The Financial Services Club's Blog

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!!

 

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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.

Announcing our latest Research Survey

Further to previous surveys conducted by the Financial Services Club, we are pleased to announce our first research for 2010 focused upon Social Media in Finance.

Social media and social networking have risen rapidly to be part of the main agenda of most corporations and banks, where do you fit? 

Are you banning employees from using Facebook at work due to productivity issues, or do you actively encourage the use of Facebook between employees and customers?

Do you wonder whether tweetups and twitterati are something to do with aviaries or do you regularly hashtag and followfriday.

Where do you fit?

How does your organisation perceive online communities, security, access and knowledge sharing in open networks?

Do you engage with your bank or software provider through such media?

In order to answer these questions and more, we ask you to join our very short online survey.

Just click here to participate (there are only 14 questions in the core of the survey).

Why join in?

First, you will all get a copy of any results of the research.

Second, one person will win a free membership of the Financial Services Club for a year, whilst three people will get a copy of the Chris Skinner book of their choosing.

So that’s worth your time surely?

For example, Guy Eden, Head of Product Management for Information Services Business Development at the London Stock Exchange won the membership to the Financial Services Club for our last survey; whilst Phil Millard of Fujitsu, Chris Purrington of Cohesive FT and Tommy Anderson of AIB all won copies of Chris Skinner's books.

If you would like to win in our 2010 series of surveys, then enter our newest one now!

Click here to take the survey.

Oh yes, if you are interested, here are the results of our SEPA and PSD research and Cloud Computing research.

Zopa members' lending near £2 million a day

Just stumbled across the website Lendify - a tracking system for lending on Zopa UK, the P2P social lending service.

Here's the chart for the last 28 days (doubleclick to enlarge):

And here are the numbers:

Wed 23rd December
Total Offered £1,784,930 (+£178,090)
7 Day Demand £3,677,500 (+£150,400)
Avg Lender Rate 11.1% (-0.08%)

Tue 22nd December
Total Offered £1,606,840 (+£70,180)
7 Day Demand £3,527,100 (+£44,440)
Avg Lender Rate 11.1% (-0.09%)

Mon 21st December
Total Offered £1,536,660 (-£175,910)
7 Day Demand £3,482,660 (-£123,200)
Avg Lender Rate 11.2% (+0.07%)

Sun 20th December
Total Offered £1,712,570 (-£153,020)
7 Day Demand £3,605,860 (-£187,000)
Avg Lender Rate 11.1% (+0.04%)

Sat 19th December
Total Offered £1,865,590 (+£197,030)
7 Day Demand £3,792,860 (-£268,400)
Avg Lender Rate 11.1% (-0.09%)

Fri 18th December
Total Offered £1,668,560 (+£217,450)
7 Day Demand £4,061,260 (-£910,900)
Avg Lender Rate 11.2% (-0.03%)

Thu 17th December
Total Offered £1,451,110 (+£164,870)
7 Day Demand £4,972,160 (-£62,000)
Avg Lender Rate 11.2% (-0.04%)

Fascinating ...

(Hattip to the Pragmatist)

Alternatives to Facebook ...

Following the news yesterday about Facebook now reaching 350 million users, I love this chart from the Focus business news service of social network sizes and the years they began (doubleclick to see larger version) ...

(Stagecoach) Islands in the Stream

I've blogged a lot about Wells Fargo's innovations in the past.

This is because they are one of the banks in the stream of innovation that comes out of Silicon Valley.  This is why they are great proponents of social media:

• Blogging: FIVE corporate blogs.
• Online video:  YouTube channel.
• Social networks:  MySpace profile for Cassie, from Stagecoach Island. 
• Facebook Stagecoach Island application and fan page.
• Virtual worlds: Stagecoach Island.

Stagecoach Island is one of their key platforms in this space.

Stagecoach Island was first piloted in September 2005 to provide financial education in a fun and engaging way.

Initially, it was piloted in Second Life but, after some issues over virtual hackers and bombers, Wells Fargo moved Stagecoach Island onto their own platform in 2006.

Three years later, it is still going, with its own community, blog and facebook fanbase.

So I was intrigued yesterday when I saw that they’ve just launched the Stagecoach Island University (the official launch was on November 30th).

What’s this I wondered?

And so I asked Tim Collins, who looks after Experiential Marketing at Wells Fargo, to tell all. I also gave him a hard time over some of the sceptics’ views on the value of these developments.

Here’s our chat:

Tim: We continue to be happy with the results of Stagecoach Island and invest in new features every year. We have tens of thousands of members and see double digit growth in membership every year. Engagement is also growing, as our session lengths are approaching an hour.

We are about to launch Stagecoach Island University, which was created in partnership with Educational Financial Services and WF Foundation. The “Admissions” module expands the Stagecoach Island curriculum to include saving for college, financial aid, tips for budgeting and information on funding post secondary education. The “University” content provides direct access to the entire young adult and adult sections of Hands on Banking in a virtual space.

To add a user incentive component and incorporate real world lessons, once members complete their university experience and pass a comprehensive exit exam, they will be eligible for a new tier of “high-level” jobs within Stagecoach Island, each of which requires the completion of Stagecoach Island University.

Chris: In other words, by completing the Stagecoach Island University examinations, users become more knowledgeable about their finances and use of money, and should be better capable of managing budgets, borrowings and investments.

Tim: That’s right.

Chris: But the sceptics out there always ask me the same questions about this stuff.

Tim: Such as?

Chris: Well, the first question would be: why would a bank keep investing in Virtual Worlds as most virtual world experiments, such as all the banking trials in Second Life, are dead and gone. Isn’t this a broken business model?

Tim: I don’t think it’s fair to compare Stagecoach Island to Second Life. It’s like comparing a private community to the entire blogosphere. Stagecoach Island is a private community with an educational purpose. Second Life has a generalist business model in a world that is increasingly specialized. They are adapting, but since their data security breach, I doubt many financial services companies will want to engage with them.

Chris: OK, even if this is worth doing, aren’t all the users young, zero profit students, or are there any real people on Stagecoach Island?

Tim: Our average age for a user is 23 years old, but we have learned that our members are much more profitable than your average 23 year old. They have higher balances, more products, and will recommend us to their friends. And did I mention their great dental hygiene :-)

Chris: Can you provide any proof points that show this to be a worthwhile venture?

Tim: I think I just did.

Chris: Maybe, but every time I mention what you’re doing to others, those are the questions I get.

Tim: I’m not surprised. Bankers are a literal audience. They want to see a direct cause and effect. If they spend a dollar on marketing today, how much will I get in sales and profits tomorrow?  Experiential Marketing is different. It doesn’t directly support the sales process. Rather, it’s the warm up act for the sales process.

If we invest the time and effort to educate consumers, whether they be our customers or not, they will think kindly of us when it comes time to doing their banking. It will make the sales process easier, and we will make more money.

We have proved this with project after project....social media as a prime example. I think you are getting these questions because many companies don’t have the patience.

Chris: Thanks Tim, and good luck with it all.

 

The Finanser is sponsored by Vocalink and Cisco:
  
For details of sponsorship email us.

Facebook is now bigger than America

If you didn’t spot it, Facebook just reached 350 million users.

That’s a lot.

In fact, Facebook is now bigger than the USA (population: 307 million) and would be the third largest country on the planet if it was a country.

Not bad for a website launched on February 4th 2004.

To celebrate, founder Mark Zuckerberg wrote an Open Letter to the Facebook community today.

What is interesting is that, after the recent use of Facebook for criminal purposes, they are changing the privacy model completely.

Here is the letter in full, in case you missed it:

It has been a great year for making the world more open and connected. Thanks to your help, more than 350 million people around the world are using Facebook to share their lives online.

To make this possible, we have focused on giving you the tools you need to share and control your information. Starting with the very first version of Facebook five years ago, we've built tools that help you control what you share with which individuals and groups of people. Our work to improve privacy continues today.

Facebook's current privacy model revolves around "networks" — communities for your school, your company or your region. This worked well when Facebook was mostly used by students, since it made sense that a student might want to share content with their fellow students.

