Category Archives: Banking

Digital transactions hold the key for Australia Post

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Last week’s news that Australia Post is shedding jobs made unwelcome reading for the 900 unfortunate employees who are affected, and the recent proposal to restructure (combined with the implicit risk to rural postal services) has generated some highly charged media commentary and prompted very passionate customer responses.

My personal view is that Australia Post will have to maintain a commitment to letter delivery as part of its protected monopoly obligations. But a “user pays” model that results in higher charges for a “premium” postal service may fail to offset losses from standard snail mail – because businesses will make greater use of existing document exchange and courier services, and retail customers will prefer to receive their utility bills and bank statements by e-mail or other digital solutions such as mobile apps.

Australia Post faces a dual challenge, quite apart from the decline in its letter business (which is rightly seen as a community service, albeit one that should be able to at least cover its costs). First, although it has diversified with a range of products and services, there is very little cohesion across its individual lines of business, and nearly all of them face strong competition, and/or rely on external service providers. Also, according to one software developer I spoke to several months ago, the sheer number of available services meant that some customer service staff did not have sufficient product knowledge and needed an in-house app to train them on how to up- and cross-sell these products.

Second, although it is trying to get into digital solutions, it seems late to the party (e.g., the MyPost Digital Mailbox, which has taken about 12 months from initial announcement to market launch). A few years ago, when I was working on a standard business identifier solution for the financial services industry, Australia Post was well placed to leverage its in-house knowledge of business customers (location, size, industry, spending patterns, logistics, etc.) and combine it with a unique entity ID to enhance and upgrade its business CRM database. However, it was unable to incorporate third-party data sources that would have resulted in even greater analytics on business customer behaviour, because the legacy data systems were unable to cooperate (and the teams that ran them unwilling to collaborate…).

Australia Post’s anticipated expansion into financial services hasn’t materialised (the current CEO is a former banker). If Australia Post became an Authorised Depository Institute, it could offer on-line banking services in its own right, giving it an alternative funding source (in addition to, or instead of, issuing corporate bonds that are implicitly guaranteed by the government). Or, in conjunction with relevant partners Australia Post could expand its Load&Go pre-paid VISA card to become a universal stored value card (such as Hong Kong’s Octopus system).

Instead, Australia Post is relying on the current boom in online shopping to drive revenue growth from its parcels and logistics operations. To me, this is a short-sighted strategy.

If digital is the key to future growth (especially for a data-rich business that operates in logistics, communications and payment transaction services), Australia Post should be looking to  provide and expand business and consumer solutions in the following areas:

  • Digital document verification, validation and transmission (to help offset the decline in snail mail)
  • Location-based payment solutions (to leverage its geographic and transactional knowledge of business customers, especially retailers)
  • Update the current post code system to provide more granular customer data to businesses and to streamline delivery and location services (e.g., like the UK’s system of house number and postcode – imagine how that would make life easier for taxi drivers!)
  • Develop off-the-shelf productivity tools for SMEs – such as on-line data forms, CRM, CMS, e-commerce (become the IKEA of small business data apps – rather like flat-pack, self-assembly furniture, many businesses might welcome such a service)

Finally, if Australia Post thinks that parcel services will carry them through, consider this: each time I want to send a parcel overseas, the counter staff have to undertake the following steps:

  • weigh the item
  • calculate the postage (using a cumbersome sequence of drop down menus on their terminal screen)
  • capture some ID information (such as my driver’s license)
  • attach the customs declaration form (which I have manually completed) to the parcel
  • print the postage label and attach it to the parcel
  • attach an “ID sighted” label to the parcel
  • attach an “Air Mail” sticker to the parcel

More steps are involved if I want use any sort of tracking, insurance or express delivery service. What if I could complete an address and customs form label, and print it before I leave home (or at a terminal at the post office)? And what if this label had scannable items, such as the destination address, for easier processing at the counter?

 

 

 

Show me the money! (or: Startup Anxiety…)

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Last week’s Lean Startup Melbourne event was entitled Doubts to Dollars – dealing with early stage uncertainty in startups and drew a crowd of close to 400 people, making this regular forum as THE networking venue for the local startup scene.

Of course, the evening’s festivities would not have been possible without the generous support of our hosts, inspire9, and sponsors BlueChilli, Startup Victoria, the Startup Foundation and the Kussowski Brothers. To kick-off proceedings, Daniel Mumby from the Startup Foundation pitched at older would-be entrepreneurs (“those with responsibilities like families, jobs, mortgages…”) in support of his organisation’s new accelerator program, which kicks off this month, under the banner of “Think and Break Free”. Next, a team of successful entrepreneurs was assembled, to discuss key startup topics, including:

  • Idea
  • Team
  • Finance
  • Product/Market Fit

On the panel were:

  • Sydney Low, co-founder of former Australian ISP, Freeonline back at the dawn of the century. (Check out his YouTube channel for some marketing archeology from the early days of web surfing, when internet access was dial-up, iPhones were a twinkle in Steve Jobs’ eye, and “social media” meant the gossip column in your tabloid newspaper.)
  • Samantha Cobb, who is founding CEO at biotech AdAlta, and who has a background in IP commercialisation.
  • Justin Dry, co-founder at wine startup Vinomofo, and one of the people behind Qwoff, an online community for wine enthusiasts.

