Growth in a New Era: Enabling Competitive Banking With Smarter Computing


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After surviving the financial meltdown in 2008, the banking industry finds itself at a
critical juncture. A slow economy restrains the potential for increasing revenue,
while new complex regulations add high levels of uncertainty to the industry.

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Growth in a New Era: Enabling Competitive Banking With Smarter Computing

  1. 1. 50 Years of Growth, Innovation and LeadershipGrowth in a New Era:Enabling Competitive Banking With Smarter Computing A Frost & Sullivan White Paper Brian Cotton, PhD and Juan Fernandez
  2. 2. Frost & Sullivan Abstract........................................................................................................... 3 The New Banking Environment: Regulations, Revenue, And Trust .................. 3 The Business Need for Smarter Computing in the Banking Industry ............ 7 The Business Value of Smarter Computing in the Banking Industry .............. 11 Building a Competitive Bank on a Smarter Business Infrastructure .............. 14 References ....................................................................................................... 16 CONTENTS
  3. 3. Competitive BankingABSTRACTAfter surviving the financial meltdown in 2008, the banking industry finds itself at acritical juncture. A slow economy restrains the potential for increasing revenue,while new complex regulations add high levels of uncertainty to the industry. Thebanking industry is also evolving in response to new technology and new customerdemands. Online channels and mobile payments banking have changed the landscapefrom branch-based to personal banking. Banks are faced with the challenge to findnew revenue streams while containing costs, and many are now turning to aSmarter Computing approach to meet the challenges and stay competitive.Smarter Computing can help turn banks into lean, agile competitors, while helpingensure adherence to regulatory compliance objectives. It can guide banks’ ITdepartments along the path of transforming the IT infrastructure to support theimperatives of a responsive, efficient, and reliable business infrastructure. A number ofprogressive banks around the world are implementing a Smarter Computing approach,including Bilbao Bizkaia Kutxa (BBK), TMB Bank Public Company Limited (TMB Bank),Zürcher Kantonalbank (ZKB), and Banco Pastor. Together with IBM, they are beginningto realize the benefits of Smarter Computing to help them meet the needs ofdemanding customers, and succeed in a competitive, cost-conscious environment.THE NEW BANKING ENVIRONMENT: REGULATIONS, REVENUE,AND TRUSTThe banking environment today is rapidly moving away from the pre-recessionstatus quo. As the upheavals spawned by the economic recession reverberate acrossthe world, banks are being forced to change their product-oriented business models “In banking, trust isand become more competitive for customers. As well, new regulations are more about what acompelling banks to adjust established practices to meet recently enacted bank is—howcompliance standards. The Dodd-Frank Wall Street Reform and Consumer customers feel aboutProtection Act, Basel III and Solvency II, for instance, have specific liquidity and banking there—rathercapital requirements for financial services institutions. 1 These regulations are than the products theexpected to help banks mitigate risk, but they are also intended to address a critical bank offers.”lack of consumer confidence in banks, particularly in mature markets. 2 —John WoodAlthough aimed at risk issues, these regulations are impacting revenue growth by and Paul Berg,constraining traditional fees-based methods of raising revenue. The Durbin “RebuildingAmendment, for instance, is expected to cause declines of $5 billion annually for Trust in Banks”debit interchange revenues, in addition to a $15 billion reduction in overdraft fees. 3As a result, a renewed focus on cost containment and efficiency is often a top-of-mind for most banking executives. 4 Incremental measures to improve efficiency,such as restricting branch hours and automating more types of transactions, arebringing some bottom-line relief, but transformative costs reductions that get tothe core of doing business are becoming essential. 3
