Global information technology spending by financial services institutions is expected to reach US$363.8 billion in 2011, an increase of 3.7% over 2010. This figure is substantially higher than the lackluster 2.5% growth increase experienced in 2010. Growth rates are starting to climb across most regions and IT products and services should grow to US$393 billion by 2013, a 3.9% CAGR from 2011 to 2013.We have published a series of 5 reports this month that are relevant to all organizations: – IT Spending in Financial Services: A Global Perspective – IT Spending in Banking: A North American Perspective – Top Trends in Corporate Banking: Asia, Europe, and North America – Top Trends in Retail Banking: Asia, Europe, and North America – Top Trends in Payments 2011: A Year In Review Happy reading!
Archives for January 2011
January 26, 2011 by Leave a Comment
The new year brings lots of questions, planning and decision making. IT spending is tied directly to these elements, and as in past years, we have been receiving a truckload of IT spending questions. After a rough couple of years folks are curious as to if the figures are on the uptick in 2011. The short answer is yes. The long answer, well, you will have to read the reports! Here is a quick snippet from, IT Spending in Financial Services: A Global Perspective (published earlier today):
January 25, 2011 by 3 Comments
In my younger days as a product manager in Silicon Valley, my engineering team often told me that I can induce bugs simply by looking at the software. The system they built would always work perfectly until I attempted to use it and then, voila, when it was time to show it to me, it would crash or behave strangely. It would appear that I haven’t lost the touch. Starbucks’ mobile payment app was no match for my deadly touch. I have had similar impacts on Chase’s mobile RDC. I downloaded the Starbuck’s new mobile payment app and it worked great. I could load my card, get my balance, view reward status. It’s only when I tried to pay using the app that I encountered failure. I was able to get the bar code to come up, as shown below, but when the cashier went to scan the code it simply didn’t work. She rescanned multiple times at multiple angles to the same result. Knowing that leading edge equals bleeding edge, I had back up payment ready. For mobile payments to work right, a payment provider needs to be able to 1. Provision the mobile device with secure account information. 2. Enable the mobile device to transmit the secure information to a reader. 3. Have the reader be able to understand the information transmitted. 4. Have the reader transmit this information to a payment network for approval. We made it to step two, but failed at step 3 in this particular case. An end user doesn’t care. The payment failed. While the mag stripe on a card is not very secure, it does work pretty darn well. I have a better than 99.9% success rate with this technology, and I expect any technology that replaces it to do at least as well. With both Chase’s mobile RDC and Starbucks mobile app my success rate has been 0%. My advice to mobile payment vendors: Please don’t roll out products until you have at least two nines (99%) of reliability. You’re competing against mature and reliable technologies and will destroy the image of mobile payments before they launch. In the world of social media, word gets out fast. The ratings for the app on iTunes: One Star: It doesn’t work. Testing involves using the software on a variety of platforms iPhone 3G, 3GS, 4, any number of Android phones and RIM phones. The list goes on. This gets complicated and difficult if you want to deliver even two nines of reliability. Be prepared to invest or outsource.
January 19, 2011 by 1 Comment
The latest big bank mobile RDC launch is by a bank holding company headquartered in Barcelona. Go figure! Banco Sabadell is the first Spanish bank to launch a mobile RDC service. Press release: http://press.bancsabadell.com/2011/01/banco-sabadell-presents-its-mobile-banking-innovations-for-2011.html The product’s menu: http://www.flickr.com/photos/bancosabadell/5367041115/ Banco Sabadell’s application has a familiar look and feel, closely resembling most mobile RDC applications launched by U.S. banks. What is surprising is that Banco Sabadell would beat so many U.S. banks to the mobile RDC punch – particularly considering the state of check (or cheque) payments in Spain. Cheques represent a small minority of payments in Spain (less than 2% of payment volume in the National Electronic Clearing System – SNCE, and about 4% of value in 2009) yet remain a part of everyday life Personal cheques are rarely used in Spain, and are not accepted as a form of payment by most establishments. Yet, banks are of course, compelled to honor checks and process them expeditiously. As check volumes dwindle, the cost to process each item grows substantially. Checks have been truncated in Spain since 1990, through the Spanish retail payment system. Initially cheques over a certain value threshold still needed to be delivered to the drawee FI, but in 2003 the transmission of images began to replace the delivery of the physical cheques exceeding the threshold. By 2006, virtually all cheques cleared electronically. Remote deposit capture therefore presents a viable value proposition to both banks and their customers in Spain.
