18 de abril. IBM Client Center, Madrid

Nuevos ecosistemas para nuevos modelos de negocio

PLATAFORMAS EN LA BANCA ABIERTA

Kwafo Ofori-BoatengGlobal LeaderDigital Front Office TransformationIBM Banking & FM Technical Leader Europe

The Post PSD2 Horizon: What Now?

The continuum of Innovation in Retail Banking

Regulation, Customer Expectations and Competitive Landscape have accelerated a deeper approach to banking transformation

• Customer Experience Optimization

• Optimizing Customer Journeys• Operating Model Optimization

• Business Model Transformation

• Operating Model Transformation

• Governance Optimization

• Focused on experience• Customer Focused

Enterprise• Focused on Analytics

• What do we do differently• How do we deliver

differently• Reinventing the

Organization

Digital transformation

• Process Model Optimization • Digitalizing Processes• Cost Optimization

• Focused on efficiency• Enabled by technology• Accelerated by best practices

Digitization

Digital reinvention

This evolution is radically transforming the structure of the industry

Traditional Full Service Bank Non-Traditional Ecosystem

Competing ecosystems

and platforms

Customers

Primary Account Institution

Customers

Financial Transactions

Financial Value-adds

Non-Financial Services

Touch points

Products / Services

Financial Transactions

More relevant to the

customer

Banking Products Customer Products

Operations & Technology Providers

Investors

More disaggregated relationships, activities and

operations

Distribution

Manufacturing

Risk Taking

Distribution

Manufacturing

Risk Taking

Today Future

Primary Account Institution

Banks and/or

Digitalization impact on Banking RoE2005 to 2025F, percent

Current Steady State

Unmitigated Digital Disruption

Source: McKinsey & Co. Forecast

↓35%+Impact on profitability

Economic value is shifting to the customer interface –which accounts for 65% of profit and delivers 20% ROE

0%

20%

40%

60%

80%

100%

Revenues Profits

“DISTRIBUTION”

“MANUFACTURING”

Revenues and Profits by activity2016, $ billions

1,871

2,085

47%

53%

65%

35%

748

404

4.4%

20%

Notes: 1. Estimate based on quantitative data and qualitative SME inputs2. Scale of disruption is the % of current banking revenue that will migrate to new digital business models (either new entrants or incumbents. Global banking revenue ($B) projected in 2020 3. Comprised of mostly unsecured loans except for auto-finance within personal loans

Source: Citi Digital Disruption Mar 2016(Disruption Shift), CB Insights (VC Funding), IBM Voyager Study

RoE

Economic Value

Shifting

Focus of Client Spending

Higher growth spending areas are focused on deploying newer “digital” capabilities including: - Channels- Analytics / Cognitive- Value added services- Ecosystem / platform

enablement

Spending on traditional back-end areas (e.g., payment engines) is large, but slower growth. Spending is focused on:- Structural cost

reduction- Operational efficiencies

Back Office

Product-centricLegacyOfficeLegacy

Systems

FrontOffice

Customer-centric

Digital OfficeOmni-channel journeys,

Experience Orchestration,

Ecosystem Integration,Value added

services

Migrating Functionality

How are we seeing the industry transform in response?

2. Creating simpler, faster, higher quality, more modular core operations at structurally lower cost

Examples:Digital TransformationCognitive, Data & AnalyticsWatson Financial Solutions

3. Delivering secure and scalable industry infrastructure, for secure big data driven workloads

Examples:Cloud Infrastructure TransformationSecurity

3

1. Building and participating in industry networks and digital platform businesses

Examples: Blockchain, Payments and Transaction Services In

sigh

tsFinancial

Managem

ent

Channels

Back Office

Customers

Products

1 2

By building and participating in Industry Networks and Platforms

Private Equity§ Deployed a security-rich

Blockchain, or distributed ledger solution for the private equity market.

§ Provides real-time insight and transparency to all parties.

