Finnova: from midfield to benchmark - Christoph Erb
Through a relaxed transition to new banking software, Finnova enabled one Swiss universal bank to reduce its IT costs from 30% to 18% of total expenditure. In this detailed case study, Christoph Erb, management board member and head of customer care at Finnova Ltd Bankware, explains how.
In the Swiss financial sector, IT expenses average at around 20% of total expenditure. One universal bank, however, was spending around 30% of its expenditure on IT costs - a key reason for it to switch banking software. Today, thanks to Finnova, the bank's IT expenditure is only 18%, and the cost-to-income ratio amounts to an unrivalled 34.4%. It is now able to take advantage of the range of offers available on the market, and the benefits of an open platform and a transparent market with various providers. The management has unrestricted freedom of choice, low IT costs and high-quality service.
In addition to independence, cost reduction and process automation, a further requirement of the bank was the ability to revert to a single platform with an integrated workflow from the front to the back office, as it had already defined the processes and structures within the framework of its strategic positioning. It was still necessary to map these from the system, as the adoption of predefined processes was not up for discussion. The software needed to map the given processes and be in a position to adopt future adjustments. Therefore, automation, together with a full range of parameterisation options, was of central importance.
A long list of six national and international providers was drawn up, and visits made to customers of their solutions in order to carry out comprehensive case studies. On the basis of these results, a winner emerged. The decision was clear: the costs, culture and positioning of the provider were the trump cards in favour of Finnova and its integrated banking solution.
The implementation of Finnova's platform took place during a kick-off meeting with representatives of the bank and all its partners. As staff members had already been given a first impression of their new platform, the project could be planned and implemented without support from external advisers, and the corresponding effect on costs.
While it did not communicate the upcoming software conversion to its clients, the bank kept staff members informed by involving them in the individual project phases. Within 15 months of the launch, every member of staff had worked with the new system to some degree. As a result, the Finnova software enjoyed a high level of trust internally.
A relaxed cutover
While overall responsibility for the project lay with the bank, joint project supervision took place at executive board level in the bank, Finnova and the implementation partner. Before the actual conversion, the data migration and cutover were run through several times. Tests were successful, and nothing stood in the way of a planned three-week parallel operation of the existing system and the Finnova software. Thanks to this careful planning, the bank was relaxed for the actual cutover. After each testing milestone was achieved, the cutover received its go-ahead, and the connection to all external systems was established, including the interbank system, ATMs, and e-banking and data providers.
Implementation in 15 months
A key factor of the success of the implementation was the careful testing under the responsibility of the respective department managers. The commitment of all staff members was paramount. Across the entire bank, there needs to be the understanding that nothing works without IT; it is the heart and brain of the organisation.
Thus, the implementation of the Finnova software took 15 months and was - as usual at Finnova - finalised as originally projected. The bank in question describes this as an ideal time frame, with a view to budgeting and the quality of the process. The number of peripheral systems involved has a large influence on the complexity, process, and thereby length and cost of an implementation. In this specific case, there were approximately 20 systems that needed to be incorporated into the integrated banking solution via interfaces.
For the calculation of its IT costs, the bank takes into consideration everything from software licences to operation, hosting and networks, through to PCs and fees for financial information. Thanks to Finnova, these costs were reduced by a total of 45%. The greatest savings were found in hosting, operation and application management.
With its cost-to-income ratio of 34.4%, the institution showed the best value among Switzerland's banks, according to a November 2013 study by a Swiss university of applied sciences. In parallel, transaction costs have also developed very positively since the implementation of the Finnova software. While IT costs were reduced from CHF24 million to CHF14 million between 2003 and 2012, business volume was doubled, with a constant number of staff members. The massive savings in process and unit costs affect most of all the back office. At the same time, the Finnova software offers support to the front office. Despite standardisation, all processes take place individually and are customised for clients. It is left to each adviser to operate processes and enter information in the specified grid. In this way, data and information are centrally captured, remaining available afterwards. Consequently, duplications can be minimised and the back-office processes at the head office and in individual branch offices can be standardised.
Reduction and expansion
One year after its decision to evaluate new software, the universal bank declared itself in favour of clear and consistent positioning as a retail bank. As such, strategy was focused on client needs rather than on IT possibilities. Internal processes needed to be adjusted accordingly and implemented in the new software. On this basis, the bank continued its steady growth with decreasing IT costs. At the same time, the technical integration of several acquired regional banks ran smoothly, as Finnova supports institutions in the reduction of costs and the expansion of business.
Despite these positive developments, the bank's management continually strives towards improvement. In order to reduce costs even further, established processes are being analysed again and reinterpreted - this also applies to the outsourcing of services. The replacement of outdated systems with innovative technologies plays a major role in this context. However, from the point of view of the bank, with regard to IT, purely financial issues are not at the forefront, but rather the relationship between costs and added value. Thus, actual IT costs have remained constant over the years. At the same time, Finnova is making additional modern tools available, with which much higher volumes are handled and processed. In parallel, numbers of clients and staff members, branch offices and ATMs continuously increase, while security and reliability are enhanced. This effectively means that costs are decreasing, leading to a cost-to-income ratio of 34.4%, which is unrivalled in Switzerland.