Post on 25-Dec-2015
3A.T. Kearney /SCB/IT Vision
What’s Hot in IT?
SOAWeb Services
Web 2.0
Memory DB
Green IT
Cloud Computing
Open Source
SaaSUtility Computing
SEAP, XTP
4A.T. Kearney /SCB/IT Vision
What’s Hot in IT?
Point of view-Just Personal interesting?
-Technological advancement?
-Industrial aspect?
-From the $$ point of view? – Business, Personal
5A.T. Kearney /SCB/IT Vision
Who are you?
- Researcher/Professor
- CEO/CSO/CTO/CIO/COO
- Engineer
- Law Maker/Politician/Regulator
6A.T. Kearney /SCB/IT Vision
Industry Domain (1/2)- Government
- Banking & Finance
- Professional Services
- Insurance
- Manufacturing
- Information Technology
- Health Care
- Education
- Utilities
- Transportation
- Telecommunications
- Retail
- Energy
- Consumer Products
- Pharmaceuticals
- Media
- F&B
- Electronics
- Constructions & Engineering
- Metals & Natural Resources
- Hospitality & Travel
- Chemicals
10A.T. Kearney /SCB/IT Vision
Customer centricity is the dominant theme
1. Industry consolidation – emergence of pan-European and pan-Atlantic institutions
2. Commoditization – little scope for game-changing innovation and low barrier to entry
3. Relentless focus on customers – service seen as point of differentiation
— focus on analytical techniques to drive advocacy
— Channel integration to allow ‘one view’ for customers and banks
— preference for best of breed self-evaluation, customer service, product customization etc.
4. Competition from non-traditional sources – especially in payments as well as retailers
5. SME integration – bundled products, pricing, dedicated platforms, non-traditional offerings, supply chain and payment integration
11A.T. Kearney /SCB/IT Vision
Innovation is at the detail level and importance is on execution
1. There are no break through technologies that will change the landscape – it is not a game of big-strokes
2. Developments at three levels
— Customer interface. Biometrics, convergence and divergence of channels and integration
— Products. Bundling, customization, pricing, etc
— Operations. Six sigma, shared services, offshore, etc
— Technology. Focus on managing “change versus run” the bank investments
3. Exception is cards and payments
— ‘War on cash’
— Nearly 40% of revenue and moving from engine room into profit center
— Innovation on multiple fronts: contact-less, pre-paid, mobile payments, etc
— Alternatives such as PayPal, ‘DebitMan’ etc
12A.T. Kearney /SCB/IT Vision
high
medium
low
low medium high
Ease of implementation
Strategic Value
CRM
There are too many new technologies – where and when to invest is the complexity
IT Value Matrix
Consolidatedstatements
Personalized, location based
offeringsStraight Through
Processes
Multi Channel
Real-timebalances
Contact less payment
Biometrics
SOA
BPMCorporate
Performance Management
Electronic invoicing
e-FormCheck image exchange
Note: Selected emerging technologies
Contact less payment
RFID
Handwritingidentification
Security tokens, mobile
TAN
OnlinePayment
Technology experiencebranches
MobilePayments
13A.T. Kearney /SCB/IT Vision
Global investment trends are more towards back office process management and intelligence
North America IT Investment Trends
Note: Data Monitor13
0%
10%
20%
30%
40%
50%
60%
70%
Fraud/ securityinitiatives
Back officeconsolidation (e.g.general ledger/ HR)
Compliance/ riskmanagement
Online channelsrefresh/ upgrade
Multi-channel platform/integration
Product origination/servicing automation
Per
cen
tag
e R
esp
on
den
ts
2007 2006 2005
BPM/ processintelligence
Core product systemsre-engineering/replacement
Branch systemsrefresh/
transformation
Electronic payments Enterpriseinfrastructure
consolidation/enhance(e.g. BPM)
What are your top 3 IT projects (in terms of investment) for 2007?
