Financial Services

[Jane B]

From today's Australian:
New year meeting

December 02, 2008

Article from: The Australian

Another RBA interest rate cut looks imminent

THE Reserve Bank board has surprised financial markets with larger than expected cuts to the official interest rate at each of its last two monthly meetings. In the multi-billion-dollar trade in interest rate futures, heavy losses were made by traders who misread the nods and winks from Reserve Bank officials in the preceding weeks. In their board minutes, the bank's directors justified their decisions to accelerate the pace of rate reduction, explaining that circumstances had changed between the bank's executive sending out board papers on the Thursday and meetings being held on the following Tuesday.

Ahead of today's meeting of the Reserve Bank's directors at its office in Collins Street, Melbourne, the markets were taking no chances, tipping an outsized rate cut of 1.25 per cent. Traders have justified this call with the observation that the board does not have another scheduled meeting until February 3. The board could still surprise financial markets today by announcing a decision to hold a meeting in early January. At a time of global turmoil, when the bank has not been able to hold a consistent position on interest rates over five days, it cannot afford to pull down the shutters for eight weeks. Financial markets march onwards while Australia togs up for the beach. There will be no shut-down in New York, London, Shanghai or Tokyo. The central banks everywhere else in the world will remain fully focused on responding to the most challenging set of circumstances in their post-war experience. There is precedent for directors to hold a January meeting. Former governor Bernie Fraser summoned two, in 1990 and in 1992, to respond to Australia's last recession, with the board resolving to cut rates on each occasion.

The Reserve Bank has struggled to get a firm grasp on the severity of the downturn because the economy is itself giving conflicting signals. Internationally, there have been some signs that official intervention in the financial system is stabilising money markets; however, there is rapidly growing concern about the severity of the downturn in China. In Australia, last week's capital investment and business borrowing figures were quite strong, in contrast to the uniformly bleak results of business surveys. Retail sales, consumer borrowing and housing approvals have shown consumers are worried, yet unemployment remains low. The official figures are inevitably out of date, making the bank's executive more dependent upon its liaison with business.
Although a case can be made for greater professional economist representation on the RBA board to challenge the bank's executive thinking, the six independent business directors should be earning their $55,170-a-year fees ensuring that timely high-level business intelligence on the health of the economy is brought to bear on the bank's decision making.

[admin]

by Phil Muncaster

Jan 20, 2009 10:37 AM

News that HSBC is introducing technology to screen all card transactions for potential fraud has been broadly welcomed by experts as a necessary step in the fight against rising card fraud.

According to reports, the bank is to use technology from business intelligence and analytics firm SAS to determine in real time whether specific customer transactions conform to pre-determined 'normal' usage patterns.

The most recent figures by UK payments association Apacs show that total card fraud losses increased by 14 per cent to £301.7m (A$650.8m) in the six months to June 2008, compared with the first half of 2007.

The number of skimmed or cloned cards increased by 22 per cent, while online banking fraud rose a massive 185 per cent to £21.4m (A$46.2m).

Neill Blundell, head of financial crime at international law firm Eversheds, argued that the increased checks would be irritating for customers but are "essential to bring the problem under control".

"The increasing technology being used by fraudsters includes sophisticated equipment to clone cards at ATM machines," he said. "Such cloning often goes undetected by the card user, and the banks' fraud departments are often the first to report a problem to the legitimate user."

Stuart Okin, former Microsoft chief security adviser and now UK managing director of security consultancy Comsec, said that the technology for fraud checking is still in its infancy, but is a necessary step for financial institutions to reduce the cost of card fraud.

"However, it doesn't matter what technologies you have in place. If you don't have a good investigative and forensics group the best tools won't help," he said.

Okin also warned that monitoring tools for insider fraud are equally, if not more, important than tools that check customer card activity.

Matthew Tyler, director of consultancy Evolution Security Systems, argued that, as fraud detection systems grow in complexity, the likelihood of false positives will increase.

"But in most cases these 'failed' transactions can be handled at the call centre level and will only enhance public perception of the 'security focus' of the banks," he added.

Gavin Bradbury, director of secure certifications company VeriSign, also welcomed the news. "This move reinforces the fact that financial institutions and online businesses should really be taking more action against criminals by putting additional security measures in place, especially as online fraud is rising," he said.
Copyright © 2008 vnunet.com

[admin]

Cross-posted here.

