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Friday, May 22, 2009

PSD and SEPA Implementations


SEPA implementation

In particular, there are issues with the SEPA model.

This was illustrated by two questions put to delegates at the start of the IPS 2009 sessions on SEPA implementation, that received overwhelming agreement: we need to create new cooperative models with the involvement of all market participants – banks, users, suppliers and regulators (70%); and we need to widen our vision of the types of services and infrastructures we should provide, such as e-billing, e-invoicing and supply chain data (75%).

Rob Jonker, Senior Product Manager, Global Payments, Deutsche Bank said the SEPA business case for corporates was still very minor. Large corporates do view SEPA as part of a bigger picture and potentially strategic, but the lack of an end date was a problem.

Mario de Lorenzo, Director of Payments Systems, SIA-SSB, said banks’ payments architectures must evolve in order to optimise processes and reduce costs. Standards would enable innovative services to be developed that can increase revenues and reduce time to market.

A key message that emerged from the sessions on SEPA was the need for better communication between banks and corporates.

Ashley Dowson, Chairman of The SEPA Consultancy, said the leadership of the political agenda had “disappeared” during the past few years. “SEPA customers were excluded from discussions for too long and are now too vocal. There must be a balance between banks and their users. Banks need to stretch their budgets to provide the services that are required, but corporates mustn’t request certain services merely to antagonise banks.”

Martine Brachet, Head of Interbank Relationships, Payment Services Division, Société Générale reminded delegates that SDDs were very complex and “there will be many lessons to be learned in November when they become a reality”. She also assured delegates that the French banking community had begun work on SDDs, having recently received clarification about multilateral interchange fees (MIFs). “The French banking community felt it was better to undertake all of the necessary preparation for SDDs before doing things we maybe could not manage.” France has committed to introduce SDDs in November 2010.

The MIF issue was important when it came to SEPA for cards as well. Norbert Bielefeld, Deputy Director, Payments and Securities, European Savings Bank Group, World Savings Banks Institute, reminded delegates of the principles of MIFs. “Interchange was successful in building and developing the cards business. If one of the objectives of SEPA is to have market transformation, you cannot have that without continued innovation. It is very difficult to innovate without investment and without MIFs this will be a real challenge.”

SEPA was introducing a more cooperative approach in the payments industry said Manfred Schuck, Executive Advisor to the Board of Directors at Equens. “Before SEPA was introduced, we had more than 30 different local infrastructures servicing only national markets. There will be a network community in the future comprised of partners. I think the number of infrastructure providers that will survive can be counted on the fingers of one hand.”

Marc Niederkorn, Director, McKinsey and Co, said SEPA would happen – something that a year ago he would have said with more caution. “SEPA will encourage interesting new economic models because banks will need to cut costs and increase efficiency. I think we will see much more outsourcing of operations that are difficult to manage inhouse, which is good news for the banks that can propose centralisation and network management.”

Jad Khallouf, Chief Executive Officer, STET, said SEPA expectations had been mismanaged. “You have to face up to SEPA if you are to survive but it is a huge challenge. Corporates are not ready, not only because of the lack of an end date. Like banks, they are striving to survive in the current economic turmoil.”

PSD Implementation

With the Payment Services Directive (PSD) due to come into effect from 1 November this year, Ruth Wandhofer, Head of Payments Strategy, EMEA Global Transaction Services, Citi, said there were still a number of challenges with the PSD, particularly for banks operating in more than one country across Europe.

“Most banks can tackle the customer communications aspect of the PSD at the last minute, but making the required system and procedure changes is more of a long-term project and some people are running slightly late on this.”

The overriding message that came out of the day was that the PSD cannot be reversed and financial institutions need to deal with it. As Dermot Turing, Partner, International Financial Institutions and Markets Group at Clifford Chance said: “It’s too late to argue about the content of the PSD. What law firms need to do now is help to interpret the PSD in a consistent way that minimises system and client-facing burdens.”

Daniela Umstätter, National Expert, Retail Issues, Consumer Policy and Payment Systems DG, European Commission said she was puzzled that uncertainty remained in the market about the transposition of the PSD into national law. “We are well on track with the PSD. Only one state, Sweden, has a problem with transposition and we will be helping them out. In general, the PSD is a fully harmonised directive, there is no room for interpretation and where there is, we are trying to solve it.”

John Burns, Senior Associate Retail Policy, Financial Services Authority had an uncompromising view: “The industry says complying with the PSD is difficult. We understand that, but the law is there and will have to be dealt with. Saying it is difficult doesn’t get us beyond what the law is.”

The PSD does present difficulties to banks, particularly those that operate in more than one country. Only the UK and Bulgaria have so far issued new payments laws based on the PSD. Concerns were raised about the treatment of leg-out transactions when no currency conversion was involved, what was meant by making funds immediately available, how to deal with late payments, charge codes for corporates, execution times for card payments and the impact of being non-compliant.

Bjorn Flismark, Senior Vice President, Global Transaction Services, SEB said the PSD changes a great deal for banks, imposing rules where previously they were used to doing “what they wanted or what they thought they could get away with”. Complying with D+1 on payments would require banks to consider new business models and how to charge customers in the future. “Those that have relied on float income in the past will be asking how they can replace this.” However, once systems have been changed “at a terrible cost”, banks will in the longer-term enjoy cheaper processing and simpler rules to live by.

Martin O’Donovan, Assistant Director, Policy and Technical, Association of Corporate Treasurers said from a corporate perspective, whether it takes one or three days for a payment to arrive is not crucial; having certainty is. The possibility of corporate opt-outs from certain provisions is being discussed among corporate treasurers and O’Donovan said many treasurers were taking stock of banking services and how they differ from country to country. “We are advising our members to ensure that they understand what they have so they can talk to banks in a meaningful way about opt-outs.”

Changes in law don’t make for a new market, it is business opportunities that do, Dr Thaer Sabri, Chief Executive, Electronic Money Association, reminded delegates. “If the PSD creates opportunities for a deluge of new payment institutions to come on to the market you would have to ask are these business opportunities that banks have left open? Money remitters, merchant acquirers and some third-party processors may all see opportunities in extending services. At the same time, some banks might hive-off their payments businesses and create specialist subsidiaries.”

Participants in the boot camp were left in little doubt that the PSD would have a significant impact on their payments operations. And as Burns pointed out, with countries outside the EU and EEA looking at the PSD, it may well be that in the future representatives from financial institutions elsewhere in the world will be mulling over the same questions.

Friday, May 15, 2009

Percentage viewer of SEPA

hroughout the conference, interactive electronic voting was used to guage people's views of the markets, the economic crisis and the implementation of SEPA.

Here are the results.

The first question was:

What is the value of transaction services (payments processing) to a bank?
32.7% A stable source of revenue
25.5% An anchor product for the bank to keep the customer
23.6% Provides infrastructure for enabling financial processes
5.5% Other

Ah, so Johnny may have been right in thinking that banks view payments processing as a way to lock in customers. After all, money transmissions are the core of a bank’s services aren’t they?

What is your most pressing area for near-term focus in 2009?

38.2% New revenue sources
22.4% Regulations
19.7% Risk management
15.8% Cost reduction
3.9% Surviving

Interestingly the focus is finding growth, which is positive.

What is your most pressing area for longer-term?

82.89% New revenue sources
5.26% Regulations
3.95% Cost reduction
3.95% Surviving

I note here how risk management disappeared from the list. So risk is just a short-term focus whilst we get over this market blip?

Of the following, which are the most interesting areas in 2009?
54.23% SEPA and the Payment Services Directive
28.81% Remittances and mobile payments
15.75% Getting back to basics
1.69% MT202 Cover Payments

So over half the audience are focused upon SEPA and the PSD. Not surprising as it’s a European audience and, in a separate voting sessions, the audience were asked specifically about their views of SEPA and the PSD’s progress.

