IS 604: Contemporary Issues in IS Banking Enterprise Systems · - finance Channels: - personal -...

Chair of Information Systems IV (ERIS)

Institute for Enterprise Systems (InES)

IS 604: Contemporary Issues in IS

Banking Enterprise Systems

Prof. Dr. Alexander Mädche

Chair of Information Systems IV

Institute for Enterprise Systems

Lecture

supported by:

Goals of this lecture 2

Give an idea of fundamental

processes in a retail bank.

Show how the concept of Enterprise

Systems applies for Banks.

Introduce to a business scenario,

that will guide the remainder of the

course.

IS 604 Banking Enterprise Systems

2

Agenda – Session I – part 2


Agenda

1 Reference Processes in Banking

2 The Bank as Enterprise System

4 Business Scenario: the Global Retail Bank - GRB

3

3

Reference Process Landscape 4


4 Source: CC Sourcing 4

Distribution Reference Process


5

Advisory

Marketing

Offer

Contact

Closure

Maintenance

Information

search

about

costumer

Generating/

adaption of

customer

profile

Detailed

knowlegde

of costumer

needs

Obtaining

costumer

documents

Determina-

tion of

customer

business

potenital &

risk

Refusal or

proposal

Develop-

ment of

campaigns

Consulta-

tion with

product

develop-

ment and

other com-

petencies

Execution

of

campaigns

Planning of

campaigns

Contact

Plan

Contact

preparation

Contact

establish-

ment

Offer

submis-

sion

Negotia-

tion &

adaptat-

ion

Acceptance

or refusal by

costumer

Refusal

Creation

of

contract

Internal

check

Signing

Initiali-

zation of

service

provision

Accepta

nce

Securing

of

customer

satis-

faction

Determi-

nation of

further

potential

Continous

documen-

tation

Archive &

Storage

Instruments:

- pay

- invest

- finance

Channels:

- personal

- written

- electronical

- via phone

Source: CC Sourcing 5

Lending Reference Process


6

Initialization

of order

Order

gathering

Order check

Order

authorization

Order

processing

Placement of

order

(customer)

Accepentance

of order

Authentication

Data gathering

(paper)

Data transfer

(electronical)

Check of offer/

Rating

Acceptance

or refusal

Conditions of

execution

(Partial)

Execution

Editing of

credit contract

Print credit

contract

Contract

signing

Provision of

securities

Completeness

check and

credit release

Determination

of charges/

commissions

Booking

Editing

customer

output

Print customer

output

Archival

storage

TRX comprehensige

processes

TRX related

processes

Refusal

Acceptance

Credit monitoring

Commission/

interest charge

Reimbursement

Investigations/

Correction

Distribution/

Consultancy

Customer/Account/

Deposit

Management

Product

development

Fees Service

Credit risks/ credit

workout

Liquidity

management

(refinancing)

Compliance

Customer reporting

Channels:

- personal

- written

- electronical

Instruments:

- Mortgage



7 Example: Credit Factory for Mortgage Loans

Front-Office:


8

Back-Office:

Example: Credit Factory for Mortgage Loans (cont‘d)

Payments Reference Process


9

Order

entry

Order

gathering

Order

check

Order

Processing

Instruments:

- payment order

- standing order

- master list

- direct debiting

scheme (LSV)

- DTA

- credit card

- debit card

- EBPP

- SEPA

Channels:

- personal

- written

- electronical

Incoming

payments

processing

TRX related

processes

TRX

comprehen-

sive

processes

External

handling

inter-

banks

Offer entry

(customer)

Acceptance

of offer

Data

gathering

(paper)c

Data transfer

(electronical)

Manual

review

Plausability

check

Authenticat-

ion

Offer

administra-

tion

Limit check

Reg.

Check

(GwG,

OFAC)

Approval?

No

Determina-

tion of

charges/fee

s

Booking of

outgoing

payment

?

Editing

customer

output

Print

Customer

output

Archival

storage

Acceptance

Manual

editing

Reg.check

(GwG,

OFAC)

Booking

Approval

Editing

customer

output

Print

Customer

output

Archive

and

Storage Compliance

Distribution /

Consultancy

Product

development

Monitoring

Customer/

Account

Management

Fees Service

Reconcilatio

n

Liquidity

Management

Investigation

s/

notifications

Customer

Reporting Source: CC Sourcing 9

Account and Deposits Reference Process


10

Opening

Management/

Maintenance

Closure

TRX related

processes

TRX comprehensive

processes

TRX customer

related processes

Channels:

- personal

- written

- electronical

Instruments:

- Customer account

- Customer depot

Placing of

order

(customer)

Accepentance

of order

Authentication

Data gathering

(paper)

Data transfer

(electronical)

Contract

signing

Conditioning

confirmation

of opening

Print

confirmation

opening

Archival

storage

Monitoring

Management

of master data

Reg. check

Determination

of charges/

fees/interest

Editing

customer

output

Print customer

output

Archival

storage

Processing of

order

Placing of

order

(customer)

Accpentance

of order

Authentication

Determination

of charges/

fees/interest

Editing

customer

output

Print customer

output

Archival

storage

Inactivation

Investigations/

notifications

Distribution/

Consultancy

Reserach (e.g.

