How Banks Might Transform Their Businesses and The Future of The Internet

Some 9,500 banks from around the world are currently meeting in Toronto to discuss the state of the industry at an annual industry gathering called Sibos.  Amongst the topics is “Where is the Growth in 2012 and Beyond.” Banks need to consider the answer carefully.  They risk becoming boring utilities, ceding the most interesting –and potentially most lucrative– customer-facing parts of the business to nontraditional players.

Take Movenbank, a start-up retail “bank” co-founded by Brett King, a speaker at Sibos and author of the book Bank 2.0.  King has teamed with seven others, from the technology and financial services world, to create what he calls banking 3.0. The venture, which is based in New York but plans to expand into Europe, is being funded by the founders and an unnamed Asian private investor.

Movenbank is not your father’s bank: it will offer clients mobile- centric personalized, contextual services, measure credit risk by gauging social network activity and apply Internet gamification techniques to encourage people to be more financially responsible.

“Banking is no longer a place you go but something you do so banks need to learn from that to better serve clients,” says King.

Mobile devices are now mobile wallets. Banks should not just keep track of the transactions but capture the rich information about the customer’s preferences and leverage it to offer a whole range of new services. Say a customer wants to buy a big ticket item like a flat screen TV. While the customer is in the store the bank could automatically calculate if the customer can afford it after paying all of that month’s bills and perhaps offer a way to finance the purchase and do it all through a beautifully designed, easy to use interface.

The same  interface could tag different expenses and have them appear in word clouds so that people would know, at a glance, how much they spent at restaurants or on clothes during a specified time period.

At Movenbank, credit scores will become an open, transparent exercise, using a range of data, says King. Customers applying for credit will need to fill in their Twitter and Facebook IDs. On-line behavior will be taken into account along with a client’s financial history and their day to day activity. A clients ability to influence others online will also help determine the customers’ value to the bank.

Good financial behavior will be rewarded through a gamification process that encourages people to save more and improve their financial health, says King. 

Movenbank and a similar start-up called BankSimple are not technically banks because they do not have a banking license. They are more akin to mobile virtual network operators or MVNOs who piggyback on white label existing bank partners. The public will neither know nor care. All they will see is a different kind of bank – one that seeks to serve them in new and better ways, abolishing paper, plastic and hidden fees.

Banks could choose to cede their clients to start-ups like Movenbank , Bank Simple or Silicon Valley giants Apple, Google and Facebook.  Alternatively, they could create mobile apps of their own based on preference and presence, capturing the youth market they now seem destined to lose.

There is another important step that banks need to take to secure their future, expand their businesses to include securing all types of data exchanges. Enter a project announced at Sibos started by InnoTribe, the innovation arm of global financial services provider SWIFT.  The initiative, called the Digital Asset Grid, or DAG  is hugely important not just to banks and SWIFT but because it might usher in a sea change on the Internet of enormous proportions, transforming the Web from a place where people go to visit sites and are tracked without their knowledge , to one  that – with our permission – knows what we are doing and uses that information to automate what we want to accomplish.

Innotribe’s Peter Van der Auwera has assembled some of the best thinkers and technologists in this space to design a global digital asset exchange that would leverage SWIFT’s existing global infrastructure. The initiative would bring bank-grade identity, privacy and security to the global exchange of any digital asset between any parties, notes Kosta Peric, head of innovation at SWIFT. Start-ups are ready to run exciting new services over it and banks could too.

Members of the so-called Digital ID team presented DAG at Sibos: They included Internet entrepreneur Mary Hodder, the chair of the Personal Data Ecosystem Consortium, Silicon Valley seer Doc Searls,  Craig Burton, a founding member of networking giant Novell, Gary Thompson, co-founder and CEO of Cloud Inc., Tony Fish, founder of London-based AMF Ventures; Internet entrepreneur Drummond Reed, and Scott David, a partner at the K &L Gates LLP law firm and an authority on safeguarding personal data.

While the Digital ID team, wearing sunglasses and shimmying to the beat of rock music, presented to a packed Innotribe session, most of the more than 8,000 bankers at the conference were off talking about things associated with business as usual.

Building a digital asset grid needs to be pushed to the top of the agenda.  SWIFT and the banking community can play a central role in the coming sea change on the Internet by safeguarding and exchanging new assets classes in the form of all types of digital data. In doing so, they will not only be expanding their own businesses but helping to transform the Web and enabling better services for consumers.

Here is hoping that SWIFT gives Innotribe’s DAG initiative the green light.





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