Nordeas Digitisation JourneySimplifying the core bank
Joseph Edwin, Head of Core Banking ProgrammeHelsinki, 24 Aug 2016
Todays agenda:
Lessons learnt from benchmark study
Case for the Core Banking Platform replacement?
What is Core Banking Platform?
The journey & progress
Investment case
A bit about me first
Startups, Consulting, Banking
Core banking at Commonwealth Bank of Australia (CBA)
5 Year Programme
$ 1.3Bn AUD expenditure (approx. EUR 850m)
SAP and Accenture along with a number of other vendors and system integrators
CBA was in the driver seat
CEO was the executive sponsor and chaired the Executive Steering Committee
Scope: customer data, term deposits, savings, transactions, loans, payments etc
Aggressive delivery with two releases in parallel
Product by product migration approach with a regional pilot and phased rollout
CBA in the lead (retained programme accountability and design authority)
Very strong internal delivery capability built up over time
CEO was executive sponsor helped with prioritisation over other initiatives
Iterative delivery of scope (deliver success early and often)
Limit platform customisation to a minimum
Focus on people look after them to keep it sustainable (e.g. mandatory programme shutdown over Christmas)
FACTS AND FIGURES CRITICAL SUCCESS FACTORS
How is Nordea applying learnings?
Simplification programme has the highest priority after critical compliance work
Nordea in the lead with strong governance anchored with Board and GEM
Allow room for the complexity in our planning (4 platforms to 1 is hard)
Initial simplification by drastic reduction of account products
Align products and processes across the Nordics (reduce local variations)
Model bank approach (adopt standard package from Temenos across the Nordics)
Incremental & frequent delivery using agile principles to de-risk delivery
Hire experienced transformation specialists into Nordea
People management: actively rotate programme staff back to the line to manage sustainability and anchor change strongly in the bank
Migration first approach prioritise migrating the legacy bank
Prepare the organisation for the change: early and regular engagement with frontline customer facing teams to prepare for aftermath of migrations
Case for the Core Banking Platform replacement?
14
Banking: an industry in transition and more disruption lurks around the corner
Big Data relevance & personalisation
Cloud profitability at lower scale
A digital revolution
Mobile always accessible
Social Media networks redefined
KEY TECHNOLOGIES IMPACTING BANKING MORE DISRUPTION COMING
E.g. Blockchain
Banking customers: Same needs as before but changing behavior
Co-creationNetwork buildingPersonalisation
Impatient & empowered - 24/7 availability and immediate delivery
Knowledgeable - Specialised and tailored advise that complements the research we have done ourselves
Integrated & connected Integrated into my process and connected/compared with peers
Require relevance - Personalised products, services and interaction
Are becoming less loyal
Use several channels in combination
Use digital channels more intensively
Use digital channels to enforce:
CHANGING CUSTOMER EXPECTATIONS AND CHANGING CUSTOMER BEHAVIOR
Also Nordeas customers are changing their behavior
22 MobileBranches
Digital response required
Front-end solutions will not suffice
Automated end-to-end processes across the full value chain is a must
Consistency and endurance in execution to unlock benefits
Tra
nsa
ctio
ns
Mill
ions
Q3/10 Q3/15
Ab
ility
to
exe
cute
Level of digital response
60
End-to-end digital response requiredRelationship banking is turning digital fast
3
Netbank
Q22015
10%
Q42014
3%
Q42016
17%
Q4 2015
Q42017
Sh
are
of
Rem
ote
Mee
tin
gs
(Per
cent
)
Fintechs exploiting regulatory arbitrage, high costs, high friction
LendingAutomated financial management
Neobanks
FXCorporate banking
Payments
Surge in new operational regulations
& OUR CUSTOMERS
Machinery room
Recovery andresolution
Solvency 2
TLAC
Structural reformsfor banking
Investorcompensation
Livingwills
Leverageratio
NSFR
Shadowbanking
Banking union
Products
Short sellingCSD
regulations
AIFMD UCITS
Long-term financing
ProspectusDirective
Bank account IORP II
SFTtransparency
Margin forderivatives
MortgageDirective Securities
legislationMMFs
Capitalrequirements
Depositguarantee
MAD
AML
EMIR PRIPs
MiFID II
FTT
FATCAData
protection
SEPA
Dodd-Frank
Paymentpackage
Corporategovernance
Benchmarkregulations
Transparency Directive
Balance sheetregulations
Fundamental review of thetrading book
Operationalregulations
PSD II
IT complexity in large legacy banks
Complex, risky, expensive & slow hinders compelling customer experience
Source: BCG
What is Core Banking Platform?
14
For Nordea the strategic response to the industry transformation isSimplification the corner stone of our transformation
Digital offeringCompliance
One operatingmodel
Cost and capital efficiency
Simplification
One building block in the Simplification Programme
Focus all development activities towards supporting simplificationSimplification compliance
Initial simplification
Customer information, savings, deposits, transaction and loan products in all business areas
Core Banking Platform (CBP)
Domestic, international and SEPA payments for all business areas New Payment Platform (NePP)
Consolidate the existing data warehouses into one to meet both regulatory requirements and changing customer demand
Group Common Data (GCD)
Simplification of products, data and processes
Simplify the system landscape and end-to-end processes outside CBP, NePP and GCD
Simplification by cluster
Legal StructureProgramme
Merger of Norwegian, Danish and Finnish subsidiary banks to parent company to create a more efficient structure that decreases administrative complexity
What is Core Banking Platform?
Lending products
Transaction banking
Product & service delivery
One standard IT platform
Customer data
Savings & deposit products
Much faster digital delivery
Reduces risk
Improvedrelationships
Improved product management
Simplified products & processes
Automated & digital
Relationship pricing
Easy tailoring
Compliance made easier
CBP enables our four strategic capabilities
Simplification activitiesSimplification activities
Other key activitiesOther key activities
Know, advice, service and stand byKnow, advice, service and stand by
Agility Competence Resilience Scale
Value to customers
Four strategic capabilities
Key activities
Relationship banking
shaping the future relationship bank
Resilience
Agility
Competence
Scale
Build the engine for faster reaction to customer needs
Reduce operational risk due to complex and old IT landscape
Quickly respond to regulatory requirements
Improve operations cost efficiency
Improve IT cost efficiency
Great customer experiences
Easy to deal with, relevant and
competent, anywhereand anytime, where
the personal and digital relationship makes Nordea my safe and trusted
partner
Enhanced sales & service capabilities in mobile & netbank
The benefits of a new and simplified core
One user interface for core banking services
WHAT CBP ENABLES
Straight through processing, task automation and real-time banking
New services and products created more rapidly
Channel-neutral customerexperience (assisted & digital)
Enhanced product tailoring
One Nordic way
Quick adaptation to market changes
Task automation
The benefits of a new and simplified core
One user interface for core banking services
WHAT CBP ENABLES
Straight through processing and real-time banking
New services and products created more rapidly
Channel-neutral customerexperience
Enhanced product tailoring
One Nordic way Quick adaptation to market changes
The journey: securing execution success
14
Managing Execution Risk through comprehensive due-diligence and preparation phase
2013-2014 2H 2014 Jan Jun 2015 Jun - Sept Sept Onwards
Pre-study phase Start Phase I Phase 2
Solution deep-dives with vendors
Proof of concept
Gaps identification
in vendor solution
RFP process (incl. demos, workshops)
Validation of transformation journey,
selection process & mobilisation with McKinsey / Bain
Reference calls with other banks (CBA, ABN, ING etc)
to validate roadmap &
