September 29th, 2014 by Collin Canright
September 10th, 2014 by Canright Communications
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.
September 5th, 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.”
August 20th, 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.
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.
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.
“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
June 9th, 2014 by Canright Communications
Debit Card Use Soars, B2B Checks Fall as Fed Revises Initial Data
Source: 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.
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
June 2nd, 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.
May 27th, 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.
May 4th, 2014 by Collin Canright
Though straight-through reconciliation for receivables (STR) may often present more of a challenge than straight-through processing for payments (STP), recent advances in regulations, electronic payments acceptance and paper-to-electronic (P2E) conversion, allow companies to move rapidly toward the STR ideal. Many are now looking to achieve rates of success similar to what they have achieved with straight-through processing for payables.
Read the rest of the article to learn more about STR and its benefits.
June 13th, 2012 by Canright Communications
The future of payments may well reside on mobile devices, but today’s mobile payments consist of the plastic cards in your pocket or purse. Card payments now make up more than two-thirds of all noncash payments, according to a new report by the Federal Reserve.
In the same vein, my last several articles for Independent Banker magazine have dealt with the following card topics:
Profitable prepaid cards remain mostly elusive, but their potential still glimmers
Prepaid card use is soaring, and the checkless account cards are expected to help banks attract millennials and other underbanked customers. As of now, however, prepaid cards are not providing easy money to many community banks.
Four principles of the top-producing credit card programs
Community banks with highest producing credit card lending programs keep cardholders close to home. They also tend to use their card programs as part of their overall relationship-building activities, in many cases offering simple, stripped-down programs that solidify their customer relationships and their community bank brands.
Making the most of your card program year round
Community banks with successful credit and debit card programs plan their success. They understand that getting customers to use their cards consistently requires more than the occasional statement insert or special event promotion.
My conversations with epayments exhibitors at the Internet Retailer Conference & Exhibition (IRCE), held June 5-8 in Chicago, brought two ecommerce payments themes to the fore: international payments and echecks.
The first seemed natural to me, as ecommerce frees retailers from geographic boundaries.
The second theme, the promotion of the echeck as a payments mechanism, surprised me at first, given that the technology is hardly new. It also delighted me because I prefer echecks to credit or debit cards as a web-based payment mechanism and do not find that it’s often available.
I did not make a complete tour of every payment vendor at the show, but here’s a rundown of the vendors I visited and conversations we had.
International Payment Options
When I mentioned to Allyson Stramotas, a marketer for Digital River, that a number of vendors were talking to me about international payments, she assumed I must have heard a lot about China. I had not, though I later found in my conference bag a card presenting the statistics for Alipay, China’s leading third-party electronic payment service. Geographically, a number of vendors pointed out their capabilities for Latin America in general and Brazil specifically.
For instance, Cobre Bem, based in Brazil, provides a PCI-compliant gateway to Brazilian and Latin American banks, providing connections to more than 80 different financial institutions and bank card organizations in Latin America. For its part, Digital River World Payments covers Latin America and Asia in its white paper “Online Payments in the BRIC Countries.”
Other international payments processors I talked to included Moneris Solutions, a joint venture between Royal Bank of Canada and the Bank of Montreal, which partners with BMO Harris in the United States. Moneris provides a whole suite of payment options, including loyalty programs and echecks, for retailers. They stressed the completeness of their solutions across all needs, from store to web to company accounting.
Payza and Order Bridge showed payment platforms. Payza, with an international gateway, presented an ewallet service that can be loaded through bank transfers, wires, credit cards, and other means, allowing you to both make and receive payments. Order Bridge seeks to make it easier to integrate a wide variety of payment, risk-management, and transaction tracking options into a merchant’s website.
2CheckOut exhibited its online payment processing service that integrates a merchant account and payment gateway in a single package, another way of making it easier for retailers to accept online payments. The 2CheckOut shopping cart seeks to open retailers to international customers by presenting international currencies upon checkout, which also supports 15 different languages. It does not require shoppers to create a separate payment account.
Several other vendors emphasized supporting international payment and currency options directly on a retailer website. JCB, a Japanese payment card, wants merchants to accept the card and display its logo on their websites and in their stores. “Japanese consumers love American goods,” said sales rep Charles Spatola. Providing a payment option they know and use will increase the likelihood of making the sale.
Planet Payment made a similar case for international currency support. The company provides in-store and ecommerce payments processing in international currencies so that shoppers can use their local credit cards at a store’s point of sale or see their currency symbol on the website. They receive a guaranteed exchange rate upon checkout, and Planet Payment ensures that it’s lower than other options, as a reason for the customer to buy more goods at the foreign exchange rate.
PacNet Services Ltd., however, impressed me with its comprehensive international payments processing. They did it with the most impressive piece of collateral from an educational point of view: the World Payments Guide 2011, a 720-page reference book and online guide to banking systems and consumer payments in every country in the world, including an explanation of PacNet capabilities.
The cost of payments filtered into the general media last year with the Durbin Amendment, which directed the Federal Reserve to place limits on the fees banks can charge for debit-card payments. For many years, credit- and debit-card processing fees have been roughly the same for retailers, regardless of who does the processing.
I believe that the increased promotion of echecks, an option that has been around for seven years, is driven in some way by today’s post-Durbin environment, in which transaction processing fees are no longer a standard three-plus percent. Electronic checks, which process as low-cost ACH transactions, provide lower transaction costs and can provide yet another option for consumers.
First Data argues as much in the latest version of an echeck white paper, which the payments processor provided at IRCE, “Electronic Checks: The Low-Risk, Low-Cost Way to Accept Online Payments.”
ACHFederal stressed the low cost and customer convenience of echecks. I agreed, as I prefer to pay by electronic check when it’s offered by a merchant, which it generally is not.
Payment fraud also arose as a topic of conversation, especially at the Authorize.Net booth. The company’s parent firm, CyberSource, estimates that merchants lost some $3.4 billion to fraud in 2011.
Finally, my favorite payments vendor of the show was Wipit, a service that allows online merchants to serve people without bank accounts (generally known as the “unbanked”). Unbanked customers use mobile devices that they load up at currency exchanges and mobile phone stores, explained Ian Williams, manager of business development.
Wipit allows them to open an account that they can add cash to in the same way. When they buy on the web, they choose the Wipit icon and pay from their Wipit account. The company has received a lot of attention since its founding in 2010, in part following FDIC concerns for the unbanked.
Whether it’s accepting cash, international payments, or echecks, the vendors face a common challenge: getting their logo for their payments option on a retailer’s website. That, in turn, depends on whether retailers believe that they can use payments channels to open new markets, increase sales to existing customers, or make paying at online checkout so easy that the customer rarely abandons the transaction.