  4. 4. Frost & Sullivan The most critical factor in the new banking environment is a radically changed dynamic in the relationship between a bank and its customers. To begin, there is a general lack of trust in banks. A recent Gallup poll revealed that more than four in five Americans distrust banks. 5 Moreover, technology, in the form of smart phones, social media, and pervasive and rapid access to information, has changed the way individuals interact with banks. The proliferation of social media, in particular, means that customers and banks can communicate with each other, and customers can share information about banks in their community. Armed with more information and an ability to influence others, consumers are better informed and demand a consistent experience across all channels. The banking industry needs to rebuild the basis of relationships with its customers, becoming customer-centric rather than product-centric. As the authors of the Gallup analysis conclude, “In banking, trust is more about what a bank is—how customers feel about banking there—rather than the products the bank offers.” 6 All of this means that personalized offers and services are becoming critical to banks’ success. For instance, the top-performing U.S. banks in 2011, according to J.D. Power & Associates, have a single common practice: a focus on the customer that provides “products and services to fit a customer’s needs, including lifestyle and access with online and mobile tools”. 7 The combination of stringent new regulations enacted around the globe, cost- cutting pressures, and technologically-savvy and empowered customers are moving banks to consider new models and approaches to their business. Those institutions that are capable of succeeding in the process of transformation will likely survive and thrive into the new era, whereas the others will likely lose value and eventually be absorbed by consolidation. The challenges of the banking environment create complexity for banks, and this is requiring them to transform their business models and the technology that supports them in order to be competitive. This transformation process is guided by four vital banking imperatives, as shown in Figure 1. Increase flexibility and streamline operations to drive a simplified enterprise with greater agility that can balance growth with efficiency and business resiliency. Create a customer-focused enterprise with new intelligence about customer requirements, preferences and behaviors, developed by optimizing customer data and using analytics to cultivate client-centricity and rebuild trust. Optimize enterprise risk management to achieve compliance objectives while mitigating operational, financial and IT risk, while fighting crime and boosting financial returns. 4
  5. 5. Competitive BankingDrive innovation while managing cost in a bank’s back-office payments andtransaction processes to better serve consumer and commercial customers, whileaddressing new regulations and risks.Figure 1: Imperatives Guiding the Transformation of the Banking Industry Increase Flexibility & Streamline Create a Customer-Focused Enterprise Operations • Customer Care & Insight • Detailed View of Business Architecture • Multichannel Customer Experience • Detailed View of the IT Architecture • Develop a Single, Enterprise View • Create Agility in Core Banking of the Customer Processes • Cross Channel Campaign Management • Staged Transition of Core Banking & Targeted Marketing Legacy Applications Banking Industry Transformation Drive Innovation while Managing Cost Optimize Enterprise Risk Management • Process, Manage, Measure, & Monitor • Integrate Finance and Risk Data Consumer & Commercial Payments • Monitor Real Time Transactions • Integrate Horizontal Payments & • Automate Risk and Regulatory Treasury Capabilities Within a Bank Compliance • Enable Cash Management & Supply • Institute Proactive Risk Management Chain Finance • Detect, Report, & Prevent Fraud and • Rapidly Adapt to New Risks & Other Financial Crime Regulations Source: Frost & Sullivan analysis and IBMThe imperatives shown in Figure 1 revolve around how a bank can transform itsbusiness model to be more efficient, attuned to the customer, and more responsible.The transformed model enables banks to adopt the lessons from the retail industry,shifting from a product focus to a customer focus and adopting a highly efficientstance, while adhering to regulatory mandates specific to the banking industry. Thisallows them to develop highly personalized relationships with their consumer andbusiness customers, and strengthen their loyalty. It enables a bank to develop a single,master view of each of its customers, and use it to guide product development andmarketing. This can be particularly important for banks as they develop relationshipswith customers holding multiple accounts. Finally, the new model empowers thecustomer to select their methods and channels of interaction with the bank, whileletting the banks learn from social media so that a customer’s suggestions andfeedback are able to build a bank’s brand. The bank that embraces these imperativescan become a lean, informed and versatile organization capable of driving operationalefficiencies and growth. The key requirement of this success is the need to upgrade abank’s IT infrastructure to handle the demands imposed by these imperatives. 5
