Banks Losing Billions to Financial Start-ups

Banks are suffering significant losses in deposits, with customers leaving to seek investing services from financial start-ups. In response, Envestnet, a leading provider of advisor-tech solutions, has developed an innovative embedded investing solution. This solution can be seamlessly integrated into the websites and apps of banks, credit unions, and other financial institutions, enabling them to enhance their core banking services with investment capabilities.

According to Dani Fava, Envestnet's Group Head of Product Innovation, the data and analytics illustrate the massive amount of money being drained from banks and credit unions by digital investment platforms. Fava emphasizes that Envestnet aims to equip these entities with a turnkey solution to help retain customers by offering a seamless investing experience.

Fava is set to deliver a speech at an industry conference titled, "Stop the Bleed: How Embedded Investing Can Save Banks Billions." In her speech, she will reveal startling statistics that shed light on the magnitude of the problem. For instance, one financial institution discovered that it had lost a staggering $4 billion in just 18 months to various fintech companies providing investment services. Fava also highlights that the average withdrawal to fund an online investment account is a mere $140, demonstrating the cumulative effect of these small losses.

Envestnet estimates that large banks are losing approximately $1.4 billion each year to fintech companies. Moreover, these fintech firms not only offer investment services but also compete with banks by providing interest-bearing savings accounts. This fierce competition necessitates banks' adoption of innovative solutions like Envestnet's embedded investing tool to stay relevant.

First Customer: Central Trust Bank Central Trust Bank is proud to be the first bank to adopt Envestnet's embedded investing solution.

Meeting the Demands of Digital Investing

Central Trust, together with Envestnet, has developed a digital investing product that caters to the needs of banking customers. This solution is particularly relevant for young individuals with modest account balances who seek a wider range of services.

According to Dan Westhues, the chief marketing officer at Central Trust, modern consumers are no longer satisfied with traditional banking products, even when they are just embarking on their financial journey. The Digital Investor tool allows customers to optimize their finances directly within their banking app while providing access to investment opportunities.

Envestnet's proposition to banks is aligned with numerous industry studies and reports highlighting the growing demand among retail investors for a broad spectrum of services from a single institution.

For those in the ultrahigh-net-worth category, this might involve concierge services such as estate planning, trusts, tax planning, and philanthropy, orchestrated by their investment advisor. Envestnet's new offering, however, targets the other end of the wealth spectrum by encouraging customers to explore investing with small amounts.

Envestnet has established Envestnet Embedded Advisory, a registered investment advisor that will act as the asset manager for this new offering. Meanwhile, DriveWealth will serve as the independent broker-dealer and custodian for the accounts.