Top five ‘hotspots’ to transform financial service processes and improve business agility

Hotspot 1 – Revenue enhancement

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  • U.K. Banks’ Profits Squeezed by Slow Lending RecoveryBloomberg
  • Aust bank fees down but revenue pressure for banks - ANZ Bank Blue Notes
  • Bank of America’s Data Mapping Adds $1 per Share - Forbes

Consumers have become more demanding. To grow revenue, banks need to gain better FSS-Blog-Infographics2insights about their consumers – their life style, their purchasing habits and their preference. Mining consumer data from social forums like Facebook and embedding analytics into banking processes delivers fact-based insights and help design personalized product offers. Banks are partnering with BPO services providers in areas such as managed marketing services to set-up integrated capabilities to improve marketing processes by using analytical tools, adopting campaign management platform and deploying proven process delivery capabilities. These steps help banks improve efficiency in marketing processes, drive digital and mobile channel adoption, identify opportunity to boost sales revenue by up to 25%, and gain faster return on investment (ROI).

Hotspot 2 – Technology shift

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  • St George to allow fingerprint access to bank accounts with new iPhone – Financial Review
  • The way Bank now embraces a digital banking revolution – Lloyds Banking Group
  • Barclays announces mobile payments to India through market leading Pingit service – Barclays

The nexus of forces – social, mobile, cloud and analytics are influencing how consumers and businesses interact. As social and mobile tools become increasingly important to support business activities, organizations need to integrate their current systems and processes to mimic this change. IBM Financial Services Automation and Analytics Asset (FSAA) does just that and help clients reduce process cycle time by up to 80% and enable 20% – 50% reduction in process cost. For example, IBM’s Digital Loan Processing Solution built on the FSAA platform allows lenders to transform the loan application process. It seamlessly integrates with existing Loan Origination System, helps customers collect and process documents; offers digitization capabilities for paperless processing through underwriting; uses robust business process and rules management to execute logical workflows and provides real-time process monitoring.

Hotspot 3 – Cost Reduction

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  • Citigroup still has a way to go in cost-cutting program – Reuters
  • JPM investment bank boss says ‘laser focus’ on costs cuts – Reuters
  • Deutsche Bank performance boost hinges on cost-cut plans – Reuters

Lowering operational expenses continues to be a critical imperative for banks. They are looking to streamline processes and adopt variable cost structures to adapt to the changing demands of their business. Financial services companies are partnering not just to reduce cost but industrialize operations across key functional areas – customer servicing, finance & accounting, procurement, and human resources to gain the advantages of standardization, innovation and improved cost and cash flow related benefits. Shared services model and cloud capabilities offer bank improved flexibility to adopt new business and operating models, and respond better by anticipating market shifts. These steps are helping banks achieve 30% to 60% run-rate savings from operational cost baseline; 15-25% improvement in working capital and up to 10x ROI with source-to-pay collaboration.

Hotspot 4 – Regulatory Pressures

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  • Deutsche Bank sees pressure ahead on regulatory ratios – Reuters
  • Barclays Swings to Profit but Regulatory Issues Persist – The World Street Journal
  • Regulatory Pressure Will Prevent HSBC Holdings plc, Banco Santander SA And Lloyds Banking Group PLC From Pushing Higher – Yahoo Finance

Banking & financial services companies face an ever-changing and increasingly complex regulatory environment. New regulatory reforms continue to emerge, with no apparent reduction in frequency. Banks see localization of regulatory requirements as a serious threat to operating a sustainable global business model. It adds to the cost of operation and impact services to global clients. Services such as IBM Accelerated Financial Reporting (AFR) built on the cloud enabled reporting factory model are transforming reporting operation. Banks are able to reduce cost with 25% to 35% productivity improvement, reduce complexity and free up highly skilled resources to deliver improved business insights.

Hotspot 5 – Financial crimes

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The explosion in global connectivity has provided malicious insiders and organized cyber criminals’ greater opportunity to commit more frequent and complex fraud schemes. Embedding analytics into banking processes and customer transactions help banks with advance detection of financial crimes and fraud cases. Banks are able to uncover fraud and suspicious activity and take proactive action before damages and loss occur and reduce operational cost.

