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Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation
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Kanika Bahadur & Jesper Behr, SAP - Core Banking Transformation

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See how Commonwealth Bank, Postbank and ING Real Estate transformed their core banking systems to achieve revenue growth, efficiency gains and full consistency of all processes.

See how Commonwealth Bank, Postbank and ING Real Estate transformed their core banking systems to achieve revenue growth, efficiency gains and full consistency of all processes.

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  • From a programperspective, corebankingtransformationisverychallengingwithin a numberof different areas.Business complexityUnderstand the products and make a decision regarding migration – theexistingbankingproductsandprocesseshasgot a longhistorybackward. This needstobeunderstoodtomaketherightdecisionsabouthow a productorprocessistobemigratedEver changing legal & regulatory requirements – during the project, new requirements will be introduced, both legal but also new business requirements. A solid change mangement is necessary to manage and to keep track of change requests.Understand the processes (in detail) – the existing processes needs to be understood, not only on high-level, but also down to the smallest level (e.g. on value date rules for different types of payments). Over the years, thousands of small exceptions has been developed in the bank which needs to be taken care of (first to discover it, document it and then to decide on it)IT complexityJust aswellastheprocessesneedstobeunderstood, the same is valid fortheexistingvintagesystems. Whichsystemishandlingwhichpartoftheprocessandhow do theycommunicatewitheachotherandwithwhichinformation? Integration withtheexistingchannelsystemsis also a challenge. Normally, thecustomeralreadyhasrecentlyinvestedintothechannelsystems (branch, mobile, internet) enablingcustomer 24x7 accesstothebank, meaning, migrationneedstobedonesmoothlyandwithoutdisruptiontothecustomers.The newsystemneeds also tobeintroducedintothe EOD batchjobschedulingandtodeliverinformationtothe subsequent systems in theprocesschain.And, settingup a testingenvironmentforthenewsystemwithpossibilitiestotestthe end-to-end processis also often a large problem. Mostly, bankshave different testenvironment, however, it‘smostlyset-uptotest different sub-processeswith limited testdatafor real e2e processesfor all affectedproducts.ScopemanagementTransformation projectstendstobecome large with a numberofexpertswith different backgrounds, companiesandcultures. Onecommonlanguageneedstobeestablishedtoavoidmis-interpretationsand miss-communication.Due tothesheersizeoftheprojectandthatitaffectsthewholebank, communicationiskeyandneedstotakenintoaccountearly in theproject. There will bediscussionsandromoursaround in theorganisationabouttheproject, whatitdeliversand not deliversandthestatusand …The projectdurationislong, andwiththat, there will bere-organisationswithinthebankaffectingtheemployees.Revolution – formostorganisations, a corebankingprojectworkslike a revolution.Most banksaretrimmedtowork in a stableenvironment, focusingtheireffortstomaintaintheexistinglegacysystemswithsmallerenhancements. Theynormallydon‘thavethecapacityfrom a resourceperspectiveto manage a large transformation. Atthe same time, duringtheproject, thebank still needstooperate.The businessorganisationhasbeenoptimizedandtrimmedtorunthebnk, with a smallnumberofkeyresourceshavingdetailedknowledgeoftheexistingprocessesThe IT, the same. Ithasgotskillstomaintainandrunningthebank, but mostly not tochangeit
  • Core banking transformation has been a hot topic for most banks. They have a problem with the complexity of the existing system landscapeThe vintage core banking systems are since a long time overdue The current IT landscape is the main blocker for business innovation and flexibilty. On a yearly basis, only about two or three core banking replacement projects are started in larger banks worldwide. So, why don’t core banking replacements happen more often? Well, there are a number of reasons for this:It’s a large and complex project with high failure rates. There has been no real IT vendor being able to deliver a modern state-of-the-are solution combining a sound architecture giving a high level of flexibility.The projects have been perceived to have high costs with few visible business benefits.SAP has, throughout the years, been involved in a number of core banking transformation projects, and we have seen a number of different approaches on how to transform the IT landscape to meet new business requirements.Incremental Enhancements – The approach to incrementally enhance the existing systems is seen as a fairly attractive way by many, especially large consulting companies. The approach is to service enable the existing core banking systems, like taking an old car engine and putting a new “bodywork” around it. Continue to modify in line with business need and viable business caseIntegration capabilities are improvedHigh