How Fintechs And Banks Can Get Along – Go Modular

Tom Groenfeldt

For the last year or two a fairly lackluster debate has – hmm, raged isn’t the word, perhaps wafted – over the financial services industry: Will banks be displaced by fintech firms with better and easier to use technology? Or will individuals and corporations stick with nice, stable, secure banks with the huge columned headquarters downtown and slick branches in the ‘burbs?

Now Oliver Wyman, the global consultancy, has wandered into the fray to suggest, just in time for Davos, that the solution is modularity – financial services are becoming modular.

“New technology is making it easier for customers to buy from multiple product providers,” the firm announces in a whitepaper, Modular Financial Services: The New Shape of the Industry. “The number of financial products used by the average customer is increasing. We call this modular demand.”

“Modular financial services are emerging at different speeds across markets. Currently, banking in the US is more modular than in Europe and Asia.  Property & casualty insurance has become more modular than life insurance.  Now, the modular industry structure will go deeper and spread to new markets,” said partner Oliver Wyman and co-author, Matt Austen. “Since the crisis, most firms have focused on optimizing their existing, integrated business model. Now, the industry is going to move towards a new, modular structure.”

Admirably enough, Oliver Wyman waits until the third paragraph of its paper before introducing the terribly familiar “seamless.”

“Financial services firms are using more third party suppliers. Providers of specialist services, back office processes, and risk capital can now seamlessly plug into a supply chain. New entrants have new, focused business models. We call this modular supply.”

Although the “modular” branding may be new, the idea isn’t especially. I recently wrote about Currency Cloud and Quicken Loans’ Rocket Mortgage, which link to other partners and platforms to deliver their services. Loan companies such as Lending Club and Lenddo have tapped new sources beyond FICO for rating borrowers. They then partner with individuals, banks, foundations, hedge funds, and pensions to provide the loans.

Oliver Wyman expects that fintechs, banks, or other established financial institutions will benefit from a modular financial services model.

“Distribution will become dominated by digital ‘platforms’ that can steer demand to any supplier, allowing new product providers to proliferate. Regulatory changes, particularly around customer data, will also weaken financial firms’ hold on their customers.”

Modularizing forces are not unopposed, however.

“Large integrated financial services firms continue to enjoy advantages, including their existing customer relationships, secure at-scale operations and the fixed costs of regulatory compliance.”

In Europe and Asia, bank customers are more likely to hold most of their financial accounts – credit cards, loans, and mortgages – with one bank.

However, if they are going to compete as modular firms, financial firms will have to replace their costly, inflexible legacy infrastructure – which could cost billions and may require suspending dividends for one to three years, says Oliver Wyman, but it will allow them to develop new services.

Some new banks, like Fidor in Germany, provide services from outside providers, like Currency Cloud, through an API.

Oliver Wyman warns that in a modular architecture, no one firm owns the customer, although financial firms may no longer have much choice.

“Customer loyalty to financial institutions has been eroding since the 1990s, with the advent of monolines, direct banks, and direct insurance,” says the report, which neglected to mention one of the largest forces in the industry – online mutual fund providers that have taken hundreds of billions that might once have resided at banks. In addition to investments, and increasingly automated or hybrid automated/personal advice, firms like Charles Schwab, Fidelity, and Vanguard offer checking accounts.

A few fintech companies I have talked with in the last couple of weeks think banks have an advantage in terms of convenience and efficiency – customers would rather go to one place for a variety of financial services than use multiple providers. The Oliver Wyman report disputes this:

“The digital revolution has reinforced this trend by massively reducing search costs for customers. What once would have taken hours of phoning providers or visiting branches now takes a few moments in front of a computer or mobile phone looking at an aggregator platform or price comparison site.”

The report also looks at the importance of a large, stable deposit base, and notes that monoline credit card companies like Capital One and MBNA grew until the mid-2000s when their ability to fund lending through securitization hit a wall. Capital One acquired Hibernia National Band and North Fork Bank and MBNA was bought by Bank of America.

