Neil Katkov

About Neil Katkov

Neil Katkov, PhD, is the Senior Vice President of Celent's Global Asian Financial Services Group, based in the firm's Tokyo office. His areas of expertise include the Asian financial services industry, financial services distribution channels, and compliance issues including anti-money laundering and business continuity planning.

On the cusp: regional integration in Asia

On the cusp: regional integration in Asia
It’s 2015, the mid-point of the decade and a good time to start looking at major trends in Asian financial services over the next five to ten years. One of the major themes will be regional integration, which is another way of saying the development of cross-border markets. There are at least two important threads here: the ongoing internationalization of China’s currency, and the development of the ASEAN Economic Community (AEC) in Southeast Asia. RMB internalization is really about the loosening of China’s capital controls and its full-fledged integration into the world economy. And everyone seems to want a piece of this action, including near neighbors such as Singapore who are vying with Hong Kong to be the world’s financial gateway to China. The AEC is well on its way to becoming a reality in 2015, with far-reaching trade agreements designed to facilitate cross-border expansion of dozens of services industries, including financial sectors. While AEC is not grabbing global headlines the way China does, we see increasing interest in Southeast Asia among our FSI and technology vendor clients. From Celent’s point of view, both trends will open significant opportunities across financial services. In banking, common payments platforms and cross-border clearing. In capital markets, cross-border trading platforms for listed and even OTC products. In insurance, the continued development of regional markets. Financial institutions will be challenged to create new business models and technology strategies to extract the opportunities offered by regional integration. It’s the mid-point of the decade, and the beginning of something very big.

Quotes from the Innovation Roundtable

Quotes from the Innovation Roundtable
They said it couldn’t be done, but we held the latest installment in Celent’s series of innovation roundtables in Tokyo recently. Our innovation roundtables put the focus squarely on interactive discussion among the participants. This is a relatively untried model in Japan, where events typically take the form of conventional conferences with presentations. We’re glad we tried it though, because we got a very interesting line-up of firms. Participants included the whole spectrum: banks, capital markets firms, and insurers; Japanese and foreign firms; traditional mega-institutions and alternative new entrants. The discussion was lively; below are some quick notes I took of some of the more interesting comments made, to capture a bit of the flavor of the day. Why Innovate? “Innovation is not the goal, it is a method and a tactic.” “We need to innovate because it has become difficult to differentiate us from our competitors.” “In today’s environment, innovation is necessary if you want to stay profitable.” Paths to Innovation “Incremental innovation is an axymoron. You can’t innovate by increments; innovation requires a big bang change.” “It might be possible to rearrange existing elements to create something new.” “When to innovate? If our clients think a new service is interesting, we try and create it for them and see if it succeeds.” “Innovation needs to be business driven.” “Financial institutions need to have an innovation division; an incubation unit that accumulates ideas from throughout the company.” IT and Innovation “IT is not the impetus for innovation, but because IT inevitably evolves, that creates need for innovation.” “Legacy is a barrier: it is hard to throw things away.” Cultural Challenges “We need to justify ROI on any investment each fiscal year. It is hard to show this on an innovation project.” “If you think about it, financial institutions don’t even have R&D departments.” Quote of the Day “Changing company culture is really about changing oneself. I personally enjoy innovation and change. Innovative culture is about getting a bunch of people together who enjoy change.”

Chase Website – Down Again

Chase Website – Down Again
Just about one year ago, the Chase website suffered a major outage. Today, chase.com is down again, this time with a revoked security certificate:

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This is a major issue, as no bank wants its customers to be presented with the message, “you may be communicating with an attacker.” This is how the browser (Google Chrome) explains the message:

“When you connect to a secure website, the server hosting that site presents your browser with something called a “certificate” to verify its identity. This certificate contains identity information, such as the address of the website, which is verified by a third party trusted by your computer. By checking that the address in the certificate matches the address of the website, it is possible to verify that you are securely communicating with the website that you intended and not a third party (such as an attacker on your network). In this case, the certificate presented to your browser has been revoked by its issuer. This usually means that the integrity of this certificate has been compromised and that the certificate should not be trusted. You absolutely should not proceed past this point.”

It’s unclear at this stage what exactly has caused the problem. This is a major concern to customers who use Chase online banking to pay bills and transfer funds. If Chase doesn’t resolve the issue shortly, it could cost them a pretty penny – they would have to reimburse late fees incurred by customers unable to access online bill pay.

The last time the site went down, Chase told customers that the site was down for “scheduled maintenance” when in fact it was revealed much later that the problem was a software error caused by a third party. Twitter was ablaze with irate customers wanting answers. It was a PR nightmare, one that hopefully will not happen this time around. Hopefully Chase will provide some information shortly and notify customers about what is going on.

UPDATE 1:10 pm: It appears the site is back up.

