This 13-page supplement to the December 2012 issue of The Banker presents EMC Consulting's 2013 perspective of how IT Transformation enables improved capabilities around Big Data, trust, and multi-channel sales and service.

2. tEchnology | reporT
contents
2 Howto make
tecHnology
move witH tHe
times
Strong forces are at work reshaping the
7 managing
customer
experience
across cHannels
Customers are increasingly interacting
financial sector. If firms are to survive with their bank using different
and thrive in this dynamic environment, technology platforms, including tablets,
they need to take a long, hard look at mobile phones and laptops. While
their IT and modernise it to ensure it customers are enthusiastically embracing
is fit for purpose. new technologies, the more traditional
bank branches are also being given a
4
new lease of life.
bigger is better
10
The truly enormous volumes
of information available to canyou
financial institutions today is trustyour
transforming the way they do business
and helping them to provide a better
it?
If a bank does not command the trust of
service for their customers. its customers and the wider population, Banks are placing more
it is nothing. An essential foundation
emphasis on creating a
of that trust is a dependable and secure
IT system. digital experience in
Branches that ‘connects
the dots’ with atms and
other digital devices
Eric Disend, director of digital,
EMC Consulting, Page 7
in association with
The Banker
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December 2012 | The Banker |1

3. reporT | technology
introduction
How to mAKe tecHnology
move witH tHe times
Introduction
Strong forces are at work reshaping the financial sector. If firms are to survive and
thrive in this dynamic environment, Alexis Kane and Shailen Salvi believe they need
to take a long, hard look at their IT and modernise it to ensure it is fit for purpose.
Banks, insurance companies, asset man- drastic automatic tax increases and spend-
agers and other financial services firms are ing cutbacks (the ‘fiscal cliff ’) facing the US
facing a range of economic, market, regula- in January 2013. More encouragingly, the
tory and technological changes like never IMF believes economic output will remain
before. these forces are compelling firms to “relatively solid” in developing economies.
adjust their business and operating models,
and to review, update and transform their It regulaTory concerns
strategies, systems and software. Financial markets everywhere have a long
technological change, whether it is evolu- way to go before they recover from the 2008
tionary or revolutionary, is not restricted to an economic crisis. the IMF’s latest global
organisation’s It department, rather it is an Financial Stability Report finds “increased
enterprise-wide issue. the wholesale over- risks to the global financial system, with the
haul and modernisation of an organisation’s euro area crisis the principal source of con-
It systems is something that has to take place cern”. the report also examines whether reg-
in close co-operation with every part of the ulatory reforms are moving the financial
organisation. It must meet the needs of the system in the right direction, and notes that
Alexis Kane, senior director, EMC Consulting
business lines and the support functions, such “progress has been limited”.
as finance, risk and human resources. not surprisingly, financial institutions
So what are the powerful external forces themselves are publicly expressing doubt at
affecting financial services institutions today? their ability to ride the tidal wave of regula-
First, you have to look at what is happening in tion: Basel III, the Dodd–Frank Act, the For-
the macroeconomic environment. global eign Account tax compliance Act, the
growth has slowed. the International Mone- Markets in Financial Instruments Directive
tary Fund (IMF) in its october 2012 World II, the european Market Infrastructure Reg-
economic outlook is forecasting growth of ulation, the Alternative Investment Fund
3.3% in 2012 and 3.6% in 2013, weaker than Managers Directive, to name a few. Firms
in its July outlook. are worried in the short term about their
“output is expected to remain sluggish ability to comply in time. And in the long
in advanced economies,” says the IMF. It term, they are concerned about the negative
points to two main difficulties: the sovereign impact that over-regulation will have on
debt crisis and other financial and economic their business strategies, profitability and
problems afflicting the eurozone, and the return on equity.
shailen salvi, director, financial services, EMC corporAte profile
Consulting EMC Corporation is a global leader in the delivery of IT infrastructure, software and services,
and is ranked 139 in the Fortune 500 ranking of the largest corporations in the US. EMC helps
clients store, manage, protect and analyse their data, increasingly through the power of
cloud computing.
EMC Consulting, the consulting arm, advises businesses on how to transform their IT
departments so they can operate more efficiently, including as internal service providers to
the rest of the business – the concept of‘IT as a service’ EMC Consulting has grown 51%
.
annually since 2004, and has business relationships with 73 of the Fortune 100, including the
10 largest global banks.
2| The Banker | December 2012

4. technology | reporT
introduction
Technological changes revenues, higher profits and increased share-
As if that were not enough, financial services holder value.
practitioners are having to cope with funda-
mental shifts in the competitive market- prioriTy areas
place, changing customer attitudes and Cloud Computing – eMc consulting has extensive experience of
technological advances. Disruptive, non-tra- running It strategy and transformation pro-
ditional competitors and discriminating
publiC, private and hybrid grammes for banks and other financial ser-
customers are squeezing banks’ profit mar- – offers the elastiC vices companies. We call it It as a Service
gins. Although emerging markets are being (ItaaS). We combine innovative ideas with a
tapped, those markets usually come with Computing platforms pragmatic approach to transformation,
regulatory, reporting and operational com- required to provide new some of it delivered over the cloud, to help
plexities that are just as tough, if not tougher, firms maximise their It effectiveness and
than in advanced economies. produCts and serviCes, cost efficiency. ItaaS is tailored to each cli-
the rise of social computing, such as net- and to CrunCh the huge ent’s particular circumstances, all within the
working sites Facebook and twitter, is pro- context of the client’s marketplace and the
viding huge opportunities to improve amounts of data assoCiated broader economic environment.
