Almost every time we brainstorm bank business models someone raises the idea of a digital vault, yet I have not seen that offered as a feature by any of the banks I use. It makes sense that a bank would consider data security a core competency and choose to leverage it as one of its dual strategies.
Skinner spends a lot of time on banks as data managers in Digital Bank. I agree, but I don’t see it yet, so let’s call it a potential trend.
I have been wondering what to say about big data in banking. I have heard of some projects here and there but not seen much of a trend.
I was reading Digital Bank and found this about what banks are doing with Big Data:
“Most are not talking publicly about how they use customer transaction data as a competitive weapon because it is exactly that— a competitive weapon. Visa is one of the exceptions, saying that it can now analyze two years’ worth of customer transaction records, or 73 billion transactions amounting to 36 terabytes of data, in 13 minutes using cloud computing . This would previously have taken a month with traditional methods of internal computer processing.“
On the other hand this reminds me of a project I did when I was 17 years old. That was a long time ago! My good friend Jim at Cooper Aerial in Las Vegas needed help processing loads of contour map data. His team created digital contour maps by using stereoscopic aerial photographs to digitize 3D coordinates with a stereoscope. They needed to process this data in hours but it was taking days-to-weeks using their CAD software. I wrote a program in BasicA on one of my Dad’s PC’s that indexed the data such that it could quickly be accessed to do the processing they needed. We got the time down to about 90 minutes. Was this a big data problem? No. There was a lot of data, but it was all similar, structured, quality data. This was my first great software development project and my début as an independent consultant, but it was not a big data project.
So not all big data is Big Data. IBM defines Big Data as data having multiple characteristics: Volume, variety, velocity, [lack of] veracity. See the IBM info-graphic below…
Unless Visa is, like other big banks, downloading Google searches to determine that a payment to Ying’s Wings is a purchase at a Chinese restaurant, or introducing some other unstructured data, or processing the data in real time, then it is an impressive application of analytics, but might not contribute to a big data trend.
See the AWS Case Study: Bankinter for another banking big data example, this time with credit simulations.
Something needs to belong in “Uncategorized”.
First installment here.
waspit is a social banking platform targeting college students that offers social banking experiences with payments, offers, loyalty, and reviews.
The “Social Lending and Savings” section of Digital Bank notes the trend of Social Finance.
Skinner covers the following:
- Zopa in the UK
- smava in Germany
- Ppdai in China
- Prosper and Lending Club in the United States
- RateSetter and Folk2Folk in the UK.
Examples of Social Saving include:
- iWish from ICICI Bank in India
- SmartyPig in the United States
- BBVA and the Compass app.
Digital Banking also covers Social Funding and Investing.
Crowdfunding of new business start-ups and include:
- United States: KickStarter, Indiegogo, crowdrise, razoo, MedStartr
- UK: Funding Circle, CrowdCube, Seedrs and ThinCats.
Crowdfunding platforms raised almost $ 1.5 billion worldwide in 2011, with a growth rate of 63 per cent CAGR.
Wonga is a UK company providing online payday loans (short-term, high-cost credit). In the US there is Cash America and Advance America.
Social Trading examples include eToro, ZuluTrade, Tradency, and StockTwits.
Deloitte observes that P2P business lending in the UK rose by 211% between 2012 and 2013. In 2014 P2P lending accounted for £250m in UK personal loans.
Financial Times reports that the UK’s peer-to-peer lending market has tripled in size in just three years, was worth £550m by mid-2013, and will be worth £1bn by 2016 if it continues to grow at its current speed.”
More on this in Industry Trend: Unbundling of banks – Lending Club.
Currently reading Skinner’s Digital Bank and noting down the trend around virtual currencies such as game currencies and Bitcoin. The most notable trend is the number of failures, which is why I tend to limit my time spent on this space.
Gaming / social currencies covered in Digital Bank:
- NHN in Japan – Line Coins
- KakaoTalk in Korea – Choco
- Tencent’s in China – QQ
- DeNa in Japan – Moba
- Facebook – Zynga credits
- World of Warcraft – Diablo Gold
- Amazon Coins.
