Thinking Outside the Bank What Can Banks Learn from Other Industries About How to Create a Culture of Innovation in Technolgy and Services?

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FEBRUARY 2012

Thinking outside the bank What can banks learn from other industries about how to create a culture of innovation in technolgy and services?

Only connect The complexities of connecting to trading venues Data daze Big Data is surrounded by hype, but there is substance too Lock up your data European Data Protection rules are about to get a lot tougher Fraud is on the rise 2011 figures show a steep increase Contents February 2012 In this issue

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4 news retAIL 7 news Analysis ■ Staring into the darkness: the latest banking 23 news banana Skins report 25 news Analysis ■ CIFaS figures show a sharp rise in fraud. 17 Cover Focus: thinking outside the bank What can banks learn from other industries rIsk & reguLAtIon about how to create a culture of innovation in technology and services? 26 news trAnsACtIons & PAYMents 28 Lock up your data New european data protection rules will have a big impact on banks and FS companies. 12 news 14 news Analysis It & oPs ■ Heather McKenzie on interchange fees ■ Celent analysts look ahead ■ european institutions holding back innovation 30 news because of harmonisation fixation 31 Data daze big Data is surrounded by hype, but there is MArkets & InvestMents substance behind it after all.

18 news 33 Industry columns & comments 20 only connect The complexities of connecting to the multiple 36 Appointments trading venues springing up may mean that it’s not worth trading in some markets. 40 out of office

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editor David Bannister, +44 207 017 4019 [email protected] Wouldn’t it be nice? Goodness me, is that the time? 2012 already? Regular Contributors Dan Barnes, Sherree Time whizzes by when you’re having fun. DeCovny, Alison Ebbage, Tom Groenfeldt, So, yes, 2012 then; it being the first issue of the Eugene Grygo, Heather McKenzie, Nicholas Pratt, Kristina West, Graham Javis year, it’s traditional to say a few words about the year ahead, perhaps to venture a few predictions, Production Kosh Naran express a few hopes … Here’s a prediction: the suggestion from the Press Releases Send relevant releases to european Savings bank Group that there should [email protected] be a five-year “holiday” from regulation will not be Group Sales Manager Neil Hartley, gratefully seized on by the regulators. exhausted +44 203 377 5385 as they must be from their efforts of the past few [email protected] years, the regulators are only just warming up. These people like regulating, and the banking Senior Sales executive Leon Thomson, +44 203 377 3493 industry has given them their biggest career boost in decades. [email protected] It’s pretty simple: regulators are beholden to their political masters, and they, in turn, are beholden to the voting public. That almost makes me feel sorry for politicians, the events Manager voting public being easily persuaded to turn into a baying mob. Want to find the Higgs Gemma Healy, +44 207 017 6752 boson? Get the Sun to run a story saying it causes paedophilia. [email protected] We can debate all we like about the effect of a eurozone country dropping out of the single currency, or whether the complexities of connecting to the various swaps Marketing and Circulation Kira McKinney, clearing systems make it hardly worth trading swaps any more, it won’t matter: no-one +44 203 377 3958 [email protected] can hear us over the noise of fat-cat bankers running down the road with barrow-loads of gold. Subscriptions and Renewals John Browne, They may as well all dress up as Captain Jack Sparrow and be done with it. you +44 207 017 75171 don’t have to be the kind of rocket scientist who used to be employed by investment [email protected] banks to construct complex synthetic derivatives to realise that if you go cap in hand For Reprints and Web Publishing Rights to a government for a billion dollar bail-out you don’t then stuff a couple of million in Please contact Leon Thomson on your pocket. +44 203 377 3493 at best it’s bad manners, like a tramp pinching the cutlery after a free meal at the Salvation army. ©2012 Banking Technology In response to that sort of behaviour, 2012 has kicked off with a lot of talk about All rights reserved; no part of this publication may be reproduced, stored in a retrieval system, or looking for some new form of capitalism. I’m particularly fond of the suggestion from transmitted in any form or by any means, electrical, Nick Clegg – the deputy prime minister of the united Kingdom – that firms should be mechanical, photocopying, recording, or otherwise run along the lines of the John Lewis Partnership, where all the staff are partners and without the prior written permission of the publisher. get a share in any profits. Banking Technology is published 10 times a year Maybe he’s right: it worked at Goldman Sachs for many years – a staple of the by Informa Business Information, a trading division financial pages used to be how much money the cleaners and receptionists there of Informa UK Ltd, 1-2 Bolt Court, Fleet Street, were getting when the annual bonuses were handed out. I rather suspect Mr Clegg London, EC4A 3DQ, UK. would probably want to cap the bonuses there. (unfortunately, the cleaners’ bonuses aren’t covered by the excellent site www.glassdoor.com, but I see a technology analyst 1-2 Bolt Court Printer: Wyndeham Grange, Southwick, UK. Fleet Street in London on £37k average might be in line for a £6k bonus, which strikes me as London Subscription enquiries: Customer Service Dept, generous, but not particularly outrageous.) EC4A 3DQ Informa UK Ltd, Sheepen Place, Colchester, CO3 unfortunately, another suggestion that is likely to go the same way as the eSbG’s 3LP. Tel: +44 (0)207 017 5540, Fax: +44 (0)20 proposed regulatory holiday is from JPMorgan chief executive Jamie Dimon. With JPM 7017 4614, Email: [email protected] Annual Subscription: UK £690, Europe €860, US/ coming out of the crisis rather less tarnished than others, Dimon speaks with more rest of world $1,235. moral authority than his peers – which is to praise with a faint damn, I realise – but he’s still a banker on a big salary so no-one is going to listen to his rather simple observation. Member of the Audit Bureau of Circulation Speaking at the World economic Forum in Davos last month, Dimon said that the Average net circulation for the period 1st July 2010 banking industry, the politicians and the regulators are all pulling in different directions. to 30th June 2011 – 8,171 In an interview with CNN, he said: “I think it would be good if we all got together ISSN 0266-0865 and said, ‘OK, what are we trying to accomplish?’ because I think anything can be accomplished.” you may say he’s a dreamer … let’s hope he’s not the only one. BT

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is also on back-office systems to take information from the wide range of specialist front-office trading systems and provide a comprehensive, cohesive view of business BIAN eyes US as NEWS performance and exposure to risk.” February 2012 In addition to its broad capabilities and functionality, Inferno is differentiated in the IBM signs up marketplace in several other ways. Firstly it has been designed by practitioners and a T giant IbM has become the latest multi-disciplined team of developers and accountants, who also support the product. member of the banking Industry “We are able to deliver very high standards and quality of service rooted in a deep Iarchitecture Network, a consortium BBVA goes into the KBC staff in management buy-out of practical knowledge of settlement and trade accounting so are able to solve business that is promoting the development and as well as technical issues,” Collings said. use of a service-oriented architecture cloud with Google post-trade systems form new company “Complex products can cause difficulties for other systems, No-one yet knows standard in the banking industry. where or what will emerge as the next complex market, but Inferno will make it easier Launched in 2008, bIaN is gathering panish bank bbVa is to Support of existing clients makes Torstone self-funding for firms to participate at an early stage, not be constrained by inflexible systems and momentum, its supporters say. In 2011, adopt Google’s cloud-based by David Bannister be equipped to rationalise settlements on a global basis.” BT nine new members joined, and the Scollaboration and communication consortium launched its new service suite Google apps for business across group of former developers landscape. The addition of IbM is seen its operations. and IT staff from KbC Financial Swift and SIA/Colt both awarded as something of a landmark. Over 35,000 bbVa workers in Spain Aproducts have taken over the as well as becoming a full member will initially use the productivity tools systems they developed at the bank of the bIaN community, Chae an, IbM’s integrated in to the Google apps suite, and set up as an independent with licences for T2S connectivity vice president of financial services including Gmail with Google Chat, what they claim is “the first major onnectivity to the Target2-Securities settlement system will be provided by solutions, will take a position on bIaN’s Google Calendar, Google Docs, Google release of post-trade securities and Swift and a partnership between telecoms provider Colt and SIa, the Italian board. Groups, Google Sites and Google derivatives processing software in Cpayment services provider. “expanding into the uS is one of Video. by the end of this year bbVa almost a decade”. Following a public procurement process run by the banca d’Italia on behalf of bIaN’s strategic objectives for 2012, expects to migrate 110,000 employees The management team behind the Central banks of the eurosystem, both have been awarded a licence to provide and given IbM’s huge presence in the in over 26 countries to Google apps. Torstone Technology reached an connectivity services to T2S, which is intended to offer a neutral, harmonised uS banking space, we are now even bbVa’s new global intranet will agreement with the KbC Group on a and commoditised delivery-versus-payment settlement in central bank money in better positioned to achieve this goal," be transformed using Google’s management buy-out of the software substantially all securities in europe. said Hans Tesselaar, executive director collaboration tools, changing it from a and the development and support Specifications for direct connectivity to the system by institutions have yet to be of bIaN. "We soon hope to welcome corporate communications and process team. Currently there are some 22 finalised, raising the question of whether the larger institutions, hitherto expected to the first uS banks as members, management site to a place where staff globally, largely where the KbC connect using existing networks, will now bother to take that route or connect using joining fellow North american bank, all employees can share, contribute Financial Products operations were, either Swift or the SIa/Colt services. Scotiabank, who joined bIaN in 2011.” and manage knowledge globally. In and it is planning to hire as new both are predicting that their options will be competitive in cost and service terms “Many of IbM’s existing clients use addition, bbVa will create a social business comes along. with in-house developments. bIaN models, and had expressed network to improve communication as a result, although Torstone as a future Network Service Provider, Swift will design, implement, deliver and an interest in aligning more with an and explore new ways of working. Technology is a new company, the operate its own connectivity solution for the secure exchange of business information, open standard, while maintaining “We were looking for a technology Inferno system has been widely in ISO 20022 format, between directly-connected participants and the T2S platform. their investment in the IbM industry that would transform our business deployed and proven to support SaI and Colt plan to develop secure, high-speed connectivity and messaging models. For IbM, this is a positive operations, not just make our workers highly complex, structured credit services in line with the requirements and specifications defined by the eCb. SIa strategic alliance which marks a shift more efficient,” said José Olalla, chief and equity derivatives as well as high and Colt’s network architecture will also allow CSDs such as Montetitoli, euroclear from closed, proprietary standards, information officer at bbVa. “Integrating volume equity products. and Clearstream, central banks and the major banks operating at european level to to an open interoperable and global the Google apps for business suite with The new business is self-funding, access the new securities transactions settlement platform. environment.” Collings: staff funded buy-out our own tools will allow us to introduce through the support of existing T2S was conceived in 2008 by the european Central bank and will be managed IbM’s an added: “Open standards a new way of working where employees clients in New york, Hong Kong and London, though the team has also taken out by four central banks (banca d’Italia, Deutsche bundesbank, banque de France create interoperability and accelerate have access to all the information they a commercial loan. Products processed through Inferno include equities, bonds, and banco de españa). It will create a single european platform for the settlement the adoption of new technologies that need with just one click, no matter where convertible bonds, reverse mortgages, warrants, and equity, FX, insurance, credit and of domestic and cross-border securities transactions and integrate post-trading help industries work more intelligently. they are, and can reap the benefits of fund derivatives. infrastructures, which are still fragmented 10 years after the introduction of the single bIaN’s collaboration with industry using advanced collaboration tools.” “Inferno was born out of the shortcomings and inflexibility of other settlement currency. groups such as Object Management Collaboration tools such as Google systems to meet the processing requirements of a wide range of instruments, complex Officially pushed back, theT2S platform is now planned for mid-2015. according Group and Swift demonstrates its Talk, Google Sites and Google Docs trades, multiple venues and the demands of very high volumes,” said brian Collings, to european Central bank figures, it will process a daily average of over one million commitment to making its banking allow users to communicate and Torstone’s chairman and chief executive. Originally it was developed for statistical securities transactions with positive effects on the costs of cross-border settlements, models more valuable to its members. share ideas more easily. With Google arbitrage trading environments. where it is forecast there will be a significant reduction. Through the bIaN community, IbM will Docs, for example, many people can Targeting regional and mid-sized investment banks, asset managers, hedge funds SIa currently processes a daily average of over three million transactions through work to address the requirements of simultaneously work on one document. and brokers, the enterprise-level clearing, settlement and integrated accounting a proprietary network infrastructure, SIanet, with two operational hubs, one in Milan financial institutions through solutions “Companies of all sizes, including application supports multi-asset, multi-currency and multi-location operations. It and one in London. based on open standards.” those with tens of thousands of addresses today’s pressing needs to reduce middle- and back-office costs and support “This important success provides confirmation of our central role in europe in Currently bIaN has 30 members employees, are now embracing the front office with improved operational efficiency, simplified regulatory compliance, the design and creation of infrastructures for financial and central institutions and among the banking and software cloud computing. It shows that cloud better client service and risk management. recognition of a ‘made in Italy’ technology that is on equal terms with that of foreign industries, including ING, computing is now a reality, and leading “The financial markets have become so fragmented with increasing numbers of players,” said Massimo arrighetti, chief executive of SIa. “This result demonstrates Commonwealth bank of australia, organisations are already realising its trading venues, centralised counterparties and rules, that middle- and back-office our ability to compete on the market with internationally recognised companies. at Credit Suisse, Microsoft, Scotiabank, potential to transform their business,” costs and efficiencies are under the spotlight more than ever before. People are asking the same time, it contributes to the creation of a network of excellence aimed at SaP, Callataÿ & Wouters, Infosys, said Sebastien Marotte, vice president has it now become more cost-effective for the back office to invest in one application ongoing innovation and system improvement which is the objective of our partnership SunGard and Temenos. BT of Google enterprise eMea. BT that can address all our needs rather than maintain disparate solutions? The pressure strategy.”BT www.bian.org

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News NewS: ANALYSIS February 2012 Go to www.bankingtech.com for the latest news and comment February 2012 Staring into the darkness A pilot of the Swiss Terravis electronic real estate business transaction software company CsC is using application modernisation, service has begun in the Canton of Thurgau and will run until the end testing and management solutions from Micro Focus Banks face multiple threats, but technology isn’t high on the list right now, according to the latest Banking of June. The system allows transactions between land registries, technologies to offer end-to-end enterprise software for Banana Skins report. notary offices and banks through a single interface. Credit Suisse, banking, cards, payments and lending across a broader range Good news for technologists: Concern about the ability of banks to dependence on a few key people. One Raiffeisenbank, Thurgauer Kantonalbank and UBS are taking part in of platforms and operating systems. CsC’s Celeriti suite technology dependence isn’t high on manage their way out of the crisis is also respondent said that “too many process the pilot, which is part of the eGRIS project and is being carried out makes use of Micro Focus server enterprise edition, which the list of threats to the global banking high: weakness in corporate governance critical IT staff are being fired [as a result under the supervision and with the approval of the Federal Office of allows customers to select operating platforms based on their system. The bad news is that the outlook (9) and risk management (10) are both of] short term-focused management Justice, the Cantons of Thurgau and Uri and the Swiss National Bank. particular total cost of ownership, security, high availability is not good for a host of other reasons: seen as Top Ten risks. a fast-rising risk is decisions”. and transaction volume requirements. Using server enterprise the risk of another global recession and a business continuation (up from 21 to 12), Many respondents expected that the Cashflows, part of the Voice Commerce Group and provider of edition, Celeriti is able to provide Linux, Unix and windows renewed banking crisis is high, according i.e. the ability of the banking system to robustness of bank technology would be business payment solutions, has become a member of swift. platforms for midsize and small banks, third-party processors, to the Center for Financial Services survive the failure of a major institution. severely tested by the current banking The relationship builds on Cashflows' existing membership of and global banks wanting multiple, in-country deployments Innovation’s annual banking banana “The picture painted by this survey conditions. There was “an increased risk the Visa and MasterCard schemes and extends the scope of using a single codebase. Skins survey, produced in association is very bleak,” said David Lascelles, the at present due to a nervous and volatile its global payments network through the use of its own IBAN with PwC, which puts macro-economic survey’s editor. “It shows a fragile banking market background amplifying the number – CAsH GB2L – which will be used in all messaging. swift has chosen business intelligence software from Microstrategy risk at the top of the list of 30 risks. system beset by major threats and consequences, though not the probability, Voice Commerce Group was the first fully authorised Payment as the basis of improvements to its BI service offering that is used The poll also shows that anxiety about uncertainties.” of failure”, said one. Institution to qualify under the 2nd electronic Money Directive by participating banking organisations, securities institutions, and the outlook for banks is at its highest level andrew Gray, banking partner at PwC, For the first time, the survey shows the in the UK. corporate customers worldwide. MicroStrategy will be used to track since the survey was started 13 years said: “banks are clearly worried about risk outlook to be better in the emerging and analyse interbank payment message traffic flowing through ago. Many respondents expect to see the dangers posed by continued turmoil economies than the industrialised world. Asset Control, a provider of financial data management systems, has the Swift network, to monitor underlying value and currency flows, further bank failures and nationalisations. in the eurozone, the threat of a further respondents from regions such as Latin integrated the DTCC Solutions Global Corporate Actions Validation allowing users to “better understand their position in the market, The poll is based on responses from more credit squeeze and uncertainty created america, africa, asia and the Far east Service into its AC Plus data management product as a standard track sales performance, manage counterparty risk, and enhance than 700 bankers, regulators and close of by continued regulatory changes. against ranked their prospects more positively function. This gives direct connectivity to DTCC’s pre-validated operational efficiencies by identifying targets for cost savings”. the banking industry in 58 countries. this backdrop many banks will struggle than North america and europe thanks corporate actions data. The interface allows clients to populate their The main cause of anxiety is the to generate adequate returns across their to stronger growth, though they felt in-house repository with DTCC Solutions’ data and link to various other Misys is to incorporate IBM business analytics, information eurozone crisis which contains the threat business. banks will be forced to reshape vulnerable to global banking shocks. data types, including instrument and pricing data. management and application server software, including of sovereign default by several countries. their businesses and further job losses However, the survey also showed Business Process server, into its BankFusion platform, The shock of a euro collapse would hit across the sector seem inevitable as mounting concern about the prospects Fundtech has partnered with Dataline, an Australian payment allowing users to tailor complex workflows without custom banks not just in europe but in all major banks seek to drive down costs.” for China as its economy slows. BT solution and services company, to offer electronic invoice programming using BankFusion and IBM’s library of regions of the world. bankers in countries While dependence on technology is not presentment and payment and related financial supply chain automated business processes. Misys is also adopting IBM’s as wide apart as the uS, Canada, China, seen as a risk per se, several respondents Banking Banana Skins 2012 services to corporate customers in Asia Pacific. Dataline’s Information Framework and will work to ensure that the argentina and australia put the euro crisis pointed out that it is a key factor as (2010 ranking in brackets) products complement Fundtech’s Accountis eIPP service. processes developed within its BankFusion solutions follow at the top of their list of concerns. banking becomes more technology 1 Macro-economic risk (4) working together, the pair will offer a complete range of the framework’s comprehensive business and data models. The first consequence of a crash would driven. One Japanese respondent said: 2 Credit risk (2) financial supply chain solutions, which includes outbound and This will enable Misys to accelerate the development of new be large credit losses, which appear at “The banking industry is effectively a 3 Liquidity (5) inbound e-invoicing, AP workflow automation, data scanning, banking processes. Number 2 on the list. but these would be technology industry.” 4 Capital availability (6) e-payments support and online expenses management. followed by a funding crisis with banks Geographically, this was a concern 5 Political interference (1) QuantHouse has added a feed handler for the Hotspot FX ECN, cut off from access to liquidity and fresh in the Far east, notably China, which is 6 Regulation (3) euclid Opportunities, ICAP’s early stage financial technology fund, allowing algorithmic trading firms sub-millisecond access Hotspot capital (Numbers 3 and 4). perhaps related to another issue that was 7 Profitability (-) has invested in London-based software firm Model Two Zero, which FX’s program trading applications. The ultra-low latency QuantFEED, Complicating the picture is the increase raised: the rise of hacking and cybercrime. 8 Derivatives (7) is developing new matching, reconciliation and data-translation captures raw data from the exchange, performs sub-millisecond in political interference (5) and regulation In general, the concerns expressed 9 Corporate governance (12) technologies. A number of Model Two Zero clients are now using decoding and delivers normalised data through a single API. (6) of the banking industry. although about technology risk centred on the 10 Quality of risk management (8) this technology to validate, enrich and reconcile volumes of complex regulatory initiatives are intended to bring adequacy of banks’ plans to deal 11 Pricing of risk (9) trading and transactional data. Post-trade services provider Omgeo reports a 38% year- about a solution to the banking crisis, with failure in a high impact, albeit 12 Business continuation (21) on-year increase in the number of investment managers they are also adding cost and distraction low probability, area and the level of 13 Back office (24) Oman International Bank, a leading retail and commercial and broker/dealers using its Central Trade Manager, for the to banks, and making it harder for them to management understanding. 14 Management incentives (16) bank in Oman, has selected sunGard’s Ambit Treasury central matching of cross-border and non-Us domestic equity supply credit to the economy. another concern was a perceived high 15 Change management (28) Management, ALM and Credit Risk Management software and fixed income transactions. It now has over 950 clients 16 Hedge funds (19) to help integrate treasury operations, reduce operational worldwide, including the addition of 265 investment managers. 17 Interest rates (14) costs and perform real-time regulatory reporting. The bank same-day affirmation rates on Omgeo CTM average 93%, 18 High dependence on technology (18) plans to establish a centralised front-to-back-office treasury versus locally matched trades with same-day affirmation rates 19 Currencies (11) operation providing support for multiple asset classes. averaging only 72%, it is claimed. 20 Business practices (22) with Ambit ALM, OIB can perform funds transfer pricing 21 Equity markets (10) and multi-dimensional analyses of the balance sheet by Sofgen, the international banking and IT consulting group and New 22 Emerging markets (17) modelling customer behaviour, economic valuation, interest Access, a provider of front office solutions for banks, have announces 23 Rogue trader (20) rate scenarios, and a range of other variables. a global services partnership. New Access will use Sofgen’s 24 Criminality (27) international network of 18 offices to provide implementation services 25 Sustainability (25) sIX Telekurs is to make 70 redundancies in Belgium, Luxemburg, and, where required, localisation and customisation. Sofgen delivers 26 Commodities (13) Switzerland, the UK and US in early 2012, including some 25 positions IT solutions to the banking and related financial services industry, with 27 Fraud (15) at the company’s headquarters in Switzerland. The move comes in a focus on private banking and wealth management. New Access’ 28 Human resources (-) the wake of a decision to renew its existing outsourcing contract with Front Office solutions offer an integrated platform for relationship 29 Reliance on third parties (-) Capgemini for data production centres in Poland and India, to which it managers, as well as portfolio, client relationship and document 30 Payment systems (26) will shift additional manual data input from the in-house locations. management solutions. BT Source: CSFI/PwC Source: CSFI/PwC Source:

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NewS: ANALYSIS February 2012

Staring into the darkness Banks face multiple threats, but technology isn’t high on the list right now, according to the latest Banking Banana Skins report. Good news for technologists: Concern about the ability of banks to dependence on a few key people. One technology dependence isn’t high on manage their way out of the crisis is also respondent said that “too many process the list of threats to the global banking high: weakness in corporate governance critical IT staff are being fired [as a result system. The bad news is that the outlook (9) and risk management (10) are both of] short term-focused management is not good for a host of other reasons: seen as Top Ten risks. a fast-rising risk is decisions”. the risk of another global recession and a business continuation (up from 21 to 12), Many respondents expected that the renewed banking crisis is high, according i.e. the ability of the banking system to robustness of bank technology would be to the Center for Financial Services survive the failure of a major institution. severely tested by the current banking Innovation’s annual banking banana “The picture painted by this survey conditions. There was “an increased risk Skins survey, produced in association is very bleak,” said David Lascelles, the at present due to a nervous and volatile with PwC, which puts macro-economic survey’s editor. “It shows a fragile banking market background amplifying the risk at the top of the list of 30 risks. system beset by major threats and consequences, though not the probability, The poll also shows that anxiety about uncertainties.” of failure”, said one. the outlook for banks is at its highest level andrew Gray, banking partner at PwC, For the first time, the survey shows the since the survey was started 13 years said: “banks are clearly worried about risk outlook to be better in the emerging ago. Many respondents expect to see the dangers posed by continued turmoil economies than the industrialised world. further bank failures and nationalisations. in the eurozone, the threat of a further respondents from regions such as Latin The poll is based on responses from more credit squeeze and uncertainty created america, africa, asia and the Far east than 700 bankers, regulators and close of by continued regulatory changes. against ranked their prospects more positively the banking industry in 58 countries. this backdrop many banks will struggle than North america and europe thanks The main cause of anxiety is the to generate adequate returns across their to stronger growth, though they felt eurozone crisis which contains the threat business. banks will be forced to reshape vulnerable to global banking shocks. of sovereign default by several countries. their businesses and further job losses However, the survey also showed The shock of a euro collapse would hit across the sector seem inevitable as mounting concern about the prospects banks not just in europe but in all major banks seek to drive down costs.” for China as its economy slows. BT regions of the world. bankers in countries While dependence on technology is not as wide apart as the uS, Canada, China, seen as a risk per se, several respondents Banking Banana Skins 2012 argentina and australia put the euro crisis pointed out that it is a key factor as (2010 ranking in brackets) at the top of their list of concerns. banking becomes more technology 1 Macro-economic risk (4) The first consequence of a crash would driven. One Japanese respondent said: 2 Credit risk (2) be large credit losses, which appear at “The banking industry is effectively a 3 Liquidity (5) Number 2 on the list. but these would be technology industry.” 4 Capital availability (6) followed by a funding crisis with banks Geographically, this was a concern 5 Political interference (1) cut off from access to liquidity and fresh in the Far east, notably China, which is 6 Regulation (3) capital (Numbers 3 and 4). perhaps related to another issue that was 7 Profitability (-) Complicating the picture is the increase raised: the rise of hacking and cybercrime. 8 Derivatives (7) in political interference (5) and regulation In general, the concerns expressed 9 Corporate governance (12) (6) of the banking industry. although about technology risk centred on the 10 Quality of risk management (8) regulatory initiatives are intended to bring adequacy of banks’ plans to deal 11 Pricing of risk (9) about a solution to the banking crisis, with failure in a high impact, albeit 12 Business continuation (21) they are also adding cost and distraction low probability, area and the level of 13 Back office (24) to banks, and making it harder for them to management understanding. 14 Management incentives (16) supply credit to the economy. another concern was a perceived high 15 Change management (28) 16 Hedge funds (19) 17 Interest rates (14) 18 High dependence on technology (18) 19 Currencies (11) 20 Business practices (22) 21 Equity markets (10) 22 Emerging markets (17) 23 Rogue trader (20) 24 Criminality (27) 25 Sustainability (25) 26 Commodities (13) 27 Fraud (15) 28 Human resources (-) 29 Reliance on third parties (-) 30 Payment systems (26) Source: CSFI/PwC Source: CSFI/PwC Source:

