BANK TECHNOLOGY OUTLOOK to Say 2009 Was a Tough Year in Banking Is an Understatement

Bye-Bye Cell Phone Banking Fraud Goes Bancassurance? p.7 For the Unbanked p.9 Channel Surfing p.24

Business Innovation Powered By Technology December 2009/January 2010

BANK TECHNOLOGY OUTLOOK To say 2009 was a tough year in banking is an understatement. Will 2010 be any different? To see what will be keeping bank IT organizations busy in the coming year, turn to page 13.

$8.95 www.banktech.com Cover Story Business Innovation Powered By Technology

Dec. 2009/Jan. 2010 banktech.com

FEATURE STORY 24 The Changing Face Of Fraud Fraudsters increasingly are targeting weaknesses in consumers’ defenses rather than attempting to exploit vulnerabilities in banks’ systems. As a result, more and more institutions are deploying enterprisewide fraud detection solutions to identify the bad guys. BANK TECHNOLOGY OUTLOOK

13 Waiting on Washington BUDGET FORECAST Ongoing uncertainty about financial services regulatory reform is forcing banks to remain flexible in terms of their 2010 IT spending plans. 16 Solutions That Sizzle HOT TECHNOLOGIES According to a cross section of bank tech executives, this could be the year that heretofore unproven solu- BUSINESS INTELLIGENCE WATCH tions — including mobile payments, cloud computing and social 11 Empowering networking — become essential components of banks’ strategies. The Business New analytics tools 20 Major Investments build on traditional business intelligence IT SPENDING Banks’ technology spending capabilities to help Jay in 2010 will focus on M&A integration and business users make Morreale expanding treasury services, according to intelligent decisions, Celent’s Jacob Jegher. reports Bank of America’s Jay Morreale. Jacob Jegher 21 Risky Business WORKFORCE WATCH RISK MANAGEMENT Pending legislation in Congress will push 12 Strength in Numbers risk management to the top of bank IT organizations’ priorities. Wells Fargo works to build a diverse workforce in order to 22 Headline Grabbers support the flexibility needed to drive innovation, says the bank’s 10 TO WATCH IN 2010 BS&T’s editors offer some predictions Kristina Draper. about the coming year’s bank technology newsmakers.

2 ■ DECEMBER 2009/JANUARY 2010 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY INDUSTRY WATCH 7 The End of banktech.com Bancassurance? MOBILE Some experts believe that Introducing banktech.com the recent news that ING For Your Mobile Device will divest its insurance operations is the beginning of the end for Now you can get all of Bank Systems & Technology’s the bancassurance business model. unmatched coverage of the bank technology sector in the palm of your hand. Point your mobile browser to banktech.com and you’ll receive all of our online 8 Payments Transparency news and analysis automatically optimized for your handheld device. To bring transparency to bank-to-bank payments and help reduce the risk of money laundering, SWIFT has created a EXCLUSIVE EDITORIAL REPORT new cover payments message standard for credit transfers. Tech Leadership in Banking: 9 Mobile Inroads BS&T’s Elite 8 CIOs Targeting the unbanked in emerging markets, Nokia If the familiar adage, “What doesn’t kill us makes is rolling out a new offering that will deliver basic us stronger,” is true, then the executives who financial services to cell phone users. comprise BS&T’s Elite 8 bank technology leaders must have incredible powers. IT organizations have been on the 10 Peer Pressure front lines as banks seek to improve governance and compliance, American Express expands cut costs, and strengthen customer relationships. The executives its presence in the remittance profiled in this special report are rising to the challenge. space with its acquisition of Free download sponsored by HP. reports.banktech.com/elite8 online peer-to-peer payments company Revolution Money. ON-DEMAND WEBCAST 2010’s Top Financial Services Business and Technology Trends BEST PRACTICES Join Financial Insight – IDC’s David Potterton as he shares his 29 An Optimal Schedule insight into the top business and technology trends shaping finan- BB&T reduces staffing costs and strengthens customer cial services in 2010. Learn how to integrate new functionality relationships by optimizing teller scheduling. into online financial applications to deliver personalized reports and improve customer satisfaction; recruit and retain customers 30 Capturing Opportunity by offering a visually compelling Web experience; and reduce First National Bank of Omaha expands development efforts by using standards-based solutions and open its remote deposit capture customer source BIRT technology. banktech.com/2010-trends base by 50 percent with a second-generation, Web-enabled RDC solution. BLOGOSPHERE British Bank Bonus Tax: Boffo or Bozo? 31 Rollouts and Toby Asplin, New Products First National “From a political standpoint, you can’t go wrong Bank of Omaha dumping on the banking industry,” observes Editorial Director Katherine Burger in a recent blog post. As 5 From the Editor evidence, she points to the U.K.’s plan to impose on all banks operating in the U.K. a 50 percent tax on bonuses of more than approximately US$40,000. To find out what Burger thinks of the 32 Exec Watch bonus tax proposal, or to read more blogs from BS&T’s editors and special contributors, visit banktech.com/blog.

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3 ■ DECEMBER 2009/JANUARY 2010 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY

Volume 47, No. 1

VP/GROUP PUBLISHER John Ecke 212.600.3097 [email protected] Who Invited Them? EDITORIAL Editorial Director Katherine Burger [email protected] Group Content Manager Les Kovach [email protected] he unsanctioned and high-profile attendance by reality star wannabes Senior Editor Maria Bruno-Britz [email protected] Senior Editor Nathan Conz [email protected] Tareq and Michaele Salahi at the White House state dinner in Associate Managing Editor Jon Schnaars [email protected] Assistant Managing Editor Thea Hetzner [email protected] November continues to provide grist for late night comedians, ART BigYellowTaxi.com morning talk shows and disapproving commentators. But the more Art Director Jim Lawyer Associate Art Director Kristen Terrana TI thought about it (although I really tried to avoid thinking about the Salahis), Designers Igor Jovicic & Amelia Fabian it occurred to me that this incident also provides bankers with one more object ADVERTISING SALES OFFICE 11 West 19th St., 3rd Floor lesson in a year full of cautionary tales, warnings and recriminations. New York, NY 10011 Director of Sales Felissa Kaplan 212.600.3171 [email protected] Midwest/International Brian Keenan 516.562.5145 [email protected] Although at press time the Salahis still contended they had been approved West Sue Ellen Wohlers 415.947.6146 [email protected] by a government official to attend the state dinner honoring Indian Prime Northeast Robyn Forma 212.600.3118 [email protected] PRODUCTION Minister Dr. Manmohan Singh, their ed entry or turned away. The policies Account Coordinator Production Manager names did not appear on the guest list and procedures for handling these sit- Amanda Waller [email protected] John Polihronakis [email protected] AUDIENCE DEVELOPMENT being checked by a Secret Service uations should be clear, well commu- Assistant Manager Adrienne Farquharson [email protected] screener. Rather than challenge or nicated and well understood, and rigid- For article reprints and e-prints, please contact: refuse them entrance, the screener ly enforced. It shouldn’t be any differ- Wright’s Reprints Brian Kolb 877.652.5295 passed the Salahis on to the next sta- ent whether it involves protecting cus- [email protected] tion, assuming someone else would be tomer data or protecting the president List Rental MeritDirect able to verify their identities and cre- and first lady. But of course that is eas- Anthony Carraturo 914.368.1083 [email protected] dentials. The rest of ier said than done, especially in today’s INFORMATIONWEEK FINANCIAL SERVICES the story is paparazzi open source, socially networked, bound- TechWeb CEO history. In a cheesy ary-less world. (And how fitting that Tony L. Uphoff [email protected] way, the tale also the Salahis proudly displayed evidence VP/Group Publisher VP, Group Sales John Ecke [email protected] Martha Schwartz [email protected] illustrates the chal- of their exploits on Facebook — no Webmaster Vitali Zhulkovsky Director of Sales lenges bankers face different from hackers bragging about [email protected] Felissa Kaplan [email protected] every day as they their break-ins.) Group Content Manager Director of Marketing Les Kovach [email protected] Sherbrooke Balser strive to gain more Today more than ever before, banks Event Director [email protected] insight about their are striving to balance requirements Jennifer Iannucci Director, Program Management, [email protected] Vertical Markets customers, verify for security and fraud prevention with Event Manager Michelle Somers Mitzi Trafton [email protected] [email protected] the identities of customer, partner and employee expec- Associate Business Manager everyone seeking tations for open access, speed and cus- Joe Donnelly [email protected]

access to company and client informa- tomization. The Salahi debacle shows TECHWEB – THE GLOBAL LEADER tion, secure the privacy of employees just how tricky — and risky — this bal- IN BUSINESS TECHNOLOGY MEDIA CEO Tony L. Uphoff and customers, and provide an appro- ancing act can be. Although we all Chief Content Officer and VP, Audience Marketing Editor-in-Chief, TechWeb.com Scott Vaughan priate level of transparency and inter- should be glad that this is one failure David Berlind VP/Group Publisher, action — and to do so cost-effective- that can’t be blamed on the banking Chief Information Officer Vertical Industries David Michael John Ecke ly, efficiently and consistently. industry, it underscores that “Know Chief Financial Officer VP, Group Sales, InformationWeek John Dennehy Business Technology Network It seems like such a simple thing: Your Customer” isn’t just a regulation Martha Schwartz SVP and Content Director Someone’s name does or does not show — it has to be a way of life. Bob Evans VP, Human Resources Beth Rivera SVP, Light Reading up on a list of approved attendees or Wishing you a secure, interactive Communications Group Executive Editor, InformationWeek Joseph Braue Business Technology Network, & customers, and they are either grant- and insightful 2010! Executive Producer, TechWeb TV SVP, InformationWeek Fritz Nelson Business Technology Network John Siefert

UNITED BUSINESS MEDIA SVP, Strategic Development and SVP, Manufacturing Business Administration Marie Myers Pat Nohilly

Katherine Burger, Editorial Director [email protected]

5 ■ DECEMBER 2009/JANUARY 2010 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY Our Subscribers Are Your Customers. Reach Out To Them Today. Direct.

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:HVWFKHVWHU$YHQXH:KLWH3ODLQV1<3+);%UDQFKORFDWLRQV$WODQWD&KLFDJR&OHYHODQG+LOWRQ+HDG6DQ)UDQFLVFRZZZPHULWGLUHFWFRP NEWS ANALYSIS Second Thoughts About Bancassurance With ING forced to divest its insurance operations, the long-term viability of the bancassurance model has come under question.

n late October Amsterdam-based finan- ence the direct impact of the financial crisis, result- cial services giant ING announced that ing in two instances of government support to strength- it would divest its insurance operations. en our capital position and to mitigate risk,” Hom- The move set ING — in many ways the men stated in the release. “Over the last six months, archetype of the banking-insurance we have worked tirelessly ... to devise a plan that will hybrid business model — down a path enable us to pay back the Dutch State [and] address out of the bancassurance market. the EC’s requirements for viability and fair competition.” ING CEO Jan Hommen said it was Following the news of ING’s plan, some observers the right time to split the company’s insurance suggested that the move marked the beginning of the Iand banking operations. “The combination pro- end for bancassurance. “In retrospect, you have to vided us with advantages of scale, capital efficien- wonder whether all the reasons used to flog the hybrid cy and earnings stability through a diversified idea as the epitome of capital and consumer efficien- portfolio of businesses,” he said in a press release. cy were bogus,” wrote Eric Reguly in The Globe and “However, the financial crisis has diminished these Mail, a national Canadian English language newspa- benefits. Now the widespread demand for greater per. “Maybe they were just another excuse for ego- simplicity, reliability and transparency has made maniac bank and insurance bosses to supersize their a split the optimal course of action.” companies and their pay packages.” Of course in many ways it wasn’t ING’s decision at all. The split was part of a restructuring BANCASSURANCE NOT DEAD YET agreement among ING (US$1.8 trillion), the Dutch But while some aspects of bancassurance surely government and the European Commission (EC) will lose favor, the concept as a whole may live on. under which the company plans to repay a US$14.9 In fact, to some in the industry, ING’s divestiture of billion bailout. All of ING’s insurance and invest- its insurance business isn’t the move that makes ment management operations will be divested over the most sense. Ellen Carney, a Forrester Research time as part of the required restructuring plan, senior analyst who covers both the banking and which ultimately was approved in mid-November. insurance industries, says she understands the move As part of the restructuring ING also will divest its from a “too big to fail” perspective but not from a U.S.-based Internet bank, ING Direct USA, by 2013. value standpoint. “The insurance business was actu- “A little over one year ago, ING began to experi- ally showing better performance,” she explains. Nonetheless Carney acknowledges that the bancassurance model likely will become less popular in the near future. The bancassurance challenge is, in part, a CRM issue, she contends. “For most [U.S.] banks, it’s all about ... moving people through and processing transactions,” Carney says. “They miss a lot of opportunities to position other services.” That said, Carney stresses that the banking-insurance hybrid model could be valuable to banks — especially smaller, community banks — if they took advantage of their high levels of customer engage- ment to capitalize on cross-sell and up-sell opportunities. “If you think about the relationship that we should have with our banks as our financial Before announcing that it would divest its insurance operations, advisers, wouldn’t it make perfect sense then to be ING, headquartered in Amsterdam (above), was the archetype of able to buy an insurance package that protects our the bancassurance business model. financial assets?” Carney asks. ■ —Nathan Conz

