creating value in financial services - nyu · 2003-06-13 · creating value in financial services...
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CREATING VALUE INFINANCIAL SERVICES
byMichael Pinedo
Sridhar Seshadri
Presentation at the “Vision Into Reality Conference”
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The topics covered in thispresentation are from thisbook. You can view it atthe following web page.
Http://www.stern.nyu.edu/om/cvfs.html
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Overview of Talk
I. Emergence of Financial Supermarkets(Universal Banks)
II. Structure of Distribution Channels
III. Information Technology Requirements
IV. Software Systems Development
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I. Emergence of Financial Supermarkets(Universal Banks)
II. Structure of Distribution Channels
III. Information Technology Requirements
IV. Software Systems Development
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Emergence of Global FinancialSupermarkets (Universal Banks)
Examples:
• Citigroup• HSBC• Deutsche• ABN-AMRO• ING
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Product Divisions•Retail Banking (Checking Accounts, Personal Loans, Mortgages)
•Credit Card Operations
•Commercial Banking (Loans, Letters of Credits)
•Investment Banking (Investment Advice, Trading)
•Brokerage (Stock Portfolio Accounts, Cash Management Accounts)
•Mutual Funds (Managed Equity funds, Index funds, Bond funds)
•Insurance (Life, Property and Casualty)
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•How many clients prefer a one-stop supermarket?
•What is potential for Cross-Sales?
Þ Customer Relationship Management (CRM)
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New Kid on the Block
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I. Emergence of Financial Supermarkets(Universal Banks)
II. Structure of Distribution Channels
III. Information Technology Requirements
IV. Software Systems Development
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Distribution Channels
•Branches
•Mini-Branches, Kiosks
•ATM Networks
•Phone, Call Centers
•PC-Banking, Internet
•Sales Force, Agents
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Figure 4: Segmentation Regions For Alternative Banking MechanismsFor A Customer Population Characterized By Wealth (W) And Aversion
To Technology (R)
Wealth W
Aversion toTechnology
R
ATM
ConventionalBank
PhoneBanking
PCBanking
MiniBranch
Low
Low High
High
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Figure 12: New Value Chain Model
Front officeBack office
Middle office
Front office Middle office Back office
Front officeBack office
Middle office
Middle office
Front office
Old Paradigm – Sequential
New Paradigm – SimultaneousFace-to-face Remote Electronic
Back office
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Distribution Channels for Insurance
0
10
20
30
40
50
60
70
80
90
0 10 20 30 40 50 60
States (Alphabetical Order)
Pe
rce
nta
ge N
PW
Dire
ct W
rite
rs
AUTO
HOME
FIRE
Figure 1: State to State Variation in Net Premiums Written by Direct Agency Firms
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Figure 1: Generic Model of a Call Center
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I. Emergence of Financial Supermarkets(Universal Banks)
II. Structure of Distribution Channels
III. Information Technology Requirements
IV. Software Systems Development
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Exhibit 3: Information Technology Spending Levels
First Chicago
Banc One
Credit Suisse
Wells Fargo
Societe Generale
SBC
ABN Amro
Bankers Trust
Nations Bank
Credit Agricole
UBS
JP Morgan
NatWest
Bank of America
Barclays
Credit Lyonnais
Deutsche Bank
Chase
Citicorp
0 0.5 1 1.5 2$ billions
Source: The Tower Group, 1996.
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The emergence of theeCustomer
The emergence of theeCustomer
1970 1980 1990 2000 2003
Time
E s timatesE s timatesContinueContinueto Growto Grow
eCustomers
Millions of Users
Distributed/Dis tributed/InternetInternetAutomatesCustomers
Client/Client/S erverS erverAutomatesE mployees
MainframeMainframeAutomates
Management
100
500
Workstatio n
Internet25
50
© e-Customer.com
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N-Tier appeared to offer a goodcombination of client/server and
centralized management
•Mid-Late 1990’s - Proprietary, n-Tier•Much more Scalable than Client/Server•Independence from the DMS•Tougher Development, But component Based
DBMSPC
CLIENT
PROPRIETARYCOMPONENT
MANAGERASYNCHRONOUS
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N-Tier Advantages
•Easier For software Maintenance & Upgrades
•Asynchronous Processing with TP Monitor Functionality
•Upward Scalability with More or Faster Servers
•Replication with Fail-over Reconstruction
•Less Software on the Client-Added Security
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N-Tier Disadvantages
•The more Tiers, the more Complex the Development, the Debugging and the Maintenance•Fewer Tools Available•More Links in the Client/Server Chain means More Possible Points of Failure•Advantage of Software Maintenance on the Server is Overstated, because you’ll probably have to Update the Thin client also
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What’s an Application Server?
Start with internet computing model
•Open Clients•3-Tier
Add State, Memory, DBMS
Add Support for Various Middleware
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What’s an Application Server?
Add Transaction Management
•Caching & Thread Management•DB Connectivity•Asynchronous Connections•Scalability•Load Balancing•Multiple Instances•Fail-over•Security
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The app server appears to bethe way n-tier will roll out
•The APP Server Replaces the Need to Code in JAVA, PERL, CGI, ODBC, etc.•It Combines the Functions of a TPM with Software Component Standards (EJB, COBRA, MTS & ?)•Independence from the DBMS•Ability to Build Extranet that Integrate with Supply Chain Partners using same Standards•….so, What’s an Application Server
DATASTORES
PC OR THINCLIENT
APPLICATIONSERVER ASYNCHRONOUS
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http://www.sun.com/software/solutions/third-party/ecommerce/pdf/etrade.pdf
Will existing ERP solutions fit the bill?
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I. Emergence of Financial Supermarkets(Universal Banks)
II. Structure of Distribution Channels
III. Information Technology Requirements
IV. Software Systems Development
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Figure 24: Statistical Analysis for Credit Card Product
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Figure 2: Overview of Yieldbook Architecture
Data Bases Compute Servers
Yield Book Servers
desktop desktop
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Figure 1: Screenshot of CMO Cash Flows
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Examples of Software Systemsin Financial Services
•Churn Management Systems
•Mortgage Application Expert Systems
•Call Routing Software in Call Centers
•Data Mining for Trading Systems
•Yield Book
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Model Development
Transaction Processing
NeuralNetwork
Output
Fraud scores and
reason codes
Property Data
Area DataCreate orupdateprofile
Past Data
Resultsfrom model
Feed input data
Build Model
Structure of Expert System for Fraud Detection
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Figure 1. Percentage of U.S. Households Using
Various Number of Delivery Channels
0
1 0
2 0
3 0
4 0
P ct. O f H o u s e h o ld s
One c hannel
Tw o c hannels
Three c hannels
>= f our c hannels
From Table 2 in Kennickell and Kwast (1997).
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