USAA, Part II

The last post I made was an informational one where I made note of the atypical banking features that USAA offers its customers. Allowing members to deposit checks by scanning them in to their personal computer as well as other features which one would deem ahead of its time sets USAA apart from nearly every other bank in the country.

With only one physical branch located at the bank's headquarters in San Antonio, Texas you and I might not see USAA as a threat to the standard brick and mortar banks such as Commerce Bank (now known as TD Bank), Bank of America, and the thousands of others we hear about or pass on the street wherever we go.

Well, we're wrong.

In an article titled, "Some See Threat to Banks in New Criteria at USAA," Thad Peterson, the vice president of strategy and solutions for financial services at the St. Louis market research firm Maritz Inc., said that because USAA has only one banking branch, it does remote banking and customer service, largely through its call centers, "better than everybody else."

USAA, a bank that offers membership only to those who have served in the military and their immediate families has decided to open membership to those extended families, widows and others which has created the opportunity for capturing greater market share in the financial services industry.

The spokeswoman for USAA, Robie Cline stated USAA Federal is so small it is "not on the radar screen" of major banking companies. However, Peterson disagreed and stated that "They've never really had a branch banking operation, and banks should view them as a serious player regardless of geography."

The noteworthy part of this article is that the Internet has changed competition and business so much that even small banks like USAA whom offer incredible online and over-the-phone services and support now have the ability to compete with the big guys. It seems that its no longer about how many branches, employees, or accounts a bank has. But rather about how technologically advanced they are and how they can use it to their advantage and providing financial services unique to the industry. People go where the services offered and customer service are the best. The biggest name is no longer enough.
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http://proquest.umi.com/pqdweb?index=3&did=1534091771&SrchMode=1&sid=1&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1226429164&clientId=31806&cfc=1

Kate Berry Some See Threat To Banks in New Criteria at USAA. American Banker [serial online]. August 12, 2008:10. Available from: ProQuest Information and Learning, Ann Arbor, Mi. Accessed November 11, 2008, Document ID: 1534091771.

Virtual Currency as a Way Out for Web Sites

It's tough not to laugh at articles that talk about the idea of giving someone a virtual gift. Back in the old days of the Internet the idea of transferring money for a virtual item stems from hardcore Diablo 2 video game players who would trade real money for virtual weapons in the game.

The trend obviously never took off outside of certain internet circles so it is hard to look at such trades as signs of anyone company pulling a profit. In the case of trade, a company might find it hard to break even if it is only taking a commission out of the trade.

So let's look at the practical reasons for having a virtual gift system in place. The new web era is rolling in and websites are looking for ways to monetize their websites in a down economy. Traditionally a website without a business strategy will use advertising to support itself economically but as money gets tight these sources of income become scarce.

The blog Venture Beat has an article on sites like MySpace and their plan to implement a virtual gift system just like Facebook. The high number of people on sites like Facebook and Myspace might explain for the reason as to why sites are pulling in the cash.

Sites like Myspace might actually have a chance of pulling a profit due to the fact that they are ten times the size of Facebook and probably have more users who have a vested interest in the site.

I am amazed that a person would be willing to purchase a virtual piece of property or to that end that the site is making up to $40 million. The old conventional wisdom said that people are most comfortable with purchasing tangible goods but obviously not every site can provide what Amazon and Ebay have.

Perhaps we are heading towards an era where people can find value in virtual commodities, a not so strange concept when you consider the fact that sites like Facebook control the number to virtual gifts to artificially create the illusion of demand.

Financial Crisis Boosts Online Peer-to-Peer Lending

With the financial crisis drying up loans from traditional banks, would-be borrowers are have begun looking to alternative channels for financing. They have turned to the fast growing online industry of peer-to-peer lending, which connect people who need money with people who have it. Going through companies such as Lending Club, Prosper, and Loanio, borrowers can get the money they want at lower interest rates than banks or credit cards, while individuals lending money get higher rates of return than many traditional investments. With the stock market down, lenders are bragging about the double-digit returns peer-to-peer lending is bringing. The industry is expected to grow over 800 percent by 2010, with lending reaching $5.8 billion.

Loanio, which opened on Oct. 1st, is aiming at borrowers who have been turned away from other lending sites because of poor credit. In its first week over 1,000 people signed up to participate. The company encourages borrower to use friends and family as co-signers and verifies a borrower’s financial footing for a fee. With the economy sliding towards recession, they are here to stay.

Lending Club limits itself to borrowers with good credit histories and brags of a default rate of less than 2 percent. It now has started a secondary business where lenders can cash out of their loans early after getting regulatory approval from the Securities and Exchange Commission. The average return for their lenders is a hefty 13 percent. This has led to Lending Club doing $20 million in loans in 18 months.

Peer-to-peer lending companies generate profits by collecting a one-time 2 to 3 percent fee on funded loans from borrowers and assessing a 1 percent annual loan-servicing fee on lenders. People willing to lend money bid on loan request by offering the lowest interest rate they are willing to accept. Though borrowers are generally selected based on credit rating and current debt, there is also a social element of how compelling their story is. One of the areas expected to thrive is in student loans, with students being prime low income and little credit candidates.

