The Financial Services Club's Blog

Why is there no global mobile remittance service?

We had a really interesting free-ranging conversation about remittances and new services for remittances yesterday.

Oh yes, I should say that I’m at a remittances conference so that’s the reason why.

The discussion was about the NEXT BIG THING in money transfer ... or rather whether and if there is a NEXT BIG THING in money transfer. To be honest, there’s not.

There’s just mobile.

Building on yesterday’s discussions of mobile, there’s actually just two discussions about mobile worth having in the remittances space: SMS texts for receivers and Mobile Internet Services for senders.

The general view is that SMS is it for wiring money to and fro. However, for the smart iPhone and Android users of this world, a fuller and richer experience using mobile internet apps might be a good thing.

Then some really good conversation started about why mobile remittances are all focused upon national systems like M-PESA and GCash, rather than the promise we thought was there for global mobile remittance services.

Global mobile remittance services still have that promise but, today, it is all national.

This is because any mobile operator could launch a local remittance service.

They don’t necessarily need to partner with a bank – did Safaricom  for M-PESA or Globe Telecom for G-Cash – and they can just get on with it.

However, if you were launching a global service, you would need to include so many other players. Banks, Money Transfer Operators, Money Transfer Agents and Merchants, Mobile Carriers and more.

That gets way too complex and difficult.

We ended up saying that the breakthrough will come as we move towards national and regional hubs for payments and transactions.

In other words, SWIFT, the European Payments Council, the G8 payments development group, Mobey Forum, the GSMA and a few other key groups could create global standards and interoperability, along with multilateral clearing, to enable global money transfer.

Could be a long time coming, but worth watching out for ...

Bank branches and the next gen mobile

Spent a lot of time yesterday talking with folks about the future of money, payments and banking.

The conversation got interesting in two particular areas: branches and mobile services.

This is because I realised some things.

Take branches.

There appears to be an evolution of branch usage from underbanked economies through emerging economies to developed economies.

In the underbanked economies, the issue is often a mixture of a lack of infrastructure and investment combined with low income and low prospects.

In these instances, banks don’t make investments in branches as there is only going to be profitability from clients in major urban areas where there’s population density, wealth and work.

As a result, these countries have had little banking prospects, availability or access, but this is changing due to the introduction of mobile wireless infrastructures.

Even so, these communities will still remain underbanked as full bank services have limited availability in rural communities.

You then move to emerging economies, and find the massive urbanisation of these economies is creating new wealth and new communities. You only have to look at the urbanisation of China, with the rural population to urban population changing from 74% to 26% in 1990 to a major switch in 2009 of 53.4% rural to 46.6% urban to realise such change.

And with such change, comes branches and branch banking. China has seen a revolution in banking during their change process, and today’s Chinese banks hardly reflect those of two decades ago in service and style.

In this instance, mobile services range from simple to complex, and the mobile channel is everything from basic payments to full service banking depending upon which consumer segment the bank serves.

Then you look at developed economies, and the bank branch is already inbuilt to their model from the past. The branch may be an asset or liability, but the criticality is that new channels and technologies – internet and mobile internet specifically – are offering additional and alternative capabilities for these banks to reach their consumer.

This also varies by culture and language. For example, Spanish bank customers much prefer bank branch access than UK customers, who would rather call their bank than visit a branch.

So you cannot generalise too much about these services.

Nevertheless, and this was my other realisation, you can also see big changes in mobile.

I’m no mobile expert but in banking, I’ve seen five phases of mobile channel access and usage.

The first was basic payments processing and transaction services using SMS text messaging.

Then there were additional bank account services based upon Wireless Application Protocol, WAP.

Third generation mobile bank services offered a more multimedia rich interaction, based upon smartphones. This was OK but limited by the fact that you had to design your apps for each phone operating system and, in some cases, model of phone. Hence, it was very limited.

Fourth generation is where we are today, and I recently blogged about the killer apps offered by iPhones and Androids. The beauty of this generation is not only that we now have phones that can offer idiot proof bank services, but apps that can be developed and deployed for mobile internet. Therefore, the design is no longer for a specific phone model or operating system, but for easy access to multimedia rich banking services using Open APIs.

Finally, there is a next generation mobile service appearing on the horizon ... the chip-neutral device.

Today, we have EMV chips for cards, SIM chips for phones and RFID chips for contactless services. This is all going to change in the next few years as Visa, MasterCard, the GSMA and mobile operators work together to develop chip enabled services that are device-neutral.

Hence you could stick your communicating wireless payments chip into any machinery, gadget, tool or technology you want ... a telephone, a watch, a television, an iPad, a laptop, a pair of sunglasses ... anything and everything can become a wirelessly communicating, interactive payments device.

Roll on the next generation.

The post-Facebook webolution: checking in

As usual, some good stuff in Wired Magazine this month.

One article stood out for me in particular, which is about the rivalry between Foursquare and Gowalla. I’d heard of Foursquare but not much about Gowallla, and now see the next rise of web usage in more clarity.

Both sites are about checking in with your mates and being able to track where they are, what they are doing and whether there’s anything interesting happening nearby. Like seeing the GSM signals of all of your friends in real-time.

Sure, Google Latitude was a good start point for this stuff, but there’s now many new ways of socialising this physical and virtual network. For example, you arrive in London and know that someone had recommended the Comedy Club ... but which one. There’s quite a few in London and you might not get the one that was recommended.

But it goes further as these sites link mobile, social, gaming and location. Like a Facebook with rewards. The idea is to get badges for visiting locations, and awards for achievements. So, if your peer group think McGinty’s Bar is cool, then you’ll get an award if (a) you get to McGinty’s and (b) you down a shot of whisky chaser at the rear bar. All of which can be tracked in real-time and checked by your friends through the geolocation services.

In other words, you set challenges and take challenges, and get badges on your social profile for achieving.

Great stuff.

What really stood out in the article though, is this chart from John Battelle, who cofounded Wired US and wrote “The Search: how Google and its rivals rewrote the rules of business and transformed our culture”.

As you can see, the chart shows the five revolutions tracked through the connected network and could be reworded as:

1. Buying stuff
2. Finding stuff
3. Building a community
4. What are you doing?
5. Where are you doing it?

On that basis, I think I could speculate about a few more cycles of revolution to come:

• Who are you doing it with?
• How are you doing it?
• Can I come too?

Or something like that anyways.

Let the iWars begin

Inspired by three events this week, I focused on apps for my panel discussion today ... and got shot down in flames for talking bollards.

Harrumph.

Here are the events, the logic, the proposal and why it got shot down.

First, the events.

Event number one: my first iPhone

My Blackberry has just been switched for an iPhone. Now, not knowing the beauty of iPhone apps personally until I made the switch, I am so in love with the new phone. It’s not just the ease of everything, the thousands of choices of apps from flight and traffic alerts to currency values to imitating noises your bottom makes, it’s something else that really amazed me. The ease of setup.

You see I am used to programming things, like the PC and Blackberry. With the iPhone, you just plug it in and it automatically synchs all your contacts, calendar, email accounts, music etc. No setting up involved, it just does it. Fantastic.

Event number two: bank bloggers unite 

This week, James Gardner kicked off a debate about iPhone apps and the lack of one at HSBC. A good debate is always a great way to resolve an issue, and between James and Brett King’s entries on this, I think it’s obvious that the iPhone and iPad have some potential in banking.

Event number three: apps are for dummies

Number three event is the front page in the business section of the Straits Times today, which has headlined with an interview with Philip Yeo.  Mr. Yeo heads up the Singapore government’s innovation and enterprise programme, Spring Singapore, and has managed to incur the wrath of Apple's fanatical followers by saying that they buy 'useless applications' for Apple's products as 'gullible customers'.

In fact, he goes one step further and calls them ‘dummies’. Tut-tut.

He did clarify later on that he meant dummies as in ABC for dummies, the books, rather than being idiots although, listening to the interview, I think he meant the latter.

Anyways, these three events inspired me to outline a vision of the future based upon this logic.

The logic is that banks are being componentised, as mentioned many times before.

As banks componentise their services into little pieces of functionality, my original proposal is that they would then offer these as widgets to customers who could build them back into any form of integrated service they wanted.

Now, my view has gone a step further with the belief that the banks will actually wrap them into apps.  I should say that my use of the word app here, is in terms of the ease-of-use of Apple apps but it does not mean that has to be Apple based. 

Just so you know I'm not an Apple fanatic, just someone who can see the ease-of-use of apps is a revolution.  So where I talk about apps, think about Google's Android phone or any other phone that makes mobile interet access easy, as these are the new generations of phone that are revolutionary.

Y'see first there were SMS and WAP-based phones; then there were mobile internet access smartphones; and now there are intelligent mobile internet phones with apps.

That's the revolution.

The first phones were mainly for just that - telephone calls.  The second wave allowed us to pull information to the phone, but push internet services were more difficult.  Push began with the Blackberry, but that was just for push email.  The iPhone revolution of apps gives us location-based push services that users download to gain such usability.

That's the revolution.

It gives us the ability to create location-based components of functionality that are relevant at the point of action.

It gives users the immediate access to pieces of functionality on demand.

It makes using the internet on the mobile as simple as touching a screen.

That's the revolution.

Now, back to banking and treasury services (note: the only reason for the focus on treasury, corporate and B2B is because that's the conference I'm attending this week).

If banks are component-based, and each bank offers different treasury apps and usability, you will soon end up with a million banking apps.  There will be a liquidity risk app, an e-invoicing app, a supply chain app, a cash management app, an accounts payable app, a foreign exchange app ... and so on and so forth.

Corporates will then take these apps and select those that work best for their businesses.

They will download the apps to their corporate treasury iPads, iPhones and Androids (Google), and roll these out to their  ‘dummies’: the employees who need to look at days sales outstanding, inventory, supplies and logistics, etc.

These dummies will be used to the interface and service – a bit like folks got used to using PC’s and keyboards to access the internet in the old days – and will take to this easily.

Similarly, the users, the corporates and the banks will be in continual ‘synch’ because, just as my iPhone automatically synched with my iTunes and Outlook, it will automatically synch with my corporate treasury processes, data and content.

