Uncontested market space

The payments environment is undergoing dramatic change, driven by the changing behavior of payment services users. While consumers have clearly expressed a desire for something more convenient than cash, the supply side has been seemingly unwilling to meet this demand. Financial institutions have failed to provide handier and more convenient alternatives to cash. Service providers should see this field as a blue ocean – a market space ripe for pioneering new payments initiatives.

The intense competition over incumbent payments services makes that market a red ocean – a market space crowded with many existing payments options. Would-be players need to create value propositions that can supplant existing payment methods if they wish to succeed. They need to develop ways that allow them to be more intimately intertwined with the activities of corporations and the lives of consumers . Indeed, the key to competition in financial services may lie outside the financial industry, coming from services and businesses that specialize in knowing the customer such as YouTube and Ritz-Carlton.
 
At Celent, we believe that new payments services for retail customers will be a watershed, replacing existing e-money and serving as a platform for information transfer and value transfer for a digital native generation. Next-generation transaction banking services for corporate customers will enable the overhaul of existing supply chains and the exercise of tighter control over corporate information and value transfer through digitizing and liberating contracts and settlement.
 
Celent sees great potential for significant innovation and a "payments revolution" from firms willing to challenge the status-quo despite the apparent immediate obstacles.

THE FUTURE OF ROBO-ADVISOR SERVICES IN JAPAN

Technology and New Business Frontiers

Megabanks, startups, and dedicated online brokers are all jockeying to leverage their strengths in a way that accords them the most advantageous position possible. The latest iteration in the ongoing battle to be first, to move early, and to outdo the competition is unfolding around robo-advisor services and technology with a key point being which customer categories to target.

Historically, the asset management business in Japan has revolved around the relatively lower-hanging fruit: customers that have both assets and financial literacy. Moving forward, that will change. It will be important for players to expand the market’s reach to include customer segments in the stage of asset creation, namely younger generations in the midst of becoming financially literate and the senior demographic of customers with little experience with technology. Early robo-advisor movers pushing the boundaries of the market and acquiring new customers will be crucial if robo-advisory services are to gain traction and not become a fleeting phenomenon. Many progressive global examples of companies and markets are responding to diverse investment and technology needs and, in doing so, helping to boost financial literacy across the market.

The robo-advisor initiatives that have hit the market in Japan so far largely appear tailored to support the sales of mutual funds. As easy-to-use, non-face-to-face channels, they are garnering interest from investors with a level of comfort with IT and a degree of financial literacy. Moving forward, further advancements that draw on both the asset management facet and technology are expected in the following areas.

  • Diversity of products: Expanding offerings from general, publicly offered mutual funds to multi-asset classes.
  • Diversity of services: Online onboarding, portfolio management, reports, and alerts. Operation support that is a hybrid approach harnessing both existing contact centers and face-to-face channels.
  • Automation: Automated reinvestment and rebalancing. Supporting small-value and high-frequency trading.
  • Accommodating B2B: Pro-level sales support tools developed to offer the advanced features professionals want. Vendor-supplied cloud services and financial institution-supplied white-label service offerings for other financial institutions.

 

Sell Side Business Model

Overcoming the first obstacle presupposes a shift in the competition among firms marketing mutual funds. This would entail a move from the conventional model, under which they vie for short-term sales commissions, to a longer-term model in which revenue is generated from discretionary investment fees. Already, the number of wrap accounts is growing quickly as major players migrate rapidly to a wrap-account approach premised not on sales commissions but on discretionary investment fees (for investment services offered on a contractual discretionary basis that include investment choices, actual purchase or sale, and regular reports).

FIG 4: Surge in Wrap Accounts

robo4

This surge in wrap accounts has spurred debate. Observers point to issues in products, service content, and management performance; in concrete terms, this means the fee structure (major firms say that they typically charge a total of around 3% for mutual fund advisory fees, transaction and management fees, and fees related to mutual funds), minimum contract amounts (major players accept contracts from 3 million yen in increments of 10,000 yen), and investment types (wrap account-dedicated mutual funds, programs combining actively managed funds, programs combining index-managed funds, etc.). Celent would like to believe that the proliferation of robo-advisors will enhance product offerings and advice across the investment cycle overall. The advent of mutual fund sales professionals (major banks and securities brokers) adopting robo-advisory technology can be expected to be the dawn of a new technological era not solely for wrap accounts, but also more broadly for the mutual fund business and the asset management business.