cost to service enable old technology due to limitation of skilled resourcesNo improvements in agility and time to marketNo basis for significant process optimisation and cost savingsNo platform for growthRemediation – to replace individual systems with best-of-breed solutions. (Example RBS and SAP Deposits Mgmt)attractive way to obtain new product functionality quicklythe IT landscape is not really transformedIntegration with legacy system may prove costlyAdvice: Selecting best-of-breed solution from one single vendor with an aligned architecture is important in this case.Due to the ease of integration, SAP has however shown in several implementation, how such implementations can be give fast business benefits without increasing the system complexity.Complete Transformation - To really gain a competitive advantage from a transformation, the experience shows that a complete transformation of both business processes and IT system gives the best result as shows in several customer examples. The transformation should be based on a single packaged solution approach to replace, over a period of time, the existing core systems.Removes complexity from core IT systemsEnables real process customer centricity & agilityCreates platform for growth , change, generational wave and lower TCOBusiness driven partnership- Integrate front end and process execution layer- Re-engineer business processes and consolidate IT and operations centres to maximise synergiesMigrate customers and products according to value
  • During the work with a roadmap it’s important that the roadmap is consistent with the business strategy of the bank. Here are some examples on different strategies, which in turn led to different roadmaps.Commonwealth Bank of Australia (CBA), the largest bank in Australia, was clearly focusing on revenue growth and how to win more customers and to retain existing one through a customer-centric business model. They developed a centralized customer model which was implemented first followed by the delivery of new “revenue generating” products before they migrated their whole customer base and their accounts to the new environment. To standardize on processes, the aligned the operating model on a process-by-process basis, across the different line-of-businesses in the bank. From an architectural model, they have also built in an additional agility into their sales environment to enable the sales organisation to define new products without even touching the back-end core banking systems.Data on CBA: Largestbank in Australia, 10 millioncustomers, Startedproject in 2008, first live withinternetsavingsaccountandcustomerinformationfile. Havemigratedtermdeposits, currentaccountsandcorporateaccounts. Solutions: Banking Services (DepositsMgmt, LoansMgmt, CollateralMgmt, Customer Information Mgmt)Deutsche Postbank had a totally different focus when they started their transformation. Here, efficiency and process standardization was in focus.Importantforthem was toreducetherunningcostofthebankandtoreplace 14 different systemsbased on an oldsolutionwithoneefficientandcost-effective SAP solutionandtostandardizetheir IT landscape on SAP. Data on Deutsche Postbank: Largestretailbank in Germany. 13 millioncustomers, 25 millionaccounts. Charterclient on DepositsMgmtand Payment Engine. Startedproject in 2000, first live withcustomerinformation in 2002, live with 5 millioncurrentaccounts in 2003 (10 milliontransactions/day) and 20 millionsavings/termdepositsfollowed 2005. Live with SAP Payment Engine in 2008. Processescurrentlymorethan 20 millionpayments per day (5% or European paymentvolume) on Payment Engine.ATB Financial had a different scope. Toreduceproject time andtransformationcost, wentfor a big-bang approachwith all systems. Startedproject in 2008, live in 2011. Transformation offullbusiness.Data on ATB, Canada : 1 millioncustomers, SAP wall-to-wall (ERP, Bank-Analyzer, Transactional Banking, CRM, Payment Engine).
  • Elevating the questions
  • Key messages:Let’s review what make a world class business to begin with. A world class business case answers the why, what, how and provides the proof that together make a compelling story and motivates your executive team to action. Provide some examples of each of the 4 key questoins:Why – we want to integrate acquisitions faster/reduce costs/improve customer intimacy etc. but we have current pain points (e.g., 11 instances of FI globally) that prevent us from achieving those goalsWhat –– to achieve the goal the solution is to consolidate onto one single instance, automate xyz, etc. If we implement the solution, the benefit to the company will be $XYZ.How – our roadmap to deliver the solution starts first with module x and then moves to module y and zProof – Company X did this and saw fantastic results – Business Transformation Study example or peer reference.The bottom provides a checklist for success – most of which we have touched on, highlight a few key items and provide some context generally from already hashed discussions.Do not spend too much time on the bottom, key is the 4 pieces on the topic – key attributes of a world class business case.
