BST TOC (Page 1)

BS&T’S EXECUTIVE SUMMIT 2011: SEE PAGES 20-21 NEW STRATEGIES FOR NEW BUSINESS MODELS

Business Innovation Powered By Technology July 2011

Arkadi Pete Kuhlmann Kight

Muhammed Steve Yunus Jobs

Richard Jack Fairbank Dorsey INNOVATORS OF THE DECADE Who has had the most significant impact on banking technology over the past 10 years? Here are 10 innovators who have helped shape the 21st century banking industry. p.15

David Jeff Walker Bezos

Aaron Barney Patzer Frank

$8.95 www.banktech.com B:8.375”

S:7”

Visit star.com/learnmore B:11.125” S:9.4375”

In today’s changing debit landscape, choose the STAR® Network to ensure success every step of the way.

Regulatory change is coming, and you need to prepare. The STAR® Network adds value beyond the transaction with: • Cutting-edge Security Solutions • Industry-leading Innovation • Coast-to-coast POS/ATM Access • Proven Commitment

79649_Star_Mag_FP_Size_A.indd

215 Park Av. South, Saved At: 4-11-2011 2:55 PM By: JPavia / mgobel Printed at: None Print #: 1 Round #: 1 2nd Level NY, NY, 10003 212.206.1005

Job Info Specs Fonts, Images & Inks Approvals W/C OK

Client: FD Bleed: None Inks: Cyan, Magenta, Yellow, Black Creative Director: Product: First Data Trim: 8.375” x 11.125” Fonts: Simple Sans (Regular, Medium) Art Director: Job #: 79649 Safety: 7” x 9.4375” Images: grey_bg_7x5.tif (Gray; 354 ppi; 169.15%), Copywriter: Star_Logo.eps, FD_3C_4c.eps, FD_Star.eps, FD_Bird.eps, Job Title: Star Program Ads Gutter: None Account: FD_Cloud2.eps, FD_Cloud1.eps, FD_Hat.eps, FD_Man.eps, FD-Beyond-Symbol-4c_ERS.eps, FD-Tagline-4c_ERS.eps Studio: Publications: The Warren Group, Bank News, Bank System & Tech Print Production: Business Innovation Powered By Technology

July 2011 banktech.com

INNOVATORS OF THE DECADE COVER STORY FEATURE STORY 29 How to Build a 15 Unstoppable Force Secure Mobile App THE INNOVATION JUGGERNAUT Innovation — and the change As banks rush to deploy mobile that comes with it — are inevitable. But innovation can be both banking apps for the fast-growing transformative and disruptive. Successful innovators, though, smartphone market, security remains paramount. But as apps recognize that it does not come without risks. BS&T presents get smarter, the potential security 10 individuals whose vision and persistence have helped shape threats are growing. the 21st century banking experience.

16 Arkadi Kuhlmann 22 Jack Dorsey PAYMENTS WATCH INNOVATE OR DIE DOUBLE DOWN 12 A Boon for P2P? 17 Pete Kight 23 David Walker A new person-to-person payments network from three of the nation’s DEFINING PAYMENTS DRIVING CONSENSUS biggest banks is receiving a warm 18 Muhammed Yunus 23 Jeff Bezos welcome — from competitors. BANKING THE UNBANKABLE THE GREAT DISRUPTOR RISK WATCH 18 Steve Jobs 24 Aaron Patzer 13 Who Goes There? The cloud and mobile banking are ARE YOU EXPERIENCED? TIMING IS EVERYTHING changing the rules of identity and 19 Richard Fairbank 25 Barney Frank access management, according to Michael Versace, IDC Financial THE SCIENTIFIC METHOD THE MAN BEHIND THE LAW Insight, and Sally Hudson, IDC.

26 Protecting Your IP KEEPING SECRETS Financial services firms often live or die on the strength of innovation. But protecting those Arkadi Pete Muhammed Steve Richard Kuhlmann Kight Yunus Jobs Fairbank advantages can be a major challenge. 28 Forces for Change DISRUPTING THE STATUS QUO Most innovation in banking isn’t really innovative, says TowerGroup’s Jim Eckenrode. But customers Jack David Jeff Aaron Barney Dorsey Walker Bezos Patzer Frank and regulators are forcing that to change.

BANK SYSTEMS & TECHNOLOGY ■ WWW.BANKTECH.COM ■ JULY 2011 ■ 3 Protecting my clients’ privacy is the best investment I can make.

3M™ Privacy Filters Look to 3M for a full line of visual privacy solutions. Designed for today’s computer monitors or mobile devices, they offer you a crisp, clear view of sensitive ﬁ nancial data while blocking wandering eyes. To learn how 3M Privacy Filters can help your organization meet regulatory and compliance standards, download the white paper at: 3MPrivacyFilters.com/ﬁ nance

BankSysTech_Ad_vend.indd 1 6/20/11 11:37 AM INDUSTRY WATCH 8 A Wallet for the Digital Age Google Wallet, a new partnership involving the search engine giant, MasterCard, Citibank, First Data and Sprint, aims to bring mobile NFC payments to the masses. 9 Disaster Preparedness Put to the Test Banks such as First Horizon and Regions Financial are heeding lessons learned during the recent devastating storms in the South not only to keep their doors open during disaster, but also to ensure that customers and 8 employees are safe. 10 Not Feeling the Love Customers don’t feel that their banks care about them, and that is costing the industry serious money, according to Corporate Executive Board. 11 Coping With the Regulatory Burden 11 Deloitte’s new U.S. financial services head, Bob Contri Bob Contri, says business strategy, for the first time, must address regulation.

BEST PRACTICES 32 Balancing Act To maximize mobile banking performance in a virtualized IT environment, Austin Bank taps virtual load balancing software from KEMP Technologies. 32 Jeff Sowell 6 From the Editor 34 Executive Watch

READER ADVISORY BOARD

FRED COOK, CIO, JOHN ITOKAZU, EVP, CIO, North Shore Credit Union Zions Bancorporation FRANK DEARMAS, CIO, PAUL JOHNSON, CIO, BB&T Whitney National Bank MARK LA PENTA, CIO, MetLife Bank COLIN ECCLES, CIO, Umpqua Bank MICHAEL LINDSEY, SVP, BancorpSouth JOHN FIORE, CIO, BRUCE LIVESAY, CIO, First Horizon Bank of New York Mellon KEVIN LYNCH, SVP, eCommerce/ VINCE HRUSKA, SVP, Director, Contact Center, 1st Mariner Bank Product Solutions and Strategies, City National Bank

BANK SYSTEMS & TECHNOLOGY (ISSN 1045-9472) IS PUBLISHED 5 TIMES PER YEAR (MARCH, MAY, JULY, OCTOBER, JAN. 2012) BY UNITED BUSINESS MEDIA LLC., 600 COMMUNITY DR., MANHASSET, N.Y 11030.; (516) 562-5000. SUBSCRIPTION POLICY: CIRCULATION FREE TO OFFICERS AND EXECUTIVES OF BANKING INSTITUTIONS WHOSE RESPONSIBILITIES INCLUDE BUSINESS LINE/P&L MANAGEMENT, TECHNOLOGY SPECIFICATION AND PURCHASING, AND OTHER RELATED FUNCTIONS. ALL OTHER DOMESTIC SUBSCRIPTIONS: $65 PER YEAR. ALL CANADIAN SUBSCRIPTIONS: $67 PER YEAR. ALL FOREIGN SUBSCRIPTIONS: $295 PER YEAR. SINGLE COPIES: $8.95, EXCEPT FOR ANNUAL BUYERS’ GUIDE, WHICH IS $50. SINGLE ISSUE REQUESTS, WRITE TO: BANK SYSTEMS & TECHNOLOGY, P.O. BOX 1052, SKOKIE, IL 60076-8052, OR CALL (1-800) 255-2824, (847) 647-4065, OR E-MAIL TO [email protected]. EDITORIAL OFFICES: 240 W. 35TH STREET, NEW YORK, NY 10001; (212) 600-3000. POSTMASTER: SEND CHANGES OF ADDRESS TO BANK SYSTEMS & TECHNOLOGY, P.O. BOX 1052, SKOKIE, IL 60076-8052. PERIODICALS POSTAGE PAID AT MANHASSET, NY, AND ADDITIONAL MAILING OFFICES. COPYRIGHT 2011 UNITED BUSINESS MEDIA LLC. “STANDARD MAIL ENCLOSED, STANDARD RATE PERMIT #161, LONG PRAIRIE, MN.” RETURN UNDELIVERABLE CANADIAN ADDRESSES TO PITNEY BOWES, P.O. BOX 255542, LONDON, ON N6C 6B2

5 ■ JULY 2011 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY FROM THE EDITOR

Volume 48, No. 4

VP & GROUP PUBLISHER John Ecke 212.600.3097 [email protected] EDITORIAL The Costs of Zero Sum Editorial Director Katherine Burger [email protected] Group Content Manager Les Kovach [email protected] Associate Editor Matt Gunn [email protected] HAT HAS BEEN THE MOST DIFFICULT TASK financial services Associate Managing Editor Nathan Conz [email protected] ART firms have faced over the past 20 years? One could easily make Kristen Terrana, Igor Jovicic & Tony Vecchione BigYellowTaxi.com the case that it hasn’t been moving to service-oriented architecture, ADVERTISING SALES OFFICE suppporting multichannel delivery, improving data security or 240 W. 35th St., 8th Floor New York, NY 10001 Wadopting analytics — all daunting challenges for banking executives at National Sales Director Ben Riggle 212.600.3171 [email protected] Northeast Robyn Forma 212.600.3118 [email protected] West Coast Leilani Provost 415.947.6146 [email protected] particular points in time. No, I think the more common “culture of fear” — Southeast and Midwest James Lloyd 212.600.3375 [email protected] the most elusive goal has been the “You’re only as good as your weakest effort to attain the holy grail of IT/ link,” Stevenson says. “We all win or PRODUCTION Account Coordinator Publishing Services Manager business alignment. The industry has we all lose. It’s about getting people Amanda Waller [email protected] Ruth Duggan [email protected] been questing for this for years, and aligned around what’s possible.” AUDIENCE DEVELOPMENT while there has been In banking, Stevenson emphasizes, Assistant Manager Adrienne Farquharson [email protected] For article reprints and e-prints, please contact: progress — execu- innovation cannot happen without Wright’s Media tives on both sides the IT organization. “It is your R&D,” Brian Kolb 877.652.5295 [email protected] List Rental: of the table are better she says. “You can’t deliver products MeritDirect at “talking the talk,” in financial services without IT to sup- Anthony Carraturo 914.368.1083 [email protected] and senior manage- port them.” However, within the afore- INFORMATIONWEEK FINANCIAL SERVICES TechWeb CEO ment undoubtedly is mentioned culture of fear is the culture Tony L. Uphoff [email protected] more appreciative of finger-pointing, where it’s more VP & Group Publisher John Ecke [email protected] today of the critical about casting blame when something EVP, Sales, InformationWeek Senior Director, Events role technology plays goes wrong than it is about partnering Business Technology Network Robyn Duda [email protected] Martha Schwartz [email protected] Event Director in the business — the to share — and hence minimize — Editorial Director Jennifer Iannucci [email protected] Greg MacSweeney Senior Event Manager fact that we’re still discussing it in 2011 risks as well as rewards. “A culture [email protected] Mitzi Trafton [email protected] Group Content Manager Senior Event Manager tells me we have a long way to go. of fear will create the pointing of fin- Les Kovach [email protected] Joseph Marks [email protected] National Sales Director Director, Program Management, This issue’s examination of innovation gers as opposed to ‘We all win, or we Ben Riggle [email protected] Vertical Markets in the industry (starting on page 15) all lose,’” Stevenson adds. Webmaster Michelle Somers [email protected] Vitali Zhulkovsky Business Manager shows how the IT/business relationship We all win, or we all lose. What a [email protected] Joe Donnelly [email protected] is the foundation of successful change simple and persuasive way of thinking and transformation. “Innovation is a about internal partnerships and collab- UBM TECHWEB CEO Tony L. Uphoff team sport,” stresses Jane Edison Steven- oration. Yet egos, politics and budgets Chief Content Officer and EVP, Sales, UBM TechWeb Events Network son, co-author with Bilal Kaafarani of typically obscure this message, as the Editor-in-Chief, TechWeb.com Marco Pardi David Berlind EVP, UBM TechWeb Light Reading Communications Group Chief Information Officer “Breaking Away: How Great Leaders fallout from the global financial crisis Joseph Braue Create Innovation That Drives Sustain- continues to demonstrate. When inno- David Michael EVP, UBM TechWeb Game Network Chief Financial Officer Simon Carless able Growth — And Why Others Fail,” vation is viewed as a zero-sum game John Dennehy SVP, People and Culture Chief Marketing Officer Beth Rivera VP, Editorial Director, InformationWeek a new book about innovation in business. it’s inevitable the outcomes will be Scott Vaughan Business Technology Network When it comes to sustaining a corporate disappointing. It’s time for bankers to EVP, InformationWeek Fritz Nelson Business Technology Network VP, Audience Marketing culture of innovation — as opposed to change the equation. ■ Ed Grossman Dan Melore EVP, Sales, InformationWeek VP/Group Publisher, Vertical Industries Business Technology Network John Ecke Martha Schwartz VP, Performance Marketing and Analytics EVP, Group General Manager, Thomas Smith UBM TechWeb Events Network VP, InformationWeek Analytics Lenny Heymann Art Wittman

