What Does the BBVA Acquisition Mean for Simple?

What Does the BBVA Acquisition Mean for Simple?
The financial world is abuzz about the recent acquisition of Simple by the Spanish banking giant BBVA.  The news is surprising, but not unusual for a banking group that has invested in other innovative companies such as Freemonee, SumUp, and Radius.  The deal also legitimizes a financial start-up that has garnered quite a bit of skepticism among some in the industry, despite a small yet dedicated and growing customer base.  Banks are clearly considering these innovators to be significant enough to validate their acquisition.  Simple is a brand, not simply a product offering. It has recognition outside of the industry, and the effect on existing customers makes this acquisition different from the norm. As the relationship unfolds, it will be interesting to see how Simple responds to the following:
  • 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?
The acquisition of Simple, no matter what happens, is a good sign for financial start-ups, especially those that compete directly on Banks’ turf.    The industry could learn from the way BBVA has taken a page from tech giants and big pharma. There are hundreds of innovative Fintech companies out there, and great ideas don’t always have to come from internal development—in fact for large banks they rarely do. But Simple has now become part of the traditional banking world they used to decry.  Will the financial services industry’s challenging record of financial innovation rub off, or will the resources of a megabank allow Simple to grow into a true disruptor?  Only time will tell.

Finovate Europe 2014: Some Key Takeaways

Finovate Europe 2014: Some Key Takeaways
Finovate just ended yesterday, and it was great to see all the new and interesting ideas floating around the financial services space.  For those who may not know, Finovate is a two-day event that showcases some of the best new and innovative things happening in financial services technology.  Over 60 companies coming from all over the world  presented this year, taking part in the rapid format that gives each presenter 7 minutes to show why their product is worth the viewers’ attention.  The event can also be a great networking opportunity, as many of the attendees are from large institutions or influential VCs.

Figure 1: Number of Presenter Products with Aspects of Each Category

 Untitled Here 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
 

2013’s most popular banking reports (Innovation rules!)

2013’s most popular banking reports (Innovation rules!)
I looked at 2013 to see what the readers of Celent’s banking reports were most interested in. Here are the top 10, ranked by the number of downloads, and the date they were published. Innovation is clearly of interest to our subscribers, as are top trends. What do you think will be hottest in 2014? We’ll be giving you our perspectives shortly.
10/25/2013 What’s Next: The Search for Disruptive Innovation
03/4/2013 Banking Presentations from Innovation & Insight Day
12/13/2012 Top Trends in Retail Banking 2013
02/27/2013 Model Bank 2013: Case Studies of Effective Technology Usage in Banking
01/7/2013 Top Trends in Retail Payments: A Year in Review
02/18/2013 Big Data: A Guide to Where You Should Be, Even If You Don’t Know Where You Are
01/8/2013 IT Spending in Banking: A North American Perspective
04/8/2013 Mobile Banking Vendor Solutions
01/22/2013 IT Spending in Banking: A Global Perspective
01/29/2013 Mobile Banking Trends in China

