Banking on integrity
Banking on integrity
Australia's banking community received an unwelcome reminder of how their IT systems can backfire on them when the National Australia Bank's (NAB) system failure allowed unauthorised foreign exchange trading to take place which cost the bank more than $360 million of shareholder funds. Rodney Appleyard uncovers what financial institutions are doing to address this issue.
The Australian Prudential Regulatory Authority (APRA) found that the fact that the NAB's trading scandal was able to occur was partly due to faults in the bank's information technology systems.
The main mission of most financial institutions when it comes to information management is to unite disparate systems into one central database, so that documents can be kept secure inside one system, and found more easily, which is essential when information needs to be audited thoroughly.
Many different vendors provide such applications, but customers are primarily interested in the ones that are the easiest to implement, use and scale upwards, whilst offering a variety of automated functions.
But the main reasons why banks and insurance companies are embracing this technology more now than ever, according to experts, is because of the need to meet compliance requirements, such as those imposed by the Sarabanes Oxley Act and Clerp 9, and their drive to improve productivity without having to increase staff.
NAB also failed in this regard recently, by not being able to supply documentation that would have allowed investigators to check the integrity of its systems in regards to processing currency option transactions.
HSBC, Lloyds, Rothschild, ABN Amro, Macquirie Bank and CitiBank have all attempted to avoid this kind of embarrassment by integrating Interwoven's TeamSite and WorkSite Multi-Platforms software systems in their Australia offices to help them access information from a centralised database. Workers are provided different levels of access, depending on their position within the organisation, so that information can be kept confidential. But access to information is structured so that workers can have access to the information they are entitled to view at their fingertips when they need it.
These banks have each been able to tailor the Interwoven technology to meet their individual requirements and architectual demands, in some cases bringing together as many as four databases under one interface.
Andrew Antal, the marketing manager for Interwoven, says that the technology helps everybody within the company to be on the same page and have full transparency over every stage in the lifecycle of each document. For instance, this is particular helpful with deal management, when an employee needs to know exactly what stage a deal is at. Antal says that this level of control prevents information from being overwritten and deleted, because the latest version is always clearly visible and a history of each version is available for backup purposes.
"By having the most up-to-date version of every single document always available to each user, with details recorded of every phone call, email or correspondence made in relation to that deal or account, everyone can be kept up-to-date with where the company is on the progress of each account.
"This means that deals can be processed faster, since mistakes are less likely to be made, and duplication is avoided. It saves workers from wasting time and having to double check that the facts are correct. Everybody knows that the final version is the right version.
"Additionally, every single piece of information is saved and altered in a central repository, so it can't go astray or get lost."
There are even reminders programmed into the systems, to prompt staff to carry out a task which they might have otherwise forgotten about.
Interwoven's software has only been in use at the banks for the last six years, and Antal says this is because they are currently going through a compliance drive, which means systems such as those provided by Interwoven are becoming essential for banks and insurance companies.
"It has become even more important for banks to protect their data, following the situation with NAB a few months ago, when there was a real scare over the security of their data. The other thing with banks is they are starting to tighten on costs, and are reaching for the next level of efficiency. They realise that the good times are over for making easy money, so now they are looking at how to extract more productivity out of the organisation and are using IT to carry out these processes for them without increasing staffing levels."
Antal says that one of Interwoven's latest clients is using their software to streamline the mortgage process, so that they can be turned over faster via an external browser. The bank, who he is unable to name at the moment, is planning on using this online service to save customers from having to make phone calls and visits the bank in order to process their mortgages.
"With broadband becoming more widespread, this kind of service is probably going to be adopted more often by the banks."
Resimac, which manages and securities residential mortgages, is one of the most recent examples of a financial organisation which is embracing technology to improve its productivity without having to employ more staff. It has recently agreed to acquire a new electronic document and records management system (EDRMS) to help process its mortgages and loans more quickly than it has ever done before in the past.
The EDRMS is provided by Stellent Software, whom Resimac selected as the most appropriate solution with the assistance of Alphawest (Resimac's IT partner).
One of the problems that Resimac had in the past was that it had a number of disparate systems in place which were not talking to each other efficiently. The Stellent Universal system will be introduced to merge all of these systems together, encompassing all its financial documents, and providing robust security over loan information.
Fiona Rankin, Resimac's chief information officer, states: "One of the main drivers behind the system upgrade was to achieve efficiency gains across the whole organisation and to provide a single consolidated source of loan documentation for the entire loan process from inception to discharge.
"The system had to be user-friendly too. Unfortunately, some of the bigger vendors did not offer an EDRM system that was easy to use. But the Stellent package makes it easier for us to manage all of the documents more carefully and comply with privacy legislation. It is also fully transparent, which allows us to find documents quickly so that we can provide them when compliance regulations require documents to be produced."Rankin believes that having a central repository for all of this information is far more beneficial than having multiple systems. It means that all of the information can be kept on site now due to the increased level of security.
Rankin also foresees that the EDRM system will improve business to business (B2B) information exchange through the employment of electronic interfaces with external parties such as Mortgage Originators, Valuers, Solicitors and Perpetual Trustees. Perpetual Trustees are the custodians of Resimac's security documentation.
"It is anticipated that at some point in the future Resimac will transfer all loan documentation to Perpetual electronically, which will eliminate the current manual process of transferring hard copy documentation between the two organisations.
"Perpetual Trustees uses the TRIM electronic document and records management system provided by Tower Software, so we have chosen our solution with the possibility in mind of it being able to link up to TRIM in the future."
This means that if they do still need to store documents at the Perpetual Trustee's office, in the future, they will be able to examine the documents electronically through the compatible systems, instead of having to have the hard copy documents delivered back to Resimac's office.
