Connected Consumer Report 2012 | Near Field Communication | Emv

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Connected Consumer and the Future of Financial Services

ConneCted ConSumer and the Future oF FinanCiaL SerViCeS
ContEntS 2 4 17 26 36 46 51 57 Connected Consumer mobile micro media mining Digitally Powerful, Digitally Visible notes acknowledgments

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shortly before the millennium — the world entered a third phase: consumer network. That is what this report is about. but the ability to make informed choices and influence others is.Connected Consumer and the Future of Financial Services CSC LEA DIN G EDGE FORU M ConneCted Consumer Financial services firms have always connected consumers. Just as the immediate reaction upon news of a medical condition is to google it (the bane of primary care physicians). bank services and insurance claims is the Web. Every financial services firm should understand the implications of the Source: CSC 2 . The consumer voice became a whisper as financial firms built customer management systems in an attempt to return to personal service in the form of an Integrated Voice Response system. This is driving radical change in the financial services industry. the consumer network affects every level. Today. A consequence of the World Wide Web is that a consumer’s hunger for hard-to-access financial knowledge has been replaced with a thirst for interpretation and opinion. The first phase. (See Figure 1. This was corporate power as centralized institutions expanded. Knowledge is not necessarily power. lasted decades as technology transformed a paper-based industry into a digital industry.) The base of the pyramid is something so basic that it would be surprising to many higher-income con- network Figure 1. There is a revolution in the power of the financial consumer because of consumers’ connection to others. corporate network. but they have challenged its supremacy. consumers are connecting directly to each other on a massive scale using new technologies. drove global brands and reaped economies of scale. local insurance agents. Then financial firms built corporate network. local moneylenders. Ironically. enabled the the technology corporate that consumer network and the connected consumers who form it. Today. community network. whether for pooling risk or converting one person’s savings to another’s mortgage. The five-sevenths of the world with digital mobile devices and the two-sevenths with Internet access have used tools from telecommunications and technology firms to challenge traditional financial models. lasted millennia. so a financial consumer’s first port of call for information about mutual funds. Well before the credit crunch — indeed. Money Matters Setting the stage is a pyramid of consumer financial needs. globalized. the second phase. Consumers have not destroyed the corporate network. consumer connection was based on locality: local bank branches. PyraMid of financial needs sowed the seeds of the greatest challenge to it. Until shortly after the mid-20th century. everything financial that any consumer could ever want to know about finance (within reason) is available to those with Internet access. It was community network. and consumers connected nationally with contact centers through letters and calls to central processing offices. however.

about 2. This report provokes financial firms and their suppliers to question how a revolution in consumer power will affect them. focuses on the technologies that are making sense of the world’s financial information for consumers. some 30 years later. micro. extant coin. Google and others elegantly solved) and more about distilling. which has existed since friends. organize and control its relevant digital world. with the Lydian Lion being. media and mining are driving a revolution in payments. are a comparatively recent phenomenon.700 years. This is about much more than grumpy customers letting off steam. The financial services industry grew up to serve the wealthy — that is. coupled with technology. then the earliest. The Web is transforming everything that consumers know and think about financial services. if not the first. even today. a venture that required capital. the underpinning tool of economic activity. the people who consume financial services and how they consume them. the fourth theme. The role of new MedIA (the Internet) is the third theme. you have. such as insurance claims. but institutionalized microfinancial services. Peer-to-peer lending has not yet transformed the consumer lending industry. New media are in some cases breaking apart previously established financial models. To understand how the consumer network plays against the pyramid. Google’s genius was to make the mining of unstructured data so simple. there are over six billion cellular subscriptions. contributing and driving unstructured connections with other consumers. MIcro is the second theme. they become digitally visible. and the power of financial services consumers. focusing on the revolution in financial inclusion as technology breaks down the barriers to financial access and transforms the economics of financial provision. While the Lydians might argue that using mobile phones for payments is a retrograde step since at least their mobile money didn’t break if dropped. If you are chinese. Mobile. if American. 3 . challenges consumers to expand their role in financial services. The poor were left behind. those who had capital that required a return. ThE JOURNEy The start of the journey — the technology that is most transformative for the most people. making accessible and finding patterns in what they may find it is useful to know. is playing a critical role in transforming the lives of hundreds of millions. in part to shine a spotlight on the very firms that are seeking to understand them. and some of the new data-driven insights. through which firms manage financial services. Microfinance. think PayPal. cards and tablets — is transforming both the payments that underpin all consumer economic activity and the financial processes. part technology firm. The first commercial cell phones were launched 1 in the early 1980s. focusing on the revolution in payments and processes that mobility is driving. oh. or assets that required insurance against potential loss. The brilliance of the Internet is not so much that it contains a large chunk of the world’s knowledge as that it is instantly accessible via the Web. the players in the financial services market who are becoming part financial firm. including hundreds of millions of the world’s poorest and billions of the world’s middle.and higher-income consumers — is digital mobile devices. Peer-to-peer payments are transforming the payments industry. MINING. The pyramid of financial needs extends from basic subsistence to building wealth for the longer term through sophisticated investments such as pensions and mutual funds. as people live more of their lives digitally. focusing on how consumer connectedness is empowering consumers like never before. at scale. think Alipay. The value of any publication since the Web matured is less about telling people what they could not find out (a problem Sir Tim berners-Lee. MobILe is the first theme. from the role of the branch to bankers’ bonuses. digital mobile technology — phones. this report explores four themes. credit and insurance. enter microfinance. Social media and the connectedness of consumers through the Internet amplify the voice of the individual consumer. not just in low-income countries but in the wealthiest countries in the world. This creates opportunities and risks for financial firms and sets up a tension between the financial firm seeking to structure. and provides a structure in which to explore the answers. Have you ever mined unstructured data? If you’ve ever done an Internet search. and the consumer finding. It is true that mobile financial services pre-date the Internet and mobile phones by. family and local moneylenders began providing services long before the Lydian Lion.C S C LE A D I N G E D G E FO RUM Connected Consumer and the Future of Financial Services sumers: a safe place to store cash. However. convenient and accessible that mining the world’s knowledge has become commonplace. but it has created an entirely new model that needs exploring. hundreds of millions of individuals lack access to the basic financial services of savings.

it’s about continuing the evolution from institution-centric to individual-centric financial services.) This means that your wallet. always on us — and secure Today’s mobile devices are profoundly altering financial services by providing anytime. Mobility streamlines the distribution chain of financial services. (See the Media chapter. with far-reaching effects. For consumers. like PayPal and e-wallets. services can be with people all the time. tablets and cards in everyone’s pockets. E-commerce put in motion many of the newer models people have today for electronic payment. banks (and banking) are expected to follow people wherever they go. The ATM set the expectation that banks should provide services to consumers where they need them (you need cash at the supermarket. it’s about money and making frictionless payments. It brings access to new. anywhere. reduced costs and a better customer experience. For everyone. and how and when you use it. and as consumers have latched on. not the bank). accessed via a mobile device that may turn out to be the most secure platform yet for consumer financial services. and now digital mobile money. This chapter explores the impact of mobile financial services on both consumers and providers. on the face of it. is changing. there are growing expectations that mobile cash will follow. like Kenya and India. With the Internet. WAllET MAKEovEr. previously excluded customers. Mobile technology is seductive. Today a broad range of banking. the relevance of physical currency appears to be shrinking as cash is subsumed into 4 . this means that your wallet. For providers. and its history. Cash itself is even taking on new forms as digital currency that leverages the Internet’s design. MONEy AND PAyMENtS MORPh today a broad range of banking. it’s about streamlined processes. It improves current financial products and services and creates new ones. With the mobile apps revolution in full swing. insurance and other financial services can be with people all the time. electronic transmissions. insurance and other financial Since the invention of coins in the second millennium BC. money has been mobile. And it offers financial services firms new ways — and a new imperative — for engaging with customers. anyone access. In some countries. and how and when you use it. Now with mobile phones. You need look no further than the bank. The journey of money continues to this day: from physical coins and cash to checks. to witness this transformation. the demand for financial services using these devices has skyrocketed. accessed via a mobile device that may turn out to be the most secure platform yet for consumer financial services. is changing. expectations broadened to include banking in the home.Connected Consumer and the Future of Financial Services CSC LEA DIN G EDGE FORU M Mobile Always on. mobile money services are already common.

Because many mobile e-wallets have been designed for near-field communication (NFC). Credit card companies want an e-wallet that works just about anywhere.” says Google4). receive money. Thus offerings like M-PESA in Kenya emerged. Figure 3. As smartphones have become ubiquitous in developed markets. since the phone is always with you in your pocket or purse. Google Wallet uses near-field communication. in which That e-wallet.) Expect every loyalty card to do the same. Major players in both the e-wallet and mobile money markets.3 The e-wallet is an app that essentially replaces what’s in your wallet. promotions and even train tickets. An e-wallet speeds transactions and arguably makes them safer (“a wallet you can lock. but it is conventionally thought of as a phone app. make purchases. or uses the Google Prepaid Card. but the explosive force of mobile devices is accelerating the process. Early movers like Starbucks have melded their loyalty and value cards into a mobile app that includes a customized e-wallet. E-wallet software can reside on a laptop or desktop computer. which can be funded with any credit (Visa).C S C LE A D I N G E D G E FO RUM Connected Consumer and the Future of Financial Services cards and e-wallets. Figure 2. expect all financial services will move to mobile over time. he simply visits the nearest mobile money agent to cash out. Serve (American Express). e-wallets based on SMS are simpler but thriving.2 A group of retailers including Walmart and Target is also pursuing an e-wallet initiative. (See Figure 2. 5 . insurance cards. loyalty cards. It can store credit cards. The ubiquity of basic SMS-equipped feature phones in these markets requires a different form of mobile money service than a smartphone-based service. they have triggered new payment and loyalty strategies. Starbucks’ mobile app digitizes loyalty. though. PayPass Wallet Services consumers deposit cash with a certified mobile money agent who converts the cash to electronic money stored on the phone. If the consumer wants cash again. This has been happening for some time. streamlining the customer experience while also putting a customer name to each card. The consumer can then pay bills. Source: Google (MasterCard) and V. and perform a variety of other activities. gift cards. These companies are lining up to ensure they are as visible in the e-wallet as they are in the leather wallet. Visa/Discover/American Express announced). e-wallets have yet to take off. value and credit cards so customers can use them to pay with their phones. only works at Starbucks. Google Wallet works wherever Citi MasterCard is accepted. Major initiatives include Google Wallet. In developing markets. transfer money to a family member or friend. Isis (MasterCard/Visa/Discover/American Express). like your wallet. shown in Figure 3 (Google/ MasterCard currently. though they are expected to. like Obopay. a technology still emerging in most developed markets.

Connected Consumer and the Future of Financial Services CSC LEA DIN G EDGE FORU M Cards of the future Just as your mobile phone has become smarter. but certain devices will be uniquely suited to certain jobs. as financial services applications are designed for the mobile platform first rather than last. Eventually you may have one “super” card that replaces all your cards because the magnetic stripe — dated but dominant — could essentially become programmable. but the sheer power of small devices including cards. and the breadth of mobile processes now make those screens even more important. Or. adding a new level of security to protect against stolen credit card numbers. Today’s cards boast chips and even tiny screen displays and mini keyboards. This has been the case since the advent of mobile phones. but one day they may show bank balances and more. sales. the small screen will play a big role. Its hallmark advantage is its size — tiny and light.7 As your card becomes a computer. like a chimney for a homeowner’s insurance claim. your credit card is becoming smarter too. Source: MasterCard Ironically.5 MasterCard has demonstrated a card that shows a one-time password to be used for online purchases. Currently these displays are used for dynamic passwords. In the future. press a button to use regular credit or spend reward points (Citi’s 2G card does this). Smartphones will be for paying smaller sums with an e-wallet or taking a picture in a hard-to-reach place. the smaller cards will continue to be popular for larger sums at checkout. There will be a spectrum of mobile devices with overlapping functionality. Tablets will do the heavy lifting for complex business processes like claims processing.6 Carry one card and program it at checkout to be your desired card. it claims its rightful place among mobile devices like smartphones and tablets. the ubiquity of the Internet. 6 . This credit card includes a display for one-time passwords. portfolio management and advisory services.

or approximately 40 percent of the adult Kenyan population. significant growth potential exists 7 . eliminating a lengthy and expensive trip to the capital.C S C LE A D I N G E D G E FO RUM Connected Consumer and the Future of Financial Services Under the hood. it is important to understand that Kenya is a cash-based society. the U. In addition 10 Figure 4. has leveraged SMS with remarkable success. has primed the country for mobile financial services. Safaricom’s M-PeSA. M-PeSA was originally developed for borrowers to receive and repay microloans. and how fast? Source: Oduor Jagero in Latin America.9 to understand this rapid uptake. government agency wanted to make payment of visa fees convenient for all applicants regardless of location. M-PeSA has even extended its services to pre-paid credit cards that allow consumers to transfer their credit to a card they can use for traditional card transactions (especially helpful if traveling outside the Safaricom environment. Consider the redLaser bar code scanner app by eBay (owner of PayPal). nFC and Qr. with 93 more planned. the mobile phone has evolved from transmitting voice to transmitting data. supermarkets. redLaser has taken the next logical step in the shopping process. cameras are becoming an important integrated technology for finance. early in this evolution. Camera technology provides rich capabilities like sense and scan that are making their way into mobile commerce and mobile payments.. visa applicants can pay using Airtel Money. government agency is launching expanded visa services in Brazil using Boleto Bancário.” (See Figure 4. working with CSC. M-PeSA is an SMS-based service but is pictured here on a smartphone.S. where more adults have mobile phones than bank accounts. Brazil’s long history of branchless banking. integrating Milo for inventory search and PayPal for payments. a popular payment service whereby consumers can pay at numerous retail outlets (e. launched in Kenya in 2007. mobile payments have become increasingly popular in Africa.g. but during market testing people quickly found other uses. post offices) and via online banking. Indeed.) this is a prime example of consumers realizing the power of their connection and shaping the financial service to suit their needs. phone add-ons. dar es Salaam. one U. which uses retail agents instead of bank branches. technologically connected consumers mean that corporate listening starts to become a higher imperative than corporate talking. and M-PeSA was repositioned more broadly as a money transfer service with the simple slogan “send money home. In tanzania. Safaricom listened. one of the keys to mobile money adoption is the technology behind the transaction — primarily SMS. such as overseas). In Kenya people can pay their application fees using M-PeSA or they can pay in person at Kenya Postbank locations. spurred on by M-PeSA. With smartphones. how will smartphones transform such services in Africa. Currently there are 130 SMS-based mobile money services operating worldwide. the agency. M-PeSA has reached over 14 million customers8 in four countries. including 9 million in Kenya. In particular. Since its launch.S. In general. initially designed for price comparisons. text messaging (SMS) was deemed a viable transport for money.11 one of the first merchants to incorporate this multi-channel experience — buy online to Africa and India. began offering mobile money solutions for visa support services in east Africa. cameras.

mobile — while extending the lifespan of the check.g. so can depositing a check. There was a collective “aha” moment when people learned they could use their camera phones to deposit checks. Source: Square NFC phone can both receive and send data (e. wireless transactions.Connected Consumer and the Future of Financial Services CSC LEA DIN G EDGE FORU M and pick up at the store — is Toys R Us. the technology is just emerging in Europe and the United States. It operates over a very short range (a few centimeters) and has bi-directional rather than uni-directional communications.12 If shopping can be seamless.) Yet the real breakthrough in developed markets may come from contactless payments enabled by NFC and QR.. uptake still depends on consumers having and using NFCenabled devices. Currently under five percent of mobile phones worldwide are NFC-enabled. However. The focus on multi-channel retailing is a key part of PayPal’s “Future of Shopping” vision. Visa is part of the Isis initiative and more recently signed on with Google Wallet. Depositing checks via camera phone is like having an ATM in your pocket. reaching critical mass in 2015. and send it to the bank. secure.) The 2012 Olympics in London is showcasing contactless payments — by both smartphone and smart card — through Visa. not just simple point-of-sale payments. a payment method many thought was dying. Google Wallet. take a picture of it.) Figure 6. Some say 2012 is the year NFC will take off.15 While Japan has been using NFC for years. Although global attention at the Olympics will raise NFC awareness. that should 8 . enabling small businesses to accept credit cards easily. which launched in the U. No more trips to the ATM.S. Square’s mobile payments technology turns a smartphone into a credit card processor. Simple. branch or post office. so the official payments sponsor. read a product description and make a payment). in September 2011. (See Figure 5. NFC is a purpose-built version of RFID that is designed for fast. (See Figure 6. practical. NFC opens the door to many process improvements. the Olympics’ Another straightforward yet innovative move was to turn the smartphone into a credit card reader. is also expected to be available at the London Olympics. Figure 5.14 (See Figure 7.13 Sign the check.

This would boost NFC adoption worldwide. notably legacy phones and phones in developing markets such as India. magnetic stripe payments. While NFC holds many exciting possibilities. NFC is expected to reduce fraud. Chip and PIN cards and contactless cards. someone could buy a latte but not a TV. NFC opens the door to many process improvements. Figure 8. loyalty rewards and secure payment all at once. The Source: IHS iSuppli latest evolution by of NFC increases security combining the embedded NFC chip with smart card PIN technology and dynamic increase quickly in 2012 as more mobile devices are shipped new with NFC chips. NFC could replace the mag-stripe card swipe and its static authentication via signature (used in the United States). merchants may pick up the tab for fraud if they don’t adapt. (See Figure 9. Brazil and across Africa. not just simple point-of-sale payments. Ultimately. it is not the only mobile technology in town. vending machines and taxis worldwide.18 In fact. merchants need NFC readers and software. scans barcodes. NFC provides a more secure method of transmitting information directly from the phone to the point-of-sale terminal. as well as the more advanced smart card Chip and PIN technology (used in Europe). consumers can scan a code for a product and be prompted to pay using PayPal.C S C LE A D I N G E D G E FO RUM Connected Consumer and the Future of Financial Services The company’s latest readers support Figure 7. If NFC takes off. shows comparative prices. finds discounts. Lev- 9 .) Chip compliance includes support for NFC devices and Chip and PIN cards. redeems coupons. restaurants. This liability shift encourages merchants to implement the new technology.) ViVOtech readers are in stores. NFC TAKES OFF Phones shipped with integrated NFC chipsets (forecasted to 2015) NFC. If your phone is stolen. A pioneer in this arena is ViVOtech.) PayPal sees QR codes as one entry point to mobile commerce. NFC functionality could be brought to any mobile phone. Source: ViVOtech codes are becoming ubiquitous. For example.19 (This shift of where financial risk lies is a recurring theme in this report. (See Figure 8. though. marketing and merchandising. Using their phones. QR (Quick Response) In addition to consumers having NFC devices. liability for card fraud for chip transactions attempted at non-chip-compliant terminals may shift from card issuers to merchants in 2015. applies loyalty card points and — best of all — pays. NFC powers single-tap coupon redemption. loyalty programs. you could set a minimum dollar amount for when a PIN is required. 16 authentication. consumers will have an all-in-one smartphone for shopping: It locates stores and products. which provides NFC software and systems to merchants for payment.17 Because payment credentials are completely hidden from merchants and “onlookers” and thus are not easily copied or stolen. And with the announcement of NFC on a SIM card.

