www.bankingtech.com MARCH 2011 Interview: Retail therapy EFMA secretary general Patrick Desmarès King Cash Cash and liquidity management are crucial for banks Consolidating the core Just because it's complicated doesn't mean it's hard ... Technology trickle-down Retail brokers get institutional systems Special Report mobile financial services: see page 25 Political issues are the biggest obstacle to the wave of international exchange mergers sweeping the industry National barriers
Transcript
www.bankingtech.com
MARCH 2011
Interview: Retail therapyEFMA secretary general Patrick Desmarès
King CashCash and liquidity management are crucial for banks
Consolidating the coreJust because it's complicated doesn't mean it's hard ...
Technology trickle-downRetail brokers get institutional systems
banking
technology
M
AR
CH
2011
Special Report mobile fi nancial services: see page 25
Political issues are the biggest obstacle to the wave of international exchange mergers sweeping the industry
NationalNationalbarriers
www.bankingtech.com I 1
ContentsMarch 2011
4 news
9 news analysis ■ heather McKenzie: payments revenues fall ■ Mobile World congress report: mobile
financial services really arrive ■ Security update: new OddJob Trojan and a
decade of US crime trends
15 By the numbers ■ Norkom highlights need for holistic view of
financial crime ■ card fraud up 60% in 18 months says acI
16 Cover focus: King Cash cash and liquidity management are crucial to
banks ability to maximise transaction banking revenues, driving a move to real-time systems.
20 Money on the move ...
cash is far from dead, and banks need sophisticated systems to manage it, as an award-winning project from Poland demonstrates.
22 technology trickle-down boosts brokers No longer the poor relations of their institutional
cousins, retail brokerage systems are getting increasingly sophisticated.
In this issue
25 special Report Mobile technology in financial services
The mobile is taking over the delivery of financial services – from customer-facing retail bank applications, to payments, including contactless ones, to services for the ‘unbanked’, remittances and corporate banking applications. There are opportunities, but there are also integration and standardisation challenges.
32 Converging on the core core replacement projects have often been
deferred as being too costly, too complex and too risky. On the contrary, a growing consensus says that it is too risky to ignore the benefits of modernisation.
34 Interview: European Financial Marketing association
general secretary, Patrick Desmarès.
36 Appointments
38 Products & services ■ Vendor announcements, enhancements and
innovations42 Industry columns & comments 48 out of office
2234
9
16
www.bankingtech.com I 1
ContentsMarch 2011
4 news
9 news analysis ■ heather McKenzie: payments revenues fall ■ Mobile World congress report: mobile
financial services really arrive ■ Security update: new OddJob Trojan and a
decade of US crime trends
15 By the numbers ■ Norkom highlights need for holistic view of
financial crime ■ card fraud up 60% in 18 months says acI
16 Cover focus: King Cash cash and liquidity management are crucial to
banks ability to maximise transaction banking revenues, driving a move to real-time systems.
20 Money on the move ...
cash is far from dead, and banks need sophisticated systems to manage it, as an award-winning project from Poland demonstrates.
22 technology trickle-down boosts brokers No longer the poor relations of their institutional
cousins, retail brokerage systems are getting increasingly sophisticated.
In this issue
25 special Report Mobile technology in financial services
The mobile is taking over the delivery of financial services – from customer-facing retail bank applications, to payments, including contactless ones, to services for the ‘unbanked’, remittances and corporate banking applications. There are opportunities, but there are also integration and standardisation challenges.
32 Converging on the core core replacement projects have often been
deferred as being too costly, too complex and too risky. On the contrary, a growing consensus says that it is too risky to ignore the benefits of modernisation.
34 Interview: European Financial Marketing association
general secretary, Patrick Desmarès.
36 Appointments
38 Products & services ■ Vendor announcements, enhancements and
innovations42 Industry columns & comments 48 out of office
Banking Technology is published 10 times a year by Informa Business Information, a trading division of Informa UK Ltd, Telephone House, 69-77 Paul Street, London EC2A 4LQ, UK.
Printer: Wyndeham Grange, Southwick, UK.
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Member of the Audit Bureau of CirculationAverage net circulation for the period 1st July 2009 – 30th June 2010 – 8,108.
ISSN 0266-0865
This year, I have been mainly looking at three aspects of the banking world – core systems, retail services and regulation – and it’s striking that the same obstacles to progress are trotted out in each: complexity, as in the intertangledness of things, and the replacement of legacy systems, are the usual pair.
Sometimes they are dressed up with the cost argument – too expensive – and sometimes with the risk argument – hey, don’t mess with these systems: look what happened last time ...
For years we’ve been hearing that the replacement of core banking systems is like open heart surgery or replacing jet engines in flight. The flaw in those analogies is that heart surgery is one of the most common surgical procedures carried out, and jets don’t have their engines replaced in-flight: they land using the other ones. ask rolls-royce or Quantas.
Let’s continue the aviation theme into my second area, retail financial services: Quantas and other airlines are flying the new a380 because they want to have the most modern fleet on its routes to attract customers. Innovative service providers in all industries are doing the same. Sometimes they have legacy systems to replace, sometimes they’re new entrants and can leapfrog to new technologies. Those are the breaks.
On the other hand, when Quantas did have a problem with the engines on its new planes, it got in highly-skilled experts to work alongside its own highly-skilled experts to sort it out.
In my third area of concern these past few months, legislation, the running is not being made by highly-skilled banking experts, but by middling politicians, unknowable bureaucrats and m’learned friends. They will make it complicated. BT
David Bannister, editor
The reporting season is underway, with Barclays going first this year announcing record profits of £11.6 billion for 2009 and the traditional claims and counterclaims can be heard.
The ‘silly season’ for newspapers used to be in august when Parliament recessed but it seems we now have another period of the year when papers get on their high horses. Indeed, I have in front of me a press release from UK Uncut outlining its plans to protest against Barclays’ excessive profits by shutting down some branches.
Now I am as annoyed as UK Uncut is that the bank only paid £113 million in UK corporation tax in 2009, just 1% of profits, but this doesn’t make it a ‘bad bank’. It just means that they are like every other major corporation at the moment – Boots, Vodafone and all the others targeted by UK Uncut – in successfully using tax avoidance schemes. By all means complain about this blatant exceptionalism for corporations, I’ll join you, but don’t pretend it’s in any way just the banks doing this. What’s needed is a sensible discussion, involving the government, public and industry, to find a middle way for our economy where businesses can flourish (using money furnished by banks that need to turn a profit), essential public services can be maintained, jobs created and wealth spread more fairly.
The legitimate concerns of the industry about the toxic public mood and the wave of expensive regulations it is prompting from politicians is expressed in our Industry columns from the BBa, BSa and IcMa (page 42 onwards). The plea is for an informed dialogue and let’s hope it’s heard so that banks can focus on innovations, not stipulations. This means technological innovations like the advances in the mobile channel (see page 25) not ‘innovations’ like cDOs. BT
Banking Technology is published 10 times a year by Informa Business Information, a trading division of Informa UK Ltd, Telephone House, 69-77 Paul Street, London EC2A 4LQ, UK.
Printer: Wyndeham Grange, Southwick, UK.
Subscription enquiries: Customer Service Dept, Informa UK Ltd, Sheepen Place, Colchester, CO3 3LP. Tel: +44 (0)207 017 5532, Fax: +44 (0)20 7017 7860, Email: [email protected] Annual Subscription: UK £655, Europe €815, US/rest of world $1175.
Member of the Audit Bureau of CirculationAverage net circulation for the period 1st July 2009 – 30th June 2010 – 8,108.
ISSN 0266-0865
This year, I have been mainly looking at three aspects of the banking world – core systems, retail services and regulation – and it’s striking that the same obstacles to progress are trotted out in each: complexity, as in the intertangledness of things, and the replacement of legacy systems, are the usual pair.
Sometimes they are dressed up with the cost argument – too expensive – and sometimes with the risk argument – hey, don’t mess with these systems: look what happened last time ...
For years we’ve been hearing that the replacement of core banking systems is like open heart surgery or replacing jet engines in flight. The flaw in those analogies is that heart surgery is one of the most common surgical procedures carried out, and jets don’t have their engines replaced in-flight: they land using the other ones. ask rolls-royce or Quantas.
Let’s continue the aviation theme into my second area, retail financial services: Quantas and other airlines are flying the new a380 because they want to have the most modern fleet on its routes to attract customers. Innovative service providers in all industries are doing the same. Sometimes they have legacy systems to replace, sometimes they’re new entrants and can leapfrog to new technologies. Those are the breaks.
On the other hand, when Quantas did have a problem with the engines on its new planes, it got in highly-skilled experts to work alongside its own highly-skilled experts to sort it out.
In my third area of concern these past few months, legislation, the running is not being made by highly-skilled banking experts, but by middling politicians, unknowable bureaucrats and m’learned friends. They will make it complicated. BT
David Bannister, editor
The reporting season is underway, with Barclays going first this year announcing record profits of £11.6 billion for 2009 and the traditional claims and counterclaims can be heard.
The ‘silly season’ for newspapers used to be in august when Parliament recessed but it seems we now have another period of the year when papers get on their high horses. Indeed, I have in front of me a press release from UK Uncut outlining its plans to protest against Barclays’ excessive profits by shutting down some branches.
Now I am as annoyed as UK Uncut is that the bank only paid £113 million in UK corporation tax in 2009, just 1% of profits, but this doesn’t make it a ‘bad bank’. It just means that they are like every other major corporation at the moment – Boots, Vodafone and all the others targeted by UK Uncut – in successfully using tax avoidance schemes. By all means complain about this blatant exceptionalism for corporations, I’ll join you, but don’t pretend it’s in any way just the banks doing this. What’s needed is a sensible discussion, involving the government, public and industry, to find a middle way for our economy where businesses can flourish (using money furnished by banks that need to turn a profit), essential public services can be maintained, jobs created and wealth spread more fairly.
The legitimate concerns of the industry about the toxic public mood and the wave of expensive regulations it is prompting from politicians is expressed in our Industry columns from the BBa, BSa and IcMa (page 42 onwards). The plea is for an informed dialogue and let’s hope it’s heard so that banks can focus on innovations, not stipulations. This means technological innovations like the advances in the mobile channel (see page 25) not ‘innovations’ like cDOs. BT
Neil Ainger, deputy editor
It’s complicated ...
Innovate, don’t suffocate
www.bankingtech.com I 5
Go to www.bankingtech.com for the latest news and comment
proposed merger, as currently constituted, will make it through the canadian regulatory process.”
The European regulators may have more of a competition issue with the proposed NYSE Euronext/Deutsche Börse merger. Not only would this create a huge entity in terms of market share, it also covers a broad spectrum of instruments, from equities to commodities and derivatives. It would also mean that two large derivatives exchanges – Deutsche Börse’s Eurex and the former London International Financial Futures Exchange would be under one roof, which some observers say would not play well in Brussels, raising the possibility that one might be divested to help the deal go through.
Under the proposed deal, Deutsche Börse would hold 60% of the equity in the combined entity, which might also raise some protectionist concerns in Washington.
assuming that the regulatory hurdles on competition can be overcome, the Frankfurt-Paris deal also raises the issue of post-trade clearing and settlement structures, which the European commission is trying to make more efficient and transparent.
Merging the various markets that would be covered by the deal into the NYSE Euronext data being built just outside London in Basildon, Essex, would create an interesting concentration of capabilities – probably the ultimate co-location site.
For more than a decade, the big international exchanges have been engaged in a complicated courtship dance that stalled not long after NYSE joined forces with Euronext – itself an aggregation of the former Paris Bourse, amsterdam and Brussels stock exchanges and the London International Financial Futures Exchange – in 2007.
That move created a three-way stand-off between the new NYSE Euronext in Paris, the LSE in London, and Deutsche Börse in Frankfurt. after failing to agree to merger terms in 2000, the latter pair spent much of that time locked in a struggle, with the German exchange making increasingly hostile approaches that London continued to rebuff.
as MiFID allowed the new breed of MTFs to encroach on the traditional exchanges market share, the Old Guard was forced back on the defensive, but now that the MTFs are themselves beginning to consolidate, the ground has shifted again, and the emphasis is now back on the old territorial alignments – London/Toronto vs Frankfurt/New York being the focus for now. BT
HSBC connects with SAP and Swift
HSBc, SaP and Swift have teamed to create a flexible multi-bank solution based
on Swift open standards in the latest version of hSBc connect to SaP, hSBc’s corporate-to-bank integration and treasury system.
“The ability to connect seamlessly with not just one bank, but several banking partners, is quickly becoming a priority in the corporate space,” said Marcus Treacher, head of e-commerce, Global Transaction Banking, hSBc. “as our hSBc connect to SaP solution evolves, our collaborative approach sets this solution apart from others and allows us to continue to meet the connectivity needs of our corporate customers.”
The new hSBc connect to SaP solution is made up of the SaP Bank communication Management application and the SaP NetWeaver technology platform, as well as a pre-configured component for optimised access to the Swift network. hSBc and SaP have signed a global business collaboration agreement. This joint approach provides customers with a one-stop shop that addresses their full bank connectivity needs.
“With our broad global customer base, including nearly three-quarters of the Fortune 500 companies running SaP software, we are in a unique position to help banks and their corporate customers to enable broader, faster and easier corporate-to-bank connectivity,” said Don Trotta, senior vice president and global head of Financial Services at SaP.
hSBc will develop and deploy connectivity products in consultation with the SaP custom Development organisation and Swift in three main phases: 1) payment and select treasury services; 2) trade finance and remaining treasury services; and 3) regulatory reporting services. The three parties plan to initially develop functionality for hSBc/SaP clients, with the goal of later expanding to broader markets as well. BT
Barclays Capital hires new corporate and investment CIO from Goldman Sachs
Barclays capital has hired Joe Squeri from Goldman Sachs as chief information officer for
corporate & investment banking and wealth management. and as cIO for the americas, according to sources.
Barclays capital declined to comment on the appointment, but it is understood that Squeri will join the firm in New York at the beginning of May, reporting to Philip Freeborn, Barcap's cIO.
at Goldman Sachs Squeri's most recent roles were as global co-head of technology for the securities division, covering equities, fixed income, currencies and commodities and the global head of regulatory technology reform. Previously he held roles at Deutsche Bank – and at Bankers Trust –
before it was acquired by Deutsche, heading, at various times, risk and portfolio management technology, interest rates derivatives technology, and treasury and proprietary trading technology. BT
BarCap New York
4 I www.bankingtech.com
March 2011
NEWSPolitical barriers pose big challenge to international exchange mergers
After a long period of dormancy, consolidation in the international stock exchange
market took a sudden lurch forward in the past few weeks with proposed deals between the London and Toronto exchanges and between the Deutsche Börse and NYSE Euronext.
Measured by market capitalisation, these are four of the largest exchanges in the world, and the first reaction of commentators was to raise the spectre of regulators preventing them going ahead on competition grounds.
These announcements were quickly followed by the completion of BaTS’ acquisition of chi-X – one of the most successful new Multilateral Trading Facilities created by the introduction of the Markets in Financial Instruments directive in Europe – and Nasdaq OMX announcing that it is looking at a potential partnership with the Intercontinental Exchange.
after that it gets complicated, with US and European monopoly laws seemingly at odds with other regulations designed to open up the market for new entrants, and the fact that most of the deals are centred around the listing of commodities-oriented stocks such as mining and mineral companies.
In Europe, MiFID was intended to remove the de facto monopolies enjoyed by national stock exchanges through the so-called concentration rule that MiFID abolished and allowing the creation of new venues of execution – MTFs such as chi-X and BaTS.
In practice, this seems to have worked – chi-X in particular has taken a significant portion of equity trading away from the London Stock Exchange – so it seems unlikely that the monopoly argument will hold sway on its proposed merger with TMX Group, the operator of the canadian exchanges, at least as far as the European regulators are concerned – the LSE can easily argue that it is reacting to the fact that it no longer has a monopoly.. The canadian authorities, however, have a reputation for being more interventionist: last year it blocked a proposed $38.6 billion purchase of Potash corporation of Saskatchewan by BhP Billiton, the australian mining company.
“Generally speaking, canadian policy seeks to ensure canada’s “ownership” of its culture. as the Toronto and Montreal Exchanges are important at both strategic and symbolic levels, we do not believe that the government will feel comfortable ceding control of either. While least concrete, this factor may ultimately prove to be one of the most important determinants in [the] decision,” said alison crosthwait, director of Global Trading research at Instinet. “[We] do not believe that the
It’s good to talk – to a person
The prolific growth of smartphones and self-service websites has lead to the development of The
Autonomous Customer according to the latest research of the same name by BT and avaya. These customers like to research financial services or other products online and use self-service mechanisms but still want to be able to speak to a real person in a call centre.
The research, obtained online by questioning 500 consumers in the UK and 500 in the US late last year, shows that an overwhelming 90% of smartphone owners still expect to use call centres in the future. Meanwhile, more than half (56%) of those surveyed think the subjects of their calls are becoming more complicated as the vast majority (81%) of them do their initial engagement with organisations online.
With the explosion in communication channels available for people to contact firms, almost two thirds (60%) of the people surveyed admitted they constantly change the ones they use. however, given that wealth of choice, even the most connected generation of consumers see a call as the obvious way of resolving an issue, particularly when it comes to complex queries.
andrew Small, global head of customer relationship management, BT Global Services, said: “For many consumers calling the contact centre is the best way to resolve complicated queries. The vast majority of people have used the internet to do their own research first, so by the time they pick up the phone, the firm they’re calling is either close to a sale or close to a fail.”
Supporting those arguments about convenience, the survey showed that a massive 83% of people tend to buy more from companies that make things easier; whilst 44% said convenience was more important than price. Perhaps not surprisingly, three quarters (76%) of consumers said a free phone number would go down very well indeed. BT
Proposed tie-ups between international exchanges face considerable political and nationalistic issues – particularly as they are largely based on commodities
National sensitivities have come into play
www.bankingtech.com I 5
Go to www.bankingtech.com for the latest news and comment
proposed merger, as currently constituted, will make it through the canadian regulatory process.”
The European regulators may have more of a competition issue with the proposed NYSE Euronext/Deutsche Börse merger. Not only would this create a huge entity in terms of market share, it also covers a broad spectrum of instruments, from equities to commodities and derivatives. It would also mean that two large derivatives exchanges – Deutsche Börse’s Eurex and the former London International Financial Futures Exchange would be under one roof, which some observers say would not play well in Brussels, raising the possibility that one might be divested to help the deal go through.
Under the proposed deal, Deutsche Börse would hold 60% of the equity in the combined entity, which might also raise some protectionist concerns in Washington.
assuming that the regulatory hurdles on competition can be overcome, the Frankfurt-Paris deal also raises the issue of post-trade clearing and settlement structures, which the European commission is trying to make more efficient and transparent.
Merging the various markets that would be covered by the deal into the NYSE Euronext data being built just outside London in Basildon, Essex, would create an interesting concentration of capabilities – probably the ultimate co-location site.
For more than a decade, the big international exchanges have been engaged in a complicated courtship dance that stalled not long after NYSE joined forces with Euronext – itself an aggregation of the former Paris Bourse, amsterdam and Brussels stock exchanges and the London International Financial Futures Exchange – in 2007.
That move created a three-way stand-off between the new NYSE Euronext in Paris, the LSE in London, and Deutsche Börse in Frankfurt. after failing to agree to merger terms in 2000, the latter pair spent much of that time locked in a struggle, with the German exchange making increasingly hostile approaches that London continued to rebuff.
as MiFID allowed the new breed of MTFs to encroach on the traditional exchanges market share, the Old Guard was forced back on the defensive, but now that the MTFs are themselves beginning to consolidate, the ground has shifted again, and the emphasis is now back on the old territorial alignments – London/Toronto vs Frankfurt/New York being the focus for now. BT
HSBC connects with SAP and Swift
HSBc, SaP and Swift have teamed to create a flexible multi-bank solution based
on Swift open standards in the latest version of hSBc connect to SaP, hSBc’s corporate-to-bank integration and treasury system.
“The ability to connect seamlessly with not just one bank, but several banking partners, is quickly becoming a priority in the corporate space,” said Marcus Treacher, head of e-commerce, Global Transaction Banking, hSBc. “as our hSBc connect to SaP solution evolves, our collaborative approach sets this solution apart from others and allows us to continue to meet the connectivity needs of our corporate customers.”
The new hSBc connect to SaP solution is made up of the SaP Bank communication Management application and the SaP NetWeaver technology platform, as well as a pre-configured component for optimised access to the Swift network. hSBc and SaP have signed a global business collaboration agreement. This joint approach provides customers with a one-stop shop that addresses their full bank connectivity needs.
“With our broad global customer base, including nearly three-quarters of the Fortune 500 companies running SaP software, we are in a unique position to help banks and their corporate customers to enable broader, faster and easier corporate-to-bank connectivity,” said Don Trotta, senior vice president and global head of Financial Services at SaP.
hSBc will develop and deploy connectivity products in consultation with the SaP custom Development organisation and Swift in three main phases: 1) payment and select treasury services; 2) trade finance and remaining treasury services; and 3) regulatory reporting services. The three parties plan to initially develop functionality for hSBc/SaP clients, with the goal of later expanding to broader markets as well. BT
Barclays Capital hires new corporate and investment CIO from Goldman Sachs
Barclays capital has hired Joe Squeri from Goldman Sachs as chief information officer for
corporate & investment banking and wealth management. and as cIO for the americas, according to sources.
Barclays capital declined to comment on the appointment, but it is understood that Squeri will join the firm in New York at the beginning of May, reporting to Philip Freeborn, Barcap's cIO.
at Goldman Sachs Squeri's most recent roles were as global co-head of technology for the securities division, covering equities, fixed income, currencies and commodities and the global head of regulatory technology reform. Previously he held roles at Deutsche Bank – and at Bankers Trust –
before it was acquired by Deutsche, heading, at various times, risk and portfolio management technology, interest rates derivatives technology, and treasury and proprietary trading technology. BT
BarCap New York
Go to www.bankingtech.com for the latest news and commentNews
March 2011
Responses to European commission proposals to review the Markets in Financial
Instruments Directive warn that some changes could increase risk, add unnecessary obligations and not address the needs of smaller investors.
In particular, the bonds market has concerns about the way that the proposals seek to bring bond trading into the scope of MiFID. The submission from the International capital Market association, the trade association for international fixed income markets, makes a number of points, including encouraging the Ec “to consider the full implications of its proposals”.
a number of the issues raised by IcMa stem from changes that
are being proposed in the equity trading regulations not being a good fit in the fixed income markets – in particular new proposals on pre-trade transparency. IcMa supports a recommendation from the committee of European Securities regulators that pre trade transparency requirements should not be mandatory outside the equity market, but goes further, calling for “the scope of the non-equity pre-trade transparency framework to be limited to large investment grade bond issues”.
The Futures and Options association supports the overall direction of the proposed changes within the commission's review of MiFID, but highlights a number of
concerns, saying that the review “places additional obligations and requirements upon firms which could be duplicative and unnecessary”. The FOa suggests the Ec should assess the potential for duplication and ensure that new proposals are “cost-effective and justified by cost-benefit analysis”.
among the specific areas, FOa says that the role of speculators in commodity markets is “critically important and excessive speculation should be dealt with through position management rather than position limits”. It also calls for commercial purpose physical forward and spot transactions to remain outside the MiFID scope. BT
The new, intrusive style of supervision being adopted across the regions hit worst by the crisis,
coupled with new penalties for those who do not measure up, will drive firms to develop a new target operating model for risk management, research has found.
In a new report, The new business of risk management, JWG, a financial regulatory analyst firm, says that new remedial tools – such as greater fines and adjustable capital and liquidity buffers – mean that firms “have a real incentive” to comply. as such, the report found that the imperatives for better risk management are clear today based on interviews with over 120 professionals
from more than 45 financial institutions, as well as suppliers, supervisors and other industry professionals.
“The new powers bestowed upon supervisors mean that the business case for improving risk management capabilities is clear. The questions are now ‘where to start’ and ‘how to get the most bang for your buck’,” said PJ Di Giammarino, chief executive of JWG (above). “Firms must think beyond their immediate priorities for risk – staying in business and out of jail – to determine what their target operating model is for risk management as a whole: what their
new ‘business as usual’ should look like. The most successful firms will figure out how to implement required changes, such as the new Basel III ratios, alongside those they themselves want – improved management information
and investor relations.“The first steps towards this new
‘business as usual’ are establishing targets and cherry-picking a promising project to achieve a quick win, demonstrating proof of concept. however, getting this process started often relies on senior management asking the right questions.” BT
www.bankingtech.com I 7
MiFID Review responses highlight concerns
Stick beats carrot as compliance imperative
6 I www.bankingtech.com
Go to www.bankingtech.com for the latest news and commentNewsMarch 2011
Contactless m-payments to be rolled out across UK
Ba r c l a y c a r d and mobile network operator
Everything Everywhere, which comprises of Orange and T-Mobile, will launch the UK’s first full scale commercial contactless mobile phone payments solution this summer. The partners are working with as yet unnamed handset manufacturers to allow Britons to use NFc-enabled devices to make low-value m-payments of under £15 for papers, sandwiches, coffee and other similar goods at the Point of Sale of selected retailers by Q2 2011. all that is required is for customers to wave their mobile phones against contactless terminals equipped with the Near Field communication short-range high frequency wireless technology that enables data to be exchanged over a 10cm distance. Mastercard will deliver the payments capability for transactions, while French vendor Gemalto is responsible for Barclays’ Trusted Service Management operation.
There are currently 42,500 contactless Wave and Pay readers installed across the UK at retailers, such as Eat, the co-op and Little chef, ready to serve the 11.6 million contactless cards that have already been issued in the UK. The new mobile payment system is compatible with the readers and uses an in-built secure SIM chip to enable the payments and protect transaction and personal data. The secure chips are increasingly being added as standard in next generation smartphones to encourage m-payments uptake and, according to colin Swain, head of mobile at Barclaycard, will follow the approach to contactless payments being backed by the GSMa and the EPc in their collaborative work.
The scheme has huge scale but it does not necessarily cover all the shops down a typical UK high Street, a drawback of these types of competitive initiatives. The UK partners are, of
course, hopeful of adding more retail participants as the initiative grows. Swain is confident of growth, pointing out that “in the UK 80% of all cash transactions are for under £15, equivalent to over £210 billion”, so there is a large market to aim for in low value payments. There are no plans to allow higher value payments, using a PIN, as yet, but presumably this functionality is there if Barclaycard and Everything Everywhere deem it desirable at a later date.
The strategic partnership “is the beginning of a revolution in how we pay for things on the high Street”, says Gerry McQuade, chief development officer at Everything Everywhere, who went on to add that he believes it is “a cultural shift as important as the launch of credit cards or aTMs.”
David chan, chief executive of Barclaycard consumer Europe, is equally bullish, saying that he is looking forward to “giving consumers in the UK the choice to make contactless payments on their mobile phone, as well as their card”, and stating that "Barclaycard is going to lead the innovation and explosive growth that you'll see in mobile payments.”
■ In separate news, the Mayor of London, Boris Johnson, has announced that by the end of 2012 passengers in the capital will be able to access the entire Transport for London public transport network with just a swipe of their contactless bank or credit card. TfL is upgrading software in the Oyster smartcard system to recognise the cards issued by Visa, Mastercard and amex, in addition to the Oyster. No PIN will ever be requested at busy stations but the usual payment scheme security protocols and behavioural software will be applied and cards issued overseas will be accepted. BT
by Neil Ainger
Visa Europe and Monitise partner
Visa Europe has licensed Monitise’s mobile technology solution to give its customers
the ability to quickly provide mobile banking and payments services. Visa Europe is also entering into a partnership agreement with Monitise to develop further services in the future.
Mobile e-commerce, account management and loyalty management applications are expected to result from the partnership in the coming years for retailers and banks alike, but Visa Europe is initially focusing on using Monitise’s front-end mobile technology software to help encourage uptake for its peer-to-peer payments and for mobile alerts, which can notify customers if they have been paid, are close to going overdrawn on a retail bank or merchant account, or can allow access to mini-statements and account balances via a mobile phone.
The arrangement will be beneficial to both companies as it will expand the reach and number of users for Monitise’s systems, while bringing an added development capability to Visa Europe and delivering volume to its €500 million European interbank processing service, which opened last year and runs on two 5,000 square foot data centres in the UK, providing authorisation, clearing and settlement services to its 4,000 member banks across the continent.
commenting on the interbank processing service and the Monitise partnership, Peter ayliffe, Visa Europe’s chief executive, said: “This agreement puts us in a position to deliver mobile services with incredible scale and processing efficiency in the mobile arena, enabling our member banks to offer mobile payment services direct to their customers – whether that is bank users or retailers.”
according to alastair Lukies, chief executive of Monitise, the deal is a major step forward. “Mobile banking and payment users with smartphones check their accounts on average 16-18 times a month, three times more than via internet banking,” he said. “We are honoured by this exclusive partnership with Visa Europe, which will help consumers benefit from growing mobile money innovation.” BT
Go to www.bankingtech.com for the latest news and commentNews
March 2011
Responses to European commission proposals to review the Markets in Financial
Instruments Directive warn that some changes could increase risk, add unnecessary obligations and not address the needs of smaller investors.
In particular, the bonds market has concerns about the way that the proposals seek to bring bond trading into the scope of MiFID. The submission from the International capital Market association, the trade association for international fixed income markets, makes a number of points, including encouraging the Ec “to consider the full implications of its proposals”.
a number of the issues raised by IcMa stem from changes that
are being proposed in the equity trading regulations not being a good fit in the fixed income markets – in particular new proposals on pre-trade transparency. IcMa supports a recommendation from the committee of European Securities regulators that pre trade transparency requirements should not be mandatory outside the equity market, but goes further, calling for “the scope of the non-equity pre-trade transparency framework to be limited to large investment grade bond issues”.
The Futures and Options association supports the overall direction of the proposed changes within the commission's review of MiFID, but highlights a number of
concerns, saying that the review “places additional obligations and requirements upon firms which could be duplicative and unnecessary”. The FOa suggests the Ec should assess the potential for duplication and ensure that new proposals are “cost-effective and justified by cost-benefit analysis”.
among the specific areas, FOa says that the role of speculators in commodity markets is “critically important and excessive speculation should be dealt with through position management rather than position limits”. It also calls for commercial purpose physical forward and spot transactions to remain outside the MiFID scope. BT
The new, intrusive style of supervision being adopted across the regions hit worst by the crisis,
coupled with new penalties for those who do not measure up, will drive firms to develop a new target operating model for risk management, research has found.
In a new report, The new business of risk management, JWG, a financial regulatory analyst firm, says that new remedial tools – such as greater fines and adjustable capital and liquidity buffers – mean that firms “have a real incentive” to comply. as such, the report found that the imperatives for better risk management are clear today based on interviews with over 120 professionals
from more than 45 financial institutions, as well as suppliers, supervisors and other industry professionals.
“The new powers bestowed upon supervisors mean that the business case for improving risk management capabilities is clear. The questions are now ‘where to start’ and ‘how to get the most bang for your buck’,” said PJ Di Giammarino, chief executive of JWG (above). “Firms must think beyond their immediate priorities for risk – staying in business and out of jail – to determine what their target operating model is for risk management as a whole: what their
new ‘business as usual’ should look like. The most successful firms will figure out how to implement required changes, such as the new Basel III ratios, alongside those they themselves want – improved management information
and investor relations.“The first steps towards this new
‘business as usual’ are establishing targets and cherry-picking a promising project to achieve a quick win, demonstrating proof of concept. however, getting this process started often relies on senior management asking the right questions.” BT
www.bankingtech.com I 7
MiFID Review responses highlight concerns
Stick beats carrot as compliance imperative
www.bankingtech.com I 9
PaymentsMarch 2011
Global payments revenues fell at a compound annual rate of 7% from year end 2008 through 2010, according to Us-based management consultancy Boston Consulting Group’s 10th annual payments survey, Global Payments 2011: Winning After the Storm.
This decline in revenues came despite increases in overall volumes (up 5%) and values (+3%) during the same period. BcG’s report said volumes and values are back to pre-financial crisis levels.
credit card transactions, once a real money-maker for banks, suffered a decline, particularly in the US where rising unemployment dampened card transactions. In Europe, said BcG, the Single Euro Payments area forced banks into a rethink of their operating models and IT architectures.
retail payments revenues fell dramatically in Europe during the period, from $173 billion in 2008 to $136 billion in 2010. BcG predicts that over the next decade, wide variations among payments markets in Western Europe and central and Eastern Europe will exist. Western European payments values will increase by around 5% annually, while in cEE growth rates will be 11% (driven largely by russia). In the US, BcG expects payments revenues in the next decade to grow by 5% annually.
