If there's one aspect of bank technology that everyone's agreed on, it's that no technology category is more important to the banking industry than Internet security. Or so suggests this year's Best of the Newest, Bank Technology News' annual industry poll. Internet security, which tied for first place last year, was the outright winner this year. And respondents anticipate its importance will only accelerate in 2001.
The emphasis on cyber security was seconded when respondents ranked specific security technologies, separate from the broad category of Internet security. Of 34 categories rated, those responding to the survey expect digital certificates/public key infrastructure, online credit card fraud detection software and online privacy protection software to enter the Top 10 bank technologies in the future. The same is true of risk-management software, which also is tied to Internet security.
At BTN, we traditionally have referred to Best of the Newest as a survey, although, scientifically speaking, it's not; it's more anecdotal. Last year, 15 people-a mix of influential bankers and consultants-responded. This year, we polled a larger group, including technology vendors. Of 70 people contacted, 23 responded: five bankers, eight vendors and 10 consultants.
We asked them to rate the significance to banking of different
technology categories, 14 of which they had been asked about in the past, plus 20 new ones. The new categories (marked "new" in the following ratings) included many technologies that have come on the scene only within the past year or so. A 10-point scale was used for the ratings, and respondents were encouraged to elaborate on their scores by writing additional comments.
4 ASPs (new) 5.33
Is "ASP" merely a new name for service bureau? we asked.
Advocates suggest not, because Web-based delivery of software allows for greater economies of scale, more timely releases of updates and- potentially-instant portals for clients.
Respondents expressed strong support for the idea that the use of ASPs will remain an important option for banks in the future. That's especially true for community banks, which can obtain "complex hosting solutions" at relatively modest costs by using ASPs.
Deleeuw's Johnson describes ASPs as "the wave of the future," noting that "ASPs use the Internet model to distribute information and can be tailored to almost any need." However, he adds, "If ASP's have a perceived obstacle, it is security...(and) convincing bank network security people to place potentially sensitive data outside their firewall."
He rates both ASPs and Internet security technology as a seven, heading toward nine.
5 Call center tech 5.27
Call centers have become the backbone of banks' inbound customer support and outbound marketing activities. The development of more sophisticated data-mining tools has turned call centers into potential profit centers for many banks. As of last year, every U.S. bank with more than $10 billion in deposits supported at least one call center, according to Gartner, and many have implemented automated call distribution and voice response unit functionality.
"It will be supplanted by online customer service," said Peter Klante, whose views-being those of the marketing vice president of a wireless applications provider, Tantau Software Corp.-represent a perspective significantly different from those of the commercial bankers. He did not comment further on the technology.
6 CRM 5.13
We asked respondents to rate traditional customer relationship management technololgy; that is, CRM minus Web-based collection and analysis of customer data.
Meridien Research estimates financial institutions will lay out $5.45 billion on CRM in 2001 and $6.85 billion in 2003.
While bad experiences and low returns on investment continue to plague some banks that have built data warehouses, the attraction of customer relationship management remains strong.
"Why would you want anything other than eCRM?" asked Walt Sizer, senior product manager with security systems integrator Shym Technologies Inc.
A similar observation comes from Susan Lundquist, director of marketing with Vestek: "It's all moving to the Internet." Nonetheless, Lundquist ranks CRM and eCRM, its Web cousin, the same: 8 currently, 10 in the future.
Plain old CRM elicited few comments. In its defense, though, Andrew Greenawalt, chief technology officer of Cybergnostic.net, says all CRM technology is "vital" and the prefixes are "beside the point."
7 eCRM (new) 4.95
Customer relationship management, or CRM, was affected-in terminology, at least-by the Internet. With significant amounts of financial business now being done online, it is essential to incorporate information about the consumer's online transactions into his data profile. This is reflected by the increasing frequency with which vendors are claiming to be in the eCRM business, rather than plain old CRM.
Vestek's Lundquist cautions: "The technology itself doesn't mean much; it depends on the specific application."
