Profiting from digital banking technology

September 25, 2015

Three ways to increase revenues and three ways to cut costs by exploiting digital banking technology

Increasing profit is simple: it will go up if you can cut costs and increase revenues. Automation can work in your favour on both sides of that equation. It kicked off the agricultural revolution and really got going with the industrial revolution. Now it’s digital change that is revolutionising profitability. Here are my top three ways that banks can use digital to cut costs and increase revenues.

Increased revenues

  1. Timely and relevant personalised mail Personalised marketing campaigns to date have meant sending Mr Jones a letter starting with Dear Mr Jones. What followed was generic and untargeted. Today, banks can do so much better. They have the data that reveal exactly how much and on what Mr Jones is spending and they should use this to sell products.For example, Mr Jones’ bank can look at his spending, see that he’s just paid an unusually large bill that might leave him short of funds later in the month. With this knowledge it can send an offer for a new credit card, short-term loan or overdraft facility. The pitch is relevant, timely and clean and more likely to be taken up. Indeed, EY research showed that 60 per cent of customers said they would expand their relationship with their bank if they were recommended products that they really needed.
  2. The marriage broker Banks are in the fortunate position to be able to hook up their business clients with their retail clients, promoting the former to the latter and getting a cut of any sale. By looking at spending patterns, banks can see what customers are interested in and make the introduction. It’s been done by credit cards for a few years and Lloyds and Barclays Bank have recently started, too.  It’s simple and effective.For example, a business client could be a golf shop. The bank offers the golf shop the ability to analyse an anonymised customer database. With this data the shop owner identifies 40,000 of the bank’s customers that are within shopping distance of the golf shop and who buy golf equipment. It can target them, sending out promotions. It can construct a push portal a bit like Groupon, and each time a retail customer responds, it gets a bit of the action.
  3. Be like Amazon’s marketplace But banks will need to go further and become a marketplace, selling competitors’ products too. Amazon does this brilliantly, offering its own products as well as other companies’ versions, which might even be cheaper. It’s about selling more products and taking a cut.

Banks will have to do this to survive. The disrupters are already taking market share and by making them a revenue stream they will no longer be a threat – it turns competitors into partners.

Success will depend on being timely and relevant, having high levels of customer service and delivering exactly what the customer wants. The process and delivery must also be transparent.

This is the future for general banking, and already we are seeing it in wealth management. YourWealth, for example, offers masses of tools and content for its customers and aggregates rivals’ offerings on its site.

There will come a point when banks that aren’t doing this will get left behind. The next generation of customers will be switchers with no bank loyalty. They will change accounts according to offer, need, price and service.

Costs lowered

  1. Go direct The more a bank goes directly to the customer, the fewer buildings and people it needs, reducing a huge cost burden. The mobile revolution is already having a massive impact, with banks closing thousands of branches and having far fewer people per square foot.HSBC is cutting 50,000 jobs as it shifts services online and into self-service channels, expecting to save $5bn a year by 2017. JP Morgan is closing 300 branches by the end of 2016 as a direct result of the increasing popularity of its mobile banking app. It revealed that seven years ago 90% of consumer deposits were made via a branch teller. Last year, that had dropped to 42%, with 48% made via an ATM and 10% via the mobile service. The result is a 50% cut in cost per deposit and that’s from just a mobile app.

    The next step is automated, full-service kiosks, which are already appearing in branches, and it won’t be long before we see them in service and railway stations, airports and shopping centres – the bank is coming to the customer.

    Taking this mobile service a little further, Idea Bank in Poland is sending a car to the customer to collect cheques or cash for deposit, which it then takes back to the bank. One day that car service will be driverless.

    We’ll have robots in branches soon too. Santander had an innovative trial back in 2010, but this year the Japanese Bank of Tokyo-Mitsubishi put a small humanoid robot into an Osaka branch. Called Nao, the robot can explain in four languages how to open an account. When it is not banking, the robot dances to entertain customers.

