Giving it another shot...

Mobile Banking's Second Act
Keith Sniatecki

Seventy percent of Americans own cell phones. That’s over 200 million people. It would seem crazy for any kind of company to ignore a customer base that size. But what is involved in attracting those customers to your service? That is the conundrum faced by bank executives today when considering mobile banking.
In the beginning of the decade, several big financial institutions rolled out mobile banking initiatives, but it seemed neither consumers nor technology was ready. Some people insist that, now in 2007, we are ready to turn the corner. There are several key reasons backing this assertion.
The first is that the actual phones we have today are better. It says handsets today have “microprocessors that rival the power of a late-90s computer.” Second, we are more familiar with the use of cell phones for more than just phone calls. Many people have already purchased online games, ring tones, etc. on their mobiles. The same challenge, however, remains.
The biggest obstacle facing mobile banking is the logistical problems between banks and mobile carriers. Additionally, there is the issue of compatibility with the thousands of models of handsets out there. Unlike the Internet where a bank could host its own site, the banks would be relying on the closed-data networks run by providers such as Verizon or AT&T. While it is attractive for these companies to see people relying on phones more, they would not be willing to let banks use their networks for free. Additional expenditure on the bank side further questions the viability of this already questionable venture. There are some alternative solutions for this.
One option is to have users access a mobile website. A bank would build a separate wireless (WAP) interface that customers navigate to by typing in a Web address. This, however, can be a slow process with even simplified pages. Also, it can get expensive for mobile users constantly paying for internet access. Additionally, security is another major concern.
There are also downloadable or pre-loaded OEM client applications. To use one of these, you would click to launch the application and it would prompt you for an access code. Then you would be able to access your bank information and complete simple tasks like check account balance, pay bills, or transfer money from checking to savings accounts. A concern with this is that since you are downloading information to the phone, it would be a security issue if you lost the phone.
Some major players in the development of this industry would be third-party core system and payment providers. They could act as the middleman between carriers and banks. This is the key to making mobile banking a reality. It is difficult though because banks and carriers are both huge industries that are unaccustomed to compromising their own core capabilities and sacrificing profits.
Despite the complications, mobile banking remains on the table as an in-progress innovation. Earlier this year, many big banks attempted to provide mobile banking services once again. Its attraction is the enormous scope of cell phones these days. Most young people view their cell phones as their most important possession. Banks do not want to lose they young customers and they will continue to pursue ways to attract them. Additionally, using a technology called Nearfield Communication (NFC) would allow debit transactions to made with cell phones instead of traditional plastic cards. This is already prevalent in Japan. No one wants to be left behind in what could potentially be the next wave of e-commerce, but they don’t want to go grow broke trying to catch it either.

John-Speed Killed The Floor Trader -- Wall Street's quest to process data at the speed of light relies on the physical proximity of servers to overcom

Martin, Richard. "Speed Killed The Floor Trader -- Wall Street's quest to process data at the speed of light relies on the physical proximity of servers to overcom." InformationWeek. Wall Street & Technology. New York:Jun 2007. Vol. 25, Iss. 6, p. 41

This article discusses the increase in electronic trading and the emergence of collocation of a firms system running their algorithms. Firms are hoping that the close proximity of their systems will eliminate time lags in area networks. In addition, firms are moving to electronic trading because they want their transactions executed instantly. For example, if a client wants to purchase 100 shares of Google stock trading at $600, and decides to call his consultant to purchase the stock it will take a while for the order to be executed and the price could jump up to $650 by the time the transaction takes place. Furthermore, firms are turning to electronic trading because a 1-millisecond advantage in trading applications can be worth millions of dollars a year to a major brokerage firm.

Collocation has allowed firms to execute transactions within seven milliseconds traveling from New York to Chicago. Furthermore, transactions taking place from East Coast to the West coast it only takes 35 milliseconds. Speed is extremely important to firms looking to obtain the best prices, which is why firms are paying high prices to have their servers placed in both the NYSE and the NASDAQ. The article explains how the servers in shared data centers are usually connected to Gigabit Ethernet. The Gigabit Ethernet uses the ultrahigh-speed switching fabric called InfiniBand increasingly used for the same purpose to support the servers and allow transactions to take place at such high speeds. InfiniBand is a high-speed input/output technology that speeds up the transfer of data-intensive files across servers, storage devices, and networks. Companies are looking to use InfiniBand because it will help reduce latency as a result from wires, switches and other equipment. Even though speed is important, how much faster can we go? Moreover, do we have the equipment that has the capability to support the speed?

Furthermore, while electronic trading sounds great it is putting floor traders out of work but is opening opportunities for ECNs to emerge. The stock market is now moving from a financial sector to an IT sector with the increase in efficiency and technology to execute trades and the elimination of latency.