Is SEPA going to help Europe’s Lisbon agenda for an integrated EU financial marketplace?
66.7% Yes
9.5% No
23.8% No idea

Around a quarter of attendees, most of whom specialise in payments in the EU, have no idea whether SEPA will help the Lisbon agenda to create a single European financial market. Interesting.

Who is going to benefit most from SEPA?
33.33% Consumers
46.97% Businesses
12.12% Banks
4.55% Public Authorities
3.03% No idea

Apparently 84.85% of the audience were bankers and 12.12% corporate users. The other 3.03% just confused.

Will the PSD be implemented homogeneously throughout Europe?
26.1% Yes
68.1% No
5.8% No idea

I think the audience conclusively concur with some of Johnny Brit’s views (by the way, this poll was taken before his speech).

The interactive voting finished with the general question:

When do you expect the turnaround to happen?

1.5% Before summer 2009
10.6% Second half 2009
21.2% Early 2010
28.8% Mid 2010
28.8% Late 2010
9.1% Later

Thursday, May 14, 2009

whats new financial channel?

he idea of mobile financial services has been a hot topic for a while now with many excursions into mobile finance from both banks and telco’s, with some successes and many failures.

More often than not we are now seeing successes, with mobile finance ranging from simple person-to-person payments via short text messages; to contactless payments on the underground through Barclaycard’s partnership with O2 and Oyster; to full financial services through Monitise’s infrastructure behind HSBC, Royal Bank of Scotland and Lloyds Banking Group.

What is the latest state of play?

Find out at this Financial Services Technology Trends meeting where we will be joined by industry leaders and innovators including:

  • József Nyíri, Chief Technology Officer, IND Group
  • Richard Johnson, Chief Strategy Officer, Monitise
  • Samee Zafar, Director, Edgar Dunn & Co
  • Steve Townend, Chief Executive Officer, MoBank

József Nyíri leads the Innovation Lab of IND Group and is an evangelist in the online banking innovation area. The IND Banking Front-Office (IND BFO) is a complete sales and banking suite of channels including branch, internet, mobile, contact centre on the same centralized platform, improving service quality and performance.

Richard Johnson joined Monitise in 2006 to lead the development of their product and service roadmap after 20 years working with some of the UK financial services' leading brands. Monitise run a mobile banking and payments service with partners including VocaLink, Metavante, Sun Microsystems, BT Global Services, T-Systems, HSBC, First Direct, Alliance & Leicester, Royal Bank of Scotland Group, Sprint, AT& T, Vodafone, Orange, O2, T-Mobile and Hutchison 3G.

Samee Zafar is a Director with Edgar Dunn & Co leading their annual Advanced Payments Study which is co-sponsored by Mobile Payments World magazine. Edgar, Dunn & Company (EDC) is an independent global financial services and payments consultancy founded in 1978.

Steve Townend is Co-Founder and Chief Executive Officer of MoBank, which is a new mobile service that allows customers to buy and pay for goods wherever and whenever they want. Steve was previously a founding Director of both Egg and First Direct.

Tuesday, May 5, 2009

Top 10 CEO salaries of 2008

The Huffington Post published the list of the Top 10 CEO pay packages for 2008.

The list is based upon the Associated Press formula which adds up salary, benefits, bonuses, preferential interest rates on pay set aside for later and company estimates for the value of stock options and stock awards on the day they were granted last year:

1. Aubrey McClendon, Chesapeake Energy Corp., $112.5 million

2. Sanjay Jha, Motorola Inc., $104.4 million

3. Robert Iger, Walt Disney Co., $51.1 million

4. Lloyd Blankfein, Goldman Sachs Group Inc., $42.9 million

5. Kenneth Chenault, American Express Co., $42.9 million

6. Vikram Pandit, Citigroup Inc., $38.2 million

7. Steven Farris, Apache Corp., $37.2 million

8. Louis Camilleri, Philip Morris International Inc., $36.9 million

9. Kevin Johnson, Juniper Networks Inc., $36.1 million

10. Jamie Dimon, JPMorgan Chase & Co., $35.7 million

Friday, May 1, 2009

Chip & PIN on mobile banking

had a call the other day about the success of Chip & PIN.

Admittedly Chip & PIN did reduce fraud for a while in merchant stores, but it’s now on the rise again. At the end of the conversation, I realised why and how Chip & PIN happened and why it is here to stay. It also made me realise why Chip & PIN is not the solution and why mobile banking is taking so long to take off.

To illustrate the process, here’s a snapshot of one bank’s boardroom:

The boardroom meeting began with the minutes of the last meeting, apologies for absence and matters of the day. After the usual mutterings and demands and debates, the large oak-panelled door opened and Mr. Mobile stepped into the room.

“Ah, Mr. Mobile”, said the bank’s CEO, Big Cheese. “Welcome to Fusty Bank’s Monthly Board Meeting. As you can see we have the Chairman here and my cohorts in attendance.” The other attendees nodded at Mr. Mobile in welcome, “and the agenda item I believe you are presenting is: ‘the business case for Fusty Bank’s move into mobile banking’. Fire away.”

“Thank you Mr. Cheese”, replied Mr. Mobile. “And let me begin by saying what an honour it is to be here with you today”.

“Get on with it Mobile”, snapped Big Cheese.

Hmmm, that was a good start.

“Well lady and gentlemen”, Mr. Mobile had always liked the bank’s only female board member, Mrs. Human Resource, “I could present numbers to you but you have those in your books and background reading, so let us look at the three main points for investment in our mobile channels today. First for competitive reasons; second for customer and revenue growth; and third for cost savings.”

“Mobile, I have heard this so many times before”, said the Big Cheese.

The Chairman nodded in agreement and, a moment later, so did the cohorts.

This was not going well.

“We have business cases presented here every month and they are all the same”, Big Cheese continued. “They all talk about numbers, competition, customers and costs, so tell me something I don’t know.”

The room fell silent and Mr. Mobile felt a little despondent already, even though he had only been in the room for two minutes.

Mr. Mobile thought for a while and finally, after what felt like an eternity but was just a matter of a few seconds, he turned to Big Cheese’s Head of Fraud, Robin Banks, and said: “you wasted millions of the banks money by ignoring my business case.”

Robin’s face reddened and he closed his eyes.

Big Cheese turned and looked at Robin in surprise, whilst the Chairman gazed like a serpent watching the room’s dynamics.

Big Cheese quietly asks, “Robin, what does Mr. Mobile mean by this?”

Robin picked up his notes and tried to hide.

“Robin?” Big cheese was losing patience.

“Sir, yes sir. I think Mr. Mobile is referring to Chip & PIN sir”, Robin replied in a slightly shaky voice.

Both the Chairman and Big Cheese looked confused, so Mr. Mobile stepped in.

“That’s right Robin, and sorry to drop you in it but Chip & PIN was a farce.”

Big Cheese glowered and asked Mr. Mobile to explain his accusation.

“Well it’s not Robin’s fault really”, said Mr. Mobile, “but more the fault of the UK Banking Industry and APACS, what is now the Payments Council. But it’s not really their fault either. They were just too short-sighted to notice how rapidly the world was changing.”

“Look”, interrupted the Chairman, “we’re in the middle of a Board meeting, listening to your business case which has so far been very unimpressive.” The Chairman does not suffer fools gladly. “Either tell us the facts in a short and succinct fashion or you can get out of here now.”

“Sorry Mr. Chairman”, Mr. Mobile replied sheepishly, “I don’t wish to annoy but some of the facts are critical in the case for this business.”

Once again the Chairman said: “Make it short and sweet, Mr. Mobile”, and now he had the full attention of the room.

