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Smarter lending leads to Business Agility

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This presentation was given during Impact 2012 in Mumbai by Mr. Mike McChesney, Global WebSphere Business Agility Tiger Team.

This presentation was given during Impact 2012 in Mumbai by Mr. Mike McChesney, Global WebSphere Business Agility Tiger Team.

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  • IT analysts recognizes the need for BPM to be inclusive of a variety of capabilities and that BPM Suites must be sensitive to the type of business you have. Forrester recognizes three types of processes – Human Centric, Document Centric and Integration Centric. Recognizing IBM’s breadth of capability across all these areas, Forrester has rated IBM a leader in it’s most recent “Wave” evaluations for BPM vendors in each of these areas.
  • ECM – data capture, content analyticsODM – Rules, Events
  • i/OS App:Simple task forms and intelligent “coaches” guide user inputsAttach supporting documents and images to any process taskImprove productivity among business stakeholders through dynamic communication of activities – reduce ‘back channel” emails, messages, etc.Improve productivity among business stakeholders through dynamic communication of activities – reduce ‘back channel” emails, messages, etc.Attach supporting documents and images to any process taskSimple task forms and intelligent “coaches” guide user inputs

Smarter lending leads to Business Agility Smarter lending leads to Business Agility Presentation Transcript

  • Lending Business Agility Mike McChesney Global WebSphere Business Agility Tiger Team Smarter Lending© 2011 IBM Corporation
  • Agenda Lending Business Agility Mike McChesney  IBM POV- Dynamics in Banking/Lending Global WebSphere Business Agility Tiger Team  WHY BPM  IBM BPM in Lending  IBM Capabilities and Architecture Smarter Lending© 2011 IBM Corporation
  • Business Agility for Smarter LendingThere are dramatic forces of change across financial institutions… ECONOMY TRUST Weak conditions impact Rebuilding trust and investment decisions and confidence across the reduce need for financial system is critical to future services growth and stability COMPETITION REGULATION Intensified competition Radically increased with increased oversight ushering in a M&A, divestitures and new era of increased entrance of non-bank government intervention service providers CLIENTS CAPITALIZATION Rapidly evolving Mature markets and expectations for emerging markets alike offerings, service focus on rebuilding their unbiased advice, and capital reserves convenience © 2012 IBM Corporation Smarter Lending 3
  • Business Agility for Smarter Lending ….Impacting the world‘s most complex system. • A global system moves more than $74T of money each day • A financial supply chain that is Financial massively interconnected and institutions interdependent • Public and private partnerships Compliance Surveillance and monitoring are suboptimal cross-border Soundness Regulators Supervisors and within borders Stability • System requires 24/7 Laws and continuous flow of information rules Standards • Rapid increase in types of data Policy makers entering financial system from ―real economy‖ digitization • A criminal element that grows more sophisticated • In total the system intermediates the needs of billions of people in 190 countries in thousands of languages. An adaptive system evolving organically © 2012 IBM Corporation Smarter Lending 4
  • Business Agility for Smarter Lending The need and opportunity for progress are clear… 50% 93% 25 billion Percentage of of the 285 million Global trading systems customers who would electronic attacks are are under extreme give their bank only focused on the finance stress, handling billions two chances to fail sector, and well over of market data before considering half were detected by messages each day. a change in banks. third parties 90% $1M in fraud 21x reduction eliminated more > > in manual each month messages > > process Streamlined operations: Large US Retail Bank: Automated trading: Bank of New York Mellon Financial Crime TD Bank Financial Group The bank streamlined On the second day of IBM developed a first-of-a- operations to achieve a production, the new system kind system capable of 90% reduction in manual prevented $500k in a single consuming, analyzing and touch points in the check- transaction, a additional acting on real-time market clearing process—cutting $733k of activities in the first data while maintaining sub- processing errors and month and confirmed $1M on millisecond response times required remediation. a monthly basis. even under extreme data loads. © 2012 IBM Corporation Smarter Lending 5