customer intimacy and loyalty, but requires with soCial networks We have identified three priority areas
more sophisticated tools for analysing large in financial services that require a transfor-
amounts of unstructured data. Meanwhile, mational approach to technology. you can
the proliferation of mobile devices is chang- read about them on the following pages.
ing the ways employees and customers inter- the first is big data, by which we mean, of
act with financial firms, and creating have probably already played a role in an course, managing and analysing the huge
significant security risks and trust problems. original transformation programme; you amounts of information available to firms
cloud computing – public, private and now need to get ready for the sequel. today, made available through better and
hybrid – offers the elastic computing plat- It departments that do not step up to cheaper processing and storage. to grasp
forms required to provide new products and these challenges risk being displaced by a the opportunities and cope with the prob-
services, and to crunch the huge amounts of growing number of external service provid- lems big data presents, firms must invest in
data associated with social networks. to ers, such as ‘software as a service’ models, a new generation of platforms, tools, meth-
make the most of cloud technologies how- business-led shadow It organisations and odologies and skill sets.
ever, new platforms and applications must full outsourced service providers. the firm the second priority is multichannel
be introduced, and legacy applications and overall will suffer if the It department does sales and service – delivering multiple
databases migrated. these migrations must not keep up. Failure to transform It will products and services through branches,
be managed carefully to avoid prohibitive result in lost business opportunities, falling call centres, AtMs, the internet and mobile
costs and business disruption. revenue, declining profits and reduced channels. ensuring that all those channels
Powerful new tools are becoming availa- shareholder value. are properly integrated, so that customer
ble that combine and analyse data from data originating in one channel can be
social networks, customer profiles, transac- seTTing The goals accessed in all the others, requires a trans-
tion repositories and third parties to create What should be the goals of a successful It formational approach.
insights into new product, service, customer transformation programme? there are the third area of focus is trust in It.
and market opportunities, but those tools many, including: Banks, insurers and fund managers must be
only work if they are used correctly and inte- ■ A strong alignment of It with the needs of able to demonstrate that they can be trusted
grated into existing business processes. the business partners. to look after customers’ money, and to pro-
■ the introduction of new technology to aid vide a reliable and good quality service.
iT TransformaTion revisiTed the development of new business models, that is their fiduciary duty. they must be
All the developments outlined – the economic products and services. able to engender trust in staff, shareholders
trends, the risks to the financial system, over- ■ Increased agility, efficiency and the ability and other stakeholders too. capable and
regulation, new competitive threats, more to deliver solutions to the business faster. dependable It systems are central to win-
discerning customers and technological ■ cost transparency. ning and maintaining trust.
advances – require financial institutions to ■ changing the operating model of the It these three priorities are interdepend-
transform their It. to cope with the threats department so it is more like a standalone ent. there is no point embarking on a
and take advantage of the opportunities, they business than an internal cost centre. transformational project in just one or two
must review every aspect of their It and ■ the evolution of It processes and the sup- of them. you have to involve them all. And,
update it to ensure it is fit for purpose. porting infrastructure to allow automation as we said at the outset, radical change ini-
the concept of It transformation is not and self-provisioning of It components. tiated by the It department has to involve
new. Firms have transformed their It ■ the modification of data warehouses to the business lines and support functions as
before. But as times change, technology accommodate the increased requirements well. only an enterprise-wide approach
must change too. even though every bank for better data analytics, for both structured will do.
or insurance company will have modern- and unstructured data.
ised its It in the past, it will eventually need ■ Better risk management. Alexis Kane is senior director and Shailen
to do so again if it is to move with the times. the ultimate goals should be increased Salvi is director, financial services consult-
If you are a seasoned It professional, you customer satisfaction and loyalty, enhanced ing, EMC Consulting.
December 2012 | The Banker |3

5. reporT | TEChnOlOgY
Big data
bigger is better
banks have to decide what they want to keep
and what they want to ditch. Even what they
keep is not that useful unless it is structured.
Big data Most data is unstructured, meaning that it
does not have a predefined data model, it
does not fit well into relational tables and is
The truly enormous volumes of information available to financial usually text heavy, and text is harder to struc-
institutions today is transforming the way they do business and helping ture than numbers. But it is becoming easier
them to provide a better service for their customers. Michael Imeson reports. to make sense of both structured and
unstructured data.
‘Big data’ is one of the latest Buzzwords MaxiMising opporTuniTies
in the lexicon of IT professionals, especially “Without question, big data provides finan-
in financial services. Banks and other finan- cial institutions with a great many opportuni-
cial institutions have always had to handle ties,” says Sharad Kumar, director of financial
high volumes of data – concerning their cus- services at IT specialists, EMC Consulting. “It
tomers and the products and services they allows them to get closer to their customers by
use, and all the support functions. The understanding their behaviour, which can be
amount of data available to them today, how- derived from deeper analysis of data from
ever, is truly mind-boggling. multiple sources and channels. One step
Better and faster processing and storage ahead, it can help them predict certain events
is the reason for this explosion of informa- such as customer attrition or fraudulent
tion. Every expert has something to say on behaviour. Big data analytics help them iden-
the scale of the growth, but a commonly tify their more profitable products and mone-
quoted estimate is that the amount of data tisation of this data – selling the data and/or
available to financial institutions is doubling analytics on the data – presents them with
every 18 months. That is forcing banks to new revenue opportunities. From an opera-
invest in a new generation of platforms, tional perspective, it helps them become more
tools, methodologies and skill sets. efficient and provides them with an ability to
The increasing level of information pre- better manage risk,” he says.
