Tag: bank

FinTech 101: What is a Green Bank?

On February 8, 2021

What Is a Green Bank?

You may have heard the term “Green Bank” and wondered what it meant. This short article will explain the term and concept behind it.

Green Banks in a Nutshell
A green bank is a bank that exists for the sole purpose of battling earth climate change by funding projects that may be able to decrease the global carbon emissions and increase the use of alternative and renewable fuels and energy. They tend to support infrastructure spending in wind, solar, and other renewable energy space.

Green Banks: Functional Model
Green banks are not climate charities. Their funding is expected to be paid back with a profit for the bank. Currently, they are supported by some states in the U.S. and also by private funding. Green Banks utilize philanthropic and public funds. They generally fund energy projects that beyond the research stage and “good to go”. The Coalition for Green Capital (CGC) is a nonprofit agency that is deeply involved in advocating for green banks’ continued development.

Where Did the Idea for Green Banks Originate?
The idea for green banks started in 2008 when two entrepreneurial-minded, Ken Berlin and Reed Hundt, came up with the concept as part of the Obama transition team’s plans for promoting cleaner energy changes in US society. A proposal to enact federally supported green banks was attached to the American Clean Energy and Security Act. The concept never made it as legislation at the federal level. Green bank supporters were not daunted. Consequently, green bank advocates persuaded some states to take up the cause.

Green Banks: Some Statics
Currently, there are at least ten states that have at least one green bank. In addition, they are in the early stages of catching on globally as well. They also exist in Australia, the United Kingdom, and Malaysia. Within the U.S., green banks have already been involved in the funneling of some $3 billion in funds for clean-energy projects.

Green Banks: Their Future Development
With the advent of the Biden presidency, green banks may again find a firmer footing at the federal level. Indeed, in December 2020, Mr. Biden proposed the idea of a national green bank. They appear sure to gain more traction internationally as the desire to dampen climate change takes hold.

What Is PSD2?

By Jacob Parker-Bowles

On March 23, 2018

In FinTech, Jacob Parker-Bowles

PSD2 (or the second Payment Services Directive) is a law in the United Kingdom and other parts of Europe that has affected payments since January 2016. All payment service providers (PSPs) were required to adhere to the new policies by January of this year. Although many Europeans may not assume this law affects them, let’s look at the ramifications of adapting to these new standards.

What does PSD2 consist of?

In order to understand the impact of PSD2, we should first explore what it is comprised of. According to waar.ch, the law is meant to open the payment services market up to more competition by regulating standards. Some of these include:

Stating of exchange rates when making a payment in another currency, such as an online purchase from a foreign site.
Increasing security measures, including a two-factor authentication system.
Limiting payer liability in the event of an unauthorized purchase, either from information theft or vendor error.

How does PSD2 affect consumers?

Consumers had previously been exposed to unfair and deceptive banking practices, which includes limited access to fee schedules and hidden interest rates. A lack of competition in the banking sphere reinforced these practices. As a result of PSD2, customers can expect more transparency and open communication regarding the status of purchases, rates/fees, and other financial services.

Another benefit is the ability for third-party payment providers to offer better solutions to traditional banking services. This may include investment products, accounts, and payment vehicles. Even online banking can change, as consumers can use sites and apps to easily access information.

How does PSD2 affect the marketplace?

Competition is expected to increase as a result of this law due to exposing unethical practices. I expect many fintech companies to debut, with solutions for every client concern. These can range anywhere from budgeting apps to alternative payment platforms. One area that should see substantial growth is wearable payment devices.

Regardless of the amount of competition this brings, we can expect to see more secure platforms and better incentives for consumers. A bank cannot simply bring people in because they exist; they must now prove they are worthy of your money. Payment systems likely will increase their move toward digital, as new businesses provide vendors with plenty of options for cashless payment accessibility.

In Conclusion

Although you may not see immediate changes in your banking routine, you can expect to hear news of increased options in the near future. I anticipate this change will affect the general population in a very positive way. Even further, this law opens the door to fintech entrepreneurs who would normally shy away from competition. In a year’s time, I believe traces of this law will show up in our everyday lives, and it may even influence other countries’ banking systems.

