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A Thing A Bigger Thing

Thursday, February 21, 2019

Experts see growth in digital-first banking

N ew findings from Marqeta, published Feb. 21, 2019, indicate millennials are less likely than older consumers to remain loyal to their banks. Compiled from a sampling of 1,200 adults, survey data found 48 percent of millennials would consider moving to a digital-only bank; only 1 in 6 respondents could not imagine changing banks. Researchers also observed a growing movement away from paper and electronic checks, with 48 percent of millennials claiming they "couldn't remember the last time they wrote a check for something other than utilities and rent."

According to industry observers, banks are feeling the pinch of the always-on economy and its expanding array of mobile payments and consumer touch points, and with younger generations firmly entrenched in these new tools, this trend is expected to accelerate. Thus, companies need to innovate to solve complex problems for an increasingly diverse set of customer preferences.

"Like every other service platform today, banking is being placed into a world that expects real-time, instant gratification," wrote futurist and author Brett King in the preface to Bank 4.0: Banking Everywhere, Never at a Bank. The book charts banking's trajectory from branch banking to multichannel banking to purely digital options for accessing banking services.

Digital-first innovations

King noted that branch banking digitalization began with paper-to-electronic conversions, followed by digital-first technologies such as mPesa, Alipay and WeChat. He pointed out that emerging countries, unencumbered by legacy banking infrastructures, had a strategic advantage over developed regions and produced the most compelling digital-first innovations.

"When technology-first players emerged in markets where there were large unbanked populations that had never visited a bank branch, there was no need to replicate branch-based thinking, there was just the need to facilitate access to the core utility of the bank," King wrote.

Following are additional highlights and emerging banking trends cited in Marqeta's research:

"Banking is being redesigned to fit in a world where technology is pervasive and ubiquitous; the only way you stay relevant in this world is by creating experiences that are purpose-built for that world," King wrote. "Iterating on the branch isn't going to be enough."

Consumers charge ahead with card spending
Wednesday, February 20, 2019

A new report from the Electronic Transactions Association and The Strawhecker Group revealed that U.S. consumers increased usage of electronic payment options at a rapid clip last year, outpacing overall growth in gross domestic product.

According to the U.S. Spending Snapshot, published this week by the ETA and TSG, consumer spending with credit and debit cards and mobile wallets grew by 7.2 percent year-over-year for the third quarter of 2018, more than doubling the 3.5 percent year-over-year growth recorded for the third quarter of 2017. This follows a report in October that put year-over-year growth in electronic payments spending at 6.9 percent for the second quarter of 2018.

To put these numbers into perspective, the U.S. Department of Commerce reported in December that real GDP grew by 4.2 percent in Q3 2018 compared to 3.2 percent year-over-year growth in Q3 2017.

“The third quarter of 2018 proved to be another strong period for electronic payments, as U.S. consumers continued to see economic benefits from tax reform and strong personal income growth,” said Jared Drieling, senior director of business intelligence at TSG.

“Our latest Spending Snapshot is indicative of consumer trust and confidence in their use of electronic payment products,” added Amy Zircle, ETA vice president of industry affairs. Some of the year-over-year increase can be attributed to increases in gas prices, which outpaced price increases in other spending categories. Electronic payments spend at gas stations rose 16.9 percent year-over-year, outpacing the 9.6 percent year-over-year growth charted for the third quarter of 2017, ETA and TSG reported. Other merchant verticals charting healthy growth in Q3 2018 included general merchandise and electronics stores.

Merchants in southern states saw robust year-over-year growth in electronic payments in the third quarter of last year. In the Southwest, electronic payments rose by 9.15 percent and merchants in the Southeast saw electronic payments growth of 7.66 percent. Both outperformed electronic payments growth in the Plains (6.73 percent), Far West (5.84 percent), Great Lakes (7.24 percent), Midwest (6.82 percent) and New England (7.46 percent). Only merchants in the Rocky Mountain States saw more growth in electronic payments (8.15 percent), ETA and TSG said.

