Imagine Imagine logging on to your own account with the U.S. Federal Reserve. With your laptop or phone, you could zap cash anywhere instantly. There’d be no middlemen, no fees, no waiting for deposits or payments to clear.
That vision sums up the appeal of the digital dollar, the dream of futurists and the bane of bankers. It’s not the Bitcoin bros and other cryptocurrency fans pushing the disruptive idea but America’s financial and political elite. Fed Chair Jerome Powell promises fresh research and a set of policy questions for Congress to ponder this summer. J. Christopher Giancarlo, a former chairman of the Commodity Futures Trading Commission, is rallying support through the nonprofit Digital Dollar Project, a partnership with consulting giant Accenture Plc. To perpetuate American values such as free enterprise and the rule of law, “we should modernize the dollar,” he recently told a U.S. Senate banking subcommittee.
For now the dollar remains the premier global reserve currency and preferred legal tender for international trade and financial transactions. But a new flavor of cryptocurrency could pose a threat to that dominance, which is part of the reason the Federal Reserve Bank of Boston has been working with the Massachusetts Institute of Technology on developing prototypes for a digital-dollar platform.
Other governments, notably China’s, are ahead in digitizing their currencies. In these nations, regulators worry that the possibilities for fraud are multiplying as more individuals embrace cryptocurrency. Steven Mnuchin, former President Donald Trump’s treasury secretary, said he saw no immediate need for a digital dollar. His successor, Janet Yellen, has expressed interest in studying it. Support for a virtual greenback cuts across party lines in Congress, which will have a say on whether it becomes reality.
At a hearing in June, Senators Elizabeth Warren, a Massachusetts Democrat, and John Kennedy, a Louisiana Republican, signaled openness to the idea. Warren and other Democrats stressed the potential of the digital dollar to offer free services to low-income families who now pay high banking fees or are shut out of the system altogether.
Kennedy and fellow Republicans see a financial equivalent of the space race that pitted the U.S. against the Soviet Union—a battle for prestige, power, and first-mover advantage. This time the adversary is China, which announced this month that more than 10 million citizens are now eligible to participate in ongoing trials.
The strongest opposition to a virtual dollar will come from U.S. banks. They rely on $17 trillion in deposits to fund much of their core business, profiting from the difference between what they pay in interest to account holders and what they charge for loans. Banks also earn billions of dollars annually from overdraft, ATM, and account maintenance fees. By creating a digital currency, the Federal Reserve would in effect be competing with banks for customers.
In a recent blog post, Greg Baer, president of the Bank Policy Institute, which represents the industry, warned that homebuyers, businesses, and other customers would find it harder and more expensive to borrow money if the Fed were to infringe on the private sector’s historical central role in finance. “The Federal Reserve would gain extraordinary power,” wrote Baer, a former assistant treasury secretary in the Clinton administration.
Some economists warn that a digital dollar could destabilize the banking system. The federal government offers bank depositors $250,0000 in insurance, a program that’s successfully prevented bank runs since the Great Depression. But in a 2008-style financial panic, depositors might with a single click pull all their savings out of banks and convert them into direct obligations of the U.S. government.
“In a crisis, this may actually make matters worse,” says Eswar Prasad, a professor at Cornell University and the author of a book on digital currencies that will be published in September. Whether a virtual dollar is even necessary remains up for debate. For large companies, cross-border interbank payments are already fast, limiting the appeal of digital currencies. Early adopters of Bitcoin may have won an investment windfall as its value soared, but its volatility makes it a poor substitute for a reliable government-backed currency such as the dollar.
Yet there’s a new kind of crypto, called stablecoin, that could pose a threat to the dollar’s dominance. Similar to the other digital currencies, it’s essentially a string of code tracked and authenticated via an online ledger. But it has a crucial difference from Bitcoin and its ilk: Its value is pegged to a sovereign currency like the dollar, so it offers stability as well as privacy.
In June 2019, Facebook Inc. announced it was developing a stablecoin called Libra ( since renamed Diem). The social media giant’s 2.85 billion active users worldwide represent a huge test market. “That was a game changer,” Prasad says. “That served as a catalyst for a lot of central banks.”
Regulators also have concerns about consumer protection. Stablecoin is only as stable as the network of private participants who manage it on the web. Should something go wrong, holders could find themselves empty-handed. That prospect places pressure on governments to come up with their own alternatives.
Although the Fed has been studying the idea of a digital dollar since at least 2017, crucial details, including what role private institutions will play, remain unresolved. In the Bahamas, the only country with a central bank digital currency, authorized financial institutions are allowed to offer e-wallets for handling sand dollars, the virtual counterpart to the Bahamian dollar.
If depositors flocked to the virtual dollar, banks would need to find another way to fund their loans. Advocates of a digital dollar float the possibility of the Fed lending to banks so they could write loans. To help banks preserve deposits, the government could also set a ceiling on how much digital currency citizens can hold. In the Bahamas the amount is capped at $8,000.
Lev Menand, an Obama administration treasury adviser, cautions against such compromises, saying the priority should be offering unfettered access to a central bank digital currency, or CBDC. Menand, who now lectures at Columbia Law School, says that because this idea would likely require the passage of legislation, Congress faces a big decision: to create “a robust CBDC or a skim milk sort of product that has been watered down as a favor to big banks.”
Wall Street is warming up to the idea that the next big disruptive force on the horizon is central bank digital currencies, even though the Federal Reserve likely remains a few years away from developing its own.
Led by countries as large as China and as small as the Bahamas, digital money is drawing stronger interest as the future of an increasingly cashless society. A digital dollar would resemble cryptocurrencies such as bitcoin or ethereum in some limited respects, but differ in important ways.
