Technology Banker November / December 2014 by Technology Banker

The Voice of Technology and Finance in Africa

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November/ December 2014 £3.99

AFRICA’s WAR AGAINST FRAUD Solving the Compliance And Security Conundrum

Rise of Islamic Banking in Kenya

The 10 Principles of Good Security

Compliance-as-a-Service – a faster and easier approach to cyber security.

The way forward for Islamic banking in Kenya.

Enough is enough – why it is time to fight back against cyber attacks.

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WELCOME In the absence of global cyber laws, every country is susceptible to all sorts of online attacks that affect ecommerce. For financial institutions, this can mean criminals gaining unauthorised access to individual and corporate databanks and the theft or manipulation of classified information. The Nigerian Senate recently joined the fight and passed a cybercrime bill that is now awaiting presidential endorsement.

CONTENTS 14

How the power of the mainframe

is supporting new mobile

banking applications

Solving the Compliance And

Security Conundrum

Africa’s Cold War on fraud –

In this issue, we look at ways how financial organisations can fight back against these criminals.

how to fight back against

fraudalent activities

As always, we would love to hear from you, our readers, so please write to us and send your views by email.

Increasing IT skills in Africa:

Oracle’s new Capacity Building

As the threat of cybercrime is getting more serious, fighting it remains an uphill battle, especially as the so-called internet of things widens the attack surface, with criminals now pursuing private customer information, employee records, financial data and intellectual property. Organisations across Africa must realise that it is no longer a case of if they will be targeted by cyberattacks, but rather when. According to The Center for Strategic and International Studies (CSIS), cybercrime costs the global economy $445 billion each year. So finding new solutions to uncover hidden criminal activity is a priority for every business that aims to reduce the growing gap between profit and loss.

Program

Warm Regards,

Remi Akinjomo Managing Editor

How banks can benefit from

combining cloud and mobile

technology 44

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The 10 Principles of Good

Security

©Technology Banker 2014 ISSN 2051-9443

NOVEMBER / DECEMBER 2014

NEWS IN BRIEF

Cisco report warns of cyber attack threat

he increasing sophistication of the technology and tactics now used by online criminals has outpaced the ability of IT and security professionals to combat these threats, warns Cisco’s 2014 Annual Security Report.

It indicates a shortage of over a million security professionals across the globe and says threats that take advantage of users’ trust in systems, applications and personal networks have reached startling levels. Most organisations do not have the qualified people or systems to protect themselves. David Meads, Vice-President for Cisco in Africa, said: “Organisations must realise that it is no longer if they will be targeted by cyber-attacks, but rather when.”

Airtel reports big rise in mobile money transactions

irtel has reported a 53.02% growth in mobile money transactions in Africa during the Quarter 2 financial year, which ended on 30 September. The telecom company saw transactions of US$3.34 billion in the quarter. The number of Airtel Money customers also increased by a total of 23.26%. This means Airtel now has 5.3 million users in Africa, compared to 4.3 million in the last quarter. The company also achieved significant growth in its data revenue. “Data revenues stood at $ 115 Mn with growth of 56.8% Y-o-Y, led by an increase in data customer base by 50.4% and higher usage per customer by 24.5%. Data revenues contribute to 10.1% of overall Africa revenues vis-à-vis 6.6% in the corresponding quarter last year,” the company said in a statement.

Instant online money transfers launched

he online money transfer service Azimo has launched in Kenya, which means its European users will be able to send cash to M-Pesa’s 19 million subscribers in Kenya. The new deal will enable residents in the UK and the Eurozone to send cash directly to their friends and family’s M-PESA wallets instantly or to participating ATMs. Azimo CEO, Michael Kent, said: “We are delighted to be working with M-PESA to expand our global money transfer network. Our new service will allow us to help customers hold on to more of their hard-earned cash.” The launch came after MoneyGram and Safaricom’s M-Pesa announced their international money transfer services will soon start in Kenya, allowing the diaspora to send money direct to the mobile wallets of Kenyans.

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New partnership to benefit African businesses

witter and IBM have joined forces to use social data to help businesses and institutions understand their customers, markets and trends. IBM plans to offer Twitter data as part of its select cloud-based services. These include IBM Watson Analytics, a new cognitive service that brings intuitive visualisation and predictive capabilities to business users, as well as a cloud-based data refinery service. Entrepreneurs and software developers will be able to integrate Twitter data into new cloud services they are building with IBM’s Watson Developer Cloud or Bluemix platform-asa-service. “This partnership will allow faster innovation across a broader range of use cases at scale,” said Chris Moody, VicePresident of Twitter Data Strategy.

Mobile phone subscribers exceed 32 million in Kenya

enya’s mobile phone subscriptions have grown by 5.6 percent and now stand at 32.2 million, according to the latest sector statistics report for the period April to June 2014, released by the Communications Authority of Kenya. This increase was reflected in the country’s mobile penetration level, which stands at 79.2 percent. Mobile money transfer subscriptions declined, however, from 26.7 million posted in the previous quarter to a figure of 26.6 million, while mobile money agents grew by 4.8 percent to reach 109,286.

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NEWS IN BRIEF

Family Bank launches new promotion

Economic forum discusses potential for promoting Islamic finance

The three-month promotion, which began on 27 October, runs until January 27 2015, when the grand prize winner will take home a total of Ksh3 million. There are also cash prizes that range between Ksh200,000 and Ksh1 million.

amily Bank has launched ‘Tajirika Na Mamilioni’, a new promotion that aims to retain their 1.5 million customers and encourage them to deposit more money.

Participants must open an account with the Family Bank and then deposit and maintain a minimum balance of Sh5,000 until 27 January 2015. Existing customers will also have to deposit and maintain a minimum balance of Sh5,000 for 3 months in order to qualify for the promotion.

Android devices attract the most mobile malware

n its 2014 Annual Security Report, Cisco Systems has suggested that 99 percent of mobile malware in 2013 targeted Android devices, with Java the most frequently exploited programming language by online criminals. The report warns that evolving methods for network and systems attack include socially engineered theft of credentials and passwords, hide-in-plainsight infiltrations and the exploitation of the trust required for economic transactions, government services and social interactions. The rapid adoption of evolving technologies, such as mobile and cloud computing, have also contributed to the heightening complexity of these threats and attacks. Cybercriminals are gradually transitioning from attacking individual devices to exploiting strategic infrastructure, such as web hosting servers and other data centres.

Hussain Al Qemzi, Board Member of the Dubai Islamic Economy Development Centre and CEO of Noor Bank in the UAE, said: “Strengthening Islamic finance through proper documentation, increased customer awareness, ensuring industry standardisation and providing supportive regulatory frameworks is needed.” The Forum concluded on a note of optimism that Islamic finance is growing in the right direction and will claim its share in global trade finance.

3D printer shipments ‘to double’ this year

Bloomberg launches List trading tool

loomberg’s multi-asset swap execution facility, Bloomberg SEF LLC, has launched a List trading tool for Interest Rate Swaps (IRS) that enables market participants to improve their operational efficiency by creating and sending a “basket” of swaps. These can be traded at a single price by using Bloomberg SEF’s request for quote functionality. Bloomberg’s swaps analytics, coupled with Bloomberg SEF’s liquidity, provide the first market solution for participants wishing to perform advanced portfolio valuation prior to execution. The List tool also allows clients to offset cleared risk, which reduces the number of existing trades and overall capital costs. “The new List tool gives our global customers an alternative way to trade swaps that provides flexibility in managing capital exposure and improves operational efficiency,” said the company.

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he 10th World Islamic Economic Forum highlighted the importance of developing a standardised documentation process to facilitate the growth of Islamic trade finance.

ed Hat Inc has announced the expansion of its OpenShift Marketplace, which acts as a single contact point for organisations to find and try solutions for their cloud applications. “With today’s announcement, Red Hat has simplified the purchasing experience for OpenShift Marketplace, introducing integrated billing that enables customers to buy complementary solutions with ease, fulfilling its vision for OpenShift Marketplace as a one-stop shop,” the company said. Red Hat has also expanded its OpenShift Marketplace to include add-on offerings from several new OpenShift ecosystem partners.

NOVEMBER / DECEMBER 2014

BUILDING FORMIDABLE

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NEWS IN BRIEF

Milestone collaboration aims to transform industries

BM and Tencent Cloud have signed a business cooperation memorandum to collaborate on providing public cloud with Software-as-a-Service solutions for industries. Both parties have agreed to focus on emerging small and medium enterprises in smarter cities and smarter healthcare industries, as well as other fields, to enable these industries to utilise mobile, cloud computing and big data tools to transform both their internal processes and operations. As part of this milestone collaboration, Tencent Cloud and IBM will jointly promote industry innovation and gain from each company’s resources and global capacity to benefit enterprise customers.

Afreximbank holds trade finance workshop

he African Export-Import Bank (Afreximbank) holds its annual seminar and workshop on the fundamentals of structured trade finance in Lusaka, Zambia, on 4-6 November 2014. The event is targeted at senior bankers, trade finance officers, fund managers, corporate executives and lawyers, who will be trained how to structure bankable trade finance deals of varying complexity.

New analytics software fights cybercrime

tanbic Bank is providing training to help its clients to manage financial risks that affect the growth of business. The bank, which is part of Standard Bank Group, is mainly helping clients who are currency sellers and recently organised a Foreign Currency Risk Management seminar. The seminar was held because the bank observed that corporate clients, in the ordinary course of doing business, are exposed to foreign currency fluctuations.

Equinix cloud innovation to help African enterprises

uniper Networks has announced that the global datacentre company Equinix has deployed Juniper Networks MX Series 3D Universal Edge Routers in 19 markets to support its Equinix Cloud Exchange. This is an advanced interconnection solution that enables seamless, ondemand and direct access to multiple cloud services and multiple networks across the globe. Equinix CEO Steve Smith said “Enterprises need simple, scalable, direct access to services in order to build flexible hybrid cloud solutions. Equinix Cloud Exchange provides that, with the automated interconnection of cloud, network and managed service providers with advanced service orchestration.”

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Entrepreneurship centre boosts small businesses

bsa’s free access to business support services, which include consultations, business facilities and infrastructural support at its Centre of Entrepreneurship in Newtown, Johannesburg, has helped over 1,500 entrepreneurs since it was launched last year. The Centre of Entrepreneurship has successfully cut the costs traditionally associated with starting and running a business through offering business support services, meeting rooms, presentation facilities, hot desks and boardrooms. The bank will soon be offering new services that include both BEE certificates and internet connectivity.

Red Hat expands OpenShift Marketplace

NOVEMBER / DECEMBER 2014

NEWS ANALYSIS

Call For Vital Infrastructure Investment CWG Boss Austin Okere spoke about the role of education, technology and computer science at the WEF Annual Meeting of the New Champions, which was held in Tianjin back in September. During the meeting he urged governments to invest in ‘last mile’ infrastructure that would take broadband into homes and offices.

he Founder of the Computer Warehouse Group Plc (CWG), Austin Okere, spoke about the role of Science, Technology, Engineering and Math (STEM) education at the World Economic Forum Annual Meeting of the New Champions in China, and highlighted the importance of computer science on future employment trends. The annual WEF Champions meeting, also known as the ‘Summer Davos’, attracted over 2,000 delegates, comprising of global industry captains, top academia, heads of states and top government functionaries

NOVEMBER / DECEMBER 2014

to the Chinese city of Tianjin for two days from September 10. The Forum was opened at a colourful event by the Chinese Premier Li Keqiang and Professor Schwab Klaus, Founder and Chairman of the World Economic Forum. Mr. Okere, who is also Entrepreneur in Residence at Columbia Business School (CBS), New York, was speaking on the Digital Advantage Panel, alongside Rich Lesser, global CEO & President of the Boston Consulting Group; Natarajan Chandrasekaran, CEO of

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NEWS ANALYSIS Tata Consultancy Services; Mitchell Baker, Executive Chairwoman of the Mozilla Foundation; and Maurice Levy, Chairman and CEO of the Publicis Groupe. The panel was anchored by Nielsen Bronwyn of CNBC Africa.