Over time people also asked us to add networks for companies and regions as well. Today we even have networks for some entire countries, like India and China.

However, as Facebook has grown, some of these regional networks now have millions of members and we've concluded that this is no longer the best way for you to control your privacy. Almost 50 percent of all Facebook users are members of regional networks, so this is an important issue for us. If we can build a better system, then more than 100 million people will have even more control of their information.

The plan we've come up with is to remove regional networks completely and create a simpler model for privacy control where you can set content to be available to only your friends, friends of your friends, or everyone.

We're adding something that many of you have asked for — the ability to control who sees each individual piece of content you create or upload. In addition, we'll also be fulfilling a request made by many of you to make the privacy settings page simpler by combining some settings. If you want to read more about this, we began discussing this plan back in July.

Since this update will remove regional networks and create some new settings, in the next couple of weeks we'll ask you to review and update your privacy settings. You'll see a message that will explain the changes and take you to a page where you can update your settings. When you're finished, we'll show you a confirmation page so you can make sure you chose the right settings for you. As always, once you're done you'll still be able to change your settings whenever you want.

We've worked hard to build controls that we think will be better for you, but we also understand that everyone's needs are different. We'll suggest settings for you based on your current level of privacy, but the best way for you to find the right settings is to read through all your options and customize them for yourself. I encourage you to do this and consider who you're sharing with online.

Thanks for being a part of making Facebook what it is today, and for helping to make the world more open and connected.

Mark Zuckerberg

Zombie money in a chainsaw hell

I recently discovered that friends were killing me.

Literally ripping me to shreds with a chainsaw.

And it hurt.

After all, I am meant to be the Zombie Priest in the Church of Goth, and no-one had beaten me before.

And where did that chainsaw come from?

I was mad.

In fact, I was steaming.

So I vowed to get a chainsaw myself.

Problem is that I would have to turn at least 40 friends into Zombies too (note: not Zombie Bankers), in order to earn enough points to buy a chainsaw.

And so far, I had invited over 200 mates to become Zombies and only 12 had bothered to do so.

How would I get 40 of them to turn?

It was a problem.

And I was still mad.

In fact, I was boiling.

Then I found Spare Change.

Spare Change sits on top of PayPal (which sits on top of the banking system) and, for a small fee for each transaction, allows me to make microtransactions and buy things to spice up my favourite Facebook apps.

Oh, thank heavens for Spare Change.

For just $5, I could buy a chainsaw. So I spent $50 and bought two chainsaws, plus a machete, shotgun, uzi, meat cleaver and bazooka for good measure.

Forget turning mates into Zombies ... just kill them.

Now, I am the Zombie Pope in the Cathedral of Death.

And Richard, the idiot who attacked me with a chainsaw, is dead meat.

Now you may wonder what the hell I am talking about, but the above is a real incident that occurred on Facebook last year, after I signed up for the game promotion of Resident Evil.

And Spare Change is a simple little Facebook app, that allows me to buy things in Facebook gameworlds. I blogged about this app, and others such as the QQ coin, a year ago if you want to know more.

And these gameworlds are growing into big business.

According to current estimates, the worldwide market for virtual goods is expected to approach $5 billion this year.

That’s $5 billion worth of exchanging stuff that doesn’t exist ... but it’s fun.

And it’s also incredibly quick to build a business.

For example, within a week of its launch, game company Zynga's new Café World game in Facebook had garnered ten million players.

Farmville, another game from Zynga that started this summer, already has over 60 million monthly users.

And analysts reckon that about a tenth of these players buy stuff so, if a tenth of Zynga’s 60 million farm players buy a cow or tractor for $5 this month, then Zynga are banking $3 million a month.

That is why another social game developer, Playfish, was acquired by the more traditional computer games developer, EA Games, for $275 million in cash last week.

This is big stuff.

Even bigger is the idea of using virtual worlds and social gaming to bling your profile.

That’s how China’s QQ coins started and soon became a phenomena. Today, QQ international boasts over a billion users and more than 500 million active monthly users. That’s four times the number of users of Facebook and six times more active users than PayPal!

Add on the microtransactions of iPhone apps, with over 1.5 billion iPhone downloads and over 100,000 apps now developed, and we start to see the world changing.

After all, if I charge $0.01 per download for an iPhone app, and get a 100 million downloads ... that makes me a millionaire. And with the SuBo effect, where a woman (Susan Boyle) appears in a UK talent show and is watched by over 300 million people globally via the internet in less than two months, 100 million downloads is not unreasonable for a good app.

These experiences, along with others such as Second Life’s Linden Dollar economy, indicate that the future of money is not money itself. We do not wake up and think about making payments and buying money, we think about waking up and thinking I’m going to use my money to buy something.

So money is purely there for the value exchange.

And if that value exchange can be achieved by using virtual coins, fantastic.

Conclusion: expect the world of the next decade to morph into a myriad of payment mechanisms that supplement, supplant and supply fun and games on top of the traditional banking network.

Oh yes, and expect billions of microtransactions to occur person-to-person globally.

 

The Finanser is sponsored by Vocalink and Cisco:
  
For details of sponsorship email us.

Mashup technologies in real-world banking

For quite a while, I've been trying to find some real-world examples of mashup technologies in banking.  I use these services extensively in other areas of my life - on this blog (the widget for search for example), my Facebook account (feeds and videos), my Twitter account and more.

However, I've never found a bank that is using these technologies in the real-world.

I have found some examples internally for services, and in some corporate to bank services but real-world with consumers?  No, although I suspect there are a few out there such as BBVA.

But I have found an IT provider who gave me a great example as to how this might work.

Here is their mashup mockup.

OK, imagine you're looking through your bank statement online and you spot a dodgy transaction (double-click the image to enlarge) ...

Mmmm ... don't like the look of that cash transaction at an ATM, let's have a look at my last few card transactions.

Here's the real reason I'm posting this.  Now we see the card transactions integrated with Google Maps, context based advertising and other services to make the card experience part of a mashup of my web experience.

In this case, I can now click to check that ATM transaction using Google maps:

 

and remind myself as to whether I was really there or not.

Love it!

And thanks to Toni Plana for the screenshots.

*

The Finanser is sponsored by VocaLink and Cisco:

For details of sponsorship email us

Update from First Direct's CEO on their social experiment

Matt Colebrook, First Direct's Chief Executive, has just written his initial observations about their social media experiment.  Interesting words:

“It’s now over four weeks since we launched our pioneering ‘live’ site and we’ve been overwhelmed with how it’s been received, over 2000 comments to date on a wide variety of topics.

“We’ve also seen a huge amount of positive comments about the site in the press, online and in social media. People have described it as brave. They might be right. What’s undeniable is that it's been the right thing to do if we’re to engage with our customers and understand how they feel towards us.

“We’re starting to analyse the thoughts, concerns and suggestions raised with a view to seeing where we might make improvements to the service and offerings we already provide. Clearly we can’t be all things to all people.

“Indeed we won’t be able to offer everything that has been suggested. But one thing we can and will do is at least capture and digest what our customers are saying. We are also introducing a way for us to join in the conversations on ‘live’ and I will soon start to feed back more detailed responses to some of the comments being left.

“The world of social media is one that is opening up a new voice for customers – we might not always get it right but you can be assured that happy customers are at the heart of our business. It’s what differentiates us from our competitors.”

Matt Colebrook
Chief Executive

Building tomorrow’s bank

My good friend Conny Dorrestijn shared this article she wrote on teenager's views on money and banking.  I thought it so good that it's worth sharing here:

Sitting in the hotel bar of a conference I recently attended on payments, I pondered with my colleagues “Are we sure we are really building the payments infrastructure for tomorrow here?” Looking around me I saw a long grayish stream of suited men, a few women and none of particularly young age.