Wholesale payments volumes are expected to post annual growth of 9% globally during the next ten years and revenues will increase from $169 billion to $471 billion.
The report cites “regulatory disruption” more than once in explaining the loss of “sizeable chunks of income” for financial institutions involved in the payments industry. For example, in the US, regulations including the credit card accountability, responsibility and Disclosure act of 2009, the Durbin amendement (part of the Dodd-Frank act) and modifications to regulation E (which establishes the rights, liabilities, and responsibilities of participants in electronic fund transfer systems) could remove as much as $25 billion in annual retail transaction revenues from financial institutions, says the report.
characterising the current payments industry as one in transition, the report states: “rigorous government regulation can have a dramatic impact on payments economics, sometimes necessitating strategic transformations. Such regulation is currently having a major effect on the US market and a substantial (but lesser) effect on the Western European market. These two markets each accounted for about 25% of global payments revenues in 2010.”
In asia Pacific, regulation differs depending on whether the market is mature or emerging. In mature markets, regulation is aimed at enabling efficient payment mechanisms and competitive market structures. In emerging markets, said BcG, it is used to create a basic framework for the payments business. It cites India, where the National Payments corporation of India has been charged with building an infrastructure to facilitate better interbank connectivity. Indian regulators have also mandated free customer access to the aTMs of all banks (as exists in many Western countries).
During Swift’s annual Sibos operations conference in amsterdam last year, Eric Modave, chief operating officer at Barclays africa, called for better payments regulation for emerging market regions, particularly India, africa and Latin america. Modave’s concern was that the growth in mobile payments solutions in these regions made it important to regulate, given that mobile telecos were not banks.
The regulation bogey-man aside, BcG’s report is fairly optimistic, setting out strategies financial institutions need to pursue in order to capture the “resurgence” in payments volumes. Unsurprisingly for a consultancy, BcG has suggested that financial institutions rethink their operating models and strategies.
Financial institutions must try to strike a balance between standardisation and customisation, designing the “right business models” and identifying which elements of the core operating models can and cannot be consolidated and used efficiently across different markets, customer segments and products.
BcG says the question of how banks strike this balance depends on whether the market they are addressing is mature or transitioning (the latter characterised by a high percentage of unbanked consumers, above average real income growth and relatively young and fast-growing populations). These transitioning markets, said BcG, were also poised for developments such as mobile payments, payments innovations and the entry of non-bank players.
In the wholesale payments market, financial insitutions need to make significant investments in improving overall capabilities, client coverage and regional scope. “In the post-crisis era, transaction banking will remain a significant opportunity for financial institutions,” said the report. “Leading global institutions are assigning more importance to transaction banking from an organisational perspective.”
While BcG suggests that a rethink of operating models and strategies will help financial institutions to recoup lost payments revenues, the real driver ultimately will be an economic recovery. as austerity measures across Europe bite ever harder a resurgence in payments revenues looks unlikely and for many but the largest transaction banks, a rethink may be as effective as rearranging the deckchairs on the Titanic. BT
Counting the costRegulation and economic gloom are combining to make business tough for transaction banks, but there is hope ...
Yorkshire Building Society has outsourced the management of its 20 Automated Teller Machines to Bank Machine and is also relying on the vendor to help it expand the number of ATMs across its 178 branches, with all the planned new installations falling under Bank Machine’s operational control. The deal covers maintenance and cash delivery, via Bank Machine’s Green Team transit company, and the rollout programme will run throughout the year.
seB has launched an iPad app with market data from more than 50 exchanges and equity research from seB enskilda for institutional clients in the Nordic region. The data on offer includes consolidated order depth for several marketplaces, charts and news, while the analysis aspect consists of research reports, fact sheets, earnings revisions and recommendation changes on the 300 largest Nordic companies. Users can also register online for any of the 800 company presentations and seminars that seB enskilda host each year.
Dubai Bank, a Sharia-compliant financial institution, selected Optial following an exhaustive, competitive evaluation of many leading operational risk management products. The Optial SmartStart platform, a pre-configured system designed for rapid deployment, has been implemented and is now being deployed across the bank. Specific customisations have been made for the bank, easily achieved through Optial’s powerful configuration capability. The system has a broad functional scope that includes loss database, operational risk self-assessments, key risk indicators, internal control monitoring and policy distribution. Initially the system will be used by group operational risk, audit, internal compliance and risk officer in each business line and at branch level. In the next stage the system will be rolled-out to all employees of the bank to enter loss events at source.
Investment Group Nord Capital, a Russian financial advisory and asset management firm, is implementing the sDX derivatives benchmark and front office system from superDerivatives to better manage its multi-asset derivatives business and enhance its investment services. The firm will deploy sDX across foreign exchange, equities and commodities derivatives, delivering better real-time pricing, analytics, post-trade deal management tools, and risk and performance reports. IG Nord Capital is active in structured products so will also use sDX to enhance its pre-trade price verification and analytics. In addition, the installation will help improve hedging capabilities and oversight as the OTC markets become more tightly regulated post-crunch.
Centrum Bank a Swiss private bank has successfully migrated to the Olympic Banking System software application from ERI. Last year Centrum Bank took the decision to in future use the same banking software as its parent company in Vaduz. The installation took three months.
Finanza & Futuro Banca, Deutsche Bank’s Italian financial adviser network, is piloting Finantix wealth Apps, an advisory suite that runs natively on iPads, to engage prospects and clients in discussions about their financial needs and goals and to help define optimal financial strategies. The Finantix wealth Apps are part of a larger suite of apps that support client interactions in the retail, mass affluent and high net worth segments, allowing tablets with highly interactive tools and content to be used in client meetings.
Tesco Bank is installing collections, risk and fraud solutions from Fico across its business lines to improve its customer view and the process efficiency. The supermarket bank has 6.5 million customer accounts across 28 product lines, but until now has been focused on credit cards, loans, insurance and other retail banking areas away from operating current accounts. This is now changing and it has ambitious plans to become a full service High Street bank with accounts and in-store branches. As part of this the bank is refreshing its technology and rolling out Fico's Debt Manager and PlacementsPlus service, respectively a debt recovery monitoring system and service for collections agency management, alongside Fico's Triad Customer Manager to improve customer intelligence and the vendor's Falcon Fraud Manager to increase security. All of the Fico software solutions will go live by the end of Q2 this year.
société Générale Corporate & Investment Banking has added seven key eMeA markets to its global Quantitative electronic services platform. with the addition of Czech Republic, Greece, Hungary, Poland, Israel, south Africa and Turkey, the bank is now offering direct electronic access on key developed and emerging eMeA markets to institutional investors. This follows the recent inclusion of key Latin American and Asian markets. The bank is now offering direct access on 44 global exchanges.
Santander Private Banking, the Italian private banking division of Santander Group, has selected SunGard’s FastVal, an independent valuation service for OTC derivatives. The bank’s risk and compliance departments will use the solution to help meet regulatory requirements on the valuation of illiquid instruments and OTC derivatives. FastVal will also provide Santander Private Banking with transparency into its valuations, with the ability to drill down into data used in the valuation process to demonstrate how each specific valuation was determined.
Barclaycard, part of Barclays' global retail banking division, has launched a mobile banking management service that allows customers to check their balances and view payment and transaction histories online, via an optimised mobile browser interface. Accessible via the mybarclaycard online account, using the same secure login procedure as web users, the mobile service also integrates with the Barclaycard Freedom loyalty scheme to provide access to the latest offers from nearby retailers, using geo-location technology. The service is compatible any internet-enabled phone.
ICICI Securities, an integrated securities firm based in India, has joined Fidessa's global connectivity network. The deal enables it to get Direct Market Access flow from the 2,400 buy-side and 600 sell-side firms already on the network and allows the firm to participate more fully in global markets. Additionally, of course, the connectivity deal makes the Indian markets more accessible for those already using Fidessa's network. ICICI Securities joins more than 20 Indian sell-side firms already on the network.
Nomura is using Corvil’s Latency Management system to achieve nanosecond latency reporting for its ultra-low latency, Direct Market Access platform, NXT Direct. Nomura has been using Corvil technology in its equities DMA operations to monitor trade performance and validate latency. Latency across the various processes within NXT Direct is now measured in nanoseconds.
8 I www.bankingtech.com
Go to www.bankingtech.com for the latest news and commentNewsMarch 2011
www.bankingtech.com I 9
PaymentsMarch 2011
Global payments revenues fell at a compound annual rate of 7% from year end 2008 through 2010, according to Us-based management consultancy Boston Consulting Group’s 10th annual payments survey, Global Payments 2011: Winning After the Storm.
This decline in revenues came despite increases in overall volumes (up 5%) and values (+3%) during the same period. BcG’s report said volumes and values are back to pre-financial crisis levels.
credit card transactions, once a real money-maker for banks, suffered a decline, particularly in the US where rising unemployment dampened card transactions. In Europe, said BcG, the Single Euro Payments area forced banks into a rethink of their operating models and IT architectures.
retail payments revenues fell dramatically in Europe during the period, from $173 billion in 2008 to $136 billion in 2010. BcG predicts that over the next decade, wide variations among payments markets in Western Europe and central and Eastern Europe will exist. Western European payments values will increase by around 5% annually, while in cEE growth rates will be 11% (driven largely by russia). In the US, BcG expects payments revenues in the next decade to grow by 5% annually.
Wholesale payments volumes are expected to post annual growth of 9% globally during the next ten years and revenues will increase from $169 billion to $471 billion.
The report cites “regulatory disruption” more than once in explaining the loss of “sizeable chunks of income” for financial institutions involved in the payments industry. For example, in the US, regulations including the credit card accountability, responsibility and Disclosure act of 2009, the Durbin amendement (part of the Dodd-Frank act) and modifications to regulation E (which establishes the rights, liabilities, and responsibilities of participants in electronic fund transfer systems) could remove as much as $25 billion in annual retail transaction revenues from financial institutions, says the report.
characterising the current payments industry as one in transition, the report states: “rigorous government regulation can have a dramatic impact on payments economics, sometimes necessitating strategic transformations. Such regulation is currently having a major effect on the US market and a substantial (but lesser) effect on the Western European market. These two markets each accounted for about 25% of global payments revenues in 2010.”
In asia Pacific, regulation differs depending on whether the market is mature or emerging. In mature markets, regulation is aimed at enabling efficient payment mechanisms and competitive market structures. In emerging markets, said BcG, it is used to create a basic framework for the payments business. It cites India, where the National Payments corporation of India has been charged with building an infrastructure to facilitate better interbank connectivity. Indian regulators have also mandated free customer access to the aTMs of all banks (as exists in many Western countries).
During Swift’s annual Sibos operations conference in amsterdam last year, Eric Modave, chief operating officer at Barclays africa, called for better payments regulation for emerging market regions, particularly India, africa and Latin america. Modave’s concern was that the growth in mobile payments solutions in these regions made it important to regulate, given that mobile telecos were not banks.
The regulation bogey-man aside, BcG’s report is fairly optimistic, setting out strategies financial institutions need to pursue in order to capture the “resurgence” in payments volumes. Unsurprisingly for a consultancy, BcG has suggested that financial institutions rethink their operating models and strategies.
Financial institutions must try to strike a balance between standardisation and customisation, designing the “right business models” and identifying which elements of the core operating models can and cannot be consolidated and used efficiently across different markets, customer segments and products.
BcG says the question of how banks strike this balance depends on whether the market they are addressing is mature or transitioning (the latter characterised by a high percentage of unbanked consumers, above average real income growth and relatively young and fast-growing populations). These transitioning markets, said BcG, were also poised for developments such as mobile payments, payments innovations and the entry of non-bank players.
In the wholesale payments market, financial insitutions need to make significant investments in improving overall capabilities, client coverage and regional scope. “In the post-crisis era, transaction banking will remain a significant opportunity for financial institutions,” said the report. “Leading global institutions are assigning more importance to transaction banking from an organisational perspective.”
While BcG suggests that a rethink of operating models and strategies will help financial institutions to recoup lost payments revenues, the real driver ultimately will be an economic recovery. as austerity measures across Europe bite ever harder a resurgence in payments revenues looks unlikely and for many but the largest transaction banks, a rethink may be as effective as rearranging the deckchairs on the Titanic. BT
Counting the costRegulation and economic gloom are combining to make business tough for transaction banks, but there is hope ...
www.bankingtech.com I 11
AnAlySiS: FinAnce SyStemMArCH 2011
major banks around the world could be losing millions of dollars through lost fees on transactions and discounts that aren’t earned by maintaining relationship agreements such as account balances or transaction volumes.
“Banks think they are missing significant amounts of money,” said Andrea Klein, vice president for banking at Oracle’s global financial services business. “Those we have talked to around the globe all have situations where they aren’t sure what they are billing their customers for, not sure they have an enterprise view of the customer and have no ability to bill based on time of day or the overall relationship.”
Although Oracle’s application is primarily aimed at wholesale customers, it has the capacity to deal with millions of accounts, so it could be applied to retail banking as well.
Oracle’s billing application came from its acquisition of Portal Software, which provided sophisticated billing systems for telecom and online entertainment firms including France Telecom, Vodafone, US Cellular, Sony and XM Satellite radio. If a system can do mobile phone billing – where customers may roam across multiple domestic and cross-border systems with outbound and inbound voice, text, SMS and Web usage – billing for banking services looks pretty simple.
At Oracle’s OpenWorld conference in 2009, Citibank executive John Kohari and Jeanne Capachin from IDC discussed how enterprise billing platforms can actually increase revenues – by detecting pricing errors, linking accounts correctly, and improving customer service. Citi was the first publicly announced customer for the Oracle billing application. After implementing the software, Citi’s Global Transaction Services retired more than 20 legacy systems, plugged revenue leaks, and reduced management overhead when it implemented the vendor’s revenue tracking software.
Indian software vendor SunTec has also drawn on its experience in telecommunications to improve enterprise billing in banking. Compared to telecom firms, banks do not seem able
to detect revenue leakage that has crept into their operations, the company says. The leakage may come from incorrect pricing, operational inefficiencies, missing transactions, accounts canceled before fees are collected and balances that aren’t maintained at minimal levels required to support discounted pricing in other transactions.
Enterprise billing systems also support sophistcated pricing. Only an enterprise view of fees will lead to optimal pricing, according to a SunTec spokesman, who said: “We have had banking clients who used Excel spreadsheets to arrive at pricing plans for their customers, and we are not exaggerating.”
Like many other problems in banking, fee leakage often goes back to siloed legacy systems that don’t talk to each other and leave each unit in the bank pricing its services in a vacuum. So if a cash-management customer signs up with float-based pricing, the bank may be unable to monitor its accounts in real-time. If the corporate customer leaves before the month end, can the system capture the amount owed? If the balances fall below the agreed amount, can the bank collect?
Fees can be complex, based on service level agreements, relationships and cross-product pricing. Business development managers and relationship managers may also have discretion over pricing. The result is complexity across the enterprise, over time, across products and often across branches of both the bank and of the customer. Banks are trying to track existing relationships, new service requests, account closures, new account openings and new products – often across multiple systems.
In many banks this work is done by individuals seeking to monitor fees and balances across the enterprise rather than by an automated system which can cover the entire bank. Oracle says that its revenue management system reduces revenue leakage, supports accurate consolidated billing and provides the sales force with the ability to competitively price new products and re-price existing products.
Sometimes, of course, the pricing issues are caused by inadequate control of the sales staff.
“If the management allows every group that sells to a corporate customer to cut their own deal and set up their own billing, then they still have a problem,” said Klein.
Some bankers claim the only person with a comprehensive view of a bank’s pricing is the corporate treasurer, who actively plays off one division against another, contending that as a good customer he deserves better pricing.
Oracle, said Klein, provides both a CrM and product view of the customer relationships. “We have talked to 20 or 30 banks and I think it is fair to say that nobody has an enterprise view of billing.” The Oracle application pulls in data that resides on other systems to run its analysis.
Klein believes that developing an enterprise view of billing will become easier as banks move to service-oriented architecture.
“Once you turn the infrastructure into services rather than a traditional set of programs, this becomes monumentally easier because you get the service to feed the data collection.” The good news is that most banks have an SOA upgrade underway.
“When they hit critical mass, these sorts of projects will become much easier in terms of integration,” said Klein. She said that Oracle’s Fusion middleware will facilitate a full services architecture.
Oracle’s revenue management application will support complex pricing agreement, implement rules-based collections and automate investigation of billing variances with audit trails. BT
Missing millions tom groenfeldt
Enterprise billing platforms can reduce or eliminate “fee leakage” for financial institutions
“We have talked to 20 or 30 banks and I think it is fair to say that nobody has an enterprise view of billing.”
Andrea Klein, Oracle
10 I www.bankingtech.com
So far 2011 has been the year of mobile retail, mobile healthcare, mobile advertising and mobile payments. And it’s only February. But while all this might be the case – or rather that the world is now becoming truly mobile – mobile ‘banking’ certainly is going to make an impact in 2011. How do I know? I’ve just been to Mobile World Congress, with 60,000 mobile people from around the world – and they are all now keenly talking up mobile ‘banking’.
I say ‘banking’ rather than banking because, while five years ago mobile banking meant doing things you’d do in a bank on a phone, now it refers to a whole cycle of transactions, from account management in the retail sector, through to some quite sophisticated management, dealing and notification tools in the wholesale and investment sector.
The resurgence of interest in mobile ‘banking’ at MWC really stems from the fact that more smartphones than PCs were sold in Q4 2010 and from two companies that five years ago would never been associated with either banking or mobile: Apple and Microsoft.
Microsoft’s announcement, on the eve of MWC, that it was teaming up with Nokia to put its Windows Phone 7 OS on to Nokia handsets has, at a stroke, made it much easier for banks to assess the cost and effort required to work with mobile, producing a pretty much three-way split in the modern smartphone market between Apple, Android and now Nokia-MS handsets.
The other boost comes from the show’s main absentee, Apple. iPhone 5 – due out this summer – is rumoured to be incorporating a payment card chip and near field communication (NFC) capability, setting the phone up to be a contactless wallet. This ‘news’ has set the mobile payments community alight and has sparked a wave of interest in using mobile devices as contactless payment tools.
What does this have to do with banking? Well, the banks and card companies are buying into this NFC revolution with vigour. At MWC, the GSMA, Samsung, Telefónica, and Visa, together with Giesecke & Devrient,
Ingenico, ITN International and La Caixa all unveiled trials and roll outs of NFC services as mobile contactless payments start to become an accepted part of life across the world.
The week before the show, Orange-T-Mobile and Barclaycard in the UK announced the development of a national NFC payment network for retailers that would be live by summer.
But there is more to mobile ‘banking’ than just contactless payments in shops. The back end of making mobile payments work has for a long time been the crucial stumbling block, as banks and operators have fought over who owns the customer. As this battle has raged, third parties have stepped in and suddenly things are moving.
The big news here from MWC is that of Monitise signing an exclusive deal with Visa Europe that gives the mobile money company access to Visa’s €500 million pan-European inter-banking payment network so that it can create, what it calls “mobile finance and payment applications for Visa’s inter-bank processing service”.
Meanwhile, Ericsson was on hand to announce that it had launched Ericsson Money Services to provide banking and payment services for consumers in both developed and emerging markets. The company has claimed that mobile banking could benefit more than a billion people with access to mobile phones but no bank account, which is possibly why so many players are now entering this space.
The crucial part of Ericsson’s strategy – like so many others entering the mobile banking space – is tapping into the large, global unbanked population in both the developing and developed worlds. This is where the growth will come. It certainly appears not to be coming from the UK. A study aired at MWC conducted by IE finds that UK banks and operators lag behind those in Germany and Holland when it comes to making mobile banking and payment services work – despite 38% of consumers actively wanting them, according to further research by Canalys.
The other factor that is starting to drive renewed interest in turning mobile phones into not just account management tools, but payment devices, is that the handsets themselves are getting more capable. The rise of apps that sit on the phone is seeing interesting third party forays into new ways of using the phone to pay – for instance, the Starbucks coffee chain is using a barcode app to let loyalty card holders pay for their coffee. We have also seen NFC-enabled chip stickers being added to phones and, increasingly, we are seeing the use of SD cards fitted into the data card slot on some handsets becoming a sure-fire way of retrofitting mobile banking to older handsets. This latter is exemplified by DeviceFidelity’s In2Pay technology being combined with Visa’s contactless PayWave technology into a handy SD card.
This combination of enabling legacy equipment, smartphones that can run payment apps and the promise of new phones from Nokia, Android and Apple that all incorporate mobile payment tools means that mobile ‘banking’ is now starting to come of age. And this is in turn driving banks, merchants and third party payment companies to invest in the means to make it possible. Together, these two things suddenly give mobile critical mass in the payment space. At last some much needed good publicity for the beleaguered banks of the world – they may not lend you any money, but they will make it easier for you to spend what you do have. BT
■ Mobile special report, page 25
Mobile banking arrives Paul Skeldon
At Mobile World Congress, the annual mobile industry jamboree in Barcelona, mobile banking and payments were very much on the agenda, with some new twists.
Microsoft’s announcement that it is teaming up with Nokia to put its Windows Phone 7 OS on to Nokia handsets has, at a stroke, made it much easier for banks to assess the cost and effort required to work with mobile
AnAlySiS: mobile world congreSSMArCH 2011
www.bankingtech.com I 11
AnAlySiS: FinAnce SyStemMArCH 2011
major banks around the world could be losing millions of dollars through lost fees on transactions and discounts that aren’t earned by maintaining relationship agreements such as account balances or transaction volumes.
“Banks think they are missing significant amounts of money,” said Andrea Klein, vice president for banking at Oracle’s global financial services business. “Those we have talked to around the globe all have situations where they aren’t sure what they are billing their customers for, not sure they have an enterprise view of the customer and have no ability to bill based on time of day or the overall relationship.”
Although Oracle’s application is primarily aimed at wholesale customers, it has the capacity to deal with millions of accounts, so it could be applied to retail banking as well.
Oracle’s billing application came from its acquisition of Portal Software, which provided sophisticated billing systems for telecom and online entertainment firms including France Telecom, Vodafone, US Cellular, Sony and XM Satellite radio. If a system can do mobile phone billing – where customers may roam across multiple domestic and cross-border systems with outbound and inbound voice, text, SMS and Web usage – billing for banking services looks pretty simple.
At Oracle’s OpenWorld conference in 2009, Citibank executive John Kohari and Jeanne Capachin from IDC discussed how enterprise billing platforms can actually increase revenues – by detecting pricing errors, linking accounts correctly, and improving customer service. Citi was the first publicly announced customer for the Oracle billing application. After implementing the software, Citi’s Global Transaction Services retired more than 20 legacy systems, plugged revenue leaks, and reduced management overhead when it implemented the vendor’s revenue tracking software.
Indian software vendor SunTec has also drawn on its experience in telecommunications to improve enterprise billing in banking. Compared to telecom firms, banks do not seem able
to detect revenue leakage that has crept into their operations, the company says. The leakage may come from incorrect pricing, operational inefficiencies, missing transactions, accounts canceled before fees are collected and balances that aren’t maintained at minimal levels required to support discounted pricing in other transactions.
Enterprise billing systems also support sophistcated pricing. Only an enterprise view of fees will lead to optimal pricing, according to a SunTec spokesman, who said: “We have had banking clients who used Excel spreadsheets to arrive at pricing plans for their customers, and we are not exaggerating.”
Like many other problems in banking, fee leakage often goes back to siloed legacy systems that don’t talk to each other and leave each unit in the bank pricing its services in a vacuum. So if a cash-management customer signs up with float-based pricing, the bank may be unable to monitor its accounts in real-time. If the corporate customer leaves before the month end, can the system capture the amount owed? If the balances fall below the agreed amount, can the bank collect?
Fees can be complex, based on service level agreements, relationships and cross-product pricing. Business development managers and relationship managers may also have discretion over pricing. The result is complexity across the enterprise, over time, across products and often across branches of both the bank and of the customer. Banks are trying to track existing relationships, new service requests, account closures, new account openings and new products – often across multiple systems.
In many banks this work is done by individuals seeking to monitor fees and balances across the enterprise rather than by an automated system which can cover the entire bank. Oracle says that its revenue management system reduces revenue leakage, supports accurate consolidated billing and provides the sales force with the ability to competitively price new products and re-price existing products.
Sometimes, of course, the pricing issues are caused by inadequate control of the sales staff.
“If the management allows every group that sells to a corporate customer to cut their own deal and set up their own billing, then they still have a problem,” said Klein.
Some bankers claim the only person with a comprehensive view of a bank’s pricing is the corporate treasurer, who actively plays off one division against another, contending that as a good customer he deserves better pricing.
Oracle, said Klein, provides both a CrM and product view of the customer relationships. “We have talked to 20 or 30 banks and I think it is fair to say that nobody has an enterprise view of billing.” The Oracle application pulls in data that resides on other systems to run its analysis.
Klein believes that developing an enterprise view of billing will become easier as banks move to service-oriented architecture.
“Once you turn the infrastructure into services rather than a traditional set of programs, this becomes monumentally easier because you get the service to feed the data collection.” The good news is that most banks have an SOA upgrade underway.
“When they hit critical mass, these sorts of projects will become much easier in terms of integration,” said Klein. She said that Oracle’s Fusion middleware will facilitate a full services architecture.
Oracle’s revenue management application will support complex pricing agreement, implement rules-based collections and automate investigation of billing variances with audit trails. BT
Missing millions tom groenfeldt
Enterprise billing platforms can reduce or eliminate “fee leakage” for financial institutions
“We have talked to 20 or 30 banks and I think it is fair to say that nobody has an enterprise view of billing.”
Andrea Klein, Oracle
www.bankingtech.com I 13
ANALYSIS: oNLINe crImeMarch 2011
The bad guys are getting ever more inventive: security specialist Trusteer has identified a new Trojan virus its researchers have named oddJob. They say it is a new type of financial malware with the ability to hijack customers’ online banking sessions in real time using their session ID tokens.
amit Klein, chief technology officer at Trusteer, said that OddJob keeps sessions open after customers think they have “logged off”, enabling criminals to extract money and commit fraud unnoticed. “This is a completely new piece of malware that pushes the hacking envelope through the evolution of existing attack methodologies. It shows how hacker ingenuity can side-step many commercial IT security applications traditionally used to defend users’ digital – and online monetary – assets. We have been monitoring OddJob for a few months, but have not been able to report on its activities until now due to ongoing investigations by law enforcement agencies. These have just been completed.”
The Trusteer research team has reverse engineered and dissected OddJob’s code methodology, right down to the banks it targets and its attack methods. Trusteer has already warned financial institutions that OddJob is being used by criminals based in Eastern Europe to attack their customers in several countries including the US, Poland and Denmark.
“The most interesting aspect of this malware is that it appears to be a work in progress, as we have seen differences in hooked functions in recent days and weeks, as well as the way the command & control protocols operate,” said Klein. “We believe that these functions and protocols will continue to evolve in the near future, and that our analysis of the malware’s functionality may not be 100% complete as the code writers continue to refine it.”
OddJob’s most obvious characteristic is that it is designed to intercept user communications through the browser. It uses this ability to steal/inject information and terminate user sessions inside Internet Explorer and Firefox, the company said.
“We have extracted OddJob’s configuration data and concluded that it is capable of performing different actions on targeted web sites, depending on its configuration. The code is capable of logging GET and POST requests, grabbing full pages, terminating connections and injecting data into web pages,” said Klein. “all logged requests/grabbed pages are sent to the c&c server in real time, allowing fraudsters to perform session hijacks, also in real time, but hidden from the legitimate user of the online bank account. By tapping the session ID token – used to identify a user’s online banking session – the fraudsters can electronically impersonate the legitimate user and complete a range of banking operations.”
The most important difference from conventional hacking is that the fraudsters do not need to log into the online banking computers – they simply ride on the existing and authenticated session, much as a child might slip in unnoticed through a turnstile at a sports event, train station, etc.
another interesting feature of OddJob, which makes it stand out from the malware crowd, is its ability to bypass the logout request of a user to terminate their online session. Because the interception and termination is carried out in the background, the legitimate user thinks they have logged out, when in fact the fraudsters remain connected, allowing them to maximise the profit potential of their fraudulent activities.
all matching is case-insensitive, and, using this process of pattern matching, fraudsters using OddJob are able to cherry pick the sessions and targets they swindle to their best advantage.
The final noteworthy aspect of OddJob is that the malware’s configuration is not saved to disk, which could trigger a security analysis application – instead; a fresh copy of the configuration is fetched from the c&c server each time a new browser session is opened.■ across the atlantic, the extent to which the internet has changed the nature of financial crime has been monitored for the past ten years by US Internet crime complaint center – Ic3 – whose 2010
Internet crime report, at published, demonstrates how pervasive online crime has become, affecting people in all demographic groups throughout the country. In 2010, Ic3 received 303,809 complaints of internet crime, the second-highest total in Ic3’s 10-year history.
Ic3 is a partnership between the Federal Bureau of Investigation and the National White collar crime center. Since its creation in 2000, Ic3 has received more than 2 million internet crime complaints.
The 2010 Internet crime report provides specific details about various crimes, victims and perpetrators, as well as state-specific data. It also outlines how Ic3 has adapted its methods to meet the needs of the public and law enforcement.
Ic3 received and processed an average of 25,317 complaints per month in 2010. Non-delivery of payment or merchandise accounted for the most complaints (14.4%). Scams using the FBI’s name (13.2%) and incidents of identity theft (9.8%) rounded out the top three types of complaints.
In 2010, Ic3 referred nearly half of all complaints (121,710) to law enforcement for further investigation. New technology developed for Ic3 allows investigators to collaborate on cases spanning jurisdictional boundaries. Ic3 analysts also provide support for various investigative efforts.
“Internet crime has affected millions across the country, and the great thing about Ic3 is that we have adapted our resources to meet this threat,” said NW3c director, Don Brackman. “We have implemented new tools to help law enforcement bring online criminals to justice.”
Gordon M. Snow, assistant director of the FBI’s cyber Division, added: “We encourage individuals to report internet crime through the Ic3 web portal. The Ic3 is a unique resource for federal, state, and local law enforcement to intake cases efficiently, find patterns in what otherwise appear to be isolated incidents, combine multiple smaller crime reports into larger, higher priority cases, and ultimately bring criminals to justice.” BT
■ The 2010 internet Crime Report is available at www.ic3.gov.
Security Update David Bannister
Another month, another Trojan, and a decade of US online crime statistics
www.bankingtech.com I 13
ANALYSIS: oNLINe crImeMarch 2011
The bad guys are getting ever more inventive: security specialist Trusteer has identified a new Trojan virus its researchers have named oddJob. They say it is a new type of financial malware with the ability to hijack customers’ online banking sessions in real time using their session ID tokens.
amit Klein, chief technology officer at Trusteer, said that OddJob keeps sessions open after customers think they have “logged off”, enabling criminals to extract money and commit fraud unnoticed. “This is a completely new piece of malware that pushes the hacking envelope through the evolution of existing attack methodologies. It shows how hacker ingenuity can side-step many commercial IT security applications traditionally used to defend users’ digital – and online monetary – assets. We have been monitoring OddJob for a few months, but have not been able to report on its activities until now due to ongoing investigations by law enforcement agencies. These have just been completed.”
The Trusteer research team has reverse engineered and dissected OddJob’s code methodology, right down to the banks it targets and its attack methods. Trusteer has already warned financial institutions that OddJob is being used by criminals based in Eastern Europe to attack their customers in several countries including the US, Poland and Denmark.
“The most interesting aspect of this malware is that it appears to be a work in progress, as we have seen differences in hooked functions in recent days and weeks, as well as the way the command & control protocols operate,” said Klein. “We believe that these functions and protocols will continue to evolve in the near future, and that our analysis of the malware’s functionality may not be 100% complete as the code writers continue to refine it.”
OddJob’s most obvious characteristic is that it is designed to intercept user communications through the browser. It uses this ability to steal/inject information and terminate user sessions inside Internet Explorer and Firefox, the company said.