RAPID INNOVATION IN TECHNOLOGY Mr Okere said that legislation will always lag behind the regulation of technology because of its innate manual and iterative nature, and the ever present need to chase rapid innovation in technology. He believes that physical stores will only be for brand enticement and ‘look & feel’ in future, while most purchases will be made online. He believes that business models based on the arbitrage of information, such as travel agencies, shall be disintermediated in favour of business models based on creativity, knowledge and information, including software design, big data analytics and ecommerce enablers, including Google and Alibaba. He added that Small and Medium Enterprises (SMEs) can now have access to the technological advantage previously enjoyed by larger companies, and be able to leverage technology solutions that are available through cloud computing, and using subscription payments to spread capital costs.

BOOSTING INCLUSIVE GROWTH He urged governments to invest in the critical ‘last mile’ infrastructure that enables broadband access to homes and offices and, as a result, boost inclusive growth, as there is a correlation between pervasive broadband access and a country’s GDP growth. When asked about financial inclusion and business expansion into emerging markets, he said the new frontiers for business expansion were Africa and Latin America. He did, however, caution against the wholesale importation of Western business model templates into these emerging markets, given the different geographies, peoples and cultures. Mr. Okere explained that the model of the widely popular M-PESA mobile banking system in Kenya, had not quite taken off in promising markets, such as Nigeria, because the Kenyan model was telecom operator led.

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He expressed deep scepticism about the ‘largest bank’ in the country being outside of the supervisory purview of the Central Bank, since telecom operators are regulated by the Communication Commission. He favours a bank-led model, which is slow in taking off because the banks are just learning the ropes in agent recruitment, a critical pillar in the value chain and the forte of telecom operators. Mr Okere, however, believes that the recent launch of the national identity card project in Nigeria will significantly boost financial inclusion in the country, as the cards, with biometrics and financial transaction capability (in conjunction with MasterCard), will be carried by over 130 million Nigerians. This is far more than the 15 million subscribers to M-PESA.

PHENOMENAL GROWTH CWG was named a WEF Global growth Company in May 2014 at the WEF Forum at Abuja in recognition of its phenomenal growth, global corporate citizenship, executive leadership and impact on the competitive landscape of the ICT industry in Africa. Acknowledging the company, David Aikman, Managing Director and Head of the New Champions at the World Economic Forum, said: “CWG Plc is a dynamic group with clear potential to shape the future in its relevant business sector and so is a perfect fit to our GGC community.” The Chinese Premier Li Keqiang assured the international business community in China that they would not be selectively targeted in the ongoing industrial reforms in China, while announcing a healthy GDP growth of 7.6% and the creation of an additional 10.4 million jobs in the eight months to September. Professor Schwab thanked the Government of China for their continued hospitality to the WEF community and assured of the reciprocity of the global business community through increased investment in the country.

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PAYMENTS

Using Payment Technologies and Applications to Drive a Diverse Customer Base in the African Market Payment services providers have exciting opportunities to provide new services and greater choice to a very diverse customer base, including the unbanked in rural and urban areas. Bethan Cowper, Head of International Marketing at Compass Plus, reports.

A Bethan Cowper

Head of International Marketing Compass Plus

s the continent with the world’s fastest growing population, projected by the United Nations to account for more than 40 percent of global population growth by 2030, Africa is an integral part of the international payments ecosystem. The continent also boasts the world’s youngest population, with more than 50 percent of inhabitants falling into the age bracket of 20-years-old or less. This fact, combined with a growing middle class and a lack of legacy payments infrastructure, makes Africa a very exciting place to be at the moment.

EXCITING DIVERSITY Africa is a very diverse region in terms of its religions, socioeconomics, politics, culture and geography, so making continentwide assumptions for the payments market as a whole can only prove detrimental for any financial institution looking to expand their business. Allowances need to be made on a country-

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by-country basis in order to drive value and grow loyalty across each customer base. With this is mind, how can payment services providers (PSPs) drive a diverse customer base without compromising the quality of the customer relationship? Globally, we can all agree that the key to growing and maintaining a customer base is to offer convenience. In a continent that is still, for the most part, predominantly cash-based and unbanked, if potential consumers aren’t being offered services that make their daily lives easier, they won’t use them. In essence, the solution in its most simplistic terms is this: PSPs need to make sure that their priorities are driven by the consumer requirements for each specific region. This strategy needs to include the banked, unbanked and underbanked in both urban and rural areas. Participating in formal banking is undeniably difficult for most rural Africans and, according to McKinsey & Company, 26 percent of urban Africans also fall into the

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PAYMENTS

unbanked category. This creates a pool of untapped opportunity for PSPs. That said, the perception that the African payments market is less mature than those of other continents is misleading.

INNOVATIVE WAYS TO TACKLE PROBLEMS Whilst many countries in the region do struggle with financial inclusion, they are finding new and innovative ways to deal with the problems they face. Joint initiatives with governments have been, and will continue to be successful; examples include the undeniable proliferation of mobile banking with M-Pesa in Kenya, which now boasts 86 percent mobile payments penetration, and the new identity cards being rolled out in Nigeria, which will provide millions of people with the opportunity to make prepaid electronic payments, 13 million of which are actively involved in the pilot.

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Financial inclusion is the key to driving the adoption of new technologies and applications, as digital payment penetration will reduce costs and increase transparency, enabling consumers to better manage their money. When the rest of the world thinks of payments in Africa, they automatically think of the mobile phone. They would be correct; the mobile device has been integral in growing the number of people with access to making electronic payments. In fact, though the mobile is the common thread across the continent as a popular banking customer interaction point, another channel that shouldnâ&#x20AC;&#x2122;t be discounted is the bank branch. From South Africa to Morocco, the bank branch still remains the number one sales channel for financial products and services. However, according to Mercator Advisory Group, the majority of African countries have fewer than five branches per 100,000 adults, even though the

branch is still where the majority of people go to withdraw cash. The bank branch is an excellent customer interaction point that can be used to cross-sell and upsell products and services, giving demonstrations of the latest features in internet banking or a mobile app, for example. In their research, Mercator Advisory Group found that consumers in countries where branches are scarce still used tellers as their main channel. This offers an unprecedented opportunity for financial institutions to serve customers in these regions by using alternative channels, such as ATMs. ATMs can act as mini-branches offering customers services, such as paying bills, mobile topups and even loan applications. These terminals can drive the interconnectivity between traditional and more innovative products and services. ATMs complement mobile banking with multi-channel functionality, such as an emergency cash initiative in

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PAYMENTS Egypt, which means the customer doesn’t have to use a bank card to withdraw cash at an ATM, and instead uses a code that is sent to the recipient’s mobile.

OPPORTUNITIES FOR NEW SERVICES With many African countries currently in the early stages of EMV migration, the opportunity to offer new services is extensive. For example, Kenya Commercial Bank is actively looking to introduce and encourage the use of contactless technology as part of a government-led scheme. With an EMV chip comes opportunities for financial institutions to offer their customers more choice whilst ensuring increased security. Though many financial institutions across the continent have found niche ways to grow their customer base and enable financial inclusion, it is important to note that what really drives a quality consumer experience is choice. The unbanked, rural population shouldn’t be ostracised for their lack of access, especially when the creation of a nation that can better manage their finances will benefit the economy as a whole. These days it is increasingly difficult to pigeonhole consumers into neat segments using demographics. For example, the unbanked aren’t necessarily poor people from rural areas; many unbanked consumers work in the city and save money every month. The problem is that these people are undereducated about the services available to them;

believing that a bank account is too expensive to maintain, they feel their need for financial services is largely unmet.

BUILDING TRUST We could effectively argue that how a consumer chooses to make a payment is based on both attitude and opportunity. If a financial institution wants to appeal to a diverse customer base, it has to offer education around opportunity and use this initial customer adoption to drive changes in attitude by building trust. As a continent in the earlier stages of its financial inclusion development, customers are only just starting to learn how banking relationships can be beneficial to them and trust is crucial at this stage. In summary, financial institutions that want to offer a high quality payments experience across all channels to a diverse consumer base should: •• Enable financial inclusion. Many unbanked consumers are more accessible than you think; especially in urban areas. Remember some services are used because of their availability, so if this was to increase, so would usage. •• Jump on the mobile bandwagon and look how you can use this device to differentiate yourself from other banks. Compete with the mobile operators by tailoring the services available to the specific regional requirements of your customer base. •• Look at the product and

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services you offer from an omnichannel perspective, rather than seeing each channel as a silo. Look at how the branch can be used to educate customers on the other services available. Use the ATM as an extension of this and integrate it with your mobile services; use internet banking to offer transparency across spend and fees. •• Leverage the data available to you and offer a personalised customer journey. This will ultimately help you retain and grow your customer base, whilst instilling loyalty from the get-go. •• Innovate to solve problems. There is an extensive number of untapped customers still out there, so look at how your applications could be used or further enhanced to fulfil their requirements. You aren’t tied to underlying legacy systems, so take the opportunity to partner with technology providers that work to help expand your business and share your vision for the future. This is a rapidly evolving region that shouldn’t be underestimated. Whilst challenges to development still remain, the African nation drives innovation through necessity, which means that all innovations are customer, rather than technology, led. Necessitydriven technologies have a much more successful penetration rate and, with a combination of improving economic conditions and an increasingly supportive banking infrastructure, other countries will undoubtedly look to Africa for inspiration in the near future.

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MOBILE BANKING

BANKING’S NEW CATALYST:

THE MAINFRAMEPOWERED MOBILE APPLICATION

Mainframe technology is enabling banks to provide a growing number of services in near real-time through new channels, like mobile banking. Ross Mauri, General Manager System z, IBM Systems & Technology Group, reports.

he statistics are staggering. The mobile install-base is already bigger than the PC installbase was at its height, with 1 billion smartphones and nearly 200 million tablets shipped in 2013 alone [1]. Ericsson, the Swedish mobile phone manufacturer, predicts 4.5 billion devices will be in use by 2016, and in the United States it is forecast that 71% of adults already own smartphones, with this number expected to rise to 78% by 2016. This is not just a US or Western nation phenomenon either, as the mobile install-base is growing even more rapidly in developing countries, where traditional internet access is sparse. The impact that the shift to mobile is having on banking is equally remarkable. A recent PriceWaterhouseCoopers report

illustrated this by showing that the volume of mobile transactions grew by 106% in 2013 over the previous year, with 67% of mobile phone owners in the US, UK and China saying they conducted a mobile banking transaction at least once a week. The study also showed that mobile banking now represents more than 20% of all financial online transactions – up from just 11% in the previous year. The challenge now facing banks is building an infrastructure that could support this new mobile world. A task made more difficult by the fact that the consumer and the banks are seeking different results to define a successful mobile banking experience. Consumers want ease of use and speed, while banks are searching for availability and security of data.

GENERATIONAL SHIFT Compounding this challenge is a generational shift in the client base. While mobile computing presents a key business opportunity, it has become an imperative for companies that want to secure their future with a new, younger customer base that is built around “millennials”. Millennials – the 18-29 demographic – represent the highest penetration (83%) of any single group of smart phone users. Many of these new users have developed a critical dependence on their smartphone and mobile devices and expect secure, dynamic, up-todate information for all aspects of their daily lives. Given these trends in mobile, it should not be surprising that when it comes to online banking, users expect and demand immediate

[1] Gartner, “The PC Slowdown” December 2013

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MOBILE BANKING

access to their current account balance or investment position at no charge – anytime, anywhere in the world, and as often as they want.

