Technology Trends in Banking - Samsung · Rethink Gen-Y Awesome! Gen Ys are making banking better...

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Technology Trends in Banking Benchmark Reports - powered by Samsung

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Technology Trends in Banking

Benchmark Reports - powered by Samsung

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> The explosion of data mining and analytics p8

and its impact on customer responsiveness.

> The rise of the digital native p4

and how the demands of this tech savvy generation has improved the banking experience for all of us.

> Beating the bad guys p12

as banks take new measures to protect consumers from online miscreants.

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Australia’s financial services industry is, in most cases, the first and most aggressive adopter of information technology

programs that sweep through dozens of industries

in the years that follow.The success and failure of technology projects in this sector is crucial to determining where Australian industry will place its bets for future value creation.

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Every year over 100 of Australia’s technology leaders gather together at the CIO Technology

Summit Awards Dinner to celebrate with the finalists and crown winners of the CIO Benchmark Awards.

The awards, now in its third year, seek to set the benchmark for IT innovation. The awards recognise the IT teams who have grappled with large and complex issues and delivered measurable value to the business.

Last year’s finalists in the Banking category included Andy Weir, CIO Bankwest, David Gee, now the former CIO of Credit Union Australia and Jim Burke, CIO, Institutional Bank, Westpac.

During a panel discussion at the Benchmark Awards, the three IT bankers discussed issues facing all CIOs. We share their wisdom throughout this report.

The Benchmark Reports aim to deliver independent opinion and insight of the key technology trends shaping Australia’s biggest industries.

The report is brought to you by the award-winning team of reporters at iTnews.

Our thanks to Samsung for its support and for making this industry series possible.

Read us daily at www.itnews.com.au

About the iTnews Benchmark Awards

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“By 2025, millennials will comprise 75% of the world’s workforce”

“Card-not- present fraud increased in 2013 from $183.1 million to $219.7 million”

Deloitte Millennial Survey, Jan 2014

APRA Australian Payments Fraud Detail and Data

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Rethink Gen-YAwesome! Gen Ys are making banking better for everyone

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C commonwealth Bank’s savings IQ report, published in October 2014, found that millennials show a greater commitment,

discipline and savviness to putting their money aside as compared with the national average.

The report ranks the savings intelligence of the nation on a scale of one to two hundred based on answers that help quantify Australians’ confidence and ability to save money.

The survey participants bracketed under the age of 30 boasted an average savings IQ of 129.4 compared to the national average of 125.2. These finding are in stark contrast to Generation Y’s reputation of being irresponsible, lazy and non-committal - but they came as no surprise to the average banker.

While we wait out the result of the 2016 national census, most recent figures for the size of the under 30s population in Australia is numbered at just over 6 million. The current population is estimated to be about 23.5million.

This generation is recognised globally as the next big accumulators of wealth and the banks that crack the code of winning their hearts, minds and wallets early are better positioned

to survive the financial demise of the baby boomers. The boomers will soon cease to be a generation accumulating money and will turn the generational corner to be drawing down against their considerable savings and assets as they enter retirement.

Banks globally are seeking to lure younger consumers into their doors, or more accurately, on to their online and mobile banking sites with dedicated strategies.

For the average digital native, an improved banking experience is the cornerstone that will drive long term engagement. Customer experience isn’t just about groovy applications, it’s about the total package.

According to research conducted by EFMA, Millenials have higher expectations, want more customised and personalised solutions with a manageable fee structure and with immediacy. What this generation don’t want is to have to join a queue in a bank – they want their banking provided through multiple engagement channels.

“We’re seeing massive amounts of change and that’s really driven by our customers who have different expectations of how they interact with

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their bank,” said Adam Bennett, the executive GM of digital and direct banking at NAB.

“We are seeing that very much in relation to mobile because customers want to be able to access the bank through many different devices and they want to be able to do that over 24/7 and at their own convenience.”

