A recent report released by the research group Celent indicated low penetration of mobile banking usage in India."Mobile banking in India is in a budding stage, with the high penetration of mobile phones acting as a growth driver. India’s existing mobile phone user base consists of 347 million users, including 73 million rural users. Celent expects the mobile banking active user base to reach 2% by 2012, up from the current 0.2%. "
2% is a pretty low penetration rate and that's in 2012 ! I wonder what that means for all the mobile banking vendors who have been aggressively pursuing the India market, driven by the hypothesis that a large mobile subscriber base would lead to a lot of usage which is clearly not the case, at least not today.
According to the report, the total number of customers registered for mobile banking is about 25 million with about 2.5 million being active users of the service. Celent cites access to ATM and online banking as potential deterrents to the adoption of online banking. I am not sure I agree with that. The rationale that was used in the past was that those Indians who do not have access to online banking but have a cell phone would use mobile banking services more actively.
I believe that the reasons for lack of mobile banking usage include:
1. Consumer behavior, where they feel comfortable banking remotely-either through the online channel or the mobile channel
2. Lack of innovative mobile apps that provide incentive to the consumer to use their mobile devices for such services
3. Expensive and slow data service which discourage the use of rich mobile applications.
4. Lack of penetration of smart phone that allow for more interactive and feature rich mobile applications beyond simple balance check using SMS
Tuesday, June 30, 2009
Wednesday, June 24, 2009
P2P War Intensifies with the Launch of CashEdge's POPMoney
CashEdge announced today the launch of POPmoney™, the first person-to-person payments (P2P) service for banks, enabling banks to provide simple and secure P2P payments from their online or mobile banking applications.
According to a release, "POPmoney allows bank customers to "Pay Other People" (POP) anywhere, at any time, directly from within a bank's online or mobile application. With POPmoney, bank customers can send an electronic payment by simply using the email address or mobile phone number of the recipient. POPmoney includes an SMS text messaging application, as well as downloadable mobile applications, enabling banks to extend their P2P functionality to mobile phones."
This surely intensifies the P2P space even more. Paypal is of course the 800 pound gorilla in this segment and then there are start ups like Obopay, which is backed by Nokia.
The unique feature of CashEdge's solution is that it is completely bank-centric and consumers do not need to set up another account like a paypal or obopay account to send money. This clearly arms the banks to finally compete with Paypal.
We will continue to watch it closely.
According to a release, "POPmoney allows bank customers to "Pay Other People" (POP) anywhere, at any time, directly from within a bank's online or mobile application. With POPmoney, bank customers can send an electronic payment by simply using the email address or mobile phone number of the recipient. POPmoney includes an SMS text messaging application, as well as downloadable mobile applications, enabling banks to extend their P2P functionality to mobile phones."
This surely intensifies the P2P space even more. Paypal is of course the 800 pound gorilla in this segment and then there are start ups like Obopay, which is backed by Nokia.
The unique feature of CashEdge's solution is that it is completely bank-centric and consumers do not need to set up another account like a paypal or obopay account to send money. This clearly arms the banks to finally compete with Paypal.
We will continue to watch it closely.
Wednesday, June 17, 2009
US online bill payment to penetrate 63 million homes by 2014 - Forrester
The number of US households paying bills online will grow from 48 million this year to 63 million by 2014, according to a new forecast by Forrester Research Inc.
The numbers and growth rates are not staggering (5.4% compounded annual growth) but it is expected in a maturing market as growth of online banking itself slows down. But here is the interesting comment in the report:
"Forrester sees a shift in the online bill payment market as more consumers turn to banks and bill payment consolidators like Yodlee and Corillian because of several factors, including: the convenience of having multiple bills aggregated at a single Web site, the elimination of bill payment fees, and innovative marketing efforts to drive adoption. By 2012, consolidators' share of the online bill payment market will surpass direct billing by merchants for the first time."
I am not sure I agree. My reason is the rising cost of "online bill pay" service being provided by banks. According to a recent report from the Tower group, financial services industry will spend over $1billion to offer free online bill pay to retail customers. I do not see banks continuing to invest more in enhancing their bill pay offerings, especially given the cost pressure and lack of a strong ROI case (other than the softer benefits of consumer loyalty etc.). A study earlier this year from Fiserv found that bank customers who pay bills online are over 15% more profitable and 76% more loyal than those that don't.
