Who can you Trust? Online Reputations…

So you’re a politician and you want to have “friends”… or a rich and famous actress and want to have followers on your Tweet. Well there seems to be answer for you… that money can buy.

https://www.mturk.com/mturk/welcome

I’m sure MechanicalTurk is not the only service.. but I had an “innocence lost” moment for social networking. Here are some of the buyers listed on mturk:

  • www.overtimesportswear.com is pay $0.01 if you become a fan.  If you post a positive review, they will pay a bonus (not stated).
  • http://whoozy.com will pay $0.20 if you tweet about them
  • Elki Media will pay $0.15 if you follow them on twitter

How many decisions are made based upon following a crowd. Swarm intelligence is particularly relevant here. How do people decide to follow a crowd and what events trigger it? Do consumers “trust” because the swarm is around it? This is not necessarily something new, as mainstream media has “defined” many issues that are probably not issues at all. It’s a media swarm that sometimes takes hold.

For financial institutions, PR, brand and marketing managers should be on top of swarms effecting their institutions. When swarms develop, customer facing employees must have responses to customer questions/concerns, and legal should be prepared to react to any disparagement. A very good tool to keep track of brand use online is MarkMonitor.

As a consumer, I found issues surrounding the portability of trust very interesting. We have credit bureaus and bank services like ITAC to manage financial identity theft.. perhaps there will be more services like http://trureputationscore.com/ to assess your online reputation. Many employers today take a look at services like LinkedIn and Facebook to see what kind of network you have… Perhaps they don’t know that now they can be bought.. .

Other Reading

Trust Agents: Using the Web to Build Influence, Improve Reputation, and Earn Trust

P2P on Mobile – CashEdge POP Money

Just announced at Finovate today

http://sev.prnewswire.com/banking-financial-services/20090929/PH8333229092009-1.html

I know the folks at CE very well. Fantastic organization.. they excel at both the Sexy front end as well as the messy back end (risk/fraud) of payments. Their new POP Money service is rock solid and could give FSIs a strong contender in competing w/ PayPal in Sending money to any phone number or e-mail address.

CashEdge is a “Bank Friendly” service provider in that all of their services are white labled for banks. Few people know that if you use Wachovia, Citi, or Bank of America today, to transfer money outside of the bank, you are using a CashEdge Service. In 2004 I selected CE (Wachovia) because they provided a higher quality service at a lower price point then what I could build  internally (fully loaded). Many eCommerce teams only focus on the User Interface and top level design when assessing the cost of delivering P2P payments.  However it is risk and fraud management where you will find the true costs of “payments” to the organization. 

This new POP service will allow banks to create a revenue generating service, and take back consumer mindshare from PayPal.  Existing CE customer have a tremendous advantage in enabling this service, particularly given the current resource constraints within bank IT.

Many large banks are just beginning to offer A2A transfers (accounts that I own across FSIs). Wells just made this service available on a pilot in June.. Chase has it, but it is buried deep within the online functionality. There will be a big first mover advantage here, and my informed opinion is that Bank of America will be the the leader… or should I say stay the leader in payments.

Move over PayPal.

Bloomberg: Citi and MSFT to compete w/ Mint.com

Citigroup, Microsoft Said to Plan Challenge to Intuit, Mint.com http://www.bloomberg.com/apps/news?pid=20601103&sid=ajESsHMx7eYU

Hmmm… I believe Brian found me from my Mint/Intuit note below. Hope I don’t come off as a radical. Citi must be successful.. US taxpayers are shareholders. Jeff is a great guy, and one of the most talented people I have ever worked with. I have no idea how Citi keeps hold of him. Perhaps it’s like joining the Army.

Citi/MSFT will obviously look to provide services to non customers and industry sources tell me that the account aggregation will be provided by Yodlee.  There is some amount of irony here, as Citi’s customer’s had access to Yodlee’s services until September 2005. During my time at Wachovia customers loved the Yodlee service, but we had to end it due to cost and risk issues. 

For Citi/MSFT a central challenge will be moving customers away from their bank to engage in activities such as budgeting and paying bills… and then transacting. (Remember Transpoint from MSFT…. it was close to the date when Gates said Banks were dinosaurs in 1994…) In the US, MSFT, Mint.com and INTU had trouble getting customers engaged seperate from their Banks. In the US, Mint had the fastest growth rate with a total of just over 400,000 customers. A figure not likely to strike fear in the heart of many banks, this combined with the Mint demographic seems to indicate that the customer base of “spenders” vs “savers” (hence the need for budgeting). This would seem to indicate a card focus for Citi.