In other words, you end up with treasury being redefined as we move to banking-on-demand 24*7 through treasury-in-the-pocket.

The critical point in this logic is that, by making treasury app-based, corporates will be much more efficient:

• They will be able to mix and match the apps and the app providers – banks – to best fit their business model;

• They will be able to ensure that even the most unskilled member of staff, associate, player, employee or whatever can use them;

• They can be easily adjusted to suit business changes over time through centralised control;

• They can be a mix of in-house created or bank provided and operated or collegiate, open source apps; and

• They will always be secure, up-to-date, controlled and managed in real-time 24*7.

All of the above will give the treasury ops incredible flexibility, agility and speed to adapt to changing circumstances.

Now ok, I said a lot more than that, but this was the gist of it.

So here’s the proposed treasury operations future.

The corporate treasury runs on SAP today, and will in the future probably. However, the CFO will have consolidated all treasury ops onto SAP as a single platform and determined that a small number of bank partners will be selected to integrate with it.

Those bank partners will be selected on the basis of the beauty, ease, adaptability and refreshment of their component-based bank app functionality, and its fit with the business needs of the corporation.

To me, this is a simplified future as we have turned a tipping point from proprietary bank lock in and lack of standards in the past, to very easy and flexible developments that are open sourced and simple in the future.

And here’s where I got shot down.

“Oh, but treasury is far more complex than your simple consumer view of the future.”

“Oh, but this won’t work because our processes and infrastructures are too difficult to change to this vision.”

“Oh, but technology is expensive.”

“Oh, but oh but, oh but, yea but no but yea but no ...”

I was really disappointed with this reaction.  Of course, I had views on these points which have been explored on this blog before, but the disappointment is that I expected more buy-in for such a vision in visionary Asia.

Then I got it.

None of these guys use iPhones (double click image to enlarge, and note Chinese and Indian iPhone users):

Sourced from icrossing

Note: Japan and Australia don’t count in this context as these are developed economies versus emerging markets

The thing that really sticks in the throat is that by omitting to view these developments, corporates and banks will miss the whole trend towards business simplification that such tools allow.

Luckily some banks are not so short-sighted in Asia, as the announcement of the iPad coming up for sale from July in Singapore was underscored with the news that OCBC and DBS have both developed specific apps for this service, amongst the first.

Meanwhile, and to put the record straight, HSBC and First Direct are on the case with these technologies as they are sponsors of this conference and have told me some of their plans.

Finally, and the real underline of this blog entry, is that it now explains why, when the Chair of the panel I was on asked: "Chris, what are the new things you see happening?  Do you think, for example, that we could use the iPhone for Treasury one day", he got a big laugh with that opening question.

Like Philip Yeo, these guys think the iPhone is just a toy.

It's not.

The iPhone, Android and, more importantly, the app is for business use as much as it is for consumers.

Get real.

Postnote: it's a shame but I suspected this at the time.  Apparently many folks in the audience thought that I was some Appleite with iPhomania because I kept referring to 'apps'.  To be honest, I meant apps as an interchangeable idea with widgets and gadgets to refer to the componentised bank functions. 

It actually doesn't matter that much if folks did interpret this as being Apple-based however, as the PC-age was Microsoft-based, the internet-age is Google/Firefox/Explorer-based and the mobile internet is now Apple-based.

With 100 million units shipped in just three years, a further 58 million this year, the iPhone is becoming the de facto standard for the mobile internet.

Ah but wait, what's this?

Android tops iPhone: Google's Android operating system edged out Apple's iPhone operating system for the No. 2 spot in the U.S. consumer smartphone market in the first quarter, according to research firm NPD Group.

Whatever.

Mobile, Mobile, Mobile

View more presentations from Paul Golding.

Why payments innovations are rubbish!

Here's my latest retail payments focused presentation.  It's premise is that there's loads of innovation out there, with micropayments and iPhone apps being hotbeds of innovation for developed economies whilst microfinance and 2G GSM messaging being creative fields for developing economies. 

However, all of these innovations are just froth on the cake of the payments infrastructure and the core of that infrastructure - the clearing and settlement services that underpin these services - is still pretty rotten.  There's still lots of legacy infrastructure out there, which needs updating to operate in our 21st century world ... but sits languishing because banks are slow to act.

And the fact that banking protects banks through bank licensing, means that none of the innovative firms - including PayPal - can make much difference to this rotting core.

A little bit over-stated, but I think it makes the point.

Why all payments innovations are rubbish

View more presentations from Chris Skinner.

You'll notice some of my usual slides in here, but I've also added quite a few new ones, including several that list stunning numbers ... such as Facebook currently uses over 30,000 servers!!

Spanish Banks leading in innovation - now the iPad Bank (UPDATE)

It surprises me how often I find Spanish banks surprise me.

First, BBVA launch the first really cool Bank 2.0 apps two years ago.

Then Caja Navarra launches a fantastic hybrid Zopa-Bank styled P2P lending service.

More recently, Santander created a really interesting head office campus full of robots.

And now Banco Sabadell is one of the first, if not the first bank to launch an iPad banking service.

My good friend Pol Navarro, Director for Innovation at Banco Sabadell, tells me that they decided to do this because: “since we launched our mobile portal, at the end of 2009, we've seen a tremendous usage from iPhone users - about 60% of access - so we decided to develop a specific app for the iPhone/iPad.”

Certainly, that seems to be indicative of a core focus upon the customer as, in just three months since its launch, Banco Sabadell’s Mobile Service (BSMS) is being used by more than 13,500 customers of the bank and is expected to exceed their target of 35,000 customers this year.*

According to the bank’s blog – yes, they have a blog! – the “new version of BS Mobile for iPhone IPAD and includes all operations currently available in the BS Mobile service (consulting accounts and cards, transfers and transfers, purchase / sale of securities, signature files, etc. ..) for both the segment private customers and companies, taking advantage of new capabilities for interaction and usability that Apple devices offer and improving current features:

Tracking all current procedures of the customer (card applications, loans, etc ...) to give the best customer service and information wherever you are.

• Higher quality maps and greater precision in the location of offices and ATMs, as well as Street View.
• New presentation of the application, Touch and more intuitive.
• Ability to save favourite operations and menu customization operations.
• Keyboard shortcuts to the operations of accounts, cards, data transfers and your personal manager.
• Option to call me back for easy access to the Contact Center.”

UPDATE: New and improved video

In addition, Pol tells me that they “think that the iPad has its own space, for consuming digital content online/offline (airplanes, garden, home, etc.) ... the iPad version, has some specific functions, adapted to the terminal’s screen size, user interaction, maps navigation, etc.”

They are also developing the iPad further: “for example, product simulation of loans and mortgages, investment portfolios, video calls with your sales rep, etc. Also this kind of gadget can be used internally, for sales rep, private banking advisors, etc. We are just investigating in this side.”

All in all, Spanish banks never fail to impress me with their first mover experiments in social and mobile finance.

Definitely not a case of mañana my friend.

* Banco Sabadell has €82 billion in assets with 1,190 domestic branches and 9,466 staff

Branches are dead, the future is social (Part Two)

After my post last week about my latest presentation with an audio file, my keynote in Bahrain this week was going to be a variation of the presentation.  Due to being unable to fly to Bahrain, I mentioned on Monday that most of the day had been spent editing a video file for the conference to be able to present my keynote. 

This 'aired' for the first time this morning and so here is the video version for the blog:

MEFTEC 2010 Presentation from Chris Skinner on Vimeo.

And the original slides, in case you missed them:

Branches are dead, the future is social

View more presentations from Chris Skinner.

And an audio file to go with it if required:

Download Chris Skinner, EBF2010 (45MB)

Bearing in mind that this was made with a cheap ($200) HD video camera, free video editing and slide management software and cheap ($59 per year) hosting services, it's an extraordinary way for anyone to create and become their own media channel in the 21st century.

Mind you, they could improve the looks of the anchor hosts a bit, couldn't they?

Branches are dead, the future is social

I haven't posted a presentation recently.  Been a bit lazy, so here's a bonus.

My latest presentation on the future of (retail) banking:

Branches are dead, the future is social

View more presentations from Chris Skinner.

And an audio file to go with it:

Download Chris Skinner, EBF2010 (45MB)

This is a keynote presentation I gave at this year's European Banking Forum: 

... an event we've partnered with for the past few years, and which enables banks and vendors to network in a convivial, exclusive and private conference.  Next year's is already in plan in Brussels for March 2011, and is well worth a look for those interested in the future of banking.

Why mobile is changing the banking planet

Back in 2004, I asked a group of bankers when mobile would take off in banking. They all said: “not in our lifetimes”.

In 2007, Bank of America launched their mobile banking applications and has seen a rapid uptake of users. In less than a year, they reached a million customers on mobile, and saw a further 300% growth in 2008. It took them over a year to get the first million customers; a pregnancy period of just nine months to get the second million; and a short six months to get the third.

According to Doug Brown, the man responsible for mobile banking at Bank of America, the speed of take-up is accelerating even faster in 2009, with 150,000 new mobile customers in September 2009, 210,000 in August and 220,000 in July.

What are they doing?

99% of mobile users’ view balances, 90% view transaction details and about $10 billion of funds have been moved via mobile.

But this is not just for existing accountholders wanting account access. The bank has gained over 150,000 new accountholders from competitors during 2009, just because they wanted mobile banking.

So far so good.

Now jump to Africa.

M-PESA is the story in Africa.

M-PESA is the mobile text service introduced by Vodafone’s subsidiary, Safaricom, back in 2007. Suddenly a country with zero electronic methods for making payments for the masses had an electronic access which has revolutionised the country.

Within a year, one in five Safaricom users were using M-PESA to make payments, and one in ten Kenyans had used the service. By November 2009, M-PESA had become the world’s biggest mobile money service with over 10% of Kenya’s GDP moved by mobile payments. Accidentally, Safaricom had become the biggest bank in Kenya with 8 million users registered and over $2 billion transferred by mobile.

