How is 2012 shaping up for the FS technology sector? FStech brings you some predictions for the year ahead, not all of them comforting

As 2012 kicks into gear, the FS sector has to contend with a myriad of problems and issues, including the Eurozone crisis, a tumultuous global economy, a raft of regulations and the fact that key banks are still trying to wrestle free of the mess they landed themselves in a couple of years back. Some companies are making mass redundancies (HSBC has announced that it is to axe hundreds of UK jobs, including 58 from its technology services division, whilst Barclays is axing 422 jobs as it makes “essential changes” to its technology and infrastructure division.). Others are talking of a freeze on IT spending. Against this backdrop, what are the top technology priorities for FS companies as they look to balance the challenges of staying afloat in a tough economic environment and remaining ahead of the competition?

Mobile to emerge as credible banking channel
“With the launch of many pioneering start-ups and partnerships over the past year, financial institutions have realised that they lag behind other more innovative industries in the delivery of mobile payments and banking services. As a result, 2012 will see substantial growth in mobile banking in the UK, with it becoming a mainstream method of money management worldwide as virtually all of the major banking players will be offering mobile banking services. 2011 has already seen some positive developments from UK banks in this space, for example the launch of Lloyds Banking Group’s mobile banking app. However, most solutions in the market still lack the appeal required for mass adoption. For UK consumers to embrace the trend, the user experience needs to provide more added value, such as targeted offers, alongside the ability to access banking services within an appropriately secure environment. So while 2012 will see a shift in the way Brits choose to bank, it will also be the year European countries follow the lead of more progressive nations, such as the US, in deploying superior mobile banking services in order to compete with new entrants. In the mobile payments space, 2012 will see the explosion of many closed loop payment systems following the success of Starbuck’s QR code and loyalty scheme. Subsequently, payments on and from phones will become commonplace. 2012 will also be the year that the first NFC-enabled mobile wallets will become available, marking the start of a much needed standardisation process. Early adopters will be using NFC phones by the summer, with mobile NFC going mainstream by 2013.” - James Richards, director of mobile, Intelligent Environments

…but security concerns must be addressed
“Following a flurry of developments in mobile payments, NFC and mobile banking in 2011, 2012 is set to be a big year for mobile banking and payments. The Payments Council is currently working on a project to develop a common central platform for bank-to-bank payments over the mobile phone. However, the take-up of mobile payments will only meet the ambitious forecasts if security is considered from the outset (“by design”) so that it doesn’t affect usability and can allay consumer fears. As with the migration to online for shopping and banking, the move to mobile will bring new opportunities for cybercriminals and fraudsters, so a quick, easy and secure way of authenticating ourselves and verifying transactions is needed for the mobile channel. Consumer awareness of threats is also increasing, which also makes security key to the success of any major project in this area.” - Pat Carroll, CEO, ValidSoft

Digital payments space increasingly important
“Yahoo’s appointment of Scott Thompson (formerly PayPal president) as CEO during January shows the growing sense of urgency in the market around mobile finance, payments and offers. Digital natives like PayPal, Facebook and Google are rapidly gaining ground on banks and card networks as commerce, and payments specifically, become smarter through mobile technologies. Yahoo has been late in realising that all online properties must make key strategic investments in this area. PayPal, on the other hand, has positioned itself as a market leader in P2P payments and digital checkouts, integrating its services across the digital landscape.” - Carl Tsukahara, CMO, Clairmail

Mobile payments: overhyped and over here
“For many financial institutions, 2012 means only one thing - mobile. Yet the hype over mobile payments is overcooked. Not every institution will make money out of mobile. An alternative view is that mobile phones, especially in the developed markets, are simply the delivery vehicles for payment services and that it is the underlying ‘digital payment world’ that will really matter in 2012. If you subscribe to this view, it is the platform that creates and manages the virtual accounts that is the lynchpin, supporting both mobile and online payments.” - John Chaplin, president, Ixaris

Seize the day with SEPA
“Just like the Euro, SEPA could go one of two ways. Whilst legislative involvement is necessary to force the tipping point, the phrase ‘end-date’ is open to misinterpretation. SEPA’s goal is mainly to standardise and simplify payments schemes, which essentially is the plumbing between the banks. The original task set in the Lisbon agenda was to make Europe the most efficient e-economy in the world. We have almost finished laying the foundations - opening up the opportunity to go forward. We can’t stop now. Otherwise, we will get a ‘mini-SEPA’, which would not only be a disappointment, but also a huge missed opportunity.” - Neil Burton, director of product service strategy, Earthport

