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2012: a bank technology outlook

What’s hot in tech in 2012 is a continuation of what’s hot in tech in 2011: cloud, smartphones, tablet PCs, contactless mobile and more.

Rather than just repeating all that again, let’s be more specific:

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

The last item is the most important one, and the preceding items show why.

Contactless mobile will reach a tipping point in retail payments

I covered this yesterday and could repeat it again, but suggest you checkout yesterday’s entry if this is of interest to you (it is repeated at the end of this blog entry if you don’t want to click through).

Social media will become a core communications tool

There were a number of major PR gaffes during 2011, where banks were caught short over social media usage.

The biggest one was from Bank of America, who tried to introduce a charge of $5 a month to use debit cards.

Customers didn’t like it and one – Molly Katchpole, a 22-year old nanny – forced the bank to change its position purely by using Change.org to create a petition that garnered over 300,000 signatures.

This was voted one of the greatest PR blunders of 2011, although there were several others, such as Chase donating $4.6 million to the NYPD the day before Occupy Wall Street started; and Citibank getting caught beating customers to death in their branches in Indonesia.

These were some of the more shocking stories of 2011, and the only reason I know about them is via Twitter and Facebook, blogs and YouTube.

Social media has reached the level of naming and shaming firms in real-time.

It’s had this power for years, but now the customer knows how to leverage such technologies to achieve real change.

That’s what the year of the Protester has been all about – a world where a whisper can be heard as a wail, with word of mouse racketing up the roar.

Customers – both retail and commercial – now want banks to be honest and, if they screw up, to admit it fast and retract their mistake.

Banks will therefore work hard to use social media to create conversations and communication that is customer centric and transparent in 2012.   

If they don’t, they risk alienating and losing business across the board.

PFM, combined with social media, is going to enjoy a boom year

PFM, or Personal Financial Management, has been discussed for a while in innovation meetings, but will enjoy its most successful year of implementation in 2012 as banks get the message.

I got the message when I visited Iceland last summer, but it has been an area that has been creeping up on us all.

This is because most bank internet access is old hat – just an online version of the old mainframe transaction systems. 

PFM provides a far richer customer experience, moving the bank’s online services from being just a record of transactions to one that shows the customer’s lifestyle, with proactive budgeting and alerts, is a no-brainer.

Combine this with improving the use of social tools as a communications mechanism – linking PFM into Facebook, Twitter, YouTube and Banking Blogs – and we will see banks make significant moves in these areas this year (if they haven’t done so already).

Tablet PCs with financial apps will be pervasive and ubiquitous

Almost two years ago, I said that iPads will take over treasury ops. Everyone looked at me as though I was from another planet.

A year later, many banks have launched treasury based iPad apps for their clients. 

For example, in November 2011 BNY Mellon launched the TreasuryEdge app designed to provide “timely information on the client's cash accounts, with information related to decision-making on cash flows, balance and investment levels; an activity feature that allows clients to report and take action on various payment activities; transaction tools that allow clients to create, verify or release intra-company transactions; and reporting tools that allow for the generation and delivery of basic TreasuryEdge reports to the mobile device”.

J.P. Morgan launched their cash management ACCESS mobile app around the same time.

“J.P. Morgan ACCESS Mobile features include the ability to view multicurrency cash balances, transaction details and alerts for J.P. Morgan ACCESS and third-party bank accounts in the United States, Mexico, Canada, Latin America, Europe, Africa and many Middle East locations; a one-of-a-kind Quick Decision feature. Clients can add anticipated transactions and set target balances – at the account level – for an instant projected cash position; customizable business critical alerts (for example, alerts notify clients when balances fall below a preferred level, or when a credit posts to the account, with links to supporting detail).”

As can be seen, apps and iPads have come a long way.

When these things are no longer toys for consumers but tools for business, it becomes seriously pervasive and ubiquitous.

That’s why, building on the simplicity of PFM for consumers and Treasury apps for corporate, the   Tablet PC will be everywhere, mainly because Tablet PCs simplify everything.

You don’t have to think with an app – just touch and go.

Combine the simplicity of apps, tablet and smartphone with the ubiquity of contactless mobile communication 24*7, and you can see the bank of the future has arrived in 2012.

There are a few other key things occurring too though.

