Business Knowledge for IT in Retail Banking: A Complete Handbook for IT Professionals

238 Pages·2007·0.97 MB·English

by  Essvale Corporation Limited

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essevale_book:essevale_book_v5 15/1/08 09:41 Page i
B
usiness Knowledge for
IT in Retail Banking
A complete handbook for IT Professionals
essevale_book:essevale_book_v5 15/1/08 09:41 Page ii
Essvale Corporation Limited
63 Apollo Building
1 Newton Place
London E14 3TS
www.essvale.com
This is the first edition of this publication.
All rights reserved
Copyright ©Essvale Corporation Ltd, 2007
Essvale Corporation Ltd is hereby identified as author
of this work in accordance with Section 77 of the
Copyright, Designs and Patents Act 1988
Requests to the authors should be addressed to:
[email protected].
This book is sold subject to the conditions that it shall not,
by way of trade or otherwise, be lent, resold, hired out or
otherwise circulated without the author’s or publisher’s prior
consent in any form of binding or cover other than that in
which it is published and without a similar condition including
this condition being imposed on the subsequent purchaser.
A CIP record for this book is available from the British Library
ISBN (10-digit) 0955412420
ISBN (13-digit) 978-0955412424
This publication is designed to provide accurate and authoritative
information about the subject matter. The author makes no representation,
express or implied, with regard to the accuracy of the information
contained in the publication and cannot accept any responsibility or
liability for any errors or omissions that it may contain.
Cover design by Essvale Design Team
Design and typesetting by Boldface, London EC1
Printed by Lightning Source Ltd, Milton Keynes
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Business Knowledge for IT in Retail Banking
Preface
This is another publication in the Business Knowledge for IT Professionals series
that will include other exciting topics in the near future. The motivation for this
publication is to bridge the gap in business knowledge between IT profession-
als and the business community. Readers will find that the topics covered in this
publication will get them up to speed with the knowledge they need to work in
the competitive world of Retail Banking.
This publication covers topics including an overview of Retail Banking, the
major players, recent trends and so on. After reading this publication, readers
will have the confidence to talk to the business users within Retail Banking,
knowing that they have a firm grasp of what the business is all about.
The types of IT professional that would benefit from the knowledge in this
publication include software developers, development managers, test analysts
and managers already working in Retail Banking or those that would want to
pursue a career in this industry. Other types are project managers, database
administrators, support analysts and business analysts that are already working
in Retail Banking or would like to cross over from other industries.
Undergraduates, postgraduates and those who have recently graduated can
also benefit greatly from reading this publication.
Finally, readers should please note that some of the data published is not
up to date. The data in this publication is meant to be a guideline to the state
of the markets and not a basis for extrapolation or forecasting.
iv
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Acknowledgements
Acknowledgements
Essvale Corporation Limited would like to thank all the authors and publishers
of all materials used in compiling this publication. Also thanks to all the respon-
dents to the research carried out to justify writing this publication.
We would like to acknowledge Edward Taylor of Misys, Melinda Mattei of
Chordiant, Manjinder Jaul and Catherine Atkinson of Temenos, Louise Jude of
Ifex Solutions, Mark Johnson and Wesley Samways of APAK Group, Jacqueline
Roose and Robert Kaar of Oracle Corporation, Mike Hutchinson of Voca, and
John Randles of Polar Lake. Also Alastair Bathgate of Blue Prism, Kate Smyth of
JD Marketing, Sandra Quinn and Chris Duncan of APACS, Paul Saunders, Amit
Dua and Navin Rammohan of Infosys, Ramesh Ramakrishnan of Polaris
Software Labs and Carol Woodcock and Roger Keel of CreditAction.
Our thanks also go to Pat Winfield of Bookworm Editorial Services,
Paul Crittenden of Boldface Typesetters, Sara Fisher and Daniel Page of
LightningSource, Barney Lodge of Lodge Consulting, Ruth Tellis of Palgrave
Macmillan, Eric Dobby of Financial World Publishing, the staff of Amazon
worldwide and the staff of City Business Library, London. Thanks for support-
ing Bizle Professional Series thus far.
v
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Contents
Contents
Preface iv
Acknowledgements v
Contents vii
Introduction x
1. Overview of Retail Banking 1
Introduction 2
Definition of a Retail Bank 2
Types of Retail Bank 2
Definition of Money 3
The Banking Code 4
Service Offerings in Retail Banking 5
Distribution Channels in Retail Banking 5
Banker–Customer Relationship 6
How Banks Generate Revenue 7
Global Retail Banking Industry 8
Overview of the UK Retail Banking Sector 9
Retail Banking in the UK in Recent Years 11
Internet Banks 11
Peer-to-Peer Banks 12
List of Some Retail Banks 14
2. Product Types in Retail Banking 15
Introduction 16
Accounts 16
Investments 25
Cards 26
Loans 28
Mortgages 29
Insurance 30
Travel Services 30
Bank Codes 31
Rates 34