  • Transcript

    • 1. Core Banking TransformationThe Grange Tower Bridge, London, June 18-20, 2012Jesper Behr, Kanika Bahadur - SAP
    • 2. Agenda Why Core Banking Transformations What makes Core Banking Transformations Different Best Practices in Managing Core Banking Transformations Value Management in Core Banking Value Management Approach Example of Business Case Development: Differentiated Products© 2012 SAP AG. All rights reserved. 3
    • 3. Reasons For Core Banking Transformation Banking specific trends… …implemented in existing IT landscapes Market Flexibility & Compliance Adaption Cost & Complexity Take Out Customer Centricity in a Multi-Channel Environment© 2012 SAP AG. All rights reserved. 4
    • 4. When Is “Doing nothing“ No Longer An Option?The tipping point – when is it time to transform? Risk/cost of “Doing nothing” is higher than the transformation risk/cost There is no real “me too” effect Changed business strategy with new business requirements – Move towards a customer-centric approach – Transaction factory approach© 2012 SAP AG. All rights reserved. 5
    • 5. Agenda Why Core Banking Transformations What makes Core Banking Transformations Different Best Practices in Managing Core Banking Transformations Value Management in Core Banking Value Management Approach Example of Business Case Development: Differentiated Products© 2012 SAP AG. All rights reserved. 6
    • 6. The Challenges of Core Banking Transformation Business IT Complexity Complexity Scope R(evolution)  Understand the  … and how they connect  One language for hundreds  The last 25 years: Ongoing products and make a to the systems (in detail) of experts legacy improvements decision regarding  Integration with channel  Communication overhead  The business organization: migration systems Benchmarked and optimized to  Duration of 3-5 years  Ever changing legal &  Changing the periodic Run the Bank regulatory requirements processing (Batch)  The IT: Skills to Run the bank,  Understand the  Testing the new Bank End- not Change the Bank processes (in detail)….. to-End© 2012 SAP AG. All rights reserved. 7
    • 7. Different Alternatives Getting There Enhance vintage system Fix and extend current vintage systems Best-of-breed replacement Replace systems over time with best of breed components keeping main processes Complete Transformation Replace key core systems and transform processes with a modern IT architecture ?© © 2012 SAP AG. All rights reserved. 2012 SAP AG. All rights reserved. 88
    • 8. Agenda Why Core Banking Transformations What makes Core Banking Transformations Different Best Practices in Managing Core Banking Transformations Value Management in Core Banking Value Management Approach Example of Business Case Development: Differentiated Products© 2012 SAP AG. All rights reserved. 9
    • 9. Core Banking Transformation Best Practices Value Based Transformation • Align roadmap with business strategy to gain quick benefits Roadmap • Deliver functionality in a phased approach • Clear governance structure with executive mgmt. involvement Program Governance • Involve key stake holders (vendor, system integrator, ..) • Align solution architecture with transformation roadmap Solution Architecture Framework • Define strong governance processes • Build or buy Core Banking Solution • Modular and flexible core banking solution • Vendor credibility with core banking transformation track record • Use proven core banking transformation methodology Implementation Methodology • Adapt to agile methodologies© 2012 SAP AG. All rights reserved. 10
    • 10. Value-Based Transformation RoadmapKey principles Year 1 Year 2 Year 3 Phased approach Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Roadmap driven by business strategy Customer Information Prioritization based on value as well as feasibility Saving Accounts Quick wins to show progress and fund future phases Value based on both tangible and strategic benefits, Personal Loans derived from past case examples Mortgages Current Accounts Duration Milestone Today © 2012 SAP AG. All rights reserved. 11
    • 11. The Transformation Should Be Based On The Business Strategy Revenue Growth Focus Efficiency Focus Best-of-breed approachScope includes some change in all end to end systems - Scope primarily manufacturing layer focus. One integrated systems to serve all customerspresentation, distribution & manufacturing layers across multiple countries • Centralised customer model to enable continued • Less channel, down-stream & orchestration • One clear goal: Achieve full consistency of business value delivery required processes, information and control across all seven operating countries • Distribution layer changes required to reflect • Focus on product & process number Manufacturing agility & new end-to-end processes reductions (reducing product set processes) to • Leverage best practise processes and standard reduce cost functionality to reduce future TCO. • Launch of growth products separated from “mop up” migration • Centralised operations for all business lines to • Focus on critical requirements and avoid “nice- enhance synergies to-have” features • Migrate customers and products according to value© 2012 SAP AG. All rights reserved. 12
