Innovation in Banking Technology Awards 2011

After the brutal post-crisis cuts of recent years, 'doing more with less' became an almost cringeworthy cliché in banking circles. Technology has been crucial to making this mantra a reality, helping banks stand out from the competition while boosting efficiency and cutting costs.

The past 12 months have seen a clear continuation of the fresh thinking and decisive action witnessed in the banking technology landscape over recent years. Nowhere was this more obvious than in the incredibly high quality of entries received for The Banker's Innovation in Banking Technology Awards 2011. This year, submissions were received from financial services organisations, of every shape and size, from retail, commercial and investment banks to brokers, stock exchanges and clearing houses, based in more than 20 different countries across the globe.

Perhaps unsurprisingly, regulatory concerns and managing the many facets of risk made up a large contingent of this year’s entries, but cost savings and competitive differentiation played an important role too.

Increased collaboration

An increasingly collaborative spirit was also in evidence. Nowhere was this more apparent than in JPMorgan’s External Longbox project, which, thanks to a partnership with Euroclear, netted the overall Technology Project of the Year award as well as the Innovation in Capital Markets Technology and Innovation in Custody and Securities Services Technology awards.

Co-operation was also demonstrated by repeat winner CECA, the Spanish confederation of savings banks. Its Mosaic project succeeded where many have failed by creating a successful service-oriented architecture platform, saving its members as much as 90% expenditure per technology project in the process.

New names were successful too, India’s Yes Bank, for example, which was launched just six years ago, took first place in the Innovation in Cash and Treasury Technology category, as well as earning highly rated mention in the Innovation in Delivery Channel Technology award.

Yes Bank’s success also highlights another ongoing trend: an extremely strong showing from emerging market banks in terms of both quantity, and quality of entry. Winning and highly rated entries were also received from institutions in Turkey, Russia, Taiwan and Brazil.  

Strong showings

As usual, there was a strong showing from capital markets operations, but retail banking entries were both plentiful and of an overall high standard, with the Innovation in Delivery Channel Technology and Innovation in Customer Service and Marketing Technology categories proving particularly popular.

This year’s entries also demonstrated that forecasts of the physical banking branch’s demise have been rather premature. Bank Hapoalim’s Poalim Connect project, which triumphed in the Innovation in Data Management Technology category, showed that with sensible use of data, banking channels can be combined in a manner which complements both online and mobile technology and the branch itself. Elsewhere, Citibank Taiwan’s Smart Banking Branch introduced new technology and links with electronic banking services to a physical location, seamlessly marrying the traditional and hi-tech.

The keenly contested Innovation in Payments Technology category was as interesting as ever. Citi's winning Flu Care Card project, triumphed through the introduction of genuinely innovative technology to neatly solve a costly problem.

Taken as a whole, The Banker's Innovation in Banking Technology Award winners are a mix of existing technology used in new ways to solve problems or offer innovative services, along with bleeding-edge technology used in projects that can genuinely be described as industry firsts (more than one entry featured unique, patent-pending components). While the awards are designed to celebrate fresh thinking and approaches rather than technology for the sake of technology, both camps have earned their places.

Once again, The Banker would like to congratulate the winning entrants and those whose efforts have been highly rated, and thank all parties which took the time and effort to enter.

Judging panel

John Beck is The Banker's technology editor and chaired the judging panel. In his role at The Banker, he covers a range of areas, including technology, trading and commercial banking.

- Gary Greenwald is chief innovation officer for Citi Global Transaction Services. He is responsible for driving client-focused innovation across market segments, regions and products, with particular focus on the critical role of technology in the transaction services business.

- Florian Miciu is head of technology with pan-European equity exchange Chi-X Europe. He leads the trading platform's technology group and focuses primarily on technology development and deployment.

- Michael Drexler is senior advisor for the financial services industries at the World Economic Forum, and global head of strategy and planning, investment banking and wealth management at Barclays Capital.

- Simon Barrows is the lead architect for consumer banking for Lloyds Banking Group, accountable for technology strategy and architectural governance across several of the bank's main UK retail banking businesses.

- Brian Ledbetter is a partner in McKinsey's business technology practice, where he focuses on financial services.