The ETA/TSG U.S. Spending Snapshot is a quarterly analysis of actual consumer spending at 3.7 million U.S. merchants with $1 trillion in combined annual card transactions. The ETA/TSG data analysis comes on the heels of mixed reports on consumer spending during the year-end holiday season. The National Retail Federation said this month its analysis suggested consumer spending (across all types of payments) rose in 2018 a meager 2.9 percent over the year-end 2017 holiday shopping season. Mastercard, meanwhile, reported in late December that year-end 2018 holiday spending across all payment types rose by 5.1 percent over 2017 spending.

Security paramount for ATM industry
Tuesday, February 19, 2019

T he ATM industry is celebrating historic milestones in 2019, as U.S. ATMs approach their 50th birthday, and the ATM Industry Association is holding its 20th annual conference Feb. 19 to 20 at Disney World’s Coronado Springs Resort in Orlando, Fla. Themed ATMs and Apps: The New World of Customer Experience, the event has attracted legacy players and newcomers across expanding self-service channels.

ATMIA conference organizers said security features prominently in the agenda; they are also publicizing industry initiatives, which include the following:

Heritage of service

Founded in 1997, ATMIA is a global nonprofit trade association with chapters around the world and more than 10,500 members in 65 countries. ATMIA members promote ATM convenience, growth and usage while endeavoring to protect industry assets and public trust. In addition to prioritizing security, ATMIA’s working committees educate the public and address government relations, regulatory oversight and a range of issues involving ATM deployers.

Mike Lee, CEO of ATMIA, underscored the need for a unified response against global criminal groups and fraudsters. “One cannot just focus on one region anymore,” he said. “Those days are over. The fight is global and that is why we will build a global security platform in the coming months and years.”

ASA President Uwe Krause agreed, adding, “Given the great strides our industry has made with advancements in various technologies that consumers value at the ATM, it’s vital that we continue our industry collaborative efforts to effectively combat the impact that technically sophisticated global crime has on the ATM channel.”

Broadened focus, united front

Bruce Wayne Renard, executive director of the National ATM Council, noted that America has the highest per capita ATM deployment of any country in the world, providing widespread, convenient access to cash that complements the free world's leading market economy. Renard acknowledged that, despite this, bank account closures and new account denials continue to roil the independent ATM sector. He expressed confidence in NAC and ATMIA’s joint action plan to promote ATM marketplace opportunities.

Renard mentioned that ATMIA and NAC will further assess industry issues with concurrent surveys of ATM industry stakeholders. “Working together I am hopeful we can reverse the current misperceptions that ATM companies are 'high risk' accounts, and instead restore an understanding that ATM providers are in fact bank-sponsored and heavily vetted businesses, whose vault cash is inherently trackable as part of the simple, cyclical, closed-loop, and highly transparent 'financial settlements' process to which it is subject,” he said.

David Tente, executive director for ATMIA USA and Americas, pledged additional resources and support to address open issues and educate the public. “There is a significant lack of understanding about how the independent ATM cash cycle works,” he said. “That is not unexpected amongst the general public or even other businesses in the financial services industry. But we find it to be true on the part of financial institutions as well - which often results in independent operators being misclassified as Money Services Businesses (MSB). We hope that through a united front, ATMIA and NAC can affect real change in how banks engage with our members.”

NRF reports modest sales gains for 2018 holiday season
Friday, February 15, 2019

R etail sales during the year-end 2018 holiday season grew at a lower than expected 2.9 percent over the same period in 2017 to total $707.5 billion, according to the National Retail Federation. That fell short of the 4.3 percent to 4.8 percent gains the NRF predicted at the start of the year-end holiday season.

"Today's numbers are truly a surprise and in contradiction to the consumer spending trends we were seeing, especially after such strong October and November spending," NRF Chief Economist Jack Kleinhenz said. "The combination of financial market volatility, the government shutdown and trade tensions created a trifecta of anxiety and uncertainty impacting spending," Kleinhenz added.

