Why Hasn’t the U.S. Adopted EMV?

EMV chip technology is not new, but why hasn’t the U.S. gotten on board?

With advanced security, endless technology benefits and success in many other markets, it can be confusing as to why Americans are not already seeing widespread use of EMV technology. After the 2013 breach of Target credit cards during the holiday shopping season, business leaders, including Target’s CFO, are now calling for acceleration adoption of the technology.

So why isn’t this more widespread? This infographic breaks down the benefits of the card and some potential  reasons why the payment technology hasn’t been widely adopted in the US.

What do you think about EMV? Will it still be Europe-only?

 

Smart Cards
Source: ComputerScienceDegreeHub.com

This Weeks Reads: Data, Innovation, Mobile Banking Success

Below are interesting stories the Banking.com staff has been reading over the past week. What have you been reading? Let us know in the comments section below or Tweet @bankingdotcom.

Stat of the Week

Here’s this week’s stat of the week, courtesy of the Accenture 2014 North America Consumer Digital Banking Survey.

Do you have an interesting industry stat you think should be featured on Banking.com? Let us know in the comments section or Tweet @bankingdotcom.

Accenture Stat of Week 6 9 14

Technology M&As: The Beats Go On

If it takes gangsta rap to spark fresh interest in the intersection of investment banking and technology, then so be it.

The ongoing fascination with Apple’s $3 billion purchase of Beats Electronics is entirely understandable, because it’s a cool story.  However, it also says a lot about what’s going on between finance and tech.

128px-Beats_by_Dr._Dre_-_logo.svg (2)On the one hand, there’s Apple, a company that’s become synonymous with innovation and raging success. It wasn’t always this way: the technology pioneer went through some serious lows, especially compared to archrival Microsoft, before reemerging as a consumer electronics giant that now has $160 billion cash on hand, nearly to be precise. And then there’s Beats, which makes audio products and offers a listening service. The company’s had some diverse owners: One is the Carlyle Group, the asset management powerhouse, whose executives have included the first President Bush, his Secretary of State James Baker, the former Prime Minister of Thailand, and a raft of financial services, business and media luminaries. But overshadowing them all is co-founder Dr. Dre, who earned early fame with gangsta rap, which of course drew the wrath of the Bush administration.

But putting aside the strange bedfellows, the high-profile deal offers a good reason to take a fresh look at the moribund investment market. To be sure, it turns the spotlight on many key elements in this market—the consumerization of IT, evolving drivers for content adoption, changing tastes expectations in key demographics and the premium placed on innovation and marketing (not always in that order).

However, as PC World points out, this is not the only silver lining in the cloud. In fact, to stretch the metaphor, cloud technology—along with software-as-a-service (SaaS) and mobile offerings—is fueling a strong drive in tech mergers and acquisitions.

The Global Technology M&A Update from EY (previously known as Ernst & Young) reveals that a curious blend of opportunity and disruption—two cornerstone elements of the tech market—came together to boost global technology M&A aggregate value by a staggering 65% in 2013. The number shot up to, $188.2 billion, which clearly hearkens back to the glory days of the dotcom bubble.

To be sure, global technology M&A volume actually declined for the year, but cloud and SaaS registered a spike—a hint as to where the future is headed. Big Data remained almost as big, with advertising and marketing technologies—packaging analytics and social networking—nudging deal volume. Security and health care IT (which often seem to go together) moved along as well. The folks in our line of work had good times too—financial services technology drove value to the tune of some 100 deals.

And while all this represents a look back, the look forward is nice too. The Apple-Beats combo aside, the first quarter of 2014 saw considerable activity in M&A circles, which is unusual for this period. The most recent report from PriceWaterhouseCoopers points to 57 deals closed in the first quarter, up by more than a third over same-period 2013. More specifically, many technology companies have not yet adapted their offerings to mobile, cloud and SaaS models, at least to the extent possible. As these pressures continue to mount, look for more wide-ranging deals to fuel technology M&As.

