B.A.Sc. Thesis Abstracts - Year 2008

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Mobile Device-Enabled Payments and their Effect on Financial Institutions

Bofei Cao, Engineering Science

Payments enabled by mobile devices are often seen as the next breakthrough in payment technology. In general, mobile payments can be categorized as either proximity or remote mobile payments, based on the channel through which payment is enabled.

Proximity mobile payments enable payment at a point-of-sale environment via a Near Field Communication (NFC) capability. This capability emulates RFID chips, and allows the mobile device to act as an instrument of payment in existing or expanding RFID-enabled contactless payment systems. Since NFC is not currently a ubiquitous feature on all mobile devices, implementation of a proximity mobile payment infrastructure will require partnerships with both handset makers and distributors.

Remote mobile payments enable payment other than those that are face-to-face. Payments can be submitted to a merchant or another person via the mobile device’s over-the-air (OTA) capabilities such as voice, Short Messaging Service or Wireless Application Protocol. These features are currently ubiquitous across handsets and mobile networks; thus, no action is required from device makers to enable remote payment infrastructures. However, most remote mobile payments are currently handled by specialized payment managers that exclude financial institutions from the value chain.

In both categories, mobile payment is a clear opportunity for financial institutions, among other players. However, significant obstacles need to be overcome before a mobile payment infrastructure can be built to generate value for all involved parties.

Innovation in Banking

Alvin Chick and Niki Kwow, Mechanical and Industrial Engineering

A large management consulting firm recently conducted a study for our client, a large Canadian financial services institution, that we will refer to as ‘the Bank’. The study reviewed nine elements of organizational performance; innovation was found to be the area with the most potential for improvement. Twelve practices that are commonly found in innovative environments were defined.

Subsequently, the Bank is motivated to explore how external companies develop an innovative culture, what best practices or frameworks are used to cultivate innovation within a company, and if innovation leads to improved financial results and performance. The authors answer these questions by analyzing the results of an extensive literature review and mapping strategies used by other leading companies to address each of the twelve innovation practices as described by the internal study.

The link between innovation and performance is established based on a systematic framework presented in the literature. Given the appropriate adoption of external strategies in the Bank's management operations, and a review of the Bank's innovation strategy with respect to market orientation, the authors believe that the Bank will be able to improve its existing innovative culture, and bring about superior performance.

The Utilisation and Implementation of Social Computing Technologies for Business Brand Management Strategies 

Norman Goh, Engineering Science

The recent ubiquity of user-driven, online services like Facebook and YouTube, have drawn cautious business interest in a group of online social computing technologies termed "Web 2.0". These new technologies, particularly social media, social networking services, wikis and folksonomies, have the potential to improve the value of a business brand by establishing closer relations and open dialogue with customers. The same technologies, if left unchecked, can cause brand erosion. Businesses are uncertain about how to effectively implement and utilise these technologies. This paper surveys the technical and social mechanisms behind a number of the leading social computing technologies. From this survey, several business models for integrating social computing closely with existing business organisations are proposed. Finally, cases in political campaigns and the financial services industry are reviewed as proof-of-concept and a recommended framework was developed.

Tacit Knowledge Management In A Canadian Financial Institution

Frankie Le and Jeffrey Tso, Mechanical and Industrial Engineering

The purpose of this thesis is to devise a knowledge management strategy for a large Canadian financial institution (henceforth referred to as “The Bank”). As the Project Management Governance Group (PMGG) plays a vital rule in project management in the Bank, this thesis provides a strategic vision to help align the group with its goals.

After providing an overview of the scope of The Bank’s current problem and a general discussion of aspects of knowledge management, this thesis identifies a model that can facilitate the sharing of tacit knowledge within The Bank. The model focuses on three main aspects: organizational structure/culture, technology and incentives. These aspects are explicitly examined through literature research and interviews conducted with project managers at the Bank.

Recommendations are based on the analysis performed on our findings. In addition, we review a case study on knowledge management in Malaysian Banks to examine the best practices in knowledge management.

The Effect On User Behaviour Of Eliminating Liability In Payment Instruments

Yun C. Liang, Chemical Engineering

We hypothesize that reducing consumer liability from fraudulent debit transactions will encourage debit card usage and increase debit transaction volume. This thesis investigates this hypothesis by analyzing the impact of Zero Liability on historical credit and debit transaction volume in Canada and the United States.

Trends observed in historical data published by the Bank for International Settlements suggest that debit transaction volume is most affected by average income and expenditure, which are governed by the employment rate, consumer price index and bank rate in the large scale. Reducing liability from fraudulent transactions increases consumer confidence and encourages card use in card-not-present payments, but its impact on the overall debit transaction volume is temporary and insignificant. Substantial long-term growth in national debit transaction volume should not be expected. However, enhanced Zero Liability is a reliable product for customers with less financial risk tolerance. It is recommended that this product be introduced.

