Sibos Notes: Day 1 Digitization

September 29th, 2014 by Collin Canright

For the 30 years I have been involved as a journalist and marketer in the industry, the message to banks has been all about the electronic future of banking customer relationships. At that time, we talked about electronic banking: now it’s digital banking.

“Digitization is increasingly an imperative. Banks must digitize how they interact with clients or they will be left behind,” said Jamie Forese, Co-President Citi, CEO Citi Institutional Clients Group, Citi, in his opening plenary talk.

I believe that. But I also believed it when I wrote it nearly 30 years ago about electronic banking and ACH-based corporate trade payments. It’s taking a long time. Even in today’s digital age, only 15 % of global consumer commerce is digital, he said, and that may even be high depending on what you count.

Yet the move from email to internet went pretty quickly once it got going, and if digital crypto-currencies move at internet speeds, who knows.

Digitization: Payments and Securities

“Banking is digitizing, and payments are the first to move,” reported McKinsey & Company Marc Niederkorn, in presenting the firm’s 2014 global payments report. Markets for other financial services may matter more in terms of profitability, but payments anchors the digital banking relationship to capture the customer.

As expected, the question arises whether banks will rise to the digital challenge or will the digitally savvy companies get their customers. Banks of all sizes do have a strategic advantage, noted Stefan Dab, in presenting the Boston Consulting Group’s 2014 global payments report. Apple, however, did not get into the payments business for the fees but for the customer experience.

Payments studies get a lot of attention. Both sessions were standing-room only.

Banks of all sizes have the advantage that they always have had: relationships and receivables. “It’s still back to what it’s always about,” Dab said. Own the household. Get them a credit card. Make the mortgage.

And sell securities on the receivables. In the seven years since Sibos was in Boston, the percentage of transactions in the securities sector has increased to 50%, up from 30%. The traders I know make a lot of SWIFT transactions.

They also use their own arcane computer codes for legal entities and other securities-related data. A number of participants mentioned the Legal Entity Identifier (LEI) initiative, another long-haul into a standardized digital future.

The Legacy of Legacy Systems

It’s a generally accepted truism–something said by enough people that it would be difficult to say who said it first–that the U.S. has never shut down a payment system.

A similar problem in for banks is reflected in their branches, drive throughs, ATMs, telephone banking centers, online banking systems, and mobile banking. Merchants face a similar situation with point-of-sale systems that manage cash and an increasing number of card and payment methods.

Digitization and B2B Financial Marketing

I tweeted a stream from this session:

“If you can get the content right and people know they can learn, social is straightforward,” Amanda Rendle, HSBC

“Nurturing relationships digitally? Social platform, media. Poor name in financial especially,” Social B2B panel

“Social media is one part of marketing mix. Face to face still powerful. Social reinforces,” Amanda Rendle, HSBC

“Social media fear: the potential for things to go wrong is worse but so is the potential to go right,” Andrew Carrier, Deutsche

“How to divorce personal profile from company profile on social? Big issue. You take contact with you,” Amanda, HSBC #compliance

“Engage with #compliance department. They are not foes. Eager to provide a framework for goals,” Andrew, Deutsche Bank

“Deutsch is clear about segmenting content, audience: target customer financial institutions-treasurers and media.”

“Social marketing has the potential to change balance of power and importance in marketing-media channels.”

“Social marketing can enable brands to be publishers, build an audience they previously paid for.”

“Content decisions can be driven by LinkedIn profile data, helping validate financial decisions,” Jennifer Grazel, LinkedIn

“HSBC running a pilot monitoring relationship managers’ LinkedIn profiles to maintain message, protect brand. Tough issue.”

That last one just appalled people who commented about it on my LinkedIn page. The challenges of regulated industries are difficult for people to understand. Banking does not change quickly, neither in systems nor in marketing.

The Rise and Rise of the Renminbi (and Bitcoin)

One of the comments on the evolution of Sibos in the last few years that caught my attention concerned the rise of the Chinese Renminbi (RMB). It first caught my attention as the example HSBC used in its social media marketing concerned a community it built on LinkedIn around RMB using social media.

I love these arcane, niche uses of social media. Actually, that’s what I thought about the Sibos Twitter feed I started in 2009. But that’s another story.

