Future of Banking

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The future of banking is interesting to consider in the light of the digital revolution. Retail banking as we have known it stands at a crossroads, with new competitors and new technology driving change at an enormous pace. It is worth looking into the history and present of banking to ponder some possible futures for banking.

My first job was at Westpac in their Wales House building at 66 Pitt Street in Sydney. In those more genteel times we had a tea lady who brought around morning and afternoon tea along with iced vovo biscuits. The banks were open between 10 am and 3 pm Monday to Friday and customers deferentially doffed their hats to the powerful branch managers. There was little competition and folks tended to stay with one bank from cradle to grave. In those days banking had a both a physical presence and a deep connection to a local place that is lost now.

But now, as Brett King, the banking guru says

“… banking is no longer somewhere you go, but something you do…”

Now technology is driving consumer behaviour and expectations for all businesses, and banking is no different to any other industry.

Some of the key technology trends that are having a big impact on banking include:

  • Mobile
  • Ubiquitous wifi
  • Realtime
  • Personalisation
  • Peer-to-peer
  • App ecosystems

The other technology trend that is influencing consumer attitudes and behaviours is the broad ability to obtain digital access to media. Platforms like iTunes, Bit Torrent and on demand television are creating a culture that is unwilling to wait. We don’t wait long for music or books now with Amazon Kindle and iTunes.

We are seeing new behaviours from consumers. Applications like Facebook have trained ordinary people to collaborate and share online in realtime.

This shift in expectations means that consumers are ripe for disruption by new entrants that can adapt to these new expectations.

Due to these shifts in user expectations banks are being forced to move from “when we can” to “realtime” service and transactions.

Banks in Australia have dragged their feet on realtime interbank payments and settlements for years (killing off the Mambo project a few years ago).

Enormous growth in online retail commerce, mobile peer-to-peer payments and near-field chips that convert mobile phones into credit cards and digital wallets means that realtime processing is coming even if the industry doesn’t want it.

This means that we will see increased pressure on financial services organisations to deliver realtime services – this ups the ante on 24×7 operations for smaller players.

These trends towards realtime and mobile banking are made made possible by the vast penetration of smart phones and mobile devices in Australia, with penetration rates of almost  90% in 2013.

Reinforcing the technology trends is generations of people who have only been part of this highly inter-connected and realtime world. They do not recall a time before the device in your hand could access most human desires.

“We call them Generation C — connected, communicating, content-centric, computerized, community-oriented, always clicking. ”

New Entrants and Disruptors

The financial services world has not been subject to many new entrants and disruptors. This is mainly due to regulation and barriers to entry such as capital adequacy requirements. However, this is changing and technology enabled competitors are now entering the market. Some disruptors are not even financial services organisations. But their business models offer challenges to traditional ones.

  • Non bank organisations
  • Typically playing in NCP or peer-to-peer space
  • Front end intermediaries
  • Using technology to deliver customer service
  • Differentiating on service

Non-traditional competitors are emerging and they are bypassing traditional banking systems

The emergence of new entrants over the past 5-10 years has seen non-financial services organisations moving into offering financial services. We have seen retailers like Tesco, Walmart, Coles and Woolworths leveraging their existing distribution networks and strong retail brands to diversity into financial services. Some are white-labeling products, using companies like GE as their backends, and others are building their own.
non-bank-emerging-competitors

The other thing to note is that several new entrants are major technology organisations, like Apple, Google, and Facebook. They are focused on expanding monetisation opportunities into financial products.

A common way for these new entrants is to start with credit cards or other non-cash payment facilities and then extend into other products.

Distribution is key and new entrants either leverage existing relationship for distribution or use social platforms to grow distribution networks. Organisations with established relationships have an advantage over newcomers, yet we are seeing few of them leverage their advantage.

Key factors enabling disruptors

Agile methods
Nimble – no legacy systems to slow them down
Connecting users but using existing back-ends
Experimental – fail fast, then pivot

Opportunities

Adopt agile approaches – lean startup
Partner with organisations that have nimble technology
Ignore legacy technology – go around it
Develop digital partnerships
Don’t try to do it all
Focus on building foundations then expand

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Sexism in Australia – the Ernies show clearly that it’s not going away

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A friend invited to me to attend the 21st Ernies Awards for Sexist Remarks and, since it was a thing I’d always meant to see, I went along.

