Archives for September 2009
Two years ago at SIBOS most of my interactions were around the topic of what was SCF (Supply Chain Finance). Banks were truly interested to know more about it.
Last year, at SIBOS in Vienna, the conversation was on what banks had ready (or almost so) to go to market with their SCF products and services. The questions were about pricing and what technology was best.
This year, at SIBOS Hong Kong, SCF was “missing in action”.
Apparently the term is not so “catchy” any longer. Major cause, in my opinion, is because SCF has been always confused with Supplier Finance (i.e., invoice-centric, post-shipment, payables financing). This has relegated the entire area to a subset of Trade Finance, at the very best at the same level as LC’s (letters of credit).
When I was almost there to surrender to frustration (SCF is one of my preferred areas of coverage – read my reports Supply Chain Management: A Source of Corporate Liquidity and Business Models for Supply Chain Finance Services) to my rescue came the panel with the heads of Global Transaction Services (GTS) from Citi, HSBC, BofA, Deutsche Bank.
Well, what they were taking about as the “next big thing” was, guess what?, Supply Chain Finance services. They just used a different tag: GTS.
This is not to say that GTS is a new invention. What is new, I feel, is that the services under the GTS “umbrella” (cash, trade finance, payments, FX) will be ever more offered in bundle, to cover the financial supply chain needs of corporate clients.
Bottom line for banks
- SCF is not (only) supplier finance
- GTS is the name of the game
- Internal organization, knowledge of business processes, and technology investments are the pillars
Bottom line for corporations
Start comparing banking offers under the light of their ability to cover the larger spectrum of the procure-to-pay and order-to-cash processes
- ING Direct now offers an online-only interest-bearing account it calls Electric Orange with free overdraft protection
- BancVue offers a turn key rewards checking product that is taking off among community banks and credit unions. The product, Kasasa, comes bundled with marketing, training and consulting aimed at maximizing the impact of the new approach.
- USAAis promoting its free checking product with free overdraft protection, free limited ATM withdrawls and the ability to deposit checks into your account with a home scanner or even an iPhone.
- Bank of America, CitiBank, Wachovia and others are promoting creative savings accounts which when bundled with DDAs will likely grow average deposit balances.
- Banks must emphasize innovation. In order to remain competitive and take a leadership position, banks need to work on innovation. It is important to recognize customer requirements, and stay one step ahead of them.
- Banks need to focus on customer experience. Innovative banks are on a path to improve the overall online customer experience of their core cash management products. Cash management features are mature for the most part. Customer experience and ease of use is where the real challenge lies.
- Banks must embrace online trends, not shy away from them. The online world moves at lighting speed and banks need to keep up with some of the trends. A great example is the use of media (e.g. video, blogs) to further knowledge and emphasize education.
Citi wasn’t the only bank to come out with interesting news at SIBOS. Bank of America signed a deal with Fundtech for its Global PayPlus platform. The goal is to create a payments hub that will be part of BofA’s next generation cash management solution. It’s all about efficiencies, and when everything is said and done, Bank of America will have a single payments processing platform. The payments hub will support payments initiated across all channels. It sounds pretty impressive and I look forward to learning more about this when it goes live (target is second half of 2010).
American Banker published a good article that highlights both of these initiatives.
Further details and some screenshots can be seen in the following video clip with Gary Greenwald (Chief Innovation Officer at Citi). Gary Greenwald’s efforts have not gone unnoticed – he was named yesterday to the Bank Systems & Technology Elite 8.
- The worst-case scenario did not materialize: FSAs, HSAs and HSAs are not targeted for extinction.
- However, there will be limited contribution amounts for FSAs (there weren’t any before). Also, there will be stiffer penalties for misuse of HSA funds. Furthermore, HSA contributions from employers and/or salary reduction contributions from employees will be figured into calculations for excise taxes on “gold-plated” health plans.
- Something that makes me very happy — healthy lifestyle incentives! The bill draft reads: “The Chairman‘s Mark would authorize and appropriate $100 million over five years for the Secretary to establish an initiative to provide incentives to Medicare beneficiaries who successfully complete certain healthy lifestyle programs. Programs would target the following risk factors: high blood pressure, high cholesterol; tobacco use, overweight or obesity, diabetes and falls. The Secretary would establish a system to monitor beneficiary participation and validate the results, as well as set standards and health status targets for participating beneficiaries. Prior to establishing the initiative, the Secretary would review evidence concerning healthy lifestyle programs and providing incentives to individuals for participating in such programs. The initiative would be implemented on January 1, 2011”.
- There is a big difference between number of users and number of ACTIVE users. Total number of users is a meaningless figure. Anyone can sign up for an account, try the service, leave, and never come back. The number of active users is not a publicly available figure and they are the ones that really matter here. Intuit will obviously acquire Mint’s user base as part of this deal and it would be useful to know more precise figures regarding active users.
- Mint’s business model is questionable. Mint has always been clear that they believe consumers should take care of PFM with them instead of with a bank. While they have been successful at growing their user base, it’s unclear if they have actually been able to generate revenue. They started off with a model based on referrals and suggestions (e.g. suggest a new credit card that may be better than the one you currently have). In May announced that they “may begin to sell anonymous consumer data” (see my blog entry, The Risks of PFM Revealed), a practice I am very much against.
I would also like to point out that this could be good news for banks who are looking at their PFM options. A combined Mint/FinanceWorks solution offered to financial institutions could prove to be a compelling option. This could be particularly appealing to midsize to large banks who want to work with an experienced vendor like Digital Insight / Intuit.
UPDATE 11:43am. Intuit confirms Mint.com acquisition