Start-up of internet-only banks in South Korea

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Feb 26th, 2015

South Korea’s government has begun to move to permit internet-only banks. It is in discussion with a group of financial institutions, vendors and other institutions, and the outline for internet-only banking services will be set up around April.

In South Korea, most banks, we can say all banks, already offer direct banking including internet, mobile and smartphone, and many customers are accustomed to them. However, dedicated internet banks have not been allowed to date due to regulatory and other issues.

Currently, there are two main challenges to setting up an internet-only bank in South Korea.

1. Identity confirmation through direct channel: the current law requires customers to open a new bank account at a face-to-face channel with their ID. So people visit a bank branch at least once to start banking transactions, although direct banking services are at a quite mature level in South Korea. The requirement for identity confirmation should be revised accordingly when permission is granted for dedicated internet banking.

2. Relaxation of the Separation of Banking and Commerce: in the current law, institutions belonging to the commerce sector cannot provide banking services, and their ownership share in a bank is stringently limited at 4%, compared to 25% in US and 20% in Japan. To encourage the entry of various kinds of sectors into the internet-only banking market, the relaxation of this law is one of the important issues.

Currently, a number of institutions including banks, vendors and other sectors are negative on entering the market and will keep a wait-and-see attitude for now. Before entering the market, they should learn from case studies of overseas internet–only banks. To cite a case, there are many good examples of online account opening using the advanced facial recognition tools.

I will appear at a conference on internet-only banking in Seoul on March 10, and will present case studies and learnings from the Japanese market. Anyone interested in the event details, please visit

Samsung’s acquisition of smartphone payment solution vendor LoopPay

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Feb 25th, 2015

Last week, Samsung announced the acquisition of LoopPay, a US-based smartphone payment solution vendor. It has been receiving attention as it may be poised to bring further growth to Samsung’s smartphone.

The strength of LoopPay technology is broad versatility. Its technology enables smartphone payment at a touch to a magnetic card reader. Most existing smartphone payment services require the implementation of a dedicated payment terminal, and ApplePay is not an exception. However, dedicated terminals will now not be required with Samsung’s smartphone payment technology.

The fact that a merchant will not incur additional cost for a payment terminal makes this smartphone payment service more attractive. The LoopPay technology with its versatility and compatibility should become one of the future growth drivers for Samsung smartphone.

A preview of Innovation and Insight Day

Dan Latimore

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Feb 18th, 2015

Celent’s Innovation and Insight Day is about a month away, and I couldn’t be more excited. We have great external speakers bookending the day, and we’ll be exploring exciting technology implementations with 18 Model Banks in five categories (plus Celent’s Model Bank of the Year):

  • Digital
  • Omnichannel
  • Legacy and Ecosystem Transformation
  • Innovation and Emerging Technologies
  • Payments

Our first speakers, Betsy Hubbard and Debra Jasper, are from Mindset Digital, an online social media training firm. As financial firms grapple with their approaches to social media, Betsy and Debra’s perspective, delivered in a completely different style than what most banks are used to, will provide ample food for thought and some concrete next steps.

Suresh Ramamurthi, Chairman (and CTO!) of CBW Bank, will tell the story of how a fintech entrepreneur bought a small ($13 million in assets, 7 employees) bank in Kansas and is in the process of turning it into a bank of the future. You may have seen the bank profiled in this story in the New York Times.

Registrations are running well ahead of last year, and our Carnegie Hall venue may well get to Standing Room Only (although you won’t be able to buy tickets at TKTS on Monday morning). We hope to see you there on March 23rd; to learn more and to register, please visit our I&I day site.

 Model Bank Logo

Google entering UK P2P payments

Feb 3rd, 2015

Last week Google announced that it will be rolling its email based money transfer system to the UK. The feature was launched about two years ago in the US and allowed those with a Gmail account to hover over a $ sign and add money to an email message like an attachment. It is expected that it would work similarly in the UK, with a $ sign naturally replaced by £.

Why now? Why P2P, and not, for example, HCE-based NFC payments, ahead of the expected Apple Pay launch? We admit we don’t have insights into Google strategies (and if we did, we couldn’t blog about it), but here are some of my thoughts.

P2P payments has rapidly become a competitive space in the UK. Consumers can already choose between PayPal and other “wallets” or individual bank-based initiatives, such as Barclays’ PingIt and Natwest Pay Your Contacts. Also, last year, Paym, an industry-wide solution was launched in partnership with banks. Paym recently reported having signed up 1.8 million consumers who transferred £26 million. Admittedly, it’s not much yet, but with some banks so far it’s only possible to sign up to receive payments via Paym, but not send. While all these solutions are making more consumers more comfortable with the idea of sending money based on a mobile phone or an email address, at the same time, Google will have to differentiate to stand out from the crowd.

