Thoughts on Branch Transformation 2016

Thoughts on Branch Transformation 2016
Last week, I had the pleasure of attending and presenting at Branch Transformation 2016, sponsored by RBR. The event was held in London on 6th-7th December. Unlike one once stalwart retail banking industry event in the US, RBR’s attendance has been on a multi-year growth trajectory. This year, attendance was up 20% over 2015 and included delegate representatives of 116 banks from 53 countries. It was time well-spent. [Read more…]

Dispatch from Vegas: Capital One places big bet on AWS

Dispatch from Vegas:  Capital One places big bet on AWS
If it’s October, it must be conference season.  Old DominionThe month started innocently enough: a visit to Nashville for the Computer Services, Inc. annual client conference.  By virtue of endless industry consolidation over the past 30 years, CSI has been initiated as a full member of the Big-5 fraternity of core banking systems providers, and Celent will be adding their flagship NuPoint banking solution to our pending updated coverage of core banking systems solutions.  I was pleased to be invited to speak to CSI’s clients about innovation in banking (more about that in a future blog post).   Entertainment was provided by an up and coming country group Old Dominion — I’d never heard of them, so was surprised at their excellent performance of songs that they had written for established acts like Blake Shelton (“Sangria”) and Tyler Farr (“Guy Walks Into A Bar”). After Nashville, it’s been back-to-back trips to Las Vegas for the Amazon Web Services re:Invent developers conference followed by the Bankers Administration Institute’s Retail Delivery Conference (BAI-RDS). BBKingFor a long time, BAI-RDC has been the premiere conference for retail banking.  When I was busy digging up acquisition opportunities for Metavante in the 2000s, BAI-RDS was a “can’t miss” opportunity to take the temperature of fintech, to see what competitors were up to, and especially to keep tabs on the many startups that had emerged from the shadows to lead the way in internet-enabled banking services.

Those were very heady days for BAI-RDS.  I have vivid memories of packing into the House of Blues in New Orleans as Chip Mahan, founder of online banking pioneer S1, invited a few hundred of his industry friends to a private performance by BB King.  It was November 29th, 2000, a Wednesday evening and yet the party went on well after BB finished up his performance at 11 PM.

Back to Vegas.  Since I also cover cloud services for Celent, I decided to check in on what AWS was up to these days.  Their annual developer’s conference is called re:Invent and since AWS has only been doing this for the past four years, I didn’t quite know what to expect.  BAI-RDS regularly draws 3,000 attendees, and while I knew re:Invent 2012 drew about twice that number, I was still not prepared for the crowd of nearly 20,000 developers and AWS partners that converged on the Venetian Hotel and Sands Expo.  The many specific education sessions were scattered over the five floors of ballrooms in the Venetian while the Expo Hall and Key Note presentations were held at the adjacent Sands Expo. While I didn’t see many bankers wandering the halls of AWS re:Invent, the one banker I did see grabbed my attention:  Capital One appthat was Rob Alexander, CIO of Capital One, who shared the stage with AWS SVP Andy Jassy during the Day One Keynote address.  Rob was there to announce that Capital One is deploying its new flagship mobile banking app on the AWS Cloud — I found that nothing less than startling in that Capital One only started experimenting with AWS last year, running a few mobile app development projects and bank-sponsored hack-a-thons in the AWS Cloud. Based on its initial success, Capital One began migrating development and testing work to AWS at the beginning of the year, and nine months later it was sufficiently happy with their experience that the bank made the bold decision to shift part of its production environment to AWS, beginning with its new mobile banking app. The new app essentially melds Capital One’s existing online and mobile banking applications, with a uniform look and feel, and changes to user preferences made on an iPhone or iPad automatically flow to the user’s online banking experience.  Capital One’s API gateway and 80 individual banking services are in the process of moving to the AWS Cloud as part of the mobile banking services launch, initially on the iPhone and later this fall expanding to the iPad and Android platforms. What’s The Hurry?   Surely Capital One is no start-up — with more than 70 million cards and $80 billion in card balances, Capital One is a top-four credit card issuer.  When combined with its direct banking operations, Capital One is in fact the sixth largest bank in the United States, with $350 Billion in assets.  Even as a proponent of the long-term impact that cloud services will have on the banking business, I was nothing less than astonished that Capital One has progressed from cloud newbie in 2014 to going “all in” on AWS in 2015. It didn’t take long to see what Capital One was up to.  By leveraging AWS for DevOps and (over time) production, Capital One is on track to reduce the number of data centers it owns and operates from 8 in 2014 to 5 by 2016, to only 3 by 2018.  Capital One intends to redeploy the capital it will recoup from data center consolidation into its core businesses while increasing the scope and pace of innovation at the bank. Capital One is betting that an AWS-based mobile banking platform will allow the bank to support the level of real-time scalability needed to cope with demand spikes such as occurs on Black Friday and Cyber Monday. But what about security?  Security is the most commonly cited reason why most banks are not embracing cloud services, so I was interested to hear Capital One’s take on security.  According to Rob, “Of course, security is critical for us.  The financial services industry attracts some of the worst cybercriminals.  So, we work closely with the Amazon team to develop a security model which we believe enables us to operate more securely in the public cloud than we can even in our own data centers.” More securely in the cloud?  Either Capital One has gone rogue (very doubtful) or it knows something that most banks have yet to reconcile:  when it comes to security, it’s much less about where your sensitive data sits and much more about how you secure your data from pranksters and thieves. AWS Party AWS’s re:Play evening entertainment was provided by Zedd, a Russian-German musician and DJ who I also had never heard of (although my 18-year old college student did).  Chip Mahan was nowhere in sight, but I might have missed him in the crowd of 19,000 AWS converts in the audience.  Zedd was no BB King for sure, and unlike Old Dominion I didn’t know any of his songs, but nevertheless his techno-pop performance was hypnotically entertaining. I could have gone back to Las Vegas for a third consecutive week, where the ever-growing Money 20-20 conference beckons, but alas I’ll be in Denver for the Association of Financial Professionals annual conference.  Dan Latimore and Zil Bareisis will be at Money 20-20 and I’m eager to hear about their experience.  

