The Financial Services Club's Blog

Upgrade, evolve or demolish

As you walk the streets of Rome, you find modern and ancient intertwined. The streets are full of gorgeous clothes from designers ranging from Salvatore Ferragano to Versace, Louis Vuitton to Gucci, Prada to Armani. All the names are here in beautifully presented shops that ooze money.

These shops are squeezed into streets laid with tiles and cobbles that date back over 2,000 years. The shops and office blocks are often built upon tombs and temples, where the new Rome sits on top of the old.

These thoughts ran through my head as I sat at the conference this week where we had a number of presentations about upgrades and releases of core software systems. The firm hosting the conference produces a new release every year, and is now on Release 9. They spent hours in the opening keynote discussing the latest features, capabilities, functions and specifications of the new product.

It is not a product I use, so much of it went over my head, but I was struck by one thought.

Why do customers need to upgrade to a new release?

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What have the Romans ever done for us?

John Cleese: And yes, all right, but apart from the sanitation, medicine, education, wine, public order, irrigation, roads, the fresh water system and public health, what have the Romans ever done for us?

Chris: Gave us banking?

John: Oh, banking - shut up!

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America is dead, long live America

In the eight years since George W Bush came to office, America has suffered 9/11, a costly war in Iraq, a period of economic growth that has come to a plateau and surprisingly speedy end, and a business climate where the next wave of growth is unclear.

America is a former superpower. This power is no more.

But, before you think this is another America-bashing column, let’s just take stock.

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UK Faster Payments goes live today

The Faster Payments project goes live today after over three years in the planning, $300 million investment in new systems and some delay - it was meant to go live in November but required such significant systems redevelopment that it took six months longer.

It should be good for all, as it means D+0 is finally here with most standing orders, internet and telephone payments processed end-to-end within two hours and within 15 seconds for a directly connected processor.

Lightspeed payments for the 21st century ... watch this space to see how it goes.

You can find out a lot more background here, and more from APACS here.

This makes clear that standing orders come into play on 6th June, so it's just internet and telephone payments today.

Barclays, Citi, Clydesdale and Yorkshire Banks, HSBC, Lloyds TSB, Northern Bank and RBS allow the sending and receiving of payments; Co-op Bank and Abbey are going to offer this later, but right now only offer receiving; whilst Alliance and Leicester, HBOS, Nationwide and Northern Rock only receive payments for the moment.

I'll leave a longer diagnosis after a few days of the system being live.

What is financial inclusion?

The European Commission is running a conference this week about financial inclusion and the unbanked. According to the Commission, almost half of all of the citizens of the EU10 – Poland, Hungary, Czech Republic, Slovakia and other recent joiners, but not Bulgaria and Romania – have no bank account.

According to their research, 47% of the EU10 adult population are unbanked, compared with only 10% in the EU15 (France, Germany, Italy, Spain, UK …).

The conference is all about establishing rights for citizens to get basic financial matters covered, such as a "right of all citizens to a transaction bank account" and "a defined minimum package of transaction bank services".

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Credit crisis causes hedge fund mogul to sell home

It shows how bad times are when even hedge fund guru's have to sell their home.

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Drench ... a little bit like Cadbury's, but different

I'm always intrigued by adverts and how they create viral campaigns and brands.  The last one that blew me away and I now use in lots of presentations is this Dove campaign:

Campaigning for truth in beauty such that customers become advocates of the campaign is key.  Why banks don't create campaigns for real banking in this way is beyond me. After all, if you could appear to be the 'good guys' for a change, it wouldn't be a bad thing would it?

Meanwhile, the ad that's creating the biggest stir over here is the new one for Drench Water. 

Simple, but very virally effective as it appeals to young and old (Thunderbirds after all) and makes you smile with a perfect punch line. 

In today's crowded airwaves, where half of all entertainment is created by my social network, it's catching the attention through being different that most banks struggle with isn't it?

Meanwhile, Drench goes into my personal hall of fame alongside the Cadbury's Gorilla.

MiFID's new MTF's start to bite

LSE reported a 52% rise in annual operating profits today, primarily related to trading which, thanks to bulk discounting to market makers, has doubled in the past year. Combine this with their acquisition of the Milan Borsa Italiana and LSE’s Earnings Before Interest and Tax (EBIT) reached £265.2m ($520 million) for the year to March 31st, up from £174.2 million ($340 million) a year ago.

