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How Banks Profit From SAP for Banking

How Banks Profit From SAP for Banking. GROW YOUR BUSINESS WITH SAP for BANKING. Bogdan Mihailescu Banking Sector Manager SAP ROMANIA. Trends in the banking industry. Clear Trends Have Been Identified That Will Shape the European Banking Industry. Banking trends. 1. Consolidation.

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How Banks Profit From SAP for Banking

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  1. How Banks Profit From SAP for Banking GROW YOUR BUSINESS WITH SAP for BANKING Bogdan MihailescuBanking Sector ManagerSAP ROMANIA

  2. Trends in thebanking industry

  3. Clear Trends Have Been Identified That Will Shape the European Banking Industry Banking trends 1 Consolidation • Size remains a critical factor in the banking industry • Scale effects are the main success factor, especially in the production/processing facilities 2 Breaking up the value chain • Decoupling of production/processing facilities from distribution units will increase in the banking industry • Emergence of specialist companies will enforce due to enhanced outsourcing efforts • Pan-European harmonization is becoming the major trend in the banking industry • Changes in the regulatory environment determine the speed at which business models and activities in the banking industry must adjust 3 A changing regulatory environment 4 Customer focused services • Customers need to be served and retained as efficiently and effectively as possible • Shift from product-oriented offerings to demand-oriented offerings including intensification of customized products and services Source: Roland Berger

  4. Consolidation

  5. The Consolidation Process Is Driven by Merging Banks or Business Lines 1 Consolidation Horizontal consolidation Vertical consolidation Merging banks or business lines covering identical value chains Merging banks or business lines with different value chains Retail Retail Retail Brokerage Retail Multi-channel retail bank Objective: • Improve critical size/market share to improve economies of scale e.g. • Merging two saving banks • Cortal taking over Consors (2002) • Deutsche Bank, Dresdner Bank, and Commerzbank merging mortgage subsidiaries into Eurohypo Objective: • Develop a new value proposition/business model for improved/new market differentiation, e.g. • Integrating Bank 24 into Deutsche Bank 24 (1999) • Takeover of Dresdner Bank by Allianz (2002) – bank assurance Source: Roland Berger

  6. Focus on Core Competencies by Outsourcing Business Elements or Increase Economies of Scale Through Insourcing 1 Consolidation Outsourcing Insourcing • Outsource non-core value chain elements to service-providing specialists • Objective: • Reduce costs if outsourcer can offer lower costs due to increased economies of scale • Improve quality through specialization • Insourcing business, especially transaction processing, from other banks • Objective: • Increase economies of scale • Cut costs • Enhance revenues Examples • Deutsche Bank outsourcing IT systems to IBM/EDS (2002) • Bank of New York insourcing global stock clearing services from IHG (2002) • European Transaction Bank ETP insourcing payment transactions from Sal. Oppenheim, Sparda Bank, Netbank • UBS insourcing Forex services from third parties through UBS Warburg Source: Roland Berger

  7. Breaking up the value chain

  8. Redefining the Value Chain Generates New Business Models for Traditional Banks – Core Competencies Are Key 2 Traditional value chain – possible future business split 1 Saleschannel specialist Customer support Sales Marketing 2 Product specialist Treasury/risk management Product development Branding 3 Platform specialist Adminis-tration Transaction Technical platform Technical platform Critical success factor: Ease of use of interfaces (business and IT processes) Source: Roland Berger

  9. The Three Basic Options Have Specific Value Propositions – Options Are Not Exclusive 2 Traditional bank – strategic options Sales channel specialist Product specialist Platform specialist • Focus on customer demands, understanding the customer • Focus not on product sales, but on customers’ needs • Expanding access channels in a multi-channel approach • Exploiting additional services that are linked with the banking product • Focus on the creation of product innovation and value-added services • Profound know-how, access to customer data • Partnerships along the entire value chain of the banking industry • Marketplace oriented business model • Solution-oriented approach with customer needs at the center • Providing the necessary infrastructure, as well as maintenance and business-related services • Realization of economies of scale is key A shift in IT companies' client focus is needed – from focusing only on traditional banking customers to focusing on outsourcing companies, as well Source: Roland Berger

  10. A changing regulatory environment

  11. Impact on business The Regulatory Environment Has a Significant Impact on the European Banking Industry 3 Aspects of the regulatory environment Basel II • Changes in the regulatory environment determine the speed with which banks need to adapt their business models and activities • Flexible and completely transparent organizational structures are crucial for quickly adjusting activities in line with regulatory changes • All transactions have to be documented and comprehensible for internal and external audit Tax reforms The euro "European harmonization" regulatory environment EU financial services action plan Pension reforms National regulation Critical success factor: flexible, auditable, and transparent systems and processes Source: Roland Berger

