Strategic Information Management - Lloyds Banking Group - Essay Example

?Introduction Internet has revolutionized every aspect of live including life styles, education, work and collaborative efforts. Likewise, the driving factor is the technology that has pushed forward from back office scenario to the leading edge. Digitals channels came in and introduced new ways to interact with customers and also introduced new online shopping experience. Today, customer do not interact face to face from the sales team or staff, rather they interact with their web browsers. We cannot say that Internet has impacted all aspects of economy; however, it occupies more than one sector. Likewise, the online business that is conducted on the Internet is called as ‘Electronic commerce’ that has proved to be a remarkable achievement. Moreover, a continual research and development by researchers has enabled business organizations to customize their business strategies. Similarly, research and development in the digital marketing sector has enabled financial institutions to deploy fully automated online banking systems that are capable of providing online banking experience to their customers. However, security breaches have also resulted in massive losses for these systems. Studies has shown that organizations have to learn customer preferences along with aligning their marketing strategies with allocated budgets, procedures, skill set and significances (Edelman 2010). As mentioned earlier, these digital channels are now business models that are customized in a way to generate online sales and revenue for the organization. Likewise, by incorporating other small applications such as Short Message Service (SMS), Really Simple Syndication’ (RSS) feed, advertisements on the cell phone are all part of the business model. Furthermore, for enhancing the customer online experience specific to online banking, clarity of text, quality of information, ease of use, privacy policies and reputation of the bank is considered. In order to gain competitive advantage and customer loyalty, Push digital marketing’ strategies are incorporated to gain user attention to spent more time on the website and browse details of associated online banking products and services. Performance Analysis The Lloyds banking group stated its net profit in 2010 was about 2.2bn (Flinders 2011). This profit returned is reported via bank’s cost reduction policy along with the IT strategies incorporation with the Halifax bank of Scotland (HBOS). (Flinders 2011) Moreover, while comparing the loss in 2009 that is around 6.3bn 2010’s profit is remarkable with the support of the above mentioned strategies. In September 2009, Halifax bank of Scotland (HBOS) obtained 12.2bn through government encouragement from the Lloyds TSB. For this reason, mark fisher who is working in the integration of parts of Dutch bank ABM AMRO was selected as a director of IT operations by the Lloyds TSB bank. According to the Lloyds banking group, the progress is being observed shortly after the merger of HBOS and Lloyds TSB banking systems (Flinders 2011). The Lloyds banking group states that “We achieved savings across a wide range of Group activities, including implementing improved processes which are now being used on a harmonized basis across the Group, and driving savings in property and procurement." (Flinders 2011) Furthermore, the Lloyds banking group affirms that around 1.4bn was estimated to be saved by reducing replication. The implementation of new systems that will help in better integration initiates in 2011 as said by the bank “"As part of the integration, we have also commence the implementation of a number of major systems changes, which will complete in 2011." (Flinders 2011) In 2010, the HBOS spend approximately around 2.7bn on IT integration systems. In comparison with the previous year the IT expenses were reduced by 4% that includes staff cuts, thousands of IT and back office jobs (Flinders 2011). Unfortunately, 26,000 total reductions were detected ever since the possession of HBOS. Therefore, in 2009 the unions unite blamed the Lloyds banking group with the charge of “death by a thousand cut” policy (Flinders 2011). The Lloyds TSB has accomplished the implementation of new software’s that can maintain all the procedures as, well as the business connections as mentioned by the bank. Fig 1.1, 1.2 and 1.3 illustrates the balance sheets and consolidated income statement for Lloyds TSB respectively. Figure 1.1 images retrieved from (, Lloyds Banking Group plc - Company Results - Lloyds TSB Bank plc ). Figure 1.2 images retrieved from (, Lloyds Banking Group plc - Company Results - Lloyds TSB Bank plc ). Figure 1.3 images retrieved from (, Lloyds Banking Group plc - Company Results - Lloyds TSB Bank plc ). In 2010, the group has suffered a loss before the implementation of taxes of 1,531 million (, Lloyds Banking Group plc - Company Results - Lloyds TSB Bank plc.). The profit for this year is estimated about 725million (, Lloyds Banking Group plc - Company Results - Lloyds TSB Bank plc.). The other charges such as, protection insurances and groups long-term funding plans has increased the budget up to 3,200millions. In fact, the additional trading expenses are lowered for about 46% or in other words it is approximately 5,598milions. The net interest on the income is improved by the 170millions from 12,686 million to 12,856millions (, Lloyds Banking Group plc - Company Results - Lloyds TSB Bank plc.). The investment company equalizes the credit income statement by lowering the