In Summary

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Today BPO services providers and process experts are working with leading banks and financial companies to not just reduce cost and industrialize their processes but help banks become more agile by taking steps to:

  • Mine consumer and business insights and develop targeted marketing campaigns
  • Integrate social and mobile tools into current systems and processes to mimic the technology shift
  • Adopt cloud and shared services model to improve flexibility in operating model
  • Embed intelligence into customer transactions to pro-actively detect fraud and reduce losses
  • Take advantage of technology and analytics to streamline regulatory filing and disclosure requirements

For more information, you can visit IBM GPS –Financial Services and contact our expert Heike Figge, GPS Financial Services Leader IBM Europe, Heike.Figge@de.ibm.com and Jeffrey R Nuckols GPS Director Financial Services, IBM North America, jeff.nuckols@us.ibm.com.

Insights for CFOs to accelerate growth in their organizations – Part 2

In my last posting, I highlighted an insight from IBM’s latest CFO study, “Pushing the Frontiers,” where we surveyed more than 576 CFOs worldwide. A number of important trends emerged, particularly as we compared their priorities today to those they cited in 2005.   In the same survey, we identified a group of CFOs, who we call the “Performance Accelerators”- these are the CFO’s who generate 70 percent more revenue and profit over the past three years than their peers. Also 60 percent are more likely to use data analytics to identify new product opportunity. They also shared how they achieved this – by implementing enterprise-wide information standards, driving the integration of information across the enterprise and generating deep business insight.

Performance Accelerators are also better at managing risk and spotting new revenue sources. We all know about risk – it’s in the CFO’s DNA…but generating revenue? This may not be something that we think as being in the CFO’s primary domain.

To generate deep business insights, there are three key components needed – a platform, talent and capability (which includes process, and policy). Many Performance Accelerator CFO’s have already put common planning platforms in place. They are far more likely to create a robust planning and forecasting process, and develop the analytical skills in their teams to truly partner with other areas of the business. Performance Accelerators combine internal data such as income, expense, balance sheet, data) and external data such as economic indicators, liquidity factors, FX, inflation data to produce these insights.

The result – Performance Accelerators are more effective at conducting various forms of analysis. They’re better at tracking and forecasting supply chain financial data, for example; ability to plan and predict resource capacity; and the ability to conduct industry and competitor analysis. Strong emphasis on analytics along with better analytical talent to partner with the business helps Performance Accelerators excel at scenario planning. They are good at working with colleagues to create timely, reliable forecasts to steer the business and are skilled at evaluating proposals from other parts of the organization. And, they are effective at assessing market trends and using predictive modeling to determine the best course of action for the enterprise.

I am sharing here 6 things for aspiring Performance Accelerator CFO’s to do:

  1. Data is a natural resource – use the financial and operational data you’ve integrated to unearth new sources of value. Evaluate the marketplace and incorporate information from social media sources to identify new revenue streams and opportunities for business model innovation.
  2. Hit the Speed Dial – it is all about speed – the faster you analyze the information you collect; the faster decisions you make.
  3. Merge to Surge – integrate financial and operational data to get a deeper understanding of complex questions such as how much does it costs to serve individual customers, who are the most profitable customers and what else can you offer them to generate sustainable increases in profit.
  4. Consolidate and conquer – model the strategic and financial implications of any opportunities, select the best options (bearing the risks in mind when you evaluate them) and develop a roadmap. Then align your capital and other resources accordingly, and find partners to help you, where necessary or appropriate.
  5. Read the Signs – use advanced analytical techniques to predict future trends and prescribe the best course of action. It’s impossible to be sure what tomorrow will bring, but analyzing all the variables provides a much clearer picture of the range of future possibilities – and your resulting options.
  6. Encourage analytical acumen – foster the skills required to analyze integrated cross-functional financial and non-financial data. Some of these skills may sit outside the finance department – or, indeed, your entire enterprise – so you may need to look further afield.

