Branded Content From Banks And Credit Unions

In a paper titled Identity and Opinion: A Randomized Experiment, researchers wrote:

“Content and identity are inextricably linked in social media. Facebook, Twitter, Linkedin, Pinterest, Reddit, Netflix and Amazon all provide identity cues that affect users’ link formation decisions and choices about who to follow for the best content. [This] raises an interesting question: To what extent are opinions about content influenced by features of the content itself or the identity of the user associated with the content? [The results of] a large scale field experiment show that identity effects exist and vary with a content producer’s reputation, activity level and reciprocity with the viewer.”

My take: This research has important implications for banks and credit unions deploying content marketing strategies.


In a previous post here titled Content Marketing For Banks, I wrote about one bank’s efforts to pursue a content marketing strategy.

According to an article in American Banker, a rather large bank “is launching a new online magazine with a goal of driving more traffic to its website.” According to an EVP at the bank, “we’re tapping into the growing trend toward trusted sources for news and information and doing it in a way that will drive new and more frequent visits to our public site.”

The article went on to say:

“The digital publication will feature branded editorial content, including promotions for the bank’s events, market data, personal finance tips and lifestyle stories on style and health.”

I had some issues with the goal of driving site traffic, and questioned whether or not the bank really thought through what kind of content would truly be effective in producing business benefits. But the academic research cited above raises another important question for banks and credit unions to consider: What, exactly, is “branded content”?


The AB article’s description of the bank’s efforts implies that the bank will be producing and distributing content under the aegis of the bank’s brand. What the academic research implies, however, is that consumers’ perceptions of the content will be influenced by the strength of the bank’s brand. In other words, content itself can have a brand–a brand that is shaped not just by the objective quality of the content, but by the brand of the producer of the content.

Yet, it seems likely to me that the bank in the AB article–as well as other banks and credit unions deploying content marketing strategies–is expecting that producing content will enhance the organization’s brand.


The research cited implies–if not outright indicates–that this is a multi-step process. Perceptions of content quality are influenced by the producer’s reputation (and degree of interactivity). But that reputation had to be built somehow, presumably by producing high quality content. The key questions–unanswered in the research study–are:

  • What was it about the reputable content producers’ content that led to the strong reputation?
  • What “level of activity”–i.e., frequency and duration–is required to develop a strong reputation?


Bottom line: A half-assed approach to content marketing is a prescription for failure.

Half-assed from two perspectives: First, from the perspective of content production. It seems very unlikely to me that the brand development that can occur from content development and distribution won’t happen after a month, and might even take years (hell, it’s taken me 8 years and 950+ posts to get Snarketing where it is).

But half-assed from another perspective: An institution that doesn’t create and nurture an overall brand image consistent with one that relies on content marketing, and consistent with the content produced, isn’t going to get the full bang for the buck from its content marketing efforts.

The big “aha” here is that banks and credit unions that turn to content marketing to enhance the brand must recognize the fact that the strength of the brand influences consumers’ perceptions of the content.

And sorry, folks, but anybody promising to show you “best practices” in financial services content marketing is probably only showing you interesting pieces of content–and not showing you how non-content related branding efforts setup, created, and/or reinforced the content marketing strategies.


Riding The Waves Of The P2P Lending Market

Congrats to all involved with the Lending Club IPO. This is what it’s all about: Building something from scratch, enduring the ups and downs, then going public and making a boatload of money.

I’m no Wall Street analyst, so I couldn’t tell you if the ~$8.5 billion valuation that Lending Club (LC) hit at the end of its first day of trading is a fair assessment of its current or future value. But what I can tell you is that there are people who are deceiving themselves about what Lending Club is, and what its future prospects are. The delusions are reflected in articles like CNBC’s How LendingClub Aims To End Banking As We Know It, which states:

“LendingClub is setting out to transform the banking world. To get there, it’s following a playbook popularized by some of the world’s biggest tech companies. Any true comparison between LendingClub and the world’s most valuable tech companies is premature, of course.”

I guess any “true” comparisons between LendingClub and the world’s most valuable lending and investment providers aren’t comparisons worth making, eh?