15A.T. Kearney /SCB/IT Vision
Future Of Services And Distribution
• New Service Propositions― Trusted advisor (‘Brand protection’ – to provide quality assurance, reduce risk related
to dealing with third parties)― Extensive self-service and anticipated service
– Customised research, updates filtered by client portfolio– Real time net worth – Portfolio alerts e.g. 5% change in your stock price
― “Organic” (heuristic) customer modeling - Customer behavior/predictive modeling to better understand their needs (Profile of one)
• New Distribution Approaches — Coordinated use of all channels, including 3rd parties (aligned to customer
profitability/preferences; holistic view of customer in each channel; …— Accessible via any device- always on, always there— Many points of presence leveraging own and third party infrastructure for low cost
improved experience
Elements of Vision
Financial Services Value Chain – Elements Of The Future VisionCustomer
Customer Service & Distribution
Processing and Administration
Product Development/
Packaging
Future banks will need to prepare to be the financial aggregators providing anytime anywhere access
Fraud Protection
16A.T. Kearney /SCB/IT Vision
Customer relationship management is essential to meet increasingly complex needs
Focus oncustomer
groups
Customer RelationshipManagement
Interaction atcontact point
DirectMarketing
TraditionalCustomer Service
MassMarketing
• Individualized mass communication
• One-way and action-oriented• No real customer relationship
• Good understanding of customer needs
• Solutions tailored not only for segment but for individual
• Leveraged customer information
• No segmentation with regard torequirements and service levels
highlow
low
high
Solution
Solution
• The informed customer has increasingly complex needs
• Effective leveraging of customer information has become essential to retain customers through offering a highly personalised service
Need for effective CRM
Future Of Services And Distribution
17A.T. Kearney /SCB/IT Vision
Proliferation of channels and devices is enabling greater accessibility and customer self service
PCs
PDAs
Games Consoles
iTV
Remote Channel Access Devices ATMs
Call Centre
Third Party Channels
(e.g. Ezybank)
eBranches
Bricks and MortarAccess Channels
Kiosks
New BranchTypes
Increased accessibility and
customer self service
opportunity
Mobile Phones
Numerous emerging technology are being considered to increase customer accessibility
Future Of Services And Distribution
18A.T. Kearney /SCB/IT Vision
Self service automation has continuously been innovated - GE in Japan has automated credit approval with Automated Credit Machines
Product Concept
• Automated Credit Machines allow instant consumer loan application
• Network of 934 unmanned branches with 1,284 units of ACM (Unmanned Contract Machines)
• Machine allows submission of documents
• Credit approval given within 15 minutes
• Withdrawal of cash at own and other ATMs across Japan (>40,000 buildings)
Source: A.T. Kearney analysis; Company websites
GE Japan - Automated Credit MachinesExample
Future Of Services And Distribution
19A.T. Kearney /SCB/IT Vision
While on the traditional branch channel, modern technologies will be integrated to improve customer experience and enhance sales
CRM in Service Area
Advisor notification when customer in self service area
Video Conferencing
POS Marketing
Document Digitising
Integration of Self Service & Service
Area
Card based customer
identification
Branch Architecture
Service Desk Design
Digital Order Authorisation
Service Front-End
STP & Order Tracking
Source: Deutsche Bank
RFID recognition – pre-empts service /
product requirements
Mobile PC tablets for customer assistance
Future Of Services And Distribution
Deutsche Bank Branch Technology
20A.T. Kearney /SCB/IT Vision
Alternative channels have gained more recognition - Banks are offering customers individual, attractive and demand-oriented solutions via mobile
Quite a few retail banks are entering the mobile services market again with demand-oriented offers
Prepaid loading: customers can load their prepaid mobile cards directly via the transactions portal. The amount is booked directly from the account.
Push services: The customer can select individual criteria on the transactions portal according to which he receives result-based news via SMS. Example: M-TAN of the Postbank, result-based trigger, e.g. for receipt of cash or order execution, news services, SMS marketing
Benefits for bank: Differentiation in the market Purely electronic processing Proceeds for prepaid
loading Effective advertising of re-
entry into mobile services
Benefits for customer: Value-added services Easy-to-use functions Flexibility
Alternative Channels – Mobile Solutions
Future Of Services And Distribution
21A.T. Kearney /SCB/IT Vision
ABN AMRO deploys instant messaging to promote external collaboration with customers and partners
ABN AMRO deployed MindAlign IM to allow bank staff to collaborate externally with clients and partners, as well as internally within the organization
• IM to help the company to trade and sell more effectively, and to reduce its reliance on e-mail, which is more expensive, slower and less secure
• MindAlign rolled out to 2,500 staff in over 45 countries. The solution allows staff to disseminate information gleaned from in-person and telephone conversations in real-time to business clients, partners and colleagues
• ABN AMRO also uses IM to deliver research reports at regular times during the day. The solution allows groups of staff to communicate and collaborate on projects in realtime, and employees to create user communities pertaining to their own responsibilities.
