Enterprise Systems

Session 7: MBA – Full Time (Trim III)

IS Stream

Jan-18
 Introduction

 Retail Banking:
– Fast-moving environment
– Seamless, digital (transactional) experiences across channels
– Ever-changing customer behaviour and expectations
– Require banks to alter, re-define their business models
• To differentiate their product and service offerings
– E.g.: Digital Payments
– Enables data capture across sales channels (for every transaction)
• Location, behavioural, search, preferences
– Amount, value of data collected on consumers: Increasing
• Advancements in processing capability, data analytics and mining
– Banks, "Digital Challengers":
• Experimenting with data-driven services
• Provide personalised financial services to their customers

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 Introduction

 Corporate Banking:
– Intricate environment characterised by regulations
• Anti-Money Laundering (AML)
• Foreign Account Tax Compliance Act (FATCA)
• International Financial Reporting Standards (IFRS)
– Siloed banking relationships, need for efficiency and cost
control
– Digital innovation: limited to
• Increasing efficiency of services (improving straight through
processing (STP)
• Digitisation of largely labour intensive, manual processes
– "Know Your Customer" (KYC), client on-boarding, contracting,
reconciliation, accounts receivable, invoicing
• Improving the usability of services for corporates
– Standardisation, consolidation and integration of connectivity options
and channels
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 Introduction

 Developments:
– Technological advances:
• Open Application Programming Interfaces (APIs), mobile devices
and cloud solutions
• Enables making data and functionality available
• Secure and cost-effective manner
• For integration within other applications,
• Creating new value, services and experiences
– Increasing openness of various data sources (both financial and
non-financial)
• Held by banks and corporates
• Potential to further drive innovation in corporate banking services

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 Introduction

 Developments:
– Open Banking Working Group (OBWG)
– Payment Services Directive (PSD2)
• Regulation of payment services and service providers in the EU
– General Data Protection Regulation (GDPR)
• Strengthen and unify data protection for all individuals in the EU
– Driver for opening up data and functionality
• Beyond the initial compliance scope of payment initiation and
account information services
 New "Data-Driven" proposition domain: "Customer in Control"
– Own data and financial assets
– Sensitive: compliance and reputational perspective

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 Transactions Amongst Corporates

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 Connectivity Options

 Digitisation: mainly within corporates

– Between corporates: to a lesser extent
• Relatively large, complex supply chains
• Bilateral connectivity is organised
– Presence of business case to justify the investments
– Electronic Data Interchange (EDI)
• First wave of bilateral connectivity solutions
– ‘De facto’ standard in the business-to-business (B2B) interactions
– Internet based new connectivity options (e.g. SOAP, XML)
• Easier (more convenient) bilateral connectivity
– Application Programming Interfaces (APIs, e.g. REST)
• Next generation connectivity option
• Provides benefits in terms of Speed, Standardisation, Simplification, Scalability and
Cost-effectiveness
• Era of machine-to-machine (M2M, including IoT) messaging
• Transforming the traditionally linear supply chain
– "Digitised Multi-Party Network": Process and update target systems in real-time
• Type of information being shared: far richer than EDI
– More free-flowing, situational
– Not required to build bilateral connections between trading partners

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 Triple A Model – Value Creation Stack

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 Availability

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 Accessibility

 Suitability of data for

exchange: categories of data
 Read, Write access

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 Accessibility

 Driving forces:
– PSD2: Right to customers
• Authorise third party applications
• Connect to their payment accounts for payment initiation and
account info
• More control for customers: how they wish to handle their data
residing within the banks
• Triggers banks to rethink the way data is used, shared and made
available, to their customers (or authorised intermediaries)
– GPDR: regulatory framework for processing personal data
• Verifiable consent to organisations before organisations can use
their personal data
• Customers will also be given the ‘right to be forgotten’
• Right to retrieve personal data for re-use at other service
providers of choice, thereby preventing ‘lock-in’
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 Accessibility