Any comparison to the raging market of 20 years ago—when dot-coms with no profits or even revenue received massive valuations from otherwise perceptive investment bankers—are not only premature but grossly unfair. But just as technology and finance have always boosted each other’s fortunes, it’s good to keep a wary eye on this market, even as it offers reason for optimism.

 

Image courtesy of Monster Cable Products, Inc., via Wikimedia Commons

Preventing Banking Errors: Q&A with Charley Rich of Nastel

As anyone in banking knows, the slightest error can result in catastrophe. Recently, Banking.com spoke with Charles Rich, vice president of product management and marketing at Nastel, an application performance monitoring company, about how the company works to help mitigate issues for financial institutions and where the biggest challenges lie.

Charley Rich, Nastel

Charles Rich, Nastel

Banking.com: What do you see as the biggest issue for financial institution’s data transfers?

Charles Rich: The biggest issue for data transfers is to ensure that they arrived on-time and accurately.  Often, there is a bottleneck in performance that prevents on-time delivery.  The challenge is building a performance monitoring culture that finds these problems before the issue impacts the transfer.

Banking.com: How does Nastel work?

CR: Nastel provides real-time monitoring and analysis of messages and transactions. Nastel’s product, AutoPilot is built on an analytical engine using Complex Event processing.  This analytical engine enables AutoPilot to utilize pattern matching of events from multiple sources along with algorithms to detect anomalies. AutoPilot is very effective at reducing the frequency and duration of incidents and at reducing false alarms.

Banking.com: What is the most common error that Nastel works to correct?

CR: Delivering visibility to IT where they were previously unable to detect problems before impact or unable to determine root-cause.

Banking.com: Is there any advice outside of adopting the Nastel technology you have for financial institutions?

CR: It is important to have requirements for applications that include performance expectations.  These should be appropriately tested in QA.  It is surprising how many times testing only looks at individual functions and does not adequately test performance.  It can be challenging to improve performance late in the application’s lifecycle.  It is better to design it in and test it before provisioning into production.

Banking.com: Which industries are the most successful or innovative right now in their data management?

CR: Healthcare is moving into the forefront as they begin to handle the loads of data from both claims and electronic health records.

How are you mitigating risk with data transfers?

 

Tax Time & Financial Institutions: Data from Digital Insight

The tax filing deadline is rapidly approaching, and for many consumers that means looking through last year’s financial records for various items like charitable contributions or tax deductions. Digital Insight, which offers TurboTax ® for Online Banking to its financial institution (FI) customers, took a deep dive into how consumers are using tax software and how it can benefit FI’s. Through tax exit studies and surveys, Digital Insight was able to see how the tax preparation software helps FI’s with customer engagement and retention. Below are key findings from the study, and you can view a more in-depth analysis here.

And, you can view previous Digital Insight studies on mobile banking behavior and online banking. 

Intuit, TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties’ trademarks or service marks are the property of their respective owners.

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Five Steps to Monetizing Your Company’s Data

Anabel Pérez - CEO, NovoPaymentEvery second of every day, banks, retailers, payments organizations and a broad network of companies across the region play host to a vast flowing river of transactional data. From the tiny ripples of single transactions to massive waves of batch settlements, this information comes from customers, merchants and even third parties. Most of this data is recorded and stored for invoicing, account statements, auditing and fraud prevention, but it’s poorly exploited when it comes to generating new revenue sources and businesses.

