01 September 2004 Product Reviews

 

Top-down technology driving BoNY

Since Tom Renyi became CEO in 1997, Bank of New York has changed from a traditional bank to a global leader in securities servicing. Sherree DeCovny asked him about the IT strategy behind this

Considering Tom Renyi’s high profile in the financial services industry, it is no wonder Bank of New York (BoNY) is a high achiever in technology.

He currently serves on the boards of the New York Stock Exchange, the Public Service Enterprise Group and the New York Clearing House. A member of the Financial Services Roundtable since 1992, he is on its membership committee and chairs its Regulatory Management Committee. He also serves as chairman of the Banking Industry Technology Secretariat (BITS), a sister organisation to the Financial Services Roundtable that focuses on issues related to emerging technology.

Renyi’s career at BoNY spans three decades and has included roles in securities servicing, credit policy, capital markets and domestic and international banking.

According to Renyi, continuous and disciplined investment in world-class technologies and top-notch IT talent lies at the heart of the bank’s IT strategy. In the last three years, the bank spent more than $2 billion, or 15% of its total revenues, on IT. A high percentage of that goes to discretionary projects.

The bank employs a shared infrastructure across the organisation. This allows it to leverage spending across multiple business lines, direct more money into research and development, increase efficiency, deliver value to customers and address their changing needs. “To my mind, that’s the difference between spending on technology and truly investing in technological leadership,” he says.

The bank’s highly experienced and well-equipped IT staff was important in getting BoNY where it is today. Over 4,000 technology professionals — 15% of the workforce — support the bank’s IT strategy worldwide. On average, each has been with the company for more than 15 years.

BoNY’s IT strengths lie in its highly integrated systems and its propensity to innovate. Integrated systems allow the bank to synchronise information flows between its various securities servicing businesses. That means customer data is more accurate, straight-through processing rates are higher, and execution and delivery of transactions and services is faster.

Innovation is a differentiator for the bank because it can rapidly expand its capabilities as customers’ needs evolve. For instance, it claims to have been the first securities servicing bank to offer web-based reporting and instruction capture. It was also the first institution to automate the collateral management process associated with repurchase agreements and to electronically connect to the Federal Reserve Bank’s book-entry system. It was the first US bank with a computer-to-computer connection to Swift.

Despite its strengths, it has encountered several notable challenges, says Renyi. Technology is only now reaching a level of maturity where users can customise applications according to their roles, responsibilities and levels of interest. The bank has made some progress in this area. For instance, the new release of the Inform information portal allows for greater personalisation of delivery to more than 43,000 corporate and institutional users globally.

Another challenge has been managing complex technical engagements in its full-scale outsourcing business. In 1998, BoNY created BNY SmartSource, a dedicated investment manager outsourcing business, for a specific customer. But in doing this it discovered that it requires a different discipline and philosophy than it uses in developing capabilities for itself and the mass market. The outsourcing business has since matured and grown considerably.

In the face of pricing pressures, IT issues that still need to be addressed include finding ways to increase the speed and efficiency of product development to meet individual customer needs on demand. That means the bank has to structure its technology and IT organisation to be more flexible and responsive. With this comes the opportunity to reduce the time to market, open up new revenue streams quickly, and send an important message to the marketplace about the bank’s capacity to continually innovate.

Recently, the bank has aligned its IT development assets more closely with the geographical distribution of its global client base. This sourcing model has worked well because it has enabled the bank to step up the pace of development and improve quality at the same time. The bank plans to continue expanding its global sourcing model.

One of BoNY’s top IT priorities is to enhance the customer-facing layer of technology along similar lines to what it recently did with Inform and NetExchange Pro. A second major IT priority is to continue to bring outsourcing clients onto the BNY SmartSource processing platforms.

“The strategic investment we’ve made in the data hub and warehouse business of Netik is bound to make BNY SmartSource even more attractive to investment managers,” says Renyi. With the Netik InterView Investment Hub product as part of BNY SmartSource, clients can now decouple their reporting and risk management systems, and keep select functions in-house, while outsourcing the rest to BoNY. “That should be a significant advantage for us in the outsourcing market,” he adds.

As chairman of BITS, Renyi is helping to address issues that are critical to the financial services industry, the broader public and the economy. This is being done through programmes focusing on cybersecurity, crisis management coordination, fraud reduction, identity theft, IT outsourcing, operational risk management and payments strategies.

For instance, progress has been made on the Software Security and Patch Management initiative, which was established to find ways to mitigate the risks and costs associated with software vulnerabilities. Microsoft recently agreed to parameters for specialised support for Windows NT and will provide local expertise and assistance to customers. BITS is continuing to work with other major software and hardware vendors in the industry.

Another key initiative at BITS is the newly launched Identity Theft Assistance Center (ITAC). Identity theft is a crime of enormous human and economic consequences. To restore their financial identity, consumers have to navigate a complex process that is frustrating, stressful and takes hours to complete. For companies, identity fraud creates losses that they are forced to offset with higher costs to consumers. The ITAC will help victims of identity theft by streamlining the recovery process and enabling law enforcement to identify and prosecute perpetrators of this crime.

“BITS is an outstanding organisation that aggressively pursues issues that are top of mind for the CEOs of the nation’s largest financial institutions,” says Renyi. “When key issues crop up, BITS works to galvanise the industry and create real solutions in as fast a manner as possible. My goal as BITS chairman is to take full advantage of the intellectual capital and best practices in technology to benefit BITS member companies and our respective customers.”