31 August, 2010 01:15 PM EST

Is time ripe for customer value in financial services?

First of all, what is meant by customer value when talking about financial services? Is it the value that one customer produces for the service provider? Yes, in the current language in this business area that is a valid definition.

If financial companies were Service providers with capital S, customer value would of course mean the value that a customer gets. Financial companies are not so far customer oriented like many other real Service providers are. One example from banking business: how customer oriented are current net banks? Very little. They are still reflections of ancient banking model, where the bank produces products and the customer comes to the bank.

In the case of customer centric service model it should be vice versa. The bank should come up to the customer in places where he or she carries out his or her real life operations. There are some examples of customer oriented financial services and typically they are first introduced by so called start up players, for example in payments services, depositing and consumption credits. They won’t be market leaders, but they can show the way for more customer centric business model in financial services.

Let´s discuss more customer centricity in financial services.

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16 June, 2010 01:21 PM EST

A mobile payment is still a payment

Rome has always been an endless source of wonderful clichés that us consultants can use when oversimplifying something that is essentially a complicated topic involving risk taking and extensive co-operation between internal and external stakeholders.  This is especially true when talking about the seemingly perpetual struggle to make mobile payments a part of people’s everyday lives.

All roads lead to Rome.

A personal mobile device is going to be the way we want to do everyday payments in the future. All research and market predictions aside it just simply makes sense: we already use our smartphones for almost everything else after all. As a concrete example think if you could just download your personal credit/debit card from your favorite app store and in the next moment use it to pay for your fancy low-fat caramel double-shot frappuccino. You could even get your frequent customer stamp, coupon discount, receipt and realtime balance update transparently all in that one tap of the phone.

Rome was not built in a day.

From the day we started using mobile phones there has always been initiatives going on around mobile payments - yet still today for an average consumer using a mobile phone to make everyday payments is just as far away as it was ten years ago.

Why is it so difficult then? Cashless payment is one of the most regulated high volume transactions in the world. In a market dominated by cash it’s also not easy to find traction for new payment methods. Regulation, perceived freeness of cash and security are just among the first hurdles we must get over and it will take time and patience.

When in Rome do as the Romans do.

Mobey Forum has recently taken one step forward in building the future by releasing a guideline document for mobile remote payments that gives financial institutions blueprints for building mobile payment services that are easy to use.

One of the key themes in this document is that mobile payment services should be based on established payment networks, regulation and standards to make the transition to mobile payments go smoothly. We need new technology to make it all cost efficient, open, easy to use, realtime and secure but we definitely should not invest time and effort in building new silos for new payment methods.

The Mobey Forum white paper is recommended reading for anyone interested in mobile payments. It is available for free download at the Mobey Forum web site http://www.mobeyforum.org.

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10 March, 2010 08:36 AM EST

Financial Services Pro: BE AN INNOVATOR

How bad that sounds in these times? To make a real financial innovation is really hard and financial services sector tends to exaggerate with innovation using others' money. In a seminar in February I saw the burden of regulation flowing on financial services providers. At the same time business conditions are still vulnerable. So many mandatory things to do. So many things to react to. Old recipes  are running out of steam. You get new steam from new tricks and new tricks must be learned. That means developing competence.

Financial services professional, be the Innovator. Find a new way through this ever worsening mess with regulatory burden and increasingly complex products. There’s a challenge I want to join.
You can find our thoughts on the future strategy in securities markets back-office activities here.

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3 March, 2010 09:20 AM EST

What was before Facebook and Google?

This question arises when reading the book related to the cultural history of Internet called From Funet to Facebook (Funetista Facebookiin, book currently only in Finnish) written by digital culture researchers from Turku University. 

I remember somehow distantly when I started using MikroMikko1, the very first version of “PC” during mid 80s’ (produced by Nokia) in a summer job in a bank. Somehow I also remember when e-mail came to use in a bank; it was an internal network, and first only the managers were allowed to use it.  But I really don’t have the faintest idea when I started to use external Internet. It was probably not any wow-effect, it probably happened step-by-step and came creeping into my life.

