“…a penniless, immigrant, orphaned kid who came out of nowhere and his achievements were monumental…he creates the first fiscal system, the first monetary system, first customs service, first central bank…”Without these innovations, the modern economy as we know it now would look very different. Anyone working in financial services today is aware of the challenges we face responding to changing customer expectations and new technology opportunities. Vast sums of money and time are being spent on innovation, looking for answers. However, Celent’s research shows a widely held view that the financial services industry cannot innovate very effectively. So how do we improve? The theme of our Insight and Innovation Day event this year will take inspiration from Hamilton’s work and use it as a guide for our future efforts. By the way, if you want to go to Hamilton while at the Celent I&I Day, I suggest you get your tickets now. It’s the hottest ticket in town! This is a republished post by Mike Fitzgerald from the Celent Insurance Blog. Click here to read the original post.
- What’s the view on blockchain? There was a lot of discussion at Sibos on the corporate side (we don’t think retail will be leading), but we’d like to find out if there’s heat behind the light.
- What sort of value added services around the payment are in production or on the drawing board?
- Is the apparent stall in mobile payments adoption temporary, and what can be done by ecosystem participants to jump-start it?
Those were very heady days for BAI-RDS. I have vivid memories of packing into the House of Blues in New Orleans as Chip Mahan, founder of online banking pioneer S1, invited a few hundred of his industry friends to a private performance by BB King. It was November 29th, 2000, a Wednesday evening and yet the party went on well after BB finished up his performance at 11 PM.Back to Vegas. Since I also cover cloud services for Celent, I decided to check in on what AWS was up to these days. Their annual developer’s conference is called re:Invent and since AWS has only been doing this for the past four years, I didn’t quite know what to expect. BAI-RDS regularly draws 3,000 attendees, and while I knew re:Invent 2012 drew about twice that number, I was still not prepared for the crowd of nearly 20,000 developers and AWS partners that converged on the Venetian Hotel and Sands Expo. The many specific education sessions were scattered over the five floors of ballrooms in the Venetian while the Expo Hall and Key Note presentations were held at the adjacent Sands Expo. While I didn’t see many bankers wandering the halls of AWS re:Invent, the one banker I did see grabbed my attention: that was Rob Alexander, CIO of Capital One, who shared the stage with AWS SVP Andy Jassy during the Day One Keynote address. Rob was there to announce that Capital One is deploying its new flagship mobile banking app on the AWS Cloud — I found that nothing less than startling in that Capital One only started experimenting with AWS last year, running a few mobile app development projects and bank-sponsored hack-a-thons in the AWS Cloud. Based on its initial success, Capital One began migrating development and testing work to AWS at the beginning of the year, and nine months later it was sufficiently happy with their experience that the bank made the bold decision to shift part of its production environment to AWS, beginning with its new mobile banking app. The new app essentially melds Capital One’s existing online and mobile banking applications, with a uniform look and feel, and changes to user preferences made on an iPhone or iPad automatically flow to the user’s online banking experience. Capital One’s API gateway and 80 individual banking services are in the process of moving to the AWS Cloud as part of the mobile banking services launch, initially on the iPhone and later this fall expanding to the iPad and Android platforms. What’s The Hurry? Surely Capital One is no start-up — with more than 70 million cards and $80 billion in card balances, Capital One is a top-four credit card issuer. When combined with its direct banking operations, Capital One is in fact the sixth largest bank in the United States, with $350 Billion in assets. Even as a proponent of the long-term impact that cloud services will have on the banking business, I was nothing less than astonished that Capital One has progressed from cloud newbie in 2014 to going “all in” on AWS in 2015. It didn’t take long to see what Capital One was up to. By leveraging AWS for DevOps and (over time) production, Capital One is on track to reduce the number of data centers it owns and operates from 8 in 2014 to 5 by 2016, to only 3 by 2018. Capital One intends to redeploy the capital it will recoup from data center consolidation into its core businesses while increasing the scope and pace of innovation at the bank. Capital One is betting that an AWS-based mobile banking platform will allow the bank to support the level of real-time scalability needed to cope with demand spikes such as occurs on Black Friday and Cyber Monday. But what about security? Security is the most commonly cited reason why most banks are not embracing cloud services, so I was interested to hear Capital One’s take on security. According to Rob, “Of course, security is critical for us. The financial services industry attracts some of the worst cybercriminals. So, we work closely with the Amazon team to develop a security model which we believe enables us to operate more securely in the public cloud than we can even in our own data centers.” More securely in the cloud? Either Capital One has gone rogue (very doubtful) or it knows something that most banks have yet to reconcile: when it comes to security, it’s much less about where your sensitive data sits and much more about how you secure your data from pranksters and thieves. AWS’s re:Play evening entertainment was provided by Zedd, a Russian-German musician and DJ who I also had never heard of (although my 18-year old college student did). Chip Mahan was nowhere in sight, but I might have missed him in the crowd of 19,000 AWS converts in the audience. Zedd was no BB King for sure, and unlike Old Dominion I didn’t know any of his songs, but nevertheless his techno-pop performance was hypnotically entertaining. I could have gone back to Las Vegas for a third consecutive week, where the ever-growing Money 20-20 conference beckons, but alas I’ll be in Denver for the Association of Financial Professionals annual conference. Dan Latimore and Zil Bareisis will be at Money 20-20 and I’m eager to hear about their experience.