“A decade ago, the British banking industry decided to introduce a better way to avoid fraud and decided on Chip & PIN. This was agreed around 2002 after a global analysis determined that the French PIN card system, which had been in place since 1995, worked well and that the EMV Chip in Credit and Debit cards was functional enough for national deployment.” Mr. Mobile was on a roll.

“The system was launched in 2005 and mandated in 2006 when all merchants had to invest millions in new PIN terminals.”

“Mobile, I am getting bored”, sniffed Big Cheese. The Chairman’s eyes had closed about a minute ago and Mr. Mobile wasn’t even sure if he was still awake, and Robin Bank’s eyes were boring into Mr. Mobile’s forehead so hard that he felt them on his face like daggers.

“Sorry Mr. Chairman”, said Mr. Mobile, “but, you see, all that cost and effort was wasted.”

“I don’t see that”, said Big Cheese, “and unless you make yourself clear in less than a minute, you can leave the room.”

“OK sir, short and sweet”, Mr. Mobile now knew he had them.

“At the same time the UK determined upon Chip & PIN, Hungarians were rolling out an alert service which is now used across Eastern Europe, Russia, Africa and other economies. It’s a mobile telephone service which simply alerts customers every time their card is used with an SMS text message. It costs virtually nothing, customers love it and are willing to pay for the service, banks make money out of it, and no infrastructure or millions were spent on terminals to avoid fraud.”

He stopped and looked around the room.

The cohorts were sniggering, Robin Banks was festering, the Chairman was now wide awake and Big Cheese looked unhappy.

“You mean we didn’t need Chip & PIN?” asked Big Cheese.

“No sir”, said Mr. Mobile.

“Banks. Is this true?” asked Big Cheese.

Robin Banks visually trembled and said, “not strictly true sir. When APACS and the industry made this decision, we didn’t think mobile telephones were going to be as ubiquitous or usable as they are today.”

“Are you an idiot, Banks?” asked Big Cheese.

“No sir”, said Banks looking a little like Forrest Gump with his mouth wide open with surprise at such an accusation. “But bear in mind this was a decade ago when we were making the decision for Chip & PIN. How could we have known?”

“And what about those one-time password terminals the banks just spent more millions on rolling out?” asked Mr. Mobile.

Big Cheese was now looking distinctly angry.

“What terminals are you talking about now, Mobile?”

“Well sir”, says Mr. Mobile feeling more and more assured, “the very same group that made the decision to go down the Chip & PIN alley found that fraud at merchant’s terminals was reduced dramatically but the criminal fraternity just shifted their attention to the internet. As a result, the industry made a decision to give customers terminals to authenticate internet transactions.”

The Chairman grunted, “I’ve even used one!” he said.

Mr. Mobile smiled and continued: “The terminals work by entering your card and PIN. You then receive a unique one-time password code that you enter to authorise the payment. The fact that you enter that code proves the cardholder is present.”

“So that sounds good if it reduces fraud online”, said Big Cheese.

“It is. Except that customers hate it and the cost of the terminals has been a waste of money”, says Mr. Mobile.

“Is this true Banks?” roared Big Cheese.

Robin Banks cowered back in his chair, “not strictly true sir.”

“Is it or isn’t it?” asked the Chairman.

“It is but we ...” before Banks could finish Big Cheese growled “get out of my sight” and the two bank security officers who guard every Board meeting picked Banks’ chair up off the floor, with him in it, and physically removed him from the meeting.

“Explain more Mobile”, said the Chairman.

Mr. Mobile was now really pleased with how it was all going and ploughed onwards and upwards ... or so he thought.

“The fact is that, just as a phone can be used for fraud alerts to customers, it can also be used for one-time password generation and authentication.”

“How?” Big Cheese asked the question, looking genuinely interested.

“Well, every time a transaction needs authentication, we send an alert to the customer with details of the transaction via an SMS message to their phone. They should send back a message to the bank server saying it’s ok with a secure code to prove it is them. The bank server then sends them the unique one-time password number as a text message which they enter into the online payment system. Voila. Job done.”

Big Cheese leaned forward and said, “this all sounds remarkably simple Mobile, so why didn’t we do this?”

Mobile smiled and said, “well, we could have done. However, we were so wrapped up with working as a collegiate industry together, and then with all the vagaries and challenges of the Chip & PIN rollout followed by the urgent issues of internet and cardholder not present fraud, that the password terminal and keyfobs seemed the obvious thing to do. However, it once again cost the industry millions, didn’t solve the problem, irritated the customer and created more complexity. If only these people making the decisions could have seen the opportunity for mobile telephones, it would have been so much more simple, cheap, cost-effective and fast.”

“Anything else?” asked Big Cheese.

“Yes, it would also have generated revenue and profit for the bank as the mobile service is a service that customers would pay for, rather than being forced to use”, said Mobile.

“Well, thank you Mr. Mobile. A most interesting presentation and business case”, said the Chairman. “Do you have anything else to say before we conclude?”

“Only that we now have a fantastic opportunity to not only differentiate Fusty Bank from the competition, overcome fraud and create great customer service experiences, but that we can also add on many more revenue-generating applications and services to the mobile.”

“Such as?” The Chairman, Big Cheese and the cohorts were all now listening to every word Mr. Mobile said.

“Billing, payments, remittances, proximity services and marketing, 24*7advisory and support for customer financial management ... anything really. It’s effectively like placing the whole bank in the customer’s hand and, as a result, you can create far more customer activity and revenue.”

Big Cheese digested what Mr. Mobile had just said. He flicked through the notes in the business case. He quietly whispered a few words in the Chairman’s ear and the Chairman nodded.

Big Cheese then waved a finger at the security guards by the door, who came over and talked quietly with Big Cheese. Upon completion of these discussions, they approached Mr. Mobile.

“What’s going on?” asked Mr. Mobile.

“Taking care of business”, said Big Cheese, at which point the two guards lifted Mr. Mobile off his feet and threw him head first out of the Boardroom window.

The cohorts screamed, with several looking visibly distressed. One was even sick.

When the furore died down a little, Big Cheese addressed them all in a very stern manner.

“Colleagues. What you have just seen is something I hoped you would never see, but it had to be done I’m afraid.”

The cohorts squealed and squirmed.

“You see, Mr. Mobile just committed the ultimate crime in banking.”

The cohorts shook and trembled.

“He pointed out the folly of our ways.”

The cohorts moaned and groaned.

“We do not like wasting money and losing revenues.”

One of the cohorts then had the temerity to ask Big Cheese the question they had all be dying to ask (in Mr. Mobile’s case literally).

“So, we are going to rollout mobile services sir?”

“Of course not you fool”, bellowed Big Cheese, rounding on the individual concerned with his face bursting into reds, purples and veins bulging, “we’re going to bury this whole discussion until someone comes into this market with a product that works and then we shall copy it.”

The room went deathly quiet.

Nothing stirred.

Not even a mouse.

Then the Chairman decided it was time to retake control.

“Big Cheese. Why would we do that?”

“Because Mr. Chairman, we cannot afford to let the mobile carriers eat our lunch and I am not about to write-off a ten year security program that cost us millions.”

“Oh yes. I forgot.”

With this, Big Cheese called the meeting to a close and left the room.

Robin Banks, who had been hiding behind the Boardroom door listening to the meeting through the keyhole, crashed into the filing cabinets as Big Cheese pushed the door open with a hefty boot.

Tuesday, April 28, 2009

Incumbent Exchanges


There were two more great discussions during TradeTech that compared and contrasted the incumbents with the new MTFs. The first focused upon attracting liquidity and what that means; the second on the likely view for the future of trading venues.

The first discussion was a debate amongst a panel comprising:

  • Hirander Misra, COO, Chi-X Europe;
  • John Wilson, Chief Executive, Baikal;
  • Rainer Riess, Managing Director, Cash Market Business Development, Deutsche Boerse;
  • Mark Hemsley, CEO, BATS Trading Europe; and
  • Simon Brickles, CEO, Plus Markets Group;

chaired by Andrew Silverman, Managing Director Electronic Trading, Morgan Stanley.

