Joining and Connecting the Dots Unlocking the Value of Data

1. Joining and Connecting the DotsUnlocking the Value of Data 25 January 2012 Gareth Lodge Senior Analyst, BankingCelent Banking Event, Boston

2. Big event, big themes, big ideas?

3. Big Data Defined…But does it help? • Definition • refers to the tools, processes and procedures allowing an organization to create, manipulate, and manage very large data sets and storage facilities. • Hype • “Worldwide information volume is growing annually at a minimum rate of 59% annually” Gartner June 2011 • “Global digital content created will increase some 30 times over the next ten years – to 35 zettabytes)” IBM CIO Survey, 2010 • But why? • Must focus on information volume, variety and velocity • In reality, a move from “what happened and why” to “what is or will happen, and why?”

4. The Big Data OpportunityIts, er, big

5. Source data Manage data Usedata Process data The Information value chainWhere to start?

6. Strategic Responses Technology Imperatives • Reducing the cost base of technology • Invest in lower capital businesses • Customer centricity • Implement end-to-end payment lifecycle servicing • Modernise core payments and banking platforms • Enhance client access and usability Common challenges in all payment businessesBusiness drivers will shape the future Business Drivers • Regulation • Economic uncertainty • High IT overhead • Increased client expectations • Emerging competitive landscape

7. Recent poll of 22 payments experts representing 15 countries across 5 continents showed that retail banks are struggling with payments innovation Who is best at driving innovation? Other comments/ findings • The inability to guarantee customer uptake was the chief reason for innovative ideas to be rejected by organisations. Banks want “proven innovation” – a contradiction in terms. • “Opportunities are often over-analysed. With many innovations you just cannot predict how customers will react, so you have to make the developments and then hope for the best; that just isn’t how banks work.” • Third-party innovators or developers have the greatest influence over innovation. In-house teams are said generally to be a ‘tick box’ for senior management rather than bringing true innovation. • Innovation in 2011 most likely to come from/ in: • Asia: a top region by a clear margin, followed by North America • Low value and micro payments • Improved product access Why banks reject innovative ideas? Source: Payments Innovation 2011 – The Global Jury Decides, a report sponsored by Ixaris, released February 2011

8. Real-life “Spaghetti-ware” – Tier 1 bank Formats V2/V3 V2/V3 V2 V3 V2 V3 V3 V2 V3 V3 V2/V3 Converter V2/V3 Converter V2V3-Converter V2V3-Converter CSV-Lastschr. CSV-Überw. Convert Convert Convert Convert Paymul 96.A Dirdeb 96.A MT94x Paymul 96.A Dirdeb 96.A CSV-Überw. CSV-Lastschr. Paymul 96.A MT94x Paymul 96.A Dirdeb 96.A MT94x Kunden Host db-direct 6.x db-direct internet db-bankline db-direct MC Convert Convert Convert Retour- INFO Retour- INFO Paymul 96.A (ZSE) Dirdeb 96.A (ZSE) MT94x Paymul 96.A (ESA / XEE) Dirdeb 96.A (ESA) Paymul 96.A (ESA / XEE) Dirdeb 96.A (ESA) Paymul 96.A (ZSE) Dirdeb 96.A (ZSE) V3 (ATZ,ATS,ATL,ATP,ATF,ATQ) V3 (ATZ) V3 (ATU) V3 (ATF) V3 (ATQ) V3 (ATS) V3 (ATL) V3 (ATP) MT94x MT94x Retour- INFO Retour- INFO ATB XCF XAP ATB XCF XAP ESA XEE ESA XEE ESA XEE ATB XCF XAP ATB XCF XAP Connection to Internet STA ZSE,ATZ,ATS, ATP, ATL,ATQ,ATF, ATU STA https RVS RVS FTP V3 V3 https STA ATZ ATU ATF ATQ ATS ATL ATP https ATB, XCF, XAP STA W W W FTP V3 Connection to Internet Connection to Internet STA ATZ, ATU, ATF, ATQ, ATS, ATP, ATL, ZSE FTP FTP STA RVS ATB, XCF, XAP x.25 (B canal) STA CAT-EB (FFM) CPH Ext. MT 101 ATZ, ATU, ATF, ATQ, ATS, ATP, ATL ATB XCF XAP Ext. MT 101 SWIFT Administration MT 103 Repl. Repl. SWIFT-Service ESA, XEE, ATU, ATF, ATQ, ZSE ESA XEE PRISMA (FRA) Ext & Int. MT 101 DB-E04 (FRA) Merva (FRA) EDI-C. (FRA) DBI-Srv. (BCN) BCS-FTP (FRA) Repl. MT 940 ATZ, ATS, ATL, ATP STA ESA, XEE, ATZ, ATU, ATF ATQ, ATS, ATL, ATP FTP MT 942 MT 940 MT 942 ESA, XEE STA MT 101 MT 103 FTP FINPAY MT 940, MT 942 V3 ESA ATB, XCF, XAP V3 bank clearing MT 940 ATZ, ATS, ATL, ATP Scanning (VIE) Tandem/i (FRA) B@FIR (FRA) IBM-Mailbox (VIE) MT 942 V3 – client data carrier (IBM is Service RZ / authorisation with DBZ Booking files (external)

9. An Abundance of Delivery Channels Future Channels?

10. Seller Buyer Invoice Creation Invoice delivery Invoice receipt Invoice verification Invoice approval Understanding payments is a means, not an endPayments Lifecycle Management Payment check Payment receipt Payment delivery Payment approval Payment verification

11. SUPPLIER A SEA FREIGHT MANUFACTURINGPLANT SUPPLIER B RETAIL STORE 2 RETAIL STORE 1 DISTRIBUTIONCENTER 2 DISTRIBUTIONCENTER 1 Simple Manufacturing Logistics Chain “The information about the package is as important as the package itself.” Fred Smith (founder of FedEx), 1978 Source: Celent

12. CustomerIntelligence Credit limits Tenure with bank BusinessIntelligence Analytics Segmentation TransactionalIntelligence Enterprise Intelligence Visibility of real-time data Service request delivery Delivering customer value, in real time

13. Multichannel Technology Framework Channels Intelligent processing Applications Deposit products Mortgage loan Credit cards Consumer loans Wealth management Branch ATM Mobile Internet Contact centre Rich Internet Applications SOA BPM Customer data Analytics ID Verification

14. Contextual self-support

15. Conclusions • Big data isn’t a big idea…. • Whilst not new, it’s certainly increasing in importance • …and it’s not necessarily the answer • Too much data is an issue, but a lack of data isn’t • Knowledge is only valuable if actionable • Digestible data is even better than Big Data • Understanding which data to capture and why is critical • Being able to capture, respond and influence in real time should be the goal • Payments are a source of the data but channels is where the engagement takes place

16. Gareth Lodge Senior Analyst glodge@celent.com +44 7753 614647