7 ■ DECEMBER 2009/JANUARY 2010 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY STANDARDS

learning curve. “In most cases the institu- Revealing Message tions [initially] won’t have the full benefit SWIFT introduces new cover payments message standard of understanding what is considered ‘nor- for credit transfers to bring transparency to bank-to-bank mal’ transaction activity, and judgments will need to be made in real time to facil- payments and help reduce the risk of money laundering. itate an orderly global payment flow,” Beat- tie explains. “The opportunity for error, o help banks battle money laundering and fraud, the pressure to get it right and future cases of noncompli- SWIFT introduced a new cover payments mes- ance will be more common due to the potential for incon- sage standard for credit transfers that increases sistency in how this monitoring is performed. Inconsisten- transparency into how bank-to-bank payments cy among organizations will also undoubtedly lead to cer- Tare processed worldwide. Cover payments are used for tain compliance functions and organizations being viewed cross-border transactions when the originating bank as laggards in fulfilling their risk mitigation responsibilities. and the beneficiary bank do not have a direct relation- This is a criticism that no one wishes to face in the highly ship and must rely on a series of correspondent banks visible court of regulatory and public opinion.” to facilitate the payment. But cover payments can mask It is unclear how much it will cost banks to implement the source and/or destination of a payment, increasing the new messaging standard from operational, compli- the risk that the correspondent banks could unknow- ance and technology standpoints. Beattie acknowledges ingly participate in a fraudulent transaction. that the new standard will require an investment by banks, In response SWIFT developed the MT 202 COV mes- but he suggests that the return will outweigh the costs. saging standard, which contains a mandatory sequence “If you leverage appropriate technology tools for moni- of information on an underlying customer credit trans- toring of suspicious activity and potential sanctions vio- fer, including originator and beneficiary details. Accord- lations, there should be a positive impact,” he comments. ing to the Brussels-based payments organization, the “Validating that you have fully implemented and test- message standard, which went live in November, has a ed the application of your matching technologies to new maximum message length of 10,000 characters. fields within new message types is critical,” Beattie con- In general, reactions from global banks leading up to tinues. “In addition there will undoubtedly be an increase the introduction of MT 202 COV were favorable, reports Steven Beattie, anti- “Inconsistency among organizations money laundering services leader in New York-based Ernst & Young’s finan- will undoubtedly lead to certain com- cial services practice. “We [heard] from pliance functions and organizations a number of the world’s largest banks being viewed as laggards in fulfilling that there is broad-based acceptance of the proposal, as it addresses a uni- their risk mitigation responsibilities.” versally recognized gap in global pay- STEVEN BEATTIE ment transparency,” he relates. Ernst & Young But, Beattie concedes, it is too early to measure the solution’s acceptance. “We believe in false positives that will need to be investigated and dis- the diversity of opinion will manifest itself in how com- positioned. ... We can expect an impact on the investiga- panies address these new requirements, and what the tive workforce, the role of compliance in determining technology, operational and compliance impacts will be what is SAR [suspicious activity report]-eligible and, ulti- within each impacted organization,” he says. mately, potential impacts to the expediency of global payments should these processes not function as intended.” GREAT EXPECTATIONS? Despite these obstacles, Beattie says, the introduc- According to Beattie, banks’ expectations for the new tion of the MT 202 COV messaging standard was a nec- messaging standard range from business as usual to con- essary step in reining in money laundering and, as such, cerns that the increased message information will lead to banks shouldn’t view it as just another compliance bur- a mountain of new alerts that will need to be investigat- den. “It was necessary and an initial step toward increased ed and settled. “Unfortunately we don’t believe the impact transparency,” Beattie explains. “It can be viewed as a will be fully understood until the new message is in place regulatory burden only if one is undertaking these steps and it has the opportunity to settle in as a new, universal- to satisfy a regulatory point of view rather than address- ly agreed upon and understood method to intervene on ing a clear gap in our ability to fully monitor both poten- both AML and sanctioning issues,” he notes. tial money laundering or sanction-related activities.” ■ In other words, as with any new tool, there will be a —Maria Bruno-Britz

8 ■ DECEMBER 2009/JANUARY 2010 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY MOBILE BANKING Have Cell Phone, Need Bank

Cell phone giant Nokia hopes to provide basic financial services to the unbanked in emerging markets via its Nokia Money mobile service.

argeting the unbanked in the phone, Romen adds. “The money emerging markets, mobile is credited to that account, while the device manufacturing giant actual money is held by our banking Nokia (Espoo, Finland) intro- partners,” he explains. Tduced Nokia Money, a new offering Central to the Nokia Money busi- that will deliver basic financial serv- ness case is that roughly 4 billion peo- ices capabilities to cell phone users. ple across the globe have mobile devices The Nokia Money service targets the The service, which was announced in while only 1.6 billion have bank nearly 2.5 billion unbanked consumers August, is set to be gradually rolled accounts, the company claims. “There’s worldwide who have mobile devices. out in select markets in early 2010, a gap of [nearly 2.5 billion] people,” according to the company. Romen says. “We feel that with the Nokia Money could be cross-platform At the core of the Nokia Money development of the technology and integration, suggests Romen. Text mes- service is peer-to-peer money trans- the availability of the services, there saging, for example, was a relatively fer capabilities. Essentially, the serv- needs to be a step forward in connect- little-used function until several years ice will allow individuals to send ing these worlds. Our approach is ini- ago, when roaming agreements between money via their cell phone to other tially in emerging countries. Most peo- mobile carriers allowed messages to mobile users in markets that are oth- ple there now [have] only a mobile be sent out of network, he notes. erwise cash-based. Via a simple inter- phone, their economies are mainly face, users can send money, view cash-based and people don’t have PCs, A MOBILE ECOSYSTEM transactions, pay bills and add money so the phone is their Internet access.” “For mobile money, or mobile trans- to their accounts. The service, which Perhaps a key value proposition to actions, the same thing needs to hap- is based on a mobile payment plat- potential Nokia Money account hold- pen. Nokia Money is positioned as an form developed by Redwood City, ers is that the service provides a safe ecosystem for the various players to Calif.-based Obopay, also can be used place to keep their cash. “There are a interact with one another and where to “top up,” or recharge, a mobile whole range of daily payment needs, each of them brings a core compe- user’s prepaid SIM card account. Nokia and what we’re adding is actually a tence,” says Romen, who adds that plans to make the service open and very important feature. A lot of these the company plans to partner with interoperable with other payments economies are cash-based, and secu- mobile network operators. systems, according to a press release. rity is a key for people,” Romen relates. Regarding go-to-market strategy, Nokia Money also could offer value Nokia Money capabilities will come INTEGRATED EXPERIENCE to city workers in emerging markets preinstalled on new Nokia phones in According to Gerhard Romen, direc- who otherwise would have difficulty emerging markets, Romen reports. tor of Nokia’s mobile financial serv- sending money to family members in Mobile users also can go to a phone ices unit and head of global alliances, rural areas. In addition an overwhelm- store and request that the functional- Nokia aims to make money transfer ing majority of merchants in emerg- ity be loaded onto their current phones, an integrated part of the mobile expe- ing markets do not have payment ter- and the service can be downloaded rience. “That is where [Nokia] can minals, limiting their businesses to onto phones with Internet access. “With add value, ... by making the payment cash transactions, Romen says, adding the life cycle of a phone being some- functionality part of your phone in that the Nokia Money service would where around two to three years, adding the same way that you make a call enable customers to pay small mer- this functionality over that time frame or send a text message,” he says. chants with their cell phones. in various markets will give us a broad Nokia is seeking bank partners in “In developing countries there is consumer base,” Romen comments. target markets as part of the Nokia a lot of microfinancing going on,” Details on Nokia’s plan are still Money service. “We are not actually Romen continues. “It’s not us doing developing, according to Romen, becoming a bank. That is not our com- the microfinance, but Nokia Money who declines to identify specific petency,” Romen acknowledges. “We’re can help those on the issuing, credit- countries or markets that are being working with the banking community.” ing or repayments side of a microloan.” targeted. The company has not yet An individual’s money would be The key to developing critical mass announced any of its banking part- stored in a prepaid account tied to for a mobile banking initiative such as ners. ■ —Nathan Conz

9 ■ DECEMBER 2009/JANUARY 2010 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY P2P PAYMENTS

Innovation ments solutions internationally, extending product offerings to banks Through Acquisition that issue cards on the American With its acquisition of online person-to-person payments Express network and creating new forms of PIN-based debit products. company Revolution Money, American Express will expand Amex’s Chenault emphasized that its reach into the growing remittance market. he wants to maintain Revolution’s culture and talent. Jason Hogg, merican Express is jump- Adil Moussa, an analyst with founder and chief executive of ing into the remittance busi- Boston-based Aite Group, notes that Revolution Money, will continue as ness. The New York-based the move is yet another example of president and CEO. Ted Leonsis, a payments giant best known a major card network trying to gain Revolution Money angel investor, forA its card business will acquire Rev- a piece of the growing P2P and remit- major shareholder and chairman, olution Money, the online person-to- tance market. “The American Express will become a special adviser to Amer- person (P2P) payments venture that acquisition of Revolution Money is ican Express working with Chenault was the brainchild of America Online going to open the doors for Ameri- on overall digital and online pay- founder Steve Case. can Express to take advantage of the ments strategy, according to a release. The online person-to-person pay- increasing interest in P2P payments,” The transaction is subject to reg- ment accounts, which are FDIC- Moussa says. “MasterCard just insured, are well suited for social and announced ... their P2P program. instant messaging networks. Saint Instead of developing their own in- Petersburg, Fla.-based Revolution house system, American Express will Money also offers a prepaid card linked benefit from the platform Revolu- to those accounts that can be used tion Money has built.” for offline payments or to withdraw Moussa adds, “Now three [includ- cash from ATMs throughout the Unit- ing Discover Card] out of the four net- ed States. No names or account num- works will be presenting a challenge bers appear on Revolution cards; trans- to the other players in the remittance actions are authorized by using a PIN. market [MoneyGram and Western Union]. The demand for such a prod- EXTENDING SERVICES uct has always existed but the case According to Amex chairman and was not always clear. However, with CEO Kenneth Chenault, the purchase the increased remittances in the world is part of the payments company’s and the convenience of it, the market strategy to tap innovative technolo- is ready for a card-to-card transfer.” gies to extend its services and expand According to American Express, The acquisition of online P2P payments venture Revolution Money will allow Amex to “deliver its reach. “New payments products initially it will concentrate on four competitive online payment products more rapidly and platforms are evolving rapidly, key areas as it brings Revolution and efficiently,” according to American Express and it’s important for us to keep iden- Money into the fold: chairman and CEO Kenneth Chenault. tifying cutting-edge technologies that • Developing reloadable, prepaid can extend our leadership beyond products for new segments of ulatory review but is expected to the traditional payments arena,” said the market. close in the first quarter of 2010. The Chenault in a statement. • Introducing new products for card- purchase price is expected to be “While Revolution Money is a young members who currently use other approximately $300 million. Upon and relatively small company, we alternative payment systems. closing, Revolution Money would believe it has big potential,” Chenault • Creating payment alternatives operate as a subsidiary of American continued. “This is a smart, nimble designed for social media sites Express and would become the first business. It’s run by an accomplished and allowing open application component of Amex’s recently formed management team who have quick- programming interfaces (APIs) Enterprise Growth organization, ly developed some cutting-edge e-pay- that can help developers distrib- which was formed to leverage the ment offerings. Joining with Ameri- ute new product innovations. company’s existing assets and capa- can Express will help unlock their • Developing mobile payments solu- bilities to generate incremental fee potential while allowing us to deliv- tions in the United States. revenue and to drive Amex’s entry er competitive online payment prod- Other opportunities will include into new payment areas and related ucts more rapidly and efficiently.” expanding Revolution Money pay- businesses. ■ —Maria Bruno-Britz