There was a little of the usual spikey stuff about “our exchange is better / cheaper / faster than your one” especially when Hirander of Chi-x mentioned how their order execution was 1.6 basis points better than Xetra’s, to which Rainer of Deutsche Bourse responded that: “Chi-x can claim a 1.6 bps improvement over Xetra but Xetra could claim a 10 bps improvement over Chi-x dependent upon how you measure it.”

Herr Riess was quite fired up in fact and continued: “you must not confuse reality with marketing. It reminds me of the bargain airlines for example, where you advertise very cheap seats but when you try to book, the seats are not there. Ignoring the depth of book is not useful.”

Ah yes, the old apples and pears difficulties of comparing the full execution, clearing and settlement cycle, although there has to be some truth in Hirander’s claims or why would Chi-x have picked up so much market share off the incumbents over the last two years?

There were also some key notes of substance during this panel as well, such as Rainer’s closing comment that you cannot ignore the depth of the book when comparing execution venues.

Mark Hemsley counteracted that liquidity flows to BATS because they have “tighter prices, a diversified customers base and no dependence upon a single order flow”; whilst Hirander talked the fact that regulations mandate Best Bid-Offer (BBO) reference pricing which, without a consolidated tape for a European BBO (EBBO) style service – which Equiduct offers if anyone’s interested – then you cannot achieve this BBO capability.

Equally, Hirander stated that you need EBBO with Volume Weighted Average Pricing (VWAP) to make it really work.


John Wilson agreed, but clarified that a mandated tape would be a bad thing because it would create latency issues and challenges in determining where to take the prices from.

In fact, the entire panel felt a consolidated reference pricing on a single tape would be great, but that is should not be a regulatory requirement. The Chairman Andrew of Morgan Stanley then made the most telling comment: “fix it or we will be regulated”.

Also true.

There was also a clear view that the clearing and settlement area is a problem, with Mark Hemsley of BATS saying it was “a joke” due the log jam of requests for change. “We will go out of our way to support those clearers who create interoperability”, and that there was room for three pan-European CCPs maximum.

John Wilson of Baikal agreed, saying that interoperability of CCPs is critical which is why CCP intermediation is increasing. With intermediation increasing, CCPs are now concerned about disintermediation, which is why interoperability and risk models are being opened up for discussion between the Clearing & Settlement Mechanisms (CSMs).

Charlotte Crosswell, CEO of NASDAQ OMX, speaking in the next session added a nice little sound bite to this debate, when she said that it didn’t matter if they were 0.1 or more basis points better on price discovery if “the elephant in the room – clearing and settlement – was not solved.”

Implication: EuroCCP and EMCF are going to get the full support to lean on Eurex Clearing and Euroclear to make change happen.

Rainer Riess then countered with a view that the Code of Conduct had created transparency and debate, and that there is competition so we do not need more regulation. Equally, in the clearing space, you have to remember the issues of risk and that interoperability between two CCPs is hard to control. “An integrated vertical silo is needed and we can do that in that we can marginalise across asset classes”. Rainer finished with the view that you “must balance competition against market integrity”.

Implication: Deutsche Bourse with Xetra, Eurex and Eurex Clearing has the straight-through processing under a single umbrella for end-to-end trading clearing and settlement … if you want to avoid risk and / or prefer a more single provider (competitors call ‘monopoly’) approach.

All in all, a great panel session.

Monday, April 27, 2009

Turner and Compliance


It will be different in the future though, and there are some firm dates such as June 2009 when the new collegiate of supervisory boards that comprise the Financial Stability Board start their work.

The Financial Stability Board (FSB) itself is there as an early warning system rather than as an actual decision-maker. In fact, it has no decision making powers and so each national and regional regulator can make their own choices. This means that there is no global regulator and there is unlikely to be one.

Equally, there is unlikely to be a regional regulator for Europe, which is why the De Larosière Group recommended strengthening CEBS, CESR and CIOPS but not to make them the EU regulatory power. That power still lies with the FSA, AMF, BAFIN and other national regulators.

So the FSB is the alarm bell and standard setting organisation between nations and regions, but not a powerbase.

The real meat of the G20 pronouncements however had more to do with liquidity – a word that had not appeared on any risk radars or regulatory agendas just two years ago – and capital adequacy. As a result Basel II will be amended to address pro-cyclicality through minimum levels of capital although, as this short clip illustrates,

Friday, April 24, 2009

are Order routers has providing Best Execution?

Chi-x began trading two years ago, soon to be followed by Turquoise, BATS, NASDAQ OMX and Equiduct. And there will be more. According to the dialogue so far, there are 125 or so MTFs registered with CESR across Europe.

Admittedly, many of these are broker-dealer based systems and services, but there are at least 10 pan-European MTFs registered, with Burgundy the next to launch.

So it’s obvious that not all of them can succeed, but having three or four in each area of service from dark pools to liquid stocks to all markets and eventually to derivatives, bonds, fixed income and other markets certainly seems to be on the cards according to the discussions here so far.

I’ll talk more about the other MTFs tomorrow but right now Chi-x is the one that shouts loudest, probably because it’s been around for longest and has first mover advantage. In fact, unlike BATS, NASDAQ OMX and Equiduct, it also had the advantage of launching well before September r2008 when the credit crisis hit, which is a definite advantage.

So Mark Howarth, the new CEO of Chi-x Europe – my friend Peter Randall left on the day I last blogged about this stuff in depth – stands up and presents some interesting slides.

For example, gross consideration for Chi-x rose steadily through to September 2008 and then dipped away as follows:

Gross Consideration (€ billions)

Q2 07 €1.5
Q3 07 €20.2
Q4 07 €34.6
Q1 08 €74.2
Q2 08 €132.5
Q3 08 €246.3
Q4 08 €205.5
Q1 09 €148.9

Now you may look at those numbers diving since Q3 2008 and think Chi-x should be worried, but that’s not the whole story in that, by the end of Q1 2009, Chi-x proudly claim fifth spot in the European pecking order of exchanges, closely followed by NASDAQ OMX Nordic and Turquoise:

Value of Equity trading, March 2009

Exchange / MTF Order Book Trades Order Book T/Over (EUR m)

1 London Stock Exchange 17,279,867 123,650.0

2 Euronext 15,365,479 116,839.0

3 Deutsche Borse 8,118,311 95,835.8

4 Spanish Exchange (BME) 2,832,093 60,682.8

5 Chi-X Europe 10,554,888 57,168.5

6 Borsa Italiana 6,227,802 45,937.2

7 SWX Europe 2,875,388 45,495.4

8 NASDAQ OMX Nordic 4,802,676 43,150.6

9 Turquoise 3,309,508 22,567.8

10 Oslo Bors 1,240,279 11,397.7

11 BATS Europe 1,760,985 8,277.7

12 SIX Swiss Exchange 462,090 2,802.3

Equally, market share of all the new Exchanges has been steadily rising. For example, the three new MTFs – Chi-x, BATS and Turquoise – are averaging around 20% of the DAX30 daily volume. That’s a wee dent in the Deutsche Bourse’s pie I suspect.

In fact, Mark claims that Chi-x’s research shows that there would be a significant shift in liquidity and market share to Chi-X and the other MTFs from the incumbent exchanges if best price routing were in play. This would be in the order of 17% of all orders for November 2008, 15% in December, 13% in January 2009 and 12% in February. The reason for the decreasing numbers is the decreased volume of trading during these months, rather than any uncompetitive aspects of the new MTF models.

In other words, and I’ve heard this from the other MTFs too, the fact that order routers aren’t smart enough to seek out best price in Europe right now is the reason why the liquidity sticks with the incumbents.