Performance Accelerators therefore spend significantly more time than their peers on a wide range of activities, particularly forging an infrastructure to capitalize on big data, handling acquisitions and divestitures and developing new business models. They are more willing to enter new arenas, and more competent when they do so. They are effective at demand planning and forecasting product/service development. And, also get actively involved in developing new products and services. Performance Accelerators use their skills with big data to help their enterprises expand into new product areas. And almost half of Performance Accelerators told us that they are using a risk management system that is driven by an automated or analytic tool, and use analytic to track revenue growth and opportunity.

As a CFO are you using analytical techniques to predict future trends? Are you thinking of the different models that can help you focus on mergers and acquisitions, new business growth and new product opportunity? I look forward to your comments and thoughts.

Check out the detailed findings and how you stack up to Performance Acceleratorshttp://www-935.ibm.com/services/us/en/c-suite/csuitestudy2013/cfo-infographic.html – and test how well you are tracking with the latest CFO imperatives.

Insights for CFOs to accelerate growth in their organizations – Part 1

CFO Blog1In IBM’s latest CFO study, “Pushing the Frontiers,” we surveyed more than 576 CFOs worldwide. A number of important trends emerged, particularly as we compared their priorities today to those they cited in 2005. One such priority that stood out was the value they placed on information integration across the enterprise. In this same survey, we also identified a group of CFOs, which we have called “Performance Accelerators” – as CFO’s who been able to generate 70 percent more revenue and profit over the past three years than their peers. What’s their secret ingredient? Yes – its insight – from all the information that flies around our companies. These highest performing CFO’s have been able to implement enterprise-wide information standards and are better at driving the integration of information across their enterprises from numerous sources.

And how have they done this? They have created a shared service delivery framework to guide the design, development and operation of key financial processes – not just transactional processes like accounts payable, accounts receivable, general accounting, but also complex finance processes like business performance reporting and analysis. This, together with the adoption of common information standards across the entirety of the business (including financial and operational data), has catapulted their enterprises into the next league of high performing companies. Over the last 18 months, this Globally Integrated Business Services model is the focus for many companies.

With a single point of responsibility and accountability for the consistent design and deployment of every financial process, regardless of business unit or territory, it’s much easier to automate manual procedures, detect variations in performance and disseminate best practices. And then combine internal data (i.e. income, expense, balance sheet data) with external data (i.e., economic indicators, liquidity factors, FX, inflation data) – and these CFO’s are able to gain real insights from all the information.

Some key actions:

  • Go global – create a single global operating model; establish centers of excellence to ensure a consistent approach and generate economies of scale, use a shared services center to become more efficient; and encourage a culture of continuous improvement,
  • Get clean and lean – simplify and standardize; develop common financial data definitions, processes and reporting procedures to deliver a single version of the truth; automate wherever possible; and
  • Connect the dots – forge seamless links between the different parts of the business, including customer-facing functions like marketing and sales as well as back-office functions like manufacturing and distribution. Data and analytics are essential for efficiency, and both depend on common technologies and processes.

So there should be no debate as to whether it is a worthwhile to drive standard or common processes, mandate standards in data, and drive integration of information across companies.

As a CFO are you using insights to create profitable growth and capitalize on Big Data? Are you addressing the need of driving integration of data across the enterprise?   What is the greatest obstacle you or your company faces as you work to drive integration and standardization of data across the enterprise? If you are already on this path, what recommendations would you have for others?

Check out the detailed findings and how you stack up to Performance Acceleratorshttp://www-935.ibm.com/services/us/en/c-suite/csuitestudy2013/cfo-infographic.html – and test how well you are tracking with the latest CFO imperatives.

Mortgage Servicing – Executing Smartly and Socially

Three reasons why you should consider social insights & analytics for loan servicing

My world has changed. I am no longer compelled to hold the physical paper while having my morning coffee; my trusted mobile device is among the first few things that I reach out for in the morning. I am user and creator of data on social media. It is not surprising that we find many reaching out to share their thoughts, success and frustrations on social media.