Bank IT Spending: What Does 2010 Look Like?

Bank IT Spending: What Does 2010 Look Like?
Celent has been receiving a truckload of IT spending questions. This is no surprise, and we usually receive these inquiries at this time of year. Things are a little bit different though this year as after a rough 2009, folks are curious as to if the figures are on the uptick in 2010. I wrote up an article for Bank Systems & Technology in late December that provided a preview. The good news is that our annual IT Spending report series has been released and all the juicy details can be found inside. The short answer is yes, bank IT spending is on the uptick. North America is a perfect example. Although there was a decline in North American IT spending growth (from 3.1% in 2008 to a mere 1.7% in 2009), it is now on the uptick. IT spending growth is expected to be 2.2% in 2010. North American bank IT spending will grow from US$50.3 billion in 2009 to US$51.4 billion in 2010. It will continue to grow over the next few years to reach US$55.2 billion in 2012. Although 2010 has the potential to be the start of a turnaround, let’s not forget that there is still plenty of uncertainty in the industry and we are not completely out of the woods. I encourage you to read the following new reports and I welcome your questions and comments.

Can the Huffington Post persuade consumers to sever their relationships with large banks?

Can the Huffington Post persuade consumers to sever their relationships with large banks?
Late last week the Huffington Post published an article called, Move Your Money: A New Year’s Resolution. It’s an interesting read, and is attracting a lot of attention in the online world. The folks involved went ahead and setup a web site, www.moveyourmoney.info. This site allows individuals to search for a community bank in their neighborhood. Can this site and popular article persuade the masses to move away from large banks? I think it is making a lot of people think more seriously about their banking relationship but I doubt that it will have a noticeable impact on the large banks. I also think it is a great way for community banks to market and promote their offerings. Celent identified a trend back in late 2008 that pointed to consumers opening up additional accounts at smaller financial institutions. This practice is still ongoing. This doesn’t mean that consumers have severed ties with large financial institutions. It is more of a step toward increasing personal financial security by spreading funds across multiple banks and establishing secondary banking relationships. What intrigues me the most about the Huffington Post article is the interest it is generating both online and offline. I was quoted in the American Banker this morning regarding the social media implications of the Move Your Money campaign. Influential web sites, bloggers, etc. have the ability to pass along powerful messages to the public and persuade decision making. Banks can do the same as many have the audience, but they aren’t exploiting the potential. They need the right mix of message, products, customer service and pricing. A tall order for banks, particularly some of the the larger ones.

Buy a TV at TD Bank?

Buy a TV at TD Bank?
TD Canada Trust recently launched an interesting web site called Shop MyAXS. It is an online shopping site that can be accessed only by TD Visa cardholders. In order to purchase an item, the user must enter their TD Visa account number and create a username and password. The site claims to offer savings of up to 50% off brand names to eligible shoppers. TD appears to have signed up for a loyalty program with a firm called MyAXS. MyAXS offers the online shopping portal and passes along the discounts to members.

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I find it curious that a bank would like to extend itself into the retail business. Granted consumer cards are used for retail purchases, but positioning the bank as a place to shop online is a completely different matter. The big question here is can TD encourage consumers to switch to a TD Visa by offering them shopping discounts? Even if customers do sign up for a TD Visa card, offering them a single deal or a handful of deals is not enough to encourage customers to alter their affiliations. Can it be used as a carrot? For sure. However, the features and rates of TD Bank’s cards would have to be extremely compelling in order for customers to switch. In fact, I would argue that TD is more likely to attract one-off deal shoppers than a loyal contingent of converts. It is also a nice feature/perk for existing cardholders.

TD also promotes the MyAXS offering on its own web site, buried in a section called “Related Services.”:

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Demystifying Social Media and Next-Generation Online Banking

Demystifying Social Media and Next-Generation Online Banking
Last week, just in time for the BAI Retail Delivery conference (see my conference summary here, and Red Gillen’s great P2P payments observations here), I released a report called, Demystifying Social Media and Next-Generation Online Banking. The report has been receiving a lot of attention as social media is a subject that is on the minds of many financial institutions. The overwhelming majority of banks don’t understand or know what to do with social media. Social media activities need to be blended into a bank’s day-to-day activities and customer relationships. They also need to be integrated into online banking and a bank’s website presence. The days of pushing data and information out to the consumer are over. It’s now a two-way street, and banks should capitalize on the stream of data, information, and interactivity that is headed their way. Some banks are doing this, most are struggling. This is a subject that banks cannot ignore. The report presents several scenarios and gets into detail about what banks should and shouldn’t be doing on Twitter, Facebook, communities, their own web sites, etc. The report also provides details about how non-banks in the financial services industry are harnessing social media. This is described by presenting a case study on SmartyPig, a firm that has blended social media with next-generation online banking. I encourage you all to take a look at the report. I am of course interested in your feedback and comments. Please feel free to post them here.