“We have extracted OddJob’s configuration data and concluded that it is capable of performing different actions on targeted web sites, depending on its configuration. The code is capable of logging GET and POST requests, grabbing full pages, terminating connections and injecting data into web pages,” said Klein. “all logged requests/grabbed pages are sent to the c&c server in real time, allowing fraudsters to perform session hijacks, also in real time, but hidden from the legitimate user of the online bank account. By tapping the session ID token – used to identify a user’s online banking session – the fraudsters can electronically impersonate the legitimate user and complete a range of banking operations.”
The most important difference from conventional hacking is that the fraudsters do not need to log into the online banking computers – they simply ride on the existing and authenticated session, much as a child might slip in unnoticed through a turnstile at a sports event, train station, etc.
another interesting feature of OddJob, which makes it stand out from the malware crowd, is its ability to bypass the logout request of a user to terminate their online session. Because the interception and termination is carried out in the background, the legitimate user thinks they have logged out, when in fact the fraudsters remain connected, allowing them to maximise the profit potential of their fraudulent activities.
all matching is case-insensitive, and, using this process of pattern matching, fraudsters using OddJob are able to cherry pick the sessions and targets they swindle to their best advantage.
The final noteworthy aspect of OddJob is that the malware’s configuration is not saved to disk, which could trigger a security analysis application – instead; a fresh copy of the configuration is fetched from the c&c server each time a new browser session is opened.■ across the atlantic, the extent to which the internet has changed the nature of financial crime has been monitored for the past ten years by US Internet crime complaint center – Ic3 – whose 2010
Internet crime report, at published, demonstrates how pervasive online crime has become, affecting people in all demographic groups throughout the country. In 2010, Ic3 received 303,809 complaints of internet crime, the second-highest total in Ic3’s 10-year history.
Ic3 is a partnership between the Federal Bureau of Investigation and the National White collar crime center. Since its creation in 2000, Ic3 has received more than 2 million internet crime complaints.
The 2010 Internet crime report provides specific details about various crimes, victims and perpetrators, as well as state-specific data. It also outlines how Ic3 has adapted its methods to meet the needs of the public and law enforcement.
Ic3 received and processed an average of 25,317 complaints per month in 2010. Non-delivery of payment or merchandise accounted for the most complaints (14.4%). Scams using the FBI’s name (13.2%) and incidents of identity theft (9.8%) rounded out the top three types of complaints.
In 2010, Ic3 referred nearly half of all complaints (121,710) to law enforcement for further investigation. New technology developed for Ic3 allows investigators to collaborate on cases spanning jurisdictional boundaries. Ic3 analysts also provide support for various investigative efforts.
“Internet crime has affected millions across the country, and the great thing about Ic3 is that we have adapted our resources to meet this threat,” said NW3c director, Don Brackman. “We have implemented new tools to help law enforcement bring online criminals to justice.”
Gordon M. Snow, assistant director of the FBI’s cyber Division, added: “We encourage individuals to report internet crime through the Ic3 web portal. The Ic3 is a unique resource for federal, state, and local law enforcement to intake cases efficiently, find patterns in what otherwise appear to be isolated incidents, combine multiple smaller crime reports into larger, higher priority cases, and ultimately bring criminals to justice.” BT
■ The 2010 internet Crime Report is available at www.ic3.gov.
Security Update David Bannister
Another month, another Trojan, and a decade of US online crime statistics
www.bankingtech.com I 15
MARCH 2011
BY THE NUMBERS
Go to www.bankingtech.com for the latest news and comment
Institutions need all-round view of fi nancial crime as fraudsters sharpen their attacks, says Norkom study
The rate of increase of fraud attacks is slowing but attacks are yielding much higher gains for
the fraudsters’ efforts, according to the latest survey on the global fi nancial crime and compliance marketplace from Norkom Technologies.
The percentage of respondents whose organisation experienced an increase in the level of fraud attacks over the last year fell from 71% (in 2009) to 64%, but 95% of these reported larger fi nancial losses arising from these attacks. Additionally, over a quarter of respondents (26%) saw their losses grow by more than one-fi fth (20%) over the period.
David Dixon, Norkom’s managing director of Global Solutions, said: “The results of this year’s survey confi rm one thing for us – that the world has become a far more dangerous place for fi nancial institutions. However, the good news is that fi nancial institutions are beginning to enhance their defences against organised crime and terrorism once again through the increase of crime-fi ghting budgets”. Forty-seven per cent of respondents said they expect their fraud budgets to increase over the next year compared to just 21% reported in 2009, while 38% expect their anti-
money laundering budgets to increase compared to 19% last year.
The fi ndings of the survey indicate that anti-money laundering, internal fraud and payment fraud top the list of concerns for senior management in leading fi nancial institutions. Seventy-
six percent of respondents indicated that the area of anti-money laundering and compliance remains front-of-mind for senior management. “With anti-money laundering headlining the fi nancial crime agenda once again, we anticipate a second phase of AML purchasing to help fi nancial institutions to comply with the expected increase in regulatory oversight, indicated by 65% of respondents to the survey, and an enhanced focus on sanctions enforcement, which is anticipated by two in fi ve fi nancial institutions,” said Dixon. “In fact, we’ve already seen unprecedented fi nes being levied against global fi nancial services
giants in very recent times for non-compliance.”
Seventy-one percent of respondents confi rmed the resurgence of internal fraud as a top fraud area of concern for senior management. According to Dixon, the internal fraud fi nding is in line with recent industry analyst commentary that suggests that internal fraud is becoming more and more prevalent and generally spikes during times of fi nancial hardship.
Dixon advocates a multi-stranded approach to dealing with this threat. He points to the strong correlation that exists between keeping senior management informed of fi nancial crime issues and the reinstatement of budgets. In last year’s survey, fraud was uppermost on senior management’s agenda while this year it is expected to receive a higher increase than AML. To keep management truly abreast of the risks facing their organisation, fi nancial crime teams needs to have a coordinated, integrated view of the all the threats they face. To achieve this, many fi nancial institutions are turning towards the consolidation of information from various fi nancial crime systems to create a holistic view of the risks facing the organisation.BT
Card fraud up 60% in 18 months says ACI Worldwide survey
The UK has a higher level of card fraud than most other countries, with 33% of consumers being victims in the past fi ve years, against an international average of 29%
– a fi gure that itself has increased from 18% in 2009.According to the 2010 Global Card Fraud Survey carried
out by payment systems supplier ACI Worldwide, the results vary signifi cantly by country – nearly half (43%) of people in China have been victims of card fraud, compared to only 11% in the Netherlands.
The survey showed that of 4,200 consumers across 14 countries, 41% would change or consider swapping their fi nancial institution as a result of being a victim of card fraud or knowing someone who was. However, a further 45% say it would depend on the quality of service they received, highlighting the importance of customer service
and response when fraud does happen. In the UK, 37% of consumers would change or consider swapping fi nancial institutions following an incidence of card fraud, down from 41% in 2009. Promisingly, the UK only had 14% of consumers unhappy with the treatment they received, while the US had 12% and Australia 10%, compared to 41% in India, 38% in Dubai and 32% in Singapore.
In the UK, the speed at which money was refunded following fraud was the main reason for customer satisfaction (40%) closely followed by the ability of fi nancial institutions to identify the fraud before account holders (34%). This is a picture refl ected across the globe although remarkably American consumers say that the ability for their bank to identify the fraud before them (40%) is more important than actually getting the money back quickly (32%). BT
95%of victims saw fraud losses increase
in value during the past year
New website coming soonBanking Technology is pleased to announce improvements to the usability of www.bankingtech.com
Visit www.bankingtech.com/bulletin to register for our regular email bulletin to make sure you receive all the news straight to your inbox.
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www.bankingtech.com I 15
MARCH 2011
BY THE NUMBERS
Go to www.bankingtech.com for the latest news and comment
Institutions need all-round view of fi nancial crime as fraudsters sharpen their attacks, says Norkom study
The rate of increase of fraud attacks is slowing but attacks are yielding much higher gains for
the fraudsters’ efforts, according to the latest survey on the global fi nancial crime and compliance marketplace from Norkom Technologies.
The percentage of respondents whose organisation experienced an increase in the level of fraud attacks over the last year fell from 71% (in 2009) to 64%, but 95% of these reported larger fi nancial losses arising from these attacks. Additionally, over a quarter of respondents (26%) saw their losses grow by more than one-fi fth (20%) over the period.
David Dixon, Norkom’s managing director of Global Solutions, said: “The results of this year’s survey confi rm one thing for us – that the world has become a far more dangerous place for fi nancial institutions. However, the good news is that fi nancial institutions are beginning to enhance their defences against organised crime and terrorism once again through the increase of crime-fi ghting budgets”. Forty-seven per cent of respondents said they expect their fraud budgets to increase over the next year compared to just 21% reported in 2009, while 38% expect their anti-
money laundering budgets to increase compared to 19% last year.
The fi ndings of the survey indicate that anti-money laundering, internal fraud and payment fraud top the list of concerns for senior management in leading fi nancial institutions. Seventy-
six percent of respondents indicated that the area of anti-money laundering and compliance remains front-of-mind for senior management. “With anti-money laundering headlining the fi nancial crime agenda once again, we anticipate a second phase of AML purchasing to help fi nancial institutions to comply with the expected increase in regulatory oversight, indicated by 65% of respondents to the survey, and an enhanced focus on sanctions enforcement, which is anticipated by two in fi ve fi nancial institutions,” said Dixon. “In fact, we’ve already seen unprecedented fi nes being levied against global fi nancial services
giants in very recent times for non-compliance.”
Seventy-one percent of respondents confi rmed the resurgence of internal fraud as a top fraud area of concern for senior management. According to Dixon, the internal fraud fi nding is in line with recent industry analyst commentary that suggests that internal fraud is becoming more and more prevalent and generally spikes during times of fi nancial hardship.
Dixon advocates a multi-stranded approach to dealing with this threat. He points to the strong correlation that exists between keeping senior management informed of fi nancial crime issues and the reinstatement of budgets. In last year’s survey, fraud was uppermost on senior management’s agenda while this year it is expected to receive a higher increase than AML. To keep management truly abreast of the risks facing their organisation, fi nancial crime teams needs to have a coordinated, integrated view of the all the threats they face. To achieve this, many fi nancial institutions are turning towards the consolidation of information from various fi nancial crime systems to create a holistic view of the risks facing the organisation.BT
Card fraud up 60% in 18 months says ACI Worldwide survey
The UK has a higher level of card fraud than most other countries, with 33% of consumers being victims in the past fi ve years, against an international average of 29%
– a fi gure that itself has increased from 18% in 2009.According to the 2010 Global Card Fraud Survey carried
out by payment systems supplier ACI Worldwide, the results vary signifi cantly by country – nearly half (43%) of people in China have been victims of card fraud, compared to only 11% in the Netherlands.
The survey showed that of 4,200 consumers across 14 countries, 41% would change or consider swapping their fi nancial institution as a result of being a victim of card fraud or knowing someone who was. However, a further 45% say it would depend on the quality of service they received, highlighting the importance of customer service
and response when fraud does happen. In the UK, 37% of consumers would change or consider swapping fi nancial institutions following an incidence of card fraud, down from 41% in 2009. Promisingly, the UK only had 14% of consumers unhappy with the treatment they received, while the US had 12% and Australia 10%, compared to 41% in India, 38% in Dubai and 32% in Singapore.
In the UK, the speed at which money was refunded following fraud was the main reason for customer satisfaction (40%) closely followed by the ability of fi nancial institutions to identify the fraud before account holders (34%). This is a picture refl ected across the globe although remarkably American consumers say that the ability for their bank to identify the fraud before them (40%) is more important than actually getting the money back quickly (32%). BT
95%of victims saw fraud losses increase
in value during the past year
68% of those who responded to JP Morgan’s survey (which was conducted for the association of corporate Treasurers), cited liquidity, closely followed by accurate cash forecasting (65%).
Put simply, cash and liquidity management focuses on forecasting a company’s cash needs to run its businesses along with managing group-wide cash flows, short-term borrowing and cash. Technology plays an important role, enabling cash to be pooled on a global basis. according to the acT, funding and liquidity needs are “intimately connected” with understanding and managing working capital and the payments and cash reporting systems to best advantage.
When it comes to putting cash management theory into practice, the picture is not quite as simple. Yera hagopian, head of liquidity services at JP Morgan Treasury Services, says each client group – financial institution and corporate – has a different way of operating and different requirements. Variation is also found from large through to small clients in each of these groups. “There are some common themes, for example in the corporate sector, automation is particularly important because they do not always have very big treasury teams. FIs, on the other hand, are very focused on the investment part of the liquidity management proposition,” she says.
Speak to any of the large cash management banks and visibility is a word that will be used liberally throughout the conversation. hagopian says the financial crisis has caused a move away from “pure automation” – whereby cash was consolidated across borders with surplus funds swept into an investment vehicle at the end of the day – to a greater requirement for visibility. “clients now want much more information about what is happening. The movement of cash and its investment is no longer the be-all and end-all. clients want tools that provide them with the visibility they require and reports on up to the minute positions.”
Jose Franco, global head of corporate banking liquidity at Bank of america Merrill Lynch, says the financial crisis provided a “sudden reality check for everyone in the market – it reminded us all that cash is still the lifeblood of business”. If clients lost sight of this fact it was because credit was cheap and plentiful, but also because treasurers’ responsibilities had grown “tremendously”, with many going beyond local treasury management into regional or global service centres. “Liquidity, while important, sometimes became a secondary focus to tasks such as funding acquisitions and securing credit lines with bank partners.”
Franco says the three key themes in liquidity management now are visibility, control and risk. “Liquidity management has to be treated in a holistic way, combined with other solutions to address these three themes,” he says.
For the past few years, says Lisa rossi, global head of liquidity management for global transaction banking at Deutsche Bank, clients have been focused on gaining more transparency into their cash
positions. “What we call true transparency is the ability to see into all of your accounts individually or in customisable groups and then with simple planning and analytics make informed decisions that will lead to better control and smart investment decisions for your business,” she says.
Technology is the enabler here, providing the ability to aggregate data, undertake analytics, plan strategies and execute them. The concept of straight through processing has been extended into visibility, mobilisation and execution, rossi says. “We have some very large multinational corporate clients that want to be able to see the cash positions of all of their subsidiaries around the world. Sophisticated clients want to see aggregated cash positions, investment allocations, cash flow requirements and rate information all in one application. Based on that information, our clients can perform various investment scenarios and then execute on investment decisions that match their cash flow requirements as well as their risk profiles.” These clients want all of the required information in front of them, rather than having to go in and out of different systems, she adds.
What clients want to see is not only on a global basis, but also on a multibank basis. BaML’s
www.bankingtech.com I 17
cash
How banks can demonstrate they have sufficient liquidity for their needs, as well as their clients’ needs, has become a key focus for regulators and banks, says Maurice Cleaves (right), managing director and global head of cash management at Barclays Corporate. “Policy on banks’ capital ratios is well documented, but that for intraday or longer term liquidity less so,” he says. “Banks are now doing a lot of work with regulators to produce information on short-term liquidity needs.”
The discussions centre on how to achieve efficient intraday liquidity clearing in the clearing system. “How liquidity moves through the system and how it is made available in the payments flow so it can be recycled are key questions. Most settlement systems are RTGS-based, which is good for risk management, but do they represent the most efficient use of liquidity intraday?”
Cleaves says when intraday liquidity was easy to find, these issues were not crucial. Now that regulators view intraday liquidity as a commodity with value, the picture has changed.
The scarcity of liquidity is having an impact on the flow of payments and on what banks are willing to do with liquidity, he says. “In the corporate environment, banks deal with very large mergers and acquisitions in very structured ways, whereby big payments flows are required. Banks line up liquidity to ensure it is in the right place at the right time and high end corporations are very used to dealing in that environment.”
Financial institutions protect their clients from becoming involved in the complexities of processing daily liquidity and throttling payments transactions into the payment clearing systems. There are now new regulatory pressures on banks to manage these flows even more closely – an area of added value that corporations need to be aware of, says Cleaves. “I believe we will see much closer interaction between a bank and its clients. Banks need to understand the needs of their clients – which payments are urgent and which are not, for example – and prioritise queues to make the best use of liquidity.”
Regulation and liquidity management
>
16 I www.bankingtech.com
Cover story: Cash managementMarch 2011
Kingcash
the news that liquidity is the main concern of treasurers surveyed by JP morgan for its global Cash management survey 2010 could have come as no surprise in an economic environment where many corporations are still struggling. Until banks and businesses have more confidence that an economic recovery is sustainable (or that there even is one under way), bank lending – particularly to small and medium business – is likely to remain low despite governments’ efforts to twist the arms of banks.
however, the ability to provide credit, according to the recently released Global Payments report 2011 from Boston consulting Group, is critical to
enable banks to maximise transaction banking revenues from medium-sized to large corporations. One of BcG’s financial institution clients said: “It is impossible to divorce the conversation about credit from cash management.” BcG suggests the opposite is also true, saying many banks will not renew a line of credit to credit-only clients unless they shift some element of their transaction banking business to the bank.
In the absence of credit, corporations are placing greater emphasis on liquidity management, which, along with cash concentration, provides the platform for cash management. When asked for their top five concerns in the treasury department,
Cash and liquidity management are crucial to banks’ ability to maximise transaction banking revenues, driving a move to real-time intraday systems, writes Heather McKenzie
68% of those who responded to JP Morgan’s survey (which was conducted for the association of corporate Treasurers), cited liquidity, closely followed by accurate cash forecasting (65%).
Put simply, cash and liquidity management focuses on forecasting a company’s cash needs to run its businesses along with managing group-wide cash flows, short-term borrowing and cash. Technology plays an important role, enabling cash to be pooled on a global basis. according to the acT, funding and liquidity needs are “intimately connected” with understanding and managing working capital and the payments and cash reporting systems to best advantage.
When it comes to putting cash management theory into practice, the picture is not quite as simple. Yera hagopian, head of liquidity services at JP Morgan Treasury Services, says each client group – financial institution and corporate – has a different way of operating and different requirements. Variation is also found from large through to small clients in each of these groups. “There are some common themes, for example in the corporate sector, automation is particularly important because they do not always have very big treasury teams. FIs, on the other hand, are very focused on the investment part of the liquidity management proposition,” she says.
Speak to any of the large cash management banks and visibility is a word that will be used liberally throughout the conversation. hagopian says the financial crisis has caused a move away from “pure automation” – whereby cash was consolidated across borders with surplus funds swept into an investment vehicle at the end of the day – to a greater requirement for visibility. “clients now want much more information about what is happening. The movement of cash and its investment is no longer the be-all and end-all. clients want tools that provide them with the visibility they require and reports on up to the minute positions.”
Jose Franco, global head of corporate banking liquidity at Bank of america Merrill Lynch, says the financial crisis provided a “sudden reality check for everyone in the market – it reminded us all that cash is still the lifeblood of business”. If clients lost sight of this fact it was because credit was cheap and plentiful, but also because treasurers’ responsibilities had grown “tremendously”, with many going beyond local treasury management into regional or global service centres. “Liquidity, while important, sometimes became a secondary focus to tasks such as funding acquisitions and securing credit lines with bank partners.”
Franco says the three key themes in liquidity management now are visibility, control and risk. “Liquidity management has to be treated in a holistic way, combined with other solutions to address these three themes,” he says.
For the past few years, says Lisa rossi, global head of liquidity management for global transaction banking at Deutsche Bank, clients have been focused on gaining more transparency into their cash
positions. “What we call true transparency is the ability to see into all of your accounts individually or in customisable groups and then with simple planning and analytics make informed decisions that will lead to better control and smart investment decisions for your business,” she says.
Technology is the enabler here, providing the ability to aggregate data, undertake analytics, plan strategies and execute them. The concept of straight through processing has been extended into visibility, mobilisation and execution, rossi says. “We have some very large multinational corporate clients that want to be able to see the cash positions of all of their subsidiaries around the world. Sophisticated clients want to see aggregated cash positions, investment allocations, cash flow requirements and rate information all in one application. Based on that information, our clients can perform various investment scenarios and then execute on investment decisions that match their cash flow requirements as well as their risk profiles.” These clients want all of the required information in front of them, rather than having to go in and out of different systems, she adds.
What clients want to see is not only on a global basis, but also on a multibank basis. BaML’s
www.bankingtech.com I 17
cash
How banks can demonstrate they have sufficient liquidity for their needs, as well as their clients’ needs, has become a key focus for regulators and banks, says Maurice Cleaves (right), managing director and global head of cash management at Barclays Corporate. “Policy on banks’ capital ratios is well documented, but that for intraday or longer term liquidity less so,” he says. “Banks are now doing a lot of work with regulators to produce information on short-term liquidity needs.”
The discussions centre on how to achieve efficient intraday liquidity clearing in the clearing system. “How liquidity moves through the system and how it is made available in the payments flow so it can be recycled are key questions. Most settlement systems are RTGS-based, which is good for risk management, but do they represent the most efficient use of liquidity intraday?”
Cleaves says when intraday liquidity was easy to find, these issues were not crucial. Now that regulators view intraday liquidity as a commodity with value, the picture has changed.
The scarcity of liquidity is having an impact on the flow of payments and on what banks are willing to do with liquidity, he says. “In the corporate environment, banks deal with very large mergers and acquisitions in very structured ways, whereby big payments flows are required. Banks line up liquidity to ensure it is in the right place at the right time and high end corporations are very used to dealing in that environment.”
Financial institutions protect their clients from becoming involved in the complexities of processing daily liquidity and throttling payments transactions into the payment clearing systems. There are now new regulatory pressures on banks to manage these flows even more closely – an area of added value that corporations need to be aware of, says Cleaves. “I believe we will see much closer interaction between a bank and its clients. Banks need to understand the needs of their clients – which payments are urgent and which are not, for example – and prioritise queues to make the best use of liquidity.”
Regulation and liquidity management
>
Franco says one of his bank’s main differentiators is its ability to offer end to end concentration of liquidity across all techniques including multi bank concentration, notional and physical pooling, single and multicurrency solutions. “We can provide our clients with a single position that reflects their multibank cash positions. This recognises that no bank can do everything for its clients, everywhere in the world.” In order to provide a multibank service, Bank of america Merrill Lynch works with banks that are strategically important. “Such a service ticks the boxes in terms of counterparty and sovereign risk – some clients may feel unhappy about leaving cash with very local banks in countries where they have concerns. automating pooling so that money can be brought back into an overlay structure and used most efficiently is important.”
For JPM’s hagopian, a differentiator is consistency: “It is very important to provide a client with information that is presented in a consistent, clear and user friendly way. This is particularly important for clients dealing in different countries – is the data based on the same premise in every
Cover story: Cash managementMarch 2011
www.bankingtech.com I 19
View from the vendors
While banks are telling their corporate clients how to manage their cash, many have little idea where their own money is, says Phil Cantor, senior product manager, strategy and product management, at transaction systems software provider SmartStream Technologies. “I have been into banks where it can take up to 10,000 clicks on a mouse every morning before they can compile all the opening balances they have across the world. They have to do separate log-ons and screen scrapes and will often be rekeying information from PDFs into spreadsheets,” he says.
Whereas companies in the automotive and food industries have very advanced systems to trace products, the banking industry has only just “grown up” and it is addressing the implementation of real time capabilities in areas other than investment banking.
“Following the financial crisis, banks have focused on basics – they have been looking to adapt their infrastructure to provide an understanding, in real time, of where all the money is. A real time, or even intraday, view of liquidity will enable banks to calibrate liquidity better and will give earlier warnings of problems,” he says.
Another shortcoming in banks’ liquidity management has been on the investment side of the equation. In many cases, says Cantor, banks simply have not known how much money they had to invest at the end of the day, nor the interest rate and return on that money. “At one transatlantic bank we consulted we found they were missing out potential opportunities of $10-$15 million a year because they didn’t have an accurate picture of their positions in their minor currencies such as Swiss Franc and Rand. At another bank, by ignoring smaller transactions they were missing out substantial percentages of the value of some currencies in their nostro accounts.”
Cantor believes regulatory pressure on banks to improve liquidity management along with an anticipated rise in interest rates will lead to even greater urgency among banks to improve liquidity management.
The financial institution clients of software developer Misys are focused on cross-border, cross-currency and multibank cash pooling capabilities, says Olivier Berthier, solutions director,
transaction banking at Misys. “During the past few years the large international corporate clients of banks have been demanding multicurrency and multibank solutions from their banks. While this can be undertaken manually, the clincher for banks is that they want to perform this at a low cost.”
This requires a high level of automation, says Berthier, which is made complex because of the specific needs of individual corporations, which include disparate tax and accounting regulations across many jurisdictions.
Another significant issue is reluctance on the part of some banks to move away from an individual branch approach. “When a corporate is more sophisticated in managing its liquidity, the bank will not have as much liquidity sitting around in its accounts. Moreover, banks fear that they will lose fees from their local banks if a corporate moves to a centralised solution. But it should be remembered that very often, if a bank can offer cross-border services, it will be able to serve a larger group of clients within that corporate. They might be making less money out of an individual branch, but as a result of being able to pool cash for the client in 35 countries, they will be increasing the share of the wallet of that client.”
Global cash pooling is not without its difficulties, says Berthier. The Swift MT 940 messages that are used to provide bank information to clients’ cash management, treasury systems and accounting applications, allow for too much variation in how information is integrated. “In our automation efforts, Misys has had to add a lot of intelligence to filter and parse these Swift messages. In fact the low quality of data in these Swift messages has been an inhibitor in global cash pooling.”
One recent trend Berthier cites could be worrying news for financial institutions: “As the level of sophistication within corporate treasuries increases, many treasurers are wondering if they can run global account pooling themselves. We have been contacted by corporations who would like access to such an engine and I believe in part this has been a reaction to the financial crisis, where some banking relationships disappeared.”
country? Is the transaction narrative consistent? If there is any reason there is inconsistency that could mean the final balance includes unclear items that cannot guide an accurate investment strategy.” BT
SAVE THE DATE
10th November 2011Grand Connaught Rooms, Great Queen Street, London, WC2B
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Franco says one of his bank’s main differentiators is its ability to offer end to end concentration of liquidity across all techniques including multi bank concentration, notional and physical pooling, single and multicurrency solutions. “We can provide our clients with a single position that reflects their multibank cash positions. This recognises that no bank can do everything for its clients, everywhere in the world.” In order to provide a multibank service, Bank of america Merrill Lynch works with banks that are strategically important. “Such a service ticks the boxes in terms of counterparty and sovereign risk – some clients may feel unhappy about leaving cash with very local banks in countries where they have concerns. automating pooling so that money can be brought back into an overlay structure and used most efficiently is important.”
For JPM’s hagopian, a differentiator is consistency: “It is very important to provide a client with information that is presented in a consistent, clear and user friendly way. This is particularly important for clients dealing in different countries – is the data based on the same premise in every
Cover story: Cash managementMarch 2011
www.bankingtech.com I 19
View from the vendors
While banks are telling their corporate clients how to manage their cash, many have little idea where their own money is, says Phil Cantor, senior product manager, strategy and product management, at transaction systems software provider SmartStream Technologies. “I have been into banks where it can take up to 10,000 clicks on a mouse every morning before they can compile all the opening balances they have across the world. They have to do separate log-ons and screen scrapes and will often be rekeying information from PDFs into spreadsheets,” he says.
Whereas companies in the automotive and food industries have very advanced systems to trace products, the banking industry has only just “grown up” and it is addressing the implementation of real time capabilities in areas other than investment banking.
“Following the financial crisis, banks have focused on basics – they have been looking to adapt their infrastructure to provide an understanding, in real time, of where all the money is. A real time, or even intraday, view of liquidity will enable banks to calibrate liquidity better and will give earlier warnings of problems,” he says.
Another shortcoming in banks’ liquidity management has been on the investment side of the equation. In many cases, says Cantor, banks simply have not known how much money they had to invest at the end of the day, nor the interest rate and return on that money. “At one transatlantic bank we consulted we found they were missing out potential opportunities of $10-$15 million a year because they didn’t have an accurate picture of their positions in their minor currencies such as Swiss Franc and Rand. At another bank, by ignoring smaller transactions they were missing out substantial percentages of the value of some currencies in their nostro accounts.”
Cantor believes regulatory pressure on banks to improve liquidity management along with an anticipated rise in interest rates will lead to even greater urgency among banks to improve liquidity management.
The financial institution clients of software developer Misys are focused on cross-border, cross-currency and multibank cash pooling capabilities, says Olivier Berthier, solutions director,
transaction banking at Misys. “During the past few years the large international corporate clients of banks have been demanding multicurrency and multibank solutions from their banks. While this can be undertaken manually, the clincher for banks is that they want to perform this at a low cost.”
This requires a high level of automation, says Berthier, which is made complex because of the specific needs of individual corporations, which include disparate tax and accounting regulations across many jurisdictions.
Another significant issue is reluctance on the part of some banks to move away from an individual branch approach. “When a corporate is more sophisticated in managing its liquidity, the bank will not have as much liquidity sitting around in its accounts. Moreover, banks fear that they will lose fees from their local banks if a corporate moves to a centralised solution. But it should be remembered that very often, if a bank can offer cross-border services, it will be able to serve a larger group of clients within that corporate. They might be making less money out of an individual branch, but as a result of being able to pool cash for the client in 35 countries, they will be increasing the share of the wallet of that client.”
Global cash pooling is not without its difficulties, says Berthier. The Swift MT 940 messages that are used to provide bank information to clients’ cash management, treasury systems and accounting applications, allow for too much variation in how information is integrated. “In our automation efforts, Misys has had to add a lot of intelligence to filter and parse these Swift messages. In fact the low quality of data in these Swift messages has been an inhibitor in global cash pooling.”
One recent trend Berthier cites could be worrying news for financial institutions: “As the level of sophistication within corporate treasuries increases, many treasurers are wondering if they can run global account pooling themselves. We have been contacted by corporations who would like access to such an engine and I believe in part this has been a reaction to the financial crisis, where some banking relationships disappeared.”
country? Is the transaction narrative consistent? If there is any reason there is inconsistency that could mean the final balance includes unclear items that cannot guide an accurate investment strategy.” BT
system are controlled and approved by the bank’s authorised staff.
The optimisation model was developed in collaboration with experts in statistics and mathematical modelling of events. a statistical expert who cooperated with the bank used historical data to identify factors that are drivers of cash balances in bank branches. The researcher then defined the weight of each variable to a bank branch reflecting regional characteristics. The resulting model automatically adjusts to changing conditions, which means that it does not need to be continuously fine-tuned. The system can reach 98% accuracy in the optimisation process.
Locking up timemeanwhile, out in the physical world, there is an interesting issue relating to the management of the actual locks on the aTm machines.
mostly these are supplied by Kaba mas, one of the world’s leading suppliers of electronic locks.
The Kaba mas cencon aTm cash Vault Security System allows banks to control access to the aTm for replenishment and servicing, providing audit trails and management tools for multiple users and passwords.
The platform is widely used, and the company is in the process of migrating users to the latest version, cencon 4.
www.bankingtech.com I 33
according to ib management Solutions, a security technology specialist that delivers lock code distribution systems to cash-in-transit providers, however, this has thrown up issues.
Due to factors entirely out of its control, Kaba mas are advising that current smart keys – so-called ‘Dallas’ keys used by security or maintenance personal on key readers mounted on the lock – are being phased out within the next two years. The new cencon 4 locks can be managed using the older cencon software in compatibility mode – but only while the lock serial numbers on cencon 4 locks remain under the one million mark. Locks with seven digit serial numbers have to be managed using cencon 4.0 software
It is not clear when the one million mark will be reached, but industry experts say ‘m-Day’ (millionth lock-Day) will come sometime within the next year, creating a sort of y2K issue for the cIT companies. BT
“A statistical expert who cooperated with the bank used historical data to identify factors that are drivers of cash balances in bank branches.”
20 I www.bankingtech.com
Cash: thE rEaL wOrLdmarch 2011
Money on the move
the feature on the preceding pages covers one of the largest areas of interest for banks at the moment, cash and liquidity management. For many, however, cash means cash, and there are whole sets of problems around it – and not simply the logistics of the cash in transit industry.