One clear differentiator is the email-based approach. While I don’t have specific numbers, my sense is that Gmail is a popular mail service in the UK, and all these customers will now be able to enjoy a new feature. Assuming they like what they see, and start sending money to each other, Google is likely to enjoy increased wallet balances, at least until the recipients are ready to cash out.

I also suspect this is a customer acquisition play for Google Wallet, which has not received as much publicity in the UK as it did in the US. Every Google email user can send money, but you do need a Wallet app to accept money. Once Google Wallet establishes a customer base, it can then take on Apple Pay more directly by rolling out its full wallet services to Android users in the UK. With Android representing ~60% share of smartphone users and a growing contactless acceptance infrastructure, the UK market might prove to be an attractive opportunity for Google Wallet.

This is what happened when I took my kids to open their first bank account

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Jan 29th, 2015

My wife and I decided that it was time. Time to introduce our 2 daughters to a bank and open their own accounts. Our girls are old enough (ages 8 and 6)  to understand what a bank is, plus they hear their daddy talk way too much about banks. So far, their birthday money has been stored in their collection of wallets, piggy banks or ziploc bags. They are no strangers to financial education as we have talked before about the different uses for money and the importance of saving. They were ecstatic when I told them we would be going on a little field trip to open bank accounts, even if it meant handing over some money to the bank to safeguard. It was all downhill from there.

I went online to try to make an appointment to visit the local branch. Unfortunately my bank offers no such tool. So, I picked up the phone, called the branch and left a message. My call was never returned. I’m a pretty persistent guy, so I actually walked into the branch (a foreign concept for me) and had no trouble making an appointment. We arrived a few minutes early on the day of our appointment as the girls were super excited to go to the bank and open their own accounts. Alas, the banker assigned to us was running late. After a 15 minute delay we were given the privilege of sitting down in his office. The process was mundane and no different than if an adult were opening an account. The girls were bored out of their minds. Thankfully, they sat nicely through the entire hour long process and were extremely patient. The only info the banker asked them for was their birth date. I wasn’t expecting this to be a kids activity, though it would have been cool if they could have opened the account while bouncing on a trampoline. In all seriousness, I was expecting there to be SOMETHING that was kid friendly. Although my kids are very digitally inclined, I was also hoping they could get a traditional bank passbook. I think it’s a little more tangible and easier to teach them about debits and credits using the book. However, the bank doesn’t issue passbooks anymore and  that frankly isn’t a big deal as I can teach them online. Daddy signed all the paperwork, they were issued debit cards, and we went off on our merry way. The girls were confused,  they wanted more. They couldn’t believe that they had to sit for an hour just so I could sign some papers on their behalf.  I felt bad, because it was my mistake. I shouldn’t have dragged them along for the account opening process without checking it out first. However, I was really disappointed that there was simply nothing in the process that was fun and educational for kids. We had some “fun” at the ATM though as I showed them how it works and they got to press all the buttons and deposit their funds.

So much went wrong, yet it was such an opportunity for so much to go right. The account opening process should have some elements tailored to kids (other than the trampoline of course). Here are some suggestions:

  • Offer a customized debit cards for kids. Kids love cards. Why not allow them to customize the color or add a picture of their choice?
  • Ask them to sign something.  Even though the parent signs the official documents, I believe it’s important for kids to feel that they have some skin in the game. A bank account is a responsibility. A fictitious kids contract will make the child feel important and also teach a sense of responsibility.
  • Give out a kid friendly short story. My kids know how to read, why not get them to read a short story that teaches lessons about money? Some banks invest pretty heavily in children’s literacy, though this doesn’t have anything to do with the branch experience.
  • Develop or showcase an app that teaches kids about money. Some banks offer this already (e.g. RBC), though it’s unclear to me if the app is used in the branch.  Even if your bank doesn’t have an app like this, there are 3rd party apps that can serve the same purpose. This would be a good use for iPads in the branch, as kids can play with an app while the parent does the paperwork.
  • Explain how the bank works.  There is so much that takes place in the bank branch. It would be great to walk the kids around the branch, and explain to them what is going on and what the various employees do.

These are just a handful of ideas, there is so much that bank can do to welcome kids into the branch.  Some banks, like PNC are already on to this. Maybe I am asking a lot, and I know that I am not typical. Some parents open accounts for the kids when they are little babies (I did this too) so this scenario wouldn’t apply. Other accounts are simply going to be opened online. Most banks in Canada don’t yet support online account opening, so the branch is where it’s at. I was really hoping that the branch experience was going to hook my kids. It certainly didn’t hook this parent.

