Archives for October 2010

11.3.10: Celent Research Webinar: Celent’s XCelent Awards

Bart Narter, Senior Vice President, Celent’s Banking Group

This event is free to attend. Celent clients and the media will have access to the webinar’s PowerPoint presentation after the event.

Please click here for more information.

The newest alternate channel: Branch

Visiting with lots of bankers and technology vendors at BAI, one hears a great deal about alternate channels, and multi-channel integration. My conclusion after all these discussions is that the new alternate channel is the branch. More customers use “alternate channels” such as internet banking, mobile banking, IVR and ATM, than use the branch. I think banks need to turn their thinking around and think of the automated channels as primary channels and the branch and call center as alternate channels when their primary channels can’t do the job. Most new consumers have already changed their mindsets. Bankers would be well advised to do the same. Branch is the alternate channel.

BAI Retail Delivery 2010 Roundup (Part 2)

While most of the banking world (including key members of the Celent team) has seemingly moved on to Amsterdam for SIBOS, I thought I’d append a few more thoughts to Jacob’s post about last week’s BAI Retail Delivery conference. Both Jacob & I were faced with variations of the “whither on-line vs. mobile?” question numerous times during the conference. This reflects the fact that as Jacob put it in his post, “mobile is a raging topic” and that some people are beginning to think that mobile could replace the on-line channel. However, I’m afraid that aren’t that simple. As many of this blog’s readers will certainly agree, our view is that both on-line and mobile will require ongoing attention in the banking space. And to make matters a wee bit more complicated, it’s now time to start thinking about tablets. The need for continued focus on both on-line and mobile banking products stems from their form factor strengths & weaknesses when applied to differing intersections of use cases and demographics. For example, mobile banking is great for on-the-run balance inquiries, but one would struggle with its small screen and keyboard for PFM. On-line banking is fantastic for investment research & trading, but its tethered, non-push technology makes it useless for real-time alerting. Younger customers with a narrower set of banking needs expect mobile banking, but older customers using relatively complicated banking products are going to demand on-line banking. Whereas tablets can bridge form factor strengths (i.e., they offer the best of both on-line and mobile interfaces), the roughly $500 price point makes it a luxury for most customers. Put another way, on-line, mobile and tablet banking developers will be employed for years to come. I did not attend any of this year’s BAI sessions, but mobile-related observations based on countless bank/vendor meetings included the following:
  • Mobile RDC. This is quickly becoming the “must have” mobile feature that vendors mentioned they are increasingly supporting. Although customer adoption is a big unknown (USAA’s numbers are meaningless to most banks), banks are adding mRDC to their mobile banking checklist when evaluating vendors.
  • P2P. Unlike last year when mobile P2P was the BAI “belle of the ball”, this year’s conference seemed devoid of P2P discussion. Sure, a number of vendors are ratcheting up their support of it, but the breathless descriptions about the potential for this feature have subdued considerably.
  • Marketing & cross-sell. More than ever before at BAI, there was an increased focus on tapping into the mobile channel’s marketing possibilities — this included video chats with bank representatives, the inevitable leveraging of contextual marketing (based on time & place) by couponing players such as BillShrink and Cardlytics, and the use of bold tablet banner ads. Another interesting tablet use case was the selling and pre-processing of deposit and loan products to customers waiting in bank branch lines.
These are just a few BAI-related mobile observations — I’d very much welcome any other observations from our readers.

BAI Retail Delivery 2010 Roundup

The BAI Retail Delivery conference is just coming to a close, and I attended along with the my colleagues in the Celent banking team. Attendance definitely appeared to be up over last year. The 2009 event was depressing from an attendance perspective, and I was happy to see the ramp up. The Las Vegas venue is certainly a draw, but based on conversations, there also seems to be more flexibility over last year with regards to travel budgets. With that said, the keynote sessions had tons of empty seats, indicating that either the “Vegas effect” is in play, and/or that there is still plenty of room for attendance to grow. I spent most of my time at the event in productive meetings with clients and prospects. I gathered a ton of information for research. A few key trends emerged from the conference, none of them are all that surprising. They do however point to what folks are thinking about and prioritizing for 2011.
  • Alternative revenue sources. There is lots of scrambling going on given regulatory shifts and the need to grow revenues in the retail banking sector. Many of my discussions were about how banks can grow using the online and mobile channels. There were lots of questions regarding merchant funded rewards and how they can be integrated into online banking using vendors like Cardlytics or BillShrink.
  • Analytics. This is a subject that everyone always seems to be talking about but isn’t doing all that much with. Banks are sitting on tons of data, sitting being the key word. A number of discussions centered around how to leverage this data to build more complete customer views and cross-sell other products.
  • Online banking platform upgrades and PFM. This is now trickling down to the retail front, following a ton of activity in the corporate banking space. Banks are realizing that their online banking offerings are stale, and don’t provide the experience that customers are looking for. This will be a slow moving boat, but the exploration phase has certainly started. Much of this is being fueled by interest in PFM and the desire to integrate it with online banking.
  • Mobile initiatives. Mobile is still a raging topic and was the focus of many discussions. A few key questions came up. Are mobile devices replacing the PC? What role do tablets play? Both these questions were also tied to the biggest dilemma – should I prioritize investment in the mobile channel, online channel, or both? My colleague Red Gillen will address these questions in more detail in a blog entry next week.

