ICG-KAR-007-Digitisation_in_Business_Banking.pptx

Knowledge Area Review
Impact of digitisation on business banking relationship
management model
July 2012

© Internal Consulting Group 2015
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2

“We know exactly where technology is heading.
What we lack is the imagination [regarding] what to do with it”
Samil Ismail
Global Ambassador, Founding Executive of Singular University
Convinced, as I am, that no industry sector or organization will be immune from digital
transformation, I have spent the last two years looking at the effect of digitization on
more traditional industries. My conclusion is that digitization is probably three steps
ahead of our managerial capabilities to exploit it!
Didier Bonnet
Global Practice Leader at Capgemini Consulting and
Executive Sponsor for Capgemini Consulting’s Digital Transformation program
3

Contents
4
1. Introduction
2. Key messages
3. Impact of digitisation
4. Lessons from retail banking
5. Digitising business banking
Appendices

Introduction
5
This document is a Knowledge Area Review (KAR). It summarises available public research and case studies on the
impact of digitisation on business banking*. More specifically, it describes how the pervasive adoption of connected,
cloud, and mobile technologies across industries is being leveraged to improve the efficiency, revenue or customer
satisfaction of the relationship management model currently used by most banks to serve their business customers
(‘the business banking model’).
Much has been said and written about the impact of digitisation on consumer banking and other industries; not so
much, though, on business banking. Business banking has so far not been at the forefront of application of new
technologies, except for some digitisation of back-office processes. A recent CEB TowerGroup survey found business
banks rolled out mobile solutions for the first time predominantly in late 2010 and 2011.
In our view, this is because lending is the core product for most SME businesses. Credit assessment of these
typically riskier borrowers requires the costly (for the customer and the bank) collection and maintenance of a large
amount of information on the customer. This dependence on credit can be leveraged by the bank to cross-sell a
number of other products. Thus business customers, especially the small and mid-sized corporates, have tended to
have a single bank and long-standing relationships.
Surely there have been for a many of years a number of players on the fringes of the business banking world
providing payments and other specialised services. But so far no non-bank entrant has come in with an all-
encompassing value proposition for mid-corporates with credit at its core.
So the question is not so much one of what bank incumbents or new entrants are doing in Australia or other
markets, but more one of to what extent digital technologies question the implicit assumptions behind the
traditional business model centred on a relationship manager facilitating access to a range of product specialists.
* ‘business banking’, throughout this document, will be used in a broad sense to mean providing banking products and services to
businesses with more than $1m of turnover (i.e. all businesses except micro-businesses)
1. Introduction

Introduction (cont’d)
6
In other words, the question of the impact of digitalisation on business banking is more one of forecasting how
digital technologies could impact the current business model.
This document is structured as follows:
1. ‘Impact of digitisation’ asks what do new technologies mean and how are they changing our lives; it
describes the types of technological innovation industries can experience and how responses need to differ,
as well as how we can estimate the likely speed and quantum of digitisation in business banking
2. ‘Lessons from retail banking’ looks at disruptive innovation in consumer and small business banking;
specifically, what new customer value propositions and business models are being created, who are some of
the new players, and obstacles to offering an all-encompassing proposition to this segment that rivals the
banks’
3. ‘Digitising business banking’ revisits the traditional relationship management model and its rationale and asks
a. how is the model evolving (how digital technologies are being deployed to sell and service business
customers by banks and non-banks and possible future developments)
b. how do data analytics create value; what’s the current state of development of data analytics in
banking; how can analytics capabilities be developed; and how can ‘big data’ be leveraged
c. to what extent are the implicit beliefs of that model being questioned by new digital technologies
d. how it could be disrupted, i.e. how could banks be desintermediated
e. how investments in digitisation should be prioritised
1. Introduction

Focus of this document
7
Business owner /
Finance Director
Finance Team
Main
interface
Segment
Small
business*
Corporate
This document focuses on the relationship management model that is typically used by banks to cover their business
customers (here defined as businesses above $1m of turnover). It excludes micro-businesses and financial institutions
* Some small businesses with complex needs may also be served by the coverage model typically associated with mid-corporates
Source: ICG analysis
Typical
coverage
model
• Branch staff
• Branch-based
small business
RM team
RM based in Business Banking
Centre + BBC and HO-based
Product Specialists
Centrally based RM +
Product Specialists
Focus of this document
1. Introduction
Turnover $1 - 50m
Mid-corporate
/ Middle Market
Business owner
Micro
businesses
<$1m $50m - $500m >$500m
Financial
Institutions

Sources used
 Google Scholar
 Google Web
 Business and financial journal databases
 Management consulting firms’ websites
 Websites of major consulting firms
8
This KAR is a synthesis of relevant public domain materials obtained by searching the sources below using a multitude of key
words
1. Introduction

Contents
9
1. Introduction
2. Key messages
Appendices

Key messages
 The explosion of new digital technologies (broadband, mobile devices, cloud computing) – and the myriad of
internet applications and new business concepts that ride on their cusp – are fuelling the imagination (and
generating concerns) about how the traditional business banking model could be transformed.
 Most of this innovation has so far been in the consumer banking arena. The thinking is only now starting
about the application of new digital technologies to business customers, especially at the front-end.
 Nevertheless, the time has well and truly come for the business market. Accenture argues we are reaching a
tipping point where the relationship between the business customer and the bank is eroding and the
traditional bundled product offer to SMEs (with credit at its centre) could be unpicked as a result of a
combination of credit unavailability, lower credit needs, new technologies, changing SME needs and
regulatory pressure to make switching banks easier.
 Most of the expected innovation in business banking is focused on new products and services leveraging the
mobile channel (payments products being the most prominent). Nevertheless, we can easily imagine a world
where a number of new technologies are leveraged to transform quite substantially the way a relationship
manager performs his/her key activities.
 It is difficult to anticipate where disruptive innovation could come from (points of entry), but given the centrality
of credit for most businesses, especially SMEs, innovation in lending is likely to be the biggest threat for
incumbents (e.g. ‘rating agency’ for SMEs that allowed businesses – once rated – to shop around for credit).
 Given the large number of possible applications of digital technologies to better sell and service businesses, it
is imperative to have a clear view of priorities. For incumbents, these should be dictated by (1) the need to
pre-empt potential disruptive innovation from other banks and non-banks, and (2) the opportunities with the
largest scope for value creation.
10
2. Key
messages

Contents
11
1. Introduction
2. Key messages
Appendices

New technologies
12
Internet
Mobile devices
(smart phones,
tablets)
Broadband
Three core technologies – broadband, mobile devices and the internet – have spawned a multitude of applications and
counting...
E-government
Business Process
Management tools
Workflow
tools
Collaboration
tools
Document and content
management
Social media
Video-
conferencing
Cloud
storage
E-commerce,
online auctions
Internet
advertising
Search
Games
Online
encyclopedias, news,
medical databases
Automatic
translation
SMS, instant
messaging, email
Coupons
websites
Geo-location
services
Blogs
Online
communities
EDI
E-health
E-wallets, e-cash, NFC
cards
Comparison shopping
websites
P-2-P
Lending
Group
Buying
3. Impact of
digitisation

Macro impacts on business and consumers
13
Consumers
When…?
• ... do I want to buy/receive the
product/ service/information?
Where…?
• ... do I want to received the
product/ service/information?
On what basis…?
• ... do I make my purchase decision? Who
influences me?
Business
What…?
• ... product/service /information
do I want/need?
Who…?
• ... renders the service?
• ... sells the product?
Where…?
• ... are transactions processed?
• ... are services provided?
• ... do sales take place?
On what basis…?
• ... are products developed and offered?
• ... are customers segmented?
What…?
• ... product/service can I provide?
New products
Automation
Industrialisation
Anywhere
(De-localisation)
New competitors
Big data:
Individualisation
Real time offers
New needs
Anytime
Real time
Right here
(‘hyperlocality’)
At work (consum-
erisation)
Customer
control
Collectively, these new digital technologies are having a profound impact on numerous aspects of our lives and changing
every element of the business model: how personal and business relationships are built and maintained, how information is
collected and exchanged, how businesses are organised and how value is created and shared
Changed
economics
3. Impact of
digitisation

