The Bankwatch

Tracking the consumer evolution of financial services

Archive for the ‘Aggregation’ Category

Where will the innovation come from in financial services?

A central question for financial services is this:  “Where will the innovation come from in financial services?”

I read this piece from Dave over at Digital Money Forum, and it highlights a central problem that traditional financial services falls into.

The 50 year plan : Digital Money forum

That sounds like the Greek restaurant will have to give a British cardholder a couple of pages of A4 and make sure that the customers reads them before they punch in their PIN.

Anyway, the point is that for banks, the PSD comes at an interesting time when transaction banking is becoming more central to strategy. The threats from both new entrants and substitutes are, according to Bob (and I agree with him), high. In these circumstances, regulation is turning from a moat that competitors cannot cross into a millstone around the incumbents necks.

The problem is in the complication and diversification of businesses contained within a typical bank.  The problems are surmountable, but first they must be recognised.  The issues arise in part from interpretaion of regulation, and in part from the diverse nature of modern large banks.

Relevance to Bankwatch:


It goes without saying that there is host of regulation that must be complied with.  As the events have occurred over the last two years, regulation has become more of a factor in oversight of banks.   In my three part piece earlier this year, The Great Unwinding, (title refers to unwinding of debt and deleveraging of households and institutions) the point was that as the economic pie decreases is size, and at the same time the role of government increases that the effect will be to produce two types of banks:

  1. Financial utilities; much as you turn on your tap for water, or plug into the wall for electricity, you will plug into these banks for basic services.  Nothing new, nothing extreme, and nothing innovative, unless the government tells them to do it and even then that won’t work – refer back to Daves piece above and SEPA.
  2. Innovators: while in the minority, this group will be comprised of those who keep their heads above the trees and see that rather than a time of crisis, this is a time of opportunity;  opportunity defined as a new market that is diametrically opposed to the market of the last 10 years for banks.

Bank bureaucracy:

Banks have always been bureaucratic but the last 15 years has seen bureacracy become triumphant in many institutions.  It began to be a problem in the mid 90’s when this new fangled thing called internet required that the entire bank be properly represented at the point of a click.  Having spent 100’s of years operating independently, to ask product managers to talk with other product managers, and in the same room as electronic channel managers required new levels of collegialism that was never requested before.  There were no rules nor common norms that could be held up as principles to guide the discussion.

Everyone at the table would claim to be ‘customer centric’ and representing their customer.  Other approaches would say ‘the bank’ owns the customer, but then who represents ‘the bank’ in that conversation – the Chairman?

It also happened that we also saw a rise in regulation for privacy, security, complaint handling, ecommerce laws all of which brought even more partners to the above table.  The result takes us to Daves somewhat humourous, but too close to the truth point above about having customers complete a two page document prior to punching in their PIN.

Market differences:

So in a climate of crisis and regulation, it will be easy for the majority to reduce themselves to financial utilities.  It comes naturally to large organisations, who have not solved the riddles of focus and simplicity.

The innovators on the other hand will see the opportunity because they can see through the morass of problems and zero in on that opportunity with laser like focus.

I blogged earlier about the changes in the economy, and while that post applied to the US context, this equally applies to all western economies, including Canada, UK, France, Germany, and Spain as obvious examples.

These macro factors will play a large role in US banks and credit unions strategy design for the next 5 years.

  1. no consumer purchase driven economy in US – with the implication of extended higher Government spending for some time to counter
  2. US consumers save (increasing savings accounts and paying down debt)

When we think about banking over the last 10 years, the predominant consumer products that saw innovation have been borrowing products.  Lines of Credit, Mortgages, Credit Cards and Consumer loans have been pre-eminent.  If we read and think carefully about Timothy Geithners comments above, and I share his view, the nature of banking products and services that see growth for the next 10 years will be different.

Economic recovery does not mean a return to things as they were.

The dominant products will shift to becoming investment accounts, savings accounts, and money management services.

As consumers seek to save (economic terminology for hoarding cash, or repaying debt) they will be watching every penny.

