fi top 10 emea final

www.financial-insights.com

Financial Insights EMEA2008 Top 10 Predictions

Today’s Presenters

Peter FarleyRachel HuntParveen BansalSimona Macellari

Webcast, February 20th, 2008

© 2008 Financial Insights, an IDC company, All rights reserved. 2

Financial Insights, an IDC company

Provide industry business leaders with informed opinions on the technologies required to create a competitive advantagePresent strategic and insightful market positions, trends, and cross-industry segmentation dataOpen dialogue with our expert analysts to support key investment decisions

– Singapore, Hong Kong, China, London, Milan, Toronto, Brazil and US


Why Predictions?

Goal: Identify trends that impact business and Information Technology decisions. Process: Drawn from IDC and Insights studies, industry contacts, and our own industry experience.Bias: We focus on the transformation of major business processes and how IT enables that transformation.Time Frame: Predictions are focused on 2008, but will have a long range impact


Agenda

The Big Picture – Banking in EuropeStructure of the Western European Banking Market

– Business Imperatives Drive Spending– Challenges: A difficult balance

Top 10 PredictionsConclusionsQ&A


The Big Picture – Banking in Europe

The impact of sub-prime/credit crunch– No immediate cuts seen to major spending plans– Banks cautious, vendors still optimistic– Rebuilding capital bases, maximising margins

Competition to increase– Bank universe to shrink as M&A pace accelerates

– Margins pressured as transparency rises, SEPA

Innovation moves up the agenda– Better alignment of IT and the business– Learning from other industries/branding


Structure of the Western European Banking Market

BNP Paribas4%

Deutsche Bank3%

Royal Bank of Scotland

3%

Rest67%

ABN AMRO Bank2%

UBS5%

ING Bank2%

Credit Suisse Group

3%

HSBC Holdings4%

Barclays Bank3%

Crédit Agricole Groupe

4%~ 142$10 B to $100 B in total Assets

Tier 2

~ 60>$100 B in total AssetsTier 1

~ 6,000<$1 B in total AssetsTier 4 & 5

~ 224$1 to $10 B in total AssetsTier 3

European* Bank Population

* Excludes Russia and Eastern Europe and Baltics

Share of Assets of Top European Banks

Based on top 400 banks in Western Europe: Total Assets $33,897BN: 2006

Still diversified, Top 10Only Account for 33%


Business Imperatives Drive Spending

Customer-Centric Focus– Products commoditised, easily copied– Customer Acquisition – Customer Retention

Knowledge-worker collaboration – Improved Data Management

Core Banking Decisions Critical–Improved Efficiency/Competitiveness


Challenges: A difficult balance

Run the Bank

Gro

w th

e B

ank

Green fingers: More than just corporate responsibility, Green IT helps grow the brand

Regulation, compliance, risk and fraud management & AML - again in the spotlight

Wealth Management: Competition heats up as customers become more sophisticated

Here we are again: Branch innovation. Multi channel-strategies, changing role of branch

Mobility: from payments to automation ( is there money to be made from mobile applications?)

The changing core banking market -deals, deals, deals but any future out there?

Saving Our Assets with Business Process Management (SOA And BPM discussion)

2008 = The year for payments (emerging payment products and impact of SEPA and PSD)

Supply Chain Financing Europe: What model will work?

Innovation - Meeting the cultural challenges and beyond

50 – 60% of IT Budgets


Top 10 Agenda

Run the Bank vs Grow the Bank:1. The changing core banking market – deals & deals but any future out there?

Rachel2. Saving Our Assets with Process Management (SOA And BPM) Rachel3. 2008 = The year for payments (emerging products, SEPA/PSD) Rachel4. Supply Chain Financing Europe: What model will work? Rachel5. Branch innovation amid Multi channel-strategies Parveen6. Mobility & Payments (Is there money to be made from mobile?) Parveen7. Wealth Management - Competition heats up with new solutions. Simona8. Regulation, compliance, risk/fraud management - in the spotlight Simona9. "Green IT”: More than just corporate responsibility. Peter10. Innovation - Meeting the cultural challenges and beyond Peter


1 – Core system replacement: Deals, deals, deals…

European deals on the increaseCollaborative model becomes the norm?

