Time to head home after a day in India at the launch of the new design centre for finance launched by Polaris Financial Technology in Chennai (Madras for the old folks out there).
As you walk into the Design Centre, you are greeted by a map of the world ... completely made out of Indian Rupees!
A fascinating trip, not least because Polaris has injected something into software development that I have not seen before: creativity.
This was clearly demonstrated by Michael Harte, CIO of Commonwealth Bank of Australia (CBA).
Over the past five years, he has replaced the bank's core systems, moved much of the banks services to the cloud, created many apps and innovations that have given CBA global recognition and more.
Continue reading "Creating an agile, designer IT Shop from a CIO who knows how" »
David Bermingham was another recent guest at the Financial Services Club.
David was one of the NatWest Three, the three bankers who worked for NatWest in the 1990s and got caught up in the Enron scandal.
What happened and how come David ended up in an American jail when he's a British citizen?
Well, after presenting at the Club, I interviewed David to capture his story.
Here it is ...
Q: What’s the background to what happened to you and your colleagues?
Continue reading "How the USA can make bankers feel like Guantanamo Bay" »
I was wondering what to blog about today, as it’s grey and cold and wet and miserable and … then I realised, I should blog about Russia.
Here in London, we’ve gradually seen a takeover of some of our key financial and national assets by billionaires from the former Soviet Union states.
Some of these are glamorous, such as Roman Abramovich with his Chelsea dreams and billion-dollar yacht, and some are a little bit more odorous, such as Vladimir Antonov.
Continue reading "How the Russian mafia use the banking system (especially Britain's)" »
I ‘ve been talking about contactless for years now - I remember talking about the Octopus card system about ten years ago after it launched in Hong Kong in 1997 – and still find it surprising how invisible it is.
Sure it got some coverage at the Olympics but some, like Forrester, reckon that NFC mobile payments will not reach critical mass until 2020. Others, like me, say that this technology is already past its sell-by date, although I am open to persuasion.
In order to persuade me, Barclaycard sent me their latest research promoting the fact that everyone in Britain knows what contactless is all about.
Someone made the comment that I would not receive any business from the five banks named yesterday with the biggest mistakes, so I thought I would rectify that by picking on five good things that banks are doing.
It’s harder to find, because it is less reported, but there are a number of banks that do really good on-the-ground work. Here are five examples:
#5: Bank of America’s Technology Leadership
I often use the example of Bank of America when discussing innovation. The reason is that they took leadership in internet banking a decade ago by committing to the technology early. This is a case study that I’ve written up in detail, and the core of the case study shows that through analytics BoA realised that share of customer wallet increased massively the more the customer was in control. That’s what internet and then mobile banking gave the customer and that’s why BoA committed early to roll out internet and mobile banking with security guarantees to assure customers that these technologies were safe and viable. It’s also why BoA is the #1 US internet and mobile bank.
Active online banking users
Active mobile banking users
#4: Barclays Innovations
It’s true that banks are lambasted for being slow to change and adopt new ideas, but Barclays has proven to be an exception in recent times. From extensive use of social media in their card operations to being the first UK bank to launch a P2P mobile payments service, Barclays has shifted the goalposts regularly in UK banking capabilities. I blogged about this in depth in April, and it shows that banks that innovate do win more business.
#3: Citigroup’s Visions of the Future
Citigroup are regularly rolling out new technology innovations and trialling new ideas. Their branch of the future concept opened in Japan last year was particularly noteworthy, as was their partnership with Google Wallet which could have been massive, if Google had opened the Wallet on the iPhone and not restricted it to one handset (the Nexus S 4G on Sprint). The Google-Citi exclusivity has now gone but, nevertheless, Citi make a point that they have been on the innovator’s curve on a regular basis for over 200 years …
… and what this video shows is that without banking and access to trade and project finance, the world would see no progress. That’s why Citi and other banks are needed to ensure that societies and economies move forward, not backward.
#2: First Direct’s Customer Focus
First Direct appear on this blog and others so often as the UK’s #1 consumer champion bank that it’s almost boring, but the reason is that they truly understand how to deal with remote banking. Regularly voted the #1 bank by their customers, the reason that First Direct get this is that they began life as a bank without branches and now see themselves as a digital bank with a human approach. That’s why they don’t script their call centre agents or do things by the book, and it’s why they win. If you want to know more about the bank, it would do no harm to revisit my 2010 interview with Paul Say, the bank’s head of marketing.