“Cards have thus gone full circle and are now part of integrated financial institutions.” The consultancy draws two lessons from this:

  • Modularization can be cyclical rather than secular; forces that encourage it may come and go (in this case, capital market liquidity).
  • Expertise is not all. The statistical marketing skill of the monolines was ultimately trumped by the greater advantage of having a large and stable source of funds from retail depositors.

The growth of online lending and uncertainty about where the Fed will take interest rates have led some observers of the online lenders to ask if they will survive a changing rate environment.

Looking ahead, Oliver Wyman expects event-based platforms that can broadly support something like buying a house from end to end; commerce platforms for both consumers and businesses with credit, cash advance, trade finance, and FX; and comprehensive personal financial management that can dynamically switch between savings and lending and keep insurance updated to cover any new purchases. The consultants also expect financial services aimed at particular business segments like property managers or importers, and expansion of affinity platforms, presumably moving beyond checks with your favorite football team.

“We believe it is realistic for new business models to capture $150-250 billion of existing revenues. Whether this accrues to new entrants will depend upon the willingness of existing providers to develop alternative models and challenger brands.”

Oliver Wyman’s managing partner for financial services, Ted Moynihan, added: “Even if we do not expect a completely modular financial services sector, the way customers buy financial services and how firms deliver them is going to be transformed.”

Combining online and in-person sales processes can lead to happier customers and higher profits. Learn more in Our Digital Planet: See It, Click It, Touch It, Buy It

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About Tom Groenfeldt

Tom Groenfeldt is a freelance reporter who focuses largely on finance and technology including trading, risk, back-office systems, big data, analytics, retail banking, international banking, and e-commerce. His work appears in several publications, including Forbes.com in the U.S. and Banking Technology in London. In 2015, he was named to the “FinServ 25,” the top 25 top global influencers in banking, by The Financial Brand.

Amazing Digital Marketing Trends And Tips To Expand Your Business In 2015

Sunny Popali

Amazing Digital Marketing Trends & Tips To Expand Your Business In 2015The fast-paced world of digital marketing is changing too quickly for most companies to adapt. But staying up to date with the latest industry trends is imperative for anyone involved with expanding a business.

Here are five trends that have shaped the industry this year and that will become more important as we move forward:

  1. Email marketing will need to become smarter

Whether you like it or not, email is the most ubiquitous tool online. Everyone has it, and utilizing it properly can push your marketing ahead of your rivals. Because business use of email is still very widespread, you need to get smarter about email marketing in order to fully realize your business’s marketing strategy. Luckily, there are a number of tools that can help you market more effectively, such as Mailchimp.

  1. Content marketing will become integrated and more valuable

Content is king, and it seems to be getting more important every day. Google and other search engines are focusing more on the content you create as the potential of the online world as marketing tool becomes apparent. Now there seems to be a push for current, relevant content that you can use for your services and promote your business.

Staying fresh with the content you provide is almost as important as ensuring high-quality content. Customers will pay more attention if your content is relevant and timely.

  1. Mobile assets and paid social media are more important than ever

It’s no secret that mobile is key to your marketing efforts. More mobile devices are sold and more people are reading content on mobile screens than ever before, so it is crucial to your overall strategy to have mobile marketing expertise on your team. London-based Abacus Marketing agrees that mobile marketing could overtake desktop website marketing in just a few years.

  1. Big Data for personalization plays a key role

Marketers are increasingly using Big Data to get their brand message out to the public in a more personalized format. One obvious example is Google Trend analysis, a highly useful tool that marketing experts use to obtain the latest on what is trending around the world. You can — and should — use it in your business marketing efforts. Big Data will also let you offer specific content to buyers who are more likely to look for certain items, for example, and offer personalized deals to specific groups of within your customer base. Other tools, which until recently were the stuff of science fiction, are also available that let you do things like use predictive analysis to score leads.