  • Business Agility for Smarter LendingWith a unrelenting focus on the client the imperatives forfinancial services are threefold… CAPITAL AND LIQUIDITY COST AND COMPLEXITY RISK AND TRANSPARENCYCapital Cost base Risk exposures Raise capital through public and  Evaluate headcount &  Address risk private investment compensation models, scenarios, stress testing Reduce leverage  Rationalize recent mergers & and model input weaknesses acquisitions  Improve governance modelsLiquidity Strategic simplification Risk portfolio management Utilize government liquidity  IT Modernisation  Ensure comprehensive, accurate facilities Leverage alternative forms of  Outsource non-core components and timely data  Create a risk-based culture financing PartnershipsM&A  Reduce the IT/business Transparency > > disconnect  Analyze and report enterprise- > Jettison all but core assets / > restructure business model  Standardize vendors wide risk positions  Connect to new utilities  Proactively create transparency Reduce government ownership for regulators, shareholders and over time (if applicable) clients © 2012 IBM Corporation Smarter Lending 6
  • Business Agility for Smarter LendingTowerGroup Top 10 Technology Initiatives forConsumer Lending (2011) Business Drivers Strategic Responses •Unprecedented regulatory compliance change •Shift to nondiscretionary compliance IT projects •Regulators seeking standardized, transparent •Continue improving risk management processes and rationalized data •Delay new IT and core systems replacement •Weak economic recovery; sovereign debt crisis •Reexamine core processes and channel choice •Flat to declining loan demand and revenue, housing •Promote information transparency and clarity market dynamics •Focus on customer segmentation, evaluation, and •Asset-backed securities (ABS) investor information retention requirements/lawsuits •Ongoing FSI failures and consolidation •Burden of distressed asset management/lawsuit Top 10 Technology Initiatives for Consumer Lending (2011) New, maintenance, Integrated credit, Core lending systems Data management for Analytics and and replacement collateral, and fraud transformation business intelligence optimization for technology for risk management loan decisioning compliance Enterprise content Refined view of Redefining and Multichannel lending Mobile lending and and process customer relationship restructuring core and servicing servicing management and value processing IT and realignment operations Source: TowerGroup © 2012 IBM Corporation Smarter Lending 7
  • Business Agility for Smarter LendingMortgage Industry TrendsThe ugly, the bad, the goodThe ugly….. Loss Mitigation and Foreclosure The politics of housing and the future of the GSE‘s No private securitizationsThe bad… Changing regulatory environment QRM Origination cycle timesThe good….. New book is best ever with high quality loans and high borrower FICO scores Low rates keeping volumes up Survivors are poised to capture new opportunities in a consolidated market New business models © 2012 IBM Corporation Smarter Lending 8
  • Business Agility for Smarter Lending Customer Satisfaction Declines As Loan Application Timelines Increase (2008-2010)(Days From Mortgage Application To Loan Closing) 757 739 734 Customer Satisfaction Rating (1) 52.1 46.9 30 +16.9 +7.5 Source: JD Power, TowerGroup analysis (1) Customer satisfaction rating measured on a scale of 1 to 1000 © 2012 IBM Corporation Smarter Lending 9
  • Business Agility for Smarter Lending … But banks are bottlenecked by growing IT complexity and lack of capacity to meet the demands of the business The need for visible and flexible connections across the lending ecosystem (customers, vendors, partners) Proliferation of rigid packaged and "homegrown" loan applications Exploding volume of unstructured information Time to market to capture market opportunities Lending platforms vs. product silos 360 degree view of the customer Common rules across platforms and products Real time decisioning Process standardization and reuse Collaboration with business users IT organizations must deliver shared and Measured on business outcomes reusable solutions more quickly and at lower cost © 2012 IBM Corporation Smarter Lending 10
  • Business Agility for Smarter Lending Why IBM Business Agility & Smarter Lending? INSTRUMENTED INTERCONNECTED INTELLIGENT SMARTER LENDING + + = Financial products are A smart bank is built A smart bank enables A smart bank decomposed and on systems that the rapid, intelligent anticipates client managed at the advance processing to analysis of a vast mix needs and delivers atomic level, allowing better automate of structured and innovative products the participants to transactions with unstructured data to more quickly and measure, control, sen counterparties, partne improve insight, consistently than the se and respond rs and suppliers to enable informed competition. It can quickly and precisely enable innovation judgment and fight respond nimbly to based on a ―single across the value abuse. changes in market source of truth.‖ chain. conditions. © 2012 IBM Corporation Smarter Lending 11
  • Agenda Lending Business Agility Mike McChesney  IBM POV- Dynamics in Banking/Lending Global WebSphere Business Agility Tiger Team  WHY BPM  IBM BPM in Lending  IBM Capabilities and Architecture Smarter Lending© 2011 IBM Corporation
  • Business Agility for Smarter Lending McKinsey 2012 Survey: Process is King Even in their dreams, they put process above creating new products and services! McKinsey 2012 Technology Survey of 927 IT and non-IT Executives, December 201113 © 2012 IBM Corporation Smarter Lending 13
  • Business Agility for Smarter Lending IBM is the Undisputed Leader in All Things Process IBM #1 in BPM with 24.7% market share IBM #1 in Rules © 2012 IBM Corporation Smarter Lending 1414
