Archives for January 2012

When Credit Card ID Checks Go Awry

I’ve always had mixed feelings regarding handing over my ID to a merchant when paying by credit card. On one hand it’s great that the merchant is attempting to protect its business and you from fraud. On the other hand you are handing over your personal information to a complete stranger. I was shopping last week with my wife at a Coach store in Florida. We made a small purchase and the sales agent asked for my ID for the credit card transaction. I handed over my credit card and ID and started chatting with my wife. I then noticed that the salesperson was studying my ID and appeared to be typing my information into her computer. I promptly asked what she was doing and she answered that she was typing my address and info into her computer so that I could be added to the Coach mailing list. She never asked for my consent and needless to say I was not happy. The salesperson thought she could simply take the liberty of capturing my personal information. I found this especially curious since this happened on the same day as the Zappos data breach that exposed the personal information of 24 million customers. I subsequently spoke to a manager about the salesperson’s actions and was told that their policy is to check IDs but ask for consent regarding the capture of your personal information. I told the manager what happened and she replied, “Oh, she probably did this on a habit.” Talk about bad habits, and ones that can certainly get you into trouble! In some instances, asking for personal information may violate store policy, credit card merchant agreements and even state law. This past February, a ruling in the state of California determined that merchants cannot even legally ask for your zip code when making a purchase by credit card. Merchants must start to weigh the pros and cons of capturing personal information at the point of sale. Sure, it can help gather data and help with marketing, but on the other hand it can open the merchant and the consumer up to all sorts of vulnerabilities. In the online world things are obviously different. Shoppers must provide (and are therefore consenting to provide) a billing address, and that can be captured. And the vulnerabilities are being exploited. Just yesterday, Coach’s website was hacked by a group called UGNazi. This group hacks organizations that support SOPA. To my knowledge no information was leaked, only the website was defaced. I’m still thinking about how to deal with Coach’s mishandling of my transaction. I am definitely going to file a complaint with Coach senior management. Other options include complaints to the Federal Trade Commission, and to the Florida Attorney General. I’m curious to hear your thoughts, please discuss!

When more regulation is good.

The Consumer Financial Protection Bureau (CFPB) is going to examine payday lenders and I think this is a good thing for banks. Approximately 60 million adults reside in these households. The FDIC estimates that 9 million household are unbanked. Another 21 million are underbanked, adding to 30 million households or about a quarter of the population. Source: FDIC: Banks compete against less regulated pay day lenders, check cashing stores, and non-bank financial services companies. Increased regulation will level the playing field and create market opportunities for banks. Most bankers aren’t finding many areas for profitable growth and would be well advised to consider this market as a real opportunity. Mobile banking enables the unbanked to access financial services in a low cost channel so that thinner margins can be effectively supported. I would suggest those that are interested to read the Celent report, Reaching Underbanked Consumers Through Mobile Services which was co-authored by the Center For Financial Services Innovation, Regulation isn’t always a bad thing and the CFPB may create new opportunities for banks that can create appropriate products for the un- and under-banked.

Videoconferencing in Retail Banking: Is BMO’s move a Harbinger for More to Come?

