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by Greg AbelLike a growing number of community banks nationwide, First Mariner Bank in Baltimore is in the middle of an online marketing experiment., The $1.4 billion-asset unit of First Mariner Bancorp recently relaunched a Web site, marketing campaign on the Google and Yahoo search engines., First Mariner plans to monitor and tweak the site's content and sponsored search terms as the campaign evolves, to move itself up the pecking order on both sides of the results page., said Kevin Lynch, First Mariner's senior vice president and director of e-commerce, First Mariner has committed to a three-month trial with a budget of $5, 000 a month, Mr. Lynch said. The Baltimore search-marketing consulting firm DMW Communications helped choose and edit the search terms and create site content, such as blogs, to maximize hits., The campaign is indicative of a growing, but still nascent, trend among community banks to leverage targeted online search marketing and advertising campaigns. Long the domain of large national or online-only banks with proportionately large budgets, campaigns using search engines, community Web sites, and other online vehicles are just starting to gain momentum among smaller banks as technology improves and awareness of effective tactics increases., The Web definitely has great potential for community banks, because you can target ads to local areas, said Jim Bruene, For the first decade bank advertising on the Internet was mostly national in scope. But all that changed in the last few years, As more and more people turn to the Web for financial research and resources, Mr. Bruene and other industry observers said, it makes sense for community banks to make sure consumers and businesses can find their institutions when looking for specific products in specific markets., If someone is moving to a new city or state, in the past they might go visit the nearest branch. Now that first search is done online, Mr. Bruene said., While First Mariner is using search engines to reach Web users, others are marketing their services through specific sites., For example, a popular online wedding planning site, The Knot, and its new companion site for newlyweds, The Nest, have become effective advertising vehicles for banks of all sizes., Alisha Johnson, a senior vice president and the director of marketing at the $411 million-asset Highland Bank in St. Paul, said that The Knot has helped her bank develop meaningful leads for its mortgage products., The site is national in scope but allows advertisers to target local communities by focusing on selected ZIP codes. More significantly, it lets banks and others focus on a demographic in the middle of making life-changing financial decisions., We're talking to an audience that is definitely in transition, A couple of years ago we wouldn't have even thought about it, That's music to the ears of David Liu, the chief executive and a co-founder of The Knot Inc., who sells national and community banks on the powerful notion that they can reach an audience with specific financial decisions looming., When consumers come back from their honeymoons, it's very predictable what's going to happen in that first year, Mr. Liu said, reeling off a list of transactions they are likely to make: buying a home, buying a car, buying insurance, and merging their finances., We've been able to create a destination that's very rich on the local level, Mr. Liu said. Six percent of his company's revenue comes from local advertisers, We are also the only media company that knows the moment a couple becomes married, Some community bankers say they do not see much value in using global search engines for local advertising, but Google Inc. is trying to convince them otherwise., The Mountain View, Calif., company, which reported an astounding $2.25 billion of revenue for the quarter that ended March 31, has targeted community banks as an area for growth. Jon Kaplan, its vertical head of financial services, said community banks have not leveraged search marketing as much as they could and need to take the time to understand what it offers., Our technology allows advertisers to target by a variety of geographic mechanisms - by market or state or radius around branch locations, Mr. Kaplan said. National banks have taken the lead in search advertising, but by doing so they have created an opening for the smaller guys., for example, a community bank's ad could appear showing not only its name and services but also a map indicating its location, Most of our advertisers find this to be the most cost-effective medium they advertise in, They are only reaching customers in the market for their products and services. There is no waste. These people have raised their hands and said, 'I'm interested in a checking account, One bank trying to do just that through a search campaign is Viking Bank in Seattle. The 13-year-old bank, which has six branches and two more on the drawing board, launched a Google Adwords campaign in November., Emily Cornwell, the $318 million-asset Viking's marketing director, bring in traffic., Part of the beauty of search advertising is its transparency, according to Ms. Cornwell. For example, she knows that in April, 000 searches made through Google brought up a results page that included Viking Bank, Of those 124, 000 searches, 105 resulted in clicks to Viking's site, of 0.1%. Viking's monthly fee? $300., We haven't gotten far enough to know if people are opening accounts, but we are seeing more traffic than last year, We want to get as much Web site exposure as we can, but we want customers to come into the branch, The desire for face-to-face interaction, though, has kept many community banks away from online advertising campaigns. Nearly every bank has a Web site, and many offer online banking, but anecdotal research suggests that the vast majority of community banks have not begun to consider online campaigns beyond e-mail offers to current customers., Perhaps owing to the community banking industry's proudly held reputation for relationship building and know-your-name customer service, some bank marketing executives said they see no need for online campaigns., With our style of community banking, people are real close to us, said Mike McDonald, a senior vice president at the $1.7 billion-asset Ameris Bancorp, a multibank holding company in Moultrie, We have not felt the need to advertise on the Web, Still, others are dipping their toe into online advertising., K Bank in Randallstown, We've been working with a few nonprofit and local community sites where people can find us as a resource, said Nicole Topper, K Bank's vice president of marketing and advertising., which is largely devoted to radio, billboard, and newspaper campaigns., The $621 million-asset bank is not experimenting with search marketing, Given we are a regional bank in Maryland, Otto Suarez, the president and marketing director at the Miami financial services marketing firm Oz Communications Inc., said he believes it is just a matter of time before community banks start advertising online en masse., Banks are often slower to react and adapt to new technologies and changing times. I think it's a great avenue, Mr. Abel is a freelance writer in Baltimore
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by Katie Kuehner-HebertWhen Dan McAllister, the San Diego County treasurer, tax collector, was campaigning for the job in *2002-, he told community bankers he would steer some county money to them., Now he's doing it., Most of the funds in a multibillion-dollar investment pool that Mr. McAllister's office manages for the county and other local agencies such as school and water districts, are invested in securities or deposited at big banks such as Bank of America or Wells Fargo Bank. But last month Mr. McAllister announced that his office had bought a $100, 000 certificate of deposit from each of 17 San Diego-area banks., For years, banks here have been trying to attract the attention of the county to do business locally, and now that my term is almost up, I thought I should work something out with them - as long as we get acceptable rates that we don't have to haggle over, Mr. McAllister said., Normally the money would have been invested in Treasury bills, Mr. McAllister said. The banks agreed to pay 5 basis points more than the going rate on a one-year T bill, Stephen G. Andrews of Bank of Alameda said the county, like other government entities, realizing that when they invest in larger banks, Paul Smith, senior counsel of regulatory policy at the American Bankers Association, said some states and big cities, including New York, often based on Community Reinvestment Act or similar ratings, when choosing where to deposit funds., They want to use the banks they think have been the best to their community, Mr. Smith said., The $777 million-asset Pacific Trust Bank in Chula Vista, Calif., is among those that sold a CD to San Diego County., It's a good start, but they need to expand it to say $1 million to $2 million for each bank to really make an impact, said Hans Ganz, the bank's president and CEO.
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by Katie Kuehner-HebertA Westport, Conn., banking executive is following in the footsteps of Martha Stewart., appears Saturdays on local cable and will soon hit the air on network TV., Mr. Jennings became a lifestyle guru by accident, while a regional manager for the $9 billion-asset Hudson United Bancorp. of Mahwah, N.J., before it was bought this year by TD Banknorth Inc. of Portland, Maine. (He is now a senior vice president of Harbor Bank, a private bank being organized in Southport, Conn.), In 2002 he was asked to show his home and garden in a home tour for a local charity, Dress for Success. Soon after, many started coming to him not only for banking needs but for tips on how to decorate bathrooms or prune shrubs., That's when the lightbulb went off and I said, 'I should be doing more of this, Mr. Jennings, started his second career by doing guest spots on other home-and-garden TV shows, he launched his own last year. North Star Media of Studio City, Calif., recently agreed to syndicate it nationally, and several network stations in Connecticut and New York were to start broadcasting it this month., He has also launched a Web site, featuring tips on how to find antique shutters, and make corn, avocado, and tomato salad., Stephen M. Carta, the president and chief operating officer of the proposed Harbor Bank, said Mr. Jennings has developed quite a following on the Connecticut shore, He said Mr. Jennings' reputation should be good for Harbor, which organizers aim to open this year once they get a final nod from regulators and raise as much as $20 million of capital., the kind of respect and following you would hope to have in a community like Fairfield County, especially when you're the new guy on the block, Mr. Carta said.