  1. Visual media matters

A picture really is worth a thousand words, as the saying goes, and nobody can deny the effectiveness of a well-designed infographic. In fact, some studies suggest that Millennials are particularly attracted to content with great visuals. Animated gifs and colorful bar graphs have even found their way into heavy-duty financial reports, so why not give them a try in your business marketing efforts?

A few more tips:

  • Always keep your content relevant and current to attract the attention of your target audience.
  • Always keep all your social media and public accounts fresh. Don’t use old content or outdated pictures in any public forum.
  • Your reviews are a proxy for your online reputation, so pay careful attention to them.
  • Much online content is being consumed on mobile now, so focus specifically on the design and usability of your mobile apps.
  • Online marketing is essentially geared towards getting more traffic onto your site. The more people visit, the better your chances of increasing sales.

Want more insight on how digital marketing is evolving? See Shutterstock Report: The Face Of Marketing Is Changing — And It Doesn’t Include Vince Vaughn.

Learn more about marketing Analytics.

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About Sunny Popali

Sunny Popali is SEO Director at www.tempocreative.com. Tempo Creative is a Phoenix inbound marketing company that has served over 700 clients since 2001. Tempos team specializes in digital and internet marketing services including web design, SEO, social media and strategy.

Social Media Matters: 6 Content And Social Media Trend Predictions For 2016 [INFOGRAPHIC]

Julie Ellis

As 2015 winds down, it’s time to look forward to 2016 and explore the social media and content marketing trends that will impact marketing strategies over the next 15 months or so.

Some of the upcoming trends simply indicate an intensification of current trends, however others indicate that there are new things that will have a big impact in 2016.

Take a look at a few trends that should definitely factor in your planning for 2016.

1. SEO will focus more on social media platforms and less on search engines

Clearly Google is going nowhere. In fact, in 2016 Google’s word will still essentially be law when it comes to search engine optimization.

However, in 2016 there will be some changes in SEO. Many of these changes will be due to the fact that users are increasingly searching for products and services directly from websites such as Facebook, Pinterest, and YouTube.

There are two reasons for this shift in customer habits:

  • Customers are relying more and more on customer comments, feedback, and reviews before making purchasing decisions. This means that they are most likely to search directly on platforms where they can find that information.
  • Customers who are seeking information about products and services feel that video- and image-based content is more trustworthy.

2. The need to optimize for mobile and touchscreens will intensify

Consumers are using their mobile devices and tablets for the following tasks at a sharply increasing rate:

  • Sending and receiving emails and messages
  • Making purchases
  • Researching products and services
  • Watching videos
  • Reading or writing reviews and comments
  • Obtaining driving directions and using navigation apps
  • Visiting news and entertainment websites
  • Using social media

Most marketers would be hard-pressed to look at this list and see any case for continuing to avoid mobile and touchscreen optimization. Yet, for some reason many companies still see mobile optimization as something that is nice to do, but not urgent.

This lack of a sense of urgency seemingly ignores the fact that more than 80% of the highest growing group of consumers indicate that it is highly important that retailers provide mobile apps that work well. According to the same study, nearly 90% of Millennials believe that there are a large number of websites that have not done a very good job of optimizing for mobile.

3. Content marketing will move to edgier social media platforms

Platforms such as Instagram and Snapchat weren’t considered to be valid targets for mainstream content marketing efforts until now.

This is because they were considered to be too unproven and too “on the fringe” to warrant the time and marketing budget investments, when platforms such as Facebook and YouTube were so popular and had proven track records when it came to content marketing opportunity and success.

However, now that Instagram is enjoying such tremendous growth, and is opening up advertising opportunities to businesses beyond its brand partners, it (along with other platforms) will be seen as more and more viable in 2016.

4. Facebook will remain a strong player, but the demographic of the average user will age

In 2016, Facebook will likely remain the flagship social media website when it comes to sharing and promoting content, engaging with customers, and increasing Internet recognition.

