Brett King

Posts Tagged ‘Citibank’

Google Wallet is not about Payments

In Engagement Banking, Future of Banking, Media, Mobile Banking, Mobile Payments on June 6, 2011 at 02:27

Last week Google announced their long awaited NFC-trial for mobile payments. On the face of it, many perceive that Google’s play is an attempt to cannibalize the lucrative payments market, but if that was the case, why has Google not taken a share of interchange fees from Citi and Mastercard? In addition, Google is supplying contactless point-of-sale units to merchants participating in the upcoming NFC trial free of charge. Why on earth would they do that?

It doesn’t make sense

In early May the Smart Card Alliance conference held in Chicago, Wal-Mart’s Jamie Henry was asked directly about the retailers plan in respect to point-of-sale. His reply was telling:

“We’re interested in helping to migrate EMV to the U.S. market. We view it as a much more secure transaction, and we want to provide our customers with the most secure transactions in the market place,” Jamie Henry, director of payment services with Walmart treasury organizations (source: NFC News)

Henry has said that 100 percent of Wal-Mart’s terminals already support EMV cards. However, when asked recently at the Smart Card Alliance Annual Conference about the role of NFC or contactless technology in the greater POS environment in the US, Henry was reported as saying

“There’s no business case for NFC yet”

Many bankers take a similar stance in respect to mobile payments support for NFC phones, stating that until contactless point-of-sale terminals have broad enough distribution, customers won’t be able to make use of their NFC phones and thus the expense of rolling-out a trial and investing in the supporting technology would be premature.

So why would Google, who admittedly have some pretty smart people in their team, not only invest in an NFC-trial, but also give away NFC point-of-sale terminals free of charge to partner merchants?

Maybe it does make sense

The thing is, Google sees the big picture.

NFC is not about payments modality alone. It’s not simply the shift from chip and PIN or contactless plastic to contactless mobile payments. It’s about what the mobile phone can do as a payment device that a plastic card can’t – it can give you context.

For example. The number one enquiry to retail banking call centers today is still “What’s my account balance?” Combining that piece of information with a payment device gives you a very powerful context for your everyday personal financial management.

If you are focused on a savings goal, I can show you the potential negative effect of making a big ticket purchase.

If you are at a retailer about to use a competitor bank’s credit card, I can offer you a no-interest payment plan through my bank.

I can tell you if you purchase that big flat screen TV that you won’t be able to make your mortgage payment due in the next 3 days.

I can offer you a really great deal at a retail outlet that you just walked into or you are walking past.

Google Wallet is simply a platform for Payment-based marketing

Google has worked out that the context of payments is perhaps the biggest advertising market ever to emerge, far more impactful and lucrative than search-based advertising. This is about offering you compelling, relevant and timely messages that improves your service experience in-store. This is about positive behavior on the part of your service providers that produces extraordinary loyalty through relevancy and responding to your behavior in a way that benefits you day-to-day, not just when you go to the bank to ask for something.

The future won’t be written by banks and marketing organizations that are passive. It won’t be written by marketers who broadcast message after message hoping you remember a brand when you want to make a purchase.

The future will be written by organizations who know you so well that they anticipate your needs, make it very simple for you to capitalize on the relationship, that saves you money and respects your time and privacy. Trust can be earned back, but it is about me trusting you enough to receive your offers and you not burning that trust with irrelevant direct mail, newspaper ads and TV commercials.

The future is messages wrapped around the context of a payment, and Google wants to own that space. It doesn’t look as if there’s really anyone ready to challenge them on that front.

Whatever you think of Google Wallet, it’s clear they have probably the most compelling business case of all for pursuing NFC payments, and it has nothing to do with competing with banks, but everything about owning the customer.

SXSW: Where’s the Bank Innovation coming from?

In Bank Innovation, Customer Experience, Future of Banking, Strategy, Technology Innovation on March 13, 2011 at 02:12

South-by-Southwest’s Interactive sessions in Austin, TX are a major creative and customer-focused experience. The amount of networking that is taking place, the amount of active innovation and discussion on taking it to the next level is awesome and mind blowing. There’s only one thing…

If there was a game on at SXSW to find 20 bankers – It is highly doubtful that anyone could win that one.

