Archives for March 2012

RIM is Dead? Long Live The BlackBerry

Before I get into any detail here, let me confess. I’m a Canadian and a very happy iPhone and iPad user. I’m here to state some facts about why the BlackBerry isn’t going away anytime soon. Sorry Apple fan boys! Last December, I published the report, Corporate Mobile Banking: Revolutionizing Cash Management. The report goes into a lot of detail regarding mobile banking trends and predictions for the corporate market. In conducting research for the report, I unearthed a few key trends that are especially relevant to RIM’s business and to banks:
  • When interviewing bankers regarding their corporate customers’ requirements and desires, pretty much everyone indicated that their corporate clients are almost all BlackBerry shops.
  • About 350 people attended my session on corporate mobile banking at the AFP Conference last fall. This is a conference that is geared towards large corporates. I polled the audience to ask how many are using BlackBerry devices. A sea of hands was raised to the point where it was difficult to pinpoint someone not using a BlackBerry.

What does all this mean? Very simply, BlackBerry emerged as a device for the corporate user, expanded to attack the consumer market, and is now going to have to shrink back to its corporate roots. Don’t get me wrong here, there have been some serious casualties on their end, and they have been unable to keep up and compete in the fast paced mobile world. Fact is though, they are still entrenched in the corporate environment. This leads to several key questions that need to be answered.

  • Can RIM hold onto their foothold in the corporate market? One can easily argue that this is already eroding. Pointing back to my informal survey of the audience at my AFP Conference session, I asked how many of them would be switching from the BlackBerry to something else over the next year. About 35 hands shot up, or roughly 10%. That is MASSIVE erosion, and it has the potential to erode further. However, we all know that large corporations move extremely slowly and it takes quite a bit of time for new devices to be supported, regardless of what the users’ intentions are.
  • Will BYOD (Bring Your Own Device) Knock RIM Out of The Corporate Picture? Likely not. I believe that BYOD is a misnomer as it creates a separation between “church and state” that most people don’t want or like. I could go on about this further, but you will have to read about it in my corporate mobile banking report.
  • Can RIM Maintain its Foothold in the Enterprise Software Market? BlackBerry Enterprise Server (BES) is what corporations use to manage and secure their fleet of Blackberries. RIM has seen the writing on the wall for some time and knows that folks want to switch over and are switching over. Supporting a myriad of devices is a nightmare for corporations and they already have invested in and standardized on BES. In May 2011, RIM announced the acquisition of Ubitexx. This will allow firms with Blackberry Enterprise Servers to support other devices like the iPad or iPhone. It’s a huge and risky move for RIM, but it’s win-win. RIM has accepted the fact that iOS devices are selling like hotcakes to business users; corporations get to stick to the popular, entrenched and secure BES. This also lines up nicely with BYOD initiatives. If RIM can pull this off remains to be seen.

I’m not here to comment on the stock, or anything financial in nature. You can be the judge on if RIM can recover or reinvent itself. And yes, BlackBerry dropped the ball on device and OS evolution. The fact is however, that the BlackBerry dominates in the enterprise and this isn’t going away anytime soon. Banks are going to have to be aware of this as they develop corporate mobile banking solutions. Can RIM maintain its foothold? That’s a totally different story that I invite you to weigh in on.

Reflections on the Commercial Payments Conference

I was lucky enough to speak at the Commercial Cards & Payments Conference in New York last week. May I congratulate Joanne, the organiser, on a great event. I spoke about a topic dear to heart – SEPA, and gave a snapshot of my recent report The SEPA Ripple Effect – Impacting a Non-European Country Near You Soon , with a particular focus on the opportunities for US banks. The response, as always, interesting, ranging from “I’m sure if was as important as you say, I’d would have heard about it” to “why did you have to go let the cat out of the bag!” Of the other presentations, a few were stand-outs, but some posed as many questions as answers to me. In particular, I was somewhat perturbed by comments from a global but US headquartered firm. They’re actively pushing commercial cards as their preferred method to receive payment. We’re not just talking the usual t&e approach here, but for goods and services worth $x0,000’s. They perceive that the ACH doesn’t have the functionality (and in particular remittance data) that a card can offer them. This raises several points. Firstly, to misquote George Orwell terribly, not all ACHs are created equal. In the world of ACH, there are some very clear differences on a country by country basis in functionality and speed provided. The US system has taken a course of low functionality and speed, but at almost unparalleled low cost. Other ACHs take a view that the greater functionality (and therefore cost) generates far more value than the alternative “thin” approach. Its a difficult call. In this case, the corporate was paying substantially more, but receiving they believe better value. Is this a missed opportunity for ACH? Which leads to the second point. I saw many friends from cards world, a number of whom were from sponsors. And how many friends from the ACH world did I see….? We talk about the war on cash, and about checks declining, but often forget about the direct competition between ACH and cards. It doesn’t often happen, but in the corporate payments world it happens most frequently. Banks have sunk significant investments into ACH – yet its cards that are most active.