Katherine Burger, Editorial Director UNITED BUSINESS MEDIA SVP, Strategic Development and SVP, Manufacturing @KathyBurger Business Administration Marie Myers Pat Nohilly

6 ■ JULY 2011 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY B:8.75” T:7.75” S:7”

Money moves fast. Stay ahead of it with 4G. In the fi nance industry, fast is king. There’s no time to waste waiting for business data to download. Fortunately, the Samsung Epic™ 4G can call up complex fi nancial information in the blink of an eye, so you can keep up with your clients. Run your fi nance business at fast 4G speed with unlimited 4G data. Only on the Now Network.™ sprint.com/4G 1-800-SPRINT-1 (1-800-777-4681) B:11.375” S:9.75” T:10.5”

Full QWERTY Built-in keyboard videoconferencing ability

Super-AMOLED display with touchscreen

Mobile hotspot– enabled

Samsung Epic™ 4G

“Sprint showed the biggest improvement in customer experience across 14 industries.” –Forrester Research Report: Customer Experience Index 2010

May require up to a $36 activation fee/line, credit approval and deposit per line. Up to a $200 early termination fee/line applies. Coverage is not available everywhere. Sprint Mobile Hotspot: Optional $29.99 add-on for sharing access to Wi-Fi. No discounts apply. Uses data allowance within your base service plan. Connectivity is dependent upon compatibility. The Sprint 4G Network reaches over 70 markets and counting, on select devices. The Sprint 3G Network reaches over 271 million people. See sprint.com/4G for details. Not all services are available on 4G, and coverage may default to 3G/separate network where 4G is unavailable. Offers not available in all markets/retail locations or for all phones/networks. Pricing, offer terms, fees and features may vary for existing customers not eligible for upgrade. Other restrictions apply. See store or sprint.com/4G for details. ©2011 Sprint. Sprint and the logo are trademarks of Sprint.

Client Sprint B2B Mechanical Specs People OK Job Number SPRNTB2B-442 B 8.75” x 11.375” Creative Director Mark Dunn/Mike Mazza Ad Number 005553 T 7.75” x 10.5” Assoc. Creative Director None Ad-ID It’s like a 4G launchpad... L 7” x 9.75” Art Director Mike Reed Job Title Q1 Verticals Print Finance Sansung G None Copywriter Mike Stone File Name SPRNTB2B-442_005553_A_7x9.75_Finance.indd S 1” = 1” Proofreader File Format Adobe InDesign Account Management Ashley Erickson Start Date 1-21-2011 2:02 PM Notes Ad Unit A Account / Operations Melissa Redada B Color / Media 4/C Mag ILT Y Additional pubs: ABA Producer Rachel Thomas U Banking Journal, Wall Materials Due 2/10/11 B Product Specialist None Street & Technology 1st Insertion Feb/March Other 39672 Version:01 02-10-11 gm 39672 Version:01 Vendor PDI Digital Studio Jennifer Pasarow @ 2-9-2011 4:47 PM O Pubs Bank Systems & Technology I D D I G U Printed at 100% Round 5 Released on 2.9.11 T I T S Eurographics A L Prepared by The Digital Studio | Goodby, Silverstein & Partners. All rights reserved. 415.392.0669 PACIFIC DIGITAL IMAGE • 333 Broadway, San Francisco CA 94133 • 415.274.7234 • www.pacdigital.com Filename:005553_A_7x975_Fin.ps_wf02 Operator:SpoolServerTime: 10:26:56 Colors: Cyan, Magenta, Yellow, Black Date:11-02-10

NOTE TO RECIPIENT: This file is processed using a Prinergy Workflow System with an Adobe Postscript Level 3 RIP. The resultant PDF contains traps and overprints. Please ensure that any post-processing used to produce these files supports this functionality. To correctly view these files in Acrobat, please ensure that Output Preview (Separation Preview in earlier versions than 7.x) and Overprint Preview are enabled. If the files are re-processed and these aspects are ignored, the traps and/or overprints may not be interpretedcorrectly and incorrect reproduction may result. Please contact Pacific Digital Image with any questions or concerns. INDUSTRY WATCH

MOBILE PAYMENTS Google Reinvents the Wallet Google Wallet, a partnership among Google, MasterCard, Citibank, First Data and Sprint, will bring mobile NFC payments to the masses this summer.

BY MATT GUNN

ALLET, MEET GOOGLE. While there has been no lack of discussion sur- rounding smartphone-based, near-field-communications contactless payments, there have been few signs that the mobile wallet would soon be ready to replace paper and plastic payments. But that might change with the introduction of Google Wallet. Announced at the end of May at Google’s functionality from Day One, Google says New York headquarters, Google Wallet is the ecosystem is open and free of cost to aW partnership involving the search giant, anyone — merchant, bank or customer New York-based Citibank, MasterCard (Pur- — who wants to leverage it. For early chase, N.Y.), First Data and Sprint (Overland adopters who are not Citi customers but Park, Kan.) that will bring mobile NFC pay- still want to use Google Wallet, they can ments to Android smartphones. At launch load funds onto a Google prepaid card. Google Wallet will allow customers to con- “[The] Google Wallet announcement nect Citi MasterCards and gift cards or supports Citi’s position as a global leader Google prepaid virtual cards to make pay- in payments,” said Paul Galant, CEO of ments at PayPass terminals. The recently global enterprise payments at Citi ($1.95 Google Wallet will allow users to connect announced Google Offers adds merchant trillion in assets). In terms of security, he Citi MasterCards and gift cards or Google prepaid virtual cards to make contactless rewards and coupons to the mix. stressed that customer data stays with mobile payments at PayPass terminals. “Our goal is to bring together all the the bank, whether it’s with Citi or with pieces of the ecosystem and drive a brand- any other bank that offers payments new experience,” Stephanie Tilenius, through Google Wallet in the future. system (for more on clearXchange, see Google’s VP of commerce, told the audi- Ed Labry, North American president of page 12). Isis, a consortium of wireless ence. “Your phone will be your wallet.” Atlanta-based First Data, which will process phone carriers AT&T, T-Mobile and Verizon According to Google, by way of mobile the e-payments, compared the state of that was announced in November 2010, app, and using data stored on a hardware mobile electronic payments today to the has its own designs on an NFC payments “secure element” within a mobile phone, credit card industry nearly 30 years ago. future. And payments start-up Square Google Wallet leverages the strengths of “Think about 1989,” he said. “You could announced in May “Card Case,” a system the smartphone platform to create a new not use your credit card in a supermarket in which customers can store payments ecosystem for shoppers that allows them in the United States. Now, over half the information with the company for cardless to do more than just make a purchase with payments in a supermarket are electronic.” transactions with select merchants. Google Wallet. “This is just the beginning,” Google began testing Google Wallet in Osama Bedier, Google VP of payments, said PAYMENTS SPACE HEATS UP New York and San Francisco in late May, at the announcement event. “We want to Google Wallet is one of several recent with the initial launch slated for those two move this industry forward faster than we announcements in the payments space. cities. Visa said its digital wallet will be otherwise would without the ecosystem.” San Francisco-based Visa announced its ready to go this fall in advance of the holiday When it launches this summer, Google own NFC-based digital wallet on May 11. shopping season. Isis recently stated it Wallet will enable Citi customers to load JP Morgan Chase, Bank of America and would begin a trial run of its system in early their MasterCard data onto the app. While Wells Fargo on May 25 unveiled clearX- 2012 in Salt Lake City. Square’s Card Case Citi is the only bank that will offer the change, a new person-to-person payments currently is available in select cities. ■

8 ■ JULY 2011 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY DISASTER PREPAREDNESS Banks Prepare for the Worst

Following some of the most devastating storms in years, banks in the South have taken new steps to ensure business continuity.

BY MATT GUNN

EAVY RAIN, deadly tornadoes, flooding. Banks in we have — to communicate many of the anticipated outages.” the South have spent much of the spring surviving From a technology standpoint, Livesay says, the bank has the worst weather crises since Hurricane Katrina. an internal group that oversees continuity plans. “Any facility But while some damage to bank branches and in the areas where there’s flooding, we are coordinating with HIT infrastructure is unavoidable during a natural disaster, banks them to move equipment off the floor,” he explains. can work to mitigate the risk presented by catastrophic storms, While the bank is able to anticipate flooding based on weather according to Bruce Livesay, CIO of Memphis, Tenn.-based First service reports, there is less predictability with a hurricane or Horizon National Corp. ($24.43 billion in assets), who says it’s tornado, Livesay notes. “With a hurricane you know it’s coming, a matter of having processes in place and taking care of what’s you just don’t know what the damage will be,” he says. most important — a bank’s staff. Disaster recovery is as much an effort to stay ahead of the storm as it is to react to the A PERMANENT DISASTER RESOURCE damages and outages a storm may cause, he adds. Birmingham, Ala.-based Regions Financial Corp. ($132 billion in As a result of unprecedented flooding caused by a rising assets) and its customers have experienced hurricanes, tornadoes Mississippi River in early May, First Horizon, the bank holding and the Gulf oil spill. Though each disaster brought unique company that owns First Tennessee Bank, suffered power or challenges, Regions has taken some of the lessons it has learned telecommunications outages at about a third of its branches, and created a permanent Disaster Resource Center on its website. Livesay reports. One branch was inaccessible for an extended Built in response to the 2010 oil spill in the Gulf of Mexico, period of time because law enforcement had shut down access Regions’ Disaster Resource Center was created as a one-stop to the particular part of the city in which it is located. information source for businesses and individuals affected by While IT assets are important, Livesay says, one of the key the disaster. “Following the tornadoes and the flooding and some factors in successful disaster recovery is to watch out for other events we’ve experienced this year, we decided to revamp employees. “Any time we have a major storm go through, we that online resource center and make it a permanent piece on have some processes we put into place to try and keep an eye Regions.com,” says Regions spokeswoman Evelyn Mitchell. on our own employees,” he relates. “The first thing you want While the now-permanent disaster resource page is a hub to watch out for is your employees.” for tools and information where customers can find bank phone For First Horizon, that includes maintaining an updated numbers, assistance programs, disaster-specific resources, a list of contact information, making sure employees are OK financial checklist and links to relevant outside agencies, and reachable after a catastrophic event, making available a Mitchell says the bank also has worked to proactively reach relief fund to help employees who have suffered a loss or out to customers with information. For example, following the damages to their property, working with local law enforcement tornadoes in Alabama, the bank began a proactive calling to find missing employees, and helping program to business customers to offer employees who have lost their homes 4 KEYS TO BUSINESS assistance if necessary. Regions also is find housing, according to Livesay. “We offering special loans, waivers on penalties try to keep in touch with the employees,” CONTINUITY for CD withdrawals, deferred payments he adds. “The most important thing is on various loans and discounts on new According to First Horizon National’s their safety and to help them out.” business loans to customers in the state. Bruce Livesay, a bank can recover Once employees are accounted for, more quickly from a disaster by Meanwhile, Regions has taken meas- Livesay says, a next step is to help the following four basic tenets: ures to ensure branch continuity following bank’s customers, which often means the recent disasters. In Tuscaloosa, Ala., donating to local charities such as the Red 1. Plan ahead. Mitchell says, the bank deployed its Cross and Salvation Army that help with 2. Know when to declare a disaster portable bank branch, a custom-built disaster recovery. Livesay adds that com- (and have a process in place for vehicle that houses two full-time bank munication is key. “This is a great area for when you do). associates, an ATM and full network con- using some of the new social media tools,” 3. Stay ahead of the game in terms nectivity. At another branch that was hit he says. “We used Facebook and Twitter of storm preparation. with outages, she adds, the bank built a 4. Have a means to communicate — particularly a lot of the Facebook pages secure wireless network. ■ with employees.

BANK SYSTEMS & TECHNOLOGY ■ WWW.BANKTECH.COM ■ JULY 2011 ■ 9 INDUSTRY WATCH

CUSTOMER SATISFACTION Season of Discontent

The masses don’t feel so positive about financial institutions, according to Corporate Executive Board’s quarterly Consumer Financial Monitor report. How can banks beat the perception?

