- European banks need to transform due to the current financial crisis. - By 2015 European banks need to raise additional 660 billion Euro core tier 1 capital - In order to survive European banks start clearance sales & reduce staff significantly - For innovative service providers of banks the situation creates an unique opportunity to help banks and to gain significant new business I am interested in * Discuss scope and approach * Identify service providers * Identify first reference banks * Identify investors * Develop detailed NewCo Banking Services business plan
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www.imacor.de “We develop innovative strategies & help to implement.” imacor Summary European banks need to transform due to the current financial crisis By 2015 European banks need to raise additional 660 billion Euro core tier 1 capital In order to survive European banks start clearance sales & reduce staff significantly For innovative service providers of banks the situation creates an unique opportunity to help banks and to gain significant new business
Transcript
www.imacor.de
“We develop innovative strategies &
help to implement.”
imacor
Summary
European banks need to transform due to the current financial crisis
By 2015 European banks need to raise additional 660 billion Euro core tier 1 capital
In order to survive European banks start clearance sales & reduce staff significantly
For innovative service providers of banks the situation creates an unique opportunity
to help banks and to gain significant new business
www.imacor.de
European banks need to transform
Increase of regulatory requirements
Decrease of margins Legacy technology
Changing customer behaviour
www.imacor.de
Regulation
SolvV
SOX AML
Basel II
Basel III
Basel I
MiFID II
WpHG BörsG
MiFID I
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Basel III – Additional Core Tier 1 Capital Requirements
European Banks
In Billion $
2.330
2010E
2.990
2015F
660
Source: McKinsey
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Return on Equity (ROE)
2007 2010
Europe
16,7%
7.9-9.2%
2015E
7.4-8.6%
Source: McKinsey
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106 billion Euro additional core tier 1 capital requirements of European Banks by June 2012
30
5.1
1.3
4.1
2.9
14.7
8.8
Source: European Banking Authority EBA, October 2011
in billion Euro
26.1
7.8
1.4
3.6
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In order to survive European banks start clearance sales
“Clearance sales at Commerzbank”
Commerzbank sells everything that is not nailed firmly in order to raise additional 2.9 billion Euro core tier 1 capital by June 2012.
Source: Süddeutsche Zeitung, October 2011
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European banks further reduce staff significantly
-500
-700
-900 -2,750
-2,350
-3,500
-3,500
-30,000
-15,000
-2,000 -2,000
-3,000
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Product
Pricing
Decision
Contract
Collaterals
Account
Customer
Recovery
Transaction
Security
Output
Archiving
Booking
Position
Governance & Control
Financial Analysis
Financial Reporting
Money Laundering
Legal Reporting
General Ledger Compliance
MIS
Identity
Major shortfalls of IT landscapes of banks
Major shortfalls
Causes
Unintended dependencies between business functionalities and technologies
Products are implemented redundant and inconsistent across product lines and channels
Too many interfaces, ftp’s and point to point connections
Too many different technologies
Knowledge about IT-landscape is limited to a few people
Effects
Expensive to maintain
No competitive time to market regarding business and regulatory change and requirements
Low agility and functional gaps
Cross product functionality is very difficult to implement
Change of IT provider or BPO is hard to establish
Not Merger & Acquisition ready
Not scalable
Retail Loan Branch
Product
Pricing
Decision
Contract
Account
Customer
Contact
Recovery
Transaction
Output
Archiving
Booking
Position
Identity
Retail Loan Internet
Risk
Product
Pricing
Decision
Contract
Collaterals
Account
Client
Recovery
Transaction
Security
Output
Archiving
Booking
Position
Identity
Corporate Loan Branch
Product
Pricing
Decision
Contract
Account
Client
Contact
Recovery
Transaction
Output
Archiving
Booking
Position
Identity
Corporate Loan Internet
Security
Product
Pricing
Decision
Contract
Account
Customer
Dealer
Recovery
Transaction
Output
Archiving
Booking
Position
Identity
Consumer Loan Extranet
Product
Pricing
Decision
Contract
Collaterals
Account
Customer
Recovery
Transaction
Output
Archiving
Booking
Position
Identity
Retail Mortgage Branch
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Over the next 10 years the majority of Banks will start a transformation of their IT-landscape, globally
0
200
400
600
800
1.000
1.200
2005 2010 2015 2020 2025 Year
# Banks
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Wants to co-create products
Expects better user experience
Inform themselves
online
Trusts in advice of peers in
online forums
Uses social media to
communicate
Buys online
The New
Customer
Banks are not prepared for the new generation
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0 new friends in 5 days
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8 new friends in 1 minute
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Comply with regulatory requirement
Reduce IT & Operations costs by 25 % p.a.
