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From Value Chain to Value Network:
Possible Digital Transformation Scenario
for the Financial Industry
Public
Tarmo Ploom
November 10, 2015
November 10, 2015 Tarmo Ploom/15-010878 2
Key Messages
Not the regulatory challenge but the technology challenge is the main challenge for financial institutions
Banks should focus on their core competencies – handling relationships with customers and on
optimizing their business processes for digital business
Banks can replace big parts of their existing
IT–landscapes with Services provided by new FinTech
entrants
Banks and Web Service providers can leverage
financial industry messaging standards to simplify
integration
November 10, 2015 Tarmo Ploom/15-010878 3
Agenda
Regulatory challenge The technology mega tornado
Emergence of Fintech
Dimensions of digital business Strategy for digital operational excellence
From value chain to value network
Current state – Combined Domain Model at Credit Suisse Current state – BPM at Credit Suisse
Overview industry messaging standards
Possible future state – Combined Domain Model at Credit Suisse Transformation – application of managed evolution
Conclusion
November 10, 2015 Tarmo Ploom/15-010878 4
Regulatory Challenge
Dodd–Frank Wall Street Reform and Consumer
Protection Act (DFA)
European Markets and Infrastructure Regulation (EMIR)
Alternative Investment Fund Managers Directive (AIFMD)
UCITS V
Market Abuse Directive (MAD)
Markets in Financial Instruments Directive (MiFID II)
US Dodd–Frank Act Volcker Rule
UK banking reform
Foreign Account Tax Compliance Act (FATCA)
OECD's Common Reporting Standard for the Automatic
Exchange of Financial Information (CRS)
UK Crown Dependencies and Overseas Territories
(UKCD and OT) Regulations
Basel III
Capital Requirements Directive (CRD) IV
…
November 10, 2015 Tarmo Ploom/15-010878 5
The Technology Mega Tornado
Cloud – Elastic storage
– Elastic compute power
Mobile – Accessibility
Analytics
– Big data – Machine learning
– Recommender systems
Social – Social network analysis
– Social marketing
November 10, 2015 Tarmo Ploom/15-010878 6
Emergence of Fintech
Digital currency payments – Circle Peer to peer payments – Facebook payments
Foreign exchange – TransferWise
Risk calculation – Riskmetrics Fixed income derivatives – TreasuryView
Portfolio management – TrueWealth
Portfolio valuation – Markit Settlements – Blockchain
Peer to peer lending – Bondora
Croudfunding – Kickstarter Credit Scoring – Big Data Scoring
November 10, 2015 Tarmo Ploom/15-010878 7
Mill
ion U
SD
Num
ber
of
deals
Growth of FinTech Investments
$13.7 bn Funding in last year
150 Avg Deals per Quarter
+45.83% YoY Funding Growth
$1.31 bn Avg Funding per Quarter
+16.41% YoY Deal Growth
Q1’15 Biggest Quarter (nr of deals)
821 Deals in last year
Q2’14 Biggest Quarter ($ Funding)
https://www.cbinsights.com/industry?sector=281&setup=2&public_list
November 10, 2015 Tarmo Ploom/15-010878 8
Dimensions of Digital Business
Forrester: The future of business is digital, March 2014.
