Citi’s geolocation move

American Banker just ran an interesting article about Citi’s foray into the use of geolocation (beacons) as it pilots several use cases in its “smart branches.” Several thoughts immediately came to mind as I read Tanaya Macheel’s well-written article:

  • The use of beacons for cardless access to branch ATMs after business hours was the lead use case cited in the article. But, that’s just one of a growing number of potentially very useful applications for beacons in retail financial services.
  • Banks have barely scratched the surface in more usefully integrating digital and physical channels as they seek to maximize customer engagement.
  • Geolocation, in particular, is under-utilized by retailers (especially banks) and remains largely experimental.

My hat is off to Citi for its purposeful investment in developing expertise in this area and to American Banker for writing about Citi’s work. In my view, the most impressive aspect of this initiative isn’t so much Citi’s pushing the technology envelope; it’s the organizational effort that was likely required. Getting its branch operations, mobile product management, IT and LOB leadership aligned represents real commitment to innovation.

How far ahead of the industry is Citi?

Here’s one data point. In Celent’s inaugural Branch Transformation Research Panel survey in (June 2015), we sought to establish a benchmark on just how far and how fast NA institutions were pursuing branch channel transformation. Of course, several questions addressed planned technology usage. Out of a dozen examples of technology usage, geo-location ranked dead last in terms of the liklihood of usage in future branch designs – just 27% of surveyed institutions thought the use of beacons would be "somewhat likely" or "very likely".

Branch Tech Usage

Pretty far I'd say!

Top trends in corporate banking webinar

Please join me on Thursday, April 21st at noon EST for an overview of the 2016 edition of our Top Trends in Corporate Banking report, which was published in March.

2016-04-18_15-40-50

Corporate banks continue to place an enormous focus on investing in digital channels to meet the ever-increasing demands of clients for enhanced tools while boosting security and fraud prevention. Despite this investment, corporate banking has lagged in terms of adoption of innovative technologies. To improve that performance, corporate banking lines of business are undertaking a broad set of initiatives to overcome the inertia that has left clients behind in terms of innovation. Among the top trends, we will examine the opportunities in trade finance and customer onboarding for improving efficiency and enhancing client satisfaction.  Other top trends include fintech partnerships, distributed ledger technology and open APIs and adapting liquidity management strategies.  I look forward to having you join us on Thursday! 

Click here to register

 

 

 

Congratulations to Celent Model Bank 2016 Winners!

Last week many of us at Celent were in New York attending our Innovation and Insight Day on April 13th. It is Celent's flagship event during which we announce Model Bank and Model Insurer winners and celebrate their achievements. In addition, the program includes keynote speeches from industry leaders and Celent analysts, plenty of opportunities to network with peers, and even to experience some of the latest technologies first hand, courtesy of our sponsors.

The theme of this year's event was "Financial Services Reborn", and the Museum of American Finance on Wall Street provided an inspiring setting to celebrate innovation in financial services. Craig Weber, Celent CEO, kicked off the proceedings drawing insightful parallels between the battle of Alamo and the future of financial services. It must have been the first time in Craig's career that he had to come up on stage to the soundtrack of hip hop music, an extract from the Broadway musical "Hamilton", but it set the tone for the rest of the day – to expect the unexpected and to be open to new ideas.

Both of our guest speakers – Nadeem Shaikh, Co-Founder and CEO of Anthemis Group, and Leanne Kemp, Founder and CEO of Everledger – thrilled the audience and opened everyone's eyes to the opportunities presented by Fintech and Blockchain respectively, while our colleague Will Trout spoke eloquently about consumer-led convergence. A big 'thank you' to all the speakers, as well as the sponsors supporting the event!

The rest of the day was all about celebrating the achievements of Model Bank and Model Insurance award winners. As many of this blog's readers know, the vision for Celent’s Model Bank research, now in its ninth year, is to spotlight effective uses of technology in banking. This year we received a record number of submissions – well over 100 – that came from all over the world; the nominations were spread equally between North America, EMEA and APAC. The award winners come from four continents and nine countries and range from credit unions and microfinance institutions to the world's largest banks.