sents banks with great opportunities. It pro- “Online retailers such as Amazon are
vides them with a deeper insight into among the best users of big data. They use it
customer behaviour and profitability. It facili- to find out an individual’s buying patterns
tates the creation of new products and ser- and preferences, improve customer satisfac-
vices. It helps executive management control tion, cross-sell and detect fraud. Banks,
the finances, measure and manage risk, and investment managers and insurers have seen
much more. But it presents problems too. what the likes of Amazon are doing and
Old tools and technologies for storing, applying it in their markets,” says Mr Kumar.
managing and analysing big data do not suf- Joe Dossantos, director of enterprise
fice. Creating new data governance and information management at EMC Consult-
management policies is a must. Implement- ing, says financial institutions have to act
ing these policies is costly, because it is a quickly to grasp the big data opportunities,
transformational process. The volume of even if the initial up-front investment is
data is in many cases unmanageable and high. “If you do not act because you are wor-
ried about the costs, then someone else will
step in,” he says. “You will save money in the
short term, but in the long run the cost of
inaction will be that you allow your competi-
Online retailers such as tors to move ahead.”
amazOn are amOng the EMC Consulting advises financial firms,
their IT experts and business executives on
best users Of big data... how best to manage and make commercial
banks, investment use of big data. IT departments want to
know about the practicalities of gathering,
managers and insurers cleansing, analysing, storing and retrieving
have seen what the likes the data. The business lines, on the other
hand, are less interested in the technicalities
Of amazOn are dOing and and more interested in how they can use the
data – especially the power of predictive ana-
applying it in their
lytics – to understand customers and their
markets Sharad Kumar needs, to develop new products and services,
4| The Banker | December 2012

6. TEChnOlOgY | reporT
Big data
and ultimately to monetise the data. tional data governance and data manage-
“We can help [financial firms] integrate ment practices are not capable of handling
the analytics into their upfront business pro- the deluge of big data,” according to the
cesses,” says Mr Kumar. “It used to be the report. These practices must be standard-
case that only the back office was interested ised, transformed and integrated.
in predictive analytics. now they are used in
the front office too, to help with direct cus- coMMercial value
tomer interactions, dealing with mortgage Alan grogan, director of corporate analytics
applicants, underwriting insurance policies and value optimisation in the product, sales
and giving investment advice. Analytics can and marketing division of Royal Bank of
drive decision-making at the front end of the Scotland’s corporate and institutional bank-
business, as well as doing the number ing, is recognised as a leading expert on big
crunching in the background.” data and its commercial uses.
EMC runs a big data advisory service “Since the dawn of technology, data has
(BDAS). “When new technology arrives, the always been used by banks to better under-
non-IT people are often unsure how to use stand the key drivers of organisational value
it,” says Mr Dossantos. “So the BDAS and risk,” says Mr grogan. “Banking leaders
matches the technological developments to increasingly understand that big data ana-
the business opportunities. Things such as lytics – turning data into actionable knowl-
Apache hadoop – open-source software that edge and insight – should not be restricted to
allows big data to be stored and processed on the credit risk function, but that it presents big data allOws us tO
a large number of computers – and Apache endless opportunities across all areas of a
hive – an open-source, big-data warehous- bank. At RBS, we use analytics to free up knOw Our custOmers
ing system than runs on hadoop – are too staff time, which they can then use to spend well, hear them well
technical for most business people. They more time with clients.”
only want to know how to use the technology Mr grogan says the commercial aspects and service them well
to meet their commercial needs, which is of big data need to be front of mind. “You David Gledhill
what our BDAS shows them.” cannot look at data across only the three vs:
velocity, volume and variety. You have to give
growTh forecasTs priority to the fourth v: value.”
gartner, a Connecticut-based IT research The amount of data available to organisa-
firm, predicts that IT spending across all sec- tions has increased tremendously, but the
tors of the world economy will increase to infrastructure and human capital required to
$3700bn in 2013, up 3.8% on 2012 – and it collect and manage it requires a significant
is spending on big data that is creating the investment. To control costs Mr grogan rec-
most excitement. “By 2015, 4.4 million IT ommends avoiding complexity, and reusing
jobs globally will be created to support big data across different functions and platforms
data, generating 1.9 million IT jobs in the to create synergies. Banks should also ques-
US,” says Peter Sondergaard, gartner’s tion whether predictive analytics – applying
global head of research. “In addition, every statistical methodology and computing power
big data-related role in the US will create to data to predict what might happen in the
employment for three people outside of IT, future – is always necessary. Simple, cheaper
so over the next four years a total of 6 million human analysis of data may be adequate.
jobs in the US will be generated by the infor- Ensuring that big data is properly man-
mation economy.” aged and used is crucial. “The first building
But there is a problem. There are cur- block is to have a central analytics function
rently not enough skilled technology profes- that is allowed to join up and generate value
sionals in the US to cater to the big data across what is really a spider’s web of data
demand. Mr Sondergaard says the public across organisational units,” says Mr grogan.
and private education systems cannot cope “Big data that is mishandled statistically
and, on current projections, only a third of or wrongly interpreted is a very dangerous
those IT jobs will be filled. “Data experts will thing. So its operating model is critical. The
be a scarce, valuable commodity. IT leaders leading analytically enabled businesses have
will need immediate focus on how their been through their own learning curve and
organisation develops and attracts the skills are now using analytics to drive a great deal
required,” he says. of systems and process re-engineering cap-
As for financial services firms, gartner turing better data, refocusing staff time on a
published a report recently noting that value basis and increasing operational excel-
banks’ big data initiatives are in their infancy, lence and effectiveness,” he says.
and for them to mature, banks must rewrite Perhaps the biggest challenge of big data
their data governance policies. “Many tradi- analytics is ensuring that the IT depart-
December 2012 | The Banker |5

7. reporT | TEChnOlOgY
Big data
ment is able to facilitate the analytics unit’s
needs. “There is little point in having a team of
analytics experts who are acting as important
consultants to the business if you do not give
them the right tools or if you restrict them if yOu dO nOt act because
with bureaucracy and a meaningless analytics
infrastructure. That would be like hiring a
yOu are wOrried abOut the
Formula 1 driver and giving him a bicycle cOsts, then sOmeOne else
with a puncture and no seat,” says Mr grogan.
