Webinar How new cloud based core banking systems can help to reduce time-to-market for new banking product? - Deloitte
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December 2021 Webinar How new cloud based core banking systems can help to reduce time-to-market for new banking product?
Team
Wojciech Wiesław Marcin
Wróbel Kotecki Knieć
Senior Manager, Digital Partner, Deloitte Digital Director, Cloud
Banking Solutions Engineering
wkotecki@deloittece.com
wwrobel@deloittece.com mkniec@deloittece.com
2 |© 2021. Deloitte Digital
Cloud Core Banking Academy – Webinar Series
15 December 2021:
How new cloud based core banking systems can help to reduce time-
to-market for new banking product?
23rd February 2022:
Thought Machine
April 2022:
TBC
June 2022:
TBC
3 |© 2021. Deloitte Digital
AGENDA
01 Trends on the market
02 Solution choice
03 Cloud - Cloud Native, Suppliers, Regulations
04 How much time it takes?
05 How much it costs?
4 |© 2021. Deloitte Digital
06 Potential benefits
LIVING IN THE NEW NORMAL
Early 2020 brought a number of challenges for banks, fast-tracking digital
(r)evolution
Illustrative
Social lockdowns Loan defaults Interest rates reduction Profitability hurdles Global recession forecasts
“Coronavirus: Digital “World’s Banks ”Negative Interest Rate ”Banks may not be ”World Bank forecasts
banking is no longer Brace for Rise in May Not Help In profitable until 2025 worst recession in
optional” Loan Defaults” Economic Recovery even as major eight decades on
April 14th, Euromoney April 17th, US News
From COVID-19” economies recover” COVID-19”
May 19th, Forbes May 22nd, Business insider June 8th, BNN Bloomberg
April May June
2020
”41% of employees ”Coronavirus: will ”'Phygital': a banking ”COVID speeds up digital
likely to continue call centre workers strategy for the new banking revolution in 10
remote working lose their 'voice' to isolation economy” weeks not five years”
after pandemic” AI?” June 5th, World Economic June 8th, The Sydney Morning
April 15th, Gartner April 22th, Financial Times Forum Herald
Remote working Process automation Branches remodelling Digitalization fast track
Source: Press Customer preferences changes Revenue compression Operating model transformation
© 2020. Deloitte 5
LIVING IN THE NEW NORMAL
Covid-19 related restrictions triggered immediate actions
from banks
L I M I TAT I O N S D U E T O C O V I D - 1 9 NEW FUNCTIONS IMPLEMENTED DUE TO COVID -19
60%
of banks closed or shortened opening 41% 34% 25%
hours of branches
of banks increased limit of banks implemented of banks introduced
of contactless fully digital processes appointment bookings
11% payments (product opening etc.) in branches
of banks turned-off selected methods
of account opening
24% 23% 18%
6%
of banks suspended account openings or
limited access to products for new clients of banks enabled of banks introduced of banks launched
donations to NGOs, digital ID&V methods contactless payment
social actions etc. methods
1. Survey conducted in June-August 2020 in ’mystery shopper’ assessment on a sample of 256 banks participating in 2020 edition.
© 2020. Deloitte 6
INSIGHTS FROM DIGITAL LEADERS
We benchmarked ~320 banks from 39 countries to understand who are
Digital Champions and how they perform
DBM index1
Digital Digital Digital Digital
latecomers adopters smart followers champions
What defines Digital
champions?
Digital champions offer a
wide range of functionalities
relevant for customers and a
compelling user experience.
Digital champions set key
digital trends and have
leading market practices,
which makes them examples
to learn from.
1. DBM index measures maturity for channels and products offered by a bank. Data for 313 out of 318 banks which participated in 2020 edition.
2. Selection of 31 banks defined as Digital champions. Defined as
Top10% of banks2
© 2020. Deloitte 7INSIGHTS FROM DIGITAL LEADERS
Incumbent champions achieve better C/I (-4.0 p.p.) and ROE (+1.9 p.p.) on
average than incumbent peers
Selected KPIs of incumbents: average difference to incumbent peers2, p.p.