Rather than be a tradable asset with wildly fluctuating prices and limited use, the central bank digital currency would function more like dollars and have widespread acceptance. It also would be fully regulated and under a central authority.
Myriad questions remain before an institution as large as the Fed will wade in. But the momentum is building around the world. As the Fed and other central banks work through those logistical issues, Wall Street is growing in anticipation over what the future will hold.
“The race towards Digital Money 2.0 is on,” Citigroup said in a report. “Some have framed it as a new Space Race or Digital Currency Cold War. In our view, it doesn’t have to be a zero sum game — there’s a lot of room for the overall digital pie to grow.”
There, however, has been at least the semblance of a race, and China is perceived as taking the early lead. With the launch of a digital yuan last year, some fear that the edge China has ultimately could undermine the dollar’s status as the world’s reserve currency. Though China said that is not its objective, a Bank of America report notes that issuing digital dollars would let the U.S. currency “remain highly competitive … relative to other currencies.”
JPMorgan Chase is staking out its own healthcare venture, after its joint project with Berkshire Hathaway and Amazon failed earlier this year. On Thursday, the financial firm announced the launch of Morgan Health, a business unit focused on improving employer-sponsored healthcare, to be led by Dan Mendelson, founder and former CEO of the Washington, D.C.-based healthcare consultancy Avalere Health.
The move comes a little over three months since the joint venture Haven Health, which also aimed to lower employee healthcare costs and boost quality services, said it would be winding down.
Morgan Health will invest up to $250 million in “promising healthcare solutions” and will also enter into strategic partnerships, the company said. The new division, which will be headquartered in Washington, D.C., will also focus on health equity issues.
“JPMorgan Chase has been focused on improving healthcare for its employees for many years,” Morgan Health CEO Mendelson said in a statement. “We are going to take what we’ve learned and accelerate healthcare innovation in the employer-sponsored healthcare market, partnering with and investing in companies that share our goals, and measuring key health outcomes to show what works.”
Mendelson has a background in both health policy and finance. He was an operating partner at healthtech PE firm Welsh Carson for the past two years and served as the associate director for health in the Office of Management and Budget in the Clinton White House prior to founding Avalere. With 165,000 employees in the United States, JPMorgan Chase provides health insurance to around 285,000 people, including dependents.
Haven was announced with much fanfare in 2018, with billionaire Warren Buffet calling rising employee healthcare costs “a hungry tapeworm on the American economy.” Around half of Americans receive healthcare benefits through their employers, according to the Kaiser Family Foundation. The federal government estimates total national healthcare spending reached $3.8 trillion, or $11,582 per person, in 2019. And health spending continues to outpace inflation, growing 4.6% in 2019.
The implosion of Haven three years later demonstrated how even well-capitalized corporate juggernauts could be thwarted by the complexity of the U.S. healthcare system. “We were fighting a tapeworm in the American economy, and the tapeworm won,” Buffet said at Berkshire’s annual shareholder meeting earlier this month, according to Yahoo Finance.
“Haven was supposed to show how creativity, ingenuity and private sector, entrepreneurship could beat the healthcare sector. And it failed,” David Blumenthal, a physician and president of the healthcare think-tank The Commonwealth Fund, told Forbes in an interview earlier this year.
He said the speculation as to one of the big challenges Haven faced was that each company wanted to make its own choices for its employees, which has been the downfall of many similar coalitions. Amazon has also been making its own big push into the healthcare sector recently with a virtual primary care service called Amazon Care, the launch of its wearable Amazon Halo and its purchase of online pharmacy PillPack for $750 million.
The radical change needed to control healthcare costs requires buy-in on many levels, including some that employees might not be happy about, says Blumenthal. It could mean narrower networks of physicians to choose from or requiring travel for certain surgeries so they take place at top-ranked facilities, as opposed to the comfort of a local community hospital.
But the biggest impediments are structural—the lack of purchasing power for employers and consolidation among health systems, he said. “In the end, controlling costs in almost every other Western country is a responsibility that government assumes,” Blumenthal said. “It’s for precisely this reason that the alternatives are not effective.”
Despite what may be an uphill battle ahead, JPMorgan leadership is giving it another go. “Covid has shed light on both the greatness of our healthcare system and its challenges,” Peter Scher, vice chairman of the company who will be overseeing Morgan Health, said in a statement. “The firm has been investing in developing solutions to address social and economic challenges over the past 10 years. We plan to take what we’ve learned there and apply it to healthcare.”
I am a staff writer at Forbes covering healthcare, with a focus on digital health and new technologies. I was previously a healthcare reporter for POLITICO covering the European Union from Brussels and the New Jersey Statehouse from Trenton. I have also written for the Los Angeles Times and Business Insider. I was a 2019-2020 Knight-Bagehot Fellow in business and economics reporting at Columbia University. Email me at firstname.lastname@example.org or find me on Twitter @katiedjennings.
Barclays has identified payments as a key growth opportunity worth £900 million over three years thank to areas such as merchant acquiring and the BNPL market.
On an analyst conference call about the bank’s first quarter results, CEO Jes Staley revealed that payment now account for eight per cent of Barclays’ total income – £1.7 billion last year.
Staley says this number can grow by around £900 million over the next three years, with double digit growth in three areas: unified payments, “next-gen” commerce, and wholesale payment fees.
In November last year the bank moved into the buy now, pay later sector through a partnership with Amazon in Germany, offering customers a rolling credit line for future purchases from the e-commerce giant. The initiative is now being extended to the UK.
“This will grow our presence in e-commerce in two of the largest markets in Europe,” says Staley. “Our partnership with Amazon reflects our growing focus on payments.”
