Thanks to initiatives like Check 21 (The Check Clearing Act of the 21st Century), financial institutions will have to collaborate to process the IRDs (image replacement documents) that will be exchanged in place of checks. While large banks are investing heavily in technology that will help clear checks faster, smaller banks are still figuring out what to do. We may see banks partner up to share expensive technology to maximize efficiency.
"Banks and insurers need to snap out of their paralysis and move their industries forward," says Dominick Cavuoto, president of the global financial services practice at Unisys. "Business as usual doesnt cut it anymore. We see financial institutions breaking both physical and philosophical boundaries in how they do business. We see banks and insurers structuring businesses and using technology in new ways. The smart ones have technology as a strategic partner to achieve their vision to transform—to look at the world differently and respond faster to global trends."
As real estate costs head higher, banks may consider sharing technology investments and retail costs to collaborate on branch locations. Unisys analysts suggest the possibility of several banks opening a joint branch together where a niche customer base requires a presence but maintaining a full-service branch would not be cost-effective. As technology improves and more customers move to self-service, collaborative efforts in ATMs and other retail models should continue to evolve.
Another issue that financial institutions will have to face with vigor this year is fraud, primarily characterized by phishing attacks but also growing to include the possibility of check image fraud as well. Coordinating fraud monitoring and detection across ATM, check, online, wire and other payment channels must be implemented to better protect customers and deter thieves. The European Union is mandating chip-and-pin technology in bank cards in 2005, so banks operating in those countries will face greater security pressures and fraud challenges.
Mergers and acquisitions have created large financial institutions with global operations. Cross-border transactions are common in the U.S., where the immigrant population growth has caused banks to improve ways to transfer funds between relatives all over the world. New regulations going into effect in the European Union will generate cooperation among banks in payment processing and insurance administration. Potential new markets include Central and Eastern European countries where economies, cultures and needs have matured for more sophisticated banking and insurance products.