Commentaries and insightful analyses on the world of finance, technology and IT.

August 20, 2015

Identity Controls Access; Access Provides Opportunities

-by Kuljit Singh and Mayur Bansal

The fact of who or what, a person or a thing is, is a definition of identity; which simply indicates a confirmed way of identifying a person. And one of the reasons for having, or giving an identity, is to help the person get what is his / hers, or what he / she deserve; that is, help the person have "access" to his / her things. But, in a world where fakes and counterfeits are everywhere, why should identity be an exception? And the identity becomes the victim, most often, in the virtual world. Banks have always been a Holy Grail for hackers, and one of the routes to get to that Holy Grail, has been assuming others' identities (euphemism for identity theft).

This fascination of hackers has thrown a challenge to banks - to ensure that only the right people get the right access, to the right resources. And further ensure that they do the right thing with those rights and resources. The management of this conundrum is called Identity Access Management (IAM). The reason banks or financial institutions need IAM is because any breach, dereliction, or plain neglect, can have cataclysmic consequences in the form of revenue loss, higher operating costs, and damaged reputation.

For instance, a malware called "Carbanak," which allowed hackers to surreptitiously install spyware on more than 100 banks' computer systems, has said to cost banks $1 billion - apart from the reputation and credibility lost, not only of targeted banks, but also of the industry as a whole.

So, in the game of one-upmanship, where hackers try to outdo banks' security, and the banks' efforts to keep the interferences from hackers to a minimum - if not obliterate it completely - the technology companies completely sided with banks. They have also been acting as guardians of the financial galaxies, by coming up with new ways and systems to verify people using PINs, passwords, fingerprints, voice, retina, even veins and other biometric sensed identifications. These technologies not only check the infringements by hackers, but at the same time, provide confidence to customers, and keep their faith in the entire banking system intact.

The cases in point - ING Bank is introducing voice-activated mobile payments, and many banks in Brazil are using veins to identify a person. Similar biometric systems have been adopted by many others.

With the combination of biometrics for identification, and security features for robustness, technology has been trying to retain the faith of customers in their banks and other financial institutions. This, in turn, has helped tide-over the heavy weather that was created by hackers.

Since hackers are not going away anytime soon, protecting the interests of banks, governments, and customers, will continue to be a field full of action for the foreseeable future. If we want to put a dollar-value to this opportunity, the MarketsandMarkets report on Identity Access Management estimates that the IAM market will grow to be US $18.3 billion, by 2019. This is an opportunity for us to train hard, and attain excellence, as true leaders do.


August 12, 2015

Pressure for Some, Opportunities for Others

-by Kuljit Singh and Mayur Bansal

Even though the crisis first started in 2007, the aftereffect is being felt even now. The major player or anti-player (as some banks feel it to be), which has emerged from all this is an entity called the regulators, which seems to be the keystone holding the entire edifice of financial services together.

In a broad sense, what the regulators have been trying to achieve is to decrease the areas of disingenuous liberties of the banks, and increase the resilience of the sector as a whole. To achieve the former, limit on how far banks can use internal models to manipulate calculation of capital for credit and market risk is being sought by regulators. Such less-than-honest use of internal models by banks have drawn a lot of flak from both regulators, and investors. To achieve the aim of resilience, regulators are pushing banks for macro-prudential measures such as higher capital, leverage, and liquidity requirements to enhance resilience of banking sector.

The case in point is the European Commission (EC), with around 39 different regulatory reforms and policies, which has been at the forefront in devising policies to stabilize, and make the markets more transparent. Some of the major areas covered are: Capital Markets Union, Banking Union, Prudential Requirements for Banks, Retail Financial Services, MiFID, and Accounting.
The US brought changes in its regulatory structure to make up for deficiencies identified in the 2008 financial crisis through Dodd-frank, and Consumer Protection Act 2010.

Then there are those regulations whose jurisdiction is global - BASEL for example.