The numbers and growth rates are not staggering (5.4% compounded annual growth) but it is expected in a maturing market as growth of online banking itself slows down. But here is the interesting comment in the report:
"Forrester sees a shift in the online bill payment market as more consumers turn to banks and bill payment consolidators like Yodlee and Corillian because of several factors, including: the convenience of having multiple bills aggregated at a single Web site, the elimination of bill payment fees, and innovative marketing efforts to drive adoption. By 2012, consolidators' share of the online bill payment market will surpass direct billing by merchants for the first time."
I am not sure I agree. My reason is the rising cost of "online bill pay" service being provided by banks. According to a recent report from the Tower group, financial services industry will spend over $1billion to offer free online bill pay to retail customers. I do not see banks continuing to invest more in enhancing their bill pay offerings, especially given the cost pressure and lack of a strong ROI case (other than the softer benefits of consumer loyalty etc.). A study earlier this year from Fiserv found that bank customers who pay bills online are over 15% more profitable and 76% more loyal than those that don't.
Wednesday, June 10, 2009
Mint Launches "Lite" on Yahoo.com
In a first of its kind, Mint.com, one of the leading PFM providers announed the launch of a "Mint Lite" application on Yahoo. It is available on "My Yahoo" start pages. Mint's start page widgets are build with the Yahoo Application Platform, and only show current spending trends, relative investment gains in charts and graphs, and basic assets-versus-debt information in a fairly customizable box or vertical toolbar. If you want actual account balances and all the other Mint tools, you have to click through to the site, which, of course, the Yahoo application makes pretty easy.
It seems like a smart strategy for both Yahoo and Mint. Yahoo is struggling to maintain its leadership in the web world adds some meaningful content while Mint gets exposed to millions of loyal yahoo users. The value of the data of course is a little limited - most users need access to account balances etc. to help them make money management decisions which will only be available through Mint.com website for security reasons.
This is indeed a great start and demonstrates the types of applications that are possible once you have access to reliable data - iphone apps, My Yahoo are just the beginning. This moves also creates additional pressure for banks and CUs who are struggling to keep pace with the innovation in the PFM space over the last 12-18 months.
Friday, June 5, 2009
Mobile Banking Expected to Grow Rapidly - Towergroup
In a recent research report, Towergroup estimated that adoption of Mobile Banking is expected to grow from 10 million active users in 2009 to over 53 million active users in 2013, representing a compound annual growth rate of 51.8%.
According to the report, "As economic concerns prompt consumers to manage their finances more closely, their desire for real-time access to- and control of- their aggregated financial information is increasing the urgency for banks to create a mobile banking channel. More broadly, the proliferation of mobile devices and smart phones symbolizes a pervasive, networked consumer market, revolutionizing many aspects of the consumer lifestyle, including finance. To this end, TowerGroup believes that mobility will be a major disruptive force in the financial services industry."
10 million in 2009 is in itself an impressive number and if it plays out, by year 2013, we should have almost 60-70% of online banking users. This certainly creates huge opportunities for technology vendors like Firethorn, Clairmail, Mcom, Mshift and others.
The key would be to continue to innovate with new applications so that banks and vendors can maximize the opportunities created by the macro trends - increased consumer interest in managing their finances and use of smart phones for accessing the internet and other information.
According to the report, "As economic concerns prompt consumers to manage their finances more closely, their desire for real-time access to- and control of- their aggregated financial information is increasing the urgency for banks to create a mobile banking channel. More broadly, the proliferation of mobile devices and smart phones symbolizes a pervasive, networked consumer market, revolutionizing many aspects of the consumer lifestyle, including finance. To this end, TowerGroup believes that mobility will be a major disruptive force in the financial services industry."
10 million in 2009 is in itself an impressive number and if it plays out, by year 2013, we should have almost 60-70% of online banking users. This certainly creates huge opportunities for technology vendors like Firethorn, Clairmail, Mcom, Mshift and others.
The key would be to continue to innovate with new applications so that banks and vendors can maximize the opportunities created by the macro trends - increased consumer interest in managing their finances and use of smart phones for accessing the internet and other information.
