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Fintech Innovation Watch – What’s next!

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There’s so much is happening in the financial services world that its enough to make your head spin. At the same time, if you take a look at the news today, you can see who’s getting it and moving forward, and who’s content with playing the same old game risking their very survival.

Here’s my Fintech Innovation Watch. With a twist! With every news item, I’ll also go out on a limb and derive some future potential innovations that might happen (or might not)!

APIs: Xero tied up with Capital One. Its a great partnership but the news is getting old now with Wells, SVB etc. already on this bandwagon. I’m sure better things are coming soon. This integration is great for a customer to import their bank transactions into Xero (and hence be happier with Capital One), but banks need to prepare for the new frontiers in customer engagement? For example, in a connected world, a simple 2-way API that helps build up context of the customer transactions that’s available in Xero to help with analytics on receivables and other cash management needs? The number of value added services (perhaps paid) that can be developed by banks are countless. We only need to look beyond the traditional products of business checking account and loans. Read the original news item here.

Core banking and community: In another interesting development, Fiserv signed up Apple Creek Bank. This is a small community bank in Ohio. The reasons for moving to Fiserv are based on traditional metrics of faster processes and providing additional digital services like PopMoney to customers. Fiserv has started to do that really well no doubt. And great goals by Apple Creek too. But if you think about it, the goals also reflect the pains of all banks who are severely constrained, and perhaps trapped inside their own perimeters. With less than deep pockets, many of them rely on their foundation platforms to carry them into the new world. Banking providers should be enabling Internet of Everything for community banks, and helping to actually build a community connected by exciting types of commerce. By serving same old same old, the community banking menu of offerings won’t be able to make escape velocity. Read the original news item here.

Payments: Then we see the continued rise of seamless payments. M&B restaurants are leading the way just like Uber and Lyft did, by making the payments and ordering seamless with Flypay. We order, we eat and drink, and we walk away. Its like Panera++ and Starbucks++! There’s also the added bonus of seamless loyalty across all the M&B brands, not to mention lots of labor efficiency gains. No doubt future enhancements like order ahead and recommendations are on the way, and we should be closely watching how these sector specific payment models will work with more traditional models such as cards and even Apple Pay. Will the list of payment options always be available? Going even further, will restaurant platforms open up APIs for ordering and payments  – to be skinned by anyone? Now, that would be a mashup to watch! Read the original news item here.

Robo-Advising: What a model this news represents! Something for all banks to think about. Danske bank launched its digital investment platform (June) to put to work deposits that are earning practically nothing where they are! Sure, all of us need a little cushion for the rainy day but lets face it – most of us have way more sitting in our checking accounts than we would like. So Danske has turned that simmering dissatisfaction into something of a delight. Independent robo-advisors watch out! Even though June itself is a robo-advisor it is showing us a model that so far has been limited to the large wealth managers like Vanguard and Schwabb. Now if only my own trusty old bank can get its act together, and actually help me manage my money better! Danske got a couple of things right – first they make it easy for customers to take an action, they offer a defined and tailored portfolio, and they’ve opened it up to customers outside of Danske. Now that’s a nice escape from the Innovators Dilemma and creating new business models of the future. Way to go! Read the original news item here.

Hope you liked my take on these innovations. Each of these innovations is awesome in its own right of course. It does take a lot of make a change, however incremental it may be. Do let me know what you thought of this Fintech Innovation Watch. These leaps of faith are based on the principles I used in my new book Connected! How Platforms of Today Will Become Apps of Tomorrow.

Thanks to Finextra for the daily sources. If you liked my take, do subscribe to the blog for when the next edition comes out in a few days. And PS: If anyone wants to partner up to target any of these innovations, look me up! Image courtesy Pixabay

Until next time!

Connected! is now live!

connected book frontExcited to announce from Barcelona, Spain, that my second book “Connected! How #platforms of today will become apps of tomorrow” is now live as a Kindle eBook! The paperback & hard cover versions will out through the distributors soon. I’ll also make the eBook available on Barnes & Noble & Apple in the next few weeks.

For a limited time, get  it now at the special price of 99 cents only!

This launch is truly special to me because it’s on my Dad’s birthday. I’ve been working towards this goal for a while, so its very fulfilling. 47K words seem to do just enough justice to this topic, and I did have this important deadline to meet!

