Copyright: Avi Rosenthal, all rights reserved 1 Banking: Business and Technology Trends Avi Rosenthal Avi Rosenthal Independent Consultant

Copyright: Avi Rosenthal, all rights reserved2 Overall Presentation Goal Understanding business trends and technological trends dependencies and their implications on technological decisions in the banking industury.

Copyright: Avi Rosenthal, all rights reserved3 Speaker ’ s Qualifications 30+ Years in IT. 30+ Years in IT. Technologies and Architectures Consultant for 30 organizations. Technologies and Architectures Consultant for 30 organizations. Working with leading Analysts Groups Working with leading Analysts Groups Consultant for Leading Edge Core Banking Consultant for Leading Edge Core Banking endeavor ( ). Assessing software products initiatives for VCs. Assessing software products initiatives for VCs. Many years of experience as CTO, Technical Manager and Technical Expert. Many years of experience as CTO, Technical Manager and Technical Expert.

Copyright: Avi Rosenthal, all rights reserved4 Presentation Agenda Introduction Introduction Business Challenges Business Challenges Decisions and Solutions Decisions and Solutions Technological perspective Technological perspective Business perspective Business perspective Summary Summary

Copyright: Avi Rosenthal, all rights reserved5 Presentation Agenda Introduction Introduction Business Challenges Business Challenges Solutions and decisions Solutions and decisions Technological perspective Technological perspective Business perspective Business perspective Summary Summary

Copyright: Avi Rosenthal, all rights reserved6 Traditional Bank - Branch ATM

Copyright: Avi Rosenthal, all rights reserved7 Traditional Technology Product and Branch centric Back End Legacy Systems Back End Legacy Systems COBOL, Mainframe Operations: By the clerks in the branch and by ATMs Operations: By the clerks in the branch and by ATMs Batch Window at night Batch Window at night

Copyright: Avi Rosenthal, all rights reserved8 Presentation Agenda Introduction Introduction Business Challenges Business Challenges Solutions and decisions Solutions and decisions Technological perspective Technological perspective Business perspective Business perspective Summary Summary

Copyright: Avi Rosenthal, all rights reserved9 Business Change The banking Business Needs are changing significantly: Customer Centric Customer Centric Globalization Globalization Distribution Channels Distribution Channels (Near) Real Time Enterprise (Near) Real Time Enterprise 24X7 24X7 Factorization Factorization

Copyright: Avi Rosenthal, all rights reserved10 Business Challenges The banking Business Needs are changing significantly (2): Merges and Acquisitions Merges and Acquisitions Increased Competition Increased Competition Bill Payers, Insurance etc. Smaller banks becoming a Niche Business instead of complete solutions Smaller banks becoming a Niche Business instead of complete solutions Business and IT converge Business and IT converge

Copyright: Avi Rosenthal, all rights reserved11 Customer Centric Improved service to the customer. Improved service to the customer. Contact Center, self service Contact Center, self service Understanding the customer. Understanding the customer. Analytical CRM Analytical CRM Collaboration Collaboration Operational Systems vs. CRM Operational Systems vs. CRM

Copyright: Avi Rosenthal, all rights reserved12 Customer Centric (2) Customer Centric is dependent upon: Multi-Channel Multi-Channel Products Products Globalization Globalization Integration: Integration: Data: Operational, DWH, External Front End: Personalization, consistent Middleware: The Glue for connecting Middleware: The Glue for connecting

Copyright: Avi Rosenthal, all rights reserved13 Customer Centric (3) 75% of US based FSPs will attempt to adopt a customer-centric by the end of 2001, less then 25% will be actually customer centric by 2003 (Gartner Group) 75% of US based FSPs will attempt to adopt a customer-centric by the end of 2001, less then 25% will be actually customer centric by 2003 (Gartner Group)

Copyright: Avi Rosenthal, all rights reserved14 Globalization Support for Multi … Support for Multi …Examples: Multi-Language, Multi Time Zones, Multi-Language, Multi Time Zones, Multi-Currency, Multi-Bank Banking groups and Merges of banks originated in different countries Banking groups and Merges of banks originated in different countries

Copyright: Avi Rosenthal, all rights reserved15 Globalization Dependencies 24X7 24X7 Customer Centric Customer Centric Products Products Integration Integration Regulations Regulations Merges Merges