• In addition, MindAlign preserves unstructured information through archiving and metadata access. Bank executives expect the solution to provide instant benefits to the company, increasing revenues by allowing staff to share information, news and documents in real time, and reducing costs by decreasing e-mail volume.
Alternative Channels - Instant Messaging
Future Of Services And Distribution
22A.T. Kearney /SCB/IT Vision
Contact less payments by using RFID becomes popular and is offered by several devices and vendors
RFID (Remote Frequency Identification) chips are getting integrated in various devices
They allow identification fast and contact less
The three major credit card vendors are offering smart cards and key toddles
• American Express: Express Pay
• Mastercard: PayPass
• Visa: Contactless
Special applications are toll and parking payment or gas station payment beside shopping
To avoid carriage of several cards and devices RFID chips are getting embedded in mobile phones and provides payment functionality
Next step will be biometric identification making devices redundant
Contact Less Payments
Future Of Services And Distribution
23A.T. Kearney /SCB/IT Vision
For business customers, Schwab has successfully automated trading and routine enquiries, and is adding further value through client advice and technological innovation
Source: Schwab Website; Schwab Press Releases; A.T. Kearney ResearchWebsite: http://www.schwab.com
• Pursuing a “clicks and mortar” touch point strategy:— Utilises physical branch, phone and web based distribution channels to maximise customer channel choice— And integrate “high tech” with “high touch”
• Using branches for customer acquisition, customer advice and facilitating transactions:— Offering segmented branch services
– Standard branches offer "Portfolio Consultation" which provides a service where investors can walk off the street into branches and get their existing portfolio analysed
– The invitation-only "Signature Service" branch offices provide services for high-end accounts beginning at $1 million
— Branches remain an important customer acquisition point with 70% customers acquired through branches
• Continuing to leverage technology to automate services:— Very successfully automated trading and routine inquiries to the internet with immediate confirmation of trades— Automating advice guidance to free up advisers to focus on providing higher value consultation:
– “Portfolio Checkup” is an on-line asset-allocation planner based on an investors tolerance for risk; – “Sell Analyser” is an online tool that evaluates the cost basis of the portfolio and recommend which to sell for tax
losses; – “Portfolio Tracker” allows investors to benchmark portfolios against standards/ indexes and identify under
performing segments— Introduced “Schwab Learning Center” – an interactive web based application to educate clients on investment— Introducing trading services via mobile phones using WAP technologies: Transmitting content (real time information)
to hand held devices via “Pocketbroker” — Launching an account aggregation service powered by Yodlee: Allowing investors to aggregate their on-line financial
information from a variety of sources such as brokerages, banks and credit card companies at no extra cost
Future Of Services And Distribution
24A.T. Kearney /SCB/IT Vision
Future Of Product Development
Customer
Vision For A Future Financial Services Value Chain —Summary
Cost effective mass-customisation
• From simple pre-packaged offerings to integrated solutions comprising information, education and product, made up of the same building blocks
Least-cost wholesale components
• Wholesale components made up of tradeable risks and pre-defined processing activities (borne by players with appropriate capital structure and risk management processes) form the basis from which products are configured
Contracts for comprehensive range of financial facilities
• Multi-purpose cash-management offer for full product flexibility
• Holistic optimisation of credits and investments (integrated cross-sectoral products)
• Family asset management offerings - “ Aggregation of family portfolio to deliver benefits - IR, offset savings etc” - tie into kids
• Lifecycle financial assets management offerings - “Product changes to meet your lifecycle requirements”
Elements of Vision
Mass-customization concepts will reshape the product development and asset management functions
Customer Service & Distribution
Processing and Administration
Product Development/
PackagingFraud Protection
25A.T. Kearney /SCB/IT Vision
Conceptually, banks will mass-customise their offers by flexibly combining least-cost components supplied by large-scale wholesale manufacturersOverview Of Concept
Retail Capabilities to be Developed
• Unbundle products into components
• Price and service each component
• Integrate components and develop modular products meeting specific needs in a timely manner
• Interface with third party/private label product providers
• Manage permissions to enable cross-product collaboration
Customer A Customer B
Unbundled Product
Component
Mass-Customisable
Bundled Products
• End State— Flexible solutions builder able to adapt to changing rules,
product needs and system growth— Customisable products that can be built to suit individual
customer needs
Wholesale Capabilities to be Developed
• Determine standard components and minimise cost, sourcing as necessary from regional/global scale based players
• Continuously refine funding need by converting capital held in the Asset/Liability Management function into “Tradable Risks”, sourced externally in accordance with Basel II principles
Future Of Product Development
26A.T. Kearney /SCB/IT Vision
12 Different Savings Accounts
An early version of a ”mass-customised product offer” has been successfully implemented by Woolwich in the U.K.
