DİGİTAL BANKING

1. 40 TECHNOLOGY IRELAND 09/08
Main Points
New trends in banking
Financial Services Innovation Centre working with companies on:
Mobile banking
Cutting the costs of cash-handling
EU SEPA law
Innovation Partnership

2. TECHNOLOGY IRELAND 09/08 41
Mon£¥
mattCr$
Plotting the smart future for financial services
D
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 Innovation
takes on greater importance. The overheads customers do not need to waste time looking
and associated costs once acceptable under for change or mess with PIN numbers. On the
Centre says companies
normal conditions of moderate growth other hand, however, it can increase costs for in the sector should pay
need 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 of
adapt 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’Donoghue
Innovative alignment of business processes advantage of mCommerce technologies stem
and technologies can help build upon an from national and international regulations,
organisation’s existing systems in order availability of technological infrastructures
to achieve higher levels of efficiency and and the end-users’ trust and confidence
productivity. in specific technologies under specific
The Financial Services Innovation conditions.
Centre (FSIC) in University College Cork The growth trend has been strong over
was launched in February 2007 to provide a recent years: $10.5 billion in 2004 and $24.1
R&D resource for national and international billion in 2006, with a predicted $56.4 billion
financial services companies in Ireland for 2008. Mobile banking is making an impact
on such things as the latest development on the financial services landscape; for
in the financial services software example, anyone with access to a cell phone
market. Innovation is unpredictable and has a place to keep his or her savings without
revolutionary. The centre aims to reduce needing a traditional bank account.
this uncertainty and exploit the power The proliferation of mobile phones
of innovation through the development in developed and developing economies
of cutting-edge software solutions via a provides a widely accessible consumer device
collaborative association of university staff capable of delivering mobile financial services
and the financial services industry. ranging from text notifications to phone-
based remittance options. For example in
mBanking mCommerce encompasses a broad 2000, fewer than eight-million Africa-based
area within financial services, from smart users owned a mobile phone; this number has
cards (mPayments) to internet banking and increased dramatically within a short period
mobile 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 many
requirements 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 countries
example, MasterCards with PayPass and are regulatory rather than technological.

3. 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

4. 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 which
Finance 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 in
the 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 as
car 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 they
The 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 siphon
financial services industry has the highest
potential customers thus reducing the traditional banking sectors customer base.
proportion of spend on IT system and
process projects globally and it is important Analysis of 2-Factor authentication solutions within banking A US-based bank
they leverage this spend to provide new has engaged the FSIC to assist in research to support their two-factor authentication
and enhanced services to their customers selection project. The approach undertaken by FSIC in developing this report on two-factor
while lowering their internal costs where authentication was to research academic resources, websites, and vendors as well as
possible. 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 services
years, organisations which adapt and company, this collaborative research project has a two-year funding package of c500,000
recognise the potential they offer may – 50% of which was sponsored by Bank of Ireland, and the remainder by Enterprise Ireland
steal 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 will
associated with moving from one business investigate how technology can be used to improve service in these areas; the secure delivery
model 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 document
and international organisations in fine
handling across the bank branch network.
tuning and tailoring the mCommerce based
technology and business processes to align
with their unique strategic drivers. TI