As money is saved or spending is reviewed the requirement for real time information is added to the mix.  Questions will be asked, such as;  ‘can I afford this purchase this month’  or ‘what if I waited till next month’, or ‘how much have I saved this month’ or ‘how much have my total credit card balances reduced’.  This introduces the need for new payments services, and that are adding value by connection to money management services such as Wesabe, or Wells Fargo spending analysis service.

These questions should drive new and innovative services that banks have not been accustomed to creating.  It requires new thinking and re-alignment of strategic resources.  It is much easier for new entrants to banking to start small and simple in this new environment.  A mix of new entrants and smart existing players will be the innovators, and the winners.

Written by Colin Henderson

June 1, 2009 at 13:04

All banks have the same strategy | what happened to the Starbucks strategy?

It was refreshing to read this piece, and takes us exactly where innovation in financial services ought to be going – the new (old) grand ideas.

Starbucks should start banking | FT

What if Starbucks opened an online-only retail bank offering competitive deposit rates and a modest range of loans and mortgages? It could do that by partnering with a finance company such as ING, which has the appropriate banking licences.

All it would need to do is install ATM machines in its outlets, which would involve investing some money but would allow it to get more out of its existing branches.

National supermarkets in the UK, such as Sainsbury and Tesco, have opened retail banks and placed ATM machines in their branches, but there is no national grocery chain in the US with a comparable reach. Even Wal-Mart lacks outlets on most urban high streets.

I recall the brainstorming sessions in the 90’s at the bank, where the discussion about competition arose not from other banks but from:

  • Starbucks levering their distribution and cards as a bank
  • ebay or Amazon offerring a credit card
  • internet only banks – ING was on the horizon – mbanx and Wingspan already out there
  • whether to join the S1 online banking commoditised platform
  • offer an All in One account that pulled together lending and deposits into one account
  • how to deal with the role of aggregation- offer it, join it, or ignore it
  • bill presentment – same idea – offer, join or ignore
  • shift in business model from generalist to:
    • product (manufacturer) – offer loans and deposts through others channels
    • distribution (channel) – sell products & services of others – Open Finance (Forrester)
    • segmentation (customer type)  – focus on a niche market, although most interpreted as the generalist, all things to all market which is where most banks ended

Relevance to Bankwatch:

The problem today is that Banks are on strategy defined 6 – 8 years ago to bricks and clicks, focussed on customer retention and wallet growth.  Customer Relationship Management (CRM) became the strategy de jour.  Who would claim that has worked?  Seibel disappeared inside Oracle for a reason.

Banks are all on the same strategy, focussed on mortgage as the entree, and upsell with other services later.

There is nothing out there that aims at shifting the balance of share of market in a substantial way.  This is not about acquisition or mergers – we have done that, and “too big too fail” is too fixated in everyone’s radar now, or until capitalisation is fixed, in any event.

No, this is about business model shifts … shifts that would have a target of:

  • double digit percentage shift in share of payments,
  • extraction of share of deposits and payments from an existing industry (the Starbucks example),
  • exponential elimination of costs relative to competition
  • focus on what your are good at and eliminate the stuff you are not good at

Business models –

Mr Bank Chairman …  what is your business model, and how is it different than the competition?

Supplementary question –

Who is your competition?  Do you lost sleep over Citibank and Wells, or Tempo and Wesabe?  Does your answer worry you?

PS …  as I finish this post the most telling thing is something I have become acutely aware of.  The blog categories I set up 5 years ago no longer apply, until I do a retrospective post such as this.  Either those were really bad ideas, or ideas yet to come.

RBC speak about convergence for EBPP and statements

The commentary here from Colin McKay, vice-president of e-business architecture RBC in this video interview, is refreshing to hear from a Bank.

