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The Innovators
The only source of profit, the only reason to invest in companies in the future is their ability to innovate and their ability to differentiate," Jeffrey Immelt, CEO of General Electric, once observed. That thinking is a welcome reminder for the banking industry, which finds itself grappling with an inverted yield curve, commoditized products and customers who expect more from their financial relationships. By John Adams, Glen Fest, and Holly Sraeel
The good news? Innovation is occurring.
In its annual ranking, BTN profiles 25 innovators whose contributions to banking are changing the rules of the game. Here's the Top 5:
1. Bank of America - Security Team:
William Fox, senior compliance executive for financial crimes; Chris Swecker, head of corporate security; Donna Bucella, business continuity executive
Time and time again, banks have been warned that when it comes to securing the enterprise, regulators and other government agents are watching to make sure the job gets done correctly. Bank of America, though, has gone straight to the source, recruiting a group of former government insiders to give it the best security guidance possible for its complex business.
In the past year, the bank has appointed three high-level executives who are charged with oversight of the bank's operations. William Fox, BofA's senior compliance executive for financial crimes, previously worked in the Financial Crimes Enforcement Network (FinCEN), where he had been director since 2003; Donna Bucella, BofA's business continuity executive, did a stint as head of the U.S Terrorist Screening Center for the FBI's Department of Homeland Security; and Chris Swecker, head of corporate security for the bank, is a former director at the FBI.
It's no surprise that security is front and center for the Charlotte-based bank. Public perception of how safe an institution is can be just as important as the security systems, policies and procedures put in place. For Bank of America, what better way to protect itself than by employing the very government officials once responsible for safeguarding against terrorism and financial crimes? (JA)
2. Goldman Sachs - Liquid Machines
Goldman Sachs is a bold proponent of what's called enterprise rights management (ERM), an approach to information security that could open up a new frontier in shielding sensitive data. Just how bold? It's put a little skin in the game.
The global investment banking giant is not only the marquee customer for Liquid Machines, but it's also a financial backer, joining the likes of Atlas Venture, Masthead Ventures and Draper Fisher Jurveston as the lead investor in a recent $7.5 million round of financing.
That puts Goldman on the ground floor of ERM, which marries security with the data itself, particularly key intellectual property and customer information. Access protection and usage control enforcement travel with electronic documents from machine to machine, in and outside the bank. Far beyond firewalls and gateway filters, which don't provide granular enforcement of acceptable use policy that define what users can and cannot do with data, ERM is the wave of the future. Phil Venables, managing director and chief information risk officer for Goldman, calls ERM a "significant enabler" of a protection strategy that allows for protection to reside with the information itself, not just the containers of the information. (JA)
3. IBM - Industry Models
Extending its end-to-end risk and business analytics model into the institutional investment arena, IBM launched its Financial Markets Industry Models that present data analytics, service and process templates to cover a global firm's risk assessments, all the way from the trade confirmation to eventual settlement.
The FMI models provide a real-time assessment of market, operational and credit risks; the models also audit high-risk transactions to cover exposure to Basel II capital requirements, Sarbanes-Oxley governance, and even the European Union's "MiFID" legislation, which, among other things, covers capital requirements and monitors commodity and credit derivatives. These models are similar to ones used by seven of the world's top 10 banks and insurance companies for straight-through processing, optimized workflow and business rules management. The difference? More institutions can take advantage of them. The models also help businesses delving into service-oriented architecture environments, say IBM officials, because they have pre-built business processes and service definitions. (GF)
4. ING Direct - Behavioral Marketing
The closest direct banks normally come to knowing a customer is an IP address. But with more clients coming on board with more available funds in high-yield savings accounts, ING Direct has adopted what it calls "Smart Sell" techniques to target users with ads specific to their interests and derived from multiple-channel interaction. So how does ING get to know customers they only observe through the Web or phone? Smart Sell uses a cross-channel, behavioral marketing solution based on a module from Epiphany that personalizes content on the Web site-links, banner ads, etc. In one example, a prospect calling ING's call center about a mortgage will begin to see mortgage ads the next time he or she logs in. It not only increases revenue-ING Direct head of marketing, John Owens, says there has been a "300-plus" percent increase in offer acceptance-but also keeps the bank from nagging customers with non-relevant offers. Although some banks have adopted call center CRM tools that help give a live operator some insight into a customer's behavior, Jupiter Research analyst Asaf Buchner thinks ING's solution is its unique flavor. "For traditional banking institutions, internal silos and the presence of different databases and legacy systems often inhibit these types of initiatives," he says. (GF)
5. Pay By Touch - Online PIN Debit
Brick-and-mortar stores have about a 30 percent reason to encourage customer use of PIN debit instead of signature debit at the cash register.