  6. 6. Frost & Sullivan Key Infrastructure Requirements • Scalability • Performance • Flexibility • Reliability and Availability • Standardization The conundrum for many banks is how to support these imperatives with an IT architecture that is collaborative, scalable, secure and integrated if their current systems do not have these characteristics. In the current atmosphere of financial efficiency, banks need to ensure that they are getting the most out of their installed infrastructure. This means that the smarter IT architecture should be able to be built on a bank’s existing infrastructure, and need not be a compete replacement of the existing equipment. Scalability is important to enable a bank to respond to increased demand, such as customer response to promotions or market-based events. The systems must also support high-performance computing across multiple workloads to accommodate large numbers of transactions across multiple channels. The infrastructure also needs to be flexible to adapt to changes in demands and new applications, freeing IT managers to direct resources where they are needed most. The architecture must also be reliable and robust to ensure constant uptime. Finally, it is crucial that the infrastructure be standardized to close gaps in the existing architecture, governance rules, and process management simultaneously across the enterprise. Many banking IT infrastructures have often been implemented without these necessities as top considerations, or as a result of merger and acquisition activity they are not part of an integrated design, and therefore fail to interoperate smoothly. Banking industry leaders are beginning to seek advanced IT solutions to help them become more competitive and remain compliant. Forward-thinking bank CIOs are starting to transform their IT infrastructures to respond to the imperatives driving new banking business models. These infrastructures must accommodate a constantly updated stream of information from customers and partners through multiple channels, feeding into analytic platforms that enable quicker reactions to changing customer preferences and operational conditions. They also need to perform complex information capture and processing efficiently, and to support different types of operational models to keep costs down. Smarter Computing is an approach that can help banking industry CIOs transform their IT infrastructures to address these imperatives. 6
  7. 7. Competitive BankingTHE BUSINESS NEED FOR SMARTER COMPUTING IN THEBANKING INDUSTRYIntroducing Smarter ComputingSmarter Computing is a new approach to transform IT systems to enable banks tobecome more focused on the customer, while managing risk and exercisingefficiency. This approach is based on three fundamental capabilities: • Designed for Data involves designing an IT infrastructure to harness all available information, including real-time streaming data, to unlock insights for better decision-making. It is about extending beyond traditional sources of data to generate insights by leveraging new forms of information, which can be incorporated into a bank’s information supply chain to reduce operational costs, master a single version of a customer profile, simplify data security, and get insights from huge volumes of complex data. • Tuned to the Task reflects matching workloads to systems that are optimized to the workload characteristics, ranging from transaction processing and database management, to business intelligence and analytics, to managing communications across branches and business units. Optimizing the systems to the workloads enables greater performance and efficiency, helping CIOs maintain a lean operational profile. • Managed with Cloud Technologies gives CIOs the ability to change operations to support evolving business models and enable delivery methods that bring greater efficiencies out of existing IT assets, and deploy resources flexibly, dynamically and quickly to multiple branch locations and partners in a cost-effective manner.Smarter Computing supports business transformation by creating a technologyframework to enable business operations that realize the business imperatives, andgenerates business value in a competitive, cost-conscious environment. The SmarterComputing approach in the banking industry revolves around how customers’ andbanks’ operational data is collected, processed, analyzed, saved, and shared. The ITinfrastructure that supports the model’s business operations delivers business valueby using data to guide decisions, by using optimized systems to maximize efficiency,and by leveraging the cloud to transcend administrative silos and legacy systemlimitations. Figure 2 illustrates the application of the Smarter Computing approachto banking industry innovation. 7
