THE TRANSFORMATION TOWARDS

DIGITAL BANKING GENERATES

NEW BUSINESS MODELS

MOBILE

BANKING
01

The keys to
mobile banking

02

04

Challenges of
financial apps

05

FINTECH SERIE BY

Six application to
get into mobility

INFOGRAPHIC

The future of
mobile banking

innovation edge

03

CASE STUDY

Simple, new
business model

01

The keys to mobile banking:

the time has come
Simple, Moven, GoBank, Fidor Bank are leading the way to mobile banking, financial
institutions without branches that are causing a digital transformation in banking.
Simplified transactions, real-time
analysis of operations, opening
of current accounts... mobile
banking as it is now already
provides f the financial
services. It is a reality, not a
future trend.
And proof of this is that all
growth estimates for the
financial sector are based,
above all, on mobile banking.

According to a PwC survey of

financial and technology
managers worldwide, mobile
banking will grow by 64% up to
2016 and online banking by
37%, while branches and
telephone banking will fall by 25
and 13%, respectively.

What is the attraction of this

kind of bank? What is
essential for users is the

convenience and simplicity with

which they can make their
transactions. They can control,
manage and perform all their
financial transactions
comfortably on their
smartphone, without having to
go to a branch or wait to be
attended by phone.
Accessibility is the key and it
requires strategies to be
improved and promoted with
regard to the user experience,
focusing on the customer of
the digital age.
The attractiveness to banks
must also be considered,
especially in terms of
profitability. Traditional financial
institutions are beginning to
commit to mobility because
mobile transactions are less
costly than branch-based
transactions.

Another advantage for the

user is the personalization
gained thanks to analysis,
practically in real time, of their
expenses, revenue and
transactions. Thus, customers
can manage their money
better, and the institution, for
its part, can gain great
customer insight, enabling it
to offer personalized products
and services to meet their
needs at each moment of
their life.
However, it should not be
forgotten that traditional
banks already have a head
start in this regard, as they
have a significant history
established through
relationships with customers
over many years.

Rather than starting from

scratch, traditional institutions
take this as the starting point
in their digital transformation
toward offering mobile
services that complement
more traditional solutions.

OBSTACLES

Inherited traditional systems that

are difficult to integrate

One of the tasks that large

financial corporations are
undertaking is simplification of
their operational models to adapt
to the new digital era. ( )
This transformation is more
complicated in retail banking
because its has lower resources.
While traditional systems have
helped banks to know their
customers' needs, it is now
necessary to make the
transformation to the digital age,
because, in addition to these
needs, banks have to meet the
new requirements of today's
customers.

Adapting to change in culture

If the business model is shifting
toward digital, a change of strategy
and a new talent assessment are
required. Shortcomings have to be
identified and learning enhanced
through a culture of open innovation
and collaboration. This key to this
transformation is imagination and
creative thinking, which the
freshness and flexibility of mobility
bring to the bank's culture. ( )
The way chosen by most banks is to
build a digitally-focused organization,
where service delivery is centered
around mobile devices. This
integration offers the institution the
best of both the traditional and
digital eras, but always basing its
strategy on customers and on
meeting their new requirements.

Lack of budget

Security

To be competitive in this new era,

investment is crucial. It is necessary
to structure and maintain a
simplified technology platform,
address new stages of training,
generate customer analysis
programs, and foster innovation to
ensure the long term viability of the
change. Many institutions in the
financial retail sector have problems
with the budget needed to meet
these challenges.

Traditional financial models have

invested heavily in obtaining the
identity of customers, in having
knowledge of their transactions and
their data. Now digital banking faces
an era of constant evolution, having
to make use of all this data, and so
security is a growing concern for
institutions. The challenge is to
maintain customer confidence ( )
by strengthening security levels in
the areas of mobility.

Source: PwC, The Financial Brand

02
The present of mobile
banking: six application
to get into mobility
Mobile banking is not a service of the future: little by little it
is becoming a part of the present. On a weekly basis,
almost 25% of users in the United States already use
mobile banking while only 14% go to a branch office. And
proof of the above are the numerous apps flooding e-stores
to offer financial services. ( ) The following is a selection
of some of the most prominent ones.

Fintonic
This is an app
for querying designed to work
with any bank, In other words
it complements and offers
services to the user so that the
latter may supervise
operations with his or her
traditional bank, including if
there is more than one, from
the mobile. It is a multi-bank
app as it works with any entity.

It use is very straightforward:

the profile is created using
one's e-mail address and within
seconds all the banks with
which the user has accounts
and the cards he or she
maintains are connected.