Similarly, Gen Ys expect choice and they expect it now. The ability to provide f lexible product offerings, test successful configurations, and provide customers the ability to switch accounts on the spot without the need to close and reopen accounts was a key driver for Commonwealth Bank’s core banking modernisation project.

Most recent findings are seeing Gen Ys continue to disrupt the traditional banking model. Capgemini’s 11th annual World Retail Banking report has found that Millenials want to conduct their banking in their social media environment of choice and are frustrated that many banks are

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“During an average monthly period,11.2 million Australians aged 14+ used internet banking at any financial institution”

Roy Morgan, Consumer Single Source Survey 2013

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The index canvassed 17,000 bank customers in 32 countries in six regions globally about their experiences across 80 different retail banking touch points.

“Just when we thought we had internet banking and mobile banking with apps under control, now Gen Y is calling out social media to us,” said Phil Gomm, director and banking industry practice leader at Capgemini. “Gen Y is becoming disenfranchised because they can’t transact in the way they want and when they want.”

In an effort to carve out new engagement channels and appeal to Gen Ys, NAB has established a social media command centre at the bank’s Melbourne headquarters.

Former executive GM of direct banking, Sam Plowman, NAB said the command centre fulfils three categories: education, communication and customer service.

“Our customers expect us to respond to them at anytime and anyplace on demand. The command centre is a great way for us to stay in touch with what is positively and negatively said about us.”

In the long run, Millenials desire for an improved and more intuitive banking experience is making banking better for all of us.

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“Mobile online shopping and banking quadrupled during the past three years”

ACMA Communications Report 2012-2013

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L ast year’s finalists in the Banking category for the iTnews Benchmark Awards included Andy Weir, CIO Bankwest, David Gee, former

CIO of Credit Union Australia and Jim Burke, CIO, Institutional Bank, Westpac.

The three CIOs shared their strategies for improving the response times of their technology teams to requests.

“The best way to help teams move faster is to get out of their way!

“It’s not as simple as employing waterfall or agile methodologies. It’s about evaluating the way we have always operated as an organisation.

“[In traditional banking], we take customer needs and put them through organisational layers before they actually gets to the people that add the value, scope the problem and deliver the solution. Then, after we develop the solution, it again goes through several layers of approvals and reviews and management before it gets in the hands of the customer.

“The challenge for me, and for any leader, is how do I strip away all those layers of non-value adding activity?

“A simple principle is get out of the way and provide your team with better supporting structures to enable your people to do what they do the best.”

-- Andy Weir, CIO Bankwest

“At Westpac, we’ve been living the concept of customer-centricity for some time. We have embedded innovation, and delivery and implementation in each of the core businesses.

“We also hold customer forums, we actually go and find

out what the key points of pain and pleasure would be for any given problem and try and translate that into a robust solution to exploit the opportunity that sits in that market.

“Most importantly, we are bedding down the courage to fail. It’s okay to get it wrong but if you do then get out of it quickly. Don’t throw good money after bad. Make the mistake, learn from it and debrief. It’s okay to make a mistake.

“If you display that level of transparency people will rally around and applaud you.”

--Jim Burke, CIO, Institutional Bank, Westpac

”When I was the CIO of CUA , I had to teach our organisation to be less order takers and say ‘yes’ less often.

“My guys were so customer focussed they wanted to do everything. We went through some training to learn how to say no - how to be politically

savvy and how to manage conflict should it arise.

“We also looked at the Gartner approach around the wolf in CIO’s clothing and had the team take the profiling to see whether they were a wolf, sheep or a lion. And we asked the questions where do our partners sit? Are they a shark? Where do the other stakeholders in the business sit?

“In short, we needed to learn how to adapt our styles to better partner with the business.”

-- David Gee, former CIO of Credit Union Australia

CREATING A NIMBLE TECHNOLOGY TEAM

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Big data means big businessBanks are predicting your next financial move

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Australian banks are investing considerable resources in data analytics, under the premise that to develop a deeper

understanding of their customers they must unlock insightful information from the terabytes of data available on them.