  8. 8. Frost & Sullivan Figure 2: Smarter Computing and Banking Industry Transformation Banking Organization Transformation Increase Flexibility Create a Customer- Optimize Enterprise Drive Innovation & Streamline Focused Enterprise Risk Management While Managing Cost Business Operations • Customer Care & • Integrate Finance • Process, Manage, Imperatives • Detailed View of Insight and Risk Data Measure, & Monitor Business • Multichannel • Monitor Real Time Consumer & Architecture Customer Experience Transactions Commercial • Detailed View of the • Develop a Single, • Automate Risk & Payments Enterprise View of Regulatory • Integrate Horizontal IT Architecture the Customer Compliance Payments & Treasury • Create Agility in • Institute Proactive Capabilities Within a • Cross Channel Core Banking Campaign Risk Management Bank Processes Management & • Detect , Report, & • Enable Cash • Staged Transition of Targeted Marketing Prevent Fraud and Management & Core Banking Legacy Other Financial Supply Chain Finance Crime • Rapidly Adapt to Applications New Risks & Regulations SMARTER COMPUTING-BASED IT INFRASTRUCTURE Business Operations Process Automation Business Process Management Data Warehousing Customer Intelligence Business Intelligence Transaction Processing Data Storage, Sharing, & Management Physical World Interfaces (Channels, Branches) & Data Acquisition DESIGNED FOR CLOUD WORKLOAD DATA ENABLED OPTIMIZED Business Value Customer-Specific Offers Lowered Cost of Operations Real-time Detection of and Outreach Activities Through Virtualization and Fraudulent Activity Consolidation Source: Frost & Sullivan analysis Bank CIOs can use Smarter Computing-based IT infrastructures to carry out the operations underlying their transformation imperatives. Because a bank’s various business operations have different characteristics, workload-optimized systems yield efficient computing infrastructure designs. The efficiencies lie in systems that are flexible enough to meet peak-level workload demands, such as increased transaction activity during paydays or seasonal shopping, and enable resources to be deployed elsewhere during off-peak periods. Smarter Computing’s cloud capabilities facilitate the deployment and implementation of new processes and models that give managers a unified view of a bank’s business architecture. By being able to capture all available data for advanced analysis, a Smarter Computing infrastructure can help managers predict customer preferences and behaviors, develop improved risk profiles, and make decisions accordingly. Importantly, the approach gives CIOs control over capital and operational expenditures because existing IT infrastructures can be transformed and need not be completely replaced. Smarter Computing can help turn banks into lean, agile competitors, while helping ensure adherence to regulatory compliance objectives. 8
  9. 9. Competitive BankingIncrease Flexibility and Streamline OperationsA bank increases its business flexibility and agility, and streamlines its operations bytransforming at its core. This requires a CIO to understand the businessarchitecture at a component level, and then optimize the IT infrastructure from asimilarly componentized perspective to support it. It also involves designing ITsystems that can efficiently process, manage, measure, and monitor high volumes oflow-value payments from customers, while also managing critical payments frombank to bank, bank to clearinghouse, and from country to country. Finally, it entailsintegrating horizontal and reusable payments and treasury capabilities across allpayment products within a bank.Banking CIOs can use Smarter Computing to streamline an IT infrastructure byvirtualizing and consolidating applications and operations in a cloud computingmodel. They can also apply advanced data warehousing, analysis, and managementtechniques to develop authoritative and dynamic records. At the same time, they canuse IT components and systems optimized for transaction processing to integrate andmonitor deposits, payments, and other transactions across multiple channels.Smarter Computing can help bank CIOs gain additional business value by: • Fostering a component-level view of the business model on which a CIO can imprint the bank’s strategic imperatives and determine which areas of the operations need attention to deliver on the overall strategy. • Modularizing the IT architecture into fundamental building blocks, enabling core architectural transformations quickly and with more control, without business disruption or unanticipated costs. • Supporting adaptable and efficient processes for account opening and management, product bundling, and dynamic relationship pricing to help bring products and offers to market more quickly.Create a Customer-Focused EnterpriseCreating a customer-focused enterprise in the banking industry means (1) creatingenterprise-wide capabilities to enable and support informed judgment and decision-making, (2) adopting a client-centered perspective, and (3) using these capabilities andperspective to drive profitable growth. The key to realizing this imperative isunderstanding customer buying behavior, gaining a deep insight into their profitabilityand risk, and using this intelligence to develop the right offerings, to the rightcustomers, at the right time and place. Savvy bankers will house this intelligence in anauthoritative single view of a customer across all of their account relationships withthe bank, their transactions, and their service requests and inquiries. 9
