Posts Tagged ‘big data’

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.

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!