- There was only one bitcoin demo.
- The Apple Watch made it’s first set of demonstrations, with three demos featuring it on day 2. Two out of three had glitches, not because of the programs (it seemed), but because of the watch itself. While mobility is going to be a very powerful force, I’m still going to wait for the Apple Watch 2.
- Personal Financial Management (PFM) was rarely mentioned, even when the demos concerned. This TLA (three letter acronym) has acquired a questionable connotation, and presenters avoided it (with some, like Moven, even declaring it dead).
- There were a lot of different concepts discussed. Here’s the wordcloud I created on Day 2, based on my impressions of the concepts that presenters were trying to get across.
- Breaking down omnichannel applications for financial services: Omnichannel within banking was a popular talking point between attendees and among presenters, and it´s obvious there´s still more than enough ambiguity around its application in the context of banking. One of the presentations used non-FI examples to look at how banks can approach integrating omnichannel into customer interactions. Home Depot was an interesting case study. The retailer combines the in-store and app experience to enhance the customer buying process. Customers can browse the app and make a list of the materials they need. The app shows only what´s in stock at the nearest physical location, and each item is given a corresponding aisle number for easy location on arrival. While in the store, customers can scan QR codes on each product to bring up specific measurements and statistics. This is the essence of an omnichannel experience. It´s not about doing everything from every channel—it´s about optimizing the customer experience across the variety of methods used to interact with the retailer (or bank).
- Community banks differentiating from large institutions: This was a common thread running throughout the presentations. How do community banks grow deposits in a climate of shrinking deposit share? Presenters proposed some solutions. One spoke of the need to market correctly. A recent study found that despite problems with megabank perception, 73% of those asked said a recognizable brand was important in choosing a financial institution. A regional bank poll of millennials found that not one could name a community institution in their area. These institutions find it hard to inform consumers about the value they provide, and often lacking the resources and experience to do so. A few small institutions spoke about shifting towards serving small businesses. Despite only having 20% of deposits, community banks are responsible for 60% of small business loans. Focusing on small businesses could be a way for small institutions to remain viable, without having to drastically alter their businesses.
- eCommerce and Merchant Funded Rewards (MFR) through mobile banking to help consumers save: During one of the sessions, a banker made a good point: consumers don´t need help spending, they need help saving. The comment reflected a number of discussions about the role financial institutions can play in helping consumers save money, but was echoed across a handful of presentations on digital commerce. US Bank discussed Peri, its eCommerce app developed in cooperation with Monitise, while other presenters spoke about card-linked and MFR propositions. These initiatives are definitely innovative, but is conflating the ideas of saving and driving commerce shaping the conversation around a fundamentally misaligned approach? First, will a bank´s eCommerce app be able to compete with the likes of Amazon and Google? Banks often do not have the customers, data, or pricing competitiveness to match big online retailers, and they seldom win on brand favourability. Second, even when these initiatives are successful, do they really help people save? For many, the data isn´t targeted enough for banks to offer deals on purchases a consumer was going to make anyway. For example, based on one bank´s demo, a customer would go to make a purchase at a retailer and the bank app would push out a geo-located card-linked offer for a nearby restaurant. This requires additional spending. Without the right data, these programs are mostly playing off impulse purchasing, not saving.