Archives for February 2012

P2P Payments Come To The UK

There were two interesting announcements this week heralding the dawn of the bank account-based P2P payment era in the UK. The first announcement came from Barclays about the launch of a Pingit service, which allows consumers to send and receive money using mobile phone numbers. Five days later, the UK Payments Council announced that it has commissioned VocaLink to build a central database that will allow bank customers to link their mobile phone number to their account for person-to-person mobile payments. Until now, if I wanted to make a payment to another person in the UK, I typically would have to give them cash, write a cheque or make a bank transfer using their bank account details. The recipient would have to share their bank account details (sort code and account number) with me in advance. These new services link the bank account details to a mobile phone number and that’s all I would need to know. Sounds much better, doesn’t it? It does, and Barclays should be congratulated for continuing to innovate and push mobile payments frontiers in the UK. From the first credit card and ATM in the UK to contactless cards, from NFC payments to now mobile P2P payments, Barclays (and Barclaycard) have been spearheading the payments innovation in the UK. However, the first question is why have two initiatives? While Barclays application is targetted at the end consumers, the UK Payments Council and VocaLink database will be a service to banks. It would appear that the Barclays service does not rely on the UK Payments Council initiative and will be asking the customers to register separately. Does it mean these two services eventualy are going to be competitive and the other banks will have to make a choice which one to use? A centralised database is a technically elegant solution, although the requirements for securing such a database are immense. On the other hand, as an individual bank handling the registrations you also want to be absolutely sure that when someone is trying to link their bank account details to a mobile phone, they are definitely the legitimate owners of both. The initial signs that the registration process with Barclays is somewhat cumbersome, perhaps deliberately so, which could yet prove to be a barrier for consumers willing to try this service. According to Finextra, “Barclays claims to have logged 20,000 downloads of Pingit in the first three days after its launch.” It is very encouraging, but these are likely to be only application downloads; it’s not clear how many of these end up getting registered and activated. The actual transfers are done over the UK’s Faster Payments service, where the transfers are irrevocable and final. This puts the onus very much on consumers to make sure that they select the correct mobile number and enter the right amount, as mistakes may not be easily reversed. Finally, it will be interesting to see whether there is a genuine bank account-based P2P market in the UK. The traditional P2P example of “splitting a restaurant bill” is overused. In the UK, a group of friends after a meal would just ask the waiter to split the bill directly on their cards. The more likely users would be small businesses, such as mobile tradesmen (e.g. plumbers), but I suspect it will take some time to displace cash and cheques from that segment of the market.

Mergers, Mergers, Everywhere

Mergers of Core Vendors In a few short weeks we have seen two core consolidation announcements. Misys and Temenos announced a planned merger and now Callatay and Wouters (C&W) is becoming part of the Sopra Group with its Evolan core system. Why the sudden rash of mergers? Will more happen? Core banking is a big decision and there are many multi-billion dollar players in the space: FIS, Fiserv, Oracle, SAP, TCS, Infosys, and SunGard to name a few. Creating software is a game of scale. It is far more profitable to write a piece of code once and sell it 500 times, than 50 times. These lean times have shown the industry that efficiency matters and that bulking up and merging customer bases to single common platforms is the way to go. Misys and Temenos have a clear go forward strategy. C&W and Sopra also seem to have one. Consolidate to a limited set of go forward platforms and sell the heck out of them. Those players that lack scale will not thrive in this newly competitive environment. Misys, Temenos, C&W and Sopra all realized this and acted. We haven’t yet seen that happen in the US market internally. Fiserv has nearly twenty core systems (14 in Credit Union and 5 in banking give or take). FIS has more than a dozen. Development dollars are spread unequally, but regulation and compliance need to be implemented on all live systems. Is it time to rationalize in the US as well? You can see Celent’s view of the core banking systems in a series of reports in the process of being released. The first one out is on solutions for mid-sized global banks.

What do RDC and RCC Have in Common?