  2. Cloud Banks still largely have bespoke core IT systems, of which they have to own two, one for disaster recovery. These are expensive, finite and reaching the very limits of their abilities. Switching to the cloud offers limitless resource to run far more powerful software, opening the door to new ways to sell. It’s cheaper, too, so banks can get a more efficient platform and cut their cost base.The disrupters are already in the cloud, traditional banks must follow.
  3. Data mining Leveraging data will help banks to sell better, but it will also help them to cut fraud. Fraud is hugely expensive, costing banks billions every year. Indeed, in 2010, the UK financial services sector alone recorded £3.6bn in fraudulent losses.

We’re not saying that fraud can be eliminated, but by analysing patterns banks can dramatically reduce these losses and they can almost entirely end swindles and scams by introducing a program that looks for patterns and raises an alarm. For example, a common credit card scam is to apply for multiple credit cards, rack up the spending, and disappear. If banks marry the data on applications to household addresses, they can set an early warning system.

The technology is already available, most of it is bolt-on and modular and the benefits are clear. Digital brings consistency, it brings opportunity, and it brings down costs.

It’s up to banks to disrupt the disruptors

March 10, 2015

Being ‘omnipresent’ and making the most of different channels means banks can yet fend off Amazon and Apple in financial services

 There’s a pervasive fear that a number of new “disruptors” are going to Balkanise the financial services market in coming years, eating into banks’ traditional revenue and profit sources.

The second annual survey of retail banks, released 10th March 2015, conducted by The Economist Intelligence Unit (EIU), on behalf of Temenos, might reinforce that sentiment. It found that 35% of the 200-plus senior bankers surveyed thought new entrants and competitors would have a major effect on the market in the next five years. That figure rose to 52% in North America.

Over one third believed that the biggest threat would come from tech and e-commerce giants like Apple and Amazon. They are disruptors by nature and experts at exploiting customer data and extracting additional retail dollars.

The newcomers, with deep pockets and the best IT platforms and skills, will certainly want to nibble at certain profitable dishes. But banks should be confident that they can remain at the head of the table if they respond in a smart and measured way, making the most of their inherent strength in data and forging new strategies for different channels.

The survey forecasts that the disruptors will grab market share from current accounts (24%), deposits (14%) and savings lines (25%). Electronic wallets and foreign exchange and remittances are merely the start. Of course, we’ve already seen that happening with Amazon Payments, Apple Pay, Google Wallet, PayPal, Samsung Wallet and so on.

The advantage for the likes of Apple is that their customer data is already refined, meaning they know client preferences and can target relevant offers. Most Apple users have long abandoned fears of surrendering data in exchange for convenient service and quality products.

Facebook is also well placed to take advantage of its huge potential customer base, already corralled inside its ecosystem and likely to stay there for the free services that are put to daily use.

The disruptors might next consider targeting the “underbanked” market. This refers broadly to those digitally savvy consumers who have less trust of traditional financial institutions and a view of banking that differs greatly from their predecessors. They are young now, but will be tomorrow’s financial decision makers.

Already, the “underbanked” conduct some of their financial transactions outside the mainstream banking system. According to one KPMG study from a few years back the “underserved” segment represented more than 88 million individuals and nearly $1.3 trillion in wages in the United States.

It’s important though not to overstate the overall trend. We’ve seen a number of false dawns before, for example mobile banking was apparently poised to dominate the market around the turn of millennium.

To be clear, banks retain inherent strengths. Clearly, the tech newcomers don’t have the local networks, the spending and savings data, the Basel-compliant capital buffers or the regulatory structures to wholeheartedly enter the universe of universal banks.

And banks are still in a great position to respond digitally. In the US, about 90% of retail banking transactions now occur online or via mobile. Banks can easily get to know their customers better by mining this data.

To do that, they will need to become omni-present and place themselves where the consumer is online, while also developing channels, allowing them to track customers better and communicate with them in a timely and relevant way. The banks can leverage their data via personal financial management and create new data-driven services like digital passports, digital vaults and digital wallets.

