The Bankwatch

I am an unabashed avid follower of Online Banking Report, and the latest “Online & Mobile Banking Forecast” continues the classic of Jims annual output.

The focus of online banking and mobile is one key attribute of this years focus.  In fact having the iphone on the front page is illustrative of the outside the box thinking.

This year in particular is when all Banks ought be thinking of ways to innovate and get outside the box.

Clearly it is no longer business as usual, and will not be for some time.

Gathering deposits is essential to future success, but that will come one customer at a time – the classic conundrum of acquisition cost remains if banks choose to use old ways to acquire.

A key component of customer acquisition is customer retention, and the thrity six pages here are one way to structure your plans to retain the customers you have.  Bank of America and Wells Fargo are doing that – what about your bank?  As word gets out, such innovations will drive acquisition too.

Report summary:

The report follows the usual style with first a summary of innovation to date.  What makes this intersting is that enough years and innovations have gone by that the history lesson in itself is fascinating, and awe inspiring if one thinks of the things that your bank did not implement.  The sheer volume of facts in Jims reports are worth the price  – no-where else is this level of detail available in one place.

Then there is a review of 2008 innovations and here it hits close to home for banks.  In the top innovations for 2008, there are only four banks mentioned (Wells Fargo, Bank of America, PNC and Zion).  Thats four out of eight thousand eligible!  For the top ten in 2008 there is one bank makes it.

The breadth and depth of the innovations covered is quite astounding, and to see them laid out in one place is refreshing showing that the possibility to innovate is there for the taking.

Finally there are the honourable mentions of 2008.  This is a fact filled detailed view of the current state of online and mobile and this one in particular frankly ought to be required reading for every banker.  Well done Jim and the team.

Reflecting on the theme of bankers reputation “being shot” that is being picked up at Davos, Gallup have releases some data based on their Gallup/ USA Today poll that addresses the reputation of bankers.  Next time Citi decide to buy a jet they should take a look at this data first, and consider the moral and reputation implications.  Nothwithstanding this is a poll, the trend over time, and the trend in the last year is clear.  HT Douglas Berlon.

The drop in 2008 is from 38 to 23 which represents the lowest in this dataset since 1977.  Of course there is the debate about investment bankers and regular bankers being painted with the same brush, but that argument fails because banks chose to make that association when it suited.

Here is the data ….

The Values Behind Market Capitalism
Tony Blair, Stephen Green, Indra Nooyi, Shimon Peres, James J. Schiro, Jim Wallis with Maria Ramos

Tony Blair – introductory remarks on the Values of Capitalism

• tendency to want to staate at this conference – “The End of Capitalism”
• it is normal and intelligent to reflect on the system
• New world, but we have been taught old lesson – that values matter
• we will build new regulation that will solve for the last crisis because that is what we do

• Old lesson was enlightened self interest, sense of long tgerm value, transparency – financial system at the service of the wider economy, and society.  Old lesson that we have re-learned again
• free enterprise has not failed – financial system has failed

1. The concept that the wider interest is as essential as the narrower shareholder interest – enlightened self interest
2. This ciris is global in nature – this is new and not seen in earlier crises

• globalisation has moved ahead of the capacity of the political system to manage
• it would be bizarre to speak about the G8 – in the space of a few months the G8 is unthinkable unless broader membership
• important – getting the right strategic relationship between US and China – big challenge for US administration
• 2nd thought: increased globally – shared purpose and shared values
• need enlightened self interest
• we need stakeholder capitalism – wider interest – not narrow shareholder interest
• important – getting the right strategic relationship between US and China – big challenge for US administration
• 2nd thought: increased globally – shared purpose and shared values
• need enlightened self interest
• we require shared purpose and shared values including justice
• Africa is important is not just about Africa – it is an essential expression of our belief on the global community
• revive a concept of free enterprise that has enlightened self interest and stakeholder broader view of success
• target would be a prosperous and just world

Stephen Green, Chairman HSBC

• How do we deal with the incentives in the system that do not addess the ;points raised by Tony
• the system allows the value of a transaction to be the only measure
• need to overhaul the regulatory environment, Basel2, Accounting – but no amount of rules will enforce good behaviour.  Rules will not institute values.
• sustained economic development in the world requires an international capital market system
• need profit growth, but we need to think about the broader responsibilities
• translates into compensation issues
• things will not bounce back to the way things were – need to bounce to something

Theme:  Capitalism is required, and well functionaling international markets are rewquired.  Regulation in and of itself is not adequate to provide for the riht kind of system.

Themes I have picked up from the World Economic Forum on day one from blogs, speeches, and other comments.  Anyone attending in person and reading this, I would love to hear your observations and perspectives in the comments.

