Understanding the Mobile Banking Consumer

In order to unlock the vast potential of mobile banking, banks and credit unions must better understand mobile banking preferences of current users while alleviating the fears and lack of understanding of non-users. Broadly speaking, while convenience is the primary benefit cited by mobile banking customers, security fears remain the number one barrier to mobile banking growth.

As opposed to a 'one-size-fits-all' approach, financial institutions should consider segmenting the mobile banking universe for improved resource allocation and to optimize customer acquisition, utilization, retention and differentiation.

Mobile devices, including smartphones and tablets continue to transform the way consumers bank, budget, make payments and shop. In fact, having a mobile banking offering is now considered 'table stakes' to consumers when selecting a financial institution. According to the 2013 Federal Reserve Consumers and Mobile Financial Services Report:

• 87% of the U.S. adult population has a mobile phone
• 52% of the mobile phones are smartphones (internet-enabled)
• 87% of smartphone users access the internet regularly (in the past week)
• 28% of mobile phone users have used mobile banking over past 12 months
• 48% of smartphone users have used mobile banking in past 12 months

While some financial institutions may be satisfied with this level of acceptance, mobile banking leaders understand that checking balances using a phone is not 'full engagement' and that growth of use beyond this level will require a better understanding of the mobile customer base and the barriers that keep non-users from using mobile banking. Banks and credit unions also realize how important this understanding will be as they try to optimize channels, reduce operating costs and identify new revenue sources.

According to a new report just released by Monitise and Cognizant entitled, 'Segment-Based Strategies for Mobile Banking', financial institutions need to better understand the mobile banking customer universe and may want to consider segmenting their customers based on mobile adoption, desired features and benefits, mobile devices and monetization potential. By segmenting the mobile customer base, the following questions could be answered:

• What is the best way to segment the mobile customer base?
• How do mobile adoption levels vary across consumer segments?
• What mobile banking features and applications are preferred and by whom?
• How do tablet users differ from smartphone users?
• What opportunities exist for further monetization?
• How can the mobile channel be leveraged for differentiation?

Understanding the Mobile Banking Consumer

Despite all of the industry discussion around the importance and growth of mobile banking, adoption levels still only average 33% across all segments and age categories. While younger, wealthier and more tech-savvy consumers are more engaged with the mobile channel, the challenge is to replicate these higher adoption levels with other segments.

Mobile Banking Adoption Across Age and Income Parameters

As can be seen above, the highest adoption rate for mobile banking is in the 25-34 age bracket with annual income above $75,000. Mobile banking is accessed primarily through mobile phones (32 percent) and tablets (7 percent), with 24 percent using both devices. As can be expected, the majority of consumers prefer smartphone and tablet apps as opposed to mobile banking web sites to access their accounts. The very oldest segment prefers text banking.

Consistent with the reality that the mobile banking channel is still in its relative infancy, the primary features offered by banks and desired by consumers are aligned around basic banking transaction functionality. Unfortunately, these functions have minimal potential for differentiation and do not increase engagement that will reduce potential attrition. In other words, these are nothing more than table stakes.

Top Three Mobile Banking Features

To move beyond a standard mobile banking offering, banks and credit unions need to provide increased functionality. We are beginning to see a response to this need with the introduction of remote check deposit and increased promotion of real-time alerts and advanced bill payment. The impact has been that some consumers are beginning to switch financial providers based on these features according to the research from Monitise and Cognizant.

More than 75% of the consumers surveyed also found the ability to personalize their experience important. Similar to the way in which financial institutions allow consumers to customize their ATM experience, consumers want to be able to rearrange tabs and functions within their mobile application, change appearances of their app and other customization.

While this personalization may feel like window dressing, the research believes these capabilities could increase retention similar to personalized debit and credit cards.

Security Concerns Remain Primary Barrier and Opportunity for Mobile Channel Growth

As innovator and financial industry futurist Brett King says, "Banking is no longer somewhere you go, but something you do." With more consumers moving away from the branch network, concerns surrounding mobile banking security remain the primary barrier to widespread adoption, especially in key demographics. This challenge can become an opportunity, however, for banks that provide enhanced security capabilities or possibly even guarantees.

According to the research conducted by Monitise and Cognizant (available here or here), 71% of respondents rated security features as 'highly important' in choosing or switching banks. Security is a major concern with mobile banking users (70%) and is the most important consideration for non-mobile banking users. 

