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Main / What We're Thinking Weblog

I recently posted a blog about a sticky situation going on in the California government that, in part, deals with the difficulty in updating its payroll system because it runs on Cobol. I commented on how similar this situation sounds to what many financial institutions are experiencing. And I received some very interesting e-mails and comments. If what readers are telling me is correct, Cobol is alive and kicking.

I recently had the opportunity to meet with Clark Abrahams, chief financial architect at SAS, on a trip he took to New York. He has helped me out with some articles in the past and it was nice to put a face to a name.

Clark, who actually wrote a column for BS&T, is working on creating a new framework for the financial services industry around scoring the risk of customers/potential customers in a manner that's a bit more three-dimensional than the tried and true credit score. His progress in convincing the industry to accept this new concept, called the Comprehensive Credit Assessment Framework (CCAF) was the subject of our conversation.

Seven days into my new job at BS&T and I have seven new password and log-on combos.
You can imagine how it struck me when security veteran RSA announced a new security token to authenticate customers for online banking that fits in your wallet like a credit card and, the release boasted, can bear the name of each bank issuing such a card. Great! It's not enough that I have two credit cards and one debit from JP Morgan Chase, alone, for example; I can look forward to having to carry additional cards to back up the original plastic online.

Sometimes I like to post stories about my personal experiences with banking technology. I think what happened to me the other day with my debit card fits the bill.

I've been pretty skeptical about the use of Web 2.0 tools in the financial services space. I just can't see how banks can broadly implement things like wikis, blogs and podcasts throughout their practice just to cater to a particular demographic—Gen Y. Nor can I see why they would want to embark on such a project beyond simple curiosity.

On Monday at the NACHA Payments 2008 conference, I attended a session on decoupled debit aptly named "Decoupled Debit: Threat or Opportunity?" During the session, HSBC's Daniel Eckert, SVP, payments products, and Mike Grossman, CEO of Tempo, an alternative payments company, spoke to a packed room about what exactly decoupled debit is and what it means for banks.

Once upon a time, the only thing green in banking was the cash. Now the financial industry has hopped aboard the Green Express – with mixed results. The newly-released 2008 IBT Market Pulse Survey has attempted to identify and measure the types and amounts of greenness in the banking sector. So how is that working out?

At a recent Web 2.0 panel discussion held in New York (courtesy of Celent), the concept of “rich user experience” dominated the discussion. Danny Peltz from Wells Fargo confessed that his bank’s rather cool Stagecoach Island website, complete with avatars, was begun on a bet. But is this the rich experience bank customers really want from their financial institution? A good-natured but pointed exchange followed from the panelists.

On the first Earth Day—April 22, 1970—I enthusiastically did my bit for the environmental cause by volunteering with some of my fellow high school students to run a car wash that was supposed to raise money and awareness. Of course it didn't occur to any of us that there was something inherently contradictory about trying to save the environment by washing cars. We felt optimistic and productive and kind of noble. We knew we had done something good, although none of us would have been very successful at explaining exactly what we had accomplished.

It looks like Data Treasury has claimed yet another victim in its patents game. It was announced recently that PNC Financial was the latest FI to settle with the notorious patent litigant over technology around electronic check imaging.

I recently attended the SWIFT Operations Forum Americas in New York. While there, I had the pleasure of hearing some very influential people from the financial services industry speak. Foremost among the FS heavy-hitters (to me, anyway) were the executives who spoke during the second keynote address. It wasn't a keynote in the traditional sense, but more like a panel. Attendees were invited to hear what Bank of America SVP Len Heckwolf, Thomas Halpin, SVP at HSBC, RBS's CIO Edward Glassman and Roy DeCicco, SVP, JPMorgan Chase, had to say about how the payments and treasury management space is changing.

What do soon-to-be-former Governor Eliot Spitzer of New York and Societe General’s rogue trader Jerome Kerviel have in common? It appears that an understanding of bank risk management systems and regulatory requirements was something that both men were able to exploit, but also something that proved to be their respective undoings.

