3. 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
4. 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 Banking
Source: 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)
5. Dynamic Banking
Tougher 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
6. This translates into a few key focus areas…
Create a customer focused
enterprise
Optimize enterprise risk Improve operational
and compliance efficiency and agility
7. 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
8. 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
Optimisation
Enabled through Front Office Digitization, Advanced Business Analytics & Information Management
12. The BAO Reference Architecture Overview
Content Master Data Data Data BI / Performance Advanced
Sources 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 Portal
Unstructured Data Data
CRUD Quality E
Extraction Warehouse Scorecards Mining
Data 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
13. Big Data: The Next Natural Resource
Data “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
14. 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
16. What are Social Technologies
Source: McKinsey & Co. The social economy: Unlocking value and productivity through social technologies, Jul 2012,
17. 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 customers
17
18. 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 “Emerging
Technologies in Retail Banking: The Long Road to Customer Centricity”. Aug 2012
19. 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
20. Why do Clients Buy BPM?
IT LoB C-Level
IT 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
21. BPM reduces paper consumption, streamline processes and shorten
cycle 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
22. The reference architecture
Modelling
Simulation &
Invoice Finance Executive Optimizzazion
Reconciliation & Ops
Users Teams
Management
Customer Workflow
Service Account
Administration
Business rules
Data
Org & Functions
User Interface
Documents
SOA Services
IT
Applications
SOA integration
BPM Metrics & Monitoring
Analysis & Reporting
23. 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
24. 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
25. 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
26. 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 Addressed
1 – Regulatory Compliance -Process and Transformation driven by Regulatory Changes (i.e. Fed/OCC, FSA, Dodd-Frank, Living
Governance 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/CyberSecurity
2 – 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 effectiveness
3 – 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) requirements
4 – 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
27. 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
28. 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
29. 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