analytics in banking preview deck - june 2013

Banking, Financial Services, and Insurance (BFSI) Outsourcing Market Report – June 2013 – Preview Deck

Topic: Analytics in Banking: War is Ninety Percent Information1

Copyright © 2013, Everest Global, Inc. EGR-2013-11-PD-0888

1 War is ninety percent information. – Napoleon Bonaparte (1769-1821)

2 Copyright © 2013, Everest Global, Inc. EGR-2013-11-PD-0888

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Background and scope

Background of the research Increasing affordability / cost efficiency of storage systems coupled with the meteoric rise of Internet and social media in the last decade has led to creation and assimilation of humungous amounts of unstructured data. Organizations today, are on the lookout for means to effectively process this unstructured data to gather meaningful insights that can be leveraged for superior decision making. Managing and processing data which is emanating from a variety of sources, generated in multiple formats and is delivered at high velocity is a key priority for enterprises. For this purpose, companies across verticals are leveraging analytics for improving their data-management capabilities to better understand customer needs, streamline and automate processes, identify clandestine patterns, and make accurate forecasts The Banking, Financial Services, and Insurance (BFSI) industry is one of the largest adopters of analytics services. Economic turmoil, increasingly demanding customer profile, and regulatory pressures have created a challenging environment for banks. Further, heightened need of customer focus is driving the demand for analytics solutions. Amidst this environment, banks increasingly realize the value they can unlock through evolved analytics capabilities. On the supply side, evolution in technology and people expertise has enabled service providers to meet this growing need of banks and make previously inconceivable tasks possible. Service providers are enhancing their capabilities at a furious pace – primarily through acquisitions and alliances. In this research, we analyse the current trends, key uses and broad service provider landscape for analytics services, specifically for the banking sector. We focus on: Understanding analytics: key elements, processes, functions and deployment areas Banking market size and key transaction characteristics Key drivers, rends and activity for analytics in banking Major service provider categories and capabilities Scope of this report Industry: Banking (retail banking, wholesale banking, credit cards, loans, and mortgages); excludes capital markets and insurance Services: Banking (industry-specific BP services), Banking-IT (application and infrastructure services) Geography: Global


Table of contents (page 1 of 2)

Background and methodology 5 Summary of key messages 10 Section I: Understanding analytics 13 Summary 14 Analytics and its building blocks 15 Levels of analytics 16 Analytics value chain 17 Analytics solution implementation – ITO model 18 Analytics solution implementation – BPO model 19 Section II: Analytics in the banking industry 20 Summary 21 Drivers for analytics adoption in banking 22 Recent analytics initiatives of large banks 30 Challenges faced by banks in analytics implementation 32

Section III: Analytics in banking: Market size and deal characteristics 33 Summary 34 Market size 35 Deal characteristics 36

Topic Page no.


Table of contents (page 2 of 2)

Section IV: Service provider landscape 42 Summary 43 Analytics service provider categories 44 Service provider capabilities by banking LoBs 45 Service provider investment in analytics – key themes 46 Recent initiatives and alliances of service providers for analytics offerings 47 Section V: Implementing an analytics solution: Key steps / considerations (case study) 55

Section VI: Implications for key stakeholders 61 Implications for buyers 62 Implications for service providers 63

Appendix 64 Analytics-related M&A by service providers in the financial services space 65 Glossary of terms 67 BFSI research calendar 68 References 70

Topic Page no.


Consistent with other research areas, our BFSI coverage is based on four pillars of strength to produce actionable and insightful research

Round the year tracking of all the service providers across ITO and BPO in BFSI Dedicated team for ITO and BPO research, spread over two continents 20+ years of advising clients on ITO and BPO related decisions Executive-level relationships with buyers, service providers, technology providers, and industry associations

Robust definitions and frameworks

1 Primary sources of information

2 Diverse set of market touch-points

3 Fact-based research

4

Market thought leadership Actionable and insightful research Syndicated and custom research deliverables

Impact on value proposition to market

Impact on efficiency or effectiveness of process

Impact on cost of process

Low High

High

Low

Strategic focus

Proc

ess

expe

rtis

e

Domain expertise

1x

0.1x

10x

Services Industry

Service Enablers

Service ProvidersEnterprises


This report is based on two key sources of proprietary information

Proprietary database of 250+ Banking BPO contracts and 300+ Banking ITO contracts (updated annually)