This week, BMO announced its rollout of Cisco Tandberg desktop video conferencing terminals to 50 of its 1,600 branches in the US and Canada. The terminals are for use by the bank’s financial planners and small business specialists. The idea is simple: more efficiently and effectively deploy SMEs across BMO’s sprawling retail banking geographic footprint. SMEs would then spend more time engaging customers and less time traveling. A recent American Banker article sums up the initiative nicely. A number of factors are conspiring to cause US banks to challenge retail operating models. Improving branch channel – indeed multichannel – efficiency and effectiveness is no longer optional. Desktop video conferencing is one of many options available to banks to do just that. In this context, is the BMO initiative a harbinger of more similar initatives to come? In July 2010, Celent surveyed nearly 200 North American financial institutions about their use of branch channel technologies. The survey spawned a three report series: • Branch Banking in a Multichannel World: What Ever Happened to the “Branch of the Future?” Branch Banking in a Multichannel World, Part II: The Many Faces of Change Branch Banking in a Multichannel World, Part III: Case Studies in Branch Transformation Through the survey, Celent found desktop videoconferencing (for client use) among the least likely deployed of any of the technologies studied in the research. Overall, just 10% of FIs surveyed had or were piloting solutions and another 7% were planning to implement a desktop videoconferencing solution. Larger banks were more likely to be considering. Only kiosks ranked below desktop videoconferencing in usage or planned usage. videoconferencing Thus, it appears that BMO is an early adopter of a technology that might see eventual adoption by a third of the larger US banks. But July 2010 was a while ago. Celent plans to field another survey in the coming weeks. Participating FIs will receive complementary summary of results. Interested parties are invited to contact me directly at to be included in the survey panel.

Bank IT Spending and Trends: What Does 2012 Look Like?

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 rocky few years folks are curious as to if the figures are on the uptick in 2012. The short answer is yes, but growth rates are down in all regions, and some regions are doing better than others. The long answer, well, you will have to read the reports! Here is a quick snippet from, IT Spending in Banking: A Global Perspective (published yesterday):
Total bank IT spending across North America, Europe, and Asia-Pacific will grow to US$173.3 billion in 2012. This spending level is approximately 2.8% higher than 2011. This is a discouraging but not surprising indicator that IT spending growth is slightly on the decline. The good news is that a slight turnaround is in sight.
We have published a series of four reports this month that are relevant to all organizations: – IT Spending in Banking: A Global PerspectiveIT Spending in Banking: A North American PerspectiveTop Trends in Banking 2012Top Trends in Payments: A Year In Review Happy reading!

Applications Open for the $50K Innotribe Startup Challenge

I’ve recently agreed to serve as a judge for the 2012 Innotribe Startup Challenge. The event provides an opportunity for FinTech and Financial Service startups and innovators to meet potential investors, customers and partners from financial institutions and FinTech investors. See the bottom of this post for info on how to receive an invite to the event.

Sponsored by SWIFT (, the Innotribe Startup Challenge ( fosters collaboration between emerging FinTech and Financial Service innovators and SWIFT’s member community.
  • Applicants to the Challenge enjoy online exposure and introductions to hundreds of potential partners and customers from SWIFT’s member community, as well as investors and other members of the startup ecosystem.
  • Semi-finalists, selected by a panel of expert judges, are invited to one of three regional Challenge Showcases (New York – Feb 8, Bangkok – Apr 25/6, and Belfast – late June), to pitch and network with a hand-picked group of 40-50 investors and financial industry decision makers.
  • The 15 most promising companies from across all three Challenge Showcases, as selected by qualified decision makers and investors from across the SWIFT community, will be invited to present at Sibos, SWIFT’s annual financial industry trade show. Sibos ( will take place this year in Osaka, Japan in October 2012.
  • One or more early-stage winners selected by the Sibos audience will share in a $50K in cash prize.

The Challenge is open to companies working in financial technology or technology-enabled financial services (no consulting or outsourcing) such as payments, securities, trading, social media tools, big data/data analytics, security, identity, b2b or b2b2c mobile, small business apps & services &/or IT infrastructure. Early-stage applicants must be less than 3 years old with less than $1M in combined revenue and investment in the last 12 months. Later-stage applicants may be of any maturity level, but the products/services they submit must still be ‘under the radar’. Applications for the February 8th NYC Challenge Showcase are due by January 13, 2012. To learn more and apply, please visit Special invite for Celent Clients: Please contact me if you are a banker and would like to attend the Innotribe Startup Challenge. Celent has been granted several passes to the events and we can share these with interested individuals (banks only please).

The New EC Green Paper: Missed Opportunities?