Celent Model Bank 2016 winners are:

  Model Bank 2016 Categories

  Award Winners

  1. Digital Banking Transformation

  Citizens Bank, US

  DenizBank, Turkey

  Garanti Bank, Turkey

  Santander, US

  2. Omnichannel Banking

  BECU, US

  Beyond Bank, Australia

  Standard Chartered Bank, Korea

  3. Digital Payments and Cards

  Bank of America Merrill Lynch, US

  RBC, Canada

  4. Corporate Payments and Infrastructure Modernization

  Bank of China, China

  CBW Bank, US

  5. Cash Management and Trade Finance

  CIBC, Canada

  HBL (Habib Bank), Pakistan

  6. Security, Fraud, and Risk Management

  Alfa-Bank, Russia

  USAA, US

  7. Legacy Transformation

  Sberbank, Russia

  Umpqua Bank, US

  Vietnam Bank For Social Policies, Vietnam

  Model Bank of the Year

  Eastern Bank, US

As always, we published a series of reports with detailed case studies of all winning initiatives. Celent research subscription clients can access the Model Bank of the Year and individual category reports via our website.

This year we also introduced a new award, Model Bank Vendor. We wanted to acknowledge the vendor role in helping multiple clients achieve technology or implementation excellence, one of our judging criteria, and to extend our appreciation to the entire vendor community, which is instrumental in the ongoing success of the Model Bank program. Celent recognized two companies as Model Bank Vendors for 2016:

  • EdgeVerve Systems
  • Nucleus Software

Congratulations to all our award winners! We are grateful to have been exposed to so many extraordinary initiatives and the talented individuals responsible for their success. We look forward to continuing with the Model Bank program next year to identify and award the most impressive banking technology initiatives from around the world, and will begin accepting nominations again in September – stay tuned!

 

Yahoo! is for sale: why banks should care

The rollercoaster that is Yahoo! continues. Yesterday, the company officially announced that it was putting itself on the selling block, in a move aimed at holding off an aggressive activist hedge fund called Starboard Value. It was only in December when management shared the stunning news that Yahoo! was planning to spin itself off (more precisely its core Internet businesses) to its shareholders. The announcement in December came on the heels of a nearly 12-month project aimed at spinning its 15% interest (worth $30 billion) in Alibaba, the Chinese e-commerce company, to its shareholders, a transaction that has been abandoned over tax concerns. By spinning out the Alibaba stake to Yahoo!’s shareholders, Marissa Mayer and the Yahoo! board hoped that shareholders could benefit from the Alibaba investment while Yahoo!’s management could focus on rebuilding the company’s core Internet businesses. Rebuilding is the correct word here. Founded in 1994 and going public in 1996, Yahoo! once lived a charmed life as the so-called “originator” of the search engine. In fact, Yahoo!’s original business represented a searchable directory of websites curated by Yahoo! staff. It was Google that improved on Yahoo!’s original idea by deploying technology that could automate the building of a website directory by using bots to crawl the web, catalog the content of websites, maintain an searchable index of the result, and most notably calculate the importance of a website that reflected the number of inbound links from other websites. Ironically, Yahoo! responded to Google’s innovation quite awkwardly, first partnering with Google, then walking away from the partnership in 2004 as it sought to exploit the technology of acquired businesses such as Inktomi (2002) and AltaVista (2003). After a dalliance with Microsoft’s Bing in 2010, Yahoo! finally came back to Google earlier this year, signing a three-year partnership in October. What can banks learn from Yahoo!’s adventures? It’s very simple:  innovation is a game that is played for a full 9 innings. Yahoo! was a public company for two years before Google was even founded, and the company at one point enjoyed a market capitalization of more than $100 billion. Today, Google’s market cap is more than $480 billion while the market cap of Yahoo! is less than $30 billion, which is slightly more than the current value of its holdings in Alibaba. So with full benefit of hindsight, Yahoo!’s original idea to offer a curated list of interesting websites was itself innovative, but it was Google’s use of automation in capturing and cataloging the rapidly growing content of the web that fueled the revolution that drives much of the global economy today.  As the legendary British venture capitalist Sir Ronald Cohen once argued in his book The Second Bounce of the Ball:
“We can all see where the ball in bouncing today, but few of us try to anticipate where tomorrow’s bounce will be, and even fewer will attempt to take advantage of it. “
The forward-thinking banks that heed the lesson of Yahoo!’s current troubles will stop worrying about the pressure coming from the current crop of Fintech upstarts and will focus on that second bounce of the ball, the place where the real opportunity lies.  There is still plenty of time left in this game.