Security concerns are not only prevalent with mobile banking usage, but are the most significant deterrent to mobile payment usage (the most engaging mobile banking function). Based on the results of the research, it appears there may be an opportunity to gain mobile payment usage if banks provided safeguards and guarantees for mobile transactions similar to those provided with card transaction. Otherwise, the value proposition of conducting a mobile payment vs. card payment does not seem to be present.

Deterrents to Mobile Payment Usage

The challenge is that consumers expect ease-of-use and seamless operation while also wanting effective security practices. These desires can conflict at times where multiple authentication processes are implemented. At this time, it doesn't appear any bank or credit union has found the perfect mix of security and simplicity.

Interestingly, mobile banking users appear to be ahead of the financial community in their desire for advanced security technology. According to the Monitise and Cognizant research, 68% of respondents believed biometric security features are important, while 35% noted that they are willing to pay for such protection. Of the different biometric options surveyed (fingerprint, voice and facial recognition), Fingerprint matching was the overwhelming favorite of most consumers.

An area where banks and credit unions could respond to the consumer's desire for personalization as well as providing a high-engagement security solution would be through mobile alerts. According to the research, the demand for these types of alerts is prevalent across all income segments.

Note: Preferred method of notification survey results and expanded discussion of mobile wallet features and benefits are available in the full report here or here.

Mobile Security Options

While this post is not intended to discuss how banks should proceed with mobile security, there are good references available that discuss options. 

In an excellent report in Bank Systems and Technology published last year entitled, "5 Critical Strategies for Mobile Banking Security," it was emphasized that banks and credit unions are challenged by the somewhat conflicting consumer desires for increased security and increased ease of use. Based on interviews with leading industry analysts from Forrester Research, Mercator Advisory Group, Aite Group and ABI Research, possible strategies were provided:

• Risk-based authentication and anomaly detection
• Application based security features
• Out-of-band authentication (separate device)
• Mobile operating system security
• Expanded defense minded devices

While Bank Systems and Technology acknowledged that it would be simple to suggest that banks go all in with all five strategies, that’s not a viable option for resource-constrained financial institutions, which need to make trade-offs and allocate security budgets based on customer needs, mobile strategies and marketplace dynamics.

Tablet Banking Differentiation

Until recently, many banks simply expanded the dimensions of their mobile phone banking application for tablet use. But tablets are quickly emerging as a user interface which provides unique challenges and opportunities for financial institutions. According to the Monitise and Cognizant research, 41% of mobile banking consumers would prefer to use their tablets as opposed to their smartphones. This preference increases to 60% among tablet owners and is even further pronounced among affluent consumers.

The research stresses that consumers use their phone and tablets for different purposes. While smartphones are used for more simple and immediate needs (balance inquiries, balance transfers, etc.), tablets are less transaction-driven and are used more for personal financial management (PFM) functions. The tablet's unique functionality also provides an excellent platform for advanced cross-selling and relationship building.

Top Features for Tablet Banking

Mobile Banking Segmentation

The Monitise and Cognizant research identified five consumer segments based on the use of mobile banking services, age and income level of the consumer. While this segmentation may not be perfect for every organization, it is a very good starting point for identifying mobile banking segment needs and ways to increase usage and wallet share.

A further description of the five segments provides additional insight:

• ASPIRING BLOOMERS: This segment is digitally inclined but not among the first to adopt mobile banking. However, they access mobile banking services at least once a week. Mobile banking features such as checking account balances, transferring funds and remote payments are important. Consumers in this segment are willing to try and adopt advanced features such as mobile photo bill pay, virtual wallet services and near-field communication payments. To retain and further penetrate this segment, retail banks can educate these consumers about advanced features through direct marketing campaigns.

• ARDENT AFFLUENTS: This segment is highly engaged with their mobile devices. They use advanced features such as mobile photo bill pay, and are interested in receiving expert guidance on personal finance and investments. They seek value-added services such as spending pattern analysis, loyalty rewards/points, shopping updates and portfolio monitoring. Sustaining this segment’s interest in mobile services by keeping up with their innovation needs can help retail banks acquire and retain this segment.

• LIBERAL USERS: This segment consists of consumers between the ages of 35 and 54. Their average annual income is between $50,000 and $100,000. They use mobile banking, but not extensively. They also seek advice to help them improve how they manage their finances. This segment will respond best to services related to money management.

