Facebook Banking: Don’t Bank on it

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Jul 23rd, 2014

On May 5th 2014, La Caixa, one of Spain’s largest financial institutions, officially announced the launch of a Facebook app that provides users access to online banking features through the Facebook platform. It’s just the second bank in North America and Europe to launch a Facebook banking app, and, as far as Celent is aware, the seventh globally. In the weeks following the announcement, I was able to speak with a few different banks about the news, and surprisingly, while they were aware that Facebook banking existed, most were unaware how many banks around the world supported it. This couldn’t come at a better time, as Celent’s recent report, Banking on Facebook: An Overview of Banks with Transactional Facebook Apps, provides detail and analysis of the current offerings, highlighting interesting use cases and opining on the broader applicability of Facebook banking apps in financial services.

Efforts are in the early stages, and even the most mature Facebook banking applications have not come close to replicating what’s possible through mobile apps. But are customer customers ready to adopt Facebook as a channel? Not really. In the figure below, taken from a Celent consumer survey last year, only 1% of respondents favored Facebook and Twitter as methods for engaging with their financial institution. In 2012, Citibank asked users about Facebook banking. The response was a resounding ‘NO.’ Users made it clear that they were not ready, echoing long-held sentiments about the perceptions of social media, and illuminating the challenge banks face in developing the channel.

Consumers Preferences For Engagement Do Not Include Social Media

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Source: Celent US/ Canada Consumer Survey, July 2013/ November 2013; If you had an important topic you would like to discuss with a banker, how would you prefer to do so? N=1028

Celent believes that Facebook banking is only going to be the right choice for a very small group of institutions, given the following:

  • Banks don’t have unlimited resources to dedicate to throwing things against the wall in order to see what sticks
  • Most banks have a long way to go in other channels
  • Social media popularity is a guessing game
  • Despite the popularity of social media, consumers and banks are still uneasy about conducting transactions over social channels

This isn’t an indictment against innovation in social media. Social media is becoming a bigger part of financial services, and many, including Facebook themselves, are investing in social transactions. Social media and banking have a bright future together, however many in the industry are having a hard enough time developing functionally rich and well-designed mobile or tablet apps. Institutions should prioritize those investments for the time being.

Banks like ASB Bank, DenizBank, FNB Bank, GTBank, ICICI Bank, La Caixa, and Tangerine (ING Direct Canada) have made Facebook banking applications an integral part of a broader social media strategy. FIs will gain the most value not by mirroring these applications, but by looking at what these institutions have done through social media. Celent found that banks supporting Facebook banking tend to have robust and highly innovative social media strategies. ASB Bank hosts a virtual branch through Facebook, GTBank allows for ‘instant account opening,’ and FNB Bank has created a social media persona that unifies the customer experience across all social platforms. The convergence of social media and banking marches on, despite the uphill battle that many institutions face validating some of the concerns consumers have, and the inherent challenges of each platform. Facebook banking isn’t going to work for all (probably most, at least for now), but lessons can be learned from the ways in which these banks have crafted solid social media strategies. Institutions looking for social inspiration need only visit their pages.

We’re back…a brief expanation of our absence

Dan Latimore

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Jul 22nd, 2014

You may have noticed that our blog has been rather…inactive…over the last several weeks. We were hit by a virus and it (of course) took longer than we thought to get back up and running. The complexities involved in fixing what would seem to be a relatively innocuous problem serve as a not-so-gentle reminder of the fiendishly difficult tasks that our clients deal with daily as they bend technology to their strategic will.

Despite our blogging absence, rest assured that we’ve been continuing to follow and research banking technology trends; they never stop evolving, and neither does our coverage. Please check back in over the next few days to see the backlog that we’re ready to unleash.

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First Impressions: SunTrust Branch Redesign

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Jul 21st, 2014

Branch transformation is no longer optional for retail financial institutions. But, the task is enormous and is best undertaken carefully and cautiously. This appears to be exactly how SunTrust is undertaking the task.

I had the opportunity to visit a newly redesigned branch in downtown Atlanta adjacent to the bank’s corporate headquarters building. The branch is located in a food court area, with no street access. The food court enjoys significant foot traffic throughout the day, but particularly during the early morning and lunch periods. I arrived there near 7:00 AM and the place was bustling.

Outside the branch were two NCR interactive Tellers flanked by two NCR SelfServ 32 ATMs . The interactive teller machines were staffed from 8:00 a.m. to 8:00 p.m. while the ATMs were available 24/7. The branch opened at 9:00 a.m. Not shown in the picture below is a large interactive digital wall used to merchandize many of the bank’s products and services.

STI Branch Redesign

The interior of the newly remodelled was similarly non traditional, with a prominent information desk, several private offices and a digital banking bar, where customers could interact with the bank – with or without staff assistance.

