Mobile Enabling Financial Services - (Financial Services Providers) - 12 years old article

{****** This article was written in 2001 -2002 on Mobile Strategy and Plan for Financial Services ....I thought may still have some relevance ******}

Mobile Enabling Financial Services

Mobility has to be embraced by the Financial Services Providers (FSPs) is clear to all. The big questions are how, when and for what services. This article gives some broad analysis to address these questions. The findings are that financial Information based services should be embraced immediately; the transactional services should be the medium term goal, i.e., within 6 months to a year, and finally by 2003 FSPs need to embrace the full customer relationship including one-click transaction, live advice, personal mobile Ads, and third party sales. 

The Financial Services Providers (FSP) including banks, Investment institutions, Insurance firms, etc, will have to adopt their offerings to the new channel to take care of the uncertain future. Although the immediate benefits of the technology may not look much due to various security related and other issues, however, the potential that mobile access offers is so great that FSPs will be forced to embrace it. Despite the initial reluctance in adoption of the technology, the FSPs will have to follow a new multi- platform strategy in offering their services. The reasons for the shift are not hard to assess.

Instead of waiting for technologies to stabilize and giving mobile delight to customers, it makes sense to deploy mobile applications now.

Mobile Access to Internet is increasing rapidly, in general. Enterprises are already making plans to invest in mobile technologies for mobile enabling their employees and customers for business purposes. This will accelerate the demand for financial services on mobile devices 

The FSPs who start these services first will have the advantage. Rather than waiting for conceptualizing a Killer Application, it would be better to adapt to wireless within the constraints of the technology. Besides the first mover advantage, this offers an experience with a technology that is continuously happening and will be improving- if we go by the new evolving networks based on increasingly powerful industry standards of GPRS, EDGE and UMTS. These are leading to next generation of wireless networks called 3G, which can provide up to 2 Mbps bandwidth. Hence, instead of waiting for technologies to stabilize and then giving mobile delight to customers, it makes sense to deploy mobile applications now. 

Financial Services

Financial services can be segmented into Retail Banking, Retail Broking, Investment Banking and Mobile payments. Beside these FSP may be providing services related to Insurance, Financial advising, Loans, Smart Cards, etc.

Survey data from TowerGroup says that users of wireless financial services in World Regions will grow at a rapid pace, reaching 35 million in North America and 77 million apiece in Western Europe and Asia Pacific by 2005. The analyst reports indicate that any FSP cannot afford to ignore the new channel. However, the question is what services to mobile enable and how to mobile enable. Will there be sufficient ROI on the investment made in the wireless applications? In the short term, it appears that profitable ROI may not be there. However, it is important to invest now in this new communication channel to the customers. An important reason is that, wireless is not only going to take a share of the financial market its going to expand the market as well. Customers, who are going to be more mobile in future, cannot ignore the value of all-time banking services.

M-Commerce Value Chain

In any relationship between a customer and a business, there are three levels. The first level is related to the content provisioning about the business. This may be about the services offered by the business or about the specific service that the customer is already subscribing or buying from the business.

The second level is the transactional level, where the customer has the option of initiating a business transaction with the business or vice-versa. Growing to this level on a new channel of communication requires a confidence about the security and authentication on both sides. Also, both parties need to be confident about the stability of the channel.

The third level is the Relationship building when both the customer and the business are confident of each other as well as channel; both have experienced the transactional level to some extent.

In the financial services scenarios, customers getting financial information on the hand held devices over wireless links, i.e., level one is already a reality. Any FSP who has not reached this level is well advised to start the wireless service.

Any FSP who has not reached Mobile Content Provisioning level is well advised to immediately start the service.

One lesson of dot com burst was that one should exercise caution while starting any technology based channel. Too much of caution in the M-Commerce world may, however, lead to huge loss in revenues and also, what is more dangerous, loss of customers to competitors who are more tech savvy in the eyes of the customers.

The FSPs have to graduate to the second level quickly. The second level is more difficult as it involves actual money changing hand in each contact with the customer. It reduces the total cost of the transaction for the FSP. However, it is more difficult to achieve because of security and limitations of the devices. We understand that by end 2002 this level will be attained by most of the financial institutions. However, the profitability may require adoption by consumers in large numbers.

