Archive for the ‘Uncategorized’ Category
Graphic that represents the current startup activity focussed on disaggregation of bank services | Pease Blog
Over at Business Insider a link to a brilliant analysis graphic using Craigslist as an example of new services that have taken individual services in Craigslist and made a business out of it.
But the interesting one is this graphic from same source at Alexander Pease blog that demonstrates the degree that is already happening to bank services.
This is a topic that this blog talked about a lot several years ago, but now it is getting the attention of the Venture Capital community. Traditional banks need to look over their shoulder.
Heenan Blaikie, 5th largest law firm in Canada (534 +/- employees) are closing down following weeks of rumours, and many significant exits by senior lawyers recently.
“I am deeply saddened to learn that the partners of Heenan Blaikie have decided to dissolve the firm. I am particularly distressed by the fact that hundreds of lawyers and members of the Heenan Blaikie staff, who have together provided the highest quality of legal services to their clients, will have their lives disrupted,” the email said.
Support staff at the Montreal offices of Heenan Blaikie were asked to clear out their desks on Tuesday
This maybe a prescient sign of the times and directly connected to my earlier post about Gen Y. My theory .. the Gen Y cohort have been making their way through university, and at double the size of the Gen X cohort, this is probably paralleled in law schools. Too many lawyers equals increased competition and reduced fees driven by competition.
More from the CBC article.
A few weeks ago, firm management warned partners that income per partner had dropped about 10 to 15 per cent and said major restructuring was inevitable.
The law firm is believed to have been hurt by a decrease in mergers and acquisitions in Canada, but also by a change in the climate for large law firms, which are losing out to more nimble boutique operations.
This graphic from CompTIA (Non-profit trade association) is fascinating. Basically it says that GenX who represent about 1/2 the population of Gen Y are being quickly overtaken by Gen Y. Gen Y are replacing Gen X rapidly and Gen X just get older. This from a CompTIA report that highlights the extraordinary impact that Millenials will have on the workforce.
I would add the impact on Banks, channel usage and expectation will be similarly dramatic. We should be increasingly viewing the channels and account acquisition in context of Millennials expectations, as they gain income and wealth.
Coming of Age: 1988-1994
Age in 2004: 28 to 38
Current Population: 41 million
Sometimes referred to as the “lost” generation
Generation Y, Echo Boomers or Millenniums
Coming of Age: 1998-2006
Age in 2004: 10 to 22
Current Population: 71 million
The largest cohort since the Baby Boomers
CompTIA is the voice of the world’s information technology (IT) industry. As a non-profit trade association advancing the global interests of IT professionals and companies, we focus our programs on four main areas: education, certification, advocacy and philanthropy.
The Financial Times html5 web app just upgraded on my iPhone. I say upgraded with some hesitation – the upgrade was anything but graceful. I will say the end result was positive and I like the upgrade but zero marks to FT for their handling of the upgrade which went like this.
- Without warning one of my icons was duplicated. The new duplicate icon was a shortcut to a safari link – lets call it icon2. Now it appeared twice – once in its original location, and now strangely the 2nd location was precisely where the FT app used to reside.
- I did a spotlight search for FT and sure enough the OS now believed that icon2 was the FT app. Yet when I selected icon2 it took me to the duplicated icon1 site. FT was gone.
- I vaguely remembered that an upgrade was coming but had not seen a recent notification and certainly not today.
- I deleted icon2.
- So now I wanted to re-install the FT app, but I cannot remember how to do that. A quick search turned that up as app.ft.com. Everyone knows that, right!
- I went to app.ft.com and sure enough the upgraded app installed, and we are back in business.
Relevance to Bankwatch:
I suspect there are many FT users wondering what is going on. Rule #1 in web/ mobile land is that you must keep users informed as to what is going on with regard to changes to the application. Who knows, perhaps the app would have self corrected had I done nothing, but like most I cannot do nothing when it has disappeared. So always keep users updated.
- Always provide in-app notifications of impending changes and how to handle it. If in-app is not built yet, which I believe to be the case with FT, then send me an email.
- Tell me approximately when it will happen, how it will happen and what if anything I should do.
- in this example also a reminder that app.ft.com is the location to re-install would have been nice.
Full marks for a great upgrade that seems fast, has a simpler interface and is a little smoother in touch reaction. But zero marks for handling me during the upgrade.
There is a general sense among many, myself included that a transformational and structural shift in employment is occurring because of technology impacts. However it has not been well defined and usually manifests in the shift of labour from established economies to emerging economies such as Mexico, China and those of other emerging Asian countries who exhibited labour costs at 1/10th of established economies.
But there is a bigger story. If it were just a question of labour cost that would be a relatively fleeting change as emerging economies production costs equalise. Labour costs do not represent structural change. There is some structural shift towards robotic manufacturing but that’s beyond this piece.
We each can feel the difference technology makes. We individually naturally gravitate to online self service for everything. Product comparison, payments, purchases, news, information … everything. But this was a consumer based benefit.
