information enabled banking - information management survey (south based private sector banks)

Information Enabled

BankingInformation Management

Survey - South based private sector banks

kpmg.com/in

© 2013 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

KPMG India’s Information Enabled Banking Survey (IEB) was conducted amongst select 10 banks. IEB aims to provide an overview of Information Management landscape across Small and medium private sector banks. Over the last 15 years banks have made sizable investment in Information Technology which brought a paradigm shift in the banking industry and information availability. Sustained focus on IT became a trend by itself raising apprehensions on it’s business impact. A focus shift from Information Technology to Information Management has become imperative for Banks to meet their business priorities and market demand.

With the advent of technology in banking, huge volume of data is produced and stored digitally. Traditional branch/location specific banking is replaced by technology enabled anywhere/virtual banking. This transformation has also resulted in increased information availability that necessitates banks to implement Intelligent Decision Support System.

The IEB survey identifies key areas in banks where Information Management plays a critical role, not just in day to day operations but also at a strategic level. Crucial Information at the right time at the right cost would enable banks to drive up their top line growth. Our survey identifies areas of Improvements in departments such as Planning & Development, MIS, Risk, Corporate Finance and Customer Care where IM can play a vital role in a banks turnaround.

KPMG’s IEB survey encompasses all aspects of Information Management relevant to banks in detail and provides an expert opinion across Strategy, Data Quality, Data Standardization, Information Systems, Business Analytics, Data Security and People.

Foreword

Information Management

Strategic Management

Data Quality

Data Standardization

Information Systems

Business Analytics

Security

People


Table of Contents

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03

05

07

09

11

13

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Information Management function helps banks to leverage investments in information systems and build a capability to use information as a key enabler. The ability of organizations to capture, manage, preserve, store and deliver the right information to the right people at the right time is one of the most success factors of Information Management.

The journey of Information Management starts when the organization defines and aligns their business objective with Information Management Capabilities. As the IM capability develops within the

organization, they start realizing benefits like lower cost on technology spend, better information for decision making, higher data security and lower resourcing spend.

Business objectives from IM defined

Sufficient data is available in accessible systems

Data validation and certification mechanisms in place

Extraction, Transform, Load (ETL) defined and technology in place for EDW

Refine IM vision to plan Implementation and value realization phases

Re-validate business objectives



IM capabilities

• Analytics

• IM process excellence

• IM organization

• Information enabled strategic initiatives

IM Capability optimized

Finalization of the IM Vision

Integrated Information Systems (Information Systems-Data warehouse)

Data Quality (Master data-Transaction data)Data AvailabilityBusiness Objectives

Information Management Journey

Information Management Ecosystem (Illustration)

The IM ecosystem encompasses all areas of the bank interlinking key areas around Strategy, Data Quality, Standardization, Systems, Analytics, Security and People. All these areas intertwine with each other and form an integral part of the overall Information Management Framework. Benefits realization from a Bank’s IM investments would materialize along with development of their organisational IM capability.

Information Enabled Banking | 02



People Strategy

QualitySecurity

StandardizationAnalytics

Systems


Strategic Management

A bank’s Information Management vision is determined by its strategic business objectives. Leveraging information capabilities and enablers are key success factors for overall achievement of business. A well defined and documented IM vision statement aligned with strategic business objective shall provide a differential advantage to banks over their competitors.

Some key fundamentals of an IM strategy are Centralization, Self service delivery model, Automation, Rationalization and Harmonization, Standardization and Outsourcing & Performance Management. Each of these blocks will enable a Bank’s capability to leverage their IM capability and re align IM investments to their strategic focus.

These components shall significantly influence profitability, reduced risks and improved ways of working. At an operational level these components would improve efficiency and reduce business complexity. These operational advantages can only be realized when key decisions on these components are taken with strategic focus.

KPMG in India Analysis


Building Blocks for IM Strategy

Characteristics of Leading IM strategies

Cost efficient IM processes and systems

Intelligent decision support systems

Competitive advantage through analytics and insight

Better corporate governance and Risk Management

Lean IM organization


Strategic Management IEB survey findings

56 percent of the respondents consider their maturity of their IM strategy as medium, indicating a need for improvement.