Access is by using the identifier

and password of the regular
entity. The app therefore
makes it possible to control
money from a single place,
organizing it under categories
selected by the user.
Data travels encrypted with
the 256-bit banking security
level used by leading banks. In
addition, anonymousness is
guaranteed, given that in order
to register and operate you
only need an e-mail and, once
inside, all is managed by an
algorithm, not humans. Noone has access to the
movements of a user.
The app is available in the App
Store and Google Play

Fidor Bank
Finance and social networks It
was six years ago that this
German company created this
app, in which the user
can monitor his money,
order transfers and
request loans almost in real
time. The app provides the user
with his or her ownewallet without need for
downloading another
application to share common
expenses with a group of
friends.
One of its qualities is
the community that has been
generated between its users, in
which they share anything from

tips on saving or recommend

financial products that they
want to promote in the entity.
"The customers know each
other and interact". This is the
crux of its philosophy: users
can exchange opinions,
information, and experiences
to improve financial decisions.
In order for this community to
operate, Fidor Bank employs
the gamification strategy:
customers are rewarded for
this dialog and all of their
activities through a bonus
system. The system already
has more than 300,000 users.
Available for iPhone and
Android.

Moven
This app makes it possible for
users to open a bank account
directly from their
Smartphone, from which they
can order transfers and even
make deposits. Moven
accounts are backed by CBW
Bank, a member of the
Federal Deposit Insurance
Corporation (FDIC), and their
debit cards by MasterCards.
One of the strong points of
this app is its user
experience, given that this
app makes it possible to see
updates in real time as well as
receive spending alerts and
analysis or send money via
Facebook,

e-mail, or a mobile phone

number. All with a simple,
attractive, and very usable
interface.
This app also helps customers
in management issues, by
offering to them not only
access to the expenses they
are making in real time, but
also by undertaking automatic
expense analysis and
comparisons to let them know
if they are spending more
than usual, given that it
automatically analyses use and
expense patterns.
This application is available
for iPhone and Android.

Number26
"The future bank branch office
is the smartphone," declares
Valentin Stalf, Number26
founder and CEO. And the key
to this forecast is the flexibility
afforded by the mobile
phone. The Number26 app
makes it possible to undertake
operations in real time, with
an example of such efficiency
being the opening of bank
accounts: "the fastest in
Europe, in less than eight
minutes" and from a
smartphone. The identity of
the user is verified with a
videoconference call, so that
no printed documentation is
needed. ( ) From that point
forward all transactions may

be carried out instantly from

the same phone number, with
account status notifications as
soon as an operation is
executed.
One of the points on which
this app has focused
is security, which can be
configured in a personalized
manner from the phone to
improve control of the app.
The objective is to offer
transparency and account
control through push
notifications for every
operation taking place on the
account.
Available fot iPhone and
Android, for now in Austria
and Germany.

Simple
The challenge of mobile banking is to create a "bank
without offices" and they have achieved it. One of their
objectives is to help the customer ( ) save using a tool
that balances ordinary monthly expenses using an
algorithm that analyzes the operations of each customer. It
amounts to a direct accountant from the smartphone,
automatically subtracting usual expenses (rent, invoices,
supermarket purchases) and offering a "more real" balance.
Just a year ago, this startup was acquired
by Grupo BBVA, but it continues to
operate as a mobile bank.
Available for iPhone and Android
in the United States.

GoBank
This US mobile bank focuses
on check-based financial
operations. The app allows its
customers to scan and
deposit checks instantly,
without need to travel to a
branch to deposit it. In
addition, it also makes it
possible to pay one's rent,
make P2P payments, and
manage money deposited into
the account.
It combines the financial
advantages of mobility with
traditional banking, as it
allows it customers to deposit
cash at Wal-Mart branch
offices. It has a network of
over 42,000 commission-free
ATMs in the United States.

03CASE STUDY

Simple, how a FinTech startup creates its

business model in online banking

The growth of this FinTech startup is one of the success examples within the sector: creation
of a retail bank with operations that are exclusively online and, mainly, executed via mobile
device. In addition, with the acquisition by BBVA, Simple also has become an example of open
innovation strategies. ( )
In 2009 Joshua Reich and
Shamir Karka made a risky
decision: We're going to
start a retail bank and in just
a few months Simple was
born. These two young men
had a clear vision: to provide
the customer with modern
tools so that they may control
their finances.

After obtaining funding in the

risk capital market, they
launched their beta version in
July 2012. Their objective
was clear: to be a bank
without offices, in other
words conduct all their
business through Internet
and, above all, using the cell
phone. In 2013 Simple had

already become the financial

intermediary in over 6.6
million transactions.
At that point, the young
founders made an alliance
with Bancorp, the partner that
provided them with a platform
for growth and for structuring
their business model.

To achieve these objectives, Simple uses

intelligent algorithms ( ) to analyze the
customers' monthly expenses and, using their
tools, assist customers in managing their savings in
any operation to achieve the objective they have
set for themselves.
It works like a social network, as you can add to
the operations stickers, comments, and even
images. The objectives its customers set for
themselves are like virtual piggy banks to which
part of the money may be moved in a simple
motion each time the customer wishes to do so.

