Information Weekly: New technologies open up the future of banking

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Information Weekly: New technologies open up the future of banking [Copy link]

[Abstract] Contactless payment cards using radio frequency identification (RFID) technology attracted widespread attention in 2005. The promotion of these bank cards is to allow consumers to easily complete small transactions in a non-cash manner.

　　New technologies will help banks strengthen security, improve customer service levels and improve business processes.

　　For new technologies, new products and new applications, the banking industry is the most anticipated field. It is like actors who are eager to participate in a blockbuster movie. As long as they can play a few scenes, they will be satisfied. Although many people have become passers-by, there are still some future stars waiting for the arrival of the mentor.

　　Just like these future stars, many technologies are also waiting for the banking industry to recognize them. Among the high-tech products developed for banks, some future star applications are often overlooked. These applications are also called "disruptive technologies." Clayton Christiansen, a partner of consulting firm Innosight, believes that disruptive technologies are often reflected in new products, new services and new business models: at the beginning, they are always positioned at a smaller, non-profit customer base, but eventually they will grow and expand until they occupy the entire market.

　　Change is never easy for bankers. Steve Wunker, partner at Innosight, said: "Banks are always early to new technologies and late to adopt them." Regardless, the banking industry should be praised for leading the technology trend, Wunker added. "Historically, the banking industry has produced many disruptive technologies, such as payment systems, ATMs and Web applications," he said. "However, we have not seen which disruptive technology the banking industry is pushing. They are more like disruptive business models."

　　What will these transformative technologies look like in 2006 and even in the coming years? Experts from various fields expressed their views on what are the disruptive technologies in the banking industry in Bank Systems & Technology, a sister publication of InformationWeek.

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Contactless payment cards　　using radio frequency identification (RFID) technology attracted widespread attention in 2005. These cards were introduced to allow consumers to easily complete small transactions in a non-cash manner. So, will these cards replace the ATM network ?

　　"Contactless payment cards can replace cash and increase transaction speed," said Jim van Dyke, chief analyst at Javelin Strategy & Research. Of course, the ATM business may be affected to a certain extent, but it is time for the ATM model to change, Dyke added.

　　Nina Owens, head of payments strategy and global solutions at MasterCard International, added that contactless payment cards could pose a threat to the ATM "if you think of it as a cash dispenser." "But we need to think of ATMs as more than just that, but as a way to provide value-added services." In fact, contactless payment cards could even increase ATM usage because they offer consumers more convenience, Owens added.

　　Paul Race, director of innovation marketing at NCR, believes that contactless payment cards present some new opportunities for banks. This new bank card is "one of several disruptive technologies that can change consumer behavior." Through the use of contactless payment cards, ATMs can also provide more "simplified technology" for cash transactions. Furthermore, banks can also replace the functions of these cards with RFID-enabled mobile phones to reduce the use of bank cards.

　　Payroll cards are another type of bank card that can replace the more expensive payroll checks. Cynthia von Hollen, head of the banking industry at SAP, said that although banks have not officially promoted the use of payroll cards, this business has indeed been around for some time. Although the promotion of payroll cards will bring potential disintermediation risks, that is, users will find that they no longer need to maintain a financial relationship with banks and will directly switch to other financial fields, industry insiders still insist that the promotion of payroll cards will bring great growth opportunities to banks.

　　Katy Jacob, senior analyst at the Center for Financial Services Innovation, believes that some large commercial banks in the United States have entered the payroll card market several years ago. They know that the payroll card business is a very valuable value-added service for commercial customers.

　　However, in Jacob's view, a good salary card project can bring more benefits. Because some employees did not have bank accounts, the issuance of salary cards allows banks to see opportunities to enter this market segment. Jacob joked: "Without financial institutions, where would these cards come from?" The introduction of prepaid cards has changed the way banks view their customers. They can enter new markets in this way and provide their customers with new products with higher profits in the future.

　　Online Learning

　　Since it is much cheaper to organize webcast courses than to organize on-site teaching of dozens of people, online learning has long been considered a way for companies to save money. It not only saves costs, but also has many other benefits. Tom Kraack, managing partner of teaching and human practice of Accenture Financial Services Group, believes that "online learning will have a great impact on the way banks and employees work, the way products are released, and the way new technologies are enabled."

　　For banks, online learning has many benefits. First, banks need to provide services to highly dispersed employees. Second, online learning can develop more standardized training processes, so through this method, employees can also be trained to better comply with regulations. Third, online learning can support the globalization of companies. In addition, the results of online learning can be measured by more standards. It is for these reasons that the scope of online learning adopted by banks is showing a trend of spreading like wildfire.

　　"There is a product that combines a variety of technologies called Agent Performance Optimization that can be used to monitor learner performance and adjust goals in advance based on actual results," said George Tubin, senior analyst at Tower Group. "With these new tools, you can track everyone's progress and evaluate their performance. This makes it much easier to evaluate the effectiveness of online learning."

　　More than just phishing attacks

　　In the past two years, the banking industry has shifted its security focus to phishing attacks, but the increase in the number of consumers using email has provided phishing attackers with almost countless targets. Brad Johnson, vice president of security consulting firm SystemExperts, said: "The problem is that phishing attacks are ever-changing, so it is difficult for users to learn useful experience from past encounters."

　　Javelin's Dyke believes the banking industry has not done enough to protect itself against phishing attacks, which have become widespread. However, "the actual cost is low, $337 million a year in the U.S.," Dyke added. By comparison, the cost of all fraud is $52.6 billion. "We have to take this seriously," Dyke said. "But we also know that just because phishing attacks are common doesn't mean they're going to be successful."

