The Bankwatch

The promise of Personal Financial Manager tools (PFM) for banks has been long predicted but slower to be adopted by customers.  This has been a natural outcome because most if not all banks have taken the route of purchasing or partnering with software suppliers.  The result has generally been as highlighted in this American Banker piece that PFM exists in a separate tab within online banking. 

With most customers used to going straight to bill payment or transfers it is only natural that the PFM tab will get less use.  Regions bank have introduced charts from their PFM offering that appear on the OLB home page.

Regions Bank to Tie New PFM Tools to Online Banking

To draw attention to the Insights tab, Regions provides online banking customers with pie charts of their transactions on their online banking home page, teasing to the Insights section to encourage the customer to click on it.

This has increased interest, but it seems to me that integration throughout OLB would be the real answer.  That presents an infinite number of technology problems for banks unless they are prepared to modernise their OLB architecture to accommodate these new offerrings which are built with new technologies.

The other challenge which is an even greater hurdle is that the definition of PFM is far too broad and frankly irrelevant to the average consumer.  This was evidenced by the original uptake of Quicken software which flatlined at something like 14% +/1.  The idea that in effect taking a ‘Quicken’ type all inclusive offerring and making it a tab within inline banking and expecting it to have immediate uptake is of course absurd.

First Look: PFM Defies Definition

I, for one, could care less about pie charts or categories showcasing the ways in which I spend. I refuse such intimacy with my transactions. All I want to know is: am I spending more than I’m saving? In other words, let me have my Jameson indulgences if I’m prudent with my overall credit card spend. Categorizing my spending choices hinders my lifestyle choice. And yet, I’ll log into my digital banking a few times a week to ensure I haven’t lost my credit card mind. To me, logging into online banking is PFM. And it’s enough for now

Its just one journalists view in this other AB article but it makes the PFM discussion real.  People trust and use their online banking, particularly using mobile now.  Somehow PFM software needs to be able to make OLB come alive for clients without being PFM.  It should just be OLB with PFM capability seamlessly integrated.

The internet is a weird thing in some respects. I did not know Aaron but I understand who he is.  Above all he is very young and at 26 he Larry writes here about someone he knows. 

Prosecutor as bully 

Since his arrest in January, 2011, I have known more about the events that began this spiral than I have wanted to know. Aaron consulted me as a friend and lawyer. He shared with me what went down and why, and I worked with him to get help. When my obligations to Harvard created a conflict that made it impossible for me to continue as a lawyer, I continued as a friend. Not a good enough friend, no doubt, but nothing was going to draw that friendship into doubt.

I can only write about what I know.

People like Aaron are a result of the life we created over the last 20+ years.  I feel responsible for Aaron because we created this cool, safe, plastic environment where people can be anything they want to be.

That is the internet.  But that is not real life unfortunately. 

I am kind of at a loss for words on this.  The promise of internet creates a belief and pressure that is all consuming.  What can I say.  He was born in 1986, about the time I got my first PC and email address.  He was a genuine product of the internet generation, and he was a believer.  He was a believer in internet and the freedom that the network demands.

RIP Aaron.

The world of securities regulation is scary.  One the face of it, it is designed to protect investors from scurrilous propositions from companies.  In reality it is so caught up in the weeds that the obvious is lost.  This stock was being pumped when the obvious was clear.

Take this latest one in Canada.  Poseidon promised “Poseidon has established a unique service offering”. 

Poseidon’s meltdown continues after ‘significant’ writedown warning

The stunning meltdown of Poseidon Concepts Corp. continued on Thursday after the company warned it could take “significant” writedowns as it struggles to collect payments from customers.

Poseidon also shook up its leadership and suspended its dividend. The announcements point to a company in disarray, analysts said, and one that grew too quickly for its overwhelmed management team to handle. The stock plunged 55%.

That promise on the company’s website ought to be enough to create suspicion.  The word ‘unique’ in itself means nothing.  Nothing is unique anymore. 