It was interesting to read the European Commission’s Green Paper “Towards an integrated European market for card, internet and mobile payments” published a couple of days ago. My colleague Gareth has already provided some insightful commentary in his blog below, and I wanted to add a few further points. My first reaction was to applaud the Commission for recognising the increasing convergence of physical and online worlds and deciding to cover in this paper three types of electronic retail payments, namely cards, internet and mobile payments. However, my excitment waned as I continued reading, as the paper is mostly dominated by card-related issues with relatively little attention on internet or mobile payments. Also, in contrast to some very specific issues around cards, such as MIF, cross-border acquiring, specific scheme rules, etc., the questions related to e- and m-payments are rather vague and quite high-level. As a result, we probably shouldn’t expect the consultation feedback and responses to be concrete and actionable proposals. The paper envisages that “an integrated EU market for payment services could also produce, as a by-product, administrative data that could be used for the production of harmonised statistics.” However, it completely misses the opportunity to recognise the complexities of gathering payment statistics in the converged world, where a card payment might be initiated via a mobile phone, or where an e-wallet might be used to pay for a purchase online, whilst at the same time trigerring a card transaction to fund the wallet. Harmonised payments market by itself will not be sufficient – a common taxonomy and agreement is needed to differentiate between payment instruments and channels, and how various transcations are going to be accounted for. I couldn’t help but think that a lot of the questions and phrasings in the paper were a thinly veiled swipe at Visa and MasterCard, two recognised international schemes on which Europe also relies to provide SEPA-compliant international payment instruments. It again raises many of the sensitive issues around MIF, surcharging, co-badging, Honour All Cards rule and others, and the reader is left with a feeling that the Commission would like to see a change in many of today’s practices. I could imagine that the schemes must feel rather aggrieved and probably feel that their efforts and investments in maintaining and innovating the payments infrastructure are underappreciated by the authorities. Continuing with the theme of what’s missing from the paper, one of the most interesting ommissions to me was the fact that nowhere in the document there is any mention of the need for a third European card scheme. There are probably good reasons for it – we have been conducting some very interesting interviews in the market and will summarise our views in a forthcoming report – keep an eye on it over the next month or so. This is a consultation document and interested parties are encouraged to submit their responses to the Commission by 11 April 2012. The Commission expects that any new proposals would be adopted by Q4/12 or Q1/13, and that “any future legislative or non-legislative proposal will be accompanied by an extensive impact assessment.” In other words, it will take some time. And the risk is that the grander the vision, the bigger the likely gap between that vision and the reality, and the longer until the actual changes take place.

A Very Green Green Paper?

This week the European Commission released its Green Paper “Towards an integrated European market for card, internet and mobile payments”. Strangely the site that lists all green papers doesn’t (yet) have it. For a copy, see this story here. At a high level there is perhaps nothing surprising in the paper, as many of the themes remain consistent. Indeed, in my recent paper “The SEPA Ripple Effect – Coming to A Non-European Country Near You Soon” I listed many of these themes that I expect to see, or already are seeing, in other countries. The more interesting piece will be the responses, and what happens as a result. The card schemes in particular, other than interchange, have had a fairly light touch so far and that looks set to change. One thing to note that a green paper is a vision paper. This is important as it sets out the target end state, but isn’t necessarily what will come to fruition as practicalities necessarily impact. As such, its easy to wearily shake your head at the naivety of it all rather than applaud perhaps what they’re trying to achieve. However, there does seem to be a danger of a growing gap between the vision and the reality. This hinges around whether payments really is a “network industry”. This is central to the concept of an integrated market. In the 10 years of SEPA work so far, there would seem to be little evidence to support any of the 4 drivers listed on pages 2 & 3. That’s perhaps unfair, as these drivers require the delivery of SEPA to come to fruition. With true SEPA not due until 2014, the question then becomes whether SEPA will ever work as defined by these 4 measures. For many, the jury is currently either still out or simply no. For all, the answer won’t be known until for several years after the deadline has passed. Yet the assumption that it will deliver these benefits is the foundation on which this report is based. A second point is that the regulators and the interests of the supposed beneficiaries aren’t 100% aligned, which can cause some strange situations. Take MIF. The regulator has a stated aim for transparency. Prices, despite the 4 drivers listed, haven’t fallen naturally, but fallen because of the very large regulatory stick that was waved, including the threat of massive fines for non-compliance. But to a consumer there is no evidence of any change. Indeed, in Australia where intervention has gone further, and surcharging is allowed, prices have not fallen therefore but risen. As a result, consumers have chosen alternative payment products as a result. You can see the same impact as a result of Durbin as well! So how is transparency going to actually help? The model works at an academic level but not in real life, and perhaps nor should it in tough economic times. So, should the regulator give up? No. But perhaps it should perhaps focus on more point intervention, with a clear understanding and statement of why it is doing so, rather than trying change the world.

