After surviving the financial meltdown in 2008, the banking industry finds itself at a critical juncture. A slow economy restrains the potential for increasing revenue, while new complex regulations add high levels of uncertainty to the industry.

1. 50 Years of Growth, Innovation and Leadership
Growth in a New Era:
Enabling Competitive Banking With Smarter Computing
A Frost & Sullivan
White Paper
Brian Cotton, PhD
and
Juan Fernandez
www.frost.com

2. Frost & Sullivan
Abstract........................................................................................................... 3
The New Banking Environment: Regulations, Revenue, And Trust .................. 3
The Business Need for Smarter Computing in the Banking Industry ............ 7
The Business Value of Smarter Computing in the Banking Industry .............. 11
Building a Competitive Bank on a Smarter Business Infrastructure .............. 14
References ....................................................................................................... 16
CONTENTS

3. Competitive Banking
ABSTRACT
After surviving the financial meltdown in 2008, the banking industry finds itself at a
critical juncture. A slow economy restrains the potential for increasing revenue,
while new complex regulations add high levels of uncertainty to the industry. The
banking industry is also evolving in response to new technology and new customer
demands. Online channels and mobile payments banking have changed the landscape
from branch-based to personal banking. Banks are faced with the challenge to find
new revenue streams while containing costs, and many are now turning to a
Smarter Computing approach to meet the challenges and stay competitive.
Smarter Computing can help turn banks into lean, agile competitors, while helping
ensure adherence to regulatory compliance objectives. It can guide banks’ IT
departments along the path of transforming the IT infrastructure to support the
imperatives of a responsive, efficient, and reliable business infrastructure. A number of
progressive banks around the world are implementing a Smarter Computing approach,
including Bilbao Bizkaia Kutxa (BBK), TMB Bank Public Company Limited (TMB Bank),
Zürcher Kantonalbank (ZKB), and Banco Pastor. Together with IBM, they are beginning
to realize the benefits of Smarter Computing to help them meet the needs of
demanding customers, and succeed in a competitive, cost-conscious environment.
THE NEW BANKING ENVIRONMENT: REGULATIONS, REVENUE,
AND TRUST
The banking environment today is rapidly moving away from the pre-recession
status quo. As the upheavals spawned by the economic recession reverberate across
the world, banks are being forced to change their product-oriented business models “In banking, trust is
and become more competitive for customers. As well, new regulations are more about what a
compelling banks to adjust established practices to meet recently enacted bank is—how
compliance standards. The Dodd-Frank Wall Street Reform and Consumer customers feel about
Protection Act, Basel III and Solvency II, for instance, have specific liquidity and banking there—rather
capital requirements for financial services institutions. 1 These regulations are than the products the
expected to help banks mitigate risk, but they are also intended to address a critical bank offers.”
lack of consumer confidence in banks, particularly in mature markets. 2
—John Wood
Although aimed at risk issues, these regulations are impacting revenue growth by
and Paul Berg,
constraining traditional fees-based methods of raising revenue. The Durbin
“Rebuilding
Amendment, for instance, is expected to cause declines of $5 billion annually for
Trust in Banks”
debit interchange revenues, in addition to a $15 billion reduction in overdraft fees. 3
As a result, a renewed focus on cost containment and efficiency is often a top-of-
mind for most banking executives. 4 Incremental measures to improve efficiency,
such as restricting branch hours and automating more types of transactions, are
bringing some bottom-line relief, but transformative costs reductions that get to
the core of doing business are becoming essential.