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by Jeremy QuittnerOffshore outsourcing has become indispensable to many U.S. banking companies in the last decade as they strive cut information technology costs and stay competitive., Some of the biggest beneficiaries of the trend have been Indian companies that handle functions like information technology development, transaction processing, and call-center staffing., But experts say the focus of outsourcing is changing. Top outsourcers in India report that in addition to providing IT functions and back-office processing to banks, they now are adding management consulting services., capacity., We can do the front-end management consulting and the heavy lifting for implementing IT, and not just make recommendations, said Ashok Vemuri, the senior vice president for the banking and capital markets group for Infosys Technologies Ltd. in Bangalore, India, Many Indian vendors acknowledge that it is important for them to have operations outside the subcontinent to minimize political risks to their clientele, as well as to offer more complete service packages that enable bank customers conduct business in other languages and time zones., With that in mind, in the last few years Infosys has opened centers in Australia, Canada, and Czechoslovakia, and it is looking at China, according to Mr. Vemuri., Tata Consultancy Services Ltd. of Mumbai said it has opened centers in Brazil, Hungary, Uruguay, and Canada in the last few years., A good number of American customers are looking for services available in Spanish, said N.G. Subramaniam, the global practice head for banking and financial services., Tata (No. 13 on this year's FinTech 100), may start a project in India and then shift it to one of its bases in Latin America or North America, Higher-cost location services can give confidence to customers for very mission-critical projects. India may be too far away, but Phoenix, Arizona, That all makes sense to Wachovia Corp. The Charlotte company recently announced plans to outsource up to 4, 000 jobs by next year to Indian firms, including Infosys and Genpact of Delhi, which has operations centers in China, Hungary, the Philippines, Poland, Romania, the United States, and Mexico., said Peter Sidebottom, Experts said that even though Citigroup Inc. and JPMorgan Chase & Co. have long been involved in offshore outsourcing, the next tier of companies, such as Bank of America Corp., Wachovia, Washington Mutual Inc., and Wells Fargo & Co. are just beginning to develop important relationships with offshore vendors., (American Banker contacted nearly a dozen U.S. banking companies about their outsourcing activities, but most would not comment for this story.), The larger national players [like Wachovia] will have to compete with the international players, contrast, Wells has announced it will build a cap-tive IT center in Hyaderbad, India, with about 300 employees by yearend, rather than depend on vendors., with Indian vendors, said John Taylor, a senior vice president and area technology manager for the San Francisco company., Wells decided to start a captive center in India for a variety of reasons, including competitive pricing and a technologically proficient labor force, Many industry experts and vendors predict the captive center will become an intermediate step for banking companies., Within the next three to five years most of this will be handed over to a third party, said Susan Cournoyer, a vice president of research at Gartner Inc., a Stamford, Conn., market research company., It may be difficult for Wells to continue to manage an operation from halfway around the globe, to foreign vendors., Though cost reduction remains a key concern for most bankers that are outsourcing, some analysts say the increasing price of labor inevitably will drive costs up., If you look at the staff costs, it is still incredibly cheaper in India, but it is all a matter of how the deals are structured, said Jeanne Capachin, vice president of global banking research at Financial Insights, in Framingham, Mass., an IDC company. Areas like the Philippines and eastern Europe, where some financial services outsourcing is now moving, may be cheaper than India, costs of labor are going up, since India is a hot market, costs to the bank are going down, Roughly 6% of the banking industry's $44 billion of IT spending has moved offshore, according to a report this year by the Boston research and consulting firm Celent LLC, which estimates the figure will increase to 30% by 2010., said Madhavi Mantha, a senior analyst at Celent., In addition to traditional application development, banking companies are becoming more interested in using offshore consulting services, according to a 2006 report from Gartner. More than half of the top 50 U.S. financial services companies use offshore IT consulting services, and nearly 20% more plan to start using them in the next 24 months., The Indian firms are moving into consulting, hiring former big five [consulting firms] officers to organically build business advisory services, and I would expect over time that they will ... have a significant minority presence in the [larger] business consulting practice, Ms. Cournoyer said., Many of the Indian vendors said their revenue from IT consulting has grown significantly., Meetul Patel, executive director of management consulting for financial services for Kanbay International Inc., said 6% of its second-quarter revenue came from management consulting, compared with 4% in the same period last year., Kanbay, which ranked No. 47 in this year's FinTech 100, is based in Rosemont, Ill., The market is evolving to more than the labor and cost question. It also wants management consulting and answers to IT questions, Mr. Patel said., According to Mr. Subramaniam, consulting work generates 28% of Tata's revenue from financial services companies, compared with about 14% three years ago., We see a tremendous amount of growth in consulting and system integration, At the same time, companies like i-flex solutions ltd. in Mumbai, No. 38 on this year's FinTech 100, say that even though their stock in trade has remained strong, revenue is growing in other areas. (Oracle Corp. of Redwood Shores, Calif., owns a 55% stake in i-flex. See related story on page 16), V. Shankar, executive vice president of PrimeSourcing, i-flex's IT services division, as well as management services that include overseeing network policies, compliance, and system processes, Tier 1 ... [banks] are not going to take just products and services, and they don't want to replace their back-office systems all the time, Mr. Shankar said. Instead, Mr. Quittner, an American Banker reporter from 1995 to *1997-, is a freelance writer in New York.
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by Will WadeNacha has approved a format for businesses to convert checks into, electronic, payments in their back offices, introducing a new competitor to remote, capture, one of the banking industry's most popular check-imaging, applications., The back-office conversion format will take effect next March and will, fill a gap in the automated clearing house system's conversion, capabilities,, which already permits companies to turn checks into electronic payments at, both the point of sale and the corporate lockbox., using the, said Elliott C., McEntee,, the president and chief executive of Nacha, the electronic payments, association., Mr. McEntee announced here Monday during Payments *2006-, Nacha's annual, gathering, that the Herndon, trade group's members had voted last, week, to approve the new ACH format, to be known as BOC., The BOC format will join the point-of-purchase and the accounts, receivable conversion formats that companies already use to turn customer, checks into ACH payments, which are faster and cheaper to settle than, checks., which took effect in *2002-, has proven one of the most popular payment, mechanisms in Nacha's history, growing 71% in *2005-, to 1.6 billion, transactions., BOC will present a new alternative to image-based check clearing because, it could be used by the same real estate managers, dentists, and other, small, businesses that have been among the primary customers for remote image, capture., These companies could not use ARC, because Nacha's rules restrict that, format to lockbox operations., Richard Oliver, an executive vice president with the Federal Reserve Bank, of Atlanta and the manager of the Fed's Retail Payments Office, said that, BOC system could be more cost-effective for banks than remote capture, less risky., Banks that offer remote-capture systems must warrant that the images that, corporate clients create can be used if they are forwarded to other, financial, This risk would be eliminated with BOC, which removes the check from the, payment stream and replaces it with a new payment mechanism, an ACH file., And though remote image capture is less costly than handling paper, checks, ACH payments are generally considered one of the banking industry's, cheapest payment types. As a result, Mr. Oliver said, some banking, companies, is a better model because of the cost and liability, Under the new rules, companies that intend to BOC consumers' checks must, post a sign at the point of sale, and also note it on receipts. The, companies, will also have to create a digital image of the entire check and archive it, for at least 60 days -- the window for consumers to dispute a payment., This is different from the POP format, which only requires merchants to, scan the information in a check's magnetic ink character-recognition line., With POP, the merchant hands the check back to the consumer as a record of, the transaction, but this is impossible with BOC because the conversion may, happen long after the customer has left the store., George Thomas, an executive vice president at The Clearing House Payments, more cost-effective to the, than converting checks at the register, because they can be, scanned, in batches. In addition, many consumers ask questions about the POP process, when clerks hand them back their checks -- extending a process that was, designed to make transactions faster., Mr. Thomas said that Nacha's members rejected another proposal last week, that would have allowed merchants to begin converting checks in their back, office in September, but using the POP code for the payment files. He said, that this would have made it impossible to track which ACH payments, originated at the register and which ones were created in the back office., Rossana Salaris, the senior vice president of The Clearing House who runs, its ACH unit, Electronic Payments Network, said that BOC is similar to ARC, which also occurs behind the scenes, but could be more confusing to, consumers., Many people are now familiar with the ARC process that billers use to, convert their monthly check payments into ACH payments. However, ARC takes, place only within established biller-customer relationships, and with, recurring payments. If a dispute arises, the consumer can easily check the, amount of the bill., But BOC payments can be used for purchases of any amount at a merchant, and if there is a dispute it will be harder to verify the size of the, Who keeps all their, Ms. Salaris asked., Ms. Salaris said that though some merchants may prefer remote capture, over BOC because there is less potential for customer service issues, will win over other corporate customers because it will be less expensive., Richard Crone, the founder of Crone Consulting of San Carlos, Calif., because it allows merchants to, store their checks and send them to the back office to process in a batch