These were a few of the

secrets that ensured Simple
became in its first year one of
the FinTech startups with the
best prospects of the market.
For this reason, BBVA, in full
transformation toward the
digital era, cast its glance
upon it. BBVA believes in our
vision and the path we have
taken to transform the
sector." It was with this
statement made in February
2014 that Joshua Reich, while
the company was growing at
full speed, justified the sale of
the company to the BBVA
Group.
The BBVA operation, through
its US subsidiary BBVA
Compass, was in keeping with
the Group's digital
transformation strategy, ( )
through new products and

services, developed both

internally and through
investments in vanguard
startups such as Simple, with
the objective of reinventing
the financial services sector.
For this reason, after the sale
to BBVA, the founders insisted
time and again that all the
popular aspects of Simple
were going to be maintained
"without change". We're going
to keep embracing our
philosophy, our business
model and the way we treat
our customers. To work with
BBVA gives us the resources,
scale, and autonomy that we
need to accelerate our growth,
remaining faithful to our
mission."
The key to this has been that
Simple has continued to work

as an independent business
within the BBVA structure, i.e.
in parallel, but always with the
support of the most global
banking groups. "We will have
important resources to grow
and follow the innovation
rhythm that our customers
deserve," Reich predicted.
At the start of the summer of
2014, Simple announced
growth of 330% in its
financial services, with respect
to the preceding tax year. With
the good annual results, Simple
estimates that it will be able to
grow 50% in terms of number
of employees to be able to
improve its products and the
services it offers to its
customers.

WHO IS SIMPLE
One of the keys to Simple's success is that it operates under the same brand,
with the same philosophy and the same approach to customer experience.
Headquarters

Portland (Oregon, United States)

Founded in

2009: 2009 by Joshua Reich and Shamir Karka

Commercial launch in

July de 2012

Sale to BBVA

In February 2014

Selling price

The transaction was evaluated to be worth US$117 million

Customers

At the time of its sale to BBVA, Simple had over 100,000 customers in the
United States, five times the users it had at the end of 2012

Employees

At the time of its sale to BBVA, the organization had 92 workers

Services

OIt offers its customers everything they need to spend more

intelligently and save more. It boasts the most advanced Android
and Apple apps, which include saving tools and outstanding
customer service
Source: BBVA y Simple

04

Challenges of financial apps

In 2012, IBM's resource portal for developers, DeveloperWorks, covered in one of its articles
the discovery by the companies of the financial sector of the fact that mobile technologies were
an "opportunity to extend their reach to the customer and improve their differentiation". ( )
According to the data available
then, in 2015 the volume of
development of apps for
mobile devices would surpass
that of all other platforms,
and the global number of
users of mobile banking and
associated services could
increase up to 894 million
users in 2015 (representing
an annual growth of a 59.2%).
The development of mobile
applications ( ) also involves

having to face many

challenges. The first one is
facing the variety of the
mobile ecosystem, providing
support for the multiple
different combinations of
devices (smartphones,
tablets, etc.) and operating
systems (Android, iOS, Windo
ws,Firefox OS and their
different variants) owned by
those millions of users, while
facing the costs of testing the
apps in all possible

scenarios and maintaining

consistent development
environments between the
different members of the team.

894 million users

Of all the challenges... the first one is security

The development of financial

apps ( ) probably requires an
urgent review in all its aspects,
but security, however, is the
main challenge for
developers of mobile banking
apps. In the past, the
technological supervisors of
the major banks had a
relatively simple task at hand:
building a security perimeter
around the centralized
computer systems of the
company, but mobile apps

have changed everything

starting with breaking that
perimeter.
And unfortunately, the
security challenge is one that
has not been properly
overcome, as proved last year
by the research performed
by IOACtive which concluded
that 40 apps for iOS of 60
major banks all over the
world had at least one
security gap.

THE ANALYSIS
IOActive investigates
the security
loopholes that are
still found today in
financial apps.

90%

70%

of non-secure apps connected without

proper SSL encryption, which allowed
attackers to intercept their traffic and
inject malicious JavaScript / HTML code .

lacked alternative authentication

options to mitigate the risk of stolen
identity attacks.

50%

40%

used an iOS function called

UIWebView (designed to display Web
content within native applications) that
has proven to be insecure, making the
apps vulnerable to JavaScript injections
and exposing the users to actions such
as sending of SMS or e-mails from the
victim's device.

did not validate the authenticity of

the digital certificates received from
a server.

20%
did not take advantage of the security
functions of the operating
system designed to limit the risk of
attacks due to memory corruption.

the file system of several apps

used unencrypted SQLite data
baseseven though they contained
sensitive information such as details
of the customer's bank account and
transaction history.

At about the same

time, Pretorian conducted a
similar study, extending it in this
case to 275 mobile banking
apps offered by the 50 major
financial companies, the 50
leading regional banks and the
50 main cooperatives in the
United States. Additionally, iOS
and Android apps were analyzed
in this case. The result? 80% of
them had shortcomings.
The times of the central security
perimeter has gone by. In fact,

the spirit of the times of this

sector seems to be quite the
opposite: users increasingly
demand more access options,
faster and easier to use. In the
end, they are the best way for
banks to reach more customers
and differentiate themselves from
their competition.
But if the great central wall is to
be replaced with a network of
watchtowers, the building
methods must change. And do
so at the same speed.

The future of
mobile banking
In full digital transformation of the financial
sector gradually mobile banking services are
being implemented tighter.
Mobility comes to stay.

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