- Bruce Weber is professor of information management and subject area chair of management science and operations at the London Business School. He specialises in IT developments in the financial services sector.

- Christine Barry is a research director with Aite Group. She focuses on strategies and technology implementations of banks of all sizes across the globe.

Technology Project of the Year

Capital Markets Technology Project of the Year

Innovation in Custody and Securities Services

Winner: JPMorgan Worldwide Securities Services

Project: External Longbox

As the globalisation of financial markets continues, international firms are increasingly keen to take advantage of assets beyond the close of local markets, improving integration, risk mitigation, global collateral utilisation and operational efficiency in the process.

JPMorgan’s clients active in the European fixed-income market are no exception. In response, the bank launched its External Longbox project, partnering with Euroclear to offer a market first – interoperability with an external custodian.

JPMorgan’s clients can now use fixed-income securities held at Euroclear within their JPMorgan collateral management programme, even after European market cut-offs, allowing them to optimise the use of their assets in US and Asian time zones. Assets can be viewed across both depots as a single portfolio, helping clients merge their fixed-income and equity businesses and move securities across markets without regards to market cut-off times.

External Longbox breaks new ground by creating interoperability in the tri-party repo market, and as such, it is a deserved winner of the overall Technology Project of the Year, Capital Markets Technology Project of the Year and Innovation in Custody and Securities Services awards.

“We are honoured to be recognised by The Banker for External Longbox,” says John Rivett, managing director and global collateral management executive at JPMorgan Worldwide Securities Services. “Our clients can now automatically transfer and use their securities held at Euroclear within their JPMorgan collateral management programme, extending the trading day in which the use of their assets can be optimised in the US and Asian time zones.”

The project relies heavily on JPMorgan’s optimisation engine and allocation algorithm, which integrates externally held assets at Euroclear with the client’s Longbox at JPMorgan. The bank also incorporated a number of technical safeguards and agreements to govern the transfer of assets between custodians in accordance with client instructions. This includes the ability prevent specific securities being transferred and used, and the option to specify the use and allocation of assets held in the External Longbox.

“Interoperability and collateral pooling are key client and market drivers, and External Longbox represents JPMorgan’s ability to anticipate these needs and quickly act to support its clients,” adds Mr Rivett.  

Highly Rated: Goldman Sachs

Project: Client Interactive Margin

Following the onset of the financial crisis in 2008, many hedge funds began to maintain relationships with multiple prime brokers. As a result, creating a single view of risk or optimising balance sheet across prime brokers became trickier. Client Interactive Margin allows users to run hypothetical portfolios from the Goldman Sachs prime brokerage portal directly against the stress-tests, and view the results without intervention from risk managers.

Retail Banking Project of the Year

Innovation in Delivery Channel Technology

Winner: Spanish Confederation of Savings Banks

Project: Mosaic

Service-oriented architecture has had something of a chequered past in financial services environments. It promises much, including increased agility, improved use of assets, as well as standardisation and quality. But these benefits have not always been delivered.

Among every bank’s core IT operations there are a huge number of systems that are often built from scratch or individually maintained despite offering no real competitive benefit. This can prove costly. Among smaller retail banks, for example, maintaining systems to ensure regulatory compliance, connections with public administrations and even some business applications is a sizeable drain on IT resources and company coffers.

As a result, CECA, the Spanish confederation of savings banks, decided to create a platform that would allow collaborative software development between all of its members. The platform was based on the same principles and government processes which drive collaborative open source software communities, implemented in a private environment.

The platform covers the entire software development process from design to execution, monitoring and adaption for each organisation.

“The consolidation process of the Spanish savings banks in larger banking institutions is transforming the scope of collaboration within [CECA]. The awards received are not only recognition of the innovation of the project, but also a boost for new models of IT management, which can leverage efficiency to new levels never known before,” says Santiago Uriel Arias, CIO at CECA.

Given that application development, management and support often accounts for a sizeable proportion of the average banking IT budget, the potential savings for banks involved in the Mosaic scheme are enormous. In a five-bank collaboration project, 75% of individual costs should be cut, while a 28-bank collaboration project will see 90% of individual costs cut.