While demand in this industry is growing, this model is not without its problems. Earlier this month Prosper stopped signing up new lenders while the Securities and Exchange Commission evaluates its regulatory filings, a process that could take up to six months. This is amongst a gradual decline in the amount of new lending and average interest rate were increasing. As the economy continues to worsen, lenders are becoming weary of tying up their money in deals that typically run three years. As the industry grows, questions will also have to be answered as to the industry’s regulation, with many having to get bank licenses.

However in a time where we have seen our first ever drop in GDP, this person to person lending process could prove to be a vital way of keeping our economy growing.

We create the consumer experience of the future

A trend analysis of the financial services industry is a perfect example that depicts cycles of change in the economy. Such changes include more or less regulation, emphasis on technology, advanced business models, diversified business units, amongst others. One can argue that no two-time period in the financial industry has been identical. In an interview given to two Microsoft leaders, David Vander, who is the worldwide banking industry manager of Microsoft and Brian Jackson, who is the worldwide banking technology strategist of Microsoft as well, a lot of ground was covered with regards to the role information technology has played over the years and will play into the future in the financial services industry, most especially banking.
David asserts that there is a growing awareness and understanding that financial services is largely a digital industry and technology underpins everything this industry does. In addition to that, he states that a major strength of this industry is the tremendous innovation over the years, such as ATMs, mobile phone based interactions and Internet based interactions. On the other hand, he believes that the current turmoil will lead banks to re evaluate where capital is invested and will really enable businesses know where their comparative advantage really lies. I personally believe that we can already see this trend occurring in the economy. A lot of divisions in banks are being shut down and are reduced in size due to redundancy and cost saving strategies. I believe that the consequence of this trend will lead to a very slow growth in the banking industry for a long period of time and a smaller investment in human skill.
On the other hand, Brian strongly believes that the future of this industry lies within the clients from other businesses and the general public. He believes that there is going to be a trend of innovations beginning in the consumer market and making its way to onto the enterprise. Furthermore, he believes that there will be a technology trend around powerful and expensive hardware both in terms of processors and storage. Given this data, there will be a lot of change as to how businesses analyze consumer behavior and also build their models. Finally he believes that the future world of having numerous applications that may consist of several different services may deploy virtualized infrastructure and that may need a lot of information technology complexity.
In conclusion, I believe that the future of the financial services industry goes to technology and the customer. Technology has helped make the financial industry what it is today and will pave the path for tomorrow. There will be heavy reliance of technology in helping guide banks and other financial institutions in improving efficiency and producing accurate data that will help make more rational decisions. In contrast, we can also expect technology replacing more humans in the financial industry. There will be very slow growth in this industry for long periods of time, but as demand rises, we can expect an expansion in this industry, not just with technology, but also with human beings.


http://www.paperjam.lu/archives/2008/11/2410_Techno_Microsoft/index.html

This article focuses on five traits that financial services are going to have to develop in order for them to remain competitive in the market. These traits are hungry for change, innovation beyond customer imagination, globally integrated, disruptive by nature, and genuine, not just generous.

Financial service companies need to build an environment that encourages constant change and development of their offerings. They will need to build upon Internet and mobile services in order to stay competitive in a world where mobility and ease are everything. This also applies to innovation. The technology that the companies are going to develop are what is going to keep them in the market. If they can not come up with some unique idea that separates them from their competitors, they are not going to get customers to switch over to their business.

Being able to spread their market overseas is another key aspect for financial service companies to remain competitive especially with the increasing ease of travel. The world is becoming more globally integrated and people are going to need to be able to access services when they are traveling. Without a globally integrated environment, financial service companies will not be able to provide for their customers, and they will lose them.

In terms of being genuine, services will have to provide good customer service that they can rely upon any time of day, at any location. This means offering customer service via the Internet, telephone and through mobile devices.

The main emphasis for next generation financial services is going to be mobile offerings, ease of use, and global integration. The constant desire of customers being able to do anything, everywhere is going to have to be provided for by financial services as well.

"The Enterprise of the Future in Financial Services." The Bankwatch 23 Oct 2008 5 Nov 2008 .

“Security-on-a-Stick”

While technological change is slow in the banking industry, consumers are demanding more innovation along with heightened security. Many large banks are trying to remain competitive through increasing their convenience by means of a push to their online banking applications. As this becomes an increasingly common mode of making bank transactions, hackers are finding ways to breach online account information.

IBM has released a new devise that uses the same hardware as a USB drive in order to counter these would be attacks by hackers. It is called the Zone Trusted Information Channel (ZTIC). When the ZTIC is plugged into your computer it is able to bypass the PC software and “create a direct, secure channel to a bank’s online transaction server”. Currently banks use two-factor authentication methods such as, PINs and one-time validation codes, to provide security for online transactions.

However, these are not enough to inhibit sophisticated hackers who can redirect and change the information flow in a PC. The IBM press release states that “nearly 90 percent of identity attacks online are targeted at the financial services sector”. Clearly a heightened form of security, like the ZTIC, is necessary to protect customer’s sensitive financial information.

The ZTIC is one way for banks to remain competitive and try to gain new customers. The first banks to get access to ZTIC technology will be able to better market the security of their online banking features, which will make them more distinguishable in the banking industry.