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4. Frost & Sullivan
The most critical factor in the new banking environment is a radically changed
dynamic in the relationship between a bank and its customers. To begin, there is a
general lack of trust in banks. A recent Gallup poll revealed that more than four in
five Americans distrust banks. 5 Moreover, technology, in the form of smart phones,
social media, and pervasive and rapid access to information, has changed the way
individuals interact with banks. The proliferation of social media, in particular, means
that customers and banks can communicate with each other, and customers can
share information about banks in their community. Armed with more information
and an ability to influence others, consumers are better informed and demand a
consistent experience across all channels. The banking industry needs to rebuild the
basis of relationships with its customers, becoming customer-centric rather than
product-centric. As the authors of the Gallup analysis conclude, “In banking, trust is
more about what a bank is—how customers feel about banking there—rather than
the products the bank offers.” 6
All of this means that personalized offers and services are becoming critical to
banks’ success. For instance, the top-performing U.S. banks in 2011, according to
J.D. Power & Associates, have a single common practice: a focus on the customer
that provides “products and services to fit a customer’s needs, including lifestyle
and access with online and mobile tools”. 7
The combination of stringent new regulations enacted around the globe, cost-
cutting pressures, and technologically-savvy and empowered customers are moving
banks to consider new models and approaches to their business. Those institutions
that are capable of succeeding in the process of transformation will likely survive
and thrive into the new era, whereas the others will likely lose value and eventually
be absorbed by consolidation.
The challenges of the banking environment create complexity for banks, and this is
requiring them to transform their business models and the technology that
supports them in order to be competitive. This transformation process is guided by
four vital banking imperatives, as shown in Figure 1.
Increase flexibility and streamline operations to drive a simplified enterprise
with greater agility that can balance growth with efficiency and business resiliency.
Create a customer-focused enterprise with new intelligence about customer
requirements, preferences and behaviors, developed by optimizing customer data
and using analytics to cultivate client-centricity and rebuild trust.
Optimize enterprise risk management to achieve compliance objectives
while mitigating operational, financial and IT risk, while fighting crime and
boosting financial returns.
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5. Competitive Banking
Drive innovation while managing cost in a bank’s back-office payments and
transaction processes to better serve consumer and commercial customers, while
addressing new regulations and risks.
Figure 1: Imperatives Guiding the Transformation of the Banking Industry
Increase Flexibility & Streamline Create a Customer-Focused Enterprise
Operations • Customer Care & Insight
• Detailed View of Business Architecture • Multichannel Customer Experience
• Detailed View of the IT Architecture • Develop a Single, Enterprise View
• Create Agility in Core Banking of the Customer
Processes • Cross Channel Campaign Management
• Staged Transition of Core Banking & Targeted Marketing
Legacy Applications
Banking
Industry
Transformation
Drive Innovation while Managing Cost Optimize Enterprise Risk Management
• Process, Manage, Measure, & Monitor • Integrate Finance and Risk Data
Consumer & Commercial Payments • Monitor Real Time Transactions
• Integrate Horizontal Payments & • Automate Risk and Regulatory
Treasury Capabilities Within a Bank Compliance
• Enable Cash Management & Supply • Institute Proactive Risk Management
Chain Finance • Detect, Report, & Prevent Fraud and
• Rapidly Adapt to New Risks & Other Financial Crime
Regulations
Source: Frost & Sullivan analysis and IBM
The imperatives shown in Figure 1 revolve around how a bank can transform its
business model to be more efficient, attuned to the customer, and more responsible.
The transformed model enables banks to adopt the lessons from the retail industry,
shifting from a product focus to a customer focus and adopting a highly efficient
stance, while adhering to regulatory mandates specific to the banking industry. This
allows them to develop highly personalized relationships with their consumer and
business customers, and strengthen their loyalty. It enables a bank to develop a single,
master view of each of its customers, and use it to guide product development and
marketing. This can be particularly important for banks as they develop relationships
with customers holding multiple accounts. Finally, the new model empowers the
customer to select their methods and channels of interaction with the bank, while
letting the banks learn from social media so that a customer’s suggestions and
feedback are able to build a bank’s brand. The bank that embraces these imperatives
can become a lean, informed and versatile organization capable of driving operational
efficiencies and growth. The key requirement of this success is the need to upgrade a
bank’s IT infrastructure to handle the demands imposed by these imperatives.