8 Document Imaging/Management 4.94
The way imaging is perceived has gone beyond early notions of scanning pages and incorporating them into the workflow involved in completing a task. As ecommerce grows, alongside notions of institutional "knowledge management," there are all sorts of disparate file formats to synchronize. The recent acceptance of electronic signatures in legal contracts adds to these possibilities.
Something "lusted after, finally being implemented," says Greenawalt, something "becoming crucial from a customer service and risk management service perspective," says Beale, but, others, such as Demeo, surprisingly contend: "Adoption of digital signatures will result in less reliance on digital documents."
The Internet is no longer an "alternative" delivery channel. For banks, it is central. Financial institutions are offering more complicated products on the Internet, fashioning their sites as portals and participating in financial "mega-malls."
Perhaps the surprisingly low rating of Internet delivery, in addition to the lack of comment we received about it, simply means the honeymoon is over. "If banks can't sell in this channel, then it will become another costly customer service channel," says Demeo.
10 Online credit card fraud detection
Here we're talking about software designed specifically to enhance credit card security online-not hardware (card readers) or general security applications (such as PKI or other forms of user authentication).
Numerous vendors, including CyberSource Inc., Nestor Inc. and Retail Decisions Inc., have introduced software to spot fraud in online credit card transactions. Others, including American Express Co., Trintech Inc. and Orbsicom, have enhanced credit card security by having consumers use either virtual card aliases or one-time, dynamically generated numbers in lieu of their actual card numbers.
"If online commerce is to survive, credit card fraud detection and prevention software will need to be a requirement rather than an option for merchant services providers," remarks Meridien's Sarah Ablett.
However, Gartner's Avivah Litan contends, "PKI (public key infrastructure) and new security schemes will eventually displace these."
11 Business-to-consumer portals (new) 4.71
In this instance, we're referring to bank-centered electronic marketplaces, where banks provide a forum-linked to Web banking-in which their retail customers buy from their commercial customers. Other services include personalized Web content, such as user-specified stocks' prices and local news.
Several respondents say B-to-C portals will be overtaken in importance by business-to-business, or B-to-B, portals. Litan says B-to- B portals (now a 10, declining to seven on the future-importance rating) "will be replaced by new distributed technologies, where content and services are aggregated locally and privately." The same is true of consumer (bill) comparison sites, she adds.
12 Bandwidth boosters 4.66
As the desire to send digital, audio and video information to users throughout their organizations becomes stronger, banks are turning to a variety of network technologies, such as integrated services digital network (ISDN), asynchronous transfer mode (ATM) and frame relay, to boost their bandwidth. Multimedia applications, data warehousing and digital imaging are just some of the applications that need extra bandwidth.
In fact, when it comes to bandwidth, there's no argument among the respondents: You can't have too much. And today, additional capacity is becoming less expensive. But, take care, advises Deleeuw's Johnson, who believes bandwidth boosters are mere "smoke and mirrors that use caching and time-slicing to give the impression of speeding things up."
13 Business-to-business portals (new) 4.60
There was a marked shift in popularity toward business-to-business Web sites, and away from business-to-consumer sites, early in 2000. In our survey, we were trying to gauge how much, if at all, B-to-B is favored over B-to-C today. We included sites that offer a combination of B-to-B services, from supply procurement to sales outlets, auctions and education, as well as ancillary services such as accounting, personnel administration and legal resources.
Meridien predicts that $230 million out of $445 million in global B- to-B ecommerce done in 2004 will be transacted in the United States.
Although Demeo contends that "only the very biggest banks will be able to compete with non-bank companies that have tons of capital," Meridien's Ablett suggests, "Financial services institutions stand to play a major role...provided that they involve themselves strategically."
And, says, Andersen's Sellers: "The second wave of B-to-B is about to begin. Collaboration capabilities will allow full integration of the supply chain model."
14 ECNs (new) 4.53
A notable area in wholesale banking is electronic communications/crossing networks, or ECNs. These competitors to traditional stock exchanges are variously expected to handle about half of all Nasdaq stock trades by next year. The ECN way-automating the process used by buyers and sellers to strike a price-is also affecting other areas of the capital markets. By late 2000, commentators were dubbing similar developments in the foreign-exchange market as "the ECN- ing" of for-ex.