    • 12. Program Governance Executive top management involvement Sponsor Level 1: Align with key stake holders such as solution vendors Executive Project Sponsor and system integrators Executive Level 2: ESC Define stake holder meetings, escalation paths and Steering Committee executive sponsorships early in the process Managemen Design Review Program & Risk & Finance Level 3: Define clear responsibilities of the involved parties Project Board Project t Board of Management, Quality PMO All should act as one team Architects Management Deposit Loans Collateral Accounting …others Managemen Managemen Managemen for and Work Streams t t t Financial Process Teams Test Management Instr. Level 4 Integration Management Technical Infrastructure, Basis, Performance Optimization Data Migration© 2012 SAP AG. All rights reserved. 13
    • 13. Application Target Architecture Framework Use industry accepted architecture frameworks such as BIAN, TOGAF Define target architectures aligned with the transformation roadmap – Business Architectures – Information Systems Architecture – Technology Architecture Establish architecture governance structures© 2012 SAP AG. All rights reserved. 14
    • 14. Core Banking Solution Build or buy Selection process best practices – Focus on future state than current – Avoid excess detailed analysis o Limit the number of vendors early o Proof-of-concept instead of RFI/RFP Selection criteria beyond functionality – Functional process coverage – Solution design (modular, bank-in-box) – Flexibility – Vendor credibility – Support & maintenance offering© 2012 SAP AG. All rights reserved. 15
    • 15. Implementation Methodology Follow a pre-define and proven methodology fit to purpose – Core banking transformations are different o Requirement analysis / re-engineering o Integration efforts o System architecture The methodology should integrate all aspects of core banking transformation Structured involvement of business from the very beginning Use agile methodology instead of waterfall method Joint Analysis Organize the project in small interdisciplinary teams with full and Design Team Lead responsibility of delivering work packages© 2012 SAP AG. All rights reserved. 16
    • 16. The Total Effort of Core Banking Transformations Consist ofDiscrete LayersSAP Implementation  Requirements gathering (Blueprint)  SAP to SAP Integration  Product related  CDP (SAP Custom Development Project)  Configuration (Build)  Unit Testing Program related effort  Organizational change management  Vintage system adaption costs  System de-commissioning  TrainingSystem integration  Roll out  Infrastructure  Vintage System Integration  Environment Integration  Testing services  Migration services  CoE (Center of Excellence)/ Operations  Process monitoring© 2012 SAP AG. All rights reserved. 17
    • 17. Agenda Why Core Banking Transformations What makes Core Banking Transformations Different Best Practices in Managing Core Banking Transformations Value Management in Core Banking Value Management Approach Example of Business Case Development: Differentiated Products© 2012 SAP AG. All rights reserved. 18
    • 18. How Do Leading Companies Realize Value? Leading companies combine business process improvement and information technology initiatives to drive higher, more sustainable business value Joint IT and Business Driven Initiatives 20% 2X Improved Productivity More Value IT and Business Units Disconnected Increased Value % 8% 2% Investing in IT Improving Investing in IT while Management Improving Management Practices* Practices * Key performance improvements i.e. Lean Manufacturing, Performance Mgmt., Six Sigma. Source: “When It Lifts Productivity”, The McKinsey Quarterly, 2004 Number 4© 2012 SAP AG. All rights reserved. 19
    • 19. Today‟s Executive Agenda is About Value as much as Risk andEfficiency How to rapidly align technology with business strategy? How to best leverage scarce capital resources? How to best mitigate business risk? How to ensure realization of the expected value? Today‟s Business Transformation programs – on time, on budget and on value© 2012 SAP AG. All rights reserved. 20
    • 20. True Value Management has not been widely adopted inorganizations Key questions Are we investing in the right initiatives? 17% Only 17% of organizations Building a Business require formal business 0% 100% Case cases Are we realizing the full value potential of these investments? 20% Only 20% of organizations Measuring Value 0% 100% measure value post go- How do we enforce live benefit commitments with the same passion that we drive budget commitments? 5% Only 5% of organizations had detailed plans to What governance, Realizing Value 0% 100% realize value from their practices and investments competencies are Source: SAP Value Engineering analysis of 1,609 completed business case engagements required to ensure benefits are achieved? When it comes to Business Transformations only 20% of organizations achieve expected value© 2012 SAP AG. All rights reserved. 21