Seven macro impacts
14
De-localisation • Services that do not involve physical contact with the customer (unlike e.g. hairdressing, massage)
can be performed from anywhere
• Face-to-face interaction with customer does not require co-location
• Co-workers need not be co-located
• Companies do not have to have a physical presence to compete in foreign markets
Individualisation • Customer segments can be much smaller (segments of one person at the limit)
• Products and communications can be highly customised (e.g. loan’s features, internet banking site)
Real time • Customers want to communicate anytime, from anywhere, and expect an answer also in real time
(the emergence of the 24x7 channel)
• Multi-channel interaction requires real time processing and channel integration
• Opportunity to market to existing customers as they interact with the bank
Customer control • The customer has a multitude of sources of information
• The rise of the militant consumer: the customer can take control of the brand and can organise
easily to corral like-minded consumers
• Amplifier effect of service quality (good and bad)
Changed economics • Changes in cost-to-serve, improved productivity and the entry of new players with novel business
models create and re-distribute value along the chain
Collectively, these new digital technologies are having a profound impact on numerous aspects of our lives: how personal and
business relationships are built and maintained, how information is created, collected and exchanged, how businesses are
organised and how value is created and shared
Automation • Needs can be anticipated without human intervention (based on digital info collected by the
systems themselves); interactive, adaptive response as customer navigates through the bank’s
website
‘Big data’ • Segmentation can be done on the basis of a wealth of psychographic data
• Much larger amount of customer data available to develop new products and services
• Location-dependant products and services can be offered
3. Impact of
digitisation

Business transformation and technological change
15
Source: ‘IT-Enabled Business Transformation: From Automation to Business Scope Redefinition”’, Venkatraman, N. Sloan Management Review,1994
1
Degree
of
business
transformation
Range of potential benefits
Five levels of IT-enabled business transformation
Low
Low
High
High
Evolutionary
Levels
Revolutionary
Levels
Localised Exploitation
Internal Integration
Business Scope Redefinition
Business Network Redesign
Business Process Redesign
A. Business
basics
(hygiene)
B. Global best
practice
C. Leap-
frogging
D.Thought
leadership
The level of technological change we are experiencing is likely to require a high level of business transformation
and thought leadership, but the benefits could be high as well
CONCEPTUAL
Response required
3. Impact of
digitisation

Speed and quantum of digitisation
16
Likely impact on Financial Services industry
Source: Booz & Co., ‘The Next Wave of Digitization – Setting your Direction, Building your Capabilities’, 2011
The financial services industry is expected to be intensely impacted by digitisation relatively early on
• Medium speed of penetration
• High impact on products/services and business models
• High impact on labour productivity and capital intensity
Factors driving speed and quantum of
digitisation in each industry:
Barriers to entry
Information is the primary
product or a key success
factor
Human or physical capital
intensity
3. Impact of
digitisation

Industries most affected by digital transformation
17
Source: PWC, ‘The new digital economy’, 2011
In financial services, retail and commercial banking is expected to be most transformed
In your view, which of the following business sectors will be most transformed (for the better)
by information technology over the next 5 years? (% stating “greatly transformed”)
3. Impact of
digitisation

Impact of digitisation in financial services
18
Digitisation is expected to impact the financial services industry at three levels
• Real-time, high resolution business insights (e.g. shopping habits, location,
finances, social activities, search history, securities trading, travel, medical
history, voting, advocacy)
• Ability to reach out to customers more effectively
• Growing use of critical business techniques such as social marketing,
crowd sensing, and crowd sourcing
• More targeted management of workforces
• Increase in process automation
• Leverage of virtualization (e.g. in testing)
• Cloud-enabled cooperation models allowing the tapping of talent globally
• Better investment decisions due to better data
• Value shifts will be primarily within industries as a result of changes in
market share or industry structure
• Consumers will gain power
• Need for a new wave of growth in capital investment
Rationale
3. Impact of
digitisation
Improved business and
customer insight and reach
Increased productivity
New value pools and
business models

Contents
19
1. Introduction
2. Key messages
Appendices

Customer innovation themes in retail banking
20
Source: McKinsey & Company, ‘Retail banking: time to innovate’, 2011
Disruptive innovation in retail banking follows six themes, all focused on the delivery of a range of financial, emotional and
physical benefits
4. Lessons from
Retail Banking

But... Virgin Money in the UK
21
Virgin Money appear to be planning a move from niche player in financial services to full-service provider of retail
banking. They will face an uphill challenge though
Source: Steve Worthington, Peter Welch, (2011),"Banking without the banks", International Journal of Bank Marketing
Recent developments Assessment
• Founded as Virgin Direct in 1995 as a jv with
Norwich Union offering index-tracking equity funds
• In 1997 launched The Virgin One Account, a jv with
RBS, the UK’s first current account mortgage
[mortgage account coupled to an off-set account)
• In 2001 RBS buys out Virgin; Virgin Direct changes
its name to Virgin Money and launched a credit card,
savings and insurance products in jv with Bank of
America
• In 2004 Virgin Group acquired full ownership
• In 2010, Virgin Money had 2.5 million customers
with over £2 billion of funds under management and
over 2.3 million Virgin Money cards in issue
• In 2010 Virgin Money bought Church House Trust, a
small regional bank offering deposits and mortgages,
which it intends to turn into its platform for a full
fledged retail banking business
• Jv with Fortis for insurance
• While existing banks may be more unpopular than
before the financial crisis, even a brand as strong as
Virgin will find it tough to shake-up the UK personal
banking market:
o Consumers’ attachments to notionally “free” banking
services (current accounts, ATM transactions, credit
cards) resulted in significant cross-subsidies
between different groups of banking customers
and thus acts as a significant barrier to innovation
and competition in pricing
o Compliance requirements related to data
protection, identity confirmation and money
laundering make it difficult to simplify products and
processes
o While 65 per cent of Tesco Bank’s business is
currently done online, 70 per cent of customers
would welcome an opportunity of transaction
banking in store. If Virgin Money’s customers are
like Tesco’s
4. Lessons from
Retail Banking

Contents
22
1. Introduction
2. Key messages
• Innovation in business banking
• Developing analytics capabilities
• Conclusion
Appendices

SME* banking tipping point
23
* SMEs are defined by Accenture in this paper as businesses with between 50 and 250 employees
Source: Accenture, ‘Next generation SME banking’, 2011
Accenture argues that as a result of skyrocketing of rejection rates and contraction of lending since 2008, the
relationship between SME and bank is eroding. This, combined with new technologies, changing SME needs and
regulatory pressure to make switching banks easier, is leading to a tipping point whereby the traditional SME bundled
product offer could be unpicked
• mobile credit card payments
• virtual advisers
• automated cash deposit machines
• social networking
5. Digitising
business banking

Four best practices in middle-market banking
24
Source: McKinsey & Company, ‘How US banks can attract middle market customers’, 2008
Segmented
product and
service offerings
World-class
account planning
Enhanced service
at low cost
Revamped sales
organisation
• Starting point is a well designed, intuitive and well-integrated online portal, similar to the
offering of a good personal bank, but with more features and flexibility (e.g. web portal of
Wells Fargo)
• Others are remote cheque capture, EDI, payables outsourcing, payroll cards
Key elements
Several of the best practices in middle-market banking require the leveraging of digital technologies (in green below). Several
also impact the relationship management model (starred)
5. Digitising
business banking
• Offer tailored solutions in an economical way (e.g. standardised product packages)
• Segment the middle market into size-tiers and by industry
• Invest in account-planning tools and the underlying systems
• Use a robust, centralised lead-generation database
• Embrace relationship managers from both commercial lending and cash management,
matching their expertise to the customer segment
• Reward RMs for cross-selling cash management products (both initial sale and continued use)
• Credit cash-management sales personnel with the full value they create
• Find economical ways of leveraging product specialists for smaller middle-market customers