Now M-PESA is being expanded into Nigeria, South Africa and other African countries, whilst banks are saying that customers are actually switching banks to get mobile channel access.

Now jump to Japan.

A bank launched in Japan in June 2008 called Jibun Bank.

Jibun Bank is a mobile only bank. The Bank is designed for access via mobile only. You try to use the bank online, and it’s rubbish. As for branches, forget it. This is a multimedia rich, mobile only bank.

The bank is a joint venture between the Bank of Tokyo-Mitsubishi UFJ and telecom operator KDDI.

Jibun Bank, which means my bank, gained 500,000 account openings in just eight months and, after eighteen months, had Y140 billion ($1.5 billion) of deposits by December 2009, from over 850,000 accounts.

At the start of March 2010, the bank opened their millionth account.

What is the point of these three short case studies?

Well, there are many, many examples of banks innovating with mobile worldwide today, but the lesson is this.

In 2004, bankers believed this revolution would not take place in their lifetime.

One banker actually said to me, in writing: “I think this idea is way out there – ten to twenty years – before this plays out in any sizable way.”

Six years later, the battleground is already defined and being won.

Are you fighting in this space?

Have you lost already?

I wonder ...

Mobile Trends 2020

View more presentations from rudydw.

Mobile Banking in 2020 - Mobile World Congress Report

View more presentations from Nadejda Tatarciuc.

Online payments is far more than PayPal

As those who follow this blog know, I write regularly about services such as Facebook and PayPal.

This is because they are disruptive and fresh, as well as being incredibly successful.

For example, Facebook is now the world’s #1 website, bigger than Google.

Not bad for a five year old.

Meantime, PayPal is still growing fast, making over $95 a second in revenues based upon $3 billion in revenues this year. This makes them the interweb’s sixth most successful website by earnings.

Not bad for a ten year old.

But these sites are not the be-all and end-all. You have to bear in mind that they are purely popular in their language of origin: English.

As a result, there are several other search engines, social networks and P2P payment services that are succeeding out there, from China’s QQ to Russia’s Yandex.

Here's a world map of social networks, taken from the blog of Vincos, Italy (doubleclick to enlarge picture):

Although Facebook is a big hit worldwide with 400 million users, it’s tiny in some countries like the Czech Republic (Lidé is the #1 social network), Hungary (iWiW), India (Google’s Orkut), Japan (Mixi), Netherlands (Hyves), Philippines (Friendster), Poland (Nasza-Klasa), Russia (vkontakte), South Korea (Cyworld), Taiwan (Wretch) ...

Similarly, PayPal is hardly recognised in some countries.

In the Netherlands, for example, the banks launched iDEAL, a set of standards to facilitate online payments.

iDEAL was created in 2005 by a range of participating banks with ABN AMRO, ASN Bank, Fortis, Friesland Bank, ING, Rabobank, SNS Bank, SNS Regio Bank and Triodos Bank on board today.

Some of the major features of iDEAL include the fact that it offers both real-time payment initiation and authorisation by both the issuing and acquiring bank, followed by irrevocable credit transfers to the merchant at the time of online purchase.

The participation of the banks along with real-time processing, has created a strong perception of iDEAL being SAFE. As a result, iDEAL has gained over 15,000 participating merchants and 5.8 million users, resulting in a total of 45 million transactions in 2009 worth over €3.4 billion (up 60% over 2008).

* maandtotalen = monthly total

In other words, iDEAL has a 40% market share of all e-payment transactions in the Netherlands, with an acceptance rate at almost 9 out of 10 online merchants (88% of all Dutch merchants) compared with only 1 in 4 for PayPal (although that’s up on 1 in 5 a year ago, thanks to the decline of AMEX in the Netherlands).

So the banks do have a PayPal service equivalent ... but, right now, only in the Netherlands, although iDEAL aims to expand across more of Europe by gearing up for SEPA Credit Transfers (SCT) and the Unify XML standards.

Meanwhile, in Russia, their version of Google Checkout has taken a place ahead of the market.

Google Checkout is actually called Yandex.Money run by Yandex, Russia’s largest search engine.

According to Liveinternet.ru, Yandex increased its share of search traffic from 56% in January 2009 to 59% in December to 62% in February 2010.

Yandex.Money claims to be the leading online payment system in Russia as a wholly owned subsidiary of Yandex. Founded in 2002, Yandex.Money has seen payment volumes grow 135% CAGR, processing 21.5 million transactions per year worth $350 million.

This may sound small, but the appeal of Yandex.Money is for the vast numbers of unbanked and underbanked Russians who want to deal online.

Yandex.Money provides over a million prepaid cards per year through 100 distributors, to be used in over 50,000 participating outlets all over Russia. They have over 200,000 participating terminals to load cash on the cards in 80 of Russia’s largest cities, and 1 in 5 customers use them as top-up wallets. Meanwhile, 61% of users pay directly from the Yandex.Money interface online.

So Russia’s online payments market has developed a slightly different way.

Meanwhile, China has an incredible story of the success of Alipay, a division of Alibaba the B2B ecommerce portal.

Alipay is China's primary payment platform thanks to being the preferred payment system for sister firms Taobao and Alibaba.com, along with over 460,000 external merchants. The result is that Alipay has a 49% market share today for all online payments in China:

Q1 2010 market share figures from iResearch

Equally, it has a larger userbase than even PayPal with over 300 million registered users as of March 2010, with five million transactions per day worth an average RMB 1.2 billion (US$176 million).

Why should this be of interest to our global banking community, and PayPal specifically?

News Headline, April 11th 2010: “Alipay, China’s largest online payment network, has announced that Alibaba Group will invest a total of RMB5 billion (US$732 million) over the next five years to upgrade the payment solution for e-commerce in China and around the world.”

Serious stuff!

Meanwhile, in a non-exhaustive list, there are many other online payment services worth a look including 2CO, AlertPay, Bill Me Later, C-gold, CashU, Dotpay, E-Gold, LiqPay, Mobile Wallet, Nochex, PayPay and Z-Payment.

So in future, when I talk about PayPal, don’t forget that we’re also talking about their national equivalents such as iDEAL, Yandex.Money and Alipay. Similarly with Facebook, don’t forget that there’s also Mixi, Hyves, Orkut and Friendster.

The implications of these services on core banking is exactly the same which is that we are seeing the creation of many disruptive, fresh and incredibly successful web services for social and P2P finance ... leading, in future, to social B2B finance.

A new PSD-approved Payments Institution starts business

Nick Ogden, CEO and founder of Voice Commerce (he previously created WorldPay, the RBS payments unit, back in 1993 and sold it to them in 2002*), recently spoke at the FSClub about using voice biometrics as part of authentication in mobile financial transactions.

Who are Voice Commerce Group?  Best to read what they say about themselves:

“The Voice Commerce Group was founded upon a simple principle ‘whenever we speak we establish a position of trust’. Consumers use their voices to communicate decisions; perhaps to instruct, to agree or to buy something. This natural process already happens automatically billions of times every day and the Voice Commerce Group has taken this natural capability and automated the process through its innovation in voice signatures.

“Voice signatures allow consumers to use their own unique voice to sign and authorise transactions, and their patented technology now lies behind worldwide standards for mobile trust. Using voice signatures guarantees transactional security when making a payment and protects users against personal data compromise. Voice signatures are complex devices that combine the use of voice biometrics with transactional history, trends and patterns to create a highly secure, unique authorisation environment. The system can deliver two factor identity authentications virtually anywhere. Authorisation failures, suspected imposters or potential fraudsters can be controlled and managed and transactions re-qualified using automated outbound IVR. This not only improves customer service but reduces the risk of fraud and identity theft.”

Why am I giving them a plug here?

Because, during the evening at the FSClub, Nick mentioned that Voice Commerce were one of the first Payments Institutions (PI) to register with the FSA, after the PSD was transposed last November and were about to announce that they are also one of the first PIs to be accepted as a Principal Member of Visa Europe.

The announcement was released this morning, so now is the time to talk about it.

What does being a Principal Member of Visa Europe mean?

The membership means Voice Commerce can start providing its own payment services to businesses including acquiring payment transactions.

Following the launch of the PSD in November 2009, Visa Europe confirmed that Payment Service Providers such as Voice Commerce, as defined in the PSD, would be eligible to apply to become members of Visa Europe. Subject to stringent risk management requirements and being capable of complying with Visa Europe’s operating regulations, the Voice Commerce application was approved by Visa Europe at the Board of Directors Meeting in February 2010.

Nick comments that: “as a Payment Institution, Voice Commerce is regulated in exactly the same way as banks in relation to capital adequacy and regulatory responsibilities for payment services. Being granted Visa membership means we can further compete on an equal footing across Europe with our banking peers. Our next move will be to grow the business and bring fresh creativity to the industry using innovative payment services, including voice biometrics to authorise payments.”

Voice Commerce also describe themselves as being “authorised by (the) UK Financial services Authority under the European Commission Payment Service Directive, and regulated in the provision of e-money services”. This means that they have to “maintain appropriate financial capital adequacy”.

Interesting.

Very interesting.

Particularly interesting as the firm that Nick created, WorldPay, is now up for sale with a price tag of £3 billion ($4.5 billion).

Bidders include private equity firms Advent International Corp; TPG Inc.; Warburg Pincus LLC; Kohlberg, Kravis Roberts & Co; Permira; CVC Capital Partners, Blackstone Group LLP and The Carlyle Group LLP.   Tsys, Atos, ChasePaymentTech and First Data are rumoured to be in there .. and IT firm Voice Commerce Group, whose chairman and chief executive officer is Nick Ogden, the founder of Worldpay, is making a bid to get them back too!

From Lafferty Card News:

“A skilled management team has already been assembled as part of the acquisition offer that will include the existing team at Voice Commerce. The team has appointed Montrose Partners, specialist financial advisors, to assist in their bid ... the value of Ogden’s bid for RBS WorldPay has still to decided, but he said Voice Commerce has substantial support from a number of private equity firms. When asked when a deal might be completed, he said: The expectation from UBS, who are handling the deal, is hopefully by August 2010. The process of due diligence is now taking place while they attain the position and value of the company. Following this period, UBS are expected to produce a sales memorandum in January 2010. Voice Commerce then predicts an 18-month separation process of the business, at which point the full extent of the deal will become clear.”

