Execution: the Achilles Heel of cool new stuff

Execution: the Achilles Heel of cool new stuff
I’m heading into Finovate in a couple of hours. The UN general assembly is in town, and the only reasonable Starwood hotel I could find was the Aloft in Harlem. It’s amazing that this hotel has exactly the same feel as its counterpart at the Denver Airport…but I digress. I’m writing because Aloft has a cool feature called Keyless Entry. Very simply, I checked in on my SPG app, was given my room (which puzzled the clerk as I tried to check in again – apparently I didn’t even need to stop at the front desk), and my phone was to serve as my key. Brilliant in theory, but in practice I overshot my floor on the elevator because I couldn’t activate the security pad quickly enough, and getting into my room and the health club took several swipes (5-10 seconds) each time. So while I like ditching the plastic key, that convenience is more than outweighed by the hassle of having to call up the app (which takes 5-10 seconds itself to load) and then match it to the pad. I’m using a plastic key next time. Another great idea is using a phone’s camera to capture data, most notably a U.S. driver’s license. I love the demos I’ve seen at prior Finovate events, but when I’ve tried it to open new accounts, it simply didn’t work. Just to show I’m not wholly negative, I also activated my BofA TouchID login today. It worked beautifully, and now I can stop typing in a truly secure password with my thumbs! BofA waited until they got it right (at least for me!). What’s the moral? When rolling something new out, you’d better be sure that it works. Few consumers will give you a second chance, at least not anytime soon, particularly when the alternative is almost as good and the experience is tried and true.

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

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

Alipay Entering into South Korean Market

Alipay Entering into South Korean Market
During the Lunar New Year, more than 100,000 Chinese visited South Korea. The way people shop in a duty free shop, or in a convenience store is quite different than before: They pay with the world’s well-known Chinese mobile payment, Alipay, the most successful case of Fintech in the world. In Seoul main streets and on Korean internet sites, we can easily find advertisements of Alipay. China UnionPay already entered into the South Korean market, and even a brand of my credit card issued in South Korea is UnionPay. They partner with BC Card, South Korea’s card issuer and they have been expanding their business in South Korea. China’s payment has entered into South Korean market in earnest and South Korean players have been getting into the game. T-money, the largest prepaid card player in South Korea and Hana Bank, the fourth largest bank in South Korea partnered with Alipay. As an example, Chinese tourists in South Korea can pay back to Alipay’s account after using T-money for foreigners if they have any remaining credits. T-money is available not only transportation including metro, bus and taxi but also for payments at convenience stores and other selected shops. Also, T-money has introduced a new service for domestic users, providing compensation system for Mobile T-money when a user loses a phone, providing a safer environment for T-money users. For Hana Bank, they haven’t started a service with Alipay but it will be launched soon. After launching a new service with Alipay, Chinese tourists will be able to pay with Alipay at merchants of Hana Bank. In other words, they can use Alipay in broader places like orthopaedics, nail salon and hair salon than what T-money service offers. The similar case has been seen in South Korea and Japan. Cashbee, South Korea’s mobile payment card partnered with Japan’s three major MNOs, NTT DoCoMo, KDDI and Softbank. Japanese tourists can now pay with their smartphone in South Korea after installing a dedicated application. A wave of Fintech has come to Korea. The country is attempting a different approach with the use of Fintech. Some players already recognized their current approach is not acceptable anymore hence it is the time to shift their strategy for future growth. Payments area has been getting global and more attractive for users. For example, Alipay gives 4.5% interest when a user deposits money. Yes, it’s attractive. However, players should evaluate what is important for their future growth without tapping into the current trend. Establishing an initiative for business growth should be the overriding concern now amid mounting attention to Fintech.

On the cusp: regional integration in Asia

On the cusp: regional integration in Asia
It’s 2015, the mid-point of the decade and a good time to start looking at major trends in Asian financial services over the next five to ten years. One of the major themes will be regional integration, which is another way of saying the development of cross-border markets. There are at least two important threads here: the ongoing internationalization of China’s currency, and the development of the ASEAN Economic Community (AEC) in Southeast Asia. RMB internalization is really about the loosening of China’s capital controls and its full-fledged integration into the world economy. And everyone seems to want a piece of this action, including near neighbors such as Singapore who are vying with Hong Kong to be the world’s financial gateway to China. The AEC is well on its way to becoming a reality in 2015, with far-reaching trade agreements designed to facilitate cross-border expansion of dozens of services industries, including financial sectors. While AEC is not grabbing global headlines the way China does, we see increasing interest in Southeast Asia among our FSI and technology vendor clients. From Celent’s point of view, both trends will open significant opportunities across financial services. In banking, common payments platforms and cross-border clearing. In capital markets, cross-border trading platforms for listed and even OTC products. In insurance, the continued development of regional markets. Financial institutions will be challenged to create new business models and technology strategies to extract the opportunities offered by regional integration. It’s the mid-point of the decade, and the beginning of something very big.