Online Merchants don't even have that option as signature debit is a physical impossibility, and online PIN debit has not been available. However, with the launch earlier this year of ATM Direct, a newly acquired subsidiary of biometrics firm Pay By Touch, online merchants may finally get their chance to get away from interchange fees.
ATM Direct went live with the first ever online, PIN-secured payments system last June when it announced agreements both with a small retailer (J. Paul Co.) and the ACCEL/Exchange EFT network. It would be hard for online merchants to ignore the savings PIN Debit could afford them, as they usually pay more than bricks and mortar stores in the first place, thus making online PIN Debit even more attractive. Online merchants can save about 40% on Interchange Rates, which equivocates to millions of dollars in savings for large online retailers like Amazon or Overstock.com
On the other side of the equation, online shoppers averse to handing out credit-card numbers online can install the ATM Direct software on their PCs, and are prompted to enter PINs into an on-screen keypad. The software overcomes the longstanding problem with online PIN debit, which normally requires third-party hardware systems for security reasons.
ATM Direct SVP and general manager Robert Ziegler estimates that ACH-enabled technologies could grab 50 percent of online payments market share.
The firm plans to pursue new opportunities in mobile-based PIN debit offerings in 2007.
The only source of profit, the only reason to invest in companies in the future is their ability to innovate and their ability to differentiate," Jeffrey Immelt, CEO of General Electric, once observed. That thinking is a welcome reminder for the banking industry, which finds itself grappling with an inverted yield curve, commoditized products and customers who expect more from their financial relationships. By John Adams, Glen Fest, and Holly Sraeel
The good news? Innovation is occurring.
In its annual ranking, BTN profiles 25 innovators whose contributions to banking are changing the rules of the game. Here's the Top 5:
1. Bank of America - Security Team:
William Fox, senior compliance executive for financial crimes; Chris Swecker, head of corporate security; Donna Bucella, business continuity executiveTime and time again, banks have been warned that when it comes to securing the enterprise, regulators and other government agents are watching to make sure the job gets done correctly. Bank of America, though, has gone straight to the source, recruiting a group of former government insiders to give it the best security guidance possible for its complex business.
In the past year, the bank has appointed three high-level executives who are charged with oversight of the bank's operations. William Fox, BofA's senior compliance executive for financial crimes, previously worked in the Financial Crimes Enforcement Network (FinCEN), where he had been director since 2003; Donna Bucella, BofA's business continuity executive, did a stint as head of the U.S Terrorist Screening Center for the FBI's Department of Homeland Security; and Chris Swecker, head of corporate security for the bank, is a former director at the FBI.
It's no surprise that security is front and center for the Charlotte-based bank. Public perception of how safe an institution is can be just as important as the security systems, policies and procedures put in place. For Bank of America, what better way to protect itself than by employing the very government officials once responsible for safeguarding against terrorism and financial crimes? (JA)
2. Goldman Sachs - Liquid Machines
Goldman Sachs is a bold proponent of what's called enterprise rights management (ERM), an approach to information security that could open up a new frontier in shielding sensitive data. Just how bold? It's put a little skin in the game.The global investment banking giant is not only the marquee customer for Liquid Machines, but it's also a financial backer, joining the likes of Atlas Venture, Masthead Ventures and Draper Fisher Jurveston as the lead investor in a recent $7.5 million round of financing.
