The future of money

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Articles - March 2014
Tuesday, February 25, 2014

Banks: stalwarts and upstarts

In 2014 digital currencies like Bitcoin may grab a disproportionate share of the news headlines. But brick-and-mortar banks are still the gatekeepers. Banks provide the lubrication that keeps the gears of the economy churning. They finance businesses and mortgages. They also have heaps of money. In Oregon alone, banks boast $16 trillion in assets.

Most banks and credit unions have a social media presence and offer customers a mobile app — Sprig is a popular one — allowing people to manage their accounts via smartphones. Still, bankers, traditionally a conservative lot, admit to taking a wait-and-see approach to the adoption of new technologies.

“Banks are always innovating and always working on new solutions with new technology, but underneath it all is still the same thing: It’s still a place for safekeeping and a source for safe credit in their community,” says Linda Navarro, president and CEO of the Oregon Bankers Association.

Financial institutions are reluctant to invest in a new technology unless demand warrants it, Navarro adds; smaller banks, she says, simply don’t have the resources for research and development.  

Umpqua Bank, with more than 200 branches and $12 billion in assets, has adopted a mobile banking platform from Q2. But the Oregon bank, the largest community bank on the West Coast, has also invested in brick-and-mortar branches that have a hip and welcoming feel with free Wi-Fi and coffee. “To me, it’s really about bringing the physical and digital worlds together,” says Sonny Sonnenstein, executive vice president and chief information officer.

As banks take an incremental approach to new technology, several startups are going forth more boldly into the digital realm. A case in point is Simple, a tech-focused bank aimed at streamlining the consumer experience. The Portland-based company — now a division of Spanish banker BBVA — opened shop in 2012, offers no storefront branches, and has partnered with Allpoint to provide customers with a network of 55,000 surcharge-free ATMs. Beyond the ATMs, Simple has little to do with physical cash. 

Like many startups, Simple poses itself as a solution to perceived shortcomings of regular banks. Traditional banks get a substantial amount of revenue from customer fees, says COO Adam Erlebacher. “When you have that kind of model, you’re benefiting when your customers make mistakes. It’s hard to design an experience where customers can avoid them.”

Simple, which has $64 million in account balances, doesn’t charge users overdraft fees. The company’s 85,000 users can access on their smartphone apps the “safe to spend” budgeting tool, which takes into account monthly bills and saving goals and tells the customer how much they have to spend. Users can also access detailed information on their spending habits. 

Another Portland startup, Chirpify, leverages social media to streamline financial transactions. CEO and founder Chris Teso got the idea for the company after seeing relatives post items for sale on Etsy or Craigslist and then promote them on Facebook or Twitter. Teso wanted to seamlessly incorporate into social media a way to make purchases. 

“Buying things is fun, but the worst part is the payment,” Teso says. Launched in 2011, Chirpify has worked with major brands like Adidas and Sprint and allows users of Facebook, Instagram and Twitter to purchase products, activate movie trailers or donate to a fund-raising campaign by posting specific hashtags, or “#actiontags.”

Hashtags, used to link to specific topics in social media, are also being widely adopted by advertisers, who might make one integral to a campaign and incorporate it in radio and television ads. This month, Chirpify will launch #Actiontags for TV, a new type of hashtag that enables consumers to request and buy products directly from a TV ad.

Despite the cutting-edge social media spin, Chirpify users’ accounts are still linked to bank accounts; meanwhile Simple uses Bancorp, a conventional bank, to hold consumers’ money. Simple is paying attention to the mobile wallet space, “but we haven’t seen anything that’s truly compelling for customers,” Erlebacher says.

Indeed, anecdotal evidence suggests mobile payment technology is still very much in the early adopter phase. The Joinery, a Portland-based furniture maker, signed up for MasterCard’s PayPass system, which allows customers to make payments with their smartphones. However, Cassandra Jackson, the company’s director of sales and marketing, says customers have yet to take advantage of it.

In other industry sectors, mobile payments might prove more practical. Mass transit appears to be among the most promising. Portland-based GlobeSherpa launched a mobile app last fall allowing TriMet and streetcar riders to pay for tickets with their smartphones; so far the app has been downloaded by 50,000 users who have purchased more than 300,000 tickets. Last year City Center Parking began offering customers the option to pay for parking in some of its downtown Portland lots with a cell phone. “Normally, you run around town putting cash in a meter, and if you’re a business user, you have no record or a bunch of receipts,” says Julian Jones, senior vice president for corporate development at parent company Impark, of the convenience of paying for parking with a phone.



 

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