In the mortgage industry, borrowers may be abandoning traditional channels of customer engagement and resorting to social media to post their issues, frustrations and questions about their lender’s services. That data is immensely valuable to deepen the understanding of those customers with whom the lenders may have very little to no contact. Also, little information about their customers may be available within the enterprise to provide the help they are seeking in a timely manner. There are three reasons why you should consider social insights & analytics for loan servicing:

1)   Power of Customer Insight – Look for insights beyond agent logs or call transcripts

There is much to be explored and gained from social data analysis integrated with enterprise data mining for servicing. According to a recent survey by the Carlisle & Gallagher Consulting Group, one in three customers would use social media to complain. Social posts go beyond complaints about mods, escrow analysis, etc. to containing the customer’s own narration/voice of life events leading up to their current situation. This rich, detailed information of one’s life events is not always found in agent logs nor obtained from transcriptions of call recordings within the servicing enterprise. But this social data is free, and timely.

2)   Power of Systems of Engagement – Make efforts to integrate social data and enterprise data

Making sense of this external data and integrating it with enterprise data appropriately will take us one step further in the quest to deeply understand our customers as a ‘segment of one’

However, a caution: use of informal, highly dynamic, less reliable social media in business processes can increase risk – risk of harm to consumers, compliance, legal, operational and reputational risk. Technologies are emerging to integrate social media at appropriate risk levels with enterprise data for proper validation and use.   Lenders need to develop localized policies for appropriately addressing these concerns and build a robust governance model for mitigating risk, thus ensuring they are not missing out on the potential of social media analytics.

3)   Power of Social – Consider the benefits of social media analytics

IBM’s point of view is unique and differs from other companies. Our focus is on responsibly using the social content to provide better services to customers. At IBM, we are developing advanced analytics to know more about customers at an individual level, for example:

  • We use analytics to deepen our understanding of accounts with which the servicer had no contact for an extended period
  • Uncover reasons for the lack of engagement especially if the accounts are delinquent
  • Analyze characteristics of delinquent customers who take up loan modifications but have never talked to the servicer, so that we can develop actions that would help customers proactively prevent re-defaulting
  • Mine customer touch points including social media data to determine what events might have turned off customers who were engaged with the servicer before.

These three practices help customer-facing operations improve service delivery at the right time to the right customers by using deep analytics to drive intelligence into the service delivery operation and to understand your customers, better.

For more information on IBM mortgage services and social media analytics, please contact Chitra Dorai, Mortgage Chief Data Scientist, dorai@us.ibm.com and visit IBM Global Process Services Financial Services page.

CFO Insights… “Pushing the Frontier”

By Christine Gattenio

New findings have been identified that provide fact-based insights that can help you learn from high performers, called Performance Accelerators, and how they are standing out in driving efficiency, business insight and profitable growth.

It is quite compelling to understand how Performance Accelerators operate much more efficiently than the rest of the pack.  In fact, the study highlights that Performance Accelerators have push farther than others in driving process and data standards enterprise-wide:

  • 100% have standard / common finance processes
  • 100% have standard chart of accounts
  • 100% have common finance data definition and governance
  •  85% have implemented enterprise-wide information standards

In addition, more than half have created a service delivery framework to guide the design, development and operation of key financial processes. They are also more likely than other finance organizations to use a standalone, cross-functional shared services center for transactional financial activities.   These are critical enablers that helps to accelerate the leverage of big data.

A critical differentiator for these top performers is how they use data. While the average CFO relies on spreadsheets and intuition for the majority (66 percent) of their work, more than two-fifths (44 percent) of Performance Accelerators combine internal and external data to produce insights. As such, Performance Accelerators are more effective at conducting various forms of analysis including tracking and forecasting supply-chain financial data, planning and predicting resource capacity as well as conducting industry and competitor analysis.

Most significantly, Performance Accelerators use the deep insights they’ve unearthed to create profitable growth, spending more time on a wide range of activities, particularly forging an infrastructure to capitalize on Big Data, handling acquisitions and divestitures and developing new business models.