Narino)

Product

development

Customer reporting

Monitoring

Reconcilation

Investigations/

notifications


Agenda – Session II

Agenda





11

11

Comprehending a Bank as an Enterprise System

The Bank can be seen as an Enterprise System, consisting of a social and a technological sub-system.

Along these two dimensions several sub-dimensions for structuring the bank are possible:

Exemplary Constituents of the social sub-system:

Business Model and Business Processes (Reference Processes)

Organizational structure (Front-, Middle-, Back-Office)

Customer segments (Retail, Private, Corporate, Institutional)

Products (Loan, Time Deposit, Money Transfer, Wealth Management…

Exemplary Constituents of the technological sub-system:

Business Functions that are supported by IT-Applications

Applications (packaged or custom-built)

IT-Architecture (Monolithic, Three Tier Application Landscapes, Service Oriented, …)

IT-Platform (Host, Server, Client-Server, Cobol, J2EE, ….)


12

Social

Technological

12

Functional Perspective on a Bank

Sales Management & Support (SMS)

Front Office Channels and Support (FOS)

Bank Management & Steering (BMS)

Core Banking (COB) Product Processes

(PP)

Infrastructure &

Support (ISU)

Fro

nt-

Off

ice

Mid

-Off

ice

Ba

ck-O

ffic

e

Master Data

Management

Account

Management Current

Accounts

Savings Loans Mortgages

Payments Cards

Financial &

Managerial

Accounting

Risk

Management

Direct

Banking

Assisted

Banking

General

Ledger

Investment

Products

CRM Acquisition

Support

Regulatory

Reporting

Asset

Liability

Management

Contract

Management


13

13

Banking Enterprise Systems

People-Centric

Process-Centric

Front-to-Back

Integration

(STP)

CRM and

Multi-Channel-

Integration

at POS

Information-Centric

Group-

ware

Portals

…

Front

Office

Back

Office

Transactional

Banking

Analytical

Banking

Mid

Office


14

Technological Components of a Banking Enterprise System

14

Definition Core Banking System

According to a study performed by the University of Karlsruhe* the term

Core Banking System is not used consistently. There are two main

usages of the term:

1. A comprehensive banking application, which covers all products, sales

channels and reporting and steering modules.

2. A banking application that covers payments, lending and deposits business

and all reporting functions needed for regulatory reporting.

We support the broader view of definition 1, that a Core Banking System

contains transactional as well as analytical application components. At

least, it should cover the most important products offered by a bank

through the sales channels branch, internet, mobile and call center.

*Rererence to the study: http://www.hs-karlsruhe.de/fakultaeten/informatik-und-wirtschaftsinformatik/lehre-und-forschung/forschungsprojekte.html; article also published in:

http://www.computerwoche.de/software/erp/1907948/


15

15

http://www.hs-karlsruhe.de/fakultaeten/informatik-und-wirtschaftsinformatik/lehre-und-forschung/forschungsprojekte.html











http://www.computerwoche.de/software/erp/1907948/

Custom-built Legacy vs. Packaged Software


16

“Custom-built

Banking Landscape”

FC 1

Contact

XLS

Controlling

Report

KK

FC 3

PD

OffR

Sett

Marketing

Contact

Offer

Closure

FC 2

ACC2

“Enterprise System

Banking Landscape”

Core Banking

Rep 1 Rep 2

Marketing Contact Offer Closure

Middleware

Frontend

NECESSARY:

Planned

Transformation

of the

technological

and social

sub-systems

16

Agenda – Session II


Agenda




17

17

Introduction GB and GRB


18

Global Bank (GB) was founded in 1889 and is a global

Universal Bank with European roots.

GB is set up as a global group with holdings in Italy, Spain,

the UK, and the United States. Since the millenium the bank

has been able to expand its reach in emerging markets like

China, India, and Russia.

