Trends and Transformation                           …..Driven by Software………….Neil BeckleyFSS Industry Leader, GMU
The ROE Challenge Global Banks                                                                 In the “New Normal” of lowe...
What Banking CIOs tell us:                Most important visionary plan elements (Interviewed CIOs could select as many as...
Dynamic BankingTougher Banking Environment•   Increasing regulation & control                                             ...
This translates into a few key focus areas…                              Create a customer focused                        ...
The 2013 Point Of View•     Empowered Customers - Think Like a Retailer•     Simplicity Low Cost - Act like a Manufacturer...
To thrive in the new environment Banks will need to “Think Like Retailers,                       Act Like Low Cost Manufac...
The ability to create competitive advantage using analytics surgeddramatically in 12 months; the bottom-line impact is cle...
Early adopters have outpaced others in gaining competitive advantageby expanding the use of analytics                     ...
Transformed organizations outpaced all others in integrating analytics intocore strategies and operations in the past 12 m...
The BAO Reference Architecture Overview                  Content        Master Data              Data                Data ...
Big Data: The Next Natural ResourceData “behaves” like a natural resource in that it can be found, extracted, refined,and ...
What does a Big Data platform do? Extract insights from a large volume   Analyze a Variety of Information of data, includi...
IBM Big Data Platform
What are Social Technologies          Source: McKinsey & Co. The social economy: Unlocking value and productivity through ...
What is Influencing This Trend?  TECHNOLOGIES change Interactions                                    CONTROL changes hand...
How are Banks Trying to Use Them?Source: The Financial Brand, Oct 25 2012, http://thefinancialbrand.com/25875/bank-and-cre...
The 2013 Point of View•   Empowered Customers - Think Like a Retailer•   Simplicity Low Cost - Act like a Manufacturer•   ...
Why do Clients Buy BPM?         IT                                     LoB                           C-LevelIT Automation ...
BPM reduces paper consumption, streamline processes and shortencycle times                                                ...
The reference architecture                                                                 Modelling                      ...
Generic Lending Process Flow                 Decisioning                                             Validation           ...
The 2013 Point of View•   Empowered Customers - Think Like a Retailer•   Simplicity Low Cost - Act like a Manufacturer•   ...
Capital – Embed Risk Management•   Basel II / Basel III / Liquidity…………..•   G-SIBs•   D-SIBs?•   Business Model Reinventi...
IBM’s Strategy – To be the leading provider of integrated risk and compliance solutions to the Financial Services Industry...
IBM Risk Management, Solution Domain Summary: CRO                Risk Enabled Decision Support & Optimization*            ...
IBM Risk Management, Solution Domain Summary: CFO                  Risk Enabled Decision Support & Optimization*          ...
IBM Risk Management, Solution Domain Summary: CCO                Risk Enabled Decision Support & Optimization*            ...
IBM Software Day 2013. Banking trends and transformation
IBM Software Day 2013. Banking trends and transformation
IBM Software Day 2013. Banking trends and transformation
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IBM Software Day 2013. Banking trends and transformation

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IBM Software Day 2013. Banking trends and transformation

  1. 1. Trends and Transformation …..Driven by Software………….Neil BeckleyFSS Industry Leader, GMU
  2. 2. The ROE Challenge Global Banks In the “New Normal” of lower-for-longer interest rates, below-trend growth and less leverage, we expect banks’  The lowest level of revenue growth for the banking management to increasingly focus on restructuring industry globally since 2008, at the height of the global financial crisis – UBS business models in order to improve returns - Citi, 4 January 2013 Emerging Markets  Declining ROEs – In 2013, banks across emerging markets could face one of the most challenging In Europe, shareholders have been operating environments in recent years, culminating in asked to provide double the amount of sector ROE falling to its lowest level since 2003 – UBS capital for effectively the same level of return - profit having only recovered to North America 2007 levels  Expect the median bank to see revenue decline 1% yoy as balance sheet growth is offset by NIM declines and mortgage banking shifts from a source of earnings growth to stability – Goldman Sachs Europe  In the UK upcoming banking reforms could cost GBP 4bn-7bn, which will likely reduce the UK banks’ ROEs by c 2.4-4.1 – UBS