For the consumer. Regardless of the growth of NFC. the world is a long way from knowing exactly how these two relatively new kids on the global payment block The largest personal lines insurer in the United States. Mobile banking apps for checking balances. scanning a detailed review of a bottle of wine prior to purchasing it). QkR (“quicker”). order and Faster. making payments and transfers. Apps available today enable consumers to initiate the first notification of a loss (the starting point of a claim). in collaboration with T-Mobile. consumers could use either technology to read coupons.23 Developed markets can learn from developing markets’ mobile innovations.Connected Consumer and the Future of Financial Services CSC LEA DIN G EDGE FORU M elUp is seeking to use QR codes. That said. view claims. “Some people look at their checking account every day but they look at their insurance policy much less frequently. So. update contact information and view their insurance card. Customer self-service is a natural. As Andrea O’Connor. viewing transactions. and finding ATMs and branches are prevalent. NFC/QR is not an “either-or” debate.22 Insurance apps for reviewing policies. bringing consumers closer to the point of sale. MasterCard’s new mobile wallet app. USAA pioneered the concept of taking a picture and submitting it for a claim via a mobile device. The QR code bridges the physical and digital worlds. State Farm. 20 will play together. consumers can purchase tickets to Cirque du Soleil using their mobile phone. the wider use of QR codes for accessing extensive online information surely means that QR will have a role in the payment value chain (for example. debuted the app with consumers in Australia in January 2012. for example. is streamlined processes for the provider and new levels of convenience and capability for the consumer. (See the Micro chapter. Policy holders Figure 9. filing claims and obtaining quotes are becoming common. when it was called GloveBox. In a restaurant. partnering with Commonwealth Bank of Australia. is also a bank. which is that retailers lack NFC-enabled equipment. Its advanced use of mobile in both insurance and banking is a fascinating example of the different impact mobility has on both industries. Source: CSC can pay their bill. The result in financial services. customer experience executive and vice president of State Farm Bank. works with both NFC and QR. And in an interesting demonstration of reverse innovation. The app provides information you need while in the car. and how to find the closest gas stations and towing services. Quicken is the first lender to offer a mobile app for getting a mortgage. pay the bill. but widespread contactless payments seem inevitable.” 10 . says.21 MasterCard.) Geico’s mobile insurance app GEICO originated for the iPhone in 2009. as in other industries. some developing markets provide crop insurance and life insurance via SMS mobile phones. Leaner Processes NFC and QR remind us that consumers have an expectation that processes be mobile (there’s an app for that!). there is room for both. to overcome a fundamental challenge of NFC. Another approach is to offer both. mobile has a stronger play in banking than insurance because of the highly transactional nature of banking. the impact of mobile apps on banking is that much greater. including what to do if you are in an accident. From this QR code.

We need to design for the small screen and take advantage of the capabilities of smartphones such as cameras and GPS.) Progressive provides a range of mobile insurance services including Mobile Photo Quoting. and by using always-on-you mobile phones to help improve driving behavior. Also. As O’Connor says.” Employing an “agent-plus” philosophy.” says O’Connor. It’s about accessing information and transacting business yourself at any time. critical in a crisis. part of its Pocket Agent app. targeted at insurers. but now mobility is an important driver of process reengineering. but it means every process must think about the mobile implications first. hard deceleration and hard swerves) by scoring a driver’s driving. Driving deep into business processes. the company is not positioning mobile for a specific demographic. and make payments from their smartphone or tablet. “Mobile is about behavior. An example of this is State Farm’s MyTime Deposit. Get an insurance quote for your car by taking a picture of your driver’s license and car’s vehicle identification number (VIN) via your phone and submitting them via the app. file a claim. “State Farm currently uses a mobile-first mentality. Every auto insurer seeks to reduce the cost of claims. scan the VIN of up to three 11 .C S C LE A D I N G E D G E FO RUM Connected Consumer and the Future of Financial Services That said. an app that allows agents to start the process of a flood claim on the spot. (More on mobile claims shortly. wherever you are. It’s not about transferring processes for the Internet onto mobile. Finding such a function or app is key for any firm to attract new groups of mobile consumers. that lets customers deposit a check by taking a picture of it. CSC’s mobile insurance app. That doesn’t mean that every process must be on mobile. State Farm complements its agents with mobile solutions. State Farm recognizes that mobile is not simply about putting insurance processes on mobile devices. whatever your age. “Mobile transcends demographics. if you are shopping for a new or used car. but about using technology to affect consumer behaviors that impact insurance.24 For example. Figure 10. Although State Farm’s apps give them a leg up with young adults. This singularly useful function created a surge of mobile customers. the company’s Driver Feedback app addresses three of the highest-risk areas for accidents (hard acceleration.25 (See Figure 11.) You can get a quote in minutes rather than painstakingly entering all the data manually. CSC provides a Mobile Insurance app for insurers that gives their customers multiple capabilities: review policies and claims. FloodConnect is Figure 11. Using the phone’s camera streamlines the process. Progressive’s app shows consumers how to take a picture of their driver’s license with their smartphone instead of manually filling out a form on the phone.” State Farm sees a shift: Just a few years ago mobile had to fit within existing processes. lets consumers initiate a claim on the spot. and existing processes must fit with mobile. enabling agents to take on more complex work as customers do self-service through mobile. (See Figure 10.) CSC also provides FloodConnect Mobile. in insurance State Farm has a portfolio of apps that goes beyond traditional insurance processes. Source: CSC provided in partnership with the National Flood Insurance Program.

In the future. appointments can be added to the adjuster’s schedule based on his or her current location. Progressive builds a “snapshot” of a driver’s risk profile.Connected Consumer and the Future of Financial Services CSC LEA DIN G EDGE FORU M Mobile ConsuMers Mobile AsseTs In the world of mobile. For example. most of the attention has been on consumers. there is no waiting for third-party information. used to calculate insurance premiums.26 For the insurance of any asset whose risk profile is affected by movement. no voice recorder. In the case of a disaster such as an earthquake. This lowers the claims processing expense significantly by providing timely data and avoiding inaccuracies and missing data. tablets have the potential to serve as both a workstation and an easy-to-read display — like handing an electronic clipboard to the customer. so tracking their mobility makes sense to calculate risk at an individual asset level. but many consumers’ most valuable assets are also mobile (cows. For cars. With the “Internet of things. The mobility of these assets is where much of their risk lies. the use of small devices to calculate risk at an individual asset level will become less a matter of cost. cars to determine which have the lowest and highest car insurance rates. Not only can consumers report claims from the scene of an accident (auto or home). Progressive’s Snapshot program uses a small telematics device plugged into the car that collects data on driver behavior such as how. An insurer could use a tablet to create illustrations and enter customer data. the tablet means no briefcase full of paperwork. but adjusters can expedite the claims process from the scene. and more a matter of consumer acceptance. Progressive states that Snapshot will not increase premiums but could deliver savings of up to 30 percent. Further. By monitoring driving behavior for up to six months. no camera. The information is transmitted immediately to the back office to initiate the claims process. For the adjuster. Consider mobile claims. and eventually live camera views could be overlaid on archive pictures and engineering designs — an augmented reality technique — to assess a claim for damage by looking at “before and after” images and design details. RFID tags are being used to track their movement (more about this in the Micro chapter). The adjuster can collect additional information from the claimant and automatically gather information such as weather conditions and accident reports. CSC’s 2Work for Adjusters tablet app lets an insurance loss adjuster take pictures and attach them to a claim with a time stamp. the customer can ask what-if questions that the agent can answer through 12 . even in lower-income countries where RFID tags remain comparatively expensive. These capabilities reinforce that mobile doesn’t necessarily solve new problems as much as solve existing problems in a better way. no GPS. cars). how much and when a vehicle is driven. archive pictures could be overlaid on live camera views. For cows. Through CSC’s 2Work for Brokers tablet app. and hand it to the customer to view the results. What may be minor in terms of function is major in terms of convenience and efficiency for the consumer and enterprise alike. The adjuster can complete and submit the claims forms while at the site. the consumer must make a tradeoff between financial security and privacy. For life insurance companies.” when a consumer wants to insure those things. pictures could be geo-coded. vastly improving efficiency. On the back end.

they can record the entire interaction with the customer to reduce fraud and ensure that all company policies are followed. in emerging markets. director of mobile insurance solutions at CSC. That said. are now partnering with MNOs to provide the value-added services that only regulated financial institutions can offer. video. this opens up new markets.” says Bob Evans. location awareness. the increased use of credit and debit cards has hastened the demise of cash. go down if it is torn.) Want to know how an increase in coverage will play out? The agent can simply move a slider on the touch screen to change the dollar amount. There will always be a need to cash out digital money. Branches will be fewer and more specialized.” needs like those of small businesses. Offering the whole range of financial services on a mobile platform will enable banks to reach new markets.29 as banks focus on branchless distribution methods and move to mobile. in Peru. biometrics. Like cash. ThE ENd OF CaSh — agaiN? does mobile digital money finally signal the beginning of the end of cash? Cash can get dirty. the Web itself is a non-cash proposition. director of CSC’s Leading Edge Forum. “aTMs might go the way of the airport payphone.28 and of course.30 A World in TrAnsiTion The transformational changes inherent in digital mobile services are impacting the financial services industry and society at large on several fronts. Banks. however. a significant number of businesses can afford to refuse to accept cash. but investment and insurance products as well. in addition to the physical drawbacks of cash. This includes not only credit and interest-bearing savings products. whose MCB Mobile service received first place in the Mobile Money Transfer global awards in 2010. (See Figure 12.” says Paul gustafson. but banks (and all financial services firms) will reprioritize their distribution strategy. such as programming money for your son to spend on college textbooks. and the anonymity of cash has its appeal. banks will not go away completely.27 Even the Salvation army accepts credit card payments (using android phones and Square to accept them). CSC’s 2Work for Brokers tablet app lets life insurance brokers present portfolio information visually to customers. handling more complex “Not only can these devices capture a signature. since MNOs are not financial institutions. laptops have provided similar services for years. cash won’t disappear. as the need for cash dwindles. recorded voice confirmation and other biometric information. they are frequently prohibited from offering services that reward interest or go beyond simple money transfers. as mobile money spreads. One bank forging ahead is MCB Bank in Pakistan. such as Sweden. Source: CSC BraNChLESS BaNkiNg. but not as conveniently or compellingly. digital payments are becoming so prevalent that in some countries. Of course. “Tablet devices have the potential to enrich the customer experience and streamline mobile insurance processes with audio. Figure 12. Mobile will become a primary means of reaching consumers. it may even become programmable so you can earmark it for specific people to pay for specific goods or services. the value of a bill can actually 13 . Still. Cash economies are still prevalent in emerging markets. worn and torn. assisted reality and once-and-done processing. mobile network operators (MNOs) like Safaricom have stepped into banking territory because of their vast distribution networks. at least in developed markets. for example. keenly aware of the MNO encroachment into financial services. Technology Programs.C S C LE A D I N G E D G E FO RUM Connected Consumer and the Future of Financial Services graphical illustrations immediately.

but security technology tailored for mobile devices makes it possible. Provides the ability to: • Manage and track the mobile device remotely • Manage the data that is considered sensitive or part of the extended enterprise • Remove sensitive data and applications if the device is lost or stolen • Quickly deploy critical data and applications to new or replacement mobile devices Mobile Application Protection on Device Encapsulates mobile applications with encryption prior to downloading to prevent application tampering or the injection of malware. since a handheld device can be more easily lost or stolen than a laptop and does not enjoy the security of the corporate network. CSC ConfidentID Mobile Solution Layers Multi-Factor “Out of Band” Access and Transactional Authentication Authenticates all people accessing mobile applications and provides transactional authentication. biometrics. creating actionable intelligence for authentication or forensics in the event of fraudulent activity. GPS/location). Secure Location Mapping Maps and displays the location of the device (person). Uses multiple levels of identification data (PIn/password. 14 . It may seem counterintuitive. Private. By uniquely authenticating a person to a particular mobile device using biometric data delivered securely from the person’s smartphone to a central server. in the near future biometric authentication will occur right on the phone itself. with only one-time passwords crossing the network.Connected Consumer and the Future of Financial Services CSC LEA DIN G EDGE FORU M SECURE IDENTIFICATION WHEREVER YOU GO Your mobile phone or tablet may eventually be the most secure platform for financial services. Mobile Device Management Remotely secures mobile devices with wipe and tracking capability. In fact. Includes processes to certify. the person and his or her session can be definitively authenticated to perform CSC’s ConfidentIDTM Mobile software turns a mobile phone or tablet secure financial service activities. manage and deploy mobile applications and data.


Connected Consumer and the Future of Financial Services

into a highly secure device that can use voice, face and palm prints to verify that you are who you say you are. This puts biometrics directly in the hands of consumers for the first time. However, biometric data is not enough to prevent fraudulent access, improper usage or falsification of identity. Nor is biometric data all that is needed to provide a secure mobile computing environment. The ConfidentID Mobile security solution includes additional layers and tools to provide the fully secure mobile environment. These layers are shown in the preceding table. User authentication is the unique feature of the ConfidentID Mobile solution, turning smartphones into efficient, cost-effective biometric devices. Built on Daon’s IdentityX platform, ConfidentID Mobile takes advantage of the built-in capabilities of smart devices to achieve multifactor authentication without requiring costly biometric equipment or system integration. People establish their identity through a combination of encryption, PIN entry, location-based technology “The mobile phone or tablet could become the most secure and effective way for banks to reach out to customers — more secure than a teller, a call center rep or a website,” says Randy Barker, CSC director of channel solutions for banking and In a world of stolen identities and 24-hour connectedness, mobile’s potential to be supremely secure upends the conventional wisdom that an in-person transaction is the safest transaction. With ConfidentID Mobile user authentication, financial services firms can specify different levels of security for different access and transaction scenarios, such as requiring a palm print and GPS entry for transactions over $1,000, or facial recognition when sending money to an offshore account, or a one-time password for accessing a certain application. The authentication data is linked to the device’s unique identification number (ESN, SIM card number or other similar smartphone facility), which enables ConfidentID to know that it is Bob using Bob’s device. This provides greater identity accuracy than the use of passwords, PINs or public key infrastructure alone. In the past, there has always been an intermediary between the customer and the bank, whether it was a teller, a call center representative, an ATM or the ISP between the customer’s browser and the bank’s website. Other than using a username and password, having the customer provide detailed answers to questions regarding his or her financial history, or having the customer show the teller his or her ID, there was no way to authenticate the customer. ConfidentID Mobile changes that by linking multiple forms of personal identification to the mobile device itself by leveraging the ubiquitous features of smartphones. Camera, GPS, voice, data application support and text support turn a smartphone into the most cost-efficient biometric device available. and biometrics such as voice, face and palm image matching. credit services. “This changes the nature and future of banking.”

FINANCIAl INClUSION. Mobile infrastructure is a platform for innovation and achievement of national development goals. It is being leveraged for a variety of financial services, especially in emerging markets. These markets do not have the fixed infrastructure or the high

premiums needed to support the more labor-intensive distribution model of developed markets. A few years ago, most rural Kenyans had no financial services. Then M-PESA began offering M-KESHO bank accounts. Now Kenyans can transfer money from their M-PESA account


Connected Consumer and the Future of Financial Services


Figure 13. Deepening Financial access in Kenya

Note: “Banks” also include other financial institutions. Source: World Bank staff estimates. The World Bank authorizes the use of this material subject to the terms and conditions on its website,

into a formal savings account. The demand was there, lying dormant until mobile money provided the means to satisfy it. (See Figure 13.)

mobile phones a direct conduit to a significant portion of the world’s unbanked.31 With this extraordinary reach, the humble mobile phone has transformed into a ubiquitous data device with the potential to influence economic and social stability worldwide. According to the World Economic Forum’s Mobile Financial Services Development Report 2011: The mobile phone’s ability to serve as a universal banking platform can provide stability in the lives of those with very limited means while unlocking new efficiencies in underserved segments of developing economies.32 In both developing and developed economies, mobile is revolutionizing financial services, bringing more services

The humble mobile phone has transformed into a ubiquitous data device with the potential to influence economic and social stability worldwide.
The target market for most SMS-based mobile money services is the unbanked in emerging markets. It is estimated that up to two billion people worldwide do not have a bank account but do have a mobile phone, making

to more people with more convenience. Mobile is at the heart of microfinance, which focuses on slimmer, redefined financial services, especially (if not exclusively) for underserved markets. Micro is next.