The initial discussion covered some of the basics to consider before launching your own startup venture, such as product testing, market analysis, listening to customers, getting honest with yourself, and protecting your IP. There was also a surfing analogy – about timing/positioning yourself to catch and ride the wave, rather than trying to paddle out to the breaker….There were also some very personal observations (including painful lessons) such as how to deal with failure (“keep pivoting, fail fast”), maintaining staff motivation when deals don’t complete, the importance of building prototypes (“even if it’s just a PowerPoint slide”), and the value of having confidants (on the board, and among key investors). However, the evening’s recurring theme, dear to many past, present and future startup founders and entrepreneurs, was all about the money – not just where it comes from in the early days of any startup (angel investors, venture capital and private equity); but how easily it can disappear.

The panel of speakers emphasised the importance of cashflow (i.e., “making payroll”), and knowing how fast or how far your money may need to go in early stage growth and the initial product development stages:

First, assuming you are not fully self-funding, you need to convince an investor of your idea. Both the team and the investors need to believe in the founders.

Second, really challenge your market/product fit – be open to telling people what you are doing so you can get validation. (Note to local startups: the Australian culture, whether it’s the tall-poppy syndrome, or a lack of trust, means people tend to hide new ideas…)

Third, work out what your cash burn rate might need to be. Stick to the capex budget as much as possible, manage the milestones (“next step of value”), and be prepared to double the costs/double the development time. Maybe spend more on marketing than on the product development – better to have an MVP that is bringing in revenue, than waiting for the perfect product that never ships….

Finally, a member of the audience wondered about the best route to establishing a startup: “should I learn to code, work for another startup, or get a job at a big firm?”. The succinct advice from the panel: “just do it.” While it may be tempting to do side projects to keep the money coming in, they may prevent you from making progress (or they become the startup). As one participant put it when describing his own new startup venture: “there is no Plan B; it’s Plan A or bust!”

POSTCRIPT TO JANUARY’S LEAN STARTUP MELBOURNE: In an earlier blog on Lean Startup Melbourne, I discussed some of the obstacles facing local startups in getting funding, and the challenge of engaging institutional investors in the startup community. Two recent developments suggest that debate on this topic is starting to gain some traction:

1) Catherine Livingston, incoming President of the Business Council of Australia, spoke on ABC Radio National about the need to connect institutional funds with domestic assets and investment opportunities that tend to get overlooked by local investors (at about 6′ 15″ into the interview).

2) Westpac bank has called for industry and regulator collaboration to provide better access to financial data on startups, and SMEs in general, in support of developing risk-based funding options for new businesses.

Dawn of the neo-meta-banks

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Digital is redefining the way we interact with money. While online banking is nothing new, virtual currencies are getting big enough to attract the attention of regulators. Mobile phones are becoming payment gateways and POS terminals; meanwhile, stored value and pre-paid debit cards are more ubiquitous than cheque accounts. (In Hong Kong, the Octopus card originally introduced as a payment system for public transport, then extended to small purchases like coffee and newspapers, has now launched a dedicated mobile SIM card.)

Last year, Wired magazine predicted that tomorrow’s banks will resemble Facebook, Google or Apple. And of course, PayPal is owned by eBay, so it sort of makes sense that tech giants with huge customer bases conducting millions of online and mobile transactions would be the source of new banking services. For example, earlier this month, online banking start-up, Simple was sold to a Spanish bank for $130m, even though it is not really a “proper” bank – more a banking services provider – because it had managed to attract customers who don’t want to deal with a “traditional” bank.

But where are the non-traditional banks and virtual financial services providers of the future actually going to come from?

The answer could be the People’s Republic of China.

Last week, it was reported that local tech companies Alibaba and Tencent will be included in a pilot scheme to establish private banks in China. The news should not be that surprising – Alibaba, for example, has already been using its experience and knowledge as a trading and sourcing platform to provide small-scale loans and export financing to Chinese manufacturers, funding production to fulfil customer orders. A few years ago I had the opportunity to visit Alibaba’s headquarters in Hangzhou, where I met with a team working on credit analysis and risk management for this micro-financing business, drawing on data insights from the payment history and transactional activity of their SME clients. It was certainly impressive, and my colleagues and I were left in no doubt that there was every intention to take this expertise into a full-blown banking vehicle.

However, this being China, it’s not quite as straightforward as it seems. Just a few days after the private bank pilot was announced, the People’s Bank of China suspended a mobile payments system used by Alibaba and Tencent.