Financial firms face IT inequities

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Some finance firms are making better use of technology than others and it could well give them an advantage over their lagging counterparts, industry leaders warned this week.

While finance companies are generally kept inline with each other by regulators on major issues such as communications and trading technology, smaller aspects of the business not yet examined by law-makers could let better enabled companies use their information management programmes to their financial advantage, speakers at a Getronics symposium said yesterday.

Such companies often trade through intermediaries. If one company is supposed to send bonds, and the other cash to buy the bonds, but one side fails to live up to the deal, then the other side can charge them interest. But knowing when a deal has failed and alerting the other firm is tricky when everything is still done on paper or very basic systems.

"Most people are paper based," Adsatis' senior consultant Jeremy Lucas said of claims departments. "It's lots of people chasing paper around."

"Some organisations use in-built systems or excel spreadsheets or lotus notes, but many just have filing cabinets of paper," said Stuart Clarke, global product manager of software firm Impendium.

And because the amounts are comparatively small, so many firms choose to write-off the money, rather than invest in IT to track it. "One organisation writes off a million pounds a day," said Clarke. "That's probably the extreme, there's not many doing that. But if you look at what they make, even that's not a big piece."

Because most firms are equally inefficient, there's balance in the market which keeps competitive risks down. But once one or two major firms up their game using software and better IT infrastructure, things could change. "The first one to start claiming it back upsets the apple cart," said David Littler, head of application services at services firm Getronics.

"The clever guys in management will work out what's going on and get their house in order," said Lucas, meaning such inefficiencies will no longer be masked.

The trickier firms will be able to use their advantage to make money not only on trades, but on interest claims as well. "The 'haves' will pick on the 'have-nots'... they'll be bullies in the playground," said Lucas.

Once this happens, regulators will have to step in, the speakers said. "Regulators will see the inefficiencies, and they'll want to know what they're up to," said Lucas.

Because of this, he advised financial firms to take up information management systems now, before regulators step in. "Early adopters gain huge benefits," Lucas said. "It's sometimes good to sit back, but not here."

But convincing managers to implement - and pay for - such a change isn't easy, Littler said. "These are not IT projects, these are business programmes of which IT is a key enabler," he said.

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