  • Business Agility for Smarter LendingChallenges of Traditional Process Management Processes inside applications – Processes are rigid and costly to change – IT changes needed lag far behind – With passage of time, changes may no longer be relevant Processes that span applications and organizational boundaries – Any changes have implications across all applications – Inefficient and ineffective processes remain long after the need for change has been recognized Managed manual processes – No automation exists to enable on-the-fly process changes – No automation exists to trigger processes based on events or patterns Ad-hoc processes – Most systems are not equipped to capture ad-hoc work – Most ad-hoc processes often not tracked or monitored – Costs remain hidden and ad-hoc processes remain ad-hoc Opportunities for business optimization and business innovation are lost © 2012 IBM Corporation Smarter Lending 15
  • Business Agility for Smarter Lending Business Chaos Begs for Process Improvement Customer Service Finance 1. Informal tasks and Account Administration and Ops communication (e.g. Paper or email) Executive Management 2. Inefficient working environment spans systems 3. Inconsistent prioritization 4. Inconsistent decision making Invoice 5. Incomplete or inaccurate Reconciliation Teams data flow between systems 3‘rd 6. Lack of control over system Party and business events Services (exceptions) Passport 7. Poor visibility into process Oracle performance 8. Tribal Knowledge QA Customer Problems: • Cannot grow efficiently • Poor customer satisfaction • Limited visibility16 © 2012 IBM Corporation Smarter Lending 16
  • Business Agility for Smarter LendingProcess and Decision Management Bring Order to Chaos Finance 1. Automatically prioritize and and Ops route work Risk Management Teams Account Executive 2. Guide users through Administration Management decisions 3. Standardize resolution across geographies Customer Service 4. Leverage existing systems and data 5. Monitor for business events and initiates action 6. Real-time visibility and PROCESS process control 7. Automate decisions 8. Reduce errors and improve accuracy 9. Improve consistency across geography, channel, division … Customer Benefits: • Huge reduction in manual interactions • Faster Issue Resolution • More flexible, responsive systems © 2012 IBM Corporation Smarter Lending 17
  • Business Agility for Smarter Lending The Essential BPM Capabilities • Modeling Finance Customer Executive and Ops Service Management • Monitoring Account • Automation Administration Risk Management Teams • Governance • Optimization • Rules • Business Data • Documents • Events • Integration • Collaboration • Analytics © 2012 IBM Corporation Smarter Lending 18
  • Business Agility for Smarter LendingBPM Capabilities Agenda Process Discovery/Analysis/design Process orchestration and Active Content Decision Services-Rules and Events Process Visibility © 2012 IBM Corporation Smarter Lending 19
  • Business Agility for Smarter LendingThe BPM Lifecycle Empowers Business and IT to Collaborate andContinuously Optimize Processes Deploy, Execute, and Change  Automate processes to improve operational efficiency and profitability  Adapt and collaboratively respond to changeProcess Discovery Continuously Optimize Monitor, Analyze, and Modeling Predict and Act Sales Operations Partners Finance Assess, capture, and  Monitor implemented analyze core processes process performance Align business strategy End-to-End Processes  Track metrics to and IT execution measure and optimize business operations  Guided optimization Governance and Compliance Manage and reuse shared services to streamline development and deployment Maintain business and IT consistency as well as organizational and regulatory policy © 2012 IBM Corporation Smarter Lending 20
  • Business Agility for Smarter Lending Process Analytics and Social Collaboration in Real Time 4 1 3 Performance Data Warehouse 1. Single BPMN model drives monitoring as well as execution 2. Data analysis performed 2 continuously on-the-fly 3 Real-time visibility. to tasks, SLAs in jeopardy Process Server 4. Visualize ―hot spots‖ on diagram BPMN Rules Monitoring BPEL ESB and drill down for insights and optimization Out-of-box Configurable Optional Process Portal Business Space Microsoft Add-ons © 2012 IBM Corporation Smarter Lending 21
  • Business Agility for Smarter LendingRules and Events Enable Optimized BPM Solutions Automate, manage and govern operational decisions Event Management: Implements Action: Upsell to otherEvent: Customer Loan Request pattern detection based on an event products/services history – as data set evolves, what of interest is transpiring? Business Event Processing Automated Evaluate and Automated Detect Events: Detect Create Actions: Enrichment Enrichment PatternsCall out for a decision How can we ‗personalize‘ the offer based on client behavior? What terms and conditions should we offer the client? Rules Processing Business Rules Management: Rule Flow Implements a decision model - Business Rules given a snapshot view of Decision Tables data, provides decision services representing best course of action © 2012 IBM Corporation Smarter Lending 22