www.bankingtech.com I 7 Cover story: InnovatIon February 2012

requires risks to be taken. banks therefore often others like SaS and Teradata that are looking at how face huge obstacles before they can even begin to you process and gain insight from the vast quantities of think about innovating their products, services and data that we have on our customers”. So the customer processes by using technology and other means. This is at the forefront of his mind, but is he missing a trick perhaps unfairly leaves behind a perception that banks from Steve Jobs’ book? Maybe, but it’s true to say that are slow behemoths that react only when non-banking without apple’s iPhone, mobile banking would not be players like PayPal and apple heave into sight. what it is today. yet he is right in saying that there is the innovator’s Paul Say, head of marketing at HSbC’s First Direct dilemma to consider. He explains that this means that the telephone banking subsidiary, thinks innovation in the incumbent player “looks at having a high performance banking sector should be about ripping up the rule threshold, but a low level of innovation”. The trouble book to avoid getting stuck with outdated practices. is that it eventually becomes too late for the incumbent He argues that taking a step back from adopting a to respond to market changes, but this leads to the traditional approach can reveal new opportunities – organisation operating at a lower performance level. ones that might not have been previously considered, So banks that don’t keep ahead of change may find and ones which mean that banking will be truly social that they are painting themselves into a corner, and in the future. a large part of this comes from mobile at worst he suggests that they could die if they don’t technology, which he claims is a very effective embrace change. He also warns that banks shouldn’t marketing channel as just about everyone in the uK look at the incumbents to find ideas for innovation; has a phone about them. His colleague aden Davies, they may only wish to adapt to new market demands, who works with HSbC Technology Services’ innovation > and this includes exploring how the generation gap alters customers’ attitudes to technology. They should RBS takes charge of innovation also look internally as well as outside the industry for inspiration. younger members of staff, for example, Royal Bank of Scotland is one bank that is keen to develop its products can be a source of inspiration as they can speak for and services with the help of technological innovation. On the mobile how their own generation uses technology and present front, it has applications for Apple’s iPhone and iPad, Research in Motion’s fresh ideas to their senior executives. BlackBerry and Google’s Android. Darren armitage, head of technology innovation at George Kelsey, chief of integrated architecture at RBS, thinks this HSbC, agrees with this opinion: “Innovation is creative, is evidence that the bank is beginning to take charge of technological so of course a company looking to innovate needs to innovation. “We have successfully deployed a mobile banking application look outside its own industry, and financial services is no across five of our brands now, and they include: RBS, NatWest, NatWest different in this respect.” He adds that financial services Offshore and Ulster North and South,” he explains. Customers are customers don’t exist in isolation. each one of them apparently enthusiastic, and he describes its uptake as “staggeringly good”. interacts with a wide range of technologies and services There are now 1.2 million customers using it, and they have used it 102 each hour of the day. He believes that this means HSbC million times. This equates to the completion of £2 billion in transfers and needs to keep innovating to keep up with the changes payments since May 2011, and he claims that these figures are continuing in their lives and with their expectations. armitage also to grow exponentially. believes that mobile technology will bring the bank and “I call it the ‘one thumb transfer’, and it is the highest rating financial Thinking outside the bank its customers closer to each other, while enabling the services application,” he says. This is because RBS and the other brands customer to control how they access their own banks within the group are watching the changing needs of their customers and There is a lot of talk about innovation in financial services, but what is it, and what can banks accounts wherever they are with the help of mobile then matching technology to them. Yet these applications are considered by learn from other industries? Graham Jarvis reports. banking and location-based services. him to be the start of his bank’s journey because there are also plans afoot yet should they wait for customers to decide how to launch similar applications for its business and commercial customers. In recent years banks have been a target for of the banks. For example, banks tend to face higher the banks should use technology to innovate their Much of the impetus for innovation is being created by a shift in how criticism, ridicule and vehemence. They are, for levels of legislation and compliance obligations than non- experience of using or buying financial products and customers wish to interact with technology, which has been created by the example, said to be slow and reluctant to innovate. but financial services organisations, which are now entering services from the banks? apple’s late chief executive, growing proliferation of the smartphone and social media networks like is it all fair? the market. Their complex back-office systems are also Steve Jobs, is reported to have said that there is not Twitter and Facebook. This trend is supported by Accenture’s research and JP rangaswami, chief scientist of Salesforce.com, problematic. They too can inhibit innovation. much point in waiting for focus groups of customers its reports, Banking 2012: Revenue Growth and Innovation and Achieving has some significant experience in this area – when For example, with regards to the data protection to decide what they want because they don’t always Strong Returns in Mobile Banking: Here’s How Leading Banks Do It. he was chief information officer at Dresdner Kleinwort compliance issue, rangaswami says the banks are know what they want or need and they are likely to ask Jonathan Gray, a senior executive in Accenture’s Financial Services Wasserstein, he was involved in the bank’s Digital reluctant to share infrastructure. This means they for something they are already used to having in their practice, explains why this research is important: “The research we have Markets project, deploying internet technologies aren’t taking advantage of the value of the cloud for lives. There is still a sense that the banks are reacting done shows that customers are much more ready to purchase goods and and social networking in the trading room. Speaking managing payments, funds transfers and credit-rating to change rather then driving it, and that innovations in carry out transactions over digital channels, and initial results indicate a at a London Financial Services Club session last information to the extent that they could do. Data things like payment systems have been coming from big jump in customers using their mobile phones for banking services each year, he described some of the difficulties he had compliance issues make them wary of exploring this outside the industry. month – up from 10% last year to 18% this year.” trying to persuade the bank to innovate. He said that kind of technology for what is judged to be highly To this charge George Kelsey, chief of integrated Teradata and SAS analytics enable RBS to see what its customers are innovation requires change, but banks are traditionally sensitive data. The public cloud is therefore more often architecture at royal bank of Scotland, says that it is doing. “The technology landscape is rapidly changing and we need to know conservative in nature and it doesn’t come readily to considered to be out of bounds to any transactional not the bank’s job to lead technological innovation. “It ourselves how these shifts could be used to better service our customers,” them – at least this was his view at the time. data. Due to legislation it needs to be tightly controlled. is our job to look at what’s happening in the technology explains Kelsey. Social media also plays a role, enabling staff to share and This doesn’t mean that banks don’t want to innovate, So, in his view, the markets make it very difficult landscape in relationship with what our customers vote on mobile applications and other ideas that could eventually be used but it does suggest that they often take their time to catch for banks to innovate and, since the beginning of want, and I welcome technical innovation.” He says to improve customer service. Only the good and most popular ideas will up with their markets and even with their customers. the financial and economic crisis in 2008, they have that apple is seen as the organisation that “has set see the light of day though. This concept is called the ’App Bank’. With it rangaswami doesn’t feel that this is necessarily the fault been required to be more risk adverse. yet innovation the bar for using mobile applications, and there are Kelsey can find ideas that would not otherwise have arisen.

8 I www.bankingtech.com www.bankingtech.com I 9 requires risks to be taken. banks therefore often others like SaS and Teradata that are looking at how face huge obstacles before they can even begin to you process and gain insight from the vast quantities of think about innovating their products, services and data that we have on our customers”. So the customer processes by using technology and other means. This is at the forefront of his mind, but is he missing a trick perhaps unfairly leaves behind a perception that banks from Steve Jobs’ book? Maybe, but it’s true to say that are slow behemoths that react only when non-banking without apple’s iPhone, mobile banking would not be players like PayPal and apple heave into sight. what it is today. yet he is right in saying that there is the innovator’s Paul Say, head of marketing at HSbC’s First Direct dilemma to consider. He explains that this means that the telephone banking subsidiary, thinks innovation in the incumbent player “looks at having a high performance banking sector should be about ripping up the rule threshold, but a low level of innovation”. The trouble book to avoid getting stuck with outdated practices. is that it eventually becomes too late for the incumbent He argues that taking a step back from adopting a to respond to market changes, but this leads to the traditional approach can reveal new opportunities – organisation operating at a lower performance level. ones that might not have been previously considered, So banks that don’t keep ahead of change may find and ones which mean that banking will be truly social that they are painting themselves into a corner, and in the future. a large part of this comes from mobile at worst he suggests that they could die if they don’t technology, which he claims is a very effective embrace change. He also warns that banks shouldn’t marketing channel as just about everyone in the uK look at the incumbents to find ideas for innovation; has a phone about them. His colleague aden Davies, they may only wish to adapt to new market demands, who works with HSbC Technology Services’ innovation > and this includes exploring how the generation gap alters customers’ attitudes to technology. They should RBS takes charge of innovation also look internally as well as outside the industry for inspiration. younger members of staff, for example, Royal Bank of Scotland is one bank that is keen to develop its products can be a source of inspiration as they can speak for and services with the help of technological innovation. On the mobile how their own generation uses technology and present front, it has applications for Apple’s iPhone and iPad, Research in Motion’s fresh ideas to their senior executives. BlackBerry and Google’s Android. Darren armitage, head of technology innovation at George Kelsey, chief of integrated architecture at RBS, thinks this HSbC, agrees with this opinion: “Innovation is creative, is evidence that the bank is beginning to take charge of technological so of course a company looking to innovate needs to innovation. “We have successfully deployed a mobile banking application look outside its own industry, and financial services is no across five of our brands now, and they include: RBS, NatWest, NatWest different in this respect.” He adds that financial services Offshore and Ulster North and South,” he explains. Customers are customers don’t exist in isolation. each one of them apparently enthusiastic, and he describes its uptake as “staggeringly good”. interacts with a wide range of technologies and services There are now 1.2 million customers using it, and they have used it 102 each hour of the day. He believes that this means HSbC million times. This equates to the completion of £2 billion in transfers and needs to keep innovating to keep up with the changes payments since May 2011, and he claims that these figures are continuing in their lives and with their expectations. armitage also to grow exponentially. believes that mobile technology will bring the bank and “I call it the ‘one thumb transfer’, and it is the highest rating financial its customers closer to each other, while enabling the services application,” he says. This is because RBS and the other brands customer to control how they access their own banks within the group are watching the changing needs of their customers and accounts wherever they are with the help of mobile then matching technology to them. Yet these applications are considered by banking and location-based services. him to be the start of his bank’s journey because there are also plans afoot yet should they wait for customers to decide how to launch similar applications for its business and commercial customers. the banks should use technology to innovate their Much of the impetus for innovation is being created by a shift in how experience of using or buying financial products and customers wish to interact with technology, which has been created by the services from the banks? apple’s late chief executive, growing proliferation of the smartphone and social media networks like Steve Jobs, is reported to have said that there is not Twitter and Facebook. This trend is supported by Accenture’s research and much point in waiting for focus groups of customers its reports, Banking 2012: Revenue Growth and Innovation and Achieving to decide what they want because they don’t always Strong Returns in Mobile Banking: Here’s How Leading Banks Do It. know what they want or need and they are likely to ask Jonathan Gray, a senior executive in Accenture’s Financial Services for something they are already used to having in their practice, explains why this research is important: “The research we have lives. There is still a sense that the banks are reacting done shows that customers are much more ready to purchase goods and to change rather then driving it, and that innovations in carry out transactions over digital channels, and initial results indicate a things like payment systems have been coming from big jump in customers using their mobile phones for banking services each outside the industry. month – up from 10% last year to 18% this year.” To this charge George Kelsey, chief of integrated Teradata and SAS analytics enable RBS to see what its customers are architecture at royal bank of Scotland, says that it is doing. “The technology landscape is rapidly changing and we need to know not the bank’s job to lead technological innovation. “It ourselves how these shifts could be used to better service our customers,” is our job to look at what’s happening in the technology explains Kelsey. Social media also plays a role, enabling staff to share and landscape in relationship with what our customers vote on mobile applications and other ideas that could eventually be used want, and I welcome technical innovation.” He says to improve customer service. Only the good and most popular ideas will that apple is seen as the organisation that “has set see the light of day though. This concept is called the ’App Bank’. With it the bar for using mobile applications, and there are Kelsey can find ideas that would not otherwise have arisen.

www.bankingtech.com I 9 Cover story: InnovatIon February 2012 team, believes that companies like apple and PayPal aren’t necessarily doing the job of the banks. “I don’t see apple building complex anti-fraud systems, or systems that track potential terrorist funding,” he says. He also doesn’t think we will see a ‘Facebook Mortgages’ in the immediate future, but who knows? It could happen. Virgin has recently bought Northern rock, and the advent of Virgin Money as a bank is expected to lead to certain kinds of innovation and increased competitiveness in the banking industry. Davies nonetheless thinks that the day might come when the daily experience of customers managing their money has become the domain of Google, apple and PayPal. There is also the issue of value chain slicing to consider. “PayPal is a great example of this as you don’t need a bank to trade, you just need a reconciliation service, which can be created easily and cheaply,” says Stuart rye, director of financial services at Fujitsu. The effect of this is that banks can end up finding themselves disintermediated, and are “left with expensive payment systems that provide bulk payment at the back end of the process”. rangaswami pointed advantage for apple. This has had a wide-ranging out in his speech that PayPal is integrated into the impact on other industries, including banking. current technical infrastructure of the banking industry So the key lesson that banks can learn is perhaps to allow payments to be deposited into bank accounts. not to wait for customers to decide what they want, Disintermediation or a lack of innovation don’t but to take the lead when it comes to developing new necessarily mean that banks as a whole will die: they still technologies. Companies like apple aren’t sitting and play an integral role in society, and they are very much waiting for innovation to happen: they are proactive embedded into its fabric. yet individual banks could lose and their innovation processes never stop. market share, or some may fade away by becoming less although apple has faced stiff competition since the competitive as a result of not exploring technological advent of Google’s android, it does demonstrate that innovation – wherever it lies internally and externally. innovation can help any company – including a bank The risks associated with change can be managed, – to at least temporarily capture a greater share of its but there can be no improvements without it. a certain market and become a trend-setter than influences amount of risk can therefore be good if it leads to other industries. yet there is still an inherent need in the ongoing improvements that benefit the organisation’s industry for regulators to understand the need of the stakeholders. be aware of the law of unintended banks to be able to innovate as prohibitive regulatory consequences though. If a bank focuses on what practices will also slow them down. might go wrong rather than what might improve as a So, with this in mind, were rangaswami’s comments result of change, then innovation is dead and the bank about the conservative attitudes of banks fair? To a might find itself being left behind in the market. degree, yes, but the banks can’t always help being andrew bale, chief executive of resilient Networks, slow. yet they can still learn many lessons from their thinks that banks are trying to act almost like a non-financial sector counterparts.BT telecommunications network operator. In his view they are increasingly dependent on technology to improve Learning from others the delivery of their products and services. So banks will need to continue to find and implement new Innovation begins by looking inside one’s own organisation, by analysing technological innovations from IT companies, but they what is happening with its market, and by considering other ideas that should also think about how they can use, implement are being developed in other industries and market sectors. Stuart Rye, and develop technology to innovate from within. director of financial services at Fujitsu, provides six tips that he thinks are bryan Foss, independent director and visiting fundamental to using technology to innovate in the banking and financial professor at bristol business School, is still not sure that services industries. “the existence of tactical innovations” like smartphone ■ Innovation is not a fad, or something you do from time to time. It needs mobile banking is sufficient “to demonstrate that the to be absolutely constant. banks really ‘get it’, and considerably more needs to be ■ It needs to be within the culture of the organisation, and this means done by their boards to re-emphasise the critical future creating an environment that allows staff to create and test new ideas. role of the banks for consumers and businesses”. ■ You have to have a culture that allows you to look outside the organisation The impact of innovation can be clearly seen: the at markets and countries to know what they are doing. iPhone is a prime example. It reshaped the market ■ Be absolutely clear about what you want to provide to whom, through and created a new ecosystem with a new device and which channels and at what prices. associated applications that could do everything a PC, ■ Understand your supply and value chain. laptop or a Mac can do. This galvanised consumer ■ Manage and align incentives along the supply chain to deliver the interest in the product, and created a competitive outcome you require.

www.bankingtech.com I 11 Cover story: InnovatIon February 2012 team, believes that companies like apple and PayPal aren’t necessarily doing the job of the banks. “I don’t see apple building complex anti-fraud systems, or systems that track potential terrorist funding,” he says. He also doesn’t think we will see a ‘Facebook Mortgages’ in the immediate future, but who knows? It could happen. Virgin has recently bought Northern rock, and the advent of Virgin Money as a bank is expected to lead to certain kinds of innovation and increased competitiveness in the banking industry. Davies nonetheless thinks that the day might come when the daily experience of customers managing their money has become the domain of Google, apple and PayPal. There is also the issue of value chain slicing to consider. “PayPal is a great example of this as you don’t need a bank to trade, you just need a reconciliation service, which can be created easily and cheaply,” says Stuart rye, director of financial services at Fujitsu. The effect of this is that banks can end up finding themselves disintermediated, and are “left with expensive payment systems that provide bulk payment at the back end of the process”. rangaswami pointed advantage for apple. This has had a wide-ranging out in his speech that PayPal is integrated into the impact on other industries, including banking. current technical infrastructure of the banking industry So the key lesson that banks can learn is perhaps to allow payments to be deposited into bank accounts. not to wait for customers to decide what they want, Disintermediation or a lack of innovation don’t but to take the lead when it comes to developing new necessarily mean that banks as a whole will die: they still technologies. Companies like apple aren’t sitting and play an integral role in society, and they are very much waiting for innovation to happen: they are proactive embedded into its fabric. yet individual banks could lose and their innovation processes never stop. market share, or some may fade away by becoming less although apple has faced stiff competition since the competitive as a result of not exploring technological advent of Google’s android, it does demonstrate that innovation – wherever it lies internally and externally. innovation can help any company – including a bank The risks associated with change can be managed, – to at least temporarily capture a greater share of its but there can be no improvements without it. a certain market and become a trend-setter than influences amount of risk can therefore be good if it leads to other industries. yet there is still an inherent need in the ongoing improvements that benefit the organisation’s industry for regulators to understand the need of the stakeholders. be aware of the law of unintended banks to be able to innovate as prohibitive regulatory consequences though. If a bank focuses on what practices will also slow them down. might go wrong rather than what might improve as a So, with this in mind, were rangaswami’s comments result of change, then innovation is dead and the bank about the conservative attitudes of banks fair? To a might find itself being left behind in the market. degree, yes, but the banks can’t always help being andrew bale, chief executive of resilient Networks, slow. yet they can still learn many lessons from their thinks that banks are trying to act almost like a non-financial sector counterparts.BT telecommunications network operator. In his view they are increasingly dependent on technology to improve Learning from others the delivery of their products and services. So banks will need to continue to find and implement new Innovation begins by looking inside one’s own organisation, by analysing technological innovations from IT companies, but they what is happening with its market, and by considering other ideas that should also think about how they can use, implement are being developed in other industries and market sectors. Stuart Rye, and develop technology to innovate from within. director of financial services at Fujitsu, provides six tips that he thinks are bryan Foss, independent director and visiting fundamental to using technology to innovate in the banking and financial professor at bristol business School, is still not sure that services industries. “the existence of tactical innovations” like smartphone ■ Innovation is not a fad, or something you do from time to time. It needs mobile banking is sufficient “to demonstrate that the to be absolutely constant. banks really ‘get it’, and considerably more needs to be ■ It needs to be within the culture of the organisation, and this means done by their boards to re-emphasise the critical future creating an environment that allows staff to create and test new ideas. role of the banks for consumers and businesses”. ■ You have to have a culture that allows you to look outside the organisation The impact of innovation can be clearly seen: the at markets and countries to know what they are doing. iPhone is a prime example. It reshaped the market ■ Be absolutely clear about what you want to provide to whom, through and created a new ecosystem with a new device and which channels and at what prices. associated applications that could do everything a PC, ■ Understand your supply and value chain. laptop or a Mac can do. This galvanised consumer ■ Manage and align incentives along the supply chain to deliver the interest in the product, and created a competitive outcome you require.

www.bankingtech.com I 11 TRANSACTIONS Go to www.bankingtech.com for the latest news and comment & PAYMENTS February 2012 US merchants advocate co-ordinated Raiffeisen Chip & Pin adoption expands First Data Geneva-based Man Brothers Group has he Merchant advisory Group, a cross-industry association of large merchants selected Brady to handle its trade finance EMV continues to gain ground as a involved in the payments industry has published recommendations for a uS deal in Poland operations. The Brady solution will integrate Telectronic payments roadmap that emphasises the importance of Chip and PIN aiffeisen bank Poland has the bank’s financial instruments, reduce standard for card payments adoption. expanded its relationship with operational risk, improve transparency and doption of eMV as a card payment standard gained further traction in 2011, with “We believe it is imperative that the united States align with the international standard Re-Commerce and payment support decision making and governance.” official figures revealing that over 42% of all payment cards and nearly 76% of of Chip and PIN to ensure global consumer payments interoperability,” said Mark processing provider First Data, which “The solution provided by Brady will enable Aall terminals in circulation globally are based on eMV technology. Horwedel, chief executive of MaG. “In today’s uS magnetic stripe-based payments will provide card payment processing us to follow in full detail all trade operations The figures come from eMVCo, the eMV standards body collectively owned by system, MaG members continue to spend millions of dollars to protect against security services to support the bank with its initiated by our clients and handle all required american express, JCb, MasterCard and Visa, and represent the latest statistics from breaches with significant and deleterious implementation of a new contactless financial transactions and documentary their respective member financial institutions globally. there are now more than 1.3 results. Many have lost sales and struggled card programme. credit operations in a fully integrated way,” billion eMV payment cards in global circulation and more than 20 million eMV based through customer confusion resulting from “It is imperative that First Data and raiffeisen bank said Haçade Bensalem, chief executive of acceptance terminals active worldwide. international cardholders’ inability to use their Poland have co-operated for over 10 Man Brothers Group. Patricia Partelow, chair Chip and PIN cards in the united States.” the United States align years, during which time First Data of the eMVCo executive “Adoption of the technology is The roadmap makes a number of with the international has delivered a range of outsourcing Payment services provider Earthport Committee, said: “as the recommendations: services for issuing and processing is providing cross-border payment figures demonstrate, eMV important as it provides a variety ■ The uS payments industry should undergo standard of Chip & PIN of debit, charge and credit cards. services to Active Management technology continues to be of risk management parameters a coordinated migration to Chip and PIN for interoperability.” raiffeisen bank’s current customer Services, a facilities management deployed globally, creating transactions which should support a broad offering will be expanded to include company, to support the delivery of a truly interoperable chip- and cardholder verification.” range of payment types and devices. contactless payments functionality payroll services. The service, which based consumer payment ■ Merchants and issuers should have the right to determine the range of payment with the introduction of Visa payWave is now live, sees Earthport facilitate infrastructure. adoption of the technology is important as it provides a variety of risk types, communication protocols and devices they will support. payment cards which are embedded payroll payments for AMS’s corporate management parameters and cardholder verification methods that reduce fraudulent ■ PIN authentication is a proven means of reducing fraud. Pursuant to an agreed-upon with an antenna and microchip. customers. AMS offers corporates the card payments. In addition to our commitment to enhance payment security, eMVCo timeline, merchants and issuers that migrate to Chip and PIN should receive the benefit The cards can be used by cardholders ability to outsource their payroll and also works to identify future requirements and enhance its established infrastructure to of full liability shift protection. to make quick low-value cashless account functions. deliver a common, robust technology platform that in the future will support contact, ■ Those who do not invest in Chip and PIN, or who decide to not perform cardholder payments at thousands of merchant contactless and mobile payments.” authentication at the point-of sale for customer convenience reasons, should bear the locations across Poland and all over the Basware, a payments systems provider, To support the adoption of eMV standards, eMVCo has established the eMVCo liability of any fraudulent activity that occurs as a result of their business decisions. world. Cardholders simply place the card has acquired German e-invoicing network associates Programme to encourage all payment stakeholders to play a more active ■ To ensure merchant choice in routing transactions and to encourage innovation, Chip near a special terminal equipped with First Businesspost, known as 1stbp. In 2011 role in guiding the organisation’s strategic and technical direction. “The participation and PIN card and system designs must provide an open architecture that is developed a contactless card reader to initiate the 1stbp delivered over 4.5 million e-invoices framework creates opportunities for interested organisations – including payment card with meaningful input from all stakeholders. transaction. The transaction is executed on behalf of its buyers and suppliers, and issuers, acquirers, merchants, processors, card and terminal vendors, networks and ■ Chip and PIN deployment in the united States should be done concurrently with in a split second. total global spend delivered across the their representative associations – to provide input into the advancement of existing integration of technologies that would secure eCommerce transactions and also shift “Our aim is to understand the needs Basware and 1stbp networks exceeded and creation of future eMV Specifications,” Partelow said. “We recognise that this will liability to any party that does not adopt the solution. of our customers and offer innovative €150 billion. 1stbp has particular strength further facilitate the global relevance of eMV technology as the marketplace advances ■ The implementation of Chip and PIN should in no way infringe upon the ability cashless payment solutions to meet these in the automotive sector with customers to offer new ways to pay for goods and services.” of issuers to choose network affiliations or upon merchant routing opportunities as needs,” said andrzej Swiech, director including Audi, BMW, Daimler, MAN and prescribed under the law. of the Individual Clients Department, Volkswagen. One of its core capabilities is ■ The roadmap should acknowledge the diversity of the marketplace by developing raiffeisen bank Poland. “Issuing cards, its Virtual Printer Driver Technology which Delta Lloyd picks Clear2Pay to build collaborative and realistic implementation timelines for all stakeholders including equipped with contactless technology, helps on-board suppliers. Basware will issuers, acquirers, hardware manufacturers and merchants. in cooperation with a trusted provider integrate this technology into its supplier central payments infrastructure www.merchantadvisorygroup.org such as First Data, will enable us to on-boarding. achieve our objective. The addition of elta Lloyd’s new group-wide central payments infrastructure is to be built Visa payWave cards to our portfolio will The IBOS Banking Association, an using the Corporate Payment Hub SePa solution from european payment Automated reconciliation choices also enable us to offer a safe, convenient international banking alliance focused Dsystems specialist Clear2Pay. ith the advent of hosted solutions, the business case for automation of product to our customers and will on providing corporate customers The new Central Payment Facility, scheduled to go live in the middle of this year, statement reconciliation has become more persuasive, according to a strengthen our position as a modern with international cash management serves the whole Delta Lloyd Group and acts as a multi-label, multi-bank and multi- Wwhite paper from Synergy Financial Systems, a uK Swift Service bureau. financial institution.” solutions, has enlisted its newest risk carrier. at a functional level, and as compliance demands, the Service Oriented “Coupled with operational requirements to accelerate the delivery of business “The number of merchants offering member, PNC Bank, the sixth-largest architecture of the system enables the various businesses to operate autonomously critical information such as daily cash balances and to increase the accuracy of the convenience of contactless cashless depository bank by assets and one in terms of processes and client data, while using a single and efficient payment information, for client and regulatory purposes, the business case starts to become payments, which forgo PIN entry, is of the largest treasury management infrastructure and centralise data storage. compelling,” the company says in a white paper. gradually increasing,” said Grzegorz providers in the US. The IBOS network Peter Heemskerk, IT director at Delta Lloyd, said: “Clear2Pay’s solution gives Most organisations with high volumes of transactions automated their statement Dlugosz, a member of the board at First is based on its 12 members and us the best of both worlds: optimisation and operational efficiency, yet flexibility in reconciliation processes some time ago, but those with modest transaction Data’s business in Poland. “Thanks their subsidiaries, each of which is a the business where we need it. The already significant and rapidly growing market volumes (either payments or securities trades) have considered the automation of to this ability to reach new market supplier of local banking services in presence of the Corporate Payment Hub, which we implemented earlier, gave us reconciliation processes hard to justify. segments, which previously did not their domestic markets. IBOS provides the confidence to make this move towards full SePa compliance with Clear2Pay’s There are many businesses where manual or semi-automated reconciliation accept cashless payments, contactless corporate customers access to local technology as well.” processes continue to operate. This can be because they believe that the nature of cards are becoming increasingly services at the IBOS bank in each Jeroen Faas, vice president of sales for Clear2Pay Netherlands said that Delta their business and the volumes involved make a worthwhile business justification for popular in Poland and are another step country, offering local in-country Lloyd is “one of the first customers within the corporate domain to enhance the full automation difficult to build. toward replacing cash payments with accounts. existing platform with the SePa extended edition module”. www.synergy-fs.com payments made using cards.”