The book also presents a history of Internet with the different browsers like Mosaic, which revolutionized the using of the Internet with hypertext based web pages from 1993 onwards. It is really unbelievable that commercial internet connections have been in the Finnish market only since 1993. Is it really so recently? A good 15 years and everything have changed!

Funny to think that at the early years of Internet some users were worried about what will happen to Internet when all kinds of people come to surf into it. They will spoil everything when surfing like wackos because they don’t know the rules! It should be obligatory to have an IT driving license! September was the really problematic month when the new students crowded into universities and crowned into the net so that the “real” users didn’t have enough bandwidth. For some the Internet was the source of all kind of pernicious things, naughty pictures, and place for Satanists etc.

An interesting part of the book is related to Internet time and how the idea of time has changed. Somehow it has become timelessness and our desire is to be everywhere, all the time, all the different ways. Do I really have to be connected all the time, do I really have to tell what I do to everybody all the time, do I have to be reachable all the time? You didn’t answer you mobile when I phoned you, where were you? Familiar question… Who says that I have to be reachable all the time?

And my question what was before Facebook and Google is a good example of so called voluntary amnesia, loss of memory: when new technology pops up all the time, the users will forget instantly what was before that. This technological determinism means being without history.  It also means that everybody has to adopt the latest technology, if you don’t, you are out.

Another thing that worries me sometimes, is that I see I have lost the capability to concentrate on one thing without stopping it; I have to send a message to someone, check it she/he is present from Communicator, surf some blogs…and all this while I should read a longer text or write something more concentrated. An addiction, this has been discussed not only in this book but also widely everywhere. How often and how many hours can I use the Internet before I’m classified as addicted?

The book is very interesting to read to get thinking about how all this has changed our lives; and also see that not all of the fears and expectations have been realized during these first years of Internet.

PS. What is FUNET? It is a project grounded by the Ministry of Education and comes from The Finnish University and Research Network, currently the service provided by CSC, It Centre for Science.

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15 February, 2010 01:52 PM EST

Who owns my banking transactions?

In the last few months we’ve seen an increasing amount of innovative online financial services enter the market.

To mention a few of them, new entrants like Blippy and Kwedit are doing a great job disrupting the way we traditionally envision financial services.

Blippy is a service built around the idea of sharing your credit card transaction information with your friends who are in turn able to comment and discuss about your transactions in a Facebook-like feed/comment view.

The idea of sharing data this private is so crazy that it possibly couldn’t work. Except that it does. After all, one of the key drivers in social media is sharing your lifestyle and habits with peers. What better way to tell about yourself than showing off how and where you spend your money?

Broadcasting your card transactions to your friends is just a start for this type of service. With integrations to other social media  services (Facebook, Twitter) and open APIs for third party developers a service like Blippy opens up a wide array of possibilities (think: consumer advisory, augmented reality).

Back here in the Nordics, innovative financial services like Blippy are not currently possible to be developed without exceptionally close relationships to local financial institutions, a luxury almost never within reach of new players. This raises the question about the ownership of consumer’s transactions. Shouldn’t I as a consumer be allowed to grant read rights to my transaction information for services that I trust?

The game in online financial services is changing. Banks should soon address the fact that they can no longer be the only providers of online financial services – after all who would believe a traditional bank would ever implement a transaction sharing service with social media integration? Industry key players and regulators should move forward with discussion on how to create equal and fair rules for third party financial services - the sooner the better.

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1 February, 2010 02:41 PM EST

Nordic Back Office 2015: buy or/and build?

Change is storming on in the Nordic back-office despite the recent calming of trading and risk-margins. Post-trade processing is showing development and progress like never before.  After recent front-office fragmentation, back-office is doing the opposite and consolidating rapidly. What´s in it for the Nordic market participants? Well, it is actually a question of build or buy. It is likely to be inexpensive to purchase transaction processing in a standardized way from a large specialized service provider by the 2015.  In the meantime there are a lot of open issues to consider and a lot of adaptation to do. This means investment to building processes, technology and competence. Changes actually make post-trade transactions even more expensive before standardized services will become available. Market participants have to both build and buy.