Three types of innovation
25
Technological innovation can come in three flavours, but all three have the potential to be quite disruptive
Innovation Type A
Do the same with new tools
Examples:
• Talk to customers via video-call
• Process loan applications using
workflow tools
• Apply for a business credit card
online
Innovation Type B
Create a new financial product or
service enabled by new technology
Examples:
• Allow businesses to check online the
progress of their loan application
• Fully-automated, contextual internet
and mobile offers
• Offer depositors opportunity to (co-)
fund directly a small business
Innovation Type C
Offer new (non-financial) products and
services leveraging new technology
Examples:
• Create an on-line community for small
businesses
• Offer marketing advice
No brainers
Defensive
moves
Strategic
bets
Productivity
plays
5. Digitising
business banking

Product and service innovations by company
26
Financial
Institution
Product/
Service Name
Overview
Business Advice Centre
Connect small businesses with local experts and
guarantees a response within 24 hours.
Breakthrough
Hybrid online community and competition for small
businesses.
Experian
Businesses can monitor creditworthiness of corporate
customers and send invoices at the right time.
CEO Mobile
Comprehensive mobile service offerings for mid-sized
businesses.
Civilised Money
Online, peer-to-peer, start-up allows individuals to
transact, invest, donate, lend and borrow money with
each other at fair and transparent rates.
GlobalVCard
Virtual MasterCard app for B2B payments that requires
no cards but ensures convenience, control and security.
Google
NFC technology lets businesses to collect payments from
customers using Google Wallets.
Global Connections
Online competition for small businesses to win lending
opportunities, cash prize and networking event.
PingIt
Mobile payment system that requires only a phone and
account number.
Mission: Small Business
Grant competition for small businesses that allows
consumers to virtually vote.
5. Digitising
business banking

Product and service innovations by type of SME financial need
27
Innovations
SMEs
financial
needs
Credit
Make and
receive
payments
Invest
Cash flow
management
• Receive credit
decisions via SMS
• Select repayment
options if
upgrading or
acquiring a
business vehicle
• Review and reset
rates for expiring
term loans on
smartphones
Specialised
products
• Mobile point-of-sale
payment technology
(using near-field
communication)
• Collect payments
from credit cards via
a card reader sleeve
and mobile
application
• Mobile remote check
deposit offers
deposits through
smart phone image
capture
• Mobile payments
(customers can pay
businesses through
their phone)
• EDI, payables
outsourcing, payroll
cards
• Make and amend bill
payments to new or
existing payees
immediately or up to
45 days in advance
• Provide balances
and recent
transaction history
by sms
• Text messaging
around events
including transfer
completion
• Text alerts that
indicate to business
owners when
transactions or
withdrawals exceed
limits
• View statements
from up to 7 years
back
Mobile
channel
• Access accounts
via secure website
that customers can
enter into their
smartphone’s web
browser
• Mobile application
which services
both retail and
business banking
clients
• Offer additional
services specific to
their business
customers’ needs
through an
integrated mobile
application
• Offer mobile
banking
applications
specific to the iPad
• Business-specific
online portal
• Businesses can
authorize trade
transactions
through the
mobile app
• View, import and
export letters or
credit and
execute online
queries
• Active money
management and
credit tools
5. Digitising
business banking

Innovation along the business banking value chain
28
Service and Portfolio
Management
Fulfillment
Origination
According to Accenture, most innovation is happening in origination and fulfillment. Both directly affect the role of the
Relationship Manager or Business Banker
• New value-based and needs-based
segmentation models
• Offer SMEs variable pricing and
service options across products
• Support through multiple channels
• Adoption of more light-touch
relationship manager models –
including remote relationship
managers available via online
messaging tools
5. Digitising
business banking

Four cases of innovation best practice
29
Accenture showcases four instances of innovation best practice in SME banking: virtual RMs, faster loan approval and
automated e-invoicing, additional (non-banking) advice and support services, and sponsoring social communities
5. Digitising
business banking

Innovation case studies
30
Banks risk being desintermediated in the emerging SME banking marketplace, pushed to the side as the unbundling
of deposit, transaction and risk gathers pace
Company Need Offer
Square Accept card payments on
the go
Instant card payment utility for iPhone
iZettle Tool enabling customers to accept credit card payments through swipe
technology; includes feature that allows merchants to email a photo and
receipt to buyers who can then upload details of their purchases to
Facebook.
OCBC Bank OCBC’s app allows customers with Android devices to scan barcodes,
obtain billing details, and make payments with merchant partners thanks
to their “Scan & Pay” facility
BankInter Provide anytime, anywhere
access
Launched online video conferencing, ‘Mobile Virtual Network’, in
partnership with Dutch telecoms operator KPN, using the Orange
network to reduce customer’s cost of data transfer. A Cisco case study
claims this model delivered positive results with over 1,000 video calls
Leumi Bank ‘Leumi V’ delivers face-to-face contact for customers at their desktop and
through mobile devices
Barclays Learning and development
programs for employees
Launched ‘MyBusinessWorks’ – a fee-based service for business start-up
customers
HSBC Launched e-Masterclass – a Global Knowledge Centre for SME learning –
with free modules
5. Digitising
business banking

Example: iZettle
31
iZettle allows merchants to accept credit card payments through swipe technology; it includes a feature that allows
merchants to email a photo and receipt to buyers who can then upload details of their purchases to Facebook
5. Digitising
business banking

Example: new ecosystem Pi and merchant terminal ‘Albert’
32
Pi is the open source platform of ‘Albert’, a new portable, multi-functional merchant terminal. It will allow businesses to
download, create and upload apps. While they wait for Albert to be launched in mid-2013, businesses can use Pi to turn
their iPod touch and iPhone 4 into a payments platform by means of another device called ‘Leo’ (planned for Q4/12)
‘Albert’ terminal:
• 7’’ screen, portable, touch interface
• Powered by Android v0.4
• Includes 5 MP camera
for scanning
• Accepts EMV chips and pin transactions
• Wireless
• Inventory management app
• Loyalty and rewards programs
• Can integrate with the customer’s electronic cash
register
• Highly customisable
• Customers can install their own or third party apps
• CBA is encouraging the development of an
ecosystem on the Pi platform (software
development kit to be available later in 2012)
Source: Commonwealth Bank of Australia website, July 2012
‘Leo’, based on iOS, functions like a mini-EFTPOS terminal (a
cradle) strapped to the back of i-pads and i-phone4s to allow
them to accept all forms of card payment with PCI-PTS 3.x
security level:
• Cards with EMV chips
• Cards with a pin
• Magnetic stripe (‘magstripe’) cards
• Contactless cards
It includes functions like:
• Purchase/Refund
• Tipping
• Split bill
• Reporting
5. Digitising
business banking

Example: Bank ofAmerica online small business community
33
Source: http://smallbusinessonlinecommunity.bankofamerica.com/index.jspa
Users can subscribe for free and use the following
features:
• Forums: discussion threads focused around
business opportunities, tips for starting a
business, financing tips, merchant services,
managing employees and HR, technology and
legal matters, etc.
• Business Articles: a series of articles on a wide
range of small business management issues.
• Stories: this section highlights success stories of
small business owners about how they started
their business and tips to others about
succeeding as business owners.
• Events: live webinars led by subject matter
experts around key issues for small business
owners.