12 I www.bankingtech.com www.bankingtech.com I 13

US merchants advocate co-ordinated Raiffeisen Chip & Pin adoption expands First Data he Merchant advisory Group, a cross-industry association of large merchants involved in the payments industry has published recommendations for a uS deal in Poland Telectronic payments roadmap that emphasises the importance of Chip and PIN aiffeisen bank Poland has adoption. expanded its relationship with “We believe it is imperative that the united States align with the international standard Re-Commerce and payment of Chip and PIN to ensure global consumer payments interoperability,” said Mark processing provider First Data, which Horwedel, chief executive of MaG. “In today’s uS magnetic stripe-based payments will provide card payment processing system, MaG members continue to spend millions of dollars to protect against security services to support the bank with its breaches with significant and deleterious implementation of a new contactless results. Many have lost sales and struggled card programme. through customer confusion resulting from “It is imperative that First Data and raiffeisen bank international cardholders’ inability to use their Poland have co-operated for over 10 Chip and PIN cards in the united States.” the United States align years, during which time First Data The roadmap makes a number of with the international has delivered a range of outsourcing recommendations: services for issuing and processing ■ The uS payments industry should undergo standard of Chip & PIN of debit, charge and credit cards. a coordinated migration to Chip and PIN for interoperability.” raiffeisen bank’s current customer transactions which should support a broad offering will be expanded to include range of payment types and devices. contactless payments functionality ■ Merchants and issuers should have the right to determine the range of payment with the introduction of Visa payWave types, communication protocols and devices they will support. payment cards which are embedded ■ PIN authentication is a proven means of reducing fraud. Pursuant to an agreed-upon with an antenna and microchip. timeline, merchants and issuers that migrate to Chip and PIN should receive the benefit The cards can be used by cardholders of full liability shift protection. to make quick low-value cashless ■ Those who do not invest in Chip and PIN, or who decide to not perform cardholder payments at thousands of merchant authentication at the point-of sale for customer convenience reasons, should bear the locations across Poland and all over the liability of any fraudulent activity that occurs as a result of their business decisions. world. Cardholders simply place the card ■ To ensure merchant choice in routing transactions and to encourage innovation, Chip near a special terminal equipped with and PIN card and system designs must provide an open architecture that is developed a contactless card reader to initiate the with meaningful input from all stakeholders. transaction. The transaction is executed ■ Chip and PIN deployment in the united States should be done concurrently with in a split second. integration of technologies that would secure eCommerce transactions and also shift “Our aim is to understand the needs liability to any party that does not adopt the solution. of our customers and offer innovative ■ The implementation of Chip and PIN should in no way infringe upon the ability cashless payment solutions to meet these of issuers to choose network affiliations or upon merchant routing opportunities as needs,” said andrzej Swiech, director prescribed under the law. of the Individual Clients Department, ■ The roadmap should acknowledge the diversity of the marketplace by developing raiffeisen bank Poland. “Issuing cards, collaborative and realistic implementation timelines for all stakeholders including equipped with contactless technology, issuers, acquirers, hardware manufacturers and merchants. in cooperation with a trusted provider www.merchantadvisorygroup.org such as First Data, will enable us to achieve our objective. The addition of Visa payWave cards to our portfolio will Automated reconciliation choices also enable us to offer a safe, convenient ith the advent of hosted solutions, the business case for automation of product to our customers and will statement reconciliation has become more persuasive, according to a strengthen our position as a modern Wwhite paper from Synergy Financial Systems, a uK Swift Service bureau. financial institution.” “Coupled with operational requirements to accelerate the delivery of business “The number of merchants offering critical information such as daily cash balances and to increase the accuracy of the convenience of contactless cashless information, for client and regulatory purposes, the business case starts to become payments, which forgo PIN entry, is compelling,” the company says in a white paper. gradually increasing,” said Grzegorz Most organisations with high volumes of transactions automated their statement Dlugosz, a member of the board at First reconciliation processes some time ago, but those with modest transaction Data’s business in Poland. “Thanks volumes (either payments or securities trades) have considered the automation of to this ability to reach new market reconciliation processes hard to justify. segments, which previously did not There are many businesses where manual or semi-automated reconciliation accept cashless payments, contactless processes continue to operate. This can be because they believe that the nature of cards are becoming increasingly their business and the volumes involved make a worthwhile business justification for popular in Poland and are another step full automation difficult to build. toward replacing cash payments with www.synergy-fs.com payments made using cards.”

www.bankingtech.com I 13 Payments: InteRCHanGe Fees February 2012

Loose interchange Interchange fees are lucrative for banks – and merchants are questioning whether they should be allowed to continue. Heather McKenzie looks at the arguments on both sides.

Last month, Deutsche Bank analyst inter-bank fees for payments by credit matthew O’Connor set out the potential or debit cards issued by MasterCard, financial hit for banks in the Us if they by bundling this type of cost with lose a pending antitrust suit over merchant membership fees, with direct interchange fees. If the fees, which are consequences for consumer prices. paid between banks for the acceptance The Italy-specific MIF did not contribute of card-based transactions, were reduced to the system’s overall economic by 75%, he said, uS bancorp could lose efficiency, said the authority, and in fact $1.2 billion of revenues in 2012, JPMorgan contained incentives for increases in the $5.38 billion and bank of america $3.68 fees because this would increase the billion, to name a few. direct proceeds of the issuer banks, and The litigation has been initiated by raise the proceeds of the acquirer banks merchants and merchant representative as the transaction volumes of the scheme groups on behalf of five million retailers increased. Finally an increased number of in the uS. Named in the suit are Visa, company, and include increased sales transactions led to greater brand name MasterCard and 13 large banks including and the ability to participate in a payment exposure for the MasterCard scheme. Citi, bank of america, Capital One system that is more cost-effective for The authority ruled that individual Finance, uS bancorp, JPMorgan, HSbC them than issuing their own proprietary banks used the membership mechanism and barclays. card or other form of credit. to manifest a unitary agreement with The plaintiffs allege that, between The uS is not the only country MasterCard in order to promote the 1 January 2004 and the present, the grappling with the issue of interchange scheme’s expansion by passing the MIF card networks and banks conspired to fees. In September last year, the european on to merchants and, consequently, to the unlawfully fix the price of interchange Central bank published a paper on prices effectively applied to consumers. fees and other fees charged to merchants interchange fees in card payments, which The authors of the report, anne for transactions processed over the Visa reviewed a number of legal assessments borestam and Heiko Schmiedel, pointed and MasterCard networks. Joint hearings of interchange fees from around the out that interchange fees are intrinsically on defendants’ motions to dismiss and european union. The report was made in tied to card payments. Said the report: plaintiffs’ motions for class certification the context of the development of a single “ ... the eCb provides guidance and were held in November 2009, and euro payment system for card payments. expresses expectations that further summary judgement motions were filed in among the rulings examined was that clarity in the framework for interchange the (northern) spring of 2011. of the Latvian Competition Council, which fees for card payments is needed so as at present, the interchange fee in the decided in March 2011 that 22 Latvian to foster the creation of an open market uS is 2%. This is quite high compared commercial banks had breached the environment for card schemes and to with interchange fees elsewhere – in country’s competition law by participating take the euro area towards an advanced australia they are 0.5% and in europe in a multilateral agreement on the retail payment market”. 0.3%, for example. according to a report interchange fees for card payments, borestam and Schmiedel wrote that by the bloomberg news wire, interchange thereby restricting competition in the interchange fees (if any) should be set “at fees on credit cards in the uS total around Latvian cards market. a reasonable level and should not prevent $40 billion a year for retailers. In this case, it was ruled that the the use of efficient payment instruments”. Not surprisingly, MasterCard says the banks had not provided evidence that the a sharp increase in cardholder costs, they lawsuits are “without merit and a clear benefits of the multilateral interchange argue, could induce consumers to use demonstration of certain merchants fees counterbalanced the restrictions to less efficient means of payment, such as wanting the significant benefits of competition, but focused on explaining the cash and cheques, which would hamper accepting payment cards without having necessity of card payments. The Council the progress of the SePa project. to pay for the value of the services they found that a MIF was not considered “Interchange fees ... should be set to receive”. The company also suggests necessary for promoting the cards market. promote overall economic efficiency in that the lawsuits are being driven by class Moreover, it found that the interchange compliance with competition rules. The action lawyers “whose primary motive is fee was not related to the issuing banks’ eurosystem recommends that a close to extract enormous fees for themselves”. actual costs but constituted an income for dialogue take place between emerging MasterCard argues that interchange them. new card schemes and the european fees “keep the system in balance and In Italy, the Italian antitrust authority Commission on the compatibility with [are] designed to maximise both merchant decided in November 2010 that competition law of the MIFS they plan acceptance and card issuance”. The MasterCard and eight banks had to charge. Guidance in the form of a benefits to merchants of accepting established agreements restricting regulation might even be considered ...”, MasterCard are significant, says the competition designed to maintain high the report said. BT

14 I www.bankingtech.com

TRANSACTIONS & PAYMENTS: NEWS ANAlYSIS TRANSACTIONS & PAYMENTS: NEWS ANAlYSIS February 2012 February 2012

Innovation and competition heat up in payments The baby and the bathwater Mobile adoption, regulation and activity among the card networks are among the hottest topics in the The European approach to regulation risks stifling innovation in payments, according to a white paper payments world according to an analysis of 2011 by Boston-based analyst firm Celent. published by the European Savings Bank Group. David Bannister reports.

“The payments industry had a busy implementing or planning to implement Nearly all governments around the terms of non-cash payment transactions catalyst, the european Commission is 2010, but 2011 proved to be even same-day or near-real time payment world are convinced that the rapid per capita. quick to take on a regulatory mantle. In busier,” says Zilvinas Bareisis, senior processing infrastructure. changes in payments technologies In this regard, europe stands out essence the european regulator not only analyst with Celent’s Banking Group In the uS, if NaCHa’s proposal for will have profound effects on their as an anomaly. “Policymakers and sets the reform agenda for the banking and co-author of the report, Top Trends same day services wins the vote in early economies, and all are reacting to regulators all see payments innovation payment industry but also determines in Payments: A Year in Review. “at 2012, it would become mandatory for all ensure that these are, on the whole, as instrumental to sustain the resource allocation, and decides least at the retail end of the spectrum, participants, presenting banks a number positive effects. competitiveness of their economies,” whether resources may be remunerated, payments industry is anything but slow- of challenges to overcome, from technical european regulators, however, stand writes bielefeld. “Some outside europe or not,” he writes. “In sharp contrast moving and boring. entrants such as issues to questions of how to price the out from their counterparts in the uS, are concerned of falling behind, which the american, australian and Canadian Google and Isis, innovators such as payments. australia and Canada, and are at risk sounds surprising knowing that europe policy makers take what is mostly a PayPal, and established giants, such In 2011 Celent has noticed the initial of stifling innovation in their desire trails the three other countries retained facilitator approach, ensuring that the as Visa, MasterCard, and amex have signs of a trend towards a fundamental to complete the european economic here for comparison purposes in terms appropriate issues are debated in the all made important steps towards their rethinking of the transactional retail harmonisation project. of payment system efficiency by 70 to appropriate forum, based on good respective visions for payments in a account. although this is not a trend with This surprisingly robust criticism of 90%.” information, at the right moment, and connected economy. In the meantime, short-term impact, it should be considered the european Commission’s approach bielefeld says that the concept of only legislating when there is consensus China unionPay, a company less than 10 by anyone seeking differentiation from to the market comes in a hefty white innovation in payments has become about the approach, or in exceptional years old, has become the largest card a crowded marketplace and investing in paper published by the european central to political and economic situations, as a last recourse.” scheme in the world. We expect that 2012 new technologies. Savings bank Group. The eSbG is one discussions. “From the everyday life That political and regulatory bodies will be a pivotal year for bedding down Gareth Lodge, senior analyst with of the largest european retail banking of technology companies it has moved should take an interest is not in doubt – many of these changes and innovations.” “Doing nothing is surely Celent’s banking Group and co-author networks, comprising about one third to the agendas of policy makers, who as the gap between mobile technology In 2011, Celent noted “a sustained of the report (pictured), says: “What is of the retail banking market in europe. would often see in innovation a way out and e-Commerce narrows, there is pace of payments innovation” – if not an option, yet the interesting is that the issues discussed in Its stated aim is to “represent the from the current economic crisis,” he expected to be a more than doubling anything, it says, the innovation pace worsening economic the report are global in nature and change, interests of its members vis-à-vis the says. of non-cash payments – largely outside increased, and the market became even or have the potential to change, the very eu Institutions and generate, facilitate “The payments market is no exception the eu’s borders. “This provides a clear more competitive. Visa and MasterCard conditions suggest tighter nature of the business. With pressures and manage high quality cross-border even for the casual observer, that market indication as to where the attention of continued on a trail of acquisitions and than ever budgets. Banks on business models due to entrants and banking projects”. has been brimming with innovations for developers and software providers will partnerships in their transformation technologies, doing nothing is surely not In the recently published paper, SEPA several years now, although that same shift to,” but as non-cash payments are journey from card networks to payments will need to take some an option; yet the worsening economic or payments innovation: a policy and observer may associate innovation with good indicators of economic efficiency, companies and beyond. american tough decisions.” conditions suggest tighter than ever business dilemma, Norbert bielefeld, companies whose names wouldn‘t have this projection also vindicates european express and its enterprise Growth team budgets. banks will need to take some deputy director payment systems at the crossed his/her mind only a decade policy makers and legislators interest in have been busy launching products and intelligence would be far more effective. tough decisions, and make sure more eSbG says: “In europe, however, one ago: amazon, Google, PayPal, alipay... payments innovation,” says the paper. announcing digital initiatives of their own. When it comes to analytics and data, than ever that they are focusing on the cannot but be left with the feeling that but even the european Central bank “but is their approach well-guided? China unionPay became the largest card banks should walk before they can run. right areas.” the competitiveness goal is secondary acknowledges that although banks Could europe beat the odds and narrow scheme in the world. Durbin continued to dominate the The report is part of an annual ritual to the market integration objective, are often accused of not being very in the coming years the widening gap as expected, mobile provided the debit cards and broader retail banking at Celent where the analysts review the and that the latter even ranks below innovative in the field of retail payments, with competing economies? Little story of the year in consumer payments discussions in the uS. The rules have preceding year and take a view on what is european authorities‘ experiments in most innovations are offered by banks comfort will be gained when trying to innovation. With Google Wallet up and been announced, and the industry has likely to happen next. formulating competition policy. directly or indirectly.” answer this question from the experience running and other initiatives in the works, been busy interpreting, implementing, an alternative insight into what they The paper – 100+ pages of it – He says that there is “a shared of the past decade. In the 10 years since mobile is finally entering the high street. and responding. However, almost no one think is likely to be on the shorter term provides a comprehensive picture of intuition” that payments innovation will the introduction of the physical euro, in although mobile at the retail POS remains is happy, and we think this story is far agenda can be gleaned from the publishing what policy makers and regulators have continue to unfold further in the electronic the field of payments no less than two years away from being mainstream, from over. schedule they have set themselves for the to say about payments innovation, what and mobile areas, but the responses european regulations and one Directive different visions will compete fiercely”. In europe, the looming regulatory end first part of this year. models academics have formulated in of eu institutions are fundamentally have been promulgated and are in force, Security in payments is a must. Mobile date for SePa is expected to force the Lodge, for instance, is looking closely this respect, the conclusions they draw, different from the other regions he with a further regulation soon to be devices and increased connectivity are procrastinating banks to get ready. Not at e-invoicing, with a planned primer and what aspirations are expressed and looks at. “european policymakers and approved by the european Parliament. raising the bar for security requirements that it will be easy, especially if the impact for banks on what it is and what their solutions introduced by the demand and regulators would go as far as sketching This massive legislative disruption on and create new roles in the payments on corporations is going to be as large as opportunities are likely to be. Looking at supply sides of the market. the solutions they wish to see, and spell one side did nothing to make europe ecosystem, such as Trusted Service feared. why e-invoicing needs to be considered on Covering public policies and related out how they should be delivered, while more efficient.” Manager. also, the questions around eMV However, still more regulation and a “big-picture” basis, a related report will action in the european union, the uS, in the three other countries under review Looking at it from the perspective in the uS are rapidly moving from “if and standards seems to be about the look at why the banks ought to consider australia, and Canada, bielefeld asks authorities first base their interrogations of the business and consumers that why” to “when and how.” only certainty in uncertain times. This, the multitude of e-invoicing service why policy makers and/or legislators are on thorough market assessment and the eC is seeking to protect and serve, Just like security, making use of combined with the need to balance providers, grouping them by business concerned about payments innovation, wide industry and public consultations,” the paper makes a central point: “the available data is increasingly a must for product enhancement and operational model and looking at the opportunities how they define payments innovation, he says baldly. demand side is not concerned with a successful payments business. big efficiency, puts most of the IT budgets in and threats each of these pose for banks. and how they see their role in making The paper outlines “steep payments innovation as such, but rather Data, a buzzword of 2011, has been transaction banking on a knife edge. bareisis, on the other hand, will be payments innovation happen. differences” between policy makers and/ with the shortcomings experienced, and accumulating ink and conference air time. at the infrastructure level, the clear looking at innovative payment startups, More unusually, it assesses the or legislators roles in making payments expectations of mitigating these.” However, Celent’s view is that enterprise trend is towards faster payments at all as evidenced by the key themes at effectiveness of the different approaches innovation happen. Intelligence, an effective application of ends of the spectrum, including low-value Finovateeurope 2012 and an analysis of against the relative efficiency achieved “In europe, although the european The full white paper is available at www. customer, business, and transactional payments. Many countries are either the start-ups demoing at the event. by each payment system as measured in Central bank intends to only be a esbg.eu

16 I www.bankingtech.com www.bankingtech.com I 17 TRANSACTIONS & PAYMENTS: NEWS ANAlYSIS February 2012

The baby and the bathwater The European approach to regulation risks stifling innovation in payments, according to a white paper published by the European Savings Bank Group. David Bannister reports.

Nearly all governments around the terms of non-cash payment transactions catalyst, the european Commission is world are convinced that the rapid per capita. quick to take on a regulatory mantle. In changes in payments technologies In this regard, europe stands out essence the european regulator not only will have profound effects on their as an anomaly. “Policymakers and sets the reform agenda for the banking economies, and all are reacting to regulators all see payments innovation payment industry but also determines ensure that these are, on the whole, as instrumental to sustain the resource allocation, and decides positive effects. competitiveness of their economies,” whether resources may be remunerated, european regulators, however, stand writes bielefeld. “Some outside europe or not,” he writes. “In sharp contrast out from their counterparts in the uS, are concerned of falling behind, which the american, australian and Canadian australia and Canada, and are at risk sounds surprising knowing that europe policy makers take what is mostly a of stifling innovation in their desire trails the three other countries retained facilitator approach, ensuring that the to complete the european economic here for comparison purposes in terms appropriate issues are debated in the harmonisation project. of payment system efficiency by 70 to appropriate forum, based on good This surprisingly robust criticism of 90%.” information, at the right moment, and the european Commission’s approach bielefeld says that the concept of only legislating when there is consensus to the market comes in a hefty white innovation in payments has become about the approach, or in exceptional paper published by the european central to political and economic situations, as a last recourse.” Savings bank Group. The eSbG is one discussions. “From the everyday life That political and regulatory bodies of the largest european retail banking of technology companies it has moved should take an interest is not in doubt – networks, comprising about one third to the agendas of policy makers, who as the gap between mobile technology of the retail banking market in europe. would often see in innovation a way out and e-Commerce narrows, there is Its stated aim is to “represent the from the current economic crisis,” he expected to be a more than doubling interests of its members vis-à-vis the says. of non-cash payments – largely outside eu Institutions and generate, facilitate “The payments market is no exception the eu’s borders. “This provides a clear and manage high quality cross-border even for the casual observer, that market indication as to where the attention of banking projects”. has been brimming with innovations for developers and software providers will In the recently published paper, SEPA several years now, although that same shift to,” but as non-cash payments are or payments innovation: a policy and observer may associate innovation with good indicators of economic efficiency, business dilemma, Norbert bielefeld, companies whose names wouldn‘t have this projection also vindicates european deputy director payment systems at the crossed his/her mind only a decade policy makers and legislators interest in eSbG says: “In europe, however, one ago: amazon, Google, PayPal, alipay... payments innovation,” says the paper. cannot but be left with the feeling that but even the european Central bank “but is their approach well-guided? the competitiveness goal is secondary acknowledges that although banks Could europe beat the odds and narrow to the market integration objective, are often accused of not being very in the coming years the widening gap and that the latter even ranks below innovative in the field of retail payments, with competing economies? Little european authorities‘ experiments in most innovations are offered by banks comfort will be gained when trying to formulating competition policy. directly or indirectly.” answer this question from the experience The paper – 100+ pages of it – He says that there is “a shared of the past decade. In the 10 years since provides a comprehensive picture of intuition” that payments innovation will the introduction of the physical euro, in what policy makers and regulators have continue to unfold further in the electronic the field of payments no less than two to say about payments innovation, what and mobile areas, but the responses european regulations and one Directive models academics have formulated in of eu institutions are fundamentally have been promulgated and are in force, this respect, the conclusions they draw, different from the other regions he with a further regulation soon to be and what aspirations are expressed and looks at. “european policymakers and approved by the european Parliament. solutions introduced by the demand and regulators would go as far as sketching This massive legislative disruption on supply sides of the market. the solutions they wish to see, and spell one side did nothing to make europe Covering public policies and related out how they should be delivered, while more efficient.” action in the european union, the uS, in the three other countries under review Looking at it from the perspective australia, and Canada, bielefeld asks authorities first base their interrogations of the business and consumers that why policy makers and/or legislators are on thorough market assessment and the eC is seeking to protect and serve, concerned about payments innovation, wide industry and public consultations,” the paper makes a central point: “the how they define payments innovation, he says baldly. demand side is not concerned with and how they see their role in making The paper outlines “steep payments innovation as such, but rather payments innovation happen. differences” between policy makers and/ with the shortcomings experienced, and More unusually, it assesses the or legislators roles in making payments expectations of mitigating these.” effectiveness of the different approaches innovation happen. against the relative efficiency achieved “In europe, although the european The full white paper is available at www. by each payment system as measured in Central bank intends to only be a esbg.eu