A glance in the mirror later that night brought the truth really home; we might feel very young, we are not young. We live in our own time capsule and although we might raise teenagers and work with people who act like them, we are mature adults with a lot of baggage called experience. Whatever we think up, whatever we create, it will be impacted by the world we knew yesterday. So with a group of people we then decided it might be fun to talk with young people to find out how they feel about money, budgeting and the role banks or others can play.

The minute I wrote the questionnaire and posted it on Twitter, an email popped up in my inbox from Morgan Stanley, who had just issued a report by a 15-year old intern on how teenagers view and use the media. My dear, it caused a huge stir in the City of London, they had six times more enquiries than with any other analyst report. Posting my survey on Twitter was my first mistake, kids don’t like it.

So back to good old email, added with some Facebook and Hyves and the responses started coming in from around the world.

In this short article I would like to give the kids, neighbours, interns, nephews and nieces a voice. Sure, the sample is limited and not entirely scientifically significant, but we just intended to get the dialogue started. The accents per region (Europe, Middle East and Africa, Asia Pacific and the US) might differ, all kids consented that you need money to live, to pay for food, college, nice stuff and to be happy or as one aptly put it: “people need money to be happier than they already are”.

‘Cool’ banks...

We first asked what they would do with an unexpected gift of 100 US dollars. Just over half of the kids said they would buy something they had wanted for a long time; the other half would save it, either with a bank or at home in a safe place. We then moved on to asking them about ‘cool banks’, well you can just imagine how cool they think we are as industry...

“Money comes and goes in life. It’s just the circle of life” – Dominic Sean (18), Malaysia

A quarter of the kids said that we should not bother, banks are never cool; Apple and Facebook, narrowly followed by Coca Cola were then pointed out as possible cool brands to have for a bank. Having said that, when we asked what other alternatives there might be for a bank from the ones we know today, the answers were surprisingly conservative. None opted for a Telco provider as the bank, none for the supermarket, a few suggested we should form groups of people in our trusted community and thus create a bank, but most (80%) said they would only trust their money with ‘banks as we know them today’.

Payments and gizmos

When we came to the payments topic, we asked how they would like to repay a friend when they had borrowed money. With the latest findings of the Morgan Stanley research in mind, which stated amongst others that kids increasingly use their game computers to communicate, we offered a wide range of suggestions (cash, mobile banking, game computer or a bank card payment). One thing became clear, we will not live to see the cashless society become a reality in our lifetime. All teenagers are aware of PIN and card payments, but most opted for cash money (“then you know for sure it’s done....!!!!”).

“Banks never lose your money – they’d better not!!!!” – Melhem Abi (14), Lebanon

Payment through a bank card drew a look warm response and the mobile phone and gaming console did not feature at all. Having said that, we should take this point on board, unknown is unloved and teenagers only judge the stuff they experience, not the things we write and talk about.

True of false – what do they know about finance?

The second part of the survey centered on a number of true/false/not sure statements. You will be surprised at some of the feedback. I am delighted to say that despite the public moaning about kids that only worry about their image and that they don’t know the difference between value and price, I am happy to say no single respondent fell into the trap about the image of credit cards – silver, gold and platinum.

The statement “having a lot of credit cards means you are an important person” was well put in its rightful place by all. Nonsense! I was slightly surprised that still 20% of kids were not sure whether you lost your money in your internet banking account if you lost your computer.

“I want to buy games, clothes, important things like food and save for college” – Kaylee (13), United States

That sense of uncertainty was a lot higher with the mobile phone. Half of the kids were not sure if a mobile phone is safe enough for banking and 40% were convinced that a phone is not safe enough to make payments. Again, work to do when it comes to the perception of safety... However when we stated “would you switch banks if they gave you an iPhone, half were happy to jump ship.

On the topic of education, only half of the kids were convinced that borrowing money always costs money. Admittedly, this might be a mistake on my side; we did not specify that we meant borrowing from a bank, but still... Finally, nearly all respondents said that the statement that banks never lose your money was entirely false. Would they be reading the papers after all?

As stated, this article and the questionnaire were merely tipping a toe in unchartered waters. But why don’t you talk to your own teens over dinner, or at another moment when you are able to get through the one syllable answers. We had a vivid debate with a large group of 14-year old boys and found that they would be quite happy to learn to budget, but we don’t seem to teach them. They don’t like running out of their mobile phone stipend, but how can they prevent this when all the world wants to do is wet their appetite for consumption. 

“People need money to spend so our economy goes back to what it used to be – growing” – Thomas (18), Belgium

I realise more than ever that yes, personal finance and budgeting should be on the menu in late primary and secondary school and we as an industry should take this on board as well. Heaven knows, that with the current national deficits they and their children will have to budget to get through life. With some googling I found a wealth of website to help them and us with this educational task. But how to reach them? Back to the golden rules of the recent Morgan Stanley research. What’s hot? Anything with a touch screen, mobile phones with a large capacity for music, and portable devices that connect to the internet and seriously large tellies. What’s not? Anything with wires, phones with black and white screens, clunky ‘brick’ phones and devices with less than ten-hour battery life.

Worried that we now give the secret away? Don’t be. Most kids don’t read anything on paper, so this article will go perfectly unnoticed.

 

First Direct leading the social finance mainstream

For over four years, since Facebook first appeared on my radar, I've been waiting for a UK bank to really get into social media.  There have been a few attempts but nothing really mainstream.  For example, the Co-operative launched a MySpace site for Good with Money and Barclaycard did some good things, but most was a gimmick or poorly delivered. 

Generally however, UK banks are reticent when it comes to blogs, podcasts, interaction and Web 2.0.

Finally, for the first time, one gets it.

First Direct.

First Direct launched their social media newsroom in June this year ...

 

and they've been on Twitter since April 27th ...

and have 464 followers and 168 tweets as of today.

So it's great to see them launch a truly open dialogue in their Live area, which was announced in the newsroom yesterday.

"We wanted to give our customers the opportunity to talk back and let us know how they really feel about us.  With this in mind we recently launched our new acquisition campaign - "Live".  It works by taking everything that's said about us online, from over 8 million forums, blogs and social media sites, and then feeding it, live, onto our website www.firstdirect.com/live for all to see.  At the same time we also launched Talking Point - a section where customers can leave a message for us."

Viewing the Live home page, you get some nice commentary to encourage you to dialogue:

 

and it clearly highlights some of the positive views:

as well as the negative:

 

In fact they clearly demonstrate how positive or negative customers are being overall:

with + signs for positive and - for negative floating up and down the home page, in real-time we assume ...

 

So hats off to First Direct for being at the forefront of UK financial social media.  In fact, a real hats off as you can find all of this easily from their home page:

 

as, being Mr. Cynical, some would think this would be hidden away in some microsite somewhere.

Only a bank voted consistently number one by independent surveys would have such confidence to do this of course.

And, just as a reality check, I thought I should see if any other UK bank had a blog, twitter link or anything on their home page to demonstrate social interactivity.

Lloyds TSB?

Nope.

No blog or anything.

NatWest?

Nope.

No podcasts or anything there on the home page.

Barclays Bank seemed to be better as, on their homepage they have a clear area prompting customers to ask a question:

 

so I thought I would search for where's their blog?

Can't find the answer?  Contact us. 

UK banks generally don't offer anything social on their internet prescence today: no Facebook, Twitter, Blog, Podcast or even interactive live chat.

It does confirm that banks don't want to interact with customers online ... only on the telephone or in branch.

At least First Direct is demonstrating some leadership here and it will be interesting to see how their service develops as the first UK bank to be in the forefront of this space ... a bit like they were the first UK bank to lead the telephone banking revolution.

*

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EU project to track all your tweets

I stumbled across Wikileaks this week, a website that leaks all sensitive information into public domain such as the leak of the UK's Ministry of Defence document on how to stop leaks.

There's tons of fascinating stuff in there, and one of the more recent leaked documents is the European Commission's Working Package 4 (WP4) which aims to crawl all over your Facebook status updates and Twittering tweets to see if you're a terrorist or anarchist.