[admin]

Renai LeMay, ZDNet.com.au
24 March 2009 12:09 PM

St George today revealed it had undertaken a minor re-shuffle within its IT management ranks last year, following its acquisition by larger bank Westpac.

In November the bank announced its group executive, technology and operations Paul Newham, who had only been in the position since May, would shift to a new role within Westpac's hierarchy, as the bank's chief operating officer for products and operations.

What wasn't announced, however, was the creation of two new chief information officer roles, to be filled by newly promoted St George executives Phil Soutter (formerly general manager of IT production) and Dhiren Kulkarni (formerly general manager of application development).

The joint CIOs report directly to St George's new chief executive, Greg Bartlett, who was appointed in December, rather than Westpac's new chief information officer Bob McKinnon. A St George spokesperson this morning said the pair divided up their responsibilities along hardware/software lines, more or less in line with their previous posts.

Most of the spotlight since the Westpac acquisition has been on the bigger bank's technology integration plans, which will require significant input from former CommBank CIO McKinnon, as well as a number of senior staffers he has brought into the bank, such as former CBA colleague Sarv Girn, now Westpac's chief technology officer.

However, the bank's broader integration effort will be led by group executive Brad Cooper.

The St George news comes as the bank also this morning launched its latest fusillade in the ongoing internet banking war. St George customers will now be able to access key internet banking features such as account details, transfers and BPAY payments from their Apple iPhone or iPod Touch.

The service is to be made available over the coming months and comes on the heels of a similar announcement by CommBank yesterday.

[admin]

Liam Tung, ZDNet.com.au

19 March 2009 05:57 PM

National Australia Bank took the knife to its long-time chief information officer Michelle Tredenick this week, but was this a reflection of her perceived incompetence or simply a consequence of the manoeuvring at higher levels that seems endemic in Australia's incestuous banking IT community?

It's fair to say Tredenick was caught off guard by the Satyam financial scandal. NAB, like its fellow Melbourne bank, ANZ, was on the cusp of launching its second round of technology cost-cutting by draining its headcount offshore to Bangalore.

It's fair to say Tredenick was caught off guard by the Satyam financial scandal.
Unlike ANZ, however, NAB had also gone public on the overhaul of its core banking systems, which would see it dip a measly $30 million toe into the water in the first year of the project, but plunge $1 billion over five years.

Perhaps Tredenick should never have selected Satyam, but neither Qantas nor Telstra had any better idea than NAB about the Indian giant's hidden problems — the only difference was that NAB was depending on it for what could soon have been a critical cost-cutting initiative.

As for the core banking strategy, was it a poor move on her part? It's too early to say, but if so, then the bank's board should also be held responsible since these decisions are rarely, if ever, made by one person.

A more likely cause of Tredenick's ousting was former Bank of New Zealand CEO Cameron Clyne's ascension to the leadership of the bank. Clyne likely wanted a familiar loyalist by his side when it came to technology, no matter what. As CommBank's David Murray reflected in 2006 (soon after he left CommBank), "I learned that the IT system can make or break the bank".

There are at least two good examples of similar blood lettings occurring. NAB's was reminiscent of events soon after CommBank seconded its New Zealand subsidiary's CEO Ralph Norris to replace Murray in 2006; only back then, the knife slipped into the arterial vein of Westpac's current CIO Bob McKinnon.

Had Norris simply allowed McKinnon a dignified exit, which covered up the real reason for his departure, or was it merely the new CEO wanting to build a team that was loyal to him?

Norris punched a hole through the wall on his arrival with a review of CBA's $1.5 billion IT transformation plan, according to sources who worked there at the time. Six months later McKinnon was out and young-blood Michael Harte was in. Just as Tredenick's last words were "core banking", McKinnon's were "Which new bank?"

Whatever the truth, McKinnon has found that new bank in Westpac. And similar to Clyne's Bennett-transfusion, it's thanks to Westpac's CEO Gail Kelly that he was resurrected to banking sector prominence.

His appointment at Westpac was coupled with the hosing out of old blood, Diane Sias and former group CIO, Simon McNamara. St George's former head of technology, Peter Clare, meanwhile was brought in, as was Brad Cooper, in yet another Kiwi transfusion, which will see the former Westpac NZ CEO head up the $600 million integration strategy with St George, which he is expected to have come up with in a fortnight.

This week's resignation of former Westpac CTO David Backley sheds some light on the conflicting messages that arise when senior executives are concerned. Backley left of his own accord and was well-regarded, Westpac spokespeople said.

