JULY/AUGUST 2011 Joining the dots - FinTech Futures...22 Cover focus: Joining the dots Big Data...

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JULY/AUGUST 2011

Interview: Aisling KaneMetro Bank's chief operating officer

Mastering the data Master Data Management is key to operational efficiency

Biometrics: the case for convenienceVoice signature technology could challenge fingerprints

Report: Mobile Technology in Financial ServicesNews and views from Banking Technology's recent summit

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gtechnology

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2011

Joining the dotsBig Data poses challenges for storage and processing, but provides

the opportunity to draw useful conclusions from global data ...

www.bankingtech.com I 1

ContentsJuLY/August 2011

4 news

10 show Report: Mobile tech in Fs summit the inaugural Mobile technology in Financial

services summit, organised by Banking Technology in London attracted nearly 200 attendees to hear speakers from RBs, Lloyds Banking group, HsBC, First Direct, La Caixa and standard Chartered among others.

15 news analysis ■ Heather McKenzie: improving payments ■ Identity: the next big thing ■ trouble ahead for infrastructures ■ show Report: sIFMA technology Expo ■ Dilemmas over Legal Entity Identifiers

20 By the numbers ■ global mobile payments to hit $670bn ■ Room for growth in uK mobile banking ■ Aite’s AML overview ■ It heads in the cloud

22 Cover focus: Joining the dots Big Data isn’t just about storage – it is mainly

about efficient access to information, and creating that information in the first place.

In this issue

26 Mastering the data Data management is often taken for granted until

something goes wrong. Master Data Management might be one way to get a grip on bulging data loads.

29 Biometrics: the case for convenience Biometric security has often meant fingerprints in

the Fs sector up until now, but voice signatures and other options are fast catching up.

32 sibos Vox Pops With the sibos 2011 show in toronto approaching,

Banking Technology talked to industry movers and shakers to gauge what they think will be the hot topics this year.

34 Interview: Aisling Kane, Metro Bank Ahead of its first anniversary in July, Aisling Kane,

chief operating officer at Metro Bank, discusses its outsourced It approach and the progress it has made breaking into uK retail banking.

36 Appointments 38 Products & services 42 Industry columns & comments 48 out of office

264

34

10


eDITORIAL COMMeNTJuLY/August 2011

editor David Bannister+44 207 017 [email protected]

Deputy editor Neil Ainger+44 203 377 [email protected]

Publishing Director Brian Meggs +44 207 017 5004 [email protected]

Regular Contributors David Adams, Sherree DeCovny, Alison Ebbage, Tom Groenfeldt, Eugene Grygo, Heather McKenzie, Nicholas Pratt, Kristina West

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ISSN 0266-0865

In the cult 1960s TV programme The Prisoner, the lead character, Number 4, played by Patrick McGoohan, used to rail against his imprisonment in a mysterious village where everyone was known simply by their designated rank. “I am not a number – I am a FREE MAN,” he would shout at the camera.

What would he make of the Indian government’s attempt to give every one of its citizens a unique identity code? Or the suggestion that uK citizens have a unique account number that they can transfer

between banks as they move in search of ever more competitive service offerings.Personal identity is becoming ever more important as mobile services, and the need

to pay for them takes off. It is a major challenge not just for the financial services industry but for societies and their governments.

And it’s not just people’s identities that are causing problems: in securities processing, Legal Entity Identifiers have been plaguing the more arcane corners of the reference data community for more than a decade, and it is about to become a mainstream concern as us regulators try to force the pace of development.

the fact is that on the securities side of the industry, there are specialists in pricing data, reference data, static data, identifiers and a host of other details, while in corporate banking there are developments like the International Bank Account Number, which is far from international.

Just to add to the fun, the world is now producing greater quantities of data than ever in history, in different forms. A lot of it is – quite literally – just noise, but it is still going have to be processed somehow.

We are all numbers now.

David Bannister, editor

With the launch of Google+ for testing, the search giant’s latest attempt at a social networking site to rival Facebook’s 700 million users, and the ongoing rise of the mobile channel in financial services (see our inaugural Summit report on page 10), I was reminded that nothing ever stands still in tech world as news simultaneously came through that the cheque guarantee card has died. It was killed off by the uK banks on 30 June and presages the end of cheques themselves by October 2018 if the

industry gets its own way. Objections from pensioner groups, small business representatives and perhaps

Parliament will have to be overcome first, with a review of the stated policy due in 2016, but banks will certainly hope to do away with cheques as they are expensive to process, prone to fraud and – unlike credit cards – do not allow banks to take a cut of the transaction. £1.4 billion worth of cheques were written last year however, so even though they are in steep decline there is still a market for them. getting rid of the guarantee cards, and thereby persuading even more shops to stop taking them, is one way of hastening their demise but the fear of legacy costs – common enough in banking – is obviously still stalking the industry. that is why the Payments Council set up a new working group at the turn of the year to look into replacing cheques with remote mobile P2P payments: another instance perhaps of the ongoing march of technology?

the rise of social networking, meanwhile, is continuing apace and more and more financial institutions are now seeking to exploit this new media (see the BSA’s column, page 45). Certainly, innovative features on google+ such as Circles, which allows users to drop their contacts into work or friend categories, and Hang Out, which allows users to launch video chats, are likely to find favour with users and perhaps we’ll all be ‘hanging out’ together in a few years time? Having said that, there is nothing to stop Facebook appropriating the ideas and google’s Buzz and Wave, previous attempts at social networking, both failed. BT

Neil Ainger, deputy editor

Numb and number

1-2 Bolt CourtFleet StreetLondonEC4A 3DQ

The passing of the guard


Go to www.bankingtech.com for the latest news and comment

Regulatory reform debate “in last stages”

countries should retain the right to apply higher levels of regulation to ensure financial stability”. the spectre of regulatory arbitrage is always a worry in this debate but the increasing globalisation of regulations may be able to help in this area. Hoban said that he wanted banks to “adhere strictly” to the Basel definition of core tier 1 capital. the market trusts these instruments to absorb losses and expects all banks to be capitalised on the same basis, he said, but is this the case? Maybe if greece defaults it’ll tell us. Looking ahead to Basel III Hoban said, “it was incredibly disappointing to hear mutterings of discontent and resistance on the implementation of Basel, including from some g20 signatories. We must resist attempts to unpick Basel at this stage.”

Andrea Enria, chairman of the European Banking Authority, also gave an overview of the European perspective and touched on the stress tests that his organisation is currently carrying out on European banks, commenting that it is “completely unfounded” speculation that as many as 15 banks could fail.

some regulators seem to believe more capital is always the answer. “It isn’t,” warned Agius. “We will become unattractive to private investors if banks are over capitalised, which will ultimately hit lending and bank prices.” utility type returns are completely unrealistic too, he said in a staunch defence of the banking industry.

Bounding up on stage at mid-day in the guildhall was Natalie Ceeney, chief executive of the Financial Ombudsman service. “Nice to be here,” she said, before adding “I’ve spent most of the last six months speaking to the BBA in the courts over the PPI mis-selling case”, perhaps causing the trade body to regret inviting her. Agius, the BBA chair, had already apologised that morning, saying: “On PPI we got things wrong. We [as an industry] let our customers down and we’ve apologised. We now need to rebuild trust and to demonstrate that we are working on customers’ behalf.”

sants outlined the gravity of the mis-selling scandals in the uK, pointing out that with the PPI compensation issue likely to cost banks in excess of £5 billion, the total amount of compensation paid to consumers over the last 20 years would burst through £20 billion. “this is an unacceptable cost to both consumers and bank shareholders.”

Andrew tyrie MP, chairman of Parliament’s treasury select Committee, talked primarily about the Independent Commission on Banking interim report (or Vickers as he called it in reference to its author John Vickers) stressing that, “we should wait for his final report in september before taking hard and fast views on it.”

the main recommendations are, of course, the 10% equity baseline for the uK (above the proposed Basel III 7% baseline); the possible sell-off of extra Lloyds branches; and ring fencing retail and investment operations within banks to stop future bailouts.

One thing tyrie said he would urge is to remember “the overriding aim of Vickers is to ensure that the taxpayer doesn’t have to pay for another bailout.” Keep that in mind when you are considering the ICB, he added. It’s sound advice for any bankers who are understandably becoming frustrated with the raft of regulations facing the sector. Let’s hope Agius and the Chancellor, george Osborne, are right and we are indeed now within touching distance of the end of this reform debate. Implementation is another matter of course. BT

The EBA Clearing Company plans to develop and promote a pan-European e-payment

service to facilitate online shopping transactions. the new solution, which the organisation says it plans to pilot by summer 2012, will enable buyers and sellers from all over Europe to exchange trusted payment orders and e-mandates directly through their online banking portals.

According to giorgio Ferrero, chairman of EBA Clearing, “the time has come to explore a collaborative initiative in the area of e-services and in particular e-payments. the European e-commerce market is witnessing growth rates of 10-20% per year and there is a keen interest among customers for secure online payment services facilitated by providers they know and trust”.

In parallel, B2B models are “more and more moving to B2C-mode usability and to a retail-like shopping experience”, he added. “We feel that EBA Clearing is well-placed to deliver the cornerstone for the new pan-European payments infrastructure that our banks will need in order to roll out the benefits of e-sEPA to their customers.”

EBA Clearing presented a blueprint document at its EBA Day event in Madrid in mid-June, outlining the e-services offering the organisation envisages launching and it says over the next few months it will now “engage in a dialogue with all relevant stakeholders from the consumer side, the e-merchants and the banks. this consultation process is geared at specifying in detail the design of the solution and its implementation process”.

Whether rival platforms, national players, processors and others want to see a pan-European solution that can usefully deliver sEPA payments, but may eventually expand into other competitive areas is up for debate. An e-identity tool has already been mooted as another possible add-on if the interbank solution does take off but the consultations running until the end of the year will first decide the shape of the e-payment service. BT

Sants: “we must force root and branch reform” of financial regulation.

EBA Clearing plans European e-payment service

4 I www.bankingtech.com

JuLY/August 2011

NEWSRegulatory reform debate “in last stages”

The idea of risk-free banking is an oxymoron, Marcus Agius, chairman of the British Bankers’ Association and of Barclays Bank, told the BBA annual international conference in London at the end of June. “Our job is to know our risks and

manage them accordingly,” he added, before going on to reiterate a point made by george Osborne, Chancellor of the Exchequer, during his Mansion House speech where he said that we’re within touching distance of the end of this reform debate.

that may be so, but the regulatory topic still dominated proceedings at the guildhall in London as real post-crisis reform draws near. How to improve the redress framework in the wake of the Payment Protection Insurance mis-selling scandal; how to increase business lending; the Basel III/CRD4 capital adequacy rules; resolution plans; and the need to avoid unintended consequences were all discussed at the conference, alongside the ICB interim report, especially the ring-fencing recommendations that Osborne controversially voiced support for during his Mansion House speech.

the treasury’s White Paper and recent draft bill, A New Approach to Financial Regulation: the blueprint for reform, was also discussed. this gives further details on the uK government’s plans for financial regulation in the country, particularly its decision to give the Prudential Regulation Authority responsibility for the insurance sector and to enhance the competition remit of the Financial Conduct Authority – both bodies will replace the FsA in 2013.

“We must force root and branch reform,” said Hector sants, chief executive of the Financial services Authority and the designated new head of the Prudential Regulatory Authority, as he addressed the BBA conference about the thinking behind the new “twin peaks” regulatory structure in the uK. the FPC – based at the Bank of England, like its subsidiary the PRA – will take overall responsibility for protecting the stability of the financial system and ensuring orderly failures. It met for the first time on 16 June.

sants is a member of the FPC as the effective ‘enforcer’ of its will at the PRA, as is another of the speakers, Paul tucker, deputy governor of the Bank of England, who told the BBA audience that “the social contract between banks and the public was found utterly wanting during the financial crisis”, stressing that it needs to be redrawn and strengthened to avoid a repeat.

the PRA will supervise around 1,000 large systemically important deposit takers and its single objective is to promote and ensure the soundness of firms. the FCA replaces the current FsA and will regulate 27,000 financial institutions including retail banks, insurers and financial advisory firms. Its single strategic objective, according to sants, is to protect and enhance confidence in the uK financial system. He then went on to outline how both would operate in pursuit of these objectives, explaining, for instance, how the FCA will take a more interventionist approach than in the past and step in to ban products that could damage consumers or were likely to be mis-sold. the replacement of the old FsA Arrow procedure with a new Proactive Intervention Framework was also explained. this five-stage regulatory procedure, or series of triggers, sets out when regulatory intervention would be required. “this is, in part, to formalise resolution arrangements but also to mitigate against the risk of regulatory forbearance,” said sants. “It will not detract from the judgment-based supervisory approach which lies at the core of the PRA philosophy. supervisors will of course still need to use their judgement within the PIF.”

Mark Hoban MP, Financial secretary to the treasury, added his take on strengthening the uK’s regulatory architecture, but widened the debate to include the European and global perspective. He stressed the need for co-operation while maintaining “that

New white-labelled online mortgage tool from HML

HML, a subsidiary of the skipton Building society, is launching a white labelled online self-service

mortgage management tool so that its clients’ customers can look at their account details more easily, including the balance and last payment. Powered by Intelligent Environments software, the new service also gives customers the ability to download commonly used forms, view frequently asked questions online and contact HML using secure messaging. An online payment facility is also scheduled to be added to the platform by the end of the year.

As a specialist financial outsourcer, HML already handles the It needs of many other firms, with approximately £43 billion worth of mortgage assets for 45 clients on its systems and 400,000 live mortgage accounts on which it handles customer enquiries using the clients’ own name.

Intelligent Environments will host the software which will integrate directly with HML clients’ websites, presenting a seamless, fully branded service to the end user. the vendor also says that it can scale to meet future demand and cope with the monthly peaks in activity that the mortgage administrator typically experiences.

Amber Homeloans will be the first of HML’s clients to use the new white labelled software this summer. Paul Fenn, managing director at the firm, said he is confident, “it will be easy for us to integrate and it will enhance our customer experience.”

Neil Warman, chief commercial and finance officer at HML, said: “We developed the product because we understand that our clients’ customers want to access their mortgage account in a number of ways and an online service is a convenience that many now consider essential. Our white-labelled service gives our clients a fully branded website that improves the service experience we provide to their customers.” BT

The BBA’s annual conference heard how the new UK regulatory bodies will operate and how to clean up messes like PPI mis-selling.

By Neil Ainger



Regulatory reform debate “in last stages”

countries should retain the right to apply higher levels of regulation to ensure financial stability”. the spectre of regulatory arbitrage is always a worry in this debate but the increasing globalisation of regulations may be able to help in this area. Hoban said that he wanted banks to “adhere strictly” to the Basel definition of core tier 1 capital. the market trusts these instruments to absorb losses and expects all banks to be capitalised on the same basis, he said, but is this the case? Maybe if greece defaults it’ll tell us. Looking ahead to Basel III Hoban said, “it was incredibly disappointing to hear mutterings of discontent and resistance on the implementation of Basel, including from some g20 signatories. We must resist attempts to unpick Basel at this stage.”

Andrea Enria, chairman of the European Banking Authority, also gave an overview of the European perspective and touched on the stress tests that his organisation is currently carrying out on European banks, commenting that it is “completely unfounded” speculation that as many as 15 banks could fail.

some regulators seem to believe more capital is always the answer. “It isn’t,” warned Agius. “We will become unattractive to private investors if banks are over capitalised, which will ultimately hit lending and bank prices.” utility type returns are completely unrealistic too, he said in a staunch defence of the banking industry.

Bounding up on stage at mid-day in the guildhall was Natalie Ceeney, chief executive of the Financial Ombudsman service. “Nice to be here,” she said, before adding “I’ve spent most of the last six months speaking to the BBA in the courts over the PPI mis-selling case”, perhaps causing the trade body to regret inviting her. Agius, the BBA chair, had already apologised that morning, saying: “On PPI we got things wrong. We [as an industry] let our customers down and we’ve apologised. We now need to rebuild trust and to demonstrate that we are working on customers’ behalf.”

sants outlined the gravity of the mis-selling scandals in the uK, pointing out that with the PPI compensation issue likely to cost banks in excess of £5 billion, the total amount of compensation paid to consumers over the last 20 years would burst through £20 billion. “this is an unacceptable cost to both consumers and bank shareholders.”

Andrew tyrie MP, chairman of Parliament’s treasury select Committee, talked primarily about the Independent Commission on Banking interim report (or Vickers as he called it in reference to its author John Vickers) stressing that, “we should wait for his final report in september before taking hard and fast views on it.”

the main recommendations are, of course, the 10% equity baseline for the uK (above the proposed Basel III 7% baseline); the possible sell-off of extra Lloyds branches; and ring fencing retail and investment operations within banks to stop future bailouts.

One thing tyrie said he would urge is to remember “the overriding aim of Vickers is to ensure that the taxpayer doesn’t have to pay for another bailout.” Keep that in mind when you are considering the ICB, he added. It’s sound advice for any bankers who are understandably becoming frustrated with the raft of regulations facing the sector. Let’s hope Agius and the Chancellor, george Osborne, are right and we are indeed now within touching distance of the end of this reform debate. Implementation is another matter of course. BT

The EBA Clearing Company plans to develop and promote a pan-European e-payment

service to facilitate online shopping transactions. the new solution, which the organisation says it plans to pilot by summer 2012, will enable buyers and sellers from all over Europe to exchange trusted payment orders and e-mandates directly through their online banking portals.

According to giorgio Ferrero, chairman of EBA Clearing, “the time has come to explore a collaborative initiative in the area of e-services and in particular e-payments. the European e-commerce market is witnessing growth rates of 10-20% per year and there is a keen interest among customers for secure online payment services facilitated by providers they know and trust”.

In parallel, B2B models are “more and more moving to B2C-mode usability and to a retail-like shopping experience”, he added. “We feel that EBA Clearing is well-placed to deliver the cornerstone for the new pan-European payments infrastructure that our banks will need in order to roll out the benefits of e-sEPA to their customers.”

EBA Clearing presented a blueprint document at its EBA Day event in Madrid in mid-June, outlining the e-services offering the organisation envisages launching and it says over the next few months it will now “engage in a dialogue with all relevant stakeholders from the consumer side, the e-merchants and the banks. this consultation process is geared at specifying in detail the design of the solution and its implementation process”.

Whether rival platforms, national players, processors and others want to see a pan-European solution that can usefully deliver sEPA payments, but may eventually expand into other competitive areas is up for debate. An e-identity tool has already been mooted as another possible add-on if the interbank solution does take off but the consultations running until the end of the year will first decide the shape of the e-payment service. BT

Sants: “we must force root and branch reform” of financial regulation.

EBA Clearing plans European e-payment service

Go to www.bankingtech.com for the latest news and commentNews

JuLY/August 2011


Bank of England backs changes to CREST mechanismsfor risk reduction in management of intraday liquidity

The Bank of England is championing the use of changed mechanisms in the CREst central securities depositary system to minimise the risks involved in managing intraday

liquidity in the uK.Euroclear uK & Ireland, the operator of CREst, is increasing

collateral management efficiency and reducing operational risks and costs in the uK for securities finance transactions, primarily involving repos. For the first time uK market participants can use the system to manage all of their collateral needs and movements against term repos for the duration of these transactions.

this new development to the CREst Delivery-by-Value (DBV) service, “heralds a new beginning in the way that uK firms will be able to manage exposures arising from their financing strategies. It eliminates a mismatch between collateral movements and the underlying financing transaction agreed between two counterparties.

In a speech given to the Yorkshire and Humberside Network of the IFs school of Finance in Leeds at the beginning of July, Chris salmon, executive director of banking services and chief cashier of the Bank of England, said: “Although the risks to the Bank from the provision of intraday liquidity are judged to be small, it is prudent balance sheet management to seek to minimise the amount of intraday liquidity created as far as is practical without impeding the efficient settlement of payments. to that end, we are working with the operator of CREst to modify the system so that intraday liquidity for securities settlement is extended only when necessary.”

He went on to say: “the Bank is supportive of efforts to modify the centralised settlement of collateralised loans in CREst, so instead of the previous arrangement, which saw the deal winding and unwinding every day, settlement simply occurs at the start of the deal and unwinds at the end. this will reduce demand for intraday liquidity from the settlement banks, which in turn reduces the intraday expansion of the Bank’s balance sheet and the associated operational risks. As such, I encourage market participants to embrace the new CREst “term DBV” product.”

salmon said that the fact that the payments infrastructure proved resilient during the crisis was “in no small part a dividend from the efforts invested in the 1990s to introduce real time

settlement into those systems,” but added that among the effects of the crisis was the strengthening of the Bank’s long-held view that “extensive indirect membership means that the uK payments infrastructure is not as robust as it could be”.

Current market practice entails the need for clients to shift their entire collateral positions in and out of their EuI collateral accounts every evening and the following morning, respectively, even when underlying collateralised transactions are of a longer duration. Consequently, the movement of sizeable collateral positions in both cash and securities is required twice per day, every day, throughout the life of the transaction. Clients are charged for each daily collateral movement. the new service will no longer oblige uK market participants to continue this market practice. the counterparties are charged upon the creation and maturity of the term DBV and a small daily management fee no matter the number of collateral movements each day.

Yannic Weber, chief executive of Euroclear uK & Ireland, said: “After two years of rigorous market consultation, we are launching a collateral management service that provides clients with unprecedented flexibility to manage their exposures and operational risks. In close co-operation with the Bank of England, more than 20 participating clients and several trade bodies, Euroclear uK & Ireland is the first central securities depository within the Euroclear group to offer such a service.” BT

Payments Council's switching plans will cost £2 billion the Payments Council has committed itself to making bank account switching in the uK easier for consumers and small businesses within two years by ensuring that incoming payments – not just outgoing ones – are automatically switched to a customer’s new bank account. A large shared database will be required and system changes at banks to access it. Initial costs of the scheme have been estimated at £2 billion and such a large target may prove irresistible to hackers, raising security concerns.

the aim is to encourage switching and more competition in retail banking, a key concern of the Independent Commission on Banking which called for portable current account numbers in its interim report in the spring and a centralised redirection service that would automatically forward on any payments

made to a closed account. the new scheme is something of half-way house response, therefore, as it does not deliver full portable accounts.

the initiative will also reduce how long it takes to switch an account from around 18 days at present to a guaranteed maximum of seven working days, says the Payments Council, which will also introduce an as yet undefined minimum customer standards guarantee. Assessment of the present arrangements will be followed by final recommendations and costings shortly, with the Council maintaining that customers will start to see improvements from the phrased project before the september 2013 end date. It may also help to reduce the 140 million personal accounts currently operated by uK banks for a population of half that. BT

Introduction of new Delivery-by-Value service provides new way to manage exposures


Go to www.bankingtech.com for the latest news and commentNewsJuLY/August 2011

Davies brands new regs “Confusing”

sir Howard Davies, ex-Bank of England and the first head of the

Financial services Authority of course, branded the new regulatory structure in the uK as “far more complicated and confusing than it was before”.

speaking at sungard’s London City Day event on 6 July, Davies (right) joked that the previous tripartite authority, which he was part of, was like Princess Diana’s famous quote that ‘there were three people in this marriage, so it was a bit crowded’ But Davies doesn’t see the changes to the uK regulatory structure as an improvement. “We’ve got five bodies now – with the FPC, FCA, PRA, BoE and treasury – not just three, so speaking personally I’m not the greatest fan of this reform. the interaction between the bodies will be complicated and require close oversight by the FPC.”

Davies speech entitled ‘understanding the new regulatory environment: sensibly safe or recklessly prudent?’ touched on three key areas: ■ global regulations ■ New European structures ■ uK regulatory reform.

the financial services veteran talked about how we got here, referring to the crash, and the challenges ahead as a raft of regulations loom. “there are two prime conclusions to draw after the crash,” he said. “Firstly, that there wasn’t enough oversight of the total risk picture and secondly that there was too little capital, or too much leverage, however you want to phrase it.”

Illustrating this point later, Davies said that as bank leverage exploded and shadow banking and the derivatives sector grew tremendously throughout the last decade, it balloned to 440% of the uK’s gDP, a frightening statistic. “there wasn’t however, a fundamental change in the regulatory environment to match this rapid leverage boom or the corresponding globalisation trend,” he said.

At the global level, Davies believes that the creation of the Financial stability Board (out of the Forum that previously existed) is the biggest news. “It’ll become more and more important as the nerve centre of financial regulation,” he said. “If

you want to know what’s going on look at the FsB reports to the g20.”

underneath this, Davies highlighted the Basel banking reforms going on and the stress testing of banks as the next most important change post-crash. “the most significant change here is, of course,

the Basel III capital adequacy rules that mean larger tier one capital ratios and larger buffers, especially for those deemed systemically important banks, like Morgan stanley where I’m on the board [and goldman sachs where my co-keynote speaker Jim O’Neill, chair of its Asset Management unit, is from]. there is a counter cylindrical mechanism too to ensure large enough buffers in future.”

the result of all of this will be to increase the cost of credit, especially once quantitive easing ends and capital will become scare in the years ahead, he added. It’s perhaps one reason why there is tension between germany and the European Banking Authority at the moment over the rigorous stress testing of European banks – the continental banks are still relying on wholesale funding too much and haven’t added as much capital since the crash as uK and us banks.

“the old European regulatory system was a mess,” said Davies, “but we now have the European systemic risk board, plus the EsFs, EBA and EsMA.” the latter is where a lot of the “action” will be in the future, he predicted, as he discussed the increasing importance of Eu regulations over national rules in the uK and elsewhere. References to the enhanced importance of regulations to politicians and society as a whole were made as Davies reverted to discussing the national scene and to the changes presaged by the Independent Commission on Banking interim report by sir John Vickers.

“I hope I’ve given you some clues as to where to look for regulatory change,” concluded Davies. He certainly had, and those in the audience who perhaps hadn’t attended a conference recently looked suitably stunned at the magnitude of the task facing them – both in terms of the changing markets, compliance and technology demands ahead. BT

BIAN boosts bankmembership

The Banking Industry Architecture Network has signed three new bank members, significantly

increasing its membership outside Europe in the process.

Commonwealth Bank of Australia, Rabobank and scotiabank join Credit suisse, Deutsche Bank, Deutsche Postbank, INg, standard Bank of south Africa and Zürcher Kantonalbank as members of the non-profit organisation, which seeks to establish and promote a common architectural framework for interoperability issues by defining sOA and semantic definitions for It services in the banking industry.

the addition of three banks, particularly outside Europe, will help to answer critics who have dismissed it as a “vendor club”.

Vendors still make up a large part of the membership, with ACI Worldwide also joining in the latest intake. Other vendor members are Axon, Callataÿ & Wouters, Capital Banking solutions, CgI, Fernbach, IFB group, IKOR, Innobis, Microsoft, sAP, sungard, swift, syskoplan and temenos.

“CBA joining BIAN is an exciting step forward into the Asia-Pacific market and scotiabank from Canada demonstrates the further internationalisation of BIAN. ACI Worldwide offers the perspective of an international provider of payment systems. Rabobank is also a truly international operating bank and the first cooperative bank to join BIAN. they all share with BIAN a common vision about the interoperable architectures in banking and a common understanding regarding the strategic evolution of core banking systems.” said Karin Fischenbeck, secretary general of BIAN. “We are looking forward to their inputs and the joint creation of global standards that can be used by the entire global banking ecosystem,”

“Lowering technology integration costs, minimising It risk, thus allowing banks to focus on their strategic priorities through It industry standards is important to us”, said René steenvoorden, chief information officer at Rabobank. “Our company is based on cooperative principles, we believe in collaboration. With BIAN we aim to stimulate international standards from which all can benefit.” BT

Former regulator says that UK regulatory changes have not improved the oversight of the financial services industryBy Neil Ainger

Go to www.bankingtech.com for the latest news and commentNews

JuLY/August 2011


Bank of England backs changes to CREST mechanismsfor risk reduction in management of intraday liquidity

The Bank of England is championing the use of changed mechanisms in the CREst central securities depositary system to minimise the risks involved in managing intraday

liquidity in the uK.Euroclear uK & Ireland, the operator of CREst, is increasing

collateral management efficiency and reducing operational risks and costs in the uK for securities finance transactions, primarily involving repos. For the first time uK market participants can use the system to manage all of their collateral needs and movements against term repos for the duration of these transactions.

this new development to the CREst Delivery-by-Value (DBV) service, “heralds a new beginning in the way that uK firms will be able to manage exposures arising from their financing strategies. It eliminates a mismatch between collateral movements and the underlying financing transaction agreed between two counterparties.

In a speech given to the Yorkshire and Humberside Network of the IFs school of Finance in Leeds at the beginning of July, Chris salmon, executive director of banking services and chief cashier of the Bank of England, said: “Although the risks to the Bank from the provision of intraday liquidity are judged to be small, it is prudent balance sheet management to seek to minimise the amount of intraday liquidity created as far as is practical without impeding the efficient settlement of payments. to that end, we are working with the operator of CREst to modify the system so that intraday liquidity for securities settlement is extended only when necessary.”

He went on to say: “the Bank is supportive of efforts to modify the centralised settlement of collateralised loans in CREst, so instead of the previous arrangement, which saw the deal winding and unwinding every day, settlement simply occurs at the start of the deal and unwinds at the end. this will reduce demand for intraday liquidity from the settlement banks, which in turn reduces the intraday expansion of the Bank’s balance sheet and the associated operational risks. As such, I encourage market participants to embrace the new CREst “term DBV” product.”

salmon said that the fact that the payments infrastructure proved resilient during the crisis was “in no small part a dividend from the efforts invested in the 1990s to introduce real time

settlement into those systems,” but added that among the effects of the crisis was the strengthening of the Bank’s long-held view that “extensive indirect membership means that the uK payments infrastructure is not as robust as it could be”.