Not sure if true, but Chi-x claim their market share would have been 10.6% higher between November and February if the full price improvement transparency and best execution rules were enforced.

Thursday, April 23, 2009

job hunters rejected

Another year, another TradeTech, Europe’s largest technology exhibition and conference focused upon the investment markets for the buy and sell side.

I love TradeTech. The smell of money, the buzz of aggressive trading strategies, the master of the universe swagger as you walk round the exhibit hall, the sound of ‘buy, buy, buy’.

More like the sound of bye, bye, bye this year it seems, as lots of workers have been laid off, bonuses cancelled or delayed and a generally sombre atmosphere around the markets.

Or that's the impression my colleague gave me as I arrived here at lunchtime.

Not sure if true, as there’s a good size exhibit hall and attendance list ... but yes, there is something missing.

What could it be?

Wednesday, April 22, 2009

Why regulators find it so hard to regulate


The theme was around how to make the G20 supervisory framework work with regulators, compliance heads, bank directors and a CIO in attendnace. All in all a nice crowd, and a convivial conversation.

However, I did note a few comments such as:

“Europe is run by the Council of ministers”
“European regulations are overly prescriptive”
“Greed is the biggest desire and how do you regulate that?”
“I’m amazed by the financial regulator’s lack of teeth”
“The French make the laws as complex as possible and then don’t follow them” …

and more.

Oh yes, nothing like being a London-based European is there?

Now this may sound like a disaffected group, but it isn’t. It is more a case that you can create as many rules and laws as you like but if they are unclear, unworkable or inappropriate, then you cannot enforce them.

This is the frustration of the regulators as much as the regulated, and there is no simple answer.

We then talked about principles- versus rules- based regulation, with three-quarters of the room saying that principles-based regulation is still far more appropriate than rules-based. Although rules are easier to follow, they can be too constraining.

Then the conversation was pulled up by the statement that principles-based regulation no longer works and we should focus upon outcomes-based regulation.

Interesting, especially as we have a lengthy process of new outcomes-based regulation coming through, such as the FSA’s Consultation Paper entitled 'Strengthening liquidity standards 2: Liquidity reporting' (CP09/13) released yesterday.

I haven’t had time to read the document but PJ Di Giammarino, who chairs the Financial Services Club’s Capital Markets Chamber**, posted a commentary as follows:

“After a rapid review of the 174-page CP09/13 response on liquidity reporting, we think the FSA is essentially saying ‘We appreciate it is going to be hard but get on with it, because we are serious’.

“Despite many of the 98 respondents to the 15 questions in CP 08/22 (the first consultation paper released last December) highlighting the practical issues associated in delivering new reports, the FSA has decided that liquidity problems need to be monitored daily. And for banks this means exactly what it says on the tin.

“The FSA recognises that reporting requirements may be costly to implement but believes the data concerned would normally be utilised by most firms during the normal course of business.

“In an important nod to the recent G20 meeting, it is also clear that the FSA is engaged in international efforts to align other regulators to its data-intensive approach – and then use this as the basis of cross-border benchmarks.

“Firms should expect the new rules and guidance to be in effect in the fourth quarter of this year with new FSA reporting arrangements going live in Q1 2010. It goes without saying that there’s a huge amount of work to be done across the industry to get this right.

“Our discussions with practitioners in banks lead us to conclude that, whilst much of this makes good business sense, it has the consequence of asking banks to rethink their infrastructures from the bottom up. The good news is that investment firms now have a clear and certain regulatory target to aim at.”

This also builds on the De Larosière report and other rulings as discussed previously, and my take on PJ’s comments is that the FSA has placed stringent rules in play which will force banks to report daily based upon strong liquidity data analysis.

Sounds like a prescriptive regulation if you ask me, and promotes the idea that outcomes-based regulation is not going to be based on principles but will be based upon strong controls, enforceable through prescriptive data reporting structures.

A-ha … and hopefully with teeth and co-ordination for a consistent approach across geographies.

But even if it isn’t, it does not matter as the key here is to have a transparent regulatory environment which ensures a robust marketplace, and the more robust the marketplace the more market players.

It honestly doesn’t matter what the UK, France, Germany, Spain, Italy or others implement in their interpretation of EU Directives, it just matters that each creates a strong and robust marketplace which attracts liquidity and has some form of consistency, even if not quite 100% the same.

This is why the FSA always jumps in first, because they want the UK market to be the most robust and well regulated, to encourage participation in that market over others.

And there's the rub. Who can create the market that has great regulations, which are easy to work with and robust, whilst avoiding constraints and rules which might deter business and liquidity.

And one, of course, that averts a disaster anything like the one we’ve just experienced in this crisis, e.g. from Paul Kedrosky’s Infectious Greed yesterday:


Anyways, back to the dinner and the comment that resonated the loudest around the room was the one that asked: “where’s the customer’s voice?”

In all the dialogue about regulations and regulating, the focus appears to have been to lock the horse back in the barn after its bolted whilst the fact is that the farm still needs looking after.

In other words, are we focusing too much upon the crisis and its issues, or should we be focusing back on what is good for corporations and citizens, and then apply this to the banks?

I guess we’re trying to do both: to plug the holes in our existing legislation that allowed the credit bubble to balloon and burst, whilst protecting corporations and customers from past, current and potential future misdemeanours.

No wonder the regulators have such a hard time.

Wednesday, April 15, 2009

about Bank CEO


The Banker magazine hit the mark again this month with a research report on CEOs views.

During February and March, they surveyed 87 bank CEOs across Western (6.5%) and Eastern (15.6%) Europe, North (5.2%) and South (14.3%) America, Africa (20.8%) and Asia (23.4%).

The figures in brackets are the percentage of CEOs from each region responding, and here’s a summary of key results:

Will business be better or worse in 2009 compared to 2008?

28.7% expect business to be better;
31% expect business to be a little worse; and
11.5% expect business to be a lot worse.

Comment: if 1 CEO was Canadian, then Western European and the USA would equal around 11.5%, about the same number that expect things to be a 'lot worse'!

When will we recover?

Q2 2009 25.3%,
Q3 9.2%
Q4 23.0%
1H 2010 17.2%
2H 2010 19.5%
2011+ 5.7%

That means approximately 57.5% of CEOs expect recovery this year … interesting that South America, Africa and Asian CEOs equal 57.7% of respondents, which means American and European CEOs may be looking to next year.

The main causes of the crisis were:

  1. Exotic financial structures
  2. Excessive leverage
  3. Global macroeconomic imbalances creating excessive liquidity
  4. Poor regulation
  5. Poor management

48.2% described their capital levels as higher than regulatory requirements, whist only 3.5% thought theirs was too low (Citi? BoA? RBS?).

50.6% expect their balance sheet structure to stay the same, whilst 15% thought a significant restructuring would be needed … woohoo!

A key note for those in my community is where do you see investment areas in 2009:

71.3% IT Systems
64.4% Core Banking Systems
63.2% The Bank's Retail Network
56.3% Compliance
36.8% Customers Surveys
29.9% New Staff
25.3% Environmentally Friendly Technology
24.1% CSR Projects

In other words, bugger the planet … we’re more interested in survival and prosperity!

