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Elton Cane

Elton Cane

Elton Cane - writer & tech geek

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Trends in Financial Services

Trends in Financial Services

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The 2007 Finextra Awards

19 December 2007  |  5183 views  |  1
So, it’s late December. The post Christmas party hangovers are becoming increasingly frequent, you’re just about done with the shopping, and the urge to work is waning. In short, it’s a great time of year to announce the inaugural Finextra Awards.

Thankfully there was no shortage of topics to base the awards on – with a wide range of good, bad and outright bizarre news keeping us busy all year.

The Back of the Sofa Award for carelessness with customer data

If we’re going on pure volume of data, the award would have to go to US retailer TJX, which saw hackers steal 45.7 million card numbers.  But as this was stolen rather than lost, the award has to go to the UK’s Revenue and Customers department (HMRC) for  losing 25 million customer records, including financial details, in the post. And this was only weeks after a CD with data on 15,000 Standard Life customers went missing when HMRC sent it to the insurer.

Honourable mentions go to JP Morgan in New York and 11 UK banks and building societies for dumping customer data in easily accessible outdoor bins, and to HBOS, which sent a customer who requested a copy of her bank statement the confidential details of 75,000 other account holders.

The Slim Shady Award for identity theft

Will the real Damian McMeekin please stand up? ANZ's global head of security experienced firsthand the perils of identity theft as our award winner, Australian TV comedian Julian Morrow, stole the stage at the annual Combating Identity Fraud summit in Australia earlier this month. See the video here. As McMeekin is called to give his presentation Morrow beats him to the lectern and starts lecturing the audience on the perils of ID theft. Asked to stand aside for the real McMeekin, Morrow calls him a fraud and asks for his wife's maiden name as proof of ID.

An honorary mention goes to Messiah the cat, who was issued a Visa credit card with a A$4200 limit by the Bank of Queensland.

The Cash for Honours Award for commercially convenient award allocation

As professional cynics, we suggest this award be shared amongst all trade publications with award programmes. While some claim to go down the route of reader votes rather than editorial decision-making in choosing the winners, the selection of categories and winners does seem very “commercially aware”. I’d love to hear about any instances of a company winning an award if they have never advertised with that particular publication and didn’t buy seats for an award dinner.

The most honest approach to industry awards is by far that of the Rebore Magazine 2007 insurance awards

The About Face Award for 180 degree position change

HSBC is the deserving winner of this award. In a testament to social media as a lobbying tool, a National Union of Students online campaign forced the bank into an embarrassing u-turn over its plans to scrap interest-free overdrafts for university leavers.

The Tenuous Link Award for most awkward seasonal tie-in

The prize for the most desperate PR stunt goes to the Merchants Payments Coalition, which gloomily informed us in February that credit card fees add $169 million to the cost of Valentine's Day. We particularly enjoyed this colourful quote from MPC chairman Mallory Duncan: “Visa and MasterCard are plucking a few petals off every rose this Valentine's Day.”

But with European regulators currently looking at the interchange arrangements, the situation could be different come Valentines Day next year.

The Christmas season brings its fair share of tie-ins too. Our favourite so far this year is this release from Zurich Insurance, which describes how they polled convicted burglars for their top ten Christmas robbery targets. Lock up your gadgets!

The Transparency Conundrum Award for mixed messages regarding online social media

This award goes to Canada’s TD Bank, which is certainly not alone among large companies that have banned access to Facebook and other social media sites due to fears over the impact on staff productivity. But it was placed in a conflicted position when it opened a Facebook group and encouraged staff to join it, despite not allowing them to do so from work.

The Fat Finger Award for losses due to failure in people, processes or systems

Morgan Stanley takes this award after one of its traders failed to spot that a system used to create basket trades had a built in a multiplier of 1000, so the trader erroneously created a basket with a value of $10.8 billion instead of $10.8 million. And as they lacked adequate checks within the order routing system, the order was routed to the NYSE floor. Market turmoil resulted and Morgan Stanley was fined $300,000 for the error.