Getting the money to the aTms is enough of a problem – at the beginning of this month a strike by truck drivers was threatening to leave many aTms in South africa empty – but the banks also have to find a way to do this efficiently and cost-effectively.
a project to automate this at Poland’s bre bank was one of the winners in the Banking Technology awards last year, and illustrates the issue well. as one of the judging panel commented at the time: “there are a lot of banks that will wish they could have cracked the problem this well.”
bre bank is the third largest bank in Poland, running three separate banking brands: bre (corporate), multibank (retail), mbank (internet-based retail). each brand had different, unique procedures, processes and costs regarding physical cash. The challenge of the project was to concentrate of management and information
and to unify key underlying processes. Local, dispersed, differentiated managing of cash was to be eliminated, whereas quality of business processes was to be functionally improved to meet the expectations of various segments of the bank’s customers.
The project resulted in the unification of cash handling procedures and relations with cash counting and transportation service providers. This unification allowed for measurement, benchmarking and process optimisation, generating considerable reduction of cost and risk. Transparent processes and their monitoring opened room for predictions regarding cash demand, supply and balances required. at the same time the bank became able to offer cheaper, faster, more reliable services, thereby acquiring new clients and their cash volumes.
before launching the project, bre bank reviewed IT solutions dedicated to cash processing and management available in the market. as none of the proposed solutions fulfilled the expectations, the bank decided to start a development project using its own resources. The decision was mainly driven by the requirement to accommodate three different cash management processes specific to the three banking brands. The resulting cash breaker system was developed and implemented from scratch in less than six months from the commencement of the works.
Three points of the project are worth highlighting: (1) implementation of a sophisticated stochastic
model for predicting future cash balances that allows cost optimisation, (2) the change of
management mindset and intensive development of internal cooperation
between corporate, retail, operations and IT necessary for successful project
completion, (3) the use of purely internal resources to build the IT platform.
Optimising cash processes within the bank means generating the timetable of
cash delivery and collection at cash points in order to minimise the total cost incurred.
The optimisation module is supplied with data by the records module, and on this basis the
system forecasts demand for cash and selects cash delivery and collection so as to reduce costs
to the institution as a whole. costs include not only the cost of transport, preparing cash, but cost
of cash “frozen” in bank branches and aTms as well. The timetable takes into account all externalities (delivery times, advance notices required for orders, etc.) and ensures adequate cash management. It should be noted that the process is supervised by the user, which means that orders proposed by the
Cash management also means moving physical money around – and despite what you might read elsewhere, even in this magazine, there is still a lot of it going on, writes David Bannister
system are controlled and approved by the bank’s authorised staff.
The optimisation model was developed in collaboration with experts in statistics and mathematical modelling of events. a statistical expert who cooperated with the bank used historical data to identify factors that are drivers of cash balances in bank branches. The researcher then defined the weight of each variable to a bank branch reflecting regional characteristics. The resulting model automatically adjusts to changing conditions, which means that it does not need to be continuously fine-tuned. The system can reach 98% accuracy in the optimisation process.
Locking up timemeanwhile, out in the physical world, there is an interesting issue relating to the management of the actual locks on the aTm machines.
mostly these are supplied by Kaba mas, one of the world’s leading suppliers of electronic locks.
The Kaba mas cencon aTm cash Vault Security System allows banks to control access to the aTm for replenishment and servicing, providing audit trails and management tools for multiple users and passwords.
The platform is widely used, and the company is in the process of migrating users to the latest version, cencon 4.
www.bankingtech.com I 33
according to ib management Solutions, a security technology specialist that delivers lock code distribution systems to cash-in-transit providers, however, this has thrown up issues.
Due to factors entirely out of its control, Kaba mas are advising that current smart keys – so-called ‘Dallas’ keys used by security or maintenance personal on key readers mounted on the lock – are being phased out within the next two years. The new cencon 4 locks can be managed using the older cencon software in compatibility mode – but only while the lock serial numbers on cencon 4 locks remain under the one million mark. Locks with seven digit serial numbers have to be managed using cencon 4.0 software
It is not clear when the one million mark will be reached, but industry experts say ‘m-Day’ (millionth lock-Day) will come sometime within the next year, creating a sort of y2K issue for the cIT companies. BT
“A statistical expert who cooperated with the bank used historical data to identify factors that are drivers of cash balances in bank branches.”
UsabilityBut no matter what the functionality the starting point for a platform its ease of use. alan rennie, head of e-commerce at charles Stanley, explains that its website has been popular with users because it is configured to hold many ‘portlets’ on the same page. It means users can see streamed real-time prices and trading activity, stocks that are moving up or down, research, news and so on all at once. It can be customised and there are no annoying pop ups. “The split screen type functionality was heralded when we introduced it a few years ago and during the course of this year we will be looking to update it and make it even better,” he says.
and charles Schwab has just launched a new platform, Streetmart Edge, that promises to “think like a trader”. Kully Samra,UK branch director, says: “Users were demanding a rejuvenated platform and we’ve essentially started from scratch and made it more intuitive to use with all the functionalities that today’s online traders demand as standard.”
accessing a decent range of investment products is also now a must-have. The days of equity-only execution are long gone and online platforms now need to offer equities and funds as well as more complex investments such as ETFs or individually managed accounts.
But it’s no good being able to access a broad investment spectrum without a corresponding level of research and news availability. here the depth and breadth of the research is dependent on the provider and varies greatly, partly because of the fear of cannibalising the advisory business and partly because an online platform needs to stop short of offering investment advice. The same encroachment issue also applies to reporting. Some platforms also link to investment communities such as the Motley Fool. The dilemma is how much or the research and underlying performance data to make available to attract as many clients as possible without encroaching on the advisor’s territory.
TD Waterhouse’s Sheil says: “Proving research is standard. We link with well-known and respected third parties such as Morningstar or KBc. Most brokers will also provide good charting functionality as well as detailed financial and accounting information.”
Indeed, additional functionality that is now commonly available includes access to other firm’s buy and sell lists and access to company director’s activity, thus making big institutional trades more visible. Platforms can also offer stop loss or buy and sell limit functionality as well as access to other exchanges so that clients can trade around the clock.
But the addition of more complex investments can present a problem in that investors need additional information on things like the exact composition of an ETF, or visibility on the end profit from a dollar-denominated stock once the FX rate is factored in.
MiFID also means that investor suitability must be assessed to prevent investors buying into products for which they lack the experience or
sophistication. again this functionality has been built into platforms. Thomson reuters’ eXimius for one, has an integrated compliance check built into its pre-trading engine.
The TD Waterhouse system also has a nifty function that links into a bank’s compliance systems and provides a viewing platform vis à vis the investment activity of that bank’s employees. This is desirable from a conflict of interest point of view.
Sheil explains: “If we are nominated a bank’s designated broker then we can provide them with trading, portfolio holdings and accounts information so that the compliance department can see who is trading what and search either by stock or employee. It’s daily, automated and so much easier than individuals submitting trades by hand for approval or us sending individual contract notes out which then need entering into the bank’s compliance software for matching.”
and there is also demand for better functionality around corporate actions so as to allow investors to better manage their tax position.
Sheil adds: “corporate action functionality including nominee voting on aGMs and EGMs is now via e-mail notifications in partnership with a third-party specialist. This is much more efficient than doing it manually.”
Under the bonnetBut underneath that front end, different investment types still have separate streams and timeframes for settlement, reconciliation, reporting and accounting, even if the processes and workflows themselves are similar or even identical.
Ian Salmon, head of enterprise business development at Fidessa, says: “Broader investment appetite obviously does throw up challenges but it’s a similar process no matter what the asset class, even if different channels to market or different investments have their own intrinsic settlement implications. The strength of an IT system is whether it is able to present a single front end while integrating with the back office.”
Geoff hodge, chief executive at Milestone, a global technology and operations provider, says: “The problem is that in the institutional world, systems have historically been designed to deliver a broad range of investment and accounting functionality, but only for a relatively small number
www.bankingtech.com I 23
>
“Users were demanding a rejuvenated platform and we’ve essentially started from scratch and made it more intuitive to use with all the functionalities that today’s online traders demand as standard.”
Kully Samra, Charles Schwab
22 I www.bankingtech.com
Trading: Online brOkingMarch 2011
Technology trickle-down boosts brokers
Online retail broking is getting an institutional-style makeover. Users now demand not just simple execution and access to research but also institutional-style trading systems with real-time streaming, better research availability, automated trade commands and the like, and all of that across the whole investment spectrum.
Indeed, retail online broking platforms have sometimes been the poor relation of the broader wealth management community. Basic platforms would execute trades and perhaps give access to some research or technical analysis. But online traders now require access to a similar level of information and functionality as advisory or discretionary managers.
“Software for the online broking community is a segment of a broader wealth management software provision. Essentially it’s about affording a 360 degree view of the market and all business areas; execution, discretionary and advisory all tend to be on the same platform,” says David Wilson, sales & marketing director for Thomson reuters’ eXimius.
But in a post-credit crunch, flat interest rate context, online traders want to aggressively seek better returns. That means the same software capability and access to data and information as other clients, minus the advice. In addition, the Financial Services authority’s retail Distribution review is expected to push the savvier segment of the IFa community into online broking to eliminate the need to pay for advice. The result is an increase in assets under management as well as raised client expectations. Execution-only services have now become ‘execution and everything that goes around that all in real time please’ services. Providers have had to adapt accordingly.
richard Sheil, business development manager at TD Waterhouse, says that people are much more at home with the internet than they were even five years ago. This, combined with better financial awareness, means the ‘do it yourself’ ethos is both much more developed and technologically enabled. “Online broking’s popularity has evolved as people realise that it can be an easy and efficient way to conduct investment activity,” he says.
Until recently retail brokerage systems were poor relations, but technology and user demands are making them more powerful, writes Alison Ebbage.
UsabilityBut no matter what the functionality the starting point for a platform its ease of use. alan rennie, head of e-commerce at charles Stanley, explains that its website has been popular with users because it is configured to hold many ‘portlets’ on the same page. It means users can see streamed real-time prices and trading activity, stocks that are moving up or down, research, news and so on all at once. It can be customised and there are no annoying pop ups. “The split screen type functionality was heralded when we introduced it a few years ago and during the course of this year we will be looking to update it and make it even better,” he says.
and charles Schwab has just launched a new platform, Streetmart Edge, that promises to “think like a trader”. Kully Samra,UK branch director, says: “Users were demanding a rejuvenated platform and we’ve essentially started from scratch and made it more intuitive to use with all the functionalities that today’s online traders demand as standard.”
accessing a decent range of investment products is also now a must-have. The days of equity-only execution are long gone and online platforms now need to offer equities and funds as well as more complex investments such as ETFs or individually managed accounts.
But it’s no good being able to access a broad investment spectrum without a corresponding level of research and news availability. here the depth and breadth of the research is dependent on the provider and varies greatly, partly because of the fear of cannibalising the advisory business and partly because an online platform needs to stop short of offering investment advice. The same encroachment issue also applies to reporting. Some platforms also link to investment communities such as the Motley Fool. The dilemma is how much or the research and underlying performance data to make available to attract as many clients as possible without encroaching on the advisor’s territory.
TD Waterhouse’s Sheil says: “Proving research is standard. We link with well-known and respected third parties such as Morningstar or KBc. Most brokers will also provide good charting functionality as well as detailed financial and accounting information.”
Indeed, additional functionality that is now commonly available includes access to other firm’s buy and sell lists and access to company director’s activity, thus making big institutional trades more visible. Platforms can also offer stop loss or buy and sell limit functionality as well as access to other exchanges so that clients can trade around the clock.
But the addition of more complex investments can present a problem in that investors need additional information on things like the exact composition of an ETF, or visibility on the end profit from a dollar-denominated stock once the FX rate is factored in.
MiFID also means that investor suitability must be assessed to prevent investors buying into products for which they lack the experience or
sophistication. again this functionality has been built into platforms. Thomson reuters’ eXimius for one, has an integrated compliance check built into its pre-trading engine.
The TD Waterhouse system also has a nifty function that links into a bank’s compliance systems and provides a viewing platform vis à vis the investment activity of that bank’s employees. This is desirable from a conflict of interest point of view.
Sheil explains: “If we are nominated a bank’s designated broker then we can provide them with trading, portfolio holdings and accounts information so that the compliance department can see who is trading what and search either by stock or employee. It’s daily, automated and so much easier than individuals submitting trades by hand for approval or us sending individual contract notes out which then need entering into the bank’s compliance software for matching.”
and there is also demand for better functionality around corporate actions so as to allow investors to better manage their tax position.
Sheil adds: “corporate action functionality including nominee voting on aGMs and EGMs is now via e-mail notifications in partnership with a third-party specialist. This is much more efficient than doing it manually.”
Under the bonnetBut underneath that front end, different investment types still have separate streams and timeframes for settlement, reconciliation, reporting and accounting, even if the processes and workflows themselves are similar or even identical.
Ian Salmon, head of enterprise business development at Fidessa, says: “Broader investment appetite obviously does throw up challenges but it’s a similar process no matter what the asset class, even if different channels to market or different investments have their own intrinsic settlement implications. The strength of an IT system is whether it is able to present a single front end while integrating with the back office.”
Geoff hodge, chief executive at Milestone, a global technology and operations provider, says: “The problem is that in the institutional world, systems have historically been designed to deliver a broad range of investment and accounting functionality, but only for a relatively small number
www.bankingtech.com I 23
>
“Users were demanding a rejuvenated platform and we’ve essentially started from scratch and made it more intuitive to use with all the functionalities that today’s online traders demand as standard.”
Kully Samra, Charles Schwab
The mobile phone is ubiquitous these days and as such it has been a key focus for retail and corporate banks looking for new customers, new channels to market and value-added revenue streams for a number of years. It can be used to access and manage retail bank accounts, to enable corporate treasurers to quickly authorise cash or trade fi nance transactions while they’re on the move, or to attract the so-called ‘unbanked’ in developing countries with mobile money transfer services and remittances, bringing more people into the orbit of fi nancial services as has happened in Africa and elsewhere. The remote mobile payment is also a potential cheque replacement technology and is presently being examined as such in the UK where cheques are due to be phased out in 2018. “It is one option we’re currently examining,” confi rms Paul Smee, chief executive of the Payments Council. Indeed, the council established a working group at the end of last year, consisting of representatives from most of the UK’s retail banks, to look at Peer-to-Peer (P2P) payments in m-banking and the interoperability issues surrounding it.
“The mobile has proven itself as a communication device – it’s immediate and convenient and has numerous benefi ts that mean banks can create new services off the back of it,” says Dag-Inge Flatraaker, chair of the European Payments Council m-channel working group and general manager of payment system strategy at DnB Nor bank. The fact that there are almost fi ve billion phones globally proves his point.
His enthusiasm for mobile technology is shared by Ron van Wezel, head of emerging payment streams at Deutsche Bank and chair of the Mobey Forum, a cross-industry group consisting of banks, handset manufacturers and network operators, who are dedicated to developing mobile fi nancial services. “I think this will be the next wave,” he says. “The mobile channel is very very exciting at the moment.”
According to Doaud Fakhri, a retail banking analyst at the Datamonitor consultancy, the mobile channel could be the main channel to market for a number of different fi nancial services in future years. He backs this assertion up by citing the fi rm’s latest Current State of Online Banking report, which shows that smartphones are popularising mobile banking and that the total number of shipments of these functionally rich devices, which can connect to existing online platforms or support standalone apps, will easily exceed half a billion by 2015 (and the growth curve could yet pick up). As an aside, Datamonitor’s fi gures also show Android fast catching up the iPhone, Blackberry and Symbian/Windows Mobile operating systems in consumer popularity. The latter two OSs of course recently announced a link-up after Nokia effectively conceded that its existing systems and planned MeeGo operating system were not up to competing against its rivals and decided to use Microsoft’s OS instead, obviously in fear of losing its previously dominant position as the smartphone market develops (see page 26).
Neil Ainger investigates how the mobile phone is taking over the delivery of fi nancial services from customer-facing retail bank applications, to payments, including contactless ones, to services for the ‘unbanked’, remittances and corporate banking end uses, highlighting the opportunities, and the integration and standardisation challenges that still remain in the way of this transformative technology
One world, one love, one banking device?
>
www.bankingtech.com I 25
MOBILE TECHNOLOGY IN FSMARCH 2011
SPECIAL REPORT
of large clients or portfolios. The issue is how to provide an institutional style range of functionality and efficiency directly to the retail client. Institutional systems are not always nimble enough or able to cope with a larger volume of smaller retail clients using an online broking platform.”
executionBut an area where retail and institutional trading are totally separate is in pricing and best execution. here it is unlikely that an online platform would ever be able to access an institutional dark pool of liquidity, where institutions cross-trade with each other.
But, since MiFID and best execution, retail investors can combine the real-time pricing and movement streams with the knowledge that they are getting the best market price to trade from a position of almost complete knowledge. In practise, online platforms will link to a variety of market makers electronically, and place the trade with the one offering the best price. It is a high volume, low turnover business.
Samra comments: “The platform gives access to market makers and although retail clients will never have access to dark pools of liquidity they will be able to see the market moving in real time.”
clearly though, online platforms need better straight through processing and other efficiencies on all investments. The issue is not that these functionalities are unavailable, just that they need to be tweaked from a low-volume high-value institutional setting. Indeed having STP around not only the execution but around the whole trade cycle; on distributions, order management, reconciliation, fee and rebate management across the whole spectrum of investments would also bring lower minimum investments as it reduces the administrative burden. Between 70% to 80% of operational cost is in labour and the majority of this is around the trade lifecycle – the area that thus needs most attention.
The question then, is how far can platforms go in legacy form? hodge thinks that an eventual rebuild is the inevitable outcome if platforms want to attract and retain ever more demanding clients: “The natural first step is to bolt on solutions to an existing proprietary system but investor demand is way ahead of the platforms’ response. Eventually a seamless IT platform will be required in order to bring functionality into line and be able to provide a system that is flexible enough to cope with today’s demands as well as those into the future,” he says.
Samra agrees. “We chose to rebuild the platform from scratch but keep the look and feel of the existing one so as not to alienate our users. We had gone as far as we could by bolting new things onto the old platform and we wanted a platform that was fit for purpose,” he says. BT
24 I www.bankingtech.com
Trading: Online brOkingMarch 2011
One of the biggest software challenges for online broking platforms is how to respond to the demand for multi-channel access. The issue is whether the demand will actually take off even if the technology is available.
Indeed, enabling multi channel dealing is seen as a real added-value service and the idea is that the end investor has instant access to information and is able to react on the back of it. For example if a dividend or a profit warning were issued the system could send out an alert and the client could then buy or sell.
David Wilson, sales & marketing director for Thomson Reuters’ eXimius, says: “The demand is for systems to be more proactive and combine market research and the anticipation of what a client would like to do to communicate intelligently. The aim is to be helpful, not to overwhelm the client. For example if the system knows that a client is overinvested in x and there is a market event then it can contact that client to see if they would like to hold or sell.”
Until recently this sort of functionality has been available over e-mail but not generally mobile enabled. But as the technology moves on and people become more aware of the possibilities then demand can be expected to grow for mobile trading apps.
A recent launch is from Halifax Share Dealing. It enables customers to access their accounts and trade shares in real-time from their phones. Investors can also search for companies and get instant updates and prices. The app also allows investors to fund their account from their mobile so that they are always able to trade. The service does not yet function for funds, international trading or fund withdrawals.
Alan Rennie, head of e-commerce at Charles Stanley says: “We are certainly looking to add smart phone functionality but it is very early days in terms of demand, the actual penetration of smart phones and whether the demand is actually there to have the same sort of functionality on a phone.” He adds that when WAP phones first came out we enabled a lot of functions but that take up was significant. “The market has evolved since then with lots more technical awareness in general so perhaps this time it will take off,” he says.
The multi-channel dilemma
The mobile phone is ubiquitous these days and as such it has been a key focus for retail and corporate banks looking for new customers, new channels to market and value-added revenue streams for a number of years. It can be used to access and manage retail bank accounts, to enable corporate treasurers to quickly authorise cash or trade fi nance transactions while they’re on the move, or to attract the so-called ‘unbanked’ in developing countries with mobile money transfer services and remittances, bringing more people into the orbit of fi nancial services as has happened in Africa and elsewhere. The remote mobile payment is also a potential cheque replacement technology and is presently being examined as such in the UK where cheques are due to be phased out in 2018. “It is one option we’re currently examining,” confi rms Paul Smee, chief executive of the Payments Council. Indeed, the council established a working group at the end of last year, consisting of representatives from most of the UK’s retail banks, to look at Peer-to-Peer (P2P) payments in m-banking and the interoperability issues surrounding it.
“The mobile has proven itself as a communication device – it’s immediate and convenient and has numerous benefi ts that mean banks can create new services off the back of it,” says Dag-Inge Flatraaker, chair of the European Payments Council m-channel working group and general manager of payment system strategy at DnB Nor bank. The fact that there are almost fi ve billion phones globally proves his point.
His enthusiasm for mobile technology is shared by Ron van Wezel, head of emerging payment streams at Deutsche Bank and chair of the Mobey Forum, a cross-industry group consisting of banks, handset manufacturers and network operators, who are dedicated to developing mobile fi nancial services. “I think this will be the next wave,” he says. “The mobile channel is very very exciting at the moment.”
According to Doaud Fakhri, a retail banking analyst at the Datamonitor consultancy, the mobile channel could be the main channel to market for a number of different fi nancial services in future years. He backs this assertion up by citing the fi rm’s latest Current State of Online Banking report, which shows that smartphones are popularising mobile banking and that the total number of shipments of these functionally rich devices, which can connect to existing online platforms or support standalone apps, will easily exceed half a billion by 2015 (and the growth curve could yet pick up). As an aside, Datamonitor’s fi gures also show Android fast catching up the iPhone, Blackberry and Symbian/Windows Mobile operating systems in consumer popularity. The latter two OSs of course recently announced a link-up after Nokia effectively conceded that its existing systems and planned MeeGo operating system were not up to competing against its rivals and decided to use Microsoft’s OS instead, obviously in fear of losing its previously dominant position as the smartphone market develops (see page 26).
Neil Ainger investigates how the mobile phone is taking over the delivery of fi nancial services from customer-facing retail bank applications, to payments, including contactless ones, to services for the ‘unbanked’, remittances and corporate banking end uses, highlighting the opportunities, and the integration and standardisation challenges that still remain in the way of this transformative technology
One world, one love, one banking device?
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www.bankingtech.com I 25
MOBILE TECHNOLOGY IN FSMARCH 2011
SPECIAL REPORT
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‘Joe the CFO’ do his job”, says George Ravich, head of marketing at Fundtech. Three specific mobile modules are currently available: Global CashPlus Mobile, which is a cash and liquidity management system; Accountis EIP Mobile, which is an electronic invoice presentation tool; and Bacsactive-IP Mobile, which is for use with UK Bacs payments. A major UK bank, believed to be NatWest, was the first client for MobileAccessPlus, deploying the Bacsactive-IP module.
Mobile banking and remote payments In the retail banking environment mobile devices have been in use for many years now and attracted millions and millions of customers to use services such as checking your account balance, topping up your pay-as-you-go mobile, receiving mobile alerts to warn of an impending overdraft, or to make remote payments to others. Although often P2P payments can only be made to others inside the same bank or by using the mobile to access an internet banking website and ultimately the ‘old’ payment infrastructures such as the FPS in the UK or Swift internationally. Using a mobile phone number itself to initiate a payment is still rare in most countries, although ANZ Bank did launch a goMoney iPhone app down under that could do this domestically.
Datamonitor’s Fakhri calls many of the existing mobile banking and payments options available to retail banking customers “read-only”, by which he means they are quite basic, relying on accessing internet banking websites or SMS text messages. This is particularly so in the UK, where Lloyds Banking Group successfully launched many of the ‘vanilla’ services mentioned above, as did RBS and many of the other large High St banks, typically relying on Monitise’s white labelled front-end software platform. As Richard Johnson, group strategy director of Monitise, points out though: “The UK has a more centralised market than some others – illustrated by the FPS, Bacs and so forth – which can mean a slower pace of development but once a move is made there is good scale and large uptake for new technologies [thanks to the history of cooperation].” The UK can, therefore, catch up quickly.
“In the US it’s very different,” he adds, “as there are so many smaller dispersed banks that rely on a ‘processor’ partner, such as FIS, who we have a joint venture with. These large outsourcing specialists provide services and reach to lots of smaller banks and allow a faster pace of mobile technology app delivery and rollouts to tier 3 players [without however the same overall scale].”
Other North American players include ClairMail which has its mobile banking and payments solution with eight of the top 12 banks in the region and reports an explosive 253% growth in the number of transactions last year. “That’s more than 170 million payments in total,” says Donald MacCormick, vice president of products.
Each country and region is at a different stage of development, with the Far East in particular generally considered to be in advance of most other areas, while Europe and North America struggle with siloed infrastructures that can’t just be skipped over and which consumers sometimes have to be prised away from [the cheque in the UK for instance won’t be easily replaced by mobile P2P payments, despite the laudable intentions of the Payments Council].
“It’s true Europe and the US have higher mobile penetration rates but also legacy issues, so while mobile payments will take off in these markets it’ll be slower than in Asia or Latin America,” says Deutsche Bank & the Mobey Forum’s van Wezel. “Emerging markets can leapfrog the ‘old world’ and its investments of the last 50 years.”
Banks have made a success of some retail mobile banking services in Europe (for instance, see First Direct’s iPhone app on page 28). La Caixa too in Spain has built a loyal fan base. “We began our services way back in 1998 and now provide SMS alerts, mobile applications for the iPad and Windows Phone 7, among many other devices, plus a mobile trade finance web portal,” explains David Urbano Martin, director of mobile at the bank. “La Caixa is the leader in Spain in mobile banking, with more than 600,000 customers using it to do a lot of different transactions such as check accounts or make transfers.”
Mobile banking can deliver so much more though and hopefully it will in the coming years. Location-specific tools, such as where to find your nearest ATM for example, can either be sold or given away free to enhance customer service – ING in the Netherlands have shown this can work. Mobiles can also be used to retrieve emergency cash from using a code texted to your phone and can link into the world of e-commerce and mobile wallets in the future. These things are possible but it takes time, of course, and requires these new services to be integrated into existing core banking operations.
Vendors are trying to help with off-the-shelf mobile banking software. Temenos for example has added a module to its T24 core banking software platform, making it easy to launch mobile banking and remote payment offerings if you stay in its proprietary environment – although Phil Sorrell, mobile business development director at Temenos maintains the mobile module is agnostic and can work with other core banking platforms too. “The real challenge these days,” he says, “is to integrate via SOA hubs, enabling multiple customer-facing channels and connecting to other systems like card schemes and merchant systems so that the e-commerce world opens up.”
There are other obstacles to the widespread adoption of the mobile in other bank sectors, such as the need to integrate it into the financial supply chain for corporates and avoid ‘communities’ of banks, vendors and others who lock-in customers to restrictive trade finance networks. The same
26 I www.bankingtech.com
Source: Datamonitor – Nokia has since agreed to use the Microsoft OS
MOBILE TECHNOLOGY IN FSMARCH 2011SPECIAL REPORT
Accenture studied 10 banks involved in mobile financial services from across all regions of the world last year and produced a blind report called Mobile Banking Case Studies to highlight best practice. When banks enable their customers to use a mobile device to check balances, transfer money, pay bills, apply for credit or use personal finance management apps, they can achieve large returns on investment – in the case of a middle eastern FI a 300% RoI was obtained by educating its two million customers how to use new services to pay bills online via the mobile and so forth. A European bank whose customers can check balances, initiate transfers and trade stock achieved a 60% growth in mobile banking consumers, while one in Asia got a return on investment of 230% by moving to interactive online services, away from text messages. “All this proves that done properly the mobile can be a revenue stream, not just a cost reduction exercise or simply another channel to market,” says Michael Eagleton, global lead for mobile money at Accenture. It can pay its own way.
As Justine Haworth, head of digital solutions at First Direct, says the important thing to remember is that “the mobile is becoming ever more important as new developments allow increasing numbers of different transactions to be made. The next generation will look to run their lives through mobile technology and this cannot be ignored.” She also points out that, statistically you’re much more likely to notice that your mobile phone is lost than when your wallet goes missing so it can help security too.
For Mark Crichton, a technology manager at security vendor RSA, this is a view he agrees with but the chief benefit to him of the mobile as a security device is that it can be an authentication tool. “It can be used to confirm or block suspect transactions with customers before they go through, with two factor authentication tests and perhaps location-specific questions, employed to identify the mobile user as the customer.”
Other consultancies see growth in the mobile channel as well, and not just in the retail mobile banking sector either. IDC’s Rachel Hunt, EMEA director of banking research, thinks the corporate banking space and trade finance solutions could present the best growth prospects citing her firm’s Mobile Payment Challenge white paper, produced last year in association with Deutsche Bank (who use Luup for their mobile banking apps), which found that “real opportunities exist for new mobile payment services, but that surprisingly those most likely to generate value-add [for banks] are in the B2B sectors, rather than P2P or B2C”.
Corporate banking and trade finance The potential of the mobile phone to bring revenue into corporate banks is perhaps unrivalled compared to other end uses. VocaLink’s Immediate Mobile Payments report for instance, unveiled at Sibos 2010, surveyed 2,000 British adults, including 301 self-employed or SME business owners, and 73% of them thought that the idea of a speedy mobile-initiated payment was valuable. Amazingly, 11% said they’d pay £1 per transaction (these seem to have been potential retail bank customers though), while more sensibly 46% said they’d pay £1 per month in a subscription.
“We’ve been rolling out mobile banking for corporates in Asia and it has been very successful there,” says Deutsche Bank & the Mobey Forum’s van Wezel. “Solutions at the moment generally consist of apps that allow corporate treasurers to authorise cash and trade deals and check their account statements while they’re on the move. Other features are being added to the suite however, such as full cash management capabilities, as we aim for a comprehensive solution as rich as our existing internet channel solutions.”
Standard Chartered is targeting corporates for growth in the mobile channel as well. It has launched two iPhone apps, downloadable via the Apple App store under the bank’s Straight2Bank suite. The Mobile Authorisation product also gives corporate treasurers improved control over their working capital when they are away from their desks allowing them to OK cash and trade transactions. The Trade Enquiry Service delivers real-time information on Letters of Credit and import documents to banks using Standard Chartered’s LoC Reissuance programme. “The iPhone is changing the way our clients access information and services,” says Neal Livingstone, global head of client access at Standard Chartered’s transaction banking unit.
A lot of vendors are offering corporate white labelled services to banks or direct solutions for end user clients. Fundtech is one such and debuted its Mobile AccessPlus offering late last year, which is an extension of its Service Orientated Architecture platform, usable across all the major mobile operating systems. It consolidates all of the vendor’s transaction banking products into one set of SOA services and is intended “to help
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www.bankingtech.com I 27
‘Joe the CFO’ do his job”, says George Ravich, head of marketing at Fundtech. Three specific mobile modules are currently available: Global CashPlus Mobile, which is a cash and liquidity management system; Accountis EIP Mobile, which is an electronic invoice presentation tool; and Bacsactive-IP Mobile, which is for use with UK Bacs payments. A major UK bank, believed to be NatWest, was the first client for MobileAccessPlus, deploying the Bacsactive-IP module.
Mobile banking and remote payments In the retail banking environment mobile devices have been in use for many years now and attracted millions and millions of customers to use services such as checking your account balance, topping up your pay-as-you-go mobile, receiving mobile alerts to warn of an impending overdraft, or to make remote payments to others. Although often P2P payments can only be made to others inside the same bank or by using the mobile to access an internet banking website and ultimately the ‘old’ payment infrastructures such as the FPS in the UK or Swift internationally. Using a mobile phone number itself to initiate a payment is still rare in most countries, although ANZ Bank did launch a goMoney iPhone app down under that could do this domestically.
Datamonitor’s Fakhri calls many of the existing mobile banking and payments options available to retail banking customers “read-only”, by which he means they are quite basic, relying on accessing internet banking websites or SMS text messages. This is particularly so in the UK, where Lloyds Banking Group successfully launched many of the ‘vanilla’ services mentioned above, as did RBS and many of the other large High St banks, typically relying on Monitise’s white labelled front-end software platform. As Richard Johnson, group strategy director of Monitise, points out though: “The UK has a more centralised market than some others – illustrated by the FPS, Bacs and so forth – which can mean a slower pace of development but once a move is made there is good scale and large uptake for new technologies [thanks to the history of cooperation].” The UK can, therefore, catch up quickly.
“In the US it’s very different,” he adds, “as there are so many smaller dispersed banks that rely on a ‘processor’ partner, such as FIS, who we have a joint venture with. These large outsourcing specialists provide services and reach to lots of smaller banks and allow a faster pace of mobile technology app delivery and rollouts to tier 3 players [without however the same overall scale].”