  3. 3. What Banking CIOs tell us: Most important visionary plan elements (Interviewed CIOs could select as many as they wanted) 83% Business Intelligence and analytics 81% 74% Mobility solutions 76% 58% Risk management and compliance 72% 68% Virtualization 70% 60% Business process management 70% 57% Self-service portals 53% 55% Collaboration and Social Networking 48% 60% Cloud computing 48% Global sample BankingSource: 2011 CIO Study, Q12: “Which visionary plans do you have to increase competitiveness over the next 3 to 5 years?”; Global sample (n=3,018); Banking (n=311)
  4. 4. Dynamic BankingTougher Banking Environment• Increasing regulation & control Tremendous Growth Potential• Mature markets continue to deleverage • Banking the unbanked• Declining profitability • Leverage the SME opportunity• Compounded by trust & reputation Issues • Drive new revenue growth through customer centricity • Continue to exploit cost efficiencies Smarter & More Demanding Customers • Technology explosion • More demanding, less loyal customers • Comparison Shoppers • New entrants will exploit gaps
  5. 5. This translates into a few key focus areas… Create a customer focused enterprise Optimize enterprise risk Improve operational and compliance efficiency and agility
  6. 6. The 2013 Point Of View• Empowered Customers - Think Like a Retailer• Simplicity Low Cost - Act like a Manufacturer• Common Agile Processes - Operate as One Bank• Capital – Embed Risk Management
  7. 7. To thrive in the new environment Banks will need to “Think Like Retailers, Act Like Low Cost Manufacturers” Right Customer Customer Segmentation Right Service Right Time Customer Customer Service Insight Right Place Right Product Multi-Channel Product / Service Optimisation Lifecycle Right Price Price OptimisationEnabled through Front Office Digitization, Advanced Business Analytics & Information Management
  8. 8. The ability to create competitive advantage using analytics surgeddramatically in 12 months; the bottom-line impact is clear Respondents who say Organizations achieving a competitive advantage with analytics are analytics creates a competitive advantage 2.2x more likely to 69% substantially outperform their industry peers Banking2011 58% 97% 35% increase2010 37% Banking 57% Ratio of respondents who indicated analytics creates increase a competitive advantage to those who indicated it did not and the likelihood they also indicated their organizations was “substantially outperforming their competitive peers”. The ratio was 2.0 to1 in 2010. Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership. Copyright © Massachusetts Institute of Technology 2011.
  9. 9. Early adopters have outpaced others in gaining competitive advantageby expanding the use of analytics Respondents who cited a competitive advantage using analytics year-over-year 2011 80% 23% Transformed increase 2010 65% 2011 63% 66% Experienced increase 2010 38% 2011 5% Aspirational decrease 2010 39% Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership. Copyright © Massachusetts Institute of Technology 2011.
  10. 10. Transformed organizations outpaced all others in integrating analytics intocore strategies and operations in the past 12 monthsRespondents increasing their integration ofanalytics into strategy and operations Transformed organizations creating a competitive advantage are Transformed 70% 3.4x more likely to Experienced substantially outperform their industry peers 55% Ratio of Transformed organizations creating a Aspirational competitive advantage compared to Aspirational organizations not creating an advantage that self- 34% assessed as “substantially outperforming their competitive peers.” Source: The New Intelligent Enterprise a joint MIT Sloan Management Review and IBM Institute of Business Value analytics research partnership. Copyright © Massachusetts Institute of Technology 2011.
  11. 11. The BAO Reference Architecture Overview Content Master Data Data Data BI / Performance AdvancedSources Management Integration Repositories Access Management Monitoring Analytics Operational Enterprise Extract / Dimensional Planning, Predictive Web / Orchestration Subscribe Layer Forecasting, Analytics Services Apps Ingestion Components Budgeting Data R PortalUnstructured Data Data CRUD Quality E Extraction Warehouse Scorecards MiningData Stores Transactional B A Components A L Device Structured Transform T T Operational Dashboards Simulation Data Stores Base Services C I Data Store Composite Data Load H M Application Load /Informational Components Publish E Time Guided Text Analytics Document Persistent Analysis Collaborative Master / Management Repository T Application Reference Services Reference Data Optimization R Reporting Data Management A Master Data Productivity Records Store External N Querying Application Management Visualization S Services Content Store A Enterprise Web C Monitoring Search Federation TI O Staging Area Business Devices N Unit A Application L Business Process Management Service Management Information Governance Collaboration Security, Privacy & Compliance Transport & Delivery Infrastructure
