MyPrivateBanking Blog
Daily Comments on the World of Wealth Management

News about the release of Snapcash surely came as no surprise to us at Myprivatebanking Research. The integration of social media and payment systems is successfully growing and clearly challenging traditional payment players like banks, credit card providers, and older online providers like PayPal. Whereas rumors have made rounds for the last months about Facebook’s plans for a mobile payments system using its Facebook Messenger iPhone app, another popular social messenger provider has stolen the thunder: Snapcash, the product of the recent collaboration between Snapchat and Square Cash (a mobile payments company headed by Twitter co-founder Jack Dorsey), is the latest mobile payment option that allows users to send money to friends via the app by simply typing dollar amounts into new “Snapcash” messages. For now, Snapcash is available to Snapchatters in the United States who have a debit card and are 18 or older.

Trying to keep up the pace with consumers’ increasing demand for highly innovative and convenient products, successful offers like Snapcash or Applepay challenge the banking industry to come up with similar or better solutions. It is true that banks must deal with stricter regulatory guidelines but they should also be aware that consumers have more choices than ever and won’t wait for banks to catch up. But banks – across the globe – seem not to have a strategic response. Will they get frozen out of the online payments markets like music labels have failed to conquer the online music business and traditional book stores never were able to challenge Amazon in online book selling?

Very few banks have already invested in convenient mobile payment solutions aimed at improving the customer experience. Barclays’ Pingit app is one exception. Users can send and receive money via the app without sharing bank account details and even send gifts to friends. But Barclays is the exception and not the rule in the banking industry. Will they finally give up this market to the tech players?

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(by Francis Groves, Senior Analyst)

Visual Media seems to have grown exponentially in the last few years. Instagram and Pinterest only date back to 2010 and 2011 respectively but as far back as June 2013 Pinterest has had second place - after Facebook -  as a driver of traffic on the Internet.

The power of images is often that they tell a story and, as advertisers have known a long time, pictures undoubtedly have a power to pull people’s attention. And people can process images very rapidly. For social media this has meant that all social media presences are becoming increasingly visual. Just think how rapidly images have crossed into LinkedIn and, especially, Twitter. And Facebook is now one of the Internet’s largest stores of images. Not only have images become ubiquitous in social media, the presences that specialize in images are highly effective. Buying rates (the proportion of buyers to visitors) are significantly higher for Pinterest than Facebook, as is the willingness of Pinterest visitors to affirm they are positively engaged by brands through Pins.

So where does this leave the banking industry with its somewhat abstract products and services?  Visual social media guru, Donna Moritz, lists four especially effective uses that images can be put to in social media: handy tips, how to advice, catchy quotes and checklists and a fifth, infographics, which is also effective but not in Moritz’s top 4. So, the secret of successful images could, it seems, be summed up in a word, ‘Advice’. But of these 5 tactics, banks - and then only a few of them - really only seem to be good at infographics. In the finance industry, if you want advice, you go to a YouTube channel or the blog page on the website because we all know that financial advice is complicated; it takes time to explain it and

So it seems as if banks are not yet quite getting the point of visual social media. No, you can’t say very much at a time through a picture or a graphic but the little you do say could have immense pulling power and visual social media sites like Pinterest could be used to advertise a bank’s services and expertise more directly than is currently the case. In short, banks should use their visual social media as hooks to draw people in to what they have to offer. They seem to ‘get’ this on Facebook and Twitter but not on their visual social media presences.

Congratulations to those banks that are leading the way in visual social media. Maybe now is the time to make these presences more than just pleasant places to visit for a few minutes (Pinterest visits were averaging 16 minutes in 2013) and to make them speak more directly about your service, your expertise and your messages. The good news is that some banks have a lot of original graphical material both already on social media and in their archives and the capacity to create even more. Only 20% of Pinterest content is original (as opposed to shared) so there should be plenty of scope for an institution that can use its visual image ‘capital’ effectively.

(Stay posted for our new report on Social Media in Banking which will be published later this November)

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Amazon has released a new device called Echo – a device combining speaker and microphone with high-tech inner life. Working Siri-like, Echo is determined to read every wish from the user’s lips. Using voice-command, it is capable of playing music, putting products on a wish list, answering questions about any topic where information is available on the Internet and do a myriad of other things.

Reactions across social media and the blogosphere to this surprising release shortly before Christmas are mostly negative – in the aftermath of the NSA scandal it is only natural people are sceptic about data leeches.

Yet nobody should ignore that voice commanded devices is gaining in popularity. Just imagine a portfolio manager retrieving portfolio infos, drilling deep on some positions or even trading while driving her car to work or sitting at home just by talking into her smartphone, Echo speaker, digital windscreen or even an implanted chip. No matter how it will look like, you can be sure that voice-commanded processes will play an important role in the future and the market potential will be enormous.

