Last week, I attended the BAI Retail Delivery conference in Boston (for more background on the event, see note 1). I enjoyed the show tremendously.

What's not to like? Famous speakers, new products, several thousand attendees, statistics galore, and a floor filled with new bank tech. For me, the only disappointments were the non-industry keynoters, who are not why I attend, but are something to tell your friends and family about when you get home (note 2).

Like last year, I'll cut to the chase and hand out my personal awards for the event. I saw only a tiny fraction of the companies, so the list below shows merely my favorites culled from about two dozen company interviews. 

The Netbanker awards

• Biggest buzz: Person-to-person payments (we'll cover it in Online Banking Report soon) 
  Runner up: Mobile banking and payments
• Most likely to make the cover of FastCompany: Cardlytics (will cover next week)
• New solution most likely to be used by 1000 financial institutions: Continuity Engine's semi-automated, compliance task-management service
  Least likely: Microsoft Surface, as cool as it looks, I just don't see banks deploying it in large numbers
• Most audacious business plan: Moneta, winner of this very award last year, but did indeed appear in Boston with a major client win, SunTrust (see Celent's Jacob Jegher's not-at-all enthusiastic post on the announcement)
• Best ah-ha moment: When Joe Salesky, Clairmail founder, observed that mobile banking is a 100% solution, meaning it's for every customer NOT just the half that do online banking
• Biggest surprise: The buzz around person-to-person payments and relative lack of buzz around online PFM
• Most-talked-about vendor without a booth: PayPal which announced partnerships with three large bank tech companies: S1, FIS, and First Data's STAR unit
• Coolest online feature, not yet available: Credit card available-balance meter displayed directly on the user's PC desktop, powered by Worklight
• Coolest new GUI feature: Fiserv's ebill snapshots
• Best demo (I'd not seen before): Dynamic Card Solution's instant issue of a credit card with my picture on it along with a background image I chose from hundreds available
• Best-attended breakout session (that I attended): Checking 2.0 which analyzed what the product might look like if NSF/OD fee revenues are materially limited
• Best number: From the opening remarks by BAI director, Debbie Bianucci: According to BAI research five years ago, one-third of consumers preferred to deal with their bank remotely; now, two-thirds do
  Runner up: Bank of America's Doug Brown revealed in his presentation that BofA has 3.5 million active mobile banking users (see recent monthly growth below)
• Scariest number: A prediction from Sherief Meleis (Novantas) that new regulation could wipe out 20% to 40% of total checking account revenue
• Missing in action: Security solutions
• Coolest new event technology: Real-time text voting in the Checking 2.0 session
  Runner up: Wifi available conference-wide for the first time ever
• Most intriguing co-brand opportunity: Getting the bank logo on PayPal messaging (FIS, S1) to payment recipients or during payment sessions (FirstData STAR)
• Product I most wanted to use now: Digital Insight's (Intuit) FinanceWorks with Turbotax integration
• Best screenshot: Lamping on the iPhone (powered by ClairMail); I call it the "little red number" superimposed over iPhone icons, that tells you how many messages are available (see inset)
  Runner up: Worklight's visualization of its widget running in four environments with essentially the same GUI (see below)
• Best party: Geezeo's blowout at Lucky's
• Best freebie on the floor: Fresh lemonade from the wonderful people with a booth by the front entrance
• Netbanker spotting: Quote in BofA's Doug Brown's Powerpoint regarding BofA threepeat (in the mobile marketplaces)

And I'm always collecting usage stats and other numerical detritus delivered during the presentations. Here are my notes with (source in parenthesis):

