Posted by Mark Brousseau
The “underserved” market is considered one of the fastest growing segments in the United States and represents significant potential for banks willing to develop new products and services -- with the appropriate risk safeguards -- and channels to distribute them, according to a study from KPMG.
The KPMG study characterizes the underserved market -- the unbanked (consumers without a transaction account) and underbanked (those without access to incremental credit) -- as having grown significantly in the United States during the economic downturn. The market represents about 88 million individuals with nearly $1.3 trillion in income, according to the KPMG study. Based on forecasts, as many as six million people could be classified as "underserved" in the next two years.
"As banks transform their business models to address a new marketplace, they need to examine the potential of the underserved market as new revenue streams are necessary due to increasing compliance costs and various fees coming under pressure as a result of regulatory reform," said Carl Carande, national account leader of KPMG’s Banking and Finance practice. "In the current environment, we see heavy competition among banks chasing customers with high credit scores, with decreasing margins, leaving the underserved market for those willing to invest in it."
Carande also says that banks, before moving forward, need to ensure that appropriate risk-protections are built-in for the bank and customer. "Risk management is a key element of the early opportunity assessment phase, as banks review their current state and design a portfolio of business opportunities for both the near-term and short-term," said Carande. "From there, it is a matter of creating a target operating model before moving to the end game of deploying a multi-generational plan."
According to the KPMG study, banks can pursue a range of key target segments among the underserved, ranging from those who do not use a bank to young adults with little knowledge of financial products.
"Customer segmentation is critical to serving the underserved market and each target segment requires a disciplined and strategic approach," said Timothy Ramsey, managing director in KPMG LLP’s Performance and Technology Advisory group. "Those banks that carve out a niche that makes sense -- and can successfully market and brand themselves accordingly -- will distinguish themselves from the competition."
"When serving this market, banks also have an opportunity to establish customer loyalty by helping these customers more effectively manage their personal finances and develop better saving and investing habits through educational, financial literacy programs," said Ramsey.
What do you think?
Showing posts with label banking. Show all posts
Showing posts with label banking. Show all posts
Monday, June 13, 2011
Tuesday, June 7, 2011
Bank CFOs fretting health reform
Posted by Mark Brousseau
While CFOs are becoming bullish on the economy, they are concerned about health care reform, according to a biannual survey of banking and financial services Chief Financial Officers (CFOs) and senior controllers conducted by Grant Thornton LLP.
Nearly half (48 percent) of the banking/financial services CFOs said that they expect the U.S. economy to improve in the next six months and nearly two-thirds (65 percent) are optimistic about their own company; however, 55 percent also report that they plan to increase the prices or fees charged by their company in the next six months.
Regarding health care reform, 49 percent of banking/financial services CFOs said that it will decrease their hiring (compared to 37 percent nationally), 52 percent said that it would decrease their company’s growth (compared to 40 percent nationally) and 58 percent said that it would increase their product pricing (compared to 49 percent nationally).
“Although we are seeing increased optimism in the banking and financial services sectors, firms are also bracing for the increased compliance costs that accompany both financial reform and health care reform legislation,” says Nichole Jordan, Grant Thornton LLP National Banking and Securities Industry Leader. “Unfortunately, this means that increased costs from interchange fees to expanded health care will be passed along to the consumer or will affect how aggressively firms can hire.”
When asked about the business climate in their own state, 61 percent of banking/financial services CFOs said that they are seeing a negative impact on their business due to the financial condition of their state and 66 percent reported that the actions of the political leaders in their state have not created a business-friendly environment. In addition, an overwhelming majority (95 percent) support public-private partnerships that seek to reorganize and improve the function of state and local governments and public services as a means to overcome budget challenges at the state and local level.
“Although much of the industry has focused on the impact of national financial reform, banks also need to understand how the political and fiscal environments in their own states can affect their business,” adds Jordan.
What do you think?
While CFOs are becoming bullish on the economy, they are concerned about health care reform, according to a biannual survey of banking and financial services Chief Financial Officers (CFOs) and senior controllers conducted by Grant Thornton LLP.
Nearly half (48 percent) of the banking/financial services CFOs said that they expect the U.S. economy to improve in the next six months and nearly two-thirds (65 percent) are optimistic about their own company; however, 55 percent also report that they plan to increase the prices or fees charged by their company in the next six months.
Regarding health care reform, 49 percent of banking/financial services CFOs said that it will decrease their hiring (compared to 37 percent nationally), 52 percent said that it would decrease their company’s growth (compared to 40 percent nationally) and 58 percent said that it would increase their product pricing (compared to 49 percent nationally).
“Although we are seeing increased optimism in the banking and financial services sectors, firms are also bracing for the increased compliance costs that accompany both financial reform and health care reform legislation,” says Nichole Jordan, Grant Thornton LLP National Banking and Securities Industry Leader. “Unfortunately, this means that increased costs from interchange fees to expanded health care will be passed along to the consumer or will affect how aggressively firms can hire.”
When asked about the business climate in their own state, 61 percent of banking/financial services CFOs said that they are seeing a negative impact on their business due to the financial condition of their state and 66 percent reported that the actions of the political leaders in their state have not created a business-friendly environment. In addition, an overwhelming majority (95 percent) support public-private partnerships that seek to reorganize and improve the function of state and local governments and public services as a means to overcome budget challenges at the state and local level.
“Although much of the industry has focused on the impact of national financial reform, banks also need to understand how the political and fiscal environments in their own states can affect their business,” adds Jordan.
What do you think?
Tuesday, December 21, 2010
The Promise of Prepaid Cash Cards
Posted by Mark Brousseau
It’s estimated that the percentage of U.S. households without bank accounts may be as high as 26 percent. So what happens to the $1.1 trillion that those households take in each year? According to Turner Investments, much of that money is likely to end up on prepaid cash cards over the next five years.
Turner Investments anticipates that the market for prepaid cash cards may grow at double-digit annual rates between now and 2015. Two small prepaid-card vendors that appear to be well positioned to profit from that growth are Green Dot and NetSpend Holdings, Turner Investments says.
For the consumers averse to traditional banking, Turner Investments says prepaid cash cards may hold three benefits:
•The cards can be a cheaper alternative to checking accounts. Consumers who are prone to overspending can’t spend more than they put on the cards, so they aren’t exposed to overdraft charges. Also, the increased checking-account fees resulting from new federal financial reforms are driving some consumers to the cards.
•The cards require no background check, unlike some checking accounts.
•The cards are convenient to load and use, enabling customers to take their paycheck to a retailer where they can have the money loaded onto a card and start shopping immediately.
What do you think?
It’s estimated that the percentage of U.S. households without bank accounts may be as high as 26 percent. So what happens to the $1.1 trillion that those households take in each year? According to Turner Investments, much of that money is likely to end up on prepaid cash cards over the next five years.
Turner Investments anticipates that the market for prepaid cash cards may grow at double-digit annual rates between now and 2015. Two small prepaid-card vendors that appear to be well positioned to profit from that growth are Green Dot and NetSpend Holdings, Turner Investments says.
For the consumers averse to traditional banking, Turner Investments says prepaid cash cards may hold three benefits:
•The cards can be a cheaper alternative to checking accounts. Consumers who are prone to overspending can’t spend more than they put on the cards, so they aren’t exposed to overdraft charges. Also, the increased checking-account fees resulting from new federal financial reforms are driving some consumers to the cards.
•The cards require no background check, unlike some checking accounts.
•The cards are convenient to load and use, enabling customers to take their paycheck to a retailer where they can have the money loaded onto a card and start shopping immediately.
What do you think?
Monday, October 18, 2010
Dodd-Frank to Usher in 'Decade of the Whistleblower?"
Posted by Mark Brousseau
When President Obama signed the Wall Street reform bill into law on July 21, two prominent attorneys say he likely ushered in what might be called "the decade of the whistleblower"—an era marked by a flood of federal investigations sparked by bounty-hunting employees looking to cash in on rewards that, in some cases, could turn them into instant millionaires.
Indeed, the Dodd-Frank bill became law just three months ago, but plaintiff's firms already report an astronomical jump in calls from would-be whistleblowers, note LeClairRyan attorneys James P. Anelli, a veteran labor and employment attorney with decades of experience representing management, and Carlos F. Ortiz, a seasoned white-collar defense attorney who served as a federal prosecutor for more than 15 years. Both attorneys are shareholders in LeClairRyan, based in the firm's Newark, N.J., office.