BY MATT GUNN

ATELY, CUSTOMERS AREN’T FEELING confidence levels were so high,” Aykens notes. much love from their financial institutions. Second, according to the study, banks face a par- According to Wahington, D.C.-based Corporate ticular challenge with both younger and older gener- Executive Board’s quarterly Consumer Finan- ations. Adults nearing retirement age (47-64) said they cialL Monitor, a global lack of confidence in financial felt more negative about their personal finances; while services providers is translating into about 63 million more satisfied with their banks than older adults, unsold financial products each year. “What customers younger adults (18-29) indicated that they tend not to are saying is, they don’t feel that banks care about proactively manage their finances. them,” relates Peter Aykens, managing director at Cor- Aykens adds that, while the older group should be porate Executive Board (CEB), a strategic adisory firm preparing for retirement, it represents one of the most- that also owns analyst firm TowerGroup. stressed and least-satisfied demographics in the Consumer In a survey of 18,500 consumers worldwide, about Financial Monitor. “When I’ve been talking to financial half indicated that they believe financial institutions institutions about this data, they’ve been saying the don’t care about them. Fifty-two percent of respondents aggregates are not so bad,” he says. “That might be true said institutions don’t offer clear and simple policies, at the national level, but at the individual level, those 51 percent said they don’t feel financial institutions people are feeling really stressed financially.” share customer values, and 46 percent reported a lack of confidence that financial institutions will live up to WHAT CAN BANKS DO? their promises and commitments. Aykens points out, however, that in some cases, consumer “The reason we are doing this analysis is, there’s a sentiment is not within the scope of a bank’s control. general feeling that customers have been very affected Job and investment losses suffered during the financil crisis could have had an impact on how stressed consumers “What customers are about their financial situations right now. “[Banks] can’t as effectively control the unemployment rate or are saying is, some of those issues,” Aykens says. “But I think that they don’t feel there is more in their control than they think sometimes.” that banks care For example, banks can do more to make customers feel confident that they have a partner in responsible about them.” financial management, Aykens says, adding that banks PETER AYKENS can influence customer behavior by providing personal Corporate Executive Board financial management tools and real-time account alerts to help manage debt or save money effectively. “A lot of by the financial crisis, that financial brands are under that challenge comes to helping customers feel they are greater scrutiny than ever before, and that customers making good decisions about their financial life,” he says. are less trusting and less confident in their banks,” Aykens Acting as a money coach not only can improve cus- adds. “A lot of that stems from the financial crisis.” tomer confidence and sentiment, but also build loyalty Personal wealth and age seemed to influence the and convert an unhappy customer into a profitable cus- study’s respondents. First, more wealth led to more con- tomer, Aykens adds. “They can also listen more effectively fidence in banks. Of those participants with more than to their customers,” he emphasizes. “Pay attention, make $100,000 in investable assets, 47 percent had positive sure they understand how to use web and other available feelings about their personal finances, while 20 percent services to help them figure out what’s the best channel, had “a lot” or “complete” confidence in their financial teach them where to get advice, that kind of thing.” institutions. From the group with less than $100,000 in Banks might not know all the answers, Aykens acknowl- investable assets, 40 percent had negative feelings about edges. “But what we do have is evidence that those cus- their personal finances and 48 percent had little to no tomers who are more confident, who do manage their confidence in their financial providers. “I was surprised finances more actively and are getting to financial goals, that the confidence levels were so low and that the negative will purchase more from that provider,” he says. ■

10 ■ JULY 2011 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY A Strategic Approach

Bob Contri, Deloitte’s new U.S. financial services head, foresees a heavy focus on Dodd-Frank compliance, the mortgage market and data management.

BY KATHERINE BURGER

ANKS ARE ACCUSTOMED to dealing with in technology: one is around data, data architecture, data complex regulation. But the challenges of com- infrastructure and data standards. That [will be] the driver pliance are different in the post-financial crisis of mortgage regulation and customer demands in the future. era of Dodd-Frank, according to Bob Contri, The other is around collapsing silos, really replacing the BNew York-based Deloitte’s recently named vice chairman, legacy technology that in many cases is siloed.” U.S. financial services. Contri, who most recently led the According to Contri, Deloitte is seeing “a big push to firm’s banking and securities practice in the U.S. (and will business platform renewal.” “Companies will spend significant continue to do so in his new role), was appointed to replace dollars to replace systems that are very antiquated or very Jim Reichbach, who is moving into a different role at siloed, like core banking systems, settlement systems or Deloitte. Financial services is Deloitte’s largest practice. wealth management platforms,” he says. “A lot of investment Given the current environment, however, a lot of the in technology has been at the back end, but [there will be] expertise within the practice will be “redirected specifically a lot of opportunity and investment around core business to some of the implications of Dodd-Frank,” Contri reports. The twist, he adds, is that today compliance must be “This is the first coupled with strategy. “This is the first time in my career that strategy and regulation come together — you can’t time ... that strategy think strategically about what you want to do with a and regulation financial institution without thinking about regulation,” come together.” Contri says. He adds that one of his goals at Deloitte is to BOB CONTRI “bring together the regulatory expertise and consulting Deloitte expertise” to help clients go beyond a short-term “to-do” list of compliance requirements. Contri emphasizes that this means “thinking about strategy ... through more of a regulatory lens.” Complicating platforms, renewing them to bring down costs, run the this approach is a continuing “level of uncertainty,” he business and garner information around the business.” Fur- says. “There is still so much uncertainty around the level thermore, Contri says, this is a good time for banks to consider of economic recovery. It’s hard to make strategic decisions new or emerging technology strategies such as cloud computing in an environment where there is still a lot of geopolitical and “other technologies that allow you to integrate or replace and regulatory uncertainty.” legacy systems with standardized solutions.” The still-recovering mortgage market is another area Who within the bank — IT leadership or line-of-business where Contri expects Deloitte to fine-tune its approach. management — will be responsible for leading these “Two or three years ago we created a big initiative around kinds of blended initiatives? Contri suggests that, just as distressed debt. Commercial real estate was having big with technology and process, there are management silos issues [at the time], but who could have foreseen everything that will need to be dismantled for banks to respond effec- happening in the residential mortgage market?” he reflects. tively to today’s market challenges. “There are functions “So that’s a bit of a shift for us, going deep into the mortgage within large financial institutions that used to be able to space. But the bigger questions are: What is the mortgage operate autonomously that can’t anymore. ... Risk, financial, market going to look like? Will securitization come back? compliance, the general counsel office, really have to What’s the future of the servicing business? — because the come together to manage the regulatory environment, economics will really change due to regulation.” and they have to do it with technology. “The old days of functional silos within large organi- THE DATA CHALLENGE zations — that’s a model that’s becoming less and less Closely related to these issues is the challenge of effective effective,” Contri continues. “The complexity of the envi- data management, Contri notes. “Coming out of the financial ronment is challenging the legacy organizational functions crisis, most institutions would agree that they couldn’t of these large institutions, [which] always have had trouble aggregate data as effectively as possible to manage risk or managing across the areas of the business. That’s where customer focus,” he says. Contri identifies “two big trends we think we have a strong role to play.” ■

BANK SYSTEMS & TECHNOLOGY ■ WWW.BANKTECH.COM ■ JULY 2011 ■ 11 P2P PAYMENTS Good for All A new person-to-person payments network from three of the nation’s biggest banks is seen as a boon to the market — even by would-be competitors.

BY MATT GUNN

HREE OF THE NATION’S big four banks have devel- Chase ($2.19 trillion in assets), in the release. “Chase customers oped a person-to-person payments service that will will be able to send and receive money even more quickly and allow customers to initiate a payment using a mobile easily — with full confidence their funds are in a bank account T number or email address. The project, dubbed clearX- without worrying about cash, checks or higher-cost services.” change, is a joint venture among Charlotte, N.C.-based Bank of America, San Francisco-based Wells Fargo and New York- VALIDATING THE P2P MARKET based JP Morgan Chase. The early response to clearXchange indicates that vendors in The first bank-owned solution of its kind, the person-to-person the space see the bank-owned person-to-person electronic payments network enables the three banks’ customers to make payments network as validation of a growing market. “It is not payments from their checking accounts to anyone with an account only an endorsement for the personal payments category as a at one of the three banks. Email addresses or mobile numbers whole, but it also validates the financial institution-centric will be used instead of routing and checking account numbers. approach that Fiserv believes is best for these types of payments,” Chase, Wells Fargo and BofA said clearXchange will roll says Tony Catalfano, division president, electronic payments, out nationally, and that the plan ultimately is to bring other Fiserv (Brookfield, Wis.). Fiserv’s ZashPay payment service is financial institutions into the network. The banks did not used by more than 700 financial institutions. indicate how payments will be initiated, whether through online One aspect of clearXchange that has Neil Platt, CashEdge banking, mobile banking services or both. EVP and general manager, banking and payments, excited is “This is an innovative game-changer in electronic payments,” the purported interoperability the new network will have with said Mike Kennedy, EVP and head of payments strategy at Wells existing solutions. “Ultimately the vision here is that everyone should be able to receive payments and send money, request “By creating a utility money or exchange money with anyone at any other bank without having to sign up for a separate service,” he says. like clearXchange, we CashEdge has more than 200 bank clients, including New are able to meet the York-based Citibank. Platt says representatives of clearXchange already have been in touch with CashEdge regarding integrating needs of our customers.” the New York-based vendor’s Popmoney solution with the DAVID OWEN clearXchange P2P payments product. Bank of America According to Platt, the clearXchange announcement is an Fargo ($1.24 trillion in assets), in a release announcing the part- indication that the industry is fully supportive of the electronic nership. “We want our customers to be able to easily send money P2P payments space, and that the new scalability that could to anyone without having to establish a new account outside come with integrated networks could help bring the critical their primary bank. All our customers need to know is the email mass in adoption that the market has been waiting for. “The address or mobile number of a friend or family member and biggest problem that I see for P2P payments in general is that we will take care of the rest utilizing clearXchange.” consumers don’t know about them,” Platt says. “Most people David Owen, ecommerce, claims and fraud executive at don’t realize that people can pay and get paid electronically.” Bank of America ($2.27 trillion in assets), added, “Our goal is Fiserv’s Catalfano adds that interoperability is key. “We envision to provide convenient and safe financial services options for that over time several networks will emerge as providers for our customers. By creating a utility like clearXchange, we are personal payments and that interoperability will become increasingly able to meet the needs of our customers and differentiate our important, similar to the way debit networks work today,” he says. capabilities from other offerings in the marketplace.” Bank of Though clearXchange already has a potentially massive America’s John Feldman will serve as general manager of built-in user base, Platt doesn’t see the network as a threat to clearXchange, which is headquartered in Charlotte. the already existing electronic P2P solutions, but rather as a “ClearXchange will allow us to make our popular person- product that will promote electronic P2P payments adoption to-person payments service even better,” said Jack Stephenson, overall. “We’re very excited about clearXchange,” he says. “We director of mobile, ecommerce and payments at JP Morgan think this is a huge boon to the industry.” ■

12 ■ JULY 2011 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY IDENTITY MANAGEMENT The Tipping Point The advent of cloud computing and the expansion of the mobile channel underscore the need to rethink identity and access management, according to Michael Versace, IDC Financial Insights, and Sally Hudson, IDC.

HE GLOBAL FINANCIAL percent or more of the total information services industry has been the security budget of a large institution, leading consumer of identity and there’s nothing on the horizon that T management technology for suggests the costs or risks will retreat decades, investing in 2011 more than any time in the future. The cost and $1 billion on the software, hardware risk impact on identity management and services necessary to identify strategies stemming from the industry’s employees, customers and partners Michael Versace, Research Director, response to recent large attacks on electronically; to provide on-demand, IDC Financial Insights, and Sally personal identity — including the RSA, on-device access to digital information Hudson, Research Director, IDC Epsilon, and Sony breaches — is not and transactions; and to protect customer interactions. completely known, but could be significant over time. But we may be at a point where the industry reevaluates its role in the identity supply chain. ACCESS MANAGEMENT IN THE CLOUD Changing user demographics, the tremendous growth Just the advent of cloud computing itself and the further in digital data, the pervasiveness of mobile devices and expansion of new media and mobile everything underscores applications, the increased sophistication of cyber threats, the need to rethink identity and access management and regulatory pressures, and the expanded use of cloud other obligations and capabilities in the use of technology computing suggest that we may be at the tipping point to deliver financial services. According to recent IDC where traditional identity providers consider a wholesale Financial Insights studies, CTOs, CIOs and business exec- re-architecture of current practices and prepare for a utives now fully understand future where they can better manage identity management that virtualization and cloud obligations and the increasing cost and risks linked to computing represent the Identity and electronic access to financial services. single most important access manage- For years, financial institutions have been required by redesign of the information ment represents both regulation and best practice to offer clients multifactor infrastructure in the history and multilayered authentication for access to their Internet of computing. Of course, 30 percent banking functions. Federal Financial Institutions Exam- however, the long-term or more of inations Council (FFIEC) guidance requires U.S. banks impact of this redesign is the total to use multifactor authentication to confirm identifies of not yet completely under- consumers and commercial customers engaged in online stood. But the impacts of information banking activities. This guidance expressly states that, this trend will be seen over security budget. although no particular technology solution is recommended, the next decade as these single-factor authentication by itself is insufficient. Prior innovations begin to deliver almost everything IT as a to this guidance, it was typical for institutions to employ service, including identity management. multifactor authentication for only their commercial and During this transformation, financial firms should high-net-worth clients when they engaged in high-risk begin to transition their identity technologies and risk activities such as transaction initiation, while other models from those that are based on the provisioning of customers simply used a single-factor authorization — identities to those that can acquire, vet and risk-score most commonly, a user ID and password. identities provided from customers, and use these identities But today multiple layers and multiple factors are in business transactions. To do this, identity management now a requirement to manage all electronic identities. capabilities will need to be re-architected, reintegrated Along with these layers comes complexity and costs — and delivered as a set of risk-aware services to customers, multiple support infrastructures and systems, multiple employees and partners, enabling better control of costs, vendor relationships, and multiple operational risks. greater connectivity and collaboration, and a better- Today, identity and access management represents 30 protected and convenient user experience. ■

BANK SYSTEMS & TECHNOLOGY ■ WWW.BANKTECH.COM ■ JULY 2011 ■ 13 BS&T Cav Jensen FP 0611.qxd:PhnxEFE_TestAds.qxd 6/13/11 9:57 AM Page 1

“We decided then to make the switch to Cavion InternetBanking.”