BUILDING LOYALTY AND TRUST The ability for the “millennials” (and the rest of us) to check bank account information in real-time (and several times) before finalising a transaction is real and growing. As a result, engaging with new, younger customers who predominantly use mobile technology is quickly becoming a necessary approach for banks seeking to grow business and build loyalty and trust. Consider a recent report on a major UK bank, which shows that their average customer now visits a physical branch only twice a month, but uses a mobile banking application 26 times during the same time period. As a result of this trend, the bank’s mobile application has had 5 million downloads since it went live in 2012. It currently averages 17.5 million hits a week, and has resulted in £4 billion ($6.5 billion) being transacted each month, which translates to £1,500 or $2,500 per second. When you analyse these trends it becomes clear that there are three primary times that consumers will access their mobile banking application. The most common is when customers habitually check or regularly query the value of an account balance or portfolio. This can occur every day. Then there are the customers who use the application for transaction-specific checking and conduct a query prior to, or after, making a specific transaction, for example depositing a cheque by using the smartphone camera and scanning software. The frequency of this may be sporadic, but the information delivered must be real-time. Finally, there are the customers

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who use the application because they anticipate activity in their accounts. Their continual, real-time querying is in expectation of an important asynchronous account update. Examples of this include the wiring of funds in/out of the account, the clearing of a cheque or expected regular payment (income), the cancelling of a cheque, the reversal of a transaction, or the recalculation of a portfolio’s valuation.

queries originating at the same time. Such a spike can seriously lag the application unless the backend infrastructure is unable to scale quickly. This problem is compounded when the data is not up-to-date. In many cases it has been observed that users will keep issuing the same request until they see the data change. The BBC News reported on this phenomenon, saying that: “The most common problems with the mobile banking applications were due to too many people trying to check their accounts to see how much they had been paid by their employers, with one bank reporting record usage and more than 5,500 customers logging on every minute.” Why is this important? Studies have shown that 32% of consumers start abandoning slow sites after waiting for between one and five seconds, and the report concluded the number one reason why people in the UK switch banks is dissatisfaction with their mobile banking application. When you add this to a report in the Wall Street Journal (April 2014), which showed that 60% of mobile users switched banks in the past year, it is easy to come to the conclusion that smartphone users are impatient and intolerant of poor service – and that they will quickly switch loyalties.

RAPID RESPONSE TIMES

SUDDEN DEMAND SPIKES This becomes an issue when a massevent occurs. If the user population is large, for example it may include consumers, citizens and benefit recipients, and the anticipated payment time is the same for everyone (for example midnight on Thursdays), it is very likely there will be a sudden demand spike due to so many mobile

The need for a secure, mobile infrastructure that can scale and provide continuous availability and rapid response times are the reasons that businesses look to the mainframe. With 92% of the world’s top banks already depending on the mainframe to drive their data transactions and 55% of all global transactions taking place on the mainframe, it is easy to see why we are increasingly seeing the power of the mainframe turned to support these new mobile banking

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MOBILE BANKING applications. When you look at the statistics I have referenced above and analyse the capabilities of the mainframe, it becomes apparent why this is happening. First and foremost, the demand within the banking sector for a greater emphasis on ever increasing levels of security plays to the mainframe’s primary strength – it is the world’s most secure computing platform. Add the mainframe’s legendary security to its ability to easily and quickly scale to accommodate increased demand, and you can see why it has flourished in the financial services sectors. Mainframe computing is an infrastructure-based concept – its true payoff is derived from growing volumes of transactions, and its main justification lies in the anticipation of a business that will grow over time, where the cost per individual transaction diminishes as more transactions are processed. In addition to security and scalability, for customer-oriented mobile banking applications to truly succeed they must meet the consumer’s needs for the latest data available, as quickly as possible. Only the mainframe and its proven record of data availability can deliver this. To illustrate the impact that a mainframe infrastructure can have in driving new banking loyalties, we only have to take a look at one of the developing mobile markets I referenced above – Africa. Today, Africa’s banking sector is one of the world’s most diversified and fastest growing financial industries, with the Economist Intelligence Unit predicting the sector will see its assets expanding by 248 percent to hit $1.37 trillion by 2020.

AFRICA’S UNBANKED Banks in Africa have enjoyed tremendous growth over the last thirty years, as more economies on the continent gain stability and foster the growth of a middle class who can

afford to save and borrow cash. But while formal banking services are firmly established in most major cities on the continent, focus within the industry is turning to a new segment: the over 80 percent of Africa’s rural populations that still have no access to banking services – known as the ‘unbanked’. In spite of growing energy, road and rail networks across Africa, access to reliable infrastructure remains the financial sector’s single biggest challenge in the push to bank the unbanked. An African Development Bank study estimates that it would require each African country to spend at least $93 billion a year in order to meet these current deficiencies in the region’s infrastructure and create universal access to a reliable infrastructure In the bid to capture these new pockets of customers in rural areas, banking firms are facing many of the same challenges they did in the pre-railroad 1800s. How do you extend services to a rapidly growing population located across varied geographies and, more essentially, how do you ensure those transactions remain easily accessible and secure? For many successful banks operating in Africa, technology has become their natural ally in delivering financial services to consumers in remote regions. Mobile banking has accelerated the regional growth of financial services and sparked competition for consumer’s deposits in ways that have never been seen anywhere else in the world.

MOBILE BANKING EXPLOSION Inspired by the boom in mobile phone use across the continent – Gartner forecasts that mobile transactions will top $160 billion in 2016 – a continentwide explosion in mobile banking is being driven by increased access to mobile devices and their usability. In addition, more consumers are willing to substitute the expense of travelling up to 20 miles to the nearest bank

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branch with a simple SMS-based transaction on their phone. But these new advances in delivering banking capability to the pockets of consumers are coming at a high technological cost. By 2015, there will be twenty times more content, fifteen times more applications and four times the number of mobile transactions than there were in 2011. In order to give consumers access to banking services that are sometimes solely delivered via a mobile phone, banks must leverage robust technology systems. For example at First National Bank (FNB) in South Africa, a mainframe enables the bank to provide a growing number of banking services in near real-time, securely. The bank’s mainframe offers rapid speed for transactions – with endto-end response times of just 30 microseconds, and record-breaking speeds of 1,541 transactions per second. More importantly, mainframe technology allows the bank to create a single image of its customers on a single machine, making it possible to quickly migrate or provide new services to clients in real-time from any of a number of data sources. With such unprecedented growth in mobile transactions, banks will need to invest in more robust technologies like the mainframe to shorten their time to market and to increase the number of products they can offer immediately through new channels like mobile banking. Buyer behaviour research suggests that enterprises expect enhanced mobility capabilities to improve both internal efficiencies, as well as external customer relationships. As a result, mobile service offerings are increasingly being seen by banks around the world as a business enabler – beyond merely enhancing productivity, they also provide a closer connection to customers, critical to any business pursuing success in today’s market.

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SECURITY

Solving the Compliance And Security Conundrum Kurt Hagerman Chief Information Security Officer at FireHost, writes about the new security challenges facing African banking organisations, how they can create an adequate defence against hackers, and the benefits of Compliance-as-a-Service.

he world of financial technology grows more advanced each year, with an ever-expanding roster of tools that offer convenience and speed to both organisations and their customers. From cloud solutions to transactional features, these technologies can empower banking institutions on multiple levels – there’s no argument about that. Yet these new technologies have been accompanied by the rise of two other dynamics: compliance regulations that grow increasingly complex every year and cybercriminals who continue to grow cleverer and more successful. These developments have saddled banking organisations with three jobs. They must maximise the potential of their new technologies to achieve a competitive advantage; satisfy an ever-growing number of financial regulations; and protect customers and data from increasingly sophisticated attacks.

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PREPARING AN ADEQUATE DEFENCE The problem? Because their expertise is financial rather than technical, most organisations are woefully unprepared for the last two tasks. It’s important to realise that the face of financial cybercrime isn’t a lone hacker anymore – it’s more often a well-funded criminal ring. Mustering an adequate defence requires a security team with an even greater budget, skills and technology. Yet even when large financial houses are willing to invest in advanced security, they find themselves competing with other enterprises for the small pool of candidates, who possess the right expertise and background. Consider one recent attack in the news; financial behemoth J.P. Morgan Chase was breached despite having a large and sophisticated internal security team. To avoid the costly disaster of an attack or failed audit, it’s clear

Kurt Hagerman

Chief Information Security Officer FireHost

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SECURITY that outside help is needed.

REBUFFING HACKERS Finance executives know that ensuring the security of their systems and customer data is critical to maintaining their market position. Additionally, they also have the burden of satisfying their many compliance obligations. As a result, these executives see that their security teams are spending a significant amount of time dealing with these issues rather than helping the bank achieve its core mission. With the banking landscape growing more competitive every year, it’s only natural that most executives want to dedicate their best talent and resources to achieving high-level brand objectives, rather than satisfying financial regulations and rebuffing hackers. As a result, many are handing off as much IT management and infrastructure as they can. In some ways, compliance and security has evolved into something that is very much like automotive work. A few decades ago, it wasn’t uncommon to see people working on their cars in their driveways. But today’s cars are so computerised most people find it easier to simply hand them over to mechanics. Similarly, today’s executive often prefers to leave the server farms and datacenters to someone else. The difference? These organisations haven’t been able to hand their compliance and security over to just one entity. Instead, they’ve often worked with multiple third parties and sorted through different security offerings while negotiating individual contracts and invoices.

A FASTER AND EASIER APPROACH Until now, that is. Providers have recently begun offering Compliance-as-a-Service (CaaS) as a faster and easier approach to both compliance and security. This is an all-in-one solution designed to help banking and financial organisations obtain key security services that allow them to more easily achieve their compliance goals quickly. It takes a huge burden off the customer’s plate while using advanced security controls to protect their data. Typically, CaaS offerings include a protected underlying infrastructure, gap analysis, remediation, ongoing monitoring, incident response and forensics – all built and managed by trained security and compliance experts. Because the components all work together, CaaS reduces the cost, complexity and length of audits. And because the buying process is simplified into one invoice, the result is a faster time to compliance. Consider this scenario. A financial corporation handling its own compliance process must identify skilled staff, then find, evaluate and test the right vendors and products. Yet, even though this months long process will consume significant funds and take the team’s best talent off other projects, the organisation can still fail its audits – because it lacks internal compliance expertise. Now consider this one. That same team decides to take advantage of a CaaS package. The provider immediately analyses their application and data security needs and recommends the right solution; expediting the

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organisation’s ability to attain the security they need and meet their compliance obligations. The environment is protected from attacks and the team’s level of compliance work is minimised, letting them focus on other business objectives.

SELECTING THE RIGHT CAAS OFFERING Because CaaS is so new in the industry, many organisations might be unsure of just what comprises an effective offering. So here are a few tips. First, companies should look for a provider that can shoulder as much security and compliance work as possible. Remember, the point is to reduce all risks – operational, financial and reputational. Scattering those responsibilities around piecemeal can easily lead to security gaps and compliance violations, so it’s always best to find a provider that can cover both the security and compliance disciplines. That said, there will always be some compliance work left to the organisation. That leads to the next trait of a desirable provider: having the knowledge and experience to answer questions and provide guidance. Finally, a good provider will be well connected, with a network of ancillary businesses that can close remaining gaps. Financial technologies are designed to ultimately benefit banking organisations, not force them to struggle with security and compliance work. By exploring CaaS offerings, companies can enjoy the power and protection of true security – and build a brand reputation for safety that their customers appreciate.

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ISLAMIC BANKING

RISE OF ISLAMIC BANKING IN KENYA Islamic banking has grown rapidly across the continent since it was introduced to Kenya a decade ago. Kedarnath Sridhara of Infosys Finacle writes about its key challenges in Kenya, its big potential across Africa and the need for advanced, flexible technology.

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NOVEMBER / DECEMBER 2014

ISLAMIC BANKING

hariah-compliant banking has evolved to become an integral part of the global financial system and witnessed considerable progress worldwide. Besides the traditional Islamic banking markets of the Middle East and Malaysia, many countries in Asia and Africa are now accepting and recognising Shariah banking as a more prudent and stable banking system. Unlike conventional institutions, which follow the directives of banking regulation, Islamic banks strictly adhere to the principles of Shariah law. Islamic finance investments in 2014 are estimated at about US$ 2 trillion and it is anticipated they will increase to US$ 2.5 trillion next year. Although the Shariahcompliant banking industry currently only constitutes 1.6% of the total assets of the 50 largest banks in the world, it remains one of the fastest growing segments in the global financial services sector.