That puts Goldman on the ground floor of ERM, which marries security with the data itself, particularly key intellectual property and customer information. Access protection and usage control enforcement travel with electronic documents from machine to machine, in and outside the bank. Far beyond firewalls and gateway filters, which don't provide granular enforcement of acceptable use policy that define what users can and cannot do with data, ERM is the wave of the future. Phil Venables, managing director and chief information risk officer for Goldman, calls ERM a "significant enabler" of a protection strategy that allows for protection to reside with the information itself, not just the containers of the information. (JA)
3. IBM - Industry Models
Extending its end-to-end risk and business analytics model into the institutional investment arena, IBM launched its Financial Markets Industry Models that present data analytics, service and process templates to cover a global firm's risk assessments, all the way from the trade confirmation to eventual settlement.The FMI models provide a real-time assessment of market, operational and credit risks; the models also audit high-risk transactions to cover exposure to Basel II capital requirements, Sarbanes-Oxley governance, and even the European Union's "MiFID" legislation, which, among other things, covers capital requirements and monitors commodity and credit derivatives. These models are similar to ones used by seven of the world's top 10 banks and insurance companies for straight-through processing, optimized workflow and business rules management. The difference? More institutions can take advantage of them. The models also help businesses delving into service-oriented architecture environments, say IBM officials, because they have pre-built business processes and service definitions. (GF)
4. ING Direct - Behavioral Marketing
The closest direct banks normally come to knowing a customer is an IP address. But with more clients coming on board with more available funds in high-yield savings accounts, ING Direct has adopted what it calls "Smart Sell" techniques to target users with ads specific to their interests and derived from multiple-channel interaction. So how does ING get to know customers they only observe through the Web or phone? Smart Sell uses a cross-channel, behavioral marketing solution based on a module from Epiphany that personalizes content on the Web site-links, banner ads, etc. In one example, a prospect calling ING's call center about a mortgage will begin to see mortgage ads the next time he or she logs in. It not only increases revenue-ING Direct head of marketing, John Owens, says there has been a "300-plus" percent increase in offer acceptance-but also keeps the bank from nagging customers with non-relevant offers. Although some banks have adopted call center CRM tools that help give a live operator some insight into a customer's behavior, Jupiter Research analyst Asaf Buchner thinks ING's solution is its unique flavor. "For traditional banking institutions, internal silos and the presence of different databases and legacy systems often inhibit these types of initiatives," he says. (GF)5. Pay By Touch - Online PIN Debit
Brick-and-mortar stores have about a 30 percent reason to encourage customer use of PIN debit instead of signature debit at the cash register.Online Merchants don't even have that option as signature debit is a physical impossibility, and online PIN debit has not been available. However, with the launch earlier this year of ATM Direct, a newly acquired subsidiary of biometrics firm Pay By Touch, online merchants may finally get their chance to get away from interchange fees.
ATM Direct went live with the first ever online, PIN-secured payments system last June when it announced agreements both with a small retailer (J. Paul Co.) and the ACCEL/Exchange EFT network. It would be hard for online merchants to ignore the savings PIN Debit could afford them, as they usually pay more than bricks and mortar stores in the first place, thus making online PIN Debit even more attractive. Online merchants can save about 40% on Interchange Rates, which equivocates to millions of dollars in savings for large online retailers like Amazon or Overstock.com
On the other side of the equation, online shoppers averse to handing out credit-card numbers online can install the ATM Direct software on their PCs, and are prompted to enter PINs into an on-screen keypad. The software overcomes the longstanding problem with online PIN debit, which normally requires third-party hardware systems for security reasons.
ATM Direct SVP and general manager Robert Ziegler estimates that ACH-enabled technologies could grab 50 percent of online payments market share.
The firm plans to pursue new opportunities in mobile-based PIN debit offerings in 2007.