The survey showed that some banks are starting to think this way. For example, BNP Paribas Fortis, KBC, ING and Belfius have set up Belgian Mobile Wallet, operating as Sixdots. Wells Fargo and Standard Bank have created their own labs to test new technology and apps. And the Spanish bank BBVA acquired the Big Data firm Madiva and the digital bank Simple.

Or take ICICI Bank in India, which has launched Pockets, an app-based digital wallet which, on installation, generates a virtual Visa card that can be used for payments with numerous online merchants. Pockets also offers the option of a physical card.

The next step would be for banks to better use the data, for example by deploying real-time, tailored marketing or guidance that offers the right product at the right time, whether that’s services, products or financial advice.

In the future there are likely to be two main types of banks: those that provide core banking transactions will compete on scale and cost and be happy for others to manage and own customer relationships; others will focus on customer relationships – they differentiate themselves via experience and intimacy with new uses of data and online channels, moving away from the previous model of interaction via branches and call centres.

2013 in review

December 31, 2013

The stats helper monkeys prepared a 2013 annual report for this blog.

Here’s an excerpt:

A San Francisco cable car holds 60 people. This blog was viewed about 2,000 times in 2013. If it were a cable car, it would take about 33 trips to carry that many people.

Click here to see the complete report.

What’s a phone anyway – the end of mobile strategies?

November 29, 2013

Since the iPhone first launched in 2006, I’ve maintained that having a mobile strategy is pointless – an opinion usually deemed either naïve, or contradictory for the sake of it. There were two reasons behind my stance: First that mobile handset technology would evolve quickly, driving constant changes in user behaviour as the increasingly powerful handsets are exploited in new ways. The second was that planning for mobile would be as ludicrous as planning for desktop, tablet, TV and other devices separately.

A third point that has come up more recently is that, while many mobile strategies have focused on phones, if you can make calls from tablets, desktops or even TVs, what is a phone anyway? Clearly the lines between devices are blurring, with smartphones the size of small tablets, tablets the size of large phones, laptops that behave like tablets, and TVs that work like PCs.

mobile strategy redundant - internet of things

As Dom Joly’s comedy sketch foreshadowed, the lines between devices are blurring

The Internet of Things

This isn’t an ‘I told you so’ post, but rather an explanation of why I think mobile strategy is becoming redundant, or is only part of a larger picture – that picture being the ‘Internet of Things’ (IOT). By now you will likely have heard about IOT, after all, it is being championed by the father of the internet, Tim Berners Lee himself. If you haven’t, then quite simply it is the concept that anything and everything, from microwaves to mousetraps, can be connected to the internet.

Driving this trend is the ever decreasing cost of computing. About ten years ago, the industry worked hard at bringing the cost of a laptop down to less than $100. Today, an Android tablet can be bought for less than $50. In fact, the cost of a chip and board that will allow you to connect to the internet has dropped to below $30 for a single unit, and below $15 for mass purchase.

Many ‘things’ can be connected

Right now, hobbyists, entrepreneurs and innovators are connecting ‘things’ to the internet. Good Night Lamp, a UK-based company, has designed a pair of lights that connect via the internet, to allow users to share their presence and availability – for example, a university student could switch on their light when home for the night, and their parent’s light would come on too to let them know their child was safe.

Mousetraps have been connected to the internet so that the owner of the trap receives an alert when the trap is set off. My personal favourite is the voice enabled / bar code scanning microwave, which scans your meal’s barcode, looks up cooking instructions on the internet, then automatically sets the cooking programme and provides voice instructions.

The next step will involve these devices talking to each other, for example, your alarm clock going off and putting on the TV, opening the curtains and turning on the lights.

mobile strategy redundant - internet of things
Good Night Lamp – one of several entrepreneurs discovering ‘things’ that can be connected to the internet

Low cost of hardware driving innovation

The low cost of the hardware is currently driving technology enthusiasts to experiment, and I believe we are in the calm before the storm. The real trigger for mass development will be non-technical people gaining the tools to build their own products and solutions, without electronics or programming knowledge.Of course, planning for a world where anything and everything is connected can incorporate a sub-strategy for mobile handsets, but planning for each device separately would evidently be counterproductive. And to prove that even the giants can get things wrong, Microsoft’s ‘three screen strategy’ (PC, phone and TV) has already been shown to be redundant.