www.bankingtech.com I 17 MARKETS & Go to www.bankingtech.com for the latest news and comment INVESTMENTS State Street leverages cloud SunGard has extended its Valdi trading February 2012 solutions suite to provide access to BETa, the European Multilateral Trading Facility investment to enhance ETF services launched by the Budapest Stock Exchange tate Street has expanded its global servicing capability for exchange traded funds in November 2011 to serve retail investors. Saudi Fransi Capital has implemented European markets move closer to with new enhancements based on the cloud computing technology investments BETa uses the BSE equity trading platform, an asset management system supplied Sit has been making over the past few years. and offers trading in foreign shares, with by Advent Software to help it provide State Street’s TotaleTF servicing solution provides full automation throughout the market makers supplying continuous liquidity. enhanced services to clients. Saudi Fransi consolidated tape with MMT mapping lifecycle of an eTF from the basket-creation process to trade processing and settlement. The BETa product range, initially restricted to is one of the largest brokers in the Saudi he first fruits of the Market Model Typology industry project, intended to form The new cloud-based enhancements provide complete integration with core Finnish, French, German and Spanish shares, Stock Exchange and a leading Saudi the basis for a consolidated european market data service, have appeared with applications, end-to-end automation and full client transparency via an eTF dashboard is expected to be broadened in early 2012, Arabia-based provider of brokerage and Tthe availability of the official MMT 1.0 mapping release. available on the company’s client website my.StateStreet.com. additional functionality with additional products to become available investment banking services, including a broad spectrum of the industry, Federation of european Stock exchange includes the geographic expansion of State Street’s Fund Connect eTF order for trading. corporate finance, asset management and members, the London Stock exchange, baTS Chi-X europe, Markit boat and market management system and a daily performance attribution capability for eTFs. advisory investment management. “We data vendors – Thomson reuters, bloomberg, Fidessa, NySe Technologies and SIX The eTF dashboard on my.StateStreet.com now allows portfolio managers to MarkitSERV, the electronic trade needed better automation capabilities and Telekurs – have built on the trade reporting standards for OTC trade reporting initiated monitor the basket in near real time, processing service for OTC derivative a decrease in manual intervention in our by a joint industry working group under the auspices of the Committee of european and geographic expansion of the transactions, is now transmitting operations,” said Yasir Al-Rumayyan, chief Securities regulators, now the european Securities and Markets authority. Fund Connect eTF order management confirmed trade records to the DTCC’s executive of Saudi Fransi. “Advent allowed MMT provides a translation between legacy trade reporting flags to a newly defined system includes coverage for europe, “The line between new Global Trade Repository for OTC us to improve core functionality while single market standard. The translation is being adopted by MMT participating Canada and the asia-Pacific region. interest rate derivatives. With client fulfilling business requirements.” vendors on behalf of investors who seek clarity in monitoring market activity. The enhanced daily performance what we used to call authorisation, MarkitSERV’s trade The MMT translations have been developed and are being maintained by MMT attribution capability also allows for NaV technology and the reporting system automatically transmits From the middle of February National exchanges and trade reporting venues on behalf of market participants until these decomposition to break down tracking confirmed trade records to the GTR in Settlement Depository, Russia’s only standards are adopted natively by each venue. errors into specific components. business almost doesn’t near real time, helping derivatives market settlement depository servicing the full This MMT initiative provides an immediate solution for users of consolidated data State Street has been moving to a make sense anymore,” participants to fulfil their regulatory range of debt and equity securities of from the participating regulated Markets and MTFs through the various applications cloud-based architecture as part of a commitments for trade reporting. Russian issuers, will settle transactions provided by the participating data vendors. three-year technology migration. In an The company has also backloaded made within the RTS Money system already underway are further efforts by exchanges to adopt MMT natively within interview with Banking Technology last approximately three million rates in line with the two exchange groups’ their datafeeds allowing direct feed users to benefit and to avoid market data vendors year, Chris Perretta, chief information officer, said that the institution is looking to use derivative trade records into the GTR, integration plans. RTS Money is a new having to apply MMT translations on behalf of users. Future announcements on native the cloud model to speed the time to market of new products and services and their which automatically updates whenever service for execution of FX trades using adoption progress by FeSe members will be communicated in due course. continual enhancement (September 2011). any of those trades change. a single trading platform on which according to the CeSr Joint Industry Working Group the most significant remaining “The line between what we used to call technology and the business almost doesn’t FORTS and RTS Standard operate. work involves the definition and implementation of trade reporting requirements make sense anymore,” he said. “The technology is the physical embodiment of the Fidessa Intelligence is a new initiative from At present the settlements on the for OTC market participants. This, the group says, is necessary work that was not product we make. It is pretty well embedded and I see new computing paradigms trading systems vendor Fidessa that will bring transactions are held using rouble and accomplished by the working group within the mandated timeframes. “This effort increasing the technology content of financial services exponentially.” together a suite of analysis tools. The first tool, foreign currency accounts. requires the industry and regulators to work together to ensure that the standards for Trader Intelligence, is now available in the US trade data are consistently applied during trade reporting by OTC market participants and is designed to help brokers capture, filter, Fujitsu has entered into a partnership and validated by trade reporting venues,” said a FeSe statement announcing the NYSE Technologies opens latest organise and display a wealth of actionable with Natterbox to offer its network-based progress. “FeSe will participate actively in these efforts and FeSe members who data from a multitude of disparate sources. recording and retention management operate trade reporting platforms will also support these efforts and develop the Liquidity Center in Toronto Integrated into Fidessa’s sell-side order solution for mobile devices to comply with necessary validation capabilities. Further updates will be posted on our website.” management platform, Trader Intelligence the FSA mobile communications recording ySe Technologies, the commercial technology division of NySe euronext, optimises workflow by aggregating a range regulation, which came into force last has opened its latest Liquidity Center installation in Toronto as part of its of data – including market data, trading data, November. A secure web portal allows Ndevelopment of a set of trading, data and connectivity applications that holding data, Opportunity Crossing data, trade administrators to set recording, retention, enable traders to quickly and easily enter global markets that were previously difficult adverts, IOIs and execution cost analysis – retrieval, blocking and re-direction policies Buy-side firms unsure of data quality or expensive to access. and presents it as counterparty and trading for their mobile user base, groups of users Toronto is viewed as a top global trading destination by NySe Technologies, which intelligence. and individual users. The same portal from disparate systems cites a 40% growth in trading activity, multiple alternative Trading Systems and can also give nominated administrators ore than 40% of buy-side firms are not confident that the data they are specialists in the energy and mining sectors as key indicators of its importance. The Citic Bank International, a Hong Kong- audited access to mobile recordings via receiving from disparate systems is consistent and of high quality, and Toronto facility joins existing liquidity centres in the uS, London and, most recently, based full-service commercial bank, has configurable approval workflows. Mmore than two-thirds (67.4%) say that there is significant effort involved in Tokyo. additional centres are planned for other international locations. chosen Pricing Partners’ Price-it Excel, reconciling data between disparate systems and sources. “We are very pleased to have our Toronto Liquidity Center fully operational and the derivatives pricing solution, for its risk Panopticon Software, a provider of The results come from a survey of North american buy-side firms carried out on available for customers,” said Stanley young, chief executive of NySe Technologies. management team. The bank will use the visual data analysis software for real- behalf of investment systems vendor SimCorp. “It continues the realisation of our virtual capital markets community strategy derivatives pricing library to evaluate a time, Complex Event Processing “The statistics are distressing,” said Matt Samelson, principal at Woodbine designed to provide customers with high-performance access to key global markets wide range of FX structured products. and historical time series data, has associates, the Connecticut-based consulting firm that carried out the work. and services that empower them to trade more effectively at a significantly lower released a new version of its software “according to these numbers, 40% of those surveyed are making investment cost with greatly reduced friction. Through this Toronto hub, we can deploy our core Infront, a provider of real-time market data that includes native support for several decisions based on poor quality data, and nearly 30% do not have a near real-time NySe Technologies services to equalise market accessibility through simplified and electronic trading solutions, is to house its of the more popular Complex Event view into their exposure, making it impossible for these firms to be agile and respond connectivity, ultra low-latency data products and world-class technology solutions.” solutions at Interxion’s Stockholm and City Processing systems and tick databases to shifting market dynamics. We, as a community, need to galvanise change in order From each of these facilities, NySe Technologies will offer many of its core of London data centres in order to provide its on the market, including Thomson to restore investor confidence.” services, including the risk Management Gateway, which provides low latency, risk- customers with faster connectivity to exchanges Reuters Velocity Analytics, OneTick Some 22% of respondents indicated that it would take days to generate a managed access to markets; SuperFeed, a high-performance market data ticker and key liquidity venues. The company has from OneMarketData, Oracle CEP and report calculating their firm’s exposure/performance across all holdings, including plant and distribution system; and Marketplace, a FIX-based trading community with over 9,000 customers in Europe spanning large the Sybase Event Stream Processor. derivatives. Nearly 8% responded that this would take weeks. more than 1,200 market participants. institutions and private investors.

18 I www.bankingtech.com www.bankingtech.com I 19 SunGard has extended its Valdi trading State Street leverages cloud solutions suite to provide access to BETa, the European Multilateral Trading Facility investment to enhance ETF services launched by the Budapest Stock Exchange tate Street has expanded its global servicing capability for exchange traded funds in November 2011 to serve retail investors. with new enhancements based on the cloud computing technology investments BETa uses the BSE equity trading platform, Sit has been making over the past few years. and offers trading in foreign shares, with State Street’s TotaleTF servicing solution provides full automation throughout the market makers supplying continuous liquidity. lifecycle of an eTF from the basket-creation process to trade processing and settlement. The BETa product range, initially restricted to The new cloud-based enhancements provide complete integration with core Finnish, French, German and Spanish shares, applications, end-to-end automation and full client transparency via an eTF dashboard is expected to be broadened in early 2012, available on the company’s client website my.StateStreet.com. additional functionality with additional products to become available includes the geographic expansion of State Street’s Fund Connect eTF order for trading. management system and a daily performance attribution capability for eTFs. The eTF dashboard on my.StateStreet.com now allows portfolio managers to MarkitSERV, the electronic trade monitor the basket in near real time, processing service for OTC derivative and geographic expansion of the transactions, is now transmitting Fund Connect eTF order management confirmed trade records to the DTCC’s system includes coverage for europe, “The line between new Global Trade Repository for OTC Canada and the asia-Pacific region. interest rate derivatives. With client The enhanced daily performance what we used to call authorisation, MarkitSERV’s trade attribution capability also allows for NaV technology and the reporting system automatically transmits decomposition to break down tracking confirmed trade records to the GTR in errors into specific components. business almost doesn’t near real time, helping derivatives market State Street has been moving to a make sense anymore,” participants to fulfil their regulatory cloud-based architecture as part of a commitments for trade reporting. three-year technology migration. In an The company has also backloaded interview with Banking Technology last approximately three million rates year, Chris Perretta, chief information officer, said that the institution is looking to use derivative trade records into the GTR, the cloud model to speed the time to market of new products and services and their which automatically updates whenever continual enhancement (September 2011). any of those trades change. “The line between what we used to call technology and the business almost doesn’t make sense anymore,” he said. “The technology is the physical embodiment of the Fidessa Intelligence is a new initiative from product we make. It is pretty well embedded and I see new computing paradigms trading systems vendor Fidessa that will bring increasing the technology content of financial services exponentially.” together a suite of analysis tools. The first tool, Trader Intelligence, is now available in the US and is designed to help brokers capture, filter, NYSE Technologies opens latest organise and display a wealth of actionable data from a multitude of disparate sources. Liquidity Center in Toronto Integrated into Fidessa’s sell-side order management platform, Trader Intelligence ySe Technologies, the commercial technology division of NySe euronext, optimises workflow by aggregating a range has opened its latest Liquidity Center installation in Toronto as part of its of data – including market data, trading data, Ndevelopment of a set of trading, data and connectivity applications that holding data, Opportunity Crossing data, trade enable traders to quickly and easily enter global markets that were previously difficult adverts, IOIs and execution cost analysis – or expensive to access. and presents it as counterparty and trading Toronto is viewed as a top global trading destination by NySe Technologies, which intelligence. cites a 40% growth in trading activity, multiple alternative Trading Systems and specialists in the energy and mining sectors as key indicators of its importance. The Citic Bank International, a Hong Kong- Toronto facility joins existing liquidity centres in the uS, London and, most recently, based full-service commercial bank, has Tokyo. additional centres are planned for other international locations. chosen Pricing Partners’ Price-it Excel, “We are very pleased to have our Toronto Liquidity Center fully operational and the derivatives pricing solution, for its risk available for customers,” said Stanley young, chief executive of NySe Technologies. management team. The bank will use the “It continues the realisation of our virtual capital markets community strategy derivatives pricing library to evaluate a designed to provide customers with high-performance access to key global markets wide range of FX structured products. and services that empower them to trade more effectively at a significantly lower cost with greatly reduced friction. Through this Toronto hub, we can deploy our core Infront, a provider of real-time market data NySe Technologies services to equalise market accessibility through simplified and electronic trading solutions, is to house its connectivity, ultra low-latency data products and world-class technology solutions.” solutions at Interxion’s Stockholm and City From each of these facilities, NySe Technologies will offer many of its core of London data centres in order to provide its services, including the risk Management Gateway, which provides low latency, risk- customers with faster connectivity to exchanges managed access to markets; SuperFeed, a high-performance market data ticker and key liquidity venues. The company has plant and distribution system; and Marketplace, a FIX-based trading community with over 9,000 customers in Europe spanning large more than 1,200 market participants. institutions and private investors.

www.bankingtech.com I 19 SECURITIES: TRADING & SETTlEMENT February 2012 Only connect Regulatory changes around the world are creating a plethora of new venues for trade and post-trade activity. Choosing which to connect to is a problem for business as well as IT and operations. Sherree DeCovny untangles the issues. The new regulations in the US and Europe require banks to make several new connections to Swap Execution Facilities and Organised Trading Facilities, central counterparty clearing houses and swaps data repositories. The complicated logistics behind connectivity is likely to have an impact on the business, operations and technology, so banks will need to figure out the optimal way to restructure their groups for the new environment. under the uS Dodd-Frank rules, standardised derivatives will have to be traded on an exchange or SeF and centrally cleared. europe is introducing a trading venue similar to SeFs that will be known as the Organised Trading Facility. Trade data must be reported to a Swaps Data repository, regardless of whether the transaction is bilaterally or centrally cleared. To this end, a web of new connections has to be established. The SeFs will have to connect to the CCPs, and the CCPs will have to connect to the SDrs. In addition to connecting to the SeFs, OTFs, SDrs and CCPs, banks will need to connect to their counterparties. Simple, isn’t it? “you would assume – especially in europe with this new definition of OTF – that there would be a large number of new venues for everybody to at least consider to connecting to,” says bob Fuller, director at connectivity the uS, but competitive pressures may still force firms or through an agent. The customer may appoint the provider Fixnetix. “So it’s just the sheer complexity of the to connect to all the SeFs. foreign dealer, SeF, clearing house or another party as web that gets created that becomes a problem.” Firms run the risk of establishing many connections “Ultimately there’s going to be a its agent. but when a uS bank enters into a transaction Traditionally OTC derivatives have been traded over to new entities only to find they are not doing enough with a foreign bank, the uS bank must report to uS the phone, but most communications will be done transactions through some of them to justify the lot of money that will be spent authorities while the foreign bank must meet its electronically in the future – at least that is what the investment. Moreover, a significant number of them to comply with this stuff, but the regulator’s requirements. regulators are advocating. The cost of establishing may not survive over the long haul. Firms are still unclear exactly what data they have electronic connectivity has to be built into the business Some observers believe the new regulations actual flows will not differ.” to provide and when they need to provide it. Does it case for participating in a given market segment. This will present new opportunities for growth, but aite John Jay, Aite have to be sent in near real time? Dodd-Frank specifies is not trivial given that each connection could cost over Group is sceptical. unlike equities, the OTC market that counterparties are required to report trades for $1 million, and the total industry spend may run into is customised and speed is not the priority. a factor the purpose of real-time price dissemination as soon the billions. input, such as a curve, may change so the dealer Theoretically, once a trade is completed electronically as technologically practicable, but that has not been “If you’re in the OTC market, you probably operate cannot pull the trigger immediately. In addition, it is not on the SeF, the confirmation and collateral requirements fully defined yet. On average it takes eight minutes under a phone and/or hybrib system where you have some a many-to-many market. There are perhaps a couple will be sent automatically to the counterparties and for an interest rate swaps trade to be fully confirmed sort of electronic communications plus voice,” says John of dozen dealers in the world who are willing to make reported to the CCP and SDr. When a voice trade is on MarkitServ. electronic confirmation in other asset Jay, a senior analyst at aite Group. “It’s going to come a market and take on the risk in these products. as a done, an electronic version will have to be created. but classes may take more than 15 minutes. another down to ‘how much can we make in a given marketplace, result, the market does not necessarily lend itself to a firms need to agree who is responsible for reporting the question that needs to be answered is whether and how much is it going to cost us’.” central order limit book model. transaction to the SDr. under Dodd-Frank, if a dealer reporting must be done strictly by way of digital feeds, The Volcker rule in the uS and the corresponding “In my mind it’s very analogous to the fallacy of build is trading with a non-dealer customer, and both are uS or can be communicated by voice. rule proposals in europe could potentially stop it, they will come,” says Jay. “at the end of the day, it domiciled, the dealer has the reporting obligation. If the The technology exists to make all the necessary brokers from creating products, limit the number of really begins and ends with the actual market need. transaction is between two uS-based dealers, at least connections to comply with the regulations. but the new trading venues and significantly curtail liquidity. What I believe will happen is ultimately there’s going to one of them has to report. If the transaction is between lack of clarity from the regulators, and uncertainty assuming that does not happen, several SeFs, OTFs be a lot of money that will be spent to comply with this two non-dealers, the obligation is decided according about what the market will look like, is taking a toll on and SDrs could emerge on both sides of the atlantic. stuff, but the actual flows will not differ.” to a hierarchy. market participants. When senior managers ask their In europe, the best execution rules require brokers to The shift from predominantly voice to electronic Cross-border transactions are more complicated. IT staff what resources are needed to comply, the scour the market for the best price for the customer, trading will have a fundamental impact on front-office When a trade is transacted between a foreign dealer best they can do is offer a price range. They have a so they are likely to have to connect to all the OTFs. workflow and back office operations, and staff will and a uS domiciled non-dealer customer, the uS conceptual understanding of what must be done, but best execution does not apply to OTC derivatives in need time to adjust to the new environment. customer has an obligation to report either directly they do not know the full scope of the project. >

20 I www.bankingtech.com www.bankingtech.com I 21 or through an agent. The customer may appoint the foreign dealer, SeF, clearing house or another party as “Ultimately there’s going to be a its agent. but when a uS bank enters into a transaction with a foreign bank, the uS bank must report to uS lot of money that will be spent authorities while the foreign bank must meet its to comply with this stuff, but the regulator’s requirements. Firms are still unclear exactly what data they have actual flows will not differ.” to provide and when they need to provide it. Does it John Jay, Aite have to be sent in near real time? Dodd-Frank specifies that counterparties are required to report trades for the purpose of real-time price dissemination as soon Theoretically, once a trade is completed electronically as technologically practicable, but that has not been on the SeF, the confirmation and collateral requirements fully defined yet. On average it takes eight minutes will be sent automatically to the counterparties and for an interest rate swaps trade to be fully confirmed reported to the CCP and SDr. When a voice trade is on MarkitServ. electronic confirmation in other asset done, an electronic version will have to be created. but classes may take more than 15 minutes. another firms need to agree who is responsible for reporting the question that needs to be answered is whether transaction to the SDr. under Dodd-Frank, if a dealer reporting must be done strictly by way of digital feeds, is trading with a non-dealer customer, and both are uS or can be communicated by voice. domiciled, the dealer has the reporting obligation. If the The technology exists to make all the necessary transaction is between two uS-based dealers, at least connections to comply with the regulations. but the one of them has to report. If the transaction is between lack of clarity from the regulators, and uncertainty two non-dealers, the obligation is decided according about what the market will look like, is taking a toll on to a hierarchy. market participants. When senior managers ask their Cross-border transactions are more complicated. IT staff what resources are needed to comply, the When a trade is transacted between a foreign dealer best they can do is offer a price range. They have a and a uS domiciled non-dealer customer, the uS conceptual understanding of what must be done, but customer has an obligation to report either directly they do not know the full scope of the project. >

www.bankingtech.com I 21 SECURITIES: TRADING & SETTlEMENT Go to www.bankingtech.com for the latest news and comment February 2012 RETAIL More to the point, it takes time to build out a individual connections. It’s a mindset problem.” February 2012 connectivity solution, so firms need to think of ways to ultimately, some banks may decide to outsource. Voice security streamline the process and hire the right staff. Outsourcers such as Fixnetix already connect multiple “banks often hire people who don’t understand the brokers to exchanges, and they can use their network has role in mobile product or the process,” warns Sonia Goklani, chief to allow brokers to talk to each other. executive of Cleartrack, “even for the likes Co-op extends IT deal with Steria banking which offers OTC clearing of a Goldman Sachs, he Co-operative banking Group has renewed its 17 year-old IT services deal oice biometrics has the potential tools and advisory services. a very large trading with Steria, extending it till “at least” May 2014 as it continues its Group to play an important role in “ultimately, they end up house, it’s going to TTransformation programme and prepares to integrate 600-plus branches of Vaddressing the security risks running into problems with “Banks need to decide whether to become very difficult Lloyds, for which it is the front-runner. associated with the increased use compliance.” build a whole new pipe so they get to create that broker Jim Slack, business leader of IT operations and development at the bank, said: of smartphones for payments and In most firms the network and make it “Our partnership with Steria is based on trust. Our relationship with Steria has already banking, according to a study, led clearing, bilateral trading both together for derivatives, or pay for itself,” says delivered many successful business-critical projects and services, including a number by Dan Miller, senior analyst at Opus and prime brokerage leverage the existing pipe Fixnetix’s Fuller. of highly strategic undertakings. both parties remain committed to continually drive out research. businesses each have their “So you’ve got to cost and improve productivity, innovation and quality.” The report, Voice Biometrics own technology silo, and they have.” start looking at an Gavin Chapman, chief operating officer of Steria uK, said:”we recognise that the Authentication Best Practices, they are very different in Sonia Goklani, Cleartrack outsourcing model need to continually improve is more critical than ever in these challenging financial times. overcoming obstacles to adoption, the way they manage the ... plugging into Steria will continue to help reduce risk through our knowledge of the bank’s systems and evaluates previous voice biometric process flow, reporting, networks where other strategy. In particular we are continuing to work hard to ensure the success of the Co- projects as well as the current market data, pricing and people are already operative banking Group Transformation Programme.” industry landscape in order to risk. Without synergies, they connected.” The bank’s Financial Transformation Programme began in 2008 and involves the identify a number of best practices cannot achieve economies of scale and service clients according to aite’s Jay, the top tier banks are further replacement of its core banking systems and complete overhaul of its payments systems to rolling out the technology and properly. The large players in the OTC derivatives advanced in their preparations than the smaller firms with the installation of a Clear2Pay Payment Hub. taking the industry forward. It was markets are struggling with this while HSbC, bNP that have to start building their infrastructure from the as part of its core Financial Transformation Programme, the Co-operative banking sponsored by ValidSoft, a supplier of Paribas and Commerzbank, which do not have a ground up. They also have the greatest voice when it Group is installing a centralised Teradata data warehouse platform to re-engineer the fraud prevention, authentication and legacy technology problem, are gearing up to capture comes to influencing the regulators. but that is not to bank’s accounting processes. transaction verification. market share. say the larger banks have a smooth ride ahead. Teradata won the contract in partnership with Microgen, which develops specialist “Voice biometrics strikes the right Once the new regulations take effect, the SeFs will banks will need to figure out how to align their software that will be used to feed financial data into the data warehouse, which integrates balance of strong authentication need to send pricing and market data to the banks. clearing and executing brokerage businesses, which credit risk and accounting data into a single environment. Predicted benefits include and usability,” said Miller. “It is a Then the banks have to figure out how to leverage their are separated by a Chinese wall, and the individual increased usability of data, reduced management overheads and improved time efficiency. powerful tool for preventing fraud and infrastructure to allow these pipes to communicate. desks within them. The products that will be affected The bank wanted to augment this new operational environment, which has promoting empowerment through self- “either you build separate connections and get are foreign exchange, listed derivatives including already been delivered in its corporate banking business, with a business intelligence service, and will in the long run help the market data connections to talk to the SeF futures and options, credit and rates. Some clients may environment, for which it chose Teradata and its Financial Services Data Model as a financial institutions save money from connections, or you build totally new connections for want to hedge their trades across multiple desks: they solid foundation for credit risk and accounting-based business intelligence. The model fraudulent transactions and reduced the market data and SeF prices,” Goklani explains. may want to do a single name credit default swap and is expandable to the entire enterprise so that other functional business intelligence can administration costs. The security “banks need to decide whether to build a whole new hedge it with futures and options, for example. Firms be added in the future. industry should adopt best practices pipe so they get both together for derivatives, or will need to manage their exposure to clients across Within the programme, the Microgen accounting Hub and Microgen aptitude is used when introducing voice biometrics to leverage the existing pipe they have.” multiple desks from a margining and credit perspective to feed the general ledger and the Teradata data warehouse with finance information. their customers.” Legacy technology is not scalable enough to extend as well as report their position to multiple regulators. Increasing incidences of data the pipe, and building a new one is expensive. Cloud restructuring groups is a political issue. The traders theft, and increasing awareness of computing may be a solution, but then banks must on different desks do not always see eye to eye and fraud, highlight the need for banks, figure out how to retain, manage and mine the data in the traders, operations and technology staff may not LCL to add coin deposit and banknote businesses and governments to real time. They need skilled technologists to support have a strong relationship. yet a coordinated approach take another look at methods of that effort, which adds to the cost. is critical to client retention. according to Goklani, recycling to ATM estate authenticating end users. It is no Goklani believes banks initially should implement JPMorgan has achieved some success in this area, rédit agricole subsidiary le Crédit Lyonnais is to replace its network of deposit- longer sufficient to merely secure a short-term technology strategy to cope with the but it remains a challenge for Citi and Deutsche bank. enabled aTMs with new machines from Diebold featuring banknote recycling and hardware end points. Organisations demands of the immature market structure. They can “banks need to come up with an incentive- Ccoin deposit capabilities in a replacement cycle beginning with pilot installations want assurances that the individual at use excel macros, access and SharePoint to semi- based mechanism so the business, technology and during the summer. that end point is the person he or she automate transaction processing and on-board clients. operations people work together just like they do in “We were among the first in France to offer our shopkeeper and artisan customers claims to be, the report says. Meanwhile, they should dedicate resources to figuring consulting firms,” she suggests. “Deloitte has a point automated banknote and coin deposit terminals, installed in dedicated areas,” said Luc The general public is becoming out how to build a framework for all the functions system to encourage its partners to work together. If Julien, head of the aTM and fiduciary department at the bank. “Diebold’s Opteva 328 more familiar with using voice for pertaining to connectivity, margins, limits, collateral they do well, they get a higher compensation at the recycling capability leads to further thoughts on future transition to full recycling.” mobile search, device control and and data repository reporting. as the market matures end of year.” In addition to crediting users’ bank accounts in real time, deposit automation will dictation and the study says that and new CCPs, SeFs, OTFs and SDrs emerge and at this stage, the industry is beyond questioning reduce time spent on handling cash by bank employees, enabling staff to offer value- with the proper approach, voice fall by the wayside, banks can implement a formalised whether the new rules make sense. Market participants added products to customers. With its immediate recycling of selected banknotes, the authentication with soon follow. Voice technology platform to support the business in the are simply awaiting more guidance from the regulators Opteva 328 delivers efficiency and security in branches, while decreasing the total cost biometrics can act as a part of a long term. so they can make strategic plans and allocate of ownership by reducing cash handling and cash management costs. multi-layer authentication process to “With a flexible, adaptable framework, if I build the resources. They want to get on with it and start making The Opteva 324 enables a coin deposit option for merchants and consumers featuring help reduce fraud and to confirm that connectivity to TradeWeb for CDS today, it should money again. Some may decide that participating in a receipt itemising totals, quantity and coin value. bulk coin deposit alongside bulk the endpoint user is genuine. Opus be easy for me build the connectivity for interest rate the OTC derivatives market is no longer worth the cash and cheque deposit functionality rounds out the self-service features offered to research predicts that the global swaps or variance swaps tomorrow,” says Goklani. cost and hassle. Clearly, as they move forward in consumers. number of registered voiceprints will “but banks are not thinking that way at this point their journey, connectivity will play a key role in their Following a first pilot installation this summer, the Opteva 328 and 324a TMs will be increase from 10 million today to over in time. They’re thinking only in terms of building decision making. BT deployed throughout and some 90 sites across France beginning in October 2012. 25 million in 2015.