A couple of things surprised me:

  • Lack of emphasis on social media. This has been a huge topic lately, and I found that the conference had little emphasis on this. Yes, the founder of Twitter was a keynote speaker, and there were other sessions on this topic, but I didn’t find that banks at the event had that many questions here. Many banks are still clueless when it comes to social media. I actually had one banker tell me that he doesn’t believe that social media will affect his customers. There is obviously a lot of learning for banks to do here in order to grow into the shifts that have already taken place in the online world.
  • Limited concerns and discussions about online banking security and threats. All kinds of fraud has hit the business banking sector this past year. There is a lot that banks can learn from this, and additional safeguards need to be put into place for consumers.

For some further reading, Jim Bruene at NetBanker has compiled his Best of BAI Retail Delivery 2010.

I welcome all comments and thoughts. I also encourage those of you who were in attendance to share your experiences.

ZashPay User Impressions

While attending Fiserv Analyst Day 2010 on Thursday last week, I unwarily volunteered to participate in a live demo as part of a presentation of Fiserv’s digital channels solutions. This was a bit risky since at the time, I had been an iPhone user all of twelve hours. Fiserv launched ZashPay in July 2010 and has commitments from over 400 FIs. It’s off to a very good start. After announcing my name and cell number to the entire crowd, I received a text message from ZashPay in seconds indicating “Steve Olson sent $25.00” and included a unique transaction identification number. Steve is Group President of Fiserv’s Digital Payments Group and was assisting with the demo. Taking all of about 10 seconds to receive the text, the demo seemed successful enough and for $25.00 it was an equitable transaction considering my risk of embarrassment. Then, I began thinking about how clearing and settlement would occur. The following day (Friday) I reviewed the message and visited the ZashPay website to see about making Steve good for his $25.00 promise. The website was simple and intuitive, with an obvious invitation to enter a unique transaction code provided within the SMS in order to receive payment. zashpay As expected, I was required to enroll in ZashPay in order to process the payment, since my primary depository financial institution does not offer the product. It took a strong stomach to enter such sensitive information as my social security number, birth date and address all in one place. This would likely dissuade some consumers from using ZashPay apart from being offered by their financial institution. Steve’s payment was credited to my DDA two business days later. Since I took action on a Friday, payment was not received until the following Tuesday. As a receiver of ZashPay payments, the experience was straightforward and did not carry a fee. I appreciated the immediacy of the SMS notification compared to PayPal which notifies using e-mail. If my primary financial institution offered it as part of its mobile banking suite, I’d be a regular user since I carry little cash and leave my check book at home. But sending carries a fee – 75 cents per transaction goes to ZashPay, plus whatever the ODFI charges for the ACH transaction. So, maybe I’ll keep sending money using PayPal.

It’s Alright To Be Little Bitty

Last week, I met with one of the founders of Supportland, a hip, Portland OR-based start-up that is trying to level the playing field for small, local merchants by building a community-wide rewards program. Merchants pay a monthly fee, and the solution currently uses plastic cards (distributed by participating merchants) as a form factor — however, sophisticated mobile capabilties are just around the corner. Although its initial focus is the rewards program, Supportland’s real work is the building out of a local merchant network, combined with the development of an IT platform that can eventually be replicated/licensed with other local merchant communities in the U.S. (and abroad). In some ways, Supportland’s approach reflects a growing trend in the payments products — merchant-funded rewards. As the Card Act and the Durbin Ammendment negatively impact FIs’ card portfolios, and as points programs are still wildly popular, merchant-funded reward solutions such as those offered by Cardlytics (and to some degree by BillShrink) are garnering lots of interest. The big differences here are that Supportland’s solution isn’t tied to payments, it’s very small (currently 54 participating merchants), and its focus is squarely on local communities (i.e., not on nationwide retailers). This got me thinking — is there a synergistic play with credit unions (CUs)? Like Supportland, credit unions are small and devoted to local communities, while at the same time they bring payment products (i.e., debit & credit cards) to the table. On the other hand, credit unions tell me all the time that they are eager to differentiate and grow a younger membership base — something that a company like Supportland and mobile solutions could provide. Assuming this synergy exists, a few areas of opportunity come to mind:
  • Embedding of community-based reward cards in CUs’ mobile banking apps –similar to the Starbucks app supported by mFoundry
  • Offering of bonus points when the reward card is used in conjunction with a CU’s debit or credit card
  • CUs taking on a role of marketing/issuing community-based reward cards to their membership
  • CUs taking on a role of acquiring local merchant members for reward program participation
CUs and start-ups like Supportland are small and passionate enough to move quickly if they want to — there’s excellent hope that they can offer as meaningful and innovative solutions as the big guys.

