1.0: Challenges for Telcos: The new EU Roaming Regulation
From June 15th, mobile roaming charges will be abolished for EU member States, after the European Council gave final clearance to the new regulation approved by the European Parliament. The effect of the new legislation will be that as of June 2017 telecom operators cannot apply any surcharge in addition to the domestic retail price on any EU roaming customer for voice call, SMS and use of data outside the customer’s host country while periodically travelling.
IDC foresees a smooth implementation of the new rules and successful adaptation of operators’ business models, given the safeguard mechanisms put in place in the regulation and the good balance achieved in wholesale roaming caps by negotiators. In both the consumer and business segments we do not foresee any hike in mobile tariffs in the short term, as operators are already adapting their business models to the new rules, and some of them have launched “Roaming Like at Home” (RLAH) schemes. It is also increasingly common for operators to bundle roaming allowances into their tariffs for business users.
In particular, we expect that the glide path of the wholesale data cap reduction will gradually ease structural differences among the countries and allows operators to adjust their business models without any substantial revenue loss. In the long term this will lead to low price and high volume (especially data) business structures across the EU area, with the corrective measures introduced with the new roaming regulation (Fair Use Policy in particular) helping preventing the risk of abusive or anomalous usage of RLAH and of rising prices from the operators’ side. Particularly, the level of detail of FUP policy guidelines will ensure a smooth implementation of RLAH, with sufficient level of transparency and control mechanism at the retail level. Besides, RLAH will work as a stimulus to reduce fragmentation across EU and more uniformity will be reached in terms of market characteristics, such as consumption patterns and costs of running the network, also ensured by operators’ ability to monetize roaming as a new business. A more unified European telecoms market, working from a single pricing approach and similar cost base, will be better prepared to collaborate, invest and innovate.
In the case of UK, the impact of Brexit on the English mobile market will depend on UK’s impending negotiations on withdrawal from the EU membership. However, even in the case of no agreement between UK and EU as well as no EU regulation to keep the roaming prices low, it is unlikely that mobile operators will explicitly re-introduce roaming fees to their UK customers travelling in Europe: operators are already moving towards roaming free/cheap plans, and even though they may be allowed to re-apply roaming charges, the move would be quite unpopular with the risk of undermining customers’ loyalty.
However, the final outcome does not depend on exogenous factors only, and eventually the future of the roaming business will greatly depend on the ability of operators to respond to the new challenges.
Read more here: 2.0: What Should Telcos Do With the New Roaming Legislation?
For more information, please contact Rosie Secchi (rsecchi@idc.com)
Quantum Computing: The Next Big Thing in Financial Services?
One of the questions you least like to be asked as an analyst goes something like this: "OK, so I've read all your reports and I've looked at your annual predictions. I've tuned in to your webinars and checked all your tweets. So tell me: what is it, that I don't yet know about, that will have a big impact on my industry in ten years' time?"
Good answers to this question are few and far between. But one candidate which has so far attracted little interest from the analyst community is Quantum Computing. This is surprising, as what we are talking about is the next generation of computing processors, and they promise to have far more processing power than anything we've seen before. Because of this, Quantum heralds a huge new wave of disruption for the financial industry. Some of the phenomena associated with quantum science may seem closer to science fiction, but forward-looking companies are already starting to explore its implications.
Computing 2.0
To put Quantum in context, Moore's Law holds that every two years, conventional processor speeds will double. This linear progression reflects the capacity of processor manufacturers to scale down the size of semi-conductors used in processors.
The principle that you can draw a straight line on a graph to represent increases in processing power has roughly held true in the decades since the Law was coined by Gordon Moore, of Intel, in 1965. A smartphone enthusiast can detect it in the announcements of chip makers in the mobile space. Last year's flagship Qualcomm chip, the Snapdragon 821, used a 14 nanometre manufacturing process. This year’s equivalent, the 835, is built using a 10 nanometre manufacturing process and squeezes 3 billion transistors onto a chip.