That’s right – businesses. Those countless daily transactions containing data have real value and are the “prima materia” or source material for improving profitability, efficiency, customer experience and customer loyalty, and fashioning new, finished products. How, is this possible? Here are five initial steps you can take to start monetizing your company’s data:

  1. Start thinking about institutionalizing your approach to data – The initial step is to promote an informed discussion about the value you can begin to extrapolate from what you have and its potential value to others inside and outside your organization. What would it look like if your company started to institutionalize the capture, storage, analysis and application of data? Clearly, the help of a business intelligence and analytics specialist would be of significant value in this process. It may also be useful to create a steering committee with specialists from various business areas.
  2. Audit your current data – Establish the size and nature of the data that your company has by undertaking a comprehensive audit. Where is it stored? Is it centralized or dispersed? How many customer records and data points do you have? How far back do they go and across how many different markets? How much of a customer’s “life journey” are you holding? What kind of predictive insights and behavioral patterns might be possible with your data, such as: what do they buy, when do they buy and how often do they take out cash? Finally, what do you know about their demographic profiles?
  3. Assign a data manager – To truly maximize revenue or any other tangible value from your data, someone must own responsibility for it. These experts are increasingly specialized and coveted talents, and like all human resources, recruiting is key. Also, when you find the right leader, make sure that person has an important seat at the executive table. In today and tomorrow’s world, data managers will have a major strategic influence as opposed to the current operational role of custodians and safe-keepers of data.
  4. Package and make your data work for you – Determining the best delivery vehicles for new data-based products or services targeted toward existing and/or new customers is a considerable, but worthy challenge. Through business analytics and intelligence, your newly collected and organized data will reveal insights and understanding into how your company’s bottom line can be improved by: 1) streamlining current business processes, 2) revealing new revenue sources and models and 3) providing opportunities to frame, package and brand the data to be shared externally. The possibilities include geo-localization, proximity +NFC, apps for mobiles, imaging and M2M among others.
  5. Embrace emerging-payment systems – As non-traditional or emerging-payment platforms (such as mobile phones and wallets) grow in use this represents a rich data pool. However, many companies are not taking advantage of such emerging payments, and they are losing out on opportunities for new revenue streams. Make sure you embrace emerging-payments systems in order to capture as much data as possible.

Regional Challenges

As the buzz around big data turns to increased action in our region, some eminent and long-term challenges will have to be addressed:

Digital payments: If our formal economies are flowing rivers of data, our informal economies are like vast, opaque lakes. We’ve heard for many years about the war on cash, but this initiative is going to be increasingly relevant to broaden our digital world and break down its current edges.

The talent question: A new generation of talent is going to be needed to carry these practices forward and improve them. The question then is where will new resources be trained in order to effectively wield these powerful tools?

Security: Our standards and local laws will need to be up to the task of addressing the risks associated with bad practices and misuses of data, and of protecting consumers in particular.

Collaboration: Good data is like good ingredients. Some combinations can be extremely appetizing and even sustaining. Will our companies learn to share data or will our strong culture of competition and suspicion keep us from great things? Can we imagine a “First Bank of Data” for sharing this information or is it some utilitarian dream?

These and many other questions come to mind when contemplating how we will relate to our data tomorrow. Whatever the answers, one thing is certain: the time to start thinking about data differently was yesterday.

 

Anabel Pérez is President & CEO of NovoPaymentthe leading payments technology services company in Latin America, providing prepaid/stored-value program design, implementation and Platform as a Service (PaaS). 

Innovation: Both Homegrown and Outsourced

Let’s put it out there: The banking industry is rising to the many challenges it currently faces, and the key to that ascension is innovation. One clear indication comes from the new report Innovation in Retail Banking 2013, commissioned by IT services conglomerate Infosys and conducted by the European Financial Management & Marketing Association (EFMA), which features a raft of good news.

The study, which surveyed 148 banks in 66 countries, shows that retail institutions around the world are systematically investing in innovation specifically to boost revenue and cut costs. A remarkable 60% of the banks now actually have an innovation strategy, compared to only 37% five years ago. Among other highlights, more than half (58%) say their deployment of new systems will have a positive impact on their ability to innovate even further, 69% are making moves into mobile location-based offerings, and 61% are working on enabling customers to do some form of product personalization. And of course, 77% already have in place or are working on a mobile wallet solution.

