Potential: Revealed

Strategic Thinking, Innovative Ideas, Growth Marketing, and Revealing of Potential

Archive for June, 2011

Recent Commentary: Person-to-Person Payments (P2P)

For a client recently I published some commentary on recent news in the financial services technology (Fintech) market.  Just sharing the publicly available portions here for your interest – and of course comments!

Here’s the second one (the first is here):

clearXchange P2P Next in Long Line of Mostly Unsuccessful Mega Bank Consortiums

On May 25, 2011  Bank of America, JPMorgan Chase and Wells Fargo announced the launch of a joint venture — clearXchange — which will enable their customers to move money using just a mobile number or e-mail address. A direct competitive move versus eBay’s Paypal unit. And threatening Person to Person (P2P) offerings from Fiserv (NASDAQ:FISV) (ZashPay), PopMoney (CashEdge), as well as money transfer players such as MoneyGram (NYSE:MGI), Western Union (NYSE:WU), Obopay and Fundamo.

The announcement garnered significant attention of course due to the banks involved.

Previous bank consortiums as mentioned in the article (e.g., Spectrum, Pariter, ISIS) have a lousy track record for a reason. Innovation and market success requires many characteristics such as capital – which the big banks have, of course – plus nimbleness and persistence in the face of inevitable challenges and failures along the way — which the big banks generally lack on an individual basis. I never see how the latter gets overcome if a group of mega banks simply band together as a “committee”.

P2P payments as the author notes have found success only where some friction in the marketplace could be reduced for a price the market would pay – providing for a sustainable, relatively defensible revenue model such as Paypal did with small/micro-sized merchant payments (e.g., eBay sellers and their auctioned merchandise).

I am unclear that this requirement is met with P2P where the P’s are really that, “persons” — indeed as the author points out this is a sort of last mile problem/opportunity in the payments market place. But is there enough friction with current methods (e.g, checks, cash) and processes (e.g., the infrequent incidence of paying another person such as a baby sitter or repaying a friend for picking up the drink tab last night) to offer sufficient latent demand that is ready to be met?

If successful in some way though, clearXchange would provide a positive force if they are a “network amongst networks” which interconnect to facilitate the critical mass reach that will eventually be required for P2P to become more mainstream.

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Recent Commentary: E-Banking

For a client recently I published some commentary on recent news in the financial services technology (Fintech) market.  Just sharing the publicly available portions here for your interest – and of course comments!

Here’s the first one …

Online Banking Increases Lead While Mobile Banking Continues to Lag

Online Banking (OLB) is far ahead now — 55% v. 28% for branch v. 2% for mobile — as the most satisfying channel for retail banking consumers according to May 2011 study from Foresee. Cautiously good news for leading providers like Fiserv (FISV), Intuit (INTU), Jack Henry (JKHY).

OLB’s main competition (or complement) is the branch. Together they make up nearly 75% of the channel preference for retail consumers. Financial services (FI) firms should continue to see these channels as complementary, driving as much customer interaction as possible to electronic channels but integrating the experience with the branch and other personal touch points rather than trying to fully replace them.

Mobile continues to lag because it is often erroneously sought as an OLB or branch channel replacement (to further drive out service costs and serve younger demographic segments). Since it is not a replacement at all, it falls naturally short of retail banking customer expectations and needs, and in turn harms its value proposition.

Mobile is more likely a successor (or complement) to the ATM and call center – and at best a complement to the online channel. Until some day far in the future, if a killer mobile device form factor emerges, mobile banking is likely to be over-hyped and under-performing. The aforementioned FinTech firms plus others such as ClairMail, FireThorn (Qualcomm (NASDAQ:QCOM)), mFoundry, the telcos are heavily invested in mobile banking technologies and apps — and their strategies need to be well crafted or they’ll continue to miss the mark and expectations.

This will mean for foreseeable future mobile banking will at best grow to 15% penetration as the “preferred” retail banking channel. A better strategy is a focused and integrated set of functionality centered around payments and customer service.

An online bank — as a stand alone or as the flag ship of retail strategy for a brick and mortar FI — done right has a significant and receptive market awaiting it. . .