The ultimate goal of all FSPs, is to enable single click transactions, live advice, location specific transactions, personal mobile advertising and third party sales from the mobile device. This level will require mobile applications and infrastructure that guarantees more security, customization, location-based actions, time sensitivity, device-neutrality and easy of action. The FSPs would be able to graduate to this level within a year, i.e., by the start of 2003. Although the schedule given here looks tight, we believe that the investments already made by the Wireless Service Providers (WSP) in the infrastructure will require them to search for services that can lead to customer ownership. In their search the WSPs will have to hit on the financial services to get the ROIs. The FSP anyway will strive to move up the value chain of the m-Commerce. This interplay of WSPs and FSPs will create more value for money for customers, as they will get the benefits and convenience of wireless banking on a continuous basis. Initial revenues, however, will be reaped by the WSPs. As per a Gartner prediction last year, WSPs will be the real beneficiaries of 

the financial data services. For FSPs the wireless delivery channel only adds to the total cost. FSPs are actually in a catch-22 situation. They have to invest in non-paying wireless services or else they will be at a considerable competitive disadvantage. This situation will continue till the end of this year. However, we believe that 2003 is the year of wireless financial services.

Given the scenario described above what should be the strategy of the FSPs in adapting to the wireless technology.

Success Strategy

Before defining any grand strategy, it is imperative to understand the guiding principles that should drive that strategy. The importance that the FSPs should give to customer retention and ownership should be more than that given to revenue stream. The applications need to be innovative and should be quickly deployed. Any service provided to the customers on mobile devices should be personalized as the mobile device is considered very personal especially in Asian and Japanese geographies. FSPs should strive to achieve synergy between physical, electronic and mobile commerce. This synergy should create a holistic strategy for the FSP.  The basic point is that the strategy should be geared towards the specific customer profiles of the FSP. It should be mentioned that unique profile of the customers for the specific FSPs is a major factor affecting the mobile strategy.

We propose at the broad level the strategy in embracing mobile technologies for the FSPs. The FSP should start with a goal of achieving the highest level in the mCommerce value chain. Rather than waiting for markets, technologies and wireless services to improve, it is imperative that applications should be deployed quickly. Taking care of competition, as far as possible, differentiate the services. Continuous innovation in differentiation is the crux of the matter.

The FSP should start with a goal of achieving the highest level in the mCommerce value chain.

Most important point in the strategy is the collaboration that should be achieved with all players across infrastructure value chain. This includes tie-ups with Operators, Mobile Content providers, Existing Web Content providers and technology providers.

However, the weakest link in the whole process, i.e., end-to-end security, should be properly planned. This planning may require readiness to pay for security breaches.

Taking all of these things into account a Roll Out plan of applications at each point of the value chain should be made and executed.

Conclusions

FSPs cannot afford to ignore the wireless channel to the customers and employees. The channel will require services to be offered to the customers. The levels of value defined for mCommerce starts with the information provisioning and ends at the mobile Customer Relationship Management (mCRM). By the end of this year, most of financial institutes would have moved up to the second level of transaction-enabled services. We believe that by 2003 the mCRM will provide the key competitive advantage to FSPs.

A Roll out plan of financial applications keeping the above scenario in consideration is the major decision that FSPs need to take NOW.

Intelligent Weapon Power Scores for C5ISR Combat Force

Modeling and Evaluation of Weapons Systems –

Intelligent Weapon Power Scores

One of the most complex problems is to create a mathematical model of combat between two military forces. This is further impacted by the increasing impact of changes in technology and new-age combat systems that are emerging continuously. Traditionally, weapon systems were modeled to include four key capabilities in defining a score or a number to indicate key capability of the weapon system. For example, weapon power scores described in our book Strategic Decision Making – Applying the Analytic Hierarchy Process, Springer UK, 2004. The capabilities that were considered are - lethality, self-protection, operability and integration of combat systems with other systems. However, we have seen a remarkable evolution of technical systems in the last three decades with extreme capabilities in information and information processing i.e., computing, becoming the key in the modern combat systems. We describe this trend as law of increasing intelligence of technical systems. In the light of this law, we propose that weapon systems capability needs to be evaluated and scored by including three new capabilities – that is – information processing, decision-making and system learning. This leads us to propose a new metric and methodology termed intelligent weapon power (iWPS) scores to evaluate any weapon system on a same capability plane. This concept of iWPS can be used for static force comparisons, in war simulations, war games and combat scenario evaluation for the new world.

Weapon Power Scores

There exist various techniques for force comparison taking into account quality or effectiveness of weapons besides the quantity of weapons held by opposing forces. These were commonly referred to as Fire Power Scores (FPS) methodologies. Basic idea in FPS methodologies is to assign a numerical value to different weapons indicating their war-making capability. The aggregated product of quantity and fire­power scores of various weapons in a force gives the Force Strength (FS) of the force. Various firepower score methodologies have been developed on the basis of expert judgment, historical data analysis and combat simulation. Some of these methodologies are Weapon Effectiveness Index (WEI)/Weapon Unit Value (WUV) which is based on expert   judgment, Potential Anti-Potential (PAP) Method which uses combat simulations, and Operational Lethality Index (OLI) based on historical data analysis, etc.