Convenience Over Customer Service? How Online Banks Appeal to a Changing Clientele

By Jacob Parker-Bowles

On May 8, 2017

In FinTech, Jacob Parker-Bowles

There is an unfortunate tradeoff with the implementation of new technology: the more advanced technology becomes, the less personalized our world is as a result. When simple jobs can be performed by robots, as many now can, there’s no need to invest the money into human labor. At certain restaurants, people can place their orders via iPads. You can pay your friends back through an app on your phone without having to travel to an ATM to take out cash. You can book an entire vacation from your phone. You can place an order online without the need to talk with a human until your food arrives at your doorstep. Luckily, the need and desire for human interaction in the way we conduct business still exists, so technology has not eclipsed customer service entirely. But it seems that things could be headed in that direction, and banks are one sector where we can already see that trend.

Without that crucial customer service element, what remains to retain customers? As paradoxical as it may sound, banks are attracting new customers by keeping them away. “Banks are finding new growth opportunities through online and mobile channels, proving once more that consumers are increasingly attracted to the convenience and speed of mobile and online solutions,” says letstalkpayments.com.

When so many people, especially the millennial generation, turn to their phones for just about everything, it only makes sense that banks would tap into that lucrative channel, prioritizing convenience over customer service. Bank transactions dropped off by nearly 50 percent between 1992 and 2012, as online and mobile capabilities came into play. In order to retain customers, banks have had to play by new rules to appeal to a changing clientele.

Some banks are combining new technologies with traditional banking elements to appeal to a younger generation. For example, Savings Bank of Danbury in Connecticut just opened a new branch, and they pulled out all the bells and whistles to cater to tech-savvy millennials. Instead of a person, a large screen recounting the bank’s history in an ongoing loop greets customers as they walk through the door. The new branch features lounges with iPads and laptops where customers can interact with bank staff through technology, rather than face-to-face in a traditional teller line.

According to Martin J. Geitz, president of Simsbury Bank, the millennial generation are outgrowing the baby boomer generation, and as such are coming to define the economy. Says Geitz:

We are now embarking on the threshold of the millennial generation driving the economy as so many are entering the workforce and their demands and tastes for products and services will really define what banks offer and other consumer-driven products. The millennial generation grew up with a smartphone in their pocket. They have a different relationship with technology than we do. It’s important that we provide functionality at their fingertips.

Banks are offering a variety of features that allow customers to conduct all of their finance needs remotely, without ever setting foot in a bank. For instance, people can now transfer money to one another through cardless ATMs and checks can be deposited through an app on one’s phone just by taking a picture of it. In fact, there is an entirely new breed of banks that’s risen up in response that is moving away from brick and mortar locations entirely, operating solely online. An example of an online bank is Simple, aptly named for its mission to make the banking process as simple and convenient as possible. The bank gained more than 100,00 customers in its first two years and was promptly snatched up by Spain’s second largest bank, Banco Bilbao Vizcaya Argentaria (BBVA).

For the time being, brick and mortar banks are here to stay. They may not be the grand, pillared buildings of years past, with imposing high ceilings and marble floors, but nonetheless, there is a large fraction of the general populace that doesn’t fully embrace or understand technology, and still desires a certain degree of customer service. Mobile banking technology will continue to expand, but it will need to do so in such a way that combines the service of traditional banks with the convenience of online banking.

Jacob Parker Bowles: When Technology Turns Tumultuous

When Technology Turns Tumultuous: 2017 Tech Predictions

By Jacob Parker-Bowles

On January 17, 2017

In FinTech, Jacob Parker-Bowles

Following the Tesco Bank hack in November 2016, many are led to wonder what this breach of security means for the future. On Monday, November 7, Tesco, a major UK bank, reported that over 9,000 customer accounts had been compromised and a total of £2.5 million had been taken from those accounts. This was the largest-ever cyber attack on a UK bank to result in a mass loss of money. Yet, following the attack, Tesco released the statement, “Tesco Bank has not been subject to a security compromise and it is not necessary for customers to change their login or password details.” They were careful to avoid using the word “hacked.”

But isn’t that exactly what it was? Well, according to an opinion piece from Payments Industry Intelligence, not exactly. Tesco itself could not even explain how this “systematic and sophisticated attack” even happened, only that (unlike the Yahoo! data breach), no personal data was compromised. Mark Weston, head of information technology at international law firm Hill Dickinson explained that, whether the attack was internal or external, no bank is immune to fraud. This could have happened to any bank.

