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Tracking the consumer evolution of financial services

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Unix & Linux could pull a HAL 9000 on June 30th ‘Leap Second”


The reference is to HAL 9000, the fictional onboard computer in Stanley Kubrick’s 2001: A Space Odyssey, which loses its mind after it is programmed to lie.

The International Telecommunications Union, otherwise known as the ‘Time Lords’ (Wired) will be meeting later this year to determine whether to continue with the Leap Second.  There have been 26 Leap Seconds since 1970. The pic shows some Japanese watching the Leap Second being added July 1st, 2012.

The problem lies that while adding the second is easy, Unix based systems believe a day is comprised of 86,400 seconds. A day is unchangeable, so what to do with that second? How can Linux live with the lie of one day being 86,401 seconds?

The next Leap Second is scheduled for Jun 30th, 2015.

This has caused problems for several that we know about with the largest being Quantas when their worldwide network running on Linux crashed.

Ow well, back to my mundane day job. I trust the Time Lords will take care of this.

Written by Colin Henderson

January 12, 2015 at 09:15

Posted in Uncategorized

The shift in cyberattacks to brute force logins – Akamai


The Akamai State of the Internet report for Q3-2014 is out here.  The paragraph on to top ports being attacked leapt out at me.  In 2014 there has been a shift towards ports that highlight attack volume is aimed at business.

Akamai who have shifted their business model to on of defence against large scale attacks such as DDoS are well placed to know.  Something for banks to know and be certain the attacks they will face are bound to increase.

1.2 Attack Traffic, Top Ports /

The significant decline in the volume of attacks targeting
Web-associated ports, coupled with the growth in attacks targeting
Telnet, may indicate a shift in attack vectors from ones that target
known exploits in Web-based software to ones attempting brute-
force logins on the underlying server infrastructure.

Written by Colin Henderson

January 8, 2015 at 22:20

Posted in Uncategorized

Mercedes made a statement at CES with the F015 driverless concept car


CES has opened.  This is a conference that some have taken to describing as closer to a World Fair than the original mobile conference that it was.

This Mercedes concept car is cool, and the link provides more pics and description of the concepts, some of which could apply to normal cars including LED messages to following cars.

mercedes-benz.com

Written by Colin Henderson

January 6, 2015 at 12:53

Posted in Uncategorized

New Year 2015 blog post – visible trends in financial services


I have long given up on predictions for banking.  The evolution of financial services has been nothing like as expected over the 19 year history since online banking began.  So here is a rather loose collection of observable trends that directly or indirectly impact banks, most strengthenining banks’ positions and some requiring adjustment. 

  1. the myth that is dis-aggregation of financial services as large banks move to become financial utilities
  2. the myth that is PFM is becoming fully exposed
  3. the near future of Banking as a business model

Discussion: what is a bank?

Banks do two things; they hold depositors money and they lend money.  They try to do the former for less than the latter thus earning Net Interest Income or spread.  During the ever lower interest environment since the 90’s, retail banks reached for alternative income sources by charging fees (transaction fees, account fees, Mutual Fund fees).  These non interest fees have become an essential part of banking profits, supported by rapid growth in spread income.  Any drop in either component represents the greatest fear of bankers.

  1. dis-aggregation of financial services

Since the the evolution of internet banking, we have first followed for innovation from banks.  Failing that we followed for innovation from startups or risk taking banks that would take advantage of the benefits internet brought.  

This did not play out as expected.  First off banks were taken aback by the fallacy of internet banking being cheaper to offer.  Internet was in fact a net new channel, bringing additional costs.  And worse, it introduced costs throughout the entire bank infrastructure that were required to bring financial services to that confoundingly difficult single internet page with the entire customer account set, all in one place.

It took this long, but many banks are getting there with complex middleware contruscted to insulate legacy systems, or alternatively new modern tiered systems designed to offer internet at least as a parallel offerring to branches.  Few to my knowledge are going head on to internet first as an offering, although Bendigo in Australia going all in with a proper internet app framework to build out their online banking.

While Banks’ umderwent this infrastructure transition, startups such as Uber, Paypal, Amazon, and to a certain extent the rise of debit (particularly touchless debit) have moved payments to the background and the experience being purchased to the foreground.  However all of this is not so startlingly novel, and banks remain satisfied to continue those payment activities along their traditional system, and see a continued use of credit cards.

There are other startups including Stripe, and Rypple that are doing innovative things in payments, making adoption of payment acquirers easier but still riding the traditional rails of banking infrastructure (credit card, interchange, SWIFT).

Net impact on Banks business model is nominal.  To a fair extent banks are becoming utilities with consumers consuming banking services through alternative front ends.  Meantime Banks see greater transaction activity along their traditional transaction systems.

This does raise an interesting question in terms of how banks advertise and offer their services in future, and banking becomes more opaque.  Will a bank advertise or sell their products within an Uber or an Amazon?

2. the myth that is PFM is becoming fully exposed

It is safe to say this parrot is dead.  In pre online banking days, Quicken and Microsoft Money were the pfm’s of the day.  Usage was limited to a hard core group of enthusiasts that accounted for less than 10% of the market.  Spreadsheets or nothing at all were the most common.  Tagging and qualifying the transaction activity in the bank account was just too much work.

