Monthly Archives: July 2014

Now hear me out,the Apple/IBM partnership is BIG for mobile payments

Apple IBM PartnershipI have worn many hats working in the financial technology vertical including business development, product, marketing and partnership development. In fact, I managed the IBM partnership for a PFM technology provider I joined in 2010. IBM played an important role for the PFM technology provider for it opened access to many of the financial institutions that run on the IBM technology to support core, online and mobile banking systems. Specifically, the PFM solution ran on IBM’s Websphere mobile software and on the IBM DB2 data base software. The software compatibility proved to be a strong selling point during business development discussions with banks that ran core legacy banking systems on Big Blue.

I learned fairly quickly that one of the biggest objections from mid-tier and larger banking executives was, “love your technology….but it MUST run on our legacy core and online banking systems.” Fortunately for us, we overcame this objection by playing the “we run on IBM” card to continue conversations. Unfortunately for IBM, these legacy limitations prevent many financial institutions from launching new tools and features that help consumers access their money through a mobile device. As we fintechers all know, these mid-tier and large banks are losing customers to the more sophisticated, innovative and mobile centric financial institutions…like Moven, Simple or GoBank.  An April 2013 Forrester study found that nearly 50% of respondents said they would be willing to switch to a bank with a better mobile experience.

The recently announced partnership between Apple and IBM could fix this and will position both companies very well for continued growth in the mobile banking and payments verticals..even with Millennials. I know, this is shocking …but in the words of Kevin Nealon, “now hear me out.”

As part of this partnership, IBM will be launching roughly 100 native mobile apps developed specifically for iOS. These apps are part of the MobileFirst platform IBM launched earlier this year and will adhere to the security, backup and data movement capabilities IBM is known for across the high technology industry. These capabilities are what keep banking IT executives coming back to Big Blue and a few of these iOS apps will strategically address the specific needs of the banking vertical.

The collaboration between IBM and Apple to build these apps will allow legacy systems written in Assembler or COBOL to run on the iPhones and iPads. Penny Crosmen at American Banker states, “Making existing mainframe applications usable on iPads could help banks bring mobility to old technology.”  This is HUGE for it helps banks easily engage with customers within the branch, through merchants or at home through a mobile device without having to make heavy investments in new technology or go through the lengthy process of selecting a clunky third party provider. For example, a bank will no longer need to license mobile platform technology from a Kony or mFoundry for their IBM partnership will open up mobile functionality through iOS sitting on top of legacy software. This is cool for the banks…but SCARY for mobile platform providers.

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The biggest use cases for the IBM/Apple mobile technology marriage can be seen at the branch and merchant levels. I can easily envision a wealth management representative having an in-branch investment conversation with a client using an iPad. The representative easily accesses a client’s core banking information from the mobile device and displays current balances, checking account activity and recommended investment opportunities right on the tablet. Taking this one step closer to the consumer, I envision the consumer later that evening going back to the banking application and sharing the investment recommendations with his/her spouse. Together the couple reviews the recommended investments, discusses financial goals and asks for further detail from their adviser directly from the iOS application.  Tadaaaaaah! The mobile/table user experience is helping the bank build deeper customer relationships through helping consumers manage their money…leveraging a channel the consumer prefers.

The second benefit of this marriage comes at the business banking level. This relationship should make payment providers pause…and maybe even shit.  Imagine a small retail merchant opens a business banking account that includes the “rental” of a payments tool like a card reader. The Apple/IBM relationship enables the bank to provide payments tools, card processors, etc. through already widely adopted iOS products. The bank may even function as a third party retailer for the iOS hardware and will save money by phasing out those clunky counter top card processors.  Banks will take away a key competitive advantages from payment providers who boast about the ease of use and mobility of collecting payments. Additional benefits for the bank are the ability for business bankers to track small business activity and recommend lower cost banking products, loan savings opportunities based on the specific business activity and transactions. Banks can also FINALLY find the right channel to provide those ever so sought after (and never well executed) locally targeted special offers and discounts to consumers.

For those of you keeping score at home, the consumer will also benefit from the IBM/Apple partnership. The iOS loving consumer will now be part of the same payment ecosystem merchants have with their banks. The iOS system now includes Passbook and it is no far leap to envision this evolving into a wallet that holds bank provided payment cards. This is “duh” obvious. Given that merchants, banks and consumers are all part of the same iOs payment system, consumers can easily continue using their long held VISA and Mastercards on their mobile device.  Continued adoption of the same payment ecosystem may provide opportunities for lower processing fees for all involved. Unfortunately, at this point the mobile payment providers are now banking on lower fees as their main value proposition. However, if banks are able to provide an easily adopted mobile wallet with many iOS supported merchants accepting these payments, even lower fees may be a moot point. Consumers will be able to FINALLY use their mobile wallets at the merchants and service providers they have always used.

Wow, way to go Apple.  You created a true mobile wallet.


