The Financial Services Club's Blog

Welcome to The Finanser by Chris Skinner

Welcome to The Finanser, the portal to the knowledge base of the Financial Services Club, chaired by Chris Skinner. 

The Financial Services Club was founded in 2004 to network financial and technology professionals, with a focus on the future of financial services.  The network delivers high quality and in-depth research, analysis, commentary and debate and has regular meetings in London, Edinburgh, Dublin and Vienna.  More importantly, it provides a critically independent platform for practitioners, regulators and industry leaders to meet, network and discuss the future of our industry.

Chris Skinner is an independent commentator on the financial markets and, as Balatro, Chris assists clients as an advisor, as well as sometimes being commissioned to write or speak on their behalf at conferences and tradeshows.  You can see a few of his presentations on the blog, under the category: presentations and some of his speeches are also transcribed.

Alongside his role as Chief Executive of Balatro, Chris chairs the Financial Services Club and writes this blog, as well as regular columns in many national and international banking publications.  He  has also written several books on banking.

If you have any commentary you wish to add to The Finanser, then send your views via the comments section on the relevant blog entry or just email Chris direct.

A few recommendations:

“Just a quick note to say thanks again for a truly terrific presentation at our SAP Banking Summit event here in The Hague. The event was overall a great success and your participation was really one of the highlights of the entire three days.”

Don Trotta, Global Head of Financial Services Industry Solutions, SAP

“The Bloomberg TV team is very grateful to have had such an insightful guest in such critical times.”

 Marta Marino, Bloomberg Television

“Chris is an accomplished speaker and facilitator with broad international experience. He's known for his quirky take on life, his sharp wit, and his deep knowledge of the players in the EU banking space. Chris knows how to entertain and educate at the same time ... I am constantly in awe of the amount of content he produces at a consistent quality through his blog.”

Brett King, Author of Bank 2.0

“Just a quick note to thank you for your contribution in the last 2 days. I know this is your ‘day job’ as  you call it, but nevertheless, it’s not easy to moderate a 90 minute discussion on Risk and follow it up with one on Regulation.  As for your presentation...well...that was a REAL eye-opener. I loved the way you referred to the guy who was idiotic enough to have the same passwords for his accounts. I glanced around the room at that point and saw some quite startled faces.  Top presentation.”

Bradley Lonnen, Vice President, Market Management, Deutsche Bank AG

“What a great speech! Thank you so much for coming to our business lunch yesterday and delivering such an excellent oration.  I have heard nothing but praise from the Liverymen, Freemen and their guests whoe were there.”

 Jonathan Soar, Master of the Worshipful Company of Information Technologists

“On behalf of all of us at the ACT thank you very much for being our keynote lunchtime speaker. As discussed I thought you successfully provoked the audience into thinking carefully about the state of their banking relationships.”

Colin Tyler, Chief Executive, the Association of Corporate Treasurers

“I just wanted to thank you again for coming over and doing the Futurist session for ISITC.  It was very well received.  In fact, in my post-event Marketing Committee meeting on Tuesday morning, it was unanimously agreed that your session was one of the highlights of the event.”

Kevin Cullen, Board Member, the International Securities Association for Institutional Trade Communication (ISITC)

“You do an amazing job with your blog. Fantastic commitment and a great service.”

Jonathan Hey, Head of User Experience, Nutmeg

“Your conversational style and very clear writing is very refreshing … I would love to have you write for us again. Your attitude and approach is something our newsletter needs.”

Paula Park, Editor, Financial Regulation, Bloomberg

“You are a versatile commentator who could easily transfer into another finance/economy debate… a topic which comes around time and again - and we don’t want to risk throwing away a valuable voice like yours.”

Cara O'Doherty, BBC 

“Thank you very much once again for your participation yesterday. Several people commented to me that your moderation style really helped bring the best out of the panelists and from what I saw I’d be inclined to agree with them.  I think the moderation role is underrated by some people – it can be the difference between a great session and an average one. I will certainly add you to our list of preferred moderators here.”