3. The Business Environment in Retail Banking 35
Introduction 36
Players in Retail Banking 38
The Competitors 38
Allied Organisations 40
4. Trends in Retail Banking 52
Introduction 53
Introduction of SEPA 53 vii
Introduction of Faster Payments 54
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Business Knowledge for IT in Retail Banking
Sarbanes-Oxley Act of 2002 56
Basel 2 Accord 56
AML/KYC 58
Growth of Social Lending 59
Emergence of Financial Supermarkets 61
Deconstruction of Banking Services 61
Remote Card Authentication 62
Use of High Technology Tools to Identify Prospects 63
Use of Customer Analytics 64
Growth of Online Banking 65
Recent Card Industry Initiatives 66
Rise of Islamic Retail Banking 69
The Introduction of SWIFT for Corporates 69
Identification of the Unbanked Retail Market 72
Onset of Banking in Virtual Worlds 73
The Growth of Buy-To-Let 73
Cheque Truncation 74
Introduction of Paperless Bank Statements 75
Popularity of Mobile Payment 76
5. Account Opening in Retail Banking 78
Introduction 79
Background to Account Opening Systems 79
Theoretically Underpinnings 80
Account Opening Process 86
Personal Banking Process 86
Events Occurring During the Life of the Customer 92
Account Management 93
6. Lending in Retail Banking 95
Overview of Lending 96
Types of Lending 96
Principles of Lending 96
Data on Lending 98
Collateralisation 98
The Cost of Credit 99
Economics of Credit 101
Granting Credit Decisions 101
7. Payments in Retail Banking 114
Introduction 115
Manual Payment Methods 115
Electronic Payment Methods 119
viii 8. Common Systems Used in Retail Banking 136
Introduction 137
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Contents
Industry Dynamics 137
Increasing Importance of Banking Platforms 138
Conclusion 148
9. IT Projects in Retail Banking 149
Introduction 150
List of Common IT Projects 150
Automation of Business Processes 150
Use of Screen Scraping for Data Migration 158
Conclusion 169
10. Common Terminology Used in Retail Banking 170
Introduction 171
List of Terms 171
11. Methodologies, Skills and Tools 179
Introduction 180
Overview of Mainframe Technologies 180
Methodologies 180
Business and Systems Analysis Methods 186
Testing Methods 187
Tools 187
Common IT Skills Required 188
Mainframe Skills 190
Soft Skills 192
12. The Future 194
The Future 195
Adopting Globalisation Strategies for Growth 195
Introduction of a New Technology Paradigm 196
Rethinking the Business Model 198
Outsourcing and Offshoring 199
Adoption of Customer Retention Strategies 200
Growth of Bank Retailing 201
Intensification of KYC Initiatives 202
Conclusion 204
Appendix 205
Bizle Business Credit Card Summary Box 206
Calculation of Simple and Compound Interest Rates 208
Useful Websites 210
Useful Job Boards 212
Specialist Recruitment Agencies 213
Bibliography 214
ix
Index 218
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Business Knowledge for IT in Retail Banking
Introduction
Professionalism is a now a word associated with IT, but this has not always been
the case. IT has traditionally been seen as a support function of many organisa-
tions, but not anymore. The strategic value of IT is underscored by the presence
of IT representatives on the board of directors. Chief Information Officers are
now accorded the same significance with regard to the progress of an organisa-
tion as Chief Finance Officers and Chief Operating Officers.
The British Computer Society (BCS) and other parallel societies the world
over share our vision of the model IT professional who is as comfortable with
technology as he/she is with business. Even governments have recognised the
criticality of IT to the success of business, which leads to growth of their econo-
mies. To make this happen, the level and standard of professionalism should be
raised to a parity with established professions like law, engineering and phar-
macy.
Against this backdrop, the BCS launched a programme, Professionalism in
IT, in 2005. The programme has had the backing of other professional institu-
tions and trade bodies and of leading members of the IT and business commu-
nities drawn from both the public and private sectors.
The need for an IT profession with a greater emphasis on business focus can-
not be overstated, especially in a constantly changing regulatory environment.
Regulations like SEPA, Basel2, and Sarbanes Oxley require changes to IT sys-
tems and as such organisations require business-aligned IT staff on board to
ensure timely compliance. Moreover, customer expectations are getting higher
as service providers in every industry sector are facing stiff competition from
existing companies as well as new entrants.
A recent global survey of senior IT and business leaders by the Economic
Intelligence Unit revealed that 69% of the respondents believe that, by 2009,
IT’s primary role will shift from driving cost efficiency to enabling revenue
growth. Interestingly, if the analysis is limited to Chief Executive Officers and
Board members, the percentage increases to 83%.
Why is Business Knowledge of Retail Banking
important?
IT professionals need to have knowledge of the retail banking industry for the
following reasons:
(cid:2) Retail banks need high-quality systems to ensure the smooth operation of
the business.
(cid:2) Business-critical IT projects in retail banks are executed to very aggressive
deadlines and hence there is little provision for training IT professionals in
the rudiments of the business justifications and implications of these pro -
x
jects.