Well before the branch was opened, a SunTrust employee was stationed outside the branch, greeting passers-by and explaining the new Interactive Teller devices. She courteously explained that the bank was testing the new devices and would welcome my input. In fact, SunTust was promoting trial of the video teller machines through a $5 promotion in return for a short survey following the interaction. The survey was administered by the bank employee using a tablet device.

While waiting for my meeting, I struck up a conversation with a SunTrust customer sitting nearby. She was traveling through town and apparently needed access to funds she held in a money market account – something she could not perform with an ATM. Her first encounter with a video teller was apparently satisfying as she left the area smiling and commenting on how it was “kind of fun” interacting with the bank this way. She was on her way at 8:05, nearly an hour before the branch opened for business.

In contrast to video teller machines inside the branch, this is a great use-case for the devices in my opinion. Used in this way, the devices add convenience through efficiently extending service hours. Placing the video tellers adjacent to ATMs offers teller interaction when desired, without adding overhead to ATM transactions. But, investing in separate devices with extensive overlapping functionality (not to mention non-working capital tied up in the form of additional cash) isn’t ideal. A better approach requires NCRs forthcoming release that would permit a single device to do double duty.

Will this branch design be a win for SunTrust? I have my opinions, but the important thing is that SunTrust is actively experimenting with branch channel transformation. This is something many more banks should be doing.

Real-Time Payments Gathering Pace

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May 28th, 2014

A number of you will know that I’ve been working on real-time payments with many clients around the world, and will have seen previews of some of the information in my forthcoming reports. One chart I have shown regularly is the likely adoption curve for real-time payments. This takes a classic innovation adoption bell curve. The top of the curve is where the market has reached 50% adoption. Of course, the question then becomes how many and of how many to plot where we are today.

Many of the conversations I have with clients often start with a belief that there are only a handful of schemes globally. The truth is rather different. A good but not exhaustive scan showed that there were actually 35 systems globally. Using a set of criteria, such as levels of GDP, maturity of electronic payments, presence of an RTGS system, we estimate that there are 115 countries which we believe could adopt a real-time systems. That actually puts us just over 30% market adoption.

At this point, I ought to point out that there are a few fudges to this figure. For example, note that we say systems, not countries, as some countries actually more than one real-time system (India for example). But it doesn’t detract from the underlying trend. Indeed, the use of the past tense was deliberate, as yesterday saw the announcement from the Finnish Federation of Financial Services of an RFI for a real-time payment system, bringing the total to 36.

We also hear rumours of several other countries in advanced discussions. This also supports our other hypothesis. A study of the adoption of RTGS systems globally proves remarkably similar to both the shape of the adoption curve but also to the timelines. If we take that adoption pattern and project forwards, it would suggest that the next 5 years will see a flurry, if not significant numbers, of other systems being announced.

It would seem that we are on the cusp of a revolution in payment processing – are you ready?

Is St. George Bank really getting rid of online banking?

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May 22nd, 2014

There was an interesting headline in the news last week that grabbed my attention - St George Bank to ‘decommission’ online banking for mobile. I read this article with great interest, particularly since St. George was such an early mover in online banking.

The message is confusing, as is the quote from the bank’s CIO:

“We will have our first implementation for tablet in October 2014, a second mobile implementation in March 2015, and then desktop sometime in 2015, so we’ll have it as one system altogether.”

All this really tells me is that the bank is going to have a single digital platform and they are focusing on a mobile first approach. The next gen desktop implementation will arrive next year!  This also begs the question of what really is mobile or desktop these days? Is a Windows 8.1 convertible unit a tablet or a desktop? If I access “online banking” through the web browser on my iPad is it online or mobile banking? It doesn’t really matter. Customers expect to pick up their device of choice and have the appropriate experience. The burden is on the bank to provide it.

The controversial nature of the headline certainly grabbed my attention. Online banking is far from dead. Feel free to add your comments, I’m interested in your opinion on the St. George bank announcement.

Customer Analytics: Time to get Your Feet Wet

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May 22nd, 2014

I had the pleasure of speaking at Fiserv Forum 2014 in Las Vegas last week, discussing “The Payoff of Turning Data into Action.” During the presentation, I offered some suggestions to financial institutions that have not yet made inroads into customer analytics.

