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TEMENOS GLOBUS.ppt

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					Investing in Information Infrastructure for
            Financial Institutions
                Enrique R O’Reilly
                  5 December 2002
Agenda


  Background on TEMENOS

  The Financial Sector for SMEs

  Obstacles

  Technology

  In House Vs Package Solution

  Questions
Temenos Corporate Summary
 Started operations in October 1993
 GLOBUS Banking System
 Revenue at June 1999 US $ 40m
 Revenue at June 2000 US $ 69.5m
 Revenue at June 2001 US $ 125m
 Revenue for Calendar 2001 US $ 140m
 Head office in Geneva

 Offices in :
           Ireland, UK, Luxembourg, Switzerland, India, Singapore, Thailand,
            USA (NY & Miami), Hong Kong, Lebanon, Eastern Europe, Russia,
            Netherlands, Malaysia, Philippines, Ecuador
           Staff 1200

 Business Partners :
           Latin America, Russia/CIS, Baltic, Sri-Lanka, Western and Southern
            Africa, Portugal, Greece, Malaysia, Philippines, Poland, Slovakia,
            Australia
           IBM World-wide

           Staff : 800




                                                                                                                                         2001
                                                                                                                                  2000
                                                                                                                           1999
                                                                                                                    1998
                                                                                                             1997
                                                                                                      1996
 Ownership - Public Company since June 2001



                                                                                               1995
                                                                                        1994
                                                                                 1993
           Management 70%
           Partners 15 %
TEMENOS Clients




       OVER 350 CLIENTS WORLDWIDE
TEMENOS GLOBUS
Clients by region

                    South America
        North America    10%
                                                                 Africa
              4%                                                  25%

    Middle East
        8%



                                                                          Asia
                    Europe                                                15%
                     38%


         “Our objective at Citibank was to create the world’s most fully
                         international banking system.”
                                         Thierry Champagne, Director, TEMENOS Systems
GLOBUS - Full Banking System
                                                              3rd Party Systems                                             Legacy
                                                                  e.g. Teller                                       Clearing          Payroll
                                                           ATMs                      IBI                                                     Etc...

                                                                                   3rd party   Internet, WAP...


           Desktop / OLE                                Open Financial Service                               Other Interfaces
                                                                                                               Takeover, GAI, Clearing,
                                                           Security Management System

 Screen            Enquiry            Report        Advice         User Exits          Database         Navigation             Help         GBS

             Retail                             Treasury                      Private Banking                          Corporate
                                                                            Asset Management

            Accounts                                  FX                               Portfolio                       Trade Finance
           Mortgages                          Money Market                 Simulation & modeling                    Commercial Loans
       Consumer Loans                              Swaps                             Fiduciaries                        Guarantees

              Teller                                 FRA                           Fixed deposits                   Cash Management

                                                   Repos                            Performance

                                             Capital Markets                      Order processing


  Accounts           Customer            Static      Accounting                        Risk          General         Messages             Multi
 Current, nostro
savings, charges
                   Address, contact
                         CIF
                                      Rates, charges General Ledger
                                       department      Profitability   Core   Credit & Counterparty Euro, Image
                                                                                 Collateral, VAR    Nostro, GAC
                                                                                                                      Swift, Print
                                                                                                                     Chaps, Email
                                                                                                                                      Company
                                                                                                                                       Lingual
    interest          overrides       currency, etc... Regulation                Market Position   Funds Transfer    Configurable     Currency
                                                           Security Management System
                                  jBase    DB2     Oracle   UniVerse   etc….
                                      UNIX   OS390    Windows NT   AS400
A package solution for Community Banking
                                                                             Core GLOBUS
                                                                             Business Area (Modules)
   eMerge                         Customer App
                             Product Design
                                                                             Tools Layer
                                                                             Implementation Layer
                        Loan App               GIB
                                    Designer
                   Screens                              APIs
                                 MI       Loans
                Reports              Deposits
                                 Accounts                      Tools
                            Funds Transfer / SO
              CGAP Tools                                          Designer

                   OFS     Teller
                                    Retail           Private
            PERLS               Image Mgm
                 APIs          Collateral
                             Past Due
                                            CORE


                           Treasury                  Corporate


                                               GIB
World-wide Support
                                                            Luxembourg
 Portland    New York                  Amsterdam              Frankfurt             Khatmandu
                          Miami
                                        London                 Warsaw                     Bangkok
         Chicago   Boston
                                                                 Moscow
                                       Dublin
                                           Paris                                           Tokyo
                                  Geneva
                                  Madrid

                                      Lisbon
                                   Athens                                                              Beijing
                                     Beirut                                                         Hong Kong
                 Mexico
San Francisco                                                                                       Manila
                                   Ivory Coast                                                  Kuala Lumpur
                                       Accra
 Quito                                                                                               Singapore
                                            Lagos
                                                                                                     Jakarta