The ZTIC is easy to use and requires no additional software configuration on either the bank’s server or a customer’s PC. This makes implementation fast and easy with reduced costs when compared to other security devices pointed out in the article. There are only two buttons on the ZTIC for confirmation, “OK” and “X” (cancel). The ZTIC has already been manufactured and is ready for pilot tests. So hopefully we will be seeing this new technology in the near future, especially as online banking becomes more popular.

Sources:
http://www.zurich.ibm.com/news/08/ztic.html
http://www.zurich.ibm.com/ztic/

The social networking of financial services

In my search for next-generation financial services, I stumbled upon a website called Wesabe. It purports itself to be a service for anyone who facing monetary problems (and who isn't, these days?). Users can post questions and advice to each other. It seems like a pretty supportive community and is fairly casual. I haven't seen anything like this before; this sort of thing usually comes in the form of self-help books or static how-to websites without much interaction. I think this can really go places.

Now, the social networking aspect of the site is something that I find particularly interesting, probably because it's such an integral part of a young person's life, but that neglects the other tools that the service provides. Wesabe enables users to see all of their financial data in one centralized location, much like Mint.com, a service that I've frequented for more than half a year now.

Both sites actually share quite a few similarities. They allow you to categorize transactions posted from your various bank accounts using different tags (something common to blog services and site aggregators) as well as set spending targets. They can be automatically set based on aggregations and averages of your spending patterns over time or manually.

This does bring about a number of issues, however. Probably the most prominent is security. How is a site like Mint or Wesabe supposed to guarantee peace of mind for users who are centralizing all of their bank information in one spot? What do you think about this reasoning? Is this enough peace of mind for you?

Beating "Virtual Sprawl"

Virtual Sprawl -- Rapid server virtualization has set the stage for a new malady known as 'virtual sprawl.' Here's what Wall Street firms are doing about it.

Penny Crosman. Wall Street & Technology. New York: Sep 2008. Vol. 26, Iss. 9; pg. 20. Accessed Via Proquest Telecommunications Database.

With the increasing amount of virtualization IT being implemented in the financial services industry, Wall-Street firms are encountering a new managerial problem labeled “virtual sprawl”. According to Crosman who writes for Wall Street & Technology, Virtual Sprawl refers “To the condition in which IT managers and, in some cases, even end users have been installing virtual machines all over the organization, creating a chaotic mess that is hard to manage.” Virtual sprawl came about as a response to “server sprawl”, a condition in which an organization has too many physical servers in use.
Virtual sprawl has proven to be problematic as many applications are not getting the server, storage and memory that is necessary to run efficiently. Virtual sprawl makes it difficult for companies to keep track of all of their systems and many times forces companies to buy more software than they really need. Additionally, virtual sprawl has also increased costs in maintenance fees as it is becoming more difficult to troubleshoot machines which move around and run multiple operating systems. Virtual sprawl is particularly problematic in the financial services industry. Functions such as algorithmic trading, financial modeling and simulation software are suffering in wall-street firms due to a lack of connectivity and communication between applications. While it is important to insure that each application has the proper memory and communication necessary to be used with other devices, the article mentions that the process is often overlooked and can be very difficult to manage on a large scale.
Part of the solution to virtual sprawl has been the development of IT mapping software which provides a “visual map” of every function of virtual applications to insure that devices are set up correctly and communicate properly with one another. Unfortunately, IT mapping software has limitations, as it does not track performance of the devices, just how they interconnect with one another. The solution to this problem has been the very recent development of configuration monitoring tools, which take data from virtual machine performance software (VMWare) and queries that information in order to develop a complete view of the virtual environment and allow IT experts and specialists to configure applications as needed. Once this type of software is implemented, it allows managers to be able to monitor and configure virtual environments on one physical machine cutting costs and creating efficiency.
Finally, the article discusses how virtual environments are still superior to physical machines as it saves energy and dramatically reduces costs. This type of technology also allows companies like Wachovia to improve their “green-initiatives” while increased performance at the same time.
This article primarily focused on the development of software to combat the virtualization problem. While I mentioned configuration-monitoring tools, other forms of software are also being discussed and researched. For instance software tools for IT discovery, configuration management, provisioning, dispatching of servers, and inventory management are all listed as methods for solving this issue. While these ideas are beginning to be researched, configuration monitoring tools seem to provide the most efficient interface to interlink virtual IT systems because it allows adjustments to every system to be made from one physical machine.
I personally believe that despite the problems with virtualization, the movement towards a decrease in both paper and machine trails will continue to be demanded in the competitive financial services industry. In an environment where the accurate processing and calculating of large amounts of data means everything, systems must be virtualized in order to compete. However, I agree with the article that virtualization is not an excuse for just setting up virtual systems in a hodgepodge fashion. Instead, it is vital that the network fundamentals of virtual systems are mapped out and tracked consistently in order to prevent any future IT meltdowns. Fortunately, the development of applications like the ones discussed in this article are allowing IT managers to prevent such problems.

The Future in IT

Modern day global competition and economic integration have placed a tremendous amount of pressure on the financial services sector to upgrade its information technology. Today’s consumers have become much more IT savvy, and as a result, expect to be presented with services and tools that build on their intricate comprehension. Society has developed an insatiable demand for knowledge that technological developments are unable to fulfill in its entirety; however, competition pushes the industry to try.