• CAUTIOUS SENIORS: These consumers are value seekers. They are interested in products that offer tangible rewards. This segment is also highly sensitive to mobile security concerns. To make mobility more palatable to them, retail banks can extol the virtues of mobile banking, including its safety and security.

• DISINCLINED CONSERVATIVES: This segment has serious concerns about the safety and security of mobile transactions. Currently available banking services meet their existing needs. Retail banks can gain from informing them about the benefits of mobile banking and alleviating their security concerns. This could encourage this segment to try mobile banking.

Addressing the needs of individual segments (or deciding to ignore some segments) provides the foundation to increase adoption of mobile banking services within a bank or credit union. By targeting efforts to specific segments, as opposed to marketing to all consumers in the same way, will better optimize marketing investments and lead to quicker returns on investment.

Based on the research, the following recommendations were provided to mobile banking developers and financial marketers:

• Remote check deposit should continue to be promoted due to being rated as the most important mobile banking feature
• Additional innovation must be ongoing since consumers are making buying decisions based on mobile capabilities
• Real-time, customizable alerts should be given top shelf attention and promoted aggressively due to their importance as a security and financial management tool
• Other security features need to be enhanced and promoted. This is the key to future mobile banking (and mobile payment) adoption
• Personalization of the mobile experience should be given priority since this can reduce attrition
• All functionality should be simplified on the mobile platform. This is especially true of mobile payment processes that do not provide additional value compared to alternatives today
• Tablets applications should be customized, with capabilities matching the advanced functionality of the channel
• Leverage advanced technology for a better user experience (online chat, voice activation, videos, etc.)
• Segmented customer experiences addressing the unique needs and usage of the various segments similar to the recommendations below.

Survey Methodology

This survey was conducted online among a nationally representative sample of approximately 2,100 U.S. consumers, roughly 700 of whom are mobile banking users, during March and April 2013. Data was collected on mobile banking sentiments, preferred features of smartphones and tablets, attitude towards mobile payment services and the major concerns regarding mobile banking. 

Additional Resources

Segment-Based Strategies for Mobile Banking - Monitise and Cognizant Research (July 2013)

Driving Mobile Banking Adoption Via a Refined Consumer Segmentation Strategy - Monitise and Cognizant Research (July 2013)

The Mobile Moment: Barriers and Opportunities for Mobile Wallet - Chadwick, Martin and Bailey (June 2013)

Mobile Banking and Technology Center - American Banker Research Site

2013 Consumers and Mobile Financial Services Report - Federal Reserve (March 2013)

What Consumers Really Want From Mobile Payments - Vocalink (June 2013)

5 Critical Strategies for Mobile Banking Security - Bank Systems and Technology (June 2013)

Digital Banking Security Report: How to Successfully Balance Security and Convenience - Mapa Research (October 2012)

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Today's Mobile Banking Apps: Table Stakes or Cutting Edge

There is no disputing that the U.S. mobile banking landscape is changing rapidly. Larger banks are setting the stage for broader market trends, while smaller banks (and even some regional players) play catch up in the development of new functionality.

What are some of the top U.S. banks doing that is innovative and what has quickly become table stakes in a game of mobile app one-upsmanship? And is mobile banking innovation becoming a value-added differentiator that can drive new revenues?

Over the past 18 months, mobile banking applications have evolved beyond the basics to include specialized functionalities, improved user experiences and an expansion of platforms supported. A year ago, mobile remote deposit capture (RDC) was live at only five of the top 13 banks. Today, it is a 'must have' banking application that has the potential to drive revenue. Similarly, P2P is now taking center stage at most banks despite some logistical hurdles, with five banks adding this functionality in the past 12 months.

How are banks keeping up with consumer demands? How are they keeping up with each other? What's next? In the third report in a series on the state of mobile banking released by the financial research and consulting firm Celent, a review of new application development is provided along with a glimpse into the future. 

In the 44-page report, The U.S. Mobile App Landscape: An Annual Evaluation of Mobile Banking at Top U.S. Banks, Celent found that larger banks tend to out-develop and out-adopt smaller institutions by a significant margin. “The channel is still relatively new, but leaders in the digital channel space are beginning to take offerings into the realm of value-added services that are context-sensitive, timely, and utilize big data", says Dan Latimore, senior vice president of Celent's Banking Group and coauthor of the report. "There’s a large disparity among digital offerings—industry leaders are light-years ahead of the laggards.”