#1: Standard Chartered’s Charitable Work
There are many banks involved in community and charitable work, but one makes a point of it and it is visible in all my dealings with them: Standard Chartered. I first noticed their work when I bumped into the then CEO Mervyn Davies at an Awards ceremony in 2006. He was wearing those tacky wrist bands and I thought it would be something about “stop bullying”. Instead it was about "Seeing is Believing", a charity that is helping to bring eyesight back to emerging market citizens who suffer from cataracts or similar eyesight issues. Mervyn explained that it was a passionate cause for both him and the bank. In fact, if you look at this charity, which aims to raise $100 million by 2020, it is actually a partnership between the bank and the International Agency for Prevention of Blindness (IAPB). In other words, the charity would not exist without the bank’s support. And it goes to the heart of the bank. For example, Standard Chartered sponsor Liverpool Football Club. The bank even replaced its sponsor logo in the Liverpool versus Chelsea match last season, to promote the charity’s work.
And it’s not just this work that places them high up in my list of banks doing good things. For example, I bumped into another senior StanChart banker in Asia six months after meeting Mervyn Davies, Mike DeNoma. Mike was championing a charitable cause to stop child pornography online. It is clear from both encounters that the bank actively encourages charitable work as part of its culture and that’s why they get my number one award for doing good things.
So there you go.
Five banks doing good things.
Note, that four out of five of these are the same five banks as yesterday (First Direct are part of HSBC), so it shows that they can just as easily do good work as messing things up.
Oh, and why did I miss out RBS?
Well, I was going to include RBS but:
Either way, they’ve got no budget for consulting with Chris.
Meanwhile, there are many other banks doing amazing things out there, including many of the names that have had reputational hits over the past year.
In particular, if you want to see a few more amazing things banks are doing that are not so big, then go check out Fidor’s Social Work and Triodos’s Sustainable Stance.
I kinda thought that some of the things that have happened in banking in the past – like the collapse of Lehmans and Barings Bank; Jerome Kerviel, Henry Blodgett and Frank Quattrone; insider trading and Ponzi schemes; and more – were pretty bad, but someone asked me to make a list of the top five most embarrassing mistakes made by banks and, as I pondered the list, they all appeared to be recent ones.
Sure, I could put in things like Chuck Prince having to apologise in person before the Japanese FSA about Citigroup’s private banking failings or Goldman Sachs calling their clients muppets, but these things are mild compared to the five here.
So, as it’s summertime and things are changing, here are the top five most embarrassing mistakes made by banks, and they all happened within the last twelve months:
#5: Bank of America’s social media gaffe
There were a number of major PR gaffes in the last year, where banks were caught short over social media usage. The biggest one was from Bank of America, who tried to introduce a charge of $5 a month to use debit cards in October 2011, in response to the Durbin amendment to the Dodd-Frank Act that limits debit card transaction charges to 12 cents per transaction. Customers didn’t like the new fee and one – Molly Katchpole, a 22-year old nanny – forced the bank to change its position purely by using Change.org to create a petition that garnered over 300,000 signatures. The fact that BoA retracted the fee was then rewarded with the award for the worst PR gaffe of 2011 and a 20 percent increase in account closures in Q4 2011.
You can have issues over reputation but the #1 reason why customers close accounts is when mistakes are made. In this case, the RBS glitch was huge, with customers at Ulster Bank closed out of their accounts for almost a month. The mistake was made by an update to CA-7, a core payments program, which corrupted the payments files. The issue has been that no matter how hard RBS try, they cannot recreate the issue to find out what caused it, or so I hear.
#3: Citibank’s mortgage mistake
When the head of mortgage Quality Control sues her employer over their mortgage processing system, you know something’s wrong. When Sherry Hunt did this, claiming that three out of five mortgage applications were missing key pieces of information including signatures and proof of salary, you know something’s really wrong. Especially when her employer told her to fudge it and stop complaining. That’s why, when the Department of Justice backed her case, she received $31 million for being the whistle-blower her blew the whistle on Citigroup and succeeded in bringing them to justice as the first test of the new Dodd-Frank whistle-blower rules.
