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FinacleConnect is a quarterly journal on banking technology published by Infosys Technologies Limited.For more information contact: Sumit Virmani, Infosys Technologies Limited, # 44 Electronics City, Hosur Road, Bangalore 560100, India.Tel: +91-80- 28520261 or write to us at: finacleinfo@infosys.comAll rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by anymeans, electronic, mechanical, recording, or otherwise, without the prior written permission of Infosys Technologies Limited.

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Welcome to the launch issue of FinacleConnect, the

quarterly newsletter from Infosys! As the global economy

strengthens and banks enter the new year on an upbeat

note, FinacleConnect aims to bring to you the latest

business and technology trends, views and opinions

impacting the banking industry.

The events of the past half decade, right from the Y2K

bug to the economic downturn, have significantly affected

the business of banking. And accordingly, the role played

by technology too has evolved. From being considered a

support function a few decades ago, technology moved to

the forefront during the dotcom era and is finally being

pragmatically viewed as a critical enabler for banks to

operate effectively. The importance of technology was

further underlined when even during the cost cutting drive

in recent years, banks realised that prudent investments

in technology were essential to compete successfully in a

globally networked world.

In this first issue therefore, we discuss how technology

has transformed banking and how most technology

decisions in banks are increasingly business driven. WeGirish G. VaidyaSenior Vice President and Business Head - Finacle

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have also tried to understand from leading industry

practitioners and analysts, how they view the role of

technology in banking - now and in the future. For, such

issues will continue to gain relevance with time. The thought

is succinctly captured in the words of Bo Harald, head of

electronic banking at Nordea. In his conversation with

FinacleConnect, he says, “Technology is a big enabler, but it

should not take the driver’s seat. Not only in banking,

but in society at large, a technological solution must meet a

business goal.”

Going ahead, FinacleConnect will continue to address critical

aspects of technology in banking and how banks can harness

technology to better service their customers. We hope

you will enjoy this issue and look forward to receiving

your feedback.

At the dawn of a promising new year, FinacleConnect wishesits readers a very prosperous and progressive 2005!

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Technology has always played an essential role in banking. Right from mainframe-based

core processing systems developed well over half a century ago, to the relatively recent

Internet banking phenomenon, the banking industry has always been at the forefront in

absorbing new technologies. But with increasing globalisation, competitive pressures,

regulatory requirements and the current economic scenario focusing on cost reductions,

technology has moved from an auxiliary position to the vanguard and is playing a more

strategic role within the banking organisation.

Realising that IT strategy needs to be closely aligned with business goals in order to derive

maximum benefits from technology investments, banks are now carefully deploying

technology to meet their key business objectives—competitive differentiation, innovative

product development, customer retention and operational efficiency.

Investment in technology has become mandatory as it has becomea competitive necessity to deliver innovative products and services.

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Some of the key areas where this change is

evident are in the delivery channel management,

including the physical branch and in the area of

core banking.

Self-service technologies

Buoyed by customer demand and technological

developments, there has been a strong emphasis

on self-service banking in recent years. Estimates

by analyst firm, Celent, suggest that delivery

channels account for about one third of a banks’

total IT spending on consumer banking products

and services.

A few decades ago, ATMs were the only

alternative to brick-and-mortar bank branches.

However, telephone banking, call centres and

the Internet have brought about a paradigm shift

in the way banking is conducted today. They

present a low-cost means of delivering banking

services to a customer’s doorstep. Banks are

focusing on moving non-critical banking

transactions, such as cash withdrawal and

deposits, funds transfer and standing instructions

to these delivery channels. This leaves the high

cost bank branch to focus on face-to-face high

value transactions.

Banks that have consciously and intelligently

invested in delivery channel technology have

gained tremendously from this strategy, as is

the case with Bank of America, which has

achieved unprecedented success in online

banking. The bank accounts for over 30 percent

of the US online banking market, having more

than doubled its online customer base from 4.7

million customers at the end of 2002 to over 11

million customers today. In addition, it is gaining

more than 350,000 new active subscribers and

150,000 new bill payers every month.

According to a recent report by analyst firm

TowerGroup, Bank of America has found that

its online customers are more profitable than its

offline customers, which has fuelled the bank’s

aggressive online strategy. What distinguishes

this strategy is the way the bank has fully

embraced the online channel as a means to

improve customer satisfaction and profitability.

Not only has the bank deployed enabling

technologies to ensure a high standard of online

banking service, but has also effectively

responded to customer feedback. For instance,

the online enrollment process was simplified

from five screens to one screen and uses the

customer’s Social Security Numbers. Similarly,

the bank also introduced a text chat feature during

online banking and many of Bank of America’s

banking centres now feature online banking

kiosks, where customers can log on to check a

balance or pay a bill.

While customer preferences for individual

delivery channels vary across regions, industry

experts are unanimous that providing multiple

delivery channels is no longer an option; it is an

imperative. Effectively implemented, a multi-

channel strategy promises greater customer

satisfaction, increased operational efficiency and

higher profitability. At ICICI Bank in India,

nearly 50 percent of all transactions take place

through ATMs. The bank’s multi-channel focus

has helped propel it to become the second largest

bank in India, in less than half a decade, despite

having less than 5 percent of the number of

branches owned by India’s largest commercial bank.

