- Wells Fargo made a pair of announcements this week aimed at meeting key customer demands: the desire to plug accounts into fast-growing platforms like Betterment, and the need for near-instantaneous money transfers.
- JPMorgan has made similar moves on both fronts in the past year.
- Wells Fargo has had to balance new tech investments against spending on improvements on the risk and compliance side as it struggles to put a wide-ranging sales practices scandal behind it.
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Wells Fargo made a pair of announcements this week aimed at what it says are key customers demands: the desire to plug accounts into fast-growing third-party services like robo-adviser Betterment, and the need for near instantaneous money transfers.
Notably, JPMorgan has made similar moves on both fronts in the past year.
Interim CEO Allen Parker earlier this year outlined priorities for reshaping Wells Fargo, and had said on the bank’s latest earnings call that, as part of the effort, it gathered feedback from employees about improving technologies and streamline operations.
That broader push also included bringing Saul Van Beurden on to fill the new role of head of technology for the bank, and Parker has said Wells Fargo is still looking for ways to use tech to make work easier and more efficient. Van Beurden was named in January and joined Wells Fargo in April — he was previously chief information officer of consumer and community banking at JPMorgan.
Spending on things like risk management, including related tech and data, means the bank now sees 2019 expenses at the high end of its target range for the year, it said on its earnings call in July.
Wells Fargo is under pressure to rein in costs to make progress on a key efficiency measure that remained stubbornly high following a sprawling sales-practices scandal that came to light in 2016. That means it’s balancing new tech investments geared at boosting revenue and efficiency against making improvements on the risk and compliance side.
Here’s what the execs working on the two new innovations at the fourth-largest US bank had to say.
Read more: TransferWise, a fast-growing money transfer startup valued at $3.5 billion, just turned in a third straight year of profit
Data-sharing agreement signed with Plaid
Wells Fargo has a new agreement to share customer data with fintech startup Plaid, which offers software that powers fast-growing services like Betterment, Robinhood, and crypto-trading platform Coinbase.
“We know our customers want to use these apps,” Ben Soccorsy told Business Insider. Soccorsy is the head of digital payments for Wells Fargo Virtual Channels. “We want to provide them with the best possible way to do that,” he said.
Wells Fargo’s agreement with Plaid is similar to the one JPMorgan signed last year, which signals the big banks acknowledging consumer demand for new fintechs.
Plaid’s API software allows companies to connect to their customers’ bank accounts. Valued at $2.65 billion, Plaid has a wide range of fintech clients across personal finance, lending, brokerage, and P2P payments apps.
“This signals to the industry that partnerships are the way forward,” said Sima Gandhi, head of business development and strategy at Plaid. Gandhi explained that this and other collaborations between fintech and traditional banks are key, given they share a consumer base.
“We are contractually holding hands around the commitments we’re making to the consumer, whether it be around security, user experiences, data quality,” she said.
Plaid will now be able to access Wells Fargo customers’ data through a secure application programming interface, or API. That’s an alternative to screen-scraping, where third party apps use users’ login information (with permission) to access their bank’s website and copy data into their own systems.
As consumers lean into the latest fintech products, legacy firms like Wells Fargo and JPMorgan Chase look to add value in data security.
“We think, for our mutual customers, this agreement is going to bring additional convenience and security to the way that our customers want to interact with third-party apps,” said Soccorsy.
This agreement will also make data from Plaid-supported apps available on Wells Fargo’s Control Tower platform. The Control Tower is offered within the Wells Fargo website and app, where customers have visibility into the different places their financial data is stored.
Wells Fargo earlier this week also announced plans to launch a cash settlement service Wells Fargo Digital Cash, run with its own distributed-ledger technology (DLT). That will allow Wells Fargo to internally transfer cash between locations in near-real time for their corporate clients using DLT.
We spoke with Lisa Frazier, head of the Innovation Group at Wells Fargo. She became head of that group in May 2018, replacing 31 year Wells Fargo veteran Steve Ellis when he retired.
“More recently, we’ve been focusing on the internal use cases, so how can we use this emerging technology to create benefits for Wells Fargo customers,” Frazier said.
This use case will be piloted on corporate clients’ cash transfers. The DLT implementation will not impact their clients’ experiences.
“It’s seamless for them, meaning they’ll use their existing processes to move money,” Frazier explained, “but they’ll be able to move that money in near real-time.”
The Wells Fargo Digital Cash platform tokenizes currencies, backed 1:1 to a USD reserve, and transfers the money via DLT rails. The firm said it has already completed a proof of concept moving money between the US and Canada. Wells Fargo is planning to pilot this technology in 2020 for USD cash transfers, with the goal of expanding the DLT across currencies.
“Consumers and businesses continue to ask for things in real-time,” said Frazier. “Because you take out friction and transactional costs with DLT, we can achieve operational efficiency.”
Wells Fargo is currently under a Federal Reserve-imposed asset cap, which went into effect in February 2018 after the bank’s massive fake account scandal and other problems that subsequently came to light.
“We’re focused a lot on meeting our regulatory requirements from a risk point of view,” Frazier said when asked about the firm balancing its investment in new technologies with managing operational costs.
“Our investments are prioritized at the senior most level,” she said.
Once again, Wells Fargo seems to be following in the footsteps of JPMorgan, which earlier this year, announced plans to launch their own cryptocurrency. “JPM Coin” is also pegged 1:1 to USD. Its coin is more like a “stablecoin,” as it is centrally controlled by JPMorgan and not subject to the open market volatility of other cryptocurrencies like bitcoin.