My take: The conditions which made Lending Club possible and got it this far are temporal and likely to change in the next few years–to LC’s detriment.


First of all, can’t somebody out there come up with a better term for what Lending Club is than calling it a “peer-to-peer” lender? The institutional investors providing funds on the marketplace are anything but “peers” to the people looking to borrow money on the site.


There are two conditions that have enabled Lending Club to exist and prosper (get it?). The first is a pool of investors that would like to get a better return on their available capital than what they can get from other (i.e., existing) investment alternatives.

The second is a pool of borrowers who need funds and are willing to pay a higher rate than they would have to pay elsewhere, or, more likely, that need funds and are unable to get those funds from other (i.e., existing) sources.

The size of these two pools–and their willingness to use Lending Club to meet their needs–have been sufficiently large, and growing over the past few years to fuel Lending Club’s growth and drive the IPO.


The questions to answer are: 1) Why did these pools grow over the past few years? 2) Will they continue to grow in the future?

The investor pool grew largely because of two reasons: 1) incredibly low interest rates, making it hard to find acceptable returns, and 2) even in the face of an increasing DJIA, professional money managers are always looking for superior returns to outshine the competition.

Why did the borrower pool grow? Because the economy sucked, and, to some extent, because some  (many?) individuals are mismanaging their financial lives–many are, or have been, unable to pay off existing loans and credit card balances. In fact, 83%of Lending Club borrowers report using their LC loans to refinance existing loans or pay off their credit cards.

Reported Loan Purpose

20141215 LendingClubSource: Lending Club


So what happens going forward? It mostly depends on the state of the economy, the direction that interest rates go in, and the P2P lending market itself.

If we experience a period of economic prosperity, and people are more able to pay off their loans and credit cards, Lending Club may very well see a steep drop in loan volume. Roughly 62% of Lending Club’s 2014 loan volume came from borrowers with a Grade C or lower rating. What happens when the economy improves and the Gen Y population–who start off adult life with lower credit scores and grades–mature and move into higher creditworthiness classes? Is there another pool of risky borrowers to fill the void? And if interest rates rise, could the rates that borrowers must pay on the LC platform might be even too high for them to stomach? Grades E, F, and G are already paying interest rates in excess of 20%. We’re getting close to payday lending territory, no?

Will the investor pool grow? This is comprised of two components: 1) the number of investors, and 2) the amount of funds those investors put into the marketplace. I can’t talk to #2, but it seems likely there are limitations to the number of investors who can or will participate in LC. As the marketplace has grown, competition to fund the best borrowing opportunities has grown, and has even spawned new companies who help investors identify their best opportunities. As a result–much like the stock market itself–professional investors have an edge over individual, amateur investors. As a result, the number of individuals investing in LC will likely remain capped.

And with a first day valuation of $8.5 billion, I’m guessing that venture capitalists across Silicon Valley are firing up their bongs and thinking “Dude! I gotta invest in one of these pee-pee lending marketplaces!” And that means more competition for Lending Club. Increased competition will likely result in some erosion of LC’s overall share.


Claims that Lending Club is “disruptive” or that it will “end banking as we know it” are so totally ridiculous that it has to make you wonder what the claimants were smoking when they made these claims. Lending Club is a niche player in the lending market, a fringe player.

According to the Federal Reserve, consumer loans issued by the 100 largest banks (ranked by assets) grew 6.5% between Q1 2012 and Q3 2014 to nearly $1.18 trillion. From the 2015 Financial Brand Marketing Survey, 43% of respondents indicated that their FI’s loan volume increased by more than 10% in 2014 over 2013 levels.

Disruption? Ending banking as we know it? Hardly. More like creating a niche somewhere between credit card borrowing and payday lending.


Bottom line: I can’t tell if you $8.5 billion is a fair valuation for Lending Club. What I can tell you is that, if and when the economy improves, it’s going to face some stiff challenges.

That said, I would love to have a ride on the boat.

Does Your Bank Need A Chief Ethics Officer?