Connected Consumer and the Future of Financial Services

Targeting the newly connected majority, not just the easiest to reach
For an African farmer, a payment for bad weather that has destroyed a season’s crops can be a life or death matter. A small amount of insurance can have a big impact. Technology, notably mobile technology, is playing an increasing role in delivering such microinsurance and is driving innovation. Brandon Mathews, head of emerging consumer with Zurich Financial Services, a global insurer, sees broad implications: “Consider reverse innovation: As we learn to supply financial services for pennies in low-income countries, that has far-reaching global consequences for financial services elsewhere.” Indeed, Kenyans may be nonchalant about the excitement over some of the mobile-to-mobile payment services emerging in the United States and Europe; Kenya’s SMS-based M-PESA service has already succeeded in making mobile payments an integral part of Kenyan financial culture. Microinsurance, and other microfinance products like microsavings and microcredit, aim to meet the needs of low-income households with commercially viable products. You can think of rental car insurance as a form of microinsurance — a mini policy for a specific situation — but unlike rental car drivers, the poor receive few options to protect their assets or income. Yet as these customers are increasingly connected via technology, financial services for them are also coming online. This is important because, as the World Bank states, there is “mounting evidence that access to financial products can make a positive difference in the lives of the poor.”33 Microfinance may not be where the money is yet, but it is arguably where much of the social value in financial services lies. It is an important part of the world’s financial future. In fact, in some countries regulators are trying to promote financial services instruments to lower-income groups by
The annual gross national income (GNI) per capita for the majority of people worldwide is less than $5,000. Microfinance can address the financial needs of this “long tail” of income distribution. Data Source: World Bank Figure 14. the long tail of income distribution

Since before the millennium, financial inclusion has been a major policy initiative. However, although the will existed to provide services, the challenge was reaching those in need. Now, the connected consumer exists in almost every country in the world at almost every level of wealth. Creative use of widespread delivery mechanisms such as mobile is enabling microfinance institutions and traditional financial institutions to address this market — the “long tail” shown in Figure 14 — at scale.


it costs M-PESA only 12 to 15 cents.. insurance is a product that you hope to not use. Governments such as India’s have pushed for microinsurance products to help prevent those living at the poverty line from slipping below it. but multi-peril crop insurance is difficult to administer because it is hard to match price to risk and assess losses. With so many of the world’s poorest working in agriculture. agricultural insurance is vital. and the role of technology in making microfinance mainstream. Smartphones offer even more potential. An SMS-based distribution method forces radical simplicity on an industry where insurance and banking firms have historically layered complexity upon complexity in their products. cash can be a barrier. whether an iTunes song or a financial service such as insurance. one bad season can ruin years of investment and leave a family destitute. including eight of the top 10 insurance companies on the Forbes “The Global 2000 Insurance” list. Demand for the benefits of microinsurance is high. Because micro 35 rFID tags are being used to identify a more mobile asset of the farmer. “Almost uniquely. In Sri Lanka.” says Mathews of Zurich. one of a number of countries 18 . It’s a piece of paper unless you need it. By linking farms to local weather stations and introducing an automatic payout process via mobile phone. Indeed. Mobile technology is not nirvana — phones fail. 34 technology to address these challenges. Insurance companies have been equally keen to expand their reach to billions of new customers.. as they bring simplicity and richness is about very small sums. The claims process is especially daunting for large numbers of small farmers. Micropayments helped transform the global music industry and are transforming microfinance today. cattle. Microfinance products must address the needs of the individuals they serve.37 With insurance. Collecting low-value cash deposits and redeeming their savings back into small sums of cash requires a costly infrastructure which few banks are willing to make extensive in low-income or rural areas. electronic micropayments pave the way for financial inclusion. of the top 50 commercial insurance companies. That said. They are used by higher-income consumers primarily to purchase digital goods over the Internet. as the Bill & Melinda Gates Foundation reports: Cash is the main barrier to financial inclusion.Connected Consumer and the Future of Financial Services CSC LEA DIN G EDGE FORU M mandating that financial firms have a minimum exposure in this segment. ironically. farmers are more willing to risk the purchase of higher-quality inputs on credit. the issue is trust in the product. Micropayments are essential for any micro digital product. be profitably marketable subjects by a range of financial institutions. The product protects against crop failure caused by drought or excess rain and enables farmers to access credit to buy quality seeds and fertilizers to maximize output. they cost money to buy and subscribe to. in principle. microsavings and microcredit flourish. But once poor people have access to cost-effective electronic means of payments such as M-PESA. microinsurance is growing rapidly. they could.36 ProTECTInG LIvELIhooD. not merely be a scaled-down version of a traditional complex product. Elsewhere. they are desirable objects and can be stolen — but the remarkable growth of mobile technology reflects the transformative effects it can have on people’s lives.. to products. This chapter describes how newly connected consumers are benefiting from microfinance. as they bring simplicity and richness to products. most offer microinsurance products. the Gates Foundation reports that while it typically costs banks $1 to $3 for a teller to process a transaction in a branch. but unlike payments. and by lower-income consumers to purchase goods by mobile phone and make remittances. MicroEnsure’s weather index crop insurance leverages MicropayMents Micropayments are the foundation and most widespread form of microfinance. MicroEnsure enables farmers to avoid filing a claim or going through an expensive loss verification process in the event of crop failure. Today. Microinsurance smartphones offer even more potential. helping microinsurance. very low costs are key to making it work. with technology a key factor enabling these new insurance products to reach underserved markets.

highly automated and highly subsidized. 39 tions providers have inserted themselves into mobile insurance. The insured uses the smart card to receive a range of treatments. The system. For example. by improving access to medicine. as well as mobile phones.41 mi-Life rides on the SMS-based MTn Mobile Money network. which are the easiest and least expensive to administer since the claim events are infrequent. have a role to play in bringing financial services to the poor. CaRDS. insurer SICL has used RFID to reduce fraud and enable cost-effective cattle insurance. Most microinsurance providers offer life insurance and death and disability insurance. health and income improve. gas stations and supermarkets. RSBY’s use of smart card technology highlights that cards. Microinsurance for farming is more than insurance as peace of mind. also be used to gain discounts in pharmacies and other retailers. Customers provide this number to a call center which records their personal details and activates the insurance policy. medical risk declines. as with mobile payments. Families. each card has a unique number. the card offers a tangible insurance product and can 19 Mobile life insurance can be sold directly in a way that would never happen in developed markets. Zurich’s Insurance and Technology report highlights pre-paid cards used for insurance in Mexico and Bolivia: Sold at kiosks. health and property insurance. another key need for the poor is health insurance. by covering damage to houses. Bundling microinsurance products provides a level of sophistication that technology makes cost-effective. telecommunica- In India. By helping improve agricultural inputs. launched the world’s first mobile microinsurance product. mi-Life. have a role to play in bringing financial services to the poor. Rashtriya Swasthya Bima Yojana (RSBY) is India’s innovative health insurance scheme that began in 2008. However. RSBY’s use of smart card technology highlights that cards. because health issues are a common consequence as well as cause of poverty. enabling consumers to buy insurance and manage their policy with their phones. this is insurance as life-changer made possible by technology. may spend all they have on healthcare and be left with nothing. in partnership with Hollard Insurance and Microensure. MTn ghana (MTn is africa’s largest mobile network operator). a policy could cover crop. as well as mobile phones. consumers have Individuals are enrolled using mobile biometric equipment and are issued a smart card in return for a 30-rupee (60-cent) registration fee. .40 BunDLIng. MoBILe LIFe. claimed over 27 million active smart cards as of February 2012. health insurance is the most pressing need. particularly for proving identity. in ghana in March 2011. PRoTeCTIng HeaLTH. By making small premium payments through a device they already use for other payments. this is insurance as life-changer made possible by technology.C S C LE A D I N G E D G E FO RUM Connected Consumer and the Future of Financial Services where this has been introduced. particularly for proving identity. offering different types of coverage under one policy reduces the cost per service for the provider and reduces risk overall. Just like pre-paid phone cards. and in SICL’s case it is only viable for the highest-value livestock (valued over $455). Microinsurance for farming is more than insurance as peace of mind. the cost of the technology remains too high to make this a ubiquitous model. technology is transforming health insurance through cards and biometrics. agricultural risk declines. even in wealthy markets.38 That said.

countries need the necessary financial infrastructure. a 12-digit unique identification number (UID) linked to demographic and biometric data. can address this. Although political will and corruption remain significant barriers in some countries. though. I need cattle insurance? There’s an app for that. until something better comes along. Microfinance providers may integrate education into their group meetings so clients understand their responsibilities. and simple first-generation tablets flowing south and east. Brandon Mathews. suggesting tablets may be a better answer. Yet. head of emerging consumer with Zurich Financial Services. Biometric identification. to provide an on-ramp to financial services. but streams — well. bridges and security are all significant barriers to microfinance. holds the promise of introducing low-income individuals to how microinsurance. such as facial recognition and fingerprints. the state must provide a regulatory framework in which microfinance can thrive.47 The combination of low-cost tablets being developed in low-income countries. microsavings and microcredit can transform their lives. support credit rating institutions in assessing borrowers’ creditworthiness and establish a method of citizen identification. MasterCard has developed pre-paid debit and credit products based on the Aadhaar platform. As well. the phone’s small screen can be limiting. which sold over a million units in the first two weeks. One loan officer in Bangladesh wades across a river at low tide in order to meet his clients. a program called Text2Teach in the Philippines shows a possible way forward by using texting to send teaching materials. a prospect that the World Bank is studying. Despite rising literacy rates worldwide. 42 in education. the rising river is. a task uniquely suited to governments and technology. In 2011 India saw the first under-$50 tablet. is literacy. Technology can provide a big assist in breaking down barriers to financial inclusion. roads. there are still hundreds of millions of people who cannot read or write their name or an identification number. has moved ahead. reliable electricity. 40 percent of India’s rural residents lacked access to bank accounts.44 Meanwhile. consumers must be individually identifiable. meaning he cannot input data into the banking system by the end of the day. education is often identified as a barrier to financial access. nobody taught people to use their mobile phones. Rivers. rising to over 60 percent in east and northeast India. the Aakash. For example. for microfinance to Beyond basic literacy. India. In addition to physical infrastructure. Indeed. regulate fees and interest rates. That’s the mindset we need. It reduces the need for travel and is often significantly cheaper and faster to deploy than roads and bridges. offers an alternative view: “As Vijay Aditya of ekgaon has noted. enforce debt repayment. 43 20 .45 Text2Teach focuses on children’s schooling but could be applied to financial education. Technology is not the problem. If he runs late.Connected Consumer and the Future of Financial Services CSC LEA DIN G EDGE FORU M OvercOming Barriers tO micrOFinance Microfinance may be moving into the mainstream. he has to stay on that side of the river until the next day. work. Mobile technology is proving to be the single biggest factor in overcoming the challenges of physical infrastructure. Mobile phones can play an important role A critical barrier to national identification programs.”46 The UIDAI created Aadhaar. as required. rivers — can get in the way. The Unique Identification Authority of India (UIDAI) noted that in 2010. for one. We need to focus on designing financial services that people can learn through use rather than complicating it.

the service overcomes the three big challenges to microsavings: distance to a branch. M-PeSA Microsavings Saving one’s way out of poverty is not easy. put small amounts of cash in. it is more important to provide incentives to save rather than disincentives to spend. took out the money. As bank interest rates fall and stock markets rise. but the cost of handling cash means that savings accounts are uneconomic for banks to provide. MAke It eASY. One young man saved money in his motorbike’s fuel tank until he had enough money to buy a new bike. with investment-linked micro-products being offered by firms in India and Indonesia. operating on less than $2 a day. microsavings rides on the coattails of the country’s popular M-PeSA mobile money service. the Bill & Melinda Gates Foundation reports that “. though they target cash-rich farmers.50 In kenya. With a bike as a savings account.48 A leading life insurer in Southeast Asia is working on providing life insurance to mobile phone subscribers as an add-on service. A mobile phone is a much better savings vehicle than a bike. livestock). Staff travel to meet clients to take savings deposits. Choices include illiquid assets (e. People will sign up via SMS and then a policy document will be mailed to them. or a savings account with some transactional cost (whether direct or indirect). Claims are submitted to an agent. Further. not the needy.. not only is setting aside very small amounts from a tiny income tough when one is already living frugally. Yet.. But a bike is neither safe nor efficient for savings. entirely liquid cash. it was nearly impossible to make withdrawals. Cashpor. the greater the portion that disappears into charges. 21 . operating on less than $2 a day. enhancing investments in farming inputs by 32-39 percent.g. Although discouraging withdrawals is one way to maintain savings. Grameen Bank reports that 80 percent of Cashpor’s customers have access to a mobile phone and that the prospect of being able to save is encouraging those without phones to purchase them. such products may be attractive. Hollard’s head of microinsurance claimed premiums of $190 million from microinsurance and sees mobile life insurance as a critical growth strategy. to provide mobile savings (the Apna Savings Account).” 49 Providing the ability for low-income people. to save small sums — even 25 cents — is a significant opportunity to pull people out of poverty. the phone number acts as the account number. the Foundation has awarded grants of $38 million to 18 microfinance institutions (MFIs) to encourage technologyenabled microsavings. send remittances and make deposits using their phones. and the associated communication scheme between the application and the mobile service. and the agent connects through SMS to the insurer to obtain approval for the claim. CSC is creating the SMS template.C S C LE A D I N G E D G E FO RUM Connected Consumer and the Future of Financial Services easy access to a financial service previously not available to them. Cashpor staff enroll customers using a mobile phone. Providing the ability for lowincome people. Grameen Bank partnered with ICICI Bank to support a not-for-profit MFI in India. the agent pays the claim to the customer via SMS. the disincentives to save — walking miles to deposit small amounts with forbidding financial institutions that impose hefty charges — are huge. people want to save. the smaller the amount being saved. the Foundation reports that farmers who were given the option to put aside money toward the next planting season increased productivity. Leveraging mobile technology for savings is gaining traction in India. Almost perversely. but customers can withdraw money.we quickly became aware that savings is the most neglected financial service and the one that is in highest demand by poor people. the sophistication of microinsurance is increasing.. to save small sums — even 25 cents — is a significant opportunity to pull people out of poverty. where agricultural income is tax free. and bought a new bike. at which point he cut open his old bike’s fuel tank. and intimidating bank documentation and processes. frequent small deposits. Once approval comes. Microsaving products must make it easy to InveStMentS. people should be able to access their savings in a pinch. the application to handle the SMS transactions. mobile life insurance can be sold directly in a way that would never happen in developed markets.

a collaboration between Equity Bank and Safaricom. Saving remains hard for anyone on a limited income. receiving global acclaim when the United nations hailed 2005 as the International Year of Microcredit and the 2006 nobel Peace Prize was awarded to economist Muhammad Yunus and Grameen Bank for microcredit work in Bangladesh.000 in Ghana use Ingenico terminals for savings and loans.. MAKE IT GrAnd. Bangladesh has the highest penetration of microcredit borrowers. use smart cards and manage biometric data (e. It also highlights that in mobile savings. government policies and education. 22 . though.. These terminals. enabling deposits to be made locally.g. overcome the issue of distance by acting as tiny automated branches. for identification. However. Other mobile devices playing a critical role in microsaving. FAB is trying to build commitments of $10 billion per year. to fund $100 for 100 million children. not just those in developing markets. and buy personal accident insurance and microcredit. at 25 percent of the population. and cards and mobile terminals on the other. across various markets there is a mixed picture. cash transfers for food and housing). is not a “new technology” model the way M-KESHO. such as from Ingenico.56 FAB plans to use biometrics. are terminals and cards. see their balance and mini-statement. delivers important banking services to the poor using mobile technology to reach them.51 Customers can make deposits and withdrawals on their account. there are two technology tracks: mobile phones on the one hand. which supplies a solar-powered ATM.g. Its premise is that microsavings can be a springboard to financial inclusion and social services (e.. Opportunity Fund. which aims to provide a $100 savings account (accessible when the recipient turns 16) to the 50 percent of the world’s population born without access to formal financial services. M-KESHO. about the size of an adding machine. emphasizing small regular savings (e. a fingerprint) on the move. and indeed other forms of microfinance. There are various enablers for the growth of microcredit. $20 per month). Another prerequisite is core transport and power infrastructure. which tends to precede Overcoming many of the infrastructure barriers to ATMs. focuses on education and matching funds to instill saving as a habit.g. Opportunity Fund is a not-for-profit social enterprise offering microsavings and microloans to lower-income individuals in California’s Bay Area. Over 700. The use of cards for microsavings in lower-income markets is a neat inversion of the use of cards for credit in higher-income markets.58 Kenya is at 3 percent penetration. The company’s CEO even envisions the use of these ATMs to process insurance. and mobile banking to implement these low-cost savings accounts. 54 Microcredit Microcredit has been the poster child for microfinance. surprisingly low given its success with M-PESA. Peru. tuition grants. Opportunity Fund. at least. Perhaps the grandest global ambition in microsavings is the Financial Access @ Birth (FAB) initiative. Mobile biometric terminals. vaccines. is.000 card holders in Malawi and over 600.55 technology unleashes huge demand among lower-income consumers for basic financial services that were previously uneconomic to provide with cash-based payment systems.57 Whether microsavings will change the world remains to be seen. exploiting mobile phones. has 10 percent. which claims that 50 percent of Americans say they cannot afford to save. Coupled with commercial investment is the availability of delivery channels (a large distributor network with significant physical reach).53 The concept of reaching the rural poor with an automated branch is taken further by Vortex Engineering. 52 Once again technology unleashes huge demand among lower-income consumers for basic financial services that were previously uneconomic to provide with cash-based payment systems. an upper-middle-income country.59 The wide variation comes back to the importance of the enabling environment — infrastructure. but technology is improving its chances by increasing its reach and importance.Connected Consumer and the Future of Financial Services CSC LEA DIN G EDGE FORU M customers can sign up for an M-KESHO savings account using their mobile phones. this model provides a range of financial services to the poor.