The Paper Tiger Award for financial services regulator issuing the largest fine

This award doesn’t actually go to a dedicated financial services regulator. Instead, the prize has to go to the US Department of Justice, which fined American Express US$65 million for failing on anti-money laundering measures.

The next best efforts were the European Commission, which fined Visa EUR10.2 million for refusing to let Morgan Stanley access its credit card payment network in the UK; and the SEC, which hit Morgan Stanley (yes, them again) with a $7.9m fine to settle 'best execution' charges.

The On the Blink Award for worst service disruption

This award has an element of glass houses and stones about it. As an online business Finextra is very aware of how important it is to have quality suppliers of web hosting infrastructure who can deliver on their guaranteed service levels.

But this year saw a number of glitches within banks and financial infrastructure worth noting. Our award winner is UK automated clearing house Bacs, which suffered a glitch that left 400,000 workers without pay.

Australian banks had a particularly hard time this year with service outages. NAB, Bank of Queensland and CBA all suffered service disruption. But Westpac had the biggest problems, as this detailed account relates (look out for the reported dialogue with the bank’s PR person.)

The Big Spender Award for acquisitions in financial technology

Private equity firm Kohlberg Kravis Roberts (KKR) wins this award with its $26 billion acquisition of First Data. Before, and indeed after, KKR got its deal up and running, First Data’s M&A team was in overdrive. It started the year off by buying Size Technologies, Intelligent Results and Datawire Communication Networks, followed by Polish card processor Polcard, Instant Cash Services, FundsXpress and Brazil's Check Forte. Once the heavily leveraged KKR deal went through, despite the credit crunch troubling the banks who had underwritten the deal, the work of integrating these disparate acquisitions began in earnest – most notably with a big round of layoffs – 1,700 jobs or 6% of the workforce.

The One that Got Away Award for most challenging M&A deal

This award goes to counter-bid specialist Microgen, which failed in its attempt to hi-jack the management buyout of Trace Group, despite offering 24 pence per share more than management buy-out vehicle Tulip Holdings. Microgen has past history in this form of acquisition strategy. In 2005 it muscled in on TietoEnator's bid for financial software house AttentiV with a bigger bid for the business. The Nordic vendor was forced to raise its offer for AttentiV in order to see off Microgen's counter bid.

The Through the Roof Award for biggest share price increase in a listed financial technology firm

Hong Kong Exchanges & Clearing takes this award with a 198% increase in share price value this year (12 month change as of  yesterday’s close) -- leading the pack in the outperforming exchange sector. It saw a tripling of third quarter net profit on the back of increasing market volume and a positive outlook for fund inflows from mainland China.

The Destroyed Value Award for biggest share price fall in a listed financial technology firm.

TRM Corp., the loss-making operator of the United States’ second-largest non-bank ATM network, is the reluctant winner of this prize. it has lost 81% of its share value over the past 12 months, despite reducing its losses in the third quarter. In November it reported a net loss of $4.89 million compared with a $98.9 million loss a year earlier on falling sales.

The Reverse Engineering Award for most innovative use of a payments terminal

Researchers at the University of Cambridge win this award for putting their skills to good use, proving that a so-called tamper resistant Chip and PIN terminal failed to live up to its name. If they can get one to play Tetris, the reasoning goes, they could just as easily turn a terminal into a harvester of card numbers and PINs. There have been no recorded instances of criminals doing this yet, but its good to see the academics testing hardware manufacturers' claims on security.

That concludes our pick of the year’s events. If you were handing out awards this year, what categories and winners would you choose?

TagsRetail bankingWholesale banking

Comments: (1)

Paul Penrose
Paul Penrose - Finextra - London | 20 December, 2007, 09:33 I'd like to book a table for the awards ceremony (NB - payment conditional on our not winning the downtime award).
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