Imagine a world where...
34
Online Scheduling: Imagine your small business customers’ having 24x7 ability to reserve a time that is convenient for
them to meet or talk with their banker or service representative. No more back and forth calls or emails, or waiting at
the branch.
Seamless channels: Imagine allowing the customer to begin and finish opening an account or submitting a service
request on any combination of channels (in the branch, online, over the phone or on a mobile device) without having to
start over. Thus allowing them to return to the process and provide the necessary documentation how, when and where
it is convenient for them.
Ask the Expert: Imagine sitting in the bank with your prospect and instantly bringing up via video conferencing an
available treasury management or mortgage expert to aid in addressing customer questions. Being able to instantly check
the availability of the “expert” and bring them up allows there to be a “face-to-face” connection, eliminates the need for
an additional appointment and expedites the sales or service cycle.
Digitized Forms: Imagine there were digitized forms which allow for pre-populating customer data from CRM or other
systems, eliminating inapplicable sections of the form in real time based on the service being sold and creating a digital
record of information for further processing.
House Calls: Imagine using mobile platform support, digital signature capture, interactive forms and secure
communications to reduce the customer’s need to go to the branch.
Scalable Relationship Management: Imagine having a CRM system that guides and informs small business bankers
in ways that promote relationship building and timely contact with their customers based on priority, “trigger” events or
anticipated needs. This supports the banker’s ability to focus on serving their customers when and where it is needed
most.
Source: West Monroe Partners, ‘How banks compete in the small business market’, 2011
Nevertheless, for the moment, a lot of the technological innovation in the business banking relationship model is more
imagined than actually realised
5. Digitising
business banking

Relationship management key activities and possible innovations
35
We can imagine a world where a number of new technologies are leveraged to transform quite substantially the way a
relationship manager performs his/her key activities. Some of these are already starting to happen
Initial
Customer
Approach
Sales
Strategy
• Prospect
identification
• Competitor/
industry research
• Product- and
service-need
planning
• Call strategy
creation
• Prospect cold calls
• Initial customer calls
• Preliminary needs
identification and
qualification
• Meeting scheduling
Meeting
Preparation
• Presentation material
creation
• Specialist
consultations
• Credit analysis and
underwriting
• Process, pricing and
terms coordination
and approval
• Closing document
management
• Business or industry
learning
Sales
• Sales calls
• Meetings and
presentations
• Proposal
negotiation
• Sales closure
• Informal
relationship
building/
networking
• Re-negotiation of
product terms and
conditions
Product &
Service
Delivery
• Solution
implementation
• Customer problem
resolution
• Collection of
additional materials
• Review of
customer's
business
• Credit portfolio
monitoring
Training &
Internal
Governance
• Training sessions,
• Coaching from
manager
• Internal meetings
• Credit committee
review
• Admin and
reporting
• tasks
• Sophisticated
analytics
• CRM tools
• Internet search
• Automated alerts
• Leverage of third
party info services
• Identify and make
contact with
customers in online
social forums
• Assisted presentation
development tools
• Calendar sharing for
ease of scheduling
various product
specialists
• Video (conf) calls
with RM and
product
specialists
• Real time pricing
and approvals
• Automated product
and service delivery
• External info
providers
• Online training
• Online coaching,
instant messaging
helpdesk service
• Real time, voice-
input database
updates
5. Digitising
business banking
Key
Activities
Examples
of possible
innovation

Contents
36
1. Introduction
2. Key messages
• Conclusion
Appendices

How ‘big data’* creates value
37
McKinsey identifies five ways in which ‘big data’ can be leveraged that offer transformational potential to create value
Creating transparency
Enabling experimentation to discover
needs, expose variability, and improve
performance
Segmenting populations to
customise actions
Replacing/supporting human
decision making with
automated algorithms
Innovating with new business
models, products and services
* Big data refers to datasets whose size is beyond the ability of typical database software tools to capture, store, manage, and analyze
Source: McKinsey & Company, ‘The challenge and opportunity of big data’, Summer 2011
5. Digitising
business banking

Benefiting from ‘big data’*
38
The finance and insurance industries are likely to benefit strongly from digitisation and ‘big data’ if barriers are overcome
* Big data refers to datasets whose size is beyond the ability of typical database software tools to capture, store, manage, and analyze
Source: McKinsey & Company, ‘The challenge and opportunity of big data’, Summer 2011
5. Digitising
business banking

The ladder of analytical capabilities
39
Source: Jeanne Harris and Tom Davenport, Analytics at Work: Smarter Decisions, Better Results (Harvard Business Review Press, 2010).
Harris & Davenport ladder of analytical capabilities is now a classic. It says that data analytics capabilities progress along a
“ladder” where sophistication and value increase as companies proceed up each rung
5. Digitising
business banking
CONCEPTUAL

Current state of development of data analytics in banking
40
“Few banks at this point have really developed capabilities to exploit data as a corporate asset”, Brian Johnston, Principal,
Deloitte Consulting LLP
Source: Deloitte, ‘Leveraging Analytics in the Banking Industry ‘ podcast, 2011
Forces pushing the development of data analytics capabilities:
• Regulatory reform: Dodd-Frank Act; more and more timely data is being requested by regulators
• Systemic risk: requirement to develop a ‘living will’
• Customer analytics: banks are focusing on customer segmentation, pricing, profitability and how
to grow and enhance the customer relationship over time
Where are banks right now?
• Creating data strategies
• Developing data roadmaps and
governance modes
• Appointing a data czar
5. Digitising
business banking

Excellence in big data and analytics
41
Banking & Payments Asia has not attributed the award for excellence in data analytics. Instead, awards were given for
customer experience and service innovation. The Editor’s Special Award 2012 for the Most Innovative Bank in Asia Pacific
was given to OCBC Bank (Singapore)
Nominations categories Awards
Product excellence Prepaid payment
Credit card
Debit card
Mobile payment
e-wallet
e-commerce
P2P payment
Payment innovation
Bank of the Philippine Islands (Philippines) and Beam Money (India)
Siam Commercial Bank (Thailand)
Special Commendation: RHB Bank (Malaysia)
KASIKORNBANK (Thailand)
Special Commendation: OCBC Bank (Singapore)
Security Bank (Philippines)
-
Bank Mandiri (Indonesia)
CIMB Bank (Malaysia)
Maybank (Malaysia)
Channel Excellence
Awards
Branch
Internet
Mobile
Social media
Multi-channel integration
OCBC Bank (Singapore)
Special Commendation: Bankwest (Australia)
Special Commendation: Bank of the Philippine Islands (Philippines)
DBS Bank (Singapore)
Special Commendation: Bank Commonwealth (Indonesia)
-
Service Provider
Excellence Awards:
Payment processing
Customer data management
Core banking
Big data/analytics
Virtualisation
Risk management
Customer experience: Citibank (Singapore)
Special Commendation: Maybank (Singapore)
Service innovation: Standard Chartered Bank (Singapore)
Strategy Excellence
in Business
Innovation
Business model innovation
Financial inclusion
ICICI Bank (India)
Special Commendation: KASIKORNBANK (Thailand)
Source: www.vrl-financial-news.com/bpa/banking--payments-asia/events/retail-banking-and-pay-in-2012/trailblazer-awards1.aspx
5. Digitising
business banking

Excellence in business intelligence
42
Gartner launched its BI Excellence Award in 2005. So far three banks have been distinguished
Winners of Gartner’s Business Intelligence Excellence Award
Global/EMEA APAC
2005 Continental Airlines -
2006 HypoVereinsbank -
2007 Richmond Virginia Police Department -
2008 n/av -
2009 Tetra Pak ICICI Bank (India)
2010 Komerční Banka n/av
2011 UPS Singapore's Land Transport Authority
2012 Medway Youth Trust -
Source: Gartner
5. Digitising
business banking

Business intelligence case study – Komerční Banka (1/2)
43
Komerční banka won the 2010 Gartner Business Intelligence Award. "Komerční banka stood out because it demonstrated in
very clear terms how it was able to use technology for quantifiable business benefits. It showed that BI is not a one time
investment but that transformation happened over several years.“ Gartner
Teradata: Enterprise Data Warehouse (EDW) requirements to turn a financial mess into banking success:
• Strong support from top management
• Rigorous application of metadata
• Clearly defined, business-essential, but incremental business intelligence (BI) projects
• Robust, flexible technology
About Komerční banka
Subsidiary of Societe Generale in the Czech republic, is one of the best run universal banks in Central Europe. It
provides comprehensive services to clients in the areas of retail, corporate, and investment banking. The Komerční
banka Group's 8,843 employees serve more than 2.7 million clients, who can use an extensive network of 398 points of
sale throughout the country. Komerční banka currently operates 682 ATMs and more than 972,000 of its clients use one
of direct banking channels.
Sources: www.kb.cz/en/about-the-bank/press-room/press-releases/komercni-banka-wins-an-important-gartner-award-784.shtml
www.teradatamagazine.com/v11n02/Features/Revolutionary-Turnaround/
5. Digitising
business banking

