The Maven's circle.

Banking Business goes back to the Branch Offices

Reading an interesting interview to the Barclays Bank's CEO - John Varley - about "Banking Business goes back to the Branch Offices" I would like to draw some considerations.

Mr John Varley was saying:

Clients want services from the Branches AND the Internet AND the Telephone, non services from the Branches OR the Internet OR the Telephone. Clients should be free to choose to do banking operations at 2:00am in his home from his PC or at 10:00am in the Branch. It is not possible to think only to “cost cutting”, we have to go towards the Clients’ needs.

Therefore if the New Banking Business Model is “Client-centric”, as Mr John Varley was suggesting, with the main target to increase “market” penetration getting new Clients, there is the need for “a more effective retail model & transformation of branches” and the Banking Information Systems have to be re-designed.

In fact existing Banking Information Systems were “technology driven” and designed to support the Old Banking Business Model that was “Product-centric”, focused to  “cost cutting”,  non taking risks, and increasing revenue, via cross selling, on the existing Clients.

The new Banking Information Systems will be designed placing the Client’s needs at the centre instead of putting at the centre the Clients’ operations needs (technical forms).

Many information about the Client in the Old Banking Information System were hidden in the procedures and not in a unique Customer File.

So the in the New Banking Information System the Customer Information File will contain whatever it is conceivable about the Client:

• Client’s risk profile,
• Problems the Client had working with the Bank, and how and when the Bank has solved those issues
• Client’s claims
• Client’s profitability (gross and net)

Basel 2 it is not only a matter of reporting to ECB information about the Bank’s capital allocation, but a guide for the Bank to re-orient its activities toward a less risky category of Clientele.

Based on the New Banking Business Model, aimed at creating a competitive edge for a Retail Bank, the values disciplines are:

• Product leadership: offering superior innovation, image, and performance in their market
• Customer intimacy: offering expert advice and customization along with products and services to ensure the customer’s success
• Operational excellence: offering the best combination of low price, reliability, and ease of purchase in their markets.

And the New Banking Information Systems areas:

• Multi-channel: where “n” information could be delivered to Clients in “n” ways
• Business Intelligence: Intelligence of all information about:
  • Client both internal and external
  • a periodic Customers Survey
  • a periodic Employees Survey
• Risk Model: create information to manage the risks (market, credit, and operational) to all levels from when the Client opens his account, and through all his transactional life in the Bank

Hoping that these considerations are of any interest I am waiting to share ideas about the New way of doing Retail Banking facilitated by the new technologies and by the emerging solutions.

Lucio Vollaro

Large European Retail Banks are concentrating their TLC infrastructure

During the month of May I've visited many European Large Retail Banks and I've gathered that there is a common strategy of centralizing TLC shared services.

I've noticed that successful European Large Retail Banks are investing in:

1. Product leadership: creating many standard, high quality, global products, with a very short time-to-market to surprise and win competitors
2. Customer intimacy: customer insight, product knowledge, sales focus, facilities
3. Operational excellence: offering the best combination of low price, reliability, and ease of purchase in their market

Therefore the objectives of Shared Services centralizations are:

1. TLC cost reduction: global contract with a supplier to reduce costs
2. Productivity increase: build TLC infrastructures that allow Large Banks to operate better and cheaper
3. Business development: to create innovative products utilizing the new TLC technologies

Moreover the "sourcing" strategy becomes a "core competency" for the European Large Banks, in fact:

1. Sourcing is not just a function through moving from category purchases to managed services
2. Focused Supplier Model approach - work with world class providers of scale managed services
3. Significant investment in supplier relationship management as majority of spend and key services are in long term relationships

Partnerships with TLC suppliers is based on Governing shared services for Value that is:

1. Focus the Retail Bank's Business Units on: Customers and External Markets and Profit
2. Focus the Shared Services on: Optimizing supply to meet demand and "best in class" sourcing strategy

In summary my findings are:

1. CIOs are not a key factor for development anymore, Banking Business Leader are!
2. TLC should be run as a business
3. "Cross-pollination is the "key"- get Business people into Technology AND Technology people into the Business

Measurement for a successful Shared Services Organization is to be recognised as a "value added" partner - to the Business"

Any idea and comment is welcomed.