Assuming a card focus, a short term need to generate revenue, offering customers a way to transact with Yodlee as a service provider.. I would see card based bill payment as a key service to be offered in this new Citi/MSFT venture. During my time at Wachovia we piloted the Yodlee biller direct service. The UI was fantastic… and that was 4 years ago. This service leveraged cards as the vehicle for bill payment through aggregation of the billers online payment interface. BAC also evaluated this service as a way to generate interchange revenue off of bill payment. 

Hence, I would assume that Citi’s business case for NewCo is based upon the following:

  1. Transacting. Both leveraging credit cards for a bill payment, and purchases. (interchange)
  2. Market customers based upon transactional data (marketing)
  3. Cross sell Citi products 

There are several organizational, brand issues and customer support isssues with Citi’s approach. Citi’s customer may get confused, is this a Citi service? How can Citi’s current card customers leverage it? How do they leverage it? For example, it is hard for me to remember the 3 separate log ins that I have today with Citi today: Card, banking, Obopay… now I need a forth? Who do I call when I have a problem?

Globally, the only success model for aggregation and comparison that I am aware of is Egg.com, which Citi acquired May 2007 for just over $1B.  If you sit down with Paul Gratton, Egg’s first CEO he will tell you that their success was driven by a complete focus on delivering value to the customer, both in product and online services. It is the coupling of product and service value that creates challenges for large companies to replicate, particularly with respect to cannibalization of existing products.

In the UK, customers select their bank savings account through leading comparison sites like www.moneysupermarket.com. In the US, customers select their bank based upon the proximity to their house. The business premise with Mint.com, Intuit and its competitors is that customers will start with budgeting, and then move to select financial products (no retention play as these are not necessarily Citi Customers) or transact. Egg was successful because is first started with the most competitive product, establishing trust, and then moved to deliver the best services to surround it.  

Fortunately for banks, customers prefer to go to their bank directly to perform financial services. This “Trust Pattern” is something banks should want to reinforce. WFC exemplifies the alternate approach within its online banking services, with integrated budgeting tools, which is a great service and provides solid customer retention. Banks hold enormous control over the success of any aggregator’s site. Yodlee possesses no contractual right to the data, and the collection of customer information by any third party can be managed. If Mint, lowermybills.com or Microsoft/Citi start to gain traction with mainstream profitable customers.. expect banks to start charging Yodlee for access to their customer data, or eliminate it outright.  

http://tomnoyes.wordpress.com/2009/09/15/intuit-mint/

BlingNation Review – Updated 11/2

Was on the phone w/ the CEO of Bling Nation recently. The company’s advisory board includes John Reed, a former chairman of Citibank and of the New York Stock Exchange and Jeff Stiefler, a former chairman of Digital Insight and a former president of American Express. I was very impressed with the focused value proposition and team they have put together.
 
Overview
Stick RFID tags on phones, establish NEW RAILS, NEW SWITCH and provide merchants POS terminals. Focus is “on us” payments within community banks.
 
Key items that should give Visa/MC and the big banks pause:
NEW RAILS. They have direct integration w/ core deposit systems (think JackHenry)
NEW SWITCH. They are the switch between DDA and POS, completely new Auth system
REPLACE CASH.
Consumer Adoption. They have 10 community bank pilots going on now. 25% of all DDA volume is going through them within 4 months. John Reed said “if this consumer behavior is true.. it would be the fastest consumer adoption [of a new Payment method] in banking”
Value Prop is FOCUSED.
    Merchant:             Small merchants.. 50% reduction in interchange
    Community Bank: Replace Cash, Interchange revenue, customer retention (loyalty program), minimal
                               IT work for bank. Core deposit system “plug in”, hosted services
    Consumer.           Use your phone as a payment device, get rewards and account status. Keep your money with local banks
 
USABILITY. Instant activation.. get the tag in the mail, call up your bank and give them the number
Board of Advisors. John Reed is a visionary.. how often have you seen his name on anything? These guys will be successful
 
 
Challenges
– Private networks have typically faced regulatory and compliance scrutiny. How advanced are the operating rules and agreements? Think ACH return… 🙂
– Long term consumer adoption.. is it just a flash in the pan.. or could this be an enabler for repacing cash for “community POS” payments (thing barber and soda shop) and move upstream from community to micro payments.. Something like this help small banks take back customers from the big guys?
– Fraud. Fraud doesn’t attack a system until there is sufficient volume to warrant investment.  If Cash replacement focus, then system should be air tight as it will be tough to commit investigative services to $0.50 transactions.
 