The shift to consumer empowerment occurred as a simple outcome of exposing web based functions to consumers. But as banks well know that consumer shift produced enormous internal problems because legacy systems were not designed to work with web based server systems. Call centers were stretched to provide the support required to fulfill the new consumer expectation. Additional technology staff were required to manage the additional requirements placed on the legacy systems, as well as the new server based systems supporting internet.
Shifts in technology infrastructure to support the consumer shift have been a long time coming, but it is here now. Google, Amazon, and IBM representing the big three are investing enormous amounts ($3bn – $10bn each) annually to create cloud based data centers that offer enormous capacity. Then layer on companies such as Softlayer recently purchased by IBM, that also offer software capabilities (SaaS) and now the heavy lifting to provide backend services for internal staff starts to become more aligned with consumer self service.
Software-as-a service applications took off because of the allure of self-service and speed. Led by the growth of the customer relationship management (CRM) category, SaaS applications have slowly penetrated into every other functional area of the enterprise – enterprise resource planning, collaboration, marketing automation, HR, and accounting, to name a few. Small and medium-sized businesses were the first ones to adopt SaaS applications because of the ease with which they could peruse the editions, and start subscribing to them with nothing more than a credit card.
A simple way to think about this is Salesforce. It’s a cloud based service that does not require highly paid sales folks to sell it. It sells itself by being an easy to use interface that new users can decide on by themselves.
Coupled with “in-app” demos, and easy access to pricing on the website, the roles of these sales reps are rapidly being relegated to routine “order taking” administrative duties, as opposed to strategic solution selling.
as SaaS platforms have matured, the user interface has become front-and-center in many of these applications, and users are able to learn even the most advanced features in a matter of days due to the intuitive nature of the UI.
Lastly the referenced article notes the middle class areas that are impacted by this shift. So we can now add those roles to manufacturing as those impacted from technology. As Lance Crosy of Softlayer notes, cloud technology shifts technology from a fixed cost to a variable cost. I would add that variable cost is significantly less than the relative old style in-house or co-located data centre cost, and hen you layer on the lower HR cost the structural shift begins to take shape.
I have noticed a trend amongst friends, and we have all read how certain demographics are dropping off Facebook.
The trend is very early days, but it is happening. The trend is towards use of specific purpose applications that work well on mobile devices. These include communications using Line, Whatsapp, Snapchat, and photo sharing using instagram, Flickr.
Line and Whatsapp are both fast closing in on 1/2 billion users. They each have their own uniqueness, including richness that text chat miss, including stickers, (non text / non verbal communication), privacy, and most important simplicity on a mobile screen. Snapchat has introduced privacy through impermanence. They demonstrate an other underlying theme, that not everyone wants to share absolutely everything with the entire world by default.
Here is a prescient comment from MG Siegler of Google Ventures.
The Age Of The Social Network Is Ending | MG Siegler
Photos were one of the first and largest to break free. Messaging has been all the rage the past year. But those were both obvious trends with links to the past. Now we have some different things coming into power based around varying degrees of impermanence and varying degrees of anonymity
Relevance to Bankwatch:
The headline on his piece may be a stretch right now, but there is the making of a trend here that demonstrates once again, that tech direction is not linear. I long ago worried that internet is being taken over by traditional marketers, (and here) despite the typical user desire for functionality, authenticity, and personal meaningfulness. It is not that it cannot be used for marketing, but with a high percentage of it being bad marketing of course people will gravitate to alternatives.
This kind of discussion simply tells me that we are still evolving internet, and social media as we know it is just one of the steps along the way.
There is a growing misrepresentation about how Bircoin will change payments. I have gone into this earlier. But today we have a new issue. Transaction cost.
bitcoin, I would have paid much much less than the c. 2.5% it cost me to process your credit card
Relevance to Bankwatch:
The argument made in this article is that Bitcoin merchant costs are different by not requiring a third party to validate the transaction. This argument is made because Bitcoin is open because “It allows you to securely and anonymously transfer money to anyone, anywhere in the world”.
Lets think that through and compare to the credit card example used.
Payor sends money to recipient. Recipient needs to trust payor. How does recipient trust payor? The post assumes that recipient is somehow magically and freely hooked into the bitcoin network. Not so.
Lets extrapolate to an ecommerce world where every e-commerce vendor accepts bitcoin. This suggests two scenarios:
- vendors hire devs to create bitcoin integration which requires up front cost and ongoing maintenance
- vendors seek third party integrators, i.e. acquirer networks
History suggests option two is most likely. Either way both options are not free. The assumption that bitcoin is much cheaper is just that at this stage .. an assumption.
I have complete faith in the various ecosystems to ensure a fair price is paid for something as intrinsically complex as bitcoin. There is no evidence to suggest that price would be cheaper.
Apple have filed a patent looking at NFC but hinting at iBeacon (a variant of bluetooth) to complete the action. The secure element in the pic below could be the digital wallet.