Martin Jensen President “When I stopped getting a response from Colorado East Bank & Trust our previous Internet banking provider, I Granada, CO Assets: $859 million called our Harland Financial Solutions representative andexplainedthe situation. We decided then to make the switch to Cavion® Internet Banking. That was it. They had the business.”

Visit our Web site for more details:

www.harlandfinancialsolutions.com Contact us at: 800-815-5592 Get the free mobile app

HERE IS SOMETHING both frightening and vendors and became banking best practices. Some of our selections inevitable about innovation — it can be disruptive, are probably predictable, while others may surprise you. risky and costly. But it also changes the rules of the Yet, it must be acknowledged that there is still room for improve- game in ways that no players can afford to ignore. ment when it comes to cultivating and embracing innovation in Banking executives know this as well as anyone. banking. According to the 2010 InformationWeek 500 study of They have seen their industry transformed by tech- innovative companies, just one-third (32 percent) of banking and nological,T social and legislative developments that in many cases financial services company respondents said their CIOs are respon- they resisted but eventually embraced. Many of today’s capabilities sible for innovation. More than half (53 percent) of the respondents for forecasting revenues and risks, communicating with customers, said they are innovating to introduce new IT-led products or and handling core transactions did not exist at the turn of the services, and 45 percent said they are innovating to improve web 21st century, yet they are commonplace in 2011. operations and customer experience. But only 24 percent of the The innovations in technology, delivery, regulation and com- bankers reported that their firms are innovating to engage customers munications that have transformed the industry over the past in new ways, and only 18 percent said they are innovating to decade are the focus of this special Bank Systems & Technology create a new business model or revenue stream. presentation of “The Top 10 Innovators of the Decade.” The BS&T These mixed results underscore how difficult it remains to editorial team identified 10 individuals who we believe came up create a culture of innovation and, as we also examine in this with innovative ideas, tools, strategies and solutions that have report, to protect those innovations once they start producing led to (sometimes disruptive) change, transformation and growth results (page 26). Successful innovators recognize that innovation within the banking industry. Some of these individuals are (or does not come without risks, wrong turns or second thoughts. were) prominent executives in the banking business; others are But without it, there is no growth or survival. By learning from from outside the industry — in some cases, way outside — yet the innovators of the past decade, we can drive the banking their innovations were adopted by financial institutions and industry into a more dynamic and profitable next decade. ■

BANK SYSTEMS & TECHNOLOGY ■ WWW.BANKTECH.COM ■ JULY 2011 ■ 15 Innovate or Die

A relentless drive to simplify banking has motivated ING Direct USA’s Arkadi Kuhlmann to reengineer products and processes and reinvent the customer experience.

By Matt Gunn

OR ARKADI KUHLMANN, innovation isn’t simply Kuhlmann says the average driver doesn’t want to look under a matter of plugging old processes into new technology; the hood and deal with the stuff that makes the car work; the innovation, he insists, comes from the reinvention driver simply wants a car that works. “In the banking industry of how technology, business and the customer interact. we have to do a very good job of making the experience simple “It’s really important in our industry that we have and straightforward,” he explains. “We need to try and make the some experimentation,” explains Kuhlmann, chairman, experience transparent and easy for our customers. The banking Fpresident and CEO of Wilmington, Del.-based ING Direct USA. industry can do a lot more to make things easier from the front Over the past decade, Kuhlmann has guided ING Direct (which to the back as opposed to from the back to the front.” at press time announced that it would be acquired by Capital One) Kuhlmann says achieving that customer-centric ideal and as it has grown into the nation’s largest direct bank — the primarily simplifying how the customer interacts with the bank is what online institution now has more than 7.7 million customers and keeps him going. “That’s been my drive for the last 10 years, and $92.2 billion in assets. In achieving such lofty milestones, Kuhlmann that’s the thing that I’m most passionate about,” he reveals. “The has focused on building a better banking experience, whether it’s core competency of ING Direct is all about marketing and tech- through the online channel, the call center, mobile devices or one nology, and to bring marketing and technology about to make of ING Direct’s seven “cafes,” which combine a friendly retail the bank work like a retailer.” environment — plus coffee and free Wi-Fi — with bankers who are there to give a face to the bank and help customers. AVOIDING THE MISTAKES OF THE PAST As Kuhlmann, who launched ING Direct Canada in 1996 and has At the same time, ING Direct relies on its ability to provide customers headed ING Direct USA since 2000, describes it, his focus with ING with a seamless banking experience that, while grounded in self- Direct is on reinvention. “It’s all about reengineering the product or service, doesn’t make the customer feel that dealing with the bank’s reengineering the process or reengineering the customer,” he says. website or call center is a hassle. “I’ve never found anybody in But that’s not accomplished simply by plugging outdated America who loves an 800-number,” Kuhlmann says. “But you could processes into shiny new technology, Kuhlmann emphasizes. It’s love it — if it’s simple, intuitive, straightforward and easy to use.” about leveraging technology to create a better experience, while The same principle applies online. “A mistake that we made as at the same time reexamining the functions of a bank, he says. an industry that we should all learn from ... When the Internet came In doing so, Kuhlmann adds, the object is to “make the customers along we took branch processes — manual, paper-based processes feel like they’re in retail mode and eliminate the friction points.” — and just copied them onto a website,” Kuhlmann says. “We didn’t Drawing parallels between banking and a modern automobile, reinvent anything, but instead made it cumbersome.” As banks move further into the mobile space, Kuhlmann sees the potential for that mistake to be repeated. Mobile, like any channel, he says, is better when banks understand that it brings a unique interface and unique customer interactions. “The ones that understand that that’s a different interface are the ones that are going to win at this game,” he contends. Ultimately, customers want an experience that is driven by context and function, Kuhlmann continues, and it’s up to banks to deliver a better outcome for the customer. “It’s also true for this industry that you need to innovate or die,” he says. And delivering that kind of innovation is not out of reach for most banks, Kuhlmann adds. “The old way of thinking was that you had to have massive scale in order to innovate,” Kuhlmann comments. “Ten years ago, to get scale to be competitive a bank needed $10 billion in assets. Now I believe that scale is at $1 billion.” ■

16 ■ JULY 2011 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY Defining Payments

Though it predates the Internet age, CheckFree founder Pete Kight’s vision of paper-free electronic bill payment has defined the e-payments market.

By Matt Gunn

FTEN, INNOVATION COMES from the need to solve a simple problem. CheckFree founder Pete Kight’s initial goal, while far-reaching, was straightforward enough: eliminate paper bills and checks for the health and fitness industries. But the path for CheckFree from concept to Omarket leader in electronic bill pay wasn’t easy. According to Kight, who founded CheckFree in 1981, some 30 venture capitalists turned him down at the start. Corporations were slow to adopt electronic funds transfer, and banks were reluctant to go online, much less take the lead in championing electronic payments, he adds. But despite all this, Kight says, he held on to his belief that paper could be eliminated from payments. “Our biggest challenge was the fact that we had three constituents in electronic bill pay: the bank, the biller and the consumer,” Kight explains. “We could only grow as fast as the slowest of and payment. In the early days, Kight relates, the payments were those three at any given time. By far the slowest to move and all standing-order, corporate-originated debits. But that changed adapt to the technology change were the banks,” he continues. when Internet service providers CompuServe and Quantum (which “They didn’t really want the Internet or online banking to happen, became AOL) began using CheckFree in the late ’80s to collect as it represented a significant change that they always worried monthly usage payments in a recurring fashion. “As we worked would be used to disintermediate them from their depositors.” more with CompuServe, we developed the second epiphany: Con- Kight served as CEO of Norcross, Ga.-based CheckFree until sumers originating their own payments would adopt [e-payments] it was acquired in 2007 by Fiserv (Brookfield, Wis.), where he much faster than corporate billing departments,” Kight says. served as vice chairman until 2010. He remains on the company’s That epiphany led to the development in the early ’90s of board of directors today. Kight’s current day job is as managing simple checkbook-bill payment PC software that CheckFree gave partner of private investment firm Comvest Group. He also is away on local bulletin board websites, according to Kight. From proprietor of Quivira Vineyard and Winery in Healdsburg, Calif. there, the company began working with corporate billing and accounts receivable departments to figure out electronic settlement. TWO EPIPHANIES FOR THE PRICE OF ONE During those early days, Kight notes, he wanted to offer Looking back at CheckFree’s ascension as a major player in CheckFree as a branded experience for banks. But early on, electronic payments, Kight says his success came as much through not a single bank was interested. “It was immensely frustrating his belief in a better way to receive and pay bills as it did through to be receiving lots of flack from the industry telling us, and me persistence. “While looking for a solution for that industry problem personally, that ... we should know our place and simply wait in the late ’70s, I came across the fact that the insurance industry for them to be ready,” Kight says. “We knew the consumer didn’t was utilizing the ACH network for monthly payment of premiums,” want to wait, and we passionately believed we were doing the Kight recalls. “That realization created an epiphany: If nonbanks banks a favor by pushing them beyond their comfort zone.” were allowed to utilize electronic funds transfer, paper would Kight kept working, demonstrating demand for the service, eventually lose. At the time, banks were just starting to roll out and finally got banks to see it his way — that banks had the ATMs, and it was clear to me that the banking industry would advantage in consumer trust when it came to paying household never be the innovator to make electronic payments work.” bills. “We convinced the industry that we could be trusted, and Kight’s vision not only led to the founding of CheckFree, an once we started signing up the banks in large numbers we ceased electronic payment service that predates the Internet era, it marketing CheckFree as a consumer brand” around 2001, he says. ultimately presaged the recent revolution in online bill presentment “In the end, we helped the banks retain their leadership.” ■

BANK SYSTEMS & TECHNOLOGY ■ WWW.BANKTECH.COM ■ JULY 2011 ■ 17 Banking the Unbankable

In seeking to help the poor, Grameen Bank founder Muhammed Yunus showed the world the value of microlending. By Matt Gunn

CONOMIST, AUTHOR, NOBEL LAUREATE and the million in assets, and Yunus’ innovative visionary who saw opportunity in a business model that model influenced the creation of other traditional banks wouldn’t touch. Muhammed Yunus microfinancial institutions around the E founded Grameen Bank in 1983 on the concept that world. Even the Dodd-Frank Act rec- making small loans with reasonable rates to the impoverished ognizes the benefit of microlending, population of Bangladesh would create financial independence authorizing the U.S. Treasury to establish among the previously unbankable and ultimately strengthen his a program of small-dollar loans and home country’s economy. In the process of empowering the poor grants to bring traditional banking to help themselves, he gave credence to the microlending model. opportunities to the unbanked or under- According to Yunus, there are two types of businesses: those banked in America. that exist to make money for themselves, and those that exist instead Despite his accomplishments, for the purpose of social goals. “It’s all about others,” Yunus said Yunus was removed from his position during a lecture at the UNC Kenan-Flagler Business School in 2010. at Grameen Bank in March. But Sen. Dick Durbin (D-Ill.) defended “Business to do good to the people, do good to the planet.” Yunus, citing an “effort on the part of the Bangladeshi government Yunus first developed the microlending concept as an economics to discredit” Yunus. “With Professor Yunus at the helm, Grameen professor at Chittagong University in Bangladesh, when he loaned Bank has played a leading role in a global movement to lift $27 to a group of local women. By the time he and Grameen Bank millions of the world’s poorest people out of poverty using the received the Nobel Peace Prize in 2006 for their efforts to help the innovative microcredit concept that he pioneered,” Durbin impoverished, the bank had grown into an institution with $125 wrote at the time. ■

Are You Experienced?

Apple CEO Steve Jobs’ insights into how consumers want to interact with technology have changed the game for everyone. By Nathan Golia, Insurance & Technology

PPLE DIDN’T MAKE the first MP3 player, or the first “The iPod changed everything in smartphone, or the first tablet. But thanks to CEO 2001,” Jobs said at the iPhone’s Steve Jobs’ vision, the Cupertino, Calif.-based company unveiling. “We’re going to do it again A has redefined the technology user’s experience. with the iPhone.” The iPod, iPhone and iPad have put users in control of tech- Indeed, mobile apps, distributed nology like never before. And the proliferation of these devices through Apple’s iTunes App Store, has recast consumer expectations, driving changes in how busi- quickly became every bit as ubiquitous nesses, including banks, service customers. as MP3s. And the model has revolu- Despite its hefty price tag, the iPod, released in October 2001, tionized the way banks, which have swept the country and set the standard for hand-held devices launched a steady stream of mobile — and the user experience — through the decade. As competitors banking apps, interact with customers. mimicked the iPod’s value proposition, however, Apple’s Now Jobs is rewriting the rules again. Apple’s iPad tablet is dominance began to slip. But by then, Jobs and Apple already changing the computing paradigm, and the company’s innovative had moved on from MP3 players, introducing the iPhone in 2007. consumer technologies are reshaping enterprise IT. “With recent In naming it Invention of the Year, Time celebrated the iPhone’s updates in terms of encrypted backups and remote disabling, design, noting that Jobs made sure AT&T didn’t influence that we’re seeing ... the company’s push to get into the enterprise,” design (or his vision). And Jobs knew what he had in the device. Celent analyst Craig Beattie says. ■

18 ■ JULY 2011 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY The Scientific Method

We wouldn’t be able to ask ‘What’s in your wallet?’ without Capital One cofounder Richard Fairbank’s innovations in bringing analytics to the credit cards business.