Evolving Role of Banks in Corporate Banking

Evolving Role of Banks in Corporate Banking
Commercial banks play a vital role in the financial system among; facilitating borrowing and lending for corporate clients to optimize their funds, provide specialized financial services to enable efficiency in transactions, and much more. Now imagine a world without banks. Corporations (excluding retail in this blog) would struggle to borrow money, spend much time seeking for savings options, and most likely increase their overall financial risks. Few can argue that all banks, large to small, bring much value to the financial system. And I agree. In this world without banks, corporations would need to leverage alternatives for borrowing in order to meet financial obligations and fund growth opportunities. Can you imagine such a scenario? This is in fact what many corporations have been facing over the last few years. Banks have reduced credit even to good businesses not because they want to but because they need to. Banks suffer balance sheet impairments arising from the financial crisis and have been forced to reduce the loan supply. So how have corporations reacted to this changing environment? Has the role banks play to corporate clients changed? Are corporate clients turning to their bank for strategic support and/or guidance? What can we anticipate corporations to do in the future regarding their bank relationships? Many good questions and the answers are in some cases multiple, others developing, and some uncertain or evolving. Where is the nucleus of the pain for corporates? I think it is in two main areas: 1. Seek funding for major capital investment such as M&A, and 2. Require funding to support growth opportunities (e.g. fund trade activity with increasingly foreign markets on goods) I will address on the latter point as this has been a more focused discussion topic for me with banks, vendors, and corporates. Aside from bonds, large corporates have been leveraging internal sources for funding. For specifically, corporate clients have been ‘smarter’ about their usage of cash and leveraging technology to make decisions on borrowing and investment. The number one priority where technology is an increasing contributor is liquidity to trade cash visibility and cash flow needs. Visibility is the key and it’s not just about today but t+5, etc. Corporates are moving beyond the intra-day cash management challenges and tackling investment decisions based on complex models. For example, if currency X hits this target and account balance is a minimum of Y, then perform Z. In sum, liquidity and trade and much more tied to the hip than before thanks to technology. This is also helping banks make better decisions on corporate lending across the entire visibility of accounts and relationship portfolio. Technology is also helping corporate clients have better analytics and integration to systems like ERPs, but this makes for a longer discussion. As the regulatory environment continues to put challenges on the players in the financial industry, the key players are finding ways to leverage technology to alleviate the pain and make good on growth opportunities. So what does this mean to the bank and corporate relationship in the future? I think technology and operating agility will evolve to strengthen the role of banks within the industry to enable corporate clients manage to STP processing while taking advantage of growth opportunities in the global marketplace.

The demise of Blockbuster and the rise of the new independent video rental store

The demise of Blockbuster and the rise of the new independent video rental store
Earlier this year, Celent released a report, Branch Boom Gone Bust: Predicting a Steep Decline in US Branch Density, which made comparisons between the decline of brick-and-mortar video rental stores, like Blockbuster, and branch banking in the US.  Celent argued that the decline of Blockbuster at the hands of digital alternatives is a cautionary tale for banks that still value a traditional branch network. As I’m sure no surprise to most, Blockbuster recently announced that they would be shutting down all remaining retail locations—around 300—effectively ending operations.
“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.

Blockbuster

Yet as countless 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.

Musings on BAI 2013

Musings on BAI 2013
I’ve had a little time now to reflect on the latest BAI conference, held earlier this month in Denver.  I have five observations:
  1. Trite as it sounds, there is still no substitute for face-to-face interaction.  The Celent banking team was booked from dawn to dusk, meeting with banks and service providers to discuss current views on the market. For us it was certainly time well spent.
  2. Of the FinTech 100 that BAI announced (together with Bank Technology News and American Banker), only 27 had booths at the show.  Of the Enterprise 25, only 8 were present.  There seems to be opportunity here to increase FinTech representation, but it also raises question about why roughly 70% of top vendors chose not to participate. Some proportion clearly thinks that there are better ways to spend their business development dollars.
  3. The buzz around core replacement is increasing.  Zions’ formal announcement of its project with TCS sparked many discussions about whether this was the first crack in the dam. The lag between talk and execution is well known, but the talk is certainly growing louder.
  4. Mobile continues on its torrid pace as today’s hottest topic.  And omni-channel (of which mobile is a critical component) isn’t far behind.  More and smaller banks are wondering how best to tackle these issues and are looking for help from partners.
  5. Panel discussions are a very challenging format for conferences, not just at BAI, but at any large gathering.  Engaging panelists in a way that moves beyond serial presentations or monologues takes real skill and preparation on the part of the moderator and participants.
We’re in the midst of planning our conference coverage for 2014 and welcome your views on the highest value shows.