The comments and articles led me to look at the SWIFT Renminbi Tracker, where I see that RMB adoption is up 30% this year, with one-third of the world’s financial institutions using it. The tracker started in Nov. 2011, with more than 80% of RMB transactions processed in Hong Kong.

Here are a few other RMB resources:

RMB Marketing and Banking Services, from HSBC

Renmibni Internationalization: A Brief Guide to Offshore RMB, from Deutsche Bank

Internationalization of the Renminbi: The Role of Trade Settlement, from Peterson Institute for International Economics

I did get the subhead from viewing the first part of the movie “The Rise and Rise of Bitcoin,” part of the #innotribe track. I liked the character telling the story, an articulate techie geek that talks clearly and with passion, speaking about bitcoin as “global decentralized money” to provide “an alternative to the banking system” that “creates money where value cannot be manipulated by a central authority.”

Very Libertarian, as the movie points out. Well worth seeing.

The smartest people in the room are working on Bitcoin, if you believe the movie (I do). The smartest money is going into person-to-person and perhaps even international transfers (not sure).

My favorite coined phrase: “purpose driven consumer finance,” from McKinsey’s Marc Niederkorn.

My favorite quote: “The British Empire may be no more but London is still the center of the financial world,” from SWIFT CEO Gottfried Leibbrandt, in discussing “The Global Network of Payment Flows,” a study of the SWIFT traffic.

In walking to my hotel, across the river I thought it appropriate that I went past a timber loft in the process of remodeling into office space, like the neighboring buildings with app companies, architects, interior design studios, and trendy restaurants. Buildings like this in my hometown of Chicago hold digital startups now, building the digital future in the spaces of the manufacturing past.

 

Corporate Culture and Inspiration

September 26th, 2014 by Collin Canright

+BABC_Sept25-Christina_Chipman

Christina Canright chats with Stephen Chipman, CEO, Grant Thornton, about corporate culture after his talk to the British American Business Council Chicago on Sep 25. Mr, Chipman spoke on “Corporate Culture as a Differentiator.”

“Mr. Chipman was very gracious,” Christina says. “He told me that he’s learned that it’s not the knowledge we have in our heads, but what’s in our hearts that determines a great culture.

“He liked learning about our weekly inspiration meetings and how they allow everyone at Canright to present something that’s important to them and inspires them.”

Top 15 Payments Articles after Apple Pay Announcement

September 10th, 2014 by Canright Communications

I spent my morning commute reviewing my Twitter feed and boy, was it flooded. Today’s payments news, needless to say, was dominated by news and analysis of Apple’s entry into the payments market, with a smattering of attention given to the latest payments-related data breach at HomeDepot. Google got one mention, Amazon none. To save you the trouble of wading through twitter for the gems, I pulled out my top picks.

 

The Apple Hype, Reaction, and Analysis

 

Apple Dazzle or Apple Schmazzle?

“[…] Apple is not trying to disintermediate the banks but, what they have done (as has PayPal and others) is laid a front-end wrap around banking to reduce the friction and the relationship.  What this means to me is that, like Starbucks and Uber apps, banks will be wrapped in layers of processing through APIs and apps by others, gradually reducing the visibility of banking to a pure utility status.”

 

Will Apple Legitimize Mobile Payments?

“Apple wants to replace the old leather wallet with its digital version. But whether the trendsetting company can kickstart the mobile payments landscape to the next level remains to be seen.”

 

 Did We Just See The Future of Mobile Payments?

“Say hello to Apple Pay. It’s the new kid on the payments block and, depending on how things unfold, it could be the new Gorilla in the mobile payments ecosystem.”

 

 iPhone, NFC & Apple Pay: How Should Banks React?

After years of speculation, Apple has finally revealed its mobile payments strategy: Apple Pay. This is good news for (U.S.) iPhone users who want to ‘tap to pay’, but what about the majority of smartphone users who are using an Android device? What about those of us outside of the U.S? And what about the banks who want to offer a solution to a wider demographic?”    

 

 Why Do You Have to Buy an iPhone 6 to Get a Working Digital Wallet? Think Different.