Sure, he left of his own accord, but after moving from a strategic role to general manager of application service delivery, is it any wonder why he had taken a self-imposed sabbatical to research the impact of technology on the work-life balance? As Backley had said at a recent conference regarding the matter of whether his new position was a demotion: "You can read into that whatever you like".

But there is cause, and then there is effect. It was well known McKinnon and Kelly worked together at pre-Norrisian CommBank, but what's not known widely is the profile of McKinnon's strengths across business, internal politicking, and his official remit, group technology.

Sources close to Westpac say McKinnon is a take-no-prisoners businessman, while others at CommBank during McKinnon's rein say his crown was propeller-less
Sources close to Westpac say McKinnon is a take-no-prisoners businessman, while others at CommBank during McKinnon's rein say his crown was propeller-less, which might explain Westpac recently hiring IT gun, Sarv Girn. And this is where the picture gets interesting.

Girn, one-time chief technology officer of CommBank, was said to have been a likely candidate for the top tech job there, according to sources. That was until — if this was in fact Girn's ambition — CommBank got its Harte transplant.

Since then Girn has served not as CommBank's CTO, as he was before Harte's arrival, but as its chief information security officer until at least early 2008. With Girn's move to Westpac, he surely takes some sensitive knowledge, having walked behind the curtain of CommBank's $580 million SAP core banking systems overhaul. Or did Harte keep Girn away from the crown jewels after McKinnon landed at Westpac?

Girn is described by some within banking IT as a "genius", a quick thinker who can wrap his head around a bank's systems faster than you can say the words "Which Bank?" and would surely be a good ally to McKinnon, having worked with him before.

NAB's blood transfusion, meanwhile, is still streaming across the Tasman as Adam Bennett clears his Bank of New Zealand desk to rejoin his former boss, Cameron Clyne. NAB appears to be in a holding pattern over the issue of Satyam, but like Tredenick, Bennett will need to lance the bank's rising technology bills and find an alternative to Satyam, to complete its second wave IT offshoring to Bangalore.

Which brings me to the mystery of ANZ. What is it doing? Why was Peter Dalton assasinated as the CIO? Did he do something wrong? Was he a weak leader? Does the bank even intend to replace him? All we have heard so far is that it wants to cut technology costs, and plans to use its Bangalore release valve to expel around 2,500 litres (500 IT staff) of blood by the end of the year.

And the merry-go-round continues.

[Steve Bennett]

Fran Foo | March 17, 2009

AUSTRALIAN banks could improve their competitive advantage by sharing internal data on client behaviour with their customers, a business intelligence expert says.

Teradata chief technology officer Stephen Brobst cited the example of Wells Fargo Bank in the US, which enabled customers to monitor their monthly expenditure online for various bank accounts, including credit card spending.

Wells Fargo customers who log into the bank's website can obtain a history of their expenses to gauge what they've been spending on, based on categories such as entertainment, groceries, transportation and utilities.

The information, gathered using powerful Teradata data analytics tools, was used only internally at Wells Fargo until about 1 1/2 years ago.

"Wells Fargo has taken it to the next level by giving millions of customers access to its data warehouse," Mr Brobst said.

Australia's big four banks, which are Teradata customers, were able to offer a similar service, he said.

It was a good time for banks to consider such features, especially in the current economic climate, as the granular information allowed customers to budget better.

Banks should extend the investment they had made in data warehousing tools and allow customers to benefit from that, he said, describing the process as "pervasive business intelligence".

"People built these data warehouses for the corporate environment but pervasive business intelligence takes it to the next level," he said during a Teradata conference in Sydney last week.

Most local banks offer historical information on previous billing statements but do not drill down extensively like Wells Fargo.

Another interesting use of data analytics is at a Teradata casino customer site in the US.

Mr Brobst said the casino used advanced data analytics to calculate the maximum threshold for each customer to prevent them from losing heavily and never coming back.

"For example, if you're married you have a lower threshold than if you're unmarried, single people who lose just have to explain things to themselves," he said.

Each time a customer starts a game, a casino-issued loyalty card keeps track of his or her threshold versus their playing habit.

If the customer approaches the maximum limit, a "luck ambassador" would be dispatched, he said.

"For example, if you've approached your maximum loss limit, say $2000, the casino wants you to stop losing, so the luck ambassador will get an alert and promptly approach the player and coax them off the machine with free movie tickets or dinner vouchers," he said.

