From a rough census of Finovate Fall 2012’s 64 presenters, it was easy to pull out the three biggest trends: PFMs, mobile payments and high-tech fraud prevention. Products falling under these three categories dominated the stage in the aggressively-air-conditioned corner of the Javits Center that housed Finovate over the past two days. What, if anything, does this mean for the state of Financial technology?
We saw seven-minute presentations from 64 different companies, each with its own vision of how to change the way banks do business with their customers. Many of them seemed determined to solve the same issues: how do we help people save more? and have fun while they save? And how do we let people spend money using their cellphones? And if we do that, how do we make that safe and secure? The three seem to intertwine in ways that might not actually benefit the consumer: let’s use mobile to help you save in novel ways, but also spend in novel ways, both of which probably introduce new opportunities for fraud.
Will any of this really change banking or personal finance? Helanie Olen, writing on her Forbes blog, raised this question, and others. The gist of her post is right here:
Most of these services either openly or subliminally promote the thesis that the vast majority of our financial problems are caused by our cognitive inability to master our finances. But toss in a little Internet innovation and . . . well, voila! Problem solved.
There is, however, little evidence to show that consumer ignorance is the primary cause of our financial woes. Sure our financial literacy is dismal, but it was likely equally as pitiful in 1980, when our national savings rate was close to 10 percent. Instead, the evidence suggests (to put it mildly) that most of us are running into money difficulties because of the sustained assault on our personal finances since the late 1970s.
Oof. That’s a bit deflating, but it’s important to keep in mind, especially as you’re bombarded by all sorts of distracting tech wizardry. It also resonates with something an acquaintance and I chatted about during an intermission. These products look cool, he said, referring to the PFMs, but most of them help customers do something that about 15 percent of bank customers do, which is: make a budget. A salient point, no doubt. Banks can white-label all the PFMs they like, it doesn’t mean that customers are going to start saving in droves — because Americans can’t save that much money right now.
Adding technology to the equation won’t change the fact that Americans have been forced to do more with less for the last three decades. But technology does create opportunities for fraudsters…and boy did we hear a lot about them over the last two days. We watched all sorts of new biometric, dynamic and cloud-based approaches to keeping people from pretending to be us behind a wall of computers, phones and other technology. The irony here seems obvious — it’s a cat-and-mouse game. The more mobile deposit apps we make, the more check-authenticating apps banks need; the less banking we do in person, the more multi-factor authentication becomes a necessity. Technology enables consumers, which enables fraudsters, who we can only stop with new technologies.
Hold on a sec. I have to take this call. It’s from my utility bill
As you watch people tout their new innovations in a highly public setting, over and over again, technology that was new just a year ago starts to lose its luster. It was hard not to wonder, as I watched a presenter spend about three minutes using his iPhone’s voice command to make and send a bill to his utility provider, whether his time might have been better spent writing a check or doing this on his computer. When another presenter showed how his iPad had taken his picture every few seconds while he was in a banking session, so that its facial recognition technology could make sure it was still him on the tablet, I was just creeped out.
Could it be that there aren’t that many new technologies left — short of some sort of money-fabricating machine — that can actually help the average American have a better experience with her bank? Isn’t it possible that all this innovation only really serves banks? That’s who Finovate is for, anyway: banks and the companies who have something to sell them. I mean, we ate filet mignon for lunch both days of the event — which, thanks!
Even if I’m cynical, like Olen is, about the promise of FinTech, I wouldn’t say any one product was a bad thing for consumers — save for one. The very first presentation on Wednesday has stuck in my mind: TruAxis, recently acquired by MasterCard, showed off a product called Profitability Analytics, which, by analyzing all sorts of consumer banking data, lets banks see which consumer segments are profitable, nearly profitable, and unprofitable. According to their presentation, it’s a good way for banks to create incentives to make the nearly-profitable actually profitable, and to reward already-profitable customers. That’s a lovely thought. Just as easily banks could create disincentives — fees and the like — to push unprofitable customers out the door. (It’s worth noting that banks already sort of do this by creating fees for those who don’t use direct deposit or still get paper statements, etc).
This obsession with tech gadgetry isn’t unique to the banking industry, but it has certainly proven problematic. Look no further than the nail-biting over Apple’s stance on NFC, Isis’ delays and Google Wallet’s constant reworking. Tech and banking are starting to get along, but it hasn’t been smooth sailing. And all this consumer-facing technology might be flashy, but it evinces a fixation on making money off of payments — and then analyzing which customers are profitable based on their spending, rather than saving, habits — rather than focusing on the fundamentals of banking. And is that any good for consumers?