Below is Celent's view of the mobile landscape as it continues to evolve. As can be seen, Emerging Capabilities include a more advanced stage of interaction with more knowledge-driven tools and analytics. While some of these may not be pursued by every organization, Celent believes most will be tomorrow's standard. Interestingly, some of the functionality in the Future Focus is already being implemented on a global basis (see previous post 'Banks Accelerate Mobile Banking Innovation', June 2013). 

While the future may be considered speculative, some components are beginning to appear at the more progressive institutions (U.S. Bank and BBVA Photo Bill Pay) and at some of the new players such as Moven, Simple, GoBank and BlueBird (see 'Challenger Brands & Disruptive Ideas: Learning From The NeoBanks', Financial Brand, August 2013).

Current Evolution of Mobile (Celent, June 2013)

Key Findings of the report include:

• Mobile, and more broadly digital channels, have become core parts of banking in 2013. Mobile devices are now just as much a tool to keep people out of branches as they are to facilitate interaction. Consumers are more eager to engage through a smartphone, and as nontraditional players rush in to fill gaps left by legacy financial institutions, CIOs are beginning to feel the pressure to build out digital capabilities.
• Digital channels are in a continuous process of evolution, proliferation, and adaption. While remote deposit capture was 'new' a year ago, it is now a basic functionality. Innovation in the mobile channels is ongoing with today's innovations quickly becoming tomorrow's table stakes. 
• Banks are moving forward in their evolution of digital channels, but it's a slow and sometimes confusing process. It’s no surprise that banks aren’t considered innovators: it’s difficult, expensive, and risky to innovate. Yet, banking is entering a time of customer-centricity, where each institution defines this concept differently.
• New functionality is on the horizon, but not yet front and center. This includes: 1) Speech recognition, 2) Social media integration, 3) Mobile PFM tools, 4) Easy access account balance, 5) Cardless cash withdrawal, 6) Debit card on/off switch, 7) Remote mobile bill pay, and 8) Biometric security.

How Are The Top Banks Doing?

Mobile is definitely moving beyond the replication of online banking services and into value-added features built to serve more specific use cases and even different segments of the bank (retail consumer, small business, wealth management, commercial, etc.). As shown above, the evolution is trending towards an environment where solutions are being 'bought' vs. 'built' and where engagement of the customer on a contextual level is beginning to be achieved. 

Using a features and functionality scoring sheet for each mobile platform (developed as part of the previous Celent research 'What's App, Doc: A Biannual Evaluation of Mobile Banking at Top U.S. Banks'), Celent evaluated apps for the Apple iOS, Android, Safari web browser and text banking. Scores were compiled for the top 13 banks in the U.S., with banks grouped into three categories based on the following criteria:

• How easy was it to find the desired function?
• How easy was the app to use?
• Was the information presented intuitive from a navigation perspective?
• Did the app take advantage of standard OS functionality to enhance familiarity?

A very in-depth evaluation was performed for the following functions on each mobile platform to determine breadth of offering. Each function was evaluated on a number of levels with values placed on each of the following capabilities: 

• Balance inquiry
• Recap of previous transactions
• Bill payments
• Moving money (RDC, A2A, P2P, etc.)
• Merchant-funded rewards
• PFM tools
• Social Media integration
• Geolocational tools
• Marketing and sales
• Security
• Customer support
• Personalization
• Alerts

Celent grouped the banks in this report into the following three categories: most improved, noticeable improvements, and minimal/ no changes.

1. The most improved apps include Bank of America and US Bank.
2. Apps with noticeable improvements are Capital One, Wells Fargo, and HSBC.
3. Banks with minimal or no changes to their mobile offerings include BB&T, Chase, Citibank, Fifth Third, PNC, Regions Bank, SunTrust and TD Bank.

According to Dan Latimore, "While Chase continues to build on their mobile excellence, some apps have been playing catch up." And while not making significant changes does not necessarily mean the mobile banking site was poor, standing still in today's mobile marketplace is not a solid long-term strategy.