THE KENYAN GATEWAY

Kenya was the first country to introduce Islamic banking in the Eastern and Central African region a decade ago, and while the business is still in transition, it has been growing steadily and shows big potential for future growth. The uptake of Islamic banking is projected to grow exponentially in sub-Saharan Africa. The Kenyan banking system is supervised by the Central Bank of Kenya (CBK). All banks, including those that follow Islamic banking principles, have to operate under the same framework as conventional banks. Two Islamic banks, namely Gulf African Bank and First Community

Bank, were licensed by CBK in 2007 and had a total of KES 15.4 billion in loans and advances at the end of February 2013, as well as KES 19.5 billion in total deposits. This clearly indicates the rise and future exponential growth of Islamic banking in Kenya.

•• Financial inclusion for the less privileged: The need of the hour in the sub-Saharan region is for suitable microfinance products that will cater to the less privileged sections of society. INITIATIVES TAKEN TO PROVIDE IMPETUS

THE KEY CHALLENGES FOR THE GROWTH OF ISLAMIC BANKING IN KENYA ARE:

The CBK has taken the following initiatives to provide impetus to Islamic banking in Kenya: •• It has amended the Banking Act, which became effective in January 2009, to incorporate the concept of “return” for Shariah-compliant savings products. •• Section 7 of Banking Ordinance 1962 does not allow a bank to own property or assets, Section 9 of Banking Ordinance 1962 prohibits entering into any kind of trade, and Section 12 of the Banking Act restricts the trading and holding of fixed assets. However, most of Islamic Finance concepts revolve around Trading of Goods/ Commodity. •• In 2006, the CBK amended the Banking Act to exempt Shariah-compliant financing products from trading and fixed assets restrictions, subject to due diligence.

•• Legal and regulatory framework: It requires an more evolved legal and regulatory framework in Kenya, which could facilitate a quick rollout, either as a wholly owned subsidiary or a window of a Kenyan bank. •• The disclosure norms of profit earned on Islamic Assets: Islamic banks should disclose the profit earned on Islamic assets that are funded by the Mudarabah pool of investments to Mudarib. The CBK is to provide clear guidelines on disclosure of profits earned on Islamic assets. Profit declaration on Islamic assets is mandatory, as per Shariah principles, and is the industry best practice. •• Mandatory payment of interest: Section 16 of the Banking Act of Kenya requires banks to pay interest on savings accounts, so long as the minimum balance is maintained. This is contrary to Shariah Law which strictly prohibits the payment of interest. •• Withholding tax on interest paid: As per the current CBK regulations, banks are mandated to collect tax on earnings on Islamic deposits, which is not an acceptable practice in other Islamic markets.

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SUGGESTED IMPROVEMENTS There have been a number of suggestions to overcome key constraints, including introducing the most popular asset financing products, like Murabaha, and joint-ownership products, such as Mudarabah and Musharakah, which will be of immense help in attracting more customers into Islamic banking.

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ISLAMIC BANKING Murabaha finance draws its strength by calculating profits upfront and keeping it constant throughout the life cycle, which virtually negates uncertainty about whether an increase in credit obligation, due to spiraling market interest rates, will occur. Mudarabah facilitates joint ownership between the bank and the customer, where the risk of loss in the enterprise is fully absorbed by the former. Musharakah provides a contractual arrangement whereby the bank and customer share loss as per a predetermined ratio. These features clearly differentiate the products from conventional loan offerings. There are also major benefits to introducing Shariah-compliant Mudarabah investment products and profit distribution models that are based on profits earned from investments in Islamic assets, as these will help the banks to attract prime Islamic banking customers, who would like to invest only in Shariah approved investment products.

TECHNOLOGICAL TRANSFORMATION A number of technological developments are needed to fuel the growth of Islamic banking. These include: •• A Bank in a Box – this is a model bank approach of implementation, with tail0r-made products and preconfigured paramaterization based on market research. It will help banks to quickly roll out Islamic product offerings and accelerate their own progression to fully-fledged Islamic banking.

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•• Banks could look at Islamic window operations, instead of launching fully-fledged Islamic banking operations. Technology providers should come up with industry standard APIs to connect the Islamic banking application with any existing core banking platform. This will help banks to save time and material and reduce the technology transformation risk. •• Technology vendors should provide an automated solution for profit calculation and distribution in the case of investment products, in order to ensure Shariah compliance. The automation of profit simulation models that are embedded in Islamic investment products workflow help the bank’s top management to take wellmeasured decisions on profit distribution. •• Technology vendors must create automatic workflows in their Islamic banking application to ensure there is compliance with Shariah Law with respect to documentation. •• Islamic banking products must be able to calculate unearned income in Murabaha, Tawaruuq, Istisna financing products, depreciation in Ijarah financing and pass the right set of accounting entries to adhere to AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions) standards. THE FINACLE SOLUTION The Finacle Islamic Banking Solution offers an integrated and comprehensive approach for Islamic banks to define and present Shariah-compliant products to

their customers. The solution, which comprises of all the key Islamic asset and liability products, has been successfully implemented in Equity Bank, Kenya. Islamic asset financing products include Murabaha, Ijarah Muntaiah Bittamleek, Ijarah Mawsufah Fi Zimmah, Mudarabah and Musharakah and liability products that include Mudarabah and Wadia. Strong product definition features, inbuilt workflows for each financing product, strict adherence to AAOIFI accounting for all Islamic banking products, and complete traceability for Shariah audits differentiate the solution from other core banking products in the Islamic banking space. The Finacle Islamic Banking Solution has inbuilt APIs to integrate with any core banking application and perform all the transactions required, as per the solution design.

THE WAY FORWARD Banks need to be more innovative and tech savvy, and redefine their go to market strategy for promoting Islamic banking. The best option is to introduce fully Shariah-compliant core banking solutions to capture the growing Kenyan Islamic banking market, either through an Islamic window or a separate subsidiary. Banks should partner with technology vendors for viable alternative methods of deploying Islamic banking applications by way of online integration with existing core banking applications.

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COVER STORY

Africa’s War Against Fraud African banks are currently engaging in an ‘arms race’ against fraudsters. Brian Kinch of FICO looks at the powerful anti-fraud tools that are available and suggests ways in which financial organisations can fight back against these criminals.

ith massive data breaches grabbing headlines worldwide, fraud has once again risen to the top of the agenda for many banks. This activity is likely to spark a new cycle of technology adoption by banks, which in turn will fuel new types of attacks as criminals seek out their vulnerabilities. Truly, banks are engaged in an ‘arms race’ against the criminal fraternity. Increasingly, the customer is an important participant in this cold war on fraud. Ensuring the loyal customers that keep your business going receive a high-quality experience is essential. If they feel that their money or personal details are not safe, or their bank’s overly aggressive anti-fraud tactics are interfering with their daily lives, they’re likely to go elsewhere.

POWERFUL TOOLS

environment are those that realise combating fraud should be as much an exercise in customer experience management as it is in loss mitigation. The good news is that the anti-fraud tools available to financial organisations are increasingly powerful. One of the latest must-haves is big data analytics, which can take burgeoning volumes of unstructured data (like telephone calls with customers) and draw insights that help to identify potentially fraudulent activities and trends much faster, as well as using existing data sources to reveal patterns that may not have been evident before. The trick is in getting the balance right: using the full complement of technologies to prevent fraud, while keeping the customer happy, safe and – most of the time, at least – unaware of all the efforts going on behind the scenes. So let’s examine some of the ways that financial organisations should fight fraud.

The most successful lenders in a fraud-heavy

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COVER STORY WHICH DATA DO YOU NEED? When it comes to big data, the first thing to consider is what data you really need in order to best protect your customers. There’s a common misconception that data will solve all problems, but it’s not that simple. A good first step in the move towards big datadriven fraud prevention is to ensure that you are clear on what the vital data is for your organisation. Some of it, like customer contact details, can be gathered directly from customers and some can be gathered from within existing silos across your organisation. Using company-wide analytics to bring these data sources together can help answer surprisingly specific questions about an individual customer, account or transaction. For example, by taking into consideration all of the data in the bank silos, as well as external data sources, does it make sense that this customer would be purchasing office furniture today? Did she recently take out a small business loan? Relying upon someone else’s data (such as using a utility bill to check a customer’s address at the account origination stage) can also be risky. If you haven’t gathered and checked the information yourself, how do you know that it’s accurate? And how will you convince an auditor or risk assessor that you’ve done your due diligence? At this stage, it pays to make sure all the data you’re getting is accurate, verified and verifiable. Once you have your accurate information, analytics will help you to make sense of the mountains of data from a fraud perspective, and to identify patterns that would not be evident to a human observer. Expertise is still needed to set up problems that can be solved in ways which have meaningful impacts on the business, but it is the analytics that helps draw out the answers. It’s a case of asking the right questions and applying the right analytics to answer those questions.

INVOLVE THE CUSTOMER With big data analytics in place, it’s important to ensure the other aspects of your counter-fraud operations are running smoothly. The customer is a good place to start. Customers are often willing to sacrifice privacy for security, so long as they feel they can remain in

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control, such as by volunteering a preferred means of communication. For example, if you know Mary prefers to communicate via text, then send her a text to check the legitimacy of a suspicious transaction or failed attempt to access her online account. This small step can make a big difference. One bank reported a 97 percent customer satisfaction rate for anti-fraud communications provided through FICO’s mobile technology. Another succeeded in halving its fraud losses by using customers’ pre-agreed preferred communication channels to contact them faster.

CONSIDER ALL CHANNELS No one likes to have a legitimate transaction refused, just because they are shopping in an unusual location. False positives are genuine transactions that are investigated because they appear to be fraudulent, and the more of these you can eliminate before involving the card holder, the fewer irritated shoppers you’ll have in your customer base. So it’s important to use all of the available information to identify suspicious activity. For instance, if you know where the customer is when a transaction is attempted, you can check whether their physical location matches that of the transaction. Trials of this service in the UK, based on customers allowing their bank to check their location by using their mobile phone’s GPS signal, reduced the number of false positives on international transactions by as much as 70 percent. However, the diversification of devices and payment types brings risks with it as well. For example, changing payment form factors, such as contactless and Near Field Communication, creates new opportunities for fraudsters. Smart financial organisations are using the plethora of extra customer profile information (about the device, its location, its content, its use and so on) gathered through these channels, along with traditional fraud prevention and detection, to better define the customer and their characteristics in a way that was never before possible.

FINESSE MODELS OVER TIME We don’t always have the luxury of time to collect relevant information when we need it, and can’t

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COVER STORY always call on a trove of historical (big) data if it hasn’t been collected. Models that self-calibrate (learn and adapt) in close to real-time are therefore key. For example, in the case of e-commerce fraud, you need the same level of protection whether a product category is brand new (and so there is no historic data available) or has been around for ten years. Self-calibration technology allows for the finetuning of models with less than a week’s worth of information, compared to the 18 months’ worth that can be required under many other circumstances. It is also important to understand how patterns in consumer behaviour should be reflected in the decision models used to identify potential fraud. For example, while on a business trip to Johannesburg, Tom purchases some new golf clubs. Such a large purchase in a town he doesn’t live in could trigger a fraud alert if traditional analytics were used, but a patented new FICO analytic tool, called behaviour-sorted lists, enables the card issuer to see that Tom frequently makes sporting goods purchases of similar amounts, and has made transactions at country clubs nearer to his home in Cape Town. In light of these behaviour patterns, the current transaction would look less suspicious. But what if Tom has never been on a golf course and doesn’t make purchases from sporting goods stores? Another new analytic technique we have developed, called collaborative profiles, analyses the behaviour patterns

Setting an example Turkey’s second largest bank, Garanti is using its deployment of the FICO® Falcon® Platform to centralise fraud protection and case management across credit cards, debit cards and current / demand deposit accounts (DDA). It also uses FICO application fraud models to detect potential fraud in credit card and consumer loan applications. The bank has increased detected credit and debit fraud cases, keeping its fraud losses down during a period when fraud attacks were doubling, whilst at the same time minimising the impact on genuine consumer spend. Garanti’s anti-fraud team can now protect multiple accounts for each individual, and view them at the customer level, rather than simply the transaction or account level. Supervisors can write and define rules and improve the agility of their parameters, which enables the bank to respond faster to high-priority risks, better delineate between fraud and genuine transactions, and stop flash fraud as it’s unfolding. If a risky transaction is identified, Garanti can create a new case and temporarily block the relevant account facilities. It then instantaneously sends an SMS or other notification to the customer. Multiple actions give the bank’s analysts a chance to make contact with the customer much more quickly, through the customer’s preferred channel, and give them a better experience. Garanti is also using application fraud models from FICO to stop first-party and third-party fraud applications. This is critical in Turkey, where banks demand relatively little documentation in order to simplify the lending process for customers. In the first six months of use, Garanti detected 80 percent of third-party and first-party fraudulent applications.

of other cardholders with similar characteristics to determine whether the current transaction — while it is a change for Tom — is nevertheless likely to be genuine.