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by Katie Kuehner-Hebertnother abrupt resignation has forced Nara Bancorp Inc. to embark on a, search for its fourth chief executive in three years., The Los Angeles company would not say why Ho Yang, resigned. But, analysts said the timing of the decision was interesting in light of a, Koreatown rival's recent hiring of his predecessor, Benjamin Hong, as its, chief., Nara spokesman Tony Rossi said Thursday that it was Mr. Yang's decision, to step down. Other executives would not discuss it., Mr. Yang provided a memo to management and the board, but he did not, Mr. Rossi said. That was on Wednesday., Mr. Yang was also Nara's president and a member of its board of, directors. The board plans to name an interim president and CEO shortly and, will then look for a permanent successor., Mr. Yang had replaced Mr. Hong as CEO a year ago. Weeks after Mr. Hong's, February 2005 retirement, an independent auditor hired by the board found, company had improperly accounted for a 2002 arrangement in which Mr. Hong, agreed to give up some of his profit-sharing rights in exchange for, reimbursement of country club and car expenses., In March Mr. Hong was asked to give up the board seat he had kept after, retiring., Nara subsequently restated 2002 and 2003 earnings and delayed the release, of its results for 2004 and the first quarter of 2005., Nara's bank subsidiary has been operating under a memorandum of, understanding with the Federal Reserve Bank of San Francisco and the, California Department of Financial Institutions since August. In the, memorandum, the bank promised among other things to strengthen oversight of, management and operations, improve internal controls and its internal-audit, function, and prepare a strategic plan., Analysts guessing at the reasons behind Mr. Yang's quitting mentioned the, fierce competition in Los Angeles' Korean-American banking sector. It may, grow, more intense now that Mr. Hong, has come out of retirement for a second, time to be the CEO of the $513 million-asset Saehan Bancorp., Maybe Mr. Yang thought that this environment is just too competitive, said Scott Carmel, an analyst for, Moors, He may have been worried about customers and, employees leaving Nara to go to Saehan, and it's already been a tough year, Analysts said Mr. Hong, whose hiring as Saehan's chief executive was, announced Feb. 1, is a local legend despite the circumstances of his, departure from Nara's board. He was widely credited with turning Nara into, what some analysts regard as one of the nation's best-performing banks, after, it was near bankruptcy about a decade ago., Before joining Nara, Mr. Hong was the president and CEO of Koreatown's, largest bank, Hanmi Financial Corp., While at Hanmi he endeared himself to the community by helping, small-business customers -- mostly mom-and-pop merchants -- in the wake of, Los Angeles' 1992 race riots., Ben Hong's been a top dog in that community for a long time, so maybe, Mr. Carmel said., Mr. Yang was formerly regional manager of Bank of New York Co. Inc.'s, Korean division. Brett Rabatin of FTN Midwest Securities said Mr. Yang was, relatively new to the Los Angeles market., Mr. Yang and Nara's board may not have seen eye to eye on strategy, Rabatin said. Nara's fourth-quarter income rose 19%, to $7.9 million, loans grew 18%, to $1.45 billon, but the board may have been looking for, even, The boards at Korean-American banks have changed their managers fairly, since, they have a little more skin in the game, board directors at these banks, have, a more vested interest in getting the right people who are very, Mr. Yang is not the first CEO to leave Nara on such short notice. The, company initially found a successor to Mr. Hong in 2003 when it named, Seong-Hoon Hong as its CEO. Seong-Hoon Hong, who had been an executive at, Asiana Bank in Sunnyvale, Calif., which Nara had acquired, quit just a few, months later. That brought Benjamin Hong out of retirement the first time., Lana Chan, an analyst at Bank of Montreal's Harris Nesbitt, said Thursday, in a research note that Mr. Yang's resignation ultimately will work in, will most likely have a difficult, time, finding a replacement given the limited talent in Korean-American banking, may lead to some, Ms. Chan wrote., We believe Mr. Yang's resignation will be a, longer-term positive, as we did not view him as a leader who could sustain
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by Daniel WolfeYodlee Inc. has long offered products that keep track of and move money between accounts at multiple financial companies, but the vendor is pitching its latest software as a tool for creating an entire online banking service., Though the basic concept of account aggregation is not new, Yodlee hopes banks will use its new software, MoneyCenter, to create a unified banking service. The Redwood City, Calif., vendor's OnCenter is used to create an aggregation page as part of a bank's Web site., Consumers are saying, 'Help me go beyond looking at my balances and paying bills online, said Anil Arora, Though many banks offer aggregation services, the Web pages can be hard to find, and the data from accounts at other financial companies, such as an online brokerage, may be limited to balances and the most recent transactions., Mr. Arora said that MoneyCenter, which will go live July 4, will let banks completely revamp their online banking sites to include data from the bank and from other companies on the same screen. As result, it will be easier for customers to see all their holdings, move money back and forth, and view and pay bills., MoneyCenter can display any information that is available online at sites from which Yodlee is permitted to gather data. It can subtract debts from assets to calculate a consumer's net worth, and it can remind people when bills are due., Much like personal financial management software such as Intuit Inc.'s Quicken, or Microsoft Corp.'s Money, the Yodlee software can track spending habits and show people how much they spend overall for various categories, from any account., It also includes a search function for users to find specific transactions., For credit cards, it can include reward balances alongside the spending history., Yodlee says it expects to have MoneyCenter running at two or three banks by yearend, and Mr. Arora said that it will help people keep track of their financial habits., In the banking industry, aggregation has had mixed results. Some companies, such as Wells Fargo & Co. and Citigroup Inc., offered aggregation services for a while but eventually dropped them from their Web sites., Others, like Wachovia Corp., have been more enthusiastic about the technology, but they have also said it is hard to justify the business case for making it easier for customers to send money to other companies., Wells, Citi, and Wachovia are or were Yodlee customers., The only way aggregation can survive is really ... as something integrated into the online banking experience, not as a separate module, said Gwenn Bezard, a research director at Aite Group LLC of Boston., Mr. Bezard said
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by We asked a group of experts what technologies they think will transform, banking five to seven years from now, ERP System Breakthroughs, The chief information officer of Huntington Bancshares Inc. in Columbus, Ohio, predicts that a breakthrough will evolve from enterprise resource, planning systems., If you think of electronic data interchange as the first wave of, business-to-business electronic integration [and] then add all of the, services behind secure online banking portals, the logical next wave in, the value chain will come from integrating online banking features, said Joe Gottron, who is also an, executive vice president., In a nutshell, this will further improve the speed, efficiency, and value, he added., He also predicted the development of more sophisticated predictive models, tools, and solutions for managing and mitigating operational risks -, especially online security risks and customer identity protection., Mr. Gottron said., Experts predict that by 2010 about 90% of Internet users in the developed, economies will be conducting financial activities and transactions online, compared with 40% to 50% right now, he noted., If financial institutions are unable to keep this channel highly secure, Although difficult, to predict, the alternative outcome would be an adoption rate south of, Banks Banding Together, Banks will work together to spot and stop fraud, said Naftali Bennett, chief executive of RSA Security Inc.'s Cyota Inc. in Bedford, Mass., Criminals already target several banking companies at once, because they, know that privacy concerns discourage many banks from sharing information, with competitors., rather than, hiding it, Mr. Bennett said., Cyota offers an ous reporting system called eFraudNetwork, but Mr., Bennett said it works only with Internet-related data. The new fraud, network he envisions would cover all forms of data. (Cyota is not working, Because fraudsters can pool information from various sources and attack, banks on multiple delivery channels at the same time, the industry is, still years away from having all the tools to successfully fight back, Bennett said., Wireless Devices, Steve Williams, a principal at Cornerstone Advisors Inc., a Scottsdale, Ariz., bank consulting firm, predicts that wireless e-commerce devices, will transform the industry., Though Mr. Williams said he's usually skeptical about gadgets, he sees, and predicts their collision could shake, things up. Those forces are:, The rapid growth of electronic payments with debit, microcredit, stored-value transactions, the explosion of wireless computing, popularity of mobile devices, he continued bundling of communications, offerings, and the headlong growth of peer-to-peer technology, such as, Skype for voice over Internet protocol phone calls and the social, Combine these five forces and you might see offerings emerge that bundle, cell phone, Internet, music, and e-payments on one totally hip device, Mr. Williams said., Generation Y would start adopting this technology through word of mouth, As this device becomes