GB has three major divisions:

Global Investment Banking (GIB)

Global Retail Banking (GRB)

Global Information Systems and Operations (GISO)

18

Overview GRB


19

GRB, the strong and profitable private and retail banking

division provides a broad range of banking services including

current accounts, deposits, loans, investment management

and pension products, to private individuals and self-

employed clients as well as small and medium-sized

businesses.

GRB worldwide:

-27 million clients

-3.000 branches

-40.800 employees

Total of 400 bn EUR CBV*, thereof:

-150 bn EUR credit products

-100 bn EUR deposits and payments

-150 bn EUR investment and insurance

products

*CBV = client business value

19

Business Scenario


20

Two years ago, reacting to the challenges of the market, new

information technology and demographic change, Global Retail

Bank (GRB) has decided to set up a major multi-year

transformation program to fundamentally change its organizational

and technological setup.

First the bank decided to standardize its heterogeneous retail core

banking application landscape by implementing a standard

software package in the project called “Copernicus”. This project is

seen as one of the most challenging IT implementations in the

financial services industry world-wide and has a pioneer character

for the whole industry.

Second the bank amended the transformation program by a

strategic innovation project “Galileo” that will provide the banking

frontends of the future for different channels, implemented on top

of the new Core Banking System. 20

High Level Program Organization


21

Transformation Program

TP1: Copernicus TP2: Galileo

Business PM GISO PM

SP1: Master Data and Deposit Management

SP2: Loans Management

SP3: Securities

BPA

Business/Process

Analysis and

Functional Spec.

I&C

Implementation

and

Configuration

MI

Migration TE

Test

Prototyping/

Implementation Design

Program Office

Internet Channel

Branch

Mobile Applications

Social Media

PM

Work Streams

Sub-projects

21

Program Timeline and Milestones


22

Kick Off

Transformation

Program

01/2xx1

Copernicus Project

Feasi-

bilitiy

Study

Business/

Process

Analysis/

Requirements

SW/

Vendor

Selection

Customi-

zation &

Configu-

ration

Test

In

tr

o SP1

SP2

SP3

Kick-Off

Galileo

02/2xx2

Galileo Project

Analysis &

Requirements

Development

new Design

Ideas

Prototyping Selection Implementation

Go-Live

SP1

12/2xx2

Kick Off

SP1

06/2xx1

Kick-Off

SP2

09/2xx2

Go-Live

SP2

12/2xx3

Go-Live

SP3

12/2xx4

Kick-Off

SP3

09/2xx3

Go-Live

Galileo

12/2xx5

Business/

Process

Analysis/

Requirements

Customi-

zation &

Configu-

ration

Test

In

tr

o

Business/

Process

Analysis/

Requirements

Customi-

zation &

Configu-

ration

Test

In

tr

o

22

Project Roles Deposit Management


23

Role Project

Management

Business/

Process

Analysis and

Functional Spec

Implemen-

tation and

Configuration Migration Test Position in Line

Organization

Project Manager Business* x NA

Project Manager GISO x GISO Project Pool

Business Analyst/External Consultant x x XYZ Consulting

Business Analyst Internal x x GISO Project Pool

Business Expert Front Office (Advisor,

Sales Processes)* x x

Retail Banking,

Deposit Products

Business Expert Mid Office

(Customer and Account Management)* x x

Retail Banking,

Deposit Products

Business Expert Back-Office

(Product Development)* x x

Retail Banking,

Deposit Products

Business Expert Back-Office (Accounting) x x Bank Management,

Accounting

Business Expert Back-Office (Controlling) x x Bank Management,

Controlling


(Administration & Processing) x x

Retail Banking,

Deposit Products


(Administration & Processing) x x

Retail Banking,

Deposit Products

Business Manager FO

(Sales Processes) x x

Retail Banking,

Deposit Products

Business Manager MO

(Account and Product Management) x x

Retail Banking,

Deposit Products

Business Manager BO x x Retail Banking,

Deposit Products

Technical Lead x x GISO Project Pool

Technical Expert Infrastructure x x GISO Project Pool

Technical Lead Applications x x External Consultant

Technical Expert Applications* x x GISO Project Pool

*Roles covered in this course 23

The current situation of TP I - Copernicus


24

One year has passed in the Copernicus Project.

A software selection process has been performed and SAP

Banking Services 8.0 has been identified as the solution that

fits best to the requirement of GRB.

The sub-project Master Data Management (MDM) & Deposit

Management (DM) has started and several activities have

already been performed (see timeline).

The work stream BPA has analyzed the status quo and

designed and documented new front-to-back processes for

Deposit Management .