What’s just as interesting, however, is how all this innovation is coming into the organization. For example, Denver’s FirstBank is about to become the first regional U.S. bank to launch mobile photo bill pay. But the $13 billion institution, which has  more than 115 locations in both Colorado and neighboring states, didn’t outsource the development of its technology—with 12% of its employee base working in IT, the company developed its own core banking software and 12% of its employee base of about 2,100 works in IT. FirstBank sees this as a competitive advantage, and a way to move fast in response to market demands.

On the other hand, there’s Tioga-Franklin Savings Bank, which has a 140-year history in the Fishtown neighborhood of Philadelphia. The institution has long prided itself on its reputation for stability, but it has more recently recognized that there must also be change—its numerous manual processes required a major transformation in order to stay competitive. So, after a year-long search, Tioga-Franklin—the bastion of tradition—signed on with Data Center Inc. (DCI), of Hutchinson, Kansas, the force behind the iCore360 core banking software. The bank is now looking forward to significant enhancements in organizational efficiencies through workflow automation and regulatory simplification.

The big picture on change through innovation offers an even more diverse view. One interesting point: as noted in a recent column on the ABA Banking Journal, a remarkable amount of the real innovation seems to be happening in less developed markets.  Many market analyses make the same point.

For example, a broad study from consulting firm BearingPoint found that emerging economies are twice as efficient at innovating as their more developed counterparts. Similarly, PriceWaterhouse Coopers says that U.S. companies are certainly tracking with the shift in innovation strategy, but most pioneers in its study are actually not U.S. companies.

Finally, a contest launched by Accenture and EFMA to find winners of their inaugural global distribution and marketing innovation awards for retail banks handed out plaudits to entries from, among other markets, Nykredit in Denmark, Hana Bank in Korea, BRE Bank in Poland and Aktifbank in Turkey.

It’s not as if in the new world, all the rulebooks should be thrown out. In fact, we still should value industry best practices and see how they apply to us. But there’s also no question that at least some of the rules are changing, and we need to keep pace. Just think who our next great rival might be: Wal-Mart (which officially gave up the banking chase in 2007), Amazon (which clearly has many irons in the fire), Facebook (which has even more), some tiny technology startup, or someone different from all of the above.

In this competitive and rapidly evolving competitive environment, we know that innovation is both the best defense and the best offense. Where that innovation comes from, however, is a different question altogether.

Banking.com, Barlow Research and Digital Insight to Host Twitter Town Hall on November 14th

Banking.com and Barlow Research SOHO Twitter Town Hall

In conjunction with Barlow Research and Digital Insight, we will host a Twitter Town Hall on Thursday, November 14th to discuss Barlow Research’s recent study of the Small Office/Home Office (SOHO) market. The Twitter Town Hall will discuss the survey results and how they tie into current banking trends, including  financial management, payment and credit card behaviors, mobile and digital banking habits.

Barlow Research recently completed a comprehensive, multi-sponsored study that gathered the information needed to segment the SOHO market, examine their financial management, payment and credit card behaviors, measure the value of the SOHO customer, analyze product usage and explore business Internet banking and mobile device habits. Banking.com will be hosting a Twitter Town Hall to discuss the study results, how banks are currently serving consumers and answer any questions about the study.

The Twitter Town Hall is open for all our readers to join and participate in the conversation. To join us and/or learn more about the event, see below

Steps to Join:

  • Twitter Town Hall: Go to www.tweetchat.com. Log in using your Twitter ID.
  • Enter the hashtag to join the conversation: #SOHOStudy
  • You can also follow the hashtag (#SOHOStudy) using Twitter applications such as Hootsuite or Tweetdeck 

Details:

  • Date: Thursday, November 14th
  • Time: 10:00 am PST/1:00 pm EST
  • Hosted by: Banking.com Staff (@bankingdotcom), Joel Mueller, Research Analyst, Barlow Research (@BankingResearch), John Barlow, President, Barlow Research (@JohnRBarlow) and Digital Insight (@Digital_Insight)
  • RSVP/Add to your Calendar: You can register for the event via Eventbrite and add a reminder to your calendar. See Eventbrite link here

Additionally, if you are interested in submitting a question prior to the Twitter Town Hall, please DM us on Twitter.

