Were Skinner’s 2012 predictions correct?

At the start of the year, I always make a few predictions about what will happen in the following year. 
Watch this blog in January for 2013’s predictions.  But what were the predictions for 2012?

Well Economically, I made the following forecasts:

1. Asia’s
   light continues to shine, but not quite as bright
2. American
   equities is the place to invest
3. There
   will be a major European bank failure
4. A
   country will leave the Eurozone

Pretty much spot on with the first two if you read the blog
this week about the hot money being in America, but a major European bank
failure and a country leaving the Eurozone? 

Well, the RBS glitch could have been a major European bank
failure but what I really meant was a bank collapsing.

Oh yes, there was one. 
Actually more than one.  A whole
ton of banks in Spain collapsed in 2012, and I would claim that Bankia was a major European banking failure.

There have been similar issues in other countries, although
there is nowhere where Europe reports their bank failures, unlike America where
the FDIC records each one and note that there have been 417 banks shut down
since 2008).

Nevertheless, if you’re interested, here’s a link to a
useful report on EU banking stats and figures.

Meanwhile, leaving the Eurozone?

Well, many would have done if Germany and France had not
kept the Union together.  Germany has
been particularly keen to maintain the Union, although most economists still
see it as unviable.

It is probably best summed up by these bullets from Graeme Leach, Chief Economist at
the UK’s Institute of Directors:

• The Eurozone remains highly vulnerable to a
  break-up between the core and peripheral economies. The centrifugal forces
  pulling the euro apart remain stronger than the centripetal forces holding it
  together.
• The survival of the euro in its current form depends
  on huge purchases of peripheral country bonds by the ECB – the ‘Draghi Plan’ –
  to drive down yields. But even this only provides a temporary solution, buying
  time.
• The competitive losses in the peripheral
  economies are so large that external devaluation (euro exit) will probably
  prove more attractive than internal devaluation (decade-long austerity, sharp
  falls in wages and massive unemployment).
• The Draghi Plan is conditional on peripheral
  economies accepting further austerity measures and an erosion of fiscal
  sovereignty. There is no certainty that countries such as Spain will sign such
  a memorandum with the ‘Troika’ – the ECB, EU and IMF.
• If the monetary option fails (monetisation of
  debt), the fiscal option (mutualisation of debt) is even less likely to
  succeed. Hybrid solutions, such as issuing a banking licence to the European
  Stability Mechanism (ESM) rescue facility, are not likely to gain traction.

Pretty much what I said recently on the Banking Union.

So what predictions did we make for banking in general in
2012? 

1. Regulatory change will still be high on the
   agenda
2. Investment banking will get a radical overhaul
3. Clearing and settlement will become a much
   bigger focus
4. Reconstructing distribution will be a big
   challenge
5. Contactless mobile will reach a tipping point in
   retail payments

Some of these were obvious – the first three – and has been
a regular source of discussion here, particularly within our newly formed Clearing
& Settlement Working Group who made it clear that EMIR, Dodd-Frank and more is a challenge.

It was also high on the agenda at SIBOS where David Wright admitted the challenge of two-stream world meant that the regulators were as
confused as the practitioners about what to do.

I haven’t even mentioned other regulatory discussions, such
as the release in October of the Liikanen report that will determine the structure of European banking for the long –term.

The report made many recommendations, with the five key ones
summarised best as:

1. If a bank’s trading assets exceeds certain
   limits against its assets, then it has to spin-off its trading into a separate
   division (ring-fenced)
2. Banks need to have living wills in place, so
   that if they fail they won’t bring down the rest of the financial market with
   them
3. Management, shareholders and creditors will all become
   more liable for losses if a bank fails to ensure that taxholders are not on the
   line for future bailouts
4. Basel capital ratios need to be implemented,
   potentially with more rigour than the Basel Committee itself would propose
5. Bank management and traders should be paid in a
   different way, with bonuses linked to bank debt and long-term returns rather than
   short-term gains

All well and good, although France has just announced a slightly different approach, so regulatory
arbitrage here we come.

