Brett King

Posts Tagged ‘cloud’

Can Social Media Bring Down a Bank?

In Economics, Future of Banking, Social Networking, Strategy on November 23, 2011 at 00:26

Bankers often talk about the ‘trust’ consumers have in banking as a defining characteristic of why customers give banks their money instead of simply keeping it under a mattress. Some bankers might have difficulty understanding why customers of today seem perfectly happy to give money to the likes of PayPal, M-PESA, Lending Club or Zopa. The fact that I trust PayPal to send money on my behalf, in lieu of banks, might have been unthinkable just a few years ago. The concept of lending money through a social network would have seemed laughable too. Part of this is that we just don’t trust banks like we used to, and alternatives seem far less risky comparatively.

Reputational risk is surfacing in the sector as a whole today through social movements like “Occupy Wall Street”, “Bank Transfer Day” and other actions led by frustrated consumer groups and collectives. As an industry, we’re not organizing a structured approach to this challenged perception of ‘banking’. Instead we’re often trying to defend the indefenisble, a system saddled by inertia that assumes we have far greater responsibility to our shareholders, than we do to the customers we are supposed to serve.

Not the Regulator’s problem

At the European Retail Banking Summit held in London on November 8th, 2011, I pitched to European regulators the issue of Social Media, the Occupy Movement and what their position was towards the increased transparency that retail banks were facing. Martin Merlin (Head of Financial Services Policy and Relations with the Council, European Commission) and Philip Reading (Director, Financial Markets Stability and Bank Inspections, Oesterreichische Nationalbank) were at a loss to understand the role of regulators in defining a coordinated industry response. Martin’s response was telling:

“It’s simply not on our radar yet as regulators”
Martin Merlin, Head of Financial Services Policy, European Commission

Customers finding their voice

The new voice of the populace is demonstrated with no greater effect than through the so-called “Arab Spring” across the MENA region. If Twitter, YouTube and Facebook can overturn regimes in Egypt, Tunisia and Libya, I’m pretty sure they can totally undermine the brand of a bank that we’ve previously thought was “Too Big To Fail”.

To add credibility to that notion, in just months we have seen the Occupy Movement develop into a global protest against the economic and social inequality promoted by the current “system”. Consumers today have found their voice. Increasingly that voice is about choice, about rewarding organizations that listen and punishing those that think their decisions are immune from public debate or dialogue.

Prior to social media, the thought of rapid political change in a country like Egypt would have been considered extremely unlikely, a real outlier. Is there a measurable effect of this voice of the consumer on retail financial institutions today? Absolutely.

In January 2011, Bank of America’s (BofA) post financial crisis share price had recovered to $15.31 at its peak. As of this blog post, BofA’s stock is ranging at $5-5.50. This is instructive. Stocks with a historical Beta (β) of 1 are generally tracking flat for the year. So why has BofA lost more than 50% of its value in the last 12 months, compared with a market and contemporaries that have remained flat over the same period?

Bank of America's share price is at a 2-year low

Overlaying stock trading volumes and pricing, against average and cumulative sentiment (via social media analysis) shows that public displeasure with the company direction and engagement has been a core driver in BofA’s troubles. What is clear is that BofA would not have considered consumer sentiment a significant driver in their share price in the past. They simply could not have run their retail bank badly enough to result in this type of dip in the past unless there was some sort of significant and very public scandal resulting in massive losses. The market is obviously now pricing in concern about the long-term viability of a brand that doesn’t have affinity with the consumers it serves.

A great infographic from EvoApp showing the correlation between sentiment and share price for BofA

What to do next?

Understanding consumer sentiment, and actively managing the brand in this open dialog is going to be a key skill in the near term. This is not about ‘spin’ or control, because as Egypt and the Occupy Movement has shown, you can’t control these forces.

Instead what will be critical is the capability to respond visibly to the markets concern, to improve sentiment. In BofA’s case, the leveraging new Debit Card fees, claiming BofA had a “right to make a profit” and then dropping the planned fees – is no way to demonstrate strategic understanding of consumer sentiment in the social age.

We need a lens on sentiment that drives strategy. This requires a very different board room and executive feedback loop that simply does not exist today.


BANK 2.0: SME Banking in the Cloud

In Customer Experience, Groundswell, Internet Banking, Retail Banking, Social Networking, Twitter on June 24, 2010 at 01:57

I met Friday with Mike Hirst, CEO of Bendigo and Adelaide Bank, one of the top banks in Australia today. As we discussed the need for community banks to get better at servicing SME business needs moving forward, we had a really interesting brainstorming session on where to go next. Mike is an easy going guy and I think he’s created a really positive, open culture at Bendigo that will pay dividends as they take market share away from the majors in Australia.