#2: HSBC’s money laundering scheme
You would think that with global AML controls in place, a bank of HSBC’s size and breadth could handle a little tracking of terrorist cash. David Bagley, Global Head of Compliance for HSBC, has been co-chair of the Wolfsberg Group that set the rules for Anti-Money Laundering worldwide for banks since 2005, so they should know something about it. However, he and the bank got caught out as accounts in Mexico enabled drug cartels to gain monetary movements via the Cayman Islands, and terrorists were engaged in similar activities via the Saudi bank division and its counterparty Al-Rajhi Bank. The result is that he stepped down from his position in the bank, even though he wrote emails warning of the Mexican banks lack of a “recognisable compliance or money- laundering function.” The lesson learned is that when business leaders see billion dollar accounts, they ride rough-shod over their risk, audit and compliance folks. The balance has to shift the other way around so that when risk, audit and compliance folks see businesses they don’t like, they can tell the business leaders that when the going gets stuffed, the stuffed get going.
[Read the full senate hearing on AML and HSBC here]
It’s not so much that LIBOR had faults so that rates could be rigged, which we all now know, but more that the messenger got shot. Barclays were the messenger who blew the whistle on LIBOR rate rigging. That’s why they got the first massive fine, as they have been co-operating with the authorities. Meanwhile, all the other banks have now been drawn into the crossfire with HSBC, RBS, Lloyds, Deutsche, Mitsubishi and more being investigated with multimillion dollar fines. So what’s the problem here? That Barclays allowed the release of the LIBOR news to make them look like the sole bad guys. Result: Diamond, del Missier, Agius and more all go and the bank becomes a headless mess. How did it happen? Well, apparently the day the news came out about Barclays fine was the first day of a brand spanking new Head of Corporate Communications joining the bank. Not a bad day’s induction training to find yourself in the middle of the biggest comms crisis of all time and #epicfail for not dealing with it effectively.
So there you have it.
Five massively embarrassing moments for five megabanks.
Nevertheless, my award for the bank with the all-time brownest stuff dripping off its fan has to go to UBS.
Yes, UBS.
UBS – the bank that changes management more often than Shameless star Frank Gallagher changes underpants.
UBS – the bank with the multibillion dollar loser.
UBS – the bank that tells their staff how to dress and not dress.
UBS – the bank that trains their staff in how to avoid the FBI and US Customs.
UBS – the bank that has employees willing to go the extra mile, like doing illegal activities on behalf of their clients.
UBS – the bank that received one of the largest Federal Reserve fines in history in 2004 for peddling dollar bills to Saddam Hussein, something that HSBC copied this year.
Need I go on?
Oh yes, but it’s still a very good, reputable bank.
Pictures sourced from WHYDTINOGO and Flickr
It’s Friday, it’s summertime and it’s the day the London 2012 Olympics begin.
Fantastic.
Tonight’s opening ceremony should be amazing and so, rather than talking about banking today, I thought I would talk about banking Olympians.
Lloyds Bank were one of the first to sponsor the London Olympics.
They have an official bank sponsor website ...
... and spent £80 million to secure their Olympian status.
This was back in 2007 of course, before the financial crisis.
Since then, there’s been a long and winding road to get from a secure, boring old retail bank to being one of the UK’s leading fruitcake banks.
This was of course prompted or caused by Gordon Brown and Alastair Darling forcing the hand of Eric Daniels and Viktor Blank, the then CEO and Chairman of Lloyds TSB, to takeover HBOS.
Since then, the bank has tumbled into an abyss of issues which led to the government taking an initial 43% stake in the bank, lowered to 39% today.
The bank found itself in a quagmire of a mess, particularly with the commercial lending portfolio of HBOS, leading to consistent losses for the past few years.
The worst of these was in 2008-2009, when the bank wrote off £24 billion in debt, although the year-on-year results are not particularly impressive.
The bank posted an operating loss of:
The 2008 – 2009 losses are attributable to the mistake of taking over HBOS, which cost the bank around £42 billion in costs, compared to the mere £8 billion acquisition price.
But more worryingly they have other challenges today as the leading UK bank embroiled in the PPI scandal.
This is the insurance that was sold without customers being aware they were buying it, and Lloyds originally estimated the cost would be about £3.2 billion in claims.
They’ve now upped that to £4.3 billion so far, with £1 billion of this just the cost of processing the claims, half of which are fictional.
Then they’ve got burnt by the European Competition Commission forcing the sale of 632 branches in Project Verde.
This decision was forced upon the bank as they gained over thirty percent market share of UK current accounts when they acquired HBOS.
Trouble is that selling branches today is not easy, as there aren’t many buyers.
In the end, they sold the package to the Co-operative Bank in a deal that was daylight robbery.