There’s innovation discussions occurring around mobile, gaming, social media, user experience, geo location, but it appears SXSW only has 4 sessions that are connected with banking, which is indicative of the level of engagement. There are payments and retail engagement discussions, there are gaming and social discussions, there are startup and venture discussions, health and work discussions, but not so many on banking.

In our session today where we attempted to discuss innovation in the banking arena, we had spirited discussion around who are the innovators, but the reality is we didn’t get into really sexy innovations. We didn’t get into how mobile payments would change the world, the emergence of new digital currencies, virtual banking models that cross borders, distributed and pervasive banking content embedded into the retail experience, Infographics style PFMs transforming customer engagement, new banking models leveraging off the likes of P2P, social or community enablement, reinventing the credit score or improving financial inclusion through cheaper smartphone platforms. The reason we didn’t get into any of the really sexy stuff is that the problems of innovating the banking sector are much more fundamental today.

Some of the Twitter feedback based on the #BankInnovation hashtag from the session “Banks: Innovate or Die!” indicated frustration at not diving into more deeper matters of innovation.

One blog response from Oscar Llarena (aka @softwaremono) asked the question “Does Customer Service = Innovation?“. In many ways, this very question and the amount of time that was spent talking about customer behavior and the ability of banks to match customer expectations is very telling when it comes to what innovation is needed in the banking arena.

Organizational Inertia
One of the key issues and the reason expectations are low in the financial services space is that most banks don’t even classify these things as innovation. When you ask a die-hard banker about innovation you are more likely to hear about Collateralized Debt Obligations, Derivatives, Barbwire Hedge Contracts or Swaptions than technology integration or customer experience improvement. This is because fundamentally banking has really never had to rapidly innovate the basic model of engagement of customers; branches, cheques (checks), credit cards and other such mechanisms are innovations that occurred over the space of decades or centuries.

The other issue is that risk aversion, philosophical marriage to traditional distribution models and embedded metrics around products sold through branches, mean that organizationally the bank has to first start thinking about changing the way the performance of the business is measured, and structured, before serious innovation can take place. This will take time.

In the meantime the easiest way to create innovation (that goes against the grain of long-embedded business practices and performance structures) is to simply circumvent the traditional bank organization. It could be argued this is why UBank, Jibun Bank, First Direct and ING Direct have been so successful at doing banking better – because they didn’t have to solve the organizational problem first. However, when we see more fundamental business model innovations like P2P lending and new payments systems like M-PESA, these have circumvented banks all together.

Banks will eventually get their act into gear and either replicate alot of this stuff, or acquire it to get the innovations, but such an approach would be like Blockbuster putting up a website that looks like NetFlix. Unless you fundamentally redress the organizational reliance on a very traditional business model and structure, then it’s never quite going to work.

Why innovation has to start with the customer…
In retail banking or financial services, one of the reasons we get so hung up on just some simple elements around customer service, the user interface between the bank and the customer, transparency and the way a bank assesses the risk of an individual consumer is simply that these are the areas that are now so glaringly obvious that they need a more rapid solution. Why? Because they are the very areas where the gap between customer behavior and expectations is growing rapidly with the delivery capability of the average retail bank. Before you can really start with breakout innovation you need to be able to meet customer needs.

Can you do that if you are trying to convince customers to buy irrelevant products because they are higher margin, or if you are trying to force customers into a branch because you’ve got a substantial investment in real estate? No.

So is customer service innovative? Transforming the customer experience and engaging customers in new ways, is a massive leap forward in banking – it may not be sexy innovation, but it is transformational for a sector who thinks they make profits despite their customers.

Why SXSW still matters for banks
In this environment, there are massive opportunities for entrepreneurs and innovators to create bridges between the customer and the institution. This will be through start-ups, new apps or UIs, new user experience models, gaming, and all the sexy stuff that SXSW at large is discussing. But it likely won’t be through traditional banks (sorry @annaobrien). Why?

Probably because you will never see a traditional banker at SXSW because they don’t get the imperative for customer innovation. They send along the geeks, who they expect to build the apps and to maintain the social media presence, but those resources won’t be sitting in the boardrooms talking about new organizational structures, different performance metrics and how to transform the business wholesale.

