Business Process Improvement Trends in Financial Services

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Business Process Improvement Trends in Financial Services

  1. 1. Business Process Improvement Trends in Financial Services Guillermo Kopp Vice President Financial Services Strategies and IT Investments, TowerGroup
  2. 2. Agenda <ul><ul><li>Macro Drivers in Financial Services </li></ul></ul><ul><ul><li>Regulatory Mandates and Enterprise Processes </li></ul></ul><ul><ul><li>Leveraging Six Sigma, Lean and BPM </li></ul></ul><ul><ul><li>Business Performance and Process Management </li></ul></ul>Business Process Improvement Trends in Financial Services Source: Harvard Business Review
  3. 3. Macro Drivers in Financial Services
  4. 4. Operational Efficiency at Diversified FSIs: Simplicity and Standardization Source: TowerGroup Average = 60.3% UBS Bank of America JP Morgan Chase Wells Fargo RBS HBOS Santander Soci é té Générale BNP Citigroup Merrill Lynch Unicredit RBC Gruppo MPS Caisse d’Epargne Deutsche Bank HSBC Wachovia BBVA Lloyds TSB Cost / Income Ratio IT Spending (Bubble size proportional to Operational Expense) Significant Change 2003–2004 Improvement Deterioration
  5. 5. Mergers Are Concentrating on Growing Asset Size While Reducing Expense Total Assets (USD in Billions) 12/31/2004, Growth 2004/2003 Source: TowerGroup 6.2% 4.4% 16.9% 4.5% 7.5% 2.3% 3.5% 9.3% 6.1% 8.2% 3.2% 10.3% 8.8% 20.8% 5.5% 13.7% 53 62 80 84 91 95 95 99 139 159 195 428 493 1,110 1,157 1,437 M&T National City MBNA SunTrust PNC US Bancorp Regions Wells Keycorp Wachovia BONY B of A Fifth Third JPM BB&T Citigroup Total Assets >$50 Billion (USD Trillions) CAGR = 9.6% Bank One (326) Fleet (200) SouthTrust (52) National Commerce (22) Provident (17) Union Planters (32)
  6. 6. Consumer Banking and Wealth Management Drive Revenue Growth (in Local Currency) Revenue Growth (Full Year 2004 versus Full Year 2003) Source: TowerGroup Revenue Velocity (1 st half 2004 versus 1 st half 2003)
  7. 7. Who Owns the Customer? FSIs Tap a Virtuous Circle of Value Creation Customer Business Processes Behavioral Traits Knowledge Fair Treatment Responsiveness Ethics FSI Culture Valued Experience Governance Vision Simplicity Relationship Pricing Easy Access (24 X 7) Trust Network Operators Retailers Service Providers Manufacturers Leadership Proactive Alerts Source: TowerGroup FSI Staff Technology
  8. 8. Regulatory Mandates and Enterprise Processes Source: NASA
  9. 9. Risk Management and Compliance: Mindless Regulations or FSIs Out of Control? Culture and Ethics Corporate Governance Reputation and Trust Regulatory Capital Regulatory Mandates Enterprise Resilience Relationship Pricing Real-Time Architecture Economic Capital Source: TowerGroup Penalties and Losses Redundancy Data Integrity Public and Government Scrutiny Policies and Procedures Business Processes Technology Solutions IT and Operational Infrastructure Overall Value Enterprise Risk Management Business, Product, and Location Silos
  10. 10. Basel II and Enterprise Risk Management: Economic Capital versus Regulatory Capital Source: TowerGroup $53 billion $277 billion $62 billion Transformation $107 billion Compliance Waste $25 billion Capital 3-year History
  11. 11. ERM Solution Layers Must Fulfill a Compelling Business Purpose Source: TowerGroup Business Goals Business Processes IT Infrastructure Applications Enterprise Strategies ERM Reporting Modeling Rules Transactions Data
  12. 12. Leveraging Six Sigma, Lean, and BPM Source: European Southern Observatory
  13. 13. Enterprise Architectures Provide a Road Map for Efficiency and Alignment Source: TowerGroup Regulation Product Innovation Networked Services Location Product Line of Business Relationship Customer Process Risk Offering Inefficient processes and IT Enterprise Processes Enterprise Processes Risk Relationship Customer
