40 TECHNOLOGY IRELAND 09/08Main PointsNew trends in bankingFinancial Services Innovation Centre working with companies on:Mobile bankingCutting the costs of cash-handlingEU SEPA lawInnovation Partnership
TECHNOLOGY IRELAND 09/08 41Mon£¥mattCr$Plotting the smart future for financial servicesD uring economic recession, the way Visa with payWave are new contact-less in which an organisation applies technologies to pay for your small day to The Cork-based Financial innovation to routine activities day items. It helps to reduce queue times as Services Innovationtakes on greater importance. The overheads customers do not need to waste time lookingand associated costs once acceptable under for change or mess with PIN numbers. On the Centre says companiesnormal conditions of moderate growth other hand, however, it can increase costs for in the sector should payneed to be brought into line. To achieve this, the acquirer and card issuers.an organisation will need to intelligently The acceptance of mCommerce attention to the reach ofadapt its current business processes and IT technologies varies considerably between the mobile phone.infrastructures to maintain competitiveness continents and even between countries.both nationally and internationally. The major hurdles for any country to take By John O’DonoghueInnovative alignment of business processes advantage of mCommerce technologies stemand technologies can help build upon an from national and international regulations,organisation’s existing systems in order availability of technological infrastructuresto achieve higher levels of efficiency and and the end-users’ trust and confidenceproductivity. in specific technologies under specific The Financial Services Innovation conditions.Centre (FSIC) in University College Cork The growth trend has been strong overwas launched in February 2007 to provide a recent years: $10.5 billion in 2004 and $24.1R&D resource for national and international billion in 2006, with a predicted $56.4 billionfinancial services companies in Ireland for 2008. Mobile banking is making an impacton such things as the latest development on the financial services landscape; forin the financial services software example, anyone with access to a cell phonemarket. Innovation is unpredictable and has a place to keep his or her savings withoutrevolutionary. The centre aims to reduce needing a traditional bank account.this uncertainty and exploit the power The proliferation of mobile phonesof innovation through the development in developed and developing economiesof cutting-edge software solutions via a provides a widely accessible consumer devicecollaborative association of university staff capable of delivering mobile financial servicesand the financial services industry. ranging from text notifications to phone- based remittance options. For example inmBanking mCommerce encompasses a broad 2000, fewer than eight-million Africa-basedarea within financial services, from smart users owned a mobile phone; this number hascards (mPayments) to internet banking and increased dramatically within a short periodmobile banking (mBanking), each providing of time to over 100 million.a specific set of services to meet the business The World Bank estimates that in manyrequirements of the end-user. countries, over half the population – ‘the The cost of handling cash is being reduced unbanked’ – has never had a bank account.by replacing cash-payment with mPayments The primary obstacles to offering mobile– such as credit cards and smart cards. For remittance services in developing countriesexample, MasterCards with PayPass and are regulatory rather than technological.