Based on the subsequent information, it is not surprising that the underlying strategy utilized by the financial services sector will not change drastically in the future. Future objectives will continue to target existing customers and aim to acquire new ones. According to articles published by CRM Magazine and USBanker, both prominent publications that discuss the latest issues and trends in customer relationship management and banking, the next generation in financial services will focus on upgrading information capabilities to better satisfy their customer’s changing needs.

Accordingly, current customer dissatisfaction in the financial services’ information technology is rooted to a lack of compatibility amongst systems, an excessive amount of required account logins, the inability to view holding in a single view, and scattered information. Future services will be designed to improve consumer satisfaction and correct inefficiencies. Ultimately, consumers can expect to see services that not only complement one another, but also the end users’ needs. Services are being designed to meet customer’s expectations in high quality content, personalization, and instant information.

In addition to adding availability, accessibility, quality, and timeliness, consumers can expect innovations in technology itself. Today Mobile Money Ventures LLC and SK Telecomm announced that it would provide Citibank Hong Kong with a new service platform that would support mobile banking and mobile stock trading. Through their phones, customers will now be able to manage their account, transfer money, make payments, time deposits, manage their portfolio, and buy and sell stocks. Consumers can expect more innovative products from Citibank in the future. The company is currently working on developing products for consumers that use public transportation to commute, manage their money online, and want more convenient retail banking experiences. The company’s goal is to “be everywhere its customers need it to be.”

While I am a major supporter of mobile banking, I am skeptical of mobile stock trading. Although it illustrates modern society’s strong ability to innovate and accommodate consumer needs, I fear that individuals will abuse the technology. Currently grade school children are being introduced to virtual stock exchange simulators and people are trying to get rich from their self-provoked beliefs that they too can become a successful day trader. In my opinion, implementing mobile stock trading technology will give rise to more day traders, which could potentially intensify individual financial problems.

Both articles accurately illustrate the growing trend toward customer satisfaction strategies. In my opinion, it is difficult to identify where more focus should be placed in the future; however, it is apparent that the role of people will be far less transactionally- focused and more strategic. But when it comes to cutting out human interface, will society be able to identify when we have gone too far?




“The Future of Financial Services." 1 Jan. 2004: 4,6+. ABI/INFORM Global. ProQuest. 30 Oct. 2008


“Next generation online channel reporting for banking and investment firms: companies must evolve information and account management capabilities to retain and grow customers” CRM Magazine. 1 March 2007.

“Mobile Money Ventures Powers Mobile Financial Services for Citibank Hong Kong”. Market Watch. 30 October 2007.

Treasury and IT link for monitoring financial firms

The Department of Treasury issued a document asking all banks, insurers, and financial services companies to implement new information technology systems to provide "real-time" data all of their operations to be able to monitor them more accurately.
These new technologies would force all of the companies involved to spend a good deal of money on new technology, but would hopefully be able to prevent issues like the sub-prime mortgage crisis or at least better prepare us for it. The exact dashboard that they are referring to is not named in the article.
This new technology would clearly not fix the current problems but I do believe for these companies to adopt new technologies that are even believed to be able to help us see these types of situation's coming then it makes perfect sense for them to take that money and invest it in this technology. The article mentioned it would almost "instantaneously" make them aware if any issues were going to come up. Although I do not believe this technology is the solution to all of the problems it is a step in the right direction.




http://web.ebscohost.com.proxyau.wrlc.org/ehost/pdf?vid=11&hid=16&sid=c848d53f-b4b6-44ac-97c4-a7ed49a90c70%40SRCSM2

Stressed-out bankers get a forum to share the pain; Social Web site benefits from executives' jitters

This article talks about MeettheBoss.com, a social networking site, similar to Facebook and MySpace, but specifically designed for top financial executives, CEOs and other C-level positions. The reason I chose this article is because there will be a workshop and feature presentation of MeettheBoss.com at the FST (Financial Technology Services) Summit, which will be held between November 5 and 7, 2008, and is one of the places where the hottest topics in technology and next generation financial services will be discussed at the executive level.

One of the more interesting points in the article is the issue of registering in the website – it is almost completely exclusive, with 20,000 of its initial members invited, and any new applicants put through a rigorous screening process of checking titles, positions, place of employment and managed budget. According to the article, this screening process has already lead to the rejection of two-thirds of applicants so far, while the intended maximum usage of the website is topped out at 50,000.

A second interesting facet of this executive networking site is that it offers numerous technologically-enabled services to its members, such as online and conference call meetings, shared document storage similar to Google Docs, extensive mobile services and even the ability to utilize the website for internal company networking. All of these services are intended to spike interest in the website and maximize utility for busy professionals who don’t have the time of an average college student to sit in Facebook.

Finally, the website still has only one advertiser as of today (which is the software company CA) and has yet to unleash its full potential for profits from both advertising and links to the parent company (GDS) which publishes business-to-business magazines aimed at top-level executives. The implications of this rather strange initial strategy for making profits are discussed below.