What do remote deposit capture (RDC) and remote cash capture (RCC) have in common? Among other things, both RDC and RCC, treasury management products in most banks, can contribute much needed retail bank cost reductions. But, remarkably few banks are enjoying the benefits. Is it because the right hand doesn’t know what the left hand is doing? In conducting research for an upcoming report, I interviewed a number of treasury management product managers responsible for remote cash capture initiatives. RCC describes the deployment of secure, validating currency accepting and recycling equipment (a.k.a. smart safes) at merchant locations coupled with information reporting and provisional credit mechanisms. Merchants deposit excess cash into smart safes and receive daily, provisional credit on the deposits. There are a bevy of merchant benefits by so doing. One benefit is the reduction in deposit activity. An individual store might go from daily, manual deposits to once per week under an RCC scenario. Most merchant locations make cash/coin deposits to a local branch. RCC invites the use of armored couriers instead. Thus, RCC can siphon considerable cash volume away from participating bank branches (where cash is handled manually for the most part) into cash vaults (where cash handling is highly automated). From a cash logistics perspective, RCC represents the best of both worlds. Cash is processed where it can be done most efficiently, branch personnel can focus on sales and service activity, and the bank receives fee income to offset its loss of working capital. Yet, only one bank of the nine interviewed recognized the retail bank benefits of RCC in developing its business case. Only one articulated RCC’s place in its overall currency management plan. The others viewed RCC through the narrow lens of its product P/(L) and nothing more. I’m not here to criticize these product managers. They’re doing exactly what they are paid to do. My criticism lies with senior management for failing to leverage synergies between the retail and wholesale lines of business. This is not an isolated occurrance. RDC offers a slightly less odious example. In a Celent survey among US financial institutions in September, 2011, the vast majority indicated that they offered RDC to treasury management and small business customers alike. So far, so good. Small businesses aren’t known to be great wholesale lockbox clients. Instead, most deposit at the local branch, and many do so simply to make check deposits. Perfect RDC candidates in other words, who self-select by their frequent visits to the local branch. Seldom are product prospects so accommodating. One would think most banks train tellers to recommend RDC to these clients. I wish it were so. Among those who utilize branch staff as part of RDC sales efforts, nearly half indicated that branch originated sales leads accounted for less than 25% of all RDC leads. And, like RCC, rare is the bank that connects the dots between small business RDC usage and the opportunity to reduce branch infrastructure costs. branch-share-of-rdc-leads I don’t suggest that the primary strategic intent in either RDC or RCC lies in cost reduction. Far from it. These examples simply serve to highlight lost opportunity through myopia. We all do it to varying degrees. As small as Celent is, we fail to leverage synergies among our banking, insurance and securities practice areas. We need to train ourselves to look for these opportunities by regularly stepping back to gather a larger view of our businesses and operating practices. Along with occasionally seeking the help of a third party who might provide a fresh perspective. Celent is rather good at that. We just need to learn how to do it for ourselves.

