a new breed of banks break through in asia...2018/06/08 · banks of the future will become more...

A NEW BREED OF BANKS BREAK THROUGH IN ASIASuccess Through Hyper-Scale, Hyper-Performing Core Systems

IDC InfoBrief | May 2018

Sponsored by

In the next 3 years, one in four top

Asian banks will make substantial changes to its core banking system with a goal to become a digital-ready

bank. As banks respond to the new dynamics of the region that is calling for digital transformation, they will have to strive for a hyper-scale,

hyper-performing future of banking.

An IDC InfoBrief A New Breed of Banks Break Through in Asia 01

Scale for the Hyper-Transacting CustomerTransactions per second (TPS) measures the throughput capabilities of banks’ core systems. This becomes more important in Asia as

the sheer scale of transactions to be processed grows exponentially.

TPS standards up everywhere:

Transaction throughput standards up

in all Asia markets, particularly in

“hot” e-commerce markets of China,

Malaysia, Thailand and Indonesia.

E-commerce boost:

In China, e-commerce transactions

could run up to 325,000 per second on

special e-commerce days.

New TPS marks:

In 2018, 10,000 TPS benchmarks are

common. Banks in China are going

for 30,000.

Core banking system requirements:

Robust infrastructure ever more crucial in

new core strategies with focus on

performance and security

Scale matters,more than ever Access everywhere:

Even in the areas that lack basic financial

service channels (branches and ATMs),

requirements for banking services have

increased (payments, basic banking accounts).

Available anytime:

On-demand, 24x7 and real-time banking will be

key differentiators for highly digital markets like

Singapore, Taiwan, Hong Kong and South

Korea.

Hyper-customization capabilities:

A one-product-fits-all approach no longer

works; hyper-customization and personalization

are key to winning over customers.


Infrastructure critical to support

hyper-transacting customers: banks need to

focus on reliability and availability

The Asian customer,always ready to be served


Banking is EverywhereThat “people don’t go to the bank, but expect the bank to go to them” has never been as true in Asia. The proliferation of channels

and the integration of banking to the digital consumer's lifestyle prove that indeed, banking is everywhere.

Core banking system requirements: Omni-channel capabilities, seamless

interaction of systems and processes

from channels to the back-office

Mobile, first and foremost:

In Asia, up to 65% of banking transactions

will be done via mobile devices by 2020.

Seamless as new standard:

Banks look to reduce friction in

interacting with customers across

all channels.

Expanding channel mix:

A tier-1 Asian bank now manages at least 18

channels, with new types of bank channels

emerging quickly.

Channels EverywhereAdoption of Open Banking:

The concept of unbundling and re-bundling of

financial services, and then offered by third parties will

be seen in Asia – first in mature markets like Australia

and Singapore, and then in the rest of the region.

Connections Everywhere


Ease of integration with internal and external

systems, with frictionless back-office integration

Analytics on data growth:

Bi-directional interaction and open integration

create opportunities for analytics on how best to

serve the customer.

Extreme flexibility:

Ability to connect to a growing network of banking

services providers. Connections to e-commerce and

payment companies most crucial in 2018.


BaoShang Bank + Transforming a very traditional bank and adopting open platform to collaborate with third-party platforms for consumer financial services+ Dual subsystem running concurrently

Digital achievements:

+ First-year achievement includes addition of 677,800 customers and Digital Bank assets of RMB 5.1 Billion

Ping An Bank+ Delivers an integrated financial service experience of “One Customer, One Account, Multiple Products, and One-stop Services”+ Its interbank electronic business system facilitates third-party custody, precious metal trading, wealth management, foreign exchange trading, fund and insurance consignment and many more functionalities.


+ Developed and implemented a new generation of core banking system (traditional core plus digital banking system)+ Integrated eChannel Service platform, business intelligence, CRM, precision marketing system and credit risk management system.

Rise of a New Generation of Financial Services Providers

The core banking systems of Asian banks are newer

compared to those in the rest of the world. The

average age of core banking systems in the top 200

Asian banks is 16 years, and is set to get younger.

The new generation of systems being developed will

make the region the most digital-ready banking

marketplace.

A new breed of digital banking is also emerging

quickly in China, setting the pace for the rest of

the region.


WeBank+ First digital bank (branchless) launched in China in December 2014, with major shareholding from Tencent+ Provides a variety of banking products to drive volume transactions


+ 38 million active users, including loaners and borrowers+ Fastest personal loan approval at 2.4 sec+ Low bad debt of less than 1%

Towards a Platform of Digital ServicesSuccessful core banking transformation hinges on adopting a set of services, from front to back, that enables banks to respond to the

demands of the digital era.

Sales &Services

Governnance, Riskand Compliance

CoreProcessing

CorporateOperations

InfrastructureServices

Ability to support hyper-growthof transactions

BUSINESS INSIGHTSDataServices

Promotes use of data gathered across all channels, and from third-party networks

WORKFLOWApplicationServices

Ease and flexibility of integration to internal and external systems

End-UserExperience

Ability to support omni-channel customers, anywhere and everywhere


DEVICES

What it enables?