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6. Frost & Sullivan
Key Infrastructure Requirements
• Scalability
• Performance
• Flexibility
• Reliability and Availability
• Standardization
The conundrum for many banks is how to support these imperatives with an IT
architecture that is collaborative, scalable, secure and integrated if their current
systems do not have these characteristics. In the current atmosphere of financial
efficiency, banks need to ensure that they are getting the most out of their installed
infrastructure. This means that the smarter IT architecture should be able to be
built on a bank’s existing infrastructure, and need not be a compete replacement of
the existing equipment. Scalability is important to enable a bank to respond to
increased demand, such as customer response to promotions or market-based
events. The systems must also support high-performance computing across multiple
workloads to accommodate large numbers of transactions across multiple channels.
The infrastructure also needs to be flexible to adapt to changes in demands and
new applications, freeing IT managers to direct resources where they are needed
most. The architecture must also be reliable and robust to ensure constant uptime.
Finally, it is crucial that the infrastructure be standardized to close gaps in the
existing architecture, governance rules, and process management simultaneously
across the enterprise. Many banking IT infrastructures have often been
implemented without these necessities as top considerations, or as a result of
merger and acquisition activity they are not part of an integrated design, and
therefore fail to interoperate smoothly.
Banking industry leaders are beginning to seek advanced IT solutions to help them
become more competitive and remain compliant. Forward-thinking bank CIOs are
starting to transform their IT infrastructures to respond to the imperatives driving new
banking business models. These infrastructures must accommodate a constantly updated
stream of information from customers and partners through multiple channels, feeding
into analytic platforms that enable quicker reactions to changing customer preferences
and operational conditions. They also need to perform complex information capture and
processing efficiently, and to support different types of operational models to keep costs
down. Smarter Computing is an approach that can help banking industry CIOs transform
their IT infrastructures to address these imperatives.
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7. Competitive Banking
THE BUSINESS NEED FOR SMARTER COMPUTING IN THE
BANKING INDUSTRY
Introducing Smarter Computing
Smarter Computing is a new approach to transform IT systems to enable banks to
become more focused on the customer, while managing risk and exercising
efficiency. This approach is based on three fundamental capabilities:
• Designed for Data involves designing an IT infrastructure to harness all
available information, including real-time streaming data, to unlock insights for
better decision-making. It is about extending beyond traditional sources of data
to generate insights by leveraging new forms of information, which can be
incorporated into a bank’s information supply chain to reduce operational
costs, master a single version of a customer profile, simplify data security, and
get insights from huge volumes of complex data.
• Tuned to the Task reflects matching workloads to systems that are optimized
to the workload characteristics, ranging from transaction processing and
database management, to business intelligence and analytics, to managing
communications across branches and business units. Optimizing the systems to
the workloads enables greater performance and efficiency, helping CIOs
maintain a lean operational profile.
• Managed with Cloud Technologies gives CIOs the ability to change
operations to support evolving business models and enable delivery methods
that bring greater efficiencies out of existing IT assets, and deploy resources
flexibly, dynamically and quickly to multiple branch locations and partners in a
cost-effective manner.
Smarter Computing supports business transformation by creating a technology
framework to enable business operations that realize the business imperatives, and
generates business value in a competitive, cost-conscious environment. The Smarter
Computing approach in the banking industry revolves around how customers’ and
banks’ operational data is collected, processed, analyzed, saved, and shared. The IT
infrastructure that supports the model’s business operations delivers business value
by using data to guide decisions, by using optimized systems to maximize efficiency,
and by leveraging the cloud to transcend administrative silos and legacy system
limitations. Figure 2 illustrates the application of the Smarter Computing approach
to banking industry innovation.
