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Security Becomes Financial Watchword

Banks and other financial firms are using technology to make sure data doesn't fall into the wrong hands.

InformationWeek 500 - Banking & Financial ServicesThe financial-services industry has been roiled this year by a string of data-security lapses involving tapes lost in transit, losses and theft of payment-card information, phishing attacks, and insider scams. The list of companies that have been stung reads like a Who's Who of the financial-services industry: Ameritrade, Bank of America, Citigroup, City National Bank, Commerce Bancorp, PNC Financial Services, and Wachovia. The data-security problem reached a new level in June when it was disclosed that a security breach at payment processor CardSystems Solutions Inc. had led to the exposure of 40 million card accounts.

Not surprisingly, security tops the list of IT priorities at many financial-services companies. Citigroup has said it would encrypt all tapes bound for transit, while Bank of America improved its tape-tracking procedures and launched a system intended to thwart phishing.


Average portion of 2005 revenue spent on IT

Companies spending more on IT this year than last

Buying directly from foreign suppliers

Centralizing control of IT operations in past 12 months

Bringing outsourced functions in-house in past 12 months

"A day doesn't go by where information security isn't front and center," says Katherine Busser, CIO of the U.S. card division at Capital One Financial Corp.

Banks, insurance companies, and investment firms will spend $362 billion worldwide this year on IT, according to research firm TowerGroup. Information security, which accounts for about 4% of that total, will be upgraded on several fronts, TowerGroup VP Guillermo Kopp says, by using technology such as two-factor authentication, biometrics, and intrusion detection.

Other IT priorities in financial services are profitability management and improving revenue streams using technology, according to research firm Financial Insights. At Vanguard Group, IT priorities are centered on capturing the assets of soon-to-retire baby boomers, who have a predilection for using the Web to check their retirement accounts. Eighty percent of Vanguard's customer interactions occur over the Web.

"We're investing heavily in technology that leverages our virtual presence," CIO Tim Buckley says. The company has invested in customer self-service technologies and has built portals that pitch products aimed at demographic segments, such as college-savings plans for parents. It's also dispensing financial advice over the Web to 401(k) plan participants.

At Capital One, profitability has revolved around diversification. In recent years, the company has expanded into auto and home-equity loans, and--through its recent purchase of Hibernia Corp.--into traditional banking. That's in marked contrast with credit-card rivals Providian Financial Corp. and MBNA Corp., which are being acquired by Washington Mutual Inc. and Bank of America Corp., respectively.

One trick in diversifying is fitting together the IT pieces of the acquired companies. "If you diversify without a plan, you can diversify into chaos," says Gregor Bailar, Capital One's CIO. In the Hibernia acquisition, Capital One is moving some of its deposit operations onto Hibernia's platforms because of that bank's core competencies in that area, he says.

IT is a driver of Capital One's productivity initiative called Future of Work. Under the program, traditional offices and cubicles are replaced by mobile work areas, retreat spaces, and casual work environments. Enabling technologies include wireless phones, broadband access, and voice over IP. The idea, Bailar says, is to "foster collaboration by providing the technological tools and environment needed to work beyond a traditional office setting."


Hardware purchases

IT services or outsourcing

Research and development



Salaries and benefits


Everything else
36% 17% 12%

Data: InformationWeek Research

Illustration By Paul Watson

Continue to the stories:
What's In Capital One's Wallet?,
Melding 60 Projects, 4 Priorities, 1 Company
and Rethinking Processes Pays Off For SLM

Return to the 2005 InformationWeek 500 homepage


* A.G. Edwards & Sons Inc.
* American Century Investments
  American International Group Inc.
  AmSouth Bancorp.
* AXA Financial Inc.
  Bank of America Corp.
  BDO Seidman LLP
  Bear, Stearns Cos. Inc.
* Capital One Financial Corp.
  Charles Schwab & Co.
* CheckFree Corp.
* Chicago Mercantile Exchange Inc.
  CIBC World Markets
  CIT Group Inc.
* CUNA Mutual Group
* Equifax Inc.
  Fair Isaac Corp.
  Fifth Third Bancorp.
  First Horizon National Corp.
  FMR Corp. (Fidelity Investments)
  GATX Corp.
  General Motors Acceptance Corp.
  H&R Block Inc.
  HSBC NA Holdings Inc.
  KPMG International
  Lehman Brothers Inc.
  M&T Bank Corp.
* Mellon Financial Corp.
  National City Mortgage Co.
  Navy Federal Credit Union
* Northern Trust Corp.
  PNC Financial Services Group
* Principal Financial Group
  Prudential Financial Inc.
  Putnam Investments
  RBC Dain Rauscher Inc.
  Regions Financial Corp.end_link
  Reuters Group PLC
* SLM Corp.
  Sovereign Bancorp Inc.
  State Street Corp.
  Suntrust Banks Inc.
  TD Banknorth Inc.
  Total System Services Inc.
  Union Bank of California
  Vanguard Group
  Visa USA Inc.
  Wachovia Corp.
  Washington Mutual Inc.
  Abbott Laboratories

* denotes a top 100 company

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