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Bank Systems & Technology: The Blog

« December 2007 | Main | February 2008 »

Wow. Talk about catching something in the nick of time. According to an AP report, a gang of fraudsters in Sweden were just seconds from pulling off a heist worth millions when an alert bank employee literally yanked the plug on the activity.

Three conditions affecting the banking business seem quite real and have already become visible in the form of poor earnings reports from the giants - losses in investment banking, the credit crunch and subprime mortgages. So it's natural to look to the left and right for other industries that might be affected. Of course, IT is a likely candidate for losses because as bank profitability goes, so goes IT investment. Maybe.

By Mark Greisiger, NetDiligence, and Jon Neiditz, Locke Lord Bissell & Liddell LLP

Imagine this nightmare:

Criminals from across the globe, armed with the most sophisticated weaponry, are converging on your bank. Inside the bank, the guards are fast asleep. Panicked tellers sound alarms. Nothing happens. (No one knew they didn't work; they were never tested.) The bad guys know precisely where the vault is and it's wide open. Bad guy after bad guy marches out with your customers' wealth. The crime's swiftness is mind-boggling. What should have taken hours was over in seconds.

But the worst is yet to come: customers, outraged that you didn't have better safeguards, are closing their accounts and suing you for negligence. Before you jolt awake, one last image flashes through your mind: the words "CEASE AND DESIST" scrawled in blood-red paint across your bank's front door and a letter emblazoned with "CLASS ACTION LAWSUIT" in your mailbox.

A couple of weeks ago, I posted a blog bemoaning my miserable customer service experience with United Airlines. It's basically a my mini guide for banks illustrating what they should not do when a customer has a problem that needs to be resolved. My United "incident" illustrated what a poor marriage of IT and people can do to a company's reputation in the eyes of the customer.

Societe General is in big trouble—about $7 billion worth of trouble. Today, it was revealed that the French banking giant suffered this staggering fraud loss at the hands of trader Jerome Kerviel. The bank said it will seek emergency funds as a result, according to a Reuters report. The implications of this huge oversight are many.

I have completed 154 consultations for 67 investment firms in the past two years. The analysts asked a lot of good questions (none that I didn't expect) about the performance of bank tech companies. However, no one ever asked me about the competence of the sales forces. Not one - nada, nyet, rien, niente, keine, tipote. So I feel the need to speak out about the overall condition of the bank tech vendor community, as I see it, including the good, bad, and ugly. Most of it is good, I'm happy to say.

With all due respect to the Cs in every bank tech company, show me a salesman who brings in the business, and I'll show you the person who is going to propel our industry into one very sweet higher level. I have met only 9 tech sales reps in 35 years who left a lasting impression on me, so don't expect a smashing 2008 unless the new breed of salesman is going to hit the streets soon.

I don’t want to impute too much significance to the fact that my spam folder held a solicitation offer from “Countrywide Home Loans” on the same day it was confirmed that Bank of America plans to acquire Countrywide Financial for about $4 billion in stock. But it seemed somehow symbolically apt.

A little while back, I blogged about the financial services community in the virtual world of Second Life, the brainchild of Linden Lab. These banks and brokers deal in Linden Dollars, which is the money of Second Life. According to wikipedia, although the exchange rate between real dollars and Lindens does fluctuate, there are approximately 270 Lindens to one U.S. dollar.

Throughout 2007 (and even into 2008—see our Jan. issue), BS&T talked about mobile banking and mobile payments until we were blue in the face. From the way things are shaping up, it doesn't look like our mobile mania will abate any time soon. Deals continue to be inked and banks are slowly starting the process of getting the word out to customers about what exactly mobile financial services are. Mind you, I speak only of the U.S. market, which is still a mobile financial services novice when compared with the rest of the world.

You may recall the hype that account aggregation produced several years ago when firms like Yodlee burst onto the scene. Banks and brokerages were quick to add these tools to their sites, fearing that if they didn’t, their competitors would. As fate would have it, these tools never really reached a tipping point among consumers. Why? Because most of the firms that used Yodlee or other screen-scraping technology never added any value to the aggregated data. Yodlee and the other aggregation vendors did their part in gathering the data, but there was always the question of "So what?" lurking in the background.

Sponsored by TCS Financial Solutions

TCS Financial Soutions Helps Manage Risk, Support Growth

By Jerry Driscoll, Exstream Software

Despite the large number of mergers and acquisitions within the industry over recent years, banking still remains highly competitive. Walk down any street in an average American city, and you're likely to pass three or four bank branches marketed to attract more customers and encourage them to do more business by opening more and different types of accounts. As always, however, the most effective way to do this is to build personal relationships with customers, to develop trust and inspire loyalty.

Happy New Year to all our readers. The holidays are over and some of us (including yours truly) are still trying to put things in order from the aftermath of having too many days off! But I think this week is when things will slowly settle down and everything will go back to the status quo.

But speaking of aftermath, I'd like to share with you a customer service disaster I experienced while traveling during the festive season.

In my view, 2007 was not a Boston-Sports-Teams year for the banktech business. There were some losers in our arena, as well as lots of worries; a large number of lower stock prices for banks and techs; a ninth inning attitude among bankers who achieved a good-enough system to get the job done, and then took a rest; certainly nothing new and exciting showed up to compete with the likes of Apple Computer. But one has to recognize the good things. For example, U.S. banking transactions got posted accurately and on time during 4,308,198 posting runs in 2007. Presumably 112 million households were pleased with the processing of their accounts. And I believe business customers got the same accuracy and timeliness. The press had far more compelling events to write about than to look for banking glitches. I was interviewed for only two failures in 2007 and both were ATM related, and both were corrected within 24 hours.

It's interesting to see the number of forecasts generated by the industry's various consulting/research firms in the waning months of a given year. In just two weeks, my email inbox was peppered with press releases illustrating where bank IT budget dollars would land and what hot trends to expect in 2008.

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