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(by L. Elsler, Analyst)

We often see that mobile apps are prematurely released into the app stores. User experience (UX) tests, if at all, have only been done once the application is fully developed. This common practice leaves little opportunity to really develop a user-friendly application. But UX testing is not something you just bolt on once the development of an app is almost finalized. Especially banking and wealth management apps, with their heavy duty transactional processing (just think of payments, brokerage or portfolio checking) UX testing must become an integral part of app processing:

  • Produce your banking app like an expensive German car. These car brands dedicate a majority of the resources during the development process into user experience. The car is being tested, crashed and judged over and over again before releasing it for sale. Developers must be proud of their end product- only then it will also satisfy the user.
  • Integrate UX tests for all the use cases during the development process. From project start to the first release a dedicated UX team should give input to the mobile app development.
  • Think about what the purpose of the application is in the first place. Is it to “kill time” or to fulfill a task? A task based approach should be held as simple as possible to efficiently support the user.
  • And last but not least, make the user part of the UX team. The most progressive banks have their own UX lab and invite clients frequently to test-drive the latest release of all their apps.

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The finance industry is positioned to benefit very strongly from Big Data. With the rise of highly performant commodity hardware, big data solutions such as Google`s Hadoop, H-Base, Pig, Hive, Mahout or Couchbase, the question of overcoming the technical barriers of big data storage and processing seems to be solved.

Customer profiling and targeted offer improvement requires careful analysis of each customer`s journey from being a prospect to becoming a customer. Understanding where the customer comes from before visiting a bank’s homepage, Facebook presence or downloading its banking app (e.g. previous visited URLs) means identifying the touch points of her journey and indirectly understanding how customers` preferences and needs are being shaped. Social media channels, forums, Q&A platforms, comparison sites have become highly relevant touch points throughout the customer`s journey, since this is where the single customer journey within the web starts.

All this means that significant investments have to be made in the technical infrastructure in order to cope with huge amounts of unstructured data. Yet, the biggest barriers to success are not related to high costs of data management but how to address privacy in Big Data systems while complying with regulatory requirements. Today there is probably no other industry under more public scrutiny than the banking industry. Big Data poses a lot of questions with regard to privacy and regulatory issues. For instance, Germany and other EU countries enforce strict privacy laws that require corporations to inform any individual about all the data which is on record about her and delete the data if this individual wishes so. On top of it, personal data can only be stored with the explicit prior consent of individuals.

However, a merely legal and regulatory perspective is not sufficient. The biggest challenge is the potential threat to a bank’s reputation when clients and the public in general perceive it as secretly spying on their lives.

Above and beyond complying with existing regulation, there is one important thing that banks need to do: being transparent about Big Data. Clients and users of the digital and social platforms of a bank should be informed in no uncertain words what the Big Data strategy of a bank is all about, how this benefits clients and users, how privacy is addressed, and how risks are monitored and managed (just think hacker attacks!). Only openness and full transparency will bring acceptance to banks’ Big Data. Big Data should not be perceived as a bad black box. It can be a win-win-game for both, financial firms and their clients. Get this message out.

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(by Francis Groves, Senior Analyst)

Little by little Internet security is moving towards center stage. At MyPrivateBanking, we’ve been focusing on the importance of security issues in Internet and mobile banking in our reports on websites and mobile apps.

Two recent developments to hit the headlines were the attack suffered by JP Morgan Chase in August. This is suspected to have been the work of Russian criminal, not government hackers, who found a way into the bank’s systems through one or more of its older components. The hackers gained access to data about 76 million personal accounts and 7 million business ones, though no JP Morgan Chase customers suffered loss as a result.

Last week the launch of the iPhone 6 in China was accompanied by a widespread outbreak of ‘man in the middle’ hacking of purchasers first time connections to iCloud. In this case the new iPhone’s reputation for being highly secure may have been part of the problem. It is believed that the authorities may have initiated the attack because they are unhappy about the increased data privacy that Chinese citizens gain through the iPhone 6’s use of encryption. Given that Apple is hoping that the enhanced security of the iPhone 6 qualifies it with the Apple Pay app for use as a payment system, this widespread hacking is worrying.

Significantly, many (but not all) Chinese users would have received a warning from their browser that the verification certificate from iCloud was actually fake. But how many of them carried on regardless and ended up by compromising their log-in details?! The problem for many of us is that we need or want to use the Internet at such speed that we risk exposing ourselves and our money to danger. Maybe we do need to bring into play the split second responses to danger signals that we’ve inherited from our early ancestors.

We also need a lot more education from our financial institutions to develop a more vigilant mindset. The problem of Internet security and banking and payments systems is certain to grow in the coming months.

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In the light of big data and real-time business intelligence discussions, one thing becomes increasingly clear: data latency is expensive, old-fashioned and not competitive. As things speed up, new technologies are needed that can cope with increasingly challenging demands. This is especially true for the financial industry where time really is money.