Celent believes that Japan’s asset management business sector currently faces two challenges that must be addressed particularly on the sell side.

  • Information imbalance: This refers to an imbalance or asymmetry in the quantity, quality, or use of information related to investment products or services. The market is flooded with investment information. However, there is a shortage of information and advice to cut through the noise to aid in reaching investment goals and to help prospective investors select products that match their risk appetites among the vast array of investment choices.
  • Know-how imbalance: This refers to an imbalance in recommending appropriate investment products and services as well as know-how related to investor management and development. The market is awash in investment know-how. Nevertheless, there is a shortfall of accurate understanding of investor orientation and experience. This is coupled with a lack of help for investors to optimize their portfolio holdings, subsequent follow-up, and advice to achieve investment objectives.

 

Just published the new Celent reports:

Fintech and Robo Advisors: Booming in Japan

 

END DESTINATION OF THE BOOM

Robo-Advisor Services: The Road Ahead

The fundamental essence of financial system services will remain, but with innovation, the inconvenient and irrational elements of the industry will be eliminated, falling by the wayside. The first touchstone for this will likely be the battle among robo-advisor services. With Japan’s highly integrated industry, mutual funds have from the beginning grown in the context of a modular (or unbundled) business structure. In the future, the insurance industry is expected to experience a similar change. It is only natural that bancassurance accelerates such structural change.

On the demand side, robo-advisor offerings are expected to play a supporting role in particular with retail investor asset management in terms of the (PDCA) cycle (which in this context refers to setting fund management goals, selecting and purchasing products or services, post-purchase review “checks,” and ongoing action). On the supply side, expectations are high that robo-advisors will yield benefits in B2B via functions that enable support tools geared toward professionals in the asset management arena. Moreover, observers have even loftier expectations that robo-advisors can play a role in enabling the asset management market to evolve into a sounder and more cyclically sustainable market.

Celent expect that robo-advisors in Japan’s market will work to supplement investment literacy on the demand side, heighten accuracy and transparency related to information (including price, quality, and risk) about asset management products and services, and supply technology that will help to solve the incentive problems that interfere with efficient business transactions on the supply side (and the oligopoly of the value chain).

From a technical perspective, there are three important points that would make the robo-advisor initiatives become widely accepted and profitable:

  • Use of refined smartphones with easy operability and robust security, providing a high-quality user experience.
  • Ability to provide diversity of products and services, low-value and high-frequency trading support, and automation.
  • Ability to (conduct / carry out) traceability and rebalancing, where assets are vigilantly monitored, and plans can be reviewed and revised accordingly.

FIG 7: Expectations for Robo-Advisors

robo7

 

Shift to the Modular Structure

It is incumbent upon the financial industry as a whole to shift to a modular demand structure to meet new demand spawned by new digital technologies and new demand in the digital industry. Institutions should ease their dependence on vertically integrated, direct sales — that is to say, keiretsu sales channels — to establish more dynamic and open delivery models. The demands and challenges of omnichannel transcend choosing an open or closed channel; rather, these demands proffer an ideal opportunity for companies to review and reconsider the optimal delivery model for their needs. Moreover, this means that financial institutions can collaborate with a wide range of non-financial sector entities including startups to broaden access to and the scope of the market that they can potentially claim as their own.

Financial institutions should strive to become trailblazing purveyors of financial services that leverage digital technology. In the financial services value chain, areas coexist where firms can and should go it alone to generate their unique in-house high-value-added services and products as well as other areas where they stand to benefit by collaborating with other firms to thoroughly drive down costs. Also, if firms thoroughly consider economies of scale and economies of scope, they can possibly parlay their cost centers into new profit centers and play a role in the industry infrastructure by collaborating with other firms. In the actual operation, after deliberating and implementing such initiatives, big-data analytics and automation of all processes will prove key. Here as well, a shift to a modular supply structure will be required, and a critical factor in determining the success of financial institution management will be alliances — namely how adroitly they select and choose to partner with other entities.

