So much has changed in the three years since I was honored with Bank Systems & Technology's Elite 8 award in 2009. The common denominator to all these changes is summed up in a single word: digital. Manifestations of digital technology -- such as mobile payments, big data analytics, tablet-based tools for salespeople and open digital identity standards -- have exploded during the past three years, with profound implications for both the technology and, more important, the business of banking.
At the end of 2010, a number of senior colleagues and I were charged by Citi's senior management to create a new business called "Citi Enterprise Payments." We quickly moved to focus full-time on understanding the trends and implications of digital technologies and on creating new business models and partnerships around them. Little did any of us know we'd be in for such a wild ride.
Disrupting the Status Quo
First, we have had to get smart about sets of new technologies. Take mobile payments and its associated technologies: near-field communication protocols, mobile handset secure elements, trusted service managers, geo-fences, and more. These have not been historical competencies of financial institution IT departments. And it's not just about mastering the technologies in the way a telecom or software company would, but doing so in a "bank-grade" way, with particular focus on regulatory compliance and, in Citi's case, massive global scalability.
Second, we have had to make some new friends and build new partnerships in industries that typically have not been part of a bank payments ecosystem, such as mobile network operators, handset manufacturers, operating system software companies and, of course, thousands of newly funded innovative start-ups. Some have called digital money a "wild west" of very diverse industries working to drive innovation. Citi, for example, has worked closely with Google to provision Citi-issued MasterCard credit cards into the NFC wallet that sits today on certain models of Android phones distributed by Sprint and Virgin Mobile. This is about several companies with very different cultures and approaches to technology having to join forces -- successfully. Collectively, we moved mountains to bring this product to market, and we learned a lot from each other.
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In some cases, digital-related opportunities also involve working in new ways with companies that always have been part of the bank payments ecosystem, such as the merchants that are the clients of the card acquiring business. Today, in addition to discussing card acceptance and point-of-sale terminals, banks are also exploring opportunities such as big-data-driven contextual merchant offers.
Last, the business models in digital are complex, not always obvious and definitely not yet fully formulated. In developed markets with strong banking economies, putting credit cards into an NFC phone, while challenging technically, is more a form factor extension than, in and of itself, a new business model for banks. New business models will mean providing new revenue-generating services to consumers and merchants, establishing shared risk-and-reward partnerships with telecom companies, supporting government policy for banking inclusion, and creating other such innovations. In emerging markets, for example, the product and business model innovation has been around mobile payments empowering new populations of consumers by bringing them into the existing formal banking economy, with banks and other participants also growing potential incremental revenue streams.
But the market is moving quickly, with many new entrants -- and many non-banks. This is not a time for complacency, particularly for banks. So buckle in for a wild ride.
Gary Greenwald is managing director, digital money services, for Citi Global Enterprise Payments (New York).