Too Big to Retail?

The BIS released came out with a list of 'systemically important' banks.http://www.bis.org/publ/bcbs207.htm

So, we now officially acknowledge that whatever happens, even if some countries go down, these banks cannot afford to fail. It reallymeans that whatever these banks do, we have to accept with grace and humility. It doesn't help that many of these giant institutions are actually owned by the governments of their country.

I found a fascinating common theme across all these banks; they are all pruning down their retail banking business. Once would have thought that with the great credit crisis brought about by the investment banks would take these banks back to the basics of retail and conventional banking. But no, almost all of them are scaling back on retail banking!

Biggest examples are HSBC, Barclays and RBS who are engaged in a fire sale of retail portfolios across the world.

Me thinks this is the worst trend in recent times and somehow the analyts don't seem to be getting it. Any slow down in retail banking only means less credit to the SMEs and consumers and only will prolong the recession.

I think it is time for the G 20 and BIS along with Central Banks of its member countries, to mandate minimum levels of growth in retail banking and retail lending/credit. Even better, should think of proportion of revenues that should be compulsorily coming out retail banking and not from investment banking.

Too big to fail cannot translate to Too big to Retail.......

How big is the US Regulatory 'Sink Hole'?

Was it just a coincidence or some kind of a 'karmic connection'? A giant 200 feet sinkhole appeared in Guatemala City last month. A few days later the Regulation II of the Dodd-Frank Amendment, slashing debit interchange fee by half, came into existence. The debit interchange 'blow out' starts from Oct 1, 2011 for banks with more than $ 10 B in assets.

Retail bankers must have had the same feeling as the residents of Guatemala; a huge abyss which nobody knows how to fill!

The post 'great recession' era has been one of 'great regulations' in the US banking system. The CARD Act, Durbin, Dodd-Frank Amendment have all carpet bombed the retail banking landscape. Every bank's financial report is splattered with tens/hundreds of millions of dollars in 'lost revenue'. While we still can't comprehend the exact numbers, it looks like the combined regulatory 'sinkhole' confronting the retail bankers adds up to $ 60 Billion.

Clearly, bank CEOs have to figure out how to address this enormous challenge in retail banking; after the relentless battering on Mortgage, Investment banking and credit losses they are still reeling under.

One school of thought feels that the 'easy revenues' from interchange on Credit/Debit cards, Overdraft fees, 'innovative fees' was too good to last. Now banks have to really prove they are worth existing and do add genuine value to the economic system.

The coming months will separate the cliched 'men from the boys'.

Disaster recovery time continues....

How social are Social media?

The increasing presence of corporates in social media like Facebook, Linked In, Twitter does not augur well. Their presence is only making social media into commercial media.
Time for these guys to create two separate classes - social and business class.
And consumers should have a choice - do I go for social class or business class or both.
This not only segregates my social life from business; but also opens up a different revenue line for the media.
Let us keep our social media social; let's stop the commercialising it now.

Cash is my only GOD!

http://www.finextra.com/news/fullstory.aspx?newsitemid=21911

This weird 'fatwa' by Somali Islamists seems to reiterate the fact that only paper money (cash) is the God they recognize! I found this quite intriguing.

I have heard and even empathized with numerous objections to mobile / E -money - security, cost, usage issues, etc. But I haven't seen anything like this!

The 'green shoots' of Mobile money and Electronic payments can do without another naysayer - that too seemingly with religious sanction. In fact, what we need a declaration by all religions of the world endorsing electronic payments against cash.

A cashless society is not going to be a Godless society!

Will Twitter Square up Visa and MasterCard?

Further to my earlier post on Internet based payment applications, it looks like 2010 is going to be the year of alternate payments. We can see the high level of interest in the subject. Jack Dorsey - co founder of the omnipresent Twitter - has come up with a free Payment Dongle called Square.

You can see his demonstration here - http://www.youtube.com/watch?v=DAJR0t-NlPk and other places on YouTube.

For Merchants, this must be sweet music resonating with cash saved on interchange fees. Square is going to be free!

If mobile applications like these (Google payment, etc) catch on fast, the poor plastic credit card and the massive 'closed networks' running them may soon be history.

What's more, Dorsey plans to launch an API in the future that will allow Square to connect to other financial systems and bookkeeping software. Do I see the entire front end application seamlessly integrated with the back end - at virtually no cost? Virtual ATMs - anyone?

So where does it leave Visa/ MasterCard with their elongated theses on the value of 'Interchange'?

As for me, I will be watching this space with utmost interest in 2010!

How to counter 'Counterfeit'? Stop printing notes!

I have been reading the news items on the volume of counterfeit notes surfacing in India. It looks like more than half a billion dollars worth of fake rupees are circulating around the country. The banking industry must be quaking in their boots on the volume of menace they carry. It is distressing to note the thumb sucking responses and comments - terror trail, economic terrrorism, police cases.....
What is the most telling response to fake notes? Electronic money. Central Banks and regulators will be better off devoting their energies to promoting Electronic money (debit cards, credit cards, mobile payments, ACH, etc) rather than investing in technology to make currency notes more 'secure'. Till date, I don't think any country has managed to come up with a fool-proof currency note that can't be replicated.
But how does one bite the bullet here? While digital money is growing, it is still nowhere close to consumer spending on cash. In India, a considerable amount of spend occurs in cash to stay outside the tax net.
If you ask me, at least one country should take the lead and simply stop printing currency notes for mass circulation. Invest that money to strengthen the electronic payments network. Shock treatment may work well where medication hasn't so far! It may sound quite a drastic step; but may be the only way to get people to using electronic currencies.
It only takes one bold move to complete the revolution.

Dumb & Dumber

I notice a lot of attention in the blogosphere to this article on how the Internet (Google in particular) is turning humanity into a mass of 'thoughtless' nerds with a poor attention span and limited ability to assimiliate useful knowledge. You can read the article here -http://www.theatlantic.com/doc/200807/google
The author's (Nicholas Carr) thoughts set me thinking on a few fronts. Aren't we all turning into 'comfortable automatons' secure in our digital world that seems so easy - mobile, internet, GPRS, Google search...? Everything seems to be within reach and just a click or a few tabs away. This kind of echoes what my father used to rant in my school going days - "using the calculator will turn your arithmetical abilities to dust". The question is whether we will be happier with our manual devices and reliance on our brains and wits to go through our daily lives. The current argument by Carr remind me of an essay by Isaac Asimov in the early eighties where he argued against notion of societies living in 'backwater' scenarios and away from the urban jungles. Asimov said that modern human simply cannot go back to the woods. Taking the same thought process, can humanity today move in any direction except forward in the digital 'evolution'.
Much is being made of the arrival of 'semantic' web that will enable users to intelligently interact with the web to a level of personalization never seen before. Carr's fears of human intelligence being replaced by AI would be magnified to a much greater degree in Web 2.0.
The moot point is - whether our over dependence on the Web to govern our lives is turning us to digital zombies? Are our lives flitting like a fly from one crumb to the other?
Certainly an interesting topic of debate that promises to enhance the much vaunted 'digital divide' of our world!