Fintech is much more than the application of novel technology in the sphere of financial services. Rather, it portends nothing less than a wholesale structural overhaul of the financial services industry that is an opportunity to envisage anew and redefine the industry’s future. There can be no doubt that Fintech transcends the mere establishment of a digital channel. Instead, it will clearly affect products, services, IT units, and sourcing models and, in so doing, provide the financial service providers of the future a chance to seriously consider exactly what kind of companies they would like to be and the corporate cultures they would like to foster.

FIG 8: Key Transformative Points in the Financial Services Industry

robo8

 

Just published the new Celent reports:

Fintech and Robo Advisors: Booming in Japan

 


JAPAN’S WEALTH MANAGEMENT MARKET

Japan’s wealth management market differs significantly from the global market in a number of ways.

Individual financial assets are managed with an emphasis on security and primarily allocated toward deposits, while potentially highly profitable securities — in particular, equity — are not typically preferred. The asset management emphasis toward savings deposits has persisted through the nation’s deflationary phase, but with the introduction of inflation targets and drastic monetary easing, this approach increasingly makes less sense. This leaves one wondering when the tide will change and who or what will trigger a change.

In January 2014, the government introduced a new initiative to encourage a shift in behavior from saving to investing. Called the Nippon Individual Saving Account (NISA) the program is designed to support the stable growth of household assets while boosting the availability of capital available for economic growth. While a combination of macroeconomic factors — including changes in exchange rates, a rebound in stock prices, and an upturn in the economic environment — seems to have the market headed in a more positive direction, Japan’s investment market still differs significantly from Europe’s and North America’s, particularly in areas such as the diversity of the composition of individual asset holdings, the investment environment for individual investors, and investment literacy.

FIG 2: Individual Financial Asset Breakdown: Japan-US Comparison
robo2

 

Growth in the Mutual Funds Market

Against this backdrop, the growth in funds allocated to publicly offered mutual funds has been particularly prominent. In May 2015, total assets under management topped 100 trillion yen for the first time, driven by an influx of money into open-ended mutual funds. As of the end of September 2015, this had reached 75 trillion yen, up 60% from 2012. This rise has been spurred not only by market value factors (a rise in asset prices) driven by increasing stock prices and a weaker yen, but also by trade-related factors — that is, new inflow of capital. Open-ended mutual funds turned positive in the first half of 2014, and in the second half of 2015, they returned to levels seen prior to the 2008 collapse of Lehman Brothers.

Two core factors are behind the growth in the mutual funds market: increases in channels and products. Channel growth principally signifies a diversification of intermediaries and intermediary types for bringing together mutual fund management firms and investors. The market was opened to banks in December 1998. After an eventful subsequent period, the formidable growth of the banking channel has put it nearly on par with the securities firm channel. As of the end of 2015, banks’ mutual fund sales, including private placements, had reached 64 trillion yen, accounting for 46% of the market; moreover, at the same time, the banking channel has similarly diversified its collective product lineup, including the following areas:

  • General mutual funds: Typical mutual fund sales through traditional channels
  • ETFs: Brokering analogous to listed securities brokering
  • Discretionary investment mutual funds (wrap account): Brokering for discretionary investment services
  • Dedicated DC (defined contribution pension) mutual funds: Dedicated sales for defined contributions to pensions

 

Wrap Accounts

Among these, the inflow of funds into discretionary investment mutual funds wrap accounts has been particularly prominent. Following 2012, the sector saw an influx of 1.4 trillion yen in the second half of 2014, and more than 1.2 trillion yen in the first half of 2015. This flood of funds has been fueled not only by the growth of products that meet consumer needs and more channels offering greater convenience, but also due to a shift in emphasis in sell side strategy from stressing sales commissions to one putting more weight on asset management balance and performance.

Until now, retail investors in Japan have exhibited a preference for major brands and the stability associated with them, resulting in investors becoming comfortable with an investment environment with a high degree of reliance on the sell side, namely the strategies of major financial groups. Further fueling the current surge in low-cost investing, which can expect high if unstable returns, will require raising investor financial literacy, providing novel products and services, and forging new sales channels that harness technology. There is vast “blue ocean” potential here for robo-advisory services to gain a foothold and thrive in the Japanese market.