Two Kodak Moments to Consider

Few global brands have created the equity of Kodak. For decades, Kodak was synonymous with family memories and led the world in intellectual capital related to imaging – in both chemical and digital realms. Kodak is a household name if there ever was one. For example, the colloquialism, “Kodak Moment”, refers to a rare, one time, moment that is captured by a picture, or should have been captured by a picture. In its own stunning Kodak Moment, it appears the company is facing likely bankruptcy. Once a US$16 billion annual revenue juggernaut, the company now fights for survival. Another Kodak Moment comes with a picture. Georgia-based RaceTrac is opening a new store today in an Atlanta suburb that company leaders say will serve as the prototype for all new RaceTrac stations. At 6,000 square feet, the new store is one-third larger than the typical station and includes new features such as free wireless Internet access, indoor and outdoor seating, expanded food and beverage offerings, a frozen yogurt bar, and a walk-in “beer cave” room for chilled beer. On the outside, the store looks vastly different from a typical gas station, with such features as stone columns and stacked-stone accents. “It’s really something you’ve never seen in a convenience store,” said spokeswoman Sherri Scott, who compared it to a mini grocery store. “The whole goal is to take you back to the idea of a neighborhood store versus a traditional gas station.” The company, headquartered in the Atlanta area, operates more than 300 gas stations in four states.
RaceTrac's New Prototype Store

RaceTrac's New Prototype Store

What do these two Kodak Moments have to do with banking? Nothing and everything. Neither is directly related to banking, of course. But, both are examples of established entities challenging their operating models – or not. For Kodak, making strategic investments in digital imaging that would cannibalize its film business was a tough decision – one it waited way too long to make. Retail banks face a similar challenge in “alternative” channel innovation when doing so will cannibalize branch traffic. In contrast, RaceTrac is challenging what it means to operate a convenience store. It’s doing so when the complexion of the average c-store hasn’t changed much in the past few decades. Sound familiar?

2.16.12: Celent Banking Webinar: Corporate Mobile Banking: Revolutionizing Cash Management

Jacob Jegher, Senior Analyst, Celent’s Banking Group This event is free to attend for Celent clients, flex-plan clients, and the media. Non-clients can attend for a fee of $195. If you are unsure of your client status, please contact Steve Nawrocki at 617.262.3128 or Please click here for more information.

Celent Banking Blog – 2011 in Review

Happy new year! I thought it would be fun to recap 2011 by calling out the top 10 posts on our blog from 2011. The following list is based on total number of unique visits to each of these posts. Some of these are bang on as far as topic interest goes others may be surprising. Happy reading!
  1. ZashPay User Impressions
  2. U.S. Bank Deposit Point: Doing Right Things Right
  3. Tablet Wars: Online/Mobile Banking Will Never be The Same
  4. New ATM Rules on the Block
  5. Will Tablets Change Banking?
  6. Bank IT Spending and Trends: What Does 2011 Look Like?
  7. Celent Model Bank Awards 2011
  8. Is PFM The Future of Online Banking?
  9. U.S. Bank Deposit Point II: Will Pay-for-Deposit Last?
  10. Chase Website – Down Again