Apart from the regulatory pressures, banks also have to deal with variety of economic and commercial factors, including the weak economic environment, low interest rates, market over-capacity, strong competition, technological change, low margins, and high cost bases.

The bank's model is based on building strong synergies between the commercial and operational side of the business. However, these regulatory pressures are disturbing the synergies, especially among universal or cross-border banks, rendering their strategic assumptions obsolescent, thus requiring change in the business model. The main aims that are being sought by these models are just the right mix of return, capital and liquid resources along with acceptable degree of resolvability.

One of the major underlying component of all these aims put forth by the new model is cost reduction. This is why investments in IT by banks in the long run, could help in improving income through increasing services to the customers, by containing risk and providing security in the cyber space which would make the entire system robust and would encourage confidence in all stakeholders. Banks should also be able to benefit from centralized and streamlined infrastructure platforms which are able to support myriad and complex business and customer propositions, through in-house solutions or by help from vendors/service providers.

To achieve their goals, banks are pursuing different paths or strategies, but in each one of them, the role of technology is indisputable. Going forward, as banks try to steer their way through the maze of regulations, and other pressures, technology service providers would find many opportunities. Hence, for the technology providers there is plenty of hay to be made, and the sun is going to shine for a long while.

Next generation IT for banking - Challenges and way forward

The bank of the future will be very different to the bank of today, thanks to a variety of factors - technology changes, client needs, regulatory pressures and new competition - which will transform the way banks operate and respond to business imperatives.

Today's Bank
Even today, banking is largely aligned with organizational business structure. While this worked in the past, emerging trends suggest a need for deeper thinking in organizing the business applications that drive competitive advantage, in building the banking shared services utility model.
Exclusivity of services and confidentiality of information have always been valued by the industry, and associated expenses treated as an inevitable cost of doing business, which banks charged back to the end customer, who didn't mind paying because the banking returns were adequate. This meant banks had little reason to optimize their cost structures, which took a back seat to service availability and support in driving IT decisions.

The Changing Paradigm
We believe the bank of the future should focus on the following dynamic areas:
1.Products - constantly evolve to cater to demographic/regulatory/technology changes
2.Channels - accelerate digitization and integration to provide single view to clients
3.Operational - rejig internal systems, processes and governance model for agility and adaptability to changing market dynamics
4.Technology - watch out for new challengers and also opportunities to serve clients with differentiated offerings

Bank of the Future
Heightened competition and the pressure to optimize service costs for larger clients drove banking organizations towards outsourcing and offshoring. Leading analysts, such as Gartner and Tower Group, have estimated that 30 to 50 per cent of IT functions is outsourced  . Over the past ten years, banks have made significant cutbacks in fixed costs, while increasing the variable component to become more business-agile. Also, they have mostly moved away from individual-based programming and supporting applications to service level agreement-based development and support.
However, the past two years have really changed the landscape of the IT organization within the financial services industry. In the interconnected world, information exclusivity does not last long enough to be advantageous. Banks need to increasingly redefine their IT systems to support business initiatives to respond to emerging competition from non-banking businesses, such as telecom and retail. 

Destination IT
There's a new thinking in the IT organization. Changing market dynamics and the predictability   of IT applications for various business needs, is leading to the creation of shared service utilities across functions. Still early-stage, these concepts can enable IT organizations to become more efficient while rendering superior support to business. We believe banks must explore the opportunity to reshape the IT organization to lead such industry changes by examining:
•The practicability of building a shared service organization across business units: Shared services within certain functions of single Lines of Business (LOB) bring some benefits, but also pose issues in cross-border trade on account of varying regulation. Building cross-LOB supporting services is yet to be understood in detail. Typically, organizations are wary of disturbing a working process, preferring to wait for first movers to succeed before making radical changes to the IT organization.
•Significant challenge in aligning mindset among diverse teams across LOBs:   Consolidating services based on utility requires broad consensus among a diverse set of business stakeholders, and a leaner organization. While this may force unpopular decisions,  consensus is necessary to mitigate the risk of disruption. 
•Difficulty in analyzing cost benefit: Rebuilding legacy platforms supporting various business processes, consolidating databases, migrating applications and reorganizing message flows, and changing downstream application interfaces is difficult to conceptualize and analyze from a cost-benefit perspective. This is further complicated by the choices available today. Given the scale of change, decision makers are finding it hard to justify a future case based on current realities. Since some decisions are forward looking, quantifying their outcome is  difficult, and they may need a leap of faith to happen. 