Here is the key latest information:

Everything changed on Nov. 14, when Poseidon shocked investors by reporting extremely weak earnings and writing off $9.5-million of accounts receivables that it failed to collect. Accounts receivable were $125.5-million at the end of Q3, far ahead of the actual revenue total of $41.1-million.

When your write offs account for 25% of last revenue booked, there is a problem.  My only point here is that securities regulators are run by lawyers and with little sense of business metrics.  This one should have been foreseen.

I have been following the success of Monitise since meeting the folks in 2008 at a London conference.  It is exciting to see BMO working with them now, and I expect their mobile offerring to perk up significantly.

BMO Bank of Montreal and Monitise to Partner on Mobile Money Solutions for BMO Customers

MONTREAL and LONDON–(Marketwire – Dec 19, 2012) – BMO Bank of Montreal and Monitise plc (LSE: MONI) today announced they have entered an alliance to develop new Mobile Money services, using Monitise’s market-leading technology platform that encompasses mobile banking, payment and commerce services.

The alliance will allow BMO Bank of Montreal to offer customers intuitive and advanced Mobile Money services. The collaboration builds on an agreement formed in 2010 with Clairmail, the U.S.-based mobile banking and payments provider acquired by Monitise in 2012.

The hatred felt for banks and British banks in particular is coming home to roost in many ways.  The latest which was telegraphed in the Independent Commission on Banking report provides direct government support to P2P lenders.

The Rothschild investment in Zopa the other day now makes sense!

Peer-to-peer lending welcomes endorsement | ft.com

Vince Cable will pledge £55m of the £100m earmarked for small business finance topeer-to-peer lenders, splitting the money between the providers Funding Circle, Zopa, Boost and Credit Asset Management.

I find this move by the US Fed quite flabbergasting.  It is admirable to link political policy to increase employment and reduce unemployment.  However the US Fed is pledging low interest rates against both and inflation target, and an unemployment target.

It begs the obvious question.  What happens when inflation goes over 2.5% and unemployment remains over 6.5%.  The inflation target says increase interest rates, but that is confounded by the requirement of the unemployment rate to retain low interest rates.

Fed links rates to US unemployment | ft.com

The US Federal Reserve will keep interest rates at close to zero until unemployment falls below 6.5 per cent in a historic change to monetary policy.

It is the first time a large central bank has ever tied its interest rate policy directly to the state of the economy. The Fed said it will continue to forecast low rates provided its inflation expectations do not rise above 2.5 per cent.

This news is great news for Zopa, but it is also particularly poignant to see an old name bastion of finance invest in the internet driven UK peer-to-peer lending company Zopa. 

Congrats to Giles and the entire Zopa team!

Rothschild buys into peer-to-peer lending | FT.com

RIT Capital Partners, Lord Rothschild’s London-listed investment trust, bought into Zopa in the expectation that it will eat into a business traditionally dominated by banks.

Marketing online has fallen into step with other marketing in traditional channels in major respects.  Just as you receive those supposedly targetted catalogs and direct mail, you also have online page ads, email offers, and offline offers based upon online signups which may have included your address or phone.

Some people however feel differently.  They see online as a fresh frontier for actually controlling your own information and managing how it is used.  Sounds like a pipedream, and of course traditional marketers are resisting.  However some new leaders, and some traditional companies see ways to harness the power of the web, and use it to improve online commerce for consumers.

A Vault for Taking Charge of Your Online Life | NY Times

While governmental efforts inch along, companies like Reputation.com are forging ahead with new services that promise consumers more insight into the data collected about them. This month, for example, the direct-to-consumer division of Equifax, the credit information services company, plans to begin offering its customers a separate personal data report from Reputation.com in addition to their credit report. Some Equifax customers will also be offered the option to have Reputation.com delete personal details, like home addresses and phone numbers, from certain information broker databases.

“We see broadening consumers’ understanding of what’s out there about them online as a very natural extension of what we do today,” said Trey Loughran, the president of Equifax Personal Information Solutions.

Next spring, TransUnion Interactive, the consumer division of the TransUnion credit information company, plans to offer its customers similar services from Reputation.com.