Well, Apple finally did it. The iPhone is officially ready to be transformed into an enterprise application. On Thursday, the Mac maker announced it will offer full support for Microsoft's Exchange corporate server. This will enable Apple to bring push capabilities for e-mail, contacts, address lists, and other enterprise-grade features via a software update in June. This includes security features as well, like remote wipe, support for Cisco IPsec VPN, certificates, identities and WPA2/802.11x support.

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.

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.

Another Sibos has come and gone and with it, we hope, many lessons were learned. What I saw as the most prominent message at the show was the fact that corporates the world over want more control, more say over how their payments are processed and how they interact with their banks.

I noticed a recent editor's note from a colleague who works at one of BS&T's sister publications, InformationWeek, where he cites an article from yet another online publication, Slate. In my colleague's editorial, he poses a question to readers about whether they were impressed when they receive an email that says "Sent from my BlackBerry" at the bottom. He says that according to the Slate article that such a message shows the recipient "you're on the move but still chained to work." The InformationWeek editor, however, feels the messages are a complete waste of time, even bordering on free ads for BlackBerrys.

By Maria Bruno-Britz, Bank Systems & Technology

We haven’t heard too much this year about the flu pandemic. News of isolated outbreaks have been few and far between when compared with the feverish reporting during the earlier part of the year and 2006. However, the idea of a pandemic is still fresh in the minds of the financial services industry and the U.S. government as they gear up for a wide-scale test later this month called the FBIIC-FSSCC Pandemic Flu Exercise of 2007.

NOTE: This blog was written in conjunction with the 2007 Gartner Financial Services Technology Summit held in New York City from Aug. 27-29.

It was too bad that Michael Oxley, former U.S. congressman, co-author of the Sarbanes-Oxley Act and currently Vice Chairman of the NASDAQ and Advocate for Corporate Accountability, didn't take any questions after his keynote presentation Monday to kick off Gartner's Financial Services Technology Summit 2007, which wraps up today in New York City. If he had there probably would have been some interesting queries about the mushrooming subprime mortgage mess and how things could have gotten so bad, when Sarbanes-Oxley was intended to improve corporate governance.

By Maria Bruno-Britz, Bank Systems & Technology

Typically, when a person goes online and decides to join a virtual world like Second Life, it’s to escape the every day problems of the real world. What better way to get away from it all than to create a virtual persona and live vicariously through him or her? Well, a trip to Hawaii might also work, assuming you’ve got the cash! But I digress.

By Maria Bruno-Britz

Will the days of corporate IT’s imperious reign over all matters tech-related soon end? When it comes to the immediate needs of the end-users within a company, it will. In fact, according to Yankee Group, it’s already happening.

For a while now, the trend in banking is to push consumers to use electronic statements. Whether to “keep green” or to just save some money, e-statements are pretty commonplace these days. Consumers seem to have accepted them.

By Nancy Feig

According to a new Celent report, The Millennials, Financial Services, and the Web, the “Millennial” generation, born between 1982 and 2000, will represent the next mass affluent group and financial institutions will need new marketing approaches to reach them.

I'm putting this question to the readers of Bank Systems and Technology because based on feedback that I have seen, some of you have the answer, whereas I don't.

By Nancy Feig
Consumers don’t trust banks. That’s what I’m hearing. New immigrants don’t trust banks because of bank failures in their home countries. Little old ladies store wads of cash in their mattresses because memories of the Great Depression still haunt them. These consumers often fall into the so-called “unbanked” or “underbanked” category, those that are hesitant to bring their money into any formal financial institution.

By Maria Bruno-Britz

Unless you’ve been living under a rock for the past month, you were among the millions of people to hear about the launch of Apple’s iPhone. The handy little device is designed to serve all your on-the-go music playing, Web browsing and movie playing needs. Oh, and it’s a phone too, so you can actually make calls and you have your address book/contact functions thrown in there as well. I know there are other features, but this editorial can only be so long!

All too often, it seems I look at the news and see yet another agency in the federal government in trouble for some kind of lapse in data protection. Of course, the private sector is no less guilty, having faced its own share of security fiascos.