 
 
 
 
 

Googlization of Financial Services

For FSIs today the top issues in delivering new value propositions are: where is the short term revenue, what can be created that leverages current assets, what provides “true” customer value, how do I stop non-banks from creating value in my ecosystem and who internally can execute?

A managing partner at KPCB reminded me that when Google first started, it had no plan on how to generate revenue. It was great technology, and investors figured that the bright young founders would “figure it out”. My how they have, with 2Q09 revenues topping $5.5B.  Harvard Business Review put out a very thought provoking article in April 2009.

What’s Your Google Strategy? by Andrei Hagiu, David B. Yoffie

This brought about a little déjà vu relating to channel strategy for banks. The focus of the HBR article seems to be intermediaries and the value that platforms/MSPs provide. Another aspect to consider in Google’s success is how to use information to add value, and how to develop leaders capable of realizing it. For FSIs today the top issues in delivering new value propositions are: where is the short term revenue, what can be created that leverages current assets, what provides “true” customer value, how do I stop non-banks from creating value in my ecosystem and who internally can execute?

Since I’m not writing a comprehensive book on the subject.. lets follow the Google vein. Banks have tremendous customer information that goes un-used, including:  location, buying habits, credit worthiness,  brand preferences and even family/life “events”. Of course most FSIs don’t use this information because of challenges faced in regulatory compliance such as Reg E, FCRA, 2009 CCA. …etc.Anyone within a bank today knows the challenges of working across the organization to develop something truly new and innovative. Each new team that is brought in brings about an n2 problem in coordination. Developing a new customer value proposition that uses customer data is a mine field that is difficult to navigate.. but it could also be a gold mine.

Here is a thought provoking example which I discussed with the innovation team in my previous life. I’ve also discussed this same example w/ JPMC, BAC, Visa and a number of other FSIs.

Summary: Bank mines customer transactional information (card) and sends targeted advertisements to customers

Customer Value

  • Get free phone or payment chip
  • Preferred rates on card/or accounts
  • Targeted discounts/coupons at selected merchants
  • Accelerated rewards

Customer Requirement

  • Agree to Disclosure allowing use of your transactional information
  • Agree to Disclosure for bank to send marketing advertisements to your mobile phone number
  • Minimum card used
  • Maximum of x ADs per month

Bank Value

  • Generate new revenue Stream from targeted advertising
  • Increase revenue (transactions/interchange)

Bank Requirement

  • Technology. Mine data, manage advertisements, coupons and rebates
  • Develop merchant relationships (advertisements), or develop relationships w/ 3rd parties
  • New business line
  • Develop product incentives

Merchant Value

  • Finally a bank brings in customers.. as opposed to taking interchange

Example “Network” Pilot Overview – A high level directional overview

  1. Customer registers credit card for mobile ADs. Allows SMS AD x times per month
  2. Clairmail acts as agency, coordinating merchants, promos and marketing spend
  • Merchants pre-pay for campaign
  • Develop target promo and bid criteria: customer location, demographic, event transaction, …
  • Claimail server Sits at “Network”, listens to transaction traffic
  • Card transaction events are triggered based upon card registration status
  • Event gets sent to campaign engine. SMS AD triggered based upon criteria
  1. Customer gets SMS notification
  2. Example. Shop at EXAMPLESTORE in next 5 hours and get 10% back
  3. Clairmail server monitors transactions at “Network”.
  • If Card transaction is for registered card it is sorted
  • Campaign engine finds that it Ad was sent to it, determines if transaction at EXAMPLESTORE meets threshold
  • If it is met, Campaign engine kicks transaction to MerchantAdvert service which bills merchant for AD and debits account for 10% credit plus fee.
  • Engine issues 10% credit to customer’s card account
  • Engine debits merchant account
  • Notification message sent to customer that their card account has been credited for purchase and 10% discount.

Good news for merchants is that they pay only for purchases. Great CPA here. Bad news for banks is that someone is already creating a model to benefit from your transactions with your customer.

Banks must identify and incent leaders capable of working across their internal organizations to develop new models which deliver value to the customer. The challenge of delivering value in new ways cannot be delegated to the technology or internet teams.. it requires business leadership from seasoned executives well established in the organization. When GE looked to establish a new business line.. it didn’t hire an outsider with no tie to the existing business.  The same approach should be taken by leading FSIs.

