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« WInd power | Main | Developing new ideas »

Innovate or not?

By Dave Birch posted Feb 23 2010 at 3:49 PM

[Dave Birch] Having agreed that Consult Hyperion would organise the third BarCampBank London, I was naturally rather nervous about whether it would work or not, having it on a Saturday and slightly out of town (in Richmond). But we had a great turn out, the folks at PayPal did a fantastic job of hosting the event (I really can't thank them enough) and it was a super day out. We ended up with six streams split across two sessions and I made a point of visiting all of them: to be honest, I would have liked to have attended all of them, as they were so interesting and the variety of perspectives was so illuminating. In case anyone is interested, here are all of the discussion points that went up on the initial wall o'postits...

Security/anonymity/KYC/AML; Security of electronic – virtual money/currencies; Voluntary identification, legal agreements, financial reconciliation representation; Anti-money laundering on a shoe string; Alternative payment tokens and holder’s identification methods; OAuth, banks and open data; Personal interaction in a digital age; Identity verification; Money go round; Micropayments; Open coin: An open source framework; Open transact; Open token, open source, digital currencies; New payment methods to replace cheques; Branch design and futures; Role and future of social media in FS; New business models for media and journalists i.e. newspapers; Designing and implementing community currency systems + front and back end IT system to support them across currencies; Using payment cards as a means to introduce local currency systems; Non-fiat currency; Localisation in a global market; Local currencies Is all forms of emoney a con and restrictive; P2P payment plus social money; P2P foreign exchange; Beyond wesabe – mirroring data back to consumers; Visualising exactly how much I spend and earn over time; Data visualisation; Group money management/group checking accounts; Commenting on purchasing buying experiences (reputation); Electronic receipts; Better collection of payment metadata e.g. for automated regulatory, tax business reporting; Digitising receipts/proof of purchase; Instant credit / LOC purchase; Payment service – utility functions; Is customer satisfaction worth investing in; Cash in/out of telecoms; The cusp between financial services for mobile, domestic and cross border; Banks as MVNOs; Role of banking staff in a deeply changing banking environment: quality of work, requalification needs etc; No frills banking; What to do with the post office; New roles of non-banks: retailers, post offices; Retailers replace banks; Community banking; Should we bother to try to restore the reputation of banks; Banking software as a service; Alternatives for traditional banks; Banks and corporate social responsibility (CSR) issues; Attempts to bring back reputation of financial sector in complicated environment; Family finance: closed/high trust social networks; Servicing the financially excluded; Alternative credit rating: renters credit, A-level based student loans; Micro finance and micro insurance; Innovating the remittance market; Mobile money for unbanked; Regulatory environment and changes i.e. banking; Worst case scenario – insurance for women; Are government regulations impeding online payment systems; Finding payment applications.

After some discussion these were grouped into the six streams of

  • Financial exclusion, how can new technology help?
  • New entrants in banking;
  • Open standards for payments;
  • Authentication and identification (I've had some feedback from a couple of people asking if we might consider organising a BarCamp only around these topics, so let me know if you would be interested in this);
  • Community currencies;
  • Value-added services around payments.

I made a point of twittering, but not identifying (Chatham House rules), some of the comments I heard during the day, and I hope that they were thought-provoking, but I didn't bother to tweet one of the points that I heard several times (and probably could have predicted on the way in), which is that banks aren't innovative. Now, on the one hand this clearly isn't true, because banks do, after all, take some inventions (eg, the ATM and the self-certified mortgage) and use them to change their businesses. But there is a general sense that we need better products and services, more attuned to current requirements.

So banks can't innovate? Why not? Chris Skinner's observation from last year's SIBOS is surely only a partial explanation:

Banks don't get innovation, and particularly crowdsourcing, because banks are secure organisations which, by nature, must be risk averse. The idea of opening a banks' doors to a group of strangers to network and debate and dialogue is therefore just completely against the very nature of banking. As a result, banks don’t get social networks, social media, crowdsourcing or open source.

[From The Financial Services Club's Blog: SIBOS #1: Why banks don't get innovation]

This is surely correct, but the problem runs more deeply, doesn't it? It's the nature of the innovation in relation to banks' core business that is the issue. The audit, tax and advisory company KPMG last year published a report on the finance industry ("Frontiers in Finance, June 2009") that includes a nice, concise, summary of the current environment.

Banks are continuing to invest significant sums in payments, but the vast majority of discretionary investment is aimed at increasing efficiency rather than introducing new products or services.

[From Show me the money: Insights into global payments]

This is the gospel according to Christensen in every respect. And we've been here before. Just as banks post-war held two-thirds of personal savings in demand deposits but let innovations in wealth management reverse that statistic so that now they only hold one third, so it is obviously the case that in the long term organisations (and banks are by no means unique) can find themselves disrupted because they focus on core business. It always makes more spreadsheet sense to invest in developing the core business a little further than experimenting with something. This ends up delivering strange product sets into the marketplace. Look at cheques. We've already decided to end cheque clearing, yet a decade after the first working groups, forums and pilots in electronic cheques, we still don't have any. And if I do log into my online banking account to send you some money, I've still only got 12 characters (or whatever it is) for the data associated with the payment. Surely I could at least send a URL with the payment so that you accounts system can figure out what on earth the payment is for?

In the end, does it matter? Why should it be banks who bring us the best mobile payment system? Why should banks run P2P lending exchange? Why should banks issue local currencies? The BarCampBank spirit was invigorating and throws the onus back on the rest of us: instead of complaining that banks haven't come up with a good internet payment service or a better social lending infrastructure or a convenient two-factor authentication scheme, we should be taking ideas to non-banks with an appetite for innovation and sharing a positive vision for the future where banks prosper by focusing on core business (savings and loans) and others compete to provide change (pun intended).

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]


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A great article.

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