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8. Frost & Sullivan
Figure 2: Smarter Computing and Banking Industry Transformation
Banking Organization Transformation
Increase Flexibility Create a Customer- Optimize Enterprise Drive Innovation
& Streamline Focused Enterprise Risk Management While Managing Cost
Business Operations • Customer Care & • Integrate Finance • Process, Manage,
Imperatives • Detailed View of Insight and Risk Data Measure, & Monitor
Business • Multichannel • Monitor Real Time Consumer &
Architecture Customer Experience Transactions Commercial
• Detailed View of the • Develop a Single, • Automate Risk & Payments
Enterprise View of Regulatory • Integrate Horizontal
IT Architecture
the Customer Compliance Payments & Treasury
• Create Agility in • Institute Proactive Capabilities Within a
• Cross Channel
Core Banking Campaign Risk Management Bank
Processes Management & • Detect , Report, & • Enable Cash
• Staged Transition of Targeted Marketing Prevent Fraud and Management &
Core Banking Legacy Other Financial Supply Chain Finance
Crime • Rapidly Adapt to
Applications
New Risks &
Regulations
SMARTER COMPUTING-BASED IT INFRASTRUCTURE
Business
Operations Process Automation Business Process Management
Data Warehousing Customer Intelligence Business Intelligence Transaction Processing
Data Storage, Sharing, & Management
Physical World Interfaces (Channels, Branches) & Data Acquisition
DESIGNED FOR CLOUD WORKLOAD
DATA ENABLED OPTIMIZED
Business
Value
Customer-Specific Offers Lowered Cost of Operations Real-time Detection of
and Outreach Activities Through Virtualization and Fraudulent Activity
Consolidation
Source: Frost & Sullivan analysis
Bank CIOs can use Smarter Computing-based IT infrastructures to carry out the
operations underlying their transformation imperatives. Because a bank’s various
business operations have different characteristics, workload-optimized systems
yield efficient computing infrastructure designs. The efficiencies lie in systems that
are flexible enough to meet peak-level workload demands, such as increased
transaction activity during paydays or seasonal shopping, and enable resources to be
deployed elsewhere during off-peak periods. Smarter Computing’s cloud capabilities
facilitate the deployment and implementation of new processes and models that
give managers a unified view of a bank’s business architecture. By being able to
capture all available data for advanced analysis, a Smarter Computing infrastructure
can help managers predict customer preferences and behaviors, develop improved
risk profiles, and make decisions accordingly. Importantly, the approach gives CIOs
control over capital and operational expenditures because existing IT
infrastructures can be transformed and need not be completely replaced. Smarter
Computing can help turn banks into lean, agile competitors, while helping ensure
adherence to regulatory compliance objectives.
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9. Competitive Banking
Increase Flexibility and Streamline Operations
A bank increases its business flexibility and agility, and streamlines its operations by
transforming at its core. This requires a CIO to understand the business
architecture at a component level, and then optimize the IT infrastructure from a
similarly componentized perspective to support it. It also involves designing IT
systems that can efficiently process, manage, measure, and monitor high volumes of
low-value payments from customers, while also managing critical payments from
bank to bank, bank to clearinghouse, and from country to country. Finally, it entails
integrating horizontal and reusable payments and treasury capabilities across all
payment products within a bank.
Banking CIOs can use Smarter Computing to streamline an IT infrastructure by
virtualizing and consolidating applications and operations in a cloud computing
model. They can also apply advanced data warehousing, analysis, and management
techniques to develop authoritative and dynamic records. At the same time, they can
use IT components and systems optimized for transaction processing to integrate and
monitor deposits, payments, and other transactions across multiple channels.
Smarter Computing can help bank CIOs gain additional business value by:
• Fostering a component-level view of the business model on which a CIO can
imprint the bank’s strategic imperatives and determine which areas of the
operations need attention to deliver on the overall strategy.
• Modularizing the IT architecture into fundamental building blocks, enabling core
architectural transformations quickly and with more control, without business
disruption or unanticipated costs.
• Supporting adaptable and efficient processes for account opening and
management, product bundling, and dynamic relationship pricing to help bring
products and offers to market more quickly.