popular, financial services loyalty could, shift more to the mobile-device providers than a traditional bank. The, checking and savings accounts become commodity plug-ins to this, A Matter Choices, For First Data Corp.'s Barry McCarthy, the future comes down to choice., We are going to see an increase in consumers' interest in paying for, said Mr. McCarthy, the, senior vice president for product and business development at the, Greenwood Village, Colo., technology vendor., And the driving force behind consumer preferences, according to Mr., McCarthy, will probably be rewards., Right now, consumers have several payment options. But when push comes to, shove, the decision comes down to either paying now (with cash, check, debit) or paying later (with credit)., Reward programs offer more variables, such as earning mileage points with, one card and merchant discounts with another. Mr. McCarthy also expects to, see reward programs become more innovative, as issuers court consumers', Air miles, though they have been very successful, that's, Mr. McCarthy said., Nothing New - Just the Internet, The Internet will continue to upend banking relationships, said Cathy, Allen, the chief executive of BITS, the technology arm of the Financial, Services Roundtable., that will revolutionize the, market the way that the Internet has over the past 10 years, Ms. Allen, It's the business models that will change because of the, Instead of using the Web to look for the highest certificate of deposit, rates or best mortgage terms, by the year 2010 consumers will be starting, In this process, consumers will define the terms of the deal, Ms. Allen, said. For example, they will post the interest rate they are willing to, pay for a loan of a specific amount, provide a link for checking credit, references, and then let bankers start bidding for their business., Privacy policies will also require reexamination in the next few years, Customers don't like it that organizations share, Personally, they're willing to give it, out if they're in control of it, but they don't want other organizations, But the Internet will present new opportunities too, Ms. Allen said, such, to securely hold and vouch for the integrity of, certain documents, such as wills and titles., A Sound and Color Explosion, George Tubin, a senior analyst at MasterCard International's TowerGroup, Inc. in Needham, Mass, said that five years from now online banking sites, will explode with sound and color., Most consumers have broadband Internet access from home or work. That, makes it practical for banking companies to offer audio and video, This will shift the focus of online banking, Mr. Tubin said. Customers, will still be able to check balances and pay bills, but they will also, increasingly turn to their banks for downloadable financial advice, There are people who want to manage their finances seriously, they will use online banking sites for regular financial advice, Mr. Tubin, said., the jazzed-up Web sites, Consumer Control, Consumers will be increasingly assertive about their personal information, in the way they promote products, and services, predicts technology market-watcher Esther Dyson., People will have much more control over the use of their information, said Ms. Dyson, editor of the tech-industry newsletter Release 1.0 and the, chairwoman of EDventure Holdings, a unit of CNET Networks Inc., the San, Francisco new-media company., One reason will be heightened concern about identity theft and data, losses, as well as a growing consumer resentment over the way financial, companies share information about them without their consent., Information sharing is increasingly controversial, and political pressure, is growing for more limits on the practice. Though a federal judge struck, down a California law that imposed tighter restrictions than the Fair, Credit Reporting Act, consumers will increasingly demand the right to, control how companies use information about them, Ms. Dyson said., There is a business payoff for banking companies in not sharing consumer, You spend less time marketing to people who are, (Ms. Dyson is an investor in TrustedID Inc. of Redwood City, Calif., start-up that is developing services enabling consumers to opt out of, credit offers and freeze their credit reports after an identity theft.), The Mobile Telephone, Mitch Christensen, the executive vice president of payment strategies at, Wells Fargo & Co., sees the future of payments in the palm of his hand., Or in his coat pocket, or clipped to his belt, or wherever he happens to, put down his mobile phone., People don't want to carry around cash or checks all the time, but they, Mr. Christensen said., The phone has become something many people never leave home without, why not turn it into a payments mechanism?Mr. Christensen said., He said banks should work with wireless companies to include contactless, payment chips in phones. Using contactless payment cards is already faster, than cash or traditional magnetic-stripe cards, according to Mr., Christensen, and building the chips into phones would eliminate the, time-consuming process of fumbling to retrieve a card from a wallet., Anything that makes people move faster through a line is good, Data Mining, Analytics, David C. Robertson, a partner at the consulting firm Treasury Strategies, Inc. in Chicago, said data mining and decision analytics to sharpen, pricing, develop new products, and enhance cross-selling to corporate, clients, will transform banking technology., Systems of record are already vast repositories of customer behavior, Robertson said. Though the tools exist and are used in the relatively, homogenous retail side of the business, such as credit cards, will be five years before they are widely applied to the more complex, corporate segment., Bankers could use them to systematically study customer preferences for, different services at different prices, refining their sales strategies, Mr. Robertson said. A bank could also use its lockbox records to help a, retailer make cash-flow predictions based on historical seasonal patterns, even factoring in weather forecasts that could affect store sales in, The most attractive target market would be companies in the range of $100, Mr. Robertson said., They're big enough to take advantage of the information, but they may not, Payments Evolution, Before predicting what will happen in the future, George Thomas, executive vice president at Clearing House Payments Co. LLC, wants to be, clear on what it doesn't hold., Whatever happens, personal account number that is used only to receive electronic payments., One of the biggest barriers to electronic payments is the fear of fraud, Mr. Thomas said. But a specialized in-box for e-payments would solve that, problem, can route money to personal e-mail addresses that are impossible to hack., When the vast majority of retailers and business customers have dedicated, payment addresses, electronic payment volume will grow exponentially, Thomas said., Wireless Methods, Accessing account information from mobile devices will be as common and, simple as banking online is today, predicts Gloria Chance, Wachovia, Corp.'s chief e-commerce director., A lot of technology will be moved to the handheld device, Ms. Chance, 'Allow me to use the same technology and, become very demanding, change than software from companies like IBM and Motorola that allows, online banking sessions on mobile phones., are getting used to having a device where they can check messages, resemble the text and voice messages many consumers already receive, said., A More Electronic Era, In response to the Federal Financial Institutions Examination Council's, guidelines that banks use stronger authentication for high-risk online, transactions, the industry will enter a more electronic era, predicts Don, Rhodes, a policy manager specializing in technology at the American, Bankers Association., Many businesses have been slow to adopt digital signatures and documents, digital, and encourage other companies to do so, Mr. Rhodes said., Electronic mortgages provide a good example of how this could work. Simple, human error leads to many incomplete documents that must be corrected, before the mortgages can be securitized., With an electronic mortgage, a borrower still closes as usual, but the, software would not close the loan unless it is complete. This allows the, Mr. Rhodes said., It is already legal to sign contracts with electronic signatures, acceptance has been slow. As businesses move all their purchase orders, time sheets, and other documents online, save millions of, With stronger online authentication, greater, acceptance of electronic records and signatures should become a reality in, Access Control, Authentication, Access-control, authentication, identity-management, and other, fraud-management and security technologies, will transfrom the banking, industry, said Bill Bradway, the group vice president for the banking, practice at Financial Insights Inc., a research firm in Framingham, Mass., Inadequate access control has the potential to disrupt how banks and, No one technology solution, exists today to prepare a bank and its customers for the fact that threats, and exposure scenarios are constantly evolving, from hackers and, The industry must develop an enterprise-level capability that can adjust, to ever-changing requirements and threats with a comprehensive, auditable, capability that spans bank platforms to all customer and business-partner, devices, from cell phones to iPods, Mr. Bradway said., This solution should also be interoperable and apply the appropriate locks, The frustration banks face is that the scope of this requirement demands a, reengineering of how access and security are enabled across many business, processes, Mr. Bradway said., Electronic Payments, Thomas P. Vartanian, a partner in the Washington office of Fried, Frank, Harris, Shriver & Jacobson, said electronic payments will be the most, transformative banking technology., Changes in the banking business evolve over generations and are only, accepted if they lower costs, increase consumer convenience, and inspire, Mr. Vartanian said., Early forms of electronic money did not satisfy this model, because they, were too expensive and consumers did not trust the security features, said., It is likely, therefore, that the technology that will be implemented, between 2010-2012 already exists but simply needs streetwise executives to, blend it over time with the right products and consumer habits, The key for the future of Emerging Technologies will be, their ability to lower operating costs and take advantage of large volumes, For example, wireless and radio-frequency ID technologies will render, financial services seamless and imperceptible, allowing remote electronic, funds transfers for small payments at vending machines and tollbooths -, over the Internet, to download music, videos, games, and other digital, content.
