Thursday, April 17, 2008

Mashups in the financial sector aren't just for the back office

I spent last week in NYC talking about mashups to a number of customers in the financial sector. I love going to NY, and last week the weather was beautiful and all the designer dogs were out in force in Central Park. The outlook from our financial institution clients wasn’t quite so perfect, however.

Here’s the message I heard over and over again: Mashups in the financial industry were only good for the back-office, not the front-line. So while we can help make their order-to-cash process mean and lean, we can’t help them bring innovative products to their customers.

I understand the reasons. Financial institutions have to be conservative. When bankers and investment institutions stray from the straight and narrow, somebody will likely be in front of Congress right before they go to jail. S&L bailout anyone? Would you like to invest in some junk bonds? Let's depend on Enron for our retirement portfolio. Oh yes, let’s not forget subprime mortgages.

So while I understand their reluctance to adopt mashups on the front-end of their business, I think it is a mistake. I wouldn’t expose the banking systems until we get better mashup security. But financial institutions have a lot of other offerings that aren’t tied directly to their transactional back-end systems.

Why should they bother?

Financial institutions have to walk a fine line. They are in a constant struggle to balance the need for governance, the heavy load of compliance, and a cutthroat competitive landscape. And the financial sector depends heavily on technology to be competitive. And not necessarily technology within a traditional IT organization.

According to a Booz Allen Hamilton study, for every dollar spent on ‘real’ IT, most industries also spend 78 cents on ‘shadow IT.’ That is, IT funded directly by, and implemented within the business. In the financial sector I’d be willing to bet the ratio is much higher. One bank employee I talked to said that embedding IT within the business is a necessary practice just to stay competitive. When one bank innovates, the others have to be right behind. That means tight coupling between the technologists and the business so new and innovative offerings can be out the door fast.

This sounds like a perfect job for mashups.

I’m not an expert on the institutional side, but I do have a number of personal and small business accounts with a couple of handfuls of banks and investment firms. As a consumer of financial services, I’ve got a number of ideas for how they could use mashups without compromising their core banking systems.

How about a money management mashup? Most banks have money management information, but wouldn’t it be a good idea to mash information from multiple sites, mashing book sales from Amazon? Then not only could the company provide good value to their customers, they might also be able to turn their website into a profit center.

Ditto for investment information. I have accounts with several investment firms, yet when I want to do any investment research, I have to search Yahoo! finance to get the financials and Google for any relevant news. I’d use a mashup that pulled that information together into a single page.

How about a mashup that pulls together many investment strategies? Again mashing up books from Amazon and information from some of the leading personal finance strategists. How about a mashup that lets me compare and contrast a company’s performance against some of its nearest competitors? Then mash in some Google Docs to let me save my analysis so I can retrieve it later.

And on the other side of the equation, banks and investment firms should turn some of their free web content into widgets. For example, Fidelity has a DJIA chart on their home page. If this was a widget, and they modified it to show provenance, Fidelity would get free advertising whenever someone added the widget to a mashup.

I’m not buying that mashups aren’t a good fit for the financial services industry. Most of the innovation, at least on the consumer side, isn’t in the back-end transactional systems. It’s out front, providing services, information and advice to customers.

Again, a perfect job for mashups.

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