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By Julian Goldsmith, 17 December 2007 11:54

NEWS

As the year draws to a close, the UK's financial organisations are struggling to fend off economic downturn. This is after a major regulatory reform has been accomplished and plastic cards make more in-roads into cash payments.

Whether or not the sector would be able to become compliant with the Markets in Financial Instruments Directive (MiFID) by the 1 November deadline was uppermost in many silicon.com readers' minds. That is, when they weren't pondering over the death of cash.

Other issues that dominated the channel were an IT skills shortage within the financial services (FS) sector, offshoring and faster payments - or the lack of it.

The top 10 financial services stories of the year:

1. Skills Survey 2007: Banks hardest hit by staff crisis

Half the readers responding to silicon.com's Skills Survey from the FS sector said they had roles they were unable to fill, mainly because of a shortage of applicants with the necessary programming skills. Demand was weighted by the need to comply with directives such as MiFID and Basel II.

However, the research showed a strong dislike of bringing in IT professionals from overseas to fill the gap. IT heads prefer to use contractors in the short-term, while existing professionals can be trained up.

Hosting applications was also unpopular, although outsourcing IT got a thumbs up from two-thirds of respondents.

2. The cashless revolution is coming…

Research house Gartner gazed into its crystal ball and saw a lot less cash being passed around in the future. Principal analyst Alistair Newton predicted the proliferation of consumer technology and the globalisation of money markets.

He cited the London Transport Oyster card as a way that paying for things with cash will increasingly be charged at a premium. So, what will referees flip at the start of football games? They'll have to resort to scissors, paper, stone.

3. 'Tap and go' plastic arrives in London

Gartner's forebodings for cash were made real with a number of commitments from credit card companies to introduce small-payments contactless chip cards. Mastercard launched such a card in September.

A number of retail outlets and high street banks within the east end of London have agreed to participate in the venture.

Apacs estimates five million contactless payment cards to be in circulation by the end of next year.

4. Faster bank transfers delayed to next year

The thing about cash is that it changes hands instantly, while other forms of payment can take a bit longer. The Faster Payments system was designed to make transactions near real-time. Slated for introduction in November 2007, it emerged that the system wasn't quite ready and could take until May next year to finish testing.

The Office of Fair Trading expressed disappointment that the 13 financial organisations, which include most of the biggest high street banks, couldn't get their act together in time.

5. London hottest for online card fraud

Research found London was the hottest spot in the UK for distance purchase (or card-not-present) card fraud.

The SE18 postcode (The environs of Woolwich, close to Shooter's Hill - a notorious haunt for highwaymen in the past) was identified as having the worst record for fraudulent transactions originating in the area.

The report sponsors, Early Warning predicted card-not-present fraud would hit £200m in 2007. Bristol, Coventry and Manchester were also among the top five cities to originate card-not-present fraud.

6. Online banking fraud plummets

While fraud on UK issued cash cards rose by 26 per cent in the first six months of 2007, Apacs estimated online banking fraud in the UK fell from £22.4m in the first six months of 2006, to just £7.5m in the same period this year.

Apacs said the reduction was because of banks putting in technology to detect fraudulent activity.

7. MiFID - Will the banks be ready in time?

This is one of many stories this year on the adoption of the MiFID, which is an effort to standardise the way transactions are recorded, so that banks can work easily across national borders.

There was much speculation that many organisations would not be compliant with the directive at its 1 November launch. So far there have not been any notable laggards.

8. Is cash costing you three days per year?

More jibes at poor old cash again. Visa Europe did a time-and-motion study and announced in October that, on average, people in the UK waste up to three days a year waiting at ATMs and fishing around for change at shop counters.

What is needed is a low value contactless payment card, said Visa, which was lucky because it has recently launched one to solve that very problem.

9. RBS, NatWest customers get to go mobile

In August, RBS Group launched a mobile banking service to customers. Essentially, customers will be offered the same services they can get over the internet.

Mobile banking took off in a small way this year but pundits predict 2008 will be the year when it really gets going. Expect more stories about this issue soon.

10. Lloyds TSB offshores IT jobs

Lloyds TSB shipped off 210 permanent and contractor roles to other countries. Existing employees affected were offered voluntary redundancy or a different role within the group and a £2,000 training bond. TCS, Cognizant and Wipro are the lucky beneficiaries of the move.

Lloyds TSB got the nod from the National Outsourcing Association for the way it handled the upheaval to its staff.