Is the branch the newest digital channel?

Stephen Greer

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Jun 17th, 2015

The branch is an important channel is every bank, but the rise of digital raises two questions: what’s its role in with a digital engagement model, and how should banks think about its value? First, consider some of the challenges of the traditional branch for the modern, digital consumer:

  • Branches suffer from lack of talent availability. The best person for the job is not always going to be in the right location at right time. Yet mobile is driving “right time, right place, instant” contextual interactions, and consumers are increasingly expecting this level of service.
  • Many of the frontline staff are underpaid and undertrained, yet are the face of the institution. They often aren´t trained properly or paid enough to care about delivering the kind of customer service banks are trying to deliver through digital.
  • It’s difficult to distribute foot traffic across locations. Some branches suffer from massive queues, while employees at other locations are killing time on Facebook. This adds cost, lowers efficiency, and is incompatible with demand for instant service from consumers as well as modern IT delivery.

Digital has allowed industries to overcome some of the barriers facing other customer experiences. The challenges facing branches are no different. Virtualizing the workforce, aggregating talent, and allowing customers to access them remotely, either in a branch environment or from a personal device, is at least one path forward. Banks need to start thinking about the branch as a digital channel. Some institutions like Garanti Bank in Turkey, ICICI in India, and Umpqua Bank in the US are already starting to think in terms of remote delivery.

As video service becomes more mature (i.e. video advisory through tablets), user experiences across devices will begin to blur, and the branch of the future will look even more like a digital experience. In the new environment, the branch becomes another presentation layer.

Vendors like Cisco are already starting to move in this direction, combining telepresence, remote signature, displays, and other infrastructure to allow banks to facilitate remote interactions using context information. Others in the market are beginning to follow suite.

The branch of the future has been a topic of discussion since the advent of online banking and mobile. While some meaningful progress has been made in branch transformation, some large institutions have launched numerous pilot ideas and concept branches that have amounted to little more than PR stunts. The role of the branch is changing, but it’s obvious that many aren’t exactly clear what that role is going to be. By talking about the branch as a digital channel, institutions may be better able to craft a true omnichannel strategy for customer experience.

Corporate banking: serving the needs of business clients

Patty Hines

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Jun 12th, 2015

Last week I joined Celent’s banking practice as a Senior Analyst covering Corporate Banking. I join fellow corporate banking analysts, Gareth Lodge and Jim O’Neill. Gareth covers payments back office, payments infrastructures, and payments connectivity. Jim covers core systems modernization, the impact of cloud computing, and treasury management technology. My coverage will be focused on the technology impacts of meeting the financial management needs of business customers, ranging from global multinational corporates to small businesses. This includes global transaction services, small business services, commercial and small business lending, and the changing role of corporate treasury and its impact on meeting the needs of corporate banking clients.

It’s an exciting time to return to the Corporate Banking analyst ranks. In the face of an uneven global economic recovery, evolving regulatory imperatives, and unpredictable supply chain disruptions, corporate treasury and finance teams have expanded roles and responsibilities. These developments are putting increased pressure on financial services providers in the areas of working capital management, liquidity management, external financing, payables and receivables, international trade, supply chain finance, merchant services and delivery channels.

For the large global banks serving corporate and institutional clients, transaction banking revenues and deposits are holding up due to strong transaction volumes, despite a low interest rate environment. Looking across the largest global banks, transaction banking’s share of total bank revenue averages 13%, with its share of deposits averaging 36%.

Transaction Banking Revenue and Deposits

Transaction Banking Revenue and Deposits

On the lending side, US commercial loan outstandings have more than fully recovered from the 2008-2009 financial crisis. US commercial and industrial loans, particularly hit hard during the crisis, have rebounded almost 45% since their lowest point in 2010. Commercial lending in the euro area is another story. Since their peak in 2008, loans to corporations have declined 9%.

As discussed in this year’s Top Trends in Corporate Banking 2015 report, banks are facing a complex new reality with disruptive technology, the changing role of corporate treasury and regulatory imperatives shaping corporate banking strategies in new and unprecedented ways. In order to maintain (and hopefully grow) corporate banking revenue and market share, banks need to address the top trends outlined in the report in the context of Celent’s three overall financial services technology themes:

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

If you have feedback on additional top corporate banking trends we should be covering, I would love to hear your ideas.


