“We’ve been interested in [personal financial management], but adoption is very low.” – Rizwan Khalfan, SVP and Chief Digital Officer, TD Bank GroupThe Canadian banking scene is super conservative, so this is no doubt an interesting move. This deal can provide great opportunities and also comes with some challenges. Great opportunities:
- Banks absolutely need to try new things. Kudos to TD for taking a leap here in an effort to innovate and try something new. Their recent mobile wallet announcement is another great example.
- Canadian consumers could benefit from new, exciting and useful mobile tools. The Canadian mobile landscape has been pretty quiet, with the most recent “innovation” being the launch of mobile remote deposit capture by some of the banks. There have been interesting mobile payments announcements (e.g. RBC and Bionym), but not much as it relates to classic banking.
- Consumers need help managing their money and turn to their bank for advice. Our US consumer survey and Canadian consumer survey point quite clearly to this. Americans and Canadians prefer to use bank provided tools to manage their personal finances.
- Adding features to TD’s simplistic mobile app could present technical and user experience challenges. Moven has a keen focus on the user experience. The existing TD smartphone app – well, not so much. TD’s Canadian tablet app is slow and buggy. We could not even install this app on our Android test tablets due to compatibility issues. This leads me to believe that TD will either completely overhaul their app or release Moven as a separate app/account.
- Most PFM endeavours have not been very successful when it comes to customer adoption. Will Moven and TD manage to figure out how to get customers on board and actively using PFM? This is going to be extremely challenging. Celent has done all kinds of research on PFM and will be publishing a fresh report on this topic in the new year. The report will encourage banks to take a completely different approach to PFM – stay tuned for our insights on this topic.
- The viability of a digital only bank is questionable. Can Canada or the United States sustain a digital only bank? Is there a future for the neobanks? See the following blog post for our viewpoint on this. The Canadian bank switch rate is quite low overall, though it is quite high (13% in 2013) for the 18-25 year old segment. Neobanks have a place, though they will have difficulty being successful in the near term.
- The big four U.S. banks sent an average of 40 attendees, with the high being 55 and the low being 30.
- MCX said that CurrentC is in pilot with merchant employees in several cities, but missed the chance to show us a demo. And as an interesting counterexample to the partnership theme, Visa told us that they “look forward to MCX presentations so that they can learn what’s going on.” I’ll stop there.
- Customer Experience continues to be a big theme
- There was way too much emphasis on Point of Sale terminals – and why does every POS terminal still look like it came from 1985 (Poynte and Clover being two exceptions)?
- What happens when there is no Point of Sale, like with Uber? (Incidentally, I wish I had a dollar for every time someone has used Uber as an example over the last twelve months – I’d be on my way to Tahiti)
- Facebook is doing some really interesting things on the commerce side: if they identify a group of profitable customers who have a certain profile (e.g., mid 30s, likes dogs and hiking), they can go find other Facebook users with the same profile.
- Security, as always, was a hot topic
- 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.
- 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.
- 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.
- 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.
- 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.
- Replace a vertical slice
- Replace a horizontal slice
- Create a new target state architecture off to the side
- Vertical Slice. Suncorp in Australia has started the process of moving off its Hogan core by focusing on unsecured lending; its next stop will be secured lending.
- Horizontal slice. KeyBank, based in Cleveland, announced at Open World that it intends to use non-core systems components of Oracle Banking Platform (“OBP”) to enhance and modernize its mobile and online channels. To be clear, KeyBank has not committed to a core transformation. The project is in its very early stages; it’s one we’ll watch with interest
- Target architecture. National Australia Bank’s new entity, UBank, is a digital-only bank that NAB created as part of its bank transformation using OBP. Its goal is to change the customer experience, and uptake has surpassed initial expectations.
- Watson understands natural language (computational linguistics).
- Watson is a voracious reader
- Watson provides recommendations with confidence levels
- You don’t program Watson, you teach it
- Consulting to investigate and establish what Watson will do for the firm
- Priced products (e.g., oncology)
- SAAS revenues from running Watson for individual projects
- A cut of the revenue that partners earn from Watson projects
- Is playing the role of an ecosystem platform
- Is using partners to reach consumers, realizing that IBM’s strength is as a B2B company
- Has built a new physical space, reversing a trend of selling real estate and having employees work remotely
- Is not trying to do this on the cheap
- Is focused on just a few areas
We usually talk about how hard it is for the financial industry to innovate at the right pace, and doing the right bets. In my opinion Latin America lags a little bit behind, in part for not having anything similar to the US’ Silicon Valley. We see though, increasing efforts to generate the environment and providing places for the ecosystem to mingle.
Adding to Dan’s post about Celent attending the several industry conferences around the world as part of our job, and keeping our finger on the pulse of the industry, I wanted to share a relatively new conference that is gaining a lot of traction in Latin America as a result of its effort to bring together traditional players with fintech start-ups: Next Bank.
I will be moderating a panel on Digital transformation in financial services next October 16th, 2014 at Next Bank Americas. The idea is to create an environment where innovators from within and outside financial services institutions come together to explore the digital transformation of the industry.
It is a collaborative conference that covers innovation, transformation and startup-driven disruption in financial services in Latin America. The theme is re-think and connect – addressing the reality that the industry is undergoing momentous change and it’s time for a new collaborative approach.
You will more likely encounter traditional players like banks, consultancies and technology vendors sharing the stage with alternative players like startups, digital ecosystems and players from other industries. All of these players, the old and the new, coming together to create a new community of innovators in financial services exploring the real future of the financial services industry and the big ideas that will forever change the industry in the region
As part of the conference, it will host the final of BBVA Open Talent for the US, Mexico and Canada, a startup competition in search of today’s most disruptive tech startups in these countries in two categories, New Banking and Digital Life. Celent will be writing a report of those more promising start-ups, so expect it coming soon after the conference.
Celent is also a conference partner, so feel free to use our discount code (C3L3NTNB4M3) to get a deal on tickets.
More information @ www.nextbankamericas.com/en
Hope to see you there!