Banks vs Fin-Tech Start-Ups and the Digital Transformation Race

Banks vs Fin-Tech Start-Ups and the Digital Transformation Race
The digital transformation in financial services is about the move from the physical to the virtual world, from person-to-person interaction toward person-to-machine or machine-to-machine. It is Celent’s view that Integrating and coordinating among disparate and siloed delivery channels will be critical to satisfying ever-increasing customer expectations. This in part encompasses looking at how financial institutions relate with their customers and ecosystem, but also about the underlying infrastructure and processes required to provide a digital experience. It also encompasses re-thinking how a branch should look like and what services it should provide as an integral part of the customer experience. In this context I had the chance to moderate a panel during last week Next Bank Americas. With the participation of Hugo Nájera Alva – Head of Digital Banking at BBVA Bancomer, Miguel Angel Fañanas – Director of Corporate Customers and Multinationals in Telefonica Mexico, Héctor Cárdenas – CEO and cofounder of Conekta (conekta.io), and Martin Naor – partner and CEO of Infocorp, we discussed about the digital transformation in the financial industry. What an excellent moment to do it, along with the BBVA Open Talent that looked into promising fin-tech and digital life start-ups. I wanted to take this opportunity to share with you some of my take aways from this panel:
  1. Banks have a harder time reconciling digital with their legacy platform and infrastructure, and how they have been doing business for many years. Fin-tech start-ups instead are born digital, without any legacy, but they need to be careful not to build one for themselves as they grow.
  2. Technology doesn’t seem to be the constraint for becoming digital, neither is budget. Banks have much more resources and still we are seeing some interesting start-ups in different aspects of banking disrupting with much better digital propositions. Banks instead need to push the digital concept across the organization, and very tied to the concept of innovation, they need to make fundamental changes in the culture of the organization. This is what banks such as BBVA are trying to do though their Innovation Centers, open API’s, Hackatons and fostering an ecosystem of fin-tech startups in Americas and Europe, and why they partner with Next Bank to propel those.
  3. Digital also needs to reach to those customers that are still analog. This requires banks to re-imagine their branches and provide solutions that leverage the digital components but understanding the customer engagement required. Banks are quite better positioned than fin-tech start-ups in terms of physical presence, though it is no longer acceptable for banks to continue to open (or update) branches under the old branch paradigm.
  4. Banks need to better understand what customers really want, and that is not necessarily other financial product, but maybe help with administering their finances, banks helping them to save money, helping SMEs make more business, even expand globally. These are the type of issues fin-tech start-ups are tackling today. Banks have tons of information but they need to become smarter in how they use it and what new services can they offer to their customers. It is also important to look at how customers use technology in their everyday life to find ways of making banking more convenient.
  5. You just don’t claim that you are going to be more digital and then magically wait for that to happen. There is a lot of effort involved. In cases such as BBVA, acquiring Simple is part of such effort. Understanding the bank limitation in terms of its culture is also important to define what is feasible and what not. Reaching out to understand what the ecosystem is doing, actively engaging and participating to come up with a better digital vision has become an imperative today.
Overall and subjacent to the digital transformation race there is still an open debate whether fin-tech start-ups are a partner or a threat to banks. My take is that they are more a threat than a partner in the long run, but they need each other in this initial stage so partnering seems a good starting point. In the long run banks should incorporate those ideas that work; otherwise they will be cornered to a role where they just process transactions for those companies that dominate the relationship with the customer. The implications of this scenario are daunting for banks. What do YOU think?

Finovate Spring 2014 Recap

Finovate Spring 2014 Recap
I spent much of last week in San Jose attending Finovate Spring. I’m a Finovate veteran at this point, having seen all kinds of companies take the stage at the conference. Even after all these years Finovate is still my favorite conference. I rarely attend sessions at industry conferences but I make it a point to attend most if not all of the Finovate demos. The demo format is awesome, new companies show up each year, and there is much to learn. Granted, some of the companies don’t stand a chance, though all need to be applauded for innovating and attempting to take our industry to the next level. There were several key themes at Finovate Spring:
  • Lending and alternative credit (e.g. LendingTree, LendingRobot, Roostify, CUneXus, Visible Equity, etc.)
  • Security and authentication. (e.g. Rippleshot, EyeVerify, TrueLink, ID.me, etc.)
  • Digital investing. (e.g. Motif Investing, Stockpile, TD Ameritrade / LikeFolio, etc.)
  • Self service (e.g. Interactions, Intellisresponse, etc.)
  • Mobile enhancements. (e.g. Ondot Systems, Loop, Jumio, etc.)
What stood out? Funniest demo and best pitch: PrivatBank with their Topless ATM. Stay tuned for when the Finovate crew posts the videos. This one is really fun to watch. Most innovative demo: Fiserv’s demo of payments and notifications using Google Glass and a Samsung Galaxy Gear smartwatch. The demo is a great example of why it’s important to dream, try things out and not be afraid to fail. Most useful and practical: Jumio’s card activation using a smartphone camera; TrueLink’s solutions to protect the elderly and impaired; Stockpile’s stock on a gift card (shout out to former Celent senior analyst Dan Schatt!) Glad it was gone: PFM has dominated the stage for several years at Finovate and I was glad to see only a handful of PFM companies on the docket this time around. Banks have lots of work to do on the PFM front and it is going to involve rethinking how banks and consumers approach PFM. More on that another time. There were other standouts, though this should give you a good sense of what Finovate Spring had to offer. Finovate Best of Show winners (audience selected) can be viewed here. I’m looking forward to seeing you all at Finovate Fall in NYC!  