will step in Joe Dossantos
iMproving cusToMer insighT
The main beneficiaries of the big data trend
are retailers, but banks are not far behind, thing about big data is the positive impact it
according to Voranuch Dejakaisaya, head of can have on the customer experience. “It
information technology at Krungsri Bank, allows us to know our customers well, hear
one of Thailand’s top five banks. “All of this them well and service them well,” says David
data improves our customer insight, allowing gledhill, managing director and head of
us to enhance service as well as offer the right group technology and operations at the bank.
products at the right time,” she says. “It is also he cites the example of how big data has
useful for credit risk analysis, fraud detection been used to reduce the number of times that
and anti-money laundering measures. ATMs run out of cash. DBS used to have a
The bank is in the early stages of tapping manual process for determining when they
into non-traditional data and accumulating needed topping up, but that process some-
it at a high rate. Ms Dejakaisaya estimates times got it wrong and machines dried up.
that the year-on-year growth rate will reach Big data was the solution.
800 to 1000% compared with about 30% for “We got all the transaction data on all of
traditional data. The bank has only just our ATMs, 24/7 over a number of years and
started using Facebook and has yet to move gave it to a business analytics company who
into social media or streaming data such as do high-end analysis work,” says Mr gledhill.
images, voice and video. “They put their best optimisation and fore-
“Once we tap into that terrain, we are casting engineers on to it, working with us,
talking about petabytes of data rather than to see how we could use technology to keep
terabytes,” she says. The most important the ATMs filled. It involved looking at the
aspect of big data analytics is to ensure that it dynamics of the flow of cash at thousands of
is properly aligned with the bank’s product access points to figure out how optimally to
and service offerings, so the data is used to get notes to those machines. Even with all
improve the customer experience and antici- the PhD-qualified analytics experts deployed
pate customer needs. on the project, it took a long time to figure
“IT departments must be willing to out how to do it. But we did figure it out and
invest in talented personnel as well as the reduced ‘cash-outs’ by 80%.
technologies if they want to get the most out “We also reduced the number of trips to
of big data,” says Ms Dejakaisaya. “There fill up ATMs by 10% and optimised the
should be regular ‘road shows’ to relevant amount of returned cash – how much comes
business departments, telling them about back if the machines are not empty – by 60
any newly discovered insights that could be to 70%. The vans filling the machines are on
translated into commercial opportunities. In global positioning systems, so the system
some cases business managers may make knows where they are and how soon the
specific requests for analytics that support vans will get to a machine. Overall, it is an
their objectives,” she says. amazing use of data, involving really
“Big data is huge in volume, comes in fast advanced analytics.”
and is widely varied. The challenge for organi- It was the UK economist EF Schumacher
sations is to translate it into genuine insights who wrote the best-selling book Small is
that create business value. To do this they Beautiful in the 1970s, a critique of conven-
must align people, process and technologies. tional Western economic thinking and it
high-performance analytical tools are received much praise. Small may indeed be
needed to create rapid results. A governance beautiful, but not when it comes to data. In
framework is essential,” says Ms Dejakaisaya. the eyes of today’s financial services practi-
tioners whose job it is to collect, manage and
cusToMer convenience analyse data, and for whom information is
For IT executives at DBS Bank, Singapore’s their lifeblood, essential for career and com-
largest bank by assets, the most important pany success, big is definitely better.
6| The Banker | December 2012

8. TEChNOlOgy | reporT
multichannel sales and service
Access all areas: India’s largest private sector bank, ICICI, has opened 25 electronic branches (pictured), which are open 24 hours a day, seven days a week and
offer a range of banking services. ICICI is just one of the banks widening its range of IT-based services
Managing custoMer
experience across channels
Multichannel sales and service
Customers are increasingly interacting with their bank using different technology platforms, including
tablets, mobile phones and laptops. While customers are enthusiastically embracing new technologies, as
Michael Imeson finds out, the more traditional bank branches are also being given a new lease of life.
Multichannel delivery has truly arrived exploring “new avenues of thought, new tech- And while technology – new and tradi-
in the retail banking, private banking and nologies and new strategies that could help tional – is central to the success of a multi-
wealth management sectors. Customers are banks to restore consumer confidence, channel strategy, “financial institutions need
spoilt for choice when interacting with their develop new business models and achieve to use it wisely and invest in solutions that
financial services providers and the quality greater long-term efficiency and profitability”. are best for both the bank and its customers”,
of delivery – whether it be through branch, Multichannel delivery is the council’s advises the council.
call centre, ATM, kiosk, internet or mobile – current preoccupation and the subject of its
is improving all the time. seventh annual report, published in October high sTreeT Branches
There is no shortage of expert opinion on 2012. “New channels have arisen over recent “A multichannel strategy is not just about
the topic. In Europe, the European Financial years but banks have to be wary of focusing multiple delivery channels – it is about deliv-
Management and Marketing Association on these at the expense of tried and tested ering multiple products too,” says Mark Mau-
(EFMA) keeps track of the latest develop- approaches that still have a role to play within riello, banking practice lead at EMC
ments in retail banking, insurance and invest- a multichannel environment,” warns the Consulting. “The two go together. It is about
ments, and disseminates ideas through council in its report. Now that banks are plac- customers transacting in various ways, across
surveys, reports and events. EFMA’s retail ing even more emphasis on customer centric- the bank’s product and business lines.”
