Online services put the heat on IT departments

As commercial banks add more online services, IT departments will feel the heat. Nick Huber reports

As commercial banks add more online services, IT departments will feel the heat. Nick Huber reports

The world's leading investment banks have discovered a new way to satisfy their customers - IT investment.

Take last week's multimillion-pound alliance between Deutsche Bank and 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, sales and other data from a wide range of software applications.

As well as making this internal investment, the partners plan to jointly develop software for the financial services sector, through DB eVentures, the private equity investment arm of Deutsche Bank.

Other leading investment banks are equally keen to jump on the IT bandwagon - the market is awash with Web-based share-dealing and personalised information services.

Jim Sanger, chief technology officer for DB eVentures and vice-president for technology investment, said, "Our feeling is that the financial services firms we serve require a lot of the Management Information Systems (MIS) that we are using [and] have the same problems."

DB eVentures' risk-management IT team will develop the new software with AlphaBlox, added Sanger, although the product details have yet to finalised.

The new wave of financial services are largely delivered over the Internet, through portals or company intranets.

Earlier this year, investment bank Dresdner Kleinwort Benson (DrKB) launched a corporate banking portal to distribute data and applications to its customers and internal users alike.

The investment, in the tens of millions of pounds, also gives its customers personalised news, research, and analysis plus applications including investment calculators and online trading tools. Customers access the service through their Web browsers.

The portal service, Online Markets Portal, is aimed at existing and new DrKB customers.

Collaboration over the Web, with customers, software suppliers and employees, is becoming a popular IT strategy in financial-service companies, enabling both suppliers and customers to cut costs and save time. The trend extends to the pension industry - particularly for the forthcoming stakeholder pensions - where it allows users to view and update their own pension details online.

Investment bank giants are also keen to cash in on growing demand for online share-dealing.

Credit Suisse last week unveiled plans to target an affluent elite of British investors through a pan-European online banking and investment service. An online service, Global Investor Portfolio, will allow customers to deal in shares on 15 stock markets, including London, Frankfurt and New York. UK and German clients can also receive an investment information service.

Analysts see the Web-based delivery of services as a logical move for both bank and customer. In theory, both sides come out winners.

"It's a bit of self-servicing and information," said Alexander Drobvik, vice-president of e-business at IT research company Gartner. "The company reduces the cost of administering the scheme and the fund manager gets a better degree of lock-in. It's harder to kick them out."

But as the banks start to pat themselves on the back for win-win added value services, a few alarm bells are ringing in retail banks.

IT managers should also be aware that personalised online financial services do come with risks, said Drobvik. The main danger areas are security and implementation.

"If a business is developing customer services and asking 'could we add this? - we need it very quickly', the IT department has to get the functionality much quicker," said Drobvik. "In the past, there could have been one to two years of planning for a new system. Now they might have to change in real time."

The fear is that, if IT departments come under increasing pressure to race products to market, corners could be cut on security. Then investment banks might find themselves apologising for the kind of security breaches that have hit the high-street banks' online banking services.

For instance, if a company's pension fund, viewable over an extranet, suffers a security breach, then employees might be able to see the pension contribution details of other colleagues.

"I do not see any reason why we will not see a repeat of high-street bank Web security problems when you have rushed delivery," said Drobvik.

IT investment and services are undergoing a quiet revolution in the investment banking sector. Portals and corporate intranets are fast becoming a standard business requirement in the fight for investors' hearts and minds.

But as City banks enter closer relationships with software suppliers, IT chiefs need to emphasise to business managers that there's a trade-off between speed of implementation and robust security. Speedy implementation and real-time updates can easily end in tears.

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