Although 100% of the respondents to the survey responded to having an Information Management Strategy

78% confirmed that this was aligned with the Corporate strategy of the Bank

56% of the respondents have confirmed outsourcing is a part of their Information Management Strategy

86% of the banks responded that their managers understood the criticality of Information Management

Have a Documented Roadmap for Information Management

IM Strategy Maturity MAP

The board room agenda for bankers should include a review of their IM strategy and its relevance to overall strategy. This well defined strategy should be cascaded and driven from senior leaders to lower levels of the organization

Self Assessment by Bankers

‘‘ ‘‘Key Take Away

1. There needs to be a better focus on better strategic alignment between IM and business objectives

2. A banker should adopt to a well defined IM strategy that will enable them to :

• Realize business objectives faster

• Make timely corrections in business strategy, processes and operations



Data Quality

Data quality is one of the fundamentals for a bank in having robust IM capabilities. Ensuring quality of data is a common challenge faced by the banks considering multiple input sources, extensive digitization of existing records and large data. Maintaining quality of data is critical for banks to leverage on IM capabilities.

In Banking sector these six areas form the core of all information that is processed. Data Quality is the backbone for all these areas that ensure that accurate outputs are generated . Quality of information would result in quality decisions made through the accuracy of the reports presented.

Key Challenges from the system perspective in Data Quality

Characteristics of Leading practicesData Quality touch points in Bank’s Ecosystem

Master data rationalization

Data cleansing and Migration projects

DQ compliance audits

DQ score cards

Centralized Master Data governance Mechanisms

Linking DQ to performance Management

Orga

niza

tion

Driv

en

Syst

em/P

roce

ss d

riven

• Changes in business activity

• Corporate restructuring

• Reconciliation between systems

• Accounting standard changes

• Changes in the regulatory environment

• Ad-hoc reporting

• Head office-imposed systems changes

• Multiple input languages

• Undefined Unit of Measurements

• Duplicate Master data

• Unclear system logics

• In-effective input validation mechanisms

• Sub optimal training /skills of data owners

• Complex input processing systems

Management Information System

Mas

ter D

ata

Man

agem

ent

Inpu

t Val

idat

ion

Mec

hani

sm

Doc

umen

t M

anag

emen

t Sys

tem

Compliance Reporting System

Data Quality

Analytics




Top 5 Data Integrity Checks and Controls used by Banks

Financial Audit 1

Internal Audit 1

Compliance Audit 3

Automated Reconciliation System 3

Cash Clearing 5


Data Quality IEB survey findings

Majority of the Banks perceive their Data Quality maturity to be average.

Documented Standards for Data Ownership and timeliness

IM Data Quality Maturity Map

Only 33% of the respondents use automation in their monthly report

generation process and 44% have minimal manual intervention, so as to reduce Data Quality issues.

Banks tend to collect information across multiple locations and multiple formats, thus potentially creating non standardized data.

67% of the respondents claimed to have clean and standardized data across systems.

Self Assessment by BankersKey Take Away

Banks should measure Data Quality in form of a scorecard and linking performance management to these scorecards, thus increasing Data accountability in the banks.





Standardization

Standardized IM processes would mean that banks have well defined and documented standards in place for managing data sources, information processing and delivery. Standardization across business eliminates data duplication, data redundancy and cost associated with resolving these issues. Standardization in Information

Management – Quantifying what you save

Full time equivalent:

With automation in place through standardization, an employee’s involvement on routine activities is reduced thereby giving employees bandwidth to participate in more productive activities.

Cost reduction:

A major benefit by standardization is that banks are able to save on operation cost. Standardization of processes by elimination of duplication of efforts and identification of potential synergies help banks reduce cost.

Turn around time:

Standardization results in optimized TAT on operations thus resulting in faster and more efficient ways of working in the banking system. Standardization would result in optimal TAT without compromising on quality.

Knowledge Management:

The benefit of knowledge management could be classified as both qualitative and quantitative. Banks gather a lot of data but deriving meaningful insights from this large data will be made possible by continues refinement and implementing standardized structure to deal with them. Standardization helps in turning data to information and thereby empowering management with clarity for decision making.

Information Management activities that can be standardized

Standardization Data Management

Master Data Management

Report Delivery

Report Production


Standardization IEB survey findings

Banks use different technologies and databases to capture and store information. One of the key problems they face is that there may be multiple versions of truth available.

Only 11 percent of the respondents perceive that they have advanced Standardization maturity, indicating there is scope for improvements.