• 27% of U.S. households are now mobile only (Doug Brown, BofA)
• New mobile customers at BofA last 3 months: 150,000 (Sep); 210,000 (Aug); 220,000 (July) (Doug Brown, BofA)
• In U.S. and worldwide, text message volume has surpassed voice call volume (Doug Brown, BofA)
• 99% of mobile users view balances, 90% view transaction detail, about $10 billion of funds have been moved via mobile transfers/bill pay; 15 million location-based searches being performed (annual run rate)
• BofA has 35% of all mobile banking users (Doug Brown, citing ComScore numbers in 2009)
• BofA has added 150,000 new checking accounts due to mobile offering
• BofA seeing voice calls decline among mobile users, but online banking usage holding steady
• In pilot, 94% of the users of TurboTax within FinanceWorks chose their host banks to deposit tax refunds (Digital Insight/Intuit)
• More than 50% of iPhone users have used mobile banking in past 30 days (Javelin Strategy)
• 33% of mobile banking users monitor accounts daily, 80% weekly (Javelin)
• Customer willingness to pay fees for (Novantas):
  -- Teller transactions 8%
  -- Bill pay 12%
  -- Mobile banking 12%
  -- Paper statement 19%
  -- ID protection 27% 
• At ANZ, 65% of its Yodlee-powered PFM (launched Oct 2008) users visit daily; 89% visit weekly (Doug Brown, ANZ; not a typo, there really were two Doug Browns)
• 81% of its PFM users rated the service at least 7 points on 10-point scale (31% rated 9 or 10; 50% rated 7 or 8)
• ANZ's PFM is a standalone free service that can be used by anyone; so far, 20% are non-ANZ customers; the business case for the service was built on customer acquisition, but they also may charge certain users for certain functions
• Yodlee-powered PFM users spend twice as much time online at the bank than regular users, and only 1.5% leave the bank each year compared to 7% of regular online banking customers 
• Worklight case study results:
  -- 8% to 15% of online customers install widgets within the first year
  -- 95% of widget users are active
  -- Customers conducted 15 to 30 sessions/month via widgets

Worklight widgets running on a variety of platforms (4 Nov 2009)

Notes:
1. About BAI Retail Delivery Conference 2009
BAI Retail Delivery is an annual rite of passage for bank tech strategies, delivery system analysts, and product managers. At the peak, in 1999/2000, there were as many as 10,000 people there (attendees + exhibitors) and close to 500 exhibitors stretching perhaps three or four city blocks in each direction through cavernous exhibit halls. It was a little like Times Square but without the highrises. Some exhibitors had massive 10,000 square foot booths filled with hardware. And the show-floor routinely sold out.

Financial institutions brought teams of people to pour over the new machines and software solutions, be inspired at the general sessions where Bill Gates, Roll Perot, Scott Cook, and other tech-industry luminaries showed up to win over the bankers.

Fast-forward a decade. It's still an awesome event which I highly recommend. I thoroughly enjoyed every conversation I had and most every session I attended. But the event has downsized considerably. This year, you could walk across the exhibit hall in a few minutes. And if you wanted to, you could have spent five minutes with all 180 companies during the show hours. That would have been impossible last year with around 300 exhibitors. But all-in-all, I'd say there was more energy on the floor this year because the attendee per square foot ratio seemed much better.

2. Unfortunately, on Thursday both Al Gore (planned) and Jack Welch (unplanned back problems) phoned in their keynote addresses via sat-link.

I've been waiting 10 years to write this story. A major U.S. bank has finally dared enter the space PayPal has all-but-owned since the first part of this decade (see note 1, 2): secure, non-card-based payments at the point-of-sale, which do not require handing over private info to the merchant. 

Yes, Bank One, Citibank and Wells Fargo all failed at person-to-person payments in 2000/2001, but this is much different. Those were payment services between individuals, not a point-of-sale option like PayPal, Google Checkout, and most recently, Amazon.com.

SunTrust's partner Moneta is an Atlanta-based startup that debuted its alt-payment system at FinovateStartup earlier this year (video here). The joint effort was announced at BAI Retail Delivery in Boston earlier today (press release).

The program is already being tested on a large group of SunTrust online banking customers who recently received an email offering a $10 cash-back incentive to make a purchase of $50 or more from one of the handful of merchants currently accepting Moneta-powered ACH payments. The biggest merchant is Delta.

Moneta's appeal to merchants is relatively straightforward: Incremental sales from customers unwilling or unable to pay via credit card online AND reduction in interchange costs by moving card-based transactions to Moneta transactions, with much lower interchange.

