Harnessing the power of technology

FST chats to David Luzon, CIO of Bank Hapoalim, to discover how technology provides the backbone of this Israeli bank’s expanding operations.

Bank Hapoalim is Israel’s largest lender. Headquartered in Tel Aviv, this financial institution has subsidiaries, branches and representative offices throughout Europe’s major financial hubs as well as in Latin America, the USA, Canada, Turkey, Singapore and Hong Kong. It’s an 87-year-old business that has come a long way since it was first established by the World Zionist Organisation and the national Israeli trade union Histadrut. And in the 21st century banking arena the man charged with overseeing the banks entire global IT infrastructure and technology innovation is the unassuming David Luzon. This softly spoken CIO, who has occupied this role for almost eight years, is a firm believer in technology being the driving factor behind any bank, not just Bank Hapoalim. “In my opinion 70 percent of the power of the bank is in the IT,” he explains. “The other 30 percent is human resources. There are some who will say it is 50/50 but IT is still the major component of the Bank’s strength, because if you close the computers then you cannot achieve anything.”

However, Luzon, who has a BSc in Mathematics and Computer Science from Bar-Ilan University, says that while technology acts as the fulcrum of the business, it will only give you the upper hand on your rivals for the short term. “I believe that the strength of IT gives the organisation high value but new technology or new features can be copied by competitors; it’s just a matter of time. So technology will not give you a dramatic advantage against the opposition, just a short period of advantage. That’s why you have to make sure that you renew your functionality and add more features, and you have to act in a very fast but conservative manner.” Luzon elaborates on this point: “You have to be conservative because we are talking about the banking environment so you need to be flexible, dynamic, and fast but also conservative; it’s a tough job.”

A mouse click
For Bank Hapoalim, which boasts more than two million customers, the Internet is proving to be a huge revenue channel. Almost 45 percent of its business is conducted online, compared to just 10 percent three years ago. Indeed, more transactions are carried out on Bank Hapoalim’s site than the rest of the country’s entire banking system combined. “I think Israel is one of the more advanced countries when it comes to people using the net, and the numbers are increasing dramatically because people are becoming more used to the net.” Bank Hapoalim’s remarkable online growth is due in no small part to it’s intuitive and accessible website. For the third year running the bank’s website has been recognised as the “most outstanding site in the area of online banking” at the WebiAwards 2007. It also scooped the “First Among Sites Award” and came out top in the category of the most accessible site in Israel for disabled persons. Luzon says these achievements were “very impressive”.

Bank Hapaolim, the only institution listed on both the Tel Aviv and London Stock Exchange, describes its website as being built from the customer’s viewpoint – a fact echoed in some of the exclusive applications launched in the past year. These include providing a full guarantee for unauthorised computerised cash withdrawals, trading on European stock markets, the ability to pay bills online with a single click, and the opportunity for customers to receive mail from the bank directly to their mailbox at Hapoalim by the Internet, instead of the postal service. “There are many customers who never enter a branch,” says Luzon. “They do everything over the web. All their payments can be transacted via the net, buying and selling of stocks, deposits and loans, and so on. Maybe if they need cash they go to an ATM. That’s it.”

With all of us choosing to bank from in front of our computers at home or at work, you wonder what effect it has on the branches. Luzon says the web has in fact boosted business. “There were thoughts that the web would reduce the number of customers in branches and that we may have to close some. However, the web is increasing business but not replacing customers at the branches.” Luzon feels that we are still a way off before the web becomes the core channel for his bank. “I think that in the long term the branch will support less and less technical transactions. By that I mean cash withdrawals, the depositing of cheques and so on – these will be done by direct channels. The branch will give you answers, analysis and advice that you cannot get through the direct channels. So you need to know your customer needs and have very, very sophisticated systems that will give you a big advantage over the competition. Customer intimacy and the CRM system is a challenge.”

Access on the move
Of course the next step from the web is access to your bank on your mobile phone, PDA, or other handy device. All of the major banks are focussing heavily on this channel, which has massive potential. Bank Hapoalim is no different. Indeed, this medium is proving extremely popular with its clients. Some 800,000 customers currently access information on their mobile devices, accounting for over one million enquiries a day. It’s an industry-leading alert service, branded ‘Poalim on time’ and launched last year, giving customers greater control over their financial information. . “This service was developed without any modification to the core systems. It is based on a rule base application, analysing the events in the customer accounts and sending an alert to the requested mobile channel. It is proving very, very popular and we have hundreds of thousands of members.”

He continues: “One solution is based on access to the internet with a PDA or any mobile device that has a large-scale display, while the other is where we pop up messages for the customer to tell him or her that their balance has reached a certain level.” The service, which notifies you about the overdraft status of your account, had signed up around 250,000 customers. The bank is sending approximately three million SMS alerts and 109,000 emails each month. Impressive figures indeed.

Seemingly at ease with the line of questioning, Luzon goes on to outline some of the key challenges that he and his technology team faces today. After all, the role of CIO has changed a great deal since Luzon first landed the job. Regulations have become a critical aspect of the business that the IT departments have had to get to grips with, while, technology itself has transformed every bank’s operations and customer offerings. “Yes, regulations are a big issue, especially in regard to the risks surrounding Basel II and Sarbanes-Oxley. Globalisation is another serious issue, both on the commercial and retail side.” He pauses for a moment to gather his thoughts. “One of the main challenges is to satisfy the business requirements of the bank. I don’t see technology as a mission or a target – it’s a tool to achieve the targets of the organisation. To achieve this we have to have a multi-channel platform, which is a major issue. So we have a very, very sophisticated Internet platform and mobile environment. And of course a very, very sophisticated branch system, etc.”

Luzon says managing cross-border systems throws up challenges in itself. “Being responsible for the IT worldwide is very complex since we don’t use the same system in each country. In order to develop the same functionality for all countries, we created a middleware based on standardized DB and a multi lingual and multi-currency application.

Of course, another challenge is staying abreast of new technologies in order to attract and retain customers in this extremely competitive market place. Luzon and his technology team are always alert to this point. “We are always looking for new technologies and new functionalities for the customers.” He gives a couple of examples to illustrate the point: “We are looking into having a system that is able to manage and understand the needs of people in the queues at branches. This puts more knowledge on the process that just dealing with data – this is a very important issue.” He adds: “We are also talking about putting systems in place that give staff a customer profile so that he or she can make a decision based on data, rather than searching around for information in order to make decisions. This too is very important because we are dealing with a CRM environment.” From chatting to Luzon about the business its clear that this is a technology leader with a great deal on his plate. Is it a tough job? “It can be, but the IT strategy is very important – not for the immediate future but for the long-term,” he concludes.

About Bank Hapoalim
Founded in 1921, Bank Hapoalim is a public company listed on the Tel Aviv Stock Exchange. It has 288 full-service branches in Israel and operates through 44 branches, subsidiaries and representative offices, in North and Latin America, Europe, the Far East, Turkey and Australia. The group boasts around 12,000 employees.