Here's the lowdown:

EU social network spy system brief, INDECT Work Package 4, October 4, 2009

This file, marked "confidential", describes development of an EU-funded intelligence gathering system ("INDECT work package 4") designed to comb web blogs, chat sites, news reports, and social-networking sites to in order to build up automatic dossiers on individuals, organizations and their relationships.

"The aim of work package 4 (WP4) is the development of key technologies that facilitate the building of an intelligence gathering system by combining and extending the current-state-of-the- art methods in Natural Language Processing (NLP). One of the goals of WP4 is to propose NLP and machine learning methods that learn relationships between people and organizations through websites and social networks ...

"Given an XML data corpus extracted from forums and social networks related to specific threats (e.g. hooliganism, terrorism, vandalism, etc.); an annotation and knowledge representation scheme that should provide the following information:

• The different entity types according to the requirements of the project.
• The grouping of all references to an entity together.
• The relationships between different entities.
• The events in which entities participate."

The file can be viewed in all its glory here, and the INDECT home page provides more background.

There's nothing that surprising about this development. 

If anyone thought their Facebook and Twitters were private for example, then they are mad. 

As soon as you record anything electronically it's in public domain and all government authorities will track and analyse your thoughts, comments, status updates and more.

On the other hand, the good news is that the idea we came up with in Hong Kong for SWIFT to be the secure owner of a trust score for individuals and businesses, based upon social network comments and rankings, has been short-circuited. 

All SWIFT needs to do is work with the Asian, European and American governmental authorities and take their analysis of your tweets.

Simples!

The YouTube consumer wins

Ann Minch of California posted an angry little video about Bank of America's policies on her credit card in mid-September, saying that Bank of America upped her credit card interest rates to 30% with no notice, and wouldn't discuss why.

"Bank of America's message to me was 'tough sh*t' ... you are evil, thieving bast**ds ... who rape and pillage middle class Americans."

So what?

Well, it mattered as her little rant got linked to by blogs and newswires globally such that, as I write this, her video has been viewed over 430,000 times.

And guess what?

According to Huffington Post, Ann was contacted by a Bank of America official the other day who "to talk a little about my personal financial situation so we can negotiate some kind of agreement in regard to my existing credit card account," she said.

The executive "tried to get me to agree to 16.99 percent and I said, 'No, nope, I believe because you guys are getting your money from the Fed at zero percent interest... that 12.99 percent is a more than generous profit margin for you guys.' So he did finally agree to that and he also agreed to send me that in writing."

The power of social media in action.

Read more at: http://www.huffingtonpost.com/2009/09/21/ann-minch-triumphs-in-cre_n_293423.html

The branch-based banking model is dead (UPDATE)

Here’s a summary of the presentation I gave at the conference this week.

The headline is that the traditional model of banking is dead, long live the new bank model.

The dead model is the one where 80% of costs of retailing are in stores (branches).

Branch based banking is dead.

Branches are not dead ... just the concept of branch-based banking per se.

UPDATE: the critical point here (which some are missing - see comments) is that branches are not dead.  You still need some for sales and relationships.  But about a tenth of the number that most banks have today as the majority are just administration or transaction outlets that can be automated.

For those who read the blog regularly , you’ll know what I mean but, just in case, the point is that 8 out of 10 branches were opened as administration centres to service the transaction needs of communities. Those needs are now being self-serviced so what are those transaction centres there for?

In particular, as 95% of customer contact is now being delivered remotely through technology channels, including corporate customers, this should mean that at least 80% of the cost goes into the staffing, processes and technology used in those channels.

In other words, 80% of the old bank operational costs for retailing were in branches. Today, it should be in technology channels.

But there’s more to it than that.

It’s about relationship and connections.

People get technology today not because it’s gadgets but because it is connecting their lives to the lives of countless friends and strangers.

This is why Facebook can go from nothing to a place with the population of the United States in under four years, and why Twitter can go from off-the-radar to on-everyone’s-radar in just under a year.

Last year, no-one mentioned Twitter.

Today, it’s an integral part of the show.

But it’s only integral because it helps people manage, share and organise their lives and loves.

And that’s what banks have to do if they are to reconnect. They must connect people to their money and finances in a simple and easy way.

The presentation draws on all the materials you can find in our directory of social finance, and is themed around the human connections that make up our lives.

This is why each point ends with human faces, as that’s what it’s all about, and empty branches, as that’s what it’s all about.

The Bank Model Is Dead (download)

View more documents from Chris Skinner.

By way of a little more explanation of the flow.

To start with, today’s kids see the computer and its operating system as a history lesson.

They don’t care how technology works, just as I don’t care how electricity works.

I just like what it can do, and that’s how kids see technology.

They also see banks as a history lesson.

Their grandparents went into branches, their parents used ATMs and they just think of money and banking as being like Mint, an internet service that organises their finances for them.

What’s a bank branch for therefore?

Equally, everyone keeps referring to the Facebook and Twitter generation, or the twitfaced generation as some might call them.

Who are the twitfaced generation?

They’re not the under 25’s.

They’re not the under 35’s.

They are the over 35’s.

Most Facebook and Twitter users are average age of 40.

So when we talk about social networks, we are not talking about the next generation of customers. We are talking about the current generation.

If anything, the new generation of customers should be called “the Mob”, as they are all about being mobile connected youth (the Mobile Youth website is brilliant if you want more on that).

So what we’re really saying is that you need to completely rethink the bank around social technologies and rethink the branch network by closing most of it down and reinvesting that saving into social finance.

If you don’t, you’re dead.

Give it less than a decade, and you’re dead.

I’m serious.

Mainstream media fought this battle ... and lost.

That’s why television and newspapers are shutting down by the bucket load as today’s media is created by me on YouTube and Typepad.

So stop fighting the lost bank cause of the branch network.

Rethink it.

Keep the branches you need for sales, and shut the rest down.

Replace them with ATMs.

Equally, start thinking about new ideas such as microtransactions.

A billion iPhone app downloads in nine months.

Charge 50 cents a download and you’ve generated $500 million.

That’s the future.

It’s the grains of sand that will build the future.

And some banks get this stuff.

eBank and Jibun Bank in Japan; Wells Fargo and Bank of America in the USA; BBVA, Caja Navarro and a few others in Europe; but these are few and far between.

By way of example, I’m still waiting for my bank to start a blog or anything ... instead I just have a locked out website with activation codes that don’t work (long story).

In summary, the bank of the future will connect with me intimately via my mobile lifestyle 24*7. They will not only be proactive, but predictive of my needs and will provide me with a connection not just to a payment or to my money, but to my financial lifestyle.

That’s what MINT is doing today and BBVA has delivered too, but it requires bravery to go down this route.

Being brave by shutting down transaction centres, opening hi-touch 21st century sales centres and pushing the rest down a common technology platform that supports access via mobile, laptop, music player, television, car ... any internet-enable device basically.

And this changes your business model as the old model would involve massive investment in the business case to launch new technology platforms.

Today, technology is free and disposable.

So get on with it.

Retail bankers of the world, unite.

Shut down the branches and bite the bullet.

Stop fighting the old fight and start focusing on the future.

Otherwise you’re just dead meat, and who are we all going to sell to then?

The mobile phone companies?

p.s. as mentioned, all the case studies supporting this can be found at our directory of social finance

Forget money, let's use sand

For years, I’ve played poker with matches and chips rather than coins and notes.

We accept that a match can be ten cents or a chip is a dollar or more.

We don’t need real money to know our exchange rates.

Now, this basic idea is being replicated in social networks.

Facebook, as many of us know, has made a bet on this with Facebook credits.

Twollars can do the same for Twitter.

And now, according to this Wall Street Journal report, everyone is trying to build virtual credits in social worlds:

To be honest, this idea is not new, as it is just an extension of complementary currencies as pioneered by Bernard Lietaer and Margrit Kennedy.

This has gained traction recently as communities try to encourage more local trade through currencies such as the Totnes and Lewes pound.

But the big deal is that social networks, with billions of users, can now take these concepts to new heights as money migrates to credits across social networks.

So the future looks like one where, as the WSJ video calls it, the world is built on sand.