Alexander Hamilton’s approach to innovation has lessons for us today

CBS’s 60 Minutes ran a story recently about the hottest new Broadway musical – Hamilton (go to the 14 minute mark). It turns out that some of the research for the show was conducted at the site our Innovation and Insight Day – The Museum of American Finance. This biography underscores why we chose the Museum for our next Insight and Innovation Day (to be held April 13, 2016). The segment talks about Hamilton’s numerous accomplishments:
“…a penniless, immigrant, orphaned kid who came out of nowhere and his achievements were monumental…he creates the first fiscal system, the first monetary system, first customs service, first central bank…”
Without these innovations, the modern economy as we know it now would look very different. Anyone working in financial services today is aware of the challenges we face responding to changing customer expectations and new technology opportunities. Vast sums of money and time are being spent on innovation, looking for answers. However, Celent’s research shows a widely held view that the financial services industry cannot innovate very effectively. Hamilton graphic nov 2015 So how do we improve? The theme of our Insight and Innovation Day event this year will take inspiration from Hamilton’s work and use it as a guide for our future efforts. By the way, if you want to go to Hamilton while at the Celent I&I Day, I suggest you get your tickets now. It’s the hottest ticket in town! This is a republished post by Mike Fitzgerald from the Celent Insurance Blog. Click here to read the original post.

Sibos 2015: banks reacting to the threat of blockchain and other FinTech

Singapore hosted Sibos this year, and judging by the reported 8,000 attendees, transaction banking is alive and well. That also means there were 8,000 different experiences, impressions and takeaways. Here are mine: Banks are fully aware of the threat of posed by technology and are beginning to act on it. Two technology vendors I spoke to said that every single bank they met with asked about blockchain, an extraordinary change from six months ago when it was only beginning to be seriously discussed. It’s encouraging that banks have evolved their positions so quickly. While no one know yet what the killer blockchain uses will be, banks are ramping up experiments along all facets of the value chain. Celent will have more to say about that shortly. Another facet of technology change is the need for banks to partner with FinTech innovators. Based on my conversations with many of these vendors, banks were a lot more willing to discuss new ways of working together. There may even me some movement toward value pricing (that is, mutual sharing in beneficial outcomes), but it’s still very early days; banks seem loathe to give away upside and are unsure how to structure enforceable deals. Sibos’ ambivalence about innovation manifested itself physically with Innotribe. The space was relatively small, and every time I went by I was unable to get in because it was filled to overflowing. Innovation clearly needs to be given even more attention despite the threats it presents to the existing structure. Was this perhaps a physical metaphor of Banking’s relationship with and attitude towards FinTech? Having had four straight nights of canapés for standing dinners, getting home to digest the whirlwind that is Sibos was very welcome. On to Geneva next year!

Helping build the fintech ecosystem in Latin America

A few weeks ago, Dan Latimore and I had the chance to attend Finnosummit in Mexico City. IMG_1341 While Dan was the one really working (he presented on “How Big Data can change Financial Services”) I mingled around the participants of this vibrant ecosystem encompassing entrepreneurs, financial institutions, investors, and regulators among other stakeholders. It is amazing how the ecosystem continues to grow and how fintech start-ups are booming.IMG_1349         Celent has been collaborating to help create the fintech ecosystem in the Latin American region since its inception and I had the honor, for 2nd time, to judge the fintech start-ups participating in the BBVA Open Talent, which brought the Latin American finalists into town as part of Finnosummit. They had their 5 minutes of glory (or suffering) by pitching their venture to the audience and two winners were selected at the end of the day. Discover the finalists of all regions here. In Latin America two chilean start-ups were the winners: Destacame.cl, aiming to financial inclusion by creating a credit scoring based on utility payments; and Bitnexo which enables fast, easy and low cost transfers between Asia and Latin America, using Bitcoin. In the US & RoW the two winners were: ModernLend enables users with no credit profile to create one in just 6 months by using alternate metrics; and LendingFront which facilitates short term commercial lending through a simple platform. In Europa the winners were Everledger, specialized in anti-fraud technology for financial services and insurance; and Origin an electronic platform that facilitates bond issuing in the capital markets. Many fintech startups that made it to the finals focus on Blockchain technology and payments. These seem to be the areas of major investment for the last two years. If you are interested in these themes I suggest that you follow my colleagues John Dwyer, Zilvinas Bareisis and Gareth Lodge. Coming back to Dan’s presentation, he made a very interesting observation around the need to move from the old paradigm (Customer response optimization) to a new paradigm (Anticipate and shape customer intent) based on the use of big data and analytics, but also warning that disruptors are out there applying the new paradigm today. If you want to get deeper into any of the subjects covered here, please let me know. By the way, is there any fintech start-up you believe has great potential? Share with us please!

