The Customer is Always Vaguely Identifiable

If any of you have ever worked in the UK service industry, you'll know that the phrase "the customer is always right" has never really applied to any business transaction. In fact, I ran a pub for a while during a brief break from journalism, where I told my staff to assume that the customer was generally wrong. Which they were. When people complain about a pint being flat, it's often to get a free top-up, or if they complain about the syrup in a mixer being gone, when it clearly isn't, it's often to get a free drink. Indeed, "I'm not drunk," should never be taken at face value. I can't repeat what the acronym for know-your-customer, KYC, actually meant for the pub trade in the pages of an international magazine, but it seems to have a different application for every industry.

In retail, for instance, it's about knowing the habits of your clients, about how long they'll spend looking at a display, about how likely they are to visit your store if it's near another one, or what kind of sales are likely to draw them in. For the financial services industry, it's a pretty stark issue. I had a friend who worked in the back office of a major multinational bank when we were just kids, fresh out of sixth form. He found himself hauled in front of a compliance committee, interviewed by police, and faced potential criminal charges over (innocently) processing payments that eventually ended up in the pockets of a nation on the blacklist. Not fun for an 18-year-old boy who comes in at 9am and leaves at 5pm for the summer.

While anti-money laundering (AML), counterterrorism and various other reasons for the growth in KYC are important, it's becoming increasingly important to have full details of counterparties, and to know exactly who they are for other reasons. Dodd-Frank Act rules over what qualifies as a US person, for instance, will affect how a derivative trade executes and reports, so having a firm grasp of whether or not Subsidiary X of Bank Y is actually a US person, despite being in Hong Kong, becomes crucial.

Thomson Reuters entered the KYC fray last week, but others are also beefing up their capabilities in this area. Swift, for instance, has its KYC utility for correspondent banking, and more vendors are giving the area a gimlet eye. The importance isn't set to lessen.

Live Tweeting
How many times did you check your Facebook account this weekend? Depending on your flavor of social media, I'd say it was either that or Twitter a fair amount, even if only in a cursory manner. Maybe not LinkedIn as much.

Thomson Reuters entered the KYC fray with this last week, but others are also beefing up their capabilities in this area. Swift, for instance, has its KYC utility for correspondent banking, and more vendors are giving the area a gimlet eye.

While it seems unlikely that there will be a genuine social platform for trading any time soon, vendors and firms alike are beginning to include social media technology and that related to search within their products and infrastructures. This is primarily for information management, in an arena where actionable intelligence can be gained by sifting through the vast noise created every day.

Trading and Twitter, as an example, have generally been associated through things like sentiment analysis and the Twitter fund. But trending topics might be able to be used inside firms to see what's trending on the research engine. Likewise, using chat, social groups that are specifically tailored to deals and a bit of historical data work can yield benefits in fixed income sales trading, as Algomi is doing. Or maybe you're just keen to define your universe of counterparties for European block trades, making sure that only those who settle at a high rate are offered up. Then Squawker's your destination.

Like I said, it's not quite MySpace, but it's a clever blend of consumer tech with capital markets.

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