Fortunately, efforts are underway to implement a more universal approach to securing data, networks and all things IT.

From a competitive standpoint, banks should think about Wal-Mart as a kind of huge, unstoppable bobo doll. No matter how many times you push it back or put obstacles in its way, sooner or later it will bounce back with another plan. Somehow or other, Wal-Mart obviously has determined, it is going to be in the financial services business. If it isn't going to be allowed to enter banking through the launch an industrial loan corporation (ILC), it will figure out some other way to provide financial services to its existing and potential customers.

By Maria Bruno-Britz

On May 31, I was up in Beantown for the annual TowerGroup Financial Services Conference. The theme of this year’s event was globalization. A fitting subject in today’s world. Right from the start, the presentations weaved the main idea of our ever-shrinking world in ways that apply to the financial services space.

By Maria Bruno-Britz

Keeping the U.S. at the forefront of technology and innovation seems to be on the agendas of many committees and conferences these days. Earlier this month, the Technology Innovation and Manufacturing Stimulation Act of 2007 was passed by the U.S. House of Representatives. The legislation earmarks new funds for the National Institute of Standards & Technology (NIST), reauthorizing several of NIST’s competitiveness and innovation initiatives.

This drive to remain competitive is certainly not lost to the U.S. financial services sector either.

By Nancy Feig

By Maria Bruno-Britz

When asked in an interview what she saw as some of the most significant trends in security in the financial services space, Gartner’s Avivah Litan, VP, distinguished analyst, said that one of the most visible is that fraudsters such as phishers “are moving downstream to smaller banks. The attacks just don’t stop.” An increasing body of evidence shows that if you’re a small or midsize bank or credit union, or small or midsize business period, you are more likely to be in the sites of spammers and cyberfraudsters today than ever before.

By Maria Bruno-Britz

Security is on everyone’s mind these days. And how can’t it be, with all the media attention given to various data breaches and phishes over the past year? So it’s no surprise to see security technology vendors go on the offensive and introduce new solutions to the problem.

By Nancy Feig
There are no secrets at the branch of the future. As soon as customers step through your door, you’ll know they’re there. You’ll know what accounts they hold and how much is in them. You’ll know the depth of their pupils and the ridges of their fingertips.

Health Savings Accounts? Sounds innocuous enough. But what is it really?

Previously, the tax code provided preferential treatment for health insurance paid by an employer, as well as a portion of other medical expenses for those who itemize. Insurance companies get to invest these funds in return for paying for the medical care of the insured.

Now, this transfer from the employer to the insurer of tax-free funds is being divided into two separate streams. The first stream replicates the old model, compensating the insurance companies for providing high-deductible plans. The second stream goes from the employer directly to the employee, or more specifically, to the employee's Health Savings Account maintained either at a bank or specialty financial institution.

As a result, the investment decision for a portion of the total funds earmarked for healthcare spending has shifted from the insurance companies to the individual. This raises several interesting problems.

I've always wondered why the lawyers get all of the attention in Hollywood, when banking is obviously the more exciting industry. Finally, Hollywood has recognized what we've known all along, with the upcoming release of a new film for the Bank Systems & Technology set, a film with the Harrison Ford seal of approval.

From the "Firewall" Web site:

Computer security specialist Jack Stanfield (HARRISON FORD) works for the Seattle-based Landrock Pacific Bank. A trusted top-ranking executive, he has built his career and reputation on designing the most effective anti-theft computer systems in the industry, protecting the bank's financial holdings from the constant threat of increasingly sophisticated Internet hackers with his complex network of tracers, access codes and firewalls.
...

But there's a vulnerability in Jack's system that he has not accounted for: himself.
...

Leading a tight team of mercenary accomplices, Bill Cox [played by Paul Bettany] seizes control of the Stanfield house, making Beth and the kids terrified hostages in their own home and Jack his unwilling pawn in a scheme to steal $100 million from the Landrock Pacific Bank.

With every possible escape route shrewdly anticipated and blocked by Cox, every potential ally out of reach and the lives of his wife and children at stake, Jack is forced to find a breach in his own formidable security system to siphon funds into his captor's offshore account -- incriminating himself in the process and eradicating any electronic evidence that Cox ever existed.
...