Current market practice entails the need for clients to shift their entire collateral positions in and out of their EuI collateral accounts every evening and the following morning, respectively, even when underlying collateralised transactions are of a longer duration. Consequently, the movement of sizeable collateral positions in both cash and securities is required twice per day, every day, throughout the life of the transaction. Clients are charged for each daily collateral movement. the new service will no longer oblige uK market participants to continue this market practice. the counterparties are charged upon the creation and maturity of the term DBV and a small daily management fee no matter the number of collateral movements each day.

Yannic Weber, chief executive of Euroclear uK & Ireland, said: “After two years of rigorous market consultation, we are launching a collateral management service that provides clients with unprecedented flexibility to manage their exposures and operational risks. In close co-operation with the Bank of England, more than 20 participating clients and several trade bodies, Euroclear uK & Ireland is the first central securities depository within the Euroclear group to offer such a service.” BT

Payments Council's switching plans will cost £2 billion the Payments Council has committed itself to making bank account switching in the uK easier for consumers and small businesses within two years by ensuring that incoming payments – not just outgoing ones – are automatically switched to a customer’s new bank account. A large shared database will be required and system changes at banks to access it. Initial costs of the scheme have been estimated at £2 billion and such a large target may prove irresistible to hackers, raising security concerns.

the aim is to encourage switching and more competition in retail banking, a key concern of the Independent Commission on Banking which called for portable current account numbers in its interim report in the spring and a centralised redirection service that would automatically forward on any payments

made to a closed account. the new scheme is something of half-way house response, therefore, as it does not deliver full portable accounts.

the initiative will also reduce how long it takes to switch an account from around 18 days at present to a guaranteed maximum of seven working days, says the Payments Council, which will also introduce an as yet undefined minimum customer standards guarantee. Assessment of the present arrangements will be followed by final recommendations and costings shortly, with the Council maintaining that customers will start to see improvements from the phrased project before the september 2013 end date. It may also help to reduce the 140 million personal accounts currently operated by uK banks for a population of half that. BT

Introduction of new Delivery-by-Value service provides new way to manage exposures

Standard Chartered Bank in India is rolling out a new range of mobile apps as part of its Breeze brand. Powered by Monitise’s Globe mobile banking technology platform, the selection of smartphone and Java applications is intended to help retail bank users manage their money more easily on the move. SCB customers can view bank and credit accounts, transfer funds to other banks in India, pay utility bills, locate an SCB branch or ATM, and purchase cinema and airline tickets – all through their mobile phone. The white-labelled Monitise app is compatible with more than 700 handsets, the majority of them basic devices, but also BlackBerry and iPhone smartphones.

Saxo Bank, the online trading and investment firm, has unveiled ForexTrading.com. Aimed at retail investors the online foreign exchange trading platform now offers variable spreads, down to 0.8 pips (percentage in points), across a restricted range of FX crosses and Contracts for Difference. The minimum deposit is a modest £2,000, reflecting the retail focus, and a range of basic functionalities, such as data streams and connectivity, is available to online investors to make trading in the world’s most liquid currency pairs and commodity CFDs flexible and straightforward.

The Jordanian Housing Bank for Trade & Finance is installing Infosys’ Finacle core banking solution to improve efficiency and straight through processing rates across its operations. The software will link HBTF’s online, corporate and branch banking offerings across 112 sites, and also allow the bank to launch new products more quickly. Plans are already underway to rollout more personalised marketing and product offerings to customers using the better customer data now available on the new bank-wide solution. The reliance on relationship managers to process retail and corporate clients will be reduced as the system is introduced and more automation is built into the system.

The Spanish Multilateral Trading Facility Plataforma Alternativa De Valores Españoles is installing Cinnober as its preferred technology partner after an earlier deal with Equiduct fell through. The two had announced last autumn that Equiduct would provide the trading platform and operational support necessary for the launch but Scandinavian vendor Cinnober will now provide the technology for the equities platform. The launch date for Pave has also slipped from the end of this year until the first quarter of next. The planned rival to Bolsas y Mercados Españoles (BME), which is almost the only player in Spanish securities at the moment, will use a customised version of Cinnober’s TradExpress Streamlined Services SaaS offering.

The European Payments Council and the Cards Stakeholders Group has released the latest version of the SEPA Cards Standardisation Volume, version 5.5, Book of Requirements for public consultation. The Volume defines the functional and security standards needed to achieve interoperability within the Single Euro Payments Area cards market. The updated version includes amendments to the security requirements, payments with cashback, dynamic currency conversion, mobile contactless payments, payment with aggregated amounts and surcharging. It is currently out for consultation until 29 July, and is available for viewing at www.epc-cep.eu. Stakeholders in the Group – banks, retailers, vendors, payment processors and card schemes – are all invited to contribute feedback.

Allied Irish Banks is deploying the Ezio authentication solution from Gemalto, including Club EMV card readers that generate One Time Passwords, on its online retail banking service. The readers will also be used to verify and sign transaction details, such as amounts transferred and credited. The vendor has also been contracted to provide consulting services to ease the integration and to manage the security architecture over the next couple of years. No figures are available as to the cost per reader, but supporting these readers in the past is known to be expensive for High Street banks, with a typical cost of about £50 per device not unknown once lost cards, multiple readers and admin costs are taken into account.

The rollout is intended to enhance the security on offer to retail bank customers at AIB and to enable new online services to be more easily, and securely, launched in the future.

Dutch-Bangla Bank Limited, one of Bangladesh’s largest banks, has selected Sybase365’s m-banking platform to support its new mobile service, which offers local and international remittance services via mobile accounts that can then be redeemed for cash at the nearest retailer or ATM. Available on all six of the mobile network operators in Bangladesh, the new service will go live this summer. DBBL intends to rollout the next phase of its mobile service later in the year, which will allow customers to top up their mobile phones, access microfinance and make merchant payments from their mobile device.

The Depository Trust & Clearing Corporation has announced that Société Générale in North America will link to its Loan/Serv Reconciliation Service as both agent bank and lender to help automate and streamline the processing of syndicated loans, enabling the bank to view and reconcile loan positions with thousands of lenders on a daily basis. SocGen is the first French bank to link to the reconciliation service in North America. Other agent banks already using the service are BNY Mellon, Barclays Capital, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, RBS and Wells Fargo. Along with the agent banks, more than 3,100 investment funds and lending entities, administered by more than 270 leading funds managers and bank lenders, have linked to the reconciliation service since Loan/Serv was launched in 2008. These firms now represent approximately 50% of the global syndicated loan market. As more participants are attracted the economies-of-scale savings and overall risk picture should both improve.

Manoeuvres in the world of international stock exchange mergers took another twist this month as the planned tie-up of the London Stock Exchange and Canada’s TMX Group was abruptly called off – hours before the LSE's EGM to vote on the deal. The LSE said the deal would not get the necessary two-thirds majority approval at the TMX Group shareholder meeting. TMX Group will pay an fee of C$10 million (£6.5m) and a further £18.8 million if TMX Group is acquired by Maple Group Acquisition Corporation, the consortium of Canadian banks that mounted a rival bid. Xavier Rolet, chief executive of the LSE, expressed disappointment at the failure of what he described as “an exciting opportunity” and went on to say: “we continue to see other significant growth opportunities across our well-positioned capital markets, information services, technology and post trade businesses.” BT

Go to www.bankingtech.com for the latest news and commentNEWS

JuLY/August 2011


if you lose your mobile, but not necessarily if you lose your card.” The scheme has since been extended indefinitely in Sitges and has now been launched as a full commercial roll-out, not just a trial, to 150,000 customers and 5,000 retailers in the Balearic Islands in Spain.

Next came a joint presentation from Diarmuid Mallon, senior product marketing manager for mCommerce at Sybase365 and Tim Roberts, technical services manager of the cross industry group at Sybase. Mallon talked through the advantages of using a unified technology platform to run mobile financial services. Roberts focused on the work corporates need to do to manage the use of mobile technologies within the enterprise, particularly the challenges created by staff using their own mobile devices at work.

After the delegates had enjoyed a coffee break and a little light networking, Jelmer de Jong, European marketing manager at portal software provider Backbase presented on his company’s concept of Bank 2.0 – wherein financial services companies seek to offer customers the same kind of seamless digital experience they enjoy when interacting with giants of the digital world like Apple, Google and Amazon. He emphasised the rise of new competitors in financial services aiming to win market share from more established players by doing exactly this, such as BankSimple, which has designed a proposition around internet and mobile channels.

Backbase’s idea is that a combination of widgets – which can be integrated and reused across multiple service channels – and HTML5 will turn this seamless vision into reality, coping with the ever more varied mix of mobile devices, operating systems and browsers with which customers will want to access mobile banking.

Jiten Arora, a managing director in the Transaction Banking Division at Standard Chartered Bank, began his presentation on the benefits of mobiles for corporate banking and trade finance by reminding us again of the potential for growth in this area within developing markets, pointing out that there are 400 million internet users worldwide, but more than five billion mobile subscribers; while in Africa for every internet connection there are 20 mobile connections. He spoke about the way that in countries like Kenya, where M-Pesa has had such an impact and where traditionally there has only ever been a fairly limited electronic payments infrastructure, the use of mobile payments is now increasing rapidly. The mobile channel can help to reach individuals and businesses that are currently unbanked, particularly in emerging markets, aid remittances, and can do so much to improve financial inclusion for small businesses by facilitating microfinance.

Arora then turned to Standard Chartered Bank’s own work on corporate mobile banking, including its Straight2Bank Authorisation service. Such ‘on the move’ services increase the ability of treasurers to make decisions from a greater number of locations, without the need to carry a laptop and find an internet connection, while also vastly increasing the speed of the trade authorisation processes – “from 24 hours to 24 seconds”, as he put it. There could also be efficiency gains for corporate treasury operations via the use of mobile invoicing and mobilisation of other processes.

Panel discussion The last session of the morning was a stimulating panel discussion, addressing the question ‘Is the mobile channel the biggest development since the web?’ Chaired by Neil Ainger, deputy editor at the organisers of the Summit, Banking Technology, the panel comprised of Tim Decker, senior product manager and

already using its SMS alert services and 750,000 users of its mobile banking portal, which has seen more than 1.5 million downloads of 45 apps developed for the bank’s customers.

The separate groundbreaking six-month long Mobile Contactless Payment pilot scheme began in Sitges, Spain, in May of last year, with Visa and Telefonica as project partners, was also discussed. It involved 1,500 customers and 500 retailers, representing nearly all of the shops in the town. Customers could purchase goods worth €20 or less simply by taping a Samsung NFC-enabled phone against a Visa payWave reader. Transactions above €20 required a PIN. By the end of the trial, 90% of customers had used the technology and more than 80% of participating retailers had processed mobile transactions, at an average spend of €31. Six out of ten transactions were for amounts under €20, with 35% under €6. Better still, the scheme led to a 30% increase in Visa transactions and a 23% rise in billing from participating consumers, showing that the scheme had driven demand up.

“So we know consumers are happy to use mobiles for high and low value transactions and perhaps mobiles could be a substitute for cash transactions in the future,” said Urbano. “Almost all customers say the new service is very quick and easy to use. They think it’s more secure than a credit card, because you don’t have to give the card to the merchant; and you realise straight away

Mobile Tech in FS Summit


>

Silver sponsor Supporting organisations:

Photos: Kosh Naran

It is a simple but true fact that there are now vastly more mobile phones in the world than there are plastic cards. With in excess of 5 billion mobile phone users now in existence, the potential for financial services companies to exploit this new medium to offer value-added banking, payment or remittance services or to reach the so-called unbanked is immense.

The Mobile Technology in FS Summit covered the different strands of mobile FS, looking at mobile alerts, banking, remote P2P payments, corporate banking, trade finance and Mobile Contactless Payments among many other issues – examining the opportunities that exist for banks in this rapidly growing area by highlighting case studies, the available technology solutions, with presentations from Sybase and Backbase outlining these options, and looking at the challenges ahead from new comers and possible limiting factors, such as the need for security and standards.

Almost 200 high quality delegates turned up for the Summit, including Graham Blythe, IT development manager at ING Direct, Anita Hockin, head of mobile at Lloyds Banking Group, Riccardo Cesarei, in charge of global online and mobile banking at UniCredit, and Neil Morrow, a senior architect with Co-op Financial Services (for a full delegate list of the attendees and to see all the presentations visit www.bankingtech.com/mobilesummit).

They were treated to speeches from David Urbano, the head of mobile at La Caixa who flew over to talk about the Spanish bank’s various mobile banking offerings in this channel and to outline the latest feedback from the groundbreaking MCP scheme in Sitges, Spain, which has since been extended to the Balearic Islands. Tom Gregory, head of digital payments at Barclaycard talked about their similar Quick Tap scheme just launched in the UK with MasterCard and Orange Everything Everywhere as partners, while Jiten Arora of Standard Chartered Bank flew over from

Singapore to talk about the use of mobiles for trade authorisation and so forth.

The audience also got a first-hand account from Justine Haworth, the head of strategy & design, digital solutions at HSBC, including First Direct, of exactly how tricky the process of getting Apple to approve distribution of a new mobile banking iPhone app can be as she discussed the rollout of First Direct’s transactional ‘banking on the move’ app this year. The unit’s plans to roll it out to Google’s Android OS and other platforms were also discussed, and indeed HSBC’s wider plans for the channel.

Other contributions from supporting organisations, Datamonitor, the European Payments Council and the important Mobey Forum trade body, which consists of banks such as HSBC, Deutsche Bank and Garanti; mobile handset manufacturers like Nokia; and software firms such as Sybase365, looked at the need for more cross-industry and cross-border collaboration in the development of technology standards for remote and mobile payments.

Presentations In the first presentation of the day, Alex Kwiatkowski, research manager, EMEA banking, at IDC Financial Insights, reviewed the development of mobile financial services to date and provided an overview of the opportunity that exists for financial institutions. “We’ve seen a decade of disappointment in many respects,” he candidly admitted, “but now the signs are that we are finally seeing mobile come of age. It’s not a technological challenge to overcome anymore; it’s a lack of understanding or awareness among consumers. And business models remain a fundamental challenge.”

David Urbano, director of mobile at La Caixa, talked the audience through the success of the Spanish bank’s activities in the mobile channel. La Caixa has acquired a reputation for innovation in the mobile channel, he said, with two million personal and professional corporate customers

SPEAKERS

CHAIRMAN

David Urbano, director of mobile, La Caixa

Jiten Arora, a managing director of Transaction Banking, Standard Chartered Bank

Ashley Machin, director of digital banking, Lloyds Banking Group

Colin Jowers, global COO, RBS Global Banking and Markets, Research & Strategy

Tim Decker, senior product manager and European head of e-channels, payments and cash management, HSBC

Justine Haworth, head of strategy and design, digital solutions, at HSBC First Direct

Tom Gregory, head of digital payments, Barclaycard

Alex Kwiatkowski, research manager, EMEA banking, IDC Financial Insights

Kieran Hines, cards and payments practice leader, Datamonitor Financial Services

Neil Ainger, deputy editor at the organisers, Banking Technology

Mobile Tech in FS Summit SuMMIt: MOBILE FS JuLY/AuguST 2011


Gold sponsors

The rapidly evolving world of mobile financial services was examined in detail by speakers from RBS, HSBC, Lloyds Banking Group, First Direct, La Caixa, Barclaycard and Standard Chartered Bank, among many others, at the inaugural Mobile Technology in Financial Services Summit, organised by Banking Technology on 22 June at Haberdashers’ Hall in the City of London. David Adams reports

if you lose your mobile, but not necessarily if you lose your card.” The scheme has since been extended indefinitely in Sitges and has now been launched as a full commercial roll-out, not just a trial, to 150,000 customers and 5,000 retailers in the Balearic Islands in Spain.

Next came a joint presentation from Diarmuid Mallon, senior product marketing manager for mCommerce at Sybase365 and Tim Roberts, technical services manager of the cross industry group at Sybase. Mallon talked through the advantages of using a unified technology platform to run mobile financial services. Roberts focused on the work corporates need to do to manage the use of mobile technologies within the enterprise, particularly the challenges created by staff using their own mobile devices at work.

After the delegates had enjoyed a coffee break and a little light networking, Jelmer de Jong, European marketing manager at portal software provider Backbase presented on his company’s concept of Bank 2.0 – wherein financial services companies seek to offer customers the same kind of seamless digital experience they enjoy when interacting with giants of the digital world like Apple, Google and Amazon. He emphasised the rise of new competitors in financial services aiming to win market share from more established players by doing exactly this, such as BankSimple, which has designed a proposition around internet and mobile channels.

Backbase’s idea is that a combination of widgets – which can be integrated and reused across multiple service channels – and HTML5 will turn this seamless vision into reality, coping with the ever more varied mix of mobile devices, operating systems and browsers with which customers will want to access mobile banking.

Jiten Arora, a managing director in the Transaction Banking Division at Standard Chartered Bank, began his presentation on the benefits of mobiles for corporate banking and trade finance by reminding us again of the potential for growth in this area within developing markets, pointing out that there are 400 million internet users worldwide, but more than five billion mobile subscribers; while in Africa for every internet connection there are 20 mobile connections. He spoke about the way that in countries like Kenya, where M-Pesa has had such an impact and where traditionally there has only ever been a fairly limited electronic payments infrastructure, the use of mobile payments is now increasing rapidly. The mobile channel can help to reach individuals and businesses that are currently unbanked, particularly in emerging markets, aid remittances, and can do so much to improve financial inclusion for small businesses by facilitating microfinance.

Arora then turned to Standard Chartered Bank’s own work on corporate mobile banking, including its Straight2Bank Authorisation service. Such ‘on the move’ services increase the ability of treasurers to make decisions from a greater number of locations, without the need to carry a laptop and find an internet connection, while also vastly increasing the speed of the trade authorisation processes – “from 24 hours to 24 seconds”, as he put it. There could also be efficiency gains for corporate treasury operations via the use of mobile invoicing and mobilisation of other processes.

Panel discussion The last session of the morning was a stimulating panel discussion, addressing the question ‘Is the mobile channel the biggest development since the web?’ Chaired by Neil Ainger, deputy editor at the organisers of the Summit, Banking Technology, the panel comprised of Tim Decker, senior product manager and

already using its SMS alert services and 750,000 users of its mobile banking portal, which has seen more than 1.5 million downloads of 45 apps developed for the bank’s customers.

The separate groundbreaking six-month long Mobile Contactless Payment pilot scheme began in Sitges, Spain, in May of last year, with Visa and Telefonica as project partners, was also discussed. It involved 1,500 customers and 500 retailers, representing nearly all of the shops in the town. Customers could purchase goods worth €20 or less simply by taping a Samsung NFC-enabled phone against a Visa payWave reader. Transactions above €20 required a PIN. By the end of the trial, 90% of customers had used the technology and more than 80% of participating retailers had processed mobile transactions, at an average spend of €31. Six out of ten transactions were for amounts under €20, with 35% under €6. Better still, the scheme led to a 30% increase in Visa transactions and a 23% rise in billing from participating consumers, showing that the scheme had driven demand up.

“So we know consumers are happy to use mobiles for high and low value transactions and perhaps mobiles could be a substitute for cash transactions in the future,” said Urbano. “Almost all customers say the new service is very quick and easy to use. They think it’s more secure than a credit card, because you don’t have to give the card to the merchant; and you realise straight away



>

Silver sponsor Supporting organisations:

Photos: Kosh Naran

take a week.” But less than 24 hours later certification was granted and the bank was ready to launch on 13 January. The First Direct customer base was already building a buzz around it via social media and in the end drove adoption very quickly. “It was fantastic,” said Haworth. “The app entered the iTunes chart at number 58, and was at number one by the end of day one. We had planned a soft launch but it took on a life of its own.”

iPhone now accounts for about 15% of First Direct’s internet business. “In this quarter 6% of new customers say the iPhone app is the reason they joined us,” said Haworth. The bank is now working on an app for the wider HSBC group and on optimising the service for use with other devices. “At the end of this year we are hoping that, as a minimum, we are offering iPhone and some Android OS devices for HSBC and First Direct,” said Haworth. “Next year we will move on to M&S Money, which is another part of our stable. We’re also undertaking research to understand what our future MCP proposition will look like, and are looking at other value-add services.”

Sirpa Nordlund, executive director of the Mobey Forum, offered her organisation’s perspective on the current and emerging situation in mobile and contactless payments. She predicts that 2012 will be the year of Near Field Communication, with RIM, Nokia, Samsung and LG all now committed to NFC technology in their handsets; Google

Wallet going live in the US this year and coming to Europe in 2012, inside all Android phones; and telcos forming consortia to promote contactless services.

Nordlund acknowledged though that the payment function alone is not an adequate driver for a business model. “You need to reinforce brand awareness by offering more complex services,” she said. “The more value the service brings to the customer the more it is used. So payments will need to be combined with geolocation or e-commerce coupons, for example.”

After coffee, Dr Marijke De Soete, senior advisor to the European Payments Council mobile channel working group, told delegates about the work that the EPC has been doing with the GSM Association and others developing standards and security for interoperable MCP, with the latest draft guidelines just released this May. The aim is to facilitate the development of commercial relationships between the mobile operators, banks/issuers and others in the value chain, such as Trusted Service Managers. An overview of the EPC’s work on developing remote mobile P2P payment standards that are SEPA-compliant and interoperable, while still allowing competition, was also provided.

Next up was Tom Gregory, head of digital payments at Barclaycard, to speak about Quick Tap, the UK’s first commercial roll out of NFC technology. Quick Tap allows Orange/Everything Everywhere and Barclays/Barclaycard customers to pay for any transaction up to the value of £15 by waving a Samsung Tocco Lite phone over a contactless terminal. Other mobile handsets will join the newly launched scheme shortly and the MCP stored value app, which can be pre-loaded with up to £100, can also tell customers their account balance. It can be used in 50,000 UK shops including nationwide chains such as Eat, Little Chef, Wilkinson and McDonalds. MasterCard

manages the PayPass transaction acceptance infrastructure.

Gregory outlined the next steps he believes are necessary for this type of service to achieve critical mass. The first, unsurprisingly, is a greater degree of cooperation between and beyond the financial sector. The second was the need for consumer education, to spread awareness and dispel any residual nerves over security – Gregory drew a parallel with the adoption of online shopping over the past 15 years. He did acknowledge that there was still some way to go on the issue of standards and interoperability with a broader range of mobile devices also required; and mentioned the problem of high staff turnover within shops making it harder to ensure all personnel are adequately trained in the use of contactless payment equipment.

Finally, we heard from David Baker, head of the card technology unit at the UK Cards Association, who also spoke of the mutual benefits that could be accrued through cooperation. He reviewed the various technical options available for the Secure Element in MCP, covering NFC primarily but also touching on bridging technologies such as microSD cards and mobile stickers. He reiterated that the technology is not, however, as important as consumer and retailer acceptance, relating the tale of visitors to his organisation’s own offices struggling to use card contactless payments in the Prêt a Manger next door. “If you ask to pay by contactless it means the staff either ask for help using it, or say it’s not working,” he said. An obvious case for further education.

Baker also listed a series of social, business and technology trends that all seem to be pushing mobile payments of all kinds closer to the mainstream. “I’d bet that the next iPhone does have some kind of NFC functionality,” he said. “In a few years’ time, when the next generation of PoS terminals have become more common, when your sole trader is using his phone to accept payments, we can really make a dent in cash. In the end, every single one of those mobile phones can be an acceptance device and a mobile device. Mobile payments has a bright future.”

As indeed, surely, does mobile banking and mobile FS generally if La Caixa, Lloyds Banking, HSBC and many of the other speakers at the Summit are to be believed. Few delegates can have left the event without holding the view that when it comes to mobile becoming a primary service channel in financial services of all kinds, it’s surely no longer a question of whether or not it will happen, but when. The discussion continued over drinks. BT


“Convenience is the thing that consumers want. And everybody has a mobile phone.”

David Baker, UKCA


European head of e-channels, payments and cash management, HSBC; Colin Jowers, global COO, RBS GBM Research and Strategy; Ashley Machin, director of digital banking at Lloyds Banking Group; and Kieran Hines, cards and payments practice leader at Datamonitor Financial Services. All strands of the FS industry were therefore covered, respectively from corporate banking, investment banking, retail banking and cards and payments, with each discussing how the mobile channel has impacted their sector and what it means for the future.

Asked if we were approaching the tipping point for mobile, Machin said: “I think in the next five years mobile will be transformational in payments and the way that people live their lives.”

Decker was not so sure. “We’re still on the journey,” he said. “I think we will get to a point where the desktop is no longer important. Web will be ubiquitous and I’m not just talking about mobile devices, but about web-enabled TVs and so on. But I don’t think it’s made that much difference to the individual or the business just yet.”

The first question from the floor came from David Lewis, chief executive at PMI Consult, who asked whether the development of mobile financial services could threaten the industry with disintermediation.

“The need for standards means banks and payment schemes will have to be involved,” said Hines. “The history of mobile payments is littered with examples of banks or mobile operators trying to create proprietary systems and failing. Ultimately, banks and existing payment schemes will dominate.”

Machin wasn’t quite so sure, but also wasn’t happy that this was the right way to consider the question. “To me, the Faster Payments Service in the UK is an example of where sufficient shared standards in the industry encourage overall economic growth,” he said. “I’m not worried about disintermediation, because [it’s] a process by which you create better propositions. Don’t focus on who gets the biggest slice of the pie now, rather than creating a bigger pie for the good of the economy.”

The panel next turned their attention to the remaining barriers to the wider adoption of mobile FS services by customers. Hines raised the issue of security, noting that while most people have anti-virus software on their laptops very few also have it on their mobile devices. He also considered the factors that may hinder adoption of contactless payments. “There is a huge opportunity here, but it requires a massive infrastructure shift. Ultimately, this is all about consumer convenience. The portability and immediacy of the mobile is probably the biggest value-add [if you can get it on to the High Street].”

Decker felt security was still the biggest concern for his corporate banking customers, but expressed his belief that this problem is now being pushed back. For Jowers, the key security questions should be around the physical management of the mobile devices themselves. “The technology will be there; it’s more about human challenges,” he said. “Let’s say someone’s had a good lunch and gets careless: do you want someone else to be able to see the numbers around a £10 million trade on their smartphone or tablet?”

The panel were asked by the audience to consider another fundamental question, the problems connected to network coverage and the expense of connectivity for mobile users travelling abroad. “This will be demand-driven,” Machin replied. “It’s definitely constraining the way in which consumers use their mobile devices. But in the UK I don’t see it being a big barrier.”

Ainger asked the panel how close we might now be to seeing the majority of banking interactions on mobile devices, referencing the title of the mid-day debate. “The mobile

banking services we offer are not going to be tied to a desktop or a particular device,” replied Decker. “Corporates don’t want staff to have to go into a browser. They want to build this into ERP. The biggest growth we’re going to see is host-to-host transmission between the bank and their own systems. I think we will see SAP deploying some of their services onto these devices. Banking information, about a trade or remittance, will be automatically incorporated.”

“I expect to see quite a lot of retail banking internet activity migrate to mobile,” said Machin. “I would stick my neck on the block and say we will be a lot closer to all [digital] interactions [between bank and customer] being mobile by 2015 than most people would have thought. It will certainly be much bigger by 2015 than people give it credit for today.”

Afternoon speakersAfter lunch, Justine Haworth, head of strategy and design for digital solutions at HSBC and First Direct, gave an entertaining first-hand account of the trials and tribulations of launching the latter bank’s iPhone app, which went live in January. First Direct started with the iPhone because it was already the mobile device being used most frequently to access its website, plus customers had indicated a strong demand for a mobile service on this platform that would go beyond the basic provision of statement and recent transaction information to offer a payment function and so forth.

The project began with technical and design workshops in March 2010 and was complete, pending certification and licensing from Apple, by December, when a staff pilot began. By far the biggest problem and cause of delay was a legal row over the Apple Developer’s Licence. “What Apple were saying was, if you do something which causes a problem within Apple then HSBC’s liability is unlimited,” Haworth explained. “If it was the other way round however Apple’s liability to us was $30. You can imagine the legal discussions. We had to secure top of bank approval to sign those contracts. In the end we did – which is a leap of faith, but you have to acknowledge that Apple would put in place all of the safeguards to protect Apple and its clients.” You also, perhaps, have to acknowledge the extent to which Apple calls the shots in its own domain...

There then followed a slightly farcical delay. Chasing up Apple in mid-January this year to see how the certification process was progressing, several weeks in, Haworth was told that an administrative error meant the process had not yet started at the Apple end. “They said they’d fast-track it,” she recalled. “The expectation was that it would


SPEAKERS (continued)

SuMMIt: MOBILE FS JuLY/AuguST 2011 Mobile Tech in FS Summit

Dr Marijke De Soete, senior advisor, European Payments Council, m-channel working group

David Baker, head of the card technology unit, UK Cards Association

Sirpa Nordlund, executive director, Mobey Forum

Tim Roberts, technical services manager, Sybase UK (Gold sponsor)

Diarmuid Mallon, product marketing manager, Sybase 365 (Gold sponsor)

Jelmer de Jong, European head of marketing, Backbase (Gold sponsor)

take a week.” But less than 24 hours later certification was granted and the bank was ready to launch on 13 January. The First Direct customer base was already building a buzz around it via social media and in the end drove adoption very quickly. “It was fantastic,” said Haworth. “The app entered the iTunes chart at number 58, and was at number one by the end of day one. We had planned a soft launch but it took on a life of its own.”

iPhone now accounts for about 15% of First Direct’s internet business. “In this quarter 6% of new customers say the iPhone app is the reason they joined us,” said Haworth. The bank is now working on an app for the wider HSBC group and on optimising the service for use with other devices. “At the end of this year we are hoping that, as a minimum, we are offering iPhone and some Android OS devices for HSBC and First Direct,” said Haworth. “Next year we will move on to M&S Money, which is another part of our stable. We’re also undertaking research to understand what our future MCP proposition will look like, and are looking at other value-add services.”

Sirpa Nordlund, executive director of the Mobey Forum, offered her organisation’s perspective on the current and emerging situation in mobile and contactless payments. She predicts that 2012 will be the year of Near Field Communication, with RIM, Nokia, Samsung and LG all now committed to NFC technology in their handsets; Google

Wallet going live in the US this year and coming to Europe in 2012, inside all Android phones; and telcos forming consortia to promote contactless services.