Create a Customer-Focused Enterprise
Creating a customer-focused enterprise in the banking industry means (1) creating
enterprise-wide capabilities to enable and support informed judgment and decision-
making, (2) adopting a client-centered perspective, and (3) using these capabilities and
perspective to drive profitable growth. The key to realizing this imperative is
understanding customer buying behavior, gaining a deep insight into their profitability
and risk, and using this intelligence to develop the right offerings, to the right
customers, at the right time and place. Savvy bankers will house this intelligence in an
authoritative single view of a customer across all of their account relationships with
the bank, their transactions, and their service requests and inquiries.
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10. Frost & Sullivan
Bank CIOs can use Smarter Computing to transform their IT architectures to
harness the wide variety and massive volumes of customer data, and to apply
advanced analytic engines to develop new streams of intelligence. They can use
cloud-based models to renovate and extend channel IT architectures and
consolidate services to provide a common customer experience across all channels.
By the same token, they can use a Smarter Computing architecture to develop
tailored offerings and manage cross-channel campaigns. Optimized systems can then
handle spikes in customer response and activity, such as when a new campaign is
launched, as well as provide high levels of transaction security across all channels.
Additional value from applying Smarter Computing to develop new intelligence can
be in the form of:
• Increased revenue from customer-focused offerings and promotions that
increase cross-sell and up-sell opportunities
• Improved customer loyalty and retention rates
• Extended customer touch points, including mobile banking and social media forums
Optimize Enterprise Risk Management
Even as a bank becomes a financially lean and agile competitor, it must achieve
regulatory compliance objectives, mitigate operational risk, and fight financial crime.
A Smarter Computing approach can enable integrated risk management capabilities
to deliver compliance across voluntary and mandatory requirements. Workload
optimized systems can be used to monitor real-time transactions, and to apply fraud
analytics to the data streams to predict and detect fraud, proactively controlling a
bank’s risk exposure. Smarter Computing infrastructures can also automate
transaction and business processes tracking and reporting to help ensure compliance.
Smarter Computing can provide additional business value in integrated risk
management initiatives by:
• Supporting continuous, comprehensive risk monitoring and analysis
• Enabling real-time risk monitoring and reporting, while automatically detecting
fraudulent activities
• Ensuring more accurate risk profiling based on authoritative , single views
of customers
• Increasing profitability by reducing nonperforming loan ratios and lowering
cost-to-income ratios
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11. Competitive Banking
Drive Innovation while Managing Cost
In a competitive environment, a bank’s capability to innovate in its core payments
and transactions services is an asset. The business processes underlying bringing
new services to market, and transforming legacy services into cost-effective
services, are based on an agile and efficient business infrastructure. The Smarter
Computing approach can help establish the IT foundations to support the
imperative to drive innovation while managing cost by using workload-optimized
systems to process, manage, measure, and monitor high volumes of low-value
payments from individual consumers. They can also be used to handle payments
from online or mobile phone channels, and scale to meet increases in these types
of transactions. Infrastructures using a designed-for-data capability can capture
critical data from commercial customers to help make payments more efficient,
including cash management and supply chain finance.
Smarter Computing can also return value to the organization by:
• Framing payment operations restructuring to comply with regulations, and be
inherently adaptable to address new risks and regulations as they arise
• Enable integrated, horizontal, and reusable payment and treasury capabilities
that can be used across payment products offered by a bank
THE BUSINESS VALUE OF SMARTER COMPUTING IN THE BANKING
INDUSTRY
Banks are facing an unprecedented set of challenges that are forcing changes in
their business models. The aftermath of the economic recession is spawning new
regulations on liquidity requirements and risk mitigation. Newly empowered
business and consumer customers are starting to demand more from banks. At the
same time that traditional revenue sources are closing down, banks are searching
for new revenue streams based on a stronger focus on their customers, rather than
on products. Competition among banks for this business is increasing, and the
successful firms will be those that consistently deliver a superior and smarter
banking experience to their customers. Commercial success will also depend on
tightly integrated risk management, and smarter and more efficient operationsAll of
these factors are driving banks’ IT departments to transform their IT
infrastructures to adapt to the imperatives of today’s environment and be more
competitive to win customers’ trust and loyalty. Some progressive organizations
have embraced the Smarter Computing approach to direct their transformation to
meet these imperatives and are seeing benefits.