Why Wholesale Lockbox Belongs in the Headlines

The American Banker published an unlikely article this morning. In its article written by Jackie Stuart, Maryland Bank to Use Wausau Lockbox Service, the article waxed eloquent about the benefits Sandy Spring Bank will realize with its outsourced wholesale lockbox solution. Really – wholesale lockbox making headlines? A 50 year-old product? I was encouraged to see the article for two reasons. Wholesale lockbox (WLBX) is traditionally associated with the largest banks. Sandy Spring Bank is a $3.7 billion asset financial institution. Not long ago, wholesale lockbox would be a rarity among banks of that size. Image workflow and check truncation changed all that. Now, a number of solution providers offer flexibly outsourced solutions making a wholesale lockbox product offering viable for small banks. Observing this opportunity, all leading remittance processing software platform vendors now offer outsourcing services. After all these years, the market opportunity for wholesale lockbox services remains significant. While the majority of large corporations already use bank WLBX services, WLBX adoption falls markedly with the size of business – particularly among businesses with annual revenues below US$250 million. wlbx-oppty Processing efficiencies from image workflows and hub and spoke processing models enable lower price points than a short while ago. Moreover, since extraction and image capture can be geographically separated from lockbox processing, competition among outsource processors knows no geographic bounds either. This is good news for banks and fits well with the idea of WLBX adoption moving down market. With checks likely to dominate business-to-business payments for the medium term and WLBX is here to stay.

How Do You PayATrader?

Earlier this week, Payatrader announced launching a card processing service aimed at the UK small businesss across a broad range of trades, including builders, carpet cleaners, locksmiths, pest control, window cleaners, mobile mechanics and decorators. The home service providers and traders market has been underserved by the payments community in the past and is often quoted as an example target market for new payments innovations, so it’s good to see an actual live solution aimed at that market. This market segment was identified by the UK Payments Council as an important user of cheques, and while there is no longer a formal commitment to get rid of cheques in the UK, all efforts to move away from paper-based instruments are welcome. Of course, the competition is heating up – P2P solutions, such as Barclays’ PingIt, can be used in this context. The likes of Square and other US-based players with “dongles” are designed to work with mag-stripe cards and are therefore less suited in the EMV environment, but the corresponding EMV solutions, like iZettle are also coming to the UK. And Celent has had a number of discussions in the market about potential mobile invoicing and payment solutions targetting the traders. Payatrader is a different kind of a card acceptance solution. It aggregates small merchant transactions and enables the merchants to accept cards without monthly fees, one of the barriers for merchants with relatively low volume of transactions. However, monthly fees are not the only barrier – for someone who is used to cash and cheques, suddenly paying per-transaction is a big mental obstacle to overcome. How quickly the traders get the money is another concern – cash is instant, whereas with Payatrader they have to wait on average 10 days to settle. And it’s no secret that customers often get quoted a significant discount for paying in cash. So, while all solutions that can help this market segment migrate away from cash and cheques are welcome, it will be interesting to see how quickly Payatrader can get to a critical mass of merchants and consumers.

Which Way for Debit in Europe?