In an article titled To Restore Trust in Banks, Build Ethics into Business Decisions in American Banker, the authors wrote:

“If a bank decides to have a formally designated individual (i.e., Chief Ethics Officer) with principal ethics responsibility, what steps should it consider to make the role effective? Such an executive could update and promulgate the company’s ethics policy and be responsible for training employees about their ethical responsibilities. He or she could help to illuminate decisions about what is “right or wrong,” even where there may be a legal argument to justify an institution’s proposed products, pricing or conduct. He or she also could be the senior officer to whom whistleblower complaints would be directed. The ethics officer might also be charged with identifying and investigating wrongdoing involving individual conduct to help ensure that the institution’s ethical culture is grounded in ethical behavior and not simply an abstract policy. In addition, he or she could be an advisor on products, services and programs, evaluating them in the light of fairness to their intended users.”

In many of these potential roles and responsibilities, there’s a strong whiff of “after-the-fact-ness,” meaning that the involvement of this chief ethics officer would come after some potentially unethical behavior was committed (with the exception of the training role).

A better solution would prevent unethical behavior (although, if you read my prior post on financial education, you might guess that I don’t think ethics education would be particularly successful). And, in fact, not only is that implied by the title of the AB article, but the authors write:

“One alternative or supplement to appointing a single officer to champion ethics is to require that bank decision processes explicitly incorporate ethics—whether the bank “should” as opposed to whether it “can”—into major decisions on products, programs and business initiatives. Especially given the subjective nature of ethical requirements, making ethics decisions part of a process that will incorporate the views of multiple executives may assist in capturing a broader corporate consensus.”

Sounds like a good idea, but seems impractical. The recommendation implies that many decisions that involve an ethical choice can be easily identified and isolated. That’s way too simplistic an assumption.


Every “issue du jour” in the business world produces calls for a Chief Fill-in-the-blank Officer. We’ve seen Chief Reengineering Officers, Chief Knowledge Officers, Chief Customer Officers, Chief Innovation Officers, Chief Security Officers, Chief Data Officers…and the list goes on and on and on. These calls rarely address some important questions, however:

  • How much budget should Chief Fill-in-the-blank Officers get to do what they’re supposed to do?
  • What are the limits, boundaries, goals, and metrics for these positions?
  • Are these permanent or temporary roles?

Lots of questions about these Chief roles, and yet the pundits who write articles advocating for the creation of these positions never seem to have any answers to the questions.


The authors of the AB article are lawyers, and they write:

“In some banks, general counsels are considered de facto ethics officers (and sometimes even hold the title of chief ethics officer).”

There’s a lawyer joke in here somewhere, but I’m going to let it pass, because I know that someday I may need a lawyer to get me out of trouble, and the last thing I need is some lawyer saying “oh, you’re the guy who made that nasty lawyer joke in a blog post back in December 2014.”


Another thing that bugs me about the “Chief Ethics Officer” proposal–as well as some of the other recommendations in the article–is that there is no root cause analysis regarding the ethics problem.

How can you know what the solution to a problem is if you haven’t defined the causes of the problem?

So what are the possible root causes of an ethics problem in banking? I’m going to need your help to come up with some more, but I can think of a few possible explanations off the top of my head:

1) Bankers are inherently corrupt cretins.

Sadly, I know there are people out there who believe this to be true (I’m thinking specifically of two Twitter buddies, neither of whom I will mention by name). We’ve been though this before. It’s not true–despite some folks’ misguided notions.

2) Banks’ cultures nourishes unethical behavior.

The authors of the AB article–like many other observers writing on the subject of bank ethics–raise the subject of a bank’s culture:

“The ethics officer might also be charged with identifying and investigating wrongdoing involving individual conduct to help ensure that the institution’s ethical culture is grounded in ethical behavior and not simply an abstract policy.”

This doesn’t get at the root cause, because there must be something that influences and shaped the culture in the first place. Like having a workforce comprised on unethical, inherently corrupt cretins. Which isn’t the case.

3) Bankers have incentives to engage in unethical behavior.