The book covers some pretty awesome ground on how the new digital and connected marketplace is going to evolve, and how we can take steps to prepare our products and companies for it. The notion that platforms will become like apps is a very interesting one, but is also a gradually emerging reality. Something we should all be thinking about as we evolve our products and companies. I’m sure you’ll like the book. I’ll be posting blogs on on my website to cover some of the topics in more detail.

A note on reviews: Some independent reviews are coming soon, but do let me know if you’d like to review the book (a brief 2-3 sentence or longer honest review). As a sincere thanks, I’ll send you a signed paperback for free when the review is posted. Your reviews will help a great deal to spread the word, and to cover additional material through blogs and articles. The process is just a little involved when you don’t have a traditional publisher’s army behind you to guide you and do all the heavy lifting! I’ll appreciate your help. Access the Kindle eBook here.

Looking forward to yet another amazing journey! Adiós amigos, and see you soon!

“What we call the beginning is often the end. And to make an end is to make a beginning. The end is where we start from.” – TS Eliot (courtesy Brainy Quote)

Customer engagement lessons from the holiday season

holiday-shopping-1921658_640-1Let’s start with some cool statistics to set the stage for customer engagement. The numbers are hard hitting. Online sales clearly exceeded offline sales as nicely explained here. 25% more people did not stand in early morning lines.  Obviously the availability of blockbuster deals is not an issue anymore. Good in a way but kind of takes some fun and thrill out of Black Friday.

More interestingly, 40% of online sales were dominated by Amazon. Wal-Mart and others are catching up slowly of course. The prediction is that the big retailers will outperform small and smaller retailers which is a bummer. And lastly all of this pales in comparison to what happens in China. The US thanksgiving TOTAL 4 day online sales are only about 10-15% of online sales on Singles Day!!

Here are some lessons I took away for creating deeper customer engagement:

Ecosystem is important

As we are learning from Amazon, eCommerce is not just transactions and volume, Its about stickiness. With Prime, affiliate marketing, and more products by more marketplace vendors, the ecosystem dwarfs that of other retailers. Consider the added advantages such as eBooks, Amazon video and so on. The question every retailer needs to start asking is very simple. What’s our ecosystem game? And how do we get started?

Mobile is beyond transactions

The steep rise in online sales means that more customers are transacting via mobile phones and tablets. Merely optimizing your mobile site or app does not help. Features such as re-targeting to remind shoppers of products they’ve looked at before, searching local inventory, and allowing social validation and interaction are crucial. In addition, the broad catalog sales approach must give way to more personalized shopping. For this, customer engagement on wishlists or social causes are good methods.

Customers need help planning

A few customers know exactly what they want and go for it. But many are impulsive shoppers. While we know that returns are expensive, online returns are even more expensive. Helping customers set goals, analyze their needs, figure out their gifting etc. is commercially smart. On the one hand, such customer engagement efforts will reduce buyer’s remorse. Even better, customers will avoid the feeling that they somehow lost out on the deals party. It will also help tie your efforts to a noble cause.

Digital commerce is truly here and gaining fast. What we need now is to reinvent our channels for true customer engagement.

The dilemma of digital banking is not about tech

scientist-762627_640I recently had the privilege of speaking at the BAI Beacon conference in Chicago. The topic was about the potential for APIs in financial services. The focus was on customer engagement.

Update: A more detailed version of this blog is now on BAI.org as an article titled: Pieces in Place: The Rubik’s Cube Model of APIs

This session presented a 3-step model for how opening up and become more connected will improve customer engagement. The 3 steps are below. You can read more on BAI under the pretty bubbly title of “Financial Services APIs: Amazing Potential Innovations“.

  1. Opening up access: Adopt APIs so we can make our services and products available when and where they are needed. This can boost top line growth and help retention.
  2. Originating transactions: Get in the middle of customer experiences to help initiate transactions that otherwise would be triggered elsewhere. For example, improve the adoption of features such as card linked offers, develop wish lists, provide better tools for personal financial management etc.
  3. Connecting experiences, creating value: Focus on improving financial well-being. Orchestrate between both banking and non-banking services. Such services include bill pay, PFM, investments, retailer loyalty programs, goal setting etc. Guide customers, advise them, and ultimately help them meet their financial goals.

