Banking as a Service (download)

The Future of Banking Technology

Chris Skinner
Chair, the Financial Services Club
CEO, Balatro
Co-Founder, Shaping Tomorrow

©Chris Skinner. All rights reserved. +44 790 586 2270 chris.skinner@fsclub.co.uk

Banks have many components

Delivery Functions External Functions
Document
Delivery Functions Direct
Payment Networks
Document Processing
Personal Self Service
Image Processing
Teller ATM/POS
ATM Networks
Counselling Telephone/Voice
Remittance Processing Credit Authorisation
Agent/Broker Home/Corp.
Mailing Settlement
Dealing
Clearing

Info. Networks
Customer Information Functions
Credit Bureau
Small Business Corporate Routers, Telerate, etc.
Personal
Securities Quotations
Private Commercial International
Other Data Services
Service Functions
Insurance International
Retail Securities
Services
Underwrite Collections Portfolio Mgr.
Term Loans Securities Foreign Ex.
Card Protection
Revolving CR Chk. Accts Money Mkt.
Claim Proc. Personal Lns. Commodities
Check Printing
External Business
Market Inst.
Investmt Mgt.
Life Policy Savings Factoring
Pensions
Relationships
Electronic Card
Leasing Commercial
Cards
Investments Non-life Derivatives
Interchange
Actuarial Mortgage Settlement Trade Finance
Re-insurance Trust


Business is a-changing

$800,000
Meetings Mailing
40 UK 1999 10,000 people
8 Ireland Twice weekly
6 CEE
$300,000
$150,000

Brochures
Newsletter
10,000+
1,000 people daily
Annual update
Text only Website
$150,000
Non-interactive
$100,000
Custom-build
$100,000

4 ©Chris Skinner. All rights reserved. +44 790 586 2270 chris.skinner@fsclub.co.uk

Business is a-changing

$160,000
Meetings Mailing
40 UK 2009 10,000 people
8 Ireland Twice weekly
6 CEE
Free
$150,000

Brochures
Newsletter
10,000+
1,000 people daily
Annual update
Multimedia Website
Gone
Non-interactive
$149
Custom-build
$10,000


Banking is a-changing

“Information about money has become
almost as important as money itself .”
Walter Wriston, CEO/Chair, 1967-1984

“Banking is just bits and bytes.”
John Reed, CEO/Chair, 1984-1998

Banking is a really changing

There are no local data centres or servers, just
access to the HSBC network ... five years ago, we
ran 130 data centres because we had acquired 50
companies up to 2003. Today, we have 20 data
centres, and in two years we will have 6 worldwide.

Case Study: http://thefinanser.co.uk/fsclub/2008/12/-hsbc-banking-on-the-network.html

Case Study: http://thefinanser.co.uk/fsclub/2008/12/-hsbc-banking-on-the-network.html


Base Rate 4%
Loans Mortgages
>5%
>6% 1999

Payments
Savings
3.5% per transaction
<2%

Investments Insurance
3% commission 3% margin
5% fee



Base Rate 4%
Loans Mortgages
>5%
>4.2% 2009

Payments
Savings
<0.5% per transaction
<3.8%

<0.5% commission 3% margin
<1% fee


eBank Japan

Japan’s largest internet
bank with no branches,
three million customers
and less than 200
employees.

Case Study: http://thefinanser.co.uk/fsclub/2008/07/internet-bankin.html

Base Rate 1%

APR
£5,000
36 months

11.9% for lowest risk
8.7% for lowest risk
borrowers
borrowers

3.55% for highest risk
12.8% for highest risk
lenders
lenders


SmartyPig

• SmartyPig one of the
first real banking
applications that is truly
social.
• It is like an online piggy
bank, where you save
money for specific goals.
• First banking application
that allows friends and
family to contribute to
interest bearing goals.
• Public goals allow
friends and family to
contribute, or keep your
account private

Where they are now

Launched in April of 2008
• Within 3 months, SmartyPig had customers in all 50 states
• Average goal amount: $8,900
• Average length of goal: 4+ years
• Top goal categories: Travel, Holiday Savings, Electronics, Home
Improvement, Weddings, Homes, Cars
• Two-thirds of all goals are public
• 25% of customers have more than one goal
• 67% of SmartyPig users are under the age of 35, 20% are
between 36- 45, and the remaining 13% are older.


Q3 2008:
• $14.81 billion worth of payments, 28% year-on-year growth;
• 65.3 million active users, up 19%;
• 214.5 million transactions, up 25%;
• Purchases made outside eBay are now greater than through eBay (71% of
PayPal payments were for eBay purchases at the end of 2004); and
• PayPal provides 28.2% of eBay revenue, up from 24.8% a year before.