What does it mean if the Internet is your bank?

In this guest blog entry Brett King, blogger at Banking4Tomorrow and author of the new book Bank 2.0, looks at what it means to live in an age where the internet is THE bank ...

In a quick straw poll recently conducted via Linked In we had a set of responses that confirms pretty much all the other data we are seeing in relation to channel adoption and utilization. The key issue is that despite the obvious data and conclusions, Internet is still seen as either the poor cousin of Branch banking, a necessary ‘burden’ or normally as a transaction channel for cost reduction – rather than what it is today…a customer channel.

The question we asked in the LinkedIn poll was very simple. Which Channel is the most important for your day-to-day banking needs? The answer was clearly Internet banking.

Poll Results - Which channel is the most important for your day-to-day banking?

Now, the conservative bankers amongst us might think that asking for people to participate in an Internet survey guarantees results skewed towards the ‘internet’ and to be honest this is not a rigorous piece of multi-variate research. However, even if you factor in that in most developed economies Internet Penetration is at 65-75%, that Internet Banking is hovering around 40-50% of the populatio and that the highest demographic of users of social media online are the coveted 35-44 year old age bracket, why would you bother arguing that Internet is not a significant channel for retail banking today?

Let us use some very simple logic. Even in the US where Internet Penetration looks as if it has started to flatten out in the last few years around the 75% mark, is it reasonable to think that Internet Banking is likely to decline in usage in the near future, or is it likely that as more people shift to internet banking via mobile phone that it will continue to increase?

Patrick Chew, Head of Delivery from OCBC in Singapore, was reported in the Straits Times this week saying

“Mobile banking customers are no longer only professionals, the technologically savvy or those who are better educated…these customers now come from all walks of life.”

Patrick Chew, Head of Delivery, OCBC Bank Singapore

In Singapore already OCBC has the majority of it’s customers on Internet Banking and expect within 2 years that approximately half of their customers will have migrated to mobile banking. Daniel Li, Director of E-Business at Citibank in Singapore, indicated similar plans, saying that one in 10 of their customers will be on Mobile Banking by the end of the year. Bank of America has had phenomenal growth in Internet banking with their user base now approaching 4 million users. A recent survey by mBlox showed that already mobile internet banking has surpassed both branch banking and traditional telephone banking in terms of usage. Internet Banking surpassed branch in respect to transaction volumes back in 2003, so that battle is long over.

But do banks really know what they are doing online? Do they understand the value proposition given that Internet is now the primary channel for the majority of customers? It appears not.

Look at the table below. It illustrates number of page updates made to the primary domain of major retail bank websites in 2005 compared with 2008. In every case, mysteriously, the major retail banks have scaled back on their commitment to Internet since 2005 reducing the number of updates they have made by about 50-75%. This is a worrying trend – it most likely signifies three things. Firstly, banks are over the initial ‘buzz’ around internet, further reinforcing the perception that it is actually mainstream. Secondly, that they don’t know what else to do, all the initial experimentation, etc has been done – what new tools do we have in the toolbox to deploy? Lastly, there has been consolidation of a lot of content that just wasn’t useful online. But, this does closely correlate with budgets online – they aren’t increasing. If anything they are decreasing.

What happened? Reduction in web banking spend has been universal...

Branch expansion is once again slowing too in the US, UK and many other markets (see FDIC:Quarterly). This is argued to be a function of cost reduction and the effects of the recession, but we can’t discount behavioral shift as a key element of this development. Yet, traffic of each of these sites has increased significantly in the same period with Internet Banking usage doubling globally in the period 2004-2009.

One global bank I met with in the last few weeks told me in confidence that they have budgeted US$800m for branch related costs this year, but less than US$8m for web, internet banking, social media, web marketing and mobile banking. What was the business case for spending 100 times more on digital versus branches – it is a function of existing infrastructure. The same bank realizes that today the Internet contributes as much revenue as the branch, and does 300-600% more transaction volume. But can’t conceptualize that Internet and mobile is underfunded.

So let’s get this straight. The web is now the dominant channel for customers. Internet and Mobile banking are growing at significantly higher rates than branch banking, branch growth is leveling off and yet we are not leveraging non-branch channels for revenue. In fact, Bans are reducing spend on non-branch because of the financial crisis.

There is something seriously wrong with this picture. First of all, banks need to realize that 80-90% of the daily traffic that comes to their site goes straight for the login button and that a great deal of time and effort needs to be spent on understanding how to sell behind the login to existing customers. I would argue as much time and money needs to be spent on cross-sell and up-sell within Internet Banking as we currently do training staff for the very same within branches – at least as much, if not more. Secondly, Banks need to better understand what customers actually want to do through internet banking and mobile internet banking. Let’s not assume it’s just checking account balances, paying bills and doing transfers. Let’s think about which products suit these channels and would make the lives of our customers easier.

Remember the two key drivers for Internet usage are convenience and price. The key driver for mobile internet banking is still convenience, but increasingly mobility itself.

Banks are getting this wrong because they are measuring the wrong things internally. They are busy measuring how much revenue increased channel by channel, product by product, and they aren’t looking at the big picture nearly anywhere near as effectively as they should. They are still thinking like the bank of the 1990s when branches continued to be the primary channel because customers had no choice.

Today we have a choice!

The bank in your hand

I just heard that Bank Leumi in Israel have launched a range of mobile services for finance, with the tagline: "the bank in your hand".

More like placing the whole bank branch in your hand and, to be clear, avoid children getting hold of these apps as demonstrated in their new ad ...

Great article from Bloomberg Business Week about their #1 Customer Service Champion Provider: USAA. Here are a few selected pieces from the story:

Since we first produced the list in 2007 with our research partner, J.D. Power & Associates, no other company has come close to achieving USAA's feat: a No. 1 or No. 2 spot for four years running. No fewer than 87% of respondents to J.D. Power's syndicated surveys say they will definitely buy from the company again, far higher than the average, which is just 36%. Its client retention rate? A near-perfect 97.8%

....

When Staff Sergeant Corey Mason wants to deposit a check, he doesn't use an ATM, a teller at a branch, or even a stamped envelope and deposit slip. Rather, the 37-year-old GPS systems specialist takes a picture of the check with his iPhone, uses an app to send it to his bank, and within minutes the money shows up in his account. Although he's now stationed at Fort Knox, Ky., it's the kind of service Mason knows his fellow troops in Iraq, where he served in 2004, surely appreciate. "The mail over there is extremely slow," he says. "They know what it's like."

...

Because USAA has just one physical bank branch, at its headquarters in San Antonio, deposit-by-iPhone is a logical step. (It also launched an app for Android users on Jan. 22.) Since August, more than $260 million in deposits have been made using the mobile service, as USAA's customers, whether in Camp Pendleton, Calif., or Iraq, send in checks. Giants like Bank of America are just testing a similar service.

Lieutenant Randall Blakeslee, a plans and operations officer stationed at Fort Sam Houston, Tex., is on two-hour standby to depart for Haiti, where he'll stay at least 90 days to help with relief efforts. That means his mail will be forwarded to him there, and he fully expects to use the mobile deposit service to submit checks from his job at home or when family sends him money. He already used the service to deposit checks when he was based in El Salvador. USAA is "really ahead of the game when it comes to technology," says Blakeslee, 34. "If I'm on the run, I can text a command and within seconds get a message back with my balance."

Blakeslee is referring to another high-tech service USAA rolled out in 2008 that lets its far-flung customers—a sizable number of whom are young, tech-savvy, and living paycheck to paycheck—get text messages about their account balances before, say, making a big purchase. Later in 2010, USAA is planning mobile peer-to-peer payments, which let customers e-mail or text-message money to friends or family for immediate deposit, no matter where they are at the time.

USAA was among the first to let customers initiate an insurance claim using their phones from the scene of an accident. And it soon will expand that app so policyholders can attach photos to the claim and complete the entire process via phone. By 2011 customers will even be able to attach voice recordings to their file, immediately retelling exactly what happened.

Also coming this year: a mobile car-buying service that lets customers standing at a dealership snap an iPhone pic of a vehicle's VIN number and instantly get back insurance quotes, loan terms, and pre-negotiated rates at approved dealerships. "The idea is you can turn that phone around to the salesman," says Bob Otis, USAA's vice-president for auto product management, "and say 'this is the price I'm going to pay.' "

If you want to know more about the USAA iPhone app, Net Banker has written up a great overview.

 

Brett King, author of the new book Bank 2.0 - which I can recommend to those of you working with social media in finance as a focus – has worked with me in the past few weeks, analysing the inital and general results from our social media survey.

Almost 450 folks responded to the survey (thank you all) and here are a few fast facts:

• the majority of the participants would participate in social media before making a decision on a financial service provider

• 93% of participants consider social networking will be worthwhile or critical for banks in the next five years

• 78% said social media is worthwhile or critical for corporate banking relationships today

• the majority of customers would go first to independent community discussions before coming to the brand itself

• Facebook and Twitter scored as the highest value social media channels for retail banking engagements

• LinkedIn, Blogs and Privately Managed Online Communities scored as the highest value social media channels for business interactions

• 74% said their use of social media organizationally will increase over the next two years, whilst only 1% said it would decrease

For the full 30-page report analysis:

Our conclusions

93 per cent of the 443 respondents to the Financial Services Club survey indicated that a focus on social media would be essential to the future of financial institutions over the next five years. Only 1 per cent of the survey group said that they feel their institution would be likely to decrease their use of social media in the next two years...only 1 per cent! All indications are that this is a hot topic for pretty much every service organization out there which is surprising as so few firms are doing anything about it!

Adoption rate of social media is scary. Two years ago Twitter was unheard of. Although Twitter started beta testing their concept in 2006, it is largely agreed that it didn’t formally launch till April 2007. Since then Twitter has taken off by storm – globally, in the USA and in Australia, Twitter ranks as the 12th most popular website by traffic, in the UK it ranks in the top 10, and in most of the EU it ranks in the top 30 or 50 websites. It took Facebook 4 years to achieve the same impact; so social media adoption is definitely speeding up, not slowing down.

