Die Bankenlandschaft der Zukunftund ihre Anforderungen an die IT

CeBIT Finance Solutions Forum 2008Hannover March 4th 2008

Klaus Rausch, HVB Information Services GmbH

Managing Director

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Munich,Feb 25th 2008

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Agenda

Megatrends & challenges in banking

CustomersCompetitionHuman CapitalRegulationTechnology

Implications for the IT

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In the coming years, some key trends will drive the industry to become a highly specialized market with tremendous demand complexity

Customers redefine the rules of the game

2015 Mega-Trends

Internationalization & new kind of customers require a new type of employee

Technology improves inexorably to enable breakaway value

Universal banks and ultra-focused niche players thrive

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Regulatory burdens intensify4

The Future of Banking

Increasing internationalization and changes in approaching the customers require a different HR-portfolio. The emphasis will shift from administration towards an increasingly mobile and diverse workforce embracing the challenges of projects and change programs with global scope. Communication and facilitating skills become essential.

Heightened requirements around privacy, security and operational and partnership risk will require banks to take an enterprise-wide approach.

Advances in global connectivity, computing power, service-oriented architectures, and data analysis will lead to unprecedented functionality.

Customers

Competition

Human Capital

Regulation

Technology

The marketplace will further consolidate. The rise of industry specialists and the emerging competition from near- and non banks will both compel and enable traditional banks to specialize

Pronounced shifts in demographics, attitudes and behaviors, in additionto ubiquitous information, are giving customers increased purchasing power. Stronger participation will be demanded by the customers

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Customer value drivers are fragmenting as a result of changing demographics and value systems

Customer Value Drivers Fragment

“Norms” become increasingly rare; companies must delve deeper to understand the needs and purchasing drivers of customer micro-segments.

20th CenturyHomogenous Customers

21st CenturyFragmented Customers

Customer Segments

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f pop

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Customer Segments

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f pop

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Extreme shifts in:

AgeWealthEthnicity/CultureLifestagepatterns Household compositionValue systems

Source: IBM

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Ongoing consolidation, the increasing success of new entrantsduring the last decade and the emergence of new smart players are forcing banks to rethink their strategies

Non and near banks

Direct banking

Industry specialists

Peer-to-peer loans

Social banking

Microlending initiatives

Price comparison sites

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Increasing regulatory burdens restrain the leeways for businessoptimization and strategic initiatives

International / pan-european initiativesBasel IISEPAMiFID

Updates on national regulationsSolvency, liquidity, MARisk, MAK,transparency, consumer protection…

Supervicory bodies' audits

Tax authority requests

Foreign supervisory authorities‘ requests

Effort saving in the area of the "run the bank"budgets are widely exploitet and thus can notabsorb the extra burdens

Budgetcap

Maintenance

Change -Δ

Regulatory +Δ

Aside of "normal" regulatory and supervisoryactivity, a series of voluminous, complex andexpensive programs occupied short businessand IT resources

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Agenda

Megatrends & challenges in banking

CustomersCompetitionHuman CapitalRegulationTechnology

Implications for the IT

Supporting a globally deployed business efficiently:Re-shaping & Re-structuring of UniCredit's German IT factory

Identification ofcore competencies

+Internationalassignment

Clearing upthe portfolio

Rightsizingcapacities

Concentration onStrategic

developmentof remainder

portfolio

Merge abundantsubsidiary structure

Establish centralizedIT governance andbudget control

Assignment ofcompetenciestowards IT factories(cross boarder)

Packaging oftopics andapplications

Execute outsourcinginitiatives

Securities &SettlementPaymentsLoan systemsmaintenance(transitional only)

Assessment ofremaining staff

Identification ofessential skillsroles & key players

Smart outplacement/separation of nonstrategic capacities

Re-deploymentof capacities withinIT factories andBack office functions

Consequent exploitationof economis of scale

Taking benefit ofin-house-specializationadvantages

Smart sourcing strategies

Point of departure:Classic universal bank portfolio comprising all traditional functions/systemsFragmented IT governanceShared budget responsibilities bewteen business deptartments and IT factoriesIT activities divided between 2 subsidiaries (infrastructure and applications)

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UCI's operating model is hinged on local and global competence centers