22 I www.bankingtech.com www.bankingtech.com I 23 Go to www.bankingtech.com for the latest news and comment

RETAIL February 2012 Voice security has role in mobile Co-op extends IT deal with Steria banking he Co-operative banking Group has renewed its 17 year-old IT services deal oice biometrics has the potential with Steria, extending it till “at least” May 2014 as it continues its Group to play an important role in TTransformation programme and prepares to integrate 600-plus branches of Vaddressing the security risks Lloyds, for which it is the front-runner. associated with the increased use Jim Slack, business leader of IT operations and development at the bank, said: of smartphones for payments and “Our partnership with Steria is based on trust. Our relationship with Steria has already banking, according to a study, led delivered many successful business-critical projects and services, including a number by Dan Miller, senior analyst at Opus of highly strategic undertakings. both parties remain committed to continually drive out research. cost and improve productivity, innovation and quality.” The report, Voice Biometrics Gavin Chapman, chief operating officer of Steria uK, said:”we recognise that the Authentication Best Practices, need to continually improve is more critical than ever in these challenging financial times. overcoming obstacles to adoption, Steria will continue to help reduce risk through our knowledge of the bank’s systems and evaluates previous voice biometric strategy. In particular we are continuing to work hard to ensure the success of the Co- projects as well as the current operative banking Group Transformation Programme.” industry landscape in order to The bank’s Financial Transformation Programme began in 2008 and involves the identify a number of best practices replacement of its core banking systems and complete overhaul of its payments systems to rolling out the technology and with the installation of a Clear2Pay Payment Hub. taking the industry forward. It was as part of its core Financial Transformation Programme, the Co-operative banking sponsored by ValidSoft, a supplier of Group is installing a centralised Teradata data warehouse platform to re-engineer the fraud prevention, authentication and bank’s accounting processes. transaction verification. Teradata won the contract in partnership with Microgen, which develops specialist “Voice biometrics strikes the right software that will be used to feed financial data into the data warehouse, which integrates balance of strong authentication credit risk and accounting data into a single environment. Predicted benefits include and usability,” said Miller. “It is a increased usability of data, reduced management overheads and improved time efficiency. powerful tool for preventing fraud and The bank wanted to augment this new operational environment, which has promoting empowerment through self- already been delivered in its corporate banking business, with a business intelligence service, and will in the long run help environment, for which it chose Teradata and its Financial Services Data Model as a financial institutions save money from solid foundation for credit risk and accounting-based business intelligence. The model fraudulent transactions and reduced is expandable to the entire enterprise so that other functional business intelligence can administration costs. The security be added in the future. industry should adopt best practices Within the programme, the Microgen accounting Hub and Microgen aptitude is used when introducing voice biometrics to to feed the general ledger and the Teradata data warehouse with finance information. their customers.” Increasing incidences of data theft, and increasing awareness of fraud, highlight the need for banks, LCL to add coin deposit and banknote businesses and governments to take another look at methods of recycling to ATM estate authenticating end users. It is no rédit agricole subsidiary le Crédit Lyonnais is to replace its network of deposit- longer sufficient to merely secure enabled aTMs with new machines from Diebold featuring banknote recycling and hardware end points. Organisations Ccoin deposit capabilities in a replacement cycle beginning with pilot installations want assurances that the individual at during the summer. that end point is the person he or she “We were among the first in France to offer our shopkeeper and artisan customers claims to be, the report says. automated banknote and coin deposit terminals, installed in dedicated areas,” said Luc The general public is becoming Julien, head of the aTM and fiduciary department at the bank. “Diebold’s Opteva 328 more familiar with using voice for recycling capability leads to further thoughts on future transition to full recycling.” mobile search, device control and In addition to crediting users’ bank accounts in real time, deposit automation will dictation and the study says that reduce time spent on handling cash by bank employees, enabling staff to offer value- with the proper approach, voice added products to customers. With its immediate recycling of selected banknotes, the authentication with soon follow. Voice Opteva 328 delivers efficiency and security in branches, while decreasing the total cost biometrics can act as a part of a of ownership by reducing cash handling and cash management costs. multi-layer authentication process to The Opteva 324 enables a coin deposit option for merchants and consumers featuring help reduce fraud and to confirm that a receipt itemising totals, quantity and coin value. bulk coin deposit alongside bulk the endpoint user is genuine. Opus cash and cheque deposit functionality rounds out the self-service features offered to research predicts that the global consumers. number of registered voiceprints will Following a first pilot installation this summer, the Opteva 328 and 324a TMs will be increase from 10 million today to over deployed throughout and some 90 sites across France beginning in October 2012. 25 million in 2015.

www.bankingtech.com I 23 RETAIL Go to www.bankingtech.com for the latest news and comment RETAIL: ANALYSIS February 2012 February 2012

Customers are Compliance issues drive IT spending in Fraud reaches record levels in the UK willing to pay for retail banks against the downward trend Austerity Britain is facing a sharp rise in fraud as economic gloom grips the country digital services lobal spending on retail banking technology will increase by $3.6 billion (3.2%) in Fraud rose sharply during 2011, Specific types of fraud broke down into completely fictitious ones) continues to be 2012, and will hit $135 billion over the next five years, according to Ovum. This bucks according to figures from CIFAS, the UK’s three main categories: the biggest fraud threat. Nearly half of all igital banking is set to overtake Ga trend in IT spending predicted by other analysts (see page 30). Fraud Prevention Service, which show a ■ Identity fraud continues to be the biggest frauds identified during 2011 relate to the branch networks as the main In a new forecast, the technology analyst says that banks in emerging economies in the 9% increase in the overall level of fraud problem, accounting for 48% of all frauds, impersonation of an innocent victim or the Dway customers interact with their asia-Pacific region will grow the fastest, at a rate of 8.3% in 2012, hitting $10.2 billion by the compared to 2010. with over 113,000 reported cases, a 10% use of completely false identities. bank by 2015 according to PwC – and end of the year. Meanwhile, Western europe will have the lowest growth of all the regions Other findings suggest that the economic increase from 2010 levels. This picture becomes more disturbing customers are willing to pay for it. (1.9%), despite being the second biggest market in terms of overall spend, reaching $44 climate is driving the increase as formerly ■ There was an 18% surge in facility takeover when viewed in conjunction with facility For a new report, The New Digital billion by the end of 2012. law-abiding people turn to fraud, though fraud, where a fraudster gains access and takeover fraud, where the fraudster gains Tipping point, PwC research found that “The technology investments will be mainly driven by the need to grow revenues but the there is still plenty of evidence that career fraudulently uses a victim’s account such as access (e.g. through computer hacking, most consumers are willing to pay up to changing regulatory compliance will also contribute significantly,” says Jaroslaw Knapik, criminals are exploiting both new technology a credit card, bank account or mobile phone. interception of post details, social £10 a month for digital banking services Ovum financial services analyst and author of the forecast.r “ eturning revenues to pre- and consumer gullibility. This type of fraud has grown by nearly 300% engineering through popular websites etc) if they believe they offer value. recession levels will be a priority for a number of institutions, as too will be the focus on “With the cost of living increasing, in just five years. to another person’s account details and The research shows that customers improving customer trust and increasing sales and servicing effectiveness.” pay levels frozen for many, and tax and ■ Misuse of facility fraud, where an account takes over the account. This type of fraud are willing to pay for social media This will lead to accelerated investment in channel technology, predominantly online VaT changes taking effect, perhaps it is or other facility has been legitimately obtained increased by 18% during 2011, which notifications, an electronic wallet for banking, which will become the fastest growing area globally in 2012, rising 5.3%, to hit $8.3 unsurprising that fraud has rocketed again,” but is later used fraudulently, grew 13%. means that the two data driven frauds loyalty cards and financial tools provided billion by year end. elsewhere, mobile will see an increase of 5% globally in 2012, reaching said CIFaS chief executive Peter Hurst. “It is vitally important to remember that (identity fraud and account takeover) now by banks. In the uK, almost two thirds $3.3 billion, while management information systems and multi-channel integration/customer “Prevention, however, remains better than fraud and economic crime are offences account for over 58% of all frauds identified. (65%) of respondents said they are willing information systems will also see high growth rates. cure, and it is time for all organisations with a range of motivations. Many will Furthermore, the number of victims of both to pay just over £4 a month for their bank “Technologies that allow ‘smarter’ selling and servicing, such as customer analytics and and consumers to start reviewing their undoubtedly be committed by organised types of fraud has – when combined – risen to store loyalty card information and customer data management, are expected to remain hot areas in the near future,” said Knapik. approaches to preventing fraud rather than criminal elements, but many will also be by 10% from the levels in 2010, underlining convert accumulated points into cash. “as sales activities are expected to be on the rise again, banks will also boost investments trying and failing to recover losses. Not committed by people who seemingly feel that the very real cost of these crimes. This amounts to annual fee income of into operations as the ability to sell products faster and service customers’ better will continue investing in proper fraud prevention systems their circumstances leave them no choice,” “The value of personal data to fraudsters approximately £50 per customer. to be a competitive differentiator in the retail market.” and approaches, from online security to data said richard Hurley, CIFaS communications has never been questioned, but the “Despite customers’ appetite for new With risk and compliance permanently on the agenda, ever-increasing regulatory sharing, is tantamount to leaving an open till manager. “equally, financial desperation continued increases in the levels of identity and innovative digital banking offerings, expenditure, which in 2012 will be predominantly related to Dodd-Frank and basel III, will unguarded. It is the same whether you are a leaves many susceptible to potential fraud and account takeover warn us all that and the fact they are willing to pay for drive investments into technologies that reduce costs, such as data management, business private sector organisation, a public sector scammers. untangling the mess that fraud not enough is done to combat fraudsters,” these, the majority of banks still only process management, business intelligence, and analytics. body or a charity. It will lead to only one causes, irrespective of motivation, however, Hurley said. “all organisations must provide basic mobile and internet banking Global spending in areas such as risk management, anti-fraud, compliance, and thing: financial loss.” is time-consuming, damaging and costly recognise this threat, and review how they services. banks are clearly missing a performance management, will experience growth of 4.6%, hitting $6.1 billion by the end of according to the latest numbers, more to businesses, to the public sector and to try to prevent such frauds: whether that is trick if they don’t start to invest in their 2012 and $7.6 billion over the next five years. However, emerging economies ina sia-Pacific than 236,500 frauds were identified during individuals. rather than being the ‘victimless by reviewing their security procedures and digital offerings and only see digital as will experience the highest growth, at 8.8% to hit $521 million by year end, although North the year – the highest number ever recorded crime’ it is sometimes heralded as, fraud increasing identification requirements when a way to reduce costs,” said Stephen america will grow the fastest by volume, an increase of $95 million, reaching $2.2 billion. by CIFaS members. In more than half the actually makes victims of us all.” dealing with applications, or by ensuring that Whitehouse, retail and commercial “regulatory demands are forcing banks to invest in their core systems. While in many cases there was an individual identifiable The fraudulent use of identity details individuals regularly change passwords and banking partner at PwC. “banks have cases tight compliance timescales lead to the ‘quick-win’ type of enhancement strategies, victim. (either those of an innocent victim or PIN numbers. It is obvious that fraud relating generally been too slow to embrace the the on-going nature of regulatory demands, together with the need to revamp the wider bank to personal data is an immense criminal trade digital innovation customers now expect to allow the adoption of newer business models, is now driving significant interest in core so, fundamentally, it’s time for every one of from other industries, such as retail or system transformation,” said Knapik. 2010 2011 Change us to start treating data in the same way travel. This needs to improve if banks Fraud cases identified 217,385 236,516 8.8% that we would guard a prized possession; are to hold on to their existing customers Fraud Type as something to be secured and protected and attract the next generation, as the Travel industry targeted by fraudsters as without complacency.” quality of a bank’s digital offering will Identity Fraud: Successful 66,680 69,761 4.6% One of the most disconcerting fraud types, become an increasingly important factor they move to customer not present scams Identity Fraud: Unsuccessful 35,992 43,498 20.9% says CIFaS, remains misuse of facility fraud, for consumers. “The lack of investment otels and the travel business now top the list of fraud targets, according Identity Fraud: Total 102,672 113,259 10.3% where a legitimately obtained account is used is perhaps even more surprising to research by FICO a provider of analytics and decision management fraudulently (such as to receive stolen funds, considering banks are struggling to Htechnology. Overall, it found that counterfeit fraud fell by 60% between March Application Fraud: Successful 7,605 12,599 65.7% or evade payment of monies owed). CIFaS grow revenues at a time of increased 2009 and March 2011. Application Fraud: Unsuccessful 37,075 30,664 -17.3% has previously highlighted that a substantial regulation and a difficult economic analysis done on 55 million active credit cards represented in the FICO Falcon Application Fraud: Total 44,680 43,263 -3.2% proportion of such frauds bear the hallmarks environment. Digital products are a Fraud Consortium for europe showed that card-not-present fraud accounted for of ‘money mule’ activity (where a fraudster significant opportunity for banks to grow 69% of all accounts victimised by fraud and 72% of all fraud losses. The top 10 False Insurance Claim 537 396 -26.3% recruits another – often innocent – party to revenues.” merchant categories accounted for 30% of the total fraud losses, led by hotels/ use his or her account to launder money The research reveals that more and lodging, travel agencies and aTMs. Facility Takeover Fraud 21,226 25,070 18.1% on the fraudster’s behalf), demonstrating more consumers are using online and “Our analysis of the data shines a spotlight on the tremendous change that has that organised criminals now have a three mobile channels to access financial occurred in europe’s fraud landscape,” said Martin Warwick, FICO’s fraud chief in Asset Conversion 539 532 -1.3% pronged attack on their victims’ identities: products. 69% of those surveyed said europe, the Middle east and africa. “Chip and PIN technology has radically driven impersonating them, hijacking their accounts they currently use the internet to purchase down counterfeit and other forms of ‘card present’ fraud in the uK, which just three Misuse of Facility 47,731 53,996 13.1% or tricking them into using their own details financial products. While a lower number years ago accounted for some 60% of europe’s credit card fraud. In response, as a shield for criminal activity. equally true, of respondents (33%) currently use criminals are operating across borders, targeting countries such as Germany that Victims of Impersonation 89,470 96,611 8.0% however, is that financial insecurity and the mobile banking it is expected to follow a have weaker detection and prevention capabilities, and shifting their attention to economic pinch will have been motivating similar usage curve to internet banking. card-not-present schemes such as online fraud.” Victims of takeover 21,322 25,250 18.4% factors for many of these frauds.

24 I www.bankingtech.com www.bankingtech.com I 25 RETAIL: ANALYSIS February 2012

Fraud reaches record levels in the UK Austerity Britain is facing a sharp rise in fraud as economic gloom grips the country

Fraud rose sharply during 2011, Specific types of fraud broke down into completely fictitious ones) continues to be according to figures from CIFAS, the UK’s three main categories: the biggest fraud threat. Nearly half of all Fraud Prevention Service, which show a ■ Identity fraud continues to be the biggest frauds identified during 2011 relate to the 9% increase in the overall level of fraud problem, accounting for 48% of all frauds, impersonation of an innocent victim or the compared to 2010. with over 113,000 reported cases, a 10% use of completely false identities. Other findings suggest that the economic increase from 2010 levels. This picture becomes more disturbing climate is driving the increase as formerly ■ There was an 18% surge in facility takeover when viewed in conjunction with facility law-abiding people turn to fraud, though fraud, where a fraudster gains access and takeover fraud, where the fraudster gains there is still plenty of evidence that career fraudulently uses a victim’s account such as access (e.g. through computer hacking, criminals are exploiting both new technology a credit card, bank account or mobile phone. interception of post details, social and consumer gullibility. This type of fraud has grown by nearly 300% engineering through popular websites etc) “With the cost of living increasing, in just five years. to another person’s account details and pay levels frozen for many, and tax and ■ Misuse of facility fraud, where an account takes over the account. This type of fraud VaT changes taking effect, perhaps it is or other facility has been legitimately obtained increased by 18% during 2011, which unsurprising that fraud has rocketed again,” but is later used fraudulently, grew 13%. means that the two data driven frauds said CIFaS chief executive Peter Hurst. “It is vitally important to remember that (identity fraud and account takeover) now “Prevention, however, remains better than fraud and economic crime are offences account for over 58% of all frauds identified. cure, and it is time for all organisations with a range of motivations. Many will Furthermore, the number of victims of both and consumers to start reviewing their undoubtedly be committed by organised types of fraud has – when combined – risen approaches to preventing fraud rather than criminal elements, but many will also be by 10% from the levels in 2010, underlining trying and failing to recover losses. Not committed by people who seemingly feel that the very real cost of these crimes. investing in proper fraud prevention systems their circumstances leave them no choice,” “The value of personal data to fraudsters and approaches, from online security to data said richard Hurley, CIFaS communications has never been questioned, but the sharing, is tantamount to leaving an open till manager. “equally, financial desperation continued increases in the levels of identity unguarded. It is the same whether you are a leaves many susceptible to potential fraud and account takeover warn us all that private sector organisation, a public sector scammers. untangling the mess that fraud not enough is done to combat fraudsters,” body or a charity. It will lead to only one causes, irrespective of motivation, however, Hurley said. “all organisations must thing: financial loss.” is time-consuming, damaging and costly recognise this threat, and review how they according to the latest numbers, more to businesses, to the public sector and to try to prevent such frauds: whether that is than 236,500 frauds were identified during individuals. rather than being the ‘victimless by reviewing their security procedures and the year – the highest number ever recorded crime’ it is sometimes heralded as, fraud increasing identification requirements when by CIFaS members. In more than half the actually makes victims of us all.” dealing with applications, or by ensuring that cases there was an individual identifiable The fraudulent use of identity details individuals regularly change passwords and victim. (either those of an innocent victim or PIN numbers. It is obvious that fraud relating to personal data is an immense criminal trade so, fundamentally, it’s time for every one of 2010 2011 Change us to start treating data in the same way Fraud cases identified 217,385 236,516 8.8% that we would guard a prized possession; Fraud Type as something to be secured and protected without complacency.” Identity Fraud: Successful 66,680 69,761 4.6% One of the most disconcerting fraud types, Identity Fraud: Unsuccessful 35,992 43,498 20.9% says CIFaS, remains misuse of facility fraud, Identity Fraud: Total 102,672 113,259 10.3% where a legitimately obtained account is used fraudulently (such as to receive stolen funds, Application Fraud: Successful 7,605 12,599 65.7% or evade payment of monies owed). CIFaS Application Fraud: Unsuccessful 37,075 30,664 -17.3% has previously highlighted that a substantial Application Fraud: Total 44,680 43,263 -3.2% proportion of such frauds bear the hallmarks of ‘money mule’ activity (where a fraudster False Insurance Claim 537 396 -26.3% recruits another – often innocent – party to use his or her account to launder money Facility Takeover Fraud 21,226 25,070 18.1% on the fraudster’s behalf), demonstrating that organised criminals now have a three Asset Conversion 539 532 -1.3% pronged attack on their victims’ identities: impersonating them, hijacking their accounts Misuse of Facility 47,731 53,996 13.1% or tricking them into using their own details as a shield for criminal activity. equally true, Victims of Impersonation 89,470 96,611 8.0% however, is that financial insecurity and the economic pinch will have been motivating Victims of takeover 21,322 25,250 18.4% factors for many of these frauds.

www.bankingtech.com I 25 RISK & Go to www.bankingtech.com for the latest news and comment REGULATION February 2012 UBS turns to RepRisk for ESG data bS is to use environmental, social and corporate governance data supplied by FCA will aim for reprisk to enhance risk management and control in customer on-boarding and balanced conduct Utransaction due diligence. EDHEC examines Algorithmics and Axioma add multi- The ubS compliance database will now also incorporate reprisk’s comprehensive environmental and social risk information on controversial companies. The bank will regulations true risk of ETFs factor equity model data to Algo Risk use the information on a global scale for client vetting within all divisions, including artin Wheatley, managing eDHeC-risk Institute has addressed the lgorithmics, now part of IbM, has partnered with axioma, a provider of multi- Wealth Management and Swiss bank, Global asset Management and the Investment director of the Financial question of the true risks of exchange factor equity models, to offer data derived from axioma’s multi-factor equity bank. reprisk data will be used in the on-boarding process to screen potential new MServices authority, has Traded Funds in europe in the light of Amodels as part of the algo risk Service, its hosted portfolio construction, risk clients and suppliers, as well as for outlined a “new orthodoxy” and issues raised by financial regulators and reporting service. periodic client review processes and to approach for the future of conduct and international organisations, and axioma risk models offer a wide range of regional and style-base models that are check on risks related to transactions. “The integration of this regulation based on getting a fair deal concluded that any discussion of the recalibrated daily, with re-estimations and production-of-factor exposures, covariance “reprisk has been a trusted business data into our compliance for consumers. risks inherent in eTFs “should go beyond matrices, and asset specific risks. This is an important differentiator for this partnership intelligence partner of ubS for five years. Wheatley, who is also chief executive merely hypothesising about potential in a market where monthly recalibration of equity factor models is the norm. With The integration of this data into our and risk processes is a designate of the Financial Conduct risks, and should also take into account axioma data available through algo risk Service, algorithmics’ clients can draw on existing compliance and risk processes key component in UBS’ authority, one of the bodies that will the empirical evidence provided by the reports from axioma’s multi-factor equity models to improve equity coverage and is a key component in the systematic environmental and social take over from the FSa next year, existing academic research on eTFs, consistency between front and middle offices. implementation of ubS’ environmental told a meeting at the british bankers’ which has documented various benefits Sebastian Ceria, chief executive of axioma, said: “The benefits of working with and social risk standards, and will help risk standards.” association that it was time for a new in terms of liquidity and price efficiency”. algorithmics are very clear. Most clients ensure that our due diligence processes approach to get the right outcomes for The vast majority of european eTFs are want to achieve modelling consistency are comprehensive and standardised at a consumers. managed within the uCITS framework and between the risk-focused middle office and “Clients want modelling global level,” said Liselotte arni, head of environmental and social risk at ubS. “We need to develop a new orthodoxy as such have the same levels of security investment-oriented portfolio managers consistency between the reprisk draws from third party sources including print media, government sites, and a new regulatory approach … I and the same risks as any uCITS fund. in the front office; our collaboration with NGOs and think tanks, as well as other independent websites, newsletters and blogs. want the culture in your firms, from “Highlighting the supposed risks of eTFs algorithmics provides that consistency of risk-focused middle office On a daily basis, it detects environmental, social and corporate governance criticism your product governance to your sales, therefore makes little sense, and even less equity risk. axioma’s front-office clients and investment-oriented about companies and projects in 13 languages. to be aligned with the best interests so in matters of retail investor protection will enjoy consistent modelling with their front-office.” of your customers. I don’t want to see in that eTFs represent but a fraction of middle-office risk departments.” any of the failings the FSa has had to the products sold to the general public andrew aziz, executive vice president OpenLink to plug Dodd-Franks deal with in the last few years,” he said. in europe and competing investment of buy-side risk solutions at algorithmics, said: “axioma’s reputation as an innovator “but I want to emphasise this is not all vehicles typically do not benefit from the in equity modelling complements algorithmics’ commitment to innovation. For our compliance gap with enhancements about regulated firms. Consumers of same level of protection as that provided clients, this relationship with axioma offers modelling across all asset classes and the course have a role to play, and we need by the uCITS framework,” it said. convenience of having the model as part of algo risk Service. Importantly, it also gives rading and risk software vendor OpenLink Financial has scheduled a range of a cultural change at the regulator as The institute concludes that “the clients the flexibility to introduce patented equity modelling as part of their custom product developments focused on accelerating compliance with Dodd-Frank well. The FCa will need to ask tougher massive marketing and media relations solution while maintaining consistency with the axioma models used by their front Tregulatory milestones scheduled for 2012. questions, and they need to be the right campaigns implemented by some offices. as we evolve our solutions for the buy side, we continue to recognise the Dodd-Frank changes regulation of the uS OTC derivatives market, with the goals ones, if we are really going to discover eTF providers in an effort to promote importance of being able to offer customisable solutions to meet our clients’ needs.” of improving transparency, reducing systemic default risk, and promoting market what lies at the heart of your firms’ counterparty-risk-based distinctions integrity. successes and failures. The FCa then between physical and synthetic replication “Our suite of regulatory compliance solutions will enable clients to leverage their needs to make better, bolder, faster eTFs are misleading”. Otkritie to use cloud surveillance technology investment in OpenLink to comply with these new requirements and the decisions.” accompanying changes that will transform the derivatives trading landscape,” said The FCa, Wheatley said, will build Indian core connectivity specialist Ideal systems from Nice Actimize Phil Wang, senior vice president of product management at OpenLink. “The goal has on the experience of the FSa but will Invent has signed a distribution agreement tkritie Capital has selected Nice actimize to provide cloud-based market been to facilitate compliance with cost-efficient solutions that can be rapidly deployed aim to strike a balance recognising that to sell and implement Financial Studio, abuse surveillance and anti-money laundering solutions in support of its and flexible enough to adapt to forthcoming changes as they are introduced.” firms, the regulator and the consumer the finance, risk and compliance solution Ocross-asset Direct Market access platform and broker dealer activities. OpenLink’s Dodd-Frank compliance initiatives include: all have responsibilities. from FinArch, in the Nordic countries, the Services will be hosted by Nice actimize from its uK data centre. ■ Dodd-Frank Regulatory Compliance Reporting Package – a suite of reports “If a consumer makes a fully informed Baltics, Poland, CIS and Russia. The pair Otkritie will use Nice actimize’s cloud-based technology for its trading practices for regulatory reporting, including the CFTC Large Trader report for Physical decision that subsequently goes wrong, have previously collaborated on a number compliance programme to detect and report potential market abuse and money Commodity Swaps. These position reports will facilitate compliance with CFTC then that is down to them. but we have of projects in these arreas. laundering activities across its european business. a combined global team based in reporting regulations. to be realistic. and what this is about is London, Moscow and Frankfurt will coordinate delivery of the services. ■ CFTC Position Limits Monitoring – real-time limit monitoring to comply with CFTC balance,” he said. “We have to realise Fiserv has enhanced its Asset Liability Nice actimize provides cloud-based solutions in addition to on-premise support position limits in aggregate for both OTC and exchange-traded products. These that consumers aren’t always in a Manager, Data Management System and as an alternative delivery mechanism, with hosting in a secure data centre. The limits can be monitored at various aggregation levels and reporting perspectives, position to take responsibility, because Funds Transfer Pricing systems to create cloud-based delivery minimises deployment time, reduces total cost of ownership such as a firm’s own positions and/or its clients’ positions. of their lack of financial knowledge and higher levels of transparency and accuracy and and speeds return on investment. ■ Swap Data Repository Reporting – gateways for real-time reporting to SDrs because we have to take a reasonable enable financial institutions to reduce risk and “Otkritie Capital conducted a rigorous search with stringent criteria before available by asset class. alternatively, standard FpML and FIX gateways can facilitate approach to what a normal person increase regulatory compliance. New features choosing Nice actimize for the automation of our regulatory compliance initiatives internal connectivity initiatives. Standard workflows are included for determination of can understand about complicated include: daily liquidity modelling; loan fees at the in trading and fixed income,” said Nils Jahn, managing director of global electronic trade eligibility for reporting, as well as block/large trades handling. products and risks.” instrument level ensuring compliance with the trading at Otkritie. ■ OTC Clearing Workflows – OpenLink’s trade processing workflows have been That said, Wheatley emphasised that FAS 91 Rule; scenario analysis improvements; amir Orad, president and chief executive of Nice actimize, said: “as the needs extended for the lifecycle of OTC-cleared derivative products, from execution, this doesn’t mean the new regulator will and scenario reporting. The new versions are of the securities market evolve, we remain committed to providing cloud-based to confirmation, matching and clearing. Post-execution processes, such as be taking a hands-off approach. “What available for Windows 7, Windows Server 2008 solutions that enable rapid deployment, offer minimal business disruption, and which amendments, terminations, assignments and option exercise, are fully supported. the FCa won’t be doing is lying back then R2 and 64 bit environments. ease the burden of regulatory compliance.” Connectivity options to CCPs and clearing houses are also available. letting the market get on with it,” he said.