I guess it’s an obvious statement, but for small to medium size businesses, banks provide a logical partnership as an enabler for a range of bank services. Mike explained that Bendigo and Adelaide Bank has, in recent times, been providing a range of services to small businesses beyond the traditional merchant, trade finance and credit services including extended services such as cash flow and accounting analysis, SME advisory, website/minisite development, telecommunications deals as a reseller, and similar services. Recently ANZ launched The Small Business Hub, as a way of extending more services to their SME clients. American Express has gone one step further with their Open Forum platform as an attempt to engage the broader business community in actively sourcing solutions. Bendigo Bank has tried to facilitate community involvement through their PlanBig portal.

As Mike Hirst and I discussed Bendigo’s wish to provide a better platform for SMEs to grow their business, it occurred to me that almost all the services we were discussing were candidates for the cloud. Here are a few that came to mind:

Accounting, Cash Flow Modeling and Credit Services:
Plugged into an SME’s basic accounting package (think MYOB, etc) the ability to provide some intelligent tracking of cash flow, help businesses to think about aged receivables and rightsizing a credit or overdraft facility is a very valuable tool. A plethora of these are being introduced into Internet Banking facilities this morning, but extending a basic accounting facility with cash flow analysis tools that is an extension of your banking relationship is not a stretch. Ben May, MD of OnlineFactor, recently showed me a new tool they had been playing with called Imagineering Profit which allows users to plug in their basic financial statements and get some great analysis on break-even, cash flow, and various what-if scenarios.

If this could be married with basic account information, accounts and invoicing data, etc – this could give SMEs a nice tool embedded within banking to start to look at a basic overdraft facility, factoring, inventory financing and a whole range of complementary services.

Easier Merchant and P2P Enablement
E-Invoicing is becoming increasingly important as part of the SME toolset for commercial banking. RBS recently has launched a range of services including e-Invoicing and electronic accounts receivables/payables management. HSBC Net for some time has offered Accounts Payable Integration which allows for e-Invoicing, better cash-flow projections and management, etc. The name of the game here is simplifying processing, improving the likelihood of rapid payment and better bank integration into your payments and receivables process.

By 31st October, 2018 the UK Payments Council has mandated that central cheque clearing will be phased out. The decline of cheque use in the UK has been widely documented. In 2000 cheques represented 25% of all non-cash transactions, but by 2008 they accounted for less than 10%, this year they will be less than 5%.

This is also where the mobile device and P2P platforms come into play. While debit cards have had big success in recent times, as credit and debit cards are integrated into your mobile phone for contactless payment capability, it is obvious that the use of cheques and cash will further decline. With the introduction of Square and Verifone PayWare it is becoming increasingly simple to provide merchant type services to accept payments.

But Person-2-Person is the big innovation for SMEs and businesses. In 2009, financial institutions including Bank of America (BAC), ING Direct and PNC Financial (PNC) rolled out so-called P2P technology that lets customers use the Web or a mobile phone to transfer money from their account to any other account. Within the next 3 years our phone will become the payment device of choice for paying SMEs who work in the service arena. This makes cloud services even more viable as SMEs will increasingly rely on virtual platforms to effect and receive payments. The ability to augment basic banking services to capture the need for virtual P2P and payments capability is a no-brainer.

SME Community Building
There are hundreds of thousands of groups currently active on LinkedIn, many dedicated to SME forums and the like. Ecademy is an social networking site based in the UK, but active globally with more than 17 million members. A survey by O2 in the UK showed that more than 600 SME businesses were joining Twitter everyday, and that 17% are already actively using Twitter to support their business.

SME community building is a great way to empower businesses and is a logical extension of the already powerful network that banks have with their customer base. Banks don’t use their community of clients to encourage interactions, but as a trusted intermediary it makes absolute sense for bankers to utilize their community to encourage internal business between their SME clients. The cloud and online communities such as LinkedIn, Ecademy and others seem like the perfect partner to kick this off.

The cloud is increasingly critical for SMEs not only for facilitating business, but also for enabling closer connections with partners, integrating shared services, improving payments and cash flow and marketing their services. Banks have a huge opportunity to be not just a trusted partner for banking services, but extending their platform to help SMEs build their business.

There’s one key problem with banks extending platform for SMEs. To illustrate, the current e-Invoicing and Accounts Payable Integration services banking provide today, a process designed ostensibly to reduce paperwork for an SME and improve cash-flow, is saddled with an antiquated, compliance heavy sign-up/application processes that mean the initial onboarding for such services is erroneous and time consuming. The benefits aren’t there for SMEs if the application process takes more effort than the benefits.