In the end, the success of start-ups and innovators like SmartyPig, LendingClub, BankSimple and MovenBank will be initiatives that banks feel compelled to follow because customers feel affinity with these new brands. But don’t expect them to rush into it…

In the end customers will win and I guess that is all that matters.

Retail Banking Innovation Infographic

Is product innovation enough?

Banks – get your website right first, before you worry about an iPad App!

In Internet Banking, Offer Management, Retail Banking on May 27, 2010 at 12:49

There’s a lot of excitement about Apple’s new iPad. This week it was reported in various news sources that two banks in Australia were releasing an iPad app to capitalize on the iPad fever. Now… you’d normally find one of the first to jump in and hail such an announcement as an indication of real progress in the fight to innovate the retail banking space. But on this occasion, well I’m not jumping…

The two banks in question in this instance are NAB (The bank formerly known as National Australia Bank) and St George (now part of the Westpac group). The problem I have with this whole announcement is not that it isn’t a positive move, because it is, the problem I have is that they still don’t have the fundamentals right on their existing websites and they’re fooling around with the iPad! Get real people!!!

NAB's Dedicated iPad App looks cool! But they've got bigger problems...

If you go to NAB, St George, Wells Fargo, Citibank, Bank of America – well just about any banking website today – the customer experience is pretty poor. When you get behind the login, which is where 70-90% of the traffic goes when it hits the homepage, things get even worse.

For over 10 years most of the banks that I work with have been collecting information about me. They know my spending habits through my credit card usage. They know the mobile phone operators I work with in the countries where I live and work. They know my average spend on things like my Apple iPhone, iPad, Laptop, Flat Screen TV, etc. They know which business accounts I transfer my salary from. They know the relationships I have with various investment partners where I make regular contributions to savings plans or lump sum payments to my managed funds. They know which stocks I favor and hold in my portfolio. The also know the name of children, how long I’ve been married and the last three residences I’ve had. The reason I know they know all this is that either it is something they’ve asked me as part of their KYC (Know Your Customer) procedures, or something that appears on the statements they send me for my credit card or various accounts. They have the potential to know me and my financial savings and consumption habits, probably better than I know myself. But…you wouldn’t know it.

The thing is…when I visit their website or login to internet banking – they appear to have absolutely no idea of who I am.

In the late 90s I remember that there was a huge push for ‘personalization’ and CMS’. But what have we really learned about forming the appropriate message and content on our homepages in that time? Pretty much nothing. Let’s look at an organization that has learned about the value of the homepage:

“Yahoo is a company that is very strong in content. It’s moving towards the web of one. We have 32,000 variations on our front page module. We serve a million of those a day. It’s all customized. Our click-through rate went up twice since we started customizing this.”
Carol Bartz, CEO of Yahoo, TechCrunch Disrupt, May 24, 2010

So why is it that banks have no idea how to engage me? Here’s a simple test. Take two products that are fairly popular when you review search engine keywords related to banks – mortgages and student loans. When I go to any of the sites mentioned above, finding information on these two products is generally not that difficult. However, when I’m doing research on these products, studies show that I will probably come back a few times to my bank’s website before I decide to apply (if I can apply online at all that is). It is the easiest thing in the world when I return to the bank’s homepage for me to be presented with an offer for a mortgage or a student loan up front, based on what I looked at on my last visit. By prioritizing this content up front, simply through the use of cookies, I dramatically improve the likelihood I’ll get where I need to. The bank already knows I’m interested in this product, so why bother slamming me with the offer of the month or telling me about the bank’s social corporate responsibility program. Give me something relevant!

The fact is, pretty much every bank you visit online these days forgets you as soon as you close the tab or window on the browser. That’s why, with many bank websites, were still presented with commercial banking information, investor news and even the dreaded press releases when 99% of the traffic is focused on retail banking related services and products.

With the amount of data bank’s have on their customers and the amount of data they have on traffic, product enquiries, applications and transaction history – building a platform to allow customization of the homepage should be a snap. There is no offer management, no active sales engagement either through the homepage or the secure internet banking portal – it’s just like walking into my branch and feeling like nobody knows me.