Given the rate at which Facebook, Twitter and other such social networking sites have impacted popular culture, it should come as no surprise that financial service providers are starting to think about integrating social media into their business. However, the path to integration of these new media tools into the institution is a tough challenge. Firstly, organizations understand that this is an issue requiring total commitment across the organization, but achieving such is difficult because finding someone who can garner that support is a challenge. Secondly, brands in general are starting to understand that social media is a medium they can’t ‘spin’ – that is customers are largely in control – and that is worrying, particularly in the current environment where FIs are facing significant perception challenges at large.

The real conclusions of our research show that individually we know that it is inevitable that social media will be integrated into our business, but our organizations are looking for direction. The difficulty is that there is no one size fits all solution. Each of the popular social networking sites works in different ways, so we need strategies that reflect this. The survey showed, for example, that LinkedIn is a far better tool for business-to-business discussions and for promotion of services to professional individuals, such as priority banking and wealth management. For general brand marketing, Facebook is an effective tool, but our respondents wouldn’t use Facebook for banking contacts or LinkedIn for private and personal socializing. So banks must target effectively if they are to get the socialization of finance right. The strategy needs to be localized and involves pay-per-click embedded advertising as well as sponsored groups and consumer support.

Twitter as a tool is an excellent research tool. We would say that this medium in its current form would probably yearn more data than your best of breed focus groups and customer satisfaction surveys if it can be harnessed correctly. When it comes to Twitter it is all about listening. Our survey showed that consumers would use social media first to ask other customers about their experience with your brand, rather than engaging with your brand directly.

The survey shows the biggest missed opportunities for banks and financial service providers are more in respect to their own properties. Banks need to be using blogs to give more of their own voice to the social discussions, along with privately owned social networks embedded into the customer website experience. If you are not sure what privately owned social networks mean, think say Amazon’s product recommendations and rating system, PayPal’s Blog, and Wells Fargo’s Stagecoach Island?

Our survey essentially shows that most banks are missing a key development in customer engagement – both at the consumer and, more importantly, at the corporate level – by not deploying and utilizing this media effectively. For example, respondents are familiar with some of the key bank provided B2B networks, such as those from Bank of America and HSBC, but these examples are few and far between. This is the case even though most consumers and corporations feel this is critical to the future!

There needs to be an immediate and concerted effort to integrate social media into your organization today. More than that, this needs to be a cross-discipline, multi-department effort and it’s going to be difficult, but not necessarily expensive. If used properly, the bank will improve delivery, revenue and customer engagement significantly.

For the full 30-page report analysis:

Interesting article in this week’s Marketing Magazine about mobile marketing.

It tries to break open a few myths that even the delusional Finanser believed.

Myth #1: Most people are using some sort of mobile internet device today

76% of UK mobile users aged over 16 don’t access the internet on their mobile.  Only 10% access the internet on their mobile daily and only 15% do so once a week.

Myth #2: Most people are interested in using a mobile internet service

60% of UK mobile users aged over 16 claim to own a phone that can’t access the internet and, of those, only 30% are interested in getting an internet-enabled mobile phone.

Myth #3: If they had the handsets, then usage will follow

Of the 40% of mobile users who can access the internet 31% have never used an internet mobile service, 8% are lapsed users (they tried to use a mobile internet service but gave up) and 24% use a mobile internet service less than once a week.

And there was me thinking everyone had an iPad these days.

It's been a while since I did a numbers post on social media, but it's time for an update and there's a great supplement in this week’s Economist discussing all things social networking.

It's well worth reading the whole 20-page report but, if you don’t have time, here are the stats (always useful).

Social Audiences

• Facebook is the globe’s largest online social network with over 350 million users.
• Facebook’s audience is bigger than any TV network that has ever existed on Earth.
• Were it a nation, Facebook would be the world’s third most populous after China and India.
• 70% of its audience is outside the United States.
• Twitter had 58 million web visitors in October 2009 ... or is it 23 million?  See end of this entry.
• Facebook took almost five years to get its first 150m users, but just eight months to double that number.
• LinkedIn has over 58 million members, and it took 16 months to reach its first million users whereas the most recent additional million came on board in only 11 days.

Mobile Social

• eMarketer estimate that over 600 million people will use their phones to tap into social networks by 2013, a more-than-fourfold increase on last year’s 140 million.
• Facebook has 65 million mobile users.

Social Content

• Facebook’s users post over 55 million updates a day and share more than 3.5 billion pieces of content with one another every week.
• Over 2.5 billion photos a month are uploaded to Facebook, making it one of the largest photo-sharing sites on the web.
• Facebook has one engineer for every 1.2 million users.
• Facebook has over 1 million developers creating software for it and its online directory contains over 500,000 apps.
• Twitter has spawned over 50,000 apps, including offerings from firms such as Twitpic, which lets people post photos to their Twitter feeds, and Twitscoop, which highlights popular topics being talked about on the service at any moment.

Social Revenues

• Facebook does not reveal numbers, but its revenues last year are thought to have been at least $500m and quite possibly more, which helped it to turn cash-flow positive in mid-2009.
• Although user numbers were sharply up last year, the social-networking industry’s revenues in America, its biggest advertising market, rose only by a modest 4% to $1.2 billion according to eMarketer, a market-research firm.
• That was still an achievement, because the total online advertising market shrank in 2009 and MySpace revenues, the largest share, are thought to have fallen last year.
• This year eMarketer expects revenues to grow by over 7%.
• ComScore found that one in five adverts viewed by American web users last June ran on social-networking sites, with MySpace still accounting for the biggest chunk of the total.

Social Games

• In 2008 Tencent, the Chinese ‘Facebook’ which runs QQ coins, listed on the Hong Kong Stock Exchange and reported revenues of just over $1 billion, with $720m coming from online gaming and sales of items such as digital swords and other virtual goods.
• Ning, another social networking tool, is targeting gifts rather than games and launched an initiative in October 2009 that allows people to sell customised digital items to their members. These cost anything from 50 cents to $10, and over 400,000 are being exchanged every month, splitting the profit equally with its customers.
• In the game “Sorority Life”, users complained about the lack of virtual men to date so Playdom quickly introduced some last November – some 10 million of the boyfriends were promptly snapped up with a few players buying as many as 500 boyfriends each; some paid for their digital darlings with virtual credits won in the game, but others stumped up over $5 a time for their beaux.
• Although Asia remains by far the biggest market for digital knick-knacks, Inside Network, a research firm, has estimated that sales of virtual wares in America on many different kinds of websites reached $1 billion last year and could grow to $1.6 billion in 2010.
• ThinkEquity, an investment bank, reckons that revenues in America from social games could hit $2.2 billion by 2012, a big leap from last year’s $375m million.
• “The best virtual goods have real currency,” says Mark Pincus who runs Zynga, on eof the biggest gaming firms on Facebook.

Social Marketing

• A survey of 1,000 heavy users of social networks and other digital media conducted in August 2009 by Razorfish, found that 44% of those following brands on Twitter said they did so because of the exclusive deals the firms offered to users.
• One in five tweets mention specific brand names in the updates.
• O2 found that 17% of Britain’s small businesses were using Twitter to attract new customers and some believe they have saved around £5,000 ($8,000) a year from other forms of marketing by doing so.

Social Hiring

• US Cellular, a telecoms company, says it saved over $1m last year by using a LinkedIn system that produced good candidates for its jobs faster than traditional recruitment channels.
• A survey by CareerBuilder.com of about 2,700 executives in America last year found that 45% of them looked at job candidates’ social-network pages as part of their research, and more than a third of those had unearthed information there that put them off hiring someone.

Social Not-working

• A survey of 500 small businesses in America conducted by Citibank last October found that most of them had not used online networks at all because they thought they would be a waste of time.
• Morse estimate that personal use of social networks during the working day was costing the British economy almost £1.4 billion ($2.3 billion) a year in lost productivity.
• Nucleus Research, an American firm, concluded that if companies banned employees from using Facebook while at work, their productivity would improve by 1.5%.
• A survey of 1,400 CIOs by Robert Half Technology last year found that only 1/10th gave employees full access to networks during the day, and many were blocking Facebook and Twitter altogether.

If you like this sort of thing, then please join our survey on social media in finance.

Click to take the survey: https://www.surveymonkey.com/s/NXWW2B3

The survey is closing very soon, so feel free to join the 425 professionals from banks, corporations, consultancies, governments and the professions who have responded so far.  Results published at the end of the month.

Meanwhile, if you like this sort of thing a lot, then here’s a few more social media numbers, this time from this year’s World Economic Forum (WEF):

• WEF reached a worldwide audience of 430 million readers online through the use of social networks this year.
• Facebook ran real-time pulses, polling over 200,000 people and bringing their views into the discussions.
• WEF has over 6,300 fans on Facebook.
• Webcasts of public sessions on Livestream reaching a cumulated audience of over 210,000 viewers.
• News conferences were seen by over 70,000 people, and they could put questions to panellists via Twitter and Facebook.
• Over 250 participants and 120 journalists continuously sharing their impressions on Twitter
• A Twitterwall allowed participants to see a running micro-commentary on the meeting as it progressed.
• ‘Davos’, ‘WEF’ and ‘WorldEconomicForum’ were mentioned 30,000 times on Twitter.
• 1,551,130 people are following the Forum on Twitter (http://twitter.com/davos)
• The Davos Debates on YouTube (http://www.youtube.com/davos) have been watched over 600,000 times.

 

UPDATE: I ran a competition related to this entry asking folks to say how many visitors went to twitter in October 2009.  The Economist had the figure 58 million but the winning entry sent me this from Usuable NZ:

In October 2009, unique visitors numbers were:

1. Facebook = 128,940,004 (+188.67% from 1 year ago)
2. Myspace = 49,903,567 (-9.18% from 1 year ago)
3. Twitter = 23,042,455 (+577.92% from 1 year ago)

Lies, darned lies and statistics!!