We introduced ourselves through an interpreter and explained that we were here to learn about their group and to help them lower the costs associated with making loan payments. bought land and built a home and a shop where she sells sodas. With her loans. She is a single mother of three and an entrepreneur. Here two groups met at a school. which indicated that they hold a very large portfolio. Mary has All of these loan recipients fully appreciate having financial services. KFS helps support a number of Financial Service Associations (FSAs) across Kenya. In October 2011 in Nunguni. It took us an hour by vehicle to traverse the terrain. a group of 12 women met in the small shop shown below Mary. CSC For three years in graduate school I studied microfinance. We then traveled to a small town that was off of a dirt (mud really) path. and I always wanted to be a part of it. In this tiny village they were able to gather a monthly payment of $600. bread and other necessities. entrepreneurial women counted their payments and accounted for each cent. Nobel Prize winning even. took notes as their loan officer explained the new payment process. In Kalembwani. Their loans are improving their lives and those of their families and villages. costs and risk. Kenya. One Tuesday. I read Banker to the Poor and wrote papers on group lending models. I watched amazed as this group of strong. Her travel time had been reduced from one day round-trip to two hours. M-PESA is reducing travel time. To see this in person drove home how powerful microfinance can be. She then came with us as we drove to the nearby M-PESA agent and made her deposit. She is doing well and pays for all of her children to go to school. I was. It was revolutionary. 23 . travel time for repayment decreased from one day to less than one hour. that was off a dirt road. (left). They introduced themselves proudly in their local language of Kamba. the chairperson (in blue). The following day. the M-PESA agent is close enough to walk to.C S C LE A D I N G E D G E FO RUM Connected Consumer and the Future of Financial Services How Mobile PayMents HelP Microcredit Erica M. Again. I was able to enjoy the same experience in another town. that was off the main road. Kenya. Salinas. They too counted their funds and eagerly learned about the new payment method. For this group. I accompanied my colleague from FrontlineSMS:Credit on a trip to launch a pilot project for K-Rep Fedha Services (KFS). Mary has been part of the group for three years. The green building in the picture below is the local M-PESA agent in Kiu. We ventured to their Nunguni FSA and installed the PaymentView software that will allow the FSA to receive loan repayments via M-PESA.

Mobile devices can eliminate the distance barrier. The Internet has become the storefront for organizations that bundle donations or interest-free loans and raise microfinance awareness. the global reach of the Internet. Another player is the U. Striking the right balance between offering credit and levying consequences for default is essential. The Starbucks initiative demonstrates that in high-income countries microcredit is where capital- The Internet has become the storefront for organizations that bundle gifts or interestfree loans and raise microfinance awareness. In addition to these enablers. Microcredit is not just for middle. In the United States. and even used to add money to PayPal. Then. In a country whose payment infrastructure like $25) to borrowers worldwide.61 The economist notes that applications have increased fivefold since 2007 as a result of the squeeze on bank credit and worsening economic conditions. providing peer-to-peer lending (typically small sums. the Starbucks “Create Jobs for USA” microlending program leverages the company’s physical and online presence and strong brand. taxpayer or consumer). These organizations are revolutionizing microcredit by harnessing ••• Providing microfinance in highly regulated markets can be tricky due to stiff compliance requirements. but the cost of compliance makes it challenging in wealthy countries to serve those most in need of financial services. As noted in the The economist. microfinance depends on charitable investment. The Internet provides a window through 24 . Kiva is the major player. microcredit is further developed. Nonetheless. interest rates of 20-50 percent per year. claims and microdeposits. A leader here is Green Dot. there is a dark side. Micropayments infrastructure enables payments of premiums. Technology plays an important role in facilitating charitable giving by higher-income individuals. New MArKeTS. mobile) that will enable payments. seemingly high but far lower than those of loan sharks. it is playing a significant role for lowincome individuals in high-income countries. which provides a pre-paid debit card to lower-income people in the United States.62 Individuals donate $5 or more to build a community finance fund.e. including the new peer-to-peer players (see the Media chapter) and even retailers like Starbucks. In high-income countries focused on microfinance. A Green Dot card can be purchased at walgreens or other stores. with some 700 institutions lending. Despite the significant progress in microcredit. technology has many roles to play in bringing financial services to everyone. High interest rates and hard-nosed attitudes to collecting payments have been criticized. unregulated or barely regulated default practices.K. Starbucks has provided seed funding. ism and corporate social responsibility meet — a powerful combination of forces. reduce fraud and make financial services economic to provide for ever-lower savings and insurance amounts. Technology can help only so much. All compliance is driven by the need for protection (whether of shareholder. and aggressive lenders can be toxic. How governments strike this balance is one of the global challenges for microfinance. It is true that a combination of vulnerable consumers. In the United States. There are non-traditional lenders as well.and low-income countries.-based MicroLoan Foundation. the response to the Haiti earthquake is one example among many. Green Dot fulfills a need similar to M-PeSA: enabling electronic payments and broader financial inclusion. Britain has seen significant growth in Community Development Finance Institutions that offer 60 is geared to cards. which specifically targets microloans for women in sub-Saharan Africa. enabling them to participate in the digital economy. The pressure to repay loans has been blamed for suicides. It enables individuals to be uniquely identified. debit also plays a role. a tipping point must be reached when individuals who need microcredit understand and trust the system.Connected Consumer and the Future of Financial Services CSC LEA DIN G EDGE FORU M the technology infrastructure (i.. Credit information must also be available (which in turn requires individual identification). Networks enable innovative data-driven products such as Microensure’s automated crop insurance.

the complexity of financial products was a consequence of competitive differentiation. providing innovative functionality and ease of use. through technology. explores how consumers connecting directly to each other are transforming financial services. as app culture already demonstrates with games Microfinance has already enabled tens of millions to make profound changes in their lives. The next chapter. The simplicity of apps is particularly well-suited for microinsurance. For example. To date. The bank or insurer that rolls out financial Angry Birds may find itself rapidly transforming the market. 25 . It has the potential. through technology.C S C LE A D I N G E D G E FO RUM Connected Consumer and the Future of Financial Services which organizations can gather funds and raise awareness of the importance of financial inclusion. Microfinance has already enabled tens of millions to make profound changes in their lives. consumers’ patience with financial complexity will shrink. Technology is overcoming barriers to distribution and product management. (Angry Birds anyone?). However. Historically. much of the work in microfinance has been with SMS because SMS is what’s in consumers’ hands. and it is connecting lenders and borrowers in ways unimaginable just 20 years ago. smartphones will be in the hands of low-income individuals in large numbers over time. attach a blood pressure cuff to the smartphone to assess people’s health and better determine the risk of providing health insurance in emerging markets. The financial services industry can play a powerful role in microfinance and alleviating poverty. It has the potential. The combination of reverse innovation and an app culture could alter traditional macrofinancial products profoundly. to do so for hundreds of millions and ultimately billions. and will be increasingly important across all demographics. In the future. microsavings and microcredit products. partly through charity but increasingly through serving the connected emerging consumer in a sustainable commercial model. The whole concept of smartphone apps has great promise for microfinance. The whole concept of smartphone apps has great promise for microfinance. providing innovative functionality and ease of use. to do so for hundreds of millions and ultimately billions. new media.

Vodafone. These capabilities. increasingly connected devices to access financial services. Peer-to-peer enables consumer-to-consumer transactions for payments. All are using diverse. volume and availability of information. The Asian crisis of the late 1990s and European crisis of the late 2000s — with their impacts on jobs. who can engage directly with consumers anywhere in the world. And. discuss financial services experiences. be it for social causes or transactions. calculate risk and make light-speed decisions that have affected the wealth. homes. driving new markets and models for micro and other financial services. The inTerneT empowerS Financial ServiceS conSUmerS information and self-educate. Built by the likes of Google. These corporations’ globally interconnected networks allocate capital. Social networks and peer-to-peer facilitate the financial consumer activist. Safaricom. they are connecting to financial data directly to conduct their own research and form their own opinions.Connected Consumer and the Future of Financial Services CSC LEA DIN G EDGE FORU M media From access to activism: amplifying consumer power New media (think Internet) are transforming how consumers interact. it’s what consumers have found and engaged with that has a more profound impact. Latin America and Africa. plus new billions needing financial services in Asia. social media are transforming the consumer financial 26 . in contrast. to find Figure 15. and exchange financial advice and opinions. Source: CSC beginning to understand. pensions and even entire national social models — were products of the power of the corporate network. and transforming processes like payments that historically have required extensive intermediation by banks. loans and even insurance and currency. Today’s connected consumers are exercising remarkable levels of clout in financial services. From there people began to engage with each other through social media and peer-to-peer (P2P). Social media and P2P are the big disrupters. homes and livelihoods of billions of consumers for decades. transact and manage their financial world. depicted in Figure 15. The consumer network. Social media crowd-regulate the relevance. Search was the entry point. an industry traditionally controlled by corporations. the consumer network is those same billions of consumers. is still emerging but starting to impose its will. Social Upheaval Although the power of search continues to amaze. differ significantly in how they impact financial services but together drive a revolution in people’s ability to manage money and risk. and through social networks provide information and opinion on what financial services consumers need and which firm to buy from. Facebook and Apple. As with other industries. Consumers are connecting directly to other consumers to transact business. having transformational effects people are just Search educates the consumer by giving access to information once available only to financial experts.

ask influencers and others for input on new products. then life insurance must be sold (to extend an old saying). The Financial Brand reports that as of 2011 “the top 35 banks on Facebook claim nearly nine million fans among them. or ideally will never be used. 66 “Creating resonance and emotional attachment is key in riding [the] wave of social media proliferation. is challenging. express opinions and seek advice. Capital One is attempting to align itself with influencers. Firms can monitor social media for positive sentiment and new ideas — target “influencers” with marketing campaigns. which can snowball in such highly connected environments. rather. This has been one of the great challenges for financial firm marketers and begs the question. social media are tools to research financial services. blogs. although social media may be a powerful tool for building brand loyalty. players had to “like” the contest’s tab on Commonwealth Bank’s Facebook page in order to be eligible to play. Lifenet has connected to a young. but reaching the people who influence others. Capital One ran a special holiday promotion in 2011 that rewarded card holders with cash-back bonuses based on their Klout score. of whether marketers are the right employees to be the firm’s social media voice. convey a strong image about the brand and increase their loyalty. Like search. firms can monitor for negative attacks on the brand.”67 Lifenet illustrates three important concepts about social media: • The consumer purchasing financial products for the first time is young and immersed in social media. Creating resonance and emotional attachment is key in riding [the] wave of social media proliferation. though. For consumers. Financial firms are using social media to build and manage their brands. financial services firms are using social media not only for brandbuilding. BuILDIng BranD. emotional attachment to an online brand is both achievable and essential. mashups and instant messages — are about changing the nature of engagement with consumers. enterprise penetration is slim. This recognizes that social media involve not just reaching people. and share important issues with influencers to get the word out. social media — social networks like Facebook and Twitter. as illustrated by new forms of marketing that are possible only through social media. wikis. For financial services firms. but also for sales. 71%… The company’s co-founder. The marketing opportunity for greater touchpoints is starting to be grasped.) Capital One gave additional cash bonuses when people signed up their friends to participate in the Klout promotion.64 Equally important. Commonwealth Bank in australia launched a Facebook “Time Vault” — a 10-day online and offline treasure hunt to celebrate its centenary. Selling a product directly over the Internet that has value only after death. social media do not change financial services. service and pricing. a measure of a person’s influence on social media sites. (See Figure 16. Of those.C S C LE A D I N G E D G E FO RUM Connected Consumer and the Future of Financial Services services industry. hoping they will spread the word about Capital One. Lacking proven products. Japanese insurer Lifenet took on the significant challenge of selling life insurance directly over the Internet. 27 . as firms’ new customer demographic evolves. social media remain primarily consumer turf. user-generated content sites like YouTube and Flickr. Social media are powerful tools for building brand loyalty.68 With prizes available. social media give consumers a way to be learners and activists. discussed later. leverages a lively website and Twitter and Facebook presences.65 If car insurance must be bought. Firms may see things rather differently. • The use of social media creates the opportunity for additional touchpoints with the consumer. which has the least number of consumer touchpoints of all consumer financial services. IDC predicts that 2012-2013 is when financial services firms will go beyond marketing in their use of social media. so the use of social media becomes critical to acquire customers.63 Indeed. a loyal customer base. • Even in the life insurance industry. as he puts it. Daisuke Iwase. urban demographic through social media to build brand and loyalty (54 percent of its customer base is aged 30-39 versus the industry average of 24 percent). brand. operating experience and relationships with third parties.

a financial services firm can alter the nature of its Figure 16.. Later that day. who in turn may tout that company’s dreamforce conference in 2011. personal lines companies with multiple distribution channels have the most to lose and most to gain from an aggressive social media program. with the permission of the consumer.71 level because it blurs the boundary between individual and supplier. into that consumer’s social environment.. Customers can click on an available staff member to initiate a chat discussion.5 billion customers. That means they are reaching an average of 0. that’s where their customers are. Figure 17.837 likes out of a combined 1. social media are about more than marketing. Regional carriers with customized or specialty products must monitor social media in order to protect their brand. after all. aXa can contact the customer through Facebook to update him or her on the status of the claim. doing business on Facebook takes this blurring to a new belong to the top three. Much more. reaching the consumer “on his turf” and blurring business and personal boundaries.73 (See Figure 17.Connected Consumer and the Future of Financial Services CSC LEA DIN G EDGE FORU M SaLeS and SeRvICe. Social media create digital community and are thus most relevant to firms with a dispersed customer base. By inserting itself. If you exclude the three top-performing banks from the calculation. geographically diverse. consumers chat live with a banking specialist.6% of their base. aSB Bank’s virtual branch on Facebook lets For the financial services firm. Klout measures a person’s influence on social media sites like Facebook and Twitter.817. likely with a younger demographic. and rightly so.2% of their base. a blurring of the relationship between individual and employer.”70 Firms’ experience with social media varies. Geico launched a Facebook app called GeICO Shortcuts that allows policyholders to access their insurance information and unlock tokens — a fun way of rewarding policyholders for engaging with Geico. 28 . a customer can see photos of branch staff tagged as available or unavailable. Financial services firms can market to those with high Klout scores. though. aSB Bank claims visits from all around the world.. an analyst firm. concludes about the role of social media for general insurers: Large. Source: Klout relationship with that consumer. using a 100-point scale. Celent. rapidly followed by a Facebook branch.72 at the Salesforce. the average drops to…only 0. Financial services firms can sell products and provide services through social media channels. but these firms do not stand to gain as much as others in a wider investment in social media. aXa demonstrated how a customer can take a photo of a crash involving his or her car and initiate first notification of loss through a mobile phone. The service is available to non-customers also.) From Facebook.”69 The Financial Brand goes on to highlight just how far the jury is still out: “The 35 banks in the list claim some 8. aSB Bank in new Zealand has taken this one step further with the creation of a Facebook presence in august 2010. That blurring is already familiar to the millions who do “work email” at home and “home email” at work.

74 The use of a digital community to obtain financial information demands a level of site structure. which draw on complex information to make judgments that can have a huge range of outcomes. To illustrate. nonetheless. The service was targeted at credit unions.) DynAMiC PriCing. and the first week of november. ConSuMer reSeArCH. With so many consumers buying online. when Bank of America announced a $5 charge for using debit cards. Bank Transfer Day sought to encourage people to switch from traditional commercial banks to credit unions.K. At a macro level. ConSuMer ACTiViSM. As far back as 2008. China) economies and natural resources. india.76 Bank Transfer Day demonstrates a strand of social activism running through social media that challenges big business and particularly big finance. the progression to financial activism was perhaps inevitable.. thus reinforcing the parallel with digital communities. rating models require access to information regarding take-up. either way. if too many “desirable” consumers are abandoning their quotes and going elsewhere. As consumers have engaged. finds that nearly two-thirds of Canadian investors take such advice. organized in 2011 by a single individual on Facebook. Bank Transfer Day demonstrates a strand of social activism running through social media that challenges big business and particularly big finance. MoneySavingexpert. in the u. 29 . This is nothing less than the dynamic adjustment of rating and pricing structures in order to achieve the desired combination of policy growth. Whether pricing financial services products or hamburgers. Here’s how it works for one car insurer: As customers request quotes online. book loss ratios and so on. client history. Bank Transfer Day is a good example. it adjusts prices higher if too many of the wrong sort of risk are accepting quotations (thus affecting the firm’s desired risk profile). dynamic pricing offers a radically enhanced way to take advantage of market data. the fact remains that a single individual had a noticeable impact.77 Providing extensive price comparison and a discussion forum for consumers. the concept of dynamic pricing based on high volumes of transaction data is now possible. the site addresses many areas of saving including insurance and banking. Adoption was light. or a major trend around consumer activism. Claiming over 13 million unique users every month.75 Another poll. (Fiserv has since evolved its digital offerings. policy retention and profitability. Social media amplify the voices of consumers so they can call attention to an issue and ultimately influence the actions of financial services firms. influencing the financial decisions of thousands. russia. if a person invested his pension in Japanese equities in 1995.C S C LE A D I N G E D G E FO RUM Connected Consumer and the Future of Financial Services Combining Facebook with banking is not new. To support this. CSC’s VP/MS insurance software calculates the quote. The insurer records whether or not the quote is accepted by the consumer and weighs this against the desirability of the consumer as a risk. it appears to have been ahead of its time. the impact was small — 650. investment executive reports an investors group poll that says more than 42 percent of Canadians who save and invest use social media to research decision making. Conversely. his retirement would look very different than had he invested in BriC (Brazil.78 The imposition of the charge likely ignited more of a shift than Bank Transfer Day. VP/MS adjusts the pricing for certain rating factors to increase consumer take-up. Fiserv launched MyMoney on Facebook so people could manage their finances from within Facebook. which are primarily community-focused organizations. journalist Martin Lewis has created something of an institution with MoneySavingexpert. The question is whether Bank Transfer Day represents an isolated social media campaign that gained some traction. This was also exemplified by the occupy Wall Street movements. a strong brand and a sufficient community to maintain current knowledge. and its Facebook presence. rejections. discussed later. client experience. from has assumed a powerful role as a consumer advocate.000 people joined credit unions between September 29. Social media are becoming particularly important for financial services like investments and wealth management. a baseline of reliable

Although western Union introduced money transfers back in 1871. Acquired in 2002 by eBay. back-room research staff. 30 Figure 18. but they do not trigger new financial business models. and P2P insurance and P2P currency have made an appearance.” where firms see a “blurring [of] the lines between companies’ ‘inside’ and ‘outside’ behaviors and communications. the Arthur w. ALL MArKeterS NOw. P2P PAyMeNtS. But social media activists are alert to marketing pitches and will resist them in favor of more direct information. the U. and the Archbishop of Canterbury. we’ve argued that social media are where some significant and financially attractive consumers are starting to live. Coins were created sometime before 1700 BC expressly for peer-to-peer payments. P2P lending is on the rise. demands that firms get their internal social media house in order. As far back as 2007. branch staff and claims loss adjusters. As was seen with the Arab Spring. has the potential be disruptive. with the Others have joined the mix. in turn. PayPal popularized peer-to-peer payments on the web and is rapidly moving its payment services to the physical world. However. the check was long the dominant non-cash payment method until the comparatively recent arrival of the card. how many financial firms will grasp the huge rewards — and huge risks — of releasing their employees into social media? P2P Drives Direct caPitalism Social media tilt the balance of power from corporation toward consumer while strengthening the relationship between corporation and consumer. consumers need just basic information about the recipient. In a world where the customer is increasingly living financial life online. peer-to-peer. All are person-to-person payment services that transfer money directly between bank accounts (versus a PayPal account). such as name and email address or mobile phone number. .’s Leader of the Labour Party. then in 1998 PayPal came on the scene and offered an alternative: online P2P payments. a different form of consumer interaction on the Internet. Page Society argued the case for “the authentic enterprise.79 Indeed. the official opposition to the government.”81 that. which had the critical mass to take action sufficiently visible and disruptive that it became national news and shaped national debate. P2P payments have had the most significant impact. including Fiserv with ZashPay.K. 80 introduction of rudimentary checks as early as the first millennium. PayPal has arguably become the most famous brand among new financial organizations (see Figure 18) and so ubiquitous that it claims over 230 million accounts worldwide. to assemble a larger group. Chase with QuickPay and Barclays with even Facebook lets people use PayPal — advertisers can purchase Facebook ads and consumers can purchase virtual items for games and applications83 — and thus injects e-commerce into the social milieu. P2P links consumer to consumer in a form of direct capitalism that is streamlined and fast. both engaged in the Occupy debate and thus escalated it. the trusted participants in social media will be the analysts. social media are pressuring firms to rethink not only their social contribution but also how they are engaging with consumers and who is doing the engaging. people had a non-cash mechanism for paying each other. including Meetup. Convenience is paramount.Connected Consumer and the Future of Financial Services CSC LEA DIN G EDGE FORU M which identified a broad target: global capitalism. a comparatively small number of individuals leveraged social media. In the financial services world. released to talk in an authentic voice about their firm and its financial wares. social media amplify the voices of activists to the point of institutional transformation. Again. a religious leader.