26 I www.bankingtech.com www.bankingtech.com I 27 UBS turns to RepRisk for ESG data bS is to use environmental, social and corporate governance data supplied by FCA will aim for reprisk to enhance risk management and control in customer on-boarding and balanced conduct Utransaction due diligence. The ubS compliance database will now also incorporate reprisk’s comprehensive environmental and social risk information on controversial companies. The bank will regulations use the information on a global scale for client vetting within all divisions, including artin Wheatley, managing Wealth Management and Swiss bank, Global asset Management and the Investment director of the Financial bank. reprisk data will be used in the on-boarding process to screen potential new MServices authority, has clients and suppliers, as well as for outlined a “new orthodoxy” and periodic client review processes and to approach for the future of conduct check on risks related to transactions. “The integration of this regulation based on getting a fair deal “reprisk has been a trusted business data into our compliance for consumers. intelligence partner of ubS for five years. Wheatley, who is also chief executive The integration of this data into our and risk processes is a designate of the Financial Conduct existing compliance and risk processes key component in UBS’ authority, one of the bodies that will is a key component in the systematic environmental and social take over from the FSa next year, implementation of ubS’ environmental told a meeting at the british bankers’ and social risk standards, and will help risk standards.” association that it was time for a new ensure that our due diligence processes approach to get the right outcomes for are comprehensive and standardised at a consumers. global level,” said Liselotte arni, head of environmental and social risk at ubS. “We need to develop a new orthodoxy reprisk draws from third party sources including print media, government sites, and a new regulatory approach … I NGOs and think tanks, as well as other independent websites, newsletters and blogs. want the culture in your firms, from On a daily basis, it detects environmental, social and corporate governance criticism your product governance to your sales, about companies and projects in 13 languages. to be aligned with the best interests of your customers. I don’t want to see any of the failings the FSa has had to OpenLink to plug Dodd-Franks deal with in the last few years,” he said. “but I want to emphasise this is not all compliance gap with enhancements about regulated firms. Consumers of course have a role to play, and we need rading and risk software vendor OpenLink Financial has scheduled a range of a cultural change at the regulator as product developments focused on accelerating compliance with Dodd-Frank well. The FCa will need to ask tougher Tregulatory milestones scheduled for 2012. questions, and they need to be the right Dodd-Frank changes regulation of the uS OTC derivatives market, with the goals ones, if we are really going to discover of improving transparency, reducing systemic default risk, and promoting market what lies at the heart of your firms’ integrity. successes and failures. The FCa then “Our suite of regulatory compliance solutions will enable clients to leverage their needs to make better, bolder, faster technology investment in OpenLink to comply with these new requirements and the decisions.” accompanying changes that will transform the derivatives trading landscape,” said The FCa, Wheatley said, will build Phil Wang, senior vice president of product management at OpenLink. “The goal has on the experience of the FSa but will been to facilitate compliance with cost-efficient solutions that can be rapidly deployed aim to strike a balance recognising that and flexible enough to adapt to forthcoming changes as they are introduced.” firms, the regulator and the consumer OpenLink’s Dodd-Frank compliance initiatives include: all have responsibilities. ■ Dodd-Frank Regulatory Compliance Reporting Package – a suite of reports “If a consumer makes a fully informed for regulatory reporting, including the CFTC Large Trader report for Physical decision that subsequently goes wrong, Commodity Swaps. These position reports will facilitate compliance with CFTC then that is down to them. but we have reporting regulations. to be realistic. and what this is about is ■ CFTC Position Limits Monitoring – real-time limit monitoring to comply with CFTC balance,” he said. “We have to realise position limits in aggregate for both OTC and exchange-traded products. These that consumers aren’t always in a limits can be monitored at various aggregation levels and reporting perspectives, position to take responsibility, because such as a firm’s own positions and/or its clients’ positions. of their lack of financial knowledge and ■ Swap Data Repository Reporting – gateways for real-time reporting to SDrs because we have to take a reasonable available by asset class. alternatively, standard FpML and FIX gateways can facilitate approach to what a normal person internal connectivity initiatives. Standard workflows are included for determination of can understand about complicated trade eligibility for reporting, as well as block/large trades handling. products and risks.” ■ OTC Clearing Workflows – OpenLink’s trade processing workflows have been That said, Wheatley emphasised that extended for the lifecycle of OTC-cleared derivative products, from execution, this doesn’t mean the new regulator will to confirmation, matching and clearing. Post-execution processes, such as be taking a hands-off approach. “What amendments, terminations, assignments and option exercise, are fully supported. the FCa won’t be doing is lying back then Connectivity options to CCPs and clearing houses are also available. letting the market get on with it,” he said.

www.bankingtech.com I 27 RegULATION: PeRSONAL DATA February 2012

reporting mechanism in place will need to implement Lock up your data measures to be able to flag breaches in time.” Europe’s revision of data protection laws will add more burden for firms handling personal among the data security vendors, however, the information, like banks. David Bannister reports on the range of reactions to the proposals. reaction was surprisingly positive. “rather than suffering from the financial and A comprehensive reform of the european 1995 Commission’s Vice President. “The protection of reputational damage that comes as a result of a “Ultimately there’s going to be a data protection rules to strengthen online privacy personal data is a fundamental right for all europeans, data breach, surely it would be more beneficial for lot of money that will be spent rights and boost europe’s digital economy will have but citizens do not always feel in full control of their businesses to take steps to prevent data breaches from significant impact on the banking and financial personal data. My proposals will help build trust ever occurring in the first place,” said aziz Maakaroun, to comply with this stuff, but the services industries, though it is intended to reduce the in online services because people will be better managing partner of Outpost24 uK, a vulnerability actual flows will not differ.” cost of administrative burdens in the longer term. informed about their rights and in more control of their management specialist. “The cost of implementing John Jay, Aite The european Commission is proposing a new set information. The reform will accomplish this while security measures to proactively protect corporate of rules in reaction to technological changes and the making life easier and less costly for businesses. a information from potential data breaches and attacks fact that the 27 european union Member States have strong, clear and uniform legal framework at eu level is far less than the ultimate cost of a data breach. implemented the 1995 rules differently, resulting in will help to unleash the potential of the Digital Single by identifying any potential vulnerabilities in their divergences in enforcement. Market and foster economic growth, innovation and corporate network or websites, businesses can protect The eC says that a “single law will do away with job creation.” their customer data to ensure that they never fall foul the current fragmentation and costly administrative The reaction of most seems to be that the intention of of these new data protection laws and therefore never burdens, leading to savings for businesses of around the regulation is welcomed, but the practical outcome have to go through the costly consequences of having €2.3 billion [£1.9 billion] a year”. The initiative will help is that it will add to the pain and cost of compliance in to announce that a breach has taken place.” reinforce consumer confidence in online services, the medium term. David Gibson, director of strategy at Varonis, a providing a much needed boost to growth, jobs and “We see no reason for such a radical overhaul, company that specialises in unstructured data, was innovation in europe, it says. when existing data protection legislation remains fit for almost sanguine. “Many IT security professionals have “Seventeen years ago less than 1% of europeans purpose,” said Matthew Fell, director for competitive expressed concerns about the technical problems used the internet. Today, vast amounts of personal markets at the Confederation of british Industry. associated with managing, protecting and auditing data are transferred and exchanged, across continents The question of adding to the regulatory burden access to their growing data stores.” “While these and around the globe in fractions of seconds,” was echoed by Lisa banyard, data protection leader concerns are understandable, the reality is that with said eu Justice Commissioner Viviane reding, the at PwC. “Implementing the proposals will present an the correct technology in place these issues can easily increased administrative burden for businesses. under be solved,” he said. The insurer’s view: planning for privacy the changes, organisations would be operating under “yes, there will be a lot of moaning and groaning a tougher regime where they would face increased about the new rules, but I predict that – as we have The new proposed European data protection law has considerable accountability and heavier fines which could add up seen with the PCI DSS governance rules – after a short implications for smaller concerns, according to Matthew Norris, e-risk and to 2% of worldwide turnover for the most serious while, they will become the accepted business practice privacy expert at specialist SME insurer Hiscox. breaches. In a move clearly aimed at those operating and part of the data protection and management “The data loss notification aspect of the new proposed law is part of on the internet, organisations dealing with personal landscape. and that is a significant move forward for a wider picture of increasing pressure on companies to be able to detect data about eu citizens would be accountable even everyone.” BT and respond to data breaches quickly. Some businesses have suffered high where they are located outside the eu,” she said. profile data losses in the past year and the speed and response insuch Margaret Tofalides, a specialist in privacy and data What the Commission wants to do: the highlights cases is crucial in limiting the adverse effects of a breach,” he says. protection at law firm Manches, said: “The proposals “The proposed law directs that certain internet businesses need to will change the basic DNa of online businesses, The European Commission’s directive include two legislative authority in their country, even when their data is processed by a contact regulators within 24 hours after an attack, and data subjects “as refocusing data protection to the centre of what they proposals: a regulation setting out a general EU framework company based outside the EU. Wherever consent is required for soon as reasonably feasible”, but it can be challenging for a company to be do through much tougher monitoring and reporting for data protection and a directive on protecting personal data data to be processed, it is clarified that it has to be given explicitly, able to report on a complicated data breach within that time. Realistically requirements and with explicit consent requirements, processed for the purposes of prevention, detection, investigation rather than assumed. many breaches will still be in the process of being forensically investigated and greater rights for data deletion. In addition, the or prosecution of criminal offences and related judicial activities. ■ People will have easier access to their own data and be able to at this stage, making it all the more essential to have an incident response pressure on firms with more than 250 employees is transfer personal data from one service provider to another more plan agreed and in place. This means the business will be able to respond now the need to employ a data protection officer. In Key changes in the reform include: easily (right to data portability). This will improve competition with as much detail as possible in as short a period as possible. This is addition data processors will now be directly liable ■ A single set of rules on data protection, valid across the EU. among services. especially important to minimise damage to the brand and avoid potential for any breaches. Fines and penalties for violations Unnecessary administrative requirements, such as notification ■ A ‘right to be forgotten’ will help people better manage data penalties.” are significant, as is the focus on the regulator taking requirements for companies, will be removed. This will save protection risks online: people will be able to delete their data if Norris says that it is essential for businesses to have a resilient incident action.” businesses around €2.3 billion a year, according to the Commission. there are no legitimate grounds for retaining it. response plan to minimise the damage in the case of a data breach. In Tofalides, who works closely with the uK ■ Instead of the current obligation of all companies to notify ■ EU rules must apply if personal data is handled abroad by preparation for a breach such a plan would include: Information Commissioner’s Office, said that firms will all data protection activities to data protection supervisors – a companies that are active in the EU market and offer their services ■ Nominating an individual who is responsible for swiftly initiating contact have to demonstrate to regulators, when they report requirement that has led to unnecessary paperwork and costs to EU citizens. with the forensic company in the case of a breach breaches, that they have contingency plans in place to businesses €130 million a year – the regulation provides for ■ Independent national data protection authorities will be ■ Determining when it is appropriate to involve a lawyer, for example to notify customers, cure IT system defects and contain increased responsibility and accountability for those processing strengthened so they can better enforce the EU rules at home. maintain legal advice and litigation privilege if the forensic report reveals damage or they could face enormous fines. “This is a personal data. They will be empowered to fine companies that violate EU data adverse facts major change,” she said. ■ For example, companies and organisations must notify the protection rules. This can lead to penalties of up to €1 million or ■ Nominating a forensic company to work with in the case of a breach PwC’s banyard added: “The introduction of national supervisory authority of serious data breaches as soon as up to 2% of the global annual turnover of a company. ■ Agreement with the forensic company on the type of instructions and compulsory breach notification means companies have possible (if feasible within 24 hours). ■ The new directive will apply general data protection principles contract it requires to start work to report losses to the Data Protection authority within 24 ■ Organisations will only have to deal with a single national data and rules for police and judicial cooperation in criminal matters. ■ Agreement of the hourly rates from the forensic company as part of the hours and that’s going to be tough for some companies protection authority in the EU country where they have their main The rules will apply to both domestic and cross-border transfers contract to adhere to. Those that don’t already have a well-oiled establishment. Likewise, people can refer to the data protection of data.

28 I www.bankingtech.com www.bankingtech.com I 29 reporting mechanism in place will need to implement measures to be able to flag breaches in time.” among the data security vendors, however, the reaction was surprisingly positive. “rather than suffering from the financial and reputational damage that comes as a result of a “Ultimately there’s going to be a data breach, surely it would be more beneficial for lot of money that will be spent businesses to take steps to prevent data breaches from ever occurring in the first place,” said aziz Maakaroun, to comply with this stuff, but the managing partner of Outpost24 uK, a vulnerability actual flows will not differ.” management specialist. “The cost of implementing John Jay, Aite security measures to proactively protect corporate information from potential data breaches and attacks is far less than the ultimate cost of a data breach. by identifying any potential vulnerabilities in their corporate network or websites, businesses can protect their customer data to ensure that they never fall foul of these new data protection laws and therefore never have to go through the costly consequences of having to announce that a breach has taken place.” David Gibson, director of strategy at Varonis, a company that specialises in unstructured data, was almost sanguine. “Many IT security professionals have expressed concerns about the technical problems associated with managing, protecting and auditing access to their growing data stores.” “While these concerns are understandable, the reality is that with the correct technology in place these issues can easily be solved,” he said. “yes, there will be a lot of moaning and groaning about the new rules, but I predict that – as we have seen with the PCI DSS governance rules – after a short while, they will become the accepted business practice and part of the data protection and management landscape. and that is a significant move forward for everyone.” BT What the Commission wants to do: the highlights

The European Commission’s directive include two legislative authority in their country, even when their data is processed by a proposals: a regulation setting out a general EU framework company based outside the EU. Wherever consent is required for for data protection and a directive on protecting personal data data to be processed, it is clarified that it has to be given explicitly, processed for the purposes of prevention, detection, investigation rather than assumed. or prosecution of criminal offences and related judicial activities. ■ People will have easier access to their own data and be able to transfer personal data from one service provider to another more Key changes in the reform include: easily (right to data portability). This will improve competition ■ A single set of rules on data protection, valid across the EU. among services. Unnecessary administrative requirements, such as notification ■ A ‘right to be forgotten’ will help people better manage data requirements for companies, will be removed. This will save protection risks online: people will be able to delete their data if businesses around €2.3 billion a year, according to the Commission. there are no legitimate grounds for retaining it. ■ Instead of the current obligation of all companies to notify ■ EU rules must apply if personal data is handled abroad by all data protection activities to data protection supervisors – a companies that are active in the EU market and offer their services requirement that has led to unnecessary paperwork and costs to EU citizens. businesses €130 million a year – the regulation provides for ■ Independent national data protection authorities will be increased responsibility and accountability for those processing strengthened so they can better enforce the EU rules at home. personal data. They will be empowered to fine companies that violate EU data ■ For example, companies and organisations must notify the protection rules. This can lead to penalties of up to €1 million or national supervisory authority of serious data breaches as soon as up to 2% of the global annual turnover of a company. possible (if feasible within 24 hours). ■ The new directive will apply general data protection principles ■ Organisations will only have to deal with a single national data and rules for police and judicial cooperation in criminal matters. protection authority in the EU country where they have their main The rules will apply to both domestic and cross-border transfers establishment. Likewise, people can refer to the data protection of data.

www.bankingtech.com I 29 Go to www.bankingtech.com for the latest news and comment IT & OPS: BIG DATA IT & OPS February 2012 February 2012 Accenture is to acquire Neo Metrics Analytics, a Spanish consulting firm specialising in optimisation and predictive analytics. Neo Metrics’ modeller solution will enhance European banks’ IT spend flatlining, say Accenture’s capabilities in this area. It also brings new social network analysts from Celent and Gartner analysis capabilities such as the ability otal bank IT spending across North america, europe and asia Pacific will grow to to identify hierarchies within online $173.3 billion in 2012 – up 2.8% from 2011, but largely fuelled by a 6% growth ina sia customer communities. The acquisition TPacific, indicating that IT spending growth is slightly on the decline. will enable Accenture to further develop In a new report, IT Spending in Banking: A Global Perspective, analyst firm Celent says advanced analytical models across that spending by banks in asia Pacific will grow by 6% in 2012 to $59.4 billion. This growth all industries and business functions will continue in 2013 to reach $62.3 billion. North american banks, particularly uS banks, including sophisticated models and are reporting more dismal forecasts, with spending set to grow by “a mere” 2.4% in 2012 to techniques for pricing optimisation, $54.7 billion. This figure will increase gradually to 2.9% in 2013 to $56.3 billion. quality and fraud management, and european banks are in far deeper trouble and are reporting little to no growth. Spending demand forecasting. by european banks will grow 0.3% in 2012 to $59.2 billion. european spending growth will continue to be flat through 2013, increasing by just 0.4% to $59.5 billion. Cable & Wireless Worldwide and data “From an IT spending perspective, the next couple of years are going to be rocky,” said centre specialist Equinix are collaborating Jacob Jegher, senior analyst with Celent’s banking Group and co-author of the report. “The to “become a one-stop shop for global good news is that a slight turnaround is in sight. When examining the sum of the three enterprises that require best-of-breed data regions, IT spending is expected to grow by 3.1% in 2013 and 3.4% in 2014.” centre services”. C&W Worldwide will deliver banks are not alone in this, however. according to a global survey of CIOs by Gartner, IT a comprehensive suite of services, such as Data daze organisations will have to deliver on multiple priorities without an increase in their IT budget, co-location, managed hosting and cloud as IT budgets are expected to be flat, increasing just 0.5 per cent, with declining IT budgets computing services to global customers. It Big Data suffers from conceptual misunderstandings and more than a little hype, but it has in North america and europe. will have access to Equinix’s 99 global data great potential in fianancial services, writes Tom Groenfeldt. “Technology’s role in the organisation is increasing. This does not mean, however, that centres. the role of the IT organisation is increasing,” said Mark McDonald, group vice president Big Data is coming, heralded by a bit of noisy hype learning where the user doesn’t know a model or key for Gartner executive Programs and Gartner Fellow. “CIOs concentrating on IT as a force SunGard has bought Syntesys, a – but many experts think it is hype that will be fully variable in advance but waits to learn it from the data. of operational automation, integration and control are losing ground to executives who European Swift service bureau and realised very shortly. accel Partners, a global venture Keith Collins, vice president and chief technology see technology as a business amplifier and source of innovation.e ffective leaders use network of business and technical capital firm, is betting on it – the firm has established a officer at SaS, said big Data can be useful in fighting technology, which includes IT, to strengthen the customer experience and eliminate costly experts dedicated to serving the Swift $100 million big Data fund. fraud, which has increased sharply in years. SaS turns internal distortions. They are using technology to ‘amplify’ the enterprise.” community. The Syntesys acquisition “big Data is one of the biggest transformational the links in social analysis upside down to spot patterns CIOs increasingly see technologies such as analytics/business intelligence, mobility, will strengthen SunGard’s AvantGard changes in the data centre and IT landscape,” Ping Li, an and anomalies, sometimes running over a long time, cloud and social in combination rather than isolation to address business priorities. Changing Ecosystem Communication Hub – Echos accel partner, recently told a conference in Silicon Valley. that can indicate fraudsters working together. the customer experience requires changing the way the company interacts externally rather – by expanding service bureau delivery big Data is more than simply a way of handling a randy Lea, vice president of the aster Data Center of than operates internally. capacity and locations as well as adding lot of data – it is also about handling a lot of data in Innovation at data specialist Teradata, said marketers analytics/business intelligence was the top-ranked technology for 2012 as CIOs are a suite of SwiftReady services. Echos new ways quickly, and making links between sets of need to know what a customer has been doing over combining analytics with other technologies to create new capabilities. For example, provides managed connectivity for unstructured data. time and across channels. Most know what a customer analytics plus supply chain for process management and improvement, analytics plus corporations and financial institutions an example of big Data was supplied by Steve has been doing on their website, but how did they get mobility for field sales and operations, and analytics plus social for customer engagement with access to a suite of services such as Hillion, chief product officer at alpine Data Labs in there – was it an email marketing campaign or a click- and acquisition. electronic bank account management, San Mateo, who said that Salt Lake City-based Zions through on a search engine ad? a cookie can identify statement aggregation and bank fee bank found some unusual patterns among its high-end his return, and if he clicks on a newsletter, the marketing analysis. The management and staff of customers by using big Data analytics. department gets his email and perhaps Facebook or Infosys claims new performance Syntesys will join SunGard. The data showed a small cluster of customers Twitter links. a week or two later he returns to browse who owned small businesses and generated a lot of some more and the bank can present a targeted offer. benchmark for e-banking system TwoFour, a provider of real-time financial value. The individuals within the group showed similar This is not, in Lea’s opinion, big Data but simple nfosys has benchmarked the latest version of its Finacle e-banking solution software solutions and consultancy in capital behaviour, but the group itself was so small that the application of the tools Teradata offers. on the Oracle platform, performing more than 550,000 online transactions and markets, has launched a rapid development individuals wouldn’t have appeared in a structured, While there is debate over whether we are talking Isupporting more than 2.8 million web page visits in a 30-minute window. platform that offers a .Net and C#-based aggregated view where some of the data would have about big Data in the sense that a computer scientist The benchmark, reviewed by ernst & young, measured the online processing core development architecture. Called been truncated or discarded. In a big Data environment, might think of the topic, data volumes are growing window, loaded with 33,000+ concurrent users, on a large retail banking deployment Foundation, it allows development projects where the information remains in raw form rather than rapidly, generated by social networking, mobile consisting of 26 million registered users and 46 million accounts. to use proven system components, letting being aggregated, the bank was able to discern some internet, geographic information and sensors. During the benchmark, the solution supported more than 195,000 user log ons developers focus on building functionality. faint patterns, and once the customers were identified McKinsey Global Institute, in a widely cited paper within a 30-minute window delivering sub-second average response time. The The core architecture includes a security it could target them with small business products. from last May, estimated that by 2009 nearly all sectors transaction workload mix consisted of viewing balance summaries, fund transfers, and user authentication component, a The ability to use this additional data offers the in the uS economy with companies of more than 1,000 payments, account transaction histories and making credit card payments. rules-based workflow engine, an automated opportunity to make a lot of money through micro- employees held an average of 200 terabytes of data, The systems under test included Oracle’s Sparc T3-1 and T3-2 servers for the web process scheduler, a modern user interface, targeting groups that may not otherwise have been twice the size of Wal-Mart’s data warehouse in 1999 and application tiers, with Finacle deployed on a multi-node WebSphere application an integrated client web portal, a user- identified, Hillion concluded. Leading users of big – which at the time was considered one of the seven server cluster. at the back-end, Oracle Database 11g was deployed on Oracle’s configurable interface gateway for systems Data are trying to develop inventive stratification of wonders of the IT world. SParC enterprise M-Series system with the latest quad-core SParC64 VII+ 3GHz communications, a user-configurable consumers to target them in a much narrower way than The definition of big Data is fairly loose: one general processors. reporting tool, and data access features. they do now. That requires what he called unsupervised definition says it is data that can’t be processed in >

30 I www.bankingtech.com www.bankingtech.com I 31 IT & OPS: BIG DATA February 2012

Data daze Big Data suffers from conceptual misunderstandings and more than a little hype, but it has great potential in fianancial services, writes Tom Groenfeldt. Big Data is coming, heralded by a bit of noisy hype learning where the user doesn’t know a model or key – but many experts think it is hype that will be fully variable in advance but waits to learn it from the data. realised very shortly. accel Partners, a global venture Keith Collins, vice president and chief technology capital firm, is betting on it – the firm has established a officer at SaS, said big Data can be useful in fighting $100 million big Data fund. fraud, which has increased sharply in years. SaS turns “big Data is one of the biggest transformational the links in social analysis upside down to spot patterns changes in the data centre and IT landscape,” Ping Li, an and anomalies, sometimes running over a long time, accel partner, recently told a conference in Silicon Valley. that can indicate fraudsters working together. big Data is more than simply a way of handling a randy Lea, vice president of the aster Data Center of lot of data – it is also about handling a lot of data in Innovation at data specialist Teradata, said marketers new ways quickly, and making links between sets of need to know what a customer has been doing over unstructured data. time and across channels. Most know what a customer an example of big Data was supplied by Steve has been doing on their website, but how did they get Hillion, chief product officer at alpine Data Labs in there – was it an email marketing campaign or a click- San Mateo, who said that Salt Lake City-based Zions through on a search engine ad? a cookie can identify bank found some unusual patterns among its high-end his return, and if he clicks on a newsletter, the marketing customers by using big Data analytics. department gets his email and perhaps Facebook or The data showed a small cluster of customers Twitter links. a week or two later he returns to browse who owned small businesses and generated a lot of some more and the bank can present a targeted offer. value. The individuals within the group showed similar This is not, in Lea’s opinion, big Data but simple behaviour, but the group itself was so small that the application of the tools Teradata offers. individuals wouldn’t have appeared in a structured, While there is debate over whether we are talking aggregated view where some of the data would have about big Data in the sense that a computer scientist been truncated or discarded. In a big Data environment, might think of the topic, data volumes are growing where the information remains in raw form rather than rapidly, generated by social networking, mobile being aggregated, the bank was able to discern some internet, geographic information and sensors. faint patterns, and once the customers were identified McKinsey Global Institute, in a widely cited paper it could target them with small business products. from last May, estimated that by 2009 nearly all sectors The ability to use this additional data offers the in the uS economy with companies of more than 1,000 opportunity to make a lot of money through micro- employees held an average of 200 terabytes of data, targeting groups that may not otherwise have been twice the size of Wal-Mart’s data warehouse in 1999 identified, Hillion concluded. Leading users of big – which at the time was considered one of the seven Data are trying to develop inventive stratification of wonders of the IT world. consumers to target them in a much narrower way than The definition of big Data is fairly loose: one general they do now. That requires what he called unsupervised definition says it is data that can’t be processed in >