 

The Financial Services Club is sponsored by:

 
For details of sponsorship email us.

Just saw this Dilbert from last month:

If you ever needed a business case for mobile banking, this is it.

Everyone's getting real excited about Jack Dorsey, the co-founder of Twitter, and his new payments application for the iPhone called Square.

If you haven't seen it, here it is:

In a lengthy interview with Pymnts.com, Dorsey says: 

"We can provide a lot of things that I think have been missing in payments – specifically like around the receipt, for instance. We all get these receipts, these paper receipts, that most of the time people are just annoyed to receive because they're not really useful. So what if we could really turn the receipt into more of a publishing medium, into something that lives on and something that is actually clickable and useable, and something that just exposes the various end points of the transaction. That's exciting."

I agree and the full interview is worth a read / listen.

The thing is that Square is good for the American markets, but it is very last century because it focuses upon a card's magnetic stripe and signature for authentication.  That's the way Americans pay for things but other markets have moved away from this as it is so insecure.

For example, watching the video of how you might pay using Square, the idea of fraud pops into my head with big alert signs, probably because it would make it easy to access a person's credit card using Square.  In particular, a signature based upon scratching away with my fingernail ...

This is why so many other markets, most recently Canada, has moved over to a Chip and PIN world, leaving America languishing in the past.

That is why Square has a limited market.

Now then, if Mr. Dorsey can take the Xiring terminal and build that into Square, he could be onto something.  For example, here's Barclays guidance video for online secure payments (2:50 is critical point here, the Xiring terminal):

Or maybe it's just something as simple as combining Square with text message alerts to the credit card holder every time a Square payment is made.

Nothing like simple solutions to complex problems, aren't there?

I chaired a dinner last night on remittances and it was pretty interesting.

The term ‘remittances’ is generally used to refer to foreign workers sending money home and represents major GDP for many countries. For example, Tonga’s remittances represent 40% of the country’s GDP, Samoa’s is 25%, Jamaica’s is over 20% and the Philippines 10%.

This is a big market and a mature one.

Equally, it is not just about migrant workers as the appetite for transferring money internationally has  extended far beyond itinerant workers to a vast and diverse cross-section of senders and receivers.

Some senders are using lo-tech systems like Hawala, whilst others are heavily linked via hi-tech mobiles ... meanwhile receivers are the same, with everyone assuming they receive through human interfaces and yet, if you study this area closely, more and more is being enabled via mobile.

For example, in the Philippines, SMART and Globe Telecom have been running riot in the remittances space for years:

• SMART is the leading mobile operator in the Philippines with over 25 million subscribers, and has been offering an SMS-based remittance service known as “SMART Padala” since 2004. This service allows expatriates to deposit money with partnering banks in areas where high concentrations of Filipinos live, such as Hong Kong, Yokohama, and Abu Dhabi, and to specify the SMART subscriber in the Philippines who is to receive the money. The service sends a text message to both the sender and the recipient, notifying them that the money has been transferred. The recipient can then use his/her mobile account to specify the desired withdrawal amount and pick it up at a partnering institution in the Philippines.

• The Philippines’ second mobile operator, Globe Telecom, offers a similar service known as G-Cash. At participating remittance companies in the US, the UK, Australia, and Taiwan, Filipino workers can send money via an SMS message to Globe subscribers in the Philippines. The recipient can pick up the cash from any Globe Telecom store by showing his mobile phone (with the SMS message) and a form of personal identification.

And if you wonder whether low-income folks want mobile money, then this is the place to look. For example, a study by the microfinance and remittance focused organisation CGAP found that targeting low income users could succeed.

“Philippines is known as the texting capital of the world but we were working in provinces that were poorer and where literacy levels were lower than the national norm. What we found is true in most markets globally: younger people whose social lives involve being connected via cell phones and people with exposure to using computers are more comfortable using cell phones to begin with.”

The result is that 80% of money movements in the Philippines is now made electronically. A decade ago, 80% would have been physical movements of cash. That’s transformational and is why one of the folks at the table said that: “if you don’t know what is happening with technology these days, then you’ve lost the plot”.

This increase in access to electronic and formal channels for money transfer, rather than physical and informal channels, is rapidly changing the dynamics of connectivity and funding.

For example, microfinance is now becoming a major focal point, as is financial inclusion, and it amazed me that everyone talked about mobile for money transfer during our discussion but no-one talked about social networks. And when I did raise the subject of Kiva as a social lending microfinance service, one of the bankers asked me: “what’s Kiva?”  Surely, being in this space, banks should know about these developments?

Another said the lack of commentary on social media and microfinance was more of a reflection of the fact that young people use social networks and the average age of a remittance sender and receiver is around 37.

I then added that the average age of a Facebook user is 42 and Twitter users are generally over 35s.

Silence.

“if you don’t know what is happening with technology these days, then you’ve lost the plot”

The nature of networks, mobile internet and social finance is changing all of our lives fundamentally and is as true in the remittances space as any other.

Ignoring such fundamental changes is likely to leave the existing money transfer firms dead in the wake of dynamic societal change.

For example, the likelihood of a divide between informal networks using human carriers of money versus formal networks using mobile internet is the clear path of the future. This inevitably raises critical questions for existing providers of Money Transfer such as Western Union, Travelex and the banks.

And these are the themes we explored in depth last night.

It was interesting that one theme that kept cropping up regularly was ‘trust’.

I always hear trust in the context of banking and payments, so challenged what it is that is trusted.

For example, the Philippine GCASH Service is delivered in partnership with financial institutions and banks. Why? Because, according to the banks, customers trust the service if a bank is involved.

Sure. They trust the service, not because they trust the bank but because they trust the banking infrastructure to guarantee movement of funds.

So the trust is in the system, not the individual bank or financial partner involved.

That’s one critical point.

Another is that this market – especially if we talk more about financial inclusion – involves so many players. It cannot be led by a bank or mobile operator, but needs to be led by a collaborative effort of banks, mobile carriers, governments agencies, regulators and more.

It may even need involvement of security services and police, as half the dialogue about money transfer is focused upon terrorism.

“9/11 was funded by hundreds of sub-$1,000 transactions through the money transfer markets”, was one of the comments made last night.

Sure, but is the role of a money transfer service to allow simplicity of money transfer or to monitor the pulse of terrorism?

I would argue that it is both, which is why so many organisations need a hand in these markets: global regulatory authorities, national governments, police and security forces, banks and infrastructure providers, mobile and electronic service organisations, software and technology firms ... and money transfer agents of course.

This led to an interesting debate at the end of the evening about the role of banks in money transfer markets and their interest, or lack of interest, in remittances.

One banker said that: “any dramatic change in the past will not have been noticed by the bank and any dramatic change in the future will not be noticed because these changes happen locally, not globally”.

Another reckoned it was because banks are not able to make money out of money transfers, but can lose money: “on a $1,000 transaction, we make about $10 if we’re lucky but, if you mess up, the costs are anything up to $100 million in fines and over $1 billion in lost business due to reputational damage.”

I disagreed with that view as, if banks felt that way, you wouldn’t be performing any payments processing for anyone.

In fact, a point came up that surely this was a corporate and social responsibility and that if banks are not interested in remittances today, and the market continues to grow, then at what point will banks start to wonder why they are disintermediated from these markets and wish they had been involved?

We concluded that, in order for remittances to really rock and roll in the future, it needed three things:

1. A goal: there must be some collaborative objective and mission to be reached;
2. A reason: there needs to be some skin in the game and value returned for all players;  and
3. A cause: there needs to be a common enemy to cause the players to do this, such as the threat of regulatory change.

With the above, then a multi-industry group could potentially be created to burst the bubble of financial exclusion and move us to a completely connected global society of commerce.

USAA: #1 for Customer Service

Great article from Bloomberg Business Week about their #1 Customer Service Champion Provider: USAA. Here are a few selected pieces from the story:

Since we first produced the list in 2007 with our research partner, J.D. Power & Associates, no other company has come close to achieving USAA's feat: a No. 1 or No. 2 spot for four years running. No fewer than 87% of respondents to J.D. Power's syndicated surveys say they will definitely buy from the company again, far higher than the average, which is just 36%. Its client retention rate? A near-perfect 97.8%

....

When Staff Sergeant Corey Mason wants to deposit a check, he doesn't use an ATM, a teller at a branch, or even a stamped envelope and deposit slip. Rather, the 37-year-old GPS systems specialist takes a picture of the check with his iPhone, uses an app to send it to his bank, and within minutes the money shows up in his account. Although he's now stationed at Fort Knox, Ky., it's the kind of service Mason knows his fellow troops in Iraq, where he served in 2004, surely appreciate. "The mail over there is extremely slow," he says. "They know what it's like."

...

Because USAA has just one physical bank branch, at its headquarters in San Antonio, deposit-by-iPhone is a logical step. (It also launched an app for Android users on Jan. 22.) Since August, more than $260 million in deposits have been made using the mobile service, as USAA's customers, whether in Camp Pendleton, Calif., or Iraq, send in checks. Giants like Bank of America are just testing a similar service.

Lieutenant Randall Blakeslee, a plans and operations officer stationed at Fort Sam Houston, Tex., is on two-hour standby to depart for Haiti, where he'll stay at least 90 days to help with relief efforts. That means his mail will be forwarded to him there, and he fully expects to use the mobile deposit service to submit checks from his job at home or when family sends him money. He already used the service to deposit checks when he was based in El Salvador. USAA is "really ahead of the game when it comes to technology," says Blakeslee, 34. "If I'm on the run, I can text a command and within seconds get a message back with my balance."

Blakeslee is referring to another high-tech service USAA rolled out in 2008 that lets its far-flung customers—a sizable number of whom are young, tech-savvy, and living paycheck to paycheck—get text messages about their account balances before, say, making a big purchase. Later in 2010, USAA is planning mobile peer-to-peer payments, which let customers e-mail or text-message money to friends or family for immediate deposit, no matter where they are at the time.

