We’re back…a brief expanation of our absence

You may have noticed that our blog has been rather…inactive…over the last several weeks. We were hit by a virus and it (of course) took longer than we thought to get back up and running. The complexities involved in fixing what would seem to be a relatively innocuous problem serve as a not-so-gentle reminder of the fiendishly difficult tasks that our clients deal with daily as they bend technology to their strategic will. Despite our blogging absence, rest assured that we’ve been continuing to follow and research banking technology trends; they never stop evolving, and neither does our coverage. Please check back in over the next few days to see the backlog that we’re ready to unleash.

Quotes from the Innovation Roundtable

They said it couldn’t be done, but we held the latest installment in Celent’s series of innovation roundtables in Tokyo recently. Our innovation roundtables put the focus squarely on interactive discussion among the participants. This is a relatively untried model in Japan, where events typically take the form of conventional conferences with presentations. We’re glad we tried it though, because we got a very interesting line-up of firms. Participants included the whole spectrum: banks, capital markets firms, and insurers; Japanese and foreign firms; traditional mega-institutions and alternative new entrants. The discussion was lively; below are some quick notes I took of some of the more interesting comments made, to capture a bit of the flavor of the day. Why Innovate? “Innovation is not the goal, it is a method and a tactic.” “We need to innovate because it has become difficult to differentiate us from our competitors.” “In today’s environment, innovation is necessary if you want to stay profitable.” Paths to Innovation “Incremental innovation is an axymoron. You can’t innovate by increments; innovation requires a big bang change.” “It might be possible to rearrange existing elements to create something new.” “When to innovate? If our clients think a new service is interesting, we try and create it for them and see if it succeeds.” “Innovation needs to be business driven.” “Financial institutions need to have an innovation division; an incubation unit that accumulates ideas from throughout the company.” IT and Innovation “IT is not the impetus for innovation, but because IT inevitably evolves, that creates need for innovation.” “Legacy is a barrier: it is hard to throw things away.” Cultural Challenges “We need to justify ROI on any investment each fiscal year. It is hard to show this on an innovation project.” “If you think about it, financial institutions don’t even have R&D departments.” Quote of the Day “Changing company culture is really about changing oneself. I personally enjoy innovation and change. Innovative culture is about getting a bunch of people together who enjoy change.”

What does Digital mean to you?

Celent held a client roundtable on the subject of “Digital.” We had a sneaking suspicion that there wasn’t a lot of consensus on what that word actually means, so just prior to the event we asked participants “to list three words or initiatives that you associate with digital in your organization.” Here’s what we found: of 30 responses from 10 people, only two terms were mentioned twice: “mobile” and “customer experience” (which isn’t quite a single word). Every other word was unique. Digital WordCloud I find this fascinating: there’s no agreement on what digital means, and yet it’s one of the hottest topics in financial technology today. How are we going to deal with this issue when we can’t even agree on what it is? We’d suggest that defining what digital means in your organization is a vital first step to refining your digital strategy. My colleague Will Trout has also blogged on what we found during our roundtable.  You can find his thoughts here: http://wealthandcapitalmarketsblog.celent.com/2014/04/12/celent-roundtable-exploring-digital-in-financial-services/  

Of Apples and Banks

Zil’s most excellent post about his recent experience with a new payment type highlights one of the challenges that all new systems face – they’ve got to work “out of the box”. Few people (including Mrs Zil!) would have been so patient. That reminded me of a recent conversation Zil & I had around iPhones, and more generally Apple. Last year Zil swapped his iPhone for another leading brand of smartphone, for a variety of reasons. But he’s almost certainly going to be swapping back, primarily because the iPhone works “out of the box” with other things he has. That phrase again. The Apple ecosystem works well together, and, for most people, life is far more straight forward by sticking to just Apple products. I think we forget sometimes that this is perhaps the single biggest differentiator for Apple. The total picture is more thought through and designed than most others. For example, many people don’t realise that Apple weren’t the first to market with the mp3 player. They were 3 years behind the first, and still after Intel (yes, that Intel!), Sony, Creative, and Bang and Olufsen. Nor was it the best (and arguably still not) in terms of features and functions. But it came with iTunes which consumerised the process of managing music – and more importantly, the buying of music, seamlessly. iTunes, for the advanced user such as me, is a real pain. Not only does it not provide the functionality I require, but it struggles with the (atypical) size of my music collection. But I still use it, because it works with my ecosystem more broadly and that offsets the deficiencies. So what’s the point of this post? I think a couple of things stand out for me. Apple are rumoured to be moving into mobile payments. The issues Zil faced will almost certainly be overcome by Apple, because of their approach to things. Equally, we can expect that it’ll be far broader and better thought through service than many offerings. And as a result, whilst it may not be the best service, it’ll probably get traction quicker. Secondly, the other take-away for banks for me is not to rush innovation, but to get it right, and to seek to how to make it a more seamless service. One positive thing as a result of being an analyst is that my bank has now provided me with a relationship manager, who can highlight to me a range of services, and is “just a phone call away”. Amazon and Apple are remarkably accurate in suggesting things I might like to buy. Not only does my bank not do it, (and I think they must have a “lucky dip” approach to the mailshots they send me!) but rarely is my relationship manager or bank manager empowered to do even start the sales process, even for something as simple as getting a credit card. This isn’t about omni-channel in terms of technology, but omni-channel in terms of customer. As a customer, I don’t care whether it’s a different part of the bank that the product is coming from – if has the same bank logo on, then too me it’s the same people. Some banks have lost sight of the old adage – it should be easy to buy, not easy to sell.