“Mobile payments can and should be universal. At their best, they increase access to the banking system for everyone by making payments easier. They improve commerce by making transactions quicker and more efficient, lowering costs.”      

 

 Apple Pay’s First Impressions

“The seven need-to-knows about Apple’s new iPhones and mobile payments”

 

Apply Pay Tries to Solve a Problem That Really Isn’t a Problem

“It’s a dangerous business to bet against Apple’s ability to make a product that you didn’t think you needed as part of your daily life. But “Apple Pay” looks as if it may be one of those offerings that doesn’t live up to the company’s hype.”

 

With Apple Pay, a Push Into Mobile Payments

“Times technology columnist Molly Wood says consumers may see a rise in the use of mobile payments now that the iPhone has a chip that will work at tap-to-pay payment terminals.”

 

Apple Looks to Swipe the Payments Market

Need account to read

“The California-based company has previously upended industries from music to mobile phones and, with other prominent technology companies such as Google and Facebook, is considered a threat by the biggest US banks.

 

The Future of Banking: Google Think Series

“Watch my full speech to understand the future of the banking industry and why I predicted in 2009 and again in 2011, that the smartphone would redefine the very nature of banking.”  

 

FIS Acquires Clear2Pay—Industry Implications?

“On September 3, 2014, FIS’ acquisition of Clear2Pay was announced, indicating an expected close in Q4 2014. What does this combination mean for the payments and banking industries? Is it a game-changer? How should competitors respond?”  

 

On the Home Depot Data Breach

 

ICBA Statement on Home Depot Data Breach

“This breach is yet another reminder why information sharing is vital among all participants in the payments system—better, timelier information translates into greater fraud detection and prevention on behalf of consumers.”

 

 The Truth About Home Depot’s Security Breach: Hacking Was Easy

“The fact that two massive breaches of such similarity happened just months apart indicates a major problem with the system. Gaining entry is simple.”

 

A Tiny Bit of Solace for Bankers in Home Depot Breach

“If there’s a silver lining for banks in the Home Depot data breach, it’s this: most experts agree banks are getting better at deterring card fraud.”

 

Meanwhile, in Europe…

 

Mastercard Announces Contactless Acceptance

MasterCard has announced today that it is establishing contactless acceptance as standard by 2020 for merchants accepting MasterCard® and Maestro® in Europe, ensuring that, consumers will be able to pay with their contactless cards and NFC enabled devices at all point-of-sale (POS) terminals in Europe by 2020.”

 

Who Loses in the Mobile Payments Game?

September 5th, 2014 by Canright Communications

As with any industry in the midst of disruption, the payments industry has been receiving a lot of attention by the tech media. Discussions of mobile payments firms and technologies generally end up speculating on who will “win.”

Will it be Amazon? What about the major card issuers? Or PayPal, the previous disruptive force “fighting to stay relevant,” in the words of one commentator? Will it be an upstart startup financial technology firm like Square, Stripe, Braintree/Paypal? And with this week’s announcements, what about Apple? Or MCX, an alliance of large retailers.

I do not know. But I can tell you for sure who is most likely to lose: community banks.

It’s a shame, because community banks are well-positioned to capitalize on the convergence of local ecommerce and the new epayment technologies.

After Our Customers

There are plenty of large banks, large card issuers, and more nimble financial technology companies that are after bank customers, given the increase in mobile-money related transactions. Data from the global business advisory firm AlixPartners, for instance, show that some 40% of smartphone and tablet owners have used their device for money-related transactions in the last month.

wholoseschart

Community banks have a lot against them, to be sure. Their marketing budgets are tiny by comparison to the larger banks and merchants. They are perennially on the short end of technology budgets, with maybe one full-time technology executive overseeing part-timers and outside vendors. They face regulation from all sides, including pronouncements on what kind of technology they can use and how they should evaluate it. Many failed during the financial crisis and many others are only now seeing major improvements.

Banks in general and community banks in particular also have themselves to blame, and the situation continues to deteriorate. “For the first time in our survey, the most preferred provider of the digital wallet has shifted from consumers’ primary bank to PayPal,” write Bob Hedges and Teresa Epperson in “.”

