Confidential
CORE BANKING TRANSFORMATION BEST PRACTICES FOR IMPLEMENTATIONThomas Mathew Head, Product Strategy & Planning, TCS BaNCS, Tata Consultancy Services1 Sep 2011
Auckland's 4th Annual Technology & Innovation The Future of Banking & Financial Services
• Understanding the business and market drivers
• Why is core banking transformation important?
• Launching a successful transformation program
• TCS BaNCS - Core banking transformation experience
AGENDA
BANKING INDUSTRY ANALYSIS
Threat of New Entrants
Greenfield Banks Non Banking Fin Firms
Discount BrokersPost Banks
Internet & Mobile Banks
Bargaining Power of Suppliers
Inflexible SystemsHigh Switching Costs
Vendor M&ARetiring Employees
Bargaining Power of Buyers
Low customer satisfaction Easy to switch
Threat of Substitute Products
Mobile WalletP2P
Rivalry Among Existing
Competition
DRIVERS FOR CORE SYSTEM REPLACEMENT
Growth
Efficiency
Innovation
Higher operational costs Lack of standardization Lower customer service level No single view of customer Regulatory compliance
challenging
Time to Market a challenge Lacking agility Inflexible business processes Scalability is an issue Customer satisfaction low
Product innovation challenging Industry transformation difficult Unable to launch new business
models
DRIVERS FOR CORE SYSTEM REPLACEMENT
When to change? How do I know?Core Banking Systems
1 Technology has become an impediment to business
2 Unable to scale operations
4 Increasing regulatory burden
5 Severe interfacing issues
6 Viability of the vendor supplying the core system
3 Cost of maintaining the system rises
IT Complexity
Complex & inflexible core systems The bigger the bank, the higher the
complexity, cost & risk
Costly Proposition
High operational costs for core applications
Multi year investments
High Risk Implementation
Under delivering on promised benefits Prolonged disruption to the business Vendor viability
Strategic Business Goals
Return on Investments
Successful Core Banking
Transformation
CHALLENGES FOR CORE SYSTEM REPLACEMENT
LAUNCHING A SUCCESSFUL TRANSFORMATION PROGRAM
CORE BANKING TRANSFORMATION
Definition Phase Phase - 1 Business Strategy
Selection Phase Phase - 3Solution & Vendor
Identification
Execution Phase Phase - 4Core Banking
Transformation
Scoping Phase Phase - 2Core Banking
Transformation Strategy
Core Banking Transformation Framework
DEFINITION PHASE – BUSINESS STRATEGY
Rivalry Among Existing
Competition
Bargaining Power of
Buyers
Threat of Substitute Products
Threat of New
Entrants
Bargaining Power of Suppliers
Business Strategy
Industry / Competition Analysis
Bank’s Context
SCOPING PHASE – TECHNOLOGY STRATEGYB
usi
ne
ss S
trat
egy
Core Banking Transformation Strategy
Discovery Evaluation Recommendation
Assess products processes, systems & architecture
How to reduce complexity
How to achieve the business objectives
Determine & prioritize your IT requirements & capabilities
Weigh the various options for core banking renewal
Decide on the Core Banking renewal approach
Develop a target IT architecture
Core banking transformation roadmap
Technology Strategy
SELECTION PHASE – CBS SOLUTION
Functionality Flexibility Cost Vendor Viability
Operational Performance
Program Management
Partner Management
Customer References
Target functionality Alignment with
business goals
Scalability Resilience Centralization
of data & process
Product survival (M&A) Customer
satisfaction
Key Evaluation Criteria
Adapt quickly to changing market conditions
Assess business value covering ROI, strategic, architecture & biz process alignment
Project mgt capabilities Quality
assurance programs
Partner certification process Partner training
programs
Validate customer reference credentials
EXECUTION PHASE – CBS TRANSFORMATION
Successful Core Banking
Solution Transformation
Projects
Challenges Key Success Factors
Project delaysBudget overrunsQuality problemsOrganizational roadblocksProject failures
Strong internal capabilitiesSelection of right implementation partnersClear contractual parameters & rolesRigorous project & change mgt
EXECUTION PHASE – CBS TRANSFORMATION
Strong Internal Capabilities
Assign highly skilled resources to steer the project Define their responsibilities and accountabilities Senior Management backing for the project
Selection of Implementation Partners
Carefully assess the implementation partners Evaluate vendor’s background, capabilities,
reliability and compatibility
Clear Roles Clarity on procedures, service level agreements Clearly define the roles of all stakeholders Comprehensive monitoring tool
Project & Change Management
Define operating model & governance rules Strong project management team Communicate – communicate - communicate
Key Success Factors How to Achieve ?