This one of the results I found in my discussions with ten representatives of market participants mainly in the Nordics and in Finland. Decision-making in the ever more complex post-trade landscape is a tough spot for everyone. I am happy to discuss this and other results in IIR Back-Office seminar in Helsinki February 9th -10th.

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5 January, 2010 01:28 PM EST

INET of NasdaqOMX will blow up Nordic trading?

Consultant's Voice blog article

Compare share turnover ratios of Nasdaq US and NasdaqOMX Nordic exchanges: 1040% vs. 140% in October 2009. Trading is seven times more active in the Nasdaq US. Spring 2010 will bring the same technology to Nordic exchanges where the same large international players are already present. Shall we see some heavy trading in previously sometimes illiquid markets? I hope to see this trading increasing market valuations and creating more revenues to brokers.

Well that is only a hope. Automated trading is behind those impressive US figures. However, just a handful of Nordic stocks are liquid enough for real high frequency trading.  And only large international brokers have tools, experience and knowledge for this kind of trading.

Are Nordic players prepared for the game? At least some Nordic brokers and illiquid stocks are out of the game. Or if they are not we will see some severe market reactions in swallow trading landscape.

More importantly, are Nordic asset managers and institutional investors prepared? Well I think some if not all lack the tools, experience and knowledge.

How about post-trade processes? This spring will measure up how STP we are in a fresh Nordic CCP-world.

Spring 2010 will show us how informed local brokers and investors will meet up with non-informed, technologically advanced, high-frequency traders. Let it be a success story.

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22 December, 2009 07:06 AM EST

When did you last time get good service in your bank?

Banks have traditionally been and still are product oriented service providers. We are talking about banking services, which are not services but intangible products and goods. That is why long time ago buried 4 P’s marketing model still describes well current banking business that consists of product silos without communicating with each other. In this make-and-sell model banking products are in the centre and you try to get customers to your products.

What about customer centricity then? Wow, sounds good? Other service providers are shaping up their services: shopping centres, air lines, even telecoms nowadays! And what does it mean? If customer is in the centre of the service, she or he participates already in the production stage, relationship is co-operation from the early stages, the producer adapts to customer’s individual and dynamic needs. This model could be called as sense-and-response. It only calls for communication, involvement, and a deep commitment to working across organisational boundaries.

Why I still believe in getting good banking service some day? The reason is simple. After the chaos in the global economy and financial crisis we can expect again good service in a bank. And why is that? Because we are important stakeholders for them now. Our savings and deposits are the main source of banks’ capital. Bankers have been reminded that customers are their core asset.

Too much to expect from my bank? Maybe I should start looking at a new banking relationship, or maybe not. I’m too lazy, and it is still only about banking..

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22 December, 2009 07:53 AM EST

Banking going social

Recently the Bank 2.0 conference took place in Stockholm and certainly Tieto was on site and shared our latest insights and predictions. Gustaf Brandberg, Digital Business Advisor took the stage in front of approximately 150 decision makers within financial services to share his views of the future in banking.

The presentation covered the key challenges and opportunities for banks going forward and was very much appreciated by the audience. His slideset are made available through the Tieto Slidshare account so you can recap the key messages which around 2,000 people already have done - I guess great Thought Leadership spreads fast.

Last week on this blog Ilkka took up the new social world currently emerging, which was something Gustaf presentation also addressed. I believe it is vital to understand that Social Media is much more than Facebook, Youtube and (the extremely hyped) Twitter together with other current (and emerging) dominant social media platforms. These platforms represent great innovation in customer engagement and dialogue, something companies definitely need to address (for a best case example please review the SEB Group Social Media Newsroom), but does not at all cover the full potential.