The website has garnered huge attention during this financial crisis from executives who seek a less public vent for their worries and at the same time an informed conversation with colleagues across the industry. Considering that MeettheBoss.com has just become popular enough to be prominently featured in a mainstream newspaper article (the International Herald Tribune), some thought-provoking questions can be raised about the way the financial world is run behind closed URLs.

For one thing, it is safe to assume that executives of competing financial institutions will not openly share with each other their companies’ strategies for developing next generation services. However, it is not difficult to imagine that there will be some influences to their decision-making process stemming from interactions within the website – be they meetings and discussions in which several executives participate, new advertisements from firms trying to push for a revolutionary software or service, or even a casual chat between online buddies like Robert Steel (CEO of Wachovia) and Lloyd Blankfein (CEO of Goldman Sachs) – both of whom are supposedly registered, although the website keeps member identities strictly confidential to outsiders. Ultimately, we could see this website as a birthplace for unpolished ideas that can later result into cutting-edge services.

Aside from member and advertiser-based influences, we can also look into the parent company’s intention to link much of MeettheBoss.com to its executive magazines, possibly creating a situation in which a CEO might become as likely to habitually browse through carefully placed pre-paid articles, just as a typical Facebook user is likely to add an outside-sponsored application that will tell him/her how many other users think he/she is hot. In this case, instead of a birthplace for ideas, the website will function as a sieve for other companies’ ideas that get translated into the financial world.

Last but not least, a social networking site, not excluding one at the level of MeettheBoss.com, offers the potential of forging alliances. Given the lack of trust between financial institutions in the current situation, “personal” contact and interactions might be just the remedy for restoring cooperativeness between financial firms. At the same time, this could also result in partnerships that aim to develop new products and services jointly.

In the end, there seems to be huge potential for MeettheBoss.com to impact the next generation of financial services, just as MySpace and Facebook have impacted online interactions. This is quite possible, even in spite of MeettheBoss.com’s limited membership compared to these other social networking sites.

And let me be the first one to congratulate the Obama supporters in the class.

Main Article: Stressed-out bankers get a forum to share the pain; Social Web site benefits from executives' jitters
Author: Eric Sylvers - The New York Times Media Group
Source: The International Herald Tribune
Date: November 3, 2008 Monday
Database Accessed: Lexis-Nexis Academic
Other Sources: http://www.fstsummit.com/program.asp

USAA

Next generation financial services is an interesting way to categorize USAA. Although USAA provides services and products which may be considered ahead of their time,....it is a service exclusively available to military personnel from this generation as well as those previous.

United States Automobile Association (USAA) is a fortune 500 financial services company focused on providing banking, investing, and insurance services to those who serve or served in the military.

USAA provides amazing and competitive insurance and savings rates to its customers who reside around the world. Along with standard banking features, some of the features USAA provides include free and unlimited fund transfers to any US bank and the ability of members to deposit checks by simply scanning them! USAA "Deposit@Home" allows members to scan their checks to usaa.com and have immediate access to their money. Scanning technology is not revolutionary, it is rather the application of such technology to the banking industry which has revamped the necessity of a brick and mortar locations. Traditionally most who visit brick and mortar bank branches do so to deposit checks, not with USAA. USAA is leading the charge in implementing technology to eliminate the need for the traditional branch. In saving branch operational costs USAA is able to dedicate more funds to increasing savings rates and making insurance and other products more affordable for its members

Deposit@Home is just one of the USAA services which enable them to have ONE physical location. This location is at the bank's headquarters in San Antonio, Texas. Some of the other services which enable its large online presence is ATM fee rebates, free standard checks for the life of the account, free online bill pay, and bank-by-mail services.

It is through its online features that USAA has been able to differentiate itself from other financial institutions. The ways USAA fully utilizes technology will soon be common in the banking industry although I am positive that they will continue to innovate and re-define the way financial services are available to its customers.

Sources:
www.usaa.com
http://en.wikipedia.org/wiki/USAA

Cloud Computing: The Artificial Intelligence Axons of the IT Galaxy

It is hard to imagine that not long ago computers were human. The word’s original meaning was literally a person that solved equations, using a mechanical calculator. Companies employed these large metal structures to do number crunching, and serve as a data center mainframe. Now they are disappearing all together, technology shifts to meet the demands of today’s society, submitting to various mutations as the years pass.

The original computer platform, referred to as the mainframe, has been ousted by minicomputers, giving way to the personal computers, now being offset by hand held devices with Smartphone architecture, completely disrupting the computing structure through this sequence. Computing is taking on yet another role, becoming more centralized, turning into a “cloud”, incorporeal and exploited when and where it is required.

The establishment of this cloud is more than a platform shift; indisputably modifying the information technology industry to such an extent that the way people work and companies function, will allow digital technology to infiltrate every niche of the economy and of society. This is not some technological nirvana that the IT industry is using to concoct new buzzwords to keep people interested, but instead a rampant term that has spread avariciously. Cloud conferences, cloud blogs are such an obsession that it may have peaked already. Gartner, a research firm, claims that cloud computing will transgress through a “trough of disillusionment”, entailing a stage in which the hype cycle of technology will fail to meet the expectations of consumers. However, the possibility of the term may already seem passé; but the cloud is going to continue to grow from an amalgamation of cut-rate power processors with ubiquitous networks. Data centers become factories delivering computer services as an online service with wireless networks connecting to such software. This disaggregates computing into component services, turning into an “internet of things” used by billions of different devices. With financial institutions creating computing grids, they will be able to link software as a service over the internet. Such computing cloud operators like Amazon and Google engage in this IT system. However, it seems that all firms will soon have no choice but to switch their infrastructure as well.

