Category Archives: Mobile

How To Fix a Bank in 100 Days

Banks have existed in a world of comfort. The high barriers to market entry like regulation and capital controls mean banks have enjoyed stable profit for decades.  This made competing with banks on their terms very difficult.

The problem is there are now players entering the market who play by entirely different rules. The days of being comfortable and relying on a strong cash flow / stable customer base are over. For banks it’s war time, just look at the facts:

  1. The major disruptors are now making inroads into banking after years of threatening to do so. Alibaba has a banking licence, credit scoring capability, insurance, takes deposits, facilitates payments and lends… and it has ~750 Million customers. It’s able to execute with the scale and efficiency of a technology company not the lumbering slowness of a bank…
  2. Start-ups such as Lending Club and Funding Circle are winning the small business loans market that banks just can’t play in because acquiring those customers is too costly. Not to mention nutmeg and Wealth Front taking some of the more profitable advisory business away.
  3. Increased capital requirements mean that more equity is required on the balance sheet for the same level of Interest Income. At the same time regulators pushing for increased competition in Retail banking means less deposits are available to make Interest Income.
  4. We’re not out of the Sovereign Debt crisis and bank balance sheets are still a long way from where they should be. Deflation is a real probability too, so how should banks react?

These are some almighty headwinds.  So it makes sense to look far and wide to see how to react.

What Strategies Are Out There?

If we look at all the different types of company eyeing fintech, they all have some characteristics that could be useful.   Below I’ve focussed on four research areas, Tech Players, Start-ups, Incumbents and Looking Internally.  Warning, this is not business as usual!

What can we learn from the Tech Players?

Technology is the focus of the entire business, not a department that is subservient to the business. In Tech companies some business based staff bemoan being second class citizens, in banking it’s the opposite. The CEO needs to be a technology focussed (or better yet obsessed) character to deliver the type of technology it takes to compete in the Tech arena. This doesn’t mean being a coder or founder, I’d look at Tim Cook of Apple or Satya Nadella of Microsoft as individuals who are obsessed with how Tech will meet customer needs.

Technology companies are arguably the best in history at building massive scale. Apple has sold over 800 Million iPhones, Alibaba, has ~750 Million customers, Facebook has over 1.3 Billion DAILY Active Users, the majority of which are mobile. These companies have built the technology to support this scale and used two key techniques to achieve this kind of growth

  1. Don’t Dabble. In banking having an accelerator or venture fund are considered table stakes, but getting the most of them is a different thing. Rather than being some the tech department can play with, they must become central to corporate strategy. Alibaba knows  exactly what they want to acquire, and are willing to pay hundreds of millions, if not billions to get it. Name a bank playing in that league? Look at Apple and Google acquisition history, it’s strategic, and based known strategy goals of the business.
  2. Growth Hack. First, hacking isn’t a bad word. Now we’ve got that sorted, if you’re not familiar with Growth Hacking and you’re a CEO or executive in a bank. Study it, internalise it, live it and breath it. The core concept is having the flexibility to tweak product appearance, settings and features and watch the reaction on user growth.

To do this you need products that can be adjusted real time, the analytics to watch the results and the skillset internally to manage that process. Facebook famously industrialised their growth hacking and (pre-IPO) saw user growth as it’s core metric. How will you Growth Hack to increase customer numbers? What’s your developer to user ratio?

The additional insight from Uber and AirBnB is one banks may not immediately feel comfortable with, but I think there are strategies where you can implement regulation digitally and with creativity. I would go as far as to say regulators are consistently underwhelmed by creativity coming from banks, and banks are like a puppy who has been kicked. Scared to go near the regulator with anything but spreadsheets and deference.   Regulation can and should be more automated.

What can we learn from the start-ups?

Segmenting the market works. Most of the really good Fintech success stories of the past decade haven’t been new banks, but in meeting a need not met by the major banks. PayPal, TransferWise and WealthFront all fit into this category. New proposition development in a bank plays in known boundaries, with assumptions about markets it can and cannot serve.

