Are you an investor in traditional banks? Bank of America (NYSE: BAC ) perhaps? Or instead of investing, maybe your checking account is with a "super-regional" like BB&T (NYSE: BBT ) or Regions Financial (NYSE: RF ) ?
If you answered yes to either question, or to another similar bank, it may be time to take a look at a new breed of competitors entering the traditional banking businesses for your investing and personal financial needs.
In today's three reads, I'll look into the future of banking, where a war is raging on multiple fronts to control consumer and business finance.
The small business front
In this article from Inc.com, writer Jeremy Quittner points to the growing ranks of tech companies seeking to provide small business financing quicker, safer, and smarter than the entrenched banking elite can. Quittner writes:
Kabbage, based in Atlanta, is a small business itself with 85 employees. Launched in 2011, it was financed by institutional investors who thought the plan to provide quick operating cash to needy small businesses was a timely idea.
Fast-forward two years: Kabbage has about 240,000 customer accounts, an increase of 150 percent over 2012, and it's advanced more than $123 million to these entrepreneurs, a 133 percent increase for the same period. Since launch, it's extended more than $200 million in financing for small business operations. ...
Nearly half of small businesses that needed financing didn't get it, according to capital access survey conducted by the National Small Business Association in 2012, its most recent. The inability to get financing caused a third of businesses to lay off employees, while 20 percent reduced employee benefits, and 17 percent were unable to meet demand.
The battle for payments
This week American Banker reports on T-Mobile US' (NYSE: TMUS ) move into providing a checking account alternative to its user base. The article points to this product, among others, as an indication that traditional banks are losing the battle for the "underbanked," those individuals who do not need a full-fledged checking account, but instead just the ability to deposit checks and purchase basic goods or services. The article explains:
By offering a reloadable prepaid Visa card, a mobile banking app, and other rudimentary features of a checking account, the carrier has joined a growing list of companies that are enabling consumers to bank without going to a bank. ...
T-Mobile is well positioned in the underbanked segment-a large chunk of the company's customers use prepaid contracts. (In the U.S. in general, there were more than 100 million prepaid phone subscriptions in the second quarter of 2012, about a third of the total number of subscribers.) Prepaid phone customers tend to be younger.
The carrier's entry into financial services "shows how these technologies are dissolving industry boundaries," says Wayne Busch, managing director of Accenture's North America banking practice.
The Wild West: Protecting your data
Yes, banks are under attack on virtually all fronts. But when it comes to data security, the established players are winning over the challengers. TheStreet.com reports on a survey released by Javelin Strategy and Research that finds without ambiguity that banks are much better at protecting customer information than retailers and other market players.
This is notable in the wake of the huge breaches at Target (NYSE: TGT ) and Neiman Marcus. The article points to one bank as the "best in class," and the full results will probably surprise you:
Banks have escaped those bad headlines, Javelin says, noting that larger banks scored higher in consumer credit card protection effectiveness.
Javelin says its top-of-the-line finishers do better in educating their customers about credit card fraud and in establishing card user identification measures.
Bank of America earned top marks as "best in class" in the Javelin study.
Enjoy these reads, and Fool on!
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