Risk management will be a key area of software development

During summer 2011, our annual European payments survey found that risk management is an area that is very underserved by technology and software solutions.

First, we asked whether the banks would know their future financial exposures in the case of another liquidity event.

73% are able to do this but only 39% of banks were able to do this with technology – 34% were using administrative processes to find their positions – and only 17% could do this in real-time.

More importantly, we asked whether a bank would know their unsettled transactions if a clearing and settlement disruption occurred. 91% would be able to do this but, of these, only 29% could do it in real-time.

Do banks know their exposures to specific individual counterparties intraday? Two out of five banks can do this through automation, but only one in five in real time.

And do banks know which assets are in play in a “liquidity event”, such as a Lehmans crash?

Only a third of banks (37%) could do this with technology.

That’s an area ripe for automation and support, and so risk management will be a key area of technology focus in 2012.

Interestingly, American Banker sees nine key trends in risk management developments:

  1. Adoption of enterprisewide risk management software among smaller banks;
  2. Adjustment of credit risk models for Procyclicality;
  3. Looking beyond the credit bureau report to assess consumer creditworthiness;
  4. The use of new methods of calculating product pricing based on risk;
  5. Risk model validation;
  6. Creation of keep-it-simple dashboards for bank board members;
  7. Real-time and intraday risk monitoring, alerts and reports;
  8. The bringing together of different risk systems, such as commercial loan risk and trading risk or fraud and anti-money-laundering; and
  9. Bigger risk data sets leading to the use of performance- enhancing technologies such as in-memory computing.

FPGAs and GUIs will be deployed across investment markets

Towards the end of 2011, I gained some insights into the use of new hardware processing capabilities in the investment banking community, specifically the use of FPGAs – Field Programmable Gate Arrays – for Graphical User Interfaces (GUIs) to model risk and provide real-time analytics.

This is a big area of focus in the capital markets community, particularly as risk modelling is becoming so complex.

For example, Monte Carlo simulations involve fifty year or more scenarios with roll back, querying, resets and roll forward all built into the modelling.

That’s complex and involves massive amounts of data analytics, taking petabytes of data and churning through it in real-time using complex formulae.

Using FPGAs, banks are finding performance levels 30 times better than doing this through a CPU and 175 times better in efficiency terms.

That’s why this is a big deal in 2012 for the low latency, high frequency trading community.

“Data as an asset” will be the most common phrase used

And all of this comes full circle in the end, and back to data.

Banks are data businesses.

Everything they do is bits and bytes, networked in real-time.

Exabytes of data are churned every day, and data is a key raw material for a bank.

Again, it’s stuff I talk about all the time, but this year banks will really start to get into data as an asset if, for no other reason, the risks of data.

Data risk is illustrated for me by three articles that hit my desk as I came back to work this week.

First, a report by Forrester into the potential for personal identities to be compromised or leveraged as individual get to manage their digital footprints better.

Second, a blog entry by Global Guerrillas talking about Bitcoin being ideal as a P2P wire service for the $10 trillion shadow economy.

He’s wrong, as every Bitcoin transaction is traceable throughout its lifetime usage.  The shadow economy works on anonymous transfers and transactions, not auditable ones, but it’s an interesting idea.

The real point is that Bitcoin is interesting as an encrypted digital currency.  It’s not like PayPal or Facebook Credits, as it has no centralised control authority, but all of these demonstrate that the new form of value is in data. 

Data management, data security, data audit trails and data exchange as a form of value transfer is what 2012 is all about. 

Finally, the Economist had a fascinating article on The War on Terabytes.  Here’s the essence of the article:

America’s defence secretary, has suggested that a cyberattack on financial markets, the power grid and government systems could be “the next Pearl Harbour”. In a move that received surprisingly little attention, Barack Obama signed an unprecedented executive order in July declaring the infiltration of financial and commercial markets by transnational criminal groups to be a national emergency.

The article moves on to discuss Lehmans crash as a game of data.