  10. 10. Frost & Sullivan Bank CIOs can use Smarter Computing to transform their IT architectures to harness the wide variety and massive volumes of customer data, and to apply advanced analytic engines to develop new streams of intelligence. They can use cloud-based models to renovate and extend channel IT architectures and consolidate services to provide a common customer experience across all channels. By the same token, they can use a Smarter Computing architecture to develop tailored offerings and manage cross-channel campaigns. Optimized systems can then handle spikes in customer response and activity, such as when a new campaign is launched, as well as provide high levels of transaction security across all channels. Additional value from applying Smarter Computing to develop new intelligence can be in the form of: • Increased revenue from customer-focused offerings and promotions that increase cross-sell and up-sell opportunities • Improved customer loyalty and retention rates • Extended customer touch points, including mobile banking and social media forums Optimize Enterprise Risk Management Even as a bank becomes a financially lean and agile competitor, it must achieve regulatory compliance objectives, mitigate operational risk, and fight financial crime. A Smarter Computing approach can enable integrated risk management capabilities to deliver compliance across voluntary and mandatory requirements. Workload optimized systems can be used to monitor real-time transactions, and to apply fraud analytics to the data streams to predict and detect fraud, proactively controlling a bank’s risk exposure. Smarter Computing infrastructures can also automate transaction and business processes tracking and reporting to help ensure compliance. Smarter Computing can provide additional business value in integrated risk management initiatives by: • Supporting continuous, comprehensive risk monitoring and analysis • Enabling real-time risk monitoring and reporting, while automatically detecting fraudulent activities • Ensuring more accurate risk profiling based on authoritative , single views of customers • Increasing profitability by reducing nonperforming loan ratios and lowering cost-to-income ratios 10
  11. 11. Competitive BankingDrive Innovation while Managing CostIn a competitive environment, a bank’s capability to innovate in its core paymentsand transactions services is an asset. The business processes underlying bringingnew services to market, and transforming legacy services into cost-effectiveservices, are based on an agile and efficient business infrastructure. The SmarterComputing approach can help establish the IT foundations to support theimperative to drive innovation while managing cost by using workload-optimizedsystems to process, manage, measure, and monitor high volumes of low-valuepayments from individual consumers. They can also be used to handle paymentsfrom online or mobile phone channels, and scale to meet increases in these typesof transactions. Infrastructures using a designed-for-data capability can capturecritical data from commercial customers to help make payments more efficient,including cash management and supply chain finance.Smarter Computing can also return value to the organization by: • Framing payment operations restructuring to comply with regulations, and be inherently adaptable to address new risks and regulations as they arise • Enable integrated, horizontal, and reusable payment and treasury capabilities that can be used across payment products offered by a bankTHE BUSINESS VALUE OF SMARTER COMPUTING IN THE BANKINGINDUSTRYBanks are facing an unprecedented set of challenges that are forcing changes intheir business models. The aftermath of the economic recession is spawning newregulations on liquidity requirements and risk mitigation. Newly empoweredbusiness and consumer customers are starting to demand more from banks. At thesame time that traditional revenue sources are closing down, banks are searchingfor new revenue streams based on a stronger focus on their customers, rather thanon products. Competition among banks for this business is increasing, and thesuccessful firms will be those that consistently deliver a superior and smarterbanking experience to their customers. Commercial success will also depend ontightly integrated risk management, and smarter and more efficient operationsAll ofthese factors are driving banks’ IT departments to transform their ITinfrastructures to adapt to the imperatives of today’s environment and be morecompetitive to win customers’ trust and loyalty. Some progressive organizationshave embraced the Smarter Computing approach to direct their transformation tomeet these imperatives and are seeing benefits.