Apple’s earnings call: an encouraging story about Apple Pay

Jan 28th, 2015

Yesterday Apple announced its results for Q1 2015: revenue of $74.6 billion, profit of $18 billion over the three months, apparently the largest quarterly corporate earnings of all time. While these numbers are hugely impressive, of course, the payments industry was looking for any hints of Apple Pay performance.

This is what we learned:

    • On enabling consumers:
      • Apple sold over 74 million units of phones, mostly iPhone 6/ 6+, which is ~9 million more than expected by the investment analysts. This matters to Apple Pay, as the new phone is a prerequisite to be able to use Apple Pay. This is a global figure, but it still means that there are millions, if not tens of millions of new phones in the US where Apple Pay has been first launched.
      • 750 banks and credit unions have signed up with Apple Pay. Of course, as we discussed in our earlier blog, the number of FIs actually already supporting Apple Pay is much smaller – 54, but the momentum is clearly there. Furthermore, the participating institutions represent over 90% of credit card transaction volumes.
    • On enabling merchants:
      • Tim Cook, Apple CEO admitted he was “positively shocked” at how many merchants were already supporting Apple Pay and revealed that POS suppliers were reporting “unprecedented demand” from merchants. Undoubtedly, the ongoing EMV migration is helping stimulate that demand for new terminals.
      • USA Technologies announced a nationwide rollout of new acceptance points for Apple Pay. This will add about 200,000 acceptance points, “bringing the advanced mobile payments service to owners and operators of coffee brewers, vending machines, kiosks, laundry equipment, parking pay stations and other self-serve appliances.”
    • On actual usage:
      • Apparently, Apple Pay is responsible for $2 out of $3 spent on Visa, MasterCard and American Express contactless transactions. While the specific statistics were not revealed, and two thirds of not much is still very little, Apple certainly demonstrated ability to acquire market share in a short period time from competitors such as Google Wallet and Softcard.
      • Apple Pay represents nearly 80% of mobile payment transactions at Panera Bread, while Whole Foods Market had seen an increase in mobile payments by more than 400% since the launch of Apple Pay.
    • On evolution and future plans:
      • Tim Cook acknowledged the opportunities around both in store and in app use cases of Apple Pay and that market specifics will determine which will be more important in any given geography.
      • As expected, Apple Pay will be expanding internationally. The management acknowledged that each market is different and will require “heavy lifting to scale,” but confirmed they were ready to tackle the challenge.

Tim Cook concluded that 2015 will be the year of Apple Pay. This might be debatable, but Apple Pay certainly had a very encouraging start. This also further validates Celent’s perspective we articulated in the latest edition of our Top Trends in Retail Payments report, which was published yesterday and is available to our clients.

On the cusp: regional integration in Asia

Neil Katkov

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Jan 26th, 2015

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.

Digital technology is spurring straight through processing (STP) in financial services industry

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Jan 26th, 2015

The media has been abuzz with reports of Toppan Printing’s plan to introduce an electronic system to facilitate the sale of home loans. In light of this, in this edition we want to consider straight through processing and its possibilities and implications in the financial services industry.

The proliferation of bank ATMs has largely driven cash transactions from banks, bank branches, and cashier windows. Meanwhile, as banking services have migrated online, online banking and online trading have resulted in small-value, high-frequency financial transactions becoming increasingly self-service in nature.

Similarly, the Internet has and continues to transform the insurance industry. Online insurance premiums payment and online requests for insurance materials have already become the norm. However, documentation and message formats particular to an industry or specific to individual financial institutions are a challenge. Today the technology is still a far cry from being able to automate business processes for complex products. As such, this inability—in addition to administrative costs and financial transaction risk—has also become a major obstacle to sales channel diversification.

Bank home loans could be called the poster child for products that have fallen behind the digitization and STP curve. However, if digital technology could be used to handle financial products—in this case home loans—that need to be processed manually, then it would be possible to recommend and compare products so that consumers can obtain the optimal loan product at the right time and place. Banks are the companies that create financial products—home loans; homebuilders and house manufacturers are the companies that market or sell these products. Digital technology is driving the decoupling of product creation from product sale, and profoundly transforming this business model.

A glimmer of this and things to come appeared on in the December 22 edition of Nikkei (1). This glimmer was an article reporting on a new initiative by Toppan Printing, in conjunction with realtor Tokyu Livable and four banks—the Bank of Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Trust Bank, Sony Bank, and Mitsubishi UFJ Trust and Banking Corporation.

