap between the top four banks and the rest of the market, is a stark reminder that smaller organizations cannot be complacent.

This week, the gap grew even larger. As noted in an article in ThinkAdvisor by Jeff Berman:

“Bank of America has jumped aboard the digital planning bandwagon with the launch of Life Plan, a free client tool now available on the firm’s mobile app and online banking platform.”

Berman adds that “Life Plan, rolled out after an eight-month pilot program, aims to help BofA clients set, track and reach their goals.”

He quotes a BofA spokesperson who said, “along the way, our clients can choose to use Life Plan on their own, or they can talk to one of our specialists, who may refer them to” a financial solutions advisor or financial advisor “depending on their assets or overall financial picture.”

Life Plan isn’t merely a Personal Financial Management (PFM) tool like those in use, or more accurately hardly used, by FIs for years. Berman writes:

“The tool integrates with Bank of America’s solutions including Erica, its artificial-intelligence driven virtual financial assistant, and Preferred Rewards, the company’s loyalty program.”

Bill Streeter, Editor at The Financial Brand, wrote an article looking at the strategy behind Life Plan. Streeter highlights two areas that make Life Plan worth watching:

  1. Life Plan uses data.

“The solution incorporates data from many different parts of the bank — including content and customer data — and combines it, using artificial intelligence, with input customers give in the app.”

  1. Life Plan is omnichannel.

“The digital solution functions within both BofA’s mobile app and its online banking platform.” Further, it “is also integrated with the bank’s digital assistant Erica.” Streeter adds, Perhaps more significantly, it “operates in parallel with the institution’s 4,200+ banking centers. Banking center associates see not only the same data that a customer using Life Plan sees, but in the same format.”

Streeter quotes Eve Varner, BofA’s Life Plan Executive, “The huge difference with Life Plan is that we don’t start the conversation with how much money do you have and how do you want to invest it? It’s not about that. So it doesn’t feel like an arduous, daunting, overwhelming exercise that most of us as consumers don’t feel their qualified for.”

Life Plan is starting to do what many have been prediciting — bridging the gap between AI, mobility, personalization, and personal touch.

Varner says, “Just to give a sense of the interest, in the week after the national launch we had 8,000 Life Plan conversations or sessions. It’s been increasing daily since then. So far the overwhelming majority of people are interacting with Life Plan in the mobile app. But we also see many who initiate the experience in the app and then come into a financial center.”

Varner notes: “With in-person conversations it starts narrowly. But as the client works with an associate and uncover more objectives and goals, it starts to impact other family members. So we’re seeing Moms bringing in kids to open up first credit cards and savings accounts, or bringing husbands or wives or partners. We’ve seen quite bit of that, actually. People realize this is a different kind of conversation I’m now having in this bank and I want my family to be part of it.”

Bank of America raised the bar with Erica and is doing it once more with Life Plan. If U.S. banks and credit unions continue to allow the gap between the top four banks and the rest of the market to widen, the U.S. will look more like Australia or Canada with a few strong banks and a smattering of smaller organizations.


Share of Wallet Lag: 3 Ways FIs Can Catch up to Megabanks

The bad news keep coming for non-megabanks FIs. According to a new study by Cornerstone Advisors, and as covered by Ron Shevlin, Cornerstone’s Managing Director of Fintech Research, in an article in Forbes:

“Among the megabanks’ customers, nearly half are moderately or highly engaged. At regional banks and credit unions, however, that percentage drops to one-third, and among community bank customers, it’s one in four.”

Shevlin adds, “Not surprisingly, then, 28% of the megabanks’ customers have six or more products—four times the percentage of credit unions’ members with that many products, and nine times the percentage of community banks’ customers.”

While many of our clients in the credit union and community banking ranks report healthy growth, the megabanks are getting more than their fair share. Shevlin notes:

“Over the past three years, the megabanks’ share of new checking account applications increased from 36% to 51%. Digital banks tripled their share over that period of time. Regional banks, credit unions, and community banks, however, have seen their collective share of new applications drop by half from 51% to 25%.”

Shevlin believes that not all is lost. He recommends FIs to “Deploy a multi-pronged strategy” that involves:

  1. Reinventing the checking account
  2. Offering new products and services for Baby Boomers
  3. Pursuing fintech partnerships

The combination of relative slower growth and reduced engagement for community banks and CUs points back to the widening gap between the top four banks and everyone else.

At Extractable, we work with organizations to address these issue head on. If you are worried about how tp close the gap, give us a call.


The Fintech Secret Weapon

Here at Extractable, we are fervent proponents of Stanford’s Design Thinking. For those not familiar, Design Thinking is a methodology for creative problem solving.

As noted by the Interaction Design Foundation:

“It’s extremely useful in tackling complex problems that are ill-defined or unknown, by understanding the human needs involved, by re-framing the problem in human-centric ways, by creating many ideas in brainstorming sessions, and by adopting a hands-on approach in prototyping and testing.”

The first stage of Design Thinking is to empathize with the people that are struggling with the problem you aim to solve.

In an article in Finance Magnates, Rachel McIntosh, examines the role of empathy as part of the fintech user experience (UX) that has surfaced as the difference between fintech firms and incumbent FIs.

McIntosh quotes Nielsen Norman Group Chief Designer, Sarah Gibbons who wrote that empathy in UX is “the ability to fully understand, mirror, then share another person’s expressions, needs, and motivations.”

McIntosh notes that:

“The role of empathy in the fintech world has never been as important as it is in 2020. This is not only because users are relying on mobile services in the absence of brick-and-mortar interactions; it is also because of the global economic fallout, and myriad personal financial hardships, brought about by COVID.”

While FIs focus on automating and digitizing experiences, fintech firms have focused on bringing different levels of personalization to technology-enabled experiences. Humanizing technology cannot faked.

Miron Lucic, CEO and Founder at, makes the point that empathy is not just about surface-level interactions.

“Surface level things, such as using a human avatar to represent your product, doesn’t really do anything to humanize the experience. The key is to think about ways to create an interactive experience that flows naturally and takes into consideration emotion.”

Lucic encourages organizations to “have extensive human or humanoid troubleshooting services at the ready.” He adds, “in such cases, it is often better to offer a hybrid system that combines AI with more traditional methods, such as a telephone helpline.” Anyone who has contacted Amazon for immediate solutions can sympathize with the issue.

Greg Ott, CEO of Nav, gives the example of the PPP loans and how many FIs were caught unabled to field questions from customers. McIntosh points out that:

“Fintech companies that were able to help users problem-solve in a timely manner during the first wave of corona lockdowns and stimulus checks did well.”

Ott adds that he believes, “that fintech companies that respond in a timely manner to customer questions will see their customer numbers go up.”

The secret weapon for fintech firms Ott calls out is empathy.

“There are huge addressable markets that are neglected by big banks. It’s now very clear to both fintech companies, and I think to business owners, too, that fintech can step up to fill that void.”

If there is a second wave of PPP funding, “the expectation will be there — more business owners will turn to fintech companies from the get-go, and the SBA is prepared to accept applications out the gate from these fintechs like it wasn’t before.”

In turn, we believe that FIs have the upper hand in empathizing with their customers, as they have the relationships.

FIs should turn to Design Thinking practices to make this possible. Bank of America is an incumbent that is applying empathy and technology to enable richer experiences for customers, exemplified by Erica and Life Plan.

Are other FIs ready to match fintech firms?

Let us know what you think of the Weekly Extract. Stay safe. And don’t forget to follow us on LinkedIn and on twitter.

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