But as the scale of manufacturing processes on silicon chips drops closer to zero, the question of whether we can continue to expect predictable rises in computing power arises. Quantum Computing holds the key to averting this seemingly Malthusian crunch.
If you prick us, do they not bleed?
Rather than working at the atomic level of silicon chips, Quantum Computing technology looks to exploit the peculiar properties of particles at quantum level. Two such properties form the basis of this technology:
Entanglement - a phenomenon best thought of as pairs of particles which exist in different places, but whereby one reacts to stimulus placed on the other, instantaneously.
Superposition - whereby according to predictions of quantum mechanics, microscopic objects can be in two places at the same time. This has been demonstrated on caesium atoms already.
A machine which can harness these literally instantaneous processes will leave even existing supercomputers in the dust.
Is "Peak Digital" round the corner?
Quantum is by no means specific to the financial industry, since it is best viewed as the next generation of computers. Nevertheless, the vast capacity of quantum computers to perform analytics will make possible Artificial Intelligence (AI) solutions which surpass those that exist today. Anything (in any industry, not just finance) which uses cognitive technology or relies on complex modelling will become unrecognisably better when quantum goes mainstream. So, expect to see:
- Utterly transformed and more flexible digital assistants (although they will need to be called something else, because they will no longer run according to the zeros and ones of today's digital processors). Everyone expects that Artificial Intelligence will improve to the point that it is indistinguishable from human intelligence and indeed transcends it: Quantum is how that’s going to happen. This will equate to a hugely enhanced ability to deliver personalised customer service without human input.
- An arms race on the financial markets as quantum analytics is deployed to crunch the numbers and formulate trading strategies at lightning speed.
- The next big jump in fraud detection and anti-money laundering (AML) technology using Quantum-based intelligence.
There is also the promise of unbreakable encryption. Leave alone the question of whether it would even be legal, if two particles can communicate instantaneously through entanglement without leaving a trace in the physical world, that communication should be essentially unhackable. This could revolutionise inter-bank and intra-bank communication and bring new levels of protection from cyber threats.
Quantum upon us!
So far, IDC has covered only one announcement from IBM on quantum. But the topic is starting to gather steam. The mainstream media is starting to take more interest, evidenced by this cover story in The Economist. At least one client of IDC Financial Insights has enquired about it. There was a recent announcement by Commonwealth Bank of Australia and a vendor, QxBranch, about their intention to simulate quantum to start understanding what the benefits might be down the line. And BT has been demonstrating its pioneering work in the field of quantum cryptography, which I had a chance to witness earlier this year at its innovation centre in Suffolk.
Based on the sheer potential of Quantum Computing to bring new capabilities to many different areas of banking, and the fact that industry is already starting to wake up to the possibilities, it’s a fair bet that Quantum Computing will feature heavily in our thinking. You will see more of it in the research of IDC Financial Insights in years to come.
GDPR Readiness – Print Could Compromise Compliance
The EU General Data Protection Regulation (GDPR) is now in force with a transition period until 25th May 2018. IDC research shows that many organizations appear to have little or no understanding of the regulation, its scope, timeline or impact, despite the risk of huge penalties of up to 4% of global turnover or €20 million, (whichever the greater), as well as potential lawsuits, suspension of personal data processing and damage to reputation.
GDPR compliance is required by any organization – regardless of their location – that processes the personal data of “data subjects” (the natural person to which the data relates) in the EU. Processing of personal data refers to what can be done with data i.e. data activities such as: requesting, collecting, storing, searching, forwarding, deleting etc. The definition of processing is very broad: it is best to think of any action that ‘touches’ personal data as being in scope. Outputting of personal data including printing, copying, faxing and scanning is therefore considered as processing and therefore is subject to GDPR regulation.
Recent IDC Western European research shows that approximately 40% of respondents responsible for the purchase and management of printing and copying devices are completely aware of GDPR and its timescales. However more than 60% of those respondents were unaware that GDPR includes print which considering the print focus of their roles gives cause for concern.