Copyright: Avi Rosenthal, all rights reserved16 Multi - Channel Branch ATM

Copyright: Avi Rosenthal, all rights reserved17 Multi – Channel Consistency between channels Consistency between channels Multi-Channels for a business operation Multi-Channels for a business operation Adding new channels Adding new channels Exploiting channel technological capabilities Exploiting channel technological capabilities Technological limitations of channels Technological limitations of channels Regulations Regulations

Copyright: Avi Rosenthal, all rights reserved18 Real Time Enterprise (RTE) Shortening decision time. Shortening decision time. Decisions Based on Real Time Data. Decisions Based on Real Time Data. Enabling Technologies: Enabling Technologies: BPM, Other Integration technologies, Collaboration, Internet

Copyright: Avi Rosenthal, all rights reserved19 Real Time Enterprise (RTE) The ability to remove latency or lag times from key business processes, to extend processes globally to "follow the sun," and to access real-time financial, managerial and operating data will increasingly separate industry leaders from also-rans (Gartner Group, 2003) The ability to remove latency or lag times from key business processes, to extend processes globally to "follow the sun," and to access real-time financial, managerial and operating data will increasingly separate industry leaders from also-rans (Gartner Group, 2003)

Copyright: Avi Rosenthal, all rights reserved20 RTE Dependencies Globalization Globalization CRM CRM Factorization Factorization 24X7 24X7

Copyright: Avi Rosenthal, all rights reserved21 24X7 Business, Applications and Technological aspects. Business, Applications and Technological aspects. A prerequisite for complete RTE A prerequisite for complete RTE 24X7 of Corporate customer 24X7 of Corporate customer Higher Availability of other customers Higher Availability of other customersDependencies RTE, Globalization, Multi-Channel, CRM, Regulations RTE, Globalization, Multi-Channel, CRM, Regulations

Copyright: Avi Rosenthal, all rights reserved22 Factorization Building Banking Products Building Banking Products By End Users By End Users Minimal development, if any Minimal development, if any No dependencies on IT for Time to Market No dependencies on IT for Time to Market Dependencies Dependencies CRM, Globalization CRM, Globalization

Copyright: Avi Rosenthal, all rights reserved23 Business issues perspective

Copyright: Avi Rosenthal, all rights reserved24 September 11 th effects Economical slowdown Economical slowdown Change of Priorities Change of Priorities “ Do more with less ” mode of thinking “ Do more with less ” mode of thinking Market Consolidation Market Consolidation Outsourcing Outsourcing

Copyright: Avi Rosenthal, all rights reserved25 Priorities Costs Savings Costs Savings Processes Processes Understanding the Customer Understanding the Customer Customer Identity verification Customer Identity verification

Copyright: Avi Rosenthal, all rights reserved26 Complexity and Functionality Functionality Complexity

Copyright: Avi Rosenthal, all rights reserved27 Presentation Agenda Introduction Introduction Business Challenges Business Challenges Solutions and decisions Solutions and decisions Technological perspective Technological perspective Business perspective Business perspective Summary Summary

Copyright: Avi Rosenthal, all rights reserved28 Solutions and decisions Guiding Principles Use of Assets and knowledge Use of Assets and knowledge Architecture Architecture KISS KISS

Copyright: Avi Rosenthal, all rights reserved29 Solutions and conceptual decisions Decisions to be made Where to begin the adaptation process? Where to begin the adaptation process? Front End, Back End, Both,some channels (e.g. Internet). All applications or only some of them Buy vs. Build or both Buy vs. Build or both Architecture (SOA, Object oriented, Component Based, Traditional) Architecture (SOA, Object oriented, Component Based, Traditional)

Copyright: Avi Rosenthal, all rights reserved30 Where to begin the adaptation process? Many start with Front-End Modernization. Many start with Front-End Modernization. Changing the Back End trade offs: Costs more but could add more business value. Changing the Back End trade offs: Costs more but could add more business value. This decision is orthogonal to the decision of Buy vs. Build This decision is orthogonal to the decision of Buy vs. Build Starting with an external channel and expanding to other channels is a possible strategy Starting with an external channel and expanding to other channels is a possible strategy

Copyright: Avi Rosenthal, all rights reserved31 Buy vs. Build Buy Core Banking packages are ERP like. Core Banking packages are ERP like. The considerations are similar. The considerations are similar. The gap between ERP packages and organization needs is usually smaller. The gap between ERP packages and organization needs is usually smaller. ERP vendors (e.g. SAP) are beginning to build vertical ERP solutions for banking. ERP vendors (e.g. SAP) are beginning to build vertical ERP solutions for banking.