10 ■ DECEMBER 2009/JANUARY 2010 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY ANALYTICS Intelligent Evolution Building on traditional BI capabilities, new analytics tools empower business users, reports Jay Morreale, VP, Enterprise Credit and Market Risk Technology, Bank of America.

s the amount of data flowing through ration of data, it increasingly incorporates real-time organizations grows daily, users are information streams and powerful statistical mod- challenged to make decisions based eling to reduce the volume of data so that results A on this information in shorter and are more relevant to the question. Such a high degree shorter time periods. But while traditional busi- of customization means that rapid analytic appli- ness intelligence (BI) tools provide valuable access cation development will displace custom software to this data and offer standardized reports that pro- development and commercial applications. vide snapshots on the state of the business, busi- To achieve this ideal, analytic software must ness users who have questions not covered by one deliver high-speed, visual and interactive analy- of these reports must either rely on IT experts to help cus- sis from a variety of data sources. It must be intuitive, tomize a new one or cobble together their own reports. and it must be fast — working at the “speed of thought.” The growing demand to enable more business users to It must allow users to access internal organizational data accelerate their decision making has made it clear that BI from corporate data stores as easily as external data. as we know it is not keeping up with user demands for Most important, it must be able to answer the “what if” faster, more-flexible and more user-driven decision-mak- questions. And it must be able to do all of this without ing tools. Analytics tools (part and parcel of BI) have emerged requiring iterations through a technology organization. to address a more on-demand decision-making enterprise. Analytic tools also must handle huge amounts of con- tinuously changing data — without necessarily present- BI IN THE BEGINNING ing business users with more data. In fact analytics must During the ’90s, business managers looking for data on key process enormous amounts of information rapidly so business metrics had to request reports from their IT staff, that business professionals are working confidently with- who pulled the data from transactional systems, created in the most relevant subset of information that applies special-purpose data stores and put together hand-coded to their decision-making situation. reports for the executives. But this process was IT-inten- The end result will be an explosion of analytic applica- sive and expensive, and could take days if not weeks. Still, tions in areas you could not imagine addressing with tra- for the first time, risk teams, for example, could pull togeth- ditional BI. These applications, which will have been devel- er data from disparate parts of a large organization, includ- oped by the power users who understand the organiza- ing trading and lending businesses, and view that data col- tional functions they support, won’t be known by BI terms lectively to get a better picture of exposure to interest rates. such as “reports” or “dashboards” — they’ll be known by The automation of reports through BI tools gave companies a competitive advantage. As demands grew from a BI as we know it is not keeping broader base of business users looking to tap BI, however, the heavy reliance on IT created a bottleneck. Thanks to up with user demands for faster, the now ubiquitous spreadsheet and end-user database tech- more-flexible and more user- nologies, power users began taking things into their own driven decision-making tools. hands, extracting and decoupling corporate data and blend- ing it with their own local data sources to produce views of the problems they address in the language of business. information to meet their specific needs. While presenting The technological needs, capabilities and expectations obvious risks to the business, it signaled that organizations of large organizations have shifted dramatically in the past wanted more flexibility and more responsiveness. 15 years. While traditional BI technologies — such as Cog- Users today want to bypass IT to get at the informa- nos, Hyperion and Business Objects — have delivered tion source. They want to explore the data and be able to preconfigured reports to users, now next-gen applications ask any type of question. In response the industry is mov- (for example, TIBCO’s Spotfire) are delivering the ability ing from a reporting-centric delivery model to a more to visually aggregate and analyze data in ways that prede- analysis-oriented approach. fined models would never allow. These new tools will The next generation of BI tools, or “analytic” BI, not only allow users to rapidly build and use applications that will allows for unanticipated user-driven questions and explo- enable better decision making — all in less time. ■

11 ■ DECEMBER 2009/JANUARY 2010 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY EMPLOYEE DIVERSITY Diverse Value Wells Fargo fosters a diverse workforce with diverse perspectives to support the flexibility needed to drive innovation, says the bank’s Kristina Draper.

n today’s business environment, there is an increas- ties Awareness and PRIDE (gay, lesbian, bisexual, trans- ing focus on cultivating a diverse workforce. A gender) among many others. TMRGs are inclusive to diverse workforce with diverse perspectives brings all team members, and any team member can create I numerous advantages to organizations, including a group, though it must meet TMRG guidelines for the flexibility needed to drive innovation. But achiev- approval to receive corporate funding and other resources. ing diversity can be a challenge, particularly in IT fields. We also focus on fostering diversity of thought Taking the time to understand the obstacles to through communities of practice (CoPs) within the recruitment and retention of any underrepresented team member networks. CoPs are groups that promote groups is critical to increasing the retention of key tal- opportunities for professional growth and develop- ent. While there are a number of ways to help foster ment and informal networking while supporting our diversity within an IT organization, three principles business strategies. These groups provide team mem- are absolutely essential. bers across the enterprise with a forum to share perspectives on a wide variety of topics, including disabil- 1. WALK THE WALK ity awareness, environmentalism and innovation. Diversity should not be just a program but a part of For example, the Women in Technology (WIT) com- the organizational culture. At Wells Fargo we’ve cre- munity of practice (of which I am a member) brings ated diversity councils within the lines of business. together team members — both women and men — Our technology and operations council meets month- who share a passion for technology and wish to facili- ly and advises managers on policy, programs, culture tate team member success through networking, sup- and leadership best practices, and coordinates activi- port and education. WIT recently offered volunteer ties designed to educate and engage our team mem- opportunities to provide online academic mentoring to bers (employees). The council actively makes recom- mendations to our leadership, such as ways to help 3 ESSENTIAL STEPS TO team members understand the importance of personal accountability to diversity growth and awareness. FOSTERING WORKFORCE DIVERSITY

2. COMMIT TO MENTORING 1. Make diversity part of the organizational culture — for example, When managers are committed to mentoring, employees through formal diversity councils. are exposed to fresh perspectives, instruction and man- 2. Institute mentoring programs to expose employees to agement styles. In addition, when mentors recognize the fresh perspectives. impact their proteges’ personal and cultural differences 3. Focus diversity efforts on employee career development have on the team’s success, mentoring relationships cre- and networking. ate a stronger, more supportive work environment in which all employees feel valued for their perspectives. young people. The system identified academic topics in which mentors were needed and then facilitated the 3. FOCUS ON DEVELOPMENT opportunity for mentors and students to meet. At Wells Fargo team members are able to join multiple In addition Wells Fargo encourages team members team member networks. These groups are designed to to job shadow — with manager approval — as a way help attract and retain diverse team members through to learn new skills and foster collaboration. By job networking opportunities, mentoring, career develop- shadowing, team members can develop their careers ment resources and community outreach programs that while coming together to think of new ways to deliv- have a positive influence on our local communities. With- er great products and services for our customers. ■ in the network are team member resource groups (TMRGs) that focus on workforce diversity (e.g., gender, race, eth- Kristina Draper manages the enterprise business nicity, age, sexual orientation, etc.). services and SOA technology group and has served Our TMRGs include I.N.D.I.A. (Individuals Network- as the technology and operations diversity council ing to Develop Indian Culture Awareness), DisAbili- chair at Wells Fargo since 2008.

12 ■ DECEMBER 2009/JANUARY 2010 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY BANK TECHNOLOGY OUTLOOK

The continuing uncertainty about financial services regulation will complicate 2010 IT budgeting by forcing banks to try to balance caution with innovation and efficiency with flexibility. ON PINS AND NEEDLES BY MARIA BRUNO-BRITZ

HE BEST-LAID PLANS of mice and men often go awry. The phrase from 18th-centu- ry poet Robert Burns couldn’t be more fitting than when applied to the technology budgets that banks had established for 2009. Nonetheless, as 2010 approaches banks still must try to determine their IT spending plans for the coming year. Bank executives are undoubtedly anxious to put 2009 behind them. To say the industry was derailed by the credit crisis and the ensuing fallout is an understatement. TGranted, budgets are never quite set in stone. But commit to incremental new spending. Now it’s there was a great deal of regrouping among finan- about reducing expenses and preserving capital.” cial institutions in the past 12 months as they tried As a result, innovation is likely to suffer in 2010, to adjust to a marketplace and regulatory environ- most observers agree. But Francisco DeArmas, ment that was — and still is — in constant flux. EVP and CIO – operations and technology with “All the banks were caught off guard [by the New Orleans-based Whitney National Bank ($12 severity of the crisis],” says Bruce Livesay, CIO with billion in assets) insists that innovation must be Memphis-based First Horizon National ($26.5 bil- viewed in a new light. “I don’t think innovation lion in assets). Adds Douglas Johnson, VP of risk will be shoved aside,” he explains. “But you will management policy with the Washington, D.C.-based have to be more innovative in how you’re inno- American Bankers Association, “Banks had to change vating. In other words, innovation will involve gears because what they originally budgeted for and using your existing resources the best you can.” what they had to spend were very different.” Jeanne Capachin, research VP, global banking According to Bill Bradway, founder of Boston- and insurance practices, with Framingham, Mass.- based Bradway Research, “2009 was almost like based Financial Insights, says, “2009 was a time of The Year Without a Budget. A meaningful portion extreme crisis that paralyzed the industry. We’re get- of the industry — 25 percent — lost money. Man- ting past that now, so we do feel like we can spend. agement in this kind of turmoil marks time with But it will be nothing like in the past.” Financial a short-term out- Insights will release its 2010 bank IT spending fore- look. There’s a cast in January, but preliminary figures show that FOR MORE ON BANK IT SPENDING TRENDS, reluctance to IT spending will be down 1 percent to 2 percent for see Celent senior analyst Jacob Jegher’s forecast, page 20.

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next year compared to 2009, Capachin reveals. to do to us? There’s a lot of nervousness in the As banks allot their IT dollars for 2010, flexibil- industry. ... But we also have to be nimble and ready ity will remain a key strategy. But Celent (Boston) as soon as the CEO says we need a differentiator.” senior analyst Jacob Jegher notes that this isn’t new Banks will invest in IT in 2010, assures Whit- for banks, especially when it comes to compliance. ney National’s DeArmas. But it won’t be on the “Some things pop up that banks don’t really account whiz-bang gadgets and projects to which the indus- for at first,” he says. “Look at the FFIEC two-fac- try has become accustomed. tor security compliance guidelines [for online authentication]: Did banks have a budget for this in place? WHERE THE SMART MONEY IS No. Did they create a budget for it? Yes. Today we’re Technology spending, according to DeArmas, will in a similar situation but just on a larger scale.” be smarter and more focused on what really mat- Still, it is difficult for banks to plan when so ters: making money and keeping customers happy. much is “up in the air,” particularly regarding reg- From the start of the downturn, DeArmas relates, ulation, says Financial Insights’ Capachin. “There’s Whitney National determined that if a project was not a lot of good information out there,” she points out. “No “We’re ratcheting down things one is able to make any big decisions yet.” that aren’t adding day-to-day The ABA’s Johnson stress- value to us or our customers.” es that, “We know neither the FRANCISCO DEARMAS regulatory costs nor who will Whitney National Bank be regulating us.” (For more on how regulatory developments in 2010 will impact IT spending, see Deloitte & part of the bank’s larger strategy, it would proceed Touche’s forecast, page 21.) as planned. For instance, he reports, a major sys- Whitney National Bank’s DeArmas, a 2009 BS&T tems consolidation currently under way will continue. Elite 8 honoree, says regulation is the top question But a plan to install a stand-alone document imag- mark in his budget. “We think we know what [Wash- ing system was altered to incorporate the project ington] may want, but then ... things go in another with the bank’s larger Jack Henry & Associates direction,” he says. “We just have to prepare for (Monet, Mo.) core system in order to cut costs. where we think things are going and hope we have In general the bank is looking to reduce costs enough time to change.” that don’t directly impact its customers or impede First Horizon also is taking a dynamic approach the ability of its bankers to remain competitive, to its budgeting due to the uncertainty around pend- DeArmas explains. “So we’re looking to reduce trav- ing federal legislation, according to the bank’s Livesay. el expenses,” he says. “We’re also going to be rene- “If you look at the legislative pipeline, it’s difficult gotiating major contracts to drive efficiencies and to plan for things,” he says. “You have to understand cost savings. We’re ratcheting down things that aren’t the basics first — which pieces of legislation like- adding day-to-day value to us or our customers.” ly won’t change. We need flexible solutions. So not Delaware County Bank also is committed to only do we do the annual budget, but we do a quar- its large, strategic initiatives, such as a channel terly reassessment of the budget as well.” renewal/integration project that includes the addi- Brian Stanfill, SVP of operations with Delaware tion of mobile banking and an upgrade of its online County Bank & Trust ($700 million in assets) in banking platform from Austin, Texas-based Q2, Lewis Center, Ohio, and a 2006 BS&T Elite 8 honoree, according to SVP Stanfill. Related to this is a larg- suggests that as a result of the uncertainty over compliance spending, as well as PRIORITIES OF BANK CIOS (OVER NEXT 24 MONTHS) the economy, 2010 will be a conservative year for bank To stretch their dollars and infrastructure, the majority of bank CIOs plan to improve technology spending. “It’s efficiencies and cut costs, according to an Aite Group (Boston) survey. But, perhaps surprisingly, offshoring ranks at the very bottom of their priorities for the coming year. harder for bankers to get their boards to take [budget proposals] seriously because they’re so risk- averse today,” Stanfill says. “What do the regulators * Multiple responses allowed want? What are they going Source: Aite Group