Nordlund acknowledged though that the payment function alone is not an adequate driver for a business model. “You need to reinforce brand awareness by offering more complex services,” she said. “The more value the service brings to the customer the more it is used. So payments will need to be combined with geolocation or e-commerce coupons, for example.”

After coffee, Dr Marijke De Soete, senior advisor to the European Payments Council mobile channel working group, told delegates about the work that the EPC has been doing with the GSM Association and others developing standards and security for interoperable MCP, with the latest draft guidelines just released this May. The aim is to facilitate the development of commercial relationships between the mobile operators, banks/issuers and others in the value chain, such as Trusted Service Managers. An overview of the EPC’s work on developing remote mobile P2P payment standards that are SEPA-compliant and interoperable, while still allowing competition, was also provided.

Next up was Tom Gregory, head of digital payments at Barclaycard, to speak about Quick Tap, the UK’s first commercial roll out of NFC technology. Quick Tap allows Orange/Everything Everywhere and Barclays/Barclaycard customers to pay for any transaction up to the value of £15 by waving a Samsung Tocco Lite phone over a contactless terminal. Other mobile handsets will join the newly launched scheme shortly and the MCP stored value app, which can be pre-loaded with up to £100, can also tell customers their account balance. It can be used in 50,000 UK shops including nationwide chains such as Eat, Little Chef, Wilkinson and McDonalds. MasterCard

manages the PayPass transaction acceptance infrastructure.

Gregory outlined the next steps he believes are necessary for this type of service to achieve critical mass. The first, unsurprisingly, is a greater degree of cooperation between and beyond the financial sector. The second was the need for consumer education, to spread awareness and dispel any residual nerves over security – Gregory drew a parallel with the adoption of online shopping over the past 15 years. He did acknowledge that there was still some way to go on the issue of standards and interoperability with a broader range of mobile devices also required; and mentioned the problem of high staff turnover within shops making it harder to ensure all personnel are adequately trained in the use of contactless payment equipment.

Finally, we heard from David Baker, head of the card technology unit at the UK Cards Association, who also spoke of the mutual benefits that could be accrued through cooperation. He reviewed the various technical options available for the Secure Element in MCP, covering NFC primarily but also touching on bridging technologies such as microSD cards and mobile stickers. He reiterated that the technology is not, however, as important as consumer and retailer acceptance, relating the tale of visitors to his organisation’s own offices struggling to use card contactless payments in the Prêt a Manger next door. “If you ask to pay by contactless it means the staff either ask for help using it, or say it’s not working,” he said. An obvious case for further education.

Baker also listed a series of social, business and technology trends that all seem to be pushing mobile payments of all kinds closer to the mainstream. “I’d bet that the next iPhone does have some kind of NFC functionality,” he said. “In a few years’ time, when the next generation of PoS terminals have become more common, when your sole trader is using his phone to accept payments, we can really make a dent in cash. In the end, every single one of those mobile phones can be an acceptance device and a mobile device. Mobile payments has a bright future.”

As indeed, surely, does mobile banking and mobile FS generally if La Caixa, Lloyds Banking, HSBC and many of the other speakers at the Summit are to be believed. Few delegates can have left the event without holding the view that when it comes to mobile becoming a primary service channel in financial services of all kinds, it’s surely no longer a question of whether or not it will happen, but when. The discussion continued over drinks. BT


“Convenience is the thing that consumers want. And everybody has a mobile phone.”

David Baker, UKCA



PaymentsJuLY/August 2011

“Imperfections” in europe’s payments landscape offer opportunities to create more efficient electronic payments methods, according to a position paper by the e-Payments merchant Initiative, a group of european internet-based retailers and electronic commerce organisations. the report lists ten issues that these merchants feel, if addressed, will accelerate market growth.

According to the group, six of the issues can be improved if better mechanisms are implemented for online authentication and authorisation. these mechanisms would reduce card fraud and the barriers to consumer use as well as opening the way for new payment services based on sEPA credit transfers and direct debits.

“the key message to the industry is to improve [the] missing e-identity component in a generic and customer friendly way: it will accelerate market growth, and thus lead to more transactions. A virtuous circle can be created,” says the report.

the establishment of digital identity was one of the main topics of discussion earlier this year at the International Payments summit in London. Director of financial services consultancy Consult Hyperion, Dave Birch, said at the time that existing security and identity systems were inadequate and argued in favour of pseudonymity that would remove the need for names on cards and other tokens but would enable a bank to identify its users.

the EPMI paper cites the European Commission’s Digital Agenda paper, which pointed out three main obstacles to widespread take-up of electronic payments: a lack of confidence in online payment methods; concerns about privacy when providing personal data to enable delivery of goods; and a lack of trust in web merchants.

Better online authentication and authorisation should improve the confidence of consumers, says the paper.

so, how to improve the situation? Among the paper’s recommendations are a series of improvements to 3D secure, an XML-based protocol used as an added layer of security for online credit and debit card transactions. the system

protects merchants from charge-backs on transactions where the card holder denies they made the purchase. Among its drawbacks are the facts it does not protect against other charge-backs and does not prevent charge-backs happening in the first place.

Moreover, because 3D secure requires an extra step in the online checkout process (such as with Verified by Visa when a separate window appears on the screen and requires the consumer to enter a password) this can reduce order conversion as users often lose passwords. 3D secure also requires additional signup from every credit card holder. Often consumers are required to do this before they can proceed with payment, without the benefit of doing so being pointed out to them. the merchants involved in the position paper felt this resulted in lower conversion rates of visitors to their sites becoming buyers.

My own experience with 3D secure chimes with the paper’s suggestion that the system’s consumer experience is weak. Apart from having to remember a password, I have often been asked to provide the sixth, ninth and thirteenth letter or number of my password when the password has only 10 digits. Or, as occurs more often, I have to change my password as it doesn’t work or I have forgotten it. Being able to change a password while in the middle of a purchase doesn’t seem particularly secure to me.

the merchants recommend the use of authentication methods that consumers already use such as bank passwords, mobile phones and other secure tokens.

Also on the issue of fraud, the paper suggests that dispute resolution processes should be standardised among acquirers, payment services providers and buyers. this would speed up resolution of disputes and improve customer satisfaction with online commerce.

there is, however, some good news on card fraud. In March the uK Cards Association reported that fraud losses on uK cards fell to their lowest level in a decade during 2010. Losses on credit and debit cards were £365.4 million, down 17% on the previous year, and the lowest level since 2000.

Despite its drawbacks, the Association cited systems based on 3D secure as contributing to the improving picture, along with fraud data sharing and the roll-out of the chip and PIN system internationally.

the online merchants can see opportunities in sEPA, according to the position paper. the sEPA credit transfer, for example, does not carry the risk of charge back for merchants because the buyer initiates the payment through his or her bank. As the sCt wasn’t designed for online purchases the online banking epayments (OBEP) method has been developed. under this method a buyer is redirected at checkout from the merchant site to the site of his or her bank, where authorisation of the transaction is done via the consumer’s online banking account. Merchants receive a real-time payment guarantee.

the OBEP method is used in the Netherlands, where it is branded iDeal. More than 90% of all online merchants operating in the Netherlands accept this payment method. similar systems are operating in germany (giropay), Austria (EPs), the us (secure Vault Payments) and other countries.

However, the use of the method is fragmented and schemes are not interoperable. the merchants therefore are calling for more cross-border Obep payment options, including a global solution that will reduce fragmentation and improve buyers’ online shopping experiences.

Other recommendations made by the merchants’ group include greater clarity on charge back rules with electronic wallet systems, the introduction of an electronic mandate for sEPA direct debits, interoperability of prepaid solutions, cross-border cash on delivery solutions, and the development of payment methods for mobile phones and tablet computers, including electronic authentication options to improve ease of use.

the position paper will be distributed to web merchants and electronic commerce associations for further discussion and endorsement. the authors of the paper hope to attract international interest and input. BT

Room for improvementRetailers say that more efficient payment mechanisms could boost online commerce, reports Heather McKenzie.

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PaymentsJuLY/August 2011

“Imperfections” in europe’s payments landscape offer opportunities to create more efficient electronic payments methods, according to a position paper by the e-Payments merchant Initiative, a group of european internet-based retailers and electronic commerce organisations. the report lists ten issues that these merchants feel, if addressed, will accelerate market growth.

According to the group, six of the issues can be improved if better mechanisms are implemented for online authentication and authorisation. these mechanisms would reduce card fraud and the barriers to consumer use as well as opening the way for new payment services based on sEPA credit transfers and direct debits.

“the key message to the industry is to improve [the] missing e-identity component in a generic and customer friendly way: it will accelerate market growth, and thus lead to more transactions. A virtuous circle can be created,” says the report.

the establishment of digital identity was one of the main topics of discussion earlier this year at the International Payments summit in London. Director of financial services consultancy Consult Hyperion, Dave Birch, said at the time that existing security and identity systems were inadequate and argued in favour of pseudonymity that would remove the need for names on cards and other tokens but would enable a bank to identify its users.

the EPMI paper cites the European Commission’s Digital Agenda paper, which pointed out three main obstacles to widespread take-up of electronic payments: a lack of confidence in online payment methods; concerns about privacy when providing personal data to enable delivery of goods; and a lack of trust in web merchants.

Better online authentication and authorisation should improve the confidence of consumers, says the paper.

so, how to improve the situation? Among the paper’s recommendations are a series of improvements to 3D secure, an XML-based protocol used as an added layer of security for online credit and debit card transactions. the system

protects merchants from charge-backs on transactions where the card holder denies they made the purchase. Among its drawbacks are the facts it does not protect against other charge-backs and does not prevent charge-backs happening in the first place.

Moreover, because 3D secure requires an extra step in the online checkout process (such as with Verified by Visa when a separate window appears on the screen and requires the consumer to enter a password) this can reduce order conversion as users often lose passwords. 3D secure also requires additional signup from every credit card holder. Often consumers are required to do this before they can proceed with payment, without the benefit of doing so being pointed out to them. the merchants involved in the position paper felt this resulted in lower conversion rates of visitors to their sites becoming buyers.

My own experience with 3D secure chimes with the paper’s suggestion that the system’s consumer experience is weak. Apart from having to remember a password, I have often been asked to provide the sixth, ninth and thirteenth letter or number of my password when the password has only 10 digits. Or, as occurs more often, I have to change my password as it doesn’t work or I have forgotten it. Being able to change a password while in the middle of a purchase doesn’t seem particularly secure to me.

the merchants recommend the use of authentication methods that consumers already use such as bank passwords, mobile phones and other secure tokens.

Also on the issue of fraud, the paper suggests that dispute resolution processes should be standardised among acquirers, payment services providers and buyers. this would speed up resolution of disputes and improve customer satisfaction with online commerce.

there is, however, some good news on card fraud. In March the uK Cards Association reported that fraud losses on uK cards fell to their lowest level in a decade during 2010. Losses on credit and debit cards were £365.4 million, down 17% on the previous year, and the lowest level since 2000.

Despite its drawbacks, the Association cited systems based on 3D secure as contributing to the improving picture, along with fraud data sharing and the roll-out of the chip and PIN system internationally.

the online merchants can see opportunities in sEPA, according to the position paper. the sEPA credit transfer, for example, does not carry the risk of charge back for merchants because the buyer initiates the payment through his or her bank. As the sCt wasn’t designed for online purchases the online banking epayments (OBEP) method has been developed. under this method a buyer is redirected at checkout from the merchant site to the site of his or her bank, where authorisation of the transaction is done via the consumer’s online banking account. Merchants receive a real-time payment guarantee.

the OBEP method is used in the Netherlands, where it is branded iDeal. More than 90% of all online merchants operating in the Netherlands accept this payment method. similar systems are operating in germany (giropay), Austria (EPs), the us (secure Vault Payments) and other countries.

However, the use of the method is fragmented and schemes are not interoperable. the merchants therefore are calling for more cross-border Obep payment options, including a global solution that will reduce fragmentation and improve buyers’ online shopping experiences.

Other recommendations made by the merchants’ group include greater clarity on charge back rules with electronic wallet systems, the introduction of an electronic mandate for sEPA direct debits, interoperability of prepaid solutions, cross-border cash on delivery solutions, and the development of payment methods for mobile phones and tablet computers, including electronic authentication options to improve ease of use.

the position paper will be distributed to web merchants and electronic commerce associations for further discussion and endorsement. the authors of the paper hope to attract international interest and input. BT

Room for improvementRetailers say that more efficient payment mechanisms could boost online commerce, reports Heather McKenzie.


ANALYSIS: INfrAStructureSJuLY/August 2011

consolidation among payment infrastructures is underway, but who will be the winners and losers is far from clear – other than that the old domestic model will be replaced by pan-regional operators.

this could mean a new role for networks like swift, according to Arun Aggarwal, head of swift uK. Aggarwal (right) was speaking at the launch of a Financial services Club report entitled The Changing Face of Payments: a Review of Current Payments Infrastructures and Implications for the Future. It shows payment systems will undergo consolidation and transformation over the next decade.

“Pure domestic has a limited future, and we are looking at what role swift has in breaking down those barriers,” he said.

the research, among 300 payments professionals shows that 40% of the organisations surveyed will be using just two to three key payments platforms in ten years, against the nine platforms that 21% of these organisations use currently.

the current payments infrastructure, while being fit for purpose today and with an enviable track-record of essential payment continuity, is not flexible enough to adapt easily to regulatory changes in payments, the research indicates. Around 63% of the participants say that payments infrastructures around the world will require significant changes.

VocaLink and swift were singled out as being “innovative and leading edge” by a majority (though VocaLink was also described as “challenging” by a substantial number of respondents on the banking side of the sample).

Chris Dunne, strategy director at VocaLink, said he was not too surprised to get a bipolar result. “We do find from our own research that half the banks say we’re going too slow and the other half say we’re going too fast,” he said.

Dunne said that the results of the survey also confirmed what his company is planning in terms of development. “Mobile payments are a big opportunity for us, but we don’t want to go down to the end consumer – PayPal has an app for that and it is very good. We want to be in the centre,” he said. “Mobile will be a big driver for cheque replacement, as well as

an awful lot of other new ways to pay, and we want to be in the middle of that, not develop a fully-functionally app.”

A lot of the development planned by VocaLink will be based on the technology developed for the uK Faster Payments system. “We see a lot of innovation coming in on top of FPs,” said Dunne. “We will take what’s already there and make it work better.”

In terms of the much-anticipated consolidation of payments processors, Dunne said that he expected that it “will end up with four or five and that VocaLink will be one of them”.

Jose Béltrán, sEPA development director at stEt, the French interbank payment services, said: “Most infrastructures are fit today, but won’t be tomorrow – and tomorrow is coming really fast.”

Béltrán warned that there was a danger of the industry being too inward-looking on the issues that are driving the changes to the payments infrastructure. “We’re at the beginning of a long road with sEPA,” he said. “the evolution of the infrastructure is not driven by sEPA, as we expected, but by consumer demand.”

According to the report, payments processing is also set for disruption from emerging technologies. For wholesale as well as retail banks, internet-based payments feature in the top three

technologies that will have the most impact on their payment platforms. Around 96% of the retail banks cite the Internet and 82% cite mobile technologies as either the most important change or one of the important changes. A higher number of wholesale banks expect cloud computing to have a big impact.

the report suggests that existing leaders in the payments industry will have to adapt to regulatory changes and increased competition in order to succeed in the future. While those surveyed consider swift to be the most important global payment platform, EBA Clearing, VocaLink and Equens are viewed as the next most important, innovative and leading-edge payment platforms.

“Payment platforms and payments processing are vital to a stable economy, as corporates and individuals expect payments to reach the right recipient at the right location at the right time and at a competitive rate,” said Chris skinner, chairman of the Fs Club. “While advances in technology mean barriers to entry are reduced – allowing new players such as PayPal, Vodafone, google and Apple into an increasingly competitive market – new regulations will require banks to adapt and ensure their processes and systems adhere to changing requirements. this will put huge pressure on the banks to respond to such changes rapidly to avoid systemic risk by choosing stable, scalable and auditable systems.”

“At a time when the forces of globalisation, regulatory changes, emerging technologies, and the demands of a new generation of ‘digital natives’ are creating profound shifts in the industry, banking and financial services firms are placing a renewed focus on ensuring flexibility and transparency,” said tony Virdi, vice president of Cognizant’s Banking and Financial services Practice for the uK and Ireland, which sponsored the report. “New entrants in the payments arena are set to bring further disruption by pushing innovation (both process and technology) to help meet customer and regulator expectations. Examples of focus include just-in-time payments processing, enterprise payments visibility and outsourced compliance as well as other back office activities.” BT

Trouble ahead for payment infrastructures David Bannister

Research carried out by the Financial Services Club confirms that payment infrastructures are under considerable pressure from several directions, and some will disappear.


ANALYSIS: pAYmeNtSJuLY/August 2011

Digital money specialist Dave Birch, a director of Consult Hyperion, told the recent annual Payment strategies Conference – organised by Experian Identity and Fraud – that “the evolution of an identity market is the next big step” in developing mobile payments and related services. But he warned that “the technologies involved are very different to those in the connectivity space. In the mass market, biometrics are about convenience, not security,” he said. (see feature, page 29).

Birch lambasted traditional banks and payments providers for their failure to grasp the nature of the opportunities presented by mobile technologies, which has led them to miss the boat, though he admitted that he too was optimistic. “Four or five years ago I would have being telling you about the potential for the mobile operators, the banks and other stakeholders to come together. We were working on a lot of exciting projects,” he told the conference. “What was I thinking? I’m almost embarrassed to stand before you and say that I thought that banks and mobile operators could work together. It was a ridiculous fantasy for which I apologise unreservedly.”

this has meant that it has taken longer for the infrastructure to develop than he’d predicted, but more importantly, banks are still missing out. only recently, banks in the us had told him that there is no business case for subsidising the installation of contactless readers in retail premises, but google has recently announced that it will do just that.

the real threat here is that while traditional providers like the banks are “having head-of-a-pin arguments about whether to charge retailers 1.73% or 1.74%, the retailers are happy to pay google 8% because they are bringing customers through the door and payment mechanisms don’t”. the use of vouchers and other enticements means that google and others are providing the retailers with new ways of attracting business – and that is what they will pay for, he said. “Banks are saying that there is no business case for this, but google is saying that there is such a business case that they will give away the terminals for free – not subsidised, not at a discount, but for nothing.”

A self-confessed payments system obsessive, Birch outlined a number of future changes in the payments world, and said that a key thing that people forget is that it is simple steps that lead to big changes.

In mobile payments, for instance, there has been a tendency to be clever-clever that has taken people up a series of blind alleys. “In order to take steps forward, it needs a little bit of imagination; it doesn’t necessarily need super complex solutions,” he said. “One of the things that has gone wrong with mobile in the immediate past is the introduction of complex technical solutions.”

technology per se is not the most important factor. “the technology roadmap is not that interesting – it is pretty well-known, and it is not terribly controversial to say that the most significant thing on that road-map is mobile. But what about mobile is interesting? We all know it is the key, but what about it is key?” he

asked. understanding that will be central to adapting to the new changes that are happening.

Over the medium term, identity mechanisms will be the key in this, he now things. In the us there is the National strategy for trusted Identities in Cyberspace, and the uK Cabinet office has indicated that it is looking to develop something similar. “the evolution of an identity market is clearly the next phase – not just because the governments want it, but because the private sector needs it too,” said Birch. “the technologies in this space are different to those in the connectivity space, and control of that is going to be very important. Biometrics in the mass market is clearly the next phase.”

A more complex issue is the blurring of the distinction between the real and the virtual in cyberspace. “some things have a real physical existence and some things don’t,” he said. “An example would be the difference between World of Warcraft gold and us dollar – one of them is a hypothetical notion of value that isn’t really backed by anything, and the other is used in a game.”

this is less flippant than it sounds: for many young people – including Birch’s 14-year old son – being rewarded with virtual credits is just as acceptable as being paid in cash. “If I said I’d pay him for doing a chore in Facebook Credits or World of Warcraft gold or British pounds, it would make absolutely no difference to him: in his head those things are all really just the same, they are just mechanisms of exchange,” he said. “that has really just crept up on us. You can now use Facebook Credits on itunes. that sort of thing is really important in shaping this sector, and it is not good enough to sit down with a couple of the banks and a few of the credit card processors, because the changes are not happening there.”

All of this will converge on mobile wallets – perhaps many of them interoperating – and mobile phones, and this will mean integration of identification and authorisation at that level. “Mobile operators should have some terrific strategies around this, but they don’t because they are all run by marketing people.” BT

Identity: the next big thing for payments David Bannister

As the mobile payments area looks set to finally take off, the next big area for payments services will be identity and authentication, according to a leading commentator.

“One of the things that has gone wrong with

mobile in the immediate past is the introduction of complex technical

solutions.”


ANALYSIS: INfrAStructureSJuLY/August 2011

consolidation among payment infrastructures is underway, but who will be the winners and losers is far from clear – other than that the old domestic model will be replaced by pan-regional operators.

this could mean a new role for networks like swift, according to Arun Aggarwal, head of swift uK. Aggarwal (right) was speaking at the launch of a Financial services Club report entitled The Changing Face of Payments: a Review of Current Payments Infrastructures and Implications for the Future. It shows payment systems will undergo consolidation and transformation over the next decade.

“Pure domestic has a limited future, and we are looking at what role swift has in breaking down those barriers,” he said.

the research, among 300 payments professionals shows that 40% of the organisations surveyed will be using just two to three key payments platforms in ten years, against the nine platforms that 21% of these organisations use currently.

the current payments infrastructure, while being fit for purpose today and with an enviable track-record of essential payment continuity, is not flexible enough to adapt easily to regulatory changes in payments, the research indicates. Around 63% of the participants say that payments infrastructures around the world will require significant changes.

VocaLink and swift were singled out as being “innovative and leading edge” by a majority (though VocaLink was also described as “challenging” by a substantial number of respondents on the banking side of the sample).

Chris Dunne, strategy director at VocaLink, said he was not too surprised to get a bipolar result. “We do find from our own research that half the banks say we’re going too slow and the other half say we’re going too fast,” he said.

Dunne said that the results of the survey also confirmed what his company is planning in terms of development. “Mobile payments are a big opportunity for us, but we don’t want to go down to the end consumer – PayPal has an app for that and it is very good. We want to be in the centre,” he said. “Mobile will be a big driver for cheque replacement, as well as

an awful lot of other new ways to pay, and we want to be in the middle of that, not develop a fully-functionally app.”

A lot of the development planned by VocaLink will be based on the technology developed for the uK Faster Payments system. “We see a lot of innovation coming in on top of FPs,” said Dunne. “We will take what’s already there and make it work better.”

In terms of the much-anticipated consolidation of payments processors, Dunne said that he expected that it “will end up with four or five and that VocaLink will be one of them”.

Jose Béltrán, sEPA development director at stEt, the French interbank payment services, said: “Most infrastructures are fit today, but won’t be tomorrow – and tomorrow is coming really fast.”

Béltrán warned that there was a danger of the industry being too inward-looking on the issues that are driving the changes to the payments infrastructure. “We’re at the beginning of a long road with sEPA,” he said. “the evolution of the infrastructure is not driven by sEPA, as we expected, but by consumer demand.”

According to the report, payments processing is also set for disruption from emerging technologies. For wholesale as well as retail banks, internet-based payments feature in the top three

technologies that will have the most impact on their payment platforms. Around 96% of the retail banks cite the Internet and 82% cite mobile technologies as either the most important change or one of the important changes. A higher number of wholesale banks expect cloud computing to have a big impact.

the report suggests that existing leaders in the payments industry will have to adapt to regulatory changes and increased competition in order to succeed in the future. While those surveyed consider swift to be the most important global payment platform, EBA Clearing, VocaLink and Equens are viewed as the next most important, innovative and leading-edge payment platforms.

“Payment platforms and payments processing are vital to a stable economy, as corporates and individuals expect payments to reach the right recipient at the right location at the right time and at a competitive rate,” said Chris skinner, chairman of the Fs Club. “While advances in technology mean barriers to entry are reduced – allowing new players such as PayPal, Vodafone, google and Apple into an increasingly competitive market – new regulations will require banks to adapt and ensure their processes and systems adhere to changing requirements. this will put huge pressure on the banks to respond to such changes rapidly to avoid systemic risk by choosing stable, scalable and auditable systems.”

“At a time when the forces of globalisation, regulatory changes, emerging technologies, and the demands of a new generation of ‘digital natives’ are creating profound shifts in the industry, banking and financial services firms are placing a renewed focus on ensuring flexibility and transparency,” said tony Virdi, vice president of Cognizant’s Banking and Financial services Practice for the uK and Ireland, which sponsored the report. “New entrants in the payments arena are set to bring further disruption by pushing innovation (both process and technology) to help meet customer and regulator expectations. Examples of focus include just-in-time payments processing, enterprise payments visibility and outsourced compliance as well as other back office activities.” BT

Trouble ahead for payment infrastructures David Bannister

Research carried out by the Financial Services Club confirms that payment infrastructures are under considerable pressure from several directions, and some will disappear.


ANALYSIS: DAtAJuLY/August 2011

three years after the financial crisis began, US regulators are taking the first steps toward issuing rules for global banks – developing standards. the standards work is detailed, tedious and time-consuming – think years, not months – and necessary for a global industry whose business is almost entirely electronic.

us regulators are working on a timeline set, in some areas, by the Dodd Frank legislation. European regulators, who are under no such immediate pressure, have done nothing so far. so will the result be global standards or just new rules for the us banks?

New financial industry standards efforts are underway in two areas – legal entities and data.

this month, the Office of Financial Regulation (OFR) will confirm the organisation(s) to develop a Legal Entity Identifier and maintain the database. the leading contenders are swift, the international banking organisation which has the backing of the International Organisation for standardisation (IsO) and the Depository trust and Clearing Corporation (DtCC).

In parallel, the Commodity Futures trading Commission announced an advisory subcommittee on data standardisation.

For both financial firms and for regulators, a single set of globally adopted standards for firms and transaction types is the goal. the single standard allows a bank to monitor its counterparty risks globally, streamlines back office processing and reduces costs in data management.

In May, the us securities Industries and Financial Markets Association and 12 other trade associations released Requirements for a Global Legal Entity Identifier (LEI) Solution, outlining an industry consensus perspective on how the LEI system should work and requirements for the future potential LEI provider.

A representative from a New York investment bank told the sIFMA securities industry conference in June how a single LEI could help her firm monitor its exposure by product and counterparty: “We do contingency stress testing. We take a large trading partner and look at all our positions

and ask what happens if the counterparty goes bankrupt, what do we have to do to close down those positions? It is very hard to do across all the products we transact with some of our largest partners. We can do it today, but it ends up being quite a difficult process and often needs manual intervention to look across all the products and asset classes.”

Firms have built their own legal identifiers, but a single standard maintained by a third party would reduce costs and eliminate the need to translate the information from system to system, said another panellist. Currently, back office staff spend four to five hours a day cleaning up data. It would also simplify regulatory reporting and provide regulators with a better view of what is happening across the world.

If this is such a great idea, why haven’t the banks created a universally accepted identifier on their own?

Paradoxically, because it is so important. Firms have already developed their own identifiers, explained Michael Atkin, managing director of the Enterprise Data Management Council and member of the CFtC technology subcommittee on Data standardization.

“the banks all did their own point solutions. then there wasn’t a business case for redoing all that to achieve global alignment,” said Atkin. “Most companies operate in narrow parameters – the curse of the short view. Compulsion by regulators is the only way to overcome that. With their task of systemic oversight, they need comparability of legal entity identification.”

However, so far only the us has taken any action to require a global identifier. At sIFMA, a us treasury representative talked of flying to Europe for talks, but so far no regulator in Europe or Asia has publicly endorsed the American effort. so the result could be that banks operating in the us use the identifier while continuing to use their own internal identifiers in their other operations. unless Europe mandates use of the us identifier, and that is confirmed by legislation in the 27 member countries, banks will have a difficult business case to make for the expensive conversion to a single global standard.

In the us, the new identifiers should be operational within three years, said Atkin.

three years to get around to addressing the issue and another three years to fix it? While that may sound slow to someone from outside financial services, Atkins, with 10 years’ experience in working with data management issues sees it differently: “this is a ridiculously short time. Firms have been scrambling to understand the data relationship, then align to address the issues in the midst of 320 regulations coming out with Dodd Frank, and the data infrastructure wasn’t even on the agenda.”

Data is boring, but it is fundamental to understanding a bank’s positions, its liquidity and its exposure risks by counterparty, currency, interest rates, credit, and geographies. With data in its raw form, rather than aggregated up through layers of assumptions and bank’s proprietary reporting structures, risk managers and regulators can drill down to see for themselves who holds what risks.

Only recently have these data issues made their way up to senior management, said Atkin. After all, the higher you go in a bank the more issues executives are responsible for, and data just hasn’t been one of them. Now senior executives and regulators understand the relationships between data and risk management and oversight.

He thinks caution is required, because getting the data right is so important.

PJ Di giammarino, chief executive of the London-based financial technology think tank JWg, said the process of developing standards has shown a lack of leadership by the global regulatory community. the OFR in the us has turned the process of developing requirements and short-listing a vendor over to sIFMA before the regulatory requirements have been agreed.

“the nuts and bolts of regulatory reform are all over the shop floor and no one knows what we are trying to build. It’s a massive challenge and everyone is afraid to admit it is their job to take it on,” he said. “Without practical, hands-on review of how we intend to use the identifier for the business of making global decisions on the riskiness of trades, positions, clearing arrangements, net stable funding ratios and counterparty exposures, the good data efforts led by the us will quickly become irrelevant.” BT

Data dilemmas tom Groenfeldt

Paradoxically, urgent efforts to create a global Legal Entity Identifier standard may be moving too fast, say long-time observers of the topic.