The problem (the root cause) is one of risk vs. rewards. The rewards for unethical behavior are greater than the risks of getting caught (or, at least, the perceived risk that one will get caught). When the perceived reward is greater than the perceived risk, people will engage in behavior to reap that reward.

If #3 is the root cause–and I believe it to be, at least, more so than #1 or #2–then the “fix” needs to be something very different than a Chief Ethics Officer running around promulgating policies, sanctioning lapses, and listening to whistle blowers.

The fix needs to be an adjustment of the rewards (i.e., compensation and incentives) and risks (penalties). In other words, it isn’t the legal department that’s important to the fix–as the authors of the article propose–but the HR department.

Unfortunately, this is anything but an easy fix. Changing the rewards/compensation structure organization–especially an organization like a large bank–borders on the impossible.


Being perceived as as unethical is not a desired image for any bank, so–from my parochial view–this becomes a marketing problem, because of the public relations and market perception implications.

So maybe the Chief Marketing Officer–and not the general counsel–should be the de facto Chief Ethics Officer?

Just as there is a risk/reward tradeoff that influences an individual’s behavior, there is a risk/reward tradeoff at the organizational level, as well. This is probably why unethical behavior persists in the industry–the downside of paying fines doesn’t outweigh the revenue gains of the behavior in question.

Marketers could model and address this. Is there an overall benefit to being perceived as honest and ethical, at an aggregate market level that could outweigh some potential gains in a few opportunities that are won with unethical behavior?

Even if that were impossible to do, if the Chief Marketing Officer is responsible for creating awareness and affinity for the organization through advertising and marketing efforts, shouldn’t that executive be responsible for preventing the actions that erode the positive affinity?

(Don’t think I don’t know that I’m going to get little support for making the CMO the chief ethics officer).


Bottom line: So I don’t know what the answer to fixing the “ethics” problem is in banking. What I do know is that creating a Chief Ethics Officer position isn’t likely to fix much. And it especially won’t fix much if the bank creating the position doesn’t first figure out what it’s trying to fix in the first place. 

I also “know” one other thing: From 30 years of consulting, I’ve come to believe that, in most cases, lawyers are usually not the solution to a business problem. I really don’t mean that as a slight to lawyers. My point is that I believe that the fix to most business problems is more operational in nature, rather than legal (or regulatory, for that matter).

Putting The Fizz In Apple Pay

In an article titled Why Apple Pay Is Fizzling and What It Means for the Future of Mobile Payments, MPD founder David Evans writes:

“Apple Pay is fizzling. And unless it drastically changes course Apple Pay will follow the hundreds of other attempts, made around the world in the last seven years, that have sputtered along at low levels of use or, much more frequently, have just flat-out died. The evidence from Black Friday confirmed my fears. InfoScout did a survey of 400+ people who (a) had IPhone 6s and therefore could have had Apple Pay on their phones who (b) were paying at stores that had NFC terminals that accepted Apple Pay. So these are 400+ people who could have paid with Apple Pay. Less than 5 percent did.”

My take: It’s way too soon to be calling the death of Apple Pay.


Take a look at the following charts showing iPod sales.

Pronouncing the failure of Apple Pay in December 2014 is akin to proclaiming in Q1 2002 that the iPod would be a failure.

And there were plenty of reasons–two-side reasons as Mr. Evans might call it–to support an iPod death notice in Q1 2002: Consumers didn’t know what it was, there was no music no buy online, anyway, they were perfectly happy buying CDs (and certainly wouldn’t want to have to throw away all those CDs they had amassed). On the other side of the coin, music publishers and the stores that sold those CDs certainly had no vested interest in supporting the sale of iPods.

I would imagine that a survey of 400+ people who bought music back in Q1 2002 might show little interest in something called an iPod.


The InfoScout survey may very well be a representative sample of iPhone6 owners, but are existing iPhone6 owners representative of the overall public?

In addition, it seems very unlikely to me that a primary reason for those people who rushed out to get an iPhone6 was the Apple Pay feature. So what should we expect from the 400+ iPhone6 owners who were surveyed?


