Top 10 Technology Initiatives for Wholesale …...Top 10 Technology Initiatives for Wholesale...

Top 10 Technology Initiatives for Wholesale Banking in 2011

Susan FeinbergSr Research Director, Wholesale Banking, TowerGroup

Patty HinesDir, Financial Services Industry Marketing, GXS

© 2011 The Tower Group, Inc. May not be reproduced by any means without express permission. All rights reserved.

Top 10 Technology Initiatives for Wholesale Banking in 2011

Susan FeinbergSenior Research DirectorWholesale Banking

February 2, 2011

Priming the Engine for Long Term Growth

© 2011 The Tower Group, Inc. 2

Agenda

2011 Business Drivers

Strategic Responses

Top Technology Initiatives

Conclusions

Source: TowerGroup


Top 10 Technology Initiatives for Wholesale Banking

Source: TowerGroup

Top 10 Technology Initiatives for Wholesale Banking (2011)

Consolidate commercial lending platforms

Deploy mobile corporate banking solutions

Enhance small and medium enterprise (SME) payment solutions

Execute on payments convergence to increase client value

Implement comprehensive life-cycle management solutions

Implement multibank digital identity management

Modernize core banking platforms to support a global branch network

Optimize use of business intelligence

Provide deeper integration to client enterprise resource planning (ERP)/ treasury solutions

Update and integrate trade finance platforms

Business Drivers

Major regulatory changes

Prolonged, uneven economic recovery

Client demand for convenience/ease of use

Reputational risk as a result of growth in

cybercrime

Globalization

Strategic Responses

Lower the overall technology cost base

Focus on ease of doing business

Minimize fraud and security risk

Invest in less capital-intensive businesses

Build capabilities targeted at high-growth

regions, industries


Business Drivers


Strategic and Tactical Impact of Regulation on Wholesale Banking in 2011

Global, regional, national

• Basel III –banks will start to make strategic decisions about long term composition of the business based on new capital requirements. Significant impact on Trade Finance

• SEPA Migration end dates – Banks and corporates will need to respond to the newly proposed end dates for legacy payment systems

• Dodd-Frank – Wholesale could be the beneficiary of the new regulatory burdens for retail but how will banks respond to the repeal of Reg Q? And nobody knows what impact might the new Office of Financial Research will have.


EC Technical Requirements for SEPA andCompliance per European Payments Council

EC Regulation’s Essential Technical Requirements European Payments Council Schemes

Must use International Bank Account Number (IBAN) and Bank Identifier Code (BIC)

✔

Must use ISO 20022 XML standards ✔

Users submitting bundled transactions must use ISO 20022 XML standards

EPC recommends but does not require these standards for customer/bank communication

Minimum 140 characters for remittance data, no clipping ✔

All messages must be transmitted electronically ✔

No minimum amount, schemes not required to process transactions of >€100 million

No minimum or maximum amounts

Interbank credit transfers must include a code to identify the payment scheme and a transaction reference number

✔

Direct debit (DD) only: Mandate reference number and date of signature

✔

DD only: Original mandate reference number for assigned mandates

✔

DD only: Identifier for type of mandate ✔

Source: European Commission, European Payments Council, TowerGroup


80

2007 2008 2009 2010

World Advanced Economies Emerging Economies

Emerging Economies Are Leading the Recovery

Source: Haver Analytics, International Monetary Fund

Merchandise Exports Index (2007–10)January 2007 = 100

Retail Sales Index (2007–10)January 2007 = 100

90

100

110

120

130

140

150

160

2007 2008 2009 2010

80

90

100

110

120

130

140

150

160

2007 2008 2009 2010


-65

-50

-35

-20

-5

10

25

40

55

70

85%

4Q05 4Q06 4Q07 4Q08 4Q09 4Q10

Small C&I Loan Demand Small C&I Loan Standards

Large and Medium C&I Loan Demand Large and Medium C&I Loan Standards

Trends in US C&I Lending Standards and Demand (2005-2010)