Perpetual Trustees is one of Australia's leading financial services organisations, which provides outsourced document management services, with maintenance of mortgage documents being a specialty.
In 1997, Perpetual Trustees adopted Tower Software's TRIM electronic document and records management system. In the intervening eight years, TRIM has grown well beyond its original uses as a records management tool to become a critical part of the company's move into electronic document management services and has helped Perpetual to greatly increase the volume of transactions conducted.
Since adopting the software, Perpetual Trustees has maintained staff numbers at the same level while growing transactions at an average of 35.6 percent for each of the last six years.
Perpetual Trustees relies on TRIM for its securitisation offering that sees it interface directly with its customers' legacy systems to allow the rapid verification of property holdings that financial institutions, such as Resimac, require before they can securitise large pools of residential loans or authorise non-residential transactions.
Socrates Vasilidias, who was formerly head of technology services for Perpetual Trustees, and is now the chairman of the Lending Industry XML Initiative, recalls how TRIM helped Perpetual to deal with stringent compliance regulations.
"First of all, we needed to know where physical documents were stored; we needed to know what each document's relation was and is to all the other documents in the repository; whether it was an urgent document; whether it was an original or a copy; and we needed a system to tell us if we were meeting all of the compliance requirements. TRIM met all of these needs.
"Version control is critical too, in terms of ensuring that documents are kept fully up-to-date at all times. Every piece of evidence needs to be accounted for and recorded. For instance, a page that was on the website four years ago will need to be preserved because it could be used as evidence in the future."
Vasilidias says that the EDRM system was chosen because of Tower Software's experience of using TRIM inside government organisations to meet tight legislation requirements.
"When we went looking for the product, we were very aware of what was around the corner and its potential impact, so we selected a system that would make it easy to meet government related legislative demands. For instance, we have to comply with the Financial Services Reform Act, which is one of the most stringent pieces of legislation there is.
"We put TRIM to the test with this Act, by workshopping it in a small environment first. We tested it to make sure that it provided all of the services needed for us to remain compliant. If we encountered any difficulties, we simply tailored TRIM to overcome these until it became robust. We apply the same principles to every compliance challenge we face so that we know if it will work in emergencies before we roll it out live. After it has worked as a pilot, we then roll it out to the rest of the organisation."
Michael dal Maso, the business solutions manager for information management practice at Alphawest, which has been responsible for implementing many document management solutions in banks throughout Australia, says Alphawest has also helped banks cope with the ever-increasing mass of paperwork that comes with new businesses, and the realities of meeting compliance requirements.
"With ING, we had to put in place intelligent document scanning technology and remove data entry methods, so that we could automate their processes to make their business activities operate more quickly. As a result, the bank can now read bank cheques a lot more quickly than most other financial organisations. These bank cheques can be processed now in 24 hours, instead of the four to five days it used to take beforehand. The system we implemented was Ascent, provided by Kofax."
Maso says that by automating these processes, time-consuming manual indexing work is no longer required, and bottlenecks are reduced so that transactions can be done quickly. Unstructured information, such as traditional mortgage applications, can also be automatically sorted through the technology.
"ING has clearly experienced areas of improvement through using this system. It has grown significantly and customer levels have increased massively too. More people keep opening up accounts and the bank is constantly launching new products too, thanks to better workflow; the introduction of imaging services; the integration of applications and the automation of previously manual processes."
In addition, Maso says there is a lot to be learnt about meeting compliance regulations from NAB, and Alphawest has been responsible for implementing both Hummingbird and Interwoven products in banks to make sure these requirements are met.
"There is huge growth in accounting standards being relevant to banks around the world. Document management packages now need to ensure they make it easy for banks to meet corporate governance needs and policies. The situation with NAB is one example of the risk involved. Systems need to be constantly updated to meet these compliance demands. The pressure is so high that the systems have to guarantee support."
The need for accuracy is critical when it comes to meeting these compliance standards. Manual processes are troublesome because human error comes into the equation. The Commonwealth Bank is another example of a bank that turned to a document management and production solution to help it eradicate these errors.
The Commonwealth Bank uses Cincom's solution, which can process hundreds of thousands of paper documents overnight. It can also back them up in many different formats, such as Word, PDF, XML or HTML. This method of automatically processing paperwork means that information gets recorded accurately, which is essential under the current climate, when financial inaccuracies can lead to prison sentences.
Paul Hargreaves, the managing director of Cincom Australia/New Zealand says banks face a multitude of challenges at present, including meeting compliance needs, dealing with ever increasing paperwork, satisfying customer demands for new products and keeping down the overall costs.
"The pressure for revenue generation and competitive positioning is driving an increase in document-based communications. Banking, finance and insurance organisations in particular need to be able to monitor and manage version control of electronic documents while meeting demands from consumers for paper-based policies, contracts and high-value correspondence.
"In addition, industry pressures for efficiency, coupled with slow economic growth, are creating a shift from paper-intensive to electronic communications to reduce costs. The challenge is balancing the reduction in operational costs with improved customer service demands that are ever-changing."
The problems for banks, finance companies and insurance providers look set to keep growing as the demand for them to maintain tighter control over their data continues to rise. But this seems entirely manageable with the introduction of software that centralises the information, automatically processes it into the database at high speed and allows that information to be retrieved and accessed through multiple sources, including call centres, which are being used more and more to deal with customer enquiries.
More importantly, this slick processing of information needs to be tied in closely with compliance control methods to meet the strict legislation.
Once an organisation has the appropriate systems in place and integrated with legacy systems, it is generally only a matter of time before the speed and efficiency created by the technology leads to new products being marketed more smartly to provide better services to customers.
A well-run, technology savvy, compliant friendly organisation will have a head start over its rivals in creating cutting edge products in the long run, as well as maintaining that all-important ingredient-customer confidence.
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