                Most of the FPS methodologies for so called static analyses give less importance to other factors such as self-protection capability of weapon system, ability to operate in all weather conditions and at night time, etc., We proposed augmentation of FPS with survivability of the weapon system to give a realistic picture of combat potential of a force. The new score was termed Weapon Power Score (WPS). Later in our book Weapon Power Scores were modified and extended to incorporate other factors such as on-board self-protection capability, operability and ability to communicate with other weapon systems through Command, Control, Communications, and Intelligence (C3I) links.  Expert judgement has been used for the evaluation of WPS.

The evaluation of WPS involves assigning a numerical value to each weapon system of Armed Forces of Adversaries indicating its combat effectiveness. The methodology to evaluate WPS of various weapon systems is given  below. WPS is defined as

WPS = Operational Lethality Index (OLI) ´  (1+Self Protection Index (SPI)) ´

            (1+ Operability Index (OI)) ´ (1+Integration Index (II))                                     (1)          

               

Lethality of a weapon is expressed as Operational Lethality Index (OLI). In this method, empirical formulae are provided for determining these indices. The method divides all weapon systems into two broad categories, namely mobile fighting machines and non-mobile fighting machines.  For non-mobile weapons the OLI is defined as a function of various factors such as Rate of Fire, Number of Potential Targets per Strike, Range Factor, etc. For mobile fighting machines, the OLI is calculated by adding the separately calculated OLIs of all of the weapons on the mobile fighting  machine and  multiplying this result by several performance factors. The methodology  is valid only for land warfare with close air support for army operations.

Besides lethality, it is observed that other factors such as on-board self-protection, operability and capability to get integrated with C3I system also plays important roles in weapon effectiveness. Weapon capability is enhanced if the weapon has characteristics that improve their  ability to survive in the battle. The characteristics may include on-board radars, decoys/chaff, Electronic Counter Measures (ECM), Electronic Support Measures (ESM),  armour protection etc. There are certain on-board systems that enhance the self-protection capability of the weapon system. This is reflected in the Self-Protection Index (SPI). The SPI  takes value in the range (0,1), is added to 1 and the result  is multiplied with OLI. The multiplication indicates that the lethality of the weapon system is considered to be contributing to effectiveness and the extent to which the weapon system has on-board self-protection capabilities improves its effectiveness. The value of SPI for various weapon systems also takes into account the environment in which the weapon system will be operating. Thus, for example, SPI for infantry weapons is considered as 0.85 as it has been observed the infantry casualties in a battle are usually 10% to 15%.  The effectiveness of a weapon system also depends upon its ability to operate in adverse weather/environment conditions and night-time operations. This is reflected in the Operability Index (OI) of the weapon system.  The OI indicates the ability of the weapon system to operate in adverse weather and night-time operations. The value of OI is chosen from the interval (0,1), added to 1 and is multiplied to the product of  OLI and (1+ SPI) indicating the fact that a weapon which can operate only under ideal conditions will have effectiveness as OLI ´ (1+ SPI) (i.e., OI = 0). However, if the weapon can operate in extreme conditions as well then its effectiveness  is enhanced i.e., OI > 0 indicating the flexibility of the weapon system. Another factor enhancing effectiveness of weapon system is their ability to get integrated in the C3I system. This factor depends upon the communication links of the weapon system with various Surveillance systems and Command and Control systems. This is represented as the Integration Index (II) of the weapon system. The value of II is also chosen from the interval   (0,1).

 
For the new network centric combat force - the so called C5ISR force (Command Control Communication Computers Combat Intelligence Surveillance and Reconnaissance) force we propose the Intelligent Weapon Power Score (iWPS) which augments the WPS with three more capability assessment - information processing, decision making and learning and foresight. The new iWPS is a function of 7 capabilities

This is as per the law of increasing intelligence of technical systems (Reference] , the combat systems are embedded with more and more intelligence to become increasingly capable, agile, autonomous and collectively synergistic.  In the new network-centric warfare scenarios, the weapon power will have three more capabilities – information processing, decision-making and learning. The intelligent weapon power score (iwps) needs to model these three new capabilities along with the four key capabilities of the weapon power scores. 

Will post more details once the paper is published ....