I didn’t leave my heart in San Francisco…

Gareth Lodge

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Sep 7th, 2015

…but something far more valuable.

So for this post to make sense, you ought to read my last 2 posts, about my experience of using my credit card in the US.

The first talked about the customer experience, and how varied it was. Some of the quirks were allegedly to improve security, yet offered no perceivable additional security. When asked, the retailers I spoke to saw EMV as offering no better security and a worse customer experience.

The second was noting that many of the threads around card fraud led to the US – either cards being skimmed there, or card details from around the world ending up in the US, where just the mag stripe is required.

Saturday morning I got a call on my mobile. I’ll write another post later about this and how banks tell you to be careful about highly professional looking phishing scams… and then contact you in ways that look like amateur phishing scams!

The point of the call was… to say my cards details have being skimmed as they assumed I hadn’t spent a lot of money in person at an art shop in India. Actually, given I had been using my PIN in a terminal 5 miles from house, in a shop I go in most Saturdays about 20mins before that transaction, I was rather shocked by the fact that they’d authorised it anyway even it was highly unlikely it was me.

And guess what? “have you had to swipe your card recently? That’s probably where they got the details”

Yes, reader – in almost all certainly, stolen whilst I was in the US.

If only they had full EMV, then this almost certainly wouldn’t have happened.

We Now Accept Nominations for Model Bank Awards 2016

Sep 3rd, 2015

I am delighted to announce that we now accept nominations for Model Bank 2016. Most regular readers of our blog will be familiar with the Model Bank programme – it recognizes effective use of technology in banking and is now in its ninth year. Model Bank is the most prestigious award a financial institution can receive from Celent. We celebrate the winners and their initiatives at Insight and Innovation Day (I&I), our flagship event.

This year we decided to publish a complimentary report, Becoming a Celent Model Bank: A Guide to Winning Celent’s Main Award for Financial Institutions. Why did we do this? A number of reasons:

  • Model Bank has become a truly global programme. We want to introduce the concept of Model Bank to financial institutions that may not be familiar with it and hope this report will help increase awareness.
  • There are some changes to the Model Bank process in 2016. We felt it was important to explain these changes to institutions that have a history with Celent Model Bank.
  • As the number of submissions grows, the quality inevitably becomes more variable. We want to offer tips on how to win a Model Bank award. We provide transparency into what Celent is looking for when judging the nominations. We also look back and consider lessons from the past.

This year we accept nominations in seven categories:

  1. Omnichannel Banking.
  2. Digital Banking Transformation.
  3. Digital Payments and Cards.
  4. Corporate Payments and Infrastructure Modernisation.
  5. Cash Management and Trade Finance.
  6. Security, Fraud and Risk Management.
  7. Legacy Transformation.

You can find the submission form here; the deadline to submit your nominations is November 20, 2015. We will inform the winners in February 2016 and will invite them to the I&I Day in New York in April.

We know that so many of you are proud of what you’ve achieved in your organization or, if you are a vendor, what you helped your clients achieve. Tell us your story – we are keen to hear from you! Good luck!

Corporate banking in China: my crystal ball grows cloudy

Patty Hines

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Sep 2nd, 2015

I’m in the midst of writing a Celent research report on how corporate banking is faring amid increasing economic, regulatory, competitive, and technology headwinds. Part of my research includes looking at the performance of 20 of the top global banks over the past 10 years. Four of these banks are headquartered in China, a country currently struggling with a government-directed transition to a “new normal” characterized by a shift to a “real economy.”

Perusing Chinese banks’ 2014 annual reports, in early 2015 the banks were looking forward to continued acceleration of growth in a stable and healthy environment. What a difference a few months make! China’s economy traditionally depended on expanding exports and massive infrastructure spending. But China’s move to a services-based economy, built on an expanding middle class and private entrepreneurship, is proving challenging.

Looking back at the past ten years, China grew to be the largest exporting nation with $2.3 trillion in exports and a CAGR of 15%, the fastest growth rate among top exporting countries. China also weathered the global financial crisis dramatically better than the rest of the world, with its GDP growth rate only dipping to 9% at the same time as world output contracted by 0.5%.

China GDP growth

China’s growth into a global economic powerhouse and its resilience during the financial crisis contributed to a nearly 20% CAGR for corporate banking operating income across the top four banks from 2004 to 2014. Similarly, these banks enjoyed a 17% CAGR for corporate banking customer deposits.

