- Banks should implement a transaction monitoring solution (if they have not done so already)
- Banks should adopt out of band authentication solutions (e.g. replace traditional token by sending a one-time password to a mobile phone via SMS)
- Banks should consider offering mobile soft tokens (e.g. an application on an iPhone or Blackberry that provides a one-time password). For more details see the following Celent blog entry, “Move Over Token, My iPhone Can do The Trick“
- Banks should revise certain policies and procedures (e.g. require a token, more frequent password resets)
- Banks should emphasize new customer education tools (e.g. training videos / blogs / podcasts on online risks, importance of virus protection, etc.)
Archives for August 2009
- Time spent opening account: 3.7 hours
- Chase employees involved: 12
- Time since opening account: 13 days
- Canadian banks are experiencing specific pain points around core banking in certain LOBs.
- There is fuel (cash) for the fire. Canadian banks are in much better financial shape than US ones.
- Canadian banks have mostly internally developed systems; many American banks have licensed systems.
- Canadian banks see their Australian peers moving forward with core banking.
- When one of the big five in Canada move, it moves the market.
When the pot does eventually boil, and one of the big five moves, it impacts the market strongly. Others in this group will need to form a response.
Islamic banking has been on the rise in the Asia-Pacific region, accounting for 60% of the global Islamic banking market. However, despite its rise in the rest of the region, the penetration of Islamic banking in India has been low. This is especially surprising with India having approximately 154 million Muslims and being the second largest Muslim population of the world. As mentioned in the Celent report Rise of Islamic Banking in the Asia-Pacific Region, this is primarily due to a regulatory block which allows Islamic banking to operate only in the form of a Non-Banking Financial Corporation. An amendment in the Banking Regulation Act of India, 1949 is required to allow the Islamic banking system to operate in banks in India.
The primary reason for the regulation can be mainly attributed to the socio-religious nature of the Indian political scene. This is especially evident in the Raghuram Rajan Committee of Financial Sector Reforms report submitted to the Prime Minister of India last year. Although the report recommended principles based on Islamic banking, the term “Islamic banking” was deliberately replaced by “interest-free banking”. The committee recommended that measures be taken to permit the delivery of interest-free finance on a larger scale, including through the banking system. With this recommendation, the ball is in government’s court and it is up to them to come up with appropriate measures to introduce these products in the Indian banking sector. However, a rebranding of the various Islamic banking products must be done to achieve widespread acceptance and serve its foremost purpose of financial inclusion.
In addition to the regulations, some experts feel that the infrastructure for Islamic banking is not yet in place and steps must be taken in that regard. In fact, last week, Kerala State Industrial Development Corporation (KSIDC) announced setting up India’s first interest-free financial institution along Islamic banking principles in Kerala. It is beyond doubt that there exists a huge potential for Islamic banking in India. But, it will take strong policy decisions to tap the same.
I am currently running a research project on e-invoicing across Europe, U.S.A., and Asia. The key areas of my investigation are:
· Volumes of paper and electronic invoices exchanged in the regions
· The role of the Public Administrations in pushing for the use of e-invoices
· Communication standards and transmission channels (e.g., inter-bank; proprietary; open networks) used for e-invoices
· Regulatory frameworks (e.g., digital signatures) that make e-invoices legally valid
· Business models adopted (e.g., fees applied- monetary value, where possible) to deliver e-invoice services
Existing market research shows with evidence that the benefits to corporate clients are significant. Especially the current economic scenario encourages corporate decision makers to identify sources of internal savings and operational efficiency. E-invoicing promises important returns. This keeps the item high on the corporate treasurer’s agenda, accelerating the business opportunities for software vendors, service providers, and the activities of government and standard bodies that aim to reduce roadblocks tied with disparate fiscal, legal and technical communication protocols.
The issue we encounter is rather with banks, which are still facing the dilemma of what to do to benefit from this trend.
Our opinion is that the real problem resides in the revenue model. Banks have tried to sell “paper-to-bit” conversion (i.e., dematerializing) services, encountering two major, and still unresolved, issues:
How much to charge
Who should pay
How to convince small companies to move from paper-based invoices to electronic B2B processes (i.e., onboarding)
Our recommendation to banks is to look at the “big picture” of e-invoicing: Electronic invoicing is part of a larger end-to-end (i.e., integrated) process.
While the “basic” electronic invoice process starts from the conversion of the invoice document from paper to electronic, down to the archiving of the invoice, a more “integrated” electronic invoice process encompasses the end-to-end order-to-payment cycle: Order, Delivery, Invoicing, Payment.
In this case, all documents (e.g., purchase orders; sales orders; shipping documents; invoices; payment documents; credit and debit notes) are digitized in electronic format, and all are automatically reconciled and archived.
There is no business for banks in the service of dematerializing a paper invoice (i.e., the “basic” e-invoice process). Our experience shows that corporates expect a free service for this, such as having an e-banking account. It has become part of the “cost of doing business” for a bank.
This part, and all the related onboarding, technological and connectivity aspects, should be handed off to a service partner, at no charge for the end user.
The business for banks comes from the services provided along the other integrated processes (i.e., Order; Delivery; Payment), where they can attach supply chain finance products and services.
The electronic invoice becomes the wagon that carries all the necessary data and information that a bank must analyze and use, to spot the business opportunities of its corporate customers. Therefore, banks should invest in analytics and supply chain visibility applications.
Figure 1 – RDC’s Impact on Branch Traffic, December 2007We’re not prophesying the end of branch banking. Rather, we’re suggesting that some amount of branch infrastructure reengineering is a likely prerequisite to enjoying a respectable return on investment in mobile RDC. Many banks already are grappling with declining branch profitability. Fixing that problem will likely be costly and protracted. Branch closures may stop the hemorrhaging, but systemic redesign is needed. In this context, a successful consumer RDC launch would exacerbate the pain already being felt and hasten the need for the really big task of branch redesign. This makes FFIEC compliance looks easy by comparison. RDC (mobile or otherwise) is, after all, a customer self-service channel. Unlike other self-service channels that have largely added customer transactions (yet with great benefit), RDC eliminates trips to the branch by definition. Check transactions remain the #1 reason banks have tellers. Mobile/consumer RDC could change that in a big way. That may be the big reason for hesitation at some banks.