That leaves my last two points:

• Reconstructing distribution will be a big
  challenge
• Contactless mobile will reach a tipping point in
  retail payments

Well the point about reconstructing distribution is true, and will continue to be true for some
time.  For example, I spoke at Next Bank
Europe earlier this year and it made me realise that
the most common question I am being asked by banks is: “It’s all well and good
talking about the Next Bank, but our
challenge is how to get This Bank to
migrate to the Next Bank”.

This is the core essence of the challenge for everyone: how
do you make the elephant dance? 

How do you get the current organisation, which will have
years of legacy operations along with many mergers and acquisitions that are
still running in pre-integration state, to all become harmonised into a lovely
and clean, fit for the future, digital customer, Bank 3.0 state?

And even if you can spring clean the company to be ready for
tomorrow, how do you get the people and particularly the management team to buy
into it?

I had this discussion for the umpteenth time the
other day, when I challenged a retail banker over the fact that their online,
mobile services appeared to missing a trick in not leveraging my mortgagee information
as part of my balancing.  He said to me: “ah,
that’s because we look after the digital operations for the deposit side of the
bank”.

Bleedin’ silos.

Anyways, the final one leads into my tech predictions:

1. Contactless
   mobile will reach a tipping point in retail payments
2. Social
   media will become a core communications tool
3. PFM,
   combined with social media, is going to enjoy a boom year
4. Tablet
   PCs with financial apps will be pervasive and ubiquitous
5. Risk
   management will be a key area of software development
6. FPGAs
   and GUIs will be deployed across investment markets
7. “Data
   as an asset” will be the most common phrase used

I was going to admit I was wrong on the first one, as
contactless?  Doesn’t that mean NFC?

Then I re-read my note where I said: “Everyone assumes
contactless = NFC chips.  It doesn’t have
to be.  Contactless in my world, is any
payment that is simple, automatic and wireless.”

I wasn’t quite as adamant as I became during 2012 that NFC
is a still-born technology with No Flippin’ Chance of success.

Why did I become so anti-NFC?

Because it involves a physical movement that adds nothing
to the retail payments process.  This
means, from a consumer viewpoint, a card is just as easy to use as a
contactless card.  Conversely, a
proximity payment is frictionless and simple. 
That is where we are heading fast and means that NFC is superseded by
proximity mobile payments faster than you think.

If you don’t believe me, PayPal President David Marcus blogged
this week the same
thing.

One of his four
2013 predictions is that NFC will fail to gain mass adoption: “The NFC payments debate will slowly
die in 2013. Is tapping a phone on a terminal any easier than swiping a credit
card? I don’t think so – it’s not solving a real consumer problem and it’s not
providing additional value to encourage me (or anyone else for that matter) to
change my behavior.”

Totally
agree.

I’m not
going to tick off the rights and wrongs of the other six predictions – you can
make your own mind up about them – except to pick up on the prediction that Tablet PCs with financial apps will be
pervasive and ubiquitous.

They are.

We now have Windows Phone 8, Android and iOS competing on
mobiles, mini tablets and tablets.

Ubiquitous touch computing is the order of the day and what
better endorsement than Barclays Bank rolling out iPads to all of their front
office staff?

According to Forbes, this makes it the seventh largest commercial rollout iPad in the world:

The Ten Largest
Commercial iPad Deployments

1. Korea
   Telecom          32,000
2. SAP
   AG                     17,000
3. Roche                       13,070
4. Cisco                        12,500
5. United
   Airlines           11,000
6. IBM                           10,000
7. Barclays
   Bank              8,500
8. Royal
   Caribbean          6,000
9. KLA-Tencor                 5,400
10. Condé
    Nast                 5,000

… and other banks will follow.

Anyways, it’s time to get ready for the holiday season so
that’s it from me for now. 

2013’s predictions on the way in early January and have a
happy hols.