　　Dyke stressed that other forms of fraud are more serious than phishing attacks. He believes: "In order to fight against traditional fraud, banks must establish a real partnership with customers." However, this new partnership may completely change the existing relationship between banks and customers. "50% of identity fraud is first discovered by customers, and the bank's fraud prevention experts have proprietary information that customers do not have. There is actually a mutual dependence between the two. But banks do not take this as an important matter."

　　At present, in addition to some traditional forms of fraud, some new threats have emerged. For example, the increase in enterprise deployment of service-oriented architecture (SOA) has put the company's chief information officer (CIO) in an awkward position.

　　Richard Mackey Jr., head of SystemExperts, believes that SOA architecture is completely different from the closed architecture of the past. The inherent feature of SOA is that applications maintain an open relationship, but the closed architecture strictly stipulates the communication scope and usage rights of users. Therefore, the increase in the application of SOA architecture means that the phenomenon of network attacks within enterprises will also show a corresponding upward trend.

　　Of course, when it comes to security, you can't get around biometrics. But there's still some debate in the industry about whether biometric systems are really effective. Javelin's Dyke isn't too interested. Dyke believes that while biometrics may have a role in identity verification, it "is not the killer app in identity verification."

　　Jon Gossels, president of SystemExperts, believes that the technology will only be accepted by users when standardized readers are integrated into common office or home devices such as keyboards. Even then, however, a new problem will arise: How can biometric data be stored securely?

　　In recent years, ATM suppliers NCR and Diebold have also entered the field of biometric recognition technology. However, despite the success of ATMs with biometric recognition functions in Latin America, the two companies have not been able to win a large bank customer. NCR's Reiss believes that this is related to the social acceptance of new technologies. "Emerging markets are indeed very interested in biometric recognition technology." NCR Chief Technology Officer (CTO) Mark Grossi said, "However, banks in the United States and Europe still have a lot of old equipment in use. But at the entrance to the vault of some banks, biometric recognition applications have been adopted."

　　Biometrics are valuable for improving security, but not everyone agrees that they can transform the entire banking industry. "'Transformation' is probably too strong a word," said Jim Block, global director of advanced technology at Diebold. "This technology will not revolutionize banks, but it will bring banks and customers a new level of comfort in transactions."

　　CRM Returns

　　Many banks were crazy about customer relationship management (CRM) technology during the first wave of technology craze. Today, they have a deep understanding of this technology, which helps banks to have a comprehensive understanding of customers in the long term.

　　Alex Berson, director and head of customer identity management practice at BearingPoint, said that customer data integration (CDI) allows banks to understand old customers better than ever before. He said: "CDI is the next stage of integrating all customer information (including all related information about the customer). This includes not only data from within the bank, but also public demographic data from third parties. Berson said that banks are also very aware of the privacy issues involved in operating such matters. However, it is an inevitable trend for financial institutions to move in this direction.

　　Once the customer data is collected, banks can offer cross-selling services to customers. However, there are more considerations to do this job well. Mike Blum, president of the financial services division of Amdocs, a provider of customer management products and services, said that the next logical step in the customer relationship building process is to offer users bundled sales of products in the form of discounts. Banks should actively implement such a retail model because it will profoundly change the face of banks. "Banks will eventually figure out that they are actually a special type of retailer and they have to sell more products to customers." Blum said, "Banks not only need to do dynamic pricing, but also provide customers with a range of products, rather than just individual products. When banks do this, they can establish long-term relationships with customers. This is the so-called 'sticky strategy'."

　　Mobile

　　Banks are even behind insurance in adopting mobile technology, said Tony Kleckner, director and head of financial services practice at communications technology provider Avaya. "As the insurance industry faces pressure to cut costs, it is more willing to try radical ways to achieve its goals," he said.

　　Jim Bright, market manager for the U.S. financial services industry at Cisco Systems, believes that banks are actually very interested in the application of mobile technology, but unfortunately, they have adopted a wait-and-see attitude due to some security concerns.

　　As network connection speeds and signal coverage improve, the possibility of banks achieving flexible and mobile working is increasing in 2007. Smart banks will improve work efficiency and increase customer satisfaction by implementing successful wireless strategies.

　　"Mobility not only improves work efficiency, but also improves customer service levels to a certain extent," Bright said. "Branch staff can let customers in line use mobile tablets to connect to self-service information kiosks. It can even allow users to communicate directly with product experts remotely."

　　This customer-first philosophy is the ultimate goal of service, said Avaya's Kleckner. "Your technology infrastructure should be such that no matter where your staff is, they can quickly connect with customers and solve their problems even if they don't go to the customer's location."

　　Nano Advantages

　　Jack Uldrich, president of consulting firm Nanoveritas Group, said the banking industry should also consider nanotechnology. Nanotechnology will also play a role in the financial industry, such as implanting nanomaterials into circulating currency to prevent counterfeiting and help verify the authenticity of currency. "You can develop very small materials that can identify real currency and many other anti-counterfeiting features." Uldrich said.

　　However, nanotechnology is more practical for the banking industry because it can be used to produce smaller and more powerful computing and storage devices. Uldrich said that the computing field will definitely make further use of nanotechnology. The reason why today's computer processing speed has become so fast is because of the use of nanomaterials. The banking industry can also use this to reduce risks and perform other functions at a faster speed.

　　In addition, data storage capacity will also be improved. If storage devices made of nanomaterials are used, companies will be able to save certain operating costs. Uldrich added: "In this way, companies can convert a lot of text materials into digital files for storage, and the operating costs of enterprises will be greatly reduced."

　　Source: Information Weekly Magazine