I did a quick analysis of Finovate presenters in 2009 that showed 35% were in the pfm space highlighting the hype of that space.

With the advent of enough data, some banks have taken on the challenge of offerring budgetting and planning services based on automated solutions.  Wells and RBC are two that spring to mind as early proponents.  RBC offer an automated graph and analysis of my spending patterns.  They have done extensive back end integration work that is obvious watching my debit activity.  On the day of purchase a debti transaction simply indicates a debit.  Within 24 hours that reference is changed to a clear name of the merchant.  They must be performing some kind of batch process that matches their debit activity with bank accounts.  It is incredibly useful, and something they have done quietly.  This is the stuff that loyalty is made of, and highlights where the pfm market is going.

3. the near future of Banking as a business model

So what of the future of Banking as a business model.  In 2007/8 dire predictions abounded that the model was flawed and banks would break up.  In fact banks became larger.  

As for this blog, I predicted a future with banks separated between financial utilities sitting in the background offering payment services, and a smaller group of risk takers.  That was 2009, and I was partially correct.  Not much has occurred in the area of risk taking, but some signs are evident with Banks purchasing development shops, and startups.  TD has aligned with Moven.  BBVA with Simple.  Interesting but nothing earth shattering there yet.

I expect a big trend to be the beginning of real branch elimination in 2015.  We have seen Lloyds as an early starter on that.

So far most startups then are enhancing the banks’ business model.

As always contrary thoughts welcome.

Written by Colin Henderson

January 4, 2015 at 23:56

Posted in Uncategorized

Thoughts on the VentureBeat 2015 predictions


Venturebeat along with everyone else has its 2015 predictions out and two of their top five caught my attention.  

  • web design using cards
  • super contextual web

Card Design

Something that tech sites began using a couple of years ago, and banks in Canada are beginning to pick up with BMO leading, and RBC to a certain extent.  Of course industry leader mbank in Poland lead the way in a super simple clear and bright card based interface.

Bank sites, epecially full service banks, have way too much information to house on a home page.  It is essential to place some control and confidence in the hands of the user and allow them to self direct to their general area of interest, and cards are a simple way to achieve.

Super Contextual Web

This is the one that really caught my attention.  Terrible title but right concept. I have been recently travelling in Japan, and the current state of contextual web is pretty obvious and not pretty.  Bascially if I have visited a site, a cookie is planted and adds associated with that cookie follow me everywhere.  I can be on the NYT site, and instead of the usual BMO InvestorLine and Canadian Muklauk ads based on my pre xmas surfing, I now see Shinkansen and JR ads.

The advertising assumption is that if I visited once, then I will continue to be interested therefore continue to pound me with the same ad for x times.

This is a weak assumption.  Better to interpret across what I visit and determine using predictions, what else I might be interested in.

Of course that would require some intelligence, and probably co-operation from ad- jaundiced me.  But the potential for a ‘super contextual web’ exists; it remains to see how that will be accomplished and not sure why 2015 is the year.

PS..  the VentureBeat piece also predicts Smartwatches will be a flop and I can’t let that go despite little evidence to support my view.  The flop view is not a safe assumption in my view.  Apple took the phone and made it into a mini computer, notepad, map, tourist saviour while walking aimlessly around Tokyo etc, etc. No-one expected that of a phone in 2006. The VB prediction is based on what Apple have told us about the iWatch, and on what they have seen from wannabees trying to get out there beforehand.  Time will tell.

Written by Colin Henderson

January 2, 2015 at 23:34

Posted in Uncategorized

Brazil – a country racked by white elephant projects

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Its that time of year when reviews are everywhere. This NY Times piece on Brazil is no surprise but shocking nonetheless. As the ‘B’ in brics (Brazil, Russia, India, China and South Africa) Brazil is least deserving to be part of the group, with Russia doing its best to hang on too. The transportation systems that will never be completed, and white elephant stadiums that will absolutely be empty after the World Cup in June make Brazil look more like Detroit relatively.

“The fiascos are multiplying, revealing disarray that is regrettably systemic,” said Gil Castello Branco, director of Contas Abertas, a Brazilian watchdog group that scrutinizes public budgets. “We’re waking up to the reality that immense resources have been wasted on extravagant projects when our public schools are still a mess and raw sewage is still in our streets.”

Written by Colin Henderson

December 25, 2014 at 20:35

Posted in Uncategorized

Just how easy is it to close down a country’s internet – reprise

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I asked this question just over a year ago. What had caught my attention was a post from Renesys indicating the single points of failure in the internet connections to Sudan.

Earlier Estonia, a highly sophisticated user of internet had been shut down, including banks, in what was suspected as a Russian attack.

Now we see North Korea undergoing a sustained attack that is significantly degrading the North Korean internet. The comments from State Department and others are very cautious, and almost denying US involvement, with exception of Dutch Ruppersberger who is probably the wrong guy for the House Permanent Select Committee on Intelligence because of inability to string together more than two words together, and a distinct lack of ability to speak about cybersecurity.

However comments from Dutch on CNN were positively crowing, but he was alone with all others very circumspect.

Fascinating.

Written by Colin Henderson

December 22, 2014 at 17:59

Posted in Uncategorized

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