Chinese Banking Income and Deposit Growth

Even as China’s economic growth decelerates, the IMF estimates that it will continue to outperform advanced economies. For the corporate banking sector, small-to-medium enterprises are expanding, increasing their need for more sophisticated trade and treasury banking products. This presents an opportunity for global and regional banks to expand transaction services, broadening the options available to corporations doing business in the region.

What remains to be seen in my cloudy crystal ball is how China’s corporate banking sector (and its client base) weathers the current stock market shocks. Will China be able to grow its “real economy” into a “new normal”? Or will China finally experience its own financial crisis with a severely contracting GDP and bursting economic bubble?

Is your institution leading or lagging?

Bob Meara

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Sep 1st, 2015

This question comes up often.

As a research and advisory firm, Celent fields ad-hoc research with regularity. No matter how well thought out our surveys, however, we nearly always wish we could have asked additional questions. This led us to launch two research panels focused on topics representing significant and growing interest among Celent clients. The purpose of the effort is to look deeply into the objectives, priorities, risks, barriers, and likely outcomes of two seminal retail banking topics in North America. Specifically:
• Digital Banking
• Branch Channel Transformation

Both panels consist of bank and credit union leaders with significant interest and involvement in one or both of these topics, willing to invest in bi-monthly surveys and interactive webinars in return for complimentary access to the resulting Celent reports. Many are not Celent clients and would not otherwise have access to the research.

Why are they doing this? We asked that question in a recent survey. Virtually all panel members are involved primarily as a benchmark to see how their institution is doing compared to the industry overall. It’s highly useful and timely insight for those involved (see below).

Perhaps you’d like to join us. You could have compelling and timely benchmarks for your financial institution.

Celent is accepting additional requests for membership in the Branch Transformation and Digital Banking Research Panels and expects to field ongoing research through 2016 at semi-monthly intervals. To request to be on one or both panels, apply Here.


Why banks and credit unions participate in Celent's research panels

Why banks and credit unions participate in Celent’s research panels

Opening a new bank account with no human contact

Dan Latimore

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Aug 31st, 2015

It’s no secret that banks are increasingly interested in using digital channels to sell to customers. With that in mind, I tried to open accounts at 26 U.S. banks using only the digital channel, typically online, but sometimes via my smartphone.  I evaluated the processes solely from the consumer’s perspective. A checking account applicant doesn’t care how hard it is to change processes, doesn’t know how difficult it can be to deal with compliance, or understand why banks have to collect so much information when he is the one giving them money. The methodology is unapologetically customer-centric.

Customer experience has become increasingly important to banks at the same time that fewer transactions are occurring at the branch. Several Celent banking clients have been asking about the account opening experience, and the confluence of events made it a good time to undertake this research. We describe seven key steps in the account opening process, describe them in some detail, and lay out best practices for each.

The quality of the experience varied widely; some banks we thought would be excellent were not, and vice versa. Leaders have moved beyond taking paper forms and putting them online, but there is still an immense amount of room for improvement. Some prominent names still required wet signatures, or made applicants spend a lot of time before telling them that they couldn’t be served because they didn’t live in the right ZIP code. Others tried to implement technology that didn’t quite work (like capturing name, address, and the like by taking a picture of a driver’s license). And the neobanks’ processes on an iPhone were shockingly clunky. The best, however, made the process seamless, simple, and as painless as possible with quick entry, easy KYC methodology, and a wide range of choices appealingly presented.

As new competitors — from neobanks to prepaid cards — raise the customer experience bar, banks need to put their best foot forward when courting new customers, more of who are opening their accounts online rather than at the branch. Customer-centricity (trite as the term is) must be the principle guiding banks as they refine their account opening processes.  Banks face a host of constraints as they bring those processes online. Customers, however, don’t care. Too often banks seem to be designing their process to meet their own needs first, with customer experience being an afterthought. Opening an account shouldn’t be a privilege that banks are deigning to bestow upon their customers; rather, it should be a welcoming and inviting introduction to the bank that sets the tone for the ongoing relationship.

Banks refining their online account opening are beginning to look to the next stage: mobile account opening. Driven by technological capabilities offered by the phone, principally the camera but also the authentication capabilities of the device (and phone number) itself, third party vendors are beginning to make interesting cases for investing in remote account opening capabilities.