The softly-softly approach ensured that the customer would walk away happy and not empty-handed, while ensuring customer retention for the casino, Mr Brobst said.

[Steve Bennett]

From East and Partners:

NAB axe staff and add some

(7 April 2009 – Australia) NAB has cut 213 staff from its workforce, including frontline branch staff, while also creating 60 back office roles and looking for more business bankers.

NAB is seeking to improve the efficiency of its branches, which number 750 bank-wide.

The change means that 113 jobs will be lost from branches. NAB has indicated that the majority of these will come from NSW.

In fact, 75 jobs in NSW branches will be lost after a pilot program undertaken by the bank trialled the movement of administrative tasks out of the branches and into the hands of back office staff working collectively offsite.

A NAB business banking spokesperson said that the changes that the bank is implementing in NSW are designed to improve the experience of customers by making bankers more available to them.

The spokesperson added that NAB will achieve this through a reallocation of how administration and processing activities are performed.

There will be 60 new jobs created in these back-office roles, although sacked staff will need to reapply for any new position.

Also, NAB announced that 95 management and support roles will also go, after nabCapital was restructured into the business banking operations of the bank.

NAB is still, however, looking for more staff in business banking. At present, the bank is looking for 155 new business bankers to bolster their team.

[Steve Bennett]

From the US publication Bank Systems and Technology. Surprise, surprise - it all rests on data integration!:

Banks -- and Their Core Systems -- in Survival Mode

Amid an economic downturn that is only beginning to show signs of a bottom, banks are reexamining their core systems, with a priority on phasing in capabilities to cope with new realities around risk, regulation and customer retention.

By Maria Bruno-Britz
April 07, 2009

Just when you thought it was safe to embark on a core systems replacement, along came the worst economic downturn in a generation.

Less than a year ago, BS&T reported that 2009 would finally be the year the industry would see movement in the U.S. behind core systems replacements. Then some of the premier financial institutions in the world went belly-up, the credit markets froze and the banking industry imploded.

TowerGroup's Bob Hunt, senior research director with the Needham, Mass.-based firm, cites at least two top U.S. banks whose plans to pursue core replacements this year have been detoured. "One was taken over, and the other is in crisis mode right now," he explains.

Stuck between the need to upgrade core systems in order to cope with a hyper-regulated, risk-averse environment and the reality of a severe recession, with few exceptions banks are looking to extend the capabilities of their legacy core systems.

"Banks are retrenching, and spending is tight now. There is tighter prioritization of what banks will spend on," acknowledges Shane Loper, COO of Gulfport, Miss.-based Han**** Bank ($7.2 billion in assets) and a BS&T 2008 Elite 8 Award winner, suggesting that complete core replacements aren't in the budget.

A data integration services executive at a large bank, who spoke on the condition of anonymity, confirms that banks are altering their spending plans around their cores. "Most know they have to do something to fix their cores," she says. "But now you have to look at how well you can manage risk and how fast. It comes back to the technology -- plans are being scaled back to first deal with the crisis, and banks are doing things on an as-needed basis."

And right now what is needed is stronger risk management, greater transparency and more-aggressive customer retention. As a result, banks are upgrading their core capabilities in these areas while making do with legacy functionality elsewhere.

Phasing In Core Functionality

According to Mike Barba, a manager with Devon, Pa.-based SMART Consulting, banks must approach core transformation cautiously, particularly in this business environment. He advises institutions to take a phased approach to refreshing their core systems, starting with one component, such as a risk management module, rather than attempting a complete rip and replace.

"Step back and look to accomplish a specific goal," Barba says. "The challenge for executives is being in crisis mode and surviving versus planning for the future. When you take a shortsighted approach, history tends to repeat itself."

Joan Kelly, group executive with Purchase, N.Y.-based MasterCard's global technology organization, oversaw the replacement of the credit giant's core payments systems over the course of four years starting in 1999. Noting that the only area of the conversion that required a "big bang" approach was the clearing system, she suggests that introducing new core functionality in stages reduced a lot of the implementation's risk.

"We had a phased-release strategy where we would release various aspects of the applications twice a year," Kelly recalls. But she stresses the importance of governance to project success. "Monitoring your delivery is important to break this down into executable pieces," she says.