Recent acquisitions noted:
- VISA acquired PlaySpan, a company with a payment platform that handles transactions for digital goods
- American Express has purchased Sometrics , a company that helps video game makers establish virtual currencies.
Payments is such a hot topic I feel so me-too’sh just mentioning it.
Venmo, (see in app store), provides one-touch payments across multiple applications. The Venmo App eliminates the need for users to enter their payment information on multiple applications. It is an online payments gateway provider that stores consumers’ payment information for future use at those merchants.
I enjoyed the summary in Skinner’s Digital Bank under “Social Money and Payments”. He covers:
- P2P internet payments such as PayPal
- Mobile remittances such as M-PESA
- Long list of long-tail merchant payments such as Square, PayPal Here, Silver, iZettle, mPowa, Payatrader, Intuit GoPayment, Bancard PayAnywhere, Verifone, Payleven and Sumup.
- Payments with mobile wallets such as Google Wallet
- Payments with virtual currencies such as Bitcoin
- Bank social payments such as iDEAL and ePayo.
A potential trend is one of those things that I hear about every day in the news but don’t actually see any evidence of yet. If it is a potential industry-led change such as mobile wallets then the industry is spending loads of money on it but so far zero revenue. If it is a potential market-led change such as mass genome mapping then people are waiting for it but it has so far not materialized–most likely because the technology is not quite there yet. If it is a technology-led change such as the internet of things then everyone is predicting that it will happen because it is possible but so far it has not.
You should do two things:
- Put it on your watch list. Scan the news to see if it is crossing the threshold from a potential trend to something that is causing change.
- Establish pivot points in your strategy. See my post The Bank Finds You. See the pivot points in the decision tree? These are actions that you can take now that will pay off even if the potential trend never actually materializes (or if you decide not to act) because they are relevant to more than one trend (or decision).
First, let me say that I do not consider myself an expert on mobile wallets. Second, I don’t have a mobile wallet and I am not aware of anyone that I know personally who has one, so I can not say that there is a trend of mobile wallets taking over the industry. I have never heard anyone lament that they could not get a mobile wallet, so I can not say that demand exists for a potential market-driven change at this time. However, I hear about mobile wallets so much that I figure I am out-of-touch if I don’t put them on my watch list as a potential trend.
Digital Bank predicts that less than half of payments will be through cards by the end of the decade and that card processing firms will no longer be around. On the other hand the glass-half-full view is that as many as half of all payments will be through cards so there will be someone processing them.
I have to assume that this will develop into an industry-driven change. Either payment-processing companies see it as a way to reduce fraud, non-payment-processing companies see it as a way to wedge in on payment-processing companies, both see it as a way to collect and respond to payment data right on the mobile device, or some other similar motivation. More and more I see statements like “Mobile payments have enabled local businesses to track customer spend and deliver unique offers to individual customers like never before. Now with iBeacon functionality, businesses using LevelUp can also communicate with customers during their crucial decision-making process.“ So I am labeling it a potential industry trend.
See Finextra Leadership: Sberbank’s digital adventurer for an update on work being done by Digital Ventures on mobile wallets in Russia.
Digital Bank refers to it as “The fifth wave” where “everything communicates in the internet of things to find you.”
I my own experience traditional banks trying to implement this find it complex. The concept is lost on all but the most savvy strategic marketing thinkers. Pivot points can become the horizon and people lose sight of the ultimate strategy.
The new banks will get it and then the old banks will get it or die. But it will be the future.
Take selling mortgages for example. How will you get leads? By waiting until the customer comes to the branch? No. By waiting until they come to your Web site? No. By waiting until they go to a 3rd party mortgage comparison site? No. By finding them when they are looking at homes? Yes! You should be all of these places, for sure. But how can you engage the customer as early in the purchase process as possible?
Another example from the retail industry is finding people in stores and pushing them offers: When LevelUp added iBeacon support, participating businesses experienced a 22% average increase in customer spend.
Waiting for customers to hit aggregator / comparison sites is a wrong turn on the strategy map for a number of reasons.