is 604: contemporary issues in is banking enterprise systems · - finance channels: - personal -...
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Chair of Information Systems IV (ERIS)
Institute for Enterprise Systems (InES)
IS 604: Contemporary Issues in IS
Banking Enterprise Systems
Prof. Dr. Alexander Mädche
Chair of Information Systems IV
Institute for Enterprise Systems
Lecture
supported by:
Goals of this lecture 2
Give an idea of fundamental
processes in a retail bank.
Show how the concept of Enterprise
Systems applies for Banks.
Introduce to a business scenario,
that will guide the remainder of the
course.
IS 604 Banking Enterprise Systems
2
Agenda – Session I – part 2
IS 604 Banking Enterprise Systems
Agenda
1 Reference Processes in Banking
2 The Bank as Enterprise System
4 Business Scenario: the Global Retail Bank - GRB
3
3
Reference Process Landscape 4
IS 604 Banking Enterprise Systems
4 Source: CC Sourcing 4
Distribution Reference Process
IS 604 Banking Enterprise Systems
5
Advisory
Marketing
Offer
Contact
Closure
Maintenance
Information
search
about
costumer
Generating/
adaption of
customer
profile
Detailed
knowlegde
of costumer
needs
Obtaining
costumer
documents
Determina-
tion of
customer
business
potenital &
risk
Refusal or
proposal
Develop-
ment of
campaigns
Consulta-
tion with
product
develop-
ment and
other com-
petencies
Execution
of
campaigns
Planning of
campaigns
Contact
Plan
Contact
preparation
Contact
establish-
ment
Offer
submis-
sion
Negotia-
tion &
adaptat-
ion
Acceptance
or refusal by
costumer
Refusal
Creation
of
contract
Internal
check
Signing
Initiali-
zation of
service
provision
Accepta
nce
Securing
of
customer
satis-
faction
Determi-
nation of
further
potential
Continous
documen-
tation
Archive &
Storage
Instruments:
- pay
- invest
- finance
Channels:
- personal
- written
- electronical
- via phone
Source: CC Sourcing 5
Lending Reference Process
IS 604 Banking Enterprise Systems
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Initialization
of order
Order
gathering
Order check
Order
authorization
Order
processing
Placement of
order
(customer)
Accepentance
of order
Authentication
Data gathering
(paper)
Data transfer
(electronical)
Check of offer/
Rating
Acceptance
or refusal
Conditions of
execution
(Partial)
Execution
Editing of
credit contract
Print credit
contract
Contract
signing
Provision of
securities
Completeness
check and
credit release
Determination
of charges/
commissions
Booking
Editing
customer
output
Print customer
output
Archival
storage
TRX comprehensige
processes
TRX related
processes
Refusal
Acceptance
Credit monitoring
Commission/
interest charge
Reimbursement
Investigations/
Correction
Distribution/
Consultancy
Customer/Account/
Deposit
Management
Product
development
Fees Service
Credit risks/ credit
workout
Liquidity
management
(refinancing)
Compliance
Customer reporting
Channels:
- personal
- written
- electronical
Instruments:
- Mortgage
Source: CC Sourcing 6
IS 604 Banking Enterprise Systems
7 Example: Credit Factory for Mortgage Loans
Front-Office:
IS 604 Banking Enterprise Systems
8
Back-Office:
Example: Credit Factory for Mortgage Loans (cont‘d)
Payments Reference Process
IS 604 Banking Enterprise Systems
9
Order
entry
Order
gathering
Order
check
Order
Processing
Instruments:
- payment order
- standing order
- master list
- direct debiting
scheme (LSV)
- DTA
- credit card
- debit card
- EBPP
- SEPA
Channels:
- personal
- written
- electronical
Incoming
payments
processing
TRX related
processes
TRX
comprehen-
sive
processes
External
handling
inter-
banks
Offer entry
(customer)
Acceptance
of offer
Data
gathering
(paper)c
Data transfer
(electronical)
Manual
review
Plausability
check
Authenticat-
ion
Offer
administra-
tion
Limit check
Reg.