Apple Pay: welcome to the UK!

Jun 12th, 2015

This week Apple announced that Apple Pay will finally make its debut in the UK. Most of us expected that after the US launch, Canada and the UK would be the next countries for Apple Pay as it expands internationally. Those of us here were hoping it would happen by April, but it looks like it will now finally be arriving in July.

The UK market has many ingredients for Apple Pay to succeed. Apple’s market share is over 40%, having climbed upwards in the last 9 months on the back of strong sales of the latest Apple 6 and 6+ devices. And the acceptance environment is rather “contactless-friendly”: about 250,000 merchant locations already accept contactless transactions in the UK, including leading retailers, such as Boots, Tesco, Marks & Spencer, and many others. Importantly, Transport for London has upgraded its infrastructure last year to start accepting regular contactless bank cards, in addition to Oyster, its own prepaid travel card. TfL confirmed that Apple Pay will also work on the London transport network, which should be a significant contributor to Apple Pay transactions in the early days.

Most of the leading issuers are also on-board. Customers with cards from American Express, First Direct, HSBC, Nationwide, RBS Group and Santander will be able to use Apple Pay at launch, with the Lloyds Group, M&S bank and MBNA joining later in the year. One notable omission is Barclays, although apparently the two companies are continuing the dialogue.

What is not clear yet is the commercial terms between issuers and Apple Pay – everyone remains tight-lipped about it. I would be very surprised though if the UK banks end up paying any transaction fees to Apple. As I already called out in my report on Apple Pay, interchange rates in the UK and Europe are simply not high enough to support any revenue sharing. Furthermore, post Android Pay and the networks dropping charges for their tokenisation services, any wallet fees are looking increasingly unlikely.

Most contactless terminals today have a £20 transaction limit, which makes sense when you accept contactless cards, which offer no cardholder verification mechanism. It doesn’t make sense for an Apple Pay transaction which uses biometric cardholder authentication via Touch ID. That is, assuming Touch ID works – I’ve been struggling badly with it lately, as my shiny iPhone 6 simply refuses to recognise my fingerprints most of the time. If I can’t resolve it, I might have second thoughts about using Apple Pay, as the last thing I would want is “faffing around” trying to pay with my phone which doesn’t work… The transaction limit in the UK is going to £30 in the autumn. And those retailers who upgrade their terminals (at least, the software bit) should be able to decide against imposing any limits for Apple Pay transactions.

We’ve had options to pay by phone in the UK for a while now, such as paym, Barclays’ Pingit, PayPal and a few other solutions. Zapp, a mobile payment method that would allow customers to pay directly from their bank accounts, is also due to finally launch later this year. Still, Apple Pay’s arrival is major news, and should give a much needed boost to the UK’s mobile payments scene. Exciting times!

Celent cards research is now published

Jun 11th, 2015

About a year ago, I decided to embark on a journey of researching vendors and service providers in card management and transaction processing (CMTP). While I have been writing extensively about emerging payments (and will continue to do so), the reality is that many of these payments still rely on cards and the supporting infrastructures. Yet, as the transaction types proliferate, some of those older infrastructures are struggling to cope. If I were at a bank looking to either establish or upgrade our CMTP capabilities, I would want to know: What options do I have? How should I approach the challenge? Who can I turn to for help?

The good news is that banks and other institutions seeking help with card management and transaction processing technologies don’t have to face the challenge alone. Depending on their requirements, they can enlist help from packaged software vendors, issuer processors and professional services firms.

It has been a massive undertaking, but I am pleased to announce that today Celent published four new reports with details on CMTP vendors. We engaged with over 30 vendors and there is a lot of detail – the reports collectively go to nearly 300 pages. Part I is an overview of the vendor landscape, and Parts II-IV have detailed vendor profiles for 27 companies below:

I hope and expect that these reports will be a great resource for everyone in the payments industry, and would like to thank all the firms that participated in this research – their effort was non-trivial.

