Archives for February 2011

5.10.11: Celent Banking Webinar: Can Banks Be Payment Innovators?

Zilvinas Bareisis, Senior Analyst, 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.

3.31.11: Celent Banking Webinar: Understanding Payment Services Hubs

Zilvinas Bareisis, Senior Analyst, 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.

Mobile RDC: Easier Said than Done

Making occasional check deposits using one’s cell phone camera is a great idea. Mobile RDC is a strong concept for its convenience, cost effectiveness and ubiquity. It’s a win-win for financial institutions and customers alike. Yet two things are causing FIs to move with extreme caution: risk and compliance. A recent Chase announcement suggests that mobile RDC may be easier said than done. Last week, Chase announced a relationship with Mitek Systems to provide mobile RDC capabilities to the bank across a variety of smart phone platforms. But, Chase had previously launched its service behind significant national television advertising buys. It’s a fun ad. The post-launch move to Mitek invites questions. Why? Why now? Chase first made its Quick Deposit service available to customers in July through an update to its app for Apple Inc.’s iPhone mobile banking platform. In November it rolled out the service to customers who use Google Inc. Android smart phones. Neither initiative utilized Mitek’s Image Prove technology. With a significant base of registered users, why change platforms now? Our guess is that the image analytics engine supporting the application wasn’t up to the task. This likely caused usability problems such as those experienced by Celent’s own Bart Narter (see Bart’s blog here). There’s nothing worse than getting all fired up from a good TV ad only to be disappointed with the app later on. OK, there are worse things. Producing consistently high quality images with low exception rates under conditions of widely variable lighting, contrast, camera angle, signal strength and steadiness of hand is not trivial. In Celent’s opinion, the key to achieving good performance with mobile RDC lies with skillful use of imaging technology. Maybe that’s why nearly all vendors of mobile RDC solutions employ Mitek’s stuff (with its resulting impact on product cost). Mitek’s Mobile Deposit addresses the high variability of mobile image capture with a real time sever-side image analytics approach it calls IMage- PROVE. The basic idea is to use image analytics to automatically and satisfactorily mitigate unwanted image variability so as to render the originally captured (e.g., “raw” image) usable for automated processing. In Celent’s view, this process (regardless of solution used) is key to Mobile RDC’s viability. Without it, both user experience and operational results would likely be unsatisfactory. The figure below shows the processing of such “raw” mobile images. Processing Raw Check Images In August 2010, Mitek was granted a patent on its use of IMage PROVE technology in a mobile RDC environment. The patent covers the process of capturing a color image of a financial document using a mobile device and then transmitting the image to a server where the image can be processed further. The patent also covers the steps of detecting the financial document in the image, converting the image and correcting the orientation and size of the image. Some vendors and banks have tried to make due with image analytics systems designed for traditional check scanning approaches. Doing so might save some money, but will likely result in an eroded user experience and dissatisfied users. Compared to the cost of branch deposits, mobile RDC is a bargain. Our advice to banks: don’t be cheap, you might regret it later on. Our view: this move is good for Chase and ultimately good for the industry. A number of other large banks are close to launch. We hope all goes well.

The Branch Isn’t Dead After All

Celent hosted an event in London with Anthony Thomson, co-founder and chairman of Metro Bank. Metro Bank is the first new High Street (main street retail) bank in the UK in over 100 years and is founded on the same precepts (with the same founder) that launched (now TD) Commerce Bank, “America’s Most Convenient Bank.” Metro Bank talked about a customer acquisition strategy that relied in large part on a branch expansion in Greater London. They expect to have 220 branches in Metro London with 10 years. One of the Metro Bank tenets is that customers will trade rate for a better retail experience. Now we hear that JPMorgan Chase. CEO of Retail Financial Services Charlie Scharf is planning to open up to 2,000 new offices over the next five years with a focus on California and Florida. Hasn’t he heard of alternative channels. Didn’t these banks get the memo? The branch is dead! What do these banks know that other don’t?

How to Unleash Payments Innovation in Banks?

Late last year I had the privilege of being invited to be on a global payments innovation jury and the new report, ‘Payments Innovation 2011 – The Global Jury Decides’, has just been published last week. The report focuses on understanding the challenges facing the payments industry and their impact on innovation in the next 12 months. The jury this year consisted of 22 panelists drawn from 14 countries across five continents and was chaired by John Chaplin, President of Ixaris, itself a very innovative payments company. The report has a number of interesting findings. For example, the jury expects that innovation in 2011 is most likely to come from Asia (a top region by clear margin) and North America, in low value and micro payments, and from improved product access (rather than the products themselves). However, for me the most interesting results had to do with sources of innovation. Perhaps unsurprisingly, the jury believes that new entrants and technology providers are best equipped at driving innovation; unfortunately, retail banks do not score well at all here. And the main reason why banks reject innovative ideas is the inability to guarantee customer uptake. The desire for “proven innovation” is so overwhelming that it outweighs all other factors in launching new products, such as technical challenges, costly development or compliance difficulties. As one of the jury said, “Opportunities are often over-analysed. With many innovations you just cannot predict how customers will react, so you have to make the developments and then hope for the best; that just isn’t how banks work.” Celent has written extensively over the years on payments innovation and developed a number of frameworks that can help banks manage their innovation efforts. For example, the report Payments Opportunities: Finding the White Space argues for a need to develop targetted solutions addressing inefficiencies in specific payment flows, industries or consumer segments, and proposes a payment product design framework. Another report, Would OBeP Be “iDEAL” for the UK Market. A Guide for the Decision Makers, includes a framework which can be used to assess whether a new payment solution is likely to succeed in the market. Of course, not all is lost for the banks. There are plenty of payments innovation examples from banks around the world (e.g. many Turkish banks) and some organisations seem to be consistently good at innovation. For example, Barclaycard in the UK has been at the forefront of innovation since inception, from the first UK credit card and the first ATM transactions to the most recent efforts in contactless and mobile payments. And Citi continues to demonstrate that it “never sleeps” with its recent announcements around 2G cards, social media efforts and importantly, Global Enterprise Payments group. I would be interested in your thoughts – what can banks do to be more innovative in payments? Do they have to come up with new ideas themselves? Or is it really a question of letting the new entrants innovate and then striking the winning partnership deals?

Will Tablets Change Banking?

Tablet computing is on an obvious growth trajectory, but is this trend something banks should be acting upon, and if so – how? Said another way, led buy Apple’s iPad, will tablets change banking? In the words of Sarah Palin, “You betcha!”. We see tablets contributing to financial services channel delivery both inside the branch network and as a viable self-service channel on its own. Tablets provide distinctive and compelling attributes that, in our opinion, will drive adoption: • Mobility compared to the desktop platform, with the ability to operate usefully in both online and offline environments. • Particularly rich video delivery capability. • A unique form factor making the platform particularly useful for interactivity between staff and bank customers. Several examples of tablet applications may help illustrate. USAA Federal Savings Bank this week launched its iPad application after months of design effort aimed at leveraging iPad’s unique attributes. Like USAA’s internet and mobile channels, the application provides banking, insurance, investments and financial advice in one place. That’s where the similarities end. The tablet application enjoys less latency. Significantly more content is available above the log-in and it’s more intuitively and easily acquired. And, the content is available whether online or offline. See: www.usaa.com. Financial Management Solutions, Inc. (FMSI), a provider of workforce automation solutions aimed at small to midsize financial institutions will be introducing an iPad integration to its Lobby Tracking System (LTS). LTS is a web-based, queuing and reporting tool that tracks key productivity, sales and service indicators. Running LTS on a tablet in addition to desktops will provide FIs new options beyond traditional desk based concierges. Finantix, a Venice Italy based provider of front end sales and service solutions launched its Wealth Apps 2.0, a comprehensive suite of wealth management applications for the Apple iPad last month and plans similar applications for its banking platform sales application in the future. Finantix won Best of Show at Finovate Europe this week with its app. Tablet apps are clearly nascent in retail banking at the moment. Banks should evaluate the use of tablets in future branch initiatives and keep the heat on vendors that are slow to respond. Why? Because tablets will help branches sell more effectively with a reduced training burden. How might this work? Currently most banks rely on branch staff to engage customers as directed by staff-facing CRM systems (or no system at all). Using a tablet interactively with clients reinvents the experience. It holds the promise of a more engaging interaction – one in which branch staff interact alongside clients as coaches. In the process, much paper can be eliminated and workflow efficiency much improved. As a self-service channel, tablets will likely emerge as yet another development opportunity. No one really wanted another delivery channel to manage, but this one looks like it’s a keeper.

Reporting from the Celent’s Banking event in London

Celent Banking team has kicked off 2011 with a bang. In addition to the flury of new reports, we hosted an industry event in London. Management of multiple channels continues to be high on many of our clients’ agendas, and so we decided to focus on the multi-channel theme and called our event “Branch is Dead; Long Live the Branch.” Bart Narter, Celent’s Senior Vice President for Banking opened the event and introduced two distinguished guest speakers representing two sides of the argument. Batting for the “Branch is Dead” corner was Mr. Steve Townend, CEO and co-founder of MoBank, an independent mobile money management app in the UK. He asserted that “customers increasingly want and need to control their finances in ways that allows them to get on with their lives” and claimed that mobile is becoming an important financial management tool for many consumers. At the other side of the argument was Mr. Anthony Thomson, co-founder and chairman of Metro bank, the first UK high street bank to be launched since Queen Victoria ascended to the throne. Given the Metro bank’s core values of convenience, service, transparency and engagement, branches are very much a cornerstone of the bank’s value proposition. It was a hard act to follow for the two Celent’s Senior Analysts, but Bob Meara and I accepted the challenge. Bob painted the vision of the branch of the future, describing it as a “journey, not a destination”. While bank branch renewal programmes can take different shapes and forms, Bob is yet to find a bank that is happy to say “we are done”. And I began with the assertion that the UK banks can do more with their investment into the online channel and use the channel for more than basic customer self-service. I shared with the audience some of the lessons from the other markets, such as how banks are re-claiming the P2P payments. However, eWise payo, UK-focused Online Banking ePayments solution represents perhaps the biggest opportunity for the UK banks to leverage their investment into online banking and Faster Payments infrastructure. Now is the right time for the UK banks to make a decision whether they should adopt such a solution. Finally, the event concluded with a mobile banking and payments panel, featuring Celent analysts from around the world, including France, Japan, China, Korea and the US, which not only affirmed the rising importance of a mobile device in financial services, but also demonstrated the diversity of development patterns around the world. And that is the value that Celent brings to its clients – a global insight based on deep local expertise in multiple markets. If you attended the event, we hope you enjoyed the presentations and networking opportunities. If not, we missed you and hope to see you at our next event – don’t forget to check our website www.celent.com for the latest schedule.