In my mind, cloud computing is just a service oriented architecture that companies have been flirting with for quite some time. The main issues at hand are dealing with the security of information. Firms essentially trust their second most valuable currency, data, in the hopes that it has not replicated or outsourced to entities that they do not want that privilege extended. The article says that companies will not be able to link service to the enterprise firms due to the security issues and conformity compliances that it faces, but firms already use their most valuable currency, money, to cloud computing services such as banking. People put trust into banks hoping that they keep an eye on their money. This same trust needs to be instilled by the Googles, Amazons, telco’s, etc. This notion is not impossible, but it is an action that needs to be taken care of before large firms buy in. For now, you will not have to bid farewell to a data center that models a raised floor, cooling data center for its IT department, until a reliable cloud model ascends.

"Let it Rise." Economist.com. 23 Oct. 2008. http://www.economist.com/specialreports/displaystory.cfm?story_id=12411882.

Next Generation Asset Management

Next-Generation Asset Management
Evolution To Becoming All-Inclusive
by Joe Rudich
PROCESSOR: February 29, 2008 • Vol.30 Issue 9
http://www.processor.com/editorial/article.asp?article=articles%2Fp3009%2F33p09%2F33p09.asp

According to Wikipedia IT asset management (ITAM) is a way of combining business practices that join financial, contractual and inventory functions to support life cycle management and strategic decision making for the IT environment. Meaning, what would be cost effective and important when creating/ retireing IT. This definition is important to better understand what changes the article is calling for.

IT services have become a corner stone in today’s business environment. The article states that usual idea of IT is that it is the “cost center of a company.” but according to Dennis Drogseth, vice president of EMA (Enterprise Management Associates), managers need to change their minds and see that IT is a necessary internal provider of the critical services a business needs to exist.

One key element is to turn IT asset management into a way to measure the true value of what services are provided, and not just the cost of the components that are used to create the IT. Showing this value requires accounting for cost and performance and will require, what EMA calls “next-generation asset management”. NGAM is to offer a way to move away from current “cost center” ideal and include quality, cost and demand of IT in the business.

NGAM is a way to create a foundation for IT planning, choosing the best way to invest based on complete knowledge of assets, not just the tangible aspects normally affiliated with IT, but on true current needs of the business. NGAM allows a way to monitor the actual cost for running and creating IT. This combines with management disciplines, service accounting, telecommunications and resource management. This change will require new organizational, process, and political models for NGAM to be viable. The old IT asset management models will have to be removed and new ones will have to take their place.

In essence, this article is a new generation of IT asset management, ITAM, which takes into account the physical costs of IT but intangible areas which are not measured by the current finical ideals. In a way, it’s about putting the cost of creating, using and retiring IT into the total costs of creating IT. This is a service asset management companies are working toward for companies to take into account the full costs to a company to create a greater measurable cost analysis to help companies and their bottom lines.

This will allow companies to create new programs and services the most cost effective way. By expanding the variables of cost, a better model of cost attribution is created. This utilization of cost could allow for the company to realize the correct price to charge for a service or if creating and implementing a program would actually be detrimental to the company.

These changes make sense, while they do call for a long and tedious process to occur; in the long run the closer cost is defined and realized the greater the ability to run and manage the company would occur.



cite for wikipedia:
Wikipedia contributors, "IT asset management," Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/w/index.php?title=IT_asset_management&oldid=249709786 (accessed November 5, 2008).

Why the mobile bank in US is less popular than Japan?