Interestingly, in an unrelated research study conducted by Xtreme Labs for the period May 18 - June 1, 2013, entitled 'U.S. Banking Apps Report: Customer Reviews', a different set of 'winners' emerged based simply on the number of positive and negative customer ratings in both the Apple iTunes Store and Android Play Store. A minimum number of reviews were required for any app and an averaging of reviews was used for scaling. While significantly less scientific than the Celent research, the Xtreme Labs research provides a social media commentary on customer sentiment around mobile banking apps.

Of the largest banks reviewed by Xtreme Labs, RBS Citizens, had the highest score on the iOS platform (4.5 out of 5 and a 93% favorability rating) and one of the best scores on the Android platform (4.5 out of 5 and a 97% favorability rating). USAA, American Express, Wells, TD Bank, Chase, BB&T and Regions and U.S. Bank also scored well in this study.

Conversely, PNC (not virtual wallet), SunTrust, TD Bank, Fifth Third, Bank of America, Well Fargo and USAA also appeared on the negative side for the iOS platform in the Xtreme Lab study, indicating that the mobile apps were not considered the best for everyone.

Issues to Address in Future

Beyond the need to explore the development of additional functionality that makes engagement easier and leverages big data more effectively, Celent saw some trends they believed warrant attention in the near term.

Marketing and Cross-Selling

As was noted in my June 2013 blog post around Mapa Research's study of global mobile banking innovation, U.S. mobile banking apps still haven't leveraged some of the power of cross-selling from a mobile device. While the Celent research noted that many banks have attempted some form of 'product pushing' or advertising of services, there seems to be minimal leveraging of big data insights to drive contextual offers. "Splash screens and real estate crowding banner ads should be left to online banking", say Latimore. "Apps should move toward offering up product suggestions (without sacrificing user experience) as well as being able to facilitate the beginning of an enrollment process, which can be finished at the branch, over the phone or online".

Mapping

While it is understandable that many banks may be a bit skittish around using Apple Maps for branch and/or ATM directions given early flaws with the iOS application, using Google Maps from within the Safari browser was found to be slow and 'clunky' compared to the integrated option from Apple. Celent believes the risk may be worth it. Another option (used by both PNC Bank and U.S. Bank) may be the use of augmented reality for locational guides.

App Design and Platform Changes

Celent noticed that a number of apps in the study had little or no change from the previous report from Q4 2012. While this may not seem out of the ordinary if compared to bank website redesigns, and certainly falls in line with the industry's normal 'wait and see' approach, this speed of change is not acceptable to most mobile users who are used to constant and frequent enhancements to apps.

In addition, as tablets of all forms have exploded onto the marketplace, banks have done a terrible job of developing applications that take advantage of this very unique platform. Beyond the tactile and length of engagement differentiation of this platform, the demographics of the typical user (more affluent and more digitally astute) warrants a greater focus.

PFM on Mobile

There is no disputing that PFM on mobile has yet to gain any traction. Banks are struggling to define what PFM should be and what it should look like on different channels as well as platforms. The majority of consumers are not attracted to charts and graphs on mobile devices (there is a segment however). But PFM on mobile may provide promise if looked at in the perspective of improved receipts, budget updates and even gamification. Merchant-funded reward integration is also possible with geolocational capabilities providing the ability for immediate rewards through the mobile device.

While some banks are testing some of these capabilities (most notably the neobanks like Moven as covered here in my early 2013 blog post), there is quite a bit of debate on whether the investment in development can be recouped without a value-added pricing model.

According to Latimore, "Eventually, Celent imagines high-value advice on savings, alerts for overspending on a budget category, or GPS-enabled deals. The camera is another unique attribute to the mobile phone that can be used to provide a snapshot of spending."

The Long Road Ahead

Mobile banking has quickly evolved from being a more cost effective way to handle balance inquiries to a core component of every bank's delivery network. We have moved from a transaction focus to an engagement focus, with CIOs beginning to feel the pressure to build out mobile capabilities. 

With basic mobile transactions such as balance inquiry and moving money, simplicity is the 'new black'. With more sophisticated interactions, the use of 'big data' for insight dissemination and solution recommendations is the key to success. In all cases, Celent found a trend away from 'bolt-on modules' to more holistic approaches that will require significant investment.

While other industries have reached young adulthood in mobile integration, mobile banking is still in its infancy. With shrinking margins and more regulatory pressure, banks must determine if there is the potential for mobile services to generate revenue that can help offset development costs and replace lost fee income. Without fees from new value added services, what is the ROI of mobile banking? (see previous BMS post, 'The Revenue Power of Emerging Financial Solutions", August 2013)

According to Celent's Dan Latimore, "While mobile banking definitely expands a bank's ability to reach new and existing customers, and while there is significant movement by some organizations, there is still a long road ahead for others."