Another take on Finovate

I attended Finovate Europe ( last week – good to see it back. Celent are a partner but even so, having attended the inaugural event last year, it was no surprise to see it both back and at a larger venue. I wonder if next year maybe at a larger venue still as it still seemed pretty full. As Zil mentioned in his blog post, he will be writing a report in the near future, looking at the aspects specifically relating to payments. Therefore I’ll make some more general observations. Finovate is an event that “showcases financial and banking technology innovation”. The format is very different –each slot is told no powerpoint (hurrah!), is only 7 minutes long and, most importantly, is all about pitching businesses. That’s the key for me. When I attend conferences, I find myself giving mental black marks to those organisations who inappropriately pitch their business when its supposedly about thought leadership. I’m not sure all the audience got these points though – I heard several people behind me saying that the presenter would do a much better job at conveying the message in powerpoint – or perhaps it was more a critique of the presenters in question? Another issue was the definition of innovation. Some in the audience were unhappy at the major brands demoing what they had already done successfully. I think many believe innovation to be anything web or mobile enabled, whilst my definition is about doing something different. I would suggest, for example, that some of the greatest innovation is coming out of outsourcing in many ways – they’re enhancing and re-engineering processes to create those savings that the banks seek. I think there is a place for both, though and there is a strong argument that there is less risk in adopting innovation that already works in a different country. The variety was much better this year – last year had too many PFM products. Whilst I get PFM, there are many reasons why it works in the US but not in many other markets, such as the UK. But a discussion for another time! The challenge is that some of the demo’s divided the audience (as I tweeted, one mans’ wow is another mans’ yawn) as either they had no first-hand knowledge of the product and/or the subtlety being addressed. Personally, I like this mix. For those who don’t, might I suggest you look at Celents’ “Model Bank” awards. Here we turn the question round and ask what would it look like for a bank to do everything right with today’s technology. Nominations have just closed, and we will announce the winners at our Innovation and Insight Day. This year it will be in Charlotte, on June 13th – save the date, more details to follow soon!

Corporate Mobile Banking: Revolutionizing Cash Management

There’s been a lot of talk in the market about corporate mobile banking but not that much action. I recently published a new report on the topic and it has been extremely well received. The report examines and analyzes the state of corporate mobile banking. It delves into why mobile banking is important in the cash management space and explains some of the adoption hurdles. It explores security challenges, the role of the tablet, and the convergence of online and mobile solutions. Finally, the report provides insight regarding corporate mobile banking functionality and how financial institutions should go about deploying solutions. Since the report has been published, there has been a tremendous amount of inquiry on the topic. It’s also been the subject of a popular article in American Banker – Large Banks Slowly Building Corporate Mobile Apps: Survey. The ABA Banking Journal also published a Q&A interview with me titled, Why Corporate Mobile Banking is Scary. Needless to say there is a lot of interest in this topic. As such, I’ll be giving a webinar this coming Thursday at noon. I encourage all of you to sign up and listen. The event is free to attend for Celent clients.

FinovateEurope 2012: More Payments and Mobile, Less PFM

Sometimes our blog entries are like London busses – you wait for a while and then two turn up in a row… This is my second entry this week, but I am back from travels and wanted to reflect on FinovateEurope, which happened earlier this week in London. For those who are not familiar with Finovate, it’s an event where companies are given 7 minutes on stage to demonstrate their products and solutions. Many companies are start-ups, although sometimes large and established players are also there promoting their innovations. This was the second Finovate event in Europe and I was privileged to attend both. 2011 was good, but as expected, the 2012 event was even better. Many things stayed the same, such as the format, the number of presenters (35), etc., but it had a much bigger audience (and hence venue) and was even better organised. Without getting into too much detail and specific companies, what were the key take-aways? To help identify key themes, Celent defined the solution categories and assigned individual companies to the specific categories – the assignments, of course, are subjective and based on Celent’s best understanding of the solution demonstrated and what the company does more broadly. Based on this categorisation, last year’s event was dominated by Personal Financial Management (PFM) with 6 companies presenting their solutions in this area, whereas this year, only one firm was firmly in the PFM category. Also, there was only one company that was focused on Financial Advice this year vs three companies last year. This year saw the introduction of a new category – Mobile Platforms, which included five companies focused predominantly on developing mobile platforms which enable banks and other players to develop apps and other mobile services. Payments category grew from six to 10 companies this year, but the definition also broadened to include companies that provide card technologies or services to card companies – as a result, some companies, such as Cardlytics moved from Miscellaneous into Payments category this year. The Payments category also includes PayPal, which is obviously a payments company, although this time it did not demonstrate a payments innovation; instead, it showed a creative way to acquire customers and open new accounts. Overall, 12 of the 35 companies presented in both years, although often with new or enhanced solutions. finovate-chart-11 Celent clients may remember my report Innovative Payment Startups: Bank Friends or Foes? in which I reviewed payments companies that presented at FinovateEurope 2011. I intend to do the same again this year, so look out for another report in the near future.