By Katherine Burger

NDERSTANDING HOW TO effectively leverage analytics is one of the hottest topics in banking today. Bankers and regulators recognize the value of applying analytics-related technologies to everything from customer lifetime value to credit risk to channel trends. And vendors have Uresponded with an array of sophisticated standalone solutions as well as by integrating analytics capabilities into core functions as varied as lending, product development, payments, CRM and fraud prevention. The widespread embrace of analytics is enabling banks of all sizes to strive to be “smarter,” more responsive and better able to anticipate market changes and opportunities. But the use of analytics wasn’t always so pervasive. While financial services firms have long recognized the value of making better use of customer, risk and performance data, it wasn’t until Richard D. Fairbank founded Capital One in 1988 that a company enabled way to analyze and segment customers and develop literally based its growth strategies on the ability to drill into and price card offerings accordingly. Signet Bank bought into customer data, develop targeted products and channels based the concept, hired the two men and revamped its card operations on the information that came out of that analysis, and also price based on the their model. What became Capital One Financial and underwrite those offerings based on that segmentation. Corp. was spun off from Signet in the mid ’90s. Today, in addition Fairbank essentially made a science of card marketing. According to being one of the world’s largest card issuers, Capital One to the McLean, Va.-based company’s corporate overview, Fairbank operates approximately 1,000 branch locations in the U.S. and (who now holds the titles founder, chairman and CEO) “founded has operations in the U.K. and Canada. It’s currently the eighth- Capital One … based on his belief that the power of information, largest U.S. bank, with more than 40 million customers. technology and testing could be harnessed to bring highly cus- tomized financial products directly to consumers.” A LASTING IMPACT Fairbank was not the first to see the potential for analytics Of course, Capital One’s use of analytics was not an end in and — but he did view its potential differently from his peers at the of itself — it helped the company develop unique, industry- time, according to Ron Shevlin, senior analyst with Boston- leading products. “With innovations like teaser rates and zero- based Aite Group. “Cap One had an analytics-driven culture balance transfers, Cap One brought a degree of personalization, from the start,” he points out. “Fairbank had a strong analytical speed to market and marketing execution flexibility that other bent. ... Unlike a lot of other firms, Cap One didn’t have to firms still aspire to,” Aite’s Shevlin says. become analytics-oriented; they were born that way.” Though Capital One was founded more than 20 years ago, Shevlin points to a key differentiator between Capital One and it has only been within the past decade that analytics have other card marketers at the time: “Unlike many other card issuers become mainstream in banking. And Fairbank’s innovations who used predictive models to drive their marketing campaigns, continue to shape the increasingly complex payments business. Cap One was a relentless tester — they were constantly in the “The potential impact of analytics on the payments business market testing various offers and product combinations,” he says. today goes beyond fraud — it’s about predicting purchase behavior,” “In contrast, other issuers would develop a predictive model, score Shevlin observes. “Until recently, a lot of card issuers’ analytics prospects and execute [only a few] large-scale campaigns.” efforts were focused on predicting who would be a good credit As far back as the 1980s, Fairbank, along with eventual Capital card customer, and if they could sell a card to that person. Today, One cofounder Nigel Morris, had an idea for a more scientific the analytics are increasingly focused on analyzing purchase approach to credit card marketing — based on a technology- behavior and predicting what cardholders will buy.” ■

BANK SYSTEMS & TECHNOLOGY ■ WWW.BANKTECH.COM ■ JULY 2011 ■ 19 IST_Spread_5_11_Layout 1 4/5/11 4:23 PM Page 1 INSURANCE & TECHNOLOGY INSURANCE & TECHNO

November 6-9, 2011INSURANCE & TECHNOLOGY THE BOULDERS RESORT & SPA, CAREFREE, AZ You can’t afford not to be part of this Executive Summit. INSURANCE & TECHNOLOGY

2011Content Highlights: The Leadership • Mobile Game-Changers – How are insurers’ mobile strategies evolving, and what is the plan to maintain a competitive advantage in this space?

• Transforming the IT Organization to Drive Growth – Get the inside story on how Challenge: Driving Growth, one insurance company’s IT organization has become a critical partner to the business by creating and executing on growth opportunities, and eliminating inefficiencies while Optimizing Resources enhancing profitability. • A Vision of the Insurance IT Organization of the Future

In the wake of the financial crisis and economic recession, • Social Media – The Future of Interaction Is Now – What will social media ultimately the long-standing challenge faced by insurance technology mean for financial services – and how will it change the way business is conducted? executives – to drive growth and innovation while controlling • The Key to Mastering the Customer Experience Puzzle risk, reducing inefficiencies and leveraging existing staff and systems resources – has taken on new significance. • Beyond Partnership – 2011 Elite 8 executives face off against executives from some of the insurance technology industry’s most innovative companies to address the most At Insurance & Technology’ s 13th Annual Executive Summit, controversial and challenging issues facing the industry. you’ll gain an edge on reconciling these imperatives and learn how top carriers are incorporating the trends and Why Should You Attend the Executive Summit? technologies that drive growth, profitability and compliance. • Learn and Network with your peers in a casual environment.

• Get Insights into today’s best practices from leading insurance industry IT and line-of-business decision-makers.

Register Now! • Unsurpassed Networking Opportunities, including receptions, Elite 8 Awards dinner, Visit our website to see workshops and more. complete agenda and registration information. • Gain Knowledge about how industry leaders are driving transformation in order to seize new growth opportunities.

Diamond Sponsor Platinum Sponsors Gold Sponsor www.insurancetech.com/summit2011

Please note that attendance at this Insurance & Technology event is limited to insurance company/carrier executives. Event producer reserves the right to qualify and deny any interested party. IST_Spread_5_11_Layout 1 4/5/11 4:23 PM Page 1 INSURANCE & TECHNOLOGY INSURANCE & TECHNO

November 6-9, 2011INSURANCE & TECHNOLOGY THE BOULDERS RESORT & SPA, CAREFREE, AZ You can’t afford not to be part of this Executive Summit. INSURANCE & TECHNOLOGY

2011Content Highlights: The Leadership • Mobile Game-Changers – How are insurers’ mobile strategies evolving, and what is the plan to maintain a competitive advantage in this space?

• Get Insights into today’s best practices from leading insurance industry IT and line-of-business decision-makers.

Diamond Sponsor Platinum Sponsors Gold Sponsor www.insurancetech.com/summit2011

Jack Dorsey’s twin innovations — Twitter and Square — are completely reshaping the ways in which people communicate with each other, interact with their banks and pay for their purchases.

By Matt Gunn

EN YEARS AGO, tweeting was the exclusive domain much anyone with a mobile phone, including businesses, the ability of the birds. Five years ago, no one considered a mobile to accept credit card payments. Since its introduction in late 2009, phone a viable replacement for a traditional point-of- the start-up has been among the companies outside the banking sale terminal. But Jack Dorsey had a vision for both. industry that are at the forefront of the mobile payments space. A little more than three years after cofounding “Square has provided us with three key learnings,” says the popular social network Twitter, Dorsey went Brett King, author of “Bank 2.0: How Customer Behavior and Ton to create Square, a new mobile payments system that’s caught Loyalty Will Change the Future of Financial Services.” “First, the attention of small-business owners and traditional payments when you make onboarding simple, you can build new merchant providers alike. He splits his time working on both ventures. relationships very quickly. Second, the current receipt and Built on the concept of communicating within a 140-character credit card statement is woefully out of date. Last, you don’t limit, Twitter has proved flexible enough to connect people, need plastic or a POS terminal at all in reality.” promote businesses, provide customer service, break news and even mobilize social change. Since its introduction in March KEEPING IT SIMPLE 2006, the platform has enjoyed a meteoric rise in popularity. Twitter and Square can be seen as two disparate innovations: Among the qualities Dorsey brought the world through Twitter one in communications and the other in payments. But if there is the inherent sense that everyone — individuals, customers, is a theme to Dorsey’s two most-substantial creations, it is businesses and employees — has a voice. In addition to giving around the idea of simplicity. people who engage in the space the sense that their voices are “Interactions are rapidly changing in the payments space being heard, in creating Twitter, Dorsey also helped banks and and Square is showing us new ways to think about context and other businesses monitor customer sentiment, respond to how to enable merchants without expensive POS infrastructure,” questions and concerns, and proactively manage the brand. King adds. “Perhaps the phone is the future of the POS itself.” “As companies grow beyond their original intent, the muddied Those interactions might just be changing the foundation organizational structure makes it more difficult for both customers of transactions themselves; Dorsey doesn’t see Square as simply and employees to feel appreciated, wanted or heard,” says changing the medium for making and accepting payments. Rebecca Schlachter, director of analytics and modeling at New “There are ways of going about [web payment systems] that York-based market research firm AMI-Partners. “Everybody are focused on the payment mechanics (i.e., Google). But we wants to feel important — social media makes it possible.” don’t think that’s the right way to focus on it,” Dorsey told Square, Dorsey’s other buzz-worthy venture, has brought pretty Fortune in a recent interview. “We think there are ways to bring that human experience to everyone.” Dorsey has influenced the payments industry as much as he’s impacted the way individuals interact online and how they make payments. In a sure sign of that influence, some of the traditional point-of-sale and payments vendors have put new emphasis on the mobile card readers that they sell, which are similar to those deployed free by Square. Some have gone so far as to produce videos and other communications in an attempt to discredit Square or point out the vulnerabilities in the way Dorsey’s company enables payments. “The truth is, the biggest threat was that Square made us realize a traditional POS terminal was not an essential part of the value chain,” King explains. In that sense, the disruptive nature of what Dorsey began is making everyone rethink how they conduct transactions. ■

22 ■ JULY 2011 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY Driving Consensus

ECCHO’s David Walker brought together sometimes-antagonists in order to win the passage of the pivotal Check 21 Act. But he didn’t do it alone. By Katherine Burger

OMETIMES INNOVATION is the proverbial bolt-of- got heavily involved,” Walker says. lightning inspiration that strikes one fervent individual. “It was a bill the industry had interest But sometimes innovation is both evolutionary and colin, but it wouldn’t go anywhere without S laborative. Such was the case with the Check Clearing someone shepherding the process.” for the 21st Century Act, or Check 21, which was signed into law What followed was a successful effort in 2003. But while the law (which allows banks to truncate paper to bring together interests that usually checks and replace them with substitute digital check images) were in opposition — big banks, com- went into effect in 2004, it was decades in the making. Among the munity banks, credit unions and other individuals who were committed to overcoming the barriers that banking industry constituencies. had stalled industrywide adoption of check truncation, one of the Despite his pivotal role, Walker most persistent and persuasive was David Walker, president and gives credit to several other individuals CEO of Dallas-based Electronic Check Clearing House Organization. who played a role in changing the way checks are processed. ECCHO had worked with the Federal Reserve Bank for years “Roger Ferguson, [who was] vice chairman of the Federal Reserve, to find ways to make the checking system more efficient, recalls was very interested in check truncation and was looking for a Walker, who joined the check clearinghouse in 1989. And late way to push it forward,” he says. “Louise Roseman, his chief of in 2001 the Fed proposed the Check 21 bill. “For the first and staff, shepherded the whole process.” And Fred Herr, an SVP only time in their history, they developed and proposed a new with the Atlanta Fed, was the main force behind the Fed’s “decision statute for Congress to consider,” Walker relates. that they were going to serve as the bridge to the industry to But initially there was little response. “That’s when ECCHO help this transition,” Walker adds. ■

The Great Disruptor

Jeff Bezos’ vision for a new kind of retailing helped reshape banks’ traditional distribution strategies. By Katherine Burger

EVERAL OF BS&T’s “Top Innovators of the Decade” site so elegant and appealing, that it are recognized for their contributions to bringing became from Day One the point of banking into the world of ecommerce. But it would reference for anyone who had anything S have been much more difficult to make those contri- to sell online.” That year consumers butions without the disruption Jeff Bezos brought to the retail bought about $15 billion in consumer industry. Bezos, a computer science major, worked on Wall Street goods online. In 2011, according to before he relocated to Seattle and in 1995 acted on his inspiration Forrester Research, consumer online for a new kind of business: selling books over the Internet. retail sales will surpass $190 billion. That company of course was Amazon.com, which reported As multichannel delivery became 2010 net sales of $34.2 billion, a figure comprised not only of sales a banking reality in the 21st century, of books but also of all kinds of consumer goods (by enabling the online channel — and now, mobile other businesses to leverage its ecommerce platform); in-the- — have become increasingly dominant. The e-commerce revolution cloud infrastructure services based on its own back-end technology led by Bezos dramatically changed the expectations of consumers platform; and its Kindle e-book (a category Amazon created), and business customers, and thus, the ways in which financial among a variety of content and technology offerings. When Time products are sold and serviced. This is not just because of the named Bezos its 1999 Person of the Year, it declared: “[His] vision simplicity and reliability of making purchases on Amazon.com, of the online retailing universe was so complete, his Amazon.com but also due to the community building that the site fosters. ■

BANK SYSTEMS & TECHNOLOGY ■ WWW.BANKTECH.COM ■ JULY 2011 ■ 23 Timing Is Everything

Mint.com creator Aaron Patzer contends that banks still don’t really understand what customers want — which is why he’s leading the personal financial management revolution.