12. Frost & Sullivan
Bilbao Bizkaia Kutxa: Smarter Banking in Spain
The global economic collapse caused banking regulators across the world to take
strong steps to ensure the health of their national banking systems. In 2010, the
Bank of Spain mandated that several of the county’s smaller regional banks merge
and combine their assets to be stronger, and to create a more competitive banking
sector. This presented an attractive business opportunity for some of the stronger
banks, which could expand their scale and develop a new, more competitive
business model. However, substantial challenges from heterogeneous regional tax
rules, labor issues, and governance guidelines needed to be addressed before the
banks could seamlessly merge with each other. 8
Bilbao Bizkaia Kutxa (BBK), headquartered in the Basque region and being one of
the larger regional banks in Spain, saw an opportunity in this new environment. BBK
is the country’s third largest savings and equity bank, and it decided to acquire
CajaSur, another regional bank almost as large as BBK itself. BBK realized that
because its recent growth outstripped the capacity of its IT architecture to keep up
with expanding data volumes, the prospect of integrating CajaSur’s operations
meant that it needed to upgrade its IT architecture to pursue its acquisition. Not
only would the bank’s IT systems need to handle larger volumes of differing types
of data, but they would also need to guarantee security, resiliency, and efficiency to
meet regulatory and operational requirements. BBK’s IT management decided to
By implementing a partner with IBM to apply a Smarter Computing approach to support its new
Smarter Computing business model and put it on a more competitive footing.
approach to support
its acquisition of The main goal of the initiative was to use as much of BBK’s and CajaSur’s existing
CajaSur, BBK was IT architectures as possible, while ensuring that the new workloads could be
able to save € 1 handled efficiently. BBK also had to keep the total cost of computing low, optimizing
million in IT capital computing resources across the combined companies’ operations. The project team
costs and 20 percent decided to replace two older servers with two new mainframe systems, built with
in operational costs. a number of specialty engines to handle data and transaction processing workloads
for the bank’s business intelligence, enterprise resource planning, and customer
relationship management tasks, as well as advanced security and encryption
applications. By applying components into the architecture that are tuned for
specific tasks, the system was designed to help free up general computing capacity
and lower the overall total cost of computing for these critical operations.
Moreover, the BBK and IBM teams decided to deploy a virtualization layer across all
of the servers running the BBK and CajaSur desktop computers, enabling both
banks’ systems to be managed side by side in the cloud. This helped BBK avoid the
need to purchase new PCs and keep the administrative burden low.
By implementing a Smarter Computing approach to supporting BBK’s acquisition of
CajaSur, the bank was able to save more than €1 million that would have been
needed in equipment and management time had the bank gone with a traditional
approach to its IT architecture. In addition to the capital cost savings, BBK also was
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13. Competitive Banking
able to reduce its IT costs by 20 percent annually and boost staff productivity by
30 percent. 9 With a Smarter Computing-inspired architecture in place, the bank has
a highly scalable, resilient, and secure IT system that can support future growth
opportunities in the competitive European banking environment.
Zürcher Kantonalbank: Using Smarter Computing to Meet Some of the
World’s Most Stringent Regulations
Swiss banks face some of the world’s most stringent regulatory requirements. Long
known for setting the standard in the banking industry, big Swiss banks have
traditionally been subject to layers of rules that exceed international standards (i.e.,
the “Swiss finish”). 10 Because the banking industry is so important to Switzerland’s
national economy, Swiss banks take regulatory adherence extremely seriously.