While it was a raucous and boozy night filled with good humour and old friends catching up, the continuing slather of horrible, vile, demeaning sexist remarks was depressing.

As a number of attendees noted, the list of eligible remarks gets longer, not shorter, every year. This merely reinforced for me the lessons of the last few years; that deep misogyny remains embedded in our culture. This problem is summed up neatly by Gavin de Becker :

 “At core, men are afraid women will laugh at them, while at core, women are afraid men will kill them.”

The sheer violence of many of the words used against women still astonishes me. The language and tone employed against women seems so very different from the terms of abuse that men hurl between each other. Also many of the words hurled between men use comparisons to women and girls as a way of demeaning their opponent. It has become increasingly clear from this ongoing language battle that being a woman is not seen as a good thing by men. Consider how many terms of opprobrium take the form of  ‘you are acting like a girl’ or ‘harden up princess’, translating as ‘you are stupid and weak like a woman’.

It is time for parents who care to stop this tide of sexist remarks from growing. Time to stop children from throwing about the sexist language upon which they are suckled, especially from our sporting media.

It is worth noting that the Prime Minister appears to be a wind powered sexist remark generator on an industrial scale.

I also found encouragement in the Good Ernie award finalists and was pleased to see Lt. Gen. David Morrison win this award for his leadership and willingness to speak out. Until more men have the bravery to speak out like Morrison this battle will continue without end.

2013 Ernie Award Winners

The Ernie Award winners for 2013 and more information can be found at ernies.com.au

GOLD ERNIE and Industrial Silver Ernie
Wesley College students for distributing stubby holders bearing the words “It’s not rape if it’s my birthday.”

Political Silver Ernie
Mal Brough for the Liberal Party dinner menu featuring”Julia Gillard Kentucky Fried Quail – Small Breasts, Huge Thighs and a Big Red Box”

Media Silver Ernie
Paul Sheehan
“The mask fell away” and Gillard came out “snarling, accusing Abbott of having a hatred of women, a man” he said – before his paper deleted it – “who unlike the Prime Minister, has raised three daughters.”

Judicial Silver Ernie
Professor Paul Wilson
“My findings were remarkably similar to studies in California and Scandinavia which suggest child victims of adult sex offenders are generally willing or active participants, and that they not infrequently initiate the sexual relationship.”

The Warney (Sport)
Nick Riewoldt – said that team mate Stephen Milne who was charged with 4 counts of rape, should be allowed to continue playing because “Milney is the absolute heart and soul of the football club.”

The Fred (Celebrity etc)
Alan Jones
“Every person in the caucus of the Labor Party knows that Julia Gillard is a liar… The old man recently died a few weeks ago of shame, To think that he has a daughter who told lies every time she stood for Parliament.”

The Elaine (For remarks least helpful to the Sisterhood)
Janet Albrechtsen
“While lack of humour infects both sides of politics, the Labor girls in particular need to loosen their pigtails. In Canberra today, there are far too few Fred Dalys and far too many Tanya Pliberseks.”

The Good Ernie
Lt General David Morrison
“On all operations, female soldiers and officers have proven themselves worthy of the best traditions of the Australian Army. They are vital to us maintaining our capability now and into the future. If that does not suit you, then get out.”

The Clinton (for repeat offenders)
Tony Abbott

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How the internet of things changes everything

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The next generation of the internet is called the ‘internet of things’. Some people like to call it M2M or ‘machine to machine’ or ‘internet everywhere’. In any case it is here and it is about to shake things up.

The internet of things is where devices become connected and have embedded sensors that enable them to act and react in connected ways. It means that devices can talk to each other, can instruct and respond to each other in response to contextual stimuli. And by devices I mean any physical object that can have sensors and communications technology attached or embedded.

Objects are becoming embedded with sensors and gaining the ability to communicate. The resulting information networks promise to create new business models and disrupt existing business models.

The internet of things builds on the foundations of Web 2.0:

  1. Participation
  2. Standards
  3. Decentralization
  4. Openness
  5. Modularity
  6. User Control
  7. Identity

Source: Launching the Web 2.0 Framework, Ross Dawson, May 30, 2007

The technical plumbing that is needed to make the internet of things real is already in place: TCP/IP, wifi, Zigbee, Bluetooth, etc. Key factors are almost ubiquitous wireless internet connectivity and devices with connection capability. These are already in place across the world.