Check
(GwG,
OFAC)
Approval?
No
Determina-
tion of
charges/fee
s
Booking of
outgoing
payment
?
Editing
customer
output
Customer
output
Archival
storage
Acceptance
Manual
editing
Reg.check
(GwG,
OFAC)
Booking
Approval
Editing
customer
output
Customer
output
Archive
and
Storage Compliance
Distribution /
Consultancy
Product
development
Monitoring
Customer/
Account
Management
Fees Service
Reconcilatio
n
Liquidity
Management
Investigation
s/
notifications
Customer
Reporting Source: CC Sourcing 9
Account and Deposits Reference Process
IS 604 Banking Enterprise Systems
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Opening
Management/
Maintenance
Closure
TRX related
processes
TRX comprehensive
processes
TRX customer
related processes
Channels:
- personal
- written
- electronical
Instruments:
- Customer account
- Customer depot
Placing of
order
(customer)
Accepentance
of order
Authentication
Data gathering
(paper)
Data transfer
(electronical)
Contract
signing
Conditioning
confirmation
of opening
confirmation
opening
Archival
storage
Monitoring
Management
of master data
Reg. check
Determination
of charges/
fees/interest
Editing
customer
output
Print customer
output
Archival
storage
Processing of
order
Placing of
order
(customer)
Accpentance
of order
Authentication
Determination
of charges/
fees/interest
Editing
customer
output
Print customer
output
Archival
storage
Inactivation
Investigations/
notifications
Distribution/
Consultancy
Reserach (e.g.
Narino)
Product
development
Customer reporting
Monitoring
Reconcilation
Investigations/
notifications
Source: CC Sourcing 10
Agenda – Session II
Agenda
1 Reference Processes in Banking
2 The Bank as Enterprise System
4 Business Scenario: the Global Retail Bank - GRB
IS 604 Banking Enterprise Systems
11
11
Comprehending a Bank as an Enterprise System
The Bank can be seen as an Enterprise System, consisting of a social and a technological sub-system.
Along these two dimensions several sub-dimensions for structuring the bank are possible:
Exemplary Constituents of the social sub-system:
Business Model and Business Processes (Reference Processes)
Organizational structure (Front-, Middle-, Back-Office)
Customer segments (Retail, Private, Corporate, Institutional)
Products (Loan, Time Deposit, Money Transfer, Wealth Management…
Exemplary Constituents of the technological sub-system:
Business Functions that are supported by IT-Applications
Applications (packaged or custom-built)
IT-Architecture (Monolithic, Three Tier Application Landscapes, Service Oriented, …)
IT-Platform (Host, Server, Client-Server, Cobol, J2EE, ….)
IS 604 Banking Enterprise Systems
12
Social
Technological
12
Functional Perspective on a Bank
Sales Management & Support (SMS)
Front Office Channels and Support (FOS)
Bank Management & Steering (BMS)
Core Banking (COB) Product Processes
(PP)
Infrastructure &
Support (ISU)
Fro
nt-
Off
ice
Mid
-Off
ice
Ba
ck-O
ffic
e
Master Data
Management
Account
Management Current
Accounts
Savings Loans Mortgages
Payments Cards
Financial &
Managerial
Accounting
Risk
Management
Direct
Banking
Assisted
Banking
General
Ledger
Investment
Products
CRM Acquisition
Support
Regulatory
Reporting
Asset
Liability
Management
Contract
Management
IS 604 Banking Enterprise Systems
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13
Banking Enterprise Systems
People-Centric
Process-Centric
Front-to-Back
Integration
(STP)
CRM and
Multi-Channel-
Integration
at POS
Information-Centric
Group-
ware
Portals
…
Front
Office
Back
Office
Transactional
Banking
Analytical
Banking
Mid
Office
IS 604 Banking Enterprise Systems
14
Technological Components of a Banking Enterprise System
14
Definition Core Banking System
According to a study performed by the University of Karlsruhe* the term
Core Banking System is not used consistently. There are two main
usages of the term:
1. A comprehensive banking application, which covers all products, sales
channels and reporting and steering modules.
