Thursday, February 17, 2011

Banks should get back to the boring

Posted by Mark Brousseau

As the world closes in on the three-year mark of the beginning of the global financial crisis, one expert believes that it’s not enough to rely on new regulations to prevent future disasters — a fundamental change in mindset is required.

Rex Ghosh, a Harvard PhD economist who has worked in the financial markets for more than 20 years, currently with the International Monetary Fund, believes that the very culture of the financial sector needs to shift back to basics as the economy limps out of recession.

“The global financial crisis, marked by the bankruptcy of Lehman Brothers in September 2008, has taken an enormous economic, financial, and social toll,” said Ghosh. “Both in the United States and abroad, regulations, laws, and practices are being changed to help ensure that such crises do not recur. But these regulations — running to the thousands of pages — are enormously complex. It may be years before they are all adopted and absorbed into the daily lives of those in the financial sector. The real prevention rests in the notion that leaders need to work toward changing the very culture of the sector to rely on more fundamental and basic practices based in prudence and responsibility.”

Ghosh would like to see the financial sector learn the following lessons in 2011:

... For the Federal Reserve -- Central banks such as the Fed should not only look at goods price inflation, but also at important asset prices, such as the stock market and housing sectors. It also needs to be more mindful of lending and credit booms, especially in the face of weakening credit standards. That’s what paved the road to hell three years ago. We do not want to repeat that option again. Traditional monetary policy tools (like the Fed’s interest rate) may need to be bolstered by counter-cyclical capital requirements (requiring banks to hold more capital in “boom” times).

... For Banks -- Boring is good. Banks should get used to being a much smaller proportion of the economy, like it was before the 1990s. Bankers should also be aware of credit and counterparty risks. They need to know who they’re doing business with, know to whom they are lending and not rely solely on credit ratings.

... For Regulators – They need to watch the kids and the cookie jar. They should not count on banks to manage their risks prudently. They should think seriously about “tail risks” — just because something has not happened before, such as a nation-wide decline in house prices, doesn’t mean it cannot happen in the future.

“These are not incredibly difficult precepts,” Ghosh added. “The short answer is that the Fed needs to broaden its view of what constitutes inflation, banks need to look past the paperwork and avoid risk, and regulators need to realize their jobs don’t end with the passage of new rules. For every regulation created, there are 50 new ways created to get around it. We need to realize that the practices of the past won’t go away until we match the letter of the regulations with the culture of the financial sector.”

What do you think?

Making the most of the economic recovery

Posted by Mark Brousseau

The U.S. economy is finally on an uptick. According to Federal Reserve Chief Ben Bernanke, the economy is set to grow by 3-4 percent in 2011. That’s great news for businesses that have been seeing decreasing or stagnant numbers on their revenue reports for the last couple of years. But now that more growth is possible, Dan Adams warns that it’s time to make sure your company is poised to get its share of the economic recovery.

"The best way to shape your company’s economic recovery into the most profitable form possible is to deliver more than your share of customer value,” says Adams, author of New Product Blueprinting: The Handbook for B2B Organic Growth. "Specifically, you need to develop differentiated products that provide benefits your customers crave. Products they can’t get anywhere else at a comparable cost. Doing so will accelerate your growth in the upturn and insulate you from the worst of the next downturn.”

Adams notes that you must keep in mind that your competition won’t be standing idly by while you innovate and grow during the improving economy. To stay ahead of your competition, you should keep a targeted focus on what sets your company apart in your industry.

“There could be any number of marketable differences,” explains Adams. “Are your scientists smarter? Do you spend more on R&D? Do you have a longer time horizon? These things can give you an incremental edge, but the best way to deliver substantial new customer value is this: Don’t approach the problem the same way your competitors do.”

Adams recommends using a differentiated approach for differentiated products. He says most competitors approach product development with a supplier-centric mentality, meaning they develop new products based on what they think their customers need. Instead, suppliers should use a customer-centric view, focusing on what their customers know they need.

To avoid this trap, he suggests following the five tips below:

Implement your customers’ ideas, not yours. Do you have a new product development process, perhaps with stages and gates? Is the first stage labeled “New Idea”? If so, that’s fine, but here’s the question: Whose ideas are listed in this stage—yours or your customers’?