81%
of Digital champions are Incumbents1
ROE 1.9 p.p.
ROA 0.2 p.p.
Cost/income -4.0 p.p.
© 2020. Deloitte 1. Incumbents – banks with long-established position on the market. Challengers – relatively small bank competing with large long-established banks. 8
2. Average difference to peers – peers are incumbent banks in the same country that were covered in the DBM survey.INSIGHTS FROM DIGITAL LEADERS
To keep up with digital arms race, banks need to accelerate their
coverage of products and services in digital channels
% of banks offering end-to-end digital opening of selected products2 Others2 Digital champions2
Transactional Saving & investment Credit
84% 85% 84%
2.1x 39% 1.7x 51%
2.8x 30%
Debit card Saving account Cash loan
85% 84%
56%
2.5x 34% 1.9x 45%
Credit card Term deposit 3.5x 16%
Overdraft
61% 69%
2.6x 27% 32%
2.7x 22%
Currency account Mutual funds 12% Car loan
2.8x
51% 58%
2.2x 23% 2.9x 20%
Current account Brokerage account 6% 15% Mortgage
2.3x
Faster digitalization of banking products is essential to achieve financial results of digital champions
© 2020. Deloitte 1. Customer research (CAWI) covered 4 900 respondents, mainly urban affluent, from 33 out of 39 benchmarked markets. 9
2. Data for 313 out of 318 banks which participated in 2020 edition, including 31 champions and 282 other banks.Core banking system in a cloud? How to use new cloud native core banking systems for faster delivery of new products
Choosing the right approach
Many factors have to be considered
Service
(Saas/BaaS/PaaS) Overall strategy / IT strategy
/ sourcing model
Partners’ ecosystem
Existing applications
landscape
Customer proposition Regulations
(Product/s)
Legacy core
New cloud based core
(functionality, Cloud platform vendors
(functionality,
implementation, support and data centers
implementation, support
model)
model)
11 |© 2021. Deloitte DigitalTypes of implementation of innovative products
LEGEND
Most common transformation archetypes exercised by Banks and Financial Institutions Legacy Existing New Banking
Ecosystem Biz / Core Ecosystem
01 Digital Wrapper 02 Legacy Powered 03 On the Edge 04 Spin-off 05 Fresh Start
Considerable Minimal
Incremental
capability systems
interoperability
overlap overlap
Investments
Digital wrapper around Separate core with shared New banks on the edge Spin off banks Challenger banks
legacy core infrastructure & applications
Build an interoperability layer (e.g., APIs, Build a new core, new front-end The new digital bank runs on a new The new bank will be a spin off. Challenger banks do not have any
microservices) wrapping around the legacy and new business processes, core and new front-end with It will have a new core, front- legacy cores or technology debts. They
core platforms, and stand up digital but share some legacy limited overlap with the legacy end, and processes, and will will either build or use a vendor digital
banking capabilities via the interoperability infrastructure and applications except enterprise GL. The new likely operate under a separate core to build a digital bank from
layer (e.g., item processing, bank may become target for organization and charter scratch
payments) migration.
Investing in a robust interoperability New core platform with separate Proposition runs on a new core and The new bank and platform can Challenger are building their
capability to deliver “on the glass” features. front-end and business processes, new front-end with limited overlap be a spun-off. It can have a new cores from scratch or using a
Enabled from legacy core platforms and while leveraging shared legacy with the legacy except temporary core or Gen2/Gen3 vendor, Gen-3 vendor to drive
biz applications infrastructure and capabilities critical components. The new bank front-end, and processes, and acceleration.
operated under the same business capabilities.