While the Dodd-Frank Act has been widely discussed, it's extremely significant whistleblower provisions have gone nearly unnoticed, the attorneys say. And yet, under those provisions, whistleblowers that provide information that exposes SEC violations will get up to 30 percent of fines exceeding $1 million. "Bear in mind that recent fines involving violations of the Foreign Corrupt Practices Act (FCPA) have reached up to $100 million," Ortiz notes. "The fallout from these whistleblower provisions will be huge. This is an incredible incentive for employees who are looking to get rich to do all they can to gather information on, and report, potential violations by their employers. Why would they go through existing compliance hotlines when they can contact a plaintiff's attorney and pursue such potentially lucrative payouts?"
Generally speaking, the scope of previous SEC whistleblower laws was limited to cases of insider trading. Dodd-Frank, which will be administered by the newly created Bureau of Consumer and Financial Protection, applies to all potential SEC and commodities-trading violations. For a variety of reasons, it will affect a broad swath of both private and public entities, Anelli notes. "In the old days, whistleblower laws applied to Wall Street traders using insider knowledge to swap 'hot stock tips' with each other, but the new framework is quite broad," he explains. "It applies to virtually any company that deals with consumer credit, loans or property in any capacity, including mortgage brokers, financial advisors and credit-counseling services."
Ortiz says public companies that do business overseas could be forced to deal with an upsurge in employee-generated complaints under FCPA (the conduct of foreign intermediaries, for example, is already under close federal scrutiny.) But public companies are not the only ones that will be affected by the bounty-hunting provisions, Ortiz warns: their subsidiaries and privately-held competitors might also come under closer federal scrutiny.
"Let's assume your company is privately owned and does business in Malaysia," Ortiz says. "If your chief competitor in the market is a publicly-traded American company that, thanks to a whistleblower complaint, becomes the target of a federal investigation, the Department of Justice might launch a broader 'industry probe.' DOJ might say, in effect, 'Now that we know Company X was bribing officials in Malaysia to get work, let's investigate all of its competitors.'"
Moreover, Anelli says the new whistleblower provisions apply to all of the subsidiaries of any public company. "A large public company might have 100 subsidiaries, and as long as the financial information of those subsidiaries is used in its consolidated financial statement, those entities are covered under this law," he says. "The 'Wall Street reforms' actually have a reach that is far beyond the publicly-traded realm."
The potential stakes, the attorneys note, are high: Federal enforcement actions have been increasingly aggressive in recent years, with approximately 150 companies already under investigation for FCPA violations and a growing number of individual executives being singled out for prosecution. "The reforms included a burden-shifting framework that is favorable to employees," Anelli concludes. "Under this framework, employees in many instances will now be able to show that they meet the burden of proof that is required to recover their cut of the eventual fine. Because of the amounts involved, whistleblower cases are going to turn into big business for plaintiff's law firms. As more whistleblowers start making big bounties—and headlines—the number of investigations will only grow. Careful preparation clearly is in order."
What do you think?
When President Obama signed the Wall Street reform bill into law on July 21, two prominent attorneys say he likely ushered in what might be called "the decade of the whistleblower"—an era marked by a flood of federal investigations sparked by bounty-hunting employees looking to cash in on rewards that, in some cases, could turn them into instant millionaires.
Indeed, the Dodd-Frank bill became law just three months ago, but plaintiff's firms already report an astronomical jump in calls from would-be whistleblowers, note LeClairRyan attorneys James P. Anelli, a veteran labor and employment attorney with decades of experience representing management, and Carlos F. Ortiz, a seasoned white-collar defense attorney who served as a federal prosecutor for more than 15 years. Both attorneys are shareholders in LeClairRyan, based in the firm's Newark, N.J., office.
While the Dodd-Frank Act has been widely discussed, it's extremely significant whistleblower provisions have gone nearly unnoticed, the attorneys say. And yet, under those provisions, whistleblowers that provide information that exposes SEC violations will get up to 30 percent of fines exceeding $1 million. "Bear in mind that recent fines involving violations of the Foreign Corrupt Practices Act (FCPA) have reached up to $100 million," Ortiz notes. "The fallout from these whistleblower provisions will be huge. This is an incredible incentive for employees who are looking to get rich to do all they can to gather information on, and report, potential violations by their employers. Why would they go through existing compliance hotlines when they can contact a plaintiff's attorney and pursue such potentially lucrative payouts?"
Generally speaking, the scope of previous SEC whistleblower laws was limited to cases of insider trading. Dodd-Frank, which will be administered by the newly created Bureau of Consumer and Financial Protection, applies to all potential SEC and commodities-trading violations. For a variety of reasons, it will affect a broad swath of both private and public entities, Anelli notes. "In the old days, whistleblower laws applied to Wall Street traders using insider knowledge to swap 'hot stock tips' with each other, but the new framework is quite broad," he explains. "It applies to virtually any company that deals with consumer credit, loans or property in any capacity, including mortgage brokers, financial advisors and credit-counseling services."
Ortiz says public companies that do business overseas could be forced to deal with an upsurge in employee-generated complaints under FCPA (the conduct of foreign intermediaries, for example, is already under close federal scrutiny.) But public companies are not the only ones that will be affected by the bounty-hunting provisions, Ortiz warns: their subsidiaries and privately-held competitors might also come under closer federal scrutiny.
"Let's assume your company is privately owned and does business in Malaysia," Ortiz says. "If your chief competitor in the market is a publicly-traded American company that, thanks to a whistleblower complaint, becomes the target of a federal investigation, the Department of Justice might launch a broader 'industry probe.' DOJ might say, in effect, 'Now that we know Company X was bribing officials in Malaysia to get work, let's investigate all of its competitors.'"
Moreover, Anelli says the new whistleblower provisions apply to all of the subsidiaries of any public company. "A large public company might have 100 subsidiaries, and as long as the financial information of those subsidiaries is used in its consolidated financial statement, those entities are covered under this law," he says. "The 'Wall Street reforms' actually have a reach that is far beyond the publicly-traded realm."
The potential stakes, the attorneys note, are high: Federal enforcement actions have been increasingly aggressive in recent years, with approximately 150 companies already under investigation for FCPA violations and a growing number of individual executives being singled out for prosecution. "The reforms included a burden-shifting framework that is favorable to employees," Anelli concludes. "Under this framework, employees in many instances will now be able to show that they meet the burden of proof that is required to recover their cut of the eventual fine. Because of the amounts involved, whistleblower cases are going to turn into big business for plaintiff's law firms. As more whistleblowers start making big bounties—and headlines—the number of investigations will only grow. Careful preparation clearly is in order."
What do you think?
Friday, April 23, 2010
Customer loyalty to banks drops significantly
Posted by Mark Brousseau
While the U.S. economy may be showing signs of a modest recovery, retail banks continue to struggle with their most basic mission: satisfying customers. In fact, a recent consumer survey reveals that overall satisfaction of retail banking customers has decreased for a fourth consecutive year, to 748 on 1,000-point scale, primarily due to low marks in customer service, according to the J.D. Power and Associates 2010 U.S. Retail Banking Satisfaction Study.
To gauge consumer attitudes, J.D. Power recently surveyed nearly 48,000 retail bank customers across the United States. Respondents were asked to rate their bank on a variety of topics encompassing account activities; account information; bank facility; fees; problem resolution; and product offerings.
Results of the study show that poor customer service is the most common reason why customers switched banks in 2010. According to the study, 37 percent of customers who changed their primary banking relationship in 2010 did so because of poor customer service at their previous bank. This represents a real missed opportunity for banks, according to the study.
“As retail banking customers become considerably less loyal, banks need to focus on getting the fundamentals right,” said Michael Beird, director of the banking practice at J.D. Power and Associates. “Banks who get back to the basics—such as maintaining a clean branch and greeting customers as they enter the branch—may help to alleviate some of the distress customers are feeling and increase overall satisfaction.”
Performing simple service acts such as greeting customers as they enter the branch, offering additional assistance, and thanking them for their business may increase overall satisfaction by nearly 50 index points. However, less than one-half of customers reported experiencing those services.
Loyalty suffers
J.D. Power and Associates research indicates a clear connection between customer satisfaction and customer loyalty. Generally speaking, satisfied customers are loyal customers. On the flipside, customers who report lower levels of satisfaction are much more likely to switch service providers, no matter the industry.
