Factors that drive consumer adoption for start-up banks

One can often find the essence of many articles by just scanning them briefly, but sometimes an article appears that requires a more careful reading. I recently came across such an article, describing the reasons why people switch banks. (Read here).

This article is based on the evaluation of almost 5 000 customers, primarily trying to understand the reasons for shopping for a new banking product. The findings of the survey (while not surprising) is important to consider. Applying these findings to the distribution and deployment of mobile banking offerings requires deeper consideration.

I have not applied my mind enough to be able to make all the conclusions, but here are some of the important lessons (I think) for start-up banks:

• It is impossible to get customers to switch without outspending your competitors on advertising. If you don't have capital to grow your bank, don't try it.
• The placement of branches (or in agents in the case of mobile banking) and the density that you can achieve is critical to how successful you ultimately become.
• The competitiveness or not of your fees and tariffs are (well quite frankly), not important.
  

The MCOM Fiserv deal. Big deal.

This transaction was announced a month ago and I wanted to write something about if for a number of weeks now. The transaction was reported on widely (Read here, here and here), with the Gartner analysis (Read here), probably giving the best (and most sober) view of what happened. Yes it made a lot of sense, with the two companies having worked together for such a long time and also given the success achieved in the US. And it is true, of course, that the Enterprise capabilities of MCOM is now available to Fiserv customers. (if it was not already available).

While the companies were quick to point out the benefits of the marraige, it felt similar to the wedding of a couple that have always hanged out and that everyone knew would tie the knot in the end. It is one of those unions that have changed almost nothing and have just developed the relationship to the logical conclusion. Maybe I am too much of a romantic. I wanted to be able to say WOW! this was truely inspirational.

Nevertheless, it is time to celebrate and wish the bride and groom a long and prosperous time together.

Rolling out mobile banking in Libya

On the 14 February 2011, More Magic and Nokia Siemens Networks announced a collaboration to offer mobile commerce and financial services. (Read here). The new partners describe the advantages of the solution and the big opportunity that they see in this space. The press release also announces that the solution would be rolled out in Libya and would be running for an initial period of four months on both network operators.

On 15 February a few hundred protesters gathered in front of the police headquarters in Benghazi. The situation soon escalated into a conflict zone that made headlines as parties started fighting for control of the country. Many foreigners left the country as the situation slipped into major unrest area. It is not clear what the status of the mobile payment project is at this time.

The press release could not have come at a worse time. One should possible consider to make press releases about events that have been concluded successfully, rather than intended actions that could be impacted by events that we do not have any control over.

This thing called mobile payments is actually very difficult

It is worthwhile to read an excellent article written by Ohad Samet (Read here) on why it would be difficult for both Apple and Google to start offering real payment services to both vendors and buyers. It does not make sense to repeat the well structured article, but it is interesting to reflect on two things:

• Real end-to-end payment solutions are in essence about managing risks. Fraudulent transactions, failed transactions and non-performing transactions should be eliminated from payment schemes. The skills, the technology and the experience to do this effectively, cannot be created overnight. It is not just about appointing the right people, but also about many other things.
• We all use the products of Apple and Google and we respect what they have achieved. However, it is clear from this article that they will not be able to produce end-to-end payment solutions over-night. It is food for thought to consider this. If great companies like this will have difficulties, would it not be more so for mobile operators, banks and other companies to launch new payment solutions?
  

When financial systems require military intervention

"Italian police to play central role in protecting banking IT assets", reads one headline and "Police guard CBA cash machines as glitch hits transaction processing" reads another. These two stories were released within a week from each other.

Luckily, nothing else followed and we could rest a little bit easier. Financial systems are not deteriorating at such a rate that the only way that it will remain stable, trusted and predictable will be through military intervention. Hopefully this will not become a trend.

Western Union's mobile remittances strategy

It often happens that one is confronted by another Western Union press release regarding mobile money. (Like for instance this one). Quite a lot are being said about turning Western Union service into a mobile enabled service. Even if one visits the official Western Union website, one can find a mobile money fact sheet (with very little effort). (Read here).

It may not be commonly known, but Western Union started out as a telegraph company more than 150 years ago. This service was provided to loyal customers till as recent as 2006, when the "Telegram and Commercial Messaging services" were officially discontinued. By this time, almost all revenue was being generated from the remittance service started in 1871. (It only became the biggest generator of revenue in 1980 when it surpassed telegram revenue!)

