I attended FST Media's
4th annual seminar on technology and innovation themed "The Future of Banking and Financial Services" at the Hilton in Sydney.
Some quick impressions:
Don Koch, CEO of ING Direct, delivered the opening keynote and spoke about what customers will want next (answer: who knows?). (Incidentally, every single talk was billed as a "keynote", which leads one to question if FST Media knows what a keynote really is.) He made a number of points but none stuck in my head as anything particularly insightful.
Rocky Scopelliti, General Manager, Financial Services, Industry Development, Telstra Enterprise & Government, spoke next about Gen Y and made some interesting points. Essentially, he was reporting on research by noted Australian sociologist
Hugh Mackay. Although Gen Y-ers have a reputation for being difficult to please and notoriously non-loyal, the research suggests that Gen Y-ers are in fact influenced by their parents, the Baby Boomers, who in turn grew up influenced by two opposing forces - on the one hand, abundant and growing prosperity that promised a better tomorrow, and on the other, by the threat of the Cold War and the possibility that there may be no tomorrow. The unique solution to this was the demand for instant gratification - enjoy life like there's no tomorrow. So Gen Y is not really demanding and disloyal; they're just keeping their options open for as long as possible.
I forget whether Koch or Scopelliti made this point, but it was interesting that nowadays, all you need to establish a person's identity is their date of birth and mobile phone number. People tend not to change their mobile numbers, even if they switch providers. More on this later.
David Boyle, CIO, International Financial Services, Commonwealth Bank next spoke about cloud computing at CBA. The interesting aspect of his talk was his call for fellow customers to get together with him and his team to define some basic standards for cloud computing, because he's afraid of the same thing that I am, i.e., that some vendor-proprietary technology will become the de facto standard for cloud computing which will make it unnecessarily pricey.
There were a few eminently forgettable panel discussions (with the only exception being the one on which Dhiren Kulkarni, joint CIO of St George Bank, was being needlessly competitive and obnoxious towards his fellow panelists. He earned a rejoinder at one stage from Pravir Vohra, CTO of ICICI Bank, which was roundly applauded.)
The next talk was billed as an "International Keynote" and was delivered by the aforementioned Pravir Vohra, who provided a few interesting insights into the growth of ICICI Bank. It's been almost 15 years since I left India, and I didn't know ICICI Bank had become the second largest Indian Bank. I guess it would still be a distant second to State Bank of India, though. SBI has more branches than some banks have customers :-).
Vohra would be the envy of CTOs everywhere, because he says he has 25% of the technology budget to play with. I.e., he's free to invest in various technologies and initiatives. If they work out, he "transfer prices" the benefits to the business units that he can serve with it. I have always felt that a similar system is required for Enterprise Utilities. Neither the "first project pays" model nor a Big Bang enterprise rollout in a single financial year is the right one. We need an accounting treatment for Utilities akin to R&D, with carryovers possible across financial years.
I was very pleased to hear that ICICI Bank only uses
OpenOffice, not Microsoft Office. Vohra estimates that this choice saves his bank more than $15 million a year, even more than the projected savings from cloud computing! Who said the Third World lags behind the First? Sometimes they lead the way.
One thing Vohra said that didn't seem quite right was his contrast of consumer behaviour in India with that in Australia - he said Indians change their mobile numbers every six months! Apart from the fact that the Indians I know haven't changed their mobile numbers in quite a while, it seems very counter-intuitive behaviour. Why would anyone make life more difficult for themselves in this manner?
The three sessions after lunch and before tea were uniformly missable.
David Cartwright, Group Managing Director, Operations, Technology and Shared Services, ANZ was probably the best of the lot. He spoke about ANZ Bank's "Journey to a Super-Regional Bank". An interesting aspect was the emphasis ANZ Bank places on its new corporate headquarters in Melbourne that has a 6 star green rating. It resembles a skyscraper on its side and is deliberately designed to have a huge floor area on a limited number of floors so as to maximise interaction between people. Another interesting technology they have is "telepresence", which is very high quality videoconferencing, which gives the impression that remote participants are actually in the room on the opposite side of the table.