42 TECHNOLOGY IRELAND 09/08 Since remittances qualify as a banking is, where their mobile services are readily transaction, mobile operators would have available and more reliable than their to comply with banking and financial fixed-line services. This again highlights regulations in both the sending and the potential for designing cost-efficient receiving countries, making it necessary solutions for the ‘unbanked’. for them to partner with existing banks or In European countries, where mobile remittance companies. phone penetration is very high the transition A regulated approach is based on from traditional branch banking to mobile trusted financial institutions (perhaps banking is very low as remote access to in conjunction with third-party agents) banking services is provided over the providing a formal money-transfer channel internet and call service centres, in addition which is carefully monitored by the existing banking infrastructures provide local governing body/bodies. With an a comprehensive suite of services for their unregulated infrastructure, informal customers. money-transfer channels are poorly monitored and prone to abuse (money EU Single Payments law From a European laundering; supporting illegal perspective, the introduction of the Single activities). International law on European Payments Area (SEPA) legislation money laundering, terrorism is having a positive effect for customers, financing, and fraud make for example, Irish companies who have cooperation indispensable. subsidiaries in several countries. Payments across national borders should be as easy as The ‘unbanked’ However, payments within those boundaries. However, telecoms may start siphoning-off in banking, the phased introduction of the traditional banking customers SEPA has begun to reduce banking revenues who do not need all of the banks (less currency conversion) and increase their services (such as mortgages). overheads in providing full European banking In Latin America, fewer than facilities which abide by the SEPA regulations. 10% of remittance recipients The cost associated with handling and hold a bank account. Therefore, accounting for high-volume, low-value the remittance and unbanked transactions is extremely high: for example, markets are an example of where within a banking outlet, cashiers/tellers mCommerce and mobile banking work in pairs when counting money in particular will have a large deposited during the day, forms are manually social impact on end-users’ daily completed to confirm the total and formally banking activities. signed-off. All of this is done in a secure room mCommerce solutions have been adopted under CCTV surveillance. This process is at a much higher rate within African and time-consuming and wasteful as the cashier/ Asian based countries than their European teller could be better-placed at the front desk, counterparts. This is primarily based on helping to open up new customer accounts their communication infrastructure – that and increase sales of mortgages, pensions and
TECHNOLOGY IRELAND 09/08 43 ‘Telecoms may start syphoning of traditional bank customers who don’t need mortgages’ FSIC projects: case examples A selection of FSIC research and industry based projects are outlined as follows: Opportunities for mBanking & biometrics The FSIC IS conducting a feasibility study to explore the opportunities for Biometrics and mobile banking within the financial services industry. The study will be executed by leveraging an Enterprise Ireland (EI) sponsored feasibility study to unearth some of the pertinent issues behind the topic. This report will be of generic interest within the financial services industry as well as for biometric solution providers, industry consultants and academics that have a research interest in this space. New and emerging technologies in the remittances market The FSIC report for the consumer panel of the Irish financial regulator will expand on international surveys that suggest that world remittance market is valued rather conservatively at US$260 billion in 2005 and is expected to increase by 30% in 2008. Migrant remittances are an important source of external finance for countries such as Poland and Brazil.Professor Ciaran Murphy is head of the Accounting, This report will cover issues behind the high costs of sending remittances whichFinance and Information Systems group at UCC, of which are often in the range of 10 to 20% and are a major drain on resources, particularly inthe FSIC is one part. developing countries. The significant players in the remittance markets are traditionally companies which specialise in remittances, as opposed to banks, who offer remittances ascar loans! The introduction of mCommerce part of their product portfolios.solutions may diminish this high cost factor. The potential of tapping this market by financial services and mobile operators is enormous with innovative but possibily non-standardised solutions. Banks are at risk if theyThe future The FSIC recognises that the do not facilitate such a market in developing countries as new competitors (such as telecoms and third-party agents providing the complete banking solution) may begin to siphonfinancial services industry has the highest potential customers thus reducing the traditional banking sectors customer base.proportion of spend on IT system andprocess projects globally and it is important Analysis of 2-Factor authentication solutions within banking A US-based bankthey leverage this spend to provide new has engaged the FSIC to assist in research to support their two-factor authenticationand enhanced services to their customers selection project. The approach undertaken by FSIC in developing this report on two-factorwhile lowering their internal costs where authentication was to research academic resources, websites, and vendors as well aspossible. As new mCommerce technologies critically reviewing existing large scale implementations within the financial services space.emerge over the coming months and Innovation Partnership As the first Innovation Partnership involving a financial servicesyears, organisations which adapt and company, this collaborative research project has a two-year funding package of c500,000recognise the potential they offer may – 50% of which was sponsored by Bank of Ireland, and the remainder by Enterprise Irelandsteal a competitive advantage over their who fund and manage the national Innovation Partnership initiative.competitors. To limit any potential risk Bank of Ireland has agreed upon a number of research streams with the FSIC which willassociated with moving from one business investigate how technology can be used to improve service in these areas; the secure deliverymodel to another the FSIC can assist national of financial services to bank customers, integrating self-service systems in bank branches, using technology to increase operational effectiveness in branches and to manage documentand international organisations in fine handling across the bank branch network.tuning and tailoring the mCommerce basedtechnology and business processes to alignwith their unique strategic drivers. TI