- Banks don’t have unlimited resources to dedicate to throwing things against the wall in order to see what sticks
- Most banks have a long way to go in other channels
- Social media popularity is a guessing game
- Despite the popularity of social media, consumers and banks are still uneasy about conducting transactions over social channels
- Will Simple really remain independent? The statements released by both parties claim it will. Recent acquisitions of Nest by Google and WhatsApp by Facebook also made similar claims of maintaining autonomy, but that doesn’t mean it will remain the case. Yahoo acquired Flickr in 2005 with similar promises of independence, yet in the subsequent years drove an up-and-coming innovator straight into the ground. The fear for Simple customers is that the unbeatable user experience and exceptional customer service that made it so appealing will slowly be lost as the two companies integrate. Accounts will remain at Bancorp bank for the time being, but the inevitable move to BBVA must be graceful, or a once innovative product is liable to lose the only edge it had in the market
- Does this deal allow Simple to become more complex? The big attraction of this deal for Simple is that it gives them access to the resource of BBVA, a massive multinational financial institution with a clear penchant for funding innovation. The main complaint with the start-up since launch was the limitations that came with not actually being a bank. Simple didn’t do mortgages, it didn’t do investments, and there were no credit cards. For the PFM features to be truly useful, users would have to go ‘all in’ with Simple. More resources could allow for more development into a more diverse set of products and financial offerings, increasing the potential of the already well designed PFM platform. The test will be the following: will Simple be allowed to continue its own brand with its own products, or will it simply become (pun intended) a funnel to push BBVA’s core business?
Figure 1: Number of Presenter Products with Aspects of Each CategoryHere are some key takeaways after watching most of the presentations:
- PFM is still going strong: Banks have been declaring the end of PFM for years now, yet the topic is still one of the most talked about at every Finovate. At Finovate Europe, PFM was the most prevalent. What does this mean for the institutions? Well, first off, it’s obvious that entrepreneurs still see the value in PFM tools. Banks, many of which adopted PFM solutions long ago, have shrugged at the lackluster adoption, subsequently declaring PFM a failed experiment. Financial institutions themselves are partly to blame, hiding these platforms in menus, barely showing any desire to market the products. Yet the biggest problem with PFM is shared by all, vendors and banks alike. PFM doesn’t add value! Let’s just assume most people want to know how much they spend on coffee each month (I don’t!). What comes next? Where’s the action? The fundamental problem with PFM is that the way the data has been leveraged to truly provide value has been disappointing at best. Until the quality of the data is there, PFM won’t be in the mainstream. A secondary concern—the misconception that most vendors buy into—is that PFM can be fun, succeeding through cleverly designed games and well-designed UIs. I hate to say it, but PFM will never be fun! Nevertheless, there were some interesting takes on PFM this year that could offer some new ways to think about it going forward. A company called Tink takes financial data and creates insights for the user like where you spent the most money in the last year, largest one-time purchase, most frequent spending location, and others. The difference is that these are non-intrusive ‘stats’ that show up only if a user scrolls down from the landing page on the mobile app. Three takeaways from Tink’s product: everything is done on the bank side, it’s is more interesting than visualizations of spending categories, and the analysis requires nothing from user. Meniga, a PFM success story in Europe, uses demographic data to help small businesses find market opportunities. It provides competitors’ sales data, locations, profitability, among other things. It’s not PFM is the strictest sense, but that’s probably a good thing. PFM needs a little shaking up
- Moving Mobile Banking Beyond Transactions: While not a new topic, this was a common theme across a variety of presentations. The most common involved using the camera to assist in account opening or paying bills (see Kofax, Top Image Systems, and Axa Banque). Mitek and US Bank have been at this for some time, but the rush of new start-ups looking to fill the gap in the market is telling. As mobile banking becomes more common, and adoption increases, consumers’ appetite for mobile-based interactions will broaden. Banks are not only beginning to offer consumers the ability to do more complex transactions via the mobile device, but they’re opening up ways for financial institutions to monetize the channel. This will effectively make ROI much more tangible, doing away with the misconception that the value of digital channels is ambiguous
- Replace the Password: Is the password dead? That was the question asked by Wired Magazine in November of 2012, and something that has been on the mind of Celent for quite some time. Finovate produced no shortage of companies looking to innovate on financial security. Finovate veterans, Behaviosec, continue pushing their gesture-based biometric product that learns how the user moves and interacts with the device to create a confidence score for use behind the scenes. Encap uses the mobile phone as an authentication device for approving transactions or logging into digital banking. This was the second most discussed topic at Finovate. While biometrics is already used in some places globally, the practicality of such solutions is dubious at best. Security needs to start becoming a little more practical. One of my favourite presentations was from Feedzai, where they use social media data scraping to assess fraud risk. For example, if I just checked in at a restaurant in San Francisco, then it’s likely that a transaction from somewhere else is fraudulent. A few took to twitter to question whether customers would be ok granting banks access to their social media lives. If Citibank starts poking people, then maybe I could see the point, otherwise, it’s a practical application for enhancing security. Besides, most social media information is already public anyway