The Digital Era is upon us

October 18, 2013

A lot has changed in technology since my last blog, and it’s only been a year! In Mobile, as expected, Android is outselling iOS, Android apps outnumber iOS apps, people are far less amazed at the size of phablets, and tablets have got both bigger and smaller. Cloud vendors continue to grow as using the cloud becomes more acceptable – as demonstrated by the Dutch authorities allowing financial services companies to use Amazon. Big Data has arrived, and companies are implementing technologies to manage, secure, and turn this data into knowledge. Social sites and technologies are now a way of life for both personal and business users. Individually, these are having a huge impact, and, combined, they will change the world around us profoundly. Technology research company Gartner calls this combination of Cloud, Mobile, Social and Big Data, ‘The Nexus of Forces’.

However, I believe there are yet more forces at hand that will combine to fundamentally transform our lives into the digital era. I’ll be covering them in more detail in future blogs, but will briefly introduce them now.

internet of things - wifi mousetrap
Finally – a digital solution to an age-old problem

The Internet of Things

One of these forces has been termed the ‘Internet of Things’, where everything from microwaves to mousetraps are being connected to the internet. We have hit price points where cost is no longer a barrier to technology, it’s only innovation and standards that are now holding us back. Within payments, innovation hasn’t been an issue, with the sector seeing lots of activity, not only in terms of technology, but also in terms of different types of payments, like Square and Pingit. However, the implementation of these solutions varies from country to country (for example, M-Pesa is huge in Africa), and there are different payment methods – such as person-to-person, or consumer-to-merchant. So, in this instance, standardisation has been the main stumbling block.End-user development (software modification by non-professional developers) is another market undercurrent, and already there are great examples where programming is being eradicated by tooling. An example of tooling is the IFTTT (if this then that) service, which allows users to visually program triggers and actions. For example, you can create a ‘recipe’, so that if you post something on Facebook it gets tweeted, or if you upload an image on Instagram it gets posted on your Facebook. This enables users to build elaborate systems, leading to easier consumption of content from a variety of sources.

Context-aware computing

A third force is context-aware computing, in which situational and environmental information is used to anticipate immediate needs, and proactively offer enriched content, functions and experiences. Gartner forecasts that by 2015, context-aware computing will affect $96 billion of annual consumer spending worldwide.

There are also many other technologies that will have an impact, such as wearable computing, gamification and augmented reality. As a technologist and gadget lover I’ve never been so overwhelmed by technology, yet we are really only at the beginning of the journey. As with the dot-com boom, innovation and new business models will change existing value chains and exploit new user behaviours – potentially, of course, leading to the emergence of a new technology bubble.

digital era christmas presents

Cost will be the only limitation to this year’s christmas present ideas

In all of this there is good and bad news, especially when it comes to Christmas. Bad news: presents are going to get much more expensive; good news: presents are going to get much more exciting!

2012 in review

February 6, 2013

The stats helper monkeys prepared a 2012 annual report for this blog.

Here’s an excerpt:

600 people reached the top of Mt. Everest in 2012. This blog got about 2,800 views in 2012. If every person who reached the top of Mt. Everest viewed this blog, it would have taken 5 years to get that many views.

Click here to see the complete report.

Vertical User Experience Platform

July 5, 2012

Whilst discussing what a UXP is and who the key players are with a customer I was asked an interesting question, “is there a need for industry (banking, retail, government …) specific UXP ?”.

My immediate reaction was that the technologies in a UXP were generic horizontal solutions that should be agnostic to the industry they were implemented in. The fact that they were specialised solutions and are not industry specific to me was a key advantage. So why would you want a content management solution or collaboration tool that was specific to banking or retail?