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by Daniel WolfeING Group NV is again testing ways to sell to Americans while they are, fast-forwarding past ING commercials., On Dec. 31 its ING Bank FSB of Wilmington, Del., which runs the, all-Internet ING Direct operation in this country, started using two of the, -- that TiVo Inc. has developed to, solve a marketing puzzle it made tougher., Though several financial companies -- including E-Trade Financial Corp., American Express Co., Visa U.S.A., and Charles Schwab Corp. -- had already, used versions of one or the other, ING was the first to use both in the, current form, TiVo said., is a stationary blurb that floats in the corner of the, screen during a commercial on playback through a TiVo digital recorder., When, the viewer fast-forwards and the action of the commercial goes into, overdrive, the inviting blurb is unchanged., In the ING campaign that began Dec. 31 and ran through Sunday, Open an ING Direct Orange Savings Account and get a, ad is a choice on the main menu from which users program, their TiVo machines. Only one gold-star ad is offered at a time, service, rotates through several companies' ads., Here's $25 from ING Direct to get the ball, Viewers who pushed a remote-control button to choose ING's branded-tag or, the gold-star ad were taken to a screen where they could select from, several, choices. They could ask for ads to watch, learn how to apply for an account, over the Internet (to a special Web site, so the bank could evaluate the, TiVo, campaign), or ask to be mailed marketing materials and applications., Todd Sandler, the head of deposit services at ING Bank, said Friday that, it was too soon to fully gauge the effectiveness of the promotion. One, reason, is that ING is mailing applications this week to people, asked for them through the TiVo service. (It is using special envelopes, that, tell the recipients they requested the mailing.), But Mr. Sandler said the early days of the promotion suggest that, acquiring a customer costs 35% less through the twin TiVo features than, through traditional marketing approaches such as TV ads., An advertiser using the branded-tag ads must send the commercials to TiVo, before they are dubbed and distributed, so TiVo can set its boxes to, recognize, them, Mr. Sandler said., ING advertised through TiVo last March, but using only the gold-star menu, TiVo sells a downloaded program schedule and digital recorders. It also, licenses its technology to manufacturers. It said last fall that it had, more, than 4 million subscribers., TiVo subscribers are the kind of tech-savvy consumers likeliest to use an, all-Internet banking service like ING Direct, Mr. Sandler said. The, challenge, is persuading them to watch the ads., TiVo marketing is unique because people choose to receive it, and can act, immediately if they like what they see., TiVo, of Alviso, Calif., introduced branded tags in July. (Unbranded, tags, which do not mention the company and simply ask people to press a, button for more information, have been available longer. ), E-Trade and American Express, both of New York, ran branded-tag, promotions in August. Visa used gold-star menu ads during the *2004-†2005, football season. Schwab was the first financial company to advertise on, TiVo, it used menu ads and unbranded tags during the 2004 U.S. Open, Ms. Kent, said., A spokeswoman for E-Trade said it plans to use TiVo's branded tags again, sometime this quarter. Spokespeople at Visa, and Schwab did not reply to, inquiries, and Amex did not provide someone to discuss the TiVo ads before, press time., Ms. Kent said financial companies have not been big TiVo advertisers., marketers think viewers, will want to see an extensive pitch for a car or an exciting movie trailer., But financial companies tend to doubt that their commercials will hold the, TiVo is working with banking and brokerage companies to make their ads, more enticing to TiVo users, said,, because half of TiVo households make $100,000 or more., so ING will get a report on which of its ads consumers clicked most often., Robert Passikoff, the president of the New York branding company Brand, Keys Inc., You've just
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by Matthias RiekerOut-of-market dealmaking is becoming more popular., Most bank and thrift purchases so far this year have been in-market, but several of the largest ones have been leaps into new - and, in some cases, far-flung - territories., Though such acquisitions can be easier to negotiate, they are trickier to integrate than in-market ones, dealmakers say., The out-of-market transactions that we have done, certainly, and I would say probably others, have a common characteristic, and that is they are revenue plays, David A. Daberko, the chairman and chief executive of National City Corp., slightly more difficult than an in-market integration, Last month his $140 billion-asset Cleveland company announced two deals within as many weeks to establish a retail banking operation in Florida, one of the country's most desired markets. Nat City said July 11 that it would buy Harbor Florida Bancshares Inc. for $1.1 billion, and on July 27 it agreed to buy Fidelity Bankshares Inc. for $1 billion., Wachovia Corp. announced the largest deal so far this year, a $25.5 billion one for Golden West Financial Corp. of Oakland, Calif., the nation's second-largest thrift company. Though Wachovia picked up 19 branches in California in March when it bought Westcorp Inc. for $3.8 billion, buying Golden West would be a major jump in a market that is as new for the nation's fourth-largest banking company as it is far from the company's Charlotte headquarters., Robert McGee, the chief operating officer of Wachovia's general bank and the co-head of the Golden West integration, outlined a similar rationale for out-of-market deals as Mr. Daberko., The benefits of the Golden West deal are not getting cost out, but taking advantage of synergies that exist between the two companies from a revenue standpoint, Mr. McGee said., Capital One Financial Corp. announced a deal in March to buy North Fork Bancorp Inc. of Melville, N.Y., and it acquired Hibernia Corp. in New Orleans last year., The deals by Capital One, Wachovia, and National City could make geographic expansion the fashion in bank mergers and acquisitions., said Andrew M. Senchak, the president and co-head of corporate finance at Keefe, Bruyette & Woods Inc., Other investment bankers also like the strategy., about the markets bankers enter through M&A, said John Chrin, We get a pop for a couple of years, and they have to continue to defend their market position, so people actually prefer, ironically, to come into markets where they might have a fourth, fifth, That is exactly what Wachovia and National City are doing. Golden West has a deposit share of 4.3% in California, its main market, which it ranks sixth, one notch below Citigroup Inc., Buying Fidelity Bancshares and Harbor Florida would make National City the ninth-largest banking company there, one notch below Colonial BancGroup Inc. of Montgomery, Ala. Harbor Florida ranks 23rd, with a deposit share of 0.6%, and Fidelity is 17th, with 0.9%., Bank of America Corp. has the largest share in both states, 20.8% in California and 20.1% in Florida., Both National City and Wachovia said they intend to expand further in their new markets by building branches., acquiring North Fork, with a 4.8% share. JPMorgan Chase is No. 1 there, with 23.8%., Many observers note that such an expansion can be challenging., said Vikram Gandhi, It's always hard to measure what the revenue synergies are. It's much easier to say, 'Hey, look, I just cut $200 million out, Therefore, shareholders might need more persuading to warm up to such deals, When the synergies are essentially cost synergies, There are operational difficulties. For example, a new market might come with a different local culture., We've got very diverse customer bases in many parts of our footprint, like south Florida and Texas, But it's a whole different level of diversity in California, Operating in different time zones also can make business more challenging., Any time you move into a new time zone, there are operational issues, Mr. McGee said. When Wachovia bought SouthTrust Corp. of Birmingham, Ala., in *2004-, Roger Lister, the chief credit officer of the U.S. financial institutions group at Dominion Bond Rating Service Inc., said the longer hours officials have to spend traveling to meet customers and local management teams, as well as the tax laws of different states, add to operational cost and risk., Far-flung branch networks can cost banking companies in profitability, Others said it does not have to be that way., I would not agree with the premise that it is not as efficient to operate with a broader network, Typically, if you buy, than entering a market by building branches., If you build a whole lot, and that's all you do in a market, then you are making an investment that, in the short term, has diminished profitability but long-term has great profitability, Many observers say pricing is even more important in market expansion than it is when staying in-market., Royal Bank of Scotland Group PLC's Citizens Financial Group Inc. of Providence, R.I. bought Charter One Financial Inc. of Cleveland in 2004 for $10.6 billion. Many observers said that purchase still needs a lot more work to be successful, mainly because the hefty price makes it hard for Citizens to generate good returns., An RBS spokeswoman said the company could not comment because it was in a pre-earnings quiet period., Mr. Daberko is getting a traditional thrift with a secondary market share in one of the country's most competitive markets, Nancy A. Bush, an analyst at NAB Research LLC in Aiken, S.C., According to Mr. Daberko, higher than Ohio deals, and we're comfortable the internal rates of returns we quoted, 13% to 14%, Not only are there less cost synergies, but sellers in attractive markets demand a premium, which can leave the buyer struggling to achieve the growth and profitability that would make the deal worthwhile, said Brian Sterling, the co-head of investment banking at Sandler O'Neill & Partners LP., Acquisitions in a new market also have a pleasant side: A banker does not need to make tough decisions about firing staff or anger customers by closing branches, Mr. Sterling said. Also, out-of-market deals come together easier than an in-market acquisition, Those deals, from a negotiating standpoint, tend to be easier to do, because there is no negotiation with respect to how to resolve overlapping management teams and infrastructure, The buyer wants to keep the management team in place, Mr. Daberko agreed that an out-of-market acquirer can be the buyer of choice., At least in these two cases, and it would carry even less risk when it acquires North Fork, because it would diversify not only its retail banking markets, but also its customer base, since North Fork has focused on professionals and small-business owners., One day before National City said it would buy Harbor Florida, it announced that it would review strategic options for its First Franklin nonprime mortgage lending unit, including a sale. Mr. Senchak said the company would lower its risk profile by selling First Franklin and going into Florida., Some bankers might make out-of-market deals as a matter of necessity, adding a new market might be unavoidable., We really believe that our corporate banking and retail banking offerings are competitive with anybody in the country, It doesn't mean that we are no longer interested in our home market. We absolutely are, and still are interested in expanding primarily by de novo branching and potentially by acquisition in Cincinnati, St. Louis, Mr. McGee said Wachovia also would continue to expand in its current markets., H. Rodgin Cohen, the chairman of New York law firm Sullivan & Cromwell LLP, said who the new customers are matters more to bankers than where they are., A lot of deals are in the markets that are demographically attractive, But some say the need to expand beyond their current markets may be more pressing for others, like Citigroup Inc., which, according to many investment bankers say need to make a deal., They might vehemently disagree, but they need more bricks, even in the New York metropolitan market, where Citi has a 16.5% deposit share, second to JPMorgan Chase's 23.8%, and in California, where it has a 4.9% share., Charles Prince, Citi's chairman and CEO, said in June during a New York conference sponsored by AllianceBernstein Holding LP's Sanford C. Bernstein & Co. LLC, I can't tell you how many times people come up to me and say, 'You need more bank branches. You've got to buy a big bank.' Many of you think of it as a bank-branch issue