 Scope for innovation for Banks in tools and technologies

 Taking into account compliance, security and usability
– Conditio sine qua non: KYC - essential for banking
– Ability to identify customers, verify identity when offering banking services:
prerequisites for secure banking
• Usage of digital identities in their own context for information security
• Required to be applied beyond banking domain
• Digital identity offered "as a service" through APIs by authorised third parties based
on customer data held by banks
• Enhanced and advanced "Data Access Infrastructure" with digital identity
technologies: essential for data availability and accessibility
– Precondition for enabling innovative data analytics applications
– Opening up of New B2B2C proposition space
• Innovative Fintech players are already beginning to occupy
– Banks can pursue an individual strategy or collaborative
• Creation of a generic data-access infrastructure
• Variety of solutions, converging into a network
• Harmonised, recognisable user experience

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 Analytics

 Relying on data analysis to facilitate informed decision making

 Hindsight (descriptive, diagnostic) & Foresight – (predictive,
prescriptive)
 Driven by technological developments
– Machine Learning, Cloud Computing, Artificial Intelligence, Robotics
Process Automation, IoT and DLT
 Banks are trusted with customers’ funds, confidential information,
and distributing and allocating risk
– Collecting, protecting, sharing and analysing data securely and efficiently
 Emerging domains:
– Make APIs available
– Use APIs
– Data Analytics
 Different levels of API openness:
– Private, partner, member, acquaintance, and public
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 Open API in Banks

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 Functional Scope of APIs in Banks (Example)

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 Correlation of Data-related Technologies

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 Data Analytics: Use Cases In Banking

 Current Analytics: internally oriented, includes application areas such as product development, targeted
market/sales efforts, operational efficiencies, and better risk and fraud management
 Internal data: not sufficiently unique to allow unlocking specific, actionable insights critical to maximise the
value of data analytics and differentiate their value proposition towards customers
 Paradox of data analytics: sophisticated algorithms and capabilities Vs. access to data
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 Data Analytics: Use Cases In Banking

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 Data Analytics: Use Cases In Banking

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 Overview of data-driven Fintech initiatives

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 Key Considerations for Banks

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 Practical Considerations

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 Components of Data Management

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 Control Automation

 Internal monitoring activities:

– Reduce management liability, strengthen process oversight and meet governance
requirements
 Mostly manual – Issues:
– Near impossibility of manual control of all critical transactions on a company-wide basis
– Controls to be tested are chosen at random, limiting process assurance
– Data and information for oversight tasks is often provided manually
– Data is fragmented across various IT systems, hampering efficient control monitoring
– Internal monitoring functions (e.g. internal audit) cannot cover all relevant processes
– Uncertainty about the financial statement audit and its control-testing results
 Scope of using advanced analytics and control automation techniques in finance
processes
– Using data from across IT systems and transactions
– Monitor the key risks of critical activities
 Continuous monitoring of critical controls and transactions by process, control owners
– Process oversight and overall control environment can be streamlined, reducing the cost of
monitoring
– Improve key processes and evaluate control effectiveness and efficiency

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 Financial Analytics

 Streamline Financial Closure Process

 General Ledger and Profitability Analytics

– Detail-level general ledger transactions and cash flow analysis across locations,
customers, products, sales territories, distribution channels, and business units
• Sample Metrics and reports: cash-flow analysis, current, quick and working capital
ratios, and balance sheet analysis
– Identification of customers and transactions that generate maximum profits by
product, location, department, and geographic detail
• Sample metrics and reports: operating profit margin, return-on-asset, and return-on-
equity performance
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 Financial Analytics

 Payables Analytics
– Provides visibility into expense line detail so managers can
maximize cash flow and control expenses
• Sample metrics and reports: supplier payment history,
outstanding payable balances, accounts payable turnover analysis

 Receivables Analytics
– Monitors collections processes to show what customers buy and
how they pay
– Enables managers to identify overdue balances and other
receivables bottlenecks
• Sample metrics and reports: customer payment history,
collection performance, bad debt-to-revenue ratio, accounts
receivable turnover

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 Analytics in Financial Services

 Risk Management
– Stakeholders demand more control,
transparency around risk, risk mgmt.
– Need to understand risk exposure at
aggregate and granular levels
• Volatile financial markets, highly networked organizations, global
operating models
– E.g. visualize risk concentration and exposure by geography
• Risk assessment, scoring and rules engine
• Fraud prediction & mitigation
• Credit Risk, AML
• Loss Forecasting, Default Management
• Collections analytics
• Regulatory Compliance (Basel, CCAR, etc.)
• Trade Cancels & Settlement Analytics