Refreshing the branch

The high degree of attention placed on self-service

technologies, however, does not lessen the

importance of the physical branch. In fact, the

physical branch is essential for a successful multi-

channel strategy—it enables bankers to provide

quality face time to their customers. Hence, banks

are renewing their branches to offer high-end

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selling and advisory services. The aim being to

create more time and space to sell sophisticated

and high value services to customers, such as

wealth management products and loan products.

In keeping with this, several banks are changing

the look and feel of their branches to create more

retail environments, places where customers can

be enticed to stay longer and hopefully discuss

and buy new financial products. Three years

back, Abbey, UK High Street bank, re-invested

in its bank branches by introducing the

revolutionary concept of ‘cappuccino banking’

(having Costa Coffee outlets within some of the

bank’s main branches) to enable customers to

have coffee while banking. In the US too, leading

banks like Bank of America have created new

branch designs and service styles to cater to

different customer needs.

In the process of re-designing their branches,

many banks are also revamping their obsolete

branch technology infrastructure to provide

branch employees with the tools they need to

be more sales-effective. Some of the main criteria

a branch solution should fulfill are easy

integration with legacy systems, extensibility

to other channels, flexible architecture, and

customisation capabilities.

Multi-channel integration

While developing each delivery channel—a

critical ingredient for multi-channel success is

the concept of a ‘unified view’ to make

customers’ sales and service experience

consistent across all delivery channels. Integ-

ration of the disparate technology systems

across various delivery channels helps increase

operational efficiency as it removes duplication

of technology systems and reduces maintenance

requirements.

In addition, multi-channel integration helps banks

gain competitive advantage through rapid

development of innovative products, enhancing

customer experience by responding to customer

requests in a uniform manner through any

delivery channel, and boosting profitability

through increased cross selling. A multi-channel

architecture that enables enterprise-wide risk

management and eases the audit process also

improves a bank’s ability to comply with

regulatory requirements.

According to a report by TowerGroup on

Huntington Bank of the US, replacing the

fragmented and siloed delivery channel

architecture with an integrated solution has

helped the bank improve customer service and

increase sales. However, achieving multi-

channel integration is not simple. A global

survey conducted by Celent at the beginning of

2004 on multi-channel integration capabilities

at banks across North America, Europe and

Asia Pacific revealed that although many banks

support multiple channels, integration between

these channels is not high.

While some banks have channel-specific

business logic, meaning that data is not

consistent across channels, other banks have

the same platform across channels but lack data

integration or support for a specific channel.

Typically, banks have integrated transactional

data, but not contact information. While

most respondents of the survey optimistically

estimated their integration projects would

be completed within three years, Celent expects

that megabanks and large regional banks would

actually have to dedicate the next five to seven

years to develop a fully multi-channel

environment. Smaller banks may, however,

be able to complete projects at a much quicker

pace.

Getting to the core

The one area that takes up a bank’s maximum

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Santander, the largest bank in Spain and one of

the largest banks in the world, is also in the

process of replacing all of the group’s core

solution in the Spanish market. According to a

report by Celent on core banking replacements,

Santander’s aim is to generate cost savings of no

less than 250 million euros annually. Celent

estimates that the total savings that are achievable

with a core solution replacement project lie in

the range of 5-8 percent of the total non-interest

expenses, which can have a profound effect on

the overall profitability of any bank.

The report labels Santander’s project as one of

the most extensive and ambitious core solution

replacement projects underway in the banking

industry, globally. It also states that along with

cost reduction, the main aim of the bank is to

increase revenues—through more effective cross

selling, better customer relationship management,

increased service quality and better leveraging

of multi-channel strategy.

End game

No longer just restricted to the operations

department, technology is driving the business

of banking today. Banks cannot avoid

investments in technology because it has become

a competitive necessity to deliver innovative

products and services. What they can do is to

deploy the technology, keeping customer

requirements and business goals in a proper

perspective. For banks that have the vision to

utilise technology intelligently, the rewards are

considerable, including transforming their entire

business.

Merwin Fernandes

Vice President & Global Head

Sales & Marketing - Finacle

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technology investments in terms of time, effort

and money is the core banking solution. Forming

the backbone of a bank’s IT infrastructure, the

core banking solution contains records of all

customer transactions and the processing of

those transactions. Most of the leading global

and regional banks have mainframe-based core

banking solutions that were developed way back

in the 1960s and 1970s.

The inflexible architecture of these solutions does

not enable banks to introduce new products

without first making changes to the software code.

Besides causing delays in product launches, these

solutions also pose challenges with respect to

integration with the bank’s other ancillary

solutions and providing customers with a unified

view of their financial information. Not surpr-

isingly, all of these put together make maintaining

these legacy applications prohibitively expensive.