Business intelligence case study – Komerční Banka (2/2)
44
What they did.
• Integrated approach pairing an enterprise data warehouse (EDW) with a performance management system
(initially, Oracle Financial Services tools for enterprise performance management (EPM))
• Step-by-step integration of this EPM functionality in an EDW from Teradata
• Phase 1: Crisis Management. Members of the BI team targeted three critical areas:
1. developed reports to analyze sales performance, risk and revenue management
2. developed key performance indicators (KPIs) across the organization (Consistent, comprehensive KPIs,
backed by helpdesk support and well-understood metadata)
3. work by the BI team enabled potential investors to conduct due diligence of the company’s business and
financial data necessary for a bank-valuation model, which led to 60% of the bank being acquired by
Société Générale in 2001
• Phase 2: From 2002 to 2004, a newly created BI team rolled out BI applications for cost management, direct
channels and sales support, winning fans with each targeted project.
• Phase 3: Starting in 2004, the BI group turned its attention to building sophisticated tools to handle risk and
further concentrated on the metadata solution. It delivered new capabilities to thwart money laundering and meet
regulatory requirements like Basel II
• Phase 4: Since 2008, the priority has been consumer-focused efforts, such as analytical customer relationship
management and campaign management
Sources: www.kb.cz/en/about-the-bank/press-room/press-releases/komercni-banka-wins-an-important-gartner-award-784.shtml
www.teradatamagazine.com/v11n02/Features/Revolutionary-Turnaround/
5. Digitising
business banking

Digital transformation case study – BNP Paribas
45
Source: MIT Center for Digital Business and CapGemini Consulting, ‘Digital transformation: a roadmap for billion dollar organizations’, 2011
Background:
• BNP Paribas grew rapidly in the past decade by acquiring banks in several countries. The firm is now aiming to solidify its international
position, aligning processes globally
• Crisis, regulation and technology adoption by customers and employees are pushing BNP Paribas to consider digital transformation
Their journey so far:
• The first step of the transformation has focused on reach: creating a multichannel strategy that includes the web as well as emerging
technologies such as mobile and social media
• BNP Paribas is today in a transition phase to reach the second step of the transformation: integrating transactions across channels and
building a conversation with clients via an external CRM and analytics-based tools
• To improve customer experience, the firm launched multiple initiatives.
− The firm increased customer touch points via social media, providing customer service on twitter and advertising on Facebook.
− In 2010, BNP Paribas launched a new branch model. This Concept Store will help develop new ways of interacting and selling
products to the customer via new technologies and self-service areas.
− The firm’s next step is to start a conversation with customers on social media. This will require building social-customer
knowledge, via an external CRM, and increasing analytics capability.
− Mobile apps provide a substitute to using the internet website. In 2011, BNP Paribas launched new mobile bank services in
partnership with a telecom operator. This was more than a simple website substitution. It was a switch from traditional business
model to a digital one, with a different cost and revenue structure.
• From an operational process point of view, BNP Paribas is still at the beginning of its transformation journey. The firm is focusing on
security improvements and cloud solutions, which executives see as key differentiators in the industry. The objective of process
rationalization will be to have end-to-end digitized processes in an integrated platform, which could generate international economies of
scale.
Next digital objectives:
• Move into mobility, reach the next level of customer intimacy and develop a strong analytics strategy.
BNP Paribas has started on a multi-year digital transformation journey
5. Digitising
business banking

Case study: Predicting potential profitability and product uptake at
First Tennessee Bank
46
Source: IBM/IDC, ‘ Banking for Success: Using Analytics to Grow Wallet Share’, Jan 2012
“By transforming its approach to data and analysis, First Tennessee Bank has dramatically increased its
marketing effectiveness. This is a bank that understands that measuring effective marketing must include
realized compared with potential customer profitability as opposed to measuring just the number of new
products sold. As every marketer knows, if you simply make an offer attractive enough, sales will follow. Many
banks pursue this strategy to increase deposit rates — offering high interest accounts to bring in new business
— but lose those customers as soon as a competitor has a better offer. Customers brought in by overly
attractive offers are not only less loyal but also less profitable.
Using analytics effectively allows banks to manipulate offer attributes, in a very granular way, to achieve
higher profitability from a growing customer base. First Tennessee uses models they have developed internally
to create profitability tiers with varying product attributes. The bank has also developed customer
scoring models, based on very granular data points, to determine each customer's likelihood to purchase
potential offers. With these product and customer models, the bank can create profitability scenarios and use
these to determine which product offers will generate the most value for the bank. The bank then uses this
information to prioritize marketing programs and allocate resources effectively.
As a result of this approach, First Tennessee has produced quantifiable results. It has cut its mailing and
printing marketing costs by 20% and 17%, respectively, by allocating resources more effectively. And at the
same time, it has increased effectiveness — generating a 3.1% increase in response rates by putting better
offers in front of its prospects without sacrificing profit targets.”
5. Digitising
business banking

Building an enterprise-wide analytics capability
47
IBM advises to start with selecting a critical question or objective
“it should not be assumed that analytical insight cannot be extracted until obstacles have all been resolved”
Approach:
Step 1: Identify and prioritize critical business issues and allow
these priorities to steer the project
Decision criteria should include:
• Value of anticipated benefits to be derived from the project
• Reports and insights need to be efficiently produced and
securely delivered
• Data sources must be trusted across functional boundaries
• Analytics tools should be adopted broadly, support self-service,
and be business-owned but IT-supported
Step 2: Conduct an inventory and assessment of the data to
confirm that the scope is achievable and that analysis will yield actionable
results within the agreed hypotheses
Source: IBM, ‘The shift to analytics: the next wave for transaction banking’, 2012
Typical obstacles:
• Complex, heterogeneous technology
architectures
• Operationally optimized but siloed processes
and systems
• Data fragmented across multiple databases
• Constrained investment budgets with
competing agendas
• Lack of skilled resources
• Perception that the data available is of
insufficient quality to support analysis.
5. Digitising
business banking

Principles to leverage ‘big data’
48
Source: McKinsey, ‘Seizing the potential of ‘big data’’, Oct 2011
Senior executives need understand big data’s potential in their businesses, the data assets and liabilities of those
businesses, or the strategic choices they must make to start exploiting big data
Identify big data
resources and gaps
Understand the
organisational
implications
Size the
opportunities and
threats
Align on strategic
choices
• Identify threats and opportunities that leverage big data
• Estimate their size and value
Key elements
• Conduct a ‘data audit’: thorough review of all relevant internal and external data to
develop a realistic view of the information and capabilities required; this will also help
identify ‘data gems’ cloistered inside business units
• Strategies involving ‘big data’ often have implications across the entire company that
only senior executives can address
• To be useful, data must cut across organisational boundaries
• Don’t rush into action: data strategies are likely to be deeply intertwined with overall
strategy and therefore require thoughtful planning about allocation of resources
• Ensure senior management has visibility and sets the priorities of the analytics team
5. Digitising
business banking

Concerns regarding ‘big data’
49
Information security
Data uses
Privacy
Rules on storage of
digital records
Comments
• Concerns around the legal implications of using statistical correlations: what if a computer model
factors in the educational level of the applicant's mother, which in America is strongly correlated
with race? And what if computers can predict his predisposition to committing a crime?
• A new regulatory principle in the age of big data, then, might be that people's data cannot be
used to discriminate against them on the basis of something that might or might not happen
Source: The Economist, ‘New rules for big data’, 2010
Society and regulators are only gradually setting rules for ‘big data’. In the meanwhile, companies have to make decisions
without regulatory clarity
• Biggest concern. Could be (partially?) resolved with more transparency and by giving users more
control
• Lack of clarity and potential legal framework changes surrounding property rights of personal
information
• A pioneering law in California in 2003 required companies to notify people if a security breach
had compromised their personal information, which pushed companies to invest more in
prevention. The model has been adopted in other states and could be used more widely.
• Current rules on digital records limit the length of time when data can be stored. However,
companies can and have an interest in keeping information for a long period of time; regulation is
also pushing in this direction
Information
integrity
• Censorship pollutes the internet environment.
5. Digitising
business banking