www.bankingtech.com I 31 Comment IT & OPS: BIG DATA February 2012 February 2012 memory and must be distributed and processed in Whatever their differences on the definition of big parallel. Data, experts agree on the value of multi-disciplinary Sceptics say that this still too broad. rasmus Wegener, teams including experts in large scale mathematics, a partner in the IT practice at management consultancy statistics, computer science and deep knowledge of tony moulange, bain, definesb ig Data as a significant amount of structured the business. High-speed trading in 2012 Colt and unstructured data that needs to be analysed at anand rajaraman, senior vice president at Wal- the same time, requiring complex very fast computing Mart Global e-Commerce and co-founder of @ there is no doubt that 2011 was the year SeF ‘exchanges‘ to trade what were once agreement addressing how markets are operations. He figures finance, electric grids and afew WalmartLabs, said big Data doesn’t just break of high-frequency trading, the practice over-the-counter instruments, such as monitored has yet to be reached. The internet companies such as yahoo and Google that are through hardware and software, it also breaks down of using computers to analyse real- credit default and interest rate swaps, and question for 2012 is how can markets be analysing users in real time so they can deliver targeted traditional analytics. Many people know how to work time market information such as stock all potentially at low latency. kept secure as the complexity and speed adverts are big Data. Computing massive amounts of with data, but that doesn’t mean they are ready to prices to implement proprietary trading It is interesting to note that this activity of trades continues to increase? There complex data to deliver a credit decision within seconds work with big Data. “The tools are very different. activity in milliseconds. according to a is not just limited to derivatives. High- are many different theories, some point is big Data – delivering the results overnight is just Large Many of the fundamental algorithms for predictive recent study carried out by the bank of speed trading is also moving into the towards circuit breakers, a limit put in Data that users can run through Oracle, Teradata or SaS. analytics depend crucially on keeping the data in england, HFT’s share of the uK equity commodities market, specifically metals, place to reduce market volatility and panic Indeed, a Teradata consultant said that more than 25 of main memory with a single CPu to access it. big Data market has grown considerably since with traders looking to arbitrage the selling by program trading computers. the firm’s clients were running over a petabyte on Teradata breaks that condition. The data can’t all be in memory 2005, rising from a tiny portion of the uK physical commodity against the futures ubS recently found that pre-trade risk systems. at the same time, so it needs to be processed in a equity market to now represent more than market. Foreign exchange has also been checks are very important. However, an understanding the difference can be worth millions. a distributed fashion. That requires a new programming 35%. In the current economic over emphasis on “the dangers” cruise ship line that bain worked with wanted to improve its model,” he said. climate, HFT is attractive because can hold the benefits of high- pricing on 300 trips a week with about 3,000 passengers Whether that requires someone with a degree in it can deliver profit with lower speed trading back. per ship. It must be big Data, said the business side, the new field of data science or merely teaching the margins. “As we move into 2012, it is The new eu MiFIr tossing it to IT; IT proposed using the apache Hadoop best business analysts in the company how to use the Now an established trading imperative that both governments regulations from brussels are software library, which is designed to allow distributed newest tools remains, predictably, a subject of debate. method, HFT has had two main aimed at forcing OTC trading processing of large data sets across clusters of machines, One ray of hope in all of this is that alpine’s Hillion effects on the markets. Firstly, and regulators introduce smarter rules in derivatives, such as credit and came up with a project budget of $1 million. bain thinks that the new tools coming over the next few there are larger volumes of trades to try to prevent further high-speed default swaps (CDS), onto new recommended the firm simply concentrate several of its years mean that ordinary business people will be than ever before. a recent report “exchange like facilities”. This scattered business analysts into a team, hire a director, working with big Data, even if they aren’t statisticians. from Thomson reuters and market abuse, without restricting is long overdue. until recently, and work on pricing. adjusting the prices for rear-facing “We need to demystify this a bit, remove the the London Stock exchange the practice – increased levels of reporting of OTC was almost cabins generated $5 million in new revenue in the first cloud of obfuscation and make big Data available to said that more than £1.9 trillion impossible because trades year, without Hadoop. people,” he said. BT was traded in the first half of regulation will only restrict the could occur in private, without 2011 – representing more than benefits of HFT.” activity being visible on any one trillion trades. Secondly, exchange. New regulation this growth has resulted in a means that new pools of large jump in the volume of liquidity will be created. With data moving between exchanges which a target for high-speed traders this year. these new pools available, it is only a has increased the networking and This is supported by recent analysis from question of when, not if, high-speed storage resources required to deliver the aite Group, confirming that over 20% traders will follow, demanding connectivity the information between exchanges. of high-frequency firms are now moving to these pools. This has in turn led to the practice of into FX, following the growing popularity at the same time that confidence in locating servers in close proximity to the of commodity derivatives. the fairness of markets is being put to data centre of the exchange, the most It is easy to understand why this trend the test under new regulatory measures, effective way of limiting latency, to enable is occurring. The potential for more assets a combination of general public anger traders to provide pricing bids faster than to be sold without causing a significant towards financial services and negative their competitors. movement in the price and no real press has created a mood of distrust loss to its original value is an attractive around high-speed trading. as we move moving to other asset proposition to any trader, regardless of the into 2012, it is imperative that both classes market. This year, we have already seen governments and regulators introduce Moving forward, we expect to see more the Latour trading group, a small New smarter rules to try to prevent further high- and more asset classes, such as energy york-based proprietary trading house that speed market abuse, without restricting and commodities, catching the high- is purely electronic, overtaking investment the practice. speed trading bug. No asset class is out banking giants such as Goldman Sachs In summary, increased levels of of bounds: if there is liquidity available, it and Morgan Stanley in trading volumes. regulation will only restrict the benefits is likely that someone will come up with brokers are making money by trading the of HFT. When new laws such as MiFIr a complex algorithm to exploit it. While firm’s own assets and not those of their come into play, it is imperative the traditionally, high-speed traders have clients. The group has traded 484.6 million aforementioned benefits around HFT are exploited the listed derivatives markets shares in principal strategies over the past not lost, particularly as the practice begins such as those of CMe, eurex and LIFFe, quarter – an attractive place to be. to grow in new asset classes such as we are now witnessing HFT trading models For organisations such as Latour to energy. a balanced approach of smarter emerging in foreign exchange, specifically continue their successful high-speed regulation and greater connectivity is in key liquidity centres in Secacus, New trading model, the issue of regulation what regulators and financial institutions Jersey. The new uS Dodd-Frank act and has to be addressed in the coming year. should be striving for in 2012. the forthcoming european union Markets In spite of the ubS scandal and the mini in Financial Instruments regulation FX flash crash in Japan that saw liquidity tony moulange is business legislation will create new brand OTF and grind to a halt back in March, a global development manager at Colt.

www.bankingtech.com I 33 Comment February 2012

tony moulange, High-speed trading in 2012 Colt there is no doubt that 2011 was the year SeF ‘exchanges‘ to trade what were once agreement addressing how markets are of high-frequency trading, the practice over-the-counter instruments, such as monitored has yet to be reached. The of using computers to analyse real- credit default and interest rate swaps, and question for 2012 is how can markets be time market information such as stock all potentially at low latency. kept secure as the complexity and speed prices to implement proprietary trading It is interesting to note that this activity of trades continues to increase? There activity in milliseconds. according to a is not just limited to derivatives. High- are many different theories, some point recent study carried out by the bank of speed trading is also moving into the towards circuit breakers, a limit put in england, HFT’s share of the uK equity commodities market, specifically metals, place to reduce market volatility and panic market has grown considerably since with traders looking to arbitrage the selling by program trading computers. 2005, rising from a tiny portion of the uK physical commodity against the futures ubS recently found that pre-trade risk equity market to now represent more than market. Foreign exchange has also been checks are very important. However, an 35%. In the current economic over emphasis on “the dangers” climate, HFT is attractive because can hold the benefits of high- it can deliver profit with lower speed trading back. margins. “As we move into 2012, it is The new eu MiFIr Now an established trading imperative that both governments regulations from brussels are method, HFT has had two main aimed at forcing OTC trading effects on the markets. Firstly, and regulators introduce smarter rules in derivatives, such as credit there are larger volumes of trades to try to prevent further high-speed default swaps (CDS), onto new than ever before. a recent report “exchange like facilities”. This from Thomson reuters and market abuse, without restricting is long overdue. until recently, the London Stock exchange the practice – increased levels of reporting of OTC was almost said that more than £1.9 trillion impossible because trades was traded in the first half of regulation will only restrict the could occur in private, without 2011 – representing more than benefits of HFT.” activity being visible on any one trillion trades. Secondly, exchange. New regulation this growth has resulted in a means that new pools of large jump in the volume of liquidity will be created. With data moving between exchanges which a target for high-speed traders this year. these new pools available, it is only a has increased the networking and This is supported by recent analysis from question of when, not if, high-speed storage resources required to deliver the aite Group, confirming that over 20% traders will follow, demanding connectivity the information between exchanges. of high-frequency firms are now moving to these pools. This has in turn led to the practice of into FX, following the growing popularity at the same time that confidence in locating servers in close proximity to the of commodity derivatives. the fairness of markets is being put to data centre of the exchange, the most It is easy to understand why this trend the test under new regulatory measures, effective way of limiting latency, to enable is occurring. The potential for more assets a combination of general public anger traders to provide pricing bids faster than to be sold without causing a significant towards financial services and negative their competitors. movement in the price and no real press has created a mood of distrust loss to its original value is an attractive around high-speed trading. as we move moving to other asset proposition to any trader, regardless of the into 2012, it is imperative that both classes market. This year, we have already seen governments and regulators introduce Moving forward, we expect to see more the Latour trading group, a small New smarter rules to try to prevent further high- and more asset classes, such as energy york-based proprietary trading house that speed market abuse, without restricting and commodities, catching the high- is purely electronic, overtaking investment the practice. speed trading bug. No asset class is out banking giants such as Goldman Sachs In summary, increased levels of of bounds: if there is liquidity available, it and Morgan Stanley in trading volumes. regulation will only restrict the benefits is likely that someone will come up with brokers are making money by trading the of HFT. When new laws such as MiFIr a complex algorithm to exploit it. While firm’s own assets and not those of their come into play, it is imperative the traditionally, high-speed traders have clients. The group has traded 484.6 million aforementioned benefits around HFT are exploited the listed derivatives markets shares in principal strategies over the past not lost, particularly as the practice begins such as those of CMe, eurex and LIFFe, quarter – an attractive place to be. to grow in new asset classes such as we are now witnessing HFT trading models For organisations such as Latour to energy. a balanced approach of smarter emerging in foreign exchange, specifically continue their successful high-speed regulation and greater connectivity is in key liquidity centres in Secacus, New trading model, the issue of regulation what regulators and financial institutions Jersey. The new uS Dodd-Frank act and has to be addressed in the coming year. should be striving for in 2012. the forthcoming european union Markets In spite of the ubS scandal and the mini in Financial Instruments regulation FX flash crash in Japan that saw liquidity tony moulange is business legislation will create new brand OTF and grind to a halt back in March, a global development manager at Colt.

www.bankingtech.com I 33 Comment Comment February 2012 February 2012

Finding sensitive data David Gibson, tony Virdi, before the hackers do Varonis Preparing for MiFID II Cognizant

With data growing at a rate of 50% a year derive access, and what level of permissions to enacting on the servers for enforcement, Since the markets in Financial eMIr and Central Securities Depositories. transparency proposal in MiFID II, liquidity and the demand for access to data from they have provide recommendations with accuracy Instruments Directive was enforced Given that some of the revised regulations, providers will need to reassess their employees, partners and customers ■ Which folders and sub folders within a file greater than 99.9%. back in november 2007, the economic including those on trade transparency service strategies in attracting buy-side at an all time high, it’s no secret to It server are accessible by any selected user any proposed solution for unstructured landscape has changed dramatically. and reporting, have already led to some clients. Similarly with the proposal on that the complexity of managing and or group, as well as the specific permissions data management should not impede Competition between trading venues objections, there is also the lingering regulating the automated trading and protecting data is growing faster than for the folder (Microsoft NTFS permissions, the performance of file servers, the user has increased while investor choice has possibility that once companies have put high frequency trading practices, sell-side the available resources. share permissions, SharePoint permissions, access experience or business traffic improved, due to enhanced availability of these regulations in place, they will be firms employing alternative exchange Certainly there is some benefit to etc.) flow. Specifically, the system should not financial instruments, reduced transaction subject to yet further change. venues, for example broker crossing, will quarantining sensitive data – taking it off ■ Filtered views that allow queries based require native operating system auditing on costs and increased integration. regardless of any anticipated changes, swiftly need to adapt their systems and the network entirely, or restricting access to on username, group name or folder/data traditional distributed systems (Windows as a result of the 2007/2008 financial the focus needs to be on enhancing the processes. only a very few people. However, there is name auditing, unix/Linux auditing) in order to crisis, both regulators and the G20 are processes and systems for electronic another point to note is around the an enormous amount of data that resides ■ automated updating of views to reflect deliver its core functionality for data control. demanding better execution, greater trading, risk management, transparency proposal of bringing all standardised in file servers and other unstructured changes or new data within active Directory because most organisations add transparency, risk management and and transaction reporting (across more trading instruments, such as commodity repositories because it’s needed for (i.e. user to group membership) as well as additional file servers over time and regulation of more opaque markets asset classes), compliance and investor derivatives, under the ambit of the execution of business processes, and within the file server (i.e. new data, deleted unstructured data grows very rapidly, the such as OTC derivatives. To meet these protection. MiFID includes a number of directive. Sell-side firms already engaged can’t be quarantined – some level data, renamed data, access control list system has to provide room for growth. a demands, the european Commission measures aimed at protecting investors in in this business will need to establish access is required by business units and changes) data governance solution should be able to announced MiFID II in October 2011. the context of the provision of investment systems and processes to meet the collaborative teams. Secure collaboration ■ any solution for unstructured data scale to accommodate unstructured data While not yet passed as legislation, services. However, modifications and reporting and compliance regulations that with valuable digital assets requires management must include all mechanisms growing by more than 50% volume every MIFID II will require significant change for improvements are clearly needed to are currently applicable on equity-related optimising and automating authorisation, to define, test, update and reverse file and year. financial services firms amid the need to strengthen the framework for the provision instruments. additionally, the enhanced and proactive monitoring of authorised use. folder permissions changes. Specifically a practical data protection solution comply with other eu regulatory reforms, of services – whether broadening the requirements for collaterals in the OTC New technologies are needed to keep up the system needs to provide: cannot disrupt business operations or as well as uS Dodd-Frank reforms. scope of the directive to cover financial segment, put in as part of risk control with the explosive growth of unstructured ■ The means to “push” or commit changes traffic flow.a solution should install quickly MiFID II is the latest in a long line of products (like Structure deposits), enhancement in MiFID II, could reduce data and collaboration requirements. to access permissions directly onto the (e.g., within five business days), without the regulations that require major changes services and entities which are currently the market interest in these instruments, While there are a number of software file server or directory service (e.g. active need for specialised professional services, in both internal infrastructure, and how not covered, modifying conduct of thereby affecting the sell-side firms solutions focused on data management Directory). The mechanism should include and without assigning dedicated IT staff. companies conduct their businesses on a business and strengthening organisational involved in the OTC segment both in and protection, only a select few effectively an option to push changes explicitly with a solution should not require specialised day-to-day basis. The eC’s own estimates requirements for the provision of services terms of business and changes required employ metadata framework technology, system administrator intervention or in an off-site training in order to operate. any for one-off compliance costs for MiFID to investors, such as adopting and in risk monitoring systems. which can identify sensitive data 90% faster automated fashion via a scheduler. necessary training should be simple, and range between €512 million – €732 million consolidating internal controls. Finally, since MiFID II’s main focus than traditional classification methods. What If? capabilities, otherwise known something the vendor can deliver on- and ongoing costs of between €312 another consideration is around data is on breaking the vertical integration Data governance software that provides as a sandbox where changes to folder site. Of course, the user interface should million – €586 million. The challenge for consolidation and dissemination. The in the sector, with the aim of increasing dynamically available metadata allows IT to permissions can be simulated in order to be intuitive and consistent across each companies, aside from the significant reporting, publication and consolidation competition by freeing the clearing service answer questions like: determine what, if any, the impact to access platform. Managing permissions comes cost burden in an extremely challenged of trade data needs to be addressed due from the trade service, sell-side firms can ■ Who has access to a data set? will be. For instance, the system shall down to users, data and level of access— market, is to ensure they don’t fall foul to problems with its formatting, cost, no longer hope to sell exclusive, fully ■ Which data is sensitive? allow the revocation of an entire group’s whether on windows or unix file shares, of the regulators – much easier said than quality and reliability, with many issues integrated investment services to their ■ Where is my sensitive data overexposed, permissions in a sandbox. The system SharePoint sites and libraries, or exchange done given how quickly regulation is highlighted by the european Commission. clients. This could represent a significant and how do I fix it? should indicate clearly which legitimate mailboxes and public folders – and the prone to change. To minimise the impact of all such change to their business model. ■ Who has been accessing it? users will be affected negatively and allow interface should provide a clear, unified The potential advantages are the changes, and given how often this can The full impact of MiFID II on the ■ Which folders need an owner? for mitigation of that condition prior to live view over all platforms. harmonisation of rules but it will also be change, a carefully planned and phased capital markets and the financial services ■ Who is the likely data owner? push. Data protection solutions need to viewed as providing uK entities with less approach for MiFID II compliance is players can only be ascertained once the ■ Who has unnecessary permissions to a detailed audit trail must be provided support a range of file servers and storage flexibility, especially for more specialised vital. IT plays a pivotal role in allowing legislation is fully in place relative to other each data set? for all aspects of data use (such as opens, devices including Windows Servers, unix/ areas such as commodities. as necessary this change to happen smoothly, so it regulatory reforms such as eMIr and ■ What data is unused? creates, deletes, moves, email sent, Linux servers, SharePoint, exchange, as this is, the continuation of changing is important businesses think carefully Dodd-Frank. Firms also need to take view When considering software automation received, etc., modifications to content, and network attached storage (NaS) from regulation is placing pressure on financial about how they work with their technology of their front to back office infrastructure that leverages metadata framework permissions, or group membership). The leading NaS vendors. institutions, particularly the sell-side firms, teams when implementing these across and have a holistic view of all regulatory technology, measuring the effectiveness presentation of the information should a solution for data protection has to who need to pay close attention to how the entire enterprise. impact on business and infrastructure, of a solution is simplified by ensuring the be easily comprehensible, sortable, demonstrate quantifiable benefits in time they adapt their systems and processes as it stands, the sell-side firms in their rather than taking a standalone approach following critical data protection features searchable and available as on-demand and resource savings. be sure to look for to adhere to strict transparency and capacity as liquidity providers arguably to MiFID II. are facilitated by the solution. and scheduled reports. automation in the following areas, which reporting regulations. have one of the biggest challenges Some firms will re-evaluate what ■ any solution for data management a system for unstructured data are often the most manually intensive: There is little doubt that, for capital to overcome with the introduction of businesses (and products) still make and control must provide a clear visual governance needs to provide an automated Data permission revocations, permissions market segments, the impact of MiFID MiFID II. Most of these were using pre- sense. Others will use this opportunity to representation of data access controls means for the revocation of data permissions. reporting, data audit report generation, data II will be felt strongly across all areas of trade transparency waivers provided in upgrade their IT infrastructure and ensure (permissions) as they are currently defined Specifically the system should identify by entitlement review, stale data identification, the business and the different operating the original MiFID, to avoid the public a flexible approach to take advantage of in the existing file system hierarchy. This name all users whose access to a given data business owner identification, and functions. The revised directives and dissemination of bid and ask prices and the market benefits MiFID II could bring. visual must show, in an aggregated and data set should be revoked, re-compute data migration. regulations in MiFID II cover a vast depth of interest creating dark pools, searchable fashion: revocations as changes to active Directory amount of ground and, in addition, the which encouraged buy-side firms to tony Virdi is vice president and head of the ■ all users with access to any folder, and file servers occur, provide the means David Gibson is director of technical full impact has to be analysed alongside use their services. With these waivers Banking and Financial Services Practice SharePoint site, etc., from which groups they to test the recommended revocations prior marketing and strategic sales at Varonis. other closely related regulations such as under review as part of the pre-trade for the UK and Ireland at Cognizant.

34 I www.bankingtech.com www.bankingtech.com I 35 Comment February 2012

tony Virdi, Preparing for MiFID II Cognizant

Since the markets in Financial eMIr and Central Securities Depositories. transparency proposal in MiFID II, liquidity Instruments Directive was enforced Given that some of the revised regulations, providers will need to reassess their back in november 2007, the economic including those on trade transparency service strategies in attracting buy-side landscape has changed dramatically. and reporting, have already led to some clients. Similarly with the proposal on Competition between trading venues objections, there is also the lingering regulating the automated trading and has increased while investor choice has possibility that once companies have put high frequency trading practices, sell-side improved, due to enhanced availability of these regulations in place, they will be firms employing alternative exchange financial instruments, reduced transaction subject to yet further change. venues, for example broker crossing, will costs and increased integration. regardless of any anticipated changes, swiftly need to adapt their systems and as a result of the 2007/2008 financial the focus needs to be on enhancing the processes. crisis, both regulators and the G20 are processes and systems for electronic another point to note is around the demanding better execution, greater trading, risk management, transparency proposal of bringing all standardised transparency, risk management and and transaction reporting (across more trading instruments, such as commodity regulation of more opaque markets asset classes), compliance and investor derivatives, under the ambit of the such as OTC derivatives. To meet these protection. MiFID includes a number of directive. Sell-side firms already engaged demands, the european Commission measures aimed at protecting investors in in this business will need to establish announced MiFID II in October 2011. the context of the provision of investment systems and processes to meet the While not yet passed as legislation, services. However, modifications and reporting and compliance regulations that MIFID II will require significant change for improvements are clearly needed to are currently applicable on equity-related financial services firms amid the need to strengthen the framework for the provision instruments. additionally, the enhanced comply with other eu regulatory reforms, of services – whether broadening the requirements for collaterals in the OTC as well as uS Dodd-Frank reforms. scope of the directive to cover financial segment, put in as part of risk control MiFID II is the latest in a long line of products (like Structure deposits), enhancement in MiFID II, could reduce regulations that require major changes services and entities which are currently the market interest in these instruments, in both internal infrastructure, and how not covered, modifying conduct of thereby affecting the sell-side firms companies conduct their businesses on a business and strengthening organisational involved in the OTC segment both in day-to-day basis. The eC’s own estimates requirements for the provision of services terms of business and changes required for one-off compliance costs for MiFID to investors, such as adopting and in risk monitoring systems. range between €512 million – €732 million consolidating internal controls. Finally, since MiFID II’s main focus and ongoing costs of between €312 another consideration is around data is on breaking the vertical integration million – €586 million. The challenge for consolidation and dissemination. The in the sector, with the aim of increasing companies, aside from the significant reporting, publication and consolidation competition by freeing the clearing service cost burden in an extremely challenged of trade data needs to be addressed due from the trade service, sell-side firms can market, is to ensure they don’t fall foul to problems with its formatting, cost, no longer hope to sell exclusive, fully of the regulators – much easier said than quality and reliability, with many issues integrated investment services to their done given how quickly regulation is highlighted by the european Commission. clients. This could represent a significant prone to change. To minimise the impact of all such change to their business model. The potential advantages are the changes, and given how often this can The full impact of MiFID II on the harmonisation of rules but it will also be change, a carefully planned and phased capital markets and the financial services viewed as providing uK entities with less approach for MiFID II compliance is players can only be ascertained once the flexibility, especially for more specialised vital. IT plays a pivotal role in allowing legislation is fully in place relative to other areas such as commodities. as necessary this change to happen smoothly, so it regulatory reforms such as eMIr and as this is, the continuation of changing is important businesses think carefully Dodd-Frank. Firms also need to take view regulation is placing pressure on financial about how they work with their technology of their front to back office infrastructure institutions, particularly the sell-side firms, teams when implementing these across and have a holistic view of all regulatory who need to pay close attention to how the entire enterprise. impact on business and infrastructure, they adapt their systems and processes as it stands, the sell-side firms in their rather than taking a standalone approach to adhere to strict transparency and capacity as liquidity providers arguably to MiFID II. reporting regulations. have one of the biggest challenges Some firms will re-evaluate what There is little doubt that, for capital to overcome with the introduction of businesses (and products) still make market segments, the impact of MiFID MiFID II. Most of these were using pre- sense. Others will use this opportunity to II will be felt strongly across all areas of trade transparency waivers provided in upgrade their IT infrastructure and ensure the business and the different operating the original MiFID, to avoid the public a flexible approach to take advantage of functions. The revised directives and dissemination of bid and ask prices and the market benefits MiFID II could bring. regulations in MiFID II cover a vast depth of interest creating dark pools, amount of ground and, in addition, the which encouraged buy-side firms to tony Virdi is vice president and head of the full impact has to be analysed alongside use their services. With these waivers Banking and Financial Services Practice other closely related regulations such as under review as part of the pre-trade for the UK and Ireland at Cognizant.