For banks that have deployed inflexible vendor

solutions too, the situation is quite similar. Their

core solutions usually exist in a siloed enviro-

nment that is further exacerbated by mergers and

acquisitions. Industry experts suggest that some

banks have over a hundred disparate banking

applications running simultaneously.

In order to meet modern day goals of high

efficiency, flexibility, interoperability and low

cost, the only option is to replace these core

banking solutions. Undoubtedly, replacing a core

banking solution is a difficult task, but the returns

are high and a few progressive banks such as the

Citigroup and ING have taken the all important

step. ABN AMRO’s Indian subsidiary too

has gained tremendously by replacing its

core banking solution with Finacle from

Infosys. This has enabled them to reduce

operating costs and improve overall efficiency.

(refer case study on page 22)

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Bo Harald, Executive Vice President andHead of Electronic Banking at Nordea, issaid to be one of the most influentialtechnologists in the banking area. Involvedin Nordea’s electronic banking initiativesfrom the very beginning, he has seen thebank’s Internet banking customer basegrow to 4 million accounts withthe world’s highest number of electronicpayments and bill payments. Harald,a frequent speaker on Internet ande-business, was awarded the FinnishMinistry of Transport and Commu-nications’ first award for promoting theinformation society and electronicservices.

The largest financial services group in theNordic and Baltic region, Nordea hasregularly received plaudits for its electronicbanking services, the most recent beingthe global award for best use of IT in retailbanking from The Banker magazine.

In a discussion with Rekha Menon,Research Analyst of FinacleConnect,Bo Harald spoke at length on the bank’sstrategy and the role of technology inensuring business benefits.

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Nordea has received several awards for

electronic banking. Please explain the

technology initiatives that have made this

possible.

Technology is used in all parts of the bank—

retail banking, wholesale banking, as well as the

technology that I am responsible for, and that is

electronic banking, which reaches all areas of the

bank. One of the main reasons why the bank has

been so successful is that we started electronic

banking very early (1979) and had time to let it

mature. In addition, we have very good solutions

that are very user friendly and simple, in fact

you can say we have made it ‘clinically simple’.

We also have a very high level of security. For

instance, we still use the same log-on method

that was introduced in 1982. Each customer has

a unique number assigned to them and through

the post they get a list of passwords that have

to be used one by one so every login is a different

combination of passwords, which is very secure.

We have not had to convince our customers about

security because they have experienced it

themselves. We have built the very best systems

and continually added value.

It is important to understand what technology

can do but it should not be behind the steering

wheel. It should take a back-seat. You have to

understand what customers can take in and

support that. It is very important. There is a

very clever saying that people do not want to

do what is good or profitable in the first instance,

they want to expand from what they are already

doing because they are used to it. To start

something totally new is a big challenge.

What are the main highlights of Nordea’s

electronic banking journey?

Finland has been the laboratory of electronic

banking—it has a very good payments

infrastructure. We launched our corporate

e-banking service way back in 1979 and private

e-banking for individuals was launched in 1982.

This was all PC banking and we had nearly a

quarter of a million e-banking customers before

the Internet came into the scene in 1995. We

have been gradually introducing other services

like equity trading in 1988, real-time e-payments

in 1996 and e-loans and B2C e-billing in 1998.

Nordea has 10 million retail customers and

1 million corporate customers, out of which over

4 million bank online. We are to the best of our

knowledge, global leaders in the number of

e-payments which, we believe, is still close to

double the size of Bank of America. 90 percent

of student loans, 36 percent of consumer finance

and 24 percent of mortgage applications in

Finland are paperless.

The second stage of the electronic revolution

has been the introduction of e-identification and

other e-business services, where customers login

to other commercial services such as utilities

through the Internet banking service. They can

then use their Internet banking passwords to

sign agreements with the service provider. This

service is even used to access government services

online, where a high level of authentication is

needed such as when filling out tax returns or

checking pensions and health reports. Our next

big focus is on business-to-business electronic

invoicing which is also receiving a strong push

from the government.

In your opinion, what is the role played by

technology in ensuring success?

Technology is a big enabler, but it should not

take the driver’s seat. Not only in banking, but

also in society at large, a technological solution

must meet a business goal. If the technology

deployed does not relate to customer requir-

ements strongly enough or build on existing user

habits, it cannot be sold and will be useless.

An innovation is a reality, only if a critical mass

of users can use it.

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Often it is a case of reusing existing technology

for new purposes. And the more important

thought is that, this is reusing existing experience,

building on habits of customers. Because what

they have done before, they can do now for an

additional purpose. The last service adds much

more than the previous one, so it becomes an

exponential value curve for the customer. This

provides economies of scale both for the

bank that can sell more to the same relationship

and the customer who can buy more from the

same relationship.

Society is getting more electronic. If the tools

to make it electronic are the same as electronic

banking that a customer is used to, then the

transformation will be that much more fast, easier

and cheaper.

Was the Internet always the main delivery

channel for Nordea? How did Nordea

respond to the predictions of the demise of

the physical bank branch during the Internet

boom?

