swim or sink? essential insights for staying afloat in the banking market place
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Swim or Sink? Essential Insights for Staying Afloat in the Banking Market Place. Webinar by PAC sponsored by SAP. Insights from global banks and financial institutions. More about innovative solutions from SAP: http://bit.ly/GHur6oTRANSCRIPT
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Sink or Swim? Essential Insights for Staying Afloat in the Banking Market Place
Caroline [email protected]
Rajeena [email protected]
Fergus O’[email protected]
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Agenda
I. Introduction: Presentation of the Research
II. Industry Analysis: Major Challenges for the Banking Sector in 2012-2015
III. Innovation in Banks: Insight Into How Traditional Business Models Can Be Adapted
IV. “Emerging Models” and New Market Entrants: Focus on the UK Market
V. Conclusion: Summary and Key Take Away Points
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I. IntroductionPresentation of the Research
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Pierre Audoin Consultants (PAC) undertook a study, sponsored by SAP.
The objectives of the study are to:
• Highlight the key challenges banks are facing across the globe;
• Understand the intensifying factors impacting banking business models;
• Investigate how banks can innovate in order to improve their business andfinancial performance;
• Provide insight into innovative approaches in order to remain competitive ina dynamic market.
Objectives
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Annual reports, market data and other desk research
PAC knowledge management database
Interviews with business users and IT professionals
Research Methodology
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Retail Banking
Wholesale/Corporate Banking
Investment Banking
Private Banking
Scope of the Paper
Personal/ consumer (mass market), includes accounts, mortgages, personal loans, etc.
B2B banking business including corporate customers and financial institutions such as cash management, etc.
Financial exchanges, clearing houses, trading, projects finance and hedging activities for companies, and
institutional investors, etc.
All services offered to wealthy individuals: asset and wealth management, retail investment services for private individuals (public fund, life insurance, etc.)
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II. Industry AnalysisMajor Challenges for the Banking Sector in 2012-2015
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A Fast-changing Environment…
Regulatory changes
New technologies and evolving customer habits
Pressure from new entrants
Customer expectations
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A Fast-changing Environment…
- Single view of the customer- Meeting levels of capital / liquidity levels set by regulators by 2015- Organizational restructuring e.g. Vickers (UK)
Regulatory changes
New technologies and evolving customer habits
Pressure from new entrants
Customer expectations
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A Fast-changing Environment…
Regulatory changes
New technologies and evolving customer habits
Pressure from new entrants
Customer expectations- Reduced customer loyalty- Shift to innovative, ‘lifestyle’ banks- Relationship-based pricing
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A Fast-changing Environment…
- Consumerization - Internet and mobile channels- Real-time services, e.g. quotation
Regulatory changes
New technologies and evolving customer habits
Pressure from new entrants
Customer expectations
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A Fast-changing Environment…
Regulatory changes + new technologies= increasing competition
Regulatory changes
New technologies and evolving customer habits
Pressure from new entrants
Customer expectations
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… Putting Current Business Models Under Pressure
Pressure on margins
=> Need to adapt post financial crisis & new economic outlook, pricing pressure from new
entrants, reform of financial system, etc.
Reduced customer loyalty Changing consumer behaviourPressure from new entrants
=> Need to enhance customer service levels, renew service offerings, build new delivery channels, etc.
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III. Innovation in BanksHow Traditional Business Models Can Be Adapted
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… Dealing with declining revenues
New generations of products and services to reconnect with customers
Deployment of new channels that meet market expectations
New approaches to customer relationship, consistent across the organisation
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…Dealing With Pressure on Margins
Design of new architectures in which smart tools play a key role
Improved customer analytics
Ability to better profile and target high-value customers
Enhanced control over processes (billing, invoicing, etc.)