  12. 12. Big Data: The Next Natural ResourceData “behaves” like a natural resource in that it can be found, extracted, refined,and fuel the cognitive engine Volume Velocity Variety Veracity 300 million 5 million 1.5 billion 80% transactions processed trade events occur total Facebook posts & of all available data every day in North every second Tweets per day will be uncertain by America 2015
  13. 13. What does a Big Data platform do? Extract insights from a large volume Analyze a Variety of Information of data, including a wide variety of Novel analytics on a broad set of mixed information that could not be analyzed before Multiple relational & non-relational data types and schemas types, with high velocity Analyze Information in Motion Streaming data analysis Large volume data bursts & ad-hoc analysis Analyze Extreme Volumes of Information Cost-efficiently process and analyze petabytes of information Manage & analyze high volumes of structured, relational data Discover & Experiment Ad-hoc analytics, data discovery & experimentation Manage & Plan Enforce data structure, integrity and control to ensure consistency for repeatable queries
  14. 14. IBM Big Data Platform
  15. 15. What are Social Technologies Source: McKinsey & Co. The social economy: Unlocking value and productivity through social technologies, Jul 2012,
  16. 16. What is Influencing This Trend?  TECHNOLOGIES change Interactions CONTROL changes hands • Learning systems interact with humans • Analytics create value for clients • The front office is now customer-owned-devices • Slick integration between platforms, channels, computers, phones, • The next App Store - who owns it? devices…or not • Cloud as a business model vs. just technology • Biometrics for authentication • Payments multiply: “50 ways to give you money”  CULTURAL THEMES change value propositions CUSTOMERS change segments • No “normal” household of customers • Location services, meet-ups, value in the app • Mobile adds billions of newly banked • The “pre-inheritance” periods where aging parents need help managing • Security issues migrate to each new service finances • Privacy continues to decline • Wealth Management as $trillions transfer • Social media usage is no longer age-related • New value aggregators steal customers17
  17. 17. How are Banks Trying to Use Them?Source: The Financial Brand, Oct 25 2012, http://thefinancialbrand.com/25875/bank-and-credit-union-technology-trends/, quoting Celent report “EmergingTechnologies in Retail Banking: The Long Road to Customer Centricity”. Aug 2012
  18. 18. The 2013 Point of View• Empowered Customers - Think Like a Retailer• Simplicity Low Cost - Act like a Manufacturer• Common Agile Processes - Operate as One Bank• Capital – Embed Risk Management
  19. 19. Why do Clients Buy BPM? IT LoB C-LevelIT Automation and Optimisation Process Automation and Optimisation Enterprise Performance Optimisation • Time to value • Automate a manual process • Innovation • Total cost of ownership • Visibility and ROI • Go to market • Prebuilt assets • Quicker, better, cheaper • Customer centricity • Reuse • Compliance • Product flexibility • IT standards • Target operating model • Industry standards System Business Agility Process Agility Agility
  20. 20. BPM reduces paper consumption, streamline processes and shortencycle times Onboarding & Before: Long, multistep process After: Streamlined and efficient process Origination without BPM with BPM Optimization Inefficient processes: Paper-based processes requiring human intervention Wait time Efficient processes: Semiautomated activity Fully automated electronic activity
  21. 21. The reference architecture Modelling Simulation & Invoice Finance Executive Optimizzazion Reconciliation & Ops Users Teams Management Customer Workflow Service Account Administration Business rules DataOrg & Functions User Interface Documents SOA Services IT Applications SOA integration BPM Metrics & Monitoring Analysis & Reporting
  22. 22. Generic Lending Process Flow Decisioning Validation Processing Credit Loan Scoring Initial Loan Doc Client Payment & Appraisal Underwriting Securitization Application Supporting Decision Packaging Sign off Servicing Docs Client Typical Results: Onboarding & Reduce cost per loan by 50% Origination Optimization Branch Reduce processing time by 80% Simultaneous and effortless access to all parties Origination Process over 85% of loans electronically Resolve 60% of inquiries on first call Credit Bureau CRM Credit card Consumer Mortgage Business Student Systems processing lending lending lending lending
  23. 23. The 2013 Point of View• Empowered Customers - Think Like a Retailer• Simplicity Low Cost - Act like a Manufacturer• Common Agile Processes - Operate as One Bank• Capital – Embed Risk Management
