Archives for September 2012

Bank Websites Under Attack!

A rash of denial of service attacks hit major US banks this week. These are scary incidents that wreak havoc for banks and their customers. For now at least, these attacks appear to be limited to online sites, and are therefore interrupting the online banking activities of the US public. Online banking is a mainstream channel – one that cannot be interrupted. Furthermore, online disruptions shake consumer confidence and can damage a bank’s reputation – financial institutions are trusted entities that are supposed to be safeguarding assets. If they can’t keep the front door locked, what does this mean for the deposits stored on the inside? What can financial institutions do and what does this mean for customers?
  • Reassure and communicate regularly with the public. This was a serious issue when Chase had a major web site outage last year. Tweet, get onto Facebook, reply directly to customers. Don’t just listen, watch, or provide generic replies with basic info. Address customers, point them to channels that do work, direct them to nearby branches, have customer service reps call them. This is easier said than done as call centers are overloaded. PNC, the latest bank to come under attack has but a handful of tweets today – all very generic.
  • pnc

  • Be prepared for round two. Right now these attacks appear to be concentrating on bank web sites. Could a completely different type of attack (e.g. a data breach) take place in the next round of cyberwarfare? Banks definitely have to be on the lookout for this. It wouldn’t surprise me to see hands try to enter the cookie jar in an attempt to steal customer information and/or assets. This isn’t happening right now, but banks have to be prepared for what could happen next.

No matter how you look at this, these attacks are terrible. We live in a world where consumers have come to rely on digital transactions (and they should). Attacks like these shake consumer confidence, and eat up precious bank IT dollars that are already quite scarce. Please feel free to chime in with your comments.

User Experience Matters

Temenos is realizing that customer experience is very important to the banking industry, at least as important as core systems. Given the trend of customers interact with their bank via the Internet or mobile as often as call center or branch, a soup to nuts technology provider needs to provide best in class user experience across all channels. Temenos acquired edge IPK in order to improve their offering in the channels. They’ve invested in the past creating the ARC solution, and will undoubtedly use edge IPK to enhance that offering. This acquisition is somewhat reminiscent of the acquisition of Chordiant by Pega. Chordiant had bank specific technology to help with user experience across multiple channels. Pega was selling their platform into financial services and wanted to improve the offering with more financial services specific content. Both firms realize that customer experience is becoming more and more important as customers interact directly with the banking technology via a myriad of devices.

10.16.12: Celent Asia Webinar: Core Banking Solutions for Small and Midsize Banks in China

Celent analyst Hua Zhang 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.

Oracle Announces a New Core System

Oracle today announced its new core system, Oracle Banking Platform. Why on earth would Oracle develop a new core system apart from its very successful FLEXCUBE? The answer is one size does not fit all. FLEXCUBE is the original bank-in-a-box solution, developed for Citi as an international branch solution, and later known as FLEXCUBE Universal. It has grown from that platform to a second code base FLEXCUBE Retail for mass retail markets. Oracle has been merging the retail and universal banking code bases to a single FLEXCUBE solution. While the solution is a very good fit for international branches and small and midsize banks it doesn’t really have the right architecture for a large bank in its home market. What Oracle has been working with National Australia Bank to develop is the Oracle banking platform, designed for a very large bank in its home market. What specific architectural features are required for such implementation? First and foremost the product needs to be exceptionally modular. A large bank will want to move stepwise with a major core project. That could mean that the bank only once replace a portion of their core system, perhaps customer information file or core deposits. This system will need to harmoniously coexist with the remaining infrastructure at the bank. Alternatively the bank may want to replace the entire core system, but not undertake the risk involved in migrating all in a single fell swoop. This also requires a very modular architecture. Large banks will not settle for best-of-suite solutions, so each module of the Oracle banking platform needs to be able to compete (or integrate) with a best-of-breed solution. Oracle also built this solution from the ground up to optimize implementation on the Oracle stack: Exadata storage, Exalogic processing, Fusion Middleware, and the Oracle database. Surprise! The Oracle Banking Platform is designed with SOA and integration in mind from the start. FLEXCUBE was not. This is clearly a play for the largest few hundred banks in the world in home markets, and was designed with that target in mind.