Other North American players include ClairMail which has its mobile banking and payments solution with eight of the top 12 banks in the region and reports an explosive 253% growth in the number of transactions last year. “That’s more than 170 million payments in total,” says Donald MacCormick, vice president of products.
Each country and region is at a different stage of development, with the Far East in particular generally considered to be in advance of most other areas, while Europe and North America struggle with siloed infrastructures that can’t just be skipped over and which consumers sometimes have to be prised away from [the cheque in the UK for instance won’t be easily replaced by mobile P2P payments, despite the laudable intentions of the Payments Council].
“It’s true Europe and the US have higher mobile penetration rates but also legacy issues, so while mobile payments will take off in these markets it’ll be slower than in Asia or Latin America,” says Deutsche Bank & the Mobey Forum’s van Wezel. “Emerging markets can leapfrog the ‘old world’ and its investments of the last 50 years.”
Banks have made a success of some retail mobile banking services in Europe (for instance, see First Direct’s iPhone app on page 28). La Caixa too in Spain has built a loyal fan base. “We began our services way back in 1998 and now provide SMS alerts, mobile applications for the iPad and Windows Phone 7, among many other devices, plus a mobile trade finance web portal,” explains David Urbano Martin, director of mobile at the bank. “La Caixa is the leader in Spain in mobile banking, with more than 600,000 customers using it to do a lot of different transactions such as check accounts or make transfers.”
Mobile banking can deliver so much more though and hopefully it will in the coming years. Location-specific tools, such as where to find your nearest ATM for example, can either be sold or given away free to enhance customer service – ING in the Netherlands have shown this can work. Mobiles can also be used to retrieve emergency cash from using a code texted to your phone and can link into the world of e-commerce and mobile wallets in the future. These things are possible but it takes time, of course, and requires these new services to be integrated into existing core banking operations.
Vendors are trying to help with off-the-shelf mobile banking software. Temenos for example has added a module to its T24 core banking software platform, making it easy to launch mobile banking and remote payment offerings if you stay in its proprietary environment – although Phil Sorrell, mobile business development director at Temenos maintains the mobile module is agnostic and can work with other core banking platforms too. “The real challenge these days,” he says, “is to integrate via SOA hubs, enabling multiple customer-facing channels and connecting to other systems like card schemes and merchant systems so that the e-commerce world opens up.”
There are other obstacles to the widespread adoption of the mobile in other bank sectors, such as the need to integrate it into the financial supply chain for corporates and avoid ‘communities’ of banks, vendors and others who lock-in customers to restrictive trade finance networks. The same
interoperable model for Europe. While mobile banking is mostly in the competitive space and will not depend too much on common rules and standards, this is not the case for mobile payments, which require a strong cooperation model both between banks and in some instances also between banks and other industries to be efficiently launched to the public,” says Flatraaker.
The market will help too. “In time m-banking and m-payments, including contactless ones, will converge,” says Monitise’s Johnson. “Customers don’t want separate mobile banking, loyalty schemes, payments, retailer or e-commerce apps. Eventually it all needs to be connected up.” That’s why the firm has launched the mobile money network in the UK with Charles Dunstone, the well-known founder of Carphone Warehouse, to provide a one-stop shop for mobile products, services and marketing to encourage uptake. And it is partnering with Vivotech in the US to gain access to its Over The Air provisioning software that enables NFC payments to be made, allied to the firm’s mobile money platform. The combined service is on offer to banks across the US.
Monitise also has a joint venture with Visa that’s just been replicated in Europe whereby its front-end platform has been licensed to give the card scheme’s 4,000 member banks – and other non-bank users – access to its mobile money management solution. An agreement to develop further services jointly has also been signed. In India a deal with Standard Chartered means the vendor is providing a mobile banking payment and commerce service, so that cinema/airline tickets can be brought or bills paid, for retail banking customers. In Nigeria Monitise has received a provisional banking license from the central bank to introduce payments by mobile phone across the country, effectively providing a FS service to the ‘unbanked’, as M-Pesa has done in Kenya (see page 30). These types of partnerships are increasingly common as the mobile channel develops around the world but wherever firms are involved in these singular networks, some form of interoperability will need to come to them in the end to ensure competition or other schemes have to be licensed.
Mobile contactless payments Mobile contactless payments are being encouraged by card schemes, banks, network operators and others to try and deliver the ability to consumers to simply tap a mobile against a reader to authorise a low-value payment, as you would with a contactless card or an Oyster transportation card in London. Indeed, the capital has already declared that 2012 will be the first ‘contactless’ Olympic games with ticketing, travel and purchases taking to the air. Allied to a loyalty scheme, the valuable functionally rich data obtained can be used to cross or up-sell other financial services, or indeed non-financial retail or bill payment services, which is attracting the interest of banks and retailers alike.
Numerous technologies are currently available that facilitate contactless payments on a mobile,
www.bankingtech.com I 29
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In a groundbreaking pilot, the biggest in Europe, La Caixa bank, Visa and Telefonica ran a large scale six-month long contactless m-payment scheme from May to November last year, involving 500 retailers and 1,500 bank customers in Sitges, Spain. The trial, since extended after it proved popular with participants, covers the vast majority of shops in the town, including pharmacies, clothes and shoe shops, stallholders in the central market, restaurants, bars, supermarkets and so forth, and allows purchases of less than €20 to be paid for simply by taping a Samsung phone against a Visa payWave reader. Transactions above €20 require a PIN.
The project uses Near Field Communication short-wave wireless communication technology between the phone and the reader terminal. A Samsung Star Touch phone was deployed with a secure mobile SIM chip inside, which effectively acts as a Visa card.
The average age of the 1,500 La Caixa bank customers taking part in the ongoing scheme is 48, with an equal split of men, women, and professions, to ensure that not just young tech-savvy participants took part. A detailed feedback survey has showed that 70% of customers rate the service at 8 out of 10 in terms of their satisfaction with it. Those that were unhappy were mainly displeased that the trial didn’t cover all the shops in Sitges or they didn’t like the particular brand of phone. Among the participants, 66% said they’d definitely use contactless m-payment technology in the future, with 25% saying they probably would. Of the purchases so far made, 60% have been for less than €20, with an average spend in this ‘tap and go’ category of €10, perhaps suggesting that there is some scope here for the technology to act as a cash replacement mechanism, or at least a complimentary low-value payment form. 40% of purchases were above the €20 limit necessitating customers to enter their PIN. The average spend in this category was €60. No instances of fraud have, so far, been reported. Ultimately, liability rests with the bank but the security features deployed, such as the PIN, allied to the usual bank and card scheme protocols that the payments tap into, are working very effectively. 85% of users said they found the security protocols to be reliable.
According to David Urbano Martin, director of mobile at La Caixa, “consistent usage of the phones has been achieved; the novelty hasn’t worn off and customers like the functionality,” he said. More than 90% have used the phones to make payments and 80% of retailers have processed a transaction. The feedback survey, completed at the end of last year, also shows the potential of contactless m-payments: customers increased by 30% their number of electronic transactions, while merchants experienced a 23% sales increase on average.
“There are also a number of value-adds in this offering, ranging from mini-statements, to budgeting aids and promotional opportunities,” points out Sandra Alzetta, senior vice president of Visa Europe innovation, new product and channel development. “This technology isn’t mass market yet but the encouraging feedback from Sitges means that it soon will be ...perhaps by 2015 or earlier in terms of a full commercial rollout.”
■ David Urbano Martin, director of mobile at La Caixa will be speaking about the Sitges project and his bank’s mobile operations at the Mobile Technology in FS Summit, organised by Banking Technology on 22 June at the Haberdashers Hall in the City of London.
www.bankingtech.com/mobilesummit
Contactless m-payments take over Sitges
28 I www.bankingtech.com
fear stalks the mobile contactless payments world – another string to the bow of the mobile device – where a service that only has certain retailers down a High Street participating in a scheme isn’t likely to find favour with shoppers.
Standardisation Standardisation and interoperability work is necessary if cross-border transactions are to be made simpler, corporate accounts to be ‘passportable’ and a secure environment provided for all. Co-operative work also needs to be done to allow mobile contactless customers and bank application users to switch handsets and indeed banks or remittance providers if they so wish. Ensuring a common architecture for all that isn’t dominated by one particular community is the aim, leaving room for a competitive space to develop. As van Wezel rightly says, “the first principle is to bring working solutions to market, then there will come a point later on where we will need interoperability. Mobile payments [whether contactless or remote] are still emerging so let’s just get solutions out there and see what works and what doesn’t. When the right models have been established we can get our arms around standardisation.”
It’s a viewpoint which Flatraaker shares, saying that he doesn’t think we’ll see a collective big leap forward on mobile payments for a few years yet. “Individual communities of banks, card schemes, network operators and others are already moving ahead separately, but I believe mobile payments will only really take off once standards are in place and interoperability and critical mass has been achieved.”
In an effort to get to this place the EPC is cooperating with the GSM Association, among others, which unites nearly 800 of the world’s mobile operators and equipment and content providers on mobile contactless payments (MCP). Together
they have developed interoperable contactless m-payment requirements and standards so that banks can leverage the MNO-controlled UICC/SIM infrastructure to store and manage their banking payments applications such as debit and credit cards on mobile phones, and also created a common architecture that boosts relationships between issuing banks, mobile network operators and trusted service managers. The joint paper called Mobile Contactless Payments Service Management Roles – Requirements and Specifications was produced last October and it stipulates what role each body is to play in the value chain (see www.europeanpaymentscouncil.eu for more). Secondly, EPC is working on a remote payments initiative and produced a report last October called White Paper on Mobile Payments. This has since gone to consultation and a second edition is due out in Q2 2011. Through this work the EPC will enable banks to be able to efficiently launch the initiation of SEPA payments through the mobile channel, complying with the Single Euro Payments Area rules. “The ecosystem is still evolving, not only via national initiatives but also in a SEPA and global context. We will make sure that interoperability is achieved so that we, in the end, also can have an efficient
Online and 24-hour telephone bank, First Direct, introduced a transactional ‘banking on the move’ application on 13 January for Apple’s iPhone and iPod Touch. Available free-of-charge on the Apple App store, it allows First Direct customers in the UK to check balances, view the last 20 account transactions, move money around within the bank and make payments to an existing person or organisation already using internet banking. The latter payment functionally is possible because the front-end app links into the existing online platform and the established transfer operations therein. “The application consists of top and bottom navigation, plus tab bars,” explains Justine Haworth, head of digital solutions at First Direct. “The content in between these bars is delivered via
optimised web pages, making this a hybrid app.”
First Direct has a history of innovation in the UK retail banking industry, having taken its first call in 1989, opened its internet bank in 1998 and SMS mobile alert services in 1999, so it was naturally keen to appeal to Apple’s typically rich users. “Since launch the transactional app has been downloaded 110,000 times, which covers nearly all our iPhone users, so we’re delighted with the response we’ve had,” says Haworth. “Our plan is to now make the mobile service available on other smartphone devices and operating systems, including Google’s Android.”
The chief executive of First Direct, Matt Colebrook, believes that the iPhone app is a huge step forward, but confirms it’s just
the beginning of the bank’s ambitions for mobile banking. “We chose to go with the iPhone first because that’s where our customers are,” he explains. “Over the last 12 months, the iPhone has grown to become the sixth largest source of visitors to our website banking facility.”
Some US banks have already tapped into the country’s more developed iPhone app market (the Bank of America was the first to launch in July 2008), but First Direct wants to try and innovate in the UK and says it has ambitious plans for the next generation of mobile banking applications already afoot, which include gathering feedback on the new launch from its online banking customers. RBS’ NatWest is the only other UK bank to have introduced a similar smartphone app up until now.
HSBC First Direct launches iPhone app for mobile banking
“In time m-banking and m-payments, including contactless ones, will converge. Customers don’t want separate mobile banking, loyalty schemes, payments, retailer or e-commerce apps.”
Richard Johnson, Monitise
MOBILE TECHNOLOGY IN FSMARCH 2011SPECIAL REPORT
interoperable model for Europe. While mobile banking is mostly in the competitive space and will not depend too much on common rules and standards, this is not the case for mobile payments, which require a strong cooperation model both between banks and in some instances also between banks and other industries to be efficiently launched to the public,” says Flatraaker.
The market will help too. “In time m-banking and m-payments, including contactless ones, will converge,” says Monitise’s Johnson. “Customers don’t want separate mobile banking, loyalty schemes, payments, retailer or e-commerce apps. Eventually it all needs to be connected up.” That’s why the firm has launched the mobile money network in the UK with Charles Dunstone, the well-known founder of Carphone Warehouse, to provide a one-stop shop for mobile products, services and marketing to encourage uptake. And it is partnering with Vivotech in the US to gain access to its Over The Air provisioning software that enables NFC payments to be made, allied to the firm’s mobile money platform. The combined service is on offer to banks across the US.
Monitise also has a joint venture with Visa that’s just been replicated in Europe whereby its front-end platform has been licensed to give the card scheme’s 4,000 member banks – and other non-bank users – access to its mobile money management solution. An agreement to develop further services jointly has also been signed. In India a deal with Standard Chartered means the vendor is providing a mobile banking payment and commerce service, so that cinema/airline tickets can be brought or bills paid, for retail banking customers. In Nigeria Monitise has received a provisional banking license from the central bank to introduce payments by mobile phone across the country, effectively providing a FS service to the ‘unbanked’, as M-Pesa has done in Kenya (see page 30). These types of partnerships are increasingly common as the mobile channel develops around the world but wherever firms are involved in these singular networks, some form of interoperability will need to come to them in the end to ensure competition or other schemes have to be licensed.
Mobile contactless payments Mobile contactless payments are being encouraged by card schemes, banks, network operators and others to try and deliver the ability to consumers to simply tap a mobile against a reader to authorise a low-value payment, as you would with a contactless card or an Oyster transportation card in London. Indeed, the capital has already declared that 2012 will be the first ‘contactless’ Olympic games with ticketing, travel and purchases taking to the air. Allied to a loyalty scheme, the valuable functionally rich data obtained can be used to cross or up-sell other financial services, or indeed non-financial retail or bill payment services, which is attracting the interest of banks and retailers alike.
Numerous technologies are currently available that facilitate contactless payments on a mobile,
www.bankingtech.com I 29
>
In a groundbreaking pilot, the biggest in Europe, La Caixa bank, Visa and Telefonica ran a large scale six-month long contactless m-payment scheme from May to November last year, involving 500 retailers and 1,500 bank customers in Sitges, Spain. The trial, since extended after it proved popular with participants, covers the vast majority of shops in the town, including pharmacies, clothes and shoe shops, stallholders in the central market, restaurants, bars, supermarkets and so forth, and allows purchases of less than €20 to be paid for simply by taping a Samsung phone against a Visa payWave reader. Transactions above €20 require a PIN.
The project uses Near Field Communication short-wave wireless communication technology between the phone and the reader terminal. A Samsung Star Touch phone was deployed with a secure mobile SIM chip inside, which effectively acts as a Visa card.
The average age of the 1,500 La Caixa bank customers taking part in the ongoing scheme is 48, with an equal split of men, women, and professions, to ensure that not just young tech-savvy participants took part. A detailed feedback survey has showed that 70% of customers rate the service at 8 out of 10 in terms of their satisfaction with it. Those that were unhappy were mainly displeased that the trial didn’t cover all the shops in Sitges or they didn’t like the particular brand of phone. Among the participants, 66% said they’d definitely use contactless m-payment technology in the future, with 25% saying they probably would. Of the purchases so far made, 60% have been for less than €20, with an average spend in this ‘tap and go’ category of €10, perhaps suggesting that there is some scope here for the technology to act as a cash replacement mechanism, or at least a complimentary low-value payment form. 40% of purchases were above the €20 limit necessitating customers to enter their PIN. The average spend in this category was €60. No instances of fraud have, so far, been reported. Ultimately, liability rests with the bank but the security features deployed, such as the PIN, allied to the usual bank and card scheme protocols that the payments tap into, are working very effectively. 85% of users said they found the security protocols to be reliable.
According to David Urbano Martin, director of mobile at La Caixa, “consistent usage of the phones has been achieved; the novelty hasn’t worn off and customers like the functionality,” he said. More than 90% have used the phones to make payments and 80% of retailers have processed a transaction. The feedback survey, completed at the end of last year, also shows the potential of contactless m-payments: customers increased by 30% their number of electronic transactions, while merchants experienced a 23% sales increase on average.
“There are also a number of value-adds in this offering, ranging from mini-statements, to budgeting aids and promotional opportunities,” points out Sandra Alzetta, senior vice president of Visa Europe innovation, new product and channel development. “This technology isn’t mass market yet but the encouraging feedback from Sitges means that it soon will be ...perhaps by 2015 or earlier in terms of a full commercial rollout.”
■ David Urbano Martin, director of mobile at La Caixa will be speaking about the Sitges project and his bank’s mobile operations at the Mobile Technology in FS Summit, organised by Banking Technology on 22 June at the Haberdashers Hall in the City of London.
www.bankingtech.com/mobilesummit
Contactless m-payments take over Sitges
expected throughout Europe. The benefit of a bridging technology such as this – or indeed one using stickers – is that it means more mobile handsets can be used by consumers, while we wait for a wider rollout of NFC-enabled phones. Indeed, in the case of the iCarte it means mobile operators don’t need to distribute NFC SIMs containing the secure element – equally though it can be seen as cutting out the mobile network operator from the transaction and distribution model.
According to Mary Carol Harris, vice president of mobile development at Visa Europe, it is still very much early days in the development of contactless mobile payments. “It will take some time before mobile devices transform FS,” she says, “but we do think that first contactless cards and then mobile devices will change the way we handle our finances on a day-to-day basis.” The acceptance infrastructure (i.e. readers) also needs to be rolled out.
The legacy position of cards in Europe, North America and other developed markets means that contactless cards may well be around for a while but in developing countries and in the Far East a lot of this technology can be skipped over and consumers will move straight to the mobile, as has already been seen with mobile money transfer and remittance schemes in Africa aimed at the so-called ‘unbanked’ who had never previously been part of the financial services world. There contactless cards – and indeed perhaps even bank branches – won’t get a look-in because the mobile phone already has such penetration that it is the device upon which to deliver FS.
Colin Swain, head of mobile at Barclaycard, agrees that regional differences are an important element in the debate around uptake and consumer technology acceptance. “The maturity of mobile payments varies greatly worldwide; with banks, mobile operators and other institutions meeting the needs of their customers in very different ways,” he says. “Whether it’s a money transfer scheme, such as M-Pesa in Kenya, or the success of mobile NFC in Japan and South Korea through NTT DoCoMo’s mobile wallet and SK Telecom’s m-finance.”
“We are now seeing advances in the older established European and North American markets around mobile payments and NFC specifically, and I expect these to be major regional growth areas over the coming years,” adds Swain. He also cites a recent report by Juniper Research that stated 1 in 6 mobile phones will be NFC enabled by 2014, equating to some 950 million subscribers globally, to illustrate expected growth. Juniper also estimated that by 2014, NFC mobile spend in Europe alone would exceed £20 billion.
Disintermediation Some fear that traditional banks could lose valuable business and future growth in certain sections of the mobile channel. In the retail app and e-commerce world, for instance, including contactless, the multitude of payment processors, retailers, network operators and bill presentation and payment companies who are keen to get involved may
www.bankingtech.com I 31
end up getting the high value front-end bit of the business, where rich data and profits are available, while banks are left with the commoditised bit at the end, running over old banking infrastructures.
We’ve seen this happen before with PayPal when a sharp front-ended service came along that was too quick for slower paced banks and grabbed a new market all for itself, running on top of existing infrastructures. A killer app, in the form of eBay, was still needed though, so banks do have a chance in this market but will have to fight hard for profits. The same is true in the remittances arena. That is why the corporate banking mobile channel may well end up being the most lucrative area for mobile devices in financial services; because banks are vital in the trade finance space and provide the reach, experience and stability that corporates need.
“Disintermediation is still a valid fear and banks could lose out on all that rich customer relationship data if they’re not careful,” says Monitise’s Johnson. “That’s why banks need to leverage their brand strength and experience of keeping money safe to ensure they remain central players. I speak to banks all the time and tell them to be on the front foot. Be proactive.”
The threat is real. O2 Money, for example, launched in 2009 and now has 800,000 UK customers and a growing FS portfolio that extends to prepay cards and insurance products for handsets, holidays and the like. It has also recently announced plans to unveil a contactless mobile payments scheme later on this year in the UK, although it won’t reveal details yet because it says it’s presently concentrating on releasing a mobile wallet app with a suite of e-commerce payment options, including P2P. “We will also be applying for an e-money license under the EU’s new electronic money directive, which is due to come into force on 30 April 2011,” says James Le Brocq, head of O2’s financial services division and an ex-retail banker who spent 26 years at Alliance+Leicester and Barclaycard. This will allow O2 Money to hold cash balances for customers. Parent company, Telefonica, has also established a vertical FS line of business to demonstrate its commitment.
Ultimately though, as Barclaycard’s Swain says, banks will need to continually evolve to remain successful – just like other industries do. You have to run to stand still sometimes and that may well be the case in certain areas of the mobile channel. Banks bring inherent strengths though – physical and regulatory security, reach and expertise in the handling of money, and they need to use these strengths to ensure a flourishing and central role in the development of what could be the 21st century’s key FS device. BT
■ Mobile World Congress report on page 10.
30 I www.bankingtech.com
Everywhere announcement of a UK-wide MCP rollout (see news, page 6). The network operator, which includes Orange and T-Mobile, will launch the UK’s first full scale commercial contactless mobile phone payments solution this summer. The partners are working with as yet unnamed handset manufacturers to allow Britons to use NFC-enabled devices to make low-value m-payments of under £15 for papers, sandwiches, coffee and other similar goods at the Point of Sale of selected retailers – including Eat and the Co-op – by Q2 2011. All that is required is for customers to wave their mobile phones against contactless terminals equipped with the Near Field Communication short-range high frequency wireless technology that enables data to be exchanged over a 10cm distance. MasterCard will deliver the payments capability for transactions, while French vendor Gemalto is responsible for Barclays’ Trusted Service Management operation. The launch apes a similar scheme underway in Nice, southern France, Orange’s ‘home’ territory where a huge NFC trial involving the transportation system, shops and thousands of participants is currently happening, with Credit Agricole recently becoming the third French bank to join the large scale initiative (Gemalto will again provide TSM).
One example of a bridging technology that is enabling contactless mobile payments to be made on iPhones right now, before the full scale rollout of internationally agreed secure chips and NFC-enabled handsets, is the iCarte accessory from Canada’s Wireless Dynamic. By partnering with Visa Europe this contactless technology can already be accessed. iPhone users simply attach the iCarte accessory, available through their bank or mobile operator, to their iPhone and download a companion Visa mobile application; the iCarte app from Apple’s App Store. The accessory contains an antenna and what is described as an embedded secure element, which is essentially where the Visa ‘card’ is stored. This card works in turn with the downloaded app to enable payments on the iPhone. Once the Visa mobile card is activated consumers can start making purchases by launching the app and touching their iPhone on any contactless-enabled Point of Sale reader across Europe. A PIN may periodically be requested for security purposes or, at a later date, this function could be added to allow higher value payments above €20.
Visa Europe’s first deployment of this technology was launched in January in collaboration with Yapi Kredi Bank and Turkcell, Turkey’s largest mobile operator. Yapi Kredi bank customers, equipped with a Turkcell plan and the Visa/Wireless Dynamic iCarte accessory and app, can now make purchases directly from their iPhone at more than 40,000 contactless terminals across Turkey – even though the iPhone isn’t formally yet NFC/secure chip ready. The product is also being used on a smaller scale in the UK by Visa staff in London, with partners FIS, a provider of prepaid platforms and processing, and Coventry Building Society assisting. Further commercialisation efforts are
including mobile stickers (those bar code like additions you may have seen on the back of a phone), to microSD cards as deployed by Akbank in Turkey last year with Visa and DeviceFidelity as project partners.
The end game though is generally considered to be the development of a standardised secure SIM chip in the phone, conforming to agreed standards that are currently being worked out by cross-border industry bodies like the GSMA and EPC. Allying this secure chip to a Near Field Communication-enabled handset and a contactless reader that is similarly equipped to allow the transfer of short wave wireless data communication is what enables payments to be made. NFC is the most talked about enabling technology for this at the moment. Persistent rumours suggest that the next iPhone 5 will be so equipped – and with a secure chip too. Other smartphones should be getting it over the next few months and years. At the moment it is only really the Samsung Star Touch phone (excepting add on bridging devices) that has the total package (see panel, page 29), which doesn’t give consumers much handset choice but this will change.
The UK Cards Association is eagerly awaiting more NFC-enabled phones to enter the market and is expecting issuers to work with network operators in developing the contactless options, as has already happened with the Barclaycard and Everything
MOBILE TECHNOLOGY IN FSMARCH 2011SPECIAL REPORT
Splash Mobile Money enables users in Sierra Leone to send and receive money, make payments and get and pay micro-loans using the mobile phone. With only 9% of the population in Sierra Leone having access to traditional banking services, there is an over-reliance on cash-based transactions but the threat of theft has been alleviated by delivering a stable and cheap mobile service to the unbanked.
Customers can register at more than 150 agents across the country to access mobile money transfer services and remittances. Electronic funds, called ‘Splash cash’, can be obtained from friends, family or employers and ‘cashed out’ or used at participating retail agent locations. Alternatively it can be converted into prepaid airtime, to pay bills or handle micro-loans. It works across all of the mobile network operators, including Africell, Comium and Airtel, without discrimination. Since its commercial launch in February 2010 Splash has grown from 10,000 to 50,000 users, making it the largest FI in Sierra Leone. It operates on MoreMagic Solutions’ mobile commerce and financial service technology platform and is looking forward to spreading it wings domestically and perhaps across Africa, as similar schemes such as M-Pesa have done, emanating out from Kenya where 50% of adults now use the service, to Tanzania, Afghanistan and India. The Mobile Money for the Unbanked (MMU) programme funded by the Gates’ Foundation and the GSMA Development Fund estimates that there are currently about 80 similar mobile money transfer and remittance schemes around the world, with more in the planning stage.
As Diarmuid Mallon, marketing manager at Sybase 365, a SAP company offering various mobile systems, notes though: “In the developing world mobile payment schemes are typically led by mobile operators and local utility companies. In Africa, for example, our remote payment MobiKash scheme means villagers do not have to walk miles and queue for hours to pay electricity bills.”
Mobile money makes a Splash for the ‘unbanked’ and remittance users
expected throughout Europe. The benefit of a bridging technology such as this – or indeed one using stickers – is that it means more mobile handsets can be used by consumers, while we wait for a wider rollout of NFC-enabled phones. Indeed, in the case of the iCarte it means mobile operators don’t need to distribute NFC SIMs containing the secure element – equally though it can be seen as cutting out the mobile network operator from the transaction and distribution model.
According to Mary Carol Harris, vice president of mobile development at Visa Europe, it is still very much early days in the development of contactless mobile payments. “It will take some time before mobile devices transform FS,” she says, “but we do think that first contactless cards and then mobile devices will change the way we handle our finances on a day-to-day basis.” The acceptance infrastructure (i.e. readers) also needs to be rolled out.
The legacy position of cards in Europe, North America and other developed markets means that contactless cards may well be around for a while but in developing countries and in the Far East a lot of this technology can be skipped over and consumers will move straight to the mobile, as has already been seen with mobile money transfer and remittance schemes in Africa aimed at the so-called ‘unbanked’ who had never previously been part of the financial services world. There contactless cards – and indeed perhaps even bank branches – won’t get a look-in because the mobile phone already has such penetration that it is the device upon which to deliver FS.
Colin Swain, head of mobile at Barclaycard, agrees that regional differences are an important element in the debate around uptake and consumer technology acceptance. “The maturity of mobile payments varies greatly worldwide; with banks, mobile operators and other institutions meeting the needs of their customers in very different ways,” he says. “Whether it’s a money transfer scheme, such as M-Pesa in Kenya, or the success of mobile NFC in Japan and South Korea through NTT DoCoMo’s mobile wallet and SK Telecom’s m-finance.”
“We are now seeing advances in the older established European and North American markets around mobile payments and NFC specifically, and I expect these to be major regional growth areas over the coming years,” adds Swain. He also cites a recent report by Juniper Research that stated 1 in 6 mobile phones will be NFC enabled by 2014, equating to some 950 million subscribers globally, to illustrate expected growth. Juniper also estimated that by 2014, NFC mobile spend in Europe alone would exceed £20 billion.
Disintermediation Some fear that traditional banks could lose valuable business and future growth in certain sections of the mobile channel. In the retail app and e-commerce world, for instance, including contactless, the multitude of payment processors, retailers, network operators and bill presentation and payment companies who are keen to get involved may
www.bankingtech.com I 31
end up getting the high value front-end bit of the business, where rich data and profits are available, while banks are left with the commoditised bit at the end, running over old banking infrastructures.
We’ve seen this happen before with PayPal when a sharp front-ended service came along that was too quick for slower paced banks and grabbed a new market all for itself, running on top of existing infrastructures. A killer app, in the form of eBay, was still needed though, so banks do have a chance in this market but will have to fight hard for profits. The same is true in the remittances arena. That is why the corporate banking mobile channel may well end up being the most lucrative area for mobile devices in financial services; because banks are vital in the trade finance space and provide the reach, experience and stability that corporates need.
“Disintermediation is still a valid fear and banks could lose out on all that rich customer relationship data if they’re not careful,” says Monitise’s Johnson. “That’s why banks need to leverage their brand strength and experience of keeping money safe to ensure they remain central players. I speak to banks all the time and tell them to be on the front foot. Be proactive.”
The threat is real. O2 Money, for example, launched in 2009 and now has 800,000 UK customers and a growing FS portfolio that extends to prepay cards and insurance products for handsets, holidays and the like. It has also recently announced plans to unveil a contactless mobile payments scheme later on this year in the UK, although it won’t reveal details yet because it says it’s presently concentrating on releasing a mobile wallet app with a suite of e-commerce payment options, including P2P. “We will also be applying for an e-money license under the EU’s new electronic money directive, which is due to come into force on 30 April 2011,” says James Le Brocq, head of O2’s financial services division and an ex-retail banker who spent 26 years at Alliance+Leicester and Barclaycard. This will allow O2 Money to hold cash balances for customers. Parent company, Telefonica, has also established a vertical FS line of business to demonstrate its commitment.
Ultimately though, as Barclaycard’s Swain says, banks will need to continually evolve to remain successful – just like other industries do. You have to run to stand still sometimes and that may well be the case in certain areas of the mobile channel. Banks bring inherent strengths though – physical and regulatory security, reach and expertise in the handling of money, and they need to use these strengths to ensure a flourishing and central role in the development of what could be the 21st century’s key FS device. BT
■ Mobile World Congress report on page 10.
will benefit institutions: the combined forces of technical standardisation and regulation will create an environment that will allow common business processes to be relatively cheap and trouble free. Time and effort can instead be spent on innovative and competitive projects.
“When things are going well everything is bespoke and interesting, but over time the things that are actually plain vanilla have got mixed up with the bespoke project, and they are being separated, if only for hygiene reasons,” he says. “The management can focus on the competitive and the really interesting issues.”
Senthil Kumar, vice president of marketing at Oracle Financial Services, says that one of the key things that has allowed the vendors to take an increasing role in larger and larger banks is that they themselves have grown to the point where they are maintaining their applications “on an industrial basis”. This means that the user organisation is not having to waste time and resource on basic system maintenance – the vendor is constantly
www.bankingtech.com I 33
Callataÿ & Wouters carried out research into how IT decision makers in banks across the UK, France and Germany are approaching their investment in core banking systems following the financial crisis. Key findings of the research include:■ 66% agree that the events of the past two and a half years
in the finance industry have increased the importance of core banking systems to the business
■ 69% are operating with a core banking infrastructure that is 11-30 years old
■ 89% agree that legacy technology has reduced flexibility and 88% say is has increased costs Only a quarter of banks are operating on core banking systems
that are less than ten years old and 69% are still operating with a core banking infrastructure that is 11-30 years old. A further 11% admit that their systems are from the 1980s or before.