AFP 2013 Conference Highlights and Review

AFP 2013 Conference Highlights and Review
I attended the AFP conference in Las Vegas. Attendance seemed high while this may be partially attributable to the fact that it was held in Las Vegas. Now I wish I can tell you more about the conference, but like they say, what happens in Vegas stays in Vegas. All jokes aside, it was a good conference for me with very productive meetings. Most of my meetings were centered on corporate-to-bank connectivity, mobile developments (tablet), foreign exchange, payment networks, and enhancements in reporting and analytics. Although there was some sense of déjà vu, I felt the conference had several new interesting trends. An interesting side observation: As you know, most of the attendees are corporate practitioners while my discussions are primarily with bankers and vendors with far less corporate clients. I bring this up since my findings in discussions with corporate treasurers, etc have been on quite different topics of interest. The corporate side seems very interested in the macro-economic and geo-political trends in the market including regulatory impacts. Okay, I guess everyone is interested in the regulatory environment. The combination of fiscal and deficit issues at the government combined with new regulatory standards is preventing a stable environment of lending and borrowing, let alone growth, in the market. Corporates are struggling to efficiently manage their liquidity while mitigating the risk of losses. I found there was less than usual interest on operational efficiencies and innovative solutions as seen at previous AFP conference venues. This could be attributable to the dominant economic and regulatory issues faced by corporates today, or possibly attributable to a smaller sample of discussions in comparison to bankers and vendors. In any event, I just wanted to make the point that bankers and vendors are aligned very differently in their focus area in contrast to corporate practitioners. Aside from the above observation, I noted several interesting trends: • Banking focus on relationships. Banks realize that their relationships with corporate clients will need to change. It’s not so much anymore about selling, or cross-selling, as many products as possible. The regulatory environment is causing corporate clients to have a much more consultative role with their banks. Banks are less concerned about product stickiness and revenue protection. The development of SAP Financial Services Network (FSN) is a good example as many global banks have promptly joined the network to best serve corporate clients. Surprisingly, this new solution does allow corporate clients to move relatively easy from bank to bank relationship. This is a concept that would have been much harder for banks to embrace only a few years ago. I think it goes to demonstrate the new bank mentality in being a partner and the race for the better bank partners will take flight in the coming years. • Vendors entering new frontiers. It was refreshing to see some developments on the vendor side in support of banks in new areas. Vendors are embracing mobile technology with processes that are client centric to help banks in areas that they have traditionally not played in – like sales and marketing. There are many vendors that I can credit here but this is a blog and space is limited. Two vendors that come top of mind are FISERV and Wausau Financial. They, like others, have taken the tablet and developed client facing solutions to support banks cross-sell products along with streamline client on-boarding and implementation. Not all banks are equal when it comes to their mobile development stage and some have embraced the technology more than others. The reality is mobile tablets can serve as excellent tools to improve the bottom line. • Enhancements on visibility. This is a broad category but mostly speaks to providing better analytics – forecasting cash and liquidity, optimizing returns on investment, risk management, and overall ability to meet regulatory and compliance requirements. The key players have done a good job of migrating from (I hate to use the term) big data to information that really counts. Vendors are driving innovation in analytics to facilitate simpler and faster processing of relevant data. This serves to address several business challenges through better forecasting and predictive analytics. Any other trends worthy of noting? Your comments are welcome so please feel free to chime in.