  • Business Agility for Smarter LendingExtend Visibility with Business Activity Monitoring Understand up-to- minute business Identify performance by trends, forecast monitoring KPIs events, make smart choices Detect, respon d rapidly to change Continuously improve key Customize business dashboards processes easily Rebalance human workload on the fly Leverage mobile devices © 2012 IBM Corporation Smarter Lending 23
  • Business Agility for Smarter LendingInstrument “Shadow Processes” IBM Business Monitor Oracle BPM Third Party Decision Anything! Solutions Connections Services © 2012 IBM Corporation Smarter Lending 24
  • Business Agility for Smarter LendingBPM Projects from Inception to Production in ~90 Days • BPM Analysts (1) • Engagement Manager (1) • Infrastructure Specialists (1) • Add BPM Developers (2) • Add Technical Architect (1) • + Infrastructure Specialists (1) Weeks Week Week 1 Weeks 2-3 Weeks 4 to 10 11 to 12 13 Detailed Discovery Iterative Development with frequent Playbacks Test Go Live Requirements Agreement on Agreement on Agreement that Technical Agreement on Data,Checkpoints Project Scope & Process Flow and Process Meets Validation and User UI, and Integrations Goals Routing Business Goals Acceptance PLAYBACK 0 “Define the Process” • As-Is and To-Be Process Maps • User Stories • Problems and Pain Points • KPIs/Metrics/SLAs PLAYBACK 1 Series PLAYBACK 2 Series PLAYBACK 3 Series • Opportunities for “Build the Process” “Connect into the “Refine the Delivery” Improvement Infrastructure” • Process Triage • Author the Business Process • Model Corner Cases • Process Charter and ROI Model • Data Flow Through • Expanded Search Capabilities • Define the Roles / Participants • Other Systems of Record • Build Metrics and Performance Reports • Define the Data Elements / • SMTP (Tuning and Measurement) Variables • Data Warehouse • Other types of Processing Automation • Configure the Screens • LDAP / SSO • Feedback from Playbacks • Model the Rules across the • EAI Screens and Model Playbacks = Running the process for an audience of 1+. The main playbacks are for sign-offs of the whole Business+IT team. There are more frequent playbacks, daily/weekly etc., for smaller audiences throughout the project. © 2012 IBM Corporation Smarter Lending 25
  • Business Agility for Smarter LendingAgenda IBM POV- Dynamics in Banking IBM BPM IBM BPM in Lending IBM BPM Capabilities and Architecture © 2012 IBM Corporation Smarter Lending 26
  • Business Agility for Smarter LendingLenders are responding to challenges by utilizing strategic leversincluding process, organizational and technology capabilities End-to-end Business Levers Process standardization and Organizational flexibility automation Documentation & GBD Planning Origination Underwriting Booking Servicing Closing 0.00 0.00 0.00 0.00 0.00 0.00 Segment Analysis & Evaluate Origination Multi-channel Servicing Platforms Plan Loan Decisioning Preservation & Retention Planning Strategy Process Policy Definition 0.00GBD Technology 0.00 0.00 Plan Origination Channel Evaluate Documentation Customer Retention Plan / Direct Planning strategy 0.00 Processor & Closing Processes Strategy 0.00 Event Management 0.00 Evaluate Personnel 0.00 0.00 Proceeds dispersement 0.00 Evaluate Personnel Profiles / Models Risk Mgmt & Disaster channels Decision Maker Recovery Planning Profiles / Models Organic Cross-Sell Executive Management 0.00 0.00 0.00 Workflow Tracking & 0.00 0.00 0.00 GBD Governance Capture Services Legal & Compliance Content Access & Statistics Requirements Protection Tracking & Reporting 0.00 0.00 GBD Performance Compliance Tracking Regulatory Monitoring Branch Officer Monitoring & Regulatory 0.50 0.00 0.00 Underwriting Document Quality Reporting Legal & Compliance 0.00 Access Protection & SLA Metrics Control / Govern Assurance Management 0.00 0.00 0.00 0.00 0.00 0.00 Security Monitoring Documentation Policies Credit Policies File Retention Customer Satisfaction Version Control 0.00 0.00 Customer Satisfaction 0.00 Management Metrics Policies & Procedures Documentation Policies Metrics 0.00 0.00 0.00 0.00 0.00 0.00 Identify Customer Needs GBD Systems Analyze & Spread Compile Loan Perfect Collateral Advances/Borrowing Administration 0.00 Financials Documentation Solution Loan Offering BPM 0.00 Prepare / Discuss Term 0.00 0.00 0.00 0.00Review executed 0.00 GBD Facilities, Billing & Payments Sheet Review documentation documents Infrastructure, and 0.00Collect Customer for completeness Generate Loan Closing 0.00 0.00 Operations Documentation Documents Create new loan Loan Maintenance 0.00 0.00 Document Imaging & 0.00 Determine credit account record GBD Security Administration Archiving worthiness of applicant 0.00 0.00 Create new customer 0.00 0.00 0.00 0.00 Collections & Recovery Execute Decision deal record and authenticate Review Closing GBD Disaster Recovery Disperse Funds 0.00 0.00 Documents 0.00 Application Processing Loan Committee Customer Inquiry 0.00 0.00 Evaluate Customer Approval 0.00 0.00 Research Execute Documents Creditworthiness 0.00 0.00 0.00 0.00 Loan Recommendation GBD Staff Administration Documentation Filing & 0.00 Customer Archiving Collateral Release / Create Preliminary Loan Post Closing Review Communication Payoff Packet & Submit Loan Request 1 