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BANK TECHNOLOGY OUTLOOK

er infrastructure project that was enabled by the this off. We’re looking to add more staff and more recent availability of less expensive point-to-point layers to the [security] onion in general.” fiber optic cable in the bank’s market. “Now our As DeArmas suggests, banks will emphasize branches are better connected, with better qual- their commercial business in 2010. And an antic- ity and throughput,” explains Stanfill. ipated explosion in the treasury management At First Horizon, IT investments actually will space should spur spending on related systems. increase in 2010, the bank’s Livesay reports. “Our capital investment budget tripled for 2010 due to COMMERCIAL SUCCESS our good capital position,” he explains. “So we’re Even in 2009 there was a shift in spending from the going to renew our core infrastructure and make retail side to the commercial side, notes Celent’s technology investments in relationship manage- Jegher. “It was a factor of banks realizing where ment — those customer-facing technologies that profits lie: transaction banking. Large corporates will influence our competitive differentiators. This will drive business at banks. They’ll require help to is the perfect time for technology investments as achieve their business goals,” he asserts. “There will we get ready for what’s next.” be massive announcements and spending of IT dol- Like Delaware County Bank, First Horizon also lars in this area. Banks view the future in treasury.” is investing in a channel integration project, in which Notable 2009 treasury services announcements retail and commercial customers will be given a included the launch of CitiDirect BE by New York- more seamless experience, notes Livesay. The com- based Citi ($1.8 trillion in assets) and Bank of Amer- pany is spending on automation of business process- ica’s (Charlotte, N.C.; $2.3 trillion in assets) latest es and its data warehouse so that it will provide iteration of its CashPro treasury services portal. better information on customer relationships. According to Bradway Research’s Bradway, “This is all being looked at under the broad spending in payments in general will be a high- umbrella of risk management,” Livesay relates. “I light of the 2010 IT budget season, especially as think it will be a major focus for other banks.” it relates to payments hub initiatives and pay- In addition to risk management, security is an ments messaging, areas of importance in the treas- area that banks cannot ignore. Both are on the ury space. “Payments can be a big-ticket item at short lists of 2010 IT priorities assembled by Brad- the large institutions,” he comments. way Research and Celent, and all the bankers Speaking of big-ticket items and large institu- interviewed for this article say they will spend on tions, many banks still are integrating major acqui- these capabilities next year. sitions from the past year, and more M&As are like- “You cannot cut security,” says Delaware Coun- ly in 2010, especially as the FDIC gets through its ty Bank’s Stanfill. “We’re putting in place tools logjam of collapsed banks and readies them for sale. that are better and more timely.” “We’re going to see more FDIC-forced M&A,” states Whitney National also plans to beef up securi- Financial Insights’ Capachin. “So there will be a lot ty. “Fraud has started to shift from the retail clients of IT integration work, rationalizing systems [and] to commercial clients,” explains the bank’s De- investment in new technologies in some cases.” Armas. “So we want to help our customers fend As the big banks complete 2009 acquisitions, Bradway adds, they will have TOP COST-CUTTING TACTICS (OVER NEXT 24 MONTHS) money to spend in other areas. “The big players will see a fulfilling of their long- Banks are going to be very sensitive to vendor pricing in 2010, according to Aite Group. More than half of CIOs polled by Aite said they plan to renegotiate prices with their term integration efforts from service providers to help cut costs. Again, however, offshoring (along with outsourcing) acquisitions,” he explains. is far from top of mind for bank tech executives. The chart shows the top three and “They will be able to recy- bottom three cost-cutting tactics CIOs expect to employ in the coming months. cle money saved into incremental spending that will keep the [tech spending] bubble from shrinking com- pletely. They’ll be incented to leverage their new footprint for organic growth. ... [This] will help the industry as a whole in sustaining modest growth.” ■ Source: Aite Group

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BANK TECHNOLOGY OUTLOOK THE BANKING TECHNOLOGY HOT LIST

HAT WILL BE 2010’s hottest technologies and application areas, and how will banks use them? According to predictions from a cross section of bank technology executives, this could be the year that somewhat unproven solutions — such as mobile payments, cloud computing and social networking — pass the proverbial tipping points Win banking and become essential components of efforts to improve customer experience, address risk management and fraud detection shortfalls, and maximize scarce resources. >>

MOBILE FOR BUSINESS BANKING As treasury clients seek a wider range of access when it PATRICK MOORE comes to conducting transactions and obtaining account SVP, Director of Treasury Management, information, mobile technologies will become more preva- Fifth Third Bank lent. Large financial institutions have already expanded their Although the current demand for mobile mobile offerings to include payment initiation, transaction financial applications is limited to niche verification and access to balance information. Improved market segments, we anticipate greater security will create a higher comfort level for customers interest from the commercial marketplace in conjunction around mobile banking, paving the way for more-widespread with the growth of virtual, more-mobile work teams in 2010. commercial adoption of sophisticated applications. Trea-

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sury professionals will increasingly leverage the will demand it. As such, in 2010 we’ll see a demand increase expanding capabilities of mobile devices, taking for systems that deliver finance transformation, analysis advantage of a powerful electronic wallet that will and a common modular infrastructure. ■ deliver a complete range of bank services. ■ ALL ABOUT INTERACTIVITY THE APPEAL OF VARIABLE-COST MODELS CHRISTINE BARRY JIM ECKENRODE Research Director, Aite Group Research Executive for Banking, TowerGroup Banks will continue to focus on the cus- The hot “technologies” are in the areas of sourcing and ana- tomer experience in order to strengthen rela- lytics. Banks will continue to be pressured to reduce expens- tionships. Aite Group expects to see a greater es, and any opportunity to shift to a variable-cost model in incorporation of Web 2.0 and interactive technologies for cus- either technology or business process outsourcing will receive tomer portals and online banking. This not only will lead to a great attention. At the same time a select minority of banks more customer-driven experience but will also enable banks are looking to press their advantage, and will turn to busi- to add customer forums and educational tools to posi- ness partners to help them develop industry-leading prod- tion themselves as more than transaction providers. ucts and services using that same variable-cost model. Many Banks will test the waters with social network- business applications within banking are candidates for alter- ing in an effort to appeal to younger consumers native hosting models — namely, software as a service (SaaS). and remain top of mind with existing customers. This is particularly important in areas that have complexi- For example, Twitter will be used to alert cus- ty in process or compliance requirements, such as payments tomers to the length of lines at branches. processing or mortgage lending. Transforming outdated infra- Technologies for the small business will contin- structures in these areas is a necessity, and SaaS-based solu- ue to be added. As remote deposit is increasingly adopt- tions can be part of a larger migration path. ed, mobile capture will enable the small business user (and In terms of analytics, banks are groaning under the weight individual consumer) to take pictures of checks with mobile of ever-increasing data volumes. Combined with increased devices and send them electronically to their banks for deposit. demand from regulators and customers for greater trans- Enhanced online banking tools to help manage cash more parency, control and relevance, banks must increase their effectively also will be important additions. investments in analytics in 2010. Analytics will be used in Finally, in the wake of a disastrous year and a half, many ways: to improve risk management and compliance banks realize the need to enhance fraud prevention, risk and in the lending area — both for more-data-intensive orig- management and credit tools. This will allow them to eval- inations processes and in default management and collec- uate the creditworthiness of new borrowers and, more tions, as well as in the product development and servicing important, measure existing portfolio risk and better fore- parts of the business. The need for greater ability to devel- cast future defaults through predictive analytics. ■ op new products and offer those products to prospects at the right time and place is increasing as regulation threat- FORECAST: INCREASING CLOUDS ens to reduce banks’ traditional sources of income. ■ SHERRIE LITTLEJOHN EVP – Enterprise Technology Architecture DATA INTEGRATION IS THE KEY and Planning, Wells Fargo FALK RIEKER VP of Banking Solutions, SAP America Realizing the value of virtualization and Web 2.0 is a jour- ney that will continue for some time. Mobility applications Banks are reconciling the sources and the will be an area of continued interest, building on the desire scope of their data in an effort to deliver a for easy, quick and accessible solutions. And cloud computing single trusted enterprise view of their busi- will continue to generate a buzz, though large companies ness. The lack of an enterprise scope in previous systems are likely to continue to be challenged by data protection helped create the crisis of confidence that occurred when concerns. That said, private clouds may well be of great portfolios could not be priced across siloed systems. With interest. Private clouds also support greener data centers the crisis came the realization that point solutions that do and bring potential cost efficiencies. not speak to each other create data integrity issues. The Ongoing feature development and maturity of systems man- key for banks in 2010 is data integration. Future systems agement tools also are of key interest to increase adoption must be based on SOA-compliant modules with common rates of virtualization and usage of private clouds. Virtualiza- data aggregation and integration capabilities. Every num- tion is one way to get closer to green data centers while pro- ber must be auditable to the source, and every calculation moting increased computing utilization and operational effi- must be arrived at transparently. Customers and regulators ciencies. However, different and possibly more-complex man-

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agement structures and security will Banks will use customer profiling and social network analy- need to be integral complementary sis for fraud detection, marketing, customer acquisition and efforts. A key enabler to lowering the customer retention. Self-learning and self-updating profiles barrier to entry for cloud usage will be advances keep track of an entity’s behavior, establishing a baseline of in identity and access management technolo- “normal” behavior for that entity. Banks can use these pro- gies that support role-based access control and entitlements. files to detect abnormal transactions, indicating fraud, or to In addition business intelligence, data semantic tech- tailor marketing of products and services to customers accord- nologies, and search and e-discovery capabilities are like- ing to their preferences. Social network analytics also can ly to be of great value as banks seek to learn more about help banks sell more products and services. customers’ behavior, business trends and risk management. Finally, smartphone mobile browsing will continue to Business intelligence helps us better understand our cus- gain adoption. Banks will have to adapt their Web servic- tomers’ objectives and can create opportunities for banks es to fit the smaller footprint of mobile browsers, and they to cross-sell products and services. Data semantic (DS) will also need to find new ways to authenticate customers capabilities also provide common views of the customer that work with the mobile browsers and smartphones. They while reducing the time to integrate and the associated will also take advantage of location services enabled by costs. Search and e-discovery capabilities will enable users mobile browsing — for example, banks will give smart- to locate pertinent data and content quickly. ■ phone users graphical directions to the nearest ATM. ■