Barclays is the only major bank-owned acquirer in the UK and has managed to slash on-boarding times in the last couple of years from 14 days to two days through digitisation.
However, Staley says “we still have a long way to go,” adding that: “Perhaps the most important investment Barclays will make in the next five years is to connect our small business banking and our merchant acquiring business, particularly as it relates to e-commerce.”
Meanwhile, the bank is working on an initiative called Barclays Cubed to better connect merchants and customers.
Staley offers up a scenario: “A merchant is able to connect with a consumer digitally by offering a discount via their Barclays mobile banking app. That consumer can then make a purchase on the merchant’s website and, if they choose to, we can instantly approve them to pay for their shopping using instalments.
“Finally, the digital receipt and the loyalty points are automatically added to their Barclays wallet.”
Jul.29 — Jes Staley, chief executive officer of Barclays Plc, discusses recent volatility in financial markets, investment banking market share, and efforts to improve diversity. He speaks on “Bloomberg Markets: European Open” after the London-based bank’s securities division reported a 60% gain in foreign-exchange, rates and credit trading revenue as the aftermath of the coronavirus pandemic whipsawed markets.
The European Banking Authority (EBA) has confirmed it has fallen victim to the ongoing Microsoft Exchange attacks.
With a total of four highly valuable zero-day exploits, previously unreported vulnerabilities that give cybercriminals a head start in any attack campaign, the attacks against on-premises Microsoft Exchange servers were always going to be a big deal. Those initial attacks, which prompted Microsoft to publish an emergency out-of-band security update, were attributed to a nation state-sponsored group identified as HAFNIUM. The nation in question is China. However, Microsoft has now confirmed that it “continues to see increased use of these vulnerabilities in attacks targeting unpatched systems by multiple malicious actors beyond HAFNIUM.”
One of those attacked outside of the U.S. was the European Union’s banking regulator, the European Banking Authority. On March 7, the EBA issued a statement confirming that it had “been the subject of a cyber-attack against its Microsoft Exchange Servers.”
While stating that a full investigation was underway, the EBA went on to add: “As the vulnerability is related to the EBA’s email servers, access to personal data through emails held on that servers may have been obtained by the attacker. The EBA is working to identify what, if any, data was accessed. Where appropriate, the EBA will provide information on measures that data subjects might take to mitigate possible adverse effects. As a precautionary measure, the EBA has decided to take its email systems offline. Further information will be made available in due course.”
Further information was, indeed, made available by way of an update on March 8. “The EBA investigation is still ongoing and we are deploying additional security measures and close monitoring in view of restoring the full functionality of the email servers,” it read. “At this stage, the EBA email infrastructure has been secured and our analyses suggest that no data extraction has been performed and we have no indication to think that the breach has gone beyond our email servers.”
“The exploitation of the 0days in question required some specific conditions and thus raises questions what exactly happened at the EBA,” Ilia Kolochenko, chief architect at ImmuniWeb, said. “Another key question is when exactly the EBA was compromised?” Kolochenko points out that if the intrusion happened after the disclosure but prior to the emergency patch, the vulnerable systems should have been immediately disconnected to prevent exploitation in the wild. “The EBA is likely not the last victim of this hacking campaign,” he warns, “and more public authorities may disclosure incidents stemming from exploitation of the same vulnerabilities.”
I have approached the EBA for further comment.
Meanwhile, Mark Bower, a senior vice-president at comforte AG, said that “the capacity for attackers to extract sensitive data from emails, spreadsheets in mailboxes, insecure credentials in messages, as well as attached servers presents an advanced and persistent threat with multiple dimensions.”
Although it should be reiterated that, at this point in the investigation, the EBA is saying that “no data extraction has been performed and we have no indication to think that the breach has gone beyond our email servers.” Bower, like Kolochenko, warns that more incidents will be reported. “Affected entities and their supply chain partners will see a persistent secondary impact as a result over a long period of time,” he said.
I’ll leave the final word to John Hultquist, vice-president of analysis with Mandiant Threat Intelligence. “Though broad exploitation of the Microsoft Exchange vulnerabilities has already begun, many targeted organizations may have more to lose as this capability spreads to the hands of criminal actors who are willing to extort organizations and disrupt systems.
The cyber espionage operators who have had access to this exploit for some time, aren’t likely to be interested in the vast majority of the small and medium organizations. Though they appear to be exploiting organizations in masses, this effort could allow them to select targets of the greatest intelligence value.”
Update March 9
The EBA has now published a third update, which I reprint here in full:
“The European Banking Authority (EBA) has established that the scope of the event caused by the recently widely notified vulnerabilities was limited and that the confidentiality of the EBA systems and data has not been compromised.
Thanks to the precautionary measures taken, the EBA has managed to remove the existing threat and its email communication services have, therefore, been restored.
Since it became aware of the vulnerabilities, the EBA has taken a proactive approach and carried out a thorough assessment to appropriately and effectively detect any network intrusion that could compromise the confidentiality, integrity and availability of its systems and data.
The analysis was carried out by the EBA in close collaboration with the Computer Emergency Response Team (CERT-EU) for the EU institutions, agencies and bodies, the EBA’s ICT providers, a team of forensic experts and other relevant entities.”
I’m a three-decade veteran technology journalist and have been a contributing editor at PC Pro magazine since the first issue in 1994. A three-time winner of the BT Security Journalist of the Year award (2006, 2008, 2010) I was also fortunate enough to be named BT Technology Journalist of the Year in 1996 for a forward-looking feature in PC Pro called ‘Threats to the Internet.’ In 2011 I was honored with the Enigma Award for a lifetime contribution to IT security journalism. Contact me in confidence at email@example.com if you have a story to reveal or research to share.