Chequing Account
Home-Equity
Secured Credit Facility
Delivery Channels
Channel Integration Layer
Homeowners Insurance
Note: (1) Funds are automatically taken from chequing account each evening and deposited into chosen savings account to maximise interest earned
Sources: Tower Group, A.T. Kearney analysis
Overdraft Protection
The Woolwich Open Plan Product
• Product launched in 1999 — by end of 2000, 500,000 customers had applied• Reduced costs and increased customer service as multiple products consolidated in one monthly statement• Has assisted in migrating customers to electronic delivery channels by enabling WAP and Web TV access• Provided customers with access to certain products (e.g., home owner insurance) from online channel that was not previously
available
ABMWireless -
WAPWeb TV
BranchInternet Banking
IVR
Automated Sweep
Functionality(1)
Mutual Funds
Visa Card
Future Of Product Development
27A.T. Kearney /SCB/IT Vision
A look at citiBank's customer life-cycle management tools in Germany and the US reveals leading approaches
Citibank: Customer Life-Cycle Management
• Since early 2002, the core banking product business has been led by the Financial Needs Analysis (FNA)
• citiBank has developed the FNA to leverage the customer's financial background to tailor individual offers
• citiBank uses advanced scoring techniques to use that data to help citiBank identify appropriate customers and to align them with the proper product and delivery channel
• In early 2003, approximately 60-70% of citiBank's customers had completed an FNA with positive early feedback
• All new incoming customers are required to complete an FNA
• Repetition of financial needs analysis planned at regular intervals
in Germany: Financial Needs Analysis
• Credit card holders information is stored in data warehouses and used to create individual recommendations at inbound (and out-bound) calls, e.g. a customer who has been flying lately may be offered extra baggage insurance
• Detailed personal data such as usage patterns of credit cards, demographics and recent offers by Citigroup are used to make individual offers
• Only customers who fit certain profiles calculated by massive data systems are given a sales pitch
• A sales pitch increases time of inbound call (three minutes) by 30-40 seconds
• About 20% of the goods and services offered are purchased by the customers
• As a result, Citigroup estimates that its credit card service centers are bringing in 115-120% of their expenses through transforming account maintenance calls into up- and cross-sales
in the US: Database recommender systems
Source: A.T. Kearney analysis
Future Of Product Development
28A.T. Kearney /SCB/IT Vision
SME needs Technology Requirements
Consolidated transactional data by
expense type (not account number)
Single direct feed of all financial data into
quicken
Summary of all account level data
Balance Sheet of all my holdings
Cashflow statements that identify my
rolling position over the month
Predictive modeling of impending
cashflow / limit issues
Information on how to optimise my
financial holdings
Data on how my organisation is performing v.
competitors and how I can bridge the gap
Alignment of my financial reporting with the taxation /
regulatory reporting I must provide
For business banking customers, the ability to provide value added consultative advice to optimize customer financing needs is a winning strategy
Wealth Creation
-
50,000
100,000
150,000
200,000
250,000
1995 1996199719981999200020012002200320042005 2004 Net Changes 2005
Mortgage pay down
Property
appreciation
Investment Growth
Savings Growth
Cash Flow
-
1,000
2,000
3,000
4,000
5,000
6,000
Jan-04 Feb-04 Mar-04 Apr-04 May-04 Jun-04 Jul-04 Aug-04 Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05
Redraw utilised for short term
need
Use of Credit Card for longer term debt meant
excessive interest charges
Suggest paying down debt during forecast low
expenses period
Forecast
Repayment Status
Movement of your
personal loan balance
onto your credit card will
save you ~$3000
Making your redraw
facility your primary
transactions account
has the potential to yield
and incremental $2000
Scenario A
Scenario B
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Original Schedule
Current Trajectory
Scenario A
Scenario B
• Supply chain integration with customers, providing insourcing working capital management with following:
• Transactional functionalities - currency reorder, report distribution, account aggregation over and above the standard functionalities
• Payment functionalities - check imaging, electronic bill presentment, wire transfers, etc.
