Community

Yeah right. PayPal was supposed to replace cash by electronic payments. From that beginning to now facilitating ATM cash withdrawals is indeed "revolutionary".

TransferWise is a good example of a service that charges lower fees for a slower (cross-border remittance) transaction. Can you give an example of a service for which "Customers are willing to pay higher fees to accomplish the faster transaction processing."?

Brilliant post. Kudos for upfront describing the business problem(s) that analytics technology can solve. I'm sick and tired of hearing fintech providers going on and on about how some spanking new technology will kill banks / insurers and, when asked for what business problems their product or service can solve, listening to some inane examples like how their "disruptive" PFM can save $3 on coffee or $5 on beer. Against that backdrop, your post is a breath of fresh air.

From my interactions with a few general insurers who provide household insurance products, I understand that many people who lose N items in a (say) flood are filing fraudulent claims for >>N items. I'm keen to know your thoughts - maybe in a follow-on post - on how analytics can help insurers unearth such frauds.

Open systems cognoscenti made the same doomsday predictions when Internet Banking emerged 15-20 years ago, Mobile Banking emerged 5 years ago and Faster Payments emerged 8 years ago. But legacy systems have held up so far. Meanwhile, the leading open core banking systems in the world have themselves become 20 years old and themselves risk becoming a part of the legacy landscape very soon:( I know banks that found it quite difficult and costly to enhance their open system CBS to support modern services like instant account opening and social media banking and had to get them developed as addons by third party providers of modern technologies. The patchwork that has been happening on top of mainframe applications has started happening over open system applications also.

Between my family and company, I have over 10 mobile phone connections across 3 TELCOs, say A, B and C. Lately, I rarely visit their stores to pay bills - HDFC Bank's PayZapp Ends My Bill Payment Woes - but when I do visit them, I see customers of TELCO B and C wanting to switch to TELCO A, customers of TELCO A and C wanting to switch to TELCO B, and so on (Under Mobile Number Portability procedure, physical visit to the destination TELCO is mandatory). 

The point of this story is this: No single MNO does so much better or worse than any other MNO as to cause a net inflow / outflow of consumers to / from it. I suspect the same with banks.

Ergo, this program will be a monumental waste of bank / taxpayer / customer's money. But there are a lot of budgets, publicity and careers at stake, so I won't be surprised if this program does happen.

When I read this and this article about Zenefits yesterday, I realized how Uber, AirBnB and many other wannabe disruptors leverage regulatory arbitrage to their advantage. It struck me that technology is only part of the disruption formula, with the real secret sauce being a cavalier attitude towards compliance. Sometimes I wonder if banks are doing this totally the wrong way and whether they should be emulating fintechs in more than just technology. Seriously.

@CliveMunn + 1. I for one wouldn't want my bank to throw up its hands and blame the regulator in the event that I have to complain to it about shady transactions happening on my bank account.

On another note, this has nothing to do with legacy landscape. If mainframes are good for one thing, it is to handle extremely high volume online transaction processing. Same doubts were expressed about legacy when Internet Banking, Faster Payments, Mobile Banking etc. came into the picture. They survived the increased workload from all of them; they will survive the increased workload arising from third party API calls as a result of this regulation. A fairly common root cause for many banking system failures has been goof ups during updates, not lack of horsepower. As counterproof, there's virtually no legacy in Indian banking landscape, still the success rate of online payments is absymally poor, thanks in part to the increased workload posed by 2FA mandate.

From personal behavior, I tend to agree with @TomHay. I found little value in my Mobile Banking app and uninstalled it within a few days of downloading it. On the contrary, the bill payment app from the same bank has been a Godsend and I use it several times a month (HDFC Bank's PayZapp Ends My Bill Payment Woes). Had PayZapp been a feature in HDFC Bank's Mobile Banking app, I wouldn't have bothered to go through the friction of opening the Mobile Banking app, locating the PayZapp feature inside it, all the while being bombarded by notifications that I'm not interested in.

@TayloeDraughon:

Totally agree that compliance officer shouldn't be made to face personal liability alone. Brilliant suggestion about the need for legal counsel.

In the early 2000s, I set up my company's subsidiary in Germany. Although I was not a compliance officer, I carried all the compliance risks in my capacity as the MD of the German subsidiary. My company approved my request to be provided with two insurance policies that protected me from personal liability in the event the company ran afoul of local laws. Translating from German, they were called Third Party Liability Insurance and Legal Defence Insurance. Not sure if such insurance products are available in Anglo-Saxon jurisdictions (e.g. USA / UK) but D&O insurance should come close.

MasterCard's inControl, launched 6-7 years ago, can do virtually everything this Visa API can. In fact, inControl was the subject of my first ever Finextra blog post back in 2010!

Credit Cards Come A Full Circle