Patti Reynolds, senior managing consultant with MasterCard Advisors, the professional services arm of MasterCard Worldwide, says she tells her bank clients that core replacement is no longer an all-or-nothing project. "When you talk about the infrastructure supporting core card systems, it is either viewed as an enabler or an inhibitor to the bank's growth and efficiency," she comments. "We're telling clients to look for places where they can decouple their systems and find alternative solutions that can be integrated with the core, so I think you'll be seeing a lot of work-arounds."

To support this kind of componentization, MasterCard built a service-oriented architecture (SOA) with the goal of creating a flexible global infrastructure capable of accommodating various payments channels over time, the firm's Kelly relates. As an added benefit, developers were able to reuse many services during its core conversion utilizing SOA and standardized processes, she reports.

Using an SOA is critical when taking the piecemeal route to upgrading core systems, according to Jim Dempster, an SVP with Milwaukee-based Metavante. "SOA leads to strong integration that connects diverse pieces of technology," he says.

Another approach that can help banks efficiently extend their core systems is the concept of software as a service. Although SMART's Barba believes SaaS is still rapidly evolving, he sees great potential in the model. "SaaS can help a bank in crisis mode by offering pieces of a solution that you use and pay for as needed," he explains.

Pilot programs, according to Don Russo, group VP, financial services global business unit, Oracle (Redwood Shores, Calif.), also are a good way for banks to kick-start core systems transformations while keeping implementation risk at a minimum. "This is part of the challenge of the financial crisis," he says. "I'm seeing a number of banks look at pilot projects because they realize they have to start something. These are projects to prove out new infrastructure that will then be rolled out across the entire enterprise."

The Customer Is at the Front of the Line

While a phased implementation of core technology can help ease the pain related to resources and risk, the success of a core transformation largely hinges on which systems a bank chooses to replace. And like the rest of financial services, many banks are placing the customer at the center of their strategy and reengineering systems with a customer-data perspective.

Given the present state of banking and the economy as a whole, as well as the inevitable rush of new regulation facing the industry, requirements around reporting and transparency will factor greatly into every bank's technology decisions. Many of the experts interviewed for this article believe that creating a better customer information system is critical for financial institutions to cope with the new compliance and customer service climate.

To that end Mahesh Makhija, associate VP of banking and capital markets with Bangalore-based Infosys, says the areas that will see the most investment likely will be around branch infrastructure and channel integration. "In this environment it's important to increase customer trust," he asserts. "So although there may be a little reprioritization around where banks are spending money, you'll see more of a focus on customer-facing systems."

TowerGroup's Hunt agrees, noting that the customer information file (CIF) is the one place where everything comes together. "There is so much information in the customer system," he says. "A new dynamic is in play that's driving banks to look at the customer information system as the piece of the core to replace."

Hunt says measures such as the Patriot Act and Know Your Customer guidelines have placed increased scrutiny on the CIF. "This is highlighting the structural problems with the old CIF systems," he explains. "But if you replace your customer system first, you can see the relationship, the risk. This is also a good way to move to a real-time environment. You have to look at what replacing the customer information management system gives the bank in terms of compliance, risk management and regulation."

Han**** Bank, which uses the core solution offered by Jacksonville, Fla.-based Fidelity National Information Services, understands the importance of focusing on the customer in the current business environment. According to Han****'s Loper, in addition to efficiency plays, the bank's technology investments will be aimed at strengthening customer service and boosting retention. "We'll look at projects to improve customer touch and tools that help us analyze how we're doing with the customers," he relates. "You have to make the case for immediate ROI today. That's why [Han****] will focus on projects that deliver a return very close to the expenditure."

Fostering Transparency With a Transactional View of Data

Metavante's Dempster suggests that core projects centered on gaining a total view of the customer are likely to provide the biggest bang for the buck. "These days banks need to demonstrate safety and soundness in an overwhelming way to their customers," he says. "Banks need [a total view of the customer] to do their risk assessment of customers and to gain the transparency that you just can't get from the point of view of one transaction. [The data] has to be integrated throughout the systems."

But banks don't always have the transactional view of their data required to achieve this transparency, Dempster continues. "The foundational technology is not about having a better DDA [demand deposit account] system," he says. "It's what you can wrap around the DDA system to supercharge it with relationship-based pricing, transaction capital, risk management and segmentation pricing."