    • 21. Effective Value Management Maintains Focus on BusinessOutcomes Through the “Value Lifecycle”Extracting value from transformation initiatives requires a consistent and rigorous focus on business value across functional, divisional, and time dimensions. The business case is the driver of change and provides the baseline for measurement and realization.  Diagnose business process performance Value Discovery  Define KPI‟s to track  Build and validate the business case “Build the Case”  Identify and manage risk and roadmap  How well are we performing today?  Design governance model  Align with CEO / Board agenda  What will make us better?  Are we willing to do something about it? Value Optimization Value Realization “Drive more Value” “Realize the Value”  How do we scale the value based  How do we execute the recommended approach across our portfolio? changes? How do we make Value Management a Value  How do we measure progress? part of our organization‟s DNA? Lifecycle  How do we get the right visibility & accountability?  Measure performance  Identify improvement actions  Leverage best practices © 2012 SAP AG. All rights reserved. 22
    • 22. Agenda Why Core Banking Transformations What makes Core Banking Transformations Different Best Practices in Managing Core Banking Transformations – SAP ASAP Methodology Case Example – CBA, etc. Value Management in Core Banking Value Management Approach Example of Business Case Development: Differentiated Products© 2012 SAP AG. All rights reserved. 23
    • 23. Typical Value-based Transformation Roadmap Approach The value-based transformation roadmap, serving both current and future business requirements, should be based on business and IT benefits and feasibility 1 Understand the business and IT strategy and operational goals:  Business objectives and priorities  Strategic initiatives planned and in implementation  Current pain points, risks and existing limitations  Current application landscape and key implications for the SAP project via external and internal data, interviews with key business, operations and IT Executives 2 Assess how the strategic goals and current pain points can be addressed by SAP Solutions Build a Board level business case that supports the key strategic and operational priorities of the bank 3  Evaluate baseline (costs, FTEs, operational KPIs) for all the functional blocks within scope  Estimate high level benefits for each of the functional blocks  Prioritize each functional block based on benefits and feasibility  Build a value-based roadmap  Estimate high level costs of the implementation  Develop a consolidated business case Conduct executive briefings to validate the business case and the roadmap 4© 2012 SAP AG. All rights reserved. 24
    • 24. Build a Value Roadmap in Partnership with SAPSuccessful implementation of an overall vision requires attention to the Value of eacharchitectural component in cooperation with the Feasibility (dependencies, risk, skills andcapacity constraints required for execution) High Deposits Mortgages (£ X-Y M p.a.) (£ X-Y M p.a.) Mobile Banking Loans (£ X-Y M p.a.) (£ X-Y M p.a.) Phase 1 Mobility Platform for Sales Enablement Value (£ X-Y M p.a.) Online Banking (£ X-Y M p.a.) Payments Phase 2 (£ X-Y M p.a.) Phase 3 Customer Billing (Out of scope area) Feasibility High© 2012 SAP AG. All rights reserved. 25
    • 25. Characteristics of a Great Business Case Key Questions Addressed  What are the strategic priorities? Why?  What challenges prevent us from achieving them?  What is the scope of what we are trying to achieve? What?  What is the recommended solution & associated benefits and cost?  How should we estimate benefits and costs? How?  How do we prioritize initiatives to build a high-level roadmap? Proof  What other similar case studies can we reference? Is our approach achievable?© 2012 SAP AG. All rights reserved. 26
    • 26. The Business Case Has To Consider All IT and BusinessBenefits and CostsTypical Quantitative Benefits Improved revenues from differentiated products (improved time to market, Ongoing customer-centric innovative products and pricing, cross-sell, up-sell, new Business + Effects + acquisition) + Improved business productivity from harmonization (via automation, process streamlining, shared services or reduced demand) and improved compliance + Net savings from avoided business projects no longer required + One-time Effects Savings from consolidating the IT platform (ongoing license costs, associated infrastructure costs of retired applications) Gross cash Ongoing flow + Effects + Improved IT staff productivity and reduced external spend from harmonization ( via competency centres and skill pooling, reduced need for operations, maintenance and integration) + Net savings from avoided IT projects no longer required + Implementation costs of single platform (including system integration) Internal and External resources - Project Management, Design, Build required functionality (customization, interfaces) + IT - Additional license costs and infrastructure + One-time Training and change management Effects Migration© 2012 SAP AG. All rights reserved. 27
    • 27. Agenda Why Core Banking Transformations What makes Core Banking Transformations Different Best Practices in Managing Core Banking Transformations – SAP ASAP Methodology Case Example – CBA, etc. Value Management in Core Banking Value Management Approach Example of Business Case Development: Differentiated Products© 2012 SAP AG. All rights reserved. 28
    • 28. SAP can help Banks Launch Differentiated Products with Customer centricproduct bundling, pricing and complex features Wish List 1. Product definition without Programming 2. Flexible definition of fees and charges 3. Customer oriented pricing 4. Easy to define „Campaign offers‟ SAP Solution Enablers 5. Product packages Advanced Product Configurators  New products and conditions without any programming effort  Flexible segmentation pricing through differentiation categories Product bundling  Customer-oriented pricing through Master Contract Management  Package combining different products such as deposits, securities and cards© 2012 SAP AG. All rights reserved. 29