Changing attitudes in IT departments
“There is a historical tendency to see IT as a necessary evil with an associate fixed or rising cost. With the increasing economic pressure, senior executives need to get smarter with their IT spend. First, they need to aggressively examine the cost and quality of their IT services. Second, they need to transform the IT function to an enabler for customer acquisition and satisfaction. Industry reports have indicated that most companies spent 70 per cent of IT budgets maintaining day-to-day operations. Surely, there is room for improvement. Only by eliminating wastes in IT can companies invest in capabilities that give them the competitive edge. In 2012, IT departments will find that they need to optimise their service delivery model while at the same time delivering more innovative solutions, such as mobile technology solutions, with lean resources.” - David Ballard, CEO, Northdoor

Regulatory agenda will require significant IT spend
“The client money fines and the suitability fines (HSBC’s whopping £10.5 million) and the acknowledgement of the regulator (seen in heightened activity on all these fronts) will mean that process improvement and data quality assurance will be high on the corporate agenda. It seems unlikely that any major financial services business is going to be able (or willing) to throw people at the challenges. There have been five years of limited discretionary spend (since Lehman). It seems to us that it is highly probable that in the five years since 2007 that many systems are creaking under the weight of new demands (like FATCA) and are probably getting toward the point at which “replace” rather than “support” is featuring on the IT programme portfolio more. New entrants are being created. The landscape is moving quickly. New financial services businesses are being formed as a fallout of the government backed bail-outs. We’ll see new entrants buying technology and we’ll see more consolidation and a reshaping of the customer facing landscape. From the major banks to the building societies in between we think 2012 is going to see a lot of integration and de-merger. The spend in this space will be far-reaching from client administration and service delivery systems to back office systems to future proof savings and efficiencies.” - Jim Muir, director, AutoRek

IT spending to fall
“In the past couple of months I’ve received several press releases, somewhat unsurprisingly from PRs representing technology vendors, informing me that organisations are increasingly looking to IT to help give them a competitive advantage etc etc. Therefore, 2012 is shaping up to be a good year in terms of technology investment. Unfortunately, in the real world the recession continues to bite and it looks like many financial institutions will rein in their IT spending during 2012. Gartner recently announced that it had revised downward its outlook for 2012 global IT spending from its previous forecast of 4.6 per cent growth, blaming faltering global economic growth, the Eurozone crisis and the impact of Thailand’s floods on hard-disk drive production. The Bloomberg Enterprise Technology Summit, which took place late last year, backed this up. A snap poll of the approximately 200 delegates attending a session entitled Outlook for IT Spending showed that around a third thought there would be a decrease of more than 10 per cent in technology spending. There will no doubt be money thrown at such areas as NFC/m-payments, virtualisation, cloud computing, risk management and data management, particularly by newcomers to the retail banking sector. But the harsh reality is that many of the UK’s large financial institutions are facing severe cost challenges across the board and the amount of new product spend will be limited for the foreseeable future.” - Scott Thompson, Editor, FStech

Big data in vogue
“Given that we have seen such turmoil in financial markets during the second half of 2011, the industry will be bracing itself for a challenging 2012. We expect to see further investment necessary to meet compliance needs of more comprehensive regulatory controls and oversight, as well as reviews of current infrastructure to build improved and more cost-effective platforms for the future. Regulators are looking for retention of a wider range of trade-related data (including recording of voice) over longer periods of time, all contributing to the growing issue of “big data” and dramatically increasing the need to hold more information online. This fast growing data source will require secure, immediate and reliable access and analysis from anywhere within the enterprise. In 2012, the nature of trading and more importantly volumes across different markets is the subject of speculation. However, the expectation is that there will continue to be uncertainties and high volatility, so all forms of trading will continue to demand the means in place to react quickly to market movements, whenever and wherever the trader is. We have already started to see firms looking towards better leverage of cloud-based infrastructure in providing more cost-effective enterprise wide technology platforms to meet these challenges. This is either through third party vendors or internally driven programmes. With such a move, there will be an increased focus on the issue of connectivity and seamless (fast and reliable) access from wherever it is needed.” - Paul Metcalfe, head of voice trading solutions, Orange Business Services - Trading Solutions

Watershed year for cloud solutions
“Financial services companies have been rapidly adopting cloud solutions, but you might not realise this if you spoke to them. Fear around security or compliance issues still defines the debate around cloud solutions - but the real fear factor is increasingly around the competitive advantage that cloud confers, and is being felt by those companies that aren’t innovating quickly enough. Cloud technologies enable competing products, services and businesses to emerge almost overnight and start taking market share. As any IT old timer will tell you, cloud computing sounds very similar to the concept of utility computing first talked about in the 1960s. In fact, it’s so similar that many IT managers in financial services have been using the terminology of utility computing when justifying new IT strategies to cautious executives, as a way to sidestep the stigma attached to the term ‘cloud’. But cloud is simply an evolution of established principles of computing, an evolution enabled by the quality of network infrastructure available in today’s world. A confluence of market pressures and maturing technologies has created a watershed moment, a genuine and meaningful opportunity to change the way IT and business strategy are organised and implemented in financial services.” - Nick Davis, cloud business expert at IBM

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