Friday, May 29, 2009
Data Security Breach at PFM Provider "Rudder" - minor blip or major setback?
The recent data security breach at Rudder.com was a huge setback to the emerging PFM industry.
According to the company's website, "Today, 732 Rudder users were sent alerts via e-mail, which could have potentially included information like account balances, transactions and bills of different users. This issue was not the result of a data breach, but due to a software issue in our program that generates emails. It is important to know that Rudder has “read only” access to your account balances and transactions and we do not store account credentials like user names, passwords, or your personal information like name, address or social security number."
Technically speaking, it is not a data security breach but the end result is pretty much the same - someone else getting access to certain sensitive information that does not belong to them.
You can read more about the breach here at Techcrunch.
But this incident has created a lot of discussions about the future of PFM providers, most of them are early stage companies. The clamor for Banks being the logical provider of PFM has also increased. I find this a little disconcerting.
This is not the first time a data breach (due to a software glitch really) has happened and this is certainly not the last. Well established financial companies (banks, credit card companies etc.) have experienced it from time to time as well.
The case for PFM service being provided exclusively by banks can not be made because of such incidents. I believe that it is entirely up to the consumers and the market to decide who comes out on top. The very reason these PFM players emerged was the lack of innovation by the banks. The last thing the industry needs is to stifle such innovative companies.
Having said that, I do believe that such incidents create a breach of trust that is extremely hard to overcome. This will certainly have a negative impact on the adoption of such services but it will also ensure such players to be more cognizant of their responsibilities towards the consumers who trust them with their personal and sensitive data and expect them to protect it. It will be interesting to see how the likes of Mint, Yodlee, Geezeo react to this incident.
According to the company's website, "Today, 732 Rudder users were sent alerts via e-mail, which could have potentially included information like account balances, transactions and bills of different users. This issue was not the result of a data breach, but due to a software issue in our program that generates emails. It is important to know that Rudder has “read only” access to your account balances and transactions and we do not store account credentials like user names, passwords, or your personal information like name, address or social security number."
Technically speaking, it is not a data security breach but the end result is pretty much the same - someone else getting access to certain sensitive information that does not belong to them.
You can read more about the breach here at Techcrunch.
But this incident has created a lot of discussions about the future of PFM providers, most of them are early stage companies. The clamor for Banks being the logical provider of PFM has also increased. I find this a little disconcerting.
This is not the first time a data breach (due to a software glitch really) has happened and this is certainly not the last. Well established financial companies (banks, credit card companies etc.) have experienced it from time to time as well.
The case for PFM service being provided exclusively by banks can not be made because of such incidents. I believe that it is entirely up to the consumers and the market to decide who comes out on top. The very reason these PFM players emerged was the lack of innovation by the banks. The last thing the industry needs is to stifle such innovative companies.
Having said that, I do believe that such incidents create a breach of trust that is extremely hard to overcome. This will certainly have a negative impact on the adoption of such services but it will also ensure such players to be more cognizant of their responsibilities towards the consumers who trust them with their personal and sensitive data and expect them to protect it. It will be interesting to see how the likes of Mint, Yodlee, Geezeo react to this incident.
Friday, May 15, 2009
Driving Sales Through the Bank's Website
This is a topic that I think about a lot - most banks still underutilize their websites and online marketing for product sales. While some of the leading banks have started leveraging the power of the Internet and search engines to drive traffic to their website for new product sales, most banks still seem to lack the focus that is necesssary to compete in the online channel.
If you think about e-tailers like Amazon and even retailers with strong web presence, most financial institutions have lacked in their efforts around search engine optimizations, and other online marketing tools.
This point was illustrated in this article in the American Banker recently:
"Rethink Web strategy. Banks have been slow to exploit the kinds of Web-based strategies retailers and other industries routinely employ to attract new prospects. Instead of focusing on driving high volumes of customer traffic to their sites and converting that traffic to product sales, as retailers do, banks have overemphasized commodity features on their sites, such as bill payments and account transfers.
Savvy retailers like Barnes & Noble and Amazon.com, on the other hand, use sophisticated digital capabilities to achieve impressive results. For example, a Google search for "book" currently displays those two companies among the top three results. But few banks appear on the initial results from a Google search of "savings account" or "CD."