Dr Neema Parvini, Senior Conference Producer, Incisive Media (Waters)

“Chris Skinner is switched on, insightful, concise and keeps his finger firmly on the financial sector pulse.  An opinion leader, not a follower.”

Robert Hokin, Chief Executive, ecoConnect CIC

“For those who are unaware of Chris' tireless work in the Financial Sector then I am glad to be able to thoroughly endorse him as a person who has both the intellectual acumen as well as the drive and dedication to his industry which is so sadly rare in the business world today.” 

Steve Edwards MBE, Head of Fraud for eBay Europe 

 “The audience couldn't stop raving about your presentation. You know you could be live at the O2 and get a full house!” 

Bikash Mathur, Partner and Head of Europe, Polaris Software Labs 

“I’ve known Chris for a long time now, well over 10 years, and I always look forward to hearing what he says. He speaks knowledgably about a wide range of topics, from social media to payments to MiFID, and is rightly an in demand speaker and chairman at conferences. He has a knack for generating pasionate debate and discussion. As a result, he’s also extremely well connected in the banking sector, and few people in the industry don’t know Chris. I’ve worked with Chris in all sorts of ways and if nothing else his sense of humour makes him a pleasure to work with!” 

Gareth Lodge, Senior Analyst, Celent

“Chris is a breath of fresh air. He continues to push the status quo thinking and adds value in looking at financial services through different and new perspectives.” 

Kevin Harris, Executive Director, SaskTel

“Over the many years we have worked with Chris Skinner, we have found him to have both a multi-dimensional understanding of the financial services business, as well as unique insights into what the future holds for our industry. Most of all, he is uniquely skilled in articulately painting a clear picture of the dynamics impacting our future to help other financial services executives see what's ahead for them.”

Deborah L. Bianucci, President & Chief Executive Officer, BAI

“Chris is actually a sage. Not only is he a wise, perceptive and funny, he is also excellent at identifying and explaining the key drivers of change in the Financial Services industry. His work and that of the forward looking Financial Services Club around the impact of Information Technology, Web 2.0 and client expectations of what Financial Services should be delivering to its clients, is superb. Chris is erudite and witty as a Chairman and informative and challenging as a speaker. You can see why he is in demand around the world.” 

Mark Outhwaite, Anti-Money Laundering Consultant & Compliance Adviser, OHL Consulting LLP

“Chris has always impressed me with his forward-looking perspectives on the global catalysts for change in the highly-commoditized retail banking industry. Chris can always be counted on to provide a controversial, yet highly-relevant dialogue on potential sources of future disruption.”

Steven D. Audino, Executive Director, USAA

"His series of blog posts prove again and again that he is a guy with a real passion for improving financial services, with an inventive approach who can be relied upon to deliver. Chris' expertise comes from a genuine interest and concern for the industry."

Andrew Carrier, Sales and Marketing Director, Cognito Analytics

“Chris is perhaps the first writer I know who successfully captures the pulse of the financial services industry not from a European or American, but from a truly global perspective. I sensed the same energy, reading it in Singapore and Beijing.”

Emmanuel Daniel, Founder and Editor-in-Chief, the Asian Banker

“Chris takes a serious subject and makes you laugh, think and worry at the same time. A provocative book about an industry being transformed in the age of the Internet.”

Leonard H. Schrank, former Chief Executive Officer, SWIFT

“Chris needs no recommendation, but here is a full-hearted one anyway! I have worked with Chris on marketing activities since 1992 and have always found him to be informed, incisive and often contentious in his analysis of the issues facing organisations today across the financial services and other sectors.”

Kerry Chapman, Marketing Manager, Tata Consultancy Services

“Chris has that rare ability to truly understand the social and business context as well as the potential technology solutions. In the finance sector this is absolutely essential, but sadly lacking in so many of Chris's peer group.”

Ian McDonald Wood, Trustee, the Strategic Planning Society

“Chris is a familiar face and voice in the UK and European banking market and being a prolific blogger on the banking and finance markets needs little introduction. His views are always of interest and are often stated to provoke broader debate. He is an excellent, intelliegent speaker and has been used by my company as a facilitator to good and useful effect.” 