SERCURITY,PERFORMANCE, SCALE

The Bright, New World of Digital-Ready Core Banking Systems in Asia

Here are 6 characteristics of core banking systems in the new era of transformation


Interoperability through an open

platform and leverages best-of-breed

functionalities and solutions that

respond to multiple and disparate

business requirements

The new "product“ utilizes

functionalities, applications, and

data from third parties; and uses

new capabilities from social media,

big data, real-time analytics, and

mobile technologies

Supports exponential upsurge of

interactions and transactions of a

hyper-growing, hyper-transacting

region

Very small, modular and virtual

components serving specific functions

and require a sophisticated level of

orchestration, but introduces flexibility

to the core system

Provides high-quality data in a

reliable and efficient manner to

various other systems and efficiently

exploits advanced and real-time

credit decisioning, pricing, and

portfolio modeling

Leaner microservices-enabled core

will mitigate deployment risks by

decoupling domains, consequently

simplifying testing

Powered byMicro-services

Agile in every way

"Real-time" analytics withdata from and around core

Open APIs-drivenproduct development

Platform-basedinterconnectivitywith third parties

Ability to handle scale

The Digital-Ready Core Banking Systems Delivering New Capabilities in Our Future

IDC Financial Insights expects new capabilities made possible, thanks to the new era

of core transformation happening in this region.


Platform-based interconnectivity with third parties There will be a significant drop in entry-level cost and time to innovation – most of these provided by a growing network of innovation partners

Open APIsMore than 1/3 of Asia/Pacific banks will be

able to create new revenue streams with Open APIs by 2020

Ability to handle scale Scalability and business continuity with multiple flavors of cloud will become the norm, and recourse to hyper-scale infrastructure will be common

The number of micro-services that bank CIOs are considering for a range of functions from origination to account opening to reconciliation150

Thumbs up for micro-services

Agile methodology of delivering

small, incremental, and more frequent releases

will become a reality

Agile development

Banks will perform better with more efficient credit and capital optimization, integration of core transactional activities such as deposit balances and repayment behaviors with

liquidity forecasting, and better profitability planning and product pricing channel strategies

"Real-time" analytics with data from and around core

The Transformation to Hyper-PerformingCore Banking Systems


Current systems and processes do not cater to timely

innovations, primarily due to

legacy technology and uncoordinated investments in core

technologies

Disconnected customer

engagementdue to data and product silos

Disparate data,

“out of date” analytics Highly manual

processesespecially seen in

onboarding solutions that are antiquated and difficult

to use

Disconnected marketingwith campaigns

Limited connectivityto digital partners

Limited success indetecting and

preventing fraud

THE CURRENT STATE

As the era of core banking system transformation progresses,banks of the future will become more and more hyper-performing.


THE HYPER-PERFORMING STATE

10 Key Outcomes

1. Platform-based,componentized digital core banking systemsSeamless interaction of systems

and processes from front to back, and the ability to handle

hyper-scaled transactions

3. Digitalized processesDigitalized onboarding and

customer servicing functions, enhancing how the bank receives

and processes data

2. Innovation in and outCollaboration with internal and

external innovation partners through APIs

8. Automated internationaltrade with DLT-based trade

finance initiativesBy the end of 2019, 35% of tier 1 banks in Asia/Pacific will deploy blockchain or distributed ledger

technology (DLT) projects on blockchain-as-a-service platforms

9. Intelligent decisionmaking with cognitive

automation and AIBy 2020, 25% of Asia/Pacific banks

will utilize cognitive systems to deliver contextual and

value-centric customer experience

10. Unprecedented customerand channel experience

By 2020, 10% of Asia/Pacific banks will use micro location for marketing and

enhanced security to deliver mobile (or IoT) real-time offers based on location,

loyalty, and business

6. More effectiveprotection of customer

data and identitiesIdentity integration and risk-based

transaction analysis to reduce fraud and cyber incidents

7. Next-generationpersonal financial

management (PFM)PFM-style functions to be a core offering, as banks build a lifestyle

platform for their customers

4. Robust customer dataIn-context customer interactions

across the life cycle of the customer, supported by integrated data and

robust data infrastructure

5. Personalizedcustomer engagement

with predictive analytics Ability to use customer insights

throughout the customer journey – and across many use cases

including from marketing to upsell to fraud detection

Success Through Hyper-Scale, Hyper-Performing Core SystemsNext steps to be Future-Ready and Asia-Ready


Long-term goal of building a digital

platformArchitectural choice

of creating a “platform of digital services” that distinguishes between end-user

experience, application services, data services, and

infrastructure services.

Scale as first consideration

Accommodate the upsurge of transaction

processing: applied read/write splitting,

asynchronous processing, business

day batches and business cluster

deployment mechanism to support

the core system of double billion digits (account number, business volume),

minimal batch processing time

Build hyper-personalization

capabilitiesDevelop product libraries ready for

hyper-customization of product

parameters such as price, tenure bundles

and others.

Simplify transformation

through prioritization of LOB

functionalities for modernization

Prioritization will be based on risk,

business performance,

business goals, and cost, but also on the context of the bank.

Dual core is an option

It will be easier for emerging digital-only

banks, thanks to digital-ready

propositions. Existing banks, meanwhile, have the option to adopt a dual-core model in the short

term, but the long-term goal is the simplification of core

banking systems, through the

introduction of a unified digital

platform.

Initiate Platformification with Open APIs

Ability to open up new partnerships with

trusted third parties (TTPs) will be crucial in an interconnected

world of financial services.

This IDC InfoBrief was produced by IDC Custom Solutions. Any IDC information ornreference to IDC that is to be used in advertising, press releases, or promotionalnmaterials requires prior written approval from IDC. For more information, visit: www.ap.idc.asia or email: [email protected]

A NEW BREED OF BANKS BREAK THROUGH IN ASIASuccess Through Hyper-Scale, Hyper-Performing Core Systems

Sponsored byThis IDC InfoBrief was produced by IDC Custom Solutions. Any IDC information or reference to IDC that is to be used in advertising, press releases, or promotional materials requires prior written approval from IDC.

For more information, visit: www.ap.idc.asia or email: [email protected]

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