The database tracks the following elements of each contract: – Buyer details including size and signing region – Contract details including service provider, contract

type, TCV and ACV, service provider FTEs, start and end dates, duration, and delivery locations

– Scope details including share of individual buyer locations being served in each contract, LoB/BU served, and pricing model employed

Proprietary database of 16+ BPO service providers and 20+ ITO service providers (updated annually)

The database tracks the following for each service provider: – Revenue and number of FTEs – Number of clients – FTE split by different lines of business – Revenue split by region – Location and size of delivery centers – Technology solutions developed

2

Note: We continually monitor the market and update the above list to include emerging service providers Confidentiality: Everest Group takes its confidentiality pledge very seriously. Any contract-specific information collected, will only be presented back to the industry

in an aggregated fashion

List of service providers covered in the analysis 1


Everest Group’s definition of BFSI includes the following three segments

1 Business-to-consumer relationships 2 Business-to-business relationships

Retail financial services (B2C1) – Retail banking – Lending – Cards

Commercial banking (B2B2)

Banking Investment banking

Asset management

Custody & fund

administration

Brokerage

Capital markets Life & pensions

Property & casualty

Insurance

Banking, Financial Services and Insurance (BFSI)

Note: This report covers vertical-specific processes within the banking space. It does not include coverage of horizontal business processes such as F&A, HR, procurement, and contact centers

Focus of this report


This report provides a comprehensive understanding of the analytics services industry with focus on banking domain. Analytics adoption in banking industry is covered in depth, exploring various aspects such as market size, key drivers, recent analytics initiatives, and challenges. The report also analyses the trends in analytics deals for various banking sub-verticals (cards, retail, commercial, and lending) and evaluates analytics capabilities of 20+ service providers in the banking space. Some of the findings in this report, among others, are:

Understanding analytics

Analytics in the banking industry

Overview and abbreviated summary of key messages (page 1 of 2)

In the banking industry, analytics adoption is driven by various factors such as real-time response requirements, increasingly demanding customer profile, and regulatory pressures. Banks are primarily implementing analytics solutions for better marketing, increasing customer value, controlling customer churn, and fraud management

Some of the findings in this report, among others, are:

Analytics, an increasingly critical function today, has grown immensely in sophistication and the business impact it creates. Specially, prescriptive and predictive analytics have unlocked immense potential for banks. The key ingredients for a successful analytics solution are right data-sets, technology tools, domain knowledge, and people expertise

Both IT and BPO service providers are at the forefront of providing analytics solutions, albeit with different models. While BPO players bring in the people expertise, IT service providers focus on the technology aspect of an analytics solution


Market size and deal characteristics

Service provider landscape

The global analytics services market is estimated to be around US$XX billion (FY 2012) and growing at ~YY%. Of this, market for analytics services in the banking industry is estimated to be ~US$ZZ million (FY 2012)

Analytics deals have been primarily announced by large-sized banks, however adoption among small and medium sized banks is picking up

While North America has traditionally dominated analytics implementations, APAC and EMEA have witnessed growing adoption of these solutions in the banking industry

Banking analytics service providers can be classified into two broad groups – ITO/BPO service providers and pure-play analytics service providers. These service providers are most active in the retail banking and lending lines of business

Overview and abbreviated summary of key messages (page 2 of 2)


This study offers 5 distinct chapters providing a deep dive into key aspects of analytics services for banking industry; below are four charts to illustrate the depth of the report

Source: Everest Group (2013)

Levels of analytics Analytics deals by time period Period 2000-2004 Indexed to 100

Analytics deals by end purpose Analytics deal split by geography

Customer insights

Operational reporting

Marketing

Fraud and risk management

Regulatory compliance

Product optimization

End purpose ITO deals BPO deals

4 7

1

3

1

5

2008 2012

North America

Latin America

APAC

EMEA

2000-2004 2005-2007 2008-2010 2011-2013E

Bus

ines

s im

pact

Sophistication of solution

Increasing maturity of analytics solutions

Prescriptive analytics

Predictive analytics

Descriptive analytics

Reporting

Emerging areas of interest

High Medium Low


BFSI ITO research agenda

Topic Release date

Published Current

October-2012 Application Outsourcing (AO) in Insurance: PEAK Provider Landscape – Policies for Growth and Differentiation

IT Application Outsourcing (AO) in Insurance – Service Provider Profile Compendium January-2013

February-2013 IT AO in Capital Markets – Service Provider Profile Compendium

October-2012 Application Outsourcing (AO) in Banking – Service Provider Profiles Compendium