Why Here, Why Now?
Quite a few community bankers have resisted implementing CRM solutions, for example, and lived to tell about it. Like big data, the promise of CRM in its early days was somewhat overblown. But, that was then. Is customer analytics the New CRM? I say “no” for at least four reasons:
1. The “new normal” in retail banking – Banks need to grow top-line revenue, but it is increasingly hard to do. Analytics applied to customer segmentation, marketing and customer experience can play a critical role.
2. The growing imperative for customer centricity – As consumers increasingly interact digitally with financial institutions, the branch channel is losing relevance and impact. In addition to improving branch channel efficiency and effectiveness, banks must learn how to engage customers digitally. Analytics is the way to do so.
3. Technological advancements – Analytics used to be the domain of data analysts and large, expensive implementations, but modern analytics applications are tailored for business users and integrated with business applications. Getting started is no longer expensive.
4. There’s money to be made – As the use cases for customer analytics multiply faster than rabbits, financial institutions are finding a growing number of ways to profit from customer analytics. In a 2013 survey of North American financial services firms, 70 percent of those having at least one year’s experience with one or more big data initiatives met or exceeded their business case. Not a bad batting average, to be sure.

If you remain unconvinced, the Celent report, Customer Analytics in Retail Banking: Why Here? Why Now? may persuade.

Getting Your Feet Wet
How does an organization get its feet wet with customer analytics? Are there best practices for turning data into action? From interviews with a number of those in the 70 percent, as well as banks who struggled initially, I offer these getting started tips.

Begin with the end in mind – Analytics is a means to an end. Successful examples of data analytics share a common element of focused energy to achieve a limited and specific business objective.
Start small, remain focused – Like its sister topic, big data, there is really no end to customer analytics. Unlike CRM projects, one is never through with analytics – its very nature requires continual refreshing of models and their use. Analytics invites a new way of doing things as much as it invites using new technology. Get started with a single, manageable project and prove its value before moving on.
Get help – There is a steep learning curve associated with fully leveraging data analytics. A modest up-front investment in assistance from firms that specialize in analytics may hasten your project deployment and product better results. Fiserv is well positioned to help – and may already be hosting your data.
Change your culture – Benefitting from analytics requires a devotion to cultural, organization and procedural change. That’s why it is important to start small. Cultural change can and will come alongside socializing the value of early successes. Tom Davenport has authored several books that shed light on the power of making analytics more than an IT project: Analytics At Work, and Competing on Analytics.
Manage expectations – Firms like Amazon and Google make analytics look easy. It’s not. Deriving benefit from customer analytics will be more of a journey than a destination and the road will seem long at times. All the more reason to get your feet wet soon.

Where Will We Meet Next?

May 21st, 2014

Traditionally, our conference season has always been September through November, when large industry events from BAI Retail Delivery to EFMA Retail Payments to Sibos take place. Increasingly, it feels that the conference season is all year around, and we often use these blogs to reflect on various events we attend.

This time I just wanted to post a brief note highlighting a few events I plan to attend in London, such as:

  • May 22: Payments Innovation 2014, Tech UK and the UK Payments Council
  • June 10-11: Digital Banking, Marketforce
  • June 23-24: Innovation in Payments, Marketforce

If you are also attending any of these events and would like to meet up for a coffee or an informal chat, don’t hesitate to reach out. Look forward to seeing you.

 

Do You Have a Story to Tell in Cards Management and Transaction Processing?

May 21st, 2014

Having spent the last few years deep in digital payments, this year I decided to dig into trends and providers in card management and transaction processing  (CMTP). My view is that CMTP technologies are more relevant than ever. Despite advancements in mobile payments and digital wallets, cards are not disappearing any time soon. Furthermore, modern transaction processing systems can be at the heart of the banks’ cards and retail payments offerings and act as a hub for a broad range of transactions from different channels, devices, and payment instruments.

However, many financial institutions around the world remain stuck with legacy solutions. Growing transaction volumes, proliferation of products, channels, and transaction types, and changes in customer expectations have been putting significant strains on those legacy platforms. Not surprisingly, issuers, acquirers, and processors around the world have been looking at options to renew and transform their retail payments platforms.

There are many vendors and service providers with relevant offerings in this space. However, navigating through their capabilities and understanding how they compare against competitive offerings can be a daunting task. Therefore, I am looking to understand:

  • What are the demand drivers for card management and transaction processing capabilities? Who needs them and why?
  • What options do the clients have to acquire those capabilities: build, outsource, etc.?
  • Who are the main players in key categories: software vendors, processors, system integrators / implementation partners?
  • What are the differentiating features to look for in solutions?
  • Which vendors distinguish themselves in terms of solution capabilities, market presence, and customer focus?
  • What can the industry learn from banks that have recently transformed their retail payments infrastructure?

 

I have already published a primer on CMTP technologies, which Celent clients can access here. Now, I am looking to understand the breadth of relevant capabilities and market presence for a diverse set of vendors – software providers, processors and professional services players. I have already reached out to many vendors and service providers, but if you haven’t yet heard from me and would like to be part of this research, please get in touch with me via email, twitter or simply by leaving a comment on this post. Also, I would be interested to hear from banks that recently undertook a cards/ retail payments transformation project and are willing to share their success story and lessons learned. So, if you have a story to tell in CMTP, I look forward to hearing from you.

