Die Bankenlandschaft der Zukunft und ihre Anforderungen an die IT CeBIT Finance Solutions Forum 2008 Hannover March 4th 2008

Klaus Rausch, HVB Information Services GmbH Managing Director Munich,Feb 25th 2008

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Agenda

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Megatrends & challenges in banking Customers „ Competition „ Human Capital „ Regulation „ Technology „

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Implications for the IT

In the coming years, some key trends will drive the industry to become a highly specialized market with tremendous demand complexity 2015 Mega-Trends

The Future of Banking

Customers

1

Customers redefine the rules of the game

ƒ Pronounced shifts in demographics, attitudes and behaviors, in addition to ubiquitous information, are giving customers increased purchasing power. Stronger participation will be demanded by the customers

Competition

2

Universal banks and ultra-focused niche players thrive

Human Capital Internationalization & new kind of require a new type of 3 customers employee

ƒ The marketplace will further consolidate. The rise of industry specialists and the emerging competition from near- and non banks will both compel and enable traditional banks to specialize

ƒ Increasing internationalization and changes in approaching the customers require a different HR-portfolio. The emphasis will shift from administration towards an increasingly mobile and diverse workforce embracing the challenges of projects and change programs with global scope. Communication and facilitating skills become essential.

Regulation

4

Regulatory burdens intensify

ƒ Heightened requirements around privacy, security and operational and partnership risk will require banks to take an enterprise-wide approach.

Technology

5

3

Technology improves inexorably to enable breakaway value

ƒ Advances in global connectivity, computing power, service-oriented architectures, and data analysis will lead to unprecedented functionality.

Customer value drivers are fragmenting as a result of changing demographics and value systems

Customer Value Drivers Fragment 20th Century Homogenous Customers

21st Century Fragmented Customers

Age Wealth Ethnicity/Culture Customer Segments

Lifestage patterns

% of population

% of population

Extreme shifts in:

Customer Segments

Household composition Value systems

“Norms” become increasingly rare; companies must delve deeper to understand the needs and purchasing drivers of customer micro-segments. 4

Source: IBM

Ongoing consolidation, the increasing success of new entrants during the last decade and the emergence of new smart players are forcing banks to rethink their strategies ƒ Non and near banks ƒ Direct banking ƒ Industry specialists ƒ Peer-to-peer loans ƒ Social banking ƒ Microlending initiatives ƒ Price comparison sites

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Increasing regulatory burdens restrain the leeways for business optimization and strategic initiatives Aside of "normal" regulatory and supervisory activity, a series of voluminous, complex and expensive programs occupied short business and IT resources

Effort saving in the area of the "run the bank" budgets are widely exploitet and thus can not absorb the extra burdens

ƒ International / pan-european initiatives ƒ Basel II ƒ SEPA ƒ MiFID ƒ Updates on national regulations ƒ Solvency, liquidity, MARisk, MAK, transparency, consumer protection…

Regulatory

+Δ

Change

-Δ

ƒ Supervicory bodies' audits ƒ Tax authority requests ƒ Foreign supervisory authorities‘ requests Maintenance

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Budget cap

Agenda

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Megatrends & challenges in banking Customers „ Competition „ Human Capital „ Regulation „ Technology „

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7

Implications for the IT

Supporting a globally deployed business efficiently: Re-shaping & Re-structuring of UniCredit's German IT factory Point of departure: ƒ Classic universal bank portfolio comprising all traditional functions/systems ƒ Fragmented IT governance ƒ Shared budget responsibilities bewteen business deptartments and IT factories ƒ IT activities divided between 2 subsidiaries (infrastructure and applications)

Identification of core competencies + International assignment

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Merge abundant subsidiary structure

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Establish centralized IT governance and budget control

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Packaging of topics and applications

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Execute outsourcing initiatives „

Assignment of competencies towards IT factories (cross boarder)

Rightsizing capacities

Clearing up the portfolio

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Securities & Settlement Payments Loan systems maintenance (transitional only)

Concentration on Strategic development of remainder portfolio

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Assessment of remaining staff

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Identification of essential skills roles & key players

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Smart outplacement /separation of non strategic capacities

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Re-deployment of capacities within IT factories and Back office functions

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Consequent exploitation of economis of scale

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Taking benefit of in-house-specialization advantages