So I would certainly like to emphasise that the potential is bigger. All major retail banking services are for example currently working on introducing new customer centric services such as budgets. To generate a budget the transactions needs to be categorized. Why not let the crowd categorize them, just as Balancion.com have introduced in Finland and Smartbudget.se in Sweden. Integrating social aspects assists in building better services to end users. And just when I thought Mint.com was one of the best cases of digital banking services, Wesabe.com comes to market also adding a social dimension. I guess money is one of the most social objects we encounter in our daily lives. We never talk utilities with our friends and family, but yes money is always present, deeply integrated in most of our activities and conversations.

And we will certainly see this trend accelerating, who would not like to know that you spend 12% more on food than other families in your area (read insurance instead of food and you clearly can see the sales pitch)? And what if our banks could more closely integrate dominant eCommerce processes such as for example “other people in your situation bought this product”?

And social is certainly consumer driven, but we now see it integrated also outside the household market, including for example The Benche Trade Community (a service for trade finance professionals to encourage sharing of knowledge and experience, open discussions and networking) offered for free by one of the major Nordic banks.

As a summary social technologies will be vital in taking (especially retail) banking from being a platform for transactions to a trusted advisor assisting customers in making smarter financial decisions. It’s not about Twitter and YouTube, it’s more than that. And surely we at Tieto will do our best to lead the way.

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3 December, 2009 07:34 AM EST

Beyond Free

There is no gravity in the online world. It is free and we are so puzzled. Some have become even paranoid. But it is free and beyond.

Why is a credit card firm giving you bonus points and discounts? Why can you use open source software platforms for free? It is because you create VALUE, which is beyond the cost you are causing to the service provider. And something which is not value for you can be value for someone else. The coin has two sides and so have many services. Especially online services usually involve more than two-sides.

In its purest form a platform allows efficient search and a match of interests and provision of advertising or ancillary services. Typically things that are free but used to have a price and seemed to create value only for one party have changed into two-sided activities. The other side offers the service for free for the user. Consider Google search, a free search tool for all of us. However it is a perfect advertising weapon and money-making machine for its owners. The oldest two-sided business model is a marketplace with a castle. The king of the castle provided safety for trading and sellers and buyers were both happy to pay tax.

Or consider newspapers, exactly the ones who are struggling today. They sold the newspaper to the reader and advertising space to the advertiser. Now we just have a lot of new advertising space.

Optimally a platform can charge a positive price from both sides. Consider a stock exchange as a market place: sellers and buyers pay a trading fee. Usually that is because stock exchanges have monopoly power. Other online market places do not have such a market power and they have to give the service free or almost free to the other side. Usually the other side of the market has more negotiation power and its pricing is lower. In many cases that is buyers. That is why credit cards are so inexpensive with fancy loyalty schemes. The credit card providers charge shops (merchants) to whom you are paying to with the credit card. In fact, shops see value in the popularity of cards as it facilitates the buying process. Hence credit card operators can charge merchants higher merchant fee if they have an extensive base of credit card holders. That is why we have free credit cards in some countries. Do you identify this mechanism? Lowering the price on the one side creates value to the other side increasing the total revenue of the platform.

So free is usually free for the other side, isn’t it.

But go beyond free into cloud-computing, for instance. Cloud is free IT capacity sold to other users. Like Google, Amazon offers cloud capacity and charges a fee. Basically, Amazon is a platform which brings sellers and buyers together. Amazon charges sellers a fee and the more buyers use free Amazon services the more Amazon gathers revenue. Cloud is a by-product as Amazon needs reserve capacity for peak-seasons. It is already paid once by sellers in Amazon. This by-product creates additional revenue stream for Amazon. It is the third-side. And more, Amazon can analyze buyer and seller behavior in their service and sell that knowledge to 3rd parties (as far as regulation allows, naturally). These 3rd parties can then develop products and services which match the buyers’ preferences.

Everybody is better off. That is beyond free. And we have seen only a start.

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12 November, 2009 11:24 AM EST

Social media: hype, froth, or serious business?

And the answer is: yes!

Social media is about sense of community, peers, crowd strength, collaboration. What’s new? Banks were originally formed around communities. Internet just gave a great platform to have a new context for all this. But then came us consultants and turned something originally very normal and everyday into so hype: digital natives, podcasts, mashups, folksonomy, RSSs.. No wonder that so many persons thought that now they are totally out of the evolution.