About the Report

The report reviewed is the third in Celent’s series on the state of mobile banking at top US financial institutions. The report examines mobile application offerings at the top 13 US banks in significant detail, beginning by looking at the state of the mobile market in the US. Celent graphically explains trends in mobile, and tries to make a case for what the future of mobile will look like. The report then dives deeply into the breadth of functionality and usability at each of these banks. Finally, each bank’s mobile application is profiled in depth, with accompanying screen shots to illustrate relevant points. This report is the best of its kind and is intended to serve as a guideline for conversations around how to strategically align mobile development with prevailing best practices.

A webinar on this study in conjunction with Kony, entitled, Tomorrow's Mobile Banking - Hear What Top U.S. Banks are Doing to Get a Glimpse Into the Crystal Ball is scheduled for September 11, 2013 at 2PM ET. 

Additional Resources

The U.S. Mobile App Landscape: An Annual Evaluation of Mobile Banking at Top U.S. Banks - Celent (June 2013)

Mobile Banker Vendor Solutions - Celent (April 2013)

What's App, Doc: An Updated Biannual Evaluation of Mobile Banking at Top U.S. Banks - Celent (January 2013)

U.S. Banking Apps Report: Customer Reviews - Xtreme Labs (July 2013)

Tomorrow's Mobile Banking - Hear What Top U.S. Banks are Doing to Get a Glimpse Into the Crystal Ball - American Banker Webinar sponsored by Kony (September 11, 2013)

Mobile in 2013: A Digital Digest Featuring Gartner Research - Kony (March 2013)

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Six Years of Financial Services Innovation

Anticipation is building as FinovateFall 2013 is returning to Manhattan on September 10 and 11 for the seventh consecutive year. With more than 70 cutting edge firms doing 7 minute demos in front of a sellout crowd of more than 1,000 bankers, investors, analysts and the press, it is the premier showcase and networking event for what is new in the world of fintech.

While the overarching innovation theme remains the same, it is interesting to see the ebbs and flows of presenting categories and companies through the years. It is more interesting to realize how fast things have changed in the financial services industry.

Finovate 2007: When Mobile Was Young

The brainchild of the Online Banking Report and NetBanker blog publisher, Jim Bruene, the very first Finovate conference was held in New York City on October 2 of 2007, when 20 of the most innovative companies in the financial, banking and lending space gathered in front of a handful more than 200 banking executives, analysts, investors and the press to offer a glimpse of the future using the now familiar 7 minute demo format (no PowerPoint slides allowed!). The one-day event was quickly sold out, with overflow space provided for late registrants to view presentations via a video feed (see all 20 videos from the first Finovate conference here).

While only six years ago, a lot has changed in the financial marketplace. In 2007, mobile banking was in its infancy, with just a few hundred thousand users across three different platforms ('mobile website' was the most popular). Interestingly, the discussion at the time was whether mobile banking would be a standalone profit center or just another cost center for banks (still up for debate by many). And despite a lot of hype at the time, only one bank (Citibank) and one vendor (mFoundry) had launched a fully downloadable, custom mobile banking app.

The themes for the 2007 show and number of companies presenting were PFM (5), mobile banking (5), payments/billing(4), P2P Lending (2), online tools (2), mortgage lending (1) and security (1).

The presenter list included (in alphabetical order); Andera, Billeo, CheckFree (acquired by Fiserv), Clairmail, Firethorn (now Qualcomm Retail Solutions), Geezeo, Digital Insight (an Intuit company), Identity Theft 911, iPay Technologies, Jwaala, Lending Club, Metavante (acquired by FIS), mFoundry, Mint, Monitise, MortgageBot (now part of Davis + Henderson), MShift, Online Resources (acquired by ACI Worldwide), Prosper Marketplace and Yodlee.

The Best of Show winners of the first Finovate were a two-week old online personal finance start-up named Mint, a mortgage marketplace from MortgageBot named Marvel and the peer-to-peer lender Prosper. The biggest winner, however, may have been the financial community, since the success of Finovate 2007 was the foundation for a growing series of global Finovate events that now include an expanded 2-day FinovateFall event in Manhattan, a second two-day U.S. event, FinovateSpring in California, a one-day FinovateAsia (30+ firms) and the two-day FinovateEurope (60+ firms).