For banks, the business case is not as obvious. The hope is that Moneta-issuing banks share of interchange revenue will more than offset what the bank might lose in card-based interchange. While that may turn out to be the case, the more compelling benefit for banks is the brand and relationship value of offering a new payment choice with more perceived security and privacy advantages. There are also intriguing possibilities to add other revenue-producing value to those transactions.

Last year in my notes from the BAI conference, I named Moneta as the "most audacious business plan." Right now, it's too early to say whether Moneta can become a legit competitor to PayPal. But with SunTrust on its side, that audacious plan is MUCH closer to realization.   
Notes:
1. For the historical perspective, see our first report on person-to-person payments (published, Nov. 1999). 
2. In somewhat-related news: A year after PayPal CEO Scott Thompson made a keynote appeal to bankers at last year's Retail Delivery, FIS and PayPal announced a partnership today (press release) as did S1 (press release) that could bring PayPal-powered peer-to-peer payments to hundreds of financial institutions.

BAI's Retail Delivery Conference is an annual rite for bank tech geeks from around the world. Although attendance was down 20% or so from last year, causing some grousing on the trade-show floor, I thoroughly enjoyed it.

Here's my personal list of highlights from the show (see note 1). 

The Netbanker awards:

• Most audacious business plan: Alt-payment startups Moneta and sister company Acculynk which are looking to disrupt online payments at the point of sale
• Most likely to succeed: mobile anything 
• Biggest "wow" factor: Cardless ATMs by Wincor Nixdorf  
• Best demo of something that actually exists: Bank of Montreal's demo of its new branch locator using Microsoft Virtual Earth (shown at the Microsoft's booth)
• Coolest solution looking for a problem: Microsoft Surface
• Product most likely to be used in our company: Bankserv remote deposit integrated with QuickBooks 
• Product least likely to be used in our company: Wii banking from Wincor Nixdorf (but it's very cool)
• Best presentation: Don Tapscott, author of Wikinomics and Growing Up Digital 
• Best buzzword comeback: Push banking (mobile apps, widgets, alerts)
• Best trade floor freebie: Free espresso from ClairMail 
• Best financial screenshot during a keynote: PayPal CEO Scott Thompson showed PayPal Mobile from Chase Bank, a pilot program running on several college campuses (Ohio State), where Paypal Mobile is bundled with banking services from Chase Bank
• Worst financial screenshot during a keynote: Don Tapscott used Zopa USA as an example of a promising new Web 2.0 financial company (Zopa pulled out of the U.S. market last month)
• Biggest jinx: Second Curve Capital CEO Tom Brown, who Tuesday afternoon explained why he is so bullish on bank stocks; the NASDAQ bank stock index proceeded to drop 200 points (10%) over the next two days (note 2)
• Most amazing stat: In his keynote, CEO Arkadi Kuhlmann said ING Direct (USA) had originated more than 100,000 mortgages worth $36 billion, and initiated foreclosures only 15 times
• Best time: Dinner with Trey Reeme and the gang from TDECU who are not only some of the nicest people you could ever meet, but also provided absolutely stimulating conversation and some great laughs

Best of show: Drum roll please. After dozens of amazing conversations over three days, the company that most intrigued me is alt-payments startup Moneta (note 3). 

Notes:
1. I visited with only a couple dozen of the 300 or so companies in Orlando, so comments here are not meant to be an overview, just the highlights of my experience. As usual, I spent most of my time looking for new ideas and ended up spending half my time talking to mobile providers.
2. To his credit, Mr. Brown did not say bank stocks had bottomed; in fact, he said they could very well go lower. But by this time next year, he expects a substantial turnaround. It was a great presentation.
3. Moneta didn't have a booth, but board member and investor Ashish Bahl was in attendance and briefed me on his firm. We'll provide more details on the company later. 

The world's largest online banking base (note 1) grew an impressive 11% year-over-year, rising to 22.8 million active users, an increase of 2.2 million from 30 Sep 2006 (note 2). 

Bill payment grew slower, up 7% or 800,000 users, ending the period at 11.6 million active users. Overall bill pay volume is $224 billion annually, or $1,600 per user per month. Bill pay as a percent of online banking fell more than one point to just under 51% (note 3).  

