Banking UP

The first version of the Compass Principles  is available for download from the Center for Financial Services Innovations’ website.

The principles apply generally to the design of consumer financial products intended to help people in their daily lives.

The first category of financial products to benefit from a detailed implementation of the Compass Principles will be prepaid card accounts.

Here are some of the specific items that my company, Plastyc,  will deploy during the next few quarters to implement the Principles:

• Make accounts easier to access with free full-featured Mobile Apps for Android phones ,  iPhones and Kindle Fire tablets, for consumers who may not have a fixed phone line and PC at home;
• Make accounts easier to open with automatic handling of soft-fails via add-on questions during enrollment, for consumers who may not have easy access to a photocopy and fax machine to send us copies of utility bills to prove their identity;
• Display product fees clearly with typical usage patterns inside a standardized “Fee Box“, to be transparent and reassure customers that we will not hit them with unexpected fees;
• Expand real-time communication with cardholders through mobile push notifications, to allow customers to always stay on top of their finances;
• Reduce time and cost of customer support through contextual interactive help, to avoid lengthy searches through solutions among  Frequently Asked Questions;
• Reduce time and cost of customer support through a collection of how-to-videos, to make learning about our services more fun and immediate;

I think that applying good product design principles pro-actively beats any kind of regulation. So kudos to the authors of the Compass Principles whitepaper.

The US Federal Reserve has just released a report about how consumers use mobile financial services.

The full report can be found here.

It contains a substantial section about how the under-banked population uses mobile phones to access financial services.

Just because people are un-banked or under-banked, does not mean that they are “unphoned”.

Mobile phone use is high among younger generations, minorities, and those with low levels of income—groups that are prone to be unbanked or underbanked.Mobile banking and mobile payments have the potential to expand financial access to the unbanked and underbanked by reducing transaction costs and increasing the accessibility of financial
products and services.

Although the report contains some contradictory numbers, it mentions that 91 percent of the underbanked have a mobile phone and 57 percent have a smartphone—rates far above those for the overall population.

As mentioned in an earlier post, we found that over 85% of the UPside Visa prepaid card users have a smartphone.
So we have just deployed a mobile banking application for both Android phones and iPhones.

Consumers would love to get a better handle on how much financial services cost. Schedules of fees can be maddeningly complicated, and are often difficult to find (or to read when printed in very small type).
I spent a couple of hours today looking for the tables of fees on a dozen of websites selling prepaid card services, and each site had its own way of listing their fees.
Not good.

Senator Charles Schumer of New York was at the initiative of a credit card disclosure law enacted in 1988, when he was a congressman, where all fees are grouped in a “Schumer box“. This has improved transparency quite a lot.
The Center for Financial Services Innovations is now preparing a similar “box” for prepaid cards. The final format of the box has not been published yet, as this is still work in progress.

Below is a sneak preview showing how we are “thinking inside the CFSI’s box” and preparing to follow their recommendations. This fee box is for our mainstream UPside card product.
Expect a few tweaks here and there as the model gets refined and finalized.

Prototype of the Fee Box for the UPside Visa Prepaid Card:

Only last November, I wrote about how 75% of our mobile customers were using a smartphone to access their account. Well, 2 months later, the number is now beyond 80%:

• 56.7% Android
• 24.2% iPhone

This penetration ratio is astounding. The technical team at Plastyc is getting itchy to release the applications we have prepared for both platforms.

Below is a sneak preview of the iPhone application:

Once released, anyone among the 80%+ with a smartphone will be able to manage the entirety of their account without touching a PC again.

As this is my last posting of the year 2011 on the Banking Up blog, I realize that our prevailing customer theme and product trend for the year was all about one thing: saving money.

This has been a year when financial woes have dominated the macro-economic news at the level of entire countries and even continents. Of course, individual consumers have suffered greatly, with the number of people in financial distress hitting records unseen in several decades.
In this dire context, protecting people’s money should be everyone’s priority in the financial services industry. Regrettably, many large banks and financial institutions have been featured on the front pages of newspapers because they have continued to protect their own money at the detriment of their customers. No wonder 2011 has seen a flurry of regulations intended to stem financial misdeeds: the implementation of the Dodd-Frank Act, the Durbin amendment, the birth of the Consumer Financial Protection Bureau.

At Plastyc, we were unaffected by this regulatory turmoil. Instead, the main additions to our service in 2011 were:

1. Allowing customers to reach a “Premium” level, similar to the frequent flyer status of certain airlines, where maintenance and support fees are waived, and where more cash back points are earned;
2. Issuing a free discount card for prescription drugs valid at tens of thousands of pharmacies to all our account holders;
3. Introducing a Rainy Day Reserve allowing people to save money automatically for emergencies or future purchases without having to open a separate savings account.

Here you have it: three different ways to save money. To be candid, our motivation and self-interest are to keep our customers longer. All three money-saving features foster a longer-term customer relationship, in a year when, for the first time, public campaigns were orchestrated to invite consumers to ditch their banks.