With the development of the technology, the Mobile bank is one of the most potential functions in the commercial bank system now. However, as the article “mobilebankerscan” argued, many drawbacks of the Mobile Bank need to be improved, and the core one is the security of the mobile bank. But does it really the security problem of the mobile bank made both the consumers and the banks reluctant to use and develop its potential to full as the article “mobile banker scan”mentioned and keep the mobile bank less popular than the Japan or India? In my view the sink cost of the American banks had invested in, difference in culture, and lacking a global vision result in such an awkward situation of the American mobile bank system
First thing first, as the author of the article “Mobile Insecurity: Reality or Just hype?” said, two mainly threats, hacker and stolen of the cell phone, lift their hand against the Scalability & Reliability of the mobile bank. Not only him, had some experts also said that “Technical hurdles, security concerns and lack of merchant acceptance may keep mobile payment from mainstream consumer acceptance.” [1] Does this really make sense? In my view, the technology to steal the information of the mobile bank customer is more complicated than that of steal the information of the Internet bank customer, even more hard than to steal the information of the tradition credit card. (The cost of tradition credit card fraud is high; in the UK in 2004 it was over £500 million [2]). If so, the chance of mobile bank fraud should no larger than that of Internet bank fraud. Or why this security problem does not stop the popularization of mobile bank in Japan?
I think the mainly reasons are that unlike Japan, US has already developed such a completed widespread and convenient retail bank system which satisfied the consumer most. As a well-developed market, the cost of the tradition payment methods, debit and credit, has been accumulated with the building up of the numerous Auto Teller Machine, the transaction machine and the branches in different areas. Moreover, the payment method of Mobile bank is quite different from other E-bank method, Internet Bank, because the Internet Bank could never take the place of the tradition credit/debit card as a useful tool of daily consumption. The larger the sink cost is, the more reluctant the bank wants to change. Moreover, the transaction system is connected, so if any one of the bank want to change the payment methods, all the bank need to adopt a new kind of machine to adopt this method, which quite a large project is to reached an agreement among all the banks. So the first-mover of adopting a large scale of mobile payment methods was impeded by the huge sink cost of tradition payment methods. However, if all the banks reach an agreement to adopt the newly methods, the pattern of every bank’ market share would not change because the consumer could do the same things with their original bank. Moreover, unlike the Japanese and Indian, the American likes to spend money in the future but not save money. The payment methods of different banks need to become a system so it can attract the consumers. But in Japan, the people there like to save money, the interest rate of Japanese bank always negative in the last 10 years. And also, draw from an article “Generally, credit cards in Japan are used for a smaller share of transactions, with a higher average amount, and with less borrowing per transaction.” (Credit Cards and Debit Cards in the United States and Japan; Ronald J. Mann ; Vanderbit Law Review, Vol. 55, p. 1055, 2002). So the Scalability & Reliability would never be so developed as American here. And according a report, the sense of responsibility the Japanese companies hold are much stronger than companies in American. Always a Japanese company more focus on service the whole society but not how many profit the company earn.
The reasons above led to less-motive of American Bank willing to change the pattern of the market. However, as far as I am concerned, even though the mobile banking could hardly lift revenue of the American Banks up to a new stage, it could serve as a useful tool for the company to seeking global opportunities. When the commercial bank is about to enter a foreign market, one of its disadvantage is that it is impossible to build the same numbers of branches in that country as the local commercial bank did. But if the commercial bank hold a sane security and have a good reputation in its own market, these two things will make the globalization real. What the company needs to do is work with local telecom serve to build an advanced transaction system. Anyway, the cost of building such a system is far less than that of hiring clerk and renting office. Moreover, when the new payment method changes the local customer’s behavior, the bank could set up a “first-move” advantage and force the local competitors follow his standard.

[1] http://www.americanbanker.com/mobilebankerscan.htm
[2] http://en.wikipedia.org/wiki/Credit_card

Posted by FengGuo
Article:
"Mobile Insecurity: Reality or Just hype?"
http:http://www.americanbanker.com/btn_article.html?id=20081028BX7G0X2H
"mobilebankerscan"
http://www.americanbanker.com/mobilebankerscan.html

Personal Financial Management Systems

I have chosen to look at personal finance applications and their future as centralized tools for consumers. As we found in class, it is now expected that consumer-banking products come with an array of online tools that give customers 24/7 access to their account information such as balances, and maybe even bill-pay abilities. While these are welcome advances to today’s mobile-minded consumers, some of us want more from these services. Where are the centralized portals where I can view all of my account information for various financial instruments? What about budgeting tools along with bill pay? The Internet is full of dynamically generated content and there are already forecasting and prediction tools out there, why not incorporate this into my finances?  

There are several financial management sites that have begun addressing the absence of these features from the websites of our financial institutions. In general, they offer increasing compatibility with various institutions and unique tools to track, monitor, and forecast based on a user’s mix of bank accounts, loans and mortgages, and investments. According to the article from American Banker, these companies are each finding their own individual niches to appeal to with a different set of features.

Intuit has just removed the subscription cost for its service and has recently added spending management features designed for low-income consumers. Mint is attempting to appeal to consumers with more “sophisticated banking needs” by adding investment tracking and retirement account access to their existing services. Geezeo is expanding from its college student focus by creating community tools revolving around financial habits. 

As each targets a different demographic, all of these online financial management sites share one crucial attribute: each of them offers their solutions for no cost to the user. Intuit, the highly recognized name in the personal finance market, was relatively unsuccessful in porting their Quicken software to the Internet in terms of obtaining a viable customer base at first. A spokesman for the company is cited in the article as saying, “We dropped the ball with Quicken Online… [the monthly fee] was an obstacle for people to enter.” They’ve reevaluated their target customer and acknowledged that the most likely users of the online software are not the same as those using the original Quicken. To compete with this, Mint and other companies make money by recommending financial products to users and getting referral fees from banks.

The playing field is level and the management sites are left creating features to segment and position themselves for the future. As personal finance tools, compatibility with a broader range of banks and lenders, and consumer trust for security measures of such products go up, the sites may find that banks seek their services as part of their own online packages in the future. 