Many have put themselves in the position of getting cut out of a bigger share of the mobile payments revenue stream. It’s natural but not helpful for an industry under regulatory assault to hunker down and focus inwardly, and banks tend to view the payments ecosystem from an internal perspective, rather than a customer perspective.

A Bank-Centric View

When you read about mobile anything in banking, you don’t read so much about mobile commerce. Instead you read about the banking industry’s own mobile segments: mobile banking and mobile payments. Most technology and banking analysts believe that mobile will become the dominant channel for banking in the next few years. Yet many community banks have not even set up mobile banking systems, let alone ventured into mobile payments and mobile money management.

All community banks, however, should be devising mobile strategies. It’s important to consider the role that mobile applications and partnerships will have in the eventual merging of mobile commerce, money movement, and financial.

Mobile apps in which checking balances and making payments are the highest functions will not engage consumers over the long term. Ideally, banks themselves should be working on apps for customers that include person-to-person (P2P) payments, merchant rewards, corporate banking services, and mobile payments.

This may require going outside existing system partnerships and experimenting with a mix of small technology innovators, app developers, and commerce providers. The main point is that there is plenty of room for agility and development for community banks, and their unique position can be leveraged to a competitive advantage.

Community Banks Know Local

Community banks remain in a better position than they might realize, and banks that are willing to innovate will find that they can out-maneuver their larger rivals. As Hedges and Epperson put it, “While the consumer perception trends should be alarming, banks still hold a trust advantage when it comes to safeguarding personal data and using data in the best interests of their customers.”

If the future of ecommerce really is social, local, and mobile, who better to bring these channels together than an innovative local bank? They have relationships with consumers and merchants, and social means face-to-face in this space. Given that local knowledge, banks are in a good position to find the mix of card, commerce, and communications services they can provide in combination with local businesses. Rather than looking at mobile banking and payments, the stock in trade of banks, they would do well to broaden their focus, to mobile commerce and financial management.

Yet the questions remain:

  • Is it too late?
  • Can banks make money at mobile and related services?
  • How best can community banks approach building a mobile strategy?

I would love to hear your thoughts.

Google and Apple are After Your Customers, Battle Banks on Mobile Phones

August 20th, 2014 by Canright Communications

It gets even worse. Amazon’s launch of Local Register has caused quite a stir among the mobile payment standard-bearers Paypal and Square. Paymenteye gives a look at who runs the greatest danger stepping up to the giant, and what can safely be done to mitigate the latest advance.

The average consumer’s banking relationship is dominated by making payments. So why are banks doing so little to defend this critical beachhead?

That is the question McKinsey & Co. asks it in its August study, “The Digital Battle that Banks Must Win.”

The report finds that “nonbank attackers” from large telecommunications companies to nimble technology firms are defining the standards of digital banking as more consumers make payments on their smartphones. The smartphone is the “beachhead” where banks are most vulnerable to losing customers to competitors outside the banking industry.

Canright Financial blog 2

“For now, the payments business remains squarely within the core bank franchise, but attackers such as Google, Apple and PayPal threaten critical source of revenue,” the study says.

These competitors have several advantages over traditional banks, including fewer regulatory constraints, a higher risk appetite, and greater leeway from customers.

The study outlines steps banks can take to get out of the defensive posture and drive traffic to their digital banking channels, starting with payments. It also divides consumers into eight profiles, based on point-of-service payment preferences.

For the full report, click here: http://bit.ly/1uwfR7k

Five Stats You Need to Know from the Fed’s Latest Payment Study

August 20th, 2014 by Canright Communications

Debit Card Use Soars, B2B Checks Fall as Fed Revises Initial Data

exhibit_1Source: The 2013 Federal Reserve Payments Study

Grab a cup of coffee and some sharp pencils. There is plenty of new data to sift through in the Federal Reserve’s revised 2013 payment study.

The 192-page report, released last month, updates a December 2013 payment study and includes new data on credit and debit cards, wire transactions, cash deposits, withdrawals, and third-party fraud payments.

The reports are part of the Fed’s ongoing effort, started in 2001, to help banks plan for the future by measuring broad trends in noncash payments.

In addition to information that is compared with previous studies, this report contains new estimates of total unauthorized transactions (third-party fraud) involving checks, ACH, and cards as well as some information on the use of alternative payment initiation methods provided by depository institutions including commercial banks, savings institutions, and credit unions.