banking advisory council, made up of senior ity, the management and personalisation of Eric Disend, director of digital at EMC
executives from a wide range of banks, the customer experience across all channels Consulting, adds that each customer typi-
describes itself as a leading “think tank”, is becoming increasingly important. cally uses several channels and that tech-
December 2012 | The Banker |7

9. reporT | TEChNOlOgy
multichannel sales and service
nology enables their interconnectedness. ATMs to free up staff to provide advice. “We
“Banks are placing more emphasis on creat- are working harder at recognising custom-
ing a digital experience in branches that ers’ needs and their value to the bank when
‘connects the dots’ with ATMs and other dig- they walk into a branch,” says Ms Cromme-
ital devices such as tablets, mobile phones If anyone needs help, lin-Risch.
and laptops,” he says. “Banks have invested “Are they a new or an existing client? Do
heavily in digital challenges, so if a customer
shop employees can assIst.
they have an appointment or not? Do they
walks into a branch and asks about a feature these employees have been have high-growth potential? Should we
of the mobile channel, the tellers need to focus on retaining them? Are they very
have been briefed on what to say. Almost all
traIned by InG and are interesting for the business?,” asks Ms
the banks I have worked with want their fully up to our standards Crommelin-Risch. “They may be greeted by
branches to be the Apple stores of banking.” a host at the door who asks them what they
That is a fundamentally important Philippine Crommelin-Risch need and can help, or sends them to another
observation. It is why bank branches, what- person to provide advice. We are also exper-
ever their detractors say, have a bright future. ■ The ability to open accounts through any imenting with machines in busy branches
If Apple, the world’s most valuable and for- channel; many banks still require customers where clients can input their questions,
ward-thinking IT company for which the to visit a branch. take a ticket and wait to be served.”
virtual world is its oyster, believes it is impor- ■ Finding new ways of acquiring customers INg’s branches, similar to those of most
tant to expand its high street presence, through different channels. banks in Europe and other parts of the
which it is doing, then banks are right to ■ getting the right mix of channels for each world, are being transformed. The transac-
think along the same lines. geographical market. tional and operational needs of customers
A multichannel strategy has to be a ■ Using new channels (such as social media are being met by machines, while their
blended experience. “Most of our banking and mobile phones) to establish a better dia- more complex needs – a mortgage applica-
clients talk about having, or aiming to have, logue with customers. tion or investment advice, for instance – are
a holistic, cross-channel collaborative expe- ■Being able to move staff more easily being met by staff.
rience, but that is a difficult goal to achieve between different channels, and more multi- “We are using IT to facilitate that shift
because all of the channels have been devel- tasking – that is, branch staff acting as call and free up capacity for our branch people
oped separately over different time peri- centre operators when required. to offer advice. We are making the branch
ods,” says Mr Mauriello. “Contact centres ■ Exploring whether banks should offer the an intimacy-oriented channel,” says Ms
providing a human interface are more same services at the same prices through all Crommelin-Risch. “For this to work the sta-
important than ever in the digital age. channels or whether a more segmented bility, security and broad functionality of
Remember that every digital channel needs approach can be taken. our ATMs is vital.”
a support component – someone they can INg launched a mobile app a year ago,
call,” he says. Banking in corner shops which now has 1 million users. Interest-
EMC Consulting advises many banks INg Bank, one of the top three Dutch ingly, the new mobile traffic has not been at
around the world on multichannel sales banks, has 274 conventional branches in the expense of the branches. “It is addi-
and service strategies. Banks must start by the Netherlands and a further 400 agents tional interaction. Clients still find a lot of
identifying the needs of their customers, or ‘service corners’, in book shops, newsa- reasons to visit our branches.”
creating an integrated view of them and gents, supermarkets and other retail outlets All of INg’s channels are, of course,
then helping them use and traverse differ- in the country. These agents have been in linked. But there is a big difference between
ent channels. It is a transformative process place for some time, in partnership with the channel interaction and channel integration.
in terms of IT because the technology has to Dutch post office and cobranded as such. “We are improving channel interaction with-
become more responsive to the needs of the however, the joint venture has ended and out fully integrating all channels,” says Ms
digitally engaged client. the bank is halfway through the process of Crommelin-Risch. “Staff can access data
“IT transformation is essential,” says re-branding them all as 100% INg and from call centres, branches and service cor-
Mr Disend. “Banks must change their leg- making them almost fully automated. ners, but that data is kept in separate data-
acy systems if they are to implement a mul- Philippine Crommelin-Risch, managing bases. We aim to have one general customer
tichannel strategy. These channels are director of the branch network for INg database in which all channels keep their cli-
expensive, especially in large banks. EMC Bank, says that clients can be served through ent data, but we are not there yet.”
has done some work to virtualise those these service corners at a lower cost than
channel architectures, which makes them through bank-owned branches, and it service as an asseT
more cost effective.” improves the proximity of the bank to cus- US-based bank Wells Fargo attaches more
tomers. “There are now only cash machines importance to service than sales, and sees
MulTichannel sTraTegy in the service corners, where people can technology as a great facilitator. “More sales
In EFMA’s report on multichannel strategy make withdrawals and deposits,” she says. do not always lead to better service, but bet-
models, EFMA director John Kirkbright “however, if anyone needs help, shop ter service always leads to more sales,” states
identities a few central themes relating to employees can provide assisted service. the bank in its latest strategy document. “Put
multichannel delivery in retail banking. These employees have been trained by INg simply, our product is service. We use tech-
They include: and are fully up to our standards.” nology to personalise service, not to deper-
■ The need “for more personalisation in The bank’s branches are also becoming sonalise it. Technology allows us to connect
each channel”. more automated, with more kiosks and with our customers in new ways.”
