The Next Wave of Digital Money Transfer

Money, technology and accounting in real time—with all deference to spiritual learnings, that might just be the mantra for modern life. At the very least, it makes for a potent brew that says a lot about how we do just about everything we do.

Image courtesty of Graur Codrin/FreeDigitalPhotos.net.

Image courtesy of Graur Codrin/FreeDigitalPhotos.net.

The trinity is in the news in our industry because late in March, mobile payment and merchant services provider Square launched a new integration program with accounting software specialist Xero. Built around a new API (application programming interface), the deal enables transaction data from Square to be fed directly into financial records managed by Xero. That’s a big market and growing: Xero claims 200,000 paying customers in more than 100 countries, with a cloud platform approach that allows a wide range of business applications—from large companies like ADP and PayPal to new entries—to be integrated easily into the ledgers of Xero users.

Of course, in many ways, that’s exactly what Quickbooks does too. Which is why, when the most recent version of Quickbooks was released last fall, owner Intuit also announced a major partnership with Square. That deal, which formally launched a few weeks later, is specifically designed to help small businesses that use the mobile payment service to automatically feed data from those transactions into their books. By all accounts, the arrangement has proved quite successful.

As observers have been quick to point out, these companies are competing furiously with each other. For example, Xero has a Quickbooks conversion service to draw users from its desktop rival, and Intuit has launched Quickbooks Online as its own cloud-based alternative. Meanwhile, Square is increasingly branching into other accounting-related services.

While the market has been waiting for options such as Facebook Credits and Amazon Coins to gain traction, Square is putting its money—in a sense literally—where its reputation is with Square Cash. This is not really another form of currency, per se, but it does represent another form of financial flexibility in the digital era. With this personal payment app, users can ‘email money’ to other individuals with nothing more than a debit card.

For the record, plenty of other companies offer similar services. Larger entities like PayPal and Google allow person-to-person payments, and as in every other category, there are newer entries like Dwolla and Ribbon are also in the mix. And let’s not forget clearXchange, the consortium created by Bank of America, Wells Fargo and JP Morgan Chase. This is clearly a work in progress: Capital One just joined, but founding member Chase has yet to come online.

And that’s really the problem in a nutshell. This is a market that exhibits all the characteristics of the technology sector—it moves forward at warp speed, seemingly solid players get nudged aside by startups, fierce competitors find ways to cooperate with each other, fickle users constantly change in their behaviors and tastes, and products go from killer app to legacy in a heartbeat. Meanwhile, banking industry giants seem to be just lumbering along—a consortium with huge names that makes more of a ripple than a splash.

Why does so much of the really exciting stuff always come from the technology side? Why do innovations from the banking industry never seem innovative enough?

It’s not as if tech companies will be replacing banks anytime soon. The barrier to entry on that side of the fence is much lower, hence there’s more experimentation, and as a result more successes (and more failures). What they do enables us to do what we do—nothing more, nothing less.

But remember, much of the customer base is now made up of a generation that never goes inside a bank branch, has precious little brand loyalty and expects instant digital gratification in every sphere of life, work and play. Other industries such as retail and music have had their very existence undermined by these tectonic shifts, some of which they never saw coming. Our world keeps changing too. Are we changing enough, and fast enough?

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?