I had the opportunity to present in Geneva for World Usability Day. Here is the Prezi of my talk, unfortunately not recorded. This is a summary of some of my previous posts in Usability in online banking and why using Accounting design as the framework for usability is wrong.
The second presentation was a summary of a study made by Telono on the Mortgage Calculators in various Swiss Bank websites. Here is a quick video extract. The person on the left is tasked with finding the Mortgage Calculator. 0:11 is priceless.
Apologizes for the really bad framing
Here is the introduction and link to the full piece:
“In 2008, glass blower James McKelvey was unable to complete a $2,ooo sale of his glassware because a customer could only pay by credit card. Frustrated, he discussed this with a friend, Jack Dorsey, the founder of Twitter. By the summer of 2009, Dorsey had prototyped a dongle and soon after, Square launched as a payments start-up targeting mainly the unservied micro-merchant space.
Fast forward to 2012. Square’s recent capital raise of $200 million implies a $3.25 billion valuation. Its valuation quadrupled between January and June 2011 and then doubled over the past year. This latest capital raise implies around 30x – 40x estimated revenue. In contrast, payment companies tend to be valued between 3x and 5x revenue multiples. What does this mean for the industry?” …
One of the points raised many times at Next Bank Europe is that banks should give better tools for people to manage their accounts and finance. Actually, when asked, most people want to be able to better manage their bank accounts.
However, maybe this is looking at this problem through the wrong lens. Actively managing my own finance is a social holy grail. Amazon has at least 14,000 references for Personal Finance Management. TV shows are devoted to educating people on better personal finance management.
What is more surprising is that personal finance, accounting are rarely taught to children and studied in school. Society sets proper personal finance management as a key life goal but does little to equip people with this task. It’s no surprise that people’s finances range from well-managed to sub-optimal (too much cash on checking account for example) to catastrophic.
But the focus put on Finance Management has another consequence. It constrains the problem of building a better bank to a very specific framework. For people to better manage their finance, banking innovators believe they should make their various products more transparent and easy to use. What if the question was: should people even use these tools? (more…)
With the lasting economic crisis, in Europe and the rest of the world, the focus on alternative currencies seems to have increased. For example the Wall Street Journal has covered extensively the development of such currencies in Spain:
Another famous example is the Brixton pound.
At the same the dramatic reduction in IT development and infrastructure costs powered by open source technology and cloud services has allowed an explosion of alternative digital currencies. From Time Banks to Reputation Currencies to new currency systems such as Bitcoin, via other solutions like Clearbon, Kurrenci. The lowering base cost of the digital economy is affecting digital currencies as well. (more…)
Time to dust off my German and start learning Swiss-German (not that similar … at all). I have the opportunity to attend the Swiss New Finance Conference which covers the following:
A lot of the topics cover funding innovation, notably via Crowdfunding. I am looking forward to learn more from C-Crowd, which as developed a legal crowdfunding solution in Switzerland. Now that they have several projects funded, I am curious to learn more how the companies manage large shareholders base.
I am also interested to learn more from the Open Bank Project. An API standard for bank connection is definitely an integral part of Banking as a Service. Whether individual solutions (such as the one created by Credit Agricole, Axa Bank for example) or standard project such as Open Bank will ultimately succeed is not sure (in my view), but they contribute in pushing this agenda.
Also interesting is the presentation from Pelle Braendgaard. I have followed Pelle on Twitter for a long time ( @PelleB ), if you are interested in innovation in financial services, this is definitely an account to add.
Finally, I am keen to get the latest update from the guys of Shareleap , they are trying to reinvent shareholders’ relations, a rather big and important problem.
Might never know, maybe some of you will be here (… Bern …. in August …. ) > happy to meet if this is the case!
Who are the underbanked in the US? If we refer to Javelin Strategy latest study:
“Comprising an estimated 35 million US adults (or 15% of the US population), underbanked are typically young, ethnically diverse, and more likely to use the “computer in their pocket” (i.e. their mobile phones) to conduct their banking.”
But does that not mean that the services targeting them are less diverse than classic banking services? On the contrary, the bank-less (as personal bank account / most of these services leverage the banking infrastructure in some form) universe of services is exploding!\
- The most know is probably the prepaid card. Greendot is one of the biggest new players in the field. These cards allows people to benefit from modern payment means without having to open a bank account. While there are several fees attached to its use (list of Greendot fees available here) , they can have advantages over a bank account as they don’t allow overdraft and don’t require minimum balance.
63% of the underbanked population has access to broadband internet whereas 68% of underbanked consumers own a mobile phone therefore reaching the underbanked by mobile is ideal. Members of the underbanked population tend to use their mobile phones as a computer with 16% of the underbanked population owning a smartphones which is almost the same rate of all consumers in the U.S. who own a smartphone.
I will not pretend that I had even one tenth of an insight into Facebook decision to finish its Credits program (announced here on their blog: http://developers.facebook.com/blog/post/2012/06/19/introducing-subscriptions-and-local-currency-pricing/). Techcrunch as a review of what this could mean: http://techcrunch.com/2012/06/23/why-facebook-is-folding-on-credits-and-doubling-down-on-payments/ .
In the context of their Karma acquisition, this actually solves one of the issue highlighted in my previous post.
The difficulty in this scenario is that the 30% rate is not compatible with ecommerce. Facebook would need to maintain several different rates depending on the activity done through its platform.