Finovate Fall 2012 Recap

I spent part of last week at Finovate Fall in New York (Celent is a proud Finovate partner). I always love the Finovate events – they provide me with a front row seat to examine the latest and greatest in banking technology. I’m primarily interested in companies showcasing emerging technology, and understanding how these technologies and solutions can be harnessed by financial institutions. I’m also really interested in firms that are coming way out of left field – in other words, demonstrating novel approaches to solve consumer challenges. Here are my favourite 7 minute demos (in no particular order): Shopkeep POS. An iPad based POS system complete with inventory management, mobile payments support, and reporting/analytics tools. LearnVest. An online tool for creating and managing a financial plan. Offers a fee-based service to connect you with a financial planner with relatively reasonable pricing. The Currency Cloud. Provide a cross-border payments and forex solution via an API. The API can be used by firms looking to provide cross border payments services. Innotribe Startup finalist TransferWise is an example of a firm that is utilizing this API. Personal Capital. I’ve written about how mass market PFM simply doesn’t work. Personal Capital is basically a wealth management PFM with a super slick UI (online, mobile, tablet). Dashlane. I like shopping online, but despise the experience of shopping using my mobile phone. Dashlane presented an elegant solution to streamline the experience. I’m not a great fan of data being stored locally on the device (encrypted). Most innovative Company:

C.K. Mack. An online investment tool that allows users to invest in real estate income properties. I really love that this is different, but I actually dislike it from an investment angle (per my tweet):


Most Overrated Demo:

MoneyDesktop. This PFM player caters to smaller institutions via a range of partners. To be fair, I really like the MoneyDesktop solution and user experience. I especially like that they have synchronized their solution across online, tablet, and mobile. What I didn’t like was the “bubble budgets” that everyone at the show was raving about:


I got a lot of flack from others about this comment, but hey, to each his own. There is so much more to PFM and what should be encompassed in next gen PFM and online banking. MoneyDesktop has some of that going on, but the demo focused on these bubbles complete with dueling iPads – highly entertaining, but not what I would call innovative or game changing. If you want to learn more about next generation PFM and online banking, come out to my BAI Retail Delivery session on this topic.

Thanks to Jim, Eric, and team for another great Finovate event.

All change!

I think when I predicted at the beginning of last year that there would be consolidation in the vendor part of the payments business I was confident that it would happen. Hand on heart, I’m not sure even I expected some of the changes that have actually happened. We of course had the “love triangle” of ACI, S1 and Fundtech, which eventually saw ACI & S1 hooking up, and Fundtech & Bankserv joining together. This week saw the announcement of the purchase by Distra by ACI. We’ll find out the details and rationale behind it this week when the deal closes. I know Distra well, but for those of you less familiar with them, they’re (amongst other things) the beating heart behind the UK Faster Payment System. They were chosen because of the speed at which they can process payments, yet they still met the essential need of the levels of reliability required in payments. What struck me was the contrast of another deal that took place this week. That was the fundraising of an additional $200m by Square, which in essence valued Square at c. $3.25bn. Was the Square deal really that much more valuable than Distra? At $48m, Distra to me seems a bargain. Square has innovated at the point of interaction with the customer. It has made acceptance more, well, acceptable, opening up a whole new market. But it’s still a wrapper on an existing system, using the same rails as before. That’s not a criticism – innovation needs to be incremental to be adopted, and in a space where not has really happened for many years. On the other hand, Distra could “turbo-charge” what happens in the back office, making real time, multi-platform interaction possible. Customers expect instant 24/7 service, and this could enable it. The challenge will be that speed is only as fast as the slowest point in the transaction, and that is usually the banks other systems, which are still batch and industrial. But for those banks that have made the transition to modern, SOA based systems, they stand to reap the benefit. I understand the valuations as an investor. But as a payments professional I certainly know which one was the more interesting.

And in the NFC Corner: Casino Supermarket in France

Just as Apple was announcing that its latest iPhone 5 would not include NFC (see my previous blog), NFC World reported that Casino, a large supermarket chain in France announced opening the “world’s first NFC-enabled supermarket.” The products would have NFC tags, which could be scanned by customers with their NFC-enabled phones in order to get product details, add items to the shopping basket, and, ultimately, check out at the till. So, how significant is this for NFC payments? While the Casino supermarket talks about enabling NFC payments in the future, at the moment its focus is on using NFC tags to provide information about the products and to scan the items to add to the shopping basket. These are two distinct and valid uses of NFC technology, both of which have been implemented in the past, with NFC and without. Last year, Museum of London has partnered with Nokia to deploy NFC tags so that visitors with NFC phones could enrich their experience and get more information about the objects they see. Scanning items to add to the shopping basket has also been done before:
  • The UK supermarket chain Tesco had a big success in Korea with its virtual shop displays in the train stations, which allows commuters to scan the items they want with their phone and have purchases delivered to their home. QR technology was used there instead of NFC.
  • In the US, Wal-Mart has just announced a phone app which would allow the shoppers to “scan & go”.
  • And in the UK, Sainsbury’s has had a way for shoppers to scan items as they load them into a shopping trolley for a few years now. Once registered, the shopper can take one of many available portable barcode scanners at the entrance and scan the item before putting it in the trolley. When done with shopping, they go to a dedicated lane and don’t have to scan their items again – just present the scanner to the register for the total, and check out in a normal way. To “encourage honesty”, there are random checks when you might be asked to re-scan all the items as you would at a regular till. Personally, I tried it a couple of times, and found that I didn’t like having to carry around the scanner (the phone would not have made any difference) and always think about scanning every item as I put it into my trolley for the sake of saving a few minutes at the checkout. It would be interesting to see some statistics; anecdotally, I see some people using it, but it must be single digit percentage of shoppers.
My point is that the emphasis here is less on payments, but more on the shopping/ retailing experience and while NFC might be a valid technology to improve that experience, there are many other ways to achieve the same objective.