margins, improved funding cost and by issuing subordinated debt securities. Furthermore, in 2010 another decrease in the income is measured i.e. from 31,768 million to 15,739 million (, Lloyds Banking Group plc - Company Results - Lloyds TSB Bank plc.). This shows the decline of about 16,029 million in income due to the decreased in the income regarding the Group’s insurance business. Therefore, this result shows a remarkable effect on the assets of policy holders (, Lloyds Banking Group plc - Company Results - Lloyds TSB Bank plc.). Moreover, the Groups banking operations for the total trading surplus can be reduced considerably thus resulting in the inauspicious market conditions. For this reason, the Group has to pay the charge of 718millions in order to adjust the net credit and debit values (, Lloyds Banking Group plc - Company Results - Lloyds TSB Bank plc ). The trading income is equalizes via liability management that supports the company to achieve net profit of 2,682 million annually. Furthermore, an increment of 599 million is achieved through the debt securities exchange and on the other hand 2,083 million gain via purchase of senior debt subsidiaries of Lloyds Banking Group plc (, Lloyds Banking Group plc - Company Results - Lloyds TSB Bank plc ). In 2010, the decline is deliberated in the insurance business therefore total trading income is decreased from 19,088 million to 6,041 million in the recent year (, Lloyds Banking Group plc - Company Results - Lloyds TSB Bank plc ). This also delineates the worst market conditions. While comparing the net in service operating expenses from the previous year there is an increased in the expenses from 13,236 million in 2010 to 16,022 million in 2011 (, Lloyds Banking Group plc - Company Results - Lloyds TSB Bank plc ). This boost replicates the payment protection insurance procedures i.e. 3,200 million charge and gain of around 910 million for the retirement funds in 2010 (, Lloyds Banking Group plc - Company Results - Lloyds TSB Bank plc.). The Lloyds TSB in combination with the HBOS business reduces all the operating expenditures. In fact, in 2010 a condition was made of around 500 million for the clients that are punctual in their payments but in 2011 an expense of only 175 million is setup for the German insurance business proceedings (, Lloyds Banking Group plc - Company Results - Lloyds TSB Bank plc.). The destruction losses are also lowered from 10,952 million in 2010 to 8,094 million in the recent year that shows an estimate of around 2,858 million reductions. The net assets that are examined at 31 December 2010 were 988,399 million, 20,366 million or 2%. This turn down reveals the ongoing disposal of the assets from the Group’s risk appetite, customer deleveraging and de-risking and subdued demand in lending markets. (, Lloyds Banking Group plc - Company Results - Lloyds TSB Bank plc ) The increment in the clients deposits in 2010 are also amplified by 2% i.e. from 416,276 million to 424,377 million. This improves the development in the significant tax free ISA balances, retail savings balances and also this will increase the value of debt subordinates subsidiaries of the Lloyds Banking Group plc due to the reduction of 12,296 million (, Lloyds Banking Group plc - Company Results - Lloyds TSB Bank plc ). The subordinates matter was greatly in charge of all the increase in subordinated liabilities. The liabilities are increased from 29,609 million to 37,330 million as observed in December 2010 (, Lloyds Banking Group plc - Company Results - Lloyds TSB Bank plc ). At 31, December 2010 the shareholders equity is raised by 3,708million i.e. from 46,891 million to 50,599 million. Throughout this year financial assets, capital donation and cash flow hedges were achieved. The donation of 2,340 million is obtained from the Llyods Banking Groups plc that equalizes the loss for this year (, Lloyds Banking Group plc - Company Results - Lloyds TSB Bank plc ). In 2011, the Groups net capital was increased to the rank 1 capital ratio of about 14.3%. On the contrary, it was only 12.2% at December 31, 2010 (, Lloyds Banking Group plc - Company Results - Lloyds TSB Bank plc ). The net capital also increased from 14.1% to 14.8% from the previous year. However, reduction of 54,031 million or 13% from 406,372 million to 352,341 million in the risk-weighted assets takes place throughout the year 2010 (, Lloyds Banking Group plc - Company Results - Lloyds TSB Bank plc ). Positive Factors Lloyds TSB purchased software that turns out to efficient, as it cuts debit fraud costs to half. The Information technology is contributing significantly for Lloyds TSB, as card frauds are been minimized and consequently, saving millions for Lloyds TSB (Huber 2004). The software continuously monitors card frauds and saved a significant ?20m approx. in the year 2003 (Huber 2004). A report published by Apacs (Payment Clearing Association) demonstrated a massive fall in terms of credit card frauds since the last eight years. Likewise, to address issues associated with frauds, Lloyds TSB utilizes fraud detection and monitoring software that monitor’s transactions and update data mining software that will develop a profile related to card criminals. The name of the software is Falcon and it works as an anomaly detector for all card transactions and is linked with Lloyds TSB card authorization system for monitoring approx. 