COLLABORATION GETS REAL MOBILE PAYMENTS GAIN TRACTION HARAGOPAL MANGIPUDI, Global Head, Finacle DIARMUID MALLON MOHIT JOSHI, Global Head of Sales & Marketing – Senior Manager, Product Marketing, mCommerce, Sybase 365 Banking & Capital Markets, Infosys Despite the financial turmoil in 2009, we saw an uptake in Technologies that are changing the ways people and organiza- mobile financial services all over the world — from simple tions communicate will ring in changes in 2010. Businesses mobile banking services such as alerts and notifications to will become more social, using collaborative technologies such end-to-end mobile commerce solutions. 2010 will see a con- as Twitter, blogs and other interactive networking tools. The tinued rise in mobile financial services initia- convenience, speed, reach and lower cost will not only make tives globally and in the U.S. in particu- these channels more attractive but also drive innovation and lar, specifically with an increasing focus creativity. Banks will use collaborative technologies to work on mobile payments. Financial institu- with partners, customers, competition, regulators and other tions need to revamp their mobile bank- stakeholders. These technologies can be used to educate and ing strategies to move away from siloed empower customers, staff and partners. Collaborative tech- mobile banking solutions to broader nologies will extend reach, enable innovative communication banking solutions that include mobile and help banks respond to rapidly changing demands. payments, which will drive additional revenues, cost ben- Also, green IT and mobility are up-and-coming technolo- efits and customer loyalty, in addition to being a defensive gy initiatives that can provide a significant competitive advan- move against new payment entrants to the industry. Mobile tage. Encompassing consolidation of data centers along with payment will continue to become more prevalent, includ- the various virtualization options, green IT can be an effec- ing person-to-person payment in the U.S. The challenge tive way to slash operating expenditures and increase effi- remains: Who will enable mobile payments first — the finan- ciency. Virtualization, in particular, has tremendous cost-sav- cial institutions or new payment entrants? ■ ing potential. Forward-thinking banks view mobile as another opportunity to connect with consumers. ■ IMPROVING SERVICE WHILE CUTTING COSTS CUSTOMER PROFILING BRUCE LIVESAY YIELDS INSIGHTS CIO, First Horizon National AVIVAH LITAN Distinguished Analyst, Gartner The hottest technologies for 2010 will fall into four categories: Some of the hottest technologies for 2010 1. PAYMENTS PRODUCT INNOVATION. The combina- will include entity profiling, typically for tion of unprecedented litigation-driven regulatory change customers and employees but also for other entities (e.g., and the emergence of social banking will force banks to ATM machines); social network analysis that looks at link- react with creative payment solutions. Institutions with ages and relationships between people, groups of people flexible payment hub architectures and foundational mobile and other entities; and smartphone browsing. solutions already in production will be best positioned to

18 ■ DECEMBER 2009/JANUARY 2010 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY HOT TECHNOLOGIES

BANK TECHNOLOGY OUTLOOK

respond with new payment product innovations and serv- will start leveraging both private and public clouds for devel- ices. Additional services such as peer-to-peer lending and opment and test activities as the paradigm matures. ■ savings, mobile device remote deposit capture and the mobile wallet will drive new sources of revenue. INTEGRATING THE EXPERIENCE 2. CHANNEL DELIVERY INTEGRATION. Seamless deliv- PAUL SUSSMAN ery of bank products and services across all channels, President, First Manhattan Consulting Group including the branch, will be an important technology investment area in 2010. First Manhattan Consulting Group sees a great 3. ENTERPRISE RISK MANAGEMENT AND ASSET deal of business interest in three technology areas: QUALITY. Bank failures will continue in 2010, and 1. CHANNEL CAPABILITIES that give customers those institutions with mature credit valuation more control over their money, such as personal financial models will be in a position to take advantage management, money movement and real-time alerts. of resulting opportunities. Technologies in the 2. ENTERPRISE CUSTOMER DATA SOLUTIONS that space of credit analysis and financial reporting will be support decision making (for dynamic pricing, risk under- important as banks work with the FDIC to manage loss- writing, customer retention, etc.) and improved service sharing agreements. In addition, future repayment model- (total customer view, case management, etc.). ing will become a critical capability for identifying lending 3. BUSINESS PROCESS MANAGEMENT combined with opportunities and simultaneously reducing credit risk. e-signature to enable online account opening, “once and 4. SERVICE MANAGEMENT AND COST OPTIMIZATION. Con- done” servicing, faster time to market and increased busi- tinued budgetary restraints will push bank IT shops to focus ness focus from IT groups. on simultaneously improving service delivery and reducing Banks will use these technologies to integrate process- operating costs. Virtualization will continue into 2010 as bank es and data across products and channels, resulting in a IT groups work to streamline both branch and data center more consistent customer experience, improved sales, operations and to reduce costs and improve reliability. Banks reduced account attrition and lower costs. ■

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BANK TECHNOLOGY OUTLOOK

Banks’ technology spending in the coming year will be defined by treasury services and M&A integration, according to Jacob Jegher, Senior Analyst, Celent. A DEFINING YEAR

he tumultuous state of the banking indus- 2008. The jury is still out as to whether spending try raises many questions about technol- growth on new investments will be back in the ogy spending at North American banks. black in 2010. But while Celent is currently in the What will total IT spending be in 2010? process of preparing its annual IT spending reports Will IT spending fall if the industry contin- (available in January 2010), it has identified a shin- Tues to suffer? It is easy to assume that total IT spending star that should contribute handsomely to ing will fall, but research shows that is not the case. spending on new investments in 2010: IT spend- While there was a decline in North American ing on corporate banking is skyrocketing. IT spending growth in 2009 (1.7 percent growth In July 2008 Celent predicted that it would be in 2009 vs. 3.1 percent growth in 2008), absolute 12 to 18 months before the industry would begin spending continues to rise. There are several rea- to see cutting-edge corporate banking solutions sons why overall spending figures are still in the complete with Web 2.0 elements. Our predictions black. First, maintenance spending makes up the were spot on. This past fall Citi unveiled CitiDirect lion’s share of the budget. About three-quarters of the total IT budget is dedicated to maintenance. Those banks involved in M&As As such, there is only so much fat that can be trimmed. While many banks are undergoing mul- in 2008 are still paying dearly tiyear projects to become more efficient and have to integrate systems and invested in service-oriented architecture (SOA), these efficiencies have yet to be fully realized. migrate users to new platforms. Another factor is M&A activity — spending on post-merger integration work is on the rise. There BE, its next-generation corporate online banking was no shortage of deals in 2008, and those involved platform. Bank of America also announced its are still paying dearly to integrate systems and next-generation offering of CashPro. migrate users to new platforms. Cash management will continue to evolve. Ana- Finally, small and midsize banks are investing lytics, social media (primarily closed groups for in IT to gain market share. Although there have corporate clients), interactive online training/edu- been several casualties during the economic down- cation, desktop and online widgets, and much turn, many small and midsize banks have enjoyed more will start to peek out in 2010. Additionally growth in deposits. These banks recognize that other large banks will attempt to catch up to Bank they have new customers who can buy addition- of America and Citi. Midsize banks will also attempt al products. Small and midsize banks are using to compete here as they recognize the importance these new customers as a jumping-off point to and profit potential of corporate banking. gain market share. Banks will invest in market- Innovation is necessary in order for banks to ing campaigns, product bundles and online offer- thrive. The spending tug-of-war between mainte- ings to develop these newfound relationships. nance and new investments has stifled innovation at many banks and limited competitive pos- CORPORATE BANKING’S RISING STAR sibilities. 2010 could be a defining year for many However, it’s not all fine and dandy on the IT banks as they aim to transition into innovative, spending front. Spending on new technology invest- competitive forces. Banks that successfully work ments by banks totaled US$8.7 billion in 2009, but toward and achieve the shift from maintenance this figure represents a 14.4 percent decline over to new investments will come out winners. ■

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BANK TECHNOLOGY OUTLOOK

Pending legislation in Congress will significantly affect banks’ IT shops, and risk management will be front and center, reports Deloitte & Touche’s Henry Ristuccia. A NEW AGENDA

great deal remains in play when it consider — and plan for — the full spectrum of comes to Congress’ debate around risk, including strategic risk, operational risk, the shape of regulatory reform. There compliance risk and financial risk. are many different views on what will become law from among the various DATA, DATA EVERYWHERE legislativeA efforts now under discussion, as well The elephant in the room is how stakeholders deter- as questions on the timing. Nonetheless, now is mine which risks matter most. It is critical for exec- the time to examine governance, risk and regula- utives to refine the key data to monitor for risk fac- tory compliance processes and to get your house tors as well as to better understand the degree of in order so that your bank can be ahead of any transparency into those factors that the data pro- requirements that may be enacted. vides. Technology is at the heart of this issue, as a Regulators already are taking steps under exist- robust technology infrastructure facilitates the iden- ing authorities to tighten control of the financial sys- tification and collection of the necessary data. tem, particularly when it comes to risk management. According to a survey of chief risk officers at News headlines over the past year have targeted risk financial institutions, however, many corporations management for its role in the financial crisis, thrust- are inhibited in their ability to fully grasp their risk exposure due to outdated or poorly integrated IT systems. As a result of multiple mergers and acqui- Many banks are inhibited in sitions, many banks have disjointed IT structures in their ability to fully grasp their which business systems are duplicated or not included in the overall data aggregation. These disconnect- risk exposure due to outdated ed and disparate systems make it more difficult to or poorly integrated IT systems. identify the information necessary to fully grasp an institution’s broad spectrum of risk exposure. ing the issue into the spotlight. The industry is rapid- Banks should look for ways to enhance their ly grasping the importance of approaching risk man- risk infrastructures, such as through a data ware- agement from a holistic perspective and driving own- housing strategy. It also is important to develop ership of the issue up the management food chain. strategies to address risk infrastructure deficien- According to the October 2009 paper on risk cies in areas such as risk applications, hardware, management lessons from the Senior Supervisors architecture standards and data sourcing. Group (which comprises senior financial super- Many firms are making sizeable investments in visors from the U.S., Canada, France, Germany, risk management infrastructure. The majority of Japan, Switzerland and the U.K.), most financial the work and spending, however, has yet to take institutions are moving to improve risk reporting place. In 2010 there most likely will be an increase to the board and senior executives, as well as in technology spending as companies update their increasing senior-level involvement in risk expo- existing systems to seamlessly integrate and eval- sure decisions. The group’s recommendation may uate data coming from all aspects of a business spur global bank regulators, as well as the Fed- and standardize that data with a risk lens. ■ eral Reserve and other U.S. regulators, to propose further guidelines to mitigate financial services Henry Ristuccia is a partner with Deloitte & firms’ risk in hopes of avoiding a future crisis. Touche and leads the firm’s governance, regula- Going forward, many organizations may need to tory and risk strategies practice in the U.S.

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BANK TECHNOLOGY OUTLOOK 10 IN 2010: WHAT TO WATCH IN THE YEAR AHEAD HICH TECHNOLOGY AND BUSINESS developments will change the competitive environment in 2010? Which executives and public figures will grab headlines? What companies and organizations will be in the news? The BS&T editorial team offers some predictions for the coming Wyear’s bank technology newsmakers.

LENDING: BACK FROM tions. With institutions such as USAA leading the way with THE BRINK? its mobile remote deposit capture app, the banking industry WITH PRESIDENT OBAMA pressuring is beginning to recognize the importance of not just the mobile banks to step up lending, 2010 could see channel, but the mobile application channel specifically. And a more active market after five consecu- it’s a good thing — the iPhone has shown no signs of losing tive quarters of reduced lending. Perhaps popularity, while recent offerings based on Google’s Android partly responding to criticism from politicians and the pub- mobile operating system promise to expand the mobile appli- lic, large institutions such as Bank of America (which says cation development universe. As consumers become accus- it will increase small-business lending by $5 billion next tomed to mobile apps in their everyday lives, they’ll demand year) and J.P. Morgan Chase (which has committed to an similar functionality from their banks. —Nathan Conz increase of $4 billion) have signaled their intentions to be more active lenders. Regional and community banks also NAVIGATING THE are getting into the act. For example, Rosemont, Ill.-based EMERGING MARKETS Cole Taylor Bank recently established a residential mort- TO SUCCESSFULLY NAVIGATE today’s gage origination line of business. Whatever the motivations, troubled economy, banks need to be able banks looking to manage the risks and costs of increased to compete profitably in emerging markets. lending activity are going to depend on technology — includ- China is the fastest-growing major econo- ing more-sophisticated credit risk-modeling capabilities, my in the world. While the world’s wealthiest have seen enterprise content management capabilities, and transac- their savings evaporate recently, the number of millionaires tion-tracking and analytics tools that help detect and pre- in China is actually growing. By the end of 2009 the coun- vent fraud — to do so. According to TowerGroup’s 2010 try will be home to 450,000 millionaires with a net worth consumer lending forecast, “Financial services institutions estimated at US$1.73 trillion, UPI recently reported. But it’s will increase IT investment for integrated credit risk man- not just the wealthiest who are saving — economists esti- agement, improved regulatory compliance management, mate that the average Chinese citizen saves between 30 and and new loan collections and portfolio risk management 40 percent of his or her disposable income, a rate that is at solutions.” —Katherine Burger least twice as high as in the U.S. Now the country is looking for new investment vehicles as well as the technology BANKS TEST MOBILE APPS infrastructure it needs to become a major player in the glob- IF 2009 TAUGHT US ANYTHING, it’s that al financial markets — creating opportunities for Western people were willing to forget the last bizarre banks and technology providers. —Melanie Rodier decade of Michael Jackson’s life. But more important, it also taught us that people enjoy A REGULATORY VOICE a good mobile app. In April, before the site AS THE ISSUE of financial regulation has even reached its first birthday, more than 1 billion applica- become more and more politicized, at least tions had been downloaded from Apple’s iPhone App Store. one public figure has managed to stay That number has since doubled. A small but growing per- largely above the fray, with some admir- centage of those apps were developed by financial institu- ers on both ends of the political spectrum.