Analysing data is not entirely new territory for banks, which have been interrogating data for years. But advancements in analytics tools and lower cost of compute power has led to the ability

to crunch data and answer questions that were previously cost-prohibitive for even the largest of our institutions.

Banks are using this information to develop personalised and timely products that reflect an individual’s financial needs at a point in time. Next best offers are now de rigeur for the big four banks and is helping to deliver a more reliable revenue stream and bigger profits.

Westpac’s head of digital and CRM, Karen

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Ganschow, utilised this approach to deliver a reported $22 million to the bank’s bottom line. “Data helps us form a picture of the customer’s life journey and the next step they will take,” she said.

Westpac’s ‘Know Me’ program is powered by data gleaned from sources that include transactional data, social media commentary, and click-stream data gained from multiple communications channels.

The increasing size of the data set being interrogated - from four million customer interactions in 2011 to 60 million in 2013 - was driven in part by the growth of online and mobile banking. The scale of data made available has helped to shape a range of personalised communications including reminders of credit card payments, the offering of travel insurance when someone is planning an overseas trip and celebratory notifications upon the completion of a mortgage.

“Service-led communication is all about the customer; it’s about making the bank the hero to them. The reason we’re calling is all about them, and shows the bank is looking out for them as a trusted advisor.”

Similarly Suncorp corralled data analysts from across its insurance and banking businesses to create an 850-strong centre of excellence for business intelligence designed to harness the team’s collective wisdom and skills.

The analytics group seeks to exceed customer expectations by combining the data held in a customer record with transactional data generated as that customer moves through a Suncorp Group website, with unstructured and social data and third party sources such as census data.

Customers want “simple, personalised, faster experiences,” said Suncorp Group marketing executive Mark Reinke. “We want to understand your life. The triggers matter – if you just got divorced, if you just moved out of home, just had a child - that’s important to us.

“In the past we built models after models trying to predict customer behaviour. [But] the best predictor of customer behaviour is customer behaviour itself.”

It’s not only the big four looking to tap data for competitive advantage. Mastercard has signed a deal with Facebook in Asia Pacific that will allow the credit card company to access users online data to uncover behavioural insights.

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“51% of consumers predict that they will spend more money online than in-store”

August 1-Mandatory PIN replaced passwords

Capgemini Digital Shopper Relevancy Report 2014

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In a two-year deal announced in the latter half of 2014, Mastercard plans to feed the anonymised Facebook data, combined with data from other sources into an analytics platform it has dubbed the ‘Priceless Engine’.

Eighteen banks have signed up for the service, for which Mastercard will charge an undisclosed fee. The project is expected to provide Mastercard and its banking partners insights to frame customised online offers and drive online sales.

Viewing analytics innovation as a collaborative affair, CommBank has invested in an innovation lab that connects staff, customers, partners, concepts and technology.

The idea incubator is located at the bank’s headquarters and houses a year’s worth of the bank’s aggregated data from two billion transactions to gain insights into shopping habits and trends.

The new centre offers partners the opportunity to use big data and social media analytics tools to develop projects and offerings.

David Whiteing, the banks’ CIO, believes that the innovation lab’s close proximity to the institution’s staff will help to create a culture of innovation.

“The real value we expect from the Innovation Lab is twofold – in being able to explore new ideas and make quicker decisions on which ones will work

best for our customers, and being able to scale those ideas across CBA so all customers and employees can take advantage of the innovation.”

Although data analytics progress continues in the banking sector, it is being held back by poor data quality, data silos, lack of standardisation and skills.

iTnews recently polled 34 Australian universities to ask which are teaching data analytics as a discrete discipline, of which only eight currently offer the course. Those who are already qualified have salaries holding their own.

According to the most recent salary survey by the Institute of Analytics Professionals of Australia (IAPA) demand for high-quality practitioners is driving salaries upward.

“The global trend of demand hugely outstripping supply is also true in Australia, said the chairman for the institute, Doug Campbell.