A server containing UL Foundation data has been hacked, officials said in an email sent to members today. The hack, which was of Blackbaud, a data management software vendor, may have compromised “names, addresses and other contact information” of alumni members, the letter states. The email was sent by John Blohm, vice president of university advancement and CEO of the UL Foundation. “Blackbaud has confirmed that your credit card information, bank account information and Social Security numbers were not compromised, since this database does not store such details,” the letter states. “Further, Blackbaud does not believe the information that was possibly exposed in the breach can be used for identity theft or financial fraud.” The email states that “Blackbaud, in conjunction with the FBI and other law enforcement agencies, conducted a full inquiry and found no evidence that the cybercriminals who gained access to the data shared it in any way. Your information was not made public or otherwise disseminated and was not misused.” It does not say when the hack occurred. The email states that “Blackbaud has already implemented several changes to strengthen its data protection and reduce the risk of future incidents.” Anyone affected doesn’t have to do anything, but it’s always a good idea to “remain vigilant,” the email says.
A group calling itself Hacked by Ghost Squad Hackers has apparently hacked a State of Idaho server. There’s a message on the screen that reads, “Free Julian Assange. Journalism is not a crime. ” So far, CBS2 News has confirmed the state’s Parks and Recreation page and the Stem Idaho page have been…
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Financial services in 2020 was defined by a sudden acceleration in digitization and digital engagement—pushed by the impacts of the COVID-19 pandemic. Exchanges shut down their trading floors and moved to remote trading, mobile banking transactions spiked, personal trading apps saw record transaction volumes, and call center personnel kept customer support going by working from their living rooms.
While the financial services industry was able to weather the digital tsunami and continue its operations, it has become clear that the winds of change are not transient. Financial institutions are now thinking strategically about their technical setup and questioning whether the tools that they have previously relied on are the right ones to use going forward. Here are a few major themes we’ve identified as being likely to dominate financial industry conversations and technology roadmaps in 2021:
1. Modernizing dated core systems will be imperative
2020 was a year that put the financial infrastructure to the test and challenged existing architecture planning assumptions. Many of the core systems had not been architected to address the volume and pace of change that was suddenly required, and dated core systems struggled under the added weight.
Relief programs such as the Payment Protection Program (PPP) in the U.S. saw tremendous demand, but loan document processing, manual reviews, and approvals became bottlenecks. As the credit needs of small and medium businesses surged, lenders faced challenges updating their legacy underwriting and risk management systems to meet the demands. Batch-based, fragmented, and slow-moving information and data pipelines hindered the ability to gain real-time insights and rapid response to customer needs.
As financial services rallied to overcome what economists were calling “The Great Shutdown” or “The Coronavirus Recession,” the need for modern, agile, scalable, secure, resilient technology infrastructures became abundantly clear—and the new imperative in 2021.
2. Banking goes beyond cash with digital engagement
The role of cash in society was in flux before 2020, with contactless payments already a way of life across Europe and Asia. Even in America, which has been resistant to move away from cash, 27% of U.S. businesses reported an increase in contactless payments by customers as a result of the pandemic, according to an April 2020 survey. That trend will continue in 2021, with 74% of global consumers saying they will use contactless payment methods even after the pandemic. Globally, the contactless payment market size is expected to grow from $10.3 billion in 2020 to $18 billion by 2025, at a compound annual growth rate (CAGR) of 11.7% during the forecast period.
This trend toward contactless finances extends to banking. In 2020, 44% of retail banking customers relied on mobile apps to conduct business. Both traditional players and financial tech firms introduced new finance apps or upgraded existing ones to offer new services and programs to match consumer needs, such as benefit tracking for government-sponsored food allowances or access to early wages. As downloads of mobile apps soared, transaction volumes skyrocketed.
In 2020, faced with a major health crisis, economic distress, and an uncertain future, insurance companies redefined how they did business almost overnight to provide stability, comfort, and peace of mind for their customers. For example, auto insurance providers offered discounts or refunds given decreased levels of driving. Health insurance companies adjusted their premiums to reflect reductions in non-essential surgeries.
It has become clearer than ever that the most useful products are tailored to the specific needs of the customer, and that hyper-personalization will continue to define the customer journey in 2021. Auto insurance products are more valuable when they are based on miles driven. Home insurance products are more effective when they are integrated with connected homes, so that they can prevent or minimize damage from water leaks or fires.
4. Institutional and wholesale trading moves off trading floors
Suddenly, trading was no longer confined to corporate trading floors. While a small handful of firms positioned their traders as “essential workers” and required them to work on site, the majority of firms allowed traders work from the safety of their homes. As trading floors and exchanges worldwide emptied, the prior assumptions that all trading will happen from physical offices—over corporate networks and enterprise-operated data centers—were suddenly rendered obsolete. Operational resilience plans that counted on falling back to a secondary disaster recovery site became useless when all corporate sites shut down.
In the new world, financial architectures will decouple financial activities from physical facilities through the use of technologies like zero-trust networks that enable location-independent secure access. Operational resilience plans will be updated to include globally and regionally resilient infrastructures like cloud.
5. Work-from-home must work across financial services
Throughout 2020, widespread stay-at-home restrictions challenged businesses everywhere to keep employees engaged, productive, and connected. With the pandemic, as corporate offices became unavailable overnight, the entire financial services workforce—from traders to bankers to support personnel—relied on their at-home internet connections along with existing VPN and virtual desktop infrastructure solutions to do their work. While it got the job done, internet connectivity issues, bandwidth limitations, security concerns, interoperability problems, and limitations in collaboration capabilities plagued the day-to-day experience.
It will take a reimagined work environment—one that combines immersive digital and mobile experiences with flexible hardware—to support in-person and remote workers.