The last point is really the case in the point. When consumers search for products such as "Savings account" or "Mortgage" etc., more often you would see aggregators or portals such as "bankrate.com" etc. would rise to the top instead of banks who actually sell these products.
The evolution of "Online Banking" explains this behavior to some extent. When financial institutions started offering "Online Banking", the justification was primarily based on cost savings and customer satisfaction. Only recently after the advent of "Online high yield accounts" and "Direct Banks" like INGDirect, we have seen the acceptance of the online channel as a "sales" channel.
The article sums it well - "Act like a retailer. Banks must become more like retailers so that their reach extends beyond the geographic boundaries of their brick-and-mortar footprint. This is particularly crucial for mid-tier institutions that cannot compete with the vast retail branch networks and huge marketing budgets of larger competitors."
If you think about e-tailers like Amazon and even retailers with strong web presence, most financial institutions have lacked in their efforts around search engine optimizations, and other online marketing tools.
This point was illustrated in this article in the American Banker recently:
"Rethink Web strategy. Banks have been slow to exploit the kinds of Web-based strategies retailers and other industries routinely employ to attract new prospects. Instead of focusing on driving high volumes of customer traffic to their sites and converting that traffic to product sales, as retailers do, banks have overemphasized commodity features on their sites, such as bill payments and account transfers.
Savvy retailers like Barnes & Noble and Amazon.com, on the other hand, use sophisticated digital capabilities to achieve impressive results. For example, a Google search for "book" currently displays those two companies among the top three results. But few banks appear on the initial results from a Google search of "savings account" or "CD."
The last point is really the case in the point. When consumers search for products such as "Savings account" or "Mortgage" etc., more often you would see aggregators or portals such as "bankrate.com" etc. would rise to the top instead of banks who actually sell these products.
The evolution of "Online Banking" explains this behavior to some extent. When financial institutions started offering "Online Banking", the justification was primarily based on cost savings and customer satisfaction. Only recently after the advent of "Online high yield accounts" and "Direct Banks" like INGDirect, we have seen the acceptance of the online channel as a "sales" channel.
The article sums it well - "Act like a retailer. Banks must become more like retailers so that their reach extends beyond the geographic boundaries of their brick-and-mortar footprint. This is particularly crucial for mid-tier institutions that cannot compete with the vast retail branch networks and huge marketing budgets of larger competitors."
Sunday, May 3, 2009
Twitter for Banks - Part of Social Media Strategy?
There is so much media attention for the social networking platforms that it is hard for the banks and other financial services companies to ignore it. The result is that we have seen several banks dabble with it, mostly with very limited success.
As a marketer, its hard to ignore the trend and the enormous number of clicks that sites like facebook, twitter and myspace are getting everyday. But at the same time, a lack of a clearly thought out strategy can actually do more harm to the brand than good.
I think its especially true for Twitter, given that its a "Internet" version of an SMS. Twitter is a free online networking platform that allows users to send and receive text updates, or "tweets" from other users that they choose to "follow." The novelty is that the message can only be 140 characters long, and can be delivered to a cell phone, email account, Twitter account page or Twitter reader installed on the desktop.
Here are some examples of how banks are using this site. BofA and Wells Fargo are utilizing Twitter as a one-to-one customer service channel. But perhaps the most personalized approach comes from Peter Aceto, CEO of ING Direct Canada, who personally Tweets several times a day about his life, his team, and his ideas. Aceto's posts never mentions ING's products; he says many of his 603 followers are "superfans" who want to share their love for the company.
If all of these efforts are a part of an overall social media strategy, then it might make sense but I have not come across or understood the benefits for banks yet.
To me the central questions banks need to answer are:
1. who are they trying to reach out to?
2. what message do they want to share with the target audience?
3. Why?
4. Is this the best channel to get the message across?
We will continue to watch the most innovative and effective social media strategies, which are still in their infancy.
As a marketer, its hard to ignore the trend and the enormous number of clicks that sites like facebook, twitter and myspace are getting everyday. But at the same time, a lack of a clearly thought out strategy can actually do more harm to the brand than good.