  12. Customer-focused services

  13. Banks Need to Serve and Retain Their Customers As Effectively and Efficiently As Possible – Launching Customer-focused Services 4 Aspects of customer-focused services One-to-one marketing Mass customization • Requires a multi-channel-compliant marketing strategy based onsophisticated channel management Segmenting customers leads to standard products being individually bundled for each customer – importance in retail banking Customer- focused services Tailor-made solutions Needs-based services • Customers become financially more literate and demand sophisticated products in private, corporate, and investment banking on an individual basis • Financial institutions will offer customer oriented services by integrating third-party products as a part of their open architecture policy Critical success factors: • Trade-off between standardization and customization • Simple configuration of new products Source: Roland Berger

  14. No. of products per client 14 11,0 12 10 Unused potential 8 5,2 6 4 2,0 2 3,1 0 Maximum cross-selling activities1) Best practice Current average Avg. in unprofit-able branches Customers Increasingly Demand a Multitude of Financial Products – Focus on Needs-based Services Leverages Cross-selling Activities 4 Needs-based services Products demanded by customers Level of cross-selling activities Current accounts and payments Overdrafts Saving products Credit and debit cards Real estate brokerage Consumer loans Mortgages Building society products Equities and bonds Pension products Life insurance and other insurance products Mutual funds Flexible integration of third-party products helps to fully exploit the complete range of financial services High margin products 1) Rather theoretical figure Source: Roland Berger analysis

  15. SAP for Banking

  16. SAP for Banking: The Solution SAP for Banking Technology Applications Processes People

  17. SAP for Banking: The Solution SAP for Banking Technology Applications Processes People

  18. SAP for Banking: Role Based Access For People SAP´s Access For People SAP understands the different roles people play in the banking environment. Benefits: • Personalize your unified point of access to relevant information and services • Eliminate traditional barriers to productivity • Create interactive gateways to accelerate business throughput Management Staff Markets Partners andSuppliers Corporates as Customers Individuals asCustomers

  19. SAP for Banking: The Solution SAP for Banking Technology Applications Processes People

  20. FinancialAdvices New Sales Services Information Providing SAP for Banking: Value Chain Based Processes (Reference Model) Production &Services Business Management Sales &CustomerService Customers Contract lifecycle Accounting Transactions& Payments Risk-calculations Events & Services Profitabilityreporting Channels Regulations Monitoring Human Resourcesmgt. Knowledgemgt. Inventorymgt. Equitymgt. Business Resources

  21. FinancialAdvices Services SAP for Banking: Process Territories in Detail (1) Sub processes of Sales & Customer Services • Generate Financial Advices • Originate new Contracts and Accounts • Capture Investment Orders • Define and Select Customer Specific Products and Prices • Valuate Customer with Rating and Scoring • Deliver Customer Specific Information & Statements • Customer Specific Overview of Relationship, Business (Contracts, Services, …) and Contacts • Process Services (Q&A, Complaints) • Execute Campaigns Sales &CustomerService New Sales Information Providing

  22. Production &Services Contract lifecycle Transactions& Payments Events & Services Monitoring SAP for Banking: Process Territories in Detail (2) Sub processes of Production & Services • Define Products to Execute Across Product Lines • Administrate Customer Contracts and Accounts • Authorise and Process Transactions and Payments • Monitor Payments, Accounts, Contracts • Initiate Processes like Roll Over • Process Legal Actions • Align cash flows of different products • Process corporate actions • Calculate fees, provision, interest • Check customer beneficiary

  23. Business Management Accounting Risk-calculations Profitabilityreporting Performancemeasures SAP for Banking: Process Territories in Detail (3) Sub processes of Business Reporting • Segmentation of Customers • Accounting and Consolidation • Risk Analytics & Calculations and Simulations • Measuring Profitability • Report for different purpose and on different aggregation (Customer level upto Enterprise level) • Analyse Sales Activities • Historical Analytics and Trend Calculations

  24. New Process Models Determine The Application Boundaries The Banking Specific Value Chain Territories Production&Services Sales &CustomerServices Business Management Application Boundaries Today Analytics, Accounting and Reporting for the Enterprise Marketing Add ons Operational Product-Based Applications Application Boundaries Tomorrow Customer-OrientedServices Contract & Transaction Services Analytical & ReportingServices

  25. SAP for Banking: The Solution SAP for Banking Technology Applications Processes People

  26. Point of Sales and Services (Channels) The SAP Reference Application Landscape CENTRAL SERVICES Sales & Customer Services Treasury &Trading Customer oriented Services Customer Information Management Business Support Contract &Transaction Services Contract & Transaction Services Business Management Analytical& ReportingService

