The Bankwatch

I was reading this interesting post from Cindy, when it really caught my attention with this point made near the end!

Innovation and Transformation Wings: Social Networking : Good for Business or Not?

At this stage in the Canadian landscape there are some leaders in developing innovative Web 2.0 approaches in companies like: Bell Canada, MTS Allstream, Royal Bank of Canada, TD Canada Trust, and early days for Bank of Nova Scotia and CIBC as well.

I am pretty familiar with RBC’s efforts, at least on the customer external facing web, but not at all with CIBC, TD, BNS, or CIBC, as upcoming posts will review. Anyone care to help me out, with examples of what those banks are doing in a social/ web 2.0 context? Especially if it is internal and staff use only, some examples would be very useful.

Further to my post back in April, its time to re-evaluate the Banks that do in fact get the web lifestyle, and are trying different things.  Offerring online banking does not get any mention in this.  Others, including especially netbanker do a great job at evaluating the latest online banking offerrings.  I am interested in how Banks are broadly embracing the web lifestyle.

Its not a long list, so suggestions are welcome. There are a few Credit Unions doing interesting stuff with blogs, and social media, and I will be looking to see if its clear that the conversations are opening up from those examples.

However an immediate example worth looking at is in Canada - RBC.

RBC Signature No Limit Banking Account: You Could Get a FREE Eee PC - RBC Royal Bank

If you’re looking to surf the net at a coffee shop, upload your latest vacation photos or just to stay in touch with your friends and family, a whole new mobile experience is now at your fingertips.

• Compact design, screen size 7″, only 0.92 kg
• Wireless connectivity
• Over 40 built-in applications

Yes indeed they are giving away free laptops, provided you open an account, actually deposit cash, register and pay some bills, and transfer some pre-authorised debits to them.

Something simple yet effective is the use of simple urls to test media. TV are things like rbc.com/tv1 or rbc.com/tv2. Another was rbc.com/switch5, with no doubt switch1, 2, etc.

Such a simple concept, and chance to learn about how people will react, and in different channels.

A search on google for a few keywords did not find much except “RBC” and that produced an sponsored link. So RBC are dabbling in Google advertising.

We should note that RBC are trying lots of small quiet initiatives many driven by their Applied Technology group. The other most recent is the rbcp2p.com where they have turned some crazy (not so crazy) students loose and doing a good job. The posts are probably (my judgement) moderated, but still come across as genuine.

They are also encouraging the team to engage in conversations elsewhere, and here and that is essential to get a blog noticed. Response on technorati remains low, and work is required to get the blog out there.

Which Banks understand the Web Lifestyle?
RBC gets a B for a good effort on a few different fronts, and thats a great start. Experiment, learn, and (yes Ron) innovate by trying new things. To get higher for RBC, and not fall back, will require some additional effectiveness and results in things like technorati.

I learned today of a new offerring scheduled to launch June 9th in the US. I am quite intrigued by the concept  that has aspects of moneyexperts.co.uk with the added mix of auctions.

moneyaisle.com

The company’s fully automated, proprietary technology creates unique online auctions where banks compete in real-time to meet each consumer’s specific banking needs until one bank  remains. The unique MoneyAisle platform has already become an attractive offering for small and mid-sized banks. Without the high costs of customer acquisition, banks are able to access a large  market of potential customers from across the United States.

A quick search found more about them here at MIT technology review. No comment till I know more, but I liked this headline “NeoSaej’s algorithms could change the rules of online auctioning”

UPDATE: Press Release

James highlights a key perspective on the new Wachovia product that is getting lots of accolades.

Javelin Strategy and Research » Rewards and the Economy: Timing is Everything

Wachovia’s way2save(sm) program is receiving peak promotion at the right time, given all the economic uncertainty.

Ron notes Wachovia’s high customer satisfaction ratings.

1) What’s Wachovia doing right? As banks’ index dropped 3.5%, Wachovia’s score increased
by about the same percentage. In the ACSI study, banks as a group scored 78. Excluding the  five largest banks — of which Wachovia is one — the score was 80. Wachovia’s performance  flies in the face of other firms’ declining scores, and is in sharp contrast to the other large banks which dragged the industry down.

Not necessarily co-relating those two things in isolation, but clearly Wachovia is doing something right.

I located this 2006 piece, suggesting a shift in the way that Wachovia were measuring customers, moving towards a lifetime value approach.