I recently published a report titled “In Search of a Third European Card Scheme: Time to Move On,” in which I claimed that most of the initiatives aimed at establishing an alternative to Visa and MasterCard were unlikely to deliver a viable solution any time soon. I also said that the arguments for having such a scheme in the first place are simply no longer there. Some arguments never really stacked-up to begin with, and others are being destroyed by the emergence of new technologies (e.g. mobile) which provide stiff competition to the card schemes in a different way. The report seemed to strike a chord with many, as it generated a lot of interest from clients, press and others in the industry. It was interesting to see vindication of these ideas at a conference I attended in Barcelona last week, Cards and Payments 2012, organised by the Axiom Grouppe. I chaired Day 1 and also presented on payments innovation. We also heard from Visa Europe on the progress of its V Pay product and a very interesting case study from Luxembourg, one of the latest examples of a trend of banks in a given European market deciding to shut down their local debit scheme and migrate their debit portfolio to a different product. Banks in Luxembourg did exactly that during 2011 – decided to stop supporting bankomat, their local debit scheme, and migrate to V Pay instead. They said they did a thorough investigation of various available options and found that none of the potential contenders for an alternative scheme could deliver on their requirements. Conferences such as this are also a great reminder (if one was needed) of the diversity of Europe. For example, V Pay is based entirely on chip and PIN with no magstripe compatibility. In other words, it doesn’t work at non-EMV POS terminals or ATM’s. Personally, I would be mortified if I couldn’t use my debit card to withdraw cash in the US or anywhere else in the world, as I would be charged an arm and a leg by my credit card issuer if I made a cash advance on a credit card. Many Europeans pay annual fees for their credit cards, but get different services, such as cash withdrawal allowances as part of the package. They are quite happy to know that they have a very secure debit card for their day-to-day needs across Europe and rely on credit cards elsewhere. V Pay has been designed to be a debit product exclusively for Europe right from the outset. However, it’s relatively modest progress (16.6m cards issued, 68.9m cards committed almost 5 years since launch) only serves to higlight the difficult, and often political, decisions banks have to make when determining the future of debit for their market.

The Battle For Transaction Rewards

Last week Zil Bareisis posted a great blog entry regarding American Express’ Tweet Your Way to Savings Program. It’s a mighty interesting concept and provides quick cash back rewards to cardholders. It raises a few relevant questions for me:
  1. Are social rewards a passing fad? While this Amex/Twitter hookup received a fair bit of attention is it going to stick? It reminds me of a SPG promo announced about a year ago that offered 250 Starwood points for every Foursquare checkin during a hotel stay. Being a regular traveller, I tried this a few times and received some bonus points. I’ve since totally forgotten about it, and I am a points junkie! I don’t have any hard stats but I’d wager that usage of this promo has dropped off. Will the Amex/Twitter offers follow the same fate? There are hard dollars and a larger number of merchants involved here (see list of Twitter offers here) so it’s a tad different.
  2. Do social rewards increase brand loyalty? Everyone likes a good deal these days but how much loyalty is this actually creating? Would you, for example, switch to McDonald’s from Burger King in order to cash in? Would this create additional loyalty towards Burger King?
  3. Will social rewards drive folks to regularly transact using Amex cards (over another payments vehicle)? There is a battle brewing between merchant rewards online banking solutions and American Express. As Zil noted, there are quite a number of vendors in this space. Cardlytics in particular has been successful at penetrating the large bank market and has also formed partnerships to deploy via Intuit and Fiserv. The Amex/Twitter program is a direct attack against online banking merchant rewards. It’s but a blow in what is going to be a drawn out battle to own the transaction.

There are lots of questions for the moment and not a lot of answers given the immaturity of this space. I welcome your thoughts and comments.

A New Player in Small Business Online Banking. What The Intuit/Bottomline Deal Really Means

On March 5th, Bottomline Technologies and Intuit announced an interesting deal. There are two components to the deal:
  • Bottomline acquires Intuit Financial Services commercial banking business for $20 million
  • The two firms have formed a partnership and will work together “through cross promotions, referrals and joint sales efforts to deliver innovative solutions for financial institutions of all sizes.”

Several Celent clients have contacted us to gain a better understanding of this deal and what it means for the market. I interpret this in a very straightforward manner:

  • Bottomline has lacked a small business offering and now they have one. This now allows them to attack an additional segment of the business market. It also allows them to move downstream to work with smaller financial institutions and their small business clients
  • Intuit is a small business powerhouse, and although they sold off their “commercial banking” business I have no doubt they will continue to tackle the small business market. What’s interesting here is that although the assets they sold have been labelled “commercial” and have some commercial capabilities, they are in fact being used by plenty of small businesses. Celent has reviewed Intuit’s solution as a small business solution, based on the size and nature of their current bank customers. It will be interesting to see how Intuit’s consumer online banking solution will evolve in order to serve micro and small businesses. I see Intuit paying extra attention to the small business market moving forward, so even though they sold off some assets this is still a player to watch.

Breaking News…..

