Market Watch Mindset Personal Finance

Big Data & Social: advantages of incumbents

I was reading the slides of Mary Meeker, the famous (now former) Morgan Stanley analyst, on 10 Questions Internet Execs Should Ask & Answer and among all the available information noted these slides on the unusually high level of innovation within incumbents. It is an interesting statement and it could in some ways be the basis of a different way to view banks and financial institutions.

It seems that big data and social will be two of the major factors that will shape the user experience in the future, including in regards to banking and financial services. For both these aspects, size matters and banks have what it takes to make significant moves in those directions (even if it may be more difficult in the social space)

– The basis of Big Data is … a lot of data. And most likely, when talking about human experience, it means a lot of humans. Banks, with their numerous accounts, transactions, information have the basis for providing a meaningful experience.
Citi, through its partnership with Bundle, is making good use of its aggregated anonymized information to provide important financial references to the Bundle PFM users (compare yourself with other users, identify most relevants shops and restaurants).
On the other hand, we can see that Mint has started the same logic with Mint data, however it comes at the cost of important investments to increase its user base and therefore obtain more meaningful data. (The relative monopoly of Yodlee makes it an exception where a new entrant has managed a relevant size, however an important investment was none the less needed to reach it.) Banks literally sit on a pile of opportunities from the information they can collect from their users and should work on providing improved experience to their customers by analyzing it.

Social and Finance is a trick question and it is not sure that people want to share their financial details with others. However, social and the social graph is becoming much more. An interesting point taken from Mark Zuckerberg’s interview at web 2.0 (video here) is that they could have done social plugins for website earlier on, but they needed to reach a certain level of pervasiveness to make it a relevant user experience (what is the point of having social websites with no social interactions due to a limited user base?). Banks, because of the way they already have created relationships with people, communities, small businesses have the basis for building relevant social relationships for their customers.

On that perspective, the “prototype” of Banksquare: the new sharing service from your bank as envisioned by Chris Skinner gives a possible path for building this experience with the existing network available. Connecting local businesses, people, offers, reviews in a meaningful and valuable way (for example an exclusive offers for a bank client from the businesses served by the bank?) is something financial institutions should start working on.

Note: on that point however, having a large user base is a necessary but not sufficient basis for creating a social network. Google’s failure with Buzz is a good example.

To conclude: Yes incumbents have some of the characteristics to become relevant in a more data driven and connected world, it is time time for them to kick into overdrive to do so.

Included under the slides of Mary Meeker

Market Watch Mindset Payments

Iphone 5, NFC and the payment experience: scenarios and implications

In recent discussions, the Iphone 5 NFC technology was often mentioned as a key move: see Brett King’s post on Iphone 5 and posts on Apple recruiting an NFC specialist. I agree an Iphone integrating NFC technology will be significant, but for me contact-less is just the technology that would allow all transactions to be electronic, with strong implications in terms of analytics, identity.

First some quick thoughts on the Iphone 5 NFC. Several models seem to be possible (feel free to add yours in comments).

1. NFC is integrated in the Iphone 5 the same way the camera or the motion sensors are. Developers, including for contact-less payment apps, have access to the module through a set of API. Apple in that case would be completely agnostic to a payment identity, network, partner. Apple could control its user experience by reviewing the apps using the module for security.

2. Apple is partnering with the carriers and payments done through the NFC module are billed by them (Billing technology is one of the forte of carriers). Rumours of Apple (and Google) talk with Boku seem to support this scenario. Apple could share revenues with the carrier on transaction fees. On the other hand Apple could also partner with payment networks to support its NFC transactions.

3. Apple is making a major step in the financial services world and links the NFC module to the Itunes identity (and credit card numbers or additional payment means). All payment done through the NFC module are debited through the Itunes identity. Apple may charge a fee per transaction for the apps using the module (in line with the way developers have to share revenues with Apple on the App store). Or as mentioned in recent patent applications, retailers would load their product details, offers in a database on Itunes to allow payment with Iphone 5 and pay a fee to Apple for that service.

However, on top of the ability to use your phone as a electronic wallet, there are strong opportunities to for this significant shift in behavior to change the payment experience.

As of now, the offline payment experience  can be defined as flat and even detrimental to the customer but can be fundamentally modified:

– Retailers most likely don’t know who you are.
In truth, even if you are coming regularly to a shop, chances are they will have a hard time identifying you as a recurrent client and build a special relationship with you. Retailers understand that and have tried to compensate for it, using customer cards (but you need to bring them back and often they have been attached to credit products), requiring information from you (what is your email, telephone number?) and now monitoring your checking on location based services. In all cases, this tracking needs a specific effort from the customer and because of that is a flawed experience.

What is the solution for retailers? Most likely in the single event that is defining any transaction: the payment experience. A payment through an NFC enable Iphone 5, could allow for each transaction to include: the identity of the customer and the retailers (maybe through Facebook if done with Credits), information based on the recurrence of such transactions leading to special offers. It could also include details on the product that would help generate recommendations in the same way Amazon is doing it online. It could help generate tips to friends, for clothes style recommendations with products already bought. The possibilities are endless.

– The receipt is the perfect example of a broken experience, as defined by Seth Godin.

Seth Godin at Gel 2006 from Gel Conference on Vimeo.

Look at any typical receipt and you would have a hard time understanding most of it. Batch numbers, RRN, Terminal Id, Merchant #, and other random pieces of numbers and letters. In most cases the product name is not even recognizable and the merchant name is broadly defined. If you try to remember where you bought a product, how much it was etc, chances are a typical receipt will not help you because it is not designed for the customer.

One of Square key point is to produce the best receipt possible. As said by Jack Dorsey:

So what if we could really turn the receipt into more of a publishing medium, into something that lives on and something that is actually clickable and useable, and something that just exposes the various end points of the transaction.

A typical Square receipt will give a clear definition of the product bought, maybe an attached text and photo, a GPS map of where you bought something and the number of transactions you had with the vendor.

A NFC enabled Iphone, if open enough to support innovative companies and models, could help support these changes. However, if kept as a new medium for a typical card transaction, the status quo would stay.