Sand?

Sure, the world is full of rocks, pebbles and sand:

• rocks are the core currencies of nation states – the dollar, euro and renminbi;
• pebbles are corporate currencies, such as store credit cards; and
• sand are the little grains of value exchange made person-to-person, peer-to-peer, P2P.

The future built on sand?

Sure.

Sand makes glass and the gazillions of grains make up the coasts of all nations.

So why not build a world on sand ...

... oh yes, the house falls down on sand.  We need rocks for foundations as well.

*

Postnote: this is actually Innovations in Retail Payments, Part 2

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SWIFT innovations: a 'trust score' (update)

So, the innotribe session has just come to a close.  I'll post more about the ideas proposed for SWIFT to invest in later, but here's our team's idea.

First, what is innotribe?

It's a stream at SIBOS focused upon finding innovations in finance for the future comprising SWIFT and banks, corporates and anyone else who's interested.

At the start of the week, we created three teams who would look at cloud computing, wikinomics and social crowdsourcing to see if we could find an idea for SWIFT to invest in for the future.

SWIFT gave me the job of managing the group focused upon social crowdsourcing - Facebook, Twitter and all that stuff - along with Tim Collins, Head of Experiential Marketing at Wells Fargo.  Through a self selection process, we were joined by:

• Patrick Nachtergaele (SWIFT)
• Linda Haddad (Bank of America)
• Amr Soliman (e.Vision)
• Thomas H Wiles (Standard Chartered)
• Nicholas Moch (SEB)
• Michael Gialis (Sun Microsystems)
• I. Vijaya Kumar (Andhra Bank)
• Dr Brad Pagnell (APCA)

to come up with our proposal for venture capital to expand a crowdsourcing idea.

We all had good ideas, although they are hard to pitch in under ten minutes.  But that's what we had to do today.

So, here's our pitch.

People don't trust each other.

Banks don't like risk.

Could banks use crowds to analyse risks through social media and networks?

If they could, then could the bank community create a 'trust score' that adds multi-dimensional analysis of corporates and individuals by aggregating all the financial and social data out there into something that makes sense?

We think we could and that SWIFT could provide the trusted and secure aggregator of trust scores which are then exchanged to secure transactions between individuals and corporations across borders.

Why is this important?

Because financial information is too stark and lacks completeness of the profile of what someone behaves like and whether they can be truly trusted to trade with:

• Is there a risk of being involved in moral hazard?
• What are the attitudes to risk and finance of the person or firm being invested in?
• If a firm has no record in this constituency, are there other proofs that could be provided?
• If a firm is trying to do something brand new, is there anything that could increase confidence with those individuals/firms

In this sense, just as you vet employees with social media by checking their profiles, in future we will check customer and client profiles for risk.

The aim therefore of our crowdsourcing group is to create a 'trust passport' that has a variety of critical applications:

• For P2P transactions where the history of one party is too poor to create trust; incurrent climate, there is no proof of dependability

• In cross-border transactions where the old way would be to provide a letter of credit but many firms do not understand such letters, particularly small firms and microenterprises working in a globalised world where they need to provide commerce with no track record in a new country of operation

• In governmental and bank transactions where governments and banks want proof of track record when no track record (financially) is available, e.g. trying to get hold of a visa

This passport and trust score would become critical for not only banked individuals and firms, but also for those who are unbanked or who have no credit history as it offers an ability to use this understanding in other environments where a 'credit history' is missing, such as mobile and gaming where you (a) can pick up behavioural details of transacting in these environments as well as (b) offering a transaction support service by enabling 'trust' in these non-financial environments.

As a result, banks could pickup a lot more business of what would previously have been unbankable due to the richness of this risk information.

The business model is based on a charge per access which may be a charge to:

• A user who wants to prove their credentials (e.g. an individual or firm that is expanding)
• A provider who wants to check a user's credentials (e.g. an auto or mobile carrier)
• A marketing organisation who want to market to a specific demographic and get a charge per clickthrough for having their banner on the trust passport check

Why should SWIFT pull this together?

Well SWIFT would become a gargantuan spider bot bringing together all this data and analysing the chatter of crowds to securely manage and distribute the trust scores and who else is better positioned to be the aggregator, manager and distributor of trust scores?

What's in it for SWIFT?

A new business model that extends SWIFT into non-bank territories, e.g. managing a trusted passport on behalf of the banking community and their customers and offering this as a pay per download/usage/software as a service.

What's in it for the user?

The user can now immediately secure trust with strangers to do business.  For example, the small business in India that wants to trade with the multinational corporation based in the States; the landlord who wants to ensure the prospective tenant is decent and trustworthy; the microcredit farmer who now wants a bank account; the migrant worker who is a new country and needs financial services ... anyone in fact who has no way to prove their standing.

And just like eBay buyer and seller ratings, the more you work on your trust score, the easier it becomes to do business.

There's lots more to this idea, but there's the bare bones.

We presented this to a 'buyers panel' who will choose one idea to go forward with SWIFT's backing to take it to a developed idea (bear in mind that this is the result of just three 1-hour discussions).

The buyer's panel (or it a judging panel?) comprised:

• Lazaro Campos, CEO, SWIFT
• Ignace Combes, Deputy CEO, Euroclear and member of the SWIFT Board
• Guy Kawasaki, Founding Partner and entrepreneur-in-residence, Garage Technology Ventures
• Gottfried Leibbrandt, Head of Markets, SWIFT
• Kosta Peric, Head of Innovation, SWIFT
• Javier Santamaria, Assistant General Manager, Banco Santander Spain and member of the SWIFT Board
• Paul Simpson, Managing Director and Global Head, Treasury and Trade Solutions, Citi

The winner will be announced in this afternoon's plenary and I'm interested to see what happens, especially as I have a £20 bet with Nick Davies of the Cloud Computing team that our idea will win.

Obviously the Hong Kong Jockey Club's experience has really gotten me in the mood for gambling.

UPDATE: I just gave Nick HK$240 (£20) as he won!

His team's idea was very similar to above, but is based on SWIFT managing a secure vault based upon the Deathbook concept I blogged about a while ago. 

No hard feelings ... and pigs fly as well ;-0

What does the future bank look like?

This is the last of a series of blogs about social finance that has covered new entrants to banking, their barriers to entry, how they might disrupt banks, social technologies and more. If you missed the earlier entries, here they are:

Why banks struggle to innovate

The relevance of social media to banks

Why banks have little competition

How social finance could disrupt banking

How a bank should respond to 'disruption'

In this final blog, I thought we would look at the likely picture of the future retail bank, as a result of all of the above.

It’s probably easiest to pick on each of a banks’ key channels of distribution to do this.

Branches

The future bank will still have branches but about a tenth or less of the number of branches they have today.

We all think firms that can distribute electronically – such as book stores, music, travel and related markets – can shut down shops and just deliver through a website.

Possibly.

Although there are still many thriving book, music and travel firms out there with high street retail stores.

Even if this were true however, a bank still needs branches.

Humans just don’t trust something they cannot touch with their money you see.

After all, where would all the crowds have gone when Northern Rock imploded if they were just an internet site?

The biggest issue with the idea of a branchless bank is how to deal with people worried about their money who need advice and support.

That’s why banks will continue to need branches ... and to sell of course.

That’s why even the branchless banks– ING Direct, First Direct, etc –are backed by banks with branches.

So the idea of a completely branchless bank is a fallacy.

But the fact that banks have legacy branches transacting and administering cheques and cash payments is a costly overhead and a burden that needs to be shed.

Therefore, over the next decade, many banks will get rid of 90% of their branch network, consolidating into mega sales branches in major town centres, and leaving the rest as satellite hubs with multifunction ATMs.

Call Centre

Today’s call centre was built for audio telephone calls from landline telephones.

25 years ago, great idea.

Today, not such a good idea as we now have multifunction telephones that are mobile.

Equally, we have chatrooms, instant messaging, text messaging and email, all of which has been thrown into the call centre operations as they migrated to become contact centres.