Plausible? A matter of concern? How would you or your organization respond in this situation? Do you know how to handle a gun? Explosives? Fast cars? At the very least, do you think you could defeat your attorney in hand-to-hand combat? The moviegoing public wants to know.

It's celebration time -- today's the day of CMP's annual holiday party.

As such, upon arriving to the office this morning, each employee at CMP received a gift from our new CEO, Steve Weitzner. He's already made a real impact on the company as a communicative leader who knows what has to be done, as someone who's come up through the ranks.

Since I make it my business to know about all sorts of things before they happen, the gift was not exactly a surprise. But I certainly didn't expect two gifts: a small blue box with a "Celebrate CMP" sticker, plus a red-gift-wrapped book. Had someone in corporate headquarters upped the gift stakes from simply a tchotchke, to a tchotche and a book? What could it be? A desk calendar? An inspirational tome? A guide to the world's telephone exchanges? I had to know!

I ran my thumb along the top of the book and gently tore open the wrapper to reveal: "How to Be a Villain: Evil Laughs, Secret Lairs, Master Plans And More!" by Neil Zawacki (Chronicle Books, 2003).

"Wow," I thought. It would certainly be a groundbreaking approach for a company to encourage each employee to embrace his or her inner malevolence. If so, we'd have no problem scooping the competition and beating forecasts for 2006. Or maybe it was a test. Would we see through the irony, and strive to become better people as a result? Tempted with the powers of evil, would we become heroes?

As an HR strategy, it's pure brilliance.

But then I read the card. The book was from one of my co-workers. She stopped by to say, "I saw this book and thought of you."

The real gift was a squeeze toy and a gourmet cookie. No death traps, no doomsday devices, no demented clowns. Well, it's probably better that way.

From the Financial Insights report: "BAI RDS: R.I.P.?"

RDS has been in decline since the shows of 1999 and 2000. Institution attendance continues to spiral downward. Participants are by and large not technology decision makers. There are no 'hot' technologies to spike interest. In short, "No buzz—No bodies". Competing with RDS (and winning) are vendor client conferences that attract senior executives and have recently shown signs of becoming collaborative efforts of non-competitive, partner vendors.
- Christine Pratt, Financial Insights

However this business shakes out, I, for one, would miss the bazaar-like industry conference, which levels the metaphorical playing field for anyone with enough money left in the business plan to pay for a booth and a business card. At the same time, the decline of the bazaar happens to make Bank Systems & Technology that much more important as an intermediary between technology providers and industry decision-makers. So I'm not complaining all that loudly.

The Chicago Merc has announced that it will introduce housing price futures in April 2006. This may shift the speculative frenzy away from real-estate into a financial instrument that measures the level of speculative frenzy in real estate. A fine distinction, but one worth making.

Personally, I don't like the idea one bit. It's one thing to have a futures contract on a bushel of wheat or a company's stock. There's an underlying commodity in a liquid exchange, and it's both very difficult and very illegal to manipulate the price of that underlying commodity. For example, if I buy futures on wheat expecting the price to go up, I can't cause a drought to further my interests. Similarly, if I sell futures on a stock, the only way I could manipulate the price of the underlying stock would run afoul of SEC regulations.

But with housing-price futures, what's to stop someone from buying their way into City Hall in order to influence local politics in such a way as to introduce distortions — either positive or negative — to housing prices? There are just too many ways for unscrupulous operators to manipulate local home-price levels in ways that would be harmful to communities. For example, if I placed a huge, pure-play bet that home prices would fall beyond expectations, I'd have an incentive to throw money at local politicians who'd cut budgets for schools, police and fire. Or, if I wanted home prices to rise, I'd want to pay off the mayor to not make any decision that could possibly jeopardize the rise in local home prices, no matter the impact on residents.

That's not to say such unscrupulous behavior isn't already happening. It's just that making it so easy will bring a great deal more money to the table, which might make for a rocky future for those living in one of the 10 cities slated for coverage by housing-price futures.

- AP article.