The atmosphere was mixed at SIFMA’s Financial Services Leaders Forum and Expo, held in New York during June. On one side, another year has gone by, and market participants are still wringing their hands over the overwhelming regulatory reforms coming down the pike. On the other, brighter side, the booths (albeit fewer than in previous years) displaying an array of gizmos offered some respite for regulation-weary attendees.

Panellists in one session noted that the Dodd-Frank Wall Street Reform and Consumer Protection Act is the biggest piece of financial legislation since the Great Depression. New supervisory entities are being created ranging from the Financial Services Oversight Council to the Office of Financial Research and the Consumer Protection Agency. The consensus is that the IT consequences are going to be enormous as institutions will now be required to introduce new processes for risk management and reporting. The reforms are still in their early stages, and the protracted period of uncertainty is taking a toll on the industry.

Yet there are opportunities for those who can anticipate and take advantage of technology-driven transformation. The industry has slowly come to grips with cyber security, cloud computing, mobility, high performance computing and real-time analytics. Social media is the new frontier. Financial firms always have been good at analysing structured data. But now they are tasked with analysing unstructured data, such as tweets, in real time to understand the mood of various stakeholders and the potential impact on their business. In short, over the next five years there will be a fundamental change in the way people market, sell, communicate, collaborate, innovate, train, educate and analyse data.

On the show floorFor the last few years, the securities industry has been driving towards increased speed. Yet handling the complexity of an end-to-end transaction and obtaining a true measure of latency remains a challenge. On the heels of the Nexus 3000 and Nexus 5500 platforms, Cisco announced a high performance trading fabric optimised for the financial

markets industry. The Cisco Algo Speed HFT Solution enables the entire lifecycle of an automated trade, as opposed to optimising one specific area.

In a recent real-world performance test completed by Miercom, Cisco performed better than previous tests performed with BNT and Arista switches, showing both lower latency and lower jitter. Tests showed significant differences in software features available with the Cisco solution,

including Layer 2, Layer 3 infrastructure and management features – many required to optimise a high performance trading fabric.

“We believe we’re the only player in the space who has delivered to the marketplace a true high performance trading fabric that cuts across the buy side, sell side and execution venues to support the entire trade lifecycle,” says Paul Jameson, Cisco global director, financial services. “To the best of our knowledge, there is no other vendor out there that has not only the architecture and solutions behind it, but also has tested and optimised it for high performance trading.”

CJC, an independent market data consultancy, announced that it achieved record growth for fiscal year 2010. The company more than doubled in size, increasing its client base by 25% and expanding its Asian presence with new offices in Hong Kong and Singapore. Its 40% revenue growth underlines the growing demand for managed services in Europe and Asia. Paul Gow, the company’s chief executive, expects to see continued growth in market data hosting as financial institutions and their partners focus on doing more with less, and more exchanges consolidate. Firms’ market data expenditures are being scrutinised at a time when stricter regulations are forthcoming. He believes an integrated

approach is necessary to manage data efficiently.

Orange Business Services launched Open Trade Store, an application store is for its smart turret, Open Trade, which was on display at the booth. Similar to the Apple Store, users can obtain applications from their own bank or from various vendors and install them on their turret. Developed as a personal trading assistant, Open Trade is a multimedia communications hub integrating voice, video, email, instant messaging and web-based applications.

Also on display was a new platform that users can pre-program to trigger an alert when certain events occur. Users may receive a pop up on Open Trade or another device such as a mobile phone, iPhone or iPad or even another vendor’s turret. With this platform traders can be more proactive with their clients.

Through a partnership with Genband, a provider of IP infrastructure and service solutions, Orange Business Services has embedded a soft switch into its voice network. Using a process called “forking”, a call can be pushed onto two devices at the same time. “That’s a value proposition for the business because then you never miss a call,” says Sebastien Jaouen, Head of Trading Community Services Trading Solutions at Orange Business Services. “That’s also important in the case of business continuity planning.”

Risk management remains in the limelight. According to FinAnalytica CEO David Merrill, models based on normal distributions did not perform well during the financial crisis. To this end, risk managers want to put better early warning processes in place. “They recognise that the systems they were using weren’t so good at looking ahead and predicting how risk was changing in different asset classes,” he says.

Unlike more commonly used models, FinAnalytica’s solution focuses on tail risk and uses distributions that allow for normal forces of symmetry. The company has been granted four patents its approach, and more patents are pending. The company now has more than 150 clients mainly in North America, Europe and the Middle East, and a platform upgrade will be announced this summer. BT

Thumbs up, thumbs down Sherree DeCovny

Gloom about the “regulatory tsunami” are still affecting the international securities industry, but there were plenty of new toys to play with at the annual SIFMA conference and expo in New York.

ShOw REpORT: SIFMAJULY/AUGUST 2011


The Dodd-Frank Wall Street Reform and

Consumer Protection Act is the biggest piece of

financial legislation since the Great Depression.


ANALYSIS: DAtAJuLY/August 2011

three years after the financial crisis began, US regulators are taking the first steps toward issuing rules for global banks – developing standards. the standards work is detailed, tedious and time-consuming – think years, not months – and necessary for a global industry whose business is almost entirely electronic.

us regulators are working on a timeline set, in some areas, by the Dodd Frank legislation. European regulators, who are under no such immediate pressure, have done nothing so far. so will the result be global standards or just new rules for the us banks?

New financial industry standards efforts are underway in two areas – legal entities and data.

this month, the Office of Financial Regulation (OFR) will confirm the organisation(s) to develop a Legal Entity Identifier and maintain the database. the leading contenders are swift, the international banking organisation which has the backing of the International Organisation for standardisation (IsO) and the Depository trust and Clearing Corporation (DtCC).

In parallel, the Commodity Futures trading Commission announced an advisory subcommittee on data standardisation.

For both financial firms and for regulators, a single set of globally adopted standards for firms and transaction types is the goal. the single standard allows a bank to monitor its counterparty risks globally, streamlines back office processing and reduces costs in data management.

In May, the us securities Industries and Financial Markets Association and 12 other trade associations released Requirements for a Global Legal Entity Identifier (LEI) Solution, outlining an industry consensus perspective on how the LEI system should work and requirements for the future potential LEI provider.

A representative from a New York investment bank told the sIFMA securities industry conference in June how a single LEI could help her firm monitor its exposure by product and counterparty: “We do contingency stress testing. We take a large trading partner and look at all our positions

and ask what happens if the counterparty goes bankrupt, what do we have to do to close down those positions? It is very hard to do across all the products we transact with some of our largest partners. We can do it today, but it ends up being quite a difficult process and often needs manual intervention to look across all the products and asset classes.”

Firms have built their own legal identifiers, but a single standard maintained by a third party would reduce costs and eliminate the need to translate the information from system to system, said another panellist. Currently, back office staff spend four to five hours a day cleaning up data. It would also simplify regulatory reporting and provide regulators with a better view of what is happening across the world.

If this is such a great idea, why haven’t the banks created a universally accepted identifier on their own?

Paradoxically, because it is so important. Firms have already developed their own identifiers, explained Michael Atkin, managing director of the Enterprise Data Management Council and member of the CFtC technology subcommittee on Data standardization.

“the banks all did their own point solutions. then there wasn’t a business case for redoing all that to achieve global alignment,” said Atkin. “Most companies operate in narrow parameters – the curse of the short view. Compulsion by regulators is the only way to overcome that. With their task of systemic oversight, they need comparability of legal entity identification.”

However, so far only the us has taken any action to require a global identifier. At sIFMA, a us treasury representative talked of flying to Europe for talks, but so far no regulator in Europe or Asia has publicly endorsed the American effort. so the result could be that banks operating in the us use the identifier while continuing to use their own internal identifiers in their other operations. unless Europe mandates use of the us identifier, and that is confirmed by legislation in the 27 member countries, banks will have a difficult business case to make for the expensive conversion to a single global standard.

In the us, the new identifiers should be operational within three years, said Atkin.

three years to get around to addressing the issue and another three years to fix it? While that may sound slow to someone from outside financial services, Atkins, with 10 years’ experience in working with data management issues sees it differently: “this is a ridiculously short time. Firms have been scrambling to understand the data relationship, then align to address the issues in the midst of 320 regulations coming out with Dodd Frank, and the data infrastructure wasn’t even on the agenda.”

Data is boring, but it is fundamental to understanding a bank’s positions, its liquidity and its exposure risks by counterparty, currency, interest rates, credit, and geographies. With data in its raw form, rather than aggregated up through layers of assumptions and bank’s proprietary reporting structures, risk managers and regulators can drill down to see for themselves who holds what risks.

Only recently have these data issues made their way up to senior management, said Atkin. After all, the higher you go in a bank the more issues executives are responsible for, and data just hasn’t been one of them. Now senior executives and regulators understand the relationships between data and risk management and oversight.

He thinks caution is required, because getting the data right is so important.

PJ Di giammarino, chief executive of the London-based financial technology think tank JWg, said the process of developing standards has shown a lack of leadership by the global regulatory community. the OFR in the us has turned the process of developing requirements and short-listing a vendor over to sIFMA before the regulatory requirements have been agreed.

“the nuts and bolts of regulatory reform are all over the shop floor and no one knows what we are trying to build. It’s a massive challenge and everyone is afraid to admit it is their job to take it on,” he said. “Without practical, hands-on review of how we intend to use the identifier for the business of making global decisions on the riskiness of trades, positions, clearing arrangements, net stable funding ratios and counterparty exposures, the good data efforts led by the us will quickly become irrelevant.” BT

Data dilemmas tom Groenfeldt

Paradoxically, urgent efforts to create a global Legal Entity Identifier standard may be moving too fast, say long-time observers of the topic.



Aite sees AML systems boom driven by regulation

IT heads in the cloud when it comes to strategyThe majority of UK businesses are planning to move their finance, e-commerce or security applications to the cloud, but only 30% of businesses currently have cloud governing policies in place.

A survey by Avanade asked 573 decision makers about their use of the cloud and attitude to future use of cloud services, revealing that most UK businesses are planning to move critical business functions to the cloud by 2013:

■ 70% of UK businesses are planning to move their finance applications to the cloud by 2013.

■ 85% of UK businesses are planning to move their e-commerce and security brokering applications to the cloud by 2013.

Moving software and services to the cloud can yield huge advantages for organisations, from straightforward cost savings to improvements in operating efficiencies. However, if different

departments begin using cloud services without the knowledge of an enterprise IT department, the result can be ‘cloud sprawl’.

The research shows that it’s not always IT staff buying cloud services: 45% of UK executives stated that someone outside IT has bought cloud services for work use. For example, HR and legal departments account for 32 and 21%of cloud purchases respectively. BT

Anti-money laundering technology has enjoyed a fresh wave of demand across the globe over the last few years, driven by the convergence of increased regulation, high-

profile regulatory enforcement actions, and next-generation technologies that address AML and fraud management needs across the enterprise.

A new report from Aite Group, based on interviews with 18 global AML compliance vendors and 36 financial institutions, gauges the state of the anti-money laundering market, including an overview of the regulatory environment, which is driving global interest in AML solutions. The report also outlines the critical components of AML solutions and profiles the major solution vendors.

As a result of the converging drivers, the global AML transaction-monitoring software market is growing at a healthy pace – one that will continue for the next few years. The $450 million global AML software market will grow at a compound annual growth rate of 9%, reaching $690 million in 2015.

“As demand for AML solutions increases globally and technology options increase, financial institutions must be careful to select the best solution for their unique needs,” said Julie Conroy McNelley, senior analyst with Aite Group and author of this report. “Financial institutions must ensure that their vendor solution can offer comprehensive rule sets to cover the AML typologies and scenarios required by regulators, and that those rule sets are easy to tailor for each country in which the financial institution has a presence.”

Market drivers include “rapid growth in Asia Pacific, the Middle East and Africa; financial institutions in the United States and Europe replacing outdated solutions; and smaller financial institutions replacing manual processes with automated, more modern solutions.” Among the recommendations for financial institutions are:■ Financial institutions should evaluate their current AML

compliance mechanisms to determine whether they have progressed with the changing times – regulators are certainly doing so during examinations.

■ Smaller financial institutions should look for a solution that can be managed with limited resources, yet which provides the comprehensive, risk-based compliance required in today’s rigorous regulatory compliance environment.

■ All financial institutions should ensure that their vendor solution can offer a comprehensive collection of rule sets to cover the AML typologies and scenarios for which regulators will be looking, and that those rule sets are easy to tailor for each country in which the FI has a presence.

■ Financial institutions in the market for a new solution should ask prospective vendors what level of revenue is reinvested in R&D on an annual basis, a key determinant of whether the solution will remain viable as a long-term investment. These figures varied widely among the vendors in this report, from 3% to 45%, with a mean of 18%.

■ Key elements to look for in watch-list filtering solutions include the ability to apply different rule sets to new customer screening and payment transaction screening; provide four-eye review; learn from false positives and reduce their impact going forward; use unstructured data in the detection process; and detect nuanced data sets such as Bank Identification Codes that represent liquidity risk. The latter is not a common occurrence, but proactive detection of the outlier cases can save FIs tens of millions of dollars.

■ Financial institutions should ask their vendor whether they provide a sandbox where rule changes can be tested prior to rolling out in production to help gauge unintended consequences (in the form of reams of accidental reports).

■ FIs with more specialised applications, like trade finance, should determine how the peer group profiling works to ensure that the logic meets the needs of the bank.

■ Analytics will increasingly come into play as AML exception volumes increase and the lines between AML and fraud blur. Rule sets are a good start, but rules can only identify a finite number of scenarios. Analytics are required to look beyond the individual rules to find broader patterns.

■ Data sharing across financial institutions could be the next frontier of AML. This is a nascent concept, but a few experiments are taking place on this front. If successful, these experiments could raise the bar for all financial institutions. BT

Download the full report here: http://tinyurl.com/6g4ghly

The report profiles the following AML solution providers: 3i-Infotech, Accuity, ACI Worldwide, EastNets, Experian, FIS, Fircosoft, Fiserv, Jack Henry, LexisNexis, Logica, Memento, NICE Actimize, Norkom Technologies (now Detica NetReveal), SAS Institute, SunGard, Tata Consultancy Services, Temenos, and Wolters Kluwer. Vendors receiving best-in-class mentions include Accuity, Fiserv, NICE Actimize, Norkom/Detica, and SAS.

To vote for one of these in the Banking Technology Readers’ Choice awards AML category, go to www.bankingtech.com/awards

Banking Technology Readers’ Choice Awards


JULY/AUGUST 2011

BY THE NUMBERS… as survey fi nds room for growth in UK mobile banking services

A quarter of UK mobile internet users now use mobile banking services, according to online consumer

research from YouGov, commissioned by mobile web and app vendor Antenna, which questioned a representative sample of 2,387 UK adults, 1,028 of whom access the internet on their mobile phone, smartphone, or tablet computer.

The fi eldwork was undertaken in late May and released during June. It shows, perhaps unsurprisingly, that the demographic driving the widespread adoption of mobile banking in the UK is young people, with 30% of 18-24 year olds and 33% of 25-34 year olds who regularly use mobile internet, accessing their bank accounts on the go. It's still not the majority, of course, but compares favourably to the 13% of over 55s in the UK who use their mobile to access their bank account.

The report also found that the functions UK mobile internet users are already using, or would most like mobile banking solutions to offer, are checking their account balance (46%); viewing their transaction history (31%); and transferring money between their own accounts (27%). A quarter of respondents use, or would like to use, mobile banking to pay their bills, and a surprisingly small 20% to transfer money to third parties – perhaps you don't know you want to pay someone outside of your own bank until you have?

Antenna's YouGov research also assessed the barriers to take-up, and found that 69% of UK mobile internet users have security concerns about mobile banking services saying they would stop using the service if they felt their data was not secure. These concerns could account for the unpopularity of third-party banking apps, with less than 1% of UK respondents saying they preferred to use a banking app not provided by their own bank.

Commenting on the research, which contrasts with some US research that

Antenna carried out simultaneously on 2,015 US adults, 906 of whom access the internet via the mobile channel, Jim Hemmer, chief executive of Antenna, said that: “Mobile banking has now taken hold. The public clearly want to fi t their banking chores around their lives and not their lives around their banking chores, using mobiles where they can. Banks

need to acknowledge this by implementing holistic mobile banking strategies as soon as possible and that means providing easy-to-use mobile web and apps across all available

device platforms.” The comparative cross-Atlantic research

also claims to reveal that the American mobile banking market is more mature than its UK counterpart – a reversal of the usual tech relationship between the US and European banks, with the latter usually ahead in tech matters. The report shows that 40% of US mobile internet users use mobile banking, compared to the 25% fi gure quoted in the UK. Other notable contrasts saw a much higher proportion of US consumers already using (or wishing to use) mobile banking services to fi nd local branches or ATMs, with 36% in the States, compared to 21% in the UK.

“Security remains the big issue for consumers,” added Hemmer, citing the fi nding that 69% of UK mobile internet users have security concerns about mobile banking services and might stop if they felt their data was unsecure. “That's probably why consumers are mostly using mobile banking services for basic tasks like checking their balances and fi nding ATMs,” he elaborated. “Banks need to start offering full mobile banking services, which allow their customers to make deposits, balance transfers and the like as soon as possible, because it's those banks which build up mobile trust in the short-term who are going to gain the most when m-commerce becomes commonplace.” BT

Global mobile payments to triple to $670bn by 2015

A new study from Juniper Research says the total value of mobile payments for digital and

physical goods, money transfers and NFC transactions will reach $670 billion by 2015, up from $240 billion this year. The forecast in the Mobile Payment Strategies report represents the gross merchandise value of all purchases or the value of money being transferred.

All segments of the market will grow by two to three times over the next fi ve years, says Juniper, driven on by the rapid adoption of mobile ticketing, Near Field Communication contactless payments, physical goods purchases and money transfers (remittances) as people in both developed and developing countries use their devices for everyday transactions.

Some 20 countries are expected to launch NFC services in the next 18 months, resulting in transactions approaching $50 billion worldwide by 2014, estimates Juniper, while mobile money use in developing countries will double by 2013. The top three regions, unsurprisingly, for mobile payments will be the Far East, Western Europe and North America, with 75% of the market. Digital goods payments will account for nearly 40% of the market in 2015, reckons Juniper.

Senior analyst David Snow said: “Our analysis shows emerging segments such as physical goods payments, NFC and money transfers will fuel market growth by a factor of 2.7 times by 2015. Digital goods is the largest segment but, although forecast to more than double, it is not growing as quickly as some of the newer mobile payment segments.” BT

Mobile money use in developing countries will double by 2013

25%of uk mobile internet users now use

mobile banking services



Aite sees AML systems boom driven by regulation

IT heads in the cloud when it comes to strategyThe majority of UK businesses are planning to move their finance, e-commerce or security applications to the cloud, but only 30% of businesses currently have cloud governing policies in place.

A survey by Avanade asked 573 decision makers about their use of the cloud and attitude to future use of cloud services, revealing that most UK businesses are planning to move critical business functions to the cloud by 2013:

■ 70% of UK businesses are planning to move their finance applications to the cloud by 2013.

■ 85% of UK businesses are planning to move their e-commerce and security brokering applications to the cloud by 2013.

Moving software and services to the cloud can yield huge advantages for organisations, from straightforward cost savings to improvements in operating efficiencies. However, if different

departments begin using cloud services without the knowledge of an enterprise IT department, the result can be ‘cloud sprawl’.

The research shows that it’s not always IT staff buying cloud services: 45% of UK executives stated that someone outside IT has bought cloud services for work use. For example, HR and legal departments account for 32 and 21%of cloud purchases respectively. BT

Anti-money laundering technology has enjoyed a fresh wave of demand across the globe over the last few years, driven by the convergence of increased regulation, high-

profile regulatory enforcement actions, and next-generation technologies that address AML and fraud management needs across the enterprise.

A new report from Aite Group, based on interviews with 18 global AML compliance vendors and 36 financial institutions, gauges the state of the anti-money laundering market, including an overview of the regulatory environment, which is driving global interest in AML solutions. The report also outlines the critical components of AML solutions and profiles the major solution vendors.

As a result of the converging drivers, the global AML transaction-monitoring software market is growing at a healthy pace – one that will continue for the next few years. The $450 million global AML software market will grow at a compound annual growth rate of 9%, reaching $690 million in 2015.

“As demand for AML solutions increases globally and technology options increase, financial institutions must be careful to select the best solution for their unique needs,” said Julie Conroy McNelley, senior analyst with Aite Group and author of this report. “Financial institutions must ensure that their vendor solution can offer comprehensive rule sets to cover the AML typologies and scenarios required by regulators, and that those rule sets are easy to tailor for each country in which the financial institution has a presence.”

Market drivers include “rapid growth in Asia Pacific, the Middle East and Africa; financial institutions in the United States and Europe replacing outdated solutions; and smaller financial institutions replacing manual processes with automated, more modern solutions.” Among the recommendations for financial institutions are:■ Financial institutions should evaluate their current AML

compliance mechanisms to determine whether they have progressed with the changing times – regulators are certainly doing so during examinations.

■ Smaller financial institutions should look for a solution that can be managed with limited resources, yet which provides the comprehensive, risk-based compliance required in today’s rigorous regulatory compliance environment.

■ All financial institutions should ensure that their vendor solution can offer a comprehensive collection of rule sets to cover the AML typologies and scenarios for which regulators will be looking, and that those rule sets are easy to tailor for each country in which the FI has a presence.

■ Financial institutions in the market for a new solution should ask prospective vendors what level of revenue is reinvested in R&D on an annual basis, a key determinant of whether the solution will remain viable as a long-term investment. These figures varied widely among the vendors in this report, from 3% to 45%, with a mean of 18%.

■ Key elements to look for in watch-list filtering solutions include the ability to apply different rule sets to new customer screening and payment transaction screening; provide four-eye review; learn from false positives and reduce their impact going forward; use unstructured data in the detection process; and detect nuanced data sets such as Bank Identification Codes that represent liquidity risk. The latter is not a common occurrence, but proactive detection of the outlier cases can save FIs tens of millions of dollars.

■ Financial institutions should ask their vendor whether they provide a sandbox where rule changes can be tested prior to rolling out in production to help gauge unintended consequences (in the form of reams of accidental reports).

■ FIs with more specialised applications, like trade finance, should determine how the peer group profiling works to ensure that the logic meets the needs of the bank.

■ Analytics will increasingly come into play as AML exception volumes increase and the lines between AML and fraud blur. Rule sets are a good start, but rules can only identify a finite number of scenarios. Analytics are required to look beyond the individual rules to find broader patterns.

■ Data sharing across financial institutions could be the next frontier of AML. This is a nascent concept, but a few experiments are taking place on this front. If successful, these experiments could raise the bar for all financial institutions. BT

Download the full report here: http://tinyurl.com/6g4ghly

The report profiles the following AML solution providers: 3i-Infotech, Accuity, ACI Worldwide, EastNets, Experian, FIS, Fircosoft, Fiserv, Jack Henry, LexisNexis, Logica, Memento, NICE Actimize, Norkom Technologies (now Detica NetReveal), SAS Institute, SunGard, Tata Consultancy Services, Temenos, and Wolters Kluwer. Vendors receiving best-in-class mentions include Accuity, Fiserv, NICE Actimize, Norkom/Detica, and SAS.

To vote for one of these in the Banking Technology Readers’ Choice awards AML category, go to www.bankingtech.com/awards

Banking Technology Readers’ Choice Awards

benefits of Big Data than most other sectors: it can afford the talent, it has the IT infrastructure and, to a far lesser extent, it has access to the data.

And where is that data? That’s right: it’s in silos scattered throughout the organisation, or at least we think it is.

Pulling together disparate data from multiple silos is something that financial service firms have been doing for some time too – a glance at the case studies on offer at user conferences from the big IT players, and from specialists like Informatica and Teradata, will show a strong representation from banks and similar financial institutions.

But there is a change happening in in the way that financial institutions are interacting with customers – or perhaps the other way round, since it is the customers who are making the changes.

Nicolas de Kouchkovsky is chief marketing officer for enterprise applications at Alcatel-Lucent, whose Genesys software handles more than 100 million customer interactions each day for 4,000 companies and government agencies in 80 countries. “It is critical to realise that consumers no longer have a single relationship with financial institutions, and new mobile payments platforms are increasing that,” he says.

More and more consumers have multiple relationships, and they are also using multiple channels to communicate with institutions. Unsurprisingly, most traditional financial institutions have been slow to pick up on this – with some notable exceptions like First Direct. “Generally, social media has been managed out of marketing, and it has been done manually,” says de Kouchkovsky. “We are now seeing a shift to it becoming a true process.”

According to a Genesys-sponsored consumer survey published last year, over 90% of consumers used multiple communication channels when contacting a company’s customer service, but only 10% of companies are geared up to handle this. The survey, was carried out by research firm Ovum.

“Less than 10% of companies are prepared today for cross channel conversations,” said Daniel Hong, lead analyst of customer interaction at Ovum. “The survey showed that customer frustration continues to grow as consumers attempt to contact companies using existing communication channels that do not transfer the context of the contact from one channel to another. It’s imperative that an enterprise like a bank engage consumers on the customers’ terms or risk losing them.”

Cross channel communications occur when a consumer initiates a request or poses a query in one communication channel, and then continues that same conversation through multiple contact methods in order to reach a resolution. Notably, most respondents said that they would like to see better human integration with the various channels – which are still dominated by voice, but now include SMS, email, live chat, web self-service, and social media such as Twitter.

While this is a day-to-day issue, de Kouchkovsky says that the very near future will bring even more complex issues for the industry to address, but he urges people to look at the opportunities, not just the

problems of Big Data. “The fact that it is ‘Big’ is just an attribute: what is important is to be able to analyse it,” he says. “Companies are going to have to employ massive analytics to understand customer behaviour – or employ third-parties such as Google to do it for them, though there are huge privacy issues.”

Others agree that the “bigness” of Big Data is not the most important factor – as McKinsey points out, you can store all of the music in the world on a disk drive that costs $600.

Even from the perspective of a storage vendor there has been a noticeable shift in customer concern away from the cost of storage towards “simplicity of access to the data, speed of access and accuracy”, says Nigel Goodwin, director of financial services solutions at EMC. “Previously, customers would have a data warehouse that they would expect to grow over time and they would negotiate a price with a vendor such as ourselves. Now they are much more concerned with speed of access and getting the quickest possible retrieval times.”

Partly driving this is the need to respond to regulatory requirements. “Previously it might take16 hours to turn a dataset around and get a report out, and today that’s down to about eight hours,” says Goodwin. “Now, with the regulation that has come in since the financial crisis it has to become intraday – they need to interrogate the dataset and get back to the auditors or regulators in six hours or less.”

“It is a convergence of data warehouse, data mining and business analytics: technologies that previously couldn’t handle the size of data sets that are now being created and that you need to have access to – that’s basically where Big Data comes from. There is so much information being thrown into those repositories that the previous technologies couldn’t cope with it,


■ 5 billion mobile phones in use in 2010 ■ 30 billion pieces of content shared on Facebook every month ■ 40% projected growth in global data generated per year vs. 5% growth

in global IT spending ■ 235 terabytes data collected by the US Library of Congress in April 2011 ■ 15 out of 17 market sectors in the United States have more data stored

per company than the US Library of Congress■ $600 to buy a disk drive that can store all of the world’s music

Big Data – the value … ■ $300 billion potential annual value to US health care-more than double

the total annual health care spending in Spain ■ €250 billion potential annual value to Europe’s public sector

administration-more than GDP of Greece ■ $600 billion potential annual consumer surplus from using personal

location data globally ■ 60% potential increase in retailers’ operating margins possible with Big

Data ■ 140,000-190,000 more deep analytical talent positions, and ■ 1.5 million more data-savvy managers needed to take full advantage of

Big Data in the United States

Source: McKinsey Global Institute

Big Data: the scale of the problem

>


Cover story: BIG DAtAJuLY/August 2011

the phrase “Big Data” has been around for a while now, but has come into sharper focus in the past 18 months with the explosion in social networking creating a need to address the content of some of that data – there are 30 billion pieces of content shared on Facebook each month. Is any of it of value?

Yes, says the McKinsey global Institute. In Big data: the next frontier for innovation, competition and productivity, a report published earlier this year, it reckons that the potential added value to the us health care sector is $300 billion, and to European public sector administration it is €250 billion (see table).

As well as those findings, the McKinsey report also examines the us retail, global manufacturing and global personal location data sectors – but not financial services. Finance and insurance, along with government, are “positioned to benefit very strongly from Big Data as long as barriers to its use can be

overcome”, it says. Because the industry is both transaction- and customer-intensive, there is room for increased use of segmentation – identifying customers and market opportunities – and automated algorithms.

the financial services sector has always been a large-scale user of these techniques. It generates a vast amount of data, and for the most part, constantly analyses it. Probably the purest example is in the securities sector, where powerful machines are crunching prices from data feeds and automatically executing trades that will have an effect on the price of the security they just traded and effects across the market. In retail banking, at a lower frequency, systems of increasing complexity are used to identify cross-selling opportunities and segment customer bases along profitability lines.

McKinsey concludes that financial services are better placed to overcome the barriers to capturing the

Big Data isn’t just about storage issues – in fact it is mainly about efficient access to information, and creating that information in the first place, writes David Bannister.

Joining the dots

benefits of Big Data than most other sectors: it can afford the talent, it has the IT infrastructure and, to a far lesser extent, it has access to the data.

And where is that data? That’s right: it’s in silos scattered throughout the organisation, or at least we think it is.

Pulling together disparate data from multiple silos is something that financial service firms have been doing for some time too – a glance at the case studies on offer at user conferences from the big IT players, and from specialists like Informatica and Teradata, will show a strong representation from banks and similar financial institutions.

But there is a change happening in in the way that financial institutions are interacting with customers – or perhaps the other way round, since it is the customers who are making the changes.

