November 2011 Archives
As I was perusing Bradley Leimer’s flood (in a good way) of links this morning, I noticed a recent piece on CIO Insight, 7 Ways to Prepare for the IT Infrastructure of the Future. I don’t disagree with the trends discussed in the article and below, but there’s more to the story than just ripping out legacy systems and tinkering with a few iPads so the CEO can check email.
Taking advantage of these trends is as much about the passion and the attitude of IT leadership as it is about the technologies themselves. An IT leader that’s interested in protecting the status quo and running the factory isn’t going to have much of an interest in understanding the impact of consumer technology, for example.
The importance of a leader’s ability to maintain an organization that can execute day-to-day can’t be discounted, but I'd argue that a passion for learning and tinkering is a critical trait necessary for a CIO to successfully take advantage of some of these trends.
Run-the-Factory Guy will execute on those things that will save money and keep the auditors off IT’s back. So, Run-the-Factory Guy will work on:
- Converge and Consolidate (because a converged network saves money)
- Rethink Security (because auditors made him do it)
- Embrace Project/Portfolio Management (because it’s a filter for the project pipeline)
Forward Gal’s looking ahead, building a team that’s passionate about what’s next. Budget’s tight, but she’s looking for cost saves to fund proof-of-concepts (help me with the plural here!).
- Consumer Technology (customers are using a variety of new devices and communications media, better be ready to deal with it)
- Modular not Monolithic (good sourcing strategy will allow IT to focus on the strategic)
- Move Beyond Alignment (don’t just communicate with the business, improve their speed-to-market and support the mobile workforce)
- Build Analytics into Everything (business units are going to demand self-service analytic capabilities from traditional and non-traditional data sources)
Forward Gal’s looking at what Run-the-Factory Guy is looking at, too, but from the perspective of how those trends benefit internal and external customers in addition to the “what’s in it for me”. Forward Gal’s staff is also more energized, spending more time looking ahead than backward. Leadership’s attitude toward embracing the future matters and that attitude finds its way down to the team. I know who’s team I'd rather be on.
Posted by Quintin Sykes on Nov 03, 2011
In the last few days numerous financial institutions have backpedaled on their plans to implement fees for debit card usage. The general consensus since then is that banks will find other ways to levy fees with varying levels of transparency. In my first fee-related article last week, I questioned whether we've done all we can as an industry to avoid “feeing up”. I was joking about potential new sources of fee-based revenue in my Bank Stanky Raises Fees follow-up, but was serious in the latter half of the article about some alternatives presented to alleviate the need for additional fees.
One of the options I suggested in the follow-up article was a freemium model for delivery channels.
There’s something to be said for the freemium model when it comes to web and mobile applications. You can pay up for premium features and avoid advertising, or you can get many of the benefits of the premium version with a free, ad-supported version. Maybe it’s time for sponsored Internet and Mobile banking for customers that might otherwise be subject to fees. If a bank’s determined a customer is unlikely to buy an additional product, why not use the screen real estate to promote a third party product that’s of likely interest to the customer and take in some advertising revenue?
Think about it. You might not want to pay full price for Angry Birds, but you value the product so you don’t find the ad in the upper right corner to be too offensive (now the popup videos are a different story, but you get the idea…)
Banks and credit unions are running propensity-to-buy models that are good enough to understand whether or not customers are likely to buy another product. If there’s not another bank product on the horizon in the near future for the customer, why not promote another non-bank product that’s relevant instead? For non-premium (think unprofitable or marginally profitable) customer segments, this additional revenue could offset the potential need for fees to make the customer relationship profitable. Premium customers wouldn’t see the non-bank offers, instead seeing the bank cross-sell or informational banners as they do today.
I see several benefits to this kind of approach:
- Customers understand why free websites and apps are ad-supported today, so this model is familar to them already (unlike, say, a $X/month debit card fee)
- Merchant reward offers are presented by some institutions today and experience indicates customers will respond to relevant offers
- Customers that would otherwise be subject to additional fees get the benefit of lower-cost banking services
- Customers may benefit from an offer of a relevant product or service (I said relevant and presented relatively unobtrusively)
- Banks get the benefit of additional income from advertisers
Am I off base in thinking this kind of model could be part of the answer?
Posted by Quintin Sykes on Nov 02, 2011
I realized after my post on big data last week that I probably needed to take a step backwards and define “big data” in the first place. What are the characteristics of big data?
- At a minimum, it’s a big data problem when the size of the data itself is part of the problem (Mike Loukides' definition), with potentially petabytes or exabytes of data to process. Raw transaction data over a long enough period of time can scale to this size.
- Frequently, the structure of the data is part of the problem as well. Unstructured data processes require technologies different from the relational database technologies we've been accustomed to working with in the past. The number of data sources and potential need to infer relationships among them also can come into play. Sentiment analysis leverages unstructured social media commentary, for example.
Big data technology has the potential to help on the revenue and risk management fronts in two ways:
- Decreasing the time it takes to perform disk and compute-intensive processes handled by traditional database and analytic technologies, such as customer profitability calculations. In-memory processing is an example of big data technology that greatly reduces processing time, with speed improvements of up to 1,000x (yes, 1,000).
- Increasing the amount and variety of information that can be used in these processes. New big data technologies can leverage real-time data as well as unstructured data to improve processes such as fraud detection (combining real-time transaction and geolocation data to score transactions, for example) as well as cross-sell (combining transaction history, propensity-to-buy models, and geolocation data to present mobile offers, for example)
Big data can also help answer unstructured questions, such as exploring at patterns of customer behavior to determine why customers buy additional products or leave the institution. Account history coupled with raw delivery channel data (teller/FSR visits, call center calls, ATM calls) and customer contact data (email) can be analyzed for patterns to determine if sales behaviors or offers are working and can identify potential sources of dissatisfaction as well.
My article last week explored the use of transaction data to target web advertising and merchant rewards. Traditional relational database and analytic technologies can do this, but big data improves the targeting by increasing the sources of potential inputs to these models and decreasing the amount of time it takes to run them (think real-time vs. overnight batch). I will be digging deeper into the underlying technologies as well as real-world applications of big data in coming posts and look forward to sharing some success stories.
Posted by Quintin Sykes on Nov 01, 2011
