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Bank Systems & Technology: The Blog« August 2006 | Main | October 2006 » Integration is a reality. Just make sure you know what the word means.September 25, 2006 @ 01:55 PM | By Art Gillis By Art Gillis In a survey I conducted last year, 74 bankers were asked to complete a questionnaire. In addition to answering specific questions, I asked them to volunteer their own words describing how they felt about technology. Fifteen words kept popping up consistently among the group’s responses. Integration was one of them. But I’m not sure everyone had the same thing in mind when they referred to the word. As with a lot of technology, one has to remove the marketing spin to get right down to the truth. When the word first appeared in the mid '80s, it was customary for vendors to pick up on the buzzword appeal, so every sales brochure described bank systems as integrated. They were not. But two decades later, it’s a safe bet that the top dozen or so core applications systems are in many ways integrated. Here is just one man’s opinion of the purest form of integration: • Every application feeds the general ledger and the customer database automatically without human intervention. Smarter technicians than me (I’m not a technician) can certainly add to my list of pure qualifications, but I’m comfortable in saying that any banker who has issues with integration today is living in a cave. Integration is available from several good vendors right now, just for the paying - paying for the system and paying for the pain of a conversion. Make sure you understand the claims vendors make, including mine September 18, 2006 @ 02:27 PM | By Art Gillis By Art Gillis In recent years, I’ve been saying that my insights about core processing come from two sources: 1) assignments I have completed for 300 banks. And 2) from the annual compilation of Automation in Banking. But last week a highly respected listener said, “Wow!” when he heard the 300 bank projects I had completed. I wasn’t sure if he meant skepticism or true admiration. In any event, it triggered my neurosis, so I counted the clients referenced in my 33-page c.v. and, uh oh, I came up with only 180 names. What happened to the other 120? It’s called “industry consolidation.” But did my recommendations cause the banks to sell out? Or was it just a natural phenomenon of the industry. In the 30 plus years that I have been working for banks, the number of commercial banks shrank from 10,850 to 5,274, according to my buddy, David Soto (dsoto@highlinedata.com), the guru of bank stats. That’s a reduction rate of 49% . The reduction rate in my client base was 40%. Then may I relax and say my clients are just representative of the industry norm? What I do know is that the 180 that still exist are using the same system I originally recommended even if it was 30 years ago. And this is why I begin the orientation meeting at each new client assignment with this remark - “We are going to select a new core system for your bank, and this will be the last conversion you will make even if you live to be a hundred.” Everyone cheers, and Excedrin sales drop in that city. As I see it, there are about 3,712 financial institutions that need to get over the denial phase and take a good look at their core system. Sooner or later, they are going to have to switch to something better. Last year, 755 bit the bullet and switched. At that rate, the entire population will be in good shape in five more years, except for the core vendors who will have to find other things to sell. That’s OK, most of them have dozens of other things to sell. Comment on this blog entryRead it and weep (if you didn’t make the cut), or draw your own conclusions September 13, 2006 @ 04:40 PM | By Art Gillis By Art Gillis I’m not a fan of “Top xxx Lists,” except for the American Banker list of the top 25 computer consultants. This week I reviewed the Top 500 Innovators list published by InformationWeek. I wasn’t sure what the criteria were until I read the back page where the editor-in-chief made certain these weren’t just pedestrian outfits that get the “plenty hard work” done. The publication was “particularly picky about applying the innovator moniker.” Following are the names of the 25 banks (including near banks) and 9 tech vendors that serve the banking industry. Banks: Tech Vendors included in Automation in Banking that made the IW 500 cut: I could have a lot of fun with the list, but one contradiction begs explanation. Northern Trust and Synovus outsource their technology to Metavante. Northern Trust and Synovus were recognized, but Metavante was not. It’s a safe bet that Metavante does M&I Bank’s work also, but M&I Bank didn’t make the cut. Will someone please explain what “innovation” really means? Comments(1)Data security, computer crime, Internet scams, terrorist attacks, natural disasters, stolen PCs, data files in the wrong hands, hackers having fun - Call it what you like, but it’s all about protecting against the unexpected. September 06, 2006 @ 01:59 PM | By Art Gillis By Art Gillis In the early '80s, the banking industry got a wake up