Patent application number 20140019367, filed in September 2012 and published today, describes a method that would send payment data through various wireless interfaces without compromising the user’s data. The method uses two links — one connection to a point-of-sale device to establish the initial connection and a second, secure connection that sends the payment information. This payment information is then processed by a backend server, which uses a shared secret to verify that the connection was secure before it authorizes the payment
Apple even notes in the patent that NFC "is less desirable for longer transactions," while Wi-Fi or Bluetooth has "more desirable characteristics for maintaining the link over time than NFC."
We now have a brilliant comparison in front of us between a government backed electronic currency and an internet peer to peer based one. May the best man win.
The Mint hopes that eventually Canadians will use a ‘chip’ to load value onto a device such as a smartphone, PC, tablet, or store it in the cloud, and then buy physical goods in the real world or digital content online.
Bitcoin uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of bitcoins is carried out collectively by the network. Bitcoin is open-source; its design is public, nobody owns or controls Bitcoin and everyone can take part. Through many of its unique properties, Bitcoin allows exciting uses that could not be covered by any previous payment system.
Relevance to Bankwatch:
I attended the release of MintChip in 2012 in Toronto, and while it was very loosely defined, despite that, I have greater confidence in it than the tightly defined Bitcoin. Time will tell. I have a lot of (ugly) experience with P2P. The premise of wisdom of crowds for example is flawed. Bitcoin by its nature involves a degree of democratic vote as to things like relative power of miners. I am immediately suspicious that my money is evaluated by other than commercial need; that’s something I understand.
I do not see money evolving in P2P at all. Money is fundamental and basic. Utmost confidence is essential.
I’d love to hear views on the pros and cons here. Weigh in please!
With the trickle down news that is worse and worse from Target about the security breach, the details about the nature of the attacks are what I find interesting. I have been reading a lot about the methods employed in the Target breach and one that immediately caught my eye was the RAM scraper. Today re/code picked up on that too.
Encryption is a word that is thrown around loosely suggesting that it is binary and either on or off. Consider the RAM Scraper.
So what the heck is a RAM scraper and how does it work? First, remember that payment systems — the cash registers and credit card terminals you see in stores and restaurants every day — have a lot of strong requirements for encrypting data, pretty much end-to-end during the transaction process, as well as any records that are stored afterward.
But there’s one particular moment when that data is vulnerable, and it occurs during the milliseconds that it is stored in the system memory — a.k.a. random access memory, or RAM — of the back-end server that processes the transaction. Think of it as a package being delivered to you with a lock on it. Even though you have the key, you still have to open it to see what’s inside. The same thing happens when your credit card number gets decrypted.
That article does a decent job at not being too geeky, yet making the point that modern technology requires a series of steps; in fact a large number of steps between inserting a payment card and a successful payment. Those steps are multiple within each of the participants in the payment process. And each step is a potential weak link in the chain.
Relevance to Bankwatch:
The only participants in this chain of electrons for each payment that has a real stake in the process are the banks. Yet they are quiet. The TJ MAXX fiasco and now the Target breakdown involving 70 million cards; that’s twice the entire population of Canada, or 20% of America, point out that fraud break-ins involve enormous numbers of households.
The dirty secret in credit cards is that they have been managed as a portfolio with revenue and costs. Fraud is an acceptable risk and cost. Fraud is simply one of those costs in the portfolio. This approach has held up so long as frauds were restricted to the group of cards that were used at a specific ATM that was hacked by organized crime. Those hacks were big for the customers involved but small for the bank.
Now the fraud has shifted not to localised ATM’s or individual store POS terminals but to entire store networks. And the big box stores are large!
The old approach of handling card fraud under the radar will no longer work for banks. I would submit this requires a shift in approach that will require amongst other things:
- liability shift to merchants based on merchants failure to meet standards
- new merchant liability standard definition based on the new normal including RAM scrapers that places accountability on merchants that are specific to the types of potential breaches that exist in the chain discussed above
- Exclusion of merchants that will not comply with what may seem to be reactionary measures, but that’s where we are
- EMV V2.0; time for banks to get together and redesign EMV which is currently based on 2007 standards, and deal with the first two points. This involves use of mag stripe, and the entire EMV sequence from card insertion through to successful payment. The design flow must consider that a customer stick his card in the terminal, and must be confident when he pulls it out that the transaction was secure.
EDIT Jan 14, 2014
It just gets worse – 110 million now and confirmation of the depth of malware infiltration which could lead to the RAM Scraper exploit:
Target’s massive data breach, which occurred in mid-December of last year, has affected millions of customers, but the company has remained quiet about howpersonal and financial information was leaked. But CEO Gregg Steinhafel’s interview with CNBC yesterday finally shed some light on the attack, and it’s not pretty: the information was lifted via malware distributed directly through Target’s point-of-sale systems, and the company waited four days before disclosing the attack. That’s probably not very reassuring to the 110 million customers potentially affected by the attack.