Fintech Startups – Coopetition or Competition? Business Models Are Shifting.

Fintech Startups – Coopetition or Competition? Business Models Are Shifting.
I spend a fair bit of time analyzing and following the fintech startup scene. I’ve met and interacted with numerous startups over the years, as well as through industry events like  Finovate and Innotribe. I frequently get very excited by their potential, and what they can bring to the industry. I admire the founders of these firms as they attempt to make their mark in an age old, highly regulated industry, that is slowly but surely adapting to the popularity of digital channels. Is there a killer fintech startup business model? Here are a handful of models out there that I invite you to weigh in on:
  1. Should startups go after consumers/businesses directly? This is the most popular model, with most firms taking this type of approach. Examples include Square, Simple, PayPal, etc. It’s also one of the hardest models as it’s quite difficult for a newly minted organization to establish a brand and build critical mass on its own.
  2. Can startups be successful at enabling others in addition to going after their core market? This is becoming an increasingly popular model as startups seek out new streams of revenue. It’s particularly popular in the payment space as it allows for a potentially increasing stream of transactional revenue. This is done by offering something like an SDK that others can build on. Examples include card.io, Stripe, etc.
  3. Is the name of the game to simply use financial institutions as a distribution channel?  Some startups take this route right out of the gate (e.g. MineralTree, Cardlytics, etc.), while others pivot to this model (e.g. Social Money, Bill.com, etc.). Finally there are startups that simply fall back on this model once they realize that they have been unsuccessful in models 1 or 2. While it sounds great to use a bank as a distribution channel, it can be a frustrating experience given the very long sales cycles typically encountered with financial institutions. Burning cash while attempting to close a deal with a bank can be a tough pill to swallow.
  4. Can a startup have it all by tackling all three of of the models ? It’s possible but it can also spread a business, particularly a newer one, dangerously thin
Finally, what does all of this mean for financial institutions? How do they get involved in industry disruption? Celent firmly believes that banks should dedicate efforts towards not only innovation, but disruption. It’s a necessary part of competing, and has to be led and sponsored by senior management. Most banks need at least a handful of projects that  are disruptive – that’s no easy task since managing technology and culture change is never a quick fix. What do you think? How should startups approach the market? How can banks play a meaningful role in the digital world?  

Applications Open for the $50K Innotribe Startup Challenge

Applications Open for the $50K Innotribe Startup Challenge

I’ve recently agreed to serve as a judge for the 2012 Innotribe Startup Challenge. The event provides an opportunity for FinTech and Financial Service startups and innovators to meet potential investors, customers and partners from financial institutions and FinTech investors. See the bottom of this post for info on how to receive an invite to the event.

Sponsored by SWIFT (www.swift.com), the Innotribe Startup Challenge (http://www.innotribestartup.com) fosters collaboration between emerging FinTech and Financial Service innovators and SWIFT’s member community.
  • Applicants to the Challenge enjoy online exposure and introductions to hundreds of potential partners and customers from SWIFT’s member community, as well as investors and other members of the startup ecosystem.
  • Semi-finalists, selected by a panel of expert judges, are invited to one of three regional Challenge Showcases (New York – Feb 8, Bangkok – Apr 25/6, and Belfast – late June), to pitch and network with a hand-picked group of 40-50 investors and financial industry decision makers.
  • The 15 most promising companies from across all three Challenge Showcases, as selected by qualified decision makers and investors from across the SWIFT community, will be invited to present at Sibos, SWIFT’s annual financial industry trade show. Sibos (www.sibos.com) will take place this year in Osaka, Japan in October 2012.
  • One or more early-stage winners selected by the Sibos audience will share in a $50K in cash prize.

The Challenge is open to companies working in financial technology or technology-enabled financial services (no consulting or outsourcing) such as payments, securities, trading, social media tools, big data/data analytics, security, identity, b2b or b2b2c mobile, small business apps & services &/or IT infrastructure. Early-stage applicants must be less than 3 years old with less than $1M in combined revenue and investment in the last 12 months. Later-stage applicants may be of any maturity level, but the products/services they submit must still be ‘under the radar’. Applications for the February 8th NYC Challenge Showcase are due by January 13, 2012. To learn more and apply, please visit http://www.innotribestartup.com. Special invite for Celent Clients: Please contact me if you are a banker and would like to attend the Innotribe Startup Challenge. Celent has been granted several passes to the events and we can share these with interested individuals (banks only please).