The other technology trend that is supporting the emergence of the internet of things is ‘big data’ and our enhanced ability to derive actionable insights from the collection and analysis of enormous amounts of data.

The convergence of big data and ubiquitously connected smart devices means that we can harness predictive capacity and enable things or objects to act in ways that are contextually relevant. It also means that we can finally start using this technology to market to an audience of one. That is, we can use technology to craft individually meaningful and relevant marketing messages and deliver them within a particular context to drive purchase behaviour for a particular individual. The entire marketing conversation can be automated and have human agency largely removed from it, while retaining human-like communication modes and styles of communication. It seems that Minority Report might not have gone far enough in conceptualising the future of marketing.

How big is the market opportunity from the internet of things?

There are many different estimates of the size of the internet of things market. One thing remains constant, business leaders who understand the concept are making big calls and are changing their business focus as a result. For example John Chambers from Cisco:

“The Internet of Things, I think will be the biggest leverage point for IT in the next 10 years, $14 trillion in profits from that one concept alone”
Cisco Chief Executive Officer John Chambers, AllThingsD D11 Conference May 2013
Source: Internet of Things Poses Big Questions, Ben Rooney, July 3, 2013

Where and how do the business opportunities arise?

The internet of things creates value that is not in the devices, rather it is in the new services that are related to the devices. Connected devices are transformed from a single purchase product into a service that generates recurring income.

A big part of the business opportunity is making it possible to bypass traditional aggregators of demand and access customers via peer-to-peer channels. Apps are key to this peer-to-peer landscape and they look to be an important multiplier in the growth of the internet of things marketplace.

“Between 2008 and 2017, Google Play and Apple’s App Store will be responsible for a mind- blowing number of mobile app downloads: 350 billion.”
Source: Decade of the 350 Billion App Downloads

New business models are emerging, and it is seems that open and collaborative models particularly lend themselves to this more interconnected landscape.

Some predictions:

  • Open models will rule the new landscape – organisations that try to control the entire vertically integrated supply chain will struggle unless they bring in partners to add diversity. A good example of this is Apple with their app store, which enables them to have a vertically integrated supply chain along with diversity via apps.
  • Collaboration and loose confederations – the barriers to entry that previously protected large players will begin to dissipate and provide opportunities for new entrants. Uber versus the taxi industry is a good example of this phenomenon.
  • Agile, change ready organisations will be best placed to adapt in this new highly connected world. Any organisation that needs two years to get a new product to market will be overtaken by those who can move faster. A good example of this is Nokia. Their new Lumia Windows phone is a great product that is two years too late to market. And the delay in getting to market means that they will need to find a niche to dominate rather than become a mass provider – perhaps they can dominate as a camera with connectivity rather than as a smartphone? Here Nokia’s decision to align themselves with the notoriously non-agile Microsoft Windows could be part of the problem.
  • Restructured supply chain – the internet of things offers enormous opportunities to restructure supply chains. Smart businesses will take advantage of this. In the 1990s ‘just in time’ inventory models revolutionised the cost base of doing business. The internet of things will provide similar opportunities.

What industries will be impacted?

All industries will be impacted but let’s examine the potential changes for a few that are interconnected:

  • Retail – already we are seeing shoppers use online and offline retail channels to find the best product for the best price. We can expect to see this intensify and put increased pressure on offline retail. Apparel shopping is one area that can expect disruption. Already shoppers are using terrestrial stores as places to check the fit of apparel items of interest, a practice known as ‘showrooming’. Some stores are fighting back by imposing a ‘trying on charge’ that is deducted if a purchase is made in store. But what if the in store retail experience became richer? What if the products started to sell themselves? What if the products knew that you were already wearing a particular brand and reached out to you and suggested complementary products? For example, a pair shoes could recognise that you are wearing a particular brand of jacket and offer you a special deal as a result. The convergence of ubiquitous connectivity, big data, and internet of things makes this scenario possible.
  • Transportation – We already have driverless transport with trains and Google is already showing us a glimpse of this future with their driverless car. But these new forms of transport require the development of new business models. For example, all that time we used to spend actually driving our cars will give rise to a new cognitive surplus – wonder what we’ll do with it? Play games, create art? Another example of new things that driverless vehicles will give rise to is smart intersections, because those new driverless cars will require smarter intersections that we currently deploy. The internet of things will make autonomous transport possible.
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What does Leadership look like? Leadership, sexism, and misogyny

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In recent times I have been feeling very depressed about the state of things including sexism, misogyny, and leadership. But a few days ago came a beacon of hope.