 

Just published the new Celent reports:

Fintech and Robo Advisors: Booming in Japan

 

GLOBAL TRENDS IN WEALTH MANAGEMENT

The year 2016 proved a watershed for Fintech. It saw Fintech move from discussion and concept to implementation in the real world. Below are four key global trends in wealth management, the central theme of this post.

  • Fragmentation of retail services: There has been increasing diversification among purveyors of asset management services including major securities firms, discount brokers, and independent asset management companies. These include a rich variety of services and technologies that span online and self-service services as well as technology-based advisory services.
  • Emergence of next-generation investors: So-called Generation X individuals (those born between 1961 and 1981) are comfortable with technology and have adopted an investment style that accommodates schedules with steep time constraints. Meanwhile, millennials (people entering the workforce in 2000 or later, in the US, primarily those born from 1980 to 2000) are gradually becoming the core investment demographic, with more than 80 million individuals of the so-called digital native generation emerging as next-generation investors.
  • A shift to passive investing: There is a broad market shift afoot to index-driven investing from active asset management, which has peaked and is declining. Exchange traded funds (ETFs) are emerging as the next stage of passive investing.
  • Digitalization: Investors, brokers, and asset management companies are demanding applications with greater mobility and automated processes. Key issues here include investor-broker communication, social media, social trading, and crowdsourcing.

In addition, fragmentation is occurring in the asset management sectors of mature markets. Robo-advisor-driven services are gathering greater attention as a technologically advanced, low-cost means of automated asset management in a market that is increasingly crowded with players including traditional brokers (such as banks with domestic and international networks and comprehensive securities firms), independent investment advisory firms, and online securities companies.

 

Automated Advice

The definition of a robo-advisor can be slippery, differing by service provider and analyst. For the purposes of this report, Celent defines robo-advisors as new services from financial institutions that possess the following characteristics.

  • Key features seen in 2015: The three primary features are automation of onboarding and analysis, portfolio management, and reporting. Gradually, in addition to online assistance, human customer response initiatives, such as call centers, are beginning to appear. While in principle a non-face-to-face approach, automated initiatives are increasingly being expanded and coupled with manned support and full-line support a la those conducted by traditional operators.
  • Non-human advisors: Algorithms are used to support investment and portfolio-building based on the risk appetite of customers including tax optimization, all based on a customer profile developed from an online questionnaire.
  • Easy to understand: The process is streamlined to reduce customer anxiety and give customers peace of mind by using simple, typically three-stage processes that support investors from application stage to portfolio creation.
  • Small-value, low-cost options: Caters to small-value amounts in the range of $5,000 to $25,000 with investment (automated robo-advisor) fees in the neighborhood of 0.3%. These small-value, low-cost investments are customized services but automated and do not involve any manual (human) attention.

Robo-advisor services are evolving at a rapid clip, particularly at the cutting-edge of the industry, and much of the effort in this area is being concentrated in the three areas below.

  • Easy-to-use non-face-to-face channels: Eliminate the tradeoff between price and convenience, offering services that are both low in price and highly convenient.
  • Full service investment support from onboarding to reports: Automating services will enable greater processing efficiency that allows industry players to break through existing limits in their capacity to handle small value investments.
  • Hybrid operation support catering to diverse needs and levels of literacy: Online self-help services combined seamlessly with existing contact centers and face-to-face channels.

 

Segment Targeted by Robo-advisors

Initially, the demographic segment targeted by robo-advisors was a fragmented portion of the retail investor market, but this has changed. As noted above, in North America robo-advisor services are most embraced by traditional and active retail investors (individuals around age 50 located somewhere in the mass to low-mass affluent demographic).

However, this demographic is not static. With age, experience, and increases in investable assets, the need for investment advice rises. In addition, advancements in technology and investment literacy are blazing a trail to undeveloped market areas for robo-advisor services. Indeed, investor segments such as seniors and the affluent, which have until now been largely untouched by robo-advisor developments, can be expected to increasingly hop on the robo-advisory services bandwagon.