You are quite correct in your observation that

when it was started, the Internet was just an

alternative channel. Then we saw that it was a

cost eliminator and income generator, because

we charged for the service and customers were

willing to pay what was considered, a very

handy service.

We have never made any predictions about the

demise of the physical branch. On the contrary,

our stance has been that nothing can replace

personal contact and personal relationships.

Even if customers do all their loan transactions

over the Internet, there is always the option

to go to a physical branch and talk to someone

face to face. We can see that the relevance of the

branch is going up. With the elimination of

manual transactions, there is more time for

relationships and advisory services.

Plus all the new services like e-invoicing,

e-business cannot be sold through the post.

People do not have time to read it all.

Are there any final thoughts you would like

to share with us?

Technology is your best friend and most

dangerous enemy. If used in the right way,

it makes anything possible. But, you have to

be very choosy on what you focus because

if you try to do everything that technology

allows, then it confuses your customers,

it becomes too complicated, too expensive,

and you may lose the confidence of your own

organisation.

Our experience is that if you start very early,

then electronic banking can be developed in

parallel with core banking. So you don’t

have to change your core banking solution for

e-banking specifically. But, if you start with

e-banking very late, then your core banking

solution is not adapted to e-banking and you

have a discord.

Banks should be interested in technology very

early. We try to be among the first few in the

world. And I tell my tech team that we must

travel out in the world and learn about new

technologies. But, you must implement it only

when you really understand it. Then, it is not

part of hype, it is mature and you do it right.

I would also like to stress that you cannot plan

the future. You will only lose time and money

if you try to predict the future. What you

have to do is have a vision, make a small

investment, evaluate the responses and take it

from there. �

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I arrived at the symposium half expecting lastyear’s critical themes again. Why wouldI expect a change–after all, the world ofcore banking technology had not changed allthat much in the last 18 months - or had it? Acouple of years ago, at the same symposium,all I heard was that core banking solutionreplacement was an idea whose time had NOTcome. The risks were just too great, saidexperts. Others opined that the costs of such adramatic change in the technology infrastructurewere just too high to justify undertaking therisk. And as I considered these views veryobjectively, I realized that they were all correct.The risks were indeed very high, costspotentially bordering on the prohibitive andin-house systems had indeed served thepurpose. However, what I had heard at this

year’s session was refreshingly different.There was still widespread cognisance of therisks and costs, but there was something elsein the air, an acknowledgement of the factthat banks, irrespective of size and geography,face the dual challenge of cutting costsand increasing internal efficiencies, with theultimate aim of improving margins, which areclearly under strain. There are visible signs oflarge global and regional banks willing to takethe plunge. While some openly stated theirintentions to consider a core banking solutionsreplacement, there were some others whohad already taken the first steps towards thisbrave move. More than one global bankis considering a new application –if not intheir home market to start off with, thenat least elsewhere.

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Core bankingreplacements

Managing risks

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This is a significant step and I strongly believe

that all it requires is a couple of successful

migrations before this develops into something

like a wave.

What then are the risks that banks should take

cognisance of, before embarking on what is

clearly going to be the single biggest technology

initiative within the bank?

Vendor or partner riskAnalysts rate this as the single biggest risk while

evaluating enterprise applications. After all, if

a core banking systems replacement is going to

be the single biggest initiative, the solution

provider should be a partner rather than a

vendor. There are various questions to be

considered while evaluating a vendor’s

credentials.

Some of these are:

Is the vendor financially strong? It is

imperative that the vendor is financially very

strong, and capable of tiding over the bad times

so as to be able to capitalise during the good

times.

Is the vendor committed to the business? It

is vital for a vendor to have a long-term view of

the banking business just as a bank would have.

They should understand the business, make

regular investments to track and understand

the business, and above all, give it the focus

that it deserves.

Does the vendor conform to quality

standards? For a software vendor, adherence

to various quality standards is of paramount

importance.

What do others have to say? The different

accolades received pertaining to corporate

governance, the quality of management and

their vision, and so on are positive indicators.

Vendors of core banking solutions are more than

just developers of another piece of software

and banks are recognising this.

Solution riskAt the end of the day, a solution is what the

bank buys. And therefore, evaluation of the

solution itself is very important. For example,

it is expected that the vendor would invest in

benchmarking the solution features against

best practices as its geographic footprint grows.

Critical evaluation of solutions by research

analysts and consultants also can provide banks

with key insights into the solution. Banks

should also look at the vendor’s strategy in

future-proofing the solution for emerging

requirements.

Technology riskIt is a must that a bank’s partner is at the cutting

edge of technology. For example, a few years

ago, the adoption of web technologies was

considered necessary–and solutions, which had

adopted these technologies early and web-

enabled their systems, were clearly the more

progressive ones. In today’s environment,

experts are talking of Web Services and a

Services Oriented Architecture (SOA), so

solutions that conform to this are obviously

more than a step ahead. There are other factors

to be considered too, such as:

Is the solution scalable? Banks should closely

look at vendors who have performed scalability

benchmarks. However, the (real) proof of the

pudding is in the number of ‘live’ sites say 500

branches, or where transactions volumes per

day are more than 5 million.