A paper prepared for law-enforcement officials by a group of anonymous moneymen … analyses trading data from American exchanges. It shows that a handful of small and midsized regional brokers saw their market share in equities trading skyrocket in 2008 to the point where some were, for a while, doing more business than giants such as Goldman Sachs and JPMorgan Chase …

The bulk of the trading appears to have been “sponsored access” agreements, under which established brokers can in effect rent their identities to other traders so that the latter do not have to jump through the usual regulatory hoops … these trades were heavily concentrated in big, troubled stocks such as Citigroup and Wachovia, the survival of which was seen as critical to the stability of the financial system. They were mostly short-selling, the paper concludes, and a good deal of the shorting may have been of the illegal “naked” kind, where the short-seller does not bother to locate and borrow the shares first.

Supporting this conclusion is a huge spike in trades that failed to settle at the time—in Lehman’s case, the number shot from tens of thousands to tens of millions.


Sponsored access is not the only way that a determined assailant could create havoc. The “flash crash” of May 6th 2010, in which American equities spectacularly nosedived, showed the damage that can be done by high-speed algorithmic trading. It is much easier to drag markets down when they are already reeling, by the use of such things as short-selling, options and swaps, points out James Rickards of Tangent Capital, an expert on financial threats. This is what the military would call a “force multiplier”.


You should be.

According to experts, flash crashes are commonplace and we’ve done well to avoid another massive one … but it’s likely to come.

I could talk about data issues and opportunities for ages, but the bottom-line is:

  • Banks are technology firms who provide financial management solutions.
  • Banks can take opportunity by combining the simplicity of apps, tablet PCs and smartphones, with the ubiquity of contactless mobile communication 24*7.
  • Banks biggest threats come from risk created by the mismanagement of data, and data is therefore the banks greatest asset and weakness.

In 2012, this is going to be the year banks focus radically on locking up these opportunities and risks, through investing wisely in technochange.

Good luck with it all.


This is one of three 2012 outlook pieces:



Make your own mind up about my predictions.  Here's what I said would be the big ticket items for bank technologies looking out to 2011 a year ago:

  1. More social media developments as firms like Foursquare, Groupon and Quora add functionalities not seen before;
  2. More bank mobile apps, with clever structures and device-specific security;
  3. The creation of new retail payments structures, as Apple and Google get into mobile payment wallets and PayPal and Facebook push credits to the extreme;
  4. The maturing usage of internet and mobile television, along with video communications for dialogue on the move;
  5. Cloud computing becoming acceptable as a service for financial applications;
  6. Major investments in creating agile infrastructures and platforms to respond to regulatory requirements.


Finally, if you can't be bothered clicking through, here's a repeat of the contactless payments piece from yesterday as promised:

Contactless mobile will reach a tipping point in retail payments

Speaking of new business models, the one that most retailing banks will move towards is contactless mobile and contactless tablets.

The experience is highlighted well by various firms, but my favourite contactless illustration is from Discover Card and Square:

The reason why I use this one is that everyone assumes contactless = NFC chips.  It doesn’t have to be.  Contactless in my world, is any payment that is simple, automatic and wireless.

That’s what the Discover video shows.

However, NFC is a key part of most contactless plans, so it is also a key part of the process of evolution.

Contactless chips have been around for ages but, on their own, are relatively useless.  We then put chips in cards, but these again are not great.

But put a contactless chip into a mobile and then we’re rocking.

That’s again illustrated well be Google.

The tap-and-go experience is good one, and one that provides major convenience for the customer – whether the customer is a corporate who wants to drive higher sales through their checkout points, or the consumer who wants speed, ease, convenience and value.

It can focus upon not just turning phones into higher volume purchasing points, but into point of sale points too, and all geolocated as contextualised point of focus.

That’s why Movenbank is launching in 2012, as the first cardless and cashless bank.

So, if the major conversation of 2010-11 was mobile, the focus in 2012-13 will be contactless mobile.

Visa Europe endorses this view:

2012 set to be the tipping point for mainstream contactless adoption

77% of contactless owners across all three markets agreed or strongly agreed that contactless technology would ultimately become more commonplace than cash as a payment method (UK: 73%, Poland: 79%, Turkey: 79%)

 87% also agreed that contactless will be instrumental in bringing mobile contactless payments to market in the near future (UK: 84%, Poland: 89%, Turkey: 89%)

And, just in case you want any further detail, checkout this infographic from NFC rumors:

Frictionlesshownfcisgoingtochangetheworldnfc_4e5faebe3a4d4 (1)

‘Nuff said.


About Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.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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