The innovation team may be able to create the idea.. but you need to pull a star out of your stable to go run with it. The other option would be for Banks to start acting like VCs and give a few years for smart people to “figure it out”. However this is loose approach would be challenging for a bank, particularly for innovation surrounding existing customers and an existing business. Only leaders that are respected across business units can pull off coordination between them, particulalry when complex regulatory issues must be addressed.

Other reading

http://www.theinnovatorssolution.com/

Citi – Bank of the Future?

Even by Citi standards it is very strange to have 2 people with no retail bank experience driving a retail bank strategy. Liza came from the card group under David Simon in Customer Experience. Liza took over from one of Citi’s best internet leaders Rob Rosenblatt (now at Chase Cards).

September 2009

Travelocity CEO Michelle Peluso was hired by Teri Dial to run “Citi Forward”, with Liza Landsman running the mobile and internet team…

http://www.bloomberg.com/apps/news?pid=20601109&sid=alIEXQt0mqFQ

Citi has proven the ability to get deposits as Citi’s US Direct Bank under Direct CEO Steve Kietz was the fastest growing bank (not just online bank) in the history of the US, collecting over $8B in 6 months. Steve’s marketing genius was not enough to overcome the lack of investment. The fact remains that building a deposit book requires investment, (a 20 month payback at best).  You either build a book or milk it.. (take a look at the balance run off in CitiDirect since the dropped the rate from 2.75%.. )
http://seekingalpha.com/article/18843-citigroup-q3-2006-earnings-call-transcript.

Even by Citi standards it is very strange to have 2 people with no retail bank experience driving a retail bank strategy. Liza came from the card group under David Simon in Customer Experience. Liza took over from one of Citi’s best internet leaders Rob Rosenblatt (now at Chase Cards).

Issue for “bank of the future” is not collecting deposits.. it’s determining how you acquire and retain customers separate from a rate driven product play. The key “Strategy nut to crack” is how to build a profitable retail bank business in the US without branches. Chase, Wells and BAC have all done extensive studies that show customers select a bank based upon the proximity of the nearest branch to home/office.

Internationally, employee direct deposit (aka salary domiciliation) has been the most effective way to gain deposit customers with a minimal branch footprint.

Citi senior management continues to fuel the churn of executives here… lessons are learned and relearned in each new management appointment and each country. Understand that Michelle has very little appetite for the job…. perhaps she’ll gain perspective after her 4 month leave starts next month.

Quest for Consumer… Why Intuit is buying Mint for $170MM

Quest for Consumer Why Intuit is buying Mint for $170MM

For those of you that have never used Mint let me give you an overview (for more info see first link below). It is a free service used by 400k-600k users for personal finance. The core of its service is aggregation, where you register your financial (and non financial) accounts by providing your online credentials. Mint then logs in to your account and pulls your balance and transactional information into its online site (service provider is Yodlee). Mint leverages this information to provide services, such as:

  • Budgeting
  • Spending comparison (geographic and income ranges)
  • Alerts (against budget, transactions, balances, …etc)
  • Recommendations (ie marketing, saving, investing and budgeting)
  • Trending, ..etc

Mint.com will become part of Intuit’s Consumer Group, which includes both Quicken and TurboTax products. Intuit’s business case for acquisition rests on 3 tenants:

  1. Grow consumer portal.. with Mint as the new base. The revenue equation here rests on expanded marketing of Financial services into combined Intuit.com/ Mint.com customer base.
  2. Mint customers can be sold into TurboTax
  3. New value added services such as: Card based bill payment (revenue from interchange), mobile, advisory, …

How should Banks respond?

There are 2 central issues for banks to consider: Customer data and customer relationship. Having your customers manage their finances outside of your financial institution is a lost opportunity to add value to your existing relationship. Banks need to decide what services and tools their customers WANT through customer engagement and advocacy. Mint’s demographic seems to indicate that there is a minimal business case for bank investment here. Banks may want to consider “good enough” services for budgeting such as what Wells Fargo provides online (https://www.wellsfargo.com/wfonline/spending).

If consumer surveys point to need for a comprehensive view and portfolio management the vendors such as Yodlee and Cashedge offer these services to banks today. Of specific focus should be small business and wealth. Banks should carefully track trends in these segment as needs are greater (as is customer profitability).

Banks have substantial control over Mint/Intuit success by controlling access to data. Many leading financial institutions have altered there hands off approach to allowing 3rd parties ad-hoc access to customer account information. Banks should require formal agreements with Intuit over data access, and shift costs to Intuit for managing the activities associated with allowing this access. During my time as head of Online and Payment services with Wachovia, over 40% of all ‘Internet’ help desk calls were related to Quicken/Money and a further 30% were related to aggregation. Banks should strategically manage access to their data from a cost, privacy and consumer perspective.