400,000 credit card transactions on real time and on daily basis (Huber 2004). Moreover, another product from SPSS is purchased for analyzing frauds pertaining different characteristics of fraud types (Huber 2004). In the trial that lasts five months revealed the results that nobody among the 23,500 clients had utilized the key-ring sized devices. The fraud case was stated by the web banking accounts. Moreover, the 70% of the customers that are the part of this trial mentioned the Access Code Devices are of excellent or good quality. The director of internet banking at Lloyds TSB banking Group, Mathew Timms states that (Nash, Thomas 2006) “the response from the customers has been fantastic and the fact that nobody taking part in the trial has had any fraud on their account since using this device is testament to technology being the way forward”. The device engenders an exclusive one-time pass code that is confirmed by the bank’s software and security systems from the Cryptomathic (Nash, Thomas 2006). In addition, the device also offers an extra security together with the user IDs and passwords thus providing additional security to the customers. The Lloyds TSB banking Group decided to implement this technology in October from the previous year but uncertainties regarding the internet criminals attacking the customers hence stealing financial information as, well as personal data. The research conducted by the Forrester reveals that this fear related to the internet crimes has stopped up around 600,000 UK customers from online banking (Nash, Thomas 2006). However, debate still survive that can be removed with the help of two-factor authentication technology in the banking industry. The industry body Apacs functioning on the payment card reader in order to authenticate the online banking and e-commerce communications on the other hand Lloyds TSB and HSBC are trying to test the number-generating key-ring devices (Nash, Thomas 2006). The strategies has been publicized by the Alliance and Leicester in order to make available the two-factor authentication technology to the 1million customers that utilizes internet banking facilities but the procedures are not been exposed yet (Nash, Thomas 2006). Challenges The requirement for securing personal data and privacy online is due to many reasons. The first reason incorporates not a single law of how to handle customer data. For instance, if an online company sells products and maintains databases including customer information, they can do whatever they want. Most probably, they can sell data in terms of cash. Every website has a link stated as ‘Website Privacy Policy’, but no one knows exactly, to what extent they are authentic. The practical approach to that privacy policy is a different story. The second most prominent reasons are hacking, viruses, Trojans, spywares, phishing and many more. All these threats are designed to gain administrative access to user systems and to steal confidential and personal information. Likewise, organizations are bound to incorporate strict security procedures and compliance for databases that are incorporated with customer data. Moreover, incorporation of intrusion detection systems and expensive security devices are not new. Customers provide information online due to many reasons, but most importantly, they provide information mostly on the website. The personal data of the customers is violated thus resulting in the revelation of the thousands of personal and financial data of the customers. The cyber criminals use internet as a carrier that helps them to pull out all the personal information. The criminals use intelligent codes that attack the web server thus providing confidential information of the customers. Moreover, database contains all the information that is provided by the online customers and it is connected with the web servers. Several methods are arranged by the hackers and cyber criminals in order to extract all the personal information of the users. In 2009 a data breach report from Verizon business investigates that hackers nabbed around 285 million records resulting in huge losses. In addition, report includes IP addresses that are used in any theft or criminal offenses. These investigations are supported by the law enforcement agencies, FBI and Scotland Yard. According to the Peter Tippett, the author of the report and the vice president of innovation and technology with Verizon Business that there are 90 security breaches out of which 68 breaches were reversed to a particular IP address and location for more investigation. The conclusions highlighted Eastern Europe as a common source followed by East Asia and North America (Larkin 2009). According to the privacy policy implemented by an e-commerce online bank is that there are no clauses present that controls the security breach or disclosure of customer’s information to the third party websites. However, there are some points that describe the disclosure of customer’s private information. The policy states that it is compulsory: To assure if the user pledges the proclamations of the law or conform to legal processes that are assisted on an e-commerce platform To preserve or guard property rights for e-commerce users To notify about the individuals involved in violation of laws, or rights of third parties. Also, teamwork with the investigation agencies for restricting unlawful activities and individuals who break or violate law is also an obligation. While collecting particular data from the database “Cookies” play a vital role. In fact, they are the tiny text files that are stored in user’s hard disk and provide data to the web server. In addition, this data that is stored in the hard drive of the customer is then transferred