Work-from-anywhere solutions need to take a comprehensive look at seamlessly enabling a heterogeneous, globally distributed workforce, including traders who need high-speed connectivity, quantitative analysts who need vast amounts of compute capacity, retail branch workers who need responsive insights platforms to serve customers, and more.
It will take a reimagined work environment—one that combines immersive digital and mobile experiences with flexible hardware—to support in-person and remote workers. New ways of hybrid working and connecting with customers will also lean heavily on helpful, integrated tools centered on the cloud to level traditional boundaries in 2021.
6. Embedded innovation is the new status quo
While 2020 was bleak from many perspectives, one of the rare positives is that it helped prove that agility and innovation, done right, is a game changer. The speed at which the financial services industry transformed to help their customers through the pandemic is the speed at which they want to continue operating. And that requires a culture of innovation that is embedded into the corporate culture of an institution.
From financial services institutions to vendors, regulators, and supervisors, 2021 is likely to be a year of deliberate cultural transformation to find new ways of working together to create safer, cheaper, more inclusive, and more equitable financial markets.
This year at Google Cloud, we will continue working with our customers across financial services to help them prepare for the future, through our technology, tools and innovation partnerships.
Keep learning: Discover the steps any organization can take to quickly adapt and achieve positive results with tighter resources. Get Google’s Guide to Innovation.
Ulku Rowe Ulku Rowe, Technical Director, Office of the CTO, Google Cloud
At the forefront of Google’s cloud and machine learning capabilities, Ulku enables the financial services industry to take advantage of Google’s technology to fuel their digital transformation. Before joining Google, Ulku was a Managing Director of Technology at J.P. Morgan Chase and Bank of America. Ulku holds an MS degree in Computer Science from the University of Illinois at Urbana-Champaign and a BS degree in Computer Engineering. She also serves on the Federal Reserve Bank of New York Fintech Advisory Group.
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For America’s biggest banks, the past twelve months have been one of the biggest tests of their resilience in history. The Coronavirus pandemic all but shuttered the U.S. economy for months, spurring enormous shifts in business and consumer habits. Lenders big and small, from America’s four megabanks to small regional firms, have passed their test with flying colors.
Despite some of the sharpest drops in gross domestic product and employment ever witnessed, banks were able to serve their customers and remain profitable. In 2020, there were just four bank failures in the U.S., despite the extraordinary economic circumstances. Only about 5% of banks nationwide were unprofitable, according to data from the Federal Deposit Insurance Corporation, and about 53% of banks reported annual increases in profits in 2020.
The pristine shape is thanks to effective emergency measures implemented by Washington that thawed corporate and mortgage credit markets, offered stimulus and small business aid to Main Street, and allowed for widespread forbearance. These factors helped firms play their role as the financial cog that lubricates the American economy.
Corporations used low rates to issue and refinance debt at record rates in 2020, creating a cash cushion. Homeowners did the same, taking advantage of near-record-low interest rates to purchase homes or cut their interest costs. Technology also played a big role as the banking industry undergoes a digital transformation. Consumers could handle their finances on mobile apps during quarantine, instead of at temporarily closed bank branches, and digital change is helping to bolster profitability.
Not only did the stellar performance help the economy through the pandemic, it has positioned the United States for an enormous economic boom as Americans are inoculated from Covid-19 and the economy reopens in full. Millennials are entering the housing market in droves, industries like software and technology are growing rapidly, and businesses will soon be on the offensive in areas like travel, entertainment and retail.
There are more than 5,000 banks and savings institutions in the U.S., but assets are increasingly concentrated at the top. The 100 largest have $16.4 trillion in assets, representing over 80% of total U.S. bank assets. Asset quality and profitability vary wildly among those institutions. With that in mind, Forbes examined the financial data to gauge America’s Best and Worst Banks.
Born out of the financial crisis of the late 2000s, this is the twelfth year Forbes enlisted S&P Global Market Intelligence for data regarding the growth, credit quality and profitability of the 100 largest publicly-traded banks and thrifts by assets. The ten metrics used in the rankings are based on regulatory filings through September 30. The data is courtesy of S&P, but the rankings are done solely by Forbes.
Metrics include return on average tangible common equity, return on average assets, net interest margin, efficiency ratio and net charge-offs as a percentage of total loans. Forbes also factored in nonperforming assets as a percentage of assets, CET1 ratio, risk-based capital ratio and reserves as a percentage of nonperforming assets. The final component is operating revenue growth. We excluded banks where the top-level parent is based outside the U.S.
CVB Financial, the parent company of Citizens Business Bank, was the top-rated bank in America for a second consecutive year, The Ontario, California-based small business lender was in the top-20 across every metric Forbes tracked, and it shone brightest in its efficiency ratio (39.%), operating revenue growth (41.5%) and posted a negative net charge off ratio. The median bank on Forbes’ list, by contrast, had a 57% efficiency ratio, posted operating growth of just 5.4%, and experienced a charge off rate of 0.17% of average loans. CVB, founded in 1974 and with over $13 billion in assets and over 50 branches across the state of California, has been profitable for 174 consecutive quarters, though a long streak of rising profitability was temporarily broken.
Smaller banks, and those focused on commercial lending, continued to dominate the top levels of the Forbes Best Banks list. Just one bank inside the top-20 had more than $100 billion in assets.
Houston-based Prosperity Bancshares ranked at #2, rising six spots from our 2020 list, thanks to its surging growth. Operating revenue rose 54% in 2020, and the lender performed well in efficiency and capitalization. Rounding out the top-5 were Kalispell, Montana-based Glacier Bancorp, Colorado Springs-based Central Bancorp and Conway, Arkansas-based Home BancShares. Average assets in our Top-5 was just $20 billion.