– Temenos/ Metavante– SAP/ Misys/ Sungard/ Callatay &

WoutersNew entrants???Increasing complexity of core system deals in the future

2006/ 2007


1 - Successful migrations are decided long before implementation…

Definition

Decision

Implementation

Business strategy articulated

Review current technology, LOB

pain points

Technology roadmap

Decision toreplace core

Delivery model

Q1Yn Q2Yn Q3Yn Q4Yn Q1Yn+1 Q2Yn+1 Q3Yn+1

RFP/ Vendor selection

Project management team

Planning & analysis

Migrationbegins

Testing/ pilot phase

Implementationcompleted

Com

munication


Banks want to re-invigorate their enterprise architecture i.e. SOA and middleware, process improvement increasingly an alternative to core system replacement

1 – But is time running out for Core system replacement?


2 - Increasingly Tier 1 banks are doing architecture transformation projects

What does that mean?– Analysing processes and data to seek to reengineer the bank, with the construction

of some form of Enterprise Architecture Framework – Single Customer Information File and a number of other horizontal layers to cut

through the silos including a thick sub-ledger that becomes the main repository for all MIS and regulatory reporting, middleware (or Enterprise Services Bus, in SOA parlance), and a single customer service and delivery layer to replace piecemeal front-ends

Define Technology StrategyPlan strategy implementationRationalize technology spendOperational risk & controlsDevelop technology “building blocks”“Top-Down” Portfolio MappingSOE Operationalization

Implement core component capabilities– Sales Desktop– Trade Desktop– Reference Data– Utility Platform– Service BusLeverage offshore souring models

MetricsInstrumentationProliferation of shared servicesRealization of Offshoringbenefits

ScalabilityFlexibilityRecord time to marketDecreased OER

2005 2006 2007 2008

Rationalization,Alignment & Stabilization

Stabilization,Investment,& Execution

Optimization &Efficiency

DifferentiationWachovia #6 US investment bankObjective: reduce time to marketBudget: $100 millionSOA incentive


3 – 2008 the year for payments…SEPA = Opportunities

Fast movers will be best positioned to take advantage of the more open market

Beyond cash and liquidity management, institutions should also investigate supporting corporations with financing services for the corporate supply chain

Banks should act quickly in implementing new services to stay ahead of the competition. Key focus areas should be:

– Cash and liquidity management – Implementation of credit transfers

and direct debits on systems like Step2 and Target2

– SWIFTNet funds, cash reporting, etc

5.9 5.9 5.9

29.417.7

47.1

64.776.4

47.0

0102030405060708090

100

In the cash and liquiditymanagement area

Corporate front-endservices

Retail payments

(%)

YesNoRefused to disclose

Q: In What Business Areas Will SEPA Create New Business Opportunities?


Who Will be the new competitors?Who Will be the new competitors?


3 – Payments in Europe looking ahead

Banks and EC look to phase cash out?What business model for mobile payments?

– Rise of prepaid cards in Europe – cash alternative with same anonymity

– EPC working on standards – use the SEPA infrastructure– M-payments and m-banking as a differentiator – enters Spain

Is this what the customer wants?E-invoicing


3- E-invoicing through SEPA – disruptive event

EC reports that an EU-wide electronic invoicing system could save Euros 243 BnTo date E-invoicing penetration and adoption in Europe is limited and fragmented VAT, accounting, payment, authentication, company transparency and data retention rules and obligations have limited European harmonisationProjects have been focused on one type of industry, e.g Denmark Public SectorE-invoicing is missing link for SEPA, provide a real opportunity towards integrated supply chain finance


