Archives for February 2010

3.5.10: Celent Banking Seminar: Processes, People, and Technology in Global Transaction Banking

Celent senior analyst Enrico Camerinelli. Admission to the event is free, but space is limited and pre-registration is required. Please click here for more information.

Saving money on core systems

Celent has recently published two core banking case studies that talk about cost reduction by moving to a modern platform: Cutting Cost to the Core:How Philippine National Bank Saved 75% by Moving off the Mainframe Tipping the Scale: Using Unix at One of the Largest Banks on Earth In the first case study, Philippine National Bank (PNB)

Philippine National Bank

moved from Kirchman (subsequently Metavante, subsequently FIS) Bankway, a traditional mainframe, CICS, COBOL, batch system to i-flex (subsequently Oracle) FLEXCUBE running on Unix. They were able to reduce costs by an astounding 70%. Celent then conducted a case study on one of the largest banks on Earth, State Bank of India (SBI).
State Bank of India

State Bank of India

SBI has about as many branches as Bank of America, Wells Fargo and JP Morgan Chase….combined. Yet, this bank decided to run its core system on TCS B?NCS on Unix to reduce their initial costs by about a third versus the mainframe. Operating costs dropped dramatically since the bank was able to drop headcount by nearly 90%!
Headcount dropped

Headcount dropped

If you are interested in lowering IT and operational costs, core systems can enable you to make the scale of change required in today’s banking environment.

Citi’s core migration

FIS announced that Citi is going to be conducting a core migration and didn’t provide many details. I filled in some of the gaps in an article in American Banker. For those of you who don’t subscribe to American Banker, This is a big deal with Citi moving their entire deposits from an internally developed legacy system to licensed software. Many of the people who developed this internal platform are no longer with Citi, so maintenance and changes are a challenge. I am consistently surprised that banks that conduct a massive core migration are continuing to move to batch systems rather than move to real time systems. Please see the Celent report, Overcoming the Fear Factor: Migrating Core Banking Systems Citi is moving to Systematics, the 30 plus year old mainframe, COBOL, CICS, batch system that runs at Bank of America, RBS Citizens, and lots of other large banks. If a bank is going to all the trouble of moving core systems, why not go all the way and move to real time, to say FIS Profile? To answer my not so rhetorical question, it will involve changes in item processing and increase risk, but there is certainly some reward to go with that. It’s much easier to have such an opinion when I’m not responsible for the conversion and change management. American banks are clearly concerned about adopting the change that a real time system brings. Union Bank (formerly Union Bank of California) is moving to Infosys Finacle, which is a real time system. I eagerly await the results of this migration. Will this start the long-awaited avalanche of core banking migrations? Not yet, but pressure is building. The Citi migration is not a game changer. The Union Bank migration may well be. The Canadians are quite active and there should be some announcements soon. I think that if Union Bank is able to out-innovate the competitors with their new real-time platform and reduce costs, the mass migration will start.

Show Me The Money

I am currently working on research that looks at the near-term (next 2 years or so) future of mobile banking in the U.S. No doubt, a lot of reports have been written about this subject, so I am taking a slightly different approach, comparing the views of the banking industry with the views of mobile technology vendor industry. One area I’m researching is new front-end (consumer-facing) technology that is expected to be increasingly offered. In terms of responses, both industries are pretty consistent in thinking that 3 front-end functionalities will soon gain traction; P2p payments, expedited payments and mobile RDC (remote deposit capture). When I ask research interviewees about which of these functionalities will be directly monetized (i.e., gain fee revenue), the answers are far less consistent (stay tuned for the report to find out who said what…). However, no matter how the two industries envision monetization, as we may already know how monetization will turn out in the U.S. This is because there are already a few examples of the above 3 functionalities in-market:
  • P2P payments: Mercantile Bank of Michigan is planning to launch a mobile P2P service (powered by S1 and PayPal) sometime in Q2 this year, for free.
  • Expedited payments. M&I Bank already offers mobile expedited payments, at $4.99 per transaction.
  • Mobile RDC: Three FIs (USAA, San Antonio CU, Randolph-Brooks FCU) already offer (or are planning to offer) mobile RDC, for free.
That both P2P and mobile RDC are offered for free is not surprising, if one looks at them (from a bank perspective) as replacements for paper checks. It’s probably quite fair to assume that most banks’ check processing costs are multiples of their electronic transaction processing costs. As such, banks should be very interested in migrating consumers from checks to P2P and/or mobile RDC — to do so, offering these two functionalities for free might not be a bad idea. Requires a Better Bundle