I think its especially true for Twitter, given that its a "Internet" version of an SMS. Twitter is a free online networking platform that allows users to send and receive text updates, or "tweets" from other users that they choose to "follow." The novelty is that the message can only be 140 characters long, and can be delivered to a cell phone, email account, Twitter account page or Twitter reader installed on the desktop.
Here are some examples of how banks are using this site. BofA and Wells Fargo are utilizing Twitter as a one-to-one customer service channel. But perhaps the most personalized approach comes from Peter Aceto, CEO of ING Direct Canada, who personally Tweets several times a day about his life, his team, and his ideas. Aceto's posts never mentions ING's products; he says many of his 603 followers are "superfans" who want to share their love for the company.
If all of these efforts are a part of an overall social media strategy, then it might make sense but I have not come across or understood the benefits for banks yet.
To me the central questions banks need to answer are:
1. who are they trying to reach out to?
2. what message do they want to share with the target audience?
3. Why?
4. Is this the best channel to get the message across?
We will continue to watch the most innovative and effective social media strategies, which are still in their infancy.
Wednesday, April 22, 2009
US Online Banking Customers Continues to Grow
Despite challenging economic environment, the number of online banking customers continued to show growth in 2008. In a recent study by Comscore, based on passively studying online banking behavior at top 10 US banks, they estimated that the number of online banking users at these banks grew from 47 Million in Q4 2007 to 51 Million in Q4 2008. According to the release, "The growth was fueled by banks' aggressive customer acquisition strategies and heightened financial interest among online banking customers wanting to keep a closer eye on their personal finances."
The other interesting finding of the study was about the interest of consumers in online banking and other related services.
Online Banking Services %of Respondents interested
Free Identity Theft Services -- 63%
Free Credit Score Monitoring -- 52%
Personal Financial Management -- 37%
Chat/Instant Messaging Service -- 30%
Widget -- 27%
Blog -- 20%
"Approximately 37 percent of respondents showed a strong interest in online personal financial management tools, with half of those interested indicating they were willing to pay a modest monthly fee for the services."
Two interesting observations:
1. More than 50% of consumers are interested in identity theft services shows the growing awareness and concern that consumers have about online fraud and Id theft.
2. Personal Financial Management (PFM)continues to be of interest to consumers, especially as consumers are focused on money management. What was more interesting was the willingness to pay a "modest fee" for such services. This could be a silver lining as banks struggle with cost cutting and try to justify additional investment in online banking.
It will be interesting to see if any of the banks try to charge a fee for such services. Given the plethora of free PFM services like Mint, Wesabe, Geezeo etc. available, I beleive it is going to be extremely difficult.
The other interesting finding of the study was about the interest of consumers in online banking and other related services.
Online Banking Services %of Respondents interested
Free Identity Theft Services -- 63%
Free Credit Score Monitoring -- 52%
Personal Financial Management -- 37%
Chat/Instant Messaging Service -- 30%
Widget -- 27%
Blog -- 20%
"Approximately 37 percent of respondents showed a strong interest in online personal financial management tools, with half of those interested indicating they were willing to pay a modest monthly fee for the services."
Two interesting observations:
1. More than 50% of consumers are interested in identity theft services shows the growing awareness and concern that consumers have about online fraud and Id theft.
2. Personal Financial Management (PFM)continues to be of interest to consumers, especially as consumers are focused on money management. What was more interesting was the willingness to pay a "modest fee" for such services. This could be a silver lining as banks struggle with cost cutting and try to justify additional investment in online banking.
It will be interesting to see if any of the banks try to charge a fee for such services. Given the plethora of free PFM services like Mint, Wesabe, Geezeo etc. available, I beleive it is going to be extremely difficult.
Monday, April 6, 2009
Micro-billing: Lessons from the Cell Phone Industry
I read a very interesting article today about the ability of mobile phone companies to charge a small fee of all kinds of content and applications - ring tones, games, TV shows and premium content.
The article says "It is a curious equation: pay for stuff on a tiny, low-resolution screen while getting some of the very same games and video free on a fancy widescreen monitor" ! This is indeed very interesting. It really goes back to setting consumer expectations. We have always paid extra for additional phone services like directory services, additional line, SMS etc.
This is in stark contrast to the world of Internet where we have come to expect everything for free - no wonder we continue to see the likes of Facebook, Myspace and others struggle to monetize their assets. The same is true for newspapers and other content providers who are not able to charge for their content online.