RBC discusses client reporting and customer statements | IT World Canada

Some notes from the interview, then commentary and discussion:

  • Old process had product and IT groups generating 18 separate statements in different formats but most ending up in print
  • each statement feed was formatted specific to the output, eg, print or web
  • each of the 18 had their own processes
  • all 18 feeds have been directed to a common store, and stored as raw data
  • the 18 raw data feeds from the core systems, are now amalgamated into a “Common Composition Engine” (CCE)
  • CCE can output in any format to print, web
  • most customers do not read statements, so the current practise of storing all in PDF format is wasteful and inefficient
  • CCE will eventually be offerred on demand, and on request, this could be PDF on demand, or web on demand
  • the Customer Preference Engine will allow customers to aggregate the data of their choice, including marketing messages,and product messages into a customised statement in the format of their choice
  • uses Telephone companies as an example of information display versus statement format.  The notion of a statement is being challenged by the web experience, and is redundant for many customers
  • He speaks of Electronic Bill Payment and Presentment (EBPP) and social networks.  “people go into town and do multiple things, vist grocery store, hardware store, and the bank;  there is a desire to conduct multiple business transactions at social networks in the same way;  what we are seeing is a convergence”

Relevance to Bankwatch:

Great interview but that last point needs some discussion.  But first with regard to the problems of multiple products and statements, the solution to the problems all banks face is clear, and he articulates it well.  The notion of on demand and in the format and design by the customer makes sense.

The notion of a social network as being analogous to “going into town to conduct business” requires some thought though.  In the real world we have Wal-Mart with photo, bank, restaurant as well as their core service of merchandise.  We have malls, with a variety of stores and banks.  We have Main St with a variety of stores and banks.  Finally we have other cities and countries that we can visit to conduct transactions.  The nice thing about the web is that it can be all or any of those.   It seems to me if we use this analogy, that the town is the web, and the concept of malls, stores, banks, and big box stores are all sites within the web, exemplified as different types of aggregation or not.  An we can get to that web using laptops, PC’s or mobile.

Customers will gravitate to the methodology of their choice, but they will require help to visualise how that future might look.  There is scant evidence that Facebook is viewed by users as that place for convergence and aggregation, or the place where they go into town to “conduct business transactions”.

In fact the evidence suggests that people are avoiding those things that get in the way of their social interaction at Facebook.  My own observation is that the jury remains out as to a desire for people to aggregate financial information anywahere except with their FI.  I know this contradicts the general movements of convergence and aggregation on the web, but so far financial services have not been pulled that way by people, which is probably dirven by privacy, security, and identity theft concerns.

Having said that it is possible if RBC display how that might work in a safe secure and convenient and non-intusive manner, that customers will accept receiving their bills and reminders inside their Social Network environment, alongside their social conversations (but obviously hidden from the view of others).  Or is this more of a channel need?  Aggregation at the device level, ie PC, mobile?  In any event its a great conversation and the rioght conversation that RBC are promoting here.

Thoughts?  Do you want to receive your statements, bills and notifications elsewhere than say at the bank site, and in your email?  If so where and how?

Written by Colin Henderson

April 15, 2009 at 11:06

ANZ Bank Brings Account Aggregation to Australia | Netbanker

In some refreshingly positive news, Jim at Netbanker highlights the new aggregation service, for ANZ Bank in Australia.   Click through for details, and screenshots.

ANZ Bank Brings Account Aggregation to Australia; Introduces Robot Mascot Qi | Netbanker

It turns out to be Qi (pronounced “key”), the robot mascot for Yodlee’s latest aggregation client, Australia’s ANZ Bank, which launched that day (press release). The new service is called MoneyManager(see screenshot below; note 1).

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Written by Colin Henderson

October 20, 2008 at 21:28

Posted in Aggregation

‘Build your own Bank’ to become customer centric? | Finextra

 Congrats Paul and Finextra on going live with embedding community into their site, with their professional network.  It has been in beta for 6 months, and just went live.

I have been posting over there periodically, and posted this today.  In general, I think it will tend to be future oriented things I do on Finextra, but still working that out.

‘Build your own Bank’ to become customer centric?

They are financial and social; two characteristics that were never expected to be operating together, but that genie has now left the bottle. Both Wesabe, and Prosper have shown there is a way to use personal data, combined with strong security, and preferences management, to provide advisory and transactional assistance at a level and scale that one bank can never achieve, one employee at a time.

Written by Colin Henderson

August 31, 2007 at 12:51

Online Banking: Moving Toward a New Paradigm

Aite Group issue a new report that assesses the business and technology strategy amongst 21 large US banks. So this will I presume include, Wells, Citi, Wachovia, Chase etc.