“Consulting companies are saying you should be interested in customer lifetime value, and  they’ll give you an average value for those customers,” said Dan Thorpe, senior vice president,  and statistics and modeling director of Wachovia’s Customer Analysis Research and Targeting (CART)  Group. “We are calculating individual estimates for each of our households. We really think  households drive customer value.”

Relevance to Bankwatch:
Its always intriguing when it appears someone is moving ahead of the pack in some way. Any comments or observations from those in the US, on Wachovia, and what they are doing right?

There is a fascinating, though apparently esoteric debate going on in Banking circles. It is worth understanding the high level points though because it actually matters to bank employees, vendors, and bank customers.

Libor (London Interbank Offerred Rate) is set daily, and represents the rate that banks will lend money to each other on the money market. It is one means of managing liquidity for Banks. Lately this rate has been much higher than expected and than historic rates. The going assumption was that Banks were afraid to lend to each other since the credit crisis due to inadequate risk identification relative to ABCP based on sub prime US mortgages.

FT.com / Companies / Financial services - Battle-scarred bankers lapse into a hoarding habit

Some observers blame this pattern on shortcomings in the way that Libor itself is calculated. However, behind the scenes, some investors are also starting to argue that it could be time to rethink what the Libor rate is telling the market.

Until now, bank analysts have assumed that the high cost of interbank
borrowing stemmed from a sense of mutual distrust. This would suggest
that, on two occasions in the past eight months, banks have been so
nervous of counterparty risk - the danger of one’s trading partners
failing to honour their financial commitments - that they did not wish
to extend funds to each other

The level of risk identification is getting closer to resolution relative to sub prime, yet libor remains steadfastly high. This is bringing anaysts to rethink the situation, and rather than replace libor as some suggest but observe and understand what the higher rates are telling us.

… … some observers are now thinking that the interbank, or money, market
has entered a new, third, phase, one that has less to do with
counterparty risk and everything to do with the risk that any
institution could face a run on its deposits or other short-term
funding.

Thus, the problem is not that banks are paranoid about
each other, or so the argument goes; instead, banks are paranoid about
their own funding state - not least because they have seen what a lack of liquidity did to Bear Stearns.

In simple terms … Banks are concerned about their own cash holding to protect against a good old fashioned run on the Bank. By holding on to cash, they are creating a scarcity in the market, hence higher libor.

An articulate summary of this thinking from head of the ECB, noting that one instrument validates the reduction of risk, yet libor remains high.

Jean-Claude Trichet, president of the European Central Bank, …. “That
would explain the simultaneous diminishing of credit risk as seen in
the [credit derivatives] market and the [elevated] spreads between
three-month money market and overnight swaps.”

Food riots in Haiti, gas at $1.31 [Canada], arctic icecap disappearing faster than previously understood, the US/ global credit crisis, etc etc. Then layer on Mikes excellent presentation about drivers of change.

I think time for me to re-read this book from 2007. Just too much makes sense, and strategy must consider the impacts of global change, to be complete.

The Upside of Down - The Argument

1. energy stress, especially from increasing scarcity of conventional oil;
2. economic stress from greater global economic instability and widening income gaps between rich and poor;
3. demographic stress from differentials in population growth rates
   between rich and poor societies and from expansion of megacities in
   poor societies;
4. environmental stress from worsening damage to land, water forests, and fisheries; and,
5. climate stress from changes in the composition of Earth’s atmosphere.

Of the five, energy stress plays a particularly important role, because
energy is humankind’s master resource. When energy is scarce and
costly, everything a society tries to do — including growing its food,
obtaining enough fresh water, transmitting and processing information,
and defending itself — becomes far harder.

The effect of the five stresses is multiplied by the rising
connectivity and speed of our societies and by the escalating power of
small groups to destroy things and people, including, potentially,
whole cities.

Tips for managing complex systems, from a book review by George Colony, Forrester Research. Click through for the full review.

George F. Colony: A favorite book: The Logic of Failure

Dorner gives advice to managers of complex systems:

1) State goals clearly.
2) Establish priorities, but don’t cling to them.
3) Form a model of the system.
4) Gather information, but not too much.
5) Don’t excessively abstract.
6) Analyze errors and draw conclusions from them for reorganizing thinking and behavior.
7) Develop common sense.

Listening to Nigel Topping speaking about Totnes currency. In Totnes, Devon, they have issued their own community currency, with a view to keeping their money in the community. All sorts of challenges, and issues, but it is receiving growing acceptance.

