New Bank Card Regulations Affect IT Shops

Archive for June, 2009

Tuesday, June 30th, 2009

I’ve reprinted an article from the July issue of Bank Technology News below. The author, Rebecca Sausner, writes that the new US regulations on credit card companies will eat up most of these companies’ IT budgets over the next couple of years. This is good news for ‘body shops’ who will benefit because internal IT shops at these banks will be overwhelmed trying to rewrite their applications to comply with the new regulations.

IT vendors who supply more innovative Card Company solutions will see their projects sidelined for the next 12 to 18 months. Opportunity always accompanies change, though. Innovative IT providers should study these new regulations and attempt to partner with the Card Companies on applications that can help them comply while also adding customer service functionality.

COMPLIANCE

Card Co’s Day of Reckoning Hits IT

Bank Technology News | July 2009

by Rebecca Sausner

The new federal regulations overhauling credit card industry practices seemed radical, until President Obama signed a law in May that upped the ante in terms of timing and restrictions, and then in June proposed the Consumer Financial Protection Agency. Either alone represent a sea change for card lenders, requiring them, as the American Bankers Association puts it, “to overhaul their entire business models, eliminate specific practices, and reconstruct the way they extend credit and interact with customers.”

“Overhauling” and “reconstructing” have technology implications, but not always good ones. What will happen with the proposed new regulator is unknown – every bank lobby in the country opposes the idea. But the card law is a done deal, and represents such a major short-term challenge for lenders’ technology operations that one banker told MasterCard Advisors that compliance could absorb as much as 70 percent of the coming year’s IT resources at his institution. Everything from customer service technologies, billing and payment processing systems, disclosure processes, and pricing models must all be rewritten or replaced. Best guess is that most lenders will band-aid existing systems to meet the deadline – or face stiff fines – and overhaul down the road. “When you combine that the changes affect every part of the process, and when every part of the process involves technology, it’s going to be a drastic and very burdensome thing for IT departments,” says Michael Brauneis, director of regulatory risk consulting at Protiviti.

Certain provisions require entirely new processes to be added to the customer information file. Among them is the requirement that consumers opt-in to the product feature that allows them to pay a fee in order to exceed their available credit limit. For this, banks will have to build permissions functionality. Some institutions are looking at ways to comply without losing revenue. One solution: instant opt-in via a text message sent to a consumer at the point of sale. “They’re looking for something that could realistically be done so that it will be legal and consumers will accept the charge for the over-the-limit transaction,” says Greg Hedges, managing director at Protiviti.

The changes in how card issuers can utilize delinquency and other information to adjust credit availability will also be onerous, requiring that the links between the risk analysis and servicing side of the system be revamped. “I think it would drive even more the move towards more flexible technology where you could have three pricing tiers or have thousands,” says Dennis Dixon, president of Zoot Enterprise.

The new law may also “serve to wash a lot of the innovation that’s existed in the market out of the market,” Hedges says. “Organizations that had very sophisticated risk-based pricing, who started to look at consumer behavior, are trying to look at how they can keep those practices in place and still stay in compliance.” And for some, the rules may be too much to handle. “I strongly believe a lot of the smaller firms are just going to exit the business,” Brauneis says, adding the understatement of the week, “It’s already less attractive than it was a few years ago.”

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Tags: card companies, regulatory compliance
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Finally Time for Insurers to Develop Comprehensive Views of Clients

Friday, June 26th, 2009

Adapting to the new economic and regulatory realities requires some new thinking on the part of insurance executives. It’s always easier for them to continue using legacy systems without any significant changes. In times like these, however, change is needed. There’s a considerable amount of research predicting that insurance industry IT budgets will increase in the remainder of 2009. This is a good sign for the industry’s future, and for vendors selling hardware, software and services to the industry.

Research shows that insurance industry executives are more likely to seek advice from technology vendors than their counterparts in banking and most other industries. I haven’t seen any convincing arguments regarding why this is the case; but anecdotal evidence from our clients supports it.

A recurring theme in media predictions and analysts’ research is that insurers are investing in better underwriting and improved risk management. These offer good and necessary improvements, but only on the tactical level, i.e. incremental improvements in efficiency.

Technology providers ought to focus on changing the way insurers operate strategically and help them to place greater emphasis on customer lifetime value. It requires some creativity and a change of mindset. It’s amazing to me that this is still an issue. Twenty years ago, when I was in Digital Equipment Corp.’s Insurance Industry Consulting Practice, we were addressing ways (mostly data warehouses) of building 360 degree views of insurers’ clients across lines of business.

It may be that, given the current environment, insurers are finally feeling enough pain to take the steps necessary to increase value and profitability by better knowing their customers. It takes more than just a vision to make things happen, though, especially with such a high level of uncertainty in the air.

I’d like to hear from insurance executives, research pundits and IT providers out there:

Is customer knowledge across lines of business still the holy grail for insurers?
How are you solving this issue?
Do you think insurance industry executives are finally ready to tackle this beast?

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Tags: digital relationships
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Digital Relationships

Wednesday, June 24th, 2009

Business to Business Moves Online

It isn’t news to you that the nature of your relationships with your clients and prospects has changed. Existing relationships are more difficult to maintain as the people you used to deal with leave their posts, and their replacements (if there are any) are much less inclined to engage with IT providers. Cultivating new relationships is more difficult because prospects don’t feel the need to interact with IT providers until they’re ready to buy. They do their research online. If they contact you, the conversation will be about price.

Relationships

What may be news is that there’s a more cost effective way to build, nurture and maintain relationships with clients and prospects. You don’t have to be in the same room (or the same country). You can build the trust online that forms the foundation of every sale. With one caveat – the relationships you build must be authentic. Everybody has a well-honed BS detector today. If you aren’t in it for the long haul, if you’re just trying to make your quarterly numbers, resign yourself to competing on price.

Return On Influence

There’s networking and relationship-building for business, and there’s ‘sales disguised as networking’. Don’t confuse the two because your prospects won’t. The first one is truly helpful because he wants to make and keep relationships. The second one is interacting only to fill an immediate need.

By being helpful over time, even when there’s no imminent payoff on the horizon, you become a trusted advisor. And you’re able to accomplish this fairly easily, because it’s a one to many relationship. By communicating relevant and useful information through your blog (and commenting on other appropriate blogs), and/or a newsletter, white papers, videos, your website etc., you build a reputation. As long as the content you develop is high quality, people with an interest will find it and disseminate it to others.

Starved for Time, Not Information

It seems counter intuitive. Why develop more content when people don’t have time to consume the information that’s already available to them? If you develop content that resonates, or informs in a way that’s valuable, or entertains (or preferably, all three), people rightly perceive it as a time saver. They didn’t have to hunt down these tidbits, assimilate them and think them through – you did it for them.

Content Strategy

Of course, you can’t deliver useful, relevant, compelling information off the cuff. You must determine what your positioning is. What subject matter do you want to be the trusted advisor for? And who are your target prospects? Once that’s done, you can develop a content strategy that outlines the research you’ll do and the topics you’ll cover. An added bonus is that, as search becomes more contextual (see Bing, Kosmix and Duck Duck Go), your relevant content becomes your search engine optimization (SEO). No need to trick the search engines into driving traffic. The same valuable information that keeps people interested, will also draw the interest of the search engines.

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Tags: content strategy, digital relationships, return on influence
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US Insurance Regulatory Reform Affect on IT

Sunday, June 21st, 2009

I found this post by Mike Fitzgerald at Celent. It’s an insightful review of the Obama plan for regulatory reform, and how it will play out for insurers and their technology providers. I’ve posted it below in its entirety. Bottom line – new compliance regulations are going to require upgrades to data management tools.

“Insurers must prepare now for stress on their data management and compliance processes.”

Thanks, Mike!

Federal Regulatory Reform of Insurance – The First Salvo

Post by Mike Fitzgerald
June 19th, 2009

The Obama administration published its white paper on financial services industry reform this week, Financial Regulatory Reform: A New Foundation, Rebuilding Financial Supervision and Regulation (http://www.financialstability.gov/docs/regs/FinalReport_web.pdf) . This will now serve as a baseline against which the legislative process can act. So, while this is not law yet, there are some broad trends which can be noted in the approach which will have implications for insurance firms and their technology response.

A high level review of the document reveals the broad goals for insurance industry regulation and the proposal of two regulatory agencies which will directly affect the way business is done. Taken from the report, the principles underlying the recommendations specific to insurance are:

Effective systemic risk regulation with respect to insurance
Strong capital standards and an appropriate match between capital allocation and liabilities for all insurance companies
Meaningful and consistent consumer protection for insurance products and practices
Increased national uniformity through either a federal charter or effective action by the states
Improve and broaden the regulation of insurance companies and affiliates on a consolidated basis, including those affiliates outside of the traditional insurance business
International coordination.

I anticipate much angst around points four and five, especially as these directly challenge the state regulatory set up and its effectiveness and efficiency. On a broad level, no one can argue that these are worthy goals, but how they are accomplished will be contentious.

The establishment of two regulatory agencies is proposed – the Office of National Insurance (ONI) and the Consumer Financial Protection Agency (CFPA). The duties of the ONI are fairly well detailed. From the report: “The ONI should be responsible for monitoring all aspects of the insurance industry. It should gather information and be responsible for identifying the emergence of any problems or gaps in regulation that could contribute to a future crisis. The ONI should also recommend to the Federal Reserve any insurance companies that the Office believes should be supervised as Tier 1 FHCs. The ONI should also carry out the government’s existing responsibilities under the Terrorism Risk Insurance Act.” The ONI will also serve as the U.S. representative to the International Association of Insurance Supervisors with “the authority to enter into international agreements, and increase international cooperation on insurance regulation.”

The potential impact on insurance of the CFPA is less clear. The report states that it would “protect consumers across the financial sector from unfair, deceptive, and abusive practices in credit, savings, payment, and other consumer financial products and services”. Insurance products, particularly life instruments such as variable annuities, are not specifically mentioned. The emphasis is on preventing a repeat of the perceived improprieties seen in the mortgage and credit card areas. However, it does not specifically exclude insurance and “other consumer financial products and services” is a very broad area.

Some of these lines will be drawn as Congress develops its legislation. Many, especially where Federal responsibility ends and state requirements begin, will only be determined once the Federal system is in place and active. The practical impact to the insurance industry is that there is another sheriff in town now and he will be demanding our time and attention. Companies must prepare now for stress on their data management and compliance processes. (See the Celent reports Insurance Data Mastery Strategies http://reports.celent.com/PressReleases/20081126/DataMasteryStrategy.asp and Insurance Data Mastery Solution Spectrum http://reports.celent.com/PressReleases/20081203/DataMasteryVendors.asp).

Pending upgrades to data management tools should happen now and any planned data conversions completed. Companies without a robust reporting environment should invest in these capabilities as the up front investment will be less than the continued expenses associated with a “catch up” approach. In 2010, plan for short timelines for compliance and a more confusing and expensive regulatory landscape.

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Execution – Get’r Done!

Thursday, June 18th, 2009

This is the area where an outside marketing agency can most help an SMB IT provider. Precise targeting, compelling messaging, attractive design, etc. won’t result in more qualified leads if they’re never implemented.

Proactive Not Reactive

This is going to sound like advice from your Dad, or your high school coach, or your spiritual mentor – because it is. It’s common sense and it applies to many facets of life. You have to know what you want. You have to have goals and direction before you launch any endeavor. When you have goals and direction, you can put together a step by step plan to get from here to there.

If you don’t have that plan in place, you’re vulnerable to the influences of many. To put it in terms of a marketing plan for an IT vendor, (this is just an illustration) the desired goal might be to secure face to face meetings with five bank CIOs to brief them about a new SaaS back office banking application. You know your close rate is 40% when you meet with qualified prospects, so these meetings will net you two new accounts.

How do you get from here to there? You might:

develop a demographic description of the bank CIOs most likely to be interested in this solution.
rent a list of 200 CIOs who meet your criteria, containing their physical addresses and phone numbers.
send each of the 200 a letter on company stationary introducing yourself, listing the benefits of the solution, and giving a landing page address where they can learn more.
post the landing page where 20 of the 200 find more detailed information about the solution.
include a registration box where they can input their first name and email address to receive a case study re the solution.
send the case study as an attachment to an email to the 10 who registered. The email thanks them for their interest, and tells them that a ‘solution consultant’ will be calling them within 48 hours to answer any questions they may have. The case study outlines an installation of the solution at a bank similar to theirs. It’s clear by the testimonials and ROI quote, that the case study CIO is a hero at that bank.
call the 10 CIOs and secure meetings with five of them.
meet with five of the CIOs, and eventually close two deals.

It seems like a lot of work to get from here to there, but consider the alternative. Cold calls, advertising, golf tournament sponsorships, etc. – all shots in the dark. You may or may not be reaching an audience that can actually buy what you’re selling. You’re messaging is generic and irrelevant, because you don’t know who you’re talking to. You’ll spend a lot of time qualifying and educating people who are never going to buy.

This is a typical scenario that I see every day. It’s wasteful. Just as much money is spent, maybe more, with little or no results.

Why Does This Happen?

There are five main reasons:

It’s nobody’s job to do the work described.
The skill set needed isn’t on the payroll.
There’s no plan, process or roadmap in place to provide direction.
You don’t want to spend the time necessary to source qualified external professionals (and don’t know where to begin).
You can’t afford the fees charged by full service agencies.

Most SMB IT companies can’t justify the expense of having an internal Marketing department. Those that are serious about gaining market share, even in a down economy, are finding external marketing consultants who understand their products, services and marketplace; and can quickly put together a team containing just the right skills and talents for a specific project.

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A Matter of Trust

Friday, June 12th, 2009

This is the core of what acSellerant is about, and what all Marketing should provide. It sounds basic, and it is. Everybody knows that trust has to be established before a sale, especially of complex and high ticket items, can occur. What is new is that it’s become increasingly difficult to establish trust. The internet has distanced buyers from sellers. If you can’t get in to see a prospect, how are you ever going to build trust?

trust

Useful and Relevant Information

Most business to business (B2B) companies use their website as brochureware. Boring, static descriptions of their company, its products and services. So easy for a prospect to click away to a competitor site. You just lost a sale and don’t even know it.

What do you do when you’re meeting with a prospect in person? You pay attention to the prospect. You ask questions to uncover problems that, maybe, your products and services can solve. And then you listen.

When prospects find you online, they already know they have a problem and they’re actively looking for solutions. There’s a whole discipline called search engine optimization (SEO) that’s devoted to getting companies, products and services found online. We’re going to cover that in depth in later blog posts, but for today we’ll focus on after they’ve found your website.

Golden Opportunity

Think about it. This individual is looking for what you’re selling. They’re already qualified, to a degree. How do you persuade them to contact you, to ask for a sales call? In stages.

Remember – your goal is to build trust. Establish rapport. Let the prospect know that they’re in the right place and that you might be able to solve their problem. Give them information that is meaningful and helps them to make an intelligent buying decision.

Above all, you have to tell the truth. You can’t build trust with sleight of hand or half-truths. If a marketing agency even suggests something like that, get rid of them. This is the age of transparency. Remember Hillary Clinton’s story about dodging bullets on the tarmac in the Mideast?

A quality marketing agency will help you build a compelling (yet truthful) story around your products and services.

Layers of Complexity

Odds are your product or service (since this is a blog for IT vendors) is fairly complex. Figure out all the questions your prospect will need to have answered before they buy, and give them the information they need. I’m not suggesting that you reverse engineer your product on your website, but you must give prospects enough information, in bite-sized bits, over time, to get them to the point where they’re ready to make a buy decision and they’re willing to meet with a sales person.

If you do this correctly, a number of things happen. While taking your prospects on this journey of discovery, you’re:

educating them about your company and its products and services;
very gently, almost imperceptibly, persuading them;
proving to them that you’re trustworthy; and
ultimately, becoming a trusted advisor.

Today, your website and other online content (blogs, case studies, email messages, white papers, etc.) are the tools to use to build trust with prospects.

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Tags: useful and relevant information
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Bank Technology News Lists Top Ten Tech Companies

Thursday, June 11th, 2009

We’re overt in stating that acSellerant only works with smaller IT companies – 25 to 150 employees. Then why include a magazine article that references much larger companies? Because Bank Technology News‘ criteria for inclusion on this list isn’t size, but effect on the marketplace. The publication lists its reasoning behind these selections, and that gives us some insight into where the banking technology industry is heading:

Everything has changed and BTN’s 10 Tech Companies to Watch keeps pace with the times. In years past, the ranking called out innovative startups with the potential to impact the financial services landscape. This year’s list recognizes triumph via acquisition, the eminence of efficiency, and the importance of security.

From the ‘deals’ category comes this year’s most influential event, and BTN’s number one pick, Fidelity National Information Services’ planned acquisition of Metavante likely to unleash competitive pressures that rewrite the core processing landscape in the U.S. Also ranked in recognition of the power of strategic purchases are Mastercard, with its Orbiscom buy; Sybase365, which packs on mobile payments dominance with paybox; Oracle’s deal for Sun; and M-Com, likely to set in motion a mobile banking juggernaut thanks to its alliance with Fiserv. Efficiency plays can be found in Verari Systems, with its uber-efficient data centers in a box, and Encomia, which rids the lending process of paper. The final three companies: Secerno, Silver Tail Systems and SAS, all make the cut as security plays of a sort, with SAS given the nod for its impending release of a truly enterprise-wide GRC platform.

This year’s selection process was daunting. If only the list were longer we’d include uGenius, for its take on convenient deposits; First American, for its place at the heart of automated valuation; Passageways, for its community bank compliance training; Billeo, as a promising payments play; and Hyland Software for its ECM SaaS efforts. These recovery-focused efforts will hopefully engender a future dominated by the renewal of forward-looking R&D. —Rebecca Sausner, Editor-in-Chief

1. Fiserv / Metavante

For Jack Henry and Fiserv, it was the rudest kind of alarm for an April morning. Archrival Fidelity National Information Services agreed to buy Metavante, turning the already cutthroat bank IT vendor game into a battle royal.

2. Silver Tail Systems

When a company builds a website security product designed to detect and prevent fraud perpetrated via website attacks, the market ought to take notice.

3. Sybase 365

Hearing about all the cool advanced mobile payments applications in production around the world – particularly in developing countries – is enough to make an American mobile banking executive feel a little inadequate.

4. Mastercard

MasterCard acquired Dublin-based software company Orbiscom in January for $100 million, hoping to empower card holders with a new generation of tools that include budgetary features and security controls. If the deal delivers, it will be a game changer.

5. M-Com

The last year has been an interesting one in the mobile banking world, as players that used to lead the pack appeared to struggle and newcomers booked deals that gave them major leverage in the U.S. market. Enter M-Com, which inked a deal to power Fiserv’s Mobile Money product line.

6. Verari Systems

Where banks park their data these days is at the heart of countless technology initiatives – whether it’s in the cloud, in a newly-virtualized server environment, or, in the case of Verari Systems’ customers, in the parking lot.

7. Encomia

Everyone’s got an opinion on what caused the mortgage meltdown, but Andy Dubinsky’s is one of the rare public criticisms of the market embedded with a forward-looking solution.

8. Oracle/Sun

If Oracle’s planned purchase of Sun is successfully completed, it will gain a connection to myriad software platforms built on JAVA by a number of other tech firms. That would put Oracle on the 50-yard line of systems integration, data management projects, the advancement of remote employee and consumer access, and a number of other major tech initiatives impacting thousands of banks in the United States and abroad.

9. SAS

SAS this year will leverage its considerable analytic capabilities and four-figure client base to plot a sweeping grab for market share in this highly competitive segment by releasing a series of new GRC-oriented software.

10. Secerno

UK-based Secerno makes the Top 10 list based on its unique take on database security. The company calls it active database control – as opposed to database activity monitoring – but it essentially comes down to real-time whitelisting of allowed queries, and blocking those that aren’t approved.

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Archive for June, 2009