Online Banking     Bill Pay     % of OL using Bill Pay

2007        22.8 mil            11.6 mil              50.8%

2006        20.6 mil            10.8 mil              52.4%

Change    +2.2 mil            +800,000            (1.6%)
                +10.7%               +7.4%

Notes:
1. As far as we know, no bank in the world has more active online users; however, one could argue that PayPal, with 37.5 million active users in the latest quarter, is larger. Interestingly, ING Direct is closing in on BofA on a worldwide basis. With its Sharebuilder acquisition, ING Direct has 20 million accounts worldwide, about 30% in the United States, although not all are active, which BofA defines as being online within the past 90 days.

2. According to Doug Brown, Bank of America's SVP Product Innovation E-Commerce Channel Services, as cited during his BAI Retail Delivery presentation.

I'm heading home from my 14th Retail Delivery Show, sponsored by BAI. The show has evolved over the years but at the core, still remains a huge technology conference. With more than 5,000 in attendance, equally split between the buy side and the sell side, it's a one-stop shopping experience for just about any piece of software, hardware, or expertise you'll need for all your retail channels, online, branch, ATM, call center, and especially this year, the mobile front (note 1).

Mobile rules
For the second year in a row, mobile delivery was a hot subject, with a number of great presentations on the subject. I didn't attend them all, but here are highlights of what I saw:

• Bankinter demonstrated how the mobile channel has as much utility, if not more, than Internet banking. My favorite stat from its presentation: 20% of the bank's retail interest rate swaps, about 200 per month, are initiated via cellphone.
• South Africa's FNB, Absa, and other banks are having such success with the mobile channel that they expect mobile banking customers to surpass online customers sometime in 2008.
• Richard Crone, Crone Consulting, was mobbed like a rock star after his presentation the first day; people crowded five deep around the podium to hand over a business card in exchange for a copy of Crone's presentation. 
• Firethorn CEO Tripp Rackley announced at an invitation-only breakfast-gathering that his company had been acquired hours earlier by Qualcomm for a cool $210 million.
• Bank of America disclosed it had attracted 500,000 active users to its mobile banking service launched 6 months ago. Although, that's more mobile users than all other U.S. financial institutions combined (note 2), it's only 2% of the bank's 22.8 million active online bankers. According to TowerGroup, 90% of those who tried mobile banking at BofA have remained active with 99% checking balances, 87% looking at transaction history, 10% making funds transfers, and 5% paying a bill.

Online banking is a virtual no-show
While the big online banking vendors were out in force, fewer small companies were out touting online banking solutions. Only 28 of 350 exhibitors listed "online banking" as one of their product areas, compared to 41 showing CRM solutions and 70 with branch banking products. 

There was even less activity in the educational sessions. It wasn't until the second-to-last session of the conference that "online" was included in a session, The Next Generation of Online Banking: Profiting from Untapped Markets, by Forrester's Cathy Graeber, and Washington Trust's Michael Rauh (see BAI coverage here). 

Alt-payments on stage
On the first day, Steve Mott of BetterBuyDesign chaired a panel discussion, Debit - The Next Generation of Profitability, with PayPal's Dan Schatt (formerly of Celent) and HSBC's Daniel J. Eckert discussing Tempo (formerly DebitMan). The session barely touched on traditional debit and was much more focused on what's now called "decoupled debit" and its potential to disrupt the Visa/MasterCard/AmEx/Discover hegemony (see HSBC article below).  

More information
—BAI's online coverage included blogs, podcasts, and longer articles (here).

—American Banker Technology Editor Steve Bills filed several reports from the conference (subscription required):

• Greenspan: Don't Blame Regulators
• Mobile Shift: Payments a Key Next Step
• HSBC Card: Decoupled, with a Twist
• Mobile Banking's Buzz Finally Matched by Marketing

Notes:

1. Mobile consultant Richard Crone counts 76 mobile vendors operating in the United States plus at least four more operating in stealth mode.

2. Online Banking Report estimate, also same conclusion reached by TowerGroup in recent report.

Editor's Note: I've been sitting on this post for a few weeks because I don't want to sound like I'm on a virtual soapbox. But since so many influential banking execs were in attendance, I feel it's important to provide an alternative view. So...