Back in late September 2009, rumors were flying regarding a Citi and Microsoft venture in the personal financial management (PFM) space. It garnered a lot of attention, particularly due to Microsoft’s decision to exit Microsoft Money online. Folks were very curious, myself included, as to what these two heavyweights would conjure up. The rumors were true, and late last month, was launched. Citi, Microsoft, and Morningstar are investors in the new venture. Jaidev Shergill, formerly of Citi Ventures, is the CEO. I visited the site with the expectation of finding a potential contender in the PFM space. Instead I found a site that provided a very limited view into personal financial management. The site allows users to compare their spending habits with others around them or in other areas. There is also a community where users can interact with one another and discuss personal finance. I like the ideas of spending comparisons but this is not a new feature. It has been offered by, Wesabe, and Geezeo for some time – all offer various flavours of community and social interaction. I see spending comparisons as a nice to have, not an absolute requirement (see my blog entry on this). I don’t believe that folks should model their spending habits according to others for one simple reason – most people don’t have good spending or budgeting habits. Everyone needs their own custom-made plan. is going to need to add a lot more to its portfolio in order to attract users and keep them coming back. Bundle is still in beta, and it will be interesting to see what else they add to the pot. I am also curious to see if Citi will begin to integrate any of the features into their own offerings.


The dark side of SaaS

The more I think of it, the more I believe SaaS is not the right model for heavy-process transaction-based applications. Certainly appropriate to manage data-intensive applications (e.g., customer interaction data à-la but not so fit when integration and STP are the business imperatives. I don’t have a final position on this matter, but I will investigate more on it, as the impact on treasury management systems (TMS) can be quite devastating. I’ll keep you posted on my research, and please feel free to inject comments.

2.25.10: Celent Banking Webinar: IT Spending in Banking: A North American Perspective

Celent senior analyst Jacob Jegher

This event is free for Celent clients and the media. Non-clients can attend for a fee of USD $4,500. This fee includes access to the research report of the same name. Celent will contact non-clients after they register for credit card information.

Please click here for more information.

How Big Is Mobile Banking’s App-etite?

I have to admit, I have app-envy. Owning an old Windows 6.1 Motorola mobile phone, I look on with a certain longing at my friends, colleagues and fellow airplane passengers who enjoy endless, happy hours with their iPhone/Android/Blackberry “iBeer” apps. I am even more jealous of their mobile banking apps, which seem to me the coolest retail banking technology ever. But truthfully, I am beginning to get a bit dizzy contemplating the options that await once I finally trade in my current mobile device. At the last count I saw, the iPhone App Store had 120,000 apps. This got me to thinking about the plight of banks offering mobile solutions, which are increasingly feeling the pressure to keep up with the app explosion. A very quick check on Wikipedia revealed the following:
  • There are about 6 versions of the iPhone OS (operating system), with a new one in beta
  • Since April 2009, there have already been 3 versions of the Android OS
  • There are at least 30 versions of the Blackberry OS, more if you include those for the Canadian market — I stopped counting, but see for yourself.
  • The Windows Mobile OS has been around for a while, but it’s probably safe to say that phones with 5 or 6 versions are still in use
  • Let us not forget the Palm and BREW OS’
Yikes… Undoubtedly, more of the above will come. I’m no developer, but common sense dictates that this is a lot for a bank to keep up with. Prioritizing, developing, maintaining and owning apps for a myriad of operating systems and mobile devices has got to be daunting and expensive. In recognition of this, some banks are just creating apps for the iPhone, which often constitutes a large number of mobile banking users. But what about addressing all the other phones and OS’ out there? It would seem to me that a bank has two choices to keep up with apps. The first is to outsource work to a vendor, whether a full-on mobile banking technology vendor, or an app “development shop”. The second is to provide a minimal level of apps (say, just for the iPhone) in the nearer-term, and wait for a “post-app” era in the longer-term. HTML 5 may have the potential to enable mobile browsers to offer the same functionality/integration with a phone’s native capabilities (e.g., locationing) that apps currently perform. In either case, both banks and vendors have a lot to think about in terms of development roadmaps. Again, I’m no developer. I would love to hear from our readers. Are apps here to stay? Will HTML 5-enabled browsers eventually usurp apps? Is there some other approach that can replicate the attractiveness of apps?