USAID Finance for Economic Development (FED) Program

WORKSHOP: “IT GOVERNANCE IN BANKS”

MAY 27, 2014

John Schlesinger, Chief Enterprise Architect, Temenos

May 2014

The Impact of IT on Banking

444

TopicsIntroduction

Banking drivers of change

Four revolutions in Banking

New Banking architecture

Why Shared Infrastructure

Enterprise Platform

Banking Software as a Service

Projecting Bank APIs

Conclusion

555

Presentation Messages

Banks are going through four revolutions all of which have IT implications

Banks need a new architecture for real time

Banks will need shared infrastructure for all systems, Software as a Service for Core Banking

We think that all new core banking initiatives will be in shared infrastructure by 2020

666

Food for Thought

Some bankers and analysts think that Google, Facebook, Amazon or the like will not fully enter a highly regulated, low-margin business

such as banking. I disagree. What is more, I think banks that are not

prepared for such new competitors face certain death

Quote from article ‘Banks need to take on Amazon and Google or die’ CEO of BBVA

777

Owned

Business

System

Internal Use Cases

Partner

Business

System

Partner

Business

System

Events In

Events Out

External Use Cases

ANALYTICS

MOBILEREGULATION

MODULARITYINTEGRATION

Banking Drivers

888

Four revolutions in banking

Banks are becoming online retailers

Banks are in a new regulatory regime enforcing low margins

Core banking is a commodity and on shared infrastructure is the cheapest place to run it

Customers are no longer loyal

The future is very uncertain, small competitors are very likely

to replace even today’s largest banks

999

New Banking Architecture

Enables banks to establish a banking marketplace for their customers

Orders

Executio

n

This banking value chain will splinter

Holdings

Settlement

Channels

Pro

duct

Clearing

Front Middle Back

Internet

API

Mobile

Advisor

Customer

Arrangement

Order

Brand

Counterparty

Product

Execution

Risk

Account Holder

Account

Clearing

Compliance

101010

Running the Value Chain

Temenos wants to provide this architecture both ‘front to back’ and as component instances

Orders

Executio

n

Transactions

Different banks may implement different parts

HoldingsReports

Settlement

Ch

an

ne

ls

Pro

duct

Clearing

Do somethingThank you Something to do Something doneDid it

Finished

Channels Front Middle Back

111111

Justification of Shared Infrastructure

Dennard scaling fails

We are moving back to workloads on servers, not servers for workloads

By 2020 multi-core fails

‘dark silicon’

121212

DatabaseApplication Server

Key

Banking Platform

API (B2C) Gateway

Activity

Req

Resp

Req

Resp

In Out

ESB

To b

e

Do

ne

Done

Done

To be

MDMCEP

Done

To b

e

HDFS

Done

To b

e

To b

e

Done

TransactionRow

Data

IntegrationApplication

Integration

ODSDone

DWH

Domain

Service

ETL

CubesB2B

Gate

way -

Biz

Talk

To be In

Report Column

The Banking platform requires middleware –ESB, B2B, B2C, API, AS, ETL and DBMS

131313

Service

Manager

Bank

Users

Bank

Customers

Multi-Tenant

Meta Data

Software as a Service

Core Banking

Bank A Bank B Bank C [Co C1] [Co C2]

Multi -Tenant

Management

The Shared Infrastructure can run SaaS with this architecture

for multiple independent banks at lowest cost

Shared stateless binaries but multiple databases

141414

Complete Banking Service

Inte

gra

tion In

terfa

ce

Interaction Interface

BPOSaaS

Core Banking

Regulatory

Risk

GL

DWH

Reconciliation

Four R

Lo Payment

Mandates

Credit Cards

Hi Payment

ReconInternet Mobile Teller Advisor BPM

Payments

Card Mgt

Statements

Workflow

Content

Case

Reporting

CRM

ISO 20022

Design Deploy Monitor

ISO 8583

SWIFT

Four R

COB

Orders

Holdings

Clearing

Settlement

Any Enterprise

Banking

151515

Projecting Bank APIs

Banking App Store

Non banking

Capability

Banking

Capability

OtherBanking

Capability

B2C

Fra

mew

ork

161616

Food for Thought

By 2015, more than 50% of public Web API

deployments will be to improve digital customer experience as an even

more important priority than net profits

Quote from ‘API Deployment Models That Accelerate Digital Banking’

4 March 2014 Gartner

171717

Conclusion

Banks have to become low margin high volume providers in the middle and back office

Banks have to become high care in the front office

This will cause the banking value chain to splinter

This will lead banks to shared infrastructure for core banking

Thank You