Infosys' Makhija adds that as scrutiny intensifies around requirements such as the Unfair & Deceptive Acts or Practices (UDAP) rules, core upgrades that enable increased transparency into customer relationships will become even more critical. "That is why banks will need a unified view of the relationship at the branch level where they'll have full product information available," he says, noting that channel integration will play a major role in this area for the large banks. "You need audit trails too. This all adds up to transparency." For these reasons, Makhija continues, Infosys' bank clients are looking to embed appropriate regulatory processes into their cores.

Of course such transparency is rooted in data integration. "You need to integrate disparate systems so that it's transparent to the user where the data comes from, who owns it," says the data integration executive. "You don't need to write a lot of new code -- just use a standard delivery method, such as Web services," she recommends, adding that her bank used a solution from San Mateo, Calif.-based Composite Software for its data integration project. She says the response from end users to having more and higher-quality data at their fingertips has been very positive.

Oracle's Russo says he expects to see more spending on creating a "single-instance infrastructure" for all regulatory reporting. "You can't immediately replace the entire core infrastructure," he comments. "You want to create stand-alone data marts where you focus on having one instance of all the information and connect that with the core so you can measure the data." This, he notes, is where Oracle plans to invest.

Operating in Crisis Mode

While U.S. banks are investing in ways to extend their legacy cores, banks outside the United States are trending toward outright core replacement, according to David Hovenden, a partner in A.T. Kearney's Sydney office. "It's a tale of two cities in some regards," he says. "Outside the U.S. I'm seeing a lot of activity [around core replacements]."

Hovenden says the trend is especially evident in southeast Asia, where he has seen proposals from two major banks for core replacements, and Australia, where two of the big four banks are in the throes of core replacements. He points out that banks in those regions weren't slammed as hard by the subprime mortgage situation. While not at liberty to divulge any names, Hovenden says, "The programs have been reconfirmed post-crisis."

It's not that banks in the U.S. don't recognize the value of full core upgrades, Hovenden notes. Rather, the uncertainty around which banks will survive is creating a fear of commitment.

"Banks are looking at things more selectively, and that makes sense," Hovenden says. "There is going to be investment -- it's not a 'Do nothing' scenario. You have to do something, but with intent. Be smart about it."

The financial crisis has forced banks to reprioritize, adds TowerGroup's Hunt. "It has everything to do with risk and compliance and having more resources devoted to those things going forward," he says.

And for banks undergoing crisis-related mergers, or institutions that have accepted government bailout money, the pressure on their cores is even greater. "Acquisition integration is putting even more stress on existing cores," says Steve Reiter, a senior executive with Accenture's banking practice.

Adds Jim Adamczyk, global process architecture lead for Accenture, "The core systems are strained to begin with and now they're being pushed harder in the M&A integration."

While Han**** Bank did not accept any funds from the government's Troubled Assets Relief Program, or TARP, the bank's Loper notes that its systems still must cope with increased transparency requirements. "Not taking the TARP funds keeps us from feeling the related requirements attached to them. But we still have to deal with the credit crisis impacts through changes to lending regulations to Reg Z [Truth in Lending] and RESPA [Real Estate Settlement Procedures Act]," he states. "We're focusing on those changes to get our systems in shape to handle them. When you have new regulations raining down on you, you have to make some tough decisions: Do you focus on responding to regulatory changes, which may drive some processing to niche providers?"

Time for a Change? Evaluating Core Systems Replacement

Infosys' Makhija is reluctant to paint the industry with a broad brush with regard to how banks will proceed with core upgrades. He says banks are reacting differently to the crisis and that their approaches to their cores are affected by the lifecycle stage of their systems. "The larger banks were mostly affected by the crisis, but if they are already committed to a core project, they will probably press ahead because many of their problems stem from their core systems."

A.T. Kearney's Hovenden believes there still is a business case for core systems replacement, even during this economy. When he helps banks make such decisions, he says, it's important to build a quantifiable case and include factors such as complexity, delivery constraints and the economic stability of the current core platform.

"We project this out five years," Hovenden explains. "We measure what the cost would be to implement the new product changes and regulatory changes on the legacy platform against installing a new platform, and it's a 20 to 25 percent differential in cost. When you consider what goes into maintaining the old platform, you don't really get a big difference in the total spend over five years."