1. government | the worlds orientation towards government economic support and regulation is at once welcomed and a concern.  A powerful sub concern is that of untended consequences – there is a general sense that the level of government support towards bailouts will create problems in the near future that we do not understand.  [my contribution - there will be rampant inflation during 2010/2011 as interest rates are ramped up significantly and home currencies revalue in consequence.  This in response to  refinance of bonds printed to ease credit crisis and bailouts]
2. small business | support is directed at large business yet the engine of world growth is expected to be small business, especially in developing countries.
3. bankers credibility is shot | typified in the comment “Do I really want to hear a banker tell me about the financial mess?”
4. Crisis | will get much worse before it gets better.  “First we had the financial crisis. We still have that plus an economic crisis. Now we’re getting both plus a political crisis. This is getting ugly.”

For your reading pleasure | very credible stuff here with the latest on statistics and reference.  Keep handy for that next strategy powerpoint.  I will add to sidebar for later reference too.

IMF World Economic Outlook oct 2008

original link – IMF

IMF World Economic Outlok – update Jan 2009

original link – IMF

The Future of the Global Financial System – World Economic Forum 2009

original link WEF

Annual Report 2008- World Economic Forum

original link WEF

A couple of interesting things from this new PEW report.

1. The pervasiveness of online usage – only over 69 is there less than 50% usage online – refer below
2. Gen Y is doing more and more banking online moving from 38% to 57% – older folks use internet for information, health and purchases.

Generations Online in 2009 | PEW

Contrary to the image of Generation Y as the “Net Generation,” internet users in their 20s do not dominate every aspect of online life. Generation X is the most likely group to bank, shop, and look for health information online. Boomers are just as likely as Generation Y to make travel reservations online. And even Silent Generation internet users are competitive when it comes to email (although teens might point out that this is proof that email is for old people).

Opening Plenary of the World Economic Forum Annual Meeting 2009
Opening address by Vladimir Putin, Hans-Rudolf Merz, Klaus Schwab, Peter Brabeck-Letmathe, Michael S. Dell, Carlos Ghosn

Live blogging through the Plenary session that includes Vladimir Putin

• Schwab is opening, speaking of the world wide imapct on the economy on people, institutions and countries

• Putin:
• speaks of the notion of a perfect storm of circumstances that have affected the entire global economy
• majority of countries especially the US that ignored the problem – 1 year ago representatives of the US stood at Davos and indicated the economy was strong.  Now without apportioning blame we must accept reality
• insufficient regulation is a cause of the crisis
• one centre prints the money while the other part of the world makes the goods and saves the money they make.  Clearly aimed at US and China
• degenerated wealth was not distributed equally
• inflated expectations both consumers and business.  Consumer prosperity was borrower prosperity.
• during the crisis simple and populous recipes were tempting, but made the situation worse – we should avoid any steps that we will regret later
• we cannot be economically egotistic
• protectionism – must be careful [ I think to avoid]
• temptation to expand the state into the economy with anti crisis – result in concentration of government within the economy. Russia had that and I believe “no-one is willing to repeat our mistake”
• should have personal responsibility – not state responsibility
• tempting to use the government money – not inexhaustible and not necessarily efficient way
• we are far from understanding the real state of the crisis
• critical to identify the results of our actions [moral hazard]
• bonuses and prestige are too important
• together with cleaning up balance sheets – get rid of virtual money – illusionist money
• basis for the reform based on accounting, fudnamental of assets – ability to generate value added – not some subjective notions
• an economy of real value – ik do not have the full answer- that is why we are here
• we need a number of reserve currencies – smooth transition
• mutual interest and mutual trust required – more openness between economies
• macroeconomic disciplines
• a system based on global international regulators within international law
• more just and efficient architecture
• all countries should have a guaranteed access to this new central architecture

energy

• future problems – energy shortgages
• global energy security
• mutual dependencies based on sharing of assets
• countries forget about agreements when it suits them
• done properly could bring economic benefit
• tie together producers and consumers based on partnership
• fluctuations in prices is bad for everyone, and produces irrational use of resources
• return to balanced prices, balanced between demand and supply
• commonly acceptable market prices, re hydrocarbons, nuclear and electricity
• energy security of Europe – speaking of Black Sea and Baltic capacity – considering increase in capacity with Mitsubishi at Sakhalin (contested island near Japan)
• talking a lot about pipelines and what Russia has built to offer energy to the Europe
• in the course of projects we must consider the programme related to the environment

Crisis impact on Russia

• Russia has reserves
• expanding technology and innovation in enhancing energy usage
• listing a few items Russia is doing internally to become more efficient
• highly educated nation but we would like Russians to get the education they need to keep improving
• looking to attract foreign students and academics

other

• military expenditures does create jobs, but it is short term
• in reality militarization does not help us
• investment could be used better
• i hope that we can develop this point of view and get disarmament agreements to be able to realign this investments
• Mumbia, Gaza Georgia -reflective of inability for governments to help ethnic and local problems
• provoking regional conflicts is a way of distracting people attention from real economic issues
• we need global agreements on this
• join efforts
• reduce the repurcussion on the world food crisis
• Russia willing to help with our world partners
• wish success to new administration in US
• pleotora of problems is extremely complex – seek support in moral vlaue, honesty, responsbility, spiritual and material resource – mutual trust

banking sector

• I would expand – confidence in banks and countries – required to achieve prosperity in 21st Century

UPDATE:  Micahel Dell mentioned he was struck by Putin speaking less government involvement.