2. A banking application that covers payments, lending and deposits business
and all reporting functions needed for regulatory reporting.
We support the broader view of definition 1, that a Core Banking System
contains transactional as well as analytical application components. At
least, it should cover the most important products offered by a bank
through the sales channels branch, internet, mobile and call center.
*Rererence to the study: http://www.hs-karlsruhe.de/fakultaeten/informatik-und-wirtschaftsinformatik/lehre-und-forschung/forschungsprojekte.html; article also published in:
http://www.computerwoche.de/software/erp/1907948/
IS 604 Banking Enterprise Systems
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15
Custom-built Legacy vs. Packaged Software
IS 604 Banking Enterprise Systems
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“Custom-built
Banking Landscape”
FC 1
Contact
XLS
Controlling
Report
KK
FC 3
PD
OffR
Sett
Marketing
Contact
Offer
Closure
FC 2
ACC2
“Enterprise System
Banking Landscape”
Core Banking
Rep 1 Rep 2
Marketing Contact Offer Closure
Middleware
Frontend
NECESSARY:
Planned
Transformation
of the
technological
and social
sub-systems
16
Agenda – Session II
IS 604 Banking Enterprise Systems
Agenda
1 Reference Processes in Banking
2 The Bank as Enterprise System
4 Business Scenario: the Global Retail Bank - GRB
17
17
Introduction GB and GRB
IS 604 Banking Enterprise Systems
18
Global Bank (GB) was founded in 1889 and is a global
Universal Bank with European roots.
GB is set up as a global group with holdings in Italy, Spain,
the UK, and the United States. Since the millenium the bank
has been able to expand its reach in emerging markets like
China, India, and Russia.
GB has three major divisions:
Global Investment Banking (GIB)
Global Retail Banking (GRB)
Global Information Systems and Operations (GISO)
18
Overview GRB
IS 604 Banking Enterprise Systems
19
GRB, the strong and profitable private and retail banking
division provides a broad range of banking services including
current accounts, deposits, loans, investment management
and pension products, to private individuals and self-
employed clients as well as small and medium-sized
businesses.
GRB worldwide:
-27 million clients
-3.000 branches
-40.800 employees
Total of 400 bn EUR CBV*, thereof:
-150 bn EUR credit products
-100 bn EUR deposits and payments
-150 bn EUR investment and insurance
products
*CBV = client business value
19
Business Scenario
IS 604 Banking Enterprise Systems
20
Two years ago, reacting to the challenges of the market, new
information technology and demographic change, Global Retail
Bank (GRB) has decided to set up a major multi-year
transformation program to fundamentally change its organizational
and technological setup.
First the bank decided to standardize its heterogeneous retail core
banking application landscape by implementing a standard
software package in the project called “Copernicus”. This project is
seen as one of the most challenging IT implementations in the
financial services industry world-wide and has a pioneer character
for the whole industry.
Second the bank amended the transformation program by a
strategic innovation project “Galileo” that will provide the banking
frontends of the future for different channels, implemented on top
of the new Core Banking System. 20
High Level Program Organization
IS 604 Banking Enterprise Systems
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Transformation Program
TP1: Copernicus TP2: Galileo
Business PM GISO PM
SP1: Master Data and Deposit Management
SP2: Loans Management
SP3: Securities
BPA
Business/Process
Analysis and
Functional Spec.