Vendor Relationship Management (VRM) for consumers remains largely a theory.  However these initiatives might be the germ of the first at scale implementation of something like VRM.

This is one of the better posts from Scoble.  This is a hard does of reality.  Nearly everyone is on twitter, Facebook and Linkedin.  As those services grew over the last 5 years, many people challenged the Dunbar rule, suggesting that smart technology interfaces could expand the maximum number that you can keep up with.

The war on noise | Scobleizer

1. Marketers suck. Including me. Look at my big tech company list over on Facebook. Do you actually learn much?  A little, but marketers push themselves too much, and say too little.
2. No one is focused on what you want. Including me. I have a list of tech industry investors. Rich people. I want to hear from them about when they talk about investing, the economy, starting companies, trends, that kind of stuff. But do they stay focused? No. They talk about movies. Their vacations. Their kids. And more.

Scoble himself topped out on technology hardware to solve it.  No.  The one thing that does not change is the human  capacity to absorb, and the amount of time available in the day to absorb it.

Back in the day, when we all began speculating about where this internet thing would take us, the one piece that always intrigued me and that never showed up is the idea of Intelligent Agents.

These Agents would be constantly roaming the internets on your behalf giving out just enough information to get answers, and gathering what you want, when you want it. This could be a financial product I need, a coat I need, or a new bike.  The Agent needs to know when I need it, and not to bother me when I don’t.

We see glimpses that try to work around it such as Quora where the intelligence comes from Social interaction and sharing.

But this goes right back to the problem that Scoble articulates.  Its just more noise and not direct to address what he wants and when he wants it.  Despite Scobles comments I always find Twitter quite interesting, but that’s because I deleted everyone a long time ago, then reselected a few sources in the spaces I was interested. (very few).

The Vendor Relationship Management (VRM) concept describes much of what I want at least for commercial purposes, but not built yet.

The challenge cries out for a standard that everyone buys into.  Unlikely.  Analysts of Twitter thought that feed would provide the answer, but with majority of tweets being retweets and not original, I am not sure that’s the answer. 

As a company, FaceBook has as much chance as anyone to solve this challenge, but they are still falling into the trap of advertisement placement.  I see Twitter is doing that now too.  Annoying.

Where are my Intelligent Agents!

One of the sad facts of the banking crisis, is that the derivatives markets remain quite opaque and too complicated for most to understand.  Enter the Federal Court of Australia.  Judge J. Jagot has taken the time to understand in this 1,376 page ruling and not just understand but to explain. 

There is another lesson here when attempts are made to hide behind newly created terms.  This reminds be of Groupon and their attempts to bypass accounting profit and loss realities using new terms thatexcluded marketing from their expenses.

The result is a damning ruling against Standard & Poors, as well as ABN Amro. Federal Court of Australia.

Here Felix Salmon of Reuters has taken the time to digest the ruling and summarise the outcome.

Hero of the day, CPDO edition

Put it all together, and you get a very shocking view of S&P. Here’s the list:

• S&P used the wrong model input for starting spread.
• S&P used the wrong model input for volatilty.
• S&P used the wrong model input for average spread.
• S&P completely ignored ratings migration.

If S&P had just got any one of these things right, the CPDO would never have gotten that triple-A rating. If it had got them all right, the CPDO would almost certainly not even have been investment grade, let alone triple-A.

Basically S&P did little or no diligence of their own, accepted ABN Amro assumptions willy nilly, and the result was a meaningless AAA rating.  Some aspects of the instrument that S&P rated are ponzi in nature.  They developed a concept called roll-down benefit or RDB, which somehow involved rolling in benefit of 7% from periodic shift in the investment.  As Felix explains:

Every six months, the CPDO would exit its existing positions, and buy new positions in the index maturing six months later. In general, bonds which mature later have higher yields, so S&P assumed that on average, the new index would yield 7bp more than the old index. And that was an utterly crucial assumption. Never mind the triple-A rating: without the RDB, the CPDO couldn’t even get an investment-grade rating. It wouldn’t even be triple-B.

This ruling will have ramifications for courts in US and UK, but more importantly it has ramifications for common sense in investment evaluation.