This beacon came from an unlikely source, the Australian Army. And the topic that this person addressed was the sombre one of sexism and demeaning treatment of women by serving military personnel.

Yet I was moved and inspired by an eloquent demonstration of leadership.

This is what a leader does.

A leader speaks out for the right things.
A leader connects values to behaviour.
A leader takes ownership of problems within their organisation.
A leader sets the standards of acceptable behaviour for members of their organisation.
A leader gets their leadership team to stand along with them to support those standards.
A leader makes it clear that people who will not do the right thing are not welcome.
A leader embraces diversity and recognises its contribution to the organisation.

As Lt Gen Morrison said: “The standard you walk past is the standard you accept.”

It appears that Lt Gen Morrison has form with this kind of thinking. In his talk on International Womens’ Day 2013 where he made his position clear:

“Any nexus between an Army such as the one I aspire to lead and sexual assault is absolutely unacceptable. I will take all necessary steps to stamp out any hint of it among my soldiers.”

He went on to say:

“Yes, we do need to bond our soldiers to one another and instil toughness and resilience into them. But when this goal is invoked to degrade and demonise women and minorities it is undermining rather than enhancing capability. We need to define the true meaning of teamwork to embrace a band of brothers and sisters.”

Organisations everywhere still allow sexist behaviour to prevail. And until their leaders take the same kind of uncompromising attitude that David Morrison has, then sexist behaviour will not disappear.

While organisational leaders are mostly men, it is time for all of our leaders to step up and show similar leadership to that demonstrated so admirably by Lt Gen Morrison.

Even Warren Buffett recently spoke out on this topic, saying:

“Fellow males, get onboard. The closer that America comes to fully employing the talents of all its citizens, the greater its output of goods and services will be. We’ve seen what can be accomplished when we use 50% of our human capacity. If you visualize what 100% can do, you’ll join me as an unbridled optimist about America’s future.”

I encourage all to view the message from the Chief of Army, Lieutenant General David Morrison, AO, to the Australian Army following the announcement on Thursday, 13 June 2013 of civilian police and Defence investigations into allegations of unacceptable behaviour by Army members.

I also recommend the PDF transcript of Lt Gen Morrison’s speech at the United Nations International Women’s Day Conference, New York, March 2013

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ANZAC Remembrance and Peace

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I usually write something to mark the passing of another ANZAC Day but was despondent this year and did not manage it on the day.

The fights on social media about the true meaning of ANZAC Day saddened me.

Then, earlier today, I was heartened to read the words spoken by the Governor of Tasmania, the Honourable Peter Underwood. His speech at the Hobart Cenotaph Dawn Service this year summarised my feelings precisely.

“I have always thought that communities gather together on ANZAC Day – usually around a war memorial or cenotaph – to do four things:

The first is to remember those who died or were wounded when their country called them to serve in wars, in other violent conflicts and in peacekeeping missions in which Australia has been, and still is involved.

The second is to reflect upon their service to our country, and for each of us, in our own way, to solemnly honour and pay respect to their bravery and courage.

The third is to think about their mental and physical suffering caused by their service and the pain, loss and suffering it caused their families and loved ones.

Menin Gate ANZAC The fourth, and perhaps the most important is, as I said last ANZAC Day, to resolve that, in the future, each of us will ask those hard questions about the meaning of wars, their causes and outcomes, in order to become resolute about peace, as well as resolute about fighting when fighting is a genuinely necessary and unavoidable act of self-protection.

All our remembrances and honours are meaningless, unless we also vow to become resolute about peace because that is what those whom we remember and honour on this special day thought they were dying for.”

Source: http://www.govhouse.tas.gov.au/sites/default/files/anzac_day_2013.pdf

I commend Mr Underwood’s words and sentiments regarding ANZAC Day and its observance. It is worth reading the PDF of his entire speech.

In reading his speech I was also reminded of Thomas Gray’s meditation on life and death. It is easy to forget how brief our time here really is. And that no matter our state or circumstance we all await the “inevitable hour”.

“The boast of heraldry, the pomp of power,
And all that beauty, all that wealth e’er gave,
Awaits alike the inevitable hour.
The paths of glory lead but to the grave.”
– Elegy Written in a Country Church Yard

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