Constraints create innovation. When you have 4 employees and $100k in seed capital, paying $500k for a web server is not an option. So you’d instead buy a little AWS cloud and let it flex up and down as required. A bank’s risk teams will find 1000 things wrong with doing this, but it works so well for start-ups that often its not until they hit hundreds of millions of users they build their own data centres. How many data centres per user does your bank have I wonder?

Acquisitions are a nice exit if you’re a start up. Again look to Google, Apple, Amazon et al here. It’s not the only path to growth if
you’re an incumbent but it’s a damn good one. Start-ups want to partner with banks, banks just need to get a lot better at meeting them half way.

What can we learn from the incumbents making moves?

Embracing Growth Hacking.  I particularly liked this statement from the BBVA CEO – that they saw a

“10% increase in online mortgage sales from simply changing the colour of the calculator”.   BBVA CEO Francisco Rodriguez

Who’s doing that in your bank?

Buying and Building Innovation.  BBVA’s recent investment in Coinbase turned some heads,.  What I like about it this example is that they’re not just buying into another bank, but something quite different.

Experimenting with New Technology. UBS, Rabo and ING have all made public statements about the importance of experimenting with (for example) Blockchain technology.  As CEO if you were to look at your IT Departments R+D capabilities, would you rate them against PayPal’s for experimenting with such technologies?

What can we learn from the challenger banks?

To me the two most interesting challenger bank types are the Branchless of the late 1990s (ING, First Direct), and the Mobile First banks of the late 2000s (Moven, Simple etc).

First Direct and ING carved a comfortable niche with a strong focus on the customer experience and leaving the pain of the plumbing to someone else. Whilst stagnating in recent years, these challenger brands have been useful to grow the customer base for their larger parents.

The newer brands (MovenSimple etc). have renewed the focus on customer experience. It seems the new entrants are able to get closer to what a customer wants than the incumbents can, and if maximised with existing bank scale could be a major tool for attracting customers.

Especially when you consider customers are most likely to be delighted by Mobile and Digital products, they use them far more frequently too…

customer-loyalty-in-retail-banking-2012-fig-09-02_embed

What Can We Learn by Being Critical of Banks Current Operating Norms?

Operational costs are inflated by poor senior level understanding of the Tech best practice, and under empowered junior staff. Banks are still building late 1990s style IT architecture, with standard software being forced onto servers whether or not its needed.

IT Spending will need to increase by an order of magnitude to compete going forward. To unlock this spending, banks will need to be more efficient about how they spend (much more efficient) and unlock cash from other cost bases around the bank. We’ve seen the beginnings of downsizing the branch network, but this needs to go much further if the image below is anywhere near accurate.

IDC Tech Spend

If you’re about to spend this much, it pays to be critical about how you spend it, and how you measure success

SImply having a Mobile App isn’t enough anymore. Sure your app has grown by 200%, but is it making you any profitable revenue? Do your users actually like it? If your App can’t cross sell or open accounts, it’s simply serving the customers you already have. Having X million App users that can’t generate you any profit doesn’t allow you to close branches.  Benchmarked against the Tech Companies the User Experience Banks Offer isn’t good enough either.

In summary, the evidence suggests banks need to increase customer numbers, by focussing on user experience, M+A and an order of magnitude increase in Tech spend / efficiency.

What would I do if I were CEO of a bank for 100 days?

After the strong response to last week’s False Certainty Post  David Brear asked me a very interesting question

“What would you do if you were CEO for 100 days?” (other than buy a snappy suit)?

I have some sympathy for bank senior executives. Making a decision isn’t enough. Having the budget isn’t enough. You can send all the emails you want, but the bank has evolved to put in place lots of checks and balances. Much like politics, making any real change isn’t about having the title it’s about having the strategy, people and capability to execute like a Technology Company. To institutionalise the change I propose some key strategic shifts, organisational change and prioritisation of budget.