Live From BAI Retail Delivery

Live From BAI Retail Delivery
I arrived in Boston on Tuesday for the BAI Retail Delivery conference. I have been attending this conference for a number of years and it typically provides me with a good stream of exciting and innovative information and solid meetings. While my calendar is booked solid, and I have had good meetings with clients and prospects, BAI has been a bit of a letdown in terms of new and innovative announcements. I must admit that I am not terribly surprised by this given the state of the retail banking industry. The state of the industry has also taken its toll on conference attendance. While I have not seen registration numbers for the show, the exhibit hall is noticeably smaller and banks attendees are few and far between in a sea of vendors and solution providers. Additionally, several large vendors have decided not to set up shop in the exhibit hall this year – NCR and Diebold are prime examples. One of the most bizarre announcements at the show came from Suntrust and Moneta. Moneta is attempting to take on Paypal in the eCommerce world. Their service allows customer to pay for goods at online merchants using Moneta. The challenge is that Moneta simply doesn’t have a large enough presence at merchants or a recognizable brand. It is highly unlikely that they will be able to oust the credit card or Paypal as the payment vehicle of choice. Having Suntrust as a partner will not improve their chances. A few key themes have emerged from the conference however that are worthy of mention. Here are a few that I have selected: P2P Payments have invaded the banking space and the mobile channel. Paypal’s X Innovate conference is taking place at the same time as BAI. Part of me thought I was at the Paypal conference with the number of P2P payments related press releases that came out. Paypal has opened up a set of APIs and announced an offering dubbed “Paypal X.” This brought out a couple of releases at BAI: S1 has teamed up with Paypal to deliver a mobile P2P payments solution FIS partners with Paypal to integrate P2P functionality into online bill payment Paypal isn’t the only one at work here: Cashedge and Firethorn also announced a mobile P2P offering Fiserv plans a P2P payments service Bank PFM solutions are on the way. It would have been nice to have heard some major announcements from banks regarding PFM. Not all is lost however as a few banks did make me aware of their near term PFM plans. The only PFM related announcement that caught my eye was Geezeo teaming up with iPay. It’s an interesting move as Geezeo attempts to gain traction and differentiate in a crowded market. In related news, Intuit announced that Quicken online users will be migrated over to the Mint.com solution.

IT spending and top banking trends for 2010

IT spending and top banking trends for 2010
Earlier this afternoon I hosted a very well attended webinar on IT spending. The webinar went over the data and trends that I published in the January 2009 report, IT Spending in Banking: A North American Perspective. We just kicked off the next round of research in preparation for the 2010 IT spending report and I am pretty excited. It will certainly be interesting to see how the figures have changed and to build out forecasts for the next few years. The banking team is also working on an updated set of top banking trends to be included in the report. This is a very strategic topic, and an extremely popular Celent report. In addition to the North American report, we will be updating our flagship IT spending report, IT Spending in Financial Services: A Global Perspective. The most recent version of the global report can be found here. Both reports will be published to Celent.com in January, so stay tuned!

Corporate Banking in Asia is Heating Up

Corporate Banking in Asia is Heating Up
The press seems to focus a lot of its coverage on competition for retail banking business in Asia, but from where I sit it looks as though the corporate banking side is at least as hot, if not more so. One reason is that retail products and services are already fairly well developed in the region, leaving much of the action on the retail side to the marketing and branding of increasingly commoditized offerings. Corporate banking services, on the other hand, are still developing. There is a lot of room for improvement in the way banks in Asia are packaging and delivering their corporate banking services. This is particularly true for transaction banking services, including cash management, treasury, trade finance and supply chain management products and services. The large global banks have been investing heavily in developing comprehensive suites of services, often on a worldwide basis; many banks in Asia are now starting to see the value in developing a full range of transaction banking services for their corporate customers. I was recently invited to speak at an event in Hanoi, Vietnam for Asian banks organized by Citi, where this trend was readily observable. The venue was packed with managers from banks throughout Asia, large and small. They came to see what Citi had to offer in the way of web-based delivery, global payments solutions, trade finance and supply chain finance services, etc etc, and to think about how to offer these services to their corporate clients. Many banks in the region are likely to use the white labeled services of global banks such as Citi, ABN AMRO or HSBC, to name a few. Banks will be faced with choices in what mix of services, both outsourced and home grown, to offer in their particular market. I was struck by the number of banks I spoke with at the conference that were feeling challenged in developing their strategies for corporate banking services. Celent has followed developments and strategies in transaction banking for some years, and is now covering the market from the corporate side as well with our new corporate treasury research service. I look forward to working more closely with banks in Asia as they consider their options in this rapidly developing area.