Operative Guidelines for Mobile Banking - Reserve Bank of India

This is a landmark event in India. The regulatory body has taken the first step in outlining guidelines for mobile banking in India. Targeted at banks and financial institutions that fall within its ambit, the draft document is simplistic at times, but does reinforce the intent.

The need and objectives are fairly obvious, and would have preferred some finer details. I'm perhaps left asking more questions than answers being questioned.

But, to be fair to them, this domain is a fairly complex confluence of multiple industries and technologies, and they would do well in defining the ground rules in what I call the "banking & finance" layer.

If you'd like to read the report click here

Carbon Redefined....

I had written a post recently on how banks can go Green. Subsequently came across a great site where you can estimate the carbon emissions in your daily life.
Interestingly Nectar has offered its infrastructure in a pilot project wherein customers' carbon credits would be deducted with every fuel purchase at British Petroleum. This of course is a pilot, but a critical step in enabling all of us to measure and and contribute back to the environment.

Given a few years of evolution, banks can perhaps permit individuals to trade in carbon credits once the metrics set in

Banking 2.0

A recent BCG publication on Financial Inclusion in India deconstructed the financial services value chain into six fundamental pieces : product development, customer acquisition, risk management, funding, administration and collection. Now this got me thinking. ......Are banks as we know today at an existential risk? Is there a disaggregated approach to banking that is emerging wherein banks do not necessarily participate directly in the complete value chain but participate in some of the pieces and not all. Is it also possible that banks may even get dislodged from their core areas of receiving deposit and enabling funding by new players.

With over 135 million households that are financially “excluded” several banks have been pushing the envelope or in several cases been pushed out of the core areas of microfinance. Players such as BASIX and SKS have been leading forays into micro lending to retail entrepreneurs, whereas banks in most cases have been involved in providing finance to MFIs and in some cases administrative and technical support.

Over 500 million footfalls annually expected in India in organised retail environments including malls, and supermarkets, in the next couple of years, retail finance is not viewed as a nice to have but a critical ingredient to fuel retail purchases. Most large retailers are either building or taking financial stake in the creation and set up of retail financial services to fuel purchases within their storefronts. Spurred on by the successful financial services models of Casa Baha in Brazil or Tesco Finance, which have multi billion dollar asset bases, the newly established retail retail financial services arms of Reliance Retail and the Future Group view the delivery of financial services as an invaluable element in fueling demand and purchase.

The Safaricom venture of Vodafone has already acquired over one million customers participating in the fund transfer process and no bank in sight. Models in Philippines and other parts of africa too have emerged, wherein banks are being marginalisd from the transfer process. The increasing penetration and significance of the mobile phone has clearly provided telecom players the right foundation to construct a financial services model that can quite clearly address the aspect of secure payments and transfer. Whether they choose to play more enhanced roles in the areas of acquisition, collections and risk management is yet to be seen. Hence can we imagine a Bharti tying up with ICICI Bank to sign up millions of customers each month for mobile connections and bank accounts for the financially excluded? Why not! With the market getting competitive and retail finance having clearly become a critical ingredient for urban and retail households, the quest for low rates is on the rise.

Hence the growing phenomenon of peer to peer lending that is emerging in Europe and North America by Zopa, Prosper, Virgin Money and a host of other players. Yet again this model technically marginalises or even excludes conventional retail banking institutions in the consumer lending process. The concept of peer to peer lending has existed since time immemorial but has also presented to the fore a new point of discussion and debate in the aspect of social scoring / equity that an individual brings to the lending process. Zopa has recently published its results on the effect of social , wherein borrowers received lower rates when endorsed by family, friends and borrowers who had lent and received their money back in the past. Would banks be able to supplement their financial credit rating score with the the aspect of social “score” Increasingly social scores would play a greater role in enabling lending decisions and processes as noticed in the case of microlending, wherein the fear of social ostracization and associated stigma associated with non payment has typically resulted in lower default rates.