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Smart sourcing strategies

UCI's operating model is hinged on local and global competence centers ICT Competence Centers

IT Near-shoring site BO Near-shoring site IT historic site BO historic site

Poland Czech

Germany

Aut

Slovakia Hungary Romania

Italy

Turkey

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Location

Main Activities

Czech Rep. Hungary Poland Slovakia Turkey Austria Germany Ireland Italy

EUROSIG support CEE Core Banking B2E, Treasury CEE Core Banking support Cards iSeries, International Network Investment Banking, Basel II, Open systems Asset Management EuroSIG, Mainframe

BO Competence Centers Location

Main Activities

Czech Rep. Germany Austria Turkey Italy Romania

Payments Finance & Treasury Loans & Mortgages Cards Core Banking Near-shoring strategic site (mainly) for all Operational Lines

Impact and benefits of the newest software technologíes for the banking industry – Web 2.0 and banking of the future Traditional internet banking

ƒ Web 1.0 reflects historical transaction-based banking (payment orders, statements…) ƒ One-way information-channel only ƒ Poor online interaction and communication possibilities

Web 2.0

ƒ Collective intelligence approach ƒ Participation of customer, bi-directional communication ƒ Social computing ƒ Customers-bank community ƒ First banking presence in Second Life already observable ƒ Leveraging internal communication ƒ Blogs and wikis enhance knowledge management (e.g. re-use of corporate best practices)

Examples: ABN Amro and Wells Fargo presence in Second Life

The battle between banks for supremacy … will be won mainly by those who succeed best in the area of personal contact. ABN Amro executive statement

Succesful companies of the future will have participants not customers. Rather than having a business, they will have a community! 10

Web 2.0 is more than a meaningless buzzword and will clearly change almost everything in the way the banks drive business with their customers Web 1.0 ƒ Web sites as well insulated entities, fully controlled by the creators‘ own sphere of influence ƒ Customers sitting behind a browser ƒ Functionality access through simple services pre-packaged by bank ƒ Website builder thinking of himself only

ƒ Functionality grows by adding services and the possibility to execute more sophisticated transactions ƒ E-commerce has it‘s break through Web 2.0 ƒ Applications that harnesses network effects, getting better the more people use them ƒ Rich functionality sets accessible to humans and machines, offered via reusable and interoperable channels/web services ƒ Web 2.0 approach puts more trust in users than ever before since it means inversion of information control to the users ƒ Network effects and feedback loops will return in reward ƒ Architecture of participation that encourages user contribution ƒ Community and sense of ownership with users‘ side

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Homepage

Customer Portal

Platform

SOA – Bringing together creation of agile business processes and supporting applications the elegant way ƒ Perfectly fitting approach for applications and processes which require ƒ ƒ

Service Orientation A General Structural Principle

Frequent changes Fast flexible and efficient change execution Business Sector

ƒ Not only a technology but also an infrastructure framework and a management approach

Business Architecture ------------------------------------Software Oriented Enterprise

ƒ Combination and administration of software services ƒ Overcomes the inflexibility of tight coupling between applications by using loosely coupled services

Service Architecture ------------------------------------Service Oriented Architecture

Appl./Infrastr. Architecture ------------------------------------Service Oriented Infrastructure

Lust but not least:

SOA will help the open standards break through and fosters functional diversity of Web 2.0.

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IT Sector

Mashups & Composite Applications – Let the others do your work, combine and save efforts! Mashups „ „ „ „

Applications that combine data / content from multiple services into a new integrated experience Sourcing mashup contents via API, web feeds (RSS/Atom), JavaScript intranet-based search engines, applications and databases exposed as web Services BI engines

Composite Applications „ „ „ „ „ „ „

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Application assembling functionalities from multiple, loosely coupled applications (servies) to support business processes messaging systems, extranet services (e. g. data sources, application utilities) Faster and cheaper way to create customized applications for companies and also software vendors selling pre-mashed or easy-to-integrate services Application possibilities „ Business productivity and research applications „ Branch and loans information services „ Corporate services (travel, conference, events, package shipping …)

Hype Cycle: Web 2.0 has already done a good way through the stage of relativization and will soon step into the real banking sector!

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Source: Gartner

Thank You for Your Attention!

(www.unicreditgroup.eu) (www.ba-ca.com)

(www.hvbgroup.com)

Klaus Rausch, HVB Information Services GmbH Managing Director 15