What a muddle though, as call centres struggle to keep up with the volume of calls and most of it is outsourced to some country thousands of miles away.

Tomorrow’s call centre will be very different.

It will be rebuilt for intuitive communication between humans visually.

As the internet and mobile networks become video-enabled, call centres will be responding to customers with avatars, humans on video cameras, voice and gesture driven interfaces with shared screen access and more.

Therefore, give it about ten years, and the nine out of ten branches that closed down will have their staff sitting at home in domestic video hubs for servicing customers.

Did I say ‘domestic video hubs’? Sure.

Why a call centre is thought to need to be based in some big office somewhere is also a fallacy.

Internet Banking

Like the branch and call centre, internet banking is already outdated and out of style as mobile banking takes over.

As a result, internet banking is straining at the leash for renewal and re-energising.

Surprisingly, in 2009, most banks have internet banking built for about 2000.

Their sites offer self-service systems which pretty much emulate the dull transactional bank statements of last century’s systems, and the rest is just advertising.

What’s lacking is interaction.

Interactive online banking with humans that is, not with data.

A multimedia rich internet experience is what we are building today, with the transactional and data forms of banking enriched with advertising, dialogue, debate and human conversations.

This is why blogging and social networking adds such a rich canvas to the electronic bank experience.

Suddenly, a bank statement comes alive with potential sales and cross-selling opportunities as bankers realise that the client’s online interactions are just as important as a human face-to-face transaction for sales, advise, support and retention.

Mobile Banking

In 2009, we have all got excited about mobile banking but, by 2020, everyone will find that the mobile is just an access device to a standardised and rationalised electronic platform for distributing and supporting banking experiences.

The mobile will access the same platform as the consumer’s television or other electronic devices.

As the iPod iPood into nostalgia, the most likely mobile access device will be either embedded in clothing or skin, or a watch style device that provides a complete experience for interacting on the move.

These devices will ink to visual displays that pop up as 20-inch projected screens on demand.

In other words, your mobile device is now tiny, transparent, voice and gesture driven and as multimedia rich as carrying around a 20-inch TV fully broadband enabled.

Wow! What will a bank do with that opportunity? Hopefully, proximity based and location based sales and advisory support.

In other words, as you walk past a real estate broker’s office, you get a mortgage advert; as you drive past the Porsche showroom, you get a car loan prompt; as you wake up in the morning, you get a reminder that you need to transfer funds today to avoid charges; and so on.

In fact, the bank has moved from being a reactive drone to being a proactive service agent, delivering exceptional service at every opportunity based upon digital connections that create human experiences.

Sounds like a load of management and futurist baloney?

Possibly. Except it’s right here, right now.

Right here, right now

You think I’m talking 2020?

I’m not.

I’m talking right here, right now.

Right here, right now, I have web services and mobile services that manage my life for me. Alerts, alarms, auto top-ups, widgets and google gadgets, rss feeds, tweets ... all of these are creating a digitally enhanced lifestyle where I have total control and total knowledge if and when I want it.

And that’s where my future bank life will be.

Total control over my finances based upon the permissions and program of menu choices made upon account opening and controlled in real-time interactively anytime through my digital connections.

Human experiences through digital connections.

That’s the future bank.

*

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The FT picks up our social lending debate

The Financial Times' Money Matters Blog has picked up on the debate  between James Gardner and I about Zopa.  They've asked readers for comments.  I thought I would re-post the responses here as it adds to the richness of the context of our discussion.

Martin Campbell (the one that started this off) responds:

Certainly wasn’t expecting it to all kick off as it has, but of course there is only one thing worse than being talked about...

Can I just take the opportunity to correct a fundamental misunderstanding that has plagued much of the debate across these various blogs. Zopa is not a lender like a bank is. It is a MARKETPLACE. It is a radically different proposition from the banks.

Zopa does NOT set the rates. Lenders make offers at the rates that they choose themselves. If borrowers think the rate is a good deal, they will take it up. If they don’t, they won’t and lenders will feel pressure to lower the rates they are offering to a level that borrowers will accept.

So all this toot about ‘price wars’ and killing-off Zopa when it becomes big enough is borne of a lack of understanding of how the Zopa model works.

If the banks wanted to kill-off Zopa with a price war as James G says they will, they would kill themselves off first; the extent to which they would have to reduce their current rates is too big, the overheads they have to cover are gargantuan compared to Zopa’s wafer thin operational costs (and charges) and because they would have to offer these new hugely loss-making rates to the whole country.

They would be dead long before Zopa would be.

Also, in response to an earlier comment, Zopa carries out all the credit and affordability checks that the banks do – and more.

Far from being denied the information banks have, Zopa obtains far more than most do, and takes more factors into account, even a would-be borrower’s eBay rating. Zopa also aims at a higher standard of “responsible lending” than most banks do – partly because it is not its own money that is being lent. The proof that they have got this right is a default rate that has never been higher than 0.5% - radically lower than the banks achieve.

GG says:

Zopa provides great rates for lenders and borrowers but, for me, it's the satisfaction of beating the bankers at their own game that makes it great.

Of course, there is no Government guarantee and that is why I focus on the lowest risk markets. At the moment, returns are double those of the best cash ISAs.

Vinay Basavaraj states:

I am sceptical of the role Skopa, and similar potential replacements, will play in the future. One fact that clearly undermines Skopa is the information advantage that banks possess. By means of the payment system, banks have acquired invaluable information of potential borrowers. What remains to be seen is whether this information advantage is eroded by an 'efficient market'.

Othermotte says:

I am a Zopa user and very pleased with it. I had money that I wanted to earn interest on and the only place to offer a decent return was Zopa.

The fact that it was "social lending" was an added incentive. In the past, I have had money in a number of mutuals and always voted against demutilisation, despite the bride of shares that was offered. I think that the demise of building socities was a bad thing and Zopa offers something closer to that model. I actually enjoy browsing the comemnts from the myriad of borrowers and the connection that it makes to real people.

But the bottom line is that it is a good interest rate for savers.

Andy from Bristol adds:

Whilst Zopa was very competitive for loans of £5K+ over terms of 4 years or more - it seemed to be in the top 2 or 3 providers offering just under 8%pa (3 months ago) - it really came into it's own for smaller loans over shorter terms. As someone who is reasonably careful with money, I wanted to borrow no more than I needed & repay it as quickly as I could afford - none of the big players (ie banks/building socs) are interested in small fry contracts so they either don't offer them at all or offer high rates, circa 15%. One thing worth noting re: Zopa is that the rate offered seems to be VERY sensitive to your credit score - I was offered a slightly higher rate (say 30 bips higher) than that published on moneysupermarket & have a good credit rating, but my wife, who I would imagine scores slightly better than me, was offered a rate 10 bips lower than me. The service was good & I would definitely use them again presuming their rates stay competitive.

Calc says:

I can only say that the returns offered by Zopa to it's lenders is considerably higher than that offered by any bank, the rates offered to it's borrowers generally, though not always, lower than those offered by the banks. It seems to me that both lender and borrower are well served.

There are though riskes to the lenders, borrowers may default, but Zopa appears to do as much as the banks to credit check those who wisht to borrow; I understand that 2/3rds that apply for loans are turned down.

My personal experience is of a lending body that was willing to offer me a £ 5,000 loan over three years at 8.1 % as against my high street bank that intitially proposed one at 16 % before reducing it on protest to 14 %. As an excersice I credit checked myself and found my credit score to be '999'; whereas I accept that different credit agencies may produce different credit scores based on different criterea, I assume that with all my credit rating is fairly high, I therefore wounder what the bank would charge me had not been so good.

The fact that Zopa exists indicates perhaps a failing on the part of our banks. I doubt Zopa and it's ilk will replace the banks but they are a highly valuable adjunct.

Comptroller adds:

Zopa is, after four plus years, very small, has operating deficiencies and obviously not fulfilling its initial business objectives (operating losses of £1million on a turnover of £673,000, reduction of staff literally in half from 2007 to 2008.) Activity spiked in early 2009 and has continued with steady growth but has nothing like the momentum required to threaten the banks.