The point (put forth by Mr. Evans) that Apple Pay can’t be used at 98% of merchant locations isn’t a compelling death knell, either. Last I checked, both American Express and Discover were not accepted everywhere. They’re not dead.

It doesn’t matter how many places accept Apple Pay–it matters which places accept it.


Payments isn’t really a two-sided market. It’s more of a three-sided market: consumers, banks, and merchants (and I can’t help but wonder if, when talking about mobile payments, I need to throw in the telcos, and make it a four-sided market). All of which just makes any change in the market harder–and slower–to come by.

The “hundreds” of other attempts that have sputtered or died had, or have had, insufficient support from the constituents in the market. Many have tried to simply garner consumer support without sufficient support from the banks or merchants. Or have presented delusions of interchange reduction to the merchants, without any game plan for winning over consumers, and figuring the banks would roll over and play dead.

Sure, Apple Pay hardly has the support of many merchants–at the moment. But the lack of merchant support isn’t the same across the board.

A large percentage of the 98% that don’t currently accept Apple Pay may never accept any form of mobile payment, and who really cares, since a large of percentage of that 98% represent maybe 0.1% of all sales.

The “merchants that matter” fall into two (overlapping) categories: 1) Those that represent a good percentage of retail sales, and 2) Those where current and future iPhone6 owners shop at and buy from.

It’s the latter category that I don’t hear a lot of the pundits talk about. Everybody wants to focus on the MCX merchants not accepting Apple Pay. But Apple Pay can drive payment volume by following the Amex strategy–not accepted everywhere, but by enough of the places where Amex cardholders shop at. Case in point: Whole Foods.


Bottom line: I hate bad analogies, but I won’t let that stop me from giving one. Apple Pay isn’t a carbonated beverage losing its fizz. It’s more like a wine that needs to be aged.

The “aging” process for Apple Pay does involve a lot of moving parts: iPhone6 adoption, changing consumer behavior, bank (and credit union) support, and merchant acceptance (reluctant or not). In a three-sided market, strong support from two of the sides will probably be enough to bring along the third (even if it is kicking and screaming).

Which is why MCX is DOA. It’s all about one side of the market–the merchants. It can talk all it wants about how it’s supposed to be good for consumers, but that message has little meat to it.

Apple Pay, on the other hand, will provide additional convenience to some consumers and may provide other benefits in terms of yet-to-be developed features (for examples, see The Mobile Moments of Opportunity), gives a huge boost to banks (i.e., keeps them in the game), and is promised to benefit all parties in terms of reduced fraud.

That said, just because you let a wine age a few years doesn’t necessarily make it a good wine. But it’s simply too soon to say Apple Pay is “fizzling.”

NOTE: Thank you for reading this post. If you work at a financial institution, please help me out and take just a few more minutes of your time to complete the 2015 Financial Brand Marketing survey. For your time, you’ll receive at least two reports that I know you’ll find interesting and helpful. And you’ll get a discount on the registration fee to the 2015 Financial Brand Forum. Thanks!

Round Round, Shop Around, We Shop Around

According to

“Two years ago showrooming was something of a boogey-man for brick-and-mortar retailers. But shopping has changed since 2014, and while showrooming didn’t go away, it’s changed its form. Consumers are getting savier, and are now increasingly likely to browse for items online for price, and actually make the purchase in the store. The practice is called reverse showrooming, or webrooming, and some have been calling it the brick-and-mortar retailers’ secret weapon in 2014.”

My take: Wait, hold on…I’m still laughing too hard at this ridiculousness to write. OK, there, that’s better. Slapping a new word on an old behavior does not make it something new.


Let me ask you something: How do you think Google got to be worth a gazillion dollars? In large part, it’s because of one word: SEARCH. People discovered that finding stuff on the Internet was a lot easier if they used a search engine than if they…oh, I don’t know…tried typing out different URLs to see what worked and what didn’t.

Of the many things they searched for was…maybe you should sit down for this in case it comes as a shock…products they intended to purchase. People wanted information about products to help them make their decisions. One of the pieces of information they wanted was price.