  12. 12. Frost & Sullivan Bilbao Bizkaia Kutxa: Smarter Banking in Spain The global economic collapse caused banking regulators across the world to take strong steps to ensure the health of their national banking systems. In 2010, the Bank of Spain mandated that several of the county’s smaller regional banks merge and combine their assets to be stronger, and to create a more competitive banking sector. This presented an attractive business opportunity for some of the stronger banks, which could expand their scale and develop a new, more competitive business model. However, substantial challenges from heterogeneous regional tax rules, labor issues, and governance guidelines needed to be addressed before the banks could seamlessly merge with each other. 8 Bilbao Bizkaia Kutxa (BBK), headquartered in the Basque region and being one of the larger regional banks in Spain, saw an opportunity in this new environment. BBK is the country’s third largest savings and equity bank, and it decided to acquire CajaSur, another regional bank almost as large as BBK itself. BBK realized that because its recent growth outstripped the capacity of its IT architecture to keep up with expanding data volumes, the prospect of integrating CajaSur’s operations meant that it needed to upgrade its IT architecture to pursue its acquisition. Not only would the bank’s IT systems need to handle larger volumes of differing types of data, but they would also need to guarantee security, resiliency, and efficiency to meet regulatory and operational requirements. BBK’s IT management decided to By implementing a partner with IBM to apply a Smarter Computing approach to support its new Smarter Computing business model and put it on a more competitive footing. approach to support its acquisition of The main goal of the initiative was to use as much of BBK’s and CajaSur’s existing CajaSur, BBK was IT architectures as possible, while ensuring that the new workloads could be able to save € 1 handled efficiently. BBK also had to keep the total cost of computing low, optimizing million in IT capital computing resources across the combined companies’ operations. The project team costs and 20 percent decided to replace two older servers with two new mainframe systems, built with in operational costs. a number of specialty engines to handle data and transaction processing workloads for the bank’s business intelligence, enterprise resource planning, and customer relationship management tasks, as well as advanced security and encryption applications. By applying components into the architecture that are tuned for specific tasks, the system was designed to help free up general computing capacity and lower the overall total cost of computing for these critical operations. Moreover, the BBK and IBM teams decided to deploy a virtualization layer across all of the servers running the BBK and CajaSur desktop computers, enabling both banks’ systems to be managed side by side in the cloud. This helped BBK avoid the need to purchase new PCs and keep the administrative burden low. By implementing a Smarter Computing approach to supporting BBK’s acquisition of CajaSur, the bank was able to save more than €1 million that would have been needed in equipment and management time had the bank gone with a traditional approach to its IT architecture. In addition to the capital cost savings, BBK also was 12
  13. 13. Competitive Bankingable to reduce its IT costs by 20 percent annually and boost staff productivity by30 percent. 9 With a Smarter Computing-inspired architecture in place, the bank hasa highly scalable, resilient, and secure IT system that can support future growthopportunities in the competitive European banking environment.Zürcher Kantonalbank: Using Smarter Computing to Meet Some of theWorld’s Most Stringent RegulationsSwiss banks face some of the world’s most stringent regulatory requirements. Longknown for setting the standard in the banking industry, big Swiss banks havetraditionally been subject to layers of rules that exceed international standards (i.e.,the “Swiss finish”). 10 Because the banking industry is so important to Switzerland’snational economy, Swiss banks take regulatory adherence extremely seriously.Zürcher Kantonalbank (ZKB) is a diversified “universal bank” providing private,retail, and commercial banking services in Switzerland and worldwide, as well as agrowing practice providing investment and asset management services to its clients.ZKB is also the largest “cantonal” or Swiss government-owned bank in the country,which carries a great deal of responsibility to ensure that it meets or exceeds thecountry’s stringent regulatory demands. To meet these regulations, ZKB mustmaintain flawless workload management practices and process massive amounts ofcustomer record, transaction, and other data on a daily basis. All of this depends onthe strength of ZKB’s IT