FSI Key PropositionsDigital Banking

Brochure

Banks are facing significant challenges: the emergence of FinTech companies, mergers and integration activities, low interest rates and their impact on financial results, new ways of communicating with customers, increasing regulatory requirements, and more. Organizational changes are necessary to address new threats and exploit new opportunities, bringing each business to a “new style of banking” – one that is more closely aligned with IT, able to react quickly to the changing business landscape, and even anticipate its evolution.

Moving to the new style is complex, especially for established banks. They have to run an already complex business based on standards and process consolidated across decades of experience; they must manage efficiently a wide variety of platforms, often including mainframes and legacy systems; and they have to satisfy increasingly strict compliance requirements. How can banks both innovate and manage today’s business effectively?

The answer often lies in a transformational approach. Organizations need to reconsider their mission and operational model, and redefine some of the fundamental aspects of their business, which may result in stopping some “traditional” services and starting new ones. Digital banking is often the key enabler for this. By bringing a simplified, transparent and flexible “IT utility”, which can follow the changing business rules, digitalization improves today’s efficiency and allows gains to be reinvested in innovation and agility (“change-budget”). Many banks across the world are announcing significant IT transformation initiatives. Such initiatives are based on long-term plans aimed at making access to IT more agile, and they are often based on a strategic partnership with an IT leader that can advise, contribute proven experiences, share the transformation risk, and provide or broker the desired technologies and skills.

Digital banking, as a key enabler to the new style of banking, must bring tangible advantages. Banks and strategic IT partners can agree on a transformation agenda and on a set of key performance indicators (KPIs), often related to business metrics (e.g., time decrease for bank operations, reduction in TMO, and improved customer satisfaction) allowing all parties to monitor the impact of IT transformation efforts.

For the banking sector, these expected business outcomes provide evident benefits; they can be grouped into some main categories:

The digital transformation of a bank, in brief, is the combination of the digitalization of the different channels along with the automation of the operating models. This ultimately produces better, cheaper, customized products, with faster services, and an improved customer experience:

DigitalChannels

DigitalTransformation

Better, cheaper, customized products,faster service and an improved customer

experience

Operatingmodels

automation

Digital Banking Transformation Journey

Definition of Digital Transformation

1. Address new customer expectations -Banks used to have direct human contact, in branches and offices, as the primary way to engage and interact with users. But today customer expectations are changing. Customers are becoming more demanding in terms of time response and quality, so face-to-face activities are increasingly being replaced by online transaction systems, mobile applications, social networks, and virtual human contact via chat or video conference. Banks need to offer virtualized, always-on, mobile services to a growing population of digital users. These organizations also need to leverage new information channels, like social media, to communicate and understand customer needs.

2. Improve Regulatory Compliance – Followingthe global financial crisis, governments and industry organizations are demanding greater transparency, more information, and comprehensive audit reports.

3. Gain competitive agility – New players, such asfully online and agile startups, are entering sectors such as electronic payments and virtual money, and taking away a significant portion of end users from traditional service providers. Moreover, companies outside the financial sector, such as large telecom operators and retail stores, are also increasingly offering competitive banking services.

4. Achieve IT cost transparency – remove silosThe banking sector is today the most “IT siloed” of all industries, as a result of numerous mergers and acquisitions, and historical operating procedures that strictly separate some business processes. Platforms are also not homogeneous, with a concentration of legacy systems with cost and integration issues. The resulting IT landscape is very fragmented, and costs are difficult to estimate and therefore difficult to control.

Digital transformation helps to achieve the following customer goals:

The main concepts used to achieve a complete digitaltransformation are:

a. Straight Through Processing (STP) Onaverage, more than 50 percent of banks’ costs relate to staffing – the sheer number of people necessary to process customer transactions. This is mainly due to incomplete automation of the service processes. Therefore, STP is about paring back to an absolute minimum the human input required to process transactions with substantial error reduction and quality improvement. For example, if a customer creates a standing order online, with STP the whole process is automated from start to finish; no human input is required. Banks should identify their STP throughput rates and try to dramatically increase them. Also, with less cost per operation, this allows banks to expend less run-budget and expand their change-budget.