I shouldn’t have to explain this, but apparently there are people out there (not readers of this blog, of course) who think webrooming is something new.


Although it doesn’t actually prove the prevalence of webrooming–because it didn’t capture channel behavior–a recent study from quantifies the amount of product research consumers do for a range of products/services, and the savings they achieve from their research. Or from their “webrooming” if you were born yesterday.

According to the study, consumers spend, on average, 10 minutes when shopping for car insurance. I imagine that number is the result of the half of people who took 15 minutes to shop at and the half of people who took 7.5 minutes shopping at These were 10 valuable minutes, however, as the average savings produced by these 10 minutes totaled $540, or $54 per minute.

In contrast, consumers spent an average of 97 minutes shopping for cellphone plans, which resulted in savings of $179 (or just $1.86 per minutes. And when shopping for cable TV or other programming, consumers spent 144 minutes, and saved $248.

My take: It’s not very surprising that an insurance shopping site would find that shopping around for insurance would produce the highest savings per minute. But some of the findings regarding the amount of time consumers spend researching by product area are interesting–if they’re reliable, that is. The savings part of the equation is a bit suspect, in my opinion.


It’s a fairly straightforward process to calculate the annual savings on an annual car insurance policy. You paid $500 last year. You found a new policy for $450. You saved $50.

But how did consumers determine that they saved $1,054 when shopping for a new car? Is that $1,054 saved on the sticker price of the car? People aren’t that stupid, are they?

And how did people figure out that they saved $119 per year by shopping around for gas? It’s entirely possible that I’m the only idiot on the planet who can’t tell you how much I spend on gas in a year. But even if I did know, I’m not sure how I’d figure out how much I saved by shopping around. And how did consumers determine that they 5 and a half hours per year shopping around for gas? And why does “waiting time” figure into this equation?


What I find more interesting in the study is consumers’ estimates of the time they say they’re willing to spend to find a better price.

Apparently, consumers are willing to spend  63 minutes to find better car insurance rates.

Let’s do a little math here (just a little, because I know how it much it hurts for some of you to do this). According to, the average consumer who researches car insurance saves $54 for each of the 10 minutes they shop around. But consumers are willing to spend another 53 minutes to find better rates. That means consumers are leaving more than $2,800 on the table (53 times 54 equals 2862, in case you were wondering).

In other words–according to’s math–if consumers spent the full amount of time they were willing to invest in researching rates, they could save more than the cost of the policy.


The study also found that, in order to find better prices, consumers were willing to spend the following amount of time (in minutes) researching other product categories:

68 Airfare
68 Laptops
53 Hotel rooms
41 Clothing
34 Prescription drugs
17 Beer/alcohol

Unfortunately (for my area of focus), the study didn’t ask about checking accounts or credit cards. I really don’t know what consumers would have said. One part of me says they’d say they were willing to spend closer to an hour, and another part of me says that number would’ve come out closer to the time they’re willing to spend researching beer/alcohol prices.

I’m also torn on how much time consumers would say they actually spent researching their checking account or credit card decisions. 

Are Bankers More Dishonest?

In an article titled Are Some Professions Less Honest Than Others? Bank On It, Researchers Find, the New York Times reported on an academic study which found that:

“______ were about as honest as anyone else—until they were reminded that they were ______.”

What was in the blanks?

What if I told you it was “African-Americans,” “Jews,” or “women”? What would you think? I bet you’d be horrified, disgusted, and outraged–without even bothering to find out how the study came to that conclusion.

What if it was “Democrats”? You probably wouldn’t believe it, but you would read further, and then blast the study for the shortcomings in its design, and lack of scientific rigor. If it was “Republicans,” many of you would chuckle and say “I knew it!”

But the blank wasn’t filled with any of the types of people I just mentioned. It said Bankers.


Apparently, “researchers” (I have to put this in quotes, as their credibility has to be called into question) from a European university ran a test with 128 employees of an ‘international bank.” They found that a subset of them, who were asked what their profession was, were more likely to cheat when reporting the results of a series of coin tosses than those who were not asked what their profession was.

