Looking back on Money 20/20

Looking back on Money 20/20
Last week my colleague Dan Latimore and I were at Money 20/20, which in four short years has become a “must attend” event in payments and Fintech. I’ve been there at the very beginning and it has been exciting to watch it grow from about 1,000 of us in the first year to over 10,000 this year. Congratulations to the Money 20/20 team for this incredible achievement! And thank you to all of those who took time out of their busy schedules to meet with us. As I was reflecting back on the last week, I realised that it’s no longer possible to take in all of Money 20/20. In the first year, even with parallel session tracks, you could absorb a lot of what was happening “by osmosis”, just walking the floors of Aria. As the event grew and moved to a much more spacious Venetian, somewhat paradoxically, the experiences got more individual, depending on which sessions and keynotes you attended, which booths you visited and which people you met. Here are some of my key takeaways:
  1. Perhaps the biggest and most talked-about announcement of the show was Chase Pay and its partnership with MCX. Chase is developing a wallet that will be available to all of its 94 million cardholders to use in-store, in-app and online. The wallet is not planning to use NFC at the POS, with QR codes set to be a most likely method, and as a result will be available on any smartphone device, irrespective of its operating system. On the merchant side, Chase is offering a fixed fee processing which will make merchant costs more reliable and predictable with an opportunity to “earn it down” based on volume. Partnership with MCX gives Chase Pay access to the largest merchants in the country. In addition to a stand-alone app, Chase Pay will also be available as a payment option inside CurrentC, the wallet that MCX has been piloting in Columbus OH, the results of which were presented and greeted with a tentative applause during another keynote at Money 20/20.
  2. Mobile payments market in the US is only getting more complex, with Apple Pay, Android Pay and Samsung Pay already there, more “Pays” on the way (e.g. LG Pay), and now Chase Pay and revived expectations of CurrentC. Make no mistake – while most “pays” look similar, they offer a different customer experience (e.g. how to trigger payment, where it is accepted, etc.) and require issuers to adapt their processes to each of them. At the show, I picked up strong signals from issuers that they want to have more control over digital payments and are looking at various options, including HCE wallets, to achieve that.
  3. The Tokenisation panel was one of the best sessions I attended with panelists from the networks, issuers, merchants and processors sharing their views how tokenisation is going to evolve. It includes tokenisation for cards-on-file and e-commerce transactions (both Visa and MasterCard announced tokenisation of their Checkout and MasterPass wallets respectively), new approach to 3D Secure, introduction of Payment Account Reference (PAR) – a non transactable ID that ties together all the tokens, and tokenisation for DDAs which The Clearing House is working on. According the panelists, tokenisation is the much-needed “abstraction layer” that will be a “foundation for the next 20 years of innovation.”
  4. Biometrics are entering mainstream, with FIDO alliance laying the groundwork for how to deploy biometrics for authentication. Sorting through a myriad of biometrics providers and approaches (e.g. fingerprints, hands, voice, eyes, etc.) is a headache and eventually, it will be consumers that will decide which approach works best for them. FIDO alliance delivers a standard irrespective of what the consumers choose. Looking into the future, the panelists envisaged a behavioural approach where the providers use a number of data points to constantly verify that the user behaviour is consistent with a typical pattern and authenticates automatically in the background, a process called “ambient authentication.”
  5. Conversations about cryptocurrencies have matured enormously over the last 12-18 months. The focus is now very clearly on blockchain technology and how the financial services industry can best deploy it. A number of exciting partnerships are emerging in this space, from TD Bank and RBC working with Ripple on domestic and cross-border P2P payments as well as more efficient transfers between subsidiaries, to Nasdaq’s partnership with Chain, to the R3 consortium. Perhaps the most exciting demo I’ve seen was Visa’s connected car experience, where the driver could review the new leasing document on the screen, sign it, register it on a blockchain and drive off. Time will tell if this is how we will be getting to drive cars in the future, but it only shows the opportunities out there.
Finally, I’ve been asking others at the show what they thought were the key themes. Interestingly, two themes came up very consistently – innovation and focus on customer experience. The latter manifests itself in so many different ways, from making it easy and intuitive for consumers to pay to solving very specific merchant problems, whether it’s around acceptance and security (Verifone, Ingenico, Poynt), conversion rates (BlueSnap, Affirm), lending (PayPal, LendUp) or seamless integration of payments into the overall proposition (Stripe, First Data). The third theme seemed to be a little more contentious. Some said it was all about disruption, while others talked about collaboration. I actually agree with both – to me they are two sides of the same coin. The disruption in FS is real, but many find that the way to deal with it is through collaboration. Few, if any, have talked about demolishing the world as we know it today; instead, all are focused on how to make it better. I know I only scratched the surface here. For example, there were also some very interesting announcements about domestic P2P/push payments such as Early Warning buying clearXchange, Dwolla partnering with CME Group, and The Clearing House working with Vocalink. And companies like Earthport, PayCommerce and Ripple are making an impact on cross-border payments. But as I said, it’s impossible to take it all in, and no write-up can do full justice to Money 20/20 – you just have to be there… See you next year in Vegas or perhaps even in Copenhagen at Money 20/20 Europe!