Jeremy - Smells Like Green Spirit

http://www.wired.com/science/discoveries/news/2007/03/72939

This article discusses the conference held at MIT called Energy 2.0 and how many large companies are looking to increase efficiency and their product base by going green. Despite the fact that many revolutions have occurred the past few decades in technology, companies are using and selling the same materials they were selling back in 1975. It goes on to talk about how unlike previous ears, where the main challenge has been communication and the sharing of information, the large problem facing people today is the issue of consumption of energy.

The article went on to specify how companies are targeting and researching newer forms of previous existing technology, such as batteries. It was discussed that one of the large obstacles stopping hybrid cars that can currently reach 30 to 40 miles per gallon from reaching over 100 miles per gallon is the creation of a lighter, more powerful battery. So, while new technologies and boundaries are being pushed everyday, older technologies are also getting looked at with new perspectives that could indeed help newer technologies take shape.

Fatou Coulibaly - "Identity Solution"

“Identity Solution.” Anita Hawser. Global Finance. New York: Sept. 2007. Vol. 21, Iss. 8, pg. S8, 2 pgs.
http://proquest.umi.com.proxyau.wrlc.org/pqdweb?index=65&did=1339992231&SrchMode=1&sid=1&Fmt=4&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1193186246&clientId=31806

This article is about the imminent necessity to use a cash management security system to ensure and reinforce the security of online transactions in a company. It is because these sorts of operations increased a lot in the past and are still amplifying that companies need to make sure measures are taken to identify people who make payments within these firms. It is the US pharmaceutical company Merck which first introduced the concept of updating the firm’s security of procedures that related to payments effectuated by Merck’s enterprise resource planning (ERP) systems. Due to the fact that any account needs to have all the information about an individual who processed a transaction to be resubmitted in case of a doubt, “there is no central repository to quickly revoke signatory rights if needed.” Thus, every bank has its own complicated or long processes and forms to fill out when such things occur.

It is in this perspective that the CEO of IdenTrust (“a global network of banks including but not limited to Citi, Bank of America, and Deutsche Bank, that issues digital certificates certifying someone’s identity”) noticed that some companies were not aware of the number of bank accounts they possess, and that “25% of case account signatories are wrong.” Therefore it is crucial for such companies to adopt techniques which will enhance their security. For instance, instead of signing payment files at a company identification level, it will now be essential to perform that signing procedure at the individual stage. This means that in general, rather than just knowing that payments were done by employees within the company, now it is going to be more specific because the exact person who effectuated the corporate payment transfer will be identified.

I believe the implementation of this identity management initiative is very good because security will be ensured at its highest level. Employees won’t exchange each other’s passwords and information in order to process payments. Companies will know who is who, and who did what. IdenTrust will help firms to know and “certify that people are who they say they are.” The specific procedure consists of using the certificates in this way: “the certificates bind an identity to a pair of electronic keys, otherwise known as Public Key Infrastructure (PKI), which uses a public and private key to encrypt and sign digital information. PKI-encrypted digital certificates are considered to be one of the strongest means of authenticating someone's identity.”

I strongly approve of the use of IdenTrust’s digital identification signature credentials, not only for firms that have encountered serious security problems, but by all companies because online transactions and payment transfers don’t simply need to be performed with passwords and pin. The identification of the individuals will lead banks and many other companies to authorize their employees to take these important actions related to great amounts of money. I think this ID management solution should be furthermore developed and spread around the world, especially in countries where corruption and fraud are very recurrent. I found that this article was very interesting in terms of the specific processes it describes concerning security issues.

Moronta-Rural E-banking

Uganda and US Co. Launch Rural E-Banking

Ederer, Edith M. "Uganda and US Co. Launch Rural E-Banking." Associated Press 21 Oct. 2007. 23 Oct. 2007 http://ap.google.com/article/ALeqM5h6jErcVy1jTFGtYKzxMR0U22f2KQ.

This article discusses how Uganda's finance minister wants to give every part of the country accesss to the banking system and financial services. Finance Chief Ezra Suruma called upon an American company to help with the infrastructuring of this immense task because Uganda does not how the IT knowledge to take on such a task. The plan is to bring electronic banking to the rural areas in which 85% of the country's 29 million people live. So far, 389 savings and credit cooperatives are functioning and at least a thousand are to be created.

I feel like this decision is taking a big step forward to improve the economic situation of Uganda. Africa is troubled by poverty and turmoil and many of its countries lack stability. Implementing E-banking for all Ugandans will allow all the people who live in rural areas to deposit, manage, and have access to their savings. Many people who live in rural areas do have more money than people think but they can not do anything productive with it. This leaves people with no choice but to stash it in their homes and on their property because they have no where to go with it.