FRAUD PREVENTION MEETS CYBER SECURITY What we think of as “fraud” is increasingly bleeding over into the area of cyber security. In light of recent data breaches, financial

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services providers need to step up and become the guardians of their consumers’ data, not just their money. By taking a holistic approach, which uses the latest capabilities in big data analytics and customer engagement to implement flexible and adaptive defences across the organisation, banks and card issuers can successfully bridge that gap.

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EXECUTIVE INTERVIEW

Closing the IT Skills Gap in Africa We interview Orfhlaith Ni Chorcora about Oracle’s new Capacity Building Program, which aims to close the IT skills gap in Africa, and Janusz Naklicki, who answers questions about some of the continent’s key technology issues.

racle has launched a Capacity Building Program to increase the skills capacity of IT practitioners in Africa. The four-pronged program was devised as a response to the rapid adoption of new technologies by governments and businesses in Africa, which has exacerbated the shortage of suitably skilled practitioners. After the launch, we asked Orfhlaith Ni Chorcora, Senior Director, Business Development, Oracle, ECEMEA, some key questions about the new initiative, which will be taken out to governments, the private sector and non-profit organisations to implement a long-term skills strategy that will help fulfill demand for relevant IT skills.

What current initiatives have been launched for IT practitioners in Africa, what do they include and are they based purely on Oracle solutions? The Capacity Building Program tackles the skills challenge from four perspectives: employee readiness, ecosystem readiness, workforce readiness and youth readiness. we create short-term, mid-term and long-term skills

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development programs so that we can create an immediate pool of talent, but also invest in creating a pipeline of IT talent to serve future needs.

The program consists of a number of elements from various divisions within the company – the Oracle University, Oracle Sales Consulting, Public Sector Centre

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EXECUTIVE INTERVIEW of Excellence, Oracle Partner Enablement, Oracle Giving and Oracle Academy, to name but a few. We also have an internship program designed for information systems and business science graduates to help bridge the skills gap and invest in future young talent. Currently, 44 interns (20 from South Africa, 12 from Nigeria and 12 from Kenya) are engaged in the program, which consists of rigorous sales training, entry-level sales activities and the opportunity to shadow more experienced sales personnel. At the end of the internship, candidates will graduate from the Sales Academy armed with onthe-job experience and industryrelevant skills. We expect to retain up to 35% of our interns after the 12-month internship period and the remainder to find employment in the Oracle partner ecosystem.

What is your long-term skills strategy to fulfill the local needs? Also, what collaborations have you developed, and in which regions? We are working with governments, the private sector and non-profit organisations to implement a long-term skills strategy that will help fulfill demand for relevant IT skills. We have already launched the program in Nigeria and Kenya and are currently working with the governments in Zambia, Ghana, Ethiopia, Botswana and Rwanda to build skills roadmaps that address their needs. Where possible, we develop the necessary partnerships to develop scalable and sustainable training programs.

Growing infrastructure in Africa calls for better technology Janusz Naklicki, Vice-President of East Central Europe, Middle East and Africa at Oracle, answers our questions about the work that African banks have done to improve their technology platforms, and how the continent’s growing infrastructure calls for better technology.

As most African banks focus on implementing good customer experience have they done enough, in your opinion, to implement modern technology? African banks have done extremely well over the last two decades to progressively modernise their technology platforms. Many bank and insurance executives tend to have a very narrow view of the now over-popular concept of ‘digital transformation’ and its resulting impact on customer experience. The capabilities that banks seek to implement can be either foundational or transformational. Common foundational capabilities include mobile apps, Personal Financial Management (PFM) tools, gamification and product comparisons and automated workflows. This is what most banks have focussed on and delivered. Less attention has been given to frontline tools for document submission, e-signatures and straight-Through processing1. These capabilities can deliver a better impact on servicing costs and bring more delight to customers.

Straight-Through Processing (STP) enables the entire trade process for capital market and payment transactions to be conducted electronically without the need for re-keying or manual intervention, subject to legal and regulatory restrictions. 1

For example, 1. In Kenya we: • Recently signed a partnership with Equity Group Foundation. The partnership will allow both organisations to join one of their capacity building initiatives (The Oracle Academy and Wings to Fly program) to reach even more students. We have trained 13 Equity African Leaders Program scholars in a week-long Java train-

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the-trainer program to prepare them, in turn, to train upwards of 1,800 high school students across four high schools (Kenya High School, Sunshine boys, Machakos Girls and Maryhill Girls). • Launched the Strathmore Centre of Excellence for Oracle to support training on Oracle technologies for faculty and students, school teachers and students, and tech entrepreneurs.

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EXECUTIVE INTERVIEW

What challenges do technology leaders face in making sure that banks comply with the latest regulations? The regulatory spectrum is expanding as the years pass. Leaders of banks need to relook and pause before addressing each of these regulations with individual point solutions. It will never end and it will eventually lead to interconnected islands of data on application platforms, which cannot be of any use. Banks need to rethink, design, deploy and transform their enterprise risk and finance architecture to enable them to offer and serve all stakeholders, within and outside the bank, with information from the same source.

How is Oracle working together with the regulators for banks to ensure there is compliance, risk reduction and the controlling of costs? At Oracle, we understand what it takes to address the regulations. We have engaged and participated in project initiatives with 70% of Systematically Important Financial Institutions (SIFIs) globally. Our solution architecture delivers better control and costs to the banks in this space.

How is Oracle dealing with the main impediments to banking transformation and enabling them to move to the next generation of banking? The idea that banks should spend billions over a decade to do a wholesale replacement of their core

2. In Lagos State, Nigeria we: •• Have already completed phase 1, tacking all 4 pillars of capacity building. We are delighted that 50 students recently graduated from the Oracle-Lagos State Workforce Development program with database and E-Business Suite skills, and we have trained 25 university faculty members from Lagos State Polytechnic, Lagos State University and the University

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systems is simply untenable. Transformation should actually be a progression, using carefully staged phases that allow a bank to continue to operate successfully, even while undergoing an enterprisewide IT overhaul. Each phase of transformation can experience its own ROI, allowing the bank to pursue projects at a logical and gated pace. While the idea of abstracting services from underlying systems has been around for more than a decade, the technology has finally come of age to do this at scale. Banks can take advantage of the technology that Oracle has to offer to migrate progressively. What standards are there for applications

and technology to operate with each other, which are targeted at the financial sector? Technology today is far more standardised than it was two decades ago. The service abstraction has helped the interoperability of applications with the banks. We have leveraged the $34B+ in R&D investment in the last 5 years to build, test and deploy our applications, along with underlying technology that is already optimised. This reduces a sizable effort of banks to buy, install, test and optimise during production runs. Furthermore, we test any updates/patches for components across the stack for our engineered systems customers before the bank moves them to production. We can only do this because we build them to standards and strictly follow this discipline across the stack. Oracle ISVs also have the same advantage when they choose to develop and deploy on Oracle.

of Lagos to support them to adopt industry-relevant content in their Computer Science programs. •• Are also supporting the Co-Creation Hub to help drive homegrown Nigerian innovation and the non-profit WTech to engage more young girls in computer science. 3. Through Oracle’s Partner Enablement Program we have delivered approximately 300

sales and implemented Partner Enablement sessions across 24 countries in Africa in FY14. These are just some examples of the initiatives that are underway. We’ve launched them in Africa due to the high demand, but we are already receiving interest from the Middle East.

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â&#x20AC;&#x153;Information is powerâ&#x20AC;?. Value it.

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COMPLIANCE

FINANCIAL CRIME MITIGATION â&#x20AC;&#x201C; ONE WORLD, MANY RULES With financial crime on the increase, it is vital that African banks and financial institutions put the right processes, systems and software in place to protect themselves in future, writes Amanda Gilmour, Product Director â&#x20AC;&#x201C; Payments at Temenos.

s the volume of electronic payments continues to rise in line with new digital channels, so does financial crime. 2014 has seen Anti-Money

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Laundering (AML), sanctions breaches and the Countering Financing of Terrorism (CFT) Act dominate the financial services landscape.

The most notable incident was the $9 billion penalty that the US arm of BNP Paribas incurred in settlement for breaching international sanctions. This

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COMPLIANCE trend is expected to continue into 2015, with an increase in personal fines (and even stronger) likely to become commonplace. But beyond the monetary fines, institutions that are in breach of regulations can be exposed to serious reputational and other collateral damages. In one case, an institution lost more than 20% of its market capitalisation within a week due to fines . To avoid these fines, and worse, financial institutions (FIs) must put the right processes and systems in place. Changing regulations, such as the recently issued recommendations of the Basel Committee on Banking on how to manage the risks related to money laundering and the financing of terrorism, must be considered.

FINANCIAL CRIME IN THE FRAME Regulations often vary from country to country, but they always stipulate that an AML/sanctions compliance program be set up with minimum requirements, such as policies, procedures and internal controls, to comply with the Bank Secrecy Act (BSA). These include verifying customer identification, filing reports, detecting suspicious activity, creating and retaining records and responding to legal requests. In addition, it is usually stipulated that a designated compliance officer be in place to assure daily compliance with the program and support other elements, such as training and

updating policies and procedures. Where an FI has a presence in more than one jurisdiction, it should adopt a group AML/ sanctions policy, which at least complies with the standards of the most stringent national framework. While the laws of each jurisdiction in which the FI has a presence may differ, the risks of being exposed to criminal activities are the same across the globe. In fact, it is possible to inadvertently conduct a transaction at an FI’s branch where money-laundering controls are stricter than in the country of origination. Working to comply with different jurisdiction-specific regulations also applies to customer-centric regulations, such as Know Your Customer (KYC). FIs are required by law to establish well-defined processes to meet global KYC requirements and this involves the constant tracking of sanction/watch/embargo lists from around the world, along with being in sync with regulatory changes in different jurisdictions. These requirements vary across the geographic areas that their customers deal in, as well as across lines of businesses, product and service portfolios, delivery channels, the type and size of transaction, and the risk profiles that they belong to.

QUALITY IS KEY AML, anti-terrorism and sanctions screening present various challenges. However, with a flexible

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system, the right level of data and the right processes, issues can be avoided. A common issue is that a system must allow for irregularities. In many cases, an FI’s data will contain gaps and inconsistencies that can come from established clients whose data was not fully captured, relevant data spread across disparate systems, or simply the inability to capture some types of information. However, the right software should be able to effectively screen the customer database, payments and any other type of transaction. It does this by comparing them against sanctions lists, while following the ‘four eyes’ rule as a default for both possible incidents of money laundering and sanctions. Even if a master customer record has been created to address these possible issues, without the right software to update this information, it can quickly become outdated. There are often issues associated with the lists that the data is matched against. They may be poorly structured, or have incomplete or inconsistent records, and there is a risk that bad data is being matched to bad data. One method of addressing this is to use a system that contains wizards to test newly-published public or private lists, highlight areas for improvement, and propose rules to avoid false detections. There is also the issue of coping with the increasing number of official lists to check against and their different formats. Your system is only as good as

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COMPLIANCE the information it uses. Moneylaundering techniques are various and ever-increasing. To counteract this, decades of records and examples of possibilities must be collated and referred to, to facilitate the identification of possible money-laundering permutations. It is therefore essential that this data is accessible, either through the bank’s own systems or a third-party provider.