Invoice HubInvoice Receipt, Classification, Line Item Capture

Automatic Validation2-3 Way Matching, Duplicate Checking

WorkflowAdmin, Query & Approval, View Status in Real Time

OnlineArchive

ERP{Accounting}

System

PaperInvoices

ElectronicInvoices

PO, GRN, and Vendor Data

Entire Process 4 to 24 hours

Accounts Payable Integration Services

Potential for exception resolution with suppliers and supply chain finance offers

from buyer or buyer’s banks

Buyer’s Accounts Payable

4 - Financial supply chain how to differentiate – HSBC example


5. Branches: Innovate and Evolve

Retail banks in Europe are re-aligning their branch strategies Branches evolving into predominantly sales channels Redesigning of branches Staff skills set is differentNew technologies to improve branch efficiency:

– Voice over Internet Protocol (VoIP) – Radio Frequency Identification (RFID) – Queue busting technologies– Behavioural monitoring systems


6. Mobility: Internal Integration versus Payments

Enterprise Mobility Solutions

• challenge is one of integration into the rest of the enterprise infrastructure.

• Security is a big issue.

Mobility Solutions for Banking – challenge is of a successful business model

• SMS payments – for micro-payments, and remittance for migrant workers

• Contact-less: chip-based for prepaid micro payments or authentication of high value payments using mobile device, or using NFC technology


Who Cares About Mobile Payments?

TechnologyVendors

Need to capitalize on the next generation of mobile payments solutions. • Horizontal and financial services technology vendors

WHO WHY

Banks & CCCompanies

must leverage existing value chains, rather than build new competitive solutions. They must also evaluate ways to let mobile telecoms participate in collaborative value generation.

MobileOperators

must open up revenue streams, especially from monthly m-payment subscription charges or per transaction fees. Operators must also take full advantage of the positive side effect of embedding the mobile phone even deeper into the life of the subscribers

HandsetSuppliers

must consider active integration of mobile payment capabilities into product road maps. making standardization and compatibility across operators and platforms critical to preserve user attractiveness and scale benefits."

Merchantsmust use cashless payments to drive further cost decreases that accrue from giving up cash, and to offset POS technology upgradecosts."

Customersit needs to be demonstrated to mobile phone users that mobile payment is much more attractive than other more familiar paymentschemes.


7 – Wealth Management - Competition heats up as customers become more sophisticated

The European wealth management industry enjoyed a record year in 2007 and the 2008 is very positive.Several market participants are jumping in this sector to grasp some market share. Clear product value proposition and targeting based on investment behavior and reach will be the key success factor in a fierce competitive environmentInvestment vehicles:

– The old world of Bonds and Property investments is over and a new and more volatile investment opportunity have made a a major inroad but with a different flavor for:

• Entrepreneurs• Generation X and Y• Women

Multi Asset Class Trading Systems will be a major focusReach - face to face coupled by electronic interaction and access is a must to have:

– Next-Generation of Communications Platforms with a major focus on mobile access to data and services

– Sophisticated CRM functionality


8 – Regulation, compliance, risk and fraud management & AML - again in the spotlight

Compliance: the most disruptive regulation affecting financial industry have already been implemented but it will remain one of the main topic in the business and technology agenda for:

– Running the business: • Financial impacts from sub-prime fallout fuelled by its spill over in Europe as well as the

recent exceptional fraud cases, will drive more rigid governance frameworks and Financial Industry will forced to focus to close internal gaps and improve weakness areas as well as to prepare for the next prescriptive rules Hedge funds? Tight oversight of derivatives?

The current risk adverse environment could be a strong market opportunity to:– Growth the business:

• Credit markets will tighten further, banks with the most sophisticated risk management and capital market firms with enhanced tool for portfolio optimization to improve the risk/return profile of the portfolio could achieve solid increase in market share

• Capital market – To ride the growth of alternative investment product advanced risk management systems could be a clear differentiator to cope with the challenge of developing pricing models across multiple asset classes and increasingly more complex derivative transactions

Security & Fraud: security breaches continues to grow and it will increase exponentially as firms embrace mobility and the the web 2.0” wave. For running the business, firms will have to get serious about their strategy - especially as fraudsters are even breaching two-factor authentication schemes -and investments , as new security and fraud management tools are mandatory to improve data protection and to safeguard against identity theft


– 68% of respondents claimed to have little or no knowledge of their suppliers' green credentials.

– This included 27% of respondents with little or no knowledge who wanted a better understanding.