In Conclusion
Banks building a business-aligned, real-time responsive technology landscape to support next-generation banking should take the following dimensions into consideration:
•Lower cost of transactions and higher operational efficiencies - through services standardization and harmonization of the lifecycle managed across processes  .
•Leveraged data management through proper lifecycle management - enabled through enhanced dashboards, minimum error, and complete visibility into banking relationships with customers and suppliers.
•Enhanced risk management services - through proper alignment of risk servicing infrastructure enabling a consolidated view of various risks across entities, accounts and geographies.
•Adaptation of "Single Customer View" - with a complete and accurate customer warehouse. Provisioning an organization-wide standard of customer data for representation, access, control and governance improves cost and operational efficiencies.

Along with simplifying application architecture and supporting infrastructure, banks must address the key issue of mapping raw data from source systems into an appropriate canonical representation that downstream applications will consume as they are provisioned. Thanks to Service Oriented Architecture and Batch Integration mechanisms, today's technology is up to these challenges.

August 10, 2015

Risk Technology: Let the CAT out of the bag

Today's banks are facing a common challenge across the globe: mounting technology costs and increasing compliance requirements. New organizations are surfacing at every nook and corner to disrupt normal life through violence, and are being funded heavily to conduct global attacks. Due to the way the banks have operated so far - coupled with the macro conditions globally - a need has arisen for tighter controls and more stringent compliance requirements. Everyone talks about the cost aspect all the time; this blog will focus on the transformation approach banks need to take in enterprise risk technology. A cross-talk within LOBs would definitely be successful in catching the big fish that currently operate outside of the radar.

The need to focus on risk management and better compliance requirements, arises from the growing fraudulent activities the world over, and the demand for illegal fund placement to feed the current crop of terror networks. The need of the hour for all financial institutions is to, at the least, talk internally across the boundaries of LoBs. Let each of them take their CATs out, that is, Customer information, Account information, and Transaction information. Bring these three attributes centrally and imagine the possibilities of obtaining Predictive, Behavioral, and Business analytics which can out-pattern any application in the world. Let's take a look at the individual components of this CAT -

1. Customer information: Each LoB holds its own System of Records to capture customer information, and their core attributes like party key, bank-assigned unique numbers, name, address, and home and work details. Most of the times, the LoBs do not talk to each other and tend to hold back this information.

2. Account information: Each LoB holds some specific account attributes, like associated owners, which are never cross-reconciled across the LoBs. This leads to missed accounts when trying to sieve them through various rule based scanners.

3. Transaction information: This is the most critical of the three and perhaps the most immature part across organizations. The fraudulent minds take advantage of this vulnerability within the bank technologies and are able to successfully siphon off the money,  pass through undetected during scanning, or are able to place and direct the illegitimate funds to feed the weeds. Not even the big banks of the world have a mature LoB-wide transaction scanning with reasonable SLAs to take informed decisions. By the time something fishy is identified, they have missed the bus by a long while.

Like all problems, these security issues have a solution too; the need of the hour is for all these CATs to be out on a single hub, reconciled and analyzed, and then discussed upon as a first layer of security checks. This hub should handle the billions of daily transactions (the average volume for big banks ranges between 40-50 billion transactions, everyday) of various forms from various LoBs, reconcile the involved parties and accounts across transactions in order to get the complete picture, and then assign them risk ratings in order to get a clear classification of High-Medium-Low Risk customers, and their relationships with the bank.

Coupled with Predictive and Business analytics, this can work wonders and truly help investigation teams - within and outside the banks - tighten the fund movements, and curb the illegitimate fund placements and fraudulent activities.