systems.ZKB partnered with IBM to evolve its IT architecture according to SmarterComputing principles, which enables it to meet the bank’s regulatoryresponsibilities. ZKB’s architecture is designed for handling critical data around aset of data marts, fed by a sophisticated data warehouse that captures current andhistoric data from more than 100 branches and distributes it to individually tailoreddata marts. These data marts ensure that each bank counter at each of ZKB’sbranches has the most current data every morning to meet their needs. The focuson data integrity not only helps the bank provide a high level of customer service,but it also helps maintain advanced safety measures through several layers ofsecurity and security analytics capabilities. ZKB’s IT architecture is also built onSmarter Computing’s Tuned to the Task principle, which allows unused systemresources to be allocated to other functions, preserving overall system efficiencyand enabling new functionalities to be added without expanding the systemDesigned according to the Smarter Computing approach and using componentsbuilt to handle specific tasks, ZKB’s architecture helps ensure that customer servicelevels and regulatory adherence are consistently met. Smarter Computing is clearlyhelping ZKB remain competitive in Switzerland’s demanding banking environment. 13
  14. 14. Frost & Sullivan Banco Pastor: A Customer Focus Improves Retention Rates Banco Pastor S.A. is the oldest bank in Spain, and one of the largest, and has used Smarter Computing to develop new intelligence about its customers. The bank concentrates on offering savings and loans to consumers and small and medium-sized businesses. This is a highly competitive segment of the Spanish banking market, making it difficult to retain valued customers. Banco Pastor understood the challenge in its market, but it also saw an opportunity to gain an advantage over its competitors. The bank initiated a strategy to sharpen its focus on its customers using a foundation of dynamic customer insight. Teaming up with IBM to implement a Smarter Computing approach, Banco Pastor installed an advanced server system loaded with sophisticated analytic applications to turn the large volume of customer data on desired services, risk levels, and predictions of future behavior into detailed, customer-specific profiles. These profiles were then used to plan, automate, and execute targeted marketing campaigns that presented offerings tailored to individual customers. By using Smarter Computing, Banco Pastor has cut its time to analyze and develop customer data from a matter of weeks to a matter of hours—a 95 percent improvement. This gives the bank a time-to-market advantage over its competitors and can help it improve retention rates, which the bank anticipates will be at least 20 percent higher compared to its traditional marketing approach. TMB Bank: Proactive Analysis Reduces Risk TMB Bank Public Company Limited (TMB Bank) used a Smarter Computing approach to improve its risk management capabilities. As Thailand’s economy continues to grow, its consumer and business lending market is expanding, and its banking regulatory environment is modernizing and becoming increasingly more complex in response. As one of Thailand’s largest banks, TMB Bank needed to transform its IT infrastructure and improve its risk management capabilities to comply with the more stringent requirements. The bank decided to work with IBM to take a Smarter Computing approach to transforming its IT systems to more rigorously and efficiently capture, store, and process customer data and risk profiles for its 6 million customers. Using a system specifically designed to process risk factors and reduce risk exposure, TMB Bank’s Smarter Computing solution breaks down old structural silos in the bank by automatically reporting risk analyses across all of the bank’s business units and applications. The bank has a new level of agility as a result and is able to manage its risk far better than before, reducing its nonperforming loan ratio from almost 13 percent to just over 8 percent. Its solution also makes it more competitive by helping it to be more responsive to its customers, reducing loan processing time from months to only two weeks. 14