The State of BPO

The State of BPO
It wasn’t too long ago that BPO was a simple exercise across a few very specific back-office processes.  Labor arbitrage was the meat of any BPO contract.  Celent’s upcoming report, BPO/ITO Provides in Banking: An Evolving Landscape of Service Complexity, shows that while this still holds true in many ways, the look and feel of BPO/ITO is changing.  FTE-based deals are still the predominant form of outsourcing contracts, but what’s becoming abundantly clear is that the top global vendors are expanding capabilities and drastically enhancing their value proposition. One element of this change has been driven partly by demand.  Earlier this year, RBC issued an apology to employees affected by a recent outsourcing deal.  American Express and Bank of America have begun moving some of their previously outsourced work back to the US, amid growing overseas labor cost and increasingly staunch public opposition to offshoring.  Large global vendors have moved to accommodate, serving many institutions through an onshore or nearshore model. Where providers have shown the largest strides is in the ability to leverage a broad set of capabilities to generate revenue and partner for transformational projects. Banks are increasingly relying on vendors and third parties for a broad range of services—more than ever before.  Most of the providers in this report have a long history of developing new products and services, mostly with the aim of servicing a broader range of processes.  Vendors want to prove to banks that they are process innovators.  Banks want to optimize efficiency. Put together, a move toward IT-reliant innovation and onshore capabilities has changed the face of outsourcing as it has long since existed. Celent continues to see a growth in partnership, leading to a number of modern provider engagements that work around some of barriers to traditional outsourcing.  Vendors know that not all operations can be outsourced successfully.  Moreover, compliance issues, reticence on the management level, and/or risk appetite might effectively limit an institutions desire to take advantage of these services.  Major global vendors have been building out Business Transformation Outsourcing (BTO) capabilities as way to service clients by acting as a transformation partner instead of a pure servicer.  In this instance, the business unit will remain with the bank, while the provider acts as consultant, IT provider, and transformation partner. A recent Celent report tackles this subject further: http://www.celent.com/reports/no-bank-island Other deals have highlighted the importance of technology, especially Business Process as a Service (BPaaS).  The new darling of the vendor community, BPaaS combines the benefits of cloud computing and business process services into an (typically) automated and multitenant solution that allows for flexibility, scalability, and a consumption-based model.  For highly variable processes, such as mortgages and consumer loans, flexibility is what makes this delivery model enticing. BPO vendors have become a lot better at what they do, and this is evident in the capabilities of the top players.  End-to-end is the new mantra by which vendors are selling their services, and no vendor in this report would discount the importance of strong IT capabilities. These are only a couple of the many trends currently affecting the market. Celent’s upcoming report on BPO/ITO is an effort to take a closer look at providers and how they have responded to these market dynamics and prevailing industry trends.  BPO service providers will be ranked using Celent’s ABCD analysis, and the report will outline an extensive list of process capabilities by vendor support.  Look for the report in Celent’s library soon!

Sibos Recap #1

Sibos Recap #1
So that was the week that was Sibos. Dan has already shared some of our thoughts from Sibos, but I wanted to add some additional insights and flavour. I’m going to split the posts in two. The second is a more informal view of the week. This post is more around content, and is based on what struck me as interesting, rather than what was necessarily spoken about most or was most profound. Those of you who know Sibos well will know the challenges of getting good dialogue in the sessions, and so it’s as often as what is not said that is interesting. Innovation 4 years ago every conversation was around innovation. This year, the “I” word didn’t come up once in any conversation I had. That’s not to say banks no longer want to innovate, but that they have a very clear view of what they need to achieve, and don’t feel they need to “dress” it up. Setting up an innovation team (again) costs money and will be slow to happen, but reducing “cost to serve” by 10% or improving STP by 5% makes a material difference to the bank, and will get funded. As a result, whilst there is innovation taking place, it’s very much rooted in the process and ways of working, rather than being called out separately.  Many of the activities we’re seeing continue to focus on the customer client interface – and rightly so. It may of course be that all the conversations around innovation took place in the Innotribe discussions – but that in some ways, that would be worse, as it would mean it was confined to its own little cocoon. I think the answer lies in what counts as innovation and to whom. There is a ripple backwards from those at the leading edge of things. For example, the closing plenary this year talked about the impact of mobile, but in effect replicated the Innotribe discussions of 2009 (as several in the audience were quick to point out in tweets). Yet the Innotribe discussion of 2013 replicated conversations we have been having around BitCoin and virtual currencies for over 18 months now. I guess my take away is that innovation is something rarely that you find at conferences, but the conference agendas act as a useful barometer to see how far that bow wave of innovation has travelled into the mainstream. Big data, little progress Big data is another recurring theme over the last few years, but that many believe that little is actually happening. Indeed, the title above is a soundbite from one of the sessions. I think it’s a classic hype cycle, with many firmly in the trough of disillusionment. But we are, I believe, seeing a number of smaller, successful projects that are having significant impacts. Many discussions around big data focus on combining the vast variety of data. Whilst not an area I follow closely, the examples I’m hearing are focusing on one of the other attributes – velocity. Being able to process data in real-time to influence outcomes is where progress in particular is being seen. It may not be sexy, but big data projects to provide teller prompts to guide the conversation is having a big impact in some banks. Whilst there was much talk about real-time at the conference, it was focused on real-time payments. In reality, real-time is a much broader topic, and will have far more profound impacts than many are planning for. Regulation It was the 5th anniversary of Lehman’s whilst we were at Sibos. Those of us who were at Sibos in Vienna will remember the events unfolding in front of us, and the palpable tension in the air, with many of us thinking Is This It? Roll 5 years forward, and the number of conversations about it were…well, zilch. A few mentions here and there, but pretty much it. What was talked about was the impact of the regulation that has happened as a result of it. We would expect much discussion about how to respond to the avalanche of new requirements, but two themes really stood out. Firstly, there is no co-ordination. Banks are feeling stretched by the regulation, and there seems to be a clear feeling that neither the banks nor the regulators have a clear view of the big picture. Regulators I can see, but the comments from banks, about banks surprised me. I don’t disagree, but then why aren’t they doing something about it? Secondly, that the regulation (or perhaps more accurately, regulators) is facing the wrong direction. Much of the regulation is about fixing the problems we have so we don’t have a recurrence of what just happened. But most agree that something else will happen, and just as we failed to foresee the circumstances that caused the last crisis, that there is little in place to identify what else could be the trigger for the next one. Real-time As alluded to in the big data section, real-time payments were all over the agenda. Australia is currently going through a large programme to implement such a system, and in the week before Sibos, the US Federal Reserve issued a consultation about the future of payments in the US. The preferred outcome of the paper was obvious – the creation of a real-time payments system. I’ve just finished a research project on real-time payments, and what is very clear is…well, it’s not very clear. Some of the systems held up as real-time, simply aren’t real-time, and even which bits need to be real-time need to be real-time for whom is not clear. As such, whilst the sessions were good, it’s clear that few are starting from the same position of understanding, resulting in some very different views of who needs to do what. Needless to say, I intend to write on this topic in the near future.