Technology integration Customer service and support Marketing Loan Origination Lending Origination Process Flow Client and Product Data RM & Client RM & Underwriter Credit Officer RM Product Marketing & Identification Closing/ Selection/ Due Diligence Fullfillment Funding Sales of Client Booking Validation Underwriting Workflow and Service Orchestration  RM identifies potential client  RM works with Underwriter to  Officer initiates CROP process  RM forwards executed needs for credit detail out discussion document to review credit deal and documentation to KEO determine pricing Client Insight Risk Analysis Tools  Credit documents updated in loan services systems DEMOGRAPHICS Current Accounts : RELATIONSHIP Management Name: John Doe Age 48 : Addr: 1234 Main Ave Cleveland OH44113 Acct # Product Balance APR/APY Remarks 12345363 DDA80 $123.00 0.5% Lending Services Cust Since: 4/30/1997 Employer: ACME Corp Phone: (216) 621-1111 (Home) Do Not Call 23425223 CDA12 $2,500 ..00 2.6% (216) 970-9988 (Cell) 12121212 ALS85 $12,532..78 8.2% E-Mail: jdoe@gmail.com . Preferred Channel TOTAL: CREDIT $12532.78 DEP: $2612.00 Value Segment FOCUS : Profitability: XXXXXX Closed Accounts Net Worth: $999999 Acct # Product Date Closed Annual Income: $99999 12345363 DDA80 May 12, 2009 Data Missing for: 23425223 CDA12 June 6, 2009 Marital Status Home Owner # Profile 80% Cell Phone Complete Products/ Document INTERACTIONS INSIGHTS Closing  Underwriter develops credit Recent Contact History (Past 6 months): 6/10/09 Profile Updated Products Needed : 5/20/09 Product Inquiry CD Overdraft protection Fees Selection/ Credit Vendor Services 5/14/09 DR Card PIN Reset Rewards Debit Card Savings Account Eligibility 5/01/09 NSF Fee Waiver request 4/12/09 Product Inquiry IRA Investment Account Conditions Recent Transactions : 5/26/09 DDA 100082109 60 D ATM Key 4910 Tiedeman .00 Current Pre-Approved Offers - : Pre-Approved KEO PCL, Auto Spring Offer , deal based on risk rating and Printing/Delivery 5/20/09 DDA 100082109 5/17/09 DDA 100082109 5/10/09 SAV 100003231 5/10/09 DDA 100082109 1,000.00 C Direct Deposit 87 D Bill Pay .47 500 C Transfer in from DDA .00 500 D Transfer out to SAV .00 Current Eligible Mass Offers : Continental One Pass25,000 Mile DDA Offer $150 KP Gift Card DDA Offer CREDIT DEPOSIT HOT DEALS SCRATCH PAD 2D analysis tools Property  New data feeds (e.g. industry Portfolio Monitoring Valuation/ Pooling/  Credit deal reviewed by credit Pricing Compliance eSign Funding  RM develops credit offer data) integrated into analysis Financial Analysis Syndication authorities and approved based on full client relationship and deal Decision/Rules structure Commercial Workflow What If/ Insurance/Tax/ Client Profile 2.0 - Screen Shot RM & Client Engine Loan Import Doc Tracking Analytics Client Client Customized Solutions Calculations Escrow Client Information Financial Statement Financial Goals & Follow-Up John Doe 155 W. Elm Street XXX-XX-XXXX XXX-XX-XXXX (213) 551-0000 (213) 555-2323 XXX-XX-XXXX XXXXXXXXXX Cell: $250,000 John_Doe@gmail.com X RM XYZ Biz Opportunities 230 Cherry Tree Lane (213) 530-8484 (213) 222-1212 X  Risk on deals monitored on John.Doe@XYZBizOps.com 2 1 Banking Relationship ongoing basis based on Weekday Evenings Client Relationship Builders preloaded data Integration Framework-Internal and External Interfaces Exit Process Request Print  RM communicates credit deal &  Risk data preloaded into conditions to client  RM initiates data gathering in discussion document by discussion document integrating with workflow  Client accepts credit deal and signs closing documentation © 2012 IBM Corporation Smarter Lending 27
  • Business Agility for Smarter LendingIBM is partnering with our clients to create innovative solutions thatwill capture the value of their investment in Smarter Lending solutionsExample: Smarter Lending Life CycleThe current process is complex, inefficient and fragmented across multiple differentsystems. The benefits of optimizing this can be applied to many other processes. Rapid Product Innovation Dynamic Offer Origination Predictive Mgmt/Sales Servicing and Analytics Settlement © 2012 IBM Corporation Smarter Lending 28
  • Business Agility for Smarter LendingThree Requirements of Smarter Lending ….  Deliver a rich, targeted customer experience  Achieve truly integrated risk management  Build flexible process and systems, integrate smarter decisionsCreate Desired Business Outcomes  Improve product marketing, delivery and customer management  Optimize account opening through multiple channels to enhance customer experience  Increase customer acquisition and retention rates at pricing that maximizes profitability  Improve customer experience with integrated case management and exception processing  Optimize operational efficiency with STP and process improvement  Enhance risk and compliance management © 2012 IBM Corporation Smarter Lending 29