By Katherine Burger

EARS ABOUT DISINTERMEDIATION — whether it involves untraditional competitors, emerging delivery models or new regulation — have often caused banks to resist or underestimate financial innovations. That explains the tentative response many institutions have had to the boom in personal financial management F(PFM) solutions that has occurred over the past several years. But according to Aaron Patzer, it’s just not in bankers’ collective DNA to confront the issues that inspired him in 2005 to create Mint.com, probably the most successful of the PFM plays. Patzer, who became VP and general manager of the personal finance group at Mountain View, Calif.-based Intuit following its 2009 $170 million acquisition of Mint, says consumers are looking for better and more automated ways to understand and manage their personal finances, but that this has little to do with building a stronger relationship with a bank. “People don’t want to be Patzer declares. “They are not oriented to delivering compelling stuck just with one bank,” he says. “Banks are in the mind-set consumer products on the web. They might be good at delivering of, ‘We need to get increased share of wallet,’” developing their compelling financial products, but with some exceptions … the branches, ATMs and other channels “in a way that people get kinds of people who can produce the kinds of experiences an locked into the system,” he adds. Apple, Facebook or Google does don’t typically work for banks.” But consumers want almost the exact opposite, Patzer argues, Mint’s success is not just about drive and determination, noting that this is what PFM addresses. “You want to choose the Patzer concedes. Consumer uptake of PFM tools no doubt was best financial product in each particular area, and then tie it all influenced by the disrepute that has clung to much of the banking together,” he says. “This was eye opening for banks. It scared industry in the aftermath of the subprime meltdown and subsequent them a bit because they feel they’re being disintermediated.” financial crisis. “The financial crisis in some ways was the best thing that happened to Mint,” Patzer says. “It was not just the CAPTURING CONSUMERS’ HEARTS AND MINDS backlash against banks, but also, people started thinking, ‘I need Sometimes it’s more about hearts and minds than cold hard to really understand where my money is going.’” cash. “Mint hasn’t gone into the transactional realm; banks still Today, Patzer is focused on growing Mint geographically offer the transactional capabilities, they hold the money,” Patzer beyond its current presence in the U.S. and Canada, as well as acknowledges. “But PFM is becoming the front end of the banking expanding PFM to other platforms and capabilities. And with system. This is good for consumers — it gives them a more in- all the buzz about NFC-based mobile wallets, he spies another depth picture of their money and what they could do with it,” potential target: “We can play a big role in that,” Patzer says of instead of the balance information and marketing pitches that the mobile wallet space, adding that the current offerings “just banks typically push out to their customers. This is more than tell you what you have, not what you should be paying [or] … just hype: Since Mint was acquired by Intuit, it has grown by a how to manage your money. It’s an infrastructure layer — just 250 to 350 percent annual rate in users and revenues, according a replication of your existing wallet.” to Patzer’s LinkedIn page. In addition to his role at Intuit, Patzer is an active investor in Why don’t bankers understand this? Why did it take a 25- start-up technology companies. How does he decide where to year-old entrepreneur (albeit one who was an IBM employee invest? “I look for three things,” he says. “Does it solve a real with degrees in computer science, electrical engineering and problem? Is it in a large, billion-dollar market? And do they have computer engineering) to develop a successful PFM solution? something sustainable — some kind of great technology no one “Unfortunately, the problem is that banks are not technologists,” else has developed or a network advantage?” ■

24 ■ JULY 2011 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY The Man Behind the Law

Outrage over Wall Street’s failures inspired the most sweeping financial overhaul since the Great Depression. Barney Frank, the man whose name is on the bill, only wishes he had gone further.

By Justin Grant, Advanced Trading

ROM THE DECRIMINALIZATION of small amounts of marijuana to gay marriage, Barney Frank has been at the forefront of liberal causes throughout his three decades as a member of the U.S. House of Repre- sentatives. But when his time representing FMassachusetts’ fourth congressional district is up, Frank likely will be remembered for two things: his colorful personality, and the co-authoring of the most dramatic rewrite of the laws governing the nation’s financial system since the Great Depression. The Dodd-Frank Wall Street Reform and Consumer Protection Act forces nearly all financial services firms to rethink how they do business, from which stocks they trade to how they disclose terms to clients. And if the nearly 70 years it took for the industry to effectively should aid their implementation of the Dodd-Frank Act. overturn the Glass-Steagall Act serve as any indication, Frank says the GOP ultimately backed down on its Frank’s influence undoubtedly will be felt throughout threat to slash funds for the Securities and Exchange the industry for decades to come. Commission and Commodity Futures Trading Commission The 70-year-old Harvard Law School graduate played because that stance was unpopular with voters. “A budget a pivotal role in preventing the global financial market cut was their side attack on the rules. They couldn’t deal from tumbling over the brink. Frank, who presided over with it head on, so they tried it this way,” he says, noting the powerful House Financial Services Committee as that Republicans have since shifted their focus to delaying the 2008 Wall Street collapse unfolded, helped craft the derivatives reform until 2012. unprecedented banking sector bailouts. Stripped of his House Republicans introduced a bill this spring that committee chairmanship following the Republican would delay new derivatives rules for 18 months. Although takeover of the House last fall, the Capitol Hill powerbroker that legislation has little chance of becoming law since now says the Democrats did enough with the Dodd- it’s unlikely Senate Democrats or President Obama Frank Act during their time controlling both houses of would support it, Frank says the tactic is a dangerous Congress to thwart a similar crisis. move for the GOP. “They’re making a great mistake politically to put off BACK FROM THE BRINK any new regulation of derivatives,” Frank contends. “That’s “We came very close — according to Bush administration going to be very unpopular when you look at the people’s officials — to a situation as bad, if not worse than the concerns about speculation.” Great Depression,” Frank says. “We had two things to do: While Frank is mostly pleased with how the bill turned First, deal with the crisis; but then do whatever we could out, he acknowledges that it hasn’t been sold effectively to make it less likely it would happen again.” enough to the general public. And he wishes the law were Despite a push by Republicans earlier this year to tougher on derivatives. But for the most part, Frank says, neuter the Dodd-Frank Act by slashing funding for the the Dodd-Frank law is as tough as it needs to be. regulatory bodies tasked with making rules to enforce “The bad mortgages, risky securitizations — I can’t the new law, Frank says the bill is now equipped to work tell you that it’s going to prevent new problems,” Frank as planned. In April the nation’s commodities and securities admits. “But if you look at all the causes of problems in regulators were given modest budget increases, which the past, we made them much less likely to occur.” ■

BANK SYSTEMS & TECHNOLOGY ■ WWW.BANKTECH.COM ■ JULY 2011 ■ 25 PROTECTING YOUR IP Keeping Secrets

Financial services firms are built on innovation. But protecting those advances is a full-time job.

By Ivy Schmerken, Wall Street & Technology

INANCIAL SERVICES FIRMS build their fortunes The creator of new software can seek copyright protection on the back of innovation. Whether your firm from the U.S. Copyright Office, Soobert says. The copyright has devised a new mobile banking product or actually exists upon the completion of the source code. A high-frequency trading strategy, no doubt your copyright holder gets additional rights once the completed company wants to protect its market position software is registered with the copyright office, which precludes from competitors. anyone from copying that software, he explains. F“Financial services companies are seeking to protect their “But with copyright protection, you have to disclose it, intellectual property assets with different forms of protection,” which has an effect on your ability to protect it as a trade comments Allan Soobert, a partner with the intellectual property secret,” points out Chad Yohn, chief IP attorney at ConvergEx practice of New York-based Paul, Hastings, Janofsky & Walker, Group, a New York-based technology company and registered which represents major financial institutions in patent and broker-dealer that recently received a patent for LiquidPoint, infringement matters. “Patents are one way of protecting IP; an electronic trading solution for the options market. This is copyrights are another, and trade secrets are significant, as well. ConvergEx’s ninth patent. That mix of IP protection is really what you see in the marketplace.” “We view the patents we have as assets of the company,” Many aspects of financial services are worth protecting, from Yohn says. “A lot of the value we get out of patents comes from online transaction systems to automated approval processes. the fact that we are a technology company.” Even in insurance, where IP litigation is less common, battles But in a highly secretive area such as high-frequency trading periodically break out among tech vendors. For example, the software, one of the crown jewels of Wall Street’s technology, ongoing patent infringement lawsuit filed by Accenture accusing firms are reluctant to disclose innovations to the U.S. Copyright San Mateo-based Guidewire of copyright infringement and Office. “Copyright protection is narrow — it protects the stealing trade secrets related to the Accenture Claim Components program as written,” Yohn explains. “Someone can gain an solution began in December 2007 and is likely to last for years. understanding to the underlying logic and they can invent

absolute problem with business method and processes under Section 101, it said that WHEN PATENTS ATTACK financial services patents,” Pernick says. the Patent Act must not be read so narrow- A recent Supreme Court decision has “But if they are too abstract, then they are no ly, especially in the ‘Information Age.’” cast doubt on whether many business good.” Pernick notes that there are grounds According to Pernick, following the methods are eligible for patents. The within Section 101 of the U.S. Patent Act Supreme Court’s decision in the Bilski case, decision, which ruled that certain business itself for prohibiting patents on ideas that are the Patent Office and the early stage courts methods are too “abstract” to be patented, too abstract. But, he stresses, “For many have begun to scrutinize patents more thor- could impact financial services companies years it was not applied with teeth.” oughly. The Bilski decision also has opened seeking patents on business methods that Previously, in February 2008, the U.S. up new ground for declaring that existing are not tethered to technology. Federal Circuit Court in Washington, D.C., patents are invalid, he adds. “The Patent On June 28, 2010, the Supreme Court held that a process that is “tied to a particu- Office and the lower courts have made it affirmed a lower court’s ruling in the lar machine” or that “transforms a particular tough on financial-services-related and Bernard Bilski patent case, which sought to article into a different state or thing,” is business-method patents,” Pernick says. protect a method that enabled commodi- patent-eligible under Section 101, Pernick To make patents more likely to withstand ties dealers to minimize risk through hedg- wrote in a recent client alert. “However, challenges, Pernick advises, firms should ing contracts. “All nine justices agreed that the Supreme Court rejected the Federal tie them to computers and other physical Bilski’s hedging patent was too abstract or Circuit’s suggestion that the machine-or- technology. “That is certainly the best clue that it was not tethered to a concrete physi- transformation test is the only measure of that we have about how to insulate your cal application and was too close to the patentability for a process,” Pernick patent in the financial services area,” he generic concept of a hedge,” relates Marc explained. “The Court stated that while the says. “The more a firm ties its invention to Pernick, partner and intellectual property machine-or-transformation test is a useful specific routers, databases and physical litigator at law firm Morrison Foerster. and important clue, an investigative tool for devices, the better your chances of surviv- “The Supreme Court ... said there is no determining whether claimed inventions are ing one of these patent attacks.” —I.S.