Nicolas de Kouchkovsky is chief marketing officer for enterprise applications at Alcatel-Lucent, whose Genesys software handles more than 100 million customer interactions each day for 4,000 companies and government agencies in 80 countries. “It is critical to realise that consumers no longer have a single relationship with financial institutions, and new mobile payments platforms are increasing that,” he says.

More and more consumers have multiple relationships, and they are also using multiple channels to communicate with institutions. Unsurprisingly, most traditional financial institutions have been slow to pick up on this – with some notable exceptions like First Direct. “Generally, social media has been managed out of marketing, and it has been done manually,” says de Kouchkovsky. “We are now seeing a shift to it becoming a true process.”

According to a Genesys-sponsored consumer survey published last year, over 90% of consumers used multiple communication channels when contacting a company’s customer service, but only 10% of companies are geared up to handle this. The survey, was carried out by research firm Ovum.

“Less than 10% of companies are prepared today for cross channel conversations,” said Daniel Hong, lead analyst of customer interaction at Ovum. “The survey showed that customer frustration continues to grow as consumers attempt to contact companies using existing communication channels that do not transfer the context of the contact from one channel to another. It’s imperative that an enterprise like a bank engage consumers on the customers’ terms or risk losing them.”

Cross channel communications occur when a consumer initiates a request or poses a query in one communication channel, and then continues that same conversation through multiple contact methods in order to reach a resolution. Notably, most respondents said that they would like to see better human integration with the various channels – which are still dominated by voice, but now include SMS, email, live chat, web self-service, and social media such as Twitter.

While this is a day-to-day issue, de Kouchkovsky says that the very near future will bring even more complex issues for the industry to address, but he urges people to look at the opportunities, not just the

problems of Big Data. “The fact that it is ‘Big’ is just an attribute: what is important is to be able to analyse it,” he says. “Companies are going to have to employ massive analytics to understand customer behaviour – or employ third-parties such as Google to do it for them, though there are huge privacy issues.”

Others agree that the “bigness” of Big Data is not the most important factor – as McKinsey points out, you can store all of the music in the world on a disk drive that costs $600.

Even from the perspective of a storage vendor there has been a noticeable shift in customer concern away from the cost of storage towards “simplicity of access to the data, speed of access and accuracy”, says Nigel Goodwin, director of financial services solutions at EMC. “Previously, customers would have a data warehouse that they would expect to grow over time and they would negotiate a price with a vendor such as ourselves. Now they are much more concerned with speed of access and getting the quickest possible retrieval times.”

Partly driving this is the need to respond to regulatory requirements. “Previously it might take16 hours to turn a dataset around and get a report out, and today that’s down to about eight hours,” says Goodwin. “Now, with the regulation that has come in since the financial crisis it has to become intraday – they need to interrogate the dataset and get back to the auditors or regulators in six hours or less.”

“It is a convergence of data warehouse, data mining and business analytics: technologies that previously couldn’t handle the size of data sets that are now being created and that you need to have access to – that’s basically where Big Data comes from. There is so much information being thrown into those repositories that the previous technologies couldn’t cope with it,


■ 5 billion mobile phones in use in 2010 ■ 30 billion pieces of content shared on Facebook every month ■ 40% projected growth in global data generated per year vs. 5% growth

in global IT spending ■ 235 terabytes data collected by the US Library of Congress in April 2011 ■ 15 out of 17 market sectors in the United States have more data stored

per company than the US Library of Congress■ $600 to buy a disk drive that can store all of the world’s music

Big Data – the value … ■ $300 billion potential annual value to US health care-more than double

the total annual health care spending in Spain ■ €250 billion potential annual value to Europe’s public sector

administration-more than GDP of Greece ■ $600 billion potential annual consumer surplus from using personal

location data globally ■ 60% potential increase in retailers’ operating margins possible with Big

Data ■ 140,000-190,000 more deep analytical talent positions, and ■ 1.5 million more data-savvy managers needed to take full advantage of

Big Data in the United States

Source: McKinsey Global Institute

Big Data: the scale of the problem

>

or they couldn’t cope with it in the timeframes that are needed to generate the reports.”

this is only one driver, though. “I don’t think that the regulators are forcing people to have things that they should’nt already have in their own management – they may be forcing better governance and more structure, but those are things that from a management point of view people should be doing because it’s good for the business and it’s good for shareholders,” says Phil Lynch, chief executive at reference data vendor Asset Control “Regulators are creating an impetus for action because people haven’t done a good job of translating the problem of too much data and not enough information into business terms. Very often it is seen as an It problem and not understood by the business – but since the crisis they have woken up to the fundamental nature of the problem.”

this awakening is combining with the need to come to terms with the growing amount of data from multiple sources to create a new scale of problem. On top of getting the data out in a reasonable time, there is that torrent of social information – and other types of data such as video – that is being poured in at the other end, and it is not just in retail banking.

“[Firms] are getting feeds from new previously unmeasured sources like twitter, which has just rocketed,” says EMC’s goodwin. “Morgan stanley has officially said that its traders can trade against twitter, and that means that they have to store all of that twitter data and be able to recall it.”

“there is just too much data,” says Asset Control’s Lynch. “there is so much data because of electronic trading, multiple asset class exposure, high frequency trading, and so on and it is difficult to synthesise that and get useful information that you can actually do something with.”

the way to address this is to square up to the fact that while there is undoubtedly going to be highly valuable data in the giant warehouse, the great majority of it is going to be irrelevant to the particular task in hand. the trick, Lynch says, it to ignore the data you don’t need. “We tend to focus on the data that people need for the business problem at hand. For instance, for risk management, you need accurate benchmarks, you need to be able to have a rigorous process to ensure that you are able to analyse risk holistically and

Cover story: BIG DAtAJuLY/August 2011


consistently over time: that’s a lot of data that you have to take in, manipulate and apply logic to. We tend to think in terms of output – what data do you need to solve what problem?”

Lynch argues that in the investment banking side of the industry, people have long experience of handling great quantities of data.

“the efforts of the past ten years have enabled us to make more pragmatic or tactical solutions that can be expanded on. If you try to address all of this on a broad enterprise basis, it is daunting and it could be a long time before you see any return on investment, or a business return to the users,” he says. “Focus on how you get accurate data, how you make it accessible to business users when they need it and make sure that they understand what it is and what they can do with it, so they can use it in their job.”

While Lynch’s pragmatic approach may yield results, it is built on an implicit acceptance of silos, in that it addresses each problem separately. that is a long way from the use of sophisticated analytics on massive databases to discover new opportunities that are promised by the futurists – or the billions that McKinsey predicts in its report.

goodwin says that financial services firms, in his experience, have yet to start using analytics across heterogeneous datasets such as video, social media and transactional data. “We’re seeing that with other service providers, but I haven’t seen much in financial services – though it will come as new alternatives start appearing,” he says.

Alcatel-Lucent’s de Kouchkovsky agrees, pointing out that many of the new payment mechanisms are closely linked to e-commerce businesses, such as PayPal and eBay. these people have different perspectives. “In new mobile payment platforms, for instance, google has no interest in the payment,” he says. “It is interested in the information that is contained in the payment and what they can tell about consumer behaviour. We are living more than ever in a consumer society and it is consumer technology, such as using a smartphone as a proxy in mobile commerce, that is driving these changes.” BT

“Focus on how you get accurate data, how you make it accessible to business users when they need it and make sure that they understand what it is and what they can do with it, so they can use it in their job.”

Phil Lynch, Access Control

having the right data at the right time and being able to pinpoint how it has been arrived at is great from an efficiency and risk management standpoint. The regulators like it too; and given the more involved nature of the current regulatory environment banks need to be able to show a data trail and present data in the right way. Should ring-fencing be introduced in the uK, banks will also need to be able to show how they have separated their various data streams.

Externally too, customers are demanding better service levels and having good data management to provide a customisable and flexible single customer view is a great facilitator of better customer service as well having a direct impact on the sales and marketing effort.

Efficient systems with good data management lying beneath also makes it easier to acquire and retain customers, something that all retail banks are feeling anxious about, especially with recent new market entrants such as Metro Bank and Tesco Bank offering a new generation of banking services.

Mark Dunleavy, financial services director at Informatica, says: “The MDM mandate is all about consistency and trustworthiness of data. The place to start is creating a single customer view that allows access to data from various silos and sources. There is a gradual move from siloed legacy systems over to newer customer-centric views. Companies are now trying to get it all synchronised so that the person viewing it can always see the very latest information, knowing it is both accurate and traceable.”

In this sense, master data management is central key to client centricity. From a back office point of view, it eliminates waste and means that data, such as names and addresses, only appears once on the system.

“It is all about setting the most appropriate framework around the data and then being able to skew and pivot the data according to what the firm needs,” says Daniel Simpson, chief executive at Cadis Software.

“It eliminates cross referencing and reduces risk in what has previously been quite a manual process. Essentially it allows for better navigation of data points and acts as the plumbing behind the front end – capturing and joining up data and making the end view more up to date and reliable,” he says.

In retail banking, the type of data that needs to be organised include key data – peoples’ names and addresses, codes identifying whether accounts are live or dormant, transaction data and product classification data. This sort of data classification is especially tricky given the amount of systems consolidations that have taken place over the years as the result of mergers and acquisitions.

Duncan Ash, head of sales and marketing at SAS, says: “Any doubt about data integrity gets aggregated and magnified further up the chain and the end result can often be very skewed. Data lineage – where it has come from plus signage – when it has been integrated with other data, and what that now shows is key. If MDM is working well there should be few question marks around this,” he says.

But it is at the front end too that good MDM, or lack of it, can make its presence felt. This is more than just the technicalities of having a single customer view, it’s about the way that MDM can facilitate and enable revenue-making activity from better customer service.

Tony Virdi, vice president of the Advanced Solutions Practice in Europe at Cognizant, says: “There is the broader industry pressure of cost pressure and consolidation plus

competition, especially around the new entrants to the market and whether they will be have a better and simpler offering.”

In practice this means that no matter how many silos the data is coming from, or how many multiple instances of data there are, it needs to appear singularly at customer level. Contextual information, such a spouse or children, other investments, broader financial and situational information is also important and turns a single customer view of what the customer has with the bank into a 360° view. This allows for better analytics and identification of what is likely to be successfully cross sold and what other services, channels or products are likely to interest that particular client.

The transformation into a 360° view dovetails with the introduction of the Retail Distribution Review in the uK under which advisors and private bankers will need to charge for the advice they given rather than use a commission-based model. Having a 360° view is doubly important for them as they will need to redouble efforts around client centricity and adding visible value in order to justify their fees. Financial advisors and wealth managers will need reliable master data management when it comes to making accurate and compliant risk assessment assessments. In addition, like broader retail banks they will need operational functionality over a variety of channels. All of this relies on capable data management on a system that can consolidate it, show it in real time and in customer friendly fashion.

“Linking the data to the CRM system underpins the fostering of a close customer relationship. It demonstrates that the advisor values the client as an individual and through the provision of enhanced reporting and the whole service looks and feels so much better from the customer’s viewpoint. says Simpson.


“If the data is the starting point for the analytics and

the behavioural analysis then it obviously makes sense to

get it right and have accurate information with which to work on product positioning. Tescos is

a market leader in this field.”

Tony Virdi, Cognizant

>

Data management is not one of IT’s shining stars, overlooked and taken for granted unless it goes horribly wrong. Why then is it receiving so much attention? The answer is the realisation it is the glue that holds an organisation’s data together, when it works well no one notices, but when it doesn’t work, the whole organisation’s data integrity – and in fact the whole organisation – can be threatened.

At the moment retail banks face a variety of sectoral and organisational changes that means their data needs to be organised entirely differently from before. Data needs to come out of its traditional silos and be held together in a central repository that is capable of giving a holistic view, be that of a customer or an organisational process. The data then needs to be reliable in terms of where it has come from, and whether it is being compared with like data to present an ‘apples compared with apples’ end result and make any analytics meaningful. Enter master data management stage left.

James Hunt, EMEA finance industry centre of expertise at Teradata, says: “Master data management is essentially an enabler of the broader business. It tends to be hidden away but getting it right can reduce costs and support activities that drive value more visibly. There is a confirmed focus in this area and for the good.”

Indeed defining master data can often be a moot point. HSBC, one bank that has invested heavily in managing its master data defines it simply as “common definitions for data used to run the bank and move it forward”.

“[MDM] is particularly pertinent to reference data such as organisational hierarchy, product hierarchy and segmentation. It is especially useful when it comes to the consistent usage of data for marketing, risk, fraud and operations across brands, countries and regions,” says an HSBC spokesman.

Wave upon wave of mergers, acquisitions and consolidation have left retail banks with lots of tangled legacy systems that need overhauling. Operationally,


DaTa managemenT JuLY/AuguST 2011

Mastering the data Master Data Management means different things to different people, but once you get past the hype it is an important approach that will be central to efficient organisations, finds Alison Ebbage.

having the right data at the right time and being able to pinpoint how it has been arrived at is great from an efficiency and risk management standpoint. The regulators like it too; and given the more involved nature of the current regulatory environment banks need to be able to show a data trail and present data in the right way. Should ring-fencing be introduced in the uK, banks will also need to be able to show how they have separated their various data streams.

Externally too, customers are demanding better service levels and having good data management to provide a customisable and flexible single customer view is a great facilitator of better customer service as well having a direct impact on the sales and marketing effort.

Efficient systems with good data management lying beneath also makes it easier to acquire and retain customers, something that all retail banks are feeling anxious about, especially with recent new market entrants such as Metro Bank and Tesco Bank offering a new generation of banking services.

Mark Dunleavy, financial services director at Informatica, says: “The MDM mandate is all about consistency and trustworthiness of data. The place to start is creating a single customer view that allows access to data from various silos and sources. There is a gradual move from siloed legacy systems over to newer customer-centric views. Companies are now trying to get it all synchronised so that the person viewing it can always see the very latest information, knowing it is both accurate and traceable.”

In this sense, master data management is central key to client centricity. From a back office point of view, it eliminates waste and means that data, such as names and addresses, only appears once on the system.

“It is all about setting the most appropriate framework around the data and then being able to skew and pivot the data according to what the firm needs,” says Daniel Simpson, chief executive at Cadis Software.

“It eliminates cross referencing and reduces risk in what has previously been quite a manual process. Essentially it allows for better navigation of data points and acts as the plumbing behind the front end – capturing and joining up data and making the end view more up to date and reliable,” he says.

In retail banking, the type of data that needs to be organised include key data – peoples’ names and addresses, codes identifying whether accounts are live or dormant, transaction data and product classification data. This sort of data classification is especially tricky given the amount of systems consolidations that have taken place over the years as the result of mergers and acquisitions.

Duncan Ash, head of sales and marketing at SAS, says: “Any doubt about data integrity gets aggregated and magnified further up the chain and the end result can often be very skewed. Data lineage – where it has come from plus signage – when it has been integrated with other data, and what that now shows is key. If MDM is working well there should be few question marks around this,” he says.

But it is at the front end too that good MDM, or lack of it, can make its presence felt. This is more than just the technicalities of having a single customer view, it’s about the way that MDM can facilitate and enable revenue-making activity from better customer service.

Tony Virdi, vice president of the Advanced Solutions Practice in Europe at Cognizant, says: “There is the broader industry pressure of cost pressure and consolidation plus

competition, especially around the new entrants to the market and whether they will be have a better and simpler offering.”

In practice this means that no matter how many silos the data is coming from, or how many multiple instances of data there are, it needs to appear singularly at customer level. Contextual information, such a spouse or children, other investments, broader financial and situational information is also important and turns a single customer view of what the customer has with the bank into a 360° view. This allows for better analytics and identification of what is likely to be successfully cross sold and what other services, channels or products are likely to interest that particular client.

The transformation into a 360° view dovetails with the introduction of the Retail Distribution Review in the uK under which advisors and private bankers will need to charge for the advice they given rather than use a commission-based model. Having a 360° view is doubly important for them as they will need to redouble efforts around client centricity and adding visible value in order to justify their fees. Financial advisors and wealth managers will need reliable master data management when it comes to making accurate and compliant risk assessment assessments. In addition, like broader retail banks they will need operational functionality over a variety of channels. All of this relies on capable data management on a system that can consolidate it, show it in real time and in customer friendly fashion.

“Linking the data to the CRM system underpins the fostering of a close customer relationship. It demonstrates that the advisor values the client as an individual and through the provision of enhanced reporting and the whole service looks and feels so much better from the customer’s viewpoint. says Simpson.


“If the data is the starting point for the analytics and

the behavioural analysis then it obviously makes sense to

get it right and have accurate information with which to work on product positioning. Tescos is

a market leader in this field.”

Tony Virdi, Cognizant

>


Biometrics: the case for convenience

A recent study by the Mercator Advisory Group on payment authentication points out that “biometrics has been long on promise and short on delivery”. Indeed, while technologies like fingerprint scanning have been gaining ground in access control applications, customer-oriented biometric authentication remains elusive, at least in mature markets.

Among the most remarkable consumer-oriented initiatives was US-based biometric payment scheme Pay By Touch, which allowed users to pay via fingerprint scanning. The company had enrolled a few million customers by the time it went bust in 2007, not because of a complete lack of demand or poor technology performance, but reportedly due mainly to governance and management issues.

Arguably the most famous example of bank-related biometric deployment is Japan, where more than half of the country’s ATMs are equipped with biometric readers for vein pattern recognition.

While similar biometric ATMs started being rolled out last year in Poland by BPS bank, using Japanese technology provided by Hitachi, no other plans for large-scale deployments have yet surfaced in Western Europe.

In fact, the so-called emerging markets have thus far proved more receptive to customer-facing biometrics technology in financial services than mature markets, where biometric payment and banking solutions mainly remain at the pilot stage.

“The big opportunities for biometrics in financial services today are in regional markets like Latin America, South Africa and India,” says Phil Scarfo, senior vice president, worldwide marketing and sales, at fingerprint sensor provider Lumidigm. “Government-issued ID documents in Chile and Brazil enable the intelligent use of biometrics for personal identity at bank ATMs or service counters. In South Africa, several large banks have begun to focus on measures to eliminate fraud that include adopting identity systems that utilise biometrics.”

In India, the country’s “Aadhar” Unique Identification Authority project, which aims to deploy a unique identification number for each citizen, is being secured by biometric authentication. The scheme will ensure government benefits are provided to the right person, but will also promote financial inclusion by shifting the large unbanked population from cash-based transactions to electronic payments. In fact, both Visa and Mastercard have already announced solutions allowing individuals to use India’s Aadhar ID number for payments.

“I believe emerging markets will likely be the fastest growth areas for biometrics over the next three to five years,” Scarfo adds. “The Indian UID program is an excellent case in point. They will be enrolling more than 1.2 billion people over the next three to five years and there will be a number of derivative programs and projects that emerge as a result.”

The use of biometric technology in the financial services sector has generally been promoted from the angle of security, with an emphasis on fingerprints. But as Fabien Buliard finds out, the development of mobile applications and a focus on customer convenience could make voice signature another strong contender.

>

SECURITY: BIOMETRICS JULY/AUGUST 2011

Doing this sort of thing obviously promotes better customer loyalty, something that can no longer be taken for granted. Indeed going forward ‘old’ retail banks also need to be able to compete with each other – especially given the expected dispersal of large banks and the as yet unknown impact of ring-fencing of retail operations.

So having decent data in this context also means the ability to work out which customers are likely to be most profitable and likely to hang around. Clearly it makes sense to focus on those people.

Virdi says: “If the data is the starting point for the analytics and the behavioural analysis then it obviously makes sense to get it right and have accurate information with which to work on product positioning. Tescos is a market leader in this field.”

Indeed, Tesco Bank, although prevented from using some of the data it has gleaned from its retail operation for banking purposes, must surely be the market blueprint in terms of gathering and analysing data around spending patterns and being able to use behavioural analytics to work out what the customer is likely to do next, where and how, and effectively leveraging that information.

Translating that to a retail banking arena means knowing where customers bank, what their habits are where they take cash out, whether they travel a lot, how much they use a credit card and whether it is paid off monthly. Knowing this sort of information is good not just from a cross-selling viewpoint but also in being able to make lending or other risk-related decisions quickly and accurately.

Virdi says: “Master data management underpins so much front-end activity. Better data management means less process inefficiency and makes onboarding much easier because the bank is able to authenticate data quickly and reinforce positive customer perceptions. In the end this generates revenue.”

INg is a good example of this in practice. It is currently running a high profile campaign under the slogan “a decent way to do banking”, based on being able to make lending decisions quickly, and providing superior customer service. The bank has 1.4 million customers in the uK.

Richard Doe, chief executive at INg Direct, says: “Our research showed that people simply want to be treated in a ‘decent’ way by their banks, yet this doesn’t always happen. In this campaign we highlight how mortgage customers shouldn’t be left waiting for an answer, how customers want their questions answered when they call their bank and how people don’t want to be told that the amount of savings they have is too small to bother with.”

Virdi also thinks that master data management also helps when it comes to analysing how efficient the sales and marketing function is by allowing for a see – through view of what campaigns are working, what percentage of potential leads are being transformed and whether onboarding and customer loyalty is as it should be.

Being able to use master data for internal purposes also ties in nicely with it facilitating greater business use of data. For this a retail bank needs its business users, not just its IT department, to have a real and meaningful interaction with data and a much bigger say in how it can be manipulated and what the end result should look like.

Hunt says: “Business users have the best understanding of what the data is and how it needs to be used so it is only right that they should be able to use it and manipulate it without having to raise an IT issue at every stage.” He cites the example of a sales manager needing to set up a new product within the system and be assured that it will be correctly assigned checks and balances and be subjected to the right workflows and processes.

But Virdi says that MDM is not a big bang project and that being SOA-based, should be phased – with clear goals, governance and support. “It cannot work alone, it is a key piece of a bigger picture,” he warns.

And Informatica’s Dunleavy adds: “This is an evolution not a revolution – we are dealing with complex and entrenched systems and business requirements that need MDM to support them. MDM is not an end in itself. It can only work if the systems and processes that it feeds are also working as they should.” BT


DaTa managemenT JuLY/AuguST 2011

“MDM is not an end in itself. It can only work if the systems and processes that it feeds are also working as they should.”

Mark Dunleavy, Informatica


Biometrics: the case for convenience

A recent study by the Mercator Advisory Group on payment authentication points out that “biometrics has been long on promise and short on delivery”. Indeed, while technologies like fingerprint scanning have been gaining ground in access control applications, customer-oriented biometric authentication remains elusive, at least in mature markets.

Among the most remarkable consumer-oriented initiatives was US-based biometric payment scheme Pay By Touch, which allowed users to pay via fingerprint scanning. The company had enrolled a few million customers by the time it went bust in 2007, not because of a complete lack of demand or poor technology performance, but reportedly due mainly to governance and management issues.

Arguably the most famous example of bank-related biometric deployment is Japan, where more than half of the country’s ATMs are equipped with biometric readers for vein pattern recognition.

While similar biometric ATMs started being rolled out last year in Poland by BPS bank, using Japanese technology provided by Hitachi, no other plans for large-scale deployments have yet surfaced in Western Europe.

In fact, the so-called emerging markets have thus far proved more receptive to customer-facing biometrics technology in financial services than mature markets, where biometric payment and banking solutions mainly remain at the pilot stage.

“The big opportunities for biometrics in financial services today are in regional markets like Latin America, South Africa and India,” says Phil Scarfo, senior vice president, worldwide marketing and sales, at fingerprint sensor provider Lumidigm. “Government-issued ID documents in Chile and Brazil enable the intelligent use of biometrics for personal identity at bank ATMs or service counters. In South Africa, several large banks have begun to focus on measures to eliminate fraud that include adopting identity systems that utilise biometrics.”

In India, the country’s “Aadhar” Unique Identification Authority project, which aims to deploy a unique identification number for each citizen, is being secured by biometric authentication. The scheme will ensure government benefits are provided to the right person, but will also promote financial inclusion by shifting the large unbanked population from cash-based transactions to electronic payments. In fact, both Visa and Mastercard have already announced solutions allowing individuals to use India’s Aadhar ID number for payments.

“I believe emerging markets will likely be the fastest growth areas for biometrics over the next three to five years,” Scarfo adds. “The Indian UID program is an excellent case in point. They will be enrolling more than 1.2 billion people over the next three to five years and there will be a number of derivative programs and projects that emerge as a result.”

The use of biometric technology in the financial services sector has generally been promoted from the angle of security, with an emphasis on fingerprints. But as Fabien Buliard finds out, the development of mobile applications and a focus on customer convenience could make voice signature another strong contender.

>


fingerprint, face or iris scans. According to proponents of voiceprint-based solutions, voice offers the same kind of reliability as other types of biometrics, with the advantage of using an existing infrastructure, the phone system.

According to the Mercator Advisory report mentioned above, other methods of biometric authentication are compatible with mobile handset, including fingerprint and iris scans, facial recognition, as well as technologies still in development phase, such as eye movement tracking.

The author goes on to say that a number of obstacles to biometrics adoption “are mitigated by the presence of the smartphone, the fact the consumer pays for the device (and not the merchant or issuer), and the ubiquity of mobile devices”.

Ease of deploymentUnsurprisingly, providers of fingerprint-based solutions contend that fingerprints are currently the most appropriate biometric technology for payment applications.

“Fingerprints are the most mature biometrics and there are even standards in place,” says Precise Biometrics’ Marschall. “No other biometric modality offers the same at this point, although they will also continue to mature.”

Besides, a number of applications, such as biometric ATMs or access control, might lend themselves better to fingerprint readers, as users may be reluctant to speak out in a public setting.

However, voiceprint technology does seem to present a few significant advantages over fingerprint and iris scan technologies, not least of which is ease of deployment, with no requirement for a expensive reader infrastructure to be rolled out, and a less cumbersome enrolment process, whereby the user just needs to speak a few sentences.

A prominent player in this budding space is VoiceCommerce, founded by former WorldPay executive Nick Ogden. The company became a payment institution in 2009 and is already a member of Visa and MasterCard.

It offers a wallet application called VoicePay, and an associated merchant acquiring capability, Cashflows, as well as a KYC and anti-money laundering system, all based on voiceprint technology.

“Voice does fix an awful lot of problems that other biometrics can’t solve,” Ogden says. “The principal one is the ability to ‘fast distribute’ at no cost. All of the biometrics technologies work as well as each other, but voice is the easiest to deploy.”

“Globally today, we’ve got about 5.1 billion mobile phones and over 3 billion consumers who also hold a Visa or MasterCard linked to their debit accounts,” he adds. “So there is a distribution ecosystem already in place for mobile payments to operate.”

Ogden says his company is hoping to create “a federated alliance” with other organisations, to allow consumers to reuse their voice signatures for multiple applications, without having to go through multiple registration.

However, Consult Hyperion’s Birch does not see mobile payments as a major driver for biometrics in Western Europe, again because he sees the security business case as insufficient.

“The security mechanisms you get with mobile devices are a big advance over what you have with cards,” he argues. “When you move the chip and PIN application into a phone, you get a lot of extra security, and I’m not sure you need a layer above that yet.”

Meanwhile, one financial institution already using voice biometrics in a live setting is online broker TD Waterhouse. The company worked with contact centre specialist Datapoint to implement a voice authentication application for its phone service, using biometrics technology from VoiceVault.

Once they are enrolled, customers calling in are authenticated by the system through their voiceprint before being passed on to an agent to carry out their transaction.

“The technology is very robust in real world applications,” says Jason Beever, head of consulting at Datapoint. “We are not analysing your voice so much as the biometric footprint generated through the energy from your physiology, focusing on actual biometric measurements.”

Beever adds the use of voiceprint authentication could easily be extended to online banking and replace token generating devices that some banks require customers to carry with them at all times.

“It seems the answer to fraud is to make the process more difficult and more secure by adding more devices and more questions to ask,” he explains. “The problem with that, is it affects the single most important thing for a retail bank, and that is customer experience.”

Instead, he suggests, customers could receive a call-back from the bank and speak the last four digits of their account number to be authenticated through their voiceprint. For Beever, it is essential that banks look at the authentication and security issue from the customer experience perspective, in order for them to gain a competitive edge.

“All banking products seem to be commoditised,” Beever argues. “ All that banks seem to be fighting on is customer service, while all customers want is a low effort, quick and efficient process. Most major high street banks are looking at this technology, among others. Our message to them is to focus on the customer experience and then choose the most secure capability to support it.” BT


“Most major high street banks are looking at this technology, among others. Our

message to them is to focus on the customer experience and then choose the most secure

capability to support it.”Jason Beever, Datapoint

Convenient securityWherever the implementation takes place, the main selling point for the use of biometrics in financial services has been increased security, and for good reason. Compared to the limitations of password-based authentication and knowledge-based challenges, biometric technology is arguably the only tool available to ensure the party to the transaction is who they say they are, not just someone who has all the right answers.

But while fraud prevention is undoubtedly a significant element in the business case for biometric authentication, convenience could be an equally compelling, if not stronger, driver in mature markets, especially for the consumer space.

As Thomas Marschall, president and chief executive of Sweden’s Precise Biometrics, a provider of fingerprint recognition technology, puts it, beside the elimination of password-related fraud, “convenient security is another driver as most security is inconvenient, but using your finger is convenient”.

For Dave Birch, director at Consult Hyperion, biometrics is really about convenience, as far as Western European consumers are concerned, because the business case for security isn’t sufficiently compelling.

“On the financial services side, we tend to think of biometrics as a security technology,” he explains, “but as such, it doesn’t buy you enough over Chip and PIN

or what you can do with mobile phones, to make it worth doing. For nuclear missile launching, certainly, but not for buying a pair of shoes.”

In emerging markets, too, convenience and ergonomics are a strong component of the business case, despite an arguably stronger case for security. Indeed, literacy can be an issue in some developing countries, where fingerprint readers can be used for document signing in bank branches. Illiteracy can also make voice recognition a useful alternative, which can be paired with voiceprint biometric technology for authentication purposes.

Among the proponents of biometric payments in Europe is payment processor Equens, which offers a payment system based on hybrid scanners that combine fingerprint and finger vein biometrics, for which the company has already conducted successful pilots. It also emphasises the convenience aspect of the technology.