So Now We Know For Sure – No NFC in iPhone 5

Yesterday Apply confirmed what many of us speculated on for months – iPhone 5 would not have NFC capability. It’s a beautiful phone – slim, elegant, with many attractive features, and no doubt will sell very well in the market. However, the payments industry was mostly interested in the question of NFC – “will they or won’t they?” The answer matters because as the single most popular smartphone, iPhone has significant power to influence the market sentiment. The inclusion of NFC would have been seen as an important endorsement of technology and would surely have given impetus to NFC deployments around the world. The fact that Apple chose not to include NFC keeps the questions open about what technologies will ultimately prevail when it comes to exchanging payments credentials and other information at the POS. Apparently, there are two main reasons for not including NFC at this stage. The first is that the focus this time was very much on getting the phone as slim as possible and NFC would have detracted from that. As laudable as that objective is, I think it is the second explanation that was the determining factor – Apple didn’t see the need at this time. Apple’s Senior VP Phil Shiller was reported saying that “Passbook does the kind of things customers need today”. Apple are known for only including technologies in their products that they believe would be widely adopted and used by the customers right away. And, as we all know, NFC today suffers from not being “immediately useful” given the lack of capable terminals and other relevant infrastructure. Just to be clear, (as far as I know), Apple has not made a statement that they would not support NFC in the future. However, it is a statement that the ecosystem needs to develop further before Apple decides to throw its weight behind NFC.

It’s That Time of Year Again – Conference Season!

There are lots of conferences this fall, so I decided to post a brief entry as a follow up to Zil’s post about conference season. Fall is an extremely busy time for analysts and this year is no exception. Here is where you can find me over the next little while: Finovate Fall. I’ll be representing Celent at the event in NYC from September 12-13. I should also note that Celent is a Finovate Partner. BAI Retail Delivery. This year BAI heads to Washington, DC from October 9-11. The entire Celent banking team will be in attendance at BAI. I’ll be moderating a discussion panel titled, Not Your Father’s PFM, with panelists from Bank of Montreal, Bank of America, and Bank of The Internet. AFP. This corporate banking conference will be held in Miami from October 14-17. I’ll be in attendance along with Bob Meara and Gareth Lodge. Please drop us a note if you would like to meet up at one of these events. Happy conference season!

UK’s Oscar Gets a Green Light from Europe

Another day, another interesting development in the mobile payments space. It was announced today that the European Commission “unconditionally approved” “Project Oscar”, a joint initiative between the leading UK telco operators to bring mobile payments to the UK. Earlier this year, the EC decided to investigate the venture’s plans citing competitive concerns. It’s clearly a welcome news to the operators. However, now that they are free to proceed, it will be interesting to watch what will actually emerge as a result. One of the key questions is how the individual efforts of each operator will fit with the JV plans. While the EC was probing Oscar, each MNO participating in the JV struck individual partnership deals with payment schemes (e.g. Vodafone and Telefonica (O2) with Visa and EverythingEverywhere with MasterCard) and some have launched their own wallets (e.g. O2 Wallet). Are we to expect another mobile wallet similar to Isis, this time from Oscar? Or will the JV focus its attention first on developing adjacent commerce services rather than payments – for example, targetting merchants with a proposition to bring their offers and coupons to a wide consumer audience? And what does that mean for the UK banks? As the experience elsewhere shows, collaboration is not easy. The Dutch version of a bank-telco consortium known as Sixpack has disbanded earlier this year. And the launch of Isis in the US has been delayed, although it is now expected to be launched this month. Lets hope Project Oscar has a recipe for success.