Here are a few highlights that we found interesting:

Noncash Payments Grow at Slower Rate

There were an estimated 122.4 billion noncash payments, excluding wire transfers, in 2012, with a value of $174.4 trillion.

The number of noncash payments in the U.S. increased at a compound annual rate (annual rate) of 4.2 percent from 2009—the year examined in the previous study. That is down slightly from the annual rate of 4.6 percent over the 10-year period from 2003 to 2012.

B2B Checks Falling

It is no surprise that business and consumers are writing fewer checks these days as more payments move online.

Business-to-business (B2B) checks fell faster than any other category, confirming industry assessments that B2B checks have been challenging to replace.

From 2009 to 2012, the rate of decline for the number of B2B checks accelerated to 3.8 percent per year compared with a decline of 3.5 percent per year from 2006 to 2012.

Nonetheless, overall paper check writing continues to persist as a significant portion of noncash payments, but interbank processing and clearing of these checks are virtually all electronic. As in 2009, almost all checks in 2012 were either cleared by electronic image exchange or converted to ACH payments.

Increasingly fewer checks enter the banking system as paper at all: in 2012 about one in seven checks was deposited by accountholders as an electronic image rather than paper.

Value of ACH Payments Triple Previous Estimate

The total number of Automated Clearing House (ACH) payments previously reported in the December 2013 report has been revised downward slightly to 21.7 billion.

The new estimate of the value of in-house on-us ACH payments of $144.1 trillion is approximately triple the size as the previously reported value.

Debit Card Use Soaring, Fraud Rate Falling

The number of debit card payments increased more than any other payment type from 2009 to 2012.

In 2012, the number of debit card payments had reached 47.0 billion—much higher than the 26.2 billion credit card payments in the same year. The number of debit card payments exceeded the number of credit card payments for the first time in 2004.

And while credit card fraud grabbing headlines, debit cards fraud is on the decline. Single-message, or PIN, debit card transactions had the lowest fraud rate among all general-purpose cards in 2012 by both number and value. The ranking applies to debit cards used for both purchases and ATM cash withdrawals.

Credit-Card Comeback

After declining from 2006 to 2009, credit card payments (including both general-purpose and private-label) returned to growth from 2009 to 2012.

The number of credit card transactions grew at an annual rate of 7.6 percent, rising from 21.0 billion in 2009 to 26.2 billion in 2012.

The number of private-label credit card transactions, which led the decline from 2006 to 2009, bounced back strongly at an annual rate of 17.1 percent.

The number of general-purpose credit card transactions, which were relatively flat from2006 to 2009, increased a total of 4.2 billion or 6.8 percent annually.

Read More Here:

The 2013 Federal Reserve Payments Study Summary Report released on December 19, 2013, was updated on July 24, 2014, to reflect revised estimates.

For a summary of the revisions, click here: http://bit.ly/X5Boch

For the full report, click here. http://bit.ly/1qdh8fD

The State of Enterprise Content Marketing: Fast-Paced Change Raises Big Questions

July 22nd, 2014 by Canright Communications

state of enterprise content marketing

 

CMI recently released its study on Enterprise Content Marketing , and we find it insightful and useful.

The fact that content marketing is here to stay is not news in particular to anyone. With enterprise content growing at an amazing 200% annually (p. 4), it is more important than ever to stop and evaluate how effective content marketing is, why we are doing it, and where it fits within the company as a whole.

Although companies are acknowledging the power of content, the management and measurement of it seem to leave many in the dust. “The research CMI conducted prior to the Executive Forum showed that while budgets for content marketing were becoming quite substantial, the processes were still mostly ‘being figured out’” (p. 9).

What has become clear is that change is happening rapidly. We will need to move just as rapidly to keep up with it. The key here is the warning at the opening of the review – content marketing needs the respect of a strategy. Mindless content creation is a dangerous dead weight both to a company’s time, and its brand as a whole.