IBM’s Cognitive Bank: Big Data, bigger problems

Last Wednesday I attended IBM’s analyst presentation on Transforming Banking and Financial Markets with Data. The crux of the presentation was the benefits of big data and cognitive analytics for financial markets. The return from better understanding the desires of an individual bank customer are well understood and IBM did a good job of illustrating the up-lift. But what were not discussed are the daunting challenges and complexities a bank will face in implementing and managing a big data project. The implementation and ongoing management of data will make or break the success of cognitive computing. What I would like to see is an open discussion on the successes and failures of big data implementation programs by the banks, IBM, and other vendors working in this space. How smooth was the implementation process (time/budget/resourcing etc.)? Were your expectations set correctly? Did you get the required support from management? What were the lessons learnt? What value do you see from your big data program? It’s not easy Structured data tends to sit in multiple databases housed in silo-ed legacy systems; it is customized, lacks consistency, has incomplete fields, is often latent in nature and is prone to human error. All of which compounds the complexity of managing the data. Add to structured data the volume, variety, and velocity (known as the 3 Vs) of unstructured data and the challenge of implementing and managing information becomes even greater. And, the larger and more complex the bank the more likely its data architecture and governance process will hinder data-based implementations projects. Automating the management of data is time consuming and laborious and scope creep is significant, adding months onto implementation projects as well as extra expense and frustration. Resourcing such projects can be taxing as there is a limited pool of big data expertise and they are expensive. To perform cognitive analytics, massive parallel processing power is required and the most cost-effective operating environment is through the cloud. If you get the data right, cognitive analytics can be very powerful. Cognitive analytics Cognitive analytics (also referred to as cognitive computing) is a super-charged power tool that allows data scientists to crunch vast amounts of structured and unstructured data and to codify instincts and learnings found in that data in order to develop hypotheses and recommendations. Recommendations are ranked based on the confidence the computer has in the accuracy of the answer. How you rate confidence was not made clear by IBM and I would argue that this can only come after the fact, when you can use KPIs to validate the scoring and criteria. The modeling techniques include artificial intelligence, machine learning and natural language processing and, unlike us mere mortals, the more data you feed the computer, the higher the quality of the insight. If you do get it right, the rewards are significant We continue to leave behind mind-boggling amounts of digital information about our lifestyles, personalities, and desires. A sample of sites where I know I have left a hefty footprint include Facebook, Reddit, LinkedIn, Twitter, YouTube, iTunes, blogs, career sites, industry associations, search history patterns, buying patterns, geo locations, and content libraries. IBM Watson offers banks a cost-effective way, through the cloud, of scouring such data to build up clues that provide a more in-depth view of what their customers’ desire. Current analytic segmentation is requirements-based and is modeled on past behavior to determine and influence future behavior. The segmentation buckets are broad and all within them are treated the same. Cognitive analytics allow a much more precise and immediate analysis of behavioral characteristics in different environments and, therefore, a more personalized and satisfying experience for the customer. I’d welcome any feedback from those of you who have been involved in implementing or are in the process of implementing big data in banking. And, if you’re interested, take a look at Celent’s Dan Latimore’s blog Implementing Watson is Hard On a side note, IBM introduced the term Cognitive Bank and it is not a phrase that works for me. It is disconcerting to describe a bank as having the mental process of perception, memory, judgment, and reasoning. Looking forward to hearing from you.  