“I’ve trained clients in hundreds of B2B industries and find suppliers nearly always begin product development with their ideas rather than their customers’,” says Adams. “The result is that they don’t know if they are truly meeting their customers’ needs until they can watch the sales results of their new product!

“Most companies make the critical mistake of starting with the supplier solution and ending with market needs,” he continues. “But what if they inverted their process by starting with market needs and ending with supplier solutions? Actually, two things would happen. First, because B2B customers are more insightful, rational, and interested than their B2C counterparts, suppliers would learn much more about customer needs than their competitors. Second, they’d prime those B2B customers to buy their new product by engaging them with highly interactive interviews.”

Conduct B2B-optimized interviews. Of all the ways to learn about customer needs—telephone, mail survey, Internet—nothing comes close in effectiveness to face-to-face customer interviews. If the information being sought is new, complex, or ambiguous—as with B2B product design—the advantages of interviews become even greater. So is the customer interview a key fixture in most new product development processes? For many producers, the answer is no.

Perhaps with so many routine customer interactions, it’s assumed much of it must be interviewing. But if you examine the call frequency of your sales and technical service staff, you will likely find that over 90 percent of face-to-face customer communication is of the “tell-and-sell” variety. Some might protest, “But we get lots of input from our customers on what they want in new products.” The reality, though, is that most new product discussions are actually customer-reactive meetings, not market-proactive interviews.

“You’ll know a market-proactive interview when you see it,” says Adams. “First, a team targets an attractive market segment. Then it schedules interviews with customers, prospects, and their customers’ customers. Two-or-three-person technical-commercial teams prepare their questions and interviewing roles in advance. During the interviews, these teams use advanced listening, probing, and interviewing skills to plumb incredible depths…and the customers love it!”

Get everyone listening to the voice of the customer. Some large firms keep a small staff of highly trained VOC (voice of the customer) experts poised for action. These folks parachute into a project as dawn streaks the morning sky, interview your customers for you, and hand you a report of “what the customer wants.” This is a flawed model, says Adams. Most businesses chalk up thousands of face-to-face customer meetings during the course of a year, as sales reps, technical service reps, and others go about their normal duties—so why not train these people to become VOC experts?

“They’ve already gained the customer’s trust, they know the customer’s language, and there’s no extra travel cost,” he points out. “Best of all, you’ll develop a reputation among customers as ‘that supplier who really listens to us.’ Now that’s how to protect today and position for tomorrow. So keep that handful of experts…but let them become trainers and coaches for the masses, not primary interviewers.”

Get quantitative. After you perform great qualitative customer interviews, you’ll have dozens and dozens of customer ideas you could work on. But which ideas do you target in your new product design? At this point in the process, it’s time to get quantitative.

“You need to understand which customer outcomes are most important and least satisfied today,” explains Adams. “The metric I’ve developed for this is called the Market Satisfaction Gap. It tells you precisely which ideas the customer is eager for you to pursue. The Market Satisfaction Gap prevents a fortune from being spent on developing supplier-centric products that will make customers yawn. Skip this step if you’ve got extra R&D resources you’re trying to keep busy. But make this a priority if you want everyone working on projects that will catapult you out of the recession faster than competitors.”

Research your customers’ alternatives. We often talk about competitive products. That’s okay, but it’s actually healthier to think in terms of customers’ alternatives. For example, if your company makes structural adhesives, alternatives for you might be other adhesives, but they could also be welding or mechanical fasteners.

“In my experience, suppliers don’t look at customers’ alternatives rigorously or early enough during product development,” says Adams. “Proper side-by-side testing requires answers to four key questions:

1) Which attributes should I test?
2) What test procedures should I use?
3) What test result is barely acceptable?
4) What test result leads to total satisfaction?

“The good news for the B2B supplier is that your customers are smart enough to answer all of these questions. Well-designed, customer-centric side-by-side testing will help you properly price your product and avoid getting blindsided by competitors’ products.”

“Research shows that only one in four new products succeeds once a project enters the costly product development stage,” says Adams. “I doubt there is any other function within your company where this level of failure and waste is tolerated. And supplier-centric product development is at the heart of the problem. The key to taking advantage of the recovering economy is in changing the way your company approaches offering new products. Start now and you’ll be well on your way to shaping a truly great economic recovery at your company.”