It seems that this organisation is capable of re-inventing itself to remain relevant in a changing world. Their mobile initiative is (in my mind) a very clever strategy because of two reasons: a)They have shown that they can re-invent themselves b)They have the tools to ensure that they remain relevant in this new world of mobile payment remittances.

All mobile remittances consist of two legs: The "send leg" and the "receive leg". It is extremely difficult (as a matter of fact impossible) to change one of these legs into a mobile wallet without considerations of the other leg. Because Western Union controls many of the existing points of presence in these legs for cash transactions, they are able to activate true mobile remittances much more effectively than others. This is a classic case of developing a strategy based on your strengths to ensure that you remain relevant in future.

Mobile operator competition, rather than cooperation drives mobile money

In the establishment of a payment dispensation, it is important to consider the size of the payment community. Closed loop payment systems catering only for a few payment participants are doomed to fail as it would only be relevant for a few payments. This is why it is important to create a payment community that is as big as possible.

As mobile operators start to recognise the relevance of mobile payments, it would be to their advantage if they can create larger communities that will accept the same payment instrument. The bigger these communities are and the better the cooperation, the bigger the benefits. This is why we are seeing more and more announcements of mobile operators collaborating (Read here), or even forming Joint Ventures (Read here and here). The intention with all these initiatives are good and (if successful) will benefit all.

The intention of this is good, but if these organisations cannot truly cooperate, nothing will be produced and all the good intentions will go up in smoke. The investment would have been in vain. What I find intriguing is if it will be possible for companies that are used to compete (and do this with intensity) can actually cooperate. Many of the structures, culture and values of mobile operators are based on out-performing the competition. Will it be possible to suppress these impulses and to act swiftly on collaborating? I don't think so.

Furthermore, history has shown that progress in mobile banking has never been achieved through collaboration and cooperation, but rather through fierce competition. The successes achieved in the Philippines, Kenya, Pakistan and other countries can all be attributed to competition, whereas initiatives like Simpay (based on cooperation) delayed the deployment of mobile payments in Europe with years. Why don't we learn from history?

Mobile banking application madness

Why would you name a conference: "planet of the apps?" (Read here). It is a catchy name, for sure, but it also inadvertently made me think of the famous movie released in 1968. In this movie some humans are lost on a planet controlled by apes. I saw this movie as a child and it was very scary. I experienced a world that I could not understand and it really felt extremely threatening. Maybe this is what the organisers meant? a scary, confusing new world?

I do think that the current mad scramble to release applications for mobile devices are often not well considered, nor understood. It is often not underpinned by a good business plan nor in support of a clear business strategy.

Some of the risks of a mad rush to roll-out mobile banking applications for mobile devices are the following:

• Configuration management of applications, devices and clients and the relationship with each other can turn into a nightmare of keeping tabs of all the applications downloaded and installed.
• Client support can escalate into a situation that will be difficult to contain, if support agents are not trained properly and empowered to deal with queries related to transactions generated by these applications.
• Back office integration and support for major spikes in transaction volumes can be underestimated. This in turn can lead to unreliable services and lost transactions.

Just some thoughts to consider.

You don't need a pilot license to be flown somewhere

A recent article on Finextra indicated that O2 is seeking to gain a license from the FSA in the UK to offer financial services (Read here). This is something that happens often and is an absolute waste of time and money in my view. It is quite possible to offer financial services under your own brand without having to have a license. Many examples exist in the retail industry where famous retailers have been selling bank accounts, insurance and lending products for years utilising some-one else's license.

The complexity is not just in getting licensed, but also to build an organisation that will ensure compliance, maintain the terms of the license and manage the risks associated with non-compliance. The resources, skills, management approach and governance required to do this is often under-estimated. Changes in the risk profile of the organisation is often also not fully comprehended.

This is almost the same as applying for a pilot's license in order to attend a business meeting that will requires a transatlantic flight. When others have done many transatlantic flights, one will still be tied up in all the prerequisites to be granted the pilot's license. As is the case with the airline industry, there are many qualified and licensed pilots that can help you establish your own mobile financial service.