Pushing beyond apps

It struck me while I was driving this morning: First-gen mobile apps are fine, but virtually everyone is missing high-volume opportunities to engage with their customers. Allow me to back up a step. I was stuck in traffic. Not surprisingly, that gave me some time to ponder my driving experience. I found myself thinking: Why can’t I give my car’s navigation system deep personalizations to help it think the way I do? And how do I get around its singular focus on getting from Point A to Point B? I explored the system while at a red light. It had jammed me onto yet another “Fastest Route,” disguised as a parking lot. My tweaks to the system didn’t seem to help. I decided what I’d really like is a Creativity slider so I could tell my nav how far out there to be in determining my route. Suburban side streets, public transportation, going north to eventually head south, and even well-connected parking lots are all nominally on the table when I’m at the helm. So why can’t I tell my nav to think like me? I’d also like a more personal, periodic verbal update on my likely arrival time, which over the course of my trip this morning went from 38 minutes to almost twice that due to traffic. The time element is important, of course. But maybe my nav system should sense when I’m agitated (a combination of wearables and telematics would be a strong indicator) and do something to keep me from going off the deep end. Jokes? Soothing music? Directions to highly-rated nearby bakeries? Words of serenity? More configurability is required, obviously, or some really clever automated customization. Then an even more radical thought struck. Why couldn’t my nav help me navigate not only my trip but my morning as well? “Mr. Weber, you will be in heavy traffic for the next 20 minutes. Shall I read through your unopened emails for you while you wait?” Or, “Your calendar indicates that you have an appointment before your anticipated arrival time. Shall I email the participants to let them know you’re running late?” Or (perhaps if I’m not that agitated), “While you have a few minutes would you like to check your bank balances, or talk to someone about your auto insurance renewal which is due in 10 days?” What I’m describing here is a level of engagement between me and my mobile devices which is difficult to foster, for both technical and psychological reasons. And it doesn’t work if a nav system is simply a nav system that doesn’t have contextual information about the user. But imagine the benefits if the navigation company, a financial institution, and other consumer-focused firms thought through the consumer experience more holistically. By sensibly injecting themselves into consumers’ daily routines—even when those routines are stressful—companies will have a powerful connection to their customers that will be almost impossible to dislodge. Firms like Google have started down this path, but financial institutions need to push their way into the conversation as well.

Innovation & Insight Day – some highlights; and a goodbye

Last week was busy for Celent: on Monday we hosted our annual Innovation and Insight Day at Carnegie Hall (more on that later). Tuesday we assembled the Celent team from around the globe for our annual in-person meeting. We find that even in this age of virtual teams and instant connectivity, there’s no substitute for face-to-face interaction; our gathering confirmed that. And on Wednesday the banking team convened to review our priorities and refresh our topic taxonomy – so much has changed in the last year that we knew it was time for a refresh. Keep an eye on celent.com and my newsletter for updates on our progress. For the first time in I&I’s history, we sold the place out! We’ve never had to turn people away before, and we’re (very frankly) still trying to figure out why. With more than 400 registrants, we had to improvise with an overflow room that streamed video of the main stage (thanks to all who helped us accommodate this nice problem). We hypothesize that the challenges of financial technology have become so important that our clients and prospects prioritized attendance at an event that showcased best practices from around the world, afforded tremendous networking opportunities, and provided an unbiased view of the hottest issues in this space today. It could also have been, of course, being in New York the weekend before, or seeing Carnegie Hall during business hours. The Banking Team recognized nineteen model banks across five categories: Digital; Omnichannel; Legacy and Ecosystem Transformation; Innovation and Emerging Technologies; and Payments. Interestingly, we had so many entries in the first two categories that we had to split them up. We produced six reports covering these five areas, together with our Model Bank of the Year, Fidor (from Germany). Clients may download these reports at Celent.com. In addition to our model bank panels we had excellent keynote speakers. Debra Jasper and Betsy Hubbard of Mindset Digital used about 300 [sic] slides in 45 minutes to prod us all to rethink how we present ourselves, not just in person, but through emails and social media. One concrete hint: think about five sentence emails (five.sentenc.es). Closing out the day was Suresh Ramamurthi, the Chairman of CBW Bank, who showed us what a sub $20mm asset bank can do by completely rethinking its technology platform. After Suresh and Fidor’s CEO Matthias Krӧner spoke, I was compelled to tweet about #nervousbankers. I’d also like to thank our sponsors: Saffron, Mindtree, Indra, Guidewire, Wipro Digital, Inetco, and RGI Group, together with our media partners Bank Technology News and Insurance Networking News. We’re already starting to think about next year’s event; it’s not too early to start submitting nominations. We’ll be sending out hold the date announcements shortly. On a final note, we’d like to say a fond farewell to Jacob Jegher. He has been a stalwart in the banking practice for the last eight years, and all of us at Celent will miss his passion for new technologies, his informed and reasoned opinions, and his keen intellect. We wish him every success in his new endeavor at a fintech player you all know; the news will be public soon. If you’d like more details, please reach out to your account manager, other analysts you know, or me directly.