  • Business Agility for Smarter Lending Lender Business Architecture-Origination Example IBM has developed a flexible and scalable business and technology architecture to support lender origination Marketing Loan Origination Client and Product Data Identificati Product Marketing Closing/ on of Selection/ Due Diligence Fullfillmen Funding & Sales Booking Client Validation t Underwriting Business Solutions Best-in-class origination fulfillment processes and capabilities  Automates end to end supply chain Shared Solution Components  Fully process and Industry-leading functionality image enabled, integrated into the lender straight through business architecture using Service Oriented Architecture processing (SOA) principles  Lower technology costs Defined Architecture  Reduced implementation Robust, agile and flexible platform for consistent risks delivery of solution assets © 2012 IBM Corporation Smarter Lending 30
  • Business Agility for Smarter LendingHowever, each bank is different……let’s follow two banks ontheir approach ZUNO Bank • Integration and BPM Centric Solution Regional European Bank • BPM and BRMS Centric Solution © 2012 IBM Corporation Smarter Lending 31
  • Business Agility for Smarter Lending Zuno Bank is charting their roadmap to agility Leveraging Agile Processes and Rapid Integration With IBM’s help, banks can And must continue to transform to grow Agile processes and decisions Rapid, adaptable integration • Optimize the loan • Decrease time-to- origination value with assets that process, improve can be easily efficiency and integrated into productivity existing infrastructure Unbounded applications Flexible and intelligent Infrastructure • Enable reuse of • Simplify complex lending services & existing point-to-point assets across LOBs, infrastructure that geographies and slows new product & projects service delivery © 2012 IBM Corporation Smarter Lending 32
  • Business Agility for Smarter Lending Loan Process Challenges Business data access GUI Auditor Fraud Officer Underwriter Processor Business rules Process complexity Integration 33 © 2012 IBM Corporation Smarter Lending 33
  • Business Agility for Smarter Lending Regional European Bank: 500 % faster time-to-market for processing loan products Situation  Bank employees were struggling with a 45-page book containing 147 business rules for routing product requests  Rules changed daily, and it was taking too long to make rule changes and get them into the hands of employees.  The decision-making process was error-prone and routing product requests took too much time.  Processing 200,000 non-payments per day, and each one had to go to the manager responsible for that account Business Agility Key Business Outcomes  Hours rather than days to implement changes to business rules  500% percent faster time-to-market for processing products  14 minutes per night to execute assignment of 200,000 non-payments to appropriate managers3434 © 2012 IBM Corporation Smarter Lending 34
  • Business Agility for Smarter Lending Loan Origination: 500% faster time-to-market for processing loan products35 © 2012 IBM Corporation Smarter Lending 35
  • Business Agility for Smarter LendingExample Smarter Lending Process OpportunityMortgage Pre-Approval Future State Process Vision Orange: Customer, Green: Lender‘s Employee, Blue: BPM Software Key Process Changes • Shift the focus from digitizing paper in the process, to digitizing the process itself • Multi-Channel Enabled • Pre-Approval or Pre-Qualification Happens as quickly as your business rules allow • Straight Through Processing • ‗Manage by Exception‘ • Skill-Based Routing • Business Dashboards for Monitoring and Process Status Tracking (also Multi-Channel) • Product systems (in house and 3rd party) are invisible and seamless to users (customers and employees) • Eliminate paper altogether where possible © 2012 IBM Corporation Smarter Lending 36
  • Business Agility for Smarter LendingIBM Capabilities Improve Efficiency and Reduce Costs Taking LOS Workflow to the Next Level with BPM Business Process Management Adds Efficiency: – Integration with Internal Bank Systems to eliminate manual verification of Deposits, Credit Card Accounts, Loans, Stocks, etc – Streamline ―on us‖ refi‘s by pre-populating all required data from servicing – Improved integration to third party providers – Extend workflow capabilities and integration between Impact and other LOS – Integrate to employee e-mail, calendar, and chat systems – Generate cross sell leads for credit card, auto loans, etc. based upon liability or other data in Impact © 2012 IBM Corporation Smarter Lending 37
  • Business Agility for Smarter Lending IBM Capabilities which Improve Efficiency and Reduce Costs Process Example  Increased AutomationManual Work TasksAutomated Work Tasks © 2012 IBM Corporation Smarter Lending 38
  • Business Agility for Smarter LendingIBM Capabilities Improve Efficiency and Reduce CostsManual Taskreduced from15 days downto 5 hours Manual Work Tasks  Business Agility  Business Scalability Automated Work Tasks  Business Transformational © 2012 IBM Corporation Smarter Lending 39
  • Business Agility for Smarter LendingIBM Capabilities Improve Efficiency and Reduce Costs In-process loans Approved Closing loans 49 10 9 8 7 6 4 3 110 … 2 1 Incoming Loans 2 5 10 18 47 Non-closing Initial Review Approved Clear Conditions Declined loansObjective: Identify loan characteristics that predict likelihood of closing and apply thatinformation to improve pull-through and productivity in loan originationsApproach: IBM Research has created a model that ranks loan applications in terms oflikelihood of closing • Analyzes multiple product, customer and process attributes • Simple and scalable density modeling technique allows consequent ―corrective action‖Result: 22-130% performance improvement over un-prioritized work flow © 2012 IBM Corporation Smarter Lending 40