We hope to “Tweet” with you on November 14th!

For more on the study, visit our earlier posts on the topic.

 

The Haves and the Should-Haves

Small business and younger, tech-savvy consumers—these are two market segments that couldn’t be more different. Yet for our purposes, at least, they could be seen as representing two sides of the same coin. For both, there are big obstacles and even bigger opportunities. The key to success on both fronts is to get smarter about what we’re doing.

First, consider the sheer size of the small business market. In a word, it’s big. In fact, with $6 trillion in revenue each year, it’s the second largest economy in the world. That is one huge pie, with profitability enough to go around for everybody. That said, it’s only a ‘market’ in the loosest sense of the term—with some 28 million companies around, it’s too diffuse to identify specific patterns. Besides, it’s a target that’s constantly moving. Thanks to the constant emergence of new online and mobile capabilities, routine best practices and fundamental human behaviors alike keep shifting.

But here are some numbers that should stick with us. Only 14% of small business owners currently use their financial institution’s cash management/business banking solutions. Sad as that sounds, our customers spend 5.4 billion hours each year doing taxes (it takes less time to produce every car, truck and van in the country). And finally, let it be noted that a stunning 66% of small business owners still use personal bank accounts for business.

So that’s what they’re not doing. To get a snapshot of what they could be doing, consider the generational shift. A Digital Insight study of 27 financial institutions found that 84% of mobile bankers fall into what we call the ‘Gen Y’ and ‘Gen X’ categories (to make some of us feel a little older, remember that Gen Y alone will account for close to half of the nation’s personal income within the next 10 years.) This is one ripe demographic.

And how does this translate into tech-savvy behavior that benefits them and us? Online banking customers have 13% more accounts than their offline counterparts. In fact, online banking customers conduct 59% more debit card purchases and have a 7% higher annual retention than offline customers. Going one level deeper, consider the difference in log-ins: for online banking users, the number is 9.73; for online and mobile users, it’s 18.87; and for online, mobile and tablet users, it’s 29.05.

We may be sick of hearing it, but mobile is a particularly big deal. These consumers conduct 40% more monthly debit card purchases than online non-mobile consumers. Even more significantly, mobile consumers access their financial information 65% more frequently than online non-mobile users.

Underlying all these changes is an even more fundamental shift, and it’s from consuming credit to managing cash. Basically, business customers of every kind want simplified workflows with greater access to financial information and tools, ranging from payments capabilities to asset management. Do traditional cash management solutions do the job? Or are they too complex to meet emerging business needs?

Now for the good news. Nearly 80% of consumers name their bank or credit union as their most trusted online destination to manage finances. According to the Tower Group, business owners’ use of online financial services has risen 17% in just the past year. Online services are among the top three reasons businesses choose their financial institution in the first place (but we warned: Barlow Research tells us that nearly half of business online banking customers would switch banks for better online banking functionality).

So here’s the future of financial management. To get smarter about profitability, credit unions must get to manage every facet of customers’ financial lives. There’s a ton of research telling us this—of the 88% of consumers who now pay bills and transfer funds online, 62% would like a single place to manage their complete financial picture, regardless of where the information originates, and an unbelievable 94% of TurboTax for Online Banking users who used direct deposit for their refund sent it directly to their host financial institution.

It’s easy to get overwhelmed by all the changes taking place in our customer base. If the move to online banking was a big change, then the adoption of mobile tools and services is a seismic shift. Yet the wealth of data we have at our fingertips also offers a clear view into the multitude of opportunities that comes with that transformation. Consumers who actively use technology-enabled services, particularly those offered through mobile channels, undeniably represent higher account ownership, balances, retention, and debit card purchases. They will find, join and be loyal to financial services providers that offer customizable tools and services to meet a wide range of evolving needs. The onus is on us to get smarter about how to meet those needs.