Driving Innovation in payments
Philip Gomm
Director, Capgemini
Tuesday 10th September 2013
2 Copyright © Capgemini 2012. All Rights Reserved
Presentation Title | Date
Driving Innovation in payments is the result of „alignment and interplay‟ of at least six aspects pivoted on „Proposition play‟
2
3
1
6
5
4 Proposition / Product
Ambition
Customer Needs Regulation
Platform
Process
Efficiency Frontier (Internal Innovation)
Innovation Frontier
4a Collaboration
3 Copyright © Capgemini 2012. All Rights Reserved
Presentation Title | Date
For the chosen customer base, understand Vanilla and Value-added needs
1
Customer Needs
Product mix
Product access
Convenience
Consumption embedded to into normal life
Smooth on-boarding and management
Insight
Customised Vs Canned
Need ?
Today‟s value add is tomorrow‟s vanilla
Velocity
Resilience
Transparency
4 Copyright © Capgemini 2012. All Rights Reserved
Presentation Title | Date
Regulation is Rhyming (if not repeating) 2
Regulation
Component View
Capital
Bu
sin
ess
Mo
de
l P
rod
uc
t
Licensing
Pricing
Features / Options
Reporting
Processing
Pro
ces
sin
g Origination
Security
Alternative Payments
Account Access
Section 1073
Durbin / EC
EU - PAAS
AML
FATCA
PSD
RTP
Mature Markets Emerging Markets
UK Bank Account Switching
PSD 2
Basel ii / iii
Access
Transpar
ency
Switchin
g
Pricing
Standard
Segregate „in radar‟ and „off radar‟ propositions
Interchange
Switching
Acquiring
RTP
5 Copyright © Capgemini 2012. All Rights Reserved
Presentation Title | Date
Time to make choices 3
Ambition
Based on your competencies and view of industry, what would you like to do ?
6 Copyright © Capgemini 2012. All Rights Reserved
Presentation Title | Date
The expanding payments universe 3
Ambition
Source: Capgemini research and analysis, 2011
Bu
sin
ess
Mo
del
(V
alu
e p
rop
osi
tio
n)
His
toric / A
s-is
To-b
e / N
ext g
en
“As-Is proposition” of banks Payments and cards mainly
delivered and processed in
the inter-banking space
‘Derivative’ transformation Build on existing network/
clearing infrastructure to
transform value proposition
combine with a newer delivery
channel. Traditional players
react through partnerships and
innovation
Operating Model (Delivery capability, scale, good practices etc)
Historic / As-is To-be / Next gen
‘Disintermediation’ transformation
Newer players bypass banks,
card networks to engage
customers directly with alternate
options (payments and funding).
Traditional players react through
partnerships and innovation
‘De-leverage’ transformation Traditional players engage in
transformation like Hubs,
outsourcing, etc., as part of their
cost-focussed strategy while
building/running their revenue-
focussed strategy
Va
lue
Ga
me
Volume Game
D1
D2
D3
7 Copyright © Capgemini 2012. All Rights Reserved
Presentation Title | Date
Successful payments innovators have to choose specific innovation value spaces / propositions
Corporate Payments Common Retail Payments
„Lend‟ the Money Money Lending
„Be‟ the Money Virtual Currency
„Change‟ the Money Currency Conversion
„Store‟ the Money Prepaid Cards
„Move‟ the Money Money Transfer
„Analyze‟ the Money Payment Analytics
„Secure‟ the Money Security Services
„Process‟ the Money Payment Processing
„Risk‟ of Money Risk Management
„Time‟ the Money Information VAS
„Match‟ the Money Trade/Supply Chain Mgmt
„Manage‟ the Money Treasury Management
1
2
3
4
5
6
7
8
9
10
11
12
4
Proposition / Product
Chosen „Value Space combination‟ will define roadmap for downstream capabilities
8 Copyright © Capgemini 2012. All Rights Reserved
Presentation Title | Date
Product harmonisation is important to steer away from pitfalls of „lift and drop‟ and aligning Platform and Process to the Innovation agenda
Product 1 specific component Product 2 specific component
Product n: specific component
Common component Option
Product Harmonisation Benefits
• Reduced time to market
• Reduced development cost
• Group liquidity savings
• Lowered transaction cost
Product Harmonisation Challenges
• Poor understanding of existing functionality (customer/country)
• Lack of awareness about specificities
• Identification of shared components
Clearing Channel
Routing Criteria
Account Management
User Access &
Reporting Pricing
Execution &
Cut off Times
Exception Handling &
Customer Service P
RO
DU
CT
AS
-IS
PR
OD
UC
T
TO
-BE
4
Proposition / Product
9 Copyright © Capgemini 2012. All Rights Reserved
Presentation Title | Date
Across markets „Collaborative models‟ are re-defining product / price / processing equations
4a
Proposition / Product
Industry-wide "dynamic credentialing" system that will improve the safety of digital payments.
