Barclays VI Project Harmony

Information driven banking

Stavros Apostolou(Vice President, Analytics Centre of Excellence, Barclays UK)December 2015Version 1.0Unrestricted

# | Information driven banking | December 2015 UnrestrictedWhy am I excited to come back to WBSDiscussing with you about oilWhy financial services are not boringHow information is transforming financial servicesDeveloping capabilities to compete with information (case studies)BreakEarn your lunch (case study 1)Earn your lunch (case study 2)My sales pitchYour very very hard questions

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Were here to talk about oil reserves

3.1m oil barrels

c80bn recoverable barrels Weve extracted just 130 oil tankersOut of 26,000 oil tankers till it dries

# | Information driven banking | December 2015 UnrestrictedAt the moment less than 0.5% of all data is ever analysed and used, just imagine the potential here.;Ghawar Field in Saudi Arabia (Hellespont Alhambra (now called TI ASIA).

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and informationFor a typical Fortune 1000 company, just a 10% increase in data accessibility will result in more than $65 million additional net income.

# | Information driven banking | December 2015 UnrestrictedFinancial services are not as attractive anymoreMoores lawKryders lawSource: A money and information business State of financial services (2013), Oliver Wyman

# | Information driven banking | December 2015 UnrestrictedStorage cost has gone down from $4 per GB in 2001 to 0.5$ per GB in 20114

What you might think is happening in banking$235bn in fines over 7 yearsFrom just 20 biggest bands

Source: http://graphics.thomsonreuters.com/15/bankfines/index.html?utm_source=twitter

Annual GDP (2014)c227bn USD

# | Information driven banking | December 2015 UnrestrictedAnd there are some more boring things. For instance the top 20 banks wordwide have paid the annual GDP of Portugal over 5 years. Which obviously, affects our ability to keep up with the necessary innovation5

What is really going on in banking

Source: http://www.economist.com/news/finance-and-economics/21674778-europes-dithering-banks-are-losing-ground-their-decisive-american-rivals-banking

# | Information driven banking | December 2015 UnrestrictedWell, in a commercial environment you may have a a tendency to think of a business like a box which does something and in order for it to keep moving you feed it with some sort of input (namely investment, demand for services and products) and on the other end it produces cashflows that you hope they are above your cost of doing this something here in the middle6

Shifting economic center of gravity

Source: The Economist, adapted MGI research

# | Information driven banking | December 2015 UnrestrictedWhat changes in Financial services

# | Information driven banking | December 2015 UnrestrictedDisrupting fintech firms

Source: http://insights.venturescanner.com/2015/09/04/the-state-of-financial-technology-in-six-visuals/

# | Information driven banking | December 2015 UnrestrictedWe should expect our very own uber moment

# | Information driven banking | December 2015 UnrestrictedTopics to touch uponAutomationSimplificationCustomer 3.0Cost structure10

A different view of the bankInsuranceBankConsumerCapital marketsLarge enterpriseSource: Oliver Wyman, The bank as an information business, (adapted)InvestorsCredit scoreAssetsInvestmentsBio/Risk infoRetirement planReal time telematicsInventoryBalance sheetReal time M2MRisk factorsCash, electronic, debit, credit, salaryLetter of credit, invoices, cash, checkBusinessTrade/Supply chainApplication dataBalance sheetCapital raising, FXReal time M2MRisk factors

# | Information driven banking | December 2015 UnrestrictedInformation product areasPublicly available informationInsights for Small BusinessesFinance & TreasuryCollection OptimisationPresents useful facts and figures about people and small businesses in local communitiesSME focused aggregated data and actionable insights serviceProvide rich, integrated financial insights into all the accounts held with a bankHelp clients collect better from their customers by being able to accurately predict future behaviorMarket & Customer InsightsPowerful insights on segments, motivations and transactional behaviors