Contents
50
1. Introduction
2. Key messages
• Conclusion
Appendices

Where does all this leave the typical business banking model?
51
The typical business banking model – centred on a business banker/relationship manager who often doubles up as the credit
and payments product specialist, supported by a large range of product specialists, some based in the BBC, others stationed at
HO – has a logical rationale. But to what extent are the implicit beliefs of that model being questioned now by new digital
technologies?
FX/IR Derivatives
20+ Product specialists
Business Banker / Lending and
Payments Product Specialist
Business Banking Centre
Business
Customer
Internet
Local retail branch
Equipment
Finance/Leasing
Invoice finance/Factoring
Payments/Merchant Services
Call Centre
Financial Planning
Trade
finance
Business
Insurance
Share Trading
5. Digitising
business banking

Beliefs underlying the traditional business banking model
52
Beliefs underlying the traditional business
banking model:
The current economic climate is making SMEs more open to considering alternatives (and easier too). But the fundamental
issue of collecting and maintaining risk assessment information has not gone away
The new reality:
• SMEs are riskier than larger corporates – the
bank needs to take the time to understand their
business before extending credit or seek
guarantees
• SMEs lack sophistication; thus products need to
be simple
• SMEs are quite diverse – products need to be
tailored, but not too much as that introduces
complexity and cost; thus packaged solutions
• SMEs lack time and resources and it is very time
consuming to shop around and supply new
banks with the necessary information on the
SME owner and their business; it is also
cumbersome and time consuming to change
transactional banking arrangements
• Risk assessment needs to be more granular than just
industry and size – this requires data and analytics
• The contraction in credit has led many small businesses
feeling the need to diversify their banking relationships
• Financial comparison websites allow quick assessment of
suitability of products and comparison of prices and
terms
• Products can now be more cheaply tailored
• More services can be provided in a fully automated way
with no human intervention
• SMEs demand business banking offers that run on their
mobile devices
• The technology now exists to provide easier access (after
hours) to the RM and product specialists (via video call)
 SMEs were fiercely loyal and ‘sticky’
customers that tended to have a single bank
 SMEs expectations are rising; more
willingness to shop around and buy
different products from different providers
5. Digitising
business banking

Abank’s processes and key functions
53
“The real issue of disintermediation therefore, is not around the core of banking – the holding money area that is
protected by banking licenses – but around the boundaries of banking. The thing is the boundaries is where all the
profit lies. […]
All of the processes and functions of a bank can become apps that users can download and integrate to build their
own bank. The Build-Your-Own-Bank (BYOB) is the new generation of banking.”
Source: ACI Worldwide
Source: Financial Services Club Blog by Chris Skinner
5. Digitising
business banking

Imagine a world with no banks
54
Our thesis is that the most disruptive innovation will come from business models that break the credit bond between bank
and business customer. For larger corporates, this already happened decades ago with direct access to the capital markets,
and the consequent decline in profitability of this segment. For SMEs, it could now happen as well
Alternative
business
models
SMEs
financial
needs
Credit
provision
Risk
assessment
Make and
receive
payments
Invest
Cash flow
management
• SME provides all
its business and
personal
information to an
SME credit rating
firm that issues
an initial risk
assessment and
monitors risk on
an on-going basis
• With a credit
rating in hand,
the SME shops
around for credit
in one of many
financial
supermarkets
• The SME receives a
product
recommendation
tailored to its needs
from a ‘Payments
Advisor’ that had
access to the info
provided to the
ratings firm
• The Payments
Advisor implements
the recommended
solution after the
customer approves it
• The SME uses a cash flow management
firm that automatically sweeps account
balances to high yielding savings
accounts according to pre-determined
rules
Specialised
products
(leasing, factoring,
derivatives)
• The SME’s financial
advisor recommends
and implements
solutions
The simpler you can make the product
the less you need face-to-face advice
5. Digitising
business banking

New business models
55
Bank SME
Other funding providers:
• Consumers
• SMEs
• Corporates
Financial Supermarket
Financial Comparison website
Payments Advisors
SME Rating agencies
...
Others Banks
• Independent advice
• Information gathering
• Product selection
• Solution implementation
A number of financial services providers could desintermediate banks and reduce them to commodity providers of funding
5. Digitising
business banking

Examples of potential disruptive innovation in business banking
56
New entrants can cherry pick on the margin (e.g. payments) or come in through the main door by breaking the bond
between bank and business customer through lending
Entrant Need Offer
Funding Circle Funding An online marketplace where people can lend directly to small businesses
in the UK
Crowdcube Offering a new model for sourcing capital for start-ups by utilizing an online
platform to help match investors with businesses through equity stakes and
non collateralized loans
GE Investing in growing their SME lending business through acquisitions
• Banks have the opportunity to co-create investment opportunities with their customers,
playing a bigger part in this emerging market.
• Business banks can look to create new asset classes by allowing retail and private banking
customers to invest in SME customers – effectively sharing the risk.
5. Digitising
business banking

Example: Funding circle
57
Source: www.fundingcircle.com/how-it-works

Example: Crowd Cube
58
Source: www.crowdcube.com/pg/how-it-works-4

Example: Civilised Money
59
What will it be like?
Eventually CivilisedMoney will offer all the services that you currently associate with traditional banks, and some you don't.
You'll be able to choose what happens with your money, whether you participate in lending, borrowing, investing, donating,
fundraising or transacting.
Source: www.civilisedmoney.co.uk

Prioritising investments in digitisation
60
• How will digitization impact my current business model and
positioning within my industry’s value chain? (speed and quantum of
impact and respective determining factors)
• What areas of my business offer new entrants clear opportunities to
disrupt my current business model, and how can I best fight back?
• How can I best identify and enter areas where value is being
created, both inside and outside my industry?
• Which capabilities do I need to build to be a leader in the field?
Source: Booz & Co., ‘The Next Wave of Digitization – Setting your Direction, Building your Capabilities’, 2011; ICG analysis
There are four questions that are key in deciding how to prioritise investments in digitisation
• How much time do I have?
• What do I need to watch?
• Future economics?
• Points of entry of disruptors?
=> Defensive moves
• Opportunities?
=> Offensive moves
=> Enablers
5. Digitising
business banking

Foundation enablers to take advantage of digital world
61
Real time / Same time • Real time integration across all channels (channel-agnosticism)
• Real time processing of transactions
• If not real time, at least ‘same-time’: all transactions reported as at the same time
‘The glass bank’ Customer is able to self-service (e.g. check on the progress of their loan application)
Sophisticated analytics The increasing amount of data that banks can/will be able to collect on customers is a
major asset that can be leveraged to develop much finer psychographic segmentation,
customised products, real time offers, location-dependent offers or alerts, etc
Customisation • Ability to offer highly customised products and services
• Customer control / self-design of products and services
• Customised processes
• Customised pricing
Single customer view This ‘holy grail ‘of banking (and other industries) has been difficult to achieve, but in the
digital era it is really a foundational pre-requisite of any player or strategy
Regardless of bank or strategy, future technological platforms will have to offer some core, foundational capabilities that all
customers will expect and demand. If properly leveraged, many of these capabilities also present great opportunities to
reduce cost, increase revenue and strengthen customer loyalty
Capability Description
5. Digitising
business banking