“In a new computing era, where the words ‘social’ and ‘community” have transformed the way we interact with our users and our clients, we are anticipating the way it will change how we manage our own IT assets,” says Mr Arias.

Highly Rated: Yes Bank

Project: Mobile Money Services

Technology Partners: Obopay, Nokia

Yes Bank’s Mobile Money Services project, conducted in partnership with Obopay India, introduced a mobile-based pre-paid instrument into the Indian market, allowing customers to load cash onto a mobile. The aim was to access the huge unbanked segment of Indian society by taking advantage of Nokia’s 250,000 outlets. The project also eliminates the need for an expensive credit-card device for small retailers wishing to offer an electronic payment option, or for those wishing to make or recieve a long-distance payment without access to internet connectivity.

Commercial Banking Project of the Year

Innovation in Cash and Treasury Technology

Winner: Yes Bank

Project: Integration Project with the Shared-Service Unit of a Multi-Business Conglomerate

Technology Partner: Cordys

As usual, the Innovation in Cash and Treasury Technology category proved popular, and any number of entries would have proven a worthy winner. In the end, Yes Bank clinched the top spot, impressing the judging panel with a three-month project it undertook on behalf of a conglomerate of companies in 2010.

Yes Bank was brought in to automate remittances, such as salaries, reimbursements, vendor payments and regulatory payments, as well as physical and electronic receivables. The customer, as a part of its internal IT strategy, had resolved to move its payments and receivables system to a shared services model, so the Indian bank’s mandate was to map and integrate the entire supply chain of the client’s business into a single workflow. It was also required to reduce the client’s manual processes as much as possible.

To accomplish this, Yes Bank created a payments automation system. The customer generates payment instructions in its recovery system, and the payment instructions are then parsed to break the files into optimal sizes. These are then converted to a Yes Bank standardised payment format and automatically uploaded into the bank’s corporate net banking portal with the relevant credentials.

Alert mechanisms were also implemented to keep users informed on the success, or lack thereof, of the processing. Failed transactions are flagged to the customer online to aid rectification. Customer authorisation options are also included. Salary payments, for example, are on an auto authorisation mode, whereas vendor payments are authorised by the client through Yes Bank’s banking portal.

"Yes Bank’s objective is to become the ‘Payments Bank of India’ ensuring secure, reliable and efficient payment processes,” says Umesh Jain, Yes Bank’s CIO. “As a full-service commercial bank, cash management is the core business indicating strength of banking relationship with corporate houses. The key requirement of any company is to focus on quicker turnaround of receivables and payables, thereby significantly bringing down working capital requirements and efficient management of capital.”

Highly Rated: PrivatBank

Project: Online Cash Collections

Efficient management of cash turnover is one of the most important tasks for any financial institution. However, there is typically no way to view the entire structure of the cash department for preliminary analysis of funds available. PrivatBank solved this problem with its online encashment technology, which allows the use of mobile point-of-sale terminals for gathering information on trade receipts taken from the encashed points of sale.

Innovation in Clearing and Settlement Technology

Winner: BNP Paribas Securities Services

Project: Third-Party Clearing in Hong Kong

As inter-brokerage competition for market share intensifies, third-party clearing (TPC) is becoming an increasingly attractive proposition. But in some regions at least, constructing a TPC platform is not easy. In Hong Kong, for example, an ambiguous regulatory framework and lack of technical infrastructure meant no large broker has attempted to implement such a service.

In a bid to remedy the situation, BNP Paribas Securities Services launched a project designed to deliver a clearing platform in the territory. BNP Paribas already employed a core clearing and settlement platform in more than 20 other markets. The challenges were extending and adapting it to the Hong Kong market, and creating a globally consistent, scalable platform in the process.

The result was a modular system – boasting real-time connectivity with both clients and market infrastructure – designed to replace the back-office systems used by the Asian broker community, which are often manually intensive.

The bank also liaised directly with local regulators to guide it towards a legal framework sanctioning TPC. This cross-disciplinary approach particularly impressed the judging panel.

Uptake has been swift; by February 2011, just a month after launch, more than 5% of the Hong Kong Stock Exchange’s daily turnover was managed by BNP Paribas Securities Services as a third-party clearer.