Zürcher Kantonalbank (ZKB) is a diversified “universal bank” providing private,
retail, and commercial banking services in Switzerland and worldwide, as well as a
growing practice providing investment and asset management services to its clients.
ZKB is also the largest “cantonal” or Swiss government-owned bank in the country,
which carries a great deal of responsibility to ensure that it meets or exceeds the
country’s stringent regulatory demands. To meet these regulations, ZKB must
maintain flawless workload management practices and process massive amounts of
customer record, transaction, and other data on a daily basis. All of this depends on
the strength of ZKB’s IT systems.
ZKB partnered with IBM to evolve its IT architecture according to Smarter
Computing principles, which enables it to meet the bank’s regulatory
responsibilities. ZKB’s architecture is designed for handling critical data around a
set of data marts, fed by a sophisticated data warehouse that captures current and
historic data from more than 100 branches and distributes it to individually tailored
data marts. These data marts ensure that each bank counter at each of ZKB’s
branches has the most current data every morning to meet their needs. The focus
on data integrity not only helps the bank provide a high level of customer service,
but it also helps maintain advanced safety measures through several layers of
security and security analytics capabilities. ZKB’s IT architecture is also built on
Smarter Computing’s Tuned to the Task principle, which allows unused system
resources to be allocated to other functions, preserving overall system efficiency
and enabling new functionalities to be added without expanding the system
Designed according to the Smarter Computing approach and using components
built to handle specific tasks, ZKB’s architecture helps ensure that customer service
levels and regulatory adherence are consistently met. Smarter Computing is clearly
helping ZKB remain competitive in Switzerland’s demanding banking environment.
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14. Frost & Sullivan
Banco Pastor: A Customer Focus Improves Retention Rates
Banco Pastor S.A. is the oldest bank in Spain, and one of the largest, and has used
Smarter Computing to develop new intelligence about its customers. The bank
concentrates on offering savings and loans to consumers and small and medium-sized
businesses. This is a highly competitive segment of the Spanish banking market, making
it difficult to retain valued customers. Banco Pastor understood the challenge in its
market, but it also saw an opportunity to gain an advantage over its competitors. The
bank initiated a strategy to sharpen its focus on its customers using a foundation of
dynamic customer insight. Teaming up with IBM to implement a Smarter Computing
approach, Banco Pastor installed an advanced server system loaded with
sophisticated analytic applications to turn the large volume of customer data on
desired services, risk levels, and predictions of future behavior into detailed,
customer-specific profiles. These profiles were then used to plan, automate, and
execute targeted marketing campaigns that presented offerings tailored to individual
customers. By using Smarter Computing, Banco Pastor has cut its time to analyze and
develop customer data from a matter of weeks to a matter of hours—a 95 percent
improvement. This gives the bank a time-to-market advantage over its competitors
and can help it improve retention rates, which the bank anticipates will be at least 20
percent higher compared to its traditional marketing approach.
TMB Bank: Proactive Analysis Reduces Risk
TMB Bank Public Company Limited (TMB Bank) used a Smarter Computing
approach to improve its risk management capabilities. As Thailand’s economy
continues to grow, its consumer and business lending market is expanding, and its
banking regulatory environment is modernizing and becoming increasingly more
complex in response. As one of Thailand’s largest banks, TMB Bank needed to
transform its IT infrastructure and improve its risk management capabilities to
comply with the more stringent requirements. The bank decided to work with IBM
to take a Smarter Computing approach to transforming its IT systems to more
rigorously and efficiently capture, store, and process customer data and risk profiles
for its 6 million customers. Using a system specifically designed to process risk
factors and reduce risk exposure, TMB Bank’s Smarter Computing solution breaks
down old structural silos in the bank by automatically reporting risk analyses across
all of the bank’s business units and applications. The bank has a new level of agility
as a result and is able to manage its risk far better than before, reducing its
nonperforming loan ratio from almost 13 percent to just over 8 percent. Its
solution also makes it more competitive by helping it to be more responsive to its
customers, reducing loan processing time from months to only two weeks.