According to the study, expressed loyalty to banks, which is measured by the percentage of customers saying they will “definitely not switch” in the next 12 months, has fallen significantly during the past three years. It was only 34 percent in 2010, compared with 46 percent in 2007. Further, the gap between larger and smaller banks is considerable, with 40 percent of customers at smaller banks reporting that they will definitely not switch, compared with 33 percent at larger banks.
High fees often cited as reason for switching
Fees continue to have a major impact on customer loyalty, as well. According to the study, 29 percent of customers who switched banks in 2010 cited high fees as their reason for leaving. The study also finds that customers can be highly satisfied even when paying fees, provided that they receive sufficient value for the price paid. Fee-paying customers with above-average fee satisfaction indicate better experiences with branch access and appearance, promptness of being served, and the bank’s Web site navigation and range of services.
“While fees have a significant impact on customer satisfaction, banks can mitigate this effect by giving the customer choices,” said Beird. “Customers tend to be considerably less dissatisfied when they have different overdraft options, such as transferring from a savings account or sending a balance alert.”
The way customers bank is changing
As technology continues to infiltrate every aspect of daily life, banks too need to adapt to changing customer preferences. According to the study, 51 percent of customers report a preference to bank online—an increase from 44 percent in 2008. In addition, 7 percent of customers report using a mobile device to check balances, transfer funds, and pay bills.
What do you think?
While the U.S. economy may be showing signs of a modest recovery, retail banks continue to struggle with their most basic mission: satisfying customers. In fact, a recent consumer survey reveals that overall satisfaction of retail banking customers has decreased for a fourth consecutive year, to 748 on 1,000-point scale, primarily due to low marks in customer service, according to the J.D. Power and Associates 2010 U.S. Retail Banking Satisfaction Study.
To gauge consumer attitudes, J.D. Power recently surveyed nearly 48,000 retail bank customers across the United States. Respondents were asked to rate their bank on a variety of topics encompassing account activities; account information; bank facility; fees; problem resolution; and product offerings.
Results of the study show that poor customer service is the most common reason why customers switched banks in 2010. According to the study, 37 percent of customers who changed their primary banking relationship in 2010 did so because of poor customer service at their previous bank. This represents a real missed opportunity for banks, according to the study.
“As retail banking customers become considerably less loyal, banks need to focus on getting the fundamentals right,” said Michael Beird, director of the banking practice at J.D. Power and Associates. “Banks who get back to the basics—such as maintaining a clean branch and greeting customers as they enter the branch—may help to alleviate some of the distress customers are feeling and increase overall satisfaction.”
Performing simple service acts such as greeting customers as they enter the branch, offering additional assistance, and thanking them for their business may increase overall satisfaction by nearly 50 index points. However, less than one-half of customers reported experiencing those services.
Loyalty suffers
J.D. Power and Associates research indicates a clear connection between customer satisfaction and customer loyalty. Generally speaking, satisfied customers are loyal customers. On the flipside, customers who report lower levels of satisfaction are much more likely to switch service providers, no matter the industry.
According to the study, expressed loyalty to banks, which is measured by the percentage of customers saying they will “definitely not switch” in the next 12 months, has fallen significantly during the past three years. It was only 34 percent in 2010, compared with 46 percent in 2007. Further, the gap between larger and smaller banks is considerable, with 40 percent of customers at smaller banks reporting that they will definitely not switch, compared with 33 percent at larger banks.
High fees often cited as reason for switching
Fees continue to have a major impact on customer loyalty, as well. According to the study, 29 percent of customers who switched banks in 2010 cited high fees as their reason for leaving. The study also finds that customers can be highly satisfied even when paying fees, provided that they receive sufficient value for the price paid. Fee-paying customers with above-average fee satisfaction indicate better experiences with branch access and appearance, promptness of being served, and the bank’s Web site navigation and range of services.
“While fees have a significant impact on customer satisfaction, banks can mitigate this effect by giving the customer choices,” said Beird. “Customers tend to be considerably less dissatisfied when they have different overdraft options, such as transferring from a savings account or sending a balance alert.”
The way customers bank is changing
As technology continues to infiltrate every aspect of daily life, banks too need to adapt to changing customer preferences. According to the study, 51 percent of customers report a preference to bank online—an increase from 44 percent in 2008. In addition, 7 percent of customers report using a mobile device to check balances, transfer funds, and pay bills.
What do you think?
Small businesses eye mobile remote deposit capture
Posted by Mark Brousseau
One in four consumers and 39 percent of small businesses desire mobile remote deposit capture (mobile RDC), a technology that allows an image of a check to be deposited through a camera-equipped mobile phone. That's according to new research from Javelin Strategy & Research. A niche product in 2010, small banks and credit unions are the first to offer mobile RDC to identified trusted consumers as a way to retain customers and grow without reliance on branches.
Per the Mobile Remote Deposit Capture report, smartphones are a key factor in the adoption of Mobile RDC. Consumers need access to the mobile web and the ability to take a two-megapixel digital picture with their camera phone. “If one of the largest financial institutions in the U.S. – Bank of America, Chase, Citibank or Wells Fargo – offers mobile remote deposit capture, you will most likely see a domino effect of the other banks offering the service,” said James Van Dyke, president & founder, Javelin Strategy & Research. “With trust worsening and mobility increasing, large banks can dampen the exodus while moving closer to mobile payments with mobile remote deposit capture. Paper payments die slowly, and as RDC helps with electronification of checks for a death by a thousand cuts.'”
Because nearly three in four of business transactions are made via check, this product also has mass appeal to businesses, which – unlike consumers – could be likely to pay for this service, Javelin concludes.
Other key findings of the report:
• Mobile RDC can be an important element to stem customer attrition or attract new customers without costly infrastructure.
• Already, more than one in four consumers who have been victims of ID fraud has had their checking account number stolen. Financial institutions considering implementing mobile RDC must put tight security measures in place to prevent even more fraud.
• Financial institutions can cut costs by offering the eight in ten of consumers who walked in to a branch to make a deposit or withdraw cash in the last 90 days the alternative to use their phone to make a deposit.
• About one in five of smartphone owners use mobile banking on a daily basis – more than double the rate for consumers who do not own a smartphone.
• Many consumers are ready for RDC now, particularly selected high-income individuals
• Four out of ten tech-savvy consumers view mobile RDC technology as desirable.
“Mobile RDC captures unique attributes of mobile hardware and always-on connectivity, to expand mobile banking relationships. We forecast that by 2014, over half of the U.S. population with mobile phones will be using smartphones, a dramatic escalation from the current 18%. This will provide a solid base of growth for additional mobile RDC services,” said Javelin Strategy & Research Analyst Mark Schwanhausser.
What do you think?
One in four consumers and 39 percent of small businesses desire mobile remote deposit capture (mobile RDC), a technology that allows an image of a check to be deposited through a camera-equipped mobile phone. That's according to new research from Javelin Strategy & Research. A niche product in 2010, small banks and credit unions are the first to offer mobile RDC to identified trusted consumers as a way to retain customers and grow without reliance on branches.
Per the Mobile Remote Deposit Capture report, smartphones are a key factor in the adoption of Mobile RDC. Consumers need access to the mobile web and the ability to take a two-megapixel digital picture with their camera phone. “If one of the largest financial institutions in the U.S. – Bank of America, Chase, Citibank or Wells Fargo – offers mobile remote deposit capture, you will most likely see a domino effect of the other banks offering the service,” said James Van Dyke, president & founder, Javelin Strategy & Research. “With trust worsening and mobility increasing, large banks can dampen the exodus while moving closer to mobile payments with mobile remote deposit capture. Paper payments die slowly, and as RDC helps with electronification of checks for a death by a thousand cuts.'”
Because nearly three in four of business transactions are made via check, this product also has mass appeal to businesses, which – unlike consumers – could be likely to pay for this service, Javelin concludes.
Other key findings of the report:
• Mobile RDC can be an important element to stem customer attrition or attract new customers without costly infrastructure.
• Already, more than one in four consumers who have been victims of ID fraud has had their checking account number stolen. Financial institutions considering implementing mobile RDC must put tight security measures in place to prevent even more fraud.
• Financial institutions can cut costs by offering the eight in ten of consumers who walked in to a branch to make a deposit or withdraw cash in the last 90 days the alternative to use their phone to make a deposit.