TCS BANCS CORE BANKING TRANSFORMATION EXPERIENCE
TCS BANCS SOLUTION STACK
TCS BANCS CORE BANKING CUSTOMERS WORLDWIDE
Allahabad Bank ANZ - International
locations Arab Bank Australia Bangladesh Bank Bank Negara Indonesia Bank of Maharashtra Central Bank of India Commonwealth Bank – Fiji Community Alliance Credit
Union CTCB Philippines Bank Indian Bank ING Direct Koram Bank Korea Development Bank Korea Exchange Bank LG Petro Bank State Bank of India The Rock Building Society
African Bank Amlak Finance Arab African International
Bank Bank of Kuwait & Middle
East Capitec Bank CMEC Mercantile Bank National Bank of Kuwait National Commercial Bank Nova Ljulbjanska Bank Post Finance Qatar Development BanK Scotish Credit Unions –
CUSCO Soceite Generale South Africa Bank of
Athens The Gulf Bank B&N Bank
Bank of China Bank of Panshin Cathay United Bank Central Bank of Mongolia China Trust Commercial Guandong Rural Credit
Union Hang Zhou Bank Hua Xia Bank Shanghai Rural
Commercial BanK Tai Fung Bank Taishin International Bank Yuanta Bank
American Express Banco Pichincha Morgan Stanley
APAC EMEA China
Americas
Forrester Wave Global Banking
Platforms (2010)
TCS BαNCSLEADER
Magic Quadrant for Retail Core Banking (2010)
TCS BαNCSLEADER
CELENT ABCD Core Banking Vendor (2010)
TCS BαNCSLEADER
The Best Core IT Implementation
Award (2010)
SBI World's Largest Centralized Core Implementation
Driving Growth Through Brand Differentiation
ANALYST’S ACCOLADES (TCS BANCS & CUSTOMERS)
#1 Core Banking Vendor in China
for 3rd Year in running (2010)
TCS BαNCSLEADER
Best Trading Back Office
Project (2010)
TCS BαNCSLEADER
Best Trading Back Office
Project 2010
Best Sub-Custodians
(2010)
“Of the hundreds and hundreds of core banking deals in 2010, the most significant and noteworthy was done by TCS BaNCS – Deutsche Bank” – Martin Whybrow,
while announcing the IBS Sales League Table for 2011.
COMMUNITY ALLIANCE CREDIT UNION (CACU)
Community Alliance Credit Union (CACU) is a full-service FSI, headquartered in Wollongong, New South Wales, Australia. The legal entity resulted from the
merger of Illawarra and Unicom Credit Union in 2003. Since then CACU has added Shoalhaven and Western City and has also launched a new online brand, bringing
a total of Five brands under its corporate structure
Core Banking Transformation Strategy
Enable CACU to continue with its multi-branding of its acquired institutions’ offerings
At the same time effectively leverage the operational efficiency of a centralized IT architecture
Shaolhaven
Illawara CU
Unicom CU
Western Sydney CU
CU Online
CACU’s Multi Brand Strategy Each brand has its own
“personality” that delivers a unique value
proposition and is highly differentiated
Focus on local community, primarily though branch channel
Serves an aging community
University focus , Internet channel, low fees, club tone.
Internet based, not linked to any specific community Friendly know
customer by name, foster innovation
CORE BANKING TRANSFORMATION STRATEGY
Business Strategy
Solution & Vendor Selection
Core Transformation Strategy
Retain unique brand identities for each of its four acquisitionsEach brand will provide unique value proposition &
highly differentiatedBring operational efficiency to support the business
goals through a centralized IT architecture
Use a single system to provide multiple products to multiple brands through multiple channels Deploying a configurable system, as a single instance
running on a single IT infrastructure
Solution should be scalable, open, flexible and configurableThe IT architecture should meet the core banking
transformation strategy needs The vendor relationship should be based on a close-
knit partnership with a shared and common understanding/belief in the strategic goals of CACU
CORE BANKING TRANSFORMATION
TCS BaNCS Single ( Platform
Instance & Infrastructure)
Shaolhaven CU
Illawara CU
Unicom CUWestern Sydney
CU Online
• Single instance running on a single IT infrastructure facilitated efficiency, saved operational costs, eased business continuity planning, and reduced maintenance and staff overhead.
• These elements ultimately converged to provide a lower total cost of ownership (TCO.)