Banks should consider four key ideas about their account opening process:

  1. Design the process from the applicant’s perspective, not the bank’s.
  2. Consider the capabilities offered by the new medium rather than simply transferring a paper- and branch-based process online.
  3. Avoid self-censorship: question why certain processes are used (e.g., wet signatures) and refine them when they don’t make sense.
  4. Develop a strategy to implement the next phase of account opening: mobile.

As we’ve all been told, you only have once chance to make a first impression. Make the most of it.

If you’d like to learn more and are a Celent client, please look at the recently published report: A Misanthrope’s Journey: Assessing the US Online Account Opening Experience. And if you’ve got comments or questions, please let me know.

What do we want? EMV! Where do we want it? Over there!

Gareth Lodge

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Aug 27th, 2015

In my last post, I talked about the experience of using my credit card in the US, and how just inconsistent it feels. Some of it was undoubtedly tied to security – using photo ID or entering zip codes – though I’m far from convinced that they provided any security at all.

In some conversations we’ve had, there has been a feeling that US fraud is actually manageable at an industry level – a belief that they are in line or better than in many other countries. Yet the recent figures from Nilson seem to paint a very different picture.

Whilst accounting for 21.4% or $6.187 trillion of total volume last year, the US accounted for 48.2% or $7.86 billion of gross losses worldwide on plastic cards.

Zil has – and will! – discuss the implementation of EMV at length with anyone, so I won’t discuss that here. What struck me was how ineffective the checks were currently.

As a consumer (rather than a payments geek) it struck me:

  • Asking for zip code as authorisation seems pointless – if I’ve stolen a purse or wallet with cards in, I’m likely to have either the zip code already or have enough info to find it within seconds on the internet
  • Asking for a signature, yet not even checking it seems odd. Perhaps I have an honest face or perhaps the risk didn’t warrant the effort
  • Photo ID, at least for non-US, seems pointless. How many people can spot fake ID, or know what a, say, Latvian national ID card looks like?

Another thought that strikes me is that the figures probably hide some other issues too. Traditionally, a third of UK card fraud takes place overseas (in 2014, £150m of £479m). And given that most other countries have EMV, of that, the majority takes place in the US – it has been ranked the country with the highest losses every year for as long as I can find records for. I suspect the figure above does not include this.

The volume of fraud then that could be cut by EMV in the US would seem to be even higher. Whilst I know it’s not that simple, the US “accounts” for over 5% of UK card fraud. Full EMV in the US wouldn’t reduced this to zero – but equally, even if it halved it in the top 10 countries which lose most to the US, the reduction in fraud would easily be in excess of £100m a year.

Visitors to the US aren’t just wanting the experience to improve, they’re wanting to stop paying for fraud that takes place in the US as well.


Global acceptance doesn’t mean global experience

Gareth Lodge

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Aug 13th, 2015

Zil wrote almost a year ago about his experience using a foreign card in the US. I’m just back from an extended stay in the US, and was really struck by how inconsistent the experience is for a consumer. Consider these variations I experienced, in just one day!

  • Check in at a hotel – swipe the card, pre-authorising a charge of $150 a day, no signature, no receipt
  • Pay at gas pump – different price for credit and cash, pre-authorised, required to enter zip code registered for card
  • Paying at till – card swiped, photo id, no signature, no receipt
  • Paying at till – card swiped, photo id, no signature, receipt only available by email
  • Paying at till – card swiped, no photo id, signature, standard receipt
  • Paying at table – card taken away out of sight, signature required, but no check on whether payment has been made before leaving the restaurant

And in no instance was the signature looked at, raising the question of what is the point of signing?! In one place I accidentally caught the enter button on the electronic pad before signing, and off it went, technically signed but with no signature – even that wasn’t challenged.

Over the course of three weeks, there were several variations even on these options. Nor did they (arguably) relate to the cost or risk of the transaction – the lowest transaction (<$10) had the most thorough checks, but the restaurants (the most expensive, and where, ahem, you’re already in receipt of goods!) the least.

To add to the confusion, it was almost funny to see the consternation that we split the bill with friends – x on this card, y on that please – something that is standard at least in the UK, but at least one restaurant claimed was both technically impossible and illegal.