  27. Point of Sales and Services (Channels) Customer Information Management The SAP Reference Application Landscape SAP´s Application Landscape SAP understands the application territories needed to adapt to future banking business models Benefits: • Flexibly adapt to future growth and business changes • Investments in future proof IT • Reduce system complexity and redundancy • Use applications stand alone or integrated seamlessly into existing landscapes • Mitigate migration risk Treasury &Trading Sales & Customer Services Business Support Central Services Contract &Transaction Services Business Management

  28. Reference Application Architecture in Detail Central Services Touchpoints Capital Market Touchpoints Customer Branches Internet ATM Call Center Mobile D. Product Data& Management Sales & Customer Services Treasury & Trading Procurement &Inventory Personalization Customer Overview Contact Center &ActivityMgmt. ContractOrigination&Offering Business Events &Service Products& Pricing Financial Advice Weath Management Trading Systems Market Data Human Resources Campaigns Customer Profiles Archiving Customer Information Management BusinessSupport Travel Management Authori-sation & Access Transaction Banking (Contract & Transaction Services) Product Configurator Payments Orders Treasury, OTC & Securities Fixed Assets& Real Estate Cash Accounts, Savings, Deposits, Cards Loans & Leasing Syndica-tion, Facilities & ABS Settlement Printing&OutputMgt. Custody Training EmployeePortal/UI Collateral Management Portfolio& ProgramManagement Business Management Customer Investment Performance Enterprise Management Customer Behavior and Lifecycle Analytics Knowledge Management ALM RiskMeasurement Profitability Accounting Regulation

  29. Current SAP offering Partial/ Planned/ Partner offer No SAP offering SAP’s Coverage of the Reference Application Architecture MySAP CRM MySAP ERP Central Services Touchpoints Capital Market Touchpoints Customer Branches Internet ATM Call Center Mobile D. Product Data& Management Sales & Customer Services Treasury & Trading Procurement &Inventory Personalization Customer Overview Contact Center &ActivityMgmt. ContractOrigination&Offering Business Events &Service Products& Pricing Financial Advice Weath Management Trading Systems Market Data Human Resources SAP Net-weaver Campaigns Customer Profiles Archiving Customer Information Management BusinessSupport Travel Management SAP Core Banking Authori-sation & Access Transaction Banking (Contract & Transaction Services) Product Configurator Payments Orders Treasury, OTC & Securities Fixed Assets& Real Estate Cash Accounts, Savings, Deposits, Cards Loans & Leasing Syndica- tion, Facilities & ABS Settlement Printing&OutputMgt. Custody Custody Training EmployeePortal/UI Collateral Management MySAP CRM Enterprise Management Portfolio& ProgramManagement Business Management Customer Investment Performance Enterprise Management Customer Behavior and Lifecycle Analytics Knowledge Management ALM RiskMeasurement Profitability Accounting Regulation

  30. SAP for Banking: Application Service Architecture SAP for Banking Technology Applications Processes People

  31. SAP NetWeaver™ People Integration Composite Application Framework Life Cycle Management Multi-Channel Access Portal Collaboration Information Integration BusinessIntelligence KnowledgeManagement Master Data Management Process Integration Business ProcessManagement Integration Broker Application Platform … … J2EE ABAP DB and OS Abstraction DB and OS Abstraction .NET Websphere SAP NetWeaver – The total integration and application platform Technology SAP Application and Integration Platform SAP understands the need to integrate across technologies and organizational boundaries Benefits: • Unify and align people, information and business processes • Interoperate with .NET and J2EE • Reduce custom integration through business-ready solutions • Combine technology platform and application landscape to achieve optimal Enterprise Services Architecture

  32. SAP for Financial Services consists of the following solutions and applications: SAP Core Banking Loans Management Account Management Collateral Management Payment Engine SAP Enterprise Management Profitability Analysis Credit Risk Management Market Risk Management Asset Liability Management Financials SAP Customer Information Management mySAP CRM mySAP ERP Corporate Services Operations mySAP HR mySAP SRM SAP xApps SAPNetWeaver Solution Overview SAP for Financial Services Solution View Business View • SAP for Financial Services supports financial institutions in all major Markets: • America • Europe • Asia Pacific • … and processes • Relationships • Loans and Leasing • Payments and Deposits • Financial and Management Accounting • Risk Management / reg. Reporting • Human Capital Management • Infrastructure Management • Corporate Services

  33. Selection of SAP for Banking Customers Strong worldwide customer base with more than 70 banks and more than 50 insurance companies

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