The Bottom Line

Vendor invoices in the financial services industry are complicated, with some listing over 500 line items. Further, annually auditing these invoices is a time-consuming task and, in the face of that kind of resource drain, many financial institutions tend to compare one month’s invoice to the last. If the amounts are similar, the invoice is approved. 

This may sound rather casual, but even when banks and credit unions commit the time required to manually review vendor invoices, human error compromises the value of that effort. Further, human errors made during the manual review process can become self-perpetuating, compounding over time without the institution’s knowledge.

The Federal Reserve recently released its annual report on debit card interchange fees and, to the untrained eye, the results are thoroughly unremarkable. The Fed has tracked this data annually since the Durbin Amendment took effect in late 2011, as a means of deciphering the interchange landscape.

Following a visible jolt to the trend line in 2012 reflecting Durbin’s targeted intent, the Fed’s charts have remained quite stable. Beneath the surface, however, factors like volume mix shifts, pricing differences between network providers, and newly added detail on certain transaction types reveal a wealth of information that can be used for card portfolio optimization.

Is cash dead? You could certainly reach that conclusion based on recent headlines. The story on the front lines isn’t so simple, however. NCR, a global POS and ATM service provider, recently launched its Silver One tablet-based point of sale platform, a clear counter to the success of competitors like Square and Clover, and a play for the next generation of small business retailers. Given this strategic push, you’d expect NCR to be firmly on the “cash is dead” bandwagon.

Speaking at FinTech South the day after Silver’s rollout, NCR acknowledged that while digital retail transactions are growing briskly, old-fashioned currency and coins aren’t going away anytime soon. Cash is still used in nearly one-third of all counter transactions, it reported, a ratio that varies meaningfully by geography and demographic.

Major League Baseball just completed its All-Star Break, which is traditionally seen as an opportunity to assess the season’s performances to date. We at SRM do something similar, revisiting our annual list of industry trends impacting banks and credit unions’ growth strategies and vendor contract relationships.

It’s been an action-packed first half of 2019. The trends we highlighted at the beginning of 2019 are actively shaping the financial services market and decisions being made by banks and credit unions. Here’s a quick summary to detailed analysis of the topics we’ve provided throughout the year. 

Last Tuesday, NCR acquired D3 Banking Technology (D3), a digital banking software company that provides solutions to regional banks. This comes just six years following NCR’s purchase of Digital Insight, a move that NCR explained would allow it to offer financial institutions a complete “omni-channel consumer experience.” Others saw the purchase as part of a “makeover” that NCR needed to survive. Whatever the case, the $1.65 billion paid for DI would suggest this was no trivial action on the part of NCR.

Is D3 another arrow in the quiver as NCR continues to remake itself? Does the acquisition signal a “reboot” to the makeover centered around DI that has stalled? Could the purchase suggest an attempt by NCR to go to market with two technologies, one more fit for smaller institutions and the other an up-market option? In fact, in the July 2 press release announcing the deal, NCR claimed that the latter question could be answered in the affirmative. The news release noted that D3 “immediately expands” NCR into new markets, notably “U.S. large banks and over time, international banks.”

Today in 2019, a mere decade since texting overtook voice calls in cellular bandwidth use, it can be difficult to find someone even willing to engage in an old-school telephone conversation. Voicemails are declining even faster. According to Forbes, several large corporations have offered to retire voicemail for non-client facing employees and were surprised by the level of uptake.

Against this backdrop, it’s interesting to note the prominent role played by voice technology in the next generation of financial solutions. The growing interest in Robo-advisors could see this become a popular model among those seeking a digital banking breakthrough, and everyone is racing to enable their products through the likes of Alexa, regardless of vertical.

One of SRM’s core values is initiative – having the grit and drive to go above and beyond to offer what people need, without needing to be asked. With this value in mind, our very own Kim Hennessy initiated organizing Strategic Resource Management’s companywide service day. On Friday, May 31, SRM reps from our Memphis, Tenn., headquarters as well as offices in Dallas, Philadelphia and the Virgin Islands, all took part in dedicating a day to volunteer with a local nonprofit of their choosing.

When we weighed in on FIS’ March acquisition of Worldpay, I predicted that a TSYS/Global Payments combination might be in the cards. Two months later, a “merger of equals” announcement between those leading players has me wishing I had spent a bit more time in Vegas.

The payment processing landscape has shifted dramatically in the past four months, with four of the major acquirer/processors making moves this year (Fiserv kicked off the action by joining forces with First Data in January). Traditional payments providers are pursuing greater scale and a broader suite of services in their quest to achieve profitable growth and stave off competition from fintechs entering the market with disruptive models.

In a recent blog post, we outlined the lessons learned in the year since the UK’s Open Banking regulation took effect. The Open Banking concept is hardly confined to Great Britain, however. Countries as geographically and culturally diverse as Singapore, Australia, Holland and Canada have also embarked on similar endeavours to alter the dynamics of their financial services sectors – thus also altering other interconnected sectors.

Although it’s difficult to envision a similar top-down mandate in the United States, there is growing evidence that many of Open Banking’s features will become part of the American landscape through other means. Yet, depending on where you look, commentators cannot agree on the impact of Open Banking’s introduction in the U.S., whether it be success, failure, positive or negative.

One of the most closely watched contests in consumer banking is the battle for P2P supremacy between Zelle and Venmo. Zelle is touted as the bank-friendly alternative, owing to its status as an offering of Early Warning, itself owned by a consortium of the largest U.S. banks. Zelle has reported eye-popping growth figures, stemming from the embrace by its market-leading owner banks and surpassing Venmo volumes by most measures.

Venmo, on the other hand, remains the app of choice for the coveted Millennial and Generation Z cohorts. Zelle has yet to attain the “verb” status of its rival (“I’ll Venmo you…”), which has managed to hold onto its cachet as few consumers realize Venmo is now owned by the not-as-cool-as-it-once-was PayPal.