“The success of our Hong Kong project was entirely due to the fact that we were able to leverage on our experience in Europe to provide specific solutions to the Asian markets,” says Barnaby Nelson, BNP Paribas Securities Services’s head of Asian client development for banks, broker dealers and corporate issuers.

Highly Rated: JPMorgan

Project: Auto Substitution

The panel was also impressed with JPMorgan’s system to help dealers manage the demands of new tri-party repo enhancements. Auto Substitution constantly searches tri-party repo loans for assets which can be released by substituting other eligible collateral such as securities or cash.

Innovation in Data Management Technology

Winner: Bank Hapoalim

Project: Poalim Connect

Technology Partners: Genesys, IBM, WizSupport, Siebel, Ykm

Retail banks across the globe are finding themselves having to cope with the growing use of internet and mobile banking channels, facing the twin pressures of maintaining demand for traditional branch access and competing with the direct banking competition.

But the online offerings put forward by many banks lag far behind the kinds of operations available from online retailers such as Amazon and its peers, partly because combining electronic and physical channels requires dealing with mountains of data and presenting it in a way which allows staff to access and service customers, and the customers themselves to access banking services and view financial information.

Keenly aware of the threat of hi-tech competitors, Israel's Bank Hapoalim launched Poalim Connect in an attempt to retain customers tempted by competitors’ offers and to increase direct and indirect revenues through targeted marketing.

The core of Poalim Connect presents a customer with their financial information in the form of multiple panels in a combined interface – inspired by features commonly found in applications for Apple’s iPad and iPhone – based around a single page for the customer’s main activity.

The service also allows customers to contact personal bankers through an interface including images of available bankers and a range of possible communication channels. Real-time alerts, text messages, reminders and the option to schedule in-branch meetings are also available.

"Poalim Connect combines a personal, highly available response with a connection to the branch,” says Merav Spektorovsky Sasson, Bank Hapoalim’s executive vice-president for direct banking. “No similar concepts have emerged until now; Poalim Connect is unique and groundbreaking on a global level.”

Highly Rated: Bradesco

Project: GCC Project – Corporate Content Management

Bradesco’s highly rated data-management system consists of an image capture system and scanners which capture, analyse and categorise paper documents. The digitised and categorised documents are then sent to an enterprise content management system controlled by a business process management module. Documents are then made available to users through a web portal.

Innovation in Payments Technology

Winner: Citi Global Transaction Services

Project: Citi Flu Care Card

Technology Partner: Visa

As the cost of healthcare continues to soar, employers face a difficult balancing act – offering attractive benefits to their employees while maintaining control over operating expenses. A significant contributor to these costs is the protection against and treatment of the influenza virus; the average cost of a flu shot when dispensed at a doctor’s office or on-site clinic is at least $80, but when the same service is provided in a pharmacy can be less than $30.

In September 2010, Citi Prepaid Services, a division of Citi’s Global Transaction Services operation, introduced its Flu Care Card which is designed to help employers reduce employee healthcare benefits by ensuring employees obtain flu shots through retail healthcare options.

Thanks to patent-pending technology jointly developed by Citi and Visa International, the cards do not require pre-loading in the manner of a regular pre-paid card. Instead payment is triggered when swiped at a point of sale, so employers pay only for flu vaccinations at the time they are administered.

To avoid any risk of fraud, Citi also worked with Visa to identify space on the usual authorisation message to insert coding to identify what is being purchased. This means that the Flu Care Card can only be used for a flu shot or other associated benefit. An attempt to buy an item outside of this list will be declined. 

Citi’s Flu Care Card project neatly addresses a real need with innovative technology, which the judging panel felt had the potential to be used in many other areas.

"In many instances, the applications for pre-paid that we are currently developing may seem non-traditional,” says John Kohari, Citi’s global head of wholesale cards. “However, if you look at certain processes/events such as the administration of flu shots from a payments perspective, you quickly see an opportunity. In the case of the Flu Care Card, the programme provides a winning situation where all parties involved in the process benefit."

Innovation in Financial Inclusion Technology

Winner: Bradesco

Project: Biometrics for the Visually Impaired

Technology Partner: Fujitsu

Financial inclusion initiatives are usually concentrated around providing banking services to populations in remote parts of emerging market countries, but one need not travel so far to find banking customers struggling to access services.