11.15-16.10: Celent Banking Webinar: The Future of Mobile Contactless Payments in South Korea

Celent analyst KyongSun Kong This event is free to attend. Celent clients and the media will have access to the webinar’s PowerPoint presentation after the event. Please click here for more information.

11.1-2.10: Celent Research Webinar: Financial Links Between China and Taiwan

Celent analyst Hua Zhang This event is free to attend. Celent clients and the media will have access to the webinar’s PowerPoint presentation after the event. Please click here for more information.

La Mano Dura

As I am Europe visiting banks, I find that they have much stronger and centralized IT functions, that allow for systems that are optimized for the bank rather than for the line of business. In the US, IT is typically a cost center, and an order taker from the line of business. The org chart follows the lines of business. The IT organization is a reflection of the LOB org chart that it serves. The IT architecture is a reflection of the IT organization. La Mano Dura means the firm hand in Spanish and is an excellent way to describe how Santander approaches IT. The bank has heavily centralized and standardized IT on platforms such as the core banking suite Parthenon and process layer Alhambra. They cut their cost income (efficiency) ratio to 39% over the most recent period, which is far superior to the efficiency ratio of Bank of America, JPMC, Wells Fargo, or Citi. These banks have efficiency ratios of 55%, 66%, 53%, and 53%, respectively. Note that Sovereign Bank, which is owned by Santander, but not yet converted to the Santander IT has an efficiency ratio of 58%. It has not yet experienced the firm hand. santander is efficient Is it worthwhile for other banks to think about giving more power to the IT department? An IT department can introduce off-the-shelf software that isn’t necessarily best of breed, but might well be good enough. As off-the-shelf software matures, it closes this gap. In an era of reduced revenue, it might be worth another look.

“Dear Banker, I would like a MasterCard, please”

Many industry commentators who attended MasterCard’s Worldwide Media and Analyst Symposium on September 23rd in Purchase, NY noted the confident tone of the company, the energetic and fired-up management team and how the firm views some of the major challenges for the industry (e.g. the Frank-Dodd act) as opportunities. However, I think one of the more subtle shifts in MasterCard’s priorities has attracted a lot less attention – the increased company’s focus on the end consumer. Of course, the schemes have always spent significant amounts on marketing (~3-5c per transaction) building up the brands and consumer awareness – Visa’s sponsorship of the Olympics or MasterCard’s “priceless” campaigns are a testimony to that. However, it would be fair to say that it was largely aimed at ensuring the consumers are comfortable at using the card once they have it. In order to ensure that more consumers actually have the cards, the schemes competed for the banks’ portfolios. Of course, banks continue to issue the cards, and therefore remain absolutely key for getting the cards into the hands of the consumers. However, it seems that in addition to a “push” from the schemes, MasterCard is trying to bolster the demand for its cards by creating a “pull” from consumers as well. MasterCard’s Marketplace ( is a perfect example of such strategy. More features continue to be added, but it is already an impressive “Web 2.0”-style shopping experience with lots of clever personalisation and “social media” features transferred to the retailing world. The site is “open” – other payment methods are accepted for most purchases. However, some of the best offers, such as Overwhelming Offers (OO), are reserved only for MasterCard cardholders. OO’s often feature large discounts on branded merchandise, which is available in strictly limited quantities for a limited period of time. In fact, some of the more attractive offers sell out in a matter of seconds (e.g. 2o Yankees ALDS Post Season Tickets sold out in 4 seconds!). Sometimes customers can even choose themselves between different products to be featured as a next OO – for example, recently the shoppers had the opportunity to vote whether they wanted to get a large discount on a Sony Playstation 3 or Nintendo Wii (the Playstation won and sold out in 7 seconds). This is consumer engagement strategy at its best, creating a powerful rationale for the consumer to actually have a MasterCard in their wallet. American Express also has a similar proposition with its ‘daily wish’ offering (, but for MasterCard, this certainly represents an interesting strategic development designed to get closer to the end consumers. So, a message to bankers – don’t be surprised if the next time your customer has strong views which card brand he or she prefers.