Efficiency
• Get products to market quickly.• Can be done in days as against
several weeks / months earlier
Configurability
• Used TCS BαNCS as the single configurable system providing, multiple products to multiple brands through multiple channels
Simplicity
KEY BENEFITS
CACU Growth over the past 5 years
• Products are white-labeled leveraging a standardized master product.
• Core processing is completed under the single legal entity, as are reporting and regulatory compliance
• Standardized processes, common consolidated information from a single data source
• The back-end system functions as a generic production "factory.”
TESTIMONY
“The TCS BαNCS retail banking platform forms the backboneof our company’s expansion strategy.
If we are aiming to launch new savings products or moreadvanced internet banking services, we can do it extremelyfast, faster than any other credit union in Australia.
It really is an outstanding core banking platform. TCSBαNCS provides our staff with a clear competitiveadvantage.
This technology puts us in the race and provides our clientswith reliable and agile technology solutions.”
Mr. Michael Halloran, Chief Executive Officer, CACU
STATE BANK OF INDIA (SBI)
SBI Group
Today
Scale of Operations• One of the largest banks in the world• One of the largest branch network in the world• One of the largest ATM network in the world• One of the largest bkg employer in the world
• Retail banking• Small business banking• Corporate/ institutional banking• Agriculture & rural banking• Principal bankers to the government,
Government institutions, city corporations• Clearing bank
37 million transactions
per day
250 + million
accounts
150,000 tellers
200,000+ employees
20,000 SBI Group
ATMs
17,000 + branches
Core Banking Transformation Strategy
Deploy a centralized core banking system that can scale up to support one of the largest transaction volumes and facilitate the high growth plans of SBI
Bring efficiency and cost benefits through the centralization of IT architecture, product factory, business processes across their 17,000 + branch network
Bu
sin
ess
Are
as
THE ISSUES
Fragmented
Inefficient , costly,decentralized at branch Level
Duplication & redundancyincluding paper based data
Duplication & fragmented,non standard processes
Absence / limited
Disparate systems
Limited
Unable to match expectations
System architecture
Operations
Data integrity
Processes
STP
Customer view
MIS
Customer service
CORE BANKING TRANSFORMATION STRATEGY
Business Strategy
Solution & Vendor
Selection
Core Transformation
Strategy
Regain market share that SBI was losing to private-sector banks Introduce new products and offer better service to customers Streamline processes across the bank to realize operational
efficienciesMerge the affiliate banks into SBI with relative ease
Deploy a centralized core system that can scale up and support the high growth plans of SBI Facilitate the standardization of the processes across the bank Single customer view of all accounts Centralized product factory
The system should be able to scale up to 10000+ branches process 72 million accounts and 25 million transactions per day Centralized architecture Implementation skills, ability to do comprehensive training The vendor’s credentials on successful execution of large
projects
LARGEST MIGRATION ON EARTH – CELENT / TOWER
System architecture
Operations
Data integrity
Processes
STP
Customer view
MIS
Customer service
Fragmented
Inefficient, decentralized at Branch Level, costly
Duplication & redundancy, including paper based data
Duplication & redundancy, non standard processes
Absence / limited
Disparate systems
Limited
Unable to match expectations
Single View
Centralized & efficient, lowered cost considerably
Data integrity achieved
All processes standardized across businesses
STP achieved
Centralized System Architecture
Functional MIS
Enhanced customer service
Before After
KEY BUSINESS BENEFITS – STATE BANK OF INDIA
Business per employee increased by 250% over 5 years, top line revenue growth at 20% CAGR
Was able to completely re-design processes and centralize the process management function
Was able to consolidate affiliate banks with ease
Customer attrition arrested & is gaining new market share with 250+ Million accounts in 2010
Able to offer full range of products across all branches , significant increase in speed to market products.
17,000 + Branches, 20,000 + ATMS, 37 Million txns per day,
Was able to considerably reduce operational costs – Drastically reduced IT staff count (65%)
$158
$ 80 bn
Deposits
2005 2010
$117
$43 bn
Loans
ENABLING STATE BANK OF INDIA TO CREATE THE
WORLD’S LARGEST HOMOGENOUS BANKING
NETWORK – 17,500+ BRANCHES
• Case Study by Celent’s Bart Narter, referred to SBI as “one of the largest Banks in the world“.
• The case study "SBI's core banking implementation, one of the largest migrations on earth" with 17,385 branches; 20,000 ATMs; 262 million accounts; 37 million peak transactions per day; and 205,000 employees
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