The response was interesting: For many smaller companies the complexity of managing their web presence is huge, even if they buy into a single vendor approach for example using Microsoft Sharepoint they still have a huge task to set up the individual components (content management, collaboration, social tools and apps) and this is only made harder with the need to support an increasing array of devices (phone, tablet, TV etc…).

It seems there is a need for an offering that provides an integrated full UXP that can be set-up easily and quickly without the need for an army of developers. Compromises on absolute flexibility are acceptable provided a rich set of templates (or the ability to create custom templates) were provided, such that the templates handled device support automatically. Further the UXP might offer vertical specific content feeds out of the box.

As in my previous blog “The End of Silo Architectures” using a UXP front end technology to create industry specific apps is a great idea. Such a solution could not only provide the business functionality (e.g. Internet banking, insurance quotes/claims, stock trading) but the technical issues of cross device and browser support, security and performance.

So whilst I can understand the requirement and the obvious benefit, the idea of a vertical UXP to me seems like providing a vertical specific CRM or Accounting package. The real answer is that it makes sense to provide vertical apps and use generic Content, Collaboration and social tools from a UXP. Ideally the generic components are integrated and have easy to configure templates.

As I have highlighted before though the UXP is complex not just from a technology perspective but also from the perspective of skills, processes and standards. The first step for any organisation must be to create a strategy for UXP: audit what you currently have, document what you need (take into consideration current trends like social, gamification and mobile) and then decide how you move forward.

Unfortunately this area currently seems ill serviced by the consultancy companies so it may just be up to you to roll your own strategy.

The end of silo architectures

June 28, 2012

From my discussions with customers and prospects it is clear that the final layer in their architectures is being defined by UXP (see my previous posts). So whether you have a Service or Web Oriented architecture most organisations have already moved or are in the middle of moving towards a new flexible layered architecture that will provide more agility and breaks down the closed silo architectures they previously owned.

However solution vendors that provide “out the box” business solutions whether they be vertical (banking, insurance, pharmaceutical, retail or other) or horizontal (CRM, ERP, supply chain management) have not necessarily been as quick to open up their solutions. Whilst many will claim that they have broken out of the silo’s by “service enabling” their solution, many still have proprietary requirements to specific application servers, databases, middleware or orchestration solutions.

However recently I have come across two vendors, Temenos (global core banking) and CCS (leading insurance platform) who are breaking the mould.

CCS have developed Roundcube to be a flexible componentised solution to address the full lifecycle of insurance from product definition, policy administration to claims. Their solution is clearly layered, service enabled and uses leading 3rd party solutions to manage orchestration, integration and presentation whilst they focus on their data model and services. Their approach allows an organisation to buy into the whole integrated suite or just blend specific components into existing solutions they may have. By using leading 3rd party solutions, their architecture is open for integration into other solutions like CRM or financial ledgers.

Temenos too has an open architecture (Temenos Enterprise Framework Architecture) which allows you to use any database, application server, or integration solution. Their oData enabled interaction framework allows flexibility at the front end too.

Whilst these are both evolving solutions, they have a clear strategy and path to being more open and therefore more flexible. Both are also are providing a solution that can be scaled from the smallest business to the largest enterprises. Their solutions will therefore more naturally blend into organisations rather than dictate requirements.

Whilst packaged solutions are often enforced by business sponsors this new breed of vendor provides the flexibility that will ensure the agility of changes the business requires going forward. It’s starting to feel like organisations can “have their cake and eat it” if they make the right choices when selecting business solutions.

If you’ve seen other solutions in different verticals providing similar open architectures I would be very happy to hear about them at

Programming with soldering irons

June 21, 2012

The last time I can remember seeing a programmer with a soldering iron was a long time ago in the hay days of micro computing in the late 70’s. A picture of Steve Wozniak and Steve Jobs in a garage having built the Apple 1 micro-computer. The component parts totalled a few hundred pounds, and the machine sold for $666.66. At this level the cost made this a niche phenomenon, however a handful of very successful entrepreneurs emerged out of this era.