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 Analytics in Financial Services

 Performance analysis
– Understanding performance - from macro organizational trends, to
departmental revenue streams, down to the performance of individual
employees
– Make smart, strategic decisions about where to invest resources so as
to deliver sustainable growth and strengthen returns
– Cost Reduction:
• Claims Analytics
• Call Centre Analytics
• Workforce Analytics
• IT Operations Analytics
• Spend and Usage
• Behaviour Analytics

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 Analytics in Financial Services

 Sales enablement
– Reliance on sales to engage with customers, expand market share, and
drive revenue
– Advanced analytics and data into the hands of sales:
• Provide the support needed to capitalize on opportunities
• Significantly improve both service levels and organizational efficiency
– E.g. Empowering the field sales team with the most up-to-date data, the
ability to conduct ad-hoc dashboard and report development, and access
to forecasting and predictive modelling capabilities
 Product analysis
– Helps in better understanding of overall performance
– Ability to drill down and get a more granular view of business
transactions
• Decision makers can make better operational decisions, identify new
potential product lines, and capitalize on opportunities
– E.g. unified view of sales, customer, and product data enabling better
decisions regarding upsell and cross-sell opportunities
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 Analytics in Financial Services

 Customer insight analysis

– Make better product-targeting decisions while also gaining a greater
understanding of the client base
– Client data accessible from one location:
• Organizations can improve customer retention
• Get a comprehensive picture of their clients
– E.g. analytics environment providing insight into consumer demographics
and spending patterns by aggregating transactions and providing filters to
slice and dice data
• Market Sizing & Segmentation
• Acquisition Strategy
• Cross-sell and Retention
• Marketing Mix Optimization
• Campaign Effectiveness
• Sales Effectiveness
• Customer Satisfaction
• Social Media & Digital
• Churn management
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 Analytics Across the Customer Lifecycle

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 Analytics Across the Customer Lifecycle

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 Forensic Data Analytics

 Science used to proactively seek opportunities to prevent and detect

fraud, waste and abuse by leveraging information in corporate data assets
 Enables identification of meaningful patterns and correlations in existing
historic data to predict future events and assess the reasons for various
fraudulent activities
 Such information is generally "invisible", but provides a platform on which
organizations can take business decisions related to fraud, disputes and
misconduct
 Identification of fraud in vendor, customer and employee registration,
procurement to pay, order to cash, sales and distribution, travel and
entertainment, payroll disbursement
 Benefits:
– Proactive fraud prevention management
– Controlling the magnitude of fraud in a reactive set up
– Effective and focused internal controls
– Improving regulatory and compliance environment

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 Forensic Data Analytics: Techniques

 Link Analysis
– Data-analysis technique used to
evaluate relationships
(connections) between nodes,
including organizations, people and
transactions
– Analysis of EPABX data, mobile bills
and user logical access records that
help a company map its user
footprint
– E.g. phone records analysed across
different zones can unearth the
nexus between employees and
selected vendors on procurement
and disposal of scrap

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 Forensic Data Analytics: Techniques

 Social Network Analysis

– Views relationships in terms of
network theory, which consists
of nodes and ties
– Helps to identify related
parties, conflict of interest,
bid rigging, among other fraud
– E.g. CPG country lead
appointing his relatives as
distributors, and through
known vendors, managing
distribution of products in key
states.
– Social Network Analysis,
followed with a background
check, helped to reveal the
nexus

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 Forensic Data Analytics: Techniques

 Concept Clustering
– Involves grouping similar
entities or behaviour into
tight semantic clusters
• For the purpose of
identifying anomalies or
red flag
– Used along with an
electronic data review
– E.g. Executed on millions
of documents to identify
all the information with
terms such as "gifts",
"incentive" and
"facilitation"

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 Forensic Data Analytics: Techniques

 Sentiment Analysis
– Application of text analytics
to identify and extract
subjective information
including the attitudes of
writers, their affective
state and the intended
emotional quotient
– Determines whether
expressed opinions in a
document are positive,
negative or neutral
– Used to conduct
behavioural training, stem
attrition, identify
disgruntled employees and
potential fraud
conversation

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Thank you