The aforementioned Dhiren Kulkarni spoke next, and repeatedly parrotted his boss Gail Kelly's favourite phrase "delighting the customer"
ad nauseam. You don't get more patronising, defensive, competitive and humourless than this bloke. Not very good PR for Westpac-St George to trot him out at industry seminars.
Rounding out the boring lot was Darren Covington, Vice President, Asia Pacific Japan, Enterprise Software Applications, Hewlett Packard. He spoke about churn and the desirability of retaining customers because it's far cheaper than acquiring new ones (a well-worn concept), but added no new insights. My cynical reaction was that with the Australian banking sector being as oligopolistic as it is, a customer who walks out the door is readily replaced by another bank's customer who walks in. There are only four banks in the game, so where will customers go anyway? It's not so much churn as a nice merry-go-round.
After tea, we had Randy Fennel, General Manager, Engineering and Sustainability, Technology, Westpac, talking about sustainability, which again was a bit ho-hum.
The last session of the day was by far the best. Phil Hopper, founder of
iGrin spoke about peer-to-peer lending. This is an extremely interesting concept that I hadn't heard of before. There have been players like Zopa, LendingClub, etc., who have all fallen on hard times now, both because of the Global Financial Crisis and because of some increased regulatory requirements.
Peer-to-peer lending exploits the big spread enjoyed by the large institutional lenders. Banks borrow from individuals at 5% (the deposit interest rate) and offer personal loans to individuals at anywhere over 12%, sometimes going up to 18% in the case of some credit cards. This means that there is a spread of at least 7% here to be exploited if individuals lend direct to each other. A P2P lending marketplace can take 2%, leaving 5% to be split between lender and borrower, with both consequently better off than by going through banks. Hopper described P2P lending as "eBay for money".
He also spoke about Australia currently operating on a model of negative credit data only, which makes it hard to assess the creditworthiness of most people. But there is apparently some privacy-related legislation due shortly that will remove impediments to acquiring (positive) credit data.
Other points were the subtle differences between microfinance, lending to the underbanked, and prime lending. Hopper pointed out that by ceding a degree of control to customers, P2P lending agencies allowed innovation to happen, such as "blenders" (arbitrage players who use their superior credit rating to borrow at lower rates and lend to others at a slightly higher rate), and people who run Self-managed Super Funds who invest (lend) from the fund into the P2P market and then borrow the money right back. Some of this sounds dodgy to me (and to the Tax Office, I'm sure), but it certainly is innovative.
In spite of the temporary problems faced by P2P players including iGrin, Hopper sees a good future for the concept. There are niches (after the Online Auction itself) that can be independently filled by various players, such as Identity Verification, Credit Assessment, Fulfillment/Settlement (both contracts and statements) and Collections. A bill likely to be passed by parliament soon (the Private Properties Securities Bill) will also allow people to securitise their own assets like their property, enabling lending to become more "secured". Once a secondary market develops, it will be possible for the P2P segment to expand from its personal lending base (with a typical term between 12 months and 5 years) into the mortgage market (with terms of upto 30 years). This is because although the typical small lender would not be willing to enter into 30-year loans, the emergence of a secondary market will make this possible, since debt obligations like these can themselves be traded. Wholesale funds are another step along the development of P2P lending.
All in all, a most fascinating concept, and Phil Hopper did an excellent job of presenting it. It seemed a little too slick, though. As moderator and host Michael Pascoe asked him, I wonder if this is a case of amateurs attempting to take on the professionals. To a more pointed question, Hopper defended the eventual viability of the "amateur" P2P market even against the eventual entry of the "professionals", and Pascoe insightfully remarked that he would rather have had Hopper express a desire to be bought out by a bank.
That was the end of the first day.