According to the Times, the “researchers” then concluded that if you remind a banker that s/he is a banker, they’ll be more likely to be dishonest. The NYT article went on to say:

“To confirm their findings, the researchers performed the study again with people from other professions. Those people did not become more dishonest when asked about their work.”

Really? No other profession demonstrated any degree of dishonesty? Not a single one? How many professions were studied? Is it not possible that members of other professions are dishonest without having to be reminded of what profession they work in?

The answer to these questions aren’t as easy to find as it should be. The Times’ online article includes a link to Nature where the study was published, but the link goes to an unrelated article. I’m sure that was an honest mistake on the part of a someone at the Times (who didn’t need to reminded that s/he was a journalist who is supposed to check the facts before publishing something).

It only took a little searching to find the right article. Reading it led me to a different interpretation than the Times’, however. The Nature article says:

“The team tried to replicate the pattern in other groups of people — for example, priming students to think about banking. But they did not see the same effect on the participants’ honesty levels.”

So it does not appear that the “researchers” asked car dealers to think about selling cars, and then tested their honesty. They tested whether or not thinking about “banking” made people who weren’t bankers more likely to be dishonest!


If it’s in the New York Times it must be true, right?  I guess that we should assume that because the Times published this article, that the sample of 128 employees of this one bank are representative of the hundreds of thousands of people who work in banks across the globe.

And actually, since the sample was split, it’s probably more like 64 people who cheated and therefore besmirch all bankers everywhere.

No questioning things like “for how long did these people work in banking?” I mean, isn’t it possible that the 64 people in the group who cheated all worked in used car sales before joining the bank, and that, therefore, it’s really used car salespeople who are the lyin’ stealin’ cheaters?

And were there any ex-bankers among the people from other professions? Do lyin’ cheatin’ stealin’ bankers become good–all of a sudden–upon leaving the industry?

The results of this “study” are laughable. The lack of rigor in its design is plain and clear to anyone with half a brain.

But in its zeal to besmirch the banking industry, and the people who work in the industry (all of whom can be considered “bankers” apparently), the New York Times had no trouble running the article.


All of this is bad enough. But what’s even more disturbing to me is the reaction I got from some people when I tweeted the link to the article, and pointed out the shortcomings of the study.

One person accused me of being a “career bank apologist.”

At the risk of incurring the wrath of the friend who sent me the link in the first place, in an email he said (among other things) “I’m not interested in a conversation that denies the findings out of hand.”

Well, that was the end of our conversation, of course, because I do deny and dismiss the findings out of hand.


I don’t really care if you believe the study’s conclusions or not. You’re free to believe that bankers are generally more dishonest than people in other professions. That’s your prerogative.

But you can’t cite this study as proof of your beliefs. The study is seriously flawed.

And if you do harbor this belief that bankers are generally more dishonest than people in other professions, I don’t see how you can be outraged when other people harbor prejudices or biases against other groups of people. What makes their biases worse than yours? Do you really not see the hypocrisy of this?

If all this makes me a “bank apologist” so be it. I’d rather be an apologist than a hypocrite.

The Future Is Bright For NeoBanks

NetBanker recently published a post titled Neo-Banking is Just Getting Started, in which Jim Bruene wrote:

“I believe we will see dozens, if not hundreds, of neo-banks launch in the next few years.”

Jim lists four reasons supporting his opinion: 1) Simple’s $100-million exit to BBVA; 2) Marketplace lending provides a path to profitability; 3) Third-party financial watchdogs become trusted services; 4) It’s much, much harder to launch a real bank.

My take: I agree with Jim 99.999% on this. The difference is that I lean more to the “dozens” estimate than the “hundreds” estimate. But that’s a nit. Jim’s arguments for the proliferation of NeoBanks are spot on–but I do see additional reasons supporting the NeoBank trend.