USAA was among the first to let customers initiate an insurance claim using their phones from the scene of an accident. And it soon will expand that app so policyholders can attach photos to the claim and complete the entire process via phone. By 2011 customers will even be able to attach voice recordings to their file, immediately retelling exactly what happened.

Also coming this year: a mobile car-buying service that lets customers standing at a dealership snap an iPhone pic of a vehicle's VIN number and instantly get back insurance quotes, loan terms, and pre-negotiated rates at approved dealerships. "The idea is you can turn that phone around to the salesman," says Bob Otis, USAA's vice-president for auto product management, "and say 'this is the price I'm going to pay.' "

If you want to know more about the USAA iPhone app, Net Banker has written up a great overview.

 

Social Media Survey

Brett King, author of the new book Bank 2.0 - which I can recommend to those of you working with social media in finance as a focus – has worked with me in the past few weeks, analysing the inital and general results from our social media survey.

Almost 450 folks responded to the survey (thank you all) and here are a few fast facts:

• the majority of the participants would participate in social media before making a decision on a financial service provider

• 93% of participants consider social networking will be worthwhile or critical for banks in the next five years

• 78% said social media is worthwhile or critical for corporate banking relationships today

• the majority of customers would go first to independent community discussions before coming to the brand itself

• Facebook and Twitter scored as the highest value social media channels for retail banking engagements

• LinkedIn, Blogs and Privately Managed Online Communities scored as the highest value social media channels for business interactions

• 74% said their use of social media organizationally will increase over the next two years, whilst only 1% said it would decrease

For the full 30-page report analysis:

Our conclusions

93 per cent of the 443 respondents to the Financial Services Club survey indicated that a focus on social media would be essential to the future of financial institutions over the next five years. Only 1 per cent of the survey group said that they feel their institution would be likely to decrease their use of social media in the next two years...only 1 per cent! All indications are that this is a hot topic for pretty much every service organization out there which is surprising as so few firms are doing anything about it!

Adoption rate of social media is scary. Two years ago Twitter was unheard of. Although Twitter started beta testing their concept in 2006, it is largely agreed that it didn’t formally launch till April 2007. Since then Twitter has taken off by storm – globally, in the USA and in Australia, Twitter ranks as the 12th most popular website by traffic, in the UK it ranks in the top 10, and in most of the EU it ranks in the top 30 or 50 websites. It took Facebook 4 years to achieve the same impact; so social media adoption is definitely speeding up, not slowing down.

Given the rate at which Facebook, Twitter and other such social networking sites have impacted popular culture, it should come as no surprise that financial service providers are starting to think about integrating social media into their business. However, the path to integration of these new media tools into the institution is a tough challenge. Firstly, organizations understand that this is an issue requiring total commitment across the organization, but achieving such is difficult because finding someone who can garner that support is a challenge. Secondly, brands in general are starting to understand that social media is a medium they can’t ‘spin’ – that is customers are largely in control – and that is worrying, particularly in the current environment where FIs are facing significant perception challenges at large.

The real conclusions of our research show that individually we know that it is inevitable that social media will be integrated into our business, but our organizations are looking for direction. The difficulty is that there is no one size fits all solution. Each of the popular social networking sites works in different ways, so we need strategies that reflect this. The survey showed, for example, that LinkedIn is a far better tool for business-to-business discussions and for promotion of services to professional individuals, such as priority banking and wealth management. For general brand marketing, Facebook is an effective tool, but our respondents wouldn’t use Facebook for banking contacts or LinkedIn for private and personal socializing. So banks must target effectively if they are to get the socialization of finance right. The strategy needs to be localized and involves pay-per-click embedded advertising as well as sponsored groups and consumer support.

Twitter as a tool is an excellent research tool. We would say that this medium in its current form would probably yearn more data than your best of breed focus groups and customer satisfaction surveys if it can be harnessed correctly. When it comes to Twitter it is all about listening. Our survey showed that consumers would use social media first to ask other customers about their experience with your brand, rather than engaging with your brand directly.

The survey shows the biggest missed opportunities for banks and financial service providers are more in respect to their own properties. Banks need to be using blogs to give more of their own voice to the social discussions, along with privately owned social networks embedded into the customer website experience. If you are not sure what privately owned social networks mean, think say Amazon’s product recommendations and rating system, PayPal’s Blog, and Wells Fargo’s Stagecoach Island?

Our survey essentially shows that most banks are missing a key development in customer engagement – both at the consumer and, more importantly, at the corporate level – by not deploying and utilizing this media effectively. For example, respondents are familiar with some of the key bank provided B2B networks, such as those from Bank of America and HSBC, but these examples are few and far between. This is the case even though most consumers and corporations feel this is critical to the future!

There needs to be an immediate and concerted effort to integrate social media into your organization today. More than that, this needs to be a cross-discipline, multi-department effort and it’s going to be difficult, but not necessarily expensive. If used properly, the bank will improve delivery, revenue and customer engagement significantly.

For the full 30-page report analysis:

Mobile delusions

Interesting article in this week’s Marketing Magazine about mobile marketing.

It tries to break open a few myths that even the delusional Finanser believed.

Myth #1: Most people are using some sort of mobile internet device today

76% of UK mobile users aged over 16 don’t access the internet on their mobile.  Only 10% access the internet on their mobile daily and only 15% do so once a week.

Myth #2: Most people are interested in using a mobile internet service

60% of UK mobile users aged over 16 claim to own a phone that can’t access the internet and, of those, only 30% are interested in getting an internet-enabled mobile phone.

Myth #3: If they had the handsets, then usage will follow

Of the 40% of mobile users who can access the internet 31% have never used an internet mobile service, 8% are lapsed users (they tried to use a mobile internet service but gave up) and 24% use a mobile internet service less than once a week.

And there was me thinking everyone had an iPad these days.

The Amazing World of Social Connectivity

It's been a while since I did a numbers post on social media, but it's time for an update and there's a great supplement in this week’s Economist discussing all things social networking.

It's well worth reading the whole 20-page report but, if you don’t have time, here are the stats (always useful).

Social Audiences

• Facebook is the globe’s largest online social network with over 350 million users.
• Facebook’s audience is bigger than any TV network that has ever existed on Earth.
• Were it a nation, Facebook would be the world’s third most populous after China and India.
• 70% of its audience is outside the United States.
• Twitter had 58 million web visitors in October 2009 ... or is it 23 million?  See end of this entry.
• Facebook took almost five years to get its first 150m users, but just eight months to double that number.
• LinkedIn has over 58 million members, and it took 16 months to reach its first million users whereas the most recent additional million came on board in only 11 days.

Mobile Social

• eMarketer estimate that over 600 million people will use their phones to tap into social networks by 2013, a more-than-fourfold increase on last year’s 140 million.
• Facebook has 65 million mobile users.

Social Content

• Facebook’s users post over 55 million updates a day and share more than 3.5 billion pieces of content with one another every week.
• Over 2.5 billion photos a month are uploaded to Facebook, making it one of the largest photo-sharing sites on the web.
• Facebook has one engineer for every 1.2 million users.
• Facebook has over 1 million developers creating software for it and its online directory contains over 500,000 apps.
• Twitter has spawned over 50,000 apps, including offerings from firms such as Twitpic, which lets people post photos to their Twitter feeds, and Twitscoop, which highlights popular topics being talked about on the service at any moment.

Social Revenues

• Facebook does not reveal numbers, but its revenues last year are thought to have been at least $500m and quite possibly more, which helped it to turn cash-flow positive in mid-2009.
• Although user numbers were sharply up last year, the social-networking industry’s revenues in America, its biggest advertising market, rose only by a modest 4% to $1.2 billion according to eMarketer, a market-research firm.
• That was still an achievement, because the total online advertising market shrank in 2009 and MySpace revenues, the largest share, are thought to have fallen last year.
• This year eMarketer expects revenues to grow by over 7%.
• ComScore found that one in five adverts viewed by American web users last June ran on social-networking sites, with MySpace still accounting for the biggest chunk of the total.

Social Games

• In 2008 Tencent, the Chinese ‘Facebook’ which runs QQ coins, listed on the Hong Kong Stock Exchange and reported revenues of just over $1 billion, with $720m coming from online gaming and sales of items such as digital swords and other virtual goods.
• Ning, another social networking tool, is targeting gifts rather than games and launched an initiative in October 2009 that allows people to sell customised digital items to their members. These cost anything from 50 cents to $10, and over 400,000 are being exchanged every month, splitting the profit equally with its customers.
• In the game “Sorority Life”, users complained about the lack of virtual men to date so Playdom quickly introduced some last November – some 10 million of the boyfriends were promptly snapped up with a few players buying as many as 500 boyfriends each; some paid for their digital darlings with virtual credits won in the game, but others stumped up over $5 a time for their beaux.
• Although Asia remains by far the biggest market for digital knick-knacks, Inside Network, a research firm, has estimated that sales of virtual wares in America on many different kinds of websites reached $1 billion last year and could grow to $1.6 billion in 2010.
• ThinkEquity, an investment bank, reckons that revenues in America from social games could hit $2.2 billion by 2012, a big leap from last year’s $375m million.
• “The best virtual goods have real currency,” says Mark Pincus who runs Zynga, on eof the biggest gaming firms on Facebook.

Social Marketing

• A survey of 1,000 heavy users of social networks and other digital media conducted in August 2009 by Razorfish, found that 44% of those following brands on Twitter said they did so because of the exclusive deals the firms offered to users.
• One in five tweets mention specific brand names in the updates.
• O2 found that 17% of Britain’s small businesses were using Twitter to attract new customers and some believe they have saved around £5,000 ($8,000) a year from other forms of marketing by doing so.

Social Hiring

• US Cellular, a telecoms company, says it saved over $1m last year by using a LinkedIn system that produced good candidates for its jobs faster than traditional recruitment channels.
• A survey by CareerBuilder.com of about 2,700 executives in America last year found that 45% of them looked at job candidates’ social-network pages as part of their research, and more than a third of those had unearthed information there that put them off hiring someone.

