I was very happy to launch the International SAP Conference for Banking in London today, looking together with our clients, our partners and our colleagues at the next few years of banking development.
For SAP’s 3,700 banking customers, spread across 120 countries, there is little doubt the kind of bank they want to be, even as soon as 2015 will have a different shape, different strategies and different spending allocations from their current model. It’s easy to say that banks want to run better – but what does that mean for a bank in 2012, looking out to 2015 and even further beyond? Today all banks are facing the same three core issues and drivers, to a greater or lesser extent: risk, cost and growth.
Risk – How will operations be empowered or endangered by the new capital ratios of the Basel accords? Will higher provisioning levels affect ability to make a profit? How many risky loans is the bank making now, and how many can it afford to carry?
Cost – How can cost to income ration be improved? And how can mature return on equity and return on assets be improved? How can the underlying complexity (and the primary driver of cost) be reduced? How much time and cost can be taken out of reconciliation?
Growth – How does a bank develop and deploy products and services that win and keep customers, and make each customer both more loyal and more valuable?
These are the fundamental challenges of banking: manage risk, control cost & complexity and accelerate growth.
So what are the obstacles, challenges and opportunities?
Firstly, banks have often developed solutions in-house, often on a massive scale, albeit for good reasons. However, the result has been that they spend a far greater percentage of their revenue on ICT than industries which embraced off-the-shelf solutions earlier. According to Gartner data, ICT spending by banks averages 6.5% of revenue – and other estimates suggest that it is higher still. Compare that with food and beverage processing – an industry with high security and compliance requirements, but one which spends just 1.4% of revenue on ICT.
Secondly, overall ICT spending in banking is predicted to grow, not reduce in the coming few years – and while the balance of spending is shifting from hardware toward innovation & technology, neither this reconfiguration of spend, nor the necessary reduction in total ICT spend, is happening fast enough. The banking sector needs not just to change incrementally but to disrupt and transform its operations.
SAP banking is ready to assist banks as they bring on stream disruptive technologies such as Mobile, Cloud solutions and In-memory Computing, and leverage new approaches such as Rapid Deployment Solutions (RDS), Innovation with Disruption in their upgrades, and Visualization to facilitate the interlock between Business & IT.
Some of the examples we spoke about today included:
- Cloud: Royal Bank of Canada has become one of the best workplaces in Canada by aligning the aspirations of employees and the enterprise using the SAP SuccessFactors suite
- Mobile: Standard Bank of South Africa can now send agents out into the field with mobile technologies to reach the “unbanked” and open a new account in less than ten minutes
- In-memory computing: Home Trust of Canada can cut loan processing times to just 45 minutes and can make database queries and reports five times faster than their previous business warehouse solution
These are just a few examples of the changes to the way banks can do business – but SAP’s technology is only a part of it. An ecosystem of partners, common applications and shared approaches based on that technology is vital. Likewise, customer co-innovation – customers deciding what they need, and working with SAP and partners in a true partnership to map and build the right future for them – completes the picture.