With technology always at the forefront, Finovate 2007 was the first financial services conference to proactively court the blogging community, with bloggers from four countries covering the 2007 event (live blogging and a ton of tweeting continues during all events). In addition, all of the presentations are streamed for later viewing for attendees and non-attendees on the Finovate web site.

FinovateStartup 2008 - The First West Coast Show

Only three months after the the success of the first Finovate show in NYC, Jim Bruene announced a slightly modified version of Finovate2007 called FinovateStartup to be held in San Francisco in late April of 2008. With a focus on showcasing the hottest financial technology start-ups, the format of 7-minute fast-paced demos remained the same as did the opportunity for the attendees and innovators to network.

With an original goal of securing 20 cutting edge fintech firms for the second Finovate conference, Jim and his team quickly surpassed their goal with a final lineup of 40 startups despite a tightening credit market and bigger financial industry storm clouds on the horizon. Included in this lineup were several firms using this event to introduce new products. (recap of presentations available thanks to Scott Loftesness of Glenbrook Partners with video archives of the presentations provided by Finovate)

Compared to the first event held 6 months prior, the second event's diversity and expansion of themes was apparent, with new savings/checking products, financial comparison tools and investing/asset management being new themes. In addition, while PFM tools still were prominent at the event, security services and investment/asset management firms had greater representation. As can be seen from the word cloud below, the industry still lacked significant mobile/payments discussions.

Riding The Storm Out: Finovate 2009 - 2011

There is not a banker alive who doesn't remember the financial crisis that started in 2007, 'peaked' in 2008, and is with us to a degree still today. Some of the many impacts of this period were that budgets were highly scrutinized and cut, investment in the future was scaled back and innovation at many financial organizations took a back seat . . . except at Finovate. 

While it would have been easy for Jim Bruene and his team to fold up the tent in late 2008 and restart the Finovate concept a few years down the road when times were better, Finovate continued to provide the premier forum for innovation. Despite the economic conditions (or because of it), companies wanting to showcase their new products increased, registrations multiplied and the trade and business press took notice. Maybe it was the ripple effect of the introduction of the first iPhone in 2007 and the rapid increase in acceptance of mobile apps, but interest in financial innovation increased during this difficult period.

During the shows from 2009-2011, innovation trends continued to be in flux (at least if measured by the products being showcased). Some interesting trends included:

• Twelve companies at the 2009 FinovateStartup did demos on PFM solutions (representing close to 25 percent of presenters).
• Small business solutions began to appear in early 2009 and have continued to be a steady category today.
• Search and comparison tools were strong during the period.
• Mobile solutions became the break-out category in late 2009 and early 2010. That trend continued in 2011, with the emergence of mobile photo bill pay and other tools.
• Safety and security tools remained in the spotlight, reflecting the fiscal conservatism that prevailed and the need for safe havens for funds.
• Alt-payments and alt-lending became a more popular category during this period.
• The emergence of real-time information distribution.
• Rewards platforms and savings tools emerged (and won Best of Show honors) beginning in 2011

As the presenting themes continued to grow and change, the interest in financial innovation continued as well. Finovate grew exponentially to meet this need. 

• FinovateFall 2010 was the first two-day event, reflecting the extraordinary desire to both demo and participate in this unique forum. Despite (or possibly because of) this expanded forum, sold out events became the norm.
• The number of demos at the FinovateSpring and FinovateFall events reached more than 60 per show.
• Audiences multiplied from the first Finovate shows, surpassing 800 at FinovateSpring 2011 and reaching 1,000 in NYC for the FinovateFall 2011 show.
• FinovateEurope was introduced, reflecting the worldwide scope of fintech innovation. While being held in London, presenters came from Europe, North America and Asia. The first show had 3 dozen presenters over 400 participants.
• Coverage in both the financial and mainstream business press exploded during this period. In addition, Twitter became an excellent micro blog of highlights as they occurred.
• All demos continued to be catalogued for future viewing on the Finovate site.
• FinovateSpring 2009 (58 presenters)
• FinovateFall 2009 (32 presenters)
• FinovateSpring 2010 (36 presenters)
• FinovateFall 2010 (56 presenters)
• FinovateEurope 2011 (35 presenters)
• FinovateSpring 2011 (64 presenters)
• FinovateFall 2011 (63 presenters)

FinovateSpring and FinovateFall 2012

The Finovate events for 2012 were filled with familiar categories, new subcategories of previous themes, and categories that didn't even exist when Finovate began in 2007. FinovateSpring 2012 highlighted firms presenting payments and rewards platforms, new mobile solutions and the beginning of social media integration. In addition, solutions emerged in response to new government compliance needs as well as in response to the reduction of fee income.