Copyright: Avi Rosenthal, all rights reserved32 Buy vs. Build: Build A major development project is required. A major development project is required. Platform decision is needed: Platform decision is needed: J2EE vs./and Dot Net, COBOL, 4GL

Copyright: Avi Rosenthal, all rights reserved33 Programmer Market Share Developers From an estimated worldwide market size of 7 million “professional” developers M = million 1M 2M 3M COBOL Visual Basic C++ Java C# Source Gartner Group

Copyright: Avi Rosenthal, all rights reserved34 Technological decision process Selecting Java could imply Paradigm Shift Paradigm Shift Cultural Change Cultural Change External people in the development team External people in the development team Internal Resistance Internal Resistance Leading Edge: More risks and more potential business value Leading Edge: More risks and more potential business value

Copyright: Avi Rosenthal, all rights reserved35 Technological decision process Selecting COBOL could imply Proven Technology Proven Technology Internal Development Team Internal Development Team No fundamental change: Less Business value No fundamental change: Less Business value Less Internal Resistance Less Internal Resistance

Copyright: Avi Rosenthal, all rights reserved36 Buy vs. Build: Buy & Build Buy Build and Integrate Buy Build and Integrate What to buy? What to build and what to keep? What to buy? What to build and what to keep? Enabling Technologies: Integration. The Challenge: Combining existing, bought and developed as an integrated system. Enabling Technologies: Integration. The Challenge: Combining existing, bought and developed as an integrated system.

Copyright: Avi Rosenthal, all rights reserved37 Architecture A Banking package defines an architecture. A Banking package defines an architecture. Components based vs. Silos Components based vs. Silos The trend: towards Service Oriented Architecture (SOA) The trend: towards Service Oriented Architecture (SOA)

Copyright: Avi Rosenthal, all rights reserved38 Architectural example New European Banking Specialization Big Banks continue their multi-lines business, in multi-countries Big Banks continue their multi-lines business, in multi-countries Big Banks infrastructure: Big Banks infrastructure: Back-End systems and Channels Back-End systems and Channels Products Banks: Build banking products and sales them to other banks. No need for Back-End production systems. Products Banks: Build banking products and sales them to other banks. No need for Back-End production systems. Sales Banks: Sales the products build by Products Banks and executed by Big Banks Back-End systems Sales Banks: Sales the products build by Products Banks and executed by Big Banks Back-End systems

Copyright: Avi Rosenthal, all rights reserved39 New Infrastructure Transaction Bank Back End TB-CH2 TB-CH3 PRB1-CH1 PRB1-CH2 PRB1-CH3 PRB2-CH1

Copyright: Avi Rosenthal, all rights reserved40 Presentation Agenda Introduction Introduction Business Challenges Business Challenges Solutions and decisions Solutions and decisions Technological perspective Technological perspective Business perspective Business perspective Summary Summary

Copyright: Avi Rosenthal, all rights reserved41 Techno-Business perspective Integration instead of Integration instead of re-development applications using new technologies ERP and ERP like packages ERP and ERP like packages Architecture: SOA, MDA Architecture: SOA, MDA

Copyright: Avi Rosenthal, all rights reserved42 Techno-Business perspective Outsourcing: Outsourcing: reuse of outsourcer methodology, technology, best practices Cooperation between banks Cooperation between banks The rational for both is : saving costs. The rational for both is : saving costs.

Copyright: Avi Rosenthal, all rights reserved43 Presentation Agenda Introduction Introduction Business Challenges Business Challenges Solutions and decisions Solutions and decisions Technological perspective Technological perspective Business perspective Business perspective Summary Summary

Copyright: Avi Rosenthal, all rights reserved44 Keys for success Business and Technology Alignment Business and Technology Alignment Business Partnership Business Partnership Customer Customer Multi Channel Multi Channel Reuse: Elements, knowledge etc. Reuse: Elements, knowledge etc. Architecture Architecture

Copyright: Avi Rosenthal, all rights reserved45 Q & A?