Currently many small banks have been built but they still lack an integrated system that will connect them with the national banking system. Uganda seeks help from foreign companies to help achieve its goals. When this project is finished Uganda should start to see vast changes in every aspect of its society. Many people in rural areas will have bank accounts and in turn will be able to recieve loans to further their local businesses. In the future, Uganands will start to see full-service banking institutions and be able to obtain credit and debit cards and he will also be able to pay bills electronically. Gradually, the economy should improve itself and Ugands will see better times.

Phil - Transformation in banking

Transformation in banking
by Team DNA | Saturday, 29 September , 2007, 11:47

http://sify.com/finance/fullstory.php?id=14535353

The article talks about the global economy in the banking industry, especially in India. Due to the increase in competition, many banks have started to work on chancing delivery channels and their quality of service. This also means to lower costs and to keep the pressure on other banks to adopt state-of-art technology. Privet companies where the first to take advantage over the use of technology then the public sector banks, also known as PSBs.

PSBs used to be known for their rising operating costs, mounting NPAs (Non-Performing Assets), declining profits and unfriendly customer. Now however, with the use of technology, they have been able to be more competitive and revamp the relations with their customers by making them friendlier to use. In India, almost 75% of the financial sector is made up of banking services which plays an important role in the economy. These improvements as M B M Rao, CMD, Canara Bank opines, "Indian banks have emerged stronger in terms of profitability, asset quality and bottom-line growth. Several balance sheet and profitability indicators of the Indian banking sector have inched closer to the global benchmarks. The adoption of international best practices in crucial areas such as prudential norms, capital adequacy, banking supervision, data dissemination and corporate governance have together enhanced the strength and resilience of the Indian banking sector."

Since technology was the driving force for change in the banking sector. Banks now can offer more, such as investment banking, insurance, credit cards, depository services, mortgage financing, securitization, and many other areas. Technology as allowed the consumer to have a larger amount of choices and information at their disposal. PSBs also offer ATMs, internet banking, D-MAT, and plastic money to help there customers access their accounts. The private sector however began to focus more on retail banking and trying to offer better products and make a better financial automation system to increase there customer service. So the future may hold that private banks may buy out some PSBs someday.

Overall the article is mostly about how technology helped increase customer services and appeal of banks through out India. It was also discussed that in the year 2010, the IBA predicted that total deposits in to banks in India will increase from Rs 10,676 to 3,500,000 crore. They believe this will happen because banks in India are striving to meet globally accepted norms for capital adequacy.

Jessica Davison "Online Businesses Face Credit Card Security Deadline"

Bednarz, Ann. "Online Businesses Face Credit Card Security Deadline." Network World 13 June 2005 16 Oct 2007 .

This article focused on the importance of secure online networks for consumers and for businesses. In particular, it focused on the deadline for secure networks that major credit card companies put in place for online retailers. The major credit card companies which included: American Express, Discover, MasterCard, and Visa “jointly created the Payment Card Industry (PCI) data security standard. The PCI standard applied to retailers, payment processors, and financial institutions”.

The PCI standard went into effect on June 30, 2005 and “consisted of 12 technology requirements for securing networks and applications, protecting cardholder data, maintaining a vulnerability management program, and regularly validating compliance via a third-party assessment.” This standard was fairly simple for major e-tailors to comply with because it consolidated the different security requirements of the various credit card companies into a standard set of requirements from all. However, some online retailers were not prepared to meet the new requirements and would face large penalties for non-compliance.

I found this article extremely interesting because we have discussed the importance of IT security throughout the course. This article seemed to be extremely relevant to all of us today, who do a lot of shopping and daily transactions online. I was very reassured to learn that online businesses could “face up to $500,000 in fines per incident if cardholder data is compromised and the merchant or service provider is not PCI-compliant.” Obviously, the financial institutions have recognized the importance of protecting individuals’ personal financial information and are taking security violations very seriously.

However, I also tried to see the security requirements from the perspective of the smaller online businesses. For many, compliance came at a high price depending on what existing security systems were in place. The article estimated that 2 months prior to the PCI requirements going into effect only about 30% of online vendors were up to the standard. “Particularly for smaller merchants, PCI compliance might require purchasing security products, such as encryption, access control, and activity monitoring and logging devices. There are also procedural mandates – such as the need to implement formal security policies and vulnerability management programs – that will require IT resources.”

Although I am extremely grateful that financial institutions recognized the need for standardized IT security practices, I could also see where these new restrictions might have been a tremendous burden for the many very small businesses that were started online. I remember seeing so many news stories of people who started one person operations that were trying to grow their businesses online. With the new IT restrictions I would think the ability to continue these very small ventures would be hindered.

Despite all of this I have concluded that PCI has had a positive long term effect. We all have a better chance of keeping our credit card information safe and the PCI mandates have allowed for new business opportunities for IT firms. These firms helped enable businesses to come into compliance by helping to encrypt and protect the databases that hold consumers valuable information; information that is also critical to the survival of the online businesses.