  24. 24. Capital – Embed Risk Management• Basel II / Basel III / Liquidity…………..• G-SIBs• D-SIBs?• Business Model Reinvention - Capital Planning / Forecasting• Risk Data• Embed into Business Decisions
  25. 25. IBM’s Strategy – To be the leading provider of integrated risk and compliance solutions to the Financial Services Industry by enabling clients to effectively manage evolving regulatory compliance mandates while improving performance.Our Capabilities Client Needs Addressed1 – Regulatory Compliance -Process and  Transformation driven by Regulatory Changes (i.e. Fed/OCC, FSA, Dodd-Frank, LivingGovernance Wills, etc.)  FED/OCC Consent Orders in Mortgage/Lending, FFIEC Exam Prep, Internal/External Audit Findings, Legal eDiscovery, Records Mgmt  Operating Model Improvements, Data Security/CyberSecurity2 – Risk and Security Application  Address new Compliance Mandates (Basel AMA, RCSA, Solvency II, Dodd-Frank,Architecture and Implementation FSA, IFRS)  Reduce cost of compliance, while improving transparency  Improve automation, risk/control monitoring effectiveness3 – Data Architecture  New Data and reporting standards for Basel II/III and Solvency II and Architecture needs  Finance and Risk Data Integration and Consolidation  Time to Data and Cost of IT  Accelerated Reporting (Intraday) requirements4 – Risk Analytics and Reporting  New Regulatory Requirements for Basel III – Liquidity, ALM, Reg/Economic Capital, Stress Testing  Data Quality and availability for timely, accurate reporting  Automation and Instrumentation of Risk and Control Data for reporting, analytics and key risk indicators/metrics IBM Confidential – Internal Use Only
  26. 26. IBM Risk Management, Solution Domain Summary: CRO Risk Enabled Decision Support & Optimization* CRO CFO CCO CIO LINES Risk Enabled Decision Support* OF Risk Analytics* GRC Management* Services BUSINESS Business Continuity Credit Operations Capital Analytics IT Security Risk IT Governance Management Operational Risk Internal Audit Compliance Vendor risk Reporting Actuarial Risk Strategic Collateral Liquidity Risk Financial Market Risk Policy & Credit Risk RETAIL Consulting ALM & GTS,GBS SWG-Lab CAPITAL MARKETS Integration GBS/BAO COMMERCIAL Services LENDING Data Aggregation and Monitoring* Implement- Fraud Monitoring Loss Event Data Industry Content Legal Case Mgt Cntll Monitoring Records Mgmt ation Seg of Duties INSURANCE Trusted Risk Information IT Ops Mgmt E-Discovery SIEM Asset Mgmt KRI Mgmt Access / IM Warehouse Application Services Database Endpoint Network AML ASSET SERVICES Consolidated Risk Data Results Datamart Operational Change WEALTH IBM Security Solutions Mgmt MGMT Services Operational Systems * representative solutions
  27. 27. IBM Risk Management, Solution Domain Summary: CFO Risk Enabled Decision Support & Optimization* CRO CFO CCO CIO LINES Risk Enabled Decision Support* OF Risk Analytics* GRC Management* Services BUSINESS Business Continuity Credit Operations Capital Analytics IT Security Risk IT Governance Management Operational Risk Internal Audit Compliance Vendor risk Reporting Actuarial Risk Strategic Collateral Liquidity Risk Financial Market Risk Policy & Credit Risk RETAIL Consulting ALM & GTS,GBS SWG-Lab CAPITAL MARKETS Integration GBS/BAO COMMERCIAL Services LENDING Data Aggregation and Monitoring* Implement- Fraud Monitoring Loss Event Data Industry Content Legal Case Mgt Cntll Monitoring Records Mgmt ation Seg of Duties INSURANCE Trusted Risk Information IT Ops Mgmt E-Discovery SIEM Asset Mgmt KRI Mgmt Access / IM Warehouse Application Services Database Endpoint Network AML ASSET SERVICES Consolidated Risk Data Results Datamart Operational Change WEALTH IBM Security Solutions Mgmt MGMT Services Operational Systems * representative solutions
  28. 28. IBM Risk Management, Solution Domain Summary: CCO Risk Enabled Decision Support & Optimization* CRO CFO CCO CIO LINES Risk Enabled Decision Support* OF Risk Analytics* GRC Management* Services BUSINESS Business Continuity Credit Operations Capital Analytics IT Security Risk IT Governance Management Operational Risk Internal Audit Compliance Vendor risk Reporting Actuarial Risk Strategic Collateral Liquidity Risk Financial Market Risk Policy & Credit Risk RETAIL Consulting ALM & GTS,GBS SWG-Lab CAPITAL MARKETS Integration GBS/BAO COMMERCIAL Services LENDING Data Aggregation and Monitoring* Implement- Fraud Monitoring Loss Event Data Industry Content Legal Case Mgt Cntll Monitoring Records Mgmt ation Seg of Duties INSURANCE Trusted Risk Information IT Ops Mgmt E-Discovery SIEM Asset Mgmt KRI Mgmt Access / IM Warehouse Application Services Database Endpoint Network AML ASSET SERVICES Consolidated Risk Data Results Datamart Operational Change WEALTH IBM Security Solutions Mgmt MGMT Services Operational Systems * representative solutions

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