26 ■ JULY 2011 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY around the patented software program.” As a result, firms may forgo copyright protection. The recent intellectual property case involving the theft of high-speed trading software developed by Goldman Sachs illustrates the point. The Wall Street firm accused a former software programmer of stealing source code from a high- frequency trading system to benefit himself and a new employer, a start-up competitor, Teva Technologies. The programmer, Sergey Aleynikov, was convicted in December 2010 of stealing proprietary code, and in March he was sentenced to eight years in prison. One of the factors in Aleynikov’s sentencing, according to one attorney who spoke only on the condition of anonymity because his firm was not involved in the case, was his disregard for all IP rights, including copyright and trade secret protections. Several IP lawyers interviewed for this story noted that the firm wouldn’t want to disclose the details of its trading system in a patent. “They’d rather keep their secret sauce, if you will, behind “We view the patents we have closed doors,” says the anonymous lawyer. as assets of the company.” Chad Yohn DISCLOSURE HAS ITS BENEFITS In exchange for full patent disclosure, however, firms get a ConvergEx Group “better return,” suggests Steve Lieberman, a partner with Wash- ington, D.C.-based intellectual property law firm Rothwell, Figg, secret is requiring any employee or consultant who comes into Ernst & Manbeck PC who was the lead counsel for Investment the company to sign a confidentiality or proprietary rights Technology Group in a patent infringement lawsuit brought by agreement, according to Yohn. A classic example is Coca-Cola, Liquidnet Holdings, two major trading systems providers. “In which has successfully protected the formula for Coke as a the trading technology space, financial services companies have trade secret for about 150 years. come to see that patents are very important,” he says. The down side? “If someone is able to reverse engineer “A patent issued by the U.S. Patent and Trademark Office is a what’s inside the black box, you have no protection,” explains legal monopoly — it gives you the right to stop anyone else from Rothwell Figg’s Lieberman. “In order to [truly] protect that doing what’s covered by the patent in the United States. That’s why innovation, you need a patent.” patents are such powerful tools in the financial industry — because they can shut down a competitor’s product,” says Lieberman. ‘TROLLING’ FOR PATENTS “A patent gives you a monopoly over the product for 20 According to Paul Hastings’ Soobert, many financial services years,” he adds. “And you can enforce the monopoly with an firms aren’t necessarily using patents to go after companies injunction against the competitive product.” infringing on their IP; rather, companies are using patents to But patents aren’t air tight, Lieberman acknowledges. “In lit- protect themselves against lawsuits from competitors. “They igation, patents can be found to be narrow and not infringed, are using the patents to protect their assets in a defensive way and they can be found to be invalid or unenforceable,” he says. — in case they are sued, they have the patents in their arsenal Before diving into the patent application process, a company to protect their assets,” Soobert says. should weigh the benefits, says ConvergEx’s Yohn. Part of the Financial services also could encounter patent “trolls” — com- analysis is to look at the longevity of the innovation. The U.S. panies also known as “non-practicing entities” that buy up patents Patent and Trademark Office generally takes three to six years and then sue the players in financial services. “These companies from application to issuance, so if the innovation is in a fast- don’t make anything; they just buy up other people’s assets,” says moving field, there may not be anything left to defend once Marc Pernick, a partner in the Los Angeles office of law firm the patent is issued, Yohn notes. Morrison Foerster with expertise in intellectual property litigation. “We want to be viewed as innovators in the investment tech- One contentious case in banking involves DataTreasury, a small nology space, and we think that our patents support that,” he technology company that registered a patent for remote check adds. But if ConvergEx elects not to file for a patent, it may imaging in the 1990s. Banks were not convinced that they needed decide to rely on trade secret rights as a form of protection. In the technology until Congress passed a law allowing digital check that case, Yohn explains, the company can keep the nature of processing in 2003. Then banks began inventing their own remote how it developed or implemented the innovation confidential. imaging applications, unaware that DataTreasury held a patent To protect something as a trade secret, “You have to demonstrate on the technology. Since then, DataTreasury has sued nearly every that you maintained the confidential nature of that innovation, major bank for infringing on its electronic check imaging patent. and you have to further demonstrate that there has been a breach But even when a financial services firm holds a patent, the lit- of that confidential information and that someone has misap- igation can go on for years, Pernick notes, adding that it’s expensive propriated that secret,” explains Yohn. But, he cautions, “It takes and distracts from operating the main business. “Patent litigation a lot of cooperation — from the sales team to the legal team to costs millions; small cases can cost $1 million, and larger, more the product team — to maintain confidentiality.” complicated ones can cost $5 million or $10 million,” according In fact, part of establishing that an innovation is a trade to Pernick. Which is why so many cases settle out of court. ■

BANK SYSTEMS & TECHNOLOGY ■ WWW.BANKTECH.COM ■ JULY 2011 ■ 27 INNOVATION DRIVERS

Disrupting the Status Quo

To meet regulators’ and customers’ demands, banks are finding innovative approaches to providing financial services, says TowerGroup’s Jim Eckenrode.

NNOVATION” IS A WORD that’s been bandied investment segments and therefore the likelihood of about for quite a long time. In the banking a market entrant disrupting business, as the Amazon industry, the term has been regarded either as Kindle did to Borders Books. “ an oxymoron (like “freezer burn”) or a one- Along with strategizing and planning, bankers way ticket to loan-loss provision purgatory are organizing themselves to innovate. San Antonio- (stated income loans, anyone?). Indeed, it can based USAA, for example, has had a solid record of Ibe argued (and I have) that the last truly innovative innovation recently, thanks to a mix of top-level exec- product in retail banking was the general-purpose utive focus and grass-roots development of ideas by credit card, created by Bank of America back in 1958. All other so-called innovations in banking were either improvements or extensions of existing functions, processes or products. “Most innovation in banking is Being somewhat of a cockeyed optimist, I’m still just an extension of an assuming that the worst of the global financial crisis is behind us, but banks face a period of slow growth existing idea, rather than and depressed earnings. With regulators and customers something truly disruptive.” alternately taking whacks at the banking piñata, some institutions are fighting back with — dare I say it? — innovative approaches to relatively prosaic innovation teams aided by technology platforms that products such as the good-old demand deposit allow for submission and tracking of ideas from con- account. We are also seeing interesting card-based ceptual glimmer to implementation. products such as the Citi 2G card, which includes Corporate venture capital is another source of an embedded microchip, and mobile payments and ideas: Investing in start-ups by VC arms of major social networking are top-of-mind. financial institutions is big business, not only for the Yes, cost cutting and compliance still occupy huge potential return but also in support of technology mind share, but the twin forces mentioned above — transfer. Finally, technology and design firms such regulators and customers — are focusing bankers’ as Cisco, Microsoft and Palo Alto, Calif.-based Ideo minds on doing things differently. Combined with support innovative developments in customer expe- ever-accelerating technology advancements, the rience and product design. potential for disruptive innovation is higher than Nonetheless, most innovation in banking is still ever before. Witness the multiple announcements just an extension of an existing idea, rather than some- this month of new mobile payments initiatives thing truly disruptive. Though we scarcely remember launched by bank consortia, Google and others (see banking without the Internet and can agree that banking related article, page 8). has changed significantly because of it, branch channel transaction volumes are ebbing only slowly even 15 THE ROAD TO INNOVATION years later, and bank business models have not mean- At TowerGroup, we’ve seen a number of examples ingfully changed as a result. As the “digital native” in the past nine months of bankers who are really population segment takes its place among banks’ looking to understand where things are going over most desirable customers, that may yet change. It’s the next three to five years and who are willing to noteworthy to see that banks are in fact interested in change priorities and strategies to account for these planning for innovation once again. ■ changes. The nature of disruption is not the same across financial services verticals; barriers to entry Jim Eckenrode is a research executive with and the pace of technology change have significant Needham, Mass.-based TowerGroup, a Corporate influences on the relative attractiveness of financial Executive Board company.

28 ■ JULY 2011 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY MOBILE SECURITY FEATURE

While it’s a relatively new channel, mobile banking is growing rapidly, and apps are emerging as consumers’ mobile solutions of choice. How do you ensure your app is secure? SECURE CONNECTIONS

BY MATT GUNN @mattgunn

S IS THE CASE WITH ANY DELIVERY CHANNEL, security is at the forefront for banks as they rush to deploy or enhance mobile banking apps in the fast- growing smartphone market. And while many banks’ mobile apps limit customers to basic functions — checking account balances and transaction histories, finding a branch or ATM location, and initiating transfers — a new wave of apps is bringing person-to-person payments, remote deposit capture and bill payA to the mobile channel. Simply, the apps are getting smarter and more capable. But with those capabilities comes the potential for greater threats. “Clearly everyone is concerned about mobile who prefer downloadable apps, banks often deploy security,” says Jacob Jegher, senior analyst for Boston- mobile banking applications across multiple platforms based Celent’s banking group. “But we haven’t really — Apple’s iOS, Google’s Android, Research in Motion’s seen the brunt of the challenges that could come BlackBerry and others — and banks have to build with mobile fraud. In other for the strengths and weakness- words, it’s a channel that hasn’t es intrinsic to every device, been heavily targeted.” which adds to the security chal- But the market is expanding lenges. Another wrinkle is that fast, and so is the target for crim- these development efforts are inals. A February IDC (Framing- creating an entirely new kind ham, Mass.) report indicated that of bank channel experience. smartphone sales outpaced PC “As you look at the back- sales for the first time ever in the office systems that are inher- fourth quarter of 2010, with 100.9 ently driving online and mobile, million smartphones shipped ver- they’re the same systems,” says sus 92.1 million PCs. The growth Keith Gordon, SVP, echannels, in smartphone sales could trans- fraud and enrollments executive, late to more opportunity for cus- Charlotte, N.C.-based Bank of tomers to access their banks America ($2.27 trillion in assets). through those devices — either “But the big difference comes via apps or mobile browser — in how our customers are inter- and more opportunity for fraud. acting with us. In an online To keep up with the prolifer- space we’ve got complete con- ation of devices and customers trol of that environment; where- >>

BANK SYSTEMS & TECHNOLOGY ■ WWW.BANKTECH.COM ■ JULY 2011 ■ 29 FEATURE MOBILE SECURITY

as when you look at mobile, we’ve now pushed the app marketplaces themselves. While it’s relatively that functionality out to the customer.” easy for anyone to develop and deploy an app for Developing an app-based mobile banking expe- Google Android, the simplicity of releasing an app rience is completely new for many banks, acknowl- to the Android Marketplace can in itself pose a edges Mark Bregman, EVP and CTO of Mountain risk to customers, who sometimes can’t see the View, Calif.-based security firm Symantec Corp., difference between an app released by a bank and who stresses that security should be paramount in a banking app built by a third party, Sievers notes. the process. “In a way you have to be more systematic On the other hand, Apple enforces an approval in planning for and building mobile banking apps process for all apps released to its iTunes App than you did with web-based apps,” Bregman says. Store, but this process can slow deployment. “On the other side of it, things are moving very fast According to Sievers, however, the Apple model toward mobility — if you’re a bank and you decide isn’t necessarily a bad thing. “There are huge to wait too long, you run the risk of being left behind.” benefits to that,” he contends. “What I would say is, a lot of developers who don’t provide secure UNDERSTANDING THE RISKS solutions — those guys get held up by the curation Because mobile banking via downloadable app is of the App Store. But when you look at the Android a relatively new phenomenon — the Apple iTunes market and you see apps that are out there pre- App Store dates back to July 2008, and the Android tending to be a bank, or you’ve got apps just loaded Marketplace debuted that October — the current with malware — it goes to show you there’s an list of threats is poorly understood, if somewhat inherent value in having a curated system.” short. But that doesn’t mean the threat isn’t real Regardless, deploying a successful mobile — even if the app itself is not the problem. banking application to consumers is not as simple In the PC-based online banking space, customers as programming an “official” banking app and sub- are vulnerable to spyware, malware and Trojans, mitting it to the appropriate app marketplace. The as well as threats such as email phishing. The issue of understanding the platform upon which threats to mobile apps may not be the same, notes the app is developed and making sure to program Bregman. “Frankly, I think it’s going to be less with that OS’s strengths and, perhaps more impor- about antivirus in the traditional sense that I’m tant, weaknesses in mind keeps coming back. “They’re not the same as your PC,” Rick Howard, “We haven’t general manager of VeriSign (Dulles, Va.) iDefense Security Intelligence Services, a network of security really seen the professionals, says of mobile devices. “If you’re a brunt of the programmer and you’re writing for your Windows challenges that box, you have a general understanding of where your files go and where things fit in place. But on a mobile could come with phone, there’s not as much transparency there.” mobile fraud.” With that in mind, BofA’s Gordon says the priority when developing Bank of America’s mobile JACOB JEGHER Celent apps — regardless of the mobile OS — is first and foremost to secure data. “Beyond that we had to make sure that that code — in the application worried about a bad piece of software getting on itself — was secure,” he adds. Whether a smartphone a mobile phone,” he says. “As mobile banking and maintains its out-of-the-box settings or is jailbroken mobile commerce become more important, we or compromised, Gordon says, BofA works to are going to see other things come into play.” make sure the application code itself is secure. In 2010, for instance, New York-based Citibank’s Finally, he continues, it’s a matter of getting back iPhone app was found to be storing customers’ to the basics and ensuring that the connection data on their phones, with obvious privacy impli- between the customer and the bank is safe. cations. Meanwhile, Google (New York) has had to pull a number of apps from the Android Mar- SACRIFICING INNOVATION FOR SECURITY? ketplace built by an anonymous developer who As banks work to deploy mobile banking apps, was creating fake bank apps that attempted to they walk a fine line between innovation and risk, exploit information on users’ devices in order to the experts admit. According to Gordon, to ensure commit banking and card fraud. that a mobile offering is secure, many banks are With these incidents as examples, Drew Sievers, limiting their apps’ functionality. “One of the things cofounder and CEO of Larkspur, Calif.-based mobile banks are staying pretty consistent on ... is the banking provider mFoundry, says one of the impor- idea of limiting the functionality of what’s on tant factors in mobile app security is understanding mobile versus what’s online,” he says.

