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  1. 1. RethinkingtheDigitalProposition:providinginformationclientsreallyneed 09 Rethinking the Digital Proposition: providing information clients really need Top Ten Challenges for Investment Banks 2014
  2. 2. Rethinking the Digital Proposition: providing information clients really need Investment Banks recognise that digitalisation is necessary to generate new sources of revenue, but are challenged with defining a strategy and supporting business case. As digital businesses, they will need to change how they engage with their employees, alter internal processes and interact with their clients. Digitalisation has become a necessary part of the fabric of which businesses are built upon today to create profitability, growth and differentiation amongst their competitors. Cross-industry insights are key to understanding how high- performing companies are delivering a rich and engaging digital brand experience. Based on a 2013 survey of 300 bank executives performed by Bank Technology News (BTN), Investment Banks are highly focused on enhancing their digital capabilities. The Case for Change The value to be realised through adoption of digital capabilities such as analytics, collaboration tools and Cloud Computing will range from improving the client experience (resulting in greater satisfaction and increased sales) to increased operational efficiencies and cost savings. When Investment Banks become fully integrated digital businesses, they will transform their engagement with clients and, more fundamentally, the way in which they do business. 1. Seamless Collaboration Although initially slow to embrace social media, Investment Banks are adopting collaboration tools that provide direct interaction between back office operations and clients. Having initially used Facebook and Twitter to add to the channels used by Marketing, Investment Banks are now turning to more specialist platforms such as SalesForce Chatter to communicate with clients which are customised and tailored for integration 09 Challenge Positioning for Growth 2
  3. 3. integration with existing CRM systems. These tools ensure information is available allowing for faster results and better decisions. Bankers will be more productive, efficient, and innovative as a result. When a top insurance company decided to overhaul its approach to managing existing customer relationships and identifying new areas of growth, better tools were required to aid in the tracking, planning and execution of their activities. How much U.S. banks expect to increase IT spending in 2013 Areas in which U.S. banks plan to increase IT spending U.S. Banks’ use of Cloud Computing Mobile banking 57% Security 52% Online banking 46% Data centre/servers 39% Desktop computing 29% 15% Less than 4% 4% By 21% to 50% 25% By 5% to 7% 32% By 8% to 10% 21% By 11% to 20% 28% Branch expansion 32% Advertising and Marketing 37% Regulation 46% New products and services 80% Information Technology 12% Infrastructure as a service 25% Software as a service 8% Platform as a service 65% None Figure 1 Source: Bank Technology News – “Banks’ 2013 IT Spending Sees Healthy Increase: Survey” (Feb 2013) 2. Data Velocity Clients are demanding more relevant, tailor-made interactions at the time and place of their choosing. Having a faster data response model will allow for sophisticated analysis of complex products, such as derivatives, and simpler understanding of changing positions in the market and their effect on risk in real time. This will enable Investment Banks to aid clients in making better investment decisions through an improved servicing experience by providing insights more quickly, allowing the customer to respond to ever-changing market conditions. 3. Collateral Management Traditionally, collateral management has been siloed. Each trading desk, prime services, financing and counterparty credit risk management units have their own individual priorities, with limited co-ordination across functions. Investment Banks are finding that cross-desk, cross legal entity, real-time product inventory management and margining can boost revenue, cut funding costs, reduce operational and counterparty risk, reduce regulatory capital needs and improve compliance (e.g., segregated account rules). This unified view for collateral management can be achieved through data rationalisation and incorporation of an analytics engine that is centrally controlled versus individual lines of business limiting data redundancy and increasing data availability across the organisation. 4. Risk Analysis Today’s regulatory environment is affecting end to end trading activities. The heightened regulatory controls imposed on trading via electronic solutions require greater transparency, and the provision of real-time exposure monitoring across the entire trade lifecycle. This requires referential data to be configured correctly and positions to be readily available. In addition, 3 Where Banks Plan to Increase Capital Spending in 2013
  4. 4. proper infrastructure is required to provide a view into client trends such as transaction types, trade activity. With this in place, forward-looking scenarios and peer analyses become possible, which will provide better understanding the client’s risk profile. Technology/Infrastructure As Investment Banks incorporate digital- driven enterprise into their critical business processes, they leverage new building blocks to support a secure and agile environment. An investment in infrastructure and collaboration tools is required to become an industry leading digital brand is required to reap the benefits of digital capabilities 1. Analytics Investment Banks are operating from poorly-integrated, legacy systems. However, refreshing technology is frequently not feasible or cost effective. One solution is to implement a Corporate-owned data structure to shift data ownership out of operations silos and ensure a single