    • 29. Differentiated products (1/2)Key challenges and solution enablers Pain Points Solution enablers System  Multiple product systems (deposit, loan, collateral  Single product system etc.) with multiple terms and conditions, duplicated  Wide range of banking products currently supported features, islands of functionality Product  Inability to respond quickly to future, unforeseen  Flexible product configuration tools definition changes in requirements and market conditions.  Development, testing and deployment of complex products Requires new transaction types, new features, new without programming effort terms and conditions (own innovation as well as replicating market-leading products quickly)  External rule definitions to define products, pricing and bundling, which can be restricted to certain customer segments or channels  Time to market is too long and cost of deploying new products too high  Offer multi-branding and white-labelling  Respond to evolving banking regulations Pricing and  Lack of flexibility to price products and define  Ability to price products based on customer value charging product arrangements based on individual, commercial or retail customer requirements  Takes too long to make pricing changes based on competitive and other external pressures© 2012 SAP AG. All rights reserved. 30
    • 30. Differentiated products (2/2)Key challenges and solution enablers Pain Points Solutions enablers Bundling  Inability to re-use existing products  Ability to provide groupings based on customer requirements  Creation of new product required  In future Customer-initiated product bundling – premier  Inability to support complex products (ex: complex customers given a menu of product and service options to mix- loan) and-match to create own bundles  Inability to easily sell and service product bundles and price based on total bundle Offering  Inability to provide products by customer groups  Ability to define product arrangements by customer type e.g.,  Inability to acquire new customers, retain existing flexibility to comply with complex rules for sweeping of funds customers and look for ways to increase product externally and internally to meet the needs of large corporates, penetration rates all at the same time ability to define flexible terms and conditions of loans Reporting  Inability to provide a 360 degree view of customer  Advanced analytics and reporting by product holdings, inability to provide accurate  Reporting by product bundle as well as a drill-down into reporting on profitability of products and product individual components bundles© 2012 SAP AG. All rights reserved. 31
    • 31. Differentiated Products: Examples of Tangible Value Company SAP Footprint Benefits achieved  SAP Deposits Management  Reduced time to market of new products from several  SAP Loans Management months to a couple of weeks  SAP Financial Database  End to end product creation  SAP Bank Analyzer  Fewer products, more features = more choice  SAP Deposits Management (from 16 to 9 retail products)  SAP Loans Management  Staff saving product linked to customer  SAP Collateral Management satisfaction score  Rapid product introduction through test launches in controlled release areas  SAP Deposits Management  Reduced time to launch new products, from 6  SAP Loans Management months to 2 months  SAP Collateral Management  Cash pooling services implemented in 1,5  SAP ERP months© 2012 SAP AG. All rights reserved. 32
    • 32. Differentiated Products :  Tangible Benefits Value Source Baseline Improvement % Benefit Increased revenues through improved time to market €M1 40-50% €M Incremental revenues from products not currently available (e.g., € M2 100% €M offset mortgages, multi-currency loans, 3rd party products bundled with own, etc) Increase in new customer acquisition due to improved pricing, € M3 2-3% €M customer-initiated product bundling Reduced customer churn due to improved pricing € M4 10-15% €M Increased cross selling due to improved pricing and product € M5 10-25% €M flexibility Improved productivity of new product development staff € M6 60-80% €M Improved productivity of product maintenance staff (IT plus € M7 60-80% €M business) Reduced cost of training new sales and service staff due to € M8 30-40% €M streamlined product catalogues ( no duplication) and simplified user interfaces Reduced cost of monitoring product features and conditions e.g., € M9 20-30% €M low activity on mandatory current account associated with a low- cost credit card Retrieve lost revenue on products with violated conditions due to € M10 5-10% €M better monitoring Total One-Time Impact € X- Y M • Assumptions: Total Annual Impact € X- Y M© 2012 SAP AG. All rights reserved. 33
    • 33. Thank you Kanika BahadurContact information: Business Development BankingJesper Behr EMEASolution Management – Transactional Banking SAP UKSAP AGjesper.behr@sap.com kanika.bahadur@sap.com+49 171 308 52 08 +44 780 857 57 39
    • 34. Questions & FeedbackTweet #SAPBanking www.blogs.sap/banking @SAPforBanking

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