If you are a Celent client, you should be able to access the reports directly. Otherwise, please get in touch with us at

Surprises from the Consumer Financial Decision Making Conference (Behavioral Economics)

Dan Latimore

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Jun 5th, 2015

A highlight of my year is the Boulder Summer Conference on Consumer Financial Decision Making put on by the Leeds Business School’s Center for Research on Consumer Financial Decision Making. An event geared towards academics, its rigor is a refreshing complement to the work that I see from market practitioners at traditional industry shows. A handful of private sector folks come each year, but most are from academia or policy; being able to bridge the two worlds is extraordinarily refreshing.

Why consumers make illogical (or even harmful) financial decisions is the general theme of the conference. I’ve put together some of the most interesting, surprising, or relevant tidbits that I heard over two and half days of presentation. Academics are a careful lot, particularly with their disclaimers, so my caveats are these: I’m an educated layman relating what I heard in broad strokes. I’m not attempting to replicate the precision of the presenters or discussants, nor am I going to cite them in accepted academic fashion. Instead, if you’d like to investigate the source papers, please go to the conference website, or click the conference program. What follows is a synthesis of what I heard, sometimes from one person, other times cobbled together from multiple sources. I’ll try to tease out the implications for banks and make some very high level recommendations. The devil, of course, will be in the details of implementation (an undercurrent running through the conference itself). Look for an expanded version of this in a forthcoming Celent report.

As I tweeted during the conference, “Fascinating #counterintuitive #behavioraleconomics Boulder results on nudging and alerts; unintended consequences abound, intuition suspect.” What did I mean? Well, more savings is unambiguously good, isn’t it? Alerts are a great way to nudge people, aren’t they? And more information will help consumes make informed decisions, right? Well….not always. Let’s look at each.


Not all savings is good; sometimes you should be spending it or using it to pay down debt. Although people save for a purpose they will, on occasion, need to dip into that savings. In one case, old age, they may be able (or need) to start tapping into their savings earlier than they think, but they’re often reluctant to. Banks can help with this decision making process. Another case arises when consumers have high interest rate credit card debt. Rationally, they should tap into that savings to pay down the higher-cost debt. But many don’t, generally because they’ve engaged in earmarking and don’t necessarily believe that their future selves will have the self-control to replenish the savings account. Again, banks can help by setting up ways to help customers make the savings process easy, transparent and seamless.


Not all alerts are good. Focusing on alerts only in the context of trying to stimulate behaviors (and leaving aside their potential to help in fraud, balance notifications, and the like), researchers found that some people who were told that their FICO score was good became complacent and indulged in behavior that subsequently lowered their score.


Anchoring on credit card disclosures is very powerful. Initial experiences with the new credit card disclosures shows that borrowers are anchoring on the minimum payment figure, and on occasion paying less each month than they otherwise would.

Scattered throughout were additional fascinating nuggets. Here are a few, in no particular order. I’ll expand on them in the upcoming report.

We all know that what you say is important, and intuit that how you say it also matters. Indeed, much of behavioral economics is devoted to the framing of issues. But there’s a much more subtle point, one that practitioners are beginning to experiment with, that seems to be fertile ground for further academic inquiry. There are variations in how an issue is framed – the exact same words can be used to ask the same question, but the font, the background – any elements of the user experience – will also have an effect. These “UX” nuances matter, and refining the details of the user experience will be hugely important.

Here are a few other tidbits that I’ll expand upon in the full report:

  • People don’t like to pay taxes (no surprise). But tax costs are perceived more negatively than other costs; Betterment got people to trade less by highlighting the tax consequences of the trade.
  • There is no such thing as the “right thing” for everybody. The right choice architecture will help people make the right choices for themselves
  • Lottery wins can cause neighbors to go bankrupt
  • Regulations may give consumers the confidence that they can undertake transactions (loan repayments under foreclosure) that they might not otherwise
  • How a person writes a justification for a Prosper loan has some predictive power (up to 5.7%) about subsequent default probability over and above the typical financial information
  • Save to win savings accounts (“lottery savings”) in Nebraska are a substitute for gambling –and help people make better financial decisions
  • Credit utilization (that is, the proportion of a credit limit that a consumer uses) remains fairly constant over time
  • Day Traders in Taiwan keep on trading even though they have cumulative losses. They are not rational learners
  • People misunderstand the benefits of diversification: most tend to think it increases volatility and leads to better performance
  • People have different learning mechanisms for positive and negative lessons.