In the top-10 were McKinney, Tx-based Independent Bank Group, #6, DeWitt, NY-based Community Bank System, #7, Bank of New York Mellon, #8, Santa Clara, CA-based SVB Financial Group, #9, and Wilmington, DE-based WSFS Financial. Bank of New York Mellon was one of our biggest risers, gaining 44 spots, and outperforming on loan quality.
For the first time ever, the Big Four of U.S. banking—JPMorgan Chase, Bank of America, Citigroup and Wells Fargo—saw their combined assets exceed $10 trillion, or more than half the U.S. total. None of these banks finished in our Top-50, generally falling due to below-average growth as they set aside massive provisions to deal with the pandemic and were hit by plunging interest rates. JPMorgan Chase ranked highest at #51, dropping eight spots. Citigroup gained 10 spots to place at #65. Bank of America and Wells Fargo both slid, placing at #74 and #98, respectively.
JPMorgan, led by CEO Jamie Dimon, ended 2020 on a high note, reporting a record $12 billion profit as it released reserves built up to handle Covid-19 related economic stress. Despite the extraordinary circumstances, the lender saw average loans and its capital position rise to end the year, and it reported a surge in bank deposits. During 2020, the bank raised over $2 trillion of credit and capital for its clients, spanning ordinary U.S. households to the biggest corporations on the planet.
“In general, the banks have so much capital, so much liquidity and so much capability,” Dimon recently told investors in a December conference, weeks before the bank reported record annual revenues. While Dimon remains concerned about the pandemic as vaccines are distributed, and sees a varied recovery for consumers and businesses, he added of the banking industry, “I think we’re coming out of this looking great.”
Wells Fargo continued to fall in Forbes’ rankings in the wake of a 2016 fake accounts scandal that has cost the bank billions of dollars and led to dramatic change atop the lender. Wells dropped twelve spots in 2019, placing #98, due to a pronounced slump in revenues as the Federal Reserve limits its asset growth.
Over the past 12-months, JPMorgan’s stock has fallen 0.4%, making it the best performer among big banks, which all saw their stocks drop and underperform the S&P 500 Index. Citigroup shares have shed 19%, while Banks of America dropped 7%. Once more, Wells Fargo was the big laggard, falling by a third in value over the past year.
Rounding out the top-100 was Texas Capital Bancshares, #99, and CIT Group, #100.
New York-based business lender CIT Group is in the process of acquiring family-controlled First Citizens Bancshares, which ranked #62. The merger that will create a new diversified consumer and business lender with over $100 billion in combined assets, and a large presence in booming Sun Belt markets like Florida, Georgia and Tennessee. The merger comes a year after the combination of SunTrust and BB&T, which created $499 billion in assets Truist Financial, #48, which created a dominant lender in the Mid-Atlantic and Southeast.
I’m a staff writer and associate editor at Forbes, where I cover finance and investing. My beat includes hedge funds, private equity, fintech, mutual funds, mergers, and banks. I’m a graduate of Middlebury College and the Columbia University Graduate School of Journalism, and I’ve worked at TheStreet and Businessweek. Before becoming a financial scribe, I was a member of the fateful 2008 analyst class at Lehman Brothers. Email thoughts and tips to firstname.lastname@example.org. Follow me on Twitter at @antoinegara
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What’s the New Phenomenon Called “COVID Vaccine Arm”?http://www.psychologytoday.com – Today[…] let me know that she was part of a group of health care practitioners comparing notes after the vaccination and that in her group, one physician had described the same delayed reaction as mine […] represent a long-term safety concern” and were “not considered a precaution or contraindication to vaccination with the 2nd dose […]0
Data Privacy Day 2021: Views and Tips from Top Industry Experts : @VMblog vmblog.com – Today[…] Covid19 and the subsequent vaccination initiatives raise new questions about the intersection of societal health and individual privacy […] A similar choice exists as vaccination becomes more widespread: how do you prove that you’ve been vaccinated without revealing mor […]N/A
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Mashreqbank PSC, Dubai’s third-biggest lender, plans to move nearly half of its employees to cheaper locations and allow some others to work from home as part of a dramatic reorganization that will spare its Emirati staff, according to people familiar with the matter.
The oldest privately owned bank in the United Arab Emirates notified employees this week that it will be shifting jobs to locations including India, Egypt or Pakistan, the people said, asking not to be identified because the information isn’t public.
Mashreq will also eliminate a significant number of existing roles and create new positions for staff moving to what it calls “centers of excellence,” they said.
The bank didn’t immediately respond to an email seeking comment. Mashreq and its subsidiaries employed almost 5,000 people as of September 2019.
As the pandemic transforms how and where people work, the planned move is an echo of a shift by other financial firms that are looking to set up bases in lower-cost locations. In the U.S., companies from Goldman Sachs Group Inc. to Paul Singer’s Elliott Management Corp. have looked outside Manhattan and bulked up their presence in Florida.
Lenders around the world have cut thousands of jobs as they slash costs to weather an economic downturn and adapt to a move to digital services. Banks in the Gulf’s expatriate-dominated economies additionally have had to contend with a period of lower oil prices and weaker profitability.
While shifting back-office operations to cities where salaries are a fraction of what bankers earn in the UAE isn’t entirely new, the scale of the planned shift by Mashreq is sizable.
Some employees will be permanently allowed to operate remotely in the offshore centers, the people said. The company is planning to lower salaries for an additional 7% of its remaining UAE staff by turning those jobs into work-from-home positions.
The relocation plan is expected to be completed in three phases by October this year. The changes will exclude Mashreq’s Emirati employees, the people said.