Despite recent publicity on national radio and in the press it's activity is still less than the average branch of a High Street Bank (and about the same number of staff.) The rates of return are not bad but thre is the risk of bad debt, many lenders think this risk was inadequately flagged when they joined. Anomolies with tax and the better returns available elsewhere for about the same risk limit growth fo the moment.

In time Zopa will probably gain some critical mass if it's backers are prepared to be patient and continue to support it, but it is unlikely that it will challenge the Banks anytime soon from it's current position of less than 0.1% of the unsecured lending market in the UK.

GRR counters:

I've lent out money through Zopa since its early days; it's a fantastic innovation, aiming to create the perfect market, and so letting prices find their own equilibrium by the laws of supply and demand.

Granted, there's room for profiteers to make a killing by offering that few extra quid to make up someone's overall loan at a premium rate, but that's how markets work, and as the number of participants increases, that will continue to drive rates to a fair level for all.

As a lender in the current market conditions, Zopa offers a far superior return to even the best depsit accounts / fixed rate bonds - even after taking account of the notional cost of bad debts. However, you can't predict what will happen with your particular borrowers, and you have to accept the fact that -statistically speaking - it's possible that all your borrowers could default! But to say that the risk isn't evident to lenders is totally unfair - all the rates quoted make allowance for bad debts, there is ample guidance (and FAQs, etc), and the very nature of the model (multiple small-denomination loans to multiple individuals in predetermined credit bands) allows lenders to minimise their risk of exposure to unacceptable levels of risk of default.

Add to this the feeling of doing something socially responsible, and a really well-thought-out and user-friendly interface, and Zopa is a winning proposition - just awaiting the critical mass which it needs to really take off and challenge the incompetent and immoral institutional lenders.

Colin Henderson throws in:

The rates will be set by the market based on supply and demand. This is not the core of the argument however. The debate turns on business model characteristics.

Banks are entering a productivity crisis. Their opportunities for revenue growth during a period of consumer retrenchment and deleveraging is low. That is why banks are looking at exiting large nmbers of branches. However they have not laid the groundwork by automation of the customer processes needed to support less branches. Automation has been focussed on data management and not customer interaction.

Zopa is built as an efficient platform and has begun to automate customer processes such as identity verification, and integration of credit scoring with lending processes in ways banks have not.

The coming crisis of productivity will define losers and winners in this debate.

I_BURDON reports:

I lend on the Zopa Market it help people to get out of the credit crunch. Yes it does work and you can earn more than the banks will hand out in intrest. Free trade should worry the banks. But the banks are in a protected position , given by the UK goverment on the following grounds.

1) Deposits protected.
2) Bad debts written of by the bank . HMRC does not allow Zopa Lenders to have bad debts written off against profits.
3) The Banks have a Goverment share holder.

So not a level playing field by any means. I would think the OFT would be trying to level things up. But who is the Piper.?

So now you have it the UK Goverment is against free trade in financal services and has a vested intrest in protecting the the banks. When did nationalization become UK goverment policy?

Pete tells us:

I have been a borrower from inception of ZOPA and paid off within a year. I am now a lender and have over 1200 borrowers with a default (lost £80) rate of 4 and a late payment of 4 of whom 1 is paying at a reduced rate. I like this , as it gives the chance for a borrower to still pay back what he/she can afford and if I were in that situation then I would feel that I would make every effort to pay back my debt as the system allows compromise.

Overall. I am returning around 7% on my lending; which I am comfortable with in the present climate and (this may seem too sugary); I get to read the comments of people I have lent to, and their success stories and ambitions. Yes, it's a tough world at the present, but I reckon that I am doing my little bit to ease it for the people who need a loan, and through Zopa, I am reasonably assured that the people I lend to are not going to take advantage.
I think this is so much better than the corrupt and overpaid banking system, particularly as interest is only paid on outstanding balance and there are no early repayment penalties - That is refreshing!!

Hope this helps the blog - Hope this helps 'Stu**' the banks whom I do not trust , particularly as most of them are now owned by our beloved government - and will we as 'shareholders' get any dividend payout from our new aquisitions?.... watch this space, but I think pink elephants may be seen in the sky before this happens.

Whilst Devongirl elaborates:

As a new lender in Zopa, I'm very pleased so far, but only time will tell just how many bad debts I experience. If they are as predicted by Zopa, then I shall be making an excellent return comapred with cash in a bank. However, this is not really comparing like with like, as I cannot withdraw my money on demand. Every loan I make will be repaid gradually over three or five years. So I regard my funds in Zopa as an alternative form of investment, not a cash deposit. But for this reason, much as I like Zopa, it can never substitute for a bank -- not that it tries to, except perhaps from a borrower's point of view as provider of personal loans.

Toontopo pipes in with:

I am absolutely convinced that Zopa and similar platforms will become an ever more important competition to banks. Personally I don't think of Zopa as the banking equivalent to e-bay, because unlike with e-bay, there is no one-to-one relationship between lender (seller) and borrower (purchaser). Rather I like to think of Zopa as a facility that simply takes the potential of internet banking to the next level. Even if occasionally banks may still make better offers to potential investors or borrowers, in the long run they simply cannot undercut the substantial advantage that Zopa has in terms of overheads, an advantage that is entirely down to the potential inherent in internet. For those who understand German, I recommend this interview with Konrad Hummler, president of the Swiss private bankers' association: http://www.nzz.ch/finanzen/impulse_archiv_juni09/impulse_juni_2009_1.2656628.html?video=1.2673974
He makes, with remarkable candour, the same point (he doesn't mention Zopa specifically though), and I think he knows what he is talking about.

Lemondy is not so agreeable:

I have tried Zopa as a lender and will not be doing so again. I think that many retail punters who want more risk/return than cash would be better in fixed interest (i.e. corp bond funds) if not equities.

I fear that many retail punters do not understand the risk of Zopa lending, do not appreciate the FSCS guarantee they get from staying in cash, and don't understand that the quoted returns are BEFORE TAX.

Even in these exceptional times, for much of the last 12 months, I could have got better returns in a cash ISA than in my Zopa loan (expected return ~= 6% after fees, bad debt), plus liquidity, plus no risk to capital, plus FSCS safety net.

If Zopa improved the liquidity of loans (i.e. shorter minimum period, ability to sell on loans), then, possibly, I could see it might be a good idea people, maybe non-taxpayers at least.

Whilst Freckles doesn't agree with that:

Remember the Breweries?
You cant have real ale - your have what we give you!!!!!

And so dream on Breweries (they lost) and dream on the banks, yes zopa can make a difference and continue to grow if people like me (retired, with nest-egg ) continue to get bad deals from banks and building societies on our capital with pultry, insulting interest rates.

I have lent money through zopa for 5 months early days, being a bit cautious, but its working, takes a bit of time to get the money invested and rolling back, but its happening

I am impressed, but having trouble interestings my peers in similar position to me to invest - something `new` worried about the defaulters (heaven knows however the money we have lost on the stock market and they accept this crazy comparison)

The current problem lack of strong advertising - never seen it on a billboard, bus stop, tele etc. that needs to be addressed marketing!!!!!

Next I would like to see a `L` catogory of lender - standing for established lender, so that lenders can get preferential rates from there peers - next year I would like to pay off my car loan, wouldnt it be nice if my zopa mates offered me 0 - 4% I know they would be loosing interest but if we all put a bit aside to finance our own loans through zopa - a double wammy!

Keep going zopa - just dont brew beer!

SoupS asks us to read monevator's view, who has seen bad debts at Zopa rise to 2.68% recently, whilst Richard027 adds:

As Bill Gates reportedly said, "the world needs banking but it doesn't need banks". The way out of the financial crisis is not the prop up existing banks at all costs but to ensure banking services are available. This is where Zopa comes in and recreates the social benefit of banking, namely the availability of credit and the rewards attached to saving both of which encourage long-term planning in individuals, without sucking up all profit for the middlemen. It is a new form of mutualism. This is such an attractive propositon for both borrowers and investors that it seems inevitable that it will grow much more important than it is now. Plus, it has a number of independent comparative advantages - entirely internet-based, absence of legacy bad debt, not at the mercy of wholesale markets - that can only further strengthen the model.