Roy McPherson, Banking Consultant, Gresham Computing

“Chris spoke at a recent Cambridge100 Club Dinner about the next big developments in technology and what these will mean to business. This was a remarkable talk - insightful, compelling and informative. Chris is a visionary and futurologist with a real command of the factors which shape our future.”

Dermot Hill, Chairman, Cambridge 100 Club

“Chris is a visionary, committed and highly knowledgeable about tomorrow’s trends. I’d thoroughly recommend him as a great speaker on the future particularly in what’s coming over the horizon in Financial Services and Technology.”

Michael Jackson, former Chief Executive, Birmingham Midshires Building Society

“Chris did a fantastic visionary presentation for me in our ‘Compliance as a Competitive Weapon’ seminar. He thinks outside the box and consistently delivers thought provoking arguments.”

Tony Ferguson, Director, UniRisX

"Thanks ever so much for your excellent kick-off of this year’s Management Conference. The feedback for the attendees was uniformly very positive. Your remarks exceeded our goal of 'telling them something they didn’t know'. Come back and see us again!"

John P. Biestman, Director, Federal Home Loan Bank of Seattle

Thanks again for Chris Skinner’s “keynote address at our conference. I’m just reviewing the evaluations and he was certainly a hit. Comments included: ‘Chris Skinner – WOW’; ‘Chris Skinner – you saved the best to the last’; ‘Chris was an excellent speaker and very thought provoking’; ‘Chris’ presentation was exceptional’.”

Anne Marie MacNeil, Deposit Specialist, SaskCentral

“I have worked with Chris over many years. His energy, drive and enthusiasm for innovation and change have impressed me greatly. His insights into financial services and his contriubution to this industry will continue to pay dividends over many years.”

Bill Wright, Owner & CEO Brand Intellect

Community Currencies, a thing of the future by Chris Skinner

Many years ago, I read a book by Bernard Lietaer on the Future of Money, which expounded the ideas of community currencies.   These are currencies where you exchange time and other measures of value that are relevant to communities, rather than money which is referred to as a commercial currency. 

The best example of a widespread community currency is the Furea Kippu, which is a caring ticket used in Japan.  In this example, the Japanese Sawayaka Welfare Foundation introduced a national system, with a clearing house operation and all the stuff you'd expect in a currency exchange system, to allow time to be exchanged through giving care to elderly citizens.  Bearing in mind that Japan has one of the most acute issues with an ageing population crisis, this makes phenomenal sense as all the young folks need some encouragement to feel its worth walking a zimmerframe across the road and this gives it to them --- ideally with someone using the zimmerframe at the time of course.

The idea is this.  My parents are old and need care, but they live in Kyoto and I work in Tokyo.  No problem.  Yukio in Kyoto is a student who has ageing grandparents in Tokyo.  So Yukio looks after my parents for 2 hours a week, doing their shopping and cleaning the house.  In return, I spend 2 hours a week doing the same for his grandparents.  And all of this is logged officially as a currency exchange between Yukio and me.  Equally, thousands of other Hagane’s, Hagino’s, Hajime’s, Hako’s, Hakuba’s, Hamako’s, Hamano’s, Hami’s, Han’s, Hana’s, Hanae’s, Hanaka’s, Hanako’s, Hanayo’s, Haruaki’s, Harue’s, Haruhide’s, Haruhiko’s ... whoops, getting a bit carried away here ... anyway, lots of other Japanese folks do the same and bank it all on the national system.

So what's the point?

The point is that, in Japan's case, they have started to solve an acute crisis over long-term care.  The fact that I'm looking after someone's else's parents who are looking after mine, means that I give them the respect I would give my own parents.  Therefore, they get a better quality of care than you would ever get from a commercially contracted carer.

Why mention this now, on 1st June?

Well, strangely enough this theme came up last night in a debate about the future of payments. 