“Our figures show that paying with biometric means is perceived as extremely convenient for the user,” the company says. “Consumers like the convenience and ease of use. 99% want to keep using it in the future and 90% of them would recommend it to friends and family.”

Equens also points out that its technology provides shorter transaction time at point of sale in 60% of cases, against the fastest card transaction, while saving consumers the trouble of looking for their card, and generates increased spending, which benefits the merchant.

But as promising as such “Pay By Touch” types of systems may be, the financial services industry seems to have focused its recent point-of-sale development efforts on contactless payments, with no biometrics in sight.

However, another major trend is the emergence of mobile payments and banking, which could drive the need for more advanced security, for which voice-based biometrics seem more appropriate than



“When you move the chip and PIN application into a phone, you get a lot of extra security, and I’m not sure you need a layer above that yet.”

Dave Birch, Consult Hyperion

fingerprint, face or iris scans. According to proponents of voiceprint-based solutions, voice offers the same kind of reliability as other types of biometrics, with the advantage of using an existing infrastructure, the phone system.

According to the Mercator Advisory report mentioned above, other methods of biometric authentication are compatible with mobile handset, including fingerprint and iris scans, facial recognition, as well as technologies still in development phase, such as eye movement tracking.

The author goes on to say that a number of obstacles to biometrics adoption “are mitigated by the presence of the smartphone, the fact the consumer pays for the device (and not the merchant or issuer), and the ubiquity of mobile devices”.

Ease of deploymentUnsurprisingly, providers of fingerprint-based solutions contend that fingerprints are currently the most appropriate biometric technology for payment applications.

“Fingerprints are the most mature biometrics and there are even standards in place,” says Precise Biometrics’ Marschall. “No other biometric modality offers the same at this point, although they will also continue to mature.”

Besides, a number of applications, such as biometric ATMs or access control, might lend themselves better to fingerprint readers, as users may be reluctant to speak out in a public setting.

However, voiceprint technology does seem to present a few significant advantages over fingerprint and iris scan technologies, not least of which is ease of deployment, with no requirement for a expensive reader infrastructure to be rolled out, and a less cumbersome enrolment process, whereby the user just needs to speak a few sentences.

A prominent player in this budding space is VoiceCommerce, founded by former WorldPay executive Nick Ogden. The company became a payment institution in 2009 and is already a member of Visa and MasterCard.

It offers a wallet application called VoicePay, and an associated merchant acquiring capability, Cashflows, as well as a KYC and anti-money laundering system, all based on voiceprint technology.

“Voice does fix an awful lot of problems that other biometrics can’t solve,” Ogden says. “The principal one is the ability to ‘fast distribute’ at no cost. All of the biometrics technologies work as well as each other, but voice is the easiest to deploy.”

“Globally today, we’ve got about 5.1 billion mobile phones and over 3 billion consumers who also hold a Visa or MasterCard linked to their debit accounts,” he adds. “So there is a distribution ecosystem already in place for mobile payments to operate.”

Ogden says his company is hoping to create “a federated alliance” with other organisations, to allow consumers to reuse their voice signatures for multiple applications, without having to go through multiple registration.

However, Consult Hyperion’s Birch does not see mobile payments as a major driver for biometrics in Western Europe, again because he sees the security business case as insufficient.

“The security mechanisms you get with mobile devices are a big advance over what you have with cards,” he argues. “When you move the chip and PIN application into a phone, you get a lot of extra security, and I’m not sure you need a layer above that yet.”

Meanwhile, one financial institution already using voice biometrics in a live setting is online broker TD Waterhouse. The company worked with contact centre specialist Datapoint to implement a voice authentication application for its phone service, using biometrics technology from VoiceVault.

Once they are enrolled, customers calling in are authenticated by the system through their voiceprint before being passed on to an agent to carry out their transaction.

“The technology is very robust in real world applications,” says Jason Beever, head of consulting at Datapoint. “We are not analysing your voice so much as the biometric footprint generated through the energy from your physiology, focusing on actual biometric measurements.”

Beever adds the use of voiceprint authentication could easily be extended to online banking and replace token generating devices that some banks require customers to carry with them at all times.

“It seems the answer to fraud is to make the process more difficult and more secure by adding more devices and more questions to ask,” he explains. “The problem with that, is it affects the single most important thing for a retail bank, and that is customer experience.”

Instead, he suggests, customers could receive a call-back from the bank and speak the last four digits of their account number to be authenticated through their voiceprint. For Beever, it is essential that banks look at the authentication and security issue from the customer experience perspective, in order for them to gain a competitive edge.

“All banking products seem to be commoditised,” Beever argues. “ All that banks seem to be fighting on is customer service, while all customers want is a low effort, quick and efficient process. Most major high street banks are looking at this technology, among others. Our message to them is to focus on the customer experience and then choose the most secure capability to support it.” BT


“Most major high street banks are looking at this technology, among others. Our

message to them is to focus on the customer experience and then choose the most secure

capability to support it.”Jason Beever, Datapoint

What aspect of Sibos 2011 is most important to you? sibos is the most important opportunity during the year to hear from industry-leaders, meet clients and partners, and network with practitioners from around the world.

What questions are you hoping to have answered (and what answers do you hope to hear)?there are a couple of key areas of industry dialogue for 2011:

■ Clarity around the direction of ongoing regulatory change impacting our industry – BaselIII in particular.■ How we as an industry can extend capability for our clients and tap into new revenuesources.

What’s missing from the agenda?Rest time! As always, it is a packed agenda covering all the important industry issues relevant to our business.

Do you have any personal must-do ideas for your visit to Toronto? I’ve visited the city before, so this time I’ll be looking for ‘hidden toronto’. I can recommend a visit to Niagara – worth the trip and much better from the Canadian side.

Anything else?the swift Business Forums have been a great way to have a ‘mini-sibos’ in the spring, and catch up on industry dialogue that has progressed since Amsterdam.

Peter Jameson is head of FI Product Management for GTS EMEA, Bank of America Merrill Lynch

What aspect of Sibos 2011 is most important to you? sibos is definitely a platform to show off our brand in terms of how we look, our thought leadership, what we have to say, and who we meet. It is like a Formula One event for payment companies, and running a stand is nearly as hard work as driving an F1 car.

What questions are you hoping to have answered (and what answers do you hope to hear)?this year there should be a lot of content about new ways to pay, including mobile banking. We have built on our consumer and sME research by partnering with 23 charities to look at charitable payments via mobile phones. I hope that others are also sharing their vision of the future – beyond the current PayPal revolution. Our industry is going through an exciting period and sibos should have lots of interesting things to say.

What’s missing from the agenda? Corporate social Responsibility is something that every company has to take seriously nowadays. We have established a special interest session on CsR with the support of swift and are delighted to say that the chairman of CsR at Royal Bank of Canada will be presenting alongside our chief executive, Marion King. I am also hopeful that a major telco brand will also join our special interest session.

What would you change about the event?I have a personal beef about the plastic laptop bags that we get handed each year. they are not very environmentally friendly and often just sit in the store room on my stand all week - blocking access to our equipment. How about giving the money to a local charity instead?

Do you have any personal must-do ideas for your visit to Toronto?I am currently picking out the must see attractions as well as some personally recommended steak houses.

Anything else? I must say that the choice of rented furniture for our stand is not great – I wonder if anyone else is having the same problem ...

Mark Chapman is commercial marketing director at VocaLink


peTer JAmeSon, Bank of America Merrill Lynch

mArk ChApmAn, VocaLink

All things to all people


SiboS: Vox pop JuLY/August 2011

Swift’s annual Sibos conference and exhibition is almost upon us. This year the format is changing to cover even more topics, finds David Bannister.

What aspect of Sibos 2011 is most important to you sibos is regarded as one of the leading events in the calendar for the financial services community and therefore it is a great place to meet with clients and prospects. It is also an excellent forum to talk to analysts and press about the current issues affecting the industry and to launch new products.

What questions are you hoping to have answered (and what answers do you hope to hear)?I hope to get an update from swift on the progress of various initiatives such as the low-end connectivity project and the endorsement by the International Chamber of Commerce of the Bank Payment Obligation instrument. I am also looking forward to hearing corporates’ feedback and take on key trends at the Corporate Forum.

Meanwhile, I know my colleagues in the world of payments are keen to hear about sEPA progress, changes in payments systems globally, IPFA and the adoption of IsO 20022.

What’s missing from the agenda?I’d have to say that I think swift has done a good job with this year’s agenda. the agenda seems pretty comprehensive and balanced and covers off the various themes keeping the financial services community awake at night these days.

What would you change about the event? How about holding a future sibos in an emerging economy, such as Brazil or India?

Do you have any personal must-do ideas for your visit to Toronto? Cirque du soleil’s tOtEM garden at the CN tower.

Olivier Berthier is global solutions director for transaction banking at Misys

For those who are regulars, Sibos, the annual conference and exhibition staged by the Swift consortium, is not just a show or conference – it is an event.

Quite how this has come to be is hard to explain – it ought to be a very dull affair, consisting as it does of several thousand people involved in deep discussion of the nuts and bolts of financial messaging standards and the like. take the wrong turning in the many corridors and you might find yourself in such a meeting, but on the whole, you should be able to find more than enough to draw you in and engage you in the event.

For the best part of two decades, Banking Technology’s editorial team has been covering sibos in the guise of Daily News at Sibos, covering the events of the week as they happen.

As part of that, we’ve done a number of vox pop surveys, asking people what they find useful and what they don’t, which topics they feel strongly about – and where they think the best social events are taking place, of course.

this year we’re going to be moving that online, to give more people the chance to air their views, before during and after the event, so head to www.bankingtech.com to join in. In the meantime, some of the early entrants are published here.

Among the other changes at the event, taking place this year in toronto from 19-20 september, is the introduction of

a two-day technology stream. Peter sondergaard, senior vice president, Research at gartner, will open the technology stream with a session called Re-imagine IT session.

Over the next ten years, gartner believes four broad trends will alter It, and drive economic change – cloud computing, social computing, context aware computing and pattern based strategy. “this will require leaders to re-imagine a business structure in which information users are simultaneously creators and consumers, and innovation occurs in an open, unstructured environment,” the programme promises, adding that “for leaders to re-imagine information technology through a process of ‘creative destruction’ that requires them to know how and where to tear down what they have in order to create what they need”.

If that doesn’t grab you – how can it not? – then there are the more traditional main conference sessions, which this year will be focussing on regulation (it’s three years since the crisis started during sibos in Vienna) and global issues.

Or there are the more niche and less traditional standards Forum sessions, which I can’t recommend too highly without being accused of personal bias as a regular contributor, and the far from conventional Innotribe innovation sessions, which sometimes verge on performance art.

something for everyone, in fact.

oliVier berThier,

Misys

What aspect of Sibos 2011 is most important to you? sibos is the most important opportunity during the year to hear from industry-leaders, meet clients and partners, and network with practitioners from around the world.

What questions are you hoping to have answered (and what answers do you hope to hear)?there are a couple of key areas of industry dialogue for 2011:

■ Clarity around the direction of ongoing regulatory change impacting our industry – BaselIII in particular.■ How we as an industry can extend capability for our clients and tap into new revenuesources.

What’s missing from the agenda?Rest time! As always, it is a packed agenda covering all the important industry issues relevant to our business.

Do you have any personal must-do ideas for your visit to Toronto? I’ve visited the city before, so this time I’ll be looking for ‘hidden toronto’. I can recommend a visit to Niagara – worth the trip and much better from the Canadian side.

Anything else?the swift Business Forums have been a great way to have a ‘mini-sibos’ in the spring, and catch up on industry dialogue that has progressed since Amsterdam.

Peter Jameson is head of FI Product Management for GTS EMEA, Bank of America Merrill Lynch

What aspect of Sibos 2011 is most important to you? sibos is definitely a platform to show off our brand in terms of how we look, our thought leadership, what we have to say, and who we meet. It is like a Formula One event for payment companies, and running a stand is nearly as hard work as driving an F1 car.

What questions are you hoping to have answered (and what answers do you hope to hear)?this year there should be a lot of content about new ways to pay, including mobile banking. We have built on our consumer and sME research by partnering with 23 charities to look at charitable payments via mobile phones. I hope that others are also sharing their vision of the future – beyond the current PayPal revolution. Our industry is going through an exciting period and sibos should have lots of interesting things to say.

What’s missing from the agenda? Corporate social Responsibility is something that every company has to take seriously nowadays. We have established a special interest session on CsR with the support of swift and are delighted to say that the chairman of CsR at Royal Bank of Canada will be presenting alongside our chief executive, Marion King. I am also hopeful that a major telco brand will also join our special interest session.

What would you change about the event?I have a personal beef about the plastic laptop bags that we get handed each year. they are not very environmentally friendly and often just sit in the store room on my stand all week - blocking access to our equipment. How about giving the money to a local charity instead?

Do you have any personal must-do ideas for your visit to Toronto?I am currently picking out the must see attractions as well as some personally recommended steak houses.

Anything else? I must say that the choice of rented furniture for our stand is not great – I wonder if anyone else is having the same problem ...

Mark Chapman is commercial marketing director at VocaLink


peTer JAmeSon, Bank of America Merrill Lynch

mArk ChApmAn, VocaLink

in Bromley and Croydon, and ambitious plans for an IPO in the next few years to fund 200 ‘stores’ by 2020 show that it is attracting custom, although the bank refuses to release the number of account holders. It must be considered as a viable threat to the established order, however, alongside other newcomers waiting in the wings such as Tesco Bank and Virgin.

“We won’t be buying the Lloyds Banking Group’s old sites either,” says Kane, referring to the 600 branches that the bank has been told it must dispose of as a quid pro quo for the state aid it received during the fi nancial crisis and the possibility that the Independent Commission on Banking in the UK will demand yet more sales to encourage competition. “Metro Bank has no desire to take on others’ premises as we want to create afresh.”

Key technology suppliers for Metro Bank include Temenos with its T24 Model Bank platform, which was installed in just nine months ready to handle the newcomer’s entire core banking needs on a managed services contract. NIU Solutions hosts the back end IT externally. VocaLink look after its Wincor-Nixdorf ATM estate, providing access to the nationwide LINK cash machine network for customers and processing debit card, domestic and international payments. The Tall Group handles the bank’s cheque origination and processing needs, while a fi ve-year deal with MasterCard, running until 2015, delivers credit and debit cards into customers hands after screening and money laundering checks have been carried out.

“The unique SaaS contracts we have in the UK make us different,” explains Kane. “It gives us a fl exible, low cost and low risk model that means my team have the time and space to be innovative and to focus on the customer without worrying about everyday operations. We can work quickly and be agile in this fast moving environment, designing new products with the assistance of our partners, because we’re not tied down to servicing old legacy systems. Our systems are all based on giving the user a single customer view.”

Metro Bank has launched lots of new products over the last year, says Kane, including new savings and ISAs, and a recent improvement of its internet banking offering to enhance the look and feel of the website after obtaining customer feedback.

“Equally, we’ve got tight contractual SLAs to ensure consistent delivery of a quality banking experience but I think you’ve already lost the plot if you rely on that too much. We’ve got excellent relations with all our partners, in part thanks to the strong selection procedures we implemented right at the very beginning, so I can just pick up the phone and change things or discuss any issues we have straight away. A good working relationship is key to way we do business.”

This is illustrated by the ongoing product development at Metro Bank, which unveiled a new mobile banking service with its partner Temenos at the vendor’s TCF user conference in Lisbon, Portugal earlier this year. The Arc Mobile solution from Temenos will give customers the ability to check their account, get mini-statements and overdraft warnings, and make secure payments to other members of the bank while they’re on the move. Arc Mobile will be installed by the end of the year, supporting all the major smartphone operating systems, covering the iPhone, Google’s

Android OS, WindowsPhone7 and Java platforms like BlackBerry. “It gives us a fl exible, secure mobile solution so we can extend our services and put Metro Bank securely and conveniently in the pocket of each and every customer,” says Kane. “It will allow us to build on our market differentiation through simple self-service and exciting new areas including payments. Additionally, it prepares us for the mobile wallet and other groundbreaking new handset developments.”

“The biggest thing I’ve learned as we celebrate our anniversary is that it’s vital to let the customer drive the IT, and not the other way around. So if they want mobile banking it’s naive not to give it to them. It’s no use foisting IT on customers that they don’t want – the opposite must be our aim.” The consumerisation trend in IT is obviously something that Kane has already taken on board and it bodes well for the future of Metro Bank that it is aware – and accommodating – of the latest customer demands. In just a few short years, if its rapid expansion continues and 200 stores are indeed opened by 2020, Metro Bank could truly be a challenger to reckon with and a real force in UK High Street banking. BT


>

Curricululum VitaeAisling Kane,Chief operations offi cer of Metro Bank UK.

2009-Present: Becomes COO of Metro Bank, the year before it opens its fi rst store in Holborn, central London, on 29 July 2010. Building on the success of Vernon Hill’s Metro Bank operation in the US the newcomer focuses on customer service, calling its branches stores for instance and opening on Sundays and with longer hours. The technological challenge is to get all its IT in place using suppliers instead of expensive in-house development teams and to rollout the various SaaS platforms in time for the launch, with strong SLAs, testing programmes and an easily replicable design – eight ‘stores’ have now been opened. Key suppliers overseen by the six person IT team that Aisling leads, which manage the everyday apps at the bank, include Temenos, with its T24 core banking system; VocaLink which looks after payments; and NIU Solutions which hosts Metro Bank’s IT. “It has been my most rewarding job ever,” she says.

1995-2009: Holds various positions in her hometown of Dublin at Anglo Irish Bank, before rising to become director of operations UK in London for over a decade. Aisling spends 14 years learning about the banking and tech operations sector at Anglo Irish, before the crash hits the bank and indeed the country as a whole particularly hard.

1991-1995: Trains as a chartered accountant at KPMG, working on audits but quickly decides it’s not for her and that banking will be her chosen fi eld.

1990-1991: Obtains a professional diploma in accounting from Dublin City University.

1986-1990: Obtains a BSc from University College, Dublin. In the fourth and fi nal year of her course Aisling specialises in Botany. “It’s not classical Darwin-type botany,” explains the 42-year-old, “but rather genetics that lead me into the fi eld and the exciting discoveries it was then opening up about plant life and the wider world around us. Daniel, her husband, is a scientist too but it’s not clear yet if their two boys, aged 10 and 12, will follow down the scientifi c or banking path.


IntervIew: Aisling KAne JuLY/August 2011

Meet the challenger

A retail revolution was unleashed last summer in Holborn, central London. I was there to see it but unusually it wasn’t just another fancy shiny new shop, loyalty card or clothes line, it was a bank. That’s right, the traditionally staid retail banking sector had a bit of hoopla about it for a change. Metro Bank UK opened its doors to the world last summer with balloons, bands, some very tasty ice cream, and a scrum of new customers all interested in this new rival to the established retail banks in the UK, which since the crash – and the takeovers it necessitated – had further consolidated their grip on the market.

“This is the most exciting job I’ve ever had,” says Aisling Kane, the COO of Metro Bank, remembering back to that launch date of 29th July last year. “Nothing I’ve done before compares to this. I’d never even worked for a start-up before until joining Metro Bank from Anglo Irish in 2009 (see boxout for career details). There are no stupid bank rules or established ways of working here; everything is up for grabs.”

“It’s been a fantastic experience at Metro Bank, delivering a multichannel service over the phone [via our call centre at the back of the first Holborn HQ], in ‘stores’ and online” she continues. “We all came together as a management team last year to ensure that all our systems were ready at the same time for the launch, despite the numerous challenges we faced.”

Not the least of these challenges was the eruption of the Eyjafjallajökull volcano in Iceland which threw out a massive ash cloud into the atmosphere delaying flights in Europe and around the world – and crucially holding up some important IT guys from Temenos in Chennai, India, who were due to come over to the UK to assist in the final ‘go live’ of the T24 core banking system supplied by the vendor. Not even that so-called ‘act of god’ could hinder preparations for the launch, however, and video conferencing calls and a clearing sky soon had the project back on track.

Metro Bank has a unique business model for the retail banking industry in that it runs all of its IT externally. If it can be outsourced it has been. Kane leads an internal technology team of just six people that test vendor systems that are installed on a Software-as-a-Service basis and devise strong Service Level Agreements and management protocols to ensure a smooth operation. “Frankly, we didn’t have the money for huge big infrastructure projects as a start-up. It was important that we minimised the capital outlay,” explains Kane, “plus the flexibility of outsourcing is attractive to us. It enabled us to avoid a lengthy implementation that would have drained financial resources.”

There is no in-house development team because Metro Bank believes that its tight-knit technology vendor partners are better equipped to look after its IT needs, freeing the bank up to focus on its core mission of providing unparalleled customer service. It refers to its branches as ‘stores’ for instance, reflecting how it wants customers to view the experience of entering one of its premises where you’ll find lots of open desks with no security screens barring access to the tellers, a coin-to-cash converter machine, access to old fashioned safe deposit boxes, Sunday opening and even free dog biscuits. “It’s refreshing to be part of a welcoming working culture that rewards the results of customer satisfaction surveys instead of using sales bonuses as an incentive,” adds Kane.

The rates on offer to retail bank customers may not necessarily top the ‘best of’ tables in the newspapers but Metro Bank is convinced that its customer-centric approach will win converts. The fact it already has eight stores, with the newest branches opening this summer

Metro Bank will celebrate its first year anniversary in the UK on 29th July. neil Ainger caught up with the chief operations officer, Aisling Kane, to review progress, discuss its outsourced IT arrangements and talk about the newcomer’s ambitious plans to rival the established High Street banks in the UK.

in Bromley and Croydon, and ambitious plans for an IPO in the next few years to fund 200 ‘stores’ by 2020 show that it is attracting custom, although the bank refuses to release the number of account holders. It must be considered as a viable threat to the established order, however, alongside other newcomers waiting in the wings such as Tesco Bank and Virgin.

“We won’t be buying the Lloyds Banking Group’s old sites either,” says Kane, referring to the 600 branches that the bank has been told it must dispose of as a quid pro quo for the state aid it received during the fi nancial crisis and the possibility that the Independent Commission on Banking in the UK will demand yet more sales to encourage competition. “Metro Bank has no desire to take on others’ premises as we want to create afresh.”

Key technology suppliers for Metro Bank include Temenos with its T24 Model Bank platform, which was installed in just nine months ready to handle the newcomer’s entire core banking needs on a managed services contract. NIU Solutions hosts the back end IT externally. VocaLink look after its Wincor-Nixdorf ATM estate, providing access to the nationwide LINK cash machine network for customers and processing debit card, domestic and international payments. The Tall Group handles the bank’s cheque origination and processing needs, while a fi ve-year deal with MasterCard, running until 2015, delivers credit and debit cards into customers hands after screening and money laundering checks have been carried out.

“The unique SaaS contracts we have in the UK make us different,” explains Kane. “It gives us a fl exible, low cost and low risk model that means my team have the time and space to be innovative and to focus on the customer without worrying about everyday operations. We can work quickly and be agile in this fast moving environment, designing new products with the assistance of our partners, because we’re not tied down to servicing old legacy systems. Our systems are all based on giving the user a single customer view.”

Metro Bank has launched lots of new products over the last year, says Kane, including new savings and ISAs, and a recent improvement of its internet banking offering to enhance the look and feel of the website after obtaining customer feedback.

“Equally, we’ve got tight contractual SLAs to ensure consistent delivery of a quality banking experience but I think you’ve already lost the plot if you rely on that too much. We’ve got excellent relations with all our partners, in part thanks to the strong selection procedures we implemented right at the very beginning, so I can just pick up the phone and change things or discuss any issues we have straight away. A good working relationship is key to way we do business.”

This is illustrated by the ongoing product development at Metro Bank, which unveiled a new mobile banking service with its partner Temenos at the vendor’s TCF user conference in Lisbon, Portugal earlier this year. The Arc Mobile solution from Temenos will give customers the ability to check their account, get mini-statements and overdraft warnings, and make secure payments to other members of the bank while they’re on the move. Arc Mobile will be installed by the end of the year, supporting all the major smartphone operating systems, covering the iPhone, Google’s

Android OS, WindowsPhone7 and Java platforms like BlackBerry. “It gives us a fl exible, secure mobile solution so we can extend our services and put Metro Bank securely and conveniently in the pocket of each and every customer,” says Kane. “It will allow us to build on our market differentiation through simple self-service and exciting new areas including payments. Additionally, it prepares us for the mobile wallet and other groundbreaking new handset developments.”

“The biggest thing I’ve learned as we celebrate our anniversary is that it’s vital to let the customer drive the IT, and not the other way around. So if they want mobile banking it’s naive not to give it to them. It’s no use foisting IT on customers that they don’t want – the opposite must be our aim.” The consumerisation trend in IT is obviously something that Kane has already taken on board and it bodes well for the future of Metro Bank that it is aware – and accommodating – of the latest customer demands. In just a few short years, if its rapid expansion continues and 200 stores are indeed opened by 2020, Metro Bank could truly be a challenger to reckon with and a real force in UK High Street banking. BT


>

Curricululum VitaeAisling Kane,Chief operations offi cer of Metro Bank UK.

2009-Present: Becomes COO of Metro Bank, the year before it opens its fi rst store in Holborn, central London, on 29 July 2010. Building on the success of Vernon Hill’s Metro Bank operation in the US the newcomer focuses on customer service, calling its branches stores for instance and opening on Sundays and with longer hours. The technological challenge is to get all its IT in place using suppliers instead of expensive in-house development teams and to rollout the various SaaS platforms in time for the launch, with strong SLAs, testing programmes and an easily replicable design – eight ‘stores’ have now been opened. Key suppliers overseen by the six person IT team that Aisling leads, which manage the everyday apps at the bank, include Temenos, with its T24 core banking system; VocaLink which looks after payments; and NIU Solutions which hosts Metro Bank’s IT. “It has been my most rewarding job ever,” she says.

1995-2009: Holds various positions in her hometown of Dublin at Anglo Irish Bank, before rising to become director of operations UK in London for over a decade. Aisling spends 14 years learning about the banking and tech operations sector at Anglo Irish, before the crash hits the bank and indeed the country as a whole particularly hard.

1991-1995: Trains as a chartered accountant at KPMG, working on audits but quickly decides it’s not for her and that banking will be her chosen fi eld.

1990-1991: Obtains a professional diploma in accounting from Dublin City University.

1986-1990: Obtains a BSc from University College, Dublin. In the fourth and fi nal year of her course Aisling specialises in Botany. “It’s not classical Darwin-type botany,” explains the 42-year-old, “but rather genetics that lead me into the fi eld and the exciting discoveries it was then opening up about plant life and the wider world around us. Daniel, her husband, is a scientist too but it’s not clear yet if their two boys, aged 10 and 12, will follow down the scientifi c or banking path.

Citi Global Transaction Services has announced that Naveed Sultan is the new global head of Treasury and Trade Solutions, reporting to GTS chief executive, Francesco Vanni d’Archirafi. Sultan will manage Citi’s cash management and trade services business, which had reported revenues of $7.2 billion last year. An 18-year veteran at Citi, Sultan was previously head of cash management solutions for GTS in EMEA. He joined via the Saudi American Bank, an affiliate, in 1993 where he had held several senior positions after beginning his career with Standard Chartered Bank in Pakistan. GTS is also making changes in the way it manages the developed and emerging markets in Europe, Middle East and Africa. Henceforth, the region will be split into two segments, with Western Europe under the continued management of 17-year veteran Aidan Brady, while Eastern Europe, the Middle East and Africa comes under the leadership of Elias Panayotopoulos, another long-termer who has been with Citi for 37 years and fulfilled this leadership role informally in the past. The new structure is intended to help the bank pursue a different approach to the developed and emerging markets.

i365 eVault, a vendor that specialises in cloud-connected data protection and business continuity services, has announced Andy Brewerton as its new country manager for the UK and Ireland, where he will take charge of all operations. Brewerton recently served as senior director of business development CA Technologies, where he was responsible for strategic planning and the creation of new programmes focused on managed service providers and cloud service providers.

oanda Corporation, a provider of online foreign exchange trading, global currency transfers and currency data, has opened an office in London to manage the company’s newest subsidiary, Oanda Europe, which is the centrepiece of its new regional expansion drive away from its American and Asian heartlands. Antony Broadbent is the managing director of Oanda Europe. He brings more than 15 years of financial services experience to his role, having previously worked at Alliance Bernstein and Capital One. Broadbent also spent 10 years working with leading international management consultants McKinsey & Company.

JCB, a global payment brand and big credit card issuer and acquirer in Japan, has made Takao Kawanishi its news chairman and chief executive. He was previously vice chairman and has been in the banking industry for 39 years, starting out with Sanwa Bank, followed by UFJ Holdings and Bank, and the Bank of Tokyo-Mitsubishi UFJ, where he held a number of senior positions including senior managing director and deputy president. His primary responsibility will be to continue to strengthen the JCB card member base in Japan and its card acceptance schemes globally by enhancing alliances with partner banks, corporations and other institutions worldwide.

Jonathan Macdonald of Barclays Capital, Sean Malone of RBS and Greig Morrish of Invesco UK were all elected to the board of the loan Market Association at the recent Annual General Meeting. Ian Fitzgerald, a managing director and head of loan syndicate at Lloyds Banking Corporate Markets, was elected the chairman of the Association, which was founded in December 1996 by seven leading international banks in London. Its aim is to encourage liquidity and efficiency in both the primary and especially, the secondary loan markets by promoting market depth and transparency, as well as by developing standard forms of documentation and codes of market practice.