By better integrating customer learning and moving SME accounts management to the cloud, a bank could provide a range of great services that really help SMEs manage their businesses and cash-flow more economically, but to do so they are going to have to think differently about engagement.

If you’re my bank – you better get moving…

In Media, Mobile Banking, Retail Banking, Social Networking, Technology Innovation, Twitter on March 25, 2010 at 07:39

Mobility in banking and payments is not a fad. This week I gave a keynote address at the 3rd Mobile Commerce Summit Asia (Manila) and meet with global players in the mobile payments and commerce space. Apart from the fact that half-way through the second day we experienced a 6.1 magnitude earthquake, the entire conference confirmed my view that banks are under massive pressure on mobile innovation – and the majority of them are not moving anywhere near fast enough.

The core proposition of mobile banking is two fold. Firstly, the device is already ubiquitous with 80% of the world’s population already owning a mobile phone. With only 20% of the world’s population having access to a bank account, it is patently obvious why mobile is the enabler for mobile wallet, payments and bank facsimile. WIth PayPal, Facebook, Square, Verifone and others launching themselves into the mobile payments arena, there is a great deal of interest in this space. Secondly, convenience has always been the core driver for the success of Internet Banking, so with mobile internet the convenience factor is even higher because you carry your “internets” with you.

“If I leave my wallet at home, I may not notice it for the whole day. But if I lose my cellphone, my life will start stumbling right there in the subway.”-21 year-old Kim Hee-young, Sookmyung Women’s University
NYTimes Article May 2009[1]

The fact is that once people start getting used to receiving and making payments from their mobile phone, whether it is via SMS initially, or via contactless (NFC) applications in the near future, the convenience element will drive adoption rapidly. With natural social media (tribes) implemented into mobile devices too, adoption would accelerate even quicker as social media creates a member-get-member effect for mobile wallets. If a few banks were to enable cash-in and cash-out via ATMs from your mobile wallet, this would add to the viability and push competitive innovation. The point is – you already have a mobile phone, if someone sends you some mobile money – you are converted into a customer right there and then. No need for fancy marketing, advertising or infrastructure. Then the more merchants that accept payments from mobile money whether online or in-store, the faster again that average spend/utilization will climb and non-participating merchants will hop on board.

So if you’re a bank have you really got anything to worry about, or is it, much ado about nothing as some learned colleagues have posited in the past? (Although to be fair to The Finanser he did soften his stance the next day)

Banks like to think they’ve got a lock on payments because everyone needs cash, and to trade cash you need some form of a banking license. Well that doesn’t explain the unmitigated success of M-PESA, G-CASH and other mobile money implementations in developing economies where the unbanked have embraced such with both thumbs. In fact, developing economies with huge populations of unbanked are absolutely prime targets for fast adoption of mobile money transfers.

Bank’s might also argue that they’re not really interested in the unbanked, and ‘real’ customers are probably not going to adopt mobile money transfers as quickly as the unbanked because they’ve got a perfectly good credit card and/or debit card they can use. Well they may have a point, but only if those same banks can accelerate the integration of credit cards and mobile phones. Why? Because the name of the game here is mobility.

The reason mobile money is going to take off so quickly is that I already have to carry my mobile phone everywhere I go, and with mobile money I don’t have to go to an ATM, branch or physical location to get cash – because I can spend my moBucks at any participating retailer.

A great example of ubiquitous adoption of cashless technology is the Octopus case study in Hong Kong. Octopus is a contactless (NFC) smart-card that was introduced as a replacement to paper ticketing on Hong Kong’s transport system back in 1997. Within 3 months more than 3,000,000 (that’s 3 million) cards had been issued. Once ubiquitous merchants from McDonalds, Starbucks, 7-Eleven, Bookstores to Cinemas and Swimming Pools. Why? Because carrying around a card and paying by a contactless ‘swipe’ is still less hassle than going down to the ATM and using cash at the POS (point-of-sale).

Customer behavior is what will drive mobile wallets – the search for convenience. The same imperative is why customers are looking to check their account balance, transfer funds and pay bills through mobile internet banking.

As Chris Dadd from the UK Mobile Data Association and RBS said today at the Mobile Commerce Summit in Manila:

“If mobile-based banking or payments are easy to use, fast, cheap, social and in the cloud the growth will be unstoppable…”

I’m sorry to say, but most of the banks I talk to are only now just considering mobile enablement. So realistically by the time they develop their iPhone App or get their act into gear we are at least 6-9 months away from workable solutions. That’s too slow. End of story?