Update 2009: The New Economic Era
Justin Yifu Lin, Trevor Manuel, Stephen S. Roach, Ferit F. Sahenk, Heizo Takenaka with Michael Elliott

As they speak about the world crisis focussing on what ought to be done, Heizo Takenaka made the smartest comment.  He says that capital injection is not enough – what is required is accurate assessment of asset values.

This comment is deep and meaningful – the crisis of confidence that persists and has frozen money markets has at its core the inability to value the assets being traded, nor the institutions performing the trades, the banks.  We just have to look at the frustrating exercise between the British government and the british banks who have been almost reduced to zero value on the LSE.

Managing Complexity: A Different Approach
with Benjamin Zander

• markets do not speak in human tongues
• lessons in art, and music in communication
• The Art of Possibility – book
• everything can be viewed two ways – positive or negative
• possibility = luck or possibility = the norm
• both are available to everyone – it is a deliberate choice
• Two shoe salesmen in th 1800′s sent to Africa;  #1 – no opportunity they don’t wear shoes.  #2 – glorious opportunity – no-one has shoes
• it is not the circumstances that are crucial – it is the choice of how we speak about the circumstances
• it is a matter of leadership – you have a choice – pertinent in the context of the world crisis
• orchestra players rank same as prison guards on morale.  Chamber musicians rank #1 (conductor or no conductor)
• top down, right thinking hierarchical – old style leadership is no longer sufficient
• question:  how do you make peoples eyes shine?

Summary – we have a choice as to how we can approach the current crisis – an opportunity or a death spiral.

Wen Jiabo, Premier of the State Council of China is speaking right now at the WEF.

Wen Jiabao (simplified Chinese: 温家宝; traditional Chinese: 溫家寶; pinyin: Wēn Jiābǎo; Wade-Giles: Wen Chia-pao) (born 15 September 1942) is the Premier of the State Council of the People’s Republic of China, leading the country’s cabinet.

He began with a bit of a lecture on western excesses of over-consumption.  He goes on to speak of China’s approach to the crisis.

• need balance between consumption and saving
• balance between regulation and innovation
• challenges in China and business environment
• Shrinking demand
• overcapacity
• difficult business conditions
• unemployment rising

Actions being takengrowth reducing

• active and responsible
• designed to boos domestic demand
• timely adjustment to macroeconomic policy
• systematic/ programmed steady fast growth
• increased government spending 4 trilion rmb (16% of GDP)
• tax cuts
• increased government housing rural investment
• railway and infrastructure
• earthquake reconstruction
• 2 year stimulus programme
• improve competitiveness
• innovation in science and technology through 16 key projects including coal, and environmental projects.  Sustainable growth
• GDP 9% growth/ CPI steady

World

• hope to improve world economy through above (no specifics here?)
• advantages contributing to Chin’as growth remain in place
• healthy fiscal balance/ adequate funds
• can undertake big projects.
• scientific approach to development that puts people first
• committed to reform and win win progress
• people are hard working and resilient
• maintain fast steady growth and contribute to world growtgh
• financial crisis is responsibility for whole world
• confidence is source of strength
• confidence in markets is essential
• confidence in leaders and in countries
• financial crisis is test of world financial co-operation

Ideas

• deepen international cooperation to solve crisis
• trade protectionism will prolong the crisis
• move forward trade liberalisation
• support Doha
• advance reform of financial institutions
• new international financial order
• exposed deficiencies in governance structure of major financial institutions
• enhance responsibility
• developing countries – greater say
• regional liquidity assistance
• financial supervision to guard against build of financial risks
• supervision of reserves and oversights – (lots of emphasis on regulation and supervision)
• promote interests of developing countries
• lots of support for developing countries
• assistance to developing countries
• “build a better home for mankind”
• no country is insulated from challenges
• reaffirm – China’s abiding commitment to peaceful and co-operative development and promotion of world economic growth and stability

Summary:  very optimistic with solutions based on a government controlled and programmed approach to “managing the world economy”.

UPDATE during Q&A:

• domestic consumption growing by 20% annually
• despite the enormous growth being experienced he is basically saying additional growth remains their focus
• Klaus asking now about global Climate Change: – answer – multi year plan, meeting targets, emphasis on coal