The author of the opinion piece theorizes that there are one of two things that could have led to the security breach, the first being that criminals made fraudulent debit card transactions by securing a large batch of real Tesco Bank debit card numbers from a third party (like one of Tesco’s core outsourcing partners), which would have contained both the CVV and CVV2 numbers and account numbers. The second theory is that the criminals made transactions using US magnetic stripe contactless debit cards (which the US is gradually phasing out in favor of chip cards) and Tesco Bank’s authorization systems did not recognize this transaction type; therefore, they did not validate the CVV values and the criminals could have inputted random values.

As technology becomes more and more advanced to the extent that nearly everything, even banking, is done by machine, there exists a much greater risk of fraud. According to BBC News, “The more connected the world becomes- think connected cars, smart homes, sensor-laden cities- the more opportunities for hackers to break into the system and wreak havoc.”

Therefore, BBC predicts, according to cybersecurity firm Trend Micro, that in 2017, the internet of things (IoT) and industrial internet of things (IIoT) will play a larger role in targeted attacks, and another major bank will fail as the result of a cyber-attack. The firm also predicts that hackers will continue renting out their ransomware infrastructures that allow them to break into computer systems, encrypt data, and demand a ransom to decrypt it.

Worse yet, hackers are no longer interested in merely stealing data and acquiring money from it; they are figuring out how to alter it, which could have potentially disastrous consequences. Major companies and entire stock markets could collapse. Essentially the entire modern world is run by a delicate web of data; data alteration has the power to bring down power grids and water supply systems. Life as we know it could be at risk. Additionally, hackers will continue to target human vulnerabilities by tricking people into transferring money into criminals’ accounts. In the US in 2016, the average payout was a whopping $140,000.

Some of the other tech trends projected for this year may sound exciting in theory, but advances in artificial intelligence, virtual reality, and automation could spell out doom as well. If we keep entrusting robots with human jobs, such as call center and customer service jobs, then there will no longer be a need for those workers and the labor market and economy will suffer unless some kind of system is put in place to accommodate for the loss of jobs.

So, the lesson here is simple. Changes in technology can be exciting and life-changing, but according to BBC, “2017 could also be the year that the world is forced to deal- finally- with the tangible impacts of technology upon human society.” Technology has the power to save lives, to revolutionize the way humans work and function- but it should be taken with a grain of salt, because technology also has the power to lead to the destruction of the lives we have become accustomed to.

Jacob Parker Bowles: Fintech For Everyday People

The Most Useful FinTech Apps for Everyday People

By Jacob Parker-Bowles

On November 21, 2016

In FinTech, Jacob Parker-Bowles

It has become undeniably clear that Fintech is here to stay. Last month, I wrote about how even the notoriously entrenched big banks are getting involved with “disruptive” banking tech and buying, investing in, and creating new fintech apps to feed the growing consumer demand for a new kind of banking, banking that is intuitive, accessible, and designed to integrate seamlessly with everyday life.

Well designed fintech cuts out the middle man and delivers a product directly tailored to the user experience. So what exciting new apps should you be using to simplify your financial life? Here are a few of the most useful new financial apps for everyday money managers.

Acorns

We all know how important it is to save up money, but often it’s much easier said than done. It takes discipline, planning, and no small amount of stress. Acorns tries to take all of these out of the savings process. Instead, Acorns simply rounds up all of your transactions and funnels the spare change into a mutual fund to help you build your retirement savings painlessly. If you buy a sandwich for $5.78, Acorns will add 22 cents to your account. You’ll barely notice as your savings steadily grow in the background.

Zopa

Next time you need a loan, large banks won’t be your option to turn to. Zopa eliminated the middle man (and, unfortunately, the safety and insurance of lending capital) by going straight to individual people. Peer to peer lending allows ordinary people to make interest by providing loans, and offers great rates that often beat out the banks to people looking to borrow. It doesn’t get much more disruptive than this – cutting banks out of loans.

Nutmeg

If you want a dedicated account manager for your investments, but don’t want to work with big banks and big bank prices, Nutmeg can step in. The app designs an investment portfolio based on your personal risk tolerance, and manages the account indefinitely. They advertise total transparency, lower costs, and you can keep tabs on your investment from any mobile device throughout the day. While Nutmeg still uses human fund managers in the backend, there are many other “robo-advisers” that manage your money using either a combination or entirely artificial intelligence.

Wise Transfer

While banks often set currency exchange rates for a profit, Wise Transfer gives you the mid-market rate, or the “real exchange rate” when switching between currencies. The service charges a small fee to connect people who are sending or receiving money across borders for peer to peer money exchange. Once again, it’s all about streamlining the process and making it transparent.