- CME's Sept. 27th announcement

- CME's earlier announcement of a letter of intent with MACRO Securities Research and Fiserv/CSW.

Before becoming a chronicler of the banking industry, I worked as a database developer. I mostly worked with an obscure hierarchical database tool called Omnis, which had the claim to fame of being the first cross-platform (Mac/PC) database for the first GUI version of Windows. Subsequently, I left the programming game to get an MBA and then, to make a long story short, here I am.

Now that I'm also managing the Web sites for CMP Media's financial industry publications, I've found it necessary to bone up on my technical skills. Thus, I've been taking evening classes on how to develop web-based database systems using Oracle and ColdFusion.

So for the first time, I'm using a true relational database system instead of an outmoded and theoretically unsound hierarchical method of structuring data. I'm using SQL instead of procedural code, and with the help of Joe Celko's excellent book on SQL Programming Style, I now understand the difference between the two. What used to take me a really long time and a big bundle of code can now be done in a single statement.

Similarly, as an old-school thick-client developer, I have found the Web to be an exciting method of deploying applications relative to distributing code updates to each user. I know, this is stuff that was a big deal about 8 years ago. But it's one thing to read and write about it, and another to build something in a day that used to take a week.

Which leads me to the question of the day: Is your IT staff trapped in the ice? Take it from this cro-magnon developer, this is a fast-moving industry, and if you're not staying on top of the trends and constantly challenging yourself, you're going to be obsolete in no time.

Technology pundits have been debating about whether Apple Computer's video iPod, and by extension, video cell phones and other video-enabled mobile devices, will take off. I wouldn't bet against it, but not because I think that we'll watch repurposed television programs on these devices. Rather, it's because there's an enormous potential to create custom media clips designed expressly for the new delivery channel. While the focus has been on Disney/ABC programs and music video, it's business-related content that may eventually drive adoption.

When banking regulators expressed concern about borrowers getting deeper and deeper into credit card debt, the major card-issuing banks increased their minimum payment requirements from two percent to four percent of outstanding balances. But one bank's making a high-profile move in the other direction.

With the FFIEC's guidance stating that banks should implement two-factor authentication for Internet services that involve sensitive customer information or movement of funds, the status quo in information security in banking has been quickly overturned.

When the lookout on the Titanic warned the officers on the bridge that the infamous iceberg was looming ahead, first officer William McMaster Murdoch had the engines stopped and reversed. He then ordered the quartermaster to turn the ship hard to port. Bad move. The iceberg sliced through the first five of 16 transverse compartments of the hull. If the ship had hit the iceberg head on, the ship likely would have limped home, and we would have been spared the sight of Leonardo DiCaprio on the bow of the ship claiming to be the king of the world. Some king. The ship sank.

With Hurricane Katrina playing the role of the iceberg, the deck officers of the United States of America are relatively fortunate in that they have the time to figure out how best to distribute the damage.

I just flew back from Europe, and boy, are my arms tired - from shlepping my luggage from place to place. It was a three-week, seven-country tour of Europe where I freely mixed business and pleasure. (If you like your work, it's always a pleasure.)

Those whose lives were irrevocably ripped apart by Hurricane Katrina face numerous pressing issues, including but not limited to finding water, food and shelter, locating one's family members, and coping with the shock and grief stemming from the immense scale of death and displacement. There's also the matter of determining whether the loss of property is total or partial, and making the decision on whether to uproot from the Gulf Coast or plan for rebuilding.

The horrifying devastation wrought by Hurricane Katrina on the Gulf Coast calls for a unified and rapid response. From humanitarian assistance to financial forebearance, the need is great and the solutions are difficult. What's certain is that the lives, homes and businesses of the people across an entire region of the country will certainly need the support of the financial industry.

Several questions come to mind: How has the disaster affected you and your institution? How can banks help people to rebuild their lives from scratch? How will the region's banks shoulder the financial burden of what looks to be substantial amounts of uninsured losses and bankruptcies? What are the operational implications for banks, mortgage companies and credit card companies during the crisis and its aftermath?

Please share your thoughts with us.