Social Computing Within the Organization

Edward On, Civil Engineering

With the introduction of social computing applications into the mainstream internet, millions of users have joined social network sites like Facebook, MySpace, Second Life etc., and have integrated tools like really simple syndication (RSS), blogs and Wikipedia into their daily lives. Is it possible to harness these powerful new technologies to encourage and facilitate smoother collaboration amongst workers? How do we implement them?
The goals of implementing social computing applications are to:

  • allow people to find and engage each other and enable groups to collaborate or contribute to projects
  • increase effective internal communications and productivity and provide easy access to information generated

We recommend that elements of social networks, wikis, blogs, really simple syndication (RSS) feeds, podcasting, instant messaging and video sharing be introduced and integrated into the intranet of the Bank. A sample integration demonstrates these concepts.
The implementation of these technologies should account for factors such as the different attitudes of workers of different generations towards new technologies as well as lessons learned from the Bank’s Corporate Human Resources department from previous successful implementations.

Vertical and Horizontal Data Mining Study on Commercial Banking Client Profiles

Banurekha Raghuraman and Stephanie Robinson, Mechanical and Industrial Engineering

The purpose of this thesis is to examine the characteristics for the average Commercial Banking client and the average client in each of the nine banking segments. The analysis includes the averages of general, product and service characteristics. These include client tenure, risk ratings; product balances, terms lengths and amortization periods; information about securities, monitoring, reporting and service request documents. Mann-Whitney U tests are performed for the product and service distributions among segments and between each segment and the overall average client. Similarities and differences between clients in the various segments result from these comparisons. The output of this report is a model for ongoing work and recommendations for performing future analysis.

Examining the Elements of Cultural Integration In Bank Merger Situations

Ada Shang, Engineering Science

As merger activity increase significantly in the banking and financial industry, it is important to understand the impact of cultural integration in merger situations and to develop ways to proactively anticipate cultural issues and problems to minimize the negative impact on financial performance. Some of the key findings and common symptoms that can cause complications in a merger are identified to be psychological resistance, lack of communications, and unpreparedness across the governance structure of the change. Effective communications with different foci that caters to the different needs at various stages of the merger is the key to success. As well, thorough preparation and research prior to the merger, strong leadership structure, clear end-state goals, and suitable human resource planning can also minimize the risk of failed synergy realization. More specifically, efforts should be focused on examining and researching thoroughly the current state, defining a clear end-state goal and effective human resource planning in the pre-merger stages. Communications, psychological support and training are vital to the success of the merger stage. Finally, follow-ups, continued employee support and effective human resources permit the sustenance of the newly developed culture. Ultimately, integration efforts should focus on introducing stability into the environment in order to nurture cultural development and growth.

Life Insurance Market Opportunity

Nicholas Straatsma, Engineering Science

The Bank under study has a large insurance operation. Customer analysis is undertaken to view the opportunity for the Bank from three angles. The first is a calculation of the total opportunity in Regions and Census Metropolitan Areas across Canada. The second is identification of the specific groups by age and income (termed ‘priorities’) which are purchasing Permanent insurance. The third angle studies the methods and approaches of competitors operating in the Canadian market. The Bank’s ability to act on the results is affected by current legislation limiting operations of bank-owned insurers. Throughout the thesis, these limitations are addressed through recommendations on where to locate separate insurance branches and send sales agents.

The ideal next location for an insurance branch is the CMA of Vancouver. Residents of this location together have high ownership of Term life insurance and also purchase large amounts of Term insurance yearly. Insurance operations should focus efforts on reaching priority candidates for the sale of Permanent insurance. Additionally, special attention should be given to the priority candidates identified among Husbands and Wives who are sensitive to life events such as marriage and children. Finally, the analysis of competitors reveals that limitations from the Bank Act may not be as significant as hypothesized. This is also confirmed by the continual use of traditional sales agents from one of the Bank’s competitors.

Enterprise Value of Internal Research

David Wu, Engineering Science

The Information Age has been characterized as the current economic era, where there is a global shift from producing physical goods to manipulating information. As firms compete in the information age, the ability to collect, filter, and analyze information is the key to achieving continued success. As such, firms spend considerable resources gathering information from external research firms and developing information through internal research groups (IRGs). However, like all business units within an organization, the economic value of such a group’s services must be considered. This thesis proposes a new paradigm to evaluate the economic value of IRGs by modeling them as external research firms with comparable operations. We ask the question: if this IRG was to operate as a separate business entity, how much profit would it generate and, subsequently, how much would this model firm be worth? The major contribution of this thesis is the proposal of a new methodology in determining the value of an IRG. In addition, the concepts presented throughout the thesis, as well as the specific results of the analysis, provide invaluable insight for others in the same area of research.