However, it will become less and less possible to ignore the fact that younger consumers are moving away from the platform as their primary source of online social interaction and content consumption. Some companies may be able to maintain status quo for 2016 without feeling any negative impacts.

However, others may need to rethink their content marketing strategies for 2016 to take these shifts into account. Depending on their branding and the products or services that they offer, some companies may be able to profit from these changes by customizing the content that they promote on Facebook for an older demographic.

5. Content production must reflect quality and variety

  • Both B2B and B2C buyers value video based content over text based content.
  • While some curated content is a good thing, consumers believe that custom content is an indication that a company wishes to create a relationship with them.
  • The great majority of these same consumers report that customized content is useful for them.
  • B2B customers prefer learning about products and services through content as opposed to paid advertising.
  • Consumers believe that videos are more trustworthy forms of content than text.

Here is a great infographic depicting the importance of video in content marketing efforts:
Small Business Video infographic

A final, very important thing to note when considering content trends for 2016 is the decreasing value of the keyword as a way of optimizing content. In fact, in an effort to crack down on keyword stuffing, Google’s optimization rules have been updated to to kick offending sites out of prime SERP positions.

6. Oculus Rift will create significant changes in customer engagement

Oculus Rift is not likely to offer much to marketers in 2016. After all, it isn’t expected to ship to consumers until the first quarter. However, what Oculus Rift will do is influence the decisions that marketers make when it comes to creating customer interaction.

For example, companies that have not yet embraced storytelling may want to make 2016 the year that they do just that, because later in 2016 Oculus Rift may be the platform that their competitors will be using to tell stories while giving consumers a 360-degree vantage point.

For a deeper dive on engaging with customers through storytelling, see Brand Storytelling: Where Humanity Takes Center Stage.

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About Julie Ellis

Julie Ellis – marketer and professional blogger, writes about social media, education, self-improvement, marketing and psychology. To contact Julie follow her on Twitter or LinkedIn.

Human Skills for the Digital Future

Dan Wellers and Kai Goerlich

Technology Evolves.
So Must We.


Technology replacing human effort is as old as the first stone axe, and so is the disruption it creates.
Thanks to deep learning and other advances in AI, machine learning is catching up to the human mind faster than expected.
How do we maintain our value in a world in which AI can perform many high-value tasks?


Uniquely Human Abilities

AI is excellent at automating routine knowledge work and generating new insights from existing data — but humans know what they don’t know.

We’re driven to explore, try new and risky things, and make a difference.
 
 
 
We deduce the existence of information we don’t yet know about.
 
 
 
We imagine radical new business models, products, and opportunities.
 
 
 
We have creativity, imagination, humor, ethics, persistence, and critical thinking.


There’s Nothing Soft About “Soft Skills”

To stay ahead of AI in an increasingly automated world, we need to start cultivating our most human abilities on a societal level. There’s nothing soft about these skills, and we can’t afford to leave them to chance.

We must revamp how and what we teach to nurture the critical skills of passion, curiosity, imagination, creativity, critical thinking, and persistence. In the era of AI, no one will be able to thrive without these abilities, and most people will need help acquiring and improving them.

Anything artificial intelligence does has to fit into a human-centered value system that takes our unique abilities into account. While we help AI get more powerful, we need to get better at being human.


Download the executive brief Human Skills for the Digital Future.


Read the full article The Human Factor in an AI Future.


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About Dan Wellers

Dan Wellers is founder and leader of Digital Futures at SAP, a strategic insights and thought leadership discipline that explores how digital technologies drive exponential change in business and society.

Kai Goerlich

About Kai Goerlich

Kai Goerlich is the Chief Futurist at SAP Innovation Center network His specialties include Competitive Intelligence, Market Intelligence, Corporate Foresight, Trends, Futuring and ideation.

