Sunday, February 22, 2015

The Motivation to go Finance 2.0

Fear has always been a bad adviser and motivator, so it is in Finance 2.0. To have a too short term view and to focus on the short term profit without having the big picture in mind will probably lead to disappointment and is going to slow down future Finance 2.0 innovations. As in all other big endeavors to have a strong vision is also going to help in Finance 2.0 to overcome obstacles and rough times and not lose ones way. Of course it still remains true, 20% is vision, 80% is implementation. But 20% vision is mandatory!

The shark, the threat

In leadership in general, when people can not be motivated by other measures to do something, threatening is still a way to go. It is not sustainable and not at all the best solution. The same goes for Finance 2.0. Above all in Switzerland the shark or in other words the fear of competitor banks and of fintechs is the main driver for Swiss banks to become active and to go Finance. 2.0. A significant number of them still believe that the shark will disappear again or at least will not bite. Dream on, that shark has tasted blood already. Fear of Finance 2.0 competitors as a motivator is better than nothing but it will not lead to creative and innovative solutions. The banks only react and do not try to find the best solution for themselves. Everyone will agree that in order to flee from a shark it is not the best approach to swim in the same direction as everybody else, neither it is in Finance 2.0. 

The rowing, the activity

Certainly to work hard, to be active and to measure ones success is important. But if the success of the rower is evaluated by counting how many fishes he caught in the first place, he will not spot the island because he is focused to much on fishing. In the best case he will become very efficient at fishing. The result is going to be poor though because his equipment is not ideal to catch fishes. In the worst case he is going to give up and never will go rowing again. The equipment would be good though to reach the island and to be rewarded big time when reaching it. It is ok to catch some fishes to survive but the main purpose must be to reach the island as directly as possible. In the Finance 2.0 case that means if the business case is to detailed and too much focused on short term above all quantitative profits, these profits are going to be too small compared to the effort and banks are going to miss the island. In other words they are going to miss the Finance 2.0 jackpot. If banks proceed like that in Finance 2.0 they lose their drive and might be eaten by the shark. 

The island, the vision

Let's face it, we do not really know what to expect on the Finance 2.0 island in detail. We are still very far away. Remember Columbus? He had the strong believe that he was going to discover a new better way to reach India. It was hard for him to find sponsors for his trip. Also the result of his trips was not at all the one he expected. At the end it was much more valuable than what he intended to discover. He never gave up is believe, he always had his "island" in mind. There is no other way for Finance 2.0. We need Swiss bank leaders to have a strong vision, to do everything that is necessary to reach the Finance 2.0 island. They should be the one make sure that their employees can spot the island as well, that their employees share their vision and have the strong believe that they will find the jackpot on this very island. All of us do not know how exactly a future digital bank will work and how it will generate profits in detail. Certainly it is going to bring banking to the next level, that is for sure.

Sunday, February 15, 2015

More than half of the money banks invest in Finance 2.0 is wasted, the trouble is they don't know which half!

The high-tech bubble burst more than a decade ago. Up till now this experience, above all the losses some faced is holding banks back from trying out new fresh ideas in Finance 2.0.  But history will repeat, because the human brain has not changed. Time will come when banks “buy” everything with a Finance 2.0 tag on it. They will follow without using their own brainpower, but banks should be aware that over 50% of their Finance 2.0 initiatives will fail or not bring the expected success. Some of the initiatives will change everything though and be the grand slam. Most probably these will not be their first initiatives. It will take time. Banks should be prepared for that. They should therefore not invest too much money in one single Finance 2.0 project which will take them out of the Finance 2.0 game in case of failure. 

I would like to point out, that I am a convinced advocate for the digitization in banking and I clearly think that Swiss Banks are not doing enough and are too slow by far. On the other hand that doesn't mean that an expensive Finance 2.0 project is a better project than a lower priced one. When I say they are too slow that doesn't mean they have to take a huge step and come up with something breathtaking in the very near future. When I follow Finance 2.0 activities of some banks I am bid worried, that those who invest spend too much money and will not be able to show the expected figures. As a result they might give up and cut down their Finance 2.0 budget too much and to soon.  Banks should be aware that in Finance 2.0 the approach is trial and error. Therefore they should rather take smaller steps. Not every step already has to bring a measurable benefit.  As long they are heading in the right direction it is ok.

Banks should be aware that we still don’t know anything on Finance 2.0 and where it will take us. We only see the peak of the iceberg. As a consequence it doesn’t make sense to blindly follow other (bigger) banks. Also these banks do not know what they are doing. Even for them it is trial and error and if it works for them it will not necessarily work for another bank too or the other way around. Have a look at the bancassurance (Allfinanz) business.  This concept has been a big success for VZ Vermögenszentrum, for Credit Suisse not so much.