Some other interesting notes include:

  • 40% of CEOs reported retail savings and deposits are the most active business are for the bank and 25.3% said that corporate lending is the most active area; less than 5% said that mortgage lending would be the most active area; and
  • Asked how governments can help banks, less than a third answered through quantitative easing … is that why the Treasury is having second thoughts about more quantitative easing

Tuesday, April 14, 2009

status of the G20


So the G20 meeting is over and has an agreement to spend over $1 trillion through the IMF on nations that are worthy. The other key agreements include:

  • a lockdown on the tax regimes of countries where people hide place their wealth. The age of bank ‘secrecy’ is over they say, although I’m not sure that Switzerland, the Caymans and other nations will appreciate that very much. Mind you, the OECD has just listed the tax havens they views as uncooperative, with Costa Rica, Malaysia (Labuan), the Philippines and Uruguay singled out as “jurisdictions that have not committed to the internationally agreed tax standard”;
  • a crackdown on light touch regulation and particularly on hedge funds, credit rating agencies and the operations of banks in the Over-the-Counter, or ‘shadow’ banking markets;
  • the creation of a new Financial Stability Board, which will focus upon financial stability across all major economies; and
  • measures to address the issues in the banking system by preventing excessive leverage and forcing banks to have higher reserve policies so that we avoid being left under-capitalised in a downturn again.

There’s a lot more to it, but I guess the key implications for banks are that there will be a fundamental rethinking of core products and services as:

  • all systemically important financial institutions will be covered by the rules, including hedge funds;
  • capital requirements will change provisioning, and this may lead to a new Basel III;
  • the current Financial Stability Forum becomes the Financial Stability Board and will embrace all G20 countries, the European Commission and Spain;
  • the new Board will have a much wider mandate to promote financial stability, set financial guidelines and monitor supervisors for the major cross-border institutions; and
  • challenges in using cross-border tax loopholes for profits and products.

On the last one, I just realised something. One of my bank friends works in London two to three days a week, but lives in a tax haven called Monaco to escape tax here. Surely now, he'll move to Costa Rica. Nice weather, and no pressure from the G20 on his tax.

Maybe they should register the bank's head office there too?

Anyway, the G20 Summit was a useful step forward as it gathered clarity from the world's largest nations in stemming this crisis and moving forward. It was useful, even though all of the agreements were made beforehand by the civil servants. It was managed well, as the predicted riots were quelled through strong police action and control (if you didn't notice, the riots in Strasbourg at the NATO meeting have been far worse).

Meanwhile, if you’re interested in learning more from a real expert, then come to the next Financial Services Club meeting on Thursday 16th April 2009 in the London.

David Bagley, Global Head of Compliance for HSBC will discuss his view of the implications of a new G20 Supervisory Framework.

Thursday, April 9, 2009

for the multichannel myth purpose


For years, I’ve dealt with banks talking about multichannel integration and adding new capabilities to the core traditional channel of branch operations.

In the 1970’s we added ATMs, the 1980’s added call centres, the 1990’s the internet, and now mobile.

For all those years, we merrily added these techno-capabilities as the world revolved around us because we felt we had to and because, in some cases, they saved us money.

We added ATMs because they reduced costs; we added call centres because new competitors were eating our lunch; we added the internet because we thought we could close branches; and we’re adding mobile because it’s the latest fad for customer service.

For all those years, we did the best we could to keep up … but we failed.

You see, I had a realisation this week.

One of those eureka moments.

The realisation that multichannel does not work.

It was something that we’ve been doing in our sleep, but it’s wrong.

What we actually created is mixichannel. Mixi stands for mixed up.

We added ATMs and they’ve grown massively in the UK, from 10,000 in 1986 to over 60,000 today.

These were typically stuck on the outside of branches and are now in car parks, pubs, casinos and anywhere else you might need cash (there are many around Soho, which I’m informed need refilling far more frequently than most ATMs!).

The ATM saved cash by increasing transactional services without the human hand involved, or not the bank's hand anyway.

The ATM however is not really a channel.

It’s an adjunct to the bank’s reach. It’s a cost reduction mechanism. It’s a method of getting rid of a branch or adding a remote branch, but it's a transaction engine.

It’s not a channel.

A channel is one where you can sell stuff and provide advice.

Anyone lingering at an ATM talking about a pension would either be (a) mad or (b) annoying, as the 100 people standing behind them wanting cash will be out with the daggers.

So the ATM is not a channel as such, but call centre, internet and mobile are channels.

And the thing about the call centre, internet and mobile is that the banks have typically added these channels onto existing operations after another player has proven their success.

In the case of the call centre, First Direct were one of the first movers to make this channel work, and are the UK’s leader in this area.

First Direct built their bank around a remote telephone based centre, rather than adding call centre to branch operations. Therefore, the difference is that First Direct have processes designed for remote customer reach, rather than a process designed for administering customer service when the branch is closed.

In the case of the internet, Britain’s leading internet bank is Smile. Smile is a bank designed for exploiting internet self-servicing, rather than adding traditional bank processes to a home-based self-service channel.

And in the case of mobile, we now have a new dedicated mobile bank, Mobank, which is soon to launch in the UK.

What’s the point?

Well, my eureka moment is that the banks of the 1970’s are still the banks of the 1970’s.

The reason why their call centre operations ask for name and account number, and focus upon balance and transaction statements, is because they view the branch as the key contact point.

The reasons their internet services are dull and boring is because they are just automating statements online, rather than leveraging and using broadband-based social media.

And their mobile services will be the same.

This is because the technology is being added to the bank focused around branch operations, rather than using the technology to design a new bank specifically for that technology.

However, when a bank is designed around the technology, it wipes the floor of the competition.

First Direct is not only Britain’s largest call centre based bank, but it’s one of Britain’s favourite banks.

Smile is not only an internet designed bank for internet access, but also Britain’s favourite bank.

According to a BBC survey last year of 13,000 UK viewers, these are the top banks for customer satisfaction and service in the UK.

They are banks without branches designed for the channels of today, rather than banks with branches who added these channels onto their traditional structures.

In Japan, I recently talked about Jibun Bank and eBank. eBank has half of the internet banking market in Japan, as a bank designed for the internet. Jibun Bank has already stormed up the bank charts, as a bank designed for the mobile.

What this tells me is that it’s not about banks closing down and being eaten by new competition, as all of these banks other than eBank are owned by traditional branch-based banks.

What it says is that a bank is far more likely to be successful with a new channel if they design a bank for that channel, rather than tagging on the technology as another on top of their branch operations.

Just a thought as, if true, it says that banks should really be launching new banks designed for new channels under separate brands as their future strategy, whilst making the absolute minimum investment in the new channel with their older channel brands.

Some banks do the latter anyway, but I’m not sure whether it’s by design or lethargy.

Final thought: if my business can run today for 80% of the costs it did a decade ago, thanks to broadband access and low cost technology, why hasn’t a bank passed on these savings to their customers?

UK bank branch numbers declined 11% between 2002 and 2007, and broadband means that UK banks have most customers looking after their own needs these days through self-service. Call centres have been outsourced and offshored, and ATMs have extended to cheque deposits and more.

how much user today?

A website created in 2004 reached 200 million users today.

That's the size of America near enough!

A website has built an America in just five years.

Not bad going is it and, even though it's not a bank, this is as important to banking as the internet as it has become the home page for almost 200 million people.

The site is Facebook, as if you didn't know, and here's Mark Zuckenberg's note explaining what it means to them (a lot of share options I would have thought):

We will welcome our 200 millionth user to Facebook some time today, and I want to take this opportunity to describe what this means to us and what we hope it can mean for everyone using Facebook.

When we built Facebook in 2004, our goal was to create a richer, faster way for people to share information about what was happening around them. We thought that giving people better tools to communicate would help them better understand the world, which would then give them even greater power to change the world.

Creating channels between people who want to work together towards change has always been one of the ways that social movements push the world forward and make it better. Both U.S. President Barack Obama and French President Nicholas Sarkozy have used Facebook as a way to organize their supporters. From the protests against the Colombian FARC, a 40-year old terrorist organization, to fighting oppressive, fringe groups in India, people use Facebook as a platform to build connections and organize action.