“There’s no better time to be, or become, an analytics professional as the field is still relatively young and developing however significant demand for analytics professionals is being driven from the increasing pervasiveness of digital impacting organisations’ costs, processes and customers.”

Customers can expect more personalised and customised solutions in step with their lifestyle choices.

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M anaging team dynamics is a challenge for leaders across all lines of business. Kindling a sense of comradery with

external suppliers and motivating the entire team can be taxing in an environment where expectations exceed resources.

Two of last year’s finalists in the Financial Services category shared their methods to encourage a team spirit and to tease the best work from your team:

“When I first joined CUA I held a town hall meeting and discussed what I cared about—I talked about people stretching themselves, feeling uncomfortable and about working together.

“I was very transparent, I explained that we’re on

a journey together and I don’t have all the answers.

“When someone new joins, often fear can occur. We kept the team up to date with our thinking—for example, my managers presented to the team any presentation I had shared at a board level.

“One concern I sort to address was the cultural divide between the CUA team and the Indian-based partner we had chosen as our supplier.

“We instigated a partnership meeting on a weekly basis: we hosted executive visits from CUA with the partner, I put in place a balanced scorecard for the supplier’s deliverables. I also started to talk to them about longer term goals rather than short term gains.

“Since one stumbling block was cultural, we embraced some Indian culture - we held Diwali parties, we organised a henna painting class for the staff to gain an appreciation.

“It made a huge difference because the Indian staff went above and beyond. Our supplier didn’t feel like a supplier, they felt like one of the team.

“As a project milestone became imminent we saw a change in attitude and commitment - the partner team were working side by side with the internal team to achieve the deadline. We were all running towards the same go live—it was about getting the job done.”

-- David Gee, former CIO of Credit Union Australia

“We determined a few years ago that we had to make a fundamental shift in the way we approached motivation. We took a leaf from Daniel Pink’s book called Drive. He talks about three aspects of motivation-purpose, autonomy and mastery.

“I remember when I first joined I spoke to some of our developers about how they approached their work. They revealed that each day they were handed a list of things to code. These were talented guys -- at night the were going home and writing apps for Apple.

“The autonomy piece was important to me because we had some of the greatest creative talent in the organisation and we knew that we had to give them autonomy to come up with the answers themselves. If you get that concept right it can really pay dividends.

“When I think of mastery, if you’ve got the greatest goal kicker, the role of leadership on a project is how you can make that person become the best they can possibly be at goal kicking. Rather than giving them lots and lots of opportunities to do other things.

“I think the piece around purpose is really setting a very clear objective and higher purpose. Workers should be encouraged to rethink the role they play - they don’t ‘cut code’. Rather, they deliver value to customers.

“The part around mastery, for me, is recognising the heroes in your organisation. You need to put those people on a pedestal because they are the guys that move the organisation forward and that is important to motivate others to step up.”

--Andy Weir, CIO Bankwest

MOTIVATING TEAMS

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Battling the bad guysBanks up the ante to fend off cyber criminals

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T he recent hack of JP Morgan and a slew of other US financial institutions has led banks globally to up the ante when it comes

to cyber security. The breach occurred in late August across the firm’s

Chase.com and JPMorganOnline websites and mobile applications.

Hackers managed to obtain names, phone numbers, emails and postal addresses of 84 million customers after compromising an employee’s credentials via a phishing email attack.

Following the ensuing FBI investigation, media storm and drop in its share price, the US investment bank announced it will double its spending in cyber security.

This sobering tale encouraged banks globally to take a closer look at their approach to information security.

The situation has been made more complex by digital miscreants having more entry points to breach the perimeter. Modern banking’s greater emphasis on mobile and social platforms provides increased touchpoints for attackers to consider.

Researchers found that a Russian-speaking hacker

group codenamed Northern Gold had been targeting the online credentials of banks in US, Europe and Australia, infecting more than 500,000 computers with a Qbot malware.

The situation is further compounded by the fact that there is no globally agreed definition among banks of cybercrime. The same event might be categorised from bank to bank as ‘industrial espionage’, ‘IP theft’ or a catch-all ‘cybercrime’.