Compare this to the UK, and most other countries I travel to – you either tap (though rarely) or enter your pin, and in either case the card never leaves your sight. So – just two experiences arguably vs the US multitude.

Being a geek (and with no shame, embarrassing my friends and family!), I asked, in just about the most unscientific survey ever, how they felt about EMV. Some hadn’t heard about it. Those who had felt it was going to put people off using cards because it was more difficult.

To those of us in the rest of the world, this seems bizarre, particularly those of us who have gone through the experiences in the US.

Then again, it’s understandable – human nature is often worried about any change and about the unknown. In addition to the messages about security benefits, we shouldn’t forget about the change management piece of the puzzle, and certainly not about taking the opportunity to see how the change could lead to improvements, particularly in customer experience.




Why I won’t be using Apple Pay during rush hour on London transport

Aug 10th, 2015

I am finally a proud user of Apple Pay! It came to the UK on July 14th while I was away on holiday, but I managed to set up my first card even while I was abroad. And I was very proud and pleased when I got back and completed my first Apple Pay transaction.

My experience has been more or less as expected. I got an email from American Express announcing that Apple Pay is available and suggesting that I should add my card to it. I have been using my Amex for iTunes, so adding it to Apple Pay was relatively straightforward. Somewhat unexpectedly, I now also get notifications on the phone for all transactions, including those made with a card – I would have thought Passbook would only have my Apple Pay transactions, but I guess it does make more sense to see all transactions on the card in the same place.

I also added a debit card issued by my bank. The bank also promoted Apple Pay to me, and when I logged into my mobile banking app, Apple Pay was featured prominently at the top of the “home screen.” Clicking on the banner took me to the screen within the bank app which explained about Apple Pay and had an “Add Card” button. Given that I was already inside the bank’s app having authenticated myself via TouchID, I was expecting that this button would give me a list of the bank issued cards I have and I could add any of them to Apple Pay by just clicking on it. Somewhat disappointingly, I was taken out of the bank’s environment into the regular Apple Pay “add card” process and had to scan my card, wait for the text message with a security code to arrive, and set it up just like I would have done with any other card. I can imagine that what I wanted is perhaps challenging technically, but it still seemed like an opportunity missed to “surprise and delight” me as a customer.

When everything works as expected, the transaction experience is brilliant. However, I already expressed my concerns about the reliability of TouchID on these pages before, and they proved to be true – TouchID does not always work for me when trying to use Apple Pay. While this is not much of an issue in a retail setting, it is not something you want when fighting the crowds to get on a tube or train platform during rush hour in London. As Transport for London confirmed in response to a number of complaints about over-charging, you have to touch in and out with the same device throughout the day to ensure the correct fare is charged; touching in with Apple Pay and out with a card or Apple Watch might result in being charged twice, even though all payments might eventually come out from the same card.

The other thing is that Apple Pay quickly conditions you to getting transactions confirmed on the phone. Because TfL has daily and weekly caps, it cannot confirm each transaction instantly. Instead, I was charged 10p when I touched in with Apple Pay, with the balance for the day’s travel being charged to my card much later. While this is understandable and a minor gripe, it still contrasts with the experience of other transactions.

None of this is TfL’s fault, which deserves plaudits for continuing to improve and give options to how we pay for travel. However, while I will definitely continue to use Apple Pay at the retailers, I am going to stick with a tried and tested Oyster card or a bank contactless card when travelling in London. It is simply not worth fretting every time I approach the gates whether the technology will work at the speed needed to keep the crowds flowing.

Don’t be surprised if your bank knows not just who but also what you are in the future

Aug 10th, 2015

We all know personality tests can be a little hit and miss – some are serious, long and can be scarily accurate. Others you do for fun on a Saturday afternoon whilst reading a magazine, and you never take the results too seriously.

I just came across a new type of personality test, Personality Insights powered by IBM’s Watson. According to the description, the test “uses linguistic analytics to extract a spectrum of cognitive and social characteristics from the text data that a person generates through blogs, tweets, forum posts, and more.” Interestingly, it claims to be able to reach conclusions just from a text of 100 words.

I was curious to see what the tool would say about me based on some of my blogs. I entered one of the recent texts and I got this back:

You are inner-directed and skeptical.

You are empathetic: you feel what others feel and are compassionate towards them. You are philosophical: you are open to and intrigued by new ideas and love to explore them. And you are independent: you have a strong desire to have time to yourself.