Digitize end-to-end
customer experience
Digitize products and
services as part of the
value ecosystem
Create trusted
machines
Digital customer experience
Source enhanced
operational capabilities
within a dynamic
ecosystem
Drive rapid customer-
centric innovation
Digitize for agility over
efficiency
Digital operational excellence Enterprise
Customer
November 10, 2015 Tarmo Ploom/15-010878 9
Strategy for Digital Operational Excellence
New entrants don’t have – Client contacts
– Banking license
– Don’t know end to end business processes of banking
New entrants focus usually on a very small and detailed business process which
could be exposed as a web service
Instead of competing with new entrants
collaborate and integrate them into banking
business processes using web services
November 10, 2015 Tarmo Ploom/15-010878 10
From Value Chain to Value Network
Firm Infrastructure
Inbound Logistics
Operations Outbound Logistics
Marketing and Sales
Service
Primary Activities
Support
A
ctiv
ities
Procurement
Technology Development
Human Resource Management
November 10, 2015 Tarmo Ploom/15-010878 11
Current State – Combined Domain Model at Credit Suisse
Business Partner Applications Financial Market Information Enterprise Content Management
Communication and Access
5: Communications & Collaboration
Street Side Interfaces
Acc
ountin
g
Contr
ol
Fin
anci
al
Acc
ountin
g
Regula
tory
, R
isk
and L
iquid
ity
6: A
cco
un
tin
g, C
ontr
ollin
g a
nd
Re
po
rtin
g
Wealth Management and Advisory
2: Finance, Investment
and Sales
Credits and Syndication
Trading
3: Trading and Markets
Order and Trade Management
Product Control
Payments
4: Cash and Asset
Operations
Settlement and Clearing
Single Accounts
Corporate Actions
Custody
Cust
om
er and P
art
ne
r
Cust
om
er R
ela
tionsh
ip
Managem
ent
1: P
art
ne
rs a
nd
Pe
rso
ns
7: Enterprise Common Services
Logistics
Basic Facilities
V 0.96 2008/12/10
November 10, 2015 Tarmo Ploom/15-010878 12
Current State – BPM at Credit Suisse
200 level 0 business processes
ca 800 level 1 business processes
ca 3000 level 2 business processes
> 10 000 level 3 business processes
> 30 000 level 4 business processes
Level 0
Level 1
Level 2
Level 3
Level 4
November 10, 2015 Tarmo Ploom/15-010878 13
Overview Financial Industry Messaging Standards
Financial industry messaging standards – ISO 20022
– FIX/FixML
– FpML
– XBRL – BIAN
Together these standards offer ca 7 500 unique
attributes
Overall banking needs ca 11 000 unique attributes.
Financial industry messaging standards cover already
ca 70% of unique attribute need in financial industry.
November 10, 2015 Tarmo Ploom/15-010878 14
Possible Future State – Combined Domain Model
at Credit Suisse
Business Partner Applications Financial Market Information Enterprise Content Management
Communication and Access
5: Communications & Collaboration
Street Side Interfaces
Acc
ountin
g
Contr
ol
Fin
anci
al
Acc
ountin
g
Regula
tory
, R
isk
and L
iquid
ity
6: A
cco
un
tin
g, C
ontr
ollin
g a
nd
Re
po
rtin
g
2: Finance, Investment
and Sales
Payments
4: Cash and Asset
Operations
Settlement and Clearing
Single Accounts
Corporate Actions
Custody
Cust
om
er and P
art
ne
r
Cust
om
er R
ela
tionsh
ip
Managem
ent
1: P
art
ne
rs a
nd
Pe
rso
ns
7: Enterprise Common Services
Logistics
Basic Facilities V 0.96 2008/12/10
IFX FIX, FPML, ISO 20022
FP
ML
Trading
3: Trading and Markets
Order and Trade Management
Product Control
FIX, FPML
FIX
FIX, FPML
Wealth Management and Advisory
Credits and Syndication
RI-XML
ISO 20022
XB
RL
XB
RL
HR-XML
BIA
N
Reuters
ISO 20022
ISO 20022
ISO 20022
ISO 20022
November 10, 2015 Tarmo Ploom/15-010878 15
Transformation – Application of Managed Evolution
Define/o
ptim
ize
Transfer
Deplo
y
Monitor
Continuous
Improvement
Business Process
Analysis Business Process
Modeling
Business Process
Enactment
Business Process
Monitoring
November 10, 2015 Tarmo Ploom/15-010878 16
Conclusion
Focus on digital operational excellence can rescue financial industry from technology mega
tornado
Industry messaging standards can be a mean to carry out semantic integration of FinTech
Web Services
Core competence of banks becomes relationship
management and business process management
Managed evolution can be used as an approach
to transform current banks to digital banks
November 10, 2015 Tarmo Ploom/15-010878 17
Questions?