As a result, 57% agree that ‘banks have had to adapt their business around legacy technology rather than using flexible technology that adapts to banks’ needs, which in turn has led to the following challenge, according to the respondents:■ 68% say legacy technology has reduced the ability to provide
high levels of customer service Overall, 43% said that legacy technology had reduced their
ability to comply with regulation. At a country level, however, this varies significantly with only 17% of respondents in the UK saying that legacy technology impacted compliance compared to 53% of respondents in France.
According to the findings, it seems that current core banking systems are primarily failing to support the business due to the siloed nature of systems (70%) and the absence of a direct link between systems and the bank’s business objectives (62%). What’s more, only 35% of banks said their current infrastructure supported them well in terms of product innovation and 39% said it supported them well in generating return on investment.
Despite the fact that many of the core banking systems currently deployed by banks are based on legacy technology and are not fully supporting the business, the majority – 66% – of respondents across Europe agree that the events of the past
two and a half years in the finance industry have increased the importance of core banking systems to the business. As a result, 44% of respondents plan to increase spend on their systems over the next two years, despite the current economic climate.
The top three business drivers for investing in core banking systems today are increasing competitiveness, meeting regulatory initiatives and managing risk. Only 36% of respondents said their current systems support them well in increasing competitiveness, 52% for meeting regulatory initiatives and 38% for managing risk.
The most popular way of approaching core banking investment is by business line (59%) with accounts, capital markets and payment & cards being the top priorities for investment.
In terms of country trends, core banking strategies and investments vary significantly between the UK, France and Germany. Overall, German CIOs seem the most progressive, while French respondents appear more reticent to invest in their core banking systems; the UK sits somewhere in the middle.
In France, banks are typically working with older systems with only 7% having conducted a major refresh of their core banking infrastructure in the last five years, compared to 54% in Germany and 14% in the UK. The French are also more likely to run all of their systems in-house (60% in France compared to 22% across Europe as a whole) and they plan to invest the least in their core banking over the coming years. One reason for this trend could be that most French banks surveyed have not undergone a Merger & Acquisition recently (87%) compared to 48% of banks in Germany who have been involved in M&A activity and 36% in the UK.
Looking to the next two years, 55% of respondents plan to increase the flexibility of their core banking system. Of those, the majority (63%) plan to achieve this extra flexibility by upgrading their core system, although 26% plan a full system replacement. Only 11% are thinking about outsourcing their core banking.
In terms of harnessing the latest technologies, 10% of respondents plan to migrate the majority of their core banking system to private clouds compared to a third who will migrate only a proportion of their overall infrastructure.
Reasons to replace
refreshing the platform. “It’s no longer the case that a new release goes out once a year at christmas – it’s happening every month,” he says.
“With the introduction of the SOa approach, business processes can be captured easily, and we have gained enormously from that over the past six years,” he says. With the acquisition of the former i-flex firm by software giant Oracle in 2006, this process accelerated. “Our technology is now much simplified because we use the same stack to build and deploy, and that gives us great advantages in terms of performance and scalability,” he says. BT
32 I www.bankingtech.com
Core banking: Modernisation March 2011
Converging on the core
go back a few years and you’ll find a general consensus that vendor-sourced core banking systems were all well and good for tier 3 banks downwards. Global Tier 1 players were too complex for vendor solutions and already have the in-house capabilities they need to manage internal systems.
You’ll find an equal consensus that the single biggest technology problem that global Tier 1 banks face – costing them a fortune in maintenance, hampering their attempts to innovate and even threatening their ability to comply with regulations – is their ageing siloed core banking systems.
Fast-forward to the present day, and the second of those propositions still stands. The first, however, is rapidly crumbling, making the case for modernisation of the core increasingly hard to ignore.
at the end of last year, Deutsche Bank Global Transaction Services and TcS Financial Solutions went public with a 10-year deal under which the bank would roll-out the TcS BaNcS core Banking platform in 30 countries, running from just two hubs.
Wolfgang Gaertner, chief information officer, core Banking Deutsche Bank, said at the time: “State-of-the-art information technology is crucial for a bank and for its clients. That is why we are investing in cost-efficient platforms to push for a high degree of industrialisation, standardisation of processes and to support business growth”.
This echoes the sentiments expressed in a recent Ovum report on the core banking market: “as institutions in the banking industry adjust to an altered competitive landscape and a revised set of priorities, the role of the core system has never been more important. The new era of banking demands a fresh technological approach, as banks must rid themselves of the burden of inflexible solutions designed and implemented when the financial world was a very different place.”
Vendors, not surprisingly, are right behind this. as Diederik Van Der Linden, EMEa Strategy Director at callataÿ & Wouters, says: “core banking systems are becoming ever more important for banks as they deal with the aftermath of the financial crisis which has brought increased competitiveness and regulation, a greater focus on risk management and a more demanding customer. Flexibility is seen as key to dealing with these challenges with nearly
two-thirds of respondents planning to increase the flexibility of their core banking system over the next two years. In this changed environment, we expect to see more of Europe’s banks implementing flexible technology that can adapt to institutions’ needs rather than banks having to adapt their business around legacy technology. To date, this has characterised and hampered many institutions.”
So how come more banks are making the move and addressing this issue? They can no longer
shelter behind arguments about complexity, says Sadasivan Sambramurty, global director for core banking at hP.
Look at State Bank of India, he says, which has gone down a vendor route. “If a bank of that size can run on a single system, and an open system at that, I don’t see any reason why any other bank can’t,” he says.
The answer, he suggests, lies with the people and organisation. he divides core implementation projects into three broad categories. In the first, there is a
green field opportunity: with no legacy systems to replace, “go and get Temenos’s T24 or Infosys, or iFlex, or whatever,” he says.
The second, applying largely to Tier 2 and 3 institutions where there is a legacy platform, is the rip and replace option. “Then,” he says, “it becomes a matter of how they want to do it, and people play a crucial role: it is about changing the mindset of people.”
In particular, it is important for people to realise that they don’t have to rip and replace everything at the same time. “You can implement modularly – adding things by functionality, or by region, for instance,” he says.
his third scenario is, bluntly, “tinkering”. This was often the effect of Service Oriented architecture implementations. “You can move your existing solution to a SOa architecture, but unless you go back and change its functionality, you’re just stitching a torn cloth,” he says.
There may not, in the very near future, be the opportunity to simply tinker with the existing fabric, says haragopal Mangipudi, global head, Finacle, Infosys Technologies. “One of the benefits of replacement is the opportunity to standardise, which is good in itself, but it would not surprise me if the regulators insist on standardisation because it improves visibility and predictability,” he says.
This, he says is a form of convergence that
Core replacement projects have often been referred as being too costly, too complex and too risky. On the contrary, a growing consensus says that it is too risky to ignore the benefits of modernisation. David Bannister reports.
“You can move your existing solution to a SOA architecture, but
unless you go back and change its functionality, you’re just stitching a torn cloth,” he says.
sadasivan sambramurty, HP
will benefit institutions: the combined forces of technical standardisation and regulation will create an environment that will allow common business processes to be relatively cheap and trouble free. Time and effort can instead be spent on innovative and competitive projects.
“When things are going well everything is bespoke and interesting, but over time the things that are actually plain vanilla have got mixed up with the bespoke project, and they are being separated, if only for hygiene reasons,” he says. “The management can focus on the competitive and the really interesting issues.”
Senthil Kumar, vice president of marketing at Oracle Financial Services, says that one of the key things that has allowed the vendors to take an increasing role in larger and larger banks is that they themselves have grown to the point where they are maintaining their applications “on an industrial basis”. This means that the user organisation is not having to waste time and resource on basic system maintenance – the vendor is constantly
www.bankingtech.com I 33
Callataÿ & Wouters carried out research into how IT decision makers in banks across the UK, France and Germany are approaching their investment in core banking systems following the financial crisis. Key findings of the research include:■ 66% agree that the events of the past two and a half years
in the finance industry have increased the importance of core banking systems to the business
■ 69% are operating with a core banking infrastructure that is 11-30 years old
■ 89% agree that legacy technology has reduced flexibility and 88% say is has increased costs Only a quarter of banks are operating on core banking systems
that are less than ten years old and 69% are still operating with a core banking infrastructure that is 11-30 years old. A further 11% admit that their systems are from the 1980s or before.
As a result, 57% agree that ‘banks have had to adapt their business around legacy technology rather than using flexible technology that adapts to banks’ needs, which in turn has led to the following challenge, according to the respondents:■ 68% say legacy technology has reduced the ability to provide
high levels of customer service Overall, 43% said that legacy technology had reduced their
ability to comply with regulation. At a country level, however, this varies significantly with only 17% of respondents in the UK saying that legacy technology impacted compliance compared to 53% of respondents in France.
According to the findings, it seems that current core banking systems are primarily failing to support the business due to the siloed nature of systems (70%) and the absence of a direct link between systems and the bank’s business objectives (62%). What’s more, only 35% of banks said their current infrastructure supported them well in terms of product innovation and 39% said it supported them well in generating return on investment.
Despite the fact that many of the core banking systems currently deployed by banks are based on legacy technology and are not fully supporting the business, the majority – 66% – of respondents across Europe agree that the events of the past
two and a half years in the finance industry have increased the importance of core banking systems to the business. As a result, 44% of respondents plan to increase spend on their systems over the next two years, despite the current economic climate.
The top three business drivers for investing in core banking systems today are increasing competitiveness, meeting regulatory initiatives and managing risk. Only 36% of respondents said their current systems support them well in increasing competitiveness, 52% for meeting regulatory initiatives and 38% for managing risk.
The most popular way of approaching core banking investment is by business line (59%) with accounts, capital markets and payment & cards being the top priorities for investment.
In terms of country trends, core banking strategies and investments vary significantly between the UK, France and Germany. Overall, German CIOs seem the most progressive, while French respondents appear more reticent to invest in their core banking systems; the UK sits somewhere in the middle.
In France, banks are typically working with older systems with only 7% having conducted a major refresh of their core banking infrastructure in the last five years, compared to 54% in Germany and 14% in the UK. The French are also more likely to run all of their systems in-house (60% in France compared to 22% across Europe as a whole) and they plan to invest the least in their core banking over the coming years. One reason for this trend could be that most French banks surveyed have not undergone a Merger & Acquisition recently (87%) compared to 48% of banks in Germany who have been involved in M&A activity and 36% in the UK.
Looking to the next two years, 55% of respondents plan to increase the flexibility of their core banking system. Of those, the majority (63%) plan to achieve this extra flexibility by upgrading their core system, although 26% plan a full system replacement. Only 11% are thinking about outsourcing their core banking.
In terms of harnessing the latest technologies, 10% of respondents plan to migrate the majority of their core banking system to private clouds compared to a third who will migrate only a proportion of their overall infrastructure.
Reasons to replace
refreshing the platform. “It’s no longer the case that a new release goes out once a year at christmas – it’s happening every month,” he says.
“With the introduction of the SOa approach, business processes can be captured easily, and we have gained enormously from that over the past six years,” he says. With the acquisition of the former i-flex firm by software giant Oracle in 2006, this process accelerated. “Our technology is now much simplified because we use the same stack to build and deploy, and that gives us great advantages in terms of performance and scalability,” he says. BT
customer in face-to-face meetings – perhaps a once in a lifetime meeting for the customers when the need in-depth discussions. When you think of the cost of operating the branch network, I don’t know if banks can have it as 50% of the cost – especially after all of the costs they have been saving as a result of the crisis.
Where does the everyday business migrate to? The internet?The internet is providing the customer with almost everything that they need – not only in terms of transactions and balances, but now also in terms of simulations and advisory services.
now we also have mobile services on all these new devices that have easier-to-use interfaces that allow people to interact in a different way. When you have a very young population – under 25, say – they transact very differently: they don’t mind paying with a mobile, or making investments.
So we move to the development of the branch network as high-level customer service centres?exactly. most of the bankers we are speaking with say that in five years’ time there won’t be any transactions in the branches – they’re not far from that already, but there are still 5% to 10% of customers who are depositing cheques or withdrawing cash in branches.
In a couple of years that will be finished and branches will be places where you will be able to get advice, and meet in a relaxed way with your account manager.
And technology has a big role in that?you have to ask, what will the branch look like? Will it be the counter and aTm that we are familiar with, or will it have these Surface tables from microsoft, or touch walls?
What we really need is an interface that allows the bank to talk to the customer and access all the information you need – maybe all you need is an iPad, or whatever; something you can carry to meetings and show the customer, perhaps in a hotel lounge, or at his home or office.
at the same time we should also be cautious about adding all the technology in the branches … I’m a techie, so I love all this, but I’ve visited all these brand new branches and I’m not convinced that you have to invest so much in things like the microsoft Surface table.
What I need – because I’m not young enough to love my mobile phone, but do love the internet – is for the internet to have all the things that allow me to simulate different setting for my retirement, or other scenarios, and I’d like to have tools to compare the different offerings from different financial services providers. my bank doesn’t’ give me that, at the moment.
Which means that there is an opportunity for competitive offerings in financial services?This is what we hear from members: the issue is not about the internet against mobile, it is to make sure
that they succeed in providing the customer with a multichannel experience. This means that if they start doing something on the internet on a Sunday evening at home, and then find that they need more advice or more details, they should have a call-back service from a sales rep to give them that.
Interconnecting the various channels is by far the most important thing that the banks still have to do – and they haven’t got very far with it yet.
Does the same apply in other areas, such as business banking for instance?The challenges are almost the same: I don’t believe that the banks have fully developed all the channels when it comes to business banking. most of the time it is handled within the retail division in the bank and maybe synergies are not sufficiently taken advantage of. If you have a small business in your portfolio then you should be fully taking advantage of the relationship.
an important fact is that many channels are digital, and more and more transactions are digital. This means that they can be stored and manipulated, and that provides a huge competitive opportunity for banks to feed their data warehouses so that they can tailor offers more accurately. It is not so long ago that the interaction was between the customers and the sales rep and nothing was captured. now everything is captured – even the keystrokes on your web transactions – and can be analysed, giving a tremendous opportunity to cross sell.
There are many factors affecting banks – regulation, the economic situation. What is your outlook?Seen from our window, things are definitely getting better – I don’t mean with regard to the resources of banks, but in terms of the fact that bankers are again taking an interest in what is going on elsewhere. Like the ostrich, in the crisis they hid for one or two years. now we are seeing they are looking around, trying to see what the best practices are and making sure that they are more efficient and improving the quality of services.
It is not only about cutting costs it’s also about growing revenues. you can always cut costs, reduce the quality of your services and lose customers …
The political atmosphere is also changing, perhaps? Is trust coming back?Trust has been a big issue and banks have not been able to communicate that they are still there for customers. It is very important to reassure customers during bad times. There is also a difference between what people say to the press and the day-to-day realities of life – customers have not left their banks, but the tightening of credit has been an issue, and this has been a very bad experience for customers.
But on the whole, you seem very optimistic …yes. If you can address the challenges – compliance, channel integration and so on – and develop competitive services to grow the business there are still great opportunities in the financial services markets for banks to exploit. BT
www.bankingtech.com I 35 34 I www.bankingtech.com
INTERVIEW: PATRICK DESMARÈSmarcH 2011
therapyRetail
EFMA has a wide geographic spread. Do you see a lot of differences across the markets?
We speak to our members in different geographies and what we are hearing right now in the Gulf or in russia is pretty different from what we hear in Ireland or other countries. It is interesting to see what the differences are.
In the discussions we’ve had recently, most of it has been around the distribution network and the fact that the banks still have these very costly physical branches. Of course, they need physical presence: the most striking quote I have in mind was a recent discussion with someone from Santander who said, ‘we are in the retail fi nancial services, and when it comes to retail, you have to have a physical presence’. coming from the bank that has the largest network globally, this is interesting, but it is also what we hearing in emerging markets – that
you have to open branches and have a presence to build market share: that is happening in central and eastern europe – most specifi cally in russia and Turkey which are very promising markets.
Does it vary with the maturity of the markets?In the more mature markets such as Spain, where the number of branches is already very high, they have to come to terms with the fact that they will be closing branches, but also opening lighter ones with less staff, and centralising all back offi ce functions. no-one is really talking about completely closing the branch network – perhaps some really innovative banks are, but even then they are looking at as much as 10 years away – but instead they are more thinking of having a different kind of reach to the market by having a small number of very sophisticated places where they can meet the
Formed in 1971 by bankers and insurers the non-profi t European Financial Marketing Association membership includes over 80% of Europe’s largest retail fi nancial institutions. As secretary general of the association, Patrick Desmarès has a wide view of the European retail banking scene. He told David Bannister why he is optimistic about the future.
Patrick Desmarès became the head of EFMA and its diverse business operations in January 2003 following a 20-year career working in retail fi nancial services throughout Europe. He was educated at HEC Business School in France.
customer in face-to-face meetings – perhaps a once in a lifetime meeting for the customers when the need in-depth discussions. When you think of the cost of operating the branch network, I don’t know if banks can have it as 50% of the cost – especially after all of the costs they have been saving as a result of the crisis.
Where does the everyday business migrate to? The internet?The internet is providing the customer with almost everything that they need – not only in terms of transactions and balances, but now also in terms of simulations and advisory services.
now we also have mobile services on all these new devices that have easier-to-use interfaces that allow people to interact in a different way. When you have a very young population – under 25, say – they transact very differently: they don’t mind paying with a mobile, or making investments.
So we move to the development of the branch network as high-level customer service centres?exactly. most of the bankers we are speaking with say that in five years’ time there won’t be any transactions in the branches – they’re not far from that already, but there are still 5% to 10% of customers who are depositing cheques or withdrawing cash in branches.
In a couple of years that will be finished and branches will be places where you will be able to get advice, and meet in a relaxed way with your account manager.
And technology has a big role in that?you have to ask, what will the branch look like? Will it be the counter and aTm that we are familiar with, or will it have these Surface tables from microsoft, or touch walls?
What we really need is an interface that allows the bank to talk to the customer and access all the information you need – maybe all you need is an iPad, or whatever; something you can carry to meetings and show the customer, perhaps in a hotel lounge, or at his home or office.
at the same time we should also be cautious about adding all the technology in the branches … I’m a techie, so I love all this, but I’ve visited all these brand new branches and I’m not convinced that you have to invest so much in things like the microsoft Surface table.
What I need – because I’m not young enough to love my mobile phone, but do love the internet – is for the internet to have all the things that allow me to simulate different setting for my retirement, or other scenarios, and I’d like to have tools to compare the different offerings from different financial services providers. my bank doesn’t’ give me that, at the moment.
Which means that there is an opportunity for competitive offerings in financial services?This is what we hear from members: the issue is not about the internet against mobile, it is to make sure
that they succeed in providing the customer with a multichannel experience. This means that if they start doing something on the internet on a Sunday evening at home, and then find that they need more advice or more details, they should have a call-back service from a sales rep to give them that.
Interconnecting the various channels is by far the most important thing that the banks still have to do – and they haven’t got very far with it yet.
Does the same apply in other areas, such as business banking for instance?The challenges are almost the same: I don’t believe that the banks have fully developed all the channels when it comes to business banking. most of the time it is handled within the retail division in the bank and maybe synergies are not sufficiently taken advantage of. If you have a small business in your portfolio then you should be fully taking advantage of the relationship.
an important fact is that many channels are digital, and more and more transactions are digital. This means that they can be stored and manipulated, and that provides a huge competitive opportunity for banks to feed their data warehouses so that they can tailor offers more accurately. It is not so long ago that the interaction was between the customers and the sales rep and nothing was captured. now everything is captured – even the keystrokes on your web transactions – and can be analysed, giving a tremendous opportunity to cross sell.
There are many factors affecting banks – regulation, the economic situation. What is your outlook?Seen from our window, things are definitely getting better – I don’t mean with regard to the resources of banks, but in terms of the fact that bankers are again taking an interest in what is going on elsewhere. Like the ostrich, in the crisis they hid for one or two years. now we are seeing they are looking around, trying to see what the best practices are and making sure that they are more efficient and improving the quality of services.
It is not only about cutting costs it’s also about growing revenues. you can always cut costs, reduce the quality of your services and lose customers …
The political atmosphere is also changing, perhaps? Is trust coming back?Trust has been a big issue and banks have not been able to communicate that they are still there for customers. It is very important to reassure customers during bad times. There is also a difference between what people say to the press and the day-to-day realities of life – customers have not left their banks, but the tightening of credit has been an issue, and this has been a very bad experience for customers.
But on the whole, you seem very optimistic …yes. If you can address the challenges – compliance, channel integration and so on – and develop competitive services to grow the business there are still great opportunities in the financial services markets for banks to exploit. BT
www.bankingtech.com I 35
europe, middle-east & africa, from ubS where she was previously running the transition team for equity Prime brokerage services. Prior to that, cameron was at bear Stearns for eight years, where she worked on a product development team developing a prime brokerage solution. She will be in charge of the on-boarding efforts for all prime brokerage accounts opened in the uK. Guido Castiglioni, joins as agency Treasurer Services relationship manager after departing Trading Technologies where he spent four years as a sales manager working both in Geneva and in the uK. Prior to that, castiglioni worked as a sales manager for reuters for seven years in both their chicago and Geneva offices. he will be responsible for building and strengthening newedge’s current on-boarding and sales efforts for advanced trading services for prime brokerage clients in europe.
Link Up Markets, the joint venture between ten central Securities Depositories to improve efficiency and
reduce costs of post-trade processing of cross-border securities transactions globally, has appointed Irene Mermigidis as new managing director. Prior to her appointment mermigidis had worked in the product management division of clearstream banking for ten years, where she was responsible for clearstream’s connectivity product offering, managing the strategic planning of information provision and customer connectivity products, reengineering and delivering clearstream’s new generation of connectivity products. She participates in a number of internal and external groups, covering topics such as market standards and interoperability, business reengineering and pricing. She is also a board member of the aLmuS, Luxembourg’s community of Swift users and a member of the european Swift alliance. before clearstream she worked in the european Investment bank and Schlumberger Limited.
Nick Masterson-Jones, managing director of transaction services and director of information technology at VocaLink, is moving to join Travelex Global business Payments as chief information officer, where he will lead the development of Travelex’s payments platform, GeO. he has over
25 years’ management experience working at financial institutions such as jP morgan, ubS, reuters and several major uK banks.
Calypso Technology has made David Little its new director of strategy and business development, responsible for identifying new products and opportunities for growth in securities finance and collateral management. It will be Little’s job to provide these solutions. he was previously a partner at the rule Financial consultancy, where he founded and led the securities finance business unit.
Upsite Technologies has hired Jim Fink as chief technology officer, in charge of developing new product lines for data centre efficiency improvement. Fink has 17 years of experience in many areas of the mission critical facilities industry and used to work for design engineers Thielsch, having previously led the business development and engineering teams at american Power conversion.
Berenberg Bank, Germany’s oldest private bank, is launching in the uK and has appointed two ex-barclays Wealth employees, Ross Elder and Fred Hervey, as managing directors in charge of developing its services and clientele. elder started his career as assistant to the chief executive of james capel in 1997 (now hSbc Investment management), before setting up the advisory derivatives business for hSbc’s private clients in 2002. he joined barclays Wealth in 2006 as a director and advisor to high and ultra-high net worth individual. hervey also started out at hSbc Investment management, before moving to barclays Wealth in 2005 where he was most recently employed as a vice president in charge of a team of seven bankers focused on high net worth individuals, as well as looking after his own client base.
The International Capital Market Association, which represents capital market participants, has appointed John Serocold to its regulatory Policy and market Practice team to lead Icma’s work on secondary market practices, covering the cross-border market for international debt securities. Serocold will work on co-ordinating the response of member firms to current consultations on the miFID review and other european regulatory reform. BT
www.bankingtech.com I 37
21-24 mArchinternational payments, LondonOnce again the IPS organisers will be broadening the speaker beyond the payments world to include leading academics and “outside the box” thought leaders.www.icbi-events.com
29-30 mArch 2011comtech 2011, LondonThe Financial Markets regulatory Risk and Compliance Technology Summit. Designed for CIOs, CTOs and Heads of Compliance IT from the financial institutions.www.comtech2011.com
12-14 APRILTradeTech Europe, LondonStill at the Excel centre in Docklands, but also still the big draw for investment banking systems.www.tradetecheurope.com
14-16 JunesiFmA Financial services technology expo 2011, new YorkThe programme will highlight key issues critical in adapting to the industry’s new regulatory drivers that are occurring as a result of the Dodd-Frank legislation and other initiatives facing the industry.www.sifma.org
15-16 JuneeBAday, madridEBAday 2011 will look beyond the practical compliance requirements of operating in a Single Euro Payments Area and deal with the critical strategic questions that banks must address if they are to prosper in the new business environment.www.ebaday.com
19-23 septemBer sibos 2011, torontoAfter a recovering some of its pizzazz at Amsterdam in 2010, the mother of all financial sector conferences and exhibitions moves further away from established traditions with a move outside the US for the North America leg of its perpetual world tour.www.swift.com
11-13 OCTOBERBAI Retail Delivery 2011, Chicago In 2010 BAI Retail Delivery was revamped, reorganised and revitalised, and is now on its way back to being the retail banking event of the year. www.bai.org
events
36 I www.bankingtech.com
PEOPLEmarch 2011
Appointments
State Street has appointed a new chief operating officer and chief risk officer in Italy. Giovanni Caricati will look after the operations of the firm’s global services business in Italy and manage 380 people in the fund services, custody and depository bank teams after leaving Intesa San Paolo, while Alessandro Ricci, a departure from mcKinsey, will be responsible for risk control monitoring and management for State Street’s Italian risk function, in addition to working on development activities across europe. In other moves, Phil McGowan is the new senior vice president and head of private equity and real estate services for europe, middle east & africa, where he is tasked with developing new solutions for clients and growing the business after leaving hFX capital where he was previously cOO for alternative investment distribution and sales efforts.
Martin Wheatley is the chief executive designate of the Financial Conduct Authority, which is due to be established
at the end of 2012 in the uK at the behest of hm Treasury. before then, he will join the Financial Services authority in September this year as managing director of its consumer and markets business unit, overseeing the transition towards the Fca successor organisation, which will effectively retain many of the FSa’s former inspection duties and focus on looking after consumers and ensuring market integrity, while the Prudential regulation authority, headed up by hector Sants, will be responsible for micro-prudential regulation of systemically important
firms. Wheatley is returning to the uK after spending the last five years in hong Kong as chief executive of its Securities and Futures commission. Prior to this, he held various senior roles including deputy to clara Furse at the London Stock exchange and sitting on the FSa’s Listing authority advisory committee.
SmartStream’s DClear Services reference data and utility business has appointed Hugh Stewart as its new sales director. he joins from enterprise data management vendor GoldenSource, and prior to that was a shareholder and director of Pelican consulting, an investment and commercial banking consultancy focused on risk management, derivatives and commercial lending. Stewart has also worked for Quic Financial Technologies, algorithmics and bankers Trust in more than 30 years in the industry and is tasked with managing teams based in the uS, uK and asia-Pacific regions at Dclear. he will be responsible for developing the data offerings available to investment banks, asset managers, hedge funds and brokers, using existing products like the financial data dictionary and instrument cleaning services, while also promoting new enhancements such as corporate actions cleansing, and counterparty, legal entity and hierarchy management solutions.
SIA-SSB has reorganised to put a greater focus on its individual business segments to improve the efficiency of the processes used to deliver the services to customers. The new organisation is split into four divisions
Financial Institutions, corporate & Pa, central Institutions and network Services, with responsibility for covering and developing the specific customer segments, and an Operations Division, to support and distribute the services. reporting directly to chief executive massimo arrighetti, the Financial Institutions Division, headed by Nicola Cordone, will bring together the activities related to large bank groups and to small- to medium-sized banks, both in Italy and abroad, through the definition of services tailored to the specific requirements of the individual customer segments. The central Institutions Division, managed by Mario De Lorenzo, has the role of consolidating the offering aimed at central banks and central Institutions (such as abI, eba, mTS and montetitoli), in the domestic and international markets.
The London Stock Exchange Group has announced the appointment of Ian-Patrick Lauder as business development manager in its capital markets Division. he joins from Plus markets, where he was head of trading services and worked to develop relationships with uK market makers and retail brokers. Lauder will fulfil a similar role at the LSe but with more of a focus on enhancing existing long term relationships with market makers and the retail investor community.
Newedge, the prime broker and institutional services provider, has added two new members to its team in London. Samantha Cameron joins as head of transition management,
Ian Axe has been hired as chief executive of LCH.Clearnet Group and Lch.clearnet, its uK subsidiary, replacing roger Liddell, who has held the post since july 2006 and who last year announced his intention to retire in. axe joins from barclays capital where he was most recently global head of operations and cOO emea. he will take up his new post in april. axe has 17 years of broad experience in the financial sector. he joined barclays capital in 2002 from booz allen hamilton,
where he was a principal in the financial services practice, advising financial institutions on strategic issues. at barclays capital he was responsible for a number of initiatives including the formation of barclays Wealth, the development of abSa capital into South africa’s leading investment bank, the integration of Lehman brothers and the divesture of bGI. he was also global head of equity finance and was appointed cOO emea barclays capital in 2009 and head of operations in 2010.
Martin Wheatley to lead new CPMA financial watchdog after FSA
europe, middle-east & africa, from ubS where she was previously running the transition team for equity Prime brokerage services. Prior to that, cameron was at bear Stearns for eight years, where she worked on a product development team developing a prime brokerage solution. She will be in charge of the on-boarding efforts for all prime brokerage accounts opened in the uK. Guido Castiglioni, joins as agency Treasurer Services relationship manager after departing Trading Technologies where he spent four years as a sales manager working both in Geneva and in the uK. Prior to that, castiglioni worked as a sales manager for reuters for seven years in both their chicago and Geneva offices. he will be responsible for building and strengthening newedge’s current on-boarding and sales efforts for advanced trading services for prime brokerage clients in europe.
Link Up Markets, the joint venture between ten central Securities Depositories to improve efficiency and
reduce costs of post-trade processing of cross-border securities transactions globally, has appointed Irene Mermigidis as new managing director. Prior to her appointment mermigidis had worked in the product management division of clearstream banking for ten years, where she was responsible for clearstream’s connectivity product offering, managing the strategic planning of information provision and customer connectivity products, reengineering and delivering clearstream’s new generation of connectivity products. She participates in a number of internal and external groups, covering topics such as market standards and interoperability, business reengineering and pricing. She is also a board member of the aLmuS, Luxembourg’s community of Swift users and a member of the european Swift alliance. before clearstream she worked in the european Investment bank and Schlumberger Limited.
Nick Masterson-Jones, managing director of transaction services and director of information technology at VocaLink, is moving to join Travelex Global business Payments as chief information officer, where he will lead the development of Travelex’s payments platform, GeO. he has over
25 years’ management experience working at financial institutions such as jP morgan, ubS, reuters and several major uK banks.
Calypso Technology has made David Little its new director of strategy and business development, responsible for identifying new products and opportunities for growth in securities finance and collateral management. It will be Little’s job to provide these solutions. he was previously a partner at the rule Financial consultancy, where he founded and led the securities finance business unit.
Upsite Technologies has hired Jim Fink as chief technology officer, in charge of developing new product lines for data centre efficiency improvement. Fink has 17 years of experience in many areas of the mission critical facilities industry and used to work for design engineers Thielsch, having previously led the business development and engineering teams at american Power conversion.
Berenberg Bank, Germany’s oldest private bank, is launching in the uK and has appointed two ex-barclays Wealth employees, Ross Elder and Fred Hervey, as managing directors in charge of developing its services and clientele. elder started his career as assistant to the chief executive of james capel in 1997 (now hSbc Investment management), before setting up the advisory derivatives business for hSbc’s private clients in 2002. he joined barclays Wealth in 2006 as a director and advisor to high and ultra-high net worth individual. hervey also started out at hSbc Investment management, before moving to barclays Wealth in 2005 where he was most recently employed as a vice president in charge of a team of seven bankers focused on high net worth individuals, as well as looking after his own client base.
