Microsoft has had a tremendous couple of years and has been flexing its muscles in the financial services space in creating mission-critical and scalable technology environments for some of the financial world’s heavyweights.
June 2007 saw the London Stock Exchange’s new securities trading system TradElect go live, marking the final phase of the Exchange’s four-year Technology Road Map project. The new technology platform, aimed at enabling significant increases in both speed of trading and system capacity, was developed using the Microsoft .NET Framework, with support from Microsoft and Accenture, and since going live has allowed the flow of 3000 messages per second and improved latency from 140 milliseconds to 10 milliseconds.
In October 2007, Grupo Santander chose to use Microsoft’s BizTalk and SQL Server to standardise its payments backbone to enable faster payment process times, and reduce operating costs across its payments division. The markets and investment banking division of UniCredito has also enjoyed successful work with Microsoft as a technology partner, with the establishment of a solution for its internet-based pricing and risk-management engine, which has lead to significant acceleration of risk computations and a lowering of complexity in cluster management.
“We are getting to the point of when a customer is thinking of doing something they will say ‘I wonder what Microsoft’s opinion is of this particular business or technology’,” says David Vander, worldwide managing director of Microsoft Financial Services. “We continue to enjoy the role that we play, it is an increasing role, and our customers are benefiting from that success with the flow of innovation and improvements this can create.”
Increased collaboration and partnering across the supply chain is one area that Mr Vander feels will intensify in the coming months as the collaboration between financial institutions and utility providers or infrastructure providers such as IT suppliers and vendors will gain traction, as banks try leveraging the research and development capabilities that those companies have.
“We have one of the largest and most dynamic partner ecosystems,” says Mr Vander. “When people are looking for an application or some technology package, we have a huge partner ecosystem that we can communicate to them. We have always had a very strong role in the consumer experience, but there are a whole range of partnering offers we can now have with our customers with things including the online space, the mobile and entertainment space.”
The strength of the partnering approach lies in the fact that Microsoft does not just have a pure technology vendor relationship with its customers but instead its financial services customers can become business partners with Microsoft. This has been seen in the payments space recently, with the work that Microsoft has done with several banks around treasury cash management, payments delivery channels and clearing and settlement.
Data connectivity
Mr Vander also believes that from an IT perspective there will be an increased focus on the current and future value of financial institution infrastructure as the role of data connectivity, business process management and the thinning of siloed, monolithic applications evolves. “You are going to want a looser, coupled-message-faced architecture rather than big, functional silos of technology capability,” he says. “This will result in cost reduction, operational leverage and it will be driven largely by standards. There needs to be a greater focus by the industry on financial services message standards, particularly in banking.”
The crux of many developments in the financial space now lies around making sure that there is a strategic, reliable data programme, and while some feel that full data excellence in a financial services firm is unachievable, the management of company data certainly needs to be much better than it currently is.
If a firm has the same data duplicated in a number of different locations across its organisation it is bad from a service perspective, from a price or market perspective and bad from a risk perspective, as one of those pieces of data could cause a huge issue for the organisation. Initiatives around system architecture and infrastructure such as service-oriented architecture (SOA), a model whereby functionality is decomposed into small, distinct units (services) which can then be distributed over a network, are making sure that systems at least connect.
Data wastage
In time, Mr Vander believes the industry will see better architecture, more real-time data, a better understanding of master-and-slave data, and better front-end applications for user input. This will result in less manual data entry or data collection within organisations, which will have a knock-on effect from a reporting and transparency perspective. When data waste within an organisation can be visualised then action can be taken and the data side of the business starts to improve.
While data management is one important piece of the puzzle, Mr Vander is one who does not think financial organisations will ever get to a situation of full information excellence because of the notion of structured and unstructured data. “You can get pretty close from the structured data perspective, but there is a lot of unstructured data that financial services firms need to use in order to be successful,” he says.
“We are seeing a tremendous uptake in enterprise content management, document management and records retention and how that relates to risk management, compliance, audit and controls. If you have a credit issue you want to be able to search the structured but also unstructured data. If you have an e-discovery issue you want to be able to search on both data sources to find out where your risk position is and we are seeing a lot of growth in customers using these tools for that very purpose.”
Mobile banking is another area where Microsoft is seeing an uptake in its products and, according to Mr Vander, Microsoft now has more than 115 telecoms companies distributing Windows Mobile, with 145 different pieces of hardware available, and sells more Windows Mobile in a month than Blackberry does in a year.
“The areas that we see growth in the use of mobile technology is in browser-based access for online banking or transactions and application-based access,” says Mr Vander. “Cantor Fitzgerald, for example, builds a huge amount of applications on the Windows Mobile device for trading and market data information and we also have examples where financial institutions use Windows Mobile in relationship management, private banking wealth management, or corporate and wholesale banking.”
In November 2007, Bank of America and Microsoft announced the delivery of a smartphone operating system after the bank had rolled out its mobile banking service to consumers in May – a service that enables more than 20 million online banking customers to bank directly from their mobile phone or smartphone. The service now has more than 500,000 registered users and extends to Microsoft’s Map Point Services Application, which helps users locate bank branches and ATM machines.
Reaching out
As well as championing mobile banking in the developed market space, Microsoft is also working in the ‘topical’ unbanked segment of the market and doing work in the Asia-Pacific and Africa region. In Sri Lanka, Seylan Bank’s mobile banking application has been developed on the Microsoft platform. Armed with a PDA, a banking representative can go out into the customer base and use the mobile device to service customers in that particular region, offering anything from opening accounts and taking deposits to providing services such as insurance and consumer finance.
“If you are in a country like Japan, for example, where you have got a dominant hardware provider and dominant telecoms provider then you can pull these initiatives off, otherwise you have got too many different ecosystems to push,” says Mr Vander. “We think mobile banking will stay in trial mode until a lot more people get together and agree some standards in this space.”
There are many pilots going on around the world but there are many parts of this ‘ecosystem’, as Mr Vander calls it, that need to shift for the payments nirvana to be made real in sophisticated, competitive economies where there is no dominant mobile hardware provider, no dominant telecoms provider, no dominant mobile device software provider, and no dominant financial services provider.
Mr Vander feels it is going to take standards and a lot of agreement around those standards for this dream to be realised, but once banks get more skilled and familiar with the mobile channel then he believes we will see more and more services being rendered for the mobile device channel.