• Integrated online representing whole of customer position and transaction history (across geographies, products, etc.) including consolidated limit management
• Solid foundation for STP and end-to-end process efficiencies with next generation of information services and intelligences
• Hosting options as many mid-tier customers do not have the in-house IT presence to manage and maintain packaged solutions
• Open-source architecture that enables the bank to customize the solution and integrate it with other customer-facing products so that customer information flows seamlessly from one solution to another
Future Of Product Development
29A.T. Kearney /SCB/IT Vision
Various international banks have already offered integrated supply chain solutions to customers
Supply Chain Solution Examples
• Standard Chartered worked with Tata Motors in supply chain services whereby the bank are able to access data all along the supply chain (e.g. movement of the vehicles) and able to have direct monitoring of the dealers' retail sales and their cashflow position
• JP Morgan has taken a toolbox approach making possible several combinations of products to create the right individual client solution
• Products range from purchase order management to supply chain finance
• Using the Bank’s modular technology platform allows trading partners to mix and match services to unique customer needs.
• Citigroup provides a single point of contact and streamlined access to cash management and trade services and a common web-banking platform
• With CitiDirect® Online Banking, Exporters can track and transfer LC and amendments online; create export LC presentation letters; monitor transactions – or outsource these processes to Citigroup
• Both importers and exporters can customize authorization, integrate systems to upload data to their treasury applications or Enterprise Resource Planning (ERP) system
• ABN Amro’s MaxTrad PO Manager automates the administrative tasks on both the buyer and seller
• It covers the entire process from electronic delivery of a purchase order for online supplier review and approval, submission of supplier documents, invoice comparison, electronic discrepancy reports, and images of documents related to the transaction to reconciliation and payment
• By connecting to corporates’ back offices and downloading PO data, the bank is then able to distribute that information to corporates’ suppliers through a common message platform
Future Of Product Development
30A.T. Kearney /SCB/IT Vision
Future Of Processing
Customer
Future processors will drive the development of industry solutions and greatly increase automation and Straight-Through-Processing
Vision For A Future Financial Services Value Chain —Summary
Full integration of value chain• Maximised use of STP, electronic interfaces, and expert mgt of 3rd parties involved in the end-
to-end process (titles offices, settlement process, valuations, verifications, registrations, etc)― Full acceptance of e-forms/signatures/external party interactions― Real time decisions with business rules
Least cost, maximum flexibility• Full access to product engines and enhanced rules• User configurable enablement (Business Process Management)• Utilization of VoIP as integrated communication infrastructure to manage increased voice and
data traffic economically and with scalability as well as increase users’ convenience• High performance processing system infrastructure with low costs, flexibility and stability (e.g.
emerging utility computing)
Elements of Vision
Customer Service & Distribution
Processing and Administration
Product Development/
PackagingFraud Protection
31A.T. Kearney /SCB/IT Vision
Disaggregation will allow competition and collaboration
Financial Services Value Chain
Sales and Marketing and
Distribution
Asset and Capital
Management
Administration and Service
Product Development
and Packaging
Retailers
Niche Sales Organisations
• IFA
• Accountants
• Tax advisors
Specialist Manufacturers
• Mutual Funds
• Debt Aggregator
• Insurance Co
Utilities
• Check Processing
• Mortgage Processing
• Card Processing
Regional/Global Wholesalers
• Wholesale Funds
• Re-insurance Providers
Niche Sales Organisations
• Mortgage Brokers
• Stock Brokers
• Insurance Brokers
Utilities
Payment Providers
Financial Institutions as financial aggregator will need to develop capabilities to interface with these emerging ‘specialists’
Future Of Processing
32A.T. Kearney /SCB/IT Vision
Integration of an extended value chain will lead to substantial improvement in throughput
Secured Lending System• Decision rules• Workflow
Review Security Quality• Housing/Land Register
Titles register exists, value register does not in most cases― 30% simple cases― 50% some review
required (building restrictions, cross ownership,…)
― 20% complex cases (strata titles, sub-divisions,…)
Coding and application of business rules to increases automation
• Can be extended to any security/any environment― Livestock register— Financial Instruments― …
Manage transfer conditions• Authentication of
involved parties― Biometrics, digital
certificates• Assess transfer
conditions (contract terms, single/multi-party ownership,…)― Coding and
application of business rules, pre-certificationSettlement
• Settlement authority pre-determined (e-signatures)
• Payment flows in existing transaction systems
Stamping• Registration and duty
paymentAutomatic
Example: Security Lending (e.g. Home Loans)
Future Of Processing
33A.T. Kearney /SCB/IT Vision
Business Process Management (BPM) allows the business users to manage processes without the IT department
Opera-tional data
Security &
Directory Services
Work items & work list
Third party applications & automated
activities
BPM System
Execution engine
Process designer
Activity monitor
Process definition
UpdatesInstantiates
Defines
Accesses
Persists
Validates
InvokesGenerates
Business Process Management products gives the business users the ability to create customized applications and auto-mate processes
These tools allow users to design, execute, and monitor processes by themselves without the IT department
The BPM cycle of design execution and monitoring provides direct feedback to process modifications
They provide a graphical interface similar to Microsoft Visio for easily building processes by linking together different objects.