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BANK TECHNOLOGY OUTLOOK

Congressional Oversight Panel (COP) chair Elizabeth War- efficiencies, reduce costs and free up capital are increasing- ren has been a critical voice in the regulatory debate, but ly turning to outsourcing — particularly in treasury manage- she has avoided the kind of tired rhetoric or piling on that ment, wholesale lockbox, remote capture, disbursements, many politicians employ to score points in the media. “To check processing and image exchange, according to reports. restore some basic sanity to the financial system, we need But outsourcing largely will remain on U.S. shores; only 4 per- two central changes: Fix broken consumer-credit markets cent of North American bank CIOs are considering moving and end guarantees for the big players that threaten our operations overseas in the next two years, Aite notes. —M.R. entire economic system,” she recently told Newsweek. War- ren’s work was set to end in June 2010, but when Treasury MANAGING FINANCES Secretary Timothy Geithner extended TARP until next Octo- GETS SOCIAL ber, he also extended the life of the COP. —N.C. THANKS TO A COMBINATION of demo- graphic trends, technology capabilities FEES UNDER SIEGE and uncertainty in the banking competi- MAYBE IT’S BECAUSE an overdraft fee is tive arena, personal financial management easier to understand than a credit default (PFM) tools — online resources geared toward helping swap. Whatever the reason, challenges to consumers and small businesses manage their finances bank fees for a variety of services are com- — really took off in 2009 and are likely to present an even ing fast and furious as all aspects of the greater opportunity (or threat) to banks in 2010. PFM banking business are subject to scrutiny. The situation is looks to be an ideal way for banks to improve customer unlikely to ease in 2010, with consumer financial protection experience and loyalty and to leverage their online bank- likely to be a key feature of whatever financial services reg- ing platforms. Banks are in a prime position to help cus- ulatory reform ultimately emerges from Congress. In a recent tomers take more control over their finances. But PFM’s Bank Systems & Technology/Fiserv webcast, Mercator Advi- growing popularity also raises the specter of disinterme- sory Group VP Bob Landry underscored the dilemma, not- diation. The leading PFM players, including Mint (acquired ing that without overdraft fees, 45 percent of banks and cred- recently by Intuit), Geezeo and Yodlee, are simultaneous- it unions would not have made money in 2008. “The [role of ly potential partners and competitors to banks. —K.B. overdraft fees] in the overall ability of the industry to make money is pretty important,” he said. But banks fight back UNTAR PED BANKS on this issue at their peril, in terms of their already shaky IN DECEMBER 2009 three high-profile reputations with the public. “It’s a social issue,” Landry noted banks — Bank of America, Citigroup and during the webcast. Since the need to generate revenues is Wells Fargo — announced plans to repay not ameliorated by social pressure, look for banks to revamp tens of billions of dollars in federal bailout their offerings, he suggested — charging for services such money. The question now becomes whether as minimum balances and optional features. —K.B. those moves came because the banks were dealing from a healthier balance sheet position or because they sought to ATTENTION TURNS TO get out from under the increased regulatory oversight imposed P2P PAYMENTS by TARP. In 2010 we’ll learn if each bank’s decision to repay THE BIG BUZZ at this year’s BAI Retail bailout funds was the right one. In part, the future state of Delivery Conference & Expo was around the economy could depend on those results. —N.C. peer-to-peer (P2P) payments. Major players including S1 and FIS announced that HR’S MOMENT IN THE SPOTLIGHT they have teamed with PayPal to offer banks mobile or online WHEN THE Wall Street Journal reports P2P solutions. Meanwhile Fiserv has started to offer a new that, “HR Executives Suddenly Get Hot,” P2P personal payments service to the 3,000-plus financial you know that things have changed in the institutions in its online payment network. In many ways business world. But it’s not surprising that, the personal payments space is the last bastion of the per- with a wave of turnover in senior positions sonal check, but perhaps with these new developments, that and reductions in workforces at companies of all sizes, cor- will finally start to change. —N.C. porate human resources departments are at the center of the action right now. It’s no different in banking — whether OUTSOURCING CLOSER TO HOME it’s finding a new CEO at Bank of America, figuring out how SEVENTY-TWO PERCENT of North Amer- to recruit millennial workers, or managing the countless lay- ican bank technology executives expect offs that have occurred following mergers, restructurings their budgets to stay the same or decrease or failures, human resources managers are playing a his- in 2010, according to a recent Aite Group toric role in shaping the workforces that are going to lead report. As a result, banks seeking to improve the banking industry into 2010 and beyond. ■ —K.B.

23 ■ DECEMBER 2009/JANUARY 2010 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY FRAUD PREVENTION THE MANY FACES OF FRAUD As fraudsters increasingly seek to exploit weaknesses in consumers’ defenses through social engineering schemes rather than hack vulnerabilities in banks’ security systems, the need for enterprisewide solutions to detect fraud across channels is greater than ever.

BY NATHAN CONZ

ank fraud can take many forms. It can manifest itself in the shape of a counterfeit debit card or as a stolen online ID and password. Sometimes it even appears as a 25-year-old man wearing his mother’s pink blouse and head scarf. That was the picture of fraud at a Chase Bank branch in Franklin, N.J., in early December, when Tita Nyambi, speaking in a high- Bpitched voice and holding a withdrawal slip with a forged signature, attempted to withdraw $700 from his mother’s bank account, according to a report in the Newark Star-Ledger. More often than not, though, banks are not able to look fraud in the face and identify its suspicious five o’clock shadow. In fact financial institutions are finding it increas- fraud are not seeking to exploit weaknesses in a ingly difficult to distinguish between fraudsters bank’s security environment, but rather weak- and their own customers. And as social engineer- nesses in a bank’s customer base. ing attacks, such as phishing, grow in popularity “The basic idea behind a social engineering and complexity, in many ways perpetrators of attack is that you can harden your IT systems to

24 ■ DECEMBER 2009/JANUARY 2010 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY any conceivable degree and there will always be channel-by-channel basis, according to S. Ramakr- a weak point, which is that those IT systems need ishnan, CEO, Reveleus and Mantas products for to interact with humans,” explains Tim Callan, Oracle (Redwood Shores, Calif.) Financial Ser- VP of product marketing for Mountain View, Calif.- vices Software. Individual susceptibilities were based VeriSign. “If [hackers] can trick the humans identified, thus generating individual remedies, into letting them in, it doesn’t matter how strong he explains. the security is.” “What’s happened since then is that fraudsters That sentiment is echoed by Bernhardt A. have gotten very clever,” Ramakrishnan relates. Alama, VP of product management in Honolulu- “Now they attack the entire system through a com- based Bank of Hawaii’s ($10.8 billion in assets) bination of factors. They tend to do cross-chan- cash management department. “Whether you’re nel fraud. If you continue to look at fraud as it is talking commercial or individual [accounts], the occurring in each channel, you’re missing the con- challenge we have is ... the physical person,” he nections across these channels that fraudsters says. “The weakness is really with the individual.” are typically exploiting.” In response, banks have learned to change the As recently as 2004 and 2005, banks still were way they approach fraud mitigation. Historical- taking a modular approach to fraud mitigation, ly, financial institutions addressed fraud on a says Alison Kuo Sullivan, director of fraud product

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management at FICO (Minneapolis). Then, “[Banks] nel, you can safely assume that you’re going to see started to adopt some of the concepts around enter- it on another channel,” Wallach details. “You can prise fraud management,” she recalls. immediately react to that in an enterprise system.” An enterprise approach to fraud detection is crit- The challenge, however, is in implementing a ical today, asserts Bank of Hawaii’s Alama. “The pri- system that is both tightly integrated with a bank’s mary driver is that the majority of fraud conducted various channels and flexible enough to react to [today] is related to social engineering,” he says. change, according to Wallach. “You can’t just take “There are some technical issues related to fraud a system ... out of the box, unwrap it and then being conducted, but most of it involves convincing expect it to meet all the expectations outlined in someone to give up their credentials one way or your business case,” he contends. “You have to another, whether that’s via voice, e-mail, cell phone tightly integrate the system, and you don’t want to or another method. What we’re finding globally is assume that the integration is only relevant to areas that our customers are getting duped somewhere in where fraudsters are hitting you today. As soon as a process to give up something that they shouldn’t.” they figure out what your controls are, they are Given changes in products and channels, fraud obviously going to move.” trends ebb and flow, notes Ben Wallach, VP and The process for identifying and eventually invest- fraud operations manager for Regions Bank ($140 ing in an enterprise fraud detection system began billion in assets). But most recently, he adds, he has at Regions Bank about two years ago, Wallach seen an uptick in cross-channel fraud. “If I had to reports, adding that initial channels went live on pinpoint a change, that would probably be the biggest the new system in June 2009. During the process, he notes, the business case for the fraud solution held strong through the economic crisis. “If the “[Fraudsters] are using business case was not as strong as it was, the eco- multiple channels now nomics that we all dealt with might have hindered the situation,” Wallach recalls. “In light of the busi- to perpetrate fraud.” ness case, the changing economy and the fraud that BEN WALLACH is indicative of that change probably actually helped Regions Bank us to [justify the investment].”

one — [fraudsters] are using multiple channels now FORTIFYING THE DEFENSES to perpetrate fraud,” he says. But while an enterprisewide view of transactions can help financial institutions identify fraudulent CHANNEL SURFING activities, banks still must drill down into specif- To address the growing cross-channel threat, Birm- ic channels and deploy specific point solutions to ingham, Ala.-based Regions Bank recently imple- prevent fraud in the first place. Hackers may obtain mented a new enterprise fraud-monitoring system user credentials for multiple channels, but they aimed at detecting fraud in areas such as debit cards still must exploit those credentials on a channel- and online banking, according to Wallach. While by-channel basis. he declines to offer specifics about the solution, At Bank of Hawaii, key-logging and other mal- Wallach says it is connected to feeds from various ware attacks increasingly target the bank’s com- channels, giving the bank an enterprisewide view mercial clients. “It’s grown significantly in the last of fraud and allowing it to write rules and score two years,” the bank’s Alama says. “We’ve noticed activities across product lines and channels. much more aggressive efforts to acquire creden- “The entire fraud management process is cen- tials on the [commercial] side, whereas before it tered around analytics, rules and neural scoring was primarily concentrated on the retail side.” models,” Wallach relates. “The approach there has- In response the bank has added security layers n’t really changed. We’ve had that approach in indi- to its credentialing process. First, Bank of Hawaii vidual silos for years now. It’s just enriching the mandated dual control for its commercial clients data in all those different aspects from various prod- — requiring two users to each provide credentials ucts and channels.” to initiate a transaction such as an ACH or wire Phishing and key-logging attacks, for example, transfer, according to Alama. target multiple channels, Wallach suggests. In a typ- The bank also has rolled out hardware tokens ical phishing attack, for example, a hacker may be that generate one-time passwords to thwart social able to compromise a customer’s PIN in addition to engineering fraud attacks, Alama adds. The hard- his or her online banking credentials. “[Fraudsters] ware tokens are distributed to users in the form are obviously going to hit on both those channels, of an RSA key fob, which contains a small key- so if you see a particular type of fraud on one chan- board on which a user types a PIN. The key fob

