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Did you really mean to say "Is lack of consumer education a barrier to banking innovation?" in the title?

I believe that rapid spitfire reactions by trigger-happy regulators is a far bigger barrier to mainstream adoption of banking innovation. Take the case of IVR and mobile channels. Responding to higher perceived risk of payments made via these two channels, India's banking regulator has been quick on the draw to mandate OTP and two-factor authentication for them. The ensuing escalation in transaction friction has been so high that many people have virtually written off these two channels for making payments.

Privacy is what I'd term "dishygeine factor" - the exact opposite of 'no big deal if you have it but a big deal if you don't have it'. Much as privacy advocates make it out to be a redline issue, privacy seems to be like many other things that simply have a price on them. As Mint, Offermatic and many others have shown, if you lure them with strong enough incentives (like money-saving offers in this case), you can manage to get a lot of people to reveal almost anything about themselves (such as username and password to their bank accounts). 

Campaign / marketing at the level of the individual customer faces major privacy challenges. Besides, even with the best of technologies, we cannot rule out 'False Positives', which can tarnish a bank's reputation far more when it develops the reputation for carrying out personalized campaigning (as against mass marketing). At the same time, the present style of carpet-bombing campaigning cannot go on forever. I believe marketing at the level of customer segments, rather than individual customers, strikes the best balance between current technical feasibility, cost, reputation and privacy. 

Kudos to Payments Council. This is surely a step that would increase customer confidence in and spur greater adoption of ePayments. As for Experian's claim that up to a quarter of customer references are invalid or are incorrectly formatted, I fail to understand why this figure can't be brought down considerably by implementing field-level validation logic on the reference fields of various ePayment forms. While on this subject, there's a strong need to increase the field lengths so that customers are really able to say what they want to say. After all, nobody said that ePayments and eBillPay applications should test customers' precis-writing skills, did they? I remember giving up ePayment on the Internet Banking website of a Top 5 UK bank just because the reference field was very short and I was unsure whether the payee would be able to figure out what I was paying them for!

1. Not sure about diamonds but banks in India do sell gold.
2. By the same token, an ATM is also a glorified vending machine!
3. Neither Indians nor anyone else is likely to make this work using contactless cards which have spending limits that would barely cover the cost of 1g of gold!

Interesting analogy but SAP, Oracle, JDE and other ERP leaders disrupted the incumbent best-of-breed players with their integrated MRP / MRP-II / ERP solutions. Whereas, banks are the leaders in the best-of-breed approach. Notwithstanding the benefits of making the shift, it seems far-fetched for banks to disrupt themselves by adopting an integrated approach. It would necessarily take someone else to disrupt banks' best-of-breed approach by providing integrated solutions. Financial services diversifications by retailers are probably the best bet to do this.     

My comments on prepaid cards are entirely USA-specific: (1) Prepaid cards are much more expensive than checking accounts offered free-of-cost by several credit unions and community banks (2) According to latest news, the moment prepaid cards are linked to ACH, which is a pre-requisite for using them to make bill payments, their interchange fees will be subject to the same ceilings imposed on debit cards by Frank-Dodd-Durbin. As a result, prepaid cards become less attractive for NetSpend, GreenDot and other prepaid card issuers, not just banks. When they raise their fees even further and / or eliminate eliminate ACH linkage and other features to compensate for reduced interchange revenue, prepaid cards will stop appearing as an alternative to traditional bank accounts. Sadly, whether they belong to Baby Boomers, Gen X or Gen Y generations, people won't have a choice but to stick around with traditional checking accounts, whether they understand them or not.

And, when it comes to fees, I forgot to add that banks have a lesson or two to learn from the NetSpends and GreenDots of the world. Why would someone exit a bank over a debit card usage fee when most prepaid card operators charge a fee for even balance inquiry? And, if I remember right, it was a bank - AmEx - that introduced the first fee-free prepaid card. 

I was with you all along until you brought up the subject of alternatives to banks in the end. I wish there was a choice, but, unfortunately, customers can't escape from banks. What's worse, many of them can't even escape from their present bank - as reports have pointed out, many BofA accountholders feel that they'll stick with BofA because switching banks is such a pain. I was shocked at BofA's CEO's statement that BofA's newly introduced debit card fees will actually bolster customer retention because they'll buy more products from BofA so that they can eventually be spared this fee!

Eventually, all monies on prepaid cards have to be deposited in a bank. In their present form, barring Boku, Zong and a few other niche players, mobile wallets merely store bank-card information, so they'll lose their existence without banks. PayPal freezes merchant accounts so frequently that it appears safer to move money through hawala. I'd have to undergo 100X more pain with banks before I'd even dream of PayPal as a bank-alternative. If the whipping that PayPal has been receiving from the Indian regulator is any indication, I'm not even sure if it will be around when - note, I didn't say if - banks cross the 100X pain threshold.

With multiple banking relationships in different countries and with each one having a proprietary interface (read Internet Banking portal), treasurers of large MNCs are grappling with ways to gain visibility into liquidity position on a realtime basis. By implementing state-of-the-art corporate-to-bank solutions from SWIFT, SAP, Oracle and other ERP / Treasury Management Systems vendors, they should be in a position to solve the visibility problem soon and turn to optimization subsequently.