In the case of retailers such as Casa Baha, their direct connect with the customer and their ability to mesh successfully with the social fabric of their target audience has successfully resulted in the creation and adoption of new risk models. Recent rise in delinquencies has put banks and financial institutions under the scanner for their collection practices. Without delving deep into the “blame” game, there is an increasing need for disemmination of education. With the subprime and related consumer credit crises affecting banks and retail borrowers alike, there have emerged over the last couple of years of sites such as Wesabe, which are essentially online communities that allow retail borrowers to share tips as to how they could reduce their financing costs and best practices to be adopted to reduce their default and overspending patterns. Quite clearly a need for banks to enhance their “dialogue” and truly engage their current and prospective customers,

Even in the traditional transactional space, wherein banks have been quite often bogged down by legacy systems and huge transition barriers. With an increasing need for security and retailers seeking lower transactional costs, the Revolution Card was launched a couple of months back in North America by Steve Case of AOL fame, which offers credit cards issued instantly at kiosks and have no numbers embossed on them! Furthermore with the transaction rates almost halved vis a vis existing rates charged by Visa & MasterCard, maybe a new David has emerged in the world of Goliaths. Quite clearly banks need to question and take a new perspective on their strength areas in the value chain. The performance and adaptability of retail finance will have an increasing bearing on the performance of other key industries including retailing, telecom, insurance, consumer goods etc. Hence it would be quite natural to expect that these industry verticals may in the near future play a larger or even different role in the banking vertical. Going forward growth models for banks would emerge more from alliances and partnerships across the value chain with other industry verticals, and in some cases questioning or redefining the perceived core competencies of their organizational charters.

Banks should also be open to adopting multiple standards and methods, which has typically been a barrier in experimenting and participating in new payment mechanisms. Inconsistecny and non uniformity is the only reality that banks would face in the coming years in these new domains, hence an ever increasing need to experiment and faulter even more ( the sub-prime crisis apart). Adoption and implementation of subjects such as mobile technologies and new systems needs to move from board room poster boy status to serious business imperative status. Banks have been relying on the trust factor that customers associate with the custodians of their money as their fundamental lifeline and often protected by regulatory frameworks.

With rapid evolution of technologies including the Internet, and the regulator’s evolving views on the scope of financial institutions,the trust factor would be better enhanced by engaging in a dialogue with its customers, and this would be a science worth cracking and perhaps the true differentiator in the coming years. This is perhaps the time for banks to define the new playground for Banking 2.0

New Linkedin Group - Loyalty Redefined

Inviting Loyalty, CRM, Marketing, brand management, direct marketing, advertising professionals to a new group on Linkedin "Loyalty Redefined"

Yup...the group would focus and exchange notes on customer loyalty!


A surprise gift for anyone who can tell me what the symbol to the left stands for?

See you there....

The World's Most Powerful Loyalty Programme?

Have been searching the web, chasing acquaintances and reading tons of reviews to determine the ingredients of a successful, sustainable and scalable loyalty programme. Loyalty as we all know is what makes every business tick and clock in the revenues. Be it banking, soap or even socks.

The quest for exemplary loyalty programmes typically results in recounting leading hotel and airline programmes that result in points, freebies, upgrades, massages and lots more. This of course is possible in industries where there is a direct customer contact coupled with transaction, and fairly higher operating margins (in good times at least). The sustainability factor of course is rather questionable, with several airlines having collapsed on account of air mile point liabilities in the recent past.

Retailers have been prone to issuing loyalty cards as if there were no tomorrow, be it the local neighborhood grocery or the big brother hypermarket on the outskirts of town. Points, discounts, special offers galore are showered on hapless customers, who rarely seem to be able to differentiate a United loyalty programme from that of Best Buy!

Marketers have been struggling to ensure that their loyalty programmes and cards remain top of mind and wallet respectively for decades. But as luck would have it, with activation levels of most programmes barely crossing the teens, the quandry remains - How in god's name do we make our customers remember the core value proposition and purchase at their stores on a frequent basis?

Hence the question of the hour " Where lies the holy grail of Loyalty" - Is there a loyalty programme out there, that has withstood the sands of time, behavioral nuances of generations and continues to grow each day?...Phew....

I posted a question on Linkedin recently soliciting feedback on Loyalty programmes that have impressed them the most, and received a response that quite clearly showed that I need to shake off my MBA hallucinations.

And that response - Religion!

Proven sustainability, adaptability and spanning all economic groups and lots more.....

So what is the secret ingredient about Religion, that drives and binds people the world over on a consistent and frequent basis?

A clear value proposition, sense of identity and social recognition that is reinforced with every generation.

"The best Loyalty Program in the world is organized religion. Highest number of enrolled members. Maximum membership longevity (hooked for life & at times from the time of birth). Moreover, it is the essence of what all successful Loyalty Programs should be. The members should not for once realize that they are the one’s who are paying for the ‘benefits’ & perpetuating program."

And all this with no loyalty cards or airmiles...hmmmm...

Green Redefined....

There's so much green talk going around these days, thought I should join the bandwagon.