These results might be even better if the LSE had their own integrated clearer rather than using LCH.Clearnet, as margins should improve.  This is one thing they may change this year, through the acquisition of Borsa Italiana which gives them a clearing operation as part of the deal.

Meanwhile, LSE's shares are trading on a price/earnings ratio of 17.9, which is slightly behind Deutsche Bourse at 19 and way behind the Chicago Mercantile Exchange (CME) at 33.4.

However, the good times are going bad and, if I were them, I would be worried.

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The future is already here (from Japan)

I've said for a while now that Robots would eventually look after all my banking needs, and with the Semantic Web and Artificial Agents, we're almost there.  But then I see these developments coming out of Japan:

and I realise that the future is real robots.

I particularly like the way that Robina signs her name.  I wonder if she can steal my identity too?

But these bots are not a joke.  They are incredibly important to Japanese society to cope with their aging population.  That's why Toyota and Honda are investing billions to lead this market, as are other firms such as Microsoft who want to set the standards for these systems.

The future is not that far away after all.

Now where did I leave R2D2 and C3PO?

SWFs and Citigroup - Unethical or just Flash Players?

Another excellent collection of folks at the annual Gateway conference, a meeting of British American Business leaders.

Sir Wim Bischoff, Chairman of Citigroup, gave the keynote speech all about the impact of Sovereign Wealth Funds (SWF). Although they have been around for decades, it has only been the recent experiences with Middle Eastern, Chinese, Russian and other nation's funds buying big chunks of foreign businesses, that this has really appeared above the radar.

Bearing in mind their lack of transparency and potential threat to national interests, the idea of Chinese or Russian funds buying up large swathes of American and British businesses is something that many are wary of, and Sir Wim asked the question: should we be?

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City bankers lose more than just their jobs

The papers have been filled with fascinating stories about banking over the past 24 hours, including a call for balance sheets and core capital ratios to be a minimum 6%; the Eurozone asking for a single seat at the IMF, rather than the current 10; better supervision of the credit rating agencies; and many more.

But three stories really stood out.

First was a small column in the International Herald Tribune that was hidden halfway down a report about Facebook, headlined “Job hunting? Avoid London.”

Apparently, 11,840 people were job hunting in London's financial markets in April, up 20% over March and the highest numbers since the recruitment firm Morgan McKinley created their job hunting database in 2004. Meanwhile, vacancies only went up by 10%, to 8,946, and mostly for back office staff. There are very few spaces for high flying investment bankers.

This reminded me of yesterday’s front pages in London, such as the FT Advisor, stating that more and more middle class folks are being impacted by financial concerns.  The number of journalists, teachers and professionals visiting money advice centres has doubled since last year.

Even bankers need help with financial advice.

I guess it’s because they cannot find a job or get a bonus.

And then, the final piece of the puzzle, is a report in today’s London Evening Standard about the Lipstick Index, which reflects how good or bad the economy is doing based upon the sales of lipstick.

As part of this index now however, there is going to be a measure based upon the loyalty of one's female spouse.  This is provided by Princess Diana’s and Heather Mill's favourite law firm, Mishcon de Reya.  They have discovered that the wives of rich City bankers are increasingly filing for divorce as the recession hits their husband's payouts, and they want their share of the riches before he becomes a loser.

Obviously, Mrs. Banker is afraid that the credit crunch will mean that they may have to stop shopping at Harrods, Harvey Nichs and Selfridges, and think more about Asda, Tesco and Sainsbury’s.

What sheer hell for the poor, little, money grabbing things.

As Mischcon de Reya say, “When money looks like flying out of the window, love walks out the door”.

Jeremy Clarkson was right after all.

Is it really you?

Whether it be watches or Windows, Louis Vuitton or Lagerfeld, Bangkok's street markets have them all.

In the alleys and markets you can find every brand for a fraction of its price. The sheer audacity of the stores in the flea markets, selling any branded good as though it were real but for a hundredth of the price, makes you wonder about approaches and ethics.

Should you or shouldn’t you buy that DVD for a dollar?

It looks like Gucci, it shouts of Gucci but it does not feel like Gucci.

It has the name, it has the style, it has the look but not the feel.

It looks like a duck, it walks like a duck, but is it a duck?

Yes … but it’s a Mandarin Duck.

What has this got to do with banking?

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Bank brands ... forget the adverts

We had a great conversation today about bank brands at the Asian Banker’s Retail Excellence Program (I'm an advisor to the program and sit on the judging panel for their Awards).