– 32% claimed a lot or limited knowledge of their suppliers' green credentials.

4.4%

5.5%

10.2%

12.7%

20.1%

23.8%

27.8%

0% 5% 10% 15% 20% 25% 30%

Curiosity

Would care if legislation forces us

Governments' responsibility

Commercial advantage

Indifferent

Moral obligation

The responsibility of IT suppliers

Q. What best describes your opinion of green IT?

Source: IDC ICT Forum Survey, September 2007 — n = 899

9. Classifying Attitudes to Green IT9. Classifying Attitudes to Green IT


10. So What Does a Bank Mean by Innovation?10. So What Does a Bank Mean by 10. So What Does a Bank Mean by Innovation?Innovation?

Hurdles to Overcome

– Banks have had a very good run – until latest credit crunch– Why spend money innovating when so much profit already?– Can Banks create an Innovative culture? Is it changing course

or changing minds?– Are banks able to create the necessary environment where

business and IT both communicate and speak the same language? CULTURAL CHALLENGES!

– What are the risks to competitiveness and customer perceptions if a bank fails to grasp the innovation nettle? EMPLOYEE CHALLENGES!


Deutsche’s bank products in a box, is another example of innovation


What does it take to innovate?What does it take to innovate?What does it take to innovate?

Planning is critical – Some Key Steps1. Formalise the Process2. Measure time to market & ROI3. Measure how many ideas are killed4. Understand what customers need5. Finance R&D staffed with PhD’s etc… (people

with new ideas)6. Diversify – learn from other industries – This is where

Help from vendors can critical7. Create an environment where change is

encouraged and failure not punished

“People Attraction NOT Resource Allocation”


Business Drivers: Globalizaton

Globalization is a double-edged sword – those well-positioned are eager to expand, the rest are fearful of more foreign competition. Institutions must prepare for

– a more global banking environment. This is good news for those that already have had success with a multi-national strategy.

– a strong local or regional footprint. This will allow firms to generate consistent revenues.

– a strong technology infrastructure and disciplined approach to acquisition. This allows them to reap the benefits of inorganic growth.

All of these attributes have posed challenges for banks in the past. The relatively weak dollar makes US institutions attractive take-over targets. Financial Insights predicts that Western European banks will be well-positioned in a more global economy with the investments in their back-office systems, particularly in their payment processing in response to both Basel II and SEPA.


Business Drivers: Customer Centricity

In the race to increase inexpensive core deposits and increase revenues, institutions are doing what they always do – focusing on their customers (again).

– While it is less expensive to serve and retain your existing customers than to attract new ones, banks are easily distracted when times are good and they lose sight of this truism.

This time, customer centricity initiatives are less ethereal than when CRM was the hot topic in the late 1990s.

– Now, customer centricity has the advantage of building upon strong data warehouses that have been developed in the intervening years, with mature analytic tools.

What banks are struggling with now is realizing a true enterprise-wide approach to their customers.

– This remains elusive for most large institutions.


Dual Approach to Profit Improvement

Enable Greater Enable Greater Enterprise Efficiency, Enterprise Efficiency,

and Decrease Costs of and Decrease Costs of ServiceService

Increase Revenues Increase Revenues from Existing from Existing

Customers, New Customers, New ProductsProducts


Top 10 Predictions

1. Only 4 ACH’s in Europe by 20122. Corporations still struggle to get real payments benefits3. Chinese banks to extend hold in top banks by market cap4. Regulated global exchanges down to 5-7 in 5 years5. Bank shares to outperform the market in 20086. Leading French bank acquired (at least partly) by foreigner7. Banks re-think mobile strategies as ROI questions rise8. The dollar again becomes strongest currency in 20089. Vendors increase acquisitions in Fintech specialists10. Europe struggles to avoid recession as deficits, productivity

& labour inflexibility weigh


Peter [email protected]+44 (0) 20 8987 7190

Rachel [email protected]+44 (0) 20 8987 7128

Parveen [email protected]

Simona [email protected]+39 348 319 4948

Our Contact Details

fi top 10 emea final

Documents