into the user’s PC from the web server. Cookies assist the title-holder of the websites to support personalized features. For example, the login credentials are stored via Cookies in order to re-use them when needed. Moreover, this feature can be enabled or disabled as the customer desires. The website has the authority to transfer customer’s information to the third party and the website is not responsible for any theft. In addition, customers are responsible for providing their personal information to the advertised links because the website is not responsible for any theft. However, several methods are introduced to control personal information breaches. Recommendations A solution was proposed by the “Trust worthy web services provisioning for differentiated customer service” (Xiong, Perros 2008; 2008). Therefore, same research is conducted in the year 2010 illustrating the issues, framework including web service negotiation via negotiation message and a negotiation protocol among both the parties. (State machine based formalism) delineates as the high-level support of data flow and security in web services. The technology stands on “Semantic Web”. The Semantic Web is enriched with information that is machine-process able semantics, as it enabled the utilization of the Web to its full potential. Moreover, the automated services are also combined with machine readable information referred as Semantic web. A research is conducted in order to launch a platform that allows strict security compliance for the user’s privacy and security. For this reason, security seals are invented. In fact, significant rules and policies are found in some of the seals. Initially, seals are invented by the “Truste” on e-commerce websites. Moreover, in July 1996 a pilot program was launched in collaboration with the electronic frontier foundation and commerce net consortium. The websites that are incorporated via “Trustes” must include the following points in their privacy policy (Moores, Dhillon 2003) What type of Personal Information is stored from the website What are the ways for processing the personal information What are the ways to collect information via web technologies? For instance, use of cookies or forms filled by users online. Are third parties involved in the processing and storage of personal information? What are the security controls that are implemented on the physical level, technical level and hardware level on information systems that are associated or linked with processing personal information? Likewise, in September 1997 ‘Web Trust’ is launched by the American Institute of Certified Public Accountants (AICPA). In addition, a latest version 3.0 was launched in November 2000. The requirements are (Moores, Dhillon 2003): For gaining a seal of web trust, a website will be inspected by the ‘Licensed Chartered Public Accountants’ (CPA) for ensuring compliance on factors including security, business practices followed, integrity of transactions, confidentiality, availability and non-disclaimer. Privacy practices must be visible on the organization’s website for ensuring trustworthiness and customer satisfaction of personal information protection. Customers must also have the freedom to interact with their privacy data at certain levels of data collection process. The methods for deploying encryption techniques, disaster recovery, If the website is entitled for security principles of ‘WebTrust’, encryption methods and techniques, disaster recovery planning and processes are essential. In 1998 BBB online was founded and launched in March 1999 via Better Business Bureau (BBB). It contains two seals first one is reliability seal and privacy seal. The reliability seal do not physically present and operates online only. On the contrary, the privacy seal supports privacy statements and issues related to the customer (Moores, Dhillon 2003). If the website wants to apply any one of the two seals of BBB online on their website they should (Moores, Dhillon 2003): Instant and efficient customer complaint resolution function A simple and easy to read privacy policy statement must be published on the website For online transaction processing, annual review or audit is required The bank must meet the criteria for assuring compliance with security seals and implement them on the online baking web portals, as these security seals provide an acceptable level of customer satisfaction to conduct online transactions. Accordingly, these processes must be added to the IT and business strategy for ensuring user accepted and secure online e-commerce services. Bibliography EDELMAN, D.C., 2010. Gaining an edge through digital marketing. McKinsey Quarterly, (3), pp. 129-134. FLINDERS, K., 2011. Untitled. Computer Weekly, (9), pp. 44-44. HUBER, N., 2004. Lloyds TSB saves ?20m by using monitoring softwareto cut fraud. Computer Weekly, , pp. 5-5. , Lloyds Banking Group plc - Company Results - Lloyds TSB Bank plc . Available: http://www.lloydsbankinggroup.com/investors/financial_performance/company_results_ltsb.asp [7/22/2012, 2012]. LARKIN, E., 2009. Organized Crime Moves Into Data Theft. PC World, 27(7), pp. 33-34. MOORES, T.T. and DHILLON, G., 2003. Do Privacy Seals in E-Commerce Really Work? Communications of the ACM, 46(12), pp. 265-271. NASH, E. and THOMAS, D., 2006. Lloyds TSB trial cuts out fraud for its online banking users. Computing (13612972), , pp. 10-10. XIONG, K. and PERROS, H., 2008; 2008. Trustworthy Web services provisioning for differentiated customer services Telecommunication Systems, 39(3-4), pp. 171 185. Read More