The International Capital Market Association, which represents capital market participants, has appointed John Serocold to its regulatory Policy and market Practice team to lead Icma’s work on secondary market practices, covering the cross-border market for international debt securities. Serocold will work on co-ordinating the response of member firms to current consultations on the miFID review and other european regulatory reform. BT
www.bankingtech.com I 37
21-24 mArchinternational payments, LondonOnce again the IPS organisers will be broadening the speaker beyond the payments world to include leading academics and “outside the box” thought leaders.www.icbi-events.com
29-30 mArch 2011comtech 2011, LondonThe Financial Markets regulatory Risk and Compliance Technology Summit. Designed for CIOs, CTOs and Heads of Compliance IT from the financial institutions.www.comtech2011.com
12-14 APRILTradeTech Europe, LondonStill at the Excel centre in Docklands, but also still the big draw for investment banking systems.www.tradetecheurope.com
14-16 JunesiFmA Financial services technology expo 2011, new YorkThe programme will highlight key issues critical in adapting to the industry’s new regulatory drivers that are occurring as a result of the Dodd-Frank legislation and other initiatives facing the industry.www.sifma.org
15-16 JuneeBAday, madridEBAday 2011 will look beyond the practical compliance requirements of operating in a Single Euro Payments Area and deal with the critical strategic questions that banks must address if they are to prosper in the new business environment.www.ebaday.com
19-23 septemBer sibos 2011, torontoAfter a recovering some of its pizzazz at Amsterdam in 2010, the mother of all financial sector conferences and exhibitions moves further away from established traditions with a move outside the US for the North America leg of its perpetual world tour.www.swift.com
11-13 OCTOBERBAI Retail Delivery 2011, Chicago In 2010 BAI Retail Delivery was revamped, reorganised and revitalised, and is now on its way back to being the retail banking event of the year. www.bai.org
events
www.bankingtech.com I 39
Go to www.bankingtech.com for the latest news and comment
dttc automates regulator view of CDS data
oracle Financial Services aims new products at regulatory data market
The Depository Trust & clearing corporation has launched an automated portal to provide regulators worldwide with direct, on-line access to global credit default swap data registered in its Warehouse Trust global repository.
currently 19 regulators around the world are already live on the portal. This is the first global regulatory service of its kind in the financial market place.
“In constructing this new portal, DTcc’s goal is to provide access to OTc derivatives data to regulators in a timely, fair, and seamless manner, without any preferential treatment across geographic jurisdictions worldwide,” said Stewart Macbeth, DTcc managing director and general manager of DTcc’s Warehouse Trust subsidiary, which operates DTcc’s global cDS trade repository. “We have been committed since the inception of DTcc’s central repository to providing data on global OTc derivatives transactions so that regulators can view risk exposures from a central vantage point as a means to help protect markets against systemic risk. DTcc anticipates that the creation of this portal will be of great value to global financial authorities and banking supervisors in fulfilling their mission.”
The portal allows for each regulator to access reports tailored to their specific entitlements as a market regulator, supervisor, or central bank. These reports are created for each regulator to show only the cDS data relevant to its jurisdiction, regulated entities or currency, at the appropriate level of aggregation.
Examples of the standard reports available to regulators via the portal include: counterparty Exposure report showing buy/sell positions for the regulated entity aggregated by counterparty and underlier and reference Entity Exposure reports showing buy/sell positions aggregated by underlier and counterparty. BT
Oracle Financial Services has launched two new products to try to help banks better manage
their risk and data functions in the face of increased regulatory and market demands for more transparency and control.
The Oracle Financial Services Data Warehouse is intended to help banks meet complex, cross-functional and departmental analytics and reporting challenges, while the Oracle reveleus Liquidity risk Management software is designed to help banks comply with the Basel III capital adequacy rules and assess liquidity positions enterprise-wide under ‘normal’ and ‘extreme’ conditions, identifying any gaps or problems.
The pre-built Data Warehouse can be specified to suit individual requirements, claims the vendor, and means financial institutions can readily access customer, financial, trading and risk-related data from across the organisation, effectively providing an internal business intelligence platform. contextual data quality checks can be made using the in-built data modelling protocols and the warehouse is compatible with all of Oracle’s analytical applications, which
are readily available, plus software from third party suppliers or in-house bank IT teams can be accommodated via simple plug-ins. The data warehouse uses established extract, transform, load practices to ensure fast load times and query responses.
The Oracle reveleus Liquidity risk Management software is part of the vendor’s wider FS analytical applications suite and comes with a set of in-built liquidity report and dashboard templates, including FSa-specified reporting forms to ease management oversight and monitoring activities. commenting on the launch, S. ramakrishnan, group vice president and general manager of the Oracle FS analytical applications division, said that the new software would be useful, “in an era of increased regulatory requirements – including the onset of Basel III – and heightened shareholder scrutiny everywhere. FIs are increasingly seeking solutions that enable them to proactively and centrally identify and assess risk under many types of market conditions, and develop effective plans for closing liquidity gaps. I believe our new offering allows firms to do precisely this.”BT
Algorithmics wins Oprisk patent
Algorithmics has been awarded a patent for its operational risk capital modelling framework,
which will shortly be offered as an extension to the vendor’s algo OpVar software that can calibrate, simulate and measure operational risk and provide data analysis capabilities.
according to the vendor, the new framework will deliver a method for aggregating loss estimates, using a combination of the actuarial technique of estimating frequency and severity separately, while marrying this up with a Monte-carlo simulation to produce an overall estimate. By performing these calculations for individual business lines and risk types, and then combining these estimates, clients can arrive at a ‘bottom-up’ estimate for their operational risk exposure.
“In my opinion, this technology represents a significant advance in the area of operational risk modelling and measurement, which is particularly timely, given the increasing regulatory recognition of the importance of operational risk,” said Ben De Prisco, senior vice president of research and financial engineering at algorithmics.
“capital remains one of the most powerful tools in the regulator’s armoury to control financial institutions and Basel III is adding yet more stringent capital requirements on the banks,” he added. “Our new capital modelling framework provides institutions with the ability to analyse their loss data in a meaningful and structured way. The patented techniques, implemented in the algo OpVar capital modelling extension, use internal and external loss data – taken from algorithmics’ existing algoFirst and OpData loss databases – to give management a good estimate of the capital required to cover these types of risk and can help them decide where to invest in additional controls or where to make changes to the business to minimise their exposure. The end result is a comprehensive and transparent approach to measuring and managing operational risk.” BT
38 I www.bankingtech.com
March 2011
ProductS and ServiceSVendor announcements, enhancements and innovations
Microsoft partners with Temenos in the cloud and Nokia in the air
Temenos is making its T24 core banking software available on an ‘on demand’ basis via the Microsoft Windows’ azure cloud computing platform, including the SQL azure offering. In the mobile phone space, meanwhile, which is
increasingly being used for e-commerce, payments and banking services, Microsoft is partnering with Nokia, which will use the Windows Phone 7 Operating System on its smartphones in future.
The latter deal is an effort to regain ground lost to the iPhone and android-based devices in the smartphone OS arena. It will sideline Nokia’s existing operating systems, including the planned MeeGo smartphone OS and Nokia’s famous Symbian system, which will continue to exist but as a franchise product for standard mobile phones.
according to Microsoft, its partnership deal with Temenos will allow banks to reduce the large data centre costs usually associated with running a multi-application, cross-channel core banking environment in-house, as well as delivering a flexible cloud-based resource that can be scaled up or down appropriately to met customer volume demands.
a loss of control is inevitable, but despite this a network of 12 Mexican financial institutions have agreed to be the first firms to make the move from a traditional hosted environment into the Windows azure-equipped core banking cloud. Sofol Tepeyac, Grupo agrifin, Findeca, Soficam and c.capital Global will be the first FIs to move by the end of this year, with seven more Mexican firms to follow by year end.
“hosting T24 on Microsoft’s azure platform gives financial institutions anywhere in the world the ability to deploy the system on a per use basis,” explains Bart Narter, senior vice president of banking at the celent consultancy, when discussing the rationale behind the move. “Giving customers this option opens up entire new markets and geographies for both azure and Temenos T24.” BT
FrSGlobal, a compliance and risk management software firm that is part of Wolters Kluwer Financial
Services, is updating its global regulatory reporting solution to include specific protocols for Germany and Bahrain, two markets it is targeting for growth alongside India, where it is opening a new office and appointing Prabhat Gupta as head regulatory specialist.
The German application covers the complex reporting processes faced by banks in the country across a broad range of requirements – for instance, foreign banks have approximately 80 report templates covering balance sheet updates, interest rates, credit users, and liquidity/solvency reports, that have now been incorporated
into FrSGlobal’s regulatory reporting solution. The software automates report compilation and submission processes to the regulator, creating a single repository that can be reused internally and specified in the English or German language.
The same functionality, tweaked to suit local languages and sharia law requirements, has been added to the solution to comply with the demands of the central Bank of Bahrain, which largely follows the Basel committee on risk issues and capital adequacy reporting. “I am very pleased that FrSGlobal can assist banks in this region [and elsewhere] by broadening our solution,” said roy Barnes, head of Middle East operations. BT
Wall Street takes Treasura from thomson reuters
Wall Street Systems is buying the corporate treasury manager service
of Thomson reuters. The Software-as-a-Service operator (commonly known as Treasura), provides cash and liquidity management services to corporations in North america.
The acquisition is the third by Wall Street Systems in the last year, and as in earlier cases is part of a strategy to strengthen the firm’s position in the global corporate treasury arena. The addition of Treasura will further accelerate Wall Street’s North american expansion in the mid-tier corporate market, complementing the company’s June 2010 acquisition of London-based city Financials and its purchase of Speranza Systems, a provider of electronic bank account management (eBaM) solutions, in april last year.
commenting on the deal, Larry Ng, managing director of corporate development at Wall Street Systems, said: “The Treasura acquisition will open up our existing cash management capabilities to a broader market, expand our client base and position us for growth as companies begin to re-engineer their financial infrastructure and workflow. In the midst of the financial crisis, the treasury function has become critical and strategic in the face of increasing complexity, regulatory changes and demands for better cash, liquidity and risk management.” BT
FrSGlobal updates compliance software in Germany and Bahrain
Turkish bank TC Ziraat Bankasi has installed all six modules of AMLtrac, the Anti-Money Laundering application from International Financial Systems, at its London branch. The bank, which uses the vendor’s BankWare software, has already gone live on the Swift Message Screening module.
www.bankingtech.com I 39
Go to www.bankingtech.com for the latest news and comment
dttc automates regulator view of CDS data
oracle Financial Services aims new products at regulatory data market
The Depository Trust & clearing corporation has launched an automated portal to provide regulators worldwide with direct, on-line access to global credit default swap data registered in its Warehouse Trust global repository.
currently 19 regulators around the world are already live on the portal. This is the first global regulatory service of its kind in the financial market place.
“In constructing this new portal, DTcc’s goal is to provide access to OTc derivatives data to regulators in a timely, fair, and seamless manner, without any preferential treatment across geographic jurisdictions worldwide,” said Stewart Macbeth, DTcc managing director and general manager of DTcc’s Warehouse Trust subsidiary, which operates DTcc’s global cDS trade repository. “We have been committed since the inception of DTcc’s central repository to providing data on global OTc derivatives transactions so that regulators can view risk exposures from a central vantage point as a means to help protect markets against systemic risk. DTcc anticipates that the creation of this portal will be of great value to global financial authorities and banking supervisors in fulfilling their mission.”
The portal allows for each regulator to access reports tailored to their specific entitlements as a market regulator, supervisor, or central bank. These reports are created for each regulator to show only the cDS data relevant to its jurisdiction, regulated entities or currency, at the appropriate level of aggregation.
Examples of the standard reports available to regulators via the portal include: counterparty Exposure report showing buy/sell positions for the regulated entity aggregated by counterparty and underlier and reference Entity Exposure reports showing buy/sell positions aggregated by underlier and counterparty. BT
Oracle Financial Services has launched two new products to try to help banks better manage
their risk and data functions in the face of increased regulatory and market demands for more transparency and control.
The Oracle Financial Services Data Warehouse is intended to help banks meet complex, cross-functional and departmental analytics and reporting challenges, while the Oracle reveleus Liquidity risk Management software is designed to help banks comply with the Basel III capital adequacy rules and assess liquidity positions enterprise-wide under ‘normal’ and ‘extreme’ conditions, identifying any gaps or problems.
The pre-built Data Warehouse can be specified to suit individual requirements, claims the vendor, and means financial institutions can readily access customer, financial, trading and risk-related data from across the organisation, effectively providing an internal business intelligence platform. contextual data quality checks can be made using the in-built data modelling protocols and the warehouse is compatible with all of Oracle’s analytical applications, which
are readily available, plus software from third party suppliers or in-house bank IT teams can be accommodated via simple plug-ins. The data warehouse uses established extract, transform, load practices to ensure fast load times and query responses.
The Oracle reveleus Liquidity risk Management software is part of the vendor’s wider FS analytical applications suite and comes with a set of in-built liquidity report and dashboard templates, including FSa-specified reporting forms to ease management oversight and monitoring activities. commenting on the launch, S. ramakrishnan, group vice president and general manager of the Oracle FS analytical applications division, said that the new software would be useful, “in an era of increased regulatory requirements – including the onset of Basel III – and heightened shareholder scrutiny everywhere. FIs are increasingly seeking solutions that enable them to proactively and centrally identify and assess risk under many types of market conditions, and develop effective plans for closing liquidity gaps. I believe our new offering allows firms to do precisely this.”BT
Algorithmics wins Oprisk patent
Algorithmics has been awarded a patent for its operational risk capital modelling framework,
which will shortly be offered as an extension to the vendor’s algo OpVar software that can calibrate, simulate and measure operational risk and provide data analysis capabilities.
according to the vendor, the new framework will deliver a method for aggregating loss estimates, using a combination of the actuarial technique of estimating frequency and severity separately, while marrying this up with a Monte-carlo simulation to produce an overall estimate. By performing these calculations for individual business lines and risk types, and then combining these estimates, clients can arrive at a ‘bottom-up’ estimate for their operational risk exposure.
“In my opinion, this technology represents a significant advance in the area of operational risk modelling and measurement, which is particularly timely, given the increasing regulatory recognition of the importance of operational risk,” said Ben De Prisco, senior vice president of research and financial engineering at algorithmics.
“capital remains one of the most powerful tools in the regulator’s armoury to control financial institutions and Basel III is adding yet more stringent capital requirements on the banks,” he added. “Our new capital modelling framework provides institutions with the ability to analyse their loss data in a meaningful and structured way. The patented techniques, implemented in the algo OpVar capital modelling extension, use internal and external loss data – taken from algorithmics’ existing algoFirst and OpData loss databases – to give management a good estimate of the capital required to cover these types of risk and can help them decide where to invest in additional controls or where to make changes to the business to minimise their exposure. The end result is a comprehensive and transparent approach to measuring and managing operational risk.” BT
Tieto has launched a product that will enable banks and other financial institutions to develop all their online and traditional service operations into one streamlined consumer experience, “transforming separate, transaction-orientated channels into new pro-active customer services”. It covers internet banking, mobile banking, contact centres and branch office advisory systems. Tieto’s service package includes all stages of customer service design, from creating a strategy and the concept design, to deployment and operating the service.
Clear2Pay, the Netherlands-based provider of payment solutions for financial institutions, has signed an agreement with Techso, appointed by the South-African National Department of Transport, under which it will develop the functional test solutions for public transport specific EMV contactless cards and payment terminals. Additionally, Clear2Pay will deploy a certification laboratory in Cape Town, enabling banks and third party vendors to locally qualify their cards and devices. This will support the strategic objectives of facilitating Automated Fare Collection via bank issued contactless payment cards. Market data from Quote MTF, a new lit trading venue for pan-European equities, will be available on the Bloomberg Professional service. The Quote MTF data will also be included in the MDM European composite, Bloomberg’s consolidated feed. Quote MTF has also implemented Bloomberg’s Global Identifiers in its static data, as a financial instrument identifier associated with all Quote MTF securities, using the vendor suffix .QM.
Multi-purpose market monitoring system Scila Surveillance has been selected for an EU pilot project on monitoring wholesale energy markets. The findings of the pilot project will feed into an enhanced EU wide framework for the supervision of energy markets. Within the pilot, Scila Surveillance will import and analyse historical trade data from energy exchanges, brokers and traders selected
Stockopedia, a social media site for UK stock market investors, has launched a Publisher Analytics platform that allows third party publishers and bloggers on the site to more accurately measure readership and engagement for their content on a real-time basis. Publishers on Stockopedia now have access to a personalised dashboard allowing them to view real-time readership statistics across all their published content. Features include the ability to track and chart readership details across different timeframes and versus their average performance.
CTI Group, specialists in call recording and call accounting solutions for mobile, PBX and VoIP telephony systems, has introduced its first call recording solution designed specifically for the financial sector following the successful interoperability testing of its call recording application, SmartRecord, now featured as part of the Speakerbus i turret global trading system.
Bloomberg has added a real-time search and analytics console for Bloomberg Vault, integrating real-time monitoring, search analytics, and archiving of Bloomberg messaging and corporate email. More than 160 financial services companies have adopted Bloomberg Vault, a hosted solution with compliance retention services, active policy management, extensive search capabilities, analytics and information governance for corporate email and instant messages, as well as all messaging content on the Bloomberg Professional service.
Excellence Nessuah, an Israeli investment house, is providing Direct Market Access to the Tel Aviv Stock Exchange using Fidessa’s global connectivity network. The move gives Fidessa’s community of 2,400 buy-sides and 550 brokers trading access to Israel’s only stock market.
Bank of America, BNP Paribas and PostFinance have become the latest firms to join Mobey Forum, the not-for-profit effort to define a sustainable and prosperous mobile financial services ecosystem. Alongside Mobey Forum’s other members, which include banks, financial institutions, mobile network operators, mobile handset manufacturers, payment processors and vendors – with the banks representing more than 450 million banking customers globally (25% of the global base) – Bank of America, BNP Paribas and PostFinance will contribute to Mobey Forum’s dedicated task forces, workgroups and member meetings.
The latest version of SAS’ Enterprise Case Management software, part of its Financial Crimes Framework, aims to assist fraud investigators and efficiency by automating more processes. The BI software now includes enhancements such as historical versioning, which shows up-to-the-minute case histories and reference material while also providing an audit trial, alongside social network analysis tools, web service search and event notification capabilities. The social networking element means the connections of individuals related to a fraud case can be examined for richer information and possible links to organised crime, giving a more comprehensive overview. Web service search tools can automatically ensure the correct target is under review, avoiding identical names by cross-referencing and improving accuracy. The event notification feature should help investigators in the field get email or text messages on case changes, keeping them abreast of progress and focused on relevant information.
euNetworks has added a new low latency route from London to Stockholm to its dedicated fibre finance network. The bandwidth infrastructure provider can deliver direct exchange-to exchange connectivity with a reduced latency of 22.4 milliseconds for the round trip from England to Sweden, which the vendor claims is 12% faster than competitor offerings. The new route joins the euTrade service portfolio, which offers market participants solutions across Europe with on-demand connectivity between all the major stock exchanges and clearing houses.
Gemalto has released Protiva One4all, an authentication solution designed for trading floors containing workstations with multiple trading terminals. Users log on at their primary terminal using a PKI smart card and the exact same authentication is automatically replicated across each of their other terminals. All events, such as log-off, log-on, and screen lock and unlock can be replicated across the slave terminals, providing banks and brokers with consistent transaction security and tracking capabilities.
Asset Control has improved its corporate actions financial data coverage by integrating its AC Plus data management platform with Fidelity’s ActionsXchange information package, which validates and enriches corporation action announcements on more than 2.5 million global securities, such as stock splits and restructurings. According to the vendors, the enriched corporate actions event information can be combined with other security and pricing data to further enhance quality.
Go to www.bankingtech.com for the latest news and comment
www.bankingtech.com I 41
PRODUCT AND SERVICESMarch 2011
Tieto has launched a product that will enable banks and other financial institutions to develop all their online and traditional service operations into one streamlined consumer experience, “transforming separate, transaction-orientated channels into new pro-active customer services”. It covers internet banking, mobile banking, contact centres and branch office advisory systems. Tieto’s service package includes all stages of customer service design, from creating a strategy and the concept design, to deployment and operating the service.
Clear2Pay, the Netherlands-based provider of payment solutions for financial institutions, has signed an agreement with Techso, appointed by the South-African National Department of Transport, under which it will develop the functional test solutions for public transport specific EMV contactless cards and payment terminals. Additionally, Clear2Pay will deploy a certification laboratory in Cape Town, enabling banks and third party vendors to locally qualify their cards and devices. This will support the strategic objectives of facilitating Automated Fare Collection via bank issued contactless payment cards. Market data from Quote MTF, a new lit trading venue for pan-European equities, will be available on the Bloomberg Professional service. The Quote MTF data will also be included in the MDM European composite, Bloomberg’s consolidated feed. Quote MTF has also implemented Bloomberg’s Global Identifiers in its static data, as a financial instrument identifier associated with all Quote MTF securities, using the vendor suffix .QM.
Multi-purpose market monitoring system Scila Surveillance has been selected for an EU pilot project on monitoring wholesale energy markets. The findings of the pilot project will feed into an enhanced EU wide framework for the supervision of energy markets. Within the pilot, Scila Surveillance will import and analyse historical trade data from energy exchanges, brokers and traders selected
Stockopedia, a social media site for UK stock market investors, has launched a Publisher Analytics platform that allows third party publishers and bloggers on the site to more accurately measure readership and engagement for their content on a real-time basis. Publishers on Stockopedia now have access to a personalised dashboard allowing them to view real-time readership statistics across all their published content. Features include the ability to track and chart readership details across different timeframes and versus their average performance.
CTI Group, specialists in call recording and call accounting solutions for mobile, PBX and VoIP telephony systems, has introduced its first call recording solution designed specifically for the financial sector following the successful interoperability testing of its call recording application, SmartRecord, now featured as part of the Speakerbus i turret global trading system.
Bloomberg has added a real-time search and analytics console for Bloomberg Vault, integrating real-time monitoring, search analytics, and archiving of Bloomberg messaging and corporate email. More than 160 financial services companies have adopted Bloomberg Vault, a hosted solution with compliance retention services, active policy management, extensive search capabilities, analytics and information governance for corporate email and instant messages, as well as all messaging content on the Bloomberg Professional service.
Excellence Nessuah, an Israeli investment house, is providing Direct Market Access to the Tel Aviv Stock Exchange using Fidessa’s global connectivity network. The move gives Fidessa’s community of 2,400 buy-sides and 550 brokers trading access to Israel’s only stock market.
Bank of America, BNP Paribas and PostFinance have become the latest firms to join Mobey Forum, the not-for-profit effort to define a sustainable and prosperous mobile financial services ecosystem. Alongside Mobey Forum’s other members, which include banks, financial institutions, mobile network operators, mobile handset manufacturers, payment processors and vendors – with the banks representing more than 450 million banking customers globally (25% of the global base) – Bank of America, BNP Paribas and PostFinance will contribute to Mobey Forum’s dedicated task forces, workgroups and member meetings.
The latest version of SAS’ Enterprise Case Management software, part of its Financial Crimes Framework, aims to assist fraud investigators and efficiency by automating more processes. The BI software now includes enhancements such as historical versioning, which shows up-to-the-minute case histories and reference material while also providing an audit trial, alongside social network analysis tools, web service search and event notification capabilities. The social networking element means the connections of individuals related to a fraud case can be examined for richer information and possible links to organised crime, giving a more comprehensive overview. Web service search tools can automatically ensure the correct target is under review, avoiding identical names by cross-referencing and improving accuracy. The event notification feature should help investigators in the field get email or text messages on case changes, keeping them abreast of progress and focused on relevant information.
euNetworks has added a new low latency route from London to Stockholm to its dedicated fibre finance network. The bandwidth infrastructure provider can deliver direct exchange-to exchange connectivity with a reduced latency of 22.4 milliseconds for the round trip from England to Sweden, which the vendor claims is 12% faster than competitor offerings. The new route joins the euTrade service portfolio, which offers market participants solutions across Europe with on-demand connectivity between all the major stock exchanges and clearing houses.
Gemalto has released Protiva One4all, an authentication solution designed for trading floors containing workstations with multiple trading terminals. Users log on at their primary terminal using a PKI smart card and the exact same authentication is automatically replicated across each of their other terminals. All events, such as log-off, log-on, and screen lock and unlock can be replicated across the slave terminals, providing banks and brokers with consistent transaction security and tracking capabilities.
Asset Control has improved its corporate actions financial data coverage by integrating its AC Plus data management platform with Fidelity’s ActionsXchange information package, which validates and enriches corporation action announcements on more than 2.5 million global securities, such as stock splits and restructurings. According to the vendors, the enriched corporate actions event information can be combined with other security and pricing data to further enhance quality.
Go to www.bankingtech.com for the latest news and comment
www.bankingtech.com I 41
PRODUCT AND SERVICESMarch 2011
www.bankingtech.com I 43
Industry columnMarch 2011
the industry is facing regulatory upheaval – again. Since my last column, the Treasury issued its proposals for the new regulatory landscape
post-crash, which effectively means replacing the FSa with new institutions operating under the Bank of England.
The Financial Policy committee, like the Monetary Policy committee, will take a long term look at the progress of the UK’s economy, but its remit extends to identifying and dealing with asset bubbles as they form, and spotting other potential weaknesses in the financial system. The Financial conduct authority (formerly known as the consumer Protection & Markets authority) will deal largely with financial services, consumers and markets, while the Prudential regulation authority will look in detail at how individual firms manage risk within their business.
also, in the EU, we have two new supervisory authorities to deal with: the European Banking authority, based in London, and the European Securities and Markets authority in Paris. Financial regulation continues to be carried out at a national level, but the new authorities can impose binding technical standards on member states and can overrule national regulators where an EU law has been breached.
But the often untold story is that alongside all of this regulatory reform, the banks themselves have already been making substantial changes to the way they conduct their business. Banks are now operating with more capital and liquidity, with top to bottom changes to risk control and transparency in ethics and in governance. They have made major changes to remuneration and are much more transparent and committed to meeting their societal obligations. These are only a few of the changes – indeed, there are so many it is difficult to describe the scope, range and impact of all the alterations underway.
The changes follow three broad themes. First there is the stability programme, centred on the work of the Basel committee for Banking Supervision and its calculation of capital and liquidity requirements for
the world’s banks (Basel III). Second, the regulatory institutions have been overhauled – in the UK, the EU and internationally. and thirdly, recovery and resolution plans – so-called ‘living wills’ – have been put in place, so that financial institutions never again have to turn to the taxpayer for support.
There are of course significant costs and implications. Two broad studies have been undertaken on what these changes mean. One has been done by an international consortium of the industry which basically said that every 1% capital ratio increase would flow through to a 1% adverse impact on the economy. Too extreme a conclusion – wrong. The other has been done by international authorities and has said that that every 1% capital increase would have a negligible impact on the economy. again too extreme; again wrong. Both these represent the outside parameters. as is so often the case, the truth is somewhere in between.
If I look at only the UK for example, the banks have had to raise something in excess of an additional £160 billion worth of capital over the last two years. That is a substantial amount of money and it has now added to the fixed cost of a bank being in business in the UK (and abroad, as the Basel committee’s standards are applied gradually in other jurisdictions).
The UK itself has put in place a liquidity regime that requires the banks to hold more cash, or cash-lookalikes, defined here as gilts. The Basel proposals see the new liquidity regime commencing in four years time; the UK implemented the standards one year ago. While evidently it is far from unreasonable to expect the banking industry to hold more liquidity, there are three things worth pausing to consider here:■ there is inevitably a cost involved,
which again adds to the fixed costs of being in business.
■ our almost uniquely narrow interpretation of what counts as a liquidity instrument is resulting in the banks holding more and more gilts, and so being more and dependent on governments taking sensible fiscal decisions.
■ the UK’s restriction on the use of such instruments as covered bonds – which
are permitted under the Basel rules – impact the ability to increase the supply of loans such as mortgages. The simple truth for any business
is that you cannot increase fixed costs without a consequent impact on the cost and availability of services. The implementation of new standards early, and the super-equivalent way in which the UK has applied existing European and other requirements, not only means that there is a constraint on the international competitiveness of the banking industry in this country compared to others, but most importantly this constraint flows directly through to the economy and economic growth.
We cannot continue down a path that says regulatory changes only have an impact on banks. Where changes have a societal impact, they need to be discussed from that perspective. It cannot be ignored or parked on the industry as if it is an industry -only problem. If a decision is being taken which says that in the interest of stability we will restrict loans and restrict mortgages, then so be it. But that is a policymaker’s decision; it is not a decision of the banks.
If one looks to see which countries are rebounding best economically they are those with governments who ran their public finances well in the years leading up to the banking crisis – not the case in the UK. The banks are responsible for banking, but they are not responsible for allowing public expenditure to balloon.
regulatory reform is not about moving goalposts, still less rearranging deckchairs, but the scant public debate on the matter constantly alleges one or the other. We need a society-wide debate, so that we can understand and agree the outcomes we need – as an economy and as a society – from reform of the financial system.
Angela Knight is the chief executive of British Bankers’ Association
The real cost of regulatory change Angela Knight,
British Bankers’ association
>
42 I www.bankingtech.com
Industry columnMarch 2011
In response to the miFId review proposals I’d like to invite you to follow me on a little analogy ... Imagine a reform of the fruit
market that looked at the orange trade, ensuring that oranges could be freely traded by a wide range of supermarkets (exchanges), online (MTFs) and over the counter. Wholesale and retail markets would be separately catered for, though the same tools might be available to wholesale and retail traders. Would you apply the lessons of that reform, including rules specific to oranges, to all other fruit and vegetables? No, of course you wouldn’t. Nor should the EU ‘copy & paste’ from equities to fixed income and derivatives.
Looking past the detail and the jargon, that’s the key common theme in a number of responses to the EU consultation on the reform of MiFID. In particular, in IcMa’s response, we: ■ encourage the commission to
consider the full implications of its proposals;
■ propose to expand the definition of ‘admission to trading’;
■ recommend that the commission excludes money market instruments from MiFID;
■ ask the commission to accommodate bilateral trading and hybrid systems within the Organised Trading Facility category;
■ call for the scope of the non-equity, pre-trade transparency framework to be limited to large investment grade bond issues;
■ support ESMa’s recommendation not to introduce mandatory pre-trade transparency outside the equity market;
■ advocate that the post-trade transparency framework be based on high/low/median prices published at the end of day, with appropriate delays to accommodate the unique nature of the bond market and phased implementation of the new requirements;
■ agree that title transfer collateral for retail clients should be properly managed, but not prohibited;
■ offer to assist in the development of
any further proposals in respect of the underwriting and placing process in the primary market.But our concerns go wider; in
particular, the rapid pace of reform, the lack of an integrated view of the multiple overlapping changes to the regulatory environment and concern about the resources supporting this ambitious programme have been highlighted in recent discussions. In the case of the MiFID consultation a two month period over christmas 2010 was allowed for responses, with a legislative proposal scheduled for May 2011 and all stages of the legislative proposal to be completed by December 2011. at the same time IcMa and its members are looking at a review of the Market abuse Directive, regulation regarding short selling and credit Default Swaps, legislation on central Securities Depositories, a planned Securities Law Directive, plus European Market Infrastructure regulation, reform via Basel III and the capital requirements Directive 4 – to name only those regulations of immediate concern.
These reforms are likely to make an enormous difference to the way European financial markets develop.
The availability of liquid capital in the hands of financial institutions will affect the market depth and spread in many asset classes, which is why we all need to understand Basel III and crD 4 fully. The availability of deep, liquid markets in turn affects investors’ willingness to commit capital to productive investment through tradable securities.
Governments’ ability to finance their deficits can be significantly affected by market developments and this is both an opportunity and a risk. There are many who resent the influence of the market on government finance; and they want to place it at the service of the people. They seem to forget that the bond market already serves the people; not only those who receive private pensions, funded by their provider’s bond portfolio; not only those who are saving for their retirement; but also those in car factories, aircraft factories and railway rolling stock factories, the sale of whose products can be financed by the issue of bonds.
The various technologies deployed in European equity markets over the last
few years have given practical impetus to the theories of those who believed that competition and choice would spur innovation. New platforms have emerged and are fighting for market share across Europe, because smart order routers seek out liquidity while trying to minimise evidence of their trading intentions.
can these technologies be deployed for fixed income trading? They can and they will. But the fixed income markets – both credit and rates, as well as their derivatives – need to grasp the opportunity and explain the benefits that can accrue from the intelligent application of technology in a properly regulated environment. The tools used in equities will need to be adapted, of course, just as the transparency regime must be tailored to fit the needs of a different market.
readers of Banking Technology will be more aware than most of the need to apply robust project management and quality control disciplines to code change, whether you are releasing a new trading algorithm into production or rolling out a major new transaction management platform.
Now think of new European legislative requirements as ‘code’. and consider that the detailed drafting of the legislative code is done in haste by people who do not have the advantage of being expert in the field. Then remember that the code writing and review process is being conducted, in parallel, by two groups (European council and Parliament) in parallel work streams. That there is no provision for unit testing, let alone integration testing. Now add stress into the process; ask the Brussels machine to run faster than it has ever run in the past, processing more lines of code, and more conflicting demands, in a fraught political environment.
Will it end well? as the French sceptics say, on verra*.
John serocold is a senior director at the International capital market Association
MiFID: equities are not the only fruit John serocold,
International Capital Market Association
*we shall see
www.bankingtech.com I 43
Industry columnMarch 2011
the industry is facing regulatory upheaval – again. Since my last column, the Treasury issued its proposals for the new regulatory landscape
post-crash, which effectively means replacing the FSa with new institutions operating under the Bank of England.
The Financial Policy committee, like the Monetary Policy committee, will take a long term look at the progress of the UK’s economy, but its remit extends to identifying and dealing with asset bubbles as they form, and spotting other potential weaknesses in the financial system. The Financial conduct authority (formerly known as the consumer Protection & Markets authority) will deal largely with financial services, consumers and markets, while the Prudential regulation authority will look in detail at how individual firms manage risk within their business.
also, in the EU, we have two new supervisory authorities to deal with: the European Banking authority, based in London, and the European Securities and Markets authority in Paris. Financial regulation continues to be carried out at a national level, but the new authorities can impose binding technical standards on member states and can overrule national regulators where an EU law has been breached.
But the often untold story is that alongside all of this regulatory reform, the banks themselves have already been making substantial changes to the way they conduct their business. Banks are now operating with more capital and liquidity, with top to bottom changes to risk control and transparency in ethics and in governance. They have made major changes to remuneration and are much more transparent and committed to meeting their societal obligations. These are only a few of the changes – indeed, there are so many it is difficult to describe the scope, range and impact of all the alterations underway.
The changes follow three broad themes. First there is the stability programme, centred on the work of the Basel committee for Banking Supervision and its calculation of capital and liquidity requirements for
the world’s banks (Basel III). Second, the regulatory institutions have been overhauled – in the UK, the EU and internationally. and thirdly, recovery and resolution plans – so-called ‘living wills’ – have been put in place, so that financial institutions never again have to turn to the taxpayer for support.
There are of course significant costs and implications. Two broad studies have been undertaken on what these changes mean. One has been done by an international consortium of the industry which basically said that every 1% capital ratio increase would flow through to a 1% adverse impact on the economy. Too extreme a conclusion – wrong. The other has been done by international authorities and has said that that every 1% capital increase would have a negligible impact on the economy. again too extreme; again wrong. Both these represent the outside parameters. as is so often the case, the truth is somewhere in between.
If I look at only the UK for example, the banks have had to raise something in excess of an additional £160 billion worth of capital over the last two years. That is a substantial amount of money and it has now added to the fixed cost of a bank being in business in the UK (and abroad, as the Basel committee’s standards are applied gradually in other jurisdictions).
The UK itself has put in place a liquidity regime that requires the banks to hold more cash, or cash-lookalikes, defined here as gilts. The Basel proposals see the new liquidity regime commencing in four years time; the UK implemented the standards one year ago. While evidently it is far from unreasonable to expect the banking industry to hold more liquidity, there are three things worth pausing to consider here:■ there is inevitably a cost involved,
which again adds to the fixed costs of being in business.
■ our almost uniquely narrow interpretation of what counts as a liquidity instrument is resulting in the banks holding more and more gilts, and so being more and dependent on governments taking sensible fiscal decisions.
■ the UK’s restriction on the use of such instruments as covered bonds – which
are permitted under the Basel rules – impact the ability to increase the supply of loans such as mortgages. The simple truth for any business
is that you cannot increase fixed costs without a consequent impact on the cost and availability of services. The implementation of new standards early, and the super-equivalent way in which the UK has applied existing European and other requirements, not only means that there is a constraint on the international competitiveness of the banking industry in this country compared to others, but most importantly this constraint flows directly through to the economy and economic growth.
We cannot continue down a path that says regulatory changes only have an impact on banks. Where changes have a societal impact, they need to be discussed from that perspective. It cannot be ignored or parked on the industry as if it is an industry -only problem. If a decision is being taken which says that in the interest of stability we will restrict loans and restrict mortgages, then so be it. But that is a policymaker’s decision; it is not a decision of the banks.
If one looks to see which countries are rebounding best economically they are those with governments who ran their public finances well in the years leading up to the banking crisis – not the case in the UK. The banks are responsible for banking, but they are not responsible for allowing public expenditure to balloon.
regulatory reform is not about moving goalposts, still less rearranging deckchairs, but the scant public debate on the matter constantly alleges one or the other. We need a society-wide debate, so that we can understand and agree the outcomes we need – as an economy and as a society – from reform of the financial system.
Angela Knight is the chief executive of British Bankers’ Association
The real cost of regulatory change Angela Knight,
British Bankers’ association
>
www.bankingtech.com I 45
commentMarch 2011
the retail banking industry in the uK is undergoing a major period of change. For the first time in recent history, new retail banks are
appearing on the high-street and are seeking to shake-up the market. This surge is driven by consumer appetite for more options, something made clear in a recent survey by Deloitte that showed almost 35% of consumers wished that there were more banks to choose from, with only 10% saying they would be happy to bank with any of the large household brands.
as these new banks, such as the recently launched Metro Bank, begin to establish themselves as mainstays of retail banking, so the competition to win over the hearts and minds of customers heats up. although both new and traditional banks face challenges when it comes to wooing the public, the key to success remains the same: how do we serve our customers better?
changing of the guardMany traditional banks are in the process of completing IT facelifts. Take, for example, Barclays Bank’s flagship branches in London and Manchester, which are using technology to deliver an efficient, slick and modern banking experience to customers. This kind of innovation has become a critical factor for traditional banks that want to remain on a par with the new players.
Traditional banks have spent decades, even centuries, cultivating service offerings that perfectly suit their customer profile. In this regard, they are a step ahead of newer banks that are starting from scratch. Established banks know their specialist areas, have created the perfect customer environment and have positioned themselves as competitors in the retail banking space. yet even traditional banks see the need for investment in more innovative services and technologies. For instance, they are upgrading to more efficient and easy-to-use technology, such as self-service banking kiosks for front-of-house. These aTMs allow customers to perform many self-service activities that they previously would have had
to queue up to do at a counter, such as depositing cheques or reading about different services that bank offers. This means customers can get in and out of the bank quickly without having to waste time in queues. This is key if high street banks are to remain open – a study by the Payments council found that more than half of UK consumers bank or pay bills electronically purely to avoid having to queue.
however, when implementing new technologies, the challenge for some banks is that their complex legacy systems have been built up over many years, which makes adding modern IT systems to this all the more difficult.
In short, despite their experience in handling complex technology implementations, adopting the very latest innovations is more complex for traditional banks than it is for newly established banks. Newer banks like Metro Bank have far greater freedom because they aren’t tethered to legacy systems.
This ability to lead the way in technology is a vital way into the market for less-established banks. While traditional banks have built up customer confidence and loyalty over many years, newer banks simply don’t have this. Therefore, newer banks must do everything they can to innovate enough to attract these customers. They can build on the experiences of traditional banks but skip over the proven, though perhaps outdated, technologies to adopt systems that offer immediately improved services.
The problem for new banks is that opting for the latest and greatest technologies often means they have to charge higher interest rates than traditional banks because they are battling expensive start-up costs. although the eventual benefits this technology will bring will far outweigh any initial costs, it is vital that banks look for ways to become more efficient so that they can afford to lower their high interest rates on overdrafts and credit cards whilst still affording to implement the best IT systems.
a crucial way for these banks to increase efficiency is to look at ways to improve cash management techniques to reduce the money lost in the cash
cycle. according to our own research, banks spend 3% of every pound managing the cash cycle, representing a huge incentive for those banks to take action. There are three key areas where banks typically lose the most money during the cash handling process: staffing the cash centre, paying for cash-in-transit vans to transport money to the bank and maintaining security.
In order to optimise the cash cycle while maximising both efficiency and security, banks should begin by automating their cash handling processes and seek solutions to enable closed cash cycles in-store. This means that cash is minimally handled and instead the money is stored directly in an intelligent bank note storage system. closing the cash cycle speeds up the handling processes while also helping to place an extra layer of security over the process because automation limits the chance for human error. as a final step, banks should try to reduce the number of stages between the customer, bank and cash centre. This will not only help to reduce complexity but will enable the bank to cut down the number of times cash is handled and the cost of employing people to perform the task.
Simply put, if retail banks are slow to embrace creativity and innovation to gain a competitive edge, they may find themselves left behind. as new challenges emerge, those that survive will be the ones that have the technology and systems behind them in order to remain adaptive.
While the rise of new high street banks will undoubtedly change the retail banking industry, that change should be a positive one – even for long-standing financial institutions and their customers. Increased competition means more creativity and innovation to gain a competitive edge and that, in turn, means better overall service.
although no amount of crystal ball gazing can foresee what the market will look like in ten years time, there is little doubt that retail banking is at a pivotal point in improving its services and the way it delivers those services.
John ennis is banking director at Wincor nixdorf
Surviving the changing face of UK retail banking John ennis,
Wincor Nixdorf
44 I www.bankingtech.com
Industry columnMarch 2011
At the end of January, Hm treasury announced a suite of measures to increase consumer protection in the mortgage market. Increased
regulation of second charge mortgages; the selling on of mortgage books; and the tightening up of sale and rent-back regulations will, in theory, offer greater transparency and fairness to consumers.
So what are each of these measures, and will they help industry and consumers or just bring further regulatory burden? In this column I intend to look at each of the major stipulations in turn, assessing their impact on the UK mortgage market and the common practices in the sector.
Second charge lending can be a useful method of borrowing for consumers and has became popular over the last ten or so years for consolidating existing debts into one secured loan, thus reducing repayments although commonly extending the time period. To eliminate second charge lending altogether would be to do away with what is a practical way of borrowing for some people. It is the case though, that second charge lending is not subject to the same affordability assessments as first charge lending and that the combined loans can mean that people struggle to meet repayments.
The move by hM Treasury to require the regulation of second charge lending in a more formalised way is a welcome step for consumers and the industry. The separate regulatory frameworks previously in place for first and second charge lending came about for historical reasons, and never made much sense.
For consumers bringing the regulation of second charge lending from the Office of Fair Trading to the Financial Services authority (and its successor bodies) should mean a more streamlined regulatory process in the future. consumers will not need to be aware of two separate regulatory requirements and two separate methods of redress if things should go wrong, as was previously the case. consumers will also benefit from lender forbearance if they get behind on their
loan repayments, so they will generally have more flexibility and time to meet repayments under the new proposals then they have at present.
From the lender’s perspective, they will gain a degree of comfort that those who hold a charge of the same property as themselves will be subject to the same regulatory regime. at present mortgage lenders are subject to more onerous and stringent requirements under the Mortgage conduct of Business handbook overseen by the FSa, than second charge lenders supervised by the OFT. The incoming level playing field is a better arrangement.
Most consumers are completely unaware that their mortgage can be sold on to a separate unregulated entity by their lender without their knowledge. It seems untenable that an institution buying a mortgage book should not be subject to the same rules as the lender that granted the original mortgage, especially as the borrower has no say.
It is important for all firms that are responsible for administering mortgage books to be subject to the same level of regulation. It is anomalous for one section of the market to sit outside the FSa-regulated sector and unfair to the majority of lenders who go to great lengths to comply with the rules and exercise suitable forbearance. This step by the UK government will allow homeowners to benefit from a joined-up regulatory regime, FSa protection and consistent requirements for lender forbearance and complaints handling, which again is a welcome development.
The enhanced regulation of sale and rent back is essentially closing loopholes in the current legislation. Sale and rent back – where a distressed borrower sells their property to a company but remains in their home and rents if from the purchaser – has been regulated by the FSa since June 2010, but is subject to a ‘by way of business’ test. The ‘by way of business’ test was intended to exclude private arrangements – for example, selling a property to a family member or friend – from regulation. But this exclusion has been widely abused by businesses to avoid falling into the regulatory structure, so now all sale and rent back arrangements will be regulated by the FSa.
For many distressed borrowers, the decision to sell their home but continue to live there under different tenure must seem preferable than the alternatives. There have been many cases, though, of the purchase price falling substantially short of market value, large legal fees being levied and families being evicted once their initial assured shorthold tenancy agreement – sometimes as short as six months – has come to an end. The increased scrutiny of the sector by the FSa (and its successor bodies) should help to eliminate the rogue elements and make sale and rent back a viable option for those struggling to meet mortgage payments. Better and more transparent information should help consumers go into sale and rent back arrangements with their eyes open, rather than being unaware of the risks as can be the case at present.
Mutuals have a long-standing record of treating customers fairly and lending responsibly and so are supportive of a crackdown on those firms which take advantage of vulnerable consumers.
So in general, the enhancements in mortgage market consumer protection are a positive step forward for homeowners and lenders alike. One word of caution though; the cumulative weight of mortgage regulation is growing and is further increased by this initiative. With the break-up of the FSa (the Financial conduct authority will take over its consumer protection duties next year) and more regulation coming in from Europe, the timing of these important changes will be fundamental to the success or otherwise of the regulatory overhaul. We hope that the FSa will take the time to consult on how the regulation of second charge mortgages in particular will work and not rush into demanding regulatory compliance and fixing completion dates prematurely.
colette Best is mortgage policy adviser at the Building societies Association
Enhanced consumer protection in the mortgage market colette Best,
Building Societies association
www.bankingtech.com I 45
commentMarch 2011
the retail banking industry in the uK is undergoing a major period of change. For the first time in recent history, new retail banks are
appearing on the high-street and are seeking to shake-up the market. This surge is driven by consumer appetite for more options, something made clear in a recent survey by Deloitte that showed almost 35% of consumers wished that there were more banks to choose from, with only 10% saying they would be happy to bank with any of the large household brands.
as these new banks, such as the recently launched Metro Bank, begin to establish themselves as mainstays of retail banking, so the competition to win over the hearts and minds of customers heats up. although both new and traditional banks face challenges when it comes to wooing the public, the key to success remains the same: how do we serve our customers better?
changing of the guardMany traditional banks are in the process of completing IT facelifts. Take, for example, Barclays Bank’s flagship branches in London and Manchester, which are using technology to deliver an efficient, slick and modern banking experience to customers. This kind of innovation has become a critical factor for traditional banks that want to remain on a par with the new players.
Traditional banks have spent decades, even centuries, cultivating service offerings that perfectly suit their customer profile. In this regard, they are a step ahead of newer banks that are starting from scratch. Established banks know their specialist areas, have created the perfect customer environment and have positioned themselves as competitors in the retail banking space. yet even traditional banks see the need for investment in more innovative services and technologies. For instance, they are upgrading to more efficient and easy-to-use technology, such as self-service banking kiosks for front-of-house. These aTMs allow customers to perform many self-service activities that they previously would have had
to queue up to do at a counter, such as depositing cheques or reading about different services that bank offers. This means customers can get in and out of the bank quickly without having to waste time in queues. This is key if high street banks are to remain open – a study by the Payments council found that more than half of UK consumers bank or pay bills electronically purely to avoid having to queue.
however, when implementing new technologies, the challenge for some banks is that their complex legacy systems have been built up over many years, which makes adding modern IT systems to this all the more difficult.
In short, despite their experience in handling complex technology implementations, adopting the very latest innovations is more complex for traditional banks than it is for newly established banks. Newer banks like Metro Bank have far greater freedom because they aren’t tethered to legacy systems.
This ability to lead the way in technology is a vital way into the market for less-established banks. While traditional banks have built up customer confidence and loyalty over many years, newer banks simply don’t have this. Therefore, newer banks must do everything they can to innovate enough to attract these customers. They can build on the experiences of traditional banks but skip over the proven, though perhaps outdated, technologies to adopt systems that offer immediately improved services.
The problem for new banks is that opting for the latest and greatest technologies often means they have to charge higher interest rates than traditional banks because they are battling expensive start-up costs. although the eventual benefits this technology will bring will far outweigh any initial costs, it is vital that banks look for ways to become more efficient so that they can afford to lower their high interest rates on overdrafts and credit cards whilst still affording to implement the best IT systems.
a crucial way for these banks to increase efficiency is to look at ways to improve cash management techniques to reduce the money lost in the cash
cycle. according to our own research, banks spend 3% of every pound managing the cash cycle, representing a huge incentive for those banks to take action. There are three key areas where banks typically lose the most money during the cash handling process: staffing the cash centre, paying for cash-in-transit vans to transport money to the bank and maintaining security.
In order to optimise the cash cycle while maximising both efficiency and security, banks should begin by automating their cash handling processes and seek solutions to enable closed cash cycles in-store. This means that cash is minimally handled and instead the money is stored directly in an intelligent bank note storage system. closing the cash cycle speeds up the handling processes while also helping to place an extra layer of security over the process because automation limits the chance for human error. as a final step, banks should try to reduce the number of stages between the customer, bank and cash centre. This will not only help to reduce complexity but will enable the bank to cut down the number of times cash is handled and the cost of employing people to perform the task.
Simply put, if retail banks are slow to embrace creativity and innovation to gain a competitive edge, they may find themselves left behind. as new challenges emerge, those that survive will be the ones that have the technology and systems behind them in order to remain adaptive.
While the rise of new high street banks will undoubtedly change the retail banking industry, that change should be a positive one – even for long-standing financial institutions and their customers. Increased competition means more creativity and innovation to gain a competitive edge and that, in turn, means better overall service.
although no amount of crystal ball gazing can foresee what the market will look like in ten years time, there is little doubt that retail banking is at a pivotal point in improving its services and the way it delivers those services.
John ennis is banking director at Wincor nixdorf
Surviving the changing face of UK retail banking John ennis,
Wincor Nixdorf
smArtstreAm technoloGies
smartstream technologies delivers operational advantage to clients through enterprise-wide, real-time Transaction Lifecycle Management (TLM®) solutions that automate, track and control financial transactions and processes within and beyond the enterprise.
Built on SmartStream’s TLM Enterprise Control Architecture, TLM solutions provide greater transaction visibility to create exceptions-based operations capable of automating complex and high volume transaction flows. Operational risk and cost is reduced, while customer service levels are improved.
SmartStream is owned by Dubai International Financial Centre (DIFC) and has global operations supporting over 1,000 clients, including more than 75 of the world’s top 100 banks.
contActs:leon thomson on +44 (0) 203 377 3493 or email: [email protected]
tieto
tieto is an IT service company providing IT, R&D and consulting services. With approximately 16 000 experts, we are among the leading IT service companies in Northern Europe and the global leader in selected segments. We specialize in areas where we have the deepest understanding of our customers’ businesses and needs. Our superior customer centricity and Nordic expertise set us apart from our competitors.
Tieto Financial Services offers services, solutions and products to financial institutions throughout Europe. Our customers include major banks and financial institutions that have chosen us for our capability to take total responsibility for any assignment.
We enable Financial Institutions to utilize their business potential by combining our technology skills and deep financial industry knowledge with advanced Nordic customer behavior. Working with Tieto you get a reliable, committed long-term partner that helps you to industrialize your day-to-day IT-operations and get the most out of your IT investments.
tcs finAnciAl solutions
tcs financial solutions, a strategic business unit of Tata Consultancy Services, enables transformation in financial services through a holistic suite of solutions for firms in banking, capital markets and insurance, and diversified financial institutions. Each solution in the TCS BαNCS family runs as a scalable and robust service, integrated with existing enterprise infrastructures and technology architectures.
Our mission is to provide best of breed solutions that drive growth, reduce costs, mitigate risk and offer faster speed to market for 240+ institutions in over 80 countries.
TCS BαNCS is an integrated financial services platform. Its embedded transformation intelligence enables flexible, open and collaborative deployment and distribution of financial products and services.
TCS BαNCS aspires to be better than established benchmarks, which is why we’ve embedded an Alpha (“α”) consciously within our brand, to remind ourselves of the superior returns that we strive to deliver. Our ability to foster rapid time-to-market with new products allows organisations to transform themselves into nimble competitors with scalable offerings.
Our Co-Innovation Network is a true partnership for sharing best practices and innovation, and our ‘Experience Certainty’ mindset ensures the brightest of futures for all our customers.
For more information, visit www.tcs.com/bancs or contact us at [email protected]
About tata consultancy servicesTata Consultancy Services is an IT services, business solutions and outsourcing organisation with over 143,000 IT consultants located across the world delivering real results to global businesses through its unique Global Network Delivery ModelTM.
About sunGardWith annual revenue of $5 billion, SunGard is a global leader in software and processing solutions for financial services, higher education and the public sector. Visit SunGard at www.sungard.com Adaptiv SunGard’s Adaptiv provides enterprise-wide credit and market risk management and operations solutions for financial services institutions. Adaptiv assists institutions of varying size and complexity to deploy technology to meet both internal and regulatory requirements for risk management and operational control. Adaptiv helps financial services institutions from the banking, hedge fund, asset management, insurance and corporate sectors with its deep understanding of risk management and operational processes. www.sungard.com/adaptiv. front ArenaA trading solution serving a range of financial institutions, SunGard’s Front Arena solution provides straight-through processing by integrating sales and distribution functions, trading capabilities and risk management. Institutional asset managers and brokers, traders, and market makers use Front Arena to trade equities, fixed-income, interest rate derivatives, and credit. For more information, visit www.sungard.com/frontarena securities financeAround the world, $11 trillion in securities financing is managed on SunGard’s proven solutions for international and U.S. domestic securities lending and repo for over 250 clients. Through our Loanet, Global One, Martini and Astec Analytics products and services, we provide comprehensive business solutions and information with worldwide reach for equities or fixed income securities financing Contact: [email protected]
Accuity is the world’s leading provider of international payment routing data and AML screening software enabling banks and corporations to maximise payment efficiency and ensure AML compliance.
Our Payment solutions help maximise rates of payment STP and with our recent acquisition of CBNet, we are now the only company to source all payment data, including SSI’s, SWIFT/BICs and National Bank Codes directly from the authoritative sources.
Our compliance suite includes the world’s first compliance filtering engine, introduced in 1994, as well as a range of caution lists and screening solutions that provide a prime defence against participation in illicit financial activities, such as money laundering.
Our strategic services Group provides deployment, consulting, training and integration services. We are experts in reducing False Positive rates and helping improve rates of Payment STP.
visit www.Accuitysolutions.com/bankingtech to sign up for a free trial of any of our industry-leading solutions.
Accuity
PeterevAns
peterevans is a leading independent provider of front to back office solutions for the financial services sector. Clearly focused on the securities and investment market petervans has more than 23 years of experience of providing solutions to this sector.
xanite, peterevans new suite of products, offers a configurable, fully integrated, browser based, comprehensive front to back solution that can be either deployed as a single application or integrated as components into your existing platform. Each of the xanite modules can de delivered via an ASP or self-hosted. Covering wealth management, custody, corporate actions, clearing and settlement, private client and on-line stock broking with full operational and administrative support for the front, middle and back office. xanite gives full but controlled access to clients, portfolio, fund and relationship managers, brokers, middle and back office staff – on line anywhere in the world and provides a modern and flexible platform for expanding future business and revenues.
clear2Pay is a payments modernisation company that actively supports global financial institutions to meet their payments unification goals through its pure SOA Open Payment Framework (OPF). The company facilitates financial organisations in their provision of payments services across the entire value and process chain: Card, ACH, Branch, Bulk, High Care and International Payments. Clear2Pay also offers solutions and services such as e-Banking, the Open Test Platform, ChargeBack, Consultancy and Training. Clients include financial institutions such as ING, Banco Santander, Crédit Agricole, VISA, MasterCard, BNP Paribas, The Federal Reserve, NETS (Denmark), The People Bank of China (PBOC), Rabobank, The Co-operative Financial Services and Commonwealth Bank. Clear2Pay operates out of 14 countries and employs over 650 staff. In 2011 the company won the XCelent Customer Base 2010 award. For more information, please visit www.clear2pay.com.
New Broad Street House35 New Broad StreetLondonUnited KingdomEC2M 1NHEmail: [email protected]: +44 (0) 2920 402200Web: www.peterevans.com
orc softwAre
About orc softwareOrc software (SSE: ORC) is the leading global provider of powerful solutions for the worldwide financial industry in the critical areas of advanced trading and low latency connectivity. Orc’s customers include leading banks, trading and market-making firms, exchanges, brokerage houses, institutional investors and hedge funds. solution DescriptionOrc Trading and Orc Connect provide the tools for making the best trading and connectivity decisions with strong analytics, unmatched market access, powerful automated trading functionality, high performance futures and options trading capabilities, ultra-low latency and risk management.
Advanced trading solutionsorc trading applications■ Orc Trading for algorithmic trading■ Orc Trading for arbitrage■ Orc Trading for market making■ Orc Trading for risk management■ Orc Trading for warrants market making■ Orc Trading for volatility trading
orc connect applications■ Orc CameronFIX for FIX to FIX routing■ Orc CameronFIX for FIX integration
fidessa group is the leading supplier of multi-asset trading, portfolio analysis, decision support, compliance, market data and connectivity solutions for firms involved in trading the world’s financial markets.
Fidessa’s products and services are used by over 85% of tier-one, global financial institutions and, uniquely, serve both the buy-side and sell-side communities.
Fidessa’s global network carries $640 billion of flow a month covering DMA, Care and Algorithmic orders, IOIs and FIX Allocations between over 2,400 buy-sides and 530 brokers across 130 markets worldwide.
Headquartered in London and with operations across Europe, North America, Asia and the Middle East, Fidessa supports over 25,000 users across 850 clients, serving a broad spectrum of customers from major investment banks and asset managers through to specialist niche brokers and hedge funds.
Fidessa group is listed on the London Stock Exchange, is a FTSE 250 company, has a turnover of around £240 million and employs 1,500 people globally.
FidessaOne Old Jewry London EC2R 8DNTel:+44 (0)20 7105 1000Fax:+44 (0)20 7105 1001Email: [email protected] Web: www.fidessa.com
www.bankingtech.com
smArtstreAm technoloGies
smartstream technologies delivers operational advantage to clients through enterprise-wide, real-time Transaction Lifecycle Management (TLM®) solutions that automate, track and control financial transactions and processes within and beyond the enterprise.
Built on SmartStream’s TLM Enterprise Control Architecture, TLM solutions provide greater transaction visibility to create exceptions-based operations capable of automating complex and high volume transaction flows. Operational risk and cost is reduced, while customer service levels are improved.
SmartStream is owned by Dubai International Financial Centre (DIFC) and has global operations supporting over 1,000 clients, including more than 75 of the world’s top 100 banks.
contActs:leon thomson on +44 (0) 203 377 3493 or email: [email protected]
tieto
tieto is an IT service company providing IT, R&D and consulting services. With approximately 16 000 experts, we are among the leading IT service companies in Northern Europe and the global leader in selected segments. We specialize in areas where we have the deepest understanding of our customers’ businesses and needs. Our superior customer centricity and Nordic expertise set us apart from our competitors.
Tieto Financial Services offers services, solutions and products to financial institutions throughout Europe. Our customers include major banks and financial institutions that have chosen us for our capability to take total responsibility for any assignment.
We enable Financial Institutions to utilize their business potential by combining our technology skills and deep financial industry knowledge with advanced Nordic customer behavior. Working with Tieto you get a reliable, committed long-term partner that helps you to industrialize your day-to-day IT-operations and get the most out of your IT investments.
tcs finAnciAl solutions
tcs financial solutions, a strategic business unit of Tata Consultancy Services, enables transformation in financial services through a holistic suite of solutions for firms in banking, capital markets and insurance, and diversified financial institutions. Each solution in the TCS BαNCS family runs as a scalable and robust service, integrated with existing enterprise infrastructures and technology architectures.
Our mission is to provide best of breed solutions that drive growth, reduce costs, mitigate risk and offer faster speed to market for 240+ institutions in over 80 countries.
TCS BαNCS is an integrated financial services platform. Its embedded transformation intelligence enables flexible, open and collaborative deployment and distribution of financial products and services.
TCS BαNCS aspires to be better than established benchmarks, which is why we’ve embedded an Alpha (“α”) consciously within our brand, to remind ourselves of the superior returns that we strive to deliver. Our ability to foster rapid time-to-market with new products allows organisations to transform themselves into nimble competitors with scalable offerings.
Our Co-Innovation Network is a true partnership for sharing best practices and innovation, and our ‘Experience Certainty’ mindset ensures the brightest of futures for all our customers.
For more information, visit www.tcs.com/bancs or contact us at [email protected]
About tata consultancy servicesTata Consultancy Services is an IT services, business solutions and outsourcing organisation with over 143,000 IT consultants located across the world delivering real results to global businesses through its unique Global Network Delivery ModelTM.
About sunGardWith annual revenue of $5 billion, SunGard is a global leader in software and processing solutions for financial services, higher education and the public sector. Visit SunGard at www.sungard.com Adaptiv SunGard’s Adaptiv provides enterprise-wide credit and market risk management and operations solutions for financial services institutions. Adaptiv assists institutions of varying size and complexity to deploy technology to meet both internal and regulatory requirements for risk management and operational control. Adaptiv helps financial services institutions from the banking, hedge fund, asset management, insurance and corporate sectors with its deep understanding of risk management and operational processes. www.sungard.com/adaptiv. front ArenaA trading solution serving a range of financial institutions, SunGard’s Front Arena solution provides straight-through processing by integrating sales and distribution functions, trading capabilities and risk management. Institutional asset managers and brokers, traders, and market makers use Front Arena to trade equities, fixed-income, interest rate derivatives, and credit. For more information, visit www.sungard.com/frontarena securities financeAround the world, $11 trillion in securities financing is managed on SunGard’s proven solutions for international and U.S. domestic securities lending and repo for over 250 clients. Through our Loanet, Global One, Martini and Astec Analytics products and services, we provide comprehensive business solutions and information with worldwide reach for equities or fixed income securities financing Contact: [email protected]
... goes to Peter ayliffe, chief executive of Visa Europe, who gave a very good speech to the FS club last month at Lloyds of London entitled ‘The cashless Society’. To illustrate his point, ayliffe screwed up a £20 note and threw it off the stage. This was then followed by his plastic cards and then his entire wallet as he went on to outline the attractions of mobile e-wallets, online e-commerce, mobile contactless payments and all the other attractions of a cashless society.
“cash is my competitor. I get pleasure from seeing the amounts of cash used going down and I don’t like to see customers using our cards to visit aTMs,” he declared. ayliffe also outlined his hopes for the Olympic games in London in 2012, which Visa is sponsoring of course. “You can come to the games and you will not need cash,” he said, referring to the contactless ticketing, travel and on-site purchasing plans. “Indeed, by the end of 2012 you could live in London without any cash at all, if you so wished,” he added, referring to London Mayor Boris Johnson’s announcement that the Transport for London transportation network will accept contactless bank cards by then.
Thankfully, ayliffe didn’t get too carried away though and start declaring the ‘death of cash’, as so many others have. “I’m not saying that there won’t be cash in the future, there will, but if you decided you didn’t want to use it then that would be possible.” Perhaps a sensible qualification in a barn-storming performance. BT
“Art for art’s sake, money for God’s sake,” sang 10cc back in the 1970s. Most bankers would probably prefer
the latter, so hats off to Deutsche Bank, which has made room for the work of 60 different artists to exhibited on
60 floors of the towers of its modernised group head office in Frankfurt. When it first moved into the towers in the 1980s, the bank dedicated each
of the floors – arranged according to the five business regions of the bank – to one of the artists. These days it is a global bank, so it has gathered 1,500 drawings, collages and photographs created by around 100 artists from more than 40 different countries, that are intended to be a “revitalised and more international presentation of works … depicting a unique cross-section of global contemporary art”. BT
Showman of the month award ...
Getting in the picture
Global Crossing to run Swift networks … Corporate treasurers want online banking services … Clearnet sole CCP for Euronext … consolidation in online bond trading platforms … ASP – A Solution in Search of a Problem?
Exchanges fear competition from new rivals … work begins on cheque imaging in UK … Toronto Stock Exchange implements platform from Paris Bourse … London Stock Exchange reveals plans for electronic trading platforms … UK set for national smart card roll-out …
Banks fear Swift II delays … Report says European banks are facing a tough decade … Bank of America says IT spend is hard to justify … UK’s deregulated building societies spend on technology as they line up against the banks …