I&C
Implementation
and
Configuration
MI
Migration TE
Test
Prototyping/
Implementation Design
Program Office
Internet Channel
Branch
Mobile Applications
Social Media
PM
Work Streams
Sub-projects
21
Program Timeline and Milestones
IS 604 Banking Enterprise Systems
22
Kick Off
Transformation
Program
01/2xx1
Copernicus Project
Feasi-
bilitiy
Study
Business/
Process
Analysis/
Requirements
SW/
Vendor
Selection
Customi-
zation &
Configu-
ration
Test
In
tr
o SP1
SP2
SP3
Kick-Off
Galileo
02/2xx2
Galileo Project
Analysis &
Requirements
Development
new Design
Ideas
Prototyping Selection Implementation
Go-Live
SP1
12/2xx2
Kick Off
SP1
06/2xx1
Kick-Off
SP2
09/2xx2
Go-Live
SP2
12/2xx3
Go-Live
SP3
12/2xx4
Kick-Off
SP3
09/2xx3
Go-Live
Galileo
12/2xx5
Business/
Process
Analysis/
Requirements
Customi-
zation &
Configu-
ration
Test
In
tr
o
Business/
Process
Analysis/
Requirements
Customi-
zation &
Configu-
ration
Test
In
tr
o
22
Project Roles Deposit Management
IS 604 Banking Enterprise Systems
23
Role Project
Management
Business/
Process
Analysis and
Functional Spec
Implemen-
tation and
Configuration Migration Test Position in Line
Organization
Project Manager Business* x NA
Project Manager GISO x GISO Project Pool
Business Analyst/External Consultant x x XYZ Consulting
Business Analyst Internal x x GISO Project Pool
Business Expert Front Office (Advisor,
Sales Processes)* x x
Retail Banking,
Deposit Products
Business Expert Mid Office
(Customer and Account Management)* x x
Retail Banking,
Deposit Products
Business Expert Back-Office
(Product Development)* x x
Retail Banking,
Deposit Products
Business Expert Back-Office (Accounting) x x Bank Management,
Accounting
Business Expert Back-Office (Controlling) x x Bank Management,
Controlling
Business Expert Back-Office
(Administration & Processing) x x
Retail Banking,
Deposit Products
Business Expert Back-Office
(Administration & Processing) x x
Retail Banking,
Deposit Products
Business Manager FO
(Sales Processes) x x
Retail Banking,
Deposit Products
Business Manager MO
(Account and Product Management) x x
Retail Banking,
Deposit Products
Business Manager BO x x Retail Banking,
Deposit Products
Technical Lead x x GISO Project Pool
Technical Expert Infrastructure x x GISO Project Pool
Technical Lead Applications x x External Consultant
Technical Expert Applications* x x GISO Project Pool
*Roles covered in this course 23
The current situation of TP I - Copernicus
IS 604 Banking Enterprise Systems
24
One year has passed in the Copernicus Project.
A software selection process has been performed and SAP
Banking Services 8.0 has been identified as the solution that
fits best to the requirement of GRB.
The sub-project Master Data Management (MDM) & Deposit
Management (DM) has started and several activities have
already been performed (see timeline).
The work stream BPA has analyzed the status quo and
designed and documented new front-to-back processes for
Deposit Management .
These are based on Banking reference processes and the
functional scope of SAP Banking Services 8.0.
24
IS 604 Banking Enterprise Systems
25
These processes will now be implemented based on the
standard software solution.
Business experts of BPA have additionally created functional
specifications for the different business functions and objects
that are needed for the realization of these processes.
Based on these functional specifications several
configuration and customization tasks have still to be
performed by the I&C work stream to implement the
processes and functions.
After the customizations and configurations performed by the
I&C team component, integration and end-to-end tests will be
run to test the functionality of the system.
The current situation of TP I - Copernicus (cont‘d)
25
IS 604 Banking Enterprise Systems
26
After passing these tests the system is ready for data
migration and after that for the Go-Live of the MDM and DM
functionality.