  14. 14. Expectations and Perceptions of Financial Services Customers Are Shifting Personalization - Multimedia - Self-Service Real-Time Delivery Channels - High Touch Enterprise Risk Management Lead and Referral Management Straight Through Origination Dynamic Products and Pricing Real-Time Data Integration 15% Gap in Customer Satisfaction Source: TowerGroup Customers Holistic View of Business and Technology Customer Acquisition and Relationship Management Product Processing and Analytics Sales and Customer Service Knowledge Management Financial Management and Control Business Process Management Enterprise Integration Architectures Technology Capabilities
  15. 15. Discrete Business Processes Give Rise to Specialized Functional Components <ul><li>Business Process Outsourcing (BPO) </li></ul>Source: TowerGroup <ul><li>Current Examples: </li></ul><ul><li>IBM: Component Business Model </li></ul><ul><li>Unisys: 3D-Visible Enterprise </li></ul>Modular Implementation (Verticalized) Policies and Procedures Business Processes Technology Solutions IT and Operational Infrastructure Holistic Functionality Estimated Global IT Spending by FSIs in 2010: USD 450 Billion Estimated Global BPO Market Opportunity by FSIs in 2010: USD 100 Billion <ul><li>Insurance Policy Administration </li></ul><ul><li>Claims Processing </li></ul><ul><li>Mortgage Origination and Servicing </li></ul><ul><li>Payments Transaction Processing </li></ul><ul><li>Collateral Management </li></ul><ul><li>Investment Funds Administration </li></ul><ul><li>Trade and Securities Services </li></ul>
  16. 16. Account Opening: FSIs Improve Core Processes <ul><li>Superior client experience </li></ul><ul><li>Client signs only once </li></ul><ul><li>Broader and deeper relationships </li></ul><ul><li>Wider range of products </li></ul><ul><li>Consistent and streamlined process </li></ul><ul><li>Higher productivity and information accuracy </li></ul><ul><li>Most client data are prefilled (once and done) </li></ul><ul><li>Flexibility to add new accounts and products </li></ul><ul><li>Fewer errors and documentation exceptions </li></ul>Source: TowerGroup Accounts Effort (hours) 80% Reduction
  17. 17. Business Performance and Process Management Source: NASA
  18. 18. A Holistic Dimension of Optimized Business Processes Maximizes Customer Value Source: TowerGroup Locations Cards Mortgages Trade Finance Liquidity Structured Fin. Asset Mgmt. Legacy Systems Cards Mortgages Trade Finance Liquidity Structured Fin. Asset Mgmt. Cards Mortgages Deposits Retail Banking Trade Finance Liquidity Credit Wholesale Banking Structd. Fin. Asset Mgmt. Brokerage Wealth Management Settlement Batch Online Payments Enterprise Workflow Management Exception Management Utilities Streamlined Business Processes CUSTOMER Value Enterprise Integration Overall Value
  19. 19. Vertical Process Improvements Add Value Holistically Across the Enterprise Source: TowerGroup Loan Processing Policies and Procedures Business Processes Technology Solutions Infrastructure Holistic Functionality Retai l Weal th Wholesale Payments Enterprise Overall Value Expense Revenue Satisfaction Productivity Quality
  20. 20. Representative Providers Across BPM and Vertical BPO, Financial Services (2005) HORIZONTAL BPO: Human Resources, Finance & Accounting, Procurement INSURANCE MORTGAGES CARDS ASSET MGMT. RETAIL BANKING TRANSACTION PROCESSING PRODUCT ADMINISTRATION CUSTOMER SERVICE BUSINESS PROCESS MANAGEMENT (LAYERS) BUSINESS SERVICES Source: TowerGroup
  21. 21. Enterprise Transformation Road Map: Core Banking Takes Center Stage (Projects and Timelines are Indicative) Source: TowerGroup 3Q’07 1Q’05 3Q’05 1Q’06 2Q’05 4Q’05 2Q’06 3Q’06 4Q’06 1Q’07 2Q’07 4Q’07 Customer Interaction Branch Automation C D E F Call Center Enhancements C D E F F Multichannel Delivery C D E IT Governance and Tactical Projects Maintenance and Production Support Enterprise ERM and Financial Management C D E F D Design Concept C E Execution F Finish Project Phases: F Multimedia Alerts D E C F Business Intelligence D E C F Business Process Management D E C Deposits, Lending, Treasury, Trade Finance, Asset Management C D E F Core Banking
  22. 22. Questions… ? [email_address] Thank You!
  23. 23. Business Process Improvement Trends in Financial Services Guillermo Kopp Vice President Financial Services Strategies and IT Investments, TowerGroup
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