As often is the case with technology strategy, size matters in the core systems debate, and smaller banks have their own options in these trying times. Kenneth Innocenzi is the VP of operations and compliance with Hamden, Conn.-based Quinnipiac Bank & Trust ($31 million in assets), which opened its doors a little more than a year ago. Although the institution started with a clean technology slate, contracting for core processing services from COCC (Hartford, Conn.) on an ASP basis, Innocenzi says it's just smart business to reassess core systems capabilities in a rapidly changing business environment. This assessment, he adds, depends on where the bank is in the life cycle of its contract and should allow sufficient time for due diligence, notification to the current provider if terminating the service and an orderly conversion to the new provider.

Innocenzi points out, however, that for an institution of Quinnipiac's size, breaking the core replacement into pieces, as many experts recommend, wouldn't make sense since everything is completely integrated within one system. "But when you do convert, make sure the data integrity is maintained so no customer or corporate data is lost in the conversion," he stresses.

MasterCard's Kelly says banks must ask themselves how much they are willing to invest and at what pace. "Core replacement is all about your business, not the technology," she says, pointing out that these tough decisions still must be made, even in this dismal market. "It's important to be alive tomorrow, but there's no point if you're not alive a year from tomorrow," she says.

Big Blue Pushes Core Transformation
While banks' core systems have served them well, legacy technology simply can't handle the evolution to a customer-centric business model, claim IBM's Chae An, VP of the vendor's software group, and David Zimmerman, global solutions executive. In this IBM-sponsored video, see why Big Blue thinks core transformation is critical in the current economic environment.

Like this article? Sign up for Bank Systems & Technology's daily e-mail newsletter to get more news and analysis delivered right to your in-box.

[Steve Bennett]

Interesting note from Westpac's new COO "At a more tactical level, it’s about data-driven management – equipping the operational leaders who are close to our teams with the tools to run their businesses by fact. This will enable us to respond to the evolving needs of the business and be on the front foot when things change". Read on:

An Interview with Paul Newham, Chief Operating Officer, Product and Operations, Westpac

By Tala Jahangiri, Journalist, FST Media

Jahangiri: As Westpac’s Chief Operating Officer, Product and Operations, what does your role predominantly entail; and what will be your three top focus areas for the year ahead?

Newham: I’m responsible for supporting the bank’s consumer and business lending, transactional and collections processes, as well as functions such as sourcing, property and security for the Westpac Group. The next three-to-five years in operations are strategically important to the group. We’ve set out to transform the business, and deliver changes resulting from merger between St.George and Westpac.

The next 12 months is about laying the foundations of our integrated operating model – how we bring together the best of both worlds to accelerate the momentum our organisations have achieved to date. This will be overlayed with a defined technology roadmap, consistent data management disciplines across all our teams and a premises strategy which maximises the Group’s property footprint as a result of the merger.

Jahangiri: You are one of eleven new executives to join Westpac, charged with leading the merger integration. Are you able to disclose what stage the current integration program is at for Operations?

Newham: The integration of our operations businesses will take time and investment and it’s something we need to get right. We won’t be rushing into any large-scale integration without the appropriate level of business assessment. Our focus is on understanding how our business model will support the multi-brand strategy of the Group, whilst delivering the efficiencies and scalability expected by bringing these businesses together. We’ve appointed single business leaders to head up our core operational areas for both brands and they are now identifying synergies between teams.

Jahangiri: To what extent is your involvement in IT-related discussions and decision making?

Newham: My role is to ensure the operations business gets the technology required to achieve its business objectives. While I’m not the CIO, I do see myself accountable for holistic service delivery, which includes IT. We also have CIO representation on my Leadership Team to ensure the technology needs of operations are considered in IT planning and decision making.

Jahangiri: One of Westpac’s main priorities is to improve customer experience. Can you specify areas and techniques that the Operations team will focus on to deliver its enhanced customer service initiatives?

Newham: At the divisional level, we’ve brought the product and operations functions together, led by one Group Executive for both brands. The rationale being that this will enable us to ensure product design takes operational fulfilment into consideration – creating easy-to-understand products backed by simple operational processes. At the Operations Team level, our focus is on driving operational excellence. That is, nimbleness, efficiency and the right cost balance which doesn’t compromise service, but enables growth and investment in our frontline businesses – those who are interacting with our customers everyday.

We’ll drive this in a number of ways. Firstly, the progressive integration of our operational teams will deliver scalability, efficiency and process outcomes to make it easier for our frontline colleagues to deliver for our customers. At a more tactical level, it’s about data-driven management – equipping the operational leaders who are close to our teams with the tools to run their businesses by fact. This will enable us to respond to the evolving needs of the business and be on the front foot when things change, particularly as we operate in an economic downturn.