January 11, 2011 by Leave a Comment
We are gathering Celent analysts from across the globe for our annual global off site at Celent. ideas around top trends in both Retail and Corporate Banking seem to take on a new tenor this year. No longer are cost reduction and risk the top priorities. Many other growth-oriented initiatives have percolated up to the top of the lists. Multichannel still remains on the top three list from mobile banking to mobile payments across the globe to mobile Remote Deposit Capture in the US. Payments are now moving to the fore. Whether it be mobile payments, P2P, or prepaid, banks across the globe are looking closely at these as a way to ensure customer loyalty or perhaps even generate profit. Banks are facing increasing complexity, whether it be across channels or lines of business. Between channel proliferation, customer profitability, and risk, many are finding that they need to take an enterprise view of architecture and have enterprise needs take a more important place in IT. Whether the discussion is around Payment Service Hubs (PSH), Enterprise Service Buses (ESB), Service-Oriented Architecture (SOA), or Enterprise Data Warehouses (EDW), bankers are thinking about their business more holistically. These three themes seem to cover the majority of our top trends this year, which is a refreshing change from recent years. These initiatives are about growing the business, offering customers more choice or better choices rather than reducing losses, collecting debts, and cutting cost. I look forward to this new, more proactive attitude around banking in 2011.
January 11, 2011 by 1 Comment
This time of the year is always good for reflection and looking forward. I have also been reflecting on the payments issues we have been dealing with at Celent in 2010 and what is likely to be important in 2011. The good news for consumer is that payments innovation continues apace. The card schemes are competing more fiercely than ever; PayPal and prepaid cards have gone mainstream, leaving the other newer, smaller, more niche players to shape the space of ‘alternative’ payments. There is finally a real acceleration towards mobile contactless payments in the developed markets, although for now, mobile banking (rather than mobile payments) remains the main type of financial transactions over the mobile device. While some of these developments are clearly global, others have a distinct regional or even country-specific flavour. The big news in the US in 2010 was the Frank-Dodd act, and specifically for the payments industry, the section that dealt with debit card interchange. This is poised to fundamentally reshape the economics not only for the US debit cards, but potentially for the checking accounts as well. In Europe, the harmonisation journey (SEPA, PSD, etc.) continues with mixed success. At the wholesale end of the spectrum, small and medium enterprises (SME) have more choice when meeting their payment needs – various non-bank competitors are active in the B2B space, offering various e-invoicing and international payment solutions. Finally, the concept of payment services hubs is getting a widespread recognition as the way forward for banks seeking to upgrade their payment infrastructures. While more work is needed to agree on the terminology, the vendor solutions are maturing and offer banks credible options when designing a payment services hub. We will continue to watch many of these developments throughout 2011. What other things do you have in mind? What payments-related topics would you like us to investigate and what reports would you like to see coming out in 2011? Happy New Year! P.S. If you would like to read about these trends in more detail, watch out for our upcoming report Top Trends in Payments 2011, due imminently.
January 10, 2011 by
There has been a lot of hype and press regarding Quora lately. Quora describes itself as:
“a continually improving collection of questions and answers created, edited, and organized by everyone who uses it. The most important thing is to have each question page become the best possible resource for someone who wants to know about the question.”I’m intrigued by the format but wary of the quality of responses (since everyone and anyone can contribute). There is a risk of this becoming a modern version of the disastrous Yahoo Answers. However, the concept got me thinking about what this could mean for online banking and bank web sites. I became further intrigued when I read the following TechCrunch post detailing BankSimple’s use of Quora. Kudos to BankSimple for using this tool to answer questions. Given that BankSimple has yet to launch, it’s certainly a good way for the firm to answer the questions on people’s minds. How else can Quora be used? I can envision multiple scenarios where user contributed content comes into play. User generated FAQs and “How do I…” type of questions come to mind. I’ve got lots more, but would rather turn the possible responses over to you. I have posted a question on Quora, and I invite you all to reply and contribute. Please click on the following link in order to add your answer – How can Quora be leveraged for online banking and bank web sites? Note: comments have been turned off for this post. Please post your answer using the link above.