This system of LoBs letting their CATs out of their bags, with a clear understanding and good coordination between them, will go a long way in curbing funds to undesirables the world over. However, most of the banks and LoBs currently operate in silos; which results in divided information with no real connection to establish a concrete risk profile. Many transactions pass under the radar and end up funding wrongdoers across the world. Only a well-connected kitty party of these CATs, across LoBs, will mitigate the risk these financial institutions run, at present, by failing to catch the suspicious transactions and parties, and paying penalties for their failures. More than improving the loss liabilities of banks, this system would directly impact the moral system of the people by cutting the financial pipeline to the malignant networks and rings around the world.


July 20, 2015

Design considerations when using crypto currencies and distributed ledgers

Crypto currencies and distributed ledgers are the latest buzz in the financial services industry. Surprised! - Did not Bitcoin originate as a radical innovation and soon got dumped in to the dark side of underworld transactions? Central banks were concerned about how to control Bitcoin usage and warned of its risks, slowing down its adoption by mainstream. Nevertheless, researchers and innovators continued to build on Bitcoin and its technologies. Quietly, new innovations based on the utility of Blockchain and solutions to inherent issues in Bitcoin emerged. The technology has evolved from Bitcoin to Alt-coins to new technology layers on top of Blockchain to new peer to peer distributed ledgers very different from Bitcoin. Now, the world sees Bitcoin as an important nascent step in the evolution of crypto currencies and distributed ledgers.

Continue reading "Design considerations when using crypto currencies and distributed ledgers" »

July 15, 2015

Bitcoin ATMs - A hype or the future?

-by Irene Varghese and Shivani Aggarwal

Human race has seen drastic change in the money system, from barter system to physical currencies and now the much talked about crypto currencies - Bitcoins for example. If estimates are to be believed, then the number of active bitcoin users worldwide will reach more than 4 million by the end of 2019. If cash gets replaced by Bitcoin, then why not Cash ATMs by Bitcoin ATMs?

Jargonized Bitcoin ATMs, provide an efficient and secure way for people to exchange bitcoins - the decentralized digital currency - for cash without the need for a humans to facilitate the transaction through bitcoin exchanges - which faces hacking and fraud threats. The world's first-ever Bitcoin ATM was opened in Canada, in Oct 2013, by Robocoin - enabling Bitcoin owners to exchange the digital currency for cash, and vice versa!

Bitcoin ATMs are gaining popularity, with the number of Bitcoin ATMs going upto 400, registering impressive growth in 2014. North America is leading with more than 130 machines installed throughout the U.S., and 69 machines in Canada.

Bitcoin ATMs are worthwhile mainly because they make peer-to-peer, decentralized currency, online money transmission easy and in a near instant exchange time - taking less than a minute! Moreover, facilitates anonymity by allowing you to convert directly from cash to Bitcoin -- without attaching a bank account or identity credentials. Only a biometric palm identification is required, which is easy, quick, and at the same time, a unique identity confirmation. For consumers who want to use crypto currency right away to make purchases, buying Bitcoin through an ATM involves much less time and risk! Bitcoin ATMs also assist tourists' withdrawal of cash in native cash at competitive rates, without needing a bank account or ATM card.

Peeping into the days ahead, Bitcoin ATMs look promising for a cashless future, as they may prove to be the most useful tool in enabling cross-border e-commerce especially for the under-banked parts of the world! Robocoin has very recently released a second-generation Bitcoin wallet, which facilitates instant person-to-person money transfers. Consumers can send money on one end, and a consumer at the other end can withdraw it from a Bitcoin ATM even in under-banked parts of the world!

When crypto currency as a concept succeeds, ATMs will become incredibly opportune and a simple way for mainstream consumers to exchange cash for crypto currency. Thus, Bitcoin ATMs definitely have a future - promising truly hassle-free money transactions.