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Is it based on open and inter-operable

standards?

The core banking solutions will co-exist with

other internal and external applications. It is

important that interfacing and integration

capabilities are proven beyond doubt.

Implementation & support riskThe banking world has seen many projects fail.

It is often said that selecting a vendor is the

easier part. The more difficult and challenging

part is, of course, carrying the project through

to a successful implementation. An experienced

vendor with impeccable implementation

credentials is one who has managed all

challenges well. Some of the key questions that

banks should be asking while evaluating this

risk are the following:

� Does the product require large-scale

customisation? How will this be managed as

part of the implementation plan?

� Will the vendor make many changes to source

code on-site?

� What is the implementation methodology

that the vendor adopts? Is it comprehensive

and does it incorporate aspects that are

critical to the bank itself?

� What is the vendor’s track record with

implementations? A clean track record here

is a significant plus, as there are not too many

vendors who can claim to not have even a

single failed implementation.

� Does the vendor have experience with

different types of implementations–in

different geographies, big bang migration as

well as phased roll-outs, etc.

A related but an equally important issue is the

post implementation support that vendors

provide.

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Positive pointers that banks should be looking

at are:

� What is the vendor’s strategy for post

implementation support? How many levels

of support does the vendor provide?

� Is the vendor equipped to handle support in

different parts of the world?

� How do upgrades and enhancements come

to the bank after implementation has been

completed?

� What do long standing customers have to

say about post implementation support?

Concluding remarksIt is important that banks take a holistic view

while considering the replacement of their core

banking platform. While the benefits of

implementing packaged solutions built on

modern technology are all too obvious, one

cannot deny that such an exercise is fraught

with risks. The risks can be mitigated and

managed–a good starting point would be for

the bank to recognise the different risks and

consider strategies to mitigate them.

As I said at the outset, the perspective at this

year’s symposium was refreshingly different.

I am confident that next year, the mood will be

a lot more optimistic as it will be built on the

plank of successful implementations by the

few courageous banks which have taken the

first steps. And these banks would be those

which would have evaluated and managed the

different risks successfully.

Sanat Rao

Associate Vice President and Global Head

Product Strategy & Management - Finacle

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A strategic imperative

ABN AMRO bank set up base in India over

80 years ago and like other foreign multi-

national banks, focused primarily on wholesale

banking, to service top-tier corporate clients.

This changed in the 1990s when strategic

business imperatives and an increased level

of competition both from domestic and multi-

national banks in India led the bank to

look at retail banking as a key area for growth.

In an effort to strengthen its retail banking

presence, ABN AMRO acquired Bank of

America’s retail banking operations in India.

As part of the acquisition, the bank migrated to

Bank of America’s technology infrastructure,

which was based on ICBS solution from Fiserv,

running on an IBM AS/400 platform. However,

the existing solution was not flexible enough to

meet the requirements of a competitive consumer

banking environment, where offering a range of

products and services to customers across

multiple delivery channels is critical. With

frequent maintenance requirements, the platform

was also proving to be a drain on resources. At

the same time, the focus at the bank was on

reduction of TCO(Total Cost of Ownership)

and therefore, a mere upgrade to a newer version

of the existing, aging system would not have

met the objective. As a result, the bank decided

to replace the legacy system with a new

generation, robust core banking solution.

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Key business requirements

The corner stone of a successful consumer

banking strategy is to have a technology

platform that can offer anytime, anywhere

banking through multiple delivery channels like

the Internet, ATM, mobile and call centres.

ABN AMRO required a platform that could

easily support existing delivery channels and

add new emerging channels, while seamlessly

integrating them to provide a relationship

view of customers’ interactions across all

delivery channels.

Being a multi-national bank, ABN AMRO was

also keen to adopt best practices being followed

in other countries, such as the ability to roll

out new products and services in line with

domestic market requirements. Equally

important was the need to roll out these

customisations rapidly so as to gain critical time-

to-market advantage. All this could only be

achieved by deploying a platform that was

flexible and easily extensible so that the bank

could by itself, launch new products and

services to its customers.

Solution overview

After intense discussions and evaluation, ABN

AMRO chose Finacle, the new generation

universal banking solution from Infosys, to

address its needs in core banking and consumer

Internet banking spaces.

Some of the key features that the solution

offered were:

True 24x7 banking

Finacle enabled zero downtime at both the

central server and branch level ensuring that

ABN AMRO is up and running on a 24x7 basis

across electronic delivery channels and branches.

Finacle’s architecture also enabled offering of

basic consumer banking services to customers

either during the planned End of Day (EOD)

black out windows, unscheduled outages of the

central data center of the bank or during

disruptions in branch network connectivity.

Leveraging Straight–Through-Processing

(STP)

Finacle provided an interoperable and open

architecture that ensures tight integration with

all delivery channels using standard message

protocols. The powerful STP infrastructure

ensured that a transaction such as a request for

a cheque book through the ATM is completed

end-to-end without manual intervention and

process turnaround times are drastically reduced,

thus enhancing productivity and customer

satisfaction. For instance, with Finacle,

transactions at ABN AMRO like cheque book

issue and account statement issue, turnaround

times have reduced by one day each.