However, one thought keeps coming up: Is the first step of this journey really the wholesale core technology and delivery transformation? Should that take place before we can do anything else? Indeed, if we go by popular opinion on financial technology (or FinTech), it does seem to be the case.

In my opinion, upgrade of technology is a reality that must be met as soon as possible. Doing so will help us deliver more efficiently. However, the immediate challenges have to do with customer engagement, differentiation, and building of context. This is arguably more so for full service banking. That is because their business purpose is higher (or can be higher) than simply helping us transact and hold balances.

If we look at what’s happening in the sector, its actually this higher purpose of financial money management and financial well-being, rather than the core banking landscape, that is being disrupted. Innovations are cropping up and aiming to meet peripheral customer needs. Such innovations include – personal financial management, saving for retirement and education, peer to peer payment transactions, lifestyle needs, product warranties, lending and mortgages, broad based loyalty management, and so on. As a result, it is evident that simply supplying various (and disjointed) products and services to customers to choose is not proving to be enough. We need to actively help customers with their goals.

Furthermore, two important considerations arise:

  1. As digital innovations drive customer experience based engagement, the underlying core is becoming more and more invisible and undifferentiated.  Given this trend, step 2 of the model to build context assumes higher importance. I outlined some approaches in this article on BAI titled Think Simple for Digital Transformation.
  2. Although innovations in Fintech provide better and effortless customer experience, the silo transactions may actually be causing defragmentation of customer engagement. So we should be looking at integrating the customer context where possible to drive immediate impact. Here step 3 of the model to build partnerships takes priority.

Those who have scale can start with Step 1 to build strong momentum in a broader market. But for others, there’s actually an opportunity to solve for customer engagement and context first. The underlying enabler will still be technology but they can first focus on creating models of customer and community engagement. These models will then demand various building blocks. And based on these we can then properly utilize and structure the core, if at all we can call it that in the future.

For those out there who are helping their organizations or clients think through these issues, please feel free to get in touch. I’d love to interview you for an upcoming series on best practices. As usual, most of the thought process in this post is based on the 5 principles from my book Dancing The Digital Tune, which are now being extended in my upcoming book – Connected! – How #platforms of today will become apps of tomorrow.

Referenced links:

Appreciate your comments!

 

PayPal, Visa and MasterCard Collaborate – For Now.

In a turn of events that demonstrates how rapidly the financial payments market is evolving, Visa and MasterCard have both entered into separate deals with PayPal. (ref 1 and 2 below)

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Image courtesy

It was puzzling. Didn’t PayPal already accept both Visa and MasterCard? Yes it did, but the growth of PayPal (and now Stripe), also posed a very real risk of dis-intermediation of the card networks we both love and hate (depending on if you’re a consumer or merchant). PayPal had been promoting the use of direct bank transfers (ACH) to users by encouraging them to enroll their bank accounts for payments. That meant that while it allowed free payment transfers to friends and family, it also saved on fees when the same source of funds was used to pay merchants.

This rising trend caused a problem for the networks. The solution they came up with was to:

  1. Get PayPal to not encourage users to use bank accounts as source of funds
  2. Allow PayPal access to their mobile payment wallets

PayPal may lose a little margin on its online transactions, but it now has a real chance at speeding up adoption of physical payments, an area where PayPal was clearly lagging behind.

Why did the consumers sign up for direct bank payments when they stand lose their credit card reward points? Its simple – PayPal charged almost a 2.9% fee for payments to friends and family. So it was beneficial to set up a bank account for the payment where PayPal would charge zero fees. With that major hurdle cleared, PayPal was obviously seeing the cheaper payment sources being used for goods and services as well.

PayPal, and now Stripe, Authorize.net and many others, have created a nice position for themselves in the online, small business payments world. It was a pain area that wasn’t addressed by banks and the card networks for a long time (and still isn’t). So it was just a matter of time that their intimacy with the customer had to threaten the underlying, commoditized service provider (the card networks). And if PayPal decides to become a bank (or ties up with a bank like Simple and Moven did), that’ll spell trouble for banks as well.

All said and done, I see this as an agreement born out of convenience, and with a focus on short terms gains and survival. We can expect big changes soon, at least from the networks. But with the rise of Dwolla, PayPal should be on its toes too.

Ref 1: PayPal and Visa ink partnership agreement

Ref 2: PayPal Strikes Deal with MasterCard to Allow Payments in Stores