"ECNs," says Ablett, "will play a larger role as foreign exchange is brought into the mix."
15 Risk management
We added this broad category of applications because risk management is arguably more important in an increasingly wired, increasingly global marketplace. Newer technological developments in this area, such as operational risk management, are the subject of considerable attention, and the category drew many corresponding comments. City National's Beale, for instance, notes that "as banks expand into new fields, the ability to quickly measure risk is vital to their quality growth."
16 New Web
XBRL (which, as you may know, was formerly XFRML) stands for "eXtensible Business Reporting Language." As this month's cover story shows, this derivative of eXtensible Mark-up Language (XML) has substantial implications for banking. Meanwhile, earlier languages, such as Java, continue to make inroads in financial services, particularly on Wall Street.
We asked respondents: How much do such standards mean in practice?
Beale responds: "XML, or some variant, will rule the day," adding that it will become a programming standard for new applications as they replace legacy applications.
The much-discussed idea of aggregating all of a consumer's financial accounts onto one Web site became a reality with the prevalence of technical standards such as OFX that enable easy data exchange on the Web. Four million consumers are expected to subscribe to aggregation services by 2002, up from an initial 30,000 in 1999. Those services are expected to become more sophisticated, allowing consumers not merely to review, but to manipulate, this consolidated information.
Aggregation and PKI probably were the greatest talking points.
"Institutions that cannot provide this capability, particularly for wealthy clients, will struggle to retain and grow their customer bases," said banker Beale.
Deeleuw's senior project manager, Sean Tibbs, suggests there will be a gradual shift away from today's third-party aggregators as banks begin doing aggregation in-house.
Gartner's Litan similarly suggests that "distributed technologies" will allow for aggregation to be done "locally and privately."
18 Bill scanning (new) 4.20
Paytrust, PayMyBills.com, Statusfactory and others moved from the outside to the mainstream during 2000. Their consumer appeal-offering to scan all of a consumer's bills and put them on one site-invited cooperation from companies that previously were the scanners' competitors. It is seen as an "interim technology"-in effect, awaiting the adoption of e-billing-agreed nearly all who expressed an opinion on bill scanning.
19 Digital certificates/PKI (new) 4.0
The combination of digital certificates and public key infrastructure is recognized as an important security technology for financial institutions despite its modest ranking. Digital signatures aren't the only form of "electronic signature" authorized by the recent E-Sign act. However, digital certificate vendors are expected to get a boost from this federal legislation, which gives electronic signatures the same legal weight as physical signatures.
All commentators indicated that this 20-year old technology has come
of age thanks to the Internet. As
Meridien's Ablett put it: "The incorporation of PKI technology into financial institutions' product offerings is an absolute necessity."
20 Electronic Bill
and Payment 3.77
While the electronic bill presentment
and payment (EBPP) market is still
sluggish, it appears to be poised to reach $825 million in global revenues by 2004, from $1 million in revenues during 1999, according to International Data Corp., Framingham, MA.
We asked respondents to rate efforts to have bills presented and paid on screen (excluding bill scanning models).
"EBPP will succeed and is a killer app, but it will take a different form than is being implemented today," said Gartner's Litan, who targets e-billing for a 10 in future importance, up from eight in this year's survey.
Payment (new) 3.63
Person-to-person payment technology, or the means to email funds to any other consumer, mushroomed during 2000. For instance, "P-to-P" provider PayPal, established in November 1999, attracted 3.3 million users within its first 10 months of operation. As these services extend to B-to-B payments, we asked respondents to rate P-to-P's impact on ecommerce.
Litan (who generally gave above-average marks) rates P-to-P as a future 10 and deems the star of P-to-P, PayPal Inc., as the star of financial tech this year. P-to-P will adopt "Napster-like peer-to-peer processing," she predicts.