More broadly, technology has made it easier and faster for people across the world to share more and more -- from the daily activities of their lives to events that impact their communities. At Facebook, we want to build the best service in the world for people to connect with and share everything that is important to them, whether day-to-day or world-changing. A heat map of our growth since 2004 shows how quickly people across the world are connecting on Facebook.

Growing rapidly to 200 million users is a really good start, but we've always known that in order for Facebook to help people represent everything that is happening in their world, everyone needs to have a voice. This is why we are working hard to build a service that everyone, everywhere can use, whether they are a person, a company, a president or an organization working for change.

To celebrate and support all of these voices and their potential to improve the world, we are creating a space on Facebook where people can share their stories about how Facebook has helped them give back to their communities, effect change or connect with a distant relative. We've also worked with 16 charitable and advocacy organizations to create gifts that are now available in our gift shop. The organization the gift represents will receive between 90 percent to 95 percent of the cost of the gift, after administrative expenses for the transaction, so we encourage you to share your passion for a cause with your friends and in doing so, support the cause. Facebook will not keep any part of your contribution.

There are still many more people and groups in the world whose voices we want to connect with everyone who wants to hear them. So even as we celebrate the 200 millionth person and all of you using Facebook today, we are working to bring the power of sharing to everyone in the world.

Tuesday, March 31, 2009

Trust the complete banker?


First, there’s the Global Trustometer from Edelman. I’ve been a follower of this for years. You can see summary results at Edelman’s website.

For quite a few years, even during the good times, Edelman found that bank and finance brands are trust challenged. Equally, they find very different attitudes between Asian, European and American brand views.

For example, I remember a few years ago that European consumers voted the World Wildlife Fund, Greenpeace and Oxfam as their most trusted brand names whilst Americans had Johnson & Johnson, Microsoft and Ford as their top names.

I’m sure the US view may have changed a bit after Vista and the auto bailout, but Europeans are still tree-huggers and fluffy-bunny lovers.

Anyways, the 2009 Edelman survey, its tenth, is based upon a thirty minute telephone survey with 4,475 people in 20 countries between November 5th and December 14th 2008.

These interviews comprised 1,075 people aged 25 to 34, and 3,400 people aged between 35 and 64.

Globally, 62% of people trust companies less now than they did a year ago, with this drop the most marked in the USA, falling from 58% of American consumers trusting business to do what is right in 2008 to only 38% in 2009.

Funnily enough, trust in government to do what is right stayed pretty much on track globally.

Although the Swedish, Americans, Mexicans and Indians trusted their governments less, these were offset by the Brits, Germans, Dutch, Polish, Brazilians and Canadians who all trust their governments more.

Companies headquartered in Sweden, Germany and Canada are trusted more than any other, whilst Chinese and Russian firms are trusted the least.

Now to the crunch (not the credit crunch!).

Trust in banking.

Unsurprisingly, it’s down.

It’s down more than any other industry.

It’s down 11% globally, from 56% to 45%, only just above Media and Insurance.

Ah well, at least banks are more trusted than sponsored links and payout avoiders (not my view but the masses maybe?).

In America, trust in banks dropped a massive 33% from 69% to 36% of consumers believe that banks can be trusted to do what is right. In the UK, France and Germany, bank trust dipped from 41% to 27%, again the biggest drop ever.

What may be surprising is that trust in the banking sector in emerging economies was up from 72% to 84% in China and from 52% to 59% in Brazil.

Trust in articles in business papers, along with analyst's stock reports, have been blown off their most trusted mantle, whilst blogs appear on the trust scale for the first time this year.

Now, that’s good news isn’t it?

Similarly, the only person to gain more trust this year is an academic or expert on an industry.

Also good news for some.

There’s a load more in the Edelman survey so I commend you to download and read it.

Meanwhile, for the UK folks, there’s also the Trustometer from Marketing Week.

Now in its ninth year, Marketing Week with Reader’s Digest produces a view on whose brands are most trusted in the UK.

Reader's Digest (RD) claim to represent Middle England with 650,000 readers spread over a wide variety of the population:

Men Women Chief Income Main Shopper Working
GB Population 49% 51% 58% 66% 55%
Reader’s Digest 47% 53% 62% 71% 51%

ABC1 <35 35-54 55+ Presence of
School Age Children
GB Population 51% 34% 35% 32% 24%
Reader’s Digest 60% 17% 37% 46% 23%

So the results are interesting.

According to the survey, the most trusted brands in Britain for financial services are:

Bank/BuildingSociety Lloyds TSB
Credit Card Barclaycard
Insurance Company Direct Line
Mortgage Lender Nationwide Building Society

Noteworthy above is that Halifax had won the mortgage lender category since the survey launched nine years ago, but not this year as they are eclipsed by the Nationwide Building Society.

That's interesting as Lloyds TSB, the most trusted bank/building society, just took over Halifax.

Ah well, I guess Lloyds still did well, as it won the most trusted bank and, in a year that we've seen over here, that's some going. Mind you, Lloyds has apparently dominated this space since the survey began, which makes me question the RD readership figures.

For example, Lloyds most loyal customer base are seniors who also happen to be the typical readers of RD. The median age of an American RD reader is 52 and I reckon that's who voted in this survey. Not Americans, but readers with an average of around 52 years old.

Anyway, it still makes interesting reading as you may think that only a few people could name a trust bank brand after the events of last year, and yet 89% of respondents named one.

Marketing Week comments: “perhaps this demonstrates the distinction between how people perceive the dismal economic outlook overall, against their ongoing personal experience of banks as day-to-day service providers of financial services, with whom many have had long-term relationships.”


Meanwhile, the fact that Barclaycard wins in the credit card sector may reflect its independence.

The magazine notes that the Barclaycard won the top spot for the second year running, sitting comfortably ahead of Capital One, which is in fourth position, and Visa and MasterCard, who are second and third, even though you can’t have a Barclaycard without one of those brands on it!

Maybe they won because of their great ad for contactless cards, which has also been a viral hit.

The other interesting point is that Norwich Union has been knocked off top spot for the first time since 2004 by Direct Line in the insurance category.

Tuesday, March 24, 2009

FSA Liquidity Regs

The FSA’s new rules on liquidity management threaten to overload banks with reporting that the regulator won’t be able to understand while missing the source of the current financial crisis, said panelists at the Financial Services Club Capital Markets forum.

Because the session was conducted under Chatham House rules, this commentary doesn’t identify individual speakers. There was broad agreement that the FSA’s new rules, which are to take effect in October, largely miss the cause of the current problems.
Panelists agreed that banks are holding onto liquidity to survive.
“What kills a bank? If it loses liquidity it dies. The essence of why banks aren’t lending to banks isn’t any longer about counterparty trust. It is banks thinking they need a liquidity buffer that is bigger than in the past – if there is a run they want to make sure they can pay everything they owe on the dot.” The American program to offer insurance is a useful approach to improving liquidity.
National regulators threaten to undermine international banks because they focus just on performance within the nation’s borders.
“How can the FSA or any national regulator adequately regulate multinational institutions when all they do is look at the local part of that institution? If Asia is in trouble the FSA may ignore it but the bank with operations in Asia won’t.” Regulators will simply want to ensure a bank is self-sufficient in its home country, but that won’t work in a global work.
“If you trap liquidity in your own system, how does the UK function as an international center?” Parliament appears to want finance to shrink to the national borders, said another speaker. The FT reported Thursday that the FSA’s proposals are under fire from the financial services industry.
“The FSA's proposals would force banks to hold greater reserves of government bonds than in the past. It would also force UK subsidiaries of foreign banks to be self-sufficient in terms of funding, unless their parent companies met certain criteria.”
The FSA stressed that its proposals were subject to consultation and that it was supportive of efforts to come up with a global solution to the problem, said the FT.

