Joe Pagano became worldwide managing director for banking and capital markets at Microsoft's Financial Services unit in December. He had been the service manager for institutions like JP Morgan Chase and Citi in New York, experience that gives him a good take on what's going on inside the big banks. Bank Technology News spoke to Pagano in early January, when he'd been on the job about a month.


BTN: What are you and your team hearing from bank CIOs now?

Pagano: They want to see solutions that are real, that have economics associated with them, that have results associated with them that could be related mainly to reducing costs. They also want to see solutions that innovate, but in a way that drives customer retention and acquisition. The third is around regulatory change and anticipation of what that might be and making sure that they're able to assess enterprise risk, not just from an IT standpoint but from a business model standpoint.

But it's not always about cost savings. For example we had Barclays PLC in the UK implement a dynamic CRM from Microsoft to solve a problem where they were having trouble responding to customer service support escalation, and they were also having problems tracking sales leads. ...They deployed dynamic CRM, and they cut customer complaints by 25 percent, they increased satisfaction by 15 percent, and they reduced cost per incident by 22 percent.

So we're getting into conversations that we haven't gotten into ever before where people come in and say, "You've got something that's measurable? We might not have considered a Microsoft solution in the past but now we will."


BTN: What areas of banking offer greatest opportunity for Microsoft over the next couple of years?

JP: We're in an unprecedented situation in our potential to help the industry reduce cost and innovate, across the stack, whether it's front office, back office or middle tier....We think the physical branch, the virtual branch, is a category that there's a ton of opportunity in, but also the knowledge worker, the risk manager, the business decision maker, is a category that has unprecedented power. The idea is that we're building in social networking features that are common in consumer world, we're building that into the stack....There's this idea of these data silos that very much still exist in banking and how can you turn data into knowledge? Well we've got some amazing things happening in the platform that are going to address that. In core banking, I just talked to Bob Hunt at Tower Group yesterday, and he's got this very interesting idea and I tend to agree with him, that this could be the decade of core banking in North America.


BTN: He's pretty safe saying, "the decade" don't you think?

JP: Yeah, but he's been wrong; he said "the decade" like two decades ago. But there's reality in this idea, as the world is changing around us and it all-whether you're into retail banking or investment banking-it comes down a lot to what's happening with the end consumer. We've got this new phenomena, I'm calling it the "new normal consumer." The consumer is changing, they're more well informed, they're better connected than ever, they're more selective, they expect more and customer service is a huge differentiator.

The ability to pull data from different data sources and make sense of it, in the entire stack, whether its search, whether it's collaboration, whether it's business analytics built into the office suite. We're unlocking the value in these different data sets and as we connect in the social networking capabilities it's going to allow banks to better understand their customers and better service those customers.


BTN: You have a new "go to market" partnership with Temenos tied to your SQL server, do you think the Swiss vendor is going to get a piece of the North American action that Bob Hunt is predicting?

JP: Well they have work to do, as we do, in core banking in North America. ...But core banking, if you modernize it, is the heart of where the customer transaction is. But you're putting in more than a system, you're putting in a long-term future ability to be agile in the marketplace, going from batch processing to real time. The 'new normal' consumer expects immediacy. We talked about a 360 degree view of the customer for the business of being a bank, well customers expect a 360 degree view of themselves. ...The vision we're putting out in coming weeks talks about the entire industry, not just North America, moving from a transaction-based architecture and business model to a customer centric architecture and business model....We're at the head of that curve right now, but I do believe that's where we're headed as early adopters go to real-time processing and prove out the benefits of that model.



Microsoft's customer-facing financial services strategy is dubbed "Three screens and a cloud" - connecting home banking, surface technology in the branch, and mobile banking.

$5.5 billion of Microsoft's $62 billion in 2008 revenue cames from financial institutions.

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