Bitcoin self regulation required to increase adoption

Screen Shot 2014-07-07 at 10.09.44 AMI remember debating the benefits and dangers of the Euro during a Macro Econ class just as the currency was being rolled out. One of the benefits of the Euro is the ability for consumers to pay for goods and services with one common currency significantly reducing costly currency exchange fees. Clearly if you are a citizen of a less economically powerful country, like Greece for example, the Euro is a big boon. All of a sudden your previously lower valued currency is a moot point and you know have equal buying power as someone from a strong country such as Germany. However, there in lies one of the biggest problems with the Euro. Countries of lower economic strength are now at currency parity with stronger countries….at the expense of the most economically strong.Yes, I understand I’m simplifying the issue, but therein lies a real economic problem.

The European Central Bank is very busy managing the EU banking system, stabilizing currency value and convincing the English and German bankers to have faith in the Euro. After all, it is their currency reserves that back the value of the Euro. This is no easy task when England and Germany have been asked to fund monetary policy, such as bank bailouts, to prevent the collapse of the system. Faith in the Euro is what is keeping the system afloat. Faith in the currency and system is what stops England and Germany from pushing for stricter regulations to protect the value of their native currencies and their ability to trade.


Faith plays a strong role in any currency. The faith is in the government issuing the currency to back up the value with sound monetary policy, a centralized bank, and financial assets. However, I think FAITH plays an even BIGGER role in the latest currency innovation, Bitcoin. Bitcoin is known as a “cryptocurrency” and its origins are mysterious. So mysterious, no one really knows who created the currency.  Not even Jack Bauer can uncover his identity.

Bitcoin is not backed by any bank, can be used to buy/sell merchandise or services, and can be used to transact anonymously. Wait, what? Without the banking system, how can this currency be valued? Bitcoins are bought and sold on an exchange…and forces of supply and demand move the currency value up and down. To further complicate the value, Bitcoins can also be  “mined” through solving complex mathematical equations using certain software programs. I can’t help think that Bitcoin is very similar to how gold nuggets were mined and valued during the California Gold Rush. The big difference, though, is that gold is a precious metal, is tangible and has had value for thousands of years. Bitcoin “gold nuggets” have been created by someone, buried in mathematical equations and has no historical context for valuation.

Clearly this raises the question of how many Bitcoins are out there. If it’s unlimited, Bitcoins will have little value. Whoever invented Bitcoin has limited the amount of available coins to 21 million. According to a recent article, 12 million Bitcoins are in circulation and 9 million remain to be “found” or “mined”. How the Bitcoins got there is still not clear and there does not seem to be a mechanism in place to prevent more Bitcoins from being anonymously created.

Wow. The entire Bitcoin currency concept blows my mind. An anonymous person created and launched a currency. Enough people have enough FAITH in this currency that it will retain value, will remain in a limited and finite supply and will continue to be an emerging form of payment. Faith in Bitcoin sounds INSANELY risky to me….but e-commerce giants such as Amazon and eBay have been considering options to accept it as a form of payment. Strange. However, there clearly remains a high level of suspicion of the cryptocurrency in the Banking industry.

Maintaining customer faith in Bitcoin is the number one priority for all Bitcoin providers, exchanges and related companies. Without a tangible asset and historical context for value, Bitcoin will collapse immediately if people lose faith in its legitimacy. Legitimacy will be lost if a number of factors occur: buying/selling illegal products or services, money laundering, currency value manipulation, counterfeit currency. Yes, EVERY currency and monetary system faces these challenges…but the challenges are addressed through a well established banking and regulatory system. Bitcoin, and other cryptocurrencies, does not have this.

Cryptocurrency providers, platforms and related services must push to self regulate to protect their value and legitimacy. The self-regulation must happen FAST for there is a lot of interest and concern building within governments and monetary systems. Establishing standards that are easily adhered to and adopted will be critical. Providers must engage in conversations to define standards and hold each other accountable in very much the same way Truste worked with websites to define consumer privacy and data usage standards.

Screen Shot 2014-07-03 at 4.47.20 PMJumio, a leading provider of identity verification products, is taking the lead in creating such a compliance network. The network is called Bitcoin Identity Security Open Network (BISON) and it’s targeting Bitcoin and Bitcoin related providers to join by agreeing to a set of standards of authenticating the identity of users they are establishing transactional relationships with. This is a great first step in building a compliance standard that is not a stretch for major platforms. The growing incidents of fraud and other criminal activity is the result of anonymous transactions. Requiring user identity authentification will help make the Bitcoin platform much safer.

The big hurdle for Jumio is the willingness of these Bitcoin providers to comply, participate and implement authentification technology.  No easy task.  Jumio is addressing this marketing challenge by building a consumer technology to pull participation by providers. The technology will enable Bitcoin consumers to verify their identity only once and carry these credentials across all Bitcoin platforms. The technology reduces the barrier to use the cryptocurrency and is designed to increase Bitcoin platform registration and trial. Will this consumer benefit increase a large enough lift in a Bitcoin provider’s business? That remains to be seen. But as we all know, the easier a product is to adopt and use, the more likely the consumer is to use it.   Currently eight Bitcoin providers are part of BISON at launch. It will be interesting to track who joins next and if there is enough consumer demand for one-time consumer identity verification. Of course, this will all depend on consumers using multiple Bitcoin platforms.

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