Deleeuw's Johnson, who earlier this year used P-to-P to receive payment for golf clubs he sold on eBay.com, said, "It worked fine but was as slow as Fed clearing. However," he contends, "this is truly a thing of the future." Indeed, he gives P-to-P a ranking of eight in future importance. "Just imagine being able to control what your college student has available to spend (versus a credit card)!"
22 Check Conversion
The process of taking a paper check at the point of sale and turning it into an automated clearing house transaction-a technology often referred to as
e-check-is growing in popularity. Will it affect item processors' bottom lines?
"Like all things related to checks," says banker Beale, "moving consumers and building a new infrastructure...will be slower than anticipated."
23 Online Privacy
Protection Software (new) 3.52
With the announcement by American Express that it is releasing software
to allow online shoppers to dictate how much personal information they will
provide, we asked if this and similar
security models will offer a boost for ecommerce.
"Consumers may not know
exactly why they need or want privacy protection, but they will demand it," says Meridien's Ablett.
Deleeuw's Johnson adds, "Amex has opened the door" with such technology.
24 Wireless eCommerce Infrastructure
Wireless banking and brokerage channels, which hit the United States during 2000 through cell phones and personal digital assistants, are poised to outstrip early-adopter Europe, according to Datamonitor Inc. Although the United States is home to only a fraction of today's $90- million market for wireless financial applications, the U.S. is expected to dominate the market within three years.
Respondents were asked to rate
the importance of wireless to the financial sector.
Catherine Allen, chief executive
of BITS, a technology-focused arm
of the Financial Services Roundtable,
the trade association group, cited the use of both wireless banking and account aggregation as the best strategic
moves of 2000.
Several sources emphasize that additional progress is needed on technical standards to facilitate mobile commerce, but most are positive about its future.
"Portable, digital payments will play a key role in the success of m-commerce," says consultant Caroline Spicer, president of Spicer's Web Inc. "As such, they provide both a large opportunity, as well as a considerable threat, to banks' traditional role as financial intermediary."
25 Web Telephony (new) 3.47
Here we're distinguishing call center software used to aid Web banking customers from other call center software. There are three main categories of Internet-based customer service in the call center: email, Web self-service and Web-based live agent help. Banks have not made much progress over the past year on call center/Web integration. We asked our respondents if banks will do so in the next year.
"Banks will need to quickly understand how to support the projected growth in online traffic," Demeo says. "If not, they will find the costs of providing customer service...rapidly spiraling out of control."
The rub comes from Sizer: "Who really uses it?"
26 Neural networks 3.36
A form of artificial intelligence, neural networks "learn" patterns from data, making them good at spotting moving targets, such the behavior of con artists. They have been enjoying renewed popularity as a way to spot Internet fraud, although it takes a lot of data and expertise to develop neural models.
Demeo is skeptical "given that
most banks can't use even simple
decision-support systems effectively." Others are hopeful, despite the neural net's complexity.
"The trend will be to connect to neural networks via the Internet to gain the power of a centralized network that charges a fee for this capability," suggested Deleeuw's Johnson, adding, "The costs to implement a neural net for a single company is high."
27 Electronic Trade
Documents (new) 3.35
Several industry initiatives
use digital certificates that enable businesses to identify and authenticate each other online. "Trust applications" built
on that foundation include letters
of credit, lease documents, trade finance agreements and the like. All are increasingly taking electronic form. We asked respondents whether such applications were likely to continue playing an important role in e-business?
"The new law accepting digital documents creates an opportunity for banks that leverage this technology to differentiate on the speed of fulfillment," says Demeo.
28 Smart Cards 3.35
Smart cards still haven't taken off in the United States the way they have abroad, and domestic financial institutions continue to struggle with this technology. But, with 90% of the world's issuers of stored-value cards effectively backing the open-standards Proton scheme, perhaps things will accelerate.
"They're not dead yet?" asks Demeo.