What do you think?

Expect exponential growth for EIPP in 2011

By Michael Lane of Data Impact

In 2010, only 57 percent of business-to-business (B2B) payments were made by check, which is down from 63 percent in 2009 and 74 percent in 2008 (according to the Association for Finance Professionals 2010 Electronic Payment Survey).

This steady decline indicates that businesses are not only looking for, but are finding a more streamlined approach for managing the financial supply chain. As companies become more attuned to the needs of the B2B transaction set, 2011 is expected to be a record breaking year for electronic invoice presentment and payment (EIPP) growth.

Solution providers now recognize that traditional business to consumer models for electronic invoicing and payment cannot accommodate the complex needs of a B2B environment. As a result, the leaders in the EIPP space are providing more robust supporting information at the invoice and payment levels. Documents necessary to support the invoice review and approval process are made available within the platform. Invoice uploads into the customer’s accounts payable platform allow for cost savings and process efficiencies which fosters adoption. More importantly, the lack of remittance details and complexity of reconciliation have been addressed by decoupling the ACH and accounts receivable file information. Auto reconciliation can be achieved with a separate remittance file that is mapped directly into the billing parties accounts receivable platform.

With the past barriers removed, companies of all sizes will more aggressively pursue EIPP platforms in 2011 in order to drive cost savings, accelerate cash and confidently control receivables.

What do you think?

Will Facebook replace the United States Postal Service?

By Flint Lane of Billtrust

Facebook and the United States Postal Service (USPS) are two organizations that have virtually nothing in common. One is a profitable enterprise that Hollywood is making movies about. The other is a government-run organization losing billions of dollars per year. What, if anything, could they have in common?

I've been thinking a lot lately about what's going to happen with the USPS. It's clear that their business model is broken and without an act of Congress, literally, they'll just continue to lose billions each year. I don't blame the folks that run the USPS, they work hard, but they're stuck with a business model that just doesn't work.

When I do the Billtrust sales pitch for electronic billing, it usually goes something like this: "How much sense does it make for a biller to take an electronic billing feed, print it on paper, put it in an envelope, mail it to me so I can then attach a check and mail it back?" Sounds pretty stupid, right? Well, why are the majority of bills still delivered via the USPS? The answer is actually pretty simple; it's still the only mechanism that can reliably reach everybody.

Below I lay out what a new "electronic post office" has to have in order to replace the USPS and why I think Facebook could easily position themselves for this.

1. Universal Deliverability - Facebook claims 150 millions active US users today and growing rapidly. While certainly not universal, they're certainly getting there with the ability to reach the majority of Americans.

2. Effective Communication Platform - Facebook falls short here quite frankly. Posting a status update is interesting and a great way to stay in touch with friends, but Facebook, in my opinion, has fallen on their face as a communication tool. What Facebook really needs here is a GMail like email interface so that people/businesses could send stuff to your address. Now this certainly would introduce enormous spamming opportunities. Facebook could impose some kind of insignificant email tariff to prevent rampant abuse. I've blogged about this in the past (here). I know most people think they get a lot of paper junk mail, but there is actually an effective tariff in place to limit this, it's called postage. I wouldn't mind receiving some junk email if they went through a system that actually had some controls in place. Charging $0.001 per email wouldn't be unreasonable and would keep out the blatant spammers.

3. Privacy - I don't get myself too worked up about my online privacy because I think the measures that most companies take are far more effective than the offline world. However, there are certainly opportunities for abuse here. I would suggest taking a portion of the tariffs collected from above to pay a third party to monitor privacy on a regular basis.

4. Payments - The majority of mail that people get, that is of any importance, are bills. That's because they require the user to take an action - return a payment. Facebook doesn't have this today but this is not a big effort.

Other have tried to become the universal mailbox. My first company Paytrust did this for bills. Zumbox and EarthClassMail are trying to do this for all other forms of mail. But all three suffer from the chicken and the egg problem. Which is to say that until they have enough users, billers and other mailers don't want to bother enabling electronic delivery to them. And users won't sign up, until they can get a majority of their mail through the channel.

That's why I think Facebook, if they want, is well positioned to do this because they already have the user base. Economically I think it would be a slamdunk. Who else could do this? Maybe Google with GMail but I like Facebook's chances better.