8| The Banker | December 2012

10. TEChNOlOgy | reporT
multichannel sales and service
The bank has identified six key areas of tomers can use the electronic branches to
opportunity, including retail banking, com- deposit cheques and cash, withdraw cash,
mercial banking, cards and residential mort- conduct online banking and carry out video
gages. It is the US’s main mortgage conferencing with customer care personnel.
originator, with $189bn of new mortgages ‘Tab banking’ is another new initiative
written directly in the first nine months of from ICICI. It allows new customers to open
this year, slightly higher than the same an account from their home or office using a
period in 2011. tablet computer with an internet or mobile
“Strong distribution channels are the key phone connection. All the relevant docu-
to reaching customers,” says Mike heid, head ments and the customer’s photograph are
of home lending at Wells Fargo. “We have a scanned and viewed on the tablet and the
very broad distribution network. We have the bank’s computer screens, without the cus-
ability to service customers when they come tomer needing to visit a branch. “Our con-
to us for purchases and refinancing.” tinuing adoption of innovative technology
The bank has two ways of looking at reinforces our commitment to improving
mortgage production. One is direct lending, and developing our relationship with our
through 11,695 home mortgage consultants, customers,” says Chanda Kochhar, ICICI’s
many of them operating from the bank’s chief executive.
stores. About half of the bank’s total mort- Meanwhile, hDFC Bank, India’s second
gage volume comes from them – roughly largest private sector bank, providing ser-
$189bn. The other half – $191bn in the first vices to 25 million retail banking customers
nine months of 2012 – comes from what the in hundreds of cities, as well as wholesale
banks are placInG more
bank calls its ‘correspondent’ or ‘aggregator’ banking and treasury services, believes its emphasIs on creatInG a
channel. Small to medium-sized mortgage competitive strength lies in its use of tech-
origination companies underwrite and close nology and its ability “to deliver world-class
dIGItal experIence In
loans, then sell them to Wells Fargo, which service with rapid response time”. branches that ‘connects
in turn pools them and securitises them for Although it already has 2564 branches,
sale on the secondary market. more than 10,000 ATMs, and extensive the dots’ wIth atms and
The direct retail channel provides the phone, mobile and internet banking ser- other dIGItal devIces such
greatest benefits for Wells Fargo, rather than vices, that is not enough. That is why in
the third-party originators. “It gives us full October it tied up with Indian Oil Corpora- as tablets, mobIle phones
control of the customer experience, the best tion (IOCl) to provide banking services and laptops Eric Disend
opportunities for cross-selling, stronger cus- through the company’s KSK petrol stations.
tomer retention, wider margins and better The objective is to reach more people living
credit quality,” says Mr heid. in semi-urban and rural parts of the country
Chase, the US consumer and commer- who cannot get to a branch.
cial banking division of JPMorgan Chase, “This initiative in partnership with IOCl
provides a good example of retail channel is yet another step towards taking banking to
innovation. It has just created a Spanish enterprising Indians in the hinterlands,” says
language version – chase.com/espanol – of Michael Andrade, head of agribusiness at
its online banking service. “We continue to hDFC. The target is to have 1000 petrol sta-
tailor products and services to meet the tions in the network, each serving about
needs of the hispanic community, which is 1500 customers with savings accounts,
a significant and growing customer seg- loans, insurance and investments.
ment,” says Pablo Sanchez, national execu- The bank switched on its 10,001st ATM
tive for Chase consumer banking. in September in Kovalam, a beach town near
The Spanish language website has been Thiruvananthapuram, the capital of Kerala.
around for several years, but up until now it “The launch of the ATM at Kovalam reflects
has provided information only, not transac- the fact that customer centricity is at the core
tion services. Spanish-speaking customers of the bank’s impetus of offering a wide array
can now use the website to manage their of electronic channels,” says hari Velloor,
accounts, pay bills and do many other zonal head in Kerala for hDFC.
things, all in Spanish. Chase already pro- For all banks, innovation is key to reach-
vided bilingual customer service through ing and serving customers. If you can have a
call centres, ATMs, bank statements and bank branch in a petrol station in rural India,
promotional literature. you can probably have one anywhere.
With banks today having to place more
indian innovaTion emphasis on customer centricity, managing
ICICI, India’s largest private sector bank, and personalising the customer experience
has just rolled out 25 electronic branches, across as many channels as possible is the
open 24 hours a day, seven days a week. Cus- only way forward.
December 2012 | The Banker |9

11. reporT | TECHNOLOgy
IT SECURITY
Can you trust your It?
IT security
If a bank does not ‘RestoRing tRust ’ was the title of the high levels of business continuity.
command the trust of its British Bankers’ Association’s annual inter- Keith Andrzejewski, practice lead for
national banking conference this year, and risk, compliance and regulatory response at
customers and the wider
appropriately so. Banks in the UK, Europe EMC Consulting, says a bank needs a first-
population, it is nothing. and the US are still struggling to regain pub- rate IT department to ensure consistent
An essential foundation of lic confidence in the wake of the 2008 global service availability, business continuity
that trust is a dependable financial crisis. They are hindered in their when disasters strike or things go wrong,
and secure IT system. efforts by the sovereign debt crisis and reces- robust security, regulatory compliance,
Michael Imeson reports. sion in the eurozone, mis-selling scandals, effective risk management, integrity and
the manipulation of Libor, Iranian sanctions good corporate governance.
