Cash is King no longer

Nick Huber continues our sector-by-sector analysis of UKe-business with a look at retail finance - where customer management,...

Nick Huber continues our sector-by-sector analysis of UKe-business with a look at retail finance - where customer management, security and mobile phones are some of the hot issues confronting the banks

The retail finance sector is the superpower of the e-business world. From Web-enabled stakeholder pensions to banking services delivered via mobile phones, Web-based services have quickly become the norm.

But despite the breakneck pace of change the new wave of e-business products are causing some major headaches for IT managers in the sector. Issues such as security, common standards and back office integration are all starting to chip the gloss off the e-business hype and spin.


The dominant trend in the banking sector is mobile banking, largely through wireless application protocol (WAP). Although WAP-based services are not universal, most of the leading high-street banks offer customers a mobile banking service through either WAP technology or short messaging service (SMS) technology.

But there is much more to the banking sector than WAP.

Barclays, which claims to be the largest Internet bank in the UK with about 300,000 online customers, is a useful case study.

It is developing WAP banking and credit card services for next year in partnership with Vodafone. The bank also offers a share dealing service through Barclays Stockbrokers. It has about 150,000 customers, who can obtain real-time prices, manage their portfolios and open ISAs online.

But security concerns still haunt Internet banking.

In the summer Barclays was forced temporarily to close down an upgraded online banking service on its second day of operation after a handful of customers became able to view other customers' account details.

And Barclays are by no means alone in suffering the curse of the online banking launch. Halifax bank is still waiting to launch its Internet bank, Intelligent Finance (IF) four months after the planned launch in July. The launch was delayed at the eleventh hour after the site slowed down during stress testing.


Stakeholder pensions are the big e-business issue for the insurance sector. The government-backed pension scheme comes into force next April creating a massive market, which will be worth over £2bn in contributions per annum by 2005, according to analyst Datamonitor.

But profit margins will be tight. Under government regulations pension providers can only charge customers a maximum of 1% commission on the stakeholder fund's total value.

Insurance industry leaders are looking to cut costs by delivering stakeholder pensions over the Internet.

But like many things Web-related this is easier said than done. Industry IT chiefs have admitted that creating a seamless real-time Web site based on ageing back office systems will not be easy.

Stakeholder pensions are also part of a wider technology trend in the industry for "worksite" marketing. This allows insurers and other financial service providers to market services through the workplace at a relatively low cost.

Legal & General, for instance, is to target stakeholder pensions at thousands of Powergen's small and medium-sized enterprise customers via the utility's Web site. The strategic alliance allows both companies to cut operating costs by cross-selling services to businesses and consumers through interlinked Web sites.

Legal & General is also planning to link its legacy systems with Abbey National as part of an online mortgage application service from Abbey National. The service allows a mortgage agreement in principle from the Abbey National Web site within 60 seconds.

If all goes smoothly, and the main mortgage providers link their systems, then mortgage brokers should be able to obtain quick mortgage agreements in principle from a wide variety of providers.


The details of the link, whether through an XML-based Internet link or through an extranet, have yet to be decided. But the innovative deal is one of the first concrete examples of Web-side co-operation between financial services rivals in a bid to improve customer service.

Financial services companies are also teaming up with software suppliers in retail e-finance. For example, investment bank Deutsche Bank recently unveiled a multi-million pound alliance with business intelligence supplier AlphaBlox.

The two-pronged partnership will see the German bank roll out the Web-based business intelligence software across its offices to analyse financial and sales data. The two companies also plan to develop software for the financial services sector through DB eVentures, the private equity investment arm of Deutsche Bank.

Challenge of security

Even seasoned analysts now struggle to keep up with the many e-business initiatives being generated by the financial services sector. Aside from Web banking and insurance, financial services companies are using the Internet to cut costs and improve customer service in innovative schemes across all sectors.

But despite the flurry of e-business activity the sector has still to address key problems, such as online security and how to integrate ageing back office systems with cutting edge Web sites. For the retail finance market, the real challenges are only just beginning.

Next week: The retail sector

Mobile banking: who does what

Only one in six UK banks offer their customers the ability to bank on the move, according to a recent survey by MobileAge Technology, the mobile finance service providers, and, the wireless Internet lab.

The three WAP-based banking services all used a Nokia handset, 7110. The main advantage of the Nokia product is that it can support secure connections, unlike some of the WAP phones on the market.


The Internet banking operation of the Prudential and the first UK financial provider to launch an Internet brand. Online savings account, credit card, share dealing and insurance. A WAP service allows the current balance of savings account and credit card to be viewed, along with recent transactions. However, it does not support online transactions and is the simplest of the services surveyed.


An Internet bank based in Dublin but operating mainly in the UK and Germany. Offers both savings and current accounts. First-e WAP service, launched in May, is well written and provides the quickest balance enquiry of the WAP services. However it is the only one of the three WAP services that requires users to have their own ISP account.


The first UK bank to offer WAP banking, in April this year. Offers the most comprehensive service of the WAP services with balance enquiry, mini statement and pre-mandated funds transfer. Application generally easy to navigate.

Case study: Marbles online credit card

When HFC Bank launched the online Marbles credit card last autumn, it wanted to deliver a product that was straightforward enough to appeal to the technophobic consumer and clever enough to appeal to the seasoned Web buyer. The service includes the ability to order statements and view balance enquiries.

HFC Bank, the UK subsidiary of US retail bank Household International, administers more than 100 credit card programmes, including the Goldfish card.

The Marbles credit card system needed to met five key criteria: functionality, security, performance, scalability and ease of use. It also had to need to integrate with HFC Bank's back office card processing systems.

HFC Bank chose iE to provide the system's e-commerce engine as well as providing consulting. HFC used Entranet for the design and development of the user interface.

The online credit card application - involving the customer's computer, an HFC Bank Web server, and an AS/400 - is co-ordinated by iE's e-commerce application.

Data traffic between the customer's machine and HFC Bank's Web servers is protected by 128-bit SSL encryption. The connections between the machines behind the firewall, including the application servers, are DES encrypted. Applicat-ion servers talk to the back office systems via a secure network.

The system has also been configured to scale with demand. "We have over-sized the system," says Nick Waugh, IT director at HFC Bank.

  • Break down of Marbles' IT systems: An IBM mainframe; several AS/400s; an RS/6000; NetFinity application servers; and Sun Web servers.

  • Read more on Wireless networking