Would You Rather Check-in Or Check-Out?

Would You Rather Check-in Or Check-Out?
You know the drill – you go into the store, select your goods, and take them to the cashier to check out and pay. What if we flipped the process on its head and you started with a check-in instead? You come to the store and your phone announces your arrival. The merchant knows you are here and is able to communicate with your phone as you move around the store, providing relevant information, such as product details, stock availability and special offers. When you see something you like, you just add it to your virtual shopping basket and when you are done, you simply leave (most likely, after you’ve demonstrated to someone that the contents of your shopping bag correspond to the items in your virtual basket.) What about payment? Well, the payment simply happens in the background based on your registered preferences (e.g. a card). Forget NFC, EMV and other complex buzzwords. We already highlighted this as a potential future scenario in our report on Digital Wallets last year. A number of announcements in the last 10 days or so indicate that this future might be closer than we think. Both Apple and PayPal announced new developments based on Bluetooth Low Energy (BLE) technology, iBeacon and Beacon respectively. The Beacons are essentially small devices that merchants can put around their stores. These devices then use BLE technology to communicate with other devices, such as Bluetooth compatible phones. Their energy consumption is very low and they don’t need Wi-Fi or a phone signal to work. Most excitingly, with built-in micro-location geo-fencing features, Beacons can enable new applications in indoor mapping. For example, iBeacon supports “enter” and “exit” events, so it can send different notifications while entering into the range and exiting out of the range. BLE has been touted for some time as NFC killer, and it’s easy to see how it can replace the NFC payment (NFC in card-emulation mode). Of course, NFC is also simply a communications technology (peer-to-peer mode), so BLE will also be competing with NFC tags. BLE devices are more expensive than NFC tags (~$30-50 vs $0.10), but their communication range is much bigger (up to 50 metres vs ~4cm), so the merchant would need fewer of them. It may be a coincidence, but there were further bad news to the “NFC camp” in the last few days in the US. First, Capital One, one of the three issuers that supported the Isis pilot (Chase and Amex were the other two), announced it would be withdrawing from Isis. Then, Google Wallet announced its new app with many new features, such as P2P payments. The app will be available to all Android phones, including those running on MNOs other than Sprint. While Sprint was the original and the largest MNO partner, Google Wallet has since rolled out to a number of smaller networks, including Virgin Mobile, US Cellular and Metro PCS, so technically it was available to more than one MNO, just not the 3 large giants behind Isis. The new app doesn’t change that – if you want to use NFC payments at the POS, it will still only work with selected handsets on Sprint and those other MNO partners. However, to me this is another indication that Google Wallet is re-focusing its attention on e-commerce, P2P, and other payment use cases, just not physical POS payments. I also thought the announcement on offers was interesting, as the wallet allows the customer to capture the offer irrespective of where it comes from and present it for scanning at the POS. The significant shifts here are the expansion of the universe of available offers and the fact that you don’t need NFC and tapping to get them redeemed, both of which could important catalysts for increased usage of the wallet. Mobile payments never cease to be exciting and interesting. Integration of BLE technology could be a game-changer for the industry.

Cap One Acquires ING Direct

Cap One Acquires ING Direct
Capital One was the likely winner to acquire ING Direct’s US business, and they did. Few people do data analytics better than Capital One and a large direct business such as that run by ING is a perfect customer pool upon which to use the analytics that they have wielded so successfully in credit cards. Capital One was experimenting with direct banking in some markets, including my home of San Jose. Half the ads I saw in my yahoo mail were for Capital One. Direct banking is like the credit card business in that they are branchless business which rely on outbound messaging and lots of experimenting around price and marketing techniques to make a successful venture. Capital One knows how to run such businesses. Nevertheless, this is a bold move by Cap One. They have assets of $129 billion and they are a acquiring a bank with $92 billion in assets. This vaults them into the top ten banks in the US. What do you think?