Was watching Al Gore a couple of days back elucidating on the need for "stepping on the gas"-metaphorically speaking of course. In the race to conserve our environment and the planet, was very curious on the role that could be played by banks and financial institutions in this direction. Posted questions on Linkedin, read the Equator principles again, observed the recent frenzy in carbon credits, scanned the absolute lack of greenery at our workspaces and became conscious of the gas guzzler that I was driving to work each day.

Banks and financial institutions can play roles in three broad areas to drive forward this movement:

a. Customer Transactions : There is an extraordinary amount of paper that is utilized daily in conducting retail transactions, be it in loan application forms, writing cheques or ATM and POS charge-slip printouts. The obvious but arduous path lies in the movement to electronic paperless formats. The challenges, as you would be aware lie in.....
i. Regulatory reforms required
ii. Shift in Consumer Attitudes &
iii. Revamp of transactional systems

The tipping point lies not in the above, but in economic incentives from governments for banks to invest in making that shift. The rest would gradually follow. And what could the nature of incentives be....A few thoughts (rather wild perhaps!)
i. Measure usage of paper per customer
ii Enable tax deductions basis the reductions achieved
iii Issue Green credits (similar to carbon credits) which could be traded!

Quite easily said of course...but am confident that the gaining momentum in Corporate Social Responsible (CSR) initiatives would also translate to a path down the green road in the coming years and push banks to lobby with governments and central banks for the same. Do not believe sufficient political intent lies currently with governments to take the first step.

b. Green Lending : There are several banks globally who specialize in lending towards eco-friendly initiatives - windmills, solar panels, low emission plants etc.

The Equator principles present another angle towards defining principles for lending to organizations and projects that follow prescribed norms towards conserving the environment and following reduced pollution norms.

Banks would do well in developing expertise in the above areas and defining policies that ensure that "green principles" are at least examined at the time of evaluating lending norms

c. Enlighten your Employees : Nothing works like dialogue, reinforcement, measure and incentives. Ask your employees to define what their understanding of going "green" means. You may be quite surprised on the responses.Most personnel believe that the issue lies in the deforestation in Brazil and the diesel guzzling buses trucks emitting carbon monoxide.

The question lies in how banks could recognize and incentivize employees to adopt car pools, rationalizing usage of paper, adopting video conferencing over flights for client meetings....

Can we have green credits which are issued to employees as well!

Innovation....Where are you?

Came across a fairly interesting article by Mark Fidelman titled "Where Are India’s Innovative Companies, Products and Solutions?"....

The article builds on the fact that India has produced some of the world's best minds in science, technology and medicine yet does not appear to have created large scale and breakthrough innovations in these fields. Further reflected by the low number of patents originating from Indian companies.

The missing ingredients required to jump-start India’s innovation ecosystem are;

1. Access to intellectual and relational capital.
2. A well developed Angel and Venture Capital industry
3. An active segment of the Press focused on promoting early stage ventures and building Entrepreneurs into Business Celebrities.
   
4. A Comprehensive Understanding of the Indian Consumer and the lack of formal Government support to promote Entrepreneurship and Innovation.
5. Establishing Compelling Reasons to Innovate

Over the last couple of months have come across several Indian start ups and large organisations that have been undertaking some breakthrough work in the areas of mobile payments, financial inclusion and even social lending. The essence, as propounded by several others, lies in creating business models and innovations from an Indian perspective and for an Indian environment. The rapid growth in the mobile telephony space has quite clearly shown that large value markets exist in India, and do not necessarily take decades to develop.

The key to the next level growth lies in innovations in financial inclusion and payments to open out new frontiers in customers and markets.

To read the article click here

Top Innovations in Retail Banking & Payments?!

I posted a question recently on Linkedin, seeking viewpoints on the top innovations in retail banking and payments in the last decade........... and received a myriad of interesting responses

Though mobile & Internet banking, bill payments and smart cards scored at the higher end, the one response that captured the essence was the Internet / IP enablement of financial services. This has led to a spate of new products & services and effectively opened out new segments that were hitherto restricted for electronic payments.

To read the various responses received on Linkedin click here

National Payments Plan - Vision for UK Payments

The Payments Council in the UK was set up to outline a strategic direction for payments in the United Kingdom. The first release of the report focuses on retail payments and focuses on those areas that require collaboration.

The report makes for interesting reading and touches upon several subjects including the phasing out of cheque based clearing by 2018, the need for open & interoperable standards for mobile payments and the imperatives for financial inclusion.