Source: July 2010 Federal Reserve Board Senior Loan Officer Opinion Survey, TowerGroup

Net percentage reporting tightening standards for C&I loans from previous quarter

Net percentage reporting stronger demand for C&I loans from previous quarter


Ease of Doing Business: A Multifaceted Approach

Source: TowerGroup

Onboarding and Account Mgmt. Centralized Support

One Size Does Not Fit All Multichannel Environment

Ease of Integration

eBAM


Top Reasons Cited by Banks for Lost Corporate Business (2010)

Inadequate Products & Services

Interest rates and fees

Ease of access to services & information (channels)

Insufficient turnaround time

Insufficient geographic coverage & reach

Financial weakness

62%

57%

57%

62%

56%

56%

25%

% of Banks Responding

Source: Finextra/Pegasystems Corporate Banking Customer Satisfaction Survey 2010


Top Reasons Cited by Corporates for Reducing Business with a Bank (2010)

Ease of access to services & information (channels)

Inconsistent customer service

Financial weakness

Interest rates and fees

Insufficient turnaround time

Insufficient geographic reach

Inadequate products & services

46%

46%

23%

56%

56%

25%

23%

15%

0%

0%

% of Corporates Responding

Source: Finextra/Pegasystems Corporate Banking Customer Satisfaction Survey 2010


Reputational Risk as a Result of Growth in Cybercrime

Banks are struggling to keep up with evolving cybercrime techniques, especially those targeting SMEs

Authentication methods once thought to be highly secure have been compromised

Most banks are adopting a layered security approach with a heavy focus on client education

Large global banks are starting to issue multibank digital certs with signing functionality to corporate clients, driven by eBAM

In US, FFIEC is expected to issue new guidance on authentication and security for online banking


Globalization of Clients and Competition

Deutsche Bank is rolling out core technology from Tata Consultancy Services

(TCS) across its Global Transaction Banking (GTB) business in more than 30

countries





countries

Deals Likely to Flow in Just One Direction: South

Reaction to BMO acquisition of M&I





countries

Deals Likely to Flow in Just One Direction: South

The Bank of Tokyo–Mitsubishi UFJ and Union Bank Establish Joint Deposit and

Cash Management Strategy

Reaction to BMO acquisition of M&I


Value of Exports (USD in Billions)

Quarterly World Merchandise Exports (2007– Third Q 2010)

14%21%

24%28%

23%

-12%

-31% -33%

-26%

4%

27% 26%

18%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3

Value of Exports Year-to-year percentage change

Source: World Trade Organization, TowerGroup

Year-to-year Percentage Change in Value of Exports


Strategic Responses


2011 Strategic Responses Will Probably Sound Familiar

Lower the overall cost base

Focus on ease of doing business

Minimize fraud risk

Invest in less capital intensive businesses

Build out capabilities targeted at high growth regions and industries


Top 10 Technology Initiatives


Deploy Mobile Corporate Banking Solutions

Many announcements at SIBOS and AFP in 2010

Many different approaches being adopted

Debate over whether clients will/should pay for the mobile channel

Emerging consensus on first gen corporate banking mobile as a distinct channel with a different set of functionality than online, designed for a senior treasury user

Focus on what is most important to that senior treasury user: alerts, approvals and exception management


Enhance SME Payment Solutions

A huge opportunity to Cross Sell Electronic Payment Services

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

2.5 - 4.99M 5 - 9.99M 10 - 51M

Intl Services

Payments (ACH, wire, Int Payables, DD)

Info Reporting

Collection Services

Source: Corporate Executive Board Business Owner Survey, TowerGroup


Execute on Payment Convergence: Integrated B2B Payment Solutions for the Buyer

Buyer’s Procurement

andAccounts Payable

Processes

Standardizes processes for initiation, approval, and information retrieval

Consistency

Multiple payment options to meet supplier preferences, transaction cost, and risk profiles