The idea is that community currencies could become bigger than real money over time because they offer a means of creating green futures. This is because community currencies lose value the moment you get them so you spend them.  The value part works a bit like airmiles.  Community currencies are therefore only valid for a short period of time then they expire.  Gone. Defunct.  A former valuable item becomes worthless.

So you spend it.

Therefore, if you have a community currency on a global basis for travelling, where every time you fly you get airmiles which you have to use within a year ... and if you don't, then they are used to plant a tree to offset carbon emissions ... then that is good. 

Funnily enough we can almost do this already, although I wish airlines would think about this more.

Anyways, there are many examples of such currencies in operation.  About 600 in Japan alone.  There are over 400 in Germany. There are examples in the USA, Brazil and the UK, and governments are looking at these even more closely as a method to overcome societal issues such as healthcare and transport.

Well worth looking into if you are a bank as, one day, according to some, these currencies could become a complete alternative to today's banking system.

Anyways, I'm going back to my community to mow my neighbour's lawn.  You may wonder why, but it's nothing to do with the above - I owe him a tenner and this is the only way I can think of paying it off.

JWG-IT TechSIG establishes reference solution working groups to fill key MiFID gaps by PJ Di Giammarino

Leveraging impartial research with over 50 financial institutions in 2007, a team of 15 technology vendors, with combined revenue of over €100 billion, has now targeted key hot spots which financial institutions face to comply with the Markets in Financial Instruments Directive (MiFID). Over 60% of the 1,000 MiFID requirements are being addressed, with both large and small vendors teaming up to identify a common set of reference architectures to comply with the new law which goes into effect on 1 November 2007.

JWG-IT Technical Special Interest Group’s (TechSIG) growing number of members has agreed how they will collaborate to build a solution stack to address new business process requirements created by MiFID. A reference framework for business and technology needs, developed in collaboration with financial experts from 10 geographies in over 150+ days of facilitated collaborative effort, will form the basis of vendors’ thinking across technology domains.

TechSIG members have allocated resources to three work teams to drill down on what is required of complex infrastructures, applications and data architectures post MiFID:
• Doing the trade right: tackling the new best execution and order management requirements
• Reporting the trade correctly: addressing regulatory, market and customer reporting needs
• Storing and retrieving records efficiently: examining the new requirements of record reconstitution for the lifetime of the relationship with the client

Each stream is now developing a view of the critical technologies that form the solution and the gaps that TechSIG members will address. Reference solution architectures will be the first outputs, against which end-user firms and vendors can design and position their approach. The groups have established aggressive targets to start the flow of deliverables this month and July dates of seminars to discuss the solutions will be announced shortly.

Nigel Woodward, Director Intel, and Chair of the TechSIG commented “This represents a significant milestone in industry collaboration which we hope will provide a valuable reference for firms and encourage assembly of solutions which take advantage of technology elements from a number of sources – we are writing the orchestral score for the industry”.

PJ Di Giammarino, CEO, JWG-IT Think-Tank, added “With less than 80 work days until financial institutions are meant to have tested their MiFID changes, the industry is still struggling to identify what “MiFID compliant solutions” are. We are delighted to have a strong core group of technology providers engaged in deep debate as to how appropriate technologies can help firms achieve compliance in cost-effective manners. Financial institutions that have engaged in our detailed requirement discussions will now have a frame of reference for getting the job done.”

Current TechSIG membership includes: Intel (Chair), Cisco (Vice chair), Aleri, Aptivaa, ASPOne, BEA, Brookcourt, BT, chi-X, Kurtosys, Redhat, Sybase, Telelogic, Tier-3 and Xenomorph.

JWG-IT is unique – the only Financial Services industry think-tank to facilitate collaborative work to resolve industry issues created by regulatory change. Based on a working model started in 2005, JWG-IT has established strong relationships with EU administrators, leading banks and technology companies. It is neither lobbyist nor consultancy and revenues are restricted to membership fees and content sales. The JWG-IT Think-Tank is designed to help members and participants manage regulatory-driven change better, quicker, cheaper and with less risk.