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by Bill StonemanBankers have moved in recent years to offer investment customers broader product menus to establish their trustworthiness as unbiased providers of answers to clients' financial needs., like estate and tax planning, according to experts., And at least one survey has found that bankers are much less likely than independent advisers to appear on customers' radar as their primary financial adviser., It will be more challenging for those who rely on their own proprietary investment products, said David Schoffstall, the president and chief executive officer of Fulton Financial Advisors, a unit of the $14.6 billion-asset Fulton Financial Corp. in Lancaster, Portfolio performance is an issue, too., The banking industry's average annual growth rate in client assets was just over 3% from 1995 to *2004-, according to the Belvedere, Calif., financial services industry consulting firm Tiburon Strategic Advisors, compared with 16% for independent advisers. This disparity has promoted the buzz in recent years about open architecture, investment platforms that do not discriminate in favor of proprietary products or services., becoming a trusted adviser requires a lot more than a shift in products, Roame, the managing principal at Tiburon., Mr. Schoffstall said an adviser has plenty of foundation-building to do before worrying about who actually manages a client's money is even worthwhile., It's critically important in establishing a relationship that you understand your client - understand their current situation, their family dynamics, what their goals are, Thomas P. Zidar, the chairman of Wayne Hummer Investments LLC, the wealth management arm of the $9.2 billion-asset Wintrust Financial Corp. in Lake Forest, Ill., The independents have gained share because they're doing the right things, They're nimble. They're quick to react to their clients. They are very responsive, Experts say that banks must view financial advice as much more than investment management, and they had better make sure the people who manage relationships with significant investors bring to the table comprehensive skills in areas like estate planning, tax planning, insurance, and transferring assets to the next generation., In many cases, according to Mr. Roame, that means upgrading the quality of staff members., Wachovia Corp. has taken a team approach to marshaling the expertise. Its program has 52 wealth management teams - staffed with specialists in credit, trusts, insurance, financial planning, and investments - operating across the territory served by the company's retail bank., Anne Doss, the $542 billion-asset Charlotte company's managing executive of wealth management services, said relationship managers are required to hold or at least be working toward a certified financial planner designation, which is conferred by an independent nonprofit organization., They need to be able to have in-depth conversations with their clients about the current situation, It is difficult to determine just how far individual banking companies have moved toward open architecture. Press releases, for example, significantly shifted in what they expect from advisers in the last few years, said George H. Walper Jr., the president of Spectrem Group, a Chicago consulting firm for businesses that supply financial services to wealthy people., In the 1970s, 1980s, and 1990s, many wealthy people tended to give advisers free rein in managing their finances, but that has changed since the Sept. 11 attacks, the bear market that bracketed that date, and the barrage of news about big corporations and financial institutions that have abused investor trust, Individuals now are taking far more responsibility for their assets and their future, Mr. Walper said. They also are looking for more sophisticated and holistic advice, including help with managing nonliquid investments such as real estate and closely held businesses, as well as direction on other financial planning issues, Banks, as an industry, have been very slow to respond to these issues, Mr. Walper said., Large and small banking companies have refashioned their trust departments into wealth management businesses in recent years, offering investment management to trust and nontrust clients. Though most say they offer some level of financial planning advice, it is difficult to charge for generalized advisory services., Bank-owned brokerages tend to serve less affluent customers than wealth management units. They are typically not offering the bank's own asset management services, but they also do not offer advice at all in areas beyond investments., The banking industry manages $5.4 trillion, or 32% of U.S. consumers' investable assets, according to Tiburon, compared with $6.2 trillion, or 36%, at full-service brokerage firms, and $2.1 trillion, or 12%, at independent firms. If the roughly $3 trillion of deposits held by consumers for liquidity purposes are subtracted, banks' share drops to about 15%., In addition, according to Spectrem, affluent people usually do not think of bankers as their main advisers. In a survey last year of 1, 014 people who had more than $500, 000 of investable assets, just 2% of the respondents named trust officers, and 1% named private bankers, as their primary financial advisers., Independent advisers have come on strong, Though it is not clear that they all are in the same business, independent advisers were named by 17% of the affluent investors in the Spectrem survey as their primary financial adviser. Financial planners were named by 14%, and investment managers by 10%., It is no wonder that banking companies are scrambling to position their advice as objective, especially in the selection of investment managers., Citigroup Inc. went so far as to sell its asset management business to Legg Mason Inc. last year, undercutting critics who suggested that the New York banking giant pushed its own investment products harder than those created by third-party managers., Many other banking companies are moving to adopt open architecture platforms. In June Wachovia started offering the Advantage platform, which offers investors access to 117 account managers and mutual funds and 124 state-specific municipal bond managers., Marc Scheuer, the national director of sales and marketing for wealth management at Comerica Inc., for large clients. But the $57 billion-asset Detroit company expects to install a vendor-provided open architecture system this year, Many of those who are moving toward open architecture are continuing to offer their own products, even though they are bringing in some outside management., For example, James P. Dunigan, the chief investment officer at PNC Wealth Management, said its parent, PNC Financial Services Group Inc., has added third-party asset management capabilities steadily during the past five years. Still, the $95 billion-asset Pittsburgh parent company manages more than half of its clients' assets internally, Wintrust manages assets on its own but is considering third-party management as well., Bank wealth management executives generally say that adding outside management to the mix is sufficient to ensure their advice is objective, and that divesting their asset management business, as Citi did, is not necessary. There is no reason to stop offering management in asset classes where the companies are strong, executives say., Spectrem's Mr. Walper agreed but said bankers will have to hold their performance up to comparison with independently produced indexes., And for all the conversation in recent years about proprietary investment products versus open architecture, the distinction may not always matter., Boston Private Bank and Trust Co., which was founded in 1987 to focus on high-net-worth people, began managing money in 1993. It now has $2.3 billion under management, all internally. Walter M. Pressey, the president of its holding company, Boston Private Financial Holdings Inc., said there is still room in the market for traditional internal asset management, even though the trend clearly is toward increased use of outside asset managers - three other banks owned by his company mainly use third-party managers., It just may take thinking a bit differently to position internal management effectively. To begin with, Mr. Pressey said, he does not put as much stock as other bank executives do in searching high and low for the best possible managers, because performance is pretty similar among good managers., With more modest claims about investment returns, Boston Private Bank - as well as the three other banks, four asset management companies, Access to relationship managers who cannot answer tough investment questions is inadequate, Mr. Pressey said. Therefore, who want to look into the eyes of the investment manager and say, 'What are you doing with my account and why? And by the way, Mr. Stoneman is a freelance writer in Albany, N.Y.
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by Barbara A. RehmOn a key strategic question facing bankers today -- whether to bulk up and, move into new businesses, or focus inward and dump peripheral lines --, Wachovia Corp.'s G. Kennedy Thompson is clear., I personally believe that, notwithstanding the spinoffs we have seen, there is great value in the universal bank model for both customers and, Frankly, it's not an, easy, model to execute, but if you can knit disparate businesses together in a, that brings greater value to customers, you will undoubtedly also deliver, Each year a prominent banking chief executive is invited to address the, Federal Reserve Bank of Chicago's Bank Structure Conference, and this year, Mr. Thompson got the nod. The Wachovia chairman, president, and CEO laid, for his audience of 500 bank policy wonks how his Charlotte company is, navigating three big trends: industry consolidation, the aging population, and globalization., Mr. Thompson clearly sees the industry evolving in a way that puts, Wachovia at its heart. Banking's future, as he sees it, handful, of dominant firms surrounded by specialty companies supplying services that, He noted that the five largest U.S. banking companies (including his, which ranks fourth) hold 50% of the industry's assets today, compared with, 16% in 1990., Consolidation continues to make economic sense. Done right, size, With economies of scale, a company, better afford the technology and longer branch hours that customers, Mr. Thompson reiterated what has become a mantra for him since May 7, when his $542 billion-asset company unveiled its $25.5 billion deal for, Golden West Financial Corp., an Oakland, Calif., thrift company built, around, a single product, the option adjustable-rate mortgage., They are combining their best-in-class product and model with a, a prepared speech., The deal has elicited criticism from analysts who cite the risk in Golden, West's signature product, a heavy deal premium, and concerns about, Wachovia's, ability to effectively cross-sell its products to Golden West's customers., Wachovia's shares have fallen roughly 9% since the deal was announced., During a question-and-answer session after his speech, Mr. Thompson, acknowledged some skepticism in building a universal structure., One of the things you give up with the universal bank model is, but the model will, rewarded by investors in the long term., In the endgame, I do think you will see universal banks producing better, he told American Banker in an interview shortly after his, presentation., Homing in on one of the three trends he identified, Mr. Thompson said, Wachovia's success in selling retirement products to aging baby boomers, will, depend on employees' ability to work across organizational lines., That is something we work very hard on at Wachovia, and I count it as, That's what I mean, The universal model also plays a role in the globalization trend Mr., Globalization can only increase as larger banks, continue, seismic change in the, distribution, As a result of the change, Japan and Europe will be supplanted in, China is going to have, more, But don't expect a big international play by Wachovia. It is taking a, We like the position we are in. We, On acquisitions more generally, he noted that Wachovia has done four in, -- targets must be an, Also, they must, have, Bigger is not always better