With Credits, Facebook may have limited itself to virtual goods as it had its rate of 30% seemed both as a platform tax as well as an “interchange” type rate for processing payments. It was therefore difficult for it to apply different rates on its currency.
Without Credits and with the new focus on local currencies, Facebook can still apply its 30% rate on the use of its platform for in-Facebook apps while having the opportunity to drive more E-Commerce on its platform for social events. Though the question remains, is is this experience significantly better than the one provided by outside websites leveraging Facebook Graph.
While covered in the aftermath of the Facebook IPO, I think its acquisition of Karma was slightly hidden behind NASDAQ failures, IPO pricing debate and overall blessing for CNBC’s octobox.
What is Karma?
On the outside it seems to be a simple and nicely designed gifting app, but looking the UX and what is known of the back end, it could become the platform for much more within Facebook:
1. Deep integration with social graph and events. Even before its acquisition by Facebook, the Karma experience was deeply connected to Facebook, pulling up your social graph details and proposing a list of events for gift situations, from birthdays to change of work, relocation, specific posts. This is information that only Facebook has at scale with respect to social graph, and this has a lot of value since an important portion of commerce is event driven.
2. A smart way of looking at lost shopping carts. When creating a gift on Karma for the first time, there are 2 times when your credit card information will be requested: once before sending the gift – the traditional way for processing payment in ecommerce and a second time when the gift has been opened and accepted by the recipient, meaning when they opened the gift email and input their delivery details. This create a peer pressure on paying for the gift and carries no risk for Karma as they have not sent the actual gift yet. This is very different from payment companies like Klarna which actually take the credit risk of payment made after physical delivery of products.
3. Ecommerce organisation, from order management to delivery. Whether this has much value to work with the necessary scale for Facebook remains to be seen. It is actually not sure in my view that Facebook would like to keep and expend this competency. There is an important gap between being a digital only platform and building the physical capabilities to deliver a real world experience.
4. On the other hand, Facebook is looking at Facebook Credits has an important driver for future revenues. Currently they are only used for virtual goods with a 30 % tax rate taken by Facebook for the use of its credits by developers. A possible opportunity is to expend Facebook Credits to real world goods. Karma ecommerce platform could be an important stepping stone toward that. Credits could work as a closed loop currency on the platform. The difficulty in this scenario is that the 30% rate is not compatible with ecommerce. Facebook would need to maintain several different rates depending on the activity done through its platform.
Facebook has announced that Karma will remain an independent app, like Instagram. But it will not prevent it from leveraging the competencies of its team in creating a mobile social commerce experience. More than expending a full e commerce stack internally, Facebook could create a social platform for e commerce companies that would like to leverage its graph. There are challenges in this strategy. As Karma as demonstrated before its acquisition, Facebook current graph capabilities can be leveraged to create a close experience outside of its control. The difference between the two might be too thin.
Funding startups, projects is being fundamentally transformed with both technology and regulation: Currently what makes the most headlines is the typical startup funding, with angels and VCs making investments decisions on the potential for high multiply exits, the basis to create returns. That pressure for growth is making Equity a challenging source of funds. See under at 1.01.50
New regulations, such as the JOBS act in the US, which makes to possibility for companies to raise funds with individuals more flexible.
see here for a detailed review of the Act // the application details will have a strong impact on its effectiveness.
This is basically geared toward an extension of equity driven funding.This is an interesting move and a valid idea that investment can be extended further for smaller businesses, especially in the light of the relative dysfunction of stock markets for long term shareholding.
Though because it is based on equity it is still suffering from the additional organisational cost of managing shareholders as well as the exit imperative, as the most plausible gain on investment.
Therefore it is interesting to see alternatives to this model being developped:
- Websites such as Kickstarter offer individuals and teams the opportunity to find funds for their projects, by proposing their future users and customers to pre-fund the projects, in most cases for an amount equivalent to the object or use of it. Its a great solution that has come to maturity with the relative lowering of the cost to receive and manage funds via intermediaries as well as the virality and critical mass of internet users. A mentioned by Kickstarter co-founder Perry Chen in an interview on GigaOm:
We’re going to keep funding creative projects in the way we currently do it. We’re not gearing up for the equity wave if it comes. The real disruption is doing it without equity. The real disruption is when you break down the funding of a project into all these little bits. We’re going to keep funding creative projects in the way we currently do it. We’re not gearing up for the equity wave if it comes. The real disruption is doing it without equity. The real disruption is when you break down the funding of a project into all these little bits.
The last piece is interesting, I think the current equity focus is creating a strong opportunity for other investment types to be further developed or invented.
Among the different ideas, Revenue Based Financing is a potential solution. See this very detailed post on AVC by Lighter Capital:
A revenue-based finance (RBF) investment provides capital to a business by “selling” an ongoing percentage of a company’s future revenues to the investor. For simplicity, you can think of it as a revenue share type of arrangement. Investor gives capital to company in exchange for a small percentage of gross revenues. RBF lives as a hybrid of bank debt and venture capital. This kind of financing has been around for a while in non-tech industries such as mining, film production and drug development, but it’s recently been gaining traction in the world of growth finance and early-stage technology funding.
There maybe some potential on coupling these types of solution with the increased transparency and diffusion of data that web based technologies allow. Among other things, SaaS accounting systems could be leveraged to provide instant financial transparency on a company performance, at a much lower cost that current public company reporting.
While recorded in the English speaking swiss radio, it is in French only (well frenglish …)