January 6, 2011 by 1 Comment
This revisits an earlier blog entry comparing stated channel priorities between US and European banks. I’m encouraged by the spirited discussions it spawned. Some have been critical of bank’s slow – even flawed – approach to multichannel delivery. We agree. There are clear philosophical, generational, organizational and systems barriers to a swift and through transition from a branch centric to multichannel operations. If it were easy, more banks would be there, but it’s an intricate and complex set of challenges in many financial institutions – particularly the large ones. But, that wasn’t the point of the last blog entry. Rather, it meant to simply highlight some differences observed in relative channel priorities between Europe and the US, particularly the mobile and ATM channels. So let’s return to the two questions posed earlier with the benefit of the many that were so kind as to weigh in with their perspectives. 1. Why is the ATM channel such a comparatively high priority among EU banks? 2. Conversely, why is the mobile banking channel such a comparatively low priority? But, first a short digression on the research cited. In both the Celent and Oliver Wyman research, surveys used a forced ranking technique when inquiring about relative channel priorities. Doing so requires survey respondents to select one answer as first priority, another as second, and so on. The idea is to better distinguish among closely competing priorities. An alternative approach is to invite respondents to rate each channel on a relative priority scale. The risk in doing so is that everything can look “most important”. Neither approach is perfect. In retrospect, I wish we had asked the question both ways. Here’s why. The specific question asked in the Celent survey was: “Given limited resources, indicate the relative priority among your delivery channels based on what gets funded in your organization.” More than a few respondents noted that channel priorities are all very closely grouped, and that coming up with a clear ranking order was difficult. Add to that, within any given financial institution, the stated channel priority might vary internally. That said, the data presented above might overstate (somewhat) the practical priorities among channels. Practically, does it really matter if a given channel is priority #2 versus priority #3 if all requested projects get funded? Perhaps not, but the differences can shed insight into how financial institutions think about the various channels. The Celent survey also asked respondents, “What is driving these priorities?” The response was an open text field, meaning respondents could type in anything they wanted. The answers are revealing. By a large margin, most FIs said that the following drive channel priorities: 1. Customer demand or channel usage (a clear #1) 2. Transaction cost (a distant #2) 3. Competition – FI’s perceived need to react to competition or be disadvantaged (an even more distant #3) Relatively few FIs in Celent’s sample seemed to indicate that channel priorities are based on a long-term strategy. Instead, many seem to be chasing transaction metrics. In other words, the greater the channel usage, the higher its priority. The obvious problem with this approach is that emerging channels will be under appreciated by definition. More strategically driven FIs will choose to get ahead of the usage curve – in fact influence channel usage with innovative delivery mechanisms. Such FIs will likely forever remain in the minority. Back to the questions… So if channel priorities are driven by usage in most FIs, then the differences between Europe and the US might be explained (at least in part) by differences in the payments landscape between the two markets. Cash usage, in particular, remains higher in Europe compared to the US. For example, the Payments Council announced in December 2010 that debit cards have just overtaken cash usage in the UK. Such occurred in the US around 2005 or so. Consequently, ATMs would be logically more highly used in Europe than in the US and a higher channel priority as a result. Additionally, there are more examples of in-branch self-service in Europe than the US, serving to broaden the functional use of ATMs as well as overall usage. What about mobile banking differences? Several weighed in suggesting that Europe has had mobile banking for years, so it’s not as trendy as it has become in the US – and that’s why the mobile channel is a lower priority in Europe. I tend to think that the differences have more to do with how “mobile” is defined in the minds of individual survey respondents. If Europeans consider smart phones as “internet devices”, then the explosive growth of smart phones might be associated with the internet channel – a very close #2 priority behind the branch channel in Europe.