FIG 1: Automation of Advice Market Segmentation (US)

robo1

 

Just published a new Celent report:

 

WHAT OUTWEIGHS THE CONVENIENCE OF CASH

The situation surrounding financial and payment services has undergone dramatic change. In any era as dynamic as ours, a comprehensive conceptual framework that can serve as a guide pointing toward a better future is essential. Toward this end, Celent uses its payments taxonomy and payments value chain frameworks as lenses to examine evolution in the payment sector. [1] Payments innovation is also informed by the changing behavior of payment services users and exists in the context of the payments value chain. Service providers should see this field as a blue ocean—a market space ripe for pioneering new payment initiatives.

The intense competition over the already existing services, which is called legacy systems in Japan, makes the market a red ocean. There is no room for anything new in the interbank payment settlement systems such as the BOJ-NET or the Zengin; ATM as a cornerstone of cash distribution; and credit card network systems as the most noncash methods of payment. We need to think of some “value proposition” which is new and beyond already existing payment methods. Despite consumers in the digital era hoping for something more convenient than cash, the supply side is not aware of this demand. As a matter of fact, the number of online banking accounts is about 60 million. This accounts for only 20% of the number of ATM cards, which is 300 million. The financial services institutions have failed to provide handier and more convenient services than cash.[2] FSI which are thriving in Japan's growing e-payment market are not very traditional ones so far.[3]

Here, Celent wants to advocate a conceptual system as an open innovation platform that would create a platform layer (the formulation of rules under new frameworks) with an innovation layer (creation of new services within the new framework). The expectation is that this conceptual system could fulfill the role of API provider in the era of the API economy. This envisions a situation in which financial institutions use an infrastructure shared with the manufacturing, retail, and logistics industries, using the API to fuse together not only B2B but also B2C information—that is, information about consumer lifestyle and consumption patterns—with financial information to create a blueprint to enable technology to bring relevant financial services into the daily lives of consumers. Historically, the business or commercial information regarding companies and consumers’ lives has been far from integrated; doing so moving forward is aimed at illuminating the flow of related funds and creating a closer and more useful relationship between the two.

In crafting a vision of the financial services of the future, one must ostensibly imagine services that transcend the traditional confines of financial services and are more intimately intertwined with corporations and their activities as well as the lives of consumers. The advent of fintech continues to raise the expectations of financial services customers. Indeed, the key to competition in financial services may lie outside the financial industry, coming from services and businesses that specialize in knowing the customer such as YouTube and Ritz-Carlton, customer behavior prediction such as Google and Amazon, or even referencing how SNS seek to clearly iterate their services and realize simple interactions. In short, meeting these needs and expectations can be seen as a compass that points toward building the financial landscape of the future.

Celent prioritizes the following three points when it envisages “the future of financial services.”

  1. The technology evolution that is taking place through the building of financial market infrastructures: the rise of Bitcoin, Blockchain, and Distributed Ledger Technology (DLT) and their latest examples.
  2. Competition and co-creation in building these financial market infrastructures: Classical technology (ACH, SWIFT, etc., which are equivalent to Japanese Banks’ Payment Clearing Network) VS Emerging Information and Value Transfer (Next-generation digital gift card service networks of Gyft[4]  and Chain.com, Ripple’s[5] bi-directional messaging system coupled tightly with distributed ledgers for international banking payments).
  3. Blue Ocean Strategy on payment services: New services based on financial market infrastructures which have resulted from the fusion of old and new techniques; Resultant new digital lifestyle or new digital supply chains. 
  • a) for retail market: inexpensive Peer to Peer (P2P) money transfer services for less frequent and small transfers.
  • b) for corporate market: next-generation transaction banking services where commercial distribution, commodity distribution, and money transfers are all integrated.

These new money transfer services for retail customers will be a total watershed, replacing existing e-money. They will serve as a basis of information transfer and value transfer for digital native generation as well. On the other hand, the next-generation transaction banking services for corporate customers will make it possible to renovate existing supply chains and exercise tighter control over corporate information and value transfer through digitalizing and liberalizing contracts and settlements. Celent sees great potential for significant innovation and a “fund transfer revolution” in these new services.