Getting Past the Hype with Customer Analytics

Getting Past the Hype with Customer Analytics
Customer analytics is so hot right now – for good reason. There are at least three reasons why now is a good time for financial institutions with no customer analytics experience to take the idea seriously. And for those with customer analytics initiatives, why now is a good time to revisit how and how broadly things are being done. Specifically: 1. The new normal: the likelihood of persistently unfavorable retail banking economics brought about by the triumvirate of low interest rates, onerous regulation, and a persistently weak economy. 2. The imperative for customer centricity: banks’ growing ranks of digitally driven consumers demand more convenience and increasingly prefer self-service. This seismic shift is at odds with banks’ historic reliance on the branch channel for sales and service. As sales and service becomes increasingly digital, skillful use of analytics will be table stakes. 3. Technology advancements in data analytics: Customer analytics solutions have come a long way in the past few years. General purpose analytics platforms have given way to a bevy of preconfigured applications designed to address specific use cases. Once the exclusive domain of data analysts (quants), modern applications are increasingly tailored for business users and integrated with business applications. Together, these factors will advance customer analytics from a project undertaken by a minority of banks to a core competency among the majority of financial institutions over the next five years. Yet a small minority of banks have experience with customer analytics. Historically this was defensible. Now, however, virtually all key retail banking priorities are supported by customer analytics. Specifically: using self-service channels to drive branch foot traffic, improving branch channel efficiency and effectiveness, and learning how to sell and service using digital channels. So, how do you get past the hype? Earlier this year, Celent published the report Customer Analytics in Retail Banking: Why Here? Why Now? containing practical advice and several case studies of banks that have achieved compelling results with customer analytics. Perhaps an even better way to get past the hype is to take two days out of your busy schedule for some immersion at Customer Insights & Analytics in Banking Summit, October 1&2 in Atlanta, GA. I’m pleased to be moderating a panel discussion on why the banking industry is ready to monetize Big Data. Joining me will be: – Tom Johnston, SVP Client Analytics, KeyBank – Robert Thompson, Chief Marketing Officer, Old Florida National Bank – David Schweidel, Associate Professor of Marketing and Co-Director, Emory Marketing Analytics Center – Ido Ophir, VP, Product Development, Personetics These folks have “been there, done that” and are generously sharing their experience. Hope to see you there.