<Climbing on soapbox> Am I the only one who thought the "branch experience" keynote at November's BAI Retail Delivery Conference was about 5 to 10 years behind the times?

Sure, I like the Umpqua Bank story as much as the next person, probably more so. I went to CEO Ray Davis's talk in a back room at Retail Delivery about ten years ago and was blown away by his retail innovations. It's in the top four or five most memorable presentations I've ever heard, and I'm glad the strategy has worked so well for them.

And I'm all for remodeling branches to keep up with times, but the Microsoft-produced video he showed, which was shot in Umpqua's Pearl District branch in Portland, was so far-fetched it bordered on ludicrous. (Note: This was Microsoft's "vision" of banking's future, not the bank's. Umpqua merely provided the futuristic location. Here's Microsoft's press release.)

The video – intended to demonstrate how in the future a fully networked high-tech, high-touch branch could serve customers better – was visually appealing, and, if there was no Internet, it might even be on the mark. But why would the wired diva in the video pay $20 to take a cab to a branch to complete her mortgage application? Surely she would have logged in, perhaps via video conference if needed, and handled it from her home or office, saving not only the $40, but also the half-hour trip. 

Umpqua succeeded because it's a great community bank, not because it had its own brand of coffee and Starbucks-like interiors. Those gimmicks grabbed attention and brought in new customers, but the bank thrived because it created an environment where its front-line employees were able to pay attention to customers and serve them better than its mega-bank competitors.

But today it would be a waste of resources to embark on a strategy similar to Umpqua's. By the time it would become fully implemented, 2009/2010 at the earliest, the world will have moved still further from the old apply-for-your-mortgage-in-our-lovely-branch model.

What's far more important going forward is the "out-of-branch experience" – online, phone, and mobile-phone hybrids. You will have ten, twenty, even 100 times more interactions with your customers outside the branch than inside.

Yes, those branch interactions are still vitally important, especially if they involve a new account or serious service issue. But branches will never again be the driver of customer satisfaction they once were. Bank on it. <Stepping down now>

For more information:

• See our Online Banking Report #128, The Demise of the Branch

I had a good chat with CashEdge <cashedge.com> VP Neil Platt at BAI's Retail Delivery last week. The company is busy working on a much-needed channel integration initiative so that account applications begun online can be completed with a phone call or even a branch visit, with no need to start all over from scratch.

The company hopes it can capture half of what it estimates is 70% of completed online applications that go unfunded
(see chart inset).
If that's true, the payback for the solution, at least at larger financial institutions, will likely be measured in months, if not weeks.

Other projects in the works:

• Cross-selling other bank products during the new account-opening process
• Facilitating other types of applications, such as loans
• Improving risk management by tapping additional data sources outside the credit bureau

CashEdge is a great example of a specialist that carves out a profitable niche in a relatively narrow, but risky area of online operations, new account funding. Thanks to big clients such as Citibank, the company is on track to facilitate one million online account openings this year, about a quarter of the estimated 3.5 to 4 million new checking and savings accounts opened this year online (Note: CashEdge estimates). 

The company ranked number 101 in INC Magazine's list of the 500 fastest growing private companies. According to the published figures, the 177-person company grew from just over $1 million in revenues in 2002, to approximately $10 million in 2005.

"The biggest profit center at banks is customer ignorance, which banks have mistaken for customer loyalty."
-- Gary Hamel, speaking to 1,000+ bankers at BAI's Retail Delivery Conference, Nov. 15, 2006

I've always been a sucker for management-guru speakers. I can still remember Tom Peters speaking at a sold-out show in Peoria, Illinois, back when I was a wet-behind-the-ears management-trainee for Caterpillar. It was 20 years ago during the height of "In Search of Excellence" mania and it helped me realize a lot can be done to improve business performance.

So every year I make it a point to sit up front when BAI trots out the guru-du-jour to inspire the banking crowd. This year, it was Gary Hamel, a Harvard guy that, I'm sorry to say, I hadn't heard of prior to Wednesday (see the End Note for a summary of his recommendations presented to the BAI crowd).

But man did he grab my attention with his challenge to the assembled bankers and tech-company reps (see quote above). He believes banks are vulnerable as customers become better equipped to compare the price of various financial services, a natural role of the Internet.