Bank of America Merrill lynch has added two new senior hires to its Corporate Banking business, based in Santiago, Chile. Rodrigo Demaria joins as director and head of Corporate Banking for the Southern Cone region, which also includes Argentina, Paraguay and Uruguay. Cristian Aguirre joins as vice president and, with Demaria, will be responsible for developing relationships with clients in the Southern Cone area. Demaria was most recently at BBVA where he worked for six years as executive director, Corporate & Investment Banking, covering companies in the energy, oil & gas, mining, telecom and retail sectors. During his tenure at BBVA, he was also head of Financial Institutions, and has previously worked at Banco de Credito e Inversiones and at Citigroup in the Corporate and Investment Banking division. Aguirre also joins from BBVA where he was a senior relationship manager in International Corporate Banking, based in New York and Chile. BT


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 tradition with a move outside the US for the North America leg of its perpetual world tour.www.swift.com

28-30 septembereFmA 2011 Cards and payments, parisNow in its ninth year, this event attracts over 40 leading industry speakers and around 350 senior executives from throughout the world.www.efma.com/cards

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

10 NoVeMBeRBanking Technology Awards 2011, londonThe premier event recognising excellence in the use of IT in financial services. We are now accepting entries. www.bankingtech.com/awards

5-9 DeCemberriskminds, GenevaThe organisers hope to beat the turnout of more than 600 chief risk officers, senior risk practitioners, academics & advisors who made last year the largest risk conference.www.informaglobalevents.com

13-14 oCtober 39th eFmA Congress, parisThe European Financial Marketing Association’s annual Congress will explore different approaches to multi-channel management. It will feature case studies from senior executives of new European banks, such as Metrobank, Zuno Bank and Alior Bank,.www.efma.com

18-19 oCtoberbusiness & operational excellence in payments, LondonFrom the organisers of the International Payments Summit, This two day conference examines the issues around achieving operational efficiency in payments.www.informaglobalevents.com

events


PeoPleJuLY/August 2011

Appointments

The link ATM network in the UK, operated by VocaLink, has appointed John Howells as chief executive, after the previous incumbent, Edwin Schooling Latter, left to join the Bank of England. Howells was previously a director of Ernst & Young’s financial services business and head of benefits and pensions consulting at the Capgemini consultancy where he specialised in the design and implementation of strategic change for major firms.

The Depository Trust & Clearing Corporation promoted Robert Garrison to the post of chief information officer in July. He has been managing director and chief development officer of DTCC’s Information Technology division since October of last year. In his new position, Garrison will have enterprise-wide responsibility for the ongoing development and testing of all the technology that supports DTCC’s post-trade infrastructure, which includes multiple data centres, communications networks, and the processing and messaging systems which receive and respond to more than 2.4 billion messages each day. Also under his remit are the IT applications underlying DTCC’s broad range of products and services, plus business continuity and information security. Garrison replaces ex-CIO Jacob Feuchtwanger who retired in early July after a 31-year career with DTCC. He will report to chief operating officer, Michael

Bodson. Prior to joining DTCC, Garrison spent 25 years at Morgan Stanley working in various senior technology leadership positions. Among his achievements, he directed the global wealth management technology group, overhauling its capabilities, and he also lead the integration of the Morgan Stanley Smith Barney joint venture and the integration of Barclays’ global custody business into Morgan Stanley Trust Company.

HP has appointed ed Adshead-Grant to lead its card & payments services in Europe, the Middle East and Africa, within the enterprise services group. Based in the UK, he will lead business development activities in the region, focusing especially on processing and analytical outsourcing contracts, covering financial services, retail and associated businesses. Adshead-Grant joins from First Data Corporation and has 18 years experience working with various vendors in the sector, including PwC and Bottomline Technologies.

Takashi Kimori has taken over from Kyoichi Murakawa as chief representative of the Clearstream office in Tokyo. His responsibilities

include relationship management of all institutions within Japan and further development of the securities servicing business in Japan. As an international central securities depository and part of

the Deutsche Boerse Group, Clearstream is obviously expecting more business under the new post-crash regulatory rules that are coming in and this appointment is evident of its intention to target international business where it can. Kimori will report to Philippe Metoudi in Hong Kong, who is head of client relations for Asia-Pacific, the Mid-East and Africa. Most recently, Kimori worked as deputy general manager of risk control at Yamaguchi Financial Group. He started his career in 1978 at the Bank of Tokyo-Mitsubishi UFJ where he held the position of general manager of the transaction services division from 2005 to 2008 and enjoyed spells working in Brussels, Paris and London for 12 years combined. Murakawa will continue as a special advisor,

FNZ, a provider of wealth management and investment technology platforms to Standard Life, JPM, Zurich FS, Axa and others, has appointed Martin Jennings as chief executive officer for Australia and New Zealand. He’ll be responsible for strategic planning, service delivery and infrastructure management in the region and will lead product development and implementation initiatives down under in consultation with the new central development centre recently opened in Brno, Czech Republic. Jennings will relocate from London to Sydney. He was previously managing director for Axa’s Elevate platform, which is powered by FNZ, and spent nine years with the firm.

Vocalink has made Marc Terry managing director of its transaction services division. He will report to chief executive Marion King and be responsible for the strategic leadership and development of the unit, which includes managing the payments specialist’s core processing contracts for Bacs, Faster Payments and the UK government. The planned replacement of cheques in 2018 and advancement of the mobile channel are also expected to be a key focus for Terry. He joins from Clear2Pay where he was EMEA managing director for the last three years, securing contracts with Standard Bank, PBS, Santander and Cedicam in France. He previously spent 17 years at payment systems provider ACI Worldwide, fulfilling various roles in the Americas and Europe, Middle East and Africa. Terry is one of a number of changes at

VocaLink in recent times with previous long-standing employees, such as Nick Masterson-Jones and Martin Wilson among others, all having left the firm as new faces are introduced. The latter is now chief executive of mobile money specialist Luup, while Masterson-Jones is CIO at Travelex Global Business Payments. Long-standing chief executive, Marion King, is still at VocaLink however, and is looking forward to working with Terry. “The transactions services division has seen rapid growth over the past year and the appointment of Marc will further support this, driving forward our strategic plans in the UK, mainland Europe and internationally,” she said. The man himself said he was “delighted to take on this role within VocaLink, especially at a time when the industry is experiencing rapid change and exciting innovation”.

Marc Terry joins VocaLink as MD of transaction services

Citi Global Transaction Services has announced that Naveed Sultan is the new global head of Treasury and Trade Solutions, reporting to GTS chief executive, Francesco Vanni d’Archirafi. Sultan will manage Citi’s cash management and trade services business, which had reported revenues of $7.2 billion last year. An 18-year veteran at Citi, Sultan was previously head of cash management solutions for GTS in EMEA. He joined via the Saudi American Bank, an affiliate, in 1993 where he had held several senior positions after beginning his career with Standard Chartered Bank in Pakistan. GTS is also making changes in the way it manages the developed and emerging markets in Europe, Middle East and Africa. Henceforth, the region will be split into two segments, with Western Europe under the continued management of 17-year veteran Aidan Brady, while Eastern Europe, the Middle East and Africa comes under the leadership of Elias Panayotopoulos, another long-termer who has been with Citi for 37 years and fulfilled this leadership role informally in the past. The new structure is intended to help the bank pursue a different approach to the developed and emerging markets.

i365 eVault, a vendor that specialises in cloud-connected data protection and business continuity services, has announced Andy Brewerton as its new country manager for the UK and Ireland, where he will take charge of all operations. Brewerton recently served as senior director of business development CA Technologies, where he was responsible for strategic planning and the creation of new programmes focused on managed service providers and cloud service providers.

oanda Corporation, a provider of online foreign exchange trading, global currency transfers and currency data, has opened an office in London to manage the company’s newest subsidiary, Oanda Europe, which is the centrepiece of its new regional expansion drive away from its American and Asian heartlands. Antony Broadbent is the managing director of Oanda Europe. He brings more than 15 years of financial services experience to his role, having previously worked at Alliance Bernstein and Capital One. Broadbent also spent 10 years working with leading international management consultants McKinsey & Company.

JCB, a global payment brand and big credit card issuer and acquirer in Japan, has made Takao Kawanishi its news chairman and chief executive. He was previously vice chairman and has been in the banking industry for 39 years, starting out with Sanwa Bank, followed by UFJ Holdings and Bank, and the Bank of Tokyo-Mitsubishi UFJ, where he held a number of senior positions including senior managing director and deputy president. His primary responsibility will be to continue to strengthen the JCB card member base in Japan and its card acceptance schemes globally by enhancing alliances with partner banks, corporations and other institutions worldwide.

Jonathan Macdonald of Barclays Capital, Sean Malone of RBS and Greig Morrish of Invesco UK were all elected to the board of the loan Market Association at the recent Annual General Meeting. Ian Fitzgerald, a managing director and head of loan syndicate at Lloyds Banking Corporate Markets, was elected the chairman of the Association, which was founded in December 1996 by seven leading international banks in London. Its aim is to encourage liquidity and efficiency in both the primary and especially, the secondary loan markets by promoting market depth and transparency, as well as by developing standard forms of documentation and codes of market practice.

Bank of America Merrill lynch has added two new senior hires to its Corporate Banking business, based in Santiago, Chile. Rodrigo Demaria joins as director and head of Corporate Banking for the Southern Cone region, which also includes Argentina, Paraguay and Uruguay. Cristian Aguirre joins as vice president and, with Demaria, will be responsible for developing relationships with clients in the Southern Cone area. Demaria was most recently at BBVA where he worked for six years as executive director, Corporate & Investment Banking, covering companies in the energy, oil & gas, mining, telecom and retail sectors. During his tenure at BBVA, he was also head of Financial Institutions, and has previously worked at Banco de Credito e Inversiones and at Citigroup in the Corporate and Investment Banking division. Aguirre also joins from BBVA where he was a senior relationship manager in International Corporate Banking, based in New York and Chile. BT


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 tradition with a move outside the US for the North America leg of its perpetual world tour.www.swift.com

28-30 septembereFmA 2011 Cards and payments, parisNow in its ninth year, this event attracts over 40 leading industry speakers and around 350 senior executives from throughout the world.www.efma.com/cards

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

10 NoVeMBeRBanking Technology Awards 2011, londonThe premier event recognising excellence in the use of IT in financial services. We are now accepting entries. www.bankingtech.com/awards

5-9 DeCemberriskminds, GenevaThe organisers hope to beat the turnout of more than 600 chief risk officers, senior risk practitioners, academics & advisors who made last year the largest risk conference.www.informaglobalevents.com

13-14 oCtober 39th eFmA Congress, parisThe European Financial Marketing Association’s annual Congress will explore different approaches to multi-channel management. It will feature case studies from senior executives of new European banks, such as Metrobank, Zuno Bank and Alior Bank,.www.efma.com

18-19 oCtoberbusiness & operational excellence in payments, LondonFrom the organisers of the International Payments Summit, This two day conference examines the issues around achieving operational efficiency in payments.www.informaglobalevents.com

events



Mobile operators form payments JV

clear2Pay expands US footprint with purchase of testing specialist Lexcel

Vodafone uK, telefónica’s O2 operation in the uK and Everything Everywhere uK, which includes

Orange and t-mobile, are forming a mobile marketing and payments joint venture to “accelerate the development of innovative mobile services”.

the joint venture is intended to provide a single contact for advertisers, marketing partners, retailers and banks, making it easier to create m-commerce products for consumers, such as coupons, ads and loyalty schemes, and payment services. the JV will be open and available to all industry participants, card schemes and so forth says the MNO, but whether others choose to join is debateable. the struggling Isis consortium in America has already proved how difficult it is for MNOs to get schemes such as this off the ground and attract partners, plus the failure of the simPay initiative last decade doesn’t bode well either.

the intention is launch before the end of the year, however, and the uK MNOs are confident that they can make it work. Everything Everywhere, telefónica uK and Vodafone uK will provide the start-up investment.

the key aims of the JV are: to create a single ecosystem for m-commerce and to get consumers to replace their physical wallet with a mobile wallet equipped with Near Field Communication technology.

“We are seeing an explosion in the m-commerce market: mobile advertising spend alone has more than doubled in two years as consumers embrace marketing on their handsets because it is now relevant to them and provides a great customer experience,” said Ronan Dunne, chief executive of telefónica uK. “the mobile marketing and payments market is extremely fragmented. By creating this new business we will underpin this nascent market, providing real size and scale, allowing consumers to benefit from new and innovative services, like the mobile wallet, and giving them more of the things they value, through offers and deals that are relevant to them. At the same time business customers will reach a vastly increased audience, using a single platform for sales, delivery and payment. “this is not just something that is unique in the uK, but a joint venture that will create a model that many countries around the world could follow.” BT

Payments system provider Clear2Pay has expanded its us footprint with the acquisition of Lexcel solutions, a developer of payment test applications for core payment platforms and system capacity.

the deal was a cash transaction, but the company declined to disclose the amount it paid. Michel Akkermans, chairman and chief executive of Clear2Pay said that the combination of the companies was complementary, and Lexcel will continue to operate as before, with Clear2Pay taking its products to international markets, where it will complement the company’s existing Integri testing product.

Lexcel provides payment testing software and services to third-party payment transaction processors, debit and credit networks, financial institutions, retailers, AtM/POs manufacturers and government organisations. Clients include us banks and companies such as Heartland Payment systems, stAR Network, Wincor Nixdorf, Mercury Payments, united states Postal service, and WorldPay.

“We feel that payments modernisation requires more than flexible technology alone: testing across the full process chain from device manufacturer to processor and the end user is of vital importance to the delivery of secure payments or value in an increasingly unified and hybrid world,” said Akkermans. “With the new combined test tool offering we can support the broadest possible range of devices and technologies and thus develop testing as a strategic line of business for the bank, card and mobile payment space alike”.

Jürgen Ingels, chief financial officer and co-founder of Clear2Pay said: “the Lexcel acquisition is the second deal funded by the proceeds of our €50 million capital increase, a fund raising round we concluded late 2009 with a consortium led by Aquiline Capital Partners. We expect more acquisitions to follow in the coming quarters that will further enhance Clear2Pay’s position in the global payments industry.” BT

SmartStream adds transaction fee management

Smartstream, the transaction Lifecycle Management specialist, has developed an automated

solution that manages all aspects of transaction fees, from exchange through to brokerage fees.

transaction fees and related invoice reconciliation are a highly fragmented and manual process, creating significant control and processing inefficiencies and introducing additional risk and cost. smartstream’s tLM transaction Fees Invoice Management allows invoices for on-exchange or Over-the-Counter transactions tobe managed through one solution delivered either on premise or as a service.

Anne Pounds, product manager at smartstream, commented: “Market fragmentation along with disparate operational approaches within financial institutions created huge inefficiencies. In discussing derivatives processing issues with clients and prospects, many acknowledged that their existing approaches for dealing with invoices were inefficient and lacked an effective methodology. It was also apparent that any form of streamlined dispute resolution processes would benefit their organisation.”

the new system is integrated in with industry initiatives such as egains, gPs and egus. Disputed transactions can also be managed and resolved through an online collaborative tool.

this collaborative approach ensures more efficient dispute resolution that removes delays in the process, lowering costs and risk, thereby bringing in more control for users, the company says.

Robert Drew, a derivatives infrastructure specialist, commented: “In my experience firms globally struggle with highly manual and fragmented invoice management processes that, in the current market conditions create unnecessary risk and cost. solutions such as smartstream’s tLM transaction Fees Invoice Management should enable industry participants to both accelerate and enhance the entire invoicing, payables and receivable process through a best practices approach.” BT


JuLY/August 2011

ProductS and ServiceSVendor announcements, enhancements and innovations

Fundtech/S1 merger dominates a month of M&A for fintech vendors

The proposed merger of s1 Corporation and Fundtech into a transaction banking solutions vendor worth $700 million dominated the fintech vendor world at the end of last month, pushing the news that FIs global has bid for Misys in a deal

that would be worth twice that, off the top of the agenda. the two deals, still to be finalised, were the top headlines in a flurry of announcements

of mergers and alliances among vendors over the past few months.under the Fundtech/s1 deal, s1 shareholders will own approximately 55% and

Fundtech shareholders approximately 45% of the combined company’, to be called Fundtech and headquartered at s1’s headquarters in Atlanta, georgia. Fundtech’s Reuven BenMenachem will become executive chairman of the combined company and s1’s Johann Dreyer will serve as chief executive.

“this merger will create an industry leader that provides a complete suite of technologically advanced transaction banking solutions,” said BenMenachem. “the s1 and Fundtech organisational, cultures are very similar in their commitment to deliver innovative products and generate the highest levels of customer satisfaction. the companies have complementary product offerings and extensive cross-selling opportunities which will position the combined company to secure larger contracts and cultivate more strategic relationships with customers.”

“the future of the transaction banking industry is highly dependent upon innovation and state-of-the-art solutions and this combination will put us at the forefront of these advancements,” said Dreyer. “Both companies have key strengths in technology, products, customers and culture, and we are extremely excited about the opportunities that will be created by combining these businesses. this merger will expand our geographic footprint and enhance our ability to accelerate revenue growth and increase profitability.”■ On the mobile front, Visa is seeking to strengthen its position in the emerging mobile payments space with a $110 million cash deal to buy Fundamo, a south African-based vendor of mobile financial services technology for banks and Mobile Network Operators in the developing world. It has also extended and formalised a pre-existing strategic development agreement with Monitise, struck in February, until 2016. It will offer Visa customers outside the us with mobile top-up facilities, utility payment options, ticketing and mobile alert services such as balance checking and so forth. Inside the us, Monitise and Visa, which has a 14.5% stake in the vendor, will launch a suite of mobile banking services for clients of the card scheme’s debit and prepaid processing platform, covering Peer-to-Peer remote payments, text alerts and loyalty offers.

the twin deals are intended to increase Visa’s global mobile payment and banking reach and range of services in the developing and developed world, so that plain mobile users, smartphone adherents and customers from anywhere in the world can access the channel through Visa.

Fundamo has more than 50 active mobile financial services deployments across more than 40 countries, including 27 in fast developing Africa, Asia and the Middle East. the vendor says it has five million subscribers for its branchless banking services, bill and airtime payment options, and P2P payment facilities.

Commenting on the developing world deal, Joseph saunders, chairman and chief executive of Visa, said: “Combining our network scale, global reach, extensive product suite and established financial institution relationships with Fundamo’s expertise in delivering mobile financial services in developing economies presents us with an important long-term opportunity to grow our business and drive financial inclusion in key geographic markets.” BT

Latest version of Sophis risque launched

Misys has launched sophis Risque 6.2, the latest version of its trading and risk

management solution for investment banks. the new version improves risk management capabilities, broadens asset class coverage and enhances operational efficiency.

Over the past year financial institutions have strengthened their securities finance and delta one businesses involving a growing use of cross-asset portfolio swaps, contracts for difference and exchange-traded funds (EtFs). to satisfy these demands, Misys sophis has continued to extend this asset-class coverage within the Risque suite.

Risque 6.2 allows greater flexibility on underlyings (including bonds and convertible bonds), and payment rules, as well as a refined collateral management.

Risque 6.2 introduces a new comprehensive event diary that accelerates the management of large complex cross-asset portfolios. It delivers transparency on portfolio management, mitigating operational risk, while increasing efficiency through improved straight-through processing.

the risk management solution has been further enhanced with full support of P&L explanation on fixed income, as well as liquidity-adjusted VaR. BT

SunGard has expanded its risk advisory service with the Ambit Risk Institute, which brings together consulting skills in banking, technology and regulation. Andreas Hug, COO for SunGard’s Ambit Risk & Performance Management business unit, said: “Investing in improving risk management capabilities will help banks benefit from increased performance and competitiveness and higher levels of risk-adjusted profitability. Leveraging the experience of our banking experts and our technology solutions, SunGard’s Ambit Risk Institute provides advisory services and thought leadership.” BT

“the transaction banking industry is highly dependent on innovation and

state-of-the-art solutions and this will put us at the forefront.”



Mobile operators form payments JV

clear2Pay expands US footprint with purchase of testing specialist Lexcel

Vodafone uK, telefónica’s O2 operation in the uK and Everything Everywhere uK, which includes

Orange and t-mobile, are forming a mobile marketing and payments joint venture to “accelerate the development of innovative mobile services”.

the joint venture is intended to provide a single contact for advertisers, marketing partners, retailers and banks, making it easier to create m-commerce products for consumers, such as coupons, ads and loyalty schemes, and payment services. the JV will be open and available to all industry participants, card schemes and so forth says the MNO, but whether others choose to join is debateable. the struggling Isis consortium in America has already proved how difficult it is for MNOs to get schemes such as this off the ground and attract partners, plus the failure of the simPay initiative last decade doesn’t bode well either.

the intention is launch before the end of the year, however, and the uK MNOs are confident that they can make it work. Everything Everywhere, telefónica uK and Vodafone uK will provide the start-up investment.

the key aims of the JV are: to create a single ecosystem for m-commerce and to get consumers to replace their physical wallet with a mobile wallet equipped with Near Field Communication technology.

“We are seeing an explosion in the m-commerce market: mobile advertising spend alone has more than doubled in two years as consumers embrace marketing on their handsets because it is now relevant to them and provides a great customer experience,” said Ronan Dunne, chief executive of telefónica uK. “the mobile marketing and payments market is extremely fragmented. By creating this new business we will underpin this nascent market, providing real size and scale, allowing consumers to benefit from new and innovative services, like the mobile wallet, and giving them more of the things they value, through offers and deals that are relevant to them. At the same time business customers will reach a vastly increased audience, using a single platform for sales, delivery and payment. “this is not just something that is unique in the uK, but a joint venture that will create a model that many countries around the world could follow.” BT

Payments system provider Clear2Pay has expanded its us footprint with the acquisition of Lexcel solutions, a developer of payment test applications for core payment platforms and system capacity.

the deal was a cash transaction, but the company declined to disclose the amount it paid. Michel Akkermans, chairman and chief executive of Clear2Pay said that the combination of the companies was complementary, and Lexcel will continue to operate as before, with Clear2Pay taking its products to international markets, where it will complement the company’s existing Integri testing product.

Lexcel provides payment testing software and services to third-party payment transaction processors, debit and credit networks, financial institutions, retailers, AtM/POs manufacturers and government organisations. Clients include us banks and companies such as Heartland Payment systems, stAR Network, Wincor Nixdorf, Mercury Payments, united states Postal service, and WorldPay.

“We feel that payments modernisation requires more than flexible technology alone: testing across the full process chain from device manufacturer to processor and the end user is of vital importance to the delivery of secure payments or value in an increasingly unified and hybrid world,” said Akkermans. “With the new combined test tool offering we can support the broadest possible range of devices and technologies and thus develop testing as a strategic line of business for the bank, card and mobile payment space alike”.

Jürgen Ingels, chief financial officer and co-founder of Clear2Pay said: “the Lexcel acquisition is the second deal funded by the proceeds of our €50 million capital increase, a fund raising round we concluded late 2009 with a consortium led by Aquiline Capital Partners. We expect more acquisitions to follow in the coming quarters that will further enhance Clear2Pay’s position in the global payments industry.” BT

SmartStream adds transaction fee management

Smartstream, the transaction Lifecycle Management specialist, has developed an automated

solution that manages all aspects of transaction fees, from exchange through to brokerage fees.

transaction fees and related invoice reconciliation are a highly fragmented and manual process, creating significant control and processing inefficiencies and introducing additional risk and cost. smartstream’s tLM transaction Fees Invoice Management allows invoices for on-exchange or Over-the-Counter transactions tobe managed through one solution delivered either on premise or as a service.

Anne Pounds, product manager at smartstream, commented: “Market fragmentation along with disparate operational approaches within financial institutions created huge inefficiencies. In discussing derivatives processing issues with clients and prospects, many acknowledged that their existing approaches for dealing with invoices were inefficient and lacked an effective methodology. It was also apparent that any form of streamlined dispute resolution processes would benefit their organisation.”

the new system is integrated in with industry initiatives such as egains, gPs and egus. Disputed transactions can also be managed and resolved through an online collaborative tool.

this collaborative approach ensures more efficient dispute resolution that removes delays in the process, lowering costs and risk, thereby bringing in more control for users, the company says.

Robert Drew, a derivatives infrastructure specialist, commented: “In my experience firms globally struggle with highly manual and fragmented invoice management processes that, in the current market conditions create unnecessary risk and cost. solutions such as smartstream’s tLM transaction Fees Invoice Management should enable industry participants to both accelerate and enhance the entire invoicing, payables and receivable process through a best practices approach.” BT

ITRS, the supplier of predictive, real-time monitoring and proactive application performance management products, and Prelert, a provider of self-learning, application behaviour analytics solutions, are to collaborate. Prelert will complement ITRS Group’s real-time predictive monitoring solution with a layer of statistical analysis which instantly identifies and isolates the root cause of end-to-end application/service anomalies where rules and exception traps have not been defined. “The statistical inference capability which Prelert provides is a natural complement to the wealth of information collected and analysed by ITRS Geneos, and is key to understanding the behaviour of vital, enterprise-wide trading and risk systems,” said Kevin Covington, chief executive of ITRS. “Our clients recognise that the real-time internal performance and status metrics they are gathering through ITRS Geneos are a vital and strategic corporate asset, that can be used for multiple purposes, such as risk management, trading venue intelligence and capacity planning, among others.”

Fidessa has released a new version of its Canadian sell-side trading platform. New features include enhanced Smart Order Routing, additional FX capabilities, updated algorithmic functionality and, on the compliance front, automated Order Audit Trail System (OATS) reporting. The Fidessa SOR now includes low latency point-to-point FIX gateways for use with the TSX and alternative trading venues to reduce latency and provide faster market access. Other changes to the platform include enhanced FX capabilities, which enable users to auto-hedge FX exposures in real time as well as a global order FX algorithm, to automatically convert orders in foreign currencies and symbols to Canadian prices and symbols. Additionally, a cross border algorithm for Canadian securities that are dual listed in the US allows better opportunities for arbitrage.

The Mobile Contactless Payment drive from Orange has reached Poland where the mobile network operator is launching a large scale pilot of the technology with the technical help of Gemalto, following on from its earlier launch of the commercial Quick Tap MCP scheme in the UK in collaboration with Barclaycard, and its participation in the big MCP rollout in Nice. It is also one of the participating operators in the UK mobile marketing and payments joint venture with Telefonica’s O2 and Vodafone. PTK Centertel, the vendor’s unit in Poland, will roll out the low value payments trial this summer using the 35,000 readers already installed in the country and relying on the cooperation of partner banks, several thousand consumers, and Gemalto which is providing the Near Field Communication software and user interface application on the SIM card and Trusted Service Management processing services.

Calypso Technology has developed a collateral optimisation solution it says is responds to new challenges in collateral management driven by substantial shifts in the basis markets, regulatory requirements for OTC clearing and associated margins, improved counterparty risk management, more stringent liquidity control, and demand for greater visibility at an enterprise level. The software uses a proprietary algorithm that allows users to manage the collateral allocation process and deploy optimisation strategies by simply defining substitution rules, targets, constraints and real-time information governed by traders. Alternatively, users can plug in their own proprietary solvers.

The Numerical Algorithms Group (NAG), provider of numerical software and high performance computing services, has announced the availability of the latest NAG Fortran Library. Now at Mark 23, the NAG Fortran Library contains over 1,700 flexible algorithms, ready for use from a wide range of operating systems, languages, environments and packages including Excel, Java, MATLAB and .NET/C#. Over 100 new user-callable routines have been added at this release. There have been extensions in functionality included in the areas of statistics, optimisation, wavelet transforms, nonlinear equations, ordinary differential equations, interpolation, surface fitting, matrix operations, linear algebra, and special functions.

Consult Hyperion, the independent consultancy which specialises in the field of secure transactions in contactless smart cards and mobile devices has joined the Smart Card Alliance, a not-for-profit group comprised of over 180 global members that stimulates the adoption of smartcard technology in the US and Latin America. By joining the alliance Consult Hyperion hopes to increase its visibility and further develop relationships with industry players after seeing an increased demand for its expertise for supporting large scale smartcard implementations for governments, banks and telecommunication providers. The 180 Smart Card Alliance members worldwide include participants from financial, government, enterprise, transportation, mobile telecommunications, healthcare, and retail industries that provide a single industry voice for smart card technology and leading industry discussion on the impact and value of smart cards.

Princeton Financial Systems has unveiled the latest version of its DVS Fund Warehouse, a platform for data management, analysis and reporting. Version 6.0 contains new functions in the areas of data management and report preparation, and improved mapping of structured products. The latest version features an improvement to the look-through function, which enables the breakdown of complex structured products into their individual components, for example by instrument type, industry sector and region. Look-through is important for reporting, and is also a valuable method of performing analyses. It is a legal requirement in many countries. The underlying data model has also been expanded and standardised in order to facilitate access to many new fields.

Lombard Risk Management has demonstrated a new web-based version of its regulatory compliance software using a working example of the forthcoming European Banking Authority’s COmmon REPorting (COREP), the first reporting manifestation of Basel III. It provides regulatory reporting, stress testing and scenario analysis, management business information and collateral management on a fully integrated web platform. The new solution has been developed in response to the increasing and changing demands of global regulators for transparency and insight into firms’ operations at a detailed level.

Voice Commerce has launched CashFlows Portable, an iPhone app that allows businesses to accept real-time credit and debit card payments on the move. CashFlows Portable can be used as a standalone service similar to a normal face-to-face payment terminal, or in conjunction with accepting credit & debit card transactions from a business’ website. It is also fully integrated with the firm’s VoicePay m-commerce service, which uses voice biometric security. BT



PRODUCT AND SERVICESJuLY/August 2011


Industry columnJuLY/August 2011

As institutions that are owned by their customers, engaging and communicating with members is of fundamental importance to building societies. It is by involving members that societies can make ownership meaningful to their customers and social media is one way of doing this. If members place greater value on being an ‘owner’ of the society, then both the society and the member will benefit. societies now seek to engage and communicate with their members more than ever before. social media can help to strengthen the bond, drive new business and potentially open up new revenue streams, but it must be done in a manner that complies with marketing and regulatory norms.

uK financial institutions, for the most part, have not been early adopters of the social media phenomenon. they have waited on the sidelines, wondering whether they need to adopt it, questioning how they can use social media effectively and, critically in a regulated industry, how they can ensure that the activity is compliant. some organisations, such as the saffron Building society and indeed other members of the BsA, have forged ahead in developing a presence in this virtual world but before taking the leap you have to develop a policy and ensure compliance with the basic rules governing financial services, and especially its promotion.