• About one in five of smartphone owners use mobile banking on a daily basis – more than double the rate for consumers who do not own a smartphone.
• Many consumers are ready for RDC now, particularly selected high-income individuals
• Four out of ten tech-savvy consumers view mobile RDC technology as desirable.
“Mobile RDC captures unique attributes of mobile hardware and always-on connectivity, to expand mobile banking relationships. We forecast that by 2014, over half of the U.S. population with mobile phones will be using smartphones, a dramatic escalation from the current 18%. This will provide a solid base of growth for additional mobile RDC services,” said Javelin Strategy & Research Analyst Mark Schwanhausser.
What do you think?
Thursday, March 18, 2010
Control is Overrated
Posted by Mark Brousseau
Out of control? When it comes to management, “Out of Control” is a compliment. Siamak Farah, director and CEO of InfoStreet (www.infostreet.com) explains:
It may seem counter-intuitive, but the more you control, the less you will succeed. In other words, unless you let go, you won’t grow.
Especially in small business environments, there is a general feeling that if management does not keep it all in check, the business will fall apart. For a moment, let’s assume that this theory is true. By this definition, the more management controls, the better work gets done.
Expanding further, it then behooves us to give management control of everything to ensure it is done the best it can be done. Now, we have just bound the growth of the company to the availability of management. Since the hours of the day are limited, the growth of the company is now limited. Therein lies the fundamental flaw in “control by management”.
If management liberates itself from control it can then be free to think of larger plans. After all, presumably the reason you are in a management position is that you have experience.
Experience can not only create competitive advantages, but it can also avoid costly mistakes. In business, as in sports, wins often come from not making mistakes. Yet, when in the trenches, even the most experienced can make mistakes since they are not sufficiently removed from the process to clearly see the obstacles. This is precisely why even the best players in the world have coaches.
Be a Coach, Not a Player
Throughout our business lives, we have all heard the advice: “delegate, delegate, delegate”. But often this great advice is shrugged off with “I wish I could”, “Don’t have the talent”, “We are under-resourced”, “It’s too risky at our size”, and similar rationalization. Yet, the truth is that by delegation you will get more done with better quality, have a happier team, and the quality of your business and your business life will increase at least ten-fold.
Some are fortunate enough that they can afford great talent, therefore delegation seems like a no-brainer. However, delegation is an acquired skill for most. Those who don’t have it will try to micromanage even the best talent, rendering it virtually ineffective.
On the other hand, some may overcompensate for previous micromanagement and completely wash their hands off of the tasks at hand. That, in the words of my friend Allen Hargreaves, is abdication and not delegation.
Delegation is about letting the person closest to the problem solve the problem, and you, the management, being there in support of them, not to monitor them. You have to be there, side-by-side and close enough to share your experience, but far enough that the work is done by the delegatee and they receive ALL the credit for it.
Developing Delegatees
A great psychiatrist friend of mine once told me that counseling is ineffective. It amounts to giving advice, in one ear and out the other. By contrast, with therapy, the psychiatrists often know the answers, but never share it with the patient. They just ask questions leading the patient down the path so they themselves can reach the right conclusions. That experience will never be forgotten, and thereafter, the patient will always take the right steps.
Management coaching should also be very similar to the therapy approach. Using this model, you can empower the best talent to be better. You can also take even the least experienced, and turn them into the most valuable team members. This approach can allow you to hire out of college, and in no time compete very effectively with those who are paying much higher salaries.
Control has its place
As you may have seen in my other posts, patience is running thin in today’s work environment. Impatient people are often short with others, especially with those that are in the learning phase, or simply did not see a problem the way others viewed it.
This is where control has its value. Regardless of how frustrated, outraged, or peeved you are, you need to be in control of your emotions. This is even more important for leaders who are coaching, teaching, and sharing their experience on a daily basis.
Remember the rule on controlling emotions: In any given exchange, regardless of the position one holds, the one who loses their temper has lost. The damage might seem temporary, but I can assure you it is not.
People often don’t remember details of events, but they do remember how they felt at the event. Therefore an event in which you have shown frustration – or worse yet, anger – will be forever be remembered in a negative light, diminishing your value as a leader or a team player.
Manage Processes Not People
In the 1930s, when talking about black empowerment, Marian Andreson was credited with a quote which truly applies to today’s business environment. She said:
“As long as you keep a person down,
some part of you has to be down there to hold him down,
so it means that you cannot soar as you otherwise might.”
So let go of controlling people today, and focus on creating processes, strategies, and competitive advantages. When you create processes, people can follow them with minimal guidance. As a result, you get controlled quality without having to control people.
This is the formula for growth. Let go, so you can grow.
What do you think?
Out of control? When it comes to management, “Out of Control” is a compliment. Siamak Farah, director and CEO of InfoStreet (www.infostreet.com) explains:
It may seem counter-intuitive, but the more you control, the less you will succeed. In other words, unless you let go, you won’t grow.
Especially in small business environments, there is a general feeling that if management does not keep it all in check, the business will fall apart. For a moment, let’s assume that this theory is true. By this definition, the more management controls, the better work gets done.
Expanding further, it then behooves us to give management control of everything to ensure it is done the best it can be done. Now, we have just bound the growth of the company to the availability of management. Since the hours of the day are limited, the growth of the company is now limited. Therein lies the fundamental flaw in “control by management”.
If management liberates itself from control it can then be free to think of larger plans. After all, presumably the reason you are in a management position is that you have experience.
Experience can not only create competitive advantages, but it can also avoid costly mistakes. In business, as in sports, wins often come from not making mistakes. Yet, when in the trenches, even the most experienced can make mistakes since they are not sufficiently removed from the process to clearly see the obstacles. This is precisely why even the best players in the world have coaches.
Be a Coach, Not a Player
Throughout our business lives, we have all heard the advice: “delegate, delegate, delegate”. But often this great advice is shrugged off with “I wish I could”, “Don’t have the talent”, “We are under-resourced”, “It’s too risky at our size”, and similar rationalization. Yet, the truth is that by delegation you will get more done with better quality, have a happier team, and the quality of your business and your business life will increase at least ten-fold.
Some are fortunate enough that they can afford great talent, therefore delegation seems like a no-brainer. However, delegation is an acquired skill for most. Those who don’t have it will try to micromanage even the best talent, rendering it virtually ineffective.
On the other hand, some may overcompensate for previous micromanagement and completely wash their hands off of the tasks at hand. That, in the words of my friend Allen Hargreaves, is abdication and not delegation.
Delegation is about letting the person closest to the problem solve the problem, and you, the management, being there in support of them, not to monitor them. You have to be there, side-by-side and close enough to share your experience, but far enough that the work is done by the delegatee and they receive ALL the credit for it.
Developing Delegatees
A great psychiatrist friend of mine once told me that counseling is ineffective. It amounts to giving advice, in one ear and out the other. By contrast, with therapy, the psychiatrists often know the answers, but never share it with the patient. They just ask questions leading the patient down the path so they themselves can reach the right conclusions. That experience will never be forgotten, and thereafter, the patient will always take the right steps.
Management coaching should also be very similar to the therapy approach. Using this model, you can empower the best talent to be better. You can also take even the least experienced, and turn them into the most valuable team members. This approach can allow you to hire out of college, and in no time compete very effectively with those who are paying much higher salaries.
Control has its place
As you may have seen in my other posts, patience is running thin in today’s work environment. Impatient people are often short with others, especially with those that are in the learning phase, or simply did not see a problem the way others viewed it.
This is where control has its value. Regardless of how frustrated, outraged, or peeved you are, you need to be in control of your emotions. This is even more important for leaders who are coaching, teaching, and sharing their experience on a daily basis.
Remember the rule on controlling emotions: In any given exchange, regardless of the position one holds, the one who loses their temper has lost. The damage might seem temporary, but I can assure you it is not.
People often don’t remember details of events, but they do remember how they felt at the event. Therefore an event in which you have shown frustration – or worse yet, anger – will be forever be remembered in a negative light, diminishing your value as a leader or a team player.
Manage Processes Not People
In the 1930s, when talking about black empowerment, Marian Andreson was credited with a quote which truly applies to today’s business environment. She said:
“As long as you keep a person down,
some part of you has to be down there to hold him down,
so it means that you cannot soar as you otherwise might.”