Monday, February 14, 2011

Lessons in leadership

Posted by Mark Brousseau

If strong leadership was important during the recession, it will be especially important as organizations try to distinguish themselves from their competitors during better economic times.

The good news is that anyone can make a difference and anyone can lead. But not everyone chooses to do so. That’s according to Steve Boehlke, author of a new book titled, “50 Lessons on Leading for those with Little Time for Reading.” The book, published by Lilja Press (, is a compilation of actionable leadership lessons from people of diverse and varied backgrounds who have helped Boehlke learn about leadership. Among some of the leadership lessons Boehlke shares:

… Leadership is more about value than success.
… Leadership is passing the ball when you want to take the shot.
… Leadership is having vision – even in the dark.
… Leadership is calling forth the best in others.
… Leadership is letting go but not giving up.
… Leadership is setting a good example.
… Leadership is acknowledging your limits in order to go beyond them.

Any leadership lessons you can share?

Saturday, February 12, 2011

Mobile technology in the spotlight at Capture 2011

Posted by Mark Brousseau

Smartphones are changing the way people shop, bank, communicate and travel. Now, these types of mobile devices are set to have a profound impact on how knowledge workers organize, access, and use business content, Anne Valaitis, associate director of image scanning trends for Infotrends, said during a keynote presentation this week at Capture 2011 in Dallas. In fact, the integration of mobile technology with data capture processes was a hot topic throughout the Capture 2011 conference.

“Mobile devices are changing how we read and work,” she said, noting that respondents to an Infotrends survey said they read 60 percent of their business documents on a screen versus paper. “As a result of mobile devices, we are accessing more content, in different ways,” Valaitis explained.

“Mobile technology is blurring the line between home and office and business and personal,” she said. Sixty percent of respondents to an Infotrends survey said they purchased their own smartphone or mobile handheld device, about half of the apps on these devices are for business, Valaitis noted.

The challenges facing data capture technology vendors and service providers today is to provide mobile tools and services that enable workers to easily plug into the existing IT infrastructure and business processes without increasing additional layers of complexity and cost, Valaitis explained.

Similarly, corporate IT departments must come to the table as an advocate for the mobile worker and help build bridges that will enable productivity, Valaitis said. “To this point, IT has had a hard time supporting these mobile technologies,” Valaitis said. But there is no time to waste. About half of the respondents to an Infotrends survey said they expect the amount of business-related work they conduct on their mobile phones to increase. What’s more, as knowledge workers return to the workforce, it’s likely they will rely on mobile technologies, Valaitis said: “It’s not clear whether they will work in an office, what tools they will need to be productive, or who will support their IT needs.

Workers already are increasingly mobile. Nearly 40 percent of respondents to an Infotrends survey said they were away from their primary work location at least once a month on business, she said.

What’s more, the evolution of technologies such as GoogleDocs will likely drive mobile adoption. “As some point, GoogleDocs will make it easier to create and edit documents in the cloud,” she said.

Valaitis also foresees growing acceptance of consumer technologies such as social media in the workplace. “Facebook is not just a personal media anymore,” she said, pointing to Goldman Sachs abolishing its policy forbidding Facebook use at work. “It is increasingly being used for business.”

What do you think?

Saturday, February 5, 2011

Are we approaching the "tipping point" for ebill usage?

Posted by Mark Brousseau

When will eBills be more widely used than traditional paper bills? A recent study suggests it might only be five years down the road.

The study conducted by NACHA’s Council for Electronic Billing and Payment (CEBP) and PayItGreen suggests that eBilling – or the electronic delivery of a bill to a customer – is gaining momentum across business industries with more billers expected to come online in 2011 and 2012. The NACHA CEBP and PayItGreen study, completed by Blueflame Consulting in January 2011, quantified the size of the eBill market, indicating that a total of 5.1 billion eBills were delivered in 2010 alone. However, some consumers are moving to adopt eBills more slowly than anticipated.

“After easily converting the ‘early adopters’ to eBills, billers are realizing that the second and third tiers of consumers will take more time to convince,” said Ed Bachelder, director of research for Blueflame Consulting. “However, billers across a broadening range of markets and sizes see eBill adoption as an important program for their companies, and have shown commitment to continuing to try to convert their customers.”