It illustrates what Wardley calls the ILC model (innovate. and shipping services.commerce ecosystem provides a single platform for merchants and developers that simplifies the technology aspects of running a business. allowing the merchant to focus on its goods and services rather than its underlying technology.commerce technology platform.84 The service will roll out across the United States. Figure 19. clearXchange. X. JPMorgan Chase and Wells Fargo have announced a joint service. shopping carts.commerce makes a commodity of the technical process of running a sophisticated business. eBay can then examine and learn from what others produce and further innovate through that learning. creating a surrounding ecosystem of companies. Capabilities include P2P payments. Bank of America. they will have the digital power and brand presence to exploit further innovations that are created using their commodity.) Digital P2P payments are transforming payment services as surely as coins transformed P2P payments between individuals in person. calls a core utility that others use. multi-channel sales and marketing modules. social media services. What does this mean? It means eBay. and merchants can subscribe to these capabilities to fit their needs. inventory management systems.C S C LE A D I N G E D G E FO RUM Connected Consumer and the Future of Financial Services In a move to bring even broader money movement to consumers.85 Digital P2P payments are transforming payment services as surely as coins transformed P2P payments between individuals in person. Source: eBay 31 . The cycle will continue. search engine marketing. commoditize). using PayPal and other capabilities. researcher with CSC’s Leading Edge Forum Executive Programme. Developers can create and distribute their applications on the open platform. (See Figure 19. CXC addresses the interoperability. with plans to expand to other financial institutions. In turn. eBay and PayPal have worked this model brilliantly. The X. They have leveraged their online marketplace and payment innovations to create a commodity for others to exploit. leverage. The creation of this ecosystem is exactly what eBay and PayPal have done with their X. creates a utility that others can exploit to manage their own businesses. But where that transformation becomes far more disruptive is when those same functions deployed by one firm are used to create what Simon Wardley. security and scale necessary to meet the needs of the emerging P2P payments market.

) Zopa and other P2P lenders have addressed two of the barriers to digital commoditization: requirements. P2P payments have overcome all three barriers. P2P does not eliminate the need for a financial services firm to mediate the transaction but uses a slimmer firm. Zopa. but Alipay has aggressive global expansion plans. and inertia. has primed the pump for P2P lenders. Borrowers say cost and social aspects are the top reasons for choosing Zopa P2P lending.87 As mediator. The LEF’s Wardley identifies three barriers to digital commoditization: requirements. by creating the technologies and offering a compelling customer reasons given by borrowers for choosing a zopa loan Figure 20. as a payer. All P2P financial schemes have one thing in common: They disintermediate traditional providers with large infrastructures and re-intermediate through a thinner organization. such as customer preferences and technology needs. has arranged over £185 million ($290 million) in P2P loans. Source: Zopa 32 . and in particular the Chinese. In the United States and Europe few have heard of Alipay. combined with trivial returns from traditional savings. China Daily reported in November 2010 that online payment engine Alipay had overtaken PayPal both in registered users and transaction volume.86 The success of Alipay demonstrates the rapid growth of financial services outside North America and Western Europe and the colossal size of the Asian. there will be competitors. the consumer’s risk is minimized thanks to digital safeguards embedded in the global payment industry. Perhaps payments are unique among consumer financial services in being able to be rendered as P2P commodities.Connected Consumer and the Future of Financial Services CSC LEA DIN G EDGE FORU M Along the way. P2P lending is one of the clearest examples of consumer financial power. risks. less costly one where the new mediator manages the process of borrowing and lending but does not itself take on risk. Lending is a very different financial service from payments. more personal and lower-cost identity that has driven many consumers to consider P2P lending. the consumer is at significant risk. which claims to have been the first to originate P2P lending in 2005. risk offeror and risk taker. (See Figure 20. Perhaps consumer banking and insurance are too complex to construct as P2P commodities. P2P LENDINg. However. But what next? Consider consumer lending. Zopa validates the creditworthiness of the borrower and insulates the lender from exposure to a single risk by divvying up loans to multiple lenders. market. Although still in its infancy. wholesome. As a lender. P2P lending changes the thick mediation model of a traditional bank into a thin. of the new business model and how it works. from companies unwilling to cannibalize their own businesses. They have cast a distinctive. the unpopularity of banks following the 2007 credit crisis. P2P lending directly links borrower and lender. without a traditional intermediary.

P2P lending is built on carrot. Key to the concept of P2P lending is a direct connection — albeit anonymous — between lender and borrower. But to be transformative. Local financial services — the local the lender-borrower relationship is built without enabling identification. which provides funding for micro-entrepreneurs in lower-income countries through MFIs. Risk is the challenge for digital disrupters as well as the potential savior for traditional institutions. streamlining the process and strengthening customer ties. then over time credit could be transformed. Zopa’s loans are either three or five years).88 Zopa and Prosper have been joined by other P2P lenders such as Smava in Germany and CommunityLend in Canada. While less purely 33 . U. and membership in a community of lenders and borrowers. and indeed other P2P financial services. The future of P2P lending.S. The stick is traditional credit collection processes applied by the P2P mediator to borrowers who fail to make payments. P2P lenders need to convince consumers that the risks of lending directly are manageable. successful social media and P2P financial organizations have defined their communities by interest. Funding Circle. The common interest of Zopa and Prosper members is lending and borrowing directly but relatively anonymously. If sufficient trust exists. The carrot is lower interest rates because of the lenders’ low overheads. successful social media and P2P financial organizations have defined their communities by interest.89 It is noteworthy that these lenders use “member” to describe their customers. these lenders need to overcome risk. ZimpleMoney takes a different approach. Operating similarly to Zopa. The question for P2P lending (and perhaps P2P insurance) is whether there is a sufficiently deep well of consumer trust to transform the market. There is enough information to enable people to feel a connection and establish the essential trust on which Risk is the challenge for digital disrupters as well as the potential savior for traditional institutions. another key element is altruism. enables lenders with common interests to combine to support certain types of businesses. Risk is at the heart of capitalism — whether about Lehman’s assets or one’s personal savings.92 Zopa claims P2P lending is a “smarter. Prosper highlights how it “allows people to invest in each other in a way that is financially and socially rewarding. and inertia.90 If human connection is important to digital communities and these new forms of direct capitalism. Related to this. ZimpleMoney calls itself a social finance community.”91 Funding Circle provides consumers with a direct route to lend to small businesses.”93 Altruism is writ large with P2P lender Kiva.g. To get beyond the inevitable anonymity of digital communities. calling them the “unsung heroes” of the economy. That trust is rooted in the ability of other consumers to pay and the longevity of the P2P platform (e. enabling families and friends to lend to each other.C S C LE A D I N G E D G E FO RUM Connected Consumer and the Future of Financial Services proposition. for example. bank branch — have always defined their community by place (“my branch”). fairer and more human way of doing money. ZimpleAuto enables small auto dealers to make loans directly to their customers. by creating new digital firms. bypassing traditional banks and credit unions.-based Prosper started in 2006 and now claims over one million members and over $313 million in loans. So how are P2P lenders trying to win it? To get beyond the inevitable anonymity of digital communities. Traditional lenders need to convince consumers that the thick mediation model is the right way for consumers to mitigate risk. rests on who wins this argument. Kiva explicitly focuses on the social benefits that lenders create for individuals who do not have access to traditional banks. The trust is borrowers’ more responsible attitude from seeing more directly that they are borrowing another individual’s money. stick and trust.. ZimpleMoney enables family-and-friend loans as well as business loans.

billions of people are effectively self-insured for small risks (i. So 34 Figure 21. However. first. . considerable borrower details are provided including a photo. Kiva still presents a noble proposition for lenders because they do not earn interest (although the mfis do). the success of any currency depends on having someone willing to receive it in return for goods or services.) members of an insured circle agree to fund between €20 and €50 each of a claim. which excludes small risks. friendsurance exploits an underserved market niche that P2P insurance can address.. coupled with the gap between premium and claim. and aims to reduce fraud through trusted networks of family and friends. lenders are able to select particular cases to lend to. P2P inSuRanCE. friendsurance depends on the trust of family and friends and limits their exposure to small claims. Source: Friendsurance an agreement to share those smaller risks among people one trusts makes sense. whether consumers are willing to pay claims on a large-enough scale to make the friendsurance model more mainstream is still to be proven. if the risk to consumers’ capital is what holds back P2P lending and insurance. currency is so fundamental that it is easy to forget what it is: a promise to pay. the need for a large group. the friendsurance business model focuses on smaller claims that would generate significant administrative costs for traditional insurers. such as their pet getting sick. it needs to expand its reach in two directions: engage the wealthy in placing significant sums on loan as part of mainstream wealth management portfolios. rather. the insurer plays an essential role in mediating a sufficiently large group. P2P CuRREnCY. they accept the risk. despite the small premium required. Borrowers may share information on the website. that person must be confident that they in turn can use it with other individuals. Governments have used their ultimately trusted (if not necessarily popular) and ubiquitous brands to overcome both barriers. rather than Kiva making that determination. personal information and why the loan is required. With traditional insurance. and pay the bill themselves). instead. there are two huge trust barriers. Claims greater than that amount are passed to traditional insurers. Kiva takes a different approach to anonymity between lender and borrower. it is overwhelmingly important in insurance because the consumer needs to trust that a claim will be paid in the event of a crisis. friendsurance spreads limited risk among a small trusted network of family and friends rather than a large anonymous population. the concept of insurance is to pool risk among a sufficiently large group of individuals to cover the potential of an event occurring that results in a claim. if trust is an important element in lending. Second. transactions are run and managed by the network. friendsurance shows that P2P insurance can work. Currency is so fundamental that it is easy to forget what it is: a promise to pay.95 there is no central bank.94 this is similar to Zimplemoney’s lending model for family and friends.e. (See figure 21. if P2P lending is to make a serious dent in consumer lending. might appear to eliminate the possibility of P2P insurance.Connected Consumer and the Future of Financial Services CSC LEA DIN G EDGE FORU M altruistic than charitable giving. Whether and when P2P lending will reach a tipping point of mainstream activity remains to be seen. an interesting aspect of friendsurance is that it requires collaboration with traditional insurers. then it is the overwhelming factor holding back P2P currency. friendsurance taps networks of friends to cover small insurance risks such as bicycle theft. and grow the size of loans expanding into P2P mortgages (which would require potentially thousands of microloans to make up a single mortgage loan). the scale of P2P lending has been small loans. they have established the trust that a $1 bill has an equivalent value to both payer and payee that the payee can assess against the goods or services. Bitcoin is an experimental P2P currency based on cryptography and open source technology. However. it does not replace the insurer because each trusted network does not have the resources to cope with large claims.

for financial firms considering new media strategies.” Consumer-as-activist models using social networks and P2P financial services are in their early days. Bitcoin may not transform currency. Citizens trust currencies because they trust the nation-state that issues them. and to believe that there is a sufficient number of people willing to accept bitcoins. and product design. but whether they are willing to cannibalize their existing models remains to be seen. arguably. utility. at the heart of this future is the ability of P2P players to mollify consumers’ fear about the risk to their capital. and perhaps more importantly. the pace of consumer adoption is a function of many things: price. the consumer is growing in power through connection. too cumbersome and too old-fashioned. DigiCash was an idea ahead of its time though. customer service and engagement. cachet. despite the availability of digital money. But cash is really just paper. But consumers have made it clear they will not be targets. thus the barrier to P2P currency is one of emotion rather than technology. DigiCash’s e-cash digital payment system was created by David Chaum back in 1993. We don’t know. it’s too expensive.) However. the jury is out on how disruptive P2P will be for financial services. the bright individual who does may just change our world. but it may transform how the trust and risk that underpin financial services are calculated. Cash is still preferred by many people. beyond payments. Canada’s exploration of a government-backed digital currency. money issued and underwritten by sovereigns in diverse currencies is at the heart of capitalism. firms need to tread carefully in social media because they are treading on consumer turf. and in rough environments it can get torn. However.C S C LE A D I N G E D G E FO RUM Connected Consumer and the Future of Financial Services and they have achieved a ubiquitous acceptance within a country that the currency can be used.” 97 Bitcoin may not transform currency. models that are hard to understand will not be understood. across the media domain. • • • Social media will continue to increase in importance for firms and consumers.. the consequences of more financially educated consumers engaging with financial activists about everything financial are profound — profound for consumers and profound for financial firms’ sales and marketing efforts. despite having been the first P2P creation almost two decades ago. part of firms’ customer engagement models and consumers’ information and reference bases. could be a way to address this barrier. digital currency has not been readily accepted. a dollar equates to a burger). the building of community — and emotional attachment to that community — through innovative marketing is paramount for firms seeking to engage consumers. only digital payments have yet reached a tipping point. Bitcoin may be too far out as well. but it may transform how the trust and risk that underpin financial services are calculated. although it seems the trust barrier is too high. Social media’s strand of social activism appears to be strengthening.g. Bitcoin and digital cash raise the question: Can you have currency without sovereignty? that is an intriguing question. profoundly altering the payments industry. it’s interesting to see what happens when this trust breaks down.96 Yet to date. dirty. mintChip. worn and even lose value. Social media will form an integral 35 . the winners will be those who participate thoughtfully rather than observe from the sidelines. and life without it is almost unimaginable. existing traditional brands stand the best chance of using their brand to build the trust required for direct capitalism. simplicity. Bitcoin has created incredibly innovative technology to manage digital data that requires trust between unknown participants as well as risk management. and consumers are looking for firms to “be good. the trust equation in P2P currency is different but equally hard to overcome. Perhaps currency is so fundamental that it can never be digitized without the nation-state behind it. and above all. (that’s where something like mintChip may come in. born of the idea that “…the days of cash are numbered. Bitcoin’s challenge for people is to overcome the entrenched view that a bitcoin should have a certain common value (e. P2P financial services have been the most radical aspect of the internet. and will be the digital ground on which brands rise and fall. and models that are hard to use will not be used.

In the workplace. While Internet search has made unstructured data miners out of all of us — people need just a browser and an Internet connection — for many financial firms the data opportunity may appear overwhelming. Complex regulations impose huge demands on firms’ ability to understand the structured data they have. Web mining is widely used by consumers too. The larger.” the impact of mining on various aspects of financial services. and “society mining. tweets. reports and documents. Today the challenge for financial services firms is to leverage the two. Vendors specializing in big data analytics for financial services are showing the way. data mining and Web mining. In the world of investments. this is what many people are familiar with: finding summaries and patterns in structured information. corporations and consumers can analyze data from blogs.” the newest and most comprehensive of all. There are new ways to manage risk and new product offerings. combined with the structured. the masses of data required by laws for financial transparency only add to the challenge. recognizing that data fundamentally alters how to view risk. The first two mining waves. individual questions. it takes a person two seconds to craft “bank account with lowest overdraft fees” and google it. social mining. The mining evolution depicted in Figure 22 reflects the continuous addition of complexity because of the shift in the data landscape. though this potential is not always mutually beneficial. let alone consider the opportunity of unstructured data. more complex and more siloed the bank or insurer. Data mining focuses on structured data — For firms. are well understood and widely used by corporations. The human brain can rapidly shape individual algorithms to address rows and columns. presents enormous opportunity for the financial firm as well as the consumer. Four Waves oF Mining At the dawn of the computer age. financial firms are stepping up and making progress. with the answer monitored constantly. Still. DATA MInIng. and the power of leveraging public data. a question like “what is my risk-weighted exposure in my consumer lending book?” is complex and needs to be asked in real time. new application forms for bank accounts — while consumers have constantly. complaint letters. created unstructured data — think phone calls. Moreover. It has since evolved to include text mining. The unstructured. this chapter describes the evolution from data mining to “society mining. the more complex the challenge becomes. Web mining. To understand the mining potential. blog posts. 36 . The connected consumer is exploding the volume and potential of data for both corporation and consumer. RSS feeds. But for the firm creating the algorithms. the data issue is no longer about storage (cheap) but algorithms and the models that use them. Firms combine data from social networks with insurance claims data to stop fraud (a reality today). The financial services industry is in the early days of its data mining journey. and marry the calculated emotional reaction of online consumers with demographic data to offer more tailored banking products. digitized forms. reports and other online sources — information once restricted to financial professionals — for investment possibilities. if unconsciously. particularly to measure risk. mining was about working with the only digital data available: data in files and then structured data in databases.Connected Consumer and the Future of Financial Services CSC LEA DIN G EDGE FORU M mining Leveraging structured and unstructured data for financial insights Financial services firms have constantly imposed structure on data — think insurance claim forms.