- Lots of Front-end, Little Back-end: One thing Finovate teaches us all is that there is no shortage of great UI designers. One thing Finovate doesn’t teach us is that banking is messy once you start connecting that nice-looking front-end to the messy back-end. Are most of these front-end products from Finovate really bank-ready? I’m not convinced. Large vendors like Misys, Fiserv, and Temenos may not have won best in show, but with integrated backend products, they’re in a much better position to succeed. One of my favorites was Five Degrees, a Dutch back/mid-office solution that runs in the cloud and offers a truly innovative BPM product. Other than that, good examples of back-end innovation were scant
- Social Collaboration: It was interesting to see different idea behind leveraging crowd-sourcing and social collaboration. Nous presented a product for investments that incentivizes users to play a game that aggregates data based on the players’ outcomes. A company called MyWishBoard uses collaboration, similar to SmartyPig, for goals and wishlists list that can be shared via social media with friends. Leveraging the power of crowds has been difficult to accomplish in financial services, and most social strategies have revolved around marketing and customer support. While some of these ideas may not be the best business ideas, it’s nice to see different takes on leveraging the power of social
- No Branch Channel Innovation: Absent from the Finovate line-up were any innovative ideas around branch technology. Celent has written a number of reports looking at branch technology, and there is undoubtedly still much to talk about in this space. The closest the show came was with JHA’s Luminous, a Dropbox-like secure storage cloud application for bank documents. Branches are changing, but they aren’t going away, at least not anytime soon. Banks have been doing some interesting things in the branch channel, but there are still plenty of innovative ways to maximize the brick-and-mortar experience. Celent did a recent consumer survey showing that branch channel adoption is still very high among consumers, and the first choice for important decisions. Considering the adoption gap between PFM and the branch, the low activity is surprising
Native ads in mobile emphasize minimal disruption in UX
- Native ads don’t disrupt user experience: The key principle of a native approach to advertising is a seamless integration of the advertisement into the user experience.
- Marketing can be well designed to fit into existing interfaces: Evernote (seen in the figure below) uses this principle to show that a properly design user interface can make ads appear very natural.
Evernote’s UI Allows for Ads While not Sacrificing UX
“This is not an easy decision, yet consumer demand is clearly moving to digital distribution of video entertainment,” said Joseph P. Clayton, DISH president and chief executive officer. “Despite our closing of the physical distribution elements of the business, we continue to see value in the Blockbuster brand, and we expect to leverage that brand as we continue to expand our digital offerings.”From the chart below, taken from the above Celent report, its clear that this has been in store for a while. blogs and news articles praise or nostalgically lament the once-great video giant’s downfall, an old question is being explored once again: what will happen to the independent video rental store? Put simply, they’re evolving. Faced with years of low business and an ever shrinking cult customer-base, many small video retailers are innovating in an attempt to draw business back into stores, adding value in areas un-served by Netflix or Redbox. From the an article by Indiewire.com:
“Videology in Brooklyn put a bar in front and a big video screen in back, where customers can sit at tables and drink while watching free screenings. It doesn’t even look like a rental outlet anymore — it moved all the discs aside from the new releases off the floor and put in computer kiosks for customers to browse the inventory. Vidiots in Santa Monica, supported by its community and patrons from the Hollywood film community, raised money to open a screening room and a non-profit foundation that holds workshops, classes, and outreach programs. It’s redefining its sense of purpose.”Is this an example for banks? Sure it is. Similar to what’s happening in retail, banks can add value to a branch-based experience. Consider this line from the above quote: “[The video store] doesn’t even look like a rental outlet anymore.” Small video retailers are refreshing the idea of what a video store is, and what it could be. Smaller banks like Umpqua Bank have already explored this idea years ago, and even megabanks like Wells Fargo are exploring the possibility of compact “boutique” branches. The rise of digital The other day I came across a cool chart from Horace Dediu that does a good job at visualizing the change in consumer behavior that drove Blockbuster underwater, and is driving younger generations toward less branch engagement. A larger version can be found here. The adoption of smartphones and tablets, even in relation to internet and mobile phones, sit in stark contrast to the group. The second part of the graph shows the duration of growth from 10% adoption to 90% adoption in years. For smartphones and tablets (estimated), these numbers are in the single digits. The result is a substantial decrease in the development life-cycle of innovation, early adoption, and late adoption. For branches, this means a dramatic and rapid shift in the way consumers interact with their financial institutions. Blockbuster trailed both Netflix and Redbox by almost five years before releasing competing products. The company not only failed to react to shifting demand, they arguably contributed to it. The founder of Netflix started the company after he paid $40 for a late video rental. Blockbuster continued to remain unmoved by customer complaints over late fees, eventually settling a series of lawsuits over the matter. Customers in turn, looked to innovative start-ups (i.e. Redbox and Netflix) to fill the void. Blockbuster failed to adapt. The path forward is a mix of early adoption and, like independent video stores, a rethink of traditional business practices. Let’s be clear, branches won’t die, but it’s difficult to make the case that significant redesign won’t happen. Will banking bloggers someday down the road, sitting in an independent video rental coffee shop, write about the nostalgia of traditional branch banking? Probably.
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