Flexibility

Controls in ERP/Accounting systems augmented by business rules and limits in solution

Control

Single window into status of payments with enhanced capabilities for research, exception resolution, and reconciliation

Visibility

Source: TowerGroup


Source: TowerGroup

RFP

Cross-sell

Negotiate

Close

Contract

Document-

ation

Key information

input

KYC

IT project

mgmt

File protocols

APIs

Training

Launch

Problem

resolution

Transaction

tracking

Exception

management

Onboarding/Implementation Ongoing ServicingSales Process

Relationship Management

Implement Comprehensive Client Lifecycle Management Solutions

eBAM is a component of this lifecycle


Optimizing Use of Business Intelligence

Source: TowerGroup

Service-Oriented Architecture, Data Warehouses, and Legacy Updates

Pro

duct

Syste

ms

Deposits TradingTrade

FinanceMortgages

InsuranceCards

Corporate

Finance

Consumer

LoansAsset

ManagementPayments

Information Integration

Busin

ess

Module

s Sales

Automation

Customer

Profitability

Marketing

Management

Collections

Customer

Information

Sales

Planning

Customer

Segmentation

Prospect

Management

Static

Surveys

Dynamic

Surveys

BRANCH/

AGENT

ADJUSTER BROKER CALL

CENTER

ATM INTERNET MOBILE BACK

OFFICE

NEW

CHANNELS

SERVICE

PROVIDERS

EXTERNAL

DATA

SOURCES

ALLIANCE

PARTNERS

Bu

sin

es

s P

roc

es

s M

an

ag

em

en

t

Da

ta A

cc

es

s M

an

ag

em

en

t

Se

cu

rity

Pre

dic

tive A

naly

tics:

Ris

k,

Mo

nit

ori

ng

, M

an

ag

ing

, G

row

ing

Business Intelligence: Analytics for Next Steps Strategy

Knowledge Management: Analytics for Operational Excellence

Customer Intelligence/Management: Analytics for Marketing

Predictive Analytics for Risk, Monitoring, Managing, and Growing

Analytics traverse the spectrum of systems, channels, and applications in a cross-dimensional value chain


Heavy use of specialized treasury technology and ERP solutions

Use of intraday bank feeds for cash position, liquidity management

Multibank payment initiation files and use of online for exceptions

Emerging need for frequent status updates

Increasing use of integration for trade finance activity

Large Corporate

Use of statements/ online banking reports to reconcile with accounting system

Initiation of payments online or through service bureau

Heavy reliance on spreadsheets

Minimal use of bank data files to update accounting package

Basic Cash

Management

Operations (SMEs) Growing adoption of

technology for cash management and forecasting (SaaS)

Use of daily bank feeds for reconciliation (online and/or B2Bank connectivity)

Initiate payments (online and/or B2Bank)

Reliance on lead bank for multibank reporting

Middle-Market Treasury

with Primarily Domestic

Operations

Multibank integration

Many banking relationships across multiple regions

Focus on managing global liquidity positions

Demand for consistent use of global standards

Reliance on treasury system for controls, workflow, and “single source of truth”

Demand for eBAM

Integration for more complex services (e.g., trade confirmations)

Complex Global

Treasury

Offering Deeper B2Bank Integration to Multiple Client Segments

Source: TowerGroup

Note: SaaS = software as a service; eBAM = electronic bank account management.