It is amazing how much change can occur with innovation themes in six short months. Possibly because of rapid changes in the acceptance of mobile devices and related apps, the increased concern around authentication and security, the beginning of marketing's emergence from the financial crisis of 4-5 years prior, and the slow acceptance of certain innovations by the public and financial institutions, the word cloud of FinovateFall 2012 themes looks nothing like the themes of the Spring.

Not only have the themes continued to change, the subcategorization also illustrates the micro segmentation of new solutions.

My First Finovate: FinovateSpring 2013

FinovateSpring 2013 was the first Finovate that I attended in person (previously, I live vicariously through others by following the live blogging and twitter mentions). As has become the norm, the event was again sold out, and you could feel the energy upon entering the venue (see my recap 'Musings of a Finovate Virgin). It also had the feeling of a class reunion since, while presenters may come and go, those who attend the event try to make it every year.

As was true with the themes in 2012, the changes in key categories seemed to evolve based on consumer demand (security services, small business), new tools and visualizations (wealth management, investing and mobile applications), new segments (underbanked) and even some advanced applications (P2P lending and B2B payments). 

Most interestingly was the emergence of so many crowdfunding solutions compared to previous shows and the disappearance of PFM in the traditional sense. As could be expected, the categories of mobile, payments and security/authentication solutions remained strong.

FinovateFall 2013: Fintech Innovation is Alive and Well

With FinovateFall 2013 a week away, there is no doubt that innovation in financial services continues unabated. Finovate will have another sell out crowd in Manhattan on September 10-11, and there will be another exciting roster of 60+ companies ready to demo their solutions.

While some may have a strong business case and a pent up demand for their solution, others may be trying to 'make a market' for their innovation. Some are hoping that their demo will spur new funding for their innovation, while others are extending a product category by an established vendor.

As in the past, there will be more than 1,000 registrants who will cast their ballots for their favorite presentation, naming them 'Best of Show'. Some of the votes will be cast based on presentation style. Others will be cast based on the 'cool factor' (which doesn't always reflect a desire or need to buy). Still others will cast their ballot based on which solutions they believe have a valid chance in the marketplace.

The networking will be one of the primary side benefits with end of day cocktails and even the introduction of the Bank Innovators Council on the Monday evening before the FinovateFall 2013 kickoff.

No matter the outcome of the voting, the diversity of innovation is broad and the excitement in the industry is strong. Innovation is a differentiator in an industry that often feels 'me too'. It is a way to potentially grow market share, retain current customers, cut costs and/or increase revenue. 

Innovation is risky but necessary. It is exciting yet frustrating. It is not for the faint of heart, yet it builds corporate character. Fintech innovation is, by definition, the future. And based on the themes for FinovateFall 2013, innovation is as different from six months ago as it will be six months from now . . . and yet many of the themes sound familiar.

While mobile, security, small business, lending and payments remain strong themes, the underbanked category all but disappears. In addition, we see the somewhat surprising reemergence of PFM and loyalty/rewards (maybe there really is something new in these spaces) at the same time that mobile wallets and customer experience get zero love.

As Bradley Leimer stated upon returning from his first Finovate . . . It is the 'The Disneyland of Fintech'™. For those attending or joining the event through social media, Finovate is definitely an 'E-Ticket' ride to the future.

Additional Resources

Finovate 'Best of Show' Winners 2007 - 2011

FinovateSpring 2012 'Best of Show' Winners

FinovateSpring 2012 Twitter Transcript

FinovateFall 2012 'Best of Show' Winners

FinovateFall 2012 Twitter Transcript

FinovateEurope 2012 Presentations (35 presenters)

FinovateAsia 2012 Presentations (35 presenters)

FinovateEurope 2013 Presentations (64 presenters)

FinovateSpring 2013 'Best of Show' Winners

FinovateSpring 2013 as Seen Through Twitter

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