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Which of the following is the biggest driver of innovation at financial institutions?(only 1 response)
• Regulatory reform• Access to new technologies• Declining cost to income ratios• Competitive pressures• New entrants to the market
POLL #1 PLACEHOLDER
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2 CASE STUDIES FROM THE RESEARCH
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Case Study 1: Corporate Bank
Design of new architectures in which smart tools play a key role
• A new generation of products and services to reconnect with customers
Corporate clients expect their financial partners to help them improve cash management
Challenge: banks’ difficulty in funding the level of investment required to succeed in the cash management business
Focused IT investments help determine the required financial equation to launch offers
Introduced electronic platforms with best of breed analytical and invoicing tools to help improve both top and bottom lines
Benefits: able to satisfy large account requirements, acquire new clients (suppliers), diminish activity ratios and reduce average collection time on outstanding invoices
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Ecosystem & Requirements
Retail Customers
Capital MarketsExchanges &
Clearing Houses
CorporateClients
Relationship Pricing
CreditBureau
Payment ServiceProviders
Consolidated Invoicing
Bank
AR/AP Factoring
Fees
Commissions
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Case study 2: BNP Paribas Online Banking
Design of new architectures in which smart tools play a key role
• Internet banking as a core line of business… BNP Paribas adopts an innovative approach to online banking
Internet and mobile habits are changing at an exponential rate
Since its launch 3 years ago, BNP Paribas Online Banking has grown to employ 1,000 people and manages 2.4 million clients
9% of savings accounts of BNP Paribas France are now signed up online, 80% of personal stock trades are placed through the Internet
These channels help build strong customer relationships
In an innovative cross-channel approach: all lines of business (traditional and online) are integrated and communicate collaboratively
Benefits: Avoid isolation of a channel from the other lines of business
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IV. Emerging Models and New Market EntrantsFocus on the UK Market
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• Established banks must adapt quickly to the changing market and increased competition
• Declining customer loyalty + regulations => more competition + lower barriers to entry
• Key examples include:
Metro Bank: 35k customers in the UK, 15k ahead of target since 2010 launch. Aims to open 200 branches by 2020.
Tesco Bank: investing in in-store branches…to launch current accounts in 2013.
Virgin Money acquired UK bank Northern Rock in Jan 2012…launched Virgin Savings Accounts.
New Banks As Challengers
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• Refocusing on branches to reconnect with customers
• Key investments:
Enhanced customer service levels
Faster time-to-market
Flexibility
Consistent service across channels
Business process automation
• Turning to IT to enable business innovation -> tailored product offerings, pricing, real-time services… and to tackle internal inefficiencies e.g. revenue leakage
• Established banks must address legacy / inflexible systems to increase efficiencies and remain competitive
New Banks Adopt New Approaches
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V. ConclusionSummary and Key Take Away Points
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Customer-centric processes
• Relationship-based pricing to reward customer loyalty and strengthen relationships
• Ability to deal with complex business rules
• Consistent experiences across channels
• Real-time capabilities to offer fast and efficient services to customers
How Banks Leverage IT to Support Business Innovation
Back-office processes
• Capacity to handle high volumes of data for fast processing and in-depth analysis
• Integration of all levels of information across the enterprise to address accurate and single view of customers
• Emergence of a ‘middle office’
• Solutions to enable localisation (e.g. multi-currencies, multi-entity capabilities)
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SAP solutions for Service to Cash
Bank/BrokerDemandsClient Satisfaction& RetentionAutomated Straight-Through ProcessingAuditability, Accuracy & TransparencyPlatform Consolidation
Bankers/BrokersProfitability
Value Chain DemandsReal-Time Revenue Management &Sharing
Flexible SLAsReal-Time Analytics & Reports
Value Chain DemandsReal-Time Revenue Management &Sharing
Flexible SLAsReal-Time Analytics & Reports Partner LoyaltyPartner Loyalty
Financial Services Partners
Financial Services Partners
Value Chain DemandsReal-Time Revenue Management &Sharing
Flexible SLAsReal-Time Analytics & Reports Partner Loyalty
Financial Services Partners
Fee Calculation
Engine
Revenue & Expense
Management
Billing & Payment
Statements
Customer & Partner Relationship Management
Accounts Receivable / Payable / GL
Clients DemandsNew Innovative Services
Relationship Based PricingOn-Demand Price Quotes
Real-Time Analytics & ReportsConsolidated Statements
Clients DemandsNew Innovative Services
Relationship Based PricingOn-Demand Price Quotes
Real-Time Analytics & ReportsConsolidated Statements
ClientsClients Client SatisfactionClient Satisfaction
Client TransactionsClient Transactions
Clients DemandsNew Innovative Services
Relationship Based PricingOn-Demand Price Quotes
Real-Time Analytics & ReportsConsolidated Statements
Clients Client Satisfaction
Client Transactions
Business Intelligence
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Which capability would you most like to have at your bank of choice?(multiple choices possible)
• Personalized quotations in real-time• Spend analysis & budgeting facilities• Mobile payments• Real-time suggestions for optimized
service fees• Free ice cream
POLL #2 PLACEHOLDER
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Key Take Away Points• Financial services institutions need to embrace change to survive
• Must adopt new business models to drive out costs, enhance efficiencies and compete better and be compliant
• Leverage IT to enable innovation and enhance differentiation
• Differentiators include: time-to-market, enhanced automation, tailored products /services, consistent service across multiple channels, real-time services
• Established banks need to address legacy and inflexible IT landscapes to more quickly address market challenges and customer expectations
Otherwise financial institutions risk losing market share or being squeezed out of the market altogether!
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Your questions are welcome!
Questions & Answers
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Sink or Swim? Essential Insights for Staying Afloat in the Banking Market Place
Caroline [email protected]
Rajeena [email protected]
Fergus O’[email protected]