June 30, 2015

Enabling Workforce Management Solution in Bank Branches: Recommendations

In my last blog, I had posited that, a bank's branch channel transformation is incomplete without a robust technology-enabled Workforce Management (WFM) solution. This blog looks at how a bank can enable its WFM implementation.

1. Driver: Operations and not HR should drive WFM implementation initiatives. This is because, Operations has a better understanding of the channel's service delivery, productivity, and costs imperatives. It is important to note that Human capital management (HCM) and WFM are not one and the same.  While HCM is concerned with hiring, compensation management etc., WFM is all about the execution and optimization of the staff's efforts and productivity on a daily basis. To enhance ownership, all levels of branch operations should be involved from the early phases of a WFM implementation.
2. Technology: Enabling a robust WFM solution that has strong technical capabilities underpinning is crucial. Many WFM solutions that are still guided by archaic principles, lack optimal automation (e.g. manual data entry is required), require long lead-time for insights generation, have interoperability issues, and lack integration capabilities. The system's usability, flexibility, and agility are all key requirements for a robust WFM solution. The solution should be quickly deployable and require minimal training. It should integrate well with the General Ledger, HR, Origination, Marketing, Sales, CRM, and other systems, to allow for easy linking of the bank's branch performance with the workforce models and the staffing levels. Web-based WFM interfaces are also important for allowing the branch managers to forecast the staffing models according to their requirements and as per their convenience. Mobile enablement of WFM is also desirable in order to allow branch/division managers to review their workforce forecast and metrics on the go. Mobile capabilities would also let branch staff view and confirm their weekly schedules on the go.
3. Structured and phased approach: Basing the WFM business case on empirical evidence is crucial. In addition, the ROI assumptions must be validated against the results, post-implementation. A phased approach for WFM implementation is recommended - for example, a bank could first enable the core WFM functions around attendance and time. In the next phase, functionalities around scheduling, absence management, demand forecasting etc., could be implemented. Beyond that, eLearning, workforce analytics, desktop analytics, mobile self-service, and other advanced capabilities could be enabled.
4. Resource pooling strategy for branches could be considered. In this, a pool of regional branch staff is maintained by the bank - over and above its dedicated branch-wise staff. The resource pool staff can be deployed to different branches in the region at a short notice, and as per the urgent temporary demand (seasonal peaks, focused marketing campaigns, unplanned key staff absences etc.) thereby ensuring that a high service-level is maintained. The resource pool staff must be cross-trained on all applicable branch activities, services and products. WFM solutions should be capable of addressing the resource pooling needs.
5. Organizational Change Management is crucial for translating the WFO insights into tangible benefits for the bank. Leadership's establishing of the WFM priority is crucial. All stakeholders must be aligned upfront, with regard to its WFM strategy, objectives, and goals. A PoC trial at the onset is recommended, as it would help gain buy-in of all stakeholders; and help in understanding the key performance indicators, such as target staffing strength. The bank's initial staffing targets should be conservative. Once this is achieved with relative ease, they can revise the targets more ambitiously. Customer satisfaction measurements should also be kept track of diligently, at all stages of the WFM implementation journey - to make sure the WFM insights' implementation will not affect customer satisfaction adversely. Ensuring enterprise adherence to WFM is important. Banks must take due note of the WFM insights and take optimal workforce related actions. All branch aspects - service, sales, and operations - must be considered in the WFM model. For e.g. time tracking is just one aspect. Staff self-service capabilities, demand, and availability-based scheduling, customer service, and sales quality etc. are all important aspects. Outstanding staff performances towards achieving the WFM targets should be duly recognized. Communication and training aspects should also be focused upon. Banks can also consider having a "Workforce Management Chief" for driving continuous improvement on WFM strategy.
6. Leverage third party expertise: Banks should engage leading WFM solution vendors and consultants. Also, leveraging Cloud-based vendor solutions can help reduce the initial capital and in-house WFM expertise needs. Managed Services options can also be considered by banks - especially by the relatively smaller banks that are short of finances and staff. In Managed Services, the vendor enables the WFM solution in a hosted environment and themselves perform most of the day-to-day WFM analysis, reporting, and forecasting activities for the bank.