Scope for standardization in IM

IM Standardization Maturity Map


Standardization is needed at Extract, Transform and Load (ETL) process which would result in process efficiency, reduced manual intervention and reduced costs.

Harmonization of reports and data management processes

This would include analysis of current reporting requirements. Post this analysis, banks need to identify sources of the data that feeds into these reports. Harmonized reporting landscape offer good standardization opportunities and better data management process. These initiatives could be very effective levers for driving IM efficiency with in Banks.

Rationalization of reports and process

After gathering of the reporting requirements, banks would need to rationalize redundant reports from their IM landscape. Elimination of duplication of reporting processes and redundant fields in reports could also provide a banks better insights from the reports generated.An exercise of Benchmarking against the best practices in the industry would help a bank understand its current standing and initiate a gap analysis to achieve its objectives.

Templates and Automation

With the strategic, tactical and operational objectives for reporting set, banks can institutionalize templates and dashboards to automate and optimize report production process. Banks can leverage automation of processes to obtain real time information feed on their key performance indicators.

All surveyed Banks have standardized reporting formats at the local branch, region, zone and at the corporate level

Banks face challenges in standardizing the report generation methodology despite having a standardized reporting form and clearly defined output.




Information Systems

Information systems generate, store and deliver data to the users. There are multiple systems that banks use to capture and store data. Thus there are chances for data duplication, data redundancy and disparate data across multiple systems. Thus it becomes imperative to have these Information systems talk to each other and ensure that there is smooth flow of information across systems.

With advancement in technology, every bank is seeking to leverage on the capability of information systems to generate, store and deliver data to internal as well as external users. Information collected by a bank may be

varied as there could be multiple entry points for data. Data entered at a retail branch, an ATM machine, a rural branch or at an overseas location need to be seamlessly woven to streamline data gathering process for the bank.

Integrated information system shall deliver

Optimization of processing time

Minimal Errors

Optimizing Automation opportunities

Value realization from IS investments

Continuous upgrade and innovation on IS applications

User Adoption

Advanced IS apps key enabler of growth



Information Systems IEB survey findings

Self service delivery platform must be implemented to ensure security, improve user experience and reduce operational cost. The survey respondents majorly use Emails and Hardcopy reports as a way to distribute management reports.

Banks are currently changing their technological landscape to incorporate Data flow automations which has been mandated by the RBI.

Despite being one of the pioneering sector to invest in Information Systems, Banks reveal that there needs to be constant review of their systems to keep up with the technological changes.

IM Information System Maturity Map


Information Systems are to be seamlessly integrated to leverage value of investments made in Information Technology by banks.

Management Report Distribution Tools

% Reports sent to RBI that are automated






Business Analytics

Business Analytics for bankers would mean the capability to mine from their huge historical data, combine unstructured data elements from external sources and use predictive modeling to provide business insight. Business Analytics help banks identify areas of competitive advantage and risks. Leading banks use analytics to track behavior of customers by identifying spending patterns to leverage on cross selling opportunities.

The historical records can serve as both lag and lead indicators to banks. Watching the historical trend, banks can predict market dynamics trends and patterns. This would not merely be for their customer base but also more broader macro economic trends could be estimated. The ability to predict and take proactive measures in line with the predicted trend will have a positive impact on the banks growth.

With more regulators across the world especially in the financial services sector, placing a greater emphasis on risk management, banks need to review their ability to manage risk. Business analytics caters to satisfy this aspect of a bank’s need as well. The Basel II norms requisite defined capital adequacy and provisioning norms for each category of assets. To ensure and enable these controls and provisions are in place, it necessitates an advanced approach to analytics capability.

Evolution of analytics in banking space would be driven by following enablers

• Customized product offerings by peer groups and international banking players

• Wallet share maximization

• Risk management – Advanced approach necessitate analytics capability

• Banks ability to predict market dynamics and their potential impact on growth.

• Optimizing existing customer base through up selling cross selling




Business Analytics IEB survey findings

Business Analytics for bankers would mean the capability to mine from their huge historical data, combine unstructured data elements from external sources and use predictive modeling to provide business insight. Business Analytics help banks identify areas of competitive advantage and risks.

Leading banks use analytics to track behavior of customers by identifying spending patterns to leverage on cross selling opportunities.