Collaborative model for ‘shared’ ATM infrastructure
India
EU
(MyBank)
Sweden
US
(TCH)
Guaranteed SEPA Credit Transfer SEPA Direct Debit mandate (create,
modify, cancel) for a: One-off collection, Variable amount, Fixed amount, Fixed number of collections
Payment on delivery Person-to-person payment Transactions outside the euro area Subscription to e-invoices E-identity services Confirmation that the buyer is over 18
IMPS
AEPS
White label ATM
NACH
• Emerging Utility Co as an APCA led industry response to the RBA Innovation in Payments agenda
• NZ Paymark initiative • Bpay and ePal shared infrastructure future overlay service models
AU
10 Copyright © Capgemini 2012. All Rights Reserved
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Lean principles come in handy to align payments operations to „new-age PSP cost models‟
Waiting Overproduction Re-work Motion& Transport
(Over)-Processing Inventory
Waiting for
FX conversion rate
Fiat approval (overdrawn)
AML compliance clearance
customer on-boarding / entitlements
Lack of work balancing over time causing ‘feast or famine’ environment
Statementing – e statement and physical statement to all types of customers (follow-up with a call?)
Customer complaints
Repair (non-STP)
Incorrect billing
Writing transaction case histories on emails (e.g. Investigations)
Incorrect static data maintenance (holiday etc)
Manual processing when automation is available (less cumbersome ?)
Movement of paper
Scanning and sharing transaction
archival and retrieval
Re-keying same data in multiple systems.
Customised reporting (beyond SLA/TAT)
Inter departmental handover processes
Audit compliance – concurrent audit, BU audit , risk audit etc -
Un-processed transactions
Missing transactions
Referring to information on contracts,
5
Process
11 Copyright © Capgemini 2012. All Rights Reserved
Presentation Title | Date
Pro
du
ct
Lea
de
r
Distributor Utility/Processor
Ph. 0 (Decision/ Foundation)
Phase 1 (Must Have) Phase 2 (Differentiators)
Differentiating Leadership
Position in one of Six Models
Strategic (or Design)
Tactical (or Execution)
Balance Sheet Driven Risk Management
Regulatory Compliance
Customer Segmentation
Customer Driven Product Design
Product Mix Product
Innovation
Relationship Pricing
Product Pricing
Multi-Channel Experience
Leading Channel Capability
Front Office Integration
Back end Integration
Channel Investment Decisions
Current Transaction Speed
System Downtime
Technology Innovation
Transaction Volume
System Security
Operating Margin
Data-driven Compliance
Data-driven Market Intelligence
System Scalability
Independent Network
Standard Products
Time to Market
Channel Analytics Channel Delivery Excellence
Highest Service Levels
Rationalize IT
Make decision on future model
Improve BI
Capgemini has developed a two tier „Must Have‟ & „Differentiators‟ approach to help guide program priority definition
Source: Capgemini Analysis, 2012; Capgemini 2012 Global Retail Banking Executive Survey
Transform to a new
technology landscape to
bring the “must haves”
on a sustainable level
Strict governance
model not to include any
differentiator (at least as
a starting point).
6
Platform
12 Copyright © Capgemini 2012. All Rights Reserved
Presentation Title | Date
Client propositions are „transcending‟ traditional product boundaries with „Platform to Platform‟ alignment the key
6
Platform to Platform
Rationalize product portfolio
Define roadmap towards Bank of the Future
Final check: Decommission legacy system?
Adopt the DNA of your package
Adopt the concepts of SOA
Use Process Reference Models
Reduce the number of products by i.e.
50%
Redesign your products based on the
services provided by the package
Reconsider your customer
segmentation
Concentrate on Must Haves
Select product-customer combinations
that require no enhancements from
vendors
Design procedures and teams for a
factory based approach
No scope change after “ordering”
Concentrate on the product services
provided by the package
Re-use the the functionality build-in
on request of your competitors for
free
Regulatory upgrades are “pushed”
For each legacy system has to be defined
when it is fit for decommissioning
Roadmap includes separate
decommission projects
Decommission projects require a
significantly different skill set
The connectivity principle of the new
“Landing Strip” approach
Say good-bye to point-to-point
interfaces.
Enables you to leap-jump in the future.
TOM design based on
Process Reference Models of
Capgemini
Model Bank processes of the vendor
Current way of working takes 40 years of
legacy processing into account
Payments
Core banking
13 Copyright © Capgemini 2012. All Rights Reserved
Presentation Title | Date
Driving Innovation in payments is the result of „alignment and interplay‟ of at least six aspects pivoted on „Proposition play‟
2
3
1
6
5
4 Proposition / Product
Ambition
Customer Needs Regulation
Platform
Process
Efficiency Frontier (Internal Innovation)
Innovation Frontier
4a Collaboration
The information contained in this presentation is proprietary.
© 2012 Capgemini. All rights reserved.
www.capgemini.com
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With more than 120,000 people in 40 countries, Capgemini
is one of the world's foremost providers of consulting,
technology and outsourcing services. The Group reported
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business and technology solutions that fit their needs and
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