Before we get to those additional reasons, let’s address some of the skepticism regarding NeoBanks future. NetBanker cites a blog post from an industry analyst firm that isn’t the one I work for, so you’ll have to find it for yourself. The author of that post wrote:

“In recent months, the neo-bank model has hit a few stumbling blocks that call into question the promise of the digital-only model, and gives credence to the skeptics. GoBank recently announced that it was going to stop allowing account opening via the mobile device. Users will now have to purchase an account opening “kit” from a store, adding significant friction to the process. Simple has experienced a number of issues related to payment scheduling, the “safe-to-spend feature,” and service outages or delays. Moven received $8 million to begin moving their app overseas in an effort to garner higher adoption.”

The author goes on to say that his firm envisions “a couple of different paths over the next few years” for NeoBanks (Snarketing note: A “couple” would imply two, and as there are three paths listed, this just supports my contention that my competitors aren’t as good at counting as I am): 1) NeoBanks are acquired and rolled into larger digital channels offerings; 2) Traditional institutions begin offering their own NeoBank, digital-only services:and 3) NeoBanks never become viable stand-alone business models, but they influence the way banks think about digital channels.

A “couple” of reactions: 1) It seems to me (and perhaps to NetBanker) that there is a fourth path: NeoBanks become viable, stand-alone businesses; and 2) Regarding NeoBanks getting acquired by larger firms, I said that three years ago in The Future of Movenbank (nice to see my competitors catch up to where I was three years ago).


So, what are my additional reasons for supporting NetBanker’s optimism on the future of NeoBanks? Supply and demand.

On the supply side, a new business model is needed in banking–one based on improving consumers’ financial performance (not from an assets/investments perspective, but from a liabilities/spending perspective).

Today’s retail banking business model is based on lending and money movement. In a low-rate environment with low borrowing demand, it’s tough to grow the business. So banks (and credit unions) have looked to supplement revenue by focusing on money movement (i.e., payments). But there is little value-added to the consumer to simply move money from point A to point B.

That’s what NeoBanks are trying to address with “safe-to-spend” and instant mobile receipts. Ne0Banks aren’t simply about “mobile,” “digital,” or “branchless”–they’re about added value. I think that’s what Jim i getting at when he talk about “third-party watchdogs become trusted services.” Can NeoBanks make money at it? Surely that’s the $64k question, but I’m betting the answer is yes.


There are some demand side factors at play here, as well. While no shortage of industry observers point to Gen Yers’ proclivity to use technology, and mobile technology at that, perhaps the most important differences about this generation has nothing to do with technology.

Instead, one defining characteristic may be their willingness to entertain alternatives to the traditional checking account. For the first time in generations, this young generation does not automatically open a (or another) checking account upon college graduation.

While some don’t want that alternative product from a traditional bank, I don’t think that number is particularly large. Which means that there are opportunities for traditional banks to offer alternative products (that they develop and launch themselves), or to acquire NeoBanks who accelerate the traditional banks’ launch of these alternative products.

There is another distinguishing factor: Gen Yers are more involved in the management of their financial lives at this stage in their lives than previous generations were at that age. This is a critical factor. In essence, younger consumers care more about having and using money management tools and capabilities than older consumers.


Bottom line: Like NetBanker, I’m bullish on the future of NeoBanks. I hear the skeptics arguments, but the “evidence” against NeoBanks are examples of execution hurdles and hiccups, not dis-proofs of concept. The skeptics’ examples of NeoBanks’ “stumbling blocks” are examples of individual firms’ problems, not of the category’s problems.

Will all NeoBanks survive and/or thrive? No. Of course not. Remember that competing operating system to MS-DOS back in the late 70s? (The under-50s reading this don’t “remember” because they never knew, and us over-50s don’t remember because, well, we don’t remember anything, anymore). The company didn’t survive, but PC computing sure as hell survived. Did the company that first came out with a PC-based spreadsheet make it? No, but that was not a sign that spreadsheets weren’t viable.

I have a book coming out (any day now, I hope) called Smarter Bank. The subtitle of the book (if it survives the publisher’s scrutiny) is “Why money management is more important than money movement to the banks and credit unions.” What NeoBanks represent are advancements in money “management” not money movement. NeoBanks are the bridge between the old world of banking and the future of banking.