Academics are sometimes a bit…academic (as they should be!). As practitioners venture into new territory, having them keep us honest by testing our naive, and often wrong, intuitions is incredibly valuable.

A final caveat: any misinterpretations are of course my responsibility.

If you’d like to learn more and are a Celent client, please look for the upcoming report. And if you’ve got comments or questions, please let me know.

Same-day ACH: is anyone excited?

Bob Meara

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May 22nd, 2015

This week’s NACHA vote in favor of mandatory rules changes enabling same-day ACH settlement is no surprise. Some of the press coverage suggests this represents some sort of significant achievement. Really?

By March 2018 (when the network is currently expected to be able to fully support systemwide changes) I predict there will be industrywide consensus on the inadequacy of the measure.

Even proponents of the measure suggest the vast majority of ACH traffic will remain the next-day float-neutral type – for good reason. The majority of payments will not see a change for the same reasons the ACH has served the industry so well for so long. Specifically:
• Dependability
• Low-cost

With this vote, we’re now going to burden this lowest cost of payments networks with perpetual, systemic cost increases for all participants. And we’ll do so for a very small percentage of network volume.

NACHA’s own estimates predict that by 2027 (I don’t make predictions that far into the future) a whopping 1.4 billion same-day payments. That’s 6% of 2014 ACH network volume – presumably a much smaller percentage of 2027 volume. NACHA estimates industrywide implementation costs of $118 million initially and $49 million annually. So, by 2027, the industry will have spent nearly $500 million so banks can offer customers a premium priced same-day payment option using the ACH when other, faster options already exist.

I think the NACHA volume estimates are optimistic and find the characterization of same-day ACH as “modernizing the payment system” curious. What’s modernizing about running the same batch system a few times each day instead of once each day? If demand is for real-time payments, this initiative will be found sadly lacking. It’s like installing more pay phones as a way to compete with mobile devices.

Am I missing something?

Reflections on Nacha Payments 2015

Gareth Lodge

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May 20th, 2015

As many of you know, I’ve been on something of a world tour, which started with Nacha Payments in New Orleans in mid-April. Expect a flurry of blogs as I pass on my impressions from my travels, starting with the Nacha show.

Whilst I may live in London, I have global coverage. Payments is an interesting business – whilst its perhaps one thing that unites all businesses and consumers in all countries, and we are moving increasingly to global standards, the finer details show that it is still a parochial business. I don’t mean that negatively, more that payments have evolved over decades, if not centuries, to address specific local needs. That’s why the SEPA project was so difficult – even what we meant by certain terms turned out to be not straight forward.

Nacha Payments this year was in New Orleans. For those not familiar, it’s a long standing show focused primarily on the ACH business. It has a very active conference schedule – I was on a panel with Dwolla and BBVA talking about real-time payments – and an exhibition floor. The US is the single largest payments market, so it’s not surprising that the show is very US in focus. What still surprises me, even now, is the fact that in a shrinking list of exhibitors each year, every time I attend there are vendors I’ve never even heard of, let alone am familiar with their products. This demonstrates the size of the market rather than my lack of knowledge!

Take-aways for me:

What a difference a year makes. Last year, one senior banker said real-time payments wouldn’t happen in the US in his lifetime. This year, it’s seen as a when, no question about if. Indeed, all the talk was about the “secret” (so secret that every meeting I attended asked me about it!) meeting the key Clearing House banks were having to build out the requirements for the Clearing House solution. The general opinion is that the Clearing House is seeking to go live long before the Fed working groups even get close to having a plan for requirement gathering. More on this soon.