In-memory analytics has great potential to become the philosopher’s stone in this issue. The concept is simple: traditional BI queries data stored on physical disks whereas in-memory analytics uses data and queries located in the server’s RAM, making query results available near time. While this concept is not new, it is far from standard in the finance industry. Yet.
As pioneer banks are taking their first steps into IMC (in-memory computing) – such as Germany-based Dekabank or Swedish Avanza bank – we will be likely to see a fundamental technological turnover in bank’s BI in the near future, triggered by falling costs and increasing capacity of RAM as this article describes very well.

The advantages for banks are obvious: Dekabank’s use of Quartet FS is only one example how in-memory computing boosts performance through high-speed risk analysis combined with trading positions, which allows for faster reaction and near time alerting. Rapid fraud detection and credit card reporting are other benefits to name only a few.

As IMC gains ground, the heavyweights of the IT industry come up with their solutions. Quartet FS, Oracle TimesTen, SAS High-Performance Data Mining, SAP HANA or IBM DB2 with BLU Acceleration are some examples. We at MyPrivateBanking Research are looking forward to see how fast the finance industry will be able to adopt this promising technology.

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Over and over we keep hearing that robo-advisors are really only capable to develop simple investment strategies mostly based on simple products like index funds. For example, today Forbes carries a story that argues along these lines:

„While innovative and cutting-edge, most of today’s digitally-based offerings are still restricted to the discrete areas of basic planning and investing. People that want a more comprehensive wealth management relationship will need a broader solution, the kind that has been perfected by seasoned wealth advisory professionals.”

Well. We beg to disagree. Forbes maybe right that today’s offerings are relatively simple and restricted to basic planning and investing. But there is no doubt that software and relatively basic artificial intelligence will soon be able to tackle more complex questions.  Private banks and conventional wealth managers should not rest on the assumption that high-net worth clients and their more complex financial needs cannot be supported and advised by algorithms. Computers are able to solve complex and relatively unstructured problems in such diverse areas as diagnosing serious health conditions or advising customers on buying perfect gifts. Partly this is based on big data analysis, partly on very smart algorithms. No doubt that this kind of software will at some point soon be able to solve tax problems or estate planning. Don’t underestimate the speed of innovation. Of course, there still will be a role for humans in the advisory industry. But it will change from subject expert to human coach or therapist as many clients prefer interaction with humans rather than machines.

Check out our new report on robo-advisors for an in depth look how this industry will develop and how this brings new opportunities for conventional wealth managers.

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(by Francis Groves, Senior Analyst)

A week and a half ago the Financial Times reported that Google was believed to have intentions to enter the asset management industry and that as long ago as 2012 it hired a research firm to look into the possibilities.

Not surprisingly, news of a possible move into the investment industry by a company as successful and powerful as Google has sent shivers through the world’s huge fund management industry and existing industry players and commentators are speculating about the likely effect of a ‘Google Investments’ landing meteor-style on their territory.

Some have forecast that Google will aim to leverage its analytics capabilities to predict macro-economic and company trends. This could be dangerous in a number of ways. An institution with a reputation for enormous predictive power could have enormous effect on financial markets. It could also be very dangerous for Google if they used their Big Data to make big gambles and got them wrong. And it could also bring down on them a whole new wave of anti-trust activity.

Maybe Google is more likely to head down the road of providing value-for-money opportunities for small investors, possibly by becoming the world’s largest (and first global) robo-advisor. The Chinese company Alipay, an Alibaba subsidiary, acquired fund manager Tianhong earlier this year, raising expectations that Internet giants could soon move into the investment industry in other parts of the world. However, the Chinese public have a justifiable reputation as savers rather than consumers that is not found in the majority of western countries. The question arises as to whether, say, an Amazon or Facebook investment fund would be able to persuade enough clients to save.

But Google occupies a different space, rather more Internet nuts and bolts than (short term) experience or pleasure though, with Google Play, they cater for that, too. The point is that an Internet giant that makes its money through services that are free at the point of use (like Google Search and YouTube) is better placed to encourage a savings habit than companies that make money by selling ‘stuff’.

That said, the kind of people needed to staff an online investment manager are unlikely to be Eric Schmidt’s ‘smart creatives’, (“impatient, outspoken risk-takers who are easily bored and change jobs frequently.” ) The staff (and the robo if there is one) had better be measured, consistent, risk aware and more concerned with investor motivation than their own great ideas.

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Having evaluated for the first time the mobile websites of the 40 leading private banks and wealth managers in our recently published report, the results left the impression that the wealth management industry is still not aware of the importance of a unique mobile web presence and simply does not care about their mobile websites.

However, reading this article about the efforts of fashion brands to make bigger pockets on their jeans to fit bigger smartphones (responding to the #bendgate issue) it becomes more than evident that as we design our habits, lives and textiles around our mobile devices, every single firm – no matter from which industry – unconditionally MUST cater for a mobile web experience. The mobile website is one element in a unified interface of a bank with its customers. Together with mobile apps the mobile website is increasingly critical to reach clients and other users. Mobile devices are quickly becoming the main access point for any private client or consumer-facing company. Banks ignoring their mobile websites are missing a huge opportunity to reach out to their clients.

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