Visually impaired customers are one such group, and in many cases they are woefully underserved outside of branch-based services. Many ATMs have Braille keypads of course, but that is often as far as provisions for the visually impaired go. Bradesco was already one of the first banks to adapt its ATMs for visually impaired clients by means of spoken text, but it is now the first Western bank to offer biometric security based on the vascular patterns of the palm of the hand, a boon to its 13,000-plus customers who are registered as visually impaired.

The technology, which is functional on Bradesco’s network of more than 19,400 Brazilian ATMs, allows visually impaired members of the population to withdraw cash, take balance statements and make money transfers.

The biometrics element is based around Fujitsu’s PalmSecure technology. It works like a scanner to capture an image of the unique map of veins on the palm of the hand. It is both secure, due to the precise and lasting nature of vein patterns, and hygienic, because direct contact is not required.

By marrying cutting-edge customer verification technology with a common sense approach, Bradesco has improved the level of service provided to visually impaired clients, giving them autonomy to perform their financial transactions outside of the branch environment.

“With this technology, visually impaired clients can make transactions such as balance queries and statement and money transfers at the ATMs," says Laércio Cezar, Bradesco’s vice-president of IT. "This pioneering product promotes true social inclusion because it improves the service provided to visually impaired clients, giving them autonomy to perform their financial transactions in a secure way at the ATMs.”

Innovation in Information Security Technology

Winner: Credit Suisse

Project: Holistic Information Security Programme

Technology Partner: Deloitte

Losing customer data can prove both costly and publicly embarrassing for any firm, particularly those involved in the financial services industry. Ensuring information security is more important that ever. The need to embrace new technologies opens new opportunities for potential assailants, and the potential rewards are more lucrative than ever. Attack methods are growing ever more sophisticated, and defence mechanisms have to evolve just as swiftly to keep up.

Like other institutions, Credit Suisse has a wide variety of cyber defence and information security measures, but it also wanted to develop a proactive system to identify threats to the bank. It set out to develop a system that would evaluate security controls against threats while identifying key risks and supporting decisions about security infrastructure.

The result is its Holistic Information Security Programme. Put simply, it identifies the key assets of the bank, considers who or what might pose a threat to those assets, and what offensive actions they might take. Probability of attack and potential impact are also considered to produce a 'threat landscape'. The controls which should be in place and their current effectiveness are then assessed, identifying key areas of risk. A plan to mitigate these is then drawn up.

“The Holistic Information Security Programme strengthens the Credit Suisse risk-management capability and supports our core ethical values and long-standing reputation for integrity, trust, confidentiality, fairness and professionalism,” says the bank’s global information security officer, Daniel Barriuso.

Highly Rated: Bradesco

Project: Monitoring and Traceability in Information Systems – SMRSI

Bradesco’s SMRSI project aims to prevent the drop-out of information and event records in stations and servers, and to centralise the capturing of suspicious events. This is achieved with software distributed through the stations to be monitored, and has a centralised system which sends alerts on hardware and software conditions, as well as relating unexpected events.

Innovation in Customer Service and Marketing Technology

Winner: Citibank Taiwan

Project: Smart Banking Branch

While the long-forecast demise of the traditional banking branch has yet to take place, some consumers are becoming dissatisfied with the level of service they receive in branches, especially in contrast to the easily accessible online and mobile services offered by many providers.

In response, Citibank Taiwan decided to update the customer experience of doing business in a retail bank by designing a new look 'digital bank'. The project, aimed at making banking processes easier, provides customers with clear, easy-to-understand information, and offers tools to simplify financial concepts and planning.  

The project, launched in June 2010 in Taipei, was in 20 branches nationwide by the end of the year. For customers, the differences are immediately apparent: they are welcomed into the branch by a large media wall displaying news, local weather, financial markets and the like, as well as marketing campaign information and details of new product and services.

The new-look branches contain a touch-sensitive service browser which supplies customers with information relevant to Citibank services and products. A so-called 'work bench' is also available, allowing users to perform various financial transactions. Staff assistance is on hand, either in person, or in private briefing rooms that boast built-in video conference facilities allowing customers to have private financial discussions with off-site consultants.