view of customer. Data can be used to tailor interactions, services, and create new insights about clients, products, and markets. Accenture worked with a leading global Asset Management company to evaluate current processes, formulate a conceptual view of service analytics to support analytics maturity progression, conceptualise and develop tools to quantify and analyse cost to serve and a recommended plan to implement managed services around cost to serve analytics to achieve a 25-30% uplift in overall process efficiency. Analytics can help an Investment Bank marry their operational needs with client insights enabling greater cross selling, client retention, and price optimisation. By knowing how to extract the most value out of every pound of spend, as well as being able to segment clients according to profitability, Investment Banks will substantially increase their competitive edge. 2. Mobility By 2016, the number of connected devices is expected to grow by ~60% from 9B today. The expectations of investors are evolving and require that data and access to their bankers needs to be on their terms - anywhere, anytime in turn requiring Investment Banks to equip bankers with the right information at the right time. This behaviour shift is demanding that Investment Banks adapt Customer Management Cross Sell Strategy Optimal Pricing Customer Retention Optimize Decision Making Clients Actual New Worth Banker Desktop Figure 2 Source: Accenture Research 4
  5. 5. their accessibility points for consumers to not just replicate the online experience but create personalised, on the go services that consider customer preferences and behaviours for the purposes of creating personalised and targeted programmes. The use of mobility also creates opportunity for things such as information sharing and training within the Bank enabling real-time access to training on tablets ensuring access to the most up to date materials, procedures and policies or providing instant updates/notifications to employees each time policies and regulations are revised or created. A large European Bank, for example, launched an iPad application for its financial advisors that provides customised presentations for client meetings and eSignature capabilities allowing for increased sales effectiveness. Differentiated mobile capabilities will allow Investment Banks to improve customer service, reduce costs (i.e. help desk, product/ service enrolment processing) and drive customer outreach/conversion. 3. Networking and Cloud Computing Investment Banks have taken advantage of point solutions in Cloud Computing – most have outsourced email and traditional server-based collaboration services to Microsoft and other established Cloud suppliers. Point solutions have been developed over time to support the types of information needed about clients for specific lines of business. The next step is a more holistic shift to Cloud services, and a move to open platforms enabling multi-market access and integration with third party Execution and Order Management systems. This enables systems and applications to become more nimble in terms of future development and will make “big data” more available. Once hosted in the Cloud, established solutions can be used to organise unstructured data allowing for personalized pricing and more accurate risk estimation. An infrastructure assessment will aid in defining the right technology solution to lower capital and operational costs and increase efficiencies through increased data availability and increased capacity from current physical infrastructure. 4. Active Defence As the uptake of Cloud Computing and open network concepts increases, Data security becomes an increasing concern requiring analytics-driven event detection and incident response. Investment Banks will need to integrate solutions and approaches into an integrated security architecture that will proactively recognise risks and issues before they occur. The aim is to position security management functions one step ahead of hackers – making it more difficult to engineer and profit from security breaches. Closing Digitalisation enables more targeted engagement with clients, efficient organisation of data leading to more insightful analysis and the tighter security over confidential data. As Investment Banks move out of crisis response in the post-2007 era towards a new level of compressed RoE, these measures provide a platform for sustainable competitive advantage. Resources Penny Crosman, Bank Technology News, “Banks’ 2013 IT Spending Sees Healthy Increase: Survey”, Jeanne Harris, “How to Turn Data into a Strategic Asset,” Outlook, Accenture, June 2010, 5
  6. 6. Copyright © 2013 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. RethinkingtheDigitalProposition:providinginformationclientsreallyneed 09 About Accenture Accenture is a global management consulting, technology services and outsourcing company, with approximately 275,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$28.6 billion for the fiscal year ended Aug. 31, 2013. Its home page is Accenture Experts To discuss any of the ideas presented in this paper please contact: Alex Pigliucci Managing Director Capital Markets, New York +1 917 452 4978 Christopher Lucy Managing Director Capital Markets, Washington +1 703 947 2651 Jessica Townsend Capital Markets, Charlotte +1 704 370 5676 Disclaimer This report has been prepared by and is distributed by Accenture. This document is for information purposes. No part of this document may be reproduced in any manner without the written permission of Accenture. While we take precautions to ensure that the source and the information we base our judgments on is reliable, we do not represent that this information is accurate or complete and it should not be relied upon as such. It is provided with the understanding that Accenture is not acting in a fiduciary capacity. Opinions expressed herein are subject to change without notice.