Klenhenz cautioned, however, that the NRF's analysis, which is based on data provided by the U.S. Department of Commerce, may be subject to change once the government revises 2018 data in the coming months.

Generally, the Commerce Department publishes preliminary year-end spending data within two weeks of the New Year, but this year it got delayed because of the partial federal government shutdown.

If data published by Mastercard late last year is an indication, the NRF may wind up adjusting its retail sales figures upward. According to the Mastercard SpendingPulse – which provides insights into overall retail spending trends across all payment types, including cash and checks – 2018 holiday spending rose 5.1 percent over 2017 to total $850 billion, making it the best holiday season for retailers in six years, Mastercard said.

Online sales surge, sporting goods sales plummet

Both NRF and Mastercard reported the largest gains in retail sales were recorded through the online channel. MasterCard said online sales were up 19.1 percent over the 2017 year-end holiday shopping season. NRF said online and other non-store sales were up 11.5 percent and totaled $146.8 billion.

Here's a rundown of year-over-year sales changes in other key retailing sectors, based on the NRF's report:

Elavon, Womply launch SMB technology suite
Wednesday, February 13, 2019

W omply, a provider of business analytics via software-as-a-service (SaaS), partnered with leading global payments acquirer Elvaon to help small and midsize businesses (SMBs) attract, retain and engage their customers. The technology suite, launched Feb. 13, 2019, addresses growing demand by SMBs for value-added services, the partners stated.

Guy Harris, president, North America and Global Revenue at Elavon, observed the rapidly changing SMB marketplace has become increasingly competitive in recent years. “Today, even sole brick-and-mortar businesses need an online presence to attract, retain and engage customers,” he said. “Our partnership with Womply further shows our commitment to digital commerce and will help our merchants quickly and easily adapt to changes in the marketplace.”

Cory Capoccia, president of Womply, agreed, adding, “Until recently, small businesses were completely forgotten as Silicon Valley spent decades helping large companies get a competitive edge through technology. We’re thrilled to partner with Elavon, one of the industry’s top payment processors, to help level the playing field for small businesses.”

SMBs embrace SaaS

Competitive pressures have driven software-as-a-service (SaaS) adoption by SMB merchants, according to a recent study by Techaisle. Researchers found adoption of cloud-based services reached 73 percent among U.S. SMBs in 2016; they expect these numbers to reach 96 percent by the end of 2019. According to the study, op-listed solutions included “CRM, supply chain management, inventory management, marketing automation, customer service, ERP and vertical applications.” Techaisle researchers additionally noted that cloud-based platforms enable businesses to react quickly to changing market conditions while automating routine business tasks, improving efficiencies and response times. However, not all SaaS platforms are created equal, Capoccia noted. Some require business owners to do more work.

“The last thing a ‘solo-preneur’ wants to do after putting in a 12-hour day is to manage another piece of software,” Capoccia said. “We give them software that does the work for them, giving them time to attract new customers. It’s a win-win-win across the board.”

Adding value to transactions

Capoccia further noted that Elavon merchants who use Elavon’s Payments Insider portal to view transaction activities, security alerts and compliance information will find additional tools and resources to engage and communicate with customers. These resources can be adapted and configured according to individual merchant requirements, he stated.

“Business owners who don’t have the time to decide on messaging can choose ‘autopilot’ and let the software do the messaging for them,” Capoccia said. “Tech-savvy do-it-yourselfers can use the software to communicate directly with customers and bridge that gap.”

The partners described the portal’s additional value-added solutions, as follows:

“Larger businesses can invest in people, but small and midsize merchants don’t have a vice president of customer success or a chief marketing officer,” Capoccia said. “SMBs are leveraging cloud-based solutions to compete with online-only businesses and attract, retain and engage with their customers.”

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