# | Information driven banking | December 2015 UnrestrictedVerifying yourself

1min 30sSource: https://gds.blog.gov.uk/category/id-assurance/Within search results, information tied to verified online profiles will be ranked higher than content without such verification, which will result in most users naturally clicking on the top (verified) results. The true cost of remaining anonymous, then, might be irrelevance. Eric Schmidt

# | Information driven banking | December 2015 UnrestrictedNotes:Identity as a provider to 3rd parties including government (IDAP) or identity as a service to own customers (IDAS)1. Government pays the provider2. Customer pays indirectly through some sort of subscription or the partner pays via revenue sharing or commission

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Your turn: break out for 15 minsBackgroundYour task is to develop your own Analytics Centre of Excellence in a major retail bank. QuestionsWhich factors would you consider to become best-in-class?

# | Information driven banking | December 2015 UnrestrictedA simple frameworkBackgroundYour task is to develop your own Analytics Centre of Excellence in a major retail bank. QuestionsLets think through each one of these areas

# | Information driven banking | December 2015 UnrestrictedAn Analytics centre of excellence structureCustomer Value ManagementPricing & OptimisationDigitalTarget Operating ModelProposition DevelopmentStrategy AnalyticsMarketing AnalyticsPricing modelingPrice testingNew product launchProduct analyticsCustomer journey analysisDigital transformationCustomer experienceAdvanced Data ScienceMachine learningText analyticsPersonalisationData management

MortgagesLendingTransactionsCorporate & SMEDigitalSavingsAdvocacyPremier & InternationalWealthNetworkInformationACE Capability areas Potential bank segments and product areas

# | Information driven banking | December 2015 Unrestricted

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The bilingual

Brief profile of a bilingual VP/AVPHas high business acumen and can have a top-down and bottom up view of the problemActs as the project manager and is delivery focusedBuilds trusted relationships quickly across multiple functions and levelsHas high emotional intelligence and people skillsCan clearly communicate complex subjects Has consulting approach to problemsIndicative skills and experiencesAt least one area of expertise (CVM, Pricing, Information products) SQL, SAS, Excel, P&L knowledge

# | Information driven banking | December 2015 UnrestrictedThe renaissance personThe data scientist evolution of the bilingualHas extraordinary curiosity and enjoys crunching (unstructured) dataIs statistically savvy, usually a PhD in Statistics, Computer Science, Behavioural Sciences or PhysicsCan apply different concepts and techniques to other fieldsUnderstands the fundamentals of machine learning, data infrastructureHas entrepreneurial attitude towards trivial problems

Indicative skills and experiencesUsually worked in major tech or start-up previously as a programmer, statistician etc Scala, Python, Hadoop, Java

# | Information driven banking | December 2015 UnrestrictedThe capability expert

Typically a fantastic modeller or subject matter expert in a portfolio or functional areaHas in-depth experience across multiple sectors and can be a trusted advisor for the bilingual project lead as wellEmbodies the excellence in a functional areaIndicative skills and experiencesMultisector experience in one of pricing, marketing analytics or sector expertiseSQL, SAS, Excel, P&L knowledge

# | Information driven banking | December 2015 UnrestrictedThe data ninja Has deep knowledge of the bank data systems and architectureHas been around long enough to be well connected across remote areasCan usually tell you which database table and column contains what you need without a dictionary

Indicative skills and experiencesn-depth data analysis and profiling, can code super-efficient processes in their respective expertise areaSQL, SAS

# | Information driven banking | December 2015 UnrestrictedRunning a CoE as a consulting teamProjects are being resourced on an incremental value basisCouncil Heads are the Partners, responsible for high stakeholder engagementCouncil leads are effectively the account engagement managers as well as project delivery consultants for up to 7-8 initiativesSenior AVP/VP are project leads working with the rest of the team on 1-2 projects simultaneouslyWe can to cross-train analysts in different capability areas via projectsEach one is expected to write code, presentations, project manage, problem solve, run workshops and provide leadership whenever neededProduct or segment Head aka Council