  15. 15. Competitive BankingBUILDING A COMPETITIVE BANK ON A SMARTER BUSINESSINFRASTRUCTUREBanking industry CIOs and IT managers are under constant pressure to ensure thattheir IT infrastructures enable their banks to be lean and agile in the increasinglycompetitive banking environment. Customers are becoming connected and empowered,and demand consistent levels of personalized service across a number of channels. Atthe same time, banks are balancing regulatory adherence with revenue pressure. Tosucceed, banks need to reinvent their business models to develop new customerintelligence and generate new revenue sources, while ensuring regulatory compliance.The application and operational requirements to realize these imperatives comewith substantive IT workloads, and traditional bank IT infrastructures either cannotcope with these workloads or cannot interoperate between merged entities. Intoday’s austere economic climate and highly competitive industry, bank CIOs havethe additional requirement that their IT infrastructures reduce operating costs, beflexible and scalable to deploy computing resources where they are needed, andenable collaboration across a bank’s business unitsThe Smarter Computing approach is a holistic solution that can guide banks’ ITdepartments along the path of establishing the IT infrastructure to support theimperatives of a responsive, efficient, and reliable business infrastructure. A numberof banks around the world are beginning to realize the benefits of implementing aSmarter Computing approach. CIOs may wish to investigate using a SmarterComputing approach if they are considering: • Supporting an innovative service development and marketing strategy aimed at new customer acquisition and strengthened customer retention initiatives • Merging with or acquiring other banking entities that may have antiquated IT architectures that cannot interoperate with their own systems • Future-proofing their bank against new regulations and requirements, as well as ensuring that their banks can achieve existing compliance objectives • Creating a company-wide data management system, with shared access to master recordsForward thinking banks, such as BBK, TMB Bank, ZKB, and Banco Pastor areemploying a Smarter Computing approach to help them meet the needs ofdemanding customers and succeed in a competitive, cost-conscious environment. 15
  16. 16. Frost & Sullivan REFERENCES 1 Anderson, Del; Buehler, Kevin; Ceske, Rob; Ellis, Benjamin; Samandari, Hamid; and Wilson, Greg. “Assessing and Addressing the Implications of New Financial Regulations for the U.S. Banking Industry.” McKinsey Working Papers on Risk, Number 25, McKinsey & Company, March 2011. 2 Ernst & Young. “A new Era of Customer Expectation: Global Consumer Banking Survey 2011.” February 2011. 3 Spitler, Rick and Kyriacou, Lee. “U.S. Banking: A Challenging Road Ahead,” Novantas Review, July 2011. 4 Sidel, Robin and Lucchetti, Aaron. “Banks Deepen Cost Cuts in Push to Juice Profits.” Wall Street Journal Online, ( 21 July 2011, retrieved 28 October 2011. 5 Wood, John and Berg, Paul. “Rebuilding Trust in Banks,” Gallup Management Journal, 08 August 2011., retrieved 24 November 2011. 6 Ibid. 7 “J.D. Power and Associates Reports 2011 U.S. Retail Banking Satisfaction Study,” press release 21 April 2011., retrieved 22 October 2011. 8 Munoz, Sara Schaefer. “Spain’s Bank Mergers Suddenly Drying Up.” Wall Street Journal Online,, 11 November 2010, retrieved 02 December 2011. 9 “Bilbao Bizkaia Kutxa Manages a Major Acquisition,” a case study published by IBM. http://www- 11 July 2011, retrieved 23 November 2011. 10 “Swiss Banks get Stricter Rules than Basel III.”,,_results,_regulations/S wiss_banks_get_stricter_rules_than_Basel_III.html?cid=28464958, 4 October 2010, retrieved 05 December 2011. This report was developed by Frost & Sullivan with IBM assistance and funding. This report may utilize information, including publicly available data, provided by various companies and sources, including IBM. The opinions are those of the report’s author and do not necessarily represent IBM’s position. XBL03016-USEN-00 16
  17. 17. Silicon Valley San Antonio London 331 E. Evelyn Ave. Suite 100 7550 West Interstate 10, 4, Grosvenor Gardens, Mountain View, CA 94041 Suite 400, London SWIW ODH,UK Tel 650.475.4500 San Antonio, Texas 78229-5616 Tel 44(0)20 7730 3438 Fax 650.475.1570 Tel 210.348.1000 Fax 44(0)20 7730 3343 Fax 210.348.1003 877.GoFrost • http://www.frost.comABOUT FROST & SULLIVANFrost & Sullivan, the Growth Partnership Company, partners with clients to accelerate their growth. The companysTEAM Research, Growth Consulting, and Growth Team Membership™ empower clients to create a growth-focusedculture that generates, evaluates, and implements effective growth strategies. Frost & Sullivan employs over 50 yearsof experience in partnering with Global 1000 companies, emerging businesses, and the investment community frommore than 40 offices on six continents. For more information about Frost & Sullivan’s Growth Partnership Services,visit information regarding permission, write:Frost & Sullivan331 E. Evelyn Ave. Suite 100Mountain View, CA 94041Auckland Dubai Mumbai Sophia AntipolisBangkok Frankfurt Manhattan SydneyBeijing Hong Kong Oxford TaipeiBengaluru Istanbul Paris Tel AvivBogotá Jakarta Rockville Centre TokyoBuenos Aires Kolkata San Antonio TorontoCape Town Kuala Lumpur São Paulo WarsawChennai London Seoul Washington, DCColombo Mexico City ShanghaiDelhi / NCR Milan Silicon ValleyDhaka Moscow Singapore