So let go of controlling people today, and focus on creating processes, strategies, and competitive advantages. When you create processes, people can follow them with minimal guidance. As a result, you get controlled quality without having to control people.
This is the formula for growth. Let go, so you can grow.
What do you think?
Thursday, October 1, 2009
ERM ROI
Posted by Mark Brousseau
With widespread acceptance that deficiency in risk management was a leading contributor to the credit crisis, these could be happy days for Enterprise Risk Management (ERM) and its advocates. With that new-found popularity will come accountability though; a request that ERM proves its real worth. Ascribing a quantifiable value to ERM may be difficult – but not impossible as Mike Nolan of KPMG’s Advisory practice explains.
As a concept, Enterprise Risk Management has now been with us for some time yet the concerns over how to quantify its effectiveness refuse to disappear.
Many people have become accustomed to judging ERM in qualitative, ‘softer’ terms. In this regard, it’s hard to argue against its effectiveness, resulting as it does in enhanced risk identification and prioritization, a common risk language, improved risk and controls optimization, better risk monitoring and reporting as well as contributing to strengthening risk governance and culture.
However, in today’s currently cost-obsessed environment, assessment against intangible KPIs is unlikely to satisfy those business leaders intent on gauging exactly what the return on investment is; what value their current — or proposed — ERM program generates.
As more companies consider implementing ERM as a way of avoiding the risk management failures which precipitated the current crisis, the good news is that I believe ERM is quantifiable.Such quantification may not be easy; there’s no single formula and the results may not even be perfect — but surely this is preferable to the insistence that ERM can only be measured qualitatively. Such a reassurance might just convince a few more skeptics to head down the ERM route.
If you think about what ERM delivers, there are actually plenty of quantifiable outputs; decreased variability in financial results for example, as well as reduced hedging, insurance and capital costs. These equate directly to improved cash flow which, when coupled with a reduced discount rate (arising from reduced earnings volatility and an improved reputation within the investment community), results in enhanced company value. The metrics are there; it’s just a question of turning them into a final assessment which quantifies that all-important return on investment.
Let’s consider those metrics more closely, starting with capital costs first. With rating agencies paying increasing attention to companies’ ERM frameworks, deficiencies or over-performance in this area can be equated to a quantifiable impact on a company’s ability to access capital and on the cost of capital. Secondly, hard cost savings can be delivered by an ERM program which streamlines existing risk efforts and highlights redundant and inefficient risk activities (e.g. identification / assessment, aggregation and validation processes). Again, another quantifiable metric.
Insurance and hedging costs can be the most tangible cost elements in managing specific risks. ERM can help to optimize and reduce these costs by more clearly identifying underlying risk exposures, existing offsets and potential redundancies and inefficiencies.
Estimating earnings variability may be a complex task but can feasibly be undertaken both before and after ERM risk mitigation activities in order to demonstrate the impact and value of the ERM program.
Harder to quantify are the investment opportunities which can arise from ERM implementation but this does not mean the potential ‘up-side’ of ERM should simply be ignored. ERM enables companies to make smarter, proactive decisions, based on a better understanding of their current risk profile and their appetite for taking onboard more risk in pursuit of competitive advantage.
ERM is about optimizing risk in accordance with your risk tolerances and setting limits; not simply minimizing risk. Applying a risk lens and risk metrics to a business opportunity, in addition to the growth metric analysis, is likely to result in improved investment decisions. ERM can assist in identifying opportunistic areas of your business that would benefit from investment.
When thought of in these terms, the value of ERM looks far more quantifiable than has often been perceived. There is no simple formula for generating that final value but it should be an aggregate of performance in the areas mentioned above.
For too long, ERM has been considered solely in compliance terms, perceived similarly to existing internal audit, legal, environmental and finance compliance activities. Its presence was designed to assuage risk concerns from external stakeholders, directors and ratings agencies alike. It should now be seen in a more proactive light.
The credit crisis has refocused attention on to this area of business. ERM’s ‘standing’ in the risk world may have gone up but, with all expenditure now scrutinized down to the last dollar, it will have to properly prove its worth; something which it has traditionally struggled to do.
Thankfully, it may not prove as difficult a task as some would have us believe.
What do you think? Post your comments below.
With widespread acceptance that deficiency in risk management was a leading contributor to the credit crisis, these could be happy days for Enterprise Risk Management (ERM) and its advocates. With that new-found popularity will come accountability though; a request that ERM proves its real worth. Ascribing a quantifiable value to ERM may be difficult – but not impossible as Mike Nolan of KPMG’s Advisory practice explains.
As a concept, Enterprise Risk Management has now been with us for some time yet the concerns over how to quantify its effectiveness refuse to disappear.
Many people have become accustomed to judging ERM in qualitative, ‘softer’ terms. In this regard, it’s hard to argue against its effectiveness, resulting as it does in enhanced risk identification and prioritization, a common risk language, improved risk and controls optimization, better risk monitoring and reporting as well as contributing to strengthening risk governance and culture.
However, in today’s currently cost-obsessed environment, assessment against intangible KPIs is unlikely to satisfy those business leaders intent on gauging exactly what the return on investment is; what value their current — or proposed — ERM program generates.
As more companies consider implementing ERM as a way of avoiding the risk management failures which precipitated the current crisis, the good news is that I believe ERM is quantifiable.Such quantification may not be easy; there’s no single formula and the results may not even be perfect — but surely this is preferable to the insistence that ERM can only be measured qualitatively. Such a reassurance might just convince a few more skeptics to head down the ERM route.
If you think about what ERM delivers, there are actually plenty of quantifiable outputs; decreased variability in financial results for example, as well as reduced hedging, insurance and capital costs. These equate directly to improved cash flow which, when coupled with a reduced discount rate (arising from reduced earnings volatility and an improved reputation within the investment community), results in enhanced company value. The metrics are there; it’s just a question of turning them into a final assessment which quantifies that all-important return on investment.
Let’s consider those metrics more closely, starting with capital costs first. With rating agencies paying increasing attention to companies’ ERM frameworks, deficiencies or over-performance in this area can be equated to a quantifiable impact on a company’s ability to access capital and on the cost of capital. Secondly, hard cost savings can be delivered by an ERM program which streamlines existing risk efforts and highlights redundant and inefficient risk activities (e.g. identification / assessment, aggregation and validation processes). Again, another quantifiable metric.
Insurance and hedging costs can be the most tangible cost elements in managing specific risks. ERM can help to optimize and reduce these costs by more clearly identifying underlying risk exposures, existing offsets and potential redundancies and inefficiencies.
Estimating earnings variability may be a complex task but can feasibly be undertaken both before and after ERM risk mitigation activities in order to demonstrate the impact and value of the ERM program.
Harder to quantify are the investment opportunities which can arise from ERM implementation but this does not mean the potential ‘up-side’ of ERM should simply be ignored. ERM enables companies to make smarter, proactive decisions, based on a better understanding of their current risk profile and their appetite for taking onboard more risk in pursuit of competitive advantage.
ERM is about optimizing risk in accordance with your risk tolerances and setting limits; not simply minimizing risk. Applying a risk lens and risk metrics to a business opportunity, in addition to the growth metric analysis, is likely to result in improved investment decisions. ERM can assist in identifying opportunistic areas of your business that would benefit from investment.
When thought of in these terms, the value of ERM looks far more quantifiable than has often been perceived. There is no simple formula for generating that final value but it should be an aggregate of performance in the areas mentioned above.
For too long, ERM has been considered solely in compliance terms, perceived similarly to existing internal audit, legal, environmental and finance compliance activities. Its presence was designed to assuage risk concerns from external stakeholders, directors and ratings agencies alike. It should now be seen in a more proactive light.
The credit crisis has refocused attention on to this area of business. ERM’s ‘standing’ in the risk world may have gone up but, with all expenditure now scrutinized down to the last dollar, it will have to properly prove its worth; something which it has traditionally struggled to do.
Thankfully, it may not prove as difficult a task as some would have us believe.
What do you think? Post your comments below.
Banks Target Gen Y
Posted by Mark Brousseau
After failing to develop strong relationships with older consumers, banks are now turning to Generation Y -- with its emerging demand for banking products -- as a source of growth in a weak economy. In addition, banks have an opportunity to start fresh and avoid the relationship sins they have committed in the past. Gen Yers' trust in banks is slipping, however. Only 14 percent of Gen Yers report that their trust in their primary bank has increased over the past year, while 22 percent say that their trust level has decreased over that time frame.