Fairly interesting reading.....

White Space Redefined

Came across a brilliant document that has outlined 12 case studies of service organisations that have applied innovation in creating quantum value.

The case studies include three players in Banking & Financial services - Bank of America, The Hartford and MyBizHomepage. The case study on Bank of America highlights the "Keep the Change" programme, has proven to be an inflection point of sorts for the bank in the North American market, which is a must read if you have'nt already.

Do read on the concept of seizing the white space as detailed in the document. The report has been prepared by Peer Insight

Much has been written on the need for innovation. The model provides a simple and lucid method to articulate the opportunities in the competitive space as also the "Inside Out" & "Outside In" approaches that your organisation could take to creating value.

Once again, a must read.

Internet Access Redefined

No laptops, PCs, PDAs, clunky internet access devices.....

Internetspeech has a developed a technology that makes the Internet accessible over the phone. That's right....no keyboards, monitors or even a stylus...Just pick up your phone and yell "Yahoo" or "email" and the service would help you access the information / messages on your account.

The possibilities and opportunities are limitless for information & transactional services. Be it for executives on the move seeking to access their email or portfolio value, or a customer in the BOP attempting to determine the rates of onions in the local wholesale market!

As I keep saying, its not in the technology...it's in the user interface!

Am excited with the opportunities for banking and financial services...Lets see how this evolves in the coming years....

Biometrics Redefined

A critical milestone for the widespread adoption of any new technology is the establishment of standards! The ISO has released a standard for financial services for biometric applications - ISO 19092:2008

This would, I hope assist financial institutions in adopting and developing applications on a common platform for biometric end uses.

Biometrics enables accurate authentication and the end benefits include reduced risk and fraud alongwith customer convenience

Biometrics is also finding new use applications in a wide array of industries including loyalty systems......

An extract from the ISO website

"ISO 19092:2008 describes the security framework for using biometrics for authentication of individuals in financial services. It introduces the types of biometric technologies and addresses issues concerning their application. ISO 19092:2008 also describes the architectures for implementation, specifies the minimum security requirements for effective management, and provides control objectives and recommendations suitable for use by a professional practitioner.

The following are within the scope of ISO 19092:2008:

• usage of biometrics for the authentication of employees and persons seeking financial services by:
• verification of a claimed identity;
• identification of an individual;
• validation of credentials presented at enrolment to support authentication as required by risk management;
• management of biometric information across its life cycle comprised of the enrolment, transmission and storage, verification, identification and termination processes;
• security of biometric information during its life cycle, encompassing data integrity, origin authentication and confidentiality;
• application of biometrics for logical and physical access control;
• surveillance to protect the financial institution and its customers;
• security of the physical hardware used throughout the biometric information life cycle.

ISO 19092:2008 provides the mandatory means whereby biometric information may be encrypted for data confidentiality or other reasons."

Scotiabank Pilots Social Network for Staff

Some of you may have read an article I had written on social networking in corporates a couple of months back.

Was thrilled to see Scotiabank in Canada having launched a social networking platform for their staff members recently. The platform would allow employees to view profiles and exchange ideas and best practices.

Social networking within large organisations can break across hierarchies and departments and tap into the unutilised potential that lies within employees............which would lead to innovation I'm sure....

Risk Redefined!

"In this country, you gotta make the money first. Then when you get the money, you get the power. Then when you get the power, then you get the women."....Al Pacino - Scarface...

Hmmmmm....and this was a blog on trends and innovations in banking and financial services...fear not.....

A research conducted recently at the University of Berkley, determined a correlation between sex and propensity to taking greater financial risk! Hence, when young men were exposed to erotic pictures, they were more likely to make a larger financial gamble than if they were shown a more scary or neutral image such as a snake.

This is in line with an increasing amount of research being undertaken in the area of neuroeconomics, which attempts to understand better the areas of brain biology with softer aspects of human psychology and its influence on individuals / organisation's perspectives and actions on undertaking financial risks.

The above study may be criticized for its accuracy, but there is obviously a need to understand the genetic code and stimuli that stimulate greater financial risk taking abilities.

Innovation and risk taking go hand in hand and am looking forward to more breakthrough research in this area.

If you'd like to read more on neuroeconomics click here to get started....

Picked up from Wikipedia...
"Neuroeconomics is the subset that focuses on personal choices and the mental changes that correlate with the choices and may even cause them. A key insight is that the biological substance of a living organism can be modeled as implementing an optimizing solution to some survival/reproductive challenge in the evolutionary environment."