Musings from the airplane

Musings from the airplane
I am not writing this literally on the plane, but I might well be – this is a conference season, so many of us are on the road. My colleagues have already been blogging from SIBOS, Finovate, Finnosummit and other events. I wanted to share my own observations from the events I attended. EMV, tokenisation, mobile, Blockchain – these were just a few major themes discussed in depth in Las Vegas at PayThink. This used to be known as ATM, Debit and Prepaid Forum and remains THE event to go to discuss these topics in the United States. It is organised by PaymentsSource and chaired (for the last 12 years!) by Tony Hayes, my colleague and Partner at Oliver Wyman. Thank you to the organisers for inviting me to moderate a panel on lessons learned from cards platform transformations, and many thanks to my panelists – senior executives from FIS and e-Global for sharing their insights. We talked about the drivers forcing processors and issuers to upgrade their processing platforms, such as growing transaction volumes and types, need for flexibility and speed when adding new products, and how the processing proposition changes. Processors are now moving away from out-of-the box to componentised solutions, are changing how they package and price their services, and are re-thinking the business terms how to engage with clients. When working with software vendors, our panelists stressed the importance of “soft aspects”. Of course, the technology matters and must meet the requirements to get you on the short list. However, often it will be your people that will win or lose you the deal – flexibility and commitment they demonstrate during proof of concept and other advanced stage interactions are often major factors when clients make a final decision. Last week I was in Lithuania, the country I grew up in and left over 20 years ago… I go back every year, but this was the first time I went there as an analyst. The Central Banks of Lithuania and Sweden jointly organised a conference on the role of Non-Banks in the Payments Market. I was kindly invited to join the panel to discuss “what’s in the future.” As our clients know, our view at Celent is that the disruption in banking is real and that, as a result, banking will change, however, banks will not disappear. Of course, some of them will, but others will adapt, and some of the today’s non-banks will become banks. The challenge for all is how best to manage that tension and the ongoing evolution of the industry. In between travels, I also published a new report on tokenisation, a hot topic in the industry at the moment. The speed of tokenisation evolution in the last 12-18 months has been remarkable, and there are no signs of slowing down. Celent clients can access the report here. Finally, it’s not long before we board the plane to go back to Vegas to Money 2020. The meteoric rise of this event has been absolutely amazing – fours years ago there were about 1,200 of us; this year, the organisers expect 10,000! My colleague Dan Latimore and I will again be there as well. My diary is already full, but if you are a client and would like to say hello, do reach out to your account managers and we’ll do our best to meet up. With everything going digital, the physical handshake remains as important as ever! Safe travels!

Gearing up for Money 2020

Gearing up for Money 2020
One key element of Celent’s value proposition is our attendance at conferences. To be a little flip, we attend so you don’t have to! More accurately, we attend because you have neither the monetary nor the time budget to jet all over the world to industry events. For us, it’s part of the job, and we get to keep our finger on the pulse of the industry at gatherings hosted by individual firms and neutral third parties. In September alone, for instance, I’ve been in Panama, Barcelona and San Francisco. A more comprehensive (although not necessarily complete) list of our attendance is below (and that’s just the third-party events!). Money 2020 image One event that’s come incredibly strong out of the gate is Money2020. Its first incarnation was two years ago and garnered more than 2000 people; last year it had over 4000, and this year is shooting for over 6000. Celent (Zil Bareisis and I) will be attending (and in full disclosure, we are a media partner of the event). We view this as a “must;” the breadth of the ecosystem attendees is immense, the diversity of topics fascinating. In the last two weeks I’ve mentioned Money2020 to two clients and both have replied that they’d have to look into attending, particularly based on my positive feedback from last year’s event. If you’d like to register, please go to http://money2020.com/register. Look for us to tweet, blog and otherwise have a host of insights after this and other fall conferences. What events do you consider crucial?

Branch Transformation: Are Bank of America and Wells Fargo on the Right Track?

Branch Transformation: Are Bank of America and Wells Fargo on the Right Track?
In a word, yes – and not a moment too soon. As thousands gather for Money 2020 in Las Vegas this week giving ear to a bevy of start-ups promising mobile payments nirvana, a small but growing number of retail banks are addressing those same consumer dynamics with much needed right-sizing of their branch networks. Celent has long asserted the need for a do-over of the traditional branch operating model that served the industry well for so many years and recently argued that a significant winnowing of US branch densities (among other things) will result over the next decade. The challenge for retail banks (and it’s a big one) is that while consumers are increasingly choosing to transact digitally, they engage banks in-person. This was seen clearly in recent Celent consumer research and the resulting report. Will this dichotomy persist? At least for a while and to varying degrees depending on one’s target market. The implications are profound. While most revenues are tied to the branch network (artificially in some cases) foot traffic is in steep decline. Celent identifies a triumvirate of multichannel imperatives arising from the growth in digitally directed consumers. Specifically 1. Right-size the branch network. Most branch networks were designed for a different consumer in a different era. They need to operate more efficiently and effectively. Celent has published extensively on this topic. 2. Learn how to sell in the digital channels. This is new territory for most banks. It starts with embracing digital channels as a key opportunity for customer engagement, rather than merely a vehicle for low-cost transactions. 3. Catalyze growth in self-service usage. This too requires new digital channel capabilities along with well-coordinated efforts to communicate those capabilities and why they’re relevant to consumers in order to maximize enrolment and usage. That a branch channel right-sizing is necessary is hardly debatable. How this right-sizing gets done is the subject of much debate. The Bank of America and Wells Fargo initiatives show similarities: • Both combine transaction automation with fewer, more highly trained “universal bankers”. • Both offer extended hours for most routine transactions. • Both are considerably smaller and less expensive than traditional branches.

But the approach to service differs considerably between the two models. Bank of America deploys ATMs with Teller Assist in its new Express Centers. Tellers still exist in Bank of America’s model, but they are located centrally and engage customers via real-time video. During business hours, tablet equipped staff can also assist. After hours, it’s all video. Wells prefers all customer interactions to be with in-person branch staff in its Neighborhood Stores. Branch Oct 2013 There’s no silver bullet when it comes to branch transformation. There will likely be a variety of design within banks and among banks. Both initiatives appear to be “test and learn” approaches, and may evolve as both banks gain experience. That’s exactly how it should be done in my opinion.

What do you think?