"Banks must avoid alienating Gen Yers as they did older consumers," says Ron Shevlin, senior analyst with Aite Group and author of this report. "Building strong banking relationships with Gen Yers involves getting them engaged with their financial lives and financial providers. Social networks and the online channel will be insufficient in accomplishing this. The tactics and strategies for winning Gen Yers' business must be cross-channel and even cross-family."
What do you think? Post your comments below.
After failing to develop strong relationships with older consumers, banks are now turning to Generation Y -- with its emerging demand for banking products -- as a source of growth in a weak economy. In addition, banks have an opportunity to start fresh and avoid the relationship sins they have committed in the past. Gen Yers' trust in banks is slipping, however. Only 14 percent of Gen Yers report that their trust in their primary bank has increased over the past year, while 22 percent say that their trust level has decreased over that time frame.
"Banks must avoid alienating Gen Yers as they did older consumers," says Ron Shevlin, senior analyst with Aite Group and author of this report. "Building strong banking relationships with Gen Yers involves getting them engaged with their financial lives and financial providers. Social networks and the online channel will be insufficient in accomplishing this. The tactics and strategies for winning Gen Yers' business must be cross-channel and even cross-family."
What do you think? Post your comments below.
Sunday, September 13, 2009
iPhone Users Doing Mobile Banking
Posted by Mark Brousseau
Mobile banking is quickly moving from a “techie” to mainstream capability that is changing how consumers manage their finances today, which in turn will change how consumers pay for goods in the future. That's according to a new report from Javelin Strategy & Research (www.javelinstrategy.com).
“Mobile banking is quickly moving from infancy to commonplace, which will help separate the winners from losers in banks’ ability to attract and keep technology-loving consumers,” said Mary Monahan, Research Director and Managing Partner. “Consumers are hungry for the ‘always-on’ and ‘real time’ ability to monitor and manage their money, and mobile banking serves that need better than any other.”
Among the findings of the report:
... Nearly half of mobile-phone owners currently have access to mobile banking today.
... By 2014, 45% of mobile-phone users will actually use mobile banking.
99 million U.S. adults will conduct mobile banking transactions at least once per year by 2014 – with 52% of mobile-phone users relying on smartphones.
... Mobile banking will rival online banking, with the former used as a “remote control” and the latter as a detailed form of control panel for more complex transactions.
... AT&T has the highest number of mobile bankers due to the iPhone’s influence, while Verizon Wireless has the lowest penetration for mobile bankers among the top tier U.S. wireless carriers.
“Mobile banking is quickly becoming an essential consumer capability,” said Mark Schwanhausser, Financial Services Channels Analyst. “Just as the iPod changed the music industry and their business models, our data shows that iPhone users are changing the banking industry by leading the way in monitoring and managing finances through mobile devices.”
What do you think? Post your comment below.
Mobile banking is quickly moving from a “techie” to mainstream capability that is changing how consumers manage their finances today, which in turn will change how consumers pay for goods in the future. That's according to a new report from Javelin Strategy & Research (www.javelinstrategy.com).
“Mobile banking is quickly moving from infancy to commonplace, which will help separate the winners from losers in banks’ ability to attract and keep technology-loving consumers,” said Mary Monahan, Research Director and Managing Partner. “Consumers are hungry for the ‘always-on’ and ‘real time’ ability to monitor and manage their money, and mobile banking serves that need better than any other.”
Among the findings of the report:
... Nearly half of mobile-phone owners currently have access to mobile banking today.
... By 2014, 45% of mobile-phone users will actually use mobile banking.
99 million U.S. adults will conduct mobile banking transactions at least once per year by 2014 – with 52% of mobile-phone users relying on smartphones.
... Mobile banking will rival online banking, with the former used as a “remote control” and the latter as a detailed form of control panel for more complex transactions.
... AT&T has the highest number of mobile bankers due to the iPhone’s influence, while Verizon Wireless has the lowest penetration for mobile bankers among the top tier U.S. wireless carriers.
“Mobile banking is quickly becoming an essential consumer capability,” said Mark Schwanhausser, Financial Services Channels Analyst. “Just as the iPod changed the music industry and their business models, our data shows that iPhone users are changing the banking industry by leading the way in monitoring and managing finances through mobile devices.”
What do you think? Post your comment below.
Wednesday, August 19, 2009
ET Phone Home
Posted by Mark Brousseau
Vijay Balakrishnan, president of StratEx LLC (770-598-5747, www.stratexllc.blogspot.com) passes along an article he wrote on the recent announcement by USAA that it will allow its customers to make deposits by iPhone:
Mobile phone cameras have captured images of everything from election protests in Iran to the recent tragic collision of a helicopter and a small plane over the Hudson River. So, what could one possibly add to the list of things that would intrigue mobile shutterbugs? With apologies to Mr.McGuire in the movie The Graduate, "I have just one word for you. Just one word.....checks."
The recent announcement from USAA, allowing its customers to make deposits by sending images of checks taken with their Apple iPhones, brings together technologies from the 19th and 21st centuries. Until the advent of Check 21, the movement of deposited funds depended on the physical transport of paper. An extensive retail branch network was developed to act as collection points for deposited paper. USAA, which serves 7.2 million active and retired members of the U.S. military and their families from one branch in San Antonio, has consistently used technology to turn conventional wisdom on its head. Three years ago, it announced its Deposit @Home service that allows customers to make deposits by sending images of checks scanned at home. Despite early scepticism from many, USAA claims 150,000 users. The addition of mobile smart phones takes the remote capture notion even further.
In addition to this announcement, mobile deposit technology provider Mitek Corporation has announced relationships with Fiserv, RDM, NCR, and J&B Software to take the capability to their customers. As these formidable players get past their pilots and launch offerings, we will likely see more financial institutions make mobile deposit services available.
What about fraud, you say? Doesn't Check 21 require account and transit information to be read magnetically to ensure security? While I admit that the prospect of sensitive check images flying through the air can be unnerving, and there are issues of authentication, privacy and data integrity that need to considered (another post, another day), the fact is that there is no regulation that requires that the magnetic ink character recognition (MICR) information be read magnetically. In fact, Check 21 is silent on the subject. Thus absent regulation, it falls to the individual financial institution's tolerance for risk, versus the obvious convenience of the service.
There are two factors that can mitigate risk to some extent: the old dictum of knowing your customer (KYC), and the option to delay funds availability until the check has cleared. I believe we will see the adoption of mobile deposit capture in defined communities such as the USAA customer franchise, where the financial institution has a very good idea of risk exposure. Credit unions with well defined memberships are more likely to offer this service than banks (and like USAA, most credit unions are also not extensively branched allowing them to make virtue out of necessity). We will likely see the service offered to the "safest" customers first, based on their deposit history, followed by a gradual expansion using funds availability agreements as a tool to calibrate exposure.
The banking community at large has a different challenge. Deposit acceptance is arguably the raison d'etre for large retail branch networks. Remote capture in general, and mobile deposit in particular, poses an interesting channel conflict paradox (see BAI Insights for a summary of a presentation I did with Bob Meara from Celent on the RDC/Branch paradox). Thus, my take is that banks (particularly the larger ones) will perceive mobile deposit as a bridge over troubled waters and be reluctant to put their branch network at risk.
While I don't see the airways saturated with check images from mass deployment, I believe mobile deposit will do well through niche (not necessarily small) adoption. Technology providers, transaction processors, and financial institutions all have different but related niche marketing challenges ahead. Astute target market selection will likely govern success. The alignment of factors like service and product features, pricing (ex: who pays for the data plan for zapping all those images, and what's the payback?), as well as path-to-market partnerships, are imperatives to be carefully considered.
What do you think? Post your comment below.
Vijay Balakrishnan, president of StratEx LLC (770-598-5747, www.stratexllc.blogspot.com) passes along an article he wrote on the recent announcement by USAA that it will allow its customers to make deposits by iPhone:
Mobile phone cameras have captured images of everything from election protests in Iran to the recent tragic collision of a helicopter and a small plane over the Hudson River. So, what could one possibly add to the list of things that would intrigue mobile shutterbugs? With apologies to Mr.McGuire in the movie The Graduate, "I have just one word for you. Just one word.....checks."