Q4 2008:
• $15.99 billion worth of payments, 14% year-on-year growth;
• $623 million in revenue, up 11% year over year; and
• 70 million active users, an increase of 23% year-over-year .

Case Study: http://thefinanser.co.uk/fsclub/2009/01/paypals-tenth-birthday-party.html

Who needs a bank?


Who needs a bank?

Case Study: http://thefinanser.co.uk/fsclub/2008/08/do-recessions-m.html

Who needs a bank?

A Red Herring Top 100 European
technology company and Top 200
worldwide.
Completely automated with no
humans involved and only 37 staff
in London, with the rest of the
development team in the Ukraine.

Case Study: http://thefinanser.co.uk/fsclub/2009/02/wonga-another-web-financial-disruption.html

Banking as a Service (BaaS)

Explanation: http://thefinanser.co.uk/fsclub/2009/02/baas-banking-as-a-service.html

Widgets and SaaS

• Widget:
– A portable chunk of code that can be installed and executed within any
web page by an end user without requiring additional compilation.

• SaaS:
– an application is licensed for use as a service provided to customers on
demand. On demand licensing and use alleviates the customer's
burden of equipping a device with every application.


BBVA Tú cuentas (You count)

BBVA has 4.1 million online
customers performing over 1.3
billion annual online
transactions

They launched Tú http://thefinanser.co.uk/fsclub/2008
cuentas in
Summer 2008 with a totally
/07/bbva-the-first.html
customizable interface for the
iPhone, Blackberry and Nokia
phones

Case Study: http://thefinanser.co.uk/fsclub/2008/07/bbva-the-first.html


Base Rate 4%
Loans Mortgages
>5%
>4.2% 2009

Payments
Savings
<0.5% per transaction
<3.8%

<0.5% commission 3% margin
<1% fee

22 Skinner. All rights reserved.
©Chris +44 790 586 2270 chris.skinner@fsclub.co.uk

These are trading venues


These are new trading venues

Explanation: http://thefinanser.co.uk/fsclub/2008/11/one-year-after.html

These are new, low cost trading venues

The firm is currently building its
own trading engine - which will be
based in London to reduce latency -
and has engaged a central
counterparty, believed to be EMCF,
for clearing ... believe they will be
able to win market share by
undercutting rivals and keeping
costs to a minimum by operating
out of Budapest.


Big difference


eXay


Lower Latency

“It takes a 240 millisecond link to go from
London to Tokyo via the US. If you go via
Russia it’s 60 milliseconds faster.”


Banking is a
really changing

We can move into a new country with credit cards
with an investment of $1-$2 million, mainly on
marketing, because we don’t have to build all that
infrastructure. We can move into a country with
full service banking for under $10 million, which is a
fraction of our competitors. We just open a
building and sell, because everything is delivered
through the network.

My Semantic HomePage

Personalised search My outlook calendar My finances My social network
(including transactions)

Personalised News
My real-time life
Personalised Weather Live TV
My outlook inbox

My Semantic HomePage

Personalised search My outlook calendar My finances My social network
(including transactions)

Personalised News
My real-time life
Personalised Weather Live TV
My outlook inbox My Personalised Advertising
(not your adverts to me)

Banking on the Network

BaaS Widgets


Further Reading

• Banks ignore social media at their • Internet Banking 2010 and Beyond
peril – http://thefinanser.co.uk/fsclub/2008/04/inte
rnet-bankin.html
– http://thefinanser.co.uk/fsclub/2008/12/ba
nks-ignore-so.html • Technology is key for banking in 2009
• Social networks don't need banks, – http://thefinanser.co.uk/fsclub/2009/01/tec
hnology-predictions-hold-the-solution-to-
they need friends
the-banking-crisis.html
– http://thefinanser.co.uk/fsclub/2008/12/so
• The next boom starts in 2014
cial-networks.html
– http://thefinanser.co.uk/fsclub/2009/01/the-
• Social finance is right here, right now
next-boom-starts-in-2014.html
• The Future of Investing in Europe's
cial-finance.html
Markets after MiFID ;
• Social money – what’s all that about?
• The Future of Finance after SEPA ; and
cial-money-wh.html
• The Future of Banking In a Globalised
• Mobile social money, the final World
frontier? – http://eu.wiley.com/WileyCDA/Section/id-
– http://thefinanser.co.uk/fsclub/2008/12/m WILEYEUROPE2_SEARCH_RESULT.html?quer
obile-social-m.html y=chris%20skinner


The Future of
Banking Technology
Chris Skinner
Read my daily blog at
www.thefinanser.com

Banking as a Service (download)

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