….Gareth Lodge will NOT be launching a mobile payment, mobile wallet or alternative payment scheme! It sometimes feels though that everyone else is. PayPal Here is the latest development in the market. Some early comments are suggesting that its too little, too late. I think it would be rash to write it off quite yet. Square has certainly made impressive progress so far, with statements that they are processing over $4bn a year. Now, that’s a long way off the mainstream payments processors – the ACH I worked for processed considerably more than that in just one day, and that wasn’t counting the ATM transactions. But for a start-up that is impressive, and equally that volume is coming from somewhere. Even if its cash, its impacting someones business somewhere. The focus of discussions to date has been on the creation of new payment types and schemes. A discussion for another time includes whether that’s true (some are actually channels or wrappers), what a scheme actually is (something that is very important, as it leads to the governance and safeguards) and frankly, who other than payment geeks like me and whoever is sad enough to read this blog! In reality, as Zil rightly and frequently says, “new payment methods have to satisfy three parties – merchant, consumer and the provider”.
  • A consumer doesn’t think about payments other than when they don’t work or something goes wrong. The obvious analogy is plumbing – unless there is a leak or water doesn’t come out of your tap when its supposed to, it just is.
  • Providers are fighting a turf war. They recognise that they missed opportunities in the nascent days of the internet – we all know those banks who passed on buying PayPal… Mobile is perceived as a new opportunity. Again, a topic for a whole discussion on its own. I fondly remember seeing a presentation entitled “Waiting for Godot”, saying that we were too unrealistic in our forecasts for mobile payments, but it would be another 5 years yet. The date? 2001….
What is interesting with Square, is that it is a proposition for all concerned, and PayPal builds on that. The things that I think make it interesting include:
  • The brand is global and established – Visa & MasterCard didn’t get to where they are today without spending a huge amount. Of all the competitors to date, few if any have that recognition factor.
  • Multi-payment type – the inclusion of PayPal (natch!) and RDC adds to the attraction to merchants and consumers
  • Established customer base – lets not forget where PayPal came from, so cost of sale in theory could be lower.
  • Building out the proposition – the inclusion of a business debit card is very canny. You still need to get money out of the “system”, so what better than controlling that channel too?
  • Multi-country launch. EMV concerns aside (i.e. the plans that credit cards in Europe won’t even have a mag stripe to read!), it demonstrates that the proposition being built is much, much bigger than its competitors. I have no insider knowledge but it feels “watch this space” to me.
Down sides? Many, and many are common across all the competitors. The one I would single out as being unique is the reserve issue, which has recently been amended. On one hand the business debit card allows “instant” access, yet it doesn’t truly act as a business bank account or even a merchant card account. For many, it won’t be an issue, but for some it may pose significant risk. Whatever your take on how successful it will be, coupled with other announcements over the last year, PayPal is signaling a clear intention to be a mainstream payments network, rather than “just” an online payments provider. It’ll be interesting to see where the journey goes next. A debit card to access your money where money has been received… isn’t that a bank account….?

Merchant Rewards and Cards

Last week American Express announced that it would be offering its cardholders the ability to sync their plastic cards to Twitter. When the customers tweet using special offer hashtags, couponless savings are loaded directly to their cards. This seems to be the latest in a number of developments by established players as well as new companies, all aimed at making it easier for merchants to offer relevant discounts or gifts to consumers by linking them directly to their existing payment instruments, most often cards. This clearly has benefits to the merchants who are able to better target their marketing spend. It also benefits the financial institutions which are able to offer their cardholders tangible rewards without significant expenditure on their part. In fact, sometimes, they even see the direct revenue benefit from participating in such arrangements. And the evidence to-date seems to indicate that consumers like it as well. Is this the way forward for card rewards? Will these merchant-funded rewards replace cash back, “miles” and other more traditional card loyalty schemes? How should banks think about these programmes? Which partners should they be working with? There are a number of companies in this space, from established players such as FIS and First Data, to relative newcomers, such as Cardlytics, Cartera, FreeMonee, BillShrink, Offermatic, Linkable Networks (formerly Clovr) and others. However, even though they appear to be offering similar services, they often have subtle, but important differences in their value proposition to at least one of the key parties (merchant, bank, and consumer.) And we suspect that they differ in their customer reach as well as technical or servicing capabilities. Merchant-funded rewards will be on the research agenda for Celent in the next few months. We intend to conduct a detailed review of the key players in this space. If your company is offering relevant services and would like to be reviewed in our research report, please don’t hesitate to contact me at

6.13.12: Celent Banking Event: Fifth Annual Banking Innovation & Insight Day

Celent senior analysts, Banking Group This event is free for Celent clients and the media. Non-clients can attend for a fee of USD $495. Space is limited, so pre-registration is required.

Please click here for more information.