January-2013 Webinar Deck: State of the Global Services Market: 2013 Predictions

January-2013 Application Outsourcing (AO) in Capital Markets Annual Report – Change is the Only Constant

December-2012 IT AO in Capital Markets: PEAK Provider Landscape – Need for Speed: Capturing the Capital Markets Momentum

June-2013 Analytics in Banking: War is Ninety Percent Information

Q2-2013 IT Outsourcing in Banking – Annual Report 2013

Q3-2013 IT Outsourcing in Banking – Service Provider Landscape with PEAK Matrix Assessment 2013

Q3-2013 IT Outsourcing in Banking – Service Provider Profile Compendium 2013

Q3-2013 IT Outsourcing in Insurance – Annual Report 2013

Q3-2013 IT Outsourcing in Insurance – Service Provider Landscape with PEAK Matrix Assessment 2013

Q3-2013 IT Outsourcing in Insurance – Service Provider Profile Compendium 2013

Q4-2013 IT Outsourcing in Capital Markets – Annual Report 2013

Q4-2013 IT Outsourcing in Capital Markets – Service Provider Landscape with PEAK Matrix Assessment 2013

Q4-2013 IT Outsourcing in Capital Markets – Service Provider Profile Compendium 2013

http://research.everestgrp.com/Product/11775









https://research.everestgrp.com/Product/11757













BFSI BPO research agenda

Topic Release date

Published Current

October-2012 Webinar Deck: PEAK into the BFSI Outsourcing Market

Insurance Business Process Outsourcing (BPO) Market 2011-2012 – Annual Report November-2012

January-2013 Insurance BPO Service Provider Profile Compendium

October-2012 A PEAK into the Leaders, Major Contenders, and Emerging Players of the Banking BPO Market

December-2012 Capital Markets BPO Service Provider Profile Compendium

November-2012 Banking BPO Service Provider Profile Compendium

November-2012 A PEAK into the Leaders, Major Contenders, and Emerging Players of Capital Markets BPO

June-2013 Analytics in Banking: War is Ninety Percent Information

Q2-2013 BFS BPO – Annual Report 2013

Q2-2013 Banking BPO – Service Provider Landscape with PEAK Matrix Assessment 2013

Q3-2013 Banking BPO – Service Provider Profile Compendium 2013

Q3-2013 Capital Markets BPO – Service Provider Landscape with PEAK Matrix Assessment 2013

Q3-2013 Capital Markets BPO – Service Provider Profile Compendium 2013

Q3-2013 Insurance BPO – Annual Report 2013

Q3-2013 IT Outsourcing in Capital Markets – Annual Report 2013

Q4-2013 Insurance BPO – Service Provider Landscape with PEAK Matrix Assessment 2013

Q4-2013 Insurance BPO – Service Provider Profile Compendium 2013























Additional BFSI and analytics research references

The following documents are recommended for additional insight on the topic covered in this report. The recommended documents either provide additional details on the topic or complementary content that may be of interest 1. BFS BPO Annual Report 2012 - Strong Growth Post the Downturn (EGR-2012-11-R-0710b); 2012: The global industry for Business

Process Services (BPS) for Banking and Financial Services (BFS) is growing at a fast pace of over 16% annually. After a dip in 2008-09, due to the global financial crisis, BFS BPS is back on track, seeing rising contract numbers in both 2010 and 2011. Although BPO services account for only 10% of the overall market for BFS BPS, adoption of BPO is now expanding globally. This report analyzes the current trends and the future outlook for third-party BPO services for the global banking and capital markets industry

2. Application Outsourcing (AO) in Banking - Service Provider Profiles Compendium (EGR-2012-11-R-0763); 2012: The banking AO service provider compendium provides comprehensive and fact based snapshots of 25 service providers featured on Everest Group Banking AO PEAK Matrix. Each more than 5 pages service provider profile provides a comprehensive assessment of their service suite, scale of operations, domain, investments, and delivery locations specific to banking AO services

For more information on this and other research published by Everest Group, please contact us: Rajesh Ranjan, Vice President: Rajat Juneja, Practice Director: Rishabh Gupta, Senior Analyst: Pallavi Saxena, Analyst:

Phone: +1-214-451-3110 Email: [email protected]

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analytics in banking preview deck - june 2013

Business

analytics implementation

analytics offerings

levels of analytics

analytics adoption

analytics solutions

banking retail banking

analytics key themes

evolved analytics capabilities