Business is alive and well. At first glance, the exhibition floor looks notably smaller than the previous year. One thing to note is that the conference is often attended by more junior people, who also get re-certification credits for attending sessions – with so many sessions to choose from, the exhibition hall is often very quiet. Yet all the vendors reported greater numbers of good meetings, with tangible next steps – in short everyone was happy. Which several said wasn’t the case of some of the new sexier shows as Money2020. It strikes me that they’re very different events.

Looking overseas. Payments are largely domestic in nature and what works in one country doesn’t always work in another. For example, check technology from the US (which writes 2/3rds of all checks globally) won’t be of interest in Finland (as checks were abolished in 1993!). As such, payment conferences tend to be very domestic in focus. Not a criticism, just pragmatic. Given the changes the US is facing, and given that many other countries have already faced many of the challenges, it was interesting to see such a noticeable increase in conversations seeking an international viewpoint. I don’t think we’re anywhere close to a global market – but the US seems to have taken a significant swing from “not invented here=not relevant” to “don’t re-invent the wheel”.

See you next year, in Phoenix!

Finovate and SAP SAPPHIRE: more in common than you might think

Dan Latimore

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May 15th, 2015

Over the last ten days I’ve spent time at two different conferences, Finovate and SAP’s SAPPHIRE NOW. Two very different conference models generated serendipity where I wouldn’t necessarily have expected it.

Both shows were rife with partnership possibilities. SAP spoke continually of the partnership ecosystem, realizing that one of its values is bringing partners together, while at Finovate, the notion of small companies going direct to consumer by themselves was basically dead – they realize they need partners. So if providers are demonstrating that they’re willing partners, all they need is someone on the other side – and that’s where banks come in. As banks strive to compete with upstarts, they’re going to need help, which means they’re going to need to work with others. And today, they just don’t do a very good job – ask anyone who’s ever been stuck in procurement hell. Banks must get better at working with outside parties, from streamlining the vendor approval process, to designing compensation models, to navigating the shoals of procurement. Speed is of the essence, and banks are woefully slow.

But I digress…

At SAPPHIRE NOW I participated in a panel: “Disrupt or Be Disrupted to Survive in Financial Services.” Partnership was one of my key themes.

SAP earlier gave center stage to its recent acquisition, Concur, its T&E management solution. The presentation’s available here (go to 41:30 where Bill McDermott introduces Concur).

Along the very same lines, one of the Finovate Best in Show winners was Shoeboxed, for its Receipt Capture for Banks solution, which boosts the functionality of online and mobile banking apps while providing fraud protection. While they have different perspectives on the expense problem (SAP goes for an integrated enterprise travel solution, including the T&E, while Shoeboxed focuses on letting banks provide its white-labeled expense solution to smaller business customers), both have focused on a particular pain point for employees and developed solutions to address it. Simplifying expense reporting may not seem like a big deal, but it’s some pretty low hanging fruit for digitization and disruption.

And disruption, of course, is one of the main themes of Finovate. A who’s who of Fintech, the conference this year was outstanding. Best of show winners were the aforementioned Shoebox, together with Alpha Payments Cloud, Avoka, Money Amigo, Moven, Namu Systems and Stratos. More can be found here.

What were my impressions? After having had a couple of days to assimilate all that was thrown at us, a couple of thoughts coalesced:

  1. There was only one bitcoin demo.
  2. 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.
  3. 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).
  4. 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.

Finovate World Cloud

As always, please let me know of your feedback or questions.

Predicting the future

May 5th, 2015

Monday was the UK bank holiday, so some of us just came back to work after a long weekend. Many across the country used the extra time to do a bit of spring cleaning. I also found myself rummaging through some old materials and came across an interesting paper on how financial markets might look in 2020.

Let me share a few quotes:

  • “The basic financial functions […] will not change, although how we perform these functions will change.”
  • “By 2020, a true global marketplace will be established, with everyone – individuals, companies, investors, organizations and governments – linked through telephone lines, cables and radio-wave technology. With the touch of a button, people will have access to other individuals and vast databases around the world. Such access will be readily available through phones, interactive television, workstations or hand-held “personal digital assistants” that combine all these functions. […] There will be no special need for retail financial branches because everyone will have direct access to his or her financial suppliers through interactive TV and personal digital assistants. […] True “global banking” will have arrived, as every household will be a ‘branch.'”
  • “A key feature of 2020 is that nearly everything could be tailored to a client’s needs or wishes at a reasonable price, including highly personalized service from financial companies. Firms will be selling to market segments of one.”
  • “Supplying financial assistance will be a free-for-all. It will not be limited to those calling themselves “financial institutions” […] That means an organization that specializes in financial matters may at times find itself competing directly with its clients.”
  • “The progress is geometric because each element – computation, availability of data, communications and algorithms – feeds on the others.”

