AI, IBM Watson, and banking

27 Oct

IBM watson

OK, I know it doesn’t sound like the most riveting topic for a Friday morning, so I’ll keep it short.

Lots of bumf out there at the moment about AI, so it’s refreshing to hear 20 minutes or so from Bridget van Kralingen of IBM on the subject, focusing on what’s happening in financial services. Intelligible for the non-geeks amongst us with some nice examples – see http://bit.ly/2zSF3y8

Note – to listen to this, looks as if you have to download or create an account with Periscope, which was used to record it. Part of the Twitter family, so you can access via your Twitter account. Otherwise Bridget dances round the stage but with no sound – nice, but not quite the point.

Meerkats and banking

13 Oct

Meerkat

I ponder, from time to time, about the potential impact of PSD2 and Open Banking. Will it lead to significant change and increased competition from third-party providers, as many commentators seem to expect? Or – given the well-known inertia of the average banking customer – will the whole thing turn out to be a damp squib?

Inertia, of course is not the only factor at work. Four example, Sheila Bair, in a piece in Monday’s Financial Times, drew attention to the data security concerns that many have voiced. If data can be hacked at a firm such as Equifax, banking customers may well have good reason to question whether retailers and others should have access to their bank account details, even if the Directive requires high levels of security to be in place.

So when I start reading Jeremy Light’s Accenture blog on the subject (see https://accntu.re/2xD0tNf ) I see my scepticism confirmed:

‘We found most consumers would be unwilling to initiate a payment through an online platform (58 percent) or a social-media company (82 percent). Fear of fraud is the primary factor. An overwhelming majority (85 percent) of consumers point to the risk of fraud as the biggest barrier to sharing bank account information with third-party providers. Data protection risks and increased potential for cyberattacks also feature highly.’

However, Gen Zs and Millennials (viz the young digital guys and gals, unlike this ageing baby boomer) are much more willing to give open banking a try:

‘One-third of Gen Z’ers say they’ll be likely to use open banking instead of usual payment methods, [and ] 42% of millennials and 52 % of Gen Z’ers say they’ll give online retailers permission to initiate payments directly from their bank accounts using apps/websites.’

So having had some of my scepticism challenged, I turned my thoughts to Meerkats – or, more accurately, to why price comparison websites had been so successful. My logic is simple: opening up customer data should make pricing banking offerings more competitive, but it will probably take aggregators like these sites to exploit the economies of scale involved.

So why their success? The title of Martin Lewis’ site – moneysavingexpert.com – says it all: it saves the consumer money, and so makes the investment of time worthwhile. Not – please note – that it saves the retailer the merchant service charge for using debit or credit cards!

That seems to me the clue for third party providers wanting to exploit PSD2 & Open Banking – create a customer value proposition that offers enough benefits to retail banking customers to overcome their ‘inertia’ – or more accurately, to recompense them for their time clicking away on their tablet or computer. Can they do it? Is there a big enough profit pool in retail banking to earn a return and incentivise the customers?

Well, here’s a clue for would-be challengers: forget about personal customers – even GenZs – and see instead how you can use PSD2/Open Banking to prize the sticky paws of the major banks off their small business customers. That is the major area where I see a lack of significant competition – but certainly no lack of profit.

Meanwhile – back to Meerkats. Check out their Kingsman video – http://bit.ly/2wRI6oh – but make sure you’ve cleaned your specs first!

Amazon gets serious about banking

12 Jun

Amazon Bank

The FT on Friday had an interesting piece on Amazon’s foray into banking (see http://on.ft.com/2t89A6L if you have access). It reckons that Amazon will be extending its lending to small businesses in the US, the UK, and Japan – focusing particularly on lending for working capital to sellers using its platform.

So here – in no particular order, are some points on this Amazon play:

  • It seems similar to the PayPal/Ebay story – recall that PayPal started off as the way to buy stuff on Ebay
  • It’s a global play – like Metro Bank, but unlike many other UK challenger banks (anyone remember Egg?)
  • The data it has access to on its borrowers gives it a genuine source of competitive advantage, both in the initial offering and the monitoring – to say nothing of control if they look like defaulting
  • It is going after a segment (small business banking) where there have been ongoing public policy concerns about a lack of effective competition

All in all, hard not to see it as good news all round.

La La Land and the vicars

3 Jun

All Gas Gaiters

Off last night to see La La Land for a second time at our local cinema club. I enjoyed it the first time, and was looking forward to seeing it again.

Why see it again? Was it that good? I had thought so, but I had noticed from Facebook that this wasn’t a universal view (search for elwin cockett la la land – Elwin’s an archdeacon, hence the title and picture 😎).

So why did it affect me so much? It’s the storyline – in our jobs and careers, do we chase our dreams, or do we make compromises?

So if that’s the theme, perhaps not surprising that the vicars don’t get it. But many of us have been there, and juggled with how relationships will work if our jobs pull us physically apart. Or whether to compromise on the job we want to take the job  that pays the bills. Or, as in the ending, we’ve thought about the great ‘might have beens’ of life and relationships.