Share your thoughts with Kai on Twitter @KaiGoe.heif Futu

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Finance And HR: Friends Or Foes? Shifting To A Collaborative Mindset

Richard McLean

Part 1 in the 3-part “Finance and HR Collaboration” series

In my last blog, I challenged you to think of collaboration as the next killer app, citing a recent study by Oxford Economics sponsored by SAP. The study clearly explains how corporate performance improves when finance actively engages in collaboration with other business functions.

As a case in point, consider finance and HR. Both are being called on to work more collaboratively with each other – and the broader business – to help achieve a shared vision for the company. In most organizations, both have undergone a transformation to extend beyond operational tasks and adopt a more strategic focus, opening the door to more collaboration. As such, both have assumed three very important roles in the company – business partner, change agent, and steward. In this post, I’ll illustrate how collaboration can enable HR and finance to be more effective business partners.

Making the transition to focus on broader business objectives

My colleague Renata Janini Dohmen, senior vice president of HR for SAP Asia Pacific Japan, credits a changing mindset for both finance and HR as key to enabling the transition away from our traditional roles to be more collaborative. She says, “For a long time, people in HR and finance were seen as opponents. HR was focused on employees and how to motivate, encourage, and cheer on the workforce. Finance looked at the numbers and was a lot more cautious and possibly more skeptical in terms of making an investment. Today, both areas have made the transition to take on a more holistic perspective. We are pursuing strategies and approaching decisions based on what delivers the best return on investment for the company’s assets, whether those assets are monetary or non-monetary. This mindset shift plays a key role in how finance and HR execute the strategic imperatives of the company,” she notes.

Viewing joint decisions from a completely different lens

I agree with Renata. This mindset change has certainly impacted the way I make decisions. If I’m just focused on controlling costs and assessing expenditures, I’ll evaluate programs and ideas quite differently than if I’m thinking about the big picture.

For example, there’s an HR manager in our organization who runs Compensation and Benefits. She approaches me regularly with great ideas. But those ideas cost money. In the past, I was probably more inclined to look at those conversations from a tactical perspective. It was easy for me to simply say, “No, we can’t afford it.”

Now I look at her ideas from a more strategic perspective. I think, “What do we want our culture to be in the years ahead? Are the benefits packages she is proposing perhaps the right ones to get us there? Are they family friendly? Are they relevant for people in today’s world? Will they make us an employer of choice?” I quite enjoy the rich conversations we have about the impact of compensation and benefits design on the culture we want to create. Now, I see our relationship as much more collaborative and jointly invested in attracting and retaining the best people who will ultimately deliver on the company strategy. It’s a completely different lens.

Defining how finance and HR align to the company strategy

Renata and I believe that greater collaboration between finance and HR is a critical success factor. How can your organization achieve this shift? “Once the organization has clearly defined what role finance and HR must play and how they fundamentally align to the company strategy, then it’s more natural to structure them in a way to support such transformation,” Renata explains.

Technology plays an important role in our ability to successfully collaborate. Looking back, finance and HR were heavily focused on our own operational areas because everything we did tended to consume more time – just keeping the lights on and taking care of our basic responsibilities. Now, through a more efficient operating model with shared services, standard operating procedures, and automation, we can both be more business-focused and integrated. As a result, we’re able to collaborate in more meaningful ways to have a positive impact on business outcomes.

In our next blog, we’ll look at how finance and HR can work together as agents of change.

For a deeper dive, download the Oxford Economics study sponsored by SAP.

Follow SAP Finance online: @SAPFinance (Twitter)LinkedIn | FacebookYouTube

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Richard McLean

About Richard McLean

Richard McLean, regional CFO for SAP Asia Pacific Japan, oversees all key finance and administrative functions for field and regional headquarters, supporting more than 16,000 employees. He has more than 20 years of experience in senior finance roles with leading global companies across a range of industries, including financial services, investment banking, automotive, and IT. He joined SAP in 2008.