It is generally now accepted that social media sites are here to stay, and while their identity may change and new forums might become established in future years, the phenomenon itself is permanent and represents a fast growing customer marketing and communication channel. A social Media Census, conducted for Lansons Communications by Opinium Research on the same weekend as the official uK Census, found that 61% of the total uK population are now engaged in some way with social media, so it cannot be ignored.

the recent instances of super-injunctions and footballers and the public using twitter have shown that it needs to be taken seriously, however, and getting into social media should not be taken lightly. According to Experian Hitwise, twitter experienced its highest ever volume of online traffic on the saturday before Ryan giggs was named in Parliament as the

footballer who had taken out a super-injunction against the uK press to stop an affair being revealed. the ‘scandal’, broken on twitter by 75,000 users before the newspapers could discuss it legally, was responsible for 1 in every 184 Internet visits in the uK on that day in May.

How does this impact financial institutions you may well ask? Well, it shows that blogs, Youtube, mobile apps, social networking sites such as Facebook and LinkedIn, and micro-blogging sites such as twitter are now mainstream. As such they should be part of the accepted marketing and communications mix in any organisation.

A primary challenge for firms is to ensure that they have the right guidelines in place for staff when using social network sites in either a professional or personal capacity. the first essential rule when using social media is to have a clear social media policy so that staff understand that what they say, on the company site or in their official capacity, must reflect the organisational viewpoint and that the content is appropriate.

Financial promotion is a tightly regulated area, as all marketing and communications teams are well aware, and it does potentially become more complex when using still evolving new social media channels. However, social media is too powerful a communication tool to be ignored in the quest for effective customer engagement.

After a review of a number of twitter, Facebook pages, as well as other online forums, the Financial services Authority issued guidelines on financial promotions using new media in June 2010. the FsA’s review concluded that some promotions lacked risk warnings. they said other promotions, while not very specific about products or services, went beyond the definition of ‘image advertising’.

For building societies or banks that are just beginning to use social media, the FsA guidelines on using new media are an essential reference point. the uK regulator’s guidelines highlight requirements for staying compliant when using social media, and include:

■ Recommendations covering all communications by regulated firms to clients, not just promotional ones. the main rule is that communications must be fair, clear and not

misleading, as with any other form of communication.

■ Firms cannot assume that because a communication is made using new media, it is an image advertisement and exempt from the normal financial promotion rules.

■ Consider whether the risk information in any missive could be displayed prominently and clearly using this media channel.

■ Promotions and communications made using new media must meet the requirements for standalone compliance.

■ New media may date more quickly than traditional media channels, so regular reviews to ensure that information is up-to-date may be required.

No specific regulations have yet been put in place by the FsA for social media, but it continues to monitor this area very closely and in time such rules may come into being, perhaps introduced by the FsA’s successor body the Financial Conduct Authority.

Financial institutions that are just entering the world of social media have a tremendous opportunity to use this channel to engage in a positive and open way with their members. Having a defined social media policy and framework will help maintain positive public relations and build reputations. Working with legal and compliance teams on social media development will also help you to stay compliant. With these stipulations in mind, organisations will be in a good position to maximise their use of social media for effective member engagement.

rachel Wylie is press and public affairs manager at the Building societies Association

Social media rachel Wylie, Building societies Association


At the Mansion House dinner in London last month, the Chancellor of the Exchequer, George Osborne, surprised many by voicing his support for the interim recommendations of the Independent Commission on Banking.

The ICB does not publish its final report until 12 September, so there is still an enormous amount of work being done analysing the details of its proposals. In fact the Chancellor’s remarks on 15 June at the Mansion House were given three full weeks before the official consultation period closed. Perhaps we can consider it as the Chancellor’s submission?

From the banking industry’s perspective, we see it as essential that the ICB positions its final recommendations firmly within the comprehensive series of banking reform measures currently being pursued under the aegis of G20 governments and the international regulatory community.

And there are some significant areas of agreement between the industry and the ICB. We are in agreement that the reform programme needs a dual focus – reducing the probability of failure of systemically important banks by improving their resilience; and reducing the impact of failure by providing for orderly resolution. We also agree that we should continue to work towards further improvements in the loss absorbency of banks and that the objective in this regard should be to ensure that ‘bail-in’ should be available as part of a resolution process in preference to ‘bail-outs’ by government and the taxpayer. This is part of an international programme of work which is now coming to its conclusion (see lead news story, page 4, for more information).

Perhaps most significantly we were pleased to note the ICB’s recognition that any proposals must also be aware of the impact they could have on the ability of banks to lend to households and businesses. A strong and competitive banking industry is a prerequisite to achieving economic growth.

The ICB’s proposals fall into three broad areas: ■ The first is that all major banks must

hold more and better quality capital: this is an unsurprising recommendation and one in accordance with the direction of travel in any event. The proposal of a higher national capital adequacy

buffer at 10% however, versus the 7% international buffer proposed under Basel III, will need to be debated though to avoid regulatory arbitrage.

■ The second point is that the retail market should be more competitive. It is easily arguable that the UK retail banking market has many competitive qualities it and that competition will increase when a significant proportion of Lloyds Banking Group’s branches are sold off as part of the agreement with

the European competition authorities [in excess of 600 will go, and the ICB may yet add to this figure]. And of course one of the greatest limiters to new entrants – if not the greatest limiter – is the simple cost of setting up as a bank. Nevertheless, at the BBA we believe there is more that can be done in this area and a quantum improvement in the ability and ease with which individuals can switch from one bank to another, coupled with greater transparency of costs and services and offerings to individuals, will significantly benefit customers and improve the operation of the retail market. We are working on this now and believe it will assist the ICB aim of introducing more competition.

■ The third major recommendation is the one that has attracted all the attention: it proposes the ring-fencing of certain retail activities from investment banking activities. On the one hand ring-fencing is seen as a way of ensuring that consumers are protected at a time of crisis and that there is a continuation of the supply of credit into the economy, with the wholesale part of a universal bank effectively sealed off from affecting retail should a problem arise. However, the access to the wholesale market – provided by the wholesale part of the bank – is essential in order to provide the

services that retail customers require. Without access to the wholesale market it would not be possible to roll over the existing mortgage book, as other kinds of lender have found out. Other critical treasury functions are as

important in retail as they are in wholesale, and where these sit with the ring-fence is unclear, but it is a vital consideration that must be addressed. Where to draw the line is an important issue.

One further point: there is widespread concern across much more than just the financial services industry about the lack of sufficient analysis of the possible outcomes of the many proposals for change that are already underway or shortly to be agreed. The nature of and consequence of the international programme of reform is huge and will inevitably have an impact on the ability of banks to perform their essential functions of supplying credit to the market. It is therefore vital that before coming to its final recommendations the ICB undertakes a full analysis to determine the impact of its proposals on different banking models, on both the economy and on the ability of businesses of all sizes to access the finance they need.

Furthermore, as the ICB’s interim proposals for ring fencing do not accord with the considered views of other countries, analysis is also required to demonstrate the effect of such a proposal on financial stability under different economic scenarios, and the consequences for the ‘internationality’ of the UK as a financial centre should such a proposal proceed.

We recognise the UK government’s desire to increase protection for the individual. In order to do this we have to work through proposals carefully and logically.

Angela Knight is the chief executive of the British Bankers’ Association

Getting ahead of ourselves? Angela Knight, British Bankers’ Association

“There is concern across much more than just the financial services industry about the lack of analysis of the outcomes of the

proposals for change that are already underway.”

Industry COLuMnJULY/AUGUST 2011



As institutions that are owned by their customers, engaging and communicating with members is of fundamental importance to building societies. It is by involving members that societies can make ownership meaningful to their customers and social media is one way of doing this. If members place greater value on being an ‘owner’ of the society, then both the society and the member will benefit. societies now seek to engage and communicate with their members more than ever before. social media can help to strengthen the bond, drive new business and potentially open up new revenue streams, but it must be done in a manner that complies with marketing and regulatory norms.

uK financial institutions, for the most part, have not been early adopters of the social media phenomenon. they have waited on the sidelines, wondering whether they need to adopt it, questioning how they can use social media effectively and, critically in a regulated industry, how they can ensure that the activity is compliant. some organisations, such as the saffron Building society and indeed other members of the BsA, have forged ahead in developing a presence in this virtual world but before taking the leap you have to develop a policy and ensure compliance with the basic rules governing financial services, and especially its promotion.

It is generally now accepted that social media sites are here to stay, and while their identity may change and new forums might become established in future years, the phenomenon itself is permanent and represents a fast growing customer marketing and communication channel. A social Media Census, conducted for Lansons Communications by Opinium Research on the same weekend as the official uK Census, found that 61% of the total uK population are now engaged in some way with social media, so it cannot be ignored.

the recent instances of super-injunctions and footballers and the public using twitter have shown that it needs to be taken seriously, however, and getting into social media should not be taken lightly. According to Experian Hitwise, twitter experienced its highest ever volume of online traffic on the saturday before Ryan giggs was named in Parliament as the

footballer who had taken out a super-injunction against the uK press to stop an affair being revealed. the ‘scandal’, broken on twitter by 75,000 users before the newspapers could discuss it legally, was responsible for 1 in every 184 Internet visits in the uK on that day in May.

How does this impact financial institutions you may well ask? Well, it shows that blogs, Youtube, mobile apps, social networking sites such as Facebook and LinkedIn, and micro-blogging sites such as twitter are now mainstream. As such they should be part of the accepted marketing and communications mix in any organisation.

A primary challenge for firms is to ensure that they have the right guidelines in place for staff when using social network sites in either a professional or personal capacity. the first essential rule when using social media is to have a clear social media policy so that staff understand that what they say, on the company site or in their official capacity, must reflect the organisational viewpoint and that the content is appropriate.

Financial promotion is a tightly regulated area, as all marketing and communications teams are well aware, and it does potentially become more complex when using still evolving new social media channels. However, social media is too powerful a communication tool to be ignored in the quest for effective customer engagement.

After a review of a number of twitter, Facebook pages, as well as other online forums, the Financial services Authority issued guidelines on financial promotions using new media in June 2010. the FsA’s review concluded that some promotions lacked risk warnings. they said other promotions, while not very specific about products or services, went beyond the definition of ‘image advertising’.

For building societies or banks that are just beginning to use social media, the FsA guidelines on using new media are an essential reference point. the uK regulator’s guidelines highlight requirements for staying compliant when using social media, and include:

■ Recommendations covering all communications by regulated firms to clients, not just promotional ones. the main rule is that communications must be fair, clear and not

misleading, as with any other form of communication.

■ Firms cannot assume that because a communication is made using new media, it is an image advertisement and exempt from the normal financial promotion rules.

■ Consider whether the risk information in any missive could be displayed prominently and clearly using this media channel.

■ Promotions and communications made using new media must meet the requirements for standalone compliance.

■ New media may date more quickly than traditional media channels, so regular reviews to ensure that information is up-to-date may be required.

No specific regulations have yet been put in place by the FsA for social media, but it continues to monitor this area very closely and in time such rules may come into being, perhaps introduced by the FsA’s successor body the Financial Conduct Authority.

Financial institutions that are just entering the world of social media have a tremendous opportunity to use this channel to engage in a positive and open way with their members. Having a defined social media policy and framework will help maintain positive public relations and build reputations. Working with legal and compliance teams on social media development will also help you to stay compliant. With these stipulations in mind, organisations will be in a good position to maximise their use of social media for effective member engagement.

rachel Wylie is press and public affairs manager at the Building societies Association

Social media rachel Wylie, Building societies Association


CommentJuLY/August 2011

Liquidity management is on a roll. the seismic shift in the financial backdrop of recent years has driven renewed and highly-focused corporate interest in the discipline, while many banks have radically enhanced their approaches to liquidity solutions.

In the past, liquidity management tools were functional, but won few prizes for flexibility. For example, physical cash concentration traditionally operated in-country and always on a daily basis, with a standard target balance of zero. this often resulted in a single solution being used to fit many diverse implementations.

Happily, that’s all changing for the better. Banks have begun to deliver a new wave of liquidity solutions that can readily be adapted to accommodate corporations’ individual liquidity profiles - rather than constrain them.

One of the items underpinning this new wave of liquidity solutions is a novel approach to solution design and development.

some banks have responded to the need for innovation in the liquidity space by rethinking existing methodology. Rather than inflexible monolithic solutions, some have switched to a modular design coupled with an iterative development approach. this can have beneficial impacts on the time to market of new solutions, as well as the customisation of existing ones. Delivery periods with this type of approach can also be considerably shorter than the traditional methods.

An associated change that also favours clients is a far greater focus among banks on delivering liquidity products with globally consistent features/functionality.

this is achievable because liquidity is unique in that it is confined internally to each bank. As such, it is not impacted by external mechanisms like clearing systems, so the liquidity products can be developed with consistent feature functionality in all locations – which has major advantages for clients in terms of uniformity and manageability.

Refinements to existing technology are continually emerging and giving treasuries reasons to be cheerful. A case in point is the enhancements to the logic used within physical cash concentration structures. these can enable account participation that in the past was prevented by the inflexibility of the products.

For example, traditional sweeping was always two-way, zero balanced and resulted in each participating account beginning the next day with zero funds. Enhancements now allow directional sweeping which when used with target balances can help control individual accounts’ access to the funds held across the group.

this makes life easier when dealing with multiple entity scenarios. In the past, the nature of the concentration relationship enabled unlimited fund movement between entities. this resulted in the restriction of certain entities from participation so treasury would have to manually manage concentration of their balances. However, some banks can now offer technology that allows one-way movement of funds, which manages individual entities’ access to balances across the structure.

this capability —coupled with target balances so that funds are left on account to support operational activity—can now open the door for these entities to participate in these structures. the headline win for treasuries is that new technology is facilitating automated cash concentration and removing the overhead of manual operations that previously led to sub-optimal liquidity management.

A vital component in the overall global liquidity solution provided by a bank is information. traditionally this took the form of account balance detail. As clients become more sophisticated in their use of liquidity management products, so the need to provide more detailed reporting related to these products increases. Banks are responding to this need by continually enhancing the product summary reporting which comes off the bank end of cash

concentration structures. this opens the door to sophisticated liquidity forecasting and modelling, including:■ Identification of liquidity trends across

multiple timeframes.■ More accurate assessment of operating

cash needs.■ streamlining of accounting, inter-

company loan administration and interest reallocation.

■ Optimisation of surplus liquidity.While the technology and functionality

of liquidity solutions continues to advance, extracting their full potential clearly depends upon the skills and experience of the provider’s personnel. A liquidity solution may on paper possess all the capabilities imaginable, but if inadequately implemented or serviced it will fail to deliver. A provider’s expertise in designing and delivering solutions can be determined by its ability to: ■ Conduct initial analysis of the

corporation’s profile and its configuration of the most appropriate liquidity solution.

■ Implement and service the solution.■ Monitor and suggest updates to the

solution on the basis of changes in either the client’s business or external factors, such as regulatory changes. Flexible liquidity management solutions grow with a company and adapt to its needs as well as the macroeconomic environment.the pace of innovation in the liquidity

management marketplace continues to increase. solutions are available today that not only extend existing functionality, but also enhance flexibility. Automation is now delivering faster and more comprehensive access to both corporate liquidity and associated data, but a key parallel development is that liquidity solutions are now able to marshal the liquidity and data in a manner that facilitates decision making and reduces manual processing.

the simplest way to keep abreast of all these opportunities and their applicability to your organisation is regular dialogue with your global liquidity provider. the more effective your exchange of information with them, the more effective your liquidity management.

Lori Schwartz is a VP and global liquidity product manager at Bank of America merrill Lynch

Liquidity management: the times they are a-changin’ Lori Schwartz,

Bank of America Merrill Lynch

“New technology is facilitating automated

cash concentration and removing the overhead of manual operations that previously led to sub-optimal liquidity

management.”



IcmA’s secondary market Practices committee, made up of a representative selection of the International capital market Association is member firms with a significant presence in the secondary debt markets, recently considered a paper on the long term future of secondary bond market trading in Europe. this identified a number of emerging trends that could put current business models under pressure, together with some ways in which market participants might respond.

First, the paper makes some fundamental assumptions about the conditions for the market’s continued existence – namely, that corporates and banks will continue to see value in the financing opportunities offered by bonds; that investors will continue to follow mandates and strategies that can be fulfilled and executed through the holding and trading of bonds; and that there will be a role for intermediaries in the trading of corporate bonds, either as a broker, finding counterparties, or as a dealer, acting as counterparty. the securities market is complementary to the bank lending channel of credit intermediation.

the future of secondary market bond trading will also be affected by current trends in the general economic environment, such as low savings rates in the ageing Western economies and the need for the Eu and us to finance their banks. Additionally, profitable investment opportunities in young Asian economies are attracting investors from elsewhere in the world; and the continuing need to finance the world’s trade imbalances will have an impact. these phenomena co-exist with the need and the opportunity to recycle domestic savings as productive investment.

technical, regulatory and market developments in adjacent markets, such as swaps, foreign exchange, securities lending and repo will also affect the way bond markets function in future, as will the high-speed market automation that has become pervasive across asset classes, partly driven by the need to reduce error rates and technical progress in delivering extremely fast trading and automated post-trade processing in a controlled environment.

Adverse trends For dealers, the capital committed to the trading book must earn a return consistent with expected returns for the group as a whole. At the margin, dealers will need to economise on the capital committed to the business if its price rises.

the consequence for issuers is that bonds as an asset class become less liquid, or that liquidity is concentrated in a smaller range of bonds. Less liquid assets are subject to a return premium to take account of investors’ increased risk; so the result is that bonds become a less attractive financing method compared to loans – other things being equal. But the reform of bank capital requirements, under Basel III and so forth, implies that the pricing of bank credit will also be less attractive than hitherto – and it may be less readily available. From investors’ point of view, while yields may rise, they will need to analyse and take account of a wider range of risks than they do at the moment, as they are being compensated for taking liquidity risk. Changes to bank capital requirements may also affect individual banks’ willingness to remain in the dealing business.

In some other markets, increased transparency has reduced dealers’ profits – indeed, this effect is one which policymakers have identified as desirable in previous rounds of reform.

Other areas of reform – in Europe, in relation to market transparency, customer relationships, market infrastructure and securities law and in the us the rising tide of rule making triggered by the wide-ranging Wall street Reform and Consumer Protection Act (referred to as Dodd Frank) – also reduce the attractiveness of the securities business to providers of capital.

mitigating factors the deployment of advanced technology, together with ‘off-shoring’ activities to less costly centres, has been a feature of European securities and derivatives markets for some years. Market automation has also played a significant role in reducing the unit cost of repetitive tasks. But some market participants are finding that they have reached or exceeded the frontier at which the benefits of off-shoring outweigh the cost; and off-shoring may not be economic for smaller market participants, given the

need for economies-of-scale and scope in the establishment of offshore activities.

opportunities If some market participants depart from the dealing business, conventional theory predicts that the rewards reaped by those remaining are likely to be increased; though this effect may be outweighed by the increasing intensity of competition. For providers of market infrastructure with the ability to reduce search costs, their services are more valuable in less liquid markets.

there may also be opportunities for issuers and investors in these rather different markets. For issuers, increased transparency will provide them with additional information about where comparable bonds are trading, allowing for more accurate pricing of new issues. For investors, reduced search costs and the application of trading tools to optimise trading performance may produce benefits comparable to those they have seen in other asset classes, through which the waves of automation have already passed.

the interplay of the factors described here will likely result in significant changes to the bond trading landscape. Furthermore not all sectors of the fixed income markets will be affected in the same way. In some sectors these factors will combine to provide well-functioning primary and secondary markets, with profitable trading opportunities; in others, these and other factors could operate so as to damage the functioning of the markets and to provide corresponding opportunities for lending bankers.

John serocold is senior director of the regulatory Policy and market Practice unit at the International capital market Association

The future of secondary market bond trading John serocold,

International Capital Market Association


CommentJuLY/August 2011

Liquidity management is on a roll. the seismic shift in the financial backdrop of recent years has driven renewed and highly-focused corporate interest in the discipline, while many banks have radically enhanced their approaches to liquidity solutions.

In the past, liquidity management tools were functional, but won few prizes for flexibility. For example, physical cash concentration traditionally operated in-country and always on a daily basis, with a standard target balance of zero. this often resulted in a single solution being used to fit many diverse implementations.

Happily, that’s all changing for the better. Banks have begun to deliver a new wave of liquidity solutions that can readily be adapted to accommodate corporations’ individual liquidity profiles - rather than constrain them.

One of the items underpinning this new wave of liquidity solutions is a novel approach to solution design and development.

some banks have responded to the need for innovation in the liquidity space by rethinking existing methodology. Rather than inflexible monolithic solutions, some have switched to a modular design coupled with an iterative development approach. this can have beneficial impacts on the time to market of new solutions, as well as the customisation of existing ones. Delivery periods with this type of approach can also be considerably shorter than the traditional methods.

An associated change that also favours clients is a far greater focus among banks on delivering liquidity products with globally consistent features/functionality.

this is achievable because liquidity is unique in that it is confined internally to each bank. As such, it is not impacted by external mechanisms like clearing systems, so the liquidity products can be developed with consistent feature functionality in all locations – which has major advantages for clients in terms of uniformity and manageability.

Refinements to existing technology are continually emerging and giving treasuries reasons to be cheerful. A case in point is the enhancements to the logic used within physical cash concentration structures. these can enable account participation that in the past was prevented by the inflexibility of the products.

For example, traditional sweeping was always two-way, zero balanced and resulted in each participating account beginning the next day with zero funds. Enhancements now allow directional sweeping which when used with target balances can help control individual accounts’ access to the funds held across the group.

this makes life easier when dealing with multiple entity scenarios. In the past, the nature of the concentration relationship enabled unlimited fund movement between entities. this resulted in the restriction of certain entities from participation so treasury would have to manually manage concentration of their balances. However, some banks can now offer technology that allows one-way movement of funds, which manages individual entities’ access to balances across the structure.

this capability —coupled with target balances so that funds are left on account to support operational activity—can now open the door for these entities to participate in these structures. the headline win for treasuries is that new technology is facilitating automated cash concentration and removing the overhead of manual operations that previously led to sub-optimal liquidity management.

A vital component in the overall global liquidity solution provided by a bank is information. traditionally this took the form of account balance detail. As clients become more sophisticated in their use of liquidity management products, so the need to provide more detailed reporting related to these products increases. Banks are responding to this need by continually enhancing the product summary reporting which comes off the bank end of cash

concentration structures. this opens the door to sophisticated liquidity forecasting and modelling, including:■ Identification of liquidity trends across

multiple timeframes.■ More accurate assessment of operating

cash needs.■ streamlining of accounting, inter-

company loan administration and interest reallocation.

■ Optimisation of surplus liquidity.While the technology and functionality

of liquidity solutions continues to advance, extracting their full potential clearly depends upon the skills and experience of the provider’s personnel. A liquidity solution may on paper possess all the capabilities imaginable, but if inadequately implemented or serviced it will fail to deliver. A provider’s expertise in designing and delivering solutions can be determined by its ability to: ■ Conduct initial analysis of the

corporation’s profile and its configuration of the most appropriate liquidity solution.

■ Implement and service the solution.■ Monitor and suggest updates to the

solution on the basis of changes in either the client’s business or external factors, such as regulatory changes. Flexible liquidity management solutions grow with a company and adapt to its needs as well as the macroeconomic environment.the pace of innovation in the liquidity

management marketplace continues to increase. solutions are available today that not only extend existing functionality, but also enhance flexibility. Automation is now delivering faster and more comprehensive access to both corporate liquidity and associated data, but a key parallel development is that liquidity solutions are now able to marshal the liquidity and data in a manner that facilitates decision making and reduces manual processing.

the simplest way to keep abreast of all these opportunities and their applicability to your organisation is regular dialogue with your global liquidity provider. the more effective your exchange of information with them, the more effective your liquidity management.

Lori Schwartz is a VP and global liquidity product manager at Bank of America merrill Lynch

Liquidity management: the times they are a-changin’ Lori Schwartz,

Bank of America Merrill Lynch

“New technology is facilitating automated

cash concentration and removing the overhead of manual operations that previously led to sub-optimal liquidity

management.”

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:neil hartley on +44 (0) 203 377 5385 or email: [email protected]

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.

SmartStream TechnologiesSt Helen’s 1 Undershaft London EC3A 8EEUnited KingdomTel: +44 (0)20 7898 0600Email: [email protected]: www.smartstream-stp.com

TietoKutojantie 6-802630 EspooFinlandTel: +3582072010Fax: [email protected]/financialservices

TCS Financial SolutionsWeb: www.tcs.com

sunGArD

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]

call a sunGard expert today: 0044 (0)208 081 2779

Email: [email protected]: +44 (0)208 081 2779Fax: +44 (0)208 081 2001

www.bankingtech.com

Directory of service

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.

Accuity1 Quality CourtChancery LaneLondon WC2A 1HRUnited KingdomTel: +44 20 7014 3480Fax: +44 20 7061 [email protected]/bankingtech

cleAr2PAy

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.

Clear2Pay NV SASchaliënhoevedreef 20A2800 Mechelen, BelgiumTel: +32 15 79 52 00Fax: +32 15 79 52 01Jean de Crane, GM EMEAEmail: [email protected]

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

Orc SoftwareAmericas: +1 312 327 8555Asia Pacific: +852 2167 1950EMEA: +46 8 506 477 00Email: [email protected]: www.orcsoftware.com

fiDessA GrouP

Exceptional trading, investment and information solutions for the world’s financial community. 85% of the world’s premier financial institutions trust Fidessa to provide them with their multi-asset

trading and investment infrastructure, their market data and analysis, and their decision making and workflow technology. $10 trillion worth of transactions flow across our global connectivity network each year. We offer unique access to the world’s largest and most valuable trading community of buy-side and sell-side professionals, from global institutions and investment banks to boutique brokers and niche hedge funds.

A global business with scale, resilience and expertise, we’ve delivered around 30% compound growth since our stock market listing in 1997 and we’re recognised as the thought leader in our space. We set the benchmark with our unrivalled set of mission-critical products and services and, uniquely, serve both the buy-side and sell-side communities. Ongoing investment in our leading-edge solutions ensures Fidessa remains the industry’s number one choice.

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:neil hartley on +44 (0) 203 377 5385 or email: [email protected]

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.

SmartStream TechnologiesSt Helen’s 1 Undershaft London EC3A 8EEUnited KingdomTel: +44 (0)20 7898 0600Email: [email protected]: www.smartstream-stp.com

TietoKutojantie 6-802630 EspooFinlandTel: +3582072010Fax: [email protected]/financialservices

TCS Financial SolutionsWeb: www.tcs.com

sunGArD

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]

call a sunGard expert today: 0044 (0)208 081 2779

Email: [email protected]: +44 (0)208 081 2779Fax: +44 (0)208 081 2001

www.bankingtech.com


JULY/AUGUST 2011

OUT OF OFFICESwiftNet opens to corporates … e-exchange proliferation will turn to consolidation … T+1 settlement is talk of SIA … XML benefi ts “will be seen in 2001” … GSTPA initiative moves towards pilot phase …

Europay sets out e-purse plans … bank IT spend fl attens at £12.1 billion … London Stock Exchange sets out its settlement plans … multimedia banking fails to capture the public imagination … visualisation tools dominate SIA Show … ISMA says VaR should be supplemented by regular stress testing …

EC probes ATM fees … banks urge Swift to open network to fund managers and others ... hackers turn gamekeeper with new security fi rms … open systems key to interoperability … US struggles with images for cheque processing … Woolwich trials unit trust dealing system …

UK banks spend £3.3 billion on IT … cashless society “still a long way off” … Debenhams adds share trading to shopping basket … smart cards fi nd a role in travel money market … retailer view of EFTPoS diverges from banks’ …

From the Archive

10Years

ago

15Years

ago

20Years

ago

25Years

ago

Many politicians, social commentators and other pundits have been calling for a new wave of fi nancial education so that the next generation doesn’t grow up “fi nancially illiterate”, unable to tell their ISA from their elbow, as it were.

Often they call on workers in the City to take a lead in this, presumably because people that work in � nancial services are � nancially competent. Even allowing for the staggeringly obvious – it’s been three years since Lehman’s: people will have forgotten, won’t they? – we’re not sure that schoolchildren are the best place to start.

Early on in the recent Wimbledon tennis championships, we repaired to the local pub to watch it on the big TV and sup soothing liquids. Sitting nearby were a classic pair of City types: minor public school, minor regiment, minor law or management consultancy � rm, at a guess.

They were discussing who they should bet on in the tournament, but were cautious to a remarkable degree. “I'm not betting on the Men’s Singles,” said one. “The way I see it, there are four of them – Federer, Murray, Nadal and Djokovic – so none of them can win.”

Indeed, the whole gambling business was fraught with risk, replied his chum. “I tried the National Lottery once, but I ran out of money …”

As the odds of winning the jackpot are something like 14 million to one and tickets cost £1 each, you have to wonder how long it took him to achieve this.

“Yes, the only racket you can win at is the Stock Exchange,” said the � rst.“That’s right, especially since they’ve bought Canada.”Er, not quite: stay behind for extra lessons. BT

It probably won’t be necessary to scramble the specialists at the US 24th Air Force from their secure bunkers in Texas, but this cyber-warfare business is getting out of hand. As Moody’s downgraded Portugal’s sovereign debt rating, someone took umbrage and hacked into the Moody’s site to change the contents in a way that expressed their opposing view, as pictured above.

Next issue: Greeks hack into rival ratings agency ∑ & ∏ ...

We don’t need no education …

State-sponsored cyber-war gets Moody’s?

JULY/AUGUST 2011 Joining the dots - FinTech Futures...22 Cover focus: Joining the dots Big Data...

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