Emerging Innovation in Banking

Emerging Innovation in Banking

Over the past few weeks we have been previewing various content themes we will be discussing at our Insight and Innovation Day in Boston on April 4th. I would like to finish this series of posts by looking at the new Model Bank category we introduced this year – Emerging Innovation.

When we added this category, we weren’t quite sure what to expect, but we certainly hoped to see the banks’ efforts at the “bleeding edge” of innovation. We were very pleased with the number and quality of such nominations, which spanned the gamut of the hottest topics today. Many of these truly outstanding stories are still in relatively early stages, but all are very interesting and pointing to the future of banking.

Model Bank nominations in 2017 showcased the banks’ efforts in the areas at the forefront of innovation in banking:

  • Innovative customer engagement: the most innovative banks go where their customers are; for example, banks are experimenting with ways to engage their customers directly from social media platforms via chatbots and other tools. They are also looking to introduce new channels, such as wearables.
  • Artificial intelligence (AI): Model Bank submissions demonstrated the diversity of AI technologies and their applications:
    • Driving a virtual agent capable to have a written exchange with the customer via a chatbot, or to even hold a verbal conversation on the phone.
    • Powering a robot to support customer engagement in physical branches.
    • Deployed behind the scenes as a tool to help the customer service agents.
    • Helping determine the best marketing offer for the customer.
  • Biometrics: banks are stepping up their efforts to deploy biometric authentication in their bid to provide customers more convenience while ensuring security. They are expanding beyond fingerprints and are experimenting with other modalities such as facial and voice biometrics. And it’s also not just for consumers – banks are beginning to use biometrics in the corporate banking context as well.
  • APIs: we already spoke about APIs when describing Open Banking, but want to highlight this again, given the importance of APIs. While banks in Europe must open up because of regulation, leading banks around the world are not waiting for the regulators and are starting to provide API-based access to their services to others. And some banks are pursuing a “marketplace banking” strategy seeking to position themselves as a banking platform in the centre on which third parties can build a myriad of discrete services. 
  • Blockchain: given how many banks have started exploring blockchain and other distributed ledger technologies, we were hoping to see some nominations describing their efforts in this space. We were not disappointed and received initiatives ranging from collaborative efforts around cross-border payments and trade finance to “solo” efforts of a single bank using blockchain to manage employee incentives.

We will be discussing all these topics and more at our Insight and Innovation Day next week. It is also the time when we announce and award all the Model Bank winners, including our Model Bank of the Year. We are in the final stages of preparation and are very excited! The event has been sold out for weeks, so if you haven't yet registered you might be too late… If you have registered, we are looking forward to welcoming you there, although if your plans have changed, please let us know so that we could invite those on the waiting list. See you in Boston!

Celent Model Bank 2017 Awards: The Payments Preview

Celent Model Bank 2017 Awards: The Payments Preview

This is the next instalment of our Model Banking preview blogs, and it’ll come as no surprise that I will focus on Payments.

Reading and evaluating the Model Bank entries is always fascinating. It’s also somewhat frustrating too at times – payments, covering so much territory, often ends up with the tricky task of comparing two very different projects, and trying to decide which is best. This year was no different, with the quality of entries high.

Until we announce all winners publicly on April 4 at our 2017 Innovation & Insight Day in Boston, we’re unable to say too much more – very frustrating! In addition to presenting the award to the winners, we will be discussing broader trends we’ve seen across all nominations and will share our perspectives why we chose those particular initiatives as winners. Unfortunately though, if you’ve not already registered, it’s too late. As with every year, it’s not only sold out, there is a growing wait list too!

So until April 4th, what can we take away from the Payment entries as a whole this year?

First, the entries this year reinforce how hard it is for any single bank to come up with a cutting edge product innovation in payments. As a result, we had a number of entries submitted jointly by multiple FIs describing their initiatives on blockchain, P2P infrastructures, and other collaborative efforts.

We also saw, particularly in the retail space, the adoption of innovations in one market, transposed from another. There were a number of these, particularly in wallets and P2P. Not bad, just not new and often with a very specific market context. For example, one technology had been in place in a different country for at least 5 years, yet the impact will be huge for the bank who submitted it, and is leading edge for their market.