Just look at the numbers:
Lloyds deal with the Co-operative
Price paid: £350 million + £400 million promised
Number of branches: 632
Virgin deal with Northern Rock
Price paid: £747 million + £538 million
Number of branches: 75
And some people thought the Northern Rock sale was a bad deal.
Lloyds was a real humdinger.
For example, they got way less than their original £2 billion estimate for the branch deal value and it cost them £1.8 billion to get rid of the branches. This was admitted yesterday when the bank stated that it had cost them around £1 billion to organise the branch sale and they had lost £800 million on the deal value.
Hmmm … doesn’t sound like good business logic to me.
Finally, there’s another small matter of LIBOR.
The bank also stated yesterday that they were involved in the scandal as defendants in several law suits that analysts estimate will cost them at least £1.5 billion or more.
All in all, between Verde, LIBOR and PPI, the bank still has a long road to run before they get out of the woods.
An Olympic marathon, you might say.
For those interested, here’s a summary of yesterday’s news stories about Lloyds:
Lloyds Banking Group has posted a half-year loss and has increased provision for payment protection insurance (PPI) claims by £700m.
It is the second time this year Lloyds, which is 39% taxpayer-owned, increased the provision for PPI claims taking the total cost to £4.3bn in 18 months from an original £3.2bn. The new provision drove the bank to a half-year loss of £439m, down from a loss of £3.3bn in the first half of last year when PPI also drove the bank into the red.
A regular critic of the claims management companies that put in claims for PPI mis-selling on behalf of customers the bank’s CEO, Antonio Horta-Osório, revealed that the bank had deployed 1,000 staff to tackle erroneous claims. He said 50% of claims put in by these firms are false, double the level three months ago. Redress payments made and expenses incurred for PPI by the end of June 2012 had reached £3bn.
Lloyds is shrinking.
Non-core assets declined from £140.7 billion at year-end to £117.5 billion and it expects to reduce non-core assets to £90bn by the end of next year, a year ahead of its target, and a negligible £70 billion by the end of 2014.
Lloyds is a defendant in several Libor-related lawsuits. Research from Liberum Capital has suggested it could have to pay out up to 1.5 billion pounds ($2.3 billion).
On a conference call with reporters, Finance Director George Culmer said there was no need for the bank to set aside funds for potential litigation arising from the Libor affair.
"We are still part of an ongoing investigation and until the regulator is satisfied that that investigation is complete there is no point at this stage in thinking about or putting down a number," Culmer said.
Horta-Osório admitted that the bank could lose up to £800m from the sale of 632 branches to the Co-op but that this would be negated by a reduction in capital needed. But creating the branch network, required by the EU as a result of the £20bn of taxpayer money used to prop up the bank during the banking crisis, had cost £1bn.
The impairment charge of £3.1bn for customers missing loan repayments was down 42%.
Some 45,000 jobs are expected to be lost as a result of the rescue takeover of HBOS in 2008 and a new cost-reduction programme implemented by Horta-Osório when he arrived. Some 4,555 full-time equivalent role reductions were announced in the first half of 2012 taking the total to 6,653 since the start of the new cost reduction programme.
If we look at the core operations of the bank, income is falling by 11% while costs only improved by 4%. Even the near-halving of the impairment charges couldn't help, as management profit slipped 5% from the first half of last year. Overall, the underlying revenue of the bank fell 17 per cent to £9.25bn, as the bank suffered subdued demand for new lending and shrunk its non-core asset pool.
The shares were flat at 29.3p yesterday, down from £5.70 before the crisis hit and under half the 63 pence the government paid, representing a paper loss of around £11bn on the taxpayer's stake in the bank.
There’s a buzz that’s started about Facebook banking asCommonwealth Bank of Australia and ICICI Bank get into Facebook banking apps, with Citibank fast to follow.
What’s going on?
Originally, we all though Facebook would take over bank functions through stealth creep via Facebook credits.
Facebook credits are in fact worth around $1.5 billon a year in revenue at 2011, about 15% of Facebook’s revenues, and are predicted to reach almost $50 billion by 2014.
So why did Facebook drop the credit system?
Because they didn’t.
They just switecherood from having something customers didn’t understand – a credit – to something they do understand – a dollar.
You still work with Facebook in pretty much the same way – register your credit or debit card details and then you can buy add-ins to games, apps and other media.
In other words, they’ve decided to take the iTunes route to payments, where everyone is registered with an account profile and all they have to do then is ‘confirm’.
From there, it’s a one-step beyond to consider the idea that ‘Facebook connect’ for a secure logon (and it is) becomes ‘pay with Facebook’ for a secure payment.