Data availability and Data Quality are the pre-requisite for any Business Analytics capability.

88 percent of the banks identify Business Analytics as one of the major area for improvements.

IM Business Analytics Maturity Map


Bankers must invest in analytics with three main objectives:

• Improved Risk Management

• Improve Asset quality

• Wallet share Maximization.

Most banks are in early stages of implementation and reported challenges of Data Availability and Data Quality.

We noted that 44% of the respondents of the survey revealed that they require at least some amount manual intervention before they can use the data for analysis

Only 44% of the surveyed banks use a Business Analytics Tool. While 22% of the responding banks have an Institutionalized procedure for Business Analytics

The most widely used tool in Analytics is SAS closely followed by SAP BI



Security in Information management deals with protecting assets such as customer database, product profile, market promotion plans and intellectual property. Banks place higher importance on information security considering the regulatory environment its operating in. Banks pose increased vulnerability of potential cyber attacks due to increased exposure on information technology , Mobile banking and use of ATMs.


Security

78% of the banks maintain a detailed list of all information assets in the bank. These banks maintain checks and controls over their all their Information Assets

Although Security is critical to banks, only 11 percent of the respondents perceive that their security systems is in an advanced stage.

IM Security Maturity Map

Average Recovery time Objectives


Bankers should practice Control Self Assessment (CSA) to protect Information assets. Security policy to be revisited regularly to plug any loopholes created due the changing technological landscape.




People

78% of the banks provide training to their employees to familiarize them with their IM systems

All the respondents have MIS teams centralized

Information owners, BA team, MIS teams form an IM Organization. Centralization of IM activities and automations are the two key enablers to an IM organization. Banks generally underestimate their Full Time Equivalent (FTE) spent on Information Management as they do not recognize IM component in most roles.

In the current age banking organizations have shifted from their decentralized methods of managing information to a more centralized framework.

56 percent of the respondents convey their IM people maturity map to be average, signifying tremendous scope for improvement.

IM Security Maturity Map

MIS Team Size in FTE


Banks should map As-Is existing IM organization structure, including partial roles and use this as a baseline to target improved IM efficiency and reduction in overall cost efficiency.



Information Enabled Banking | 14Information Enabled Banking | 014



KPMG’s IM framework aims to help transform your banking organisation by:

• Streamlined IM processes

• Increase visibility of Customer Behavior

• Timely corrections in business strategy, processes and operations

• Competitive Market Intelligence

• Builds the right data model and platform to respond to changing business needs

• Transparent Performance Management Systems

• Information integrity and continued alignment to business needs

• Proactive Risk Management and Data Security Mechanisms

• Futuristic Product and Service Developments

• Leverage value of investments made in Information Technology

• Leverage from External and Internal sources for a comprehensive Perception Analysis

• Secure foundation for reliable information aggregation and delivery

• Streamlined Project and Change Management for IM Strategy

• Periodic Technology and Infrastructure Assessment

• End to End Dashboards which captures Key KPIs delivering right information to the Right people at the Right Time

• Seamless Data Migration.

How KPMG adds value in your IM journey


Conclusion

Acknowledment

Information Management is now recognized as a key function by Banks . There is a clear distinction between IM and IT across the banking sector. There is bound to be increased attention on impactful IT investments to land information management objectives across banks . These objectives are

• Cost efficient IM organization

• Business partnering decision support systems

• Insightful information systems

• Value realization from IT investments through centralization and outsourcing.

We would like to acknowledge the efforts put in by Rohit Nair, Narayan Mahadevan, Ameer Iqbal, Nanda K Jayakumar and Remedios Dsilva for the development of this thought-leadership.


kpmg.com/in

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Any trademarks or service marks identfied in this publication are the property of their respective owner(s)


The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.

Printed in India.

Information Enabled

BankingInformation Management

Survey - South based private sector banks

kpmg.com/in

KPMG in India Contacts

Pradeep UdhasPartner and HeadMarketsT: +91 22 3090 2040 E: [email protected]

Ambarish DasguptaPartner and HeadManagement ConsultingE: [email protected]: +91 33 4403 4095

Kalpana BPartner Management Consulting T: +91 080 3065 4051 E: [email protected]

Shashwat SharmaPartner Management Consulting T: +91 22 3090 2547 E: [email protected]

information enabled banking - information management survey (south based private sector banks)

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