www.bankingtech.com I 35 PeoPle February 2012

developing the firm’s insights into the Nicholson is “leaving bT to pursue other retail banking and mortgage market, and opportunities”, according to a statement events will provide strategic consulting advice to from the company. regent joined bT in Appointments Deloitte’s clients. November 2010 as president of global 22-23 FebruAry 2012 HSBC loses IT veteran to Barclays sales and marketing. In his new remit, Correspondent & relationship banking, The Depository Trust & Clearing he will also be responsible for bT Global London Corporation has appointed Mark Service’s global banking and financial Now in its 20th year, IIR’s Correspondent Davies as vice president, data business markets customers across the world. & Relationship Banking continues to serve HSBC veteran Rumi Contractor is moving to barclays as chief operating officer for uK retail and development, a new position focusing on He reports directly into Jeff Kelly, chief as the annual gathering of the global business banking, charged with driving “customer service innovation and technology across ... from DTCC’s involvement in the Legal entity executive of bT Global Services. correspondent banking community. It is the product design to improvements to the branch network and customer contact centres”. Identifier programme in europe. DTCC is only event that focuses specifically on the Since 2008, Contractor has been global head of service delivery and chief executive of global the proposed facilities manager for the LeI Wolters Kluwer Financial Services, full range of relationship and correspondent resourcing. apart from short stints in New york with bankers Trust and Citibank in 1998-2000, he project, with responsibility for gathering, a compliance and risk management banking issues, particularly focusing on the has worked at HSbC since 1987, when he joined as a programmer. validating, storing and distributing various specialist, has hired Dharpan Koul key role correspondent bankers play in When he returned in 2000 it was as chief information officer for South america, based in brazil, data on each legal entity. to its FrS Global business as head of creating value throughout the bank. and he has since been CIO at HSbC Securities and Investment bank, New york; chief executive of Davies will be based in London and professional services, India. based in Topics for 2012 include: the evolution of the bank’s software development centre in Pune, India, and CIO for the uK and europe. will be responsible for strategy and liaison bangalore, Koul was previously vice correspondent banking, emerging markets, He will report to ashok Vaswani, chief executive of barclays uK retail and business banking, activities in europe regarding the LeI president at core banking and business new banking models, Trade Finance who described him as “a recognised leader in financial services operations and technology”. project. This will include participating in intelligence provider iCreate Software developments, and new Global Trade “rumi is a highly seasoned business leader with a strong track record for strategic thinking, the development of a distribution strategy, where he led its africa operations. Prior Finance Routes. hands-on execution and building strong teams who collaborate and innovate to improve the serving as a subject matter expert on the to that role, he worked at Oracle Financial www.informaglobalevents.com/ customer experience,” said Vaswani. “He is a great addition to our senior executive team.” LeI business with regulators and industry Services, where he held posts as delivery FKW52328bt committees and representing DTCC in manager, project manager and team customer meetings, customer forums and leader across multiple countries in asia, mArCh 12 -15 2012 3d Innovations, a data management providing strategic consultancy and Industry veteran Ian Hillier-Brook regulatory meetings. He will report directly europe and africa. international payments summit, consultancy specialising in market, change management support including has joined Two Four Consulting, to ronald Jordan, DTCC managing London reference and derived/computational pan-european CCP clearing and on- which provides global technology and director and chief data officer, who is Plus Markets Group has named Gavin The 20th annual IPS event will be looking data, has appointed market data veteran exchange settlement services for capital consultancy solutions for treasury and based in New york. Bridge as head of business development at the effect of the Single Euro Payment Roderick Manzie as chief operating markets and securities trading firms. capital markets, as uK sales director at its Davies joined DTCC from the royal at Plus Derivatives exchange. He has Area beyond Europe and features a new officer. He will manage the legal, TrG provides consultancy on regulatory newly opened London office. Hillier-brook bank of Scotland, where from 2008 he over 20 years’ experience with financial expanded exhibition. commercial and financial aspects of the change, compliance, audit, process flows, was most recently involved with the Wocu was head of reference Data within the derivatives, joining from ICaP energy www.informaglobalevents.com company. Co-founder of MSb Consultants trade reporting and operational risk. world currency unit, and has worked for bank’s Shared Services unit, heading where he worked with renewable energy, in 1990, Manzie was responsible for a number of market data and analytics a global team of 90 and managing the emissions markets and oil derivatives. mArCh 25 – 28 2012 finance, commercials and administration Independent financial research company firms in the financial technology market, legal entity database for rbS across its Previously, bridge worked in New isitC Annual industry Forum and from start-up mode to the firm’s ultimate Defaqto has appointed Asitha Rodrigo including Market Data Services, a time- divisions. He also managed all datasets york on the interest rate swap desk at Vendor show, boston multi-million pound acquisition by New era as chief technology officer. He joins from series analytics specialist that was sold to required for reporting in the group risk interdealer brokerage firm Tradition. ISITC brings together broker/dealers, of Networks. Standard & Poor’s where he was senior Dow Jones Telerate. Platform, and set strategy for reference custodians, investment managers, vendors/ director for eMea systems for more than data involving legal entities and risk data. lCH.Clearnet has appointed lisa Rosen utilities and other industry professionals to ClS Group Holdings has added four four years. rodrigo has over 15 years’ Market data and trading infrastructure Prior to rbS, Davies was associate as group head of compliance and public develop proposed standards to enhance new members to its board of directors, experience in technology and change services provider MarketPrizm has hired director for shared data services at affairs. In this newly created role, rosen efficiencies in trade processing and related including VocaLink chairman Sir John leadership in financial services, media Jon Yates as head of sales and marketing. barclays Capital from 2000 to 2008, will oversee LCH.Clearnet’s regulatory communications. In 2012 it will be asking – Gieve and former HSbC chief technology and e-commerce, having held senior He will report to chief executive Tanuja managing the group’s central counterparty and lobbying activities. Previously she 2020 Vision: Cloudy or Clear? and services officer Ken Harvey. along technology-related roles at Deloitte, randery, and have responsibility for all database. was managing director and global head www.isitc.org with Christine Mead, former chief financial Morningstar and Money Marketing. commercial activities relating to market before barCap, he was manager of of regulatory affairs at barclays Capital officer at Safeco Corporation and Travelers strategy, sales, presales, marketing and the client reference data division and in London. She joined barclays Capital mAy 15-16 2012 Insurance Group, and Bryan osmar, Financial outsourcer HMl has appointed sales operations. yates has more than supervisor for the strategic projects team after 10 years at Merrill Lynch, most ebAday 2012, edinburgh managing director and head of market Richard Hennah as sales director. 18 years’ experience in the financial for Credit Suisse First boston. recently as first vice president, head Now running over two days, the EBAday infrastructure at royal bank of Canada Hennah joins after nearly 12 years with services industry with a focus on front of litigation and contentious regulatory payments event will be held in Scotland. Capital Markets, this brings the number KPMG where he was a sales director in office trading floor technologies. He joins GoldenSource, a provider of enterprise matters for europe, Middle east & africa. www.ebaday.com on the CLS board to 23 directors. Other the financial services division and sold from Thomson reuters where he spent 17 Data Management systems, has opened than rbC’s Osmar, the new members are professional services primarily to global years in a variety of sales and business an office in Singapore and appointed as part of a recent expansion into June 19-21 2012 outside directors who are not affiliated with banks and insurance companies. development roles, most recently head of David Chew as sales director with europe from its North american home siFmA Financial services technology any of the Settlement Members that use the eMea Trading Division at Thomson responsibility for growing and developing market, Clairmail, the mobile banking Leaders Forum and expo, new york the CLS settlement service. Geo Networks, a provider of dedicated reuters. Prior to that he led the uK and the company’s presence in the region. and payments vendor, has appointed The old SIA Show continues to remodel fibre networks, has appointed Carol Nash Ireland sales division. Prior to joining GoldenSource, Chew was otto Neuer as its first vice president and rebrand as it regains its former pre- TRG Post Trade Services has hired Mark as sales director for the finance sector. With responsible for development within the of sales for central europe. based in eminence as the event for securities Profeti as head of strategic consulting. over 25 years’ experience in the City, Nash’s Deloitte, the business advisory firm, has aPaC region for SmartStream and was Germany, Neuer has over 20 years’ industry technologists. His new role also encompasses industry previous positions include senior level roles appointed Michael Coogan as a strategic country manager for China. He has also experience of IT and business software www.sifma.org/events initiatives in Counterpart Default at organisations including reuters and Cable adviser to its financial services practice. held senior sales positions with Siebel solutions having previously worked at Management Systems delivery and & Wireless. She has previously worked with Coogan was director general of the and Oracle. HP, Seagate Software, Cognos and oCtober 29 – noVember 2 recovery and resolution Planning. Profeti clients such as Deutsche bank, barclays Council of Mortgage Lenders for almost most recently Informatica. He will cover sibos, osaka joins TrG after a banking career with and Lloyds. In her new role, Nash will be 15 years. at Deloitte he will work closely Tom Regent is to replace Andy Germany, austria, Switzerland and More details are expected to be announced F&C and abN amro. He also consulted responsible for driving Geo’s customer with the retail banking and building Nicholson as president of BT’s Global other central european states in his new during March. both with braxxon and independently, growth in the financial services sector. Society advisory group, focussing on Banking & Financial Markets unit. sales role. BT www.swift.com

36 I www.bankingtech.com www.bankingtech.com I 37 developing the firm’s insights into the Nicholson is “leaving bT to pursue other retail banking and mortgage market, and opportunities”, according to a statement events will provide strategic consulting advice to from the company. regent joined bT in Deloitte’s clients. November 2010 as president of global 22-23 FebruAry 2012 sales and marketing. In his new remit, Correspondent & relationship banking, The Depository Trust & Clearing he will also be responsible for bT Global London Corporation has appointed Mark Service’s global banking and financial Now in its 20th year, IIR’s Correspondent Davies as vice president, data business markets customers across the world. & Relationship Banking continues to serve development, a new position focusing on He reports directly into Jeff Kelly, chief as the annual gathering of the global DTCC’s involvement in the Legal entity executive of bT Global Services. correspondent banking community. It is the Identifier programme in europe. DTCC is only event that focuses specifically on the the proposed facilities manager for the LeI Wolters Kluwer Financial Services, full range of relationship and correspondent project, with responsibility for gathering, a compliance and risk management banking issues, particularly focusing on the validating, storing and distributing various specialist, has hired Dharpan Koul key role correspondent bankers play in data on each legal entity. to its FrS Global business as head of creating value throughout the bank. Davies will be based in London and professional services, India. based in Topics for 2012 include: the evolution of will be responsible for strategy and liaison bangalore, Koul was previously vice correspondent banking, emerging markets, activities in europe regarding the LeI president at core banking and business new banking models, Trade Finance project. This will include participating in intelligence provider iCreate Software developments, and new Global Trade the development of a distribution strategy, where he led its africa operations. Prior Finance Routes. serving as a subject matter expert on the to that role, he worked at Oracle Financial www.informaglobalevents.com/ LeI business with regulators and industry Services, where he held posts as delivery FKW52328bt committees and representing DTCC in manager, project manager and team customer meetings, customer forums and leader across multiple countries in asia, mArCh 12 -15 2012 regulatory meetings. He will report directly europe and africa. international payments summit, to ronald Jordan, DTCC managing London director and chief data officer, who is Plus Markets Group has named Gavin The 20th annual IPS event will be looking based in New york. Bridge as head of business development at the effect of the Single Euro Payment Davies joined DTCC from the royal at Plus Derivatives exchange. He has Area beyond Europe and features a new bank of Scotland, where from 2008 he over 20 years’ experience with financial expanded exhibition. was head of reference Data within the derivatives, joining from ICaP energy www.informaglobalevents.com bank’s Shared Services unit, heading where he worked with renewable energy, a global team of 90 and managing the emissions markets and oil derivatives. mArCh 25 – 28 2012 legal entity database for rbS across its Previously, bridge worked in New isitC Annual industry Forum and divisions. He also managed all datasets york on the interest rate swap desk at Vendor show, boston required for reporting in the group risk interdealer brokerage firm Tradition. ISITC brings together broker/dealers, Platform, and set strategy for reference custodians, investment managers, vendors/ data involving legal entities and risk data. lCH.Clearnet has appointed lisa Rosen utilities and other industry professionals to Prior to rbS, Davies was associate as group head of compliance and public develop proposed standards to enhance director for shared data services at affairs. In this newly created role, rosen efficiencies in trade processing and related barclays Capital from 2000 to 2008, will oversee LCH.Clearnet’s regulatory communications. In 2012 it will be asking – managing the group’s central counterparty and lobbying activities. Previously she 2020 Vision: Cloudy or Clear? database. was managing director and global head www.isitc.org before barCap, he was manager of of regulatory affairs at barclays Capital the client reference data division and in London. She joined barclays Capital mAy 15-16 2012 supervisor for the strategic projects team after 10 years at Merrill Lynch, most ebAday 2012, edinburgh for Credit Suisse First boston. recently as first vice president, head Now running over two days, the EBAday of litigation and contentious regulatory payments event will be held in Scotland. GoldenSource, a provider of enterprise matters for europe, Middle east & africa. www.ebaday.com Data Management systems, has opened an office in Singapore and appointed as part of a recent expansion into June 19-21 2012 David Chew as sales director with europe from its North american home siFmA Financial services technology responsibility for growing and developing market, Clairmail, the mobile banking Leaders Forum and expo, new york the company’s presence in the region. and payments vendor, has appointed The old SIA Show continues to remodel Prior to joining GoldenSource, Chew was otto Neuer as its first vice president and rebrand as it regains its former pre- responsible for development within the of sales for central europe. based in eminence as the event for securities aPaC region for SmartStream and was Germany, Neuer has over 20 years’ industry technologists. country manager for China. He has also experience of IT and business software www.sifma.org/events held senior sales positions with Siebel solutions having previously worked at and Oracle. HP, Seagate Software, Cognos and oCtober 29 – noVember 2 most recently Informatica. He will cover sibos, osaka Tom Regent is to replace Andy Germany, austria, Switzerland and More details are expected to be announced Nicholson as president of BT’s Global other central european states in his new during March. Banking & Financial Markets unit. sales role. BT www.swift.com

www.bankingtech.com I 37 contActs: neil hartley on +44 (0) 203 377 5385 or leon thomson on +44 (0) 203 377 3493 or Directory of service email: [email protected] email: [email protected]

Accuity smArtstreAm technoloGies

Accuity is the world’s leading provider of international payment routing data and AML screening software smartstream technologies delivers operational advantage to clients through enterprise-wide, real-time enabling banks and corporations to maximise payment efficiency and ensure AML compliance. Transaction Lifecycle Management (TLM®) solutions that automate, track and control financial transactions SmartStream Technologies Our Payment solutions help maximise rates of payment STP and with our recent acquisition of CBNet, and processes within and beyond the enterprise. St Helen’s we are now the only company to source all payment data, including SSI’s, SWIFT/BICs and National Bank Built on SmartStream’s TLM Enterprise Control Architecture, TLM solutions provide greater transaction 1 Undershaft Accuity Codes directly from the authoritative sources. visibility to create exceptions-based operations capable of automating complex and high volume transaction London 1 Quality Court Our compliance suite includes the world’s first compliance filtering engine, introduced in 1994, as well flows. Operational risk and cost is reduced, while customer service levels are improved. EC3A 8EE Chancery Lane as a range of caution lists and screening solutions that provide a prime defence against participation in illicit SmartStream is owned by Dubai International Financial Centre (DIFC) and has global operations United Kingdom London WC2A 1HR financial activities, such as money laundering. supporting over 1,000 clients, including more than 75 of the world’s top 100 banks. Tel: +44 (0)20 7898 0600 United Kingdom Our strategic services Group provides deployment, consulting, training and integration services. We are Email: marketing@ Tel: +44 20 7014 3480 experts in reducing False Positive rates and helping improve rates of Payment STP. smartstream-stp.com Fax: +44 20 7061 6478 Web: www.smartstream-stp.com [email protected] visit www.Accuitysolutions.com/bankingtech to sign up for a free trial of any of our industry-leading AccuitySolutions.com/bankingtech solutions. sunGArD

About sunGard cleAr2PAy With annual revenue of $5 billion, SunGard is a global leader in software and processing solutions for financial Email: [email protected] services, higher education and the public sector. Visit SunGard at www.sungard.com Tel: +44 (0)208 081 2779 clear2Pay is a payments modernisation company that actively supports global financial institutions to meet Fax: +44 (0)208 081 2001 their payments unification goals through its pure SOA Open Payment Framework (OPF). The company Adaptiv Clear2Pay NV SA facilitates financial organisations in their provision of payments services across the entire value and process SunGard’s Adaptiv provides enterprise-wide credit and market risk management and operations solutions for Schaliënhoevedreef 20A chain: Card, ACH, Branch, Bulk, High Care and International Payments. Clear2Pay also offers solutions and financial services institutions. Adaptiv assists institutions of varying size and complexity to deploy technology 2800 Mechelen, Belgium services such as e-Banking, the Open Test Platform, ChargeBack, Consultancy and Training. Clients include to meet both internal and regulatory requirements for risk management and operational control. Adaptiv helps Tel: +32 15 79 52 00 financial institutions such as ING, Banco Santander, Crédit Agricole, VISA, MasterCard, BNP Paribas, The financial services institutions from the banking, hedge fund, asset management, insurance and corporate Fax: +32 15 79 52 01 Federal Reserve, NETS (Denmark), The People Bank of China (PBOC), Rabobank, The Co-operative Financial sectors with its deep understanding of risk management and operational processes. www.sungard.com/ Jean de Crane, GM EMEA Services and Commonwealth Bank. Clear2Pay operates out of 14 countries and employs over 650 staff. In adaptiv. Email: [email protected] 2011 the company won the XCelent Customer Base 2010 award. www.clear2pay.com For more information, please visit www.clear2pay.com. front Arena A trading solution serving a range of financial institutions, SunGard’s Front Arena solution provides straight- through processing by integrating sales and distribution functions, trading capabilities and risk management. Institutional asset managers and brokers, traders, and market makers use Front Arena to trade equities, fixed- income, interest rate derivatives, and credit. For more information, visit www.sungard.com/frontarena fiDessA GrouP securities finance Exceptional trading, investment and information solutions for the world’s financial community. Around the world, $11 trillion in securities financing is managed on SunGard’s proven solutions for 85% of the world’s premier financial institutions trust Fidessa to provide them with their multi-asset international and U.S. domestic securities lending and repo for over 250 clients. Through our Loanet, Global trading and investment infrastructure, their market data and analysis, and their decision making and workflow One, Martini and Astec Analytics products and services, we provide comprehensive business solutions and Fidessa technology. $10 trillion worth of transactions flow across our global connectivity network each year. We information with worldwide reach for equities or fixed income securities financing Contact: securitiesfinance@ One Old Jewry offer unique access to the world’s largest and most valuable trading community of buy-side and sell-side sungard.com London professionals, from global institutions and investment banks to boutique brokers and niche hedge funds. EC2R 8DN A global business with scale, resilience and expertise, we’ve delivered around 30% compound growth call a sunGard expert today: 0044 (0)208 081 2779 Tel:+44 (0)20 7105 1000 since our stock market listing in 1997 and we’re recognised as the thought leader in our space. We set the Fax:+44 (0)20 7105 1001 benchmark with our unrivalled set of mission-critical products and services and, uniquely, serve both the buy- Email: [email protected] side and sell-side communities. Ongoing investment in our leading-edge solutions ensures Fidessa remains tieto Web: www.fidessa.com the industry’s number one choice.

tieto is an IT service company providing IT, R&D and consulting services. With approximately 16 000 orc softwAre experts, we are among the leading IT service companies in Northern Europe and the global leader in selected segments. We specialize in areas where we have the deepest understanding of our customers’ businesses Tieto About orc software and needs. Our superior customer centricity and Nordic expertise set us apart from our competitors. Kutojantie 6-8 Orc software (SSE: ORC) is the leading global provider of powerful solutions for the worldwide financial industry Tieto Financial Services offers services, solutions and products to financial institutions throughout Europe. 02630 Espoo in the critical areas of advanced trading and low latency connectivity. Orc’s customers include leading banks, Our customers include major banks and financial institutions that have chosen us for our capability to take Finland trading and market-making firms, exchanges, brokerage houses, institutional investors and hedge funds. total responsibility for any assignment. Tel: +3582072010 Orc Software We enable Financial Institutions to utilize their business potential by combining our technology skills and Fax: +358207263025 Americas: +1 312 327 8555 solution Description deep financial industry knowledge with advanced Nordic customer behavior. Working with Tieto you get a [email protected] Asia Pacific: +852 2167 1950 Orc Trading and Orc Connect provide the tools for making the best trading and connectivity decisions with reliable, committed long-term partner that helps you to industrialize your day-to-day IT-operations and get the www.tieto.com/financialservices EMEA: +46 8 506 477 00 strong analytics, unmatched market access, powerful automated trading functionality, high performance most out of your IT investments. Email: [email protected] futures and options trading capabilities, ultra-low latency and risk management. Web: www.orcsoftware.com Advanced trading solutions tcs finAnciAl solutions orc trading applications orc connect applications ■ Orc Trading for algorithmic trading ■ Orc CameronFIX for FIX to FIX routing tcs financial solutions, a strategic business unit of Tata Consultancy Services, enables transformation in ■ Orc Trading for arbitrage ■ Orc CameronFIX for FIX integration TCS Financial Solutions financial services through a holistic suite of solutions for firms in banking, capital markets and insurance, and ■ Orc Trading for market making Web: www.tcs.com diversified financial institutions. Each solution in the TCS B NCS family runs as a scalable and robust service, ■ Orc Trading for risk management α integrated with existing enterprise infrastructures and technology architectures. ■ Orc Trading for warrants market making Our mission is to provide best of breed solutions that drive growth, reduce costs, mitigate risk and offer ■ Orc Trading for volatility trading faster speed to market for 240+ institutions in over 80 countries. TCS BαNCS is an integrated financial services platform. Its embedded transformation intelligence enables flexible, open and collaborative deployment and distribution of financial products and services. PeterevAns TCS BαNCS aspires to be better than established benchmarks, which is why we’ve embedded an Alpha (“α”) consciously within our brand, to remind ourselves of the superior returns that we strive to deliver. Our peterevans is a leading independent provider of front to back office solutions for the financial services sector. ability to foster rapid time-to-market with new products allows organisations to transform themselves into Clearly focused on the securities and investment market petervans has more than 23 years of experience of nimble competitors with scalable offerings. New Broad Street House providing solutions to this sector. Our Co-Innovation Network is a true partnership for sharing best practices and innovation, and our 35 New Broad Street xanite, peterevans new suite of products, offers a configurable, fully integrated, browser based, comprehensive ‘Experience Certainty’ mindset ensures the brightest of futures for all our customers. London front to back solution that can be either deployed as a single application or integrated as components into For more information, visit www.tcs.com/bancs or contact us at [email protected] United Kingdom your existing platform. Each of the xanite modules can de delivered via an ASP or self-hosted. Covering wealth EC2M 1NH management, custody, corporate actions, clearing and settlement, private client and on-line stock broking with full About tata consultancy services Email: [email protected] operational and administrative support for the front, middle and back office. xanite gives full but controlled access Tata Consultancy Services is an IT services, business solutions and outsourcing organisation with over Tel: +44 (0) 2920 402200 to clients, portfolio, fund and relationship managers, brokers, middle and back office staff – on line anywhere in the 143,000 IT consultants located across the world delivering real results to global businesses through its unique Web: www.peterevans.com world and provides a modern and flexible platform for expanding future business and revenues. Global Network Delivery ModelTM.

www.bankingtech.com www.bankingtech.com contActs: neil hartley on +44 (0) 203 377 5385 or leon thomson on +44 (0) 203 377 3493 or email: [email protected] email: [email protected] smArtstreAm technoloGies smartstream technologies delivers operational advantage to clients through enterprise-wide, real-time Transaction Lifecycle Management (TLM®) solutions that automate, track and control financial transactions SmartStream Technologies and processes within and beyond the enterprise. St Helen’s Built on SmartStream’s TLM Enterprise Control Architecture, TLM solutions provide greater transaction 1 Undershaft visibility to create exceptions-based operations capable of automating complex and high volume transaction London flows. Operational risk and cost is reduced, while customer service levels are improved. EC3A 8EE SmartStream is owned by Dubai International Financial Centre (DIFC) and has global operations United Kingdom supporting over 1,000 clients, including more than 75 of the world’s top 100 banks. Tel: +44 (0)20 7898 0600 Email: marketing@ smartstream-stp.com Web: www.smartstream-stp.com sunGArD

About sunGard With annual revenue of $5 billion, SunGard is a global leader in software and processing solutions for financial Email: [email protected] services, higher education and the public sector. Visit SunGard at www.sungard.com Tel: +44 (0)208 081 2779 Fax: +44 (0)208 081 2001 Adaptiv SunGard’s Adaptiv provides enterprise-wide credit and market risk management and operations solutions for financial services institutions. Adaptiv assists institutions of varying size and complexity to deploy technology to meet both internal and regulatory requirements for risk management and operational control. Adaptiv helps financial services institutions from the banking, hedge fund, asset management, insurance and corporate sectors with its deep understanding of risk management and operational processes. www.sungard.com/ adaptiv. front Arena A trading solution serving a range of financial institutions, SunGard’s Front Arena solution provides straight- through processing by integrating sales and distribution functions, trading capabilities and risk management. Institutional asset managers and brokers, traders, and market makers use Front Arena to trade equities, fixed- income, interest rate derivatives, and credit. For more information, visit www.sungard.com/frontarena securities finance Around the world, $11 trillion in securities financing is managed on SunGard’s proven solutions for international and U.S. domestic securities lending and repo for over 250 clients. Through our Loanet, Global One, Martini and Astec Analytics products and services, we provide comprehensive business solutions and information with worldwide reach for equities or fixed income securities financing Contact: securitiesfinance@ sungard.com call a sunGard expert today: 0044 (0)208 081 2779 tieto tieto is an IT service company providing IT, R&D and consulting services. With approximately 16 000 experts, we are among the leading IT service companies in Northern Europe and the global leader in selected segments. We specialize in areas where we have the deepest understanding of our customers’ businesses and needs. Our superior customer centricity and Nordic expertise set us apart from our competitors. Tieto Tieto Financial Services offers services, solutions and products to financial institutions throughout Europe. Kutojantie 6-8 Our customers include major banks and financial institutions that have chosen us for our capability to take 02630 Espoo total responsibility for any assignment. Finland We enable Financial Institutions to utilize their business potential by combining our technology skills and Tel: +3582072010 deep financial industry knowledge with advanced Nordic customer behavior. Working with Tieto you get a Fax: +358207263025 reliable, committed long-term partner that helps you to industrialize your day-to-day IT-operations and get the [email protected] most out of your IT investments. www.tieto.com/financialservices tcs finAnciAl solutions tcs financial solutions, a strategic business unit of Tata Consultancy Services, enables transformation in TCS Financial Solutions financial services through a holistic suite of solutions for firms in banking, capital markets and insurance, and Web: www.tcs.com diversified financial institutions. Each solution in the TCSα B NCS family runs as a scalable and robust service, integrated with existing enterprise infrastructures and technology architectures. Our mission is to provide best of breed solutions that drive growth, reduce costs, mitigate risk and offer faster speed to market for 240+ institutions in over 80 countries. TCS BαNCS is an integrated financial services platform. Its embedded transformation intelligence enables flexible, open and collaborative deployment and distribution of financial products and services. TCS BαNCS aspires to be better than established benchmarks, which is why we’ve embedded an Alpha (“α”) consciously within our brand, to remind ourselves of the superior returns that we strive to deliver. Our ability to foster rapid time-to-market with new products allows organisations to transform themselves into nimble competitors with scalable offerings. Our Co-Innovation Network is a true partnership for sharing best practices and innovation, and our ‘Experience Certainty’ mindset ensures the brightest of futures for all our customers. For more information, visit www.tcs.com/bancs or contact us at [email protected]

About tata consultancy services Tata Consultancy Services is an IT services, business solutions and outsourcing organisation with over 143,000 IT consultants located across the world delivering real results to global businesses through its unique Global Network Delivery ModelTM.

www.bankingtech.com From the Archive OUT OF OFFICE FEBRUARY 2012 10 Years On your marks ... ago We’re a bit down on running Standard Chartered moves global IT events here at the back page, functions to India ... VoIP telephony starts ever since, a few years back, to make inroads in fi nancial services ... a quiet evening’s drinking was XML-based apps arrive ... Omgeo and curtailed by the arrival in the GSTPA yet to resolve interoperability pub of about a zillion sweaty issues ... bodies fresh – wrong word, that – from running around Battersea Park. However, overcoming the memory of that trauma in the 15 cause of the greater good, here is a photo of some runners setting Years out from the Master Gunner in City Road in the direction of the ago Old Doctor Butler’s Head, though many will likely have to go to the Telegraph. Bank of England prepares for UK staying All of which is by way of saying that the Standard Chartered Great City Race, the out of the single European currency ... only corporate sporting event to be held exclusively on the closed-off streets of the MasterCard make fi rst Secure Electronic City of London, will this year be happening on Thursday 12th July 2012. Payment over the internet (for a Stephen This is the eighth year the Bank has sponsored this not-for-pro t event. In the last King paperback) ... mobile phones three years all 6,500 places have sold out in record time. Due to its popularity, places edge into fi nancial services ... High will initially be offered to teams who have previously competed. Runners wishing to Value Payments systems hit technical participate for the rst time can register their interest and nd out more about the race challenges ... by visiting www.cityrace.co.uk. The race is a charity vehicle to help raise awareness and funds for Seeing is Believing, a global initiative set up by Standard Chartered to help tackle avoidable blindness. This year the charity will once again be the of cial bene ciary of the Race with £5 from every £25 entry fee donated to an eye-care project in Zambia. 20 The latest news and training tips can be found by joining the designated Facebook page at www.facebook.com/StandardCharteredGreatCityRace Years Richard Holmes, chief executive of Standard Chartered in Europe, said: “Since ago 2005, the Great City Race has established itself as one of the major highlights of the summer in the City and each year we are overwhelmed by the huge level of interest Banks urged to adopt EDI for corporate and support we get for the race. “For Standard Chartered it’s a wonderful opportunity customers ... London Stock Exchange to bring together over 400 companies and promote the bene ts of teamwork, while forced to open Regulatory News Service also helping to raise money for great charitable causes.” to rivals ... EC examines plans to improve The event is organised by London Marathon. “We are delighted Standard Chartered cross-border payments systems ... Banque is continuing as title sponsor. The Bank has been a very loyal supporter of the race and de France picks Swift’s Premium for High we’re very much looking forward to working with them to develop the race experience Value Payments ... to ensure we continue to be the best running event in the City,” said David Bedford, joint race director and 1970s athletics legend. BT Living in glass houses 25 Oh dear. The editor has had his normally dormant Facebook ID hijacked. This was quickly noticed because (i) there were status updates for the rst time since he went Years off it in favour of Twitter, (since abandoned in favour of Quora ...) and (ii) the updates ago claimed that he’d lost a stone in weight. As this is the opposite of the truth in the post- Christmas period, it raises the possibility that it may have been a personal attack. European exchanges to keep fl oor trading How could it have come about? Ah, let’s see ... could it have been when he ... risk management systems needed ... unthinkingly clicked the link to a photo that had been, apparently, sent from a chum smartcard tech standards battle rages on ... who happens to be a senior IT security and risk bod at a Very Big Bank? Credit Suisse plans complete automation by Yes, of course it could. BT 2000 ... Reuters goes on acquisition spree ...

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