BPM processes can be executed to interact with both employees and systems
BPM saves time and money
Future Of Processing
34A.T. Kearney /SCB/IT Vision
Several banks have realized impressive benefits by using Business Process Management
DZ BANK Reduction turn around time of personal loans by 70%
Allianz Efficiency improvement at accident regulation by 80%, ROI after 6 month
Citibank Reduction of failure rate by 80%
Barclaycard Origination of credit cards in 18 minutes
Volkswagen Bank Reduction of run times of all changed processes by more then 50%
Future Of Processing
35A.T. Kearney /SCB/IT Vision
Increasing uses of VoIP will enable conveniences and savings
VoIP Deployment
Implementation Examples
Lloyd’s of London completed the implementation of a $2 million VoIP system and anticipated $5.7 million in total savings over four years
– VoIP allows data and voice to be transmitted over a single cable, and enable users to play voicemail on their PCs.
Bank of America decided to migrate from PBX to VoIP, replacing more than 500 legacy PBX systems and deploying 180,000 IP phones on users’ desks
– Based on the evaluation, the bank segregated VoIP into two categories - VoIP infrastructure services (VIS) and VoIP application services (VAS)
– The deployment of VoIP was done in phases – first at its branch and corporate offices, and then at its call centers, and commodities and stock trading offices
– VIS and VAS enable the bank to consolidate its voice and data staff within the IT department
– Post-deployment, the company reports significant reduction in telephony costs and enhanced employee productivity
Source: NetworkWorld Financial Sector Technology
Future Of Processing
36A.T. Kearney /SCB/IT Vision
Industry Analysts suggest that the Utility Compute market will be largest offering for ICT suppliers by 2010
Offering Evolution - ICT
Time
Market Penetration Basic ConnectivityOptimised Infrastructure
Optimised Network
Messaging
SecurityMobility
IPT
Asset Oriented Mobility
Utility Compute
Managed Storage
Managed Server
Managed Hosting
Managed Apps Performance
Managed Applications
Network Mgt & Professional Services
DecliningGrowth / EmergingInnovative
Notes: (1) Diameter and darkness of bubble indicates size of 2010 marketSource: IDC
Future Of Processing
37A.T. Kearney /SCB/IT Vision
Elements of Vision
Financial Services Value Chain – Elements Of The Future VisionCustomer
Customer Service & Distribution
Processing and Administration
Product Development/
Packaging
Fraud protection and compliance has gained significant attention over the past few years
Fraud Protection
Stronger, more reliable authentication tools• Use of new technologies such as biometrics and smart cards to improve customer
authentication – financial institutions worldwide spent US$15 billion in information security projects in 2005― Biometric technologies include finger scanning, iris recognition, retina recognition,
facial, signature, voice recognition― Smart cards, security tokens, anti-phishing solutions are deployed to enable dual-layer
authentication systems
IT Solutions to automate compliance processes and mitigate compliance related risks• Basel II compliance management systems, internal-rating based credit system for grading
loans
38A.T. Kearney /SCB/IT Vision
Modern security devices are improving the authentication of customers and the security of remote transactions
HSBC Australia is providing all of their retail customers a security device for internet banking
The small devices constantly generate one-time numeric codes that are required to authenticate third-party transfers and bill payments online
The code allows two-factor authentication – customer identification by a password and something else (a token, or biometric identifier such as a fingerprint)
Costs for the tokens are $ 1.5 mil. and customer will not be charged
Westpac already provides the devices to some of its business customers for a monthly fee of about $5. Most Bendigo Bank customers can choose whether to purchase a device for $16
An alternative is to send a Transaction Authorization Number (TAN) per SMS on the customers mobile phone
National Australia Bank and St George are sending SMS-generated codes to a customer's mobile phone
