6 banking innovations to look for in 2011
By Clark Schultz
I have always thought of banks as the bad guys. They charge too much on my credit card balances. They pay too little interest on my savings. And they charge me fees for every little thing. In the last couple of years we even had to endure our tax dollars going to bail out banks that went a little crazy with their lending.
Lately, though, I have started to look at banks differently. In the last year, banks have become more responsible with their lending and have implemented features and services that are useful to me. And it looks like that is just the tip of the iceberg. I think 2011 is the year that banks become the good guys again.
Here are six banking innovations to look for in the coming year that can help make life easier:
- Social savings accounts
I realize now that reaching a savings goal when interest rates are low can be tricky. You lose the power of compounding interest and inflation can actually decrease the worth of your money. To help you save in spite of these problems, a new form of savings, called a social savings account gaining steam. The account helps you increase your savings by publicizing your savings target with a widget or personal message on a social network, blog or website. This allows friends and family to hear your story and contribute to your goal.
Savings is now a higher priority for Americans. The question is how to save enough for college, a family vacation or a wedding. Social savings accounts may be the answer. It's the modern day version of your grandparents buying you a savings bond. Look for the best online banks to start offering this product in 2011.
- Remote deposit
The ability to cash a paper check without ever going to the bank is a feature I know will save me time and money. You can accomplish this with a relatively new banking service called remote deposit. With this service, a digital image of your check is scanned by a computer and is sent electronically to the bank for processing.
Remote deposit makes a lot of sense for a business with a large volume of checks. The problem for consumers is that the service fees and the cost of the scanner is high. But a currently emerging form of remote deposit--one using a cell phone--is taking this economical concern away.
If you use mobile remote deposit, your phone takes a picture of your check and sends the image electronically to the bank for deposit. Other advantages include less check float and the ability to easily track your deposits. Best of all, the service is free when included as part of your mobile banking app.
- Mobile text banking
I can call my bank, go online, or use my mobile phone browser or banking app to retrieve my account balance. All seem reasonably fast, but now there is something new on the scene that is even faster.
Text banking services allow bank customers to send SMS text messages to retrieve an immediate answer from their bank regarding balances, transaction history or bill payments. No fees are charged by most banks for enrolling in the program, but check your phone's service plan to make sure these texts are free.
The first bank to roll out a sophisticated text banking service was Wells Fargo Bank. Bank of America even plans to roll out a text banking service in 2011 that includes the ability to move money between accounts and instantaneously respond to fraud alerts. Expect to hear much more about text banking services in 2011 as more advanced features are developed by banks.
- Inflation-indexed CDs
I knew that certificates of deposit with variable rates had been around for a long time, I just couldn't figure out how a variable rate CD could be better than a fixed rate CD when interest rates are so low. Then it hit me.
A CD that is actually indexed to inflation, as measured by the Consumer Price Index (CPI), could be an exciting product. Why? First, inflation reflects your actual cost of living, so a CD that is indexed to inflation will protect you from rising prices. Second, the Fed has already announced that they plan to hold rates low for an "extended" period. This means your CD rate could stay low, even if inflation is increasing, unless you have a CD indexed to inflation. Finally, bank high yield savings accounts compete directly with Treasury products for your deposit dollars. The Treasury Department already offers the Series I bond and TIPS securities for investors worried about inflation.
Banks aren't likely to sit on the sidelines if inflation becomes a buzzword. Look for at least a few banks to realize the value of an inflation-indexed CD for consumers. We hope to see them sooner, rather than later.
- iPhone, iPad and Android banking applications
In the beginning mobile banking left a lot to be desired. I remember when mobile browsers were primitive and features were very limited. Some mobile banking applications did nothing more than tell you where the closest ATM machine was located. Those days are gone.
Today, applications written for the iPhone, iPad and Android-powered devices are taking mobile banking to the next level. Users can pay bills, see transaction history and send third-party payments. The next wave of banking applications will add even more money management features and tighten up security issues.
You probably don't need to switch banks to find a mobile banking app. The app will find you. 2011 will see a large number of new banks and credit unions develop their iPhone, iPad or Android app--just sit back and let the app wars begin.
- Mobile payments
I still have a wallet, but the days of the wallet are numbered if something called mobile payments takes off. This form of payment uses information stored on your phone that can be scanned to immediately purchase an item, make a person-to-person (P2P) payment or provide identification. Think of a checking account, credit card and driver's license all rolled into one. Sound far-fetched? Don't bet against mobile payments being the wave of the future.
There is a furious battle raging between phone carriers, banks and credit card companies like VISA, Discover and Mastercard on the issue of mobile payments. No one wants to be left behind. Earlier this month, Google bought the mobile payment company Zetawire, a company that uses near-field technology to allow consumers to make payments with their Smartphones. There are also strong rumors that Apple will bring mobile payments to the next version of the iPhone.
Whether or not you decide to be one of the first pioneers to start moving money by pointing your phone at a cash register, one thing is for sure: we will be hearing a lot more about mobile payments in 2011.
Clark Schultz is a writer who contributes articles on the topics of finance, the economy and savings for major financial sites. He resides in University City, Missouri with his wife and three young children.