I know they can’t sing – but that’s not the point. It’s more about Mia’s audition lyrics – ‘Here’s to the ones who dream, / Foolish as they may seem. / Here’s to the hearts that ache. / Here’s to the mess we make.’

Brexit the day after: on the stairs

30 Mar

So I’m sitting in the cafe in St James Park, looking out towards Whitehall – the pulsating heart of British Government. I’m wondering how many of my former civil service colleagues are suffering from ‘Divorce Separation Blues’ (Avett Brothers).

And why ‘on the stairs’? It seems to me the relationship between Britain and the EU is rather like going to a party. We were reluctant to go to this particular gig – we thought the vibes might be better elsewhere (EFTA anyone?), and we were worried they wouldn’t let our friends come in with us (viz, sheep from New Zealand). Then eventually we said we’d go on certain conditions (‘It all depends on the terms – H. Wilson).

No sooner had we arrived than we had a quick vote on whether to stay, and ever since we got in we’ve been complaining about the food, the drink, the other guests, and how the party is organised.

Now we’ve decided to leave to explore the world, and we’re on the stairs on the way to the exit door. Will we have second thoughts? – apparently the guy who drafted Article 50 doesn’t share the common view its irrevocable. But more to the point, will the other guests ever let such a arkwark fellow back in?

Perhaps De Gaulle was right when he described us as a ‘maritime nation’ ill suited to join his European party?

Can Scotland remain in the EU?

14 Mar

‘Up to a point, Lord Copper’, as Evelyn Waugh’s famous journalist might have said.

But let’s start at the beginning. As Parliament clears the way for Article 50 to be triggered, Nicola Sturgeon is requesting a second referendum on Scottish independence – with a promise that, if she wins, she will keep Scotland in the EU.

Is that possible? Wouldn’t an ‘independent Scotland’ have to join the queue of countries lining up to join the EU? Well, the Scottish Government has an alternative solution – just don’t leave the European Economic Area (EEA) in the first place.

Doh…now you’ve pulled a fast one. You’ve switched from talking about the EU to the EEA – what’s the difference? Well, the EEA Treaty signatories are the members of the EU and the members of EFTA, and leaving the EEA is a separate legal process to leaving the EU. It is open to debate whether this would be an option for the UK – see some of my earlier posts – but it could make sense for Scotland, particularly since the EEA Treaty has some provisions for differential treatment of regions within signatory countries. So Nicola Sturgeon and the Scottish Government, if they won a referendum, could say ‘when you give notice of your intention to leave the EEA, please exclude Scotland’.

Now it has to be said the legal eagles think this is impractical – see the LSE blog at http://bit.ly/2no1wwX for example. But it does raise some interesting points. If Scotland can do it, what about other areas that were strongly ‘Remain’ – London, for example, and Northern Ireland?

And for the Scottish Government, it’s beautiful politics and possibly good economics. A Scotland inside the EEA when the rest of the UK is outside could be quite attractive to some businesses south of the border. Financial services, in particular, might well find a base (or an expanded base) in Edinburgh quite appealing.

Triggering Article 50 is beginning to look like opening Pandora’s Box.

 

 

 

The Kerslake Review of North Essex Garden Communities – perhaps not what you thought?

28 Jan

sir-humphrey

Some commentators seem to think that this recently completed report supports the plans of the local councils to create 32,000 new homes in three different locations. For example, the Essex County Council website has an item entitled ‘Leading housing expert supports Garden Communities project’.

However, it helps, when reading this report (available at http://bit.ly/2ky7cTu) to recall that Lord Bob Kerslake – a former permanent secretary of the Department for Communities and Local Government (DCLG) is rather a ‘Sir Humphrey’ character. As readers of a certain age will know, Sir Humphrey was the fictional civil servant advising the hapless Jim Hacker, and was master of the rather subtle way of saying things.

A reading of the report shows that some translation is required from mandarin-speak of the Sir Humphrey variety to the modern idiom. For example, when the report says ‘The council’s ambition for this project is impressive’ we can translate this as ‘there’s little chance of them delivering this as it stands’. Similarly when referring to the timetable as ‘ambitious’, and strongly advising  ‘that they complete the Planning Advisory Toolkit to evaluate their readiness’ we can see clear mandarin-speak for ‘you are not ready – there’s a lot more work to do’.

Perhaps the most damning but understated finding is on delivery capacity: ‘the current team is too small to deliver the next stage of the project; all but two staff deliver this project alongside other work (italics added)’. This is an incredible statement for a project designed to, as the report notes, ‘add over 80,000 to the existing population – equivalent to the City of Bath’.

Against this background it is no wonder that Braintree District Council have pushed back a key meeting to 5th June from February.

But the report is not content to challenge delivery and timescales – it has an appendix saying that the concept needs a clear ‘strategic narrative’. A good challenge – which invites the local councils to come clean on whether they simply plan more dormitory suburbs or have a genuine strategic plan for a significant expansion of North Essex.

In short, it’s a good report – but it doesn’t give the support to the North Essex Garden Communities project that some commentators think it does.