Comparasites

I've recently been enjoying the spat between insurers and internet providers, especially as this will spill-over into banking before too long. Here's why.

Direct Line - owned by Royal Bank of Scotland - is getting fed up with websites that compare insurance quotes. As a result, they will not have their quotes listed on these sites and have now started running a specific ad campaign to target these sites.

Price comparison sites, or comparasites as I call them because they suck the information out of all the insurance and banking websites and present their lowest cost preferred offers, are becoming increasingly popular.

The two UK market leaders - moneysupermarket.com and confused.com - are estimated to be worth a marcap of £1 billion and £700 million respectively when they IPO. Not bad for firms who turnover under less than £100m revenues and £30m profits.

Now Direct Line's point is that consumers think these sites are independent and neutral but they are not. They show their preferred insurance providers first and make their money from the commissions paid by those providers when you clickthrough and buy their insurance product. They are therefore just online insurance brokers.

Although this is the point of Direct Line's campaign, perception is reality and the perception is that the information-sucking comparasites are the good guys, whilst the rest of the direct firms are not.

In fact, Direct Line really have got it wrong themselves.

After all, Direct Line was doing the same thing 20 years ago, when they said stop paying high commissions to brokers and come to us direct because we're cheaper.

20 years ago, they broke the mould because they offered call centre direct operations which cut out the middleman. Now, they are part of the mould as the internet has allowed a new, low-cost middleman to arise - the information broker.

The comparasite.

To be honest, Direct Line, Aviva and the other traditional insurers should be willing to put their competitive spirits on the line and allow the comparasites to include them in their pricing and quote systems. Instead, they avoid them like the plague.

That is where they are really short-sighted, as this doesn't do their business any favours. I would far rather have a single price quote aggregator than go to every service provider to try to find out how much they would quote individually.

And this again shows how the internet world is changing us.

For example, in banking a few years ago, we all thought that customers' aggregating their financial dealings online using Yodlee, Checkfree, Corillian and so forth would be the future ... yet most consumers' rejected that idea. We can work out our own aggregation of wealth if we want to and don't need a single portal provider to do that for us.

However, when it comes to a good deal, of course we want aggregation that gives us the best online price for commodity products such as car and home insurance ... and yes these are commodities no matter how much the industry doth protest.

Soon, we'll see this spread into other financial products - from loans to savings to deposit accounts ... oh my, I just realised ... moneysupermarket.com does that lot already.

Ah well.

The comparasites are here and here to stay.

Start letting them take your information but don't let them suck you dry.

Technology and Risk are the same thing by Chris Skinner

Yesterday was a fascinating day full of presentations on risk in the morning from a bunch of old CRO's (Chief Risk Officers) followed by a lunch with a crock of CIO's (Chief Information Officers).  In fact, there was even one CIO who became a CRO ... and that's something that might happen more often on the basis of what was discussed.

For example, Juan Yanes, Deputy Group Chief Risk Officer at Grupo Santander, kicked off discussions with a presentation entitled "Risk Management and Value Creation: Challenges for the Risk Function". 

Now, you may already be losing interest at this point having seen such an exciting opening line but DON'T!!!  Juan's presentation was really interesting, and that's saying something for a Deputy Group Chief Risk Officer.  After all, you know when you've met an extrovert Risk Officer in a cocktail bar ... he's the one looking at someone else's feet.

So, back to Juan's presentation.   

Halfway through his slide deck, he had a slide that looked at the relationship between risk management and the business functions.  His conclusion was that there needs to more of a business orientation of the risk function, and more of a risk orientation of the business.

In other words, risk management is not a function but a culture.

Funnily enough, I then went into a separate lunchtime conversation with CIO's focused upon information vulnerability, business continuity, phishing attacks and so forth; all of which are Group Risk issues. 

The CIO's lamented the fact that many people in the business did not understand the risk of data loss. 

The fact that taking a laptop home could be a serious data breach, as it might have customer data on that laptop.