The importance of switching tools
Hamel believes financial services loyalty will disappear once customers discover how easy it is to move their accounts to pick up a hundred basis points on their savings rate, or avoid $35 overdraft fees.

In his BAI presentation, Hamel pointed to U.K.-based uSwitch <uswitch.com> as an example of a new tool to help financial customers compare and switch banking accounts (we'll profile it in an upcoming article).

As Hamel was delivering his keynote, Intuit was busy in a nearby Mandalay Bay eatery briefing analysts on its new account switching service, scheduled to go live December 15. The clever service is built on the Teknowledge aggregation engine acquired last year (data sheet here). Intuit's service is similar to Yodlee's service announced in September (see our coverage here). We'll be covering it in more detail as it goes live. 

End Note:

Hamel's management philosophy
I have yet to read Hamel's books, but what he talked about Wednesday could be boiled down to the following:

• Employees shouldn't be "managed" they should be "led."
• In practice, he'd like to see nearly all management eliminated and replaced by small, self-managed teams working to achieve company goals.
• As much as possible, teams would make their own product, pricing, and staffing decisions.
• Compensation would be highly dependent on the team's results in achieving the ambitious profit goals set for them by the company.
• His examples: Whole Foods, W.L. Gore, and Google.      

During 11 years of publishing Online Banking Report, we've written about 500 words on so-called "mobile banking."

Even though it was a much-hyped topic in the late 1990s, our answer when asked about mobile banking was, "Fix your Web-based banking, add email alerts, and mobile will take care of itself."

But it looks like times may be a-changing. Cingular is throwing its considerable muscle into a phone-centered service using Firethorn's <firethornmobile.com> new platform (see homepage right), and the U.S. market for wireless services is enormous (per MasterCard & Cingular during their Nov. 16 presentation at BAI's Retail Delivery Conference):

• 2 billion mobile phone users worldwide, including 218 million in United States (per Cingular)
• Nearly 80% of U.S households own one (per Forrester)
• $660 billion of revenue for voice, messaging, and data services
• 75 million U.S. mobile phone users sent a text message in September (per M:Metrics, 20 Nov. 2006)

Even more interesting, ClairMail shared market research showing that nearly two-thirds of U.S. consumers aged 18 to 34 have used text messaging during the past three months, demonstrating that even in the laggard U.S. market, a core group of consumers is ready, willing, and able to use the phone for more than just voice calling.

Analysis
There are three main reasons why mobile banking's time has arrived:

1. It works on common phones: Previous generations only worked on a subset of high-end PDAs; now most mobile phones can handle mobile banking.

2. It has a business case: Mobile banking can both increase fee income by being a core component of a Premium Online Banking service (see Online Banking Report #109) AND lower costs by migrating voice calls away from the IVR and into self-service.

3. The youth movement: Younger consumers interact with each other in real time via text and instant messaging. There is little doubt that they will value the same type of interaction with their bank.

We'll be looking at this subject in much more detail when we publish our first exhaustive report on the subject in January (see Online Banking Report in late January or early February).

BAI's Retail Delivery Conference continues to offer an excellent array of speakers on almost every delivery topic, from the "branch experience" to "optimizing multi-channel delivery." But one area that's barely covered is loan originations. 

Only one session, out of 36 total, dealt with lending issues this year. And it was a last-minute replacement, not even in the program guide, substituting for NetBank and UPS's Banking on Brown, scrubbed after the announcement last week that the effort was being shuttered (see our coverage here).

Cornerstone Advisor's Steve Williams presented Consumer Lending: It's Not Just a Transaction Anymore. Although lightly attended, due to its placement at the closing moments of the show, he discussed a number of great ideas for improving loan originations, both online and in other channels. We'll look at some of them in more detail in coming weeks.

The presentation is available via email from swilliams@crnrstone.com. 

For the next three days, I'll be in Las Vegas looking at the hottest new technology and innovations at the largest financial services event in the world, BAI's Retail Delivery Conference.

I'll report here on some of my favorite topics. If you are there, let me know what you found most interesting by emailing jim@netbanker.com.