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2013 was the year for renewal

This is my penultimate review of 2013, as we head towards the shutdown season, so here goes

2013 was the year of meditation.

Banks had the chance to think, reflect, plan and look ahead.

After five years of manic panic, hysteria, anger, fear, angst and doubt, 2013 was the first year we could actually have a breather and consider what’s gone before and what is planned ahead.

This was reflected by the feel-good buzz at SIBOS Dubai, along with the fact that we didn’t have any disastrous headlines this year.

No crisis.

No LIBOR (well there was an FX issue); no major money laundering or major fines of a bank (well, apart from JP Morgan), but that was for last year’s issue); no issues of poor bank management or controls (well, apart from the Crystal Methodist); and a much more stable market generally.

The reason for the breather is that we just went through what I would call the year in-between.

2012 was the year we could have tried to reshape the Volcker Rule, rethink the UK Banking Reform and redefine the European Banking Union.

We could try to lobby against PSD2, MiFID2 and EMIR.

But 2013, all fo these things were locked down.

That means that, like the SEPA mandate in Europe and mobile faster payments in the UK, these things are all now done and dusted, so we just need to implement them.

Not as easily done as said, but 2014 is the year for pulling up the sleeves and getting down to work.  2013 was the year to think about it.

Nevertheless, 2013 did see one big change.


The digitisation of banking hit full force this year, as evidenced by the fact that all markets have moved towards a digital form.

In investment banking, the Chi-X effect is hitting the post-trade world.  All of the clearing and settlement markets will see transparent and open pricing and processing by the end of this decade.  OTC Derivatives will be completely electronified and the Chi-X effect will mean that new forms of electronic trading will reshape the markets.

There will be a new and dominant clearing operation.

Will it be the EuroCCP/DTCC?  Or something else?

It will be one of them, and the game will be determined by electronic liquidity movements aligned to the Chi-X BATS platform.

In commercial banking, the digitisation effect is being seen in the form of real-time, automated clearing.  We have moved from batch to real-time.  This was clearly evidenced by the NACHA conference in June, when ACHs from the UK, Sweden, Poland and Mexico stunned the US payments processors by showing both real-time clearing and, in the case of Poland, real-time settlement.

The digitisation effect is more predominant in the retail sector however.

This is evidenced by the #1 Financial Services Club news item of 2013 being the shrinking bank branch network backed up by the seventh most popular blog entry:  Proof that mobile banking is killing the branch.

The move from physical to digital banking is in full flow.

Mobile internet everywear 24*7 is the mantra of 2013, and this is hitting retail and other markets hard (remember that the bank to corporate relationship is driven by the corporate to consumer relationship in many markets).

This move to remote, digital banking is also seeing a further trend as banks move from customer service with humans to customer service through machines.

Machine based customer interaction is moving towards mainstream banking, as evidenced by ICICI Bank in India, Deniz Bank in Turkey and mBank in Poland, all of whom are invested heavily in Facebook banking.

Facebook banking via digital channels is going to be the mainstream dialogue of 2014 if, for no other reason, that it can have a magical effect on customer service.  This was evidenced by ICICI saying that before using Facebook for customer engagement, 24% of the online mentions of ICICI were negative and only 19% positive.  Now, 49% are positive and just 6% negative. 

Mind you, banks must commit to social engagement through these channels if they are to be taken seriously, and not be scared off by the backlash they might receive initially.  In fact, if anything, the core issue with JPMorgan’s twitter disaster was not all the jokers who took the mickey out of the bank via their tweets, but the fact that the bank did not continue to engage via twitter.

Instead, they pulled out of the dialogue.

To me, this is like a person arriving at a party and because people bully them, they run home in tears.  The only way to stand up to a bully is to be just as assertive back.  Shame on you JPM!

Amnhways, the increasing digital social bank engagement with their corporate and consumer client base will continue apace in 2014. 

This then reasises the fainl question: what about the digitsation of money?

The story of 2013 has to have been the digitsation of money and the movement inot virutality of money.

Bitcoin led the march, but it is not just Bitcoin but the Bitcoin brethren and clan of currencies.

Everything from Candy Crush in-app gaming to online global trade is being disrupted

I first blogged about Bitcoin back in 2011, and predicted that this – or something similar – would take off big time back in February.

Since then, Bitcoin has probably been most regular subject to return to throughout 2013 but, as evidenced by the news that the currency has halved in value in the last week, Bitcoin is not something I’m backing long-term.

My view is that the Bitcoin bubble will burst, and everyone will lose confidence in it.  This is because too many people are using the currency as a speculative investment, rather than using ti to actually trade in real goods and services.

When the bubble bursts, the coin will drag its heels along for a year or two.  Then it will come back, or one of its brethren like Ripple, will take off as a serious alternative to real money exchange online.

And that is the core point: that digital money is as good as real money in a digitised world of trade.

In fact, the point I keep coming back ot is that banks are not for banking money, but banking data.

Data is where the value is today.

That’s why criminals target banks’ systems rather than banks’ branches, as the systems are the places that hold the money.

The money is held in a digitised form, and it’s far better to rob the digital assets therefore than to try to rob the physical assets.

Therefore, the 2013 trend that is emerging is to bank data, not just money.

This was illustrated to me perfectly by FIDOR Bank in Germany, who are laughed at by some because they bank data.

What do I mean by banking data?

They bank anything in a digitised form that has value to their clients.

Banking data might be banking data about money – the euro assets, investment, deposits and withdrawals I make.

Banking data is also about banking data about other commodities I own – gold, commodities, equities and other assets.

They also bank data about other things I believe have digital value however, such as World of Warcraft Gold or Diablo Gold.

For the new generation of the internet, banking data is going to be as, if not more important, than banking money.

Securing my data about my Bitcoin’s for example.

Bitcoin’s have a real value.  They can be traded in and out of the Bitcoin network for real currency.

That is the reason why so many are investing in the economy, as speculators on a commodity they perceive to be of value.

That is why SIBOS debated: should banks be banking Bitcoins? and why the answer should be yes.

That’s why FIDOR Bank banks Bitcoins and why they are already engaged in around two transactions a day, rising to many more if this economy really becomes viable.

It’s not just Bitcoins that banks should bank however, but any data that customers think has value.

That’s why FIDOR accepts the banking of gaming gold and why banks will, in the long-term, be securing anything from photographs to key documentation.

After all, the one thing that differentiates a bank from everyone else is that they give a guarantee of your money back if you secure it at the bank.

Soon, they will give that guarantee about your data or, rather, the equivalent value of the data you have stored with the bank.

If you lose all you Bitcoins or Diablo Gold on your PC, tough.  If you’ve stored it at the bank and, at the time of the loss, it was worth $10,000, then that’s what the bank licence guarantees. That you get $10,000 back.

You don’t have that guarantee from anyone else, so the big sea change that I’ve seen in 2013 is that banks are finally getting to grips with digital money, not just real money, thanks ot Bitcoin.

In summary, 2013 has been all about the digitisation of banking.  From the Chi-X effect to the growth of real-time payments to the emergence of the digital, social databank, 2013 has seen all banks wake up to the digital effect.

That’s pretty lucky, as that’s what I called my new book (in case you hadn’t noticed!).

Anyway, after that shameless plug, I’m going to call it quits today.

Tomorrow?  A review of my 2013 predictions made in January. Did they come true?



About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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One comment

  1. Nice review, and I’m fully agree on the digital comments. I have been pitching for while that bank’s need to grasp the way in which they are uniquely digital businesses, with no physical product. I’m waiting to see who will be first to acknowledge that cash is non-core and “officially” outsource it. The supermarket banks are probably ideally placed.

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