The fact that the CEO does not implement a standardised policy across the board and that he/she can apply the policy favourably for some and not for others.

The fac that branch staff cannot take information home but Head Office line managers can. 

The fact that the CEO needs to take a single data risk policy across the business and apply that policy to every person in the same way.

In other words, information is a core Risk in the business and needs the CEO and the enterprise to understand and manage these risks.

This brought us back to Juan's message. 

His message is a business orientation of the risk function, and a risk orientation of the business.  The CIO's message is a business understanding of information, and an information understanding of risk. 

The CIO's message is a difficult one though, in that ask any senior representative about the data risks of their blackberry or laptop and you get a pretty offensive response.

My walk-away is that there needs to be a major cultural shift to get to a world where Risk and Information become synonymous.  In fact, the only way we'll get there is if the CRO's and CIO's work together to make it happen.

IT and Business alignment ... Risk and Business alignment ... one and the same.

Chris

Prepaid's demographics by Chris Skinner

We run regular meetings at the Financial Services Club, and launched in Ireland last year. 

The forthcoming event in Dublin on 14th June is talking about various things from mobile to prepaid and it prompted Kieron Guilfoyle, CEO of 3V, to send me details of the prepaid product program they are running in Ireland. 

The product is a payment solution marketed by 3V and allows folks over 16 to purchase a voucher (a Visa-branded debit card) for cash.  The product is also available in the UK and Spain, and is similar to the program being run by IDTPrime with MasterCard.

The purpose of such cards is primarily for online payments for those who don't have bank accounts, such as many teenagers who can now purchase online. 
Or that was my thinking, as I've written about prepaid before, and spent some time analysing this market in Europe last year.
Kieron's information shows me something slightly different.

The 3V product launched in Ireland towards the end of 2005 and now has over 100,000 active users, which is about 15% of the national online purchasing population.
According to the experience of 3V in Ireland, the customer base looks like the following.

63% are male and 37% are female.

So, it's mainly man shopping that appeals to the prepaid crowd ... or maybe the females are credit card users?

Nope.

33% have a credit card, but two thirds do not.  In fact, according to 3V, most of their customers fear using credit cards and, although they could get one, they just have a phobia about people stealing their identity and all that stuff.

As a result, 52% do not have a credit card, 17% can’t get a credit card and 15% use someone else’s.   

Ah, so maybe it's that last 15% who are using their husbands and wives' credit cards some might think?

Nope.

54% of 3V users are single whilst 40% co-habit.

OK, so we see so far that the users are typically male, without a credit card and they're single. 

What sort of profile does that fit?

Students!

So, they're all teenage students ...

... nope.

33% are currently students whilst 28% did not complete secondary education.

Ah well, I suppose then that they're young?

Yep.

66% of purchases are made by 18-34 year olds and they claim that  group 84% of purchases are needs driven.

In summary, we have predominantly young males who are single who are using prepaid because they don't have credit cards.

But it's the last statistic that surprised me as I thought the main profile of prepaid was to appeal to the unbanked and the disenfranchised, and yet 94% of 3V users have a bank account or a savings account.

So what are they using it for then?

Well, it is pretty much what you'd think.

• 17% are buying music downloads;
• 15% are buying holidays and flights;
• 14% are buying tickets for concerts and events;
• 14% are buying electronics goods (more gadgets);
• 10% are buying gifts;
• 9% paying for mobile and telephone billing;
• 7% on books;
• 7% on clothes;
• 2% on groceries;
• 1% on commuting; and
• 4% on other stuff.

I guess this tells me overall that yes, prepaid does work as a debit card for the young community who want to buy online services but don't have credit cards.

Now how many of those do we think there are out there?

Mmmmm ... according to Neilsen ratings, 18-34 year-olds are the most prevalent demographic group online, accounting for 32% of all active online Britons.  Equally, in 2006, there were 68.9 million individuals aged 18-34 in the USA, representing 23.1% of the total population.

Sounds like a pretty good marketplace to me.

So, I'm off for a pre ...

Chris