You are motivated to seek out experiences that provide a strong feeling of connectedness.

You are relatively unconcerned with taking pleasure in life: you prefer activities with a purpose greater than just personal enjoyment. You consider achieving success to guide a large part of what you do: you seek out opportunities to improve yourself and demonstrate that you are a capable person.

As always with these things, you never entirely agree, but I could recognise some of my personality there, so I was intrigued. I wanted to try it more and started entering other blogs written by me and my colleagues on this site. Most of the results turned out to be remarkably similar, suggesting that we are “shrewd, skeptical, imaginative, philosophical, driven by a desire for prestige, relatively unconcerned with tradition, etc.” Well, it is possible that we are a fairly homogeneous bunch – as analysts we often talk about new technologies, so we are “relatively unconcerned with tradition”, yet we can’t afford to succumb to the latest hype, so can come across as “skeptical.” But the homogeneity of results made me rather suspicious, so “for something completely different”, I entered an article on English football by a broadsheet journalist. While his profile turned out to be a bit more different, he was also “inner-directed, skeptical, empathetic, and philosophical.”

Not surprisingly, I wasn’t the first person to try out the tool with the extremes. A Mashable article described someone submitting “a 1919 letter from Hitler explaining his anti-Semitic agenda to a well-wisher” for analysis. Apparently, Hitler was also “shrewd, skeptical, imaginative, philosophical, laid back, appreciating a relaxed pace in life” and someone who thinks “it is important to take care of people around you.”

Now, it’s easy to show how something new is not yet perfect, but there is serious science behind the service. And even though this particular tool still needs to learn and improve, we are convinced that artificial intelligence and Watson-type technologies will have a big impact on customer servicing in Banking and other industries. Implementing and making use of these technologies is not easy, but there is no doubt that in the future more decisions will be driven by data and analytics. So, don’t be surprised if the next time you call up your bank to discuss the latest transactions or the new product you want to buy, you realise they know instantly not just who you are (e.g. via voice biometrics), but also what you are.

P.S. I just did sort of a “meta-test” by entering the above text into the service. The tool called me “unconventional” and suggested that I am “intermittent” and “have a hard time sticking with difficult tasks for a long period of time.” Is it not just smart, but potentially vindictive as well? :)

The acutely digital bank

Stephen Greer

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Aug 4th, 2015

A few months ago there was a question posed on Twitter which sparked a pretty intense debate: “What makes a bank a digital bank?” Perspectives varied, but after a reading through many of the responses, it seemed most were answering a different question. How far do incumbent banks have to go in order to adjust to the new age of digital financial services?

At a very basic level, most bankers understand the importance of digital. Many started digital transformation years ago, but the strategies have often been too narrowly focused to make a significant impact. Efforts consisted of stand-alone projects running in isolation within a LoB, too vertical to meet the needs of a real transformation strategy. Simple point solutions and narrowly defined projects in turn produce lackluster results, and the perceived value of Digital decreases, potentially falling out of favor with key decision makers based on a cost/ benefit analysis. Stakeholders might think digital is important, but without a vision they´ll often decide that the risk isn´t worth the reward.

This can be underpinned by an organization´s lack of understanding around what it means to be a digital institution. A Celent report from December of last year, Defining a Digital Financial Institution: What “Digital” Means in Banking, proposed a definition for the industry. Digital banking is:

  • Delivering a customized but consistent FI brand experience to customers across all channels and points of interaction
  • … underpinned by analytics and automation
  • … and requiring a change in the operating model, namely products and services, organization, culture, and skills and IT…
  • … in order to deliver demonstrable and sustainable economic value.

We´ve used this definition quite a bit, but it´s important as institutions develop visions around digital. It´s difficult to develop a clear strategy around a topic so loosely defined within an organization. In a new report set to publish in a few days, The Acutely Digital Bank: Mechanisms for a new Reality, we outline a few of the mechanisms institutions are using to transform. The report will also propose a general model for how many organizations are evolving.

Digital transformation is not an easy proposition. The cultural and business model changes required for some institutions are daunting, and inertia always has a seat at the table. Without orienting the business towards digital, banks risk losing out to more agile and digitally adept competitors, both from within the industry and from nonbank challengers.

How is your institution approaching digital? Feel free to leave a comment.