At the FS Club, participants suggested delaying implementation of the rule for six to nine months.
The problems of national regulation aren’t limited to the UK.
Also on Thursday, the FT reported that American Congressmen want the Treasury to insist that banks which have received US funding invest in the US. Reacting to $8 billion of financing that Citi is arranged for public authorities in Dubai and a $7 billion investment by Bank of America in the China Construction Bank, they have raised questions about why US bailout money should be used outside the US.
Several FS Club participants said the FSA liquidity rules, which are to take effect in October, were adding cost to banking without adding much value. Banks will have a difficult time finding some of the data and it is unlikely the FSA will have staff in sufficient numbers, or with sufficient knowledge, to make use of it.
However, some vendors said that the information is more readily available than many banks think. One or two said that banks would actually derive business benefit from following the FSA liquidity regulations because this is information they need.

Thursday, March 19, 2009

How to choice a good payment processing services to your business


What do you need to enhance your retail establishment business and internet Website.
I think you must do something to fastest your payments for your business, one way to do it using a credit card. The problem is how you get a suitable credit card from your business.

To choose a suitable credit card you can find it more on http://www.fivestarpayments.com you also can find the solutions if you have any problem with your credit card to resolved that, so you don’t have any problem with your credit card its mean your payment process will always in a good conditions I think it will help you to trusting your business is good.

http://www.fivestarpayments.com provide you to choose your payment processing services, its very helpfully to your business, do your business simple easy, trusted but have a good profit with a suitable payment possessing services.

Wednesday, March 18, 2009

are human hands needed?


The final day in Hong Kong focused upon innovations and several speakers provided a rich overview of innovation across the region, mainly n Japan and China.

I’ll blog about some of these for the rest of the week, as I was particularly impressed with a few areas of leading-edge technology being deployed in a consumer and business friendly manner.

For example Kazuhiko Saiki who leads marketing and operations for eBank in Japan, discussed the latest developments in eBank in-depth. Now I’ve blogged about eBank before and use them regularly as an example of how to do things differently because they have over 3 million customers with a total bank staff of under 200 people. That’s 15,000 customers per employee. Amazing.

I also notice that the number of accounts almost doubled from the end of 2006, as the bank moved access to both mobile and internet channels rather than just internet services.

How eBank manages the on-boarding process and structure is fascinating, as I haven’t seen this in other countries yet, and it’s also a major part of their success as it means no human hand is involved with the account opening process.

This is fascinating stuff and, as a result of such innovations, eBank have become the most popular inter-based Japanese bank with almost 1 in 2 online accounts, a 48% market share.

This success attracted an acquirer to step in and, in January 2009, eBank become a fully owned subsidiary of ... an etailer!

Rakuten Group purchased eBank to become the one of most popular internet sites in Japan behind Google, Amazon, eBay and Yahoo!

Considering our concerns about Wal-Mart and others entering the retail banking space, it is interesting to consider that we now have several internet brands running the largest financial operations in the world. For example, Rakuten in Japan, eBay in America with PayPal and Alibaba in China with Alipay.

This is a space to watch.

Meanwhile, eBank aren’t alone with their success, and are now threatened by a new bank.

A mobile telephone only bank.

A bank with no branches or internet site as such, but everything focused upon self-service through the mobile.

A bank launched only a few months ago.

A bank launched by a major Japanese bank.

Tuesday, March 17, 2009

Use Mobile for payments


Mobile payments in China

Researchers estimate that there were only 83.5 million online payment users in China in 2006, due to the lack of access to payment cards. Admittedly, Tencent with the QQ coin has enabled more payments outside the banking system, but the lack of access to e-payments has been an inhibitor to the democratisation of commerce in China.

However, this is changing and changing fast with UMPay, a Joint Venture between Unionpay and China Mobile, targeting this space through mobile services.

According to UMPay, e- and m- payment users will exceed 500 million people next year and there are already 100 million m-payment users under the UMPay scheme. That’s more than the total number of online payment users only two years ago.

UMPay launched in 2003 and provides China Mobile users with a comprehensive mobile payment platform and mobile payment system provide mobile wallets, financial message services, top-ups and mobile ticketing.

Where they are going to gain the greatest growth is from rural farmers though. This is the strategy of UMPay today - to saturate the rural locations with UMPay access - and will take the 100 million users through the half a billion number in the very near future according to UMPay CEO Bin Zhang.

I was lucky enough to catch up with Mr. Zhang in Hong Kong and asked him to briefly explain their strategy. Here's a short version of our discussion** and apologies for the sound, but we were in the middle of a conference

Mobile finance is fast demonstrating its power in countries that are using such technologies to leapfrog established financial infrastructures.

In China's case, this is a sophisticated mobile financial service from billing and payments to utilities and transportation. In other words, a comprehensive use of mobile for banking and financial services.

We could learn a thing or two.

Wednesday, March 11, 2009

crisis is an economic


Warren Buffett said yesterday that the US economy had “fallen off a cliff”, describing the current crisis as “an economic Pearl Harbor” as concern spread about the US Administration’s fitful attempts to halt the collapse of the American banking sector.

The leading investor, an informal adviser to President Obama whose financial diagnoses are widely respected – even though he conceded that he failed to predict the severity of the crisis – said that the economy had come “close to the worst case” imagined, and that recovery would be slow.

Mr Buffett, a multibillionaire, said that the entire banking sector had been hours from collapse in September, and would have imploded without the $700 billion Wall Street emergency bailout.

Mr Buffett also spoke of the growing fears over Mr Obama’s muddled approach to the central issue in solving the economic crisis: what to do with the banks’ $2 trillion of toxic debt that is threatening the collapse of the financial sector. Mr Obama and his Treasury chief, Timothy Geithner, have said that they do not want to nationalise any banks but they are coming under increasing pressure after massive and repeated injections of cash into crippled financial giants such as Citigroup, Bank of America and AIG have failed to stem losses.

Mr Geithner, who is woefully understaffed at the Treasury Department, has yet to come up with a detailed plan to stabilise the financial sector. Mr Buffett told CNBC that there needed to be a “very, very clear message”, adding: “People are confused and scared. People can’t be worried about banks, and a lot of them are.”

Tuesday, March 10, 2009

Whats the big barrier?


this about disruptive models of banking and payments, such as complementary currencies, the new European Exchanges, Paypal, Zopa and SmartyPig.

The aim is to illustrate that there is the potential to do banking without banks.

This is not to say that, we believe people want to do banking in a different way, and even to do banking without banks. It's possible.

This is a theme explored by Banking as a Service and many of the other presentations, discussions and dialogues you will read on this blog.

Much of the dialogue is there to create a discussion, no more and no less. It is not to promote or demonstrate it has to be this way, just that it could be.

And each time the same questions are nearly always raised:

"Ah, but no-one trusts those new forms of finance which is why they stay with us."

So what does this mean: trust?

Does anyone trust the bank these days?

After the collapse of so many institutions, can banks really claim any trust at all?

Not necessarily.

The banks admit that trust is no longer guaranteed, and so we then move onto the next barrier to disruption:

"These new forms of finance do not work because they are not regulated."

Sure, and the banks were regulated with light touch, principles-based, self-regulation and look what that did for us.

Does regulation work in banking?

Not necessarily.

That's why the G20 and all the supervisory bodies are scrambling around to find a new way to regulate the system.

A Global Deal.

But if banks aren't trusted and regulation hasn't worked, are there really any barriers to new entrants in banking?

"Yes", say the bankers. "To be a bank you have to be licenced by the Central Bank, and many of these new players do not have that guarantee."

"And what does that mean?"

"It means that if we fail, the government guarantee the return of our customer's money."

Mmmm ... if that's the only reason customers stay, it's not a great case for keeping the business models of the past is it?

The banks of tomorrow are arising already.

They are nothing like the banks of the past and they may not have the licence, trust or regulatory endorsements that the old banking system had ... but do they need it?



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