161616
764534
Security Tokens
Future Fraud Protection – Security Tokens
39A.T. Kearney /SCB/IT Vision
Banks are experimenting with innovative Biometrics solutions for management of frauds and identity protection
Source: ATK Research, Fujitsu
High
Low
HighLow
Security
Cos
t
Non Biometric FingerprintVein
Iris
Face
Signature
recognitionVoice
Biometrics Solution Map
Future Fraud Protection – Biometrics
40A.T. Kearney /SCB/IT Vision
Biometrics offer an automated and highly secure solution for customer authentication
Source: www.biometrics.org
Implementation Examples
• Biometrics are automated methods of recognizing a person based on a physiological or behavioral characteristic.
– Biometric technologies are becoming the front line defense against fraud and are typically used in conjunction with smartcards to store the users biometric data.
– Features measured are face, fingerprints, hand geometry, handwriting, iris, retinal, vein, and voice.
• Citibank rolled it’s biometric payment systems in Singapore (Pay by Touch) in 2006 that allow Citibank Clear Platinum credit card holders to pay using only their fingerprints.
• Barriers to implementation: consumer reluctance, questionable accuracy, high cost, cultural and religious objections, unsuitable for some customers with injuries or missing fingers etc
Leading US Bank – Biometrics
Future Fraud Protection – Biometrics
41A.T. Kearney /SCB/IT Vision
Fingerprint authentication is relatively cheap and user friendly, but there are barriers to industry wide adoption
Implementation Examples
• Banco Azteca in Mexico have implemented fingerprint scanners at all branches. Customers are also given a smartcard that stores the users picture and fingerprint data to make purchases at stores affiliated with Banco Azteca
• Standard Bank in South Africa is using fingerprint verification for it’s ATMs.
• ING Direct Canada: The system will identify the bank's customers through a high-resolution fingerprint recognition system that fits into a regular-size mouse. The bank will offer the mouse to its banking customers so that they can securely bank over the Internet.
Finger printing is a relatively secure,
cheap and effective method of
identification
Security can be improved by combining fingerprint authentication with other measures such as a PIN, signature or voice scan.
Fingerprint Authentication
Future Fraud Protection – Fingerprint Authentication
42A.T. Kearney /SCB/IT Vision
A leading bank’s research found 95% of consumers would accept voice verification, compared with 80% accepting fingerprinting
Source: http://www.banking.com/aba/cover_0197.htm
Voice recognition can be used remotely by customers
where as other biometrics require specialized scanning
hardwareAccuracy declines when the audio quality is poor or background noise is
high or the customer has influenza
Implementation Examples
• Chase Manhattan Bank recently decided to use voice verification for customer identification following a review of several types of biometrics. However, voice identification has been implemented only for internal security, not customer facing at this stage
• Charles Schwab and Prudential Securities use voice identification to control access to secure areas and records to prevent internal fraud
Future Fraud Protection – Voice Verification
Leading US Bank – Voice Verification
43A.T. Kearney /SCB/IT Vision
Japanese banks prefer vein scanning since customers dislike touching fingerprint readers
Implementation Examples
• Bank of Tokyo-Mitsubishi and Suruga have adopted palm vein scanning systems for ATM authentication
• Japan Post, Mizuho Bank and Sumitomo Mitsui Banking Corp. have announced their adoption of a biometric system that reads the pattern of veins in the index finger to identify customers
• Japan's Financial Services Agency has proposed the standardization of biometric identification systems otherwise customers will inconveniently locked into using only their own banks ATMs
Vein scanning uses infrared light and is inexpensive, non intrusive and a highly secure authentication method – false rejection: 0.01%
Selected IT trends in banking – Vein Scanning
Vein Scanning