This perhaps serves as a timely reminder that innovation isn’t always about cutting edge technology, but doing something different. Scanning other markets for what they do, and why, is a great source of new ideas, Given that these innovations are, by definition, tried, tested and live, it also has the benefit of being easier to adopt, from the likely business benefits to the actual technology used and lessons learnt.

The second theme is the continued payments back-office renovation story, particularly around the adoption of payment services hubs, which continue apace. Whilst we have defined what is or isn’t a hub, we have always been clear that no two hub projects are exactly the same, and the entries this year reinforce that.

A few things really stood out in particular about the entries. First, some clients still consider hubs to be mainly European, yet we had entries from right around the globe. Second, whilst the details may differ, common to all was the belief that the bank had to re-engineer payments, not just for the future, but to better respond to changes that were imminent. Given the change in the last 10 years, and the likely change in the next 10, perhaps the question for many banks is more about when than if they also undergo their own transformation.

Look out for the case studies being published on April 4th for more detail!

We Now Accept Nominations for Model Bank Awards 2016

We Now Accept Nominations for Model Bank Awards 2016
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!

A preview of Innovation and Insight Day

A preview of Innovation and Insight Day
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

Banking by Appointment…finally!

Banking by Appointment…finally!
For years, I’ve been able to schedule an appointment with my healthcare provider, barber, pastor and friends, but never my banker. What’s up with that? That’s because banks have historically relied on a 100% walk-in model for in-branch sales and service. Things are finally beginning to change. They need to. With branch traffic declining at most banks by more than 5% CAGR, sales leads aren’t just walking through the doors like they used to. And that traffic won’t return unless banks take proactive steps to generate those leads. Banking by appointment is one great way to do so. Why this is such a good idea: • Customer convenience. Rather than rolling the dice with an unannounced branch visit, consumers make their appointment knowing staff with the requisite knowledge and experience will be ready and waiting (at least in theory). • Improved channel capacity. Demand for sales and service staff is hard to predict accurately. This creates several problems. As more customer interactions are scheduled, channel capacity improves along with customer satisfaction. • More effective customer engagement. Done well, front-line staff knows who is coming and what their needs and interests are prior to their arrival. This provides staff the ability to be well-prepared for the appointment, rather than reacting to walk-in visits. Bank of America and Bank of Montreal are two excellent examples of well-executed banking by appointment initiative in my opinion. Bank of America’s capability extends to online, mobile and Facebook customer touchpoints and invites both in-person and telephone appointments. Bank of Montreal (BMO) was a 2013 Celent Model Bank winner for its initiative. BMO Online Appointment Booking (OAB) Initiative BMO launched its new Online Appointment Booking (OAB) functionality in May 2012 allowing personal and small business banking customers and prospects to book appointments in real time, quickly and conveniently directly into branch employees’ calendars through Online Banking and BMO.com. The capability is being extended to mobile devices in 2013. Through the first six months since launch, OAB booked nearly 19,000 appointments, resulting in 8,355 product sales. Roughly half appointments were booked through BMO’s public website. On average, 1.8 products were sold per appointment. Based on these results, the project payout is less than 7 months (net of estimated cannibalization – sales that would have otherwise been made). The sales mix (below) reflects significant complex products, suggesting that OAB has been effective in bringing in foot traffic among prospects not likely to purchase online. BMO OAB Staff response to OAB has been favorable. Apart from exercising discipline in maintaining Outlook calendars, no additional staff effort is required as a result of OAB – other than keeping appointments booked on their behalf. Celent regards OAB as a model example of making a significant business impact with a relatively simple and low-cost technology investment. So much so, we awarded BMO a Celent Impact Award last month. Celent Impact Awards As Celent reviewed the unprecedented number of Model Bank nominations this year, we were struck in several instances by initiatives that were impactful but were not particularly innovative or difficult. Rather, we were left with the sentiment, “Why aren’t more banks doing this?” In recognition of the wisdom demonstrated by these initiatives, Celent chose to honor three financial institutions with a unique distinction among Model Bank Components. Hence, the Celent Impact Awards. The report, Celent Model Bank 2013: Case Studies of Effective Use of Technology in Banking is packed with 20 detailed case studies. Celent is accepting nominations for Model Bank 2014 through November 29, 2013.