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then generates a one-time, six-digit pass code that J.P. MORGAN SHARES the user reenters when signing on to Bank of Hawaii’s online applications. BEST PRACTICES FOR FIGHTING Many of Bank of Hawaii’s enhanced security CORPORATE PAYMENTS FRAUD measures have been put in place with an assist from Atlanta-based Online Banking Solutions’ (OBS) Online Messenger version 3.0 and M-Secure Bank- orporate payments fraud is becoming a growing threat to banks as the economic slump continues and the ing Suite products, Alama reports. Implementation, sophistication of attacks increase. In light of this, New he relates, began late last year, and the solutions CYork-based J.P. Morgan Chase ($2.2 trillion in assets) went live in the third quarter of 2009. has issued a new white paper suggesting best practices intended In addition to other OBS tools — including a to raise corporates’ fraud awareness. secure browser that clients can use to access the The paper examines check, ACH and credit card fraud and bank’s online applications — Bank of Hawaii lever- provides tips on protecting treasury operations from advanced ages the vendor’s M-Secure Virtual Keyboard, soft- phishing techniques. It also explores key areas of fraud vulnerability ware that provides an additional layer of security and proliferation, and reviews available products and services. by limiting account access to a specific computer According to Iqbal Khan, executive director, J.P. Morgan Treasury or other device. Alama describes the virtual key- Services, the white paper was meant to be neutral and nonbiased in order to best convey the importance of the issue to corporates. “We board as a “soft token” that uses the same strate- wanted to raise general awareness of corporate payments fraud and gy as a hardware token. help people get a better understanding from a corporate perspec- Essentially, he explains, a customer uses his or tive,” Khan says. “We’re also using [the white paper] internally as col- her mouse to enter login information and a PIN lateral for our bankers and sales team to help them educate clients number via an on-screen keyboard (as opposed to on their responsibilities and how to prevent fraud.” a physical keyboard) to generate a one-time pass Khan notes that as banks push more responsibility onto clients code that automatically is sent to the bank for cre- by offering self-service functions, they also have to build more- dentialing. The process eliminates physical key- powerful security around these service platforms. In the end, strokes, greatly reducing the effectiveness of key- however, the effectiveness of security measures comes down to logging malware. “The majority of the problems the person using the platform, he says — all the more reason to increase education at corporates. that are out there today are customers that have malware downloaded on their computers that is Some of the best practices highlighted in J.P. Morgan’s white capturing all their keystrokes and passing that off paper include: to a foreign computer somewhere else,” Alama says. • CHECK FRAUD. To prevent check fraud, take practical defensive Unfortunately, Alama acknowledges, while the measures, including securing check stock and implementing dual new controls have helped to prevent fraud, they control around key treasury functions such as check issuance and also have limited the convenience factor of the account reconciliation. Using high-quality check stock with built-in online banking channel. “In the end, the applica- security features will reduce the likelihood of check manipulation. tions have gotten a bit more cumbersome to use, Industry tools such as Positive Pay reduce the possibility of fraudu- especially for the smaller business, because of the lent check payment. dual controls and other security features we’ve had • ACH FRAUD. To minimize ACH or electronic payments fraud, to implement to protect [clients] from some of the sensitive information needs to be protected. Masking account key-logging efforts,” he concedes. numbers and Tax ID Numbers in your written correspondence and utilizing encrypted e-mail for confidential, nonpublic information are both critical steps to reducing fraud. ACH debit blocks or ACH WORTH THE INCONVENIENCE debit filters guard against unauthorized ACH debit transactions. That said, push back from the bank’s customer base has been tempered by the growing awareness of • CORPORATE CREDIT CARD FRAUD. Misuse of corporate identity theft and other social engineering fraud payment cards by employees is not typically considered fraud by card issuers. The company is usually responsible for any loss, so schemes. “Initially, a couple years ago, it was diffi- organizations must have prevention programs in place. Protec- cult,” Alama says of the effort to partner with cus- tive controls, such as setting transaction limits and monthly limits tomers to prevent fraud. “[But] our customers are for all cardholders, as well as blocking unauthorized vendors, will actually appreciative that we’re going through the greatly reduce misappropriation. Companies should also use effort to try and protect them, even though it may Web-based payments tools that provide enhanced reporting and require additional effort on their part.” real-time visibility into spending. The balance between convenience and securi- • PHISHING FRAUD. Phishing spammers establish fake e-mails ty was central to fraud mitigation efforts at Addi- and Web sites in an attempt to steal security information, such as son Avenue ($2.2 billion in assets), a Palo Alto, login names, passwords and other personal data. Organizations Calif.-based federal credit union serving select should ensure that browser and security software information is employee groups (SEGs) at technology companies continually updated and that spam-blocking filters and surfing such as Hewlett-Packard. With a globally dispersed block controls are maintained companywide. Privacy locks should be utilized to restrict access to sensitive data. —Maria Bruno-Britz

27 ■ DECEMBER 2009/JANUARY 2010 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY FRAUD PREVENTION

customer base, Addison considers the online chan- cating the user who is submitting those requests,” nel to be a top priority. In fact, the credit union aims Balaji comments. to provide online banking services that can sup- Addison Avenue’s enterprisewide fraud mitiga- port any transaction that a member can perform in tion practices are augmented by specific security a physical branch, according to Addison Avenue layers that aim to ensure users are who they are CIO Blanca Guerrero. purporting to be. Like Bank of Hawaii, the credit Those online services extend all the way to enabling union introduced one-time pass codes to the authen- a customer to open an account online with an elec- tication process. According to Balaji, when addi- tronic signature. “We may open an account with a tional credentials are required the company sends member and never see their face,” Guerrero relates. users the one-time pass code via phone, e-mail or “The risk is high, but we have measures in place [to SMS text message. ensure] that the person who is applying for a loan Addison also rolled out hardware tokens that or a new account is who they say they are.” generate random one-time pass codes, Balaji adds. In 2006 the company started working with VeriSign The tokens are available to members in various to implement the vendor’s fraud detection system. form factors, including key fobs and a credit card- The VeriSign solution monitors traffic that comes size device. BlackBerry and iPhone users can download software to their mobile devices that serves the same function as the hardware token. “There isn’t any one Addison first went live with the VeriSign solu- answer that is going to tion in late 2006 and since the initial deployment has continually updated the system’s functionality, lead to complete security.” adding features such as rules, phone OTP (one-time SRI BALAJI password) and SMS OTP, Balaji reports. The most Addison Avenue recent addition, she notes, was the hardware token rollout, which went live in June 2009. through the online banking site and develops behav- That progression perhaps best sums up the ioral patterns for members based on factors such constantly evolving battle financial institutions as transaction types and where and when they face when it comes to fighting fraud. Yesterday’s access their account, explains Sri Balaji, a solutions secure practice can become tomorrow’s securi- design and development manager at Addison Avenue. ty liability, especially with the advent of cross- “Everybody has a unique behavioral map. Whenev- channel threats. er the system detects a deviation from that exist- “It’s a constantly evolving landscape, and our own ing map, it challenges the member to authenticate evolution with the [VeriSign] system speaks to that. themselves,” says Balaji, who managed the team When we started off, sending a one-time code to an that implemented the VerSign solution. e-mail was acceptable. Now you have Trojan [horse On top of the behavior engine, the VeriSign solu- viruses] and key-loggers, and people’s e-mail accounts tion allows Addison to provide rules to, for exam- are getting compromised,” Balaji says. “There isn’t ple, target specific high-risk transactions for addi- any one answer that is going to lead to complete tional authentication. “Everything is happening in security. We have to constantly tweak rules and work this online system, so we really want to put a lot of toward the next generation [of security solutions] rigor in place in terms of validating and authenti- to try and keep up with the hackers.” ■

28 ■ DECEMBER 2009/JANUARY 2010 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY TELLER SCHEDULING Sticking to the Schedule BB&T optimizes teller scheduling with GMT Planet, reducing staffing costs and building stronger client relationships.

inding the right balance when staffing les-based consultant performed time studies in a sampling branches can be a tricky, sometimes sub- of BB&T’s branches to develop time standards for transac- jective task. For BB&T ($154.2 billion in tion activity that were fed into the GMT forecasting tool. As assets), which had acquired more than a result, Thompson says, BB&T has enjoyed 90 percent fore- 175 financial organizations in the past cast accuracy with the workforce optimization tool. two decades, the lack of standardization The system was tested for several weeks in November from branch to branch and region to 2007 and was rolled out by March 2008 to all 1,500 branch- region fueled inefficiencies in the sched- es, enabling teller scheduling at the branch level using GMT uling process, according to John Charles Thompson, EVP, Planet over the branch intranet. “It was a very quick roll- Fmanager of branch operations, for the Winston-Salem, out,” Thompson recalls. “By the end of 2008 we achieved N.C.-based bank. “We had a variety of branch types with our stated projected goals: 5 percent reduction in teller line unique challenges around staffing,” he says, noting, “We resources, and we had tellers scheduled at the right time were overstaffed at the teller line.” Without a centralized teller system, BB&T relied on “We wanted a solution that gave data collection at the branch level to determine the teller schedule, Thompson relates. Reports were produced at us ease of integration into our the end of each month and compared at each branch and existing teller system and ease by each city/region. But, “There was no degree of sched- of operation.” uling or forecasting assistance,” he says. “It was just one- JOHN CHARLES THOMPSON dimensional, historical data. There were no sophisticat- BB&T ed modeling tools to staff against forecasted needs, so we needed to do something.” with no degradation in client service quality and no layoffs.” When Thompson set out in late 2006 to find a solution, As with any new technology, there was a learning curve, his search was guided by two goals: gain efficiencies avail- Thompson acknowledges. But new training materials stream- able by optimizing teller scheduling, and ensure that BB&T lined the rollout. “We didn’t test or pilot it for very long — maintained the highest-quality service possible using the about 30 days,” Thompson reports. “BB&T has its own train- right number of tellers at the right time. “This required a ing division called BB&T University. So we wrote our own forecasting tool,” he explains. “Our operating model is a materials and repiloted the software after another 30 days. high-quality service model, and we didn’t want to dam- But we were able to roll the solution out ... in just four months.” age our service. ... So we wanted a solution that gave us With the new workforce management solution in place, ease of integration into our existing teller system [from hiring, scheduling and management of teller personnel Richardson, Texas-based ARGO] and ease of operation is more standardized across the entire bank, notes Thomp- so it was not just efficient but simple to use. We didn’t son, who points out that BB&T has reduced teller over- want the branch people spending a tremendous amount time compensation by 50 percent and expects to save 15 of time learning this solution.” percent in labor costs over the BB&T issued an RFP at the end of 2006 and examined next two years thanks to GMT solutions from several vendors, including ARGO, Exametric Planet. But more important, he SNAPSHOT (San Diego) and Norcross, Ga.-based GMT Corp. According suggests, the bank has been to Thompson, BB&T selected GMT’s GMT Planet Web-based able to ensure more-consistent, INSTITUTION: BB&T workforce management tool in the first quarter of 2007 based high-value service. (Winston-Salem, N.C.). on the solution’s ease of use and its ability to integrate with “Our employees develop rela- ASSETS: $154.2 billion. the bank’s technology infrastructure, which includes an IBM tionships with clients,” Thomp- BUSINESS CHALLENGE: (Armonk, N.Y.) mainframe along with HP (Palo Alto, Calif.) son says. “[With the scheduling Formalize and standardize the teller servers running Microsoft (Redmond, Wash.) SQL and IBM’s tool], we’re enjoying less turn- scheduling process across the DB2 for its databases. Implementation took place over a over than in previous years at organization to improve efficiencies. three-month period, beginning in summer 2007. the teller line,” allowing for SOLUTION: GMT Corp.’s In addition to GMT’s help, CAST Management Consul- stronger client relationships. ■ (Norcross, Ga.) GMT Planet tants also provided support for the project. The Los Ange- —Maria Bruno-Britz workforce management tool.