busting, breaching anti-money laundering “As customers do more of their banking
regulations, rogue trading, internet security on mobile devices and over the internet it is
breaches and more. important that, in this virtual world, they
Because of the inter-connectedness of have confidence in their banks’ IT systems
the global financial system, even banks in and that there is trust in who they are doing
countries that have not suffered any of these business with at the other end of the device,”
problems are afraid of being tarred with the says Mr Andrzejewski. “But they must have
same brush and so must work hard to main- the right degree of business continuity and
tain the trust of customers, shareholders, IT security. There has to be a balance. A
governments and wider society. bank’s business continuity capabilities
There are many facets to this trust: trust- should not be over-engineered, because not
ing a bank to safeguard customers’ funds; to everything needs to have 100% availability,
provide a secure and reliable service; to treat or uptime.”
customers fairly; to support the economy
through targeted and responsible lending, MiniMising risk
efficient payments processing and other When working on uptime assurance for
essential financial services; and to be a good financial institutions, Mr Andrzejewski
‘corporate citizen’. always starts with the legal and regulatory
IT is central to everything a bank does requirements. The aspects of a banking ser-
these days. Trust in IT is therefore vital. vice that regulators regard as the most
Banks must be able to demonstrate to cus- important must take precedence when plan-
tomers and shareholders that they can be ning service availability. “The next step is
trusted to look after their money and their risk assessment,” he says. “That starts with
investments, and to provide a good service. classifying assets, and deciding on the pro-
Capable and dependable IT systems are cen- tection and support that ought to be assigned
tral to winning and maintaining that trust. to each. Separating assets into those where
some downtime is acceptable and those that
VirTual ThreaTs are not is a delicate business, but the key
HSBC suffered a severe ‘denial-of-service’ consideration is that they are separate.
cyber attack in October 2012. Its web-based “The risks posed by potential equipment
services around the world crashed, leaving failure, and by malicious agents inside and
millions of customers without access to their outside your organisation are relatively easy
An importAnt driver accounts for many hours. It could have been to quantify. Harder to account for is human
behind trAnsformAtion is disastrous for customer trust. But the bank carelessness, though it should always be fac-
was quick to acknowledge the problem, tored in to any risk assessment. A huge and
derisking.You cAn never apologise to customers, work with the rele- costly denial-of-service attack that cost a
get to zero risk in An it vant authorities and tell the press what was well-known organisation a great deal of
happening. Customer data was not compro- money was only made possible because a
environment, but whAt You mised and the bank was able to restore nor- technician plugged a USB stick into a server.
mal service in a day. That organisation’s risk assessment was oth-
cAn do is be obsessed About
No banking platform is safe from cyber erwise solid,” says Mr Andrzejewski.
where You see potentiAl attackers – even US defence agencies can “Uptime in the IT infrastructure, and the
be hacked into – but the best banks will risk assessment that goes with it, is merely a
risks And then mitigAte
deploy the latest security measures, limit part of the wider business risk assessment
them David Gledhill any damage caused by breaches and ensure process. It is still very common to see senior
10 | The Banker | December 2012

12. TECHNOLOgy | reporT
IT SECURITY
executives in the financial services sector sig- the hurricane evacuation zone. To minimise
nificantly underestimate the risks that their disruption to these services, Citi used its
business faces, in IT or elsewhere. It is very back-up locations to ensure continuity of
common to see short-term business impera- operations until staff were able to return to
tives take precedence over risk control, and their lower Manhattan offices.
that is fundamentally flawed as a long-term
strategy. Sometimes those responsible for eliMinaTing inconVenience
risk assessment have to tell their bosses David gledhill, managing director and head
things they do not want to hear,” he says. of group technology and operations for DBS,
Effective means of preventing, detecting Singapore’s biggest bank by assets, says reli-
and mitigating fraud is essential for main- ability, resilience, security and performance
taining customer trust. Banks in advanced all play a part in the customer’s mind. “It is
countries are good at this, those in emerging one thing to build a back-end internet resil-
markets less so. ience solution, so if the internet banking
“Banking fraud in China is rampant,” goes down there is an immediate alternative,
says Mr Andrzejewski. “Banks there know but if the user feels that the performance of
how to stop it, but are reluctant to improve that alternative is not up to standard, then it
counter-measures for fear of making it more is not a good solution,” he says. “From my risk
difficult for people to open accounts. Many management point of view it may be alright,
bankers believe that if they require six pieces but it may not meet the customer’s expecta-
of information from an applicant for an tions of reliability and dependability.” As customers do more of
account, and another bank requires only DBS uses a number of tools to constantly
five, then the applicant will be more likely to monitor the availability of its digital channels. their bAnking on mobile
choose the second bank – so the first lowers It also monitors what its competitors are devices And over the
its requirement to five as well.” doing. Planned downtime for maintenance
has been reduced significantly as this was internet, it is importAnt
WeaThering The sTorM identified as an inconvenience for customers. thAt, in this virtuAl world,
The destruction wrought by Hurricane “Historically, banks have regarded
Sandy on the US north-east coast in October planned downtime as OK, because the idea theY hAve confidence in
2012 caused immense problems for banks was that all you do is inform customers and their bAnks’ it sYstems
and really put their disaster recovery plans – they should accept it,” says Mr gledhill. “But
and customer trust – to the test. Most banks informing customers in advance is not good Keith Andrzejewski
coped well. For example, although the storm enough these days. The principle we applied
severely disrupted Citibank’s network, is that planned downtime is almost as bad as
within a few days service was restored to unplanned downtime, so the aim has been to
nearly 90% of the bank’s branches and get planned downtime to as close to zero as
ATMs, including all six branches on Staten possible. In the past few years we have
Island, one of the worst affected areas. striven to reduce it and have done so by 95%.