The demand for an enterprise view of structured data. data mining remains a vast challenge that becomes more complex as firms globalize and regulations follow. primarily 37 . The solution distills millions of pieces of hybrid Web data and thousands of Web pages daily to provide the most current statistics possible.K. the consumer has never engaged in data mining of this sort because it has not been relevant. Web mining provides direction: Which firm shall I choose? What does this product do? For example.98 Some 50 percent of all U. Source: CSC This has been the stuff of corporate management information systems for or MoneySupermaket. that allows ongoing business activity monitoring is a problem banks and insurers are still wrestling with. The aggregators interface to subscribing insurers to compare car quotes from a wide range of providers and present a summary to the consumer for comparison and selection. For example. which led to the creation of Web mining.C S C LE A D I N G E D G E FO RUM Connected Consumer and the Future of Financial Services Figure 22. Enter Lab Immo. and FATCA (Foreign Account Tax Compliance Act) affects the global operations of U. consumers no longer have to sift through numerous financial services sites to compare offerings but can use aggregators like the U. structured and unstructured. Unlocking data. comprehensive real estate statistics. mining has evolved from the early days of structured data mining to the most recent and all-encompassing wave of society mining. both internal and external. social and machine data. both structured and unstructured. the data and mining tools have not been accessible. but while the consumer has provided input to the process. Such traditional data mining simply does not answer questions that consumers may have. Solvency II affects the global operations of European insurers. For consumers. Even if it did. Web mining has turned search results pages into the new global Main Street through which financial firms must reach consumers. In the last decade of the 20th century Sir Tim Berners-Lee unleashed the World Wide Web. This Web data. The goal was to optimize real estate sales in France and minimize investor risk. which aggregate structured data previously locked inside diverse financial’s gocompare. Lab Immo uses a semantic search solution from Exalead to analyze multiple sources of data. car insurance is driven through such price comparison sites. banks. maintained in real time. Mining evolution With the influx of Web.K.) This is what French real estate company Akerys faced in seeking an innovative decision-making tool for real estate investors. Though well understood. Akerys’s site designed to provide accurate.S. plus deep analytics. (See Figure 23. google and other search engines have become essential consumer and corporate tools for mining the world’s unstructured data. is at once the reward and the challenge. WEB MInIng.

This contraction of the distribution system has positioned the consumer to drive demand and the financial services firm to listen rather than guess. opinion surveys or complaint letters is now drawn from Internet activity. The combination of social mining. an individual’s emotional reaction to a type of product (“stock markets terrify me”) or a firm (“I will never do business with them again”) is a powerful indicator of propensity to purchase. complicated. identification. from real estate agency sites. Facebook. Social mining provides deep. Figure 23. requires tackling data volume. These companies enable firms to understand how they are perceived and engaging with consumers through social media.e. The click or tap of a keypad is all that stands between consumers and their financial services products today. is comfortable with sifting and assimilating the unstructured data “as is” to make a judgment. but it takes real mining to discover what makes people Unlocking the value hidden in today’s wealth of data. both structured and unstructured.. if it can be unlocked. But the explosion of social media — blogs. The Exalead solution enables Akerys to combine timely Web data with corporate data and let people explore the data for the insights they need. A typical consumer uses social mining to answer questions like “What experiences have others had with this bank?” Yet here lies the difference in social mining for corporations and consumers. The fundamental questions are the same in financial services as elsewhere: What are the consumer’s pain points and how does the firm address them? How successful are promotional campaigns? What are competitors doing? Trampoline Systems’s SonAR social analytics technology grew out of ethnographic research into the social behavior underlying efficient collaboration. costly process. format and translation so that data can be readily accessed (i.e. the individual consumer. Source: CSC move their money from bank to bank. YouTube. conversely. is meaningful). The daTa challenge: hide and seek always seeking a specific answer to a specific question. Social mining is where consumers flex their muscles. purchase intent and demographics. Because it is dealing with consumers on a large scale. data aggregation and pattern detection has created a new segment of technology companies that use text analytics and natural language processing to find meaning in social conversations. In the past. For the financial firm. automated insights and answers. the financial firm must seek to impose structure This contraction of the distribution system has positioned the consumer to drive demand and the financial services firm to listen rather than guess. today that knowledge is 38 . Investors can review data by geographic region and obtain statistics such as price per square meter or the number of listings in a certain area over a certain period. is usable) and searched (i.Connected Consumer and the Future of Financial Services CSC LEA DIN G EDGE FORU M on unstructured data. including sentiment. The “like” button is easy to understand. Data and Web mining focus on comparatively static structured and unstructured data. data was provided by third parties. SocIAl MInIng. and what types of customer service are important to a consumer. is used to enrich Akerys’s existing data. Twitter — has ignited an explosion of opinions and emotions flowing second by second from individuals and influencers.. Information that may have come from focus groups. which was a slow. why consumers defect from one insurance company to the next.

39 . primarily created by consumers. Bank A could “listen” for mentions of “Bank B” plus “hate” and reach out to those individuals. but more important in the connected world is the story in a transaction. Indeed. you can’t have it all. Unstructured data. use Twitter as the first point of contact. RSS feeds. podcasts.) Firms can listen to these customers in the aggregate or individually. name. email. corporate data centers is now fastmoving unstructured data created and altered at the click or touch of a keypad. With social mining. If a person’s complaint is about high-interest credit cards. Imagine: The combination of a person’s credit card number. For example.101 but the implications for the financial industry are clear. What was once static or slow-moving structured data in consistency of data has taken a back seat to availability of information. SHApE. expiration date and security code is a financial passport to any criminal’s dreams that can be funded up to that person’s credit limit. A bank might detect that Jane Doe is more Sentiment analysis can be used for competitive information too. That volatility challenge is the basis for Eric Brewer’s cAp theory about the inherent tradeoff in distributed database design. few facts) — high volatility. SElF-AWAREnESS. Using technology from Salesforce Radian6. images. consider a forum in which consumers discuss whether to fill in that form (emotional. there are sufficient big brains debating this to make this the stuff of tomorrow. and via details registered with his or her bank. Data in rows and columns represent the facts of a transaction. consider a bank account application form (date of birth. or. This self-awareness is being driven by cybersecurity needs for missioncritical government data. this is the sort of goal that repurposed bitcoin algorithms could accomplish. regularly updated.C S C LE A D I N G E D G E FO RUM Connected Consumer and the Future of Financial Services Data LanDsCape As mining and its tools evolve. Data can be coded to understand how it is being used for customer relationship management optimization. text messages. If not yet the stuff of today.g. The shape of data is different. Facebook wall entries. structured. videos.99 Enough said about size. since she has been a customer for 10 years. Today this is captured in the vast array of online communication channels: Web pages. The transaction is blocked. financial services firms can identify topic trends over time (complaints about fees? praise for new credit cards?) as well as zero in on specific customer comments. the person is sent a text asking to confirm the transaction. address.. In short. 100 Changing used and even attempt to prevent itself from being misused. suspend her service fee for a month. now imagine if this combination of data appears on a website accessed from a device the person has never used. (note: It is best to engage first in the channel where the comment was made — e. is massively expanding the volume of data in the world. Bank A can market a lower-interest card to that person. tweets. high availability required by sites like Amazon means that either Consistency or performance must be sacrificed. unstructured. the nature of the data being mined is also evolving. for a Twitter comment. it could route a complaint to a call center for immediate follow-up. VolATIlITY. IDc reports that the digital universe will be 44 times bigger in 2020 than it was in 2009. the fundamental evolution in customer relationship management is being able to listen to all consumers — or at least those many more consumers who care enough (positively or negatively) to engage actively on the Web. 102 sensitive to banking fees than interest rates and. telephone) — low volatility. SIzE.

or driving a car. “It doesn’t have to be that way.” and banks and insurance companies are paying attention. information from credit bureaus. the first company to provide a big data platform for analyzing financial industry data. analyze it. a many-to-one customer relationship can become a one-to-one customer relationship by leveraging the power of social big data. surveillance videos and other sensors. fail-safe mechanisms in trading prevent some risks. corporate databases. Despite the Big Brother overtones of potentially tracking one’s every digital detail. algorithms and query collections — targeted to highly specific financial services business problems. society mining is a positive tool in the hands of innovative. cofounder of Tresata. friends and associates. Already. DnA databanks. It is about aggregating and analyzing a mass of public and private.103 With each connection consumers shape a picture of their lifestyle. parents teach their children “you are judged by the company you keep.” says Abhishek Mehta. 104 “Why is it that Amazon knows more about me than my bank?” asks Mehta. insights mining and cRM integration. enabling the financial services firm to better understand customers at the individual level and gear specific products to specific individuals. government databases. chat forums. as financial services (like most This means an underwriter. the risk of investing. Society mining can provide an understanding of risk in the allocation of capital to minutely accurate levels. SocIETY MInIng. If fraud is eliminated. complex. propensity modeling for student loan applicants requires a different approach from propensity modeling for mortgage applicants. Salesforce Radian6. industries) uses very specific performance metrics and data semantics that Tresata can cater to.” (See Figure 24. but for the consumer. or just plain breathing can be transformed by a precise real-time understanding of the consequences of any action. a many-to-one customer relationship can become a oneto-one customer relationship by leveraging the power of social big data. avocations. and other important big data trends. insights mining and cRM integration.) Tresata’s platform aims to do for financial data what google does for Web data: make sense of it using Hadoop. Banks can leverage a massive amount of information about their customers. Society mining extends social mining almost into digital omniscience. geospatial databases that track where the consumer has been. This specialization is key. which is completely different from building an ad optimization engine. Visa has applied for a patent for systems and methods to create profiles for ad targeting that go well beyond credit card transaction data. providing grist for the social mining mill. For example. responsible firms. is described in the 2011 lEF report Data rEvolution. information from DnA databanks” and other sources. distributed data sets. loan officer or marketer can be armed with an arsenal of data that makes the connected consumer more digitally visible than ever before. marketing director. They can store it. social mining is about individual relationships. If investment risks are better understood. tastes. then insurance premiums plummet.105) Firms can leapfrog traditional data warehouse approaches with Tresata’s specialized analytics platform. and use it to make decisions that advocate for the consumer. This.Connected Consumer and the Future of Financial Services CSC LEA DIN G EDGE FORU M “For financial services firms. This wasn’t possible two years ago. Society mining “lays bare the fact that no two people are alike. These containers 40 . Who you “friend” on Facebook could influence your credit rating — if they pay late maybe that means you will too — and whether or not you get a loan.” says Jon Mcginley. secure and open databases including credit bureaus. social sites. (Hadoop uses an open source implementation of google’s MapReduce distributed processing framework. Tresata has developed analytics containers — pre-built data. Web logs. information from search engines. information about insurance claims. potentially transforming the nature of risk itself. the framework for processing large. It describes the possibility of using “information from social network websites. then consumers’ savings and investments are more secure. Ultimately.

merge and score it at an individual unit level. financial and economic . or low risk) when seen at the household level. email. telecom) and social data (tweets. one can see the large variability in probabilistic analysis of home value versus property debt. Source: Tresata are built on top of Tresata’s massively parallel Data Assembly Line that can ingest structured and unstructured data. or high risk) at the aggregate level reveals a fair amount of green values (positive. non-financial data (online. from firms like Tresata. household) level. Financial services firms can build business models that enable a virtuous cycle of innovation and value creation driven by consumer needs. processed and analyzed at the individual (i. net worth). Data as a service. Historically. By leveraging a platform that allows data to be stored. geo tags). want and should be offered. but the financial firm no longer needs to own those data centers. process. and produce a “total” view of the customer. enables firms to tap the data they need when 41 they need it. Tresata has partnerships with leading data companies that provide access to financial data (assets. from the cloud. What appears to be predominantly red values (negative. mash it with external data sources. like Tresata’s Analytical Platform. It is critical for financial services firms to process and analyze data at the individual level to see a true picture of the household and create products and services that meet consumer needs. Tresata’s platform makes it possible to take data across all of a bank’s data systems.C S C LE A D I N G E D G E FO RUM Connected Consumer and the Future of Financial Services Figure 24.. This is one reason Citi is exploring IBM’s Watson technologies to analyze a range of client.e. mining the vast volumes of data implied by society mining required access to vast data centers (and still does). state or ZIP code aggregations) masks the variability in data. This is what society mining is all about: combining myriad data sources and finding useful patterns in them. InnovatIve Data analysIs Reveals BusIness oppoRtunItIes Aggregated analysis (such as national. This is where the firm’s insight into the consumer is unlocked. real estate. and process the resultant data sets to better understand what consumers have.

The exponential increase in real-time unstructured data has fueled new technology designed for corporations to exploit this data. the fast-moving data is there for anyone who can keep up. data protection will never have a more important role to play for the consumer. because short-cycle transactions like trades and fraud detection are based on data that is stale by day’s end. this area has seen the biggest explosion of data in unstructured analyst reports. TRansacTion TiMes foR financial seRvices TRAnSAcTIon TIMES. markets and banking typically have the shortest transactions times and therefore have seen the earliest and greatest impact from mining volatile data. Unlikely? Hardly. Transaction times vary for financial services. the shorter the transaction time. the aggregation and analysis of big data sets becomes not only practical but essential. the shorter the transaction time. This “connecting the dots” is the corporate gold mine — so valuable that governments must intervene with data protection legislation and rigorous protection of consumer information. Mining has different impacts depending on the length of a transaction. think of the insurer paying for a long-term costly treatment for diabetes. discussion forums and RSS feeds. conveniently (or perhaps consequently). Typically. so too is the impact of fast moving unstructured data. for example). Financial service transactions range from splitsecond trades to decades-long life insurance policies. no longer is an advisor-broker on the other end of the telephone line required for today’s connected investor. generally. But the combination of mobile technologies and new media has placed all of this in the hands of the consumer as well. now interface that with the supermarket that confirms John Doe binges on Snickers bars. If this sounds obscure. the consumer asking the individual question to Mining Makes iTs MaRk Data mining impacts financial services in many ways depending on the situation. If a person buys shares in a bank for her investment portfolio.106 no one firm owns all the data but as data is commoditized. Wealthier consumers. the greater the impact of mining volatile unstructured data. if she applies for a life insurance policy. increasingly dependent on their own financial decisions rather than a future generation of taxpayers for a comfortable retirement. Unlikely? In a world where supermarkets act as insurance distributors? Think of the travel insurer that sells a policy that excludes bungee jumping. consumers’ most sophisticated. Source: CSC 42 . capital trading to decades-long transactions for life insurance. InVESTMEnT SERVIcES. and most current. that requires underwriting that may take weeks. and the time after that for transaction fulfillment. but the mobile phone database identifies that the insured was at Face Adrenalin. since short-cycle transactions are based on data that is stale by day’s end. the world’s highest bungee bridge. she wants that done now. as shown in Figure 25. The limitation of society mining is no longer technology but privacy. demand this data to form insights. on the date of the claim. longer-cycle transactions are based on long-term trends and thus are less affected by volatile data. longer-cycle transactions like those related to life insurance policies are based on long-term trends and thus are less affected by volatile data. Saving one large claim could recoup the cost of the cheap interfaces needed to connect the dots. blogs. be it making split-second investment decisions or insuring a self-driving car.Connected Consumer and the Future of Financial Services CSC LEA DIN G EDGE FORU M data. from split-second transactions for The elapsed time leading up to the transaction commitment. the greater the impact mining can have. Importantly. Figure 25. information needs relate to complex products dependent on the performance of markets (a unit-linked pension. are noticeably different across financial services.