Check out the detailed findings and how you stack up to Performance Accelerators – and test how well you are tracking with the latest CFO imperatives.

IBM Watson: Advancing Brain Cancer Treatment

By on March 20th, 2014
Sometimes life throws a few unexpected events at you.  Near midnight on the evening of July 19th, 2012, I felt my wife shaking me and pleading:  Wake up; you have to listen to this guy!”  Groggy, through half-open eyes, I listed as Charlie Rose interviewed Dr. Lukas Wartman about how whole genome sequencing famously saved his life from cancer.  At the time my mother was battling… continue reading

Genomic Diagram

Compliance Excellence in Today’s New Mortgage “Norm”

By Eric Ray

The mortgage industry continues to experience an unprecedented number of changes to its regulatory framework.   The rules mandated by Dodd Frank are designated as consumer protection in nature as well as overall banking and mortgage regulations.  The impact of these regulations will inevitably result in increases in the cost to originate and service loans.  It is more critical than ever for lenders and servicers to plan and invest in processes and technology that are compliant with this new industry “norm”.

A robust compliance management system across the end to end enterprise is more critical than ever, not only for risk reduction, but as an important profitability lever.   Lenders need to focus on three key areas:

  • Compliance through operational execution through consistent, repeatable processes generating a positive customer experience;
  • Accuracy and transparency in all reporting, and
  • A controls framework governed independently from the business reporting structure to ensure true objectivity and adherence to all aforementioned rules.

Technology infused compliance framework

When looking to invest in solutions, it is important to look across the enterprise to leverage compliance benefits as well as business benefits.   Investing in enhanced capabilities, such as compliant imaging and digitization (e-documentation, etc) technology, will be critical in order to drive efficiencies across the business model as well as provide new reporting capabilities.   The regulatory environment today is focused not only on process execution, but the management processes and reporting required to track and identify results, manage exceptions, and remediate issues.   Record retention and content management solutions will be more critical in order to demonstrate past results and demonstrate the outcome of remediation plans.

The collection of data across the entire end to end value chain is the single most important attribute required to not only ensure the business is operating  in a compliant manner but to enable the identification of  gaps and remediation efforts.  Although some of the new servicing rules were relatively simple to implement, many required significant collaboration across business units and technology to get them accomplished.   The Consumer Financial Protection Bureau  (CFPB) examination manual for mortgage servicers points out that servicers are not only subject to Real Estate Settlement Procedures Act (RESPA), Truth In Lending Act (TILA), Equal Credit Opportunity Act (ECOA), Gramm–Leach–Bliley Act (GLBA), and the Fair Credit Reporting Act (FCRA), but they will also be focusing on other risks that could impact consumers, such as unfair, deceptive, or abusive acts or practices (UDAAPs).

Compliance in this new evolving regulatory environment will require robust internal quality control programs.   Monthly and quarterly periodic monitoring of core processes such as default servicing, including loss mitigation efforts, foreclosure processing, servicing transfers and new boarding data, fees, and escrow administration, among others will reduce the risk that issues will go undetected for extended periods of time and limit or eliminate harm to consumers and regulatory violations.   The reporting methodology to executive management needs to be consistent and frequent.   Executive and operations management need to be actively engaged to ensure process improvements can be designed and implemented.

The ability to successfully manage this new norm of evolving regulatory changes over the next five to seven years will dictate who the new leaders will be in the servicing industry.   With margin pressures on all lenders and servicers, those able to achieve compliant operational excellence will enhance profitability and ultimately grow market share as GSE’s, as well as other  large lenders and holders of MSR’s,  will increase their reliance on these best in class servicers.

For more information on IBM’s mortgage risk and compliance processes, please contact Karen Pollock, Mortgage Chief Risk and Compliance Officer, kbpolloc@us.ibm.com and visit IBM Global Process Services Banking page.

About Eric Ray:

EricEric R. Ray is currently the General Manager of the Financial Services Sector business. In this capacity, Mr. Ray has global profit and loss responsibility for IBM’s business process outsourcing portfolio for its clients in the Insurance, Banking and Capital Markets industries.