Overall GDPR awareness is growing albeit slowly and there is clearly a long way to go for many organizations. You may think that your organization is on track and working diligently towards full compliance in time to meet the 2018 deadline. But don’t overlook your print infrastructure as it could be the chink in your armour that will mean non-compliance and cost you dearly. If you are a print provider there is clearly an opportunity for you to ensure that your customers meet the print requirements that help will help them attain GDPR compliance.
If you want to know more about IPDS and how it’s complying with EU Regulations, please contact Sharon McNee.
It’s Time for Banks to Improve Mobile Banking Satisfaction
The gap in usage and satisfaction between the mobile, online and branch channels of European retail banks is stark, according to our recently completed 2017 European Consumer Survey. Of the 1934 consumers surveyed across France, Germany and the United Kingdom, only about two thirds said they use mobile banking, compared to more than 90% for each of branch and online.
And satisfaction level of those who used mobile banking is lagging branch and online as well. A smaller proportion of people rate mobile banking as “excellent” than branch or online: a smaller proportion also rate it “very good”. And a larger number rate it “fair” or “poor”, the lowest two categories.
Despite these discouraging numbers, banking, along with so much of the rest of our lives, is moving towards the smartphone as the dominant channel, and the reasons for this have been repeated many times. Smartphones are ubiquitous, convenient and increasingly functional compared to the alternatives.
There are a few possible reasons why people are less satisfied with the mobile banking channels than others. One is that mobile banking is a young channel compared to the branch and even online. A second is that people may have higher standards for mobile than other channels, as they become so used to communication, gaming and media consumption on the mobile. But there is strong evidence that people are simply nervous about managing their money on their phone.
We asked the respondents why they might not be happy with the mobile banking channel as it currently is, and almost half answered that they are concerned about the security of the channel.
IDC Recommendations to Financial Institutions:
Changing the conversation on security
Not least because a strong argument can be made that mobile banking is more secure than online or branch channels, working out how to move the 40% odd of customers who don’t currently use mobile banking onto their apps is therefore perplexing banks. This is, of course, against the backdrop of PSD2 which is expected to cause a major shake-up in customer experience when starts to take effect from next year. Hugging customers as tightly as possible should be an absolute priority before the new account aggregation and payment initiation providers appear.
But it remains the case that banks on the whole have not talked up the security benefits of mobile to the extent that they might, and this could be the key to push mobile penetration up past 70, 80, 90% of the customer base. The mobile can be presented as a weapon that the customer can wield to protect their own money in a few ways. These could include:
- Real-time updates that can alert the customer to every transaction, allowing them to look out for and report anything they don’t recognize
- Paperless communication lessening the chance of old-fashioned identity theft
- Strong customer authentication through biometric technologies which are becoming the norm for smartphones
- The ability of customers to block their cards the second they notice them missing, through the app.
Considering the efforts banks expended to convince customers, generally successfully, that online banking is safe – for example by advertising campaigns promising to reimburse victims of online fraud, or tie-ups with anti-virus companies – it is surprising that we have not seen something similar for mobile banking.
Upgrading the technology
But it’s also the case that many banks lack the technical capability to offer all this mobile functionality at present. For these banks, overhauling their mobile channel should be a top priority, and it was with these banks in mind that IDC recently conducted a European Mobile Banking Software Solutions vendor analysis.
There are lots of ways of going about overhauling mobile banking functionality. Banks are split between taking omni-channel solutions which cover mobile, online, call center and other channels as a single package, and deploying best of breed mobile offerings. And they are equally split between building mobile or omnichannel functionality themselves, relying on their back-office vendors to either provide the solutions or source them from partners, or going to specialist front office vendors separate from their existing core suppliers.
More insights are revealed in an IDC MarketScape: IDC MarketScape: European Mobile Banking Software Solutions 2017 Vendor Assessment, which offers guidance on what functionality is prized and what is likely to become mainstream in terms of customer experience in the next few years, as well as to get a picture of the state of vendor competition in the market in Europe. You can read the press release here.