Unique extensibility features

Finacle’s unique Xtensibility tool kit comp-

rising Scripting Engine, Workflow, and Remote

Application Interface (RAI)) provided the much

needed flexibility to ABN AMRO, enabling it

to easily and rapidly add new business rules,

launch new products, and modify processes.

Using this tool kit, ABN AMRO developed a

loyalty reward programme for its customers

wherein, the bank offers incentives like

charge free demand drafts based on specific

business rules like maintaining specified

minimum balances. Such programmes have

helped the bank reap the twin benefits of

customer retention and an increase in low cost

funds. Some of the modules that have been

quickly rolled out by ABN AMRO are:

Direct Sales Agent (DSA) Module: To track

the performance of Direct Sales Agents (DSAs)

of the bank and to have customised commission

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17

computation logic for the DSAs based on

predefined parameters like product type,

geography and hierarchy.

Complaint and Request Tracking System

(CARTS): To track customer request and

complaints without manual intervention

and assign priority based on customer profile

and request severity by seeking reference from

the Finacle core banking database.

Card Management System (CMS): This is a

repository of customer card information and acts

as a focal point in various events relating to cards

like issue, re-issue and maintenance. An additional

feature of this module is the ability to

communicate on an online basis for activities

like “hot carding” a card, activation/de-activation

of cards.

A success storyFor ABN AMRO, the choice of an enterprise

banking platform hinged on factors like

flexibility translating into ease of customisation,

availability of an integration infrastructure

with multiple delivery channels and reduced

TCO. Finacle has delivered on all of those points

along with giving crucial time to market

advantage and business agility to the bank,

thus helping script a retail banking success

story.

“The continually changing business

dynamics in the new age economy

requires banks to respond with a high

degree of agility. Today, technology has

emerged as both the key enabler and

driver of change. We believe the Finacle

universal banking solution from Infosys

is not only functionally rich and

technically robust and scalable, but also

that its new generation architecture based

on the web paradigm, true 24x7

operability and straight-through-

processing infrastructure provides ABN

AMRO the crucial time-to-market

advantage and business agility to gain

and retain competitive leadership in the

consumer banking space.

“We are confident of achieving a very

healthy ROI on this technology project

and have already experienced various

costs savings. For instance, we have

experienced over 60 percent increase in

realization of fee-based income. Besides,

in Infosys we see a strategic partner who

has the global reach, rich experience and

expertise in financial services, and a wide

range of technology. It is this rich

repository of experience and skills that have

helped them carry out this demanding

implementation project within budgeted

costs and time frames.”

Romesh Sobti

EVP & Country Representative

ABN AMRO, India

�

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20

Organisations today are facing intense competition to

deliver better value to their customers and stakeholders.

Typically, this is handled by developing additional

functionality through customisation and new products

deployment. Traditional response to additional requirements

is addition of H/w resources and at times, development/

deployment of applications in silos. Such constant addition

of hardware beyond a point leads to unmanageable

application/infrastructure silos with little focus on

performance. Problem is further compounded due to

tremendous increase in size and complexity of application

and infrastructure. Further, in the current economic scenario,

CIOs and CTOs are faced with the need to reduce the TCO

of all systems and deliver more value with less investment.

This article discusses how an organisation can maximise the

return on new and existing investment by getting the maximum

out of the firm’s IT infrastructure through end-to-end

performance tuning and management.

Functionality centric focus combined with lack of resources

and time, results in inherent flaws in the design of application

or coding style. Sometimes, application testing is conducted

with scaled down environment to just test the functionality

and not performance and eventually, performance problems

under high work load conditions are left to be faced during

production. Clearly, special attention to performance,

improvement of existing deployments is required to meet

these challenges. The benefits are manifold and not limited to

a high ROI. By ignoring these performance aspects, firms

can end up paying penalty on various fronts like damaged

customer relations, lost income, increased hardware

costs, increased development costs and cancelled projects.

End-to-end performance paradigm could be effectively used

to address the above issues.

End-to-end performance paradigmOne can define the end-to-end performance paradigm as

having a performance focus at each stage— planning, design,

deployment, ongoing optimisation at all layers of the

infrastructure and application. Using end-to-end approach

on performance optimisation and management, one could have

a holistic view of entire system right from planning and

deployment to usage, constantly evolving the system to keep

meeting dynamic customer expectations / performance

targets, as indicated in Figure 1.

Enhancing performance by maximisingreturn on technology investments

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21

End-to-end performance paradigm approach broadly involves the following stages:

Set appropriate, reasonable, tangible, measurable and justifiable performance goals

Design, architect and develop from a performance perspective

Allocate adequate capacity based on benchmarks / stress tests

Design and deploy IT infrastructure for optimum performance

Capture changing business requirements

Monitor, fine-tune and optimise on an ongoing basis

Be ready for the future

Figure1: End-to-end performance paradigm

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Set appropriate, reasonable, tangible, measurable and justifiable

performance goals

The best place to look for performance problems is by understanding

stakeholders’ requirements and user perception. Establishing a tangible,

measurable and realistic performance goal is the most important aspect as

every thing else evolves from these inputs. Obviously, these criteria need to

be established well in advance to address performance issues effectively.