Technology and Service Providers: Different Beats, Same Tune

Dan Latimore

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May 16th, 2014

It’s been a whirlwind week for service provider analyst days and client conferences: Friday with Genpact, Tuesday and Wednesday with FIS, and Thursday with IGATE. Each firm is trying to differentiate itself amidst all the market noise; like banks, they’re constantly resisting the grind of commoditization. And while interaction was unique and fascinating, four common themes struck me as being indicative of the massive changes going on today in banking technology. Not coincidentally, they’re all consistent with what Celent has been saying about the evolution of the banking ecosystem.

  1. Focus
  2. Realignment
  3. Security
  4. Partnership

Focus takes on different meanings for different firms, but both Genpact and iGate were very clear about where they were going to spend time and energy, and where they weren’t (banking makes the cut for both of them). FIS may seem oxymoronic because of its product and service breadth and depth, but the company appears to be making steady progress towards rationalizing a variety of disparate products obtained through acquisition.

Realignment follows focus. FIS is for the first time dividing itself into three groups: North America, International, and Global Institutions (roughly the top 30 international banks). Genpact and IGATE are both focusing on nine verticals (the specific nine vary), with IGATE putting P&L responsibility with the verticals for the first time. They will both have, however, certain horizontal practices that continue to run across their verticals.

Security is a key value-add for these companies; with a broader base across which to spread costs, they tend to impose attention and discipline that many smaller banks can’t hope to match. While specifics vary, all made it a point to mention their approach to security. As the issue continues to increase in importance, we think this element of their value proposition will become ever more significant.

Partnership is perhaps the ultimate defense against commoditization. Each of the three firms mentioned in their first breath the desire to work with their clients as Partners. Celent has written extensively on the transition from a vendor/customer to partner/client relationship in banking, and while talking about it doesn’t guarantee execution today, it’s a necessary first step for it to be tomorrow’s reality. What will be particularly interesting is the ongoing tension between providers’ professed desire to do the right thing and regulators’ apparent wish that contracts spell out in gory detail what will be required (including who bears responsibilities for mistakes). For more, see an interesting American Banker article here: http://bit.ly/1sAAE7j. For providers, guaranteeing that they can pass regulatory muster with minimum fuss will be a key requirement as they seek to win more business.

As the year continues we’ll be watching keenly to see whether other providers’ actions echo these trends, and what banks’ reactions are.

As a footnote, two of the firms have taglines, one brand new, the other a bit older:

IGATE: Speed. Agility. Imagination.

Genpact: GENerating imPACT

FIS may have an opportunity here to help define itself; right now it’s self-admittedly one of the biggest companies that no one’s ever heard of.

What do you see in the marketplace? Has my quick synthesis missed a key trend? I welcome your thoughts.

Quotes from the Innovation Roundtable

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May 15th, 2014

They said it couldn’t be done, but we held the latest installment in Celent’s series of innovation roundtables in Tokyo recently. Our innovation roundtables put the focus squarely on interactive discussion among the participants. This is a relatively untried model in Japan, where events typically take the form of conventional conferences with presentations. We’re glad we tried it though, because we got a very interesting line-up of firms. Participants included the whole spectrum: banks, capital markets firms, and insurers; Japanese and foreign firms; traditional mega-institutions and alternative new entrants.

The discussion was lively; below are some quick notes I took of some of the more interesting comments made, to capture a bit of the flavor of the day.

Why Innovate?
“Innovation is not the goal, it is a method and a tactic.”

“We need to innovate because it has become difficult to differentiate us from our competitors.”

“In today’s environment, innovation is necessary if you want to stay profitable.”

Paths to Innovation
“Incremental innovation is an axymoron. You can’t innovate by increments; innovation requires a big bang change.”

“It might be possible to rearrange existing elements to create something new.”

“When to innovate? If our clients think a new service is interesting, we try and create it for them and see if it succeeds.”

“Innovation needs to be business driven.”

“Financial institutions need to have an innovation division; an incubation unit that accumulates ideas from throughout the company.”

IT and Innovation
“IT is not the impetus for innovation, but because IT inevitably evolves, that creates need for innovation.”

“Legacy is a barrier: it is hard to throw things away.”

Cultural Challenges
“We need to justify ROI on any investment each fiscal year. It is hard to show this on an innovation project.”

“If you think about it, financial institutions don’t even have R&D departments.”

Quote of the Day
“Changing company culture is really about changing oneself. I personally enjoy innovation and change. Innovative culture is about getting a bunch of people together who enjoy change.”