Next steps: strategic issues facing business banks today
 Can we afford an RM-centred model for more/different customers if we use a different model?
 Can a more digitised coverage model make it economical for us to target new customers?
 Will our current coverage model remain competitive against an alternative, lighter coverage model of
a competitor?
 How do we leverage new digital technologies...
 ... without weakening the quality of the relationship?
 ... to leapfrog competitors with denser coverage and more resources?
 ... to increase cross-sell and deepen relationships?
 ... to create new products, services and value propositions?
 From where can we expect disruptive innovation? Can the traditional bundled product offer to SMEs
(especially the smaller ones) be unpicked? How?
 What do we need to do to ensure we retain the direct interface with the customer? E.g. do we need
to offer third party products and provide independent advice?
 How do we re-define the role of each channel and the customer value proposition? Could the
mobile channel replace the relationship manager altogether for certain simple products and services?
62
Digital technologies raise a number of new strategic issues for business banks that should be further investigated

Contents
63
1. Introduction
2. Key messages
Appendices

Appendix A
Impact of digitisation
64

Speed of digitisation
65
There are four sets of factors driving the speed of digitisation

Industries most affected by digital transformation
66
Financial services and insurance are expected to be highly impacted by digitisation in the medium term

Impact of digitisation on various industries
67
Digitization will allow for an increase in customer insight/reach, improvements in productivity and access to new
value pools and business models

ICT and e-business impact on the banking industry
68
Source: Rambøll Management for the European Commission , ‘ICT and e-Business Impact in the Banking Industry’, 2008
Process efficiency
Branch renewal
Market structure
• Mergers drive increased spend on ICT
• ICT, in turn, makes integration easier
• Acquiring certain technologies is a key thrust behind some
acquisitions (e.g. Acquisition of Egg bank by Citibank)
Key findings
The European Commission sees ICT having an impact on the banking industry in three ways
• Productivity is increasing while average working hours per
employee are falling. In other words, ICT capital investments are
largely substituting labour, particularly in retail banking
• Standardisation of ordinary financial services and increase in
customer on-line self-servicing are rendering the tellers
redundant
On-line increasingly used for traditional, manual banking services,
while branches are reserved for face-to-face advisory services

Value shifts within industries – The media sector
69
Source: PWC 2010 industry data for US and Western Europe; Booz & Co., ‘The Next Wave of Digitization – Setting your Direction, Building your
Capabilities’, 2011
While the overall economic value of the media sector has risen, there has been a major shift from traditional media
to new media

Appendix B
Excellence in customer analytics and data management
70

Sources of value in customer analytics
71
Increased maturity in customer analytics will only deliver a sustainable competitive advantage – through increased
bargaining power and marketing effectiveness and efficiency – if coupled with other unique company resources like scale
advantages and privileged access to data
Source: Olena Valentynivna Bazylevska, Master thesis ‘Customer analytics as a source of competitive advantage’, Delft University of Technology,
November 2011
Increased
bargaining
power
Improved
marketing
effectiveness
Improved
marketing
efficiency
Sustainable competitive advantage
Scale
Privileged access
to data

Data management best practices
72
The MBA identifies six areas of data management best practice
Source: Mortgage Bankers Association Residential Technology Steering Committee, ‘Data management best practices’, 2008
• Ensure support from the most senior business leaders
• Establish a Data Governance committee to align the
processes and technologies to manage data
strategically
• Nominate a Business Data Steward to define:
−Business definitions & business rules
−Identification of critical data elements
−Data quality monitoring, issue identification &
resolution
−Identification of trusted sources of data
−Support in the simplification of the data
environments
• Use common business definitions
• Move data quality checks as far upstream
as possible
• Put data quality checks on critical data
elements
• Understand the quality of the data
• Execute common business rules once and
centralize
• Ensure that metadata is captured in a
central source
• Identify trusted sources of data
• Share data when possible
• Methodologies that can be utilized to improve
an organization’s data quality are based on
more generic quality improvement
methodologies, such as Six Sigma or Total
Quality Management
Data
stewardship
Data
governance
Data
security
Data
architecture
Data
standards
Data quality
• Create an enterprise data model which logically
represents the business and shows the relationships
between various subject areas
• Create diagrams that show the lifecycle of how data
moves across major business entities
• Identify data stakeholder roles, organizations,
processes and applications
• Define how data will flow between applications and
databases
• Assign data stewards to subject areas, data entities,
and application code sets
• There must be an agreement among
all interacting parties that their data
values will conform to that standard
Data security, or Information Security, covers the confidentiality,
integrity, and availability of data regardless of the form the data
may take: electronic, print, or screen visible. It also can be
regarded as the protection of data from unauthorized (accidental
or intentional) modification, destruction, or disclosure.

ExcellenceAwards
73
The Banking & Payments Asia 2012 award for excellence in data analytics was not attributed. The Editor’s Special Award
2012 for the Most Innovative Bank in Asia Pacific was given to OCBC Bank (Singapore)
Source: www.vrl-financial-news.com/bpa/banking--payments-asia/events/retail-banking-and-pay-in-2012/trailblazer-awards1.aspx
Nominations categories Awards
Process Excellence Awards Customer centricity
Account opening
Loan origination/approval
Collection/debt management
Risk management
Maybank (Malaysia)
Standard Chartered Bank (Singapore)
Special Commendation: OCBC Bank
Citibank Savings (Philippines)
-
Kotak Mahindra Bank (India)
Product excellence Prepaid payment
Credit card
Debit card
Mobile payment
e-wallet
e-commerce
P2P payment
Payment innovation
Bank of the Philippine Islands (Philippines) and Beam Money (India)
Siam Commercial Bank (Thailand)
Special Commendation: RHB Bank (Malaysia)
KASIKORNBANK (Thailand)
Special Commendation: OCBC Bank (Singapore)
Security Bank (Philippines)
Bank Mandiri (Indonesia)
CIMB Bank (Malaysia)
Maybank (Malaysia)
Channel Excellence Awards Branch
Internet
Mobile
Social media
Multi-channel integration
Special Commendation: Bank Commonwealth (Indonesia)
-
Service Provider Excellence
Awards:
Payment processing
Customer data management
Core banking
Big data/analytics
Virtualisation
Risk management
Customer experience: Citibank (Singapore)
Special Commendation: Maybank (Singapore)
Service innovation: Standard Chartered Bank (Singapore)
Strategy Excellence in
Business Innovation
Business model innovation
Financial inclusion
ICICI Bank (India)
Special Commendation: KASIKORNBANK (Thailand)

Accenture customer analytics case study – Wachovia Bank
74
Source: Accenture, ‘Data to Knowledge to Results: Building an Analytic Capability’, 2001

Business analytics in transaction banking
75
Commentators, analysts and banks recognize four key areas where analytics capability can provide value:
• Customer analytics
• Integrated risk management
• Operational effectiveness
• Optimized transaction products
Source: IBM, ‘The shift to analytics: the next wave for transaction banking’, 2012
Case Study: North American bank improves payment processing and customer satisfaction
A leading North American institution required real-time information on queued payments to calculate changes in intraday
liquidity positions and assess the risk, based on time of day, of all payments not being completed by deadlines. The
organization was also striving to improve payments customers’ satisfaction with its call-centre service, seeking insight on
customers affected, expected completion and the potential liability of in-flight payments within the bank’s payment
system.
The operational dashboards made available through IBM’s payments and analytics solutions provided a consolidated real-
time view of payments process flows, performance indicators for key customers, and alerts to appropriate team
members for out-of-bound payments, bottlenecks and customers at risk.
The solution accelerated the bank’s ability to identify and act on events by providing better insight into process
bottlenecks. This resulted in improved STP rates, reduced service disruptions and lower operating costs. The net result
was increased customer satisfaction by improving payment processing and enhancing information provision.