Branch Transformation: The Line Extension Approach

Branch Transformation: The Line Extension Approach
Celent recently published a detailed case study on Easy by RHB, a leading retail bank in Malaysia seeking to grow market share in the large but under-banked Malaysian mass market. Celent was so impressed with its initiative that it awarded RHB Bank the Celent Model Bank of the Year award for 2012. Ernst & young said this in its recently Global Consumer Banking Survey 2012: “Banks are competing for the business and loyalty of increasingly demanding customers. In response, different models are emerging to serve different customer needs. Some are based on low-cost competition, some on high-touch service and some on accessibility. Large, full-service banks need to defend market share against specialist competitors focusing on particular products or customer segments, as well as new entrants in the payments space. At the same time, full-service banks need to retain the ability to meet a huge range of customer needs.” In this context, I assert there is not a credible argument to be made for the status quo in retail branch banking. Financial institutions simply must evolve their branch networks into more efficient and effective delivery channels – alongside carefully and fully integrating other delivery channels. Doing so, however, is perilously difficult for many banks – particularly full-service financial institutions. There are both perceived and real risks associated with massive branch transformation initiatives – alienating profitable customers that liked things the old way. Thus, to balance the imperative for branch transformation alongside the risk of customer attrition, many banks are moving at a glacial pace. This won’t work either. Therein lies the brilliance of the RHB initiative. Rather than transforming RHB branches to profitably serve the Malaysian mass market (and risk messing up its profitable mass affluent business), RHB launched a new brand, a line extension of its RHB parent. The new brand, Easy by RHB, was launched using an entirely new retail delivery model and a portfolio of four ultra low-cost retail outlet designs. Easy by RHB is: • A stellar branch transformation success story • A new consumer brand (a line extension to RHB) • Simplified products to make them easy to sell and deliver • An entirely new organization – younger, empowered, compensated, and a different culture within RHB (bold, ambitious). • A fully-automated retail delivery model interfacing to RHB’s legacy systems (biometrics, cash recycling, paperless origination, automated underwriting, instant-issue cards, instant disbursement). The figure below shows Easy’s four different retail outlet designs. easy-portfolio In its first two years (through 2011) RHB deployed 235 Easy outlets, taking its retail footprint from a distant #5 to market leadership. Over the period, total RHB customer deposits have grown by more than 50% and assets by 45%. And it has done so with a portfolio of retail outlets that cost, on average, about a tenth of what a traditional branch costs to build and operate. This would have likely been nearly impossible if attempted using existing RHB branches and the legacy RHB brand. Line extensions are common in consumer packaged goods (e.g., Tide with Bleach, Charmin Ultra, Bounty Basic). Line extensions can also be found among restaurants seeking to expand into smaller, faster dining environments such as airport and shopping mall food courts. Pizza Hut express is one such example. Why not with retail financial institutions? Branch transformation has always been about more than just technology. In our view, the line extension approach can be an attractive strategy that deserves a close look. Readers may download an excerpt of the Celent report, Model Bank 2012: Case studies of Effective use of Technology in Banking, June 2012 by clicking here. The excerpt features an abbreviated case study of Easy by RHB.

Now Accepting Nominations for Celent Model Bank 2012

Now Accepting Nominations for Celent Model Bank 2012
Remember when banking was broadly embraced as an honorable profession? That idea seems to have been lost among most businesses and consumers these days. Hardly a day goes by without a news story about some sort of alleged bank impropriety. In sharp contrast, Celent seeks to celebrate financial institutions doing things well. Each year, we honor a hand-picked selection of financial institutions who model excellent utilization of technology in banking. Celent Model Bank 2011 winners received recognition at our annual Innovation and Insight Day this past May in Atlanta, GA.