Strategy Focus Points:

1) Become A Technology Company that Does Banking

Create more of a technology company culture. I’ve seen this go wrong and create a culture clash in the financial services industry. Technologists and bankers struggle to meet in the middle, but is there a way to get your employee base engaged? I’m willing to bet the vast majority own smartphones. How many of them have access to the sheer amount of openly available, free software development resources out there? A start-up does. If even 1% of the workforce started to build in a sandpit the snowball would start to roll. Google Mail and Google Maps both started as pet projects by staff. How many bank products start that way vs on a powerpoint slide?

Embrace DevOps There is simply no excuse in 2015 for not embracing DevOps. DevOps (short for Developer Ops) means instead of having one set of people that provide new services, and another set of people who develop code. The developers use automated tools to spin up new servers in real time *click* new server, *click* new server. That simple. Unleashing developer creativity is central to the entire company’s strategy of becoming more technology focussed.

2) Become Laser Focussed on Scaling Customer Growth

Growth Hack. 4 Million users isn’t cool, you know what’s cool? 400 Million. AirBnB and Uber as challenger brands started with a laser focus on user growth.  What does your mobile suite need to look like to grow at that speed? Simply put make mobile and digital not just an acquisition channel, but THE acquisition channel. Yes, it can be done, and the business depends on it. Do not take no for an answer from compliance or anyone else. You might see a ~1% increase in Fraud, but that is more than worth it for a 1000% user growth in Mobile ARPU (Average Revenue Per User).

To implement Growth Hacking go find the best growth hackers from silicon valley, and put them in golden handcuffs. Support them in their battles with the organisational anti-bodies.

Build or Buy a Challenger Brand: What if banks had a challenger brand, that they owned 49% of, with an option to acquire at a later stage, and it had the ability to growth hack the overall customer base?  This would give the bank a far greater scope for experimenting and bringing what works into the bigger machine.

3) Define the Key Strategic M+A and Product Development Areas

Think about the Alibaba example earlier in this post, they know exactly what they’re going after and why. As CEO do you know who’s the single person responsible for partnering with start-ups and M+A in that space? Or does it vary on geography and business line?

Make it a priority to know who that person is and empower them to think about questions like: How do we partner with P2P lenders? What are the opportunities in blockchain technology? What bets should we be making (Like BBVA with coinbase)? Does every employee know where to send these ideas to?

Group the key areas into themes that have their own tiger team with a handful of developers, strategists and risk people. The areas would be no surprise. Customer Growth, Use of Data, Alternative Payments, User Experience etc.

4) Give a Clear Mandate for Innovation

Give Innovation It’s own Budget and Structure.  Teams focussed on innovation should have their own budget (or ideally sit inside a challenger brand / subsidiary) and a clear mandate to execute when they identify M+A, partnerships or products that meet their criteria. That mandate normally only exists in multiple committees, making getting anything done impossible.

If this group sits inside an existing Group Function, it will be subject to that functions finance processes, HR processes, risk teams etc. Your organisation can’t innovate in it’s current shape, so create a new shape and then think about how the business lines that are there today should interact with it. Feeding in a shopping list of needs, sense checking outputs etc. Innovation will not succeed with 25 different risk areas trying to fight over the eventual user experience and T+Cs.

Staff the Innovation / Strategy Capability with key skill sets. Consider the type of employee that would fit in a new function / challenger brand. Where do they work now? How will you convince them to come work for you? They want autonomy (to be able to deliver and execute) and mastery (to get really good at something). A new interior design won’t cut it. They don’t want to see corporate comms that talk about “how a committee met and agreed 12 principles to strategic alignment for forward planning purposes”. They want an internal video from an impassioned leader who’s getting the best from them and empowering them.

Ensure Innovation is being Reported to you Correctly.  If someone tells you mobile usage is up 200%, the next question is how does that benchmark against PayPal? If someone tells you mobile transactions are up, ask them what the ARPU is (Average Revenue Per User).

  • Ban any KPI that doesn’t come with a benchmark against competitors in banking and in tech
  • Ban “doesn’t need to worry about that” – I’ll decide that!
  • Sense check your directs – do they get it?