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by Daniel WolfeRSA Security Inc. has long been considered a major provider of, general-purpose security technology, but until recently it was less of a, force in banking., But its purchase Monday of the banking security software vendor PassMark, Security Inc. of Menlo Park, Calif., brought it one of the financial, industry's best-known authentication software products. PassMark plus Cyota, Inc. of New York, which RSA bought in December, make it of the banking, industry's top security vendors., With the successful integration of Cyota, and our acquisition of, PassMark today, RSA is now the undisputed leader in online banking, said Art Coviello, its president and chief executive, in a, call to analysts Monday., Banks use PassMark's flagship product to assure customers that their Web, site is legitimate, not a fake created to trick people into revealing, personal information. Customers select an image that is later displayed, when, they log in to a bank's site., The software also examines customers' computers when they log in to make, sure they are using a known computer system, those who attempt to log in, from, an unknown system must answer challenge questions to verify their identity., Such software is a form of multifactor authentication -- that is, requires more than just the standard user name and password., One of PassMark's most important customer is Bank of America Corp., top online banking provider, which has implemented the software for all of, its customers., Last year the Federal Financial Institutions Examination Council issued, guidelines last year urging financial companies to implement stronger, online, authentication procedures by the end of this year, and many banks are, evaluating multifactor authentication., Banks that are evaluating such software are looking the hardest at Cyota, and PassMark, according to Aite Group LLC., The Boston research firm polled 21 of the 50 banking companies with the, most checking accounts. Of those that had narrowed their focus to four or, fewer vendors, 79% were evaluating Cyota and 71% PassMark, Aite reported, last, week. (The online banking vendor Corillian Corp. of Hillsboro, Ore., came, at a distant third, at 36%.), RSA said it had paid $44.7 million for PassMark: $9 million in cash and, the rest in RSA stock. It also set aside $2.7 million for employee, retention, and termination costs. For accounting purposes, using its stock price over, the past week, it estimated the deal cost at $48.2 million., On Monday, RSA raised its forecast of its own second-quarter revenue to a, range of $89 million to $94 million, from $88 million to $92 million. It, predicted that PassMark would add $4 million to $5 million of revenue in, remainder of 2006 and $10 million to $15 million in 2007., late Monday, RSA stock was trading at $19.73, up 0.92% from Friday's, close., Mr. Coviello said there is a lot of overlap between the PassMark and, Cyota product lines. For example, much like PassMark's software, Cyota's, eStamp enables people to select an image that banks display when they log, PassMark also has a transaction-monitoring system that can prompt banks, to require additional authentication for high-risk transactions. Cyota's, flagship product, Risk Based Authentication, does the same thing but also, works with Cyota's eFraudNetwork to pool data from other financial, customers, to spot fraud patterns industrywide., The eFraudNetwork captured much of the spotlight during Monday's, conference call. Chris Young, an RSA senior vice president and the general, manager of its Cyota Consumer Solutions unit, having the, to the, network, Bill Harris, PassMark's founder and chairman, was named a member of RSA's, board. He said that Bank of America's online banking site gets 3.5 million, 4 million visitors per day. The Charlotte banking company has said it has, more than 15 million active online banking customers. (It did not define, But Mr. Coviello, Mr. Young, and Mr. Harris were all careful to describe, not a certainty., Gwenn Bezard, a research director at Aite Group, said RSA would likely do, I'm not saying, they won't charge for it, but they could definitely discount the price, said., B of A would probably be interested in joining, Mr. Bezard said. A, spokeswoman for the banking company said it was too early to tell., Mr. Bezard said the deal was less about technology than the power of the, at least on par with, PassMark, probably even superior with the eFraudNetwork, because Bank of America has selected PassMark, a lot of banks that have, Before buying Cyota, RSA's main offering for banking authentication was, passcode tokens, which it has long offered to corporations for internal, security. These devices, which generate a new passcode every minute or so, are considered a very effective form of multifactor authentication, critics have said that they are too expensive to work for online banking, because banks would have to deploy millions of them., RSA's main token customer is E-Trade Financial Corp. of New York, even E-Trade has backed away from the technology. It said in November that, expects to be using something else in a few years., In February, PassMark announced a marketing pact with Vasco Data Security, International of Oakbrook Terrace, Ill., a token provider that competes, with
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by Jody ShennThe Santa Monica, Calif., residential and commercial real estate lender, Fremont General Corp. said its fourth-quarter earnings plunged 40% from a, year earlier, to $54.5 million, or 72 cents a share., Residential mortgage originations climbed 37%, to $9.63 billion, but the, net margin on sales and securitizations of such loans, including hedge, results, fell by more than three-fourths, to 0.29%, Fremont said Thursday., The gross margin, excluding hedge results, fell by more than half, 1.23%., Fremont said it stepped up its securitization activity last quarter, because of the weak secondary market for whole loans, its securitization, volume more than tripled from the third quarter and a year earlier. As a, result, residual interests rose more than tenfold from a year earlier, $170.7 million at yearend., However, Fremont said it included $89 million of those residuals in a net, interest margin securitization this quarter., Using $2 billion of forward sale commitments for the second quarter as a, guide, Fremont said sales margins are improving, as a result of rising, loan coupons and a better secondary market. Gross premiums on those, forward sales are over 2%, but margins will continue to decline this, quarter, the lender said., Shares of Fremont dropped 3.51% Thursday., Fremont, which focuses on nonprime home lending, does business primarily, through its industrial bank, Fremont Investment and Loan.
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by Jody ShennAs Downey Financial Corp. had warned, its decision several months ago to raise starting rates, and hence minimum payments, on option adjustable-rate mortgages made for its portfolio caused assets to fall in the second quarter., Older option ARMs also stung the Newport Beach, Calif., thrift company. For the second consecutive quarter, despite nearly nonexistent chargeoffs, it took a sizable provision for credit losses, partially to gird against an expected spike in delinquencies as the loans hit negative amortization caps and reset to higher payments., Analysts were surprised that Downey did not benefit more from last quarter's rise in secondary-market prices for option ARMs. Also, about 26% of its loan interest income represented negative amortization from such loans, up from 25% in the first quarter and 14% a year earlier., Although we offer other types of adjustable rate loans for [the] portfolio that do not permit negative amortization, there is less consumer demand for these products, therefore, loan originations for [the] portfolio did indeed fall short of loan payoffs, Daniel D. Rosenthal, Downey's president and chief executive, said Wednesday in a press release., continue to closely monitor trends in the residential housing and lending markets, especially the pricing of our competitors, and we will make pricing adjustments as deemed appropriate and necessary, Second-quarter net income fell 23%, to $49.5 million, or $1.77 a share. Downey blamed the decline on a $40 million drop in gains on sales of loans and mortgage securities, caused by lower volumes and margins, a 4.4% rise in general and administrative expenses, a $1.8 million litigation award a year earlier related to a foreclosed property, and the provisioning., Downey's earnings per share missed the average estimate of the two analysts covering it by 3 cents, according to Thomson Financial, but beat one of the analysts' projections., Originations fell by about half from a year earlier, to $2 billion. Total assets rose 5.1% from a year earlier but slipped about 1.9% from the first quarter, to $17.5 billion., The negative amortization included in its loan balances rose by $47 million from the first quarter, to $229 million, or 1.73% of its option ARMs., On the positive side, Downey's net interest income jumped 20% from a year earlier, to $132.3 million, on a 4.3% rise in average interest-earning assets and a better spread. Its average interest spread widened 40 basis points from a year earlier and 10 basis points from the first quarter, to 3.07%. The company credited an increase in no-interest checking accounts in proportion to its investments and prepayment fees covering more deferred loan costs written off as a result of payoffs., Downey also cited slowing California residential real estate markets for its higher provisioning. In the second quarter it set aside $6.7 million, versus $600, 000 a year earlier., Paul Miller, an analyst at Friedman, Billings, Ramsey & Co. Inc., said that Downey's provisioning over the past six months -- it also set aside $8 million in the first quarter -- has exceeded what it did over the previous six years., We'll never criticize a company for putting money away for a rainy day, Mr. Miller said. Downey's mortgage banking revenue fell short of his expectations, but its earnings beat his estimate, mainly because of the interest margin expansion, Frederick Cannon, an analyst with Keefe, Bruyette & Woods Inc., said FirstFed Financial Corp., a Santa Monica, Calif., thrift company with a similar model and reliance on option ARMs, began provisioning aggressively last year. He said that he was surprised by the weakness in Downey's mortgage sales margins
