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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

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


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 ) 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 – – 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 – – 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 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.

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 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.




Cash ain’t King in Greece!

1 Jul

No doubt many of you have been watching this unfolding Greek tragedy. And I’ve tweeted already about the excellent CEPR piece about he background to the crisis and Greece’s (pre-financial crash) economic mess – see

But it occurred to me to wonder how card transactions are faring in Act II (Act III being, I assume, where everyone gets killed, which seems the likely outcome at the moment). Well, according to Visa Europe’s news update from a couple of days ago, not too badly (see ). Not only is there a distinction between Greek and non-Greek Visa card holders (to whom the €60 daily limit doesn’t apply), but Visa also says that card transactions are being processed as normal, and helpfully hints that some shops are still doing cashback!

Cash is King? – not at a Spanish petrol station!

19 Mar


So we have been enjoying a well-earned break in Andalusia for a few days following the end of my contract with the new Payment Systems Regulator ( We pull in to a petrol station somewhere south of Ronda (definitely worth a visit). I fill up with €31.20 worth of petrol and proffer €32. ‘Un momento’ says the lady – who has noticed another car pulling up in front of us. She leaves us, fills up the new arrival. He proffers a card, which she processes with a portable card terminal – voila, done. He drives off. At which point she toddles off to get my 80 cents. Leaving me feeling very stupid. Good job I didn’t try Bitcoin.

Apple Pay – an iTunes for the card industry?

16 Sep
Credit: Tambako/Flickr

Credit: Tambako/Flick

The headline in the FT is uncompromising – “Apple Pay is poised to do for payment companies what the iPod did for the music industry” – and the piece that follows is an interesting exploration of what Apple’s announcement last week signified. So is this the end of Visa and Mastercard’s dominance of the world of card payments? (see for those with FT access.)

Probably not. Buried in the detail of that piece (and in other analysis from, for example, Mobile Payments Insider is a rather different picture, which has a lot more to do with the security features of Apple devices, and the resultant savings in fraud costs, than with the death of the card titans. The latter might usefully paraphrase Bogart :“Reports of our death are greatly exaggerated”.

Tim Cook, CEO of Apple, made much of Apple Pay being designed with the consumer in mind. Be that as it may, the biometric security technology built in to Apple’s devices will serve the more prosaic end of making payments via an iPhone and other Apple gadgets less prone to fraud. Don’t forget that the launch was in the US, a country who leads the world in patent innovation but has, for whatever reason, lagged Europe by a decade or so in the adoption of CHIP and PIN as a method of verifying payments. Apple Pay neatly gets round that impasse. And also ushers in the new era of single-use tokenisati

And at the rumoured 0.15% per transaction, the merchants, card processors and bank issuers look to have acquired something of a bargain – a price Apple is no doubt willing to concede (for now) to secure its seat at the global payments table, and to lure the banking top brass to Cupertino to pay homage.

So what do the card titans lose? Well, the physical plastic card may not be as ubiquitous as heretofore, but that will probably save them in renewals and lost card replacements. Their infrastructure, and charges to merchants for processing, will roll on pretty unchanged. True, their own e-wallet offerings may now be quietly shelved or allowed to wither on the vine – but that again will yield savings on investments. Perhaps the biggest blow will be to their plans to expand their scope. Apple is pushing them firmly back into a payments processing box and saying “leave the customer side to people who know what they are doing.” Which, as anyone who uses Verified by Visa or the Mastercard alternative will testify, is probably no bad thing.