Community

@KyleT: Internet Banking, Mobile Banking, eTrading - Applications like these, and many more, have been around for ages and involve wrappers around legacy systems. Keen to know if you've any other type of wrapper in mind.

To continue with the railway analogy, the light at the end of the tunnel is perhaps yet another train. Compared to realtime systems like FPS and TARGET2, SEPA should be child's play. Having worked with a payments vendor that enabled a Top 5 UK Bank go live on SCT on the first deadline in Jan. 2008, I'm sure that technical solutions for SEPA have been around for several years now. Relatively poor offtake of SEPA is likely the result of the lack of business case for a system designed around cross-border EURO payments against a reality where over 80% of payments traffic is still domestic. Not surprisingly, the aforementioned Top 5 UK Bank, which was an SCT leader in 2008, opted to outsource SDD to another bank. 

One thing I always hope to see in articles like these is what I call the "perfection requirement" that banks are uniquely subject to. Before shipping a car, the auto manufacturer can inspect all the units coming out of the shop floor, conduct QC, reject the subpar quality cars and prevent them from going out the door. This luxury is available to almost all industries except banking where high transaction speed precludes any inline QC. Despite that, when they work, most banking systems deliver 100% accurate results. This poses a very different pressure on maintenance of existing banking systems that few other industries face and perhaps makes it inevitable for banks to spend so much of their IT budgets on RTB activities.

From anecdotal evidence about and personal experience with overzealous fraud detection and prevention systems, let me add "minimization - if not elimination - of false positives" as another ingredient of a great FD&P system. Above all, the system and its practitioners shouldn't forget that any business has to take calculated risks and exists only to enable, not block, transactions. 

@GaryW: Wow! When LinkedIn reached the 100M user mark, I was excited to receive an email from Reid Hoffman thanking me for being one among the platform's first 1M users whose early adoption fueled its rapid growth. But your accomplishment is in an entirely different league. Congrats!

Oh, I keep getting such offers but, since I don't intend to open the attachment, I delete such emails w/o opening them just after reading their subject. 

My experience resonates well with your views about how eStatements are not suitable for increased cross-selling. As I'd highlighted in my Finextra post titled, Save Costs But Lose Revenues With eBills And eStatements, because of better open-rates and a more natural advertising experience, "Most advertisers... are willing to pay a premium for advertising on printed documents compared to eBills or eStatements."

Why do we take a regulated industry like banking and keep quoting examples of disruption from transportation, consumer electronics and other unregulated industries? I suspect it's because there are hardly any examples of successful disruptors in telecom, utilities and other regulated industries. Compared to them, structured financial products like CDO, CDO2, CDS and MBS prove that banking is a lot more innovative. The very fact that these products sold so well establishes their customer-centeredness as well. 

As I've argued in my JIBC op-ed article titled "Impact of Regulation on Financial Services Providers", some nonbank financial products are too small to threaten banks (e.g. Dwolla, PROSPER) and the others will simply cease to exist in the absence of the banking rails on top of which they’re built (e.g. Facebook Credits which has, since then, ceased to exist despite the continued presence of the underlying banking rails). 

That said, it’s not as though regulation has totally paralyzed banks. There are several areas in which banks can enhance their services to become customer-centric. But they involve operational improvements rather than large-scale innovation.

If I understand this article correctly, only businesses - not banks - are lagging behind on SEPA implementation. This matches my experience with a Top 5 UK bank that went live with SCT on the first deadline in Jan. 2008 after barely 3-4 of months of work despite having a large and complex payments landscape. Maybe this migration is far more complex and time-consuming for businesses. In which case, they might try to justify their laggard status by raising basic questions around its business case.

I think this Microsoft Research paper gets it absolutely right when it says, "Despite countless attempts and near-universal desire to replace them, passwords are more widely used and firmly entrenched than ever... and not only will passwords be with us for some time, but in many instances they are the solution which best fits the scenario of use."