Figure: Open Innovation Platform

open-innovation-platform

 

This area is explored in depth in the Celent report:

 

「現金」を超える利便性を求めて

金融と決済サービスを巡る情勢は一変した。いつの時代においても、こうした混沌とした時代における羅針盤の構想には、網羅的なフレームワークが不可欠である。セレントは独自の「ペイメントのタクソノミー(分類)」「ペイメントバリューチェーン」と呼ぶフレームワークを用いて考察する[1]が、決済のイノベーションは、決済サービス利用者の行動変化に起因し、その価値連鎖に存在すると考える。この領域で、新時代の決済フロンティアを開拓し、ブルーオーシャンを航海すべきだ。

「日銀ネット」「全銀システム」に代表される銀行間決済インフラ、「現金」流通の要であるATMや、「現金代替手段」であるクレジットカードのネットワーク網は、日本社会のレガシーシステムであり、その領域は既にレッドオーシャンである。構想すべきは、それらが実現していない「利便性」である。デジタル時代の消費者は、「現金」以上の利便性を望んでいないのか?いや、サービス供給者が、その需要に気付いていないだけだ。事実、ATMカードの発行枚数(3億枚)に対して、オンラインバンキングの契約口座数(6千万件)は2割に満たず、金融機関は「現金」以上の利便性を提供していない。[2] また、隆盛する電子マネーの担い手は、今のところ、伝統的な金融機関ではない。[3]

セレントは、「オープンイノベーションプラットフォーム」として、プラットフォームのレイヤ(新たな枠組みでのルールの形成)、イノベーションのレイヤ(新たな枠組み上の新たなサービスの創造)を実現する「構想システム」を提言したい。この「構想システム」には、APIエコノミー時代の「API提供者」としての役割も期待される。金融機関は、製造、小売、流通などの産業界とインフラを共有し、B2Bのみならず、B2C、つまり生活者の生活情報が、APIを通じて金融情報と融合し、いわば、テクノロジーが日常生活の中に、「金融サービス」を「溶かし込む」青写真を想定している。日常生活と企業の商流はこれまでシームレスでなかったが、これからはお金の流れをより身近にし、両者をより密接な関係にしようとしている。

金融の未来図を描くならば、金融が特別で独占的なサービスでなくなり、企業活動や消費生活と融合している図になるだろう。フィンテックの時代、金融サービス利用者の期待は高まり続けている。サービスを競うべき相手は、金融業界の外、ユーチューブやリッツ・カールトンの顧客認知、グーグルやアマゾンの顧客行動予知や優先顧客対応、全てのSNSが展望するサービスの可視化とシンプルなインタラクションかもしれない。その期待に応えることが、金融の未来図の羅針盤となる。

セレントは、「金融サービスの未来図」を構想するうえで、以下の3点が最優先の事柄として重視している。今後もこの重点ポイントでのインサイトを発信してゆく。

  1. 金融インフラを構築する技術の進展: ビットコイン、ブロックチェーン、分散型台帳技術の隆盛と、その先進的なユースケース
  2. 金融インフラの主流を巡るビジネスの攻防: レガシーな技術による金融インフラ(例えば、全銀システムのような各国のACH、SWIFTなど)と、新たに隆盛する、インターネットをフルに活用した情報と価値移動のインフラ(例えば、Gyft[4]とChain.comによる次世代デジタルギフト券サービスネットワーク、Ripple[5]による新たな国際銀行間決済サービスネットワークなど)の競合と共創の関係
  3. 決済サービスのブルーオーシャン: そうした新旧の金融インフラを駆使して提供される新サービスと、それが革新する新たなデジタルライフやサプライチェーン
  • 個人向け:少額低頻度のP2P送金を極めて安価に提供するサービス
  • 法人向け:商流、物流と金流を融合する次世代トランザクションバンキングサービス

個人向けの新決済サービスは、デジタルネイティブ世代の日常生活における新たな情報と価値移動の基盤として、既存の電子マネーを凌駕する破壊力を感じる。法人向けの新決済サービスは、決済指図と契約を電子化、自動化することで、企業活動の情報と価値移動の源泉を握り、既存のサプライチェーンを革新することが期待される。セレントはここに、破壊的なイノベーションと「資金決済革命」の可能性を見出す。

図: オープンイノベーションプラットフォーム

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E-money will play a central role when it comes to information and value transfer in the digital age

The widespread proliferation of electronic money hinges on convenience that transcends that of existing financial services. This convenience is not a replacement for the street corner ATM or convenience store, but rather qualitatively different in that it is part and parcel of the digital lifestyles of consumers.