In a move that showed it understood “At the back-end this has required a mas-
customers’ problems, the bank offered sig- sive amount of re-engineering on the main
nificant relief to those in the disaster zone. It frame. We have had to re-architect the main
allowed mortgage customers more time to frame and put in place all sorts of parallel
make repayments, waived late payment processing. On the internet front-end, we
charges for 90 days and suspended foreclo- have completely revamped it to provide par-
sure sales. For other customers it provided allel environments. I can now take down one
overdraft protection, wired emergency funds online banking site to upgrade it and flip to
to them and said it would refund fees for the the other. This is all invisible to customers,”
use of ATMs outside its network. To cap it all, says Mr gledhill.
the bank donated $1m to the American Red
Cross’s relief and recovery efforts. iT TransforMaTion
“Our Hurricane Sandy relief pro- Mr gledhill says this re-engineering is a
grammes are intended to alleviate some of prime example of IT transformation. In the
the financial hardships facing our customers past three to four years DBS has almost com-
so they can focus on the most pressing issues pletely transformed much of its IT infra-
in front of them,” said Citi CEO Michael Cor- structure and many of its applications to
bat. “Citi is committed to helping our cus- make banking easy for customers. It has
tomers recover and rebuild by being sensitive been a long journey, focused on what really
and accommodating their needs.” delivers value to customers.
Another issue for the bank was the fact “An important driver behind transfor-
that its investment banking operations in mation is derisking. you can never get to zero
New york city were situated at the heart of risk in an IT environment, but what you
December 2012 | The Banker | 11

13. reporT | TECHNOLOgy
IT SECURITY
can do is be obsessed about where you see the country’s academic ability in all fields of
potential risks and then mitigate them. We cyber security. Its research will ultimately
have an availability strategy that allows us to make it easier for businesses, individuals and
decide what capacity we need to build to governments to protect their computer net-
cope with a crisis,” says Mr gledhill. works and the data they contain. compliAnce with
“Some of the systems when I first arrived Professor Angela Sasse, director of the
here had a disaster recovery capacity that was institute and professor of human-centred
regulAtion often
less than 100% of the total need. Imagine a technology in the department of computer deteriorAtes into A
scenario where you lose a data centre. Many science at UCL, is looking for businesses,
more customers than usual will log onto their including financial institutions, to get tick-box exercise And the
online account to check their balance. So you involved with the research the institute will ‘best-prActice’ ApproAch,
will need even more capacity in a disaster carry out to assess the costs and benefits of
than in a normal situation,” he says. security measures for all stakeholders. She which should reAllY be
“But you shouldn’t have too much capac- believes that banks take cyber security seri- cAlled ‘common prActice’
ity. If a data centre goes down you might have ously. They are well aware that fraudsters tar-
a 200% to 300% surge of customers in the get online banking because that is where the As theY Are onlY doing
first couple of hours of them hearing the money is. But controls are not always effec- whAt others Are doing
news, then it trails off. So you probably don’t tive, as evidenced by the fact that there have
want to build 200% to 300% of emergency been a number of examples of banks losing Angela Sasse
capacity. What else can you do that is better customer data and countless more examples
than putting up a ‘service not available’ mes- every year of customers being defrauded.
sage, which for customers would be the worst “Regulators may require a firm to have a
possible time for them to see such a message? security policy, but do not specify how strong
We have therefore invested in ‘overflow tech- the policy has to be and whether it is working
nology’ from third-party vendors, so that in in practice,” says Ms Sasse. “For instance, a
such situations we can gracefully overflow, bank may require that employees have
with a reassuring message saying that due to strong passwords, but if employees re-use
high traffic they may experience a delay, so the same password on external services or
could they try again later,” says Mr gledhill. sites, to make it more memorable, it may
become compromised. Compliance with
acTion By The auThoriTies regulation often deteriorates into a tick-box
Although banking fraud is endemic in China, exercise and the ‘best-practice’ approach,
Hong Kong is a different matter. Hong Kong which should really be called ‘common prac-
banks are in the process of adopting chip- tice’ as they are only doing what others are
based technology to strengthen ATM secu- doing rather than what is ‘best’.”
rity even more, assisted by the Hong Kong
Monetary Authority (HKMA), which has set proTecTing nuMBer one
the technical and security standards banks Another problem is that banks tend to focus on
must implement. All ATMs must comply protecting themselves more than their cus-
with the new standards by the end of Febru- tomers, who are wide open to phishing and
ary 2013 and existing cards must be replaced malware attacks. “There have been some
by new chip cards by 2015. efforts to protect them with two-factor authen-
“Although ATM fraud is not a significant tication devices, such as Barclays’ PINsentry,
fraud in Hong Kong, it is important for Hong and anti-phishing software such as Solid, but
Kong to stay at the forefront of the technol- customers are still vulnerable,” says Ms Sasse.
ogy and be in line with international trends,” “This is particularly the case where
says Arthur yuen, HKMA’s deputy chief banks still have bad habits such as phoning
executive. Anita Fung, chairwoman of the up customers to ask for their credentials,
Hong Kong Association of Banks, says that when the customer has no way of verifying
banks set up a taskforce on ATM fraud more that the caller is actually from the bank and
than two years ago to work with the HKMA not an attacker,” she says.
on developing the new security measures. So, there is no denying that bankers, reg-
An indication of how seriously politicians ulators, politicians and academics share the
treat IT security is provided by the UK gov- same view – that it is a bank’s fiduciary duty
ernment, which in 2011 launched a cyber to safeguard customers’ money from loss or
security strategy. As part of that initiative it set fraud, as well as provide a reliable service
up a research institute in the science of cyber that works even when disaster strikes. Just
security in October, funded by the govern- as importantly, everyone also agrees that for
ment intelligence agency gCHQ and other a bank to fulfil that duty it must have a
official bodies, and hosted by University Col- dependable, secure, high-performance IT
lege London (UCL). Its purpose is to increase infrastructure. Trust in IT is everything.
12 | The Banker | December 2012