Industrialized Operations
Industrialized Data Center
Standard Banking Software
based IT
Landscape
Bank A
NewCo Banking Services Banks
Transaction-based pricing Bank B
Bank C
Bank D
Benefits for Banks
NewCo offers banks to transform their production …
Meet new customer expectations
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… and helps to increase capital
NewCo Banking Services Banks
Outsource IT & operations commodities Invest in new business
People Technology IP Annual fees New projects
One-off investment Banking Services Delivery
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Infrastructure
Software
Processes
User interface Functional Productivity oriented
Fix Flexible
Application centric
Service- oriented
& packaged
High variety
Industrialised & low cost
NewCo banking services are founded on new paradigms
traditional new
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NewCo partners with world class specialists and established service providers dependent on the first reference bank customers
Data Center Automation Specialist
Low cost Hardware Specialists
Standard Banking Software Provider
Data Center Company
Business Process
Automation Specialists
Professional Services
Organisation
NewCo: Plan, Transform & Run
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The European market for banking services is
more than 65 billion US $ annually
Sources: Ovum, Gartner, McKinsey
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NewCo addresses 80% of the current costs of banks
New projects
Maintenance
25 %
40 % Infrastructure
35 %
80 % are addressable by NewCo
Typical cost distribution of banks
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New technologies, processing and operating model will enable total cost of ownership reductions up to 50%
8 %
17 %
25 %
50 % Cost reduction potential
New projects
New operating model
Industrialized data center
New projects
Maintenance
25 %
40 % Data center
35 %
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NewCo Banking Services offers banks cost reductions up to 25% and generates a 25% margin
25 % Banks cost savings
25 % NewCo margin
8 %
17 %
25 %
50 % Cost reduction potential
New projects
New operating model
Industrialized data center
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NewCo is financed by three stakeholder groups
Banks
Financial Investors
Service Providers
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NewCo needs to invest into first reference banks
Requirements on reference banks
Stable balance sheet
Regional coverage across several countries
Willingness to partner
…
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Roadmap to sustainable success
Year 1 Year 2 Year 3 Year 4
Set up NewCo - Business development - Hire Specialists - Contract Partners - Form Team
Win investors
Win reference bank
NewCo
Investors
Customers
Grow NewCo - Pre-Sales - Plan & start trans- formation of reference bank - Team & partners perform
Win investors
Pre-Sales
Stabilize NewCo - Finish first transformation and run established banking services
Win 2nd and 3rd customer
Grow NewCo
First profits
Win next 4-7 customers
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Investments dependent on size of first deals
P/L View i n v e s t
Year 1 Year 2 Year 3 Year 4
profit
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Next steps
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“We develop innovative strategies & help to implement.” imacor
Frank Schwab’s customers are banks, IT consultancies and IT Service Providers in Europe and Middle East.
Until 2009 he was chief architect at Deutsche Bank. Amongst others he was responsible for the planning of the core banking transformation based on SAP Banking
Winner of three European Awards in 2009 and 2010 for the New Online Banking , Mobile Banking and Touch Banking at Q110 - The Deutsche Bank of the Future
More than 20 years of professional bank and IT business experience
Lecturer „Creativity and Innovation Management“ at Mannheim Business School
MBA from Ashridge Business School in London and Computer and Business Science Diploma from University of Mannheim, special focus on software development, networks, banking and marketing