So moving fast forward to 2012, Raspberry PI foundation have launched a $25 computer running Linux, has sockets for Ethernet, HDMI, USB, RCA Video and SD Cards. At this price and capability this is unlikely to be a niche phenomenon, indeed February this year more people were searching for Raspberry PI than they were the world’s most famous pop artist, Lady Gaga ! On launch the interest in Raspberry Pi flooded their website and had to be taken down, and the first batch these was sold out in 1hour.

So is this just about a cheap computer to surf the internet on your TV and to do your basic home computing tasks like word processing on? Well by the time you add a keyboard, mouse and decent memory card the cost will be very close to a low android tablet, so this isn’t the reason to buy one.

The target market for Raspberry Pi Foundation is the education sector where it is hoped these devices will encourage children (11years+) to learn programming which in turn should produce more developers from university. At this cost it is hoped that schools / parents can afford to provide a platform upon which kids will want to learn to program.

However the bulk of the demand I would say will come from techies that want to build low cost solutions that require compute power and software applications. Home automation projects are likely to be popular: creating a solution that allows you to switch lights and other things on/off remotely via the internet. Solutions that require integration with other hardware such as a GPS or camera will also be popular.

Already projects looking to create their own weather balloons, remote controlled robots, music studios and many more have started ahead of people actually having the kit in their hands. So you can see more idea’s here .

It is early days but to me it’s obvious the options and therefore opportunities for innovation are going to be huge, some will be very practical, some will be fun (for example the guy that created a device that allows him to feed his dog via the internet, some will be useless but in all there will be lots of new ideas using these devices in the coming years.

The next Steve Jobs, Mark Zuckerberg or Bill Gates is amongst our children already so the time is right to get in the queue for your piece of Raspberry Pi.

Future of mobile: Part 3

May 13, 2012

Today I have 3 GPS devices, 4 Cameras, 3 Video cameras, 3 movie players, 5 music players and the list goes on. All of these are in a variety of devices that I use in different places for different purposes.

Drilling down into the detail what I actually have is a phone, a desktop home PC, a laptop, an iPod, a car stereo, in-car GPS, a TV+HD/DVD Player, a digital SLR, that’s just me and not including what the family has.

This presents a number of challenges, risks as well as a lot of cost…

Most of us want as little duplication of cost as possible. Already even though cars come with stereos many people are now plugging in their MP3 players, utilising the speakers in the car only. Many people will also use their phone’s GPS rather than the car’s. Newer TV’s have wireless access to browsing and social apps. I’m tempted by the hype of tablet computing, but have to ask myself, why? I have all the compute options I need?

More devices mean more synchronisation issues for personal settings and personal data. While cloud based services will resolve many of these issues, it is still early days to move everything into the cloud as users of MegaUpLoad found.

In 1999 I went to a tech show in Vegas, where I saw a potential solution to the problem from Sony. They were demonstrating the concept of “apps on sticks”. Basically these were memory sticks (max 32mb at the time) with other devices, like GPS, radio and even camera on the stick. The idea was simple you’d simply plug your GPS stick into your phone, laptop, car or any other device, rather than have that function in multiple devices. This approach would have required a lot of standardisation and clearly is a concept that never came to fruition.

More recently Asus have launched their PadFone, this is a smartphone that comes with a tablet screen. When you need to work with a bit more screen estate, you simply slot your phone into the back of the screen and hey presto you have a tablet that can use the 3G or wireless connection on your phone. Apart from being able to charge your phone, the tablet screen also integrates with the phone itself so voice and video calls can be made/received using the tablet screen.

This concept really works for me, and I could see myself buying into the family of products: TV, Car Stereo, projector. This with the ability to have my data in the cloud so losing the phone is not the end of the world, makes for a great solution. Whether the phone slots in, or connects wirelessly the ability to drive a different screen from my phone, either works for me as a concept. Maybe the idea could be taken even further so that the circuitry for the device could be slotted into the phone itself?

As I’ve discussed in my previous blogs there are many new avenues for phones, in shape, size and function. It would be difficult to predict the future with so many possibilities, but one thing for sure is that for gadget geeks like me, the phone is going to be the constant source of innovation we thrive on


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