ADAPTING TO A CHANGING WORLD An FI’s client profile is usually not only very varied, but continually evolving. Therefore, AML and sanctions screening software needs to be sufficiently nimble to adapt. One approach is to use a flexible workflow management framework, with the ability to respond to changing customer profiles, changing types of transactions and new legislation. A complete picture of a transaction is vital. Monitoring and sharing customers’ transactions across businesses and jurisdictions facilitates the identification of any unusual transactions and behaviours. While most FIs invest in updating and validating their existing systems, a long-term approach should be adopted, rather than just aiming to meet today’s set of minimum regulatory standards. For a system to function effectively, other factors, such as the wide variety of languages used or country names, need to

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be considered. Effective software screening solutions use lexical analysis to match against not only country name variations, ISO country codes and deductions from city names, but also free text descriptions and financial identifiers. The solution must be sufficiently agile to spot even the slightest irregularity, utilising features such as ‘relaxed pattern matching’, where words are compared with a tolerance for approximation. Flexibility is key, as every institution will have its own needs, and rules may need to be applied according to requirements, such as the geographical area or business line. Cultural differences are also important when screening for sanctions, particularly as these can be used to avoid detection. In many cultures, people may use four or five names, combining their given name and family names. Matching algorithms that fail to take into account these cultural differences result in gaps for FIs to fall through when the individual slightly modifies their name. Effective software should have good support for these cultural differences, which is capable of matching on portions of the name or name elements that are ‘flipped’ in order and then weighted differently.

is matched up legitimately, yet there isn’t a sanction applied or an incident of money laundering. Resolving these hits costs time and money, and may cost banks good customers. The challenge is that there are so many common names on the lists that many normal, potentially good customers may be treated unfairly, unless they are identified as ‘false positives’ quickly and addressed effectively. It is therefore essential that software with a very low ‘false-positive’ alert rate is used. Software may use information, such as address, date of birth, mother’s maiden name, passport number, or further historical trends that can help clear these hits quickly. There is a distinct difference between money laundering (where the funds are always of illicit origin) and both sanctions breaches and terrorist financing (where funds can stem from both legal and illicit sources). However, in general, the methods of addressing these forms of financial crime apply to all. With the right processes, framework and an efficient, agile solution that supports stringent checks and allows for every different permutation, FIs can rest assured that they will avoid being in the headlines for financial crime breaches in 2015 and beyond.

EVERY TRANSACTION DIFFERS Alert rates for ‘false positives’ are another important consideration. These occur when a transaction

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THOUGHT LEADERSHIP

THE FUTURE OF AFRICAN BANKS IN THE CLOUD African banks can leapfrog competitors with a “cloud-first” approach to technological innovation, writes Taiwo Otiti. But they must act now, if they are to provide the flexible, tailor-made services that will win the hearts and minds of customers.

B Taiwo Otiti

Country General Manager IBM West Africa

anks are the nervous systems of any economy. As technology trendsetters and economic intermediaries in the commercial space, they represent the health and wealth of nations. In Africa, banks have long been among the largest and most sophisticated consumers of technology. They have built some of the biggest and most secure networks in the world and assembled armies of programmers to write code and maintain software programs. But this very scale can hinder instead of help, when they need to create and launch new products and services in today’s fast-changing world of borderless financial transactions. The positive news for Africa’s banks is that they are relatively unfettered by legacy fixedpremise IT infrastructure, while experiencing a substantial and fast-growing market share – for now. However, nimble players from across Africa and outside it are already introducing cloud-based solutions that offer integrated risk management, predictive real-time analytics, core banking transformation, mobile money systems, and more. The African financial services industry can play to its unique strengths by leapfrogging

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competitors – including rivalries from global technology firms – with a “cloud-first” approach to services and technology innovation. But they must act now if they’re to provide the flexible, mobile and pervasive transaction touch-points that will win the hearts and minds of customers.

UNIQUE OPPORTUNITY Banks in Africa have a unique greenfield opportunity at their disposal. Most of them are only now starting to ramp up their investments in IT infrastructure. They can, and should, skip the traditional servers and networks for far more flexible cloud-based architectures. A cloud-first approach helps banks to avoid getting fixated on hardware ROI, and start focusing on how to establish and maintain access to the customer. And cloudbased services can be scaled, tailored and rolled out to meet customers’ preferences in real time – or even anticipate them. So, why is persistent, pervasive customer access suddenly so important? The mobile device, that’s why. With mobile transaction values in Africa expected to exceed US$160bn by 2016, African banks

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Cloud's Silver Lining Forecast for Africa

With 9 in every 10 African IT leaders listing cloud as critical to business success*, governments and companies across the continent are already identifying innovative ways to leverage the technology - leapfrogging regional challenges and eyeing new solutions to export to developed markets.

The Field Team

The Developers Thousands of African innovators are looking for nimble and affordable spaces to collaborate on new solutions.

Open-source, open-standards clouds ensure that for start-ups like Kenya’s iCow, infrastructure is no longer a barrier to growth.

Unreliable or non-existent infrastructure hampers communication between field teams. Cloud-based innovations like the Portable Modular Data Centre connect employees over vast distances.

One in three African CIOs see fostering innovation internally as a big challenge.

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Initiatives like IBM’s Centre for Data-Driven Development help CIOs use cloud to tap into Big Data and its applications.

The Data Scientists

Governments are keen to solve national issues using technology, but lack funding for individual data centres. Trailblazers like Mauritius, Kenya and Ghana are exploring how cloud services can reach up to double the population than before.

The Head Honcho of African CIOs are feeling ! 45% the impact of limited budgets. Moving from fixed-location infrastructure to the cloud enables more cost-effective and innovative business transformations.

The End-Users

The Regulators

! Legend:

Problem

Solution

90% of African public cloud

environments are still unregulated 9 out of 10 individuals in Africa say they trust cloud environments, with providers like IBM working to ensure that trust is well-founded.

Mobile transaction values in Africa are expected to exceed US$160bn by 2016. Customers expect 24-hour, 100%-uptime service. Businesses like Ghana's Surfline Communications use the cloud to expand mobile data services; for others like Fidelity Bank, it helps open new markets as far as South-East Asia.

*Source: IBM 2014 IBM, the IBM logo, smarter planet and Let’s build a smarter planet are trademarks of IBM Corpregistered in many jurisdictions worldwide. Other product company or service names may be trademarks or service marks of others. A current list of IBM trademarks is available on the Web at “Copyright and trademark information” at www.ibm.com/legal/copytrade.shtml © Copyright IBM Corporation 2013 All Rights Reserved.

THOUGHT LEADERSHIP need to build their business models and systems around the mobile device as the core access point for financial services. The Cloud, as most CIOs will know, is a fundamental part of mobile service delivery: it not only powers the back-end processes of any mobile app, but stores the rich customer data which will increasingly inform banking services innovation. And if Africa’s financial industry can master mobile financial services, even greater opportunity awaits beyond Africa’s shores – namely the 3 billion mobile devices currently in play worldwide. Global opportunity does not come without global competition. Consumer technology giants and service providers – like Google, Amazon and Samsung – have major technical advantages when it comes to accessing customers via mobiles and mining their data. The Cloud removes entry-level barriers for smaller African banks, too. Just take Capitec’s meteoric rise to unseat incumbent Nedbank as one of South Africa’s “Big 5” banks. Four competitors last year could well be twenty the next – and market share will only come to those banks nimble enough to keep up with the customer.

ENABLING “CUSTOMER ACTIVATION” Over the next two years, banks across Africa must start shifting from customer-centricity to what IBM refers to as “customer activated” business models. They need to develop products and services that intuitively fit with customers’ preference of touchpoints and access patterns – to the point that they can anticipate user trends by analysing volumes of

transactional and behavioral data. Any bank’s success will hinge on two factors: how accurately they can pinpoint these trends, and how quickly they can roll out and scale new services tailored to them. Cloud infrastructure underpins efforts in both respects: it offers the only cost-effective platform for analysing so-called “Big Data”, and allows banks to provision, test and deploy service innovations far faster than traditional IT systems. At one major multinational bank, it took up to 45 days to provision their 20,000 developers to code and test a new application. An IBM private cloud architecture, offering developers shared resources and a common platform from the get-go of any project, helped that bank cut that time down to just 20 minutes. If African banks are to take full advantage of the Cloud’s agility, however, they need to dispel the unfounded fears that often hinder its application. For the financial services industry, the most critical security concerns revolve around customer data, not the cloudbased operating environments or touch-points through which transactions take place. More and more banks globally have started using the Cloud effectively by applying the most stringent security measures to data instead of the platform. And the global financial services industry is increasingly acknowledging that data sovereignty has become less relevant in a world where our banking activities regularly make international individuals of all of us. Today, 9 in every 10 Africans say they trust cloud environments – CIOs and regulators will need to do so too.

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BANKING ON A MOBILE FUTURE Africa’s last decade has witnessed exponential uptake of mobile telephony devices, products and services. It is obvious that if future financial innovation is to be meaningful to African-based customers, financial institutions will have to rely on mobile and cloud technology. Combining mobile and cloud technology capabilities, these institutions can extend their reach beyond their traditional urban markets, offering cost effective rural banking services to the “unbanked” sections of our population, and use their mobile usage patterns to develop tailormade products that “speak directly” to them. The Cloud’s true value for African banks is as a growth engine for new innovations, including those that leverage their unique expertise in mobile and crossborder transactions to leapfrog overseas rivals. Africa’s financial players will, however, have to act fast – transforming their systems and testing new customer-activated processes based on analytics and data – to compete against not just banks, but consumer technology giants whose networks and expertise pose an increasingly imminent threat. Investing in the Cloud will have long-term returns for the continent’s financial services industry, particularly when partnering with technology providers with expertise in translating customer data into precisely targeted innovation. But their window of opportunity will not last forever.

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10th Annual OPEX 2014

– The Financial COO Event

18 – 19 November 2014 | Habtoor Grand Beach Resort & Spa Hotel, Dubai, U.A.E.

850 Operational Excellence Specialists 75+ Sponsors Over 200 Speakers Even Better in 2014 The AnnuAl COO PAnel DisCussiOn

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Celebrating a Decade of Transformation via Operational Excellence in Financial Services Sanjay Swamy Tel : +971 4609 1570 | sanjay.swamy@fleminggulf.com | http://bit.ly/OPEX14FG

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TECHNOLOGY TRENDS

THE FUTURE OF HIGH STREET BANKING IS CAREFUL CONSIDERATION

As customers demand more from their banking customer experience, branches are bringing their customer service up to date with new innovations. Ajay Joshi, Tensator Groupâ&#x20AC;&#x2122;s head of media and technology, explains how this is happening.

anks are one of those institutions that, in many cases, have changed very little in decades. For years, branches followed the same basic layout without taking into account the changing habits of their customers. However, in the last few years, banking is starting to take on more of the traits many would have previously associated with retail. High street stores are facing a

period of change, as technology is now being embraced in-store. Whilst brands experiment with how best to utilise technology, many are embarking trials in flagship stores. We have seen this at Tensator, in the differing solutions that we are now producing for retailers. There has been increased demand for call forwarding systems, virtual queue management systems and

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screens to deliver brand messaging and interactive devices to provide product information, such as the Tensator Virtual Assistant.