These are based on Banking reference processes and the

functional scope of SAP Banking Services 8.0.

24


25

These processes will now be implemented based on the

standard software solution.

Business experts of BPA have additionally created functional

specifications for the different business functions and objects

that are needed for the realization of these processes.

Based on these functional specifications several

configuration and customization tasks have still to be

performed by the I&C work stream to implement the

processes and functions.

After the customizations and configurations performed by the

I&C team component, integration and end-to-end tests will be

run to test the functionality of the system.

The current situation of TP I - Copernicus (cont‘d)

25


26

After passing these tests the system is ready for data

migration and after that for the Go-Live of the MDM and DM

functionality.

The current situation of TP I - Copernicus (cont‘d)

26

Sub-Project Deposit Management Timeline


27

Kick Off DM

06/2xx1

Go-Live

12/2xx2

Analysis

completed

02/2xx2

Today

SAP BS 8.0

Hardware/Infrastructure Set-up

Business and Process Analysis

Functional Specifications

Technical Set-

up completed

12/2xx1

Process Landscape

Customization & Configuration

of SAP BS 8.0

Test

Migration

BPA

and

TE

I&C

and

MI

Customization

completed

08/2xx2

Go-Live

PM and Training

27

Functional landscape of GRB – Functions involved in

Deposit Management


28

Sales Management & Support (SMS)

Front Office Channels and Support (FOS)

Bank Management & Steering (BMS)

Core Banking (COB) Product Processes

(PP)

Infrastructure &

Support (ISU)

Fro

nt-

Off

ice

Mid

-Off

ice

Ba

ck-O

ffic

e

Master Data

Management

Account

Management Current

Accounts

Savings Loans Mortgages

Payments Cards

Financial &

Managerial

Accounting

Risk

Management

Direct

Banking

Assisted

Banking

General

Ledger

Investment

Products

CRM Acquisition

Support

Regulatory

Reporting

Asset

Liability

Management

=Business functions involved in the deposit management process

and covered by the MDM & DM Project

28

Deposit Management Process Landscape 29 F

ron

t-O

ffic

e

Mid

-Off

ice

Ba

ck-O

ffic

e

Contact Advisory Offer Deal Mainte

nance

Create BP

Create

Account

Maintain

BP

Maintain

Account

Settle

Account

Create

Product Maintain

Product

Maintain

Conditions

Create

Conditions Assign

Product

Define Ind.

Conditions

Manage

Payments

Maintain Product

Pricing List

Create Product

Pricing List

Account

Settlement

Posting

Control

Business

Processes

Business

Events

Business

Transactions

Book on internal

accounts Reporting

Account

Closure

Order

Management

Payments


30

Sub-project have been created one of the three banking

channels:

Internet

Branch

Mobile Applications

Social media has been re-prioritized and shifted to a project

that will start later

Each project team will follow a design thinking approach to

come up with new ideas and a (mock-up) prototype for

(innovative parts) of the respective channel application.

At the end of the project the findings of the project will be

presented to the program steering committee.


The current situation of TP II - Galileo

30

31

• Identify and understand problems and

requirements

• Observe users (visit a branches and

observe how others use internet and

mobile banking applications)

• Interpret, consolidate and document the

empirical findings, i. e. your

observations

• Engage in (several) brainstorming

sessions to generate as many ideas as

possible (expand the solution space)

• Build prototypes and share them with

other people (narrow down the solution

space again, experimental phase)

• The brainstroming and prototyping

• Test, implement, and refine the design

(narrow down the solution space again;

solution-driven phase)

Under-

stand


Ob-

serve

Point

of

view

Ideate Prototype Test

Based on: The d.school/D-School (2009)

The current situation of TP II – Galileo (cont‘d)

31

Introduction to SAP Banking Services 32

Retails banks nowadays work very

process-oriented and have achieved a

high degree of process standardization

especially in the back-office functions.

A bank can be considered as a

complex Enterprise system, consisting

of organizational and technical

elements

We use the GRB scenario to guide the

future lectures


References


33

The d.school/D-School (2009) Design Thinking Process (from:

www.designthinkingblog.com/wp-content/uploads/2009/10/Design-thinking-process.png

http://www.sapdesignguild.org/community/design/print_design_thinking.asp

CC Sourcing, 2012: Bankmodell und Referenzprozess des Sourcing Competence Center

der Universität St. Gallen und der Universität Leipzig

Further Reading:

Casu B., Giardone C., Molyney P. (2006), Introduction to Banking, Prentice Hall

33

http://www.designthinkingblog.com/wp-content/uploads/2009/10/Design-thinking-process.png












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