Today the proliferation of digital technology is spurring the automation of business processes. Digitization is a key technological development that promises to bring improvements and advancements in many areas. Indeed, processes that cannot be digitized are likely either extremely high value-added or, perhaps, should be eliminated.


(1) The Toppan-developed system will be set up at Tokyu Livable’s network of real estate offices. It is designed to streamline the home loan application process by allowing customers to use a tablet computer to apply for a mortgage from any of the four banks, and to as many as three at once.

December 22 edition of Nikkei


Tokyu Livable

The quest for Omnichannel continues

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Jan 23rd, 2015

Earlier this month, Celent published a report providing an analysis of an October 2014 survey among North American banks and credit unions. The effort sought to understand the state of retail banking channel systems. It should be no surprise to find that revenue growth broadly remains bank’s #1 strategic priority. Or, that digital banking channel development and omnichannel delivery are statistically tied with customer analytics in being considered the most important technologies in delivering revenue growth.

What may come as a surprise is how far most banks have to go in terms of actually delivering what they say is important. Here’s one example; mobile banking.

Everyone knows mobile is so hot right now, yet many institutions have difficulty monetizing those investments. That’s because precious few sales are closed in the mobile channel (at present) and institutions struggle with proper attribution when multiple channels are involved. What seems clear is that institutions find several compelling reasons for the mobile channel’s high priority, and cost reduction is the least likely reason. Institutions across the asset tiers have a similar strategic basis for mobile banking. However, valuing mobile for its ability to attract new customers is a sentiment largely held among large banks.

Source: Celent survey of North American financial institutions, October 2014, n=156

Source: Celent survey of North American financial institutions, October 2014, n=156

Customer engagement and upselling customers through the mobile channel? That’s a tall order for most banks when historic mobile channel development investment has been all about migrating “low-value” transactions. Even if consumers would be disposed to enroll in products or services on their device (a reasonably fast growing trend) precious few banks even offer that ability.

Source: Celent survey of North American financial institutions, October 2014, n=156

Source: Celent survey of North American financial institutions, October 2014, n=156

Moreover, simply having the ability means little if the user experience is less than satisfactory. A future Celent report will explore digital account opening experiences among large US banks.

The quest for omnichannel continues indeed – and will be continuing for some time.

Getting m-POS ready for EMV in the US

Jan 23rd, 2015

As we highlighted in our recent report The Update on EMV Migration in the US: Leaving the Station and Building up Steam, the US market is finally making a strong progress towards EMV. While many of the barriers we discussed in the past have been dismantled, there are still challenges that remain.

One such challenge is the upgrade to m-POS platforms. Square has created an entirely new market a few years ago with a simple ‘dongle’ that a merchant could connect to his smartphone’s or tablet’s headphone socket and start accepting cards. The customer would swipe the card, sign on the phone and that would be it. Now Square and its many competitors have to bring out new devices that support EMV cards. That also means a change for merchants, and they will have options.

Square announced its new device in November last year. Unlike most of m-POS solutions in Europe, it will not support chip and PIN, but will be a standalone chip card reader and will support signature as the cardholder verification method. It will start shipping in spring, but will not be free – merchants will have to pay $29 for the mobile chip card reader and $39 for the accessory to Square Stand.

Earlier this month PayPal Here also announced that it will be bringing its EMV reader already available in the UK and other markets to the US. And in addition to iOS and Android, it will support Microsoft Surface Pro 3, and other devices running Windows 8.1.

First Data’s Clover has launched Clover Mobile, a mobile and EMV compatible version of its Clover m-POS platform. Unlike Square’s readers, Clover Mobile also supports NFC transactions, including Apple Pay.

And then there is Poynt, launched at last year’s Money2020. Poynt is described as “a future-proof device that accepts magnetic stripe, EMV, NFC, Bluetooth and QR code payment technologies. You are ready to accept your customers’ favorite payment methods: Apple Pay, chip-and-pin, mobile apps, and whatever else the future brings.”

Of course, there are other options, above solutions are just a few examples. The challenge for merchants is deciding if and when to upgrade the readers and whether to stick with their existing provider. As always, risk-based assessment will be key. For example, whenever I am in Vegas, I try to visit a small shop that sells vinyl records, which accepts card payments via Square. If I were the owner, I would look to upgrade to an EMV reader as soon as possible – while it’s not a coffee shop in terms of frequency of transactions, most payments are tens and hundreds of dollars. On the other hand, a local dry cleaner who already knows most of its customers will be less compelled to upgrade. Clearly, not everyone will be ready by the liability shift deadline in October, but merchants with the risky profile should make sure they are.