The current situation of TP I - Copernicus (cont‘d)
26
Sub-Project Deposit Management Timeline
IS 604 Banking Enterprise Systems
27
Kick Off DM
06/2xx1
Go-Live
12/2xx2
Analysis
completed
02/2xx2
Today
SAP BS 8.0
Hardware/Infrastructure Set-up
Business and Process Analysis
Functional Specifications
Technical Set-
up completed
12/2xx1
Process Landscape
Customization & Configuration
of SAP BS 8.0
Test
Migration
BPA
and
TE
I&C
and
MI
Customization
completed
08/2xx2
Go-Live
PM and Training
27
Functional landscape of GRB – Functions involved in
Deposit Management
IS 604 Banking Enterprise Systems
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Sales Management & Support (SMS)
Front Office Channels and Support (FOS)
Bank Management & Steering (BMS)
Core Banking (COB) Product Processes
(PP)
Infrastructure &
Support (ISU)
Fro
nt-
Off
ice
Mid
-Off
ice
Ba
ck-O
ffic
e
Master Data
Management
Account
Management Current
Accounts
Savings Loans Mortgages
Payments Cards
Financial &
Managerial
Accounting
Risk
Management
Direct
Banking
Assisted
Banking
General
Ledger
Investment
Products
CRM Acquisition
Support
Regulatory
Reporting
Asset
Liability
Management
=Business functions involved in the deposit management process
and covered by the MDM & DM Project
28
Deposit Management Process Landscape 29 F
ron
t-O
ffic
e
Mid
-Off
ice
Ba
ck-O
ffic
e
Contact Advisory Offer Deal Mainte
nance
Create BP
Create
Account
Maintain
BP
Maintain
Account
Settle
Account
Create
Product Maintain
Product
Maintain
Conditions
Create
Conditions Assign
Product
Define Ind.
Conditions
Manage
Payments
Maintain Product
Pricing List
Create Product
Pricing List
Account
Settlement
Posting
Control
Business
Processes
Business
Events
Business
Transactions
Book on internal
accounts Reporting
Account
Closure
Order
Management
Payments
IS 604 Banking Enterprise Systems
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Sub-project have been created one of the three banking
channels:
Internet
Branch
Mobile Applications
Social media has been re-prioritized and shifted to a project
that will start later
Each project team will follow a design thinking approach to
come up with new ideas and a (mock-up) prototype for
(innovative parts) of the respective channel application.
At the end of the project the findings of the project will be
presented to the program steering committee.
IS 604 Banking Enterprise Systems
The current situation of TP II - Galileo
30
31
• Identify and understand problems and
requirements
• Observe users (visit a branches and
observe how others use internet and
mobile banking applications)
• Interpret, consolidate and document the
empirical findings, i. e. your
observations
• Engage in (several) brainstorming
sessions to generate as many ideas as
possible (expand the solution space)
• Build prototypes and share them with
other people (narrow down the solution
space again, experimental phase)
• The brainstroming and prototyping
• Test, implement, and refine the design
(narrow down the solution space again;
solution-driven phase)
Under-
stand
IS 604 Banking Enterprise Systems
Ob-
serve
Point
of
view
Ideate Prototype Test
Based on: The d.school/D-School (2009)
The current situation of TP II – Galileo (cont‘d)
31
Introduction to SAP Banking Services 32
Retails banks nowadays work very
process-oriented and have achieved a
high degree of process standardization
especially in the back-office functions.
A bank can be considered as a
complex Enterprise system, consisting
of organizational and technical
elements
We use the GRB scenario to guide the
future lectures
IS 604 Banking Enterprise Systems
References
IS 604 Banking Enterprise Systems
33
The d.school/D-School (2009) Design Thinking Process (from:
www.designthinkingblog.com/wp-content/uploads/2009/10/Design-thinking-process.png
http://www.sapdesignguild.org/community/design/print_design_thinking.asp
CC Sourcing, 2012: Bankmodell und Referenzprozess des Sourcing Competence Center
der Universität St. Gallen und der Universität Leipzig
Further Reading:
Casu B., Giardone C., Molyney P. (2006), Introduction to Banking, Prentice Hall
33