Where banks have taken a structured approach towards their WFM implementation, the gains have been immense. For example, the Commonwealth Bank of Australia could immensely improve its customer service by optimization of its consumer-banking workforce, leveraging the workforce optimization, desktop, and process analytics solutions from Verint. 

June 29, 2015

Look and Learn - Exploring ideas from outside the industry

Historically, financial services has produced limited indigenous innovation, with most new ideas coming from non-banking players. So, it is not surprising that banks have been proclaimed the most vulnerable to disruption from next-generation entrants and their technology-led business models. But even as they look to compete and grow in this environment, is there an opportunity to turn that challenge on its head by learning valuable lessons from outside players?

As an illustration, let's take the example of Netflix - how they redefined themselves as markets evolved and what banks and other financial services organizations can learn from their approach.

Netflix - Motion Picture

Netflix started as a subscription based DVD-by-mail service in 1997. By allowing customers to keep a DVD for as long as they wanted, without penalty, they shook up Blockbuster's monopoly on the home entertainment business. Around 2007, after the phenomenal success of their DVD-by-mail model, Netflix added a streaming delivery option.
By 2010, Netflix's streaming business started growing much faster than the DVD-by-mail business. Reading the tea leaves, in 2011, the company decided to offer standalone streaming packages and hive off the DVD business as an independent subsidiary (Qwikster) . This was met with a huge outcry from subscribers. Netflix lost ~800K of their 26 million subscriber base that year and their stock plummeted to $54 from a high of $295.
Yet, as we look at Netflix today, their customer base has grown to more than 50 million and the stock price is ruling above $400. The company has moved over 80% of their customers to the digital channel and is producing content that's winning wide recognition, forcing competitors like HBO to follow their lead.

So, what did Netflix do right?

1. Reinvent the Business Model - One of their smartest moves was to recognize the power of the internet for entertainment and an increasing customer preference for online content , apparent in the growth of their "streaming only" customer base. Netflix responded by introducing streaming only monthly services packages, and significantly raising the price of the "DVD + streaming" package to discourage the DVD delivery option. At that time, this was met with significant resistance, but Netflix stood their ground to emerge a much stronger player in the media space. This is a great example of a company that is willing to reinvent their business model and also transform their identity by going digital.
2. Control the Supply Chain - Netflix is one of the largest buyers of content rights, having spent over $3 billion in 2014. Recognizing that better margins and market positioning are achieved through content ownership, the company has turned producer of original content (as an example, the television series 'House of Cards'). This is tightening Netflix's control over the supply chain and enabling them to attract new subscribers and improve profitability.
3. Use technology to drive business - Netflix has made significant investment in a recommendation engine. Today, 75% of movie selection is based on recommendation, not search. The company has also made key investments in ensuring speedy and uninterrupted delivery of entertainment by becoming the largest public cloud user (using AWS) and leveraging DevOps across the organization.

What Financial Services Companies can take from Netflix

1. Digital Transformation will require significant shake up of business models - Currently , most banks are focusing digital investments primarily on enhancing user experience. This needs to be significantly augmented with changes to business models, processes and value chains.
Today, there are very few examples of new digital business models in financial services, besides   Internet Only Bank - ING Direct, Capital One 360 and Robo Advisor, Charles Schwab's Intelligent Advisor. FIs need to create more business models that leverage the digital paradigm. 
2. There's a need for setting up and nurturing new supply chains - A classic example of supply chain control in financial services is the closed loop card processing done by AMEX and the insights they bring to their merchants leveraging the same. Chase launched ChaseNet, their merchant services offering in partnership with Visa to achieve similar control of their supply chain. ChaseNet, along with Chase Paymentech, ChasePay and ChaseOffers, enabled JPMorgan Chase to post $848 billion in merchant-processing charge volume (total amount charged by Chase merchants)  last year, up 81% from $469 billion in 2010.
3. Adopt evolving technology paradigms - Netflix has been a significant adopter of new computing paradigms, namely, the Recommendation Engine, Platform as a Service, Public Cloud and DevOps. This helps them meet ever evolving customer demand. Banks have similar opportunities to leverage technology to shake up business models, in the shape of Analytics, Digitization and Mobility.

Digital Transformation is forcing a new business order.  Its imperative upon Financial Services companies to redefine their business model to take advantage of evolving technologies like Netflix has done.

June 10, 2015

Workforce Management technology a must for true branch banking transformation?

While globally, consumer banks are focusing on transforming their digital channels (online, mobile); the branch channel would continue playing a crucial role. Branches would remain an important channel for banks to connect with their key customers, provide bespoke advice, and drive the bank's revenue and customer satisfaction. Although; to reap the maximum benefit, the future banks' branches need to be digitally transformed and have stronger multi-channel integration.

In years to come, the branches of proactive banks would offer a combination of state-of-the-art lounges equipped with Wi-Fi, Social features, digital queuing system and display, self-service kiosks, tablets for the customer-facing staff, video conferencing capabilities, kiosks and smart ATMs, video-tellers and many other innovative digital capabilities.

Amidst all these, a bank's branch transformation would still be incomplete without a robust technology-enabled Workforce Management solution. Workforce Management solution can provide a bank competitive advantage through the enablement of an integrated central staffing for the bank's branch, customer support center, call center, back-office operations etc. After all, for any organization, optimally engaged and skilled employees are its most valuable resource.

Why Workforce Management solution?

At a minimum, by using robust Workforce Management solution a bank can:

  • Efficiently forecast, plan, and schedule branch, call center and other back-office staffing requirements. Scheduling preferences and self-scheduling capabilities can also be enabled. The bank would be able to plan the deployment of staff in optimal numbers, at the right place and at right time. 
  • Reduce wait-time by minimizing under or over-scheduling of staff.
  • Revise its staffing forecasts and staff performance goals in real-time, based upon the staff-related KPIs. The staffing forecast would automatically consider historic staff performance data, workload information, as well as staff experience and skills attributes.
  • Reduce staff absenteeism costs, excess over-time, or leave liability.
  • Enhance staff satisfaction; with scheduling based on a staff preferences and availability, especially for the part-time staff.
  • Achieve cost and efficiency optimization with "shared" staff that can be deployed across any of the branches in the region, depending on the workload forecast.
  • Consistently enforce all workforce related policies.
  • Release branch managers' time by automating human resource management and administrative activities with the Workforce Management solution. Managers can now focus on more strategic activities like liaising and up selling to high value customers, and growing the bank's business.

More capable and advanced Workforce Management solutions can further help a bank in:

  • Staff coaching: Enabling robust workflow for staff coaching assignment, delivery, and tracking with individual evaluation and KPI scores generation.
  • eLearning: Providing automated training, delivered at the staff desktop at optimally planned times. This helps to keep staff continually updated on their evolving skill requirements, bank's processes, products, new regulatory requirements, and other relevant information.
  • Performance visibility: The unified solution can enable end-to-end visibility on staff work and processes. Branch managers would have a deeper understanding of their staff performance. Standardized frameworks for efficiently managing and improving the team and individual staff performance can be enabled. The solution can also aid in identifying training and execution issues. The customizable role-based staff scorecards and the predefined KPIs would aid staff in judging their performance against their goals.
  • Desktop Analytics capabilities of the solution can help the bank monitor and enhance its staff performance with the capture and measurement of their desktop application activities. Objective visibility into the staff's work performance at their desktop would be provided. Real-time guidance to staff can be delivered, as needed.
  • Identity management capabilities of the solution would help identify fraudulent callers to branch/call center. Customer-staff interaction security would also be enhanced.
  • Quality Management is enabled through secure capture, encryption, and archival of staff calls and screen interactions. The archives can be easily searched and replayed for liability protection, compliance, analysis, and general quality management. Efficient selection and evaluation of a large numbers of customer-staff interactions across numerous touch points can also be enabled.

What are your views on the role of a Workforce Management technology solution in the transformation of a bank's branch? I am keen on hearing your thoughts.


April 7, 2015

Belling The Cat - Addressing a dilemma faced by Investment Bank Risk Officers

Compliance in the trading world is more a topic for frequent discussion than proactive action. In case of investment banks, which significantly influence industry behavior, compliance is viewed more as a back-office function and hence, a cost centre. And when compared to profit centres such as frontline SBUs, the reputation of this function is a dampener for growth.

Though not publicly accepted, investment banks view many regulatory initiatives with apathy - just do what is required. Complying with the letter is more important than the spirit. In fact, if the front-office focuses on building flexible, real-time systems which are in line with stringent norms of microsecond advantage using superior process definition, technology and talent, regulatory compliance applications are built using batch processing legacy technologies. And the development team considers such assignments more as punishment posting than an elevation. In essence, effort is directed more towards 'complying'.

Although trading is supervised well from the perspective of 'front running' and helping their counter-party trader (prevalent in bond trading desks) within the investment banking, less has been achieved on employees' personal trading for a set of assets classes or individual securities. Over the years, there has been little progress on building a proactive mechanism of monitoring, reporting and possibly restricting personal trading. One reason is that monitoring personal trading significantly depends on manual processes such as paper submission using spreadsheets and investment banks lack the wherewithal to file personal trading details during an audit process. Where it exists, the process of filing external regulatory reports on employee personal trading is riddled with delays and inaccurate data attributes.

Within investment banks, employee personal trading falls under two categories - noncore and privileged. Noncore employees may not have access to privileged information and may fall in the outer layer. Privileged employees have privileged access to information related to the material interest of the bank. Such information has leveraging potential from the personal gain perspective. And while there are laws in place to closely monitor these conflicts of interests, many of the disputes between SEC / FSA and investment banks involve individual interests. These experiences form the basis for arguments to separate the research department from the investment banks.

Within an investment bank, the personal trading compliance process follows four distinctive phases:

1. Restricted list watch: Restricted list of securities are predefined and broadly communicated to employees who matter from the perspective of privileged access. This list restricts employees trading in securities where the bank has built the holding and calls for mandatory disclosure. Depending on the holding percentage which may vary from country to country, it is the bank's responsibility to maintain and update the restricted list to avoid any conflict of interest. FSA in the UK, as per rule number 7.3, checks for possible conflict of interest which includes front running (staff deals ahead of investors in the securities based on privileged access). Similarly, SEC 17j-1, rule 204-A-1 calls for the employee to obtain a duplicate brokerage statement and submit it to their employer bank.

2. Pre trade clearance: Banks have a list of 'what not to buy'. However, pre trade clearances are obtained through e-mails or by signing paper documents and often, this is done post the trade. The delay in correspondence between the risk office and an employee often results in a breach of code of conduct. Eventually, these breaches find their way into audit reports and draw the attention of regulators.

3. Broker confirmation: Though many employees diligently submit their confirmation duplicate to the bank, it is generally filed with the individual employee's records. There is hardly any automated process to reconcile the various broker confirmation receipts that an employee files from time to time. Tracing back to the point of any breach of trust is not only time consuming but also manual which means there is scope for human error.

4. Documentation: This is one of the weakest links in the chain. Poor documentation of an employee's personal trading history affect the firm's ability to pin point where the blame lies. From a compliance perspective, gathering information from various sources to synthesize and then arrive at a meaningful conclusion is still challenging.

Emerging regulations across the globe clamor for a different approach. Considering the external stimulation and more awareness on the need for better conduct internally, investment banks are looking for solutions that will enable them to stay informed and track employee personal trading to the spirit of the laws rather than the letters. Essentially, this requires behavioral changes at an employee level. But automating the process of gathering and creating reports on personal trading compliance would reduce the number of questions raised by the auditor in the short-term, and help in brand building in the long-term.