Mobile Banking - Opportunities & Challenges

There have been several papers and articles written on the opportunities offered by the mobile phone in enabling banking access and transactions in an economical manner....

Came across this paper, which clearly outlines the basics of the subject and would serve as a good starting point for those who would like a simple document that covers the fundamentals quite well

To download the paper, click here

The Base of the Pyramid.....

The Base of the Pyramid (BOP) is an area that has ignited research and several initiatives across the globe in recent years. The challenge in extending basic banking services and credit to BOP members is one that is spurring innovation amongst bankers and financial institutions alike. Over the next couple of months, I would be touching upon some work & initiatives being undertaken in this space.

The BOP as a concept gained much visibility with CK Prahlad's book on the same subject. The Base of the Pyramid (BoP) Protocol Initiative is an action research program launched in 2003 to develop and refine a corporate innovation process geared for the unique challenge of sustainably serving Base of the Pyramid markets.

The initial framework for the BoP Protocol process was developed in 2004 through an intensive four-day design workshop at the Johnson Foundation's Wingspread Conference Center. The workshop brought together a diverse mix of social entrepreneurs and non-governmental organizations, a dozen managers from the project's four corporate sponsors, and thought leaders from various academic fields such as International Development, Social Work, Economic Anthropology, and Design.

Working from this framework, the 1st Edition of the BoP Protocol was released in March 2005. Since then, CSGE has partnered with two corporations to implement the BoP Protocol. The first project was launched in 2005 by SC Johnson in Kenya, and the second was launched in 2006 in India by the Solae Company, a subsidiary of DuPont.

To read / downlad the second edition published recently, click here

Innovation Redefined!

"Innovation is the ancient art of letting people do their jobs!"

I just loved this one when I came across it in wired....Your views ?

Debt Redefined!

The Indian market for unsecured and secured loans including credit cards has exploded over the last seven years. Access to low cost loans has fueled the growth in consumer spending but has also resulted in "exuberance" and resulted in rising defaults.
As more consumers traverse the rocky path of increasing interest rates and as newer customers enter the credit fold there is an ever growing need for education and advise at the right time!

A movement that has gathered momentum are Internet based communities that facilitate members to exchange notes and also advise on how loans should be managed and repaid in effective manners. Wesabe offers both a forum and a set of tools that help customers make better financial decisions!

This leads us to another question/ opportunity? Perhaps there is an opportunity for lending institutions to play a consultative / advisory role in guiding clients on the quantum of loans that they should take?

Your views?..........................

Compromise Redefined !

Over 162 million electronic records containing data like credit card, social security numbers etc were compromised in 2007!!!!

With an increasing number of cases of data theft globally across retailer and financial institution databases, customers quite often seek simple solutions that offer greater online transaction security. The challenge is not only with credit card number details but a wide array of personal records including driver's license, PAN card numbers and other personal details.

Credentica is working on a product that would enable customers to enter partial information and not divulge the complete details whilst completing an Internet transaction.

Those who are "tech" oriented can visit their site or the recently published article in Wired.

However there are two key aspects that we need to address at this time, and which continue to infuence the growth of e-commerce....
a. Most researches conducted in India continue to indicate that online security continues to be an area of concern for customers to reveal their credit card details in an online transaction

b. With increasing instances of compromise of personal & transactional identity information, are we investing sufficiently in working towards a more secure payment mechanism for the Internet and mobile?

Cards & Transfers Redefined

There's a small revolution brewing in North America...........coincidentally called the Revolution Card!

There are two products actually....the first is a credit card which consists of a card which has neither the card-holder name nor the card number embossed on it! The cards can be used at the existing Point of Sale (POS) infrastructure and would require customers to use pins to complete their transactions.

The USP - significantly lower merchant interchange fees of 0.5% vis a vis the prevailing rates in the range of 2% ( in North America). For the customer much greater security and identity protection.

The second product is an online money transfer service, that enables customers to transfer funds free of charge! There are fees incurred for withdrawals and some deposit transactions. Quite a healthy benefit for customers using Paypal, Western Union and similar wire transfer services.

The company is backed by Steve Case, one of the founders of AOL and has received funding from an interesting array of investors including Citibank, Morgan Stanley and Deutsche Bank.

The payments industry has typically been driven by Visa, MasterCard, American Express and a few others. Innovations have been typically been incremental & reactive and not always quantum in nature. It is refreshing to see the birth of an all new player that might just change the rules of the game.....