And we continued: every firm has to tweet and blog and if you are not, you’ll be out of the business. They both are fine communication channels among others but no, you don’t have to tweet and blog if it does’t suit to your business culture. Ads in Facebook may be a good operation, but there is nothing strategic in that.

What is strategic then in this entire social media thing for business? Consider two things. First: what social media tells about your customers’ changing behaviour? Second: keep that as one driver for your business model, i.e. elaboration of strategy, products and services, processes, networks, business culture, and finally, make sure that all this is a business case. Then you can make also an easy decision about Facebook advertisement..

Guess what song this all associates in my mind: “then came the lawyers then came the rules… telegraph road got so deep and so wide…” then came social media then came consultants…

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6 November, 2009 01:38 PM EST

Financial Services in Climate Change

It is indirect, the industry representatives used to say. Then the stories went to the difficulty to provide climate change- or sustainability-oriented mutual fund products as they underperform the main indexes. Finally, we have this payments related e-invoicing story which is to the point and of high importance.

But to really understand how Financial services can directly contribute into the fight against climate change, consider paper. Banking and insurance is about everything on black and white. We know how paper is made. So get rid of paper. Principle is simple as that, implementation is not.

There is increasingly evidence about smart printing practices etc. However the story starts from banking processes. Paperless banking processes. And go even further; do paperless banking processes with Green IT. That means optimize your technical infrastructure from climate change perspective with energy efficient solutions.

Yes right, and who will pay that massive investment? And who will educate clients and personnel? Not me or my bank. Well, we have the opportunity to reward those financial institutions who carry the responsibility and take action. Climate change is the strongest business driver ever seen. Its other name is survival. And paper is the no-brainer.

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2 November, 2009 08:12 AM EST

The average mobile customer is not an average customer

One of the key points I try to emphasize in my work with our customers is that mobile solutions should be designed specifically for mobile use to answer specific needs in everyday life situations. As pointed out in several contexts before, simply transferring functionality from your web site to a mobile device is not the right solution.

This user- and situation oriented digital service design is one of the first things to do, but once you’ve cleared that hurdle and know what you want to do, we come to the mandatory technical questions: how can we build this? Which phone models do we need to support? What handsets are our customers using?

There is a wealth of mobile technologies you can choose from these days. While mobile apps - iPhone in particular - are the latest hype, there still are a number of other ways you should consider. Mobile browsing based services have developed a lot during the last couple of years and in many cases deliver almost as smooth experience as native applications. Messaging is also one of the ‘good old’ ways to go with SMS working in virtually every handset on the planet.

So what to do? How can you reach all your customers with your fancy new mobile service? The answer is: don’t. Usage statistics of many existing mobile web sites and services point out that the vast majority of traffic is generated by very specific consumer groups with only a handful of different devices. By optimizing your service for these devices you will not only serve your most active customers better but reach a segment of your users that are willing to promote your service if they like it.

The lead user segment is growing by the day and they are demanding more and better mobile services. Low hanging fruit in mobile services today are lower than many institutions think by simply looking at device market shares and the infamous “average customer” behavior patterns. Look past the statistics, focus and grab the mindshare of today’s lead user: the tomorrow’s average consumer.

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20 October, 2009 10:47 AM EST

The future of mobile banking is fragmented

I love Legos. As a kid I spent hours and hours building the products of my imagination from space stations to floating fortresses using the various building blocks that I had acquired by de-constructing the pre-designed Lego models you could buy from toy stores (making a Lego contraption float on water was no easy task by the way).

The modular nature of building from Lego blocks has undoubtedly inspired a lot of innovations in the IT industry. In this case, the analogy to Lego building occurred to me when working on research about new ways of using mobile technology in banking.

After a very early start in the WAP 1.x era, the development of mobile banking in the Nordics has been at a virtual stand-still due to a very high e-banking uptake and bad experiences from early mobile technologies. On top of this the traditional approach to mobile banking has been to shrink the e-banking portal to a mobile screen. This approach has not been very successful.