A BANKING REVOLUTION Retailâ&#x20AC;&#x2122;s use of technology to improve customer experience may have unexpectedly kickstarted something of a revolution for the high street banks. As with

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TECHNOLOGY TRENDS retailers, many banks’ operations are increasingly moving online. However, given that the majority of banking services usually require a certain level of faceto-face contact, managing the customer journey throughout the branch remains at the forefront of operations. Banks are using similar tactics to retailers to develop a new, more technological approach in the pursuit of both customer satisfaction and service efficiency, due to the pressure to improve the quality of the in-branch experience. This is what two leading African banks wanted to achieve when they selected Tensator to create new solutions – increased efficiency with faster service times for customers. The first bank also presented the challenge of requiring different solutions for urban centres and rural areas across its 90 branches, because of the difference in customer needs. The system that Tensator developed for the city branches, which typically cater for the most affluent of its customers, was a virtual queue management solution (VQMS). This consists of a fully branded PRIMA interactive ticket dispenser with touchscreen technology. From this, the customer is able to select which service they require when they walk into the branch. The machine then prints a ticket for the appropriate service.

VIRTUAL QUEUES The customer is then free to wait anywhere in the branch, to browse displays or to use another service first. This is the ‘virtual queue’, whereby people wait their turn

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with numbered tickets but are not required to stand waiting in a line. As a result, the branch is free from long lines or crowded waiting areas. Additionally, the branch is able to make better use of its space to provide more information on other services to the waiting customers. When a service representative becomes available and presses the customer call button on their operating console, a set of Inline TV screens situated throughout the branch call out the number and direct the customer to the appropriate available desk with an on-screen graphic. This latter part of the solution is known as a ‘call forward system’, but has a use beyond simply reading out numbers. The screens can be linked to a central network to enable them to display sales messages, video or even advertising when they are not calling ticket numbers.

KEY OPPORTUNITY TO PROMOTE SERVICES This extra marketing capacity provides a key opportunity to increase revenue by promoting new services or offers. The system is managed from a central server for the entire bank, which means the whole branch network can be updated by just one person. This technology is something that is becoming increasingly common amongst big retailers to promote in-store offers. As well as having the advantage of being much more engaging than billboards, the content is delivered centrally without the need for physical intervention. The complete solution carries

numerous benefits. Firstly, customers are less likely to become aggravated or stressed by having to wait, because they are able to sit down or browse until their number reaches the front of the virtual queue. Numerous studies have addressed at length how a so-called “occupied” wait, in this case browsing or watching a screen whilst waiting, feels shorter than an “unoccupied” one, even if actual waiting times remain the same. Secondly, it reduces stress on staff by allowing them to call forward the next customer only when they are ready to serve them. This means administrative tasks can be attended to if required without the next customer automatically advancing as the previous one leaves. Thirdly, because the customer chooses which service they require at the point of joining the virtual queue, it is possible for the bank to match customers to specific service representatives, according to the best skills match. For example, new account enquiries can be funneled to the best seller in the branch.

EXPLOITING EFFICIENCIES Staff performance can be monitored with analytics software. When linked to the system, it can count the number of customers taking tickets from the dispenser machine and compare it with those served at each desk. This allows the bank to manage its staff better and further exploit the efficiencies that the solution brings. For the more rural branches of the bank, which tend to be smaller and therefore do not have the need for the same level of queue management as their urban counterparts, Tensator

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TECHNOLOGY TRENDS

implemented multimedia kiosks. As well as dispensing tickets, these kiosks also provide extra functions. For example, various additional services can be paid for instantly, without having to go to the service desk. This technology is a welcome optimisation in smaller branches that typically employ fewer staff and therefore have less service capacity. The units also have the capability to scan customers’ IDs, which allows them to be offered more personalised service options and information. This aspect may well become a more common sight in banks, allowing customers to carry out basic administration tasks on their account, such as ordering new cards or updating their details. It allows service desk staff to concentrate on more complex requests and avoids the frustration and inefficiency of customers having to wait in line for small requests.

CUSTOMISED KIOSKS Both the ticket dispensers and kiosks are customised with the bank’s branding and logos to match the décor of the branches. The whole system is managed through a central server for every branch. This is essential when achieving consistency at a national or international level. In some countries with less reliable power supplies, the bank may benefit from not having the system centralised. This was the case with another of Tensator’s projects – another leading bank consisting of 60 branches in central Africa. This solution was similar in that

it included ticket dispensers and Inline TV multimedia systems, but with the software architecture distributed regionally. Nevertheless, the bank is still able to collect a considerable amount of data on where its service is most efficient and importantly where improvements can be made. Using this intelligence it can adapt its branches and management to allow staff to perform to their best potential. After installing the Tensator solutions, the two banks have both since seen an increase in branch footfall, thanks to the more efficient and therefore more pleasant customer experience. Service time has also been cut dramatically, with customers now having their queries dealt with much faster.

RISING CUSTOMER SATISFACTION In the city branches of the first bank, customer satisfaction is markedly improved as a result of not having to wait in long queues. Meanwhile, the rural branches with multimedia kiosks are now able to provide a wider range of fast services to customers. As the bank continues to expand in Africa and Europe, it continues to adopt the same technology in new locations. Meanwhile, the second bank has reaped the benefits of the analytics and reporting that its solution provides, and has been able to use the data to improve its quality of service. With all projects of this type, it is important that the solution matches the bank’s own brand identity. Not just in terms of the

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branding that equipment is given, but also in terms of what matches the specific expectations of those customers. The future of high-street banking – as with retailing – is not to simply fill a branch with technology for technology’s sake. It can be tempting to go for an array of high-tech equipment that simply looks impressive, but may only have a tiny impact on profitability if unwisely chosen. Instead, bank managers should carefully observe their customers’ journey and identify the areas of their experience that could be improved. A specialist like Tensator can use its industry knowledge to offer solutions that directly target the issue and make the whole operation more efficient – and therefore more profitable. The wider role of technology on the high street is less about an abundance of screens and more about a consistent approach across various platforms – known as ‘omni-channel’ retailing. The financial sector can learn from this, by using in-branch systems that dovetail neatly with their online and mobile services. As technology progresses, these solutions can be updated for more functionality, without the need to add more and confuse customers. The future of in-store technology for any sector is difficult to predict, and is reliant on other trends that affect customer behaviour. However, if these innovations are carefully considered, they will not only bring a bank’s service up to date, but also improve its profitability for the future.

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SECURITY

THE 10 PRINCIPLES OF GOOD SECURITY With no financial institution safe from hackers and data breaches announced almost daily, a full blown cyber war is now underway. Pat Carroll, the Founder and Executive Chairman at ValidSoft, writes about the ten principles of good security and how they can help us to fight back against cybercrime.

ne of the most fascinating things about human behaviour is our innate ability to adapt to change. Left to our own devices, we will instinctively adapt to our environment, tactically and strategically, as the security conditions we find ourselves in force change upon us. Nowhere is this more apparent than when we find ourselves in danger. Instinct and adrenaline kick in, and from somewhere we find the strength, energy and clarity of thought to ensure our survival. When a nation decides to go to war it does so with intent: lives are committed and such decisions can only be taken with a full knowledge and understanding of the consequences of such actions. Whilst this may sound dramatic and scaremongering, the headline by Gartner is similarly startlingly direct: “Malware Is Already Inside Your Organization; Deal With It”. We are under cyber attack. A full blown cyber war is underway, and it doesn’t look pretty. Whilst the consequences of successful attacks don’t visibly translate into lost lives, sadly, the financial proceeds gleaned from such attacks do. Such funds are channeled into illicit drugs trading, organised crime and terrorist activities and many innocent people lose their lives as a direct consequence.

ENOUGH IS ENOUGH It has been an interesting year to date.

Following on from 2013, the year of the “data breach”, we knew that 2014 would likely be worse… and it has lived up to our fears. With new breaches announced almost daily, we are all numbed by the data breach headlines this year; failing to recognise that we are at a pivotal moment in time, a time where we must admit that we are losing this war. The bellwether breach at JP Morgan last September surely must be the catalyst to say: “enough is enough!” We all know the phrase, “bigger is better,” but when it comes to security breaches, recent events targeting JP Morgan and 9 other financial institutions, demonstrate that while top-tier banks may be “too big to fail,” they certainly aren’t immune to the type of attacks which impact merchant-side retailers like Target, Home Depot and a dozen other household names over the course of the past year. To me, this proves the fact that despite significant investments in security infrastructure and technology, supported by the highest level resources and talent, no institution or organisation is safe from hackers and fraudsters. So the question we must ask ourselves is, why haven’t we learned from these experiences and why haven’t we adapted? Unfortunately, the answer to this question is a very complex one because it involves many factors; lack of global cohesion, lack of will, lack of understanding, technological issues,

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economic issues, regulatory issues and, in particular, the complexity of our global payments processing ecosystem.

SILVER BULLET? From a technological perspective, the last five to 10 years has seen tremendous innovation in banking and payments. Today, consumers have a myriad of payment and banking options, ranging from the traditional paper-based checking account, to new digital channels, including online and mobile. But it is the pace of this technological change that is at the very heart of the problem – how do we provide added consumer convenience without onerous restrictions, and how do we protect the infrastructure systems from the explosion of new attack vectors that these new channels expose our sensitive data to? All too often, the answer is the championing of new security solutions as the “silver bullet” to all of our problems. Solutions, such as Multifactor Authentication, EMV (“Chip & Pin”), Tokenization and encryption, have all been hailed as our saviour by the press and many of our peers. They are seen as the answer for securing access to sensitive data, but all of them have unique issues that must be addressed if they are to be successful in their specific roles. For example, there are those that believe that EMV will solve the Card Present

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SECURITY fraud situation in the US and have a significant impact on reducing card present fraud worldwide. Unfortunately, as contemplated, despite years of global experience with the technology, EMV implementation in the US is “different” to deployments elsewhere. The consequence is that the positive effect will be far less than it could have been. This is the result of the tradeoff between consumer conveniences, traditional ways of doing things, and the cost of system deployment and liability. As for other technologies, there is clearly an important role for solutions, such as end-to-end encryption and tokenization. In fact, many of the incidents that have occurred over the past year were enabled by the lack of the deployment of such technology. Such capability, however, whilst strongly advisable, will not stop the fraudsters, but will have the important effect of raising the hurdle. When it comes to technology, there is no panacea, no silver bullet. However, there comes a point where the hurdle has been raised sufficiently high that the fraudsters, always looking for the weakest link in the chain, will simply turn their attention to lower hanging fruit. Fraudsters will always find a weak link, be it slower moving companies, or weak points in the process flow.

FRAUDSTERS EXPLOITING WEAKNESS This brings me to two of the primary issues I see impeding our ability to raise that hurdle. Firstly, that security technology is not applied holistically within an organisation, and secondly, that standards have yet to be adopted (or worse, they haven’t even been developed or fully tested) to enable such security capabilities to be applied both intra-company and intercompany. The rapidly emerging new payments landscape is actually contributing to the opportunity for fraudsters. The desire to grab landmass

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in the new payments eco-system has led to rapidly deployed functionality at the expense of proper processes, procedures and security. The fraudsters are perfectly positioned to exploit this weakness. If the institutions aren’t willing or able to adapt, that leaves us subject to the whims of regulators. While regulation is something that is often greatly beneficial to ensure protections for consumers, the process can be slow and cumbersome, and comes at an increased cost – for compliance, reporting and auditing. Sadly, we often find that the relevant authorities are weak, their guidelines are late, out of date and toothless, and there lacks a formal process to ensure compliance (i.e. a lack of formal certification). In this environment, fraud is the winner and we all are the losers. For too long we have relied on the vested interests at the heart of the problem, where innovation in security has been stifled at the risk of cannibalising revenue streams, directly contributing to our inability to protect our organisation from cyber threats today. For too long we have been complacent and happy to hide behind “the big security” vendors whose balance sheets provide us with a veil of financial comfort when faced with a breach. Such complacency does nothing to thwart the fraudsters and hackers and only serves to contribute to our own downfall. Financial recourse is slim comfort when faced with reputational damage, class actions, fines and endless compliance, which could lead to the demise of an organisation. No organisation is immune.

strategically to the threats facing our economies, at the micro level there is much that we can do to protect our own organisations and institutions The principles of good security underpin an organisation’s security, and can act as a guide for individuals in making good decisions when faced with critical security decisions. The following are my thoughts in this regard and whilst some might seem like “mom and apple pie”, the objective is simply to stimulate discussion that helps raise the profile of the importance of the relevant principles of good security to any organisation.