organisation and charter
12 |© 2021. Deloitte DigitalMajor steps and factors for choosing and implementing a core banking
solution
Definition of business goals Choosing the right cloud based Implementation Operate / DevOps
and new products core banking solution
• Business requirements and • Overall architecture • Choosing the right • Implementation of DevOps
specification of new products / implementation partner processes
customer segments • Choosing the right cloud based
core banking system • Preparation of own internal • Continuous improvements /
• Is it possible to implement and resources delivery
maintain them efficiently in the • PoC
existing core banking system? • Agile cloud-based development • Cultural change
• IT strategy / sourcing model
• Cloud adoption - Choosing cloud
platform
• Data processing strategy
• Regulatory considerations
13 |© 2021. Deloitte DigitalMain solutions available on the market
Choosing a cloud based core banking system
• It’s not easy to compare different systems, as they have
different characteristics / value propositions
• Functionality (what is out-of-the-box)
• Implementation model
• Support model
• Integration with existing & planned Apps
• Architecture
• Compatibility with preferred cloud platform vendors
• Licensing model & cost
• PoC
• Compliance with regulations
14 |© 2021. Deloitte DigitalCloud Cloud Native, platform providers, regulations
Cloud technology is constantly changing 2010 2015 2020 Virtual Machines Automation Serverless 16 |© 2021. Deloitte Digital
The Cloud Market is also changing and becomes more mature
Multi-Cloud Container Management
Cloud Service Expense Management
IoT Platform
Cloud Managed Services
Machine Learning
Hyperscale Computing
Edge Computing
Immutable Infrastructure
Cloud Tethering
API Economy
Cloud Native Application Architecture
Serverless PaaS
Hybrid IT Infrastructure-as-a- Cloud Security
Cloud to Edge Development Support IaaS+ SaaS
Service Assessment
Cloud Testing Tools & Services
Cloud Marketplaces
SaaS Administration & ERP
Blockchain PaaS
Cloud Networking
Cloud Office Public Cloud Storage
Software Defined Networking Private PaaS
iPaaS
Site Reliability Integrated IaaS & PaaS Cloud Center of Excellence
Engineering (SRE) Hybrid Cloud Computing
Cloud Migration
Cloud Service Brokerage Cloud Management Platforms
Cloud bursting Private Cloud Computing
Innovation Peak of Inflated Trough of Slope of Plateau of
Trigger Expectations Disillusionment Enlightenment Productivity
17 |© 2021. Deloitte DigitalCloud Native – technical aspects influencing your business
Why should we care?
Efficiency Resilience
(response speed, (self-healing, design for failure).
concurrency)
Automation Monitoring
(infra & applications)) Principles (access to logs, metrics…)
Elasticity, Scalability Automated deployments
(auto-scaling, plenty of (shorten time to market for new
services and choices) versions and features)
18 |© 2021. Deloitte DigitalWhat could this mean for YOUR business?
Secure Your Move Beyond Innovate
Business Value Limitations to Win
Technology resilience, disaster Modernization of legacy platforms, Leveraging a market-leading stack of
recovery, data privacy. Enterprise enablement of rapid functionality cloud services to rapidly build new
releases, exceptional user experience,
security and compliance with business, reducing the cost income
enhanced data analytics and
regulatory guidelines. predictive modeling. ratio by 3x, improving time to market
for new products and services by 5x.
19 |© 2021. Deloitte DigitalWhich cloud provider should you choose?
What about the cloud strategy?
Private Cloud
Public Cloud
Hybrid Cloud
Multi-Cloud
20 |© 2021. Deloitte DigitalCloud Strategy – related with Business Strategy
Implementation of a cloud strategy has comprehensive effects, not limited to enterprise IT
T P O G F
Governance
Technology Processes Organization Finance
Compliance
IT Architecture IT-Broker Role Cloud Competence Center Cloud Governance Costs Structure Change
Cloud Capabilities Continuous Integration + Delivery New / Extended Roles Compliance / Cloud Proof Gov. Adapt Business Case
21 |© 2021. Deloitte Digital
Future Workspace Updatated / New processes Cloud Operating Model Cloud Playbook Using Cloud Benefits LeversCloud - related legal topics
This is where we can help as well
We identify the applicable
L&R landscape and assist in
effectively managing L&R
changes. We advise on Cloud
Deloitte Legal’s experienced strategy and management
practitioners bring a practical from a L&R perspective.
focus to Cloud solutions that L&R Strategy
help clients manage and
increasingly rigorous
Management
regulations and local
enforcement.