Design, architect and develop from a performance perspective

Figure 2 depicts various layers of performance optimisation. Out of these,

performance focus at the design and architecture layer is the most rewarding

because any re-work on these layers after the system is already developed

and deployed can be extremely time consuming and costly. In today’s

competitive market, customer needs and technology keep on changing.

Therefore, during regular performance reviews one should be open enough to

re-look at the overall design and architecture.

Allocate adequate capacity based on benchmarks / stress tests

Adequate capacity provisioning is mandatory for any system to perform

well. Enough resources should be ensured by establishing appropriate

capacity planning / optimum deployment architecture needs through suitable

benchmarks and stress tests.

Design and deploy IT infrastructure for optimum performance

It is extremely important that all the learnings of this benchmark / stress tests

must be implemented in the final deployment.

All the infrastructure layers such as servers (CPUs, memory and I/O access

bus, cache in relation to application), storage architecture (disk drive type

and speed, cache on storage), RAID type, I/O access mechanism and

21

parallelisation, network (bandwidth and

access between servers), and WAN should be

evaluated with a holistic view of performance

and not leave

any performance

bottleneck point.

After all, the stren -

gth of the chain is

determined by its

weakest link.

Capture changing business requirements

Each system is designed to serve a set of well-

defined expectations. Therefore, each

application should be used in accordance with

its intended use and any change due to changing

business process should entitle a close

observation of its impact on the overall system.

Monitor, fine tune and optimise on an

ongoing basis

Proactive and ongoing monitoring is important

to ensure that performance requirements are met

on an ongoing basis. Regular performance audit

and tuning of the entire system helps improve

performance and availability.

Performance tuning is a high skill job, requiring

expertise and experience of all five layers

discussed above, with a holistic understanding

of the overall system to deliver best performance

tuning results. Domain knowledge to which the

system pertains is extremely important for quick

and effective performance tuning. As the overall

complexity increases, one should involve

specialised technical resources and services to

help the organisation in addressing performance

issues effectively. The most effective way to keep

the system optimally tuned is to involve such

experts to review the system performance at

regular intervals. We have seen major

improvements ranging from 20 percent to 60

percent where such regular tuning exercises are

conducted on a regular basis, with initial visits

showing higher improvements.

Be ready for the future

Regular trend analysis and projections should be

conducted on system usage patterns and changing

business needs. Using these trend analysis

reports, we can envisage forthcoming additional

resource requirements. This essentially avoids

surprises and the need for adhoc buying at short

notice and deployment in silos. The other

important business benefit is that it provides

sufficient time to negotiate a deal, as there is no

time pressure to upgrade or deploy.

Leveraging performance out of a deployed system

is not a destination but, a journey. Any typical

deployment keeps on evolving in terms of usages,

processes and complexities; the market forces

change business requirements which manifest into

changes in user expectations from the system. For

instance, how a user transacts with a bank itself

has totally changed over the last couple of years

(from branch banking to on the spot delivery

channels). These changes alter the importance

of various business functions or results in

requirements of a totally new functionality to meet

business requirements.

Fierce competition has made an optimally

performing system a mandatory requirement.

This is also evident from increasing requirements

of IT governance, SLA management, QOS on

performance aspects. An optimally performing

system not only increases customer loyalty by

increasing overall availability, satisfactory and

reliable response from the system, but also

reduces the overall investment on infrastructure

by optimally utilising the existing resources.

End-to-end performance paradigm can

effectively be used to leverage high performance

and scalability from the deployed IT solutions

thereby, ensuring higher ROI and return on

existing investment.

Rajinder K. Gandotra

Head -Technical Consultancy Group - Finacle

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Figure2: Optimisaton stack

22

Infosys Technologies Ltd.announced financial resultsfor its third quarter endedDecember 31, 2004.Revenues for the quarteraggregated $423 million, up53% from $276 million forthe quarter ended December31, 2003. Net income was$112 million ($71 million forthe quarter ended December31, 2003).

Q3 revenues up 53% Most admired enterprise Wins global respect Winning with ethics

Breaks scalability record!The Universal Banking Solution from Infosys, Finacle, set anew threshold in core banking scalability. This new scalabilitybenchmark will help large banks realise lower TCO and providea proven alternative to legacy systems. Finacle clocked 11,180transactions per second (TPS) in online mode and 19,568 TPSfor batch mode, improving its own previous record of 7357TPS for online transactions and out-performing the industrystandards by a wide margin. Ernst & Young reviewed thebenchmark test.

Recent wins� SBI selects Finacle to power its international operations. Thebank will deploy core banking, e-banking and treasury solutionsacross its global operations. The deployment is expected to becompleted in a record time of 12 months in 20 countries, spreadacross 3 global data centers in USA, UK and India.