We looked through the main highlighted points of the study, and pulled them together in a way that will help everyone wrap their heads around the whole concept a little better. We divided this into the greatest challenges and how they affect the whole process:

  • A lack of process/standard operational model
  • A failure of existing measurement tactics
  • The need for integration of content marketing not just into the strategy, but into the culture of the company
  • Need dedication to understanding the creation of content, not just management and distribution

Purpose: Understanding the purpose of content creation not only drives a stronger creation process (less mindless churning out of “filler” content) but shapes more effective operational models and measurements. “When looking at data integration and providing value, it’s important to develop a robust taxonomy and tagging structure for your content from the very beginning” (p. 6).

Quality: The first key is understanding that unless your content is providing real value to your customer – we’ll give you a hint: this doesn’t mean just listing product features – you are throwing away valuable time and money. Quality comes from addressing the needs of your clients. This is one of the key reasons we emphasize the need for the integration of content marketing within the company’s culture. The company is a hive of experts with valuable knowledge to share. Time and energy must be invested in communicating it. These are things employees and c-suite will only dedicate once they truly embrace the culture of content marketing, not just the requirements.

Integrity: Integrity is a word that gets thrown around quite a bit in our industry, but one of the best definitions we’ve read views integrity as a consistency of values. Uniting the need for a cultural embrace of content and the need for operational models, content marketing is not just the hook to the old fashioned sales funnel, but nurturing the life-cycle of client interaction. An important note here is consistency does not necessarily mean every area and every product needs dedicated content, so much as a strategy in how we apply it.

Measurement: Most importantly, results must be measured. This is difficult, as many of the executives interviewed noted. To read an interesting take on the problem with the measurement of content success, take a look at the proposed “attention web” plans that Forbes describes.

There are of course, a number of views on the subject. BMA takes a look at B2B marketers and the struggle to connect content marketing with business value.

All these different view means there are a lot of change happening in the industry right now. We’re all looking forward to new challenges these changes will present. It’s certainly an exciting time to be working in marketing, but we’ll all need to be quick on our toes to prevent wasted hours and useless content. Stay interesting, stay informed, and be informative! All of this seem like a bit much to you? Give us a call!

The Wall Street Journal Celebrates 125 Years

July 8th, 2014 by Samantha Hulings

Today is the 125th anniversary of The Wall Street Journal (WSJ) and to celebrate, the newspaper reprinted the cover of its very first issue from July 8, 1889.

Founded by Charles Dow, Edward Jones, and Charles Bergstresser, the name for the long-standing paper was created by Bergstresser, the lesser known of the three founding reporters.

IMG_20140708_103643876

 

The first edition included just 4 pages and cost $0.02. Two pennies for a paper! Now, that would equate to $0.51. . . almost $1.50 less than the actual cost of The Wall Street Journal today.  Below are a few facts from that original cover.

IMG_20140708_103726140

To continue the commemoration of the anniversary,WSJ staff rang the opening bell of NASDAQ this morning.

Also for this milestone anniversary, a number of celebrities and industry leaders served as guest columnists. Singer, songwriter, and seven-time Grammy Award winning artist, Taylor Swift penned a column on the future of the music industry. Facebook founder and CEO, Mark Zuckerberg discussed a future where the internet is available to all and Bill Ford, executive chairman of Ford Motor Companydiscussed the future of transportation. If you would like to read more opinions of industry leaders, visit online.wsj.com.

If you are interested in how the Journal has covered the last 125 years, I recommend heading over to the WSJ 125 Archive, so you can explore history through the lens of the Journal.

 

 

Market and Regulatory Changes Prompt Investment Policy Review

June 9th, 2014 by Canright Communications

The continued low interest rate environment, ongoing regulatory reform and record stockpiles of corporate cash have contributed to a renewed focus on the investment policy process. While most large companies have an investment policy statement to help guide their cash investments, many privately held or smaller firms may not. It is considered best practice for companies to implement one.

Read the entire article here.

 

Taking on International Supply Chain FX Risks

June 2nd, 2014 by Canright Communications

As the US economy continues to strengthen, many treasury teams are wisely reviewing established payment practices to allow them to take full advantage of new growth opportunities. A US company that has taken the time to explore and implement finance and treasury processes that work best with international suppliers and customers will have greater opportunities to maximize rewards and gain a competitive advantage.

Read the entire article here.