Misys and Temenos together

The press has reported that Misys and Temenos are likely to merge. I think these two companies make a very good couple with significant overlap in geography, and complementary product sets. Misys customers on Midas, Bankmaster, and Equation have been waiting for a path forward and were recently given BankFusion as a way forward. It is not fully built out, but now T24 presents another attractive option with a much larger customer base than BankFusion. Temenos had T24 model bank (a preconfigured T24 designed for certain target markets) designed for Misys clients. As a single company, it will be much easier for Misys to present viable paths forward in retail and commercial core banking.

Bank Mobile Wallets: NFC or Cloud?

Extensive travel tends to wreak havoc on the usual patterns and the best intentions. As a result, I haven’t yet had a chance to blog about an interesting development first announced a couple of weeks ago. FIS, a large technology and services provider, has announced a new m-payments system, developed in partnership with Paydiant, a mobile technology company. Celent clients may recall my recent report, “What’s In Your Mobile Wallet? Winning the Battle for Mobile at the Retail POS” where I described the four major domains which represent the key battlegrounds for bringing mobile payments to the physical stores in the developed markets. In that report, I suggested that banks are in danger of losing control over POS payments to cloud-based wallet providers, such as PayPal and others. I also said that NFC, despite all the concerns around infrastructure and business models, represents the best chance for banks to keep their payments credentials used at the POS in the mobile world. With the announcement from FIS, it seems that banks can take on the cloud-based wallet providers at their own game. FIS and Paydiant developed a cloud-based solution that can be integrated into the bank’s mobile app and simply requires downloadable apps for consumers and retailers. Because the app resides in the cloud, no payment credentials need to be exchanged at the POS, giving everyone an additional piece of mind and alleviating the retailers from PCI compliance requirements. In the demo showed to Celent in Boston, the POS terminal produced a QR code, which a consumer would scan with his app on a mobile phone, which then triggers the payment transaction. The QR code is only one possible communications technology – NFC could be used instead if both the terminal and the phone were NFC-capable. The payment is done via one of the payment instruments (e.g. a card) that the consumer has pre-registered with the app and the retailer already accepts. The app could also be developed by retailers rather than banks. In fact, the retailers might find the solution easier to implement than banks, as they can control the acceptance side. The banks wishing to use this solution must ensure that there are enough merchants that have downloaded the appropriate app and are willing to let customers use it. All of which points for the need to create and manage a new scheme, one that consumers recognise as they decide which app to pull up on their mobile phone at the POS. Still, I think it’s a very interesting solution and one that allows the FIs and retailers explore the opportunities around cloud-based wallets.

Review: What Corporate Mobile Banking Will Really Mean For Your Bank

I’m just back from the US where I was presenting at our Corporate Mobile Banking event. Unsurprisingly, given the topic, we had a very high level of interest, resulting in a large number of registrations. We also had a first for me – a gate crasher who had to be ejected! Many thanks to all those who attended and who made the event the success it was. I’d particularly like to thank my colleagues Dana and Erica who made it run so smoothly. We took the opportunity to run the event with a slightly different approach than perhaps others would take. One of the benefits of using an analyst firm such as Celent is that we’re able to address questions from multiple angles. Questions rarely come with a binary answer – it depends on who’s asking , why etc. As analysts we are able to provide much richer answers as we discuss the impacts that they have from our particular coverage area. As a result, we had one analyst talking specifically about the subject (Jacob), a second (Zil) who took more of a sideways view and looked at the impact of mobiles on corporates, particularly merchants; and the final presentation (mine) looked at how the linking of payments data with data from corporate mobile banking, using Enterprise Intelligence, could enrich the servicing of corporate clients. Clients are able to login and see any of the slides presented. Jacob will also be doing a webinar on the topic on February 16th (details here: ). This is open to both clients and non-clients alike.