As a part of the 50 years celebration, Mashreq has launched ‘#HeritageSeries – Connecting with UAE’ with Gulf News. The first episode of the Heritage Series is E11: The Road that Unites the UAE. In this chapter, we look at how the development of the E11 highway tells the story of overcoming old divisions and building the Union. The E11 is a notable and enduring symbol of the diversity of the UAE. The E11 is the spine of the UAE. As quoted by Abdul Aziz Al Ghurair, “The E11 joined the country: it brought us closer together, doing business became easier, and the tangible activity along the road spells out its success today. In much the same way that the E11 has endured, thrived and grown to be a great unifier across this nation, the growth at Mashreq has run parallel alongside it. We grew together, endured many changes in the environment and today, both are living symbols of a unified country.” Know more: http://bit.ly/M50HeritageSeries Read More: http://bit.ly/mashnews50yrs
Wirecard filed for insolvency in June after the accounting scandal came to light, and now the administrators have announced that Santander will pick up “several highly specialized technological assets” from the defunct company, as well as around 500 of Wirecard’s staff.
The technology and the staff will be subsumed into Santander’s Getnet business, which provides a range of payment and e-commerce solutions.
Santander is keen to stress that the deal does not leave the bank liable for Wirecard’s past misdemeanors. “The acquisition does not include Wirecard companies and Santander will not assume any legal liability relating to Wirecard AG and Wirecard Bank AG or its past actions,” Santander’s statement states.
Wirecard’s creditors are expected to find out more details of the winding-down process this week, with the administrators having to deal with dozens of lawsuits from investors.
It was the suspension of Wirecard’s U.K. subsidiary, Wirecard Card Solutions (WCS), that prompted the banking crisis in the summer. The U.K.’s Financial Conduct Authority (FCA) suspended activity at WCS for several days until it was reassured customers’ money wasn’t being transferred out of the business, leaving millions of banking customers unable to access their funds.
WCS has since sold many of its card technology and other assets to Railsbank, although many of the banking services that previously used Wirecard have since moved to alternate payment providers or have set up such services themselves.
I have been a technology writer and editor for more than 20 years. I was assistant editor of The Sunday Times’ technology section, editor of PC Pro magazine and have written for more than a dozen different publications and websites over the years. I’ve also appeared as a tech pundit on television and radio, including BBC Newsnight, the Chris Evans Show and ITN News at Ten. Hit me up if you’ve got a tech story that needs breaking at email@example.com.
In 2019, half of all community banks and credit unions opened less than 5% of their new checking account applications in digital channels. Granted, there were some who opened far more than 50% of their checking accounts digitally—but they were few and far between.
But community banks and credit unions accounted for just 15% of all checking account applications in 2019.
Megabanks—Bank of America, JPMorgan Chase, and Wells Fargo—and digital banks, however, accounted for roughly 55% of all checking account applications in 2019, 63% in Q1 2020, and 69% in Q2 2020.
With the megabanks’ and digital banks’ focus on digital channels, checking account openings in digital channels exceeded branch openings in 2019, and grew to 66% of the volume so far in 2020.
Digital Account Openings Overtake Branch Applications
Simply looking at the total number of checking account applications by channel overlooks an important difference in consumer behavior, however:
Consumers open more checking accounts through digital channels when applying for a secondary account than when they open their primary account.
Primary Account Applications
Nearly two-thirds (64%) of the checking account applications taken during the height of the Coronavirus crisis in Q2 2020 for what consumers considered their primary account were submitted either online or on a mobile device.
That was up from 59% in the first quarter of the year.
The transition point was sometime in the second half of 2019 when, for the first time, digital applications for primary accounts exceeded branch applications.
There is an emerging dynamic skewing checking account applications away from branches, however: The rise in the secondary checking account.
Secondary Account Applications
Cornerstone’s consumer research, commissioned by Velocity Solutions, found that 35% of Americans have more than one checking account. These secondary accounts are opened in digital channels at a faster pace than those intended to be consumers’ primary accounts.
In Q2 2020, roughly three-quarters of the applications consumers submitted for their secondary checking was done through digital channels, up from 65% in the first quarter of the year.
The crossing mark happened between late 2018 and mid-2019 when 60% of applications for secondary accounts came in on digital channels.
Consumers Rate The Mobile Process Higher
Across 10 aspects of the checking account opening process, a larger percentage of consumers who opened an account in the past three years rated their experience on the mobile channel as “excellent” than consumers who applied online or in a branch.
Bankers like to believe that consumers open checking accounts in branches because they want human assistance and assurance in making the right decision. There may be some truth to that, but according to Cornerstone’s study:
The rest of the experience isn’t as good as it is in a digital channel, and
Consumer ratings of the quality of the branch experience haven’t improved over the past few years (and have actually declined in some aspects).
For example: Among consumers who opened an account in a branch more than three years ago, nearly half (46%) rated the number of steps it took as excellent. Of the consumers who opened an account in a branch within the last three years, however, just 37% rated that aspect of the process as excellent.
The Hard News For Community Banks and Credit Unions
The pandemic forced many mid-sized financial institutions to accelerate their digital account opening efforts as branches were temporarily closed.
It also forced them to re-think some long-held assumptions.
As mentioned above, many bankers believe that consumers open checking accounts in branches because they want human assistance in making the right decision. There may be some truth to that, but it’s overstated. Choosing a checking account isn’t rocket science.
Investing in improvements to the branch-based account opening experience, at this point, is crazy.
Competing With the Megabanks
The three megabanks have an outsized share of the Millennial market. It’s not just because of digital account opening, but thanks, in part, to superior mobile banking capabilities.
Community banks and credit unions will find it nearly impossible to beat the megabanks at that game.
