Transcript No Slide Title

SUN in Financial Services
BANKSETA
Shaping up to Global Banking
Nigel Woodward: Global Segment Manager
MAY 20 2003
Agenda
Automation in Banking in Developing Countries
-
Global market overview
-
Macro trends
-
Contemporary challenges
-
Segment value chains
- Scenarios
-
June 18, 2002
-
“Northern hemisphere” context – South Africa – relevant lessons to be
-
Retail
-
Wholesale
learnt
Technology implications
-
Managing the market
-
Dispelling myths
-
Foundations to be laid
2
The South African challenge
Not lessons, but useful watchwords
Retail
• Growing newly banked demographic profile
• Developing infrastructure
• Mix of needs – commodity retail – wealth management
• Education opportunity
Wholesale
• Full functional scope
• Corporate banking to securities
• Need to take best practice models
Electronic – automated backdrop
June 18, 2002
3
E-Business is reshaping retail securities broking
… and institutional E-Business is quickly emerging
Margins down = cost down with IT and ops &/ or
volume up to maintain profit with brand
…but Internet commissions
are plummeting
Retail Internet Brokerage Forecast
anticipates significant growth...
Accounts
(millions)
Assets
($ billions)
25
$3.5
60
Average commission charged by
top 10 online brokers
20
$2.8
Assets
45
30
15
$2.1
Accounts
15
10
$1.4
0
‘96
5
‘97
‘98
$0.7
Dollars
0
$0.0
1999
Source:
2000
2001
2002
2003
Source:
Credit Suisse First Boston
Forrester Research, Tower Group, PwC analysis
Looking to the future you have to be a low(est) cost producer
June 18, 2002
4
Where are we today - Retail ?
- Dot.com is dead, long live dot.com
- Ridiculous business propositions – but have taught us
-“e” or is it “i”
- Does the e customer exist – he is everywhere … and emerging in RSA
new demographic behaviours
- Existing business processes are challenged
- The status quo is not sacrosanct
- Barriers to entry are down, new entrants can appear ….
June 18, 2002
5
Retail continued ….
• Late 90’s new entrants have not survived – lacked full product scope,
e not enough on its own - electronic delivery channels for established banks are now a given
• Specialist value propositions – technology enabled niche plays have appeared
• Branch has survived the electronic onslaught – USA branch renewal focus,
behaviour indicator
• Personal finance links to trusted brands and establishment
• High end being siphoned off from mass market – cost reduction economies of scale
mergers
• Challenge – If you’ve got process efficiency turn to service edge (at lower cost)
- If you haven’t – catch up fast
• How broad is my business … Group structures – product lines – production and distribution synergies
Financial Services STOVEPIPES….The e customer doesn’t want to see these
June 18, 2002
6
Wholesale market
Corporate banking, trade finance, securities and capital markets
Cost Cost Cost – Efficiency Efficiency Efficiency
• STP ….
• Risk Management
•Trading Infrastructure
June 18, 2002
7
STP – a market ecosystem
While T+1 is on the shelf the industry will still spend
$5.9 billion on STP in next 3 years
North American Securities Industry IT Spending on STP (US$ billions)
$2.1
$2.0
$1.8
$1.5
2002
Asset Managers
June 18, 2002
Source: TowerGroup estimate
2003
Broker/dealers
2004
Custodians
2005
Exchanges/Utilities
9
The Key STP Pieces
?
The Transaction Pipeline
?
Core Systems
?
Risk Management
?
Market Connectivity
June 18, 2002
10
Customer Challenges
Internal
Front Office
Multi-instrument
Front Office
Organic growth
Middle office
Middle Office
Multi-divisional
Evolutionary
Back office
Back Office
Multi-location
Deals, transactions,
messages
June 18, 2002
11
Cost reduction – process improvement
•Standards based messaging – ubiquitous adoption - Market responsibility
• FIX – 4.4 equities – fixed income, SWIFT and ISO 15022
• Intermediary functions
• Settlement - Omgeo
• Execution - ECNs
• Routing - Easyscreen
• e de facto enabled – Technology cost of ownership
• Next generation trading infrastructure – web MDDP – TIB, Triarch, RMDS
• Corporate payments – MA-CUG – Portal delivery
• Trustact security
• MT103 and 103+ November 2003 replacing 70/75
• SWIFT IP 2004 … new service and automation models
•South African wholesale market displays all these characteristics
June 18, 2002
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Risk Management
?
Market risk
?
- Front Office
?
- price feeds/trading platforms
?
Credit/Counterparty Risk
?
Institutions - global
?
Sovereign
?
AML – Know your Customer …
?
Operational risk
?
Fundamental business processes
?
Basle 2 … 2006, Sarbane Oxley …… regulatory driver global consistency
?
Systemic risk –
June 18, 2002
the market itself – CLS, RealTime Nostro
13
Automating the trading cycle will enable firms
to do more with less
.. Taking out cost at all
possible points
June 18, 2002
14
Structural implications of Financial Service delivery …
• Blurred lines of demarcation
• Developing markets
• Execution in an e environment
June 18, 2002
15
What business are we in … Retail, Wholesale, both?
complex overlaps and market practice
Buy side
Asset Mgt
Retail
Private
Banking
Sell side
investment
Execution
Execution
Custody
Corporate
June 18, 2002
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Are we working the linkages …aware of the sub drivers, synergies, economies of scale?
Buy side
Asset Mgt
Retail
Private
Banking
Sell side
investment
Execution
Custody
Corporate
June 18, 2002
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Dynamics – what the (e) customer wants?