§ Allows fund to transfer ownership stakes and be managed, serviced and audited throughout the investment lifecycle on a transparent platform

Trade Finance§ Digital Trade Chain (DTC)

consortium§ Solution builds on the current Trade

Information Trade Finance – Open Account for SME.

§ 10+ Additional Banks to join in 2018

§ Expansion outside of Europe in future

Post Trade Processing§ Builds on current Trade Information

Warehouse service, which manages recording keeping and payments for $11 trillion of credit derivatives and is used by 2,500 buyside firms such as mutual funds and pension funds in more than 70 countries.

§ Becomes a key piece of the infrastructure in a very critical market

Hyperledger based platform for developers to create, activate and run Blockchain based processes

Building and operating Financial Services Blockchain industry networks

Partner with clients to establish and own network

Focus

Examples

Industry Networks enabled with Blockchain

Build Operate Own1

By becoming more Efficient and Flexible

§ Global market-leading risk management and regulatory compliance capabilities combined with IBM's deep industry expertise and cognitive capabilities

§ Addresses the substantial operational effort of escalating regulation and risk management requirements.

§ Capabilities include: Regulatory Change Management, Know Your Customer, Anti-Money Laundering, Conduct Surveillance

§ Customer Journey-led digital transformation

§ Extracting banking functionality into a digital agility layer, creation of a “library of services”

§ Ability to launch new digital customer journeys in 14 weeks, reduced change effort by 40%

§ Digital Banking Market Place -1500+ public APIs

§ Application transformation 30% of applications decommissioned

§ Multi-year transformation deployed as an integrated program comprised of 4 work streams that are oriented to enable or improve a number of business capabilities

§ Cost to income ratio improved 10.3 points (55.7 to 45.4%) and lowest customer complaints of the big 4 banks

§ Enabling cognitive interaction to enhance customer experience, improve employee productivity, and reduce costs

Radical middle and back office transformation with up to 40% cost reduction

Digital front office and flexible portfolio to address demand in customer demands

Smarter regulatory compliance through expert trained cognitive solutions

Focus

Examples

Cognitive Operations and Software

Structurally lower costs Customer Centricity Regulatory Compliance2

By driving towards more secure and scalable infrastructures

§ Legacy and cloud hybrid - migration to IaaS & PaaS hybrid model

§ Transfer apps from legacy to cloud-based componentry & cloud native solutions

§ Transformation into composablebusiness models, products, services & capabilities to drive cost reduction and new revenues

§ Nationwide embarked on a radical five-year transformation program to replace its existing systems with a real-time, always-on banking solution built on the IBM zEnterprise mainframe.

§ IBM security tools help Nationwide lock down its mission-critical database environments, manage access rights , detect potential threats in real time and take action to prevent breaches from occurring.

§ 40% cost savings over 10 years§ Enable additional savings through

Dev Ops and Target Operating Model transformation

§ Build new Cloud platform – on and off premise

§ Migrate 1,300 applications § Drive significant standardization

through increased automation and pattern based deployment

Enable banks to transition to, and re-use systems and applications in, the cloud environment

Customer and corporate data and systems security and management

Hybrid computing provides the flexibility to put workloads and data on-prem, private or public cloud

Focus

Examples

Industry Clouds and Infrastructure

3 Industry Clouds Security Hybrid Architecture

What does this all mean?

We believe that marketplaces will become the new normal business model for running a company over the next decade

1

We believe that the individual will generate an increasing volume of unstructured personal digital data, which will require structure, through insights and requests

2

The relationship between the changing needs of the individual and the supply of product and services needs to be supported by a dynamic infrastructure and analyzed using intelligent technologies

3

Components to make it happen

Define what you want to be…. and where you are...

...and then integrate the components that make it happen

Aim for full flexibility, ability to cater for changing needs, new technology components and your strategy...which will change

Think big, start small, deliver fast to production

Accelerators for Post PSD2 Transformation 5 Key Building Blocks

Multiple entry points to the roadmap

18 de abril. IBM Client Center, Madrid

Nuevos ecosistemas para nuevos modelos de negocio

PLATAFORMAS EN LA BANCA ABIERTA