Social Not-working

• A survey of 500 small businesses in America conducted by Citibank last October found that most of them had not used online networks at all because they thought they would be a waste of time.
• Morse estimate that personal use of social networks during the working day was costing the British economy almost £1.4 billion ($2.3 billion) a year in lost productivity.
• Nucleus Research, an American firm, concluded that if companies banned employees from using Facebook while at work, their productivity would improve by 1.5%.
• A survey of 1,400 CIOs by Robert Half Technology last year found that only 1/10th gave employees full access to networks during the day, and many were blocking Facebook and Twitter altogether.

If you like this sort of thing, then please join our survey on social media in finance.

Click to take the survey: https://www.surveymonkey.com/s/NXWW2B3

The survey is closing very soon, so feel free to join the 425 professionals from banks, corporations, consultancies, governments and the professions who have responded so far.  Results published at the end of the month.

Meanwhile, if you like this sort of thing a lot, then here’s a few more social media numbers, this time from this year’s World Economic Forum (WEF):

• WEF reached a worldwide audience of 430 million readers online through the use of social networks this year.
• Facebook ran real-time pulses, polling over 200,000 people and bringing their views into the discussions.
• WEF has over 6,300 fans on Facebook.
• Webcasts of public sessions on Livestream reaching a cumulated audience of over 210,000 viewers.
• News conferences were seen by over 70,000 people, and they could put questions to panellists via Twitter and Facebook.
• Over 250 participants and 120 journalists continuously sharing their impressions on Twitter
• A Twitterwall allowed participants to see a running micro-commentary on the meeting as it progressed.
• ‘Davos’, ‘WEF’ and ‘WorldEconomicForum’ were mentioned 30,000 times on Twitter.
• 1,551,130 people are following the Forum on Twitter (http://twitter.com/davos)
• The Davos Debates on YouTube (http://www.youtube.com/davos) have been watched over 600,000 times.

 

UPDATE: I ran a competition related to this entry asking folks to say how many visitors went to twitter in October 2009.  The Economist had the figure 58 million but the winning entry sent me this from Usuable NZ:

In October 2009, unique visitors numbers were:

1. Facebook = 128,940,004 (+188.67% from 1 year ago)
2. Myspace = 49,903,567 (-9.18% from 1 year ago)
3. Twitter = 23,042,455 (+577.92% from 1 year ago)

Lies, darned lies and statistics!!

 

The Financial Services Club is sponsored by:

 
For details of sponsorship email us.

Dilbert's business case for mobile

Just saw this Dilbert from last month:

If you ever needed a business case for mobile banking, this is it.

Twitter's Jack Dorsey reinvents US card payments

Everyone's getting real excited about Jack Dorsey, the co-founder of Twitter, and his new payments application for the iPhone called Square.

If you haven't seen it, here it is:

In a lengthy interview with Pymnts.com, Dorsey says: 

"We can provide a lot of things that I think have been missing in payments – specifically like around the receipt, for instance. We all get these receipts, these paper receipts, that most of the time people are just annoyed to receive because they're not really useful. So what if we could really turn the receipt into more of a publishing medium, into something that lives on and something that is actually clickable and useable, and something that just exposes the various end points of the transaction. That's exciting."

I agree and the full interview is worth a read / listen.

The thing is that Square is good for the American markets, but it is very last century because it focuses upon a card's magnetic stripe and signature for authentication.  That's the way Americans pay for things but other markets have moved away from this as it is so insecure.

For example, watching the video of how you might pay using Square, the idea of fraud pops into my head with big alert signs, probably because it would make it easy to access a person's credit card using Square.  In particular, a signature based upon scratching away with my fingernail ...

This is why so many other markets, most recently Canada, has moved over to a Chip and PIN world, leaving America languishing in the past.

That is why Square has a limited market.

Now then, if Mr. Dorsey can take the Xiring terminal and build that into Square, he could be onto something.  For example, here's Barclays guidance video for online secure payments (2:50 is critical point here, the Xiring terminal):

Or maybe it's just something as simple as combining Square with text message alerts to the credit card holder every time a Square payment is made.

Nothing like simple solutions to complex problems, aren't there?

Remittances and the need for financial inclusion

I chaired a dinner last night on remittances and it was pretty interesting.

The term ‘remittances’ is generally used to refer to foreign workers sending money home and represents major GDP for many countries. For example, Tonga’s remittances represent 40% of the country’s GDP, Samoa’s is 25%, Jamaica’s is over 20% and the Philippines 10%.

This is a big market and a mature one.

Equally, it is not just about migrant workers as the appetite for transferring money internationally has  extended far beyond itinerant workers to a vast and diverse cross-section of senders and receivers.

Some senders are using lo-tech systems like Hawala, whilst others are heavily linked via hi-tech mobiles ... meanwhile receivers are the same, with everyone assuming they receive through human interfaces and yet, if you study this area closely, more and more is being enabled via mobile.

For example, in the Philippines, SMART and Globe Telecom have been running riot in the remittances space for years:

• SMART is the leading mobile operator in the Philippines with over 25 million subscribers, and has been offering an SMS-based remittance service known as “SMART Padala” since 2004. This service allows expatriates to deposit money with partnering banks in areas where high concentrations of Filipinos live, such as Hong Kong, Yokohama, and Abu Dhabi, and to specify the SMART subscriber in the Philippines who is to receive the money. The service sends a text message to both the sender and the recipient, notifying them that the money has been transferred. The recipient can then use his/her mobile account to specify the desired withdrawal amount and pick it up at a partnering institution in the Philippines.

• The Philippines’ second mobile operator, Globe Telecom, offers a similar service known as G-Cash. At participating remittance companies in the US, the UK, Australia, and Taiwan, Filipino workers can send money via an SMS message to Globe subscribers in the Philippines. The recipient can pick up the cash from any Globe Telecom store by showing his mobile phone (with the SMS message) and a form of personal identification.

And if you wonder whether low-income folks want mobile money, then this is the place to look. For example, a study by the microfinance and remittance focused organisation CGAP found that targeting low income users could succeed.

“Philippines is known as the texting capital of the world but we were working in provinces that were poorer and where literacy levels were lower than the national norm. What we found is true in most markets globally: younger people whose social lives involve being connected via cell phones and people with exposure to using computers are more comfortable using cell phones to begin with.”

The result is that 80% of money movements in the Philippines is now made electronically. A decade ago, 80% would have been physical movements of cash. That’s transformational and is why one of the folks at the table said that: “if you don’t know what is happening with technology these days, then you’ve lost the plot”.

This increase in access to electronic and formal channels for money transfer, rather than physical and informal channels, is rapidly changing the dynamics of connectivity and funding.

For example, microfinance is now becoming a major focal point, as is financial inclusion, and it amazed me that everyone talked about mobile for money transfer during our discussion but no-one talked about social networks. And when I did raise the subject of Kiva as a social lending microfinance service, one of the bankers asked me: “what’s Kiva?”  Surely, being in this space, banks should know about these developments?

Another said the lack of commentary on social media and microfinance was more of a reflection of the fact that young people use social networks and the average age of a remittance sender and receiver is around 37.

I then added that the average age of a Facebook user is 42 and Twitter users are generally over 35s.

Silence.

“if you don’t know what is happening with technology these days, then you’ve lost the plot”

The nature of networks, mobile internet and social finance is changing all of our lives fundamentally and is as true in the remittances space as any other.

Ignoring such fundamental changes is likely to leave the existing money transfer firms dead in the wake of dynamic societal change.

For example, the likelihood of a divide between informal networks using human carriers of money versus formal networks using mobile internet is the clear path of the future. This inevitably raises critical questions for existing providers of Money Transfer such as Western Union, Travelex and the banks.

And these are the themes we explored in depth last night.

It was interesting that one theme that kept cropping up regularly was ‘trust’.

I always hear trust in the context of banking and payments, so challenged what it is that is trusted.

For example, the Philippine GCASH Service is delivered in partnership with financial institutions and banks. Why? Because, according to the banks, customers trust the service if a bank is involved.

Sure. They trust the service, not because they trust the bank but because they trust the banking infrastructure to guarantee movement of funds.

So the trust is in the system, not the individual bank or financial partner involved.

That’s one critical point.

Another is that this market – especially if we talk more about financial inclusion – involves so many players. It cannot be led by a bank or mobile operator, but needs to be led by a collaborative effort of banks, mobile carriers, governments agencies, regulators and more.

It may even need involvement of security services and police, as half the dialogue about money transfer is focused upon terrorism.

“9/11 was funded by hundreds of sub-$1,000 transactions through the money transfer markets”, was one of the comments made last night.

Sure, but is the role of a money transfer service to allow simplicity of money transfer or to monitor the pulse of terrorism?

I would argue that it is both, which is why so many organisations need a hand in these markets: global regulatory authorities, national governments, police and security forces, banks and infrastructure providers, mobile and electronic service organisations, software and technology firms ... and money transfer agents of course.

This led to an interesting debate at the end of the evening about the role of banks in money transfer markets and their interest, or lack of interest, in remittances.

One banker said that: “any dramatic change in the past will not have been noticed by the bank and any dramatic change in the future will not be noticed because these changes happen locally, not globally”.

Another reckoned it was because banks are not able to make money out of money transfers, but can lose money: “on a $1,000 transaction, we make about $10 if we’re lucky but, if you mess up, the costs are anything up to $100 million in fines and over $1 billion in lost business due to reputational damage.”

I disagreed with that view as, if banks felt that way, you wouldn’t be performing any payments processing for anyone.

In fact, a point came up that surely this was a corporate and social responsibility and that if banks are not interested in remittances today, and the market continues to grow, then at what point will banks start to wonder why they are disintermediated from these markets and wish they had been involved?

We concluded that, in order for remittances to really rock and roll in the future, it needed three things:

1. A goal: there must be some collaborative objective and mission to be reached;
2. A reason: there needs to be some skin in the game and value returned for all players;  and
3. A cause: there needs to be a common enemy to cause the players to do this, such as the threat of regulatory change.

With the above, then a multi-industry group could potentially be created to burst the bubble of financial exclusion and move us to a completely connected global society of commerce.