Even Catherine Allen, who wrote a book about smart cards, rated them only a 2 on the significance scale today, rising to a six in the future. A number of respondents who gave their answers in interviews, rather than by correspondence, asked to be able to rate the United States separately. Much of the developed world has been using integrated- circuit, or chip, cards for years. To be sure, significant U.S. implementations are under way, particularly among government agencies, but the planet's largest market clearly remained cool to smart-card technology at year's end.
29 Online Alternatives to Credit Cards (new) 3.33
In this category, we excluded P-to-P payments from consideration,
asking respondents to focus instead on applications such as online debit. Extending debit cards to the Internet requires hardware: add-on PIN readers for PCs. U.S. makers of these devices include SafeTPay, Atlanta, and UTM Systems Corp., Seattle. NYCE Corp.'s SafeDebit is among the online debit offerings to appear. Other efforts, such as using checks over the Internet by converting them to ACH transactions, are taking shape as well. We asked our judges if these alternatives to plastic can be expected to take hold.
"Viable and simple alternatives that emerge will eventually be promoted by merchants frustrated by...fraud," concludes Gartner's Litan, not to mention the high credit card rates fraud produces.
30 Linux (new) 3.17
There has been a lot of talk about the relatively new, UNIX-derived operating system. Does this spell the end for Windows' dominance? We asked respondents if Linux means much for banks.
Linux was among a number of new technologies that elicited a lot of commentary despite its low rating (others being person-to-person payments, privacy, wireless applications and bill auctions).
"Until security features are enhanced, additional tools are available and vendors build applications, Linux will spend more time in the lab than the enterprise,"
said Beale, even though he views Linux as "an inexpensive and reliable
To Greenawalt, its "cool." To Johnson, it's "like the Apple Macintosh in the
mid-'80s." For Sizer's PKI integration company, however, Linux is "a requirement for our customers."
31 Streaming Media (Video) (new) 3.11
Some investment banks are starting to use Webcasting when they play host to analyst conferences. Our respondents think this technology will have a moderate effect on banks in the future.
"Banks will not benefit much, as their content is generally boring and will not 'come to life' with video," says Beale. Enough said.
32 Bill Auctions,
A recent twist in EBPP is the role played by online auctions. A number of companies offer Web sites where consumers pay their bills and hope to attract better offers from firms that compete with their current service providers. Utilities are among the companies using these sites to compete for customers. Hosts include PayMyBills.com and Zingbill.com, among others. We asked respondents if this is a viable model.
No commentators expressed unbridled enthusiasm for such sites. While Meridien's Ablett suggests "bill auctions...could become the carrot that finally leads consumers to EBPP," Gartner's Litan sees a major weakness in the scheme: "No one wants to share detailed cost information on their products or services."
33 Biometric Security 2.50
Biometric technology uses unique physiological or behavioral characteristics to identify an individual-say, by his fingerprints or voice. It hasn't been used much in financial services. The lead application has been for security at ATMs. However, more banks are planning to integrate today's much-improved speech recognition technology into their call centers. We asked respondents whether biometric technology is a worthwhile investment for banks.
As with smart cards, the basic
technology has been around for more than 20 years, but neither has been deployed significantly in the U.S.
Consequently, neither technology prompted much additional comment from our respondents.
Still, none dismissed biometric identification. Andersen's Sellers suggested iris scanning "is the one" because it's "safe and affordable," while Cybergnostic's Greenawalt likes thermal scans (of a person's body temperature, taken from 15 feet away) because they are "non-invasive." The strongest endorsement of biometric technology came from TANTAU's Klante, who maintains biometrics won't catch on terribly soon but eventually "is going to be the security model in financial services."
Is interactive television a bit like smart cards, "gee whiz" but going nowhere? Some say additional bandwidth, in the form of digital TV
signals, will make television a forum for all sorts of transactions, includ-
Forrester Research Inc., Cambridge, MA, reckons interactive TV will generate nearly $7 billion in "t-commerce" by 2004. Our judges were asked to rate iTV's potential for banking.
"Still too soon to matter," says Demeo. "Ho-hum," says Johnson. "Holds great promise...access to a customer base willing to bank on TV before they bank on the computer," says Ablett. Clearly, the jury's still out.