It started with Nielsen sharing some data about a branding analysis project they ran over the last year, across 179 bank brands across Asia. The results looked at the Brand Equity Index (BEI) for each bank, with BEI being comprised of various features such as awareness, consideration, confidence, preference, recommendation, trust, reputation and so on.

As a result of looking at these factors, each bank is given a score between 1 and 10 based upon consumer surveys, e.g. if the consumer is aware of the bank brand, it gets 1; if they would consider that brand, it gets a score of 2; if they are confident of the brand, then a 3. You get the idea, e.g. a score of 10 is a really good score where you not only have a loyal customer, but an advocate who would recommend you to their friends and family.

Only 3 banks out of 179 across Asia scored more than 4; half scored less than 1; and the average score was 1.37.

So much for all those $’s spent on marketing, ay?

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What is ‘world class technology’?

It’s a question that came up yesterday in discussion with a group of bankers and I often find myself challenged to discuss ‘world class technology’ with folks. This is because they want to be leading edge, innovative, seeking new ways of doing business and driving the engines of the bank with best in class.

But ‘world class technology’.

What is that?

Is it IBM?

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How to stay off the implode-o-meter

The Financial Times has been writing about the end of the credit crisis this week, saying that BlackRock's $15 billion deal to buy a portfolio of distressed subprime mortgage debt from UBS, for 75 cents on the dollar, shows things are picking up.

Also, Deutsche and Citi have sold $20 billion of similar debt products to private equity houses such as Blackstone, Apollo and TPG recently.

Add to this that the US private-equity firm, Cerberus Capital, are quoted as saying: "The banks need to unload their inventory or they cannot do deals. The market has started to move and we have bought quite a few of the loans", and might all of this be pointing to the end of the bad times?

Are the good times coming back?

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“A smarter, simpler SWIFT”

The SWIFT Annual Report came out last Friday (download it here, 3.4 Megabytes) and makes for some interesting reading, especially as I like numbers.  Yes, it does include lots of numbers:

• there are 8,332 institutions connected to SWIFT (note: institutions, not banks) across 208 countries and territories;
• over 3.5 billion FIN messages exchanged last year (that’s a lot!), up 22% over 2006;
• 27 SWIFT users process almost half of these FIN messages;
• 1,800 users send less than 150 messages per day;
• all users received a 25% price reduction in 2007 through a 10% reduction in prices for messages, combined with a 15% rebate on messaging traffic;
• SWIFT conducted a customer survey at the end of 2007 and gained an overall rating of 8.33 out of 10 for the total SWIFT customer experience (you’re so nice);
• 64% of respondents cited security as SWIFT’s most valued attribute, rating this capability as 9.1 out of 10;
• the SWIFT network delivered 99.9% availability throughout 2007, with just one power outage in March 2007 (what did everyone do?); and
• over 5,000 folks are registered on SWIFTCommunity.net. (which is why you're reading this). 

There’s a few choice quotes and comments in the report too.

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China launches Facebank

Rather than Facebook, China's Facebank makes far more interesting viewing:

Internet banking in 2008 should be very different

The banking world makes radical changes slowly.

Major changes are big risks and we don’t like to jump into taking big risks too fast … unless it’s a structured investment risk of course.

But risks related to our technical infrastructures take place far more slowly. That is why most banks launched internet banking well after the first internet boom had come and gone.

Now we are entering the tail end of the second internet boom of Web 2.0 and I wonder what banks have really done in this space?

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Today is Europe Day, and are we proud (Part 2)?

The EU has an anthem. 

It is Beethoven's Ode to Joy, with the lyrics removed.

The original German chorus has been removed to respect the fact that we don’t have a common language in Europe, yet.

Strange that, as I thought that most us speak a version of English.  For example, the French Eurovision song contest entry this year has most of its verses in English.

Mon dieu! C'est le monde merde!

Ah well, at least it's not an Irish Turkey.

Maybe we shouldn't be so proud after all?

Today is Europe Day, and are we proud?

You may not have realised it, but today is Europe Day.

In the UK, we took especial notice of Europe Day by not mentioning it in the news, not talking about it on TV, not referring to it on the radio and avoiding any reference to it in the newspapers.

However, there are some things in Europe we should be proud of: not just a flag, a motto and an anthem, but a globally recognised financial unification program that is becoming the envy of all.

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