Jahangiri: Your immediate past position was CIO of St George. Today you join a unique yet growing league of CIOs whom have made the successful transition into more business-centric C-level positions. What thus far have you found to be the most significant parallels between the roles of CIO and COO?

Newham: The parallels between a CIO and COO role are significant, largely because both roles are customer-outcome focussed ie delivering visible uplifts and enabling differentiation. Both functions have the fundamental goal of balancing investment against cost and continuous improvement.

Jahangiri: Do you think it’s still possible to effectively implement leading-edge innovation whilst adhering to the current pressures of cost-reduction directives?

Newham: Yes, provided the approach recognises that service, process and cost are not mutually exclusive. Good service is driven by good process and will ultimately drive the right cost outcome. Above all, we need to ensure we’re focussing on the right customer outcome upfront.

We often overlook a fundamental source of innovation, which is the knowledge stored in our people’s heads. They are close to the systems and processes and are best positioned to pick up nuances which affect our service delivery. We recently rolled out an idea generation tool for our people to submit and discuss what they think will enhance the way we do business – not only for our customers, but in the way we interact with each other. It’s an empowering proposition, and we’ve already implemented improvements based on what our people are telling us. The key is to never underestimate the value of listening to people’s ideas.

Jahangiri: Who would you consider to be (or have been) your professional mentor?

Newham: I’d have to say it’s the people I’ve chosen to surround myself with throughout my career. Mentors aren’t necessarily people more senior, or with a high profile. Professional growth is equally about opening yourself to the capabilities your own team bring to the table.

Jahangiri: Every leader, particularly at your level, has a legacy they wish to be remembered for. What is yours?

Newham: Every leader’s legacy should be the team they leave. The fundamental leadership objective is to grow the people who run the business. When I reflect on the capability of my team, I’d like to think that Operations is acknowledged as the strategic centre of the organisation – not the cost centre, but the profit enabler.

[Steve Bennett]

Westpac to use St George apps

Australian IT | Mahesh Sharma and Mitchell Bingemann | May 07, 2009

WESTPAC chief Gail Kelly has flagged a technology-supplier squeeze as part of the $12 billion acquisition of St George Bank.

As part of the merger of technology operations St George’s teller, human resource and finance systems will be rolled out across Westpac, Mrs Kelly said.

Westpac has also finalised a new technology operating model, it said in its financial report for the six months to March.

Westpac has already spent $183 million on the integration - out of a total expected merger cost of $700 million - which includes $30 million to integrate technology functions, according to the report.
Mrs Kelly said Westpac has started to negotiate and work with suppliers as part of the integration, but did not provide specific details.

However, she said Westpac will adopt St George’s ‘Spider’ teller system, HR Express human resource software and the ‘Firefly’ customer relationship management platform.

“We are negotiating and working with suppliers at the moment,” she told reporters during a conference call.

“Westpac sorely needs a new teller system so if we didn’t do that we would have to go out and get a new teller system for Westpac.

“St George has a teller-system called Spider. We’ve had a really good look at it, in fact (Westpac retail and business banking head) Peter Hanlon and his team have looked at it and said we would love to have that within Westpac retail and business banking world.

“It’s a definite opportunity. We are working up the business case to make sure it makes sense.”

Mrs Kelly said St George’s finance and treasury system will be migrated onto Westpac’s backbone.

Westpac will delay any work on core banking systems until after the customer-facing functions have been integrated, she said.

She also flagged the development of a new internet banking system for both banks.

“An area that we are likely to move together into something that is new would be in internet banking,” Mrs Kelly said.

“On priority it will be the customer facing systems of the bank - teller, CRM, internet, payments - those are going to be the priorities before we move onto the core systems.”

Westpac detailed the early progress on the technology integration, including secure email connectivity between St George and Westpac, virtual desktops to enable St George employees to access Westpac systems and vice versa and a review of all third-party contracts.

The technology strategy for the merged group has also been finalised, Westpac wrote in the report, but the bank did not reveal details.

The integration has delivered $22 million in savings from procurement, sourcing and early technology synergies, it said.

However, 769 employees have been axed from the product and operations, technology and group business units due to streamlining management structures and lower resource requirements as projects have been completed.

The purchased technology services for the half had grown to $117 million, which was up from $103 million compared with the six months to September 2008.