Nine of 10 of the companies surveyed rate eBill adoption to be a significant opportunity for their organizations. Cost-savings serves as a major driver for companies, with projected savings falling between 40 and 50 cents per bill. Another motivating factor, billers also said eBill customers are more satisfied customers and are easier to retain. Collectively, participants in the study distribute 735 million bills in a typical month, which is approximately 25 percent of all bills nationwide.

“eBills have not reached their full potential, but they’re gaining momentum,” said Janet O. Estep, president and CEO of NACHA — The Electronic Payments Association. “With companies’ long-term commitment to converting their customers to electronic bill presentment, we see adoption gaining momentum.”

Of those surveyed, universities had the most successful eBilling programs by far. Most universities can mandate eBilling for their students or use a customer opt-out approach rather than an opt-in approach.

“Most billers ask their customers to opt-in to the eBilling program,” said Bachelder. “Companies could increase their eBill participation dramatically by changing their new customer enrollment to an opt-out approach. Our study suggests that only 10 percent of customers who have Internet access would choose to opt-out once they experienced eBilling. Study participants identified one obstacle to eBilling is that the sign-up process is often too time-consuming for customers. An opt-out program would simplify that step.”

Participants in the study agree that more customer education is needed about how eBilling works, the security involved, and how significant paper reduction is to improving the environment.

“Once customers truly understand eBilling, they respond positively for a number of reasons,” said Estep. “Convenience is key, and environmental messaging continues to be a supporting motivator for eBill adoption.”

What do you think?

Friday, February 4, 2011

New NACHA rule will streamline remittance processing

By Mark Brousseau

Hoping to make automated clearing house (ACH) processing more appealing to businesses – especially smaller ones – NACHA is doing away with its outdated opt-out provisions for Accounts Receivable Check (ARC) Conversion and Back Office Conversion (BOC) transactions.

The new rules, which will be effective March 18, reverse a longstanding policy that requires billers and merchants to let consumers choose not to have their checks converted to electronic debits. Merchants and billers will still have to give notice to customers that their checks will be converted.

NACHA sees the rules change as particularly important as smaller merchants and billers look at adopting ACH payments as an alternative to remote deposit capture (RDC), which allows businesses to create images of checks and deposit them electronically to a financial institution.

With ARC, billers are able to convert paper checks they receive from consumers at designated lockboxes into electronic transactions. With BOC, merchants can batch consumer checks throughout the day and convert them later—typically, in a back office rather than at the point of sale—into electronic debits. While ARC and BOC opt-out rates have been marginal, typically running well under 1 percent of all consumers, the handling of these exception items was a big hassle for billers.

“This is a step in the right direction for businesses,” says US Dataworks Product Manager Leilani Doyle. “Businesses no longer are required to offer opt-out indicators on their remittance documents or worry about honoring an opt-out provision, if they don’t want to. This simplifies remittance processing. But the fact is, a miniscule number of opt-outs have been requested since the ARC rule was introduced. And, consumers are only becoming more comfortable with electronic payments.”

What do you think?

Wednesday, February 2, 2011

2011 Predictions for Payments Security

Posted by Mark Brousseau

As 2010 came to an end, it was no surprise that payments security was a top priority for financial institutions, credit card companies, merchants and consumers.

Progress in stopping attacks was achieved last year, resulting in many high-profile arrests. More than 50 individuals involved in the highly publicized Zeus gang were apprehended, and developers of the Mariposa botnet, which stole information from approximately 12.7 million users around the world, were arrested. Most recently, five arrests were made this year for taking part in a series of denial-of-service attacks against major websites as part of the group "Anonymous."

Despite these efforts, cyber fraud is far from being eliminated. In fact, it is evolving into groups (WikiLeaks), resulting in even more malicious and dangerous attacks on consumers and organizations in 2011.

Daniel McCann, president of NetSecure Technologies, a provider of online transaction security solutions, sees the following payments security trends and issues in 2011:

... The emergence of hacker groups

... An increase in mobile fraud as mobile commerce increases

... More attacks on Apple’s i-products as they continue to dominate the industry

... A significant increase in security spending, especially in new technologies like virtualization

What do you think?