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Alternative lenders, once considered competitive threats, are becoming allies for some banks. BBVA Compass now pitches its clients on OnDeck loans in the hopes of better retaining small-business customers.
May 8 -
With the hiring of the former PerkStreet team, the Boston bank joins the likes of BBVA Compass in teaming with nonbank disruptors to help it better compete in the digital age.
April 29 -
Gavin Michael, Chase's relatively new head of digital, shared some plans for heightening the emotional levels of mobile banking.
April 25
BBVA Compass is outsourcing
All are examples of mainstream banks turning to tech entrepreneurs, even disruptors, to help them better compete in the digital age. As banks look to modernize their designs and customer experiences, they are buying, poaching talent from, or working with digital-first companies that are perceived to be more in touch with consumer demands.
Their challenge, of course, is figuring out which technologies have the most promise, or might pose the biggest threat to their business models. If they see the threats as legitimate, their next decision is whether to try to beat the upstarts or team up with them.
That's why representatives from some of the nation's largest banks were on hand at an
P2P Lending Threatens Smaller Banks
Peer-to-peer lending was originally created to serve consumers and therefore wasn't seen as much of a threat to banks that had little interest in making small loans to individuals. But with institutional
For banks, this could mean a loss of business to more nimble firms that can offer more flexible loan terms and quicker turnaround times.
"Banks will wake up and an entire generation of customers will [have] left," Matt Burton, the chief executive of Orchard Platform, a New York company that aggregates lending products for prospective investors, said at the conference.
Smaller banks "are most at risk," added Simon Hermiz, founder and CEO of NoteX360, an aggregator of alternative lending products for institutional investors. "They are most in need of tech solutions to cut costs and to become more efficient with lending."
To be sure, some community banks are forging alliances with alternative finance companies in a bid to reach new audiences.
The Sacramento, Calif., bank intends to sell its technology, SmartBiz, to other banks.
Keeping Watch on Cryptocurrency
"The future of finance will be in cryptocurrencies," said Reggie Middleton, founder of BoomBustBlog. "It's a big opportunity for banks."
Where that opportunity lies, though, is still an open question. Wells Fargo, for example, recently
Banks' newer research projects are designed to identify the risks and opportunities within digital currency rather than getting involved in the Bitcoin business directly. "It's a wait-and-see approach," said Barry Silbert, founder and chief executive of SecondMarket and founder of the Bitcoin Investment Trust.
Cash, in Some Circles, Remains King
The mobile wallet may someday emerge as the payment method of choice for debit and credit card users, but for some segments of the population, cash is and always will be king.
"Cash has never been as strong as it is today," said Clinton Townsend, founder and chief executive of FreeATM in New York. FreeATM's business model is to make ATM transactions free for users by charging for ads to run on designated ATMs.
It is one of several young companies creating tech solutions geared at the cash-heavy crowd. PayNearMe, in Sunnyvale, Calif., helps people who are generally paid in cash (think waitresses among others) and tens of millions of Americans who rely on cash to, say, make purchases online or pay their rent, among other use cases.
Banks, meanwhile, have been experimenting with ways to make ATMs do more, such as distributing $1 and $5 bills and letting consumers pay their bills through the machines.