It is too early to say whether Citi has produced the next generation of banking branches, but by using cutting-edge technology to improve the relationship between customers and bank staff, it has offered a real alternative to both the direct banking model and traditional branch-based offering.

So far it seems to be working; after opening the the first branch, customer interactions with staff actually increased, while 75% of customers felt it made their daily banking business more efficient.

"As the leading industry player, setting new standards to serve our customers the best is our everyday responsibility," says Yunny Lee, head of retail banking at Citibank Taiwan. "Smart Banking is aimed at providing a new and unique customer experience through a well-integrated and digital solution."

Innovation in Risk Management Technology

Winner: JPMorgan

Project: GPU Deployment for Risk Computation

Risk management has been a huge, and increasingly costly, focus for the financial services industry for some time. By 2008, JPMorgan’s equity derivatives business alone had found itself spending more than $30m annually on servers for market, credit, scenario and regulatory risk computation.

In response, the US bank launched an ambitious plan to reduce the computational costs of risk calculation by three-quarters over a three-year timeframe, while also enabling more accurate and frequent risk calculations.

A huge part of this plan was to transfer risk computation from conventional central processing units (CPUs) to graphics processing units (GPUs) – usually employed for consumer applications – and migrating all risk calculations to the firm’s computational grid so that they are performed on an as-needed basis in any of the firm’s global data centres that can provide capacity.

Because GPUs are not a typical component of high-performance computing and only suitable for certain operations, JPMorgan had to port its risk library to run efficiently on GPUs and to integrate the units into its global grid computing infrastructure.

Typical or not, the process has achieved spectacular results. Risk calculations on long-running exotics instruments, for example, are now performed up to 30 times faster.

“This transformation has not only reduced the total cost of ownership of JPMorgan’s risk-management platform,” says Alain Gaudeau, CTO of global equity derivatives at JPMorgan. “It has also created a quantum leap forward in the speed of risk calculations and the speed we can service client requests opportunities.”

Highly Rated: Sberbank

Project: Sberbank Credit Factory

Technology Partner: Experian

Sberbank’s Credit Factory system also won plaudits from the judges. It ensures the implementation of a single retail lending process, based on centralised analysis and processing of credit transactions in all bank branches. The system checks applicants through a process of automated interfaces to more than nine different internal and external databases containing information about potential borrowers.

Innovation in Dealing Technology

Winner: Instinet

Project: Newport 3

Global agency-only broker Instinet’s execution management system (EMS) is essential to the company's daily operations, serving as a global gateway to its entire product suite, and enabling its team of sales traders to understand risk, customise trading strategies, analyse performance and execute on behalf of clients across the globe.

The system, dubbed Newport 3, has won itself many plaudits since its launch, but new functionality launched in 2010 caught the judging panel’s attention, clinching this year’s Innovation in Dealing Technology category.

The first enhancement is a so-called 'staging blotter', which allows users to select orders, or portions thereof, to expose to buy-side-only networks BlockCross, Liquidnet and BIDS, with plans to introduce additional buy-side-only liquidity pools this year.

Instinet also introduced risk controls, which alert and then systematically withdraw a client from the market if they over-spend or raise cash beyond their desired risk tolerances. This tool, which would usually have to be monitored and implemented manually – no small task given the challenges, and multitude of operations which must be monitored within a typical trading environment – was developed in close collaboration with Ryan Wiley, senior trader at Dimensional Fund Advisors, at his request.

Finally, Instinet introduced US-listed futures and options trading available directly through Newport 3. This will no doubt prove a welcome option to the institutional trading community, given that derivatives markets are increasingly echoing the activity seen in equities trading.

"As an integral gateway to our entire global product suite, Newport 3 allows both our clients and our sales traders to intelligently source liquidity around the world, access hundreds of broker-neutral destinations and leverage a sophisticated, fully integrated analytics platform,” says Frank Freitas, Instinet’s global head of product strategy. “We've spent significant time and energy collaborating with our clients to optimise Newport, and we are proud that The Banker has joined so many of our industry peers in recognising our industry-leading EMS."