So, forget the depressing daily news and think about great examples of technology innovation at your institution (or one of your clients if you’re a technology provider). Share your story with us using our online nomination form. We’ll welcome nominations through January 31, 2012. A panel of analysts will review all nominations based on three criteria: 1. Degree of difficulty 2. Degree of innovation, and 3. Measurable, quantitative business results achieved Success stories are welcome across the spectrum of financial services disciplines, from: infrastructure and architecture, product development, marketing/sales, distribution / channel management, transaction processing, loan processing, customer service / support, and security and risk management. Nominations can be made online at: http://www.celentmodelbank.com. If you’d like, e-mail me and I’ll send you an excerpt from last year’s report, Celent Model Bank 2011: Case Studies of Effective Technology Usage in Banking.

Celent Model Bank Awards 2011

Celent Model Bank Awards 2011
The capstone of Celent’s Innovation and Insight Day held in Atlanta, GA last week was the recognition of Celent Model Bank award recipients for 2011. For the most part, it’s not much fun to be a banker these days. The news media, consumer advocates, regulators and politicians alike seem to make bank bashing their full-time job. In sharp contrast, Celent sought to celebrate financial institutions doing things well. The picture below shows this year’s Model Bank winners that were able to accept the awards in person.
Celent Model Bank 2011 Award Winners

Celent Model Bank 2011 Award Winners

Pictured in the back row, left to right: • Rick Robel, EVP, Operations & Technology, American Savings Bank • Andrew Lederer, VP, Business Process Manager, Kenebunk Savings Bank • Paul Garofallou, VP , JPMorgan Chase • Basil Lyden, Sr. Business Dev. Exec., Temenos (on behalf of Metro Bank) • Joshua Guttau, President & CFO, TS Bank • Jun Seong Han, Head of New Business, Hana Bank • John Finley, SVP Digital Channels, Bank of the West Pictured in the front row, left to right: • Karl Lamar, VP & Product Manager, Receivables, JPMC • Pete Ingles, SVP, UMB Bank • Stephen Irish, EVP & COO, Enterprise Bank • Alicia Moore, VP & Head of ATM Banking, Wells Fargo • Rachael Diamond, Sr Client Rel. Mgr., Citibank • Bill McNamara, EVP & CIO, Union Savings Bank • Sandy Dixon, EVP & Group Exec., Extraco Banks Here’s a very brief sampling of some of the celebrated initiatives: Bank of the West began its Future Bank initiative in 2007. The purpose of the project was to create a new retail operating model by reengineering systems and processes that would allow reallocation of local resources. The new retail operating model was facilitated by a significant technology change which it implemented alongside comprehensive business process redesign over a period of three years. Results included impressive improvements in teller and platform operational efficiency as well as sales effectiveness. Citi Prepaid Services has a number of success stories to its credit. All are examples of listening to customer needs and responding with innovative and effective payment solutions that reduce cost and improve user experience. Celent recognizes two initiatives Citi Flu Care and Citi Plasma Donation Solution. Over a span of six years, Extraco Banks implemented multiple projects designed to significantly improve its multichannel delivery effectiveness. Its online banking channel now offers online account opening, online lending, live chat, and a life event assistance tool. The majority of its ATMs have been replaced with deposit automation units. Its branch channel has been transformed through technology, organizational redesign, and rigorous workflow improvements. The result was significant efficiency gains, happy, well-served customers, and, as the bank says, a “boringly profitable” business. Hana Bank has gained attention by launching the first smartphone banking service in South Korea. The bank distinguished itself with an array of novel and innovative features including GPS service, Coupon service and mobile PFM. Hana Bank now enjoys nearly a quarter of a million smartphone banking users. JPMorgan’s US Dollar Clearing—Asia Direct, offered by the firm’s Treasury Services business, is the first payment solution to provide direct access to multiple regional and in-country US dollar clearing systems in China, Hong Kong, Japan and Taiwan from a single US dollar account. Clients are not required to establish separate accounts in each country of clearing, resulting in better cash concentration, lower fees, simplified funding arrangements, and less time spent on reconciliation activities. The product has been a win for customers and the bank as well, contributing to a 20% increase in JPMorgan’s Asia revenue from 2008 to 2010. Our hats are off to these banks and their vendor partners for the vision, innovation and hard work that brought so many quality initiatives to market. Celent is accepting nominations for the 2012 Celent Model Bank awards and will be actively soliciting nominations beginning this fall. Nominations can be made online at: http://www.celentmodelbank.com/.