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Banks to invest in IT to reduce risk in 2008.

Look for banks to focus information technology (IT) spending on initiatives that reduce risk as the U.S. subprime mortgage crisis has forced banks to enter 2008 in a reactive mode, according to a report by Needham, Massachusetts-based TowerGroup.

The TowerGroup report--2008 Top 10 Business Drivers, Strategic Responses and IT Initiatives in Retail Banking--noted concern by bankers surveyed over disclosure of customers' financial information and attempted fraud, which have forced bank boards and management to pay more attention to information security and fraud prevention.

Expect these concerns to lead to greater organizational responsibility and visibility for risk-management and information-security experts, while IT departments will be required to respond to targeted efforts to identify and mitigate financial and reputational risk, according to Robert Hunt, report coauthor and research director of TowerGroup's retail banking practice.

"Many banks have embarked on multi-year strategic technology initiatives that are already well under way," said Hunt. "In many cases, it would simply not be economical or strategically sound to put these large-scale projects on hiatus. Progress on the IT front may slow substantially, but it must be sustained."

In researching top banking trends for 2008, the TowerGroup report found that retail banks will return to proactively approaching their markets only when the extent and expected duration of the credit crisis is understood, according to Kathleen Khirallah, TowerGroup managing director and practice leader of the retail banking practice.

"[The year] 2008 promises to be a year of adversity for some retail bankers and opportunity for others," said Khirallah.

Although the credit crunch has undoubtedly resulted in the reallocation of management and technical resources, TowerGroup found banks continuing to focus efforts on a number of business drivers and technology investments that will provide longer-term benefits.

For example, explained Khirallah, banks will continue their efforts around the re-engineering of payments processing, offering new product and pricing packages to targeted customers, and developing a more flexible payments processing IT environment.

"The key issue for retail banks will be managing growth and profitability while adapting to an ever-changing economic climate," said Khirallah. "Opportunity can be found in adversity, and retail bankers that pursue cautious forward movement will be rewarded."

Additional findings of the TowerGroup report include:

* Sustaining organic growth or growth not related to mergers or acquisitions will continue to be a top challenge for most retail banks.

* Concerns over disclosures of customer information will lead bank management in 2008 to focus on creating enterprise centers of excellence for information security.

* As electronic-payments volume continues to increase and banks introduce new delivery channels, they will no longer be able to afford operational silos for each type of payment. This pressure will help drive a continued focus on streamlining payments processing.

* Heightened consumer awareness of Internet fraud and identity theft will motivate banks to develop new offerings that combine conventional products with identity-theft and fraud-protection services.
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Title Annotation:TechNewz
Comment:Banks to invest in IT to reduce risk in 2008.(TechNewz)
Publication:Mortgage Banking
Date:Mar 1, 2008
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