Finacle – The Universal Banking Solution from Infosys

� Finacle to replace mainframe based Systematics solution atUnion Bank of Philippines(UBP). Among the top 10 banks inthe Philippines, UBP is going to use Finacle to drive costreduction and business agility.

� National Bank of Umm Al Qaiwain, one of the leading Banksin UAE, has signed on Finacle universal banking solution topower its core banking, treasury and Internet banking operations.

“Infosys Technologies haswon the prestigious GlobalMAKE (Most AdmiredKnowledge Enterprises)award, for the year 2004.Infosys won the award forthe second time in a row, andremains the only Indiancompany to have everbeen named a GlobalMost Admired KnowledgeEnterprise.”

Infosys is ranked as one ofthe World’s Most Resp-ected Companies in theFinancial Times-PwCannual survey. Infosys wasranked 62nd this year andis the only Indian companyincluded in this elite group.It is 37th in the list ofcompanies that createdthe most value for itsshareholders.

Businessworld, a leadingBusiness publicationfrom India, rankedInfosys the most resp-ected company in India.(November 2004). Infosystopped all nineteenparameters includingthe special categoriesof Most Ethical andMost Globally CompetitiveCompanies.

“Finacle was successfully implemented and went live on 28th November at ABN AMRO, Taiwan. This is a major milestone bringing

next generation banking technology to support our current business and future growth. Such a smooth implementation cannot be

achieved without hard work, long hours, and of course great teamwork across the bank, and also between ABN AMRO Bank and

Infosys—our Finacle vendor.”

Jim Brown, Country Manager

ABN AMRO, Taiwan

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Banking barons brew success

Author : Steven I.Davis, Palgrave

Macmillian, 2004

The past couple of decades have seen thebanking industry being transformed through thetwin forces of globalisation and competition,combined with the ubiquitous demand forhigher levels of customer service. In theirefforts to extend their breadth of serviceofferings and expand their geographical reach,the banking industry is witnessing increasing levelsof consolidation.

In an attempt to take a closer look at the qualitiesthat have contributed to the success of some banks,Davis nails down on ten leading banks, acknowledgedto be the best managed in the business, from aroundthe world to distil from their experience learningthat could prove invaluable.

Selected by a panel of bankologists (banking industryconsultants and analysts), this list includes universalbanks like Citigroup, HSBC and UBS, leading regionalcommercial banks such as Wells Fargo, Banca PopularEspanol and Svenska Handelsbanken, and, specialistinvestment banks like Goldman Sachs. This book isa sequel to two similar studies carried out in the1980s and Davis also tries to contrast the results ofthe previous studies with the current findings, bothin terms of the banks selected as the top ten ‘excellent’banks and the subsequent findings.

While this list of ‘excellent banks’ is skewed towardsthe US and Europe, the insights provided aresufficiently generic to be applied globally. People,culture and leadership, are highlighted as thequalitative features that distinguish a progressiveorganisation. Cross-selling and Innovation distinctlymark these banks services offering. While most banks

are unanimous in advocating the benefits of cross-selling and have setaggressive cross-selling objectives, there are several challenges to achievingsuccess especially when trying to cross-sell across geographies.

Those who have adopted the route ofacquisition as a means of inorganic growthand expansion into different geographiesand wider product offerings, place thechallenge of managing size and complexityat the very top of their agenda. Accordingto him, banks as large and diverse asCitigroup, HSBC and UBS have managedto acquire and grow successfully but statesthat it is an individualistic issue. As forcost reduction, the trick lies in maintaininga low cost to income ratio. However, for itto truly make difference, it ought to be inthe bank’s DNA.

Interestingly, one area that is barelytouched upon is technology. It is mentioned only in passing. He states,“While technology is a necessary ingredient in the delivery equation,banks since the 1980s seem to have found acceptable solutions intechnology management, whether through outsourcing, joint venturesor simply by managing their own systems more effectively.”

While there is some truth in that statement, it may not be the entiretruth—it may be presumptuous to assume that bankers may know allanswers with respect to technology and its usefulness. The book alsodoes not adequately dwell upon back-office outsourcing trend, corebanking replacement strategies and the debate on offshoring.

In an attempt to improve on his previous two studies on bankingexcellence written a decade ago, Davis presents his own reflections onissues of concern today and the outlook for tomorrow. As a scientificstudy, ‘Excellence in Banking - Revisited!’ deserves a read, and being150 odd pages long, avoids being tedious. But, the frequent use ofquotations throughout gives the book the feel of an extended magazinearticle and not an academic-like volume prepared in a research setting.

This book could have proved to be more insightful had it includedsmaller banks and banks outside the US and Europe to the list of ExcellentBanks, a sentiment that is shared by the author as well. Perhaps, onecan look forward to this expanded list in Davis’ next book in this serieson Excellence in Banking and hope to gain a truly global perspective onthe best management practices in banking.

BOOKREVIEW

Rekha MenonResearch Analyst - FinacleConnect

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