How a bank should respond to 'disruption'

The word ‘disruptive’ is being bandied about liberally in the debate about new competitors, such as Zopa.

First, as I’ve said before, banks don’t really have any competition except between the incumbents, due to the structure of the industry.

Second, where there are openings, then disruptive new players may find a way to find a niche which is what Zopa and their brethren are trying to do.

So what exactly is ‘disruptive’.

Well the term ‘disruptive’ in the management school sense, was coined by Clayton Christensen, the Harvard Business School Professor who wrote the book “The Innovator’s Dilemma”.

I've seen Mr. Christensen present this concept a couple of times, and he talks about two types of innovation: sustaining and disruptive.

Sustaining innovation targets the existing market, whilst disruptive innovation either creates new markets or takes root with the incumbent’s worst customers.

And a disruptive innovation cycle goes something like this ...

An industry grows up around a product or service.

Over time, many companies enter the market and compete.

Gradually, the competition moves from being the basic product to being the best product for a target market segment.

As a result, lots of different market niches emerge, and competitors compete on building more and more functionality to appeal to their target markets.

This leads to inefficiencies as the competitors add a lot of form and function that no-one needs but they have to add this as, otherwise, there is no desire to replace and repurchase.

The industry over time becomes one where a lot of the price of the goods is going into form and function that the customer does not require, and so new competition comes in and disrupts the incumbents who are now too blind to see the folly of their ways.

The new competition enter with a new technology or approach.  This new angle allows them to build the same product, but often stripped to the bones into the original basic and functional product and at a fraction of the price of the incumbents.

The new competitor wins eventually, because the incumbents laugh it off when they first see.

The incumbents dismiss the new competition as being trivial. 

They pour scorn on it, as it is a no-frills basic service compared to their beautiful, functionally rich offer. 

The real issue though, is that the incumbents dismiss it as trivial but the market - the customer - does not. 

The customer wants it because it is cheap and simple, rather than expensive and complex. 

They want it because they are paying for what they get, rather than the irrelevant form and function the incumbents have added on top that they do not need.

By the time the incumbents realise this, it is when the new competitor is succeeding.

By the time the new entrant is succeeding, it is because they have reached critical mass (above 2.5% of market share, according to some).

By the time they have critical mass, the industry has disrupted and it is too late to turn things around for the incumbents, who are stuck with legacy structures and products.

And so the industry reignites and rebuilds in a new business model, having been disrupted by a new competitor using new technology to build a new way of doing business.

Mr. Christensen used the car industry as his major case study, although he says you can apply this to any industry such as mobile telephones (Nokia v iPhone) or computing (Google v Microsoft), but let’s look at the car industry.

In the USA in the 1950s, Ford and General Motors were rocking and rolling with the Mustang, Chevvy and more.

Ford and GM built bigger, brasher, louder and weirder cars to create appeal to more and more diversified customer segments.

The cars were not cheap and most Americans were happy to buy used vehicles because they could not afford new ones.

Then a strange little company came into the US car market from Japan called Toyota.

Toyota’s offer was a really cheap, basic car with no bells or whistles, and not particularly attractive.

Ford and GM laughed at the new entrant as just cheap rubbish, and particularly derided the fact that after just a few years most Toyotas became rust buckets.

But guess what?

A large part of America that could never previously buy a new car could suddenly afford to do so.

This did not impact Ford or GM who just measured their new car sales and had no track on the second hand market, but a lot of that market were switching to buying new Toyotas.

After a few years, Toyota’s success meant that they could start up-scaling their car offer to slightly better cars at a cheaper price.

Meanwhile, Ford and GM were losing a few customers who used to buy their entry-level cars.

These customers now realised that (a) the resale value of their car was going down, because people were buying fewer second hand cars; and (b) they could now buy better new cars, with more spec than they could previously afford, if they bought Toyota's up-scaled offer.

These customers were typically the entry-level Ford and GM purchasers, so Ford and GM weren’t too worried as they didn’t make margin from those guys.

They made margin from the big spenders.

So, let Toyota have a few of the muckrakers with their rust buckets. We’ve got our big expensive and loyal customer base who spend lots and give us profits. We’re happy with those.

Over the years, Toyota upscale again, bringing in a new brand called Lexus.

The disruptive cycle went from rust bucket to luxury vehicle over a period of about 25 years.

Today, Ford and GM are dinosaurs dying in the heat of the comet that hit their industry called just in time manufacturing, total quality management and Japanese methods of sourcing and producing.

You could take this story and apply it to any industry. Think British Airways v Virgin or Easyjet; AT&T v Verizon; WHSmith and Barnes & Noble v Amazon; Thomas Cook v Expedia; and so on.

Or banks v social finance, lenders v social lending, and Lloyds and their cartel v Zopa and their brethren.

Zopa’s big attraction is that they purely provide a platform for people to sell money to those who want to buy money. Zopa sets no rates and makes their margin on the difference between the buy and sell rates, a few basis points of margin in other words.

That’s the razor thin margin I referred to in my earlier post this week.

The point I should underscore here by the way is that it is not that social lenders are necessarily cheaper as product, in the sense of the car illustration, but that they are cheaper as an operation.  Because they operate at razor thin margins, they give all of that margin that banks would take - the 1%+ differential - and give it directly to the customer.

That is their secret - not cheapness, but sub-1% margin operations.

The result is that Zopa and their brethren are disruptive innovators, gaining bank’s customers who seek to borrow money at discounted rates from people who have money based upon basis point differential, rather than percentage point.

Equally, as banks currently offer really bad rates for lending and saving, they’ve already risen above being off-radar as they are taking at least 1% marketshare, and possibly 2% (see yesterday's blog). This is because, as I've been telling all my mates who have bank savings accounts earning sub-4% interest, they could get 6% or more return on their savings through Zopa.

Is the risk greater with Zopa?  No.  They use the same risk management systems as the banks called Experian and Equifax.

What if people don't pay me back?  If you're worried about that, they offer an insurance policy you can buy for a small premium to cover your investment.

As a result, Zopa’s funders and borrowers who are giving and taking money (liquidity) on their platform are building and, since this crisis hit, building more and more rapidly.  This is because savers and borrowers can see that they can get better rates here than they can find anywhere else.  Slowly, this will attract more money and, like Toyota, over time it may attract a lot more.

Once the banks notice the loss of their loan book, it is too late.  The new operations will have critical mass and once you see critical mass, the train has left the station.

So you can't get on the train - it's left - and if the new competition operates at margins of around 0.5%, then a bank cannot compete.  Reason: how can a bank with 1,000's of branches, staff and fixed cost, suddenly operate at zero margin?

Add on to this the social, human and fun bit, and you can see where this goes, in terms of really innovative disruption.

Now, right now, banks laugh at this new competitor because it is an irrelevant bit of fluff on their shoulder, a flea on their backside, a noise that cannot be heard.

After all, Zopa is purely attracting muckrakers buying rust buckets.

But, as this week’s blogging has started to find, maybe they are not. And maybe its not them anyway. Maybe it will be Prosper, Boober, Smava, PPDai, SmartyPig, Wonga or one of the many, many others out there.

So a bank should compete.

How should a bank compete?

Do what Caja Navarro have done, and create a hybrid social lending model that is bank run but the exchange of monies is between mums and sons, dads and daughters, aunts and cousins, friends and strangers.

Why should a bank compete?

Not because it will make the bank money in the short-term, as the margins are rubbish, but it will keep the bank in the food chain and stem the tide of any demand that disappears to a new fledgling before the fledgling finds its feet.

That’s the real answer to this innovator’s dilemma.

After all, if you just laugh at the flea on your backside, before too long you find the nasty little parasite has sucked all the blood out of you and ... you die.