ICT Competence Centers

Location Main ActivitiesCzech Rep. EUROSIG supportHungary CEE Core BankingPoland B2E, TreasurySlovakia CEE Core Banking supportTurkey CardsAustria iSeries, International NetworkGermany Investment Banking, Basel II, Open systemsIreland Asset ManagementItaly EuroSIG, Mainframe

BO Competence Centers

Location Main ActivitiesCzech Rep. PaymentsGermany Finance & TreasuryAustria Loans & MortgagesTurkey CardsItaly Core BankingRomania Near-shoring strategic site (mainly) for all

Operational Lines

RomaniaHungary

Turkey

Poland

CzechSlovakiaGermany

Aut

Italy

IT Near-shoring site

BO Near-shoring site

IT historic siteBO historic site

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Impact and benefits of the newest software technologíes for thebanking industry – Web 2.0 and banking of the future

Traditional internet bankingWeb 1.0 reflects historical transaction-based banking (payment orders, statements…)One-way information-channel onlyPoor online interaction and communication possibilities

Web 2.0Collective intelligence approachParticipation of customer, bi-directional communicationSocial computingCustomers-bank communityFirst banking presence in Second Life already observableLeveraging internal communicationBlogs and wikis enhance knowledge management (e.g. re-use of corporate best practices)

Examples:ABN Amro and Wells Fargo presence in Second Life

The battle between banks for supremacy … will be won mainly by those who succeed best inthe area of personal contact.

ABN Amro executive statement

Succesful companies of the future will have participants not customers.Rather than having a business, they will have a community!

Web 2.0 is more than a meaningless buzzword and will clearly change almost everything in the way the banks drive business with their customers

Platform

CustomerPortal

Homepage

Web 1.0Web sites as well insulated entities, fully controlled by thecreators‘ own sphere of influenceCustomers sitting behind a browserFunctionality access through simple services pre-packaged by bankWebsite builder thinking of himself only

Functionality grows by adding services and the possibility to executemore sophisticated transactionsE-commerce has it‘s break through

Web 2.0Applications that harnesses network effects, getting better the more people use themRich functionality sets accessible to humans and machines, offered via reusable andinteroperable channels/web servicesWeb 2.0 approach puts more trust in users than ever before since it means inversionof information control to the usersNetwork effects and feedback loops will return in rewardArchitecture of participation that encourages user contributionCommunity and sense of ownership with users‘ side

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SOA – Bringing together creation of agile business processesand supporting applications the elegant way

Perfectly fitting approach for applicationsand processes which require

Frequent changesFast flexible and efficient change execution

Not only a technology but also an infrastructureframework and a management approach

Combination and administration of softwareservices

Overcomes the inflexibility of tight couplingbetween applications by using looselycoupled services

Service OrientationA General Structural Principle

Business Sector

IT Sector

Business Architecture-------------------------------------

Software Oriented Enterprise

Service Architecture-------------------------------------

Service Oriented Architecture

Appl./Infrastr. Architecture-------------------------------------

Service Oriented Infrastructure

Lust but not least:

SOA will help the open standards break through andfosters functional diversity of Web 2.0.

Mashups & Composite Applications – Let the others do your work, combine and save efforts!

Mashups

Applications that combine data / content frommultiple services into a new integrated experienceSourcing mashup contents via API, web feeds(RSS/Atom), JavaScriptintranet-based search engines, applications anddatabases exposed as web ServicesBI engines

Composite Applications

Application assembling functionalities from multiple,loosely coupled applications (servies) to supportbusiness processesmessaging systems, extranet services(e. g. data sources, application utilities) Faster and cheaper way to create customizedapplications for companies and alsosoftware vendors selling pre-mashed oreasy-to-integrate servicesApplication possibilities

Business productivity and research applicationsBranch and loans information servicesCorporate services (travel, conference, events, package shipping …)

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Hype Cycle: Web 2.0 has already done a good way through the stageof relativization and will soon step into the real banking sector!

Source: Gartner

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Thank You for Your Attention!

(www.ba-ca.com)

(www.unicreditgroup.eu)

(www.hvbgroup.com)

Klaus Rausch, HVB Information Services GmbH

Managing Director