29 ■ DECEMBER 2009/JANUARY 2010 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY CASE STUDIES

REMOTE DEPOSIT CAPTURE Capturing Clientele First National Bank of Omaha’s second-generation, Web-enabled remote deposit capture solution helps the bank expand its RDC customer base by 50 percent.

s an early adopter of Remote Capture was the only solu- “Since we have customers who run Check 21-enabling tech- tion offering immediate integration close to a quarter-million checks nologies in 2006, First with our new lockbox solution.” per month, seconds matter.” National Bank of Omaha The supporting infrastructure quicklyA reached the limits of its includes physical Microsoft [Red- WORTH THE WAIT initial remote deposit capture mond, Wash.] IIS servers on the Unfortunately Wausau did not yet (RDC) solution. “We rolled out our front end and virtualized IBM support the CaptureOne device, original solution to get us to mar- [Armonk, N.Y.] blade servers on Asplin notes. So while First Nation- ket quickly,” recalls Toby Asplin, the back end. “We planned to com- al waited for Wausau to integrate the bank’s strategic partnerships plete the project in less than five CaptureOne with the solution, the officer. “Then ... a wider range of months,” Asplin says. “But two hur- bank proceeded slowly with the customers started inquiring about dles doubled the time frame. First, rollout of its new RDC product in solutions to meet their needs.” running virtual machines on blade January 2008. After CaptureOne Early in 2007 the subsidiary of servers in a high-security environ- was added in late 2008, First Nation- Omaha-based First National of ment was relatively new for Wausau. al’s RDC clientele soared. “For 2009 we’re on track to add about 50 per- “Since we have customers cent to our RDC base,” Asplin reports. According to Asplin, the new who run close to a quarter- RDC solution is so efficient that million checks per month, no additional support personnel seconds matter.” have been added. “We did add one TOBY ASPLIN net new person,” he confides. “But First National Bank of Omaha that position is really focused on implementing new business.” Nebraska ($21 billion in total assets) Additionally, in mid-deployment Now First National is explor- began exploring options. “Our exist- our 13 First National affiliates asked ing ways to use the system to pro- ing solution was delivered via an to be included on the platform. ... vide even more value to clients. ASP model, but we wanted to bring These two factors required more- “For example, a few of our cus- the system in-house,” Asplin relates. complicated integration and test- tomers ... and several of our respon- “At that time, very few software ven- ing than is otherwise typical.” dent banks are exploring how they dors offered the type of Web-enabled While the Wausau implemen- could use RDC as an in-house lock- solution we wanted, so we only eval- tation proceeded, First National box solution,” Asplin explains. uated four options. Of those, Wausau began evaluating point-of-service First National has asked Epson Financial Systems [Mosinee, Wis.] check capture devices. “Although to double the speed of the Capture- was clearly the most familiar with we planned to support the most One device, from a 90-document- check processing. And Wausau’s prominent devices on the market, per-minute capacity to 180, Asplin we wanted to standardize by rec- reveals. “We have some customers ommending a single, best-of-breed with large volume peaks,” he notes. SNAPSHOT unit,” Asplin explains. “We want- “As a work-around, we’re support- ed a more cost-effective unit [than ing another vendor’s device. But INSTITUTION: First National Bank of our original system], with improved we’d prefer to tightly standardize Omaha, a subsidiary of First National of speed, accuracy and reliability.” on CaptureOne.” Nebraska (Omaha). In internal benchmarking of Still, the Wausau/Epson com- ASSETS: $21 billion. seven devices, Epson America’s bination has been a home run, BUSINESS CHALLENGE: Expand remote new CaptureOne check scanner Asplin says. “With the speed and deposit capture client base by implement- stood out, according to Asplin. “Cap- quality of our system, we’re con- ing a second-generation RDC system. SOLUTION: Wausau Financial Systems’ tureOne had seven to 10 percent fident we’re offering a complete (Mosinee, Wis.) Remote Capture platform greater throughput overall, largely solution that’s difficult for even our and Epson America’s (a division of Nagano, due to faster initialization and fewer largest competitors to beat,” he Japan-based Seiko Epson Corp.) MICR misreads,” Asplin asserts. says. ■ —Anne Rawland Gabriel CaptureOne scanners.

30 ■ DECEMBER 2009/JANUARY 2010 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY NEWS & ROLLOUTS

NEW PRODUCTS CORE BANKING

CORE SYSTEMS Clean Up, Aisle 6 SAP ENHANCES BANKING SUITE SAP (Walldorf, Germany) introduced Tesco Bank, the U.K.’s supermarket bank, selects SAP Banking Services 7.0, a set of Fiserv’s Signature core banking platform. enhancements to its banking-specific software solutions. According to the he United Kingdom’s largest bank. Fiserv’s Signature platform will vendor, the innovations help banks gain supermarket bank is rolling out help form the infrastructure on which the greater transparency, better focus on the Fiserv Signature bank plat- new products and services will be built providing value-added customer offers form. London-based Tesco Bank and provided. According to a release, and meet changing compliance —T the financial services venture started Tesco selected Fiserv based on the Brook- demands. Updates include new functionality for the SAP Deposit Manager by the U.K.’s largest supermarket chain — field, Wis.-based vendor’s ability to pro- application that offers a better view into selected Fiserv’s Signature solution as its vide an end-to-end banking solution that customers’ deposit accounts, enabling core banking platform. is proven in the marketplace. cross-sell and up-sell opportunities. In As reported previously by BS&T, Tesco The Signature platform will provide addition the SAP Loan Management Bank, which has more than six million the foundation of Tesco Bank’s account application has been upgraded to offer customers and 28 financial products and information and transactions for its cus- end-to-end automation of loan process- services, plans to extend its financial serv- tomers. Consumers will be able to access es, from origination to contract. ices business from a collection of finan- banking services from call centers, stores, www.sap.com cial products to that of a full-service retail online or via ATMs, the release noted. ■ DISTRIBUTED CAPTURE PANINI MANAGES REMOTE CAPTURE RECENT ROLLOUTS Panini (Dayton, Ohio) added Panini Web Portal and Panini Dashboard to its distrib- COTTONPORT BANK USES MAGTEK FOR DEBIT CARD ISSUANCE uted capture services. The new tools pro- ottonport Bank (Cottonport, La.) implemented the IntelliCAT system from Seal vide remote deposit capture and branch Beach, Calif.-based electronic payment security technology provider MagTek image capture users with the ability to C to provide bank customers with personalized, instant-issue debit cards. Facing manage their fleet of check scanners. The higher costs through third-party issuance, Cottonport Bank decided to bring those Panini Dashboard provides asset manage- operations in-house with the MagTek solution. MagTek IntelliCAT instantly issues ment capabilities and real-time alerts and secure debit, credit, ATM and gift cards with consumer-selected PINs at any of a reporting on check scanner performance. bank’s branches using the ExpressCard 1000 desktop device, which features The configurable dashboard provides color printing, embossing, indent printing and color tipping, according to the flexible reporting options and features a vendor. The Microsoft Windows-based software allows the financial institution to user-friendly interface. The Panini Web create, manage and monitor its entire card-issuing program. Portal establishes an electronic commerce portal, including custom catalog options. ABU DHABI COMMERCIAL BANK PICKS CYVEILLANCE FOR SECURITY www.panini.com bu Dhabi Commercial Bank (United Arab Emirates) partnered with security FRAUD DETECTION A solutions company Cyveillance (Arlington, Va.) to secure bank customer data from Internet-based threats. Cyveillance’s online risk monitoring solutions are based WOLTERS KLUWER BEEFS UP on real-time intelligence to help identify cyber threats. The information is being ANTI-FRAUD FUNCTIONALITY integrated with the bank’s security solutions to protect data from internal and exter- Minneapolis-based Wolters Kluwer Finan- nal attacks on the bank’s network. In addition the partnership will provide ADCB cial Services enhanced the investigative with a more comprehensive view of its online presence through brand-related intelli- services functionality of its Wiz Sentri: gence reports that focus on online brand protection. Cyveillance will help ADCB Anti-Fraud solution, which detects fraudu- become one of the first banks in the Middle East to leverage its online presence in lent attacks via continual, real-time social media networking sites such as Twitter, Facebook and MySpace. monitoring of activity and behavior. The solution includes new visual relationship BROADWAY BANK UPGRADES SALES SOLUTION analysis capabilities to identify correlations roadway Bank (San Antonio, Texas) has upgraded to the newest version of Brook- between customers, their accounts and field, Wis.-based Fiserv’s EnAct solution, an enterprise sales management solution employees who may be involved in or B for banks. Designed exclusively for bankers, EnAct is built on the Microsoft Dynamics impacted by a criminal scheme. The CRM platform. It combines the capabilities and flexibility of a banking solution with enhanced investigative services also allow specific profiles for Wealth Management, Commercial Banking and Retail Banking. It management to more effectively assess also seamlessly integrates with Microsoft Office’s Outlook. The solution supports a set current risk levels through reporting tools of best practices and management techniques to help bankers manage local markets, and case management dashboards. an approach that has helped Broadway Bank to refine its relationship-based sales www.pciwiz.com culture and grow successfully in its chosen markets, the company says. ■

31 ■ DECEMBER 2009/JANUARY 2010 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY Microsoft Taps Pagano for Banking and Capital Markets

oe Pagano has been named by Redmond, Windows software and development environments Wash.-based Microsoft Corp. as managing in the financial services, retail and international director of banking and capital markets in shipping industries. the Worldwide Financial Services Industry “Joe brings to his new leadership role a great Group. Pagano will report to Susan Hauser, depth of experience in aligning our solutions with vice president, Worldwide Financial Services. industry business needs and developing strong IT JIn his fifteenth year at Microsoft, Pagano has more and business management relationships with our than 22 years of experience in information technol- Joe Pagano financial services customers,” Hauser said in a press ogy, financial services industry and worldwide busi- release. “During Joe’s tenure at Microsoft, he helped ness leadership roles. As the services sales leader in the New deploy the first Global Services Executive (GSE) roles, and York metro area most recently, he managed the sales team his team achieved unprecedented customer service results for strategic global financial services accounts, which includ- in delivering industry solutions for Citicorp and J.P. Mor- ed J.P. Morgan Chase, Citicorp, Morgan Stanley, Bank of New gan Chase. He also demonstrated thought leadership in the York, Barclays, Credit Suisse, NYSE, Nasdaq, Merrill Lynch current economic downturn by developing and implement- (now Bank of America) and the Depository Trust & Clearing ing a mergers-and-acquisitions services strategy for finan- Corp. Prior to joining Microsoft in 1995, Pagano was respon- cial services clients that helped launch our M&A technical sible for evangelizing and initiating the use of Microsoft community.” ■ Noonan Named Chief Huntington Bank Appoints Systemic Risk Officer at DTCC Plum Director he Depository Trust ogy. Noonan will have leader- Of Consumer & Clearing Corp. ship responsibility for identi- appointed Anne fying needed systemic risk Lending (Nan) Noonan to the management changes and Tnew position of managing direc- developing and implementing ames J. Plum has been named tor and chief systemic risk offi- those solutions. Noonan will senior vice president and direc- cer. Noonan will oversee the report to Larry Thompson, tor of consumer lending for management of the systemic DTCC’s general counsel. Columbus, Ohio-based Hunting- Anne Noonan J risk framework for New York- “The financial crisis ... has ton Bank. Plum has led home lending based DTCC and its subsidiaries to ensure cast a very bright light on the risks that programs for Citizens Financial Group DTCC can readily identify and assess exist at the level of the financial serv- for the past five years, most recently the systemic risk implications for all ices system as a whole,” according to serving as president of Home Lending existing and new DTCC products, activ- Donald Donahue, DTCC chairman and Solutions for RBS Citizens. ities, processes and systems, according CEO. “We are delighted to have some- In addition to his most recent role to a press release. one with Nan’s extensive background for RBS Citizens, Plum has served as In pursuit of these objectives, Noo- in risk management join DTCC. We can executive vice president for both nan will work closely with DTCC expect that there will be new demands Home Lending Solutions and Nation- subsidiaries’ direct regulators — the that infrastructure organizations like al Home Equity for Citizens Finan- Securities and Exchange Commission, ours remain at the forefront in meet- cial Group. He has also held leader- the Federal Reserve Bank of New York ing business and regulatory require- ship roles with Provident Financial and the New York State Banking Depart- ments on systemic risk issues across and Bank One. ment — and with regulators globally all our operations.” A member of the National Secondary on systemic risk issues, according to a Noonan joins DTCC from CLS Bank Markets Advisory Board for Fannie DTCC source. She also will work close- International in New York, where she Mae, Plum also serves on the Lender ly with Douglas George, DTCC’s chief was EVP and global head of risk man- Advisory Council for LendingTree.com risk officer, to review DTCC’s enter- agement and regulatory affairs, a post and the Banking Advisory Board for prisewide risk management methodol- she had held since 1999. ■ TransUnion. ■

32 ■ DECEMBER 2009/JANUARY 2010 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY