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Main Points

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40 TECHNOLOGY IRELAND 09/08

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TECHNOLOGY IRELAND 09/08 41

During economic recession, the wayin which an organisation applies

innovation to routine activities

takes on greater importance. The overheads

and associated costs once acceptable under

normal conditions of moderate growth

need to be brought into line. To achieve this,

an organisation will need to intelligently

adapt its current business processes and IT

infrastructures to maintain competitiveness

both nationally and internationally.

Innovative alignment of business processes

and technologies can help build upon an

organisations existing systems in order

to achieve higher levels of efciency and

productivity.

The Financial Services Innovation

Centre (FSIC) in University College Cork

was launched in February 2007 to provide a

R&D resource for national and international

nancial services companies in Ireland

on such things as the latest development

in the nancial services software

market. Innovation is unpredictable and

revolutionary. The centre aims to reduce

this uncertainty and exploit the power

of innovation through the development

of cutting-edge software solutions via acollaborative association of university staff

and the nancial services industry.

mBankingmCommerce encompasses a broad

area within nancial services, from smart

cards (mPayments) to internet banking and

mobile banking (mBanking), each providing

a specic set of services to meet the business

requirements of the end-user.

The cost of handling cash is being reduced

by replacing cash-payment with mPayments

such as credit cards and smart cards. For

example, MasterCardswith PayPassand

Visawith payWaveare new contact-lesstechnologies to pay for your small day to

day items. It helps to reduce queue times as

customers do not need to waste time looking

for change or mess with PIN numbers. On the

other hand, however, it can increase costs for

the acquirer and card issuers.

The acceptance of mCommerce

technologies varies considerably between

continents and even between countries.

The major hurdles for any country to take

advantage of mCommerce technologies stem

from national and international regulations,

availability of technological infrastructures

and the end-users trust and condence

in specic technologies under specic

conditions.

The growth trend has been strong over

recent years: $10.5 billion in 2004 and $24.1

billion in 2006, with a predicted $56.4 billion

for 2008. Mobile banking is making an impact

on the nancial services landscape; for

example, anyone with access to a cell phone

has a place to keep his or her savings without

needing a traditional bank account.

The proliferation of mobile phones

in developed and developing economies

provides a widely accessible consumer devicecapable of delivering mobile nancial services

ranging from text notications to phone-

based remittance options. For example in

2000, fewer than eight-million Africa-based

users owned a mobile phone; this number has

increased dramatically within a short period

of time to over 100 million.

The World Bank estimates that in many

countries, over half the population the

unbanked has never had a bank account.

The primary obstacles to offering mobile

remittance services in developing countries

are regulatory rather than technological.

MonMattCr$The Cork-based FinancialServices InnovationCentre says companiesin the sector should payattention to the reach ofthe mobile phone.By John ODonoghue

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42 TECHNOLOGY IRELAND 09/08

Since remittances qualify as a bankingtransaction, mobile operators would have

to comply with banking and nancial

regulations in both the sending and

receiving countries, making it necessary

for them to partner with existing banks or

remittance companies.

A regulated approach is based on

trusted nancial institutions (perhaps

in conjunction with third-party agents)

providing a formal money-transfer channel

which is carefully monitored by the

local governing body/bodies. With an

unregulated infrastructure, informal

money-transfer channels are poorly

monitored and prone to abuse (money

laundering; supporting illegal

activities). International law on

money laundering, terrorism

nancing, and fraud make

cooperation indispensable.

the unBankedHowever,

telecoms may start siphoning-off

traditional banking customers

who do not need all of the banks

services (such as mortgages).

In Latin America, fewer than10% of remittance recipients

hold a bank account. Therefore,

the remittance and unbanked

markets are an example of where

mCommerce and mobile banking

in particular will have a large

social impact on end-users daily

banking activities.

mCommerce solutions have been adopted

at a much higher rate within African and

Asian based countries than their European

counterparts. This is primarily based on

their communication infrastructure that

is, where their mobile services are readilyavailable and more reliable than their

xed-line services. This again highlights

the potential for designing cost-efcient

solutions for the unbanked.

In European countries, where mobile

phone penetration is very high the transition

from traditional branch banking to mobile

banking is very low as remote access to

banking services is provided over the

internet and call service centres, in addition

existing banking infrastructures provide

a comprehensive suite of services for their

customers.

eu Single PayMentS lawFrom a European

perspective, the introduction of the Single

European Payments Area (SEPA) legislation

is having a positive effect for customers,

for example, Irish companies who have

subsidiaries in several countries. Payments

across national borders should be as easy as

payments within those boundaries. However,

in banking, the phased introduction of the

SEPA has begun to reduce banking revenues

(less currency conversion) and increase their

overheads in providing full European banking

facilities which abide by the SEPA regulations.The cost associated with handling and

accounting for high-volume, low-value

transactions is extremely high: for example,

within a banking outlet, cashiers/tellers

work in pairs when counting money

deposited during the day, forms are manually

completed to conrm the total and formally

signed-off. All of this is done in a secure room

under CCTV surveillance. This process is

time-consuming and wasteful as the cashier/

teller could be better-placed at the front desk,

helping to open up new customer accounts

and increase sales of mortgages, pensions and

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TECHNOLOGY IRELAND 09/08 43

car loans! The introduction of mCommerce

solutions may diminish this high cost factor.

the futureThe FSIC recognises that the

nancial services industry has the highest

proportion of spend on IT system and

process projects globally and it is important

they leverage this spend to provide new

and enhanced services to their customerswhile lowering their internal costs where

possible. As new mCommerce technologies

emerge over the coming months and

years, organisations which adapt and

recognise the potential they offer may

steal a competitive advantage over their

competitors. To limit any potential risk

associated with moving from one business

model to another the FSIC can assist national

and international organisations in ne

tuning and tailoring the mCommerce based

technology and business processes to align

with their unique strategic drivers. ti

FSIC ProjECtS: CASE ExAMPlESA selection o FSIC research and industry based projects are outlined as ollows:

oPPortunitieS for MBanking & BioMetriCS The FSIC IS conducting a easibility study toexplore the opportunities or Biometrics and mobile banking within the fnancial services

industry. The study will be executed by leveraging an Enterprise Ireland (EI) sponsoredeasibility study to unearth some o the pertinent issues behind the topic.

This report will be o generic interest within the fnancial services industry as well asor biometric solution providers, industry consultants and academics that have a research

interest in this space.

new and eMerging teChnologieS in the reMittanCeS Market The FSIC report or theconsumer panel o the Irish fnancial regulator will expand on international surveys that

suggest that world remittance market is valued rather conservatively at US$260 billion in

2005 and is expected to increase by 30% in 2008. Migrant remittances are an importantsource o external fnance or countries such as Poland and Brazil.

This report will cover issues behind the high costs o sending remittances which

are oten in the range o 10 to 20% and are a major drain on resources, particularly indeveloping countries. The signifcant players in the remittance markets are traditionallycompanies which specialise in remittances, as opposed to banks, who oer remittances aspart o their product portolios.

The potential o tapping this market by fnancial services and mobile operators isenormous with innovative but possibily non-standardised solutions. Banks are at risk i theydo not acilitate such a market in developing countries as new competitors (such as telecomsand third-party agents providing the complete banking solution) may begin to siphon

potential customers thus reducing the traditional banking sectors customer base.

analySiS of 2-faCtor authentiCation SolutionS within Banking A US-based bankhas engaged the FSIC to assist in research to support their two-actor authentication

selection project. The approach undertaken by FSIC in developing this report on two-actorauthentication was to research academic resources, websites, and vendors as well ascritically reviewing existing large scale implementations within the fnancial services space.

innovation PartnerShiP As the frst Innovation Partnership involving a fnancial servicescompany, this collaborative research project has a two-year unding package o c500,000 50% o which was sponsored by Bank of Ireland, and the remainder by Enterprise Irelandwho und and manage the national Innovation Partnership initiative.

Bank of Irelandhas agreed upon a number o research streams with the FSIC which willinvestigate how technology can be used to improve service in these areas; the secure deliveryo fnancial services to bank customers, integrating sel-service systems in bank branches,using technology to increase operational eectiveness in branches and to manage document

handling across the bank branch network.

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Pfess Ciaan Muphy is head f he Accuning,Finance and Infmain Sysems gup a UCC, f whichhe FSIC is ne pa.