The recent announcement from USAA, allowing its customers to make deposits by sending images of checks taken with their Apple iPhones, brings together technologies from the 19th and 21st centuries. Until the advent of Check 21, the movement of deposited funds depended on the physical transport of paper. An extensive retail branch network was developed to act as collection points for deposited paper. USAA, which serves 7.2 million active and retired members of the U.S. military and their families from one branch in San Antonio, has consistently used technology to turn conventional wisdom on its head. Three years ago, it announced its Deposit @Home service that allows customers to make deposits by sending images of checks scanned at home. Despite early scepticism from many, USAA claims 150,000 users. The addition of mobile smart phones takes the remote capture notion even further.
In addition to this announcement, mobile deposit technology provider Mitek Corporation has announced relationships with Fiserv, RDM, NCR, and J&B Software to take the capability to their customers. As these formidable players get past their pilots and launch offerings, we will likely see more financial institutions make mobile deposit services available.
What about fraud, you say? Doesn't Check 21 require account and transit information to be read magnetically to ensure security? While I admit that the prospect of sensitive check images flying through the air can be unnerving, and there are issues of authentication, privacy and data integrity that need to considered (another post, another day), the fact is that there is no regulation that requires that the magnetic ink character recognition (MICR) information be read magnetically. In fact, Check 21 is silent on the subject. Thus absent regulation, it falls to the individual financial institution's tolerance for risk, versus the obvious convenience of the service.
There are two factors that can mitigate risk to some extent: the old dictum of knowing your customer (KYC), and the option to delay funds availability until the check has cleared. I believe we will see the adoption of mobile deposit capture in defined communities such as the USAA customer franchise, where the financial institution has a very good idea of risk exposure. Credit unions with well defined memberships are more likely to offer this service than banks (and like USAA, most credit unions are also not extensively branched allowing them to make virtue out of necessity). We will likely see the service offered to the "safest" customers first, based on their deposit history, followed by a gradual expansion using funds availability agreements as a tool to calibrate exposure.
The banking community at large has a different challenge. Deposit acceptance is arguably the raison d'etre for large retail branch networks. Remote capture in general, and mobile deposit in particular, poses an interesting channel conflict paradox (see BAI Insights for a summary of a presentation I did with Bob Meara from Celent on the RDC/Branch paradox). Thus, my take is that banks (particularly the larger ones) will perceive mobile deposit as a bridge over troubled waters and be reluctant to put their branch network at risk.
While I don't see the airways saturated with check images from mass deployment, I believe mobile deposit will do well through niche (not necessarily small) adoption. Technology providers, transaction processors, and financial institutions all have different but related niche marketing challenges ahead. Astute target market selection will likely govern success. The alignment of factors like service and product features, pricing (ex: who pays for the data plan for zapping all those images, and what's the payback?), as well as path-to-market partnerships, are imperatives to be carefully considered.
What do you think? Post your comment below.
Friday, May 29, 2009
Impact of the Economy on Online Banking Systems Purchasing Decisions
By Mark Brousseau
Today’s economy has presented challenges for banks to invest in new technologies, such as online banking solutions. However, for those banks that can, now is the time to do so, says Joe Spatarella, vice president, sales & marketing, Online Banking Solutions (OBS).
"With minimal activity and deal flow, this is an opportune time to move forward and negotiate an ideal vendor partnership to take you well into the future," Spatarella says.
Below are best practices that Spatarella offers for acquiring and deploying online banking solutions in a challenging and transforming economic climate. "With little or no margin for error, the following could help you win a greater share of customer revenue with a contemporary solution when others are afraid to move," he says.
1. Set your goals: Identify a solution that can differentiate the financial institution in a crowded market. Focus on improved user experience: semantics, navigation and ability to customize at the user level without expensive vendor modifications.
2. Walk a different path to success: Find a vendor that is truly willing to partner and share project risks rather than the 800 pound gorilla who is less likely to negotiate favorable terms or who makes promises that cannot be met.
3. Go with a fixed cost model: Annual license fees and fixed per user pricing is much easier to manage than variable transaction pricing.
4. Purchase in the present, not the future: While product roadmaps are important, be sure the vendor can deliver the product version you purchased at the time you need to deploy it
5. Share in project success: A vendor will be more likely to share the risk and contribute specialized resources if there is also an opportunity to benefit from project success.
6. Watch the clock: Give yourself enough time to make a decision and give the vendor a reasonable timeframe to deliver. Don’t use so much of the project timeline on evaluation that the vendor is left with a highly compressed window for implementation.
7. Minimize the frequency: The solution must be sustainable and scalable so that in 3 to 5 years, you are not looking for another vendor and having to repeat the process with valuable time and resources. Plan for continued success, not failure.
What do you think? Post your comments below.
Today’s economy has presented challenges for banks to invest in new technologies, such as online banking solutions. However, for those banks that can, now is the time to do so, says Joe Spatarella, vice president, sales & marketing, Online Banking Solutions (OBS).
"With minimal activity and deal flow, this is an opportune time to move forward and negotiate an ideal vendor partnership to take you well into the future," Spatarella says.
Below are best practices that Spatarella offers for acquiring and deploying online banking solutions in a challenging and transforming economic climate. "With little or no margin for error, the following could help you win a greater share of customer revenue with a contemporary solution when others are afraid to move," he says.
1. Set your goals: Identify a solution that can differentiate the financial institution in a crowded market. Focus on improved user experience: semantics, navigation and ability to customize at the user level without expensive vendor modifications.
2. Walk a different path to success: Find a vendor that is truly willing to partner and share project risks rather than the 800 pound gorilla who is less likely to negotiate favorable terms or who makes promises that cannot be met.
3. Go with a fixed cost model: Annual license fees and fixed per user pricing is much easier to manage than variable transaction pricing.
4. Purchase in the present, not the future: While product roadmaps are important, be sure the vendor can deliver the product version you purchased at the time you need to deploy it
5. Share in project success: A vendor will be more likely to share the risk and contribute specialized resources if there is also an opportunity to benefit from project success.
6. Watch the clock: Give yourself enough time to make a decision and give the vendor a reasonable timeframe to deliver. Don’t use so much of the project timeline on evaluation that the vendor is left with a highly compressed window for implementation.
7. Minimize the frequency: The solution must be sustainable and scalable so that in 3 to 5 years, you are not looking for another vendor and having to repeat the process with valuable time and resources. Plan for continued success, not failure.
What do you think? Post your comments below.
Thursday, October 23, 2008
Thursday, April 24, 2008
PNC Settles with DataTreasury
By Mark Brousseau
DataTreasury announced this week that it had settled a patent infringement lawsuit brought against The PNC Financial Services Group, Inc. and PNC Bank, two of 55 defendants in active litigation in the United States District Court for the Eastern District of Texas.
DataTreasury had accused PNC of infringing U.S. Patent Nos. 5,910,988 and 6,032,137, which were issued to the Plano, Texas company in 1999 and 2000 for image capture, centralized processing and electronic storage of document and check information. DataTreasury also had accused PNC of infringing U.S. Patent Nos. 5,265,007 and 5,717,868, which were issued in 1993 and 1996 for a central check clearing system.
The litigation had been stayed while the U.S. Patent & Trademark Office reexamined the validity of DataTreasury’s ‘988 and ‘137 patents, and has recently resumed after the Patent Office confirmed the validity of the claims of those patents and granted DataTreasury additional claims. None of the defendants in this litigation have ever proved that any of the claims of these DataTreasury patents are invalid or unenforceable, DataTreasury notes.
PNC concluded that this settlement was in the best interest of its business.
Part of the settlement is documented in the form of a Consent Judgment filed in the Marshall division of the U.S. District Court for the Eastern District of Texas. “It is comforting to my client that the banks are doing the right thing by licensing this patented technology,” said DataTreasury’s patent and licensing counsel, Rod Cooper of Texas-based Nix, Patterson & Roach, LLP.DataTreasury has granted PNC a worldwide license for its patents.
Terms of the agreement are confidential, but they include protections for PNC’s customers, giving the bank a competitive edge in check processing, DataTreasury claims. “It is clear that PNC understands the importance of DataTreasury’s patents, which help the bank realize the benefits afforded by the underlying technology,” continued Cooper. “PNC has shown respect for our patents, and has resolved a costly court battle,” said Claudio Ballard, founder and Chairman of DataTreasury and the inventor of the company’s patented technology.