Re-imagining Banking

On June 30th, Peter Sands, Group CEO of Standard Chartered, published an article in Financial Times called Banking is heading towards its Spotify moment. The article seems to have resonated incredibly well with the banking community: at a conference this week, two senior banking executives from different parts of the world referred to the article, while we have been discussing it with our clients. The article argues that “banking is very digitasable, but we have not yet seen the fundamental transformation of business models that have taken place in other sectors, such as music […] Margins will fall unless banks reinvent what they offer and how they work.” At Celent we agree wholeheartedly – the move towards “all things digital” is both a serious threat and an incredible opportunity in banking. The regulators and their “zero tolerance” attitude is one of the many barriers making it difficult for banks to be truly innovative. But many recognize the need for change and are investing accordingly. We are committed to helping our clients along their journey through our research, insights, and networking events. Dan in his recent blog post summarized our NYC event on Omni-Channel Delivery. We will also be hosting a banking roundtable in London on Oct 17th, “Evolve or Die: The Future of the Bank Account.” Again, it will be a bank-only forum with an emphasis on idea exchange, and if you are interested in attending, please contact Chris Williams at cwilliams@celent.com or +44 20 8870 7875.

Clients or Customers? The distinction makes a difference

We’re all engaged in commercial relationships; sometimes we buy, sometimes we sell. But what roles do the buyers and sellers play? At a host of conference and briefings over the last several weeks, I’ve been struck by the number of times that software and hardware providers (most often “vendors” in analyst-speak) have referred to their buyers as “customers” rather than “clients.” This thought, neither unique nor new (and perhaps pedantic), takes on particular relevance as 1) the bank technology space is being reshaped by a host of new forces, and 2) technology providers enter into new sorts of relationships with their bank buyers. In its purest form, the customer – vendor relationship is transactional, impersonal and zero-sum. It’s built on a series of one-off, individually negotiated exchanges of value. The seller doesn’t take account of the individual buyer’s needs, and could indeed be selling to anyone. And because there’s little give and take, except on price, one party’s loss is the other’s gain – the definition of zero-sum. Selling shrink-wrapped software in the past, or apps today, exemplifies a customer – vendor relationship. At the other end of the spectrum is the client – advisor association. It’s relationship-based, contextual and positive sum. The seller is not in this game to make a single high-margin sale, but instead wants to build a lasting rapport that will generate an on-going stream of revenue in return for a fair provision of value. The advisor develops an understanding of the client’s needs and provides tailored advice or products suited to the situation; there’s no such thing as one size fits all. And finally, when the client wins, the adviser wins; they both do well together. Strategy consulting and legal advice are classic examples of client-advisor relationships. Celent serves two main sorts of clients: financial institutions and technology providers. Depending on what they’re selling, they fall somewhere on the spectrum between the two pure-plays I’ve described. I’d suggest, though, that both types of firms can do a better job serving their “customers” if they start thinking of them as “clients” instead.

2013 Celent Banking Insight and Innovation Day Roundup

Last Wednesday, Celent hosted its sixth annual Banking Innovation & Insight Day. We had a full house of energetic attendees, and a solid crew of dynamic panelists and presenters. For the first time, Celent combined the Banking and Insurance events with a welcome by Celent CEO, Craig Weber introducing creative disruption and recognizing winners of the “Innovation is…” competition. The competition was inspired by the Earnest Hemmingway six word-long story. To capture the essence of innovation with utmost brevity, here are the six finalists: 1. Human generated evolution 2. Creating tomorrow’s today. 3. Nowhere. Now here. 4. Bringing dreams into reality before others. 5. Transforming lateral thinking into practical reality. 6. Repeat. “Try. Fail. Modify.” Until success. Next, Keynote speaker, Jeanne Ross, Director and Principal Research Scientist, MIT Sloan Center for Information Systems Research (CISR) electrified the audience with wisdom and enthusiasm. Jeanne presented a compelling case for developing a culture of innovation using case studies from Amazon, Apple, Credit Suisse, Foxtel, Guess and USAA. The audience was a blaze with tweets as Jeanne presented CISR research on the topic. Culture of Innovation After a networking break, the audience was treated to a panel discussion, Multichannel Delivery: Raising the Bar, featuring Dan Dickinson (BMO), Tom Poole (Capital One) Kim Summerrow (Bank of America) and Mike Young (Everbank). The panel advanced many themes including: how to sell in self-service channels, the longevity of the branch channel influence, channel self-sufficiency and the need to banish “single channel” initiatives forever. Following lunch we were extremely honoured to present Celent Model Bank awards to 20 financial institutions. Each of the 21 initiatives are presented as case studies in the report: Celent Model Bank 2013: Case Studies of Effective use of Technology in Banking. Celent clients may download the report here. The audience then enjoyed the privilege of hearing from Sergio Fidalgo, CIO, BBVA Compass, Celent’s Model Bank of the Year, as he presented the largest, successful, U.S. core banking transformation project in the past ten years. MB2013 Following Sergio’s presentation, Celent Senior Analyst Zil Bareisis presented a thorough discussion Debunking Mobile Payment Myths: 1. Mobile Payments = NFC 2. One wallet will rule them all 3. Banks don’t have to/can’t do much about mobile payments All presentations from the event are available for Celent clients to download on our web site. We look forward to seeing you at our next event!