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15. Competitive Banking
BUILDING A COMPETITIVE BANK ON A SMARTER BUSINESS
INFRASTRUCTURE
Banking industry CIOs and IT managers are under constant pressure to ensure that
their IT infrastructures enable their banks to be lean and agile in the increasingly
competitive banking environment. Customers are becoming connected and empowered,
and demand consistent levels of personalized service across a number of channels. At
the same time, banks are balancing regulatory adherence with revenue pressure. To
succeed, banks need to reinvent their business models to develop new customer
intelligence and generate new revenue sources, while ensuring regulatory compliance.
The application and operational requirements to realize these imperatives come
with substantive IT workloads, and traditional bank IT infrastructures either cannot
cope with these workloads or cannot interoperate between merged entities. In
today’s austere economic climate and highly competitive industry, bank CIOs have
the additional requirement that their IT infrastructures reduce operating costs, be
flexible and scalable to deploy computing resources where they are needed, and
enable collaboration across a bank’s business units
The Smarter Computing approach is a holistic solution that can guide banks’ IT
departments along the path of establishing the IT infrastructure to support the
imperatives of a responsive, efficient, and reliable business infrastructure. A number
of banks around the world are beginning to realize the benefits of implementing a
Smarter Computing approach. CIOs may wish to investigate using a Smarter
Computing approach if they are considering:
• Supporting an innovative service development and marketing strategy aimed at
new customer acquisition and strengthened customer retention initiatives
• Merging with or acquiring other banking entities that may have antiquated IT
architectures that cannot interoperate with their own systems
• Future-proofing their bank against new regulations and requirements, as well as
ensuring that their banks can achieve existing compliance objectives
• Creating a company-wide data management system, with shared access to
master records
Forward thinking banks, such as BBK, TMB Bank, ZKB, and Banco Pastor are
employing a Smarter Computing approach to help them meet the needs of
demanding customers and succeed in a competitive, cost-conscious environment.
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16. Frost & Sullivan
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Sidel, Robin and Lucchetti, Aaron. “Banks Deepen Cost Cuts in Push to Juice Profits.” Wall Street
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2011, retrieved 28 October 2011.
5
Wood, John and Berg, Paul. “Rebuilding Trust in Banks,” Gallup Management Journal, 08 August 2011.
http://gmj.gallup.com/content/148049/rebuilding-trust-banks.aspx#1, retrieved 24 November 2011.
6
Ibid.
7
“J.D. Power and Associates Reports 2011 U.S. Retail Banking Satisfaction Study,” press release 21
April 2011. http://www.jdpower.com/news/pressRelease.aspx?ID=2011043, retrieved 22 October
2011.
8
Munoz, Sara Schaefer. “Spain’s Bank Mergers Suddenly Drying Up.” Wall Street Journal Online,
http://online.wsj.com/article/SB10001424052748704804504575606393486918472.html, 11
November 2010, retrieved 02 December 2011.
9
“Bilbao Bizkaia Kutxa Manages a Major Acquisition,” a case study published by IBM. http://www-
01.ibm.com/software/success/cssdb.nsf/cs/STRD-8J9EVS?OpenDocument&Site=corp&ref=crdb. 11
July 2011, retrieved 23 November 2011.
10
“Swiss Banks get Stricter Rules than Basel III.” Swissinfo.ch,
http://www.swissinfo.ch/eng/Specials/Rebuilding_the_financial_sector/News,_results,_regulations/S
wiss_banks_get_stricter_rules_than_Basel_III.html?cid=28464958, 4 October 2010, retrieved 05
December 2011.
This report was developed by Frost & Sullivan with IBM assistance and funding. This
report may utilize information, including publicly available data, provided by various
companies and sources, including IBM. The opinions are those of the report’s author
and do not necessarily represent IBM’s position.
XBL03016-USEN-00
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