Bringing It All Together

Lisa Phillips had a great suggestion “Start with a Summit for the CEO’s direct reports (and 1 -3 others who should be)”, perhaps around the themes above. Aim to leave with a new organisational structure. Heritage (we’re not going to touch it) and Growth (The new org structure for being a Tech Led company). The key with this session will be identifying who’s grasping the importance of this change and who’s paying lip service.

From here think about the reshuffle at the top and new hires needed. If they’re paying lip service, perhaps they fit will keeping the
heritage business going, or somewhere else. If you’re creating a subsidiary or new unit priorities will be finding

  • A Chief compliance officer with amazing relationships but that gets tech and surround him with technologists (e.g. Circle the Bitcoin wallet has hired tremendous experience and surrounded them with Tech talent)
  • Strategists or VCs who are experts in the emerging Fintech space
  • An HR and Finance Exec who could lead a new unit and fundamentally understands the challenges of being a technology company focussed on user growth

Assuming the board understands the need to grow the customer base as being the key to shareprice raising and the story you outline the hard part will come once the change is made. Seeing it through, getting personal daily updates as CEO on Daily Active Users, Cost of Acquisition and ARPU…

Well that’s my £0.02, and if you’re still with me, I’d love to get your thoughts. Do you disagree? What would you do?

How to Fix NFC and Help it Go Mainstream…

Near Field Communications (NFC), promised to turn your phone into the digital key to your identity, transport and money.

The problem? This promise has been around since the late 90s, and shows no sign of crossing the chasm

How Does NFC Work?

The idea is you present your NFC device, to the NFC reader… and almost instantly the transaction is complete.  This will be very familiar to those of you who use the Oyster card on the Tube.

The User Experience Problem

Have you tried paying with a contactless card?  You’re never quite sure when to present the card to the reader, and often it can take a couple of seconds for the reader to recognise the card.  This creates a sloppy experience, and one that means only those with unlocked Nexus devices are using NFC today.

Google solved this in peer to peer using the “tag dispatch” system.  Sadly, the likes of Igenico, Verifone and Streamline who build the payments terminals most retailers use do not react nearly as well as an Android device does.  Herein lies the problem.

How *should* NFC work?

  1. NFC must be as easy to use as a touch screen.  This means overcoming any lag (like the contactless card example above).  This requires the same kind of user experience as touch screens now have.  If you remember those awful touch screens from 10 years ago? Or the one at your local supermarket… vs your phone.  NFC has to make that kind of leap in user experience.
  2. NFC software needs to be context sensitive.   When recognising another NFC device, both devices need to know how to play with each other and what the rules of the game are.  For a specialist NFC App working with an NFC terminal, this isn’t a huge problem… but if you just want to put your phone near the ticket machine at the train station… this becomes a problem.
  3. NFC must become more open.  NFC being a standard that has been driven by the GSMA is needless to say, very Mobile Operator driven.  The whole ecosystem is designed to be managed and leased by the provider of the NFC chip, who in turn re-sells that access.  This is a huge financial hurdle to adoption.  Why should OEM’s and big business adopt NFC, if the MNO gets to be the gatekeeper and charge for the privilege?

Crossing The Chasm

To solve these challenges, old school hardware manufacturers will need to embrace a Google like approach to NFC.  Speed and user experience is everything.  Contextual sharing (media, contacts, documents) has largely been solved, and I expect Apple to follow where Google has led.

Adopting This Approach Would Benefit

  • Security (door locks, car locks, building access)
  • Transport (rail, airlines – similar to how barcodes work today)
  • Ticketing (events, sports)
  • Form of Identify (Passport app, Driving Licence app)
  • Logistics (RFID style self aware packaging)

I’m sure you can think of plenty more, but the above are some of the more common examples.  My speculation is that this is why Apple has focussed on Passbook initially.  Apple owns a portion of the user experience.  The older organisations that own logistics and specialist ticketing equipment may take a little longer to catch up…

Your Thoughts Here:

Do you think NFC has what it takes to go mainstream?  Will another contender like Bluetooth 4 become standard because it’s not driven by the GSMA?  How can older manufacturing led businesses improve their NFC performance?