List ofACLreferences
76
Source: www.acl.com/customers/success_stories.aspx
“ACL Services Ltd. is the leading global provider of audit analytics and continuous monitoring software to the audit and
controls professions and the financial management community”

CognitroAnalytics success stories
77
The Royal Bank of Canada saved over $15m after the implementation of a fraud
prediction measures
National Bank of Canada increased Customer Retention rate by 40% through proactive
initiatives in customer churn analytics
Bank of America reported a net reduction rate of 17% in loan defaults following the
adoption of predictive scoring analytics
The Banco Santander Totta in Portugal increased conversion rates on credit card offers
from 5% to 30% and reduced the churn by 25% by using data mining techniques
Source: http://cognitro.com/DMABA10-Seminar-Brochure.pdf

IBM case study –Analytics in action: FIDUCIAITAG
78
“FIDUCIA is the largest comprehensive outsourcing partner in the cooperative banking sector, serving more
than 850 banks and 38 million banking customers in Germany. With IBM Cognos software at the core of its
business intelligence competency centre, FIDUCIA can bring new answers and insights to its banking
customers.”
Cognos fits perfectly with FIDUCIA’s streamlined ASP model—letting FIDUCIA offer BI capabilities to its
hundreds of banking customers in a way that is consistent with its vision of providing comprehensive, value
added services in a simple, secure, and scalable manner. Here are some of the key benefits that FIDUCIA
executives attribute to Cognos:
• Expanded self-service offerings—One key to FIDUCIA’s success is the ability to empower its customers to
use new BI solutions and capabilities at the desktop level—but without the complexity and expense of
installing and upgrading desktop software.
• New revenues—Easy to deploy and use, IBM Cognos BI solutions expand FIDUCIA’s ASP model and enable
it to serve its customers with cost effective, value-added applications and services— enhancing revenues
and building the customer base.
• Better information and more transparency— Direct, fast, flexible, and integrated access to relevant
information lets FIDUCIA help its customers achieve their business and profit targets. For example, by
identifying market potential, they can ensure that they are maximizing it.
Source: IBM, ‘Business analytics for banking ‘- Three ways to win, 2010

IBM case study –Analytics in action: BankAustriaAG
79
Bank Austria AG is the clear number one in the Austrian banking industry. With a balance sheet total of
around €145 billion, Bank Austria is about double the size of the next largest bank. Bank Austria needed a
system with an independent and flexible response to be able to produce efficient ad-hoc reporting
whenever it was required.
With Cognos 8 BI, reporting to the parent company is now uniform, and can be achieved much more
quickly and at a lower cost than previously. This speed and flexibility are also apparent in the bank’s ad
hoc reporting, particularly important in the current economic climate.
With all controlling content consolidated to a single platform, data discrepancies are a problem of the past
– the bank can now have total confidence in its data.
IBM case study –Analytics in action: Major European Bank
A major European bank has deployed IBM SPSS predictive analytics to construct an innovative early
warning system that detects potential failures among its business customers. It also models the
relationships and economic dependencies among them. This allows the bank to predict the impact on the
bank (and its other customers) of a business failure by a major client, taking into account the “domino
effect” in which one failure may trigger others. It provides an effective safety net by allowing the bank to
calculate the maximum risk from a major business failure.
Source: IBM, ‘Business analytics for banking ‘- Three ways to win, 2010

Appendix C
Additional Knowledge References
80

Additional Knowledge References
81
• ‘Driving Business Value From Investments in Information’, Jiří Omacht, Michael Ventruba, available at
http://agendabuilder.gartner.com/BIE12I/webpages/SessionList.aspx?SessionType=140
• ‘The Komercni Bank Profits From Investments in Information - Analyst Report, available from Gartner
• IBM reports on business analytics for banking available at http://www-01.ibm.com/software/be/analytics/banking/index.html
• Rambøll Management for the European Commission , ‘ICT and e-Business Impact in the Banking Industry’, 2008, includes the
following case studies:
−ICA Banken – Making banking more convenient
−Hansabank – Development of an e-banking product for private customers
−Tapiola Bank – Dual-combination banking
−National Irish Bank – The impact of ICT on post-merger branch renewal
−Nova Ljubljanska Banka – Implementing Online Banking in a CEE-context
−SkandiaBanken – the role of ICT in the development of an Internet-only bank
−Egg/Citibank UK – Acquiring Online Capabilities
−Eurobank EFG – ICT-facilitated Process Management
−Glitnir Bank – Banking in an Online Society
−Société Générale – Strategic Procurement of ICT
• How Citibank uses Twitter to improve customer service, available at
http://cio-asia.com/resource/industries/how-citibank-uses-twitter-to-improve-customer-service/?page=2

Further reading –Articles from ‘ICG Industry Insights Review’(1/2)
82
Face-to-face channels
 “Face-to-Face: A €15–20 Billion Multichannel Opportunity.” – McKinsey and EFMA
 “The Future of Face-to-Face: How to Make the Transformation a Reality” – McKinsey
Mobile channel and payments
 “Monetising Mobile: How Banks are Preserving Their Place in the Payments Value Chain” – KPMG
 “Applied Mobility for the Banking Industry” – Deloitte
 “What’s the Future of Mobile Banking in Europe?” – McKinsey
 “Your Wireless Wallet” – McKinsey
 “Dialing up a Storm: How Mobile Payments Will Create the Most Significant Revenue Opportunities of the Decade for Financial
Institutions” – PWC
 “Online Merchant Acquiring: Innovating Beyond Payments” – McKinsey
Digitisation
 “Minding Your Digital Business: McKinsey Global Survey Results” – McKinsey
 “Preparing for RDR: Opportunities and Challenges for Wealth Managers and Private Banks in the UK” – Accenture
 “Measuring Industry Digitization: Leaders and Laggards in the Digital Economy” – Booz
 “The New Digital Tipping Point” – PWC
 “Digital Insurance – Charting a Course to Best‐in‐Class Capabilities” – BCG
Social media
 “Designing the Transcendent Web: The Power of Web 3.0” – Booz & Co
 “Banking on Social Media” – Booz and Co

Further reading –Articles from ‘ICG Industry Insights Review’(2/2)
83
Data analytics
 "Creating Value through Data Integrity - a Pragmatic Approach" – Boston Consulting Group
 “An 8-Point Tune-up to Boost Auto Lending: How Analytics and Business Rules are Helping Steer More Top-Line Growth to the Bottom
Line” – FICO
 “Driving intelligent growth with Customer Value Maximization: How banks should go beyond CRM” – McKinsey
 “Finally, Customer Analytics for Banks” – Deloitte
 “Seizing the Potential of ‘Big Data’” – McKinsey
 “Competing Through Data: Three Experts Offer Their Game Plans” – McKinsey
 “Analytics in Banking: Taking a Fresh Look at Your Challenges” – Deloitte
 “Turning Data into Dollars” – Deloitte
 “A New Virtuous Cycle for Banks – Linking Social Media, Big Data, and Signal Advantage” – BCG
Cloud computing
 “Cloud Computing in Banking - What Banks Need to Know When Considering a Move to the Cloud” – Capgemini
 “Banking on Capability Clouds” – Deloitte
Other
 “A ‘New Normal’ is Emerging – But Not Where Most Banks Expect” – FICO
 “Rethinking Retail Banking Growth: Effective Strategies for Increasing Revenue by Building Stronger Connections to the Post-Crisis
Consumer” – Deloitte
 “A Strategic Approach to Self Service: Capture the Value, Avoid the Pitfalls” – Booz and Co.
 “IT Advantage Fall 2011” – BCG
 “Commercial Banking: Competing for Growth in 2012” – Oliver Wyman
 “Banking Technology Vision: Technology Waves that are Reshaping the Banking Landscape” – Accenture
 “Retail Banking in CEE: Exploiting the Potential of the Micro Business Segment” – Roland Berger

Internal Consulting Group
Unbundled consulting  Project support  Capability building  Professional association
www.internalconsulting.com.au
84
ThisdocumentwaspreparedbyAnnaVideira-Johnson(avj@internalconsulting.com.au). AnnaisanICGaffiliate
wholeads work in corporate and business unit strategy, operational improvement and corporate
restructuring. Anna spent six years with McKinsey & Company as a strategy and corporate
finance consultant and over two years as a senior advisor in NAB’s Corporate Strategy &
Investments team.
Anna was assisted by ICG’s Wholesale Banking Practice Leader, Peter Beaumont, and an ICG
expert panel drawn from ICG’s affiliate pool.

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