TEN PRINCIPLES OF GOOD SECURITY

It would be heartening that, if nothing else, such discussion acts as a catalyst within an organisation, so that the security and protection of our customers’ data and money is finally elevated and enshrined within the business principles and values on which an organisation’s reputation and market standing is based.

Whilst at the macro level, as an impacted organisation, we must continue to press our governments, industry bodies and associations, regulatory authorities, the law enforcement agencies, etc, to collaborate and react, tactically and

1. Security is only as strong as its weakest link 2. Traditional security has failed to keep out the fraudsters 3. No individual should be a critical part of the security process flow 4. A determined thief will eventually compromise an organisation – predict; detect; prevent 5. Different transaction types have different risk profiles – a one-size fits all security approach will fail 6. Security should not be compromised purely for ease of use or convenience 7. Achieving good security is the product of understanding processes, risks and hostile weapons 8. A layered security architecture is key: multi-factor; multi-layer is the de-facto 9. Security metrics are key: If you can’t measure it, you can’t manage it 10. Independent expert assessment and certification of the security approach is vital

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TRAINING

GROWING IN LEAPS AND BOUNDS The CWG’s high successful Academy is growing and aims to bridge Africa’s workforce knowledge gap by equipping graduates with the skills they need to be successful entrepreneurs. Technology Banker talks to some of its recent graduates about their experiences.

world of endless possibilities in IT. I consider myself blessed to have had a solid foundation provided through this laudable initiative.” Dominic Julian, who is a Sales Executive in a Nigerian IT company, said: “Apart from the IT-related knowledge I garnered, my self-confidence improved. The Academy developed me from a greenhorn and gave me the opportunity to harness my potential in the ICT Industry.” Training at the Academy enables graduates to be employable in any world class organisation and uses a combination of intensive classroom work, practical training and live project attachments.

he highly acclaimed CWG Academy, which has successfully trained and placed over 500 ICT professionals into various fields of industry since it started in Lagos four years ago, is now expanding. It has already been extended to the other operational bases of the Pan African Company, including Accra, Kampala, Port Harcourt and Abuja, and there are plans to incorporate Cameroon by the first half of 2015. The goal of the CWG Academy is to bridge the workforce knowledge gap in Africa by equipping fresh graduates with the required skills to make them employable and enable some of them to become successful entrepreneurs. About 85% of the Academy’s graduates have been employed in leading companies, such as IBM, CWG, MTN, Standard Chartered Bank, Stanbic-IBTC, Chevron, Cadbury, Etisalat, Ericsson and Unilever, while about 10% have become technology entrepreneurs.

ENDLESS POSSIBILITIES IN IT Some of the CWG Academy alumni shared their experiences with us, including Ezekiel Oyerinde who is a Storage Systems Specialist at IBM West Africa. He said: “The Academy was the opener for me into the

NOVEMBER / DECEMBER 2014

PREPARING FOR THE NEW DIGITAL ECONOMY With its extension into new frontiers, the Academy’s beneficiaries are expected to quadruple. CWG Boss & Entrepreneur in Residence at CBS, Mr. Austin Okere, says: “This project has grown in leaps and bounds to become a succour for ambitious trainable youth, who would otherwise be locked out of reaching their full potential. “Since industry has come to be dependent on our highly trained and qualified graduates, we shall be formalising their placement through an online site currently under construction. We believe that this initiative shall contribute to the key aspiration of Africa, which is inclusive growth and job creation.” The World Economic Forum predicts that Science, Technology, Engineering and Math (STEM) education will be essential to the future of jobs globally. According to Mr. Philip Obioha, Chief Operating Officer of the Group, “The CWG Academy plays a major role in preparing African youths for the New Digital Economy, and is indeed a commendable effort worthy of emulation.”

www.technologybanker.com

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EVENTS FOR YOUR DIARY

Jan - March 2015

19 - 20 January 2015 5th ANNUAL MIDDLE EAST AND AFRICA INSURANCE SUMMIT

5th Annual Middle East & Africa Insurance Summit will gather industry peers to brainstorm on solutions that will achieve the vision to have a regulated, consolidated and lucrative business model in the dynamic and ever-growing insurance sector.

28 January 2015 4G MOBILE VAS INDIA SUMMIT & EXPO 2015

Being India’s leading forum on “Mobile VAS on 4G Networks” would offer a best platform in the country for your organisation to identify right customer matrix for converting low end VAS services users into high end users.

3 - 4 February 2015 eCOMMERCE AFRICA CONFEX

The eCommerce Africa Confex brings together a unique blend of compelling and knowledge filled conference sessions featuring a technology showcase from companies that will demonstrate and provide business solutions to improve eCommerce enterprises.

11 - 12 February 2015 RETAIL BANKING AFRICA 2015

Providing a forum for delegates to network and discuss innovative ideas covering topics including ‘Banking the unbanked, Distribution networks and Cultivating innovation’.

17 - 19 February 2015 ATMIA US Conference 2015

ATMIA USA’s annual conference and expo is the largest ATM-focused event in the world. The theme for this ATMIA USA conference is: “Enhancing the Consumers Self-Service Experience”.

25 - 26 February 2015 IDC MIDDLE EAST CIO SUMMIT 2015

The CIO Summit is a unique opportunity for CIOs and ICT professionals to gather to gain insight from industry experts as well as real–world experience from CIOs on critical business and technology issues.

NOVEMBER / DECEMBER 2014

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10 - 11 March 2015 SOUTHEAST ASIA ATMs 2015

The event will bring together 200-300 banks, independent deployers, processors, ATM hardware and software vendors, CIT companies and other service providers, in one venue, for a unique conference.

10 - 11 March 2015 CARDS AND PAYMENTS AFRICA 2015

Cards & Payments Africa 2015 is the leading marketplace and ideas exchange for Africaâ&#x20AC;&#x2122;s payments community, who are hungry for innovative solutions.

16 - 17 March 2015 AFRICA CEO FORUM

The 2015 AFRICA CEO FORUM is designed to facilitate networking and to encourage participants to share their experience, know-how and best practices.

17 - 19 March 2015 3rd ANNUAL GLOBAL TELECOMS FRAUD, REVENUE ASSURANCE & RISK MANAGEMENT FORUM 2015

Fraud is one of the major concerns of the tele-communication sector causing estimated loss of 7 percent of their revenue annually.

17 - 20 March 2015 PAYMENTS INTERNATIONAL 2015

The programme is driven by extensive research with the payments community, including leading names from transaction banking, new payments providers and corporate customers from around the globe.

18 March 2015 CUSTOMER INSIGHT AND ANALYTICS IN FINANCIAL SERVICES

Customer Insight and Analytics in Financial Services is a cutting edge conference which tackles the expanding role of data and analytics in understanding customers and the challenges for financial service providers as they seek to use insight to improve the customer experience.

NOVEMBER / DECEMBER 2014

PREMIUM VENDORS DIRECTORY

Computer Warehouse Group offer integrated ICT solutions that add value to the operations of diverse clientele, using highly skilled and well motivated workforce. CWG work with best-inclass partners and technologies from all over the world.

Digital Jewels Limited is an ISMS Certified Information Value Chain Consulting and Capacity Building Firm specialising in Information Technology and Project Management and first in Africa to achieve accreditation to the ISO27001.

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GRGBanking, a leading provider of currency recognition and cash processing solutions in the global market with great potential and rapid development with comprehensive solutions widely used in Finance, Telecom, CIT and Retail sectors.

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VCASH allows you to transfer and receive money locally and through Western Union using your phone or online, plus much more. VCASH is fully licensed by the Central Bank of Nigeria to deploy mobile payment services in Nigeria.

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Mobile Money Transfer VTN VCASH and Western Union Mobile Money Transfer service with Western Union and VTN is an easy, fast and convenient way for VTN customers in Nigeria to receive money from abroad on their VCASH account.

In a few quick steps, a Western Union® Money Transfer can be added into a VTN VCASH account in Nigeria. 1 Western Union sender makes a money transfer at a Western Union® Agent location or online on a Western Union transactional website (where available). 2 Sender provides the VTN receiver the Western Union MTCN tracking number. 3 With the MTCN number, the VCASH customer can follow the Western Union menu prompts on their VTN phone to add the funds directly* onto their VCASH account! 4 The VCASH customer will enter their PIN, for user authentication. Additional information about the transaction may also be requested. (See diagram below) A 1. Send Money 2. Western Union 3. Check Balance 4. Mobile Top-up 5. Pay Bill Select

Western Union

1. Pick-up money

Western Union

Please enter 10-digit Western Union MTCN: _ (3 unsuccessful attempts will result in account blocking)

Select

Cancel

Select

Cancel

Western Union

Please enter the amount you are expecting to receive: _ (3 unsuccessful attempts will result in account blocking)

Select

Cancel

Western Union

Please enter your PIN to continue: _

Pick-up Confirmation: Western Union has deposited XXXXX into your account No. 00045XXX

Select

Cancel

5 The VCASH customer will receive an SMS notification confirming the deposit of funds into VCASH.

If the Western Union sender provides their mobile number on the Western Union Send Form, they will also receive a text message when the funds are delivered1.

Did you know? VCASH consumers in Nigeria can use funds in their VCASH account as determined by VTN, including: • Pay bills • Withdraw cash • Purchase airtime • Buy goods and services For more information, visit virtualterminalnetwork.com or WesternUnionMobile.com Available through:

* Funds will be paid to receiver’s VTN VCASH account provider for credit to account tied to receiver’s mobile number. Additional third- party charges may apply, including SMS and account over-limit and cash-out fees. Funds availability subject to terms and conditions of service. See Send Form for Restrictions. ** Service options are determined by the mobile phone service provider. 1 Standard Message and Data rates may apply. VTN, VCASH and the VTN logo are trademarks of Virtual Terminal Network. © 2013 Western Union Holdings, Inc. All Rights Reserved.

Human Capital Performance Improvement Audit Are you completely satisfied with the Return on Investment (ROI) from your current training? Are your training budgets driven by business goals and Key Performance Indicators (KPIs)? Are you holding training vendors accountable for quantifiable business improvements? Based on over 25 years of providing the BEST! Training, Communication and Consulting Solutions to the banking industry worldwide, the leaders of Global Bankers Institute have designed the Human Capital Performance Improvement (HCPI) Audit. The HCPI Audit is the first-of-its-kind service to offer the following benefits: 1) Ongoing Performance Improvement Plan based on cascading Strategic and Operational Goals. 2) Comprehensive Training Plan with behavioral outcomes aligned to Key Performance Indicators (KPIs) and Key Performance Measures (KPMs) resulting in a concrete Return on Investment for all training. 3) Effective Training showing measurable benefits in Sales, Customer Satisfaction, Operations Productivity and Quality, Employee Motivation, Risk, and Compliance, as well as any other identified bank goal. 4) Efficient Use of Training Budget through improved curriculum priorities and vendor selection and negotiation. 5) Holding Training Vendors Accountable by making them partners in the HCPI Audit process and requiring that they accept responsibility for delivering measureable improvement through their programs. Please contact me to let us know how we may best serve you. Global Bankers Institute brings experience, innovation and value, providing the BEST! Training, Communication and Consulting solutions to the financial services industry.

Dr. Linda Eagle Founder and President Global Bankers Institute 245 Park Avenue New York, NY 10167 +1.212.579.5500 ext. 3106 +1.646.236.7538 (mobile) linda.eagle@globalbankersinstitute.com www.globalbankersinstitute.com

Global Bankers Institute