The Totnes Pound was launched as an initiative of Transition Town Totnes Economics and Livelihoods group in March 2007^[2]. The group argues that “Economic localisation is considered to be a key aspect of the transition process, and local currency systems provide the opportunity to strengthen the local economy whilst preventing money from leaking out”^[3].

Their near term plans are interesing, yet large in potential:

1. Issue a totnes 5 pound note, including full security features
2. move from being sterling backed, to being carbon backed

The notion of community, yet with such scale, brings new meaning to think globally, act locally. in fact, it makes me wonder if there is not a direct application to social lending, social investing, by encouraging the same goals of keeping in the community, yet offerring greater scale.

I rarely if ever do this, out of respect for my subscription to FT, however here is one of these occasions, and I hope they don’t mind.

I am just a blogger, but I have been blogging consistently since March 07 about how the sub prime crisis will change everything in banking, and in the economy. For the full list see here. Its scary how long this has been a topic on this blog!

That leads into …. I have never met Gordon Brown, but there are (at least) three thoughts that leap out at me from this FT piece, and he fails in #1.

1. did it really take a meeting with the heads of all Banks in April 2008 for the PM to understand we have an issue here?
2. the Banks are playing on 1. to get a bailout from their own shortcomings. [A few CEO firings would be a better approach] Did it really take till April 2008 for the heads of Banks to understand we have an issue here?
3. HSBC see the crisis differently than the rest. hmmmm

Enjoy ….

FT.com / In depth - Bankers see shift in PM’s grasp of crisis

Bankers see shift in PM’s grasp of crisis

By Peter Thal Larsen and Jim Pickard

Published: April 15 2008 22:57 | Last updated: April 15 2008 22:57

When leading bankers arrived in Downing Street for breakfast with Gordon Brown on Tuesday morning, expectations were low. The meeting, arranged about 10 days earlier, was billed as an opportunity to provide the prime minister with an update on the credit crisis before his departure for a visit to the US. However, many participants feared they were little more than extras in a  photo-opportunity designed to show voters that Mr Brown was personally getting to grips with the crisis in the mortgage market.

Ever since the wholesale markets froze last August, bankers have been pressing the government and the Bank of England to follow the lead of other countries by intervening in the  money markets. Despite a few efforts to restart wholesale lending, however, nothing much has been achieved.

By the time they walked out of Number 10 an hour and a half later, however, the mood had shifted. Several people who were present felt that, for the first time since the turmoil in the financial markets started, Mr Brown had fully grasped the severity of the crisis and its impact on the economy. Many now expect the government to act. “I think Gordon has crossed the Rubicon,” one senior banker said.

Gathered around the table in one of the grand state rooms at Downing Street were the chief executives of Britain’s six largest banks, as well as smaller lenders. Mr Brown had also invited a number of leading investment bankers and representatives from some of London’s largest hedge funds.

Flanked by junior ministers Shriti Vadera and Yvette Cooper, as well as Sir Gus O’Donnell, the cabinet secretary, Mr Brown asked chief executives of the UK’s largest banks to set out their views.

As participants tucked into breakfast, John Varley, chief executive of Barclays, and Sir Fred Goodwin of Royal Bank of Scotland outlined the difficulties they believed were facing the banks.

Michael Geoghegan, chief executive of HSBC, then raised eyebrows by declaring that the crisis was not as severe as some were making out. “He was the lone, dissenting voice,” one person who was present said.

But other bankers quickly spoke up for the smaller lenders which have been worst hit by the crisis. Antonio Horsa-Osorio, chief executive of Abbey, the lender owned by Santander of Spain, pointed out that the crisis threatened the survival of many small building societies which still account for a large chunk of Britain’s mortgage lending, leaving large banks to pick up all the  business.

Others echoed the point. “The big banks said: you’ve got to think about this,” one person who was present said. “We’re going to take 100 per cent of the market.”

One after the other, bankers urged action, pointing out that the US Federal Reserve had not hesitated to move when a run on Bear Stearns, the Wall Street investment bank, had threatened the stability of the markets.

Mr Brown dropped hints that he might be prepared to support a plan, designed by the BoE, to break the logjam in the money markets by swapping mortgage assets for government bonds.

Ministers also made it clear that they wanted the benefits to filter down to homeowners. “The government wanted promises that they will get a direct return on the money they put in.”

Many bankers remain sceptical that it is possible to agree such an explicit quid pro quo. Nevertheless, Mr Brown will have been left with considerable food for thought for his journey on Tuesday night.

Copyright The Financial Times Limited 2008