A word to the wise – you should know me well enough to serve me better through these basic platforms. Get those right before you start worrying about your iPad app!

Forget greater regulation, social media will force transparency (HuffPost)

In Retail Banking, Social Networking, Strategy on May 10, 2010 at 09:53

See the original post on Huffington here

As President Obama was gearing up last month to push further reforms for the finance sector through congress, the sector lobbyists were also gearing up for a battle of PR wits to try to prevent changes that threaten the status quo.  Senior industry players like Jamie Dimon were extremely vocal in challenging the president’s push for greater regulation.

The mantra of “too big to fail” was the protection the big banks were all hoping to fall back on, and this call was certainly an underlying foundation of the bailout and TARP initiative in the US. The fear that if the biggest banks fail, the economic repercussions would be so serious that it is less costly and more economically prudent to bailout big banks so the economy didn’t get hurt further. Such sector lobbying and grandstanding is a fairly standard reaction to such government intervention, as we’ve seen time and time again.

But there is something more powerful than regulation or reform which looks like it will be a much more powerful force for creating change that even politicians will learn to fear – social media. In the recent UK elections, voter turnout was at the highest level in 13 years, largely due to the influence of social media in creating interest and driving participation in the election.

We’ve seen social media act as a force for small business and consumers in breaking the back of long held bank policies that have been unyielding even in the most regulated markets, with active ombudsmen or watchdogs. In February of this year Citibank was forced to very publicly back down from a policy-based decision on blocking the business account of a web start-up called Fabulis. In September of 2009 Ann Minch, a long and faithful BofA customer, posted a YouTube video documenting the interest rate increase on her BofA credit card from 12 to 30%. In the video Minch comments that she “could get a better rate from a loan shark”. Bank of America was unmoved by her social media efforts, at least initially. But after more than half a million views in just a few weeks, BofA was forced to reverse their interest rate increase and in doing so set a very public precedent for other customers.

Corporations are under the watchful eye of social media

This is a trend more and more questions by customers, more reversals in policy decisions that were once held as sacred and unmovable by the biggest corporations globally – basically they were too big to be challenged.

The largest corporate bankruptcies in history (see great infographic) largely occurred due to either lack of adherence to existing regulations (Lehman Bros), unbridled greed (Enron), lack of innovative thinking (GM) or just poor management. Even though Enron and Worldcom’s collapse resulted in the creation of the Sarbanes-Oxley act, it is generally believed that it is not lack of regulation that resulted in what were the biggest bankruptcies in US history at the time, but the intent of the management to circumvent existing regulations to create ‘arbitrage’ opportunities.

Great infographic on largest corporate bankruptcies (Source:www.good.is)

Goldman Sachs is being targeted for similar practices, this time around CDOs and the sub-prime crisis. Calls for Lloyd Blankfein’s resignation are sounding around Wall Street as Goldman’s shares have plummeted 19% since April 15, knocking $15 billion from Goldman’s market cap. The issue at hand is Goldman’s active strategy to make money from the collapsing sub-prime market, such as the so-called “Big Short”.

We saw the same shenanigans during the Enron debacle with empowered traders coming up with trading strategies they gave nicknames such as “Get Shorty”, “Fat Boy”, “Death Star”. This represents an institutional, wall street embraced, increased appetite for driving speculative bubbles or exploiting regulatory weaknesses to make extraordinary profits. Traders argue that arbitrage is just an ability to read risk and hedge appropriately, but when the traders have enough clout to create the bubble that generates the arbitrage opportunity, it takes on a different life – and creates lots of ethical questions.

We are coming to a point in time where such speculative, hedging and arbitrage strategies, or even outright fraud, are going to be a lot more difficult to execute because of the force of public opinion powered by social media.

We have come to an age where those organizations who are transparent, open and engaging with their customers will be rewarded. Those who don’t understand social media, refuse to participate in the conversation, and who don’t easily integrate customer needs, opinions and issues into their organization, will be punished – publicly and without mercy.

We often talk about the privacy implications of social media, but when it comes to large corporations – you most private, sacred issues will be played out on the public stage unless you are on top of social media and it’s impact on the voice of your customer.

Get ready for open, transparent customer engagement, 2.0 style!