Customers’ Increasing Sophistication and Needs


Upgrade and Integration Trade Finance Platforms

Treasury taking the

lead on risk

management and

enhanced visibility

Changing

Trade

Patterns

Demand

for

Traditional

and Open

Account

New Business

Models for

Banks

Growing

Role of

Treasury in

Trade

Focus on

Supply

Chain

Efficiency

Key to improving

working capital

and liquidity

mgmt

Regional shifts,

counterparty risk,

later financing

decisions

Partnerships, 3rd

party integration,

white labeling

New open account

tools and

instruments (TSU,

BPO)Client

Sophistication


Conclusions

2011 business dynamics will not be radically different than 2010 dynamics


Conclusions


Bigger emphasis in 2011 on business intelligence, mobile, and eBAM


Conclusions



Given the continuing economic challenges and the impact on revenue growth, reducing the overall cost of technology will be a major goal of most banks – leading to consolidation, elimination of duplicate functionality, more use of SaaS


Conclusions



Given the continuing economic challenges and the impact on revenue growth, reducing the overall cost of technology will be a major goal of most banks – leading to consolidation, elimination of duplicate functionality, more use of SaaS

The lines between Cash and Trade will continue to blur to the point that they are indistinguishable within five years

Delivering on Your 2011

Technology InitiativesPatty Hines

Director, Financial Services Industry Marketing

©2011 GXS, Inc.

Solving Business Challenges

Exchange

Electronic

Transactions

Manage Your

e-Commerce

Operations

Connect to Your

Trading PartnersGet Visibility and

Control

• Optimize Working Capital

• Launch New Fee-Based Products & Services

• Enable the Global Financial Supply Chain

• Integrate Accounts Payable/Receivable

• Enable B2Bank Connectivity

• Accelerate Client-Side ERP Integration

• Improve Straight-Through Processing

• Augment and Extend Client Delivery

Services

• Manage Cost Variables

• Future-Proof Operations

• Increase Competitive Advantage

• Extend Global Reach and Delivery

• Adapt for Regulatory & Legislative Risks

©2011 GXS, Inc.

B2Bank Integration

Electronic Data

InterchangeExpert

On-Boarding

ERP Integration

Dealer Floor Plan

Trade Finance

Client Information

Mgmt

Supply Chain

Finance

SWIFT Service Bureau

System Migration

Managed File

Transfer

GXS Financial Services Solutions

©2011 GXS, Inc.

Enhance Small and Medium Enterprise (SME) Payment Solutions

Need to support upload of payment files and

download of information reporting files for small to medium enterprises

(SMEs)

Implemented GXS Trading Grid Online with Intelligent Web Forms,

Microsoft Excel and accounting package integration options

©2011 GXS, Inc.

Global treasury unit running multiple SAP versions wanted to rationalize systems while centralizing

treasury operations and consolidating

banking relationships

Implemented GXS Active Payments, with centralized cash flow management, ERP

integration and conversion of paper to electronic payments

Execute on Payments Convergence to Increase Client Value

OpCo 5 OpCo 6

OpCo 7 OpCo 8

OpCo 1 OpCo 2 OpCo 3

OpCo 4

Citigroup Chase

BNP Paribas

HSBC

ABN AMRO BMO

Commerzbank

ANZ

©2011 GXS, Inc.

Implement Comprehensive Lifecycle Management Solutions

Merchant acquirer currently on-boarding

its merchants manually and remitting

settlement payments via paper check

Proposed GXS Community Intelligence

solution to collect merchant information including electronic

remittance data

©2011 GXS, Inc.

Provide Deeper Integration to Client ERP / Treasury Solutions

A global bank is extending its cash

management offerings to clients of a newly

acquired entity but does not have sufficient

implementation resources

GXS is providing the ERP consulting and

integration expertise to accelerate client on-boarding and ERP

integration

©2011 GXS, Inc.

Take-Aways

• Lower your technology cost base

• Modernize business-to-bank

platforms

• Extend capabilities for high-growth

segments

• Deliver local solutions for global

customers

• Meet client demand for

convenience and ease of use

©2011 GXS, Inc.

Thank You

North America | gxs.com EMEA | gxs.eu ASPAC | gxs.asia.com

Susan FeinbergSenior Research Director,

Wholesale Banking

Work +1.617.488.1940

E-Mail: [email protected]

Patty HinesDirector, Financial Services

Industry Marketing

Work +1.704.969.0763

E-Mail: [email protected]

mailto:[email protected]

mailto:[email protected]

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