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by Jody ShennAs part of its diversification beyond home lending, Countrywide Financial, Corp. plans to get into derivative trading and write traditional auto, insurance, and it is now brokering commercial policies., The Calabasas, Calif., mortgage giant also plans to expand further in home, warranty, futures trading, and asset management, particularly in, chairman and chief executive Angelo Mozilo, said Wednesday at an investor conference., Also Wednesday, Countrywide took the unusual step of affirming its, full-year profit guidance between quarterly earnings calls., Its capital markets unit is a leading issuer of mortgage securities and, became a primary dealer of Treasury bonds in 2004. It will get into, derivative trading this year, Mr. Mozilo said, because such products, complement its Treasury business., traditional types of derivatives that you see the, In light of recent weather-driven events, it is looking to lower its, insurance lines, and it will add other, lines with lower capital requirements, Mr. Mozilo said., will, also help it retain customers for homeowners insurance, Mr. Mozilo said., (Countrywide already provides lender-placed auto insurance and it has, been underwriting homeowners insurance since 2000 and brokering it for, decades.), Home warranty insurance, expand in, covers the home's major systems, such as heating and plumbing, as well as appliances, while homeowners insurance covers the home itself., In insurance, most consumers seek to purchase multiple products at the, so Countrywide will seek to bundle insurance products, together, Mr. Mozilo said., He also reiterated that his company has stopped writing voluntary, homeowners insurance in Florida., It has also exited the lender-placed flood insurance underwriting, business, and it is reducing other coastal exposures, Other lender-placed homeowners insurance providers tend to price their, insurance at a single level within states, but Countrywide is implementing, risk-based pricing for insurance in catastrophe-prone areas. It has also, nearly doubled the amount of catastrophe reinsurance it has taken out for, itself, to $500 million., Mr. Mozilo said Countrywide has become an agent, not an underwriter, commercial policies. (A spokesman said the agency opened last year.), In asset management, about a year ago it launched the Sunfish Fund, a $250, million private equity fund co-managed with C-Bass LLC, that buys, securitization residuals from Countrywide, which owns about 19% of the, fund. Countrywide also is marketing its first collateralized debt, obligation., (In 1999, the company sold its mutual-fund arm.), Last year Countrywide opened its first Asian capital-markets office, Tokyo. It plans to open one soon in Hong Kong, Mr. Mozilo said., Also Wednesday, Countrywide reaffirmed its full-year earnings forecast of, $3.90 to $4.80 a share. The average analyst estimate calls for earnings of, $4.44 a share, according to Thomson Financial., Mr. Mozilo said the guidance assumes a slightly smaller total residential, mortgage market than what his company had been expecting when it updated, its guidance last month. It now expects an origination market of $2.2, trillion to $2.9 trillion, the top end of the range was lowered by $100, billion., Strange Brew, Trac Financial Group Inc. has signed a letter of intent to acquire 25% of, popular, new, by that name., In a press release Tuesday, Trac Financial calls itself a publicly traded, Huntington Beach, Calif., financial services holding company that provides, mortgage services through a subsidiary, Segway Financial Inc., and joint, ventures with other mortgage companies., to actively pursue acquisition and merger candidates,, not only in the mortgage industry, but also in other consumer-oriented, It is also launching a REIT that will invest in both real estate, and mortgages., The management of Trac believes that it must continue to expand its, CEO James E. Shipley said in the release., Multilingual, Fidelity National Title Group Inc. said its Chicago Title Insurance has, launched consumer Web sites in Chinese, Spanish, and Vietnamese., The sites contain information about real estate, title insurance, escrow procedures., The homebuying process ... involves terms that are not used in everyday, Pablo Wong, Fidelity National Title's senior vice president of, market development, said Tuesday in a press release., Randy Quirk, its chief executive, an important component of the ongoing education and outreach initiatives, that ... [its] multicultural marketing division has under way to increase, Mr. Wong heads that division, which was created this year., Fidelity National Title, the biggest title insurer by market share last, year, is majority owned by Fidelity National Financial Inc., Southern Comfort, The Forked River, N.J., mortgage bank and brokerage American Advantage, Mortgage Co. said its South Carolina division has been selected as the, for the Myrtle Beach homebuilder Nations Homes II LLC., In a press release issued Tuesday, American Advantage called Nations Homes, II one of the top 10 builders in the Coastal Carolinas region., Realty Redux, Cendant Corp. toned down its revenue and earnings forecast Tuesday for the, realty division it plans to spin off, blaming the cooling of the market, for existing homes., The division - whose brands include Century 21, Coldwell Banker, Sotheby's International Realty - is expected to begin trading on the NYSE, July as Realogy Corp., Had it had been spun off Jan. 1, it would report about $7.1 billion of, revenue and about $1 billion of earnings before interest, taxes, depreciation, and amortization for this year, Cendant said. It had, previously estimated the revenue at $7.3 billion to $7.5 billion and the, earnings at $1.09 billion to $1.14 billion., The spinoff is part of a plan to break up Cendant into four companies., Last year's spinoff of the mortgage outsourcer PHH Corp. was not part of, that plan.
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by Jody Shenn and Todd DavenportThe new accounting standard for servicing rights, which the industry, lobbied for, will make it harder to compare companies' results and create, confusion about the assets, says the lone dissenter on the board that, approved the standard., impair, according to a note in the statement issued, last week., The other six members of the Financial Accounting Standards Board voted, to approve the statement. Ms. Schipper disapproved because it gives, servicers, between two methods of accounting for the assets' value over, time, the note said., Today, servicers generally can only recognize the assets at their, original cost (less amortization) or current market value, whichever is, lower, on a quarterly basis., Under the new standard, servicers are still allowed to use that method on, a quarterly basis, but they can choose instead to simply recognize assets, fair value. The fair-value method eliminates the major problem for, companies, that hedge the asset with derivatives that drove the rewrite., Today, without special steps, changes in derivatives' fair values get, recorded in income statements but servicing values are capped at cost, creating the potential for misleading pictures of performance. (If the, derivatives qualify for hedge accounting under FAS 133, the servicing's, value, can exceed the cap - but qualifying takes measuring and proving hedge, effectiveness, which can be costly and difficult.), Ms. Schipper preferred a new standard that called for using only fair, value, inherently, Comparing companies will be difficult because many will choose to use, straight fair-value while others will not. And in Ms. Schipper's view the, standard will add to the confusion by allowing servicers to use different, treatments for different parts of the servicing portfolio., Board members hash out accounting pronouncements at weekly public, meetings, and it's not unusual for them to air opposing views -- though, most, disagreements are ironed out as standards work their way toward completion., Disagreements about fair value tend to be about the pace of implementing, rather than its propriety., The board has made the point in a number of their recent pronouncements, that they see fair value as a more relevant measurement attribute, so it's, not a surprise that one of the board members thinks that ... [FAS 156], said Charles Gilman, an accounting policy adviser, the American Bankers Association., The standard requires new and detailed disclosures, including the listing, of the servicing assets' fair value by all companies, Ms. Schipper, who was a professor at Duke University's Fuqua School of, should be predicated on the nature of, the item being measured and not on management intent (in this case, hedge, Regardless of management's intent in holding, servicing rights, changes in fair values of those rights represent economic, At a conference in New York Tuesday, Eric Sieracki, the chief financial, officer of Countrywide Financial Corp., reiterated it has not announced, whether it will elect to use fair-value accounting., It is widely assumed, however, that Countrywide, the largest mortgage, servicer, will. And Mr. Sieracki did say that fair-value accounting, which, would have allowed it to post $110 million of additional profits last, and eliminate, -- by, continuing to use the old method for some servicing classes -- Countrywide, would gain nothing in either a rising or falling rate environment. But he, gave no firm answer on whether it would do so., Companies must adopt the new standard, which amends FAS 140, in the first, fiscal year that begins after Sept. 15, and in certain cases are permitted, do so earlier., Buy Me, Don't tell New Century Financial Corp. that secondary-market buyers of, subprime loans have gotten too skeptical., in the market - in which buyers are paying more for some, originators' loans than for others' - has resulted in their paying more for, New Century's loans than it thinks it could make by putting them in the, portfolio and securitizing them, Patti M. Dodge, its chief financial, officer,, said at the Piper Jaffray & Co. conference. That is why the Irvine, Calif., real estate investment trust expects to miss its portfolio-growth goal for, New Century has already sold forward most of its production through June, at prices slightly more than 2% above par, said chairman Robert Cole., Mr. Cole and Ms. Dodge said it appears Argent and Ameriquest, units of, longtime New Century rival ACC Capital Holdings, are less worrisome than, they, used to be., In the middle of last year New Century's sales force was easily listing, the ACC units among their three most competitive subprime rivals. Today, that, is no longer true, focus is, after a $325 million settlement with attorneys general and, banking, regulators from 49 states over its lending practices., Quotable ..., If that happens, you're going to have bigger problems. You're going to, be stocking water, bullets, Mr. Sieracki, on the possibility of five straight years of home price, declines.
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by Jody ShennCountrywide Financial Corp. has replaced its second-highest-ranking executive, clarifying who is likely to eventually succeed its co-founder, chairman, and chief executive, Angelo Mozilo., Still unclear is when Mr. Mozilo, who is actively involved in day-to-day operations, plans to leave the executive wings of the nation's top home lender., The Calabasas, Calif., company said Friday that Stanford L. Kurland, its president and chief operating officer and Mr. Mozilo's No. 2 official for well over a decade, will be departing. It did not give a reason or a date., David Sambol, activities and a variety of other areas, will succeed him., Mr. Kurland and Mr. Sambol were both promoted in 2004. Mr. Kurland took over the president job that Mr. Mozilo had long held, and Mr. Sambol succeeded Mr. Kurland as the head of Countrywide's home loan unit after having run production for it., Countrywide did not address the succession issue in its press release Friday, and a spokesman did not return calls by press time., Mr. Mozilo's CEO contract is scheduled to expire at yearend, but he is slated to remain Countrywide's chairman through 2011. People close to him have said recently that he appears in no hurry to scale back his involvement in the company he co-founded in 1969., Robert P. Napoli, a Piper Jaffray & Co. analyst, said that the announcement of Mr. Kurland's departure led him to believe that the board recently decided between Mr. Kurland and Mr. Sambol as a successor. However, Mr. Napoli said that, partly because of his own conversations with people familiar with Mr. Mozilo's thinking, Other observers said that Mr. Sambol's relative youth -- he is about eight years younger than Mr. Kurland -- may also signal that Mr. Mozilo will be staying on longer as CEO., (In *2003-, Mr. Mozilo said he was befuddled by a trend, caused by the separation of the chairman and CEO roles, board leaders. But he has been known to adapt his views to new circumstances.), Countrywide is known for having many longtime executives, Domingo, an executive vice president at Countrywide's bank, who will join Doral at the end of the month. Joe Anderson, the head of Countrywide's retail origination operations, and David Spector, the head of its capital markets unit, also left recently. Thomas K. McLaughlin, who had been its chief financial officer since *2001-, departed last year., Mr. Kurland joined Countrywide in 1979 as its controller. He did not return a message left for him by press time., Mr. Sambol, who joined in *1985-
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