Instead of trying to compete head-on with the big banks to be consumers’ primary checking account provider, the community-based institutions should strive to get a foothold in consumers’ financial lives by being their secondary checking account provider.
Consumers choose a secondary account for a wide range of reasons including better interest rates, better rewards, and better personal financial management tools.
It’s still going to require a good digital account opening process, however.
To see more of the research, click here for a copy of the report The Reacquisition Imperative: Why Financial Institutions Must Reacquire Customers Through Engagement. Follow me on Twitter or LinkedIn. Check out my website.
Ron Shevlin is the Managing Director of Fintech Research at Cornerstone Advisors. Author of the book Smarter Bank and the Fintech Snark Tank on Forbes, Ron is ranked among the top fintech influencers globally, and is a frequent keynote speaker at banking and fintech industry events.
On Wednesday, Citigroup, the nation’s fourth largest bank by asset size, pledged more than $1 billion over the next three years to address the widening racial wealth gap and increase the economic mobility of Black Americans.
“The pandemic is a health crisis with severe economic implications and it’s led to an unveiling of the systemic racism that has existed in this country for far too long,” says Citi’s CFO Mark Mason, who’s part of a small cadre of prominent Black executives on Wall Street.
Citi’s announcement follows that of Bank of America’s in June pledging $1 billion to advance racial equality and economic opportunity over a four-year span.
The coronavirus pandemic and subsequent demonstrations against the killings of Black people have placed a searing spotlight on existing racial disparities in the U.S., bringing them to the fore of the business world’s conscious.
“It has been a catalyst for many companies to really try and get after this in a substantive way, and for Citi, it’s certainly caused us to take a step back,” Mason says.
“The killings of George Floyd in Minnesota, Ahmaud Arbery in Georgia and Breonna Taylor in Kentucky are reminders of the dangers Black Americans like me face in living our daily lives.” Mark Mason, Citi CFO
In the wake of Floyd’s death in May, Mason penned a candid and poignant letter to the bank’s corporate blog, wherein he detailed Floyd’s last minutes alive and acknowledged that the latest deaths of Black citizens in police custody were “reminders of the dangers Black Americans like me face in living our daily lives.”
The letter was widely circulated among business leaders, including Citi’s outgoing CEO Michael Corbat, who encouraged employees in an internal memo to do their part to create a “truly equal and just society.”
As protesters rallied across the country, reigniting a national conversation about race, Corbat challenged his executive reports to conceive a strategic initiative that would address key factors of economic racial injustice and deliver meaningful impact to the Black community.
Those executives swiftly assembled a team of business leaders throughout the firm to devise what would later form Citi’s $1 billion commitment to help advance racial equity and allay the financial drag Black people experience in the U.S.
The funds will be directed toward expanding access to banking and credit building in communities of color, investing more heavily into Black-owned businesses, promoting the growth of Black home ownership and strengthening Citi’s antiracism policies and practices.
Nearly half of the three-year investment will be meted out to boost homeownership for people of color, which has historically been one of the primary drivers of wealth creation in the U.S., and support affordable and workforce housing projects by minority developers. Just under $400 million will go toward procurement opportunities for Black-owned business suppliers while $50 million will go toward additional impact investing capital for Black entrepreneurs.
Citi is allocating $100 million to support the growth and revenue generation of Minority Depository Institutions, which play a critical role in fostering the economic viability of the communities they serve, by supplying them with $50 million in growth capital. The bank’s philanthropic arm, Citi Foundation, will receive the remaining $100 million to provide economic opportunities for young people in underserved communities.
Citi is also scrutinizing some of its own longstanding policies. The bank says it will develop standards for inclusive software design that eliminate bias, expand Citi’s capital market activities with minority-owned broker dealers and increase the representation of people of color on Citi accounts and within their leadership teams.
Mason says that weeding out a company’s underlying and often deeply rooted biases requires a thorough probe and heavy introspection. “It’s not until you take a hard look at those things—the screening processes that exist, the age-old criteria that’s been designed—and are challenged to see who they’re inadvertently leaving out or boxing out, that you can then change them in a way that helps to eliminate those obstacles.”
The bank’s financial commitment comes on the heels of a new Citi-sanctioned report that puts a numerical figure behind the economic cost of Black inequality in the U.S. Published on Monday, the analysis found that nearly $5 trillion could be added to U.S. GDP over the next five years if four key racial gaps for Black people—wages, education, housing and investment—were closed today, a .4% annual increase to U.S. GDP growth. Closing those key racial gaps 20 years ago could have yielded a $16 trillion gain to the U.S. economy, according to the report.
“Addressing racism and closing the racial wealth gap is the most critical challenge we face in creating a fair and inclusive society,” Corbat, Citi’s CEO, said in a press release announcing the bank’s pledge. “We are bringing together all the capabilities of our institution…like never before to combat the impact of racism in our economy.”
Citi will establish a council of senior leaders from across the company to assess its performance and hold businesses accountable to the bank’s racial equity commitment. Follow me on Twitter. Send me a secure tip.
I’m a reporter covering the various aspects of diversity and inclusion in business and society at large. Previously, I was a reporter at CNBC, where I focused on leadership and strategic management. I’ve also dabbled in video journalism, working as a breaking news digital producer for New York Daily News, followed by a yearlong stint as a producer at Rolling Stone. My work has been featured on New York Daily News, Yahoo Finance and Time Out. I’m a proud alumna of Columbia University Graduate School of Journalism, receiving honors for my investigative thesis on the alarming number of physicians dying by suicide. Tweet me @ruthumohnews or send tips to firstname.lastname@example.org.
Bank of America has announced that it is committing $1 billion to fight racial and economic inequality, pointing to recent civil unrest over racism in the country as its impetus for the major move.