Retail
Buy side Asset Mgt
Sell side investment
Execution
Private Banking
Custody
Corporate
June 18, 2002
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Dynamics – what the (e) customer wants?
Retail
Day to day service
Where & when wanted
Channels
No frills
No cost
Cross product
Buy side Asset Mgt
Institutional
Long term performance
Information/risk strategies
Retail
Short term return
Low fees
Private Banking
Premium service
All these at
reasonable costHow
many hidden in Retail
$ 300Bn-25Tn
2001- 2005
Sell side investment
Market access
Best price
Soft services
Risk protection
Execution
Price transparency
Custody
Efficient processing shop
Market advice
Outsource buy side
Technology soak - SWIFT
Corporate
Global trade, ePayments+
TrustAct, Bolero
Order to pay
Debt markets
Complexity translated
Market price
June 18, 2002
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e doesn’t recognise organisational stovepipes?
Retail
Buy side Asset Mgt
Institutional
Long term performance
Information/risk strategies
Retail
Short term return
Low fees
Day to day service
Where & when wanted
No frills
No cost
Cross product
Sell side investment
Market access
Best price
Soft services
Risk protection
Execution
Private Banking
Premium service
All these at
reasonable cost
How many
hidden in retail
Custody
Efficient processing shop
Market advice
Outsource buy side
Technology soak - SWIFT
Corporate
Global trade, ePayments+
Order to pay
Debt markets
Complexity translated
Market price
June 18, 2002
-Organisational linkage
- Shared technology
-Cost efficiency
- SERVICE ENHANCEMENT
20
Therefore the issue is how to reach the customer and with what products
•Multi channel delivery
•Product transparency
•Retail - Demographic integration
•Wholesale - Operations integration
June 18, 2002
21
…. Through the looking glass
….architecture
Service delivery – meeting the challenge
Legacy
Core
Systems
June 18, 2002
From manufacturing plants
To customer behaviour
22
…. Through the looking glass
Recognizing end to end topology
….architecture
eChannel
Legacy
eInfrastructure eProcesses Management Channels
Core
Systems
June 18, 2002
23
…. Through the looking glass
SUNOne - Architecture +Functions
….architecture
working organism
eChannel
Legacy eInfrastructure
eProcessesManagement
Core
XML-JMS/JCA
SIntServer
Components
J2EE
Collab/
Community/
portal/LDAP
Systems
Integration/Information
Bus/Messaging
LDAP
LDAP
RDbms
SUNOne Architecture
Phase n
Core Processing
•Core replace
•Consolidate
June 18, 2002
•Extend
Claims
Loans
Credit
Security
Cross sell
CRM
Aggregationl
Java
J2SE
Apps Server
Channels
Internet
Call centre
J2ME Mobile
Digital TV
Web Server
Phase 3
Phase 2
E-Infrastructure E-Function
•Middleware • Incremental
•Legacy connect• new business
•Infrastructure functions
Retail outlets
Branches
F/WallDMZ
Phase 1
E-Presence
•Web server
•firewall
24
Model FI Proving
- securities
- securities
Market the concept
Sell
Side
Buy Side
Internet
Trade
5
Execute
6
Exchange
ECN
Settle
technologies
8
Random WalkSales
1
F-fusion
Reuters
Manage
Risk
•ASP
•Netting7
•Affirmation
•Exception reporting
•Matching
4
Fund 3
Manager
Private
Client
B2BITS
2
Intermediary
Web server
Oracle
Monitor
Pacemetrics
STP
9
-Heterogeneous technologies
influence
ISV brands
andYork,
small California,
innovators London, Johannesburg ?
Proving the -Big
concept
… New
-J2EE architecture binds – JMS, XML FIX communicates
-J2EE - JCA op ….. Leverage
- so what can we do/facilitate for you …?
June 18, 2002
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… some technology commentary ….
June 18, 2002
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Organic growth – vision impediment
June 18, 2002
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Business
Core business
Business Operations
Technology
Audit/Compliance
Business processes
Consulting services
Services
Operations audit
Technology infrastructure
Risk application analysis
Selection/installation/
Functional integration
Infrastructure audit
Partner community iForce
Functional support
Applications
J2EE architecture
Middleware
Rules/exception
Messaging
Partner community iForce
SUNONE + Partner community iForce
SUNone
Architecture
JCA/JMS
Storedge
Platform foundation
O/S Solaris/Linux
Chipset
June 18, 2002
Architectural compliancy/strategy services
Peripherals
Platform optimisation services, “ilities”
Operating system – fit for purpose
Sparc/Intel
28
… What do we want from technology – the myths?
- Beware Solutions – second most abused term after “partners”
- Optimised cost (not necessarily lowest)
- Flexible – to business change and open supply market
- Market is shifting – evolution into revolution perhaps
- SUN Microsystems Java – 1995 response to proprietary lock in
(Unix in 1980s, Java in 1990s)
-Java language and J2EE architecture – Retail J-XFS,
Capital Mkts – JoW established
-SUNONE Webservices (standards and interoperability)
June 18, 2002
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…. Continued
-Legacy systems – High organic investment cannot replace – need to evolve
- re architect …. But need ROI, sounds expensive – seek interim deliverables approach
- start topological environment approach
- make v buy, now make and buy, know what and why you are doing it
- OO …. Java opens the way forward – makes sense
- Small is probably beautiful, big may not be – new selection and project management skills
- Manage innovation
-Work the commitments to partnership,
- Play to core competencies – take advice from where it should come from
Get navigation round the buzz and fashion!
June 18, 2002
30
Technology is the easy part ….
Good luck ……
Give us a call, we have a lot of friends !
Thankyou
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