Example client teamExample Client

Pool of (Senior) Decision AnalystsStaff rotationHow does it work

# | Information driven banking | December 2015 UnrestrictedWho would you want to bedont think twice

Bilingual

Data ninja

The renessance scientistCapability expert

# | Information driven banking | December 2015 UnrestrictedTea timeFor those that had enough

# | Information driven banking | December 2015 UnrestrictedTime to earn your lunch: case study 1 (30mins) You have just joined the bank.The MD of the Analytics MD wishes to hear your thoughts about how she could develop a world-class information product targeted to Small-Medium Businesses. Its not clear what she has in mind.How would you approach such a problem statement?

# | Information driven banking | December 2015 UnrestrictedOpen discussionIntroduce the subject and give them 1-2 mins and gauge participation. If limited, guide them through the framework in the next slide. Offer to answer any questions for them24

A simple frameworkBackgroundYou have just joined the bank.The MD of Analytics wishes to hear your thoughts about how she could develop a world-class information product targeted to Small-Medium Businesses. Its not clear what she has in mind.QuestionHow would you develop this proposition?

# | Information driven banking | December 2015 UnrestrictedQuestions to ask

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Whats unique about your offering20-35% share (UK) in each sectorTop 10 bank worldwide1st -2nd bank across most products in UKGood innovation history

# | Information driven banking | December 2015 UnrestrictedPotential target sectors

# | Information driven banking | December 2015 UnrestrictedPartnering or going solo

Source: Oliver Wyman, winning the digital battlefield

# | Information driven banking | December 2015 UnrestrictedFront endGrowth in data trafficeMultichannel data flowsMiddlewareLoyalty programmes, dynamic pricing, online communitiesReal time processingData managementBack endResilient, fast, transacting, booking and accounting systems

Would you stay connected?Source: AT Kearney, FS in the age of digital, (adapted)BranchWeb/MobileThird-party apps

Customer intelligence kernelCustomer intelligence kernelValue added functionalitiesAPIAPIAPI

# | Information driven banking | December 2015 UnrestrictedOpen data (co-founded by Sir Tim Berners-Lee and Sir Nigel Shadbolt, and offer training, membership, events and consultancy around open data.)PSD2 (what this might mean for us)

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Time to earn your Friday drinks: case study 2 (30mins) You are the MD of the Direct Investing plattformFor the past 2 years, you have been building platform to provide execution only investment services. You believe this would work brilliantly and you bet your career on it. The analytics team has worked out the pricing and looks like youll be making a good deal of money for the next three years.All you have to do is sit back and enjoy the ride. The product will take care of itself. Or maybe not.

How do you make sure your venture doesnt turn into a flop?

# | Information driven banking | December 2015 UnrestrictedSkip if theres not enough time30

A simple frameworkHow do you make sure your venture doesnt turn into a flop?Your goal is to find ways to utilise the data you have

# | Information driven banking | December 2015 UnrestrictedWeve only processed about 0.5% of all the available data

3.1m oil barrels

c80bn recoverable barrels Weve extracted just 110 oil tankersOut of 27,000 oil tankers till it dries

# | Information driven banking | December 2015 UnrestrictedAt the moment less than 0.5% of all data is ever analysed and used, just imagine the potential here.

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We generate even more every year44x more since 2009Most of it would be your data, managed by enterprisesWhat is a zettabyteEquivalent in Zettabytes1 gigabyte1,000,000,000,0001 terabyte1,000,000,0001 petabyte1,000,0001 exabyte1,0001 zettabyte1

# | Information driven banking | December 2015 Unrestricted1 terabyte holds the equivalent of roughly 210 single-sided DVDs.took roughly 1 petabyte of local storage to render the 3D CGI effects in Avatar.The current estimated information content of all human knowledge is only 12 exabytes.3 mins

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What could this mean for you

# | Information driven banking | December 2015 UnrestrictedYour workYour beloved onesYour healthYour privacyGlobal inequalityYour attitude towards changeClimateOur warsYour life

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