Financial Analysis.

$170MM is 5.5x invested capital of $31MM, and $408/Mint user. Revenue has not been disclosed, but it is assumed that Mint.com is operating at a loss.

2009 has seen other activity in this space, with Apax Partners $571MM acquisition of BankRate (NAS: RATE). Also look for new financial portals coming out in partnership with Microsoft within the next few months.

Related Links
http://deals.venturebeat.com/2009/09/28/finance-startup-yodlee-we-werent-screwed-by-mints-acquisition/
http://moneyning.com/review/overview-of-mint-as-a-money-management-tool/

http://www.techcrunch.com/2009/02/19/quicken-online-cant-believe-mint-is-doing-so-well-sends-threatening-letter/

http://www.businessweek.com/technology/content/sep2009/tc20090914_208171.htm

http://www.businessweek.com/the_thread/techbeat/archives/2009/03/sxsw_mintcoms_d.html

http://www.reuters.com/article/pressRelease/idUS180130+22-Jul-2009+PRN20090722

From WSJ: The Top Sleepers

http://online.wsj.com/article/SB124146312592184275.html

Great Article.. had a good laugh.

Every time I go to France I marvel at the pace of life, whether in Paris, Lyon, Nice, or traveling in Bordeaux.  32 hour work weeks, minimum of 30 days of paid leave…late to bed, late to rise.. time spent eating 135 minutes PER DAY.  How can you spend 2 hours EATING every day!?  It’s no wonder that the French see American’s as always in a hurry… to talk, to eat, to walk, to work…  Its also not surprising to see so few French emigres: as few want to leave, and fewer would want to hire…

But what are we in a hurry for? Seems like we spend 44% of our free time watching the tube…  Sure would be great if we (Americans) could find something useful to do with our free time (community, social, educational).. then perhaps we could realize a quality of life advantage.

Thought for the day… is all time spent in bed by the French considered sleeping? Maybe we should have something to envy…

FIS to buy Metavante

http://pindebit.blogspot.com/2009/04/nyce-metavante-acquired-by-fidelity.html

http://www.digitaltransactions.net/newsstory.cfm?newsid=2130

http://www.americanbanker.com/btn_article.html?id=20090402BY4WW8EY

The payment space is hot. With FIS’s recent $2.94B acquisition of Metavante will create a company w/ combined revenue of over $5B. Good move by FIS. According to the deal summary, drivers were:

Enhances growth prospects
•Generates substantial synergies
•Drives margin expansion
•Increases financial flexibility
•Accretive to cash earnings
•Creates significant shareholder value

Expect $260MM expense save in combined entity.  FIS will be a key channel to deliver service to banks outside the top 20. External vendors should be ramping up there alliance plans w/ FIS.

Fidelity to Launch new Direct Bank

Rob Foregger is now Chairman and CEO of Fidelity Investment’s new internet bank. Reporting initially to Sanjiv Mirchandani under Steve Akin’s personal investment group Rob will be building on the cash management platform. Ned and Abigail are keeping the lid on this one.

Fidelity’s plan is to create a Direct Bank based upon an investment led model… Similar to e*Trade and their stock plan services. Abigail is leading the corporate side plan services… and is looking for something new to sell. In addition to 401k, stock plan services, … why not offer banking?

Note that Rob’s background is in mortgage. The lending side is quite attractive for Fidelity… it obviously needs to get the liabilities side of the balance sheet going before jumping in with the asset products. It looks like the bank is FDS National out of Mason Ohio.

Order No.: 2000-27

Date: March 10,2000

FDS National Bank, Mason, Ohio (the Bank), has applied to the Office of Thrift

Supervision (the OTS), pursuant to 12 U.S.C. $ 1464 and 12 C.F.R. 0 552.2-6 for permission to convert from a national bank to a federal stock savings bank, FDS Bank (the New FSB). Federated Department Stores, Inc., New York, New York (the Acquirer) and FDS Thrift HoldingCompany, Inc., Cincinnati, Ohio (collectively, the Applicants) seek approval under 12 U.S.C. !j1467a(e) and 12 C.F.R. $ 574.3 to acquire the New FSB. In addition, FMR Corp. and Fidelity Management & Research Company, Boston, Massachusetts, and Abigail P. Johnson and Edward C. Johnson, III, have filed, pursuant to 12 C.F.R. 5 574.4(e), a rebuttal of control submission that includes a rebuttal of control agreement for approval to acquire up to 25% of the stock of the Acquirer.