Daniel Wolfe. "Financial Web Site Operators Increasing Focus on Niches. " American Banker  [New York, N.Y.] 20  Oct. 2008,8. Accounting & Tax Periodicals. ProQuest.  American University. 2 Nov. 2008 

Financial Foot Soldiers, Feeling the World’s Weight

OK- I could not resist getting into the class blog with a posting. Monday, Nov 3rds New York Times columnist, Dan Barry, goes behind the scenes with NYSE Floor Brokers. Learn about how their jobs have changed: information technology, 9/11 and the current tumult in the markets can make the day, well, a little lonely. What I suspect many of you will find interesting, is the educational level of these workers. These are not newly minted college graduates. These men (yes, still mostly men) rose up from the running positions at the broker firms. This is not your nattily dressed banker but the folks who can "feel" the market. Just think about how much we discussed program trading, decision modeling. These tough guys are really the touchy-feely folks on Wall St.

Financial Foot Soldiers, Feeling the World's Weight by Dan Barry; New York Times 11/3/2008

Personal-Finance Software goes lite?

Nowadays, as the technologies develop so fast, usage of advanced Personal-finance software should have grown to make people manage their money better and easier.
However, since Quicken Software, which Intuit’s Quicken is founded on, no longer contributes 10% to the company’s revenues, Intuit’s Quicken is shifting its resources from its Quicken software to its Web-based Quicken Online. Also, Microsoft, which was a leader in the field of personal-finance software, recently pulled its Money Software from retail channels in favor of online sales only.

Why? There are a couple of reasons.
First, as the article mentioned, market and industry changes are quickly rendering existing products and services obsolete. Set recent finance crisis as an example. The break out of the finance crisis brings great tremendous changes to almost all the markets and industries. It will also certainly bring many influences on people’s money management. Although software companies know that the tools they setup with the software to give advice on people’s investments are turning useless, it is extremely hard to figure out more useful tools, as who knows what will happen in such destructive finance crisis.
Secondly, the technologies applied in the personal-finance software become more and more common. As personal-finance service is still at the early stage of its life cycle and relatively low cost to have related technologies, many companies will try to enter this market. Increasing competition will make personal-finance software less profitable. Actually, Intuit’s Quicken software has become just a landing pad to send customer to more profitable offerings like TurboTax.
Thirdly, few new functions have been generated. When the personal-finance software came up, it really help people, who do not have such tools before, a lot with its basic functions. A decade has passed, although many usability and features were added to the product, few of them seemed useful. It will be a big problem for its product to attract new-use people and maintain payments of former purchaser without significant advancement.
Additionally, recent weak economy cannot be ignored as an important environment factor.

In fact, Intuit’s Quicken is not the only company which is facing this problem, Rudder, Mint, and other personal-finance product providers are in the same situation as Intuit’s Quicken.

But on the other hand, personal-finance software still has some advantages, which developed well will benefit its sales.
Compared to the same kind online services, software will present a more secure-condition in terms of steady operation and safety of password.
Also, it can provide all the available information updated to when you use it online last time when there is no access to Internet. It will become quite useful in some time.

The article is available at http://online.barrons.com/article/SB122488830513468381.html

The “Next Generation” of Credit Cards and Banking

Mobile phones will play a significant role in the “Next Generation” of financial services. Who knew when Alexander Graham Bell first invented telephone in 1876 that it would eliminate the need to carry money in peoples’ wallets? It is astonishing how the technology has emerged to shrink the needs of a traditional bank for customers to do their transactions.

The concept to carry less money in peoples’ wallets started to emerge when credit cards first came into the market during 1920s. Later, the invention of smart cards took the credit card payments into the next level. Today, smart cards have gone through a radical change, and now been used for everything from credit cards, paying bus fares, entering secure building, borrowing from libraries etc. The most common smart card applications includes Credit cards , Electronic cash, Computer security systems, Wireless communication, Loyalty systems Banking, Satellite TV, Government identification etc. Financial institutions have been adopting the smart card technology aggressively. These activities include, but not limited to, credit cards, debit cards, corporate cards etc. Major credit card companies such as American Express, Visa, and MasterCard have their own smart card technology built into their credit/debit cards. This includes Express Pay from American Express, Contactless from Visa, Paypass from MasterCard etc.

Now the concept of digital money is about to make the next revolutionary change from smart cards into mobile phones. The leading credit card company, that operates world's largest retail electronic payment network, is planning to work with Nokia, the world’s leading phone manufacture, to build a mobile phone that takes financial transactions into the next level. Tim Attinger, Head of Global Product Innovation at Visa Inc, says "Mobile payments and services are one of the most vibrant areas of innovation at Visa, as we seek to accelerate the migration from paper forms of payment to digital money". He also maintains the view that "Visa is already better money - more convenient, reliable and secure than cash.

This new invention would allow the customers to use their mobile phones “to pay for goods and services; initiate mobile money transfers to other individuals with Visa accounts; receive near real-time notifications of activity on their Visa account; and "opt in" to receive offers and discounts from merchants.” This concept would allow the mobile payments a reality for consumers around the globe. Consequently, the “Next Generation” of financial services will be based on the concept of mobile banking. Although this concept may not eliminate the entire baking system, it will definitely shrink the need of a traditional bank for customers to do their banking.


Visa Inc.; Visa and Nokia Working Together to Deliver Payment Applications for Next Generation Mobile Devices. (8 October). Telecommunications Business,320. Retrieved November 1, 2008, from Sciences Module database. (Document ID: 1565706591).