  • Business Agility for Smarter LendingIBM Capabilities Improve Efficiency and Reduce Costs  Alerted When Key Performance Indicators Approach Tolerance  Data Helps Pinpoint Troubled Areas – How Do You Repair? © 2012 IBM Corporation Smarter Lending 41
  • Business Agility for Smarter LendingIBM Capabilities Improve Efficiency and Reduce Costs Objective: Identify, at a loan level, the best time to contact borrowers to maximize RPC Application – Loss Mitigation Department:  Manual mode: loan officers will be able to determine the best time to call, given the borrower they want to reach on a given day.  Given a time instant, loan officers can query which phone numbers have the best success rate of being reached in terms of right party contact and increase loan workout success rates Application – Contact Center:  Automated mode: with IVR for a given day, it will schedule a selected set of phone numbers to be dialed out at selected best times to call, to maximize right party contacts Result: Outbound calling efficiency gain between 20% and 37% and lowered OpEX Best time to call borrower JD with cell phone number (xxx) xxx-xxxx: 12 -1 PM local time Baseline and Final Scores 8/4/10 -- some data available 50% 45% 40% 35% 30% Score 25% 20% 15% 10% 5% 0% 8:xx 9:xx 10:xx 11:xx 12:xx 1:xx 2:xx 3:xx 4:xx 5:xx 6:xx 7:xx 8:xx am am am am pm pm pm pm pm pm pm pm pm Baseline for cell phones Final score © 2012 IBM Corporation Smarter Lending 42
  • Business Agility for Smarter Lending IBM Capabilities Improve Efficiency and Reduce CostsObjective: In a multi-channel world, given borrowerdata, determine the best channel (phone, texting (SMS), e-mail, portal (web-chat), print, (potentially social media), etc. tocontact a borrower? Pr{ response } = 0.5 Pr{ response } = 0.75 Challenge: Without the knowledge of channel response probabilities, which channels should you try over N attempts to maximize your total number of responses? How well can you do? Result: We have developed a predictive model using an exploration-exploitation strategy that provides a near-optimal policy to determine the best channel to contact borrowers. © 2012 IBM Corporation Smarter Lending 43 43
  • Business Agility for Smarter LendingUsing BPM to Enhance existing LOS Applications:Loan Disclosure Use Case © 2012 IBM Corporation Smarter Lending 44
  • Business Agility for Smarter LendingAgenda IBM POV- Dynamics in Banking IBM BPM IBM BPM in Lending IBM BPM Capabilities and Architecture © 2012 IBM Corporation Smarter Lending 45
  • Business Agility for Smarter Lending IBM Products for Business Process & Decision Management Blueworks Live Business Process Operational Decision Manager Management Process Center Decision Center Process Server Decision Server Management of all process components Management of business rules & events Business Monitor Work together to deliver effective solutions for business operation improvement © 2012 IBM Corporation Smarter Lending 46 IBM Corporation © 2011
  • Business Agility for Smarter Lending IBM Business Process Manager Social Mobile Coaches Portal Business Space Optional Microsoft Add-ons Process Server Core BPM Advanced Integration Performance BPMN Process Rules BPEL ESB Adaptors Data Warehouse Deploy Measure Governance / Visibility Define Improve Shared Assets Server Registry Process Center Versioned Assets Network Multiple Process Centers Process Designer / Process Center Integration Optimizer Console Designer © 2012 IBM Corporation Smarter Lending 47
  • Business Agility for Smarter Lending Drive Deeper Business User Engagement Change the way work gets done by making it social and accessible Simplify user Dynamic activity interactions by notifications facilitate allowing “in-line” real-time collaboration task completion and responsiveness Social Collaboration © 2012 IBM Corporation Smarter Lending 4848
  • Business Agility for Smarter Lending Collaboration Breeds Better Results Easily access and connect with participants and experts Connect to other Experts and Participants to get help with this task – via: Coach Toolbar or Process Diagram Interact with other Participants via Stream of comments and attachments for process instance Social Collaboration © 2012 IBM Corporation Smarter Lending 4949
  • Business Agility for Smarter Lending Empower Business Users by Extending Access to Mobile Flexible access promotes broad adoption Simple task forms and intelligent “coaches” guide user inputs Mobile © 2012 IBM Corporation Smarter Lending 5050
  • Business Agility for Smarter Lending Push your BPM initiative to the next level, into the cloud The discipline of business model agility demands an agile infrastructure Gain the simplicity, visibility, governance and power of the most comprehensive BPM platform without sacrificing capital and resource budgets Kick off that ever important initial BPM project within minutes versus weeks by turning to the IBM Smart Cloud Enterprise Leave the scalability and security of your infrastructure up to IBM while maintaining control over the service level agreement required by your business Bring your own licenses or pay as you go, you can now take resource constraints out of the project to program roadmap and you can focus on delivering business value © 2012 IBM Corporation Smarter Lending 5151