The Hewlett Packard Enterprise (HPE) Digital Banking Framework is an HPE-built industrialized digital factory-like framework for banking processes which enables business process automation and improves operational excellence. In addition, it enhances business process services with back office transformation; by increasing scalability and flexibility, banks can absorb additional services and volumes at a flat or marginal cost increase while maintaining EGM.

Hewlett Packard EnterpriseDigital Banking Framework

b. Self-service channel usage By givingcustomers more power and responsibility for carrying out their own banking activities, there will be less need for human input from the bank, with obvious cost implications. However, banks should remember that moving a process to a self-service channel without adequate planning risks inadvertently increasing the cost. Inviting customers to bank online increases the number of transactions carried out. If you don’t automate these processes, eventually you will need more people simply to handle the increased number of transactions.

c. First-time resolution (FTR) This means thatprocesses are resolved immediately at the first point of contact with the customer, whether this is in a branch or a contact center. For example, if a customer wants to open an account, they are able to do it there and then in one go, without needing multiple contacts with a bank employee or contact center to complete the transaction. This contrasts with the current centralized model in which the vast majority of transactions end up in central operations. FTR will only work effectively and cut costs if the underlying transactions abide by STP principles.

Savings• Budget reductions /incremental activity absorption with decreasing marginal costs

Agility• Accelerated accommodationof regulatory changes

• Reduced time-to-market

Control• Operational risk and variance reduction

• Traceability of states andactivity levels

Quality• Error decrease• Cost decrease• Less run-budget• More change-budget

Supported by advanced technology architecture, a powerful BPM integration tool, a comprehensive document management and processing system, and an SOA service layer

Integrates with existing legacy and core banking systems

It’s a transformation framework for financial business processes

Leverages 43 technology components capable of automating keysteps in business processes

Designed by HP to transform financial operating models

HPE Digital Banking Framework enables banks to define processes and redefine and assign in-house staffing resources in accordance with complex operational requirements.In addition, in terms of quality and monitoring, banks are better able to manage based on KPIs and SLAs, increase the STP rate, reduce manual processes, standardize processes, minimize exceptions, and make continuous process improvements in terms of efficiency and quality.This framework also allows for a certain degree of scalability through tactical application tools. It also provides service platform definition and design, and supports service platform implementation.

© Copyright 2016 Hewlett Packard Enterprise Development LP. The information contained herein is subject to change without notice. The only warranties for Hewlett Packard Enterprise products and services are set forth in the express warranty statements accompanying such products and services. Nothing herein should be construed as constituting an additional warranty. Hewlett Packard Enterprise shall not be liable for technical or editorial errors or omissions contained herein.

Implementation of the HPE Digital Banking Framework produces the following achievements:

Work allocation: Automatic work allocation to appropriately skilled workers; pushes work ítems and automatically tracks time/motion; work is delivered by SLA priority, FIFO, or supervisor override and integrated workforce managementImage viewing: Automatically presents an image with each work ítem and an auto index for created documentsCustomer information: Systematic pre-validation and seamless user interface (UI) integration of comments.Primary Application: Common process-oriented UI front-ending for multiple applications and presents a highly-efficientprocess-oriented user interface.Customer notification: Automatically produce documents and rules based determination of paragraphs, copies, etc.Comments and work entry: Automatic and integrated tracking, and seamless update of operational statistics.

The HPE Digital Banking Framework produces a series of productivity gains that could be up to 46% depending on theinitial maturity level of the processes. The different levers used to obtain the efficiencies are:

1. 5% - Best-practice BPS processes deployed across regions2. 10% - Global Operating model: Global policies, common processes, and standard operating procedures, process

driven delivery organization, standardization of data, and streamlined reporting and resource planning management (iWom)

3. 14%-Robotics process automation: Business process re-engineering aligned with artefacts deployment (datacapture robotics, automated file classification, desktop activity capture, logical treatment of lists, text pattern recognition and others), digital-enabled technology such as e-Forms, workflow and case management, and reduction in exceptions/increased straight-through processing.

4. 15% - Consolidation to best-shore model, staff pyramid resizing and regrading5. 30% - Extensive use of self-service: Portal for customer queries and access to reporting tools6. 46% - Overall productivity and gain