Lucio Vollaro

Banks and TLC...

Making VoIP/Broad Band Matter:

Defining & Delivering Business Value

Last week I’ve met a Large Italian Banking Group’s CIO and discussed about TLC’s  Operations’ (Automation and Management) implications since the Bank fully migrated into VoIP and Broad Band.

This discussion was about key issues for the Bank, and – between the lines-the evolving role of its TLC department in the future.

The theme of the discussion was TLC infrastructure redesign, in fact:

* Production centres’ (data centres, server farms) operations, infrastructure duplication logic have to be re-architected

* Communication logic between Production Centres have to be re-thought

* Way of Integration  re-defined

TLC are becoming more and a more a neuralgic element for the Bank’s information system: the problematic that before were distributed in the periphery of the Bank (branch offices), now are centralized.

Therefore there is a need to create a robust TLC architecture.

TLC are becoming dominant and they need a platform to control and manage the services delivered to the Bank.

But in the discussion came out clear that the Bank needs a TLC Business Partner for the big task of redesigning its TLC architecture, and help the Banks’ TLC Operations in the automation and management of its activities.

The key value for Bank is to be able to de-couple its TLC infrastructure from its TLC services delivered to the Bank.

Two nagging questions kept repeating in this discussion:

1. What is the “Governance” role for the Bank’s TLC department

2. What is the “House keeping” role for the Bank’s TLC Business Partner?

Let’s probe both these questions

The “Governance” role of the Bank’s TLC department

So how important, really, is to keep a strong TLC “governance” in the Bank?

In a word: Very.

Here there are two evidences from the IDC world.

First, from IDC Europe’s 2005 ICT Forum in Paris where Frank Gens, IDC Senior VP Research, in his speech was saying that “success of a Leading Bank’s Business Strategy fully relies in its automation & execution” capability. See IDC eXchange blog.

A second indicator is the Governance definition given at the IDC Italy’s Innovation Forum.

Governance is the Bank’s TLC organization capability to execute the Bank’s strategy communicating to the Bank’s TLC Business Partner: provisioning needs and verifying relevant SLAs.

The Bank’s TLC department should then link TLC value to “metrics” that “matter” to the Bank Business Leaders like:

* Human Capital: employee churn rate; time-to-productivity

* Customer Care: customer retention, after-sale revenue

* Performance Management: customer satisfaction, employees satisfaction, productivity, growth & innovation, financial results

* Branch Operations: Sales/m2

* Sales&Marketing: Sales productivity, channel profitability, promotion effectiveness

* Innovation: product “hit” rate, development cycle

* Production: product quality, product variability

* Supply Chain: perfect order rate, inventory level

* Financial Management: cash-to-cash cycle, working capital

* Risk Management: operation risks, market risks, credit risks

* Compliance: Sarbanes-Oxley, IT control efficacy

So that they can talk to the Bank’s Business Leaders and CEOs in term of TLC services that “matter” to them.

The “House keeping” role of the Bank’s TLC Business Partner

From what said earlier, we can also affirm that the success of a Leading Bank’s TLC Operations fully relies on its “automation & management” capability.

The Bank cannot do and manage this change alone, it needs a solid TLC Business Partner able to accompany the Bank into this process of de-coupling TLC infrastructure from the services so that the management of the TLC environment could become more feasible.

Therefore the Bank’s TLC Business Partner should be capable to:

* Evolve its Role: from supplier (of hw/sw, maintenance & installation services) to TLC Business Partner. The TLC Business Partner should develop better Account Management skills to create/develop/cultivate a solid and profitable relationship with the customer; offer insights about “best practices”; develop infrastructure solutions to present to customer to help him in its decision process. TLC Business Partner should be able to create a Program Management Office that allows the management of Third Party players (even if they are their competitor).

* Address its Investments: to be able to buy customer (hw/sw) assets, develop an infrastructure service where knowledge of all applications affecting information (Information Lifecycle Management: a Bank’s asset) are managed by a small team that could provide useful information to the customer in the area of application development as well as opportunity for rationalization.

So how important, really, is TLC Business Partner’s “house keeping” role to the Bank?

In a word: Very.

Something to say?