Until now, financial institutions have gone to great pains to mechanize financial services. But financial services in the digital age must go beyond this to meet the needs of digital natives. This is perhaps best exemplified by person-to-person (P2P) services—namely the transfer of funds between individuals—that are conducted via the Internet.

Now is the time, not to be myopically focused exclusively on improving the bottom line by reducing costs, but rather for players to strive to effectively expand the top line and grow brand value.  There is a distinct possibility that electronic money will play a central role when it comes to information and value transfer in the digital age.

Bloomberg:  Apple’s Fight to Lure Japanese From Cash Starts at Turnstile

 

This area is explored in depth in the Celent reports:

Payments Systems Trends in Japan, Part III: Blueprints for the Next-Generation Zengin System

Innovation in the Japanese Financial Services Industry: Retail Payments

 

DIGITAL8

 

「現金社会」日本で存在感高める電子マネー、取扱額は2桁成長

電子マネーの普及は、既存の金融サービスを凌駕する利便性の提供にかかる。
それは、街角のATMやコンビニの現金の置換ではなく、デジタルライフの中にある。

これまでの金融機関は、金融サービスを機械化して提供することに腐心してきた。
デジタル時代の金融サービスは、デジタルネイティブのニーズを満たす必要がある。
インターネットを使ったP2P(個人間の資金移動)サービスがその代表となろう。

今こそ、コスト削減によるボトムラインの改善に終始せず、
新サービスによるトップラインの拡大とブランド価値の高揚に邁進すべきだ。
電子マネーは、デジタル時代の情報と価値移転の中核となる可能性がある。

ブルームバーグ: 「現金社会」日本で存在感高める電子マネー、取扱額は2桁成長

 

この分野は、以下のセレントレポートに詳しい

日本の銀行業界におけるレガシー・モダナイゼーション パート2:銀行業界への提言

日本の決済システムの動向パート3:全銀システム、次期システムの青写真

日本の金融業界におけるイノベーション:リテールペイメント市場における動向

 

Digital transformation

 

Blueprints for the Next-Gen Zengin, Part 4

It is here that Celent would like to put forth a conceptual system as an open innovation platform to realize a platform layer (rules formulated under the new framework) and innovation layers (creation of new services within the new framework). The expectation is that the conceptual system could fulfill the role of application programming interface (API) provider in the era of the API economy.

This is a theoretical blueprint envisioning a situation in which financial institutions share an infrastructure with industry—sectors including manufacturing, retail, and logistics. This will transcend B2B (business to business) to include B2C (business to consumer) such that information and data related to the daily lives of consumers will be combined through API with financial institution information, with the goal to bring technology—and through it, financial services—seamlessly into the everyday lives of consumers.

Historically, the flow of commerce and lives of consumers have been far from seamlessly connected. Moving forward, these technology and payment developments can be expected to bridge this gap by bringing the flow of money between the two closer together.

When envisioning the financial services of the future, one must ostensibly imagine services that transcend the traditional confines of financial services and that are more intimately intertwined with corporations and their activities as well as the lives of consumers. The advent of fintech continues to raise the expectations of financial services customers.

Indeed, the key to competition in financial services may lie outside the financial industry, coming from services and businesses that specialize in knowing the customer such as YouTube and Ritz-Carlton, customer behavior prediction such as Google and Amazon, or even referencing how social networking services (SNS) seek to clearly iterate their services and realize simple interactions. In short, meeting these needs and expectations can be seen as a compass that points toward the financial landscape of the future.

 

Figure 4: Open Innovation Platform

Zengin_FIG4  Source: Financial System Council, Celent

 

Just published a new report:

Payments Systems Trends in Japan, Part III: Blueprints for the Next-Generation Zengin System