New, Cloud-
Intellectual
based, Business
Property & Trade
We assess the impact of Models and E-
moving to Cloud on the Secrets
organization’s IP, data and commerce
trade secrets strategy,
ownership and management.
We provide tailor-made
solutions on how to safeguard
these valuable assets.
Cloud Contracts
We support and set up new,
We assist in reviewing, negotiating, Cloud-based, business models
drafting and modifying Cloud and coordinate new digital
contracts and ensure appropriate enabled business structures, in
22 |© 2021. Deloitte Digital back-to-back arrangements. terms of multiple existing and
new and unprecedented L&R
challenges.Summary – how much time it takes
Many factors impacting project duration Sample duration: 6-8 months
• Project scope • For simple products (np. retail lending)
• Complexity of products • Standard out-of-the-box implementation,
configuration without customisation
• Complexity of Technical solution
• First full release (vs. MVP, friends and family)
• Internal resources
• External resources – quality and experience of
implementation partner
23 |© 2021. Deloitte DigitalSummary – what is the cost Typical factors impacting scope and cost of the Total Cost of Ownership for X years project • Complexity of products (requirements) • Implementation • Technical debt • Maintenance and development • Scope related to cloud adoption • Licencing • Availability and capability of internal resources • Services • Short-term (tactical) vs. long-term (strategic) • Licencing model • Maintenance and development model 24 |© 2021. Deloitte Digital
Summary – benefits
Financial benefits Business and technology benefits
• Reduced total cost of ownership (lower • Shorter time-to-market
maintenance, internal resources) • Better customer experience customer satisfaction
• Improved C/I and ROE • Flexible solution flexibility for development in the
• Scalable (more efficient) licencing model future
• Improved flexibility and agility of organisation (e.g.
reacting to market or regulatory changes)
• Development of partners ecosystem (APIs)
25 |© 2021. Deloitte DigitalThank you. Nazwa Deloitte odnosi się do jednej lub kilku jednostek Deloitte Touche Tohmatsu Limited, prywatnego podmiotu prawa brytyjskiego z ograniczoną odpowiedzialnością i jego firm członkowskich, które stanowią oddzielne i niezależne podmioty prawne. Dokładny opis struktury prawnej Deloitte Touche Tohmatsu Limited oraz jego firm członkowskich można znaleźć na stronie www.deloitte.com/pl/onas. Deloitte świadczy usługi audytorskie, konsultingowe, doradztwa podatkowego i finansowego klientom z sektora publicznego oraz prywatnego, działającym w różnych branżach. Dzięki globalnej sieci firm członkowskich obejmującej 150 krajów oferujemy najwyższej klasy umiejętności, doświadczenie i wiedzę w połączeniu ze znajomością lokalnego rynku. Pomagamy klientom odnieść sukces niezależnie od miejsca i branży, w jakiej działają. Ponad 264 000 pracowników Deloitte na świecie realizuje misję firmy: wywierać pozytywny wpływ na środowisko i otoczenie, w którym żyją i pracują. W Polsce usługi na rzecz klientów świadczą: Deloitte Advisory sp. z o.o., Deloitte Audyt spółka z ograniczoną odpowiedzialnością sp. k., Deloitte Doradztwo Podatkowe Tokarski i Wspólnicy sp.k. , Deloitte PP sp. z o.o., Deloitte Polska Sp. z o.o., Deloitte Strategy and Research Sp. z o.o., Deloitte Consulting S.A., Deloitte Legal, Pasternak, Korba, Moskwa, Jarmul i Wspólnicy sp. k., Deloitte Services sp. z o.o. (wspólnie określane mianem „Deloitte Polska"), będące jednostkami stowarzyszonymi Deloitte Central Europe Holdings Limited. Deloitte Polska jest jedną z wiodących firm doradczych w kraju, świadczącą usługi profesjonalne w obszarach: audytu, doradztwa podatkowego, konsultingu, zarządzania ryzykiem, doradztwa finansowego oraz prawnego za pośrednictwem ponad 2 500 profesjonalistów z Polski i zagranicy. © 2021 Deloitte Advisory Sp. z o.o. Sp. k. Wszystkie prawa zastrzeżone.
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