. a browser) than the broker.C S C LE A D I N G E D G E FO RUM Connected Consumer and the Future of Financial Services draw an individual judgment requires far less sophisticated technology (i.000 customers in the Baltic republic withdrew large amounts of capital from both Swedbank and SEB. financial services has depended on financial modelling and analytics to understand money trends. with major implications not only for motorists but for car insurers. making provision of the insurance viable. and one part big data analytics to meet the technology demand of data-driven businesses. can frame unstructured “experience” data with structured “assessment” data to drive new innovation in insurance risk assessment by reducing the time to the financial transaction commitment. In December 2011 it was reported that a latvian bank run was caused by mounting Twitter rumors.111 Autonomous technologies in the car represent a powerful extension 43 In any event. converging technologies that push the envelope of media. consumer fraud comes in many forms. With self-driving cars. Revolution Analytics provides an enterprise wrapper that makes R commercially viable. data from the agent/broker statement. with its long begin-to-end cycles. fraudulent claims are eliminated. While the financial transaction commitment time for a bank has historically been the end of the business day.109 BioSignia uses analytics to determine the cumulative effects of health risks on mortality. progressive uses highly personal data you agree to share (your actual driving behavior. Integrating and mining different data sets is at the heart of MicroEnsure’s crop insurance that automatically pays out claims based on independent weather data. autonomous technologies are part of the solution. The insurer then applies that structured and unstructured data to risk profiles to determine a risk rating. 108 Such cumulative analysis compounds the complexity of the analysis but also the value of the results. cSc is leveraging R in its development laboratory to design a starter expert model to give an insurer a jump start on creating customer intelligence up-sell and cross-sell marketing community. once only used by universities and the scientific community. is reshaping and collapsing the life underwriting process by utilizing science-based predictive underwriting tools like Mortality Assessment Technology (MAT). which are intended to be safer than human-operated cars due to innovative crash-avoidance techniques. and marrying it to structured data. “As many as 10. the self-driving car — is on the horizon. BAnkIng. Will so-called telematics insurance take off? Some say young drivers will be more willing to offer their driving data in exchange for a discount. consumer access to low-latency data such as email.110 Several car manufacturers have announced a goal to eliminate auto-related deaths and injuries by 2020. For financial firms. RSS feeds.107 pRIcIng SEgMEnTATIon.. Taming the shape and size of the unstructured data. mobility and big data into a reusable industrial-strength framework will help life insurers better exploit the fast moving volatile data. and lifestyle data including physician statements. gathered via a plug-in device) to provide a new level of risk assessment and discounts. telematics rede- fines risk from imagined to actual behavior and enables a form of mass customization for car insurance. This is good for both insurers and consumers. now the open source concept allows those financial models to be shared by the inside-R. consumers can not only manage their money in an agile manner but influence the actions of their consumer networks. from credit card fraud in banking to claims fraud in insurance. on the other hand. emptying cash machines of $29 million and leading to local reports of long queues and spreading concern. For instance. developed and patented by BioSignia. Issuing a life insurance contract requires collecting factual data from the customer’s application. Since the consumer does not submit a claim. accident risk shifts from the driver to the manufacturer. social media and blogs helps address consumer demands in a volatile 24x7 financial environment. The data-driven car — which is to say. costing the industry and consumers billions of dollars annually. The detection and prevention of fraud essentially comes down to mining for undetected relationships.e. the democratization of consumer access via the Internet and smartphones is challenging the retail banking industry for greater transparency.) nevada became the first state in the first country in the world to approve self-driving cars in February 2012. FRAUD. This is where society mining can shine. cAR InSURAncE. medical records and prescription drug histories. (See Figure 26. with potentially substantial consumer savings. For decades. Data from an instrumented environment (the car) represents a new source of data that yields a single instance product based on a single instance of risk. insurers are preparing for what could be a major upheaval. UnDERWRITIng. Mining can also be used to prevent fraud in the first place. Insurance. enabling insurers to leverage unstructured data sources to detect unusual patterns and insights. Revolution Analytics has created an enterprise-strength tonic from a recipe of one part R open source statistical modelling software.

so it can be leveraged for commercial use. to local councils considering investment in snow plows. to cities overwhelmed by catastrophes. location. OmniMap’s unique ability to collect. ranging from applications for insurance and reinsurance to energy and local government. CSC is working with the U. January 2012 . and investments by public authorities to cope with snow and freezing conditions. (See Figure 27. A variety of industries could benefit from historical geophysical and earth science data collected from satellites. analyze and overlay public domain unstructured data onto a geospatial structured context — a map — gives insights for of automation: from recording data generated by the driver to operating the car based on the For example. Source: Munich Re GeoRisksResearch NatCatSERVICE. For Pulling layers of unstructured data together is like collecting structured pixels of data until an image forms. naturaL catastroPhes worLDwiDe 1980 — 2011 Overall and insured losses with trend The ability to more precisely forecast climate by analyzing public climate data has significant implications for insurers. government to apply big data skills to climate and weather data. Source: Steve Jurvetson http://www. Further.Connected Consumer and the Future of Financial Services CSC LEA DIN G EDGE FORU M saved through better warnings and preparation. National Highway Traffic Safety Administration data of accidents and severity overlaid on street maps. Given the immense human cost of catastrophe that dwarfs the impact of events affecting one or a few individuals. Figure 26.112 (See Figure 28.) Leveraging PubLic Data An important element of modern mining is the ability to leverage public data. The potential value of this data is broad. mining climate data for risk is arguably one of the most significant forces for good in which the financial services industry can engage. If one can better predict the probability. collected by agencies such as NASA and NOAA. domestic and business energy use. natural catastrophes. then insurers and banks can price risk with much greater precision and people’s lives can be 44 ••• Never before has the mine field been so rich yet so complicated as it is with today’s structured and unstructured Figure 27. timing and size of catastrophes. climate affects agriculture. consumers could receive a return on their tax dollars through lower prices for property and business insurance or improved warnings about catastrophes. a major change for the auto insurance industry.S. reinsurers and consumers. using open source technologies and publicly available geospatial data. to pull together a variety of so-called pictures. risk shifts from consumers to manufacturers. With self-driving cars like this one from Google. a number of industries beyond the obvious government and federal applications. The ability to more precisely forecast climate through data analysis has significant commercial implications for the poor farmer whose crops may be ruined.S. CSC has designed OmniMap. automobile insurers could see risk corridors based on U.

113 In addition.S. Society mining. Indeed. the insights available from analyzing big data transform the very understanding of risk. By overlaying accident data (red) from the U. Mathematical algorithms that structure and align unstructured information to find relationships are the basis for fraud detection technologies. To horribly mangle the words of george orwell: Hadoop is watching you.C S C LE A D I N G E D G E FO RUM Connected Consumer and the Future of Financial Services Figure 28. attitudes. then. It means that with ever greater precision. particularly young financial consumers. Data protection is the consumer’s armor. barring accident. After all. but that it can identify individually when. national Highway Traffic Safety Administration on a map. family. It is not too extreme to suggest that big data will ultimately change almost every aspect of consumer financial services forever. the importance of enforcing data protection regulations will become ever more critical as complex data sets are assembled and the most intimate details of consumer behavior. marketing and other purposes. each of us is likely to die. In transforming the understanding of risk. The ease with which consumers. As mining becomes more intimate. big data transforms the nature of financial services and capitalism itself. attitudes and emotions are examined with ease. car insurers can see where the high-risk areas are. is about compiling a comprehensive digital dossier of you for risk evaluation. Yet analysis of unstructured plus structured data goes much further. It means not that insurers can better assess the risk of a driver crashing. insurance rates can be more precise. Society mining is where the corporation can lay bare the consumer. the consumer needs to be aware. the elimination of fraud would dramatically reduce insurance premiums. 45 . hatreds. That said. It means not just that a firm can assess the mortality risk cohort that a person falls into for life insurance. Source: CSC data. Detecting behavior patterns or weather patterns and predicting outcomes can provide actionable insight regarding risk. and where risk lies. the implications of society mining are not all sinister. but that the driver is completely incapable of crashing the car. legislators will work overtime deciding “public” versus “private” data and how it can be used. consider how information on Facebook and Twitter can be used to nail policyholders for filing inflated or fraudulent claims. based on known behavior patterns and repeatable characteristics that can be quantified. are willing to share intimacies is remarkable and important. desires. friends. the new frontier. cSc’s omniMap integrates the accident and geospatial data. society mining provides a superior way to assess risk. Every digital step you take creates a digital footprint that builds a profile for the firm that wants to look well beyond demographics into emotions. Risk is at the heart of financial services and capitalism. humanity can predict the catastrophes that can overwhelm entire countries and populations.

and in the power that consumers can achieve.288. the Internet. and the financial markets that serve them. physical security and legal protection as a critical pillar to transform lives. and that is extraordinary. micro. but they are growing in wealth and require the full gamut of consumer finance. latin American and African countries are not just more populous and faster growing.) DigitaLLy VisibLe the ether using mobile technology. Many Asian. This is a revolution in who is engaging in financial services.and middle-income countries had a gross national income per capita of $1. media and mining — represent profound changes to how consumers engage with each other. microfinance stands alongside healthcare. there is the potential of technologyenabled microfinance to bring greater prosperity to the poor. The connected consumer is transforming consumer social responsibility. people RevoluTion Six billion mobile phone subscriptions and two billion Internet users mean that an Australian citizen in a taxi visiting new York chats live over the Web with an Indian banking employee in Delhi about a money transfer. These themes are born of the participation of most of the world’s population in digital networks — mobile networks. A kenyan lacking electricity in her home makes digital payments over 46 . For the financial firm. At a human level. In lending models such as kiva.114 By 2010. The gulf to high-income countries remains huge.Connected Consumer and the Future of Financial Services CSC LEA DIN G EDGE FORU M DigitaLLy powerfuL Four themes — mobile. this brings both opportunity and threat. low. social media networks. where they are. the financial firms they transact business with. Despite legitimate issues and concerns. in the players who serve the consumer finance market and create new processes for how financial services are delivered. This is important in the near term for consumers. actions and habits are on display like never before to those with the tools to understand them.140. (See Figure 29. connecTed consuMeR: financial seRvices RevoluTion With this digital power comes digital visibility. and in the longer term for firms seeking new markets. gnI had nearly tripled to $3. in payments. consumers’ views. payment networks. The themes drive a four-pronged revolution: in who and how people engage in financial services. Figure 29. In 2002. and how they are choosing to engage around money. In just the lifespan of a cat this has ceased to be fantastic. but that fast-growing income supports a fast-growing level of demand for financial services. the foundation of economic activity.

of course. Whether one agrees with them or not. This is too radical. such as options on insurance policies. Euro notes in circulation grew to 14. But Bitcoin’s challenge to the fundamental foundation of how economies work is breathtaking in its ambition. and why. ing mobile first. widespread availability of sophisticated financial market data. how. for the first time. As a store of value. the Internet is taking that level of interaction to a new level with p2p financial services. Euro area card payment transactions 47 consumers are thinking mobile first. consumers are think- of countries. At the same time. The ultimate state monopoly. .C S C LE A D I N G E D G E FO RUM Connected Consumer and the Future of Financial Services The connected consumer is transforming consumer social responsibility. In the occupy movement a tiny minority of consumers used connection to try to effect major change in financial services. Financial firms need to design for mobility not as an afterthought but as the primary mechanism through which consumers expect to connect. However. alternatives to for the first time. mobile phones and tablets are the first devices people use to access financial services. even in the most libertarian zopa and prosper there is a strong strand of social activism that stretches from the purely charitable to investment opportunities (with a conscience). is able to be counterfeited. banknote printing and coin minting remain a growth industry. a payments revolution is well underway. driving enterprises to think mobile first. it is challenging for the poor. and is easily stolen with no recourse for proving ownership. cash is a clumsy payment mechanism in a technology-equipped world. Thus the people revolution is not only about who is connecting to financial services. Money not backed by assets is the supreme expression of consumer trust that the state will stand behind paper scraps. after millennia of state monopoly currencies. investment funds and bank products. discussion boards and consumer trading software have created an environment in which financially sophisticated consumers take responsibility for their own investments and make a living by doing so. metal tokens or bits as having value. to succeed. is money. If that feels like the tail wagging the dog. The wealthy have had alternatives to cash for centuries. That said. money has no value except what a sovereign says it has. cash for mainstream payments of all values for all people are becoming available and economically feasible. cash degrades in quality (notes anyway). consumer power changed aspects of financial services years ago. alternatives to cash for mainstream payments of all values for all people are becoming available and economically feasible. driving enterprises to think mobile first. Bitcoin takes the payments revolution to its ultimate conclusion — payment without sovereignty — by privatizing currency. payMenTs RevoluTion Alongside the people revolution is a payments revolution. This is a trend measured in millions of consumers. cards and ATMs.3 million in January 2012 from 10. it is — culminating in a power revolution that is discussed last. consumer trading platforms disintermediated the broker but p2p payments and lending disintermediate the bank. at least for significant payments — first in the form of checks and then cards.5 million five years earlier. Broadband access. their old media impact enabled by new media connection is out of all proportion to their number. As a means of exchange. In any event. consumers configure their own products on the Internet. who are unable to access bank accounts and the assorted paraphernalia of checks.115 However. but also the connected consumer’s impact on the financial services enterprise. is physically bulky. A trend measured in billions of consumers is that people are thinking mobile first — that is. there are more alternatives being used more frequently for more transactions.

9 billion to 3. have growth strategies in Asia. Trampoline Systems and Salesforce Radian6 exist at the intersection of media and mining. So the more interoperable the payment network is with other payment networks. Twitter (2006).8 billion in 2001 to 20. could exceed $1 trillion by 2015. jiao and centavos. payment networks. The most radical are the new firms that have not just extended the boundaries of existing financial space but have steered towards new horizons. This is changing where financial services are happening. Safaricom. The use of nFc-enabled mobile devices. pence. connection has disintermediated aspects of the firms that manage consumer financial services. companies such as Exalead. from citi to prudential. The ubiquity of mobile phones has enabled private mobile networks (such as Safaricom) and technology firms (such as google) to enter the payment value chain. and electronic money purchases rose from just 135 million to 1 billion. so consumer financial services is becoming at the very least a global game. while cheque transactions declined from 5.9 billion. the capital. Rather. also playing at the intersection. Western global banks and . and over time it is tilting further south and east. is happening and will grow. But on a continent where cheques still outnumber electronic payments by nearly 4 to 1. expertise and desire to export financial brands at scale. at least in banking. The new intermediaries are often inextricably interwoven with the technology that supports them. or will soon.” Also. Today the payment battleground is cents. Yahoo (1995). meaning my digital payment for my Snickers bar is simply more convenient. The connected consumer does not so much create new space as change existing space. kiva and zopa are still intermediaries. card and mobile are gearing up for this fight with cash.117 Although none of these are financial services firms per se — they are not regulated financial entities — all are building consumers’ knowledge of financial services. a mainstay physical store of cards and cash. one must take care not to scream revolution too loudly. That said. consider the world’s top 10 visited websites: google (1998). Wikipedia (2001). It’s still about mediating capital and risk but. the more participants and thus the more power it will have. have moved “up the stack” to offer this data “as a service. it has slimmed the intermediary and changed what the intermediary does. but differently. consumer financial services have always been about mediating consumers’ capital and the risks they face. for transformed brands. and their entire existence lies in the connected consumer. Baidu (2000). But these are not the most radical consequences of the players revolution. Digital payment won the battle for the larger transaction many years ago. an Asian game that the United States and Europe try and hold back with trade barriers called (1998) and Amazon (1995). 116 insurers. micro. paypal and Alipay are still intermediaries. illustrate the network effect: The network increases in value with the number of participants. Much as enterprise technology services have become. M-kESHo and M-pESA are enabled by a mobile telecommunications company. enabling firms to make sense of the mass of Web and other unstructured data that connected consumers are continually adding to. other countries will follow. what’s happening. Meanwhile. consumer-connected world. playeRs RevoluTion The connected consumer is providing space for new brands. estimated at some $240 billion in 2011. Brazil. Middle-income countries in particular are generating consumer brands. like any network. It’s not a fight to the death but a fight for supremacy. and how they’re happening. The point is that they are different types of intermediaries. companies like Tresata. The purse or wallet. and at different paces. china and India already have. will become less important as mobile devices enable payment through multiple cards and from bank accounts at marginal cost. These are the new intermediaries. You Tube (2005).6 billion in 2010. Windows live (1975). media and mining. and for a whole new breed of financial intermediaries and technology firms. we’re starting to see a slimmer mediation by firms that understand mediation in a consumer-driven. There is no apology for the airtime given to M-pESA in this report. M-pESA is a model for the payments revolution in poorer countries. to some extent. perhaps alongside QR codes. and the winner will vary by country. Some analysts believe that the value of mobile payments.Connected Consumer and the Future of Financial Services CSC LEA DIN G EDGE FORU M rose from 8. getting into financial services. fostering 48 Japan leads the world in nFc mobile payments with 47 million Japanese using tap-and-go phones. Facebook (2004). QQ. Yet consumer connection has not destroyed the need for intermediation. new technology firms have appeared across mobile. from brokers to payments.

here are 10 questions to consider. the question will be how much you want to invest to obtain that knowledge. oh. The retail insurance business is 49 less affected by the payments revolution than banks. smartphones) and what role will each play? If the answer is they won’t. • Where are consumer payments in your value chain. a thought experiment for you: Think of a scenario where a mobile device must be used in a process. • What products should you redesign for micro — whether targeted at higher. online insurance quotes are the mainstream now in that country.k. but insurance is being transformed as profoundly by the power of the connected consumer. and how will the payments revolution affect your processes? Does the payment revolution open up new business opportunities? • In which of your consumer touchpoints will mobile devices play a role? What are the devices (tablets. The process of making payments is very different in kenya today than in 2000 because of telecommunications firms. which is digital? Just like it would never happen to the music industry. • To what extent should lowerincome consumers in both lowerand higher-income countries have • • To what extent will you take the risk of converting employees into corporate activists to engage with connected consumers in social media? If you won’t. others may be uncomfortable. determining consumer perception of financial brands. The process of motor and home insurance distribution in the U. They are the new digital dance floor for financial firms. you gathered biometric data about who your • How do you plan to leverage the digital visibility of your customers? Will you target them shamelessly or become their advocate? What does customer visibility mean to your firm? • To what extent is your firm equipping customers to demonstrate consumer social responsibility and ensuring that employees demonstrate the values that consumers expect? • If you could know anything about your customers. how will you engage in the discussion about your firm that is happening somewhere right now? In the 1990s.C S C LE A D I N G E D G E FO RUM Connected Consumer and the Future of Financial Services Questions for finanCiaL serViCes firms To help financial services firms grasp the challenge and opportunity of the connected consumer. All are relevant.or lower-income consumers — and how? How should you grasp the increasing granularity of financial products? • A thought experiment: Describe how a new player could cannibalize part of your business by connecting your customers in a different way. and allowing consumers to select financial services firms. now how far will you go in using technology to understand how your customers think and their emotional reaction to your firm? new payment methods. has been turned upside down by online insurance price comparison sites. How much money would you bet that this would never happen to the financial industry. new players find space because they change the process of financial services. Tablet technology brings investment advice more easily into the home at the same time as a more educated consumer has already googled those investment firms on . a place in your customer strategy? What would be your motive for reaching these customers? customers are. Some may have already been answered. which is also digital. what would that be? Increasingly. now ask someone in their early 20s why that will never happen (because they will convince you it will).