call. Lloyds of London was underwriting a new rider to their blanket bond coverage - computer crime insurance. To justify paying the huge premiums, bankers wanted to know if they were at risk. So I went to work and developed a program called “39 Steps to Better Security.” The process was simple. I acted out the role of the perpetrator and the bank CIO (and his team) presented installed mechanisms that would block the threat. If they blocked it, they won. If they couldn’t block it, the perpetrator won. That’s how we measured the risk so we could deliver a score card to the CEO. The process was published in several banking trade journals (they love things having to do with crime), including what was then known as Bank Systems & Equipment in November 1981 on page 103. Exposure in the trade press created a lot of feedback, even from an inmate at the Federal Prison Camp in Lompoc, California (I still have his letter). This man had successfully stolen $10.2 million (using a terminal in the bank) from a West Coast bank (since acquired by a very large U.S. Bank). He got caught only because his envious buddy ratted on him. The bank never had a clue as to what happened, but the public announcement was something to the effect that the amount wasn’t large enough to be noticed. The perpetrator used the $10.2 million heist to buy diamonds in Switzerland, but by the time the case was solved and the bank recovered the diamonds, the booty had lost some of its value, presumably because unlike a repossessed Corvette, banks aren’t in the business of selling 115,000 Russian diamonds. And remember, there wasn’t an eBay in those days. Back to my 39 threats, I often worried about the 40th threat that I had not anticipated, and no one tried to one-upmanship me, not even the inmate who succeeded in overcoming one of my 39 threats. The 39-step program in computer crime prevention occurred long before the Internet. It also occurred prior to the now popular concept of distributed processing where responsible CIOs abandoned sound security policies and released data files to almost any legitimate bank employee who had a need to know. This release of files was also known as “user friendly,” which bestowed to the CIO the honor of being one heckuva good guy. Today, bankers should worry about hundreds of steps to better security not just my '80s-styled 39, and the scary part is they’ll never get to the end of the what-if list. In some banks, there’s a lot of skepticism regarding threats, as was clear to me on my first 39-step assignment in New Orleans where the culture is Laissez les bons temps rouler. The conventional wisdom at that bank was, “It’s good in theory, but it won’t happen in the real world.” After 9/11, I went back to my 39 steps to see if I had included a suicide attack using a commercial airliner to destroy a physical structure. In 1981, I hadn’t even heard of the name al-Qaeda, or the threat of terrorists. So it wasn’t on the list as such, but the following threats seemed awfully close to what happened: #17 Explosion caused by a bomb (can a fuel-filled jumbo jet be considered a bomb?) What you should know is that back in the “safe ol’ days” my 39 threats produced chuckles from many bankers, mostly CIOs, who considered the precautions absurd. I’m not blaming them. The CIA, FBI and DOD might have chuckled also even though they are in the business of snooping on potential enemies, the business of crime, and the horrors of war, rather than loans, deposits and payments. Be careful, it’s a battlefield out there and it’s getting worse because we don’t know where the next hit will come from - Could it be grandma’s wrinkle-free lotion while flying home from a visit with the grandkids? Comment on this blog entryThe smartest people have the simplest answers September 01, 2006 @ 01:31 PM | By Art Gillis By Art Gillis Recently I enjoyed the honor of working for the #1 consulting firm in the world. I won’t embarrass them by naming them, and they certainly don’t need the publicity. A comment from the partner-in-charge of their financial services practice got my attention. “Some of the most complex issues can be resolved with simple answers.” I’m learning things from smart people every day, so here are some simple answers. After 503 pages of knowledge in the 2006 Edition of my report, 66 blogs at banktech.com/blog, 114 published articles, and 91 presentations to sleepy audiences, here’s what every bank in the world needs in order to be at its peak performance - simply stated: 1. First and foremost, a core system that satisfies users in the conduct of their daily activities. I just did the simple task. Now you’ve got the tough job of finding the 169 resources that constitute the seven major pieces of the technology pie. And don’t be discouraged if you have to work with five to seven vendors to get the right solutions for your bank. If one vendor claims they are the one-stop vendor, it just means they have one very slick salesman. Enjoy your Labor Day with labor, the cerebral kind. I’ll be at my beach, now that all the tourists are gone. Comment on this blog entry
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