Banks and other financial firms are using technology to make sure data doesn't fall into the wrong hands.
The financial-services industry has been roiled this year by a string of data-security lapses involving tapes lost in transit, losses and theft of payment-card information, phishing attacks, and insider scams. The list of companies that have been stung reads like a Who's Who of the financial-services industry: Ameritrade, Bank of America, Citigroup, City National Bank, Commerce Bancorp, PNC Financial Services, and Wachovia. The data-security problem reached a new level in June when it was disclosed that a security breach at payment processor CardSystems Solutions Inc. had led to the exposure of 40 million card accounts.
Not surprisingly, security tops the list of IT priorities at many financial-services companies. Citigroup has said it would encrypt all tapes bound for transit, while Bank of America improved its tape-tracking procedures and launched a system intended to thwart phishing.
INSIDE BANKING & FINANCIAL SERVICES
Average portion of 2005 revenue spent on IT 10.0% Companies spending more on IT this year than last 69% Buying directly from foreign suppliers 35% Centralizing control of IT operations in past 12 months 58% Bringing outsourced functions in-house in past 12 months 20%
"A day doesn't go by where information security isn't front and center," says Katherine Busser, CIO of the U.S. card division at Capital One Financial Corp.
Banks, insurance companies, and investment firms will spend $362 billion worldwide this year on IT, according to research firm TowerGroup. Information security, which accounts for about 4% of that total, will be upgraded on several fronts, TowerGroup VP Guillermo Kopp says, by using technology such as two-factor authentication, biometrics, and intrusion detection.
Other IT priorities in financial services are profitability management and improving revenue streams using technology, according to research firm Financial Insights. At Vanguard Group, IT priorities are centered on capturing the assets of soon-to-retire baby boomers, who have a predilection for using the Web to check their retirement accounts. Eighty percent of Vanguard's customer interactions occur over the Web.
"We're investing heavily in technology that leverages our virtual presence," CIO Tim Buckley says. The company has invested in customer self-service technologies and has built portals that pitch products aimed at demographic segments, such as college-savings plans for parents. It's also dispensing financial advice over the Web to 401(k) plan participants.
At Capital One, profitability has revolved around diversification. In recent years, the company has expanded into auto and home-equity loans, and--through its recent purchase of Hibernia Corp.--into traditional banking. That's in marked contrast with credit-card rivals Providian Financial Corp. and MBNA Corp., which are being acquired by Washington Mutual Inc. and Bank of America Corp., respectively.
One trick in diversifying is fitting together the IT pieces of the acquired companies. "If you diversify without a plan, you can diversify into chaos," says Gregor Bailar, Capital One's CIO. In the Hibernia acquisition, Capital One is moving some of its deposit operations onto Hibernia's platforms because of that bank's core competencies in that area, he says.
IT is a driver of Capital One's productivity initiative called Future of Work. Under the program, traditional offices and cubicles are replaced by mobile work areas, retreat spaces, and casual work environments. Enabling technologies include wireless phones, broadband access, and voice over IP. The idea, Bailar says, is to "foster collaboration by providing the technological tools and environment needed to work beyond a traditional office setting."
How Enterprises Are Attacking the IT Security EnterpriseTo learn more about what organizations are doing to tackle attacks and threats we surveyed a group of 300 IT and infosec professionals to find out what their biggest IT security challenges are and what they're doing to defend against today's threats. Download the report to see what they're saying.
Infographic: The State of DevOps in 2017Is DevOps helping organizations reduce costs and time-to-market for software releases? What's getting in the way of DevOps adoption? Find out in this InformationWeek and Interop ITX infographic on the state of DevOps in 2017.
2017 State of IT ReportIn today's technology-driven world, "innovation" has become a basic expectation. IT leaders are tasked with making technical magic, improving customer experience, and boosting the bottom line -- yet often without any increase to the IT budget. How are organizations striking the balance between new initiatives and cost control? Download our report to learn about the biggest challenges and how savvy IT executives are overcoming them.