Banks can accelerate their involvement in the mobile, social boom by being open and collaborative. By partnering with every telco, app developer and retailer they can think of, by encouraging (or forcing) card issuers to upgrade POS technologies, and by helping customer awareness of mobile solutions, banks can play a vital role as integrators of mobile into commerce and payments. In fact, banks should work on publish a channel SDK and put a partner program on their websites right now for this stuff – building it on the go.

If not, my guess is they’ll simply become spectators in the next big thing.

[1] “In South Korea, All of Life is Mobile”, NYTimes May 2009

Computing in the cloud

In Retail Banking, Technology Innovation on December 18, 2009 at 11:36

Excerpt from Chapter 10: Gridless Customer Experience – More complexity, More choice

As we become more mobile, a great deal more of what we do will need to become detached from our work computer, laptop or enterprise network server. The ability to get access to our data and core applications on the move is one simple example. Restricting this data to physical devices in one specific location is not going to work. So the trend has been for laptops to get more capable so that we can carry them with us. But laptops still have to deal with access to corporate data, security issues and such regardless of their portability.

For this reason, Google, IBM, Apple, and even Microsoft are making various bets on what is known as cloud computing. Cloud computing is an emerging computing technology that uses the internet and central remote servers to maintain data and applications. It allows the use of applications without installation and allows users access to their personal data and files using any device that has internet access. Cloud computing abstracts users from their applications and data by providing those facilities via the browser effectively, making storage requirements minimal and leaving processing to the cloud rather than requiring heavy processing capability. It does, however, rely very heavily on bandwidth to get expeditious results.

Although Windows still runs on 90% of PCS and laptops, the fading importance of the PC means that Microsoft is no longer all-powerful. While some look to Google’s Chrome OS and Apple’s OS? to produce a viable competitor to Windows, the fact is that with increasing reliance on mobile devices, App Phones and other device platforms, the role of the PC operating system is not necessarily a key driver in the future of computing.

While there are hundreds of firms offering cloud services—web-based applications living in data centres – Microsoft, Google, IBM and Apple play in a league of their own. Each of these firms has their own global network of data centres and they are working on a whole suite services within the ‘cloud’. Such tools and services being touted include e-mail, address books, storage, collaboration tools and business applications. App Phones or smart devices will add to the mix, with various approaches to widgets and applications, some from within the browser and others integrating with the cloud.

Apple has recently started to make a foray into cloud computing in a major way. Apple is building a $1 Billion data centre in North Carolina (USA), possibly the largest of any in the world. MobileMe® is the first of a series of online services based on cloud computing that are designed to create new revenue streams for the tech giant. MobileMe is designed to connect all of your devices and push information up and down to keep everything synced and up to date. iDisk, incorporated into MobileMe, gives you 20GB of remote hard disk space for storing files that are too big to email, photo galleries, and such. MobileMe even allows you to find your iPhone if you’ve lost it.

While Microsoft has launched Office Live as an attempt to win over cloud enthusiasts, their poor mobile showing in recent times against both Apple and Google’s Android might affect their ability to dominate the cloud as they have the PC market. Motorola’s ditching of Microsoft Mobile in favour of Google’s Android platform may just be another nail in the MS Mobile coffin.
The question remains as to what services work, and what revenue models will drive cloud computing. For corporations the business case is simple, shifting to the cloud reduces infrastructure costs and moves platform and application costs to an OpEx (Operating Expense) model instead of CapEx (Capital Expense). In the current economic environment this has to be promising. Distributed platform access and the benefit of data centres in the cloud, also creates more opportunities for more agile institution operations and different models such as telecommuting, homeshoring, pop-up branches and so forth.

If you are sitting there reading this right now with some scepticism about the possibilities of the cloud, think about this. Arguably the most successful cloud computing service today, with more than 350 million users is Facebook. If you can’t get your head around that – think about it. It is completely run through your browser or app widgets. It allows users to collaborate, share information and communicate online – all things that businesses want to do to…

Whether Google, Apple, IBM, Microsoft or another contender like Amazon or Facebook is able to dominate the cloud space, is not really the issue. The issue is that if you are a decision maker in a business you need to think about whether some of your core infrastructure, platform or applications would be better placed in the cloud so that your workforce can be more innovative and productive. It can be just as secure as your own dedicated infrastructure, plus you get the benefit of much more mature UI (User Interface) and shared services.

One of the more interesting elements to think about with cloud computing is what happens to the role of the bank in payments. If the majority of payments processes on a consumer and B2B space are increasingly deployed within the cloud, then the need for such services provided by banks to their customers directly becomes effectively redundant. After all, Pay Pal is already in the cloud…