Keith DeLucia, DataTreasury’s CEO added: “PNC is the second financial institution from the Financial Services Roundtable to license our patents despite the association’s efforts to lobby the Congress for infringement immunity from our patents."
"We are now preparing to take the remaining defendants to trial,” said DataTreasury’s lead trial counsel, Nelson Roach of Nix, Patterson & Roach, LLP.
DataTreasury announced this week that it had settled a patent infringement lawsuit brought against The PNC Financial Services Group, Inc. and PNC Bank, two of 55 defendants in active litigation in the United States District Court for the Eastern District of Texas.
DataTreasury had accused PNC of infringing U.S. Patent Nos. 5,910,988 and 6,032,137, which were issued to the Plano, Texas company in 1999 and 2000 for image capture, centralized processing and electronic storage of document and check information. DataTreasury also had accused PNC of infringing U.S. Patent Nos. 5,265,007 and 5,717,868, which were issued in 1993 and 1996 for a central check clearing system.
The litigation had been stayed while the U.S. Patent & Trademark Office reexamined the validity of DataTreasury’s ‘988 and ‘137 patents, and has recently resumed after the Patent Office confirmed the validity of the claims of those patents and granted DataTreasury additional claims. None of the defendants in this litigation have ever proved that any of the claims of these DataTreasury patents are invalid or unenforceable, DataTreasury notes.
PNC concluded that this settlement was in the best interest of its business.
Part of the settlement is documented in the form of a Consent Judgment filed in the Marshall division of the U.S. District Court for the Eastern District of Texas. “It is comforting to my client that the banks are doing the right thing by licensing this patented technology,” said DataTreasury’s patent and licensing counsel, Rod Cooper of Texas-based Nix, Patterson & Roach, LLP.DataTreasury has granted PNC a worldwide license for its patents.
Terms of the agreement are confidential, but they include protections for PNC’s customers, giving the bank a competitive edge in check processing, DataTreasury claims. “It is clear that PNC understands the importance of DataTreasury’s patents, which help the bank realize the benefits afforded by the underlying technology,” continued Cooper. “PNC has shown respect for our patents, and has resolved a costly court battle,” said Claudio Ballard, founder and Chairman of DataTreasury and the inventor of the company’s patented technology.
Keith DeLucia, DataTreasury’s CEO added: “PNC is the second financial institution from the Financial Services Roundtable to license our patents despite the association’s efforts to lobby the Congress for infringement immunity from our patents."
"We are now preparing to take the remaining defendants to trial,” said DataTreasury’s lead trial counsel, Nelson Roach of Nix, Patterson & Roach, LLP.
Tuesday, January 8, 2008
Market Slowdown in 2008?
By Mark Brousseau
Fifty-eight percent of those responding to a recent TAWPI Question of the Week said they had an optimistic outlook for the economy in 2008, while 42 percent of respondents said they didn’t (note: those responding in the positive did so before the recent stock market dive).
Clint Shank (cshank@sortlogic.com) of SortLogic SYSTEMS, a division of Omni-Soft, Inc., sides firmly with the pessimists. “In this election year, a lot of what we’ll see is the same as what we’ve seen these first few weeks of January, and that’s a lot of volatility. There’s been a significant drop in the stock market, and that’s telling,” Shank told me. “A lot of people aren’t comfortable with how things might work out; how stable their job is, as an example.”
“In our market, we could see a slow down because of the volatility,” Shank said. “Good, bad or indifferent, market volatility will affect the banking market as users pull back and wait to see how things turn out with the economy and the election. There’s a sense that there could be a change of parties in the White House, and that would bring new tax rules and guidelines, among other things. Banks will want to see what happens before making big investments.”
“I personally don’t think this is going to be a great year for vendors,” Shank said. “I think next year, if the new presidency gets off to a good start, we could see more of an up tick.”
What do you think? E-mail me at m_brousseau@msn.com.
Fifty-eight percent of those responding to a recent TAWPI Question of the Week said they had an optimistic outlook for the economy in 2008, while 42 percent of respondents said they didn’t (note: those responding in the positive did so before the recent stock market dive).
Clint Shank (cshank@sortlogic.com) of SortLogic SYSTEMS, a division of Omni-Soft, Inc., sides firmly with the pessimists. “In this election year, a lot of what we’ll see is the same as what we’ve seen these first few weeks of January, and that’s a lot of volatility. There’s been a significant drop in the stock market, and that’s telling,” Shank told me. “A lot of people aren’t comfortable with how things might work out; how stable their job is, as an example.”
“In our market, we could see a slow down because of the volatility,” Shank said. “Good, bad or indifferent, market volatility will affect the banking market as users pull back and wait to see how things turn out with the economy and the election. There’s a sense that there could be a change of parties in the White House, and that would bring new tax rules and guidelines, among other things. Banks will want to see what happens before making big investments.”
“I personally don’t think this is going to be a great year for vendors,” Shank said. “I think next year, if the new presidency gets off to a good start, we could see more of an up tick.”
What do you think? E-mail me at m_brousseau@msn.com.
Sunday, September 30, 2007
Mobile Devices: New Payments Tool
By Mark Brousseau
New analysis from Frost & Sullivan finds that the number of users of mobile banking services in the United States could reach 21.27 million in 2010.
“Mobile devices are becoming important tools in the payments and banking space and can definitely be expected to play an important role in the U.S.,” said Frost & Sullivan Strategic Industry Analyst Vikrant Gandhi. “There is a flurry of recent activity around both payments and banking, with investments, operator adoption and development of innovative solutions driving these markets.”
Various mobile payment solutions allow peer-to-peer (P2P) money transfer between individuals through the mobile phone, while increasing penetration of mobile data services such as messaging, mobile Internet and others offer multiple avenues for providing mobile banking services.
However, gaining subscribers’ confidence and educating them about the capabilities of mobile financial services offerings poses a major challenge, Gandhi said. There are bound to be concerns about storing subscriber information on the handset or losing connectivity in the middle of an important financial transaction.
“A strong push by FIs and mobile operators is required to help in the adoption of mobile financial services,” said Gandhi. “Specialized industry participants from the mobile payments and mobile banking segments need to work closely to offer solutions capable of satisfying a wide range of financial needs of mobile subscribers.”
The key success factor will lie in giving customers the option of performing various financial transactions on the move, Gandhi predicted. While mobile payments and banking may never fully replace online interactions, they could prove to be an ideal fit for particular types of transactions such as micro-transactions. These services can also be tailored to the needs of a particular niche or category of customers by adjusting various parameters.
Integrated mobile banking and payments services are likely to be a key future trend, according to Frost & Sullivan's research. Where is your financial institution in the rollout of its mobile payments and banking offerings? E-mail me at m_brousseau@msn.com.
New analysis from Frost & Sullivan finds that the number of users of mobile banking services in the United States could reach 21.27 million in 2010.
“Mobile devices are becoming important tools in the payments and banking space and can definitely be expected to play an important role in the U.S.,” said Frost & Sullivan Strategic Industry Analyst Vikrant Gandhi. “There is a flurry of recent activity around both payments and banking, with investments, operator adoption and development of innovative solutions driving these markets.”
Various mobile payment solutions allow peer-to-peer (P2P) money transfer between individuals through the mobile phone, while increasing penetration of mobile data services such as messaging, mobile Internet and others offer multiple avenues for providing mobile banking services.
However, gaining subscribers’ confidence and educating them about the capabilities of mobile financial services offerings poses a major challenge, Gandhi said. There are bound to be concerns about storing subscriber information on the handset or losing connectivity in the middle of an important financial transaction.
“A strong push by FIs and mobile operators is required to help in the adoption of mobile financial services,” said Gandhi. “Specialized industry participants from the mobile payments and mobile banking segments need to work closely to offer solutions capable of satisfying a wide range of financial needs of mobile subscribers.”
The key success factor will lie in giving customers the option of performing various financial transactions on the move, Gandhi predicted. While mobile payments and banking may never fully replace online interactions, they could prove to be an ideal fit for particular types of transactions such as micro-transactions. These services can also be tailored to the needs of a particular niche or category of customers by adjusting various parameters.
Integrated mobile banking and payments services are likely to be a key future trend, according to Frost & Sullivan's research. Where is your financial institution in the rollout of its mobile payments and banking offerings? E-mail me at m_brousseau@msn.com.
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