  • Business Agility for Smarter Lending How to Get Started on the path to Smarter Lending BVA Case Value analysis from the review Current Process Challenges After evaluating the current mortgage origination process, we have identified the following challenges: Identified Benefits from Automating Processes Automation Impact Time Comparison 1. Revenue Growth – Mortgage sales goals and objectives are increasing and HSBC does not have the operational capacity to continually keep pace with increasing revenue targets. Total Number of Tasks Work Effort to Complete a Mortgage 140 Average 2. Shorter Process Cycle – Current process cycle is time intensive; takes longer than industry averages and has 120 132 6 5.9 5.98 “As Is” 5 Work a large amount of manual hand-offs. 100 70.83mins 5.08 Effort 4 Hours 80 is 3 3. Process Control – Front-end processing has few control points (i.e., no triggers or controls) to track 60 72 2 2.2 5.73 Hours 31.74mins applications, view application status or identify bottlenecks and impediments. 40 1 Branch MBC DB To Be 20 As Is 0 To Be 4. Systems Integration / Operational Efficiency – Current process is very time intensive; requires up to twenty- 0 As Is Channel five days to fund mortgages and has little systems integration, internal controls and process management. Average Days to Close Percentage of Automated Tasks 5. Relationship Management – HSBC has two types of customers to satisfy – the broker and the mortgagee. Average 35 The experience of both should be responsive, uncomplicated and pleasing. “As Is” 30 Days 70 To Close 31 Know Your Customer (KYC) – HSBC has a need to continue its development of a single view of customer to 25 6. 60 25 26 Mortgage is 20 Days 68% integrate all customer data into a single repository. 50 Percentage 28 days 15 40 12 10 7. Document Management – Current environment is paper intensive, requires a great deal of re-entry and incurs 30 5 Branch MBC DB To Be 20 excessive administrative costs. 8% 0 10 As Is As Is To Be 0 Channel Implications & Best Practices Key environmental challenges and enablers Industry Costed Operating Inefficiencies in the MO process Mortgage Origination Pre-Sales Apply & Verify Pre-Approval Activate & Transfer Cost per New Mortgage Origination Savings Explanations Based on Total cost of mortgage on the book Total Cost Base = CAN$1931 Apply Pre- Pre- Activate & Approve Transfer Efficiency $49 – $244 $64 – $386 $40 – $480 As Is Savings ($) Efficiency 10% - 50% 10% - 60% 5% - 60% $800 Savings (%) 1960 $40 - $480 1820 People Automated task Automated task Automated task Efficiency 22% of total completion completion completion All Channels Key Current Environment Challenges 1680 1. Each channel has separate and unique procesess which add time and cost. savings through rule through rule through rule Automated Tasks: 0 1540 based workflow based workflow based workflow Manual Tasks: 11 2. Many manual tasks and hand-offs; little to no systems integrationCost ($) 1400 3. Very few process control points Process Collect data Collect data Collect data 4. Large amount of paper documents 1260 $644 6% of total once once once 1120 $64 - $386 savings Auto distribute Auto distribute Auto distribute Efficiency product/price info product/price product/price 980 info info 840 To Be 700 Technology Integrated Automated 3rd Electronic fund $488 72% automated price party integration mgt through 560 $49 - $244 (Interlock lock Electronic wire transfer 420 Efficiency with transport of data All Channels 280 process) Smart doc. validation Automated Tasks: 1 140 Manual Tasks: 2 Key “To Be” Environment Enablers 0 1. Developed common processes across channels Apply 2. Developed Straight-Through Processing (STP) technology to reduce number of Pre-Approve Activate & manual processes and increase systems integration. Transfer 3. Added workflow management to control processes, identify bottle-necks and Manual/Mostly Manual Process Manual/Mostly Manual Task track status. Estimated Future Cost Base = CAN$153 /$1110 Total Efficiency Savings Estimates represent $153 4. Developed a total document management solution that supports internal and Automated Process Automated Task Decision path to $1110, corresponding 8% to 57% total savings external document sharing and assists with regulatory compliance..Source: CAFI – Australia – Benchmark review 2002, IBM Analysis from identified improvements © 2012 IBM Corporation Smarter Lending 52
  • Business Agility for Smarter LendingHow to Get Started on the path to Smarter Lending Partner with IBM on a Process Improvement Discovery Workshop A complimentary 2.5 day workshop to help you evaluate a banking process improvement initiative Read more… http://www-01.ibm.com/software/websphere/products/business-rule- management/lombardi/workshop/ IBM Process Improvement Discovery Workshop Quick Win Pilot for Business Process and Decision Improvement in Lending Deliver measurable business results in 10 weeks or less Quick Win Pilot © 2012 IBM Corporation Smarter Lending 53