ASX chief risk officer Alan Bardwell at a recent panel discussion in Sydney said that the exchange referenced the Australian Department of Defence Intelligence and Security’s top 35 intrusion mitigation strategies when seeking to put a cyber policy in place.

According to the Australian Signal Directorate, following it’s top four strategies will prevent at least 85 percent of targeted cyber intrusions. They include: • Use application ‘white-listing’ to help prevent malicious software and unapproved programs from running,• Patch applications such as Java, PDF viewers,

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Flash, web browsers and Microsoft Office,• Patch operating system vulnerabilities,• Restrict administrative privileges to operating systems and applications based on user duties.

Having good governance practices in place and educating staff on the tactics of cyber criminals are also essential. A recent poll of 1500 iTnews readers identified the most prevalent attack point within their organisation was social engineering and phishing strategies.

Bardwell also advised having a team of security specialists on board is vital, as well as a clear understanding of how to manage a threat at a senior level.

“So we’ve got a very senior security steering committee,” he said, outlining that reporting and transparency all the way through to the audit risk committee is also vital.

He argues that vulnerabilities and a security team’s combat approach should be understood at a senior level as it is a CISOs best opportunity to secure “the dollars to invest to continually be upgrading”.

“Online shopping by Australian consumers has grown by 35 percent on average over the last four years”

NAB Online Retail Sales Index December 2013

MWhat role does technology really play in differentiating a bank’s brand to a customer? Two of last year’s finalists in

the Banking category for the iTnews Benchmark Awards believe it’s a combination of influencing the business and listening to the customer.“When I first joined CUA I held a town hall meeting and discussed what I cared about—I talked about people stretching themselves, feeling uncomfortable and about working together.

“As technologists in the business, we have a role called thought leadership. You should assume that position and help work with the business to focus an outcome.

“Don’t be afraid to take the leadership, don’t

be afraid to take your skills to that part of the discussion and the equation.

“With that comes the responsibility comes a mandate to execute. I can’t emphasise that enough.”

--Jim Burke, CIO, Institutional Bank, Westpac

“For me when you talk about customer-centricity it’s not about talking about customer-centricity.

“Rather than looking to leaders in an organisation as an authority on what matters we need to return to the customer.

“The banks that will win and differentiate are those that view the customer as the ONLY authority on what matters to them.”

--Andy Weir, CIO Bankwest

TECHNOLOGY AS A CONTRIBUTOR TO CUSTOMER LOYALTY

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Vice President of Samsung’s enterprise business, Craig Gledhill, addresses guests prior to crowning the winner of the 2014 award.

The winners in all categories join the iTnews team on stage.dinner and the awards ceremony.

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“ACMA’s communication report for 2013 found 53% of adult Australians identified a mobile phone as their most used communication service compared to 16% with a fixed-line telephone”

ACMA Communications Report 2012-2013

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Finalist CIOs and their colleagues mingle over drinks at the 2014 Benchmark Awards prior to dinner and the awards ceremony.

David Gee, former CIO of Credit Union Australia, acknowledges the support of his team when accepting the Finance CIO of the Year award.

The awards are held at the Gala Dinner of the CIO Strategy Summit at Melbourne’s Grand Hyatt.

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This whitepaper was produced by the team at iTnews, Australia’s most awarded technology publication for Australian business.

In an age where the right information at the right time can make or break a deal, Australia’s technology leaders rely on iTnews for their daily fix of accurate, up-to-the-minute news, analysis and research.

Information and communications technology is the engine room of the modern business. Business leaders tell us they rely on iTnews to inform their strategy, make business cases for technology investments, set policies and chart their careers.

Collectively, the team at iTnews has won a swag of awards which include Technology Title of the Year, Best News Title, Best Editor, Best Business Journalist, Best News Journalist and Best Technical Journalist.

The iTnews team also curates technology conferences and judges the annual Benchmark Awards for excellence in ICT project delivery.

www.itnews.com.au

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