When I say do not follow blindly I do not mean that banks should invest a lot of time in trying to calculate complex highly sophisticated business cases neither. A very detailed business case will give them a feeling of safety when there is no safety at all. For Finance 2.0 there are too many unknowns which will pulverize a too detailed case. Such a business case might also limit banks view. They might miss some great unexpected benefits generated by their Finance 2.0 initiative because it was not part of their business case and therefore is not measured.  Of course a Finance 2.0 project must have a certain potential to be successful. I recommend keeping it simple though. The lower the price the higher the probability of generating a profit and the number of potential users must be big enough. When thinking about the number of potential users banks should not think too much of the past. Only because clients did not use online channels in the past doesn't mean they won’t use new digital solutions in the future.

My dear bank friends be aware: A significant part of your Finance 2.0 activities will be a financial failure short term and a big part of your benefits will be a great gain of knowledge and experience. 

Sunday, February 8, 2015

Swiss Finance Fair in Zurich 4th - 5th February, a Summery of my Visit

This year it was the first time to hold this fair as a combination of the fund fair and fair for structured products. Will it be a success or will it show, that the time of big financial fairs is over? Many people asked themselves this question. It seemed that the organizers put a lot of energy in the preparation and also seemed to have some new fresh ideas.

The fair started to be busy right from the door opening on the day for professionals as on the day for private investors. The visitors where queuing already at 10 o clock. Good for the fair, less good for me who had to stand in line;-)

Right when entering, there was a tweet wall. Finanzmesse 2015 this time really seemed to put a focus on Finance 2.0, great! Even the better it showed, that at least some people where tweeting actively. Above all, the organizers tweeted very actively as well, already weeks before the fair and even more actively during the event. Well done!

There was a panel with the title "Wealth Management 2.0". Not reading the details one could expect something else, something which talks about solutions for a successful future. Actually it was about regulations. The same "old" people talked about the same "old" problems. 2.0 means the future, 1.0 the present, right? Then a more appropriate title would have been "Wealth Management - 2.0" (minus 2.0, meaning the far past). Sorry, I am mean;-) At least Gerard Fischer, CEO of Swisscanto made some good points and made clear, that the extreme regulations we have now help nobody, not the banks and above all not the clients. Filling in a big number of forms, doesn't increase clients confidence and  cost of a six digit amount for a new financial start up to receive approval and a licence by FINMA doesn't help the financial sector either. The FINMA Director for asset management pointed out, that this was no problem and that there were hardly any financial start-ups applying. Of course not, with a waiting period of up to one year and very high cost, they would be bankrupt before even starting their business!

Also this year professor Erwin Heri, presented fintool and how he wants to help the financial sector. It is Heri's strong believe that financial literacy and clients who understand the markets better is a key element to future success of the financial sector. I share this believe to 100%! While at the above panel panelist talked about present and future problems, Heri comes up with a solution!

Why financial literacy is so important can be found below in the picture and the shown questionnaire including results. Many visitors participated, so there is hope....

This time there were two panels on Finance 2.0. Both moderated by Reno Borini, publisher of Punkt Magazin. Borini tried his very best to get out some decent information out of the panelist. He was not always successful. The audience also had the chance to ask questions by Twitter, great! It was certainly worse while to participate. That is also what thought the Finanz15 participants. In comparison to past years, both panels were frequented very well, excellent!

Because of the very interesting  panels and the even more interesting conversations aside of the panels time was short, or even too short for breakfast and lunch. Thank you very much LEONTEQ for saving my life;-)

Watching the visitors, talking to the exhibitors and participating in the panels it seems the Finanzmesse 2015 was a big success. Well done!

Sunday, February 1, 2015

Finance20: The Swiss Finanzmesse 2015 goes digital

The Swiss fair for structured products and the one for funds turn the page and move to an other chapter. They become one and above all they become digital. In Switzerland there are already a number of events on Finance 2.0 but they are unfortunately rather frequented by tech guys than by business bankers. The Finanzmesse 2015 seems to be the first big event with mainly business guys with a good part of Finance 2.0 and Social Media. Cudos!

In the financial sector, at least in Switzerland, it has become harder and harder to attract a wide audience. To combine the fair for structured products and the one for funds has been a good idea, so is to focus more on the new, the finance 2.0 world. Several steps were taken to become more digital.

Social Media

The responsibles of Finanz 2015 have increased their activity on Twitter significantly quite some time ago. They are interactive, respond on questions and have increased their activity on twitter in the last weeks before the event even more. This time there is also a hashtag #finanz15 and above all it has been communicated well. For those who can not participate, follow on twitter. I believe the number of people will still be limited but there will be activities. Certainly I will tweet. Take take a look! There will also be a tweet wall at the fair. Therefore who will be absent can not only follow on Twitter but also post their input to the Finzanz 2015 participants.

Finanz15 App

This time there is also a free and easy to use app available. Great one doesn't need to carry around the paper program anymore and waste time by searching for panels and speeches. No everything is at your fingertips.

Round Tables on Finance 2.0

Last but not at all least, there are going to be also two round tables on Finance 2.0 with very interesting panelists. 

Probably the Finance 2.0 activities will not be a huge success yet. It still needs a bit of time till people jump on the train. But it is important to give it a go in order the audience gets aware of it. I hope Finanz 2015 has enough perseverance! ... and I hope there will be Calanda this time!!;-)

Good luck!