“Online Banking: Moving Toward a New Paradigm Aite Group forecasts that by 2010, 13% of checking accounts will be opened online in the United States, up from 3% in 2006. Aite Group recommends the leading online banking channel vendors should progress beyond software applications and offer value-added services, such as online marketing outsourcing, to remain competitive.”

Source: “Aite Group, LLC Report #200608281 – Mozilla Firefox”

The report details the banks’ interest in eight value-added products and services including expedited bill payment, account-to-account transfers, fraud management services, online personal finance management tools (PFM-Lite), card-based bill payments, online bill presentment, account aggregation, and online marketing campaign outsourcing.

Among its key findings, the report notes that while banks are making online customer acquisitions a priority, there are significant differences in the number of new, online accounts banks are opening. The top performer, among the banks surveyed, is sourcing about 20% of its new checking accounts online, the next highest performer is sourcing 13%, and the lowest performer is sourcing 0.03%.

The vendors mentioned in the report is a useful list of vendors in this space.

The vendors mentioned in the report include:

Andera, BankDetect, Cashedge, CheckFree, Corillian/Intelidata, Digital Insight, eFunds, Equifax, Experian, Financial Fusion, Intuit, Lexis-Nexis, MasterCard RPPS, Metavante, Microsoft, MoneyGram, Online Resources/Princeton eCom, Verid, Visa ePay, Western Union, Xoom, and Yodlee.

Written by Colin Henderson

August 25, 2006 at 08:28

Yodlee launches personal finance platform

Yodlee continue to successfully build out functionality, and capability founded on aggregation of all a consumers financial accounts.

Finextra: Yodlee launches personal finance platform

The Yodlee MoneyCenter suite includes Yodlee PersonalFinance, Yodlee BillPay, and Yodlee FundsTransfer. The integrated solution gives consumers everything they need to answer the ever-important and ever-changing question: where is my money?

Key Yodlee MoneyCenter Features:

  • Account Consolidation – from over 8,000 financial, bill and rewards accounts
  • Personal Data Reports – such as a net worth statement, cash flow report, and historical  account balances
  • Expense Categorization – for all credit card and bank account transactions
  • Budgeting – including spending analysis, goal vs. actual and business related  reports and  charts
  • Automatic Check Register – includes future, projected cash flows based on  scheduled  payments and transactions
  • Bill Pay – including card payments and “same day” payment credit for consumers
  • Account-to-Account Funds Transfers – the easiest, quickest way to move money  between any  two financial accounts
  • Universal Portfolio Tracker – with quotes, company profiles, and historical portfolio  performance and asset allocation charts

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Written by Colin Henderson

June 29, 2006 at 22:35

Account aggregation is dead, long live account aggregation

Despite the positive comments here, I believe account aggregation as a stand-alone concept is dead. Customers didn't get it, saw no incremental value, and in fact were scared of it, because of having to share online sign in credentials.

However, and perhaps thats where Robert is going with his post, it will be a valid component in development of other services in the future, and it will be bank changing in its significance.

WebCPA | Tools and Resources for the Electronic Accountant – An Investcorp and SourceMedia Publication

Since a search of the Intuit Web site yields no hits for the term, "Customer Central," it's likely this technology will surface in the next year or so. But maybe it's not aggregation. TekPortal also supported online account opening and authentication services, the same things that get more attention these days at Yodlee.

We noted recently the new Yodlee service, which eliminates the "friction" that binds customers to banks today. This is a brilliant strategy, that uses aggregation to add value.

The other space I see aggregation playing, and I can see Intuit going there, is financial planning. Once you have all your customer data in one place, it can be sorted, manipulated, and analysed. The power in that concept is considerable, to develop investment plans, track success, alert for issues, and help the customer stay on track. Even more powerful if the data is shared with the customers personal broker/ banker/ financial planner, then the customer can watch the planner at work and see the results real time.

Relevance to Bankwatch:
Real and valid new services can be developed using aggregation as a component tool.

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Written by Colin Henderson

April 29, 2006 at 05:09

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