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According to Digital Bank by Chris Skinner  society now create 2.5 exabytes of data per day. An exabyte is a 1 with 18 zeroes after it, or 1,000,000,000,000,000,000 bytes.

Closely related to the “Cloud” trend, it makes sense that banking services running in the cloud would be offered for consumption by the computer systems of other organizations (as an API) in addition to humans (as in a mobile app).

From Digital Bank by Chris Skinner…

“PayPal launched X, a developer-based service for PayPal processes as application program interfaces (APIs), … The result is that PayPal’s relevance increased greatly overnight and led to Citi following a similar approach when it announced that its transaction services would be offered as APIs at the SWIFT International Banking Operations Seminar (SIBOS) in 2013. In other words, all bank processing is just open-source coding, offered to anyone to plug and play with their offerings through APIs.”

I am not sure that I would equate an API with open source code, but I agree with his points — Such as the need to open the API’s up to start-up developers.  This will make sure the bank is involved in the “next big thing” and reduce the pressure on the bank to keep on top of everything going on in the industry.

There are digital natives and digital immigrants.  Digital natives, having grown up around computers and mobile phones, have radically different needs, wants and expectations.

The market trend is that digital immigrants are naturally being replaced by digital natives.

The market force is that companies must (at this time) address the needs of both types of customers.

A key market and technology trend is the increased use of mobile phones and tablets to access banking services. The meta-trend is that the mobile trend will overtake all other channels. There is decreasing usage of bank branches. The sales of laptop computers is slowing. As cash usage gives way to electronic payments the ATM will become less important.

“Barclays Bank took thirteen years to achieve two million customers using Internet banking but took just two months to reach that number for mobile banking. Société Générale took ten years to achieve twenty million contacts per month through Internet banking but took just eighteen months to achieve that number through mobile bank services.”

From Digital Bank by Chris Skinner

How can digital banks on-board customers without a branch visit?

From Digital Bank by Chris Skinner:

“Danish banks, along with others in the Nordic nations, have focused on using digital identities to avoid having to on-board customers using a traditional paper-based process. “On-board” is the term used by banks to manage the account-opening process and is incredibly difficult due to the regulatory requirements of Know Your Client (KYC). KYC demands that new customers opening accounts at a bank must prove their identity with various documentation, such as a passport or driving license as well as proof of address through official letters sent to them recently at that address, such as a utility bill.

In contrast, digital identities allow customers to be recognized without the need for such physical documentation, and are the likely way in which banks will manage the KYC process in the future.”

And “Jibun Bank and eBank in Japan both accept account opening on the basis of just a photograph of your driving license via mobile. The driving license is read by a character recognition system and checked with the government’s driving database. As long as all is aligned, the account is opened.”

Finextra KYC Exchange builds banking momentum points out another option for acquiring KYC data: “Swiss-based due diligence utility KYC Exchange has signed service contracts with Commerzbank, Société Générale and Standard Chartered for the regular exchange of Know Your Customer data between the banks and their clients.”

Potentially a powerful trend where imbedded systems in everyday objects from clothes to power systems communicate wirelessly to emit data, receive instructions, etc.
I call it a potential trend because I have not yet seen evidence that it is impacting banks. Keep on “watch”.
A simplistic system workable with today’s technologies would be RFID chips in “things” and sensors leveraging near field communications (NFC).

Bluetooth is another option leveraged by iBeacon.  “All LevelUp merchant partners are now being offered an iBeacon, which is ready to go as soon as it is plugged in. The firm expects to have delivered up to 1000 by the end of the summer but in the longer term plans to build the technology into its POS scanners.”

Google is apparently a believer as they bought the smart thermostat Nest.

In Digital Bank, Chris Skinner envisions a world where objects in the internet of things transact, making the internet of things of importance to bank strategy.

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.

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.

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.

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.