What’s holding back Mobile Payments?

It’s a complex picture, but so far the Solutions have come from two angles.  The first is from the banking sector, which is historically complex, and evolutionary.  As such we have product offerings packaging a prepaid card, with mobile services, tied to one operator and one bank…  The definition of a silo.

The second is from the technology sector.  In the past 5 years companies have been able to revolutionise advertising, media and traditional retail using a combination of technology & business model change.  Yet despite several complete implementations and product offerings, that would be enough to revolutionise or even create some market sectors, Mobile Payments have not taken off.

The businesses using the latest technology, software and business models have missed a critical element of the banking sector.  The banks themselves are the largest gatekeepers to change, and are often so slow to adapt they move forward with Scheme and Legislative mandates rather than through any entrepreneurial spirit.

The critical mistake made so far by existing solutions, appears to be the focus to sell mobile payments to the consumer, without considering the merchant or bank.  Many of the solutions are also technologically complete but unable to interface with existing banking business processes & Infrastructure.  The Open solutions allow anyone to become a merchant and completely bypass the existing network.  Whilst Square has focussed on the Merchant, they offer nothing to the consumer that is new & none of the banking security that comes through a regular Merchant account.

Neither Payment Silo’s nor Open Payment Platforms will gain ground without a killer feature or major unique selling point to the Merchant.  The keys to an adoption of a new model have historically been Simplicity, Compatibility & Universality.   TSYS is uniquely placed to provide this.

Lessons from Technology Companies

The story of how Apple ‘evolutionised’ their way into a market leading position with the iPod and iTunes is a great case study for how to approach the Mobile space.  The iPod when it launched was “just another MP3 player” however its unique selling point was the wheel interface.  Being intuitive there was a low barrier to adoption from a usability standpoint.  At the time the only solution had been illegal Mp3 downloads, or by ripping your own Mp3s from legally owned media.

Apple coupled their iPod launch with the launch of iTunes.  By coupling a business process, and media supply channel with the technology change, Apple positioned themselves uniquely for the coming move away from physical media by the consumer.  Despite the resistance of the recording industry Apple subsequently came to dominate the Music Sales space.

Scheme Dominance

Critical to understanding the slow uptake of Mobile Payments is the Schemes themselves.  Visa and Mastercard have piloted payWave and PayPass respectively.  Despite this the schemes have not issued any mandates like they have with DDA / PKI security.  They are in no hurry to jeopardise their position as Gatekeepers to the Point of Sale.

SEPA (Single European Payments Area) and GSMA (Trade Group of Wireless Operators responsible for the SIM card standard) have recently launched a consultation on mobile contactless payments.  The likleyhood is that before we get any real movement on Mobile Payments, we’ll need a Compliance mandate to make it happen.  History teaches us that banks move slowly to protect their dominance.  I expect this trend to continue.  How about you?

Want Mobile Payments?

The EDC 2009 Global Payments Survey suggested that in the USA, the mobile would replace the wallet over the coming half decade. A bold statement indeed, and something we have all heard before. It’s an argument that is winning traction since Square has won itself a lot of attention, mostly for some snazzy web design, and having a certain Jack Dorsey at its helm.


The problem facing these upstarts is that some very exciting companies are trying to create a solution where the consumer doesn’t see a problem. Perhaps the greatest degree of disruption will come from developing economies. Payment processors and banks have been attempting to load these territories with credit cards. Whilst this might give a short term revenue burst, where is the strategy?

Africans are already using SMS as a form of payment, because its simple and low tech. Payments in the western world need to be simpler, and have no barrier to entry for the consumer. The consumer has a phone, and has a bank account. They don’t have a payment mechanism that works as well as the card.


Until that is the case, we’re in an interesting but risky place with mobile. mPayy and oboPay both show a lot of promise in solving the Mobile Payments problem. However until someone is able to package this service and sell it to the banks, Mobile Payments will not take off. Given that most Payment Processors still think “e-commerce” is the future (scary I know), that could take a while.