30 ■ JULY 2011 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY Security remains a top priority, confirms Alex else, the bank needs to take kind of this multichannel Sion, VP of financial services at SapientNitro, a approach to fraud detection,” Celent’s Jegher says. division of Sapient (Boston). “It’s absolutely top “Regardless of what [device] you pick up as a cus- of mind,” he says. “But sometimes security and tomer, you shouldn’t have to worry about it.” the thinking around security is compromising Just because it’s a mobile app that provides a speed and innovation.” somewhat different experience from the other But mFoundry’s Sievers argues that app-based channels in which customers access their banks, interactions actually are safer than the alternatives. the damage if an account gets compromised is just “What we’ve learned with online banking in this as real. And as with any type of account security, industry is, people are going to try and phish you, people are going to try man-in-the-middle attacks,” he says. “With mobile, the most-used mode is app “Mobile ... has [as opposed to mobile browser or text message]. our highest And that mode also is the most secure by far.” attention as it A mobile app provides a direct conduit of sorts between the customer’s device and the bank, relates to what whereas there potentially is more going on with we can offer to a PC-based web browser, notes Ed Gainer, EVP of cash management in North America for bank our customers.” technology provider Fundtech. “As I look at our KEITH GORDON web applications, I actually think that mobile is Bank of America more secure because of its ability to go computer to computer effectively — from an app to an app customers are going to hold their banks accountable — as opposed to a browser on a PC,” he says. “It to protect them, suggests Symantec’s Bregman. is a more secure way of doing things.” “Fundamentally, the banks are just dealing A customer using a bank app on a mobile net- with information,” he says. “If you do that from work might just be safer than a customer accessing the mobile device and that device gets compro- online banking on a PC using an open Wi-Fi con- mised, as a customer, I would get very upset, and nection, according to Celent’s Jegher. “It’s not as I would blame my bank.” secure as, say, if you’re sitting behind a firewall BofA’s Gordon says customer outreach is impor- in your office,” he says. “But it’s more secure than tant in creating consumer confidence in the channel. an open Wi-Fi connection that anyone can watch.” Banks, he adds, have a role in making sure cus- Jersey City, N.J.-based Fundtech is building tomers know that the apps they’re downloading apps for commercial banking, an area in which, to their devices are legitimate bank apps. But BofA especially on tablets such as Apple’s iPad, the ven- is taking this responsibility further — according dor’s Gainer sees an opportunity for creating novel to Gordon, the bank is developing a remote kill portable banking experiences with security that function so that, in the event a malicious app is is comfortable for users at the C-suite or enterprise downloaded to a customer’s device, it can be level. He says a mobile app is a good way to ensure remotely stopped and removed from the device. a secure, device-to-device experience. “Mobile is our fastest-growing channel and has “The simplest way to eliminate man-in-the- our highest attention as it relates to what we can browser or man-in-the-middle-type attacks is to offer to our customers,” Gordon says. “We’re looking use two different devices,” rather than communicate forward to some of the capabilities we can roll out over a standard Internet connection, he says. to our customers over the next 12 to 18 months.” “Someone can hack a [web] session. But the odds A well-informed customer using a mobile of them simultaneously hacking two different ses- banking app can serve as an added layer of pro- sions on two different devices — the odds of that tection in itself. Simply having a mobile app with are pretty much nil.” enough functionality to show account balances and transaction history, and send account alerts, REASSURING CUSTOMERS IT’S SAFE along with a customer who uses it regularly, could Ultimately, no one — banker or customer — wants help customers identify any occurrence of fraud to experience a case of bank account fraud. As more as it happens, Celent’s Jegher notes. customers download mobile apps and access their “It’s one of the main reasons to enroll in mobile bank accounts through that channel, banks need banking,” he says. “As a customer, you now have to add mobile security as another layer to their control. And that control can help you actively overall approach to multichannel antifraud efforts. manage your financial situation and ultimately help “Whether it’s online, mobile, tablet or anything you prevent fraud in your account.” ■

BANK SYSTEMS & TECHNOLOGY ■ WWW.BANKTECH.COM ■ JULY 2011 ■ 31 BEST PRACTICES

DATA CENTERS In Balance

Austin Bank transparently and cost-effectively maximizes mobile banking performance in a virtualized environment with virtual load balancing software from KEMP Technologies.

BY ANNE RAWLAND GABRIEL

AVING VIRTUALIZED 95 However, the bank already had lever- into a single interface to access all banking percent of its data center in aged VMware (Palo Alto, Calif.) to vir- applications and making external traffic 2008, Jacksonville, Texas- tualize a mainframe and four IBM boxes faster and more reliable, Sowell says. based Austin Bank faced a running about 70 virtual machines in its “Regardless of how many features Hnew challenge in late 2010 when strong headquarters data center. Some 40 miles we add to our online banking, we still mobile banking adoption among its cus- away, a disaster recovery (DR) site within have to push traffic through the same tomers coincided with a merger that one of Austin’s branch locations contained pipe,” he observes. “The VLMs maximize delivered a significant number of new a similarly virtualized environment. The performance, making the added com- customers. As online and mobile banking most recent generation of physical KEMP plexity transparent to the end user.” users skyrocketed, the bank experienced devices also had been deployed at both In addition, the VLM software allowed a network appliance malfunction that the main and remote locations. Austin Bank to begin balancing online it was unable to resolve in production. In search of a solution to prevent and email traffic between the main data Had the issue occurred prior to vir- future outages in the bank’s virtualized center and the DR site. “This turned tualizing, the bank’s physical load bal- environment, Sowell called KEMP and our DR location into a hot site,” Sowell ancing appliance — LoadMaster from discovered that the vendor offered a notes. “If there is an outage at one loca- Yaphank, N.Y.-based KEMP Technologies new virtual software option, the Virtual tion, such as during a storm, traffic automatically routes to the other with “We not only shifted traffic no perceived difference to the end user.” VLM also makes network adminis- between two virtual servers tration a snap, Sowell adds. “Before, but also between distant sites.” we’d take online banking down over a JEFF SOWELL weekend to apply patches, updates and Austin Bank upgrades,” he says. “Now, we do it on the fly, during weekdays.” Moving forward, the bank will load — would have automatically shifted LoadMaster (VLM). Rather than support balance internal banking applications traffic non-disruptively to allow affected two different vendors, Austin Bank ($1.2 between the main and DR locations, machines to go offline, explains Jeff billion in total assets) decided to stick as well as online and email apps. “At Sowell, Austin’s VP and network support with the proven partner. the moment, the limitation is the way manager. “With the added demands After purchasing the solution online, banking application vendors wrote from mobile and the merger, we needed Sowell says, he downloaded, installed their software,” Sowell explains. “Once the same [load balancing] capability and configured it on the spot, going live vendors upgrade their applications to for our virtual environment,” he says. within about two hours. “Since we were permit load balancing, we will begin familiar with the vendor, we were com- doing so immediately.” fortable installing VLM during the busi- With so many capabilities available SNAPSHOT ness day,” he remarks. at the click of a mouse, Austin Bank’s setup is getting noticed. “A Houston INSTITUTION: Austin Bank VIRTUAL ADVANTAGES banker recently visited us,” reports Sow- (Jacksonville, Texas). Within just a few weeks Austin Bank was ell. “He was flabbergasted that we not ASSETS: $1.2 billion. leveraging other VLM capabilities to only shifted traffic between two virtual BUSINESS CHALLENGE: further streamline IT operations, according servers but also between distant sites. Maximize mobile banking perform- to Sowell. First, in combination with the Plus, VLM takes up very little space, ance in a virtualized environment. SOLUTION: KEMP Technologies’ physical LoadMaster appliances, the bank uses very little CPU and eliminates hard- (Yaphank, N.Y.) Virtual LoadMaster separated internal traffic from external ware failure concerns. Due to the benefits, (VLM) load balancing software. traffic, permitting internal users to log the cost of VLM is washed away.” ■

32 ■ JULY 2011 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY e Worst-Case Scenario Backup and Recovery Handbook

How to BACKUP & RECOVER REMOTE OR BRANCH OFFICE DATA While Escaping from Quicksand.

Stu happens. But with SunGard® Availability Services online backup and recovery, a backup failure is one worst-case scenario you’ll never have to face. SunGard solutions are the perfect way to gain central control over Remote or Branch O ces. Because backups and restores are done online, they can be easily managed by a central IT sta , ending headaches related to short backup windows or transporting tapes. At the same time, your bank or credit union can stay compliant with Gramm-Leach-Bliley, FFIEC or SOX backup regulations. Supported by world-class SunGard expertise, you’re always on solid ground.

Learn how to avoid quicksand — and survive nearly any other worst-case scenario — with a free Survival Handbook. Get yours today at sungardas.com/WCSBK1.

©2011 SunGard. SunGard and the SunGard logo are trademarks or registered trademarks of SunGard Data Systems Inc. or its subsidiaries in the U.S. and other countries. All other trade names are trademarks or registered trademarks of their respective holders. WORST-CASE SCENARIO ® trademark and elements of WORST-CASE SCENARIO ® trade dress are used under license from and with the exclusive permission of Quirk Productions, Inc. www.worstcasescenarios.com. Based on The Worst-Case Scenario Survival Handbook, published by Chronicle Books. EXECUTIVE WATCH

Former BB&T Exec Joins SunTrust as Head of Treasury & Payment Solutions

RIC BREWER HAS served as president of Creative Payment joined Atlanta-based Solutions, a wholly owned BB&T sub- SunTrust Banks ($170.8 sidiary that offers electronic payment billion in total assets) products and services to financial insti- as executive vice pres- tutions for resale to their clients. He ident and head of treas- previously served as head of Europe, ury and payment solu- Middle East and Africa regional trans- tions. Brewer will be Eric Brewer, action banking and cash flow advisory responsible for treasury management sales, SunTrust sales for ABN AMRO. Etreasury management services, commercial “As the financial services industry card services, merchant services, treasury product evolves and adjusts to new economic and regulatory management, business deposit management and realities, treasury and payment services will only global trade services. He will report to Mark continue to grow in importance for our clients Chancy, who recently was named wholesale bank- and SunTrust,” said Chancy in a release announcing ing executive, a newly created post overseeing Brewer’s hiring. “Eric’s substantial experience SunTrust’s wholesale banking businesses aligned and proven leadership abilities have prepared him as one integrated organization. well to lead delivery of these integrated services Prior to joining SunTrust, Brewer led the treas- going forward, and we are pleased to welcome ury product business line for BB&T Corp. and him to our SunTrust leadership team.” ■

Central Pacific Bank Names New CIO

ENTRAL PACIFIC BANK (CPB) Prior to joining Central Pacific Bank, appointed Glen Blackmon as Blackmon was the managing principal EVP and CIO. In the CIO role, and founder of Trinity M&A Group, a Blackmon is responsible for the mergers and acquisitions advisory service Ccompanywide strategic direction and and consulting firm based in Houston. management of technology for new and He also was president and COO for Inter- existing products and services. Blackmon, net America, a wireless Internet service who also will serve as a member of the Glen Blackmon, provider based in Houston. bank’s executive management committee, Central Pacific As a consultant, Blackmon’s assign- has more than 30 years of experience in Bank ments included managing technology various industries, including financial services, procurement and implementation projects, leading the high-tech sector and third-party administrative strategic planning and technology planning projects business services. for commercial banks and credit unions, and “Glen brings to the bank a wealth of proven advising companies in diverse industries on merger experience and knowledge across many industries and acquisition activities and technology issues. in leveraging information management for growth In addition to Silicon Valley Bank, his experience and profitability,” said John C. Dean, president in the commercial banking sector, either in man- and CEO for Honolulu-based Central Pacific Bank, agement or in consulting/advisory services, includes in a release announcing the appointment. “His positions or engagements with First Interstate role with Central Pacific will be key to our com- (Billings, Mont.), Union National Bank (Tulsa, petitive positioning in a dynamic financial services Okla.), Lakeside National Bank (Lake Charles, La.) industry going forward.” and Coastal Bank Group (Dickinson, Texas). Central Blackmon worked under Dean at Santa Clara, Pacific Bank is the primary subsidiary of Central Calif.-based Silicon Valley Bank during the company’s Pacific Financial Corp., a Hawaii-based bank holding turnaround as its CIO and CFO from 1993 to 1997. company with $4 billion in assets. ■

34 ■ JULY 2011 ■ WWW.BANKTECH.COM ■ BANK SYSTEMS & TECHNOLOGY Clairmail_Fraud_ad_FINAL.indd 2 6/16/11 10:10 AM B:8.25” T:7.75” S:7”

When you work with Visa®, you get IT wunderkinds like Jason. He’s the wizard behind the curtain, orchestrating the formidable task of building a rock-solid prepaid card program that’s custom- tailored to your operating requirements, processing needs and system specs. But Jason and his team don’t just get your prepaid card program up and running. They keep it running—Visa’s DPS authorization system doesn’t take a nanosecond of downtime for granted. Chalk it all up to amazing technology in the hands of amazing people. Find out what Jason and his team can do for you at visadps.com/allsystemsgo.

Transaction Processing Risk Mitigation Business Analytics

B18189_1c_Jason_A A18189x01F_300ucr.tif 04.14.2011 133 linescreen jn

Date: 4-12-2011 3:53 PM Pub: None Inks: CMYK Fonts: Whitney (Semibold, Bold, Book) Client: Visa dential Job Number: Vis-0120-11 Bleed: 8.25” x 11.125” File Name: Vis_Jason_A_Page_Ad_m1.indd Trim: 7.75” x 10.5” Description: Jason A Page Magazine Ad Live: 7” x 9.75” Insertion Date(s): None Gutter: None Notes: Pubs: Bank Systems & Technology, Digital Transactions, US Banker Scale: 1:1 Client Conﬁ Print Scale: 100%

Date Initials OK Date Initials OK Date Initials OK Mechanical Version: Trafﬁ c: Katja Ollendorff Designer: . Project Mgr: Proofreader: Shannon Roy Creative Dir: Michael Fiore Product Mgr: Studio: Stephen Hememway Creative Dir: Rob Price Editor: Client Eleven Diana Courcier Tiffany Titolo Production: Account Mgr: Legal: 1 Copy Writer: Elisabeth Seng Account: Julie Nash Round #: