Archives for March 2011

U.S. Bank Deposit Point: Doing Right Things Right

Earlier in March, U.S. Bank launched two consumer/small business products after extensive pilot testing: • Deposit Point, a desktop RDC product bundled with its online banking solution. • Deposit Point Mobile, Initially available to U.S. Bank Mobile Wallet users who have an iPhone
To be eligible for Deposit Point, one must have had a U.S. Bank checking or savings account for at least 12 months, be enrolled in online banking and have no more than two returned items over the past three months. Eligibility for Deposit Point Mobile similarly required longevity with the bank and enrollment in U.S. Bank Mobil Wallet. Ostensibly, U.S. Bank’s strategy with these products is to improve convenience among existing customers, not to use the channel for new customer acquisition (at least not initially). While this may appear to be a concession, there may be clear wisdom here as well. Here’s why. To mitigate risk, financial institutions typically establish suitability or eligibility criteria for RDC users and place sensible deposit limits on those users. Tighter eligibility requirements allow less restrictive deposit limits. U.S. Bank set deposit limits as follows: • Consumers: $2,500 per day, $5,000 in a five-day period • Small businesses: $5,000 per day, $15,000 in a five-day period These are generous deposit limits compared to the Chase Quick Deposit mobile RDC option, for ecample. If a bank doesn’t have the flexibility to enforce multiple deposit limits based on user segments, we think U.S. Bank’s approach will be much more satisfying to customers wanting to deposit pay checks or other non-trivial items. Celent finds two other aspects of the product launch noteworthy. • U.S. Bank is making both desktop and mobile RDC available to its consumer and small business retail banking clients • It is charging $.50 per deposit for the service This post addresses the former. A subsequent post will address the latter. Last fall, Celent sought to understand if consumer desktop and mobile RDC would co-exist, or if mobile RDC might leapfrog its desktop cousin. If research results are to be believed, U.S. financial institutions intend to launch a goodly number of both product variations.
Source: Celent FI survey, September 2010, n=246. Q: In thinking about the industry's adoption of consumer capture, which outcome below do you think is most likely?

Source: Celent FI survey, September 2010, n=246. Q: In thinking about the industry's adoption of consumer capture, which outcome below do you think is most likely?

Yet, in discussions with financial institutions, many wonder why they would want to launch both desktop and mobile variations. After all, if a customer could just use their smart phone, why would they want to set up a desktop scanner for the same purpose? Do these same banks have both internet and mobile banking platforms? Of course. Mobile banking hasn’t and likely won’t render internet banking channel obsolete. So why would about 25% of financial institutions think mobile RDC will render desktop RDC obsolete in the short-term? Celent’s research supports U.S. Bank’s wisdom in making both product variations available. Mobile banking is hot right now, but the addressable market of internet banking users is much larger and will likely remain so for some time. Although very early, U.S. Bank is seeing higher adoption rates with its desktop solution. See, what did I tell you? We need to remember that financial institutions serve a diverse customer base. Offering customers the ability to interact with their financial institution when and how they prefer is going to be a winning strategy. The same applies for remote deposit capture. Kudos to U.S. Bank for making both options readily available. Next week, we’ll address the fee issue.

5.11.11: Celent Banking Webinar: Branch Banking in a Multichannel World

Bob Meara, 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.

BMO Adds “Compare your Spending” to MoneyLogic PFM

There has been some serious PFM activity taking place in the Canadian market. – May 31, 2010: RBC announces its myFinanceTracker solution (see blog entry here) – Dec 3, 2010: officially launches in Canada – January 31, 2011: BMO announces MoneyLogic Given that there are only a handful of major financial institutions in Canada, it’s only a matter of time before the others ante up. Additionally, these competitive activities foster innovation and the expansion of feature sets. Lo and behold these feature sets continue to grow as BMO has rolled out a compare your spending tool. Those of you that have spoken to me about PFM know that I don’t rank community features very high up on my PFM and online banking prioritization list (see Requires a Better Bundle). However, it’s great to see a large financial institution embrace the concept of community and open up the data coffers with the intention of providing insightful information. The social features are a draw for consumers because it’s always interesting to know how you stack up. There are a couple of caveats to keep in mind with regards to social and community features:
  • Consumers shouldn’t make financial and budgeting decisions based on the actions of others. I don’t believe that folks should model their spending habits according to others for one simple reason – most people don’t have good spending or budgeting habits. Everyone needs their own custom-made plan and the good news is that banks are in a position to help consumers build this plan.
  • Adoption is critical. The quality of the information displayed by a comparison tool will depend on multiple factors and one of these factors is critical – adoption. In order for relevant info to be displayed folks have to use the tool. The more data points thrown into the pie the better.

BMO is in a position to take advantage of this tool. They have an entry point to provide financial education to their clients. However they have to ensure that it is properly positioned and pitched within online banking and other channels. Additionally, BMO is large enough that with decent adoption of MoneyLogic, they can collect enough data points and provide relevant info to their customers.

Stay tuned for an upcoming report on PFM that will have a section in it that addresses social and community features.

The integration of mobile and banking

Banks, mobile network operators (MNO) and other payment service providers (PalPal, Boku) across the globe are exploring the integration of financial services and the mobile phone. Analogous to the Celent reports on the Taxonomy of Payments, I will be writing about the taxonomy of mobile banking. In broad brushstrokes I think of the following categories:
  1. Alerts: A one way text message likely configured on another channel.
  2. Alerts: A request response text message that can generate a transaction. e.g. Your balance is $95. Would you like to transfer from savings?
  3. Mobile banking: internet banking on your phone with an app or web browser
  4. Mobile proximity payments: typically using NFC, but also bar code, or camera for RDC.
  5. Mobile payments using the mobile network as the account holder, e.g. mPesa
  6. Mobile payments using mobile commerce via merchant.
  7. Mobile couponing: transmitting tokens of value to users.
I’d be interested in feedback on these categories and whether you think they should change. I encourage your comments. The integration of mobile and banking vary hugely. In Hong Kong, holders of the Octopus card, a transit payment card that is now accepted at many merchants in and near the metro stations, have taped their card to their mobile. It’s a crude link between mobile and payments, but it is a first step. First Data has rolled out NFC tags that accomplish the same task. First Data provides the adhesive. On the other end of the scale is BankInter. This Spanish bank decided that mobile was so important it became a mobile virtual network operator (MVNO) BankInter Mobile. They buy network capacity from a MNO and have their own mobile service that they offer banking customers. Why do they do this? The bank wants to be thought of as on the leading edge of innovation. The phones you get from the bank, have banking software preloaded into the SIM. Banking is on your main phone menu.
Banking built into your phone

Banking built into your phone

Because your bank is your cell phone provider, they allow free mobile access to the bank. You don’t pay SMS or data charges to use your BankInter Mobile phone to transaction with BankInter. This creates a level of integration between the bank and the customer other Spanish banks can’t match. It also creates increased levels of customer satisfaction. BankInter Mobile customers have an 11% higher satisfaction score than BankInter’s bank only customers. Please look for upcoming reports in The Taxonomy of Mobile Banking, and a case study on BankInter, as well as other reports on mobile banking.

Innovation in Unlikely Places

BAI Payments Connect event this past week in Phoenix wasn’t exactly a hotbed of innovation in my opinion. Not surprising perhaps, when so much collective industry activity needs to be spent on compliance these days. In fact, one mid-tier bank asserted publically that 30% of its IT budget in 2010 addresses compliance directives. A sad reality in my opinion. But, innovation wasn’t absent at the event. It did show up in some unlikely places, however. Here are two innovations I observed. A common element in both is that they have to do with paper. When all the action is on the imaging and electronic side of payments, these two innovations deserve recognition for the value they provide to those having to deal with residual paper. Block & Company: helping RDC clients protect checks post-imaging. Most everyone is familiar with the FFIEC Guidance on RDC Risk Management. This too little too late guidance has spawned extraordinary industry-wide effort with the objective of reducing RDC risk mechanisms. Page 4 of the document addresses operational risk at customer locations. In particular, financial institutions are challenged to ensure customers properly safeguard original items once scanned and deposited. This is a tough one, because customers will do what they do, with little ability for financial institutions to impose procedural changes upon them. Block & Company invented a device to address the risk associated with multiple presentment and inadvertent disclosure of sensitive information from original items. The RDCheckTrack by NKL®, Paper Check Storage Device provides a secure way for RDC customers to temporarily store deposited items prior to destruction. The device provides storage capacity of about 2,400 checks held between three internal bins. A laptop-style cable lock keeps the unit in place, and an outside timer tracks the client prescribed time period for holding checks and prompts when destroying is required. Not exactly game changing, but a very practical benefit to financial institutions and customers alike. In my opinion, these ought to be offered to all new and existing commercial RDC clients.
A Solution to Original Item Storage for Commercial RDC

A Solution to Original Item Storage for Commercial RDC

Everyone hates IRDs, but Liberty Processing & Services Innovation, LLC (LPSI) is focused on taking away as much of the pain and cost of IRD production and clearing as possible. Earlier this week, LPSI announced the launch of services to more efficiently print and distribute substitute checks for financial institutions. LPSI has joined forces with United Parcel Service (UPS) and a top tier bank to bring aggregator services, convenient settlement, advanced logistics and timely delivery to financial institutions nationwide. LPSI offers same day, and deferred services to endpoints in all states for both forward presentment, as well as returned items. The innovation here is a logistical one – teaming up with a transportation logistics pro – UPS, with operations in Louisville, Kentucky, a stone’s throw away from the UPS air transportation hub. Celent understands that LPSI pricing and lead times will challenge the Federal Reserves FedImage Services. Perhaps with its logistics superiority, LPSI is well positioned to be the last man standing as IRD volumes continue their decline.

How Much Does Google Love Mobile?

Yesterday morning London commuters reading a Metro, the local free paper, were hit with the front-page news about recent security issues on the Android platform and how Google had to use a remote ‘kill switch’ to delete up to 58 free apps from phones running its Android software without users’ permission. It was a somewhat ironic coincidence that some of us were actually coming to a Google-hosted event called “Google Loves Mobile”. So how much does Google really love mobile? The answer, at least judging by yesterday’s event, is “a lot”. Anyone who still thinks of Google as primarily an “online search” company should think again – the company now follows a “mobile first” strategy. One of the most frequently quoted phrases during the day was Eric Schmidt’s, Google’s Chairman and CEO, saying that “if you don’t have a mobile strategy, you don’t have a strategy”. Based on what I saw yesterday, it seems to me that there are multiple inter-related strands to Google’s mobile strategy: 1. Android ecosystem. As the owner of the initial developer of Android, a smart-phone operating system, Google has a vested interest in seeing it succeed. Android has a powerful competitor in the shape of Apple and its iPhones, but the range of applications and devices on Android, both phones and tablets, is growing rapidly. Occassional glitches and setbacks notwithstanding, it already represents a formidable alternative to Apple in the smart-phone market. 2. Apps. In addition to thousands of independent developers on the Android platform, Google creates apps itself, the most popular of which it makes available across platforms. Many of its flagship online apps are already on mobile devices (e.g. Google Maps) and the company is constantly innovating and bringing out new applications, that utilise the unique characteristics of a mobile device. Combine those with cloud computing, and you have a powerful new tool in your hands. Yesterday we saw how Goggles, a Google app, running on a mobile phone can be used to solve Sudoku puzzles, or how Conversation, an app still in development, will be able to help people speaking different languages to understand each other with the phone acting as an interpreter. And the apps are not just for fun; many FIs are starting to show interest in the app market, from basic mobile banking apps to remote deposit capture to car insurance. For example a car insurance app can allow you to record and transmit details of the accident to the insurer right on the spot. Google’s message to FI’s – now is the time to experiment, test and learn. 3. Mobile advertising, which unsurprisingly, Google is very keen to promote. Just like online, it creates a revenue stream for Google; however, the research indicates that mobile ads, if executed well, have better response rates than their online counterparts. Google continues to develop a wide range of various ad formats and helpful tools, such as “click to call”, which can populate the dialler automatically with a number, or “site links”, particularly useful to FIs, as it allows to have links to dedicated product pages within the main site (e.g. separate links for mortgages or credit cards). Google’s advice to FIs – separate your mobile and online campaigns and make sure you are using the most appropriate tools and ad formats. As a payments analyst, I couldn’t resist asking the question about Google’s ambitions in payments. While Google’s executives were understandably careful not to make any “forward looking statements”, it is obvious that Google already has many of the ingredients (NFC-enabled Android platform, Google Checkout, One Pass, etc.) to play a key role in mobile payments. Their competitors are clearly thinking the same way – Apple recently announced that more than 200m people have now registered their credit card details with Apple’s iTunes. For now, these services are targetting publishers of digital content, but for how long? Today a song, tomorrow a sandwich or perhaps a full meal, all on iTunes? Would you bet against it?

Squaring Off Over Mobile Payments: Verifone Delivers Low Blow to Square

It’s no secret that the mobile payments space is heating up and there is no question that security concerns are popping up. Today, Verifone took aim at Square over security concerns with its reader. Verifone’s CEO published an “open letter to the industry” at Here are a few excerpts:
“The issue is that Square’s hardware is poorly constructed and lacks all ability to encrypt consumers’ data, creating a window for criminals to turn the device into a skimming machine in a matter of minutes.” “Consumers who hand over their plastic to merchants using Square devices are unwittingly putting themselves in danger.” “Don’t take our word for it. See for yourself by downloading the sample skimming application and viewing a video of this type of fraud in action.” “We call on Square to do the responsible thing and recall these card skimming devices from the market.”
I have no doubt that the Square reader or any other reader for that matter can be compromised. That is a SERIOUS concern and Square’s lack of encryption needs to be addressed immediately. The security is only as good as those who created it. Since it has been created by a person it can be bypassed by an even savvier person. In fact, if a fraudster wanted to steal credit card info they don’t even have to resort to fancy technology – they could use carbon paper, take a picture of the card, write down the details, etc. The big question here is whether or not security should be actively used as a competitive differentiator. I’m a believer in collaborating to defeat fraudsters. Verifone is effectively enabling fraudsters by handing off instructions to them. IF Verifone’s offering is more secure, there are more appropriate ways to communicate this. I debated whether or not to embed Verifone’s video in my blog entry simply because I don’t want to promote it. However, I would like you to watch it and weigh in on if you think this is a productive competitive move for Verifone or a sad day in the war against fraudsters. Here is the video posted by Verifone.

Making a Bad Business Case Worse: Durbin and Mobile NFC

We keep hearing that mobile payments are coming, but to date there has been more light than heat. Why is this? In a previous Celent report, The View from the Mobile NFC Finish Line: Bank Economics in a Mature Mobile NFC Payments World, September 2009, Celent made the case that NFC payments were not in the interest of the established players. The upside, incremental interchange fees based on increased usage of debit cards, would generate about $3.25 per card per YEAR in incremental revenue to the bank. After netting out the incremental expense of NFC, including over the air provisioning, customer service, and SMS fees, the net revenue to the bank was under two dollars per year. In this model we assumed a debit interchange rate of $0.04 + 1.55%, VISA’s small ticket interchange. A $20 purchase would generate $0.35 of interchange. Well those days are fading fast. Durbin will drop that $0.35 to $0.12, dropping the incremental revenue to about $1.10. Mobile NFC then becomes a money losing activity for the large banks rather than merely one that generates uninspiring returns. Where does Celent see an opportunity for mobile NFC? In closed loop retail payment systems. Starbuck’s launched a mobile (non-NFC) payment system using scanner technology, and it’s taken off like wildfire. Other retailers, looking for ways to generate loyalty, avoid interchange, and understand their customers even better, may well follow suit.

6.13.11: Celent Banking Webinar: Why Change Cores?

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.

4.19.11: Celent Banking Webinar: Top Trends in Corporate Banking

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.