If you attended any recent conferences on digital banking, this will sound very familiar – just replace “personal digital assistants” with “smartphones.” However, these quotes are not from a recent conference presentation. They are from a paper given by Charles S. Sanford, Jr., serving as the Chairman of Bankers Trust at the time, at the Kansas City Fed’s economic symposium. The date? August 20, 1993…

Many of these predictions ring true, although we are not quite there yet, 22 years after the paper has been delivered with only five more left to go. Why? The clues might also be in the paper:

  • “Human nature will not change. […] A very basic element of that nature is a hunger for security – law and order, job security, retirement security, decent and affordable health care and financial security.”
  • “Dishonesty will be around in 2020 as it is today. Voice recognition, DNA fingerprinting and secure data encryption will instantly verify transactions, preventing today’s scams. But new forms of “information crime” will appear.”
  • “Technology will never replace the subtlety of the human mind. People will be the most important factor in 2020, just as they are now. We must learn how to grow wise leaders from the ranks of specialists, a difficult task.”

As humans we also bring the baggage of unpredictability, irrational behaviour and desire for comfort and the familiar. We should bear this in mind next time as we contemplate how technology is changing our lives and what the future might bring.

P.S. The entire paper is available here.

Pushing beyond apps

Craig Weber

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Apr 30th, 2015

It struck me while I was driving this morning: First-gen mobile apps are fine, but virtually everyone is missing high-volume opportunities to engage with their customers.

Allow me to back up a step. I was stuck in traffic. Not surprisingly, that gave me some time to ponder my driving experience. I found myself thinking: Why can’t I give my car’s navigation system deep personalizations to help it think the way I do? And how do I get around its singular focus on getting from Point A to Point B?

I explored the system while at a red light. It had jammed me onto yet another “Fastest Route,” disguised as a parking lot. My tweaks to the system didn’t seem to help.

I decided what I’d really like is a Creativity slider so I could tell my nav how far out there to be in determining my route. Suburban side streets, public transportation, going north to eventually head south, and even well-connected parking lots are all nominally on the table when I’m at the helm. So why can’t I tell my nav to think like me?

I’d also like a more personal, periodic verbal update on my likely arrival time, which over the course of my trip this morning went from 38 minutes to almost twice that due to traffic.

The time element is important, of course. But maybe my nav system should sense when I’m agitated (a combination of wearables and telematics would be a strong indicator) and do something to keep me from going off the deep end. Jokes? Soothing music? Directions to highly-rated nearby bakeries? Words of serenity? More configurability is required, obviously, or some really clever automated customization.

Then an even more radical thought struck. Why couldn’t my nav help me navigate not only my trip but my morning as well? “Mr. Weber, you will be in heavy traffic for the next 20 minutes. Shall I read through your unopened emails for you while you wait?” Or, “Your calendar indicates that you have an appointment before your anticipated arrival time. Shall I email the participants to let them know you’re running late?” Or (perhaps if I’m not that agitated), “While you have a few minutes would you like to check your bank balances, or talk to someone about your auto insurance renewal which is due in 10 days?”

What I’m describing here is a level of engagement between me and my mobile devices which is difficult to foster, for both technical and psychological reasons. And it doesn’t work if a nav system is simply a nav system that doesn’t have contextual information about the user. But imagine the benefits if the navigation company, a financial institution, and other consumer-focused firms thought through the consumer experience more holistically. By sensibly injecting themselves into consumers’ daily routines—even when those routines are stressful—companies will have a powerful connection to their customers that will be almost impossible to dislodge. Firms like Google have started down this path, but financial institutions need to push their way into the conversation as well.