At that point, Facebook has both an iTunes card aggregation capability (currently expected to be for around 50 million people this year from 15 million last year) growing into a full PayPal style payments service shortly thereafter.
As Techcrunch noted: “And then, what’s to stop Facebook from introducing a Facebook Credit Card? Facebook could be bigger than PayPal and become Visa or MasterCard as well. Facebook has the potential to become a universal wallet for both online and offline purchases.”
So Facebook is still a serous payments player, credits or no credits.
That is why banks are starting to jump on the Facebook payments and banking train.
Noteworthy has been Commonwealth Bank of Australia’s (CBA) jump into the Facebook banking space.
CBA is building a Facebook app that will make it possible for customers to make payments to third parties and to their friends through the social network.
Transactions are secured using the bank’s own authentication system and the bank's chief marketing and online officer, Andy Lark, said the institution was not seeking to reinvent banking rather that “help people manage their money and their lives” in ways that suited them, The Sydney Morning Herald reports. “We as a society have migrated to Facebook [...] social banking is here”, Lark said.
PC Advisor provides more details quoting David Lindberg, executive general manager of card payments and retail strategy, on the aspects of Facebook banking and the lack of privacy and security of Facebook .
“We know that there are customers who just do not want their financial information sitting on Facebook,” he said. “For those customers, of course, there is no reason to use [the application]. At the same time, we know that there is a segment of customers who are very comfortable with using Facebook for a number of private things, one of which is for financial services. So, in terms of the privacy, our view of privacy is that it is something which is completely up to the consumer.”
CBA is not the only bank on Facebook. ICICI bank in India has been there for a while.
According to CNN’s IBN service, ICICI Bank launched its Facebook banking application earlier this year to give customers the ability to carry out a number of banking related tasks such as checking account details, getting account statements, upgrading debit card and cheque book enquiry.
The bank claims that using the ‘ICICI Bank App’ on Facebook is completely safe and secure due to features such as “Secure SSL connection, two-factor authentication process (and) activity details not (being) published on Facebook Wall … there is no charge for this application. ICICI Facebook banking application is totally secured. All communication between the app and ICICI server is encrypted. No data is stored on Facebook. All communication is secured and encrypted,” the bank says.
As part of the security features, registration is subject to Debit Card and PIN authentication and access to the application is subject to a separate PIN authentication generated by the user.
The bank goes on to claim that a customer’s account details would remain secure even if the Facebook ID is hacked: “Since your account data is not stored on Facebook, your bank account is completely safe. Even if your Facebook ID is hacked, the hacker will not be able to access the application unless you have shared your application password with the hacker,” ICICI Bank says on its Facebook page.
And, in yet another move towards Facebook banking, Citigroup asked the social stratosphere if they would be interested in banking on Facebook the other day.
This immediately got everyone thinking that Citi would follow on the heels of CBA and ICICI to soon launch Facebook banking.
You never know, although Citi have not confimed such plans yet.
Meanwhile, at least these banks didn’t have the epic Facebook fail that Barclays achieved the other day.
Barclays launched a new viral media campaign on Facebook the day before the LIBOR scandal broke and it’s not gone down well.
The campaign is based around Dan, a fictional character who the bank was following to see how the guy spends and lives his life.
Soon the campaign fell into pointed comments and attacks, along with several in the social sphere poking fun.
A few examples:
Dan moves all his accounts from Barclays to financial institutions that pay him interest. Suddenly he can afford to fund his condom habit, thus avoiding the unnecessary expenses of unwanted babies by ex-girlfriends.
Is Dan into fraud and larceny? Or being ripped off as a customer? If not I doubt Barclays are that interested in him. Hang on, is Dan black? Does he know barclays used to invest in apartheid? He should move his account sharpish.
Bob’s a CEO and spends £5,000 a day on Bollinger. That’s about £155,000 a month; enough to buy a classic Ferrari at the vintage car festival he really wants to go to in August. Rigging LIBOR for a couple of months would mean a more memorable end to the summer. Haha :)
No wonder the campaign ended early, with the official response from Linzi on 8th July:
Thank you all for your comments over the past week. We have read them all and provided your feedback to the rest of the business. However, under the terms of the settlement we cannot discuss this matter in any further detail, but you can read our official statements here http://group.barclays.com/news/news-article/1329925891776/navigation-1330349053975. If you would like to speak to us directly, you can email wr@barclays.com.
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