so desirable. All this is possible because consumers are connected not with the corporation. poweR RevoluTion Financial services were built on corporate networks. wishes to hear. and if it uses that digital intimacy not to target the consumer but to become what Abhishek Mehta of Tresata calls a “consumer advocate” — if that organization makes it so easy. we think so too. cash is the last bastion of the consumer who wants the corporation to be unaware of his or her intimate habits. what then for the future of financial services? A transformation this profound can happen. as they always were. others. It is much more than this. addressing micro needs and leveraging all the power of new media. so financially attractive and so specifically relevant to do business with it. This has huge consequences for employee engagement and how firms organize themselves to engage with consumers. It could place all staff on the digital front line. which is the virtual world every individual has built for himself or herself. their attitude to saving money. media (the most visited website in the world) and mining (their algorithms to unlock the world’s knowledge). The Facebook generation has an expectation that the firm will engage with them on their terms and in their space. may appear to be vaguely interesting if not amusing. Yet is all this actually a tame analysis? Is there an ultimate disruption? Is there a development so profound that it does to banking or insurance what iTunes did to music? If an organization truly supplies consumers with the power to take control of financial services using mobile tools. google has done it for the world’s information not by mining. A consumer who screamed at the top of his or her voice “don’t bank with them” and reached family and friends can now with minimal effort whisper “Don’T BAnk WITH THEM” and reach whoever ••• The fuel of economic activity. to achieve anything they want to do. it is all four of those Ms. its services are increasingly consumed digitally. this report’s author was interviewed — yes. Store cards have provided supermarkets such as Tesco deep insight into the habits of its customers: their children. but with everyone they want. England in the late 1970s. are flexing their muscles in the realization that their individual voice can be amplified by connection to their peers. interviewed — by the local bank branch manager to see whether he was a sufficiently worthy citizen to hold a bank account. payments. not with their family and local community. once the targets of financial services. but by combining mobile (where the consumer is). •••••• Join the blog and debate about the connected consumer at csc. But — and there has to be a but — a profound consequence of digital engagement is digital visibility and loss of anonymity. as they always were. Financial services firms are transforming how they engage with customers. Are digital payments just too orwellian to destroy cash? What’s the value to the insurer who funds your diabetes treatments of knowing your secret chocolate habit? How long before that interface is created? The consequences of consumers using social media to obtain information. As these innovations evolve. where firms intermediated consumer capital and risk. an even more radical financial future is in store for the connected consumer. respond and proactively serve the connected consumer. Such corporate power over consumer has become laughable because technology has connected consumers. Firms need to listen. planet Mars? no. As a 15year-old. and posting about getting grumpy about banks that keep them waiting for 20 minutes during their lunch break. Firms are innovating in financial services on various combinations of the four Ms. Bank branches and insurance claim updates are on Facebook. If you think that is dramatic. their drinking habits. is being transformed by 50 . A financial firm’s brand is increasingly shaped by consumers digitally. micro (tiny payments for search advertising funding free searches). his father briefed him on how to present himself well. wherever they are.Connected Consumer and the Future of Financial Services CSC LEA DIN G EDGE FORU M which his pension depends. people once unable to access financial services are finding that access. The secret is not mobile or micro or media or mining. and if it can use the petabytes of data being generated and the tools available but not yet leveraged to unlock intimate knowledge of the consumer. and it is increasingly easy for consumers to amplify their views on their experiences. new firms are appearing.

9 December 2011. http://www. (video) “credit card of the google Wallet. “IT pro Impact: nFc and Mobile commerce. 15 october 2010.” nFc World. How It Works. all huddled around gSMA’s standard. and “SIM-based nFc gains global support from 45 mobile carriers. https://www.” payments news.” InformationWeek. http://www.worldbank. http://online. http://www.theregister. http://www. 2 July 2010. and “The end of the credit card as we know it?” msnbc.” The Wall Street Journal.” nFc World.aspx?newsitemid=21900.” InformationWeek.” cards International.informationweek.” Bill & Melinda gates” http://www. http://thenextweb. 5 January p.html “paypal Unveils the Future of Shopping.html “Taiwan’s Bank Sinopac issues credit cards with digital display. 15 november “Schmidt sees nFc terminals Sreedhar Sreedhar M-pESA customer and Agent numbers. 30 January 2012. 14 September 2011. 23 June “Visa moves US to EMV and “google Wallet reportedly coming to the Uk. “Mastercard unveils interactive credit card. http://reports. “The future of banking? The credit card that will spell out your balance. http://www. http://www.” Engadget. p.” www.wimp.msn. in time for the 2012 london olympics. 5.” The next Web.aspx. 9 August http://www.dailymail.aspx “Three Big plastic Issuers Take Step Toward Mobile Wallets. “The origins of 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 “How levelUp aims to shake up mobile payments. http://www.pdf (data as of April 2011) “Mobile payments go Viral: M-pESA in kenya. 4.intomobile. 10 March Ibid.C S C LE A D I N G E D G E FO RUM Connected Consumer and the Future of Financial Services NOTES 1 2 The British Museum. http://www. http://www.vrl-financial-news. January 2010. http://www.) “chase iphone app lets you deposit checks by taking pictures.safaricom.” IntoMobile.cnet.” paypal 28 november 2011. 14” Finextra.engadget. “IT pro Impact: nFc and Mobile commerce. 17 november 2011.” The Register. 28 February 2012. 51 .” (last accessed 18 March 2012) “Red laser Mobile App now Supports paypal and Milo. 2010. 5 January (See video.pdf Mobile Money live: Deployment “Inside shows off nFc on a SIM.” Daily Mail Reporter.msnbc.

March 2010.” The new York Times. 16 november 2011.pdf 52 .com/2011/05/kenya-crop-insurance-via-cell-phone. http://www.pdf “Financial Services for the poor. p. 4 and” Mobility Digest.” zurich Financial Services group. 32 33 34 35 36 37 38 39 40 “Insurance & technology to better serve Emerging consumers: learning to improve access & “Will bank branches wither away?” USA Today.html “Bell Ringers go Digital This Season. kinect.mcbmobile.” IcMIF Microinsurance.” The Huffington post. 2 “commercial Insurers in Microinsurance. and “In Sweden. http://www. Bangladesh.9. 27 october 2010. p.microinsurancenetwork. April 2011. http://www. november 22 23 24 25 26 27 28 29 30 “McB Mobile wins MMT Award for ‘The Best Bank led Mobile Money Transfer January “There’s an App for That: Mobile phone Quoting.cgap. prosper issue 9).Connected Consumer and the Future of Financial Services CSC LEA DIN G EDGE FORU M NOTES 21 “Mastercard QkR unites QR codes. http://mobilitydigest. http://www.pdf Ignacio Mas and Dan http://www.” World Economic Forum. http://home. 17 March 2012. 6 July 2011 (originally published in July 2011. p.” African Agriculture. World Bank policy Research paper 5253.” August 2011.php Microensure.qkr. 23 May 2011. 6.php Report overview here: http://www.htm How Snapshot Works. Serbia and Malaysia. “kenya: crop insurance via cell phone takes root.’” McB Mobile. 31 “The Socio-Economic Impact of Mobile Financial Services: Analysis of pakistan. 15 november 2011. Measuring Financial Access Around The http://reports.pdf. http://www.” Strategy overview. http://www.asp “providing access to affordable livestock insurance. Weather Index crop Insurance. p. 16.shows. March 2010.africanagricultureblog.html “Quicken loans is first lender with a mobile mortgage app.pdf “The Mobile Financial Services Development Report 2011. p. 21 February Bill & Melinda gates Foundation. http://www. http://www.” Boston consulting group. 28 June 2011.” Bill & Melinda gates Foundation. India.” Insurance Journal. cash Is king no More. http://telenor.rsby. vii.” Electronista. 16 September 2011. RSBY. 4. “Mobile payments go Viral: M-pESA in kenya.43130/Measuring_Financial_Access_Around_World.weforum.

html Vortex Engineering. http://southasia. co-founder and cEo of ekgaon. http://www.cgap.” ITp. http://financialaccessatbirth.php?option=com_content&view=category&layout=blog&id=34&Itemid=60 “Microfinance as a development and poverty reduction policy: is it everything it’s cracked up to be?” overseas Development Institute. 53 .” press release.” Modernghana. March “Microfinance Investment in Sub Saharan Africa. http://financialaccessatbirth.” The Times of” cgAp Technology” grameen Foundation Blog. http://www.opportunityfund. p. is credited with this insight in “Insurance and technology to better serve Emerging consumers: learning to improve access & service. 3 June 2005.html 52 53 54 55 56 57 58 59 60 Microloan 51 “M-pESA meets microsavings with Equity Bank deal in kenya.wordpress.C S C LE A D I N G E D G E FO RUM Connected Consumer and the Future of Financial Services NOTES 41 “MTn and Hollard Insurance group pilot mobile money insurance in 46 Vijay Aditya. 18 May 2010. Microsavings.” The World Bank. and “World’s cheapest tablet launched.” International Association of Microfinance Investors.” Strategy overview.” Engadget.pdf “Mastercard provides payment solution for India’s UID card http://go. planning commission. http://zis.indiatimes. January 2011. Bill & Melinda gates Foundation.engadget. pp. 3-4 50 “giving India’s poor a new Way to Save. http://grameenfoundation. 45 “Text2Teach: Making SMS Relevant in Education.” zurich Financial Services “Insurance & technology to better serve Emerging consumers: learning to improve access & service. http://uidai.” zurich Financial Services group. opportunity Fund. 5 January 2012.php?option=com_content&view=category&layout=blog&id=39&Itemid=71 About 49 “Financial Services for the poor.” Unique Identification Authority of India.4 million orders in two weeks. http://www. http://zis. http://www.modernghana.html “From Exclusion to Inclusion with Micropayments. http://technology. 23 March 4 January 2012. 10. november 2010.pdf Financial Access @ Birth FAQ. 1.oneworld.” oneWorld South Asia. 24 March 2011.” philippine Headline news 19 May 2011. p. 5 october 2011. 42 43 44 “The Use of Mobile phones in Education in Developing “Ingenico payment solutions help promote financial inclusion in the Middle East and Africa. Table 1. January April 7. http://www.cms 48 “MTn ghana and Hollard launch m-insurance service. http://vortexindia.pdf 47 “India’s sub-$50 Android tablet claims 1. 8 December 2010. ii. 25 october 2011.” The Financial Brand.meetup. p.html “customers chat one-to-one in Bank’s Virtual Facebook Branch. http://www. 28 February occupy Together Meetups Everywhere.economist. 71 “Mining the chatter: optimizing Social Media Monitoring. 9 november 2011.insurancenetworking. http://www.” The Financial 2 november 2011. p. July 2011.” The guardian. 17 november 2011. September ASB on Facebook is at https://apps. “IDc predictions 2012: competing for 2020. 8 october 2011.fiserv. Survey (requires client registration) “gEIco Steps Further Into Facebook. 69 70 Ibid.” The Whig Standard. and “commonwealth Bank opens ‘Vault’ on Facebook.” December 2011.moneysavingexpert.idc-cema.” press release. page Society.Connected Consumer and the Future of Financial Services CSC LEA DIN G EDGE FORU M NOTES 61 62 63 “Shark Bait: Microfinance is not just for poor To Join credit Unions.” mUmBREllA. 28 August 2008. http://www. July 2011. 18. http://www. 81 “The Authentic Enterprise.awpagesociety.” lifenet Insurance company.” Arthur W. 72 73 74 75 76 77 78 79 80 “occupy london: archbishop of canterbury backs new tax on banking. (requires client registration) 65 lifenet Insurance “Bank Transfer Day pushes 40.” Investment Executive. http://thefinancialbrand.” The Financial Brand. http://www.” The Huffington post. http://www. 20. http://www. http://newsroom.investmentexecutive.aspx?e=3132817 About 20 May” The Economist. 9. http://www.pdf 67 68 Ibid.pdf 64 “Mining the chatter: optimizing Social Media “The Top 35 Banks on Facebook. 11.” Insurance networking 26 May 2011.” celent.cfm?releaseid=330941 “Investors look to social media for financial advice: survey. “Fiserv MyMoney Banking Application Built on Facebook platform Wins The Banker Technology Awards 2008 Retail Award for online Innovation. create Jobs for “commonwealth Bank’s Time Vault treasure hunt p. 2 november 2011” The 66 “Breathing new life into an old Industry. http://www. 27.pdf 54 . http://www. “get financial advice from social media? Most of us do.” celent. 22 november 1 September 2011. p. http://thefinancialbrand.

com/news/ 97 98 “How Digicash Blew Everything.” china Daily. May 2010. About Us.” Unknown Author. 24 June 2010. http://www. http://cryptome.C S C LE A D I N G E D G E FO RUM Connected Consumer and the Future of Financial Services NOTES 82 83 “Alipay snatches online payment crown from paypal.html 102 Social Media for the Financial Services Industry.” Engadget. 21 February http://www.” http://chas. http://www. 25 May 2011.chinadaily.” press release.” Banking Review.” The Wall Street Journal. http://www.fundingcircle. http://www. 86 87 88 89 90 “zimpleMoney launches zimpleAuto: give credit Where credit Is Due.html 85 “Bank of 101 “cyber Security R&D needs for DoE. 24 november 2010.zopa. http://www. pp 1-2.aspx 91 92 93 prosper company 100 “The cAp theorem is like physics to airplanes: every database must design around it. https://www.gocompare. sponsored by EMc “The Filter Bubble: What the Internet Is Hiding from You” (new York: The penguin press. p2p lending: How it works. 2011). 95 Smava.paypal. Digits Blog.smava. http://www.html 84 About clearXchange. Wells Fargo Form new Venture To Help consumers Make person-to-person payments 22 April 55 .com/car-insurance/ 99 “The Digital Universe Decade — Are You Ready?” 5 April 2012.” Four kitchens while banks debate M@MBo.” press 103 Eli pariser.typepad. http://clearxchange. 10 February 1999.radian6.htm communications with zopa 12 March 2012 prosper.html 94 Friendsurance.prosper. http://fourkitchens. 24 october 2011. aurkFMt&sig=jSWwTdUfWXBnEMn--nuIkER1n8&hl=en&ei=gAefTqlln-rhiAlkzITocQ&sa=X&oi=book_result&ct=result&resnum=1&ved=0cBsQ6AE wAA#v=onepage&q=stryker%20creditworthiness%20based%20on%20social%20graph&f=fals 104 “Visa’s Blueprint for Targeted “Facebook sets sights on payments.wellsfargo.communitylend.emc. 96 “Royal canadian Mint aims to kickstart digital currency with Mintchip developer Funding circle. zopa. http://www.htm http://www. http://www.moneysupermarket.engadget. http://bitcoin. http://books.zimplemoney. http://blogs.

17 February 2012.pdf 110 “nevada approves permits for self-driving cars on roadways. 109 “cSc Teams with BioSignia to offer life Insurers.cscomnilocation.” Digital Journal. http://wardsauto. gnI per 112 omniMap.and middle-income countries. 26 February 2010.html 107 “latvian bank run sparked by Twitter rumors.html 113 “Insurers use social media to investigate claims. 6 March 2012.html 116 global mobile statistics 2012. http://www.sun-sentinel. http://assets1. 114 The World Bank. http://www.cD/countries/Xo?display=graph 115 European central Bank. http://gigaom.” 117 Alexa Top 500 global Sites. http://data.digitaljournal. 56 . 11 April 2011.pdf 106 “IBM’s Watson gets Wall Street Job After ‘Jeopardy’” press release. Reinsurers predictive Underwriting http://www. September Atlas method (current US$). 9 october 2011.Connected Consumer and the Future of Financial Services CSC LEA DIN G EDGE FORU M NOTES 105 “Data rEvolution.” Sun Sentinel. http://mobithinking.gnp.” cSc leading Edge 108 “Will telematics change car insurance as we know it?” 28 February 2012. Banknotes and coins Data as of 17 April 2012 confidentID is a registered trademark of computer Sciences corporation.” 111 “zero Fatalities: can Auto Makers Eliminate Vehicle Deaths By 2020?” WardsAuto. 12 December http://www.

CSC Mitch lynch.C S C LE A D I N G E D G E FO RUM Connected Consumer and the Future of Financial Services aCknowLeDgments pATRIck MolInEUX is chief services in the future. CSC Ben lydecker. Special thanks go to ERIcA M. Mohit Banerjee. CSC Michael Ferrari. believing that any 21st century technology should be so advanced in its simplicity that it is easy for everyone to use. CSC Dan Himmerich. CSC Amitabha Ray. English history of the 1060s to 1090s). He sees his strategy role as working with colleagues and clients to understand the broad scope of the financial services sector and zero in on the key areas for cSc to focus on. he drove the research for this report. CSC Dan Munyan. CSC 57 . CSC Brandon Mathews. The most important part of the journey for patrick was microfinance: “I had been conscious of microfinance but unconscious of its power to transform lives. CSC Rich carreau. CSC Bob Evans. CSC Andrea o’connor. CSC Simon Wardley. and lISA BRAUn for synthesizing and producing the final text. Exalead Utkarsh Sharma. The lEF thanks the many others who contributed to the connected consumer report. CSC Rosemary Hartman. State Farm Bank nalini omtri. patrick embarked on this report to bring mental order to the vastness of where technology can take financial patrick lives near guildford in Surrey. Tresata Simon Millett. CSC Brian Wallace. reading. cooking. CSC prasenjit chatterjee. Zurich Jon Mcginley. CSC Sreedhar kajeepeta. needed to learn. CSC Tom Rogerson. CSC David Dyer. Microfinance takes technology from being merely useful to patrick has worked hard to increase his technical illiteracy. CSC Mark Masterson. and counts as his hobbies gardening. As lEF Associate. community affairs (he is a local councillor) and medieval history (specifically. The report looks utterly different from patrick’s initial ideas. CSC Randy Barker. CSC chris Wiesinger. CSC Eric Rogge. pmoline3@csc. England. CSC Faisal Siddiqi. shaping the core themes and drawing on a team of cSc experts and select financial services and technology firms. CSC Hugh Roberts. Salesforce Radian6 Abhishek Mehta. life changing and saving.” strategy officer for cSc’s financial services business. CSC Rajeev Bhatia. in some cases. That is a lesson I patrick has held roles in project management. sales and marketing at cSc and previously worked in the financial services industry. consulting. a desirable consequence of the intellects of the report’s many contributors. CSC paul leadbetter. DAISY WEAVER for her expertise on the Mining chapter. SAlInAS for enriching the Mobile and Micro chapters.

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