   Planned offices                                               Dubai
                                                                             Chennai
   Offices                                                           Dhaka
   Partners                                  Johannesburg   Riyadh        Colombo      Melbourne
The financial sector matters
  A strong financial sector promotes sustainable economic
   development. There are direct linkages:
        between financial and “real” sectors
        between economic growth and poverty alleviation
        between the “efficiency” of resource allocation and the
         sustainability of economic growth
        between access to financial services, equitable distribution
         of income and sustainability of growth

  A poorly developed financial sector can cause (or
   exacerbate) a financial crisis
  Major beneficiary of growth = the poor; major victim of
   crisis = the poor
Our common image of a bank



     FIRST BANK OF TRUST & SECURITY
The reality of a bank
Profit and risk dynamics:

 Bank with capital of $ 100K and assets of $1M (100 loans of $10K each) --
(A) earns 10% ROC / 1% ROA -- or
(B) loses one of 100 loans -- profits then equal zero or
(C) loses one out of ten loans -- equity then equals zero and the bank is insolvent

           Assets             L + OE
           Profit - 10,000    Profit - 10,000   P =s 0            P =s 0

                              E = 100,000       E = 100,000
                                                                  E =s 0
           100 loans
           of                 Liabilities
           $10,000            total
           each               900,000
           =s
           total
           Assets of
           1,000,000



           ---------------A-------------        ----B----         -----C---
GLOBAL Threats
   Occurence of bank insolvency since 1980




      Systemic
      crisis

      Borderline
      crisis
      No crisis or
      insufficient
      data
Cost of Failure
 Globalization and consolidation
        Less banks                      More banks with
                                                bigger assets

            Number of US Banks                    Number of US banks > $10B

11500                                        80
                                             75
11000
                                             70
10500                                        65
10000                                        60
                                             55
9500
                                             50
9000                                         45
8500                                         40
          1993       1996        2001             1993       1996        2001




                                 Top 50 global banks
                     1972           14% of bank assets
                     2000           32% of bank assets
Mexico Case
Banks unwillingness to lend to SMEs


  1995 Banking Crash. Cost US $ 150 billion

  Foreign Banks enter to bring discipline & liquidity

  85% of Mexico’s Banks are in now foreign hands

  Reluctant to take on credit risk
       Rates typically at 20 points over base rate
       Difficult to repossess collateral

  58% of total credit provided by Non-Banks

  Non-Banks lack technology and control
Banks in retreat
Mexican private-sector credit market, % of Total


                          Bank   Non-Bank


  1997                                                        Consumer
                                                              Credit
 2002*

  1997                                                        Housing
                                                              Credit
 2002*

  1997                                                        Business
                                                              Credit
 2002*

     0%          20%      40%        60%         80%   100%

 Source: Bank of Mexico                *As of June
Market Segments
                                      Int.
                                     Banks.

                                                                              Large Banks
                                Private
Medium & Large Cap.             Banks                        International
                                            Treasury
                        Wholesale
                                                                             Medium Banks
                                              Retail

                            Retail
                                                                  Domestic
SMEs                              SOFOLES
                                                   Coop

                    Coops
                                                                             Community
                                                          CU                 Banking

                                Coops
               MFIs
              Network                                     S&L
                                                                Coop
                        Cajas             Coops
       MFIs
                 MFIs
                                     MFIs              S&L         CU         Non-Formal
         MFIs
                                                                              Finance
                         Number of Institutions
Potential players & new competition
                                                 business    branches &
WORLD STATISTICS                                     units     agencies

Credit unions                                     37,500       56,250
Community Savings Banks                            1,187      216,982
NGO’s and social lenders                           7,000       21,000
Credit unions not affiliated                      20,000       30,000
Rural banks                                       20,000       40,000
BPR’s and other private micro banks               20,000       25,000
Other small private banks                          5,000       12,500
Other retailers with loan books                        500     12,500
Pensions and rural payments                             40      4,000
Total                                            111,227      418,232

“Banking is essential in the modern economy - Banks are not!”
                         Business Week Magazine (US)
Are banks finished?

            Until 1910, over 90% of financial
           intermediation was through banks.
                Today it is approximately 25%.

                % of intermediation through banks*
   100
    80
    60
    40
    20
     0
         1850    1875   1900   1925   1950   1975   2000
                                                       *Source: Cox University, 1997
Industry Trends

 Competition
       Larger Banks, Smaller Banks, Local Banks, Foreign Banks, Other
        industries, Supermarkets, Post office, Cherry- picker practices

 Integration of Applications
     Centralization of Administration key for cost saving
     Integration to reduce risk


 Reduce Time to Market
     Market research
     >100 new Banking products are introduced per month
     Improving Information Infrastructure


 Increased Automation
       Better use of technology
       Technology affordable to everyone
What are the obstacles?
  Changing Legal Framework
  Complex Risk Management - Lack of skills
  Customer Loyalty
  Cost of Technology
  Complex System Integration
  New Delivery Channels
Strong Competition