Building the next generation of mobile banking services is much like building Lego contraptions. You take selected building blocks from your existing banking services and combine them with the fancy new blocks you just got. In this case these new blocks are mobile technologies like location, context, augmented reality, push technology and multi-sensory interaction. Combine some of these with a surrounding concept and you just might have invented a successful mobile service.

What are the situations your customers are facing every day? What can you build from your pool of building blocks to address the specific needs of your customers? Forget large service entities, forget building new modules in your portal, even forget technology restrictions for the time being – mobile banking is simply personal customer service at its core using single purpose tools on a mobile device.

Event feeds, payment and invoice approval tools, pro-active advisory and notification handlers are just a few examples we came up with– what can you think of?

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23 September, 2009 03:15 PM EST

Is research for any use in banking business?

For many years that I have been involved with banking business and especially during those years that I have increased some theoretical view to understand banking business myself, I have wondered the fewness of Finnish banking studies. Certainly there is some, but not any systematic and university managed programs.

In summer 2008 I visited Kungliga Tekniska Högskolan in Stockholm together with my colleague Atso Andersen. I was amazed about the number of banking researchers; it was nine, and all with Ph.D. And that place was however a school of technology. What about the number in some schools of economics in Sweden then..

Well, you can ask that what would be the use of local research? Would we have a better banking business in Finland? Or would we have some more Finnish owned banks here..? I don’t know. But soon we’ll get some evidence of Finnish banking research for the business. Tampere University of Technology and Hanken in Helsinki have started two years research program of financial service development for small and medium sized firms. Tieto is one of the corporate members in the research.

Now we have at least one decent banking research going on, and one less issue to have the feeling of inferiority with Swedes!

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16 September, 2009 03:18 PM EST

Corporate customers expecting uniform SEPA services from banks, why on earth?

Corporate customers have just started SEPA projects or at least are just starting to foresee what the SEPA impacts might be for them. It has been promised that all the banks in SEPA area will be providing SEPA services using the same standards, same processing cycles, same end dates for local payments etc. In the future It will be easy to change bank or payment service provider, it is like electricity: you just plug into a new electricity company. And the product is the same, standard, only price matters.

SEPA provides standard infrastructure for clearing and settlement of payments between banks and payment institutions. But the services for end users, corporate customers and private persons, why should they be uniform all over the euro area? The basic idea of SEPA is to provide more competition, and I suppose that most of us don’t only want competition based on prices, but also on different, innovative payment services. Corporate customers are now expecting that all the banks will have same transition period and end dates for local standards, but is this now a place to look which of the banks are providing SEPA services at the front row? If the development have to be the same for all banks, it means that the development pace will be determined by the slowest banks.

The payment services will be in the future like airline travelling: some of us just want to transfer money as cheap as possible (like cheap airline carrier; nothing more is including into price, you have to pay even for the toilet) but then some of us want more developed services. And now there is time to demand more developed services from banks and payment institutions. Sure, it means that we have to know more about our needs related to payment services in order to be able to race the banks. But it all can be learned!

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3 September, 2009 09:27 AM EST

Who will benefit from financial regulations? Congratulations!

Workload related to continuously changing and increasing regulation seems unbearable. And it will not end. EU Commission and regulatory bodies are just drafting financial crisis driven regulatory actions which will be implemented during the next few years. Is it overregulation some ask. Maybe yes, maybe not but force majeure it is for financial institutions.

Often firms adapt slowly to regulation. However, increasing number of firms see regulatory changes as a catalyst for business transformation. Regulation has a pattern and foreseeable business implications.

The normal path of adapting to regulation starts from ignorance, turns into denial, then minimum changes are made and, finally, transformation of business becomes evident.

We have seen in Tieto how regulations can create massive costs and unbearable operational pressure.

We have also wittnessed how new regulation catalysts new growth opportunities for those financial institutions which foster success of their clients by making clever moves even before regulations come into force.

Congratulations, you will benefit from financial regulation by the end of the day!

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