You would wonder why is this relevant to our world of online banking and payments? Well, we have all been wondering about the future of mobile banking and payments and who will come out as the winner - banks or telcos or neither? It seems like Telcos are better positioned to at least benefit from these transactions, since they are at least charging for the use of the network. iPhone and Blackberry may end up making money through paid downloadable financial applications.
That leaves the banks who still seem to be looking at "mobile" simply as an alternative channel without a clear quantitative ROI model. What do you think?
The article says "It is a curious equation: pay for stuff on a tiny, low-resolution screen while getting some of the very same games and video free on a fancy widescreen monitor" ! This is indeed very interesting. It really goes back to setting consumer expectations. We have always paid extra for additional phone services like directory services, additional line, SMS etc.
This is in stark contrast to the world of Internet where we have come to expect everything for free - no wonder we continue to see the likes of Facebook, Myspace and others struggle to monetize their assets. The same is true for newspapers and other content providers who are not able to charge for their content online.
You would wonder why is this relevant to our world of online banking and payments? Well, we have all been wondering about the future of mobile banking and payments and who will come out as the winner - banks or telcos or neither? It seems like Telcos are better positioned to at least benefit from these transactions, since they are at least charging for the use of the network. iPhone and Blackberry may end up making money through paid downloadable financial applications.
That leaves the banks who still seem to be looking at "mobile" simply as an alternative channel without a clear quantitative ROI model. What do you think?
Online Banking Bill Payers - More Profitable Customers?
In a recent study sponsored by Fiserv ( acquired the leading bill pay provider CheckFree), it was reported that Online banking bill pay customers are 15% more profitable and 76% more loyal.
The study was conduted at a "major US bank" (name not provided but I suspect is a top 10 bank) over 16 months and 10 million consumers. The findings also reported that active bill pay users carry almost 79% higher balances. This is all good news for bill pay vendors and also banks who are paying a lot to offer "free" online bill pay services.
But the industry continues to be concerned over the high cost of bill pay. It is estimated that online bill pay service wiill cost the US financial services industry $1 billion by 2010, according to research published by TowerGroup last August.
Banks will need to continue to do advanced analytics to justify the cost of bill pay and other "non-fee" generating services. I can easily think of "mobile banking" as another case where banks and credit unions will struggle to create ROI cases.
The study was conduted at a "major US bank" (name not provided but I suspect is a top 10 bank) over 16 months and 10 million consumers. The findings also reported that active bill pay users carry almost 79% higher balances. This is all good news for bill pay vendors and also banks who are paying a lot to offer "free" online bill pay services.
But the industry continues to be concerned over the high cost of bill pay. It is estimated that online bill pay service wiill cost the US financial services industry $1 billion by 2010, according to research published by TowerGroup last August.
Banks will need to continue to do advanced analytics to justify the cost of bill pay and other "non-fee" generating services. I can easily think of "mobile banking" as another case where banks and credit unions will struggle to create ROI cases.
Friday, March 13, 2009
Citi Partners with MySpace - Signs of Emerging Revenue Models in Social Networking?
In a novel partnership, Citi announced that is has has teamed up with MySpace to launch a credit card that lets customers earn reward points for acts of financial and social responsibility.
Citi Forward by MySpace cardholders can earn "ThankYou Points" for completing socially responsible acts, such as donating to food drives, going paperless, switching to energy efficient light bulbs and volunteering.
Citi Forward by MySpace cardholders can earn "ThankYou Points" for completing socially responsible acts, such as donating to food drives, going paperless, switching to energy efficient light bulbs and volunteering.
Citi Forward aims to encourage the maintenance of good “healthy” credit, by incentivizing consumers by things like lowering their purchase interest rates by a quarter percent when cardmembers use credit wisely. Other rewards include ThankYou Points each billing period for paying on time and staying under the credit line.Directing these incentives to college age students and young adults that may be using MySpace is especially important as this is the demographic that needs such rewards the most, for encouraging good credit behavior.
It will be interseting to see if this captures the imagination of the loyal Myspace users. We could similar integrations between financial products and other social networking sites (such as Facebook etc.) who are struggling to monetize the site traffic and justify the lofty valuations they have received from investors.
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