       Unless you’re the lead dog
        the view never changes
Technology Adopter Countries
World Wide Internet Access

  New handheld devices prolific in adopter countries –
   leapfrog comms/PC phase


  Off-line networks supported with electronic purse
   cards


  Broadband DSL, fixed wireless rapidly eclipsing
   traditional dial-up connectivity


  90 million households with broadband by 2004 (Ovum)
Reduced Transaction Costs

                                                                           1.07
             1.2
               1
                                                                    0.54
             0.8
         USD 0.6                                     0.27
             0.4              0.01      0.03
             0.2
               0                     Banking



                                                        Telephone
                   Internet




                                                                      Service
                                               ATM



                                                                      Branch
                              PC



                               Source: Booz Allen & Hamilton Banking Survey
Is there any other way?
Automation - the race to stand still

                                                    Automation means that by 2030 it would take
                                                more than the entire population of the world to process
                                                           banking transactions manually.
                                                                       World population v financial transactions
                                                    12
                                                    10
                               Billions of people




                                                     8
                                                                                                                            Bank staff
Source: Macmillan University




                                                     6                                                                      required
                                                     4                                                                      Population
                                                                                                                            of world
                                                     2
                                                     0
                                                    -2   1850   1875     1900   1925    1950   1975    2000   2025   2050
Improve Service

   Multiple products
         Reduce time to market

   Multiple delivery channels
         Internet
         TV
         WAP
         Telephone (IVR)

   Improve Customer Service
         Not retail but large private Bank
Need for banking MIS
to target SMEs


 IT required to target and
 price services to avoid                     greater
 product cross-subsidy and      targeted
                                             access
 segment market                 services
                                            for SME

 Technology provides a
 management information
 system to find value and     more demand   improves
 develop the potential of         for       customer
 your client base
                                banking       base
If technology is one of the answers,
       how do we provide it?
Resource options



      In-house development
          Expensive




      Package Solution
            Best of Breed

            Integrated
Integrated or Best of Breed
The Risk Perspective

 “Ever increasing rate of change may be seriously
  compromising bank’s ability to manage risk”
               Paul Beech, KPMG Risk Management


                        Best of breed   Integrated system
        Cost            High            Low
        Risk control  Difficult and   Integrated and
                      often very poor simple
        Functionality Highest         Compromise
Best of Breed or Integrated

 Best of Breed
     Expensive     to get right
     Difficult   synchronization “spaghetti syndrome”
     Difficult   to Control

 Integrated
     Some   compromise on functionality
     Improved     risk management
     Straight    through processing
Integrated System to improve Risk Management


            Corporate/
                                    Saving / Lending                  Risk Management
            Commercial


           Retail Banking                                                 General


                                 Security Management System




                                         Core
   Iface                                                                            Iface




              Accounting                     Static
                  and         Customer                    Utilities
                                             Data                       Payments/
              Profitability
                                                                         Clearing
IT Development/support investment




                 1400       Internal
                                                    In house development -
                 1200                                growth will grow (285%)
  USD millions




                 1000
                 800
                 600
                 400
                 200
                   0
                   1999 2000 2001 2002 2003 2004



Source: Datamonitor
IT Development/support investment




                 1400   Internal   External         In house development -
                 1200                                growth will grow (285%)
  USD millions




                 1000
                 800
                 600                                External options will
                 400                                 grow faster (484%)
                 200
                   0
                   1999 2000 2001 2002 2003 2004



Source: Datamonitor
Your IT Spend on a Large Implementation


  $120

  $100

   $80
                                                          Software
   $60                                                    Implementation
                                                          Annual Royalty
   $40

   $20

    $0


  Heavy investment in customisation – long term project
Your IT Spend on a Package


 $100


  $80

  $60                                            Software
                                                 Implementation
  $40                                            Annual Royalty


  $20


   $0


   Rapid implementation, minimal customisation
Outsourcing


              UK outsourcing

     18
     16
     14
     12
     10
      8
      6
      4
      2
      0
      1995    2000        2005   2010
Irish Credit Unions
    Same capability as other Financial Institutions
    One stop shop, full financial services:
           Savings / Loans
           Clearing
           ATMs / POS
           Internet Banking
    Best technology for CU Staff
    Regulatory Compliance
                                                                         F/R Nodes
                                          Frame Relay
                                            Network

           Data Centre                                                               Credit U
                                             Digital
    TEST                        PRD        Leased Line                                 Co.
    ACC                                     (eircom)
                                                                  Digital      Cisco
                                                                Leased Line    Router
                 Production         Firewall                     (eircom)
                                                                                                 Client
                  Servers
                                                                                                 Client
                                               Cisco
    eMerge                                     Router     I.S.D.N Backup
                                                                                           LAN
    GAC Module


           Cu1   Cu2   Cu3    Cu4     OSS
                                    Temenos
                                                         I.S.D.N. Network
Thank you

      Questions ?

				
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